Analysts are optimistic about the prospect of the data center business, and Qualcomm (QCOM.US) has received target price upgrades from multiple institutions.

Qualcomm (QCOM.US) detailed its data center business strategy at its investor day event, and significantly raised its non-smartphone business revenue targets for the next few years, receiving positive evaluations from several Wall Street institutions. Boosted by optimistic expectations, Qualcomm's stock price rose by 5% in early trading on Thursday. Among them, Morgan Stanley upgraded Qualcomm's rating from "underweight" to "hold," and raised its target price from $146 to $231. In the latest report, the Morgan Stanley analyst team led by Joseph Moore stated that Qualcomm's diversification progress exceeded expectations, mainly benefiting from the larger opportunities in the data center market than previously predicted. The report stated: "Overall, Qualcomm's diversification progress is faster than we expected, and the opportunities brought by the data center market are larger than expected." Morgan Stanley believes that Qualcomm has laid the groundwork for entering the data center market in recent years through a series of targeted acquisitions. The company's latest announcement of the acquisition of AI software company Modular will further strengthen its AI software platform capabilities and be synergistic with its chip product roadmap. Citigroup maintained a "neutral" rating on Qualcomm and raised its target price from $160 to $198. Citigroup pointed out that Qualcomm has significantly increased its fiscal year 2029 non-smartphone business revenue target from the previous $22 billion to $40 billion, with over $15 billion expected to come from the data center business. Meanwhile, the company also expects that its earnings per share under non-US GAAP for fiscal year 2029 will exceed $18. Citigroup stated that the target price increase mainly reflects Qualcomm's improved growth prospects and performance visibility in the data center business, giving the company a valuation multiple higher than the average over the past three years. However, Citigroup still maintains a "neutral" rating, citing that the expected increase in memory costs in 2026 may affect demand for smartphones, putting pressure on Qualcomm's core smartphone business. JPMorgan also maintained a "neutral" rating on Qualcomm, with a target price of $265. The JPMorgan analyst team led by Joseph Cardoso stated that the development speeds of Qualcomm's data center, automotive electronics, and Internet of Things (IoT) businesses are faster than previously planned. However, the firm also pointed out that Qualcomm will still face certain short-term challenges in the future. On the one hand, rising memory prices may lead to weak demand in the smartphone market; on the other hand, to seize the data center market, the company needs to continue to increase research and development and capital investments. Despite this, JPMorgan remains optimistic about Qualcomm's long-term growth prospects. The report stated that Qualcomm has raised its fiscal year 2029 non-smartphone business revenue target to $40 billion, almost doubling from the previous target, and expects the company's revenue to grow at an annual average rate of 15% and earnings per share to grow at an annual average rate of about 20% by fiscal year 2029, significantly higher than the growth levels of about 6% and 8% in fiscal years 2023 to 2026. JPMorgan believes that this not only reflects Qualcomm's more diversified business structure, but also indicates that the company's overall financial performance is expected to accelerate significantly in the future. Diversifying revenue sources is particularly important for Qualcomm. For a long time, the company's performance has been highly dependent on its smartphone chip business, but with the global smartphone market growth slowing down, Qualcomm is actively looking for new growth engines. JPMorgan predicts that by fiscal year 2027, revenue from Android smartphone business will be flat or even decline; at the same time, revenue from smartphone chips from Apple Inc. (AAPL.US) is expected to decline to about $2 billion and will completely exit by fiscal year 2029. Overall, these factors are expected to reduce Qualcomm's smartphone business revenue by about $5 billion to $6 billion around fiscal year 2027.