Qualcomm's Handset Chip Sales Fell 26% Last Quarter

Qualcomm's handset chip revenue fell 26% year over year to $5.14 billion in its fiscal fourth quarter, and the stock dropped about 7% in Wednesday extended trading as investors weighed a phone business in decline against management's promise that cars and AI data centers will replace it.

The numbers behind that selloff were unambiguous. For the quarter ended Sept. 27, Qualcomm reported non-GAAP revenue of $10.44 billion, down 7% from a year earlier, and non-GAAP earnings of $2.17 a share, down 28%. GAAP revenue came in at $10.32 billion. The QCT semiconductor unit, which houses the handset business, posted overall sales of $9.02 billion, down 8%, with pretax margin narrowing to 24% from 29% a year ago.

The result marks the sharpest quarterly contraction in Qualcomm's core phone franchise in recent reporting periods, and it lands at a moment when the company's future depends on whether non-handset businesses can scale fast enough to cover the shortfall. Management says they will. The market, on Wednesday night at least, was not convinced.

What did analysts expect, and where did Qualcomm miss?

The handset segment failed two tests at once. Handset revenue of $5.14 billion trailed the $5.21 billion estimate cited by CNBC from StreetAccount, and the segment fell far faster than the company overall. Adjusted earnings of $2.17 a share did edge past the $2.16 LSEG consensus, CNBC reported, but that single-cent beat carried little weight against the guidance that followed.

Qualcomm's outlook for its fiscal first quarter put non-GAAP earnings at $2.15 to $2.35 a share on revenue of $10.4 billion to $11.2 billion. Analysts had expected $2.27 a share on revenue of $10.48 billion, according to CNBC. The midpoint of the earnings range sits below the consensus, and the revenue midpoint barely clears it.

The market reaction was immediate. Shares slid about 7% in Wednesday extended trading, CNBC reported. SiliconANGLE likewise tracked a mid-single-digit after-hours drop, attributing it to the handset miss and the soft profit outlook. Other chip stocks offered little cover; SiliconANGLE noted that Arm and GlobalFoundries also fared poorly in the same session.

How does Qualcomm plan to replace handset revenue?

CEO Cristiano Amon framed fiscal 2027 as the pivot point. In the earnings release, he said:

"Fiscal 2027 marks the start of our non-handset revenue inflection, including the ramp of our Data Center business. Non-handset revenues are projected to grow by more than 60% year-over-year, and we are reiterating our fiscal 2027 Data Center revenue target of $5B."

That is a large claim to stake on businesses that currently generate a fraction of handset volumes, and Amon's own figures show the gap. He told CNBC the company booked about $650 million of data-center revenue in the quarter, mostly from custom silicon and connectivity work. A $5 billion annual target implies a steep ramp from a quarterly run rate of roughly one-eighth of that figure.

The demand side, Amon argued, is not the constraint. Qualcomm has engaged a global hyperscaler after signing a customer for optical connectivity, he said, and the bottleneck is manufacturing capacity.

"We don't have a demand issue; it's a supply issue," Amon said, according to CNBC. "If I had more supply, I would probably be doing better."

The company's earnings presentation lists Amazon among its connectivity and custom-silicon customers and describes a multi-generation product collaboration for AI data-center infrastructure. Qualcomm is also expanding its ground-network chip work beyond phones through a separate Starlink Mobile radio deal, under which SpaceX picked Qualcomm chips for Starlink Mobile's ground-based 5G network.

Can automotive and IoT carry the load sooner?

Automotive chips were the clearest counterweight to the handset decline in the quarter just reported. QCT automotive revenue jumped 89% to $1.99 billion, the segment's first quarter near the $2 billion mark. Internet-of-things revenue rose 4% to $1.89 billion. Combined, automotive and IoT grew 36%.

The licensing business moved in the opposite direction. QTL revenue fell 7% to $1.30 billion, even after Qualcomm said it renewed long-term agreements with Apple, Huawei and Transsion. License renewals at major phone makers normally signal stability in that segment; the decline alongside them points to pressure on licensed device volumes themselves.

Why are memory prices squeezing both sides of the business?

Input costs cut in two directions at once. Higher memory prices, fueled in part by AI server demand, have pushed handset makers to raise device prices and cooled phone demand, CNBC noted. The same cost pressure that supports the AI infrastructure buildout Qualcomm wants to serve is depressing the phone market Qualcomm still depends on.

Qualcomm is responding with its own price increases. The company said it expects the full benefit of those pricing actions in QCT gross margins only in the second half of fiscal 2027, which leaves several quarters of compressed margins before the offset arrives.

What did the full fiscal year look like?

The fourth-quarter weakness capped a down year. For the full fiscal year, Qualcomm reported GAAP revenue of $43.1 billion, down 3%, and non-GAAP earnings of $10.54 a share, down 12%.

Capital returns continued through the decline. Qualcomm returned about $2.0 billion to stockholders in the fourth quarter, split between $1.0 billion of share repurchases and $1.0 billion in dividends.

What happens next?

The stakes for Qualcomm are now explicit: handset revenue is shrinking faster than analysts modeled, and the company has dated its own recovery. Amon has committed to more than 60% growth in non-handset revenue in fiscal 2027 and a $5 billion data-center target, and he has tied both to supply rather than demand. Until automotive, IoT and data-center silicon fill the hole left by a 26% handset decline, each quarterly report will test whether the inflection Amon promised is arriving on schedule.