Qualcomm Plummets 24% in 2026, Announces $20B Buyback: Bullish Move or Red Flag?
Challenges Facing Qualcomm
Qualcomm’s stock has experienced a decline due to several challenges, including a memory shortage that is affecting its smartphone component sales, which remain its core business. Additionally, the company faces the potential loss of its partnership with Apple, as the tech giant is developing its own custom-designed modem chips to reduce reliance on Qualcomm.
As of March 23, Qualcomm’s stock has dropped by 25% year to date. However, the company recently announced the authorization of a $20 billion share buyback and increased its quarterly dividend from $0.89 to $0.92. These moves have positioned Qualcomm as one of the top dividend stocks in the tech sector, offering even more returns to investors.
Strong Financial Position
Despite these challenges, Qualcomm maintains a solid financial position. The company has $7.2 billion in cash and cash equivalents at the end of last year, and its long-term debt is manageable at $14.8 billion. Qualcomm has also generated $12.9 billion in trailing free cash flow, demonstrating its ability to afford both the buyback and the dividend hike.
In the first quarter of its 2026 fiscal year, which ended on December 28, 2025, Qualcomm delivered record revenue of $12.3 billion. While smartphones remain the largest revenue stream, the company showed promising growth in other areas. Automotive revenue increased by 15% year over year to $1.1 billion, and Internet of Things (IoT) revenue rose by 9% to $1.7 billion. These figures indicate that Qualcomm is making progress in diversifying its business.
Moderately Bullish Outlook
Currently, Qualcomm appears undervalued compared to other tech stocks, trading at 12 times forward earnings. This low multiple, combined with the company’s strong cash flow, suggests that the buyback could be an opportunity to acquire shares at a lower price and return value to investors.
However, there are some concerns. The memory shortage remains a significant issue, and the potential end of the Apple partnership could impact future revenue. Additionally, Qualcomm’s revenue guidance for the next quarter was not impressive, ranging between $10.2 billion and $11.0 billion.
Another concern is Qualcomm’s long-term performance. Since CEO Cristiano Amon took over in 2021, the company has delivered a total return of 11% to shareholders, while the S&P 500 returned 79% over the same period. Looking back over the past 10 years, Qualcomm has returned 229% compared to 276% for the S&P 500.
Investment Considerations
While the buyback indicates that Qualcomm may be undervalued, there are still uncertainties. Investors should consider whether the company can overcome its current challenges and demonstrate stronger long-term growth.
Before deciding to invest in Qualcomm, it’s important to evaluate the broader market and other investment opportunities. For example, the Motley Fool Stock Advisor analyst team recently identified what they believe are the 10 best stocks for investors to buy now, and Qualcomm was not among them.
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Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Qualcomm and is short shares of Apple. The Motley Fool has a disclosure policy.
