Qualcomm Warns of Weak Profit as Apple Business Shrinks Faster Than Expected

Qualcomm gave Wall Street a rough forecast Wednesday, July 29, and the stock paid for it immediately.

Shares fell more than 3% in extended trading, according to Reuters. The Business Times put the after-hours drop at about 4.3%. Either way, investors didn't like what they heard.

The company expects fourth-quarter adjusted profit between $2.05 and $2.25 per share. Even the high end of that range misses the average analyst estimate of $2.36, according to data compiled by LSEG. Revenue guidance of $9.7 billion to $10.5 billion also came in below some Wall Street models, per Business Times, which cited a $9.95 billion average projection, while Reuters cited a separate $10.02 billion consensus figure.

Apple Is Walking Away Faster Than Qualcomm Expected

Qualcomm CEO Cristiano Amon told Reuters that Apple's iPhone business is shrinking for Qualcomm faster than the company had planned for. Qualcomm had estimated it would supply around 20% of components for the next iPhone. That share is now expected to fall well below that mark starting in the fourth quarter.

Amon blamed "availability of supply" for the change. Business Times reported the broader context plainly: Apple has been building its own in-house chips and moving away from Qualcomm for years. This isn't new, but the pace is accelerating.

Qualcomm's answer is diversification. The company is targeting $5 billion in annual revenue from AI data centers by fiscal 2027, and $15 billion by 2029, according to Reuters. "We kind of replaced Apple with the data center," Amon said.

Seaport analyst Jay Goldberg told Reuters that Qualcomm's push into new markets has come at a cost. "These results show that as Qualcomm is diversifying, it has lost focus on its core mobile market," Goldberg said. "They are seeing share shift away from them in Android and have lost almost all remaining share at Apple."

Qualcomm is betting big on data centers years before that revenue shows up at meaningful scale, while its bread-and-butter phone business is bleeding on two fronts at once: Apple's exit and an Android slowdown. If the data-center bet takes longer than 2027 to pay off, investors are stuck holding a phone-chip company with a shrinking phone business.

Costs Are Up Everywhere, Not Just Memory Chips

Amon told Reuters that costs have risen across Qualcomm's entire supply chain, not just for memory chips. Qualcomm plans to raise prices starting September 1 to push margins back toward historical levels.

"We're just passing through big cost increases that we have," Amon said. He acknowledged the transition won't be seamless: "The temporary disconnect between cost and pricing causes a slight decline temporarily in gross margin."

Business Times connected this to a bigger industry story. Memory-chip shortages, driven by runaway AI data-center demand, have forced phone makers to build fewer devices. Qualcomm depends on Taiwan Semiconductor Manufacturing Co. for production, and TSMC is stretched thin trying to serve a customer list that spans the entire electronics industry.

Android Isn't Saving the Day Either

Business Times reported Qualcomm expects Android phone revenue to fall about 20% in fiscal 2026, costing the company more than $1.50 in lost earnings per share. Reuters confirmed the handset unit's revenue fell 20% to $5.09 billion in the third quarter.

Counterpoint Research data cited by Reuters shows Xiaomi, Oppo and Vivo posted the steepest shipment declines among the top five global smartphone vendors in the June quarter. Amon told Reuters that as Android makers raised prices to cope with rising costs, buyers shifted toward cheaper phones or held onto older models, both of which hurt Qualcomm's margins. "There was a mix change versus what we expected," he said.

Chinese phone makers have worked through excess inventory and Qualcomm expects that segment to return to double-digit sequential growth in the fourth quarter, after bottoming out in the third.

The Broader Chip Picture

Business Times noted that Arm Holdings, another company tied closely to smartphones, also reported results Wednesday evening and acknowledged its own growth expectations from phones had come down significantly in the short term. That's a second data point suggesting this isn't just a Qualcomm problem, it's a smartphone-industry problem layered on top of an AI-driven memory shortage.

Qualcomm's stock had rallied earlier this year on its data-center announcements, according to Business Times, but has given back ground over the past month as investors grow more skeptical that AI infrastructure spending is generating returns fast enough to justify the outlay.

Qualcomm says data centers will offset Apple's exit and Android's mix problems, but $5 billion by 2027 is still small next to the roughly $40 billion in annual revenue the company currently pulls from chips. Whether Qualcomm's price increases, set to begin September 1, actually restore margins without costing it more Android customers is something investors will find out over the next two quarters.