Qualcomm (NASDAQ: QCOM) is facing a significant revenue blow as Apple (NASDAQ: AAPL) moves to replace Qualcomm modems with its own in-house silicon, threatening one of the chipmaker’s most valuable business lines.
On its fiscal third-quarter earnings call, Qualcomm management warned that its share of upcoming iPhone launches would be “materially lower” than a prior 20% estimate, with Apple product revenue expected to fall roughly 50% in the September-to-December quarter.
Into that widening gap steps Amazon (NASDAQ: AMZN), which announced a multi-generational product collaboration with Qualcomm on September 8, 2026, focused on building next-generation AI data center infrastructure.
Warrants issued to Amazon as part of the deal could be worth approximately $4 billion if commercial milestones are reached, though that figure represents a performance-contingent ceiling rather than confirmed cash paid or revenue booked.
Qualcomm trades near $176.40 with a market capitalization of around $188.4 billion, and investors are now weighing whether the Amazon partnership is substantial enough to offset the Apple-shaped hole in its financials.
Qualcomm’s data center play centers on inference-oriented custom silicon, high-bandwidth compute AI accelerators, CPUs, and optical connectivity, deliberately avoiding a direct confrontation with NVIDIA in the training accelerator market.
CEO Cristiano Amon said on the Q3 call that Qualcomm has two custom silicon engagements with “global scale hyperscalers,” both with purchase orders in hand and wafer production already underway, with initial Amazon-related revenue expected in the December quarter.
Qualcomm is targeting $5 billion in data center revenue in fiscal 2027, scaling to $15 billion by fiscal 2029, as part of a broader goal to reach $40 billion in non-handset revenue by that same year.
Management stated that fiscal 2027 non-handset growth is expected to “replace the entire Apple product revenue within the year,” a bold projection that depends heavily on execution in a market already crowded with entrenched rivals.
The margin picture complicates the optimism, with Amon telling analysts the initial data center ramp will be “significantly lower” margin than baseline, trimming QCT weighted-average gross margin by 1.5 to 2%, against a consolidated gross margin currently sitting near 55.4%.
Competition is fierce, with Broadcom (NASDAQ: AVGO) and Marvell (NASDAQ: MRVL) already shipping custom ASICs and optics to hyperscalers at scale, while AMD continues to expand its MI-series accelerator lineup and NVIDIA dominates the training segment.
Qualcomm’s differentiation rests on power efficiency inherited from its mobile heritage, an open software stack anchored by the completed Modular acquisition, and Alphawave-derived SerDes IP for connectivity solutions.
The warrant structure means Amazon holds the optionality while Qualcomm carries the execution risk, a dynamic reflected in analyst sentiment showing 27 downward EPS revisions for fiscal 2027 against just three upward in the trailing 30 days.
QCOM shares are up 13.52% over the past year and trade at a forward price-to-earnings ratio of 17x, with an average analyst price target of $193.90, suggesting modest upside if the data center thesis materializes.
Automotive revenue offers some genuine ballast, with 61% year-over-year growth and an updated $7 billion exit run rate providing a more established diversification channel while data center ambitions are still being proven out.
The Apple runoff and margin compression represent near-certain headwinds, while the Amazon offset remains contingent on milestones not yet demonstrated in production, making December-quarter data center revenue and HBC Gen 1 performance the critical data points for investors to monitor.
