Qualcomm falls more than 9% after phone sales drop 26% in fourth quarter
Key Facts
Qualcomm shares fell more than 9% in early trading on Nov. 5 after the company reported lower revenue from phone chips and a weak earnings outlook for the following quarter. The company reported results for its fourth fiscal quarter and fiscal 2026 on Nov. 4, for a period ended Sept. 27, according to its filing with the U.S. Securities and Exchange Commission. Non-GAAP revenue was $10.442 billion, while GAAP revenue was $10.322 billion. Non-GAAP revenue fell 7% from the same quarter a year earlier, while GAAP revenue declined 8%. Non-GAAP diluted earnings per share were $2.17, down 28% from $3.00 a year earlier, while GAAP earnings per share were $1.17. The company’s filing did not provide an analyst estimate comparable with these figures.
The steepest decline was in the handset business, which accounts for the largest share of revenue in the QCT chip segment. Handset revenue fell 26% to $5.137 billion, compared with $6.961 billion in the year-earlier period. Total QCT revenue declined 8% to $9.015 billion, from $9.821 billion a year earlier. By contrast, automotive revenue rose 89% to $1.990 billion, and IoT revenue increased 4% to $1.888 billion. Automotive and IoT revenue grew a combined 36% year over year, according to the company’s filing. The figures highlight the widening gap between weakness in handsets and growth in other chip businesses.
Reuters linked the share decline to phone-chip sales that fell short of estimates and investor concerns about weakness in the handset business. The news agency said market concerns included the possibility that weakness in this business could limit data-center growth. CEO Cristiano Amon said demand for Android devices had improved compared with the previous quarter. He also said the company had identified a memory shortage early and prepared for it, adding: "Unlike some other companies, we saw the memory shortage coming and prepared for it early." Reuters reported that the shares closed at $156.75 on Nov. 5, according to EL7 daily data. In early trading, Reuters estimated that continued losses could erase more than $17 billion from the company’s market capitalization.
Qualcomm issued first-quarter fiscal 2027 guidance for revenue of $10.4 billion to $11.2 billion, and QCT revenue of $9.0 billion to $9.6 billion. It forecast non-GAAP diluted earnings per share of $2.15 to $2.35. The company said its QCT revenue estimate includes data-center business. In its filing, it said the semiconductor industry is facing broad increases in manufacturing, assembly, testing, advanced packaging, memory and other material costs. It added that it is taking steps to reflect higher input costs in product pricing. The company expects the full impact of these actions on QCT margins to be visible in the second half of fiscal 2027.
Seeking to highlight growth paths beyond handsets, Amon said revenue from non-handset activities was on track to grow by more than 60% year over year in fiscal 2027. He also reaffirmed the company’s target of $5 billion in data-center revenue in the same fiscal year. But the decline in handset revenue in the latest quarter put those targets up against market questions about whether newer businesses can offset weakness in the core business. Reuters reported that at least 10 brokerages cut their price targets for the stock after the results, citing LSEG data. The news agency quoted Morgan Stanley analysts as saying: "We lack conviction in a 3-year growth trajectory in an environment full of potential AI chip targets."