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Qualcomm

QCOM · Nasdaq

Costs rose 9.4% while revenue fell 4.0%

Research and selling costs grew as handset sales slipped, so operating income fell 41.1% to $1.63B and operating margin to 16.3%.

Q3 FY2026, the quarter to Jun 28, 2026 · 10-Q filed Jul 29, 2026

Q3 FY2026 · revenue
$9.9B-4.0% on the year
Operating margin
16.3%
Net income
$2.0B
Free cash flow, quarter
$495.0M
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Key insights · Q3 FY2026
  1. 01

    Costs rose 9.4% while revenue fell 4.0%

    Research and selling costs grew as handset sales slipped, so operating income fell 41.1% to $1.63B and operating margin to 16.3%.

    Why it matters

    Total revenues fell 4.0% to $9.95B from $10,365 million a year earlier, while total costs and expenses rose 9.4% to $8.32B. Research and development grew 17.1% to $2.61B and selling, general and administrative grew 26.6% to $976M. Operating income fell to $1.63B from $2.76B, and operating margin to 16.3% from 26.6%.1

    Research spending of $2.61B now exceeds operating income of $1.63B. A year earlier it was $2.23B, 80.6% of operating income of $2.76B. The filing names lower reimbursements for product engineering work and higher share-based compensation, which now includes equity awards that replaced annual cash incentives for non-executive leaders. Restructuring, substantially all severance, added $68M.1

    The filing traces the revenue drop to handsets: "lower chipset shipments to certain major OEMs", as customers adjusted build plans "as a result of the negative effects of recent memory supply constraints and related price increases." Automotive and IoT revenues rose, offsetting part of it.1

    AnalysisAnalysis: part of the cost growth is a change in how leaders are paid, equity in place of cash, so not all of it is new capacity. The margin rebuilds when handset revenue returns or the newer markets grow into the larger cost base; neither has happened in this quarter's numbers.

  2. 02

    Investment gains made up 41% of pre-tax income

    Investment and other income of $1.01B equalled 41.2% of pre-tax income, so net income of $2.00B exceeded operating income of $1.63B.

    Why it matters

    Investment and other income, net rose 183.2% to $1.01B from $358M, which the filing attributes "primarily due to higher net gains from initial public offerings of certain QSI equity investments." A year earlier the line was 12.1% of pre-tax income of $2.95B; this quarter it was 41.2% of $2.46B.1

    The gains equal 62.4% of operating income. Net margin was 20.1%, above an operating margin of 16.3%; a year earlier net margin of 25.7% sat below operating margin of 26.6%. Net income fell 24.9%, operating income 41.1%.1

    The filing notes that the equity securities in QSI investees that completed initial public offerings "remain subject to short-term lock-up restrictions on the ability to sell." Their value can move in either direction before the shares can be sold.1

    AnalysisAnalysis: results below operating income swing widely from quarter to quarter. Net income was a loss of $3.12B in Q4 FY2025 and $7.37B in Q2 FY2026, against operating income of $2.92B and $2.31B. Operating income is the steadier read of the chip and licensing businesses.

  3. 03

    Capital spending absorbed half of operating cash flow

    Operating cash flow fell to $991M while capital spending rose to $496M, so free cash flow was 5.0% of revenue, against 24.9% a year earlier.

    Why it matters

    Operating cash flow was $991M against $2,875 million a year earlier, and capital expenditure rose to $496M from $294M. Capital spending took 50% of operating cash flow, against 10.2% a year earlier. Free cash flow was $495M against $2,581 million.1

    Cash fell further than profit: operating cash flow was 60.9% of operating income of $1.63B, against 104.1% a year earlier. Over the nine months the filing points to working capital, chiefly "an increase in inventory reflecting certain customer demand impacts from memory supply constraints".1

    The higher capital spending runs through the whole fiscal year: capital expenditure was $549M, $533M and $496M in the first three quarters of fiscal 2026, against $277M, $214M and $294M in the same quarters of fiscal 2025.1

    AnalysisAnalysis: the inventory links the handset slowdown to the cash line. If customers resume builds as memory supply settles, that inventory turns into cash; if the slowdown lasts, it carries a write-down risk. Even at its higher level, capital spending of 5.0% of revenue stays light, because manufacturing is outsourced.

Sources

  1. 1.Qualcomm 10-Q for the period to 2026-06-28 (the filing), Jul 29, 2026, read Nov 2, 2026

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Business performance

Growth, profit and margin

Revenue went from $8.9B in FY2007 to $44.3B in FY2025, the operating margin from 32.5% to 27.9%, over 18 years.

  • Revenue$44.3B
  • Operating income$12.4B
  • Operating margin27.9%
Period
Q3 FY2026
Revenue
$9.9B
Operating income
$1.6B
Operating margin
16.3%
Net income
$2.0B
Free cash flow
$495.0M
Business performance

Does the profit turn into cash?

Q3 FY2026: free cash flow of $495.0M against net income of $2.0B in the quarter.

  • Operating cash flow$14.0B
  • Capital expenditure$1.2B
  • Free cash flow$12.8B
  • Net income$5.5B

Capital expenditure is drawn below the axis as cash out. Cash conversion is operating cash flow over net income, shown in the tooltip for years with a profit.

Financial data and sources

How the revenue mix has shifted

Each breakdown the filing reports, as shares of revenue, for every period it restates.

Composition of Certain Financial Statement Items Revenues (Details). The filing restates this breakdown for 1 period.

Click a member to isolate it across the years shown.

The figures

Margins, cash and growth for the period, each with what it was computed from.

Gross margin
53.1%
Source10-Q, Derived from Total revenues and Cost of revenues in the 10-Q filed 2026-07-29
Operating margin
16.3%
Source10-Q, Derived from Operating income and Total revenues in the 10-Q filed 2026-07-29
Net margin
20.1%
Source10-Q, Derived from Net income and Total revenues in the 10-Q filed 2026-07-29
Free cash flow, quarter
$495.0M
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-07-29
Free cash flow margin, quarter
5.0%
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-07-29
Cash conversion, quarter
0.50x
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-07-29
Capital spending, quarter
5.0%
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-07-29
Revenue growth
-4.0%
From the record's own history, against the prior year.

Where revenue comes from

Every breakdown the filing reports for the period, with each item's share.

Revenue streams

Handsets$5.1B51.1%
IoT$1.8B18.4%
Automotive$1.6B16.0%

These items do not sum to total revenue; the filing states them beside it. Source10-Q, us-gaap:Revenues, as reported in the 10-Q filed 2026-07-29

ConsolidationItems

Operating Segments$9.8B98.3%
Reconciling Items$165.0M1.7%

Source10-Q, us-gaap:Revenues, as reported in the 10-Q filed 2026-07-29

What it costs

The cost lines beneath operating income, each as a share of revenue, then the operating result.

Costs are reported by function: what it cost to make what was sold, then the expenses of selling, developing and administering.

Cost lineQ3 FY2026Of revenueSource
Total costs and expenses$8.3B83.7%Source10-Q, us-gaap:CostsAndExpenses, as reported in the 10-Q filed 2026-07-29
Operating income$1.6B16.3%Source10-Q, us-gaap:OperatingIncomeLoss, as reported in the 10-Q filed 2026-07-29

The statements, as filed

The income statement, cash flow statement and balance sheet in the company's own order and words. Every line links to the filing.

Income statement18 lines, as presented in the 10-Q
LineQ3 FY2026A year earlierChangeOf revenueSource
Revenues:
Equipment and services$8.48B$8.89B-4.7%85.2%Source10-Q, qcom:EquipmentAndServices, as reported in the 10-Q filed 2026-07-29
Licensing$1.47B$1.47B0.0%14.8%Source10-Q, qcom:LicensingRevenues, as reported in the 10-Q filed 2026-07-29
Total revenues$9.95B$10.37B-4.0%100%Source10-Q, us-gaap:Revenues, as reported in the 10-Q filed 2026-07-29
Costs and expenses:
Cost of revenues$4.67B$4.61B+1.4%46.9%Source10-Q, us-gaap:CostOfRevenue, as reported in the 10-Q filed 2026-07-29
Research and development$2.61B$2.23B+17%26.2%Source10-Q, us-gaap:ResearchAndDevelopmentExpense, as reported in the 10-Q filed 2026-07-29
Selling, general and administrative$976.0M$771.0M+27%9.8%Source10-Q, us-gaap:SellingGeneralAndAdministrativeExpense, as reported in the 10-Q filed 2026-07-29
Other (shown as a deduction)(-$68.0M)$00.7%Source10-Q, us-gaap:OtherOperatingIncomeExpenseNet, as reported in the 10-Q filed 2026-07-29
Total costs and expenses$8.32B$7.60B+9.4%83.7%Source10-Q, us-gaap:CostsAndExpenses, as reported in the 10-Q filed 2026-07-29
Income Statement
Operating income$1.63B$2.76B-41%16.3%Source10-Q, us-gaap:OperatingIncomeLoss, as reported in the 10-Q filed 2026-07-29
Interest expense (shown as a deduction)($178.0M)$168.0M+6.0%1.8%Source10-Q, us-gaap:InterestExpense, as reported in the 10-Q filed 2026-07-29
Investment and other income, net$1.01B$358.0M+183%10.2%Source10-Q, us-gaap:NonoperatingIncomeExpense, as reported in the 10-Q filed 2026-07-29
Income before income taxes$2.46B$2.95B-17%24.8%Source10-Q, us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest, as reported in the 10-Q filed 2026-07-29
Income tax (expense) benefit (shown as a deduction)($460.0M)$286.0M+61%4.6%Source10-Q, us-gaap:IncomeTaxExpenseBenefit, as reported in the 10-Q filed 2026-07-29
Net income$2.00B$2.67B-25%20.1%Source10-Q, us-gaap:NetIncomeLoss, as reported in the 10-Q filed 2026-07-29
Basic earnings per share$2$2-23%0.0%Source10-Q, us-gaap:EarningsPerShareBasic, as reported in the 10-Q filed 2026-07-29
Diluted earnings per share$2$2-23%0.0%Source10-Q, us-gaap:EarningsPerShareDiluted, as reported in the 10-Q filed 2026-07-29
Shares used in per share calculations:
Basic1,057,000,0001,092,000,000-3.2%Source10-Q, us-gaap:WeightedAverageNumberOfSharesOutstandingBasic, as reported in the 10-Q filed 2026-07-29
Diluted1,069,000,0001,099,000,000-2.7%Source10-Q, us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding, as reported in the 10-Q filed 2026-07-29
Cash flow statement4 lines, as presented in the 10-Q

Year to date, as a quarterly filing reports it.

LineQ3 FY2026A year earlierChangeSource
Adjustments to reconcile net income to net cash provided by operating activities:
Impairment losses on other investments$38.0M$52.0M-27%Source10-Q, qcom:ImpairmentLossesOnOtherInvestmentsWithoutReadilyDeterminableFairValue, as reported in the 10-Q filed 2026-07-29
Equity in net earnings of investees (shown as a deduction)($66.0M)-$4.0MSource10-Q, us-gaap:IncomeLossFromEquityMethodInvestments, as reported in the 10-Q filed 2026-07-29
Statement of Cash Flows
Total cash and cash equivalents at end of period$4.53B$7.77B-42%Source10-Q, us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents, as reported in the 10-Q filed 2026-07-29
Ending Balance - Restricted Cash$0Source10-Q, us-gaap:RestrictedCashCurrent, as reported in the 10-Q filed 2026-07-29
Balance sheet36 lines, as presented in the 10-Q
LineQ3 FY2026A year earlierChangeSource
Current assets:
Cash and cash equivalents$4.53BSource10-Q, us-gaap:CashAndCashEquivalentsAtCarryingValue, as reported in the 10-Q filed 2026-07-29
Restricted cash$0Source10-Q, us-gaap:RestrictedCashCurrent, as reported in the 10-Q filed 2026-07-29
Marketable securities$3.77BSource10-Q, us-gaap:MarketableSecuritiesCurrent, as reported in the 10-Q filed 2026-07-29
Accounts receivable, net$4.67BSource10-Q, us-gaap:AccountsAndOtherReceivablesNetCurrent, as reported in the 10-Q filed 2026-07-29
Inventories$8.38BSource10-Q, us-gaap:InventoryNet, as reported in the 10-Q filed 2026-07-29
Other current assets$1.65BSource10-Q, us-gaap:OtherAssetsCurrent, as reported in the 10-Q filed 2026-07-29
Total current assets$23.00BSource10-Q, us-gaap:AssetsCurrent, as reported in the 10-Q filed 2026-07-29
Assets
Deferred tax assets$5.68BSource10-Q, us-gaap:DeferredIncomeTaxAssetsNet, as reported in the 10-Q filed 2026-07-29
Property, plant and equipment, net$5.22BSource10-Q, us-gaap:PropertyPlantAndEquipmentNet, as reported in the 10-Q filed 2026-07-29
Goodwill$14.27BSource10-Q, us-gaap:Goodwill, as reported in the 10-Q filed 2026-07-29
Other intangible assets, net$1.51BSource10-Q, us-gaap:IntangibleAssetsNetExcludingGoodwill, as reported in the 10-Q filed 2026-07-29
Other assets$7.68BSource10-Q, us-gaap:OtherAssetsNoncurrent, as reported in the 10-Q filed 2026-07-29
Total assets$57.37BSource10-Q, us-gaap:Assets, as reported in the 10-Q filed 2026-07-29
Current liabilities:
Trade accounts payable$2.90BSource10-Q, us-gaap:AccountsPayableCurrent, as reported in the 10-Q filed 2026-07-29
Payroll and other benefits related liabilities$1.47BSource10-Q, us-gaap:EmployeeRelatedLiabilitiesCurrent, as reported in the 10-Q filed 2026-07-29
Unearned revenues$280.0MSource10-Q, us-gaap:DeferredRevenueCurrent, as reported in the 10-Q filed 2026-07-29
Short-term debt$2.49BSource10-Q, us-gaap:DebtCurrent, as reported in the 10-Q filed 2026-07-29
Other current liabilities$4.28BSource10-Q, us-gaap:OtherLiabilitiesCurrent, as reported in the 10-Q filed 2026-07-29
Total current liabilities$11.41BSource10-Q, us-gaap:LiabilitiesCurrent, as reported in the 10-Q filed 2026-07-29
Liabilities and stockholders’ equity
Unearned revenues$81.0MSource10-Q, us-gaap:DeferredRevenueNoncurrent, as reported in the 10-Q filed 2026-07-29
Long-term debt$12.78BSource10-Q, us-gaap:LongTermDebt, as reported in the 10-Q filed 2026-07-29
Other liabilities$5.43BSource10-Q, us-gaap:OtherLiabilities, as reported in the 10-Q filed 2026-07-29
Total liabilities$29.71BSource10-Q, us-gaap:Liabilities, as reported in the 10-Q filed 2026-07-29
Stockholders' equity:
Preferred stock, $0.0001 par value; 8 shares authorized; none outstanding$0Source10-Q, us-gaap:PreferredStockValue, as reported in the 10-Q filed 2026-07-29
Preferred stock, par value$0Source10-Q, us-gaap:PreferredStockParOrStatedValuePerShare, as reported in the 10-Q filed 2026-07-29
Preferred stock, shares authorized8,000,000Source10-Q, us-gaap:PreferredStockSharesAuthorized, as reported in the 10-Q filed 2026-07-29
Preferred stock, shares outstanding0Source10-Q, us-gaap:PreferredStockSharesOutstanding, as reported in the 10-Q filed 2026-07-29
Common stock and paid-in capital, $0.0001 par value; 6,000 shares authorized; 1,057 and 1,074 shares issued and outstanding, respectively$0Source10-Q, us-gaap:CommonStocksIncludingAdditionalPaidInCapital, as reported in the 10-Q filed 2026-07-29
Common stock, par value$0Source10-Q, us-gaap:CommonStockParOrStatedValuePerShare, as reported in the 10-Q filed 2026-07-29
Common stock, shares authorized6,000,000,000Source10-Q, us-gaap:CommonStockSharesAuthorized, as reported in the 10-Q filed 2026-07-29
Common stock, shares, issued1,057,000,000Source10-Q, us-gaap:CommonStockSharesIssued, as reported in the 10-Q filed 2026-07-29
Common stock, shares, outstanding1,057,000,000Source10-Q, us-gaap:CommonStockSharesOutstanding, as reported in the 10-Q filed 2026-07-29
Retained earnings$27.26BSource10-Q, us-gaap:RetainedEarningsAccumulatedDeficit, as reported in the 10-Q filed 2026-07-29
Accumulated other comprehensive income$395.0MSource10-Q, us-gaap:AccumulatedOtherComprehensiveIncomeLossNetOfTax, as reported in the 10-Q filed 2026-07-29
Liabilities and stockholders’ equity
Total stockholders’ equity$27.66B$27.21B+1.7%Source10-Q, us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest, as reported in the 10-Q filed 2026-07-29
Total liabilities and stockholders’ equity$57.37BSource10-Q, us-gaap:LiabilitiesAndStockholdersEquity, as reported in the 10-Q filed 2026-07-29

About this data

Source
Qualcomm 10-Q, accession 0000804328-26-000086, filed Jul 29, 2026, read on Nov 2, 2026.
History
From the SEC's XBRL company facts, the value from the latest filing that stated each period.
Reading
Paragraphs marked Analysis are CXProWealth's reading; everything else is the filing's own numbers and words, or a cited source.
Version
methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-02
Edge and risks

What holds Qualcomm's model up, and what could bend it

Competitive edge

  • Licensing held at $1.47B as chip sales fell

    Royalties on other makers' phones were flat year on year while equipment and services fell, so licensing revenue now equals 90.5% of operating income.

    The detail

    Licensing revenue was $1.47B both this quarter and a year earlier, while equipment and services fell to $8.48B from $8.89B, lifting licensing's share of revenue to 14.8% from 14.2%. The filing describes licensing revenues as "principally from royalties generated through our licensees’ sales of mobile handsets".1

    Licensing revenue equals 90.5% of operating income, against 53.3% a year earlier. That is a comparison, not a margin: the licensing business carries its own costs, and the filing says "Substantially all of QTL’s costs and expenses are comprised of operating expenses."1

    AnalysisAnalysis: the royalty rides on the whole industry's phone volumes and license terms, not on Qualcomm's share of chip sockets, which is why it held while shipments to some major OEMs fell. It holds only as long as the major licenses renew on similar terms; the filing names OEM efforts to avoid paying royalties.

  • The phone chip platform now earns in cars and devices

    Automotive at 16.0% and IoT at 18.4% of revenue grew while handsets fell, spreading research that phones already pay for.

    The detail

    Handsets were $5.09B, 51.1% of revenue; IoT, which covers PCs, extended reality, industrial and networking devices, was $1.83B, 18.4%; automotive was $1.59B, 16.0%. Automotive and IoT revenues rose this quarter, offsetting part of the handset decline.1

    In automotive the filing names higher revenue per unit from "favorable mix and higher average selling prices", and shipments from "new vehicle launches with our Snapdragon digital cockpit" and driver-assistance products.1

    AnalysisAnalysis: automotive revenue now equals 31.2% of handset revenue. Each new market lowers dependence on a few phone makers, but no single one is yet large enough to offset a handset slowdown by itself.

What to watch

  • Supplier costs rose faster than chip prices

    Cost of revenues rose to 46.95% of revenue from 44.4%, which the filing attributes to higher product cost only partly offset by higher selling prices.

    The detail

    Cost of revenues was $4.67B, 46.95% of revenue, against $4.61B and 44.4% a year earlier. The filing attributes the chip unit's lower gross margin to "higher product cost, partially offset by higher average selling prices".1

    The filing says the industry is seeing "a broad-based increase in input costs and capacity constraints across wafer fabrication, assembly, test, advanced packaging, memory and other materials", due in part to AI and data center demand. As a fabless company it relies on a limited number of foundries and test houses, mostly in Asia.1

    AnalysisAnalysis: the same memory shortage hits twice, raising Qualcomm's product cost and leading phone makers to cut build plans. Gross margin turns on whether higher selling prices come to cover higher product cost across the chip lines.

  • Handset revenue rests on a few large customers

    Handsets were 51.1% of revenue, and the filing expects Apple to use more of its own modems, with a significant negative impact on chip revenue.

    The detail

    The filing states: "We derive a significant portion of our revenues from a small number of customers and licensees, and particularly from their sale of premium-tier handset devices." A delay in one large customer's purchases cuts revenue in that period.1

    Apple and Samsung design some of their own chips, and the filing says "we expect that Apple will increasingly use its own modem products, rather than our products, in its future devices, which will have a significant negative impact on our QCT revenues, results of operations and cash flows."1

    AnalysisAnalysis: this is the pressure the diversification spending answers. The modem shift is stated as an expectation rather than a line on this quarter's page, so its size shows up only as it happens.

  • China exposure meets a push for chip self-sufficiency

    A significant portion of revenue comes from Chinese phone makers, and the filing names government pressure, trade restrictions and payment delays as threats.

    The detail

    The filing says a significant portion of revenue comes from Chinese phone makers and others selling devices into China, and that some customers there may use their own or Chinese suppliers' chips, including due to pressure from the "Chinese government (which has prioritized semiconductor self-sufficiency)".1

    It also names the revoked U.S. export license for sales to Huawei, tariffs and trade restrictions, and Chinese rules on moving funds out of the country, which can delay payments from customers and licensees.1

Sources

  1. 1.Qualcomm 10-Q for the period to 2026-06-28 (the filing), Jul 29, 2026, read Nov 2, 2026
Go deeper

Qualcomm, further in

Member research, then your own questions on ChatGPT.

What could change the outlook

What Qualcomm's numbers depend on from here, read from the filing: the conditions behind this period's margins and growth, and where a change would show first.

  • What it would take for operating margin to rebuild

    Which of the handset recovery, supplier pricing and the newer markets the margin depends on most, and the lines in each quarter's filing that show which way it is going.

  • How much of the earnings the operating business produced

    Separating chip and licensing profit from investment gains, and what the lock-up on newly listed QSI stakes means for the quarters ahead.

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Questions to start with
  • How much of Qualcomm's Q3 FY2026 net income came from QSI investment gains rather than its chip and licensing businesses?
  • Why did Qualcomm's licensing revenue hold flat at $1.47B while its chip revenue fell?
  • How does the memory shortage both raise Qualcomm's product costs and cut its handset chip sales?

Business Lens describes Qualcomm from its own filings with the SEC. It is not a view on its shares, a target, or advice to buy, sell or hold anything; figures are as filed and may be restated by the company later. The filing, the dates and the version are under the financial data above.