− Our rating on the shares is REDUCE, Medium conviction, with a 12-month price target of $93.44 against a current price of $162.67. We want to be explicit at the outset: this is a valuation call, not a quality call. The business is sound, cash-generative and competitively entrenched in its core markets. Our objection is price, and the derivation of the target — where a discounted-cash-flow view and

− | Report Date | 2026-08-05 |

− | Current Price | $162.67 |

− | Market Capitalisation (on current shares outstanding) | $170,803.5M |

− | 12-Month Price Target | $93.44 |

− QUALCOMM is run as a cash-return story, and FY2025 pushed that posture harder. Capital is deployed overwhelmingly toward shareholders rather than into the balance sheet: the dividend has been raised steadily and buybacks were stepped up sharply in FY2025, with repurchases well above the prior year. On a trailing basis the total-shareholder-return yield reached 7.0% and the dividend payout ratio wa

− | Revenue | 0.1% | 13.5% | -% |

− | EBITDA | -7.5% | 12.8% | -% |

− | Net Income | -24.6% | 1.3% | -% |

− | Diluted EPS | -23.9% | 2.1% | -% |

− | FCF | 23.3% | 23.8% | -% |

− | **Z-Score** | **2.52** | **2.83** | **3.11** |

− | Zone | Gray (1.81–2.99) | Gray (1.81–2.99) | Safe (>2.99) |

− **Interpretation.** The Z-Score has trended steadily *upward* — 2.52 in FY2023, 2.83 in FY2024, 3.11 in FY2025 — and crossed out of the gray zone into the safe zone (above 2.99) this year. The improvement is telling on two counts. First, it is driven by the operationally sound components: X1 (working capital rose as the cash-conversion cycle tightened and current liabilities fell), X3 (EBIT/assets

− | Risk-Free Rate (10Y UST) | 4.70% | US Treasury daily yield curve |

− | **Cost of Equity (Ke)** | **11.72%** | CAPM: Rf + β × (ERP + CRP) |

− The resulting cost of equity of 11.72% is high for a company of this size and balance-sheet quality, and the reason is entirely the beta. Decomposed, the risk-free rate of 4.70% contributes the base, and the beta of 1.66 applied to the 4.23% equity risk premium adds roughly seven percentage points on top — so the equity-risk term, not the risk-free rate, is what drives Ke. That beta above 1.6 is i

− | Equity Weight (market value) | 94.9% |

− | **WACC** | **11.31%** |

− At 94.9% equity and 5.1% debt on a market-value basis, the capital structure is effectively all-equity — near-zero leverage, consistent with the low net-debt/EBITDA and investment-grade profile documented in Section 3. The practical consequence is that WACC and the cost of equity are almost the same number: at a debt weight of only 5.1%, the cheaper after-tax cost of debt of 3.65% barely pulls the

− The valuation is built on a five-year explicit unlevered-free-cash-flow projection discounted at the WACC derived above, with a terminal value computed two ways — a perpetuity-growth calculation and an exit-EV/EBITDA multiple — and the selected method disclosed in Section 4.2.3 together with the rationale for the choice. Three scenarios frame the range. The Base case carries the assumptions detail

− | WACC | 11.31% | 11.31% | 11.31% |

− *Note: Bear and Bull use the standard adjustments above (per the valuation-agent methodology), applied to every projection year. The resulting fair values appear in Section 6.2 ($78.66 / $110.99).*

− | PV of UFCF ($M) | — | $8,870.7M | $7,714.9M | $7,022.9M | $6,602.6M | $6,109.7M |

− The projection reads as a business on a plateau, not a growth machine: unlevered free cash flow moves from $9,874.0M in Year 1 to $10,439.8M in Year 5 — a broadly flat trajectory that mirrors the near-zero revenue path and the mix-compressed margin. Discounting at 11.31% pulls the present-valued cash flows down from $8,870.7M to $6,109.7M across the horizon, the discount effect doing more to shrin

− | Sum of PV of UFCFs ($M) | $36,320.8M |

− | Terminal Value — Perpetuity Growth ($M) | $121,458.2M |

− | Selected Terminal Value ($M) | $121,458.2M |

− | PV of Terminal Value ($M) | $71,080.4M |

− | **Enterprise Value ($M)** | **$107,401.2M** |

− | **Equity Value ($M)** | **$98,110.2M** |

− | Shares Outstanding (M — current count used in the per-share bridge) | 1,050 |

− | **DCF Fair Value / Share (Base)** | **$93.44** |

− | Upside / Downside vs. Current Price | -42.6% |

− Two terminal values are computed and the more conservative is selected. The perpetuity-growth method yields $121,458.2M; the exit-multiple method, applying 11.0x to terminal EBITDA, yields the materially higher $156,921.6M. The model selects the perpetuity figure of $121,458.2M — a deliberate conservatism, because the exit-multiple approach effectively imports today's trading multiple into perpetu

− The price target is most sensitive to the discount rate and the terminal growth rate, and the grid below isolates the perpetuity-growth terminal leg so that effect can be read directly. Because the base case selects the perpetuity method (the selected terminal value equals the perpetuity terminal value, not a blend or the exit multiple), the bolded central cell of this grid *is* the base case — it

− | WACC \\ TGR | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |

− |---|---|---|---|---|---|

− | 10.3% | 96.8 | 101.4 | 106.5 | 112.4 | 119.1 |

− | 10.8% | 91.1 | 95.1 | 99.6 | 104.7 | 110.4 |

− | **11.3%** | 85.9 | 89.5 | **93.4** | 97.9 | 102.9 |

− | 11.8% | 81.3 | 84.5 | 87.9 | 91.8 | 96.2 |

− | 12.3% | 77.1 | 79.9 | 83.0 | 86.4 | 90.3 |

− The grid is arranged with WACC increasing down the rows and terminal growth increasing across the columns, so the highest fair values sit in the top-right corner (lowest discount rate, highest terminal growth) and the lowest in the bottom-left. The decisive observation is what the grid does *not* contain: nowhere in it — not even in the top-right corner, at a WACC well below the base assumption co

− The same tax distortion that depressed net margin flows straight through the returns table, because ROIC, ROE and ROA all sit on the same after-tax numerator. QUALCOMM's FY2025 ROIC of 17.0% and ROE of 23.3% look pedestrian relative to their own five-year history — where ROIC ran far higher — but that step-down is the deferred-tax charge, not a deterioration in the business earning power. On a nor

− | EV/EBITDA | 13.5xᵐ | 55.7xᵐ | 42.8xᵐᶠ | 17.9xᵐ | 9.7xᵐ |

− | FCF Yield | 7.1%ᵐ | 1.4%ᵐ | 2.6%ᵐᶠ | 4.0%ᵐ | 11.6%ᵐ |

− On the multiples, QUALCOMM screens inexpensive against this peer set — and this is where the section's central tension must be stated plainly rather than smoothed. On EV/EBITDA — the cleanest of the three because it strips out both QUALCOMM's tax charge and differences in capital structure — QUALCOMM trades at 13.5xᵐ, below NXPI (17.9xᵐ) and a fraction of AVGO (55.7xᵐ) and MediaTek (42.8xᵐᶠ), and

− So the relative-value screen says cheap. The report's verdict is nonetheless REDUCE, with a target of $93.44 against a current price of $162.67 — and the reader is owed a straight explanation of why the section does not simply read as a buy. The answer is methodological, and it is the honest core of this section. The multiple-based composite is calibrated on where these companies trade *today*: ev

− Four methods carry the analysis, equal-weighted at 25% each within every scenario, exactly as the Valuation sheet composes the composite fair value of $137.94. The equal weighting is a convention, not a conviction; the prose below argues which method deserves the reader's attention for a business like this one. The decisive point, developed through the section, is that three of the four methods ar

− | Scenario | Fair Value / Share | Upside / Downside vs. Current Price ($162.67) |

− | Bear | $78.66 | Below current price (downside) |

− | Base | $93.44 | -42.6% |

− | Bull | $110.99 | Below current price (downside) |

− The DCF range is the strongest part of the bear case, and it is strong precisely because the conclusion does not depend on aggressive inputs. The base case lands at $93.44, implying downside of -42.6% against the current price — but the base case is not where the argument lives. The argument lives in the bull case. Stacking the assumptions in the optimists' favour — revenue growth two percentage p

− | P/E | 32.5x | 15.0x | $146.53 |

− Two of these lines demand a caution before they are read. First, the P/E current multiple of 32.5x is a GAAP trailing figure computed on the tax-charge-depressed FY2025 earnings; it is not a fair characterization of how expensive the stock is. On normalized earnings the trailing multiple is roughly 16.6x, so the 15.0x target represents a modest de-rating from *normalized* earnings, not the enormou

− | DCF | $78.66 | $93.44 | $110.99 |

− | P/E Relative | $124.55 | $146.53 | $168.51 |

− | **Composite Fair Value** | **$117.58** | **$137.94** | **$161.00** |

− **Composite Fair Value (Base):** $137.94

− **Current Price:** $162.67 | **Implied Upside / Downside:** -15.2%

− The composite tells two stories at once, and the dispersion between them is the point. The equal-weighted base composite of $137.94 implies downside of -15.2% — a far gentler verdict than the DCF alone. The reason is visible in the columns: the DCF row ($93.44) sits well below the three relative rows ($146.53, $137.37 and $174.42), so averaging them pulls the composite up toward the market and blu

− The base-case DCF fair value is most sensitive to the discount rate and the terminal growth rate, and the grid below isolates that surface. Its central bolded cell is the base case itself. The decisive reading is what the grid does *not* reach: nowhere across it — not in the top-right corner combining the lowest discount rate shown with a terminal growth rate above long-run nominal GDP — does the

− | WACC \\ TGR | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |

− |---|---|---|---|---|---|

− | 10.3% | 96.8 | 101.4 | 106.5 | 112.4 | 119.1 |

− | 10.8% | 91.1 | 95.1 | 99.6 | 104.7 | 110.4 |

− | **11.3%** | 85.9 | 89.5 | **93.4** | 97.9 | 102.9 |

− | 11.8% | 81.3 | 84.5 | 87.9 | 91.8 | 96.2 |

− | 12.3% | 77.1 | 79.9 | 83.0 | 86.4 | 90.3 |

− The base case uses the perpetuity-growth terminal method, and the grid below — WACC against the exit EV/EBITDA multiple — is a cross-check on that choice, not a second valuation or an alternative target. Its purpose is to show what the intrinsic value would look like had the model instead capitalised terminal EBITDA at a market multiple. In fairness to the counter-argument, this is the strongest s

− | WACC \\ Exit EV/EBITDA | 7.0x | 9.0x | 11.0x | 13.0x | 15.0x |

− |---|---|---|---|---|---|

− | 10.3% | 84.9 | 101.5 | 118.1 | 134.8 | 151.4 |

− | 10.8% | 83.1 | 99.4 | 115.6 | 131.9 | 148.2 |

− | **11.3%** | 81.4 | 97.3 | **113.2** | 129.1 | 145.0 |

− | 11.8% | 79.7 | 95.3 | 110.8 | 126.4 | 141.9 |

− | 12.3% | 78.1 | 93.3 | 108.5 | 123.7 | 138.9 |

− **Rating:** REDUCE | **12-Month Price Target:** $93.44 | **Conviction:** Medium

− The rating is REDUCE, with a 12-month price target of $93.44 against a current price of $162.67 and medium conviction. The target is deliberately anchored on the DCF base fair value, not on the multiples composite, for the reason developed throughout this section: the discounted cash flow is the only method here that does not borrow its answer from the market it is trying to judge. Framed as a ran

− | **Trigger to revisit** | QCT handset revenue stabilising YoY for two consecutive quarters (i.e. the Apple/OEM step-down proving smaller than modelled), **or** the share price converging toward the $93.44 DCF-anchored target — QUALCOMM repurchased stock at rising prices from $130.45 to $222.00 per share through this quarter, so the valuation gap widened rather than closed. |

− This quarter confirms the Section 6 REDUCE thesis on its own terms and adds a new, durable negative that the valuation had not fully priced. The confirmation: revenue declined 4.0% YoY with QCT handsets down 19.6%, exactly the Apple/OEM step-down Section 2 identified, while EBIT fell 41.1% to $1,626.0M and EBIT margin fell 10.3 pp to 16.3% — the franchise is not broken, but its operating earnings