Qualcomm Boss Cristiano Amon Targets $10B in Car Chips as Handset Sales Fall
Observer ·
Cristiano Amon is trying to diversify a chipmaker that generated $43.1 billion in fiscal-year revenue. Cars and data centers carry different timelines for replacing lost handset sales.
Qualcomm CEO Cristiano Amon is pushing into data centers while expanding a car-chip business approaching $2 billion in quarterly sales. He is trying to make those operations grow fast enough to offset falling handset revenue. In the three months ended Sept. 27, handset sales fell 26 percent to $5.1 billion, according to results released Nov. 4 .
Qualcomm reported revenue of $10.3 billion for the period, down 8 percent from a year earlier. Adjusted earnings were $2.17 a share, compared with $3 on the same basis a year earlier.
Automotive sales rose 89 percent to $1.99 billion, approaching $2 billion in a quarter for the first time. That growth came as Amon sought more business outside smartphones.
A major pressure on handset sales comes from Apple , a Qualcomm customer, moving more products to its own modems. Amon has planned for that shift by expanding automotive and data-center operations. The extent to which those businesses can offset the lost chip sales remains uncertain.
Amon is targeting $5 billion in data-center revenue in fiscal 2027. His June 24 investor-day plan set a longer-term target of more than $15 billion by fiscal 2029. In the Nov. 4 results, he projected that non-handset revenue would grow more than 60 percent in fiscal 2027.
For the three months ending in December, management projected adjusted earnings of $2.15 to $2.35 a share.
On Nov. 6, Reuters reported that Alphabet had built a stake worth nearly $548 million in Qualcomm during the third quarter. Google , Alphabet ’s subsidiary, already works with Qualcomm on smartphones and its Googlebook laptops.
Qualcomm has spent the last year pushing its custom A.I. processors as an alternative to Nvidia ’s chips. In a September securities filing describing its Amazon collaboration , Qualcomm tied stock warrants to commercial arrangements and purchases of chips, technology, systems and manufacturing services, up to $60 billion in payments over the warrant’s term. That ceiling is not a guarantee of $60 billion in sales.
Amon also announced an agreement on Nov. 4 with Elon Musk ’s SpaceX to supply technology for Starlink Mobile’s terrestrial base stations. The announced nationwide 5G rollout is planned to begin in 2027 under a multiyear agreement.
Qualcomm’s automotive products sit under its Snapdragon Digital Chassis portfolio. The technology supports digital cockpits, infotainment, connectivity and advanced driver-assistance systems in modern vehicles.
Amon has secured substantial automaker relationships. In July, BMW Group selected Qualcomm as a lead supplier of computing chips for next-generation digital cockpits and automated-driving systems. In May, Stellantis expanded its multiyear collaboration for Snapdragon Digital Chassis products. Volkswagen signed a letter of intent in January for a long-term supply agreement; it should not be described as a finalized purchase contract.
While Qualcomm’s automotive business is growing, it is still smaller than its handset business. Nvidia and Mobileye also compete in automotive chips. In the Nov. 4 release, Qualcomm said it was raising product prices to reflect higher semiconductor input costs. How that will play out in its automotive business, however, is still unclear.
Qualcomm’s management set a target in June of $10 billion in automotive revenue by fiscal 2029 and described a $65 billion pipeline of design wins—expected business from chips selected for future vehicle programs. A pipeline is not booked revenue, especially when competitors are courting some of the same automakers. The question for Amon heading into next year is whether cars, together with data centers, can grow fast enough to fill the hole that Apple and handsets leave.