Qualcomm Sinks 11% as Soft Profit Guidance and Handset Slump Overshadow Beat; Arm Holdings Drops 7%, Skyworks Slides 2%

A quarter that beat on both lines wasn’t enough to shield Qualcomm (NASDAQ:QCOM | QCOM Price Prediction) from a steep selloff, because a soft profit outlook and a shrinking handset business drew more attention than the results. Qualcomm stock is at $153.54, down 11% in morning trading.

The chipmaker reported its Q4 FY2026 results after the close on November 4. Qualcomm’s handset sales dropped sharply and its gross margin missed. Its Q1 FY2027 earnings per share (EPS) outlook also came in below consensus, which eclipsed record automotive revenue and a repeated data center target.

Qualcomm’s Handset Slump Overshadows a Quarterly Beat

On an adjusted basis, Qualcomm earned EPS of $2.17, exceeding the $2.16 consensus estimate. Top-line results were also solid, with Qualcomm reporting revenue of $10.32 billion against the $10.12 billion consensus.

Handset weakness did the damage, with Qualcomm’s handset revenue falling 26% year over year to $5.14 billion. Management tied the decline to “the impact of industry-wide memory dynamics on the global smartphone market.” Automotive provided the offset, as Qualcomm’s automotive revenue jumped 89% to a record.

At 52.4%, Qualcomm’s gross margin missed the 53.2% analysts expected. Rising costs for wafers, packaging and memory are pressuring the company, so Qualcomm is raising prices across its products. Chief financial officer and chief operating officer Akash Palkhiwala said the full benefit should reach the company’s chip-segment gross margins in the second half of fiscal 2027.

Qualcomm’s Guidance Splits Between Sales and Profit

For Q1, Qualcomm guided its revenue to a range of $10.4 billion to $11.2 billion, with the midpoint above the $10.6 billion consensus estimate. Earnings are where the outlook disappoints. Qualcomm expects EPS of $2.15 to $2.35, and that $2.25 midpoint trails the $2.32 consensus estimate.

Data Center and Auto Growth Anchor Qualcomm’s Bull Case

Palkhiwala noted non-handset revenue should make up more than 50% of revenue in Qualcomm’s chip segment in fiscal 2027. In the same remarks, Palkhiwala repeated Qualcomm’s $5 billion fiscal 2027 data center revenue target and said data center sales should exit the year at a $7 billion run rate.

Qualcomm highlighted a multi-generation collaboration with Amazon (NASDAQ:AMZN) on custom AI inference silicon and optical connectivity. On the call, the company also announced a multi-year deal to power the Starlink Mobile 5G network of SpaceX (NASDAQ:SPCX) in the U.S.

Goldman Sachs analysts summed up the open question for Qualcomm, writing that “we think investors will want to see more evidence of the magnitude and timing of the Datacenter ramp through FY27.” The firm also pointed to gross margin stabilization as a key proof point. The broader expansion extends well beyond the chipmakers themselves, and we featured seven suppliers riding the AI data-center wave in a free report.

Arm and Skyworks Slide Less Than Qualcomm

Meanwhile, Arm Holdings (NASDAQ:ARM) stock is at $177.80, down 7%. The company, which licenses the chip architecture that Qualcomm and many smartphone chipmakers use, reported its Q2 FY2027 results on November 4. Arm’s revenue rose 27.1% to $1.44 billion, but its GAAP EPS of $0.12 missed expectations. The quarter carried $46.6 million in fair-value losses on listed equity investments.

At the same time, Skyworks Solutions (NASDAQ:SWKS) stock is at $81.53, down 2%. As a supplier of radio-frequency chips for smartphones, Skyworks is exposed to the same handset cycle. Qualcomm’s steeper drop points to company-specific pressure on top of weakness across the sector.

Semiconductor stocks are also dealing with the possibility of new AI and data center regulation after Democrats won control of Congress. Higher memory prices, which are pressuring smartphone unit sales and PC demand, add to the strain on Qualcomm and its peers.

How Qualcomm’s Business Differs From Arm and Skyworks

Qualcomm sells finished chips and also licenses its wireless patents, so it earns money from hardware and from a high-margin royalty stream. Arm has historically licensed processor designs and collected royalties on the chips its partners ship, though it’s now moving into making its own production chips.

Skyworks builds radio-frequency front-end components for premium smartphones, and its Qorvo combination broadens its reach into defense, data center and automotive markets.

What Comes Next for Qualcomm’s Diversification Push

The next test for Qualcomm is whether its price increases steady its gross margin as fiscal 2027 unfolds. A second is whether the company’s data center customers ramp up on management’s schedule.

Qualcomm bulls can highlight the company’s record automotive sales, a repeated data center target and hyperscaler customers that are already receiving shipments. On the other side, the bears see a handset business that’s still shrinking, input costs that keep climbing and an earnings outlook that came in below expectations.

Qualcomm’s Q2 results should be the first to show the price increases, since management expects to start realizing the benefit in that quarter. It may make sense to stay cautious until the debate over Qualcomm’s margins settles.

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