Qualcomm’s Smartphone Chip Sales Miss Estimates, Shares Fall as Memory Costs Pressure Demand

Qualcomm’s shares fell more than 6% in extended trading on November 4 after the semiconductor company reported weaker-than-expected smartphone chip revenue for its fiscal fourth quarter. Revenue from its handset business dropped 26% year over year to $5.14 billion, missing analysts’ expectations of $5.25 billion, as higher memory costs and weaker smartphone demand affected the global electronics market.

The results highlight the challenges facing Qualcomm as it tries to reduce its dependence on smartphone processors and expand into automotive chips, Internet of Things (IoT) devices and artificial intelligence infrastructure. Although the company delivered better-than-expected overall revenue and provided a stronger sales outlook for its next quarter, investors remained concerned about the decline in its largest business and the gradual loss of Apple-related revenue.

Qualcomm’s Smartphone Chip Revenue Falls 26%

Qualcomm’s handset business recorded revenue of $5.14 billion in the fourth quarter of fiscal 2026, compared with $6.96 billion in the same period a year earlier.

The 26% decline was the main reason investors reacted negatively to the company’s earnings report.

The handset business is part of Qualcomm’s Qualcomm CDMA Technologies (QCT) division, which supplies processors, connectivity chips and other semiconductor products.

The broader QCT division generated revenue of $9.02 billion during the quarter, down 8% year over year from $9.82 billion.

The company’s reported financial performance included:

Financial metric	Q4 FY2026	Year-over-year change
GAAP revenue	$10.32 billion	-8%
Adjusted revenue	$10.44 billion	-7%
Handset chip revenue	$5.14 billion	-26%
QCT segment revenue	$9.02 billion	-8%
Automotive revenue	$1.99 billion	+89%
Adjusted diluted EPS	$2.17	Down from $3.00

Despite the weakness in smartphone chips, Qualcomm’s adjusted revenue of $10.44 billion exceeded analysts’ expectations of approximately $10.11 billion. Adjusted earnings per share of $2.17 also came in slightly above the expected $2.16.

This suggests that the stock reaction was driven less by the headline revenue figure and more by concerns about the composition of revenue and the outlook for its core handset business.

Rising Memory Prices Are Hurting Smartphone Demand

One of the major factors affecting Qualcomm is the rising cost of memory chips.

Demand for high-bandwidth memory and other components used in AI servers has increased as technology companies expand their data-centre infrastructure.

This has created pressure across the semiconductor supply chain, particularly for components used in consumer electronics.

According to Counterpoint Research data cited by Reuters, global smartphone shipments fell 20% in the September quarter to their lowest level in 14 years.

Higher memory costs have pushed up manufacturing expenses for smartphone companies. Device manufacturers may respond by increasing prices, reducing production or adjusting inventory levels.

These decisions can affect demand for smartphone processors and connectivity chips supplied by Qualcomm.

The impact is particularly important because handset processors remain the company’s largest individual QCT revenue stream.

Qualcomm CEO Cristiano Amon said Android handset sales had bottomed out and were beginning to improve sequentially. He also indicated that the company had anticipated memory-related challenges and prepared for their impact.

However, a recovery in smartphone demand will depend partly on whether memory supply improves and device prices become more affordable.

Apple’s Shift to In-House Chips Adds Pressure

Another challenge for Qualcomm is Apple’s gradual transition towards internally developed modem technology.

Qualcomm has historically supplied modem chips for Apple’s iPhones, making the relationship an important source of revenue.

Apple has been developing its own modem technology to reduce dependence on external suppliers and gain greater control over its hardware ecosystem.

Qualcomm has warned that revenue from Apple will decline faster than previously expected.

Amon said Qualcomm’s first-quarter fiscal 2027 forecast does not include further Apple handset-related chip sales.

This creates a significant adjustment for the company because Apple-related revenue has historically contributed to its handset business.

Qualcomm is attempting to offset the expected decline through new customers and growth in other markets.

The company said its non-handset business is expected to grow by approximately 60% year over year in fiscal 2027, while design wins are projected to increase 70%.

These targets reflect its strategy to expand beyond conventional smartphone processors.

Automotive Chip Business Grows 89%

Qualcomm’s automotive division delivered one of the strongest performances in the latest quarter.

Automotive revenue reached approximately $1.99 billion, representing an 89% increase from $1.05 billion a year earlier.

For the full fiscal year 2026, automotive revenue reached $6 billion, up 52% from the previous year.

The company supplies semiconductor technology for connected vehicles, digital cockpits, infotainment systems, advanced driver-assistance systems and vehicle connectivity.

As automakers introduce more software-defined vehicles, demand for advanced computing and connectivity platforms is creating new opportunities for semiconductor suppliers.

Qualcomm’s automotive growth is important because it offers a business opportunity that is less directly dependent on annual smartphone replacement cycles.

The company is also expanding its IoT portfolio, which includes chips used in industrial devices, networking equipment and connected consumer products.

Combined automotive and IoT revenue grew 36% year over year in the fourth quarter, according to Qualcomm.

Qualcomm Expands Its AI Data-Centre Business

Artificial intelligence infrastructure is becoming another important growth opportunity for Qualcomm.

The company is developing custom processors and AI accelerator products for data centres, targeting customers that need alternatives to traditional GPU-based computing infrastructure.

Qualcomm expects its data-centre business to generate approximately $650 million in revenue in the first quarter of fiscal 2027. That forecast is above analysts’ expectations of around $539 million.

The company is targeting $5 billion in data-centre revenue during fiscal 2027 and $15 billion in annual data-centre revenue by fiscal 2029.

Its expansion includes a major agreement with Amazon that allows the e-commerce company to purchase up to $60 billion worth of Qualcomm AI chips and related data-centre products, subject to the agreement’s terms and milestones.

Qualcomm also counts Microsoft and Meta among its customers for its broader AI and computing initiatives.

The company expects revenue from two custom-chip programmes with large cloud-computing customers to begin in the current quarter, followed by a broader ramp-up of its AI accelerator products next year.

These opportunities could help Qualcomm diversify its revenue base, although the data-centre business is still developing compared with its established smartphone operations.

Qualcomm Signs Multi-Year 5G Agreement With SpaceX

On November 4, Qualcomm also announced a multi-year agreement to supply technology for SpaceX’s planned Starlink Mobile network.

The agreement covers radio equipment, baseband units and software for the planned nationwide mobile network, with shipments expected to begin in 2027.

The deal adds another opportunity outside the traditional smartphone market.

It also demonstrates Qualcomm’s efforts to use its wireless communications expertise in satellite-connected mobile infrastructure.

However, the financial contribution will be spread over multiple years, and the agreement is not expected to immediately offset the decline in handset revenue.

Qualcomm’s Next-Quarter Outlook

Qualcomm provided a first-quarter fiscal 2027 revenue forecast that was stronger than analysts’ expectations.

The company expects:

Metric	Qualcomm’s guidance	Analyst expectation
Total revenue	$10.4B–$11.2B	Around $10.48B at midpoint
QCT revenue	$9.0B–$9.6B	$8.88B
Adjusted EPS	$2.15–$2.35	$2.27
Data-centre revenue	Around $650M	$539.1M

While the revenue and chip-segment forecasts were encouraging, the midpoint of its adjusted earnings guidance was slightly below analyst expectations.

Qualcomm’s finance chief Akash Palkhiwala said the company expects its baseline gross margin to return to the historical 48%–50% range by the second quarter, with the full benefit of chip price increases becoming visible in the second half of fiscal 2027.

This suggests that pricing adjustments could help protect profitability, although higher component costs and changes in product mix remain important considerations.

The Bigger Picture

Qualcomm’s results reflect a broader shift in the semiconductor industry.

The same AI investment boom that is creating demand for advanced data-centre chips is also contributing to pressure on memory supply and costs for consumer electronics.

For Qualcomm, this creates a difficult transition. Its traditional smartphone business remains a major source of revenue, but handset demand is facing pressure while Apple’s move towards in-house modem technology creates an additional challenge.

At the same time, automotive chips, IoT products and AI data-centre processors are becoming increasingly important growth opportunities.

The company’s ability to turn these emerging businesses into reliable revenue streams will determine how successfully it can reduce its dependence on smartphones.

Looking Ahead

Investors will watch whether Android smartphone demand improves as Qualcomm’s CEO expects and whether higher memory costs continue to affect device shipments. The company’s pricing strategy, gross-margin recovery and ability to manage the decline in Apple-related sales will also be important factors during fiscal 2027.

Beyond smartphones, Qualcomm’s progress with Amazon, other cloud-computing customers and the Starlink Mobile agreement could strengthen its position in AI infrastructure and connectivity. However, these businesses will need to scale substantially to offset pressure on the handset segment. The latest results show that Qualcomm has meaningful diversification opportunities, but its transition away from smartphone dependence is still underway.