Sharp post-market drop! Smartphone business drag plus memory cost squeeze: Qualcomm (QCOM.US) Q1 profit guidance misses expectations

Qualcomm (QCOM.US) released its fiscal Q4 2026 earnings (quarter ended September 27) after the U.S. market close on November 4: GAAP revenue was US$10.322 billion, down 8% year-over-year, above the market expectation of US$10.1 billion; non-GAAP diluted earnings per share were US$2.17, down 28% year-over-year, slightly beating the expected US$2.16. QUALCOMM Incorporated noted that component and manufacturing costs are "rising broadly." Like many chipmakers, the company is also facing higher spending due to shortages in its own supply chain and insufficient memory chip supplywhich in turn was triggered by surging demand for data center equipment. On the positive side, demand from automotive and data center equipment manufacturers is offsetting the impact of slowing growth in the smartphone market. Handset suppliers remain Qualcomm's largest customers, but they have cut production as prices for memory chips and other components surge. By segment, chip business QCT revenue was US$9.015 billion, down 8%: automotive revenue was US$1.990 billion, up 89% year-over-year, a record for a single quarter and the first time above US$2 billion. IoT revenue was US$1.888 billion, up 4%. Automotive and IoT combined grew 36%, with both figures beating expectations and partially offsetting the contraction in handsets. The smartphone market remains a drag on Qualcomm's results. Revenue in that business plunged 26% last quarter to US$5.14 billion, below analysts' expectation of US$5.25 billion. In addition, technology licensing business QTL revenue was US$1.304 billion, down 7%. The world's largest smartphone processor maker QUALCOMM Incorporated gave a lackluster profit forecast for the current quarter, indicating the company is still grappling with rising component prices. The profit guidance is the key takeaway this quarter. The company expects fiscal Q1 2027 non-GAAP diluted earnings per share of US$2.152.35, with a midpoint of US$2.25 below analysts' expectation of US$2.32; revenue guidance is US$10.4 billion11.2 billion, with a midpoint above the expected US$10.55 billion. Qualcomm said outright that input costs for wafer manufacturing, packaging and testing, advanced packaging, and memory are "rising across the board," and it is passing them through via product pricing, with the full effect on QCT gross margin expected only in the second half of fiscal 2027memory chips are in shortage due to surging data center demand, forcing handset makers to cut output. GAAP net income was US$1.251 billion, with earnings per share of US$1.17, superficially a year-over-year "return to profit"actually a tax base effect: in the same period last year, the company recorded US$6.088 billion in income tax expense and a net loss of US$3.117 billion. Full-year GAAP earnings per share were US$12.70, up 153% year-over-year, also including the release of a US$5.7 billion deferred tax valuation allowance in the second quarter (US$5.32 per share); on a clean basis, full-year non-GAAP earnings per share were US$10.54, down 12% year-over-year. CEO Amon called fiscal 2027 an "inflection point for non-handset revenue": non-handset revenue is expected to grow more than 60% year-over-year, and he reiterated the target of US$5 billion in data center revenue for fiscal 2027; the company has renewed long-term QTL license agreements with Apple Inc., Huawei, and Transsion, and announced a multi-generation product collaboration with Amazon.com, Inc. in AI data centers. Earlier on Wednesday, QUALCOMM Incorporated's efforts to diversify its customer base got a boost from SpaceX, which plans to use QUALCOMM Incorporated components in a nationwide terrestrial wireless network. Amon has been working to expand into areas including PCs, automotive, networking, and most recently data centers. QUALCOMM Incorporated announced it has won major customers for AI computer technology and emphasized that its experience in building energy-efficient devices gives it a unique advantage. But investors remain cautious, causing Qualcomm's stock to keep falling in recent months. Qualcomm has been dogged by concerns that new revenue growth is not enough to offset the decline in its main business. After the post-market release, as of press time, the stock fell as much as 7.24% after hours to US$160.65. It is up 1.3% year-to-date (through the November 4 close).