Qualcomm Inc. Qualcomm (QCOM) shares tumbled about 6% in premarket trading Thursday after the chipmaker delivered a solid fiscal third-quarter revenue beat but issued fourth-quarter guidance that left investors cold. The culprit? A nasty combination of rising memory costs, a weak Android market, and a looming drop in Apple-related revenue.

Earnings Beat, But Guidance Disappoints

Qualcomm reported revenue of $9.9 billion for its fiscal third quarter, topping the analyst consensus estimate of $9.67 billion. Adjusted earnings per share came in at $2.21, just missing the Street's $2.23 forecast.

The company's Qualcomm CDMA Technologies (QCT) segment generated $8.5 billion in revenue, fueled by record automotive sales and continued growth in the Internet of Things business. Qualcomm Technology Licensing (QTL) revenue totaled $1.3 billion.

Automotive revenue climbed 61% from a year earlier to a record $1.59 billion, marking the segment's 23rd consecutive quarter of double-digit revenue growth. CEO Cristiano Amon noted that two near-term custom silicon design wins are expected to start generating revenue in the December quarter, with wafer production already underway and tape-out completed for HBC Gen 1.

But the headline numbers masked a deeper problem: elevated memory prices are weighing on the global smartphone market, pressuring handset demand and Qualcomm's QCT handset business. CFO Akash Palkhiwala said QCT handset revenue of $5.1 billion reflected the impact of industrywide memory dynamics.

Fourth-Quarter Outlook Misses Estimates

For the fiscal fourth quarter, Qualcomm expects revenue of $9.7 billion to $10.5 billion, compared with the analyst consensus estimate of $10.02 billion. The company forecast adjusted earnings of $2.05 to $2.25 per share, well below analysts' expectations of $2.36 per share.

Qualcomm said unprecedented increases in memory prices and supply constraints created significant cyclical headwinds for the global smartphone market during fiscal 2026. The company expects fourth-quarter QTL revenue of $1.2 billion to $1.4 billion and QCT revenue of $8.4 billion to $9 billion.

Android Weakness Weighs On Outlook

Qualcomm said revenue from QCT handset sales to Chinese original equipment manufacturers hit a bottom in the third quarter and is expected to return to double-digit sequential growth in the fourth quarter. Still, the company expects QCT Android handset revenue to decline about 20% in fiscal 2026, reducing annual earnings by more than $1.50 per share.

Fourth-quarter QCT handset revenue is expected to be about $5.2 billion, while QCT IoT revenue is expected to remain roughly flat from a year earlier. On a brighter note, QCT automotive revenue is expected to grow about 60% year over year in the fourth quarter. Qualcomm also raised its outlook for annualized automotive revenue to about $7 billion exiting fiscal 2026 and said Snapdragon processors now power about 70% of Samsung Electronics (SSNLF) flagship devices.

Non-Handset Growth Takes Center Stage

Qualcomm is clearly trying to pivot away from its dependence on the smartphone market. The company raised its long-term target for QCT non-handset revenue to $40 billion by fiscal 2029, nearly doubling its previous goal. Data center revenue is expected to reach $5 billion in fiscal 2027 and $15 billion in fiscal 2029.

Perhaps most striking, Qualcomm expects fiscal 2027 non-handset revenue growth to replace its total fiscal 2026 Apple Inc. (AAPL) product revenue. The company also said Apple-related revenue is expected to step down more quickly beginning in the fourth quarter, as its modem share in the upcoming iPhone launch is projected to be materially lower than its previous estimate of 20%.

Non-handset revenue growth is expected to accelerate from 24% in fiscal 2026 to more than 60% in fiscal 2027, led by expansion in data center products. Qualcomm expects non-handset businesses to account for more than half of QCT revenue by fiscal 2027 and about two-thirds by fiscal 2029.

QCOM Price Action: Qualcomm shares were down 5.90% at $146.50 during premarket trading on Thursday.