U.S. semiconductor company Qualcomm has issued a profit outlook that falls short of market expectations due to rising memory prices and semiconductor production costs. To alleviate cost pressures, the company plans to increase chip prices used in smartphones and other devices.
On July 29, Qualcomm projected its adjusted earnings per share (EPS) for the fourth quarter of fiscal year 2026 (July to September) to be between $2.05 and $2.25. This adjusted EPS, which excludes one-time costs or gains, is below the market expectation of $2.36.
The company anticipates revenue between $9.7 billion and $10.5 billion, which falls within the market estimate of $10.02 billion.
The main issue is the rising costs of semiconductor production. Cristiano Amon, Qualcomm's CEO, stated, “Costs are increasing across the entire production process, including chip manufacturing, assembly, testing, and memory.”
Qualcomm plans to pass these increased costs onto product prices. Amon explained, “We will raise chip prices starting September 1 and are negotiating with our customers.” Bloomberg reported that Qualcomm has informed some customers of price increases in the double digits.
The company’s core smartphone business has also struggled. In the third quarter, revenue from smartphone chips was $5.09 billion, a 20% decrease from the same period last year, although it exceeded the market estimate of $4.96 billion.
Additionally, Apple’s increased use of its own developed chips poses a challenge. Qualcomm expects the share of its modem chips in the next iPhone to be significantly lower than the previously estimated 20%, indicating that revenue from Apple may decline faster than anticipated.
Overall revenue for the third quarter was $9.95 billion, down 4% from the previous year but above the market estimate of $9.67 billion. The adjusted EPS was $2.21, slightly below the market expectation of $2.23.
To reduce its reliance on smartphones, Qualcomm is expanding its automotive and data center businesses. The company has set a goal to generate over $15 billion annually from data centers and $10 billion from automotive by fiscal year 2029.
Amon believes that by fiscal year 2027, growth in sectors outside of smartphones, such as automotive and data centers, will significantly offset the decline in revenue related to Apple.
The market reacted sensitively to the rising costs and the disappointing fourth-quarter profit outlook, with Qualcomm's stock falling about 4% in after-hours trading following the earnings announcement.
* This article has been translated by AI.
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