Qualcomm Warns of Lower Profit Amid Rising Costs

Qualcomm has announced a fourth-quarter profit forecast that missed Wall Street's projections, signaling challenges from increasing costs and supply chain disruptions. The company also anticipates a more rapid decrease in revenue derived from Apple products.

To counteract rising expenses, particularly for memory chips and other supply chain components, Qualcomm intends to raise prices effective September 1. CEO Cristiano Amon stated this measure is necessary to return gross margins to their historical averages. This adjustment is expected to cause a temporary dip in gross margins as pricing aligns with new cost structures.

Furthermore, Qualcomm expects its revenue from Apple to decline more significantly starting in the fourth quarter. This is due to supply constraints reducing Qualcomm's share of components for the upcoming iPhone launch to below its initial 20% estimate. The company is shifting its strategic focus, anticipating that by fiscal year 2027, chip sales outside of smartphones, such as from the data center sector, will constitute the majority of its revenue.

For the fourth quarter, adjusted profit is projected to be between $2.05 and $2.25 per share, falling below the estimated $2.36. Revenue forecasts range from $9.7 billion to $10.5 billion, with estimates around $10.02 billion. The chip segment revenue is expected between $8.4 billion and $9 billion, against an estimate of $8.49 billion. Qualcomm also reiterated its belief that revenue from Chinese phone makers has reached its lowest point as inventory levels normalize. Despite a recovery in Android phone sales, higher prices have influenced consumer purchasing towards lower-end premium models or older devices, impacting Qualcomm's margins.