Qualcomm Inc (QCOM) — Q1 2024 Earnings Call Transcript

Thank you, and good afternoon, everyone. Today's call will include prepared remarks by Christian Amon and Akash Palkhiwala. In addition, Alex Rogers will join the question-and-answer session. You can access our earnings release and a slide presentation on our Investor Relations website. In addition, this call is being webcast on qualcomm.com, and a replay will be available on our website later today. During the call today, we will use non-GAAP financial measures as defined in Regulation G, and you can find the related reconciliations to GAAP on our website. We will also make forward-looking statements, including projections and estimates of future events, business or industry trends or business or financial results. Actual events or results could differ materially from those projected in our forward-looking statements. Please refer to our SEC filings, including our most recent 10-K, which contain important factors that cause actual results to differ materially from the forward-looking statements. And now to comments from Qualcomm's President and Chief Executive Officer, Cristiano Amon.

Thank you, Mauricio, and good afternoon, everyone. Thanks for joining us today. In fiscal Q1, we delivered non-GAAP revenues of $9.9 billion and non-GAAP earnings per share of $2.75, above the high end of our guidance. Revenues from our chipset business of $8.4 billion reflect healthy Android demand and continued strong momentum in automotive. Licensing business revenues were $1.5 billion. We're pleased with these results, and I will now share some key highlights from the business. In handsets, the Snapdragon 8 Gen 3 mobile platform is setting a new standard for on-device generative AI experiences for premium smartphones and powers all flagship Android devices launched and launching this fiscal year. Notably, the Snapdragon 8 Gen 3 mobile platform for Galaxy is featured in the recently announced Samsung Galaxy S24 Ultra globally, in addition to the Galaxy S24 and S24 Plus in multiple regions. The Galaxy S24 Series includes on-device AI features such as live translation, interpreter, chat assist, nitography and more. This marks the beginning of how generative AI will evolve the overall smartphone experience and highlights the significant opportunity for Snapdragon platforms. We're also announcing that we extended a multiyear agreement with Samsung relating to Snapdragon platforms for flagship Galaxy smartphone launches starting in 2024. The extended agreement demonstrates the value of Snapdragon 8, our technology leadership and our successful long-term strategic partnership with Samsung. In the quarter, we also announced the Snapdragon 7 Gen 3 mobile platform, which brings leading generative AI capabilities to high-tier Android smartphones and is a category leader in both experiences and performance. In our QTL business, we're pleased to share that we recently extended several key license agreements. First, Apple exercised its unilateral option to extend its global patent license agreement for an additional two years, taking the existing agreement through March 2027; second, we have renewed long-term agreements with two significant Chinese smartphone OEMs. In addition, we continue to negotiate new agreements or renewals with other key licensees and OEMs, including some whose current agreements are set to expire in early fiscal 2025. Automotive continues to be an important pillar of our growth and diversification strategy. Notably, 75 new models launched commercially in 2023 were for technologies, highlighting Qualcomm's growing scale in automotive and execution of our design wins. Earlier this month at CES, we announced our collaboration with Bosch to have our Snapdragon Ride Flex SoC power their new central vehicle computer. As a reminder, Snapdragon Ride Flex enables the fusion of infotainment and ADAS functionalities on a single SoC, enabling automakers to realize a unified central-compute and software-defined vehicle architecture that scales across tiers. Additionally, we demonstrated digital cockpits connected services and advanced driver systems enabled by generative AI models running locally on the Snapdragon platform. These new capabilities can be enabled on several existing designs via a software upgrade. This represents significant new opportunities for Qualcomm and our partners. In PCs, we're driving towards the launch of Snapdragon X Elite in mid-2024 and are pleased that our design win traction continues to increase since the platform was announced last October. We expect Snapdragon X Elite to set the industry benchmark for on-device generative AI and copilot experiences in addition to leading performance and battery life for next-generation Windows PCs. We recently expanded our mixed reality solutions with the announcement of the Snapdragon XR2+ Gen 2. Our new platform supports 4.3k per eye resolution and 90 frames per second in 12 or more concurrent cameras to deliver crisp immersive mixed reality and virtual reality experiences. We are proud to partner with Samsung and Google to provide leading XR experiences to Galaxy users by utilizing Snapdragon XR2+ Gen 2. In edge networking, we announced the Snapdragon X35 5G Modern-RF system, the world's first commercial Release 17 5G RedCap solution. The Snapdragon X35 brings a new class of purpose-built 5G for Internet of Things devices. Devices powered by Snapdragon X35 are expected to launch in the first half of 2024. We continue to believe that industrial edge devices with connectivity, high-performance computing, and on-device AI will become one of our largest addressable opportunities fueled by secular trends of digital transformation. As such, we're accelerating our investments in solutions, ecosystems, and broad channel enablement to position ourselves for growth while we navigate the industry-wide inventory drawdown. One key area of focus is to enable our customers to unlock the potential of generative AI at the enterprise using our chipset solutions. As an example, Zebra Technologies and Toshiba recently demonstrated on-device generative AI capabilities for enterprise workflows and inventory management at retail self-checkout, respectively. Additionally, Honeywell showcased a Qualcomm-powered edge AI box for warehouse applications. As we complete the first quarter of fiscal '24, ahead of our expectations, I'm very optimistic about Qualcomm's trajectory and the opportunities ahead. The fundamentals of our growth drivers remain unchanged, our diversification strategy is working, and we're making significant progress across mobile, automotive, computing, XR, edge networking, industrial IoT and more. At the upcoming Mobile World Congress in Barcelona, we will provide an update on our cellular modem and connectivity leadership as well as on our overall scale of Snapdragon generative AI.

Thank you, Cristiano, and good afternoon, everyone. I'll start with our first fiscal quarter earnings. We are pleased to announce strong non-GAAP results above the high end of guidance with revenues of $9.9 billion and EPS of $2.75. QTL revenues of $1.5 billion and EBT margin of 74% were at the high end of guidance, reflecting slightly higher handset units. QCT delivered revenues of $8.4 billion and EBT margin of 31%, both above the high end of guidance, reflecting strength in handsets and automotive revenues. QCT EBT margin includes the benefit of revenue scale, stronger product mix, and operating discipline. Handset revenues of $6.7 billion were higher than our prior expectations primarily due to the increased demand driven by the acceleration of Android flagship launches with our Snapdragon 8 Gen 3 mobile platform. Notably, our Android handset revenues from Chinese OEMs exceeded our expectations of greater than 35% sequential growth. IoT revenues of $1.1 billion reflect the industry-wide challenges we've previously outlined. We achieved record automotive revenues of $598 million which grew by 12% sequentially, reflecting the increased content in new vehicle launches with our Snapdragon digital chassis platform. Non-GAAP operating expenses decreased 5% sequentially to $2.1 billion and included the benefit of accelerated implementation of cost actions that we had previously outlined for the first half of fiscal '24. Lastly, we returned $1.7 billion to stockholders during the quarter, including $784 million in stock repurchases and $895 million in dividends. Before turning to second fiscal quarter guidance, I'll update you on global 3G, 4G, 5G handset units. We estimate that global units declined by mid-single digit percentage in calendar '23 relative to calendar '22, an improvement from our prior expectations due to the recent stabilization in demand. For calendar '24, we estimate that global handset units will be flat to slightly up on a year-over-year basis. This estimate includes expected growth of high-single digit to low double-digit percentage in 5G handsets. Turning to guidance for the second fiscal quarter. We are forecasting revenues of $8.9 billion to $9.7 billion and non-GAAP EPS of $2.20 to $2.40. The sequential decline in revenues and non-GAAP EPS relative to the first fiscal quarter will be driven by seasonality for a modem-only handset customer in both QTL and QCT. In QTL, we estimate revenues of $1.2 billion to $1.4 billion and EBT margins of 69% to 73%. In QCT, we expect revenues of $7.6 billion to $8.2 billion and EBT margins of 27% to 29%. For QCT handset revenues coming off strong performance in the first fiscal quarter, we anticipate Android revenues will be approximately flat quarter-over-quarter. On a sequential basis, we expect QCT IoT revenues to grow by mid to high-single digit percentage with QCT automotive revenues slightly down, consistent with the trend in the prior year. Lastly, we expect non-GAAP operating expenses of approximately $2.2 billion. This reflects typical calendar year resets for certain employee-related costs. In closing, we're very pleased to start our fiscal year with strong execution and financial performance. In QTL, as Cristiano outlined, we are pleased to have extended several key license agreements. We do not expect any material change in QTL licensing revenue run rate as a result of these extensions. In QCT, our technology differentiation will accelerate with our on-device generative AI leadership and introduction of our custom Qualcomm Orion CPU. We also remain well positioned to execute on our diversification strategy by extending our technology portfolio to deliver industry-leading products across automotive and IoT.

Thank you, Akash. Operator, we are now ready for questions.

Hi. Thanks for taking my questions and congrats on the results here. Maybe if I can start with AI and particularly the launch of the Samsung S24. Now you have some incremental sort of experience in terms of devices launching in the market and the performance and consumer reception you're seeing to that. So I know you outlined adoption of 3G, 4G, but any way of giving us some flavor of what you're thinking in terms of adoption of these AI devices or AI on the edge in terms of the smartphone market? How similar or different will that curve look like relative to 5G adoption? And any insights from the sort of pipeline you're working on will be helpful for us? Thank you and I have a follow-up.

Hello, Samik. Thanks for the question. This is Cristiano. Look, it's early, but I think we're definitely excited about what we see in the beginning. It's not only unique to the Galaxy S24, that has a number of now use cases running generative AI on the device. I mentioned a few in my prepared remarks like translation and you have a much more effective assistance in a number of different applications. We're going to see productivity coming. But we'll also see that happening with some of our other customers from China, launching a number of models. So I think we have a large number now of models being ported into our hardware for generative AI. I think we're starting to see the beginning of new use cases. Reviews have been positive, and we are happy with what we've seen following the launch. I think we need to monitor the situation. But eventually, at a minimum, it's going to have a favorable impact on the mix, which is a trend that we continue to see premium and high tier with more computing power as the fastest-growing segment in the handset market.

Got it. Just following up, the Android OEMs, especially the Chinese ones you collaborate with, did better than expected in the first fiscal quarter. However, as you look ahead to the second quarter, you're projecting a more stable trend. I understand that the industry has been anticipating inventory restocking from these customers, which has contributed to some of the recent momentum. Can you provide an update on what you're observing from these clients? Additionally, has Huawei's return to the market started to impact the volume or market share for these customers, considering your flat quarter-over-quarter guidance? Thank you.

Sure. Samik, it’s Akash. As we have said previously, as we entered fiscal '24, our view was that Android channel inventory had largely normalized. And so as we go through the year, we typically see a normal bill bleed cycle around handset launches. So that’s kind of the phase we are in from our perspective. In the first quarter, what we saw was higher demand due to the acceleration of Android flagship launches with our new chip, Snapdragon 8 Gen 3. And we saw very strong demand across all the major Android OEMs. And so we're happy, of course, with that traction, and that momentum carries over to the second quarter as well. And that’s what you’re seeing both in our results and our guide going forward. In terms of your comment on Huawei, really what we’ve seen since the Huawei 5G launch is that the premium tier total addressable market in China has expanded. And so we’re continuing to see strong demand from our customers post that launch.

Thank you very much, guys. I guess for my first question, Cristiano, I was fit to hear, I guess, the formal announcement of an extension with your partnership with Samsung. And you mentioned, I think, in your prepared script that it started with 2024 devices, but I assume it's longer than that. So maybe you could give us a little context as to the length and any details you can share on the new agreement. You guys obviously have your new custom CPUs coming into the Snapdragon roadmap and some expanded MPU product as well. So we see kind of what the split is of share in the flagship at Samsung currently, but I'm just trying to understand a bit more about what this means for on a go-forward basis. Thanks.

Thank you for your question, Matt. The agreement we announced during this earnings call is a multiyear contract. While we aren’t disclosing the exact duration, it spans several years. Your observation is accurate; it begins in 2024. Looking at the launch of Galaxy S24, it serves as a good indication of the agreement between us and Samsung. Most importantly, our roadmap is strengthening over time, particularly with our custom CPU entering mobile, and we aim to lead in mobile CPU performance. Additionally, our NPU continues to grow, as I previously mentioned, we are just at the start of the generative AI transition. In summary, we are very pleased with our long-term relationship with Samsung.

Got it. Thank you for that. I guess my follow-up question is one for Akash, first of all, Akash, congratulations on the new COO hat. Well done. But my question is around margins. And I noticed that even with the IoT business down dramatically, there was some improvement in sequential gross margin in the quarter and back above 30% in QCT operating margins. So maybe you could discuss some of the moving parts with margins in the business because it was pleasantly a bit better than I had modeled, and I kind of want to see what might be sustainable or what actions you took on a go-forward basis on both the gross and the operating side. Thanks.

Thank you, Matt, and thanks for your wishes. I'm looking forward in this new role to working with Cristiano and the executive team to deliver on our long-term priorities. And of course, I'll continue to remain committed to my CFO role, working closely with the team here and maintaining consistency and transparency and looking forward to seeing a lot of you at upcoming events. On the margin side, what you saw in the first quarter is really the fact that our gross margins were stronger because the mix was richer. We had a higher set of premium tier launches coming through, and that impacted our volume, and we benefited from that richer mix. If you look at our second quarter guidance, we are guiding largely in line with how our first quarter came in. From an operating margin perspective, it's in addition to the strength in the gross margins, obviously, the revenue scale and the actions we took on operating expenses also benefited. So we were happy to deliver a 31% operating margin in QCT and really focused on delivering the long-term target we’ve outlined to the investors.

Great. Thanks for taking my question and congrats on extending some of the licensing deals. I guess, just want to jump a little bit into the IoT business, the three segments, I assume, consumer is still weaker. But can you update us kind of how the inventory bleed is trending for the three businesses within IoT? And then within that question too, just on the recovery of IoT, share with us the X Elite ramp and how material this might become for IoT, say, in the next one to two years?

Maybe I'll address the first part, and then Cristiano can talk through the X Elite question. From an IoT entry perspective, what we have seen is stabilization really on the consumer side. As you know, we were one of the first to call out the weakness in IoT, and now we're seeing it go through both on the industrial and the edge networking side. Consistent with our previous comments, we think the first quarter was the bottom for our IoT revenue stream. We're guiding second quarter up mid to high-single digits. In the second half of the fiscal year, as we see the inventory channel normalizing and end markets benefiting from that, we're excited about what our product portfolio can bring overall, lots of opportunities for us. So over, in my mind, there's significant uncertainty, but we are cautiously optimistic, and I think we have a great product portfolio as we look forward.

Look, your question about X Elite and in PC. It's too early. We're tracking to the launch of products with this chipset tied with the next version of Microsoft Windows that has a lot of the Windows AI capabilities. We're still maintaining the same date, which is driven by Windows, which is mid-2024, getting ready for back-to-school. What we're excited about is that since we announced at the Tech Summit showing the performance of the product and the AI capabilities, design traction continues to increase. So we had increased the number of designs since last quarter, and we continue to march forward towards the launch. We like that everybody is now talking about on-device AI on PC. That's where we started this journey with X Elite, and I think that has proven to be a tailwind for the opportunity for us in PCs.

Great. Thanks. And maybe Cristiano, just a quick follow-on question. Just on the auto business, how should we think about the ramp of that business over the next one to two years? You've talked about a lot of design win activity and digital chassis ramping this year, but with ADAS coming into the model, how might that business ramp towards your target in 2026?

No, absolutely. Thank you for your question. Look, let me step back a little bit and say we're extremely pleased with our performance in auto, especially when you look at the overall market. Right now, you can look at Qualcomm results with record revenues and very strong, I think, year-over-year growth. In 2023, in the year that just closed, we launched 75 models with our silicon with a significant improvement in silicon content as it relates to those immersive cockpit and in many cases, processing for safety. So we're very happy with the business. I think the answer to your question is, we are on track to meet our target that we said on the Auto Investor Day of $4 billion and $9 billion, respectively, for 2026 at the end of the decade. So we’re on track for that. In the next quarter, we're going to give you an update on the design win pipeline that continues to grow.

Hi, guys. Thanks for taking my question. So given that you've got Android, Android was pretty strong in December, and it's flat into March. How are you thinking about June seasonality given all these trends and moving pieces? I know it's usually down a bit for March, but I guess in the current what are you thinking about June seasonality?

Stacy, it's Akash. No change to the shape of the year comments that we made last time. Following the second quarter, we do expect the third quarter to be the lowest quarter. It's one of the quarters where we do not have any significant flagship launches, and as a result, you kind of see a decline in the third quarter then growth back into the fourth quarter. When you look at the second to third quarter, we expect a trend consistent with the last two years. The first half obviously benefited from this acceleration of launches for Android, and we're pretty happy with that. I think it sets us up as we look forward in terms of both content growth with our strong roadmap and just positioning overall in the handset market.

Thank you. I would like to follow up by asking about Huawei. Was Huawei completely out of the model in December? And is it also excluded from the model in the March guidance?

Yeah. So as we’ve said in the past, Stacy, we do have a 4G license to ship to Huawei and so we’ve continued to ship based on customer demand. But as you’re aware, they have launched a 5G device with their own chip, and that’s, I think, the priority going forward.

Thank you. I have a question regarding QTL based on your comments about the global handset market. It seems you are feeling more optimistic about the 5G market this year. QTL revenue has been somewhat stagnant because of the current handset unit situation. What is your outlook for QTL moving forward considering your expectations for the overall handset market?

Yeah. So as we outlined for our handset market, when you look at calendar '24, overall market, we expect it to be flat to slightly up. But within that, 5G, obviously, is our target market, especially for the chip business, we expect that to be high-single digit to low double-digit up on a year-over-year basis. Within QTL, I will stick with the guidance we have given before. We think there's a scale to the business that's aligned with the handset market and the two will move in line. And then on the extensions of the license, I just wanted to make sure that I said this in my prepared remarks, but just to confirm, as a result of the extension, we do not expect any material change in our QCT licensing revenue run rate. So it's consistent with the program.

Okay. That's helpful. As a follow-up, Cristiano, I wonder if you could speak to sort of the decision to reengage in custom cores with Orion and what outcome you expect that? I mean, it sounds like that's been one of the reasons or one of the things behind the renewal of the Samsung agreement. What sort of change in the market because Qualcomm did custom cores in the past? And what do you expect to get out of that in terms of market share and content and such?

Thank you, Chris, for your question. Look, it's consistent with the strategy we outlined, I think, following the acquisition of Nuvia. In the past, Qualcomm has been designing its own custom cores, and I think the first instantiation of that was for PCs. Actually, if you remember, in the past, that was the key motivation as we embarked on this journey to create a leading SoC for laptops for the Windows ecosystem. We needed to have the performance leadership, and we needed to design our own CPU to deliver the results that we did with X Elite. Now we're taking that across the entire roadmap. Your observation is correct. As we take that into mobile next, we're seeing significant interest from our partners as it truly becomes a leadership position in the marketplace now across all cores, not only graphics and AI but also CPU. And we’re not stopping there, following smartphone that’s going to go into our automotive business, and we’re excited about what the team has accomplished to date. Orion is really well positioned to be the leading CPU core in the industry.

Thank you. Can you discuss restocking in China? It seems that the China Android has seen a significant increase but is now being projected to remain stable. Your competitor was somewhat cautious about this. Do you believe you are aligning shipments with market consumption? And do you think you will continue to ship according to consumption for the rest of the year? I also have another question.

Yeah. Tim, consistent with what I said earlier in the call, I think we were largely at normalized inventory for Android entering the fiscal year. What you saw in the December quarter, at least for us, to a large extent was a build for the various premium tier launches that happened during the period. We do expect normal bill bleed cycles through the year as devices launch. But that's kind of the framework with which we are operating going forward.

Got it. And then now that you have the modem for longer for this one flagship customer, one can envision a scenario where maybe you can leverage that into some new RF content that you have not had in the past. Is this a scenario? I mean, it seems like it could add $1 billion maybe. I mean you were sort of running to $4 billion a year in your RFFE business prior to stopping to tell us what that is. So it seems like that is something you could potentially leverage the reliance on your modem business? Thanks.

Yeah, Tim. I’d say that’s a conversation, obviously, that we will talk to the customer about. It’s part of our portfolio, and we’ll make it available if they’re interested.

Hi. Thanks for a couple of questions and Akash, congrats on the COO role. The first one is on the OpEx side of things. You guys did a great job in the calendar fourth quarter and you gave the guidance for the fiscal first or fiscal second quarter, how should we think about that for the remainder of the year, given your commentary on kind of doubling down on some of the opportunistic investments to diversify the company, new cores, etc.

Yeah, Ross. Thank you very much. From an OpEx perspective, really, the way we think about it is any hiring that we do will be very selective and focused on really acquiring new skills that are required for diversification. But other than that, we've gone through a reduction recently. We think we're at scale to a large extent, and we're committed to operating discipline.

Great. And I guess for my follow-up, I noticed in the 10-Q, you had a new 10% customer, I think it was a 14% customer. I don't expect you to name who that is. But is that a reflection of the strong China demand that you talked about in the continuation of good future growth opportunities or was there any one-time aspect of that customer popping up in the quarter?

I think the way you framed it in your first theory is a reasonable way of thinking about it.

Thanks for taking the question. Just passing on my congratulations to Akash as well. I just wanted to ask on the ASP side for Android. You're obviously kind of characterizing the market that's flattish into March, kind of the bottom in June and then improving from there. But you benefited from some good mix in the beginning of the fiscal year here. Could you talk about what you would expect from a mix perspective as you go to the back half? Would you see the same kind of strength on the ASP side that you've kind of seen over the past year? That would be really helpful to understand. Thank you.

Yeah. So if you think about premium flagship launches for our OEMs, a lot of the launches happen in the holiday timeframe just before the holidays going into Chinese New Year as well. And so you've seen a lot of those happen. We do have some significant launches through the middle of the year, but obviously, the next big launch goes into the holiday season, starting with Apple and then going into the Android launches. So that's a typical cadence. Now just to confirm, just the premium tier we are talking about. Of course, there are other tiers, including the high tier, where we have very significant presence, and that does drive a significant portion of our launches through the year and also our revenue base.

Helpful. And then just on the auto business, you've clearly seen some weaker data points just out of the ecosystem. Can you explain why your auto business may not be levered to some of the ADAS areas where you've seen the particular weakness of late? And like when do those ADAS and win start layering on? Is that more of a '25 story for you guys or '26? Can you talk about the pipeline and when you see those more advanced wins kind of layering into the revenue stream? Thank you.

Hi. This is Cristiano. Look, the automotive story of Qualcomm is primarily driven by share gains as models with our silicon part of our pipeline started to materialize into revenue. And the way you should think about it, historically, a lot of the revenue was telematics, now you see the largest component being a lot of the fully immersive digital cockpits in the car. We already have some revenue from ADAS processing. You see a lot of cars, for example, in China with both ADAS and autonomy using our processor; you see some of our customers in the United States using our processor. I think that continues to grow as we get towards our 2026 revenue target. You’re probably going to see very healthy components of all those elements.

Thank you. I have two follow-up questions regarding previous inquiries. The first pertains to Samsung. There is a new contract in place, but Samsung is also planning to increase its use of their own products in 2024 compared to 2023. Overall, are you anticipating that Samsung's revenues will rise or fall in 2024 relative to 2023? Can you provide insight into any expected share losses? The second question concerns the auto business. You had an exceptional quarter, which contrasts with the performance of other auto companies that have experienced weakness. What do you attribute this strength to? Is it a matter of gaining market share with specific customers, introducing new products, or can you elaborate on the reasons for this relative strength? Thank you.

Yes, Tal. It's Akash. Regarding Samsung and the premium tier discussion, we did achieve global share with the Galaxy S23. With the recent launch of the Galaxy S24, and in line with our previous statements, we expect to secure a majority share based on the model distribution between us and Samsung. As Cristiano mentioned earlier, the agreement with Samsung provides us with predictability regarding our standing in the premium tier moving forward. There's notably an expansion of content happening; looking at our roadmap for the premium tier, we are integrating not only generative AI and custom CPU cores, but also advancing in other technologies. As consumer demand for enhanced capabilities increases, we anticipate our content offerings and average selling price will continue to rise. Regarding your second question on our automotive business, it's important to view this area as being closely linked to the introduction of new vehicles. The industry is undergoing a transformation with the digitization of cars, and we are positioned right at the center of this change. Our growth is linked to the increasing infotainment capabilities and advanced driver-assistance systems being incorporated into new vehicles. Consequently, we are seeing a rise in content as new car models are rolled out. This creates a difference between our performance and that of some competitors. Overall, while the industry faces some short-term dynamics that we are keeping a close eye on, our technology, position, and product offerings look very promising, and we are enthusiastic about our future prospects.

Yes. Just in closing, I'd just like to remind everyone, look, we're as I said, we're happy with the quarter. We see the Android market stabilizing after we went through '23. That was a year of correction. We like the transition of user experience with generative AI that could create an opportunity in mobile. This is one of those times for Qualcomm. Both our Apple and Samsung revenue on the chip side are under contract. We're very happy about that. We continue to move towards stability of the QTL revenue stream with those new agreements. As you look at the growth opportunity, I think the auto results speak for itself. We're now in the IoT segment, really focused on the launch of X Elite. In the PC, we announced a new product for XR. If you believe that, that market is finally going to get very large scale, we're well positioned with our partnership with Meta as well as Samsung and Google. As IoT, especially industrial, goes through a correction, we expect that to resume growth. So we're focused on what we can control, busy working with the growth and diversification of the company. And I want to say a big thank you to all of our partners and employees for helping us get to this quarter. Thank you very much, and I talk to you all next quarter.