Qualcomm shares jumped 10.3% before the bell on Thursday, as investors responded to the chief executive's upbeat assessment of the company's smartphone business and its longer-term prospects in data center processors. The rally came even after the company issued a subdued revenue outlook for the fiscal third quarter.
CEO Cristiano Amon told Reuters in an interview that Qualcomm expects the smartphone market to begin recovering after the firm’s fiscal third quarter. The company, which is a leading supplier of smartphone chips and also counts Apple among its customers, has pursued a strategy of diversification into higher-growth areas such as data center processors and chips for autonomous vehicles to lessen its dependence on the cyclical handset market.
That strategy has taken on added urgency this year amid heightened uncertainty from smartphone makers. A sharp rise in memory chip prices has pushed up costs for global consumer electronics, prompting some customers to scale back purchases. Qualcomm’s push into the data center market is viewed as a way to tap into faster-growing demand beyond smartphones.
Management said the company plans to begin shipping products aimed at the data center before the end of the year, signalling an entry into what has become an increasingly competitive segment. Amon described work with customers on three classes of chips - central processing units, inference accelerators, and custom application-specific integrated circuits, or ASICs - the latter an area that has benefited rivals in recent years.
Despite the market’s positive reaction, several analysts expressed reservations about the durability of the smartphone recovery Amon outlined. Analysts at J.P. Morgan cautioned that while Qualcomm may gain visibility into stabilizing handset revenues, the smartphone industry still faces meaningful downside risk if memory shortages worsen and memory prices continue to rise.
Analysts at Morgan Stanley also pushed back on the notion that memory shortages will ease in calendar year 2027, saying these challenges could persist and continue to weigh on the underlying market. Such warnings underscore a divergence between management’s outlook and some sell-side expectations.
Adding to industry interest, an analyst report earlier in the week said Qualcomm and Taiwan’s MediaTek are co-development partners on an AI-first smartphone planned by OpenAI. Following Qualcomm’s results, data compiled by LSEG showed that at least 10 brokerages raised their price targets on the stock.
The company’s ability to translate optimism about smartphone demand into sustained revenue recovery will likely hinge on whether memory market dynamics moderate and whether Qualcomm can establish a foothold in the data center segment while competitors and some device makers increasingly rely on in-house chips.
Context and outlook
Qualcomm’s trading response illustrates investor appetite for future growth narratives even when near-term guidance is weak. The coming quarters will test whether Amon’s confidence about a handset rebound and the timing of data center shipments align with evolving market conditions and customer buying patterns.