Qualcomm (QCOM) shares are inching lower in extended hours after the company reported fiscal Q3 results that reflected persistent semiconductor supply constraints.
The company based out of San Diego, CA earned $2.21 per share in its third financial quarter, less than $2.23 that analysts had called for, as net income tumbled 25% year-on-year to $2 billion.
However, QCOM’s sales soared to $9.95 billion in Q3 – handily beating the consensus set at $9.67 billion. Including after-hours decline, Qualcomm stock is down some 40% versus its June high.
Why did Qualcomm miss on Q2 profit estimates?
A sharp escalation in semiconductor component costs was the primary culprit behind Qualcomm’s bottom-line miss.
In the press release, management pointed to much higher input expenses across wafer fabrication, packaging, assembly, and particularly memory components.
The supply crunch severely impacted Qualcomm’s core handset segment, where chip sales dropped 20% annually to $5.1 billion, with CEO Cristiano Amon noting that elevated memory costs have altered consumer behavior in the core smartphone market.
Budget and mid-tier devices have faced severe affordability bottlenecks, and even premium Android shoppers are increasingly opting for lower-tier configurations or prior-year models, he added.
This structural shift in buying patterns, paired with elevated supply chain overhead, squeezed gross margins in Q3, triggering an after-hours sell-off in QCOM shares.
What else is weighing on QCOM shares in after-hours?
Investors bailed on Qualcomm shares also because of the disappointing current-quarter guidance.
Management projected adjusted earnings per share between $2.05 and $2.25 – falling noticeably short of the $2.36 consensus estimate compiled by analysts polled by LSEG.
Expected sales of $9.7 billion to $10.5 billion surround the $10.02 billion Wall Street consensus, reflecting stable demand alongside ongoing cost inflation.
To offset these pressures, Amon announced comprehensive price increases across QCOM’s chip product line beginning September 1.
However, he categorized higher supply costs as a temporary disruption – emphasizing that raising prices and streamlining supply chain operations will restore margin expansion moving into the next fiscal year.
Should you buy the post-earnings dip in Qualcomm stock?
Despite near-term supply chain friction, Qualcomm Inc’s strategic expansion beyond smartphones continues to gather momentum.
Non-handset divisions delivered standout results, led by the automotive business with $1.59 billion in sales, anchored by a fresh digital cockpit supply partnership with BMW as the chipmaker targets $10 billion in automotive revenue by 2029.
The Internet of Things segment grew 9% year-on-year to $1.83 billion, while the licensing division (QTL) generated $1.28 billion, topping StreetAccount estimates.
With non-smartphone business targeted to represent 60% of total revenue next year, the finalized acquisition of Modular and an upcoming AI software platform signal that QCOM stock remains aggressively positioned for data center and edge AI expansion.
That said, Wall Street currently rates Qualcomm Inc at Hold only.
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