Qualcomm's smartphone chip sales miss estimates, shares fall

On November 4, Qualcomm's smartphone chip sales fell short of Wall Street estimates, resulting in a 4.5% drop in the company's shares during extended trading. The decline was attributed to sluggish demand for its products and a decrease in Apple-related revenue. The cost of memory chips for AI servers has risen, impacting the profitability of consumer electronics and putting pressure on smartphone chip designers like Qualcomm.

Global smartphone shipments declined by 20% in the September quarter, reaching a 14-year low according to Counterpoint Research. While Qualcomm forecasted better-than-expected revenue in its data-center segment, the overall impact of the miss in its core business was too significant to ignore. Revenue from Qualcomm's handset unit, which manufactures chips for smartphones, dropped 26% to $5.14 billion in the fourth quarter, causing the chip segment's revenue to decline by 8% to $9.02 billion.

Analysts expected handset revenue of $5.25 billion, with Qualcomm CEO Cristiano Amon stating that Android handset sales had peaked and were beginning to recover. Amon emphasized that the company had anticipated the memory challenge and prepared accordingly, with sequential growth observed in the Android business. Investors were also concerned about Apple potentially switching to its own modem chips and Qualcomm's forecast of a faster-than-expected decline in sales to the iPhone maker.

Despite the lower-than-anticipated sales from the handset unit, Qualcomm remains optimistic about the non-handset business, expecting a 70% year-over-year increase in design wins for fiscal 2027 and a 60% year-over-year growth in non-handset revenue.