Qualcomm, one of the world’s leading suppliers of smartphone and wireless chips, warned investors that its second-quarter revenue and profits would fall short of market expectations, directly blaming an ongoing global memory chip shortage for the weaker outlook.
While the company reported stronger-than-expected results for its first fiscal quarter — with revenue growing and earnings per share beating forecasts — its guidance for the upcoming quarter disappointed analysts. Qualcomm projected revenue between $10.2 billion and $11.0 billion and adjusted earnings of $2.45 to $2.65 per share, both below full-year Wall Street estimates.
Memory Shortage Hits Smartphone Supply Chains
The shortfall comes amid a structural memory chip shortage that has increasingly affected the global tech supply chain. Memory chips — essential components in smartphones, PCs and many consumer electronics products — have seen shortages driven by supply reallocations to high-margin AI and data-centre markets and broader production constraints.
Qualcomm’s CEO acknowledged that the company’s smartphone customers — particularly original equipment manufacturers (OEMs) in China — have been reducing inventory and slowing orders because they cannot secure enough memory chips to build finished devices. This has directly impacted demand for Qualcomm’s mobile processors.
Industry analysts also warn that tight memory supply and rising memory prices could continue to pressure smartphone chip shipments through 2026, potentially leading to a 7 per cent decline in advanced smartphone chip sales this year.
Diversification and Longer-Term Strategy
Despite near-term headwinds, Qualcomm is expanding its business beyond smartphones. The company is increasing investments in automotive chips, Internet of Things (IoT) components, and AI data-centre processors, segments less affected by memory supply constraints. Qualcomm has noted that its forthcoming AI data centre chips are on track for introduction later in 2026, with meaningful contribution expected in fiscal 2027.
This diversification strategy aims to balance out cyclical downturns in handset demand and position the company for growth in higher-margin markets that are less tied to consumer memory shortages.
Market Reaction and Competitive Landscape
Qualcomm’s weaker forward guidance had an immediate impact on markets, with the company’s shares falling significantly in after-hours trading. Investors and analysts are closely watching how memory shortages and competitive pressures from rivals may reshape demand for Qualcomm’s core mobile business.
While supply constraints remain a challenge across the semiconductor industry, Qualcomm’s efforts to tap into adjacent sectors — such as automotive and AI — may provide a hedge against short-term cyclicality in smartphone markets.
