Qualcomm bullish on AI, teases flagship platform coming in October

Chip outfit boosted by Chinese market, but goals for smartphones, PCs are ambitious

Qualcomm is confident its bet on AI in phones and Arm PCs will pay off, buoyed by more than 50 percent growth in revenue from Chinese handset makers and a promise of $700 Copilot+ PCs coming next year.

The San Diego chips and telecoms outfit reported revenues up 11 percent to $9.4 billion for its fiscal Q3 2024 that ended June 23, while net income for the quarter was up 18 percent to $2.1 billion compared with the same period a year ago.

However, stock market watchers report that Qualcomm's shares started to sink in extended trading in the US after an initial rally amid concerns that the smartphone market may not be recovering as fast as some investors would like.

This was despite the company's revenue and earnings per share coming in above the midpoint of its guidance, and revenues from Qualcomm's QCT chipset business growing by 12 percent year-on-year to $8.1 billion. Licensing revenue was also up 3 percent.

President and CEO Cristiano Amon said on a conference call that the company's performance reflected growth in the automotive and IoT sectors, and of course demand for the company's Snapdragon mobile platforms, which he expects to continue with its focus on bringing AI capabilities into handsets.

"We're pleased with the growth and trajectory of AI use cases on smartphones," Amon stated. "This continued expansion of AI features is a precursor to next-generation smartphones, which we believe will become AI-centric with pervasive on-device AI working across applications in the cloud. Qualcomm is very well positioned to help drive this transformation across the industry in the coming years."

This is presumably referring to its mobile chipsets such as the Snapdragon 8 Gen 3 and Snapdragon 7+ Gen 3 that feature an integrated neural processing unit (NPU) to accelerate AI processing. Qualcomm also showed off a 7 billion parameter large language model running on an Android phone at MWC earlier this year and launched an online AI Hub at the same event.

Amon said that AI has expanded the size of the premium tier for smartphones.

"So even in a market which is kind of flattish to low single digits in growth, the premium tier is actually growing faster, and we've seen that. We're seeing a larger premium tier enabled by AI," he said, claiming that the market has moved from models greater than $400 representing 21 percent of handset sales now to representing 31 percent.

Amon said the next-generation Snapdragon 8 flagship mobile platform will be unveiled at the company's Snapdragon Summit in October. This will be the first to be powered by Qualcomm's custom Oryon CPU, combined with "new and unparalleled NPU AI capabilities."

But Qualcomm is already doing well enough in some phone markets, with chief financial officer Akash Palkhiwala revealing that the company saw a more than 50 percent year-on-year growth in revenues from Chinese phone makers during Q3.

This is one market that is likely to be well served by the Snapdragon 4s Gen 2 mobile platform that Qualcomm announced this week, aimed at bringing Gigabit 5G connectivity to sub-$100 handsets and already adopted by Chinese brand Xiaomi.

When asked about bringing AI capabilities to the mass tier of the smartphone market, Amon responded: "We intend to do that."

The company is also looking to infuse AI capabilities into the in-vehicle chipsets and software it sells, saying it is working to extend its on-device AI solutions to the Snapdragon Digital Chassis to enable automotive-centric GenAI use cases and applications.

Qualcomm also has high hopes for its Snapdragon X Arm-based laptop platform, claiming that there are now 20 Copilot+ PCs available from vendors such as HP, Lenovo, Acer, and Asus.

"As we look forward to 2025, we are already working with OEMs on the next wave of Copilot+ PCs," Amon said.

"In addition to new design wins, our X Series product road map will expand to address PCs with retail prices as low as $700 without compromising NPU performance," he claimed.

He added that "we believe the benefits of Snapdragon X Series platforms make it clear that the PC ecosystem has begun the transition to an ARM-compatible architecture," and predicted that at least 50 percent of PCs will be AI capable by 2027.

For its fiscal Q4 2024, Qualcomm is forecasting revenues of $9.5 billion to $10.3 billion.

The company said it expects handset revenues to grow only by a low single-digit percentage during the quarter, reflecting an increase in purchases from a modem-only handset customer offset by seasonally lower Android revenue ahead of its new Snapdragon premium chipset launch coming in the first quarter of fiscal 2025. ®