The Six Five team discusses Qualcomm Q2/FY24 earnings.
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Transcript:
Daniel Newman: Qualcomm.
Patrick Moorhead: Very good quarter for the company and like we discussed with AMD, people are looking for beat, beat and arrays. That’s exactly what Qualcomm did. On one hand it’s unexpected in that while smartphones have recovered, as we saw with Apple, and we’re going to talk about them, didn’t recover as much as everybody thought. But that’s okay because auto absolutely kicked butt. And not only did they kick butt for the quarter, but they increased their backlog by 15 billion going from 30 billion to 45 billion.
I was on a call with Nakul Duggal and I was joking with him. I had written an article and I referenced him as the $10 billion man. Do I need to go in and re-up that and call him the $45 billion man? I have no idea.
Daniel Newman: It’s time.
Patrick Moorhead: So a big surprise in those numbers, Dan, was that ADAS is a third of that backlog and it’s just crazy. Four months ago I was in a car in Las Vegas where Qualcomm had a couple engineers that had done some software together and they wanted to give me a ride on it. And this is when Qualcomm wasn’t even talking about this. So pretty awesome that within four years they have this much business across ADAS and connectivity and of course the dashboard. Handsets, market’s up and they’re kicking absolute butt in China. It was kind of like puts and takes here. They have content in Apple. Apple’s down. It was down 10% as we’re going to talk, but they have more content when you add the AP PoP plus the modem and the RF. I think the highlight was Snapdragon 8 gen 3 up 40% first half ’24 year-over-year. And that is fantastic growth.
Final comment, we still haven’t seen the super cycle yet kick in for AI smartphones and AI PCs. I believe that it will start in the second half and I do think that Qualcomm will be a beneficiary.
Daniel Newman: I’m interested here. Old, former Qualcommer, Samir Khazaka, we’ve known Samir for a long time. He’s hitting us up on the Twitter. He is asking us a question. Let’s play the game a little bit. He said Qualcomm said 40% revenue growth in China for the first half of its year. Growth should have contributed better revenue growth for the quarter, which came in at, he said, a tepid 1%.
Patrick Moorhead: Yeah, I felt like I peeled the onion on that, on the puts and the takes, right? You had Huawei grow, which doesn’t have any Qualcomm content, but you had Apple come down and you had OPPO go up. And by the way, a lot of this depends on year-on-year or sequentially, but those to me were the puts and the takes. MediaTek’s doing really well too. So I think that’s a factor.
Daniel Newman: Yeah, I think the market is in a slow state of recovery. I think that the China number coming in above is really, really strong. I do think we’re still not in the point yet where handsets are really growing quickly, but I think we are going to see that. It’s going to be interesting. We’re going to have some fired up conversations over the next 24 to 48 hours across the world about Apple and their next generation of iPhone and we’ll just create the AI phone.
Our friend Dan Ives tweeting about this morning that there’s a super cycle coming. I know a guy that said something like that at an event just about PC. So I mean smart people say smart things, but look, it was a pretty spot. It was a very tidy earnings, Pat. It was very tidy across the board. The growth isn’t as fast as a whole 1%. It sounds like we have that. IBM is always like, “We got all this great stuff going on, but the overall revenue was up 1%.” What was the market super excited about?
I had an interesting back and forth with Ben Bajarin about this and he said, “It’s AI. Everybody got into AI.” I said it was automotive. I think it’s automotive. I think that there’s some AI at the edge enthusiasm for sure, but I actually think that’s kind of slow because people are still waiting to really see it and feel it a little bit. We talk about it a lot and you know a little bit of what’s going on, you know the secret sauce because you’re on the inside track, so you can’t talk about that stuff. But people, the average Joe out there is not experiencing AI at the edge in a way that they’re like, “Oh my gosh, I can’t wait the extra two milliseconds for something to go out to the cloud.” I’m kidding. It might be eight milliseconds, but we can’t feel that difference as humans.
Or the privacy stuff that we’ve talked about or some of the ability to track every single sort of thing we do in data and being able to separate private from public and what goes to the cloud and what doesn’t go to the cloud.
And then again, what do we value as a society? Because people largely haven’t actually valued any of that stuff. We’re all like, “Yeah, sign me up. Term of service? I’m not reading that. Just hit Yes. Here we go.” But long and short, Pat, the automotive business is incredible. And where are they taking that from? I mean that’s another question. I don’t know. Did you answer it? I was looking at myself in the self view, but where’s that growth of pipeline coming from?
Patrick Moorhead: I mean it has to be coming from Nvidia, Texas Instruments, NXP. It just, it has to.
Daniel Newman: I mean, it’s like a Hoover effect. And that’s ADAS growth though, the ADAS expansion of-
Patrick Moorhead: Oh sorry, Mobileye, my gosh. Of course. Mobileye.
Daniel Newman: Yeah. I mean that is a Hoover effect to have that much pipeline grow that quickly. Because you know these cars. It’s three, four and usually like six, seven years out. So these design agreements take a long time. Maybe Qualcomm will hoover up Luminar.
Patrick Moorhead: Maybe. But Elon Musk says you don’t need ADAS. Did you say it was 12 cents a share?
Daniel Newman: I was joking, but I mean give it another few weeks.
Patrick Moorhead: Yeah, totally. Hey, did you catch …
Daniel Newman: Go ahead.
Patrick Moorhead: Did you catch Cristiano’s final comment on the call?
Daniel Newman: Which one? No.
Patrick Moorhead: Yeah. So he said, “I’m just going to leave you all the thought. One great thing about the execution company, every time we enter new market or set ourselves up into a new market, we end up building a very strong position. We went for mobile modems to RF front end, we became number one. Same thing, went to Wi-Fi. Automotive is something we had ambition to build as part of diversification. I think we’re quickly becoming the industry partner of choice. We believe there’s a long time opportunity with VR, AR and now we’ve absolute majority of the designs. And with PC, we clearly built the leading platform, and we have the product momentum that we hopefully will translate into financial in the coming years. This is a company that delivers, a company that … ” Yeah, anyways. So that was his mic drop that it was good.
Daniel Newman: Oh, it was a worthy mic drop. Now having said that, we haven’t heard much yet on, and you and I talked to Cristiano this week.
Patrick Moorhead: Yeah.
Daniel Newman: I may have answered a question and he may have responded something like, “No hablo Ingles.” But the point is that-
Patrick Moorhead: I asked him the same. Yeah, I asked him the same question.
Daniel Newman: We’re going to be looking to see the impact that creates. The only thing I think, Pat, that, and you and I, we get more right than we get wrong. And that’s the only thing you have to do, is get more rights. If you’re like 50.1/49.9. But the timing on AI PC is peculiar to me as how quick it ramps and how quickly it makes the market and how quickly it starts to drive revenue. It does seem you’ve got some very different kind of points of view. And I guess we also have some different points of view on really what defines a true next gen AI PC.
By the way, Apple’s going to have something to say about this in the next few weeks too. They leaked their M3. I know you want to say something, so I want to let you get it out because I want to move to Apple now, so I’m going to-
Patrick Moorhead: Well, I just want to be really clear. I talk about the cycle starting in the second half.
Daniel Newman: Yeah.
Patrick Moorhead: I mean the meat of this is going to be in ’25, ’26, but that’s to start somewhere. And in fact, some will debate that the AI PC started with Meteor Lake in January, and maybe it did. And some people might say that the AI smartphones are the Samsung with the S24. And it did. It kind of did, right? But I think the impact from it will hit in the second half. So just for all those keeping score out there who would like to attack me if we don’t see a doubling of business in the second half, it’s going to start, it’s going to probably crux at the second half of ’25. So there.
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.
