Qualcomm Just Gave Investors a Reason to Look Beyond Apple. The Market Is Focusing on the Wrong Story.

Qualcomm (QCOM) posted a decent quarter this week, yet the market still turned on it. Revenue came in at $9.9 billion for its fiscal third quarter, hitting the high end of the company’s own guidance. Non-GAAP earnings of $2.21 marginally missed the Wall Street consensus, though it was also in line with the company’s guidance of $2.10 to $2.30. Automotive, being the standout, reached a record $1.6 billion and grew 61% from a year earlier. The stock, already weak over the past month, fell further after the earnings report. The selloff after a revenue beat came down to a few reasons, with Apple (AAPL) playing a big part in it. Qualcomm’s share of the next iPhone is set to come in well below the 20% it held before. Management itself expects the revenue through Apple products to decline sharply. A memory supply crunch is also squeezing the wider smartphone market, and handset chip sales already slipped 20% year-on-year (YoY) to $5.1 billion. Guidance for the next quarter, with EPS of $2.05 to $2.25, further disappointed investors.

Here’s the part that got buried, though. Qualcomm’s data center business is set to start generating revenue in the December quarter, just as the Apple decline deepens. The company reiterated its plan to reach $5 billion in data center revenue by fiscal 2027 and $15 billion by 2029, with two hyperscaler chip deals kicking in and wafer production already underway. CEO Cristiano Amon expects non-handset growth of more than 60% in fiscal 2027 to fully replace the Apple revenue lost this year. To protect margins, the company is rolling out double-digit price increases across its chips from September 1. For now, the market is focused on what Qualcomm is losing rather than what it is building.