Qualcomm’s smartphone chip business shrank by about a quarter in the September quarter, according to the company’s latest earnings report. Handset chip revenue fell 26% to $5.14 billion from $6.96 billion a year ago, wiping out roughly $1.8 billion in sales and missing the StreetAccount estimate of $5.21 billion. Adjusted earnings per share dropped 28% to $2.17, adjusted pre-tax profit fell 30%, and total adjusted revenue slipped 7% to $10.44 billion.Its chips are about to get more expensive too. The Snapdragon maker is raising prices across its products, citing rising costs in wafer fabrication, chip packaging, memory and other materials. It already raised prices in September, and phone chip sales fell anyway. The stock slid as much as 7% in after-hours trading on Wednesday after the company’s forecast for the current quarter came in below expectations. Before the results, it was up just 1.3% for the year.
Qualcomm’s chip margins are shrinking despite the price hikes
The price increases are not protecting margins yet, and the company says they won’t fully do so until the second half of fiscal 2027, which begins in April. Revenue at its chip division fell 8% to $9.02 billion, and its pre-tax margin dropped to 24% from 29% a year ago. For this quarter, Qualcomm has guided for 20% to 22%. It puts three points of that fall down to folding its data centre unit, which is spending heavily ahead of its revenue ramp, into the chip segment.The full year was no better. Handset chip revenue fell 13% to $24.07 billion in fiscal 2026, about $3.7 billion less than the year before. Adjusted earnings per share dropped 12% to $10.54, and adjusted pre-tax profit fell 16%. The company still spent $7.8 billion buying back its own shares over the year.Licensing, the business that collects royalties from phone makers using the company’s patents, slipped as well. Its revenue fell 7% to $1.3 billion in the quarter, and its profit dropped 10%, even after it renewed licensing deals with Apple, Huawei and Transsion.The forecast offers little comfort. Qualcomm expects adjusted earnings of $2.15 to $2.35 a share this quarter, a midpoint below the $2.27 analysts had pencilled in. It also expects the smartphone market, which still drives most of its chip sales, to stay flat through 2027.
Qualcomm’s biggest Android customers are shipping fewer phones
The slide in handset revenue mirrors the trouble at the phone makers Qualcomm sells to. Rising memory prices have forced brands to raise prices and cut production. Global smartphone shipments fell 20% year-on-year in the July to September quarter, according to Counterpoint Research. OPPO and Vivo, two of the chipmaker’s major Android customers, each shipped more than 20% fewer phones than a year ago.Xiaomi, another key customer, also cut shipments. It is now using its own XRING O3 chipset to set its premium phones apart, the same segment where Qualcomm sells its most expensive chips.The data centre business Qualcomm wants investors to focus on is being held back as well. CEO Cristiano Amon said the unit is limited by supply. “If I had more supply, I would probably be doing better,” he said.Qualcomm is now asking phone makers to pay more for its chips at a time when they are already struggling to sell phones. By the company’s own timeline, the higher prices won’t fully show up in its margins until April at the earliest.