Updated Version 1 - Qualcomm smartphone chip sales missed expectations, stock price drops

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Reuters, November 4 - Qualcomm (QCOM.O) reported on Wednesday that its fourth-quarter smartphone chip revenue missed Wall Street expectations due to weak demand and a decline in revenues from its Apple-related AAPL.O business, causing its stock price to fall more than 4% in after-hours trading.

Demand for high-bandwidth memory in lucrative artificial intelligence servers has driven up memory chip prices, raising the cost of consumer electronics and putting pressure on smartphone processor designers like Qualcomm.

According to Counterpoint Research, global smartphone shipments fell 20% in the September quarter, dropping to the lowest level in 14 years.

The revenue of Qualcomm's mobile division, which is responsible for smartphone chips, dropped 26% to $5.14 billion in the fourth quarter, dragging overall chip business revenue down 8% to $9.02 billion.

Analysts surveyed by Visible Alpha had previously expected mobile business revenue of $5.25 billion.

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Qualcomm CEO Cristiano Amon told Reuters in an interview that sales of Android phones are rebounding.

"Unlike some other companies, we anticipated the memory issue early on and said we were prepared for it," Amon said. "Now we are starting to see quarter-on-quarter growth in Android phone sales, and we have indeed taken action in our non-handset business."

Investors had also been concerned about Apple AAPL.O shifting to self-developed modem chips, while Qualcomm had warned that sales to the iPhone maker would fall faster than expected.

Amon said the fiscal 2027 first-quarter outlook, published Wednesday, no longer includes any revenue from Apple, and Qualcomm has successfully won orders from other customers outside of its smartphone business.

"Excluding Apple, we expect the number of design wins for fiscal year 2027 to increase 70% year-over-year," Amon said. "We expect revenue from non-handset businesses to fully replace Apple's contributions, and as fiscal 2027 progresses, non-handset business will achieve 60% year-over-year growth."

According to data compiled by LSEG, the smartphone chipmaker expects first-quarter revenue to be between $10.4 billion and $11.2 billion, with the midpoint exceeding analysts' average forecast of $10.48 billion.

The company expects its chip business sales to range from $9 billion to $9.6 billion, surpassing the expected $8.88 billion.

Adjusted earnings per share are estimated at $2.15 to $2.35, compared to analysts' expectations of $2.27.

An agreement reached in September allows Amazon AMZN.O to purchase up to $60 billion (link) in AI chips and related data center products from Qualcomm, making the e-commerce giant join a client list including Microsoft MSFT.O and Meta Platforms META.O.

Qualcomm noted that the revenue from two custom chip projects with hyperscale cloud service providers will begin generating this quarter. Afterward, its AI accelerator products will be ramped up for production next year, with the company aiming to achieve $15 billion (link) in annual data center revenue by fiscal year 2029.

Earlier on Wednesday, the company signed a multi-year 5G agreement to provide SpaceX's planned SPCX.O nationwide "Starlink Mobile" network, set to launch in 2027, with radio equipment, baseband units, and software.

Fourth-quarter adjusted revenue dropped 7% to $10.44 billion, beating expectations of $10.11 billion. Adjusted earnings per share were $2.17, above the expected $2.16.

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