By Anhata Rooprai and Stephen Nellis
Nov 4 (Reuters) – Qualcomm on Wednesday fell short of Wall Street estimates for fourth-quarter smartphone chip sales on sluggish demand and declining Apple-related revenue, sending its shares down more than 6% in extended trading.
A better-than-expected revenue forecast for its nascent data-center segment failed to enthuse investors as they focused on the sharp decline in the company’s core business.
Global smartphone shipments fell 20% in the September quarter to a 14-year low, according to Counterpoint Research, as surging memory chip costs drove up device prices amid booming demand from AI data centers.
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.
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 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.”
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.”
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. The $2.25 midpoint of that range was below estimates of $2.27.
On a call with analysts, finance chief Akash Palkhiwala said baseline gross margin should return to its historical 48% to 50% range by the second quarter as chip price increases take effect, with the full benefit seen in the second half of fiscal 2027.
Bernstein analyst Stacy Rasgon said shares declined because Qualcomm’s “margin outlook is lousy” and that its forecast of a flat smartphone market in 2027 “may be viewed as aggressive” relative to what analysts expect.
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.
LOOKING BEYOND SMARTPHONES
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.
The company 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.
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.
“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 and Stephen Nellis in San Francisco; Editing by Sriraj Kalluvila)
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