Qualcomm Shares Fall After Mixed Fourth-Quarter Earnings and Guidance
The chipmaker reported a slight earnings beat for the fourth quarter, but missed revenue estimates and issued soft guidance.
Qualcomm Inc. shares dropped more than six percent in after-hours trading following the release of its fourth-quarter financial results. The chipmaker posted adjusted quarterly earnings of $2.17 per share, narrowly beating Wall Street estimates of $2.16 per share, according to reports from Yahoo Finance and SiliconANGLE. However, the company's revenue of $10.44 billion fell short of the $10.48 billion expected by analysts.
The mixed financial report highlighted ongoing pressures within the smartphone industry, which remains Qualcomm's primary revenue source. Rising costs for components such as memory have forced handset manufacturers to increase consumer prices, subsequently reducing overall market demand. Consequently, Qualcomm's smartphone chip sales fell 26 percent during the quarter to $5.14 billion, missing the projected target of $5.21 billion.
Despite the downturn in mobile hardware demand, certain segments of Qualcomm's business demonstrated strong growth. The automotive division stood out with sales surging 89 percent year-over-year to $1.99 billion, comfortably surpassing consensus estimates of $1.66 billion. Internet of Things revenue also rose modestly by four percent to $1.88 billion.
Under the leadership of Chief Executive Cristiano Amon, Qualcomm has actively worked to expand its footprint in alternative markets, particularly artificial intelligence data centers. Data center revenue reached $650 million for the quarter. Amon expressed optimism about future expansion during a conference call with analysts, stating that the company recently secured an optical connectivity chip agreement with an unnamed global hyperscaler and aims to scale the data center business past $5 billion in revenue by the end of fiscal year 2027.
Addressing supply constraints, Amon remarked to analysts that the business faces a supply challenge rather than a demand shortfall. Meanwhile, the company's technology licensing division, QTL, generated $1.3 billion, marking a seven percent decline despite securing renewed agreements with major industry players including Apple Inc., Transsion Inc., and Huawei Technologies Co. Ltd.
Looking ahead to the current quarter, Qualcomm projected earnings of approximately $2.25 per share at the midpoint of its guidance range on sales of $10.48 billion. This outlook fell short of Wall Street expectations, which anticipated earnings of $2.27 per share alongside matching revenue. Market analysts noted that the company currently holds a Zacks Rank #4 Sell rating, reflecting unfavorable estimate revisions ahead of the report.
Other semiconductor companies also reported recent financial updates alongside Qualcomm, reflecting broader investor scrutiny regarding the sustainability of artificial intelligence sector growth. Arm Holdings delivered a slight earnings beat with adjusted earnings of 52 cents per share on revenue of $1.44 billion, though cautious guidance caused its stock to dip two percent in late trading. GlobalFoundries reported third-quarter adjusted earnings of 53 cents per share on $1.9 billion in sales, exceeding expectations driven by strong artificial intelligence and data center demand, while its stock remained flat after-hours.