Qualcomm (QCOM) is facing pressure from slower smartphone growth and limited data center progress, RBC Capital Markets said in a note Wednesday.

The handset segment, which makes up over 60% of sales, is expected to see revenue declines through fiscal 2027, mainly due to Apple's (AAPL) replacement of Qualcomm modems with its own, the investment firm said.

RBC also cited headwinds such as high memory prices and rising competition from Samsung in premium phones, as well as uncertainty over licensing deals with Apple and Huawei.

In contrast, Qualcomm's automotive, extended reality, and Internet of Things businesses are showing strong growth, with management targeting $8 billion in auto revenue by fiscal 2029, RBC analysts noted.

The data center segment remains in early development stages despite the recent launch of AI accelerators and the acquisition of Alphawave, RBC said.

While Qualcomm's deal with HUMAIN could bring in $1 billion to $2 billion in revenue by fiscal 2027, larger cloud customers will be needed to drive real momentum, RBC added.

RBC initiated coverage for Qualcomm with a sector perform rating and a $180 price target.

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