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Earningspalooza Returns: Can Big Tech Keep Up With the Market’s Insatiable Growth Appetite? – The Six Five Webcast
by Daniel Newman | August 5, 2021

On this episode of The Six Five Webcast hosts Patrick Moorhead and Daniel Newman discuss all things earnings. The six handpicked topics for this week are:

  1. Amazon Q2 Earnings
  2. Latest Earnings Report from Google
  3. Microsoft Sees Growth in Q4
  4. Strong Q1 For Poly
  5. AMD has an Incredible Q2
  6. Qualcomm Exceeds Analyst Expectations

For a deeper diver into each topic, please click on the links above. Be sure to subscribe to The Six Five Webcast so you never miss an episode.

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Disclaimer: The Six Five Webcast is for information and entertainment purposes only. Over the course of this webcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors and we do not ask that you treat us as such.

Transcript:

Patrick Moorhead: Hi. This is Pat Moorhead with Moor Insights & Strategy, and we are here for episode 87 of The Six Five Podcast, broadcasting from different areas in Austin, Texas. Daniel in the north and Patrick, me, in the city. Daniel, how are you?

Daniel Newman: I’m doing good. I like to think I’m in the west, but you’ve only lived here like a decade-

Patrick Moorhead: That’s right.

Daniel Newman: … so you don’t know where I live yet, and that’s okay. I understand. But you know what? As long as I’m here, I’m happy. And I’m in a place. You know what I said today? I said, “I’m in Austin, Texas. And it feels like home.”

Patrick Moorhead: Yeah, and it does. It is your home. And by the way, I would come visit you. I don’t know where you live because you haven’t invited me over yet. So maybe we can change that this weekend. I don’t know.

Daniel Newman: Yeah, there’s a surprise to everybody out there that knows us like, “Wait, you haven’t actually had Pat over yet?”

Patrick Moorhead: Nope.

Daniel Newman: Nope.

Patrick Moorhead: Nope, nope, nope, nope, nope.

Daniel Newman: Well, I did invite you over to help me move in, and you said something like, “Wow, you didn’t pay to have someone else move you in?” and I said, “Well, I’m stingy. What can I say?” But we are almost unpacked now. I’m almost starting to feel like I’m at home. Like my setup here, you wouldn’t know I’ve moved. And that feels like an accomplishment.

Patrick Moorhead: I know. I know. Well, you got to take every win. Every win is a big win, Daniel. But hey, you’re unpacked there at home, but let’s unpack today.

So we are doing an earnings palooza, as you can see on there. But one thing I do want to remind you is that The Six Five Podcast is not for investment purposes. It is for educational, informational purposes only. We are going to talk about publicly traded companies, but don’t take what we say as investment advice. Go talk to a professional.

So with that said, we are covering six companies today. We have Amazon, Google, Microsoft, Poly, AMD, and Qualcomm. Daniel, let’s start off with Amazon. What in the heck happened? Was it a train wreck that their stock is down 7%?

Daniel Newman: Oh my gosh. And by the way, before you say, why aren’t you covering Apple? We just figure everyone does that so we wanted to cover some other companies.

Okay. So, Amazon 27% growth, 113 billion beat the EPS by almost three bucks a share, delivering incredible earnings. And everybody’s pissed. Why is everybody pissed? Well, I would say we are in this fast money growth era. Everybody wants to put in a dollar, take out 10 tomorrow. And anything that doesn’t happen faster than that isn’t fast enough?

We got stocks, we got AMC, we’ve got SPACs, we’ve got Bitcoin. And you know what happened to good old investment? I think I heard a piece of advice just this week is the best trading advice I can give to the world is lose your password to your E-Trade account. Now again, not my advice. We don’t give advice here.

So let’s talk about what happened here. Two things. The 27% growth over a hundred billion. Remember that means every 1% growth is over $1 billion in new revenue. This quarter had Prime Day. Prime Day was good, really good for small business. Wasn’t necessarily blow out year over year growth for Prime Day. I think some people might’ve thought that was going to happen.

But here’s the real story about Amazon. You saw three years at least of growth pulled forward into about 18 months or less. People don’t realize that these astronomical growth figures that we’ve had each and every quarter along the way, along with these earnings, aren’t really sustainable.

We are returning to some level of normal mobility. The Delta variant has slowed a little bit, but people are out and about way more than ever before, everywhere around the country, and in most places around the world. That means that we pulled forward that demand. More people are on Amazon buying stuff through.

And you and I went in one of those factories, Pat, this week, the SAT2 factory in San Marcos and we can tell you it’s a pretty impressive operation. I just think people have lost the plot. That is really the big thing when it comes to the 27% growth.

And I know you’ll like to lean into AWS. We both do. I’ll touch on that one really quickly because, again, we can talk about this topic for a long time, but 37% growth north of 14 billion. So over the last four quarters 30-ish percent growth.

And I think a lot of people thought 30 was sort of the marker and we were going to start to see downward from here. Just the law of large numbers, which by the way, is the same thing that’s impacting the bigger end of the company. It shows that the cloud has even a more resilient ability to grow with mobility returning.

And maybe back to office is actually going to accelerate cloud, but also the diversification of product, the expansion of CapEx, the larger footprint, the continued innovation. I mean, those are all things that have been put in motion and the return is here.

Last thought on Amazon as a whole, I think this is a return to more normalcy. I think the market needs to adjust, adapt, and get used to it. Amazon is performing extremely well. If you can’t be happy with 27% growth at 113 billion a quarter, you’re talking about a trillion dollar a year in revenue company in a few years at this growth rate, you have lost your mind. That is not official medical advice, by the way.

Patrick Moorhead: You left almost nothing for me, but the good news is the almost nothing. That’s good analysis. No. Yeah, let me just do a deep dive into AWS real quick, just to give you kind of the scale of number.

So, revenue was at $4 billion, okay? Most cloud plays do $4 billion maybe a year. This was the incremental growth and we are looking at a $60 billion run rate company. AWS contributed 54% of total company operating income, which is completely bonkers, but bonkers in a good way.

And another way that I look at it is they do dominate in IaaS. They’re very competitive in PaaS and they’re just itching and scratching on the whole SaaS part with a few targeted applications, but this company just keeps motoring and does not stop. One interesting factoid. I mean, if you compare it to even a Salesforce or even an SAP, I mean, you’re looking at six times the size of these companies that are giants in themselves.

I feel like I’m talking about this every quarter, but it’s a proportionality conversation that I think is important before people get freaked out about that 37% growth on a freakin’ monster base. So yeah, that’s the thought. That’s the tweet, Daniel.

I think we covered Amazon from top to bottom, but let’s shift to the other doomed company here, but doomed in the sense that the Apple IDFA was going to crush them. They did not get crushed. In fact, they had some seriously monster earnings that nobody expected.

The revenue increased 62%. And yes, I am saying this slow because it’s absolutely insane. A company that’s under fire by regulators, a company that’s structurally under fire by regulators and being cut off at the pass by Apple or supposedly.

And to be fair, we did see, well, Facebook had good earnings, but their projections weren’t great. They talked a little bit about that, but it’s truly unstoppable. Now, did I say unstoppable? I think I did. It’s getting a little bit over my skis there.

But I like to talk about Google cloud because we are tech analysts and Google is growing on a rate that is faster than any of the cloud giants, albeit on a smaller base. But Daniel, I know you and I both appreciate that at least they’ve carved that out.

Now, we don’t know how much of it is IaaS, PaaS, or SaaS. My intuition tells me there’s a lot of SaaS when you have things like workspaces out there and they are significantly stomping on the gas pedal from an IaaS perspective. They grew 53%, but their losses were significantly narrow here. And Google is on the run here.

We’ve got three huge players at the top there with AWS, Microsoft, and Google, and a lot of powerful folks who are vying for those fourth, fifth, and six spots, when you’re looking at folks like IBM and Oracle. I can’t put SAP in a cloud spot because technically they don’t actually stand up their own clouds. So I’d have to probably put Salesforce in there.

Daniel Newman: Yeah, I mean, look, across the numbers 61.88 against 56. The earnings were just absolutely mind boggling. I mean, look, I’m putting this out there, Pat. Wall Street in some of these cases has either become clueless, they’ve lost the plot, they have no idea what’s going on, they’re completely sandbagging for some reason or another, or don’t understand the technology and the market and the transitory and secular demands that are going on in the marketplace.

They could not … I mean, first of all, how do you miss by like 40% when your one job in most of the cases of these guys is to get that right. They’re guided all the way up to the end. And so you come in at 27 plus against 19.

And by the way, this is what happened with AMD. This is what’s happening with Qualcomm. This is happening with Microsoft. These overshot. Like I said, I don’t think these companies are not trying to project correctly. I think they always want to outperform.

We also are seeing a market now where even when you do perform, the stock sells off and the prices drop half a percent on average on an earnings beat. So the demand for digital in technology is massive. And I know we’re techs so tend to focus on cloud. All of this stuff is tech.

So going back to this info say what? We had heard that apple, by making it harder, to in more forcing greater amounts of opt-in that all the other advertisers were going to get hurt. Google is clearly above the law here. Google said, you know what? I know you’re Apple, but we’re Google and you aren’t going to stop us from growing.

They’re guiding forward strong. Their traffic acquisition costs are not much higher given the growth in revenue. YouTube, I think is on pace to be bigger than Netflix. I read this. It’s about to surpass Netflix. So what’s the story here? Google’s on fire. Google is absolutely on fire. And I don’t see that changing anytime soon.

Cloud is probably. I know we get most excited about it. You and I like to debate this one a little bit. I think cloud is going to be the one they’re going to have the hardest time on because Amazon’s even more on fire and Azure is doing a pretty darn good job itself. Maybe we can talk about that.

Patrick Moorhead: Gosh, let’s just dive right in into Microsoft. And maybe, Daniel, why don’t you kick this off? You’re on a roll.

Daniel Newman: Yeah, we split and we jab and punch. Sometimes I jump and Pat slides under. We’ve got a way, but there is a method to this madness for everyone out there that’s like, “Why is pat talking now? Why is Daniel.” We plan this stuff believe it or not.

Patrick Moorhead: Why is Pat ever talking? Sometimes that comes up.

Daniel Newman: Does it?

Patrick Moorhead: No.

Daniel Newman: All right, look, Microsoft best growth in three years. Last quarter, by the way, was also its best growth in three years. So just when you think you can’t grow anymore, it grew some more. Outperforming on earnings, outperform in revenue. 46.15. I know compared to Amazon’s 113 that was barely anything, but in all serious, what a great quarter, what a great run the company is on. What are we all looking at? Look, Azure is always the number.

Now it’s a little bit mysterious because Microsoft doesn’t actually tell you how much IaaS it’s doing, but the market yet always gets … You see the CNBC number that comes out right away. What do they look at? Overall growth and Azure growth.

Azure growth 51%. Why is that so important? Well, it’s much like AWS where you’re starting to get to this point where you’re starting to see the Azure number dropping into the forties a couple of quarters ago. And you’re like, “Oh.” And you saw the exact same thing happened with AWS. You see the law of large numbers.

The intelligent cloud business for Microsoft is almost 17 1/2 billion dollars and you’re going, “Oh-oh, are they getting so big that you’re going to start to see this shrink?” So what it does mean though is that from an IaaS standpoint Microsoft is still gaining ground on AWS. That’s just technicality of 51 verses 37. But what it also means is that the cloud business has a lot of momentum.

I like to look beyond that. See, Microsoft is really taking this full stack approach. So what really caught my attention this quarter? A, the Dynamics 365 and Teams business. This integration that’s going on. Teams is at the epicenter of our business world. They announced a 250 million monthly user number this quarter.

And you’re starting to see that instead of the center of our universe and as workers being our inbox in our productivity apps, you’re seeing it become Teams.

And with this type of saturation in the market, it’s hard to think that this isn’t going to continue to grow and scale as they connect platform, automation, API, ERP, CRM, all into chat, plus productivity and Word and Excel and low code. All this stuff is coming. And the center of our universe if Microsoft gets its way is going to be Teams. So that’s a big point to pay attention to.

The growth of its software, by the way, Dynamics 365, almost 50%, Pat. 30 plus percent for the whole Dynamics business, 50% for the cloud business. I know you like to talk about that and compare how that sets up to a few of the other companies that you’ve got some strong opinions on. So I’ll actually let you lean further into that one.

Last one. And this is one that I know you’re going to want to talk about, too. So I’ll just start it off. The one alarm bell that went off for me this quarter was, why in the world was Surface down 20%? Yes, chips are short, but look at Intel’s numbers, look at AMD’s numbers, look at Qualcomm’s numbers. And then look at the recent quarter performances from Dell. Look at the reason quarter performances from HP. Look at Apple’s growth of Mac.

I get you have some growth and constraints due to some shortages, but nobody has been down that far. And with the number of shipments, higher end ASP’s, the fact that the Surface has a mix of devices at the mid and the high range on ARM, on AMD, and on Intel, I didn’t understand why that number fell so hard.

In gaming I think it’s just seasonal. I think that’ll pop back in the next couple of quarters, but the productivity cloud and windows business all very strong, very impressive. And by the way, LinkedIn, Microsoft social media company too, and LinkedIn advertising crushed it as well.

Patrick Moorhead: Wow. I think you left me with nothing.

Daniel Newman: I did give you some. I told you I didn’t even lean into how good Dynamics was. I figured you might want to ping that one a bit.

Patrick Moorhead: Listen, this story of earnings, I feel like I’m almost saying the exact same things, which is all the 365 suites, whether it’s Office or Dynamics, are just off the rails. Dynamics had a 49% growth. Commercial Office 365 was up 25%. And that is exactly where you want the growth, right?

That is SaaS and that is where Microsoft I don’t want to say needs most of its growth, but it’s a more profitable area. And the fact that they’re hosting all that on their own Azure cloud is a built-in advantage that it has over Salesforce. I could say SAP in there in the same breath, but they’re also partners there.

Microsoft did have its supply chain act together for Xboxes though. Xbox hardware was up 172% at the same time that Surface was off 20%. And I am sure they are gnashing of teeth going on at the Surface level because their product line is extremely competitive.

I think the challenge in fighting for supply chain and trying to overcome the lead, it might be a multi-trillion dollar company, but to try to come in and fight for the same components that Dell, HP, Lenovo, and Apple are fighting for is going to be really hard. Ironically, I think the thing that might’ve saved Xbox hardware was that it uses so many custom components, right? Nobody is fighting the Xbox group to get the custom AMD processor module with memory that’s sitting right on top. It’s a different type of part.

My final commentary, I feel like the strategic projects are starting to kick in post COVID, right? So we hit COVID and then people got into survival mode of their businesses and they might have pushed something. But what they did do is they put more strategic, dare I say, digital transformation projects on hold that didn’t relate to staying in business. And I feel like, based on my channel checks and talking with all the IT groups that I talked to, that those are kicking back in.

So finally, I got to hit this. Search ads up 53%, just like … And we’re going to … We talked a little bit about Amazon, but Amazon ads were up huge. We’ve got Search ads up huge. By the way, I directly relate this to the new Edge that Microsoft has that quite frankly is incredible. And every new Windows PC that you get it brings up Edge and Edge is a very, very good product.

So Daniel, let’s move on here to Poly. And I’m going to take this one. So if you’re not familiar with Poly, Poly is the former Polycom and they are … I would call them the industry leader in non-industry specific video and audio equipment.

What do I mean by that? Cisco devices run Cisco WebEx. Poly products, which by the way, my camera and my microphone are Poly right now, the P15, they run a myriad of services like Zoom as one of them. They play nicely with companies like 8×8 and also with Microsoft Teams. So that’s where we are.

So I felt like Poly came out with really good earnings. There were above guide on revenue. Revenue was up 20%. And they were also above guide on EBITDA and EPS. Video was up 94%. Audio was up 34%. In a call today that we had with Dave Shull who’s Poly’s CEO he told us that his newer video products, I think, Daniel, he said it was up 260%. And that is really good news.

Well, why the sell off then? Well, gross margin was off 520 basis points and they can’t get nearly the amount of product that they need because of that. So their PPV, which is basically the variance in price between what you had forecast and what it was, they got hit with big time. And that’s the fancy way of saying they couldn’t get the chips that they needed to make enough products quickly enough.

One little hint that was in there as well that wasn’t in the deck but was in the press release was that they signed an OEM agreement with a global PC manufacturer who’s going to do pro grade headsets. And I need to go off and do the search of it, but it seems to me that it’s a Lenovo. I could be wrong, but I need to dive into this.

But all in all, listen, Poly is in the right place, which is I would say digital transformation of collaboration. Oh my gosh, that sounded like such a marketing term, but they’re doing it in a way that I feel that businesses want. And that’s that not to be linked into one specific codec or one specific service provider. Anyways, good job Poly.

Daniel Newman: Yeah, that’s a great one. I’ll keep it moving. Your coverage there was fantastic. You ripped through the whole thing really, really well, Pat. The company is really well positioned. Its ecosystem and its partner extensibility is really what I like about it and why I see a big future for it. Hybrid remote work. It’s not going away anytime soon.

The virus in itself wasn’t the only reason. We just identified how much more productive we can be when we’re not constantly commuting and companies are investing in that. That company has a lot of great products. It connects to really every brand, Microsoft, AWS, Google, Zoom, RingCentral, Five9, 8×8. You name it Poly has a piece of hardware that can peripherally connect to it. And we need that. Everybody wants to build a full stack. There is a place.

So why did I say small cap, big promise, because Poly is very well positioned. Its hardware sits in the right places and I see a good long-term trajectory for the company as long as it can keep track of its supply chain, get the parts and pieces it needs, and stay closely connected and become a more and more integral part of all those partner relationships.

All right, that’s it. That’s the tweet.

Patrick Moorhead: That’s the tweet. Okay. Let’s jump into, we’re going to finish this up with AMD and Qualcomm. Let’s get into AMD. Gosh, what a disappointment, Daniel. I mean, they couldn’t drive revenue top line triple digits. Amazing.

Daniel Newman: I know. Sell it. Sell it.

Patrick Moorhead: Big disappointment. Only a 99% year on year increase. Yes, 99%. And gross margin was up to 48% and just a crazy operating margin of 22%. Literally every product line was hitting on all cylinders.

And, Daniel, that gross margin number is even more impressive, in my opinion, when you look at that they had a stellar quarter with console chips. And console chips, the way they’ve structured, it’s lower gross margin because Sony and Microsoft give them a below the line R&D funds to be able to create that in exchange for a lower price.

Now, the net operating margin, as you can see, and this is one of the first quarters where it really kind of hits here, that operating margin hitting not only from Epic but also from more console chips being sold. I mean, everything is up and to the right except for expenses. I mean, sure OPECs hit a billion dollars, but more importantly is the stock price for AMD hit an all time historical high, which was a hundred dollars a share.

And there’s kind of an emotional thing there, Daniel, as you know. When a stock hits a certain price, even though they could split and it would be half that. But there are there are certain levels of investment prices that I’ve seen that are just emotional and kind of spiritual milestones. And I think this was a biggie here.

Now, what I want AMD to do now, okay, now that they’ve come this far is I really want to know exactly how much Epic did in their data center. Epic is lumped in there with gaming consoles and traditional embedded business, like on a factory floor robotics, right? Those need to be broken up. Those are big enough businesses that they need to be broken up or broken out, or is it that those businesses really aren’t as big as you might imagine.

And the other thing I’d love to see broken out is the difference between CPUs and GPUs. We really don’t know financially. We have no idea how GPUs are doing.

Quite frankly when what I look at the competition Nvidia that just keeps running a truck through gaming and data center numbers every quarter for the last eight quarters, I really don’t have a good sense of how AMD is doing there. I get the sense that they’re doing really well in notebook GPU’s, but add-in cards for Desktop and Enterprise not nearly as well as they should be in my opinion, doing.

So, Daniel, I think what you’re going to hear from me in covering AMD in the future of no longer … It used to be they were lucky to be alive. That was the meme. They sold off their Austin headquarters and we’re down to their last sellable asset. And then it became, “Oh my gosh, is it time for a comeback? Could they do a comeback?” And then we got into the, “Oh my gosh, it’s a comeback,” right?

But I feel like now we’re into, it’s a much different company. No companies are ever too big to fail, but we’re at the point where people should be scrutinizing the numbers even more. Maybe the breakout will happen during Xilinx and the close of that acquisition. I don’t know. But I would love to have a better idea of financially how some of these businesses are doing.

Daniel Newman: Yeah, Pat, you made a number of great points. You covered this one well as you always do. I think you’re sometimes like the AMD whisperer. Not a ton to say here. I mean, clearly market share in data center, I’m very interested in seeing when those numbers come out. It looks very promising that AMD is going to see and grab little bit here. You made a really good point about breaking up the computing graphics.

Someone said to me the other day, made a comment along the lines of like, AMD is really a thorn in Nvidia’s side. And I’m like, “I don’t think so.” Their numbers, the way they’re packaged though, you see that growth rate. And they’re like, “All right, but how much of that’s GPU?” And like you said, what kind of GPU? It’s time to start breaking that out.

We all know the reason a lot of companies don’t break this stuff out is because they’re having overall strong growth, but maybe in certain areas that people are going to want to see growth it’s not as big yet. And so I wouldn’t be surprised to start seeing like Epic and data center chips split out from custom soon though, as the run of success has been somewhat consistent now over several quarters.

But, look, AMD, it’s a combination of better, much better execution over the past several years and opportunism. I mean, clearly some opportunism on the backs of some difficult challenges, some leadership changes at Intel. And these are moments in time that company’s smart CEOs like Lisa Su is take advantage, gain momentum, raise capital, strengthen it. And we’re starting to really see the fruits bearing into their bottom line. These are some much better bottom line results.

They’re multiple still makes them well, well, a higher price than the likes of an Intel, but I think that’s the momentum play. That goes back to the comments I made earlier about Wall Street and fast money and everybody losing the plot. AMD has momentum. Other companies are seen as a bit more stagnant, and that’s why so much money keeps funneling in and that a hundred dollar barrier was broken.

But yeah, great analysis, Pat. Good for AMD. I’m not always the nicest to AMD. I’ve sometimes wondered if it was more opportunism than execution, but you’re starting to see it really is a by-product of both.

Patrick Moorhead: Yeah, listen, having insight scoop at AMD sometimes, I don’t mean proprietary information, but having worked there and seeing what makes AMD work, I’ve got a pretty good idea of it. In the same vein, I think people are being way too hard on Intel.

And by the way, I’m really interested to see when Intel brings out their full line of drop-in graphics cards what that’s going to do to AMD. That is right in the AMD sweet spot, which is right in the middle of the market. I mean, that’s going to be like … Nobody’s talking about it. Nobody’s debating it, but I can’t wait to see that.

Let’s get to our final stock here, Qualcomm. Gosh, I think they were up like 7% after they announced … What in the heck is going on at that company, Daniel?

Daniel Newman: First of all, Pat, how much do you like my chyron?

Patrick Moorhead: Your chyron is the best. I mean, sometimes I-

Daniel Newman: Okay. It is.

Patrick Moorhead: … wish I had come up with your chyron. But no, this is really good. RFFE really is for fantastic earnings.

Daniel Newman: Yeah, I love that. And yeah, a great close out there and great point about Intel. Don’t rule them out. Don’t rule them out.
Look, Qualcomm, a couple of things are happening here. One, the bellwether of 5G. Is 5G growing? How fast is it growing? Qualcomm is, if not the most, it’s one of them, and I would say the most important company here on any US exchange and probably around the world to pay attention to.

How are they doing? Well, 65% growth year over year, or sorry, 63 in non-gap, 65 gap earnings growth, 131% on a non-gap earnings before taxes and 123% on earnings per share. Triple digits, dude. Triple digits. Outstanding first quarter for CA, Cristiano Amon, as a fully minted CEO of the company and what an opportunity to report that, Pat.

So, first of all, that’s just an overall momentum thing. We’ve been waiting years, 2019, 2020, ’21. 5G is here. It’s in full effect. But by the way, I’ve heard some insane commentaries about how now we’re late. We are not late in 5G. This is just the beginning. It just feels like relate because we’ve been talking about it for so long.

There’s really two things to break down here, Pat. The company splits its business into kind of two groups. It’s QCT, which is the technology business, and it’s QTL, which is the licensing business. Straightforward licensing. Solid business overall.

Best thing to note about that business is it doesn’t have a lot going on that we’re hearing about. They got licenses with all the big 5G handset providers, and they’re not in any major legal battles in the public eye right now. I’m sure there’s tons of stuff going on behind the scenes. Don’t need to comment about that.

But QCT, Pat, handsets 57% RF front-end RFFE, 114% growth, nearing a billion dollars in the third fiscal quarter, automotive 83%, IOT 83% growth everywhere. So that handset business, which is what everyone knows Qualcomm for is the chips that go inside your phone. It can be your iPhone. It might be your Samsung phone. It could be your Nozomi or whatever your device you’re using. 57%, nearing $4 billion, but everybody kind of thought that’s it.

And so, we’ve heard Cristiano Amon for like three, four years now, Pat. I remember sitting in a Mobile World Congress in Barcelona with you in one of those rooms when we used to go out in public and actually see people and we listened to Cristiano talk about IOT and automotive. And we were like, “Yeah, yeah, yeah. Okay. Yeah, we’ll see.” Like handset company.

Well, he was right. The company has been right. The bet’s been right. And we, as we’ve continued to prognosticate that this would end up being successful, have been right. You and I have been right.

Their IOT business, Pat, $1.4 billion this quarter. Automotive is starting to become of critical mass at 253. They are absolutely unseating the Corevos and Broadcom’s and Skyworks in the RF front end, which is a really difficult business. And Pat, almost 2.6 billion in non handset revenue on the quarter. I mean, what great results.

So overall I want to try to leave a little bit here for you. I was only like three minutes. It was just really high paced and high energy. I’m getting a little tired here. But company looks really good. Guiding really well going forward. 5G is on fire. But more than anything what excites me is that Qualcomm is hedging itself. It’s becoming really interesting and relevant and something that’s not just handsets. And I think that’s going to be really important for its long-term prospects.

Patrick Moorhead: Yeah, some other fill in the blank stuff that came in off the call that I thought was good was this automotive pipeline, right? So, as we’ve talked about before on this show, the pipeline to get into a car to production is within four to five years. I mean, companies like Tesla, it’s not that long, but with traditional car vendors it is. And the design link pipeline is up to $10 billion, and most of that will be hitting in a couple years.

Daniel Newman: The other impressive thing that came out was on the 5G, the eight series. More than half of the smartphone design wins are using the eight series. So you can imagine the ASP compared to everywhere else. People think that, oh, it’s Apple who owns the high end. Well, that’s not true globally necessarily where, if you’re going to be at the high end, you’ve got one chip choice and that’s Qualcomm. So everybody is going over there.

And I never like to say there’s no blemishes on somebody’s quarter, but Qualcomm had about as perfect a quarter as possible. And if I’m going to itch, if I’m going to scratch something though, it’s this IOT carve out. When I think of IOT, I’m thinking of industrial IOT and I’m thinking consumer IOT.

What Qualcomm has also put in here is computing chips for tablets and PCs and also edge networking. So I don’t consider those a internet of things, but I think Qualcomm had to have a place to put this.

I’d like to see them carve out IOT in the traditional IOT sense or I’m afraid that IOT sector could lose its meaning in the future, right? Because Oberon’s in there. PC parts for HP laptops are in the IOT section. But hey, if I’m going to pick on anything, I had to bring up something.

But with that said, a nearly perfect quarter. And typically you want to have the perfect quarter when you have a CEO leaving and a new CEO coming in, but this is a perfect quarter under the new CEO Cristiano. So congratulations to Cristiano and the entire crew there at Qualcomm.

So Daniel, wow, six companies, six minutes each. We are the 6, 6, 5 here. It was a lot of fun. And I’m hoping that I can get that invite maybe sometime in the next week here. So maybe we can do brunch or something like that. We’ll see.

I’ll think about doling out the address. I got to keep it private. I’ve got to protect the fame. Lots going on here, but just look for all the mobile trucks from all the big business network. When they’re looking for an opinion they’re out in my front yard.

But no, in serious, Pat, great show, great topic. You know how much I love to talk about earnings, but more or less, I love the fact that we use this as a moment of beacon of truth to connect what’s really going on in the business and the strategy. We’re not equities guys. You can go to Yahoo Finance and go to it.

We always appreciate the feedback. Hit that subscribe button. Listen to us on Spotify and Apple. Watch us on YouTube. Share us with your friends. Be part of our community. Stick with us. Check Pat’s column out on Forbes. Check mine out everywhere and anywhere. I like to opine for this episode.

We got to go. We got to see you another time, another week. Later. Bye-bye.

 

About the Author

Daniel Newman is the Principal Analyst of Futurum Research and the CEO of Broadsuite Media Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise. Read Full Bio