Qualcomm Sinks 8% on Memory Shortage Warning

Qualcomm beat on every Q1 metric and still got punished. The culprit wasn't demand—it was supply.

The San Diego chipmaker reported fiscal Q1 earnings of $3.50 per share on revenue of $12.25 billion, topping consensus estimates of $3.40 and $12.18 billion respectively. It was a record quarter. But investors zeroed in on the guidance, which told a much less comfortable story.

The Memory Problem

Qualcomm guided Q2 revenue to a range of $10.2-11.0 billion with adjusted EPS of $2.45-2.65. Both figures fell well short of the $11.02 billion and $2.87 consensus. The reason: a global memory shortage that is diverting DRAM and NAND supply away from consumer electronics and into AI data centers.

This is the flip side of the hyperscaler spending boom. As Amazon commits $200 billion to AI infrastructure and Alphabet pushes toward $185 billion in capex, the chips needed for those data centers—particularly high-bandwidth memory—are being prioritized over the components that go into smartphones, laptops, and IoT devices.

Qualcomm's management was blunt about the constraint. Smartphones need memory chips, and memory chips are increasingly going to AI servers first. The company expects the shortage to persist through at least the first half of 2026, with a gradual easing in the back half as new fab capacity comes online.

Shares dropped about 8% on Thursday, extending a rough stretch for the broader semiconductor complex.

Handset Business Still Growing

The Q1 numbers themselves were solid. Qualcomm's QCT handset chip revenue rose 12% year-over-year to $7.6 billion, driven by premium Android device launches in China and growing Snapdragon adoption in flagship phones. The automotive chip business grew 22% to $961 million, and IoT revenue ticked up 8%.

The Snapdragon 8 Elite processor, launched in October, has been well-received. Qualcomm's AI-on-device capabilities are a genuine differentiator—the chip can run large language models locally without cloud connectivity, which appeals to privacy-conscious markets.

Sector Implications

Qualcomm's warning adds a new wrinkle to the chip selloff that has already rattled semiconductor stocks this week. Where AMD's 17% plunge was about demand concerns and forward guidance conservatism, Qualcomm's issue is supply-side. The memory shortage creates winners and losers within semis.

Memory producers like Micron and Samsung stand to benefit from tight supply and rising prices. But downstream chip companies that depend on memory availability—Qualcomm, MediaTek, and PC-facing names like Intel—face margin pressure and potential production delays. We saw Micron hit record highs just weeks ago on exactly this dynamic, while AMD faced its own challenges with forward guidance.

Trading the Setup

QCOM has now pulled back about 18% from its December high of $182. The stock is trading at roughly 14x forward earnings, which is cheap relative to the broader semiconductor space. The problem is that cheap can get cheaper when guidance is deteriorating.

The $140 level—roughly where the stock sits now—was a support zone last summer. Watch whether institutional buyers step in there. If the memory shortage resolves faster than management expects, this will look like a gift. If it drags into Q3, there's another leg down. For a broader view of how semiconductor earnings are shaping this cycle, the read-through is clear: AI demand is insatiable, but the supply chain is buckling under the weight.