Qualcomm down double digits in handsets and IoT; automotive remains a growth driver
Qualcomm reported third quarter results this week; total revenues were down 23% from the same quarter last year to $8.45 billion with handset revenue down 25% and IoT revenue down 24%. The company’s licensing business was down 19% from the same quarter last year to $1.23 billion. Qualcomm’s booming automotive business continued to be a growth driver with a 13% year-over-year increase to $434 million. In prepared comments, company CEO Cristiano Amon focused on the still-developing, long-term opportunity around artificial intelligence (AI).
Amon specifically referenced a collaboration with Arrow Electronics to establish Edge Labs which is “designed to help customers alleviate IoT development challenges while increasing adoption of edge AI.” Other partnerships around AI development including work with Meta to bring its Llama 2 large language model on Qualcomm-powered devices.
“We are uniquely positioned to help shape and capitalize on the upcoming on-device gen AI opportunity,” Amon said. “Our AI technology is highly differentiated, with best-in-class high-performance, low-power heterogeneous computing across our CPU, GPU and NPU. And as multibillion parameter gen AI models run pervasively and continuously on device, we believe our NPUs’ unparalleled AI processing performance and power efficiency will become a requirement.”
Amon also tied the outlook around AI to the company’s ongoing diversification plan which is meant to materially increase total addressable market by the end of the decade. “We’re very pleased and encouraged by the rapid acceleration of gen AI at the edge. This presents a significant opportunity for Qualcomm across our end markets. Use cases at the edge are evolving differently than the cloud given the inherent context, immediacy, privacy, security, application reliability and personalization capabilities available on device.”
Asked when revenue associated with AI would materialize, Amon teased announcements coming at the Snapdragon Tech Summit in October around gen AI-capable devices, including in the handset, PC, automotive and internet of things segments. He said handsets equipped with gen AI features “could create an upgrade cycle in between 5G and 6G,” and boost average selling price. He also noted Qualcomm’s NPU is “probably unmatched by any of our peers in ability to do high-performance AI pervasively and continuously at low power…Those things could create an inflection point. It’s hard to predict the timing, but we can see how it changes the mix and improves the ASP in our products.”
Responding to a question around seasonality trends for Qualcomm’s handset business, CFO Akash Palkhiwala referenced the company’s relationships with smartphone giants Apple and Huawei. Looking at the September to December period, Palkhiwala called out a historical holiday bump in licensing revenue and another bump from an annual handset launch from “a modem-only customer. “So those would be the two significant growth drivers into the quarter.” On Huawei, the fourth quarter “does assume no material revenue…As you are aware, we have a 4G license for shipping into Huawei. We do not have a 5G license, and we are not assuming any material revenue going forward.”
