Should Qualcomm Stock’s Drop After Earnings Worry You?
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Shares of Qualcomm (QCOM) fell 9.5% in the session following its fiscal Q4 2026 report on November 4, 2026, while the S&P 500 lost 4.4%. Management said December will no longer be Qualcomm’s biggest quarter of the year as its Apple sales wind down. For the drop not to worry you, Qualcomm’s phone chip sales must stop shrinking, and its new data center business has to grow into the $5 billion of sales management targets for fiscal 2027. Is either of those happening yet?
Qualcomm’s Phone Chip Sales Are Set To Fall Again
Phone chip sales are not there yet. Management expects phone chip revenue to fall by a mid single digit percentage in the December quarter from fiscal Q4, as growth in Android sales is offset by the continued drop in Apple sales. Phones remain the largest part of the chip business, accounting for $5.1 billion of its $9 billion in fiscal Q4 sales, and management said a memory squeeze across the smartphone industry weighed on them.
Total revenue has been heading the same way. Qualcomm’s reported revenue fell from a year earlier by 3.5% in fiscal Q2 2026 and by 4.0% in fiscal Q3, before the drop deepened to 8.4% in fiscal Q4. Management said its China Android business hit its low point in the June quarter and has grown since, but it expects global handset sales to be flat to slightly down in 2027.
The quarter’s headline numbers were close to forecasts. Adjusted revenue of $10.4 billion came in 1.2% above what analysts expected, while adjusted earnings per share of $2.17 were 1.5% below. Broadcom, NVIDIA and Intel fell between 9.3% and 10.4% in the same session, putting Qualcomm’s drop in line with other large chip stocks. On its own, the size of the fall says little about how investors judged the report. By the November 6 close, the shares were 4.5% below their pre-report close, while the S&P 500 was down 4.0%.
When every big chip stock drops at once, look past the report. Here’s the record after 21 days like November 5.
Qualcomm’s Custom AI Chips Have Just Started Shipping
The data center target still stands according to management, but the business has only just begun to deliver. Most of the fiscal 2027 sales will come from custom AI chips for two large cloud computing customers, management said, and those chips began shipping in October.
Management expects data center sales to build through the year, running at about $7 billion a year by the end of fiscal 2027. It expects more than $650 million of those sales in the December quarter. Supply, not customer demand, would limit any sales above its target, management said.
Why Qualcomm Expects A Lower Chip Margin
Starting in fiscal 2027, the data center business sits inside the chip segment, and Qualcomm is paying for it before the sales arrive. Management expects the chip business’s pretax margin to be 20% to 22% in the December quarter, against 24% in fiscal Q4. It said 3 percentage points of that come from adding data center and its spending on AI chips ahead of their sales.
The revenue forecast, by contrast, is higher. Qualcomm guided December-quarter revenue to a midpoint of $10.8 billion, against $10.4 billion in fiscal Q4, and said it is not guiding much beyond that quarter. If data center sales arrive late, Qualcomm will carry the spending without the revenue while its phone chip sales are still falling.
For now, the phone business is still shrinking, and the data center business has a target and two customers but only weeks of shipments. The number to watch is phone chip revenue for fiscal Q1 2027, due when Qualcomm reports in February 2027.
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