A photo of a corporate Qualcomm sign by JHVEPhoto via Adobe Stock Qualcomm (QCOM) stock rose 3.2% on Sept. 8 after the chipmaker announced a partnership with Amazon (AMZN) focused on customized AI data center silicon. The agreement could generate up to $60 billion in revenue opportunities over the next decade, giving Qualcomm a new…
A photo of a corporate Qualcomm sign by JHVEPhoto via Adobe Stock
Qualcomm (QCOM) stock rose 3.2% on Sept. 8 after the chipmaker announced a partnership with Amazon (AMZN) focused on customized AI data center silicon. The agreement could generate up to $60 billion in revenue opportunities over the next decade, giving Qualcomm a new growth avenue as revenue related to Apple (AAPL) declines.
Qualcomm is strengthening its position in the fast-expanding artificial intelligence (AI) infrastructure market through a multi-year partnership with Amazon. The companies plan to develop customized silicon for large-scale AI data centers. Moreover, the partnership also includes work on optical connectivity technologies, along with solutions designed for future generations of AI infrastructure.
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Amazon Deal Comes as Qualcomm Faces Smartphone Weakness
The agreement comes at an important time for Qualcomm, as the company faces weakness in its CDMA Technologies (QCT) business and a slowdown in the smartphone market.
Qualcomm reported $9.9 billion in revenue for the third quarter of fiscal 2026, down 4% year-over-year (YoY). QCT revenue declined 5% to $8.5 billion, with the handset business emerging as the largest area of weakness. Handset revenue fell 20% during the quarter.
The broader Android smartphone market has been under pressure. Rising demand for AI infrastructure and high-bandwidth memory (HBM) has redirected memory capacity toward data center applications, contributing to higher component costs for smartphone manufacturers. At the same time, soft consumer demand has weighed on smartphone shipments. Several Android device makers, particularly those based in China, have responded by reducing production.
Despite the challenging environment, Qualcomm’s management expects handset revenue from Chinese original equipment manufacturers (OEMs) to improve sequentially from the fourth quarter, providing some relief to the struggling handset business.
However, declining Apple-related business remains a significant headwind. It has historically benefited from its relationship with the iPhone maker. Qualcomm expects the decrease in Apple-related revenue to accelerate beginning in the fourth quarter of fiscal 2026. Supply constraints and an expected transition in Qualcomm’s role across Apple’s product portfolio are likely to accelerate the decline.
Against this backdrop, the Amazon agreement gives Qualcomm a significant new growth avenue in AI infrastructure while strengthening its efforts to diversify its revenue base.
Solid Growth Opportunities Ahead
Qualcomm’s ongoing efforts to diversify its revenue and gain share in the AI infrastructure space provide a solid base for long-term growth. While the chipmaker could face short-term challenges, its growth prospects remain solid.
The company is gradually reducing its dependence on the smartphone market by expanding into high-growth areas, including data centers, automotive, and IoT. At the same time, its handset business is likely to stabilize, with increasing AI integration in smartphones driving the upgrade cycle.
QCOM’s most significant growth opportunity is beyond smartphones. It expects non-handset QCT revenue to surpass $40 billion by fiscal 2029, up from its earlier target of $22 billion. Automotive and IoT are expected to account for more than $24 billion of that total, while the data center business could generate over $15 billion.
Data centers are a key part of Qualcomm’s long-term expansion strategy. The company intends to build its presence in the market progressively, beginning with connectivity solutions in fiscal 2026. Custom silicon and AI accelerator offerings are expected to follow in 2027, with server CPUs planned for 2028.
Qualcomm has already moved its first two custom silicon programs into wafer production, with revenue generation expected to begin in the December quarter. Beyond their initial financial contribution, these projects could help Qualcomm establish deeper, longer-term relationships with customers as demand for AI infrastructure continues to accelerate. It is also targeting approximately $5 billion in data center revenue by fiscal 2027.
Overall, Qualcomm’s evolving revenue mix points to strong growth ahead. By fiscal 2027, non-handset operations are expected to account for more than half of QCT revenue, increasing to approximately two-thirds by fiscal 2029. The transition will help Qualcomm gain share in faster-growing technology markets.
Is Qualcomm Stock Stock a Buy Now?
While Qualcomm’s stock faces near-term pressure from declining Apple-related revenue and weakness in the smartphone market, its long-term growth prospects are improving significantly. The Amazon partnership provides a significant growth opportunity, while expanding automotive, IoT, and custom AI chip businesses should further diversify Qualcomm’s revenue base.
With non-handset operations expected to become the majority of QCT revenue and data center revenue projected to grow rapidly, Qualcomm is well-positioned to benefit from secular growth in AI infrastructure.
Analysts maintain a “Moderate Buy” consensus rating on QCOM stock due to near-term challenges. However, Qualcomm’s revenue diversification and growing exposure to high-growth markets support a “Buy” rating.
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On the date of publication, Amit Singh did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
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