The chipmaker faced a steep contraction as quarterly handset chip sales fell 26% year-on-year to $5.14 billion amid a 20% decline in worldwide smartphone shipments. Major Android clients, including OPPO and Vivo, cut their shipments by more than 20%, while Xiaomi reduced orders and incorporated its own in-house processor. To offset escalating fabrication and packaging expenses, the company is instituting fresh price hikes across its portfolio. However, executives caution that chip pre-tax margins will continue shrinking to between 20% and 22% in the current quarter, with flat industry demand expected to persist through 2027.
Key points
Rising wafer fabrication, material, and packaging costs continue to squeeze chip pre-tax…: Rising wafer fabrication, material, and packaging costs continue to squeeze chip pre-tax margins down toward an anticipated 20% to 22%.
Product price increases are not expected to successfully protect the company's profitabil…: Product price increases are not expected to successfully protect the company's profitability margins until the second half of fiscal 2027.
Competition and customer cutbacks pose sustained headwinds, with Xiaomi adopting in-house…: Competition and customer cutbacks pose sustained headwinds, with Xiaomi adopting in-house chips and global smartphone volumes remaining flat through 2027.
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Qualcomm's smartphone chip business shrank by about a quarter in the September quarter, according to the company's latest earnings report. Handset chip revenue fell 26% to $5.14 billion from $6.96 billion a year ago, wiping out roughly $1.8 billion in sales and missing the StreetAccount estimate of $5.21 billion. Adjusted earnings per share dropped 28% to $2.17, adjusted pre-tax profit fell 30%, and total adjusted revenue slipped 7% to $10.44 billion.
Its chips are about to get more expensive too. The Snapdragon maker is raising prices across its products, citing rising costs in wafer fabrication, chip packaging, memory and other materials. It already raised prices in September, and phone chip sales fell anyway. The stock slid as much as 7% in after-hours trading on Wednesday after the company’s forecast for the current quarter came in below expectations. Before the results, it was up just 1.3% for the year.
Qualcomm’s chip margins are shrinking despite the price hikes
The price increases are not protecting margins yet, and the company says they won’t fully do so until the second half of fiscal…
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