Qualcomm Sets $40B Non-Handset Revenue Target, Unveils Data Center Push

What happened

At its June 2026 investor day in New York, Qualcomm raised its fiscal 2029 non-handset revenue target from $22 billion to $40 billion and set a data center revenue goal of more than $15 billion, with $5 billion expected as soon as fiscal 2027. The company introduced a comprehensive data center product lineup including the Dragonfly C1000 CPU, AI accelerators (AI200), high-bandwidth compute memory architecture, and networking components. Meta Platforms signed a multi-generation agreement to use the C1000 processor across its server fleet starting in 2028. CFO Akash Palkhiwala projected the company would reach more than $18 in adjusted EPS by fiscal 2029. Qualcomm also announced plans to acquire Modular, an AI infrastructure software company, in a deal reportedly worth close to $4 billion. The company stated that by fiscal 2029, handsets would account for only about one-third of chip revenue, with automotive contributing over $10 billion and IoT businesses more than $14 billion.

Why it matters

This represents a fundamental shift in Qualcomm's business model at a critical juncture. The company faces existential pressure from two directions: Apple is transitioning to its own modems by 2027, eliminating a major revenue source, and the premium Android smartphone market has stagnated. The data center expansion offers Qualcomm a path to offset declining handset revenue while participating in the rapidly growing AI infrastructure market. The Meta partnership validates Qualcomm's technology and provides a marquee reference customer that could attract other hyperscalers. If successful, Qualcomm's non-handset business alone would approach the size of the entire company today, which generated about $44 billion in fiscal 2025. The high-bandwidth compute memory architecture, if proven effective, could provide a defensible technological edge in addressing power and cost challenges that constrain AI inference workloads.

Bigger picture

The AI infrastructure market is projected to grow from approximately $110 billion in 2025 to roughly $497 billion by 2030, with spending shifting from training to inference workloads where Qualcomm is focusing. Qualcomm's $15 billion data center target represents only a low-single-digit market share, making it an achievable goal without directly challenging Nvidia's dominance. The move positions Qualcomm against established data center processor makers including Intel, AMD, Arm Holdings, and Nvidia at a moment when hyperscalers are seeking power-efficient, customizable CPU options. The memory architecture targets a critical bottleneck in AI systems, as high-bandwidth memory (HBM) faces both cost and supply constraints. Qualcomm's entry adds competitive pressure in the data center CPU space while potentially disrupting the memory hierarchy that benefits suppliers like SK Hynix, Micron, and Samsung. However, Qualcomm still faces the challenge of overcoming Nvidia's software ecosystem, which has historically locked in developers regardless of silicon performance.

What to watch

Execution on the fiscal 2027 revenue ramp will be the first major test, as almost all products announced ship in 2027 and 2028. Watch for additional hyperscaler customer wins beyond Meta to validate market acceptance, and independent benchmarking of the high-bandwidth compute architecture against traditional HBM solutions. The Modular acquisition's integration will indicate whether Qualcomm can address the software ecosystem gap that has historically protected Nvidia's market position. Monitor whether the company achieves the projected $5 billion in data center revenue by fiscal 2027 and delivers the AI200 accelerator shipments in the second half of that year. The renewal of Qualcomm's licensing agreement with Apple remains uncertain and could impact overall financial projections. Watch for clarity on China-linked custom chip revenue given geopolitical risks, and track whether automotive and IoT segments meet their respective $10 billion and $14 billion fiscal 2029 targets.