Qualcomm's Shift Beyond Smartphones Faces Near-Term Challenges

Qualcomm Inc. is accelerating its expansion beyond smartphones into artificial intelligence data centers, but executives cautioned that the transition will take time amid industry-wide supply constraints, Janet H. Cho reported for Barron's Daily.

Qualcomm continues investing in artificial intelligence as it works to reduce its dependence on smartphone chips. [Image: Qualcomm Facebook]

The company reported third-quarter profit below analysts' expectations, although revenue exceeded forecasts.

Revenue from Qualcomm's semiconductor segment—which includes smartphone, automotive, and Internet of Things (IoT) chips—declined 5 percent year over year to US$8.5 billion, while earnings before tax fell 18 percent to US$2.19 billion.

Handset revenue dropped 20 percent, but automotive revenue increased 61 percent, while IoT revenue rose 9 percent.

Chief Executive Cristiano Amon said Qualcomm remains well positioned to achieve its long-term strategy, targeting US$40 billion in annual non-handset revenue by fiscal 2029.

The company expects growth in non-handset businesses—including AI data centers—to accelerate from 24 percent in fiscal 2026 to more than 60 percent in fiscal 2027.

Qualcomm also completed its acquisition of AI infrastructure software company Modular Inc., saying the deal establishes an open software foundation for generative and agentic AI applications.

Management said rising costs across the semiconductor industry are likely to be reflected in product pricing.

The company also expects revenue from Apple-related business to decline more rapidly because of supply constraints, with Qualcomm's modem share in the next iPhone launch projected to fall below its previous estimate of 20 percent.