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6,400 | QCOM | 2 | 2,024 | 2024-05-01 16:45:00 | QUALCOMM Incorporated | 33,493 | Akash Palkhiwala: Thank you, Cristiano, and good afternoon, everyone. I'll start with our second fiscal quarter earnings. We are pleased to announce another quarter of strong non-GAAP results with revenues of $9.4 billion and EPS of $2.44, which was above the high end of our guidance range. QTL revenues of $1.3 billion and EBT margin of 71%, were in line with our expectations. . QCT delivered revenues of $8 billion and EBT margin of 29%, which was at the high end of our guidance range, reflecting strength across handset and automotive. QCT handset revenues of $6.2 billion included the benefit of flagship Android smartphone launches powered by our Snapdragon Gen 3 mobile platform. QCT IoT revenues increased 9% sequentially to $1.2 billion, which was slightly better than our expectations. We had another record quarter in QCT Automotive, with revenues increasing by 35% on a year-over-year basis, reflecting increased content in new vehicle launches with our Snapdragon Digital Chassis products. We returned $1.6 billion to stockholders during the quarter, including $731 million in stock repurchases and $895 million in dividends. During the quarter, we also announced an increase in our quarterly dividends from $0.80 to $0.85 per share, consistent with our commitment to dividend growth. Lastly, the sale of the restraint control system business successfully completes the divestitures of the non-Arriver businesses related to our acquisition of Veoneer. We are very pleased with this acquisition, and the Arriver team is executing on the development of our computer vision and drive policy ADAS software stack, targeting vehicle launches starting in late '25. Now turning to guidance. Our forecast for global 3G, 4G, 5G handset units remains unchanged for calendar '24. We estimate that global handset units will be flat to slightly up on a year-over-year basis. This includes expected growth of high single digit to low double-digit percentage in 5G handsets. For the third fiscal quarter, we are forecasting revenues of $8.8 billion |
6,401 | QCOM | 2 | 2,024 | 2024-05-01 16:45:00 | QUALCOMM Incorporated | 33,493 | digit to low double-digit percentage in 5G handsets. For the third fiscal quarter, we are forecasting revenues of $8.8 billion to $9.6 billion, and non-GAAP EPS of $2.15 to $2.35. In QTL, we estimate revenues of $1.2 billion to $1.4 billion and EBT margins of 69% to 73%, reflecting normal seasonality for handset units. In QCT, we expect revenues of $7.5 billion to $8.1 billion and EBT margins of 25% to 27%. Consistent with our previous comments, we anticipate QCT handset revenues to decline by mid-single-digit percentage sequentially, reflecting a seasonal trend due to the absence of flagship handset launches in the quarter. We expect QCT IoT revenues to grow sequentially by low to mid-single-digit percentage as we continue to see a gradual recovery from the macro factors impacting the industry. Following a record performance in the second fiscal quarter, we expect QCT Automotive revenues to grow by low double-digit percentage quarter-over-quarter as the increase in our design win pipeline continues to materialize into revenue. Lastly, we expect non-GAAP operating expenses to be approximately $2.2 billion. In closing, we are pleased with our execution and financial performance for the first half of the fiscal year. Specifically, we saw year-over-year handset revenues from our Chinese OEM increased by greater than 40% in the first half of fiscal '24, reflecting our strong competitive positioning and recovery of demand. Looking forward, our technology leadership positions us to continue to execute on our diversification strategy across IoT and automotive. In IoT, we look forward to normalization and demand across our customer base exiting fiscal '24. In addition, we're excited about the launch of our next-generation AI PCs powered by our Snapdragon X Elite and X Plus platforms from all leading PC OEMs starting in mid-'24. These PCs will deliver industry-leading processor performance, advanced on-device GenAI features and extended battery life. In automotive, we are pleased that our design win pipeline has |
6,402 | QCOM | 2 | 2,024 | 2024-05-01 16:45:00 | QUALCOMM Incorporated | 33,493 | advanced on-device GenAI features and extended battery life. In automotive, we are pleased that our design win pipeline has increased from $30 billion in September '22 and to approximately $45 billion, providing confidence in executing to our long-term revenue targets. This concludes our prepared remarks. Back to you, Mauricio. |
6,403 | QCOM | 2 | 2,024 | 2024-05-01 16:45:00 | QUALCOMM Incorporated | 33,493 | Mauricio Lopez-Hodoyan: Thank you, Akash. Operator, we are now ready for questions.
Operator: [Operator Instructions] One moment please for the first question from Matt Ramsay with Cowen.
Matthew Ramsay: Cristiano, I wanted to ask you a question about sort of handset, modem and RF architecture as we move into sort of the era of AI in handsets and mobile devices, where I think it's likely that the compute system and the memory system of the phone take up more battery life potentially as we try to compute some of these applications for AI inference on the device. And I wonder if that how that changes your potential opportunity for your modem business integrated with your RF business. There was a -- one of your competitors talked about socket lost last night, and I think it went to you guys. I wonder if you might comment on how or why. But I think it's a bigger picture question as the compute subsystem of the phone puts pressure on the modem and RF does that give you opportunities for further integration. |
6,404 | QCOM | 2 | 2,024 | 2024-05-01 16:45:00 | QUALCOMM Incorporated | 33,493 | Cristiano Amon: Well, let me unpack this. I think as far as modern-RF, we believe we have a very competitive RF front end portfolio, and we have been really delivering unique features across the modem RF, especially on power. I -- as a general comment, not related to AI, but as general comment. I think as you look at RF AI running on device and AI running on the cloud modem becomes more important, especially things like latency of response or hybrid AI models has a new importance of real-time connectivity. So we're starting to see more and more the modem becoming more important. The real advantage for Qualcomm is not only on the modem-RF, even though I think we're very proud of having the leadership position there is the fact that we actually created the ability to run AI pervasive on devices without compromising battery life. And that has been reflected within our NPU performance both on phones as well as PCs and cars. And I think that's the key, I think, technology leadership position for AI, which is the best possible performance per watt.
Operator: Our next question is from the line of Samik Chatterjee with JPMorgan.
Samik Chatterjee: Maybe if I can start with Cristiano asking sort of you mentioned the strong performance you're seeing in the China market, but maybe any more details in terms of just what you're seeing in the market relative to any specific numbers that you can share because there's been a lot of conflicting data points about the market being strong in 1Q and then maybe taking a breather. So curious to understand what you're seeing on the ground there in terms of the China market. Also, it's always been sort of a leader in adopting new technology and it seems like the AI phones are doing well. So how much of the recent strength do you attribute to AI-led upgrade cycle versus a normal market rebound? And I have a quick follow-up after that. |
6,405 | QCOM | 2 | 2,024 | 2024-05-01 16:45:00 | QUALCOMM Incorporated | 33,493 | Cristiano Amon: Thank you, Samik. So what moves to market for us premium and high tier. And I think what we're seeing in the China market is that the mix is improving. As the market has stabilized, when and return to some form of normality. What we really liked is that within that market, premium and high tier as a percentage continue to increase, and that's actually what's driving the results. And you -- and we are seeing the very first instances of on-device AI and GenAI being launched in premium devices, and that has been resonating well with the consumer. So it's a positive trend that we like. The other color I'd like to add is, we have not seen signs of weakness in the Android premium market in China, especially with our OEMs. So a lot of the strength is really coming from premium devices from Xiaomi, Honor, Oppo, OnePlus, Vivo. And I think Huawei entering that market actually increased the overall TAM of premium Android.
Akash Palkhiwala: And maybe, Samik, to add a couple of quick data points on top. As we mentioned in our prepared remarks, first half of fiscal '24, our revenue from Chinese OEMs and grew by greater than 40% year-over-year, and that is also reflected in our third quarter guidance. So it's a trend that's holding up as we look forward. And then from a road map perspective, as you look into our new premium tier launches coming up later this year, in addition to GenAI, we'll have our Oryon custom CPU core's coming in as well. So we're very excited about the road map. |
6,406 | QCOM | 2 | 2,024 | 2024-05-01 16:45:00 | QUALCOMM Incorporated | 33,493 | Samik Chatterjee: Got it. And for my follow-up, maybe Akash, this is more for you. I mean when you talked about the seasonality into the June quarter, handset seasonality is sort of the typical seasonality that you see and the aggregate results or revenue being better than seasonal is really being driven by autos here with the low double rate growth that you talked about. Clearly, very strong sort of pipeline of wins, but how sustainable is this sort of pace of improvement quarter-over-quarter in terms of revenue. Just want to get a sense if this is when we start to see more sort of inflection in auto revenues given the strong pipeline you have and that drives better seasonal results going forward. even into the September quarter?
Akash Palkhiwala: Yes. From an automotive perspective, as you know, we've given out a target of greater than $4 billion revenue in fiscal '26. And what you're seeing is really our design win pipeline materializing into revenue on our way to that number. And so that's the framework as to how I think about it. Two key kind of data points on our design win pipeline. So as you'll recall, the last number we had given was $30 billion in September -- about 18 months ago, September '22. The updated number that we just provided is $45 billion of design wins. So obviously, a very significant increase. And of note, within that, approximately 1/3 is driven by ADAS. So we're seeing tremendous success now in ADAS and that's adding to our design win pipeline.
Operator: Our next question is from Mike Walkley with Canaccord Genuity.
T. Michael Walkley: And maybe just building off the 40% increase in shipments to the Chinese OEMs holding through the June quarter guidance. just based on your expanding on device AI portfolio, is this level of demand sustainable into the back half of the calendar year? Or asked another way, do you expect the smartphone market to have kind of normal seasonal trends after the June quarter dip? |
6,407 | QCOM | 2 | 2,024 | 2024-05-01 16:45:00 | QUALCOMM Incorporated | 33,493 | Akash Palkhiwala: Yes. So as you'll recall, Mike, we had said earlier that we expect the third quarter to be the low quarter from a financial perspective, just given the seasonality of our business. That still holds true. So as we go from third to fourth quarter and then into fiscal first quarter, which is the December quarter, we expect growth as new launches of phones happen across all major OEMs. And as I said earlier, we're going to have the launch of our Snapdragon 8 Gen 4 chip as well, and we're extremely excited about what that chip does and the launches that will come through that chip later in the year. Specifically, as you think about fourth quarter, we expect the EPS growth from third to fourth quarter to be consistent with fiscal '23, and then we'll grow beyond that into the December quarter.
T. Michael Walkley: Great. That's very helpful. And maybe just for a quick follow-up on the IoT business. It sounds like March is the bottom, as you laid out. Can you maybe update us on the 3 segments, just what you're seeing in terms of the inventory correction? |
6,408 | QCOM | 2 | 2,024 | 2024-05-01 16:45:00 | QUALCOMM Incorporated | 33,493 | Akash Palkhiwala: Yes. So Mike, we had talked about December fiscal first quarter as the bottom quarter. We grew from that into March by 9% sequential growth. which was better than our expectations. And then now we're guiding low to mid-single-digit growth into the September quarter. So it's -- as we had outlined at the beginning of the year, we would see improvement through the year, and that trend is holding, and we expect it to hold in the fourth fiscal quarter as well. In terms of different parts within IoT, consumer is more aligned with phones. So we've seen that recover faster. And then the industrial networking is consistent with what our peers are seeing within those industries and the recovery time line is aligned with that. If you kind of step back and think about our business there, we're pretty excited about new products that are coming out. So Cristiano talked about the PC set of products coming out later this year, device launch coming out later this year. But then in addition to that, we also have new products in industrial and WiFi 7 that will drive growth into this IoT segment as well.
Operator: Our next question comes from Stacy Rasgon with Bernstein Research.
Stacy Rasgon: For my first question, just on the PC outlook, it does sound like devices are going to be available for purchase in the back half. So like how much PC is actually in the Q3 outlook? And what should we expect for the PC in the numbers like into the second half and beyond, like when does PC actually get big enough for us to see it? |
6,409 | QCOM | 2 | 2,024 | 2024-05-01 16:45:00 | QUALCOMM Incorporated | 33,493 | Cristiano Amon: Stacy, thanks for the question. We have a lot of product momentum right now and especially with all the launches, I would encourage everybody to go watch the Microsoft Build event, especially or what is happening with on device AI. There's a lot of product momentum and launches. As those devices started ramp up in volume. And since a lot of them are going to be back to school, it's going to be more of a fiscal '25 event in terms of being material within the IoT segment. Anything you'd like to add, Akash?
Akash Palkhiwala: Just maybe in our June quarter guidance, there isn't material PC volume forecasted in our numbers.
Cristiano Amon: One thing we're going to do -- sorry, just real quick. One thing we're going to do, like we provide an update on auto this quarter. We're going to provide a more detailed update next quarter on PC, especially as we're going to have those devices are launched.
Stacy Rasgon: Got it. That's very helpful. For my follow-up, I wanted to ask about Huawei revenues. So in the Q, it says that you're not expecting any further product revenue from Huawei beyond the end of the calendar year. So I know it's only low end 4G that's left, but like how big is that now in the numbers in the end? How much of that will be going away into the calendar year?
Akash Palkhiwala: Yes. So Stacy, if you look at Huawei, as you've seen, they have launched multiple tiers of 5G devices already with their own chips. And clearly, we don't participate in those devices. What we are shipping at this point is the license that we have is for 4G chips. And as you rightly pointed out, it's at the low end of the spectrum. What we outlined in the Q is since the devices will eventually transition all to 5G, we don't expect any revenue from Huawei product business in '25.
Operator: Our next question comes from the line of Chris Caso with Wolfe Research. |
6,410 | QCOM | 2 | 2,024 | 2024-05-01 16:45:00 | QUALCOMM Incorporated | 33,493 | Operator: Our next question comes from the line of Chris Caso with Wolfe Research.
Christopher Caso: Question is on QTL. And it sounds like that you're starting to see some degree of improvement particularly among the China OEMs in the QCT business. But that has thus far hasn't translated to the QTL business. Can you talk about sort of the lag between the recovery in those segments and what your level of optimism or not is -- for sort of breaking out of this range in the QTL business. .
Akash Palkhiwala: Yes. So as you know, well, QTL business is really driven by the size of the market. And there is a cap on the total ASPs, up to which the royalty rate -- the percent royalty rate applies. So as we have seen the benefit on the QCT side is a lot driven by more units at the premium tier, especially above $400 in price. It does not -- it's not something that benefits the QTL business directly, the way the royalty program is structured. So that's the disconnect between the 2.
Christopher Caso: Got it. That's helpful. As a follow-up, with regard to the AI handsets, a lot of the questions that we receive on this is, sort of why? And what are the applications, what are the reasons for a consumer to upgrade their handsets to AI. Cristiano, you talked about the developer hub that you're running, perhaps that gives you some insight into what the developers are doing, what's going on in the pipeline that will drive these AI handset sales? |
6,411 | QCOM | 2 | 2,024 | 2024-05-01 16:45:00 | QUALCOMM Incorporated | 33,493 | Cristiano Amon: Look, it's a great question. And I want to step back and say, in general, I think AI is going to benefit all the devices. I think AI when extends to running on device besides the benefit of working alongside the cloud. They have completely new use cases, privacy, security, latency, costs, personalization, et cetera. Here's how you should look into this. in the same way that when the smartphone started, you have a handful of apps that eventually grew to thousands and hundreds of thousands of apps, and that was really the user experience. I think we're in the very early stage. And you're starting to see some of those use cases and you have exactly that moment. Some of the phones have 10 apps and they're growing. And one of the reasons we have the AI hub because this is a new, I think, moment for the industry. it works a little bit different. It's different than how you think about the traditional app store. You have many models, many in the open source models, They can run on a device and they can be attached or built into any application. So I think we're starting to see is a lot of developer interest. As we said in the prepared remarks, we have over 100 different models, from -- models from OpenAI to Llama 3 and many, they're quantize and optimized to the NPU when they are optimized using the tool, they run 4x faster than the model without optimization. And those models and those use cases started to be implemented in apps, whether it's an image or associated with a camera, it's associated with language. So we're in the beginning of that transition. We really like what we see because it's really creating a reason for people to buy a new device, it's going to be the same on PC. It's going to be the same as they come to cars as well and in industrial. So it's an exciting tailwind, I think, for our strategy of actually driving computing and connectivity at the edge.
Operator: Our next question is from the line of Timothy Arcuri with UBS. |
6,412 | QCOM | 2 | 2,024 | 2024-05-01 16:45:00 | QUALCOMM Incorporated | 33,493 | Operator: Our next question is from the line of Timothy Arcuri with UBS.
Timothy Arcuri: I wanted to ask about the mix of the business. And as you said, Akash, China is holding up quite well. It's up 40% year-over-year in the fiscal first half. But it's within shouting distance of kind of where it peaked on a quarterly basis back in fiscal '22 when they were obviously over building at that time. So can you talk a little bit about what's happening there? How much of the year-over-year growth is units versus pricing?
Akash Palkhiwala: Yes. Thanks, Tim. It's -- as we said earlier, it's really the biggest benefit we are seeing is the mix being stronger. And as you know, we are competitive positioning is stronger at the higher tiers, and so that's helping us. The second is, when you look at generation over generation, the chips, especially at the premium tier are getting more capable as more -- not just GenAI, but other additional capabilities are being integrated into the chips and the strong competition between the OEMs. So there's demand for those capabilities. So we're seeing that come through as well. And it's really a combination of those things that is driving strength versus a unit upside. The unit size we are seeing is very much aligned with the market forecast, which says flat market versus last year.
Timothy Arcuri: Got it. Okay. And then just as a quick follow-up. How sustainable are these RF wins that you've obviously gotten for this upcoming phone? Should we consider that as kind of part of the modem. So when the modem goes away, the RF wins also go away?
Akash Palkhiwala: So of course, we'll not talk about any specific customer here, but I think I'd go back to the very first question that Cristiano answered. The key thing for us is the modem-RF architecture and how when we develop the end-to-end together, it creates an advantage for us in terms of performance, in terms of time to market for our customers as well. And that's a sustainable advantage that will stay going forward for us. |
6,413 | QCOM | 2 | 2,024 | 2024-05-01 16:45:00 | QUALCOMM Incorporated | 33,493 | Operator: Our next question is from the line of Tal Liani with Bank of America.
Tal Liani: When I look at your numbers, you bid the numbers mainly on handsets. It's both for QTL and QCT, of course. And I'm trying to understand how much of the outperformance is just China versus the rest of the world. So when you look at the rest of the world, what were the trends when it comes to your QCT shipments and QTL? And then within China, where are we in the recovery cycle, right? There is ongoing growth, but there is -- what we are seeing now in the first half of the year is mainly recovery from last year. So are you now at normal levels? And from here, it should trend normally based on demand? Or are we still recovering from the low of last year?
Akash Palkhiwala: Yes. So a couple of comments. First is on the overall picture across OEMs. So China saw a very significant benefit, but we had strength across other parts of the Android ecosystem as well. And so it's not something that was isolated to 1 or 2 OEMs. It was a broad trend that is just represented of the overall market and the mix shift that we discussed in the overall market. On your second question, as we think about our strength in handsets, we are very optimistic that as we go forward, this is a trend that holds forward. This is not about inventory. As I said earlier, the units are actually aligned with the size of the market and the trends are really driven by mix and increased content.
Tal Liani: Got it. Okay. Second question, just on the AI. I don't know if it's possible to quantify at all. But if you look at the non-AI QCT contribution versus an AI QCT contribution, when AI is included in the mix, is there a number where it comes to the increase in content per phone. Does it mean that the semiconductor there is going to be more expensive, higher price for you? So even if the market doesn't grow, can you grow just by the market shifting to AI? That's theoretical, but I'm trying to isolate the impact of AI. |
6,414 | QCOM | 2 | 2,024 | 2024-05-01 16:45:00 | QUALCOMM Incorporated | 33,493 | Cristiano Amon: A lot of people who [indiscernible]. But let me try to give you maybe an answer to help explain this. In first step, a lot of the increased content in ASP on QCT chipsets, including premium has been driven by the compute part. And it's more performance on the compute, CPU, GPU, the NPU. Second, the NPU has been the largest area of silicon growth in those chips. So generation over generation, one of the largest improvements has been the NPU for AI, and AI is driving a lot of silicon content in those devices because the expected computational capability to run those models. The benefit financially I think it's going to come probably in the way that you're starting to see the beginning of it right now, which improves the mix. Users want to buy a more capable phone that can run AI. So it drives the market towards a richer mix of higher improvement here, share gains and then an upgrade cycle as people want to buy a new phone. That's how we should think about it in phones. PC is a little different. As we enter the PC, I think the AI and the ability to run on device AI better than any of our peers on a laptop, I think it's going to be a tailwind to the capability. Car, it builds more value on top of the platforms that were -- that are being commercialized and design win with the increase of the pipeline, especially in many of those platforms, we can do a softer upgrade to be able to run GenAI on those vehicles. So I think that's how this is going to materialize for Qualcomm. The last part of my answer is industrial, which is a new area that we're trying to upgrade to higher performance from microcontrollers to high-performance computing connectivity. I think Edge AI is proving to be a key attribute of this market going forward.
Tal Liani: Our final question is from the line of C.J. Muse with Cantor Fitzgerald. |
6,415 | QCOM | 2 | 2,024 | 2024-05-01 16:45:00 | QUALCOMM Incorporated | 33,493 | Tal Liani: Our final question is from the line of C.J. Muse with Cantor Fitzgerald.
Christopher Muse: I guess I was hoping you could speak to QCT gross margins. They impressively held flat despite revenues down 5%. And I guess the real question here is not just how you did it this quarter, but how should we be thinking about as you bring on non-handset revenues to the model, what incremental gross margins might look like for QCT, particularly as we think about the AI PC and IoT as well as auto, given that growing backlog.
Akash Palkhiwala: Thanks C.J., yes, I think the first couple of quarters of this fiscal year, we've seen -- definitely seen strength in margin, and it's driven by the return mix that we've discussed on the call. What we're guiding for the third quarter is a sequential decline, again, reflecting kind of lack of flagship launches in the quarter. No change to what we've said on gross margins before. We've given a range, and we've been operating at the high end of the range, but no kind of fundamentally change on the framework of it going forward.
Christopher Muse: Great. As a quick follow-up, on the auto side, you talked about the higher reiterated the $4 billion plus. Should we be thinking about kind of amortizing that 26-plus percent growth equally into fiscal '25-'26? Or might that come in sooner with faster growth.
Akash Palkhiwala: Yes. So I mean, obviously, we are not kind of guiding quarters that far out at this point. But if you kind of take the current run rate and extend it forward towards the $4 billion target, kind of generally slope x -- slope growth increase between the 2 data points is a reasonable way of thinking about it.
Operator: That concludes today's question-and-answer session. Mr. Amon, do you have anything further to add before adjourning the call? |
6,416 | QCOM | 2 | 2,024 | 2024-05-01 16:45:00 | QUALCOMM Incorporated | 33,493 | Cristiano Amon: Yes. Just a few questions, I think we're incredibly pleased with our technology and product road map evolution. And we're really looking forward to our next-generation PCs with Snapdragon as I said during the call, I encourage everyone to look at the announcement from Microsoft Build and how that's going to drive much more AI into the Qualcomm platform. And I was just going to leave you all with a thought. One great things about the execution of the company. Every time we enter a new market or we set ourselves to go to a new market, and we end up building a very strong position. We went from mobile to RF front-end, we became #1. Same thing when we went to WiFi. Automotive, it was something that we had ambition to build as part of the diversification. I think we're quickly becoming the industry partner of choice. We are -- believe that there is a long-term opportunity with virtual reality, augmented reality. And now we have the absolute majority of the designs. And with PC, we clearly build the leading platform, and we have the product momentum that we hopefully will translate in the financial in the coming year. So I just wanted to state that we feel good about the company technology capabilities and how we're driving growth and diversification for shareholders. Thank you very much for your support. Thank you to all our employees, and I'm looking forward to talking to you in the next call.
Operator: Ladies and gentlemen, this concludes today's conference call. You may now disconnect. |
6,417 | QCOM | 1 | 2,024 | 2024-01-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Qualcomm First Quarter Fiscal Year 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded, January 31, 2024. Playback number for today's call is 877-660-6853. International callers, please dial 201-612-7415. The playback reservation number is 13743224. I would now like to turn the call over to Mauricio Lopez-Hodoyan, Vice President of Investor Relations. Mauricio Lopez-Hodoyan, please go ahead.
Mauricio Lopez-Hodoyan: Thank you, and good afternoon, everyone. Today's call will include prepared remarks by Christian 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 have [Technical Difficulty] 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 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. |
6,418 | QCOM | 1 | 2,024 | 2024-01-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Cristiano Amon: Thank you, Mauricio, and good afternoon, everyone. Thanks for joining us today. In fiscal Q1, we delivered non-GAAP revenues of $9.9 billion and non-GAAP earnings per share of $2.75 above the high end of our guidance. Revenues from our chipset business of $8.4 billion reflect healthy Android demand and continued strong momentum in automotive. Licensing business revenues were $1.5 billion. We're pleased with these results, and I will now share some key highlights from the business. In handsets, the Snapdragon 8 Gen 3 mobile platform is setting a new standard for on-device gen AI experiences for premium smartphones and powers all through flagship Android devices launched and launching this fiscal year. Notably, the Snapdragon 8 Gen 3 mobile platform for Galaxy is featured in the recently announced Samsung Galaxy S24 Ultra globally, in addition to the GalaxS24 and S24 Plus in multiple regions. The GalaxS24-Series includes on-device AI features such as live translate, interpreter, chat assist, nitography and more. This marks the beginning of how gen AI will evolve the overall smartphone experience and highlights the significant opportunity for Snapdragon platforms. We're also announcing that we extended a multiyear agreement with Samsung relating to Snapdragon platforms for flagship Galaxy smartphone launches starting in 2024. The extended agreement demonstrates the value of Snapdragon 8, our technology leadership and our successful long-term strategic partnership with Samsung. In the quarter, we also announced the Snapdragon 7 Gen 3 mobile platform, which brings leading gen AI capabilities to high-tier Android smartphones and is a category leader in both experiences and performance. In our QTL business, we're pleased to share that we recently extended several key license agreements. First, Apple exercised its unilateral option to extend its global patent license agreement for an additional two years, taking the existing agreement through to March 2027; second, we have renewed long-term agreements |
6,419 | QCOM | 1 | 2,024 | 2024-01-31 16:45:00 | QUALCOMM Incorporated | 33,493 | for an additional two years, taking the existing agreement through to March 2027; second, we have renewed long-term agreements with two significant Chinese smartphone OEMs. In addition, we continue to negotiate new agreements or renewals with other key licensees and OEMs, including some whose current agreements are set to expire in early fiscal 2025. Automotive continues to be an important pillar of our growth and diversification strategy. Notably, 75 new models launched commercially in 2023 were for technologies, highlighting Qualcomm's grown scale in automotive and execution of our design wins. Earlier this month at CES, we announced our collaboration with Bosch to have our Snapdragon Ride Flex SoC power their new central vehicle computer. As a reminder, Snapdragon Ride Flex enables the fusion of infotainment in ADAS functionalities on a single SoC enabling automakers to realize a unified central-compute and software-defined vehicle architecture that scales across tiers. Additionally, we demonstrated digital cockpits connected services and advanced driver systems enabled by gen AI models running locally on the Snapdragon platform. This new capabilities can be enabled on a number of existing designs via a softer upgrade. This represents significant new opportunities for Qualcomm and our partners. In PCs, we're driving towards the launch of Snapdragon X Elite in mid-2024 and are pleased that our design win traction continues to increase since the platform was announced last October. We expect Snapdragon X Elite to set the industry benchmark for on-device gen AI and copilot experiences in addition to leading performance and battery life for next-generation Windows PCs. We recently expanded our mixed reality solutions with the announcement of the Snapdragon XR2+ Gen 2. Our new platform supports 4.3k per eye resolution and 90 frames per second in 12 or more concurrent cameras to deliver crisp immersive mixed reality and virtual reality experiences. We are proud to partner with Samsung and Google to provide leading |
6,420 | QCOM | 1 | 2,024 | 2024-01-31 16:45:00 | QUALCOMM Incorporated | 33,493 | immersive mixed reality and virtual reality experiences. We are proud to partner with Samsung and Google to provide leading XR experiences to Galaxy users by utilizing Snapdragon XR2+ Gen 2. In edge networking, we announced the Snapdragon X35 5G Modern-RF system, the world's first commercial release 17 5G RedCap solution. The Snapdragon X35 brings a new class of purpose-built 5G for Internet of Things devices. Devices powered by Snapdragon X35 are expected to launch by the first half of 2024. We continue to believe that industrial edge devices with connectivity, high-performance computing and on device AI will become one of our largest addressable opportunities fueled by the secular trends of digital transformation. As such, we're accelerating our investments in solutions, ecosystem and broad channel enablement to position ourselves for growth while we navigate the industry-wide inventory draw down. One key area of focus is to enable our customers to unlock the potential of gen AI at the enterprise using our chipset solutions. As an example, Zebra Technologies and Toshiba recently demonstrated on-device gen AI capabilities for enterprise workflows and inventory management at retail self-checkout, respectively. Additionally, Honeywell showcased a Qualcomm-powered edge AI box for warehouse applications. As we complete the first quarter of fiscal '24, ahead of our expectations, I'm very optimistic about Qualcomm's trajectory and the opportunities ahead. The fundamentals of our growth drivers remain unchanged, our diversification strategy is working, and we're making significant progress across mobile, automotive, computing, XR, edge networking, industrial IoT and more. At the upcoming Mobile World Congress in Barcelona, we will provide an update on our seller modem and connectivity leadership as well as on our overall scale of Snapdragon gen AI. I would now like to turn the call over to Akash. |
6,421 | QCOM | 1 | 2,024 | 2024-01-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Akash Palkhiwala: Thank you, Cristiano, and good afternoon, everyone. I'll start with our first fiscal quarter earnings. We are pleased to announce strong non-GAAP results above the high end of guidance with revenues of $9.9 billion and EPS of $2.75. QTL revenues of $1.5 billion and EBT margin of 74% were at the high end of guidance, reflecting slightly higher handset units. QCT delivered revenues of $8.4 billion and EBT margin of 31%, both above the high end of guidance, reflecting strength in handsets and automotive revenues. QCT EBT margin includes the benefit of revenue scale, stronger product mix and operating discipline. Handset revenues of $6.7 billion were higher than our prior expectations primarily due to the increased demand driven by the acceleration of Android flagship launches with our Snapdragon 8 Gen 3 mobile platform. Notably, our Android handset revenues from Chinese OEMs exceeded our expectations of greater than 35% sequential growth. IoT revenues of $1.1 billion reflect the industry-wide challenges we've previously outlined. We achieved record automotive revenues of $598 million which grew by 12% sequentially, reflecting the increased content in new vehicle launches with our Snapdragon digital chassis platform. Non-GAAP operating expenses decreased 5% sequentially to $2.1 billion and included the benefit of accelerated implementation of cost actions that we had previously outlined for the first half of fiscal '24. Lastly, we returned $1.7 billion to stockholders during the quarter, including $784 million in stock repurchases and $895 million in dividends. Before turning to second fiscal quarter guidance, I'll update you on global 3G, 4G, 5G handset units. We estimate that global units declined by mid-single digit percentage in calendar '23 relative to calendar '22, an improvement from our prior expectations due to the recent stabilization in demand. For calendar '24, we estimate that global handset units will be flat to slightly up on a year-over-year basis. This estimate includes expected |
6,422 | QCOM | 1 | 2,024 | 2024-01-31 16:45:00 | QUALCOMM Incorporated | 33,493 | we estimate that global handset units will be flat to slightly up on a year-over-year basis. This estimate includes expected growth of high-single digit to low double-digit percentage in 5G handsets. Turning to guidance for the second fiscal quarter. We are forecasting revenues of $8.9 billion to $9.7 billion and non-GAAP EPS of $2.20 to $2.40. The sequential decline in revenues and non-GAAP EPS relative to the first fiscal quarter will be driven by seasonality for a modem only handset customer in both QTL and QCT. In QTL, we estimate revenues of $1.2 billion to $1.4 billion and EBT margins of 69% to 73%. In QCT, we expect revenues of $7.6 billion to $8.2 billion and EBT margins of 27% to 29%. For QCT handset revenues coming off strong performance in the first fiscal quarter, we anticipate Android revenues will be approximately flat quarter-over-quarter. On a sequential basis, we expect QCT IoT revenues to grow by mid to high-single digit percentage with QCT automotive revenues slightly down, consistent with the trend in the prior year. Lastly, we expect non-GAAP operating expenses of approximately $2.2 billion. This reflects typical calendar year resets for certain employee-related costs. In closing, we're very pleased to start our fiscal year with strong execution and financial performance. In QTL, as Cristiano outlined, we are pleased to have extended several key license agreements. We do not expect any material change in QTL licensing revenue run rate as a result of these extensions. In QCT, our technology differentiation will accelerate with our on-device gen AI leadership and introduction of our custom Qualcomm Orion CPU. We also remain well positioned to execute on our diversification strategy by extending our technology portfolio to deliver industry-leading products across automotive and IoT. This concludes our prepared remarks. Back to you, Mauricio. |
6,423 | QCOM | 1 | 2,024 | 2024-01-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Mauricio Lopez-Hodoyan: Thank you, Akash. Operator, we are now ready for questions.
Operator: Thank you. [Operator Instructions] The first question is from Samik Chatterjee with JPMorgan. Please proceed with your question.
Samik Chatterjee: Hi. Thanks for taking my questions and congrats on the results here. Maybe if I can start with AI and particularly the launch of the Samsung S24. Now you have some incremental sort of experience in terms of devices launching in the market and the performance and consumer reception you're seeing to that. So I know you outlined adoption of 3G, 4G, but any way of giving us some flavor of what you're thinking in terms of adoption of these AI devices or AI on edge in terms of the smartphone market? How similar or different will that curve look like relative to 5G adoption? And any insights from the sort of pipeline you're working on will be helpful for us? Thank you and I have a follow-up.
Cristiano Amon: Hello, Samik. Thanks for the question. This is Cristiano. Look, it's early, but I think it's -- we're definitely excited about what we see in the beginning. It's not only unique to the GalasxS24, that has a number of now use cases running gen AI on the device. I mentioned a few of my prepared remarks like translation and you have a much more effective assistance in a number of different applications. We're going to see productivity coming. But we'll also see that happening with some of our other customers from China, launching a number of models. So I think we have a large number now of models being ported into our hardware for gen AI. I think we're starting to see the beginning of new use cases. Reviews have been positive, and we are happy with we've seen the results following the launch. I think we need to monitor the situation. But eventually, at a minimum, is going to have a favorable impact on mix, which is a trend that we continue to see premium and high tier with more computing power -- is the fastest-growing segment in the handset market. |
6,424 | QCOM | 1 | 2,024 | 2024-01-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Samik Chatterjee: Yeah. Okay. Got it. And maybe just as a follow-up, the -- and the Android OBX customers of the Chinese OEMs you work with, they exceeded your expectation in the fiscal first quarter -- but as you're looking to the second quarter, you're guiding to a more flattish trajectory here? I know the industry has sort of been looking at inventory refill from those customers as well, driving some of the momentum. So just wondering if you can give us an update in terms of what you’re seeing from those customers? And if at all, Huawei and their reemerges in the market is starting to have an impact in terms of volume or market share for these customers as well in the context of your flat guide for them for quarter-over-quarter? Thank you.
Akash Palkhiwala: Sure. Samik, it’s Akash. As we have said previously, as we entered fiscal ‘24, our view was that Android channel inventory had largely normalized. And so as we go through the year, we typically see normal bill bleed cycle around handset launches. So that’s kind of the phase we are in from our perspective. In the first quarter, what we saw was higher demand due to the acceleration of Android flagship launches with our new chip, Snapdragon 8 Gen 3. And we saw very strong demand across all the major Android OEMs. And so happy, of course, with that traction and that momentum carries over to the second quarter as well. And that’s what you’re seeing both in our results and our guide going forward. In terms of your comment on Huawei, really what we’ve seen since Huawei 5G launch is that the premium tier TAM in China has expanded. And so we’re continuing to see strong demand from our customers post that launch.
Operator: Our next question is from the line of Matt Ramsay with Cowen. Please proceed with your question. |
6,425 | QCOM | 1 | 2,024 | 2024-01-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Operator: Our next question is from the line of Matt Ramsay with Cowen. Please proceed with your question.
Matt Ramsay: Thank you very much, guys. I guess for my first question, Cristiano, I was fit to hear, I guess, the formal announcement of an extension with your partnership with Samsung. And you mentioned, I think, in your prepared script that it started with 2024 devices, but I assume it's longer than that. So maybe you could give us a little context as to the links and any details you can share on the new agreement. You guys obviously have your new custom CPUs coming into the Snapdragon road map and some expanded MPU product as well. So we see kind of what the split is of share in the flagship at Samsung currently, but I'm just trying to understand a bit more about what this means for on a go-forward basis. Thanks.
Cristiano Amon: Thanks for the question, Matt. The agreement that we announced at this earnings call, it is a multiyear agreement. We're not disclosing the duration, but there are several years into that agreement. And I think your observation is correct. I think it starts in 2024. I think as you look at the launch of GalaxS24 is a good proxy on how we should think about the agreement between us and Samsung. But most important is the thing that you outlined. Our road map is getting stronger over time, especially with our custom CPU coming to mobile, and we're aiming to have the leadership position in the mobile performance on CPU. And our NPU continue to expand as we -- as I mentioned before, we're just at the beginning of the gen AI transition. I think in summary, we're very pleased our relationship with Samsung, and it's a very long-term relationship with this customer. |
6,426 | QCOM | 1 | 2,024 | 2024-01-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Matt Ramsay: Got it. Thank you for that. I guess my follow-up question is one for Akash, first of all, Akash, congratulations on the new COO hat. Well done. But my question is around margins. And I noticed that even with the IoT business down dramatically, there was some improvement in sequential gross margin in the quarter and back above 30% in QCT operating margins. So maybe you could discuss some of the moving parts with margins in the business because it was a -- pleasantly a bit better than I had modeled, and I kind of want to see what might be sustainable or what actions you took on a go-forward basis on both the gross and the operating side. Thanks.
Akash Palkhiwala: Thank you, Matt, and thanks for our wishes. I'm looking forward in this new role to working with Cristiano and the executive team to kind of deliver on our long-term priorities. And of course, I'll continue to remain committed to my CFO role, working closely with the team here and maintaining consistency and transparency and looking forward to seeing a lot of you at upcoming events. On the margin side, what you saw in the first quarter is really the fact that our gross margins were stronger because the mix was richer (ph). We had a higher set of premium tier launches coming through and that impacted our volume, and we benefited from that mix -- richer mix. And if you look at our second quarter guide, we are guiding largely in line with how our first quarter came in. So that was obviously great to see. From an operating margin perspective, it's -- in addition to the strength in the gross margins obviously, the revenue scale and the actions we took on the OpEx also benefited. And so we were happy to -- extremely happy to deliver 31% operating margin in QCT and really focused on delivering to the long-term target we’ve outlined to the investors.
Operator: Our next question is from the line of Mike Walkley with Canaccord Genuity. Please proceed with your question. |
6,427 | QCOM | 1 | 2,024 | 2024-01-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Operator: Our next question is from the line of Mike Walkley with Canaccord Genuity. Please proceed with your question.
Mike Walkley: Great. Thanks for taking my question and congrats on extending some of the licensing deals. I guess, just want to jump a little bit into the IoT business, the three segments, I assume, consumer is still weaker. But can you update us kind of how the inventory bleed is trending for the three business within IoT? And then within that question too, just on the recovery of IoT, share with us the X Elite ramp and how material this might become for IoT, say, in the next one to two years?
Akash Palkhiwala: Maybe I'll address the first part and then Cristiano can talk through the X Elite question. From an IoT entry perspective, what we have seen is stabilization really on the consumer side. As you know, we were one of the first to call out the weakness in IoT, and now we're seeing it go through both on the industrial and the edge networking side. And consistent with our previous comments, we think the first quarter was the bottom for our IoT revenue stream. We're guiding second quarter up mid to high-single digits. Second half of the year -- fiscal year, as we see the inventory channel kind of normalizing and end markets kind of benefiting from that -- we're excited about what our product portfolio can bring and overall, lots of opportunities for us. So over -- in my mind, there's significant uncertainty, but we are cautiously optimistic, and I think we have a great product portfolio as we look forward. |
6,428 | QCOM | 1 | 2,024 | 2024-01-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Cristiano Amon: Look, your question about X Elite and in PC. It's too early. We're tracking to the launch of products with this chipset tied with the next version of Microsoft Windows that has a lot of the Windows AI capabilities. We're still maintaining the same date, which is driven by Windows, which is mid-2024, getting ready for back-to-school, what we're excited about it is since we announced that Tech Summit showing the performance of the product and the AI capabilities, design traction continue to increase. So we had increased the number of designs since last quarter. and we continue to march forward towards the launch. We like that everybody is now talking about on-device AI on PC. That's where we started this journey with X Elite. And I think that proved to be a tailwind to the opportunity for us in PCs.
Mike Walkley: Great. Thanks. And maybe Cristiano, just a quick follow-on question. Just on the auto business, how should we think about the ramp of that business over the next one to two years? You've talked about a lot of design win activity and digital chassis ramping this year, but with ADAS coming into the model, how might that business ramp towards your target in 2026. |
6,429 | QCOM | 1 | 2,024 | 2024-01-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Cristiano Amon: No, absolutely. Thank you for your question. Look, let me step back a little bit and say we're extremely pleased with our performance in auto, especially when you look at the overall market. Right now you can look at Qualcomm results with record revenues and very strong, I think, year-over-year growth. In 2023, in this year that just closed, we launched 75 models with our silicon with a significant improvement in silicon content as it relates to those immersive cockpit and in many cases, processing for safety. So we're very happy with the business. And I think the answer to your question is, we are on track to meet our target that we said on the Auto Investor Day of $4 billion and $9 billion, respectively, I think for ‘26 at the end of the decade. So we’re on track for that. And the next quarter, we’re going to give you an update on the design win pipeline that continues to grow.
Operator: Our next question comes from Stacy Rasgon with Bernstein Research. Please proceed with your question.
Stacy Rasgon: Hi, guys. Thanks for taking my question. So given that you've got Android, Android was pretty strong in December, and it's flat into March. How are you thinking about June seasonality given all these trends and moving pieces? I know it's usually down a bit for March, but I guess in the current what are you thinking about June seasonality. |
6,430 | QCOM | 1 | 2,024 | 2024-01-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Akash Palkhiwala: Stacy, it's Akash. No change to the shape of the year comments that we made last time. Following second quarter, we do expect third quarter to be the lowest quarter. It's one of the quarters where we do not have any significant flagship launches. And as a result, you kind of see a decline in third quarter then growth back into the fourth quarter. And it's -- when you look at second to third quarter, we expect a trend consistent with the last two years. First half, obviously benefited from this acceleration of launches for Android and pretty happy with that. And I think it sets us up as we look forward in terms of both content growth with our strong road map and just positioning overall in the handset market.
Stacy Rasgon: Got it. Thank you. And so my follow-up, I just want to ask about Huawei -- was Huawei still completely out of the model in December? And is it out of the model in the March guidance?
Akash Palkhiwala: Yeah. So as we’ve said in the past, Stacy, we do have a 4G license to ship Huawei and so we’ve continued to ship based on customer demand. But as you’re aware, they have launched a 5G device with their own chip, and that’s, I think, the priority going forward.
Operator: Our next question is from the line of Chris Caso with Wolfe Research. Please proceed with your question.
Chris Caso: Yes. Thank you. I guess just a question on QTL and coming from your comments about the global handset market, it sounds like you're a little more optimistic on the 5G market on the year, QTL revenue has been kind of stuck in this range because of where handset units have been. Do you -- I guess what's the outlook for QTL going forward in the context of what you're expecting for the handset market overall. |
6,431 | QCOM | 1 | 2,024 | 2024-01-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Akash Palkhiwala: Yeah. So as we outlined for our handset market, when you look at calendar '24, overall market, we expect it to be flat to slightly up. But within that, 5G, obviously, is our target market, especially for the chip business, we expect that to be high-single digit to low double-digit up on a year-over-year basis. Within QTL, I will stick with the guidance we have given before. We think there's a scale to the business that's aligned with the handset market and the 2 will move in line. And then on the extensions of the license, I just wanted to make sure that I said this in my prepared remarks, but just to confirm, as a result of the extension, we do not expect any material change in our QCT licensing revenue run rate. So it's consistent with the program. In the QTL licensing revenue run rate, it's consistent with the program.
Chris Caso: Okay. That's helpful. As a follow-up, Cristiano, I wonder if you could speak to sort of the decision to reengage in custom cores with Orion and what outcome you expect that? I mean, it sounds like that's been one of the reasons or one of the things behind the renewal of the Samsung agreement. What sort of change in the market because Qualcomm did custom cores in the past? And what do you expect to get out of that in terms of market share and content and such? |
6,432 | QCOM | 1 | 2,024 | 2024-01-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Cristiano Amon: Thank you, Chris, for your question. Look, it's consistent, I think, with the strategy we outlined, I think, following the acquisition of Nuvia. In the past, Qualcomm has been designing now its own custom course. And I think the first instantiation of that was for PCs. Actually, if you remember, in the past, that was the key motivation as we embark on this journey to create a leading SoC for laptops for the Windows ecosystem. We needed to have the performance leadership and we needed to design our own CPU to deliver the results that we did with X Elite. Now we're taking that across the entire road map. Your observation is correct. As we take that into mobile next, we're seeing significant interest from our partners as it truly becomes a leadership position in the marketplace now across all course, not only graphics and AI but also CPU. And we’re not stopping there, following smartphone that’s going to go into our automotive business, and we’re excited about what the team has accomplished to date. Orion is really well positioned to be the leading CPU core in the industry.
Operator: Next question comes from the line of Timothy Arcuri with UBS. Please proceed with your question.
Timothy Arcuri: Thanks a lot. Can you talk about restocking in China? It looks like the China Android obviously, it was up a ton and it's being guided flat. Your peer was a bit cautious on this. Can you talk -- do you think you're shipping that to consumption? And do you think you're going to ship to consumption through the rest of the year? And then I had another question. |
6,433 | QCOM | 1 | 2,024 | 2024-01-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Akash Palkhiwala: Yeah. Tim, consistent with what I said earlier in the call, I think we were kind of largely at normalized inventory for Android entering the fiscal year. What you saw in the December quarter, at least for us, to a large extent was a build for the various premium tier launches that happened during the period. And so we do expect normal bill bleed cycles through the year as devices launch. But that's kind of the framework with which we are operating going forward.
Timothy Arcuri : Got it. And then now that you have the modem for longer for this one flagship customer, one can envision a scenario where maybe you can leverage that into some new RF content that you have not had in the past. Is this a scenario? I mean, it seems like it could add $1 billion maybe. I mean you were sort of running to $4 billion a year in your RFFE business prior to stopping to tell us what that is. So it seems like that is something you could potentially leverage the reliance on your modem business? Thanks.
Akash Palkhiwala: Yeah, Tim. I’d say that’s a conversation, obviously, that we will talk to the customer about. It’s a part of our portfolio, and we’ll make it available if they’re interested.
Operator: Our next question is from the line of Ross Seymore with Deutsche Bank. Please proceed with your question.
Ross Seymore: Hi. Thanks for a couple of questions and Akash, congrats on the COO role. The first one is on the OpEx side of things. You guys did a great job in the calendar fourth quarter and you gave the guidance for the fiscal first or fiscal second quarter, how should we think about that for the remainder of the year, given your commentary on kind of doubling down on some of the opportunistic investments to diversify the company, new cores, etc. |
6,434 | QCOM | 1 | 2,024 | 2024-01-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Akash Palkhiwala: Yeah, Ross. Thank you very much. From an OpEx perspective, really, the way we think about it is any hiring that we do will be very selective and focused on really acquiring new skills that are required for diversification. But other than that, we've gone through a reduction recently. We think we're at scale to a large extent, and we're committed to operating discipline.
Ross Seymore: Great. And I guess for my follow-up, I noticed in the 10-Q, you had a new 10% customer, I think it was a 14% customer. I don't expect you to name who that is. But is that a reflection of the strong China demand that you talked about in the continuation of good future growth opportunities or was there any onetime aspect of that customer, whoever it may be popping up in the quarter?
Akash Palkhiwala: I think the you framed it in your first theory is a reasonable way of thinking about it.
Operator: Our next question is coming from the line of Tom O'Malley with Barclays. Please proceed with your question.
Tom O'Malley: Thanks for taking the question. Just passing on my congratulations to Akash as well. I just wanted to ask on the ASP side for Android. You're obviously kind of characterizing the market that's flattish into March, kind of the bottom in June and then improving from there. But you benefited from some good mix in the beginning of the fiscal year here. Could you talk about what you would expect from a mix perspective as you go to the back half? Would you see the same kind of strength on the ASP side that you've kind of seen over the past year? That would be really helpful to understand. Thank you. |
6,435 | QCOM | 1 | 2,024 | 2024-01-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Akash Palkhiwala: Yeah. So if you think about premium flagship launches for our OEMs, a lot of the launches happen in the holiday time frame just before the holidays going into Chinese New Year as well. And so you've seen a lot of those happen. We do have some significant launches through the middle of the year, but obviously, the next big launch goes into the holiday season, starting with Apple and then going into the Android launches. So that's a typical cadence. Now when -- just to confirm, just the premium tier we are talking about. Of course, there are other tiers and including the high tier, where we have very significant presence and that does drive a significant portion of our -- the launches that happened through the year and also our revenue base.
Tom O'Malley: Helpful. And then just on the auto business, you've clearly seen some weaker data points just out of the ecosystem. Can you explain why your auto business may not be levered to some of like the ADAS areas where you've seen the particular weakness of late? And like when do those ADAS and win start layering on? Is that more of like a '25 story for you guys or '26. Just can you talk about the pipeline and when you see those more advanced wins kind of layering into the to the revenue stream? Thank you.
Cristiano Amon: Hi. This is Cristiano. Look, the automotive story of Qualcomm is primarily driven by share gains as models with our silicon part of our pipeline started to materialize into revenue. And the way you should think about it, historically, a lot of the revenue was telematics, now you see the largest component been a lot of the fully immersive digital cockpits on the car. And we already have some revenue from ADAS processing. You see a lot of cars for example, in China with both ADAS and autonomy with our processor, you see some of our customers in the United States of our processor. And I think that continues to grow as we get towards our 2026 revenue target, you’re probably going to see very healthy components of all of those elements. |
6,436 | QCOM | 1 | 2,024 | 2024-01-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Tom O'Malley: Thank you.
Operator: Our final question is from the line of Tal Liani with Bank of America. Please proceed with your question.
Tal Liani: Thanks. I have two follow-ups on answers or questions you had before. The first one is Samsung. On one hand, there is a new contract. On the other hand, Samsung is going to use their own more in '24 versus '23. So net-net, are you expecting revenues of Samsung to go up or down in '24 versus '23? What are your expectations of share losses within -- can you frame it for us? And the second question is on the auto business. You had a phenomenal quarter. It's very different from the other auto companies, most of the other (ph) companies had weakness. What is the strength related to meaning is it share gain with certain customers? Is it new product or can you just put some color on the strength, the relative strength versus the others? Thanks. |
6,437 | QCOM | 1 | 2,024 | 2024-01-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Akash Palkhiwala: Yeah, Tal. Ut's Akash. So on this -- on Samsung and this is a conversation about the premium tier, I assume. In GS23, we did have global share. In the GS24 that just launched and consistent with what we said on the last quarter, we expect to have a majority share based on the model split between us and [indiscernible]. As Cristiano indicated in his prepared remarks, one of the benefits of the agreement that we did with them is it gives us predictability on our position within the premium tier going forward. And then from a content perspective, there's clearly content expansion happening. And this is really when you look at our premium tier road map, not just with gen AI coming in our custom CPU course coming in as well, but then also across other technologies. As consumers demand more capability, we see our content and our ASP both continue to grow. Switching over to your second question on automotive. You should really think -- the way to think about our automotive business is we're tied to the launch of new cars. Clearly, the industry is going through a transformation, digitization of cars, and we are right at the intersection of that transformation. We are we're benefiting our cars put in more infotainment content for experience within the car. More ADAS content comes into the car as well. And really, we get to benefit from all those intersection points in the car, and we're increasing the content as new cars launch. So that's the maybe a disconnect between some of our peers what they're seeing and what we're seeing. Stepping back, I mean, clearly, this is an industry that's going through some shorter-term dynamics, so we'll be closely monitoring it. But when you step back, our technology, our position, our products look really good, and we're excited about where we're going.
Operator: Thank you. That concludes today's question-and-answer session. Mr. Amon, do you have anything further to add before adjourning the call? |
6,438 | QCOM | 1 | 2,024 | 2024-01-31 16:45:00 | QUALCOMM Incorporated | 33,493 | Cristiano Amon: Yes. Just in closing, I'd just like to remind everyone, look, we're as I said, we're happy with the quarter. We see the android market stabilizing after we've been to '23. That was a year of correction. We like the transition of user experience with gen AI that could create an opportunity in mobile. This is one of those times for Qualcomm. They are both our Apple and Samsung revenue on the chip side or under contract. We're very happy about that. We continue to move towards stability of the QTL revenue stream with those new agreements. As you look at the growth opportunity, I think the auto results speak for itself. We're now in the IoT segment, really focus on the launch of X Elite. In the PC, we announced a new product for XR. And if you believe that, that market is finally going to get very large scale, we're well positioned with our partnership with Meta as well as Samsung and Google. And as IoT, especially industrial goes to the correction, we expect that to resume growth. So we're focused on what we can control, busy work with the growth and diversification of the company. And I want to say a big thank you for all of our partners and employees they help us get to this quarter. Thank you very much, and I talk to you all next quarter.
Operator: Ladies and gentlemen, this concludes today's conference call. You may now disconnect. |
6,439 | QCOM | 2 | 2,025 | 2025-04-30 16:45:00 | QUALCOMM Incorporated | 33,493 | Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Qualcomm Second Quarter Fiscal 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded April 30, 2025. The playback number for today's call is (877) 660-6853. International callers, please dial (201) 612-7415. The playback reservation number is 13752782. 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. |
6,440 | QCOM | 2 | 2,025 | 2025-04-30 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 $10.8 billion and non-GAAP earnings per share of $2.85. Revenues of $9.5 billion from our chipset business were driven by strength across Handsets, Automotive and IoT, all exceeding revenue expectations. Automotive and IoT revenues increased 59% and 27% year-over-year respectively. Licensing business revenues were $1.3 billion. Demand for our industry leading platforms continues to expand as high performance, connectivity and processing at the edge are increasingly important and AI becomes more pervasive across industries. We have the industry's broadest product and IP portfolio, a strong track record of establishing a technology leadership position in every industry we enter, and a clear vision for the future. As we navigate the current macroeconomic and trade environment we remain focused on driving the next wave of AI smartphones and growing our non-handset revenues to $22 billion by fiscal 29th. We are excited by the ongoing developments in generative AI, including the proliferation of smaller models. In just six months, the AI landscape has been redrawn with a wide array of new consumer and enterprise applications. New players have emerged and AI video models are becoming more dependable, marking a significant expansion in capabilities. Additionally, smaller GenAI models that can run directly on device are also advancing rapidly. It now takes only a few months to match the performance of their larger cloud based counterparts compared to 12 months just a year ago. Several new state of the art small language and multimodal models were recently released including Microsoft Fi, Google Nano, Metalama, Mistral, Ministral, OpenAI Whisper and Alibaba Quen. Some of these models are already running on Snapdragon platforms. As these trends continue, the opportunity for Qualcomm is significant. I will now provide some key highlights from across the business starting with mobile. |
6,441 | QCOM | 2 | 2,025 | 2025-04-30 16:45:00 | QUALCOMM Incorporated | 33,493 | opportunity for Qualcomm is significant. I will now provide some key highlights from across the business starting with mobile. At Mobile World Congress, we announced our X85 5G platform, the world's most advanced AI powered modem 2 antenna system delivering substantial show improvements in speed, efficiency, coverage and power consumption. The X85 sets new benchmarks and brings connectivity leadership to the Android ecosystem. It also supports 5G advanced capabilities with ultrafast peak download speeds of up to 12.5 gigabits per second and delivers the connectivity required for hybrid and agentic AI experiences. High performance low latent 5G is essential for AI applications, ensuring seamless and timely data transmission and information retrieval for real time processing and decision making. According to Google, the X85 is “designed for mobile AI and is the perfect match for Android and the agentic experiences of the Gemini era. This modem delivers breakthrough 5G speeds, network reliability and intelligent connectivity to Android phones, cementing Android and Qualcomm Technologies leadership in the mobile AI world”. The X85 was also positively received by many of the largest operators in the us, China and Japan who are excited about the superior connectivity X85 brings to 5G smartphones, the improved network performance and reliability, and potential for new AI powered services. The X85 will be shipping in handsets, automotive and IoT products starting in the second half of the year. Within smartphones, we expect this platform to be available exclusively on Android devices. In handsets, we continue to gain design traction with our Snapdragon 8 Elite, the industry's most powerful smartphone platform. To date, we have 90 flagship designs shipped or announced globally across major Android OEMs. During the quarter, subsidies in China had a positive impact on growing the premium tier, which has continued to expand over the last several years. Additionally, we're incredibly excited to see our customers launching |
6,442 | QCOM | 2 | 2,025 | 2025-04-30 16:45:00 | QUALCOMM Incorporated | 33,493 | has continued to expand over the last several years. Additionally, we're incredibly excited to see our customers launching innovative new Flip style devices featuring Snapdragon 8 Elite. This is now a flagship smartphone category. As an example, the recently announced Flip style Motorola Razr Ultra 2025 comes with Moto AI, a suite of AI powered features such as Catch Me up, which summarizes notifications and prioritizes urgent messages Remember this, which saves screenshots, photos and notes to recall later, and Magic Canvas, which lets users create AI generated images as wallpapers. It also integrates Perplexity AI, Google Gemini, Microsoft Copilot and Metalama. We remain excited about the PC opportunity for Snapdragon and we're making progress toward achieving $4 billion in revenues by fiscal 2029. We're extremely focused on driving new OEM designs, expanding markets and channels, growing into the enterprise, and increasing the ecosystem of native applications. Since the launch of the first Snapdragon X power devices in mid 2024, we have more than 85 designs in production or development and we're targeting more than 100 designs to be commercialized to 2026. In the first calendar quarter of 2025, according to third party sources, Snapdragon based PCs made up approximately 9% of Windows laptops above the $600 price tier in retail, U.S. and the top five European countries. We now have more than 750 native applications running on Snapdragon X, including over 100 for the enterprise. Additionally, there are over 1400 games running on the platform. Microsoft has continued to add new Copilot plus AI capabilities. This includes the rollout in March and April of Expand Live Captions, which offers real time audio and video translations in English during virtual meetings, podcast or video playback, and new voice access functions that enable users to interact with the AI assistant using natural language voice commands. Consumers can also experience recall, improved Windows search and click to do, making it easier to pick |
6,443 | QCOM | 2 | 2,025 | 2025-04-30 16:45:00 | QUALCOMM Incorporated | 33,493 | voice commands. Consumers can also experience recall, improved Windows search and click to do, making it easier to pick up where you left off, find what you're looking for and do more with less time. We also continue to partner with Microsoft on their signature Surface PCs. In XR, favorable consumer reception for smart glasses continues, particularly as AI enables more compelling use cases. Meta continues to add more capabilities to their Ray Ban smart glasses powered by Snapdragon. These include enhanced AI assistant interactions, video AI support, location recall, live speech translation and more. In addition to Meta and Samsung's upcoming Android XR headset, we're pleased to report that we now have more than 15 designs of smart glasses from our global partners. Smart glasses are now the best example of a new device category gaining scale because of AI. We remain confident in our ability to achieve $2 billion in XR revenues by fiscal 2029. We continue to see strong demand in automotive for the Snapdragon Digital chassis and we are on course to reach our fiscal 2029 revenue target of $8 billion. During the quarter, we secured 30 new designs including five ADAS programs as well as designs from Chinese automakers such as Nio, Zeekr, Great Wall, Dongfeng and more. We also saw 14 commercial vehicle launches from global automakers utilizing our platforms with a total of 29 commercial vehicle launches since the start of the fiscal year. Additionally, last week at the Shanghai Auto show, we announced new collaborations with Visteon and PATEO to create next generation AI intelligent cockpit solutions based on our Snapdragon Cockpit Elite and with Disa SV to jointly deliver a suite of pre integrated ADAV solutions that support L1 and L2 plus functions. Fiscal Q2 was a strong quarter for industrial IoT with notable new partnerships and recently the completion of two strategic acquisitions increasing our confidence in executing on our industrial IoT revenue target of $4 billion by fiscal 2029. In a major step toward |
6,444 | QCOM | 2 | 2,025 | 2025-04-30 16:45:00 | QUALCOMM Incorporated | 33,493 | our confidence in executing on our industrial IoT revenue target of $4 billion by fiscal 2029. In a major step toward advancing industrial intelligence at the edge, we're collaborating with Palantir to integrate their Ontelligent enterprise systems and AI capabilities on our advanced platforms. This collaboration will enhance real time insights and data driven decisions in remote and offline environments, enabling OEMs and enterprises to deploy scalable AI solutions for manufacturing, industrial and automotive applications. We acquired Edge Impulse, one of the industry's leading edge AI development platforms which enables more than 170,000 developers to build solutions for a wide range of applications such as asset tracking and monitoring, manufacturing anomaly detection and predictive maintenance systems using various AI capabilities including computer vision, time series, data, audio events and speech recognition. The development platform includes a comprehensive set of tools and features for data collection and preparation, model training, deployment and monitoring, all with an easy to use user friendly interface requiring little or no code at all. As AI accelerates the next phase of digital transformation, Edge Impulse combined with our AI hub creates a true world class industrial development platform for the age of intelligence. We also acquired FocusAI, a leader in computer vision at the edge, for an intelligent end-to-end edge AI and cloud management solution that enables real time insights and analysis. FocusAI solutions are now part of the new Qualcomm Dragon Wing Intelligent video suite, enhancing our video analytics AI portfolio. Finally, in edge networking we launched the Dragon Wing fixed wireless access gen 4 elite platform based on the X85 and is the world's first 5G advanced FWA platform. It includes an AI co-processor that delivers up to 40 tops of AI processing power to optimize wireless connectivity across 5G broadband and Wi-Fi 7 and unlocks new GenAI capabilities at the network edge. I would |
6,445 | QCOM | 2 | 2,025 | 2025-04-30 16:45:00 | QUALCOMM Incorporated | 33,493 | optimize wireless connectivity across 5G broadband and Wi-Fi 7 and unlocks new GenAI capabilities at the network edge. I would now like to turn the call over to Akash. |
6,446 | QCOM | 2 | 2,025 | 2025-04-30 16:45:00 | QUALCOMM Incorporated | 33,493 | Akash Palkhiwala: Thank you Cristiano and good afternoon everyone. I'll start with our second fiscal quarter earnings. We are pleased to announce non-GAAP revenues of $10.8 billion and non-GAAP EPS of $2.85, both of which are above the midpoint of our guidance. QTL revenues of $1.3 billion and EBT margin of 70% were flat on a year-over-year basis and slightly below the midpoint of our guidance due to lower handset units in emerging regions. QCT delivered revenues of $9.5 billion, an EBT margin of 30% with revenues and at the high end of our guidance due to upside across handsets, IoT and automotive. QCT handset revenues grew 12% year-over-year to $6.9 billion, reflecting the benefit of increased premium tier Android shipments. QCT IoT revenues of $1.6 billion increased 27% versus a year ago period driven by demand for our products with connectivity, processing and AI technologies. We delivered QCT Automotive revenues of $959 million, reflecting 59% year-over-year growth on increased content in new vehicle launches with our Snapdragon digital chassis platforms. Lastly, we returned $2.7 billion to stockholders, including $938 million in dividends and $1.7 billion in stock repurchases. Now turning to guidance, I'll first address the macroeconomic environment, including the impact of tariffs. There's uncertainty around the impact of the global trade landscape on demand across our businesses. Our guidance for the upcoming quarter is based on our current assessment of the financial impact of tariffs as they stand today. As the situation remains dynamic, we'll continue to closely monitor for potential changes. For the third fiscal quarter, we're forecasting revenues of $9.9 million to $10.7 billion and non-GAAP EPS of $2.60 to $2.80. We estimate QTL revenues to be approximately flat on a year-over-year basis, reflecting normal seasonality for handset units with revenues of $1.15 billion to $1.35 billion and EBT margin of 67% to 71%. In QCT, we expect revenues of $8.7 billion to $9.3 billion and EBT margin of 28% to |
6,447 | QCOM | 2 | 2,025 | 2025-04-30 16:45:00 | QUALCOMM Incorporated | 33,493 | $1.35 billion and EBT margin of 67% to 71%. In QCT, we expect revenues of $8.7 billion to $9.3 billion and EBT margin of 28% to 30%. At the midpoint, this reflects year-over-year revenue growth of approximately 12% led by strength in handsets, IoT and automotive. We expect QCT handset revenues to increase approximately 10% on a year-over-year basis driven by growth in Android. We estimate QCT, IoT and automotive revenues to grow approximately 15% and 20% respectively versus a year ago period driven by the same factors I outlined in our second quarter results. Lastly, we estimate non-GAAP operating expenses to be approximately $2.25 billion. In closing, we are very pleased with our strong results in the first half of fiscal 2025 with revenue and non-GAAP EPS growth of 17% and 21% respectively versus a year ago period. We are increasing our capital return target to 100% of free cash flow in fiscal 2025, reflecting confidence in our strong cash flow generation and financial targets outlined at our recent Investor Day. As the global trade environment continues to evolve, we remain focused on our execution priorities including our relationships with customers and partners globally and investing in our industry leading technology and product roadmap. Despite the near term macro uncertainty, our business strategy remains unchanged and we remain committed to our long-term financial framework. Our disciplined capital allocation and balance sheet flexibility position us for success across varying market scenarios. This concludes our prepared remarks. Back to you Mauricio. |
6,448 | QCOM | 2 | 2,025 | 2025-04-30 16:45:00 | QUALCOMM Incorporated | 33,493 | Mauricio Lopez-Hodoyan: Thank you Akash. Operator, we are now ready for questions.
Operator: Thank you. [Operator Instructions] The first question comes from Joshua Buchalter with TD Cowen. Please proceed with your question.
Joshua Buchalter: Hey guys, thanks for taking my question and congrats on the solid results in a difficult backdrop. My first question could you maybe spend a couple minutes talking through what kind of assumptions you're baking into in particular your guidance in the handset market? I mean given there's pretty widespread concerns of tariff related pull ins, are you seeing any signs of that yet? And in particular your largest customer was up pretty meaningfully year-over-year, so was any change in order patterns there? Thank you.
Cristiano Amon: Yes, thanks Josh for the question. Our approach on tariffs is really our guidance reflects our current assessment of the financial impact from it. We do not see any material direct impact to us at this point, the landscape obviously is dynamic, so we're closely monitoring, but we're very focused on things we control and very focused on supporting our customers as well. One thing to remember is when you look at our supply chain, we have a very diversified global supply chain. And so that positions us very well to navigate challenges that might happen as a result of tariffs. And then maybe specifically on your question of pull ins, we have not seen any material pull ins from our customers. So this reflects kind of reasonable, consistent ordering patterns from them and that's what's reflected in our guidance.
Joshua Buchalter: Understood, thank you. To follow up, I think a quarter ago you expressed some optimism but certainly didn't include any Huawei royalty revenue in the model. Any updates to share on those negotiations, obviously, given the difficult backdrop to be signing deals right now. Thank you.
Alex Rogers: Josh. This is Alex. There really aren't any updates. Discussions will be ongoing, but we don't have any updates right now. |
6,449 | QCOM | 2 | 2,025 | 2025-04-30 16:45:00 | QUALCOMM Incorporated | 33,493 | Operator: The next question is from Samik Chatterjee with JPMorgan. Please proceed with your question.
Samik Chatterjee: Hi. Thanks for taking my question. So maybe if I can start on the IoT segment and just in relation to the seems like that is the segment you saw the most upside relative to your own expectations for the quarter. If you can just flesh out what drove that upside and maybe just going back to following up on the last question as well, like is that a segment that you've seen any evidence of pull forward of demand and then have a quick follow up. Thank you.
Akash Palkhiwala: Yes, hi Sameet, it's Akash. So in the IoT area we saw tremendous growth in the quarter. We reported results so 27% year-over-year growth and we saw growth across all three areas. So consumer networking and industrial. The largest growth contributor was actually industrial. As we've discussed in the past, we have this premise of where the market is going, which is a transition from microcontrollers to microprocessors and AI. And we're seeing the benefit of our technology portfolio as it applies to that transition. And so we're at the front end of the transition in our minds and some of the upsides in the quarter came through the benefit that came from that transition. Maybe the last thing I'll highlight is when you step back and look at all the different areas in our IoT revenue stream, which is PCXR, industrial networking, our technology is becoming more relevant than ever to each of those areas, so that's what gives us confidence in our long term forecast. |
6,450 | QCOM | 2 | 2,025 | 2025-04-30 16:45:00 | QUALCOMM Incorporated | 33,493 | Samik Chatterjee: Yes, got it. And then maybe for my follow up, if I can ask you about your M&A pipeline and strategy here. Just when I look at FocusAI and Edge Impulse, obviously I don't know those businesses as closely, but how should we think about some of these acquisitions enhancing the capabilities in the current end markets that you're trying to diversify and enhance your position in relative to maybe some acquisitions, adding to the existing end markets and giving you more growth pillars in terms of additional incremental end markets that you can go into with some acquisitions. Thank you.
Cristiano Amon: Hi, Sameet, this is Cristiano. Thanks for the question. Look, this is very consistent to what we said before and I kind of point you back to the plan we outlined on our last investor day. If you look, we had made acquisitions in the past to create our automotive business, which we feel very confident about how complete our roadmap is. We made acquisitions such as NUVIA, which enable us to create an opportunity in compute. And we have been saying that the next focus for the company was to really augment our IoT space and especially in industrial. As a cash outline, we're, we're 100% convinced there's a significant opportunity for advanced computing and AI at the edge in industrial. And what you see us doing with Edge and Pulse with FocusAI is actually building a software platform that we can scale our technology to all those different verticals and we'll probably continue to augment the platform with those types of acquisitions.
Operator: Our next question comes from Timothy Arcuri with UBS. Please proceed with your question.
Timothy Arcuri: Thanks a lot, Akash. Typically September is like seasonally, it's up kind of mid singles to high singles. I know there's a lot of uncertainty, but is there anything besides just the macro that you would sort of, point us away from thinking of that as like a normal, Q3? |
6,451 | QCOM | 2 | 2,025 | 2025-04-30 16:45:00 | QUALCOMM Incorporated | 33,493 | Akash Palkhiwala: Yes, Tim, you're right. I mean, as we look at the fourth quarter, obviously the underlying factor there is the macro environment. And so we've reflected the best information we have today and we're going to watch, obviously monitor that closely. In QCT specifically, when you look at Android Automotive and IoT, we expect normal seasonality both from a quarter-over-quarter and year-over-year perspective. And then within the Apple product business, as we've said, we expect our share to go lower in the launches that happen in fall 2025. So we're forecasting approximately 70% share in that launch and the rest of the factors kind of consistent with what you'd expect.
Timothy Arcuri: Great. And then just on China, there's a few offsetting factors. I know you did speak about the stimulus helping the market, but there's also tariffs and trade. So how do you handicap your China business? Are you seeing signs of the customers wanting to move away from U.S. suppliers like you and move more to MediaTek? How do you weigh those factors? Thanks. |
6,452 | QCOM | 2 | 2,025 | 2025-04-30 16:45:00 | QUALCOMM Incorporated | 33,493 | Cristiano Amon: Hey, Tim, thanks for the question. This is Cristiano. Look, at this point, we feel their position is strong because it has to do with how unique our product is and how relevant our product is for the global ambition, for our, of our customers. I think we, we remind everyone that when, when we look at our China exposure, there are the products that stay within China, but there is a significant volume that goes from China to the rest of the world, and I think that's what drives uniqueness. I think of the Snapdragon position there. And, and there are a couple of data points. I think just a couple of weeks ago we had the Shanghai Auto Show we had a number of new partnerships, including an expansion of the pipeline with new design wins in auto. We have seen no signs of a slowdown in design traction on Qualcomm products within our Chinese base. And that includes smartphones, PC, Automotive, XR and we're excited about some traction in industrial as well. Thank you.
Operator: Our next question is from the line of Stacy Rasgon with Bernstein. Please proceed with your question.
Stacy Rasgon: Hi guys. Thanks for taking my questions. I wanted to first ask about chipset gross margins. It looks like they were down a bit in Q2, maybe 90 dips or so. They seem like they're being guided up a similar amount in Q3. But why were they down in Q3 in Q2, especially given with this within handsets, the presumed mix toward more premium given the weakness in the emerging region smartphones that you talked about, was it just mix between like the different segments or just like what was going on there? |
6,453 | QCOM | 2 | 2,025 | 2025-04-30 16:45:00 | QUALCOMM Incorporated | 33,493 | Akash Palkhiwala: Yes. So, Stacy, this is Akash. It's really the mix across tiers and segments as well. Right. We saw some upside that came through on lower tiers that kind of made us very small difference in gross margin. But kind of when you step back and think about broader gross margin trend, we're pretty, pretty happy with kind of both our actuals and guidance. And there's no new information versus what we've told you before. It's just how the mix plays out between quarters.
Stacy Rasgon: Got it. Thank you. And for my follow up, I know you talked about no direct impact from tariffs, but you said you're baking in what you're seeing. What are you baking in for the indirect effect of tariffs? You talked about Android being seasonal, I guess in the September quarter, which doesn't sound like you're baking in or suggesting any potential for demand destruction if tariffs or anything get put back on this. How should we be thinking about like the actual specific assumptions you're putting on the market in the wake of the current macro and the tariff situation as we go through the year?
Akash Palkhiwala: Sure. So Stacy, what I said is we do not see any material direct impact. There is smaller direct impact and some minor changes in demand. We are reflecting that and so it's in our numbers, but nothing that really is significant enough to change the direction of our guidance. So that's the data point I was giving. In terms of indirect impact, that's obviously something that we're watching closely. Difficult for us to predict that at this point.
Operator: Our next question is from the line of Joe Moore with Morgan Stanley. Please proceed with your question. |
6,454 | QCOM | 2 | 2,025 | 2025-04-30 16:45:00 | QUALCOMM Incorporated | 33,493 | Operator: Our next question is from the line of Joe Moore with Morgan Stanley. Please proceed with your question.
Joseph Moore: Great, thank you. You guys are continuing to show really strong results in auto in what's been a tough market for others. And you're talking about a doubling by fiscal 2029 from here. Can you talk about the growth drivers there? When does ADAS start to kick in more as a growth category and just what is it that gives you that confidence in that multi year forecast?
Cristiano Amon: Joe, this is Cristiano. There are a couple of drivers, I think if you remember when we outlined and disclosed the pipeline, we said one third of that was ADAS. And we also had Flex is really becoming a reality. We have some interesting designs and some upcoming SOPs with Flex that has both the digital cockpit and ADAS in the same chipset. But the key drivers of the revenue is really the mix improvement with more digital cockpit, more computing content and then in the ADAS coming up. On ADAS alone, I think we just announced in the quarter five new designs of ADAS.
Akash Palkhiwala: And Joe, to quickly add a data point to it. When you kind of step back and look at within the auto market, the car is being transformed. We play in the market that is being transformed. So digitization of car is happening, and we play in the area that is actually growing significantly, both in terms of the penetration within established base of the auto market, but then also the silicon content multiplies as you get into the new type of cars. And so we are playing in this tremendous growth area within the car market, and that’s what you’re seeing in our numbers show up.
Joseph Moore: Okay, thank you.
Operator: Our next question is from Chris Caso with Wolfe Research. Please proceed with your question. |
6,455 | QCOM | 2 | 2,025 | 2025-04-30 16:45:00 | QUALCOMM Incorporated | 33,493 | Operator: Our next question is from Chris Caso with Wolfe Research. Please proceed with your question.
Chris Caso: Yes. Thank you. First question is with regard to handsets and you talked about that being up about 10% year-on-year. Could you break out the relative strength of I guess the two buckets that would drive that the China business and then your other large customer? And you also mentioned some impact from some of the subsidies that were happening in China. Could you give some more detail of that? And perhaps is that sustainable demand? Or would perhaps that cause some pull forward as well?
Akash Palkhiwala: Yes. From a subsidy perspective in China, what we’ve seen is really the total units for the March came in line with expectations. We are continuing to see a stronger mix play out, and this has been a trend for the last several years. So if you think about premium tier handsets over $400 they have increased from 21% of the installed 21% of new devices sold in 2019 to about 30% now in 2024. And so that part of the market is expanding. Our customers are gaining share. And that is really what is informing the upside for us, both in the results quarter and the guidance quarter and that’s the primary driver of growth for us.
Chris Caso: Got it. Thank you. I guess with regard to the PC business and you gave some data points on the in your prepared remarks. I know that your product line has changed a bit, so you can attack some lower price points there. What does that mean for the growth of the PC business within IoT this year? And as you attack some of those lower price points, are the margins on those products similar to what your IoT business is today? |
6,456 | QCOM | 2 | 2,025 | 2025-04-30 16:45:00 | QUALCOMM Incorporated | 33,493 | Akash Palkhiwala: So if you think about what we’ve done in the PC business, we started at the top of the road map and established ourselves as the performance leader. And since then, we’ve introduced a total of four platforms, which addresses PCs all the way down to $600 And then the next generation of chips will come out later this year as well. So very, very happy with how the road map is playing out. In terms of design wins, we expect 100 devices to be commercialized by in 2026. We have greater than 85 design wins today. And in terms of applications being ported and games being ported, we have now ported 1,400 games onto the platform and seven fifty native applications. So that’s kind of preparing ourselves for ramp in the market. The data point that Cristiano provided in his prepared remarks is for Windows devices greater than 600 in U. S. and the top five EU markets, we have approximately 9% share in the March quarter. So very happy with how the traction is playing out and it positions us to achieve our target.
Cristiano Amon: Yes. Just want to maybe as a reminder, when you go back to our Investor Day, we’re kind of projecting 12% share by fiscal 2029. So I think that gives us confidence we’re on the right track.
Operator: Our next question is from the line of Christopher Rolland with Susquehanna International. Please proceed with your question.
Christopher Rolland: Hey, guys. Thanks for the question. I guess my first one is, if you guys could address maybe competition, whether you guys are seeing either more or less pressure, particularly at the high end. And kind of related, would you say that CSS designs that might provide APs out of the box for handset OEMs, would you ever consider that a threat or probably just a very low level threat to your business? Thank you. |
6,457 | QCOM | 2 | 2,025 | 2025-04-30 16:45:00 | QUALCOMM Incorporated | 33,493 | Cristiano Amon: Thanks for the question, Chris. I’m assuming you’re asking about the competitive landscape in smartphones. So that’s what I’m going to address. Competitive landscape has not changed for us at all. I think if we break that down by customer group, I think we have on Samsung a relationship that is very stable. We have been competing for decades with their own silicon. We have changed the baseline of that business. It used to be 50% level. Now our baseline share is about 75% level. And we have been executing multiyear agreements with that customer. So I think no changes in the competitive landscape. When you look about the competition for China based customers, the competition is really between two players, us and MediaTek. I think we like the fact that the premium tier has expanded. We always have said it’s a large enough market for two players and that’s the competitive landscape we see going forward.
Christopher Rolland: Excellent. And Cristiano, maybe my second one here around AI. You guys have been really successful in AI, adding NPU, adding ASP as a result. But maybe Intel suggested that this isn’t the case in PC. They’re not getting better ASPs for increasing AI capabilities. So I guess my question is, I guess, first kind of philosophical. Why does this work so well in mobile? And then for your future products going forward here, do you think there’s still that link more AI, more NPU, more ASP? Or is this an upgrade cycle that’s really taken place and kind of ASP expansion from here related to AI might be more difficult? |
6,458 | QCOM | 2 | 2,025 | 2025-04-30 16:45:00 | QUALCOMM Incorporated | 33,493 | Cristiano Amon: This is a great question. Actually, Chris, I love this question. So thank you. I am so I wanted to unpack this and I think they’re two separate conversations. So I’m going to start with the philosophical as you pointed out. It’s interesting. There’s it seems to be a little bit of an impatience I think about what’s happening with AI, especially with mobile and PCs. But what you have to look is really the trend. And I think that’s what’s really important. And I will unpack the difference between phone and PC. In phones, it’s crystal clear, especially when you look at the maturity of AI today, the ability to have an assistant that does things for you, even for productivity, you see now more clarity on use cases being developed for smaller screen. When you have a smaller screen, some of those systems are incredibly useful for you. And where we are in the cycle right now, it’s kind of similar to what we saw in the feature phone to smartphone transition. You’re in the part of the cycle that most of the new features come from the OEM and from the OS provider on AI and then eventually they’re going to start coming from third party developers and that’s where it gets scale. So we like the trend. It’s driving more NPU content into the phone, it’s driving ASP and it’s going to be a game about once this thing is deployed at scale with a number of new use cases about who can deliver more NPU performance without compromising battery life. And I think that’s kind of most of our investment is in this area. We like everything we see. I think there’s impatience people expected everybody like tomorrow to buy an AI smartphone, but the trend is good and again measured by the number of use cases where the beginning of third party developers building use cases. PC is a little different. PC, the first when we enter the PC space, it’s about we can deliver multi day battery life and faster CPU in a better form factor. Now, it’s the same exact trend. It is a little bit different. I think that’s why things like DeepSeek is |
6,459 | QCOM | 2 | 2,025 | 2025-04-30 16:45:00 | QUALCOMM Incorporated | 33,493 | a better form factor. Now, it’s the same exact trend. It is a little bit different. I think that’s why things like DeepSeek is incredibly helpful understanding a smaller model running on the PC. And four capabilities that you use AI all the time, there is an economic aspect of running that on the devices at the edge. So, think what we’re seeing right now is we’re winning PC designs because we have a better laptop. It’s faster. It is smaller multi day battery life. But the PC AI, it’s just at the beginning as more and more SaaS companies, especially as they get pressure from competition, smaller models make the cloud and the devices of the edge now competing for inference. You’re going to see more of those use cases and then the NPU is going to shine. And I think that you started to see that from the OS vendor, Microsoft talks about it a lot because they’re building the AI use cases as an OS. But next, you’re going to see that third party and it’s going to be the same dynamics that we’re on the phone. So we remain encouraged by it. I think it’s going to create a positive cycle and we are investing to have the best NPU out there. Thank you. |
6,460 | QCOM | 2 | 2,025 | 2025-04-30 16:45:00 | QUALCOMM Incorporated | 33,493 | Operator: Thank you. Our last question is from Ross Seymore with Deutsche Bank. Please proceed with your question.
Ross Seymore: Hi, Thanks for asking a couple of questions. Akash, they’re both going to I think be for you. So the first one is you mentioned about the market share at your U.S. customer going down to about 70% in this generation. I wanted to see what that means on the OpEx front for you. You guys have done a great job of controlling the OpEx dollars. But as that business goes away in the trajectory you’ve said many times before, how does the OpEx change and maybe the margin structure of Qualcomm during that exit from that main customer?
Akash Palkhiwala: Yes, Ross. Thanks for the question. I think our strategy around OpEx has been very clear and we put this in place a couple of years ago where the idea was to keep the existing scale of the OpEx investment and transition the investment from handsets while still maintaining leadership in handsets to these new areas that we are focusing on within automotive and then PCXR and industrial within IoT. So that is the framework under which we are operating. We’re continuing to move investment into those areas to create this tremendous growth opportunities for us. And then on the revenue side, as kind of Apple revenue goes down, we’re looking we are very optimistic that the targets we laid out replaces that revenue and puts us in a good place from an overall P&L perspective. So that’s the framework that we outlined at Investor Day as well and that’s what we’re executing on.
Ross Seymore: Great. And one more for you quickly. You guys boosted the free cash flow return to 100% return to shareholders. What was the reasoning behind doing that? I think everybody will obviously take it and it’s a positive sign, but just wanted to see what the catalyst was. |
6,461 | QCOM | 2 | 2,025 | 2025-04-30 16:45:00 | QUALCOMM Incorporated | 33,493 | Akash Palkhiwala: Well, I think we’ve had very strong cash flow for the last couple of years. And so we’ve seen our cash balance grow and so it is an opportunity given where the stock price is, it’s an opportunity for us to leverage that cash balance and increase our buybacks. But we are doing it while, of course, maintaining our strategic flexibility for M&A. And it’s the same framework we laid out at Investor Day, not fundamentally changing how we think about it, but there’s an opportunity and we’re investing as a result.
Ross Seymore: Thank you.
Operator: That concludes today’s question and answer session. Mr. Amon, do you have anything further to add before adjourning the call?
Cristiano Amon: Yes. Just a few comments. Thank you all for listening to our call. I would like to say a big thank you to all of our employees, especially our supply chain teams that have been doing a lot of great work. Thanks for all of our customers. And I just want to leave you with this thought. As navigate those times, this is a company that is not it’s experienced a little of uncertainty. We always ask ourselves, is our technology relevant? And I think this is a time that we actually never feel stronger about their technology roadmap and how the company is positioned to be relevant to a number of different industries. So that’s our Northstar. We’ll continue to execute to that. And I look forward to see you all in the next quarter. Thank you.
Operator: Ladies and gentlemen, this concludes today’s conference call. You may now disconnect. |
6,462 | QCOM | 1 | 2,025 | 2025-02-05 16:45:00 | QUALCOMM Incorporated | 33,493 | Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Qualcomm First Quarter Fiscal 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded February 5, 2025. The playback number for today's call is (877) 660-6853. International callers, please dial (201) 612-7415. The playback reservation number is 13750899. I would now like to turn the call over to Mauricio Lopez-Hodoyan, Vice President of Investor Relations. Mauricio 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. |
6,463 | QCOM | 1 | 2,025 | 2025-02-05 16:45:00 | QUALCOMM Incorporated | 33,493 | Cristiano Amon: Thank you, Mauricio, and good afternoon, everyone. Thanks for joining us today. In fiscal Q1, we delivered record revenues of $11.7 billion and non-GAAP earnings per share of $3.41. Our chipset business achieved record revenues of $10.1 billion, the first $10 billion quarter for QCT, including record quarterly handset and automotive revenues. Licensing business revenues were $1.5 billion. We're off to a great start in fiscal ‘25. Our mobile roadmap is the strongest in our history with exceptional traction for Snapdragon in premium tier handsets and we are delivering growth across our diversification initiatives. This quarter, automotive and IoT revenues grew 61% year-over-year and 36% year-over-year, respectively. We are committed to achieving $22 billion on non-handset revenues by 2029 as outlined during our 2024 Investor Day. Our advanced connectivity, computing, and edge AI technologies in product portfolio continue to be highly differentiated and increasingly relevant to a broad range of industries. We also remain very optimistic about the growing edge AI opportunity across our business, particularly as we see the next cycle of AI innovation and scale. DeepSeek-R1 and other similar models recently demonstrated the AI models are developing faster, becoming smaller, more capable and efficient, and now able to run directly on device. In fact, DeepSeek-R1 distilled models were running on Snapdragon powered smartphones and PCs within just a few days of its release. As we entered the era of AI inference, we expect that while training will continue in the cloud, inference will run increasingly on-device, making AI more accessible, customizable, and efficient. This will encourage the development of more targeted, purpose-oriented models and applications, which we anticipate will drive increased adoption and in turn demand for Qualcomm platforms across a range of devices. With the industry's most powerful and efficient AI processors for the edge, we're well positioned to drive this transition and |
6,464 | QCOM | 1 | 2,025 | 2025-02-05 16:45:00 | QUALCOMM Incorporated | 33,493 | With the industry's most powerful and efficient AI processors for the edge, we're well positioned to drive this transition and benefit from this upcoming inflection point. Let me now share some key highlights from the business. In handsets, we're pleased that the recently launched Samsung Galaxy S25 series of smartphones will be powered by the Snapdragon 8 Elite for Galaxy globally. The Snapdragon 8 Elite for Galaxy delivers the latest AI experiences, showcasing one of the best integrations of Galaxy AI and Google Gemini. We are encouraged by the number of AI features which has nearly doubled in the Galaxy S25 series. We expect this trend to continue as part of the transition to AI smartphones. We're extremely proud of this launch and our long-standing strategic partnerships with Samsung and Google. As a reminder, the Snapdragon 8 Elite is our most powerful mobile platform today, featuring the industry's fastest custom CPU, the most powerful NPU, incredible GPU performance, and the best camera. In addition to Samsung, we're very pleased with the design traction and strong end customer demand for recently launched Snapdragon 8 Elite powered flagship smartphones by Chinese OEMs. Our design win momentum in PCs has also increased, with more than 80 designs in production or development on our category-leading Snapdragon X series platforms, and we're targeting more than 100 designs to be commercialized through 2026. Importantly, we recently announced our newest compute platform, the Snapdragon X, specifically designed to address PCs in the $600 price range, further expanding our addressable opportunity. Snapdragon X features best-in-class performance, multi-day battery life, powerful on-device AI, and Copilot+ experiences. We look forward to PCs powered by Snapdragon X from leading OEMs including Acer, ASUS, Dell, HP, and Lenovo in the coming months. In partnership with Lenovo, we introduced the world's first mini desktop AI PCs powered by the Snapdragon X series. These devices redefine compact computing in a new form |
6,465 | QCOM | 1 | 2,025 | 2025-02-05 16:45:00 | QUALCOMM Incorporated | 33,493 | world's first mini desktop AI PCs powered by the Snapdragon X series. These devices redefine compact computing in a new form factor ideal for developers, consumers, and enterprises. The number of NPU powered on-device AI experiences running natively on Snapdragon has continued to grow with more than 50 AI applications now optimized for Windows 11, including apps for enterprise collaboration, productivity, creativity, and more. Microsoft also announced it is bringing NPU optimized versions of DeepSeek-R1 directly to Copilot+ PCs beginning with the Qualcomm Snapdragon X series. Additionally, the broader app ecosystem continues to expand with Snapdragon native apps now including 20 of the most popular VPNs, 50 of the most popular security and cloud storage apps, as well as new applications for creators. While we're still in the early phase of the transition to Copilot+ PCs, we are pleased with consumer reception for Snapdragon X series, which has exceeded our expectations. According to Circana, in December, Snapdragon X series had more than 10% share of the greater than $800 window laptops in US retail. In XR, we remain the preferred solutions provider for VR, MR, and AR across major OEMs and ecosystems, and our strategic long-term collaborations with Meta and other key partners are playing a key role in growing this area. The Snapdragon-based Ray-Ban Meta glasses continue to exceed expectations as they adopt more AI features. We remain optimistic that we are at the beginning of an inflection point for smart glasses to gain scale as they become wearable AI. Additionally, at the recent XR Unlocked event, Google announced Android XR, and we are pleased that the first device available for purchase later this year will be built by Samsung and powered by the Snapdragon XR platform. We continue to expand our industrial IoT portfolio of products and solutions, and we are encouraged by the positive reception across multiple industry verticals, including energy and utilities, robotics, manufacturing, warehousing and |
6,466 | QCOM | 1 | 2,025 | 2025-02-05 16:45:00 | QUALCOMM Incorporated | 33,493 | positive reception across multiple industry verticals, including energy and utilities, robotics, manufacturing, warehousing and logistics, retail, enterprise, and commercial. At CES, we introduced our AI on-prem appliance and inference suite, which enables Generative AI inference in computer vision workloads to run on dedicated on-premises hardware, allowing sensitive customer data, fine-tuned models, and inference loads to remain within the enterprise. The AI inference suite provides ready-to-use AI applications and agents, tools and libraries to easily operationalize AI and GenAI applications in a variety of deployments on-premise or in the cloud. Our first wave partners for these new platforms include Honeywell, IBM, and others. We also announced the next evolution of Qualcomm Aware, our cloud-based asset visibility platform. As a horizontal enablement platform, Qualcomm Aware allows for a highly integrated way to add cloud-based observability and insights, geolocation, fine indoor positioning, firmware updates and device management services to connected devices. In edge networking, we're pleased with the momentum in Wi-Fi 7 with recent product launches from Cisco, Charter, Eero, Netgear, Nokia, and Ubiquiti. We're also seeing strong traction for 5G fixed wireless access with next-generation design wins at operators in North America and India. We continue to strengthen our position in automotive as the industry's leading technology partner for the software-defined vehicle, AI-powered in-cabin systems, advanced driver assistance, and connected car experiences. At CES, we announced new collaborations with Alps Alpine, Amazon, Google, Leapmotor, Mahindra, and Hyundai Mobis, which will use Snapdragon digital chassis solutions to drive AI-powered in-cabin and advanced driver assistance systems. We also expanded our partnerships with several Tier 1 suppliers to now utilize the Snapdragon Cockpit Elite platform, including with Panasonic Automotive Systems, Garmin, and Desay SV. These collaborations will bring |
6,467 | QCOM | 1 | 2,025 | 2025-02-05 16:45:00 | QUALCOMM Incorporated | 33,493 | Cockpit Elite platform, including with Panasonic Automotive Systems, Garmin, and Desay SV. These collaborations will bring advanced intelligence, including Generative AI, to all levels of software-defined vehicles, enabling automakers to build safe and extraordinary user experiences. We're very pleased with the strong industry reception to Snapdragon Cockpit Elite platform since its launch late last year. Our new collaboration with Hyundai Mobis will combine the Snapdragon Ride Flex system on chip and the Snapdragon Ride automated driving stack with Hyundai Mobis cutting edge software and sensors. This will deliver a comprehensive system solution that powers advanced infotainment and advanced driver assistance systems, bringing a one-of-a-kind user experience to future vehicles. Another significant milestone was the launch of the Snapdragon Digital Chassis Workbench, a cloud-based workflow for developers building the software-defined vehicle. To complement the hardware and software of the Snapdragon Digital Chassis, Workbench provides a complete development and test environment to build and deploy automotive applications. Finally, we remain very pleased with the execution of our QTL business in recent years and were well positioned to maintain fiscal ‘24 revenue scale going forward. Over the past year, we have extended key agreements with major OEMs and were poised to shortly execute new long-term license agreements with two additional large OEMs. We also recently signed Transsion to a long-term 4G license to go along with the 5G license signed in the last fiscal year. Our progress reaffirms QTL as the industry's most extensive licensing program of cellular essential patents. Before I turn the call over to Akash, I would like to provide an update on the Arm vs. Qualcomm trial from December 2024. The jury's verdict vindicated Qualcomm's CPU innovations and affirmed that Qualcomm's contract with Arm provides a license for Qualcomm's products containing our proprietary Oryon CPUs in industries such as smartphones, |
6,468 | QCOM | 1 | 2,025 | 2025-02-05 16:45:00 | QUALCOMM Incorporated | 33,493 | with Arm provides a license for Qualcomm's products containing our proprietary Oryon CPUs in industries such as smartphones, automotive, next generation PCs, IoT, and data center. In addition, ARM recently notified us that it was withdrawing its October 22nd, 2024 notice of breach and indicated that it has no current plan to terminate the Qualcomm Architecture License Agreement. We're excited to continue to develop performance leading, world-class products that benefit consumers worldwide that include our incredible Oryon custom CPUs. I will now turn the call to Akash. |
6,469 | QCOM | 1 | 2,025 | 2025-02-05 16:45:00 | QUALCOMM Incorporated | 33,493 | Akash Palkhiwala: Thank you, Cristiano, and good afternoon, everyone. I'll start with a summary of our record performance in the first fiscal quarter. We are pleased to announce revenues of $11.7 billion and non-GAAP EPS of $3.41, both of which were above the high end of our guidance. QTL revenues of $1.5 billion and EBT margin of 75% were in line with expectations. QCT delivered record revenues of $10.1 billion, which was above the high end of our guidance on outperformance across Android handsets, IoT, and automotive. QCT handset revenues were a record $7.6 billion with 13% year-over-year growth, reflecting higher volume and content increase in Android premium tier, driven by industry-leading performance of our newly launched Snapdragon 8 Elite platform. Higher volume in Android premium tier in the quarter was driven by stronger end consumer demand for recently launched flagship smartphones and global share in Samsung Galaxy S25 devices. QCT IoT revenues of $1.5 billion increased 36% year-over-year, driven by new product launches with our industry leading processors and on-device AI capability across consumer networking and industrial. We delivered our sixth consecutive quarter of record QCT automotive revenues of $961 million, representing 61% year-over-year growth on continued content increase in new vehicle launches as automakers deploy our high-performance, low-power computing and connectivity chips to bring next-generation experiences to consumers. QCT EBT margins of 32% exceeded the high end of our guidance, reflecting the benefit of revenue upside and operating leverage. QCT EBT dollars of $3.2 billion increased by 25% versus the year-ago period. Lastly, we returned $2.7 billion to stockholders, including $1.8 billion in stock repurchases and $942 million in dividends. Now, turning to guidance. For the second fiscal quarter, we are forecasting non-GAAP revenues of $10.2 billion to $11 billion and non-GAP EPS of $2.70 to $2.90. In QTL, we estimate revenues of $1.25 billion to $1.45 billion and EBT |
6,470 | QCOM | 1 | 2,025 | 2025-02-05 16:45:00 | QUALCOMM Incorporated | 33,493 | to $11 billion and non-GAP EPS of $2.70 to $2.90. In QTL, we estimate revenues of $1.25 billion to $1.45 billion and EBT margins of 69% to 73%, reflecting normal seasonality for headsets units. In QCT, we expect revenues of $8.9 billion to $9.5 billion and EBT margins of 29% to 31%, with strong year-over-year growth across handsets, IoT, and automotive. We expect QCT handset revenues to grow by approximately 10% on a year-over-year basis, including the benefit of increased shipment for Samsung Galaxy S25 smartphones. On a sequential basis, the decline in QCT handset revenues is primarily driven by seasonality and shipments to Apple. We expect IoT and automotive revenues to grow by approximately 15% and 50% respectively versus the year-ago period, driven by the strong product momentum I just outlined. Lastly, we estimate non-GAAP operating expenses to be approximately $2.25 billion. In closing, we are very pleased with our strong first quarter results, with new records across the following metrics, total company revenue, non-GAAP EPS, QCT revenues, QCT handset revenues, and QCT automotive revenues. In QTL, we finalized renewal negotiations for long-term licenses with two key Chinese OEMs and expect to execute those agreements shortly. We also recently signed Transsion to a long-term 4G license in addition to the 5G license signed in the last fiscal year. With these additional long-term agreements, we expect fiscal ‘25 QTL revenues to be consistent with fiscal ‘24. Our recent product announcements at CES across PC, automotive, consumer, and industrial IoT, along with the continued performance leadership in premium tier Android handsets, underscore our position as the connected computing leader across edge devices. Lastly, as AI approaches an inflection point of scaling at the edge, our leadership in high-performance on-device inference solutions positions us to benefit as we lead this transition. This concludes our prepared remarks. Back to you, Mauricio. |
6,471 | QCOM | 1 | 2,025 | 2025-02-05 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 the line of Joshua Buchalter with TD Cowen. Please proceed with your questions.
Joshua Buchalter: Hey, guys. Thanks for taking my question. I guess to start, I wanted to clarify the QTL guidance. You're talking to sort of flat or levels with fiscal 2025 versus 2024. I know you signed the two agreements recently. Could you maybe speak to how we should think about your assumptions on overall unit shipments and the royalty per unit tracking through the year. Thank you.
Akash Palkhiwala: Joshua, it's Akash. I think our overall assumption on the market is that it is either flat or gross low single-digits on a year-over-year basis. Now, of course, this doesn't take into account upside opportunities in terms of the China subsidy and the AI replacement rate. But the baseline assumption is what goes into the QTL forecast that we just gave.
Operator: Our next question comes from the line of Samik Chatterjee with JPMorgan. Please proceed with your question.
Samik Chatterjee: Hi, thank you for taking my questions. And I have a couple of questions, but maybe if I can start off on the PC platform and particularly Snapdragon X. Maybe Cristiano, if you can sort of talk about how you're sort of thinking about 2025 and 2026 playing out in terms of device launches on your Snapdragon platform for PCs, and particularly more interested in hearing how you're now thinking about the adoption curve between enterprises and consumers. What are you hearing from the OEM partners in terms of how to think about the adoption curve relative to enterprise and consumer as we go look for the next couple of years? And I have a quick follow-up after that, thank you. |
6,472 | QCOM | 1 | 2,025 | 2025-02-05 16:45:00 | QUALCOMM Incorporated | 33,493 | Cristiano Amon: Very good, Samik, thank you for your question. Look, we're very happy with the trajectory that we are on PCs. Maybe I'll start answering the question by providing some bookends, right? We said at the Investor Day last year that we expect to get $4 billion in Windows PC revenue by 2029. We actually said at that time $4 billion out of a $35 billion, if I'm not mistaken, Sam, which if you calculate, you assume a share about 12% of the market we're addressing. I think we started very well with the number of designs. 1 metric that we have is the design traction continue. We have now over 80 design wins, launch or in development, across the X series. And we're targeting commercialization on more than 100 devices as we go to 2025 to 2026. So design traction is good. It continued to increase, which is a good sign. The second data point we actually provided on the script is we look at the United States retail. We started to expand retail in different markets. We look at the United States, which one of the priority markets that we had, and the data show that the sale, within the sale of US retail of Windows laptops above $800, we had more than 10% share, which is actually consistent with the projection we made of how we're going to grow under five years. And we like the metric that's early in the process. We're still starting. As I said, we'll continue to expand new markets. We like the results today. And the design traction is continuing to increase. The first wave was consumer. Now it's being deployed towards commercial. That's why we have emphasis on showing a lot of the commercial applications now native on Snapdragon from VPN, from security, et cetera. And we're excited especially because of that we launched a new product to expand the addressability to now $600 price laptops which we're not compromising AI. And as I mentioned in the call, actually a few days after Microsoft announced DeepSeek-R1 running on Snapdragon X Elite -- X series laptops first. So actually, we're starting, we're happy with the |
6,473 | QCOM | 1 | 2,025 | 2025-02-05 16:45:00 | QUALCOMM Incorporated | 33,493 | DeepSeek-R1 running on Snapdragon X Elite -- X series laptops first. So actually, we're starting, we're happy with the traction consistent with our long-term projections, we're just going to keep executing. |
6,474 | QCOM | 1 | 2,025 | 2025-02-05 16:45:00 | QUALCOMM Incorporated | 33,493 | Samik Chatterjee: Got it. Got it. No, thank you for that. And maybe for my follow-up, I can sort of take the cue from what Akash mentioned for the last question which is China market for smartphones and the subsidies that you're seeing sort of what are you seeing on the ground in terms of response for the -- from the consumer to the subsidies and what are you sort of thinking in terms of the impact to overall the Chinese smartphone OEM and their sort of growth, sustainability, and I don't know if, Akash, you gave the number in terms of what growth you saw with the Chinese OEMs -- Chinese Android OEMs this quarter, but how are you thinking about the growth trajectory going forward with them, particularly in light of these subsidies? Thank you. |
6,475 | QCOM | 1 | 2,025 | 2025-02-05 16:45:00 | QUALCOMM Incorporated | 33,493 | Akash Palkhiwala: Sure. So let me address it in parts. So, as it relates to the subsidy, as you know, they just began in January. So we are not that far into the cycle. And so we'll have a better view of it next quarter. In terms of historical reference point, in the past we've seen that when subsidies have come in, it has improved the size of the market. So there is an opportunity that comes with it, but it's not something that is contemplated yet in our second quarter guidance. Now, let me go back to first quarter, because that's where I made the volume comment as well. If you look at the first quarter upside that we had in handsets, very strong performance, record performance, and there were two drivers. First is the content increase year-over-year that we have discussed in detail. As more capability gets added to the chipset, it shows up in our price points. The second was the volume increase that we saw on a year-over-year basis as well. And when you really look at the volume increase and break it down into drivers, we had higher share, of course at Samsung, they're using us globally in the GS25. So that helps, purchases that went into the December quarter before the phone launch. The second is we saw higher end consumer demand in China for premium devices. And if you think about how that happens, it's a long-term trend that we've seen in China that the premium tier continues to grow, and it's a benefit that showed up in the quarter as well. The second is our customers are gaining share in the China market. And so that is a benefit that translates through as well. So, very -- we feel very good about all those drivers. They're all kind of sustained long-term drivers in our business that positions us well as we look at the second half of the fiscal year.
Operator: Our next question comes from the line of Stacy Rasgon with Bernstein Research. Please proceed with your questions. |
6,476 | QCOM | 1 | 2,025 | 2025-02-05 16:45:00 | QUALCOMM Incorporated | 33,493 | Operator: Our next question comes from the line of Stacy Rasgon with Bernstein Research. Please proceed with your questions.
Stacy Rasgon: Hi, guys. Thanks for taking my questions. For the first one, I wanted to ask about the QTL guide flat year-over-year. So in the Q, it suggests that you're still negotiating with Huawei, and I'm assuming the QTL guide for Q2, which is a little lighter than the normal, has no Huawei in it because of that. Does the annual guide for flat year-over-year assume you do not settle Huawei and if you do renegotiate and get some money, there would be upside to that number based on your current assumptions?
Alex Rogers: Yeah, this is Alex. So thanks for the question, Stacy. So basically what we've managed to accomplish over the last year or so is essentially signing up everybody to extensions. So we've had a really good run of execution with bringing in Transsion for 4G, which is a significant development because they've popped up the ranks of OEMs in terms of unit volume, very high up the ranks actually. So, the 4G complements the 5G license that we have been signed up to and they're transitioning to more 5G content in their overall product offering. And then we have these last two significant Chinese OEMs that we've signed up or that we finished negotiations with and the execution is just pending return from the Lunar New Year holiday. The Huawei discussions are still in play, so the numbers don't actually include the potential from a renewal with Huawei. And basically everything else is taken care of.
Stacy Rasgon: Got it. So that flat guidance doesn't include any Huawei settlement, just to be clear?
Akash Palkhiwala: Correct. Neither the second quarter guidance or the full year comment. |
6,477 | QCOM | 1 | 2,025 | 2025-02-05 16:45:00 | QUALCOMM Incorporated | 33,493 | Akash Palkhiwala: Correct. Neither the second quarter guidance or the full year comment.
Stacy Rasgon: That's great. And for my follow-up, I just want to note you -- we've seen a fair amount of, just in general, personal electronic strength recently and there's some thoughts that maybe some of it might be related to sort of pre-tariff pull forwards. I don't know if you guys would be able to have any view on that, but do you have any comments on what you might see in whether or not the threat of tariffs might be driving some pre-builds or increased demand in the near term?
Cristiano Amon: Yeah, absolutely not. I think it's funny, Stacy, we expected everybody to be asking this question. We actually are seeing -- it's pretty simple, right? So number one is higher than expected, I think share of Samsung with the launch of GS25 globally. The second thing is end customer demand in China and we have data on the sell-through is basically Snapdragon 8 Elite has been quite successful. Demand on smartphones [on to actually] (ph) exceed our expectations is built on what Akash said, the trend of premium tier continue to expand. Smartphone is number one consumer electronic device purchase. I think there is a positive launch of AI features. Customers build great devices. They are gaining share in the premium tier. And that is what we're driving demand. And as Akash outlined, all of our smartphone products, products from our customers in China using 8 Elite, the price points that they launch those devices in the market, they're all eligible for the subsidy. So that's not contemplated in the Q2 guide, which it could be an interesting development. We saw they usually further expand the premium tier. But this is no inventory, this is no build-out ahead of tariffs, this is end customer demand.
Operator: The next question is from the line of Chris Caso with Wolfe Research. Please proceed with your question. |
6,478 | QCOM | 1 | 2,025 | 2025-02-05 16:45:00 | QUALCOMM Incorporated | 33,493 | Operator: The next question is from the line of Chris Caso with Wolfe Research. Please proceed with your question.
Chris Caso: Yes, thanks. Good evening. I guess following on with those comments, Cristiano, how should we think about June quarter now? Because typically, June quarter, there are no flagship launches in that that has some effect on QCT. Given the share gain at Samsung, does that affect the seasonality for June at all, and how should we be thinking that in general?
Akash Palkhiwala: Yeah, I think, Chris, you're right in terms of understanding our seasonality. When you look at the last several years, the kind of the framework across quarters, it is driven by the timing of the flagship launches. And so as a result, we expect kind of first quarter to be the high point from an EPS perspective and third quarter is the low point because you don't have as many flagship launches in it. On your question specifically on Samsung, Samsung is in, kind of the impact of the higher share is included in the first quarter and the second quarter guide as well. And so it will be included in third and fourth quarter as well. So I don't think it fundamentally changes the seasonality across the quarters.
Chris Caso: Got it. As a follow up, if you could address some of the higher price points that you're seeing on Snapdragon now, and certainly there are more features in there because of AI, but to some extent, it's also about cost too, because the waiver costs are higher. What's the impact of that on Qualcomm, not just from a quarter basis, but looking a little bit out, should we expect ASP to be a tailwind for you? And then how are your OEM customers dealing with that? Is it a factor of, we're just going to see a mix higher to higher end phones, or is that going to result in higher ASP? |
6,479 | QCOM | 1 | 2,025 | 2025-02-05 16:45:00 | QUALCOMM Incorporated | 33,493 | Akash Palkhiwala: Chris, the primary driver here is that there is a consumer demand for more capable smartphones. And so as we go from generation to generation, we're adding a lot more capability on the processing side, on AI side and connectivity, and that is showing up in the price points in our chip. So that's the primary driver. Of course, as you're aware, the TSMC price increases for 3 and 4 nanometer did kick in in January. And so, as we've said in the past, our objective there is to reflect the cost increases in ASPs over a period of time. So those are the key drivers. When you step back, I think one of the messages that Cristiano gave earlier is an important one, is that the overall market, it's not just about each tier kind of having a more capable chip, but a mix shift across tiers and a larger market for premium devices.
Operator: Thank you. The next question is from the line of Ross Seymore with Deutsche Bank. Please proceed with your questions.
Ross Seymore: Hey guys, thanks for letting me ask the question. I just want to ask a more cyclical question, probably most applicable to your IoT segment. That business has been very strong year-over-year, but you've had a couple quarters with negative sequential comps. Is that just normal seasonality, or is there cyclicality involved that some of your broad-based peers are seeing? Just kind of want to judge where we are in that cyclical trend.
Akash Palkhiwala: Yeah, Ross, there's definitely -- one of the big drivers on the quarterly profile is because of consumer IoT, and that does have cyclicality involved because you're building for the holiday season, and then when we get into the March quarter, of course, you're past that point. When you look at the other two parts of our IoT business, which is industrial and edge networking, we're consistently seeing strength across the quarters. |
6,480 | QCOM | 1 | 2,025 | 2025-02-05 16:45:00 | QUALCOMM Incorporated | 33,493 | Ross Seymore: Great to hear that. I guess as a follow-up question, then switching gears to the gross margin, Akash, congratulations again. It looks like you kept that in QCT pretty much flat sequentially despite your thought that it was going to go down the December quarter. Is that something that is just structurally going to be a little higher than that, I guess, kind of implied 48% to 49% range, and if so, what's changed?
Akash Palkhiwala: Yeah, the gross margin, both in our December quarter and our March quarter, it benefits from the fact that we have stronger premium tier volume. That improves the mix, overall mix of our portfolio, and that shows up in gross margins. So that's kind of the primary driver of the strength. And so as you see the mix changes, it will flow through the margin numbers. But yeah, we are very happy just like you that the margin's been very strong.
Operator: Our next question is from the line of Timothy Arcuri with UBS. Please proceed with your questions.
Timothy Arcuri: Thanks a lot. I had two. Cristiano, is there any evolution in the way you're thinking about the modem situation that your large customer? I know there's been some back and forth on that recently. Is there any change there? Are you feeling like maybe you'll be there a little bit longer than you had expected? That's the first question.
Cristiano Amon: Yeah, the answer is no. I think we're really operating with the assumptions. I think we've been very clear. I think what those things are. We expect 20% share for the launch that happens in 2026, and the current agreement ends after that. We're assuming no renewal, which means nothing in 2027. For 2025 launches, we expect share to be between 100% and 20%. So we don't know. But I think we've been very clear about how we're modeling the business, and I think that's the assumption going forward. |
6,481 | QCOM | 1 | 2,025 | 2025-02-05 16:45:00 | QUALCOMM Incorporated | 33,493 | Timothy Arcuri: Thanks a lot. Akash, can you give us an idea of how big the PC business was within IoT? You said you were 10%, I think, of the $800 or sorry, the above $800 laptop market in the US. I'm guessing you did about $100 million, a little bit more than $100 million in December. Is that close? Thanks.
Akash Palkhiwala: Yeah, Tim, it's Akash. So from an overall revenue perspective, I think the way we've set it up is we've set targets long-term for ‘29 for each of these areas, and we plan to give an annual update on each of those targets. So we're not breaking it down every quarter by area. To me, what's the most important thing on the PC is the market that we were playing in, which is devices over $800, and our focus on retail to begin with, we're very happy that we were able to get 10% share. I think just as Cristiano said earlier, if we equate that to our long-term target, which is 12% of the overall market, that's a great start towards the number we'd set up.
Operator: Thank you. Our last question is from the line of Tal Liani with Bank of America. Please proceed with your questions.
Tal Liani: Hi, guys. I want to focus on a 20% growth of smartphones and QCT this quarter. And the question is how long will this continue? The market itself is not growing. There was -- last quarter there was growth in China that was very strong. This quarter, we have the initial Samsung. So, can you talk about longevity of the current trend? How long can it continue? Could you grow even if the market doesn't grow and then just an update on China demand? Thanks. |
6,482 | QCOM | 1 | 2,025 | 2025-02-05 16:45:00 | QUALCOMM Incorporated | 33,493 | Akash Palkhiwala: Sure, Tal. So let me break it down. If you look at our year-over-year performance in QCT handsets, we were up 13%. And as I said earlier, the drivers of those is really a combination of higher volume and higher ASPs. The ASPs as content increase, which we've talked about, we've seen consistently that continue to increase over the last several years. And as we look forward, we think that's very sustainable, just we're adding a lot more capability to the device and the consumers are looking for that opportunity. In terms of volume, one of the key metrics for us is the fact that the premium tier continues to grow. So if you look at the last three or four years, devices greater than $400 have gone from being 21% of the market to now over 30% of the market. And so that is a trend that's incredibly positive for us because that's the market that we are very strong in. And so we have a combination of the units within that part of the market is growing very quickly and within that our content is growing as well. And those are the two factors that drive the handset growth of 13% on a year-over-year basis. When you look at the March quarter, we're guiding handset growth of 10% on a year-over-year basis, which is again a very strong number. So pretty happy with how we are set up in that business and both in the first half of the year and it positions as well as we look forward.
Q - Tal Lian: China update?
Akash Palkhiwala: Can you repeat your question on that, Tal, please?
Q - Tal Lian: Just China. China was strong the last few quarters. Can you give a idea? Maybe I missed it, but what's the current trends in China?
Akash Palkhiwala: Yeah, I think China definitely is strong in the premium tier. We've seen that part of the market grow. We've also seen our customers gain share within that market. And then last thing is, we're going to have subsidies come in, and so there is a potential that that benefits that part of the market as well. So, pretty, I think, positive tailwinds for us there. |
6,483 | QCOM | 1 | 2,025 | 2025-02-05 16:45:00 | QUALCOMM Incorporated | 33,493 | Operator: Thank you. That concludes today's question-and-answer session. Mr. Amon, do you have anything further to add before adjourning the call?
Cristiano Amon: Just would like to [Ends Abruptly] |
6,484 | SBUX | 4 | 2,024 | 2024-10-30 17:00:00 | Starbucks Corporation | 34,745 | Operator: Good afternoon. My name is Diego and I will be your conference operator today. I would like to welcome everyone to the Starbucks Fourth Quarter and full Fiscal Year 2024 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] I will now turn the conference call over to Tiffany Willis, Senior Vice President of Investor Relations. Ms. Willis, you may now begin your conference. |
6,485 | SBUX | 4 | 2,024 | 2024-10-30 17:00:00 | Starbucks Corporation | 34,745 | Tiffany Willis: Thank you, Diego. And good afternoon and thank you everyone for joining us today to discuss Starbucks fourth quarter fiscal year 2024 results. Today's discussion will be led by Brian Niccol, Chairman and Chief Executive Officer; and Rachel Ruggeri, Executive Vice President and Chief Financial Officer This conference call will include forward-looking statements which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. Any such statements should be considered in conjunction with cautionary statements in our earnings release and risk factors discussed in our filings with the SEC, including our latest Annual Report on Form 10-K and Quarterly Report on Form 10-Q. Starbucks assumes no obligation to update any of these forward-looking statements or information. GAAP results in fourth quarter fiscal year 2024's comparative period includes several items related to strategic actions, including restructuring and impairment charges and other items. These items are excluded from our non-GAAP results. All numbers referenced on today's call are on a non-GAAP basis unless otherwise noted or there is no non-GAAP adjustment related to the metric. As part of our non-GAAP results. Revenue, operating margin and EPS metrics on today's call are measured in constant currency whereby current period results are converted into United States dollars using the average monthly exchange rates from the comparative period rather than the actual exchange rates for the current period excluding related hedging activities. For non-GAAP financial measures mentioned in today's call, please refer to the earnings release on our website@investor.starbucks.com to find reconciliations of those non-GAAP measures to their corresponding GAAP measures. This conference call is being webcast and an archive of the webcast will be available on our website through Friday, December 13, 2024. Also, for your calendar planning purposes, please note that our first quarter fiscal |
6,486 | SBUX | 4 | 2,024 | 2024-10-30 17:00:00 | Starbucks Corporation | 34,745 | website through Friday, December 13, 2024. Also, for your calendar planning purposes, please note that our first quarter fiscal year 2025 earnings conference call has been tentatively scheduled for Tuesday, January 28, 2025. With that, I now have the privilege of turning it over to Brian. |
6,487 | SBUX | 4 | 2,024 | 2024-10-30 17:00:00 | Starbucks Corporation | 34,745 | Brian Niccol: Thank you Tiffany and good afternoon and thank you for joining today. Starbucks is one of the world's great companies and most iconic brands. It really is a privilege to take on this role and I'm excited to be here and optimistic about the future. Since joining Starbucks last month, I've spent my time digging into the business, listening to partners and connecting with customers. These experiences and my learnings have helped me form a clear understanding of where we are and what we need to do differently moving forward. Everything I have seen and heard tells me we have significant strengths to build on. The brand is strong and enduring, we have deep coffee expertise, and we have a fantastic team of Green Apron partners. I look forward to sharing more about my plan to get back to Starbucks with you shortly, but first I'd like to turn it over to Rachel for a more detailed overview of our final Q4 and full fiscal year 2024 financial results. Rachel? |
6,488 | SBUX | 4 | 2,024 | 2024-10-30 17:00:00 | Starbucks Corporation | 34,745 | Rachel Ruggeri: Thank you Brian, and welcome to your first Starbucks earnings call. And good afternoon everyone. As you saw in our press release last week, our traffic challenges persisted in Q4, resulting in pressures throughout our P&L from our top line to our bottom line. With that, I'll briefly discuss our Q4 and full year results and then turn the call over to Brian. In regards to Q4, our Q4 consolidated revenue was $9.1billion, down 3% from the prior year, driven by a 7% decline in comparable store sales, consisting of an 8% decrease in transactions and a 2% increase in average ticket, partially offset by 7% net new company operated store growth. The revenue decrease was primarily due to a 6% decline in U.S. comparable store sales, driven by a 10% decline in comparable transactions, partially offset by a 4% increase in average ticket, mainly from pricing. Traffic declined across all channels and day parts, with the most pronounced decline in the afternoon day part. In addition to the continued decline of non Starbucks rewards member visits, frequency also slowed across all SR member deciles in comparison to prior year and ultimately impacted spend. While active SR membership grew 4% year-over-year to $33.8 million, it remained flat to Q3 as our product innovation and offerings as well as promotions did not create sustained excitement or the stickiness we planned. Our Q4 results also reflected China comparable store sales decline of 14% driven by an 8% decline in average ticket and a 6% decline in comparable transactions, weighed down by intensified competition and a soft macro environment that impacted consumer spending. Although the market reached an all-time high of 23.5 million SR active members during the quarter with 2.2 million net new members versus prior year, comp declined due to non SR member traffic pressures, elevated discounting given the highly promotional environment and lower sales of high ticket items impacted by consumer sentiment. Shifting to margin. Our Q4 consolidated operating margin |
6,489 | SBUX | 4 | 2,024 | 2024-10-30 17:00:00 | Starbucks Corporation | 34,745 | and lower sales of high ticket items impacted by consumer sentiment. Shifting to margin. Our Q4 consolidated operating margin was 14.4% contracting 370 basis points from the prior year, primarily driven by deleverage, investments in store partner wages and benefits as well as increased promotional activities. The contraction was partially offset by pricing and the in store operational efficiencies. In store, we were successful in getting increased hours per partner, which is contributing to low hourly partner turnover and reduced training costs. However, we have additional work to do to obtain the correct staffing. We also expect our throughput to be further optimized once the Siren Craft processes stabilizes across the company operated store portfolio. Outside the store, we remain focused on capturing additional end to end supply chain efficiencies. Collectively, in and out of store efficiency efforts have yielded savings of approximately 150 basis points in the quarter. Our G&A expenses were higher than expected and exceeded 7% of revenue in Q4, primarily due to unplanned and non reoccurring third party services and transition costs. Excluding these costs totaling approximately 50 basis points, G&A was 6.6% of revenue in Q4 and remained closer to 6% for the second half of fiscal year 2024 in line with expectations. We expect G&A to further decrease relative to revenue over time leading to sustained margin expansion. Q4 EPS was $0.80, down 24% from the prior year. The decline was primarily driven by a combination of traffic challenges and heightened investments, partially offset by our pricing and efficiency efforts. Moving to full fiscal year 2024, consolidated net revenues increased 1% to $36.2 billion in fiscal year 2024, driven by 7% net new company operated store growth offset by a 2% decline in comparable store sales. Full year consolidated operating margin was 15%, contracting 110 basis points from prior year, primarily driven by investments in store partner wages and benefits, deleverage and increased |
6,490 | SBUX | 4 | 2,024 | 2024-10-30 17:00:00 | Starbucks Corporation | 34,745 | 110 basis points from prior year, primarily driven by investments in store partner wages and benefits, deleverage and increased promotional activity. The contraction was partially offset by pricing and in store operational efficiencies. Our in store and out of store efficiency efforts collectively delivered roughly 250 basis points of margin improvement for the full year, which is nearly a billion of cost reductions throughout our P&L as aligned with our original plan. Full year EPS was $3.31, declining 6%, including a 1% unfavorable impact from higher effective tax rate. Shifting to our Outlook. As noted in our press release last week, given the company's CEO transition coupled with the current state of the business, our guidance is suspended for full fiscal year 2025. This allows ample opportunity to assess the business and solidify key strategies as we refocus our efforts on the turnaround, I would like to still briefly touch on our capital allocation priorities. As Brian mentioned in his prepared remarks last week, one of our top priorities includes reestablishing Starbucks as the community coffee house. To do so, we plan to reduce the number of our new stores and renovations in fiscal year 2025 to accommodate a redesign, while also unlocking capital to support our broader turnaround. We expect this shift coupled with efficiencies will help us balance our investments accordingly. We're working through the details of the impacts on key metrics including store growth, and we'll revert back with insight at a future date. In the meantime, I want to be clear that this shift in store growth strategy does not reflect and should not be interpreted as a statement on our long-term opportunity view or new store performance. In fact, we continue to see strong, highly incremental performance from our new stores. As a proof point, approximately 40% of our U.S. company operated stores had positive comp growth in full fiscal year 2024 with outsized contribution from our newer stores, especially in markets where store |
6,491 | SBUX | 4 | 2,024 | 2024-10-30 17:00:00 | Starbucks Corporation | 34,745 | comp growth in full fiscal year 2024 with outsized contribution from our newer stores, especially in markets where store density remains low. We continue to see store growth opportunity, especially as we focus on continuing to create a welcoming coffeehouse and the store experience that both our Green Apron partners and our customers deserve. Also, last week we announced an annual increase in the quarterly cash dividend from $0.57 to $0.61 per share. This marks our 14th consecutive year of annual increase at a CAGR of approximately 20%, offering shareholders a sense of certainty during the turnaround and our confidence in our long-term growth. In summary, our results do not reflect the strength of our brand and what we're capable of. As a 20 plus year partner, I've seen what Starbucks is capable of when we focus on what we do best. It's because of that that I have confidence in our ability to turn around our business and I have the utmost confidence in our partners around the globe that together we can deliver. With that, I'll now turn the call over to Brian. |
6,492 | SBUX | 4 | 2,024 | 2024-10-30 17:00:00 | Starbucks Corporation | 34,745 | Brian Niccol: Thank you Rachel. Our financial results were very disappointing and it is clear we need to fundamentally change our strategy to win back customers and return to growth. Back to Starbucks is that fundamental change. We have to get back to what has always set Starbucks apart. A welcoming coffee house where people gather and where we serve the finest coffee handcrafted by our skilled baristas. Regardless of the consumer environment, we must be at our best to succeed. And right now, despite the hard work of our Green Apron partners, we aren't always at our best. I've heard that while people love Starbucks, some feel like we have drifted from our core. We've made it harder to be a customer than it should be and we focused our marketing too narrowly on Starbucks rewards members. I've spent my career understanding, building and stewarding brands and it's clear the Starbucks brand is iconic and loved. My experience tells me that when we get back to our core identity and consistently deliver a great experience, our customers will come back. Our problems are fixable. Most of what we need to do is in our control. So our path forward is clear and with our U.S. business being our priority, work is already underway. Some things will take some time as we test and learn, but we're moving quickly on the things we can. I want to share a few examples. We have to make it easier for our customers to get a cup of coffee. We are prioritizing work across the U.S. Business support a clear throughput with quality goal. We want to hand deliver a high quality handcrafted beverage to our cafe customers in four minutes or less and deliver orders on time for our mobile order and pay customers every time. We have work to do to achieve this consistently, but we've learned lessons from our success improving the drive-thru experience and reducing out the window times. Our throughput with quality aspiration and getting the core cafe experience right will drive everything we do and every decision we make. The moment our Barista hands |
6,493 | SBUX | 4 | 2,024 | 2024-10-30 17:00:00 | Starbucks Corporation | 34,745 | and getting the core cafe experience right will drive everything we do and every decision we make. The moment our Barista hands a cup of coffee directly to the customer is our brand moment of truth. So let's talk about some of the changes we're making to do this. First, we're working to get staffing right in our stores. As Rachel shared, we've made significant progress to improve average hours per partner and partner turnover is at another low. Our efforts to get partners the hours and schedules they want are working. Now we need to make sure we have the right number of partners on the floor, particularly during our morning peak and shoulder hours. We are moving quickly to test and learn. We're also making a commitment to grow from within by identifying internal hires for 90% of our retail leadership roles and to rally our team behind our Back to Starbucks plan and help support strong leadership in every store we're planning to host a store manager conference in 2025. Second, we're making it easier for customers to enjoy brewed coffee their way. We plan to bring back condiment coffee bars in all our cafes by early 2025. It's a great customer experience and will help with speed of service. We also plan to complete the rollout of our Clover Vertica brewers in all our company operated locations by the end of fiscal year 25, providing customers more on demand choice in high quality brewed coffee. And we're evolving store routines to hand deliver brewed coffee to customers faster upon order. Third, to improve throughput quality and consistency, we will cut down our overly complex menu to align with our core identity as a coffee company. We will still offer customers great choice but will be focused on fewer, better offerings consistently crafted. Fourth, we will continue to scale our investment in Siren equipment and Siren Craft processes to improve the in store experience for our partners and customers. This work is a critical enabler in helping to achieve our four minute wait time aspiration. And finally, we'll |
6,494 | SBUX | 4 | 2,024 | 2024-10-30 17:00:00 | Starbucks Corporation | 34,745 | and customers. This work is a critical enabler in helping to achieve our four minute wait time aspiration. And finally, we'll bring order to mobile order and pay so it doesn't overwhelm our cafes. Today more than 30% of transactions are driven by mobile orders. At peak it can drive an influx of orders that can be difficult to sequence and quickly deliver to our customers. When it works well, it's great, but sometimes it can be a challenge for both customers and partners. So we're working to improve sequencing with a new algorithm that enables on time mobile order handoffs and supports our four minute throughput with quality being our goal for cafe customers. We're also placing common sense guardrails on mobile ordering that we think will improve the experience for all customers. And over the coming months, we plan to take steps to better separate mobile order pickup from the cafe experience. There are also some additional steps we're taking beyond a throughput with quality focus that we believe will resonate with our customers and partners. First, we are reimagining our pricing architecture, starting with non-dairy milk customizations. We know customization is an important part of the Starbucks experience and we want to make it easier for customers to order their beverage just the way they want while still feeling like it's worth it. So beginning with holiday launch on November 7th, we're eliminating the upcharge for non-dairy milks at North American cafes owned and operated by Starbucks. It's the most popular customization after an extra shot of Espresso. And once implemented, nearly half of customers that pay for a modifier could see a price reduction of 10% or more when they choose a non-dairy milk. We're also investing in our customers with an intent not to increase menu prices at company owned and operated stores in North America through fiscal year 2025. It's a great start, but we have more work to do to make our pricing architecture straightforward and logical. Next, we're reclaiming the third place so |
6,495 | SBUX | 4 | 2,024 | 2024-10-30 17:00:00 | Starbucks Corporation | 34,745 | we have more work to do to make our pricing architecture straightforward and logical. Next, we're reclaiming the third place so our cafes feel like the welcoming coffee house our customers remember. In the coming months, we intend to reintroduce more personal touches to elevate the cafe experience. For instance, we'll begin to prioritize serving coffee and ceramic mugs for customers who choose to enjoy their coffee in our cafes. We're also beginning to review and revise our cafe designs to bring back more comfortable seating and amenities and to ensure our stores are a place where customers want to sit, work and meet. We're beginning to revisit certain policies with our partners and customers being top of mind. Lastly, we're getting back to marketing Starbucks to all our customers. We've already made some changes, so first, we're focusing on coffee. Starbucks sources, roasts and crafts some of the finest quality coffee. I have always loved Starbucks coffee, but I haven't always fully appreciated the quality and care that goes into every cup. From the work of our agronomists to support tens of thousands of independent coffee farmers to our master roasters, our high quality equipment and our skilled baristas, our marketing needs to tell our coffee story and showcase our premium coffee beverages. Second, we're reducing the frequency of discount driven offers that have proven ineffective, diluted our premium positioning overburdened our baristas and detracted from a consistent customer experience. We're working to make every visit worth it for our customers with straightforward pricing, timely service and a more consistent, enjoyable cafe experience. Third, we need to broaden our marketing beyond our Starbucks rewards customers. Our newly launched campaign focuses on talking to all customers and elevates the Starbucks brand in a much more visible way through broad reach media like Linear TV. It reminds customers across age groups that Starbucks serves the best coffee. You've likely seen our new approach in practice |
6,496 | SBUX | 4 | 2,024 | 2024-10-30 17:00:00 | Starbucks Corporation | 34,745 | It reminds customers across age groups that Starbucks serves the best coffee. You've likely seen our new approach in practice already and you will see more of it throughout the holidays and into January. Our customers find worth through quality, consistency and a sense of value. I'm confident that even these early steps will begin to remind customers the Starbucks experience is all of these things. The U.S. is my near term priority, but our international business presents significant opportunities. Before discussing China in detail, I need to spend time there to better understand our operations and the market. All indications show me the competitive environment is extreme, the macro environment is tough, and we need to figure out how we grow in the market now and into the future. In the meantime, we continue to explore strategic partnerships that could help us grow in the long-term. Looking elsewhere, I've been pleasantly surprised to learn about significant international growth opportunities for the business beyond China. We'll spend more time and effort to capitalize on growth across other international markets in the coming years. As I mentioned last week, success comes from staying true to your identity, taking care of customers and your team, simplifying the business, delivering consistently high quality products and experiences, and telling your story. I'm confident we'll make it easier to be a customer and we'll encourage customers to visit more often. And I'm confident we'll set our partners up for success so they can deliver the great customer experience I know they want to provide. In doing so, we'll reinvigorate our brand, drive stronger financial returns and return Starbucks to growth. Thank you for your time and as we get back to Starbucks, we'll regularly share results driven by our work. And as we begin to see results from pilot projects and early initiatives, we'll share more about our long term plan. With that we will open the call for questions. Operator? |
6,497 | SBUX | 4 | 2,024 | 2024-10-30 17:00:00 | Starbucks Corporation | 34,745 | Operator: Thank you. [Operator Instructions] Your first question comes from Jeffrey Bernstein with Barclays. Please go ahead.
Jeffrey Bernstein: Great. Thank you very much, and welcome to Starbucks, Brian. Just a bigger picture question. Obviously, you met with baristas, presumably a lot over the past 50 days. I'm wondering what your key learnings have been in terms of maybe top requests or what areas you think are the greatest opportunities because presumably you're bringing it back to the basics at Starbucks, and you would think that handoff between barista and customer is the most important. So just wondering what your key takeaways were, and if I could just layer in another component there. It just seems like you had tremendous success at Chipotle implementing very similar initiatives. I'm just wondering what you think were some of your greatest wins at Chipotle with some initiatives that maybe could be applied at Starbucks. Thank you. |
6,498 | SBUX | 4 | 2,024 | 2024-10-30 17:00:00 | Starbucks Corporation | 34,745 | Brian Niccol: Yes, thanks. And, terrific to be here at Starbucks and delighted to be talking about the business with all of you. So to answer your first question, yes, I had the opportunity, frankly to spend time with our baristas from the west coast, east coast, middle of the country, in the South. And one thing that was consistent that I got to start with is they love this brand, okay? They love serving craft coffee that they know we go the extra mile to ensure it's absolutely the best. And I had the opportunity to ask people over and over again, what is your favorite drink to prepare? And consistently, every barista came back to me with, what I love making the espresso drinks, the latte art, the flat whites, the cappuccinos, the lattes. These are things that literally, they shined when they answered the question. Now, as regard to, I also asked them, what do you think are some things we could be doing better? And right out of the gate, one of the things they said that would help the whole process is if we could get brewed coffee not to be going down the line and ending up down at the counter. And so that's why you heard me, in my prepared remarks here, talk about how we're going to bring back the coffee condiment bar, because both our customers are asking for it, and our baristas are saying it would help them deliver the speed of service that they want to provide. So that's one big piece of feedback I got. The second piece of feedback right there with the brewed coffee is take a hard look at the staffing both during peak and shoulder hours to ensure that we're setting the teams up for success all day long. And so we've looked at it, I'm happy to say we're already implementing some changes in a couple thousand stores, and we are going to be piloting some new approaches on how we set up the labor model so that our baristas have time to give not only great craft drinks, but also that hospitality and that human touch of handing off the drink to our customer at the counter and then also making sure that we're on |
6,499 | SBUX | 4 | 2,024 | 2024-10-30 17:00:00 | Starbucks Corporation | 34,745 | and that human touch of handing off the drink to our customer at the counter and then also making sure that we're on time with the mobile order business. The other thing that they shared with me in some of the stores is they wanted their cafe dining room back. They like leading the coffee house. I think there's a moment of pride, of saying, this is my place. They know our customers by name. They have their regulars. They want to have a great seat for them. They want to have a great environment for them to enjoy, whether it's a moment for themselves or whether it's sharing a moment with others. And so I couldn't agree more, frankly, with a lot of their feedback. I'll touch on one more, which was, hey, is there any way to simplify the customization that we provide? Can we put in some guardrails on this so that it's not out of hand? Those were the big ones. To your question on similarities of Chipotle, what I would tell you is the similarities start with, you've got an employee/partner base at Starbucks that is hugely committed to the brand and hugely committed to doing the right thing for the business. And when you start with that kind of foundation, you're able to put in the right programs so that we can get the business turned around. So I would say that is one big similarity. The thing, obviously, that I've also just been really impressed by is just how special Starbucks is to so many people, both customers at all ages. And whether they're getting, just a brewed cup of coffee quickly or whether they're getting, a flat white. The brand means a lot to them and it means a lot to their communities. And, I take that as a lot of responsibility. So long answer to your question, but I wanted to make sure I was thorough. So thanks for the question. |
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