Qualcomm beat Wall Street forecasts for its fiscal fourth quarter on Wednesday, but its shares slid in extended trading after smartphone-chip sales came in below expectations — the latest sign that the fading Apple modem business and surging memory prices are reshaping the chipmaker.
Adjusted revenue fell 7% from a year earlier to $10.44 billion, ahead of the roughly $10.11 billion analysts had expected, while adjusted profit came in at $2.17 per share against a $2.16 consensus. The beat, however, was not enough: Qualcomm's shares fell more than 4% after hours as investors focused on the phone business and a profit outlook that came in a little light.
The phone business is shrinking — fast
Revenue from Qualcomm's handset unit, which makes chips for smartphones, fell 26% to $5.14 billion in the quarter, below the $5.25 billion analysts polled by Visible Alpha had expected. That dragged total chip-segment revenue down 8% to $9.02 billion.
Two forces are squeezing the business. Global smartphone shipments fell 20% in the September quarter to a 14-year low, according to Counterpoint Research. At the same time, demand for lucrative high-bandwidth memory for AI servers has pushed up memory chip prices, raising the cost of consumer electronics and squeezing smartphone processor designers such as Qualcomm.
Investors had also worried about Apple switching to its own modem chips and Qualcomm's warning of a faster-than-expected decline in sales to the iPhone maker — a drag that is now showing up clearly in the numbers.
Amon: Android is turning, and non-handset will replace Apple
Chief executive Cristiano Amon struck a defiant note in an interview with Reuters, saying sales of Android handsets are ticking upward again. "Unlike some other companies, we called this memory thing early, and we said we prepared for it," Amon said. "We're starting to see sequential growth now on Android, we have been really executing on the non-handset business."
Amon said the first-quarter fiscal 2027 forecast given on Wednesday includes no further sales from Apple at all. Qualcomm has been winning business with other customers beyond smartphones, he said, with design wins up 70% year over year in fiscal 2027 with Apple out of the model. "We expect the non-handset revenue to replace Apple entirely, and you're going to see 60% year-over-year growth in the non-handset business as you go to fiscal '27," he said.
The data-centre pivot — and a SpaceX deal
Qualcomm expects first-quarter revenue between $10.4 billion and $11.2 billion, with the midpoint above analysts' average estimate of $10.48 billion, according to data compiled by LSEG. It expects chip-segment sales of $9 billion to $9.6 billion, exceeding estimates of $8.88 billion, while adjusted profit of $2.15 to $2.35 per share implies a midpoint below the $2.27 analysts had pencilled in. Full-year capital spending of about $2.5 billion also ran well ahead of expectations near $1.9 billion — another reason investors looked past the beat.
The longer bet is data centres. A September agreement allowing Amazon to buy up to $60 billion of Qualcomm's AI chips and related data-centre products added the e-commerce giant to a client roster that includes Microsoft and Meta. Qualcomm has said revenue from two custom chip programs with hyperscalers would begin in the current quarter, ahead of a ramp-up of its AI accelerator products next year, as it targets $15 billion in annual data-centre revenue by fiscal 2029.
Earlier on Wednesday, the company also signed a multi-year 5G deal to supply radio equipment, baseband units and software for SpaceX's planned nationwide Starlink Mobile network, starting in 2027.
