Qualcomm’s handset division reported $5.1 billion in revenue for its latest quarter, down 26% from the same period a year earlier, according to MarketWatch. That figure fell short of the $5.2 billion analysts had forecast, exposing how sharply declining smartphone demand is pressuring the chipmaker’s main business.
Total revenue came in at $10.4 billion, down 7% from a year ago, though that still managed to top the $10.1 billion consensus estimate tracked by FactSet. Even so, investors fled the stock in after-hours trading Wednesday. MarketWatch first reported a 5.1% decline in extended trading Wednesday afternoon.
The divergence between the top-line beat and the handset miss is telling. While the overall $10.4 billion cleared expectations, the handset unit’s $5.1 billion fell short, suggesting that weakness in smartphones is more acute than the broader figures imply. The results land at a precarious moment for Qualcomm, which is attempting a fundamental reinvention even as it loses ground in the smartphone market—caught between Apple’s transition from Qualcomm modems and a memory-cost crisis rippling through the consumer-electronics supply chain.
Apple’s in-house modems carve out Qualcomm’s biggest revenue stream
The 26% plunge in handset revenue carries a structural sting beyond the cyclical downturn. Apple, Qualcomm’s largest customer, has been transitioning its modems to custom internal designs, gradually severing one of the tech industry’s most profitable partnerships. While Qualcomm’s handsets business still accounts for the majority of its chipset sales, each quarter of Apple’s migration chips away at a revenue base that once seemed untouchable.
Compounding the pressure, Qualcomm—like its rivals across the semiconductor industry—is contending with sharply higher memory-component prices. These costs eat directly into profit margins and have forced the broader consumer-electronics sector into a painful reckoning, as manufacturers struggle to maintain profitability amid component inflation.
The $5 billion data-center bet on AI infrastructure
CEO Cristiano Amon attempted to frame the quarter as a turning point rather than a setback. In a statement, he said the company’s new fiscal-year 2027, which kicked off at the end of September:
“marks the start of our non-handset revenue inflection, including the ramp of our data-center business.”
Amon projected that non-handset revenues will grow more than 60% year over year, anchored by Qualcomm’s existing target of $5 billion in data-center revenue this fiscal year. The strategy centers on chip-based accelerator cards designed to support running AI models—a direct play for the booming artificial-intelligence infrastructure market. For the December quarter, Qualcomm offered a revenue outlook of $10.4 billion to $11.2 billion, which topped the $10.5 billion analysts had expected at the midpoint. However, its adjusted earnings guidance of $2.15 to $2.35 per share landed one cent below consensus at the midpoint, a subtle disappointment that likely amplified the stock’s after-hours decline.
Analysts see progress in diversification, but warn the reset isn’t finished
Bernstein analyst Stacy Rasgon offered a mixed assessment ahead of the earnings report. He noted that Qualcomm’s attempt to diversify beyond smartphones has been working, pointing to growth in its automobile and internet-of-things businesses as evidence that the strategy is gaining traction. But he cautioned that handsets still make up most of Qualcomm’s chipset sales, and that the supply chain:
“seems to indicate a markedly worsening environment given the current memory dynamics.”
Looking beyond the current fiscal year, Rasgon said he sees a chance for data-center growth to eventually drive earnings higher, but stressed that the company’s results:
“still need a reset before we get there.”
What the twin pressures mean for the smartphone ecosystem
Qualcomm’s challenges highlight a tightening market across consumer technology. When memory prices spike, smartphone manufacturers must choose between absorbing the cost and eroding their own margins, or passing costs to consumers and risking further demand destruction in an already sluggish market. As a primary supplier of processors for Android devices, Qualcomm sits at the epicenter of that pressure.
The company’s pivot toward AI data centers represents a high-stakes attempt to escape its handset dependency. If the $5 billion data-center target materializes and non-handset revenue grows as Amon predicted, Qualcomm could evolve from a smartphone chip supplier into a significant AI infrastructure player. But the transition is unfolding while its legacy business contracts—a delicate balance that the stock market appears unwilling to wait for. With fiscal 2027 only just beginning, the coming quarters will test whether diversification can truly offset the Apple losses and memory-cost headwinds before they do lasting damage.
