Analyst(s): Olivier Blanchard
Publication Date: November 22, 2024
Qualcomm ended its fiscal year 2024 with significant developments in essential sectors, including record automotive revenue and strong handsets growth. Driven by expanding product offerings and strategic diversification efforts, Qualcomm is well-positioned for sustained growth amid economic uncertainties.
What is Covered in this Article:
- Breakdown of Qualcomm’s fourth-quarter performance and revenue growth drivers
- Detailed analysis of QCT Automotive’s record revenue streak
- Qualcomm’s handset and IoT segments and their contributions to Q4 earnings
- Overview of Qualcomm’s FY 2024 financial performance and capital returns
- Insights into Qualcomm’s strategic investments and growth outlook for FY 2025
- Key risks and challenges facing Qualcomm in the semiconductor industry
The News: Qualcomm ended FY2024 on a high note, reporting strong fourth-quarter results with total revenues of $10.24 billion, reflecting a 19% growth compared to the previous year. The business achieved record quarterly revenues in its QCT Automotive division, reflecting a 68% year-over-year increase, driven by expanding demand for Snapdragon®-powered automotive solutions.
Qualcomm’s smartphone division experienced a 12% revenue increase from the previous year, amounting to $6.1 billion. The IoT sector also rallied with a 22% year-over-year revenue growth in Q4, highlighting the importance of Qualcomm’s strategic diversification into mobile-adjacent technology sectors. Moreover, Qualcomm distributed $7.81 billion to shareholders this fiscal year through dividends and stock buybacks, displaying stable financial resilience and dedication to shareholder value.
Qualcomm’s Fourth Quarter FY 2024 Analysis: Key Drivers and Overall Performance
Analyst Take: Qualcomm’s Q4 FY2024 performance highlights the consistency and momentum of the company’s broad strategic execution. Qualcomm continues to build a robust foundation for development in next-generation technologies and driving demand for Snapdragon-powered products across an expanding ecosystem of verticals and use cases. Qualcomm’s diversification strategy into mobile-adjacent verticals like Automotive, PC, XR and IOT also reduce Qualcomm’s reliance on premium devices, and expand its market opportunity into high-growth areas. Qualcomm’s unique performance-per-watt advantage also positions the company extremely well as AI workloads begin to expand from cloud environments to the edge and devices. Lastly, Qualcomm’s emphasis on operational efficiency, fiscal discipline and market adaptability are also assets going into FY2025, and help the company continue to maximize shareholder value.
QCT Automotive: Record Quarterly Revenues
Qualcomm’s automotive division, part of its Qualcomm CDMA Technologies (QCT) segment, has consistently surpassed new revenue milestones with six straight record-breaking quarters. QCT Automotive revenue scaled by 68% yearly, totaling $899 million in the fourth quarter and $2.91 billion for the fiscal year. This expansion indicates the increased demand for Qualcomm’s automotive solutions as the industry incorporates AI-powered and connected vehicle technology.
Qualcomm’s Snapdragon® Digital Chassis, the foundation of its automotive technology, continues to attract automakers looking for greater connectivity, safety, and self-driving capabilities. As the automotive industry turns toward electrified, software-defined, and self-driving vehicles, Qualcomm’s position in enabling these breakthroughs underlines the company’s potential for long-term success in this sector. As the Snapdragon stack continues to mature, Qualcomm is beginning to leverage its success in Cockpit and Telematics as natural attach onramps for ADAS adoption – a strategy that could help Qualcomm engineer as much as >2x revenue growth in the Automotive segment by 2029.
QCT Handsets: Strengthening Core Revenue Stream
Despite a challenging market environment, Qualcomm’s QCT Handsets segment recorded a 12% year-over-year sales gain, reaching $6.1 billion in Q4 FY 2024. The fiscal year total reached $24.86 billion, up 10% from the prior year.
Qualcomm attributed this growth to the company’s ability to consistently deliver high-performance, low-power solutions for premium and midrange devices – a critical market advantage as on-device AI and online gaming become more important in North American and Asian markets. We also see the strength of Qualcomm’s partnerships with key handset OEMs as a hedge against fluctuations in the handset market.
Qualcomm’s progress in the mid-tier handset market is also a critical strategic initiative for Qualcomm, as it accounts for a sizable share of worldwide smartphone demand. Qualcomm’s ability to scale down Snapdragon features into lower tiers has allowed it to gain market share while mitigating the risks of relying on premium-tier handsets, despite fierce competition from competitors like MediaTek.
IoT Segment: Resilience Amidst Declines
The Internet of Things (IoT) segment experienced varying success. Although IoT revenue fell 9% in the current fiscal year, Q4 FY2024 showed a promising 22% year-over-year gain, hitting $1.68 billion. Qualcomm’s latest product introductions and partnerships at events like Embedded World have reignited interest in the IoT segment by embedding AI into scalable use cases for industrial, consumer, and edge devices.
Qualcomm is establishing itself as a critical player in the larger IoT ecosystem by focusing on sectors such as industrial IoT, where demand for automated and networked solutions is increasing. Its emphasis on embedded technology, backed by efficient AI and networking solutions, strengthens its value proposition for IoT clients looking for dependability and scalability. Qualcomm’s unique strength here is in its ability to deliver premium performance and AI-enabled features at extremely low power – a critical enabler of on-device intelligence for camera, drone and other IIOT applications. The potential operational and cost efficiency gains enabled by on-device AI features, especially at scale, opens the door to a >$2B IIOT revenue opportunity for Qualcomm between now and 2030, particularly in energy, manufacturing and retail segments. Although Q3 results still don’t reflect that potential, we expect the IIOT segment to experience significant growth in 2025 for Qualcomm.
Qualcomm’s Q4 FY2024 Financial Performance
Qualcomm reported a total revenue of $38.96 billion in fiscal year 2024, a 9% increase over the previous year. The QCT division was the company’s biggest contributor, with revenues of $33.2 billion, up from $30.4 billion in fiscal year 2023. This consistent development was fueled by growing demand for automotive and handsets, with IoT having a mixed yet positive impact.
On the licensing front, Qualcomm Technology Licensing (QTL) generated $5.57 billion, up 5% from the previous year. The segment’s earnings before tax (EBT) margins rose from 68% to 72%, indicating increased profitability due to attractive licensing agreements and a strong patent portfolio. The QTL segment’s success demonstrates Qualcomm’s substantial intellectual property portfolio, particularly in 5G and advanced connectivity solutions.
Qualcomm’s earnings per share (EPS) increased significantly year on year, with a GAAP EPS of $8.97 and a Non-GAAP EPS of $10.22, reflecting 40% and 21% growth, respectively. This improvement reflects efficient cost management and operational efficiency throughout its sectors. Qualcomm’s operational income for the fiscal year was $10.07 billion, a 29% increase over FY 2023, indicating higher profit margins across its portfolio, notably in high-margin businesses like licensing.
Outlook and Growth Opportunities
Strengthening AI and 5G Ecosystem: Qualcomm’s focus on AI and 5G technology remains essential to its growth strategy. Qualcomm’s extensive Snapdragon product lineup positions it to facilitate the growing adoption of AI-driven applications in mobile, automotive, and IoT devices. Qualcomm’s Investor Day on November 19 is expected to highlight additional accomplishments in these areas, such as partnerships and product breakthroughs that enhance the company’s leadership in AI and 5G.
Expanding Diversification Efforts: Qualcomm’s historic results in the automotive sector and its strategic push into mid-tier handsets and IoT applications suggest that diversification remains a top goal. Qualcomm reduces the risk of market saturation and economic uncertainty by diversifying its revenue streams beyond high-end devices. Qualcomm’s diversified approach allows the company to capitalize on growth prospects in various areas, including smart cities and industrial automation.
AI-enabled IIOT Resurgence: The low-power, high-performance profile of Qualcomm’s IOT and IIOT solutions opens the door to a significant intelligent device opportunity for a segment that had grown somewhat dormant in recent years. The potential operational and cost efficiency gains enabled by on-device AI features, especially at scale, opens the door to a >$2B IIOT revenue opportunity for Qualcomm between now and 2030. For now, we see the majority of the IIOT resurgence opportunity for Qualcomm centering around energy, manufacturing and retail segments, but it could expand into adjacent verticals like healthcare, transportation, smart buildings, and public infrastructure.
Qualcomm’s Risks and Challenges
On paper, the potential volatility of US-China relations as the incoming US administration takes a tougher stance towards China could expose Qualcomm to some headwinds, but it is important to keep in mind that, given Qualcomm’s strategic importance to the US economy and US national security (relative to both AI and 5G), we expect US strategy to take into account its own best interest. You will remember that the first Trump administration – CIFIUS specifically – protected Qualcomm from an acquisition by Broadcom.
My meetings with Qualcomm executives during the company’s Investor Day 2024 event in New York on November 19th, confirmed two important facts that are relevant to this discussion: The first is that the US Department of Commerce is expected to continue working with Qualcomm and other critical companies to ensure their best interest despite any trade disputes or aggressive negotiations between the US and China. The second is that Qualcomm’s relationship with the incoming Trump administration is expected to be even more collaborative than it was between 2016 and 2020. Both of these facts bode well against the potential threat of deteriorating US-China relations. Qualcomm may be far more protected from trade dispute blowbacks than may initially appear.
The company’s reliance on a concentrated customer base, particularly premium handset consumers, remains a point of exposure, however. Qualcomm’s diversification into automotive, IoT, PC and XR across all price tiers does act as a buffer against that particular vulnerability. The company’s strategy of reducing its reliance on a single market or customer is expected to keep its expansion going, with the company shifting from a roughly 75% reliance on the handset market today to a 50% reliance on the handset market by 2030.
Looking Forward
Qualcomm’s performance in Q4 FY 2024 highlights its effective application of a multifaceted development plan based on technical leadership, diversification, and operational excellence. The company’s remarkable achievements in handsets and automobiles and strong IoT performance point to its flexibility and fit with evolving industry trends. Thanks to ongoing investments in artificial intelligence, 5G, and industry diversification, Qualcomm’s projection for FY 2025 is still optimistic.
As Qualcomm is ready to present its strategic orientation at Investor Day, its FY 2024 performance offers a solid basis for continuous expansion. Qualcomm is positioned to seize new prospects and provide long-term value for its customers by emphasizing enhanced connectivity, artificial intelligence integration, and market diversification.
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.
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Author Information
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.
