Qualcomm's Solid Execution of Four-Pillar Growth Strategy
In November 2021, on Qualcomm’s first investor day since he took over the CEO job, Christiano Amon laid out his 4-pillar growth strategy for Qualcomm. 1) focus on the premium and high-end-tier Android smartphones in the handset market; 2) expand RF and modem system across all connected devices; 3) become the preferred partner for auto OEMs for digital chassis, and 4) expand Qualcomm’s connectivity and smart processing capabilities to all kinds of edge devices. The latest quarterly result is clear proof that the company is executing the strategy well.
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First, on the handset, the company grew handset revenue by 56% in the March quarter despite worries that the smartphone market is slowing down. Qualcomm remained the clear leader in the premium segment, seeing continued traction across all OEMs for the Snapdragon platform. Qualcomm powers 75% of Samsung’s latest S22 flagship devices compared to 40% in S21. Management expects the strength to continue and guide to 50% revenue growth for the entire year, much stronger than anyone expected given that total smartphone shipment is likely flat to down in 2022.
RF also had an excellent quarter, with revenue growing 28% compared to the same quarter last year, with quarterly revenue above $1.1 billion for the third consecutive quarter. The company is also expanding RF solutions into the automotive market, demonstrated by the latest collaboration with Stellantis.
Automotive revenue grew 41% in the quarter, a 20-point acceleration compared to last quarter. While the revenue base is still tiny today at ~$1.3 billion annual revenue, the pipeline continues to grow, sitting at $16 billion now compared to $13 billion last quarter. The company had an annual automotive revenue target of $3.5 billion by FY2026, and the robust pipeline growth makes that target very conservative.
IoT revenue grew 61% last quarter to $1.7 billion, the highest quarterly revenue ever. Strength was broad-based, with the consumer, edge networking, and industrial growing more than 50%.
Overall, it is a flawless quarter with solid execution. We expect the company to generate ~$45 billion of revenue and over $10 billion of free cash flow in 2022.
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