Qualcomm expects its fourth-quarter profit to fall below market expectations, citing a faster-than-anticipated decline in revenue from Apple products. However, the company stated that growth in data centers and other non-smartphone businesses will be sufficient to offset the revenue loss by fiscal 2027.

Qualcomm said that due to supply constraints, its share of components in the next-generation iPhone lineup will be significantly lower than its previous estimate of 20%.

Qualcomm CEO Cristiano Amon said, “The key factor is supply availability.” He added that Qualcomm plans to implement a double-digit percentage price increase starting September 1 in an effort to restore profit margins to historical levels. According to Amon, the cost increase is driven by rising expenses across the entire supply chain, rather than memory chip costs alone.

Amon noted that Qualcomm will need to negotiate with each customer individually, as “the temporary disconnect between costs and pricing has resulted in a temporary slight decline in gross margins.”

• Data Center Business Transformation

Qualcomm expects that by fiscal 2027, the majority of its chip sales will come from markets outside the smartphone sector.

Qualcomm CFO Akash Palkhiwala said that growth from Qualcomm’s non-handset businesses in fiscal 2027 is expected to replace all revenue associated with Apple in fiscal 2026.

The company has been expanding into the fast-growing AI data center market and aims to generate US$5 billion in revenue from this business by fiscal 2027, increasing to US$15 billion by fiscal 2029.

“We are replacing the Apple business with the data center business,” Amon said.

Amon also revealed that Qualcomm has begun wafer production for two custom chip agreements with hyperscale customers, with revenue contributions expected to begin in the December quarter.

He added that Qualcomm has completed the tape-out of its first-generation high-bandwidth computing chip, which integrates computing and memory within a single package and is scheduled for release in mid-2027.

Bob O’Donnell, Chief Analyst at TECHnalysis Research, commented: “The long-term positive news is that Qualcomm is rapidly expanding beyond smartphones. Automotive chip sales have reached record levels, and the company is expected to launch its first major data center product later this year.”

• Continued Pressure on Smartphone Business

According to data compiled by the London Stock Exchange Group (LSEG), Qualcomm expects adjusted earnings per share for the fourth fiscal quarter to be between US$2.05 and US$2.25, below the analyst consensus estimate of US$2.36.

The company forecasts fourth-quarter revenue of US$9.7 billion to US$10.5 billion, below the previous market expectation of US$10.02 billion. Revenue from its semiconductor business is expected to reach US$8.4 billion to US$9.0 billion, compared with analysts’ previous estimate of US$8.49 billion.

Palkhiwala said that despite declining Apple-related revenue, Qualcomm’s handset business revenue is expected to reach approximately US$5.2 billion in the fourth quarter, supported by growth in the Android ecosystem. Analysts surveyed by Visible Alpha had previously expected US$5.03 billion.

The handset chip division, which primarily supplies smartphone processors and related components, reported third-quarter revenue of US$5.09 billion, down 20% year over year, but above Visible Alpha analysts’ previous estimate of US$4.96 billion.

Amon said that although Android smartphone shipments have started to recover, manufacturers are being forced to raise device prices. This has encouraged consumers to shift toward lower-end models within the premium smartphone segment or purchase older-generation devices, both of which are putting pressure on Qualcomm’s margins.

Qualcomm said revenue from Chinese smartphone manufacturers bottomed out in the third fiscal quarter and is expected to return to double-digit sequential growth in the fourth quarter.

For the third fiscal quarter, Qualcomm reported revenue of US$9.95 billion, down 4% year over year, but above the previous market expectation of US$9.67 billion. Adjusted earnings per share came in at US$2.21, compared with the previous analyst estimate of US$2.23.