Qualcomm shares fell roughly 5% in premarket trading after the chipmaker warned investors that higher memory and manufacturing costs, combined with a deeper-than-expected decline in revenue tied to Apple, will weigh on profit growth in the near term.
Company officials said a wave of investment in AI infrastructure has tightened semiconductor supply chains and pushed up expenses across several inputs - including memory, wafers, packaging and testing. To respond, Qualcomm plans to implement double-digit price increases for customers, though management said the benefit of those price changes will appear gradually over the next couple of quarters.
Margins under pressure
Qualcomm warned that margins will be squeezed while current contracts expire and new product cycles begin. For the current quarter the company provided a range for adjusted earnings per share of $2.05 to $2.25, notably below the LSEG-compiled analyst consensus of $2.36. The guidance contributed to the premarket pullback in the stock.
The firm also disclosed that its modem share in the upcoming iPhone will be materially lower than its prior estimate of 20%, indicating a faster-than-expected contraction of its Apple-related business.
Analysts highlighted the competing forces at work. Bernstein analysts said, "Cost increases and higher spending are significantly impacting margins, and while the company is trying to raise prices to compensate, the forthcoming data-center ramp seems likely to more than offset that pricing action." TD Cowen analysts cautioned that the companyaces a timing challenge as its diversification strategy into AI and data centers matures, noting initial data center programs tend to carry lower margins.
Longer-term growth expectations
Despite the near-term headwinds, Qualcomm reiterated optimism about its expansion outside handsets. The company said growth in non-handset revenue is expected to accelerate to more than 60% in fiscal 2027, up from 24% in fiscal 2026. Management emphasized that the benefits of price increases would be phased in over subsequent quarters.
Analyst reactions and valuation context
At least six analysts reduced their price targets on Qualcomm following the update, leaving the mean target at $208.68. Market valuation multiples cited by the company omparison show Qualcomm trading at 14.31 times expected earnings over the next 12 months, versus 43.85 times for Intel and 17.49 times for Nvidia.
Key metrics and takeaway
- Guidance for the quarter: adjusted EPS $2.05 - $2.25 (below consensus $2.36).
- Modem share in upcoming iPhone: materially lower than prior 20% estimate.
- Non-handset revenue growth: expected to accelerate from 24% in fiscal 2026 to more than 60% in fiscal 2027.
- At least six analysts cut price targets; mean target now $208.68.
The companyaces a period of margin compression even as it bets on a longer-term pivot into data center and AI-related revenue streams. Investors will be watching how quickly price increases can be implemented and how soon new, higher-margin programs begin to offset rising input costs and a shrinking handset business.