Qualcomm's Big Gamble: Data Centers and Cars to Offset Apple Loss

Qualcomm's recent financial performance shows a notable slowdown, with revenue growth decelerating significantly over the last twelve months and a clear downward trend in year-over-year quarterly sales. This shift from growth to shrinking sales presents a key risk for investors to evaluate.

The company's mobile segment, responsible for about half of its revenue, is under pressure. Management anticipates a 20% drop in Android chip revenue for 2026 compared to 2025, attributed to unprecedented memory prices and supply shortages affecting consumer electronics.

Adding to these challenges, Qualcomm's relationship with Apple is evolving faster than planned. The company now expects a materially lower share in new iPhone launches than its prior 20% estimate. For fiscal 2027, Apple product revenue is projected to be below its earlier guidance of a little over $2 billion, representing a substantial customer base whose contribution is rapidly decreasing.

To counterbalance these declines, Qualcomm is focusing on non-handset revenue streams. Automotive revenue reached a record $1.6 billion in fiscal Q3 2026, an impressive 61% increase year-over-year. The company aims for non-handset revenue to grow by more than 60% in fiscal 2027.

Data center revenue is a newer, less proven area of focus, with management targeting $5 billion in fiscal 2027. This includes custom silicon wins with major hyperscalers, though initial revenue is expected to run below baseline gross margins. The December quarter is set to be the first real test for this segment.