filings.toolsQualcomm 10-Q 2024-12-29
Filed 2025-02-05. 8 sections, 251K characters. Original on sec.gov · Markdown · JSON
Cover and table of contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________
FORM 10-Q
_____________________
(Mark one)
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 29, 2024
OR
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission File Number 0-19528
QUALCOMM Incorporated
(Exact name of registrant as specified in its charter)
| Delaware | 95-3685934 | |||||||||||||
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |||||||||||||
| 5775 Morehouse Dr., San Diego, California | 92121-1714 | |||||||||||||
| (Address of Principal Executive Offices) | (Zip Code) |
(858) 587-1121
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
| Common Stock, $0.0001 par value | QCOM | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | ☐ | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
The number of shares outstanding of the registrant’s common stock was 1,106 million at February 3, 2025.
QUALCOMM Incorporated
Form 10-Q
For the Quarter Ended December 29, 2024
PART I. FINANCIAL INFORMATION
Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
| QUALCOMM Incorporated | ||||||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||||||
| (In millions, except par value amounts) | ||||||||||||||
| (Unaudited) |
| December 29, 2024 | September 29, 2024 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 8,713 | $ | 7,849 | |||||||
| Marketable securities | 5,592 | 5,451 | |||||||||
| Accounts receivable, net | 3,550 | 3,929 | |||||||||
| Inventories | 6,303 | 6,423 | |||||||||
| Other current assets | 1,907 | 1,579 | |||||||||
| Total current assets | 26,065 | 25,231 | |||||||||
| Deferred tax assets | 5,409 | 5,162 | |||||||||
| Property, plant and equipment, net | 4,460 | 4,665 | |||||||||
| Goodwill | 10,908 | 10,799 | |||||||||
| Other intangible assets, net | 1,225 | 1,244 | |||||||||
| Other assets | 7,508 | 8,053 | |||||||||
| Total assets | $ | 55,575 | $ | 55,154 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Trade accounts payable | $ | 2,581 | $ | 2,584 | |||||||
| Payroll and other benefits related liabilities | 1,424 | 1,834 | |||||||||
| Unearned revenues | 212 | 297 | |||||||||
| Short-term debt | 1,365 | 1,364 | |||||||||
| Other current liabilities | 4,372 | 4,425 | |||||||||
| Total current liabilities | 9,954 | 10,504 | |||||||||
| Unearned revenues | 77 | 88 | |||||||||
| Long-term debt | 13,212 | 13,270 | |||||||||
| Other liabilities | 5,452 | 5,018 | |||||||||
| Total liabilities | 28,695 | 28,880 | |||||||||
| Commitments and contingencies (Note 5) | |||||||||||
| Stockholders’ equity: | |||||||||||
| Preferred stock, $0.0001 par value; 8 shares authorized; none outstanding | — | — | |||||||||
| Common stock and paid-in capital, $0.0001 par value; 6,000 shares authorized; 1,106 and 1,113 shares issued and outstanding, respectively | — | — | |||||||||
| Retained earnings | 26,607 | 25,687 | |||||||||
| Accumulated other comprehensive income | 273 | 587 | |||||||||
| Total stockholders’ equity | 26,880 | 26,274 | |||||||||
| Total liabilities and stockholders’ equity | $ | 55,575 | $ | 55,154 |
| See accompanying notes. | ||||||||||||||
| QUALCOMM Incorporated | ||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||
| (In millions, except per share data) | ||||||||||||||
| (Unaudited) |
| Three Months Ended | |||||||||||||||||||||||
| December 29, 2024 | December 24, 2023 | ||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Equipment and services | $ | 9,942 | $ | 8,316 | |||||||||||||||||||
| Licensing | 1,727 | 1,619 | |||||||||||||||||||||
| Total revenues | 11,669 | 9,935 | |||||||||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||
| Cost of revenues | 5,161 | 4,312 | |||||||||||||||||||||
| Research and development | 2,230 | 2,096 | |||||||||||||||||||||
| Selling, general and administrative | 723 | 627 | |||||||||||||||||||||
| Other | — | (28) | |||||||||||||||||||||
| Total costs and expenses | 8,114 | 7,007 | |||||||||||||||||||||
| Operating income | 3,555 | 2,928 | |||||||||||||||||||||
| Interest expense | (163) | (178) | |||||||||||||||||||||
| Investment and other income, net | 243 | 212 | |||||||||||||||||||||
| Income from continuing operations before income taxes | 3,635 | 2,962 | |||||||||||||||||||||
| Income tax expense | (455) | (151) | |||||||||||||||||||||
| Income from continuing operations | 3,180 | 2,811 | |||||||||||||||||||||
| Discontinued operations, net of income taxes | — | (44) | |||||||||||||||||||||
| Net income | $ | 3,180 | $ | 2,767 | |||||||||||||||||||
| Basic earnings (loss) per share: | |||||||||||||||||||||||
| Continuing operations | $ | 2.86 | $ | 2.52 | |||||||||||||||||||
| Discontinued operations | — | (0.04) | |||||||||||||||||||||
| Net income | $ | 2.86 | $ | 2.48 | |||||||||||||||||||
| Diluted earnings (loss) per share: | |||||||||||||||||||||||
| Continuing operations | $ | 2.83 | $ | 2.50 | |||||||||||||||||||
| Discontinued operations | — | (0.04) | |||||||||||||||||||||
| Net income | $ | 2.83 | $ | 2.46 | |||||||||||||||||||
| Shares used in per share calculations: | |||||||||||||||||||||||
| Basic | 1,110 | 1,116 | |||||||||||||||||||||
| Diluted | 1,122 | 1,127 | |||||||||||||||||||||
| See accompanying notes. | ||||||||||||||
| QUALCOMM Incorporated | ||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||||||||||||
| (In millions) | ||||||||||||||
| (Unaudited) |
| Three Months Ended | |||||||||||||||||||||||
| December 29, 2024 | December 24, 2023 | ||||||||||||||||||||||
| Net income | $ | 3,180 | $ | 2,767 | |||||||||||||||||||
| Other comprehensive income, net of income taxes: | |||||||||||||||||||||||
| Foreign currency translation (losses) gains | (216) | 83 | |||||||||||||||||||||
| Net unrealized (losses) gains on available-for-sale debt securities | (39) | 32 | |||||||||||||||||||||
| Net unrealized (losses) gains on derivative instruments | (58) | 17 | |||||||||||||||||||||
| Other gains | 1 | 1 | |||||||||||||||||||||
| Other reclassifications included in net income | (2) | 2 | |||||||||||||||||||||
| Total other comprehensive (loss) income | (314) | 135 | |||||||||||||||||||||
| Comprehensive income | $ | 2,866 | $ | 2,902 |
| See accompanying notes. | ||||||||||||||
| QUALCOMM Incorporated | ||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||
| (In millions) | ||||||||||||||
| (Unaudited) |
| Three Months Ended | |||||||||||
| December 29, 2024 | December 24, 2023 | ||||||||||
| Operating Activities: | |||||||||||
| Net income from continuing operations | $ | 3,180 | $ | 2,811 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization expense | 436 | 437 | |||||||||
| Income tax provision in excess of (less than) income tax payments | 247 | (1,012) | |||||||||
| Share-based compensation expense | 759 | 602 | |||||||||
| Net gains on marketable securities and other investments | (45) | (71) | |||||||||
| Other items | (23) | 9 | |||||||||
| Changes in assets and liabilities: | |||||||||||
| Accounts receivable, net | 392 | (325) | |||||||||
| Inventories | 111 | 165 | |||||||||
| Other assets | 148 | 115 | |||||||||
| Trade accounts payable | 11 | 241 | |||||||||
| Payroll, benefits and other liabilities | (541) | 74 | |||||||||
| Unearned revenues | (88) | (81) | |||||||||
| Net cash used by operating activities from discontinued operations | — | (16) | |||||||||
| Net cash provided by operating activities | 4,587 | 2,949 | |||||||||
| Investing Activities: | |||||||||||
| Capital expenditures | (277) | (214) | |||||||||
| Purchases of debt and equity marketable securities | (914) | (1,452) | |||||||||
| Proceeds from sales and maturities of debt and equity marketable securities | 752 | 463 | |||||||||
| Acquisitions and other investments, net of cash acquired | (260) | (60) | |||||||||
| Other items | 28 | 7 | |||||||||
| Net cash used by investing activities | (671) | (1,256) | |||||||||
| Financing Activities: | |||||||||||
| Proceeds from short-term debt | 500 | 400 | |||||||||
| Repayment of short-term debt | (500) | (400) | |||||||||
| Repurchases and retirements of common stock | (1,750) | (784) | |||||||||
| Dividends paid | (942) | (895) | |||||||||
| Payments of tax withholdings related to vesting of share-based awards | (315) | (370) | |||||||||
| Other items | (1) | 8 | |||||||||
| Net cash used by financing activities | (3,008) | (2,041) | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | (44) | 15 | |||||||||
| Net increase (decrease) in total cash and cash equivalents | 864 | (333) | |||||||||
| Total cash and cash equivalents at beginning of period (including $77 classified as held for sale at September 24, 2023) | 7,849 | 8,527 | |||||||||
| Total cash and cash equivalents at end of period (including $61 classified as held for sale at December 24, 2023) | $ | 8,713 | $ | 8,194 | |||||||
| See accompanying notes. | ||||||||||||||
| QUALCOMM Incorporated | ||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY | ||||||||||||||
| (In millions, except per share data) | ||||||||||||||
| (Unaudited) |
| Three Months Ended | |||||||||||||||||||||||
| December 29, 2024 | December 24, 2023 | ||||||||||||||||||||||
| Total stockholders’ equity, beginning balance | $ | 26,274 | $ | 21,581 | |||||||||||||||||||
| Common stock and paid-in capital: | |||||||||||||||||||||||
| Balance at beginning of period | $ | — | $ | 490 | |||||||||||||||||||
| Common stock issued under employee benefit plans | 1 | 1 | |||||||||||||||||||||
| Repurchases and retirements of common stock | (476) | (773) | |||||||||||||||||||||
| Share-based compensation | 790 | 629 | |||||||||||||||||||||
| Tax withholdings related to vesting of share-based payments | (315) | (370) | |||||||||||||||||||||
| Common stock issued in acquisition | — | 23 | |||||||||||||||||||||
| Balance at end of period | — | — | |||||||||||||||||||||
| Retained earnings: | |||||||||||||||||||||||
| Balance at beginning of period | 25,687 | 20,733 | |||||||||||||||||||||
| Net income | 3,180 | 2,767 | |||||||||||||||||||||
| Repurchases and retirements of common stock | (1,286) | (11) | |||||||||||||||||||||
| Dividends | (974) | (924) | |||||||||||||||||||||
| Balance at end of period | 26,607 | 22,565 | |||||||||||||||||||||
| Accumulated other comprehensive income (loss): | |||||||||||||||||||||||
| Balance at beginning of period | 587 | 358 | |||||||||||||||||||||
| Other comprehensive (loss) income | (314) | 135 | |||||||||||||||||||||
| Balance at end of period | 273 | 493 | |||||||||||||||||||||
| Total stockholders’ equity, ending balance | $ | 26,880 | $ | 23,058 | |||||||||||||||||||
| Dividends per share announced | $ | 0.85 | $ | 0.80 |
| See accompanying notes. | ||||||||||||||
| QUALCOMM Incorporated | ||||||||||||||
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||||||||||||||
| (Unaudited) |
Note 1. Basis of Presentation and Significant Accounting Policies Update
Financial Statement Preparation. These condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and the instructions to Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, the interim financial information includes all normal recurring adjustments necessary for a fair statement of the results for the interim periods. These condensed consolidated financial statements are unaudited and should be read in conjunction with our Annual Report on Form 10-K for our fiscal year ended September 29, 2024. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year.
We operate and report using a 52-53 week fiscal year ending on the last Sunday in September. Each of the three months ended December 29, 2024 and December 24, 2023 included 13 weeks. Our fiscal year for 2025 will include 52 weeks.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in our condensed consolidated financial statements and the accompanying notes. Actual results could differ from those estimates. Certain prior year amounts have been reclassified to conform to the current year presentation.
Recent Accounting Pronouncements.
Segment Reporting Disclosures: In November 2023, the Financial Accounting Standards Board (FASB) issued new requirements to disclose certain incremental segment information on an annual and interim basis, including (among other items) additional disclosure about significant segment expenses. We will adopt the new requirements for our annual periods starting in fiscal 2025 (and interim periods thereafter) on a retrospective basis.
Income Tax Disclosures: In December 2023, the FASB issued new requirements to disclose annually certain additional detailed income tax information related to the effective tax rate reconciliation and income taxes paid, among other items. We will adopt the new requirements starting in fiscal 2026 on a retrospective basis.
Income Statement - Expense Disaggregation Disclosures: In November 2024, the FASB issued new requirements to disclose certain additional expense information on an annual and interim basis, including (among other items) the amounts of purchases of inventory, employee compensation, depreciation and intangible asset amortization included within each income statement expense caption, as applicable. We will adopt the new requirements for our annual periods starting in fiscal 2028 (and interim periods thereafter) on a prospective basis.
Note 2. Composition of Certain Financial Statement Items
| Inventories (in millions) | |||||||||||
| December 29, 2024 | September 29, 2024 | ||||||||||
| Raw materials | $ | 333 | $ | 340 | |||||||
| Work-in-process | 3,636 | 3,497 | |||||||||
| Finished goods | 2,334 | 2,586 | |||||||||
| $ | 6,303 | $ | 6,423 |
Revenues. We disaggregate our revenues by segment (Note 6), by products and services (as presented on our condensed consolidated statements of operations), and for our QCT (Qualcomm CDMA Technologies) segment, by revenue stream, which is based on the industry and application in which our products are sold (as presented below). In certain cases, the determination of QCT revenues by industry and application requires the use of certain assumptions. Substantially all of QCT’s revenues consist of equipment revenues that are recognized at a point in time, and substantially all of QTL’s (Qualcomm Technology Licensing) revenues represent licensing revenues that are recognized over time and are principally from royalties generated through our licensees’ sales of mobile handsets.
| QUALCOMM Incorporated | ||||||||||||||
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||||||||||||||
| (Unaudited) |
QCT revenue streams were as follows (in millions):
| Three Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||
| December 29, 2024 | December 24, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| Handsets (1) | $ | 7,574 | $ | 6,687 | |||||||||||||||||||||||||||||||||||||||||||
| Automotive (2) | 961 | 598 | |||||||||||||||||||||||||||||||||||||||||||||
| IoT (internet of things) (3) | 1,549 | 1,138 | |||||||||||||||||||||||||||||||||||||||||||||
| Total QCT revenues | $ | 10,084 | $ | 8,423 |
(1) Includes revenues from products sold for use in mobile handsets.
(2) Includes revenues from products sold for use in automobiles, including connectivity, digital cockpit and advanced driver assistance systems (ADAS) and automated driving (AD).
(3) Primarily includes products sold for use in the following industries and applications: consumer (including personal computers (PCs), tablets, voice and music and extended reality (XR)), edge networking (including mobile broadband and wireless access points) and industrial (including handhelds, retail, tracking and logistics and utilities).
Revenues recognized from performance obligations satisfied (or partially satisfied) in previous periods generally include certain sales-based royalty revenues related to system software, certain amounts related to customer incentives and licensing revenues recognized related to devices sold in prior periods (including adjustments to prior period royalty estimates, which include the impact of the reporting by our licensees of actual royalties due) and were as follows (in millions):
| Three Months Ended | |||||||||||||||||||||||
| December 29, 2024 | December 24, 2023 | ||||||||||||||||||||||
| Revenues recognized from previously satisfied performance obligations | $ | 263 | $ | 176 |
Remaining performance obligations, which are primarily included in unearned revenues (as presented on our condensed consolidated balance sheet), represent the aggregate amount of the transaction price of certain customer contracts yet to be recognized as revenues as of the end of the reporting period and exclude revenues related to (a) contracts that have an original expected duration of one year or less and (b) sales-based royalties (i.e., future royalty revenues) pursuant to our license agreements. Our patent license agreements with key OEMs are generally long-term, with remaining terms expiring between fiscal 2027 and 2031. Separately, we have finalized renewal negotiations for long-term licenses with two key Chinese OEMs (for which the initial terms have expired) and expect to execute final agreements shortly. We are also in discussions with Huawei, whose agreement has expired.
Concentrations. A significant portion of our revenues are concentrated with a small number of customers/licensees of our QCT and QTL segments. The comparability of customer/licensee concentrations for the interim periods presented are impacted by the timing of customer/licensee device launches and/or innovation cycles and other seasonal trends, among other fluctuations in demand. Revenues from each customer/licensee that were 10% or greater of total revenues were as follows:
| Three Months Ended | |||||||||||||||||||||||
| December 29, 2024 | December 24, 2023 | ||||||||||||||||||||||
| Customer/licensee (x) | 24 | % | 25 | % | |||||||||||||||||||
| Customer/licensee (y) | 15 | 18 | |||||||||||||||||||||
| Customer/licensee (z) | 14 | 14 |
| QUALCOMM Incorporated | ||||||||||||||
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||||||||||||||
| (Unaudited) |
| Investment and Other Income (Expense), Net (in millions) | |||||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||||
| December 29, 2024 | December 24, 2023 | ||||||||||||||||||||||
| Interest and dividend income | $ | 169 | $ | 149 | |||||||||||||||||||
| Net gains on marketable securities | 19 | 11 | |||||||||||||||||||||
| Net gains on other investments | 30 | 5 | |||||||||||||||||||||
| Net gains on deferred compensation plan assets | 15 | 66 | |||||||||||||||||||||
| Impairment losses on other investments | (24) | (12) | |||||||||||||||||||||
| Other | 34 | (7) | |||||||||||||||||||||
| $ | 243 | $ | 212 |
Discontinued Operations. On June 1, 2023, SSW Partners completed the sale of Veoneer’s Active Safety business to Magna International Inc. for net cash proceeds of $1.5 billion. On March 1, 2024, SSW Partners completed the sale of Veoneer’s Restraint Control Systems business (collectively with the Active Safety business, the Non-Arriver businesses) to American Industrial Partners Capital Fund VII. Through the date of disposition by SSW Partners, the results of operations and cash flows of Veoneer’s Non-Arriver businesses are presented as discontinued operations. Cash flows from investing and financing activities from discontinued operations reported for the periods presented were not material.
Note 3. Income Taxes
We estimate our annual effective income tax rate to be 11% for fiscal 2025, which is lower than the U.S. federal statutory rate, primarily due to a significant portion of our income qualifying for preferential treatment as foreign-derived intangible income (FDII) at a 13% effective tax rate, which includes certain additional benefits from the requirement to capitalize research and development expenditures for federal income tax purposes (that are expected to continue to decline over time as capitalized research and development expenditures continue to amortize) and a benefit from our federal research and development tax credit. Our effective tax rate of 13% for the first quarter of fiscal 2025 was higher than our estimated annual effective tax rate, primarily due to $107 million of net discrete tax charges, which principally related to foreign currency losses on a noncurrent receivable related to our refund claim of Korean withholding tax. Our effective tax rate of 5% for the first quarter of fiscal 2024 included $79 million of net discrete tax benefits.
Note 4. Capital Stock
Stock Repurchase Program. During the first quarter of fiscal 2025, we utilized the remaining repurchase authority under the $10.0 billion stock repurchase program announced on October 12, 2021 and we began repurchases under the $15.0 billion stock repurchase program announced on November 6, 2024, which has no expiration date. At December 29, 2024, $14.3 billion remained authorized for repurchase under our stock repurchase program.
Shares Outstanding. Shares of common stock outstanding at December 29, 2024 were as follows (in millions):
| Balance at September 29, 2024 | 1,113 | ||||
| Issued | 4 | ||||
| Repurchased | (11) | ||||
| Balance at December 29, 2024 | 1,106 |
Dividends. On January 17, 2025, we announced a cash dividend of $0.85 per share on our common stock, payable on March 27, 2025 to stockholders of record as of the close of business on March 6, 2025.
| QUALCOMM Incorporated | ||||||||||||||
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||||||||||||||
| (Unaudited) |
Earnings Per Common Share. Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per share is computed by dividing net income by the combination of the weighted-average number of common shares outstanding and the weighted-average number of dilutive common share equivalents, comprised of shares issuable under our share-based compensation plans, during the reporting period, using the treasury stock method. The following table provides information about the diluted earnings per share calculation (in millions):
| Three Months Ended | |||||||||||||||||||||||
| December 29, 2024 | December 24, 2023 | ||||||||||||||||||||||
| Dilutive common share equivalents included in diluted shares | 12 | 11 | |||||||||||||||||||||
| Shares of common stock equivalents not included because the effect would be anti-dilutive or certain performance conditions were not satisfied at the end of the period | 1 | 14 |
Note 5. Commitments and Contingencies
Legal and Regulatory Proceedings.
Consumer Class Action Lawsuits: Beginning in January 2017, a number of consumer class action complaints were filed against us in the United States District Courts for the Southern and Northern Districts of California, each on behalf of a putative class of purchasers of cellular phones and other cellular devices. The cases filed in the Southern District of California were subsequently transferred to the Northern District of California. On July 11, 2017, the plaintiffs filed a consolidated amended complaint alleging that we violated California and federal antitrust and unfair competition laws by, among other things, refusing to license standard-essential patents to our competitors, conditioning the supply of certain of our baseband chipsets on the purchaser first agreeing to license our entire patent portfolio, entering into exclusive deals with companies, including Apple Inc., and charging unreasonably high royalties that do not comply with our commitments to standard setting organizations. The complaint sought unspecified damages and disgorgement and/or restitution, as well as an order that we be enjoined from further unlawful conduct. On September 27, 2018, the court certified the class. We appealed the court’s class certification order to the United States Court of Appeals for the Ninth Circuit (Ninth Circuit). On September 29, 2021, the Ninth Circuit vacated the class certification order, ruling that the district court had failed to correctly assess the propriety of applying California law to a nationwide class, and remanded the case to the district court. On June 10, 2022, the plaintiffs filed an amended complaint, limiting the proposed class to California residents rather than a nationwide class. We filed a motion to dismiss the amended complaint, and on January 6, 2023, the court issued an order granting in part and denying in part our motion to dismiss. We subsequently filed a motion for summary judgment on the plaintiffs’ remaining claims. The court granted our motion in its entirety and, on October 5, 2023, entered final judgment in Qualcomm’s favor. On November 2, 2023, the plaintiffs filed a notice of appeal to the Ninth Circuit, and on October 15, 2024, the court held a hearing on the appeal. The court has not yet issued a ruling. We intend to continue to vigorously defend ourselves in this matter.
Beginning in November 2017, several other consumer class action complaints were filed against us in Canada (in the Supreme Court of British Columbia and the Quebec Superior Court), Israel (in the Haifa District Court) and the United Kingdom (in the Competition Appeal Tribunal), each on behalf of a putative class of purchasers of cellular phones and other cellular devices, alleging violations of certain of those countries’ competition and consumer protection laws and seeking damages. The claims in these complaints are similar to those in the U.S. consumer class action complaints described above. These matters are at various stages of litigation, and we intend to continue to vigorously defend ourselves.
ParkerVision, Inc. v. QUALCOMM Incorporated: On May 1, 2014, ParkerVision filed a complaint against us in the United States District Court for the Middle District of Florida alleging that certain of our products infringed seven ParkerVision patents. On August 21, 2014, ParkerVision amended the complaint, alleging that we infringed 11 ParkerVision patents and sought damages and injunctive and other relief. ParkerVision subsequently reduced the number of patents asserted to three. The asserted patents are now expired, and injunctive relief is no longer available. ParkerVision continues to seek damages related to the sale of many of our radio frequency (RF) products sold between 2008 and 2018. On March 23, 2022, the district court entered judgment in our favor on all claims and closed the case. On April 20, 2022, ParkerVision filed a notice of appeal to the United States Court of Appeals for the Federal Circuit (Federal Circuit). On September 6, 2024, the Federal Circuit reversed the judgment of the district court, citing certain substantive and procedural issues, and remanded the case to the district court for further proceedings. We intend to continue to vigorously defend ourselves in this matter.
| QUALCOMM Incorporated | ||||||||||||||
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||||||||||||||
| (Unaudited) |
Arm Ltd. v. QUALCOMM Incorporated: On August 31, 2022, Arm Ltd. (Arm) filed a complaint against us in the United States District Court for the District of Delaware. Our subsidiaries Qualcomm Technologies, Inc. and NuVia, Inc. (Nuvia) are also named in the complaint. The complaint alleges that following our acquisition of Nuvia, we and Nuvia breached Nuvia’s Architecture License Agreement with Arm (the Nuvia ALA) by failing to comply with the termination obligations under the Nuvia ALA. Arm is seeking specific performance, including that we cease all use of and destroy any technology that was developed under the Nuvia ALA, including processor core technology (which Arm alleges includes our custom Qualcomm Oryon CPU cores). Arm’s complaint also contended that we violated the Lanham Act through trademark infringement and false designation of origin through unauthorized use of Arm’s trademarks and sought associated injunctive and declaratory relief; however, Arm dismissed these claims prior to trial. On September 30, 2022, we filed our Answer and Counterclaim in response to Arm’s complaint denying Arm’s claims. Our counterclaim seeks a declaratory judgment that we did not breach the Nuvia ALA or the Technology License Agreement between Nuvia and Arm, and that, following the acquisition of Nuvia, our architected cores (including all further developments, iterations or instantiations of the technology we acquired from Nuvia) and System-on-Chip (SoC) products incorporating such cores are fully licensed under our existing Architecture License Agreement with Arm (the Qualcomm ALA) and Technology License Agreement with Arm. A trial was held beginning on December 16, 2024, and on December 20, 2024, the jury found that (i) Qualcomm did not breach the Nuvia ALA and (ii) Qualcomm CPUs that include designs acquired in the Nuvia acquisition are licensed under the Qualcomm ALA. The jury was unable to reach a verdict with respect to Arm’s claim as to whether Nuvia breached the Nuvia ALA. The parties have filed various post-trial motions in this matter, including motions for judgment as a matter of law. We intend to continue to vigorously defend ourselves against Arm’s claims in this matter.
On April 18, 2024, we filed a separate complaint (captioned QUALCOMM Incorporated v. Arm Ltd.) against Arm in the United States District Court for the District of Delaware. The complaint alleges that Arm has breached the Qualcomm ALA by failing to provide certain deliverables that Arm is obligated to provide. The complaint seeks an order that Arm comply with its contractual obligations, damages, and additional relief. Arm moved to dismiss this complaint, and on October 30, 2024, the court denied Arm’s motion to dismiss. On December 16, 2024, we filed a First Amended Complaint, alleging additional causes of action based on Arm improperly seeking to terminate the Qualcomm ALA and improperly publicizing that it was seeking to terminate the Qualcomm ALA. Trial is scheduled to begin on March 9, 2026.
On October 22, 2024, Arm provided us with a notice alleging that we have breached the Qualcomm ALA by marketing products that contain CPUs that Arm alleges use designs, technology and code created by Nuvia employees prior to our acquisition of Nuvia; by seeking support and verification from Arm for additional products that use such alleged designs, technology and code; and by suing Arm for breach of the Qualcomm ALA. Arm’s notice asserts that it will have the right to terminate the Qualcomm ALA if such alleged breaches are not cured within 60 days of such notice. We disagree with Arm’s allegations, including that we are, or have been, in breach of the Qualcomm ALA. On January 8, 2025, Arm notified us that it was withdrawing its October 22, 2024 notice of breach and indicated that it has no current plan to terminate the Qualcomm ALA, while reserving its rights pending the outcome of the ongoing litigation.
Contingent Losses and Other Considerations: Litigation and investigations are inherently uncertain, and we face difficulties in evaluating or estimating likely outcomes or ranges of possible loss, particularly in antitrust and trade regulation investigations. We have not recorded any accrual at December 29, 2024 for contingent losses associated with the pending matters described above based on our belief that losses, while reasonably possible, are not probable. Further, any possible amount or range of loss cannot be reasonably estimated at this time. The unfavorable resolution of one or more of these matters could have a material adverse effect on our business, results of operations, financial condition or cash flows. We are engaged in numerous other legal actions not described above (for example, our 2010 European Commission matter relating to the Icera complaint, and other matters arising in the ordinary course of our business, including those relating to employment matters or the initiation or defense of proceedings relating to intellectual property rights) and, while there can be no assurance, we believe that the ultimate outcome of these other legal actions will not have a material adverse effect on our business, results of operations, financial condition or cash flows.
| QUALCOMM Incorporated | ||||||||||||||
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||||||||||||||
| (Unaudited) |
Note 6. Segment Information
We are organized on the basis of products and services and have three reportable segments. We conduct business primarily through our QCT semiconductor business and our QTL licensing business. QCT develops and supplies integrated circuits and system software with advanced connectivity and high-performance, low-power computing technologies for use in mobile devices; automotive systems for connectivity, digital cockpit and ADAS/AD; and IoT including consumer electronic devices, industrial devices and edge networking products. QTL grants licenses or otherwise provides rights to use portions of our intellectual property portfolio, which includes certain patent rights essential to and/or useful in the manufacture and sale of certain wireless products. Our QSI (Qualcomm Strategic Initiatives) reportable segment makes strategic investments. We also have nonreportable segments, including QGOV (Qualcomm Government Technologies) and our cloud computing processing initiative.
The table below presents revenues and earnings (loss) before income taxes (EBT) for reportable segments (in millions):
| Three Months Ended | |||||||||||||||||||||||
| December 29, 2024 | December 24, 2023 | ||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||
| QCT | $ | 10,084 | $ | 8,423 | |||||||||||||||||||
| QTL | 1,535 | 1,460 | |||||||||||||||||||||
| QSI | — | 13 | |||||||||||||||||||||
| Reconciling items | 50 | 39 | |||||||||||||||||||||
| Total | $ | 11,669 | $ | 9,935 | |||||||||||||||||||
| EBT | |||||||||||||||||||||||
| QCT | $ | 3,246 | $ | 2,593 | |||||||||||||||||||
| QTL | 1,158 | 1,080 | |||||||||||||||||||||
| QSI | 19 | 11 | |||||||||||||||||||||
| Reconciling items | (788) | (722) | |||||||||||||||||||||
| Total | $ | 3,635 | $ | 2,962 |
Reconciling items for revenues and EBT in the previous table were as follows (in millions):
| Three Months Ended | |||||||||||||||||||||||
| December 29, 2024 | December 24, 2023 | ||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||
| Nonreportable segments | $ | 50 | $ | 39 | |||||||||||||||||||
| EBT | |||||||||||||||||||||||
| Unallocated cost of revenues | $ | (59) | $ | (56) | |||||||||||||||||||
| Unallocated research and development expenses | (598) | (533) | |||||||||||||||||||||
| Unallocated selling, general and administrative expenses | (189) | (185) | |||||||||||||||||||||
| Unallocated other income | — | 28 | |||||||||||||||||||||
| Unallocated interest expense | (163) | (178) | |||||||||||||||||||||
| Unallocated investment and other income, net | 221 | 208 | |||||||||||||||||||||
| Nonreportable segments | — | (6) | |||||||||||||||||||||
| $ | (788) | $ | (722) |
| QUALCOMM Incorporated | ||||||||||||||
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||||||||||||||
| (Unaudited) |
Note 7. Fair Value Measurements and Marketable Securities
The following table presents our fair value hierarchy for assets and liabilities measured at fair value on a recurring basis at December 29, 2024 (in millions):
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Cash equivalents | $ | 4,111 | $ | 363 | $ | — | $ | 4,474 | |||||||||||||||
| Marketable securities: | |||||||||||||||||||||||
| Corporate bonds and notes | — | 4,727 | — | 4,727 | |||||||||||||||||||
| Mortgage- and asset-backed securities | — | 457 | — | 457 | |||||||||||||||||||
| U.S. Treasury securities and government-related securities | 245 | 72 | — | 317 | |||||||||||||||||||
| Equity securities | 91 | — | — | 91 | |||||||||||||||||||
| Total marketable securities | 336 | 5,256 | — | 5,592 | |||||||||||||||||||
| Derivative instruments | — | 5 | — | 5 | |||||||||||||||||||
| Other investments (1) | 1,012 | — | 41 | 1,053 | |||||||||||||||||||
| Total assets measured at fair value | $ | 5,459 | $ | 5,624 | $ | 41 | $ | 11,124 | |||||||||||||||
| Liabilities | |||||||||||||||||||||||
| Derivative instruments | $ | — | $ | 244 | $ | — | $ | 244 | |||||||||||||||
| Other liabilities (1) | 1,008 | — | — | 1,008 | |||||||||||||||||||
| Total liabilities measured at fair value | $ | 1,008 | $ | 244 | $ | — | $ | 1,252 |
(1) Other investments and other liabilities included in Level 1 are comprised of our deferred compensation plan assets and liabilities.
Long-term Debt. At December 29, 2024, the aggregate fair value of our outstanding fixed-rate notes, based on Level 2 inputs, was approximately $13.6 billion.
Marketable Securities. At December 29, 2024 and September 29, 2024, our marketable securities were all classified as current and were primarily comprised of available-for-sale debt securities (substantially all of which were corporate bonds and notes).
The contractual maturities of available-for-sale debt securities were as follows (in millions):
| December 29, 2024 | |||||
| Years to Maturity | |||||
| Less than one year | $ | 1,477 | |||
| One to five years | 3,567 | ||||
| No single maturity date | 457 | ||||
| Total | $ | 5,501 |
Debt securities with no single maturity date included mortgage- and asset-backed securities.
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This information should be read in conjunction with the condensed consolidated financial statements and the notes thereto included in “Part I, Item 1” of this Quarterly Report and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the fiscal year ended September 29, 2024 contained in our 2024 Annual Report on Form 10-K.
This Quarterly Report (including but not limited to this section titled Management’s Discussion and Analysis of Financial Condition and Results of Operations) contains forward-looking statements. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “may,” “will,” “would” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this Quarterly Report. Additionally, statements concerning future matters such as our future business, prospects, results of operations or financial condition; research and development or technology investments; new or enhanced products, services or technologies; emerging industries or business models; design wins or product launches; industry, market or technology trends, dynamics or transitions; our expectations regarding future demand or supply conditions; strategic investments or acquisitions, and the anticipated timing or benefits thereof; licensing discussions and negotiations; legal or regulatory matters, including the expected impacts of pending tax or other regulatory changes; U.S./China trade or national security tensions; vertical integration by our customers; competition; annual effective tax rates; and other statements regarding matters that are not historical are also forward-looking statements.
Although forward-looking statements in this Quarterly Report reflect our good faith judgment, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include without limitation those discussed under the heading “Risk Factors” below, as well as those discussed elsewhere in this Quarterly Report. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report. We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Quarterly Report. Readers are urged to carefully review and consider the various disclosures made in this Quarterly Report, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.
First Quarter Fiscal 2025 Overview
Revenues for the first quarter of fiscal 2025 were $11.7 billion, an increase of 17% compared to the year ago quarter, with net income of $3.2 billion, an increase of 15% compared to the year ago quarter. Key items from the first quarter of fiscal 2025 included:
-
QCT revenues increased by 20% in the first quarter of fiscal 2025 compared to the year ago quarter, due to higher handsets, IoT and automotive revenues.
-
QTL revenues increased by 5% in the first quarter of fiscal 2025 compared to the year ago quarter.
Our Business and Operating Segments
We develop and commercialize foundational technologies and products used in mobile devices and other wireless products. We derive revenues principally from sales of integrated circuit products and licensing our intellectual property, including patents and other rights.
We are organized on the basis of products and services and have three reportable segments. We conduct business primarily through our QCT (Qualcomm CDMA Technologies) semiconductor business and our QTL (Qualcomm Technology Licensing) licensing business. Our QSI (Qualcomm Strategic Initiatives) reportable segment makes strategic investments. We also have nonreportable segments, including QGOV (Qualcomm Government Technologies) and our cloud computing processing initiative.
Our reportable segments are operated by QUALCOMM Incorporated and its direct and indirect subsidiaries. Substantially all of our products and services businesses, including QCT, and substantially all of our engineering and research and development functions are operated by Qualcomm Technologies, Inc. (QTI), a wholly-owned subsidiary of QUALCOMM Incorporated, and QTI’s subsidiaries. QTL is operated by QUALCOMM Incorporated, which owns the vast majority of our patent portfolio. Neither QTI nor any of its subsidiaries has any right, power or authority to grant any licenses or other rights under or to any patents owned by QUALCOMM Incorporated.
Seasonality. Many of our products and much of our intellectual property are incorporated into consumer wireless devices, which are subject to seasonality and other fluctuations in demand. Our revenues have historically fluctuated based on consumer demand for devices, as well as on the timing of customer/licensee device launches and/or innovation cycles (such as the transition to the next generation of wireless technologies). This has resulted in fluctuations in QCT revenues in advance of and during device launches incorporating our products (for example, certain major handset OEMs accelerated their premium-tier device launches into the first quarter of fiscal 2025) and in QTL revenues when licensees’ sales occur. These trends may or may not continue in the future. Further, the trends for QTL have been, and may in the future be, impacted by disputes and/or resolutions with licensees and/or governmental investigations or proceedings.
Results of Operations
| Revenues (in millions) | |||||||||||||||||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| December 29, 2024 | December 24, 2023 | Change | |||||||||||||||||||||||||||||||||
| Equipment and services | $ | 9,942 | $ | 8,316 | $ | 1,626 | |||||||||||||||||||||||||||||
| Licensing | 1,727 | 1,619 | 108 | ||||||||||||||||||||||||||||||||
| $ | 11,669 | $ | 9,935 | $ | 1,734 |
First quarter 2025 vs. 2024
The increase in revenues in the first quarter of fiscal 2025 was primarily due to:
+ $1.6 billion in higher equipment and services revenues from our QCT segment
+ $75 million in higher licensing revenues from our QTL segment
| Costs and Expenses (in millions, except percentages) | |||||||||||||||||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| December 29, 2024 | December 24, 2023 | Change | |||||||||||||||||||||||||||||||||
| Cost of revenues | $ | 5,161 | $ | 4,312 | $ | 849 | |||||||||||||||||||||||||||||
| Gross margin | 56 | % | 57 | % |
First quarter 2025 vs. 2024
Gross margin percentage decreased in the first quarter of fiscal 2025 primarily due to a decrease in the proportion of total revenues related to QTL licensing revenues (which have a higher margin contribution).
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| December 29, 2024 | December 24, 2023 | Change | |||||||||||||||||||||||||||||||||
| Research and development | $ | 2,230 | $ | 2,096 | $ | 134 | |||||||||||||||||||||||||||||
| % of revenues | 19 | % | 21 | % | |||||||||||||||||||||||||||||||
First quarter 2025 vs. 2024
The increase in research and development expenses in the first quarter of fiscal 2025 was primarily due to:
+ $103 million increase in share-based compensation expense
+ $61 million increase driven by higher costs related to the development of wireless and integrated circuit technologies (including investments in key growth and diversification opportunities)
- $31 million decrease in expenses driven by the revaluation of our deferred compensation obligation (which resulted in a corresponding decrease in net gains on deferred compensation plan assets within investment and other income, net due to the revaluation of the related assets)
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| December 29, 2024 | December 24, 2023 | Change | |||||||||||||||||||||||||||||||||
| Selling, general and administrative | $ | 723 | $ | 627 | $ | 96 | |||||||||||||||||||||||||||||
| % of revenues | 6 | % | 6 | % | |||||||||||||||||||||||||||||||
First quarter 2025 vs. 2024
The increase in selling, general and administrative expenses in the first quarter of fiscal 2025 was primarily due to:
+ $48 million increase in share-based compensation expense
+ $46 million increase in sales and marketing expenses
- $19 million decrease in expenses driven by the revaluation of our deferred compensation obligation
| Interest Expense and Investment and Other Income, Net (in millions) | |||||||||||||||||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| December 29, 2024 | December 24, 2023 | Change | |||||||||||||||||||||||||||||||||
| Interest expense | $ | 163 | $ | 178 | $ | (15) | |||||||||||||||||||||||||||||
| Investment and other income (expense), net | |||||||||||||||||||||||||||||||||||
| Interest and dividend income | $ | 169 | $ | 149 | $ | 20 | |||||||||||||||||||||||||||||
| Net gains on marketable securities | 19 | 11 | 8 | ||||||||||||||||||||||||||||||||
| Net gains on other investments | 30 | 5 | 25 | ||||||||||||||||||||||||||||||||
| Net gains on deferred compensation plan assets | 15 | 66 | (51) | ||||||||||||||||||||||||||||||||
| Impairment losses on other investments | (24) | (12) | (12) | ||||||||||||||||||||||||||||||||
| Other | 34 | (7) | 41 | ||||||||||||||||||||||||||||||||
| $ | 243 | $ | 212 | $ | 31 |
Income Tax Expense (in millions, except percentages)
The following table summarizes the primary factors that caused our income tax provision to differ from the expected income tax provision at the U.S. federal statutory rate:
| Three Months Ended | |||||||||||||||||||||||
| December 29, 2024 | December 24, 2023 | ||||||||||||||||||||||
| Expected income tax provision at federal statutory tax rate | $ | 763 | $ | 622 | |||||||||||||||||||
| Benefit from foreign-derived intangible income (FDII) deduction, excluding the impact of capitalizing research and development expenditures | (207) | (164) | |||||||||||||||||||||
| Foreign currency loss (gain) related to foreign withholding tax receivable | 166 | (39) | |||||||||||||||||||||
| Benefit from FDII deduction related to capitalizing research and development expenditures | (152) | (189) | |||||||||||||||||||||
| Benefit related to the research and development tax credit | (74) | (75) | |||||||||||||||||||||
| Excess tax benefit associated with share-based awards | (37) | (29) | |||||||||||||||||||||
| Other | (4) | 25 | |||||||||||||||||||||
| Income tax expense | $ | 455 | $ | 151 | |||||||||||||||||||
| Effective tax rate | 13 | % | 5 | % |
We estimate our annual effective income tax rate to be 11% for fiscal 2025, which is lower than the U.S. federal statutory rate. Additional information regarding our annual effective income tax rate and income tax expense is provided in this Quarterly Report in “Notes to Condensed Consolidated Statements, Note 3. Income Taxes.”
The Organization for Economic Co-operation and Development (OECD) has announced a framework to implement a global minimum tax of 15% (referred to as Pillar Two). Certain countries have implemented or are in the process of implementing the Pillar Two legislation, which applies to us beginning in fiscal 2025. While we do not currently expect this to materially impact our consolidated financial statements, we continue to monitor the impact as countries implement legislation and the OECD provides additional guidance.
| Discontinued Operations (in millions) | |||||||||||||||||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| December 29, 2024 | December 24, 2023 | Change | |||||||||||||||||||||||||||||||||
| Discontinued operations, net of income taxes | $ | — | $ | (44) | $ | 44 |
Discontinued operations in the first quarter of fiscal 2024 are related to the Non-Arriver businesses. Information regarding the Non-Arriver businesses is provided in this Quarterly Report in “Notes to Condensed Consolidated Financial Statements, Note 2. Composition of Certain Financial Statement Items - Discontinued Operations.”
Segment Results
The following should be read in conjunction with our financial results for the first quarter of fiscal 2025 for each reportable segment included in this Quarterly Report in “Notes to Condensed Consolidated Financial Statements, Note 6. Segment Information.”
QCT Segment (in millions, except percentages)
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| December 29, 2024 | December 24, 2023 | Change | |||||||||||||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||||||||||||||
| Handsets | $ | 7,574 | $ | 6,687 | $ | 887 | |||||||||||||||||||||||||||||
| Automotive | 961 | 598 | 363 | ||||||||||||||||||||||||||||||||
| IoT (internet of things) | 1,549 | 1,138 | 411 | ||||||||||||||||||||||||||||||||
| Total revenues (1) | $ | 10,084 | $ | 8,423 | $ | 1,661 | |||||||||||||||||||||||||||||
| EBT (2) | $ | 3,246 | $ | 2,593 | $ | 653 | |||||||||||||||||||||||||||||
| EBT as a % of revenues | 32 | % | 31 | % | 1 point | ||||||||||||||||||||||||||||||
(1) Descriptions of our three QCT revenue streams can be found in this Quarterly Report in “Notes to Condensed Consolidated Financial Statements, Note 2. Composition of Certain Financial Statement Items.”
(2) Earnings (loss) before income taxes.
Substantially all of QCT’s revenues consist of equipment and services revenues, which were $9.9 billion and $8.3 billion in the first quarter of fiscal 2025 and 2024, respectively. QCT handsets, automotive and IoT revenues mostly relate to sales of our Snapdragon platforms (which include processors and modems), stand-alone Mobile Data Modems, radio frequency transceiver, power management and wireless connectivity integrated chipsets as well as sales of 4G, 5G sub 6 and 5G millimeter wave RFFE products.
First quarter 2025 vs. 2024
The increase in QCT revenues in the first quarter of fiscal 2025 was primarily due to:
+ higher handsets revenues, primarily due to $448 million in higher chipset shipments driven by certain major OEMs, and $424 million in higher revenues per chipset (driven by higher average selling prices and favorable mix), both of which benefited from an increase in demand in premium-tier Snapdragon platforms
+ higher IoT revenues, due to $513 million in higher shipments across consumer, industrial and edge networking products, partially offset by unfavorable product mix
+ higher automotive revenues, primarily driven by an increase in shipments from new vehicle launches with our Snapdragon digital cockpit products
QCT EBT as a percentage of revenues increased in the first quarter of fiscal 2025 primarily due to:
+ higher revenues
- higher operating expenses, primarily driven by higher research and development and selling, general and administrative expenses
Gross margin percentage remained approximately flat in the first quarter of fiscal 2025, primarily driven by higher product costs, offset by higher average selling prices.
QTL Segment (in millions, except percentages)
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| December 29, 2024 | December 24, 2023 | Change | |||||||||||||||||||||||||||||||||
| Licensing revenues | $ | 1,535 | $ | 1,460 | $ | 75 | |||||||||||||||||||||||||||||
| EBT | 1,158 | 1,080 | 78 | ||||||||||||||||||||||||||||||||
| EBT as a % of revenues | 75 | % | 74 | % | 1 point |
First quarter 2025 vs. 2024
The increase in QTL licensing revenues in the first quarter of fiscal 2025 was primarily due to:
+ $32 million increase in estimated sales of 3G/4G/5G-based multimode products
+ $30 million in higher royalty revenues recognized related to devices sold in prior periods
QTL EBT as a percentage of revenues increased in the first quarter of fiscal 2025 primarily due to higher revenues.
QSI Segment (in millions)
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| December 29, 2024 | December 24, 2023 | Change | |||||||||||||||||||||||||||||||||
| Equipment and services revenues | $ | — | $ | 13 | $ | (13) | |||||||||||||||||||||||||||||
| EBT | 19 | 11 | 8 | ||||||||||||||||||||||||||||||||
First quarter 2025 vs. 2024
QSI segment results were not material in the first quarter of fiscal 2025 and 2024.
Looking Forward
We believe that 5G combined with high-performance, low-power computing and on-device artificial intelligence will continue to drive adoption of certain technologies that are already commonly used in smartphones by industries and applications beyond mobile handsets, such as automotive and IoT. We believe it is important that we remain a leader in 5G technology development, standardization, intellectual property creation and licensing, and a leading developer and supplier of 5G integrated circuit products in order to sustain and grow our business long-term.
As we look forward to the next several quarters:
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We expect transitions to new generations of leading process technology nodes to continue to drive product cost increases from certain of our key semiconductor wafer suppliers.
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We expect continued intense competition, including from vertical integration by certain of our customers (e.g., Apple).
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Current U.S./China trade relations and/or national security protection policies may negatively impact our business, growth prospects and results of operations. See “Risk Factors” in this Quarterly Report, including the Risk Factor titled “A significant portion of our business is concentrated in China, and the risks of such concentration are exacerbated by U.S./China trade and national security tensions.”
We have recently entered into comprehensive 4G and 5G license agreements with Shenzhen Transsion Holdings Limited (a growing, China-headquartered OEM that sells primarily in developing regions). As a result of our agreements with Transsion, all outstanding litigation between the parties has been, or is in the process of being, dismissed.
Further, we have finalized renewal negotiations for long-term licenses with two key Chinese OEMs, and expect to execute final agreements shortly. We are also in discussions with Huawei, whose agreement has expired. See “Risk Factors” in this Quarterly Report, including the Risk Factors titled “The continued and future success of our licensing programs requires us to continue to evolve our patent portfolio and to renew or renegotiate license agreements that are expiring.”
We are also involved in other legal proceedings, including those described in this Quarterly Report in “Notes to Condensed Consolidated Financial Statements, Note 5. Commitments and Contingencies.” Litigation is inherently uncertain, and, while we intend to continue to vigorously defend ourselves in such matters, the unfavorable resolution of one or more of these matters could have a material adverse effect on our business, results of operations, financial condition or cash flows.
In addition to the foregoing business and market-based matters, we continue to devote resources to working with and educating participants in the wireless industry and governments as to the benefits of our licensing programs and our extensive
technology investments in promoting a highly competitive and innovative wireless industry. However, we expect that certain companies may be dissatisfied with the need to pay reasonable royalties for the use of our technologies and not welcome the success of our licensing programs in enabling new, highly cost-effective competitors to their products. Accordingly, such companies and/or governments or regulators may continue to challenge our business model in various forums throughout the world.
Further discussion of risks related to our business is provided in the section titled “Risk Factors” included in this Quarterly Report.
Liquidity and Capital Resources
Our principal sources of liquidity are our existing cash, cash equivalents and marketable securities, cash generated from operations and cash provided by our debt programs. The following tables present selected financial information related to our liquidity at December 29, 2024 and September 29, 2024 and for the first three months of fiscal 2025 and 2024 (in millions):
| December 29, 2024 | September 29, 2024 | Change | |||||||||||||||||||||
| Cash, cash equivalents and marketable securities | |||||||||||||||||||||||
| Cash and cash equivalents | $ | 8,713 | $ | 7,849 | $ | 864 | |||||||||||||||||
| Marketable securities | 5,592 | 5,451 | 141 | ||||||||||||||||||||
| $ | 14,305 | $ | 13,300 | $ | 1,005 | ||||||||||||||||||
| Debt (1) | $ | 14,577 | $ | 14,634 | $ | (57) |
(1) Includes our issued debt reported as long-term and $1.4 billion reported as short-term debt (which matures in May 2025). As of December 29, 2024 and September 29, 2024, our credit facility was undrawn, and we had no commercial paper outstanding.
| Three Months Ended | |||||||||||||||||||||||
| December 29, 2024 | December 24, 2023 | Change | |||||||||||||||||||||
| Net cash provided by operating activities | $ | 4,587 | $ | 2,949 | $ | 1,638 | |||||||||||||||||
| Net cash used by investing activities | (671) | (1,256) | 585 | ||||||||||||||||||||
| Net cash used by financing activities | (3,008) | (2,041) | (967) |
Cash, cash equivalents and marketable securities. The net increase in cash, cash equivalents and marketable securities for the first three months of fiscal 2025 was primarily due to net cash provided by operating activities, partially offset by $1.8 billion in payments to repurchase 11 million shares of our common stock, $942 million in cash dividends paid, $315 million in payments of tax withholdings related to the vesting of share-based awards, $277 million in capital expenditures and $260 million in cash paid for acquisitions and other investments.
The impact on our operating cash flows from net changes in our operating assets and liabilities for the first three months of fiscal 2025 was largely flat primarily from a decrease in accounts receivable (despite having higher revenues compared to the fourth quarter of fiscal 2024) due to the timing of integrated circuit shipments during the period and an increase in customer incentive arrangements that are included in accounts receivable, which included the impact of timing of related payments. This was largely offset by a decrease in payroll and other benefit related liabilities primarily driven by payments related to our employee cash incentive program.
Capital Return Program. Our stock repurchase program is subject to periodic evaluations to determine when and if repurchases are in the best interests of our stockholders, and we may accelerate, suspend, delay or discontinue repurchases at any time. We currently intend to continue to use cash dividends as a means of returning capital to stockholders, subject to capital availability and our view that cash dividends are in the best interests of our stockholders, among other factors. Additional information regarding our capital returns is provided in this Quarterly Report in “Notes to Condensed Consolidated Financial Statements, Note 4. Capital Stock.”
Additional Capital Requirements. Expected working and other capital requirements are described in our 2024 Annual Report on Form 10-K in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” At December 29, 2024, other than for the changes disclosed in the “Notes to Condensed Consolidated Financial Statements”, “Looking Forward” and “Liquidity and Capital Resources” in this Quarterly Report, there have been no other material changes to our expected working and other capital requirements described in our 2024 Annual Report on Form 10-K.
Further, regulatory authorities in certain jurisdictions have investigated our business practices and instituted proceedings against us and they or other regulatory authorities may do so in the future. Additionally, certain of our direct and indirect customers and licensees have pursued, and they or others may in the future pursue, litigation, arbitration or other strategies against us related to our business. Unfavorable resolutions of one or more of these matters have had and could in the future have a material adverse effect on our business, revenues, results of operations, financial condition and cash flows. See “Risk Factors” in this Quarterly Report.
We believe, based on our current business plan and the facts and factors known by us, our cash, cash equivalents and marketable securities, our expected cash flow generated from operations and our expected financing activities will satisfy our working and other capital requirements for at least the next 12 months and thereafter for the foreseeable future. See “Risk Factors” in this Quarterly Report.
Recent Accounting Guidance
Information regarding recent accounting guidance and the impact of such guidance on our condensed consolidated financial statements is provided in this Quarterly Report in the “Notes to Condensed Consolidated Financial Statements, Note 1. Basis of Presentation and Significant Accounting Policies Update.”
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Financial market risks related to interest rates, foreign currency exchange rates and equity prices are described in our 2024 Annual Report on Form 10-K. At December 29, 2024, there have been no material changes to the financial market risks described at September 29, 2024.
Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report.
Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting, as defined under Rule 13a-15(f) promulgated under the Exchange Act, in the first quarter of fiscal 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Information regarding certain legal proceedings is provided in this Quarterly Report in “Notes to Condensed Consolidated Financial Statements, Note 5. Commitments and Contingencies.”
Item 1A. RISK FACTORS
You should consider each of the following factors in evaluating our business and our prospects, any of which could negatively impact our business, results of operations, cash flows and financial condition, and require significant management time and attention. Further, the risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently consider immaterial may also negatively impact our business, results of operations, cash flows and financial condition, and require significant management time and attention. In such cases, the trading price of our common stock could decline. You should also consider the other information set forth in this Quarterly Report in evaluating our business and our prospects, including but not limited to our financial statements and the related notes, and “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” References to “and,” “or” and “and/or” should be read to include the others, as appropriate.
Risk Factors Summary:
RISKS RELATED TO OUR OPERATING BUSINESSES
*•*We derive a significant portion of our revenues from a small number of customers and licensees, and particularly from their sale of premium-tier handset devices. If revenues derived from these customers or licensees decrease or the timing of such revenues fluctuates, our business and results of operations could be negatively affected.
*•*Our business, particularly our semiconductor business, may suffer as a result of our customers vertically integrating (i.e., developing their own integrated circuit products).
*•*A significant portion of our business is concentrated in China, and the risks of such concentration are exacerbated by U.S./China trade and national security tensions.
RISKS RELATED TO NEW INITIATIVES
*•*Our growth depends in part on our ability to extend our technologies and products into new and expanded product areas, and industries and applications beyond mobile handsets. Our research, development and other investments in these new and expanded product areas, industries and applications, and related technologies and products, as well as in our existing technologies and products, and new technologies, may not generate operating income or contribute to future results of operations that meet our expectations.
*•*We may engage in acquisitions and other strategic transactions or make investments, or be unable to consummate planned strategic acquisitions, which could adversely affect our results of operations or fail to enhance stockholder value.
RISKS RELATED TO SUPPLY AND MANUFACTURING
*•*We depend on a limited number of third-party suppliers for the procurement, manufacture, assembly and testing of our products manufactured in a fabless production model. If we fail to execute supply strategies that provide supply assurance, technology leadership and reasonable margins, our business and results of operations may be harmed. We are also subject to order and shipment uncertainties that could negatively impact our results of operations.
*•*There are numerous risks associated with the operation and control of our manufacturing facilities, including a higher portion of fixed costs relative to a fabless model; environmental compliance and liability; impacts related to climate change; exposure to natural disasters, health crises, geopolitical conflicts and cyber-attacks; timely supply of equipment and materials; and various manufacturing issues.
RISKS RELATED TO CYBERSECURITY OR MISAPPROPRIATION OF OUR CRITICAL INFORMATION
*•*Our business and operations could suffer in the event of security breaches of our IT systems, or other misappropriation of our technology, intellectual property or other proprietary or confidential information.
RISKS RELATED TO HUMAN CAPITAL MANAGEMENT
*•*We may not be able to attract or retain qualified employees.
RISKS SPECIFIC TO OUR LICENSING BUSINESS
*•*The continued and future success of our licensing programs requires us to continue to evolve our patent portfolio and to renew or renegotiate license agreements that are expiring.
*•*Efforts by some OEMs to avoid paying fair and reasonable royalties for the use of our intellectual property may require the investment of substantial management time and financial resources and may result in legal decisions or actions by governments, courts, regulators or agencies, Standards Development Organizations (SDOs) or other industry organizations that harm our business.
- Changes in our patent licensing practices, whether due to governmental investigations, legal challenges or otherwise, could adversely impact our business and results of operations.
RISKS RELATED TO REGULATORY AND LEGAL CHALLENGES
*•*Our business may suffer as a result of adverse rulings in governmental investigations or proceedings or other legal proceedings.
RISKS RELATED TO INDUSTRY DYNAMICS AND COMPETITION
*•*Our revenues depend on our customers’ and licensees’ sales of products and services based on CDMA, OFDMA and other communications technologies, including 5G, and customer demand for our products based on these technologies.
*•*Our industry is subject to intense competition in an environment of rapid technological change. Our success depends in part on our ability to adapt to such change and compete effectively; and such change and competition could result in decreased demand for our products and technologies or declining average selling prices for our products or those of our customers or licensees.
RISKS RELATED TO PRODUCT DEFECTS OR SECURITY VULNERABILITIES
*•*Failures in our products, or in the products of our customers or licensees, including those resulting from security vulnerabilities, defects or errors, could harm our business.
RISKS RELATED TO INTELLECTUAL PROPERTY
*•*The enforcement and protection of our intellectual property may be expensive, could fail to prevent misappropriation or unauthorized use of our intellectual property, could result in the loss of our ability to enforce one or more patents, and could be adversely affected by changes in patent laws, by laws in certain foreign jurisdictions that may not effectively protect our intellectual property and by ineffective enforcement of laws in such jurisdictions.
*•*Claims by other companies that we infringe their intellectual property could adversely affect our business.
*•*Our use of open source software may harm our business.
GENERAL RISK FACTORS
*•*We operate in the highly cyclical semiconductor industry, which is subject to significant downturns. We are also susceptible to declines in global, regional and local economic conditions generally. Our stock price and financial results are subject to substantial quarterly and annual fluctuations due to these dynamics, among others.
*•*Geopolitical conflicts, natural disasters, pandemics and other health crises, and other factors outside of our control, could significantly disrupt our business.
*•*Our business may suffer due to the impact of, or our failure to comply with, the various existing, new or amended laws, regulations, policies or standards to which we are subject.
*•*There are risks associated with our debt.
*•*Tax liabilities could adversely affect our results of operations.
Risk Factors:
RISKS RELATED TO OUR OPERATING BUSINESSES
We derive a significant portion of our revenues from a small number of customers and licensees, and particularly from their sale of premium-tier handset devices. If revenues derived from these customers or licensees decrease or the timing of such revenues fluctuates, our business and results of operations could be negatively affected.
We derive a significant portion of our revenues from a small number of customers and licensees, and particularly from their sale of premium-tier handset devices,
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Item 5. OTHER INFORMATION
On November 26, 2024, Akash Palkhiwala, our Chief Financial Officer and Chief Operating Officer, adopted a Rule 10b5-1 trading arrangement (as defined in Item 408 of Regulation S-K) providing for the sale of an aggregate of (i) 40,000 shares of our common stock plus (ii) 100% of the net shares issued to Mr. Palkhiwala upon the vesting of restricted stock unit awards representing 25,269 shares of our common stock, including accrued dividend-equivalent shares and excluding any shares withheld to satisfy tax withholding obligations in connection with the settlement of such awards. The plan is scheduled to terminate on February 27, 2026.
On December 11, 2024, Heather Ace, our Chief Human Resources Officer, acting as trustee on behalf of her family trust, adopted a Rule 10b5-1 trading arrangement providing for the sale of 6,400 shares of our common stock. The plan is scheduled to terminate on November 13, 2025.
Item 6. EXHIBITS
(1)Indicates management contract or compensatory plan or arrangement.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| QUALCOMM Incorporated | |||||
| Dated: February 5, 2025 | /s/ Akash Palkhiwala | ||||
| Akash Palkhiwala | |||||
| Chief Financial Officer and Chief Operating Officer |