Optimistic outlook for Qualcomm’s data center business, price target raised to $265

Overview

This report analyzes the data center revenue targets and customer pipelines that Qualcomm may announce at its upcoming Investor Day, expecting data center, automotive, and IoT businesses to drive the company’s revenue growth in the coming years. While the report is optimistic about Qualcomm’s technological leadership, it maintains a neutral rating given the intense competition in the data center market.

Core views

The report projects that Qualcomm’s data center revenue will exceed $3 billion in FY27 and reach $35 billion by FY31, driven by its three-pillar strategy in custom silicon, commercial CPUs, and AI accelerators. Additionally, the automotive and IoT segments are expected to post steady growth, targeting $17 billion by FY31. The report emphasizes that these new businesses will account for roughly 70% of non-smartphone revenue over the next five years, with approximately 35% coming from the data center segment. Although the report is bullish on Qualcomm’s technological edge and its ability to expand into new markets, it retains a neutral rating due to fierce competition in the data center space, awaiting further execution proof. The report has raised the price target to $265, based on a 23x forward P/E multiple on the FY27 EPS estimate—a significant increase from the previous $160. This valuation reflects expectations for future data center market growth, though the report notes the need for additional execution monitoring. Demand side: The report anticipates revenue support from multiple customers, including cloud service providers in the U.S. and China. Supply side: Qualcomm enters the data center market through customized ASICs, CPUs, and accelerators, with these product categories projected to see rapid market expansion in the coming years.

Analysis framework

The report employs a TAM (Total Addressable Market) analysis, drawing on data from industry peers AMD and Broadcom to assess Qualcomm’s potential revenue in the data center market. TAM analysis is a common industry research method used to estimate a company’s maximum potential revenue in a given market. By disaggregating the market potential of different product lines—custom silicon, commercial CPUs, and AI accelerators—the report forecasts Qualcomm’s future revenue trajectory. The report also uses a PE valuation approach, assigning a 23x forward P/E multiple based on the FY27 EPS estimate, above historical levels to reflect the company’s anticipated growth in the data center market.

Methodology notes

• Valuation MethodPE/PEG valuation

  The report set a 23x forward P/E multiple based on the FY27 EPS estimate

  The PE valuation method assesses a company’s valuation by dividing its stock price by earnings per share; higher P/E multiples typically indicate stronger market expectations for future growth. In this case, the report believes Qualcomm’s P/E should exceed historical norms to reflect its growth potential in the data center market.

• Industry/Industrial Analysis Framework

  The report employed a TAM (Total Addressable Market) analysis

  TAM analysis estimates a company’s maximum potential revenue in a specific market. By analyzing data from industry peers, the report projected Qualcomm’s revenue growth prospects in the data center sector. This approach helped the report evaluate Qualcomm’s future growth opportunities in new markets.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• QCOM.US

  Benefiting from expectations of data center market growth

  Strengths

  Technological leadership, diversified business portfolio

  Weaknesses

  Faced with intense market competition

  Comparison

  Compared with rivals, Qualcomm’s progress in the data center market remains relatively slow

  Risks

  Execution risks in the data center market, macroeconomic pressures on the smartphone market

Key data

• FY27 Data Center Revenue Target3 billion USDYear-over-year growth expected to exceed 60%
• FY31 Data Center Revenue Target35 billion USDExpected to account for approximately 35% of total revenue
• FY27 Adjusted EPS11.50 USDUp 10.1% from the previous estimate
• Target Price265 USDUp 65.6% from the prior level

Impact & implications

The report believes that growth in Qualcomm’s data center revenue will substantially increase the share of non-smartphone business, driving double-digit growth in the company’s overall revenue and profits. Despite being optimistic about Qualcomm’s technology and market opportunities, the report maintains a neutral rating due to intense competition in the data center market, pending further execution evidence. Raising the price target to $265 signals an optimistic outlook for future growth.

Risks

• The smartphone market may face more severe macroeconomic pressures
• Competition in the data center market could increase execution challenges

What to watch

• Specific revenue targets and customer pipeline announcements at the Investor Day
• Actual execution of the data center business