Qualcomm shares have dropped about 7.1% year to date while the broader chip sector rallied. Management is now betting on a fast-growing non-handset business, including a new data center chip deal with Meta Platforms, to drive a turnaround in 2027.
A widening gap with the chip sector
Qualcomm has lagged the rest of the semiconductor industry this year, falling about 7.1% year to date. The iShares Semiconductor ETF, by contrast, has surged more than 68% over the same stretch.
The stock now trades at a P/E ratio of only 18, low relative to peers such as Broadcom and Advanced Micro Devices. Qualcomm posted a 4% year-over-year revenue decline in its fiscal 2026 third quarter, ended June 28. Net income dropped 25% year over year in that quarter. Those numbers explain the discount, but the same results also included management's outlook for non-handset revenue to reach $40 billion by fiscal 2029.
AI could flip the narrative in 2027
Qualcomm CEO Cristiano Amon told investors the company expects non-handset revenue growth to accelerate from a 24% pace in fiscal 2026 to more than 60% in fiscal 2027. Meta Platforms has already backed that shift: the two companies agreed to a long-term deal for data center CPUs, a deal that can provide an immediate windfall and could help validate Qualcomm's new technology.
If that deal drives further demand, Qualcomm may raise its fiscal 2029 guidance again. Non-handset revenue already made up 40% of Qualcomm's fiscal 2026 third-quarter revenue, and a faster growth rate there would reduce the company's reliance on smartphone chips.
Apple's exit adds urgency
That shift needs to happen soon. Qualcomm's contract with Apple ends in March 2027. Apple has been using its own chips for recent smartphones and is eager to part ways with Qualcomm. Handset sales are expected to keep declining, so Qualcomm needs its non-handset business to pick up momentum before that contract lapses.
The pieces are aligning at the same time: a low valuation, an accelerating AI chip business, and a major new customer in Meta Platforms. Whether that combination turns into a genuine breakout depends on Qualcomm converting its AI pipeline into the revenue growth management has now promised for 2027.
Source: Qualcomm Is Poised for a Breakout in 2027 (The Motley Fool)
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