Qualcomm (QCOM) Plunges 13%, Worst Day Since 2020

Qualcomm shares fell as much as 13% on Nov. 5, their steepest drop since 2020, after handset chip revenue fell 26% and profit guidance disappointed investors.

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What Did Qualcomm Report?

Qualcomm reported non-GAAP revenue of $10.44 billion, up 8% from a year earlier, and earnings of $2.17 per share. Revenue was marginally below the $10.48 billion consensus, while earnings edged past the $2.16 estimate.

The handset business, reported inside the QCT chip division, was the weak point. Its $5.14 billion in revenue missed the $5.21 billion estimate. Total QCT revenue was $9.02 billion.

Other segments performed better. Automotive revenue reached $1.99 billion, up 89% and well above the $1.66 billion estimate. It was the first quarter in which the segment passed $2 billion on a rounded basis. Internet-of-things revenue rose 4% to $1.88 billion.

Why Did Qualcomm Shares Fall So Sharply?

Shares fell because the outlook confirmed that the handset slowdown will continue into the new year. Qualcomm guided December-quarter revenue to $10.4 billion to $11.2 billion, in line with the $10.48 billion consensus at the midpoint. The earnings-per-share range of $2.15 to $2.35 has a $2.25 midpoint, below the $2.27 consensus.

Two pressures sit behind the weakness. The first is memory. Demand for memory from data centers has raised component prices, forcing smartphone makers to lift device prices and dampening unit sales. Chief Executive Cristiano Amon described the issue as one of supply rather than demand, saying the company prepared early for the shortage.

The second is Apple (NASDAQ: AAPL). Qualcomm is losing modem revenue as the iPhone maker moves to in-house chips. Management expects handset revenue to fall by a mid-single-digit percentage sequentially in the December quarter, with growth in Android revenue offset by the continued ramp-down of Apple product revenue.

How Did Arm and the Wider Chip Sector React?

Arm fell about 7% as investors treated the Qualcomm results as a read-through for the mobile chip supply chain. Arm's own quarter was stronger than Qualcomm's: revenue rose 27% to $1.44 billion against a $1.38 billion estimate, and earnings of $0.52 per share beat the $0.48 forecast. Its guidance of $1.54 billion in revenue was only slightly above the $1.52 billion consensus, and that was not enough for a stock priced for sustained upside.

The decline came during a broad semiconductor selloff that hit AI-linked names. The PHLX Semiconductor Index fell about 12%, and memory maker Micron (NASDAQ: MU) also dropped sharply. Qualcomm's results added a company-specific trigger to a sector already under pressure.

Is Qualcomm's Data Center Push Enough to Offset Handset Weakness?

Not yet. Qualcomm expects data center revenue to exceed $650 million in the December quarter and has set a target of more than $5 billion by the end of fiscal 2027. The company recently secured an optical connectivity chip agreement with an unnamed hyperscaler. Combined automotive and IoT revenue is guided roughly flat sequentially.

The gap between the current base and the target is large, and the handset business still generates the majority of QCT revenue. At least 10 brokerages lowered price targets after the report. Even after the drop, Qualcomm trades at about 16.8 times forward earnings, well below MediaTek at about 25.4 times and Intel at about 33.3 times, which reflects the market's discount for its dependence on smartphones.

Strategic Context

Qualcomm is attempting to reduce its reliance on a handset market that is both maturing and increasingly exposed to component inflation. Automotive growth of 89% shows the diversification is working at the margin. The AI data center business is where the company hopes to compete with established suppliers, but it starts from a small base and faces rivals with far larger revenue in that market.

The Apple transition is a defined headwind rather than a surprise, but it compresses the revenue base just as memory costs weigh on Android volumes. Both factors now feature in the December-quarter outlook.

Outlook

Qualcomm's next test comes with December-quarter results, when investors will check whether Android growth is offsetting the Apple decline and whether the data center business reaches its $650 million milestone. Memory supply and pricing remain the main swing factor for handset volumes across the industry. For Arm, the debate centers on whether data center licensing growth can sustain a valuation that left little room for guidance in line with expectations.