Qualcomm Jumps on $15B Data Center Sales Projection

Yeah, very good. Happy to talk to both of you guys. Look, this is an exciting time, especially because we kind of upgraded our knowing the handset revenue as we've been diversifying the company from 22 to 40 and entered the data center market, and $5 billion in fiscal 27. It's a high confidence number that we have based on customer engagements. We have right now most of the revenue from customer engagement that expanded since the acquisition of Alpha Wave. And you started to see in their revenue some of this innovative technology. We came up with accelerators that don't require HBM memory; it's our high bandwidth compute. And as we keep executing on those customers, we're excited to see that revenue going to about $15 billion in fiscal 29.

Look, the $5 billion, as I said, I'll give you the composition. I think what I can say right now, as you would expect, a lot of those contracts are governed by non-disclosure. We have one large hyperscale customer in the United States, one large hyperscale customer in China, and then we have some other engagements that we had on a data center that all go into the $5 billion. So the $5 billion is a very high confidence forecast to which we have the customers, the capacity, the memory allocation, and everything as we think about the engagement we have today. And also we talk about a contract that we have with Meta also for two generations of the CPU, especially as we position ourselves for the generic CPU opportunities that those engagements are into. The $15 billion numbers for Qualcomm as a new entrant, those are great numbers. But really, when you look at the scale of what's happened in the data center, you would imagine as we execute and we show a differentiation, there could be upside, but we just focus on the engagements we have today.

Yeah. Look, the circumstances, I think when we started on this CPU, actually, I know people talk about data centers in general terms, but we actually started a long time with an ARM-compatible CPU very early. There was a big software barrier. This is before AI, and at the time, the market wasn't ready for it, only to later. So it was probably the right decision for Qualcomm at the time. This is a different conversation. It's a different data center right now. This is about AI. But it's a valid question. So I will give you the same answer that I gave when we entered the automotive business, when we entered the industrial business, and everything that we have been doing to diversify the company. Those are fast-moving markets now changing with technology. So where we really focus is not what the data center is doing today, but what the data center is going to be doing tomorrow. The data center is now moving to a gigantic... That's why you see CPU companies on the rise. You see demand on the rise in the data centers. Being disaggregated is not one single GPU that does everything. You have different hardware, and we're coming out with a comprehensive portfolio. We have a CPU, we have a new memory solution that is not a memory, so from the memory providers actually been designed by Qualcomm that doesn't require HBM. We have a different accelerator for the disaggregated compute. And we have our semiconductor scale which is good for customizing. So that's what we're doing. And if technology matters and you have fast innovation cycles, there's room for Qualcomm.

What? We're still not commenting on it, but I will tell you that, like everybody else that has a significant portion of their data center revenues also with customers in China, there's a very clear set of regulations and specifications that you have to follow, and you should expect Qualcomm is complying with those. And I think there are different types of products that are destined for China, and those are the ones that we are shipping to our China customers.

Absolutely not. Look, I get this question all the time, and I think if that was true, Qualcomm would not diversify from phones and enter the automotive industry, into the industrial, into the robotics, into the broadband. And I actually believe it's exactly what I said before. I'm going to give you a simple answer. There are vectors of differentiation. Accelerator. First of all, we know that power matters. If you look at the demand that exists in the data center right now, it's a demand that's going like this, and the energy available is like this. So that's perfect for Qualcomm because what we do is very power efficient. We design our technology always thinking there's going to be a battery on the other side, and we're going to be efficient in power consumption. That's one vector of differentiation. The other one is what I said: we designed for the future, which does not have the memory constraint that you have today. We don't have to move a lot of data between the accelerator and memory. And that reduces thermal, reduces power consumption, and increases the memory bandwidth. And we don't have to use expensive HBM. We have the ability to do this at a much lower cost. Number three is we are coming in with very high density of transistors with our cell. And we're not a small company. I think we ship 40 billion components a year. We do more than 30 new chips per year on leading nodes. And I think we have the ability to execute. And if the data center is changing because of AI and the data center is changing because of this disaggregation, there's an entry point for Qualcomm.

Look, two parts. Yes, we have a contract with Meta. That's why we talk about them as a customer for two generations. And it's very significant for our CPU. We have a very unique CPU. If you look at some of the metrics we provided, and I think we have a track record to have a good CPU. The second part of the question, I will never bet against Meta. You know, they have incredible first-party applications. They have a lot of data. They have a lot of data from consumers. They're well positioned. We are in the early innings of AI. Anybody that believes right now whoever the players are on AI, this is already defining. This is a decade-long. And I think if we learned something about the internet, technology is going to move very fast and the players are going to change. I will not bet against Meta.

It's 100%. Look, at the end of the day, this is not a one-time relationship. We have built over a long period of time a strategic relationship. And what happened was to have that relationship in place and we have more products. You have the trust, you have the capability of execution. And by the way, this is also true with customizing. We bought Alpha Wave. They have some engagements, but now they're part of Qualcomm. Qualcomm has broader relationships with some of those companies. And I think that just scales. And that's exactly what you're seeing.

Yeah, 100%. Look, if you look at our track record, especially as I think about the diversification of the company, first was automotive. We bought Arriver, and that is now the stack that you see on BMW for highway autopilot. We bought Nuvia, and you see now our CPU showing up not only in PCs and phones and automotive, but now in the data center. We bought Alpha Wave, and you see us now into the connectivity business and the custom AI business. And the merger acquisition is incredibly exciting. I actually don't think the industry investors really understand what that acquisition is. I think my prediction is people are going to read it three or four or five times, and eventually they're going to get it. It's an industry-friendly alternative that we're going to make available, open close to everybody. So all of those things, modular acquisition. You're Chris Lattner, he's sticking around. Absolutely. That's why you can see, if anything, what you should see about this acquisition is that by being an all-stock deal, it means that the founders are now fully vested in the future of Qualcomm. And I think there's another thing that investors do not understand. They asked me the question, why did this size acquisition do it all stock? Because they're all now committed to the future of Qualcomm when we're connected together. So all of those things are part of us doing that. And to your question, are there going to be some other acquisitions? But as we have been very disciplined as we're building industrial, some of the acquisitions we did, Arduino with 33 million developers, would focus on industrial, edge, and pulse. Now you see us doing data center. Future acquisitions are focused on data center and robotics, which is another area of investing for Qualcomm.

That's a great question. I think you have to look at those markets very short term and you need to look at this market. So what's happening in the mid-term? For the very short term, I think the whole world is dealing with this memory situation right now, which is not great. And I respect the companies making choices of the different industries. But then what happened is you don't have a demand problem for mobile and PC. You have the memory availability and prices. I think what you saw was the message from Apple. So we even expect when we think about, for example, the Android market in China, I think when you think about year over year, when you look at 27, expect it to be flat to probably have a down bias. And that has all to do, not with demand, but with the memory situation. But the other part is more interesting. There's a lot of clarity right now because of AI agents, how this market is going to change with AI, very, very clear. And I think we see a lot of those phones now becoming the customers of the phone as the human in the agents. And that is changing the architecture of the devices.