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Qualcomm Q4 2023 Earnings Reflect Start of Device Market Recovery

Qualcomm Q4 2023 Earnings Reflect Start of Device Market Recovery

The News: Qualcomm Incorporated announced results for its fiscal fourth quarter (Q4) 2023. Qualcomm’s Q4, which ended September 24, delivered revenue of $8.63 billion – a 24% drop year-over-year (YoY), exceeding analysts’ expectations by $150 million. Diluted earnings per share (EPS) fell 48% to $1.32 but again beat consensus forecasts.

“As we enter fiscal 2024,” said Cristiano Amon, Qualcomm president and CEO, “we are pleased with our roadmap and product execution, which position us well across our businesses. Our recent Snapdragon Summit announcements underscore our technology leadership, establishing Qualcomm as a leader in on-device generative AI and mobile computing performance.” The full release can be found on Qualcomm’s investor relations page.

Qualcomm Q4 2023 Earnings Reflect Start of Device Market Recovery

Analyst Take: In Q4, Qualcomm revenue slipped to $8.63 billion from $11.39 billion for the quarter a year ago, a 24% drop. Under normal circumstances, this kind of performance would be cause for concern, but these are not normal circumstances: For starters, Qualcomm’s Q4 results reflect the persistent industrywide macroeconomic and inventory headwinds that have acted as a brake against mobile and PC device (and semiconductor) shipments for almost all of 2023.

Second, and perhaps more important, Qualcomm’s Q4 numbers, especially when set alongside other quarterly earnings from device OEMs and chipmakers, suggest that the worst of the 2023 dip is behind us and make the case for the beginning of an ecosystem-wide recovery. Case in point, Qualcomm earnings for the quarter beat analyst expectations by $150 million. Even diluted EPS, which slipped 48% to $1.32 beat consensus forecasts.

The central theme with almost all device OEM and semiconductor companies this past quarter and for most of 2023 is that the numbers on their own do not tell the full story. Qualcomm, like many of its high-tier peers and customers, is not underperforming. Quite the contrary. Exceeding consensus expectations, especially in challenging market conditions, is always a very good sign.

Here are Q4’s main throughlines with YoY comparisons:

  • Q4 revenue: $8.63 billion (versus $11.39 billion in 2022), -24% YoY
  • Q4 earnings before taxes (EBT): $1.42 billion (versus $3.47 billion in 2022), -59% YoY
  • Q4 net income: $1.49 billion (versus $2.87 billion in 2022), -48% YoY
  • Q4 diluted EPS: $1.32 (versus $2.54 in 2022), -48% YoY

Drilling down into Qualcomm’s Q4 numbers a bit, we note several trends emerging: First, QCT revenue of $7.4 billion and QTL revenue of $1.3 billion both came in above the guidance midpoint, echoing my earlier point about Qualcomm beating expectations. Second, looking at QCT specifically, Qualcomm’s bets in automotive keep paying off with twelve consecutive quarters of double-digit YoY growth for Qualcomm’s auto business. While small relative to some of Qualcomm’s more mature markets (Automotive came in at only $535 million in Q4 revenue), Automotive remains a major growth opportunity for Qualcomm. For reference, handset revenue for Q4 came in at $5.5 billion, and Q4 revenue for its IoT business came in at $1.4 billion, so Automotive still has some way to go to be on the same level.

Summary of Qualcomm’s Fiscal 2023

Q4 earnings also closed out fiscal 2023 for Qualcomm, and here are the year’s key numbers with YoY comparisons:

  • Fiscal 2023 revenue: $35.82 billion (versus $44.20 billion in 2022), -19% YoY
  • Fiscal 2023 EBT: $7.44 billion (versus $14.99 billion in 2022), -50% YoY
  • Fiscal 2023 net income: $7.23 billion (versus $12.94 in 2022), -44% YoY
  • Fiscal 2023 EPS: $6.42 (versus $11.37 in 2022), -44% YoY

QCT revenue FY 2023 fell to $30.4 billion from $37.7 billion for FY 2022 (a 19% drop). QTL, meanwhile, fell from $6.4 billion in fiscal 2022 to $5.3 billion in FY 2023 (a 17% drop). Digging deeper into QCT’s primary revenue streams, we note a 22% drop in handsets and a 19% drop in IoT, which is in line with 2023’s well-documented market and macroeconomic headwinds. The 24% growth in the Automotive segment is encouraging, though, and illustrative of the importance of Qualcomm’s market diversification strategy.

How Qualcomm Plans to Accelerate the Post-2023 Recovery

Handsets: Looking through the fog of recovery to the coming year, one of QCT’s trump cards, besides consistently leading the premium Android handset SOC market with its Snapdragon platform, is Qualcomm’s agreement with Apple to continue supplying Snapdragon 5G Modem-RF Systems to the iPhone maker’s smartphone launches through 2026. Qualcomm also just announced its latest premium mobile platform, the Snapdragon 8 Gen 3, designed specifically to deliver impressive on-device generative AI capabilities, and we expect it to power some of 2024’s most premium phones, as usual.

Edge Networking: On the IoT side of the business, Qualcomm’s broadband gateway services platform with 10G Fiber and Wi-Fi 7 could also be a significant play. It helps usher a new era of 10 Gigabit fiber broadband service with software-defined, continuously customizable gateways. Qualcomm service-defined Wi-Fi technology is built to understand, classify, prioritize, and organize network traffic for a significantly improved user experience (UX) and allows providers to use the broadband gateway as a vehicle to increase subscriber engagement and drive more smart home innovation than we have seen in recent years.

IoT and XR: Qualcomm’s Snapdragon XR2 Gen 2 and AR1 Gen1 platforms, which power the Meta Quest 3 VR headset and Ray-Ban Smart Glasses, respectively, further align with Qualcomm’s ecosystem-building diversification strategy. Although the numbers for augmented reality (AR) and virtual reality (VR) are not quite there yet, and the metaverse is not yet a core market priority for device OEMs and network operators, Qualcomm is both broadening its footprint in the space and pushing its semiconductor and platform roots deeper into the ecosystem. Both platforms deliver already impressive on-device AI, which will only improve in the coming years, and will define extended reality (XR) UX perhaps more than any other on-device interface. Qualcomm is already the spatial computing platform of choice for leading XR players.

Automotive and Mobility: In Automotive, Qualcomm’s Snapdragon Digital Chassis solutions continue to bring advanced capabilities to the segment. The next Cadillac Escalade IQ (commercial production slated for next year) will be equipped with Qualcomm’s Snapdragon Cockpit, Snapdragon Auto Connectivity, and Snapdragon Ride Platforms, essentially operating as a showcase for how well Qualcomm’s automotive solutions work together in a premium software-defined vehicle. Qualcomm also emphasized its partnership with BMW in all new vehicles and highlighted that its Snapdragon Digital Cockpit and connectivity solutions will power the new Mercedes-Benz User Experience starting with the automaker’s 2024 E-Class Sedan. Interestingly, Qualcomm is also expanding its automotive platform technologies to two-wheeled vehicles (motorized and not), which obviously has the potential of vastly expanding the company’s mobility footprint around the world.

Conclusion and Main Takeaways

Qualcomm’s Q4 results, while still weighed down by several consecutive quarters of sluggish device and semiconductor shipments due to inventory bloat and macroeconomic headwinds, indicate that a recovery might be underway. When considered alongside semiconductor companies and device OEMs’ quarterly numbers (especially when looking at YoY versus QoQ trending), that overall ecosystem trend toward recovery becomes a lot clearer. The question now is not so much whether a recovery is already underway but rather how quickly it will accelerate into 2024.

I remain encouraged by the following key factors:

  • Qualcomm’s ability to help build new markets with leading, high-performance platforms, such as mobility, edge networking, IoT and XR, and increasingly, AI-powered 5G PCs
  • Qualcomm’s ability to smoothly apply its broad IP portfolio across its entire ecosystem of solutions in every market segment it serves
  • Qualcomm’s track record of forming enduring, profitable, growth-driven partnerships with leading OEMs in every market it helps develop (see how quickly Qualcomm’s automotive platforms are finding their way into every major automaker’s vehicles as an example of this reach)
  • Last but not least, Qualcomm’s ability to not only build on its innovation momentum (and the head start the company maintains in core business areas such as connectivity and on-device AI) but also scale its ecosystem platforms quickly

2023’s drag on revenue will not disappear overnight, and it might still take several quarters to see YoY numbers move back into the green, but as QoQ performance starts improving, we feel that Qualcomm’s fiscal discipline, pace of innovation, segment diversification, and market penetration approach position the company well to navigate this period of recovery.

Daniel Newman and his co-host of The Six Five Webcast, Patrick Moorhead of Moor Insights and Strategy discussed Company 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 Snapdragon 8 Gen 3 Brings Generative AI to Smartphones

Qualcomm Raises Bar for On-Device Generative AI at Snapdragon Summit

Qualcomm Revenue in Q3 Dips to $8.44 Billion as Mobile, IoT Soften

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.  Read Full Bio.

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