Qualcomm’s Smartphone Slump Overshadows Its AI Ambitions

Qualcomm’s expansion into data centers is gaining attention, but falling smartphone chip sales are testing investor patience. Its latest results show why new growth opportunities still need support from the core business.

Qualcomm’s next growth story is taking shape, but its biggest business is getting in the way.

Shares of the chip designer fell around 9% in premarket trading on Thursday after disappointing smartphone chip sales raised concerns about its near-term earnings.

Quarterly handset revenue dropped 26% to $5.14 billion, below Wall Street’s expectations. Revenue across its chip segment fell 8% to $9.02 billion.

Sluggish smartphone demand and declining Apple-related revenue weighed on performance. Rising memory costs are adding another challenge as demand from AI infrastructure absorbs semiconductor supply and increases costs across consumer electronics.

Qualcomm is expanding into automotive and data-center chips, giving investors potential sources of growth beyond smartphones. However, those opportunities have yet to offset the pressure on its established business. At least eight brokerages lowered their price targets following the results, according to Reuters.

For investors, the issue is the timing of that transition.

Developing a new business takes spending, customer commitments and time. Meanwhile, weaker sales in an existing business can affect earnings immediately. That creates a difficult period in which investors must judge future potential against current financial pressure.

The results also show how uneven the AI investment boom can be. Heavy infrastructure spending can create opportunities for chip suppliers while increasing costs elsewhere in the electronics market.

Qualcomm’s next few quarters will therefore need to show progress on two fronts: stabilizing handset sales and turning diversification into a larger earnings contribution.

Investor Take: Qualcomm’s broader ambitions remain relevant, but the immediate test is whether smartphone revenue can stabilize before newer businesses carry more of the load. Investors should watch handset trends, margins and actual data-center sales when assessing the pace of the recovery.