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SEC filingRevenue grew 5% to $12.3B, but net income fell 6% as higher expenses and lower gross margin weighed; QCT margins compressed while QTL expanded.
In the first quarter of fiscal 2026, QUALCOMM reported revenues of $12.3 billion, up 5% year-over-year from $11.7 billion. The growth was driven by a $528 million increase in QCT equipment and services revenues and a $57 million increase in QTL licensing revenues. Gross margin contracted to 55% from 56%, primarily due to unfavorable product mix and higher costs in QCT. Net income declined 6% to $3.0 billion, as higher operating expenses—especially research and development (up $223 million to $2.5 billion) and selling, general and administrative (up $142 million to $865 million)—more than offset revenue gains. Operating expenses were elevated by increased investment in wireless and integrated circuit technologies, share-based compensation (including a shift to equity awards), and acquisition-related costs. The effective tax rate rose to 15% from 13%, partly due to changes from the One Big Beautiful Bill Act (OBBB), which reduced FDDEI benefits and introduced a corporate alternative minimum tax.
QCT segment revenues grew 5% to $10.6 billion, with handset revenues up $250 million to $7.8 billion, automotive up $140 million to $1.1 billion (driven by Snapdragon digital cockpit launches), and IoT up $139 million to $1.7 billion (led by edge networking and consumer products). QCT earnings before tax (EBT) increased modestly to $3.3 billion, but EBT margin fell to 31% from 32% due to higher operating expenses and lower gross margin from unfavorable product cost, partially offset by higher average selling prices and volume.
QTL segment licensing revenues rose 4% to $1.6 billion, reflecting increased estimated sales of cellular products. QTL EBT grew to $1.2 billion, with margin expanding to 77% from 75% as operating expenses declined, particularly in research and development.
QSI reported EBT of $179 million, up from $19 million, driven by higher net gains from observable price changes on non-marketable equity investments.
Management highlighted several headwinds for coming quarters. Memory supply constraints and related price increases are expected to dampen demand from handset customers. Global trade policy changes, including tariffs, add uncertainty to demand, pricing, and costs. Competition from vertical integration by customers, notably Apple's transition to its own modem, is expected to significantly reduce QCT revenues and cash flows. Additionally, rising process node costs and U.S./China trade tensions pose further risks. On the positive side, the company completed the Alphawave acquisition to strengthen its data center connectivity portfolio and continues to invest in on-device AI and diversification. No specific numerical guidance was provided, but capital allocation priorities remain dividends and share repurchases, with $2.65 billion in buybacks during the quarter.
As of December 28, 2025, QUALCOMM held $7,205M in cash and cash equivalents and $4,617M in marketable securities, totaling $11,822M in liquid assets. Total debt stood at $14,817M, essentially flat sequentially. Shareholders' equity increased to $23,073M from $21,206M at fiscal year-end, driven by net income of $3,004M and $1,860M in common stock issued for the Alphawave acquisition, partially offset by $2,650M in share repurchases and $949M in dividends. Inventory rose to $6,665M, with work-in-process representing the largest component at $4,026M. Unearned revenues (deferred revenue) totaled $458M.
The Notes disclose multi-year capacity purchase commitments with certain integrated circuit suppliers. Total advance payments related to these commitments were $1.2B as of December 28, 2025, down from $1.9B at September 28, 2025. Of this amount, $831M is classified in other current assets and $331M in other assets. No other purchase commitments or contractual obligations are detailed in the Notes.
During the first quarter of fiscal 2026, QUALCOMM repurchased 15M shares for $2,650M, with $4.6B remaining under the $15.0B program announced November 6, 2024. Dividends totaled $949M ($0.89 per share), up from $0.85 per share in the prior year quarter. Capital expenditures were $549M, or 4.5% of total revenues. There was no new debt issuance or repayment; long-term debt remained at $14,817M. The company also completed the $2.3B Alphawave acquisition, funded primarily with $1.8B in equity (11M shares) and $301M cash.
QUALCOMM reports three segments: QCT, QTL, and QSI. QCT revenues of $10,613M (up 5.2% YoY) were driven by handsets ($7,824M), automotive ($1,101M), and IoT ($1,688M). QTL revenues were $1,592M (up 3.7% YoY). QSI reported $179M in EBT, primarily from investment gains. Segment EBT for QCT was $3,302M (31.1% margin) and for QTL was $1,231M (77.3% margin). Nonreportable segments (QGOV, Data Center) contributed $47M in revenue and a $85M EBT loss. No geographic revenue breakdown is provided in the Notes.
Operating cash flow (CFO) of $5.0B significantly exceeded net income of $3.0B, indicating strong cash generation. The ratio of CFO to net income is 1.65x, partly driven by non-cash charges (depreciation $393M, share-based comp $888M) and favorable working capital movements (notably a $243M decrease in accounts receivable and a $553M increase in other assets). Capital expenditures of $549M represent 11.1% of CFO, up from 6.0% in the prior year, reflecting increased investment. Implied free cash flow (CFO minus capex) of $4.4B covers dividends ($949M) and share repurchases ($2.65B) by a comfortable 1.2x. Net gains on marketable securities of $165M provided an additional boost. The increase in inventories ($99M use) and decrease in trade accounts payable ($73M use) were modest drags. Overall, the cash flow profile remains healthy, with ample liquidity for capital returns.