Qualcomm Shares Slide as Smartphone Slump Pressures Its Core Business
The chipmaker reported a 26% drop in handset revenue and warned that memory costs and Apple's departure will continue to impact the market. Qualcomm is diversifying into data centers, automotive, and other sectors to reduce its reliance on smartphones.
Qualcomm shares were down more than 9% in Thursday trading, extending losses following a 26% decline in handset chip revenue and concerns over a shrinking phone market and Apple's exit, despite arguing the worst may be over.
"We closed fiscal 2026 with many of the uncertainties now behind us," said CEO Cristiano Amon. "Specifically, QTL license renewals, Apple's departure, and the memory pricing impact on the mobile industry."
Handset revenue fell to $5.14 billion, below expectations, with adjusted revenue declining 7% to $10.44 billion, beating estimates. Adjusted earnings per share were $2.17. For fiscal 2027 Q1, Qualcomm forecasts revenue of $10.4-$11.2 billion and EPS of $2.15-$2.35, slightly above and below estimates respectively.
CFO Akash Palkhiwala stated that price increases will lift gross margin back to its historical range of 48-50%, albeit at the lower end, effective in Q2. Custom chips for data centers will improve operating margins but dilute gross margins.
Qualcomm projects revenue from non-handset businesses to grow over 60% in fiscal 2027, with handset revenue accounting for less than half of total revenue. Data center revenue is expected to exceed $650 million in Q1, $5 billion for the year, and an annualized $7 billion exit rate, aiming for $15 billion by fiscal 2029.
Most data center revenue this year is expected from two hyperscale customers, one being Amazon, according to Amon. Amazon's warrants are an exception to Qualcomm's standard terms, noted Palkhiwala.
Qualcomm's automotive business achieved its first $2 billion quarter with an 89% revenue increase. Amon mentioned that the company's deal with SpaceX for Starlink Mobile 5G network will contribute mostly to fiscal 2028 revenue.
The chipmaker also renewed patent license agreements with Apple, Huawei, and Transsion, maintaining rates and royalties.