Changing relationship with Apple will affect the business going forward. Qualcomm is kicking off its annual Snapdragon Summit as the company pushes further into AI, PCs, automotive, and data center. CFO and COO Akash joins us from Maui to discuss the company's next phase of growth and what investors should be watching. Akash, we appreciate you taking the time away from the beautiful weather to be with us. I mean, you're coming right off the stage. Qualcomm framing this year around the concept of agentic AI moving from apps to user. So how does agentic AI change the way consumers interact with their devices compared to the first wave of generative AI?
Yeah. So first of all, thanks for having me on. It's great to be here on the show. You know, the Snapdragon Summit is our annual celebration of new technologies that we bring to all edge and cloud devices. And so we're showing off these new technologies. And one of the areas of focus for us in this conference is Agentic AI. And as everyone knows well, we've kind of gone through this model of where consumers use AI more in a question and answer format, similar to search in the past, where they would ask a question to a model. The next transition, we think, is going to be increasingly around agents and consumers interacting with agents, and then agents acting on behalf of the consumer. And it's a very different paradigm. These agents are becoming a lot more capable. These agents can understand context around the consumer, understand information that the consumer has. And then a device like a phone would be able to give the location of the consumer, what the camera can see, what the audio can hear, and all that context becomes a very important input in agents being able to figure out how to serve the purpose that the consumer is asking for. So we're going to bring that technology not just to phones, but to automotive, to industrial AI and wearable devices, and PCs. So very excited. This is horizontal technology, a pretty significant shift in the industry. Qualcomm is really sitting at the crossroads of this transformation and so excited to be a part of it and excited to talk about it here at the event.
And at the event, you've announced the Snapdragon 8 Elite Extreme and the Elite Gen 6 flagship mobile platforms. Why is it critical to launch two distinct flagship SKUs, and also what level of processing power was required to run directly on device?
Yeah, so I think we've been seeing the expansion of the premium handset market, right? As the handset continues to be more and more important in every consumer's life, there is a lot more people buying more expensive handsets. And so the premium segment of phones, which is devices over $600, we're seeing that market expand globally, not just in developed markets, but even in emerging markets. We are seeing that trend. And as a result, we thought why not split our roadmap in that tier and deliver two chips, one that gives you the extreme high end of the performance. And so that is our Snapdragon 8 Elite Extreme chip. And then Snapdragon 8 Elite, which is a slightly lower tier than that, but still delivers incredible performance and improvements over what we had last year. So this is about leadership in the premium tier. Snapdragon has done it every year. And this is one more year where we're delivering an incredible product that across all the OEMs globally are deployed. You're looking, you should look forward to a lot of new devices coming in with these chips over the next several months.
One of the things I thought was particularly exciting is as part of Qualcomm's forecasting, this acceleration in on-device AI capabilities as we head into '27 rather than seeing a plateau. So I am curious what is giving you the confidence that consumers and developers are ready for that fast of an adoption cycle?
You know, it's just a technology that makes a lot of sense from a consumer perspective. This Agentic AI transformation is at the center of it. As we discussed earlier, the amount of computing power and chip capabilities that's going to be required really gets transformed as you go from the previous model of consumers using AI to agentic AI. And what we're delivering with these chips is this incremental capability that allows you to do that. And remember, what's one of the most important things in these devices, because they are all battery-powered devices and battery life is very, very important. We're delivering these technologies at very high performance, at very low power. And that's foundational to how our customers differentiate in the market.
And there's an audio component to this as well. You had Elite Gen 2. How are you viewing the earbud moving from a simple music streaming device, or how I take my calls without having to hold my phone up, into this always-available interface for personal AI?
Yeah. So one of the categories of devices that we're incredibly excited about is a third device in the consumer ecosystem. So you have your phone, you have your PC, but we visualize a third device that's going to be used by a lot of consumers. And there is different form factors to this third device. It could be a pair of glasses like the Ray-Ban Meta glasses you've seen. It could be a pair of buds, it could be a watch. And as a result, this is a device that can see what you can see, that can hear what you can hear, and you can have an agentic AI conversation with this device. And one of the form factors for the device is buds. So we're very excited to announce this new product where you can not just kind of do what you used to do with your buds, but be able to add a camera to the bud and add more perspective to what it can understand around you, but also put an agent on the bud. So you can have an agentic AI conversation with it. Tell the agent a task that you need to get done, and then it can work within the ecosystem of the data that exists on the bud, but then also go to the cloud when needed to execute on the task. So pretty incredibly exciting set of new products coming out. And we're very fortunate and excited about this new product category that's developing across different form factors. And Snapdragon Sound is a step in that direction.
And with the phone sort of central to this ecosystem, we have to talk about this multi-year transition. You indicated that Qualcomm's share of the latest iPhone launch would fall below your previous 20% baseline projection. I'm curious what caused that accelerated step down? And is supply constraint a factor?
Yeah, I think it's a conversation that we've been having about the ramp down of the business for the last several years, and we've been very transparent with the investors. And so our forward plan with the company is really kind of the transition into these new diversification areas. We've already talked about replacing the entire Apple revenue over the next year because of the growth in auto, data center, IoT. So we're excited, the company is transforming. Next year, more than 50% of our revenue will be non-handsets, and in three years only a third of our revenue will be smartphones. So excited about the transformation of the company. Data center is turning out to be an incredible opportunity for us, growing revenue at a very strong pace, and I think there's a long way to go. So very excited about our diversification plan.
And Akash, it's like you knew where I was going next. I have your target for non-handset growth about replacing all of that lost product revenue. You have it stepping up from 24% in fiscal '26 to more than 60% in fiscal '27. What's giving you the visibility there to make that explicit replacement promise to Wall Street?
