The operator welcomes participants to the Qualcomm Second Quarter Fiscal Year 2024 Earnings Conference Call and provides instructions for accessing the call. Mauricio Lopez-Hodoyan, Vice President of Investor Relations, introduces the speakers and provides information on accessing the earnings release and slide presentation. Non-GAAP financial measures will be used and forward-looking statements will be made. Cristiano Amon, President and CEO of Qualcomm, discusses the company's non-GAAP revenues of $9.4 billion in Fiscal Q2.

Qualcomm's non-GAAP earnings per share exceeded expectations, with strong demand for their chipsets and continued growth in the automotive sector. The company has made progress in technology and product development, particularly in the area of on-device AI applications. Qualcomm's Snapdragon Digital Chassis is a leading solution in the automotive industry, with a growing design win pipeline. In the smartphone market, their Snapdragon mobile platforms are performing well, especially in China.

Qualcomm is expanding their 8 series capabilities to more flagship and high-tier smartphones, and has set a new industry benchmark with their Snapdragon X80 5G modem RF system. They are also gaining traction in Wi-Fi 7 for enterprise networks and are excited about upcoming launches of Windows AI PCs. They have also expanded their compute portfolio with the Snapdragon X Plus platform and are seeing good momentum in augmented and virtual reality, particularly with the Ray-Ban Meta glasses. At a recent conference, they announced two new solutions for the industrial IoT ecosystem, including a micro-power Wi-Fi SoC and a new platform.

The RB3 Gen 2 platform is a comprehensive solution for various types of products, and Qualcomm is pleased with the progress of their growth and diversification strategy. They have established leadership positions in automotive, XR, and networking, and are well positioned for growth in PCs, industrial, and Edge AI. In the second fiscal quarter, they had strong non-GAAP results with revenues of $9.4 billion and EPS of $2.44. QTL and QCT both performed in line with expectations, with QCT seeing strong growth in handset, IoT, and automotive.

During the quarter, the company returned $1.6 billion to stockholders through stock repurchases and dividends. They also announced an increase in their quarterly dividends and completed the divestitures of Non-Arriver businesses. The company's forecast for global handset units remains unchanged for 2024, with expected growth in 5G handsets. For the third fiscal quarter, they are forecasting revenues of $8.8 billion to $9.6 billion and non-GAAP EPS of $2.15 to $2.35. In QTL, they expect revenues of $1.2 billion to $1.4 billion, while in QCT, they anticipate revenues of $7.5 billion to $8.1 billion. They expect QCT handset revenues to decline and QCT IoT revenues to grow, while QCT automotive revenues are expected to see a low double digit percentage increase.

The company expects non-GAAP operating expenses to be around $2.2 billion and is pleased with its performance in the first half of the fiscal year. They have seen significant growth in handset revenues from their Chinese OEM and are confident in their diversification strategy in IoT and automotive. They are also excited about the launch of next generation AI PCs and have seen an increase in their design win pipeline for automotive. The operator then opens the call for questions and the first question is about the potential impact of AI on the company's handset modem and RF architecture.

The speaker, Cristiano Amon, responds to a question about a competitor's recent socket loss and how it may impact their opportunities for further integration in the compute subsystem of phones. Amon mentions the importance of modem RF in the context of AI running on devices and the advantage Qualcomm has in being able to run AI without compromising battery life. He also highlights their technology leadership position in AI performance per watt. A question is then asked by Samik Chatterjee from JPMorgan.

Cristiano and Akash discuss the strong performance of the China market and the increasing mix of premium and high tier devices. They attribute this to the stabilization of the market and the introduction of on-device AI and GenAI in premium devices. There is also no sign of weakness in the Android premium market, with many Chinese OEMs seeing growth. In the first half of fiscal ‘24, revenue from Chinese OEMs grew by over 40%, and this trend is expected to continue in the third quarter.

The speaker discusses the company's upcoming premium tier launches, including the GenAI and Oryon custom CPU core, and expresses excitement about their roadmap. They also mention that the current quarter's strong revenue is driven by the automotive sector, which is expected to continue due to a strong pipeline of wins and a target of over $4 billion in revenue by fiscal year 2026. The company's design win pipeline has increased from $30 billion to $45 billion, with one-third of that coming from ADAS. The next question is from Mike Walkley with Canaccord Genuity.

The company expects the third quarter to be the lowest in terms of financial performance due to seasonality, but they anticipate growth in the fourth quarter and into fiscal year 2023. The launch of their new Snapdragon 8 Gen 4 chip is expected to drive this growth, along with new phone launches from major OEMs. In regards to the IoT business, the company saw a 9% sequential growth in March and is expecting low to mid-single digit growth in the September quarter, following an inventory correction in the December fiscal first quarter. This aligns with the company's earlier predictions for improvement throughout the year.

The recovery in the IoT segment is expected to be faster for consumer products, while industrial networking is consistent with industry trends. The company is excited about new products launching later this year, including PC and device launches, as well as new products in industrial and Wi-Fi 7. The upcoming back-to-school season is expected to drive growth in the PC market, but it will not have a significant impact until fiscal year 2025. The June quarter guidance does not include a significant volume of PC sales.

The speaker discusses an upcoming update on the PC business and provides more details on the Huawei revenue. They mention that Huawei has launched multiple tiers of 5G devices and they only participate in the low-end 4G devices. They do not expect any revenue from Huawei in 2025. Another question is asked about the QTL business and the speaker explains that the recovery in the China OEMs has not yet translated to the QTL business due to the cap on ASPs. The QCT business has seen a benefit from more units at the premium price range.

The disconnect between the QTL business and the royalty program is that the latter does not directly benefit the former. When it comes to AI handsets, there is a lot of interest from developers and potential for growth, similar to how smartphone apps grew in popularity. The AI Hub provides a platform for developers to access and utilize various AI models for their applications.

The optimized models run four times faster than the non-optimized models and are being implemented in various apps. This has created a reason for people to buy new devices and is a positive trend for the company's strategy. In China, the mix of business is stronger due to the competitive positioning and increased capabilities of the chips, resulting in higher demand and pricing. The unit size aligns with market forecasts of a flat market compared to last year.

The speaker discusses the sustainability of recent RF wins for an upcoming phone, stating that the advantage gained through the modem RF architecture will continue to be a strength in the future. The next question asks about the performance of the company's numbers in relation to headsets, specifically in China and the rest of the world. The speaker notes that there has been significant growth in China, but also strength across other parts of the Android ecosystem. They express optimism about the trend continuing in the future.

The increase in content and ASP on QCT chipsets is driven by the compute part, including CPU, GPU, and NPU. The NPU for AI has been one of the largest areas of silicon growth. The financial benefit of AI will come from improved mix, share gains, and an upgrade cycle. In the PC market, the ability to run on-device AI will be a tailwind for capabilities.

The paragraph discusses the potential for Qualcomm's growth in the automotive and industrial markets, particularly with the integration of GenAI into vehicles and the expansion into higher performance computing and connectivity. The QCT gross margins have remained strong despite a decline in revenues, and the company expects a sequential decline in the third quarter due to lack of flagship launches. The backlog in the auto market is expected to contribute to growth in fiscal years 2025-2026.

Akash Palkhiwala discusses the potential growth of Qualcomm, stating that a reasonable way to think about it is a slope increase between the current run rate and the $4 billion target. Cristiano Amon adds that the company is pleased with its technology and product roadmap, specifically mentioning their strong position in new markets such as RF front end, Wi-Fi, automotive, virtual reality, and PC. He also expresses confidence in the company's ability to drive growth and diversification for shareholders. The call concludes with Amon thanking everyone for their support and looking forward to the next call.

This summary was generated with AI and may contain some inaccuracies.