Qualcomm shares 9% slump as weak smartphone chip sales overshadow data-center momentum

Qualcomm shares dropped over 9% in early trading on Thursday after the company's smartphone chip sales missed Wall Street estimates, raising concerns that weakness in its core handset business could offset gains from newer growth in areas such as data-center chips.

If losses hold, Qualcomm is on track to shed over $17 billion in market value.

* The chipmaker has been caught between rising memory costs fueled by surging data-center demand and slowing smartphone sales, as AI infrastructure spending absorbs supply across the semiconductor industry


* "Unlike some other companies, we saw the memory shortage coming and prepared for it early," CEO Cristiano Amon told Reuters

* Android demand showed sequential improvement and the company was making solid progress in expanding beyond its handset business, he added

* Qualcomm's push into data-center and automotive chips has strengthened its long-term growth outlook, but brokerages broadly said the improved visibility was yet to translate into stronger near-term earnings as the Apple revenue roll-off and higher input costs continue to weigh on results

* "We lack conviction in a three-year ramp in a target-rich environment for AI semis, and it's unclear whether a foundation built on custom chips has legs as the business transitions to merchant solutions," analysts at Morgan Stanley said

* Quarterly revenue from the chipmaker's handset division, its largest business, fell 26% to $5.14 billion, pulling chip segment sales 8% lower to $9.02 billion

* Qualcomm trades at 16.78 times forward earnings, well below peers such as MediaTek at 25.41 times and Intel at 33.28 times

* At least 10 brokerages lowered their price targets on the stock after the results, according to LSEG-compiled data.