Q1 2025 Summary
Published Feb 7, 2025, 7:58 PM UTC- QCT handset revenues increased by 13% year-over-year, driven by higher volume and higher ASPs due to increased content in devices. Qualcomm expects 10% handset revenue growth in the March quarter, indicating strong momentum in their handset business. This growth is fueled by the expanding premium-tier smartphone market, where devices over $400 have grown from 21% to over 30% of the market in the last 3-4 years, benefiting Qualcomm significantly.
- Qualcomm is seeing strong demand in China for premium-tier smartphones, with their customers gaining share. Additionally, the introduction of subsidies in China could further enhance demand, providing a potential upside not yet included in their guidance. "We've also seen our customers gain share within that market... we're going to have subsidies come in, and so that is a potential that benefits that part of the market as well."
- Qualcomm's expansion into the Windows PC market with the Snapdragon X Series is exceeding expectations. They have achieved over 10% share of the >$800 Windows laptop market in U.S. retail, aligning with their long-term target of 12% market share by 2029. With over 80 design wins launched or in development, targeting more than 100 devices to be commercialized through 2025-2026, Qualcomm is well-positioned for growth in the PC market.
- Uncertainty regarding future modem business with a major customer: Qualcomm expects its share of modem supply for launches in 2026 to be 20%, with the current agreement ending after that and assuming no renewals. For 2025 launches, the share is expected to be between 100% and 20%, but the company is uncertain about the exact figure. This uncertainty with a key customer could negatively impact future revenues beyond 2026.
- Dependence on premium-tier handset market growth, which may not be sustainable: The 13% year-over-year growth in QCT handset revenues was driven by higher volumes and increased ASPs due to content increase, particularly in the Android premium tier. However, if the premium-tier market growth slows or reverses, especially in important markets like China, Qualcomm's handset revenue growth could be at risk.
- Potential margin pressure due to higher wafer costs: Qualcomm acknowledged that TSMC price increases for 3- and 4-nanometer nodes took effect in January. While the company aims to reflect these cost increases in ASPs over time, there is a risk that they may not be able to fully pass on these costs to customers, potentially compressing gross margins.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +17% | Increased from $9.935B to $11.669B due to higher demand for premium-tier Snapdragon platforms in handsets, strong Automotive adoption in new vehicle launches, and IoT recovery post-inventory drawdowns (** **). Forward-looking growth may continue as 5G and automotive digitalization accelerate. |
QCT | +20% | Driven by sustained Handset demand (+13%) and strong Automotive momentum (+61%) as OEMs adopted Snapdragon digital cockpit products, alongside IoT gains (+36%) from normalizing inventory (** **). Company execution and premium chipsets are key ongoing drivers. |
Handsets | +13% | Growth to $7.574B stemmed from increased chipset shipments (+$448M) and higher ASPs (+$424M) as customers sought premium-tier solutions; continued uptake of 5G devices also played a role (** **). Strong OEM partnerships may maintain momentum. |
Automotive | +61% | Jumped to $0.961B on new vehicle launches featuring Snapdragon digital cockpit, reflecting the sector’s shift toward connected, software-defined vehicles and Qualcomm’s expanding customer base (** **). Ongoing digital transformation in automotive points to further upside. |
IoT | +36% | Reached $1.549B primarily through increased shipments (+$513M) across consumer, industrial, and edge networking segments; partially offset by an unfavorable product mix (** **). With inventory normalization and industrial IoT adoption, Qualcomm expects continuing opportunities in AI-enabled edge devices. |
QTL | +5% | Rose to $1.535B on higher estimated sales of 3G/4G/5G products and additional royalty revenues recognized from prior periods (** **). Licensing revenues benefit from OEM compliance and broader 5G penetration, which may support future licensing growth. |
Equipment & Services | +19% | Hit $9.942B due to rising demand in QCT equipment (handsets, automotive, IoT) as customers replenished inventories and pursued premium platforms, reflecting a rebound in end markets post-FY24 softness (** **). Ongoing product innovation is set to uphold momentum. |
Licensing | +7% | Grew to $1.727B on stronger multi-mode 3G/4G/5G licensing and some royalties recognized from prior sales (** **). As global 5G handset deployments rise, licensing fees remain a key profit driver, though reliant on OEM volumes. |
Net Income | +15% | Climbed to $3.180B, aided by higher operating income from multiple business lines—especially Handsets and Automotive—and effective cost management (** **). Future profitability hinges on continued expansion into premium-tier solutions, automotive, and IoT markets, plus disciplined spending. |
Diluted EPS | +15% | Improved to $2.83 from $2.46, reflecting the net income rise and share repurchases that lowered the share count, magnifying per-share earnings (** **). Sustained buybacks, combined with revenue growth, could maintain upward EPS trajectory. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Non-GAAP Revenues | Q2 2025 | no prior guidance | $10.2 billion to $11.0 billion | no prior guidance |
Non-GAAP EPS | Q2 2025 | no prior guidance | $2.70 to $2.90 | no prior guidance |
QTL Revenues | Q2 2025 | no prior guidance | $1.25 billion to $1.45 billion | no prior guidance |
QTL EBT Margins | Q2 2025 | no prior guidance | 69% to 73% | no prior guidance |
QCT Revenues | Q2 2025 | no prior guidance | $8.9 billion to $9.5 billion | no prior guidance |
QCT EBT Margins | Q2 2025 | no prior guidance | 29% to 31% | no prior guidance |
QCT Handset Revenues | Q2 2025 | no prior guidance | +10% year-over-year | no prior guidance |
QCT IoT Revenues | Q2 2025 | no prior guidance | +15% year-over-year | no prior guidance |
QCT Automotive Revenues | Q2 2025 | no prior guidance | +50% year-over-year | no prior guidance |
Non-GAAP Operating Expenses | Q2 2025 | no prior guidance | ~$2.25 billion | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Premium-tier smartphone market expansion | Growth from ~$400 devices rising from ~21% to ~30% share, with Qualcomm benefiting from flagship chipset adoption | Continued upside in $400+ segment, bolstered by Galaxy S25 and China’s premium market success | Positive momentum continues |
Strong demand from Chinese OEMs and potential subsidies in China | High revenue growth from Chinese OEMs (>40% sequential), with no prior subsidy mentions | Focus on higher-end demand, customers gaining share, and new subsidies not yet included in guidance | More emphasis on subsidies |
Uncertainty over major modem customer supply post-2026 | Assumption of customer share ramping down to ~20% for 2026 launch | Expectation of no renewals post-2026, modeling no business in 2027 | Ongoing exposure |
Automotive revenue growth and global design wins | Record revenues and strong pipeline with global OEM traction | QCT Auto revenues reached $961M (+61% YoY); over 80 design wins in development | Sustained momentum |
PC market expansion with Snapdragon platforms | Expanded OEM traction and goal of ~$4B Windows PC revenue, benefiting from on-device AI | Over 80 design wins, >10% share in $800+ laptops, and new $600-tier offering | Continued growth |
Margin pressure from TSMC wafer cost increases | Slight margin decline guided due to higher wafer costs and product mix | Elevated costs but offset by premium-tier ASPs | Still monitoring |
IoT growth in XR, NPC, and industrial applications | Strong XR traction (e.g., Meta glasses), new industrial solutions, and AI-ready offerings | XR momentum with Ray-Ban Meta glasses surpassing expectations; industrial AI solutions (on-prem inference) introduced | Expanding use cases |
Huawei export license revocation impact | License revoked, revenue reduction largely offset in forecasts | No mention | No longer referenced |
Flat to slightly up global handset market outlook | Flat to slight growth assumption for global handset units | Expects flat to low single-digit growth, not factoring in subsidy upside | Remains consistent |
AI capabilities as a differentiator in PC and automotive segments | On-device AI fueling PC performance leadership, ADAS and cockpit integration in autos | Copilot+ boost in PCs, AI-driven infotainment and ADAS enhancements for automakers | Increasing emphasis |
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Huawei Licensing Renewal
Q: Does the QTL revenue guidance assume no Huawei settlement?
A: Yes, our guidance for flat QTL revenue year-over-year does not include any potential from a renewal with Huawei. Negotiations are still ongoing, and any settlement could provide upside to our current expectations. -
Smartphone Growth Sustainability
Q: How long can the 13% smartphone growth in QCT continue?
A: We believe this growth is sustainable due to higher volumes and increased ASPs from added content. The premium tier (devices over $400) has grown from 21% to over 30% of the market, and we're well-positioned in this segment. -
China Demand and Subsidies
Q: What impact are China's smartphone subsidies having?
A: Subsidies began in January, so it's early to assess their effect. Historically, such subsidies have expanded the market size. We haven't factored potential upside from them into our guidance. -
Samsung Share Gain Impact
Q: Does higher Samsung share affect your seasonality?
A: We've included the higher share at Samsung in our forecasts, but it doesn't fundamentally change our seasonality, which is driven by flagship launch timings. -
Modem Supply to Major Customer
Q: Any change in expectations about modem supply to your large customer?
A: No change. We expect 20% share for the 2026 launch, with the current agreement ending after that and no renewals assumed for 2027. For 2025 launches, we expect share between 100% and 20%. -
Increased Snapdragon ASPs
Q: What's driving higher Snapdragon price points?
A: Consumer demand for more capable smartphones leads us to add more processing, AI, and connectivity features, increasing ASPs. We also aim to reflect TSMC's cost increases over time. -
Gross Margin Trends
Q: What's behind the strong gross margins in QCT?
A: Stronger premium-tier volumes improve our product mix, benefiting gross margins. This strength is primarily due to increased demand for premium devices. -
IoT Segment Cyclicality
Q: Is there cyclicality in your IoT segment?
A: Yes, mainly in consumer IoT due to holiday seasonality. However, industrial and edge networking segments show consistent strength across quarters. -
PC Business in IoT
Q: How big is the PC business within IoT?
A: We don't break down revenues quarterly, but we're pleased to have achieved 10% share in U.S. retail for Windows laptops over $800, aligning with our long-term target of $4 billion in revenue by 2029.