Qualcomm targets $5 billion data centre revenue next year as Apple business shrinks

Qualcomm expects data centre revenue to jump sharply next year as it expands into CPUs, AI accelerators and custom chips while reducing its dependence on smartphones.

By Ashmit Kumar

Qualcomm expects its data center business to generate about $5 billion in revenue next year (FY28), sharply up from $300 million this year, as the chipmaker expands into custom chips, CPUs, AI accelerators and connectivity.

Speaking to CNBC-TV18, Akash Palkhiwala, CFO & COO, Qualcomm Inc, said the company sees a roughly $1 trillion total addressable market in data centers and has an aspiration to capture 5% of it, equivalent to $50 billion.

“This market is expanding in a big way,” Palkhiwala said, adding that customers are looking for alternative suppliers with technology expertise and scale.

Qualcomm's data center offering will span connectivity, custom chips, CPUs and AI accelerators. Palkhiwala said the sharp increase in the revenue target reflects the traction the company is seeing with customers.

Qualcomm sees shift towards specialised AI computing

Qualcomm is seeking to build a position in an AI accelerator market dominated by Nvidia's GPUs, with Palkhiwala pointing to a shift towards more specialised and disaggregated computing.

Rather than using a GPU for every workload, data centers could increasingly use solutions optimised for specific tasks, including prefill and decode during inference, he said.

Palkhiwala said Qualcomm's experience in delivering high performance at low power on edge devices could give it an advantage as power consumption becomes an important consideration for data centers.

“We have also developed this technology called high-bandwidth compute, which allows us to deliver a solution that has very high memory bandwidth,” he said.

Qualcomm believes this combination of low-power computing and high memory bandwidth can address key requirements for data center customers.

Apple revenue to decline over next 12-18 months

Qualcomm expects revenue from Apple to decline over the next 12 to 18 months, but Palkhiwala said the company expects to replace the decline with growth in data centers and automotive.

“Within the next 12 months, we expect to replace all of it with growth in data center and automotive,” he said.

The expected decline in Apple revenue comes as Qualcomm seeks to expand its business beyond smartphones and build new growth engines in data centers and automotive.

Automotive business seen at $10 billion by 2029

Qualcomm expects its automotive business to exit the current fiscal year at a run rate of around $7 billion and has outlined an opportunity to reach approximately $10 billion in 2029.

Palkhiwala said demand for technology in vehicles is rising across connectivity, cockpit systems and advanced driver-assistance systems. Qualcomm is leveraging technology developed for smartphones while adding customised solutions for automotive applications.

The company is working with major Indian automakers including Mahindra, Tata and Maruti.

Palkhiwala said the amount of silicon required in vehicles is likely to increase as cars incorporate more capabilities. Qualcomm is also combining its chips with software solutions for the automotive market.

Qualcomm passing higher component costs to customers

Qualcomm has been raising prices as costs across the semiconductor supply chain increase.

Palkhiwala said demand is significantly higher than supply, resulting in high utilisation rates at foundries as well as test and packaging facilities. The company has also seen higher costs from suppliers.

Qualcomm is seeking to pass those increases on to customers. Palkhiwala said many customers understand the conditions in the industry and the reasons behind the company's price increases.

Agentic AI central to Snapdragon strategy

At the Snapdragon Summit, Qualcomm highlighted agentic AI as a central theme for its consumer technology strategy.

Palkhiwala said AI is moving from a question-and-answer model towards agents capable of performing tasks for users. These agents could use information from a device, including location, user data and sensors, to carry out tasks.

Qualcomm expects these technologies to be deployed across smartphones, PCs, wearables, automotive, industrial applications and data centers, with hundreds of millions of devices expected to use its Snapdragon platform over the next couple of years.

Palkhiwala said he did not expect the debate around AI safety to impede adoption, arguing that it could help ensure the technology is deployed responsibly.

He said Qualcomm itself uses about 4 trillion AI tokens a week for applications including software development, chip design and customer support, and believes there is a long runway for additional enterprise use cases.

Qualcomm has around 20,000 engineers in India

India remains an important R&D base for Qualcomm, with approximately 20,000 engineers working in the country, according to Palkhiwala.

The company has development centres in Bengaluru, Hyderabad, Chennai and Delhi, which he said are a core part of Qualcomm's engineering organisation.

Qualcomm is also engaging with the Indian government on the country's semiconductor programme and has held discussions with Minister Ashwini Vaishnaw and companies including Tata.

Palkhiwala said Qualcomm is already engaging with Tata and other companies to leverage manufacturing capacity being built in India and remains interested in participating in the next stages of the programme.