Qualcomm Crushes Q1 Earnings As Memory Crunch Casts A Cloudy Outlook
Qualcomm is coming off its best financial quarter to date, with Q1 earnings hitting a record $12.25 billion in revenue, a 5% year-over-year gain, resulting in a profit of more than $3 billion. The biggest driver in Qualcomm beating out expectations for a record quarter is demand for flagship and other premium smartphones running on its Snapdragon silicon.
If you own an Android phone, chances are high that it's powered by a Snapdragon chip. Qualcomm's smartphone chip stack runs the gamut from entry-level solutions on up to its flagship Snadragon 8 Elite Gen 5, as featured in the OnePlus 15 we reviewed in November, and is expected to power Samsung's upcoming Galaxy S26 Ultra (among other devices).
Handset chip revenue contributed $7.8 billion to Qualcomm's Q1 earnings, by far its top earning category. During an earnings call, Qualcomm President and CEO Cristiano Amon said consumer demand for handsets, especially premium and high-tier, exceeded the company's expectations.
Qualcomm also generated $1.7 billion in IoT revenue for a 9% year-over-year gain, driven by consumer and networking product demand, while its Automotive revenue grew 15% to a record $1.1 billion on stronger Snapdragon digital chassis demand. The remaining revenue came from licensing agreements.
"We are pleased to deliver strong quarterly results, with record total company revenues," Amon said in a statement. "Our momentum across personal, industrial and
physical AI is growing, as evidenced by recent product announcements at CES and customer traction.
While our near-term handsets outlook is impacted by industry-wide memory supply constraints, we are
encouraged by end-consumer demand for premium and high tier smartphones, and remain on track to
achieve our fiscal 2029 revenue goals."
By all accounts, it's a successful quarter for Qualcomm, which has its hands in multiple cookie jars. That includes PCs, with Qualcomm making a spirited push into Windows systems with its Snapdragon X2 Plus silicon featuring a third-generation Oryon CPU and a dedicated NPU capable of 80 TOPS of AI muscle.
Despite the strong quarter, Qualcomm's share price is down more than 8% in early morning trading. Our best guess is that it's knee-jerk reaction to the industry-wide memory shortage
"Increasing demand for memory solutions in AI data centers is driving near-term uncertainly in memory supply and pricing for OEMs. As a result, handset OEMs are taking a cautious approach in planning their business. We have seen several OEMs, especially in China, take actions to reduce their handset build plans and channel inventory," Qualcomm states in a slide deck presentation.
Qualcomm highlighted this as the basis for its downward guidance in Q2, which revenue expected to check in between $10.2 billion to $11 billion. And looking further down the line, Qualcomm says the memory shortage and subsequent price increases will likely define the overall scale of the handset market throughout its fiscal year.
That said, Amon pointed out during an earnings call to discuss Qualcomm's latest earnings (PDF) that the high-end handset market has proven to be resilient to price increases, as was the case during the pandemic.
"The most important thing is that the issue is not just the price. The issue is just availability. So I think the memory availability will determine the overall size of the handset market. OEMs are very likely to prioritize premium and high tier how they have done in the past," Amon said.
He added that Qualcomm will monitor the situation on a quarterly basis as phone pricing gets adjusted and "tiers kind of shift towards high-end premium, and we'll see what happens in the marketplace." Or put another way, Qualcomm isn't in panic mode.
