Qualcomm beat estimates and still fell, because the memory crunch is squeezing phones
Qualcomm reported quarterly results on Wednesday that topped Wall Street estimates, but the chipmaker's earnings forecast came in lighter than expected. The stock slid 7% in extended trading. 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.
(See the reader poll and source context below).
What do the sources establish?
| Platform / Source | Core Stance / Quote | Engagement Metric | Timestamp |
|---|---|---|---|
| CNBC | Reported context: Qualcomm’s quarterly results topped forecasts but its guidance came in light, handset chip sales dropped 26% and the shares slid as rising memory costs pushed phone prices up. | Not recorded | |
| Channel NewsAsia | Reported context: Qualcomm’s quarterly results topped forecasts but its guidance came in light, handset chip sales dropped 26% and the shares slid as rising memory costs pushed phone prices up. | Not recorded |
Qualcomm reported quarterly results on Wednesday that topped Wall Street estimates, but the chipmaker's earnings forecast came in lighter than expected. The stock slid 7% in extended trading.
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. Analysts expected earnings per share of $2.27 on revenue of $10.48 billion.
Qualcomm on Wednesday fell short of Wall Street estimates for fourth-quarter smartphone chip sales on sluggish demand and declining Apple-related revenue, sending its shares down more than 6 per cent in extended trading, Reuters reported via Channel NewsAsia.
The numbers that mattered
Adjusted company revenue fell 7% from a year earlier. Handset chip sales during the quarter fell 26% to $5.14 billion, trailing a StreetAccount estimate of $5.21 billion.
Revenue from Qualcomm's handset unit dragged the chip segment's revenue down 8% to $9.02 billion in the fourth quarter, according to the Reuters account. Analysts polled by Visible Alpha had expected handset revenue of $5.25 billion.
Qualcomm raised prices in September, and the average selling price helped offset some of the volume decline. It was not enough to keep the segment flat.
The memory squeeze
Global smartphone shipments fell 20 per cent in the September quarter to a 14-year low, according to Counterpoint Research, as surging memory chip costs drove up device prices amid booming demand from AI data centers.
That is the mechanism behind Qualcomm's problem, and it is the same force that has lifted memory makers. AI data centers absorb high-bandwidth memory, handset makers compete for the remaining supply, and the price of a phone rises until demand falls.
Chief executive Cristiano Amon said the company had seen the cycle coming. "Unlike some other companies, we called this memory thing early, and we prepared for it," he said. He added that Android sales had bottomed and were ticking upward again.
The Apple problem
Investors had also worried over Apple switching to using its own modem chips and Qualcomm's warning of a faster-than-expected decline in sales to the iPhone maker. The first-quarter forecast includes no further sales from Apple.
Amon said design wins in fiscal 2027 were up 70 per cent year over year with Apple out of the model, and that non-handset revenue would replace Apple entirely, growing about 60 per cent as the company moves through the year.
That claim is the centre of the investment case. If it holds, Qualcomm becomes a diversifying chipmaker rather than a supplier losing its largest customer. If it slips, the handset decline dominates the story.
The data center bet
Under Amon, Qualcomm has tried to turn investor attention to other kinds of chips, and the company is looking to enter the fast-growing market for AI data center infrastructure. It had $650 million in data center revenue during the quarter, mostly from customisation and connectivity work.
Amon said Qualcomm expects $5 billion in data center revenue in fiscal 2027. He said 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, referring to the data center business. If that is accurate, the constraint on Qualcomm's growth next year is fabrication and packaging capacity rather than customers, which is a better problem to have than a weak order book.
What the guide says
The guidance is where the market made its judgment: a midpoint slightly below consensus, a handset market Qualcomm expects to be flat in 2027, and a data center business that is growing from a small base.
The shares fell on the gap between those two facts. A company beating on the quarter and missing on the outlook is telling you the current period is fine and the next one is not.
The memory shortage will ease eventually, and the question for Qualcomm is what its revenue mix looks like when it does. Next quarter's numbers will show whether the Android recovery is real and whether the data center business is winning customers at the pace the guidance assumes.
Amon's argument about supply is plausible on the data center side, where capacity is constrained by packaging and memory availability rather than by demand. On handsets it is harder to sustain, because the volume decline is exactly what a price increase is supposed to cause.
The company's own guidance implies the handset business stays flat through 2027, and the growth has to come from automotive, industrial and data center chips. That mix shift is the story to follow, and it explains why a quarter that beat expectations was received as a warning. Qualcomm's shares had already risen this year on the data center story, which is why the market punished the guidance rather than the quarter: the parts of the business that are growing are still small enough that a flat handset year shows up immediately in the total.
Context worth keeping in view: the memory cost squeeze already hitting Apple, the AI trade that has been moving markets and the Snapdragon X2 Linux preview earlier this autumn.