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Qualcomm Inc Earnings - Analysis & Highlights for Q1 2025
Overview
PositivesNegativesOutlook
- QCT handset revenues were a record $7.6 billion, with 13% YoY growth, reflecting higher volume and content increase in the Android premium tier, driven by the industry-leading performance of the newly launched Snapdragon 8 Elite platform.
- The company is pleased with consumer reception for Snapdragon X Series, which has exceeded expectations.
- The company remains very optimistic about the growing edge AI opportunity across its business, particularly as it sees the next cycle of AI innovation and scale.
- The company is pleased to announce revenues of $11.7 billion and non-GAAP EPS of $3.41, both of which were above the high end of guidance.
- The company is pleased with the execution of its QTL business in recent years and is well-positioned to maintain fiscal 2024 revenue scale going forward.
- The company expects Q1 to be the high point from an EPS perspective, and Q3 to be the low point due to the lack of flagship launches.
- The company's overall assumption on the market is that it is either flat or grows low-single digits on a YoY basis.
- IoT and automotive revenues are expected to grow by approximately 15% and 50%, respectively, versus the year-ago period, driven by strong product momentum.
- Non-GAAP operating expenses are expected to be approximately $2.25 billion.
- QCT EBT margins of 32% exceeded the high end of 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.
- The company returned $2.7 billion to stockholders, including $1.8 billion in stock repurchases and $942 million in dividends.
Q&A Highlights from Qualcomm Inc Earnings Call Q1 2025
- Analyst asked about the adoption curve between enterprises and consumers, and how the company is thinking about the rate of adoption between the two.
- The company is happy with the trajectory that they are on with PCs. They have over 80 design wins launched or in development across the X Series, and they are targeting commercialization of more than 100 devices as they go to 2025 to 2026. They have seen a consistent increase in design traction, with the first wave being consumer and now being deployed towards commercial. They are excited about the launch of a new product to expand the addressability to now $600 price laptops, which they are not compromising on AI. They are also happy with the results they have seen so far and will continue to expand new markets.
- The company is happy with the trajectory that they are on with PCs. They have over 80 design wins launched or in development across the X Series, and they are targeting commercialization of more than 100 devices as they go to 2025 to 2026. They have seen a consistent increase in design traction, with the first wave being consumer and now being deployed towards commercial. They are excited about the launch of a new product to expand the addressability to now $600 price laptops, which they are not compromising on AI. They are also happy with the results they have seen so far and will continue to expand new markets.
- Analyst asked about the growth trajectory going forward with Chinese Android OEMs, particularly in light of the subsidies.
- The company has seen that subsidies have improved the size of the market in the past, and there is an opportunity for growth with the subsidies. However, they are not yet contemplating it in their second quarter guidance. They had a strong performance in the first quarter, with record performance and higher share at Samsung and higher end consumer demand in China for premium devices. They feel good about all those drivers, which are long-term drivers in their business, and they are well-positioned for the second half of the fiscal year.
- The company has seen that subsidies have improved the size of the market in the past, and there is an opportunity for growth with the subsidies. However, they are not yet contemplating it in their second quarter guidance. They had a strong performance in the first quarter, with record performance and higher share at Samsung and higher end consumer demand in China for premium devices. They feel good about all those drivers, which are long-term drivers in their business, and they are well-positioned for the second half of the fiscal year.
- Analyst asked about the impact of negotiations with Huawei on the QTL guide for Q2 and the annual guide for a flat year-over-year.
- The QTL guide for Q2 assumes no Huawei revenue, and the annual guide for a flat year-over-year assumes no settlement with Huawei. If a settlement is reached with Huawei, there would be upside to the current assumptions.
- The QTL guide for Q2 assumes no Huawei revenue, and the annual guide for a flat year-over-year assumes no settlement with Huawei. If a settlement is reached with Huawei, there would be upside to the current assumptions.
- Analyst asked about the impact of the Lunar New Year holiday on the execution of the last two significant Chinese OEMs.
- The execution of the last two significant Chinese OEMs is pending return from the Lunar New Year holiday.
- The execution of the last two significant Chinese OEMs is pending return from the Lunar New Year holiday.
- Analyst asked about the impact of the share gain at Samsung on the seasonality of the June quarter.
- The impact of the share gain at Samsung is included in the first and second quarter guides, and it is expected to be included in the third and fourth quarter guides as well. The seasonality across quarters is not expected to change significantly due to the share gain at Samsung.
- The impact of the share gain at Samsung is included in the first and second quarter guides, and it is expected to be included in the third and fourth quarter guides as well. The seasonality across quarters is not expected to change significantly due to the share gain at Samsung.
- Analyst asked about the impact of TSMC price increases on Qualcomm's ASPs.
- Akash Palkhiwala explained that the primary driver of ASP increases is the consumer demand for more capable smartphones, and that as the company adds more capability to its chips, it reflects in the price points. Additionally, TSMC's price increases for 3- and 4-nanometer did kick in in January, and Qualcomm's objective is to reflect these cost increases in ASPs over time.
- Akash Palkhiwala explained that the primary driver of ASP increases is the consumer demand for more capable smartphones, and that as the company adds more capability to its chips, it reflects in the price points. Additionally, TSMC's price increases for 3- and 4-nanometer did kick in in January, and Qualcomm's objective is to reflect these cost increases in ASPs over time.
- Analyst asked about the negative sequential comps in Qualcomm's business.
- Akash Palkhiwala explained that the negative sequential comps are due to the cyclicality of the consumer IoT business, which is built for the holiday season and then declines in the following quarter. However, the other two parts of Qualcomm's IoT business, industrial and edge networking, are consistently seeing strength across the quarters.
- Akash Palkhiwala explained that the negative sequential comps are due to the cyclicality of the consumer IoT business, which is built for the holiday season and then declines in the following quarter. However, the other two parts of Qualcomm's IoT business, industrial and edge networking, are consistently seeing strength across the quarters.
- Analyst asked about the company's decision to keep QCT flat sequentially despite the expectation of a decline in the December quarter.
- The company explained that the gross margin in both the December and March quarters benefited from stronger premium-tier volume, improving the overall mix of the portfolio, which shows up in the margin numbers. The company is happy with the strong margin performance and sees it as a result of the mix changes.
- The company explained that the gross margin in both the December and March quarters benefited from stronger premium-tier volume, improving the overall mix of the portfolio, which shows up in the margin numbers. The company is happy with the strong margin performance and sees it as a result of the mix changes.
- Analyst asked about the evolution of the company's thinking regarding the modem situation at its large customer.
- Cristiano R. Amon stated that there has been no change in the company's assumptions. They expect a 20% share for the launch that happens in 2026 and the current agreement ends after that. They are assuming no renewals for 2027, and for 2025 launchings, they expect a share between 100% and 20%. The company has been clear about how they are modeling the business, and this is their current assumption.
- Cristiano R. Amon stated that there has been no change in the company's assumptions. They expect a 20% share for the launch that happens in 2026 and the current agreement ends after that. They are assuming no renewals for 2027, and for 2025 launchings, they expect a share between 100% and 20%. The company has been clear about how they are modeling the business, and this is their current assumption.
- Analyst asked about the sustainability of Qualcomm's growth and the impact of the market on its performance.
- Akash Palkhiwala, CFO of Qualcomm, explained that the company's growth is driven by a combination of higher volume and higher ASPs, and that this trend is expected to continue. He also noted that the premium-tier market, which is where Qualcomm is strong, is growing, and that the company is well-positioned to benefit from this growth. Additionally, he mentioned that China, specifically the premium-tier market, has been strong in recent quarters and that the company has gained share in that market. Finally, he noted that subsidies in China could benefit the company's performance in that market.
- Akash Palkhiwala, CFO of Qualcomm, explained that the company's growth is driven by a combination of higher volume and higher ASPs, and that this trend is expected to continue. He also noted that the premium-tier market, which is where Qualcomm is strong, is growing, and that the company is well-positioned to benefit from this growth. Additionally, he mentioned that China, specifically the premium-tier market, has been strong in recent quarters and that the company has gained share in that market. Finally, he noted that subsidies in China could benefit the company's performance in that market.
