Qualcomm Is Down 37% From Its High and Reports Wednesday. Is the Stock a Buy?

Qualcomm (NASDAQ: QCOM) trades at $162.88 as of this writing, about 37% below its 52-week high of $259.92. The 36 analysts covering the chipmaker rate it, on average, a hold. Yet those same analysts carry an average price target of $221.23, about 36% above the stock.

What gives? In short, shares have pulled back sharply -- and most analysts covering the stock haven't updated their ratings. So, is this a buying opportunity? With the company reporting fiscal third-quarter results after the market closes Wednesday, this is a timely question worth considering.

Image source: Getty Images.

What's leading to some caution

Qualcomm's most recent report shows some reasons to be cautious. Revenue for the fiscal second quarter (the period ended March 29, 2026) came in at $10.6 billion, down 3% year over year, and non-GAAP (adjusted) earnings per share fell 7% to $2.65. And the underlying trouble sat exactly where the company's chip revenue is most concentrated. Handset chips, at $6.0 billion of revenue, fell 13% from the year-ago period.

"We are pleased to deliver results in line with our guidance, reflecting solid execution as we navigate a challenging memory environment," said CEO Cristiano Amon in the company's fiscal second-quarter earnings release.

That memory reference is the near-term story. Memory chip prices have surged, squeezing the budgets of the phone makers that buy Qualcomm's processors. Qualcomm reportedly answered on July 24, telling customers it will raise chip prices by double digits on products shipped after Sept. 1. Guidance for the quarter being reported Wednesday calls for revenue of $9.2 billion to $10.0 billion, below last quarter at the midpoint, with adjusted earnings per share of $2.10 to $2.30. Management said the outlook reflects memory supply constraints hitting demand from several handset makers. It also said it expects handset revenue from Chinese customers to bottom in the quarter and return to sequential growth the following one -- a specific, checkable claim that Wednesday's guidance will either support or undercut.

Then there is Apple. The iPhone maker began shipping phones with its own in-house modem chip in early 2025 and has reportedly been working toward dropping Qualcomm's modems across its lineup, a transition reported to run through 2027. That transition has hung over this stock for years, and it lands on the same handset line the memory squeeze is hitting now.

Reasons to be optimistic

But there's some good news, too.

Automotive revenue rose 38% year over year last quarter to a record $1.3 billion, and its Internet of Things (IoT) revenue grew 9% to $1.7 billion. Together, the two grew 20%, and they now account for about a third of chip segment revenue. Qualcomm's licensing business (the patent royalties phone makers pay to use its cellular technology) added $1.4 billion on top, at a 72% pre-tax margin.

The company is also pushing into data centers. Amon said a custom silicon engagement with a leading hyperscaler (one of the giant cloud computing providers) remains on track for initial shipments later this calendar year. At an investor day in June, management set a target of more than $15 billion of data center revenue by fiscal 2029, up from about $300 million this year.

And Qualcomm continues returning capital to shareholders. It paid out and repurchased $3.7 billion in the fiscal second quarter, bought back $5.4 billion of stock in the first half of its fiscal year, and announced a new $20 billion repurchase authorization. At the current price, the dividend yields 2.2%.

To be clear, no price target makes an investment case on its own, and the distance to this one is not a reason to buy the stock. What the gap shows is simply that the analysts who study this company most closely think the diversification is worth considerably more than a memory-squeezed handset cycle. But there are still risks.

After all, at about 17 times forward earnings with a 2.2% yield, a lot of handset erosion is arguably already in the price.

So here is what I'd watch Wednesday afternoon. First, does management's call for a bottom in Chinese handset revenue survive contact with the new guidance? And second, is automotive still compounding at anything near last quarter's pace? This may be a buying opportunity. But I'd personally rather wait for more information before considering buying, even if the stock rebounds too fast for me to get an opportunity to own shares.

Daniel Sparks and his clients have positions in Apple. The Motley Fool has positions in and recommends Apple and Qualcomm. The Motley Fool has a disclosure policy.