Qualcomm, Arm Hit by Memory Crunch as AI Data Center Push Falls Short

Qualcomm's revenue fell 8% year over year to $10.32 billion (about 13.86 trillion won) in its fiscal fourth quarter, the company disclosed in a regulatory filing on the 4th, as a memory supply crunch pushed smartphone prices higher and curbed sales. Shares dropped 7.47% in after-hours trading following the release.

The quarter, covering June 29 through Sept. 27, showed handset chip revenue down 26% to $5.14 billion. That's the core of the problem: memory suppliers have retooled production toward high-bandwidth memory (HBM) for AI data centers, leaving conventional smartphone memory in short supply and driving prices up.

Higher memory prices raise handset prices. Higher handset prices curb sales. Qualcomm's largest revenue source took the hit.

CEO Cristiano Amon put it bluntly. "There is no problem with demand, there is a problem with supply," he said. "If we had more supply, the situation would have been better."

What does the chipmaker's diversification actually deliver?

Qualcomm has been pushing hard beyond its mobile-centered business into data centers. In October last year it launched the AI200 and AI250 accelerators plus server racks optimized for AI inference (running trained AI models on live data).

The shift is producing real numbers:

• Data center segment revenue, including custom chip solutions and networking: $650 million
• Automotive chip revenue: up 89% year over year to $1.99 billion

Not enough to offset the smartphone slide, but growing fast from a smaller base.

Where does Arm stand?

Arm, the world's largest semiconductor intellectual property company, reported the same day. Revenue for its fiscal 2027 second quarter, covering July through September, rose 27% from a year earlier to $1.44 billion. Growth is real. Sentiment wasn't.

The problem is guidance. Arm projected third-quarter revenue of $1.54 billion, in line with Bloomberg's consensus estimate. Some brokerages had projected as much as $1.7 billion, and the shortfall against those hopes disappointed investors.

Like Qualcomm, Arm has been pushing into AI infrastructure. In March this year it unveiled the Arm AGI CPU, its first in-house central processing unit for data centers, stepping into direct chip design for the first time in its 35-year history.

Arm's main revenue sources remain architecture licenses, essentially chip blueprints, and royalties tied to sales of products such as smartphones. That tether to the handset market means the memory-driven slump hits Arm too, despite its own diversification.

CEO Rene Haas said the company expects $2 billion in sales of its own CPUs across fiscal 2027 and 2028, stressing that the data center business will account for a growing share of revenue.

What does this change for the chip industry?

The two companies that dominate the mobile chip market both missed expectations in the same week, for the same underlying reason. Memory producers are chasing higher-margin AI data center demand, and the resulting smartphone memory shortage is rippling through the entire mobile silicon stack.

Diversification is the stated answer at both firms. Qualcomm's accelerators and automotive chips, Arm's first-party CPUs — all pointed at the same AI data center market that's starving the smartphone side of their businesses. Until memory supply rebalances, handset-focused chipmakers carry the cost.