Qualcomm announced second-quarter fiscal 2026 results which demonstrated the impact of a challenging memory environment on its core business. The company reported $10.6 billion in revenue, in line with expectations, but a 3% decline year-over-year. Net income surged 162% to $7.4 billion, largely driven by a one-time tax benefit of $5.7 billion. Despite the strong net income due to this benefit, adjusted earnings per share for the quarter fell 7% to $2.65, below analyst estimates of $2.77 the prior year. Phone-related revenue specifically saw a 13% decline year-over-year, coming in at $6 billion.
Looking ahead, Qualcomm's forecast for the third quarter of fiscal 2026 underwhelmed analysts. The company expects revenue to be between $9.2 billion and $10 billion, falling short of the LSEG compiled estimate of $10.27 billion. Similarly, it projected third-quarter adjusted profit of $2.10 to $2.30 per share, compared to analyst expectations of $2.45 per share. Chip revenue for the third quarter is anticipated to be between $7.9 billion and $8.5 billion, below estimates of $8.93 billion. This lower outlook is attributed to a shortage of memory chips, which has led to increased smartphone and PC costs and subsequently reduced consumer demand.
The memory chip crunch has significantly impacted the global smartphone market. Counterpoint Research indicated a 6% year-over-year decline in smartphone shipments in calendar Q1 and an 11% drop in Q2, marking the worst second quarter in 13 years for the industry. Qualcomm CEO Cristiano Amon acknowledged the challenging memory environment but expressed confidence that the smartphone market would rebound after the fiscal third quarter, stating, "We can now call the bottom." Qualcomm, a major supplier to companies like Apple and Samsung, is seen as a barometer for market health. The company also announced a $20 billion stock buyback program to reassure investors and aims to diversify, with automotive sales rising 38% to $1.3 billion and IoT revenue climbing 9% to $1.7 billion in Q2. Data center products are projected to generate $5 billion in revenue in fiscal 2027 and non-handset sales are targeted to reach $40 billion by fiscal 2029.
