Qualcomm (QCOM) announced a better-than-expected data center strategy at its investor day, but rising competition and uncertainty around customer procurement remain key concerns, RBC Capital Markets said in a note Thursday.
The analysts said management set a formal data center revenue target of $5 billion for fiscal 2027, rising to $15 billion by fiscal 2029. The company also highlighted two custom silicon wins with major hyperscaler customers, with each expected to contribute more than $1 billion in fiscal 2027 revenue.
Longer term, management is targeting more than 5% share of the $1 trillion data center total addressable market over the next five to 10 years, according to the note.
Management also raised its fiscal 2029 revenue target to $40 billion versus $22 billion prior, driven by $10 billion from automotive, $14 billion+ from Internet of Things, and $15 billion from data center, the analysts added.
Meanwhile, management is targeting more than $18 in non-GAAP EPS by fiscal 2029 and sees annual revenue opportunity of over $100 billion the next five to seven years, the analysts said, adding that they are raising their fiscal 2026 EPS estimates to $10.85 from $10.77 and fiscal 2027 to $11.61 from $10.42.
"On the other hand, competition remains intense and it's unclear how hyperscaler customers will prioritize ASIC/CPU procurement given the multitude of supply agreements," the analysts said.
RBC raised its price target on Qualcomm to $250 from $175 and has a sector perform rating on the stock.
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