Qualcomm beat analyst estimates for fiscal Q4, yet its shares fell nearly 14% at one point on Thursday. Weak handset results and first-quarter guidance below last year's level drove the selloff, while the company's data center push remains unproven.
Qualcomm shares fell nearly 14% at one point on Thursday before paring the loss to just under 10%, even though the chipmaker beat estimates in its fiscal fourth quarter. The reaction followed results released after Wednesday's close.
Revenue fell 7% year over year to $10.4 billion, above analysts' estimates of $10.1 billion. Qualcomm earned $2.17 per share, down from $3 a year earlier but slightly above the $2.16 analysts anticipated.
Handset revenue drops 26%
The flagship handset business saw revenue fall 26% to $5.1 billion. Pretax earnings in that segment declined 30%, a larger drop than overall revenue. Like other technology companies, Qualcomm is feeling higher costs, particularly in memory.
Guidance adds to the pressure. Qualcomm expects revenue of $10.4 billion to $11.2 billion for the quarter now underway, versus $12.3 billion in fiscal Q1 of last year. It is targeting between $2.15 and $2.35 in earnings per share, compared with analyst estimates of $2.32. The article attributes the outlook to higher costs and waning demand for mobile chips.
Data center bet faces doubts
CEO Cristiano Amon pointed to a shift in the company's mix. In the fourth-quarter report he said, "Fiscal 2027 marks the start of our non-handset revenue inflection", according to the fourth-quarter report quoted by the Motley Fool. Qualcomm is reiterating its fiscal 2027 Data Center revenue target of $5B. It confirmed in June that Meta is a data center processor customer.
One Morgan Stanley analyst, however, said the firm lacks conviction in a three-year ramp in a target-rich environment for AI semis.
Shares are now down 37% from their mid-year peak, and trade at 15 times this fiscal year's projected per-share profit of $10.16.
Source: The Motley Fool
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