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A pioneer in wireless communications, Qualcomm makes semiconductors and software for use in vehicles, industrial technology, smartphones, laptops, and many other devices. The company uses a fabless semiconductor model, designing chips but outsourcing the manufacturing of many components. It also has a strategic investments and venture arm, which backs early-stage companies in industries like 5G, artificial intelligence, and the Internet of Things. Founded in 1985, Qualcomm developed the CDMA technology that now underpins commercial cell phone networks.

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Qualcomm (QCOM): Company Profile, Stock Price, News, Rankings

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Qualcomm

qualcomm

Ladies and gentlemen, thank you for standing by. Welcome to the Qualcomm Second Quarter Fiscal Year twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. Later, we'll conduct a question and answer session. As a reminder, this conference is being recorded, 04/30/2025.

Playback number for today's call is (877) 660-6853. International callers, please dial (201) 612-7415. Playback reservation number is 1375278. I would now like to turn the call over to Mauricio Lopez Odoyen, Vice President of Investor Relations. Mr.

Thank you, and good afternoon, everyone. Today's call will include prepared remarks by Christian Ramon and Akash Palakkawala. In addition, Alex Rogers will join the question and answer session. You can access our earnings release and a slide presentation that accompany this call on our Investor Relations website. In addition, this call is being 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 ks, 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 Mon.

Thank you, Mauricio, and good afternoon, everyone. Thanks for joining us today. In fiscal Q2, we delivered non GAAP revenues of $10,800,000,000 and non GAAP earnings per share of $2.85 Revenues of $9,500,000,000 from our chipset business were driven by strength across handsets, automotive and IoT, all exceeding revenue expectations.

Automotive and IoT revenues increased 5927% year over year respectively. Licensing business revenues were $1,300,000,000 Demand for our industry leading platforms continues to expand as high performance connectivity and processing at the edge are increasingly important and AI becomes more pervasive across industries. We have the industry's broadest product and IP portfolio, a strong track record of establishing a technology leadership position in every industry we enter and a clear vision for the future. As we navigate the current macroeconomic and trade environment, we remain focused on driving the next wave of AI smartphones and growing our non handset revenues to $22,000,000,000 by fiscal twenty twenty nine. We are excited by the ongoing developments in generative AI, including the proliferation of smaller models.

In just six months, the AI landscape has been redrawn with a wide array of new consumer and enterprise applications. New players have emerged and AI video models are becoming more dependable, marking a significant expansion in capabilities. Additionally, smaller Gen AI models that can run directly on device are also advancing rapidly. It now takes only a few months to match the performance of their larger cloud based counterparts compared to twelve months just a year ago. Several new state of the art small language and multimodal models were recently released including Microsoft Fi, Google Nano, MetaLama, Mr.

Minnestral, OpenAI Whisper and Alibaba Quen. Some of these models are already running on Snapdragon platforms. As these trends continue, the opportunity for Qualcomm is significant. I will now provide some key highlights from across the business starting with mobile. At Mobile World Congress, we announced our x85 four gs platform, the world's most advanced AI powered modem to antenna system delivering substantial improvements in speed, efficiency, coverage and power consumption.

The x85 sets new benchmarks and brings connectivity leadership to the Android ecosystem. It also supports five gs advanced capabilities with ultrafast peak download speeds of up to 12.5 gigabits per second and delivers the connectivity required for hybrid and agentic AI experiences. High performance low latency five gs is essential for AI applications, ensuring seamless and timely data transmission and information retrieval for real time processing and decision making. According to Google, the x85 is designed for mobile AI and is the perfect match for Android in the agentic experiences of the Gemini era. This modem delivers breakthrough five gs speeds, network reliability and intelligent connectivity to Android phones, cementing Android and Qualcomm Technologies leadership in the mobile AI world.

The x85 was also positively received by many of the largest operators in The U. S, China and Japan who are excited about the superior connectivity x85 brings to five gs smartphones, the improved network performance and reliability and potential for new AI powered services. The x85 will be shipping in handsets, automotive and IoT products starting in the second half of the year. Within smartphones, we expect this platform to be available exclusively on Android devices. In handsets, we continue to gain design traction with our Snapdragon eight Elite, the industry's most powerful smartphone platform.

To date, we have 90 flagship designs shipped or announced globally across major Android OEMs. During the quarter, subsidies in China had a positive impact on growing the premium tier, which has continued to expand over the last several years. Additionally, we're incredibly excited to see our customers launching innovative new flip style devices featuring Snapdragon eight Elite. This is now a flagship smartphone category. As an example, the recently announced flip style Motorola Razr Ultra twenty twenty five comes with Moto.ai, a suite of AI powered features such as Catch Me Up, which summarizes notifications and prioritizes urgent messages, Remember This, which saves screenshots, photos and notes to recall later and Magic Canvas, which lets users create AI generated images as wallpapers.

It also integrates Perplexity AI, Google Gemini, Microsoft Copilot and MetaLama. We remain excited about the PC opportunity for Snapdragon and we're making progress toward achieving $4,000,000,000 in revenues by fiscal twenty nineteen. We're extremely focused on driving new OEM designs, expanding markets and channels, growing into the enterprise and increasing the ecosystem of native applications. Since the launch of the first Snapdragon X Power devices in mid-twenty twenty four, we have more than 85 designs in production or development and we're targeting more than 100 designs to be commercialized to 2026. In the first calendar quarter of twenty twenty five, according to third party sources, Snapdragon based PCs made up approximately 9% of Windows laptops above the $600 price tier in retail U.

S. And the top five European countries. We now have more than seven fifty native applications running on Snapdragon X, including over 100 for the enterprise. Additionally, there are over 1,400 games running on the platform. Microsoft has continued to add new Copilot plus AI capabilities.

This includes the rollout in March and April of expanded live captions, which offers real time audio and video translations in English during virtual meetings, podcast or video playback and new voice access functions that enable users to interact with the AI assistant using natural language voice commands. Consumers can also experience recall, improved Windows search and click to do, making it easier to pick up where you left off, find what you're looking for and do more with less time. We also continue to partner with Microsoft on their signature Surface PCs. In XR, favorable consumer reception for smart glasses continues, particularly as AI enables more compelling use Meta continues to add more capabilities to their Ray Ban smart glasses powered by Snapdragon.

These include enhanced AI assistant interactions, video AI support, location recall, live speech translation and more. In addition to Meta, in Samsung's upcoming Android XR headset, we're pleased to report that we now have more than 15 designs of smart glasses from our global partners. Smart glasses are now the best example of a new device category gaining scale because of AI. We remain confident in our ability to achieve $2,000,000,000 in XR revenues by fiscal twenty twenty nine. We continue to see strong demand in automotive for the Snapdragon digital chassis and we are on course to reach our fiscal twenty twenty nine revenue target of $8,000,000,000 During the quarter, we secured 30 new designs including five ADAS programs as well as designs from Chinese automakers such as NIO, Zeeker, Great Wall, Dongfeng and more.

We also saw 14 commercial vehicle launches from global automakers utilizing our platforms with a total of 29 commercial vehicle launches since the start of the fiscal year. Additionally, last week at the Shanghai Auto Show, we announced new collaborations with Visteon and Patel to create next generation AI intelligent cockpit solutions based on our Snapdragon cockpit elite. And with this SV to jointly deliver a suite of pre integrated ADAS solutions that support L1 and L2 plus functions. Fiscal Q2 was a strong quarter for Industrial IoT with notable new partnerships and recently the completion of two strategic acquisitions increasing our confidence in executing on our industrial IoT revenue target of $4,000,000,000 by fiscal twenty nineteen. In a major step toward advancing industrial intelligence at the edge, we're collaborating with Palantir to integrate their Ontelligent enterprise systems and AI capabilities on our advanced platforms.

This collaboration will enhance real time insights and data driven decisions in remote and offline environments, enabling OEMs and enterprises to deploy scalable AI solutions for manufacturing, industrial and automotive applications. We acquired Edge Impulse, one of the industry's leading edge AI development platforms, which enables more than 170,000 developers to build solutions for a wide range of applications such as asset tracking and monitoring, manufacturing, anomaly detection and predictive maintenance systems using various AI capabilities, including computer vision, time series data, audio events and speech recognition. The development platform includes a comprehensive set of tools and features for data collection and preparation, model training, deployment and monitoring, all with an easy to use user friendly interface requiring little or no code at all. As AI accelerates the next phase of digital transformation, Edge Impulse combined with our AI hub creates a true world class industrial development platform for the age of intelligence. We also acquired Focus AI, a leader in computer vision at the edge for an intelligent end to end edge AI and cloud management solution that enables real time insights and analysis.

Focus AI solutions are now part of the new Qualcomm Dragon Wing Intelligent Video Suite enhancing our video analytics AI portfolio. Finally, in edge networking, we launched the Dragonwing fixed wireless access Gen four Elite platform based on the x85 and is the world's first five gs advanced FWA platform. It includes an AI co processor that delivers up to 40 TOPS of AI processing power to optimize wireless connectivity across five gs broadband and Wi Fi seven and unlocks new Gen AI capabilities at the network edge. I would now like to turn the call over to Akash.

Thank you, Krishana, and good afternoon, everyone. I'll start with our second fiscal quarter earnings. We are pleased to announce non GAAP revenues of $10,800,000,000 and non GAAP EPS of $2.85 both of which are above the midpoint of our guidance. QTL revenues of 1,300,000,000 and EBITDA margin of 70% were flat on a year over year basis and slightly below the midpoint of our guidance due to lower handset units in emerging regions. QCT delivered revenues of $9,500,000,000 an EBT margin of 30%, with revenues at the high end of our guidance due to upside across handsets, IoT and automotive.

QCT handset revenues grew 12% year over year to $6,900,000,000 reflecting the benefit of increased premium tier Android shipments. QCT IoT revenues of $1,600,000,000 increased 27% versus a year ago period, driven by demand for our products with connectivity, processing and AI technologies. We delivered QCT Automotive revenues of $959,000,000 reflecting 59% year over year growth on increased content in new vehicle launches with our Snapdragon digital chassis platforms. Lastly, we returned $2,700,000,000 to stockholders, including $938,000,000 in dividends and $1,700,000,000 in stock repurchases. Now turning to guidance.

I'll first address the macroeconomic environment, including the impact of tariffs. There's uncertainty around the impact of the global trade landscape on demand across our businesses. Our guidance for the upcoming quarter is based on our current assessment of the financial impact of tariffs as they stand today. As the situation remains dynamic, we'll continue to closely monitor for potential changes. For the third fiscal quarter, we are forecasting revenues of 9,900,000,000.0 to $10,700,000,000 and non GAAP EPS of $2.6 to $2.8 We estimate QTL revenues to be approximately flat on a year over year basis, reflecting normal seasonality for handset units with revenues of 1,150,000,000.00 to $1,350,000,000 and EBT margin of 67% to 71%.

In QCT, we expect revenues of $8,700,000,000 to $9,300,000,000 and EBT margin of 28% to 30%. At the midpoint, this reflects year over year revenue growth of approximately 12%, led by strength in handsets, IoT and automotive. We expect QCT handset revenues to increase approximately 10% on a year over year basis, driven by growth in Android. We estimate QCT IoT and automotive revenues to grow approximately 1520%, respectively, versus a year ago period, driven by the same factors I outlined in our second quarter results. Lastly, we estimate non GAAP operating expenses to be approximately $2,250,000,000 In closing, we are very pleased with our strong results in the first half of fiscal twenty twenty five, with revenue and non GAAP EPS growth of 1721%, respectively, versus a year ago period.

We are increasing our capital return target to 100% of free cash flow in fiscal twenty twenty five, reflecting confidence in our strong cash flow generation and financial targets outlined at our recent Investor Day. As the global trade environment continues to evolve, we remain focused on our execution priorities, including our relationships with customers and partners globally and investing in our industry leading technology and product road map. Despite the near term macro uncertainty, our business strategy remains unchanged, and we remain committed to our long term financial framework. Our disciplined capital allocation and balance sheet flexibility position us for success across varying market scenarios. This concludes our prepared remarks.

Operator, we are now ready for questions.

Thank you. The first question comes from Joshua Buchalter with TD Cowen. Please proceed with your question.

Hey, guys. Thanks for taking my question and congrats on the solid results in a difficult backdrop. My first question, could you maybe spend a couple of minutes talking through what kind of assumptions you're baking into, in particular your guidance in the handset market? I mean, there's pretty widespread concerns of tariff related pull ins, are you seeing any signs of that yet? And in particular, largest customer was up pretty meaningfully year over year.

So was there any change in order patterns there? Thank you.

Yes. Thanks, Josh, for the question. Our approach on tariffs is really our guidance reflects our current assessment of the financial impact from it. We do not see any material direct impact to us at this point. The landscape obviously is dynamic, so we're closely monitoring.

But we're very focused on things we control and very focused on supporting our customers as well. One thing to remember is when you look at our supply chain, we have a very diversified global supply chain. And so that positions us very well to navigate challenges that might happen as a result of tariffs. And then maybe specifically on your question of pull ins, we have not seen any material pull ins from our customers. So this reflects kind of reasonable consistent ordering patterns from them.

And that's what's reflected in our guidance.

Understood. Thank you. I have to follow-up. I think a quarter ago, you expressed some optimism, but certainly didn't include it any Huawei royalty revenue in the model. Any updates to share on those negotiations, obviously, given the difficult backdrop to be signing deals right now?

Josh, this is Alex. There really aren't any updates. Discussions will be ongoing, but we don't have any updates right now.

The next question is from Sadamik Chatterjee with JPMorgan. Please proceed with your questions.

Hi. Thanks for taking my question. So maybe if I can start on the IoT segment and just in relation to the it seems like that is the segment you saw the most upside related to your own expectations for the quarter. If you can just flesh out what drove that upside? And maybe just going back to following up on the last question as well, like is that a segment that you've seen any evidence of pull forward of demand?

Hi, Samik. It's Akash. So in the IoT area, we saw tremendous growth in the quarter. We reported results. So 27% year over year growth.

And we saw growth across all three areas, so consumer, networking and industrial. The largest growth contributor was actually industrial. As we've discussed in the past, we have this premise of where the market is going, which is a transition from microcontrollers to microprocessors and AI. And we're seeing the benefit of our technology portfolio as it applies to that transition. And so we're at the front end of the transition in our minds.

And some of the upside in the quarter came through the benefit that came from that transition. Maybe the last thing I'll highlight is when you step back and look at all the different areas in our IoT revenue stream, which is PC, XR, industrial networking, our technology is becoming more relevant than ever to each of those areas. So that's what gives us confidence in our long term forecast.

Okay. Got it. Got it. And then maybe for my follow-up, if I can ask you about your M and A pipeline and strategy here. Just when I look at Focus dot ai and Edge Impulse, obviously, don't know those businesses as closely, but how should we think about some of these acquisitions enhancing the capabilities in the current end markets that you're trying to diversify and enhance your position in relative to maybe some acquisitions adding to the existing end markets and giving you more growth pillars in terms of additional incremental end markets that you can go into with some acquisitions?

Samik, this is Cristiano. Thanks for the question. Look, this is very consistent to what we said before and I kind of point you back to the plan we outlined on our last Investor Day. If you look, we had made acquisitions in the past to create our automotive business, which we feel very confident about how complete our roadmap is. We made acquisitions such as Nuvia, which enable us to create an opportunity in compute.

And we have been saying that the next focus for the company was to really augment our IoT space and especially in industrial. As Akash outlined, we're 100% convinced there's a significant opportunity for advanced computing and AI at the edge in industrial. And what you see us doing with Edge and Pulse with Focus dot ai is actually building a software platform that we can scale our technology to all those different verticals and we'll probably continue to augment the platform with those types of acquisitions.

Our next question comes from Timothy Arcuri with UBS. Please proceed with your question.

Thanks I know there's a lot of uncertainty, but is there anything besides just the macro that you would sort of point us away from thinking of that as like a normal Q3?

Yes, Tim. You're right. I mean, as we look at the fourth quarter, obviously, the underlying factor there is the macro environment. And so we've reflected the best information we have today, and we're going to watch obviously monitor that closely. In QCT, specifically, when you look at Android, automotive and IoT, we expect normal seasonality, both from a quarter over quarter and year over year perspective.

And then within the Apple product business, as we have said, we expect our share to go lower in the launches that happen in fall twenty twenty five. So we're forecasting approximately 70% share in that launch. And the rest of the factors kind of consistent with what you'd expect.

Great. And then just on China, there's a few offsetting factors. I know you did speak about the stimulus helping the market, but there's also tariffs and trade. So how do you handicap your China business? Are you seeing signs of the customers wanting to move away from U.

S. Suppliers like you and move more to MediaTek? How do you weigh those factors? Thanks.

Hey, Tim, thanks for the question. This is Cristiano. Look, at this point, we feel their position is strong because it has to do with how unique our product is and how relevant our product is for the global ambition for of our customers. I think we remind everyone that when we look at our China exposure, there are the products that stay within China, but there is a significant volume that goes from China to the rest of the world. And I think that's what drives uniqueness I think of the Snapdragon position there.

And there are couple of data points. I think just a couple of weeks ago, had the Shanghai Auto Show. We had a number of new partnerships including an expansion of the pipeline with new design wins in auto. We have seen no signs of a slowdown in design traction on Qualcomm products within our Chinese base and that includes smartphones, PC, automotive, XR and we're excited about some traction in industrial as well. Thank you.

Our next question is from the line of Stacy Rasgon with Bernstein. Please proceed with your question.

Hi, guys. Thanks for taking my questions. I wanted to first ask about chipset gross margins. It looks like they were down a bit in Q2, maybe 90 bps or so. They seem like they're being guided up similar amount in Q3.

But like why were they down in Q3 and Q2, especially given with within handsets, the presumed mix toward more premium, given the weakness in the emerging region smartphones that you talked about? Was it just mix between like the different segments or just like what was going on there?

Yes. So Stacy, this is Akash. It's really the mix across tiers and segments as well, right? We saw some upside that came through on lower tiers that kind of made us very small difference in gross margin. But kind of when you step back and think about broader gross margin trend, we are pretty happy with kind of both our actuals and guidance and there's no new information versus what we've told you before.

It's just how the mix plays out between quarters.

Got it. Thank you. And for my follow-up, so I know you talked about no direct impact from tariffs, but you said you're baking in what you're seeing. Like what are you baking in for the indirect effective tariffs? Like you talked about Android being seasonal, I guess, the September, which doesn't sound like you're baking in or suggesting any potential for demand destruction if tariffs or anything get put back on this.

How should we be thinking about like the actual specific assumptions you're putting on the market in the wake of the current macro and the tariff situation as we go through the year?

said is we do not see any material direct impact. There is smaller direct impact and some minor changes in demand. We are reflecting that and so it's in our numbers. But nothing that really is significant enough to change the direction of our guidance. So that's the data point I was giving.

In terms of indirect impact, that's obviously something that we're watching closely. Difficult for us to predict that at this point.

Our next question is from the line of Joe Moore with Morgan Stanley. Please proceed with your question.

Great. Thank you. You guys are continuing to show really strong results in auto in what's been a tough market for others. And you're talking about a doubling by fiscal twenty nineteen from here. Can you talk about the growth drivers there?

When does ADAS start to kick in more as a growth category? And just what is it that gives you that confidence in that multiyear forecast?

Hi, Joe. This is Cristiano. There are a couple of drivers. I think if you remember when we outlined and disclosed the pipeline, we said one third of that was ADAS. And we also had Flex is really becoming a reality.

We have some interesting designs and some upcoming SOPs with Flex that has both the digital cockpit and ADAS in the same chipset. But the key drivers of the revenue is really the mix improvement with more digital cockpit, more computing content and then in the ADAS coming up. On ADAS alone, I think we just announced in the quarter five new designs of ADAS.

And Joe, to quickly add a data point to it. When you kind of step back and look at within the auto market, the car is being transformed. We play in the market that is being transformed. So digitization of car is happening, and we play in the area that is actually growing significantly, both in terms of the penetration within established base of the auto market, but then also the silicon content multiplies as you get into the new type of cars. And so we are playing in this tremendous growth area within the car market, and that's what you're seeing in our numbers show up.

Our next question is from Chris Caso with Wolfe Research. Please proceed with your question.

Yes. Thank you. First question is with regard to handsets and you talked about that being up about 10 year on year. Could you break out the relative strength of I guess the two buckets that would drive that the China business and then your other large customer? And you also mentioned some impact from some of the subsidies that were happening in China.

Could you give some more detail of that? And perhaps is that sustainable demand? Or would perhaps that cause some pull forward as well?

Yes. From a subsidy perspective in China, what we've seen is really the total units for the March came in line with expectations. We are continuing to see a stronger mix play out, and this has been a trend for the last several years. So if you think about premium tier handsets over $400 they have increased from 21% of the installed 21% of new devices sold in 2019 to about 30 now in 2024. And so that part of the market is expanding.

Our customers are gaining share. And that is really what is informing the upside for us, both in the results quarter and the guidance quarter. And that's the primary driver of growth for us.

Got it. Thank you. I guess with regard to the PC business and you gave some data points on the in your prepared remarks. I know that your product line has changed a bit, so you can attack some lower price points there. What does that mean for the growth of the PC business within IoT this year?

And as you attack some of those lower price points, are the margins on those products similar to what your IoT business is today?

Yes. So if you think about what we've done in the PC business, we started at the top of the road map and established ourselves as the performance leader. And since then, we've introduced a total of four platforms, which addresses PCs all the way down to $600 And then the next generation of chips will come out later this year as well. So very, very happy with how the road map is playing out. In terms of design wins, we expect 100 devices to be commercialized by in 2026.

We have greater than 85 design wins today. And in terms of applications being ported and games being ported, we have now ported 1,400 games onto the platform and seven fifty native applications. So that's kind of preparing ourselves for ramp in the market. The data point that Cristiano provided in his prepared remarks is for Windows devices greater than 600 in U. S.

And the top five EU markets, we have approximately 9% share in the March. So very happy with how the traction is playing out and it positions us to achieve our target.

Yes. Just want to maybe as a reminder, when you go back to our Investor Day, we're kind of projecting 12% share by fiscal twenty nineteen. So I think that gives us confidence we're on the right track.

Our next question is from the line of Christopher Rolland with Susquehanna International. Please proceed with your question.

Hey, guys. Thanks for the question. I guess my first one is, if you guys could address maybe competition, whether you guys are seeing either more or less pressure, particularly at the high end. And kind of related, would you say that CSS designs that might provide APs out of the box for handset OEMs, would you ever consider that a threat or probably just a very low level threat to your business? Thank you.

Thanks for the question, Chris. I'm assuming you're asking about the competitive landscape in smartphones. So that's what I'm going to address. Competitive landscape has not changed for us at all. I think if we break that down by customer group, I think we have on Samsung a relationship that is very stable.

We have been competing for decades with their own silicon. We have changed the baseline of that business. It used to be 50% level. Now our baseline share is about 75% level. And we have been executing multi year agreements with that customer.

So I think no changes in the competitive landscape. When you look about the competition for China based customers, the competition is really between two players, Us and MediaTek. I think we like the fact that the premium tier has expanded. We always have said it's a large enough market for two players and that's the competitive landscape we see going forward.

Excellent. And Cristiano, maybe my second one here around AI. You guys have been really successful in AI, adding NPU, adding ASP as a result. But maybe Intel suggested that this isn't the case in PC. They're not getting better ASPs for increasing AI capabilities.

So I guess my question is, I guess, first kind of philosophical. Why does this work so well in mobile? And then for your future products going forward here, do you think there's still that link more AI, more NPU, more ASP? Or is this an upgrade cycle that's really taken place and kind of ASP expansion from here related to AI might be more difficult?

This is a great question. Actually, Chris, I love this question. So thank you. I am so I wanted to unpack this and I think they're two separate conversations. So I'm going to start with the philosophical as you pointed out.

It's interesting. There's it seems to be a little bit of an impatience I think about what's happening with AI, especially with mobile and PCs. But what you have to look is really the trend. And I think that's what's really important. And I will unpack the difference between phone and PC.

In phones, it's crystal clear, especially when you look at the maturity of AI today, the ability to have an assistant that does things for you, even for productivity, you see now more clarity on use cases being developed for smaller screen. When you have a smaller screen, some of those systems are incredibly useful for you. And where we are in the cycle right now, it's kind of similar to what we saw in the feature phone to smartphone transition. You're in the part of the cycle that most of the new features come from the OEM and from the OS provider on AI. And then eventually they're going to start coming from third party developers and that's where it gets scale.

So we like the trend. It's driving more NPU content into the phone, it's driving ASP and it's going to be a game about once this thing is deployed at scale with a number of new use cases about who can deliver more NPU performance without compromising battery life. And I think that's kind of most of our investment is in this area. We like everything we see. I think there's impatience people expected everybody like tomorrow to buy an AI smartphone, but the trend is good and again measured by the number of use cases where the beginning of third party developers building use cases.

PC is a little different. PC, the first when we enter the PC space, it's about we can deliver multi day battery life and faster CPU in a better form factor. Now, it's the same exact trend. It is a little bit different. I think that's why things like DeepSeek is incredibly helpful understanding a smaller model running on the PC.

And four capabilities that you use AI all the time, there is an economic aspect of running that on the devices at the edge. So, think what we're seeing right now is we're winning PC designs because we have a better laptop. It's faster. It is smaller multi day battery life. But the PC AI, it's just at the beginning as more and more SaaS companies, especially as they get pressure from competition, smaller models make the cloud and the devices of the edge now competing for inference.

You're going to see more of those use cases and then the NPU is going to shine. And I think that you started to see that from the OS vendor, Microsoft talks about it a lot because they're building the AI use cases as an OS. But next, you're going to see that third party and it's going to be the same dynamics that we're on the phone. So we remain encouraged by it. I think it's going to create a positive cycle and we are investing to have the best NPU out there.

Thank you. Our last question is from Ross Seymar with Deutsche Bank. Please proceed with your question.

Qualcomm (QCOM) Q2 2025 Earnings Call Transcript

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