Why Qualcomm Stock Fell 9% Despite Beating Earnings Estimates

Qualcomm's stock price fell 9% on Thursday despite the company beating earnings estimates for its fiscal fourth quarter. The chipmaker's revenue fell 7% year-over-year to $10.4 billion, which was slightly better than analysts' expectations of $10.1 billion. However, the company's earnings per share were $2.17, down from $3 in the previous year but still above the anticipated $2.16 per share.

The decline in Qualcomm's stock price can be attributed to increased costs, particularly in memory, which affected its flagship handset business. The mobile business revenue fell 26% to $5.1 billion, while pretax earnings declined more than overall revenue. Looking ahead, Qualcomm's revenue guidance for the first quarter is significantly lower than its first-quarter revenue of $12.3 billion a year ago, reflecting lower demand for its mobile chips.

The company's CEO, Cristiano Amon, acknowledged that fiscal 2027 would mark the beginning of non-handset revenue growth, including the ramp-up of the Data Center business. However, this growth is expected to be modest, with a target of $5 billion, representing roughly 13% of Qualcomm's fiscal year revenue of $37.2 billion. While Qualcomm's non-handset revenues are projected to grow by more than 60% year-over-year, analysts remain skeptical about the long-term growth prospects in the AI semiconductor industry.

Despite the stock's current cheap valuation of 15 times the projected fiscal year per-share profit of $10.16, there is uncertainty about whether meaningful growth is imminent.