QUALCOMM Incorporated

Ladies and gentlemen, thank you for standing by. Welcome to the Qualcomm third quarter fiscal 2023 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. If you would like to ask a question during this time, press star, then the number one on your telephone keypad. To throw your question, press star, then the number two. If you're using a speakerphone, please pick up your handset before pressing the numbers. please lend me your questions to one question and one follow-up. As a reminder, this conference is being recorded August 2, 2023. The playback number for today's call is 877-660-6853. International callers, please dial 201-612-7415. The playback reservation number is 137-3925. I would now like to turn the call over to Mauricio Lopez-Odoin, Vice President of Investor Relations. Mr. Lopez-Odoin, please go ahead.

Thank you, and good afternoon, everyone. Today's call will include prepared remarks by Cristiano Mon and Akash Palkawala. 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 has been 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-K, which contain important factors that could cause actual results to differ materially from the forward-looking statements. And now the comments from Qualcomm's President and Chief Executive Officer, Cristiano Mon.

Thank you, Mauricio, and good afternoon, everyone. Thanks for joining us today. In our fiscal Q3, we delivered results consistent with our guidance with non-GAAP earnings of $1.87 per share above the midpoint of our guidance. We recorded fiscal Q3 non-GAAP revenues of $8.4 billion, including $7.2 billion from our chipset business and $1.2 billion from our licensing business. This quarter also marked our 11th straight quarter of year-over-year double-digit percentage growth in QCT automotive revenues. We are pleased with our technology, product, and design win execution, positioning us well for continued leadership enhancements in future growth and diversification in automotive and IoT. I will now share some highlights from across the business. Our Snapdragon 8 series mobile platforms continue to set the benchmark for premium-tier mobile experiences. Smartphones powered by our Snapdragon 8 Gen 2 represent the top devices according to Antutu benchmarks in Android Authority. We are also pleased that the Snapdragon 8 Gen 2 for Galaxy will again power Samsung's newest flagship device lineup globally. the Galaxy Z Flip 5, Galaxy Z Fold 5, and the Galaxy Tab S9 series. Our fastest Snapdragon ever for Samsung defines a new standard in smartphone computing capabilities, AI experiences, desktop-level gaming features, professional-grade photography, enhanced mobile productivity, and more. This launch underscores Qualcomm and Samsung's mutual commitment to delivering premium consumer experiences for flagship Galaxy devices. We are extremely proud of our successful partnership with Samsung Mobile. We are also pleased to extend Snapdragon experiences to mass market 5G smartphones. The redesigned Snapdragon 4 Gen 2 mobile platform will bring premium experiences at reduced prices to help drive 4G to 5G migration, especially in new 5G deployments worldwide. We're looking forward to device announcements in the second half of 2023. In automotive, we hosted our first automotive summit in Suzhou, China. with more than 1,000 automotive OEMs, tier ones, ecosystem partners, media, analysts, and government officials in attendance. The broad participation at the event demonstrates Qualcomm's strong position as a technology partner to the growing automotive ecosystem worldwide, especially EVs, as well as Snapdragon digital chassis technology and product leadership. We also won more than 10 new designs with leading automakers across the globe for next-generation digital cockpit and telematics systems. In consumer IoT, the recently announced Meta Quest 3 is the first virtual and mixed reality headset to be powered by a next-generation Snapdragon XR platform developed in collaboration with Meta. The Quest 3 features two times the graphical performance, higher resolution, and a slimmer, more comfortable form factor than the Quest 2. We're also helping to drive the growing ecosystem of VR and MR developers in China. OPPO recently announced their OPPO MR Glass Developer Edition powered by Snapdragon XR2+. And in compute, our next-generation PC platform with integrated custom Orion CPUs and a significantly upgraded AI engine remains on track for commercial readiness. We look forward to sharing more information at our Snapdragon Summit in October. In networking IoT, we continue to gain momentum with Wi-Fi 7 customer design wins. As an example, TP-Link expanded its retail small and medium business lines by launching five new routers, spanning indoor and outdoor deployment scenarios, all based on Qualcomm Networking Pro Wi-Fi 7 platforms. Lastly, we're very pleased to share that we have begun shipping our fixed wireless access solutions in support of Reliance Jio's upcoming 5G FWA service in India. In Industrial IoT, we launched a video collaboration platform suite which provides OEMs choice and flexibility for the design and deployment of immersive video conferencing devices across conference rooms, healthcare settings, and at-home video calling with friends and family. Enabling Windows, Android, and Linux on our platforms offers the ability to customize and deploy video conferencing products across diverse environments. Additionally, our platforms offer industry-leading AI-based noise suppression and dynamic framing. We also launched the QCS8550 and QCS4490. our first software-defined IoT solutions at Hannover Messe. These solutions enable next-gen smart cameras, drones, robotics, cloud gaming, industrial handhelds, panels, point-of-sale devices, and more. Lastly, together with Arrow Electronics, we announced a strategic collaboration to accelerate edge and AI adoption through the formation of Edge Labs, an Arrow Center of Excellence in designed to help customers alleviate IoT development challenges while increasing adoption of Edge AI across a variety of platforms. With an update on our progress in generative AI since the last call. We're very pleased and encouraged by the rapid acceleration of Gen AI at the Edge. This presents a significant opportunity for Qualcomm across our end markets. Use cases at the edge are evolving differently than the cloud, given the inherent context, immediacy, privacy, security, application reliability, and personalization capabilities available on device. For example, in handsets, models such as stable diffusion and control nets are changing user experiences for content creation and photography. Large language models embedded in the user interface can also enable enhanced virtual assistance. In personal computing, real-time co-pilots can bring significant enhancements to productivity and creativity, the benefits of which are well understood and very compelling for enterprises across industries. We believe the automotive industry will use some of the most advanced edge AI capabilities. from large language models for personalized and curated content and services, driver and occupant monitoring, and AI virtual assistants to contextual search. ADAS and autonomy applications can be enhanced by diffusion of data from cameras and other sensors for combined real-world perception, drive path prediction, and more. We're helping enable these capabilities and expect GenAI use cases to extend to XR, edge networking, and industrial IoT. Within the quarter, we expanded our collaborations across the ecosystem, and we are engaged with multiple hyperscalers, OEMs, and ISVs. Notably, we recently announced a collaboration with Meta on LAMA2-based AI implementations on flagship smartphones and PCs that will enable developers to create new and exciting GenAI applications using the AI capabilities of Snapdragon platforms beginning in 2024. Together with Meta, we're working to optimize the execution of Meta's LAMA2 large language models directly on-device. We also announced a focused collaboration with Microsoft to scale AI capabilities and bring best-in-class AI experience to users across consumer, enterprise, and industrial devices. At the Microsoft Build Developer Conference, our on-device stable diffusion was showcased on a Windows on Snapdragon powered laptop. We're also working with them to enable a host of productivity-based applications with multiple large models running on the device. As part of this collaboration, our AI engine Direct SDK is now available to Windows developers to easily accelerate their AI apps on Snapdragon compute platforms. This marks a significant milestone. In summary, we are uniquely positioned to help shape and capitalize on the upcoming on-device GenAI opportunity. Our AI technology is highly differentiated with best-in-class, high-performance, low-power, heterogeneous computing across our CPU, GPU, and NPU. And as multi-billion parameter GenAI models run pervasively and continuously on-device, we believe our NPU's unparalleled AI processing performance and power efficiency will become a requirement. We look forward to sharing more about our GenAI capable products at Snapdragon Summit in October. Before I turn the call over to Akash, I would like to provide an update on how we are managing our business in the current macroeconomic environment. We remain focused on executing our strategy and prioritizing capital and resource allocation on our future growth and diversification opportunities. Simultaneously, we are focused on long-term operating margin targets all while maintaining technology leadership across wireless connectivity, high performance, low power processing, and artificial intelligence. To that end, we're taking a conservative view of the market and will be proactively taking additional cost actions to ensure Qualcomm is well positioned to deliver maximum value for stockholders in an uncertain environment. I would now like to turn the call over to Akash.