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Qualcomm (QCOM -6%) breaks below early August lows today after outlining new growth targets across its Automotive and Internet of Things (IoT) businesses, projecting to reach $22 bln in combined revenue by FY29 (Sep). Following roughly $8.33 bln combined revenue in FY24, QCOM anticipates compounded annualized growth of over +21% over the next five years.

• Given QCOM's aggressive growth targets, why are shares sliding? Most of the targets were in line with street estimates. On the IoT side, revenue growth recovered nicely in Q4, jumping by 22% to finish the year down just 9% yr/yr. Meanwhile, Automotive revenue surged by 68% in Q4, ending the year 55% higher compared to FY23.
  • Inventory woes are mostly behind QCOM, aiding its sharp rebound in IoT. At the same time, Automotive has been capitalizing on new vehicle launches over the past few quarters.
• Slightly disappointing was QCOM's PC revenue target, which is under the IoT business. QCOM projected PC revs of $4.0 bln by FY29, which may be a bit of a letdown given the AI PC buzz lately. While it is unclear how much IoT revenue stemmed from PCs in Q4, AI PCs likely helped pull QCOM's IoT business out of its slump, reflecting growing momentum within the PC market.
  • During its conference yesterday, management mentioned that its PC roadmap will soon cover tiers from $600 and up, boasting over 100 designs by 2026, giving it access to 70% of the PC market.

There is still a lot to like about QCOM's financial targets. The company noted that its Automotive design-win pipeline stands at $45 bln, up from $13 bln just three years ago, reflecting healthy demand for connectivity and advanced driver assistance systems. Management added that its current design win pipeline covers 80% of its Automotive revenue goal for FY29, highlighting how very little of its ambition will depend on new business. Furthermore, QCOM's PC sales projection could be leaning conservative, given that it recently ventured into this industry with its Snapdragon X Elite chip. AI-powered Copilot+ PCs may garner more widespread adoption once their features are better known by the market, such as significantly improved battery life and on-device AI capabilities.

Bottom line, QCOM's new five-year financial estimates were decent but likely priced in for the most part. Meanwhile, investors may feel a tad blue over a PC projection that does not align with the outsized AI-related enthusiasm. There could also be some angst brewing ahead of NVIDIA's (NVDA) Q3 (Oct) report today.