Fresh off a report that it’s working on a smartphone chip with OpenAI, Qualcomm (QCOM) will report its second quarter earnings on Wednesday.
According to TF International Securities analyst Ming-Chi Kuo, Qualcomm’s OpenAI chip will go into mass production in 2028 as the AI Lab looks to do something Amazon (AMZN), Meta (META), and Microsoft (MSFT) have failed to do: crack the Apple (AAPL) and Google (GOOG) smartphone duopoly.
But Kuo’s report comes at a difficult time for the smartphone market as the global memory crisis cuts into supplies, increasing prices and eroding demand for entry-level devices.
According to the International Data Corporation, global smartphone shipments declined 4.1% in the first quarter to 289.7 million units. That broke a 10-quarter streak of growth that began in mid-2023.
Worse still, the market research firm says the first quarter drop is a “mild precursor” for what the remainder of 2026 has in store for the market.
According to Bernstein Research’s Stacy Rasgon, the broader smartphone space could face double-digit unit declines this year.
Qualcomm’s handset business makes up the vast majority of its overall revenue, though it’s working to diversify into other areas, including data center chip sales and increasingly pushing its automotive and robotics technologies.
But Rasgon says those efforts are unlikely to offset the drop in smartphone shipments.
For the second quarter, Qualcomm is expected to report earnings per share (EPS) of $2.55 on revenue of $10.56 billion, according to Bloomberg analyst consensus estimates. That’s down from the same quarter last year, when the company saw EPS of $2.85 and revenue of $10.83 billion.
Wall Street is anticipating the largest decline from Qualcomm’s handset segment, which is pegged to drop 12.5% year over year to $6.05 billion.
Overall, the company’s QCT business, which includes handset, automotive, and internet-of-things revenue, is set to decline 3.5% to $9.13 billion.
Qualcomm’s licensing segment sales will top out at $1.32 billion.
The company could, however, provide Wall Street with some good news in June, when CEO Cristiano Amon provides the keynote address at the annual Computex conference in Taiwan.
Titled “AI Together,” the speech could offer up a better look at Qualcomm’s data center strategy and how it plans to gain share in the space.
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on X/Twitter at @DanielHowley.
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