$QCOM · Parkev Tatevosian, CFA · 2026-11-06

Qualcomm announced its quarterly financial results, and the report showed a decline in revenue of 8% compared to the same period last year. Pre-tax profits fell even more sharply, by 61% year-on-year.

What is the reason for this decrease? The smartphone industry. The rising cost of memory and storage components has forced consumer electronics manufacturers to raise smartphone prices, resulting in a decline in the number of units sold.

Because Qualcomm derives a large portion of its total revenue and profits from this industry, investors have begun selling its shares. The stock fell by about 7% in after-hours trading, losing almost all of the gains it had made during regular trading hours, when the company announced a multi-year partnership with SpaceX.

So, does this make Qualcomm stock a sell, or is it a buy opportunity when the price is low?

So, it wasn't all bad news for Qualcomm. The company has renewed its long-term licensing agreements with Apple, Huawei, and Transition.

These agreements will allow the company to maintain its performance level in this sector while moving into newer categories. This is what excites me most: the shift towards generating revenue from data centers.

The company announced a multi-generational product collaboration with Amazon in the field of artificial intelligence data centers.

This is the category I'm most excited about with regard to Qualcomm. This is why I bought Qualcomm shares a few weeks ago, and subsequently increased my stake in them.

Qualcomm projected and confirmed that it would generate approximately $5 billion from its data center business in fiscal year 2027.

Now, to put that in perspective, the company generated $43 billion in total revenue in fiscal year 2026. So, this would represent more than 10 % of total revenue for 2026.

I expect, and indeed hope and believe, that this figure will grow to represent an even larger percentage of the company's total revenue in a relatively short time, given the increasing and escalating demand for data centers.

Looking ahead, the company is forecasting revenues of $10.8 billion at the midpoint of the next quarter, disappointing Wall Street investors who had expected better figures. However, if this figure is achieved at the midpoint, it will represent consecutive growth compared to the company's previous quarter, but this does not mean much.

Qualcomm typically generates higher revenue in its first fiscal quarter compared to its fourth quarter, because that quarter includes the holiday shopping season, which sees much higher sales of consumer electronics.

As expected, Qualcomm's cash flow from operations declined in fiscal year 2026. During the twelve months ending September 27, Qualcomm's cash flow from operations fell to $11.1 billion, down from $14 billion in the same period of the previous year.

I appreciated that, and I thought I knew this would happen. I predicted a slowdown in the consumer electronics industry as a result of rising component prices. Almost all manufacturers, including Apple, Samsung and others, have imposed some kind of price increase on their consumer electronics, and this will lead to a decline in consumer purchases.

Therefore, Qualcomm shares are now trading near their cheapest valuation in years with a forward price-to-earnings ratio of 13, undoubtedly due to these short-term headwinds from the smartphone industry.

I saw an opportunity in that, and began building a position in Qualcomm stock, expecting it would take some time before the company's shares recovered. And so, I slowly began to accumulate a stake in Qualcomm, and I will likely continue to add shares in this company for the next few months, and perhaps even the next few quarters, as long as I continue to see the company achieve successes in the data center industry, which I saw in this recent report, where the company confirmed its $5 billion estimate for the data center category in 2027.

The reason for my optimism about this is that even with my assessment of the declining free cash flow and its continued deterioration, right? It decreased in 2026. I expect it to decline again in 2027.

But even taking that into account, I still value the company at much more than its current closing price.

I value the company at $281 per share. In after-hours trading, after falling by about 8%, it is trading at $160.

Therefore, I reiterate that I believe this stock represents an excellent buying opportunity, and I have a high level of conviction and confidence in this rating.