Qualcomm Targets $650M in Data Center Revenue, Names Amazon

Qualcomm expects to generate over $650 million in data center revenue for the October to December quarter, the first in which this business is reported within its QCT chip division. The projection was announced with the fiscal year 2026 fourth-quarter results released on November 4, and included a name the company had previously withheld: according to the conference call summaries, Cristiano Amon identified Amazon as one of two custom silicon hyperscale customers.

The company reiterated its goal of $5 billion in data center revenue for fiscal year 2027 and anticipates growth each quarter, aiming to exit the year with an annualized rate of $7 billion. Customized accelerators began shipping in October, and connectivity solutions with AWS are expected to gain traction later in November, according to Amon.

The Quarter and Guidance

In fiscal year 2026, GAAP revenue totaled $43.1 billion, with a GAAP earnings per share of $12.70, according to the company’s statement. For the first quarter of fiscal year 2027, Qualcomm projects revenue between $10.4 billion and $11.2 billion and adjusted earnings per share of $2.15 to $2.35. The midpoint revenue estimate of $10.8 billion exceeds the LSEG consensus of $10.48 billion; the earnings estimate of $2.25 is below the expected $2.27.

The variance between the two figures represents the transition costs. Qualcomm guided QCT operating margin to be between 20% and 22%, with 3 percentage points consumed by data center investments before the revenue matures. The company also cited rising costs for wafers, testing, advanced packaging, and memory, without relief expected before the second half of fiscal year 2027. Management stated that custom silicon contracts should enhance QCT operating margins but dilute gross margins, which is typical for designing chips on demand for a client with bargaining power.

Why Naming Amazon Matters

Until the previous quarter, Qualcomm referred to a "leading hyperscaler" without identifying it. With Amazon named, the market can compare this bet to existing players: AWS internally designs the Graviton processors and Trainium accelerators, and purchases GPUs from Nvidia. Qualcomm's entry occurs in the realm of custom accelerators and connectivity, where Broadcom and Marvell dominate ASIC contracts for hyperscalers.

According to conference call summaries, there is a third customer in advanced discussions for custom silicon aimed at ramp-up in 2028 and 2029. The company did not disclose this customer's identity.

Mobile Still Footing the Bill

The smartphone business continues to face pressure. Licensing revenue (QTL) dropped by 7% to $1.3 billion, and memory shortages impacted Android device sales, according to the earnings coverage. For the current quarter, QTL has been guided between $1.3 billion and $1.5 billion, and QCT between $9.0 billion and $9.6 billion. Despite exceeding $650 million, the data center segment represents about 7% of the guided chip revenue for the period.

The interpretation shifts depending on the market. In the U.S., Qualcomm ceases to be merely a modem supplier for Apple, a customer that has been internalizing the component, and begins to compete for cloud capex budgets. In China, where Android manufacturers like Xiaomi, Oppo, and Vivo account for a substantial portion of Snapdragon purchases, memory constraints increase the final device cost and reduce volume. In South Korea, Samsung and SK Hynix capture margins that high memory prices take away from those assembling the phones. For the corporate cloud buyer, in any country, the entry of another custom silicon supplier into AWS enhances the competition in the layer that defines the cost per inference.

The most useful comparison is not with Nvidia. It's with Broadcom, which took years to turn ASIC contracts with Google and Meta into a predictable revenue stream. Qualcomm promises to follow a similar path in 12 months, scaling from $650 million to an annual rate of $7 billion. Guidance on margins shows that the company is already investing in this ramp-up before realizing it, and the next two quarters will reveal whether Amazon is the first of several clients or the only significant one.