Qualcomm's Revenue Miss Overshadows Modest Beats at Arm and GlobalFoundries

Qualcomm, Arm and GlobalFoundries all beat some part of their earnings estimates, and none of them got much of a reaction. Qualcomm took the hardest hit, with shares down more than 6% after hours. Arm slipped about 2% in late trading, and GlobalFoundries held flat. The common thread is that investors are growing less willing to pay for AI-linked growth unless it shows up quickly and cleanly in the numbers.

Qualcomm's miss and a smartphone problem

Qualcomm reported fourth-quarter adjusted earnings of $2.17 per share, slightly ahead of the $2.16 analysts expected. Revenue was the problem. It came in at $10.44 billion, up 8% from a year earlier, against a Street estimate of $10.48 billion. The company reported the results, and the revenue shortfall was what the market focused on.

Guidance didn't help. For the current quarter, Qualcomm pointed to earnings of about $2.25 per share at the midpoint, below the $2.27 analysts wanted. A beat on the bottom line with a soft top line and a light outlook is a combination investors tend to punish.

The core issue is exposure. Most of Qualcomm's sales still come from system-on-chips and modems for smartphones, which means it has far less direct exposure to the AI data center boom than many of its peers. That segment is currently under pressure from memory costs. Rising memory prices have pushed handset makers to raise their own prices, and higher prices have dampened demand. Qualcomm tried to offset this by raising the prices of its own chips, but smartphone chip revenue still fell 26% in the quarter to $5.14 billion, short of the $5.21 billion estimate. Price increases can protect margins for a while, but they don't create units.

The data center bet is early

CEO Cristiano Amon has been steering the company toward alternative markets, especially AI data centers. The segment brought in $650 million in the quarter. That's a meaningful start, but it's a fraction of the smartphone business, and the gap is hard to close quickly.

Amon still set a clear target: more than $5 billion in data center revenue by the end of fiscal 2027. He said the company recently signed a deal with an unnamed global hyperscaler for optical connectivity chips. On the conference call, he framed the constraint as supply rather than demand: "We don't have a demand issue; it's a supply issue. If I had more supply, I would probably be doing better." That's a reasonable claim to make, but it also shifts the question to whether Qualcomm can secure capacity fast enough to hit its timeline. Investors will want to see that shift into reported revenue before they give the story much credit.

The bright spots

Qualcomm's automotive unit was the standout. Sales rose 89% to $1.99 billion, comfortably above the $1.66 billion consensus. Internet of Things revenue reached $1.88 billion, up 4% and just ahead of expectations. Those two segments show the company's diversification is working in some areas, even if they weren't enough to offset the handset slump.

The QTL licensing business, which earns revenue from intellectual property for modems, 5G and other technologies, brought in $1.3 billion, down 7%. That's a weaker figure for a business that's supposed to be a steady earner, even though Qualcomm renewed licensing agreements with Apple, Transsion and Huawei during the period. Renewals keep the income stream intact, but they don't guarantee growth.

Arm: a clean beat, a cautious outlook

Arm had the more palatable quarter. It reported adjusted earnings of 52 cents per share against a 48-cent estimate, and revenue rose 27% year over year to $1.44 billion, ahead of the $1.38 billion analysts expected. Those are solid numbers for a company whose business model depends on licensing processor designs rather than manufacturing chips.

Arm is also making the same data center pivot as Qualcomm, but from a different position. It doesn't sell finished silicon. Customers including Apple, Samsung and Qualcomm license its blueprints and build their own custom chips, so Arm's income rises with the volume and sophistication of AI compute that its licensees design. Arm said data center was the main growth driver this year, with royalties from that segment doubling year over year.

The guidance is where the caution showed. Arm expects earnings of 56 cents per share, plus or minus 4 cents, against Street expectations of 55 cents. Revenue guidance of $1.54 billion, plus or minus $50 million, sits just above the $1.52 billion target. That's a slight beat, and the range is wide enough that the market saw little reason to chase the stock.

GlobalFoundries: the steadiest of the three

GlobalFoundries had the narrowest margin, but it posted a clean result. It reported third-quarter adjusted earnings of 53 cents per share on sales of $1.9 billion, up 12% from a year earlier. Analysts had expected 51 cents on $1.89 billion. The company credited strong demand from AI and data center customers for the growth.

Its business model is different from both Qualcomm and Arm. GlobalFoundries is a pure-play contract manufacturer, building chips designed by other companies rather than designing or branding its own. Qualcomm is one of its biggest customers, along with Broadcom, NXP and Infineon. That makes its fortunes tightly linked to the health of the chip designers it serves. When Qualcomm's handset volumes drop, the effect eventually reaches the foundry side, even if it lags.

For the coming quarter, GlobalFoundries guided to earnings of 59 cents per share, plus or minus 5 cents, on revenue of about $2 billion. Wall Street was looking for 57 cents on the same revenue figure. A modest beat, with the stock flat, suggests investors are waiting for more than a slight edge.

What to watch

The common question across all three is whether AI-driven demand can keep carrying growth while consumer electronics remain under cost pressure. Qualcomm's next few quarters will show whether its data center ramp can offset smartphone weakness, and whether the supply constraints Amon described are easing. Arm's royalty trajectory will indicate how much AI compute is flowing through licensed designs, and GlobalFoundries' order book will hint at how long customers expect the current demand to last. For now, the stocks are priced for execution, and modest beats aren't enough to change that.