Qualcomm's Apple Exit and Data Center Ambitions: A Mixed Bag for Investors
Qualcomm (QCOM) shares have plummeted by 32% over the past three months due to the contracting smartphone market and Apple's faster-than-expected exit from its iPhone business. The company has acknowledged that its share in the upcoming iPhone launch will be significantly lower than previously estimated, with Apple product revenue set to drop by around 50% from September to December.
Qualcomm's QCT ( Qualcomm Technologies) handset revenue was $5.1 billion in fiscal Q3 2026, accounting for roughly half of the company's total revenue of $9.9 billion. Management estimates that the earnings hit from the weaker handset market will exceed $1.50 per share for fiscal 2026, with QCT Android revenue down by 20% year-over-year.
However, Qualcomm is optimistic about replacing the lost revenue through its non-handset business growth, which is expected to accelerate from 24% in fiscal 2026 to over 60% in fiscal 2027. The automotive segment has already shown promising results, with $1.6 billion in revenue in fiscal Q3 2026 and 61% year-over-year growth.
The data center segment, on the other hand, comes with a margin discount, as custom silicon wins for global-scale hyperscalers begin generating revenue in the December quarter. Management expects these new revenues to carry a gross margin below the 48-50% range of the baseline business, which could drag QCT's weighted-average gross margin by 1.5-2%.