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Qualcomm’s (QCOM) next 40 years will look different than its past four decades as it seeks to diversify into data centers and cash in on the AI gold rush.
But that also likely means going at things other than its lucrative business with Apple’s (AAPL) iPhone. Qualcomm has been Apple’s largest cellular modem provider, but the tech giant is transitioning to its own in-house C1 modem in a bid to boost margins.
“That’s our contract, you know, and if we don’t get a new contract, that’s what it is,” Qualcomm CEO Cristiano Amon said on Yahoo Finance’s Opening Bid podcast (see video above; listen below). “And there’s so much drama and association about the Apple relationship, which I think it’s not warranted, to be honest.”
The tech duo’s licensing agreement ends in 2027. Research firm Futurum estimates that Qualcomm’s annual modem revenue from Apple is between $5.7 billion and $5.9 billion. Analysts estimate Qualcomm will pull in about $43.5 billion in sales this year.
Qualcomm has said publicly it expects to have a 70% share in iPhones launching this fall. That will drop to 20% for iPhones next fall, and then stand to be zero for iPhones debuting in fall 2027.
Yahoo Finance caught up with the globe-trotting Amon — fresh off a visit to Saudi Arabia with other top execs and the Trump administration — at the Nasdaq. Amon began his career at Qualcomm as an engineer in 1995.
“We’re planning our business assuming that they [Apple] are going to use their own modem,” Amon said. “And what’s exciting about the company is all of this growth that we’re creating, all of those other markets, including on Android. Like, if you look at our Android business, it has continued to grow.”
To offset the lost Apple sales, Qualcomm continues to invest in the connected car cockpit and the internet of things domain. The company thinks it can grow its business from these two segments to $22 billion by 2030, up from $8.3 billion in fiscal year 2024.
“Qualcomm’s diversified growth across these specific verticals is credibly expected to significantly exceed the revenue scale of modem-only handset customers well into the era of 6G,” Futurum researchers wrote in a note.
The company also announced in mid-May that it plans to launch processors designed for data centers to power artificial intelligence, which will connect to Nvidia (NVDA) chips. Qualcomm failed to successfully expand into data centers years ago and returns to the field with formidable rivals in AMD (AMD), Intel (INTC), and soon ARM (ARM).
“It’s a massive TAM [total addressable market] and will continue to grow at very high growth rates for decades. If we can build something unique and disruptive, there’s room for Qualcomm,” Amon said of the data center push.
The Street has taken a wait-and-see approach to Qualcomm’s stock, preferring to witness tangible progress in diversifying its business away from Apple.
Qualcomm’s stock has been trading at a price-to-earnings ratio discount to the S&P 500 (^GSPC) for the past three years, according to data from Evercore ISI tech analyst Mark Lipacis. The current P/E multiple is roughly a 39% discount to the S&P 500. The stock also trades at a more than 20% discount versus its 20-year median P/E.
Shares are down 28% in the past year compared to a 13% advance for the S&P 500.
“We expect Qualcomm’s P/E to continue trading at a discount to the market until it demonstrates more traction into the IoT, Auto and PC markets,” Lipacis added.
Three times each week, Yahoo Finance Executive Editor Brian Sozzi fields insight-filled conversations and chats with the biggest names in business and markets on Opening Bid. You can find more episodes on our video hub or watch on your preferred streaming service.
Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email [email protected].
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