Qualcomm aims to generate $5 billion in data center revenue by fiscal 2027 as it pivots away from its reliance on Apple’s smartphone business. The company is also scaling its automotive and AI infrastructure segments to drive long-term growth. However, investors are watching closely as these new areas carry lower profit margins and face tough competition from major industry players like Nvidia and AMD.
Qualcomm is reshaping its business strategy as it prepares for a future with less revenue from its long-time partner, Apple. The company has set a goal to bring in $5 billion from data center products by fiscal 2027, with a longer-term plan to reach $15 billion by 2029. This strategic shift is designed to reduce the company's historical dependence on its smartphone chip business, which has seen declining income from Apple due to shifting device strategies.
To support this transition, the company is aiming for total non-handset revenue—which includes data centers, automotive, and other technology sectors—to reach $40 billion by 2029. The automotive segment is already showing signs of growth, reaching an annualized run-rate of $7 billion as of the end of the 2026 fiscal year.
This shift into data centers and custom silicon is a major undertaking that brings specific challenges for investors to track. Entering the data center market is currently creating pressure on the company's profit margins, causing a drag of about 1.5% to 2% on chip gross margins. To help manage these increased costs from manufacturing and memory, Qualcomm introduced double-digit price increases for its Snapdragon products, effective September 1, 2026.
Investors are also watching the competitive environment closely. The data center and AI infrastructure space is currently dominated by established players like Nvidia and AMD. Qualcomm’s ability to compete effectively in these markets while balancing its overall profitability will be a key factor for the company’s financial health in the coming years.
The primary monitorable for shareholders will be the speed of this diversification. With Apple’s reliance on Qualcomm chips expected to continue decreasing, the company must prove that its new investments in AI and data centers can reliably replace the high-margin revenue previously generated by its smartphone business. While Qualcomm has renewed a patent licensing agreement with Apple that runs until early 2027, the market is primarily focused on whether these new revenue streams can offset the reduction in handset-related income.