Qualcomm Falls 5% as Memory-Cost Squeeze Hits Handset Chips

Qualcomm shares dropped roughly 5-7% in extended trading on Wednesday after the chipmaker beat quarterly estimates but issued a lighter-than-expected earnings forecast, with memory costs weighing on smartphone demand.

Adjusted earnings per share came in at $2.17, just above the $2.16 LSEG consensus. Adjusted revenue reached $10.44 billion. Total adjusted revenue fell 7% from a year earlier.

For the current quarter, Qualcomm guided to earnings of $2.15 to $2.35 per share on revenue of $10.4 billion to $11.2 billion. Analysts had expected $2.27 per share on $10.48 billion in revenue — the midpoint of the guide sits below the consensus profit figure.

Why is the handset business shrinking?

Most of Qualcomm's chip sales come from system-on-chips and modems (the processors and connectivity components inside smartphones). Rising memory prices are forcing handset makers to raise prices, which hurts demand.

Handset chip sales fell 26% year over year to $5.14 billion, missing a StreetAccount estimate of $5.21 billion. Qualcomm raised prices in September to counter cost pressure.

Management pointed to green shoots. CEO Cristiano Amon said the company is starting to see sequential growth in handsets and that Android shipments in China have bottomed, even though Qualcomm predicts the overall handset market will be flat in 2027.

"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."

Can data center offset the smartphone slide?

Under Amon, Qualcomm has tried to redirect investor attention toward other chip markets, including AI data center infrastructure. The segment generated $650 million in revenue during the quarter, mostly from customizing and connectivity work.

Amon said Qualcomm expects $5 billion in data center revenue in fiscal 2027. The company recently signed a customer for optical connectivity and has engaged a global hyperscaler (a large cloud operator such as Amazon or Microsoft).

Automotive provided the standout number. Chip revenue in that division soared 89% year over year to $1.99 billion, beating StreetAccount expectations of $1.66 billion.

Internet of things revenue — spanning low-power chips, smart glasses SoCs, laptop chips and cellular infrastructure — rose 4% to $1.88 billion, slightly above estimates. Earlier on Wednesday, Qualcomm announced a deal to supply technology for SpaceX's cellular buildout.

What did the licensing business deliver?

Qualcomm's QTL division licenses its intellectual property for 5G and other technologies to other companies. During the quarter the company renewed licensing agreements with Apple, Huawei and Transsion.

"QTL will maintain its scale going forward," Amon said.

QTL revenue sank 7% to $1.3 billion, in line with the StreetAccount consensus.

The quarter's pattern is clear for finance teams tracking semiconductor exposure: beat on the print, guide soft on the core handset franchise, and lean on data center, automotive and licensing to carry the growth narrative.