Qualcomm shares dropped sharply after the company reported fiscal third-quarter 2026 results on July 29, with the stock falling roughly 5% in premarket trading, closing down 4.49% at $155.57, and then sliding a further 7.16% to $144.53 in after-hours trading as investors digested a guidance range that fell well short of Wall Street’s expectations. The selloff illustrates a squeeze increasingly familiar across the chip industry in 2026: demand for AI infrastructure is driving up the cost of the memory, wafers, packaging and testing that every chipmaker needs, even ones like Qualcomm whose core business is smartphones rather than data-center GPUs.
The Numbers
Qualcomm’s adjusted earnings per share came in at $2.21, just a cent below the $2.22 analysts expected. Revenue of $9.95 billion beat the roughly $9.71 billion consensus estimate but was still down 4% from the same quarter a year earlier. The real damage was in guidance: Qualcomm forecast fiscal fourth-quarter adjusted EPS of between $2.05 and $2.25, badly missing the $2.36 analysts had modeled, a rare miss on forward guidance for a company that has generally been able to signal steady results through the current AI infrastructure boom.
Handsets Keep Shrinking
Qualcomm’s handset chip business — still its largest single segment — fell 20% year over year to $5.1 billion. Compounding that, the company signaled that its modem chip share in upcoming iPhones will be “materially lower” than the roughly 20% previously estimated, pointing to an accelerating erosion of one of Qualcomm’s most important customer relationships as Apple continues developing more of its own modem silicon in-house.
Amon’s Fix: Raise Prices
CEO Cristiano Amon told investors the company plans to raise chip prices across the board starting September 1 to offset surging input costs tied to the broader AI buildout — memory, wafers, packaging and testing have all gotten more expensive as AI infrastructure demand competes for the same fabrication capacity that smartphone and PC chips depend on. Qualcomm has said the benefit of those price increases will show up gradually over coming quarters rather than immediately, meaning near-term margins stay under pressure even as the pricing action takes effect.
Wall Street’s Split Reaction
Analysts at Bernstein were blunt about the trade-off Qualcomm is navigating, writing that “cost increases and higher spending are significantly impacting margins, and while the company is trying to raise prices to compensate, the forthcoming data-center ramp seems likely to more than offset that pricing action.” That captures the tension at the heart of Qualcomm’s current strategy: the company is betting its future growth on non-handset revenue — including a push into AI data-center chips — accelerating to more than 60% of the business in fiscal 2027, up from just 24% in fiscal 2026. TD Cowen analysts cautioned that Qualcomm’s initial data-center programs carry structurally lower margins than its legacy handset business, meaning the growth Qualcomm needs to offset handset erosion may itself be less profitable per dollar of revenue.
The Bull Case Still Standing
Not every analyst treated the print as uniformly negative. Some noted that Qualcomm still beat on revenue and that a 9%-plus analyst target-price cut following the report reflects a re-rating of near-term margin expectations rather than a fundamental thesis change — the diversification into automotive, IoT and data-center chips that Qualcomm has pursued for years is still progressing, just arriving into a costlier input environment than the company modeled a year ago.
What’s Next
Investors will be watching whether Qualcomm’s September 1 price increases actually stick with customers in a competitive chip market, and whether the promised acceleration in non-handset revenue shows up on schedule in upcoming quarters. Apple’s continued in-house modem development remains the larger structural risk hanging over Qualcomm’s handset business, one that no near-term pricing action can offset. The quarter is also a reminder that the AI boom’s costs are not confined to the companies buying GPUs directly — Qualcomm makes almost none of the chips inside a data center, yet it is absorbing higher input costs because the same fabrication and packaging capacity it depends on for smartphone chips is now being bid up by AI infrastructure spending. Investors will get their next read on whether that dynamic is easing or worsening when Qualcomm reports fiscal fourth-quarter results later in the year, the first period in which the September price increases will show up in reported numbers rather than guidance.
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