Qualcomm Stock Falls on Memory Supply Issues and Weak Earnings Outlook

Leading chip manufacturer Qualcomm (NASDAQ: QCOM) experienced a significant stock decline following the announcement of its fiscal third-quarter 2026 results on July 29, 2026. Despite surpassing revenue expectations, the company fell short of its earnings per share (EPS) forecasts and provided a cautious outlook for the fourth quarter. This combination, particularly weakness in the smartphone market and challenges in memory chip supply, prompted investors to sell off shares.

Qualcomm's fiscal third-quarter revenue, for the period ended June 28, 2026, reached $9.9 billion, landing at the high end of the company's guidance and exceeding analyst estimates of $9.68 billion to $9.7 billion. However, adjusted EPS came in at $2.21, slightly missing the analyst consensus of $2.23. CEO Cristiano Amon stated that the results reflected "solid execution despite a challenging memory and supply environment."

Company shares closed down 4.49% to $155.57 in regular trading after the report, and further declined by 7.16% in after-hours trading to $144.53. This drop was influenced by a sharp reduction in the company's Apple (NASDAQ: AAPL)-related revenue outlook, margin pressure in its core chip business, and a cautious near-term view for handsets. Specifically, strong demand from artificial intelligence (AI) data centers redirected conventional DRAM memory chips away from the smartphone market, forcing Qualcomm's customers to reduce phone production.

Despite the cyclical weakness in the smartphone market, Qualcomm reported robust growth in its non-handset segments, such as automotive and the Internet of Things (IoT). Automotive revenue surged by 61% to a record $1.6 billion, while IoT revenue increased by 9% to $1.8 billion. The company anticipates its non-handset revenues to grow to $40 billion by fiscal 2029. Additionally, Qualcomm completed the acquisition of Modular Inc. to establish an open software foundation for generative AI.

Looking ahead, Qualcomm issued guidance for its fiscal fourth quarter of 2026, projecting EPS between $2.05 and $2.25 and revenue between $9.7 billion and $10.5 billion. These forecasts fell below analysts' average EPS expectation of $2.38, raising additional concerns in the market. The company noted that it is taking steps to reflect higher input costs in its product pricing and expects gross margins to improve over time as these changes gradually take effect.

Analysts suggest that gains in Qualcomm's other businesses, including automotive and technology licensing, should offset concerns about the smartphone market's weakness. However, the company's faster-than-anticipated loss of business from Apple and its projection of a roughly 20% decline in Android phone revenue for fiscal 2026 will continue to exert pressure in the near term.

The company returned $2.3 billion to stockholders during the quarter, comprising $973 million in dividends and $1.4 billion through share repurchases.