NEW YORK: Qualcomm Incorporated (NASDAQ: QCOM) shares fell about 9% in US premarket trading on Thursday after weaker smartphone chip sales overshadowed the company’s push into artificial intelligence (AI) data centres.
Handset revenue in the fiscal fourth quarter dropped 26% to $5.14 billion from $6.96 billion a year earlier. Revenue across its chip business fell 8% to $9.02 billion from $9.82 billion.
The premarket decline threatened to erase approximately $17.5 billion from Qualcomm’s market value if the losses persisted during regular trading.
Rising memory prices have added pressure to the smartphone industry. Heavy investment in AI data centres has increased demand for memory chips, raising costs for consumer electronics manufacturers.
Qualcomm Chief Executive Officer Cristiano Amon said the company had anticipated the supply shortage. “We saw the memory shortage coming and prepared for it early,” Amon said.
He pointed to sequential improvement in Android demand and progress in expanding Qualcomm’s business beyond smartphones. Qualcomm has been developing data center and automotive processors to reduce its reliance on handset sales.
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However, analysts warned that higher input costs and declining revenue from Apple could weigh on near-term earnings.
At least eight brokerages lowered their price targets after the results, according to London Stock Exchange Group (LSEG) data. Qualcomm traded at 16.78 times forward earnings, compared with 25.41 times for MediaTek and 33.28 times for Intel.
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Morgan Stanley analysts questioned whether Qualcomm’s custom-chip strategy could sustain its planned three-year expansion in AI semiconductors.
With additional input from Reuters
