Qualcomm reports third quarter earnings on Wednesday, and analysts expect both profit and revenue below last year's. Handset sales are projected to fall roughly 21% as a global memory shortage pushes up phone prices, while the company steers investors toward a new data center line.
Qualcomm is anticipated to report earnings per share of $2.21 on revenue of $9.6 billion for its third quarter, down from an EPS of $2.77 in the same period last year. Shares traded at $159.86, down 1.86% on Wednesday ahead of the report.
Smartphone makers are raising prices to offset the rising cost of memory and storage chips caused by the global AI build-out. With that, the handset market is looking rough.
Smartphone shipments post worst second quarter in 13 years
CounterPoint Research counted Q2 global smartphone shipments down 11% year over year, marking the industry's worst second quarter in 13 years. Bernstein analyst Stacy Rasgon told Yahoo Finance: "The smartphone industry is not great", pointing to rising memory prices and unit growth that has gone negative as AI absorbs much of the supply.
The segment covering smartphone, internet of things, and automotive sales is expected to decline 8% year over year to $8.2 billion. Handset sales alone are projected to fall roughly 21% year over year to $4.9 billion. Automotive-related sales, however, are anticipated to increase 49% to $1.4 billion in the quarter.
Data center line aims at $5 billion in fiscal 2027
Qualcomm is working to reduce its dependence on the handset business for revenue, which has slowed over the years as customers hold on to their phones for longer before upgrading. At its investor day in June, the company showed off data center offerings including an AI accelerator, CPU, memory, and a rackscale server.
CFO Akash Palkhiwala told Yahoo Finance after the event that those products should generate $5 billion in revenue in fiscal 2027. The company also doubled its non-handset sales projection for fiscal 2029 to $40 billion. But the broader decline in smartphone sales is expected to hit the company sooner than that.
Source: Yahoo Finance
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