The Six Five team talks about the latest earnings coming out of Qualcomm.
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Transcript:
Daniel Newman: So hey, let’s move on to the next topic, which is a biggie that I think we will easily spend 10 minutes on, because you will spend at least six just to get through it. What a great second quarter for CEO Cristiano Amon, another one of those ones that kind of was quiet because it was reported on the day the Meta bomb went off. But if you wanted something to feel about that day, Qualcomm.
Patrick Moorhead: Yeah, absolutely. So NVIDIA crushed their fiscal Q1 ’22. They had it beat on the top, they had it beat on the bottom, and they had a raise. So really, the trifecta of what you would want. They had another record revenue, another record EPS, and another record EBT quarter. And what i really liked is in their deck, they said, “We have revenues, that’s QCT, revenues exceeding any other fabless company out there.” And it’s like, do you hear that, NVIDIA, do you hear that AMD, do you hear that folks? I do like that fire, and if Cristiano weren’t CEO, we definitely wouldn’t have hit that. Handsets, just a banner quarter, 42% improvement. And then rounded out with their growth areas, RF front end at 7%, automotive at 21, and IoT at 41%. Some people are asking, “Hey, what’s up with this 7% versus 42% on the handset?” And it’s very simple, that RF customers buy earlier than they do on the digital side, because they’re, quite frankly, concerned with the availability. And potentially the previous quarter was bigger than it should’ve been, but this quarter for sure was endemic of a buy ahead. So great stuff there.
Their guide was really good too. 10 to $11 billion in the top line, $2.80 to $3 on EPS. Net net, their growth and diversity strategy is working. Daniel, I gave you a lot of oxygen, buddy.
Daniel Newman: Yeah, well, you hit a lot of the key points. I had a chance to dig in deeper, you and I actually got a briefing from both their CFO and from Cristiano on the day of earnings, so it was great to get a chance to speak to the senior team, get their takes, ask some questions, try to get beneath the hood and say, “Hey, what’s ahead?” You mentioned guide, just terrific. One of the things that Cristiano said that really stuck with me was, the company is, at this point in time, by revenue, the largest fabless semiconductor manufacturer on the planet, was basically either trending towards, what is it, 35 billion? He said they’re nearing 10 billion a quarter on the QCT side.
Now, just as a little bit of a reference, I believe NVIDIA’s guiding toward about 25 billion in revenue this year. So NVIDIA, which trades at well over 40 times forward earnings right now, even after a significant pullback, Qualcomm on the day of its earnings was around 17. So if you look at the way the market treats Qualcomm, I think what was being sort of insinuated through that conversation is, “Hey, we’re fast growth, we hit double-digits, in some case high-double digits. We’re diversified,” which was something that Qualcomm was often accused of not being, because it was basically handsets.
And I did a little bit of assessment of this, Pat, when I wrote, I did a writeup on MarketWatch about this, and I just looked over the past couple of years. In fiscal 1 of ’20, the first time they broke out those business units, it was a $3.6 billion total, so across those business units. At this point now you’ve seen, handsets have doubled since they first reported, so that was five quarters. The handset has more than doubled, the IoT business has more than doubled. The IoT business now is a $1.5 billion a quarter business for the company. We’ve seen the RFFE grow about 22% from that time five quarters ago, but it actually, the full year five quarters ago, but that actually has grown much faster if you look at individual quarters before that. It was about five quarters ago that started that big ramp where they had their near first billion dollar quarter.
And then automotive has also grown about 27%, but you can’t forget, that’s a $13 billion pipeline that is now with their acquisition of Veoneer, the skateboard, the digital chassis acquisition. I want to say, sorry about that, I just totally slipped on it, but it was the ADAS part of the Veoneer business that they acquired. And then on top of that, you add on all these subsets, and you’ve got a business that’s, it’s impressive. And about a third to 40% of it on a quarter-by-quarter of QCT’s not handset. And I think that’s a really important thing.
And then behind all this, Pat, is you have a extraordinarily robust licensing business, which doesn’t get talked about as much as it needs to be, but it’s, one, extremely high margin, and two, it basically gives Qualcomm a piece of every dollar that comes in in the 5G, basically for every 5G thing that sells on the planet.
And the one last thing, Pat, I think worth mentioning here is you said this really well, and it goes back a ways, but the sub-5% expectation. Sorry if I doubled up on a couple things you said, buddy. The sub-5% expectation for Apple over the next couple of years I think has really put the market in a spin. So you got this kind of opposing forces. You got fast growth, but the company’s appreciation in terms of its P/E has still been pretty slow. But at the same time. You’ve got a lot of the things falling into the right place, and lastly, the antitrust space seems to have sort of shifted away from Qualcomm, at least at the moment. And by the way, now that I say that, we’ll probably see something get filed today. But in this particular moment in time, it seems that the Alphabets, Amazons, Facebook Metas seem to be much more in the crosshairs, at least at the moment, so …
Patrick Moorhead: Yeah, if I can, can I do a boomerang on this one real quick?
Daniel Newman: Yeah. And by the way, you said a lot, so if I did repeat any data points, it was only because I felt everybody out there needed to hear it as well.
Patrick Moorhead: I got you, no, I appreciate that. I just thought because you weren’t listening to what I was saying.
Daniel Newman: Maybe.
Patrick Moorhead: No, it’s funny, I want to put an asterisk, you had brought it up, kind of the Android growth versus Apple. And I wrote a piece in Forbes that essentially said that Qualcomm in 2025 will be Apple-proof. And especially what that means is is based on growth in all their other businesses and the growth in Android, Qualcomm is no longer going to be reliant as the biggest driver of their stock. In fact, Cristiano Aman and Akash said they essentially zeroed out Apple at, I believe 2025 was the year, correct me if I’m off on the year. But what I really liked is they did 60% of their year-on-year growth in revenues was from Snapdragon. It essentially means they’re gaining market share in Android, and I think this is part of the becoming Apple-proof.
Anyways, I thought that was interesting. I think Cristiano maybe two quarters ago laid it to rest, but I think repetition is important. For everybody to know that Qualcomm’s essentially becoming Apple-proof.
Daniel Newman: It’s a big one. And it’s Arriver, by the way, that I was choking on. The part of Veoneer that they did not spin off was Arriver. Sometimes, I think, Pat, weeks like this, when you’re just digesting so much, that perfect factoid brain that I try to keep goes imperfect on me.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
