Qualcomm Shares Fall on Weak Profit Forecast, Citing Higher Costs and Apple Business Decline

Qualcomm (QCOM) shares fell approximately 5% in premarket trading on Thursday after the chipmaker issued a disappointing profit forecast, citing pressure from rising supply chain costs and a more rapid decline in its business with Apple Inc.

Weaker Guidance Hits Shares

For the current quarter, Qualcomm projected adjusted profit in a range of $2.05 to $2.25 per share. This forecast fell significantly short of the average analyst estimate of $2.36 per share, according to data compiled by LSEG.

The weaker outlook prompted a negative reaction from Wall Street, with at least six analysts cutting their price targets on the stock. The mean price target now stands at $208.68, as per the report.

Dual Headwinds Pressure Margins

Qualcomm identified two primary challenges impacting its near-term profitability. The company is facing increased costs for memory, wafers, and other components as a surge in AI infrastructure spending tightens semiconductor supply chains. While Qualcomm plans to implement double-digit price hikes to offset this, it noted the benefits would emerge gradually over the next few quarters, leading to margin pressure in the interim.

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Adding to the pressure, the company said its modem share in Apple's upcoming iPhone would be materially lower than its previous 20% estimate. This indicates that revenue from its major customer is set to shrink faster than analysts had anticipated.

Long-Term Diversification Takes Time

Despite the near-term challenges, Qualcomm expressed optimism about its long-term expansion into AI and data centers. The company projects its non-handset revenue growth will accelerate to more than 60% in fiscal 2027, up from 24% in fiscal 2026.

However, analysts cautioned that this strategic shift will take time to materialize. Analysts at TD Cowen noted that the diversification story would not be immediate and that initial data center programs carry lower margins. Bernstein analysts added that while the company is trying to raise prices, "the forthcoming data-center ramp seems likely to more than offset that pricing action."