Qualcomm sat out the semiconductor rally. Can a SpaceX partnership change that?

By William Gavin

The company is furthering its expansion outside of the handset market - by powering Starlink Mobile

Qualcomm is set to report fiscal fourth-quarter earnings on Wednesday.

Qualcomm's stock has largely missed out on the chip sector's rally this year, but now the company is getting in on a hot area of market interest.

The company (QCOM) said Wednesday that its Dragonwing cellular infrastructure platforms will power the ground-based side of Starlink Mobile, the mobile service SpaceX (SPCX) wants to compete with the likes of Verizon Communications (VZ) and AT&T (T). SpaceX will also provide satellite-based coverage using thousands of its satellites in low-Earth orbit.

The multiyear agreement will cover tens of thousands of sites across the U.S., with the rollout beginning next year, Qualcomm said. It didn't disclose the financial terms of the deal.

"Together with SpaceX, we are building world-leading cellular infrastructure in the United States, advancing 5G today, with an opportunity to lay the foundation for AI-native 6G in the years ahead," Durga Malladi, a Qualcomm executive overseeing data centers and other technology planning, said in a statement.

Qualcomm shares rose 2% on Wednesday to buck the chip sector's weakness, while the PHLX Semiconductor index SOX is off 1.8%. But Qualcomm shares have lost about 2% so far this year as the chip index has risen 46%.

The Wall Street Journal reported in July that SpaceX was developing a mobile handset prototype powered by Qualcomm's Snapdragon chipsets. SpaceX CEO Elon Musk has rejected the report, calling it "utterly false."

Wednesday's deal highlights the hybrid strategy SpaceX plans to employ in its wireless push. Among the weaknesses of satellite internet is that it doesn't perform very well in cities and other population-dense areas. It's also more vulnerable to bad weather, and service can be spotty inside buildings.

That's why SpaceX has been moving quickly to improve its capabilities ahead of a planned launch of a mobile carrier network. It currently provides some limited service through deals with established carriers. Musk has said that the U.S. buildout will take two or three years, while some industry leaders and analysts say a more realistic timeline calls for a 2030 launch at the earliest.

SpaceX plans to buy spectrum licenses from at least a few companies and appears to be in talks with cellular tower operators to buy access to their infrastructure. Musk is also reportedly in discussions to possibly acquire EchoStar (ECHO) and its wireless assets, including Boost Mobile.

Qualcomm is scheduled to report fiscal fourth-quarter earnings after the market closes on Wednesday as Wall Street predicts a downturn. It's expected to report earnings per share of $2.16, a 28% year-over-year decline, and revenue of $10.1 billion, a 10% drop, according to FactSet estimates.

Bernstein analyst Stacy Rasgon wrote in a note to clients that while Qualcomm has been "doing everything they can to be viewed as something other than a smartphone company," handsets still account for the bulk of its chipset sales. He also lowered his estimates for Qualcomm's December quarter, citing a "markedly worsening environment" as a result of high memory prices.

-William Gavin

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11-04-26 1013ET