US chip design firm Qualcomm reported a drop in both revenue and earnings on Wednesday, as rising memory prices weighed on global smartphone sales and hurt its core business. For the quarter ending in June, revenue reached $99 billion, down 4% year-over-year, though this still exceeded Wall Street's forecast of $97 billion. The company projects current-quarter revenue between $97 billion and $105 billion, with the midpoint roughly aligning with analyst expectations of $100 billion.

Despite a recent push into developing chips for AI data centers, Qualcomm has been impacted by major tech companies' heavy investments in AI infrastructure, which tighten the electronics supply chain and push up consumer electronics prices. Qualcomm's mobile phone business revenue fell 20% year-over-year to $50 billion. CEO Cristiano Amon acknowledged a "challenging memory market and supply chain environment," citing rising costs that dampen demand. Net profit came in at $20 billion, down 25% year-over-year. Amon said Qualcomm's non-handset segments, including automotive and data center operations, will grow to $40 billion in revenue by fiscal 2029.

Following the earnings report, Qualcomm shares fell about 4.5% in after-hours trading; the stock has dropped over 17% in the past month. This comes as semiconductor stocks broadly corrected in recent weeks, after leading global markets higher in the first half of the year. The Philadelphia Semiconductor Index, tracking major US chip firms, fell over 10% this week and is down more than 25% from its June record high, reflecting concerns that the AI boom may be unsustainable. South Korean memory chip maker SK Hynix also reported weaker-than-expected results on Wednesday, adding pressure to the chip sector.

Meanwhile, ARM Holdings, a British chip design firm backed by SoftBank, posted solid revenue figures and a positive outlook on Wednesday. Quarterly revenue reached $13 billion, up 22% year-over-year, and the company expects current-quarter revenue of $14 billion, matching market consensus. CEO Rene Haas noted that data center licensing fees more than doubled, driven by demand for the new "General-Purpose AI Central Processing Unit (AGICPU)". ARM's architecture is used in most mobile device chips globally, but the company has avoided the smartphone downturn as tech giants also leverage its chip designs in AI infrastructure.

ARM raised its revenue forecast for a new central processing unit chip, set for launch next year, with Meta and OpenAI as initial customers. Despite this, ARM's shares fell about 6% in after-hours trading, and the stock has declined nearly 35% over the past month. Both ARM and Qualcomm are vying for market share in AI processor chips, a segment that has propelled Nvidia's market value from roughly $400 billion to $4.6 trillion in about three years. Earlier this year, ARM introduced its own complete AI processor chip, marking a strategic shift from its traditional model of selling chip designs for clients to develop. This in-house chip is a key component of SoftBank CEO Masayoshi Son's "Project Izanagi," which aims to build an integrated AI infrastructure ecosystem to compete with Nvidia.

Qualcomm launched its own processor for AI data centers last year and announced in June that Meta would be its first major cloud service customer. The company is actively diversifying its business to reduce reliance on handset chip revenue, especially as its long-term agreement to supply baseband chips for Apple's iPhone nears its end. CFO Akash Palkhiwala said that in the fourth quarter of 2026, Qualcomm's share of baseband chips for the iPhone 18 series will be significantly lower than the previously estimated 20%. Memory chip costs surged 300% this quarter, hitting affordable smartphone manufacturers harder than premium brands like Apple. IDC data shows global smartphone shipments fell 6.7% year-over-year in the second quarter, marking a second consecutive decline, with only Apple and Samsung reporting shipment growth.