Qualcomm announced it anticipates achieving $15 billion in revenue from its data center division by 2029 as it expands beyond its primary smartphone chips, causing shares to rise over 12 percent during after-hours trading on Wednesday.

Chief Financial Officer Akash Palkhiwala stated during an investor presentation that the data center division is expected to generate $5 billion in fiscal 2027, with US$1 billion derived from new custom-chip clients.

Qualcomm also projected revenues of $40 billion from chip sales outside its smartphone dominance by 2029, an increase from earlier forecasts of $22 billion, with handsets representing only a third of its chip revenue by that time.

Palkhiwala stated, 'We will be genuinely diversified.'"

Arm Holdings, which provides foundational technology for numerous Qualcomm chips, also increased by 5 percent following the forecast.

Analysts at Bank of America previously indicated they anticipate modest revenue of around $2 billion to US$5 billion each year from Qualcomm's data center initiative by fiscal 2027-2028.

Earlier today, Qualcomm announced that Microsoft MSFT.O and Meta Platforms META.O will utilize its new AI chips, and it will produce custom chips for two other unspecified "hyperscalers."

Qualcomm's transition to AI chips illustrates increasing pressure in the smartphone industry, affected by a memory chip scarcity caused by rising demand for AI infrastructure, along with significant clients like Apple AAPL.O and Samsung 005930.KS creating chips internally.

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The chipmaker announced that Microsoft will adopt its new type of chips, which utilize affordable memory chips found in smartphones and laptops, rather than the expensive high-bandwidth chips utilized by Nvidia and the SRAM memory used by Cerebras Systems CBRS.O.

The organization refers to the new category as "High Bandwidth Compute" or HBC.

Tony Pialis, Qualcomm's data center leader says, "We provide significant value to the industry regarding performance relative to cost benefits."

Qualcomm announced that Meta will utilize its newly designed CPU, the Dragonfly C1000, aimed specifically at AI data centers, stepping into a market where Arm Holdings and Nvidia are also seeking clients.

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Pialis also mentioned that Qualcomm has secured two significant clients — referred to as "hyperscalers" in the tech sector — for which it will produce tailored chips, with income beginning before this calendar year concludes.

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"I haven't needed to force my way into hyperscale clients; they've been inviting us in," Pialis stated, not mentioning the clients.