SAN FRANCISCO, Feb. 5, 2026, 10:01 a.m. (PST)
- Qualcomm signaled that a worldwide memory chip shortage is hitting phone manufacturers hard and issued second-quarter revenue and profit forecasts that missed expectations.
- Arm warned that future royalty revenue could take a hit, despite projecting fourth-quarter revenue that beats Wall Street estimates
- Analysts and executives warn the memory shortage might drag on until 2027, squeezing smartphone shipments and hitting some consumer electronics sectors hard
Shares of Qualcomm and Arm Holdings dropped after both flagged a global memory chip shortage hitting the smartphone supply chain, weakening demand for their key products.
The problem isn’t chip design—it’s the parts. Phone makers rely on memory chips to assemble finished devices, but executives report that limited supplies and rising costs are making customers hesitant.
Memory is inside nearly every device people use today, making this squeeze a real problem. It’s pushing manufacturers to reconsider their production strategies for 2026. Several analysts predict the shortage will stretch far beyond the usual quarterly hiccup.
Qualcomm projected late Wednesday that its second-quarter revenue will land between $10.2 billion and $11 billion, with adjusted earnings per share ranging from $2.45 to $2.65—both figures falling short of expectations. CEO Cristiano Amon boiled down the shortfall to a single cause: “I just wish we had more memory.” Reuters
The San Diego chipmaker surpassed Wall Street expectations for the quarter ending Dec. 28, reporting $12.25 billion in revenue and an adjusted EPS of $3.50. However, it noted that smartphone chip sales are sluggish, as original equipment manufacturers (OEMs) face memory shortages, particularly those in China.
Arm, the company behind the architecture in many smartphone chips, posted $1.24 billion in revenue for its fiscal third quarter and expects $1.47 billion in the fourth. However, investors zeroed in on a shortfall in licensing sales—the upfront fees paid for access to its tech. “A weak licensing revenue today will likely result in weaker future royalties revenue,” noted Summit Insights analyst Kinngai Chan. Reuters
Arm CFO Jason Child warned that royalty revenue—the per-chip fee Arm earns when a client ships products based on its designs—might drop by up to 2% in the next year if the memory shortage keeps phone shipments down. Qualcomm execs said the shortage could drag on through this fiscal year and into 2027. Analysts at Morningstar and J.P. Morgan also predict tight memory supply lasting until 2027. Reuters
Investors saw the warning as a wider signal for consumer tech. Qualcomm shares slid about 9% in after-hours trading Wednesday, while Arm dropped close to 8%. Traders said the results didn’t fully reflect the memory shortage’s impact. Economictimes
There’s some buffer at the high end. Qualcomm admits its chips mostly target pricier Android models, and Bernstein analysts note stronger chip demand in premium phones as OEMs prioritize their most profitable devices amid tight supplies. Still, if the squeeze drags on, mid- to low-end phones could see steeper cuts—those buyers react more to price hikes.
Both companies are doubling down on data centers, fueled by AI’s surging compute demands. Amon remains confident that the memory shortage won’t derail Qualcomm’s AI chip launch for data centers slated for later this year. Meanwhile, Arm reports growing interest in its power-efficient designs for AI server chips, with Nvidia among the customers driving that demand.
Arm’s latest quarterly report, also reported by Irish broadcaster RTE, underscored a familiar conflict: strong revenue gains paired with worries that licensing and future royalties might falter if smartphone sales remain throttled by memory supply constraints. Rte
