Qualcomm Replaces Apple with Amazon, But Margins Remain a Concern
Qualcomm's stock is undergoing significant changes as it loses Apple but gains Amazon. On September 8, Amazon signed a custom silicon and optical connectivity deal with Qualcomm, which will start generating revenue in the December quarter. The agreement includes warrants tied to up to $60 billion of purchases over 10 years.
Management has guided fiscal 2027 non-handset growth above 60% to replace Apple product revenue, while targeting $5 billion of data center revenue. This transition is expected to be a pause before Qualcomm's growth reaccelerates in fiscal 2028.
The main risk for the company is margin, as custom silicon is expected to drag QCT gross margin by 1.5 to 2 points. Gross margin recovery will be crucial in determining the success of Qualcomm's fiscal 2028 estimate, with the December quarter being a key test.