Qualcomm's stock falls as twin forces pressure sales

By Britney Nguyen

Qualcomm faces the loss of Apple's business and the negative impact of high memory costs on overall smartphone demand

Qualcomm has had to deal with the negative effects of higher memory-component prices, which can eat into profits.

Qualcomm is going through a period of reinvention - at the same time that the broader consumer-electronics industry reckons with higher memory costs.

The company on Wednesday said it saw revenue fall 7% from a year ago, coming in at $10.4 billion, though that was above the $10.1 billion that analysts tracked by FactSet had been expecting. Qualcomm's (QCOM) handsets business saw revenue fall 26% to $5.1 billion amid weak smartphone demand. That unit slightly missed expectations for $5.2 billion in revenue.

Qualcomm also must contend with a gradual loss of business related to the company's work with Apple (AAPL). The smartphone giant has been transitioning its modems over to custom designs.

Qualcomm CEO Cristiano Amon said in a statement that the company's new fiscal-year 2027, which kicked off at the end of September, "marks the start of our non-handset revenue inflection, including the ramp of our data-center business."

Amon said the company expects non-handset revenues to grow more than 60% year over year. Qualcomm has an existing target for $5 billion in data-center revenue this fiscal year.

For the December quarter, Qualcomm set its outlook for revenue of between $10.4 billion and $11.2 billion, which topped the $10.5 billion that analysts were looking for at the midpoint.

However, the midpoint of its expectations for adjusted earnings of between $2.15 and $2.35 per share came in one cent below the consensus.

Qualcomm, like other chip companies, has to deal with the negative effects of higher memory-component prices, which can eat into profits.

Ahead of the report, Bernstein analyst Stacy Rasgon said Qualcomm's attempt to diversify its business beyond smartphones has been working, as its automobile and internet-of-things businesses have grown. He also pointed to the company's push into data centers with its chip-based accelerator cards to support running AI models.

Still, handsets make up most of the company's chipset sales, Rasgon said, and the supply chain "seems to indicate a markedly worsening environment given the current memory dynamics."

Beyond the current fiscal year, however, Rasgon said he sees a chance for Qualcomm's data-center growth to drive its earnings higher. In the meantime, its results "still need a reset before we get there," he said.

Qualcomm's stock fell 7.5% in extended trading Wednesday.

-Britney Nguyen

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11-04-26 2006ET