Q4 2023 Qualcomm Inc Earnings Call

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Ladies and gentlemen, thank you for standing by.

Welcome to the Qualcomm fourth quarter and fiscal year 2023 earnings conference call.

At this time all participants are in a listen only mode.

Later, well conduct a question and answer session.

If you'd like to ask a question during this time.

Star then the number one on your telephone keypad.

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If you're using a speakerphone please pick up your handset before pressing the numbers.

Please limit your questions to one question and one follow up.

As a reminder, this conference is being recorded November <unk> 2023.

Playback number for today's call is 8776606853.

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Six one to 7415.

The playback reservation number is 137.

41657.

I would now like to turn the call over to Mauricio Lopez, the dying Vice President of Investor Relations.

The peso Diane Please go ahead.

Thank you and good afternoon, everyone. Today's call will include prepared remarks by Christiane them on and of course Pago wallet. In addition, Alex Rogers will join the question and answer session.

You can access our earnings release and a slide presentation that accompany this call on our Investor Relations website. In addition, this call is being webcast on Qualcomm Dot com and a replay will be available on our website later today.

During the call today, we will use non-GAAP financial measures as defined in regulation G. And you can find the related reconciliations to GAAP on our website. We will also make forward looking statements, including projections and estimates of future events business or industry trends or business or financial results.

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As we entered the age of generative AI, we're seeing an unprecedented pace of innovation on devised Jenny.

Is evolving in parallel with Jen AI and the cloud, enabling entirely new use cases <unk>.

He has the potential to change how we interact with our devices, making the user experience more natural intuitive relevant and personal with increased immediacy privacy and security.

We have quickly established Qualcomm as a leader in one device Jen AI for smartphones next generation laptops, XR and automotive and we are well positioned to benefit from this opportunity we expect high performance one device AI.

Unknown Executive: Ladies and gentlemen, thank you for standing by. Welcome to Qualcomm's fourth quarter in fiscal year 2023, Earnings Conference Call. At this time, all participants are not only mode.

To become a requirement over the next few years driving content units or both.

Unknown Executive: Later, we'll conduct a question and answer session. If you'd like to ask a question during this time, press star then the number one on your telephone keypad. To throw your question, press star then the number two. If you're using a speaker phone, please pick up your handset before pressing the numbers. Please let me your questions to one question and one follow-up.

Our snapdragon platform is highly differentiated from its competitors.

First was significantly increase the AI processing performance and power efficiency of our best in class N. P. U C. P. U N G. P. U second we're collaborating with multiple partners and ecosystem to enable a host of consumer and productivity base model.

Unknown Executive: As a reminder, this conference is being recorded November 1st, 2023. Playback number for today's call is 877-660-6853. International callers, please dial 201-612-741-5. The playback reservation number is 137-416-57.

Running natively on our platform third we're enabling multibillion powermeter Jen AI models to run continuously and concurrently for multiple use cases, including multi modal.

For example in the latest Snapdragon <unk> smartphone platform state of the art large language models, such as dilemma in Beichuan up to 10 billion power meters are running at up to 20 tokens per second enlarge vision models, such a stable diffusion can jenner.

Mauricio Lopez: I would now like to turn the call over to Mauricio Lopez-Odion, Vice President of Investor Relations. Mr. Lopez-Odion, please go ahead. Thank you and good afternoon everyone.

Unknown Executive: Today's call will include prepared remarks by Cristiano Monde and the Koch-Palkoala.

Right images from text in less than one second with ultra low power consumption.

Unknown Executive: In addition, Alex Rogers will join the question and answer session.

S I always running on device gin AI becomes pervasive we believe it will create one of the most significant changes in user experience similar to the transition from the future phone to this smartphone and the introduction of the graphical user interface four P. Six.

Unknown Executive: You can access our earnings release and a slide presentation that accompanied this call on an Investor Relations website. In addition, this call has been webcast on Qualcomm.com and a replay will be available on our website later today. During the call today, we will use non-gap financial measures as defining regulation G and you can find the related reconciliations to Gap on our website. We will also make forward looking statements including projections and estimates of future events, business or industry trends or business or financial results. Actual events or results could differ materially from those projected in our forward looking statements.

Snapdragon will play a significant role in this transformation.

We also reached an important milestone in our expansion into P. Six with the announcement of our Snapdragon X elite platform.

It is the result of a relentless pursuit to create the ultimate intelligent computing experience and establish snapdragon as the industry leader and performance empower efficiency there's.

Unknown Executive: Please refer to our SEC findings include our most recent 10K which contain important factors that could cause actual results to differ materially from the forward looking statements.

Snapdragon X elite includes are forced to implementation of the customer Ryan CPU, which exceeds the multi threaded CPU performance of any X 86 or arm competitor in its class.

Cristiano Amon: And now to comments from Qualcomm's president and Chief Executive Officer Cristiano Monde. Thank you Mauricio and good afternoon everyone. Thanks for joining us today.

Cristiano Amon: In fiscal Q4, we delivered non-gap revenues of $8.7 billion in non-gap earnings per share of $2.02 above the high end of our guidance. Revenues from our chipset business of $7.4 billion reflect a more stable Android handset environment. Licensing business revenues were $1.3 billion. Scholars. During the quarter, we also made significant progress on our leading technology and product road maps while improving operational efficiency. We remain fully focused on our future growth and diversification opportunities.

It also matches the single threaded CPU peak performance of the leading X 86, Cpus competitors at 70% less power.

Additionally, our premium integrated adrenal GPU delivers up to two times faster performance than the competition at ISIL power or matches competitor peak P. C performance is 74% less power.

Snapdragon X elite also features our newest X had gone and P U.

With 45 tops of performance the <unk> N P. You escape hobo overrunning Jenny models with over 30 billion per meters on device.

Cristiano Amon: Let me now discuss key highlights from the business. As we enter the age of generative AI, we're seeing an unprecedented pace of innovation. On device, Gen AI is evolving in parallel with Gen AI in the cloud, enabling entirely new use cases. It has the potential to change how we interact with our devices, making the user experience more natural, intuitive, relevant, and personal, with increased immediacy, privacy, and security. We have quickly established Qualcomm as a leader in own device, Gen AI for smartphones, next generation laptops, XR and automotive.

In total AI performance of their snapdragon exolete across CPU G. P. U N N P. U is 75 tops the highest in the industry.

Microsoft is redefining the entire windows experience with the AI copilot and the Snapdragon actually is built from the ground up for this opportunity. We look forward to bce's powered by Snapdragon X elite from leading Oem's starting mid 2024.

The emerging a physical and digital spaces remains a significant future opportunity for Qualcomm and we recently launched a snapdragon a R. One platform are forced dedicated platform for smart glasses.

Cristiano Amon: And we are well positioned to bend. We expect high performance on device AI to become a requirement over the next few years, driving content units or both. Our Snapdragon platform is highly differentiated from its competitors. First, we significantly increase the AI processing performance and power efficiency of our best in class, NPU, CPU, NGPU. Second, we are collaborating with multiple partners and ecosystems to enable a host of consumer and productivity based AI models running natively on our platform.

A R. One gene one was developed in close collaboration with meta empowers the new Ray ban matters smart glasses.

The features a dual ISP camera system for premium photos and videos as well as powerful one device AI for image enhancement virtual assistance real time translation visual search and more.

Together with meta we're developing next generation technologies to create the future spatio computing.

The E R. One gene one along with the previously announced Snapdragon XR Gen two or a testament to the strength of this longstanding partnership across the industry Snapdragon remains the platform of choice for all leading V. R. M R and designs.

Cristiano Amon: Third, we're enabling multi-billion-per-meter Gen AI models to run continuously and concurrently for multiple use cases, including multi-modal. For example, in the latest Snapdragon 8 Gen 3 smartphone platform, state-of-the-art large-language models such as Lama and Baishuan, up to 10 billion parameters are running at up to 20 tokens per second. And large vision models such as stable diffusion can generate images from text in less than one second with ultra-low power consumption. As always running on device, Gen AI becomes pervasive.

In networking, we continue to be a global Wifi leader across enterprise and home networks as well as broadband gateways. Our Wifi seven solutions are seeing strong traction with more than 350 design wins across all categories. Today, We recently announced several new <unk>.

Durations, including with charter communications in the U S and <unk> in the UK, both of which are preparing to rollout enhance next generation Wifi seven connectivity to the residential and small and medium sized business customers.

Cristiano Amon: We believe it will create one of the most significant changes in user experience similar to the transition from the feature phone to the smartphone and the introduction of the graphical user interface for PCs. Snapdragon will play a significant role in this transformation.

We're excited about the launch of our fiber gateway platform, which adds 10 gigabit passive optical network capabilities to our portfolio with fiber. In addition to five G and Wifi seven we're now positioned to lead in next generation broadband solutions.

Cristiano Amon: We also reached an important milestone in our expansion into PCs with the announcement of our Snapdragon X Elite platform. It is the result of a relentless pursuit to create the ultimate intelligent computing experience and established Snapdragon as the industry leader in performance and power efficiency. The Snapdragon X Elite includes our first implementation of the custom Orion CPU, which exceeds the multi-treated CPU performance of any X86 or ARM competitor in its class. It also matches the single-treated CPU peak performance of the leading X86 CPU competitors at 70% less power.

Additionally are unique service defined Wifi technology signature feature introduced with our Wifi platforms offers a unified data fold management architecture from cloud to device. It delivers orchestration classification scheduling and insights to enable the anti.

And management of home networks in real time optimizations across devices.

An automotive the digital transformation of the industry continues to bring new levels of computing intelligence and cloud connectivity to the vehicle. This trends are driving new user experiences advancements in driver assistance autonomy and safety.

Cristiano Amon: Moore. Additionally, our premium integrated Adreno GPU delivers up to two times faster performance than the competition at ISO power or matches competitor peak PC performance at 74% last power. Snapdragon X Elite also features our newest exagon NPU. With 45 tops of performance, the exagon NPU is capable of running GNI models with over 13 billion parameters on device. In total AI performance of the Snapdragon X Elite across CPU, GPU, NNPU is 75 tops, the highest in the industry. Microsoft is redefining the entire Windows experience with the AI co-pilot and the Snapdragon X Elite is built from the ground up for this opportunity.

They also offer the potential for new revenue opportunities as vehicles gained the ability to evolve with over the air updates and digital services.

The vehicle is becoming software defined and the Snapdragon digital chassis remains at the center of this transformation.

We are pleased that our digital chassis solutions will bring advanced capabilities to the upcoming Cadillac Escalade Q, which is planned for commercial production in 2024, the Cadillac Escalade I Q will be equipped with the snap Dragons cockpit, Snapdragon alto connectivity and snapdragon.

Right platforms.

Additionally, we're proud of our partnership with B M. W for all vehicles as well as the upcoming noir classic.

We're also excited that they're snapdragon digital cockpit and connectivity solutions now powered the new Mercedes Benz user experience starting with the 2024 E class sedan, we recently expanded our digital chassis offering with the launch of two new platforms for two wheelers and other vehicle classes.

Cristiano Amon: We look forward to PC powered by Snapdragon X Elite from leading OEMs starting mid-2024.

Cristiano Amon: The merging of physical and digital spaces remains a significant future opportunity for Qualcomm and we recently launched the Snapdragon AR1 platform, our first dedicated platform for smart glasses. AR1 Gen1 was developed in close collaboration with META empowers the new Rayban META smart glasses. He features a dual ISP camera system for premium photos and videos as well as powerful on-device AI for image enhancement virtual assistance, real-time translation, visual search, and more. Together with META, we're developing next-generation technologies to create the future of spatial computing.

As such as motorcycles E bikes scooters and all terrain vehicles.

Or a new platform design wins and launches with Google Harley Davidson and others are receiving positive feedback from the ecosystem on their ability to advanced technology development and bring new user experiences to this vehicles <unk>.

Finally, we announced a new long term relationship with Amazon Web services to enable automakers to integrate cloud technologies into their vehicle development lifecycle, the offering combined the Qualcomm cloud AI 100 solution or snapdragon ride platforms as well as AWS breath of.

Cristiano Amon: The AR1 Gen1 along with the previously announced Snapdragon XR Gen2 or a testament to the strength of this long-standing partnership. Across the industry, Snapdragon remains the platform of choice for all leading VR, MR and AR designs. In networking, we continue to be a global Wi-Fi leader across enterprise and home networks as well as broadband gateways. Our Wi-Fi 7 solutions are seeing strong traction with more than 350 design wins across all categories today.

Services and capabilities. This will advance the future of software defined mobility and change how vehicles are designed and developed.

Enhancements, we announced our latest premium mobile platform, the snapdragon, H, and three which delivers industry, leading performance and extra ordinary experiences to consumers for the upcoming Jen AI era.

Some key features include intelligent capture with awards smartest AI powered camera console level gaming with Ray tracing with global illumination studio quality audio.

Cristiano Amon: We recently announced several new collaborations, including with charter communications in the US and EE in the UK, both of which are preparing to roll out and hence next-generation Wi-Fi 7 connectivity to the residential and small and medium-sized business customers. We're excited about the launch of our fiber gateway platform, which adds 10 gigabit passive optical network capabilities to our portfolio. With fiber, in addition to 5G and Wi-Fi 7, we're now positioned to lead in next-generation broadband solutions.

World's first expand technology best in class connectivity and the world's fastest one device AI processing on a smartphone we look forward to flagship device launches power by the Snapdragon Agentry by global Oems and smartphone brands, including Xiaomi honor.

Opal vivo, one plus Sony and more in.

In addition, we recently enter into an agreement with Apple to supply Snapdragon five G modem RF systems for a smartphone lounges in 2024 2025 in 2026. This agreement reinforces our track record of sustain lizards ship across five G technologies and products.

Cristiano Amon: Additionally, our unique service-defined Wi-Fi technology signature feature introduced with our Wi-Fi platforms offers a unified data-foam management architecture from cloud to device. It delivers orchestration, classification, scheduling, and insights to enable the end-to-end management of home networks and real-time optimizations across devices.

We are proud of our ongoing relationship with Apple.

As we look forward our technology roadmap has never been stronger and the fundamentals of qualcomm's growth drivers remained unchanged with significant opportunities in the coming years.

Cristiano Amon: In automotive, the digital transformation of the industry continues to bring new levels of computing, intelligence, and cloud connectivity to the vehicle. This trends are driving new user experiences, advancements in driver assistance, autonomy and safety. They also offer the potential for new revenue opportunities as vehicles gain the ability to evolve with over the air updates in digital services. And the Snapdragon digital chassis remain at the center of the transformation. We are pleased that our digital chassis solutions will bring advanced capabilities to the upcoming Cadillac Escalade IQ, which is planned for commercial production in 2024.

We continue to focus on stockholder returns and executing on our ongoing diversification opportunities Wyoming training operating discipline.

I would now like to turn the call over to a cash.

Thank you casciano and good afternoon, everyone.

I'll start with our fourth fiscal quarter results.

We delivered non-GAAP revenues of $8.7 billion in EPS of $2.02, which is about the high end of our guidance.

QTL revenues up $1.3 billion in EBIT margin of 66% more in line with our expectations.

UCT delivered revenues of $7.4 billion in EBIT margin of 26%.

Which were near the high end of guidance on strength and handset and automotive revenues.

Cristiano Amon: The Cadillac Escalade IQ will be equipped with the Snapdragon cockpit, Snapdragon auto connectivity and Snapdragon ride platforms. Additionally, we're proud of our partnership with BMW for all vehicles, as well as the upcoming Noya Cluster. We're also excited that the Snapdragon digital cockpit and connectivity solutions now power the new Mercedes Benz user experience starting with the 2024 E-Class sedan.

Handset revenues of $5.5 billion increased 4% sequentially and were higher than expectations due to the benefit from the early stages of recovery and Android demand.

Iot revenues of $1.4 billion, we're down 7% quarter over quarter, including softness and industrial Iot demand.

Automotive revenue grew 23% sequentially to $535 million, making this the 12th consecutive quarter of double digit percentage growth on a year over year basis.

Cristiano Amon: We recently expanded our digital chassis offering with the launch of two new platforms for two wheelers and other vehicle classes, such as motorcycles, e-bikes, scooters and all-terrain vehicles. Our new platform design wins and launches with Gogoro, Harley Davidson and others are receiving positive feedback from the ecosystem on their ability to advance technology development and bring new user experiences to these vehicles.

non-GAAP operating expenses decreased 1% sequentially to $2.2 billion.

Before turning to guidance I'll summarize our fiscal twenty-three results.

We delivered non-GAAP revenues of $36 billion in Aps of $8.43, despite the challenging macro environment <unk>.

We remain focused on our strategic priorities of extending technology leadership, and driving revenue diversification, while taking significant steps to improve our operating efficiency.

Cristiano Amon: Finally, we announce a new long-term relationship of Amazon Web Services to enable automakers to integrate cloud technologies into their vehicle development lifecycle. The offering combines the Qualcomm Cloud AI-100 solution, our Snapdragon ride platforms, as well as AWS, Breath of Services and Capabilities. This will advance the future of software-defined mobility and change how vehicles are designed and developed.

We continued our strong momentum and automotive and delivered record revenues of $1.9 billion with year over year growth of 24%.

Progressing towards our target of greater than $4 billion in revenue by 2026.

We exceeded our fiscal twenty-three cost action target, reducing non-GAAP operating expenses by 7% relative.

Relative to the fiscal 2002 exit rate executing on our commitment to manage the cost structure given the current operating environment.

Cristiano Amon: We announced our latest premium mobile platform, the Snapdragon 8 Gen 3, which delivers industry leading performance and extra ordinary experiences to consumers for the upcoming Gen AI era. Some key features include intelligent capture with the world's smartest AI-powered camera, console-level gaming with ray tracing with global illumination, studio quality audio, the world's first X-pan technology, best-in-class connectivity and the world's fastest on-device AI processing on a smartphone. We look forward to flagship device launches, powered by the Snapdragon 8 Gen 3 by Global OEMs and smartphone brands including Xiaomi, Honor, Opel, Vivo, OnePlus, Sony and more.

Our business continues to generate strong free cash flow with a record of $9.8 billion.

Lastly, our balance sheet remained strong with $11.3 billion in cash and marketable securities.

No turning to guidance.

We are seeing early signs of stabilization and demand for global three G. Four G. Five G handsets.

We now estimate that calendar twenty-three handsets will be down mid to high single digit percentage relative to calendar twenty-two an improvement from our products Spectation.

And the first fiscal quarter of 24, we are forecasting revenues of 9.1% to $9.9 billion and non-GAAP EPS of $2.25 to $2.45.

In QTL, we estimate revenues of $1.3 billion to $1.5 billion in EBIT margin of 70% to 74%.

With sequential growth driven by an increase in global handset units for the holiday season.

Cristiano Amon: In addition, we recently enter into an agreement with Apple to supply Snapdragon 5G modem RF systems for smartphone launches in 2024, 2025 and 2026. This agreement reinforces our track record of sustained leadership across 5G technologies and products. We are proud of our ongoing relationship with Apple.

<unk>, we expect revenues of 7.72 $8.3 billion in EBIT margin of 26% to 28%.

On a sequential basis, we estimate double digit percentage growth four Q city handset revenues and anticipate both Iot an automotive revenues decline consistent with last year.

Q City handset revenue forecast includes the benefit of normalization of Android channel inventory and higher demand due to the acceleration of flagship launches with our newly announced snapped resonate Gen three mobile platform.

Cristiano Amon: As we look forward, our technology roadmap has never been stronger in the fundamentals of Qualcomm's growth drivers remain unchanged with significant opportunities in the coming years. We continue to focus on stockholder returns and executing on our ongoing diversification opportunities while maintaining operating discipline.

Notably UCT handset forecast include sequential revenue growth of greater than 35% from Chinese Oems.

Q City Iot revenue forecast reflects the industrywide cyclical factors, we've previously discussed.

Akash Palkhiwala: I would now like to turn the call over to Akash. Thank you, Cristiano, and good afternoon, everyone. I'll start with our fourth fiscal quarter results.

Including lower demand and elevated channel inventory.

Lastly, we expect non-GAAP operating expenses to be flat relative to the fourth fiscal quarter.

Akash Palkhiwala: We delivered non-gap revenues of $8.7 billion, an EPS of $2.02, which is above the high end of our guidance. QTL revenues of $1.3 billion, an EBT margin of 66%, were in line with our expectations. QCT delivered revenues of $7.4 billion, an EBT margin of 26%, which were near the high end of our guidance on strength in handset and automotive revenues. Handset revenues of $5.5 billion increased 4% sequentially and were higher than expectations due to the benefit from the early stages of recovery in Android demand.

As we enter physical 24, we are encouraged by the early signs of demand stabilization and handsets and our strong competitive positioning across revenue streams.

Key industry trends, such as heterogeneous mobile computing and on devised generate of AI provide a strong foundation for content growth and expansion to new device categories.

Driving growth opportunities for Qualcomm.

In closing I want to thank our employees for their hard work and dedication and for the remaining focused on execution and continuing to Delaware industry leading products.

This concludes our prepared remarks back to your Mary Sue.

Thank you cost operator, we're now ready for questions.

Akash Palkhiwala: IOT revenues of $1.4 billion were down 7% quarter over quarter, including softness in industrial IOT demand. Automotive revenue grew 23% sequentially to $535 million, making this the 12th consecutive quarter of double digit percentage growth on a year-over-year basis. Non-gap operating expenses decreased 1% sequentially to $2.2 billion.

Thank you to keep a question press Star then the number one.

To throw your question press Star too.

If you're using a speaker phone please pick up the handset before pressing the numbers.

One moment please for the first question.

The first question comes from semi Chatterji with J P. Morgan. Please proceed with your questions Yep.

Akash Palkhiwala: Before turning to guidance, I'll summarize our fiscal 23 results. We delivered non-gap revenues of $36 billion, an EPS of $8.43, despite the challenging macro-environment. We remained focused on our strategic priorities of extending technology leadership and driving revenue diversification, while taking significant steps to improve our operating efficiency. We continued our strong momentum in automotive and delivered record revenues of $1.9 billion, with year-over-year growth of 24%, progressing towards our target of greater than $4 billion in revenue by 2026.

Hi, Thank you thanks for taking my questions and congrats on the results here I guess, if I can start with Christianity comments about on device AI became an becoming bogus live in a few years I think investors are largely looking for more sort of evidence and validation that this is going to be a key focus area for a lot of <unk>.

Mmm smartphones and other device or yeah. So as you look over the next 12 to 18 months, what sort of investors look at in terms of more validation of either wins or revenue is that you would expect from the monetization of the train in relation to what investors can really look to his milestones to validate that this is actually going to.

Akash Palkhiwala: We exceeded our fiscal 23 cost-action target, reducing non-gap operating expenses by 7%, relative to the fiscal 22 exit rate, executing on our commitment to manage the cost structure given the current operating environment. Our business continues to generate strong free cash flow, with a record of $9.8 billion. Lastly, our balance sheet remains strong, with $11.3 billion in cash and marketable securities.

B, so playing out over the next three to four years and have a follow up.

Thank you so much for your question for those that have not seen I think I would recommend to.

See the highlights of our Snapdragon Tech summit. It just happened a couple of weeks ago. When we announce the results of our investments and Jennie I I'll I'll I'll tell ya stomach that one device Jenny I as I mentioned in my prepared remarks are evolving in parallel to the cloud and.

Akash Palkhiwala: Now, turning to guidance. We're seeing early signs of stabilization in demand for global 3G4G5G handsets. We now estimate that calendar 23 handsets will be down mid to high single digit percentage, relative to calendar 22, and improvement from our prior expectations. In the first fiscal quarter of 24, we are forecasting revenues of $9.1 to $9.9 billion, and non-gap EPS of $2.25 to $2.45. In QTL, we estimate revenues of $1.3 to $1.5 billion, an EBT margins of 70 to 74%, with sequential growth driven by an increase in global handsets units for the holiday season.

And it's going to have a significant impact and how you change the user experience just think about a simple use cases, you're texting every single test to you right could be could be an input to a model and that could bring a prediction of your behavior and bring other applications. We demonstrated a number of use cases, there under developer, but Maine.

Other Oems there are a number of different models from large language models to large visual models one.

Unique position of Qualcomm, we have many of those models running natively on a platform, we're creating a models who for snapdragon and you saw announcement from Microsoft for meta from what we're doing a Android we're doing a Chinese partners and you're going to start to see those signs, especially with flagship.

Akash Palkhiwala: In QCT, we expect revenues of $7.7 to $8.3 billion, an EBT margins of 26 to 28%. On a sequential basis, we estimate double-digit percentage growth for QCT hands-up revenues and anticipate both IoT and automotive revenues to decline consistent with last year. QCT hands-up revenue forecast includes the benefit of normalization of Android channel inventory and higher demand due to the acceleration of flagship launches with our newly announced Snapdragon 8 Gen 3 mobile platform.

<unk> is launching in 24 as it started to see those use cases, changing photography changing messaging changing scheduling changing assistance. How you should think about this financially for US you have the potential to create a new cycle for phones and.

We will have an impact on increase silicon content just to put in perspective, we have a significant increase the processing performance or for AI.

Akash Palkhiwala: Notably, QCT hands-up forecast includes sequential revenue growth of greater than 35% from Chinese OEMs. QCT IoT revenue forecast reflects the industry-wide cyclical factors we have previously discussed, including lower demand and elevated channel inventory. Lastly, we expect non-gap operating expenses to be flat relative to the fourth fiscal quarter. As we enter fiscal 24, we are encouraged by the early signs of demand stabilization and handsets and our strong competitive positioning across revenue streams. Key industry trends, such as heterogeneous mobile computing and on-device generative AI, provide a strong foundation for content growth and expansion to new device categories, driving growth opportunities for Qualcomm.

The processing and the device or N P. U. He's gonna have silicon content is going to have an impact on mix and it's gonna have an impact on unit of all of it and it's it's likely going to start as use cases get development with flagships launching 24, but he could be very significant as you look in the next two to three years.

Okay.

And for my follow up I guess, you're sounding a lot more positive around the recovering the Android OEM sated with the smartphone market.

Think investor that at the same time are grappling with the.

The potential sort of puts and takes particularly when it comes to your primary.

Akash Palkhiwala: In closing, I want to thank our employees for the hard work and dedication and for remaining focused on execution and continuing to deliver industry-leading products.

<unk> Android customer Samsung using more in house solutions going forward. So when we think about sort of seasonality beyond the December quarter, particularly on the launch periods. How should we think about your market share with Samsung progressing and what impact does that have on your typical teen 90 from this.

Mauricio Lopez: This concludes our prepared remarks back to you, Mauricio. Thank you, Kosh.

Unknown Executive: Operator, we're now ready for questions. Thank you. To give you a question, press star then the number one. To throw your question, press star two. If you're using a speaker phone, please pick up the handset for pressing the numbers. One moment, please, for the first question.

<unk>. Thank you.

Very good question, let me unpack that question, let's divide the conversation and too I think the first part of the conversation as.

As we said in the prepared remarks, we're happy that the inventory dynamics that we have seen within the Android business or largely behind US right now and and one data point that we provided in a cautious I think remarks is sequentially from Q for <unk>.

Samik Chatterjee: The first question comes from Simeig, Chatterjee with JP Morgan. Please just hear with your question. Yep. Hi. Thank you. Thanks for taking my questions and congrats on the results here. I guess if I can start with, Christiana, your comments about on device AI becoming pervasive in a few years.

Cristiano Amon: I think investors are largely looking for more evidence and validation that this is going to be a key focus area for a lot of OEMs, smartphones and other device OEMs. As you look over the next 12 to 18 months, what are the investors look at in terms of more validation of either wins or revenues that you expect from the monetization of the trend in relation to what investors can really look to as milestones to validate that this is actually going to be playing out over the next three to four years and have a follow-up.

Fiscal tour guide, we're seeing a total growth of revenue from Chinese Oem's, both in China and outside China.

Of 35% and I think that that shows that our customers are in a great position I think even ah facing new interest in the market and it also strength of a roadmap and and it's <unk> of the market the second questions about Samsung.

Look we we're we're happy with partnership with Samsung Thursday upcoming launch of the G. 24, we expect to have the majority sure. Our our product is really great I think as as I said, we probably have one of the best product Roadmaps in the history of the company, especially.

Cristiano Amon: Thank you so much, Simeig, for your question. For those that have not seen, I think I would recommend to see the highlights of our Snapdragon tech summit that just happened a couple of weeks ago when we announced the results of our investments in Genai. I'll tell you some, I think that on device Genai, as I mentioned, my prepared remarks are evolving in parallel to the cloud and it's going to have a significant impact in how you change the user experience.

Indigene AI processing capabilities and the product is getting better we were happy to talk about what we have done MPC with her new Orion CPU. That's C. P was coming to mobile, especially in 25, and we expect even more I think evolution of Jenny So the roadmap gets better over time.

Cristiano Amon: Just think about a simple use case as you're texting. Every single test that you write could be an input to a model and that could bring prediction of your behavior and bring other applications. We demonstrated a number of use cases that are under developer by many other OEMs. There are unique positions of Qualcomm. We have many of those models running natively on a platform. We're creating a model for Snapdragon. You saw announcement from Microsoft from Meta from what we're doing over Android.

Overall, we're positive about our relationship with Samsung. Thank you.

Our next question is from that Ramsey with Cowan. Please proceed with your question.

Thank you very much guidance. Good afternoon, I guess for my first question Cristiana I did pick up on on the 35 per cent growth sequentially with China Oems, but you guys. A question I've been getting a ton is around Huawei and what they're doing so you guys called out I think last quarter that day.

Cristiano Amon: We're doing our Chinese partners. You're going to start to see those signs, especially with flagship devices launching in 24. As you started to see, those use changing photography, changing messaging, changing scheduling, changing assistance. How you should think about this financially for us, you have the potential to create a new cycle for phones and we'll have an impact on increased silicon content. Just to put in perspective, we have a significant increase in processing performance of our AI processing in the device or NPU. It's going to have silicon content. It's going to have an impact on mix and it's going to have an impact on unit of all of it.

Cristiano Amon: It's likely going to start as use cases get developed with flagships launching in 24 but it could be very significant as you look at the next two to three.

We're gonna be getting some supply on seven nanometer from smirk and being able to do some devices themselves and then you call out an impact to your revenue, but I think longer term into all of next calendar year, there's some expectation that they might get some more supply some of it from smirk on seven some of it from smirk on 16.

And that might be a unit headwind through some of your other OEM customers, maybe you can sell into them and what as well on four G. So if you could unpack a little bit of what's going on with Huawei and how you see that impacting the market in China that would be helpful and I have a follow up thanks.

Thank you for the question I think maybe separate and forced as we indicated in the last earnings call. I think we indicated that we don't have any more projection of selling our four G. I think sfc's to walk away and and going forward or we don't expect to have.

Cristiano Amon: And for my follow-up, I guess you're sounding a lot more positive around the recovery in the Android OEM, so it was a smartphone market. I think investors at the same time are grappling with the potential sort of puts and takes, particularly when it comes to your primary or large Android customers, I'm using more in-house solutions going forward. So when we think about sort of seasonality beyond the December quarter, particularly on the launch periods, how should we think about your market share with Samsung progressing, and what impact does that have on rate of your typical United from December to March?

Any significance who's going to be a very small I think contribution from from my wallet.

This I think they're more interesting answer to your question and that's the reason I provide the 35% data point is.

As squall, we launched the device we what we are seeing from our customers is continue I think growth from our customers on the Android side, we see a mixed improvement of our customers moving towards flagship and and it's kind of reflected in our numbers. So it does.

Not change I think the trajectory that we have with our Android customers in China and there is a possibility that I think that Huawei as upgrading their existing customer base. You know there was a data point, there's about 100 million Huawei former customers with four to five.

Cristiano Amon: Thank you. Very good question. Let me unpack that question. Let's divide the conversation in two. I think the first part of the conversation, as we said in the prepare remarks, we're happy that the inventory dynamics that we have seen within the Android business are largely behind us right now. And in one data point that we provided in a cautious, I think, remarks is sequentially from Q4FISCO to our guide, we're seeing a total growth of revenue from Chinese OEMs, both in China and outside China, of 35%. And I think that shows that our customers are in a great position. I think even facing new interests in the market. And it's also a strength of our roadmap and this stabilization of the market.

Your old Huawei phone and that could have an impact on increasing the Tim.

Thank you, Chris Yano, I guess my follow up but it was very impressive some of the products that you put forward for the P. C market at the the latest Snapdragon stomach I think you were right to call out the performance level, the power level and the much much different support from Microsoft I guess, what I'm trying to.

Understand a little bit more is.

Support for arm P c's, whether in gaming or an enterprise.

By other Isps, so folks that might need to use other and applications that wouldn't be touched directly by Qualcomm are directly by Microsoft.

Cristiano Amon: The second question is about Samsung. Look, we're happy with partnership with Samsung. There's the upcoming launch of the GS24. We expect to have the majority share. Our product is really great. I think, as I said, we probably have one of the best product roadmaps in the history of the company, especially in the Genai processing capabilities. And the product is getting better. We're happy to talk about what we have done in PC with our new Orion CPU. That CPU is coming to mobile, especially in 25. And we expect even more, I think, evolution of Genai. So the roadmap gets better over time. Overall, we're positive about a relationship with Samsung.

Unknown Executive: Thank you.

Could you give us a little bit of an update their what are you seeing from the I V ecosystem in and what parts of the P. C market do you see potential momentum for your product. Thanks.

Look there's a lot to impact here alright, I can I can speak about this for the whole day, but I'm going to try to <unk>.

First thing, where you can credibly proud of the accomplish ment of our team and I think Snapdragon acts elite took the leadership position in this space for Amy Mobile computing device were incredibly happy with the performance of the New C. P U both single threaded and multi threaded performance.

But not only that I think it's important to highlight the AI processing capability because that's key to answering your question. If you look.

Matthew Ramsay: Our next question is from Matt Ramsey with Calon. Please proceed with your question. Thank you very much, guys.

Versus announcements on N P U of some of the other arm competitors. We had 45 tops performance on the N P. A total tops performance on Exolete of 75.

Matthew Ramsay: Good afternoon. I guess for my first question, Cristiano, I did pick up on the 35% growth sequentially with China OEMs. The question I've been getting a ton is around Huawei and what they're doing. So you guys called out, I think last quarter, that they were going to be getting some supply on seven and a meter from Smith and being able to do some devices themselves. And then you called out an impact to your revenue.

In that our lines with the transition that Microsoft is making towards windows.

Matthew Ramsay: But I think longer term into all of next calendar year, there's some expectation that they might get some more supply. Some of it from Smith on seven, some of it from Smith on 16. And that might be a unit headwind to some of your other OEM customers. Maybe you can sell into them as well on 4G. So if you could unpack a little bit of what's going on with Huawei and how you see it impacting the market in China, that would be helpful, and I will follow up.

Future, especially the new services with the copilot and everything we're doing with Microsoft on one device working together own device with the cloud and where the Azure endpoint. We're excited about that and you should start thinking about the P. C business almost like the Alto business, where focus on next generation P.

<unk> not existing P. C's and that's those windows started to switch to windows and I and our platform launch it you create.

<unk> two nitty for us to start gaining scale specifically to your question. Microsoft has been very active together with us of bringing a lot of applications natively to the platform I think we had a.

Matthew Ramsay: Thank you for the question, Matt. I think maybe separate and first, as we indicated in the last earning call, I think we indicated that we don't have any more projection of selling or 4G, I think, SOSIs to Huawei. And go in forward if we don't expect to have any significance. It's going to be a very small contribution from Huawei. I think the more interesting answer to your question, and that's the reason I provide the 35% data point, is as Huawei launched the device, what we are seeing from our customers is continue, I think, growth from our customers on the Android side, we see a mix improvement of our customers moving towards flagship, and it's kind of reflected in our numbers.

It can progress made across consumer in commercial applications, you continue to see announcements and Windows 11 can also run every X 80, 632, and 64 bit to the Microsoft emulation. We also made significant strides in the emulation performance. So I think snapdragon actually.

<unk> represents the result of this Microsoft work in collaboration and I'll finish up the answer by saying.

If you look at the announcements of order computing companies talking about having an arm based P. C process preprocessor that is validation that that's our Tam now it is going to be part of the expansion of time for Qualcomm, where new player and we look at this as a growth opportunity which cited about it.

Matthew Ramsay: So it does not change, I think, the trajectory that we have with our Android customers in China. And there is a possibility that I think that Huawei has upgrading their existing customer base. There is a data point, there's about 100 million Huawei former customers with a four to five-year-old Huawei phone, and that could have an impact on increasing the temp.

Our next question comes from the line of Mike Walkley with Canaccord Genuity. Please proceed with your questions.

Okay. Thanks.

A quick question for a cause they are strong cost execution come in in the head of plan for exiting the fiscal 23 and flattish into the start to Q Q1, how should we think about opex levels plan for the or is it more areas to cut or do you think you'll make kind of flattish for the year.

Cristiano Amon: Thank you, Cristiano. I guess it's my follow-up, but it was very impressive some of the products that you put forward for the PC market at the latest napdragon summit. I think you were right to call out the performance levels, the power levels, and the much, much different support from Microsoft. I guess what I'm trying to understand a little bit more is support for ARM PCs, whether in gaming or in enterprise use cases by other ISVs, so folks that might need to use other end applications that wouldn't be touched directly by Qualcomm or directly by Microsoft.

Good start.

Yeah. Thanks, Mike for the question Yeah, we're very happy that we set a target for fiscal twenty-three of a reduction of 5% relative to the 22 exit raped and we came in at 7% as we've continued to mentioned we re of Recommitting to operating discipline and we did implement additional actions this call.

Proactively and the way we are managing our portfolio is really while we are reducing cost we want to ensure that we continue to invest appropriately in technology leadership and diversification and some of the areas that Cristiana just went through so that's the balance we're trying to strike and and as we looked at the rest of the year again.

Cristiano Amon: Cristiano, could you give us a little bit of an update there? What do you see in from the ISV ecosystem and in what parts of the PC market do you see potential momentum for your products? Thanks. Look, there's a lot to unpack here. I can speak about this for the whole day, but I'm going to try to be succinct. First thing, we're incredibly proud of the accomplishments of our team. I think Snapdragon X Elite took the leadership position in this space for any mobile computing device.

Committed to maintaining operating disciplined as we move forward I think we're in a very good place from an Opex perspective, we are investing in the right areas and we'll we'll focus on those that scale.

Mmm great. Thanks.

The other one that my follow up question to you Cristiana just just to follow up on the on device <unk> I have an opportunity how should we think about increased dollar content her device for Qualcomm or increased asp's relative to your high and snap Craig shipped today. Thank you.

Cristiano Amon: We're incredibly happy with performance of the new CPU, both single-treated and multi-treated performance, but not only that, I think it's important to highlight the AI processing capability, because that's key to answer your question. If you look versus announcements on NPU or some of the other ARM competitors, we had 45 tops performance on the NPU, with a total tops performance on X Elite of 75. That aligns with the transition that Microsoft is making towards a Windows AI future, especially the new services with the co-pilot and everything we're doing with Microsoft on on-device working together on-device AI with the cloud and with the Azure endpoint.

Well, let me start and chief of cash wants to it.

It's something else to the to the answer.

The way we think about this is let you know rather than provide a specific dollar content is he has a mix improvement and it will drive towards a richer mix of higher and premium interior devices. He has an ASB increase, especially because of the accelerated performance.

AI and we're combining that with significant advancements in CPU and N G. P U as well and he has the opportunity to drive units, where there's a new upgrade cycle or share gains a cush I don't know if you want to add anything.

Cristiano Amon: We're excited about that. You should start thinking about the PC business, and it's almost like the auto business. We're focused on next-generation PCs, not existing PCs, and as those Windows started to switch to Windows AI in our platform launches, you create opportunity for us to start gaining scale. Specifically to your question, Microsoft has been very active together with us of bringing a lot of applications natively to the platform. I think we had a significant progress made across consumer in commercial applications.

And maybe just the other thing to keep in mind is outside handsets as we talk about the P. C opportunity of course already I leadership becomes extremely important there and then also with an I O D. We think about Jenny I have something that's going to be a key technology going forward. It will expand our addressable market <unk> spend the dollars we make poor device on.

In that area as well so it's it's a much broader play for us, including automotive with aid Us I O T and P C.

Our next question comes from the lineup tasting your <unk> with Bernstein Research places here with your questions.

Cristiano Amon: You continue to see announcements, and Windows 11 can also run every X86, 32 and 64-bit to the Microsoft emulation. We also made significant strides in the emulation performance. I think Snapdragon X Elite represents the result of this Microsoft Qualcomm collaboration, and I'll finish with the answer by saying, if you look at the announcements of other computing companies talking about having an ARM-based PC processor, that is validation that that's our TAM now. It is going to be part of the expansion of TAM for Qualcomm.

Hi, guys. Thanks for taking my questions Uhm. So my first one I wanted to ask the March quarter seasonality question, a little more directly. Okay. Can you just give us the puts and takes.

On that March quarter seasonality, and you've gone swelling Apple quarter balloon December rolls off we've got Samsung.

Launches although.

Question, what what the Sierra as we've got other things going on just how do we think about that seasonality and the contents of everything that's going on which would be expecting.

Alright sure. So let me maybe try to address the shape of the Euro is a broader comment I mean, we we do expect the first quarter and the fourth quarter to be the strongest quarters within the year and then third quarter. As you know is typically the lower quarter, because we don't have a flagship phone lines that happens during the quarter.

Cristiano Amon: We're a new Thank you very much for your question.

Mike Walkley: Our next question comes from a lot of Mike Walkley with Canacorn Genuity. Please just see your third question. Great, thanks.

When you step back and kind of look at as we enter fiscal 2004.

Akash Palkhiwala: A quick question for Akash. We have strong cost execution coming in ahead of plan for exiting the fiscal 23 in Flatish into the start to Q Q1. How do you think about op-ex levels planned for the year? Is it more areas to cut or you think you'll main kind of flatish for the year from the good start? Yeah, thanks Mike for the question. Yeah, we're very happy that we set a target for fiscal 23 or for a reduction of 5% relative to the 22 exit rate.

Very happy with kind of the early signs of stabilization in the global handset market.

So we are cautiously optimistic as we go forward.

With that stabilizing and the normalization of indoor channel inventory, we don't know strong trajectory as we go through the air.

I hope that's helpful. Well My second question I wanted to ask about the new Apple agreement. So we put that out a little while ago.

Your modeling 20 per cent sure are now in the phone that launches in 26, so that'll be primarily a physical twenty-seven issue how should we think about the shape. It in in 24 and the launches that happened in in 24 25, do we assume that you've got close to 100 per cent of the majority of the units there and then it drops down.

Akash Palkhiwala: And we came in at 7%. As we've continued to mention, we have we're committing to operating discipline. And we did implement additional actions, this quarter proactively. And the way we are managing our portfolio is really while we are reducing cost, we want to ensure that we continue to invest appropriately in technology leadership and diversification in some of the areas that Kushano just went through. So that's the balance we were trying to strike.

For modeling purposes to 20 per cent on the 26 months or like what what <unk>, what does that look like.

Yeah. So the way you should think about the new agreement without going into specifics. The framework is very consistent with the previous agreement. It covers three three launches so the lunch and 20 for lunch and twenty-five and lunch and 26 and again the framework is consistent with what we had before for financial planning purposes, we're taking the <unk>.

Akash Palkhiwala: And as we look at the rest of the year, again, we're committed to maintaining operating discipline as we move forward. I think we're in a very good place from an op-ex perspective. We are investing in the right areas and we'll focus on those that scale.

Akash Palkhiwala: Great, thanks.

Cristiano Amon: And kind of building on that, my follow up question to you, Kristiana, just to follow up on the on device, Gen AI opportunity. How do you think about the increased dollar content per device for Qualcomm or increased ASPs relative to your high end snap graduate ship today? Thank you. Let me start and see if Akash wants to add something else to the answer. The way we think about this is let, you know, Reddit and provide a specific dollar content is he has a mix improvement.

<unk> approach as we did with last agreement and that's a 20 per cent you mentioned where in the last year. We are planning as if we're gonna get 20 per cent sure, but you know to the extent that we got more than that that'd be upside for our plan.

Our next question is from the lineup for US say Mart with Deutsche Bank Places here with your questions.

Hi, guys. Thanks for letting me ask a question I just wanted to die of a little bit into the automotive an Io T sides of things just a clarification for your fiscal fourth quarter Guy to cash I believe you said they'd be somewhat similar to last year I just wondered what you meant by that and then a bigger cyclical question. We've heard a number of different companies talk about inventory burn.

Cristiano Amon: He will drive towards a richer mix of higher and premature devices. He has an ASP increase, especially because of the accelerated performance for AI and we're combining that with significant advancements and CPU and GPU as well. And he has the opportunity to drive units, whether it's a new upgrade cycle or share gains. Akash, I don't know if you want to add anything. Well, maybe just other thing to keep in mind is outside handsets as we talk about the PC opportunity.

And those two markets you guys highlighted it in Iot's I wondered where we were there and are you seeing anything in automotive.

Sure so.

Financial guidance, we gave is that the year over the quarter over quarter trend from September quarter to the December quarter in automotive N. I O T will be consistent with last year. So if you look at last year automotive was down I think one or two per cent and so we're guiding effectively down one or 2% of our flat for automotive, we obviously had.

Cristiano Amon: Of course, our AI leadership becomes extremely important there. And then also within IoT, we think about Gen AI as something that's going to be a key technology going forward. It'll expand our addressable market, expand the dollars we make per device in that area as well. So it's it's a much broader play for us, including automotive with ADAS, IoT and PC.

Very strong quarter in the September quarter, the business traction continues to accelerate for us the product roadmap as great.

As Kushan outlined in his prepared remarks that relationship with the customers is very strong as well. So we continue to be optimistic and we're well on our way to execute on the financial targets, we have given longterm.

From an Iot perspective again, the same guidance that it is consistent with last year, what the trend resolved between the September and December quarter, and really when you think about Iot. We are seeing some of the same factors that other players in the industry are seeing.

Stacy Rasgon: Our next question comes to the line of safety, ask on with Bernstein Research. Please see if there are questions. My guys, thanks for taking my questions.

Akash Palkhiwala: So my first one, I want to ask the March quarter seasonality question a little more directly. Akash, can you just give us some of the puts and takes on that March quarter seasonality? I mean, we've got a strong Apple quarter presumably in December that rolls off. We've got Samsung that that that launches, although, you know, we can question what what the share is, we've got things going on. Just how do we think about that seasonality in the context of everything that's going on, which we would be expecting?

Some demand recognized coupled with channel inventory.

As we look forward, we think of first quarter at the bottom for the year for Iot, we expect to strengthen from that point on and especially as we get into the second half of the fiscal year would the environment normalizing, but then also.

Very increasingly strong traction for our products, we think will will have a strong second half an audi.

Akash Palkhiwala: Sure, so let me maybe try to address the shape of the year as a broader comment. I mean, we do expect the first quarter and the fourth quarter to be the strongest quarters within the year. And then third quarter as you know is typically the lower quarter because we don't have a flagship phone launch that happens during the quarter. But when you step back and kind of look at as we enter fiscal 24, we're we're very happy with kind of the early signs of stabilization in the global handset market. And so we are cautiously optimistic as we go forward with that stabilizing and the normalization of Android channel inventory. We are on a strong trajectory as we go through the year.

Yeah, I just want to add a little color.

Unknown Executive: That's helpful.

Just wanted to ask a follow up on the gross margin side of things Christianity, you talked about AI at the edge across a number of different products, whether it's the P. C side, the handset side et cetera, I just wondered what does that mean to the gross margin within Q C. T. It seems like it opens up new towns on the unit side.

Outside of handsets, probably increases the Tam from one dollar content on the handset side does that yield upside to gross margin in about the same just what are the puts and takes as we translate all that to the profitability side.

Sure it's from a shorter term perspective as you'll see from our guide we did we did very well in September quarter were guiding in line for December quarter. I think your question is more of a longer term opportunity of the expansion of gross margin as we get into these new areas and we definitely agree that I think as we scale in out.

Akash Palkhiwala: So my second question, I want to ask about the new Apple agreement. So you put that out a little while ago. You're modeling 20% share or now in the phone that launches in 26. So that'll be primarily a fiscal 27 issue. How should we think about the shape of that in 24 and the launches that happen in 24 and 25. Do we assume that you've got close to 100% of the majority of the units there and then it drops down from modeling purposes to 20% on the 26 launch or like what is that look like?

Side handsets, especially in automotive an I O D. We have an opportunity for margin expansion.

<unk> just two things I want to add real quick on the first question and then on on this S. As we can <unk> gain scale and in markets for example, such as <unk>.

Akash Palkhiwala: Yeah, so the way you should think about the new agreement with our kind of going into specifics, the framework is very consistent with the previous agreement. It covers three three launches so that launch in 24 launch in 25 and launch in 26. And again, the framework is consistent with what we had before for financial planning purposes. We're taking the same approach as we did with last agreement and that's a 20% you mentioned where in the last year we are planning as if we're going to get 20% share. But you know to the extent that we get more than that that we applied for our plan.

<unk> and <unk>.

Certain segments of the Iot like P. C S X.

X R do things. They also have the opportunity to give us operating margin efficiency, because our our r&d's highly leveraged, especially on on the computing and the connectivity part. So the more do we get scale will continue to probably be accretive two martians I Wanna make a quick come.

On your Iot you should look at our a T dynamics not I Oh Iot are created equal I think we have a lot of things within our Iot. So there's existing business that are subject to the some of the inventory dynamics, but there are new growth opportunities. There one of I remind everyone that P. C. As in there which is likely going to be.

Ross Seymour: Our next question is from the line of Ross Seymour with Deutsche Bank. Please sit with your questions. Hi guys, thanks for letting me ask a question. I just wanted to dive a little bit into the automotive and IoT side of the things. Just a clarification for your fiscal fourth quarter guide Akasha, I believe you said they'd be somewhat similar to last year. I just wondered what you meant by that. And then a bigger cyclical question, we've heard a number of different companies talk about inventory burn in those two markets.

Ross Seymour: You guys highlighted it in IoT. So I wondered where we were there and are you seeing anything in automotive? Sure. So the financial guidance we gave is that the quarter quarter trend from September quarter to the December quarter in automotive and IoT will be consistent with last year. So if you look at last year automotive was down, I think one or two percent. And so we're guiding effectively down one or two percent or flat for automotive.

Material in fiscal 25, if you think about devices would they actually are lounging towards the second half of 24, you have X R, which were still in the early phase of that opportunity. He has networking we have fiber we didn't have it before so I think we're position now to expand and at working with <unk>.

<unk> and five G and Wifi seven is positive and you know he has still an opportunity to move processing to the edge when Io Phoenix. So we're going to be those are less subject to do someone did cyclical dynamics, we're seeing right now for existing business. Thank you.

Our next questions are from the line of Christopher Rolland with Susquehanna. Please proceed with your questions.

Ross Seymour: We obviously had a very strong quarter in the September quarter. The business traction continues to accelerate for us. The product roadmap is great. As Kushian outlined in his prepared remarks, the relationship with the customers is very strong as well. So we continue to be optimistic and where well on our way to execute on the financial targets we have given long term. From an IoT perspective, again, the same guidance that it's consistent with last year.

Thanks for the question guys. How are you guys thinking about global handset units over your next fiscal year and then also given your new product launches here, how how should we think about Qualcomm asp's as we progress for the next fiscal year as well.

Sure it's it's.

Ross Seymour: What the trend we saw between the September and December quarter. And really when you think about IoT, we're seeing some of the same factor that other players in the industry are seeing. Some demand weakness coupled with channel inventory. As we look forward, we think of first quarter as the bottom for the year for IoT. We expect to strengthen from that point on, and especially as we get into the second half of the fiscal year with the environment normalizing, but then also very increasingly strong traction for our products. We think we'll have a strong second half.

So as we mentioned on the call we've seen kinda early signs of stabilization in the handset market, including China <unk>.

And four calendar twenty-three read now expect mid to high single digits versus 22, which is an improvement from what we had before.

As we look at 24, the recent demand stabilization, obviously provides a positive set up as we go into the year. So we are cautiously optimistic on how 24 plays out, but specifically unflapped five G units, which is really our target market. We expect high single digit too low double digit growth from 23 to 24.

Cristiano Amon: I just wanted to ask the follow-up on the gross margin side of things. Cristiano, you talked about AI at the edge across a number of different products, whether it's the PC side, the handset side, etc. I just wondered what does that mean to the gross margin within QCT? It seems like it opens up new tabs on the unit side, outside of handsets probably increases the tab from a dollar content on the handset side.

So that's that's kind of the market that we pursue and we think there's growth opportunity they're going into next year.

From NASP perspective, because of all the factors we discussed earlier in the call with the chips, becoming way more capable, especially with Jennie I. We think we're on a good trajectory to continue to expand our ASB consistent with the last three year trend. So if you look at our last three a trend.

Cristiano Amon: Does that yield upside to gross margin about the same, just what are the puts and takes as we translate all that to the profitability side? Sure, so from a shorter term perspective as you'll see from our guide, we did very well in September quarter, we're guiding in line for December quarter. I think your question is more of a longer term opportunity of the expansion of our gross margin as we get into these new areas.

We've added approximately 10% increase in any deer off chipset every year and we think as we look forward, we have the opportunity to do that going forward.

That's a great update. Thank you. Another question for you quickly there was some new language in your 10-K around the European Commission proposing regulations around standard essential part.

Cristiano Amon: And we definitely agree that I think as we scale in outside handsets, especially in automotive and IoT, we have an opportunity for margin expansion. You know, Ross, this question is just two things I want to add real quick on the first question and then on this. As we gain scale in markets, for example, such as alto and certain segments of the IoT, like PCs, XR, those things, they also have the opportunity to give us operating margin efficiency because our R&D is highly leveraged, especially on the computing and the connectivity part.

Potentially devaluing those patents I wasn't familiar with this how serious do you think that risk could be and are there any other meaningful developments in any other geographies or are we all kind of status quo.

Yeah. So thanks for that question. This is Alex so we've been tracking these developments in the European Union, there's actually a.

Variety of parts to this proposed regulation ranging from wanting more transparency and ownership of S. C. P as in essentiality of.

S C p's two to other issues relating to kind of pre legal processes and other sorts of regulations that would affect the licensing and go to court process.

Cristiano Amon: So the more that we get scale, we'll continue to probably be a creative to Marsons. I want to make a quick comment on your IoT. You should look at our IoT dynamics, not all IoT are created equal. I think we have a lot of things within our IoT. So there's existing business that are subject to the some of the inventory dynamics, but there are new growth opportunities there. One of I remind everyone that PC is in there, which is likely going to be material in fiscal 25, if you think about devices with the ex elite are launching toward the second half of 24, you have XR, which was still in the early phase of that opportunity.

The the European Union right now is in what they call a trilogue process, it's going to take awhile to get through Parliament and the member states are going away in the commission is going away in the European patent office is actually opposed to parts of the regulation Ericsson.

Ericsson and Nokia of course weighing in as well. So this is going to be a fairly messy just call. It legislative process that will take.

Some number of years to sort out.

It's being followed in other jurisdictions, we're following it here in the U S.

Cristiano Amon: He has networking, we have fiber, we didn't have it before, so I think we're positioned out to expand networking with fiber in 5G and Wi-Fi 7 is positive. And you know, it has still an opportunity to move processing to the edge when IoT next. So we're going to be those are less subject to the some of the cyclical dynamics we're seeing right now for existing business.

The U S patent and trademark office has weighed in.

Somewhat negatively I think.

Unknown Executive: Thank you.

And it's being followed in China as well. So this all this will kind of play out over some years. It's it's not that unusual to have a variety of different SCP related policy initiatives underway in different jurisdictions.

Christopher Rowland: Our next questions are from the line of Christopher Rowland with Susquehanna, please hear with your questions. Thanks for the question, guys. How are you guys thinking about global handset units over your next fiscal year and then also given your new product launches here? How should we think about Qualcomm ASPs as we progress for the next fiscal year as well? So as we mentioned on the call, we've seen kind of early signs of stabilization in the handset market, including in China.

Our next questions from the line of Chris Queso with Wolf Research places here with your questions.

Yes. Thank you good evening. The first question is regarding the overall handset demand and understand the comments.

You made about five G and it's going into next year.

I guess one part of the question is with the 30th the increase that you saw in the China business. How much of that do you believe was associated with just inventory normalization as opposed to.

Actual you know.

Christopher Rowland: And for calendar 23, we now expect mid to high single digits versus 22, which is an improvement from what we had before. As we look at 24, the recent demand stabilization obviously provides a positive setup as we go into the years. So we're cautiously optimistic on how 24 plays out, but specifically on 5G units, which is really our target market. We expect high single digit to low double digit growth from 23 into 24.

More more and market units and then what does that mean for QTL, which has also been you know somewhat depressed because of the lower handset market.

What what should we expect on that as we go into next year.

Yeah, Chris that's a couch so the the way we think about the handset market as we've seen a stabilization in the market and we're projecting forward, especially into the December quarter in QC Qtl's Guide.

As something that a stable market re presence and so regarding our mid point of $1.4 billion.

Christopher Rowland: So that's kind of the market that we pursue and we think there's growth opportunity there going into next year. From an ASP perspective, because of all the factors we discussed earlier in the call with the chips becoming way more capable, especially with Genai, we think we are on a good trajectory to continue to expand our ASP consistent with the last three or trend. So if you look at our last three or trend, we've added approximately 10% increase in any tier of chips at every year. And we think as we look forward, we have the opportunity to do that going forward.

Sequential growth of 11%.

From in terms of breaking down the revenue growth and qcd between inventory and market, obviously, it's kind of difficult to do over a quarter.

But we do we do think that inventory is a big part of it and it's really the market is stabilizing where it's at with inventory really driving a majority of the improvement. In addition to our market share position and revenue growth that comes with Ah content increase as new tips get launched.

Alexander Rogers: That's a great update. Thank you. Another question for you quickly. There was some new language in your 10k around the European Commission proposing regulations around standard essential patents, potentially devaluing those patents. I wasn't familiar with this. How serious do you think that risk could be? And are there any other meaningful developments in any other geographies? Or are we all kind of status quo? Yeah, so thanks for that question. This is Alex.

Got it and and with regard to Q T. L. N. You know I guess I assume with to see the QTL numbers to come back Ah closer to where we've seen them in the past that's going to require some more improvement and and market demand is accurate.

Yeah, that's right I mean, cutie QTL revenue forecast is really a function of the scale of the overall handset market and and so does the scale changes it would improve use QTL revenues as well.

Our next questions from the line of bread Simpson with research. Please proceed with your questions.

Alexander Rogers: So we've been tracking these developments in the European Union. There's actually a variety of parts to this proposed regulation ranging from wanting more transparency and ownership of SEPs and essentiality of SEPs to other issues relating to kind of pre legal processes and other sorts of regulations that would affect the licensing and go to court process. The European Union right now is in what they call a tri-log process. It's going to take a while to get through Parliament and the member states are going to weigh in.

Alexander Rogers: The commission is going to weigh in. The European patent office is actually opposed to parts of the regulation. Erickson and Nokia, of course, weighing in as well. So this is going to be a fairly messy, just call it legislative process that will take some number of years to sort out. It's being followed in other jurisdictions. We're following it here in the US. The US patent trademark office has weighed in somewhat negatively, I think. And it's being followed in China as well. So this will kind of play out over some years. It's not that unusual to have a variety of different SEP-related policy initiatives underway in different jurisdictions.

Yeah. Thanks, very much my question was really on physical.

Fiscal 24, Android a smartphone outlook and I guess, there's a lot of moving parts here with.

With while we're building up their their own ship Sam we've all seen the volumes, they're talking about it for next year and you've also got up fairly high share in flagship segments for smart with Samsung.

So just you know looking at physical 24 can you, perhaps just provide us a framework for whether or not call come can grow androids.

Handset sales and physical 24, thank you.

Brett we're not we're not getting the full you're at this point, we gave you the guidance for fourth quarter and I gave you an outline as well of how we expect the shape of the or to play out for the overall company and I think.

Those pointers should give you a sense of our view into the ear.

Okay, maybe just a follow up a cash in terms of your Opex plan for fiscal 24, I mean, we've senior sales and physical twenty-three decline uhm.

An operating profit down you know pretty significantly in physical twenty-three.

How.

How were you thinking about the Opex for a physical 24, and I guess, specifically when I look at Qualcomm. His head can you have over 50000 people in the business and a lot of your large fabolous peers have about half that headcount how do we think about it's.

Christopher Rowland: Our next question is from the line of Chris Kaiso with Wolf Research. Pleasure to see your third question. Yes, thank you. Good evening. The first question is regarding the overall handset demand and understand the comments you made about 5G units going into next year. I guess one part of the question is with the increase that you saw in the China business. How much of that do you believe was associated with just inventory normalization as opposed to actual more end market units? And then what does that mean for QTL, which has also been somewhat depressed because of the lower handset market? What should we expect on that as we go into next year?

The the the soda spending plan for for next year, just giving the puts and takes here. Thank you.

Yeah, so bread as you're aware true calendar of true physical twenty-three, we took action on cost reductions a couple of times and and as I also mentioned.

This quarter, we've taken under selection. So the idea is is how do we maintain operating discipline, while continuing to invest in the diversification initiatives that are so important for the company going forward and.

What you're seeing in our forecast is that of your presentation of those factors.

Thank you. My final question is from the line of <unk> with Bank of America. Please proceed with your questions.

Akash Palkhiwala: Yes, Chris, that's a gosh. So the way we think about the handset market is we've seen a stabilization in the market and we're projecting forward, especially into the December quarter and QTL's guide as something that the stable market represents. And so we're guiding a midpoint of 1.4 billion dollars sequential growth of 11%. From in terms of breaking down the revenue growth in QCT between inventory and market, obviously it's kind of difficult to do over a quarter.

Akash Palkhiwala: But we do think that inventory is a big part of it and it's really the market is stabilizing where it's at with inventory really driving a majority of the improvement in addition to our market share position and revenue growth that comes with content increase as new tips get lost. And with regards to QTL and, you know, I guess I'd assume with the, to see the QTL numbers to come back closer to, you know, where we've seen them in the past, that's going to require some more improvement in market demand is accurate. Yeah, that's right. I mean, QTL revenue forecast is really a function of the scale of the overall handset market. And so as the scale changes, it would improve QTL revenues as well.

Hey, Thank you so much.

I want to ask about market share next year immediate take is saying that they're doing great in their gaming chair Wowie published now there target 400 million units versus $60 million that they had before.

And the question is how do you feel about your market share for headset sources within China.

What are the areas may be that you are strong it what are the areas that you think you'll see more competition. Thanks.

Ah cash I will start and maybe you had some quantitative comment.

I think I will say if you just just a recap in in fiscal twenty-three that just ended we had our share increase both globally and in China.

Of of cell true and we'd like I think the direction that we have been going as we said, we'll we'll continue to retain majority sure is Samsung we feel good about their relationship going forward and we have seen traction from premium and high tier before.

Chinese Oems. This in spite of the launch off and the successful I think initial sales of a newcomer and that's kind of also reflected in the sequential 35% Grill gosh I don't know if they're anything like the word no I'll I'll, just say a discount and competitive environment is no different than what we've had in the.

Brett Simpson: Our next question is from the line of Brett Simpson with a research. Please just see if there are questions. Yeah, thanks very much. My question was really on fiscal 24 Android smartphone outlook. And I guess there's a lot of moving parts here with, with Huawei building up their own chipset. And we've also seen the volumes they're talking about for next year. And you've also got fairly high share and flagship segments for small with Samsung.

Fast and really if you look at our current products and going forward. We thank god competitive differentiation is actually accelerating boat with our custom Cpus coming into our handset product line and with the journey I. In addition to other factors that differentiate us. So we're pretty confident as we go forward we are in a good place.

Akash Palkhiwala: So just, you know, looking at fiscal 24, can you perhaps just provide us a framework for whether or not Qualcomm can grow Android handset sales in fiscal 24. Thank you. Brett, we're not, we're not guiding the full year at this point. We gave you the guidance for first quarter. And I gave you an outline as well of how we expect the shape of the year to play out for the overall company. And I think those pointers should give you a sense of our view into the year.

From a competitive positioning perspective and content increase.

Thank you.

Thank you that concludes today's question and answer session Mister a monday or anything further to add before joining the call.

Oh, Thank you all for listening to and participating in our call I just want to say thank you to our employees are support suppliers are partners and I think we have been focused on the things, we can control and and really focus on building incredible I think products as we continue to change Qualcomm from a communications company too connected.

Akash Palkhiwala: Okay, maybe just to follow up a caution in terms of your all packs plan for fiscal 24. I mean, we've seen yourselves in fiscal 23 decline and operating profit down, you know, pretty significantly in fiscal 23. How are you thinking about the all packs for fiscal 24? And I guess specifically when I look at Qualcomm's head count, you know, over 50,000 people in the business and a lot of your large fabulous peers have about half that head count.

Computer company and go into new markets. Thank you again and looking forward to talk to all the next quarter.

Ladies and gentlemen. This concludes today's conference call May now disconnect.

Akash Palkhiwala: How do we think about some, you know, the sort of spending plan for for next year, just giving the puts and takes here. Thank you. Yeah, so Brett, as you are aware through calendar through fiscal 23, we took action on cost reductions a couple times. And, and as I also mentioned, this, this quarter, we've taken additional action. So the idea is, is how do we maintain operating discipline while continuing to invest in the diversification initiatives that are so important for the company going forward? And what you're seeing in our forecast is a representation of those factors. Thank you.

Tal Liani: Our final question is from the line of Taliani with Bank of America. Please just use your questions. Hey, thank you so much. I want to ask about market share. Next year, MediaTek is saying that they're doing great and they're gaining share. Huawei published now their target for 100 million units versus 60 million that they had before. And the question is, how do you feel about your market share for hand-set sourced within China? What are the areas maybe that you are strong at? What are the areas that you think you'll see more? Opposition. Thanks.

Cristiano Amon: Akash, I'll start and maybe you had some quantitative comment. Tal, I think I will say if you just just a recap in fiscal 23, the just ended, we had a share increase, both globally in China, of sell true. And we like, I think, the direction that we have been going, as we said, will continue to retain majority share as Samsung, we feel good about their relationship going forward. And we have seen traction from premium and high tier of attorneys, OEMs, this in spite of the launch of in the successful, I think, initial sales of a newcomer.

Cristiano Amon: And that's kind of also reflected in the sequential 35% grow. Akash, I don't know if there anything like to add. Now, I'll just say this competitive environment is no different than what we've had in the past. And really, if you look at our current products and going forward, we think our competitive differentiation is actually accelerating both with our custom CPUs coming into our handset product line and with Gen AI in addition to other factors that differentiate us. So we're pretty confident as we go forward, we're in a good place from a competitive positioning perspective and content increase.

Mauricio Lopez: Thank you. That concludes today's question and answer session. Mr. Ramon, do you have anything further to add before joining the call? No, thank you all for listening to and participating in the call.

Cristiano Amon: I just want to say thank you to our employees, our suppliers, our partners, and I think we've been focused on the things we can control and really focus on building incredible, I think products as we continue to change Qualcomm from a communications company to a connected computer company and go into new markets. Thank you again and looking forward to talk to you all next quarter.

Unknown Executive: Ladies and gentlemen, this concludes today's conference call for to me now, just kidding.