Qualcomm's stock fell 5% due to a weak outlook and a rapid loss of orders from Apple

Shares of Qualcomm, the largest manufacturer of smartphone processors, fell 6% in premarket trading on July 30 due to a weak earnings forecast for the current fourth fiscal quarter. The company is under pressure due to a downturn in the mobile device market and is passing on some of its increased costs to customers in order to restore profitability over time.

In the fourth fiscal quarter, which ends in September, Qualcomm’s earnings are expected to be $2.05–2.25 per share, with revenue of $9.7–10.5 billion. Even the upper end of the forecast fell short of analysts’ average estimates, according to Bloomberg.

Qualcomm estimates that revenue in the Android smartphone segment will fall by approximately 20% in fiscal year 2026, costing the company more than $1.50 in lost earnings per share. In addition, the chipmaker warned of a faster-than-expected loss of orders from Apple, which has accelerated its transition to in-house processors.

Among the positive factors, the company highlighted the Chinese market: revenue from local smartphone manufacturers “hit bottom in the third fiscal quarter and will return to double-digit growth (quarter-over-quarter) in the fourth.”

In the third fiscal quarter, which ended in late June, earnings per share were $2.21, while sales fell 4% to $9.95 billion. The results met analysts’ earnings expectations and exceeded their revenue forecasts: Wall Street had projected $9.62 billion, according to Bloomberg.

The smartphone segment remains a key component of the company’s revenue, generating $5.1 billion. The IoT (Internet of Things) and automotive electronics segments accounted for $1.83 billion and $1.59 billion, respectively. Qualcomm expects revenue growth outside the mobile segment to accelerate from the current 24% to 60% in fiscal year 2027.

The downturn in the smartphone market has hit Qualcomm harder than the company had anticipated. To restore profitability, the chipmaker—which outsources production to third-party factories—is passing on some of its increased costs to customers, Bloomberg explains.

Expansion into the data center market is expected to reduce the company’s reliance on the mobile segment; according to Qualcomm’s estimates, this will generate billions of dollars in revenue. However, the agency believes this transformation will take time.

The situation is exacerbated by a shortage of memory chips triggered by the rush for AI-powered devices: due to the component shortage, manufacturers are forced to cut back on smartphone production. For Qualcomm, this is a direct blow to its revenue, as the company receives royalties for every gadget shipped that uses its processors and technologies.

Qualcomm’s stock, which had previously been rising on the back of announcements regarding its entry into the data center market, has fallen 15% over the past month, in line with the broader semiconductor sector. Investors are increasingly concerned that the return on investment in AI is not keeping pace with the enormous costs of new equipment.

Most analysts have a neutral view on Qualcomm shares: 23 out of 42 have assigned a “Hold” rating, according to MarketWatch. Another 15 analysts recommend buying (Buy and Overweight), while four recommend selling (Sell and Underweight).

This article was AI-translated and verified by a human editor