Qualcomm flags weak forecast as memory chip shortage hits smartphones

Despite delivering a strong first-quarter performance, Qualcomm has cautioned investors that ongoing global memory constraints are hurting smartphone supply chains, impacting near-term revenue visibility while pushing the chipmaker to accelerate diversification into automotive, IoT and AI-driven data centre markets.

Qualcomm has warned that its financial performance in the upcoming quarter is likely to fall below market expectations, citing persistent global shortages of memory chips that are disrupting smartphone manufacturing and dampening demand for its mobile processors.

The US-based semiconductor major, a key supplier of chips used in smartphones and wireless devices worldwide, reported better-than-expected results for its first fiscal quarter, with revenue growth and earnings surpassing analyst forecasts. However, its forward guidance struck a cautious tone, projecting second-quarter revenue in the range of $10.2 billion to $11.0 billion and adjusted earnings per share between $2.45 and $2.65—both below Wall Street’s broader expectations.

Memory constraints hit handset demand

Executives attributed the softer outlook largely to tight memory supplies, a problem that has intensified as manufacturers divert capacity toward high-margin segments such as artificial intelligence servers and data centres. Memory components are critical to smartphones, PCs and other consumer electronics, and shortages have begun to ripple through global supply chains.

Qualcomm acknowledged that several smartphone makers, particularly in China, are scaling back production plans and trimming inventories because they are unable to source adequate memory. As a result, demand for application processors and modems has weakened, even as consumer interest in new devices remains steady in some markets.

Industry analysts caution that memory shortages and elevated component prices could persist well into 2026, potentially triggering a mid-single-digit decline in advanced smartphone chip shipments this year.

Betting on diversification beyond phones

Facing near-term pressure in its core handset business, Qualcomm is accelerating efforts to broaden its revenue base. The company is ramping up investments in automotive semiconductors, Internet of Things platforms, and processors designed for AI data centres—areas viewed as structurally more resilient than consumer electronics.

Qualcomm said its upcoming AI-focused data centre chips remain on schedule for launch later in 2026, with meaningful revenue contribution expected in the following fiscal year. These initiatives are intended to cushion the impact of cyclical downturns in smartphone demand while positioning the company for longer-term growth in higher-margin segments.

The cautious guidance weighed on investor sentiment, sending Qualcomm shares lower in after-hours trading. Market watchers say the company’s ability to navigate ongoing supply constraints while executing its diversification strategy will be critical in shaping its competitive position over the next few years.

While semiconductor supply challenges continue to affect the broader industry, Qualcomm’s expanding presence in automotive and AI infrastructure could provide a strategic hedge against prolonged volatility in the global smartphone market.