Here is the uncomfortable arithmetic behind Qualcomm’s best week in months. The company’s data center revenue is expected to be about $0.3 billion in fiscal year 2026. Its stated target is more than $15 billion by fiscal 2029. And Apple-related chip revenue is set to fall roughly 50 percent sequentially between Qualcomm’s September and December 2026 fiscal quarters, a sharper drop than Qualcomm had previously expected. Tuesday’s Amazon deal was real and significant. Whether it closes that gap is a separate question.
Qualcomm announced a partnership with Amazon Web Services on Tuesday to develop custom chips for AI data center infrastructure, sending the stock up sharply in early trading. The two companies will work together across multiple generations of customized silicon, with a focus on inference workloads. The agreement also covers optical connectivity extending to 1.6 terabits per second, drawing on the SerDes and optical DSP technology Qualcomm gained through its acquisition of Alphawave IP Group plc, which Qualcomm says closed on December 18, 2025. Shares added another 1.3 percent on Wednesday, finishing at $176.40.
The AWS agreement gives Qualcomm a second major anchor customer alongside Meta, one with a capital spending budget for AI infrastructure that is measured in the tens of billions of dollars per year. The structural detail that matters most: Amazon received a warrant to acquire up to 25 million Qualcomm shares, with the shares vesting in tranches tied to Amazon purchases of up to $60 billion of Qualcomm data center chips and related products and services through September 2036. That figure represents the maximum purchases connected to the warrant’s vesting conditions rather than booked revenue or committed orders.
Custom AI chip design is not an open market. Broadcom and Marvell are widely viewed as leading players in hyperscaler custom silicon co-design. Qualcomm is entering late, as an underdog with a credible power-efficiency argument and two anchor customers, but no shipped data center revenue yet worth mentioning. The company’s own projection calls for $5 billion in data center revenue in fiscal 2027 and more than $15 billion by fiscal 2029. Qualcomm’s CFO Akash Palkhiwala said the company has “very high confidence” in the fiscal 2027 figure.
The handset business, meanwhile, is deteriorating faster than expected on two fronts. Qualcomm’s handset division generated $5.09 billion in fiscal Q3 2026, a 20 percent drop from the same period last year. On top of volume pressure, Qualcomm has said Apple is moving faster than expected toward its in-house modem, accelerating the step-down in Qualcomm’s Apple-related revenue. Lost Apple modem revenue is estimated at $5.7 billion to $5.9 billion annually.
The strategic case that Qualcomm can absorb the Apple departure rests on a single claim: combined non-handset revenue growth is forecast to exceed 60 percent in fiscal 2027, with Qualcomm now targeting $40 billion in total non-handset revenue by fiscal 2029, up from a prior target shared in November 2024. Automotive is the lower-risk leg of that plan. In the latest quarter, Qualcomm’s automotive segment delivered record revenues with 61 percent year-over-year growth.
The bull case is that AWS validates a technology platform that Broadcom and Marvell do not offer at Qualcomm’s power-efficiency level, and that two named hyperscalers before a single chip ships is a genuine moat in formation. At a forward price-to-earnings ratio of about 16, Qualcomm trades at a discount to AI-focused peers like Broadcom and Marvell, giving it significant re-rating potential if execution matches guidance.
The bear case is timing. The Amazon collaboration advances the roadmap without yet producing a disclosed product or revenue. Data center chips are a multi-year development cycle, Apple is leaving faster than planned, and handset pricing power is deteriorating. The $60 billion warrant ceiling tells you what the relationship could eventually be worth. The December quarter revenue guidance tells you where Qualcomm actually stands today.
Watch the fiscal Q4 earnings call in late October or early November for the first concrete data point on whether data center revenue is tracking toward that $5 billion fiscal 2027 target. If the number is on pace, the re-rating thesis has legs. If it is not, two customer announcements will look exactly like what skeptics already suspect: a long list of promises that the income statement has not yet confirmed.