Big drop after the market! The mobile phone business is dragging down storage costs, and Qualcomm's (QCOM.US) Q1 profit guidance falls short of expectations

The Zhitong Finance App learned that Qualcomm (QCOM.US) released its financial report for the fourth quarter of fiscal year 2026 (ending September 27) after the market on November 4: GAAP revenue of 10.322 billion US dollars, down 8% year on year, higher than market expectations of 10.322 billion dollars, higher than market expectations; non-GAAP diluted earnings per share were 2.17 US dollars, down 28% year on year, slightly exceeding expectations of $2.16.

Qualcomm notes that parts and manufacturing costs are “generally rising.” Like many chip makers, the company is also facing increased spending due to a shortage in its own supply chain and insufficient supply of memory chips — which in turn is being triggered by a surge in demand for data center equipment.

On the positive side, demand from automotive and data center equipment manufacturers is making up for the impact of the slowing growth rate of the smartphone market. Mobile phone vendors are still Qualcomm's biggest customers, but they've cut production due to soaring prices for memory chips and other components.

By business, the chip business QCT's revenue was 9.015 billion US dollars, down 8%: automobile revenue was 1.90 billion US dollars, up 89% year over year, setting a record for the first time in a single quarter and breaking 2 billion US dollars for the first time. IoT revenue was $1,888 billion, up 4%. The combined growth of automobiles and the Internet of Things was 36%. Both figures exceeded expectations, partly hedging the contraction of mobile phones.

Currently, the mobile phone market is still a drag on Qualcomm's performance. The business segment's revenue plummeted 26% to US$5.14 billion last quarter, falling short of analysts' expectations of US$5.25 billion. Additionally, QTL's revenue from the technology licensing business was $1.304 billion, down 7%.

Qualcomm, the world's largest smartphone processor manufacturer, had a mediocre profit forecast for the quarter, indicating that the company is still struggling to cope with rising component prices.

Profit guidance is the highlight of the news this season. The company expects non-GAAP diluted earnings per share of $2.15-2.35 for the first quarter of fiscal year 2027, with a median value of 2.25 lower than analysts' expectations of $2.32; revenue guidance is $10.4-112 billion, which is higher than the median estimate of $10.55 billion. Qualcomm bluntly said that investment costs in wafer manufacturing, packaging and testing, advanced packaging, memory, etc. are “rising across the board” and are being transmitted through product pricing. It is expected that the second half of fiscal year 2027 will only be fully reflected in QCT gross margin — memory chips are in short supply due to a surge in data center demand, and mobile phone manufacturers are forced to cut production.

GAAP net profit of $1,251 billion and earnings per share of $1.17. On the surface, “reversal of losses” — this is actually a tax base effect: $6.088 billion in income tax expenses and a net loss of $3.117 billion in the same period last year. GAAP earnings per share for the year were $12.70, +153% year over year, which also included the release of $5.7 billion of deferred tax valuation allowance in the second quarter ($5.32 per share); clean caliber was $10.54 per share for the non-GAAP full year, down 12% year over year.

CEO Amon said that FY2027 is an “inflection point for non-mobile phone revenue”: non-mobile phone revenue is expected to increase by more than 60% year over year, reaffirming the target of data center revenue of $5 billion in fiscal 2027; the company has renewed long-term QTL license agreements with Apple, Huawei, and Voice, and announced multi-generation product cooperation with Amazon in AI data centers. Earlier Wednesday, Qualcomm's efforts to diversify its customer base were boosted by SpaceX, which plans to use Qualcomm components in a nationwide terrestrial wireless network.

Amon has always been committed to expanding its business into the fields of personal computers, automobiles, networks, and recently data centers. Qualcomm announced that it has acquired important customers for artificial intelligence computer technology and emphasized that its experience in manufacturing energy-efficient devices makes it a unique advantage.

However, investors remain cautious, causing Qualcomm's stock price to continue to fall in recent months. Qualcomm has been plagued by concerns that new revenue growth will not be enough to make up for the decline in its main business.

After the earnings report was released, as of press release, the stock price fell 7.24% after the market to $160.65. YTD up 1.3% (to close on November 4).