Qualcomm shares dropped 6% in extended trading on Wednesday after the chipmaker issued an earnings forecast that came in lighter than Wall Street expectations, as rising memory costs weigh on smartphone sales. The company reported quarterly results that topped analyst estimates, with adjusted earnings per share of $2.17 against $2.16 expected and adjusted revenue of $10.44 billion, but its guidance for the current quarter came in lighter than expected.
For the current quarter, Qualcomm said it expects earnings per share of between $2.15 and $2.35 on revenue of $10.4 billion to $11.2 billion. Analysts had expected earnings per share of $2.27 on revenue of $10.48 billion.
Most of Qualcomm's chip sales come from system-on-chips and modems for smartphones, a market currently in turmoil as rising memory costs force handset makers to raise prices, hurting demand. Adjusted company revenue fell 7% from a year earlier. Qualcomm raised prices in September.
Handset chip sales during the quarter fell 26% to $5.14 billion, trailing a StreetAccount estimate of $5.21 billion. Qualcomm said it is starting to see sequential growth in the category and that Android shipments in China have bottomed, even though it predicts the handset market will be flat in 2027.
Under CEO Cristiano Amon, Qualcomm has tried to turn investor attention to other kinds of chips, including the fast-growing market for AI data center infrastructure. It had $650 million in data center revenue during the quarter, mostly from customizing and connectivity work, Amon said. Amon said Qualcomm expects $5 billion in data center revenue in fiscal 2027, and that the company recently signed a customer for optical connectivity and had engaged a global hyperscaler.
"We don't have a demand issue; it's a supply issue," Amon said. "If I had more supply, I would probably be doing better."
Revenue in Qualcomm's automotive division soared 89% on an annual basis to $1.99 billion, beating StreetAccount expectations of $1.66 billion. Internet of things revenue, which includes low-power chips, smart glasses SoCs, laptop chips and the company's bid to provide cellular infrastructure, increased 4% from a year earlier to $1.88 billion, slightly higher than estimates. Earlier on Wednesday, Qualcomm announced a deal to provide technology to SpaceX's cellular buildout.
Qualcomm's QTL division, which licenses its intellectual property for 5G and other technologies, saw revenue sink 7% to $1.3 billion, in line with a StreetAccount estimate. Qualcomm said during the quarter that it had renewed licensing agreements with Apple, Huawei and Transsion. "QTL will maintain its scale going forward," Amon said.
Analysis
Why This Matters
- Qualcomm is a major supplier of smartphone chips, so its weak handset outlook signals continued pressure on the phone market from rising memory costs.
- The company's push into AI data center and automotive chips is an attempt to diversify beyond smartphones, and investors will watch whether those businesses can offset handset declines.
- The forecast miss and stock drop reflect investor concern about near-term growth, even as Qualcomm beat quarterly estimates.
Background
Qualcomm is a leading designer of chips and modems for smartphones and holds a large portfolio of wireless technology patents. Its results are closely watched as a barometer of the smartphone supply chain. The company has been expanding into automotive, internet of things and data center markets to reduce reliance on handset sales.
Key Perspectives
- Cristiano Amon, Qualcomm CEO: attributed the shortfall to supply constraints rather than demand, saying "We don't have a demand issue; it's a supply issue." He also said he expects $5 billion in data center revenue in fiscal 2027.
- Analysts (LSEG and StreetAccount estimates): had expected higher earnings per share and revenue for the current quarter, and higher handset chip sales for the quarter just reported.
What to Watch
- Qualcomm's handset chip sales in the coming quarters, and whether the company's prediction of a flat handset market in 2027 holds.
- Progress on the data center business, including the optical connectivity customer and the global hyperscaler engagement Amon mentioned.
- How rising memory costs continue to affect smartphone pricing and demand across the industry.
Checked
12 claims in this story checked against 1 source: 12 supported.
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- SupportedQualcomm shares fell 6% in extended trading on Wednesday.Tech: “The stock slid 6% in extended trading.”
- SupportedQualcomm’s earnings forecast came in lighter than expected.Tech: “Qualcomm reported quarterly results on Wednesday that topped Wall Street estimates, but the chipmaker's earnings forecast came in lighter than expected.”
- SupportedRising memory costs are hurting smartphone demand.Tech: “It's a market that's currently in turmoil as rising memory costs force handset makers to raise prices, hurting demand.”
- SupportedQualcomm’s quarterly results topped analyst estimates.Tech: “Qualcomm reported quarterly results on Wednesday that topped Wall Street estimates”
- SupportedAdjusted earnings per share were $2.17, compared with $2.16 expected.Tech: “EPS: $2.17 adjusted, versus $2.16 expected”
- SupportedAdjusted revenue was $10.44 billion.Tech: “Revenue: $10.44 billion, adjusted”
- SupportedQualcomm forecast current-quarter earnings per share of $2.15 to $2.35 and revenue of $10.4 billion to $11.2 billion.Tech: “For the current quarter, Qualcomm said it sees earnings per share of between $2.15 and $2.35 on revenue of $10.4 billion to $11.2 billion.”
- SupportedAnalysts expected current-quarter earnings per share of $2.27 and revenue of $10.48 billion.Tech: “Analysts expected earnings per share of $2.27 on revenue of $10.48 billion.”
- SupportedHandset chip sales fell 26% to $5.14 billion, below a StreetAccount estimate of $5.21 billion.Tech: “Still, handset chip sales during the quarter fell 26% to $5.14 billion, trailing a StreetAccount estimate of $5.21 billion.”
- SupportedCristiano Amon said, “We don't have a demand issue; it's a supply issue,” and, “If I had more supply, I would probably be doing better.”Tech: “"We don't have a demand issue; it's a supply issue," Amon said. "If I had more supply, I would probably be doing better."”
- SupportedQualcomm had $650 million in data-center revenue during the quarter, mostly from customizing and connectivity work, Amon said.Tech: “It had $650 million in data center revenue during the quarter, mostly from customizing and connectivity work, Amon said.”
- SupportedAmon said Qualcomm expects $5 billion in data-center revenue in fiscal 2027.Tech: “Amon said Qualcomm expects $5 billion in data center revenue in fiscal 2027.”
