The News: Qualcomm Incorporated today announced results for its fiscal first quarter (Q1) ending December 24, 2023. The company reported $9.9 billion in revenue for the quarter, a net 5% year-over year (YoY) bump, with a Generally Accepted Accounting Principles (GAAP) earnings per share (EPS) of $2.46 and a non-GAAP EPS of $2.75, generally beating expectations.
“We are extremely pleased to report strong quarterly results, with revenues and EPS exceeding the high end of our guidance,” said Cristiano Amon, President and CEO of Qualcomm Incorporated. “Looking ahead, we are building on this momentum with our leading Snapdragon platforms and technology differentiation in connectivity, computing and on-device generative AI, across Handsets, Automotive, PC, XR and Industrial IoT.”
The full release can be found on Qualcomm’s investor relations page.
Qualcomm Q1 2024 Earnings
Analyst take: Qualcomm’s Q1 2024 report signals a welcome return to growth after a tough year marked by soft YoY sales numbers. The downturn in smartphone sales early in the past fiscal year had contributed to the drag on earnings, but the market seemed to rebound in H2. In addition to handsets, Qualcomm continued to capitalize on its momentum in the automotive and XR segments, which were enough to offset a slight decline in the IoT segment.
Qualcomm’s Q1 2024 by the numbers:
By the numbers, Qualcomm’s quarter looks solid: Its $9.9 billion in revenue landed at the very high end of analyst expectations and came in 5% above Q1 2023. EBT and EPS YoY growth came in at +13% and +16%, respectively. More granularly, Qualcomm CDMA Technologies (QCT) produced the lion’s share of the quarter’s revenue with $8.4 billion (a 7% YoY increase), while Qualcomm Technology Licensing (QTL) contributed $1.5 billion (a 4% drop YoY).
Despite a rocky start to the year, the handset market rallied in H2 2023, and the momentum of that rebound carried into Q1, with Qualcomm generating $6.7 billion from the segment for the quarter (a 16% YoY increase). While the automotive segment is still comparatively small when gauged against handsets, Qualcomm saw its automotive revenue jump 31% YoY in Q1, highlighting the momentum of the company’s digital chassis solution. The most obvious trouble area for Qualcomm this past quarter was the IoT segment, which took a 32% revenue hit, falling from $1.7 billion to $1.1 billion YoY.
Powerful On-Device Generative AI, Best-in-Class Performance Per Watt, and Execution at Scale Were Among Key Differentiators Driving Qualcomm’s Momentum
It was interesting to see the street react yet again to positive numbers from Qualcomm with measured disappointment—with the stock falling slightly following earnings amid concerns about the trajectory of handset sales in 2024. First, we feel that investors still do not fully understand how Qualcomm’s product roadmap, partnership ecosystem, and ability to execute at scale continue to act as growth drivers for the company beyond handsets, or how Qualcomm’s expansion into other high-growth segments far outweighs any short-term upcycle/downcycle fluctuations in the handset market.
Second, we feel that some investors may have missed three significant announcements directly related to the handset market: The first is Qualcomm extending its multiyear Snapdragon platforms agreement with Samsung for its flagship Galaxy smartphone launches. The second is Qualcomm also renewing long-term agreements with key Chinese handset OEMs. The third is Apple choosing to extend its global patent license agreement an additional 2 years (through March 2027). Securing these agreement extensions speaks to Qualcomm’s continued relevance in the handset market, particularly at the bleeding premium tier edge, and sets the stage for continued leadership in the segment.
For the sake of playing devil’s advocate, let’s say that Qualcomm’s focus on delivering leading edge technologies to the market might seem (to some) at odds with longer purchasing cycles and open to disruption in the more competitive midrange tier. To that, we would say that Qualcomm’s upper and midrange tier Snapdragon solutions remain on solid footing thanks to the company’s competitive performance, which draws on Snapdragon’s flagship features. (For example, Qualcomm’s new Snapdragon 7 Gen 3 mobile platform draws on the more powerful 8 Gen 3 to deliver leading generative AI capabilities, performance, and user experiences to high-tier Android smartphones. Additionally, Qualcomm’s existing footprint with its handset OEM partners, which both simplifies and accelerates handset development across the mid-to-flagship price tiers. My one caveat to this line of thinking is Qualcomm’s pricing, which could be seen as an opportunity for other mobile SOC and connectivity vendors to step in and capture vulnerable market share, but that has not been a problem for Qualcomm yet, let alone one that could not be easily addressed.
Last, the handset upcycle already defining H1 2024 revenue should drive enough growth in H1 to offset any potential softening in H2, so the market’s fears about a softening of the handset market, particularly with regard to Qualcomm’s performance in 2024, seems off target.
What makes me especially bullish about Qualcomm’s prospects in 2024 touch on the company’s substantial market differentiators: leadership in on-device AI, performance per watt, attractive thermal envelope, best-in-class connectivity solutions, the breadth and strength of its industry partnerships, the company’s ability to execute reliably and at scale, and its expansion into growing market segments such as automotive, PCs, and XR. Snapdragon’s bleeding-edge on-device AI capabilities already give the company a unique advantage in mobile, which ranges from back-of-the-house power and connectivity efficiencies, camera intelligence, and smart UX features to front-of-the-house features such as generative AI capabilities, elite mobile gaming performance, live translation, and powerful voice assistant advancements.
This very market advantage with regard to on-device AI performance is going to be instrumental in helping Qualcomm deliver next-gen AI-powered experiences to its XR partners, from thin-client style smart glasses to flagship VR and MR headsets in 2024 and beyond, and is part of Qualcomm’s latest ADAS breakthroughs, bringing the company closer to completing its already impressive automotive stack—the Snapdragon digital chassis. Seventy-five new cars launched commercially in 2023 with Snapdragon Digital Chassis solutions, highlighting both the company’s growing scale in the automotive segment and its execution of design wins. Qualcomm also demonstrated digital cockpits, connected services, and advanced driver assistance enabled by generative AI models running locally on the Snapdragon platform. These new capabilities can be enabled on a number of existing designs via software upgrades, which opens the door to significant new opportunities for Qualcomm and its industry partners. Qualcomm’s ability to adapt its solutions to new market segments and use cases has been the engine of its diversification strategy for years now, and we see this already in the XR and automotive segments.
All Eyes on Qualcomm’s AIPC Play—and Its Broader IoT Opportunities—In 2024
Qualcomm is just a few months away from a wave of AI-powered PC OEM launches featuring its new X Elite Windows-on-Arm PC platform powered by its powerful new Oryon chip. And while ramp-up could take a few cycles, Qualcomm’s play here has teeth to it. We do not think anyone is questioning the inflection point that on-device AI is going to create in the PC space this year. AIPCs powered Intel and AMD’s on-device AI platforms are already hitting the market and promise to revolutionize the PC segment with powerful AI training and inference capabilities. Qualcomm’s X Elite builds on this potential by not only bringing its powerful AI-forward SOCs to the PC space but also its leadership in performance per watt and connectivity, essentially promising to deliver more power-efficient, workload-efficient, and always-connected PCs to the enterprise and premium PC users.
Qualcomm expects its Snapdragon X Elite platform to set new industry benchmarks for on-device generative AI and copilot experiences, along with performance and battery life for next-generation Windows PCs, and we think the company has a credible shot at carving out a piece of the PC market for itself through better performance and differentiated UX. Granted, Qualcomm has a long road ahead if it aims to displace Intel and AMD in the PC market, but its value proposition already looks solid.
Regarding the IoT category as a whole, Qualcomm believes that industrial edge devices with connectivity, high-performance computing, and on-device AI will continue to be its largest addressable opportunities. Whether that is true or not, Qualcomm is going to need to find new onramps in 2024 to make its case. One key area of focus that the company has identified is with helping its enterprise customers find more use cases for generative AI. Examples are Zebra Technologies and Toshiba recently leveraging on-device generative AI capabilities for enterprise workflows and inventory management at retail self-checkouts. We do not yet see how Qualcomm and its channel plans on scaling this approach, but we are hopeful that 2024 will deliver more focused and scalable execution in the segment. Additionally, Qualcomm’s global expansion of 5G RedCap with its Snapdragon X35 5G Modem-RF System should be helpful in fueling the expansion of the 5G ecosystem to new wave of low-bandwidth use cases, primarily in the IoT segment.
Regarding XR, the segment has not quite found an onramp to mainstream adoption yet, and the metaverse remains years, if not a solid decade, away. That being said, on-device AI, natural voice interfaces, and gesture recognition open the door to entirely new controls and experiences for the category and should help deliver much needed utility and hands-free UX for mainstream technology users. Qualcomm’s Snapdragon XR2+ Gen 2 platform is powering these new experiences, positioning Qualcomm to not only accelerate adoption of XR headsets and smart glasses but also capitalize on the market opportunity once it finally starts to ramp up.
In Closing
Looking at Qualcomm’s overall trajectory, and how its diversification strategy works both as an overall a growth driver and a hedge against handset downcycles, the market’s initial reaction to Qualcomm’s Q1 numbers over fears of a possible softening of the handset segment later in the year is a bit of a head-scratcher. With the exception of its IoT business, Qualcomm looks like a company well positioned for continued growth across key market segments well beyond 2024, but looking toward the next 12 months, we mostly see upside: solid performance in handsets, XR, and connectivity solutions, continued growth in the automotive segment, and a credible onramp into the PC market with a competitive and cleverly differentiated new AIPC platform launching in H2.
Here we go: @Qualcomm FY 24 Q1 results:
~EPS: $2.75 vs $2.37 est
~SALES: $9.922B vs $9.517B est
Some extended thoughts 👇
TLDR: Qualcomm delivered a very robust set of Q1 earnings, beating on the top line as well as on EPS. Handsets showed strength, meeting the company’s… pic.twitter.com/g4brURcYbD
— Daniel Newman (@danielnewmanUV) January 31, 2024
Daniel Newman and his co-host of The Six Five Webcast, Patrick Moorhead of Moor Insights and Strategy discussed Qualcomm’s earnings in their latest episode. Check it out here and be sure to subscribe to The Six Five Webcast so you never miss an episode.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
Other Insights from The Futurum Group:
Qualcomm Q4 2023 Earnings Reflect Start of Device Market Recovery
Qualcomm Snapdragon 8 Gen 3 Brings Generative AI to Smartphones
Qualcomm Snapdragon X Elite and Oryon CPU Aim to Disrupt the PC Market
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.
Olivier Blanchard has extensive experience managing product innovation, technology adoption, digital integration, and change management for industry leaders in the B2B, B2C, B2G sectors, and the IT channel. His passion is helping decision-makers and their organizations understand the many risks and opportunities of technology-driven disruption, and leverage innovation to build stronger, better, more competitive companies.
