The News: Qualcomm Incorporated announced results for its fiscal second quarter (Q2) ended March 24, 2024. “We are pleased to report strong quarterly results, with EPS exceeding the high end of our guidance,” said Cristiano Amon, President and CEO of Qualcomm Incorporated. Amon also highlighted the company’s third consecutive quarter of record revenue from its QCT Automotive, upcoming PC launches powered by new Snapdragon X platforms, and the company’s focus on enabling on-device artificial intelligence (AI) capabilities across multiple product categories. Revenue for the quarter was $9.38 billion, a modest but encouraging 1% year-over-year (YoY) increase. GAAP and non-GAAP EPS were $2.06 and $2.44, respectively. Read the press release here.
Qualcomm Q2 2024 Earnings
Analyst Take: Overall, another solid quarter for Qualcomm and a continuation of the trends we highlighted in Q1. We see good execution and operational efficiency, strong momentum in Automotive, and basically a no-drama quarter. Steady is the name of the game for Qualcomm right now, especially after a little bit of turbulence in the handset space mixed with residual hardware inventory woes last year (especially in the PC space), which destabilized the tech sector a bit. For us, Qualcomm’s easy Q2 is a healthy bit of calm wedged between the accelerating sector’s recovery, and Qualcomm’s big PC play starting in H2. Before we get back to that, let’s drill down into those Q2 numbers a bit:
QCT: QCT revenue landed about the guidance midpoint, at $8 billion for the quarter, up 1% YoY (from $7.9 billion in Q2 2023). Handsets accounted for $6.2 billion, up 1% YoY (from $6.1 billion in Q2 2023), while Automotive accounted for $603 million, a whopping 35% increase from $447 million in Q2 2023. IoT softened a bit, dropping to $1.24 billion for the quarter from $1.39 billion in Q2 2023 (an 11% YoY drop).
In handsets, there were no surprises this quarter, with consistent strength in the premium and high-tier smartphones, where Snapdragon Mobile platforms continue to lead in on-device generative AI capabilities. Recently launched flagship Android devices powered by Snapdragon 8 Gen 3 are seeing strong demand globally, especially in China. Revenue from Chinese OEMs increased by >40% YoY in H1 2024, reflecting a strong competitive positioning, but perhaps more importantly to the market as a whole, a recovery in demand.
On-device AI seems like a likely disruptor for the handset segment, with live translation, live transcription, portrait generation, photo AI editing, semantic search, text summarization, writing assistance, image generation, and virtual assistants leading the core use cases resonating with consumers. We think that the ability to run large language models (LLMs) and perhaps more importantly large mixed models (LMMs) workloads directly on a phone could help reset the buying cycle, particularly in the flagship and premium tiers, once users have had a chance to get their hands on those capabilities. We also want to point out that as AI-capable handset SOCs improve, so does their overall performance for more “traditional” workloads such as streaming and gaming. Performance per watt also seems to be improving enough that longer battery life and faster charging may be reasons enough for many consumers to upgrade their Android phones earlier in the refresh cycle than they normally would have, regardless of next-gen AI capabilities.
Qualcomm nonetheless continues to accelerate the expansion of generative AI to the edge and to devices. We keep thinking back to Qualcomm’s AI Hub announcement at Mobile World and to the impact that its library of pre-optimized AI models will have on helping scale and accelerate the creation of new apps and use cases for on-device AI (effectively a sticky demand generation pipeline for next-generation Snapdragon platforms). The library already provides access to 100 or so optimized AI models at up to 4X inferencing speeds, with more on the way.
In Auto, the Snapdragon Digital Chassis stack’s design win pipeline has now reportedly reached ~$45 billion, suggesting that Qualcomm’s expansion in the segment may be outpacing the addressable market’s overall growth. Qualcomm believes that it is on track to achieve >$4 billion in revenue in fiscal 2026.
Not a great quarter for IoT in general, but networking solutions continued to gain traction, thanks to Wi-Fi 7 expansion in the enterprise. Edge Networking IoT has legs, and we expect a lot more growth to be coming from the segment.
Significant focus on PCs this year, especially ahead of upcoming OEM launches, but Q2 numbers obviously do not reflect what may be coming down the road if Qualcomm’s Windows on Arm next-gen AI PC platform performs well in the market, particularly in the enterprise. Qualcomm recently expanded its compute portfolio adding the Snapdragon X Plus Platform to its flagship X Elite. X Plus addresses a broader range of design and price tiers, which should provide OEMs with more market penetration flexibility.
In XR, the new Meta Horizon OS, running on Snapdragon, is now open and available to third-party hardware OEMs—a significant milestone toward expanding the device ecosystem. It is still early days for XR, which has remained somewhat niche across its subsegments, but the hands-free combination of on-device AI, natural language processing, AI assistant features and camera intelligence could accelerate mainstream demand for thin XR solutions such as smart and AR glasses in the next 12-24 months.
QTL: QTL revenue for the quarter was $1.318 billion, a 2% increase from Q2 2023’s $1.290 billion, with an EBT margin of 71%—roughly midpoint of the guidance range.
What’s Next
Guidance for Q3 revenue points to somewhere between $8.8 billion and $9.6 billion, with QCT revenue expected to land between $7.5 billion and $8.1 billion, and QTL revenue in the $1.2 billion to $1.4 billion range.
We suspect that Qualcomm’s big Q3 story won’t be earnings though, but rather the wave of PC launches featuring Qualcomm’s Snapdragon X next-gen AI PC platforms: X Elite and X Plus, with major PC OEMs taking turns introducing their new Snapdragon-powered Windows on Arm PCs to their enterprise and retail customers. That is when we expect the clock to start in earnest in the PC segment’s refresh cycle reset, with next-gen AI PCs bringing considerable performance improvements, new capabilities, and improved TCO to the PC space to disrupt it much in the way that generative AI disrupted the data center space over the course of the past 2 years. And while it will likely take a minute for Snapdragon-powered AI PCs to scale and capture enough market share from Intel-based PCs and Macs to significantly impact Qualcomm’s PC business revenue, pre-orders and market reactions to this first wave of Windows on Arm AI PCs should give us early clues about the category’s potential.
We will also be looking at Qualcomm’s automotive numbers in Q3 and any auto OEM announcements that might move the needle forward even more. Despite EV sales softening for the time being, software-defined vehicles are not going away, and Qualcomm’s design win pipeline looks solid well into the second half of the decade. Additional opportunities with two-wheeled vehicle connectivity and software subscription services likely won’t materialize by then, but the scalability of the vehicle market across all tiers and segments is driving demand for solutions that Qualcomm could easily deliver, not only in India and China but in Europe and in the US market as well.
In summary, Qualcomm’s diversification strategy still looks like a finely-tuned engine for growth for Qualcomm. And while Q2 may have felt a little flat to some, we see it more as both a steady foundation for Qualcomm’s next growth cycle and the proverbial calm before the storm—manifesting as a purchase cycle reset—that on-device AI is likely about to unleash on the PC segment.
Daniel Newman and his co-host of The Six Five Webcast, Patrick Moorhead of Moor Insights and Strategy discusses 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:
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Qualcomm Creates Opportunities, On-Device Generative AI 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.
Research Director Olivier Blanchard covers edge semiconductors and intelligent AI-capable devices for Futurum. In addition to having co-authored several books about digital transformation and AI with Futurum Group CEO Daniel Newman, Blanchard brings considerable experience demystifying new and emerging technologies, advising clients on how best to future-proof their organizations, and helping maximize the positive impacts of technology disruption while mitigating their potentially negative effects. Follow his extended analysis on X and LinkedIn.
