The chill in the mobile phone market has exceeded expectations! Qualcomm (QCOM.US) Q3 revenue and profit both declined, and profit guidance fell short of expectations

The Zhitong Finance App learned that Qualcomm (QCOM.US) announced financial results for the third quarter of the 2026 fiscal year ending June 28 after the US stock market on Wednesday. According to the data, the company's Q3 revenue fell 4% yoy to US$9.95 billion, better than market expectations of US$9.62 billion; adjusted earnings per share fell 20% yoy to US$2.21, in line with market expectations.

By business segment, Qualcomm's Q3 mobile phone business revenue fell 20% year over year to US$5.086 billion. However, automotive business revenue soared 61% year over year to US$1,588 billion, while IoT business revenue increased 9% year over year to US$1.83 billion.

Looking ahead, Qualcomm expects fourth-quarter revenue to be between US$9.7 billion and US$10.5 billion, with a median range of US$10.1 billion, higher than market expectations of US$9.95 billion; adjusted earnings per share are expected to be between US$2.05 and US$2.25, which is lower than the market's general expectation of US$2.35.

Qualcomm, the world's largest smartphone processor manufacturer, gave weak quarterly profit guidance, indicating that component shortages and rising costs are impacting its major markets.

After the earnings report was announced, Qualcomm's share price fell about 4% after the market.

Poor mobile phone business intensifies Apple order loss rate faster than expected

The impact of the downturn in the smartphone market on Qualcomm exceeded expectations. The company said it is passing on some of the rising costs to customers, and said the move will drive a gradual restoration of profit margins.

Chip company Arm (ARM.US), which is also deeply tied to the smartphone circuit, also announced earnings on Wednesday evening. Arm management admits that their expectations for the growth of the mobile phone market have been drastically lowered, especially in the short term.

Like many peers, Qualcomm was forced to raise product prices due to tight supply chains. Qualcomm, headquartered in San Diego, commissioned TSMC's foundry chips, and it is difficult for this core foundry to meet the strong order demand from customers throughout the electronics industry.

The surge in demand for artificial intelligence servers has led to a tight supply of memory chips, forcing Qualcomm customers to reduce mobile phone production. Qualcomm chips are the core processors of smartphones. The company charges patent licensing fees from manufacturers based on mobile phone shipments, and the contraction in mobile phone production capacity directly dragged down its core mobile phone business revenue.

Qualcomm predicts that in the 2026 fiscal year, revenue related to Android phones will drop by about 20%, corresponding to a loss of more than 1.5 US dollars in earnings per share.

At the same time, Qualcomm warned that orders from Apple are falling faster than expected. The iPhone manufacturer is gradually getting rid of Qualcomm chips and switching to self-developed processors. Qualcomm said, “Due to limited supply, we expect the decline in Apple product revenue to accelerate from the fourth fiscal quarter, as our share of modems for the upcoming iPhone is expected to fall far short of the previous 20% forecast.”

The good news is that Qualcomm mentioned that Chinese mobile phone makers' revenue “bottomed out in the third fiscal quarter and will return to double-digit month-on-month growth in the fourth fiscal quarter.”

Qualcomm's entry into the data center market, and the non-mobile phone business is expected to become the core growth engine

Qualcomm promises that its new move into the data center market will help reduce its dependence on the mobile phone business and generate billions of dollars in revenue. But this transformation will take time.

Benefiting from news related to the data center business layout, Qualcomm's stock price rose for a while during the year. However, in the past month, the global chip sector has recovered as a whole, and Qualcomm's stock price has weakened at the same time. Investors are increasingly concerned that huge investments in artificial intelligence will not bring corresponding returns.

In response to this financial report, Qualcomm CEO Cristiano Amon said, “Despite the challenging memory and supply chain environment, our third quarter results reflect the steady implementation of our growth strategy, and quarterly revenue reached the upper limit of the guideline. We are fully prepared to achieve the vision recently presented on Investor Day. By the 2029 fiscal year, total non-mobile phone business revenue is expected to grow to US$40 billion, almost double the target announced in November 2024. In the short term, we expect the year-on-year revenue growth rate of the non-mobile business, including the data center business, to accelerate from 24% in FY2026 to more than 60% in FY2027, which will be an important turning point in the implementation of our growth strategy.”