QUALCOMM Incorporated

Ladies and gentlemen, thank you for standing by. Welcome to the Qualcomm 3rd Quarter Fiscal 2026 Earnings Conference Call. At this time, all participants are in listening mode. Later, we'll conduct a question and answer session. If you'd like to ask a question during this time, press star, then the number 1 on your telephone keypad. To withdraw your question, press star, then the number 2. If you're using a speakerphone, please pick up your handset before pressing the numbers. Please limit your questions to one question and one follow-up. As a reminder, this conference is being recorded July 29, 2026. The playback number for today's call is 877-660-6853. International callers, please dial 201-612-7415. Playback reservation number is 137-61-080. I would now like to turn the call over to Brett Simpson, Senior Vice President of Investor Relations. Mr. Simpson, please go ahead.

Thank you and good afternoon everyone. Today's call will include prepared remarks by Cristiano Amon and Akash Palkhiwala. In addition, Alex Rogers will join the question and answer session. You can access our earnings release and a slide presentation that will 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 10Q, 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 Amon.

Thank you, Brett, and good afternoon, everyone. Thanks for joining us today. In fiscal Q3, Thank you for joining us. Expanding into the data center with four unique product lines. Two, driving a GenTech and physical AI compute everywhere. And three, expanding beyond silicon to full stack software and platform solutions. We also updated our fiscal 2029 financial targets which now include more than $24 billion in revenue across automotive and IoT plus more than $15 billion in data center bring our total non-handset revenue outlook to $40 billion by fiscal 2029 up from our previous target of $22 billion. This reflects our conviction in the opportunities throughout the end of the decade in the scale of our business diversification. In the short term, the entire industry continues to be impacted by unprecedented memory prices, higher manufacturing and input costs, as well as supply chain shortages driven by overall data center demand. In addition to the resulting revenue decline in mobile and consumer electronics, this is creating short-term pressure on UCT gross margins, which will be slightly below our historical range. We're implementing price increases, and as they take effect, we expect to see gross margins realign to our operating model. Despite these headwinds, we expect top-line growth for Qualcomm and Cisco 27, driven by an inflection in non-enhanced revenues throughout the fiscal year. We're incredibly excited about the next chapter of Qualcomm, our relevance in the next phase of AI, and distributed intelligence from edge to cloud, and we remain firmly focused on the execution phase of our strategy. I will now share some key highlights on the business. Let me start with data center. This is the ideal and logical time for Qualcomm to enter the market as agentic workloads are reshaping the economics of AI. Efficient token generation and total cost of ownership are fundamental to scaling AI and as a result, inference is becoming disaggregated in the data center and will be increasingly distributed. This means hybrid inference will evolve across the entire compute continuum from data center to on-premise, network edge and edge devices. Giving Qualcomm's assets is a natural evolution of our growth story. Thank you for joining us. Our two near-term custom silicon winds will be revenue generating in the December quarter and we have begun wafer production. Both projects are in the first phase of strategic multi-year customer relationships that we expect to expand over time. Our innovative high bandwidth compute solution is designed to address one of the industry's most difficult bottlenecks by integrating compute directly with high density memory and Improving performance per watt, memory efficiency, and total cost of ownership. I'm pleased to report that we have completed the tape-out of HBC Gen 1, an engineering milestone that moves us into the next phase of customer engagements. We expect to demonstrate HBC performance on silicon in the coming quarters ahead of the launch of our first HBC solution in mid-2027. Across our merchant platforms, including HBC-based AI accelerators, service connectivity, and CPUs, we are in active conversations with nearly every leading data center player about building long-term partnerships. We're pleased for the activity and interest across these opportunities and expect to share more as they advance. As announced earlier today, we have closed our acquisition of Modular Incorporated and integration is now underway. Modular strengthens our ability to deliver an end-to-end software stack for data center and edge AI deployments. It will also be hardware agnostic, helping simplify AI software complexity across multiple platforms and giving developers a modern and open environment for heterogeneous compute. This is an important step in how we see AI infrastructure evolving and with software and hardware coming together to deliver better performance, flexibility, and efficiency. Our vision and objective with Modular goes far beyond augmenting our AI software capabilities. We have the ambition to change the current industry approach to AI software from closed to open systems to promote enhanced competition, innovation, and resilience. Modular will host ModCon in August. with some incredible announcements from industry partners and we look forward to further engaging with developers and ecosystem partners at this event. In automotive, customer momentum continues to drive exceptional revenue growth. This quarter, we signed a landmark expanded agreement with BMW, winning a highly competitive selection process to become the lead compute silicon provider for their next generation ADAS as well as digital cockpit. This agreement represents a material expansion of our automotive pipeline and establishes Qualcomm as the lead compute silicon partner for BMW, extending across model programs for well into the next decade. We look forward to building on our existing cooperation with BMW in the years ahead. Additionally, our recently announced collaboration with Stellantis supports our automotive pipeline well into the 2030s. These agreements reflect the broad interest we're seeing for Digital Cockpit and ADAS. Customers are shifting from socket-by-socket design awards to multi-generation strategic engagements as they increasingly recognize the value of our broad technology portfolio, platform approach, and long-term commitment to partnerships, the automotive industry, and open ecosystems. Further, with our fifth-generation Snapdragon digital chassis ramping in September, we We're delivering a significant increase in content per vehicle, and we are on track to become the number one automotive semiconductor player by revenue. Last quarter, we said we were targeting an annualized revenue run rate of $6 billion as we exit fiscal 2026. Today, we're raising that outlook and now expect annualized sales of approximately $7 billion exiting fiscal 2026. Within industrial... We're strengthening our position across many verticals as they embrace AI at the edge and open weight models. At our investor day, we introduced a fiscal 2019 projection of $8 billion in revenue for industrial networking and robotics. We're happy to report that our industrial design wind pipeline exceeds $7 billion, with over $3.5 billion in design wind secured this fiscal year. Moving on to handsets. Despite overall industry contraction caused by the current memory environment, we're seeing early signs of an agentic smartphone cycle that will grow over time. In China, major OEMs are preparing to bring new on-device agents and orchestrators to market, and we believe agentic experiences will play a larger role in premium tier demand as adoption grows. Our share position at Samsung remains strong, with Snapdragon powering Approximately 70% of their flagship devices. As announced at Samsung Unpack, our collaboration is now expanding across the wider Galaxy ecosystem from the latest foldable phones and Galaxy watches to intelligent eyewear developed with Google, bringing new agentic experiences to more devices. This reflects a broader potential to reimagine mobile for the age of agentic AI. Beyond smartphones, PCs, smart glasses, and other new personal AI form factors are all becoming endpoints for agents. That creates a significant multi-year upgrade opportunity for Qualcomm, as today's install base needs to evolve to enable more personal, contextual, and autonomous AI experience. In PCs, we're growing our leading share of design wins in Google Books, bringing Snapdragon together with Gemini Intelligence for a new generation of AI-first laptops. With Microsoft, we're collaborating on Project Solara, a chip-to-cloud platform designed for agent-first enterprise devices. And through our Snapdragon Start program for smart glasses, we're delivering a complete reference platform that enables eyewear brands to develop their own devices. With roughly 600 million global eyewear units shipped every year, this program will help expand the ecosystem and accelerate the transition of this category to smart glasses. You will hear more about this at Snapdragon Summit in September. At Investor Day, we lay out our vision for Qualcomm's next chapter and our path toward our fiscal 2029 targets. We already seen an inflection in our non-handset businesses which underscores the success of our diversification strategy and there's a lot more to come. Our data center business is just at the beginning of its journey and we recognize that investors want to see more proof points that we can successfully execute on our plans as a new entrant. We welcome the challenge ahead and are confident we will prove, as we have many times before, that Qualcomm can execute and win in new growth areas, including data center. With that, I'll turn the call over to Akash.