QUALCOMM Incorporated (QCOM) Q4 2025 Earnings Call Transcript

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Overview

The earnings call summary shows strong financial guidance for Q4 and fiscal 2025, with significant growth expected in automotive and IoT segments. Q&A insights reveal robust performance in premium Android and automotive sectors, with strategic investments in AI and data centers. Despite some management ambiguity, the overall sentiment is positive, driven by growth projections and strong market positioning. The lack of market cap information limits precise prediction, but the positive outlook suggests a stock price increase of 2% to 8%.

Key Financial Performance

Revenue for fiscal Q4 $11.3 billion, exceeded the high end of guidance range, driven by strong end customer demand for Snapdragon-powered premium tier Android handsets, automotive Snapdragon Digital Chassis, and IoT strength.

Non-GAAP earnings per share (EPS) for fiscal Q4 $3, exceeded the high end of guidance range.

QCT revenues for fiscal Q4 $9.8 billion, up 9% sequentially, driven by strong demand for Snapdragon-powered Android handsets, automotive Snapdragon Digital Chassis, and IoT products.

Automotive revenues for fiscal Q4 Over $1 billion, record quarterly revenue, driven by adoption of Snapdragon Digital Chassis.

Licensing business revenues for fiscal Q4 $1.4 billion.

Fiscal 2025 non-GAAP revenues $44 billion, up 13% year-over-year, driven by record QCT annual revenues and growth in automotive and IoT.

QCT annual revenues for fiscal 2025 $38.4 billion, up 16% year-over-year, including automotive revenue growth of 36% and IoT revenue growth of 22%.

QCT non-Apple revenues for fiscal 2025 18% year-over-year growth, above prior estimates.

QCT handset revenues for fiscal Q4 $7 billion, up 14% year-over-year, driven by demand for premium Android handsets powered by Snapdragon Elite Gen 5 platform.

QCT IoT revenues for fiscal Q4 $1.8 billion, up 7% year-over-year, driven by industrial and networking products and AI smart glasses demand.

QCT Automotive revenues for fiscal Q4 $1 billion, up 17% year-over-year, driven by adoption of Snapdragon Digital Chassis.

Non-GAAP tax rate for fiscal Q4 13%-14%, impacted by the One Big Beautiful tax bill, resulting in a noncash charge of $5.7 billion to reduce deferred tax assets.

Non-GAAP EPS for fiscal 2025 $12.03, up 18% year-over-year.

Free cash flow for fiscal 2025 $12.8 billion, record level, with nearly 100% returned to stockholders through repurchases and dividends.

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Operating Highlights

Snapdragon 8 Elite Gen 5: Introduced as a next-generation flagship AI smartphone platform with the fastest mobile CPU, upgraded NPU, and GPU.

Snapdragon X2 Elite and X2 Elite Extreme: New platforms for premium laptops, surpassing Intel and AMD in speed and power efficiency, with the world's first 5-gigahertz CPU for ultra-mobile laptops.

AI200 and AI250 SoCs: Unveiled for AI inference optimized solutions, targeting data center growth with HUMAIN as the first customer.

Arduino UNO Q: Released as a single-board computer powered by Dragonwing processor for edge AI applications.

Automotive: Achieved record quarterly revenues exceeding $1 billion, driven by Snapdragon Digital Chassis and the launch of Snapdragon Ride Pilot in collaboration with BMW.

IoT: 22% year-over-year revenue growth, supported by acquisitions like Arduino and strong demand for AI smart glasses.

AI PCs: Optimistic growth with approximately 150 design wins for Snapdragon-powered AI PCs.

Revenue Growth: Fiscal '25 non-GAAP revenues of $44 billion, up 13% year-over-year, with record QCT annual revenues of $38.4 billion.

Tax Rate Adjustment: New tax legislation resulted in a noncash charge of $5.7 billion but reduced future cash tax payments.

AI Expansion: Focus on expanding AI to the edge and edge-to-cloud hybrid AI solutions.

Partnerships: Expanded partnership with Google for integrating Google Gemini models into Snapdragon Digital Chassis solutions.

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Risk or Challenges

Regulatory and Taxation Changes: The enactment of the 'One Big Beautiful tax bill' resulted in a noncash charge of $5.7 billion to reduce the value of deferred tax assets, impacting GAAP results and potentially affecting future financial planning.

Seasonality in IoT Revenues: A sequential decline in IoT revenues is expected due to seasonality in consumer products, which could impact overall revenue growth in the short term.

Supply Chain and Component Demand: The company faces challenges in maintaining supply chain efficiency and meeting demand for Snapdragon-powered devices, especially in high-growth areas like automotive and IoT.

Competitive Pressures in AI and Processors: Intense competition from companies like Intel and AMD in the processor market and the need to maintain technological leadership in AI and edge computing could strain resources and impact market share.

Economic Uncertainties: Global economic conditions and uncertainties could affect demand for premium Android handsets, automotive solutions, and IoT devices, impacting revenue projections.

Strategic Execution Risks: The ambitious multi-generation roadmap for AI, data centers, robotics, and 6G devices requires flawless execution to meet targets, posing risks if milestones are not achieved.

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Guidance & Outlook

Revenue Projections: In the first fiscal quarter, Qualcomm expects record revenues in the range of $11.8 billion to $12.6 billion, with non-GAAP EPS of $3.30 to $3.50. QCT revenues are projected to be between $10.3 billion and $10.9 billion, with EBT margins of 30% to 32%. QTL revenues are estimated at $1.4 billion to $1.6 billion, with EBT margins of 74% to 78%.

Handset Revenue Growth: Qualcomm anticipates record QCT handset revenues with low teens percentage growth sequentially, primarily driven by new flagship Android handset launches powered by Snapdragon.

IoT Revenue Outlook: Following outperformance in QCT IoT revenues in the fourth quarter, a sequential decline is expected in the first fiscal quarter due to seasonality in consumer products.

Automotive Revenue Outlook: QCT Automotive revenues are expected to remain flat to slightly up on a sequential basis in the first fiscal quarter, following a record fourth quarter.

Long-Term Revenue Targets: Qualcomm remains on track to achieve its $22 billion fiscal '29 revenue target across automotive and IoT. Automotive revenue is targeted at $8 billion, while IoT revenue is targeted at $14 billion.

AI and Data Center Growth: Qualcomm plans to provide an update in the first half of 2026 on its data center plans, including roadmap performance and differentiated memory and compute technology. The company is pursuing opportunities in advanced robotics, next-generation ADAS, industrial edge AI, 6G devices, and AI-powered RAN.

PC Market Growth: Qualcomm is optimistic about the growth potential for Snapdragon-powered AI PCs, with approximately 150 design wins expected to be commercialized through 2026.

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Shareholder Return Plan

Dividend Payments: Consistent with our commitment, we returned nearly 100% to stockholders through repurchases and dividends through the year.

Share Repurchase: Consistent with our commitment, we returned nearly 100% to stockholders through repurchases and dividends through the year.

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Key Q&A

Q:What is Qualcomm's strategy and right to win in the data center space, and can you provide details on the AI200 and AI250 specs?

A:Qualcomm is focusing on power-efficient CPUs for AI clusters and general-purpose compute, as well as a new architecture for inference to increase compute density and performance per watt. They are developing AI200 and AI250 solutions and will provide more details in early 2026. Qualcomm is also in discussions with hyperscalers and sees significant market interest.

Q:What is Qualcomm's visibility into its share with its lead Android customer, and how does it expect this to evolve?

A:Qualcomm has a strong relationship with Samsung, with a baseline assumption of 75% share for Galaxy devices. The premium tier of Snapdragon Android is expanding, driving growth even in a flat handset market. Qualcomm assumes 75% share for Galaxy S26, consistent with its financial assumptions.

Q:What are Qualcomm's cost performance expectations for AI inferencing workloads, and what are the revenue implications for HUMAIN?

A:Qualcomm expects data center revenue to ramp starting in fiscal 2027, pulled forward from fiscal 2028 due to the HUMAIN engagement. They are focused on competitive solutions for inference workloads and will provide more details on KPIs and roadmaps in early 2026.

Q:What is Qualcomm's outlook for the March quarter in the handset market, given changes in share at its primary Android customer?

A:Qualcomm did not provide guidance beyond the first quarter but noted strong business momentum and expects to close the Alphawave acquisition in early 2026. The March quarter's performance will depend on market dynamics and execution.

Q:How did Qualcomm's September quarter performance in premium Android compare to expectations, and what is the outlook for December?

A:The September quarter beat expectations due to strong premium Android performance, not from Apple. Qualcomm expects low teens sequential revenue growth in handsets for the December quarter, driven by Android premium tier shipments.

Q:Is there any update on Qualcomm's license negotiations with Huawei?

A:No substantive updates were provided. Discussions with Huawei are ongoing.

Q:What is driving Qualcomm's strong year-over-year growth in non-Apple QCT revenue, particularly in Android?

A:The growth is driven by a mix shift towards premium devices and increased content in premium tier chips. These trends are expected to continue over the next several years.

Q:Is Qualcomm's Snapdragon Android strength primarily driven by China, and are there concerns about pull-forward effects?

A:Qualcomm's Snapdragon Android strength is not due to pull-forward effects. The growth reflects normal purchase patterns and strong consumer reception to new device launches in China and globally.

Q:What is Qualcomm's approach to AI data center architecture, and how does it differ from existing solutions?

A:Qualcomm is developing a new architecture focused on high compute density and low energy consumption for inferencing clusters, moving beyond traditional GPU and HBM solutions. This approach aims to optimize cost and energy efficiency.

Q:How are higher ASPs impacting Qualcomm's handset growth, and what is the outlook for premium tier devices?

A:Higher ASPs are driven by demand for more capable chips and devices, as well as a mix shift towards premium devices. Qualcomm expects these trends to continue, supported by strong consumer demand and competition among OEMs.

Q:What are the components of Qualcomm's outperformance in the December quarter, and how is QCT performing across segments?

A:Qualcomm's outperformance is driven by strong premium Android performance, record automotive revenue, and growth in IoT. Handsets are expected to see low teens sequential revenue growth, while automotive and IoT are positioned for continued growth.

Q:What is the seasonality of Qualcomm's handset business, particularly in relation to the Chinese New Year?

A:Qualcomm's first and second fiscal quarters are typically the strongest, with the third fiscal quarter being weaker. This seasonality aligns with normal purchase patterns around device launches and the Chinese New Year.

Q:What is driving the year-over-year decline in QCT EBT margins despite revenue growth?

A:The decline in QCT EBT margins is due to increased investments in the data center area, which is incremental to Qualcomm's existing investment profile.

Q:Is there any update on Qualcomm's non-Android handset business for calendar 2026?

A:No changes were reported regarding Qualcomm's share within Apple or its non-Android handset business.

Q:What is the potential size of Qualcomm's data center opportunity, and how does it compare to other segments?

A:Qualcomm sees the data center as a multibillion-dollar revenue opportunity in a few years, potentially larger than the $2 billion to $4 billion opportunities outlined for other segments like XR at the last Analyst Day.

Q:Review of Unclear Management Responses

A:Management avoided providing direct answers or sufficient details on several topics, including the specifics of cost performance expectations for AI inferencing workloads, updates on Huawei license negotiations, and detailed guidance for the March quarter in the handset market. Additionally, they deferred providing comprehensive data center KPIs and roadmaps until early 2026.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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