QUALCOMM Incorporated Q1 FY2026 earnings call

Key Highlights - Record revenues of $12.3 billion and non-GAAP EPS of $3.50 in fiscal Q1. - QCT had record revenues of $10.6 billion, with strength in flagship handsets, growth in automotive and IoT. - Launched the first AgenTek AI smartphone powered by Snapdragon 8 Elite. - Introduced Snapdragon X2 Plus for PCs, with strong PC debuts at CES. - Announced collaborations in automotive with Volkswagen, Toyota, and others. - Expanded into industrial IoT with acquisitions and new products. - Acquired Alpha Wave SEMI and Ventana Micro Systems to strengthen platforms.

In fiscal Q1, QUALCOMM had total revenues of $12.3 billion. QCT (Qualcomm Technologies) had revenues of $10.6 billion, with QCT handset revenues at a record $7.8 billion, QCT IoT revenues at $1.7 billion (up 9% year-over-year), and QCT Automotive revenues at $1.1 billion (up 15% year-over-year). QTL (Qualcomm Technology Licensing) had revenues of $1.6 billion with an EBITDA margin of 77% at the high end of guidance.

Second Fiscal Quarter Guidance - Forecasts revenues of $10.2 billion to $11 billion and non-GAAP EPS of $2.45 to $2.65. - QTL estimated revenues of $1.2 billion to $1.4 billion, EBT margins 68% to 72%. - QCT expected revenues of $8.8 billion to $9.4 billion, EBITDA margins 26% to 28%. - QCT handset revenues forecasted at approximately $6 billion due to memory constraints. - QCT IoT revenues expected to grow low teens year-over-year. - QCT Automotive expected to have year-over-year revenue growth >35% in Q2.

Risks - Memory industry dynamics impacting handset business, with DRAM availability for handsets constrained due to prioritization for data centers. - Potential impact on handset OEMs' build plans and inventory levels.

Q: Hey guys, thank you for taking my question. I wanted to start with the handset outlook. Any other factors that are driving the weakness beyond the memory pricing? It was good to hear the reiterated Samsung share. But I think, you know, most importantly, how should we think about the TAM for the year and do you feel like this inventory correction is sort of the last true shoe to drop in the March that you're seeing?

A: Thanks, Joshua, for the question. I will start and I'll ask Akash to add more color. It's 100% related to memory. Actually, I'll say the macroeconomic indicators have been strong. We look at the handset demand has been strong, I think because of our licensing business, we have a good understanding of the overall demand. We look at sell-through data also very strong. Unfortunately, I think, what we saw in Q1 as we guide to Q2 is 100% sized by the availability of memory. So as you all know, as all the indications show that DRAM availability for consumer electronics, especially handsets, is actually down bias on a year-over-year because of the prioritization of HBM for data centers. I think the market is going sized by that. And I think we saw the reaction right away from our customers adjusting, I think, their build production to the memory they have available. And I don't know if Akash, you'd like to add some more color to that.

Q: Hi. Thanks for taking my questions. I have one on data center and one on the smartphone side. Maybe on the data center, Cristiano, if you can give us an update in terms of the progress with your customers on that front. And given sort of the volatility we are seeing in memory, is that sort of being more disruptive to making progress with your customers, or instead, is it sort of augmenting some of the piece of the discussions given sort of big focus on that side of the sort of bill of materials as well?

A: Thank you so much, Samik. So let me start with the data center. I think everything is going in the way we have planned. I think the only public customer announced today is Humane that is progressing well. We have started shipping. We have been working with them in ISV on third-party workloads. We're encouraged about the progress our teams are doing on our roadmap. We continue to get very positive feedback, I think, from broad engagements. You would imagine that a company at our size will be engaged in conversations with some of the largest hyperscalers and cloud service providers in the industry. We have something very unique. We always said we have a dedicated platform for the disaggregated data center. We do very, very well in certain workloads such as decode with our different approach to compute and memory. If anything, I think the transaction of Grok kind of validates that when you think about this aggregated data center, you have specialized hardware versus just a GPU that would do everything. And we're getting good traction. What we're really focused on right now is on execution. I think we had identified some of the milestones. We're executing on two fronts. It's CPU. We added a RISC V CPU now to our roadmap in addition to Orion, which is ARM compatible. And we're executing on AI250 with our new memory architecture. And we will provide details of our roadmap in our investor event. But so far everything is on track. We still restate that we expect 2027 to start showing in revenues. And we feel good. We're just going to keep executing that. And if I don't know, Akash, you want to add anything before I go to memories?

Q: Hi, guys. Thanks for asking the question. Mentioned a couple of different things on the handset side for my first question. But I guess what it comes down to is what percentage of your handset business do you think is in China? Considering that you cited them as being especially hit? And do you think normal seasonality is likely to occur after this step down in the March or is that too difficult to tell?

A: Yes, think on your first question, Ross, we don't really kind of break down by regions. But if you think about the percent of volume that is driven by the Chinese OEMs, but then adjusted down for the tiers that they play in. So our exposure would be less than what you would just see based on the units. The seasonality on the handset side, I think you think of the seasonality in the demand from the consumers is going to be consistent with what we've seen in the past. I think consumers will wait for premium tier launches, and there are significant purchases that happen when that plays out. I think to Cristiano's earlier point, it's really a question of how supply aligns against the demand. We don't have a demand issue, as we said earlier. The demand continues to be strong. Our design win pipeline continues to be strong. And then it's just a question of supply alignment with it over the next few months.

Q: Thanks a lot. Akash, I wanted to ask about the op margin guidance in QCT. The drop through is more than 100%. I mean, it's not surprising that margins would come down. They seem to be coming down pretty quickly, like, faster than I would have thought. Is there is there something else going on there? I know that, you know, wafer costs are going up and you know, MediaTek said on their call that they're still gaining share at the high end. Something going on to make the drop through more than 100% on the top line for March?

A: No. There isn't, Tim. I think, we're expecting gross profit to be large gross profit margin to be largely in line with the December. And so it's just the scale of the revenue coming through and the OpEx guidance that we provided.

Q: Yes, good afternoon. Thank you for taking the question. I guess curious obviously, the DRAM makers have been talking about satisfying only 50 to 70% of the demand, and they're highlighting you know, shortages into 2028. So curious how you're planning for you know, a situation where this could be sustained. Are your Chinese customers looking to design in CXMT? And could you get qualified inside of that? I would assume your business with Samsung would be strong given their internal supply from DRAM and as well as your supply chain in terms of, you know, your wafer commits to TSM guess, how are you managing all of that given all this great uncertainty?

A: Very good question. And I and I'm gonna I know it's obvious, but just in case, I'm gonna use this opportunity make clarification. For handsets, we don't buy memory. I think there are some memory that gets stacked on models, but the majority of memory is purchased directly by our customers. You should expect given our scale, we're probably among the first to be qualified with every memory provider. Every single memory you can imagine has CXMT and other smaller companies, we have been qualified. And also we have flexibility versus some of the other companies. If you actually double click, you're going to see we have flexibility about working with new versions of memory as well as older version of memory on our platform. Platforms. We have multi-generation memory controller. So from a platform we're going to work with whatever is available. I think that's kind of the approach we always took when you have shortage. So the second part of the question, which is the bigger question. Look, the trend I think of growth in the data continues and it's pretty obvious. I think memory vendors have prioritized the build out of HBM. And I think some of the data that you just provided is kind of what we see. As I said before, it's very clear indication that as of today, the availability of memory for consumer electronics year over year has been below the demand and we see that in handsets. You start to see commentary on gaming consoles and other consumer electronic devices. We can't really predict if this will continue for 2027 or 2028. I think there's is capacity build out in plans. It all depends also how how much the trend on data center continues to accelerate. It is fair to assume at this point that for the fiscal year, the size of the handset market which one that is probably getting the blunt of the impact in our business, is going to be defined by the availability of DRAM. And CJ, your second part of your question on wafers, for leading nodes, as as you know, kind of leading nodes are constrained on the wafer side as well. But we have great relationships with our suppliers, and so we're confident that we'll have enough wafers to address the demand.

Q: Yes. Hey, guys. I wanted to just kind of keep going on the memory side. As we you know, kinda look at Apple, and their their propensity for double digit growth, maybe even the whole year, just seems like they are going to continue to get disproportionate you know, share of the available DRAM. Is it possible you know, how do you kinda navigate that with with all your partners? And I guess the question would be, does that add to some of the uncertainty that could linger into the next fiscal year, with one vendor getting disproportionately this kind of unit growth and obviously, the kind of allocation they get.

A: Look, it's hard to make prediction, but I will also probably remind you that we have another large customer that also have memory division as well. So I think as a general statement, I think it is probably a fact that OEMs of larger scale will have probably better ability to have enough memory and they will make priority calls than OEMs of smaller scale. But I think at this this problem is probably going to be industry wide. I don't think any OEM has been immune. In general, I think the statements we seen broadly in the industry is not a demand issue, it's also supply constraint.

Q: Thanks for that. This is Alex. Really no update on the Huawei discussions. The discussions are still underway. In terms of sticking points, I really can't get into what are confidential discussions. I see these two sets of negotiations as, you know, fairly distinct, actually significantly distinct, operating on different paths. And as you know, with the other with the other company, whenever we see a renewal date on the horizon, we start discussions very well in advance. And so that's underway, and we don't have any update on that.