In a recent earnings call for the first quarter of the fiscal year 2025, Qualcomm CEO Cristiano Amon highlighted the rapid development and deployment of artificial intelligence (AI) technologiesHe mentioned that models like DeepSeek-R1 and their counterparts are rapidly evolving, becoming smaller and more efficient, thus enabling them to run directly on devicesThis advancement marks a significant shift from traditional AI processing methods that heavily relied on cloud computing.

According to Amon, shortly after its release, the DeepSeek-R1-Distill model was already being utilized on smartphones and PCs equipped with Qualcomm’s Snapdragon chipsHe emphasized that we are entering a new era where while training models continues to be cloud-based, the inference part will increasingly shift to end-user devicesThis shift signifies that AI will become more accessible, customizable, and efficient for everyday users.

This rapid evolution of AI technologies is not just a technical advancement; it represents a fundamental change in the semiconductor industry

Historically, customers were mainly concerned about chip speeds; however, the focus is now turning towards how many AI models a chip can run concurrentlyThis paradigm shift is reshaping how companies like Qualcomm are approaching chip development.

To adapt to this new landscape, Qualcomm has made significant preparations over the past few years, reimagining chip development through the lens of AIAmon stated that as developers create more targeted models and applications, the demand for Qualcomm’s platforms is set to soarHe expressed optimism about profiting from the impending turning point in the market.

Amon’s remarks indicate that Qualcomm's mobile business continues to remain its cornerstone, even as the company diversifies its focusIn the first quarter of fiscal 2025, Qualcomm reported revenues of $11.669 billion, which is an 18% year-on-year increase, with a net profit of $3.83 billion, marking a 24% rise

• 2025 Gold Surge
• Turning Point in Central European EV Industry
• Zebra Intelligence: Transforming Smart Cabins
• Rising U.S. National Debt Fuels Market Anxiety
• Can DeepSeek Revalue Chinese Tech Stocks?

The smartphone segment accounted for approximately 65% of total revenue, generating $7.574 billion, a 13% increase from the previous year.

The growth in the smartphone sector is attributed largely to several Original Equipment Manufacturers (OEMs) increasing shipment volumes of chipsets and a rise in average selling prices driven by a favorable product mixNotably, Qualcomm’s Snapdragon platform is seeing increased demand in the premium smartphone market, where its market share for devices priced over $400 has jumped from 21% to over 30% in the past few years — a significant positive trend for Qualcomm.

The upward trajectory of high-end smartphone sales is closely tied to the surge of AI functionalitiesAmon remarked that smartphones are the largest consumer electronic devices worldwide, and the introduction of AI features is positively impacting salesA prime example is Samsung's recently announced Galaxy S25 series, which nearly doubled its AI features compared to its predecessor

Amon anticipates that this momentum in transitioning to AI-driven smartphones will continue to accelerate.

It’s worth noting that due to yield issues with Samsung’s 3nm GAA process, the Exynos 2500 chip could not reach mass production, leading to the full lineup of Galaxy S25 smartphones adopting the Snapdragon 8 Elite for Galaxy chipsAnalysts from JPMorgan predict that Qualcomm could see a revenue increase of $2 billion from this collaboration with Samsung, which is already one of Qualcomm’s largest customersRecent data from Canalys for the third quarter of 2024 shows that Samsung accounted for 21% of all smartphones shipped with Qualcomm processors, contributing an astonishing 47% to revenue.

On the other hand, Qualcomm emphasized that the combination of 5G technology with high-performance, low-power computing, and device-side AI is driving the technology of smartphones into various other industries, such as automotive and the Internet of Things (IoT). This expansion into diverse markets has been central to Qualcomm's strategic vision in recent years.

The first quarter of fiscal 2025 also saw Qualcomm’s IoT segment generate $1.549 billion in revenue, a spectacular 36% year-on-year growth, while automotive revenue surged to $961 million, reflecting a robust 61% increase

Although these figures indicate that these businesses are still in their early stages, they represent key pillars for Qualcomm as it aims to reduce its dependency on the smartphone businessLast year, the company set an ambitious goal to reach $22 billion in non-smartphone revenue by 2029.

Within the non-smartphone sector, personal computers (PCs) represent a significant area of focus for QualcommData from Circana shows that by December 2024, Qualcomm's Snapdragon X series had captured over 10% market share in Windows laptops priced above $800 in the U.SAmon noted, “Even though we are still in the early transition period towards Copilot+ PC technology, the acceptance of the Snapdragon X series has exceeded our expectations.”

Furthermore, during this year’s CES, Qualcomm introduced its fourth platform in the Snapdragon X series, targeting the $600 price range for Windows 11 AI PCs

Over 80 PC products powered by the Snapdragon X series are currently in mass production or development, with expectations to exceed 100 by 2026.

Amon also shared that sales of Meta’s VR headsets, which are built on Qualcomm chips, have surpassed forecastsWith the trend towards more portable smart devices, the market for headsets is poised to undergo a pivotal shift towards mass production.

However, it’s important to mention the mounting challenges in Qualcomm’s licensing business segmentQualcomm's revenues stem mainly from two areas: its semiconductor business, which includes smartphones, automotive, and IoT, and its licensing segmentDuring the first quarter of the fiscal 2025, Qualcomm's QCT (Qualcomm CDMA Technologies) recorded revenues of $10.084 billion, a 20% increase from the previous year, while QTL (Qualcomm Technology Licensing) saw a more modest rise to $1.535 billion, a 5% increase.

Amon expressed satisfaction with the execution of QTL in recent years and is confident that revenues for fiscal year 2025 will remain consistent with 2024. Yet, he notes that growth in QTL is constrained and facing several challenges

According to the report, Qualcomm successfully negotiated long-term licensing renewal agreements with two major Chinese OEMsIn addition to previous 5G licenses, it recently formalized a long-term 4G licensing agreement with Transsion Holdings.

On the flip side, negotiations with Huawei remain unresolved as their agreement has expiredQualcomm has reported that the U.SDepartment of Commerce revoked Qualcomm’s license to export 4G and certain other integrated circuit products to Huawei on May 7, 2024, which generated approximately $560 million in product revenue from Huawei prior to the suspension.

Moreover, Qualcomm faces uncertainties surrounding its collaboration with AppleReports indicate that Apple is set to gradually replace Qualcomm chips with its proprietary 5G technology starting this fall, which could impact Qualcomm’s revenues significantly.

Nevertheless, there are some promising developments in the licensing sphere

Amon revealed that Arm has withdrawn its previous notice of breach from October last year, signaling that there are currently no plans to terminate the licensing agreement with Qualcomm.

The data and forecasts from Qualcomm’s executives illustrate a path forward where the company is integrating AI technologies into its mobile business while simultaneously expanding significantly into non-mobile sectorsDespite the challenges facing the licensing business, Qualcomm’s investments in new areas like AI, IoT, and automotive technology lay a strong foundation for its future diversified growth.

As we usher into the age of AI-driven inference, Qualcomm’s ability to maintain a leading edge in device competition will be crucial for its future trajectoryThe “turning point” mentioned by Amon may very well represent a pivotal opportunity for Qualcomm to transition from being a traditional chip giant to an AI-driven technology powerhouse.