Qualcomm Q4 Smartphone Chip Revenue Misses Estimates, Shares Drop 4.5%
By Anhata Rooprai and Stephen Nellis
Qualcomm's Fourth-Quarter Performance and Market Impact
Nov 4 (Reuters) - Qualcomm on Wednesday 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% in extended trading.
Market Conditions and Smartphone Demand
Demand for lucrative high-bandwidth storage for 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.
Data-Center Segment and Revenue Forecast
The company forecast better-than-expected revenue in its nascent data-center segment, but the outlook was not enough to outweigh a miss in its core business.
Handset Unit Performance
Revenue from Qualcomm's handset unit, which makes chips for smartphones, fell 26% to $5.14 billion in the fourth quarter, dragging the chip segment's revenue down 8% to $9.02 billion.
Analysts polled by Visible Alpha expected handset revenue of $5.25 billion.
CEO Insights and Non-Handset Business Growth
In an interview with Reuters, Qualcomm CEO Cristiano Amon said sales of Android handsets had bottomed out and were ticking upward 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."
Apple Revenue Decline and Future Projections
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 forecast given on Wednesday includes 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-over-year in the design wins in fiscal 2027, 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% year-over-year growth in the non-handset business as you go to fiscal '27."
Financial Outlook and Strategic Partnerships
The smartphone chipmaker expects first-quarter revenue to be between $10.4 billion and $11.2 billion, the midpoint of which is above analysts' average estimate of $10.48 billion, according to data compiled by LSEG.
It expects sales in its chip segment to be between $9 billion and $9.6 billion, exceeding estimates of $8.88 billion.
Adjusted profit is expected to be between $2.15 and $2.35 per share, compared with estimates of $2.27.
Amazon and Data-Center Expansion
A September agreement allowing Amazon to buy up to $60 billion of Qualcomm's AI chips and related data-center products added the e-commerce 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 $1.8 billion 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 programs with hyperscalers would begin in the current quarter ahead of a ramp-up of its AI accelerator products next year as it targets $15 billion in annual data-center revenue by fiscal 2029.
SpaceX Partnership and Data-Center Sales
Earlier 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.
Qualcomm said it expects $650 million in data-center sales for the fiscal first quarter, above analysts' expectations of $539.1 million, according to Visible Alpha data.
Analyst Commentary and Overall Financials
"The new SpaceX deal will pay out over many years and will ship tens of thousands of units. However, handsets being down 26% really drags things down quite a bit, considering the size of that business, and I believe it is the major reason the stock is down," said Anshel Sag, an analyst with Moor Insights & Strategy.
Adjusted sales in the fourth quarter fell 7% to $10.44 billion, beating estimates of $10.11 billion. Adjusted profit came in at $2.17 per share, compared with estimates of $2.16.
(Reporting by Anhata Rooprai in Bengaluru; Editing by Sriraj Kalluvila)