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Qualcomm shares dropped 7% in extended trading on Wednesday after its latest earnings forecast disappointed investors. Rising memory costs are putting pressure on smartphone makers, reducing demand for mobile chips and affecting Qualcomm's sales. The company reported better-than-expected quarterly results, but its weaker outlook raised concerns about future growth.
The chipmaker reported adjusted earnings of USD 2.17 per share, slightly above Wall Street's USD 2.16 estimate. Qualcomm generated USD 10.44 billion in quarterly revenue. However, its forecast fell short of analysts' earnings expectations. The company expects December-quarter earnings between USD 2.15 and USD 2.35 per share.
The main pressure came from Qualcomm's smartphone business, which remains its largest source of chip revenue. Handset chip revenue fell 26% year over year to USD 5.14 billion, missing analysts' expectations of USD 5.21 billion. Qualcomm had also increased chip prices in September, but higher costs continued to affect smartphone demand.
Rising memory prices have created problems for smartphone manufacturers across the industry. Memory suppliers now prioritize chips for AI data centers, leaving less supply for consumer devices. Higher component costs have forced phone brands to increase prices, making smartphones less affordable.
Qualcomm is now looking beyond smartphones to support its future growth. Its automotive revenue jumped 89% to USD 1.99 billion during the quarter. Internet of Things revenue also increased 4% to USD 1.88 billion.
The company is also building its presence in the AI data center market. Qualcomm reported USD 650 million in data center revenue during the quarter. CEO Cristiano Amon expects this business to generate USD 5 billion in fiscal 2027.
Amon also discussed the company's supply position, saying, "We don't have a demand issue; it's a supply issue." He added that additional supply could help Qualcomm improve its business performance.
Qualcomm also announced a technology deal with SpaceX for its cellular network expansion. The company renewed licensing agreements with Apple, Huawei and Transsion during the quarter.
Despite growth in automotive and data center businesses, smartphone weakness remains a major concern. Investors now want stronger handset sales and better earnings guidance before expecting a recovery in Qualcomm stock.
Also Read: Qualcomm to Supply 5G Technology for SpaceX's Nationwide Network