Qualcomm delivered a record Q1 with $12.3 billion in revenue, beating analyst expectations. Then CEO Cristiano Amon warned that AI datacenters' appetite for memory is creating a supply crunch that will drag down smartphone production for the next several quarters.
The problem is straightforward: memory manufacturers are prioritizing high-bandwidth memory (HBM) for AI datacenters, reducing DRAM output for smartphones. Basic supply and demand kicked in. Prices are climbing, and handset makers, particularly in China, are cutting build plans and drawing down chipset inventory.
Qualcomm's Q2 guidance reflected the damage: revenue of $10.2-11 billion versus $11 billion in the same quarter last year. The company expects handset chip revenue to drop from $6.9 billion to $6 billion. Shares fell 10% in after-hours trading.
Amon was careful to note this isn't a demand problem. Consumers still want premium smartphones. OEMs just don't think they can source enough memory to build them. The short-term pain is real, but Qualcomm's CEO believes the company's diversification strategy remains intact.
The bright spots: automotive revenue hit $1.1 billion (up 15%), marking the second consecutive quarter above $1 billion. IoT brought in $1.7 billion, up 9%. The company's licensing business (QTL) delivered $1.6 billion at a 77% margin.
Qualcomm also confirmed it's shipping its own AI inference accelerators to Humane and is in conversations with hyperscalers. Revenue from that silicon won't arrive until next year, but Amon says traction is "good."
The memory shortage exposes an uncomfortable reality: on-device AI requires significant memory, but so do datacenters. Until supply catches up, or manufacturers figure out more efficient model compression techniques like quantization and pruning, smartphone makers are caught in the middle.
Worth noting: this is the same dynamic driving interest in optimization techniques for on-device AI. When you can't get the memory you need, you make the models fit the memory you have. That's not just an engineering challenge, it's now a business imperative.
Qualcomm returned $3.6 billion to shareholders in Q1 and maintains its 2029 target to reduce smartphone revenue dependency. Whether memory supply cooperates with that timeline is another question entirely.