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Weak Forecast, Chip Drop Sink Qualcomm Shares
12 Nov
Summary
- Qualcomm shares dropped 9.5% on November 5th.
- Handset chip revenues saw a 26% year-over-year decline.
- Automotive and IoT segments showed significant revenue growth.
Qualcomm's shares plunged 9.5% on November 5th, even as the company surpassed revenue and earnings expectations for its fourth fiscal quarter of 2026. This downturn was primarily attributed to a disappointing profit forecast for the first quarter of fiscal 2027 and a sharp 26% year-over-year decrease in handset chip revenues.
The political landscape also played a role, with the Democratic Party's victories in the U.S. House and Senate sparking concerns about potential impacts on data-center development. This uncertainty cast a shadow over semiconductor stocks, including Qualcomm.
While Qualcomm's diversification into automotive and data center silicon presents growth opportunities, potential headwinds exist. Apple's increasing in-house modem production and a projected dilution in profit margins for the QCT segment could temper investor enthusiasm. Furthermore, a current crunch in memory costs is adding to the near-term uncertainty in the global smartphone market.
Qualcomm's fiscal fourth-quarter results revealed significant achievements in its diversification strategy. The QCT Automotive segment achieved a milestone by generating $2 billion in revenues, marking an impressive 89% year-over-year increase. Additionally, QCT IoT revenues grew 4% year-over-year to $1.9 billion.
Looking ahead, Qualcomm anticipates a mid-single-digit sequential decline in QCT handset revenues for the first quarter of fiscal 2027. However, the company projects its non-handset revenues, encompassing automotive, IoT, and data center businesses, to surge over 60% year-over-year in fiscal 2027, with the QCT Data Center segment expected to generate over $650 million in revenues.
For investors seeking exposure to Qualcomm's growth potential while mitigating direct stock volatility, semiconductor exchange-traded funds (ETFs) with substantial Qualcomm holdings are a viable option. Funds like the First Trust NASDAQ Semiconductor ETF (FTXL), Invesco PHLX Semiconductor ETF (SOXQ), and VanEck Semiconductor ETF (SMH) offer diversified exposure to the semiconductor industry, with Qualcomm being a significant component in each.
