Unnamed: 0 int64 | symbol string | quarter int64 | year int64 | date string | company_name string | company_id float64 | text string |
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6,300 | PYPL | 1 | 2,024 | 2024-04-30 08:30:00 | PayPal Holdings, Inc. | 112,732 | With that, I'll now hand it back to the operator to begin Q&A.
Operator: [Operator Instructions] Your first question comes from the line of Tien-Tsin Huang with JPMorgan.
Tien-Tsin Huang: Just I wanted to ask on transaction margin dollars, if you don't mind, the acceleration there. Maybe can you give us a little bit more detail on the growth across the main businesses, branded checkout, unbranded and what we've been calling other? And of course, on the other side, love to hear if there's any change in thinking there on the strategy to reclaim growth or even divest some of those assets.
James Chriss: Yes. Thank you, Tien-Tsin. Let me hand it over to Jamie to walk you through transaction margin, and then I'll take the more strategic piece on other and how we think about the year.
Jamie Miller: I'll just walk you through the drivers for transaction margin growth during the quarter. We were happy with the positive growth progression. I mentioned in my prepared remarks, we've got a lot underway to really position the company for positive TM growth over time.
In the quarter, just to walk it a little bit, interest income on customer balances was the highest contributor. Branded checkout continued to grow profitably and was a nice contributor to our growth this quarter. We did benefit from leap day, but we also benefited from strength in large enterprise and international. We've been very focused this year on PSP profitability, and that will ramp over time, but it wasn't a meaningful contributor this quarter. And we just had small but I'd say steady ongoing product improvements in Venmo and P2P. So we saw some shifting there and better transaction and credit loss performance. And then lastly, to the last point of your question, we did see a smaller drag from the other smaller parts of the portfolio.
I don't know, Alex, do you want to talk through that a little bit. |
6,301 | PYPL | 1 | 2,024 | 2024-04-30 08:30:00 | PayPal Holdings, Inc. | 112,732 | I don't know, Alex, do you want to talk through that a little bit.
James Chriss: Yes. Let me just sort of take a step back, Tien-Tsin, and talk about how we've been thinking about the year. You've heard us talk about this as a transition year. The way we've really been focusing the team is on sort of 3 different components to make sure that we're set up well for profitable growth into the future.
The first is accelerating innovation and ensuring that we've got best-in-class innovation, whether that's on the consumer side and ensuring that our customers have a frictionless, incredible experience in checkout; to an unbranded side where we allow our merchants to have, again, best processing available. So really accelerating the velocity of our innovation.
The second is adoption and ensuring that once that innovation is actually in the market, that our consumers are using it, that our merchants are onboarding to our latest and greatest integrations. I'll give you an example. We talked about in the last call the opportunity for debit card engagement. We changed the onboarding flow inside of the PayPal app this past quarter and saw a 69% higher debit card engagement just by changing that flow. So a big focus on the team on not just delivering our innovation but actually delivering the adoption.
And then lastly, as you mentioned, cleaning up some of our underperforming services. I mentioned Xoom on the call. That is a business that we looked at very hard. It's been underperforming for a couple of years now. And we wanted to make a decision on, is this an asset that's strategic to the business that should be a profitable grower for us, or not? And when we looked at it, we realized that there were just opportunities where we had priced ourselves out of the market in a number of different corridors that we could make strategic decisions on and actually make this a profitable, growing business. |
6,302 | PYPL | 1 | 2,024 | 2024-04-30 08:30:00 | PayPal Holdings, Inc. | 112,732 | And so that's just an example. We're going top to bottom throughout the organization. And there will be some businesses or markets that don't meet that cut, and we'll let you know when we make those decisions. And there will be other ones that, with focus and execution, we'll turn around.
Operator: Your next question comes from the line of Darrin Peller with Wolfe Research.
Darrin Peller: I think it would be helpful, if you don't mind, just first revisiting some of the initiatives around unbranded and your conviction and the timing around the impact from them on -- perhaps on transaction margin.
But maybe even more specifically, if you've had discussions with Braintree merchants around pricing, and I think you touched on this in the prepared remarks, but more pricing to value than pricing to win, how are those conversations going?
And I guess, Alex, market-wide, when we think about the appreciation of the value-added services and differentiator for PayPal's 2-sided network, how has that been resonating in the market lately?
James Chriss: Yes. Thank you, Darrin. So again, just to sort of paint the high picture on unbranded, this is an important segment for us, both on -- for enterprise and for small business. We have to nail the basics, right? So our customers are looking for the best auth rates, the best uptime, the best availability, the best reliability. And those are things that we are now providing.
And I think over the last few years, as we've been building the service, whether it's Braintree or now with PPCP, we've been investing in that and establishing a beachhead for our product across the market. In doing so, though, we also have been building value-added services that, to be totally transparent, we haven't been able to price to value or we haven't been able to ensure that we're engaged with our customers in a real end-to-end strategic conversation. That's changing now. |
6,303 | PYPL | 1 | 2,024 | 2024-04-30 08:30:00 | PayPal Holdings, Inc. | 112,732 | And so to your question, we're having great conversations with both enterprise and small business merchants around our end-to-end solutions, the value-added services that we can now bring to bear, really more strategic conversations, as you mentioned, around the 2-sided network, both on unbranded, on branded, and then even things like our new marketing and ad platform in the mix. We're now having really deep conversations with our merchants that, again, are strategic for them and extract the value that -- of the services that we're providing.
So very encouraged with these conversations. Obviously, it's going to take time. Especially for some of the largest merchants, it just takes time for them to roll out and adopt. But our teams right now are, as I mentioned on the call, in L.A. with our Customer 360 conference and showing them all the innovations and having really, really good conversations. So encouraged with the start. It's just going to take time throughout the year.
Operator: Your next question comes from the line of Timothy Chiodo with UBS.
Timothy Chiodo: I wanted to [indiscernible], 2 parts really, one around mechanics, one around the uplift. On the mechanics, there might be 2 ways to go about this. One is to make it a part of your unbranded offering, and it could be either part of your negotiations on pricing, it could be a separate fee. But any way you look at it in that scenario, would be more of an, if Fastlane, then Braintree does the processing. But the alternative way would for it to be more of an as-a-service and available on a processor-agnostic basis. Wanted to see, first, if you can give us color on which routes you might be able to take, or maybe both.
And then lastly, on the uplift, which is if we think about the range of net take rates with unbranded at the low end and branded at the high end, where do you think Fastlane could eventually reside on that spectrum? |
6,304 | PYPL | 1 | 2,024 | 2024-04-30 08:30:00 | PayPal Holdings, Inc. | 112,732 | James Chriss: Yes. Thanks, Tim. Let me take the first part and see if Jamie wants to add anything in. We are really excited about Fastlane as it now gets to market. We are live with a handful of early partners, and the results just continue to impress.
And just as a reminder, we're now enabling 80% conversion rate for returning users through our guest checkout flow. What's even more exciting, that we've now been able to start to see with these early merchants, is that we're actually seeing unrecognized users, so these are non-PayPal users, opting in to Fastlane at a 40% rate.
That just shows the power of our brand, and it shows the power of what PayPal can be. And it goes a little bit to your question around how we think about pricing it and how we think about go-to-market because it's even beyond just an unbranded processing element. I don't want to unveil exactly how our go-to-market will work. But that data point shows that this is not just within a PayPal ecosystem. This is allowing us to actually take the brand that we've established over 25 years and leverage that for our merchants to deliver incredible checkout conversion rate for the 60% of the market that continues to go through a guest checkout experience. So we're really encouraged by the early signs there.
In terms of rollout and how we think about it, obviously, on the PPCP side, as we continue to deliver Fastlane to that platform through many of our platform partners, it becomes easy for our small businesses to, one click, turn that on. So that will be a big part of our rollout. And then having good merchant conversations as well on the large enterprise side. And again, those are kicking off really in earnest this week at our C360 conference.
So again, the last thing I'd say just on pricing, and then, Jamie, see if you want to add anything, is because we've focused this year on a transition year, we may get very aggressive on the pricing side when it comes to Fastlane for 2024 because we want to drive adoption. |
6,305 | PYPL | 1 | 2,024 | 2024-04-30 08:30:00 | PayPal Holdings, Inc. | 112,732 | We think this is the best in the market innovation that all merchants should have access to. And as they think about winning this shopping season, our encouragement is improve the onboarding for them, create low-code, no-code opportunities for them to get up and running as fast as possible so that they can win this season and really prove to themselves that conversion improvement. And rest assured, we'll be pricing to value over time to ensure that we get the right value from that.
Jamie, anything you'd add?
Jamie Miller: No, I think you've said it all. I really think Fastlane reinforces our holistic value prop, both for branded and for unbranded. And the focus on merchant checkout conversion, and that being at our core, I think, drives a strong value prop, and it will support strong pricing over time.
James Chriss: The only thing that I would -- just last point is this conversion rate with Fastlane, what's so exciting to me is not just the 40% that's coming in, it's unrecognized users leveraging our brand and the 80% conversion rate of guest checkout for returning users. But this is just early days. This is with a handful of merchants.
This is a network effect. As we gain more and more users coming through, as these users now become returning users over and over again, those rates should continue to improve. And so this is already an order of magnitude better than anything else in the market. And with the network effect and scale that we have, we just expect it to continue to get better.
Operator: Your next question comes from the line of Ramsey El-Assal with Barclays.
Ramsey El-Assal: Alex, could you comment on the European Commission ruling to open up the iPhone NFC hardware on the handset, and whether you see that as a competitive opening for PayPal in Europe? I know there's some rumblings in the U.S. as well about that type of a move. I mean, how ready from a product perspective are you to take advantage of a more open NFC environment? |
6,306 | PYPL | 1 | 2,024 | 2024-04-30 08:30:00 | PayPal Holdings, Inc. | 112,732 | James Chriss: Yes. Thank you for the question, Ramsey. So let me set the context so that it's clear how we think about it. First, we must play in an omnichannel world. We have established ourselves as the leader in the market in online. And our customers love us and use us globally for online checkout.
But they are demanding an off-line opportunity, an omnichannel opportunity, and to get the value that we're able to provide as we start to deliver not only the basics of our security and flexibility, but also as our rewards platform continues to improve, we want to be able to deliver a PayPal service for customers everywhere, anytime, every purchase. So we will be playing in an omnichannel environment.
That -- where there are locations where NFC opens up, that obviously becomes a very easy opportunity for us to provide a wallet in an Android or iPhone operating system, and we will be ready. If there are environments where it's not available, we will still operate in an omnichannel.
So omnichannel is a strategic initiative for us, it's something that is customer-backed and delivers an incredible PayPal experience, again, for every purchase and every checkout. And we'll take advantage of whatever market, whatever features and functionality we have in whatever market we play in.
Operator: Your next question comes from the line of Jason Kupferberg with Bank of America.
Jason Kupferberg: I just had a 2-part question. The first, just following up on the transaction profit dollar growth. I know you're now expecting slightly positive for the year. I guess that would seem to imply maybe a little bit of deceleration from the Q1 levels, even though the second half comps are a little easier. So just wanted to get a sense of whether that's conservatism or just some normalization of things like transaction and loan loss that helped you in Q1.
And then the second part is just is there any change in your full year expectations for branded payment volume growth? |
6,307 | PYPL | 1 | 2,024 | 2024-04-30 08:30:00 | PayPal Holdings, Inc. | 112,732 | And then the second part is just is there any change in your full year expectations for branded payment volume growth?
Jamie Miller: So just to walk through a little bit of the first half, second half dynamics on transaction margin dollars. As I talked about before and you noted, I mean, Q1 in particular benefited from a few tailwinds. And we do expect those will be less meaningful as we move throughout the year.
First of all, the growth in our interest income on customer balances, it was the largest contributor. But when you start to look at later in the year, the comps just get more challenging. Rates are rising in the latter half of last year.
We also saw improvement in transaction loss and credit loss in the first quarter. Transaction loss in particular may not sustain -- or may not be as material as we move throughout the year. And we saw, as you pointed out, a meaningful benefit in loan losses in the first quarter, and we don't expect that to continue either.
So I'd say those few things are some of the dynamics. And then our initiatives and some of the new innovation that Alex talked about, it will take time to ramp. So right now, we're focused on execution. We want to keep expectations measured until we see really steady execution results.
James Chriss: And just to underline Jamie's point, we have not put -- or we have put limited upside to this innovation that we've talked about in these expectations. And so again, this is about us having the flexibility, us ensuring that we take the right time and do the right thing by the customers as well as building the long term. But those are not built in to the rest of the year.
Jamie Miller: Yes. And you asked about branded as well. And when we look at that, we had a nice quarter in terms of TPV and revenue. It was a healthy contributor to our transaction margin dollars. We did have some benefit this quarter from leap day. But by and large, we expect branded revenue trends to be pretty consistent with last year as we look at that. |
6,308 | PYPL | 1 | 2,024 | 2024-04-30 08:30:00 | PayPal Holdings, Inc. | 112,732 | And I guess the other comment I might make is that, when you think about take rate for us, we saw a decent drop last year. We do expect take rate will come down again this year, but not nearly to the same extent. And a little bit of that as it comes through on the branded trend line is just that we're seeing a little bit of mixing towards large enterprise from SMB. And that's impacting the take rate side.
Operator: Your next question comes from the line of Mike Ng with Goldman Sachs.
Michael Ng: Just 2 for me. First, I was just wondering if you could just talk a little bit more about the drags on the smaller part of -- from the smaller part of the portfolio and transaction margin dollars. When does that kind of work itself out of the system?
And then related to transaction margin dollar growth, you talked about balance-funded Venmo transactions contributing to growth in the quarter. Could you expand a little bit on that? Do you see that scaling over the next couple of years? And what are the opportunities to improve card attach for Venmo users?
Jamie Miller: Great. On the smaller parts of the portfolio, I guess what I'd say at a macro level, we had seen a pretty significant drag on that last year. It is coming through this year at a smaller rate. I mean, part of these are products we've deprecated. Some of these are, frankly, acquisitions that we just haven't invested in. And as Alex mentioned, we're going through a process of really looking hard at these.
Candidly, some are just in decline, but the declines are smaller. And some, we're investing in or making decisions to really put in more in maintenance mode, which is really shifting the profile going forward. But it will be smaller this year, and it will take a few years for that to burn off. |
6,309 | PYPL | 1 | 2,024 | 2024-04-30 08:30:00 | PayPal Holdings, Inc. | 112,732 | James Chriss: Yes. Let me talk about -- up-level and talk about Venmo for a minute and the opportunity there. So again, on the positive side, we have the leading P2P platform with incredible customer base with disposable income 22% higher than the U.S. average, 60 million monthly active users and 90 million 12-month actives. So this is an incredible platform for us to work at.
As we talked about in previous calls, and I'll reiterate here, I'm dissatisfied in how we've really thought about monetizing the platform and really thought about delivering, in many ways, just customer experiences that they're looking for, right? Customers of Venmo are looking for dollars and looking for an alternative to traditional mechanisms when dollars are flowing in. And they want to be able to use Venmo for all of their expenses.
Just to give you -- put some numbers behind it. There's $18 billion of net new funds that flow into the platform of Venmo every single month. 80% of those dollars leave within 10 days. That is just unacceptable.
And so our ability to provide the products and services that our customers need when those dollars come in, whether that's improving debit card penetration, which you've heard as a focus, and you've heard we already, in some of our onboarding flows, are starting to make significant improvements on; or providing other opportunities for money in or money out opportunities and access to capital for our Venmo users. This is just a clear opportunity and a clear focus area for us.
So again, early days. The team is focused on it. Hopefully, you hear sort of a reinvigoration in my voice of what Venmo can be and the opportunity ahead of us. But very, very excited about where we're taking it.
Operator: Your next question comes from the line of Bryan Keane with Deutsche Bank. |
6,310 | PYPL | 1 | 2,024 | 2024-04-30 08:30:00 | PayPal Holdings, Inc. | 112,732 | Operator: Your next question comes from the line of Bryan Keane with Deutsche Bank.
Bryan Keane: Solid first quarter results here. My question is just still more on the big picture. The naysayers on PayPal would say the company is structurally challenged with the rise of payment methods like Apple Pay. Alex, I know you've been at PayPal now for a little over 6 months. What do you think the naysayers are missing on the competitive advantages PayPal still has in the market? In particular to grow branded?
James Chriss: Thank you, Bryan. Thanks for the question. So a couple of thoughts here that I think people are maybe not appreciating enough. The first is 60% of the market is still what I would consider to be nonconsumption. 60% of the market still does not use any mark. So that's what we're playing for.
We have the best brand. We have the best products and services and the best ability to be able to deliver. And with products like Fastlane not only delivering a reboarding opportunity for our customers, but that stat that I put in earlier, around 40% of unrecognized customers coming through and taking a Fastlane experience, now gives us an opportunity to be able to remarket to them and turn them into PayPal customers.
So step one, 60% of the market is nonconsumption, and I think we've got a leading opportunity there. On the other 40%, we're still the leading player. And to be, again, transparent and I've said this before, we have not delivered the innovation and the experience that I would expect and that our customers expect.
We are doing that now. Improvement in the app, an improvement in the branded experience, reducing latency by 50%. Investing in passwordless opportunities and passkeys will improve the conversion rate and improve the experience. And then creating value-added opportunities and an increased value proposition for our consumers with rewards. I think we're the only player out there at the scale that we have to provide that end-to-end experience. |
6,311 | PYPL | 1 | 2,024 | 2024-04-30 08:30:00 | PayPal Holdings, Inc. | 112,732 | And again, we provide everything for our customers. It's rewards. It's Buy Now, Pay Later. It's the debit experience. And back to what I mentioned earlier on the call, with an omnichannel play now, PayPal can be the solution that you can use anytime, anywhere.
So our ability to now start to play in an offline world and take the same brand and the same experience to every purchase, I think, is something that, again, gets me excited. But we've got to prove it, and we've got to continue to execute and create great experiences in the market for our customers.
Bryan Keane: That's great. And just had one follow-up. We are getting a few questions on the pending CFPB regulation on late fees. Any impact on PayPal from CFPB caps on late fees?
Jamie Miller: So first, while PayPal is not directly impacted by that regulation, we are indirectly impacted through our revenue share with our consumer credit partner. There's a lot of uncertainty right now around both timing and implementation of that. And as I mentioned before, our guide excludes the impact of that, just given the uncertainty.
The industry expects that, if implemented, the impact would be largely offset over time. And we have been very focused on mitigation. We have actions underway. In -- but really, in any scenario, it takes time for those offsets to fully set in. But I guess what I'd say in terms of impact is the date that's being debated right now is the May 14 implementation date. And if that were to be implemented, it would be approximately a 3 percentage point impact to EPS growth for the year, but that is before mitigation. So by 2025, we would expect roughly half of that impact to be offset, and then more over time.
Operator: Your next question comes from the line of James Faucette with Morgan Stanley. |
6,312 | PYPL | 1 | 2,024 | 2024-04-30 08:30:00 | PayPal Holdings, Inc. | 112,732 | Operator: Your next question comes from the line of James Faucette with Morgan Stanley.
James Faucette: Wanted to go back to Fastlane. And Alex, you made the comments around making Fastlane available to all merchants and deriving -- so that they can derive the benefits of it. How should we think about that in terms of what needs to be done, timeline for progression, et cetera? It sounds like you're going to start moving beyond at least those initial merchants that are using it now. But just trying to think about like how that ultimately could end up with most of the first -- the merchants served by Braintree, and then ultimately, the merchants served by PayPal more broadly.
James Chriss: Yes. Thanks, James. Here's the best way to think about it. First and foremost, we have to have the best innovation in the market. We -- it was important for us to get some early customers up and running and using it. And the data continues to hold and certainly delight these merchants.
And look, in this world, they all talk to each other. And so the ability for our merchants to now be rabid fans of the checkout conversion improvement that they're seeing through Fastlane is great proof points for us as we now start to scale it, and again, think about price to value.
The second leg will be, okay, now that we've proven this out and we've started to really -- I mean, just to be clear, we're talking about driving conversion rate for some of the largest merchants in the world. We need to make sure that this was proven and that it works before we roll this out at scale. There's a lot on the line to be able to nail this, which is why we're moving at a measured pace and ensuring that, in Q1 and Q2, we've really proven it out. |
6,313 | PYPL | 1 | 2,024 | 2024-04-30 08:30:00 | PayPal Holdings, Inc. | 112,732 | The conversations we're having at our C360 conference right now, the conversations we're having with some of our PPCP platforms that are now rolling it out to small businesses, is okay, what is the way that, as we get to the second half of the year, we can really enable the merchants to have this up and running so that they can win the shopping season, holiday season in the back half of the year?
So that's how we're thinking about it. Merchant demand is very encouraging. As you would imagine, when you have a product that improves conversion rate and provides a double-digit lift in guest checkout conversion, that's a game-changer. And so demand is high. We want to make sure that we have as low friction and onboarding experience as possible, which is why we wanted to make sure that the ability for folks to upgrade to new integrations would make sense and be easy for them. And we wanted to make sure that customers could onboard.
So the plan is, back half of the year, get as many merchants on so that they can win the holiday season. This will still take time. Not everyone will get on for this holiday season, and we expect that will continue into 2025.
But at some point, there will be a tipping point. If I think about over the next year or 2 years, where we are going to expect all of our merchants to be on the latest and greatest integration, which includes Fastlane. And we will then move to deprecate our old integrations. And that's going to be an important milestone for us as we take what is really 15 years of legacy integrations and consolidate them on a more modern stack and a more modern integration for our customers. That allows us to continue to build innovation, continue to drive the best experiences for merchants, for customers, and obviously the best transaction margin results for the company as well. |
6,314 | PYPL | 1 | 2,024 | 2024-04-30 08:30:00 | PayPal Holdings, Inc. | 112,732 | James Faucette: That's great. Appreciate the color there, Alex. And then you mentioned you're getting a little bit of improvement in Venmo transaction margin. How much of that is coming from increased acceptance of Venmo as a payment option versus finding ways to reduce costs in transacting Venmo and P2P transactions, et cetera? Just trying to understand kind of what the drivers there are and what the potential could be.
James Chriss: Yes. It is a combination. What I'd say is we're seeing Pay with Venmo really starting to take off. Obviously, it's -- in the U.S., it's an incredibly well-loved brand. And when people see that button, it's an opportunity for them to use those dollars that I mentioned earlier that are in their account. So that's an exciting piece online.
The piece that, again, I'm sort of dissatisfied with but excited about the future is the offline piece, right? When I talk about omnichannel, it's for PayPal and for Venmo. And so those billions of dollars that are coming in every month into the Venmo ecosystem, we have to continue to give our customers opportunities, whether it's debit card penetration or other innovation that we come up, with for them to be able to tap and pay and check out. And so all of that will move towards improving transaction margin.
That said, we're also getting better with our risk models and leveraging AI. We are -- there's a lot of AI conversations in the market. I would say we are one of the leaders when it comes to leveraging the data that we have at scale to improve our transaction losses, improve the customer service ability for our customers and improve our transaction margin over time.
So still, again, early days. There's a lot of work to continue there. But again, my excitement for the path and the direction for Venmo is pretty high.
Operator: That is all the time we have for questions. I will turn the call back to Alex Chriss for closing remarks. |
6,315 | PYPL | 1 | 2,024 | 2024-04-30 08:30:00 | PayPal Holdings, Inc. | 112,732 | Operator: That is all the time we have for questions. I will turn the call back to Alex Chriss for closing remarks.
James Chriss: Fantastic. Thank you, Sarah. And thanks, everyone, for joining us today. As you can tell from our results and the comments today, we're making steady progress on our transformation efforts. We had a good first quarter, and we are deep in execution mode. And with time, we will return this company to profitable growth that I know we can deliver. So thank you all.
Operator: This concludes today's conference call. You may now disconnect. |
6,316 | PYPL | 1 | 2,025 | 2025-04-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Operator: Good morning and welcome to PayPal’s first quarter 2025 earnings conference call. My name is Pauly and I will be your conference Operator today. As a reminder, this conference is being recorded. I would now like to turn the program over to your host for today’s conference, Steve Winoker, PayPal’s Chief Investor Relations Officer. Please go ahead.
Steve Winoker: Thanks Pauly. Welcome to PayPal’s first quarter earnings call. I’m joined by CEO, Alex Chriss and Chief Financial and Operating Officer, Jamie Miller. Our remarks today include forward-looking statements that involve risks and uncertainties. Actual results may differ materially from these statements. Our commentary is based on our best view of the world and our businesses as we see them today. As described in our earnings press release, SEC filings, and on our website, those elements may change as the world changes. Now over to you, Alex. |
6,317 | PYPL | 1 | 2,025 | 2025-04-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss: Thanks Steve. We had a strong first quarter as we begin to execute on the strategy we laid out during our recent investor day. PayPal is transforming from a payments company to a commerce platform. This includes expanding to be available everywhere, whether it’s online, in store or agentic. This means moving from a one-size-fits-all experience to personalized experiences that leverage the vast data at our fingertips. We are developing a dynamic smart wallet that will allow consumers to make the smartest choice in how to pay and get rewarded. With this transformation, we are shifting from being purely a payments processor to an end-to-end strategic commerce partner for our merchants. Underpinning this is our work to converge into a single PayPal platform that unlocks the full potential of PayPal’s two-sided network in support of both consumers and merchants. This strategy is durable and positions us to win in the months and years ahead. Turning to Q1, we have so much to be proud of. Let me share just a few highlights. Our strategy is designed to improve PayPal’s profitability over time. In Q1, we delivered our fifth consecutive quarter of profitable growth with transaction margin dollars growing by 8%, excluding the impact from last year’s leap day. That growth was driven by multiple sources across our strategic initiatives, including omnichannel commerce, both online branded checkout and offline branded payment methods, Venmo, and PSP. As a result of this focus on profitability, non-GAAP earnings per share increased 23% year-over-year. Additionally, PayPal and Venmo are being used by more people, more often. Both total active accounts and monthly active accounts grew a healthy 2% in the quarter. Transactions per active account ex-PSP grew 4%, reflecting improved engagement in transaction growth in online branded checkout and Venmo. As we expand our offerings from online to everywhere, the best way to see the traction we’re gaining is through branded experiences at TPV. Branded experiences comprises |
6,318 | PYPL | 1 | 2,025 | 2025-04-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | everywhere, the best way to see the traction we’re gaining is through branded experiences at TPV. Branded experiences comprises volume from PayPal and Venmo online checkout, as well as branded in-store payment methods like debit and tap to pay. In Q1, branded experiences TPV grew 8% excluding last year’s leap day - that’s a full two points higher than branded experiences growth for the full year of 2024, highlighting the growing contribution of our omnichannel initiatives. It’s still early days, but we are very proud of this progress. Within branded experiences, we’re continuing to accelerate the rollout of our upgraded online branded checkout flows. This includes our simplified and modernized pay sheet design with streamlined log-in and reduced latency. Since the beginning of the year, we’ve driven a 25-point jump to more than 45% of U.S. checkout traffic. This shows we can execute, and we anticipate an even faster rollout for Europe starting in the second quarter. Finally, Venmo had another standout quarter. We hit an important inflection point for Venmo monetization with 20% revenue growth, driven by our push to make Venmo one of the best ways to pay online and in store. These are only a few examples of the strength we’re seeing in the execution of our strategy. We’re feeling the excitement of our innovations in the market and engagement from consumers and merchant partners, and we’re just getting started. As you can here, I’m encouraged by the momentum we are driving. We had a great start to the year and expect a solid second quarter, which would result in the first half coming in above our prior expectations. However, given it is early in the year and because of the current level of macro uncertainty, we are maintaining our guidance for the full year at this time. Jamie will provide more color on our results and guidance in her remarks. Let me now go into the details of the progress we’re making on our strategic growth drivers. Starting with win checkout, online branded checkout TPV, including PayPal and |
6,319 | PYPL | 1 | 2,025 | 2025-04-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | we’re making on our strategic growth drivers. Starting with win checkout, online branded checkout TPV, including PayPal and Pay with Venmo, grew nearly 6% this quarter, accounting for last year’s leap day. We’re proud of this growth and expect it to increase over time as more traffic flows through our upgraded experience. One of the main benefits of our upgraded experience is the modernized pay sheet, which improves the presentment of our full suite of payment options. This contributes to a personalized experience where consumers can more easily pay their own way, whether now with balance, cards, crypto, or Buy Now Pay Later. What we’re seeing is that as we improve the presentment of the BNPL and checkout, it’s being selected more often. In Q1, the BNPL volume grew more than 20% and monthly active accounts grew 18% year-over-year, highlighting the effectiveness of the new design and the strength of our value proposition. As a reminder, the NPL users spend 33% more on average and conduct 17% more transactions. BNPL is featured our latest marketing efforts with Will Farrell about PayPal’s flexible online checkout, and we are focused on winning in key markets. We will continue to lean into BNPL throughout this year with targeted consumer awareness campaigns in the U.K. and Germany and continued investment in other priority global markets, including Australia, France, Italy and Spain. Pay with Venmo is resonating well with consumers and merchants and is growing rapidly, with TBV increasing more than 50%. Monthly active accounts grew 30% as we increased merchant availability. For example, in January JetBlue became the first airline to accept Venmo for bookings. We’re seeing strong selection from Venmo’s valuable demographic at major brands such as Dominoes, Instacart, and TikTok Shop. I expect more demographic-relevant merchants to offer Pay with Venmo over the coming quarters. Let’s move to the progress we are making to become omnichannel, serving our customers everywhere they want to shop with PayPal and Venmo. As |
6,320 | PYPL | 1 | 2,025 | 2025-04-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | the progress we are making to become omnichannel, serving our customers everywhere they want to shop with PayPal and Venmo. As I noted earlier, branded experiences TPV grew 8% in the quarter, excluding last year’s leap day. This growth reflects our strategy to deliver flexible and rewarding experiences that connect consumers to the things and experiences they want and love wherever they shop. Today, our PayPal and Venmo debit cards are enabling our customers to use their balance to shop anywhere cards are accepted. Adoption is strong and growing with approximately 2 million first-time PayPal and Venmo debit card users in the quarter, an increase of nearly 90% from last year. Debit card TPV grew approximately 64% in the first quarter. Venmo debit card monthly active accounts grew nearly 40% and penetration has increased to 6% of Venmo MAAs. We are focused on getting these products into the hands of even more of our customers because they allow them to choose PayPal and Venmo as their way to pay more often. In the first quarter, users who adopted the PayPal debit card transacted nearly six times more and generated more than two times the average revenue per account compared to those who used online branded checkout only. There is also a halo effect where debit card users choose PayPal more often in online branded checkout. Our omnichannel strategy is showing early success in the U.S. and we are excited to replicate it internationally. We are on track to launch NFC capabilities in Germany later this quarter and bring PayPal everywhere to the U.K. in Q3. Moving to our PSP business, which remains a key driver of transaction margin dollar growth, we continue to build deeper relationships with the world’s largest brands and sell our strong suite of value-added services. That is a massive untapped and margin-rich opportunity. I’ll share two examples. We recently scaled our optimized debit routing with Wayfair and Upwork. This service routes eligible debit cards through lower cost debit networks, which helps merchants |
6,321 | PYPL | 1 | 2,025 | 2025-04-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | with Wayfair and Upwork. This service routes eligible debit cards through lower cost debit networks, which helps merchants reduce their transaction fees. Regal Cinemas has adopted our fraud protection advance service which allows merchants to leverage PayPal’s decades of fraud intelligence and advance machine learning to improve their risk decisions and capture even more revenue. Let me give you an example of how this focus on adoption of value-added services can improve the end-to-end relationship and margin profile of our largest customers. Recently we expanded our relationship with a long-time Braintree merchant. By focusing on price to value and processing, attachment of advanced risk capabilities and leading edge branded solutions like payment-ready API, we were able to improve merchant performance and profitability. We took this merchant from unprofitable to profitable, improving their transaction margin nearly 20 percentage points over the course of a year. These are the kinds of conversations we’re having that drive value for our customers and for PayPal. Because of the quality of our value-added services, we expect these types of improvements to continue over the next few years. For small businesses, we continue to migrate volume onto PayPal complete payments. Today, nearly half of SMB processing and checkout volumes is on this platform, which is steady progress from last quarter. Bringing more SMBs into the stack enables them to easily access our latest online branded checkout and new products like Fast Lane, and we’ve seen incremental product adoption increase by 33% as a result. Next, PayPal is leveraging our two-sided ecosystem in ways we’ve never before to innovate and build the future of commerce. Whether it’s AI, personalization, ads or crypto, we are providing our customers with the most advanced ways to engage in a shopping experience. These initiatives are in the early stages but unlock significant growth potential for us in the years ahead. Take AI, for instance. At investor day, I told you |
6,322 | PYPL | 1 | 2,025 | 2025-04-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | stages but unlock significant growth potential for us in the years ahead. Take AI, for instance. At investor day, I told you we were leaning into agentic commerce. I asked you to imagine what a future would look like where AI agents could bring up the right products at the right time and complete your purchase. Thanks to rapid developments, that future is here. Just a few weeks ago, we launched the industry’s first remote MCP server and enabled the leading AI agent frameworks to seamlessly integrate with PayPal APIs. Now any business can create agentic experiences that allow customers to pay, track shipments, manage invoices and more, all powered by PayPal and all within an AI client. As we speak, developers are gathering at our San Jose headquarters for our annual Developer Days. Every major player in AI is represented, providing demos and engaging with our developer community. The future of commerce will have a strong agentic presence and we’re excited about leading the charge. PayPal Ads is continuing to lay the foundation for a robust and highly differentiated ads business that will create more personalized shopping experiences. We’re leveraging our extensive cross-merchant transaction data and customer insights to develop a platform that improves discovery for consumers and helps merchants reach more shoppers. We recently expanded PayPal Ads internationally with our launch in the U.K., and today we are launching offsite ads, which are ads informed by our insights, placed outside of the PayPal platform. This will allow PayPal to help brands find the right user at the right time, and it is built with privacy in mind. We are working to rapidly accelerate advertiser on-boarding as we continue to grow Ads. Crypto is another area we’re making strides. We’re moving quickly to bring the benefits of crypto and stable coins to our customers and the industry. Last week, we introduced the ability to earn rewards for holding PYUSD. This will increase the adoption and use of digital currencies for everyday commerce, from |
6,323 | PYPL | 1 | 2,025 | 2025-04-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | to earn rewards for holding PYUSD. This will increase the adoption and use of digital currencies for everyday commerce, from sending money internationally to making purchases and more. We’ve also strengthened our relationships with major crypto players like Coinbase, so people can more easily access and use PYUSD. As I close my remarks, I want to again highlight how proud I am of our team and the focused execution and innovation we are driving. To reinforce this point, let me bring together Venmo’s strength in the first quarter as an example. We’ve leaned into Venmo and the investment is starting to pay off. The Venmo user base continues to expand and we’re growing monthly active accounts mid-single digits. Pay with Venmo TPV grew more than 50% and MAAs grew 30%. Venmo debit card MAAs grew nearly 40% and penetration has increased to 6% of Venmo MAAs - that’s up from 4% a year ago. When you add it all up, the Venmo business grew revenue by 20% - that’s sequential double-digit growth and the highest rate we’ve achieved in years. Our execution muscle is growing stronger by the day and we’re just getting started. To recap, we had a great first quarter. We are confident in our ability to execute the strategy we laid out as we entered the year. With our clear strategy, strong balance sheet, high free cash flow conversion and traction and execution, we have a solid foundation that allows us to navigate uncertain times and invest in our long term growth. With that, over to Jamie. |
6,324 | PYPL | 1 | 2,025 | 2025-04-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Jamie Miller: Thanks Alex. Moving to Slide 5, PayPal delivered a strong quarter to start the year. Our results reflect another positive step forward with multiple drivers contributing to an acceleration in profitable growth. We are improving our speed and focus across the organization, working hard to transform the company while improving our value proposition for consumers and merchants. Excluding interest on customer balances, transaction margin dollars grew 7% or 8% ex-leap day, accelerating from last quarter. We outperformed the TM dollars and EPS guidance we provided in February with upside driven by a combination of sources, including PSP profitability, Venmo, credit and transaction expense improvement, and a more favorable tax rate. Non-GAAP earnings per share were $1.33 in the quarter, up 23%, and PayPal generated $1 billion of free cash flow in the first quarter, bringing trailing 12-month free cash flow to $6 billion. Adjusted free cash flow, which excludes the net timing impact between originating and selling European Buy Now Pay Later receivables, was $1.4 billion in the first quarter and $6.2 billion over the past 12 months. Turning to Slide 6, total active accounts increased by about 1.5 million from the fourth quarter and over 8 million versus the prior year’s first quarter, to 436 million. Monthly active accounts continue to show steady progress, up 2% year-over-year to $224 million with contributions from PayPal consumer accounts and Venmo. Transactions per active account excluding PSP processing grew 4%. Moving to Slide 7, total payment volume grew 3% at spot and 4% on a currency-neutral basis to $417 billion. As we highlighted at our investor day in February, this slide now includes a simpler and more relevant TPV breakout. This view reflects how we think about our product portfolio today, the go-forward strategy, and our customer needs. Looking across these categories, we are encouraged to see signs that both consumers and merchants are expanding how and where they use PayPal. Winning |
6,325 | PYPL | 1 | 2,025 | 2025-04-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | we are encouraged to see signs that both consumers and merchants are expanding how and where they use PayPal. Winning checkout remains our most critical priority and our teams remain laser focused on advancing the many initiatives that reinforce our checkout business. In the first quarter, online branded checkout volumes grew more than 4% on a currency neutral basis, and excluding last year’s leap day which contributed over a point to growth, online branded checkout volumes increased nearly 6%. Branded experiences TPV, which includes online checkout, PayPal and Venmo debit, as well as tap to pay, grew 8% ex-leap day, accelerating from the prior year. We’re excited about this momentum as we work to drive greater awareness that both PayPal and Venmo are ways to pay anytime and anyplace. Ultimately, our goal is to form deeper consumer relationships, driving habituation across online and offline channels. Turning to PSP, which spans both large enterprise and SMB processing, as well as part of our VAS portfolio like payouts, invoicing and point-of-sale solutions, volume grew 2% compared to 6% in the fourth quarter. As we’ve discussed throughout the past year, the shape of this growth is intentional. We are prioritizing healthy, quality growth within our Braintree business and have made deliberate choices to shift away from unprofitable volume. Shifting away from this volume pressures gross revenue but is accretive to transaction margin dollars and should result in more than one point of TM benefit this year. We continue to expect this benefit to build over time as we drive more value-added services. Moving to more financial detail on Slide 8, transaction revenue was flat on a spot basis or up 1% on a currency neutral basis to $7 billion, driven primarily by branded checkout, Venmo and SMB processing. This growth was offset by the shift away from unprofitable Braintree volume that I just mentioned. Importantly, other value-added services revenue grew 17% to $775 million, driven primarily by healthy performance in |
6,326 | PYPL | 1 | 2,025 | 2025-04-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | mentioned. Importantly, other value-added services revenue grew 17% to $775 million, driven primarily by healthy performance in consumer and merchant credit. We ended the quarter with $6.5 billion in net loan receivables, up 1% sequentially, and we continue to be pleased with the quality, the diversification and the performance of our credit portfolio. We take a prudent approach to managing the portfolio’s exposure and our goal is to sustain a balance sheet-lite business model while providing our customers with more ways to manage their cash flow, spending and borrowing needs. Transaction take rate declined by six basis points to 1.68%, driven largely by product and merchant mix. The two largest drivers of this change were momentum in payouts and shifting away from unprofitable volume on Braintree, some of which carries a higher gross take rate due to card funding. There was also impact from faster growth of large enterprise volume within branded checkout, adoption of the PayPal debit card, and growth of Venmo and PayPal P2P. These are positive trends for our business, demonstrating the relevance and importance of PayPal to consumers and merchants around the globe, as well as the progress we are making to improve profitability. Our focus on profitable growth and the progress we are making across our strategic growth drivers is most clearly demonstrated by the acceleration and transaction margin dollar growth that we have delivered over the past year. Branded checkout, PSP and value-added services, credit and Venmo were all meaningful contributors to transaction margin dollar growth in the quarter. These drivers also include improvement in transaction expense. Transaction margin rate increased by more than 270 basis points year-over-year, reflecting our focus on price-to-value and profitable growth. Non-transaction related opex increased 2% as we continue to actively manage our cost structure while reinvesting in key growth initiatives. This includes marketing to support the rollout of new products and |
6,327 | PYPL | 1 | 2,025 | 2025-04-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | cost structure while reinvesting in key growth initiatives. This includes marketing to support the rollout of new products and initiatives. Non-GAAP operating income grew 16% in the quarter to $1.6 billion, and non-GAAP operating margin increased about 260 basis points to 20.7%. In the quarter, we completed $1.5 billion of share repurchases, bringing share repurchases over the past four quarters to $6 billion. Finally, we ended the quarter with $15.8 billion in cash, cash equivalents and investments, and $12.6 billion in debt. Moving to guidance on Slide 9 for the second quarter and the full year of 2025, our teams are focused on execution and capturing the opportunity in front of us. We are confident that our scale, diversification and balance sheet enable us to keep advancing our strategic growth drivers through different operating environments. As we continue making progress on PayPal’s transformation, we have multiple growth levers and are well positioned to help merchants and consumers navigate the environment. Importantly, with a strong first quarter behind us and a good start to the second, we believe we are on pace to outperform our original expectations for the first half of 2025. At the same time, given uncertainty in the environment and the potential for a wide range of outcomes, we are appropriately cautious. Consumer spending and the labor market have proven resilient, but it remains to be seen how tariffs and other trading friction will impact global economic activity, consumer spending, and supply chains over time. As Alex mentioned, despite our strong start to the year, we’re maintaining our full year guidance, and this guidance now implicitly builds some incremental flexibility into the second half of the year from macroeconomic uncertainty. Throughout different macro environments, we will remain focused on making the right long-term decisions for the business, striking an appropriate balance between investment and productivity. For the second quarter, we expect low to mid single-digit revenue |
6,328 | PYPL | 1 | 2,025 | 2025-04-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | an appropriate balance between investment and productivity. For the second quarter, we expect low to mid single-digit revenue growth on a currency neutral basis, which is impacted by the Braintree renegotiation efforts I discussed earlier. We’ve seen a good start to April and are watching trends closely. Tariff-related concerns and news flow have likely resulted in some spend being pulled forward for certain verticals in the U.S. We are not assuming that those higher activity levels persist for the entire quarter. We expect second quarter transaction margin dollars to be between $3.75 billion and $3.8 billion, which represents 4.5% growth at the midpoint. Excluding interest on customer balances, we expect transaction margin dollars to increase by approximately 6.5% at the midpoint. We are planning for mid single-digit non-transaction opex growth in the quarter due to the timing of initiatives and marketing spend, and we expect to deliver non-GAAP EPS in the range of $1.29 to $1.31, or 9% growth at the midpoint. For the full year, we are maintaining our guidance as I mentioned earlier, and I’ll just highlight a couple of lines. Excluding interest on customer balances, we expect transaction margin dollars to grow by at least 5% compared to 4.6% growth in 2024, and we expect to deliver full year non-GAAP EPS in the range of $4.95 to $5.10, representing about 8% growth at the midpoint. This includes negative impact from lower interest rates and compared to our guidance a smaller headwind from our expected non-GAAP effective tax rate. Our guidance continues to assume approximately $6 billion in share buybacks for the full year, and we continue to expect full year free cash flow of approximately $6 billion to $7 billion. I’d like to wrap up by thanking the PayPal team for their continued focus and dedication. We have a solid foundation to build on as we execute on the second year of PayPal’s transformation. With that, back to you, Alex. |
6,329 | PYPL | 1 | 2,025 | 2025-04-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss: Thanks Jamie. To summarize, we had a great start to the year and our strategy is taking hold. We’ve built a solid foundation and have multiple ways to win. A huge thank you to the PayPal team for their focus on delivering for our customers and our business. Steve, let’s go to Q&A.
Steve Winoker: Before we open the line, I’d ask everyone in the queue to consider your fellow analysts and ask just one question, so we can get to as many people as possible. Pauly, please open the line.
Operator: [Operator instructions] Your first question comes from the line of Tien-Tsin Huang from JP Morgan. Your line is open.
Tien-Tsin Huang: Hi, thanks for the progress report here, lots to talk about. Just wanted to maybe ask the obligatory macro question, if you don’t mind. I’d love to hear a little bit more on how you’d characterize consumer and SMB health overall. I know you touched upon it a little bit, but is the macro, the geopolitical stuff that’s going on in the world, is that changing enough for you to reorder some of your priorities? It does sound like you’re leaning harder into BNPL and Venmo, but yes, just a broader macro question. Thank you. |
6,330 | PYPL | 1 | 2,025 | 2025-04-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss: Hey Tien-Tsin, thanks for the question. I wouldn’t say we’re reordering any priorities, and I don’t think we’ve--you know, we’re obviously watching it very closely to see what plays out, but things have been pretty consistent so far. Obviously we think there’s an opportunity - you mentioned Buy Now Pay Later. We think with our strong position there and strong product, there’s obviously an opportunity to continue to lean in. I think from a consumer standpoint, we’ve been building over the last few quarters to really be the most rewarding way for consumers to pay, and we think that’s an opportunity for us to continue to get our message out - you know, our rewards coming back on debit card, the rewards we just put out on crypto. These are things that put more money in the pockets of consumers, and that’s a positive thing and an opportunity for us. On small business, again we know that cash flow is the most critical part for small businesses. We haven’t seen a big impact yet, but as they think about money-in, money-out, and access to capital, we know that we have tremendous strength when it comes to providing capital to our small business customers, and we think we can be a place for them to come in times of need. But I’d say we’re still early and we haven’t seen any big shifts yet, but we feel confident in our position if those things happen. |
6,331 | PYPL | 1 | 2,025 | 2025-04-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Jamie Miller: Yes, and Tien-Tsin, I would just add that when you look just at the core credit portfolio as a monitor of some of your question around consumer health or merchant health, we monitor that very closely. Charge-off rates are stable and, in some cases, improving, and in particular with respect to the consumer portfolios, we’ve actually seen delinquencies over the last 30 days improve. Also as it relates to just broader consumer trend, the first part of April we saw an uplift as well in terms of TPV, and a lot of folks have referenced that as pull-in; but when you look at just general consumer health coming into what could be a more uncertain time, it’s looking pretty healthy and pretty good. Then with respect to SMB, good continued consistent performance there too, and on the merchant lending side as we monitor that, honestly, pretty consistent with what I’d say about consumer charge-offs, also improving. Obviously we’re monitoring the whole thing very, very carefully, but it looks pretty steady right now.
Operator: Your next question comes from the line of Dan Dolev from Mizuho. Your line is open.
Dan Dolev: Hey guys, great results here. Really appreciate it. Can you give us a sense of--it looks like the branded experience TPV strategy is doing really well. Can you give us maybe a sense of how much traction you’re getting there and what you’re doing to get those nice results? Thanks again. |
6,332 | PYPL | 1 | 2,025 | 2025-04-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss: Yes Dan, let me start. Good to hear from you. This is the strategy that we’ve laid out really coming to life. First, we have a branded checkout strategy that is really about driving habituation everywhere that a customer wants to pay. We have such strong brands in both PayPal and Venmo, and our customers are asking to be able to leverage that trust, the safety, the brand, the rewards in every purchase that they make. We’ve been focused on not only improving that online experience that we’ve talked about, and I’m sure we’ll talk about more, making it available for them exactly how they want to pay, whether that’s immediately or with a pay later scenario with Buy Now Pay Later, but then also offline. You mentioned branded experiences - this really is enabling our PayPal debit card or our Venmo debit card to be accessible to our consumers. We saw PayPal debit card TPV growth over 100% in Q1, and that really is driving habituation. This is driving our consumers to actually start to come back, move online, and start to pay with PayPal wherever they see it, so the strategy is working, TPV up 8% overall in branded experiences, and this really is the metric that we are focused on, and we hope you’re focused on as well because, again, it is really all about the strategy that we’ve laid out.
Operator: Your next question comes from the line of Ramsey El-Assal from Barclays. Your line is open.
Ramsey El-Assal: Hi, thank you very much for taking my question this morning. I wanted to ask about the de minimis tariff exemption for China - I think that’s scheduled to be eliminated on May 2. Do you expect an impact from that, I guess, and if so, if you could help us dimensionalize the impact, I’d appreciate it. |
6,333 | PYPL | 1 | 2,025 | 2025-04-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Jamie Miller: Yes, good morning. Obviously the whole situation around tariffs is really changing daily, and there is multiple scenarios that could unfold. Maybe I’d first start by saying, I think we come into this from a position of strength. We are globally diversified, our merchant base, our region base, it’s just very, very global and diverse, and we’re well positioned to capture shifts in spending as they happen. The other thing I would just add is in particular in the U.S., we are about 50/50 between retail and services, so diversification there as well. But when you talk about de minimis, the way I’d size that for you, our Chinese merchants selling into the U.S. is less than 2% of our branded checkout TPV, and this includes both direct China to U.S. cross-border transactions and volume from Chinese merchants with U.S. entities, but where they’re shipping from China. From that perspective, that’s probably how I’d size it there.
Operator: Your next question comes from the line of Darrin Peller from Wolfe Research. Your line is open.
Darrin Peller: Hey guys, thanks. Maybe just go a little further, if you don’t mind, into what’s embedded in your outlook around KPIs and modeling assumptions. Totally understand not changing guidance despite the beat, but if you could help us with assumptions on the macro front of what you’re embedding in your outlook, especially around cross-border and China, and just what we should think about being included, as well as just even give us a little more color on branded growth expectations. What are you seeing specifically in April right now from a branded growth rate standpoint, and then branded versus unbranded growth as the year progresses would be really helpful. Thanks guys. |
6,334 | PYPL | 1 | 2,025 | 2025-04-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Jamie Miller: Sorry Darrin - I’m just writing down all your questions here. Let me start with the macro question. I think Alex was alluding to this before, but I would start by saying as we look at this year, we are laser focused on what we can control, staying focused on delivering for customers, and really executing around our core initiatives and our investments. When we look at the macro and forecasting, it’s really difficult to predict which way all these scenarios could land. I would just say maybe that we’re prudently guiding, so despite a strong first quarter and second quarter guide, we’re maintaining our full-year guide, just given the macro uncertainty. It builds in room for a range of consumer activity softening in the second half. Overall, I’d say it covers about two to three points of deceleration in overall ecomm trends in the second half, which is not what we see as run rate. Current performance is really trending well. But when you think about two to three points of ecomm, I think about that as two to three points of TPV plus some level of lower credit originations, maybe a little bit of credit losses, maybe some FBO impact or interest rate impact from some rates shifting. That’s roughly how I’d package it from that perspective. When you ask about April and branded trends, branded has had pretty consistent trending as what we saw in the fourth quarter. In April in particular, we saw some U.S. consumer activity accelerating. I mentioned before it’s likely a pull forward, we’re not assuming that continues. But all in, we’re on track for a mid single-digit branded checkout TPV guide, what we gave earlier this year. Then you also asked about branded and unbranded and how to think about, I think, the revenue side of that. Maybe I’ll just anchor there around the unbranded side of that. You saw that pull back this quarter - that was expected. That deceleration really began in the second half of last year. The one thing I would say about unbranded, or PSP and VAS, is that it’s been a very strong and |
6,335 | PYPL | 1 | 2,025 | 2025-04-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | in the second half of last year. The one thing I would say about unbranded, or PSP and VAS, is that it’s been a very strong and growing contributor to transaction margin dollars, so while revenue is shifting down, we’re seeing a nice contribution to TM as we really just shift that margin profile of the business over time. Second quarter on revenue, we expect pretty similar profile to the first quarter and then a second half ramp, and overall continuing to contribute to that transaction margin growth for 2025. |
6,336 | PYPL | 1 | 2,025 | 2025-04-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Operator: Your next question comes from the line of Jason Kupferberg from Bank of America. Your line is open.
Jason Kupferberg: Good morning guys, thank you. It looks like online branded, you were stable on an underlying basis here in Q1 at up 6%; but now, we’ve got almost half the U.S. on the new checkout experience, it sounds like Europe is on tap to start pretty soon, so could we start to see some initial acceleration in online branded volume growth by the end of this year, if the macro stays stable, and could you just give us a word on what the U.S. versus international branded split looked like in terms of Q1 growth rates? Thank you.
Alex Chriss: Hey Jason, thanks. Again, just to unpack our branded strategy, I’d really think about it as three parts. One is the improved branded checkout experience, and as you mentioned, we’ve moved very quickly, up now over 45% in the U.S. Again, that still is--you know, think of that as sort of low double-digits of our global transactions, and so we’re really excited--you know, we think we’ve got a really strong playbook now and we think as we start to roll this out into Europe, we’ll actually accelerate even faster; but our pay sheet redesign is holding, the improvement is holding, and now this is just about scaling. Second lever is really accelerating pay with Venmo, and you’ve seen the results there, so very fast flywheel starting to happen from a pay with Venmo perspective - TPV up over 50% and MAAs up over 30%. Then the third lever is Buy Now Pay Later and our pay later products, and again TPV up over 20%. You add all three of those together, and as we continue to see us leaning into those three levers, I don’t know the exact timing of when we’ll start to see branded checkout, but we put pretty strong growth numbers of 8% to 10% by 2027, and I think those three levers continue to give us confidence that we’re executing well and heading in that direction. |
6,337 | PYPL | 1 | 2,025 | 2025-04-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Jamie Miller: Then Jason, what I would just add to that, when you look at the pay sheet redesign, I would say we think about that as ramping over time. This is something that as things come on, transactions start flowing, it’s not something that is an immediate translation, and we do see impact coming through the numbers but it’s very small so far, so maybe that’s how I would position that piece of it. When you look at the U.S. and international, I guess I’d start with the U.S. by saying performing was relatively consistent with the fourth quarter. We are beginning to see good traction across U.S. MAAs, across TPA, across shifting to--you know, more upstream to more power users. Alex mentioned pay with Venmo, which has really had good traction there. It is early, but we talked in the fourth quarter about seeing some shifting in our U.S. branded checkout levels. We saw that hold again this quarter, watching it very closely but cautiously optimistic about that. Then on the outside the U.S. side, relatively consistent as well, a little bit of macro volatility across the markets. But in Europe, we continue to take share in continental Europe, including in Germany - you know, really strong brand presence, as you know, across merchants, across consumers. I think what we’re really excited about is that we’re bringing our new product innovation to the market in Europe starting this quarter, so we’ll start with Germany and the U.K., and this is the checkout redesign, it is Buy Now Pay Later, it is omni and NFC launches, and brand marketing to accompany all of that with a fast follow to other countries after that. I think the overall look right now, we feel pretty good about branded checkout and just laser focused on our execution.
Operator: Your next question comes from the line of Andrew Schmidt from Citi. Your line is open. |
6,338 | PYPL | 1 | 2,025 | 2025-04-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Operator: Your next question comes from the line of Andrew Schmidt from Citi. Your line is open.
Andrew Schmidt : Hi Alex, hey Jamie - good morning. Thank you for taking the questions. Maybe we could switch gears to the consumer side. I was wondering if you could just talk a little about the PayPal Everywhere program - obviously some rich rewards across categories there, but could you talk a little bit about the halo effect, if any, that you’re seeing outside of those categories? I’m curious about adoption and spend trends with that program now that it’s been in place for some time. Thank you so much. |
6,339 | PYPL | 1 | 2,025 | 2025-04-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss: Yes, thank you Andrew. Again, what you mentioned is exactly what we’re starting to see. Just as a reminder, rolled out PayPal Everywhere, we really launched it in August-September of last year. Since then, 4 million new debit card active, so really starting to see strong demand from our consumer base that loves the brand and wants to be able to use PayPal everywhere that they shop. TPV growth, again up over 100% in Q1 with attractive economics in offline as well, so it’s not just delivering the habituation that we want for every purchase, but the offline spend is actually quite attractive. What’s exciting is, though, that halo effect, so we’re starting to see that debit card users have a 5.5% to 6% lift in transaction activity and over 2x increase in average revenue per active user, versus just a checkout only. This is the strategy starting to take hold. This is a user that’s now becoming habituated with PayPal. They’re enjoying their rewards in a category of their choice. We’re also starting to see the spend and the category demand actually extend to other categories outside, so we started with things I mentioned in the past - gas, groceries, restaurants, things that consumers have never used PayPal for before. Now, we’re starting to add new everyday spend categories like ride share and transit, so demand is really strong from these consumers. We’re starting to see the halo effect of not just offline but now moving into online, and again this is why this all comes back to this habituation and this branded experience journey that we think is going to work, first in the U.S. and then as Jamie just mentioned, really excited to see this roll out in Germany and then the U.K, with Germany as an example coming this quarter. We’ve got some really exciting Buy Now Pay Later opportunities which are, I think, going to be very, very powerful in a market that has traditionally not been a credit market but one that’s been connected to bank, that we think we can come in with our already connected bank product and |
6,340 | PYPL | 1 | 2,025 | 2025-04-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | a credit market but one that’s been connected to bank, that we think we can come in with our already connected bank product and actually give consumers the ability to make the purchases they need on a Buy Now Pay Later product. Again, lots of exciting innovation coming and the flywheel starting to spin. |
6,341 | PYPL | 1 | 2,025 | 2025-04-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Operator: Your next question comes from the line of Harshita Rawat from Bernstein. Your line is open.
Harshita Rawat: Good morning Alex and Jamie. I had a clarification question on the [indiscernible]. Are these numbers holding as you [indiscernible].
Alex Chriss: You broke up a bit, Harshita, but--you’ve got it, Jamie?
Jamie Miller: I think so, yes. First, I think the first part of the question was talk about conversion uplift as we roll out the new checkout redesign. We talked about 100 BPs of conversion uplift, is that holding, and I’d say yes, that is what we’re seeing continue to come through in the results that we have. Then your second part of your question was how quickly can we roll this out in Europe, and what I would say is a really important point here, is that a much higher proportion of our European merchants are already on our latest integration, so this makes a much faster and easier rollout process for them as we tackle Europe.
Alex Chriss: If we didn’t get that whole question, Harshita, we can follow up later.
Operator: Your next question comes from the line of Sanjay Sakhrani from KBW. Your line is open.
Sanjay Sakhrani: Thank you, good morning. OVAS revenue growth was quite strong. I was wondering, Jamie, if you could just walk through where the strength was and if it outperformed relative to your expectations, and if you expect that strength to continue over the course of the year. Thanks. |
6,342 | PYPL | 1 | 2,025 | 2025-04-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Jamie Miller: Yes, good morning. When we look at OVAS, there is one thing I would just call out before I talk about the actual quarter, which is that in the first quarter of ’24, we did have lower credit revenue with a lower gain share on our consumer credit partner. As we had coming through COVID, we had some loss normalization happening there, so last year’s first quarter was slightly lower in that regard, and if you remember, we had also pulled back on our merchant lending portfolio, so revenue was lower there as well. As we come into this year, I mentioned on our fourth quarter call that we are really back in the market with a rebuilt credit team and just really good capability, and we saw that growth come through. Again, OVAS growth this quarter was primarily credit driven, both consumer and merchant, small contribution from interest. But I mentioned the portfolio is performing well, we feel really good about it. We’re very actively managing it, and as we look at the year, we continue to expect mid-single digit OVAS growth. Credit will continue to be a primary driver this year, but you might remember that we also have baked into our forecast about $150 million of impact of interest rate headwinds, which also run through OVAS as well.
Operator: Your next question comes from the line of Timothy Chiodo from UBS. Your line is open.
Timothy Chiodo: Great, thank you for taking the question. I want to dig in a little bit more to Germany and the U.K. - I believe they’re the two largest branded markets outside of the U.S., particularly from a gross profit standpoint. I believe they’re two of the largest markets for branded. Two topics I was hoping we could touch on. One is a little bit about the competitive landscape in those two markets specifically, and then on the U.K., I know there were some efforts to roll out biometrics to help with two-factor authentication, and I was hoping you could talk a little bit about the progress and the phasing of that initiative. |
6,343 | PYPL | 1 | 2,025 | 2025-04-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Alex Chriss: Yes, let me get started, Tim. As you said, two very important markets for us and strong markets outside of the U.S. Competitive dynamics are a little bit different, so let me unpack them. Germany, we are really the market leader there. I think we’re the number one brand in Germany for the last three years, so very, very strong consumer presence, very strong merchant presence. It’s also a different type of market - as I just mentioned, it was not--it’s not a credit-heavy market, so the way PayPal is used is we’re connected to bank and then PayPal is used as really the way to make an online purchase. Our transactions in ecommerce in Germany are extremely high. That’s what gives us a lot of confidence as we now move into offline, is we’re really going to be really one of the first at scale bank connected offline wallets, that we think will be able to drive significant penetration into the market, so we’re really excited about that, as well as bringing some new innovations to market with not only our rewards program but also the Buy Now Pay Later connected element as well. With the brand presence we’ve got in Germany, with the banks already connected and the on-boarding experience that’s just really delightful - I mean, it’s literally one click from your bank to be able to set up your offline wallet, and with the innovations of rewards and Buy Now Pay Later, we’re really excited to get into the market there. U.K., much more competitive dynamic there. We’ve really suffered in the last few years with what I would consider to be one of our poorest app experiences for consumers. We’re rolling out a new app experience in the U.K shortly, but we’ve already started with, as you mentioned, the biometrics. We actually got a favorable connection with the regulator there to enable us to enable our biometrics to be considered two-factor authentication. That’s rolling out quickly and enabling a much better experience, whereas before it really was choppy and created a lot of friction and a lot of latency in the |
6,344 | PYPL | 1 | 2,025 | 2025-04-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | a much better experience, whereas before it really was choppy and created a lot of friction and a lot of latency in the experience. Biometrics is now really creating a seamless experience. You add on top of that the new app that’s going to be rolling out and then our rewards program, and all the other innovation that we’ve brought to bear, and we think we’re going to be competing quite well in the U.K. You’ll see us leaning in from a go-to-market perspective as well to really remind consumers that we now have the best product in the market. The last thing I’d say is--you know, I was actually just there a few weeks ago, and I think there’s a big opportunity for us in Buy Now Pay Later. I sat down with a lot of merchants in the market, and they’re really looking for PayPal to come in. There’s a lot of different options that are available now, and I think we’re hearing from merchants that PayPal is a beloved, trusted brand that they would love to be able to have their consumers have a single one-time checkout or Buy Now Pay Later option from a single brand, and so we’re going to lean in heavily in Buy Now Pay Later in the U.K. as well. |
6,345 | PYPL | 1 | 2,025 | 2025-04-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Operator: Your next question comes from the line of Dan Perlin from RBC Capital Markets. Your line is open.
Dan Perlin: Thanks, good morning. I just wanted to revisit cross-border for a moment and maybe the puts and takes in terms of dynamics that we need to be thinking about. One of those is just kind of now that we have a situation where we have this weak dollar, how does the purchasing power parity associated with a weaker dollar typically play out for you guys in terms of cross-border behavior, and then if you can just also give any color as a reminder, kind of discretionary versus non-discretionary spending bents that tend to fall heavy in cross-border. Thank you. |
6,346 | PYPL | 1 | 2,025 | 2025-04-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Jamie Miller: Yes, good morning Dan. How are you? I’ll start with the discretionary side of it. When you look at PayPal today, I would say discretionary spend, we are a lot more diversified today than we were a few years ago. Now we’re about 50/50 split in our U.S. TPV between goods and services, and even in those categories, we are diverse as well. When you look at that, just breaking down retail as an example, about 10% of that is fashion, but then it’s really split across a lot of different things between variety and discount, beauty, sports, pets, toys - lots of different things. When you look at those, I mentioned before I think we’re really positioned well to capture spend as it may shift amongst categories, and we’re well positioned around that. When you look at the cross-border side of it, what I would really say there, again, is it’s really diversified. I talked before about the China to U.S. direct, a large portion of our cross-border is intra-European corridors, and so when you start to look at how this looks over the globe, it’s just very well diversified. It’s really hard to say how a shifting dollar is going to impact that and, honestly, what will actually happen there, but I would just say if we take a step back and we think about our guidance here, our process, we’re just planning prudently and preparing for some level of uncertainty.
Steve Winoker: Hey Pauly, we’ll make time for one more question.
Operator: Your last question comes from the line of Will Nance from Goldman Sachs. Your line is open. |
6,347 | PYPL | 1 | 2,025 | 2025-04-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Operator: Your last question comes from the line of Will Nance from Goldman Sachs. Your line is open.
Will Nance: Hey, appreciate you taking the question. I just wanted--you know, you said several times on the merchant lending portfolio that you guys are actively managing standards in the current environment. I’m just wondering if you’ve made any changes to underwriting or how you would think about changes to underwriting in the face of merchants facing cash flow strains on the back of supply chain dynamics, tariffs specifically, and if you guys have any way of dimensionalizing what sort of cash flow strains your merchants may experience if tariffs do go into effect, in terms of things like importing inventory and things of that nature. Thank you.
Jamie Miller: Yes, I think it’s difficult to answer the latter part of your question, but if we go back to the merchant lending part of it, this is a portfolio that is actively managed, and it’s something that a year ago, when Michelle Gill came in and really reconstituted the team, they’re very focused on how we can help our small businesses really navigate growth. The portfolio has a couple of different things in it. One is just really helping small businesses with working capital and inventory buy, and we monitor that and underwrite it with an eye towards credit, towards cash flow. When you look at this, these are things where we’ve got cash tweaks with sales as sales come in. It’s just a very well constructed portfolio from both an underwriting and from a risk management perspective. The other side of it is PayPal business loans, which are cash flow based, they’re typically personally guaranteed, and again these are things that we monitor all the different indicators of the portfolio and we adjust as we go. I mean, we did make some adjustments in March to tweak and fine tune and make our underwriting slightly more conservative, but it’s something the team is all over and I think we can react very quickly in a changing environment. |
6,348 | PYPL | 1 | 2,025 | 2025-04-29 08:00:00 | PayPal Holdings, Inc. | 112,732 | Steve Winoker: Thanks Jamie. Alex, any final thoughts?
Alex Chriss: Yes. Thanks everyone for the call this morning. I’m very proud of the quarter that the team delivered, not only great results but also just the innovation and the pace that the teams are moving. We didn’t get a chance to talk a lot about Venmo, but I know I mentioned it on the call - we’ve leaned in there, and the innovation is really starting to take hold. We talked about moving into monetization and debit cards, just to give you another data point - 10% of the new cohort of users are now adopting the debit card. This is showing our innovation coming to life, and funds-in, Venmo users that are using and keeping funds in, we’re seeing funds beyond P2P up over 100%, and add funds and auto reload, really as we’ve innovated there, are starting to become the habituation for our consumers. Just goes to show that as we are executing and leaning into our strategy, our innovation is really taking hold. So we’re focused, we’ll continue to scale our innovation, and look forward to updating you along the way. Take care, everyone.
Operator: Thank you. This concludes today’s conference. Thank you for participating. You may now disconnect. |
6,349 | QCOM | 4 | 2,024 | 2024-11-06 16:45:00 | QUALCOMM Incorporated | 33,493 | Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Qualcomm Fourth Quarter and Fiscal 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, November 6, 2024. The playback number for today's call is (877) 660-6853. International callers, please dial (201) 612-7415. The playback reservation number is 13749366. I would now like to turn the call over to Mauricio Lopez-Hodoyan, Vice President of Investor Relations. Mr. Lopez-Hodoyan, please go ahead.
Mauricio Lopez-Hodoyan: Thank you, and good afternoon, everyone. Today's call will include prepared remarks by Cristiano Amon and Akash Palkhiwala. In addition, Alex Rogers will join the question-and-answer session. You can access our earnings release and a slide presentation that accompany this call on our Investor Relations website. In addition, this call is being webcast on qualcomm.com, and a replay will be available on our website later today. During the call today, we will use non-GAAP financial measures as defined in Regulation G, and you can find the related reconciliations to GAAP on our website. We will also make forward-looking statements, including projections and estimates of future events, business or industry trends or business or financial results. Actual events or results could differ materially from those projected in our forward-looking statements. Please refer to our SEC filings, including our most recent 10-K, which contain important factors that could cause actual results to differ materially from the forward-looking statements. And now the comments from Qualcomm's President and Chief Executive Officer, Cristiano Amon. |
6,350 | QCOM | 4 | 2,024 | 2024-11-06 16:45:00 | QUALCOMM Incorporated | 33,493 | Cristiano Amon: Thank you, Mauricio, and good afternoon, everyone. Thanks for joining us today. In fiscal Q4, we delivered non-GAAP revenues of $10.2 billion and non-GAAP earnings per share of $2.69. Chipset business revenues were $8.7 billion, and licensing business revenues were $1.5 billion. During Q4 in fiscal '24, we continue to make progress on our growth and diversification strategy, addressing new end markets for Qualcomm's technology. Our differentiated technology and product roadmaps lead in every industry in which we now participate, and we are very optimistic about the edge AI momentum across our business. As such, we will continue to transform Qualcomm from a wireless communications company into a connected computing company for the age of AI. In the current environment, more than ever, we remain extremely focused on executing our strategy and targets while maintaining operating discipline and creating value for our stockholders. I will now share some key highlights from across the business. As the strong pace of AI innovation continues, there is now broad recognition of the opportunity for on-device AI to enable new capabilities and transform the human computer interface. On-device AI provides context, enhances immediacy and reliability and enables personalization while providing privacy and security. Additionally, GenAI-enabled devices and applications are evolving to understand natural language, images, sound and the world around us, driving a new generation of AI-first experiences. This has the potential to create a new cycle of semiconductor innovation and content, and Qualcomm is well positioned to capitalize on this opportunity across devices at the edge. We shared this vision at the recent Snapdragon Summit with the support of key industry leaders, including Microsoft, Meta, Amazon, OpenAI, Mistral AI, IBM and others. Together with our ecosystem partners, we're driving this transition to AI-enabled edge computing to empower consumers and enterprises by enhancing productivity, entertainment, |
6,351 | QCOM | 4 | 2,024 | 2024-11-06 16:45:00 | QUALCOMM Incorporated | 33,493 | this transition to AI-enabled edge computing to empower consumers and enterprises by enhancing productivity, entertainment, creativity, convenience and more. Notably, we're partnering with Meta to support Llama 3.2, including their multimodal 11 billion, 3 billion and 1 billion parameter models on Snapdragon-powered devices. We're also working with Amazon to create a cloud-to-edge solution that allows developers to customize their models on SageMaker and deploy them to Qualcomm and Snapdragon platforms via the AI Hub. Model availability on the AI Hub has grown by more than 50% since last quarter with both open source and proprietary models. In handsets, we recently unveiled the Snapdragon 8 Elite, our latest flagship mobile platform, which features our second-generation custom Oryon CPU. This CPU delivers up to 30% faster performance with 57% less power, a significant leap over the first generation in less than a year. Snapdragon 8 Elite is the world's fastest mobile processor, restoring performance leadership to the Android ecosystem. In addition, Snapdragon 8 Elite introduces a newly architected Hexagon NPU, delivering a 45% improvement in both performance and power efficiency over Snapdragon 8 Gen 3. Combined with the improved CPU and GPU, Snapdragon 8 Elite can dynamically manage AI workloads and handle the complexities of multimodal GenAI in real time. We are extremely pleased with the Snapdragon 8 Elite design traction with successful launches at Xiaomi, Honor, Oppo and Vivo, and we look forward to additional launches at Samsung, ASUS and more. In a short period of time, our Snapdragon X Series platforms have redefined personal computing. Building on the initial launch momentum, we have expanded our portfolio with the addition of the Snapdragon X Plus 8-core compute platform. The X Plus 8-core maintains leadership in performance and battery life, enabling OEMs to offer thin and light Copilot+ PCs with transformative, uncompromised on-device AI and more affordable price points. This makes next-gen AI PCs |
6,352 | QCOM | 4 | 2,024 | 2024-11-06 16:45:00 | QUALCOMM Incorporated | 33,493 | light Copilot+ PCs with transformative, uncompromised on-device AI and more affordable price points. This makes next-gen AI PCs accessible to even more users, expanding our addressable market. We are very pleased that leading OEMs, including Dell, HP, Lenovo, Samsung, Acer and ASUS will all have devices powered by our X Plus 8-core platform. We now have a total of 58 platforms launched or in development across the X Series portfolio. Snapdragon X Series power laptops will also be the first to get the new Copilot+ PC features announced on October 1, including Recall, Click To Do, improved search, super resolution in photos, generative fill and erase in Paint. In XR, together with Meta, we continue to enable the future of spatial computing. The recently announced Quest 3S powered by Snapdragon XR2 Gen 2 delivers a more affordable headset, target for users new to mixed reality and immersive experiences. This is an important milestone in increasing the scale of this opportunity. Additionally, the Snapdragon AR1 Gen 1 powered Ray-Ban Meta glasses are receiving new AI features, including location and navigation assistance, real-time speech translation, answering questions about their environment and hands-free access to user digital lives. We're also pleased that Snap recently unveiled their next-generation Spectacles powered by dual Snapdragon processors, which are aimed at creators exploring advanced AR experiences. Industrial IoT is evolving with advanced edge computing and intelligence, driving demand for our technologies and providing a significant future opportunity for Qualcomm. To that end, we recently announced the Qualcomm IQ Series, a new family of industrial-grade solutions specifically designed to meet the needs of next-generation industrial edge applications. With on-device AI performance of up to 100 TOPS, the ability to operate in extreme conditions in a suite of building safety features, the Qualcomm IQ Series of chipsets are purpose-built to power a wide range of solutions, including inspection and |
6,353 | QCOM | 4 | 2,024 | 2024-11-06 16:45:00 | QUALCOMM Incorporated | 33,493 | features, the Qualcomm IQ Series of chipsets are purpose-built to power a wide range of solutions, including inspection and automation, robotics, drones, advanced computer vision, edge AI boxes and gateways and more. Additionally, we introduced the Qualcomm IoT Solutions Framework, which helps enterprises build solutions that enable easy development of end-to-end applications, reduce time to implementation and improve operational efficiencies. This all-encompassing framework features recommended chipsets and core software support for multiple operating systems, such as Android, Linux and Windows, tailored reference designs, software libraries, SDKs, supplementary cloud-based services, microservices and access to a growing network of channel partners. In edge networking, we announced the Networking Pro A7 Elite platform, the first commercial platform to revolutionize enterprise and home networking connectivity with edge AI. This platform includes Wi-Fi 7, 5G, 10-gigabit PON, Ethernet and an AI co-processor with 40 TOPS of NPU processing power. The transformative integration of connectivity and computing power into the network unlocks opportunities for operators and enterprises to deploy innovative applications and services in areas such as security and surveillance, energy management and automation, personalized virtual assistance and health monitoring, among others. Edge AI also enhances privacy by processing sensitive information on the gateway while enabling personalization through contextualized understanding of the environment and immediacy to near real-time responses. Finally, in automotive, we recently announced our most powerful platforms to date, the Snapdragon Cockpit Elite and Snapdragon Ride Elite. Both feature our category-leading custom Oryon CPU, now optimized for automotive safety standards and design for 3x faster CPU performance over previous generations. These platforms are also developed for current and future multimodal AI in assisted driving workloads, feature our dedicated Hexagon NPU with |
6,354 | QCOM | 4 | 2,024 | 2024-11-06 16:45:00 | QUALCOMM Incorporated | 33,493 | are also developed for current and future multimodal AI in assisted driving workloads, feature our dedicated Hexagon NPU with up to 12x increased AI performance over previous generation, a substantial upgrade. The Snapdragon Cockpit Elite powers advanced digital experiences, including robust multimedia capabilities, such as gaming and advanced 3D graphics, on-device AI with fully integrated edge orchestrator, optimized safety and security and long-term software support. The Snapdragon Ride Elite platform offers an end-to-end ADAS system with advanced features, such as vision perception, sensor fusion, path planning, localization and complete vehicle control. Additionally, these platforms are built on a unique flexible architecture that gives automakers the option to combine both digital cockpit and automated driving functionalities on the same SoC. We are pleased that leading car manufacturers are adopting Snapdragon Elite automotive platforms for their future software-defined vehicles, including Li Auto and Mercedes-Benz. We are very pleased with the progress we have made this year with significant advancements on our product roadmap and customer engagement across multiple end markets. I look forward to sharing more about our strategy and progress at our upcoming growth and diversification focus Investor Day in New York on November 19. I will now turn the call to Akash. |
6,355 | QCOM | 4 | 2,024 | 2024-11-06 16:45:00 | QUALCOMM Incorporated | 33,493 | Akash Palkhiwala: Thank you, Cristiano, and good afternoon, everyone. I'll start with our Fourth fiscal quarter earnings. We are pleased to announce strong non-GAAP results with revenues of $10.2 billion and EPS of $2.69, which was above the high end of our guidance. QTL revenues of $1.5 billion and EBT margin of 74% were at the high end of our guidance driven by slightly higher handset units in the quarter. QCT delivered revenues of $8.7 billion and EBT margin of 28% with revenues at the high end of our guidance range on strength in both IoT and automotive. QCT handset revenues of $6.1 billion were in line with our expectations for the quarter. QCT IoT revenues of $1.7 billion increased 24% from the prior quarter due to the benefit of new product launches and continued normalization of channel inventory. We delivered our fifth consecutive quarter of record QCT automotive revenues of $899 million with sequential growth of 11% and year-over-year growth of 68% on continued content increase in new vehicle launches. Lastly, we returned $2.2 billion to stockholders, including $1.3 billion in stock repurchases and $947 million in dividends. Before turning to guidance, I'll summarize our fiscal '24 results. We are very pleased with our execution and financial performance in fiscal '24. We delivered revenues of $39 billion and non-GAAP EPS of $10.22, a growth of 21% on a year-over-year basis. Our results reflect the benefit of operating leverage as we maintain fiscal discipline and manage non-GAAP operating expenses relatively flat as compared to fiscal '23. In QTL, we made significant progress in our ability to maintain revenue and margin scale as a result of completing a number of licensing renewals during the year. In QCT handsets, we delivered greater than 20% year-over-year growth in Android revenues driven by technology leadership of our premium-tier Snapdragon products and normalization of channel inventory. Consistent with expectations outlined at the beginning of the fiscal year, QCT IoT revenues grew |
6,356 | QCOM | 4 | 2,024 | 2024-11-06 16:45:00 | QUALCOMM Incorporated | 33,493 | of channel inventory. Consistent with expectations outlined at the beginning of the fiscal year, QCT IoT revenues grew sequentially in each of the following quarters throughout the year. In a challenging industry environment, we delivered full year revenue growth of 55% in QCT automotive, extending our leadership in automotive computing and connectivity platforms. Lastly, our business generated record free cash flow of $11.2 billion, and our balance sheet remains strong with $13.3 billion in cash and marketable securities. Turning to guidance. We now expect global 3G, 4G, 5G handset units to increase by low to mid-single-digit percentage on a year-over-year basis in calendar '24. For the first quarter of fiscal '25, we are forecasting revenues of $10.5 billion to $11.3 billion and non-GAAP EPS of $2.85 to $3.05. In QTL, we estimate revenues of $1.45 billion to $1.65 billion and EBT margins of 73% to 77%, reflecting normal seasonality for handset units when adjusted for the extra week in the fourth quarter of fiscal '24. In QCT, we expect revenues of $9 billion to $9.6 billion and EBT margins of 29% to 31%. We expect QCT handset revenues to grow by a mid-single-digit percentage on a year-over-year basis. This forecast includes greater than 40% sequential revenue growth from Chinese OEMs and the acceleration of flagship Android handset launches powered by our recently announced Snapdragon 8 Elite platform. We anticipate QCT IoT revenues to increase by more than 20% on a year-over-year basis with growth across consumer, industrial and networking. Following our outperformance in the fourth quarter, this forecast reflects a seasonal sequential decline consistent with the last 2 fiscal years. We expect QCT automotive revenues to grow by 50% relative to last year and be approximately flat on a sequential basis. Lastly, we estimate non-GAAP operating expenses to be approximately $2.2 billion. In closing, I want to thank our employees for their hard work and dedication and remaining focused on execution while delivering |
6,357 | QCOM | 4 | 2,024 | 2024-11-06 16:45:00 | QUALCOMM Incorporated | 33,493 | closing, I want to thank our employees for their hard work and dedication and remaining focused on execution while delivering industry-leading products. The last few weeks have marked a meaningful acceleration in our progress towards our diversification strategy, and I'd like to highlight some significant product announcements. First, we announced our Snapdragon X Plus platform at IFA Conference, which extends our performance leadership to the $700 price-tier for personal computers. Second, at the Embedded World North America, we introduced the most comprehensive chipset and software portfolio for AI-ready industrial IoT solutions. And third, at the Snapdragon Summit, we unveiled the Snapdragon 8 Elite handset platform, featuring the world's fastest mobile CPU; and the Snapdragon Cockpit Elite and Snapdragon Ride Elite automotive platforms, establishing us as a performance leader in digital cockpit and ADAS. Lastly, we look forward to seeing you in New York on November 19, where we will expand on these exciting product announcements with an update on our IoT and automotive diversification strategy. This concludes our prepared remarks. Back to you, Mauricio. |
6,358 | QCOM | 4 | 2,024 | 2024-11-06 16:45:00 | QUALCOMM Incorporated | 33,493 | Mauricio Lopez-Hodoyan: Thank you, Akash. Operator, we are now ready for questions.
Operator: [Operator Instructions] First question comes from Joe Moore with Morgan Stanley.
Joseph Moore: Great. Wondering if you could talk about the strength in autos, you've obviously put up great sequential numbers, there are headwinds in that business. I know you have a lot of pipeline momentum, but just kind of give us a picture of how the environment is affecting you and how much visibility you have into that trajectory?
Cristiano Amon: Joe, thanks for the question. This is Cristiano. As we said before, I think you should look at our revenue in auto, less sensitive to what happens in the market much more related to new models that are being launching with Qualcomm technology, and it's reflecting a shift in share. So as we gain share and new models get launched, you started to see that show up in our financials. So that's the reason we continue to have growth both sequentially and year-over-year.
Joseph Moore: Great. And then I don't think you mentioned it. Anything you could say about the ARM dispute? Because that would help us understand what's the stake there.
Akash Palkhiwala: Yes. Joe, on the ARM side, from our perspective, we have a very broad, well-established license rights that cover our custom design CPUs. So we are very confident that those rights will be affirmed. The trial is scheduled for December, and so we're looking forward to addressing ARM's claims at that point.
Operator: The next question is from the line of Samik Chatterjee with JPMorgan. |
6,359 | QCOM | 4 | 2,024 | 2024-11-06 16:45:00 | QUALCOMM Incorporated | 33,493 | Operator: The next question is from the line of Samik Chatterjee with JPMorgan.
Samik Chatterjee: Really strong results, so congratulations on that. Maybe if I can start with IoT. You -- for the first 3 quarters of the year, you had declines on a year-over-year basis. And we're seeing this sort of acceleration in IoT in the fourth quarter and going into first quarter on a year-over-year basis. Can you just sort of parse that out a bit? How much of this is a recovery in sort of the traditional IoT businesses you are in relative to contribution from the PC market and really an acceleration on account of that? Just anything you can parse out between industrial IoT, consumer IoT and new products versus older sort of products you've been on. And I have a follow-up.
Akash Palkhiwala: Sure. So Samik, it's Akash. If you look at our performance both in first -- fourth quarter and first quarter in IoT, we saw benefit across all the 3 areas, so consumer, industrial and networking. And within fourth quarter, as some new products were launched in PC, in XR, in other areas as well, we saw the benefit of those launches come through in our numbers. There is a portion of channel inventory normalization as well, but it's really the new product launches kind of coming through for us both in the fourth and the first quarter. And that sets up -- sets us up well for the rest of the year.
Samik Chatterjee: Okay, okay. Got it. And I mean, it's -- obviously, as you mentioned, it's been a tough backdrop in terms of the macro, and you're guiding to about a 10% revenue growth in the first quarter, just trying to think about sustainability of that into the March quarter, particularly given that you did mention there's some acceleration of Android launches as well. How should we think about -- with the combination of smartphone and sort of the impressive performance you have on the non-smartphone areas now, how sustainable is this sort of double-digit growth into the March quarter? |
6,360 | QCOM | 4 | 2,024 | 2024-11-06 16:45:00 | QUALCOMM Incorporated | 33,493 | Akash Palkhiwala: Yes. Samik, so we're pretty happy with the trajectory of the business both in terms of our fourth quarter results and first quarter guidance. We are not guiding beyond the first quarter at this point. But as you know, we have an Investor Day coming up in a couple of weeks, where we're going to talk through our diversification strategy and growth, and we'll provide a financial framework around it. So we'll address some of these topics at that point.
Operator: The next question is from the line of Stacy Rasgon with Bernstein Research.
Stacy Rasgon: My first question, just on chipset gross margins, they seem to be guided down a bit, I don't know, 100 or 150 bps in Q1. Is that just like increased wafer cost, [ TSM? ] Is there something else going on with mix just given which products are shipping? Any color you can give us on gross margins? And I guess, like is the framework on how to think about them going forward around 48-ish, plus or minus? Is that still the right way to think about chip gross margins?
Akash Palkhiwala: Yes. Sure, Stacy, it's Akash. So in fourth quarter, we actually guided lower, and we came in slightly better because of stronger mix. And so what we're guiding in first quarter is really largely in line with fourth quarter, and we think that's kind of a reasonable way to model the business going forward. And I think from a product mix perspective, we feel pretty good about where we are set up both across businesses and within handsets. So that will obviously continue to play a factor as we look forward.
Stacy Rasgon: Got it. For my follow-up, I just wanted to ask a little more about on PCs. You'd talked about new product launches in Q4. Can you help us size, like how big was the PC portion in Q4? And given you're guiding IoT down seasonally, sequentially in Q1, is PCs as well as some of the other stuff a function of that? Like how do we think about the contribution that we're seeing early in the launch of those products? |
6,361 | QCOM | 4 | 2,024 | 2024-11-06 16:45:00 | QUALCOMM Incorporated | 33,493 | Akash Palkhiwala: Yes. So Stacy, as you know, we're pretty excited about the PC roadmap. I think we've kind of established ourselves as a performance leader in Windows devices. And during the quarter, we also launched a new chip, Snapdragon X Plus 8-core chip, which allows us now to access the $700 price tier for the PC market as well. So now we have performance leadership really without compromising on NPU performance across tiers in the PC market. And so initial reaction has been great. We are pleased with it. We will talk about this in a lot more detail at Investor Day, both from traction across OEMs and then targets for the longer term.
Cristiano Amon: Stacy, this is Cristiano. I just wanted to add one thing. While I think we are going to make probably financial projections, how we think about the PC business in November 19, I wanted to point out one thing which is very visible. When we launched this, we launched this in May, we are -- so in a short period of time if you think about it, we are now in November. When we launched in May, we have about 20 platforms. One thing we disclosed on this call is now the platforms that we have designed in, they add to about 58. That is almost a 3x increase on the number of platforms that are being designed and under development. I think that is giving us a lot of confidence that our platform to resonate with the market and we're getting traction with the OEMs.
Operator: Our next question is from Joshua Buchalter with TD Cowen. |
6,362 | QCOM | 4 | 2,024 | 2024-11-06 16:45:00 | QUALCOMM Incorporated | 33,493 | Operator: Our next question is from Joshua Buchalter with TD Cowen.
Joshua Buchalter: I wanted to follow up on Joe's question from earlier about the auto upside. I mean, in particular, the auto space upside has been driven by China. I guess, maybe you could give us some data points on how much your exposure within the auto market is driven by the China market now? And then also maybe some -- any metrics you can give us on how much is infotainment versus ADAS? And in particular, as you ramp Snapdragon Ride Elite with capabilities of both infotainment and ADAS on one SoC, how is engagement for that? And how do you expect that to ramp over the next couple of years?
Akash Palkhiwala: Josh, it's Akash. From a geography diversity perspective, you should think of our portfolio as very diverse. We have a very strong set of design wins globally across OEMs. And so you should not think of this as reliant on a specific geography. And we are planning to give some disclosures on that topic as we go forward.
Cristiano Amon: Maybe just kind of add one thing. I think in addition of in design with virtually every single OEM and every region, one of the things we're very excited about it is what we did on both the Snapdragon Ride Elite and Cockpit Elite. One of the things I want to point out is it's one of the biggest upgrades, I think, to date in order of magnitude about 12x on AI. As we said before, I think GenAI use cases on a car and especially a little different approach is about future-proofing that design for software-defined vehicle is getting a lot of traction to a lot of OEMs. We announced two that made public, but I think design traction on that chipset is actually very high. |
6,363 | QCOM | 4 | 2,024 | 2024-11-06 16:45:00 | QUALCOMM Incorporated | 33,493 | Akash Palkhiwala: And Josh, on your second question on a combination of cockpit and ADAS, a lot of our traction this year is with launches with cars using our cockpit solution. And we see ADAS having some traction, some deployments right now, but it's going to ramp over the next couple of years. And that becomes kind of another inflection point in our revenue growth going forward.
Joshua Buchalter: Got it. Thank you for all the color. And then a follow-up, I wanted to ask about the handset market. If we sort of back out your top 2 customers, handsets are up, I think, around 50% year-over-year. Any metrics you can give us on units versus ASPs? I know there was an inventory dynamic last year. So as we think about the sustainability of that growth vector into 2025, in particular, for the China market, would be curious if there's any incremental metrics you can give us outside your top 2 customers.
Akash Palkhiwala: Yes. I think, Josh, the -- if you look at the total handset market, and this is sell-through, we are projecting in '24 that the market will be up low to mid-single digits. But the big story for us has been content increase. We've kind of seen the chipsets becoming a lot more capable, and you saw the X Elite -- 8 Elite announcement that we did last month, a lot more content is going into the chip. And as those get -- solutions get adopted, we get to see the benefit on the ASP side. The second factor is the mix across tiers. We're seeing the mix across tiers continue to improve in the handset market as well. So if you kind of look back over the last 3 or 4 years, devices greater than $400 has gone up from being 21% of the market to 30% of the market, and that is definitely beneficial to us. Maybe one last point is, if you think about our guidance quarter, December quarter, we do not have any Huawei product revenue in our guidance. A year ago quarter, we did have Huawei product revenue. So it's actually something that we overcome, and then we have growth on top of it. |
6,364 | QCOM | 4 | 2,024 | 2024-11-06 16:45:00 | QUALCOMM Incorporated | 33,493 | Operator: Our next question is from Chris Caso with Wolfe Research.
Christopher Caso: Just another follow-up question with regard to handset. And if you could kind of characterize because I think for Qualcomm, you saw a rebound or normalization in the premium part of the handset market in the first half of the year. Is what you're seeing now some follow-through on kind of the mid-tier or it's just kind of continuation of what you saw in the first half of the year? And then secondly on that, with regard to some of the accelerated China launches, do you think that's a reflection of the market, of some perhaps improvement in the market in China or at least the China OEMs? Or is it simply a matter of timing?
Akash Palkhiwala: Yes. I think, Chris, if you think about our handset business, we're definitely really strong at the top of the roadmap in premium tier. And as we mentioned earlier, we announced our new flagship chipset, and you're seeing OEMs launch with that chipset. So those definitely factor into our numbers. And it's less about other tiers, more about the fact that we launched our new premium-tier chipset, and the OEMs are actively taking advantage of it by accelerating their launches and really increasing the scale of their launches.
Christopher Caso: Got it. And just with regard to the licensing business, you see a shallow sequential increase in the December quarter. I imagine that's because of the absence of the extra week for that licensing business. Any changes for just kind of the structure of that market that we shouldn't anticipate going forward? Or is it about what you'd consider to be normal?
Akash Palkhiwala: Yes, it's very much normal. It's really the extra week coming out and the normal sequential quarter-over-quarter growth.
Operator: The next question is from Tal Liani with Bank of America. |
6,365 | QCOM | 4 | 2,024 | 2024-11-06 16:45:00 | QUALCOMM Incorporated | 33,493 | Operator: The next question is from Tal Liani with Bank of America.
Tal Liani: Other companies reported kind of opposite trends of what you're talking about. Some of the companies reported weakness in China migration to lower tier, and then Apple had kind of weaker numbers than expected. How do you connect the comments we get from other vendors to your strengths? And are you concerned that maybe the strength is more inventory build-out or build-out by customers because of your new launches? So can you comment about end-market demand and the composition of end-market demands in -- globally?
Cristiano Amon: Look, thanks for the question. I can't really speak of other companies. The only thing I can say is I'm actually very happy with our results. But I'll give you a couple of data points, maybe help you triangulate that. When we look sequentially, we have now quarter-over-quarter greater than 40% handset revenue growth with Chinese OEMs in -- as we look in the 1Q fiscal '25, if you look at the guide. In fiscal '24, our Android revenues, we get 20% year-over-year growth, including the loss of Huawei revenues. And when we compare with our closest competitor, for example, in Android, our premium tier, we get greater than 5x the premium-tier revenue. So I think it shows a couple of things. As Akash outlined, content is increasing. The premium tier is expanding in the market that it kind of normalized. And we don't see much of the inventory dynamics we used to see. So I think it speaks a little bit to the strength of our product roadmap. I think the launch of new products from customers in China, but more important is this trend that the mix are really improving.
Operator: The next question is from Timothy Arcuri with UBS. |
6,366 | QCOM | 4 | 2,024 | 2024-11-06 16:45:00 | QUALCOMM Incorporated | 33,493 | Operator: The next question is from Timothy Arcuri with UBS.
Timothy Arcuri: Akash, I'm just looking at the guidance, and for China Android to be up more than 40%, it implies that your 2 other big customers are both down in the double-digit range. I mean both of them have to be down. So can you speak to that? It's very sort of anti-seasonal for at least one of those guys to be down. And then can you speak to what's driving this? Do you think -- I mean, is any of this pull-forward because of tariffs? Are these customers concerned about potential tariffs with -- given the results of the election? So maybe they are pulling some things forward. Is that plausible?
Akash Palkhiwala: Yes. Let me start with the second part of your question. That's not the case. This is not about tariffs or pull-forward because of those reasons. From a customer perspective on the quarterly trend, the way we think about it is what we're guiding is based on customer launch cadences and their demands. You should not think of this as a statement on sell-through. It's really kind of chipset purchases that are happening from us. So I think that's -- those 2 may be disconnected in some cases. But you already know what our share position is across OEMs. And so it's not a share question. It's just the timing of purchases from us.
Operator: Our final question will be from C.J. Muse with Cantor Fitzgerald.
Christopher Muse: I guess first question, was hoping to revisit IoT business growing nicely for you year-on-year, and pretty much every other company that I've come across is seeing challenges there, particularly parts of consumer and industrial. So would love to hear perhaps on the consumer side, whether you're seeing kind of the uptake that we're hearing in China. And then moreover, I guess, on the industrial side, is that where you're seeing inventory correction? What's the timing of kind of recovery and your thoughts there? |
6,367 | QCOM | 4 | 2,024 | 2024-11-06 16:45:00 | QUALCOMM Incorporated | 33,493 | Akash Palkhiwala: Yes. Sure. So on the consumer side, as we said, new product launches, both in XR and NPC, definitely a factor in our performance. And then on the industrial side, at Embedded World, we announced a new product portfolio, updated product portfolio that addresses both not just chipsets but software readiness to drive through AI-ready use cases in industrial. We think that, that market is turning. There's an inflection point and there's going to be a lot of demand for solutions that have processing, connectivity, AI readiness. And so we're seeing this early stages of demand come through for our solutions. And this is one of the topics that we'll discuss in detail at our Investor Day. So stay tuned on that one.
Christopher Muse: Very helpful. And as a follow-up, in your 10-K, you talked about a large customer potentially going internal as a next several quarter risk. And obviously, this has been discussed for many years. But if it were to happen, how should we think about the moving parts to your overall QCT margins?
Akash Palkhiwala: I think no real change, no new information here. I think you -- there's enough data out there for you to be able to size the risk that we've always outlined. As we've said, we have a 3-year agreement, '24, '25 and '26 phone launches, and the framework of that agreement is consistent with the prior one. Our planning assumption has been that the share will ramp down to 20% for the '26 launch, and the agreement ends after that. So no change really to anything we've said in the past, and I think that's how our planning assumption is. Anything better would be upside.
Operator: That concludes our question-and-answer session. Mr. Amon, do you have anything further to add before adjourning the call? |
6,368 | QCOM | 4 | 2,024 | 2024-11-06 16:45:00 | QUALCOMM Incorporated | 33,493 | Cristiano Amon: Yes, just a few statements. Thank you. Thanks, everyone, for joining us on the call today. When we look at Qualcomm, I think we feel pretty good at our position. There are very few companies positioned in so many markets, and the transformations of many industries. We -- there's a lot of distraction out there, but we're not distracted. We're really focused on executing on our growth and diversification. And we're really looking forward, I think, to tell our story on November 19. I'd like to take a moment to thank all of our employees for incredible fiscal year -- Fiscal '24. They're truly the best part of Qualcomm. And we're going to be keep executing and focus on changing the company into a connected computing company for the age of AI. Thank you so much, and I look forward to speaking with you all next quarter.
Operator: Ladies and gentlemen, this concludes today's conference call. You may now disconnect. |
6,369 | QCOM | 3 | 2,024 | 2024-07-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Qualcomm Third Quarter Fiscal 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, July 31, 2024. The playback number for today's call is (877) 660-6853, International callers, please dial (201) 612-7415. The playback reservation number is 13747430. I would now like to turn the call over to Mauricio Lopez-Hodoyan, Vice President of Investor Relations. Mr. Lopez-Hodoyan, please go ahead.
Mauricio Lopez-Hodoyan: Thank you, and good afternoon, everyone. Today's call will include prepared remarks by Cristiano Amon and Akash Palkhiwala. In addition, Alex Rogers will join the question-and-answer session. You can access our earnings release and a slide presentation that accompany this call on our Investor Relations website. In addition, this call is being webcast on qualcomm.com, and a replay will be available on our website later today. During the call today, we will use non-GAAP financial measures as defined in Regulation G, and you can find the related reconciliations to GAAP on our website. We will also make forward-looking statements, including projections and estimates of future events, business or industry trends or business or financial results. Actual events or results could differ materially from those projected in our forward-looking statements. Please refer to our SEC filings, including our most recent 10-K, which contain important factors that could cause actual results to differ materially from the forward-looking statements. And now to comments from Qualcomm's President and Chief Executive Officer, Cristiano Amon. |
6,370 | QCOM | 3 | 2,024 | 2024-07-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Cristiano Amon: Thank you, Mauricio, and good afternoon, everyone. Thanks for joining us today. In fiscal Q3, we delivered non-GAAP revenues of $9.4 billion and non-GAAP earnings per share of $2.33, which was above the midpoint of our guidance range. Revenues from our chipset business of $8.1 billion reflect a sequential growth in automotive and IoT and continued traction of our Snapdragon mobile platforms across leading smartphones. Our automotive and IoT revenues were the result of ongoing execution of our diversification strategy. Licensing business revenues were $1.3 billion. Now I would like to share some key highlights from the business. In automotive, we secured more than 10 new design wins with global automakers during the quarter. These include next-generation digital cockpit connectivity and/or ADAS and autonomy. Our Snapdragon Digital Chassis continue to scale across virtually all OEMs and is now a key asset for the automotive industry. As we look forward, we're focused on extending our industry-leading on-device AI solutions to the Snapdragon Digital Chassis to enable automotive-centric Gen AI use cases and applications. It's important to note that our architecture with capabilities across all domains is uniquely positioned to enable sensor data to be utilized simultaneously for ADAS autonomy workloads and user-centric Gen AI experiences in the digital cockpit. A great example is our Snapdragon Ride Flex solution, which combines digital cockpit and ADAS on a single SoC. Future drivers for automotive growth include Gen AI experiences the software-defined vehicle transition, central computing replacing microcontrollers, expansion into 2-wheelers and core to cloud services. In handsets, we are pleased that all Galaxy Z Fold6 and Flip6 are powered by the Snapdragon 803 for Galaxy, delivering extraordinary AI capabilities premium level performance and power efficiency for foldable devices. Together with Samsung and our other partners, we continue to push the boundaries of own device Gen AI on mobile |
6,371 | QCOM | 3 | 2,024 | 2024-07-31 16:45:00 | QUALCOMM Incorporated | 33,493 | devices. Together with Samsung and our other partners, we continue to push the boundaries of own device Gen AI on mobile devices. To that end, we're pleased with the growth and trajectory of AI use cases on smartphones. This continued expansion of AI features is a precursor to next-generation smartphones which we believe will become AI-centric with pervasive on-device AI working across applications in the cloud. Qualcomm is very well-positioned to help drive this transformation across the industry in the coming years. At our upcoming Snapdragon Summit in October, we will reveal details of our next-generation Snapdragon 8 flagship mobile platform, the first to be powered by our custom Oryon CPU. This platform, combined with new and unparalleled NPU AI capabilities is already exceeding both our and our customers' performance expectations. In compute, we're very pleased that Copilot+ PCs powered exclusively by Snapdragon X Series platforms became available for purchase on June 18. This marks the start of one of the most significant transitions in personal computing since the launch of Windows 95 and is restoring performance leadership back to the Windows ecosystem. 20 Copilot+ PCs from Microsoft, Dell, HP, Lenovo, Acer, ASUS and Samsung are now available across 20 countries and 47 retailers. It's important to highlight the unique Copilot+ and Snapdragon ex-elite dedicated retail spaces in Best Buy, Costco, Curies, Harvey Norman and many more. We are very pleased with the initial response with several models sold out at retailers and online. Our retail presence is expected to expand to more than 60 retailers across 25 countries in the coming months. We're also working closely with more than 50 global commercial customers to drive Snapdragon readiness in their respective environments. Additionally, we added the Snapdragon X Series platforms to the Qualcomm AI hub, allowing developers to easily take advantage of optimized AI models to create responsive power-efficient and compelling on-device generative AI |
6,372 | QCOM | 3 | 2,024 | 2024-07-31 16:45:00 | QUALCOMM Incorporated | 33,493 | to easily take advantage of optimized AI models to create responsive power-efficient and compelling on-device generative AI applications for Copilot+ PCs. As we look forward to 2025, we are already working with OEMs on the next wave of Copilot+ PCs. In addition to new design wins, our X Series product road map will expand to address PCs with retail prices as low as $700 without compromising NPU performance. Longer term, we believe the benefits of Snapdragon X Series platforms make it clear that the PC ecosystem has begun the transition to an ARM-compatible architecture. As we look forward, we're forecasting that at least of PCs will be AI capable by 2027. Given our clear technology leadership and competitive road map we expect to be positioned as one of the top silicon suppliers for these devices. We also remain excited about the continued positive momentum in XR, particularly the success of Meta's Ray-Ban smart glasses. Sales are exceeding our expectations due in part to the integration of Llama into the experience. We foresee an acceleration in demand for extended and mixed reality devices as new use cases enabled by Gen AI gain scale. Snapdragon XR remains the industry platform of choice, and we are engaged with major ecosystem players, including Meta, Google, Microsoft, and others. Most recently, at the Augmented World Expo will showcase 2 of the latest XR devices, NTT's augmented reality glasses and Sony's upcoming head-mounted mixed reality device. In industrial IoT, we're pleased to report that we're now collaborating with Aramco on connectivity, AI and advanced computing solutions for industrial and enterprise use cases in Saudi Arabia. This also includes accelerating development of the industrial 4G, 5G and non-terrestrial networks ecosystem, including the first significant wide area private cellular network for IoT. As the industrial sector is transformed by AI, we expect an increase in demand for more complex on-device processing. This trend aligns well with our core capabilities, especially the |
6,373 | QCOM | 3 | 2,024 | 2024-07-31 16:45:00 | QUALCOMM Incorporated | 33,493 | an increase in demand for more complex on-device processing. This trend aligns well with our core capabilities, especially the computing and AI road map we have built for Auto and PC. As high-performance processing and intelligence at the edge becomes critical for the next phase of enterprise digital transformation, we see a unique opportunity to build a leadership position in this space. In the next few months, we will announce our new dedicated product road map for industrial IoT and including support for multiple operating systems, ability to run multibillion parameter AI models in a comprehensive development platform. Finally, we're very pleased to share that we recently signed a key long-term licensing agreement with Honor, a leading Chinese smartphone OEM. We continue to be pleased with the company's diversification beyond mobile, and we're particularly proud of what we have accomplished to date in automotive and PC. We will provide additional updates on our diversification strategy at our Investor Day in New York on November 19. I would now like to turn the call over to Akash. |
6,374 | QCOM | 3 | 2,024 | 2024-07-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Akash Palkhiwala: Thank you, Cristiano, and good afternoon, everyone. I'll start with our third fiscal quarter earnings. We are pleased to announce strong non-GAAP results with revenue of $9.4 billion and EPS of $2.33, both of which were above the midpoint of our guidance. QTL revenues of $1.3 billion and EBT margin of 70% were in line with our expectations. QCT delivered revenues of $8.1 billion and EBITDA margin of 27%, which was at the high end of our guidance range, driven by upside in both IoT and automotive. QCT handset revenues of $5.9 billion were in line with expectations, reflecting our scale in premium Android handsets and greater than 50% year-over-year growth in revenues from Chinese OEMs. QCT IoT revenues increased 9% sequentially to $1.4 billion as we continue to see a gradual recovery in the industry environment. We delivered our fourth consecutive quarter of record QCT automotive revenues of $811 million, with sequential growth of 34%. Our revenue acceleration reflects content growth in new vehicle launches as we become the leading supplier of advanced computing and connectivity solutions to the automotive industry. Lastly, we returned $2.3 billion to stockholders during the quarter, including $1.3 billion in stock repurchases and $949 million in dividends. Before turning to guidance, I would like to outline 3 factors included in our forecast. First, Consistent with our long-term financial planning assumption of largely flat handset units, we continue to estimate global 3G/4G 5G units in calendar '24 to be flat to slightly up on a year-over-year basis. Second, our license to export products to Huawei, which was set to expire in late calendar '24 was revoked on May 7. This change will impact our revenues in both the current quarter and the first quarter of fiscal '25. Lastly, our fourth fiscal quarter includes an additional week as we align our fiscal reporting period with the calendar quarter end every 5 to 6 years. Now turning to fourth fiscal quarter guidance. We are forecasting revenues of |
6,375 | QCOM | 3 | 2,024 | 2024-07-31 16:45:00 | QUALCOMM Incorporated | 33,493 | with the calendar quarter end every 5 to 6 years. Now turning to fourth fiscal quarter guidance. We are forecasting revenues of $9.5 billion to $10.3 billion and non-GAAP EPS of $2.45 to $2.65. In QTL, we estimate revenues of $1.35 billion to $1.55 billion and EBT margins of 70% to 74%, reflecting normal seasonality for handset units. In QCT, we expect revenues of $8.1 billion to $8.7 billion and EBT margins of 27% to 29%. We expect QCT handset revenues to grow by low single-digit percentage sequentially. This forecast reflects an increase in purchases from a modem-only handset customer partially offset by seasonally lower Android revenue ahead of our new Snapdragon premium chipset launch in the first quarter of fiscal '25. We expect QCT IoT revenues will increase by low double-digit percentage sequentially, driven by growth across consumer, networking and industrial. Following our outperformance in the third quarter, we expect QCT automotive revenues to remain flat in the fourth fiscal quarter. We are on track to deliver approximately 50% year-over-year revenue growth in fiscal '24, providing confidence in our ability to execute to our long-term targets. Lastly, we expect non-GAAP operating expenses to be approximately $2.2 billion. In closing, we are pleased with our execution and financial performance in fiscal '24. Based on the midpoint of our guidance, we are on track to deliver strong non-GAAP EPS growth of approximately 20% relative to fiscal '23. Over the last quarter, industry support for our vision for on-device AI has accelerated and been validated by several key players. Beyond handsets and PCs, we expect on-device AI to drive competitive differentiation for us in industrial, networking, automotive and XR. Our leading technology and product portfolio has positioned us to continue to execute on our diversification strategy. And in the months ahead, we look forward to introducing new industry-leading products across all our end markets. Finally, as Cristiano outlined, we'll be hosting our Investor Day |
6,376 | QCOM | 3 | 2,024 | 2024-07-31 16:45:00 | QUALCOMM Incorporated | 33,493 | new industry-leading products across all our end markets. Finally, as Cristiano outlined, we'll be hosting our Investor Day on November 19, where we'll provide an update on our IoT and automotive diversification strategy. This concludes our prepared remarks. Back to you, Mauricio. |
6,377 | QCOM | 3 | 2,024 | 2024-07-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Mauricio Lopez-Hodoyan: Thank you, Akash. Operator, we are now ready for questions.
Operator: [Operator Instructions] First question will come from the line of Matt Ramsay with TD Cowen.
Matt Ramsay: I have a couple of questions, guys, really highlighting some of the diversification the company is now starting to deliver on in the revenue. I guess the first one is in the automotive business, some pretty big upside there. And maybe you could talk a little bit about like the -- you're seeing some of this revenue come through now in OEM programs that no doubt you won 2 or 3 years ago. Do you think that continues as we roll through the next several quarters? I mean what kind of momentum could we see as some of these units start to roll out from, I guess, the programs you won a long time back? And then Cristiano on the second one, people keep asking lots of questions about AI PCs. As you know, you're getting really close here to when the holiday ramp period would start for you to sell in units. So maybe you could give us your current take on your expectations of what the PC market could bring in terms of units or revenue for your company as we look forward into the next fiscal year. |
6,378 | QCOM | 3 | 2,024 | 2024-07-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Cristiano Amon: Very good. Thank you, Matt. Thanks for asking the questions. Let me start with automotive. Look, we're very pleased with automotive performance. And I want to start by saying this is you continue to see signs of the pipeline translating into revenue. There are a couple of things we really like it. The first one is -- our automotive revenue is all about share of new cars being launched with our content, also is independent whether the industry is about internal combustion or EV because it's all about digital, would be the Snapdragon Digital Chassis really became a key asset for the automotive industry. And just within the quarter, we have not only the launch of 10 new models with our technology, but also we actually have 10 new design wins, which continue to add to the pipeline. So we're very excited about that. We will continue to see as new cars get launched with our technology from the pipeline, the revenue to grow. And as Akash said in the script, we're actually on track to the metric we provided for $4 billion in 2026. One side comment on your question. An upside is what Gen AI is doing in automotive. Gen AI use cases, especially using large language models for audio. It was a great user interface for were behind the wheel. We're starting to see a lot of interesting use case being developed. That upside to our model, it could be an upgrade of content in the digital cockpits that we have in. The second comment which is about PCs. I will start by saying we're very pleased is exceeding our expectations. We -- it's a new version of Windows, the Copilot+ is a new architecture with an ARM compatible. We expect that, that will ramp over a period of time. But what we have seen in the market right now with the 20 models that can launch is exceeding our internal targets. Some models, as I mentioned in my prepared remarks, had sold out. And I think we should expect that, that will continue to be a crescendo, slow and steady as the market transition. We will have new product announcements coming up at |
6,379 | QCOM | 3 | 2,024 | 2024-07-31 16:45:00 | QUALCOMM Incorporated | 33,493 | will continue to be a crescendo, slow and steady as the market transition. We will have new product announcements coming up at EFA, and you're going to continue to see more Copilot+ features coming from Microsoft we're very happy about that as the same thing we did with auto, we expect PC to be the next biggest driver of diversification for the company, and we'll continue to track every quarter. |
6,380 | QCOM | 3 | 2,024 | 2024-07-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Operator: Our next question is from the line of Samik Chatterjee with JPMorgan.
Samik Chatterjee: Congrats on the strong print here. I guess, Cristiano, if I start you off with those smartphone question here related to VI smartphones. One, can you share if you're seeing any depreciable difference in the demand for smartphones with AI features in them from consumers already. And as you look to the pipeline in terms of design wins for next year, how are you thinking about proliferation of the AI features and capabilities into more mid-tier or outside of the flagship to your phones that you work with, with your customers? And I have a follow-up. |
6,381 | QCOM | 3 | 2,024 | 2024-07-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Cristiano Amon: Thank you for your question, Samik. So on smartphones, I would start by saying one thing that we really like. And I think it was reflected by some of the metrics provided by Akash he talks about in his remarks, 50% growth within China with Chinese OEMs. So I has expanded the size of the premium tier. So even in a market which it's kind of flattish to low single-digits in growth. The premium tier is actually growing faster. And we've seen that. We're seeing a larger premium tier enabled by AI. And to your specific question, we are happy with the trajectory of AI features. We used to have a few. Now we have tens of AI features. And eventually, when they get to 100, we're going to start to see a change that -- a smartphone with AI feature will become an AI smartphone. We don't have any heroic assumptions in our model, but we actually like the direction this is going that could create an interesting upside if we have an AI-driven upgrade cycle. It's still early in the process, but the use cases are becoming more interesting. I pointed to the increase of use cases in the Galaxy Flip6 and Fold6. China has a number of use cases. They're going to be launched in the next flagship. And I know you asked about bringing AI to the master. We intend to do that. The same thing we're doing with the PC which is as we expand the road map, we're not compromising on AI capabilities. We're going to see us doing that within our mobile road map. But on the premium tier, I'm actually very excited given the upcoming launch of our next Snapdragon that has our custom CPU. And you're going to see the same shift in performance that we have done in the PC ecosystem restoring the performance back to the Windows ecosystem, you're going to see doing us something similar in phones. And AI is going to be a big part of the story. |
6,382 | QCOM | 3 | 2,024 | 2024-07-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Samik Chatterjee: Got it. And a quick one for Akash. Akash, the guide for September revenues, that looks pretty similar to what you were sort of soft guiding us to back sort of 90 days ago, although you now have incremental headwinds with the license to export to Huawei. How should we think about sort of where you're finding the offsets? Where is the upside to help you offset that incremental headwind?
Akash Palkhiwala: Yes. Thanks, Samik. Samik, we're pretty happy with the way the quarter has played out, right? If you look at our handset business, we are growing. We are -- we're guiding that will grow low single-digit percentage on a quarter-over-quarter basis. IoT, we're guiding low double-digit growth, and we're seeing strength across industrial edge networking and consumer. And then auto coming off of an extremely strong quarter in June, we're guiding flat revenue in the September quarter. And so all of these, both IoT and automotive are incremental to our previous expectations, and you're seeing that benefit show up in our guidance.
Operator: Our next question is from the line of Chris Caso with Wolfe Research.
Chris Caso: I guess first question is just a clarification on the extra week in the quarter that you referred to. Can you speak about what impact you might expect it to have on both revenue and cost? And if there's any implications on that the absence of the extra week, as you go into the following quarter, which is obviously a seasonally strong quarter. |
6,383 | QCOM | 3 | 2,024 | 2024-07-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Akash Palkhiwala: Yes. Sure, Chris. If you think about the 2 factors I outlined for the guidance, which is the extra week on one hand and then offset by the Huawei reduction, revenue reduction on the other side. Those 2 largely offset each other. And so the net impact on our overall guidance is pretty limited when you consider the impact of both factors. Specifically on the extra week, as you know, not all weeks are created equal as you think about the different parts of our business. So what we've factored in is incremental revenue on the QCT side, incremental OpEx on the OpEx side. And then within -- sorry, incremental revenue on the QTL side. And then within QCT, revenue forecast and the benefit that we have from a flagship phone launch that doesn't really change based on the number of weeks. So that remains largely consistent and these factors are already included in. But kind of the big message is when you step back and look at the 2 key factors I outlined, they're pretty much canceled out against each other.
Chris Caso: Okay. Understood. And then moving over to QTL. The guidance for the fourth quarter is -- it's outside of the range that you have been talking about before. You haven't changed your expectation for global handset units. So can you speak to the reason for the QTL guidance and if that's sustainable going forward because typically, the first quarter is a stronger quarter for that segment.
Akash Palkhiwala: Yes, sure. So the QTL guidance is relatively straightforward. If you look at June to September, we typically see very small growth on a quarter-over-quarter basis. So we factored that in. And then we have the extra week on top of it as well, which is also factored into our numbers. So that's how we got to the number we're guiding for QTL.
Operator: Our next question is from the line of Stacy Rasgon with Bernstein Research. |
6,384 | QCOM | 3 | 2,024 | 2024-07-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Operator: Our next question is from the line of Stacy Rasgon with Bernstein Research.
Stacy Rasgon: I want to ask the second half of Chris' question again that you didn't quite get to. The extra week, I should think about the implication for December quarter seasonality coming off of that. What are you guys thinking for December? If you could help us shape that a little bit?
Akash Palkhiwala: Sure, Stacy. So as you know, well, we typically grow into the first quarter into the December quarter, and we're expecting that it's a seasonally strongest quarter of the year going forward. And as we think about the quarter, there couple of factors we consider. First is the launch of our new Android premium tier chip, which is going to be a tailwind for us. We do go back from the 16 weeks -- 14 weeks back to 13 weeks within the quarter. And then relative to last year, we'll not have Huawei product revenue going forward, which we did have last year. So net of all of this, when you look at a year-over-year basis, we expect revenue to be largely -- revenue growth to be largely consistent with the year-over-year growth we saw in December quarter last year.
Stacy Rasgon: Got it. That's helpful. If you could also just give us any sort of incremental color. How much of the guide actually includes how much of the guide is PC revenue at this point for next quarter? I know you said the consumer piece sounds like it's growing in IoT, that's where it is, but how much of it actually is PCs? |
6,385 | QCOM | 3 | 2,024 | 2024-07-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Akash Palkhiwala: Yes. I mean Stacy and all candor, we're a few weeks into our launch. And so it's too early to kind of have either a bullish assumption or a specific assumption on PC. We do have indications from our customers and we've tried our best to factor it in as we usually do. But as Cristiano said, to us, this is about kind of the longer-term growth opportunity and being very specific on sell-through in the short term is not really something that we have insight into. But we will, as we get to Investor Day, we're going to give a lot more disclosure on our specific plans on revenue ramp.
Operator: Our next question comes from the line of Joe Moore with Morgan Stanley.
Joe Moore: I wanted to come back to the 50% growth in China handset. And it sounds like you talked about growth in the premium tier there. Can you kind of give us a sense of how much of that is price versus units? And is that -- is the market expanding? And then maybe market share commentary because your numbers seem better than your competitor.
Akash Palkhiwala: Yes. So if you look at the total handset market, our general assumption is that from '23 to '24, it's flat to slightly up. So the market is not growing. But within that, the premium tier, the trend has been very positive. We've gone from greater than $400 representing 21% of the market now to representing 31% of the market. And so that's very significant growth that we are benefiting from. And as you know, we are very strong at the premium tier. And as that market expands, we get to participate in that, not just from a revenue perspective, but content increase perspective as well.
Operator: Our next question is from the line of Christopher Rolland with Susquehanna. |
6,386 | QCOM | 3 | 2,024 | 2024-07-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Operator: Our next question is from the line of Christopher Rolland with Susquehanna.
Christopher Rolland: I guess in your latest Q, you talked about a bunch of new licenses coming up. I think they expire early fiscal '25, including Huawei. I guess, first of all, the 4G at Huawei would this might affect these negotiations? Do you expect everyone else to sign in those negotiations as well? And then lastly, do we think about Huawei that impact is roughly $150 million a quarter. Is that a fair number on the 4G stuff from Huawei?
Alex Rogers: Chris, this is Alex. Thanks for the question. So if you look at the licensing progress basically over the last year or so, we set out to execute on a number of renewals and extensions. And we've done actually a really good job doing that. The most recent was getting on or signed up to a long-term agreement. And then, as you know, Apple extended through '27. But we also noted recently that we have 2 major Chinese OEM signed long term. Well, we haven't named them, but they are significant handset manufacturers. And then we're working through negotiations with others that we still have optimistic expectations in terms of getting them signed up. We also recently announced that we signed up tranching to a 5G license, and we're still negotiating with them. There's some litigation ongoing, but I think the important thing is to focus on the 5G license with that company and the ongoing negotiations. So Huawei is a company that we've been engaged with, just like the others in terms of trying to move negotiations forward. We expect that to continue. We don't really have any news on that just yet.
Akash Palkhiwala: And then from a revenue breakdown perspective, as you know, we don't break down our QTL revenue by OEM, but a reasonable way of thinking about it is look at the scale of the market the number of units, any specific OEM contributes to the scale of the market and apply that to our overall revenue stream. |
6,387 | QCOM | 3 | 2,024 | 2024-07-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Operator: Our next question is from the line of Ross Seymore with Deutsche Bank.
Ross Seymore: One question, one follow-up. First one, probably more for Cristiano. I just wanted to see how you feel with your leadership position on both the modem and the apps processor side in your handset business. How do you feel about the relative market share that you'll have in the penetration at given customers? There's kind of perpetual debate about what you're doing with your lead Korean customer, year-to-year, gen-to-gen same thing with your modem only customer. So as you look forward over the next year or 2, how are you feeling about the penetration that Qualcomm can have at the major customers? |
6,388 | QCOM | 3 | 2,024 | 2024-07-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Cristiano Amon: All right. Thanks for your question, Ross, loaded question. So I'm going to have to unpack one by one. I think the first part of the question, how do we think about modem technology. We feel pretty good about our modem technology. I think this is one of the core competencies of the company. We continue to be the number 1 company in the country in a number of wireless patents and extended essential patents and continue to be the company pushing for the road map. As it relates to our business with Apple, we still operate with the framework that we provided to you all. I think when we extended the chipset agreement, and we expect to be operating within that. We have no new update to provide it everything above what we said before is an upside. So we don't have that in our financial planning assumptions above what we had disclosure. When we think about the application processor, I think the conversation is a little bit more interesting because we have always said the leadership in AI performance, we always had the leadership and sustained peak and sustained performance in mobile gaming in other applications with our Adreno GPU. And now for the first time in a while, we're going to have our own custom CPU, which will be announced at the Snapdragon Summit and will be in the flagship devices launching towards the end of the year, beginning of 2025. So I will argue that our application processor advantage is accelerating. And as I said in this earnings, I think the launch of the Copilot+ PC was really a graduation for Qualcomm as it used to be perceived as a communications company isn't really a computing company. To the point that now we become the benchmark for others to follow within the PC industry. And I think that is going to be reflected in -- in the handset as well as we have our own custom CPU. As it relates to relationship with Samsung, we have executed agreements with them. It's largely consistent to what you have seen with the launch of the GS24, how is that going to continue. We're pretty |
6,389 | QCOM | 3 | 2,024 | 2024-07-31 16:45:00 | QUALCOMM Incorporated | 33,493 | them. It's largely consistent to what you have seen with the launch of the GS24, how is that going to continue. We're pretty happy with the relationship. And I think we both have a lot of opportunity with the AI coming into premium smartphones. |
6,390 | QCOM | 3 | 2,024 | 2024-07-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Ross Seymore: I guess as my follow-up for Akash. One, in the answer to your prior question, you said that your year-over-year growth in December would be about the same as it was last December. Just a clarification. Was that just for QCT? And then I guess my bigger picture question, how should we think about gross margins in QCT going forward? Looks like you're implying them down a bit in the September quarter, but still flat year-over-year. Has the diversification process happens, automotive, PCs, et cetera? How should we think about that line in your income statement?
Akash Palkhiwala: Sure, Ross. So that comment was really focused on overall company, so not just QCT, but the overall Qualcomm metrics. From a gross margin perspective, we did slightly better than we expected. We had guided in the third quarter. And what we're doing is we're guiding fourth quarter in line with the guidance we had provided for third quarter. I think as you look forward beyond fourth quarter into fiscal '25 using fourth quarter as a way to model the going-forward path is a reasonable way of thinking about it.
Operator: Our next question is from the line of Tal Liani with Bank of America.
Tal Liani: Can you hear me?
Cristiano Amon: Yes, we can.
Tal Liani: Okay. Perfect. Sorry. So I need help to define your addressable market in compute, meaning. Is it mostly about consumer laptops, enterprise? How do you envision your addressable market in the compute segment? And the second thing is you talked a lot about AI, AI inclusion in handsets. When we talk to carriers, they seem to be far away from it in the sense that they can't find the applications yet. What do you -- what do you think is going to drive the deployment? What kind of applications and what's the timing of applications that will drive the deployment of AI in handsets? |
6,391 | QCOM | 3 | 2,024 | 2024-07-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Cristiano Amon: Tal, this is Cristiano. Thank you for your question. Let me take the first one. You should think about addressable market the follow way. First of all, it's Windows 11, addressable market. We're very focused right now on laptops, whether it's commercial laptops for enterprise, consumer laptops. We're ranging price points, I think, especially as we talked in the prepared remarks, extending the road map from $700 and above. That's -- and what is defined as AI PC, a metric that I can provide to you. And I think there has been a number of OEMs indicating their respective views, but we forecast about 50% of our computers sold in 2027 will be AI PCs. That's one way to think about it. And we continue to basically see the transition of as upgrades are happening to Windows 11 and Copilot+ PCs, an opportunity for us to participate with a highly differentiated solution. I think your second question...
Akash Palkhiwala: It was on AI applications. |
6,392 | QCOM | 3 | 2,024 | 2024-07-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Akash Palkhiwala: It was on AI applications.
Cristiano Amon: It was about AI applications for devices. So here's how you should think about it. AI is going to do on phones, whether you're going to text, whether you're going to talk, whether you're going to touch, it's going to be a very important part of the human computer interface. And this is going to start to change a lot of the user experience on apps. It's less of a carrier conversation. It's really more of an application conversation. And those are going to start to change a lot of the use case of existing apps or you're going to start to see as we see the development of new agents that become more relevant. For example, if you are like me, a user of WhatsApp, you're going to see the ability within WhatsApp for you to search with Llama for you to do different things with their model. And eventually, a lot of the models are going to have multiple functionality across multiple apps. The way to measure this is the number of use cases. And we're -- as I said before, we're actually very happy with the trajectory. I'd like to compare what happened with the smartphone. When the smartphone -- first, there were like 10 apps and then became 100 apps and became 1,000 of apps, became hundreds of thousands of apps and then it became very clear what was happening. I think we look at a little bit the same way. We're in the beginning, but we like the number of use cases increasing, and that's going to drive a lot more AI NPU performance in the silicon and hopefully continue to expand the premium and high tier.
Operator: Our last question is from Tom O'Malley with Barclays. |
6,393 | QCOM | 3 | 2,024 | 2024-07-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Operator: Our last question is from Tom O'Malley with Barclays.
Tom O'Malley: I have one for Cristiano and one for Akash. Just very recently here, obviously, in the quarter, there's a huge step-up in the auto portfolio, and I think you guys did a good job of kind of describing what drove that. But you've also, in your deck and kind of in your commentary talking more about AI PC being a driver. Cristiano, if you look at kind of the next 12 months, you hosted an Auto Analyst Day and you kind of talked about the opportunity being back-end loaded, and I think the end date was kind of the late 2020s. But if you look at the next 12 months, what opportunity do you think is more exciting to you the automotive side or the IoT in terms of revenue growth? Obviously, the buckets are different sizes, but just breaking those 2 out as to what can drive some growth there. And then on the Akash side, if you look into Q4, you obviously have an extra week there, but you are seeing OpEx step down. Could you just walk through the moving parts that I would expect it to be up a little bit just given the extra week? |
6,394 | QCOM | 3 | 2,024 | 2024-07-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Cristiano Amon: Thank you, Tom. Actually, I appreciate the question. I really like the question to give me an opportunity to explain this. You should think of Qualcomm -- we're not just trying to build one big business of differentiation. Actually, we're building a number of business -- I'm sorry, of diversification. We're really focused on this. And when we talk about Auto Investor Day, that was actually in September 2022, we kind of outline how that is going to be turning into a big platform for Qualcomm and building into the financials. And then hopefully, you can see now, especially with this quarter, that's materializing. And that will continue. That's not going away. We expect -- given the size of our pipeline, we talk about $4 billion in '26. We talk about $9 billion towards the end of the decade. We're on track to do that. But the second one is PCs. And as we get -- it's early. As I said, we're very happy. It's exceeding our expectations. Some models sold out. We just launched. I think when we get to the Investor Day, we probably will feel comfortable putting a metric out there of what that's going to represent and how that's going to grow over time when we think about the total contribution to Qualcomm. That's one they're very excited. But we don't stop there. The next one, and I encourage you to so what we're going to do next quarter, I think AI and computing, it's driving the industrial road map towards Qualcomm. So we we're completely redesigning our industrial road map, and we're going to unveil that road map in the coming months. So we think about this as -- there are many markets that can benefit from technology. We're super focused on growth and diversification and it's about a number of bets, not just one bet. |
6,395 | QCOM | 3 | 2,024 | 2024-07-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Akash Palkhiwala: And Tom, on your second question on OpEx, we had some non-labor material-related spent and tape-out related spend in the third quarter, which is why third quarter OpEx was higher and it goes down into the fourth quarter despite the extra week. And so it's just timing of non-labor spend that drove it. But fundamentally, no change in kind of the way we are managing OpEx. We're very committed to operating discipline and hiring, even when we do it, it is very focused on specific new skills that are required for diversification. So you won't see a difference in the way we are managing the OpEx for the company.
Operator: That concludes today's question-and-answer session. Mr. Amon you have anything further to add before adjourning the call?
Cristiano Amon: No, I just want to just quickly thank all of our partners. Our suppliers, our employees for a great job on PC execution. I think we're very proud of what we accomplished. We will continue to drive AI across each one of our businesses. We feel we have a very unique position in the ability to run AI at the edge. We're very happy with the automotive traction, and we're actually looking forward to the next generation of products launching coming months, as I said, hopefully creating a new vector for growth of the company in the future in industrial IoT. Thank you very much.
Operator: Ladies and gentlemen, this concludes today's conference call. You may now disconnect. |
6,396 | QCOM | 2 | 2,024 | 2024-05-01 16:45:00 | QUALCOMM Incorporated | 33,493 | Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Qualcomm Second Quarter Fiscal 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded May 1, 2024. The playback number for today's call is (877) 660-6853, International callers, please dial (201) 612-7415. The playback reservation number is 13745532. I would now like to turn the call over to Mauricio Lopez-Hodoyan, Vice President of Investor Relations. Mr. Lopez-Hodoyan, please go ahead.
Mauricio Lopez-Hodoyan: Thank you, and good afternoon, everyone. Today's call will include prepared remarks by Cristiano Amon and Akash Palkhiwala, in addition, Alex Rogers will join the question-and-answer session. You can access our earnings release and a slide presentation that accompany this call on our Investor Relations website. In addition, this call is being webcast on qualcomm.com, and a replay will be available on our website later today. During the call today, we will use non-GAAP financial measures as defined in Regulation G, and you can find the related reconciliations to GAAP on our website. We will also make forward-looking statements, including projections and estimates of future events, business or industry trends or business or financial results. Actual events or results could differ materially from those projected in our forward-looking statements. Please refer to our SEC filings, including our most recent 10-K, which contain important factors that could cause actual results to differ materially from the forward-looking statements. And now to comments from Qualcomm's President and Chief Executive Officer, Cristiano Amon. |
6,397 | QCOM | 2 | 2,024 | 2024-05-01 16:45:00 | QUALCOMM Incorporated | 33,493 | Cristiano Amon: Thank you, Mauricio, and good afternoon, everyone. Thanks for joining us today. In fiscal Q2, we delivered non-GAAP revenues of $9.4 billion. Non-GAAP earnings per share of $2.44, was above the high end of our guidance. Revenues from our chipset business of $8 billion, reflect strong premium tier demand for Android smartphones and continued momentum in automotive. Licensing business revenues were $1.3 billion. During the quarter, we also made significant progress on our leading technology and product road maps as well as executing on our growth and diversification opportunities. Let me share some key highlights from the business. As we drive intelligent computing everywhere, we're enabling the ecosystem to develop and commercialize on-device GenAI applications across smartphones next-generation PCs, XR devices, vehicles, industrial edge, robotics, networking and more. To that end, we recently launched the Qualcomm AI Hub, a gateway for developers to enable at scale commercialization of on-device AI applications. It features a library of approximately 100 pre-optimized AI models for devices powered by Snapdragon and Qualcomm platforms, delivering 4x faster inferencing versus nonoptimized models. As AI expands rapidly from the cloud to devices, we are extremely well positioned to capitalize on this growth opportunity, given our leadership position at the edge across technologies, including on-device AI. In automotive, the Snapdragon Digital Chassis is the industry's leading technology solution, and we're pleased to announce that our design win pipeline has increased to approximately $45 billion. We're growing faster than the addressable market and remain on track to achieve more than $4 billion of automotive revenues in fiscal '26. In premium and high-tier smartphones, our Snapdragon mobile platforms continues to set the bar for performance and on-device GenAI capabilities. Recently launched flagship Android devices powered by Snapdragon 8 Gen 3 are seeing strong demand globally, especially in |
6,398 | QCOM | 2 | 2,024 | 2024-05-01 16:45:00 | QUALCOMM Incorporated | 33,493 | Recently launched flagship Android devices powered by Snapdragon 8 Gen 3 are seeing strong demand globally, especially in China. We are extending the most sought after 8 Series capabilities, including on-device AI to a broader range of flagship and high-tier smartphones with the new Snapdragon 8S Gen 3 and Snapdragon 7 Plus Gen 3 mobile platforms launching in the second half of 2024. In cellular modems, we have again established a new industry benchmark with the Snapdragon X80, the world's most advanced 5G Modem-RF System. The X80 supports 5G advanced, the next era of 5G in addition to direct to mobile 3GPP compliant satellite communications and leading Release 18 features. Additionally, our networking solutions continue to gain traction as the WiFi 7 transition expands to the enterprise. We are excited about the upcoming launches of next-generation Windows AI PCs powered by Snapdragon. The Snapdragon X Elite is the leader in performance on device AI and power efficiency for the Windows ecosystem and is optimally positioned to lead the transition to true AI PCs. I'm also pleased to share that we recently expanded our compute portfolio with the Snapdragon X Plus platform. which is designed to address a broader range of device tiers. In XR, we're seeing good momentum in augmented and virtual reality. In particular, the Ray-Ban Meta glasses powered by our Snapdragon AR1 Gen 1 platform continue to gain traction with consumers. Additionally, the Meta Horizon OS running on Snapdragon is now open and available to third-party hardware makers. This is a significant milestone as they will expand the device ecosystem. Finally, at the Embedded World Conference in Germany, we announced 2 new solutions for the industrial IoT ecosystem. The Qualcomm QCC730 micro-power WiFi SoC in the Qualcomm RB3 Gen 2 platform. The QCC730 is specifically designed for IoT connectivity in battery power, industrial, commercial and consumer applications, featuring 88% lower power consumption than previous generations. In the RB3 Gen 2 platform is |
6,399 | QCOM | 2 | 2,024 | 2024-05-01 16:45:00 | QUALCOMM Incorporated | 33,493 | and consumer applications, featuring 88% lower power consumption than previous generations. In the RB3 Gen 2 platform is a complete hardware and software solution designed for a wide range of products, including various types of robots, drones, industrial handheld devices and more. The RB3 is supported by the recently announced AI hub and also feature support for Qualcomm Linux, a comprehensive package of operating system, software and developer tools for our IoT platforms. In summary, we're very pleased with the continued progress on our growth and diversification strategy. Beyond handsets, we have established leadership positions across automotive, XR and networking and we are well positioned to do the same in PCs, industrial and edge AI. We're optimistic about the opportunities ahead for the company and will continue to execute on our plan to deliver long-term growth and value for shareholders. I would now like to turn the call over to Akash. |
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