Qualcomm’s smartphone chip business has taken a hammering, with fourth-quarter handset revenue falling 26 per cent as customers struggle with rising memory prices and weaker demand.
The San Diego chip designer reported revenue of $10.32 billion for its fiscal fourth quarter, down eight per cent from $11.27 billion a year earlier. Its handset business generated $5.14 billion, compared with $6.96 billion in the corresponding quarter of 2025.
Fortunately for Qualcomm chief executive Cristiano Amon, the automotive business is growing at a spectacular rate. Revenue surged 89 per cent to $1.99 billion, helped by increasing demand for digital cockpit systems, connectivity and advanced driver assistance technology.
The Internet of Things division, which includes networking equipment, industrial products and computing devices, increased revenue by four per cent to $1.89 billion. Combined automotive and IoT revenue grew 36 per cent, providing some relief from the disappointing figures from the smartphone operation.
Qualcomm’s chip division, QCT, reported revenue of $9.02 billion, down eight per cent, while its patent licensing business brought in $1.30 billion, a seven per cent decline. The chip division’s operating margin fell from 29 to 24 per cent.
Amon believes the company has prepared itself for the memory shortage that is making smartphones increasingly expensive to manufacture.
Amon told Reuters: “Unlike some other companies, we called this memory thing early… Android handset sales were beginning to recover.”
Memory manufacturers have been diverting production towards more profitable server products, leaving smartphone makers paying higher prices for essential components. According to Counterpoint Research, global smartphone shipments fell approximately 20 per cent during the September quarter, reaching their lowest level in 14 years.
Qualcomm faces another problem in the form of the Fruity Cargo Cult Apple, which is gradually replacing purchased Qualcomm modems with internally developed components. That transition threatens another important source of chip revenue, although Qualcomm has renewed its long-term patent licensing agreements with Job’s Mob, Huawei and Transsion.
For the full fiscal year, Qualcomm generated revenue of $43.12 billion, down three per cent. Reported net income jumped 146 per cent to $13.63 billion, although a $5.7 billion tax benefit did much of the work.
Stripping out the accounting benefits produces a less cheerful picture. Qualcomm’s adjusted earnings per share fell 12 per cent to $10.54, while adjusted net income declined 15 per cent to $11.31 billion.
The company expects revenue between $10.4 billion and $11.2 billion during the first quarter of fiscal 2027, with adjusted earnings between $2.15 and $2.35 per share.
Qualcomm is increasingly banking on data centres, where it wants to challenge established processor suppliers with specialised computing hardware. Amon forecasts $5 billion in data centre revenue in fiscal 2027, with about $650 million expected in the first quarter.
The outfit has announced a multigenerational chip collaboration with Amazon and is developing products for other major cloud operators, including Microsoft and Meta. Amon expects revenue from businesses outside smartphones to increase more than 60 per cent during fiscal 2027.
Qualcomm recently signed a multiyear agreement to supply cellular technology for SpaceX’s expanding Starlink Mobile operation, giving it another opportunity outside conventional smartphones.
The diversification strategy also brings financial complications. Qualcomm expects semiconductor manufacturing and packaging costs to increase, with the operating margin of its chip business forecast to slip to between 20 and 22 per cent in the coming quarter.
The company is raising prices to compensate, although it expects the full benefit of those increases to appear during the second half of fiscal 2027.
Investors were unimpressed by falling handset sales and weakening margins. Qualcomm shares dropped more than six per cent in extended trading following the results, despite the company’s optimistic forecasts for its new businesses.
