Key Highlights

  • Qualcomm closed up about 9% near $194 on September 21 after an optical die-to-die interconnect demo with Lumentum and Corning at ECOC 2026.
  • On September 8 Qualcomm announced a multi-generational Amazon deal for custom AI inference silicon and optics, with Amazon able to buy up to $60 billion of products and holding warrants on 25 million shares.
  • Fiscal Q3 Revenue fell 4% to $9.9 billion as handset revenue fell 20%; Q4 revenue guidance is $9.7 billion to $10.5 billion.
  • Automotive revenue jumped 61% to $1.6 billion, its 23rd consecutive quarter of double-digit growth, while IoT revenue rose 9% to $1.8 billion.

Qualcomm (NASDAQ:QCOM) shares jumped about 9% on Monday, September 21, closing near $194. The move followed a joint demonstration with Lumentum (NASDAQ:LITE) and Corning (NYSE:GLW) of a high-density optical die-to-die interconnect designed for AI Data Center systems. It was the stock's highest close since late June. The demonstration, unveiled at the European Conference on Optical Communication (ECOC) in Malaga, Spain, gave investors another sign that the company is building a presence in AI infrastructure beyond its core smartphone chip business.

The rally built on a larger development two weeks earlier. On September 8, Qualcomm announced a multi-generational collaboration with Amazon (NASDAQ:AMZN) to Supply custom AI inference silicon and optical connectivity for Amazon's data centers. Under that deal, Amazon could buy up to $60 billion of products and received warrants on Qualcomm shares. Together, the two announcements suggest to some investors that Qualcomm's data center ambitions are moving from concept to customer commitments.

Timing also helped. The demonstration came a day before Qualcomm's annual Snapdragon Summit opened in Maui, where on September 22 it unveiled its next flagship smartphone platforms, the Snapdragon 8 Elite Extreme Gen 6 and Snapdragon 8 Elite Gen 6. Broader semiconductor sector gains also helped that day.

What the Optical Interconnect Actually Does

According to Lumentum's September 21 announcement, the board-level demonstration combines Qualcomm Technologies' die-to-die interface IP subsystem, Lumentum's 1060 nm VCSEL-based optical engine and Corning's multimode fiber connectivity. The goal is to extend chip-to-chip links, which normally run over copper traces a few millimeters long, across tens of meters of optical fiber. That would allow accelerators in different parts of a rack or neighboring racks to behave more like a single large processor, a setup known as AI scale-up.

The release said the platform uses 32 Gb/s NRZ channels and delivers about 1 Tb/s per millimeter of chip edge ("shoreline" bandwidth density). The partners target about 4 Tb/s per millimeter with higher lane rates and more channels, and the architecture is aimed at co-packaged and near-packaged optics. "This demonstration shows how Lumentum's 1060 nm VCSEL platform can bring high-density optical connectivity closer to AI compute," Lumentum Chief Technology Officer Matt Sysak said. It is a technology demonstration, not a product launch, and no commercial timeline or revenue was disclosed.

The Amazon Deal Behind the Rerating

The Amazon agreement covers custom AI inference processors and 1.6-terabit-per-second optical interconnects, and Amazon could buy up to $60 billion of products through 2036. Qualcomm issued Amazon warrants for 25 million shares at $161.26 each; of those, 3.75 million vested immediately and the rest vest as Amazon's purchases grow. Qualcomm shares rose more than 5% after that announcement. As with similar hyperscaler deals, the $60 billion is a ceiling tied to Warrant vesting, not guaranteed revenue.

Fiscal Third-Quarter Results Show the Handset Drag

The data center push comes as Qualcomm's core Business faces pressure. For the fiscal third quarter ended June 28, the company reported on July 29 revenue of $9.9 billion, down 4% year over year. GAAP EPS was $1.87 and non-GAAP EPS was $2.21. QCT chip revenue fell 5% to $8.5 billion. Handset revenue declined 20% to $5.1 billion, while automotive revenue jumped 61% to $1.6 billion, its 23rd consecutive quarter of double-digit growth, and IoT rose 9% to $1.8 billion. QTL licensing revenue fell 3% to $1.3 billion. Qualcomm returned $2.3 billion to shareholders, including $1.4 billion in buybacks.

"Despite a challenging memory and supply environment, our third quarter results reflect solid execution of our growth strategy, with quarterly revenues at the high end of guidance," Chief Executive Officer Cristiano Amon said. For the fiscal fourth quarter, Qualcomm guided revenue to $9.7 billion to $10.5 billion and non-GAAP EPS to $2.05 to $2.25, with QCT revenue of $8.4 billion to $9.0 billion. On the earnings call, the chief financial officer said handset revenue from Chinese phone makers had bottomed in the third quarter and was expected to return to double-digit sequential growth. The company also completed its Acquisition of AI software company Modular during the quarter.

Crowded Field in AI Connectivity

Qualcomm is entering a field where Nvidia (NASDAQ:NVDA), Broadcom (NASDAQ:AVGO) and Marvell (NASDAQ:MRVL) are well established. Nvidia dominates AI accelerators and its own interconnect ecosystem, while Broadcom and Marvell lead in custom accelerators and optical DSPs for hyperscalers. Marvell used the same ECOC conference to show 2nm optical interconnect technology. Qualcomm's pitch rests on its power-efficient design heritage from mobile and its high-speed connectivity IP. The company is now trying to show those strengths carry over to rack-scale AI systems.

Risks and Analyst Caution

Wall Street remains divided. Of 38 analysts tracked, 9 rate the stock a Buy, 2 Outperform, 23 Hold, 2 Underperform and 1 Sell. The mean price target of about $194 is roughly equal to Monday's close, and the median of $175 is below it. Not everyone is cautious: StoneX analyst Cody Acree kept a Buy rating and a $270 target, citing expanding data center leverage.

The main risks are execution and timing. Data center revenue remains small relative to handsets, and demonstrations like the ECOC showcase may take years to become products. Handset revenue is under pressure from memory costs and customer changes. Licensing disputes, China exposure and the cyclical smartphone market add further uncertainty.

Qualcomm's Next Data Center Milestones

The Snapdragon Summit runs through September 24, and details on the new flagship platforms and design wins with Android phone makers could influence sentiment in the near term. Beyond that, the fiscal fourth-quarter report, covering the quarter ending in September, will show whether revenue lands within the $9.7 billion to $10.5 billion guidance and whether the Chinese handset recovery is materializing. Investors will also watch for more detail on the Amazon program, including the timing of first silicon, and any additional hyperscaler customers for Qualcomm's data center products.