Qualcomm NASDAQ: QCOM CFO and COO Akash Palkhiwala said the company’s newly announced multiyear agreement with Amazon represents a “landmark deal” for its expanding data-center business and supports its previously disclosed growth targets.
Speaking at the Goldman Sachs Communacopia + Technology Conference, Palkhiwala said the agreement includes multiple generations of customized silicon as well as optical connectivity products beginning with 1.6T technology and future generations. Qualcomm expects to begin recording revenue from Amazon in the December quarter and said it is already producing chips for the customer.
The transaction also includes a warrant agreement tied to Amazon purchases of up to $60 billion in Qualcomm data-center products over 10 years, according to Palkhiwala. He said roughly 15% of the warrants vest upfront based on Amazon’s initial commitments.
Data-center targets and product strategy
Palkhiwala said the Amazon relationship gives Qualcomm high confidence in its target of approximately $5 billion in data-center revenue for fiscal 2027, which begins shortly for the company. He also said the agreement should support strong year-over-year growth in fiscal 2028 and is among the core components supporting Qualcomm’s goal of $15 billion in data-center revenue in fiscal 2029.
Qualcomm’s data-center approach consists of four business areas, Palkhiwala said:
- Custom silicon for hyperscale customers
- AI accelerators
- Central processing units
- Connectivity products, including SerDes and optical connectivity
The company is also working with another global hyperscaler on custom silicon, he said. Qualcomm’s custom-chip capabilities draw on its compute and connectivity technologies, experience with advanced manufacturing nodes and high-yield production, according to Palkhiwala.
In AI accelerators, Qualcomm is initially targeting inference workloads, particularly memory-bandwidth-intensive decode tasks. Palkhiwala highlighted the company’s High Bandwidth Compute technology, which combines compute and memory through stacking. He said the technology is designed to deliver high bandwidth at low power and has received a positive response from customers.
Qualcomm is also bringing its CPU technology to data centers, where it has Meta as its first silicon customer. Palkhiwala said the company believes its products can provide strong performance per watt and performance per area. He said the CPU market opportunity has expanded to more than $200 billion annually and that Qualcomm sees about half of that market moving toward Arm architecture.
Software and power efficiency
Palkhiwala said Qualcomm’s acquisition of Modular addresses a key software need as the company expands in data centers. Modular’s software stack is designed to enable models to run across multiple silicon platforms, including those from NVIDIA, AMD and Qualcomm, without requiring developers to build separately for each architecture.
Qualcomm plans to use Modular as its software stack going forward and is pursuing an open-source approach for lower layers of the stack, Palkhiwala said. He compared the strategy to an Android-like model intended to make Qualcomm silicon more accessible to developers across both edge and data-center products.
He also said power constraints, wafer availability and memory supply are likely to shape the AI infrastructure market. Qualcomm’s longstanding focus on performance per watt could provide an advantage in a power-constrained environment, he said, while its manufacturing scale could also be strategically important.
Palkhiwala said AI computing will be distributed between cloud data centers and edge devices rather than concentrated solely in one environment. Qualcomm is developing AI accelerators for edge devices including smartphones, vehicles, PCs, industrial products and robotics.
Smartphones, automotive and wearables
On smartphones, Palkhiwala described the market as being in transition toward agentic and voice-first experiences. He said future devices could incorporate separate AI accelerators alongside main processors, increasing silicon content.
He said global smartphone volumes have declined by low-double-digit percentages over the past year, with the largest pressure affecting devices priced below $300 as memory costs rose. However, Qualcomm has seen limited impact at the premium end of the market, where it has its greatest presence.
Palkhiwala also pointed to personal AI devices—including smart glasses, watches, pendants, pins and dongles—as another opportunity. He said companies are developing devices that can see and hear what users do and serve as AI interaction points. Qualcomm is moving toward providing modules and systems-in-package for these products, integrating processing, connectivity, AI, memory and passive components.
In automotive, Palkhiwala said Qualcomm expects to become the largest chip supplier to the auto industry next year. He said the company’s automotive compute content has increased eightfold from its third-generation products to its fifth-generation products, supported by demand for AI, advanced driver-assistance systems and in-car voice interfaces.
Qualcomm has also shifted from selling individual chips toward selling modules and systems-in-package for automotive customers, he said. The company has accelerated its automotive revenue target timetable, originally targeting $10 billion in revenue by 2031 before moving that objective to 2029 and then earlier.
Margins and investment
Regarding financial implications, Palkhiwala said Qualcomm expects data-center gross margins to remain broadly in the range of current company margins. Custom products may carry lower margins, while merchant products could carry significantly higher margins, he said.
He added that operating margins should benefit as Qualcomm scales new businesses and leverages research and development investments across its product portfolio. The company has set a target of 30% operating margins three years out, with operating-expense increases expected to trail revenue growth, according to Palkhiwala.
About Qualcomm (NASDAQ:QCOM)
Qualcomm Incorporated is a global semiconductor and telecommunications equipment company headquartered in San Diego, California. Founded in 1985, the company is known for its development of wireless technologies and for playing a central role in the evolution of digital cellular standards, including CDMA and subsequent generations of mobile standards. Qualcomm’s business combines the design and sale of semiconductor products with a patent licensing program for wireless technologies and related intellectual property.
The company’s product portfolio includes system-on-chip (SoC) platforms marketed under the Snapdragon brand, cellular modem and RF front-end components, connectivity solutions for Wi‑Fi and Bluetooth, and processors and platforms aimed at automotive, IoT, networking and edge-computing applications.
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