Key Takeaways

• Strong Financial Performance: Exceeded expectations with $10.2B in Q4 revenue and $2.69 EPS, while delivering record free cash flow of $11.2B for the year. This performance came despite challenging market conditions, demonstrating the company’s operational resilience.
• Successful Diversification Strategy: Moving beyond just mobile chips, with remarkable growth in automotive (68% YoY) and IoT segments. The expansion into PCs is gaining significant traction, with platform designs increasing from 20 to 58 in just six months, showing strong OEM adoption.
• AI-Focused Transformation: Qualcomm is continuing to reposition itself as a “connected computing company for the age of AI,” securing partnerships with major tech leaders (Microsoft, Meta, Amazon, OpenAI) and launching new AI-capable products across all segments. This strategic shift appears to be resonating with customers and partners.
• China Market Strength: Despite broader market concerns about China, Qualcomm is projecting >40% sequential handset revenue growth from Chinese OEMs in Q1 FY2025. This growth comes even without Huawei product revenue, suggesting strong positioning with other Chinese manufacturers.
• Positive Forward Outlook: Guidance suggests continued growth with Q1 FY2025 revenues projected at $10.5-11.3B, anticipating 50% YoY growth in automotive and >20% growth in IoT. The company expects the global handset market to grow by low to mid-single digits in 2024, indicating a stabilizing market environment.

Qualcomm’s latest earnings report demonstrates strong financial performance and strategic evolution. The company reported Q4 non-GAAP revenues of $10.2 billion and earnings per share of $2.69, exceeding guidance expectations. The fiscal year 2024 concluded with impressive results, including total revenues of $39 billion and non-GAAP EPS of $10.22, representing a 21% year-over-year growth. The company also achieved a record free cash flow of $11.2 billion, highlighting its robust financial health.

Across business segments, Qualcomm showed notable growth. The handset division generated $6.1 billion in revenue, with Android revenues growing over 20% year-over-year. The IoT segment reached $1.7 billion, marking a 24% increase from the previous quarter, while the automotive division achieved record revenues of $899 million, representing an impressive 68% year-over-year growth and 11% sequential growth.

The company is actively transforming from a wireless communications company into a “connected computing company for the age of AI.” This strategic shift is evidenced by significant partnerships with industry leaders like Microsoft, Meta, Amazon, and OpenAI. Qualcomm has launched several innovative products, including the Snapdragon 8 Elite platform with enhanced AI capabilities, the Snapdragon X Plus A Core Compute Platform for PCs, and new solutions for industrial and automotive applications.

Looking forward, Qualcomm expects global 3G/4G/5G handset units to increase by low to mid-single digit percentage in calendar 2024. Their Q1 FY2025 guidance projects revenues between $10.5-11.3 billion and non-GAAP EPS of $2.85-3.05. The company’s diversification strategy is showing strong momentum, particularly in the PC market where they now have 58 platforms in development, up from 20 at launch. The automotive segment is expected to grow 50% year-over-year, while IoT revenues are projected to increase by more than 20%.

The earnings report reflects Qualcomm’s successful execution of its diversification strategy beyond mobile, with growing strength in the automotive, IoT, and edge computing sectors. Their emphasis on on-device AI capabilities across all segments positions them well in the evolving technology landscape. The company appears to be effectively balancing its traditional mobile business while expanding into new growth markets, maintaining strong financial performance while investing in future opportunities.

View from the Street – Analysis of Investor QA

Following Qualcomm’s Q4 earnings call, we remain constructive on the company’s execution and strategic positioning, though several key questions emerged during the Q&A session that warrants attention. Management fielded numerous questions about the sustainability of their growth vectors, particularly in automotive and IoT segments, where Qualcomm’s performance notably diverges from broader industry trends. CEO Cristiano Amon provided compelling evidence that the automotive strength stems from design wins and share gains rather than market dynamics, suggesting a more durable growth trajectory than some investors might assume.

The China market emerged as a focal point of analyst inquiries, given the stark contrast between Qualcomm’s robust performance (projecting >40% sequential growth in Chinese OEM revenue) and weaker signals from competitors. Management’s confident response, emphasizing content increases and premium tier expansion, coupled with strong Android revenue growth despite the Huawei headwind, suggests their China strategy remains on solid footing. However, we believe investors should continue monitoring this dynamic, particularly given broader macroeconomic uncertainties in the region.

The IoT segment’s performance, which bucked industry-wide weakness, raised eyebrows among analysts. Management attributed the strength to new product launches across PC, XR, and industrial segments, along with inventory normalization. While encouraging, we’ll be looking for sustained momentum in coming quarters to validate this isn’t merely a temporary boost from channel dynamics.

Perhaps most notably, management addressed the elephant in the room regarding a major customer’s potential internalization of components (widely understood to be Apple). Their matter-of-fact response, maintaining previous assumptions about share reduction to 20% by 2026, suggests they’ve appropriately de-risked this aspect of the business. This transparency is commendable and allows investors to more accurately model future scenarios.

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