Amazon Offers Qualcomm $60 Billion Escape Route Amid Apple Losses
Qualcomm is facing significant revenue losses as Apple shifts to in-house modems for its iPhone lineup. The company's share of upcoming iPhone launches will be 'materially lower' than previously estimated, with Apple product revenue expected to fall roughly 50% from the September-to-December quarter.
However, Qualcomm has secured a $4 billion deal with Amazon as part of a multi-generational product collaboration to build next-generation AI data center infrastructure. This move is aimed at generating $5 billion in replacement revenue by fiscal 2027 and scaling up to $15 billion by fiscal 2029.
CEO Cristiano Amon stated that Qualcomm has two custom silicon engagements with global scale hyperscalers, both with purchase orders in hand and wafer production started. The initial data center ramp is expected to be 'significantly lower' margin than baseline, trimming QCT weighted-average gross margin by 1.5 to 2%.
The deal also includes performance-contingent warrants worth up to $4 billion if commercial milestones are reached. However, analysts have cut their fiscal 2027 EPS estimates for Qualcomm by 27 against just three upgrades in the trailing 30 days.