Qualcomm (QCOM US): Hold: Near-term headwinds despite long-term AI narrative

Research evidence excerpt

Qualcomm (QCOM US): Hold: Near-term headwinds despite long-term AI narrative

16.1 17.1 12.5

Qualcomm expected to increase ASPs in Sep-Q to offset rising input costs with QCT ROE (%) 56.0 54.1 62.7 99.3

GM expected to be at 47% – lower than our 3QFY26 QCT GM estimate of 48%. 52-WEEK PRICE (USD)

LT AI narrative offset by datacentre GM dilution: Post the June 24 Investor Day, 270.00

Qualcomm re-iterated its FY29 targets across the board for automotive + IoT, datacentre, 185.00

and overall non-handset revenue. We also expect to see datacentre sales starting in

100.00

1QFY27 (Dec quarter) of USD500m, but datacentre sales are also expected to be GM 07/25 01/26 07/26

dilutive initially. As highlighted in our 15 July note Big datacentre opportunity, bigger TargetHigh: 251.02price: 165.00Low: 124.07 Current: 155.68

execution test, our sensitivity analysis assuming USD5bn in FY27e datacentre revenue Source: LSEG IBES, HSBC estimates

shows upside of just 4% to FY27e EPS vs our base case implying limited earnings upside.

Qualcomm’s server CPU product is not expected until 2028, which could be too late as Frank Lee*

Global Head of Tech Hardware & Semi Research

Intel (INTC US, USD81.88, Buy), AMD (AMD US, USD429.56, Hold) and Arm (ARM US, The Hongkong and Shanghai Banking Corporation Limited

USD224.89, Hold) continue to solidify their positions. Having limited expertise in AI compute, frank.lee@hsbc.com.hk

+852 2996 6916

pivoting resources to datacentre might prove to be expensive and contract margins. We

Pulkit Aggarwal*

continue to expect nearly half of QCT revenues to still be smartphone driven by FY28e. Associate

Bangalore

Maintain Hold rating; cut TP from USD180.00 to USD165.00: We cut our FY26/FY27

EPS estimate by 2%/6% to reflect the margin dilution.