Qualcomm FY23Q4 Earnings:
Revenue was $8.631B, down 24% year over year, marking the fourth consecutive quarter of year-over-year decline; up 2% sequentially, ending three consecutive quarters of sequential declines (revenue peak was $11.2B in FY22Q2).
GAAP gross margin was 55%, down 2.3 percentage points year over year and flat sequentially.
GAAP net income was $1.489B, down 48% year over year and 17% sequentially, a new low since FY20Q3.
Business Segments:
Handset revenue was $5.456B, down 26% year over year, the fourth consecutive quarter of decline, accounting for 63% of revenue; Android demand is beginning to show preliminary recovery, cautiously optimistic on 2024, expecting 2023 handset unit volumes to decline mid-to-high single digits year over year, and 2024 5G handset unit volumes to grow high single digits to low double digits year over year; in FY23 Qualcomm gained share in both China and globally, and Qualcomm chip ASP increases ~10% annually.
The agreement to supply Apple with modem chips extends to 2026; management assumes 20% share in 2026; Qualcomm will capture the vast majority of the Samsung S24 series; Huawei revenue exposure will continue to shrink; domestically there are 100M users on 4-5 year old Huawei phones, which will impact Qualcomm's future TAM.
Automotive revenue was $535M, up 25% year over year, the 12th consecutive quarter of double-digit year-over-year growth, accounting for 6% of revenue; this quarter Qualcomm automotive revenue exceeded Intel Mobileye for the first time.
IoT revenue was $1.383B, down 28% year over year, the third consecutive quarter of double-digit year-over-year decline, accounting for 16% of revenue; industrial IoT demand is weak, expected to recover mid-next-year; X Elite laptops launch mid-next-year, PC revenue will mainly materialize in FY25 (2024Q4); Wi-Fi 7 currently has 350+ design wins; new fiber gateway business added.
Guiding FY24Q1 automotive and IoT revenue down sequentially, with IoT hitting the revenue trough; handset revenue up double digits sequentially, primarily due to Android inventory normalization and strong Snapdragon 8 Gen 3 demand, with China OEMs contributing 35% of the sequential growth.
Overall, Qualcomm finally walked out of the handset trough this quarter, with Android beginning to recover. Huawei will have some impact next year, but the premiumization trend among domestic Android customers, strong iPhone sales, and high Samsung S24 share remain the three main growth drivers. As IoT and automotive mix rises, gross margin will continue to expand. As for AI PC, it remains largely hype for now; Windows on Arm and Windows 12 still need to be observed.