Qualcomm's stock plummeted 10% in after-hours trading on Wednesday, February 4, 2026, despite the company beating both profit and revenue estimates for its fiscal first quarter. The sharp decline was triggered by a weaker-than-expected forecast for the upcoming quarter, which the company attributed to memory chip supply constraints affecting demand from handset customers.
For Q1 2026, Qualcomm reported adjusted earnings per share of $3.50, surpassing the $3.41 estimate. Revenue reached $12.25 billion, slightly ahead of the $12.21 billion forecast and marking a 5% year-over-year increase. However, the guidance for the next quarter painted a gloomier picture. The company projected revenue between $10.2 billion and $11 billion, below the analyst consensus of $11.11 billion, and earnings per share in the range of $2.45 to $2.65, missing the expected $2.89.
"Our guidance includes the estimated impact of memory supply constraints and related pricing on demand from several handset customers," Qualcomm stated. This warning had a ripple effect, spilling over to other companies in the semiconductor ecosystem.
The fallout extended to Arm Holdings, a major chip design licensor and a key partner for Qualcomm. Arm's stock dropped 7.48% after hours on Wednesday and fell a further 10% by Thursday morning. While Arm posted a record quarterly revenue of $1.242 billion (up 26% year-over-year), it missed licensing revenue expectations ($505 million vs. $519.9 million expected). Analysts linked the selloff directly to Qualcomm's warning, highlighting Arm's continued heavy reliance on royalties from consumer products like smartphones.
Andrew Jackson of Ortus Advisors noted, "Arm is trying to diversify into AI chips used for DC/servers, but the success of this remains uncertain, and its business model is still heavily reliant on royalties from chips used in consumer products such as handsets." The concern is that a slowdown in smartphone production, as signaled by Qualcomm, could directly impact Arm's future royalty income, which was $737 million last quarter—a 27% annual jump.
Despite growth in its Compute Subsystems (CSS) and licensing programs, Arm's financials showed pressure: GAAP net income fell 12% to $223 million, free cash flow was halved to $169 million, and remaining performance obligations dropped 8% to $2.15 billion.
