Qualcomm Reports Revenue Decline Amid Diminished Smartphone Demand
Qualcomm (QCOM), on Wednesday, reported fourth-quarter revenues that fell short of Wall Street’s expectations due to sluggish demand for its smartphone chips and a notable decrease in revenue associated with Apple.
This disappointing performance resulted in a drop of over 4 percent in its shares during after-hours trading.
As the appetite for high-bandwidth memory solutions for AI servers surged, memory chip prices escalated, driving up the costs of consumer electronics.
This phenomenon has exerted pressure on smartphone processor manufacturers like Qualcomm, compelling them to navigate challenging market conditions.
According to Counterpoint Research, global smartphone shipments plummeted by 20 percent in the September quarter, reaching a 14-year low—a striking statistic that underscores the current market malaise.
In the reported quarter, Qualcomm’s handset division, responsible for manufacturing smartphone chips, experienced a substantial revenue decline of 26 percent, amounting to $5.14 billion.
This downturn contributed to an 8 percent decrease in the overall revenue of the chip segment, which totaled $9.02 billion.
Analysts from Visible Alpha had anticipated handset revenue to be around $5.25 billion, indicating a more optimistic outlook than what was realized.
In a conversation with Reuters, Qualcomm’s CEO, Cristiano Amon, expressed optimism, noting a modest resurgence in sales for Android devices.
He stated, “Unlike some other companies, we identified the memory issue early and made preparations accordingly. We are now witnessing sequential growth in the Android sector, along with executing well in our non-handset business.”
Investor concerns have also been amplified by Apple’s planned transition to its proprietary modem chips and Qualcomm’s forewarning of a more rapid decline in sales to the iPhone manufacturer than previously expected.
In light of this, Amon indicated that the recently provided fiscal first-quarter forecast for 2027 does not incorporate any further sales from Apple. Nevertheless, Qualcomm has been actively securing business from additional customers outside the smartphone domain.
“We anticipate a 70 percent year-over-year increase in design wins for fiscal ’27, with Apple excluded from the model,” Amon noted.
“We foresee that non-handset revenue will entirely supplant Apple’s contributions, expecting to achieve a remarkable 60 percent year-over-year growth in that sector as we approach fiscal ’27.”
For the upcoming first quarter, Qualcomm expects revenues to fluctuate between $10.4 billion and $11.2 billion, with the midpoint projected to surpass analysts’ average estimate of $10.48 billion, as per data collated by LSEG.
The company anticipates sales within its chip segment will range from $9 billion to $9.6 billion, also exceeding estimates of $8.88 billion.
Additionally, adjusted earnings per share are projected to land between $2.15 and $2.35, compared to consensus estimates of $2.27.
Noteworthy among recent developments is a September agreement permitting Amazon to purchase up to $60 billion in Qualcomm’s AI chips and related data center products, adding the e-commerce titan to a client roster that already includes Microsoft and Meta Platforms.
Qualcomm has indicated that revenue from two bespoke chip initiatives with hyperscalers will commence in the current quarter, paving the way for an escalation of its AI accelerator offerings in the forthcoming year.
The company is targeting an ambitious goal of achieving $15 billion in annual data center revenue by fiscal 2029.
Earlier on Wednesday, Qualcomm secured a multiyear agreement to provide radio equipment, baseband units, and software for SpaceX’s proposed nationwide Starlink Mobile network, which is expected to launch in 2027.
In the fourth quarter, adjusted sales experienced a 7 percent decline, amounting to $10.44 billion—still surpassing estimates of $10.11 billion. Adjusted profit was reported at $2.17 per share, marginally exceeding the projections of $2.16.
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