Qualcomm Inc.'s revenue from smartphone chips fell 26% from a year earlier to $5.14 billion in its fiscal fourth quarter, as a global shortage of memory chips pushed phone makers to cut production plans, the company reported on Wednesday, Nov. 4. Sales of chips for cars climbed 89% to a record $1.99 billion, which the company called its first $2 billion quarter for the business.

The results matter for Asia because the phone makers buying Snapdragon processors are mostly in the region, and so are the suppliers squeezing them. China, including Hong Kong, accounted for $18.08 billion, or 42%, of Qualcomm's fiscal 2026 revenue, down from 46% a year earlier, according to its annual report filed the same day. South Korea contributed 22%. The memory makers whose prices are rising, led by Samsung Electronics and SK Hynix, are Korean.

Total revenue for the quarter to Sept. 27 fell 8% to $10.32 billion on a reported basis. Non-GAAP revenue of $10.44 billion came in near the top of the $9.7 billion to $10.5 billion range Qualcomm gave in July. Non-GAAP earnings per share fell 28% to $2.17. Reported net income was $1.25 billion, against a loss of $3.12 billion a year earlier, when Qualcomm took a large tax charge.

Memory shortage hits Qualcomm's handset customers

In its 10-K, Qualcomm said lower handset revenue for the year came mainly from smaller chipset shipments to certain major phone makers, which adjusted build plans to cut inventory because of memory supply constraints and related price increases. The company said it expects those conditions to keep weighing on demand from several handset makers over the next several quarters.

Handset revenue for the full fiscal year fell 13% to $24.07 billion. Total fiscal 2026 revenue slipped 3% to $43.12 billion. Reported earnings per share more than doubled to $12.70, lifted by a $5.7 billion tax benefit, while non-GAAP earnings per share fell 12% to $10.54.

The squeeze is also reaching Qualcomm's own costs. The company said input costs are rising across wafer fabrication, assembly, test, advanced packaging and memory, and that it is raising prices across its products in response. It now expects the full benefit of those increases to show in chip-unit gross margins only in the second half of fiscal 2027, which starts around the end of March.

The same shortage has been a windfall for memory suppliers. Samsung reported higher third-quarter sales of HBM4 memory as AI demand absorbed supply, and South Korea's October exports were again driven by chips.

Qualcomm guidance and the data center push

For the December quarter, Qualcomm forecast revenue of $10.4 billion to $11.2 billion and non-GAAP earnings of $2.15 to $2.35 a share. Revenue from its chip unit, which from this quarter includes data center products, is expected at $9.0 billion to $9.6 billion, with a profit margin before tax of 20% to 22%, down from 24% in the September quarter. The company said 3 percentage points of that drop come from moving data center spending into the chip segment.

Chief Executive Cristiano Amon said in the release that fiscal 2027 marks the start of a "non-handset revenue inflection." Qualcomm expects non-handset revenue to grow by more than 60% in fiscal 2027 and reiterated a target of $5 billion in data center revenue for the year.

That push now rests heavily on Amazon. Qualcomm said it has agreed a multi-generation collaboration with Amazon covering custom AI inference silicon and optical connectivity, with warrants tied to up to $60 billion of potential Amazon purchases over 10 years, 15% of which vested immediately. It expects data center revenue of more than $650 million in the December quarter, rising each quarter, and an annualized run rate of $7 billion by the end of fiscal 2027. Its presentation lists Meta as a CPU customer and three custom accelerator customers, including Amazon.

Internet of things revenue rose 4% to $1.89 billion in the quarter. Licensing revenue fell 7% to $1.30 billion.

Licensing renewals with Apple, Huawei and Transsion

Qualcomm also renewed long-term patent licenses with Apple, Huawei and Transsion. The company said its licensing revenue run rate is unchanged after the deals and that the next renewal cycle runs from fiscal 2030 to 2033.

The chip relationship with Apple is shrinking. In its annual report, Qualcomm said it expects Apple to rely mainly on its own modems going forward, and it named Samsung and Xiaomi among large customers that have developed their own chips. Apple and Samsung each accounted for at least 10% of fiscal 2026 revenue.

Qualcomm returned $2.0 billion to shareholders in the quarter, split evenly between buybacks and dividends, bringing the fiscal-year total to $11.67 billion. Its December quarter results will be the first to show data center sales as a separate line within the chip unit.