Qualcomm's phone-chip sales fall 26% to $5.1 billion, and cars and IoT fill only 56% of the gap

Qualcomm reported fiscal fourth-quarter results on Wednesday that beat Wall Street, then guided to a first quarter that CNBC says sent the stock down 6% in extended trading. The details are in the company’s earnings release, filed with the SEC. The core problem is simple: the business that still pays most of the bills, phone chips, is shrinking faster than the new businesses can replace it.

The quarter in numbers

Source: Qualcomm earnings release, Exhibit 99.1. GAAP revenue was $10.32 billion, down 8%.

The number behind the number

Handsets fell $1.82 billion from a year ago. Automotive and IoT together grew $1.02 billion, from $2.86 billion to $3.88 billion, which is the 36% growth the company highlighted. So the growth engines covered about 56% of the lost phone revenue, and the chip division as a whole (QCT) still shrank by $806 million, or 8%. Handsets are now 57% of QCT revenue, down from 71% a year earlier. That is the real shift in this report: Qualcomm is becoming a different company, but not yet one big enough to offset the old one.

Profitability fell with it. QCT earnings before taxes were 24% of revenue, against 29% a year ago. Qualcomm says it is raising prices to cover higher costs for wafers, packaging, memory and other inputs, but expects “the full benefit” to reach QCT gross margins only in the second half of fiscal 2027.

The full year: don’t trust the GAAP jump

Fiscal 2026 GAAP earnings per share were $12.70, up 153%. That looks spectacular, and it is not. The release says GAAP results include a $5.7 billion income tax benefit, worth $5.32 a share, from releasing a valuation allowance set up a year earlier. On the non-GAAP basis most analysts use, full-year EPS was $10.54, down 12% from $12.03, on revenue of $43.24 billion, down 2%. For the year, handset revenue fell 13% to $24.07 billion while automotive rose 52% to $6.00 billion.

Is the guidance really weak?

Qualcomm guided first-quarter revenue to $10.4 billion to $11.2 billion and non-GAAP EPS to $2.15 to $2.35. CNBC reports analysts expected $10.48 billion and $2.27. The midpoints, $10.8 billion and $2.25, put revenue about 3% above that revenue estimate and earnings per share about 1% below the EPS one. The low end of the EPS range is below Wall Street, which is what the market reacted to, but this is not a collapse. The company also guides QCT revenue to $9.0 billion to $9.6 billion, including data center, against $9.02 billion in the quarter just reported, so the midpoint of $9.3 billion implies about 3% sequential growth.

CEO Cristiano Amon said the company has “a supply issue” in data center rather than a demand issue, per CNBC. The release reiterates a fiscal 2027 data center revenue target of $5 billion. CNBC reports data center revenue was about $650 million in the fourth quarter, mostly customization and connectivity work. Reaching $5 billion would need an average of roughly $1.25 billion a quarter next year, nearly double the latest quarter. That is a target, not a result, and the one to watch on the next call.

Who it actually hits

Phone makers are the first in line. Qualcomm’s price increase and the memory shortage land on the same bill of materials, which is why handset prices have been rising; see our reports on Samsung’s price increase and Pixel 10a fleet costs. A business that buys phones for staff in volume should expect higher quotes, and fewer upgrades, through fiscal 2027. Qualcomm itself says the handset market will be flat in 2027, per CNBC. The licensing side is steadier: Qualcomm renewed agreements with Apple, Huawei and Transsion (see our look at the Apple license).

Earlier on Wednesday Qualcomm also won a role in SpaceX’s planned US mobile network; see our report. The company has not put a revenue figure on it.

Capital return and the stock

Qualcomm returned $1.998 billion to shareholders in the quarter, $1.011 billion in buybacks and $987 million in dividends at $0.92 a share, and $11.67 billion over the fiscal year. In our chart data the stock last traded at $173.19, about 31% below its May 29 peak, before the after-hours drop CNBC reported.

What we are watching: whether first-quarter handset revenue stabilizes as the company says Android shipments in China have bottomed, how fast the data center line ramps, and when price increases show up in margin.

Sources: Qualcomm earnings release (SEC EDGAR, filing list); CNBC for analyst estimates, after-hours move and executive comments. Percentages and sums are our calculations from the release. This is market information, not investment advice.