Qualcomm (QCOM.US) Earnings Forecast: Increased memory chip prices may hit the smartphone market, Bernstein lowered the target price to $155

The Zhitong Finance App learned that Wall Street research firm Bernstein released a research report on Monday stating that as rising memory chip prices continue to impact the smartphone market, Qualcomm (QCOM.US)'s short-term performance prospects are under increasing pressure. Although the company is actively expanding its automotive, IoT and data center businesses, smartphone chips are still its main source of revenue. Bernstein is concerned that the smartphone market may repeat the recent sharp decline in demand in the personal computer (PC) market, so he lowered Qualcomm's future performance expectations and lowered its target price from 165 US dollars to 155 US dollars, maintaining the “same as the general market” rating.

Qualcomm will announce the fourth quarter results of the 2026 fiscal year after the US stock market on November 4. Bernstein expects the company's revenue for the quarter to be around US$10.1 billion, with adjusted earnings per share of US$2.15, which is basically in line with Visible Alpha's agreed market expectations, namely US$10.1 billion in revenue and US$2.17 per share, which is also broadly consistent with the company's previously issued performance guidelines.

However, Bernstein believes that what really deserves investors' attention is not the upcoming quarterly results, but rather the impact that weak smartphone demand may have on the next quarter and 2027 fiscal year results.

The agency lowered Qualcomm's revenue forecast for the first quarter of fiscal year 2027 from 10.6 billion US dollars to 10.2 billion US dollars, and the adjusted earnings per share forecast fell from 2.34 US dollars to 2.21 US dollars, all lower than the market's unanimous expectations of 10.6 billion US dollars and 2.32 US dollars.

For the entire 2027 fiscal year, Bernstein lowered Qualcomm's revenue forecast from about US$44.9 billion to US$42.2 billion, and adjusted earnings per share forecast from US$9.57 to US$8.77. In contrast, the market agreed expectations were $45.1 billion and $10.02 billion, respectively.

Bernstein's current downward forecast is mainly due to continued deterioration in demand in the smartphone market, especially the Android phone market, which Qualcomm is highly dependent on. According to industry data quoted in the research report, global smartphone shipments fell 22% year on year in the third quarter of 2026, and the performance was even weaker than during the low market period after the COVID-19 pandemic in 2022. Unlike the seasonal pattern where shipments usually increase month-on-month, smartphone shipments fell by about 8% month-on-month in the third quarter of this year.

Excluding Apple (AAPL.US), the year-on-year decline in global smartphone shipments further expanded to 26%, and fell 11% month-on-month, one of the worst performances in the third quarter in many years.

Bernstein pointed out that these figures are highly similar to the recent weak performance of the PC market. Previously, Intel (INTC.US) lowered its performance outlook due to a sharp deterioration in PC demand, causing the stock price to plummet. The agency is concerned that rising memory chip prices may also curb smartphone production and consumer demand, thereby impacting Qualcomm's chip sales.

Although Bernstein believes that the scale of Qualcomm's previous chip supply to the market did not clearly exceed terminal demand as some PC chip manufacturers, its mobile phone chip revenue forecast for the current quarter is still significantly higher than the overall growth trend of the smartphone market.

Furthermore, Bernstein believes that Qualcomm's previous judgment that Android-related revenue would remain roughly flat in the 2027 fiscal year is becoming more and more difficult to achieve. The agency currently predicts that Android-related revenue will drop by a high single-digit percentage in the 2027 fiscal year, while the previous forecast was basically the same.

The continued loss of Apple's business is another important pressure. Bernstein estimates that the Apple-related chip business contributed about 7.5 billion to 8 billion US dollars in revenue for Qualcomm in fiscal 2026, but as Apple gradually switches to self-developed modem chips, Qualcomm's revenue from Apple in fiscal 2027 may decrease by about 6 billion US dollars over the same period last year.

This means that even if the Android phone business remains stable, Qualcomm will still face a significant revenue gap due to the decline in Apple orders. Meanwhile, with demand in the Android market also weakening, the growth pressure on the company's overall mobile phone chip business will further increase.

Notably, the smartphone business still accounts for most of Qualcomm's chip business revenue. According to Bernstein data, in the past 12 months up to the third quarter of fiscal year 2026, about 68% of Qualcomm's chip business revenue came from mobile phones, automobiles, and IoT businesses, which accounted for 13% and 19%, respectively.

Although Qualcomm has actively promoted business diversification in recent years and made progress in the fields of automobiles, the Internet of Things, and data centers, it is still difficult for these new businesses to fully offset the pressure faced by the mobile phone business in the short term. Among them, Bernstein sees the data center business as an important driving force for Qualcomm's future growth. The agency predicts that the data center business is expected to generate revenue growth of about $5 billion in fiscal year 2027, thereby partially offsetting the impact of the loss of Apple's business.

Bernstein believes that as the data center business gradually expands, Qualcomm's profit performance in the 2028-2029 fiscal year is expected to improve again. However, until then, the company's short-term profit expectations may need to be further lowered.

Judging from the valuation, Qualcomm's current stock price is not that expensive. According to research data, as of October 30, Qualcomm's expected price-earnings ratio is about 16.5 times, lower than the average of components of the Philadelphia Semiconductor Index of about 18.2 times, and also about 19.5 times that of the S&P 500 index. However, Bernstein believes that lower valuations are not enough to offset the risks brought about by the continued deterioration of the smartphone market.

As of October 30, Qualcomm's stock price was $164.79. Bernstein's latest target price of $155 means that the stock still has room to fall by about 6% from its closing price at the time.

Bernstein said that although Qualcomm's business expansion prospects in fields such as automobiles, the Internet of Things, and data centers are becoming more credible, the weakness in the smartphone market is still a major risk that cannot be ignored in the short term.

Regarding the upcoming financial report, investors need to focus on Qualcomm's latest judgment on smartphone demand in 2027, the impact of memory chip price increases on customer production plans, and whether the data center business can scale up as expected.