JPMorgan has stark message on Qualcomm stock

JPMorgan is becoming more cautious on QUALCOMM Incorporated (QCOM) ahead of its upcoming earnings report, citing rising pressure in its core handset business. At the same time, newer growth areas are not yet large enough to offset that weakness.

Here's JPMorgan's message to Qualcomm investors:

JPMorgan flags rising earnings risk ahead

On April 16, JPMorgan downgraded Qualcomm to Neutral from Overweight, cut its price target from $185 to $140, and put the stock on "Negative Catalyst Watch" ahead of fiscal Q2 results expected on April 29. Negative catalyst watch is a term JPMorgan uses when it sees meaningful near-term downside risk and no clear event likely to improve the outlook.

Qualcomm shares have already fallen 22% so far in 2026 and nearly 40% from their October peak, with the stock currently trading around $136 per share.

JPMorgan's call reflects growing downside risk to near-term earnings as Qualcomm’s handset business faces several pressures at once:

Memory supply constraints

Weak smartphone demand in China

Heavy customer concentration with Apple and Samsung

Those risks matter because Qualcomm still depends heavily on Qualcomm CDMA Technology (QCT), its chip unit, for earnings. J.P. Morgan now expects QCT revenue to decline 22% in calendar 2026, worse than the 17% decline expected by the broader Street.

Qualcomm's current forward P/E multiple of just over 12x only looks cheap if earnings hold. If handset weakness persists and exposure to premium customers shrinks, the stock may not be cheap relative to normalized earnings power.

Qualcomm's margin reset puts handset weakness back in focus

The setup for Qualcomm’s upcoming Q2'26 earnings report on April 29 was established with Q1 results released in late December. The company posted fiscal Q1 revenue of $12.25 billion and non-GAAP EPS of $3.50, both ahead of consensus estimates of $12.21 billion and $3.39, respectively. But the market focused on weaker guidance rather than the beat.

For fiscal Q2, Qualcomm guided to revenue of $10.2 billion to $11.0 billion and non-GAAP EPS of $2.45 to $2.65. More importantly, it guided QCT EBT margin to 26%-28%, down from 31% previously.

QCT is Qualcomm’s main profit engine, so a 3- to 5-point drop in profitability reduces profit per handset dollar and increases the risk that any revenue decline will translate into a larger hit to EPS.

Whether the cause is lower utilization, weaker mix, pricing pressure, or softer volumes, Qualcomm is earning less from its core business just as smartphone demand weakens. For that reason, investors want proof that earnings will improve.

Diversification still not enough to offset handset pressure

Qualcomm has made real progress outside smartphones, but those businesses remain too small to offset weakness in the core franchise. In fiscal Q1, automotive revenue reached $1.1 billion, up 15% year over year, and management expects more than 35% growth in fiscal Q2.

CEO Cristiano Amon said on the most recent earnings call that "Demand for our Snapdragon Digital Chassis solutions remains incredibly strong, and we announced several collaborations with top automakers, OEMs, and service providers during the quarter."

That is meaningful progress, but investors still view automotive as a partial offset rather than a replacement for handset earnings. The lost profit pool in smartphones is larger and more immediate.

The same problem applies to data center AI inference. The opportunity matters strategically, but revenue is not expected to become meaningful until around fiscal 2027. By then, Qualcomm will be competing in a market where Arm-based CPUs and Nvidia inference platforms are already pressing harder.

At the same time, the core business faces customer risks that diversification has not yet neutralized. Apple's modem insourcing could eventually remove roughly $7 billion to $8 billion of business from Qualcomm, while analyst assumptions for Samsung’s Galaxy S26 reportedly now point to a 75% Qualcomm share instead of 100%. These shifts would pressure the company's scale in the premium segment that supports QCT margins.

Even Qualcomm’s licensing business is seeing lower expectations. JPMorgan cut its FY2026 QTL revenue forecast from $5.5 billion to $5.3 billion, reinforcing the broader concern that the company’s higher-margin buffers are also coming under pressure.

What could lift Qualcomm shares

Handset demand comes in better than feared, with QCT revenue holding above reset expectations

Margins stabilize, signaling the earnings base is no longer deteriorating

Automotive growth accelerates, helping support the diversification story

Stronger Snapdragon content in premium Android launches supports chip revenue even if unit growth stays soft

Licensing collections come in stronger, supporting higher-margin earnings

Qualcomm's down 22% YTD. Here's what could send it down further

Memory constraints limit smartphone production

China's demand weakens further

Lower Samsung share reduces exposure to premium Android devices

Another QCT margin step-down, signaling a more structural reset to earnings power

Key takeaways for investors

JPMorgan’s downgrade is driven by the fact that Qualcomm’s earnings base may be weaker than it looks.

The stock trades at just over 12x forward earnings, but that multiple depends on profits holding up. With margins falling, handset demand softening, and customer risks building, JPMorgan argues that investors need to see clear signs that earnings are stabilizing.