TL;DR

· Bernstein raises Qualcomm's price target from $140 to $235, but maintains a Market Perform rating.

· Qualcomm's FY2029 targets focus on data centers, automotive, and IoT, with non-smartphone revenue target around $40 billion.

· Decline in the smartphone business, rising OPEX, and uncertainty in data center gross margins remain key constraints for a rating upgrade.

Price Target Soars, But Rating Stays Put

Following Qualcomm's Investor Day in New York, the company unveiled a set of larger long-term growth targets for the market. Subsequently, Bernstein raised Qualcomm's price target from $140 to $235, but the rating remains Market Perform.

The increase in the price target indicates Bernstein's recognition that Qualcomm's long-term story is expanding. The company is no longer positioning itself solely as a smartphone chip supplier but is striving to enter a broader computing market, including AI data centers, automotive, IoT, and personal AI devices. According to Qualcomm's official targets, by FY2029, the company's non-smartphone revenue will reach around $40 billion, data center revenue will exceed $15 billion, and Non-GAAP EPS will surpass $18.

However, the rating remaining unchanged suggests that the sellers do not believe this story is yet solid enough. The real constraint lies in the timing mismatch: the realization of data center and automotive businesses is further out, while the decline in the smartphone business, Apple's revenue exit, OPEX increases, and margin pressures will manifest earlier in the financials.

This explains why the $235 price target does not equate to a "Buy" signal. Bernstein acknowledges that Qualcomm's long-term valuation ceiling has been raised, but with the current stock price already reflecting some optimistic expectations, the risk-return profile has not tilted significantly toward a Buy.

A New Story: Shifting from the Smartphone Cycle to AI Data Centers

Qualcomm's most significant new story this time is the data center.

The company's official targets indicate that FY2029 data center revenue will exceed $15 billion. Compared to the current base of around $300 million in data center revenue, this means Qualcomm aims to genuinely enter the AI infrastructure budgets of cloud vendors over the next few years, rather than just staying in the mobile chip and edge computing markets.

Qualcomm's disclosed data center roadmap includes custom ASICs, AI Inference Accelerators, the Dragonfly C1000 CPU, connectivity products, and related software layers. The company also mentioned two unnamed Hyperscaler customers, expecting them to each contribute over $1 billion in custom silicon revenue in FY2027.

The Meta partnership is another key validation point. Qualcomm and Meta announced a multi-generational data center CPU collaboration, with the Dragonfly C1000 CPU set to begin production in the second half of 2028. However, caution is advised here: the official statement is that Qualcomm will become one of the suppliers, with the amount, capacity, and exclusivity remaining undisclosed.

Automotive and IoT form the second growth curve. Qualcomm's official targets show that by FY2029, automotive revenue will reach $10 billion, with IoT revenue exceeding $14 billion. The automotive design-win pipeline has grown from $45 billion 18 months ago to $65 billion, with the company continuing to focus on digital cockpits, assisted driving, and in-car connectivity.

$235 Price Target, Betting on 2029 Instead of Next Year

Bernstein's core rationale for raising the price target is not Qualcomm's sudden improvement in short-term performance, but rather that the valuation model is beginning to incorporate larger data center revenue and a more balanced business structure.

According to Bernstein's model, Qualcomm's FY2029 revenue is estimated at around $64.8 billion, with an EPS of approximately $18.12, closely aligning with the company's long-term target of "Non-GAAP EPS exceeding $18." Compared to the past, where Qualcomm's valuation revolved mainly around the mobile cycle, the data center, automotive, and IoT segments give the company an opportunity to achieve a higher valuation multiple.

The $235 price target corresponds to a higher valuation framework. Bernstein adopts a 20x P/E valuation based on an average EPS of around $11.75 for FY2027/FY2028; the previous $140 price target corresponded to a multiple of about 14x. In other words, the key to the price target increase is not a significant profit upgrade next year, but the market's willingness to pay a higher multiple for Qualcomm's AI data center and diversified revenue story.

However, there are also points of contention. Bernstein's model assumes a data center business gross margin of around 40%, lower than Qualcomm's current company-wide average. Even with increased data center revenue, it may not necessarily lift the overall profit quality early on. The report estimates that with the change in business structure, Qualcomm's overall gross margin could decrease from 55.2% in FY2026 to 51.6% in FY2029.

Mobile Pressure Comes First, Data Center Payoff Still Pending

Qualcomm aims to prove that its revenue mix will change with data center, automotive, and IoT, but the pressure from its mobile business remains.

Seller checks and management Q&A indicate that FY2027 Android phone revenue is expected to remain flat or slightly decrease. Adding Apple's revenue exit, total handheld device revenue may decrease by $5 billion to $6 billion year over year. The handheld business is still Qualcomm's largest revenue source, and this decline will directly impact the profit base for the next two years.

The company's long-term assumptions about Android phones are also more cautious. From FY2026 to FY2029, Android handheld revenue compound annual growth rate is expected to be around 5%, significantly lower than the high-growth phase in the previous cycle. Qualcomm may still maintain an advantage in Android high-end phones, AI phones, and RF front-end, but it is challenging to fully offset the pressure from Apple's exit and the slowdown in the smartphone industry.

Costs will also come under pressure early. Qualcomm clearly stated that FY2027 OPEX will see double-digit growth. To advance data center CPUs, AI accelerators, custom silicon, and software ecosystems, the company needs to invest early in R&D, sales, and customer support. Revenue recognition typically lags behind investment, meaning there may be downward risks to EPS forecasts around FY2027.

This is the key to the target price increase while maintaining the same rating: Qualcomm's long-term story has become bigger, but the profit trajectory for the next two to three years may not necessarily be smoother. Investors need to accept two judgments at the same time: FY2029 EPS may be lifted by AI data centers, and profit pressure around FY2027 may also be more apparent.

The Disagreement Lies in Whether $15 Billion Data Center Revenue Can Turn into Real Profit

Bernstein's report is not simply bearish on Qualcomm but is in the process of repricing Qualcomm while reminding the market not to consider long-term targets as already achieved performance.

In a downside scenario, if data center revenue falls significantly below the $15 billion target and personal AI and compute business growth is also limited, Qualcomm's FY2029 EPS may still reach around $15. This indicates that Qualcomm's fundamentals are not weak, and automotive, IoT, licensing business, and cost control can still support a certain level of profitability.

However, the gap between $15 and EPS above $18 has a significant impact on valuation. If the market has already priced Qualcomm with more optimistic data center revenue and higher valuation multiples, the company must prove three things: cloud vendor customers can ramp up as planned; data center gross margins will not consistently drag down overall profit margins; and the decline in the mobile business will not excessively depress EPS before new businesses pay off.

Therefore, the $235 price target is not a conclusion of "Qualcomm's AI transformation has been successful," but a new price that incorporates the long-term diversification prospects into the valuation. Qualcomm's story is indeed bigger than ever before, resembling more of a chip platform company spanning across mobile, automotive, IoT, and AI data centers.

However, the Market Perform rating serves as a reminder that until the headwinds in the mobile sector ease, data center revenue ramps up, and gross margins stand the test, there is still reason for the market not to hastily view Qualcomm as a definitive AI winner. What truly needs validation next is not whether Qualcomm can articulate a $15 billion data center target, but whether this target can translate into revenue on time and ultimately into sufficiently good profits.

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