Apple Accelerates 'De-Quectel'! iPhone Chip Market Share Plummets, Qualcomm Pre-Market Slumps 5%

Qualcomm (Qualcomm) saw its pre-market stock price drop nearly 5% on Thursday (30th), primarily due to the company's warning of rising memory costs and a faster-than-expected revenue decline from Apple (AAPL-US), sparking market concerns over short-term profit growth. At the time of writing, Qualcomm (QCOM-US) was down 4.42% in pre-market trading, temporarily trading at $148.80 per share.

Surging investment in artificial intelligence (AI) infrastructure is tightening the semiconductor supply chain, driving up costs for memory, wafers, packaging, and testing. Qualcomm plans to pass on some of these costs to customers through double-digit price increases, but the benefits of these hikes are not expected to materialize until several quarters from now.

Qualcomm stated that cost pressures will continue to erode near-term profit margins during the period when existing contracts expire and before new product cycles begin. The company forecasts adjusted earnings per share (EPS) for the current quarter between $2.05 and $2.25, significantly below the $2.36 average estimate compiled by analysts at London Stock Exchange Group (LSEG).

Bernstein analysts noted that rising costs and increased spending are significantly impacting Qualcomm's profit margins. Although the company is attempting to offset this through price hikes, the initial investments required for its upcoming data center business could be substantial enough to offset the benefits of higher pricing.

Outlook for Apple-related business is also unsettling investors. Qualcomm revealed that its modem chip market share in the upcoming new iPhones will be far below the previously estimated 20%, indicating that revenue from Apple may shrink faster than originally anticipated. As Apple continues to expand the use of its in-house developed modem chips, the pressure on Qualcomm's business losses is intensifying.

Despite worsening short-term headwinds, Qualcomm remains optimistic about its AI and data center initiatives. The company expects non-smartphone business revenue growth to accelerate from 24% in the 2026 fiscal year to over 60% in the 2027 fiscal year. However, TD Cowen analysts caution that Qualcomm's business diversification results will take time to materialize, and the initial data center projects are expected to have relatively low profit margins, making it difficult to immediately fill the gap left by declining smartphone business.

Following the financial forecast release, at least six analysts have downgraded Qualcomm's stock price target, bringing the current average target price down to $208.68. Qualcomm's estimated price-to-earnings (P/E) ratio for the next 12 months is approximately 14.31x, lower than Intel's (INTC-US) 43.85x and NVIDIA's (NVDA-US) 17.49x.