Qualcomm Stock Drops 11% Premarket on Slowing Chip Demand and Weak Outlook

Qualcomm Incorporated (QCOM) shares plummeted nearly 11% in premarket trading on Thursday, February 5, 2026, following the semiconductor giant’s disappointing guidance for the upcoming quarter. The chipmaker cited industry-wide memory supply constraints that are hampering smartphone production and forcing the company to slash its revenue forecast well below Wall Street expectations.

Trading at $131.48 in premarket hours as of 7:15 AM EST, down $17.41 from the previous close of $148.89, Qualcomm’s sharp decline reflects growing investor concerns about the prolonged impact of memory shortages on the smartphone chip market.

Earnings Beat Overshadowed by Troubling Guidance

Despite beating expectations for its fiscal first quarter ending December 28, 2025, with adjusted earnings of $3.50 per share on revenue of $12.25 billion, Qualcomm’s forward guidance sent shockwaves through the market. The company reported 5% year-over-year revenue growth, with handset revenue rising 3% to $7.82 billion and automotive sales jumping 15% to $1.1 billion.

However, CEO Cristiano Amon acknowledged that “industry-wide memory shortage and price increases are likely to define the overall scale of the handset industry through the fiscal year.”

For the second quarter, Qualcomm forecast adjusted earnings between $2.45 and $2.65 per share on revenue of $10.2 billion to $11 billion, substantially below analyst expectations of $2.90 per share and $11.1 billion in revenue.

The company explicitly noted that its guidance includes “the estimated impact of memory supply constraints and related pricing on demand from several handset customers.” This dramatic shortfall signals deepening challenges in the smartphone supply chain that could persist well into 2027, according to industry analysts from J.P. Morgan and Morningstar.

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Memory Shortage Creates Ripple Effects Across Chip Industry

The memory supply crisis is affecting more than just Qualcomm. Arm Holdings, which designs the chip architecture underlying most smartphone processors including Qualcomm’s, also reported disappointing results and saw its shares drop 7% in premarket trading.

Arm CFO Jason Child warned that royalty revenues could be impacted by as much as 2% over the next year due to memory shortages constraining phone production. Global shipments of advanced smartphone chips are expected to decline 7% in 2026, with J.P. Morgan analysts forecasting double-digit percentage declines in overall smartphone shipments as rising memory costs particularly dampen demand in mid-to-low-end device segments.

Qualcomm executives indicated the memory supply shortage could last through the entire current fiscal year, potentially dragging supply pressures into calendar year 2027. However, CEO Amon told Reuters the company does not expect the global memory shortage to affect its rollout of AI chips for data centers, scheduled for the second half of 2026 with meaningful revenue anticipated in fiscal 2027.

Despite the near-term headwinds, the company maintains it is “on track to achieve our fiscal 2029 revenue goals,” pointing to diversification efforts in automotive, IoT, and AI as longer-term growth drivers beyond the troubled smartphone market.

Disclaimer: The author does not hold or have a position in any securities discussed in the article. All stock prices were quoted at the time of writing.