Qualcomm won’t be a big datacenter player anytime soon

Qualcomm has predicted its entry to the datacenter market will yield $15 billion of annual revenue by FY 2029 – huge growth, but also a modest number compared to its more established rivals. The chip design firm dangled the $15 billion figure on Wednesday along with its Q3 results, which included a warning that revenue from its business selling modems to Apple is about to crater. Execs told investors that supply chain constraints mean Qualcomm expects “an acceleration in the step down of Apple product revenues” as its contribution to the next iPhone “is expected to be materially lower than our prior estimate of 20 percent.” Apple has spent years working on its own modems, a shift Qualcomm has long acknowledged. Now the House of the Snapdragon has advised investors to expect less than $2 billion in sales to Cupertino next year. “This obviously accelerates kind of the exit of Apple revenue out of our model,” said CFO Akash Palkhiwala. Qualcomm has a plan to replace Apple’s cash, by diversifying away from smartphones. Execs said the company thinks it will sell $40 billion a year of products not tied to handsets in FY 2029, with $10 billion of automotive sales and revenue from internet of things devices hitting $14 billion. The company sold $3.3 billion on non-smartphone kit in Q3 and previously forecast $22 billion of non-phone revenue in 2029. Growing its datacenter business from zero to $15 billion in a few years is impressive, but it’s worth comparing Qualcomm’s plans to current results from its rivals like AMD and Intel, both of which won over $16 billion in datacenter revenue in FY 25 and are growing fast. And then there’s Nvidia, which is on track to post over $250 billion annual datacenter revenue. Qualcomm’s datacenter products compete directly with AMD and Nvidia. $15 billion of annual revenue in 2029 will mean Qualcomm is a minor player, suggesting its focus on cheaper inferencing won’t have wide appeal. Execs could at least point to initial sales of datacenter kit arriving just in time to replace revenue it used to win from Apple. On the company’s earnings call, Qualcomm CEO and president Cristiano Amon foreshadowed price rises across the company’s range and said he doesn’t expect that decision will hurt the already-depressed smartphone market. “Even a double-digit price increase, which is just a pass-through of the input costs increase and wafer price increases, it actually is small when you compare it to the order of magnitude of the memory bill of materials,” he said, after blaming slow handset sales on the cost of RAM. Indeed, Qualcomm is banking on increased revenue from sales of its products for use in Android handsets, helped by a resurgent Chinese market. Amon thinks Middle Kingdom smartphone sales will rebound now that vendors have sold all the stock they warehoused and are set to launch new models featuring agentic AI. Q3 revenue came in at $9.95 billion, a four percent year-over-year dip. Net income fell 25 percent to $2 billion. Those figures weren’t far off the company’s predictions. Qualcomm’s share price dropped by about five percent in after hours trading. ®