BACKGROUND: Brain-related disorders are characterized by observable behavioral symptoms, for example, social withdrawal. Smartphones can passively collect behavioral data reflecting digital activities such as communication app usage and calls. These data are collected objectively in real time, avoiding recall bias, and may, therefore, be a useful tool for measuring behaviors related to social functioning. Despite promising clinical utility, analyzing smartphone data is challenging as datasets often include a range of temporal features prone to missingness. OBJECTIVE: Hidden Markov models (HMMs) provide interpretable, lower-dimensional temporal representations of data, allowing for missingness. This study aimed to investigate the HMM as a method for modeling smartphone time series data. METHODS: We applied an HMM to an aggregate dataset of smartphone measures designed to assess phone-related social functioning in healthy controls (HCs) and participants with schizophrenia, Alzheimer disease (AD), and memory complaints. We trained the HMM on a subset of HCs (91/348, 26.1%) and selected a model with socially active and inactive states. Then, we generated hidden state sequences per participant and calculated their "total dwell time," that is, the percentage of time spent in the socially active state. Linear regression models were used to compare the total dwell time to social and clinical measures in a subset of participants with available measures, and logistic regression was used to compare total dwell times between diagnostic groups and HCs. We primarily reported results from a 2-state HMM but also verified results in HMMs with more hidden states and trained on the whole participant dataset. RESULTS: We identified lower total dwell times in participants with AD (26/257, 10.1%) versus withheld HCs (156/257, 60.7%; odds ratio 0.95, 95% CI 0.92-0.97; false discovery rate [FDR]-corrected P<.001), as well as in participants with memory complaints (57/257, 22.2%; odds ratio 0.97, 95% CI 0.96-0.99; FDR-corrected P=.004). The result in the AD group was very robust across HMM variations, whereas the result in the memory complaints group was less robust. We also observed an interaction between the AD group and total dwell time when predicting social functioning (FDR-corrected P=.02). No significant relationships regarding total dwell time were identified for participants with schizophrenia (18/257, 7%; P>.99). CONCLUSIONS: We found the HMM to be a practical, interpretable method for digital phenotyping analysis, providing an objective phenotype that is a possible indicator of social functioning.