Qualcomm cuts outlook as phone demand softens

Qualcomm (QCOM) issued guidance for its fiscal fourth quarter that undershot average analyst profit expectations, underscoring ongoing pressure in its smartphone business. The company projected adjusted earnings of $2.05 to $2.25 per share, compared with a consensus estimate of $2.36 per share. Revenue is expected to come in between $9.7 billion and $10.5 billion, versus estimates near $10.02 billion. The forecast suggests only a modest potential revenue beat at the midpoint, while earnings are seen under more pronounced pressure.

Management linked the weaker profit outlook to both demand and cost dynamics. Softer handset demand continues to weigh on volumes, while rising supply-chain costs are pressuring margins. These factors combined to produce guidance that investors viewed as disappointing relative to prior expectations.

A key element in the new outlook is a sharper anticipated decline in revenue tied to Apple (AAPL) products starting in the fourth quarter. Qualcomm (QCOM) said that supply constraints will reduce its share of components for the next iPhone to well below a previous estimate of 20%. As a result, Apple-related (AAPL) sales are expected to fall faster than the company had earlier projected.

The faster rollover of this high-profile customer exposure adds another headwind to near-term revenue visibility. It also reinforces the company’s message that it must rely less on a small number of large handset customers as the smartphone market matures and supply dynamics shift.

For the third quarter, Qualcomm reported revenue of $9.95 billion, a 4% decline from the same period a year earlier. Adjusted earnings came in at $2.21 per share, slightly below some estimates of $2.23. The results illustrate that the company is already experiencing both top-line and profitability pressure before the weaker fourth-quarter guidance takes effect.

Chief Executive Cristiano Amon pointed to rising costs across the supply chain as a key driver of margin compression. To help restore margins toward historical levels, Qualcomm plans to increase prices on products shipped after September 1. The move signals a shift toward passing more of the cost burden to customers in order to support earnings.

Alongside the near-term guidance, Qualcomm reiterated its strategy to diversify revenue away from smartphones. Management highlighted initiatives in areas such as data-center products as part of a broader effort to balance exposure across end markets. This strategy is positioned as a response to both current chip-cycle headwinds and the long-term evolution of handset demand.

The combination of below-consensus profit guidance, faster-than-expected Apple-related revenue declines, and ongoing cost pressures weighed on investor sentiment. Following the announcement, Qualcomm shares fell more than 4% in extended trading. The market reaction reflects concern about the pace of earnings recovery and the time needed for diversification efforts to offset smartphone-related volatility.