Qualcomm Shares Slump as Phone-Chip Sales Fall 26%

Qualcomm shares fell more than 9% in early trading on Thursday after the chipmaker reported a sharp drop in smartphone-chip sales, raising doubts about whether its newer data-centre business can offset weakness in its core handset division.

The stock had already fallen more than 6% in after-hours trading on Wednesday, when the results were released, and was down almost 12% in premarket trading on Thursday at one point. If the losses hold, Qualcomm is on track to shed more than $17 billion in market value, Reuters reported.

It is a striking reversal for a company that had closed Wednesday’s regular session up 5.33% at $173.19. By 7:59 p.m. Eastern time that evening, the shares were trading at $160.25, down 7.47%, according to CNBC market data.

Handsets fall 26%

For its fiscal fourth quarter, which ended on 27 September, Qualcomm reported revenue of $10.32 billion, down 8% from a year earlier. On an adjusted basis, revenue was $10.44 billion, down 7%, and adjusted earnings came to $2.17 a share, down from $3.00 a year ago.

The weak spot was handsets. Revenue from phone chips fell 26% to $5.14 billion, below the roughly $5.21 billion analysts had expected, pulling the broader chip division down 8% to $9.02 billion. Handset-chip revenue a year earlier was $6.96 billion.

Chief executive Cristiano Amon told investors the problem was supply, not demand. “We do not have a demand problem,” he said, calling it “a supply issue.” Qualcomm said the semiconductor industry faces rising costs across wafer fabrication, packaging and memory, and that it is passing those costs through in its prices.

Reuters cited Counterpoint Research figures showing worldwide smartphone shipments fell 20% in the September quarter to their lowest level in 14 years, as higher memory-chip prices — driven by demand from AI data centres — pushed up the price of phones. Phone makers have responded by trimming production schedules and cutting inventories, which in turn has hit Qualcomm’s chip shipments.

Data centres offer only partial cover

Qualcomm’s newer lines told a very different story. Data-centre revenue reached $650 million in the quarter, drawn mainly from custom-chip solutions and networking, and Amon said the company expects $5 billion of data-centre revenue in fiscal 2027. Automotive chips rose 89% to $1.99 billion.

But the scale of the handset decline overwhelmed those gains, and at least 10 brokerages lowered their price targets on the stock after the results, according to LSEG data compiled by Reuters.

The outlook added to the pressure. Qualcomm guided first-quarter revenue to between $10.4 billion and $11.2 billion, with adjusted earnings of $2.15 to $2.35 a share — a range whose midpoint sits below analysts’ estimates. The forecast assumes no further chip sales to Apple, which is shifting to its own modems, and Qualcomm said it expects revenue outside handsets to replace Apple entirely.

A familiar squeeze for chip stocks

Qualcomm is caught in a squeeze affecting chip stocks across the industry: the same AI boom that is lifting demand for data-centre hardware is also absorbing memory supply and pushing up costs for the consumer devices that have long been the industry’s bread and butter. AI chip demand remains strong — rival AMD recently raised its outlook on the back of it — but the benefits are unevenly spread, and Qualcomm’s exposure to phones leaves it on the wrong side of that divide for now.

The company did announce one longer-term bet on the day of its results: a multi-year partnership with SpaceX to supply its Dragonwing platforms and software for the terrestrial 5G network that Starlink Mobile is building in the United States. Deployment is not due to begin until 2027, however, and the deal is unlikely to contribute significant revenue in the short term.

Qualcomm also said it had renewed long-term patent licence agreements with Apple, Huawei and Transsion. Those licences now run until between fiscal 2030 and 2033, though they cover patents rather than chip sales.

For now, investors are left weighing a company in transition: a data-centre business growing fast from a small base, against a handset business still large enough that a 26% drop wipes billions from its market value in a morning. US markets will be watching whether the December quarter shows the memory squeeze easing — or whether phone makers cut production further.