Qualcomm and Arm see momentum in AI, but smartphone weakness weighs on both stocks

UPDATED 21:39 EDT / JULY 29 2026 INFRA Qualcomm and Arm see momentum in AI, but smartphone weakness weighs on both stocks by Mike Wheatley Shares of the chipmakers Qualcomm Inc. and Arm Holdings Plc were trading lower after-hours today after warning of sluggish demand in the smartphone industry due to rising prices relating to the cost of key components such as memory chips. Qualcomm reported third-quarter earnings that fell just short of Wall Street’s expectations, and while it beat on revenue, its management warned that it’s going to have to take strong measures to protect its profit margins going forward. This includes a decision to raise prices across the board starting September 1, and looking for new ways to protect its supply chain. “Cost went up, so prices are going to go up,” said Qualcomm Chief Executive Cristiano Amon (pictured) in a conference call with analysts. The smartphone chipmaker just reported earnings before certain costs such as stock compensation of $2.21 per share, trailing Wall Street’s forecast of $2.23 per share. Revenue for the quarter came to $9.95 billion, ahead of the $9.67 billion estimate. For the current quarter, Qualcomm said it’s forecasting earnings of between $2.05 to $2.25 per share on sales of between $9.7 billion and $10.5 billion, but that’s below the Street’s target of $2.36 per share in earnings and $10.02 billion in sales. Qualcomm’s stock was down just over 3% on the report as investors digested what the forecast means. In a press release, Qualcomm explained that the semiconductor industry is dealing with a “broad-based increase in input costs, across wafer fabrication, assembly, test, advanced packaging, memory and other materials,” though it noted that “revenues continue to be healthy.” Qualcomm’s main problem is that, unlike other chipmakers that increasingly cater towards the artificial intelligence industry that’s responsible for all of those soaring costs, its primary focus remains the smartphone industry. While the company has been trying to diversify into segments like cars, smart glasses and robots under Amon’s leadership, handset sales still account for the bulk of its revenue. During the quarter, handset chip sales generated $5.1 billion in revenue, down 21% compared to the same period one year earlier, due to what Amon said is a “bottoming market” in China. The CEO explained that the dynamics in the smartphone market mean that low-end and mid-range phones are now a lot less competitive due to affordability issues. Even premium Android phones, where Qualcomm is dominant, are being viewed as too expensive by some customers, Amon said. ““Consumer preference within the premium category is changing towards a preference to the lower end of the premium, as well to last year’s phone, because of the memory price increases,” he told analysts on the call. Qualcomm continues to pin its hopes on diversification, and said it’s still hoping for non-handset chip sales to reach 60% of its total revenue by the end of next year. The automotive segment was a bright spot during the quarter, generating $1.59 billion in sales. The company is also looking to capitalize on the AI infrastructure boom. Amon said the company is on track to do $5 billion in data center chip revenue next year. The company will be helped towards that goal by the recent acquisition of Modular Inc., a software company that makes programming technology for AI. The chipmaker said it’s planning to unveil a new AI software platform based on Modular’s technology next month. Qualcomm’s Internet of Things business segment, which makes chips for industrial applications, smart glasses and robotics, delivered $1.83 billion in sal