Qualcomm Takes Aim at Nvidia With New AI Data Centre Chips
Qualcomm delivered record quarterly revenue of $12.25 billion for its fiscal first quarter ended December 2025, edging past Wall Street’s $12.21 billion estimate. Adjusted earnings per share came in at $3.50, also topping the $3.41 consensus. On the surface, this looks like a clean beat. But the real story lies in what comes next, and that picture is considerably less reassuring.
The company’s forward guidance landed well below expectations, projecting Q2 revenue of $10.2 billion to $11.0 billion against analyst estimates of $11.11 billion. Adjusted EPS guidance of $2.45 to $2.65 also fell short of the $2.89 consensus. The culprit is a global memory shortage that is rippling through consumer electronics. Massive demand for data center memory is cannibalizing production capacity for smartphone and device memory, and Qualcomm’s handset customers are pulling back on orders as they manage constrained inventories. This is not a Qualcomm specific problem, but it is very much a Qualcomm sized problem given that handsets still account for roughly 74% of the company’s chip revenue.
Looking at the segment breakdown, the QCT chip division generated $10.6 billion in revenue, up 5% year over year. Within that, handset revenue grew a modest 3% to $7.82 billion. The more encouraging growth came from smaller but faster moving segments. Automotive revenue hit a record $1.1 billion, rising 15% and marking a second consecutive quarter above the billion dollar mark. The IoT division, which includes chips powering products like the Meta Ray Ban smart glasses, grew 9% to $1.69 billion. The licensing business (QTL) contributed $1.59 billion at an impressive 77% margin.
However, investors should note some concerning details beneath the headline numbers. GAAP net income actually declined 6% to $3.0 billion, and operating income fell 5% despite the revenue increase. Total costs and expenses rose 10% year over year, outpacing revenue growth, driven by higher R&D spending and a notable jump in SG&A expenses. The company also completed its acquisition of Alphawave Semi to push into data centers, adding roughly $2.8 billion in goodwill to the balance sheet.
Qualcomm returned $3.6 billion to shareholders through dividends and buybacks during the quarter, signaling confidence in its cash generation. Management expressed optimism about premium smartphone demand and reiterated long term fiscal 2029 revenue targets. But for the near term, the memory bottleneck introduces real uncertainty. The diversification into automotive and IoT is a genuine bright spot, yet these segments remain too small to offset a meaningful slowdown in handsets. Investors should watch memory supply developments closely in coming quarters.
QCT Revenue Streams
| Segment | Q1 FY2026 | Q1 FY2025 | YoY Change |
| Handsets | $7,824M | $7,574M | +3% |
| Automotive | $1,101M | $961M | +15% |
| IoT | $1,688M | $1,549M | +9% |
| Total QCT | $10,613M | $10,084M | +5% |
