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Semiconductors · #83 in the Retail 100

Qualcomm

QCOM
Bond yields highest since 2002↓The memory chip shortage↓
Our rating
hold
12-month target
$185.44 +14.4%
Expected vs. S&P 500
-1.9 ptsSee the math
Next earnings
Nov 4In -1 days

Qualcomm is replacing lost iPhone chip sales partly with data center chips, which its CFO says earn below its usual margins, so revenue can recover before profit does.

Summary

Qualcomm earns most of its money selling Snapdragon chips to phone makers and collecting royalties on their phones. That core is shrinking for now: AI data centers bought up memory chips, which made phones costlier and cut orders, and Apple is replacing Qualcomm modems with its own. Car and device chips are growing fast, and licensing still throws off high-margin cash. The stock depends on a data center business that barely exists today growing fast enough, at decent margins, to fill the Apple gap.

$164.51
-$16.21 (-8.97%)Past year
What Qualcomm does

Qualcomm designs the Snapdragon chips inside most premium Android phones and collects a royalty on nearly every phone with cellular service. Phones still bring in most of its sales, so profits follow the phone market.3,1,5

What it sells

  • Phone chips63% of revenue, FY2025

    Snapdragon processors and modems for Android phones, plus modems for iPhones, which Apple is replacing with its own designs.

  • Car and device chips24% of revenue, FY2025

    Chips for car dashboards and driver assistance, laptops, headsets and factory equipment. The fastest-growing part of the company.

  • Patent licensing13% of revenue, FY2025

    Royalties phone makers pay to use Qualcomm's cellular patents. Small in sales, but about 72 cents of each dollar becomes pretax profit.

  • Data center chips

    Server processors and custom AI chips for cloud companies such as Amazon and Meta. A new business with little revenue so far.

Who buys it

Phone makers. Apple, Samsung and Xiaomi each bought more than 10% of fiscal 2025 revenue, and the top two were about a fifth each. With Apple leaving, Qualcomm is leaning on Android makers, carmakers and cloud companies.

Where you've seen it

The Snapdragon name on Samsung Galaxy phones and some Windows laptops; its modems sat inside recent iPhones too.

How the business makes money

The backstory

For years Apple bought Qualcomm modems for most iPhones, on top of paying patent royalties. A Bernstein analyst put those chip sales near $7.5B in fiscal 2026, a figure the CFO called fair, and most disappear in fiscal 2027. In 2026, costly memory chips also cut Android phone orders. CEO Cristiano Amon's answer is to sell outside phones: chips for cars and devices and, since 2025, server and AI chips for cloud companies.

Qualcomm designs chips that TSMC and Samsung build, and licenses the cellular patents every phone needs. It is now reusing the same chip designs to sell into cars and data centers.1,2,3,5,6,7,8,9,10

  1. 1 · Core salesPhone chipsAndroid makers buy Snapdragon to compete with the iPhone. Qualcomm only designs the chips, so it needs no factories of its own.
  2. 2 · TollPatent royaltiesAlmost every phone maker pays a royalty for Qualcomm's cellular patents, even when it buys another company's chips.
  3. 3 · ReuseCars and devicesThe same designs, reworked for car dashboards, driver assistance and laptops, add sales from research Qualcomm has already paid for.
  4. 4 · Next betData centersLow-power phone know-how goes into server and AI chips. Custom-chip revenue from two cloud giants starts in the December quarter; Meta's CPUs follow in 2028.
  5. 5 · PayoutBuybacksCash goes back to shareholders. Qualcomm spent $6.8B buying back stock in nine months, so each remaining share earns more.

Advantages

Patents nearly every phone pays for

Major advantage

The most durable advantage. Qualcomm licenses its cellular patents to almost every phone maker and keeps most of each royalty dollar as pretax profit. That income does not depend on who wins the chip sale, so it holds up when a customer like Samsung uses its own chip.1,3

The default chip for premium Android

Strong advantage

Strong but contested. Snapdragon powers most premium Android phones, where buyers pay for speed and battery life. MediaTek ships more chips overall, but mostly into cheaper phones, the segment rising memory costs hit hardest.11

A head start in car computers

Strong advantage

Strong and growing. Carmakers pick a chip years before a model launches, so today's wins set revenue for years. Higher-value driver-assistance chips are lifting what Qualcomm earns per car, not just how many cars it is in.1,2

Low-power design for data centers

Supporting

Promising but unproven. Qualcomm says its Dragonfly server CPU does more than twice the work per watt of competing chips, which matters where electricity limits AI data centers. No independent test has confirmed it, and the chip only ships in 2028.8,9

What's changing

The hand-off year from phones to data centers

At its June investor day Qualcomm named Meta as a server CPU customer and raised its fiscal 2029 targets. In September Amazon signed a server chip deal. But Qualcomm's share of this fall's iPhones came in well below the 20% it expected, partly because of its own supply limits, so Apple chip revenue roughly halves this quarter, just as data center revenue first arrives.4,5,6,8,9,10

Competitors

Who else an investor would consider, and how they compare.

CompanyMarket valueWhat it doesCompared with Qualcomm
Qualcommthis stock
$175.67B
Qualcomm designs the Snapdragon chips inside most premium Android phones and collects a royalty on nearly every phone with cellular service. Phones still bring in most of its sales, so profits follow the phone market.
MediaTek (Taiwan-listed)private—Taiwanese designer of cheaper phone chips, mostly for mid-range and budget Android phones.MediaTek ships more phone chips; Qualcomm owns the premium tier and collects royalties.11
AppleAAPL—Designs its own iPhone processors and now its own modems, built to replace Qualcomm's.Apple was Qualcomm's biggest modem buyer and is becoming its own supplier.5,11
BroadcomAVGO
$1.57T
Designs custom AI chips for Google and other cloud giants, plus data center networking.Broadcom leads custom AI chips today; Qualcomm is a newcomer selling lower power use.14
NVIDIANVDA
$5.31T
Sells complete AI systems, its GPUs plus networking and software, to every cloud.NVIDIA dominates AI computing; Qualcomm pitches cheaper, lower-power chips for running AI models.15