Qualcomm Stock Slips as Weak Forecast Overshadows Earnings Beat

Qualcomm reported quarterly results on Wednesday that surpassed Wall Street estimates, yet the chipmaker’s adjusted earnings fell short of expectations, dragging the stock down in extended trading.

Here is how the chipmaker’s performance compared to LSEG consensus estimates:

• EPS: $2.17 adjusted, compared to the $2.16 expected
• Revenue: $10.32 billion, compared to the $10.11 billion expected

For the current quarter, Qualcomm projected earnings per share between $2.15 and $2.35 on revenue ranging from $10.4 billion to $11.2 billion. This fell short of analyst expectations, which anticipated earnings per share of $2.27 on revenue of $10.48 billion.

Qualcomm’s chip sales are primarily driven by system-on-chips and modems for smartphones, a market currently facing significant turbulence. Rising memory costs are forcing handset manufacturers to increase prices, which is dampening consumer demand. Consequently, overall company revenue declined by 8% year-over-year.

Despite raising prices in September, handset chip sales fell 26% to $5.14 billion during the quarter, missing StreetAccount estimates of $5.21 billion. Qualcomm indicated that it is beginning to see sequential growth in this category, noting that Android shipments in China have bottomed out, even as the company forecasts a flat handset market in 2027.

Under the leadership of CEO Cristiano Amon, Qualcomm has been directing investor attention toward other chip categories. The company is targeting the rapidly expanding AI data center infrastructure market, generating $650 million in revenue during the quarter, primarily from customization and connectivity solutions, Amon noted.

Amon stated that Qualcomm anticipates reaching $5 billion in data center revenue by fiscal 2027. He highlighted that the company recently secured a customer for optical connectivity and has engaged with a major global hyperscaler.

“We don’t have a demand issue; it’s a supply issue,” Amon explained. “If we had more supply, we would likely be performing much better.”

In addition to automotive chips, revenue in Qualcomm’s automotive division surged 89% year-over-year to $1.99 billion, significantly exceeding StreetAccount expectations of $1.66 billion.

Qualcomm’s Internet of Things (IoT) segment encompasses low-power chips, smart glasses SoCs, laptop chips, and cellular infrastructure solutions. Earlier in the day, the company announced a partnership to provide technology to SpaceX’s cellular rollout. IoT revenue grew 4% year-over-year to $1.88 billion, slightly surpassing estimates.

Qualcomm’s QTL division manages revenue from licensing its intellectual property for 5G and other technologies. During the quarter, the company announced the renewal of licensing agreements with major partners, including Apple, Huawei, and Transsion.

“QTL is poised to maintain its scale moving forward,” Amon asserted.

QTL revenue declined 7% to $1.3 billion, aligning with StreetAccount estimates.

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