Q3 2024 Summary
Published Jan 10, 2025, 5:10 PM UTC- Strong momentum in the automotive segment, with 10 new design wins added during the quarter, keeping Qualcomm on track to reach $4 billion in automotive revenue by 2026 and $9 billion by the end of the decade.
- Exceeding expectations in the PC market, with the launch of 20 Copilot+ PC models, some of which have already sold out, positioning PCs as the next significant driver of diversification for the company.
- Accelerating application processor advantage with the upcoming launch of a custom CPU at the Snapdragon Summit, to be featured in flagship devices by end of the year, enhancing Qualcomm's leadership in AI performance and computing.
- Qualcomm's license to export products to Huawei was revoked on May 7, which will impact revenues in both the current quarter and the first quarter of fiscal '25.
- The global handset market is expected to be flat to slightly up from '23 to '24, indicating limited growth potential in Qualcomm's core handset market.
- Carriers are not yet seeing compelling AI applications for handsets, which could hinder the deployment and adoption of AI features in mobile devices.
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Revenue Guidance Despite Huawei Headwinds
Q: Revenue guidance unchanged despite Huawei headwinds; what's offsetting?
A: Despite the incremental headwinds from the Huawei export license loss, we're pleased that our handset business is still growing. We're guiding low single-digit percentage growth quarter-over-quarter. Strength in IoT, with low double-digit growth, and solid performance in automotive are offsetting the Huawei impact, reflecting incremental benefits in our guidance. -
December Quarter Outlook
Q: How does the extra week impact December quarter seasonality?
A: We expect the December quarter to remain our seasonally strongest quarter. Factors include the launch of our new Android premium-tier chip, a tailwind for us. We return from 14 weeks back to 13 weeks in the quarter. Relative to last year, we won't have Huawei product revenue, which we did have last year. Net of these factors, we expect year-over-year revenue growth to be largely consistent with last December quarter. -
Growth Drivers: Automotive vs. IoT
Q: In the next 12 months, which offers more growth: automotive or IoT?
A: We're focused on building multiple businesses for diversification. Automotive is materializing as per our plans and will continue on track towards $4 billion in 2026. PCs are also exceeding our expectations, with some models sold out shortly after launch. We're excited about both areas and will provide more metrics at our Investor Day. Additionally, we're redesigning our industrial roadmap, with AI and computing driving growth in IoT. -
Market Share with Major Customers
Q: How do you feel about market share and penetration at major customers?
A: We feel good about our modem technology—a core competency. Regarding our business with Apple, we're operating within the framework we've previously provided. In application processors, we're accelerating our advantage with our own custom CPU launching in flagship devices late this year and early next. Our relationship with Samsung is strong, consistent with the launch of the GS24. We're optimistic about opportunities as AI comes into premium smartphones. -
QCT Gross Margins and Diversification
Q: Thoughts on QCT gross margins going forward amid diversification?
A: We did slightly better than expected on gross margins this quarter. We're guiding the fourth quarter in line with prior guidance. Looking forward into fiscal '25, using the fourth quarter as a model for ongoing gross margins is reasonable. Diversification efforts in automotive, PCs, and other areas are factored into this outlook. -
Licensing Renewals and Huawei Impact
Q: How might upcoming license renewals, including Huawei, affect revenue?
A: We've made significant progress on renewals and extensions, recently signing major Chinese OEMs and extending with Apple through 2027. We're engaged with Huawei to move negotiations forward but have no news yet. As we don't break down QTL revenue by OEM, a reasonable approach is to consider the scale of the market and apply the OEM's unit contribution to our overall revenue stream. -
Demand for AI Features in Smartphones
Q: Are consumers demanding smartphones with AI features?
A: AI has expanded the premium tier, which is growing faster even in a flattish market. We're happy with the trajectory of AI features, increasing from a few to tens now. As use cases grow, an AI-driven upgrade cycle could emerge. We're also planning to bring AI capabilities to the mass tier without compromising on features. The upcoming launch of our next Snapdragon with a custom CPU will make AI a big part of the story. -
Addressable Market in Compute
Q: How do you envision your addressable market in compute?
A: We're focused on the Windows 11 addressable market, targeting laptops—both consumer and enterprise—priced at $700 and above. We forecast that about 50% of all computers sold in 2027 will be AI PCs. The transition to Windows 11 and Copilot+ PCs presents an opportunity for us to provide highly differentiated solutions. -
Impact of Extra Week on Revenue and Costs
Q: How does the extra week in the quarter affect revenue and costs?
A: The extra week and the Huawei revenue reduction largely offset each other in our guidance. We've factored in incremental revenue on the QTL side and incremental OpEx due to the extra week. However, the benefit from flagship phone launches in QCT doesn't change with the number of weeks. Overall, the net impact on guidance is limited. -
PC Revenue Contribution in Guidance
Q: How much of the guidance includes PC revenue?
A: It's early in our PC launch, so it's too soon for specific assumptions on PC revenue. While we have indications from customers and have tried to factor them in, short-term sell-through insights are limited. We'll provide more details on our revenue ramp plans at Investor Day.