Qualcomm FY24Q1 Earnings:
Revenue was $9.935B, up 5% year over year, ending four consecutive quarters of year-over-year declines, and up 15% sequentially, marking the second consecutive quarter of sequential growth (revenue peak was $11.2B in FY22Q2).
GAAP gross margin was 57%, down 0.7 percentage points year over year and up 1.6 percentage points sequentially.
GAAP net income was $2.767B, up 24% year over year, ending four consecutive quarters of declines, and up 85% sequentially.
Business Segments:
Handset revenue was $6.687B, up 7% year over year, ending four consecutive quarters of declines while setting a new all-time high, accounting for 67% of revenue; demand for flagships powered by the Snapdragon 8 Gen 3 exceeded expectations; estimates 2023 handset units down mid-single digits year over year, and 2024 5G handset units up high-single-digits to low-double-digits year over year; revenue from Chinese Android OEMs grew 35% sequentially.
Extended the agreement to supply modem chips to Apple through March 2027; last quarter assumed 20% share in 2026; signed a multi-year flagship supply agreement with Samsung; although the S24 partially uses Exynos, the majority still uses Snapdragon, and the future Snapdragon 8 Gen 4 will adopt a custom non-reference CPU, lifting ASP; regarding Huawei's return, management views it as an expansion of the TAM in China's high-end market, not impacting other Android demand.
Renewed long-term QTL agreements with two Chinese handset OEMs; continuing to renew long-term QTL agreements with customers expiring in early 2025; overall QTL revenue run rate sees no material change.
Automotive revenue was $598M, up 31% year over year, marking the 13th consecutive quarter of double-digit year-over-year growth, accounting for 6% of revenue; the $4B by 2026 and $9B by 2030 automotive revenue targets remain on track.
IoT revenue was $1.138B, down 32% year over year, the fourth consecutive quarter of double-digit year-over-year declines, accounting for 11% of revenue; industrial and edge networking demand remains weak, with recovery expected to begin next quarter and inventory normalization in the second half of the fiscal year; X Elite laptops launch mid-year, catching the back-to-school season, with design wins continuing to rise.
Guides FY24Q2 Android revenue flat sequentially, iPhone revenue down seasonally sequentially, IoT up mid-to-high single digits sequentially, automotive down slightly sequentially.
Overall, Qualcomm benefited from a strong Android recovery and robust iPhone sales, with the handset business setting a new high and wiping out a full year of gloom. Simultaneously extending supply agreements with its top two customers gave investors a dose of reassurance. The previously weak IoT business is also finally poised for recovery; in short, this report started 2024 on a strong note for Qualcomm.
Qualcomm's prior net income peak was $12.9B (FY22); based on FY24Q2 net income guidance, the run rate is $8.7B; applying a long-term valuation anchor of 20x PE yields a rough valuation range of $174B-$258B. Qualcomm's valuation has long been constrained by uncertainties such as Apple in-house, Huawei in-house, and even Samsung in-house development.