Qualcomm (QCOM US)_Hold_ Headwinds and tailwinds in the balance in FY25e

Qualcomm (QCOM US) Conference Call Summary Company Overview - Company: Qualcomm - Ticker: QCOM US - Market Cap: USD 194.39 billion - Current Share Price: USD 175.86 - Target Price: USD 180.00 - Rating: Hold Key Points Financial Performance - 1Q25 Results: Revenue of USD 11.7 billion, exceeding both company guidance of USD 10.9 billion and consensus estimates of USD 11 billion, marking a 14% quarter-over-quarter increase [2][24] - Segment Performance: - Handsets Revenue: USD 7.6 billion, up 24% quarter-over-quarter [2][20] - Automotive Revenue: USD 961 million, up 7% quarter-over-quarter [20] - IoT Revenue: USD 1.5 billion, down 8% quarter-over-quarter [20] - Gross Margin: 56.3%, beating guidance of 55.7% and consensus of 55.8% [2][20] - EPS: Non-GAAP EPS of USD 3.41, surpassing the guidance range of USD 2.85-3.05 [20] Future Guidance - 2Q25 Revenue Guidance: Expected to be in the range of USD 10.3-11.2 billion, implying a 9% sequential decline at the mid-point [20] - QCT Revenue: Expected between USD 8.9-9.5 billion with an EBT margin of 29-31% [20] - QTL Revenue: Expected between USD 1.25-1.45 billion with an EBT margin of 69-73% [20] - Handset Growth: Expected to grow 10% year-over-year, driven by increased shipments for the Samsung Galaxy S25 series [20] Market Dynamics - Smartphone Market Outlook: Management anticipates low-single-digit year-over-year unit growth for FY25, similar to FY24, with uncertainty regarding sustainability due to potential seasonal weakness in the S25 series [3][4] - China Subsidy Program: Recent subsidies may provide a tailwind for smartphone demand, not reflected in current forecasts [3] Risks and Challenges - Headwinds: Ongoing challenges include potential gross margin impacts from foundry ASP hikes and muted AI PC revenue outlook despite long-term targets of USD 4 billion by FY29 [4] - Market Sentiment: Despite positive sentiment around AI and high-end smartphone adoption, Qualcomm does not expect significant ASP increases beyond the usual 10% for next-generation mobile SoCs [4] Valuation and Rating - Target Price Adjustment: Target price revised to USD 180, applying a target PE multiple of 16x to FY25e EPS of USD 11.18 [5] - Rating: Maintain Hold rating as headwinds and tailwinds appear balanced for FY25 [5][32] Financial Metrics - EPS Estimates: FY25e EPS raised by 6% to USD 11.18 from USD 10.57 [5] - PE Ratio: FY25e PE ratio projected at 15.7x [8] - Dividend Yield: Expected to be 2.0% for FY25 [8] Additional Insights - Market Data: 3-month average daily trading volume (ADTV) of USD 4.76 billion [7] - Sector: Semiconductors and Equipment [7] This summary encapsulates Qualcomm's recent performance, future outlook, and the associated risks, providing a comprehensive view for potential investors.