Pretty great. Good afternoon, everyone. Thank you. I'm Stacey Rasgon. I cover the U.S. semiconductor and semicap space at Bernstein, and it's my honor to introduce our guest today, Cristiano Amon, the President and CEO of Qualcomm. If you have questions, you should have access to your pigeonhole form. You can put them in there, and we will have time to ask those at the end. Now, Qualcomm, look, I always say Qualcomm, both as a company and a stock, it's been through an awful lot, I think, over the last five or ten years. I think now, at least my own view, sitting where we are today, I think it looks to be coming into its own.
I think both in their core handset franchise as well as developing a much more diversified portfolio with very strong execution around things like automotive and IoT and even data center today. I think it should be a primary beneficiary of AI, especially as adoption increasingly migrates to the edge. They seem to be the way to play that. I think to tell us all about all of that, it gives me great pleasure to welcome Cristiano. Thank you so much for being here.
Mic microphones on. Yeah, it looks like they're on. Okay. Very good. Thank you for having me here.
Oh, you bet. You bet. Thank you. You know, before I get into some of the near-term stuff, which I want to actually dive more first into some of the more recent data center announcements that we heard over the last week or two. There was the Saudi Arabia announcement. There was the, I guess, the Nvidia open sourcing NVLink, which I guess kind of goes hand in hand with that. Maybe you could talk a little bit about that. We'll get to handsets and everything else. I'm sure you're super eager to talk about that.
Maybe we don't.
Maybe we don't. This, right, at least in the very near term, this has been, I think, top of mind, at least in terms of some of the newer opportunities that are in front of you. Can you tell us a little bit about what's going on in the data center there? I want to talk about some of the other edge AI opportunities, but data center in particular. This is an area I know you guys bought Nuvia, which was a data center CPU company. It looked like you were sort of doing that for a while, and then maybe it backed off, and then now it looks like we're going back into that again. Anything you can tell us about some of these new opportunities, I'd love to hear about it.
No, thank you. Thank you for the question. Maybe I'll start at the very top. It's a very natural, I think, evolution of the new Qualcomm. I think we have been really focused, as you know, leveraging our technology to create new growth markets, new diversified, I think, revenue and earnings. We're kind of going to everywhere we can go within the edge. The natural, I think, evolution for us in data center. I'll say we've been sort of looking at what will be the right entry point. We talked about that before we started looking at this market, somewhat opportunistic, understood where we can make a difference. I think now with that clarity, you started to see different data points here and there of what we're building.
Let me, with that frame, kind of tell you where do we think we can add value and make a difference. First of all, we believe we have one of the best CPU teams in the world. I think we had both the ability to execute to different CPU design points in record time. We executed our new custom CPU for the PC, very competitive, disruptive, better than phones. We did that in automotive. We have the ability to do that at a very compelling, I think, performance and power for the data center. The data center is changing. First, you have a lot of AI data centers, and all of those GPUs need a CPU to go along with it. It creates an opportunity. You also have a much more mature software ecosystem form instruction set.
I think thanks to AWS and Graviton that did a lot of the heavy lifting on the software ecosystem, that opportunity exists. The first one is, if you look at companies that are saying, even companies that are not traditionally chip companies saying, "I'm going to go build a CPU chiplet for the data center," then you look at Qualcomm and you say, "If you believe companies like Arm can do it, you believe Qualcomm can do it." Because we're a real chip company. We do 40 billion components a year. We have a lot of scale to leading node. We have a leading node every year. We have been executing in so many markets, and we have a great CPU team. That's one entry point. The other entry point is there's a lot of production of AI, right?
You have all of those foundational companies continue to chase more and more. For many applications, I think you've started to see the AI is getting good enough to scale. We go from creation to production at scale. When you go to production of scale, you need it to be very competitive. You just look at the conversation, just step out and look at the conversation when people are saying, "I'm going to go from here to the Middle East because there's going to be this many cents per token," you know, because you chase where energy is going to be cheaper. Performance per what? Performance per dollar matters. There's plenty of room for inference. We have been doing a lot of the edge on-prem and as a natural extension. That's kind of our angle.
We believe there is plenty of SAM, continue to grow. We have differentiated IP that we can put to work in both on the CPU side as well as high-scale inference that you are doing at scale. You started to see some of those signs. The first one you saw, Humane, I think we are going to be part of the data center. You saw Nvidia around Computex announced two partners. They announced two partners. I expected to see more. I saw two. Us and Fujitsu for building CPUs and NVLink. We have a couple of other things we are working on. I think hopefully people will see all the pieces on the puzzle, but it is a natural expansion and other opportunity for Qualcomm.
What is this, though? These are CPUs that are like the head node in GPU servers, or are these CPUs for standalone general purpose data centers? Is this like a merchant opportunity where you'll sell them to anybody? What are the dynamics of how you're thinking about this market that you're attacking?
Yes. All of the above. Here is the simple way to describe it. Think about it in terms of building blocks. We have an asset that you need. I think the industry has matured a lot. You just look at the number of custom ASICs they have been building. You have a lot of people looking at how to build a custom ASIC. You do a general purpose ASIC. You have major companies providing their solutions. You have different boards that get built. Think about a building block. You are going to need a CPU. We can provide a CPU chiplet all the way to a full SoC in any combination. We can provide it to anybody. We are going to be building interfaces. That is part of the NVLink announcement that you saw with Nvidia.
The way you should think about it is this CPU asset is very competitive, even if you start as a very simple building block, which is a CPU chiplet that can go into other things. Soon, hopefully at the end of the year, we'll be able to provide a very detailed product roadmap of what we're doing, how big the opportunity is, how that's going to be financially impactful to Qualcomm in the long term. We're not there yet.
Okay. So you do not want me to ask that now? You want me to wait till the end of the year?
That's the answer I'm going to provide. I think the reality is we've been putting those things together, I think, to tell the whole story. I think the acceleration of the announcements in the Middle East based on the president's visit kind of run the clock on us, and Computex run the clock on us. You've started to see that we're building something interesting. We'll show what the roadmap is pretty soon.
That's how we should think about it, at least right now. When you're building something interesting, the opportunity in theory is very large, and we'll see where it goes.
Here's how I should think about it. Remember our investor thing? We set $22 billion by 2029 non-handset. Include zero. Zero.
Okay. That was my next question, actually.
That's an optionality on the Qualcomm investment. I think we have two proven assets, a CPU. It goes back to the simplicity of the argument. If you believe that a company like Arm is going to build a CPU chip for the data center, if you believe they can do it, then I think you'll believe and they can enter this space, then you definitely believe Qualcomm can do it based on our assets, based on our CPU, based on our scale. The second thing is AI is getting scale. There's something about Computex that I've—are you going to ask about Computex later? I'll shut up and wait.
Go ahead.
There's something about Computex that actually—I won't say I was entirely surprised, but I was a bit surprised. There's something very interesting. Actually, it was announced at Dell Tech World, and it was displayed at Computex, which is there's all of those laptops with Qualcomm Snapdragon X. The conversation is, look, Qualcomm is providing the SoC for the laptop. Instead of Intel and AMD, you have Qualcomm. This one, it was one that was very interesting, and it should give you a different frame to think about it. They show a laptop with the best, I think, that you can get from Intel. I think the CPU was actually Intel, was Arrow Lake. They connected to that CPU a Qualcomm AI 100, which is in a laptop form factor. That's a laptop with Qualcomm AI 100 doing 100 billion parameter models in this PC.
That should tell you that as inference gets scale and is going to be running everywhere, the data center has to compete with the edge. I think we have a room to play there. It gets scale. In essence, those are the two assets. I think that's an optionality on Qualcomm, not included in any of their forecasts and not included in our $22 billion by 2029.
Okay. We'll get to the longer-term targets in a minute. I want to hit you over the head with handsets now. I'm sorry, but I'm going to. Let's do it. Look, I'm going to fold in just briefly some of the near-term stuff. I mean, clearly, there's been a lot of noise around tariffs and people worried about pull forward and then eventually demand destruction. I guess just very briefly, what are you seeing? What's the state of the universe right now in handsets and what you guys are seeing, I guess, in the near term in terms of trajectory? We've had the subsidies in China, and people worry that that's pulling forward. Just how do we think about this over the near term?
Okay. Maybe I'll list some simple facts. We have not seen any pull forward. We even said that in the last earnings call. No pull forward.
How would you know?
Because we look, we know every phone, remember, every phone is licensed and pays royalty. We get activation data. We know what's happening. We know the inventory levels. We have not seen pull forward. Will this situation change? I don't know, but we have not seen it. Second data point. No direct impact. If you saw what happened when there was an active embargo between the U.S. and China with 134, 125% consumer electronics coming into the U.S., except chips going into China, except so no direct impact. The real question that I don't think anybody knows the answer is there an indirect impact, which is consumer confidence where people buy new phones, going to buy new cars, going to buy new PCs? I don't know. We have not seen that yet in the numbers.
We are in the same boat as everybody else trying to get a hold of the situation. We have not seen that yet. We monitor and focus on the things that we can do.
Got it. Got it. No, that makes sense. I wish I knew. I just don't.
If you know, just let me know.
I mean, the other indirect issues you talked about, macro and consumer confidence. I mean, look, all of a sudden, if iPhones are going to cost $5,000, I mean, I guess iPhones has to.
If the `Galaxy doesn't, then I'll be.
We'll get to Apple in a minute. I want to ask about Xiaomi because that's the other big piece of handset news that's been causing a lot of angst. They just said, I can't remember what it was, O1 or O3, whatever they call their chip. They are clearly your three biggest customers: Apple, Samsung, and Xiaomi. They all have various degrees of trying to internalize silicon. I think Xiaomi's tried this before and others have tried this before, but they're trying to make a bigger push. They're delivering it. At the same time, you guys also just signed what you call a multi-year agreement. It said flagships. I don't know if that meant all flagships, but flagships will contain Qualcomm chips.
I guess the volume commitments are going to go up every year, and you're going to work with them outside of smartphones. Just how do we think about that Xiaomi thing? Because that's probably the second biggest question I'm getting right now.
Yeah. No, look, I'm going to unpack this. I love talking to you because I think you're very thoughtful about the company, directly understands what's going on. I will use this opportunity, Stacy, to give you probably a more detailed answer. I'll start with a very short one. By the way, I'm not worried about it. I've been getting questions. Qualcomm is turning 40 years this year. I've been in the company about 30. We've been getting questions about customers that get big enough trying to do their own chip for about 30 years now, which is okay. I think that's how the industry evolves. It keeps moving. Here's the more detailed answer to the question. It's important to understand what's happening with the phone market and the dynamics of Xiaomi and the dynamics of the China market.
First of all, if you analyze the China domestic market, Xiaomi is gaining share. Look, I don't need to say it, but you can check on the two things that are happening. Who is losing share at the premium tier? By the way, in China, when our premium tier customers, including Xiaomi, gain share, it's a multiplying effect on Qualcomm. It's a 6-7X when instead of supplying a modem, I supply the whole Snapdragon 8 Elite. One dynamic is the premium Android is gaining share. Dynamic number one. Dynamic number two, the premium tier expanded. The China market is becoming like the US market. Premium and low. The middle is contracting. I think the subsidy helped just accelerate affordability of a premium, expanded the premium tier. Number three dynamics happen in China. There is a market in China for a domestic chip.
That is the Huawei phone. And because of the Huawei inability to go beyond 7 nanometer, exactly they qualify, but it's a 7 nanometer process. They are hitting a little bit of a plateau. Xiaomi is in upswing. They see an opportunity to serve the market that exists in China. It doesn't exist outside China. It exists in China for a China domestic chip. Now, how do you put everything together? How do you put everything together? And how that is consistent with the fact that we signed an agreement with Xiaomi. In that agreement, it says that our volume with Xiaomi will expect it to increase on the annual basis.
That's from current levels?
Yes. Expect it to increase. How do you put it together? You're going to see that for the Xiaomi flagship, the main flagship, their main customer base is going to continue to be Snapdragon. Xiaomi is becoming more relevant outside China, continuing to be Snapdragon. There is going to be competition with Huawei for the segment in China that cares about a domestic chip. That's going to be Xiaomi with their chip. What actually means in the Qualcomm-Xiaomi relationship? The only thing that means is Xiaomi for China domestic is going to start to look a little bit more Samsung. It doesn't impact the Qualcomm volume, but it does impact the other suppliers that they have. You should think about what happens in Samsung. Samsung, look at the premium tier Samsung. Premium tier Samsung is Qualcomm, and then is their own chip. It varies. One year, they're there.
The other ear, they're not there. Everything else for the low, it's a combination of Qualcomm and MediaTek and other suppliers. Xiaomi is going to look like that. I said it doesn't change anything. It explains the dynamic of the China market. It speaks about Xiaomi exactly putting some competition with Huawei. It continued to expand our position and the strength of Snapdragon in China with Xiaomi for the MI series, for the flagship, and outside China. Overall, I think it's like I am now word actually happy about the Xiaomi relationship right now.
Okay. What does multi-year, by the way, mean in the context of that agreement?
Multi-year means it's more than one, and it's sometimes more than two.
Okay. Okay. All right. You know, to stick on the China situation, so clearly you talked about Huawei, and you're no longer shipping any chips to Huawei at this point.
I don't have the ability to.
Yes. Unfortunately, I was surprised how big the 4G was until, I guess, a year or so ago when it was a billion dollar a year. So there was pretty much, but that's out. I guess they're still not paying royalties either right now. You're still in the midst of the renegotiation?
Yes.
So.
Not that big anymore.
Here's, I know there's a lot of conversation about this. I'll tell you exactly what we did. Exactly what we did. I want you to take away from the answer I'm going to provide to you how we think about our licensing business in China and how stable it is in China. Actually, I'd love to hear about the licensing business outside of China as well.
We renew every one of our Chinese customers in China. Okay? We renew all of them. We knew that Huawei were going to expire. As you would imagine, Huawei, there is a lot on their plate right now. As we said in the last earnings call, we are in conversations with Huawei, but we have not renewed the agreement, and we are not in a position to provide a deadline. Here's what we did. We knew that we had one licensee that needed to get licensed, that was Transsion. Transsion is about the size of the Huawei licensing business. I wanted to make the Huawei licensing renewal because I have been saying QTL is this annuity that is not the growth engine of the company, but it is a great business. It is an annuity.
The company, we said, we want to make the Huawei renewal an upside to the model, not a downside to the model. We went to renew Transsion. Actually, in Transsion, we litigated against them in China in the Beijing court. We had a successful outcome. They are licensed. Now Huawei is an upside to the model. We'll continue the conversations with Huawei, but that's how you should think about the QTL business.
Got it. That makes sense. And to be clear, Huawei's not that big. By own numbers, it was 10, maybe 15 cents of EPS in the context of the earnings chart. It's not that big, but okay. The other headwind in handsets one day, which is known, is clearly Apple, right? I mean, you were up here on stage, I mean, years ago telling everybody to think about that business going away. It's taken a lot longer than I think, like maybe not longer than you thought maybe, but certainly longer than I think they thought it would. It is starting to roll off now. Maybe just to first of all remind us, to remind everybody in the audience if they're not clear, like how we should be thinking about the trajectory of that business going down.
Look, we have been, and this one I can go back even to the very first time I spoke about it when I became CEO in 2021, and we have our first investor day. We have been incredibly transparent with the Apple relationship. Every time we have a contract, contracts have a beginning, a middle, and an end. As soon as we have a contract, we say, this is what the contract is. Starts here, it ends here. I think that's where we are with Apple. Look, we built great modems, as you expect. We have a great, we are a great supplier. We build quality products that go into their products. They decided to build their own modem. We have a contract with them that has a very well-defined trajectory, which is starting where we are right now. We should expect the iPhone to launch in 2025.
There are these upcoming launches. We expect to have a 70% market share. The iPhone that will launch in 2026, we expect to have about 20% market share. The iPhone that launches in 2027, we expect to be zero because our agreement ends. Now, we continue to grow in Android. I think when we had an investor day, we said 5% CAGR out 2029. If you look at what's happening right now, if you look at the.
That looks to the market, right? The Android.
We're saying we're going to grow with the market. It's a reasonable projection to make, right? Here's how you should think about it since that time. I am excited about the dynamics in China. Remember, every time one Android premium with Snapdragon 8 Elite replaces a phone with our modem, it's a multiplier of six to seven plus times for Qualcomm. Second, if you look at the announcements that you saw from Google I/O, incredibly exciting where Android is on AI. That's great too. That's changing the dynamics. The company is growing all the other areas, so we expect to grow to the spirit. We're planning our business 100% with zero expectations that anything changes with Apple from our 2027 projection.
We're confident we're going to go to the spirit if you don't have a crazy cyclical correction in the market because of the macro, the tariffs, and everything. We're just focused on the new Qualcomm. That's it.
That makes sense. That makes sense. What happens when Apple's licensing agreement expires? When is April of 2027?
Look, I feel like you would expect. We will expect to renew that agreement. I feel we're in a stronger position now than we've ever been for the license renewal. Just look at the landscape of the license renewal right now versus before. It's not going to be any different. That is how we should think about the licensing business. The licensing business, it's this great annuity on Qualcomm. It's about 5.
Yeah.
The rest of the growth is all about semis that is independent in Apple. We will see how the renewal is going to go.
Yeah. That makes sense. It's funny too. When I started covering the company, licensing was all that mattered. It was like 80%+ of the profits back then. And it's not trivial anymore, but still, but it's not 80%. I mean, the growth in the chip business, chip business must be 5X bigger now over the last 10 or 15 years versus where it was then.
Oh, yes. Look, I want you to think about the chip business. Having said that, remember, just last year, just last year, we were, of all American companies, the number one company in patent applications of granted and pending. We have probably one of the world's best patent portfolio, and we're not shy about it.
Yeah. Used to have that slide in your quarterly deck. You took it out.
It's still in our lobby. You have the patent wall in our lobby.
Sure. That's great. I want to shift a little bit. I still want to stay on handsets, but I want to talk about the more fun part of handsets now. You talked about the Android, and clearly there's a big push toward AI content. I won't say pricing going up, but content certainly does seem to be going up. I think we saw the same thing even during the 5G rolloff, where you used to say like your ASPs or your content would go up 50%. It went up a lot more than that. I think handsets are down, I don't know, 15-20% off the peak. Your chip business, which is still mostly handsets, I mean, grew with something like a 20% CAGR. Even as handset numbers came down like on the back of content.
I look at like your, it ties into your 2029 targets. You're still looking for Android to grow like mid-single digits. It feels to me like even in a flat market, why wouldn't it, especially given where you play, why wouldn't it grow more than that? It feels like it ought to.
Look, if you look at the past performance, we're very happy with it. I think we.
Certainly grown more than mid-single digits.
Yes. I think we're trying to make reasonable estimates going forward. Here's the more qualitative answer to that question. There are two dynamics that are driving the growth in ASP enhances. The two dynamics. One is a lot more processing content. Those are becoming way more powerful devices. It's actually going to be, there are even going to be more content when you think about AI. There's so much processing. Actually, one of the areas I'm incredibly excited about is about what we can do with processing memory, bandwidth, and all those things with AI that's driving content. That's number one, n umber two, mixed expansion. If you look historically, if you're tracking the company quarter after quarter, year over year, premium tier expansion, that is a great driver for overall revenue enhancement for us.
Got it. Yeah, I believe. I mean, maybe you could talk a little bit about the actual silicon content that AI is driving for you. I mean, you have the NPU, and you're also doing a ton of work like on the software and the ecosystem side. I don't know if you're charging for that, if that's just to help drive adoption, but maybe talk a little bit about the specifics about what you're doing on AI.
Yes. Look, can I do one thing? Since we're talking a lot about handsets, can I just take two minutes and talk about.
We're going to go off of handsets right after this question.
No, I know. I want to take two minutes and talk about what's really exciting about handsets right now. Like we're really excited. I am going to probably repeat this. I'm saying every opportunity I have. I know folks and investors are very impatient to see this AI upgrade cycle. I remember probably many of you in this room, many of you, from the iPhone launch until you gave up your BlackBerry, probably 18 months to two years. The main driver for that is really the third-party application ecosystem. Like when iPhone launched, about, I don't know the number, but about 20 apps and people like playing with iTunes, playing with those instruments that you can choose, the battery, the guitar, and those little things.
Then eventually you realize it wasn't about the features and the apps that come with the OS and the OEM, but what's coming on the third-party ecosystem. I feel the inflection point is now starting. We started with this AI transition. And the first thing you saw, same thing. You saw the use cases from the OEM, and you try to measure, you try to measure whether this AI transition is happening based on the use case of the OEM. Like I said, combined Galaxy S25 when it launched, combined Google and Samsung about 20 AI use cases. The important thing is actually the third-party ecosystem. You saw in the Google I/O, incredibly exciting that you're starting to bring the third-party ecosystem. Like any app, you can have a completely new app, which is free from the constraints of OS. You see that happening in glasses.
In glasses, the AI use cases are pure AI agentic use cases. There's no constraints of OS and apps. You see that in glasses. You're going to start to see this hybrid when people integrate AI to their app, what is the front end. Those things are starting to happen. I think that's the exciting thing. As third-party applications start to go up, we're going to get to the AI upgrade cycle. I can't really predict it's going to be one year, it's going to be two, but just track that. That's why we're doing so much work on the ecosystem, making sure that any model, all of the open-source models, those things are optimized, can run on this. The other thing that is good is there are new wearable AI devices. Glasses is starting to converging is probably the place that this happened.
That is where you start to see those new use cases. Now, going back to your question, we are doing the software work. In phones and PCs, the software work we could do was limited. We're just going to have to support Android, support Windows, support Linux. In automotive, in edge industrial, in what we're doing with smart glasses, completely different. We have built a lot of software assets in the company. We built a lot of software capabilities for AI. You see some acquisitions, Edge Impulse, Focus AI, very relevant. It's building a direct developer platform because the development of AI is very different than what happened with apps. In those markets, there's plenty of opportunity to build a platform.
Got it. Makes sense. I want to switch away from handsets to other things. Maybe to use your, you just had the analyst day a few months ago, and maybe to use your 2029 targets as a baseline. If I run through the math, it was roughly $50 billion in overall revenue. You said $22 billion in non-handsets. By the handset piece, it has no Apple in it at that point. I think it was what it was, it was $8 billion in auto by then and $14 billion in IoT. Of the IoT, $8 billion was kind of core. You had $4 billion in PCs and $2 billion in VR/AR, if I have.
That is correct.
Okay. So those are all the ones. Maybe we take those one at a time. Let's talk about auto first, because I think that's been sort of the clearest evidence of this diversification story. The growth there has been like, I mean, even in an auto market that's not been all that great recently, that business has been growing by leaps and bounds. You did some acquisitions there. You got the Arriva self-driving software. You're one of, I mean, there's three guys out there with sort of a full stack self-driving solutions, you and Nvidia and Mobileye. Maybe talk about the auto growth. Maybe talk about the pipeline you've got. What gives you confidence in your visibility in some of those revenue targets that are out there? Maybe just generally, what are you actually selling in that business that's driving that growth?
Okay. It's a lot of questions.
It's a lot of questions. All around.
That's all right. That's all right. Let me go in reverse order. What are we selling in the business today? I actually think we got the right anchor. We got the right center point in the car. What we're selling in the car today, we sell all of the computing for what we call the digital cockpit. It's a high-performance compute that powers every screen in the car. Not only that, it powers the dashboard. It's safety grade. It's ASIL compliant. We have built a lot of software assets. We have our hypervisor. You can build, it's supporting the safety system, the driver, camera, and everything, powers the sensor island. At the same time, on top of the hypervisor, you can run gas. You can run other different ecosystems on it. It became the platform of choice for virtually every OEM.
We're working with all the Americans, all the Japanese, all the Koreans, all the Europeans, all the Chinese on the digital cockpit. That digital cockpit that we provide, this computing solution, is now also evolving for the software-defined vehicle as the central computing on the car. Functionality started to get accumulated in zonal, in our controllers, and our different domains. Some of that started to run as software. The Chinese did a lot of that. A lot of microcontrollers became a software application on our center computing of the car. That's the first thing we sell. The second thing we sell is the connectivity engine of the car. It connects the car with Wi-Fi, Bluetooth, and cellular. We have the processor for ADAS and autonomy. In the process for ADAS and autonomy, we work with AnyStack.
That's kind of the first thing that we sell to the car. A lot of chips. There's a lot of software on it, including the platform that the OEMs use for cloud services. Okay. The next part of your question. We have disclosed the pipeline. I think the pipeline continues to grow, but I.
I can't remember what it is. Is it $45 billion? I can't remember.
$45 billion. I won't do the additional disclosure today. I think we have been talking about it. You see in the quarterly result, we continue to win new designs. That $45 billion is about one-third of that is the digital cockpit. One-third of that is processor for ADAS and autonomy. We work like with AnyStack. One-third of that is the legacy telematics. That continues to grow. Okay. The other thing we're doing on cars, we took a platform approach and we have something very unique, which is Flex. Flex basically is leveraging our software capabilities and high-performance compute. We now can split and run the digital cockpit, the central computing on the car, and ADAS on the same SoC. That has been incredibly powerful for brands. They have multi-tiers. Think about companies like Stellantis. Think a lot of the Japanese providers. They have multi-tier.
You can bring ADAS down to the entry levels with single SoC. I actually like the position that where we are in the control point of the car. Think about we add ADAS to the central computing of the car. The other thing that we have in auto that we have not commercialized, and you do not see it in the numbers, is our stack. What we did with the stack, with something very unique, we bought Arrival. We combined the Arrival R&D with BMW R&D. We jointly developed, and now people will be able to see it. You will be able to go in the field and measure. We are May 28. Next month, we are going to launch it for the first time. We are going to launch it in 100 countries.
Once it launches, I have the ability to get the stack and offer it to every other OEM. You will be able to see how it performs.
You're not locked into BMW with that then?
No, no, no. It's a very unique partnership that we did. For them, it's a benefit the more scale we get. We have something very unique. We've been training. We've been training that stack on several millions of miles. We're also using AI data, synthetic data. We created something very unique. We have a gen AI path. For safety, we have a rule-based machine learning path that overrides for safety. It's been a lot of work, and it's now coming to the market in June. People will be able to measure. They will see how the stack performs. It's an option for the OEMs that's not in our numbers. I'm excited about the auto business. I think we put that in execution mode. I think it was the first way to demonstrate the power of Qualcomm and learn new core competencies and go to different markets.
We're going to kind of repeat that in some of the other initiatives we have.
Okay. Got it. Got it.
And just for the record, I mean, this business is doing close to $1 billion a quarter now. Like this is a real business now.
Record consecutive quarters. Like the last one, I believe last quarter, we're growing year over year in excess of 50%.
Got it. Got it. Now on the IoT side, if I take the three components, so you have the core piece. So I know the target was like $8 billion. You're running a little over, I can't remember, $5 billion plus right now. It was at $8 billion, right? It was doing a $2 billion a quarter run right there in the peak of COVID. I guess to me, getting back to peak levels in the next five years doesn't seem crazy. Is there anything more that's required to get there beyond just sort of cyclical recovery over time?
No. No. Look, I think we have very reasonable estimates. Maybe I will start by providing clarification. When we talk about the revenue stream of IoT, there's a lot of things in there. I'm going to talk about what's really important. We did break that down in our investor day. Within that segment, let's go one by one. First of all, we said PCs. PCs, we said $4 billion by 2029, which assumes a 12% market share.
12%.
12% market share of our SAM. With the market that we serve, which is laptops, we assume 12% market share to get to $4 billion revenue. The reason the number is 12 is because it was $4 billion. It was the plug number that accounts to 12% market share.
That's a revenue share, I guess, or?
Yes.
Okay.
Now, of 2029, where are we doing right now? We're doing okay because we have about 85 designs across all the PC makers. It's going to go to 100 now that is going to be in the market as we get to next year. Within that, the markets that we launched, we only launched domestic U.S. retail and now the European top five. We're in the 9-10%. Not an unreasonable target when you think about 2029 based on where we are right now. That's the first one. Second one, we said $2 billion in VR/AR. When we look at what's happening with smart glasses.
How big is that now, by the way?
I don't think we're—Akash is just shaking his head. I cannot provide a disclosure.
I tried. Sorry.
Yes. I tell you right now, the forecast on these Meta glasses continues to increase. We had the Meta glasses now just in the last quarter. We got 15 different designs. This thing is multiplying like rabbits. It is the AI that you can wear. I think that is a very reasonable estimate. Let's go to the next one. We said about $4 billion in networking. That is already a mature business for us. Then $4 billion in this edge industrial. I am very excited about that. That is the large SAM. That is all of the stuff that you see now, AI running at the edge, especially that you have models that are smaller and very efficient.
Got it. That makes sense. Let's dig into those PC assumptions a little bit because I know people got very excited about that last year. I always look at this. I mean, my view on this for you guys is like, look, I actually don't know if it's going to be a thing or not. They're not new. I would also say like quite often I hear you guys talk about these in the context of AI PCs. I sort of view like AI PCs and Arm PCs as sort of orthogonal to each other. To me, it's more it seems to me like you're trying to use the AI PC push to drive consumers toward, which is fine. Arm PCs have been around for a long time. I mean, 2012, I think, was when the first Microsoft Surface tablet was the first one.
You guys have actually sold into this market since like 2016. I mean, I could go into a Microsoft store and buy a Surface laptop since then with a Qualcomm chip. They did not sell very many of them back then, but they sold them. What is different now that actually starts to drive like material amounts of adoption?
Oh, okay. This is a great question. I think it's just you brought memory lane. It wasn't really.
It was actually at the launch event.
No, but it's great. It's a great question. And remember, we also started this when Microsoft bought Nokia. And Nokia wanted to make a PC, wanted some Arm base. And this is a while ago. Let me just cut to the chase, right? So Arm wasn't real until Microsoft actually launched an emulator that could run Win32 and Win64 x86 apps. The ability to run Win64 apps was not ready until Windows 11. So before that, I think was try to build a converged device between it's like a competitor to iPad as an extension of the phone. And there was no room for that in the Windows because there is no second-class Windows. It's Windows or it's not Windows. What is real now and wasn't before is the Microsoft decision to transition to Arm. And it combines with a number of things, right?
There are many things that drove this point that we are today. The first one is Apple successfully executed on the M series. And that was the performance benchmark for a personal computer.
They've done a good job.
Yes.
Sure. Yeah.
Yes. I think we're very happy with the CPU team that we have right now. Okay. That's the first.
Former.
There's the first data point. The second data point is Intel no longer could provide technology leadership for that. Windows is very important for Microsoft, right? The number three data point is a transition of PC into next-generation devices for the age of AI, which I'll get to that in the point. That's what's different. We knew that we needed to check those boxes. The performance one is on us. The compatibility with x86 is on the Microsoft front and the transition. That was a great combination that landed with Snapdragon X Elite, which it was when it launched, incredible. The one we're going to launch in Snapdragon summer this year is going to be even more incredible. We started this business on those premises that entire SAM is going to switch to ARM.
The first thing that you see now, I'm going to get to the first part of your question. The first thing that you're going to see is we can build better, thinner, multi-day battery life laptops. That's what you start to see right now. The attraction on the design, the reason we get designs is because people say, "I can build this device. It's very competitive. And it has high performance. Is the Apple compete? And it has multi-day battery life." We're not yet into the AI PC. We're not yet. We will be there, right? What happened is you started to have the ability for many of the things you run on a PC to include an AI front end, an AI assistant. The third-party ecosystem is what's going to drive scale. Copilot+ features are awesome. Those are what comes with the OS.
Same conversation we had on the phone. When that happens, you're going to see something different. Do you have the ability to run AI pervasively on that device without compromising battery life? Because that's not going to be a gaming rig anymore. It's going to be an everyday laptop. I think that's where our platform is going to shine. Right now, we're winning designs on fast, multi-day battery life, cool PC. AI is coming, and we're ready for it.
Got it. Okay. We've got about five minutes left. Do you want to move to the lightning round?
Yes.
Got a few questions. Okay. Here's a PC one. There's a trend of PC companies reportedly working on their own custom Arm-based chips, including Lenovo and Huawei. Considering this, what gives you confidence in hitting your targets? I would actually add to that question, are more players in Arm PCs good or bad for you? Because I could actually argue it both ways.
Okay. Two very simple answers to the question. First of all, transition to more companies working on Arm is awesome. It's awesome. One of the best things that happened for us was Nvidia, which has been on the PC forever, providing the RTX graphics card, decided to add an Arm CPU next to it to replace Intel. That is moving the entire gaming ecosystem. That was the hardest part for us to do. The gaming ecosystem moving, great news. Second thing, remember, Windows is not Android. Windows is not open source. Every time you add a new silicon, Microsoft needs to put an engineering team to do the work. How many they will be willing to take, that's a question for you to ask them.
That makes sense. Question here on the Apple loss. Basically, what it's asking is, as that Apple business goes away, will you take costs out to mitigate, I guess, the EPS hit?
Look, we have been clear about the operating model of the company when we look at what is how much we invest in R&D, how much is the operating margin profile. We communicated in our investor day when we look at our targets, that's how we're going to operate the company. We're investing in the new areas. We're rationalizing OpEx in the areas that are not growing. We're not changing the operating margin profile of the company.
Got it. I mean, I'll add a question of my own to there. You've talked about your, I know you guys don't report a chip gross margin, but it's not that hard to back it out. You've kind of talked about 48%-50%. I guess as the Apple business goes out, do you expect any changes to those gross margin ranges?
Look, how we've been talking about the overall company, we're now in so many different industries, and they have different margin profiles. Overall company, where we're reporting and where we're saying we're going to be, that's where we're going to be.
Got it. Okay. Here's someone who wants you to front-run your roadmap. Let's see. What further improvements in energy efficiency can we expect from Qualcomm's future production innovations, especially next-generation Snapdragon chips?
I think this is a great question. The biggest opportunity, and it's a technical challenge, but it's the biggest opportunity. You're going to do a lot of AI processing at very high performance AI, especially going to measure the amount of tokens you have to generate on the devices at the edge. Phone is very unforgiving. Phone, there is no compromise on the entire day your battery need to last, thermals and size. You cannot deal with the phone the way you deal with the data center, but you still need memory bandwidth increase. You need the processing. You need power consumption. We have some great innovation in this area. I think if people come to Snapdragon Summit every year to see where we're up on our flagship, you're going to be impressed what we're doing.
When is that, by the way?
It's usually around August, September timeframe.
Okay. Got it. All right. Great. I have a question for you. And it sort of relates to the current valuation of the stock. I mean, you guys are upping your cash return this year. You're returning more. Is that strictly just a view on the stock valuation? Are there other reasons? And does it make sense to think about that change in cash return strategy as potentially being more permanent?
Look, it's opportunistic. I think the reason to do it is we believe in the company. We think the company has been trading at low multiples, especially we trade as an Apple supplier and a mobile supplier. I think we have all of those other things that we're doing. It's opportunistic. I think we're always going to balance that between that and the opportunity in our industry to have flexibility for M&A. No big change in how we operate.
Okay. So look, I guess along those lines, we've got about one minute left. As always, you've got a packed room here. I will give you your soapbox. Why should everybody in this room buy Qualcomm stock?
Okay. One other thing we did not talk about, but I'll answer your question, is we're also incredibly excited about.
Wasted our time.
Two things. We did not talk about it. You did not ask the question, so I am just going to use the microphone to talk about it. One thing that people are not paying attention to what we are doing, but you should because the thesis is very simple. I cannot think of a device that looks like a phone like this. There are a lot of interesting things happening with Qualcomm and robotics. Because remember, a robot is untethered, is mobile. It needs a back.
That is not a market that I think investors typically think about for Qualcomm, by the way.
Yes, I know. I'll show you some of the stuff we're doing. I have some videos of some of our customers. Very interesting. It's mobile. It requires a lot of computing power. It requires to run AI locally. It needs to have battery. It needs to go to manufacturing at scale. It needs to leverage the build materials that you see in markets like phones. Very exciting opportunity for Qualcomm. Now with that, I'm going to ask you a question. If your mindset as an investor is thinking about Qualcomm about 10 years ago, 15 years ago, or even five years ago, you're probably obsessed about the licensing business, obsessed about, "Are we going to have Apple? Are we not going to have Apple?" and probably not understanding how different this company is. I'm going to say something I said in a conference that was in Shanghai.
When people were looking at China and everything that's happening in China, and I said, "You know, two types of CEOs can be very dangerous to their business. One is the CEO that never been to China. But more dangerous is the CEO that been to China 10 years ago and thinking understands China, right?" Let's just use the same metaphor. I think if you were thinking of Qualcomm about 10 years ago, you're probably putting the focus not where the company is going. Because if you look at what we did in automotive, that was a standalone business. You can probably have significantly higher multiples.
If you look at the position that we're building for AI at the edge, if you look at all of those exciting markets, and this is a company that in each and every market we chose to enter, despite in spite of all the skepticism, we actually built a leading platform. We didn't show up with a commodity solution. We built a leading platform. And the company's proving that we can learn new tricks and execute in new areas. I think that's the opportunity for Qualcomm. I think investors need to get probably past, and maybe that day will come when Apple is zero and I'm going to be a more diversified company.
I wish it was zero tomorrow. I do.
Anyway, so that's how I feel about it.
Got it. I think that's as good of a place to end off as any. Thank you so much. Really appreciate it.