Qualcomm shares surged in after-hours trading after the chipmaker signaled progress in expanding beyond smartphones, pointing to new opportunities in the fast-growing data centre sector and a potential recovery in China’s mobile market.

The company said it is preparing to supply components to a major hyperscale operator, a term used for the world’s largest data centre groups, with deployment expected later this year. While no specific customer was named, Qualcomm indicated it has been working with several large players and is becoming increasingly confident about its prospects in this space.

Chief executive Cristiano Amon told analysts that the shift towards artificial intelligence infrastructure is reshaping the company’s long-term strategy, particularly as it looks to diversify away from its traditional reliance on mobile chips.

There were also signs of improvement in Qualcomm’s core business. The company expects the Chinese smartphone market, which represents its largest source of revenue, to stabilise in the third quarter before returning to growth in the following period.

Investors responded positively, pushing the stock up more than 15 per cent in extended trading. Prior to the announcement, Qualcomm’s shares had fallen 8.5 per cent this year, making it one of the weaker performers in the semiconductor sector.

Despite the upbeat outlook, current trading conditions remain challenging. Qualcomm forecast revenue of between A$14.1 billion and A$15.3 billion for its third quarter, which fell short of analyst expectations of around A$15.6 billion at the upper end.

A shortage of memory components, driven by strong demand for AI-related hardware, has limited smartphone production, reducing demand for Qualcomm’s processors. The company acknowledged that this environment continues to weigh on its performance.

The group also announced plans to buy back up to A$30.6 billion worth of shares, signalling confidence in its long-term outlook.

Earnings guidance for the upcoming quarter was set at between A$3.21 and A$3.51 per share, below the A$3.64 analysts had been expecting. In the most recent quarter, adjusted earnings came in at A$4.08 per share, slightly ahead of forecasts, while revenue slipped 3 per cent to about A$16.3 billion.

Breaking down its business segments, Qualcomm generated around A$9.2 billion from smartphone-related sales. Internet-connected devices contributed approximately A$2.7 billion, while automotive chips brought in about A$2 billion.

The company has been working to broaden its reach into areas such as connected devices and vehicle technology, but the push into data centres represents its most ambitious move yet. Last year, Qualcomm outlined plans to compete with Nvidia in supplying chips for AI workloads.

Its first known customer in this area was Humain, an artificial intelligence venture backed by Saudi Arabia. The latest update suggests additional partnerships are now in progress, including a new hyperscale client that will use custom-designed chips known as ASICs.

These specialised processors are currently dominated by companies such as Broadcom and Marvell, which supply major technology groups including Google. Qualcomm is aiming to carve out a position in this market as demand for tailored AI hardware increases.

Amon said the evolution of artificial intelligence is opening the door to a wider range of chip designs, particularly as the focus shifts from training models to running real-world applications. He noted that data centres are becoming more modular, creating opportunities for new entrants to challenge established leaders.