Qualcomm to raise chip prices Sept. 1 after weak guidance rattles investors

Qualcomm ↘ 4.42% reported fiscal third-quarter results on Wednesday that beat revenue expectations but missed on earnings, while issuing fourth-quarter guidance that fell short of Wall Street estimates on both profit and the midpoint of revenue, sending shares down roughly 5% in after-hours trading.

The San Diego-based chipmaker posted revenue of $9.95 billion, topping the consensus estimate of $9.67 billion, but adjusted earnings per share of $2.21 came in just below the $2.23 analysts had expected. More troubling for investors was the outlook: Qualcomm guided fourth-quarter adjusted EPS of $2.05 to $2.25, well below the Street's $2.36 estimate, on revenue of $9.7 billion to $10.5 billion.bloomberg+2

Rising Costs and Price Increases

CEO Cristiano Amon told Reuters that costs had risen broadly across the supply chain, not just for memory chips. In response, Qualcomm plans to raise prices starting September 1 to restore margins to historical levels.reuters+1

"We're just passing through big cost increases that we have," Amon said, adding that customer contracts would need to be renegotiated individually. "The temporary disconnect between cost and pricing causes a slight decline temporarily in gross margin."reuters

The company noted in its earnings release that the semiconductor industry is experiencing "a broad-based increase in input costs, across wafer fabrication, assembly, test, advanced packaging, memory and other materials."cnbc

Apple Revenue Decline Accelerates

Qualcomm warned that revenue from Apple ↘ 0.56% products would decline faster than previously expected starting in the fourth quarter. Supply constraints will reduce Qualcomm's share of components in the next iPhone launch to well below its earlier estimate of 20%.cnbc+1

"It's availability of supply," Amon said of the change. He added that the company has offset the Apple loss with growth in data center chips: "We kind of replaced Apple with the data center."reuters

Smartphone Headwinds, Auto Bright Spot

Handset chip revenue fell 20% year-over-year to $5.1 billion, which the company said reflected a bottoming in the China market after Xiaomi, Oppo, and Vivo worked through excess inventory. Amon said rising memory costs forced handset makers to raise phone prices, pushing consumers toward the lower end of the premium segment or older models, hurting Qualcomm's margins.benzinga+1

Automotive revenue was a standout, surging 61% to $1.59 billion and marking 23 consecutive quarters of double-digit growth. For fiscal 2027, Qualcomm expects the majority of chip sales to come from categories other than smartphones, with non-handset revenue growth accelerating from 24% this fiscal year to more than 60% next year.investing+1