Samsung Partnership Extension
Q: What's the duration and impact of the new Samsung agreement?
A: Qualcomm announced a multiyear agreement with Samsung, starting with 2024 devices like the Galaxy S24. Though the duration isn't disclosed, it spans several years, providing predictability on Qualcomm's position in the premium tier. The partnership strengthens as Qualcomm brings custom CPUs to mobile, aiming for leadership in mobile CPU performance. - -

Margins Improvement and Sustainability
Q: How did margins improve despite IoT weakness, and is it sustainable?
A: Gross margins strengthened due to a favorable mix with higher premium-tier launches. Operating margins also benefited from revenue scale and actions on operating expenses. Qualcomm delivered a 31% operating margin in QCT and expects similar performance in the second quarter, focusing on achieving long-term targets. -

Auto Business Ramp and Strength
Q: What's driving the strong auto business, and how will it ramp to 2026 targets?
A: Qualcomm's auto business is performing well, with record revenues and strong year-over-year growth. In 2023, they launched 75 models with significant silicon content in immersive cockpits and safety processing. They're on track to meet targets of $4 billion in 2026 and $9 billion by the end of the decade. Growth is driven by share gains as new car models launch, with increasing content in infotainment and ADAS systems. - - -

Android Demand and Huawei Impact in China
Q: How are Android sales in China, and is Huawei affecting them?
A: Android channel inventory has normalized, with strong demand due to accelerated flagship launches featuring Snapdragon 8 Gen 3. This momentum continues into the second quarter. Huawei's 5G launch expanded the premium-tier TAM in China, but Qualcomm continues to see strong demand from its customers post-launch. - - -

IoT Recovery and X Elite Ramp
Q: What's the outlook for IoT recovery and the impact of X Elite?
A: The IoT business is stabilizing, with the first quarter marking the revenue bottom. Qualcomm is guiding for mid- to high single-digit growth in the second quarter and is cautiously optimistic for the second half of the fiscal year. The X Elite chipset, tied to the next version of Windows with AI capabilities, is set to launch in mid-2024. Design traction has increased, signaling a positive outlook for PCs. -

QTL Outlook and Handset Market
Q: What's the outlook for QTL amid handset market expectations?
A: For calendar 2024, Qualcomm expects the overall handset market to be flat to slightly up, with 5G devices growing high single digits to low double digits year-over-year. QTL revenue is expected to scale with the handset market, and recent license extensions won't materially change the revenue run rate, keeping it consistent with the existing program. -

Custom CPU Cores with Orion
Q: Why is Qualcomm re-engaging in custom cores with Orion, and what's expected?
A: Following the acquisition of Nuvia, Qualcomm is designing its own custom cores, first seen in PCs with the X Elite. They're now extending this to mobile, aiming for leadership across CPU, graphics, and AI cores. Partners show significant interest, and these developments will also extend into the automotive business. Orion is positioned to be a leading CPU core in the industry. -

OpEx Outlook and Investments
Q: How will operating expenses evolve given investment plans?
A: Qualcomm will hire selectively, focusing on acquiring new skills required for diversification. After recent reductions, they believe they're largely at scale and remain committed to operating discipline. -

Leveraging Modem Relationship for RF Content
Q: Can Qualcomm leverage its modem position to add RF content with key customers?
A: This is a conversation Qualcomm will have with customers. They will make their RF portfolio available if customers are interested, potentially expanding content in flagship devices. -

New 14% Customer Indicative of China Demand
Q: Is the new significant customer a sign of strong China demand?
A: Yes, the increased percentage from a new customer reflects strong demand in China and suggests good future growth opportunities. -

Android ASP Outlook and Mix
Q: How is Android ASP expected to trend in the back half of the year?
A: Premium flagship launches typically occur before holidays and Chinese New Year. While significant launches happen mid-year, the next big wave is during the holiday season. Beyond the premium tier, Qualcomm has a strong presence in higher tiers, driving a significant portion of launches and revenue. Content and ASP are expected to continue growing as consumers demand more capabilities. -

Auto Business Resilience and ADAS Contributions
Q: Why is Qualcomm's auto business strong despite industry weakness, and when will ADAS revenues grow?
A: Qualcomm's auto growth is driven by share gains and increased content as new models launch. They've shifted from primarily telematics to immersive digital cockpits and have existing revenue from ADAS processing. As they approach 2026 targets, contributions from ADAS and autonomy are expected to become more significant. -

June Quarter Seasonality
Q: What is the expectation for June quarter seasonality?
A: The third quarter is expected to be the lowest due to a lack of significant flagship launches, following a trend consistent with the last two years. A decline in Q3 is anticipated, with growth resuming in Q4. -

AI Adoption in Smartphones
Q: How is AI adoption progressing in smartphones like the Galaxy S24?
A: It's early, but Qualcomm is excited about the adoption of generative AI on devices like the Galaxy S24. Positive reviews and new use cases are emerging, with multiple models incorporating AI capabilities. This is expected to favorably impact the premium and high-tier segments, which are the fastest-growing in the handset market. -