Qualcomm (QCOM.US) recently held its first-quarter earnings call for fiscal year 2026. The company noted that despite robust end-market demand, the handset industry is confronting a severe memory shortage. Due to pricing pressures from rising memory costs, second-quarter revenue from handset chips is anticipated to decrease to approximately $6 billion, reflecting direct constraints on shipments from supply chain bottlenecks.

In terms of financial performance, Qualcomm achieved a record quarterly revenue of $12.3 billion, with Non-GAAP earnings per share (EPS) of $3.50. Revenue from the QCT (chip business) segment reached a record $10.6 billion, primarily driven by strong performance in flagship handsets. The automotive business revenue grew 15% year-over-year to $1.1 billion, also setting a new record. The Internet of Things (IoT) business showed positive momentum in industrial applications, edge networking, and smart glasses.

For the second quarter, the company provided a revenue forecast ranging between $10.2 billion and $11.0 billion, with Non-GAAP EPS projected to be between $2.45 and $2.65. Despite facing supply headwinds, Qualcomm's position in the premium market remains solid. Regarding Samsung's upcoming flagship devices (Galaxy S26 series), Qualcomm confirmed it expects to maintain approximately a 75% market share, consistent with prior expectations. Additionally, the company specifically highlighted ByteDance's launch of the Doubao AI smartphone, referring to it as a "significant milestone in the transition to AI-native smartphones."

**Q&A Session**

**Operator:** The first question comes from Joshua Buchalter of TD Cowen. Please proceed.

**Joshua Buchalter:** Good afternoon, thank you for taking my question. I'd like to start with the handset outlook. Aside from memory pricing, are there other factors contributing to the weakness? It's good to hear the reiterated Samsung share. But most importantly, how should we think about the total market size for the full year? Do you feel this inventory adjustment is the last issue you'll see in the March quarter? Thank you.

**Cristiano Amon:** Thank you, Joshua. I'll start, and then Akash can add more detail. This is 100% related to memory. Actually, macroeconomic indicators have been strong. We've seen handset demand remain robust. Given our licensing business, we believe we have good visibility into overall demand. Sell-through data has also been very strong. Unfortunately, what we observed in Q1, and what's reflected in our Q2 guidance, is entirely determined by memory availability. As you know, all indications are that DRAM availability for consumer electronics, particularly handsets, is down year-over-year because data centers are prioritizing HBM (High Bandwidth Memory). I believe the market size will be determined by this. We see customers immediately reacting, adjusting their production plans based on the memory available to them. Akash, anything to add?

**Akash Palkhiwala:** No, I think that covers it.

**Joshua Buchalter:** Okay, thank you, Cristiano. As a follow-up, just extrapolating from your QCT guidance, the automotive number implies a fairly significant sequential acceleration. Is this a reflection of some of the ADAS orders you've discussed before? Could you talk about the drivers and the sustainability of this higher level you're guiding to? Thanks.

**Cristiano Amon:** Thank you very much. As we've consistently said, the pipeline we've built in automotive continues to convert to revenue, especially as new vehicle platforms ramp up and new models launch. This is why we continue to see record revenue in the automotive business. Our performance isn't solely tied to the industry cycle; it's primarily driven by our share gains. We are very excited about the trajectory. We feel good about all our projections for revenue scale, and when you look at our fiscal 2029 targets, everything is moving in the right direction. We continue to win more design deals. Our position in the industry is strengthening. With our platforms, we see Flex gaining traction, enabling ADAS and digital cockpit across tiers on the same chipset. We are now seeing some major volume drivers going into production. We did announce a very broad partnership with the Volkswagen Group. Your comment is correct; once OEMs see the stack we launched with BMW, it becomes an option for them, and we're gaining more traction in ADAS. We see strong interest, and things are progressing very well.

**Operator:** The next question comes from Samik Chatterjee from JP Morgan. Please go ahead.

**Samik Chatterjee:** Hi, thanks for taking my question. I have one on the data center side and one on the handset side. Perhaps on data center, Cristiano, could you provide an update on your progress with customers there? Given the volatility we're seeing in memory, is this more disruptive to your progress with customers, or does the heightened focus on the bill of materials (BOM) aspect actually accelerate discussions in some way? I have a quick follow-up. Thanks.

**Cristiano Amon:** Thank you, Samik. Let me start with data center. Everything is progressing as we planned. Currently, the only publicly announced customer is [inaudible], and that engagement is going well; we have begun shipments. We've been working with them and ISVs on third-party workloads. We are encouraged by the progress our team has made on the roadmap. We continue to receive very positive feedback from a broad range of engagements, as you would expect from a company of our size in discussions with major hyperscalers and cloud providers. We have a very unique proposition. We've consistently said we have a platform dedicated to a disaggregated data center. We perform exceptionally well on certain workloads, like decoding, utilizing our differentiated compute and memory approach. If anything, I think this dynamic validates the concept of having dedicated hardware in a disaggregated data center versus a single GPU doing everything. We are gaining good traction. Our focus now is squarely on execution. We have identified key milestones. We are executing on two fronts: the CPU – adding a RISC-V CPU to the roadmap alongside the Arm-compatible Orion – and the AI 250 and our new memory architecture. We will provide more detailed roadmap information at an investor event. So far, everything is on track. We reiterate our expectation for revenue to begin materializing starting in 2027. We feel good and just need to continue executing. Before I touch on memory, Akash, anything to add?

**Akash Palkhiwala:** No, the only thing to add on data center is that we've previously mentioned we expect this to become a multi-billion dollar revenue opportunity over the next few years. So everything Cristiano outlined reaffirms that opportunity.

**Cristiano Amon:** Okay, regarding memory. We'll have to see how this develops. Let me give you some dynamics. Stepping back, we are very satisfied with all other aspects of our business. We simply wish there was more memory available. Given its scale and cycle times, the handset segment is being impacted the most. We expect the impact on other businesses to be more moderate. For instance, automotive is somewhat less sensitive to memory price increases, and as you noted, the handset impact extends beyond just that. That said, looking back at historical precedents, the best reference might be what happened during the pandemic. The premium and high-tier segments have proven to be more resilient to price increases. This might be a factor, but the most critical issue is simply availability. So, memory availability will define the overall size of the handset market. OEMs will likely prioritize premium and high-tier devices, as they have done historically. These segments might be less affected, and we will observe how consumers react to potential increases in final product prices. I stand by my earlier statement: I believe the total mobile handset market size for the fiscal year will be determined by memory availability. We will monitor this quarterly as handsets are repriced, tiers shift towards premium, and we see how the market evolves.

**Samik Chatterjee:** Understood. A quick follow-up, Cristiano. Regarding OEMs prioritizing the premium tier, within that premium tier, do you expect them to potentially down-spec the chipset or SoC tier just to manage their overall costs relative to what they need to pass on to consumers? That's it. Thanks.

**Cristiano Amon:** As a general trend, I'd highlight what we saw this quarter. Yes, there is a memory shortage, but where memory is available, the results have been excellent. Consumer demand is very strong. What we've observed, consistently over years, is the continued expansion of the premium tier. In a relatively flat total handset market, we see growth within the expanding premium segment. So, I believe this is a factor that will likely drive OEMs to continue focusing on the premium tier. I did mention earlier our dual-flagship strategy, which has been well received by the market. When you look at different OEMs, you see variations like 'Ultra' models or multiple tiers within the high-end. I expect this dynamic to play a role. But broadly, we expect the premium tier to be more resilient. Ultimately, the available memory is the limiting factor.

**Operator:** The next question comes from Ross Seymore of Deutsche Bank. Please proceed.

**Ross Seymore:** Hi, thanks for taking my question. You mentioned several things regarding handsets for my first question. But ultimately, what percentage of your handset business would you estimate is in China, given you mentioned they are particularly hard hit? And do you think normal seasonality could return after the March quarter decline, or is that too difficult to call?

**Cristiano Amon:** Regarding your first question, Ross, we don't break down specifics by region. But if you consider the percentage of volume driven by Chinese OEMs and then adjust downward based on the tiers they compete in, our exposure would be lower than what unit numbers alone might suggest.

**Ross Seymore:** And on seasonality?

**Akash Palkhiwala:** Regarding handset seasonality, you should consider that consumer demand seasonality will be consistent with what we've seen historically. Consumers tend to wait for premium-tier launches, and significant purchasing occurs then. As Cristiano mentioned earlier, the real question is how supply aligns with demand. We don't have a demand problem; demand continues to be strong. Our design win pipeline remains robust. The issue is simply aligning supply with this demand over the coming months.

**Ross Seymore:** Then a follow-up on operating expenses. You gave a good explanation for the slight increase in the March quarter. After that, given what you've said about memory, are there any adjustments, or are you investing through this period?

**Akash Palkhiwala:** I think the way we guided for the March quarter is a reasonable way to think about the rest of the year. Our focus, as we've stated, follows this framework for operating expenses: really reducing investment in mature businesses and using those savings to fund diversification priorities. Then we have these acquisitions, including AlphaWave, driving incremental expenses and investment in data center. The focus is just on those areas. As we've been very disciplined over the past few years, with operating expense growth significantly slower than revenue and gross profit growth, this framework will not change for our future operating plans.

**Ross Seymore:** Thank you.

**Operator:** The next question comes from Stacy Rasgon of Bernstein Research. Please go ahead.

**Stacy Rasgon:** Hi, thanks for taking my question. For the first question, I want to ask about seasonality differently. It's really about June. Typically, just seasonally, I know your revenue declines sequentially in June. So you're guiding to $6 billion in handsets for the March quarter, which is down about 13% year-over-year. Given what you're seeing in the memory market now, do you expect a similar year-over-year decline in June, or do you view this $6 billion figure, given it's a supply constraint, as a good number to consider until things normalize? How should we think about June relative to March in the context of the memory situation, considering the March decline?

**Akash Palkhiwala:** Stacy, given the market uncertainty, we obviously don't guide beyond the second quarter. But as Cristiano said earlier, when you look at demand fundamentals, they are strong. The real issue is how supply aligns with it, and we expect supply to really define the financial outlook for the remainder of the fiscal year. Specifically for quarter-to-quarter modeling, you should view the March quarter as a reasonable base for modeling June, really akin to the seasonal patterns you've seen in other years.

**Stacy Rasgon:** Understood. Thank you. For my follow-up, I wanted to ask about QTL. Again, it sounds like demand is there, but we just don't know how many handsets can be built. In that context, how should we think about the typical QTL run-rate throughout the year across quarters? Do you think they are similar to what we've seen in the past? Your guidance might be consistent with or slightly below what we typically see in March and the following levels. How do you see it?

**Akash Palkhiwala:** Stacy, this is Akash. Let me try to address this a couple of ways. First, the strong performance in the December quarter. We saw handset units come in above expectations for the quarter. As we look to the next quarter, our QTL guidance is slightly below where we were last year. So it's very consistent with the trend. But of course, it is subject to supply considerations. For the full year, at this point, given the supply situation, we have a negative bias on units, but we really have to see how it develops over the next few months.

**Stacy Rasgon:** Understood. So perhaps slightly below what we saw in March, but similar seems reasonable given what we know now.

**Akash Palkhiwala:** I think that's the framework I outlined; that's how we're thinking about it.

**Stacy Rasgon:** Okay, thank you both.

**Operator:** The next question comes from Timothy Arcuri of UBS. Please proceed.

**Timothy Arcuri:** Thank you very much. Akash, a question on the QCT operating margin guide. The flow-through is over 100%. The margin decline isn't surprising, but it seems to be happening quite rapidly, faster than I would have thought. Is there anything else going on? I know wafer costs are rising, and you said on the call you're still gaining share in the high-end. Is there anything causing the flow-through on the topline to be over 100% for March?

**Akash Palkhiwala:** No, Tim. We expect gross profit dollars to be roughly flat with the December quarter. So it's just the passthrough of the revenue scale and the operating expense guidance we provided.

**Cristiano Amon:** Sorry, Tim. Just to add one thing. I think the view of what we're seeing sequentially this quarter is very consistent with how other companies are reporting. The handset market is simply adapting to the new build realities. So we don't really see anything beyond that. As a reminder, irrespective of this memory issue, we always have seasonality where a lot of the high-tier launches happen around the Lunar New Year. So you would typically see some sequential decline in the China market as they build for those high-end launches.

**Timothy Arcuri:** Okay, thank you. Any update on the Huawei license? I know we're still waiting for it. Perhaps what is the sticking point? Is there a risk if you don't sign a license with Huawei? We've discussed this before, but is there a risk and a precedent for large customers? Thanks.

**Alex Rogers:** Thank you. This is Alex. There's really no update on the Huawei discussion. Discussions are ongoing. Regarding the sticking point, I can't really get into the details of confidential discussions. I would say the two sets of negotiations are quite different, significantly different actually, operating on different paths. As you know, for the other company, whenever we see a renewal date approaching, we start discussions well in advance. So that is ongoing, and we don't have any update on that.

**Timothy Arcuri:** Okay, thank you.

**Operator:** The next question comes from C.J. Muse from Cantor Fitzgerald. Please go ahead.

**C.J. Muse:** Yes, good afternoon. Thank you for taking the question. I'm wondering, obviously, DRAM manufacturers have been talking about only being able to meet 50% to 70% of demand, emphasizing shortages lasting into 2028. So curious how you plan for a scenario that could persist? Are your Chinese customers looking to design in CXMT, and can you get certified there? I imagine your business with Samsung should be strong given their internal DRAM supply, and your wafer commitments with TSMC on the leading edge. Given all this significant uncertainty, how are you managing all of this?

**Cristiano Amon:** That's a very good question. I know it's obvious, but just to clarify for the record: For handsets, we do not purchase the memory. There is some memory stacked on modems, but the majority is purchased directly by our customers. Given our scale, you should expect us to be among the first to be certified with every memory provider. Every memory you can think of, CXMT and other smaller players, we are already certified with. Also, compared to some others, we have flexibility; if you dig deep, you'll find we have flexibility to use both new and older versions of memory on our platforms. We have multi-generational memory controllers. So from a platform perspective, we will utilize whatever is available. This has always been our approach during shortages. Now, the second part of your question is the bigger issue. The growth trend in data centers continues; that's very evident. Memory suppliers have prioritized building HBM capacity. The data points you mentioned align with what we see. As I said earlier, there are clear signs that, as of today, memory availability for consumer electronics is below demand year-over-year, and we've seen that in the ramp. You're starting to see commentary about gaming consoles and other consumer electronics. We really can't predict if this will continue into 2027 or 2028. There are capacity build plans. It also depends on how much the data center trend continues to accelerate. At this point, it's fair to assume that for this fiscal year, the size of the handset market – which is likely the most impacted within our business – will be defined by DRAM availability.

**Akash Palkhiwala:** C.J., on the second part of your question regarding leading-edge wafers, as you know, leading-edge nodes are also constrained from a wafer perspective, but we have strong relationships with our suppliers. So we are confident we will have sufficient wafers to meet demand.

**C.J. Muse:** Thank you. As a follow-up, I'm curious, if we do see a mix shift towards higher-end Snapdragon but lower unit volumes. How should we think about the impact on your QCT EBITDA margins?

**Akash Palkhiwala:** Yes, as you well know, C.J., we perform very well in the premium and high-tier segments. So as the mix shifts upward, that is generally favorable for us.

**Operator:** The next question comes from Ben Reitzes of Melius Research. Please proceed.

**Ben Reitzes:** Yes, hey, guys. Want to continue on the memory topic. When we look at Apple and its propensity for double-digit growth, potentially for the full year, it seems they will continue to get a disproportionate share of available DRAM. Is that possible? How do you navigate that with all your partners? I guess the question is, does one vendor getting disproportionate unit growth and obviously the allocation they get, add a layer of uncertainty that could persist into next fiscal year?

**Cristiano Amon:** It's difficult to make predictions, but I might also remind you that we have another large customer that also has a memory division. So, a general statement might be that larger OEMs probably have better ability to secure sufficient memory, and they will make prioritization decisions compared to smaller OEMs, which might be true. But I think this is an industry-wide issue. I don't think any OEM is immune. Generally, the commentary we see across the industry is about supply constraints, not demand issues.

**Ben Reitzes:** Okay. Well, look, there have been a lot of questions on this. My next one, I just wanted to dig a bit deeper into data center. I know you were asked if there would be memory available for it. But in terms of recent validation events, I believe it was the decoding aspect of your solution. I'm wondering if you can provide some update on what's happened since NVIDIA and the discussion about moving beyond human-like and the overall trends and your ability to participate? Thanks.

**Cristiano Amon:** Well, this is what I can say without preempting our investor event. First, I think we are – I would characterize it this way. I think there are many companies now that recognize Qualcomm's technology and technical capabilities. I think you know our track record in technology execution has been very successful. I think we also understand some of the dynamics in compute and memory, and given the breadth of our IP roadmap, I believe we are one of the few companies that can span from below 5 watts all the way to 500 watts today. We've said in the past that when we enter this market, we need to intercept where the market is going, and we are really focusing on inference, specifically in a disaggregated context. I think you correctly pointed that out. For example, in decoding applications, we believe we are very competitive, not just from a power perspective, but from overall TCO, compute density, memory density. We are really focused on execution. The feedback we get from many large companies, both on the technology and product side, is very positive. The ball is in our court now to execute, have hardware available, and show results. We will just continue to do that.

**Operator:** Thank you. This concludes today's Q&A session. Mr. Amon, do you have any closing remarks before we end the call?

**Cristiano Amon:** Yes, the only thing I'd like to add is that, unfortunately, I think the entire industry is impacted by the memory situation, but we remain very encouraged by the foundation the company has laid to maintain relevance across many industries. So we are on track to deliver on our fiscal 2029 diversified revenue commitment. We are gaining very good traction in future opportunities like robotics, physical AI in robotics, which is the best example of edge AI I can provide outside of automotive. We believe we are creating a completely different company, relevant in many, many markets. We will continue to execute on our roadmap. I want to thank all our partners, suppliers who are working with us through this memory shortage, and our employees. We look forward to speaking with you next quarter.

**Operator:** Ladies and gentlemen, this concludes today's conference call. You may now disconnect.