Qualcomm Stock Drops 6% After Q3 Beat Misses Forward Expectations

Qualcomm shares fell 6% in extended trading on Wednesday following the release of third-quarter results. The decline occurred despite the company exceeding immediate financial benchmarks, as investors reacted to a forward outlook that fell short of market projections. The stock movement followed a report where adjusted earnings per share came in at $2.17, slightly above the $2.16 consensus figure compiled by LSEG.

The company generated $10.44 billion in adjusted revenue for the period. For the current quarter, Qualcomm projected earnings per share between $2.15 and $2.35 on revenue ranging from $10.4 billion to $11.2 billion. These figures lagged the analyst estimates of $2.27 per share on $10.48 billion in revenue. Adjusted company revenue decreased 7% from the same period in the prior year.

The smartphone segment, which drives the majority of chip sales, faced headwinds from rising memory costs that have prompted handset manufacturers to increase device prices. This price adjustment has dampened consumer demand. Although Qualcomm raised its own prices in September, handset chip sales dropped 26% to $5.14 billion, missing the $5.21 billion estimate from StreetAccount. The company noted it is beginning to see sequential growth in this category and stated that Android shipments in China have stabilized. Qualcomm expects the overall handset market to remain flat in 2027.

CEO Cristiano Amon directed investor focus toward the company's data center operations, a sector that recorded $650 million in quarterly revenue primarily from customization and connectivity work. Amon stated that Qualcomm anticipates $5 billion in data center revenue for fiscal 2027. He noted recent engagements with a global hyperscaler and the signing of a customer for optical connectivity. Amon attributed the current performance gap to availability rather than consumer interest, saying, "We don't have a demand issue; it's a supply issue. If I had more supply, I would probably be doing better."

The automotive division outperformed expectations, with revenue rising 89% on an annual basis to $1.99 billion, surpassing the $1.66 billion estimate. Internet of things revenue, which encompasses low-power chips and smart glasses processors, grew 4% to $1.88 billion. Earlier that day, the company announced a partnership to provide technology for SpaceX's cellular network buildout.

The QTL division, responsible for licensing 5G intellectual property, saw revenue decline 7% to $1.3 billion, matching analyst forecasts. Qualcomm confirmed it renewed licensing agreements with Apple, Huawei, and Transsion during the quarter. Amon assured stakeholders that the QTL unit will maintain its scale in the coming periods.