Qualcomm gives tepid profit forecast in sign of phone woes

Published Thu, Jul 30, 2026 · 08:58 AM

QUALCOMM, the largest maker of smartphone processors, gave a weak profit forecast for the current quarter, signalling that component shortages and rising costs are taking a toll on its main market. 

Earnings will be US$2.05 to US$2.25 a share in the period running through September, excluding some items, the company said in a statement on Wednesday (Jul 29). Even the upper end of that range would miss the average analyst estimate. Revenue will be US$9.7 billion to US$10.5 billion, compared with an average projection of US$9.95 billion.

The company’s stock fell about 4.3 per cent in extended trading following the release. 

Qualcomm is getting squeezed more than expected by a smartphone slump. The company, which outsources production of its chips, said it’s passing along some of its cost increases to customers. That will help profit margins recover over time, it said.

Arm Holdings, another chip company closely tied to the smartphone industry, also reported its results late Wednesday. Executives at the UK-based company acknowledged that their expectations for growth from the phone market had come down significantly, particularly in the short term.

Qualcomm has promised that a new push into the data centre market will help reduce its dependence on phones and deliver billions of dollars of revenue. But that transition will take time.

Memory-chip shortages — fuelled by runaway demand for AI computers — have forced Qualcomm customers to produce fewer phones. Qualcomm’s chips are the brains of those devices, and it gets licensing revenue from handset makers based on the number of units shipped.

Revenue from phones running the Android operating system will decline about 20 per cent in fiscal 2026, Qualcomm projected. That will cost the company more than US$1.50 in lost earnings per share, it said.

Qualcomm also warned that it’s losing business from Apple more rapidly than anticipated. The iPhone maker has been transitioning away from Qualcomm chips, shifting instead toward in-house silicon. 

On a more positive note, Qualcomm said that Chinese phone makers’ handset revenue “reached a bottom in the third fiscal quarter and will return to double-digit sequential growth in the fourth quarter.”

Qualcomm shares, which had rallied this year on its data centre announcements, have lost ground over the last month in a general decline for chip-related stocks. Investors have become more concerned that the returns from AI investments aren’t keeping up with the massive outlay in new gear.

Qualcomm is being forced to raise prices, like many of its peers, as it struggles to get enough supply.

The San Diego-based company relies on Taiwan Semiconductor Manufacturing Co. for chip production. That key supplier is struggling to keep up with demand from a customer base that spans the electronics industry. 

Fiscal third-quarter earnings were US$2.21 a share when excluding some items. Sales decreased 4 per cent to about US$9.95 billion in the period, which ended Jun 28. Analysts had estimated earnings of US$2.21 a share on revenue of US$9.62 billion.

Qualcomm’s phone-related revenue was US$5.1 billion in the period. Internet-connected devices generated sales of US$1.83 billion, with the vehicle electronics market contributing US$1.59 billion.

The company said growth for non-phone revenue will accelerate to 60 per cent in fiscal 2027, an expansion from 24 per cent. BLOOMBERG