A disappointing forward outlook for the December quarter sent Qualcomm (NASDAQ: QCOM) shares sliding roughly 7% on Thursday, overwhelming what had otherwise been a strong earnings report.

The company’s guidance called for adjusted earnings of $2.15 to $2.35 per share in the current quarter, with the midpoint landing below what analysts had expected.

That shortfall in projected profitability was enough to spook markets and raise fresh questions about how quickly Qualcomm can sustain its growth momentum heading into 2027.

The irony is that Qualcomm’s actual fiscal fourth-quarter numbers were solid, with non-GAAP earnings of $2.17 per share edging past the consensus analyst estimate of $2.16.

Revenue for the quarter also cleared Wall Street’s bar, coming in across a range of $10.32 billion to $10.44 billion and signaling that demand, at least in the near term, held up better than feared.

Yet the smartphone segment, which remains Qualcomm’s largest revenue driver, continued to weigh on the broader picture, with handset chip sales dropping 26% year over year to $5.14 billion.

Two forces contributed to that sharp decline: rising memory costs that compressed margins, and a pullback in modem demand tied to Apple’s ongoing push to develop its own in-house chip technology.

Apple’s move toward proprietary modem solutions has been a slow-moving threat on Qualcomm’s horizon for years, but the 26% revenue drop in handsets suggests the impact is becoming increasingly difficult to dismiss.

Against that backdrop, Qualcomm’s automotive division offered a rare and striking contrast, with revenue surging nearly 89% year over year to approximately $1.99 billion.

The automotive unit’s rapid expansion underscores a deliberate strategy by Qualcomm to reduce its reliance on the smartphone market, which has grown more competitive and more vulnerable to customer self-sufficiency.

Whether the automotive momentum can scale fast enough to compensate for the pressures in handsets will likely be the defining question for investors as Qualcomm navigates a challenging stretch ahead.