Qualcomm Shares Fall on Disappointing Outlook, Cites Faster-Than-Expected Apple Revenue Drop

Qualcomm Inc. issued a fourth-quarter profit forecast that fell short of Wall Street estimates, signaling that an accelerated decline in revenue from key customer Apple Inc. and rising supply chain costs are weighing on its business. The chipmaker's shares fell more than 3% in extended trading following the announcement on Wednesday.

Weaker Outlook and Cost Pressures

Qualcomm projected adjusted profit for its fiscal fourth quarter to be between $2.05 and $2.25 per share, below the average analyst estimate of $2.36, according to data compiled by LSEG. The company forecast revenue in the range of $9.7 billion to $10.5 billion, compared with consensus estimates of $10.02 billion.

In an interview with Reuters, CEO Cristiano Amon attributed the pressure to broad cost increases across the supply chain. To combat margin compression, Amon said Qualcomm plans to raise prices starting September 1, stating, "We’re just passing through big cost increases that we have."

Apple Headwinds and Shifting Focus

A significant factor in the weak guidance is a faster-than-anticipated decline in business from Apple. Qualcomm said it now expects its share of components in the next iPhone launch to be well below its earlier estimate of 20%. Amon told Reuters this change was due to the "availability of supply."

Ad

This development underscores the company's ongoing diversification away from the smartphone market. Qualcomm is targeting its fast-growing AI data-center business to replace the lost revenue, with Amon stating, "We kind of replaced Apple with the data center." The company is targeting $5 billion in revenue from that segment by fiscal 2027.

Core Handset Market Challenges

The company's core business is also facing challenges. Revenue from its handset unit, which supplies chips for smartphones, fell 20% to $5.09 billion in the third quarter, though this figure beat the $4.96 billion expected by analysts polled by Visible Alpha.

While Qualcomm noted that revenue from Chinese phone makers had bottomed out as they cleared excess inventory, Amon explained that price hikes by Android handset makers have pushed consumers toward lower-end premium phones or older models, hurting the company's margins. Seaport analyst Jay Goldberg commented that the results show "as Qualcomm is diversifying, it has lost focus on its core mobile market."

For the third quarter ended in June, Qualcomm reported total revenue of $9.95 billion, a 4% year-over-year decline but ahead of the $9.67 billion analysts expected. Adjusted profit was $2.21 per share, slightly missing estimates of $2.23.