The operator welcomes listeners to the Qualcomm Third Quarter Fiscal 2024 Earnings Conference Call and provides details for accessing the call. Mauricio Lopez-Hodoyan introduces the speakers and mentions the use of non-GAAP financial measures and forward-looking statements. Cristiano Amon reports on the company's fiscal Q3 results, including non-GAAP revenues of $9.4 billion and non-GAAP earnings per share of $2.33, which exceeded the midpoint of their guidance range.

In the second paragraph, the company reports a sequential growth in revenues from their chipset business, particularly in the automotive and IoT sectors. They have secured multiple design wins with global automakers and are focused on expanding their on-device AI solutions for automotive use. In the handset market, the company is pleased with the success of their Snapdragon processor in Samsung's Galaxy Z Fold6 and Flip6, and they continue to push the boundaries of on-device AI on mobile devices.

Qualcomm is leading the way in AI technology for smartphones and other devices, and will be revealing their next-generation Snapdragon 8 mobile platform in October. They have also launched Copilot+ PCs powered by Snapdragon X Series platforms, which are receiving positive reviews and are available for purchase in multiple countries and retailers. Qualcomm is working with global commercial customers to integrate Snapdragon technology into their environments and is already planning for the next wave of Copilot+ PCs in 2025.

Qualcomm's X Series product road map will expand to address lower-priced PCs without compromising NPU performance. They believe the PC ecosystem is transitioning to an ARM-compatible architecture and expect at least half of PCs to be AI capable by 2027. The success of Meta's Ray-Ban smart glasses, which integrate Qualcomm's Llama technology, has exceeded expectations and there is an increasing demand for extended and mixed reality devices. Qualcomm's Snapdragon XR platform remains the industry choice and they are engaged with major players in the ecosystem. They will showcase two new XR devices at the Augmented World Expo and are collaborating with Aramco on connectivity, AI, and advanced computing solutions for industrial and enterprise use cases. This includes accelerating development of 4G, 5G, and non-terrestrial networks for IoT. As the industrial sector is transformed by AI, there is an expected increase in demand for on-device processing, which aligns with Qualcomm's core capabilities and road map for Auto and PC.

Qualcomm is focused on building a leadership position in high-performance processing and intelligence at the edge, as it becomes crucial for the next phase of enterprise digital transformation. They will announce a new product roadmap for industrial IoT and support for multiple operating systems. They have also signed a long-term licensing agreement with a leading Chinese smartphone OEM and are pleased with their diversification beyond mobile, particularly in automotive and PC. In the third fiscal quarter, they exceeded expectations with strong non-GAAP results, including revenue of $9.4 billion and EPS of $2.33. QTL revenues and EBT margin were in line with expectations, while QCT had higher than expected revenues and EBITDA margin, driven by growth in IoT and automotive. QCT handset revenues were in line with expectations, while IoT revenues increased 9% and automotive revenues saw a 34% sequential growth.

The company's revenue has increased due to growth in new vehicle launches and the company's position as a leading supplier in the automotive industry. The company has returned a significant amount of money to stockholders and has outlined three factors that will impact their forecast. These factors include a flat to slightly increase in 3G/4G/5G units in 2024, the revocation of their license to export products to Huawei, and an additional week in the fourth fiscal quarter. The company is forecasting revenues of $9.5 billion to $10.3 billion and non-GAAP EPS of $2.45 to $2.65 for the fourth fiscal quarter. They expect QTL revenues to be $1.35 billion to $1.55 billion and EBT margins of 70% to 74%, while QCT revenues are expected to be $8.1 billion to $8.7 billion and EBT margins of 27% to 29%. The company expects QCT handset revenues to grow slightly and QCT IoT revenues to increase by a double-digit percentage, while QCT automotive revenues are expected to remain flat.

The company is expecting 50% year-over-year revenue growth in fiscal '24 and non-GAAP operating expenses of approximately $2.2 billion. The company is pleased with their execution and financial performance and expects strong non-GAAP EPS growth of approximately 20%. The company's vision for on-device AI has been validated by key players and they expect it to drive competitive differentiation in various industries. They are also diversifying their portfolio and plan to introduce new products in the future. The company's automotive business has seen significant growth and they expect this trend to continue as they have won contracts with OEMs several years ago.

Cristiano Amon discusses the company's performance in the automotive industry, noting the launch of 10 new models and 10 new design wins. He also mentions the potential for growth in the automotive sector with the use of Gen AI technology. Regarding PC market expectations, Amon states that the company is pleased with their performance and it is exceeding their expectations.

Cristiano Amon, speaking about the new Copilot+ architecture with ARM compatibility, expects a gradual ramp-up in the market. He notes that the 20 models currently available have exceeded internal targets and some have sold out. New product announcements are expected at EFA, with Microsoft anticipating PC to be the next big driver of diversification. In response to a question about AI features in smartphones, Amon highlights the 50% growth within China with Chinese OEMs, indicating an expansion of the premium tier and a larger market enabled by AI.

The speaker is happy with the increase in AI features in smartphones and believes that as the number of AI features reaches 100, smartphones will become AI-driven. They are not making any unrealistic assumptions and are excited about the potential for an AI-driven upgrade cycle. They plan to bring AI capabilities to their mobile roadmap and are also excited about the upcoming launch of their next Snapdragon with custom CPU, which will improve performance and include AI. The company is also offsetting potential headwinds from the Huawei export license by finding other areas of growth, such as their handset business. They are expecting low single-digit percentage growth in the upcoming quarter.

In the paragraph, the speaker discusses the impact of an extra week in the quarter and the reduction in revenue from Huawei on the company's guidance. They clarify that these two factors largely offset each other and have a limited impact on the overall guidance. The speaker also mentions that the extra week will result in incremental revenue and OpEx for the QTL side, but the flagship phone launch for QCT remains consistent regardless of the number of weeks. Overall, the two key factors cancel each other out and do not significantly affect the company's guidance.

The guidance for the fourth quarter for QTL is outside of the previously discussed range, but the company has not changed its expectation for global handset units. The extra week in the quarter has been factored into their numbers, and they expect a small growth on a quarter-over-quarter basis. The company is also expecting a strong December quarter, with the launch of a new Android premium tier chip and the absence of Huawei product revenue. Overall, they anticipate revenue growth to be consistent with the previous year's December quarter.

The speaker, Akash Palkhiwala, is asked about the revenue for PCs in the next quarter. He responds by saying that it is too early to make an assumption since they are only a few weeks into their launch. He also mentions that their focus is on long-term growth rather than short-term sell-through. The next question is about the 50% growth in China handset and Palkhiwala explains that the market is not growing overall, but the premium tier is expanding, which they are benefitting from. The final question is about market share and Palkhiwala says that they are strong in the premium tier and are seeing significant growth in that market.

Alex Rogers, Qualcomm's Executive Vice President and President of Qualcomm Technology Licensing (QTL) division, addressed the progress of the company's licensing agreements during their latest quarterly earnings call. He mentioned that they have successfully renewed and extended agreements with major companies such as Apple, and have signed on two significant Chinese handset manufacturers for long-term agreements. They are also in negotiations with other companies, including Huawei, and are optimistic about reaching agreements with them as well. Rogers also noted that they have signed a 5G license with a company that is currently involved in litigation, but they are focused on the 5G license and ongoing negotiations. When asked about the potential impact on revenue, Qualcomm's CFO Akash Palkhiwala stated that they do not break down revenue by specific OEMs, but a reasonable way to estimate would be to consider the scale of the market and the number of units contributed by each OEM to the overall revenue stream.

Ross Seymore asks Cristiano Amon about Qualcomm's leadership position in both the modem and apps processor side of their handset business and how they feel about their market share and penetration at major customers. Cristiano Amon responds by saying they feel good about their modem technology and continue to be the top company in terms of wireless patents and pushing for the roadmap. He also mentions that their business with Apple is operating within the framework they previously disclosed and any updates would be considered an upside. When it comes to the application processor, Amon notes their leadership in AI and mobile gaming performance and the upcoming launch of their own custom CPU.

Qualcomm's application processor advantage is accelerating, as shown by the launch of the Copilot+ PC and their position as a benchmark in the PC industry. They have executed agreements with Samsung and are optimistic about the opportunities in premium smartphones with the integration of AI. In response to a question about their year-over-year growth, they clarified that it applies to the overall company, not just QCT. They also provided guidance for gross margins, which are expected to remain flat in the September quarter and then follow a similar path in fiscal '25.

Cristiano Amon discusses the addressable market for Qualcomm in the compute segment, focusing on Windows 11 laptops for both enterprise and consumer use. He also mentions that 50% of computers sold in 2027 will be AI PCs. When asked about the deployment of AI in handsets, Amon explains that AI will play a crucial role in the human-computer interface and will change the user experience on apps, but it is less of a concern for carriers.

The use case of existing apps is changing as new agents are being developed, and they will have multiple functionalities across multiple apps. The number of use cases is increasing and driving the need for more AI NPU performance in silicon. There has been a significant increase in the auto portfolio in the recent quarter, and the opportunity for growth in both automotive and IoT is exciting in the next 12 months.

In the fourth quarter, Qualcomm saw a decrease in operating expenses despite having an extra week, which can be attributed to their focus on diversification and growth in various markets such as auto, PCs, and AI. They plan to unveil a new industrial roadmap in the coming months to further drive growth and diversification.

The speaker, Akash Palkhiwala, explains that the increase in OpEx in the third quarter was due to non-labor and tape-out expenses, but there is no change in the company's management of OpEx. The company remains committed to operating discipline and hiring for specific new skills related to diversification. The speaker thanks partners, suppliers, and employees for their work on PC execution and expresses excitement for the company's future growth in AI, automotive, and industrial IoT.

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