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Qualcomm Shares Tumble on Apple Woes, Cost Hikes
30 Jul
Summary
- Qualcomm stock dropped 5% due to higher memory costs.
- Apple's revenue contribution to Qualcomm is shrinking.
- Near-term profits face pressure from increased expenses.
Qualcomm's stock saw a notable drop of approximately 5% in premarket trading on Thursday. This decline followed the chipmaker's cautionary statements regarding increased memory costs and a sharper decrease in revenue from Apple. The broader semiconductor supply chain is experiencing strain due to surging AI infrastructure spending, leading to higher prices for essential components like memory, wafers, and packaging.
Qualcomm intends to offset these rising costs by implementing double-digit price increases for its customers. However, analysts suggest that while these price adjustments will gradually benefit margins over the next few quarters, the immediate impact of existing contracts and new product cycles will keep margins under pressure.
The company's revenue from Apple is expected to shrink more rapidly than anticipated, as Qualcomm projects a significantly lower modem share in upcoming iPhones compared to its previous estimate. This contraction in the Apple business is a key factor contributing to investor concerns.
Despite these near-term challenges, Qualcomm remains optimistic about its long-term growth prospects in AI and data centers. The company projects non-handset revenue growth to accelerate significantly, from 24% in fiscal 2026 to over 60% in fiscal 2027. However, some analysts caution that this diversification strategy will take time to fully materialize, noting that initial data center projects may yield lower margins.
