Qualcomm on Wednesday lowered its near-term profit outlook and warned that revenue from Apple-linked components will shrink more quickly than earlier projected, attributing the change to supply shortages and escalating costs across the supply chain. The San Diego-based chipmaker said its fourth-quarter adjusted earnings per share are expected to land between $2.05 and $2.25, undercutting the Wall Street average forecast of $2.36 compiled by LSEG.
Shares of Qualcomm fell more than 3% in after-hours trading following the update. In a conversation with Reuters, Chief Executive Cristiano Amon described cost pressure that extends beyond memory chips to multiple tiers of Qualcomm's supplier base, and announced a scheduled price increase for customers effective September 1 aimed at restoring margins to historical norms.
"We’re just passing through big cost increases that we have," Amon said, noting that pricing adjustments will require negotiations with each customer. He added that this mismatch between rising input costs and timing of price changes means "the temporary disconnect between cost and pricing causes a slight decline temporarily in gross margin."
Qualcomm also revised its expectations for revenue tied to Apple devices, saying that supply constraints will curtail its share of components used in the next iPhone launch to well below the earlier estimate of 20 percent. "It’s availability of supply," Amon said when asked about the reduction in Apple-related revenue share.
The company reiterated a strategic shift in its chip portfolio, forecasting that by fiscal 2027 the bulk of its chip sales will originate from categories other than smartphones. "We kind of replaced Apple with the data center," Amon said, pointing to Qualcomm’s planned expansion into AI-focused data-center processors. The company is targeting $5 billion in data-center revenue by fiscal 2027 and $15 billion by 2029.
For the fourth quarter, Qualcomm anticipates revenue of $9.7 billion to $10.5 billion, compared with the Street estimate of $10.02 billion. It expects chip-segment revenue in the range of $8.4 billion to $9.0 billion; analysts had been modeling $8.49 billion for the period.
Those forward-looking figures follow a third quarter in which handset-unit revenue declined 20 percent to $5.09 billion, pulling the overall chip segment down 5 percent to $8.50 billion. Company-wide third-quarter revenue fell 4 percent to $9.95 billion, narrowly topping estimates of $9.67 billion. Adjusted profit in the period was $2.21 per share, slightly below consensus of $2.23.
Qualcomm said it sees signs that revenue from Chinese phone makers bottomed in the third quarter as those customers worked through excess inventories. The company pointed to the steep shipment declines posted by Xiaomi, Oppo and Vivo among the top five global smartphone vendors in the June quarter, citing data from Counterpoint Research.
Amon described how handset makers' pricing moves have shifted product mix and pressured margins. As manufacturers raised retail prices, some buyers gravitated toward lower-tier premium models or older phone designs, a dynamic that reduced Qualcomm’s average realizations. "There was a mix change versus what we expected," he said.
Analyst commentary highlighted the risk in Qualcomm’s mobile exposure. Jay Goldberg of Seaport said these results indicate that Qualcomm’s diversification comes at the cost of its mobile franchise: "These results show that as Qualcomm is diversifying, it has lost focus on its core mobile market," he said. "They are seeing share shift away from them in Android and have lost almost all remaining share at Apple."
Market consensus and the company’s guidance now diverge on several near-term metrics. Visible Alpha polled analysts who had expected handset revenue of $4.96 billion for the quarter, a figure below Qualcomm’s reported $5.09 billion in handset sales for the third quarter. For investors and industry watchers, Qualcomm’s results remain a closely watched indicator of consumer electronics demand because of the company’s broad exposure to devices such as smartphones.
What the numbers show
- Q4 adjusted EPS guidance: $2.05 to $2.25 (LSEG mean estimate $2.36).
- Q4 revenue guidance: $9.7 billion to $10.5 billion (Street estimate $10.02 billion).
- Chip segment revenue guidance: $8.4 billion to $9.0 billion (analyst estimate $8.49 billion).
- Q3 handset revenue: down 20 percent to $5.09 billion; chip segment revenue down 5 percent to $8.50 billion.
- Q3 company revenue: $9.95 billion, down 4 percent; adjusted profit $2.21 per share.
As Qualcomm moves to raise prices and expand in the data-center market, the company faces a period in which margin recovery depends on successful customer negotiations and resolution of supply constraints that have already trimmed its share of Apple launches. The firm’s longer-term data-center revenue targets remain unchanged, but the near-term picture reflects a challenging mix between device demand, inventory cycles and supplier cost inflation.