Qualcomm shares fell over 6% in after-hours trading after the semiconductor manufacturer missed fourth-quarter smartphone chip estimates due to sluggish demand and declining Apple revenue. According to CNBC TV18, the stock decline came despite the company beating overall revenue expectations with adjusted sales of $10.44 billion, beating estimates of $10.11 billion. However, investors focused on the sharp decline in the company's core smartphone business, with handset unit revenue falling 26% to $5.14 billion, dragging the chip segment's revenue down 8% to $9.02 billion and missing analyst expectations of $5.25 billion. Adjusted profit came in at $2.17 per share, slightly above estimates of $2.16 but below the midpoint of the company's guidance range.
Qualcomm's handset business has experienced significant deterioration throughout the current financial year. According to CNBC TV18, global smartphone shipments fell 20% in the September quarter to a 14-year low as surging memory chip costs drove up device prices amid booming demand from AI data centres. The weakness was evident in the company's third-quarter financial performance, with Qualcomm reporting revenue of $9.95 billion for Q3 FY2026, down 4% year over year but above analysts' estimates of $9.66 billion. Non-GAAP earnings per share declined 20.2% to $2.21. In an interview with Reuters, Qualcomm CEO Cristiano Amon indicated that sales of Android handsets had bottomed out and were ticking upward again, saying the company had prepared for the memory chip challenges and was starting to see sequential growth.
Another major concern for Qualcomm is Apple's gradual shift towards internally developed cellular modem technology. As reported by CNBC TV18, investors had worried over Apple switching to using its own modem chips and Qualcomm's warning of a faster-than-expected decline in sales to the iPhone maker. Amon said the first-quarter fiscal 2027 forecast given on Wednesday includes no further sales from Apple, while Qualcomm has been winning deals with other customers beyond the smartphone business. "We have within the year a 70% increase year-over-year in the design wins in fiscal 2027, with Apple out of the model," Amon said, adding that the company expects 60% year-over-year growth in the non-handset business as it goes to fiscal 2027. The company also expects $650 million in data-center sales for the fiscal first quarter, above analysts' expectations of $539.1 million.
Despite smartphone business challenges, Qualcomm has secured significant opportunities in the data center and AI segments. According to CNBC TV18, the company expects first-quarter revenue to be between $10.4 billion and $11.2 billion, with the midpoint above analysts' average estimate of $10.48 billion. It expects sales in its chip segment to be between $9 billion and $9.6 billion, exceeding estimates of $8.88 billion. The company has secured a September agreement allowing Amazon to buy up to $60 billion of Qualcomm's AI chips and related data-center products, adding to its client roster that includes Microsoft and Meta Platforms. Additionally, Qualcomm expects baseline gross margin to return to its historical 48% to 50% range by the second quarter as chip price increases take effect, with the full benefit seen in the second half of fiscal 2027. The company also signed a multi-year 5G deal to supply radio equipment, baseband units and software for SpaceX's planned nationwide Starlink Mobile network starting in 2027.
