Qualcomm (QCOM.US) 1QFY25 earnings call: Forecasting Windows PC business revenue to reach $4 billion by 2029.

In recent days, Qualcomm (QCOM.US) held a 1QFY25 performance conference. Qualcomm stated that it expects Windows PC business revenue to reach $4 billion by 2029, which means it will hold about 12% market share in the market it targets. Progress is going smoothly, with over 80 X-series based designs currently in development or launched, with a target of commercializing over 100 devices by 2025-2026. Regarding the modem business, Qualcomm's assumptions about the modem business with major customer (Apple Inc.) remain unchanged. Qualcomm expects to hold a 20% share in the customer's product releases in 2026. The current agreement ends in 2026. Assuming it is not renewed, the company will have no share in 2027. Qualcomm expects its share in the 2025 product releases to be between 10% and 20%. Q&A Q: Regarding the outlook for the QTL business, you mentioned it will be flat in the 2025 fiscal year compared to the 2024 fiscal year. Can you provide more details on the assumptions for overall shipments and royalties per unit? A: Our overall assumption for the market is that shipments will remain flat or slightly grow (low single-digit growth, around 3%). This does not take into account potential upside opportunities such as Chinese subsidies and AI device upgrades. But this is the basis for our QTL forecast. Q: For the development of the Snapdragon X platform in the PC sector in 2025-2026, can you share the expected adoption curve on the enterprise and consumer side? The impact of Chinese smartphone market subsidy policies on consumer demand, and the sustainability of growth for domestic OEM manufacturers? A: PC platform development: We expect Windows PC business revenue to reach $4 billion by 2029, which means we will hold about 12% market share in the market we target. Progress is going well, with over 80 designs based on the X series currently in development or launched, with a target to commercialize over 100 devices by 2025-2026. In the US retail market (especially for Windows laptops priced above $800), the market share of the Snapdragon X series has exceeded 10%, in line with our expectations for long-term growth. The first wave is primarily consumer products, and will expand more into the business applications field in the future. Chinese market subsidies: The subsidy policy started in January 2025 and is still in the early stages; we will have a clearer assessment in the next quarter. Historically, subsidy policies tend to expand the market size, but it is not currently factored into our second-quarter expectations. The growth in the Chinese market this quarter is mainly due to increased demand for high-end devices, and our customers gaining market share domestically. Q: Does the expectation of flat annual performance for the QTL business assume no settlement with Huawei? As for tariffs, do you see recent growth in personal electronics products related to tariff expectations? A: We have renewed long-term licensing agreements with almost all major OEM manufacturers over the past year, including recently signing a 4G licensing agreement with Transient (in addition to the previously signed 5G license). Negotiations with Huawei are still ongoing, and the expectation of flat performance for the year does not include potential benefits from a settlement with Huawei. It is confirmed that the expectation of flat performance for the year does not include the possibility of a settlement with Huawei. As for tariffs, the market demand growth we currently see is mainly due to: Strong performance of the Samsung Galaxy S25 series, with our global share in that series exceeding expectations. Strong demand from Chinese consumers for high-end devices, and our customers gaining market share domestically. This growth is unrelated to tariffs, but rather related to consumer demand for high-end devices and the push for AI features. Q: Typically, the second quarter does not have flagship product releases, how does this affect the seasonality of the QCT business? Will the ASP (average selling price) of Snapdragon chips continue to grow due to AI features and rising costs? A: Seasonal impact: The performance of the QCT business in each quarter is mainly influenced by the timing of flagship product releases. Typically, the first quarter is a high point, and the third quarter is a low point. Samsung's high share is reflected in our expectations for the first and second quarters, and will not change the overall seasonal trend. ASP growth: The ASP growth of Snapdragon chips is mainly driven by consumer demand for higher-performance chips, as we continue to add features in AI, processing power, and connectivity. Although TSMC's 3-nanometer and 4-nanometer process prices have increased (effective from January 2025), our goal is to reflect these cost increases in the ASP in the long term. Overall, the increased demand for high-end devices in the market has driven the growth of our chip ASP. Q: Is there seasonality in the performance of the IoT business? Will the gross profit margin of the QCT business remain at a high level in the future? A: Seasonality of the IoT business: The performance of the IoT business does indeed have seasonality, especially in the consumer IoT sector, which typically prepares for the holiday shopping season in the fourth quarter and then slows down in the first quarter. Industrial IoT and edge networking businesses, on the other hand, maintain strong growth in each quarter. Gross profit margin: The gross profit margin of the QCT business was strong in the first and second quarters, mainly due to an increase in shipments of high-end devices, improving the overall gross profit margin of our product portfolio. The future gross profit margin will fluctuate with changes in the product portfolio, but currently, we are satisfied with the performance of the gross profit margin.How large is the scale of the network?A: Modem Business: Our assumptions regarding the modem business for our major customer (Apple Inc.) have not changed. We forecast our market share to be 20% in their product releases in 2026. The current agreement ends in 2026. Assuming it is not renewed thereafter, we will have no market share in 2027. We forecast our market share to be between 10-20% in their product releases in 2025. PC Business Scale: We do not currently disclose specific revenues for the PC business on a quarterly basis, but we have achieved a 10% market share in the laptop market priced at over $800, which is a positive start and aligns with our long-term goal to reach a 12% market share by 2029. Q: Is the 20% growth in the smartphone business sustainable? What are the latest trends in the Chinese market? A: Smartphone Business Growth: We expect the growth of the smartphone business to be sustainable. In the first quarter of 2025, QCT's smartphone business grew 13% year-on-year, mainly due to increased shipments and rising ASP. The high-end device market (priced above $1000) has grown from a 21% market share to over 30% in the past 3-4 years, which is very favorable for us as we are strong in this area. We forecast a 10% year-on-year growth in the smartphone business in the second quarter of 2025, which is a very strong figure. Trends in the Chinese Market: The Chinese market has shown strong performance in the high-end device sector, and we see continued growth in this market segment. Our customers have increased their market share in the domestic market, and subsidy policies will also help drive growth in this market.