Qualcomm Beat Estimates but Lost a Quarter of Its Phone Business — Can Cars and Data Centers Fill the Gap Fast Enough?

Shares of Qualcomm slid 6% to $162.74 after the chipmaker's fiscal fourth-quarter report exposed a widening crack in its foundation: the handset business saw revenue plunge 26% year over year to $5.1 billion , missing analysts' target of $5.3 billion . The headline numbers looked fine — adjusted EPS of $2.17 on revenue of $10.32 billion topped expectations — but investors zeroed in on the smartphone weakness that has now defined four consecutive quarters.

Phones Still Pay the Bills, and the Bills Are Shrinking. Chip-segment revenue declined 8% to $9.02 billion, with Qualcomm blaming sluggish demand and declining Apple-related revenue . Bernstein estimates Apple-related chip revenue could drop roughly $6 billion by fiscal 2027 as Apple shifts to its own in-house modems. That means Qualcomm's largest revenue line is being squeezed from two directions at once — a soft smartphone market and a departing mega-customer.

Memory Costs Are Making Phones More Expensive to Build. The global shortage of memory chips — driven partly by AI demand consuming semiconductor capacity — is raising the cost of every smartphone. Android weakness reflects memory-driven pressure on smartphone production, with the company estimating an earnings hit greater than $1.50 per share for fiscal 2026 . Qualcomm raised chip prices in September , a move that may protect margins but risks further dampening unit volumes.

The Diversification Bet Is Real but Unfinished. Automotive sales jumped 89% to $2 billion , and CEO Cristiano Amon projected $5 billion in data center revenue in fiscal 2027 . At its June investor day, Qualcomm raised its fiscal 2029 non-handset revenue target to $40 billion . Those are ambitious figures, but today, non-phone businesses still represent a minority of total sales.

The Forward Outlook Offers a Thin Silver Lining. Qualcomm guided first-quarter revenue of $10.4 billion to $11.2 billion, with the midpoint above analysts' $10.48 billion estimate, and forecast chip-segment sales of $9 billion to $9.6 billion versus the $8.88 billion expected . That suggests management sees some stabilization — but at a price-to-earnings ratio near 19x trailing earnings, with full-year adjusted EPS down 12% to $10.54 , the stock isn't pricing in much margin for error. Qualcomm's pivot away from phones is a multi-year wager; this quarter showed just how urgently the clock is ticking.