Cristiano R. Amon
President & Chief Executive Officer at QUALCOMM
Thank you, Mauricio and good afternoon, everyone. Thanks for joining us today. In fiscal Q1, despite the ongoing macro economic headwinds and short term challenges impacting the semiconductor industry we delivered revenues of $9.5 billion and non-GAAP earnings of $2.37 per share including year-over-year growth in QCT, automotive in IoT.
QCT revenues of $7.9 billion were down 11% year-over-year as a result of weaker handset demand and inventory drawdown. In the current quarter, combined auto and IoT revenues represent 27% of total QCT revenues, reflecting continued progress on revenue diversification. QTL delivered $1.5 billion in revenues within Q1. As the handset industry continues to experience reduced demand, we are now expecting elevated channel inventory levels to persist at least through the first half of calendar '23. In addition, multiple end industries within IoT are also experiencing weaker-than-expected demand and elevated inventory levels.
Given the current macro economic and demand environment, we're implementing further spending reductions and streamlining operations without losing sight of the significant growth and diversification opportunities ahead. This is consistent with our commitment to actively manage operating expenses as indicated during our last earnings call. Combined with the actions we have already taken in the quarter we expect to reduce non-GAAP operating expenses by approximately 5% relative to our run rate exiting fiscal '22.
Despite near-term headwinds, our long-term growth opportunities remain unchanged. Our leading technologies, such as advanced wireless connectivity, high-performance low-power compute and on device intelligence, are enabling the ongoing trends of digital transformation across industries.
From a product and technology perspective, we believe we are in the strongest position in our history. Our strategy is working and we remain focused on expanding our addressable market to approximately $700 billion in the next decade and firmly establishing Qualcomm as the connected processor company for the intelligent edge.
I will now provide key highlights from across our business. In automotive, the industry continues to evolve at an unprecedented rate, driven by the adoption of digital technologies. The software-defined vehicle is at the core of this transformation offering automakers, a significant opportunity to deliver enhanced connectivity, improved safety and security features, increased levels of autonomy, as well as new business models and revenue streams. We believe the Snapdragon Digital Chassis is the industry's preferred purpose-built platform to help drive this innovation for the next generation of vehicles.
At CES, we announced Snapdragon Ride Flex, which enables digital cockpit, advanced driver assistance systems and automated driving functions to coexist on a single SoC, a first for the automotive industry. Automakers and Tier 1s can now scale a unified central compute and software-defined vehicle architecture across their portfolio. We also demonstrated our expansion into two wheelers, with the latest infotainment and car connected digital services to enhance safety and deliver a more personal experience for riders.
Our solutions also enable OEMs and fleet providers to deliver over-the-air updates, subscription services, remote diagnostics, geofencing, theft protection and more. We are very proud of the progress we have made in automotive and we believe that we are the best-positioned technology partner to help drive this industry into the future.
In handsets our recently-announced Snapdragon 8 Gen 2 Mobile Platform begins a new era of AI-accelerated experiences for smartphones. The Snapdragon 8 Gen 2 includes our first ever AI-powered camera processor that enables real-time semantic segmentation for photos and videos. A dedicated 5G AI processor that can enhance 5G data speeds, coverage, latency and battery life and an updated general-purpose AI engine with a larger Tensor accelerator for increased performance.
We are also pleased to enable the world's first satellite-based two-way capable messaging solution for Android smartphones. Snapdragon Satellite will provide global connectivity for messaging, utilizing Iridium's weather-resilient L-band spectrum and will initially be available on next-generation premium smartphones using Snapdragon 8 Gen 2 within the second half of 2023.
Yesterday I was pleased to join Samsung's Unpacked event where they launched the Galaxy S23 family of smartphones, powered by the Snapdragon 8 Gen 2 Mobile Platform for Galaxy globally. This premium platform features accelerated performance and unique customizations made possible by our expanded strategic partnership with Samsung. The Galaxy S23 represents the first smartphone announced from this partnership.
In IoT, which is poised to become our largest addressable market, our revenue stream spans across three categories, consumer, edge networking and industrial. In consumer IoT, our next-generation PC platform with integrated custom Oryon CPUs and upgraded AI engine has sample on-time and is exceeding our internal KPIs, delivering disruptive CPU performance per watt across tiers.
In addition, Snapdragon's AI capabilities in leading battery life opens unique new possibilities for differentiated user experiences for the modern workforce. Key examples are Window Studio effects, including portrait blur, eye framing and noise cancellation with voice focus. Together with Microsoft, we're broadly engaged with the app ecosystem, and are pleased that native applications have been launched for Windows on Snapdragon by market-leading ISVs, such as Zoom, Amazon Prime Video, VMware Carbon Black, Cisco and eConnect and CrowdStrike. Additionally as Adobe announced at our Tech Summit its creativity suite of apps, including Adobe Photoshop, Lightroom, Fresco and Acrobat will run natively on Snapdragon.
We're now engaged with major PC OEMs with multiple platform design wins across their product roadmaps for consumer and commercial. In Edge Networking IoT our Wi-Fi infrastructure and networking products continue to gain share led by strength in enterprise Wi-Fi, access points and carrier gateways. We see several trends that are favorable to our Wi-Fi solutions. Wi-Fi mesh networking continues to grow in popularity worldwide, increasing the number of Wi-Fi chipsets installed per home.
The hybrid work trend appears to have had lasting impacts on enterprise networking with workers relying on real-time collaboration tools, regardless of whether they are in the office or remote. Broadband Internet service providers are turning increasingly to a modular software development model, creating new opportunities for Qualcomm in next-generation home gateway routers. And the transition from Wi-Fi 6 and 6E to Wi-Fi 7, which we're currently leading across home enterprise and carrier segments.
In 5G fixed wireless access we're encouraged by the significant momentum in India following the recent 5G auctions. Operators have publicly stated their ambition to provide broadband services to a 100 million homes using 5G FWA. Qualcomm is well-positioned to enable the 5G FWA ecosystem in India with our leading product portfolio on 5G millimeter-wave base, high-power CPEs, complemented by small-cell and compact macro cell infrastructure modem RF platforms. We are currently working with CPE and infrastructure OEMs on the commercial rollout in India, spanning both millimeter-wave and sub-6 spectrum.
In industrial IoT, digital transformation is still in the early phases and the scale of the opportunity for Qualcomm in the long-term across many verticals is significant. In the tracking and logistics space, we believe we have established one of the largest ecosystems of manufacturing partners. Last month, we announced a new IoT optimized modem, the QCX216 for applications, such as smart utility meters, trackers, e-Mobility, parking meters, home automation and security and other location-based solutions.
The QCX216 reduces power consumption by up to 80% versus the previous generation solution while also enabling customers to design modules with an up to 40% lower cost structure. In retail, our point-of-sale solutions continue to drive the transition from traditional terminals to full feature Android-based terminals. We have shipped over 70 million Snapdragon devices since 2016 into handheld and desktops point-of-sale terminals worldwide. In enterprise video collaboration we are leading this rapidly-growing segment, powering many of the key OEMs such as Foley [Phonetic] Logitech, Cisco, Bose, Aver and Alibaba. These are just a few examples of our traction within industrial and we remain excited about the growth prospects, as digital transformation accelerates.
In summary, the overall long-term growth opportunity for Qualcomm remains unchanged as demand for technology extends to virtually every device at the edge. Our track record of innovation, provides a unique perspective and capability to be at the forefront of the digital transformation across new and diverse end markets.
I would now like to turn the call over to Akash.