QUALCOMM INC/DE Q4 FY2025 earnings call

• Cristiano Amon noted strong Q4 results with revenues and EPS exceeding guidance. Highlights include introduction of Snapdragon 8 Elite Gen 5 mobile platform, 10th Snapdragon Summit, growth of Snapdragon Insiders community, new platforms for premium laptops, smart glasses growth driven by Meta, launch of Snapdragon Ride Pilot in automotive, acquisition of Arduino, entry into data center with AI200 and AI250 SoCs, and progress towards fiscal '29 revenue target. • Akash Palkhiwala discussed Q4 results, QTL and QCT performance, guidance for Q1 fiscal year, strong fiscal '25 performance with record revenues and EPS, and progress towards revenue targets in various segments including automotive, IoT, handsets, etc.

In fiscal Q4, Qualcomm had revenues of $11.3 billion. QCT revenues were $9.8 billion, up 9% sequentially, driven by strong end customer demand for Snapdragon-powered premium tier Android handsets, automotive Snapdragon Digital Chassis, and IoT. QTL revenues were $1.4 billion. Fiscal '25 non-GAAP revenues were $44 billion, up 13% year-over-year. QCT annual revenues were $38.4 billion, up 16% year-over-year, with IoT up 22% and automotive up 36% year-over-year. QCT handset revenues were $7 billion, up 14% year-over-year. QCT IoT revenues were $1.8 billion, up 7% year-over-year. QCT Automotive surpassed $1 billion quarterly revenue, up 17% year-over-year.

• First fiscal quarter guidance: revenues in range of $11.8 billion to $12.6 billion and non-GAAP EPS of $3.30 to $3.50. • QTL revenues estimated $1.4 billion to $1.6 billion with EBT margins 74% to 78%. • QCT expected record revenues $10.3 billion to $10.9 billion with EBT margins 30% to 32%. • QCT handset revenues expected low teens sequential growth. • QCT IoT expected sequential decline due to seasonality. • QCT Automotive expected flat to slightly up sequentially.

Q: Congrats on a stellar set of results in a bumpy backdrop. I wanted to start with the data center business. I realize you're going to provide more details in the first half of 2026, and my questions might get punted as a result. But maybe you could spend a few minutes talking about what you see as Qualcomm's right to win in the data center space? And any details you can provide on the specs of the AI200 and 250 beyond what you were able to offer in the press release when the HUMAIN engagement was announced. And then lastly, on this topic, last quarter, you called out, I believe, a hyperscale engagement. I assume that's distinct from the HUMAIN engagement and any details on timing there?

A: Josh, thanks for your question and thank you. Yes. Look, we're very excited. I think this is the next chapter of, I think, the process we have been in Qualcomm to changing the company, diversifying the company, expanding our IP. I think that's one of the reasons I think we made acquisitions such as Alphawave. We think there are 2 areas that we outlined that we can participate into the data center. We were incredibly excited about the size of the opportunity in the next phase, I think, of data center build-out where there's going to be real competition. We go from training to inference. We have been focused in 2 areas. One is we believe we have one very strategic asset in the industry, which is very competitive, power-efficient CPU. That is both for the head node of AI clusters as well as general purpose compute. And then we also have been building what we think is a new architecture dedicated for inference. I think the focus has been increased computer density and simplify the architecture for the data center in terms of increase, I think, performance per watt. I think it's all going to be about generating the most amount of tokens with the least amount of power, and that's our right to play. We're excited about what we're doing that has been in development. It's something that we're actually doing in a very disciplined manner. We spend a lot of time, I think, with our early experimentation with AI100 to develop the software. And then we're now building AI200, AI250, both the SoC, the card, direct solutions. And I think we're pleased with what we're seeing. We will provide more details on that as you outlined early next year. Specific to your questions, I think we were in discussion with a hyperscaler. We're very pleased with the outcome of that conversation, and that's going to be part of our update when we provide details on the road map, the performance, the KPI, we'll be able to show details of the solution as well as our customer engagement. We are in conversation with a lot of companies. It's clear the market wants competition for this. But in a typical Qualcomm way, we're just going to be focused on executing and show the products performing. Like I said, this is an exciting new chapter of our expansion. And alongside robotics, those are kind of new opportunities for us.

Q: Cristiano, you mentioned the -- on the data center side, starting with that, you mentioned the price performance for the inferencing performance that you're trying to deliver. I mean most of the training clusters that we've sort of seen the other incumbents sort of talk about the ranges of installation cost is somewhere in the sort of $30 billion, $40 billion per gigawatt that we're hearing of. Can you just right size us in terms of when you're thinking about the deployment on a gigawatt basis, what kind of cost performance or price performance are you thinking of relative to these inferencing workloads that you can support on the AI 200 or AI 250? And I'm also trying to get to sort of what revenue implications are for HUMAIN when you sort of deploy 200 megawatts with them? And I have a follow-up, please.

A: Okay. I'm going to try to give as much color as I can without getting ahead of the update we're going to provide next year. So first, let's just have a broader discussion about revenue. What we said before that we expect data center products to start leading to a revenue ramp beginning in fiscal '28. I think as a result of the HUMAIN engagement and our progress on the AI accelerator, I think we're pulling this forward into fiscal '27. So you should expect now from what we said before, I think data center revenue is going to start to become material in fiscal '27. So I think that's the extent of what I can provide at this moment. It's about a 1-year pulling. The second thing is we are getting interest. You should assume that companies, they are having to deploy as much compute as they need in the data center for inference, especially now that you see the constraints that you have on power, the constraints that you have on the amount of computer density. I think we have a lot of folks interested. We were not having conversations if we didn't have a solution that is competitive. But we will show the KPIs of the platform, I think, when we have a road map update early next year.

Q: Timothy Arcuri: Akash, when you talked about September, you said that the beat was driven mostly by premium Android, but it seemed like it came a little more from your top customer because before you were saying to take like 30% of units out, and that was like $500 million roughly. But it seemed like nowhere near that much came out from that customer. So -- I mean, it was kind of barely down year-over-year. So can you just square that? And then also as part of that, can you speak to how much that customer is as kind of a baseline assumption for December? I think we've seen that the model that has their modem and it's not really selling very well. So I would assume that that's a tailwind for you also in calendar Q4. And then I had a second question.

A: Sure, Tim. So as we had said earlier, we expected to be in 3 of the 4 models of the phone that was launched. And so that is exactly what happened. And share, of course, is based on what sell -- how sell-through plays out. Specifically on the September quarter question, we already had kind of demand from the customer that was factored into the guidance we gave. So the upside we saw was not from Apple. It was really driven by Android customers and primarily the premium tier with the launch of our new Snapdragon chip. When you look at the sequential trend as well, as I mentioned, the -- we are forecasting approximately low teens sequential revenue growth in the handset revenue stream for QCT and primarily driven by Android as well. So there is some benefit from Apple, but the primary driver for the growth quarter-over-quarter is actually Android premium tier shipments.

Q: Timothy Arcuri: Okay. And then is there any update on the negotiation with Huawei for a license? It seems like it's kind of dragging on a little bit. Can you just talk about that?

A: Yes. This is Alex. Thanks for the question. No, we actually don't have an update now. Discussions are still underway, really nothing substantive to say beyond that.

Q: Stacy Rasgon: So you noted the non-Apple QCT revenue was up 18% year-over-year. And even if I take out the auto and the IoT, it's clear that the Android piece was up like pretty strong double digits year-over-year. So am I right in assuming that's all content or primarily content given I don't think units grew that much. And is that the right sort of pace of like further content increase that we ought to be thinking about as we go forward?

A: Yes. So Stacy, you're doing -- obviously doing the math right. There are 2 primary drivers on this. One is just the mix shift of units up. And so this is a trend that we've seen over the last several years, and it's -- sometimes it's thought of as a developed market trend, but that's not true. It's across all developing regions as well. The devices that are purchased continue to move up, and so that shows up in the benefit to our revenue stream. The second trend is within premium tier. Content continues to grow as we deliver more and more capable chips, and more capable handsets are being delivered as a result of it. And those are the 2 primary drivers of kind of the long-term trend of our handset business.

Q: Stacy Rasgon: Got it. And if I could have a quick follow-up. Just the Snapdragon Android strength in September and December, is that primarily China? And are there any concerns there? I mean, is that just the timing of the launches? Like any thoughts on pull forward or anything like that. Anything we ought to be thinking about there?

A: Yes. No, there's no pull forward there. I think what we've seen is all of our -- most of our China customers, actually, all the major customers have already launched devices and the initial reception to the devices have been very positive. We'll see a lot of our global customers launch devices as well later this quarter going into early next year. And so it's just a reflection of kind of normal purchase patterns around the launch of these devices and the great initial consumer reaction to the launches.

Q: Christopher Caso: And a question again on AI data center. And I realize you're going to provide some details coming up, but there's some specs out there, so -- which is why we ask. But from what we've seen what was in the press release was perhaps a different architecture than what we've seen others attack the market with DDR memory, PCI Express in that. Should we interpret that as sort of a first approach by Qualcomm with more to come? Or is this rather a different sort of philosophy for attacking the market? You talked about being more efficient on power consumption. Is this sort of a different -- attacking the market differently than what's in the market today?

A: I think the answer to the question is yes. For us, I think we're approaching this thinking about what the future architecture should look like. We had said before, and I think that's -- we have thought about this for the edge as well, which means when we think about dedicated inferencing clusters and the goal is to actually have the highest possible computer density at the lowest possible cost and energy consumption to generate tokens, we thought that maybe an architecture that is beyond the GPU and what you've traditionally been doing with GPU and HBM is what we should be doing. That's we're developing and we have to execute, and that's the focus on the company right now.

Q: Christopher Caso: Got it. With -- just back on handsets. And you talked about a mix shift towards the premium tier. To what extent has the growth that you've seen in handsets been driven by Snapdragon ASPs? And obviously, wafer prices are going up as you go to finer geometries. Maybe talk about the impact of higher ASPs on handset growth, both now and going forward and how the industry absorbs those higher ASPs?

A: Yes. So I think there's a long-term trend that we've seen. This is a conversation that we have every year, but we continue to see just very strong demand for more capable chips, more capable processing in these premium tier chips. And so the competition between the OEMs drives it, the demand for consumers doing more activity on the phone drives it. And we know the next couple of chips that we are making, and we're already in discussions, advanced discussions with our customers. So we feel pretty confident that there are legs to this trend over the next several years. The second factor that I outlined is important to keep in mind as well is this very significant mix shift towards more premium devices. And that's not about content growth within the tier, but it's more about more capable devices being purchased by consumer. And that is a multiyear trend as well that we're continuing to see going forward.

Q: Tal Liani: If I look at this quarter, you grew handsets by 14% and it looks like next quarter, you're guiding again 600 basis points of above market growth or above market expectations for QCT. When you look at next quarter, what are the components of this outperformance? Do you -- can you go over kind of IoT, autos and handsets? Where do you think you can perform better than you initially thought last quarter, et cetera? Can you give us a little bit of a color on how next quarter is behaving of the QCT breakdown?

A: Tal, just to confirm, your question is about the December quarter, first fiscal quarter?

Q: Yes, first fiscal quarter, sorry. The question is about the guidance for next quarter. Yes.

A: Yes, perfect. So in -- specifically in automotive, we had a record quarter in September, so $1.1 billion -- approximately $1.1 billion, and we are guiding flat to slightly up in automotive. We do think that we're in this very strong position as additional cars get launched with our capabilities in them, we will continue to grow revenue through the year. IoT is similarly positioned, right? We saw significant upside relative to our guidance within the September quarter, and we are positioned to continue to grow revenue starting first quarter going into the rest of the fiscal year as well. Within handsets, the upside that you're seeing in the December quarter is really the success of our launch of our new chip. We've seen all the major OEMs launch devices with it. As I said earlier, strong consumer reaction, and that is reflected in our financial forecast. On a sequential basis, as I mentioned earlier, we are forecasting a low teens sequential revenue growth in the handset stream in QCT.

Q: Benjamin Reitzes: Just wanted to touch back on the data center event, you said you're going to be updating us in the next calendar year. Previously, you had an Analyst Day where you've put out these long-term targets for FY '29. I would assume that the smallest opportunity was in XR at $2 billion. I would assume if we're going to have an event and go through something like this, this has the opportunity to be something pretty material, bigger than the smallest opportunity outlined at the last Analyst Day, that was $2 billion for XR by '29 and more like another multibillion opportunity. Can you just -- can you guys clarify that?

A: Yes, Ben, that's a great observation. I think we're seeing this market take off very fast, especially AI smart glasses. And so we definitely feel like we're significantly ahead of the guidance that we had provided and very significant upside opportunity. I mean if you kind of step back and think about the broader opportunity around personal AI, and you could think of it as the glasses form factor or the watch form factor or hearables form factor, this could be a very, very large market. And so if that plays out as we suspect it might, it will create significant upside opportunity.

Q: Benjamin Reitzes: Yes. Sorry, just to clarify, though, my question, I appreciate that is that if you're going to outline the data center opportunity and have a special event, should we assume that it's a multibillion opportunity, something that you would call out that's at least as big, if not bigger, than anything you laid out at your last Analyst Day, which is the smaller opportunities are $2 billion to $4 billion.

A: Ben, now -- thanks for the question. I understand it now. Yes, it's upside on that number and success in this area, I think, presents to us a potential multibillion-dollar revenue opportunity in a couple of years, and that's how we're thinking about it right now.