Qualcomm’s phone chip sales drop 26%
Handset chip revenue fell 26% to $5.14 billion from $6.96 billion a year ago, wiping out roughly $1.8 billion in sales and missing the StreetAccount estimate of $5.21 billion. Adjusted earnings per share dropped 28% to $2.17, adjusted pre-tax profit fell 30%, and total adjusted revenue slipped 7% to $10.44 billion. The stock slid as much as 7% in after-hours trading on Wednesday after the company’s forecast for the current quarter came in below expectations. Before the results, it was up just 1.3% for the year.
Qualcomm’s smartphone chip business shrank by about a quarter in the September quarter, according to the company’s latest earnings report. Its chips are about to get more expensive too. The Snapdragon maker is raising prices across its products, citing rising costs in wafer fabrication, chip packaging, memory and other materials. It already raised prices in September, and phone chip sales fell anyway.
Qualcomm’s chip margins are shrinking despite the price hikes
The price increases are not protecting margins yet, and the company says they won’t fully do so until the second half of fiscal 2027, which begins in April. Revenue at its chip division fell 8% to $9.02 billion, and its pre-tax margin dropped to 24% from 29% a year ago. For this quarter, Qualcomm has guided for 20% to 22%. Handset chip revenue fell 13% to $24.07 billion in fiscal 2026, about $3.7 billion less than the year before. Adjusted earnings per share dropped 12% to $10.54, and adjusted pre-tax profit fell 16%. The company still spent $7.8 billion buying back its own shares over the year. Qualcomm expects adjusted earnings of $2.15 to $2.35 a share this quarter, a midpoint below the $2.27 analysts had pencilled in. It also expects the smartphone market, which still drives most of its chip sales, to stay flat through 2027. Global smartphone shipments fell 20% year-on-year in the July to September quarter, according to Counterpoint Research. OPPO and Vivo, two of the chipmaker’s major Android customers, each shipped more than 20% fewer phones than a year ago.
It puts three points of that fall down to folding its data centre unit, which is spending heavily ahead of its revenue ramp, into the chip segment. The full year was no better. The forecast offers little comfort. The slide in handset revenue mirrors the trouble at the phone makers Qualcomm sells to. Rising memory prices have forced brands to raise prices and cut production.