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Qualcomm (QCOM) stock returned 4.5% over the past year, trailing the 15.1% return for the S&P 500. Sales are also under pressure, as revenue fell 4.0% from a year earlier in fiscal Q3 2026, and management expects the handset market to shrink in 2026. The company does have a new business that is due to generate its first sales within months. So what is Qualcomm building, and is there any early sign that it works?
Qualcomm Already Has Orders For Data Center Chips
Qualcomm is entering the data center chip market. Management said on a July 29, 2026 call that the timing is logical. The company has secured two custom chip customers, both of which management describes as global-scale hyperscalers.
That effort is moving beyond the planning phase. Management said Qualcomm already holds purchase orders from both customers and has started manufacturing the wafers, and that revenue from both starts in the December quarter. The early proof of progress comes from orders and production rather than actual sales.
The company has also acquired software for the new business. Qualcomm closed its acquisition of Modular Inc. on the day of the July call. Management said Modular strengthens the company’s ability to deliver an end-to-end software stack for data center customers.
How Big Could Qualcomm’s Data Center Sales Get?
Management targets data center revenue of $5 billion in fiscal 2027, rising to $15 billion in fiscal 2029. The fiscal 2029 target represents about a third of the $44.1 billion Qualcomm sold over its last twelve months, so the data center business would be far more than just a side project. The segment also factors into a broader upward revision. Management lifted its fiscal 2029 target for sales outside phones to $40 billion, up from $22 billion. These figures remain management targets, not achieved results.
You are not paying a premium for them. Qualcomm trades at 19.7 times its earnings over the last twelve months, compared with 23.0 for the S&P 500, suggesting the price assumes less growth than the broader market. The shares have also lost ground since the spring. On October 22, the stock closed 30.5% below its highest close of the past year, which was reached on May 29, 2026.
What Must Go Right For Qualcomm In Data Centers?
Once the first sales arrive, the business must continue to grow. Management said on the July 29 call that investors should expect a ramp through the year.
Qualcomm is carrying costs before that revenue materializes. On the July 29 call, management forecast non-GAAP operating expenses, its own measure, of about $2.7 billion for fiscal Q4 2026, a quarter that has since ended. Management said the figure reflected the Modular deal and investment in data center products ahead of the revenue ramp.
