Qualcomm's Conservative Forecast Weighs on Stock; Chip Prices to Rise from September

Qualcomm (QCOM-US) released its fiscal third-quarter earnings on Wednesday (29th), with profits largely meeting market expectations, but its guidance for the fourth quarter fell below Wall Street estimates. The company attributed the conservative outlook to ongoing tightness in computer component supply, particularly the surge in memory prices. Following the announcement, Qualcomm's after-hours stock price continued to decline, dropping over 4% at the time of reporting.

In an interview, Qualcomm CEO Cristiano Amon stated the company is taking concrete steps to enhance future profitability, including a full price increase on chip sales starting September 1 and ongoing supply chain streamlining.

"Costs have gone up, so prices will naturally go up," Amon said. Currently, most of Qualcomm's chips are supplied to smartphone manufacturers.

FY2026 Q4 Guidance vs. Wall Street Estimates

Revenue: $9.7–10.5 billion vs. $10.02 billion EPS: $2.05–2.25 vs. $2.36

In its earnings statement, Qualcomm noted, "The entire semiconductor industry is facing comprehensive increases in input costs, including wafer fabrication, packaging, testing, advanced packaging, memory, and other materials." However, management emphasized, "Overall revenue remains healthy."

Smartphone chips remain Qualcomm's largest revenue source. Under Amon's leadership, the company is actively expanding into other markets, including automotive, smart glasses, and robotics. Qualcomm aims for non-smartphone businesses to account for 60% of total revenue next year.

Q3 Earnings Key Data vs. LSEG Estimates

Revenue: $9.95 billion vs. $9.67 billion Adjusted EPS: $2.21 vs. $2.23

Qualcomm's Q3 smartphone chip revenue was $5.1 billion, down 20% year-on-year. The company said this reflects a gradual bottoming out in the Chinese smartphone market.

Amon pointed out new consumer trends in the smartphone market. He noted that rising price burdens have weakened the competitiveness of low- and mid-tier phones. Even for high-end Android phones, consumers are increasingly favoring lower-priced models.

"Consumer preferences in the high-end smartphone segment are gradually shifting toward lower-priced premium models, including last year's older models, due to rising memory prices," he said.

He added, "Everyone knows supply costs are very high right now, so our gross margins are affected. This is just a short-term phenomenon, and we're responding by raising prices."

Expanding into AI Data Centers

Qualcomm's automotive business emerged as a major highlight. Q3 automotive revenue reached $1.59 billion. The company previously stated in June that it expects automotive revenue to reach $10 billion by 2029. Additionally, on Wednesday, Qualcomm announced a partnership with BMW to supply digital cockpit chips.

The company is also actively entering the fast-growing AI data center infrastructure market. Amon said the company is still on track to achieve its goal of $5 billion in data center revenue next year.

Furthermore, Qualcomm announced it has completed the acquisition of AI software company Modular. Modular is known for developing AI programming technologies, and Qualcomm plans to officially unveil a new AI software platform at an event in August.

Licensing Remains a Key Profit Source

Qualcomm's Q3 IoT revenue reached $1.83 billion, up 9% year-on-year. This business includes industrial low-power chips and smart glasses chips.

Net profit for Q3 reached $2 billion, down 25% from $2.66 billion in the same period last year.

In addition to chip sales, Qualcomm's other key profit source is its technology licensing QTL division. The division generates revenue by licensing mobile communication technologies and chip-related intellectual property to other companies. Qualcomm's Q3 QTL revenue was $1.28 billion, exceeding StreetAccount analysts' estimate of $1.26 billion.