Apple To Give Qualcomm Holiday Boost, But Trouble Looms Next Quarter

Core Viewpoint - Qualcomm Inc. is expected to perform better than anticipated in the December quarter due to strength from Apple, but a weaker smartphone market and rising operating costs may negatively impact future outlook [1] Group 1: Earnings Estimates - JPMorgan has lowered its fiscal year 2026 earnings estimate to $11.50 from $11.80 and fiscal 2027 forecast to $12.15 from $12.80 [3] - For the first quarter of fiscal 2026, revenue is expected to be $12.6 billion, exceeding consensus of $12.2 billion, but a softer second quarter is anticipated with revenue of $10.8 billion compared to consensus of $11.2 billion [3] Group 2: Margin Pressures - Earnings per share outlook is facing challenges due to costs from recent acquisitions and increased R&D spending in the datacenter business, with a forecast EPS of $2.66 for the second quarter of fiscal 2026 versus consensus of $2.90 [4] - Android original equipment manufacturers are experiencing memory cost increases, which may affect Qualcomm's handset revenues and licensing business starting in the March quarter [5] Group 3: Valuation and Market Position - Despite the reduced price forecast to $195, this implies a 29% upside from current levels, supported by a valuation multiple of 13 times next twelve months earnings and opportunities in AI for datacenters [6] - Qualcomm is rated Overweight due to expectations of a long-term share re-rating as the company shifts focus from smartphones to PCs, IoT, and automotive sectors, which are projected to become significant revenue contributors by the end of the decade [7]