Qualcomm Q3 earnings to highlight AI's impact on smartphone market, data center plans

Chipmaker Qualcomm (QCOM) will report its third quarter earnings on Wednesday, giving investors a closer look at the impact the global memory shortage is having on smartphone sales and the status of the company’s upcoming data center segment.

Qualcomm is working to diversify its business to reduce its dependence on its handset business, which has slowed over the years, as customers hold on to their phones for longer before upgrading.

And with smartphone makers increasing prices to offset the rising cost of memory and storage chips caused by the global AI buildout, the handset market is looking rough.

“The smartphone industry is not great,” Bernstein analyst Stacy Rasgon told Yahoo Finance’s Julie Hyman on Wednesday.

“Memory prices are going up, and AI is sort of sucking up a lot of the supply. And so it’s just not leaving a lot for the smartphone players. And we’re seeing unit growth has gone negative,” he added.

For the third quarter, Qualcomm is anticipated to report earnings per share (EPS) of $2.21 on revenue of $9.6 billion. That’s down from an EPS of $2.77 and revenue of $10.3 that the company saw in the same period last year.

To address concerns about smartphone dependence, Qualcomm is expanding into the AI data center space.

During its investor day in June, the company showed off its line of data center offerings and servers, including an AI accelerator, CPU, memory, and rackscale server.

CFO Akash Palkhiwala told Yahoo Finance following the event that the company expects its data center products to generate $5 billion in revenue in fiscal 2027. It also doubled its non-handset sales projections for its fiscal 2029 to $40 billion.

But the broader decline in smartphone sales is expected to hit the company sooner than that.

SHENZHEN, CHINA – JULY 23: In this photo illustration, a smartphone displays the logo of Qualcomm Incorporated (NASDAQ: QCOM), an American semiconductor and wireless technology company specializing in mobile processors, connectivity solutions and communication technologies, in front of a screen showing the company’s latest stock market chart on July 23, 2026 in Shenzhen, Guangdong Province, China. (Photo illustration by Cheng Xin/Getty Images) · Cheng Xin via Getty Images

According to CounterPoint Research, Q2 global smartphone shipments fell 11% year-over-year, marking the industry’s worst second quarter in 13 years.

Qualcomm’s CMDA Technologies (QCT) segment revenue, which includes smartphone, internet of things, and automotive sales, is expected to decline 8% year over year to $8.2 billion.

Handset sales in particular are projected to fall roughly 21% year over year to $4.9 billion. Automotive related sales, however, are anticipated to increase 49% to $1.4 billion in the quarter.