NEW YORK: Qualcomm fell short of Wall Street estimates for fourth quarter revenue from its smartphone chips on sluggish demand and declining Apple-related revenue, sending its shares down more than 4.5%.
Demand for lucrative high-bandwidth storage for artificial intelligence (AI) servers has pushed up memory chip prices, raising the cost of consumer electronics and squeezing smartphone processor designers such as Qualcomm.
Global smartphone shipments fell 20% in the September quarter to a 14-year low, according to Counterpoint Research.
The company forecast better-than-expected revenue in its nascent data centre segment, but the outlook was not enough to outweigh a miss in its core business.
Revenue from Qualcomm’s handset unit, which makes chips for smartphones, fell 26% to US$5.14bil in the fourth quarter, dragging the chip segment’s revenue down 8% to US$9.02bil.
Analysts polled by Visible Alpha expected handset revenue of US$5.25bil.
In an interview with Reuters, Qualcomm chief executive officer Cristiano Amon said sales of Android handsets had bottomed out and were ticking upwards again.
“Unlike some other companies, we called this memory thing early, and we said we prepared for it,” Amon said.
“We’re starting to see sequential growth now on Android. We have been really executing on the non-handset business.”
Investors had also 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 (FY27) forecast given on Wednesday included 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-on-year (y-o-y) in the design wins in FY27, with Apple out of the model,” Amon said.
“We expect the non-handset revenue to replace Apple entirely, and you’re going to see 60% y-o-y growth in the non-handset business as you go to FY27.”
The smartphone chipmaker expects first quarter revenue to be between US$10.4bil and US$11.2bil, the midpoint of which is above analysts’ average estimate of US$10.48bil, according to LSEG data.
It expects sales in its chip segment to be between US$9bil and US$9.6bil, exceeding estimates of US$8.88bil.
Adjusted profit is expected to be between US$2.15 and US$2.35 per share, compared with estimates of US$2.27.
A September agreement allowing Amazon to buy up to US$60bil of Qualcomm’s AI chips and related data centre products added the eCommerce giant to a client roster that includes Microsoft and Meta Platforms.
Qualcomm valued the warrants to Amazon, which are similar to those issued by rivals such as AMD to customers, at about US$1.8bil when the deal was signed, with the online giant able to acquire up to 25 million shares as purchase commitments and spending milestones are met.
Qualcomm has said revenue from two custom chip programmes with hyperscalers would begin in the current quarter ahead of a ramp-up of its AI accelerator products next year as it targets US$15bil in annual data centre revenue by FY29.
On Wednesday the company 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. — Reuters
