The world's leading smartphone chip manufacturer, Qualcomm, has released a quarterly earnings forecast that fell short of Wall Street projections, indicating that supply chain constraints and rising costs are significantly impacting its primary market. In a statement on Wednesday, the company projected earnings per share, excluding certain items, of between $2.05 and $2.25 for the quarter ending in September. Even hitting the top of this range would lag behind the average analyst estimate. Revenue is expected to fall between $9.7 billion and $10.5 billion, compared to the $9.95 billion analysts had anticipated. Following the announcement, Qualcomm shares dropped approximately 4% in after-hours trading.

The downturn in the smartphone market is hitting Qualcomm harder than anticipated. The company, which outsources its chip production, stated it is passing some of the increased costs onto customers, a move it believes will help gradually improve profit margins. Qualcomm forecasts that its revenue from Android-based phone sales will decline by roughly 20% in the 2026 fiscal year, which it says will reduce earnings per share by more than $1.50. The company also cautioned that business from Apple is dwindling faster than expected, as Apple progressively shifts to its own in-house chips.

On a more positive note, Qualcomm indicated that revenue from Chinese phone manufacturers hit a low point in the third fiscal quarter and is expected to return to double-digit sequential growth in the fourth quarter. Qualcomm shares had risen earlier this year due to its data center business plans, but have retreated over the past month along with a broad decline in the chip sector. Investors are growing increasingly concerned that returns from artificial intelligence investments are not keeping pace with the massive spending by companies on new equipment.

For the third fiscal quarter ending June 28, Qualcomm reported earnings per share of $2.21, excluding certain items. Quarterly revenue fell 4% to approximately $9.95 billion. Analysts had forecast earnings per share of $2.21 on revenue of $9.62 billion. Qualcomm’s third-quarter mobile-related business revenue was $5.1 billion. Its connected devices business contributed $1.83 billion, while the automotive electronics segment added $1.59 billion. Qualcomm stated that revenue growth from its non-handset businesses is expected to accelerate from 24% to 60% by the 2027 fiscal year.