Qualcomm Q3 2025 Earnings Call | Q3 2025 Earnings Conference Call | Q3 2025 Results

Ladies and gentlemen, thank you for standing by. Welcome to the Qualcomm third quarter fiscal 2025 earnings conference call. At this time, all participants are in listen-only mode. Later, we'll conduct a question and answer session. If you'd like to ask a question during this time, press star, then the number one on your telephone keypad. To withdraw your question, press star, then a number two. If you're using a speaker phone, please pick up your handset before pressing the numbers. Please submit your questions to one question and one follow-up. As a reminder, this conference is being recorded July 30th, 2025. The playback number for today's call is 877-660-6853. International callers, please dial 201-612-7415. Playback reservation number is 137-54332. I would now like to turn the call over to Mauricio Lopez, vice president of investor relations. Mr. Lopez, please go ahead.

Thank you and good afternoon everyone. Today's call will include prepared remarks by Cristiano Amon and Akash Palkhiwala. In addition, Alex Rogers will join the question and answer session. You can access our earnings release and a live presentation that accompany this call on our investor relations website. In addition, this call has been webcast on qualcomm.com and a replay will be available on our website later today. During the call today, we will use non-GAAP financial measures as defined in regulation G and you can find the related reconciliations to GAAP on our website. We will also make forward-looking statements including projections and estimates of future events, business or industry trends or business or financial results. Actual events or results could differ materially from those projected in our forward-looking statements. Please refer to our SEC filings, including our most recent 10-K, which contain important factors that could cause actual results to differ materially from the forward-looking statements. And now to comments from Qualcomm's president and chief executive officer, Cristiano.

Thank you, Mauricio, and good afternoon, everyone. Thanks for joining us today. In fiscal Q3, we delivered revenues of $10.44 billion and non-GAAP earnings per share of $2.77, which was near the high end of our guidance range. Our chipset business delivered revenues of $9 billion, reflecting strength in automotive and IoT and ongoing growth in handsets. Automotive and IoT revenues increased 21% and 24% year-over-year, respectively. Our licensing business revenues were $1.3 billion. Our momentum in automotive and IoT is the result of strong execution of our growth and diversification strategy. We remain on track to meet our fiscal 29 target for combined automotive and IoT revenues of $22 billion. We're forecasting fiscal 25 to be the second consecutive year of greater than 15% year-over-year growth in total QCT non-Apple revenues. I will now share some key highlights from the business. In handsets, we extended our Xiaomi collaboration with a multi-year agreement. Snapdragon 8 series platforms will power multiple generations of Xiaomi's flagship devices for China and global markets with volume increasing each year of the agreement. The Snapdragon 8 Elite continues to set the pace of innovation in mobile processors and is leading the transition to AI smartphones with 124 designs shipped or announced today. AI usage in smartphones is increasing. Samsung noted that 70% of Galaxy S25 users are utilizing Galaxy AI and usage of Google Gemini AI has nearly tripled among S25 users compared to the S24. Looking ahead, we expect the range of on-device agentic AI use cases will continue to expand and reshape the mobile industry. We are optimistic about the Android ecosystem's leadership in AI. As we reach the one-year mark of our entry into AI PCs, we are encouraged by the steady progress we're seeing with our Snapdragon X series platforms. Multiple new devices launched during the quarter from leading OEMs such as Acer, Dell, HP, Lenovo, Microsoft, and Samsung. And we remain on track for more than 100 designs to be commercialized through 2026. Snapdragon is transforming personal computing experiences. In the second calendar quarter of 2025, according to third-party sources, Snapdragon-based PCs continue to make up approximately 9% of Windows laptops sold above the $600 price tier in retail US and the top five European countries. While we are at the beginning of our journey into PCs, we remain excited about the long-term opportunity and continue to work toward our target of achieving $4 billion in revenue by fiscal 29. In XR, Snapdragon continues to be the platform of choice for smart glasses and mixed reality devices. We now have 19 designs from our global partners. Demand for Meta's AI smart glasses continues to exceed expectations and they recently expanded the portfolio with the launch of new Meta Oakley smart glasses and introduction of new Ray-Ban styles. Xiaomi's new AI glasses launched in the quarter were also well received. All three are powered by the Snapdragon AR1 Gen1 platform. At Augmented World Expo USA, we conducted the world's first demonstration of a 1 billion parameter model running locally on smart glasses powered by our next-generation Snapdragon AI platform. We also introduced a smart ring controller reference design as a new input device. Our Snapdragon digital chassis solutions continue to see strong traction across the automotive ecosystem with 12 new designs during the quarter and a total of 50 vehicle launches this fiscal year. We're incredibly excited about BMW's upcoming Neue Klasse vehicles which will launch globally with our new ISO safety-certified ADAS later this year, including our Snapdragon Ride platforms and jointly developed driving stack. Our Snapdragon Ride platforms and driving stack are also gaining momentum more broadly with 20 OEM programs for various highway and urban navigate-on-autopilot solutions. In industrial IoT, we continue to expand our ecosystem of partners and we're pleased with the traction of our Dragon Wing platforms. We've also seen continued strength in edge networking driven by strong demand for Wi-Fi 7 gateway platforms. Now I would like to provide an update on our expansion into the data center. This represents a new growth opportunity for Qualcomm and is a logical extension of our diversification strategy as we continue to demonstrate leadership in CPU performance and NPU efficiency. As inference workloads scale, cloud service providers are building dedicated inferencing clusters focused not only on performance but also efficiency, specifically tokens per dollar and tokens per watt. These factors combined with the shift from merchant x86 CPUs to custom ARM-compatible CPUs for both cloud computing and AI head node create an entry point for Qualcomm. We're currently building NPU-based AI inference accelerator cards as well as custom SoCs for general purpose and AI head-node compute solutions utilizing our Orion CPU. We also reached an agreement to acquire Alphawave IP Group, a global leader in high-speed wire connectivity and compute technologies for data centers, AI, data networking, and data storage. The acquisition is expected to close during the first calendar quarter of 2026, subject to customary closing conditions. Alphawave's leading IP and data center design capabilities are key assets that will complement our Orion CPU and Hexagon NPU processors and help accelerate our roadmap. While we are in the early stages of this expansion, we are engaged with multiple potential customers and are currently in advanced discussions with a leading hyperscaler. If successful, we expect revenues to begin in the fiscal 28 time frame. Additionally, we signed an MOU with Humane to develop AI data centers in Saudi Arabia and deliver highly efficient and scalable cloud-to-edge hybrid AI inferencing solutions for local and international customers. We also announced that our Orion CPUs can be integrated with Nvidia GPUs for high-performance NVIDIA AI factories using the Nvidia NVLink Fusion architecture. Over the past 12 months, we have continued to see AI and generative AI advance at an accelerated rate, and we're both excited and confident in the opportunities this is creating for Qualcomm across all our businesses. As generative AI changes the human-computer interface and agent AI experiences continue to evolve, the mobile industry is being redefined and a new generation of personal AI devices are emerging. Smart glasses and wearables such as smart watches, earbuds, and other form factors are being transformed into personal AI devices as they connect the user directly to the AI agent and model. These devices are quickly transitioning from simply extending smartphone experiences to now providing new and unique personalized AI and agentic use cases. These devices will evolve independently of the smartphone ecosystem and become a significant opportunity given our technology leadership in mobile, XR, and wearables and the breadth of our IP and product portfolio. We expect to be the industry's preferred solution provider in this new category. Specifically, personal AI devices will require Snapdragon's always-on cloud connectivity, 5G and low-power Wi-Fi, power-efficient processing, on-device AI, best-in-class imaging, audio, video, sensors, and context capabilities. Meta AI smart glasses are currently the best example of personal AI. Physical AI is another technology that is reshaping industries and creating new opportunities, particularly in robotics. Robotics require high-performance computing including powerful on-device AI, extended battery life, reliable connectivity, a higher level of silicon integration, and advanced computer vision and sensor fusion. These requirements are perfectly aligned with our strengths and our technology and product portfolio. Our right to play in this new segment is similar to our expansion into automotive. Furthermore, our experience in industrial and safety-grade silicon perception and sensing technologies and ADAS and autonomy provide a very competitive foundation. Third-party estimates indicate a potential TAM of $1 trillion in the next decade. I would now like to turn the call over to Akash.

Thank you, Akash. Operator, we're now ready for questions.

Thank you. To queue a question, press star then number one. To withdraw your question, press star two. If you're using a speaker phone, please pick up your handset before pressing the numbers. One moment, please, for the first question. Our first question comes from the line of Joshua Buck Halter with TD Cowen. Please proceed with your questions.

Hey guys, thanks for taking my question. I wanted to start with the handset market. I think you just spoke to 5% growth in the September quarter despite the lower share that you communicated at Apple. Can you speak to the drivers there? I think Xiaomi was up meaningfully in the quarter, which is typical in the June quarter. But investors are worried about some level of pull-ins. Are you seeing any evidence of that specifically related to China?

Got it. Thank you. And to follow up, I wanted to ask about the data center business and the hyperscaler engagement you mentioned specifically. Any details you can give us on the scope of that engagement? Is that for an ARM-based CPU? Is it an accelerator? And you mentioned fiscal 2028 as potential if that converts. Is that the right time frame to think about contribution from your data center business more broadly at other customers as well? Thank you and congrats on the results.

Thank you, Joshua. This is Cristiano. We can't really disclose more other than what we said in the script. We are in advanced discussions, we have been executing on a product. As we said before, we always felt that we had IP that was very relevant to the data center. I think the Alphawave provides complementary IP that allows us to build custom SoC products and we're pleased with the way we're developing this. I'm sure we'll be able to share more as we conclude some of those discussions.

Our next question is from the line of Samik Chatterjee with JP Morgan. Please proceed with your questions.

Hi, thanks for taking my questions. Cristiano, maybe I can follow up on the data center roadmap or the thought process and strategy around it. Less so maybe timing, but in terms of how do you envision Alphawave integrating into the portfolio or the stack capability that you have currently, and in relation to just thinking about how you're going about selecting customers that you want to approach for this, what's typically the thinking about customization relative to standardization of the chipsets, how you're thinking about deal sizes that would make sense for you in the longer run for this business. Any thoughts around that? Thank you. Can I follow?

Very good. Thank you for the question. I know there's a lot of topics in that question. I'll try to give an overview. As we said before and we said in the script, we have been focused on building two products. One is the ability to leverage our CPU asset. That happens in two situations. One, of course, is a general-purpose CPU. We've been very focused on hyperscalers that have first-party workloads for ARM-compatible CPU. The other one is the head unit for inferencing clusters. As AI starts to get scale and we're starting to see inference taking over training, there's a new dynamic in the marketplace which is about the ability to be efficient with tokens per dollar as well as energy. That creates an opportunity for us. We have been building accelerator cards and we will be building a rack as well. Those are the two areas that we're building product roadmap. We're very focused on customers that have the ability to put first-party workloads or inferencing clusters. The Alphawave IP is important. It provides us the ability to scale out and provide connectivity. We believe it's leading connectivity in the industry and that should inform you the type of customers that we've been focusing on. We think there's a very large TAM. As you know, there is an opportunity for Qualcomm to play if you have leading IP. Of course, as this is a new market for us and we have been planning for it, we're going to be very careful about making disclosures. We're going to wait until they become factual. We're excited about the engagement we have today. We are in advanced negotiations with one significant customer and hopefully that creates a halo effect that could validate our platform and create other opportunities down the road.

Thank you for that. And for my follow-up, in the handset business for fiscal Q3 here, you had 7% revenue growth year-over-year, which I think did sort of miss modestly your guidance from last quarter for about 10% growth. So maybe if you can share any color in terms of if you did see any parts of the market that were weaker than you expected in the quarter. And then similarly, when I think about your guidance for fiscal Q4 here, it looks like you're heading to about high single-digit growth even with the impact of Apple. So maybe parse out where that strength is, because that seems like a pretty robust number for fiscal Q4 even with the loss of Apple revenues.

Our next question comes from the line of Stacy Rasgon with Bernstein Research. Please proceed with your questions.

Hi guys, thanks for taking my question. Given the guidance into September but the dynamics around Apple and everything else, what would you consider normal seasonal into the December quarter? And how should we think about drivers as you currently see them against that seasonal trend? How should we expect things, if there's anything else funky going on in December that we should know about that would influence results versus what might be more typical?

I mean, what would you consider normal seasonal then?

Thank you. Our next question is from the line of Joe Moore with Morgan Stanley. Please proceed with your question. Mr. Moore, your line is live for question. Perhaps you're on mute. Thank you. Our next question will be from the line of Chris Caso with Wolfe Research.

Yes, thank you. If I could just expand upon some of the commentary with regard to the December quarter. My understanding is last year the Chinese OEMs started pulling forward the launch a little bit of some of the flagship devices, and also as we were last year there was an extra week in the quarter. So I guess maybe just some more granularity on the puts and takes on December, taking that into account. How much of a lift is that in the December quarter, and then does that turn into more of a headwind as you go into the March quarter?

Got it. Okay. If I could follow up on the data center business, and I understand that you can't talk so much about some of the progress and design wins until they become factual. What about from a spending side and moving into a new line of business, what's going to be the impact on spending? And then as Alphawave closes, what will be the effect of that on revenue, expenses, and EPS?

Our next question comes from the line of Raj with Deutsche Bank. Please proceed with your questions.

Hi guys. Thanks for letting me ask a couple questions. I just want to get into the OEM side. You've been very clear about what's happening on the Apple side of things, but recently you've seen Samsung launch a couple models with its own processor. I just wondered how do you compare and contrast that against the X85 that you guys are rightly excited about going forward? Do you think you will maintain the 100% share on the Galaxy S generation or is that decision not quite made yet? Any color on that would be helpful.

Thank you for that color. I guess as a follow-up, and it probably would align to that also, within handsets you've talked about at least the premium tier, flagship tier of having roughly double-digit ASP or content increases going forward with all the capabilities that you're offering. Does that still hold true? Does it accelerate or decelerate with the X85? Just any update on that would be great.

The next question comes from the line of Tal Liani with Bank of America. Please proceed with your questions. Tal, your line is live for question. Perhaps you're on mute.

About China, the proportion of China is going up. And if Samsung, you said you're working with an assumption of 75% for Samsung. So if Samsung is going to go down from 100% for the Galaxy to 75%, China will further go up in percentage of QCT revenues. How do you see the China growth trends when it comes to the domestic market and international markets? What's the outlook from your perspective? And what's the risk of competition within the Chinese market? I have just a follow-up question on margins, but I'll keep it separate.

So let me just add a different perspective. Tal, I'm going to agree with Akash but I'll provide probably a comment or questions that we usually don't get. We have been doing business in China for 30 years. We actually started down at 3G. And I think what we learned by doing business in China, we actually learned how to move at China's speed. And I think if you look at the position of Qualcomm in China, they only improve over the years. As Akash outlined, not only we've been well positioned in the phone business, we're well positioned with some of the fastest growing OEMs in the auto business and that is expanding now into industrial, into robotics, and other areas. Another way to look at this is Qualcomm has become a very competitive company and learned how to compete in China and have been serving well. I think we expect that to continue to be the case.

Got it. Maybe just a question on margins. A quick one. I see that when I look at the gross margin, operating margin, you managed to maintain a very healthy operating margin despite the fluctuations in Apple revenues. So I just want to ask you a question I'm getting from investors quite often. What are the implications of the decline in Apple? What are the implications on margins? Are they positive or negative? Thanks.

Thank you. Our last question comes from the line of Ben Reitzes with Melius Research. Please proceed with your questions.

Oh, hey guys. Thanks a lot. I appreciate it. I wanted to ask about the data center. You're buying Alphawave for $2.4 billion. You have big ambitions there, it sounds like, for FY28. What are your thoughts on doing more of a tuck-in acquisition strategy there or even going bigger to get big fast and get a hold of customers if you have such great IP? I was just wondering if you could give a little bit more of the strategy. Is it more Alphawaves coming or would you ever consider a bigger acquisition?

All right. Thanks. And can I just ask a quick follow-up on your comments around Gemini and Galaxy AI use in the Android area. Can you just draw that out a little more? Obviously there's a perception that Apple products are a little behind in AI and what that means for you over the long term, whether you're really optimistic about that, maybe even past your fiscal first quarter. Just any bit more color there. Thanks.

Yes, consistent to what we have been saying, we're starting to see AI use cases on phones gain traction. And there's also another interesting data point. If you look at the overall share of AI models, you see Gemini actually increasing dramatically over other models. I think the advantage of the Android ecosystem in terms of maturity of AI, as more and more use cases become agentic or you start to see AI as part of the applications, I expect that it creates excitement about the Android ecosystem, expands its SAM, and it drives upgrade cycles. Those are all positive things from a mobile business. I think what AI is doing is making connectivity more relevant again, especially because of voice utilization. It's driving more computing, more capable devices, and is actually changing the use cases and the rate of utilization. It's very encouraging what I said in the call about 3x between Galaxy S24 and Galaxy S25, and I expect that to continue to accelerate.

Thank you. This concludes today's question and answer session. Mr. Amon, do you have anything further to add before closing the call?

Thank you all for attending the call. I would like to thank our employees, our partners, and we appreciate you following Qualcomm. We'll continue to execute on our strategy. We feel that the company is on the right trajectory, especially as we look for growth and diversification beyond handsets, and AI continues to be a great opportunity for us. Thank you very much.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.