Key Takeaways
- Qualcomm fell 12% today on a soft guide and a warning that rising chip costs will squeeze margins into late fiscal 2027.
- Cars and IoT covered only about half of the 26% drop in handset chip revenue, and the stock still trades above its five-year average forward P/E.
- Memory and data center chip stocks fell too on Qualcomm’s cost warning.
Qualcomm (QCOM) beat on sales and earnings after Wednesday’s close. The stock is down 12% anyway.
The beat came with a bill
Here’s the quarter ended Sept. 27, and the guide:
- Handset chip revenue fell 26% to $5.14 billion
- Automotive revenue rose 89% to $1.99 billion
- December-quarter adjusted EPS guidance was $2.15 to $2.35, a midpoint below the $2.29 consensus
“Fiscal 2027 marks the start of our non-handset revenue inflection,” CEO Cristiano Amon said in the release, with non-handset revenue projected to grow more than 60%. But this quarter, cars and IoT added about $1 billion while handsets lost $1.8 billion.
Analysts already had earnings dipping in fiscal 2027:
Annualize the guide’s midpoint and you get $9, well short of the expected $10.17.
Margins have to turn first
Qualcomm says its price increases won’t fully offset rising costs, from wafers to memory, until the second half of fiscal 2027. Its gross margin was already sliding:
The September quarter’s was lower still, at 50.7%.
TIKR tracks 37 analysts on Qualcomm. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Qualcomm, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Qualcomm’s Analyst Ratings
The squeeze spreads
Dell Technologies (DELL), down 7%, buys the memory Qualcomm blamed for weak phone demand, and Sandisk (SNDK), down 9%, sells it. Dell expects revenue to jump 69% to $192 billion in the year ending January 2027, much of it from passing on memory costs, Barclays argued last month. Phone buyers balked at that. Will server buyers? And if high memory prices mean fewer phones and PCs, as Qualcomm and Intel both warn, how long can Sandisk keep raising them?
Applied Materials (AMAT) fell 6% and Astera Labs (ALAB) fell 7%, both selling into the data center buildout. In data centers, Amon said on the call, “We don’t have a demand issue; it’s a supply issue.” Astera just guided fourth-quarter revenue 13% above consensus, and tight chip capacity is the argument for more of Applied Materials’ tools. I’d call this part of the selloff overdone.
Still not cheap
Qualcomm traded at 18x forward earnings at Wednesday’s close, against a 14x five-year average:
At today’s price, it’s about 16x.
I wouldn’t pay an above-average multiple until the price increases show in the margins. The December-quarter report in early 2027 is the first real test.
So what is Qualcomm stock actually worth?
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Disclaimer:
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