IDCC · Research
InterDigital Collects a Toll on Wireless and Video Standards and Kept 192 Million Dollars for Owners
InterDigital kept $191.7M of owner cash over the latest twelve months after property spending, patent costs and all stock pay, while recurring revenue grew 7%.
Spreadsheet & IC Deliverables: Download the formula-linked IDCC 5-tab Excel (.xlsx) workbook and printable 1-page tearsheet.
Download IDCC .xlsx →- Owner cash after capex, patent costs and all stock pay
- $191.7M
- Owner cash as a share of revenue
- 23.5%
- Diluted share count above basic
- 34%
1. Our call: Buy, because InterDigital collects a royalty on the wireless and video standards every connected device must use
Our call: Buy. InterDigital invents wireless and video technology, gets it written into industry standards, and licenses the resulting patents to the makers of phones, televisions, laptops, cars and streaming services [1].
Over the twelve months ended Sep 30, 2026, operating cash flow was $312.4M, property spending and capitalized patent costs were $60.4M and stock pay was $60.3M, leaving $191.7M of owner cash, 23.5% of $817.2M of revenue, our calculation from SEC XBRL and the filings [1][3][11].
Owner cash has been positive in every year from fiscal 2020 to 2025, ranging from $65.7M to $430.8M, our calculation [1][9][11]. The swings are large because license deals often include catch-up payments for past sales, which land in a single quarter [2][6].
The question this piece answers is who owns the checkpoint when software agents start buying, streaming and generating video on their own. Our answer is that the agent does not matter to InterDigital; the device and the video stream do, and both run on standards it helped write
2. A quarter of revenue goes to research, and roughly half of revenue became profit last year
| Metric | Value |
|---|---|
| Research share of revenue | 25.4%, research and portfolio development of $211.4M on $834.0M of revenue, fiscal 2025, our calculation [1]. Nine months ended Sep 30, 2026: $168.9M on $659.0M, 25.6%, our calculation [3] |
| GAAP net margin | 48.8%, net income of $406.6M on $834.0M, fiscal 2025, our calculation [1]. Nine months ended Sep 30, 2026: $271.9M on $659.0M, 41.3%, our calculation [3] |
| API quality | Not applicable in the usual sense, our scoring: the product is a patent license, not software, so we score licensing reach instead, 4 of 5, with eight of the top ten smartphone makers licensed [5] |
| Toll-gate score | 3 of 4 pass, 1 partial (section 2b) |
2b. InterDigital owns patents inside the standards, which every device maker must pass through
The company holds about 38,000 granted patents and pending applications, a count that grew 14% in 2025 [5]. Its revenue comes in three programs: Smartphone, CE, IoT/Auto for televisions, laptops and cars, and Streaming and Cloud Services for video subscription services, pay television and cloud gaming [3].
| Test | Result | Evidence |
|---|---|---|
| Owns the record | Pass | The patents cover cellular, Wi-Fi and video coding standards that products must follow to work with networks and content [1]. A device maker cannot design around a standard and still connect [1]. The pass is not absolute: a California court held some claims invalid in March 2026, and Dolby is challenging six video patents [3]. |
| Owns the connection | Pass | Licensees include Apple, Google, Honor, Lenovo, LG, OPPO, Samsung, vivo and Xiaomi [1]. The company says it licenses eight of the top ten smartphone makers, covering 85% of the market, and four of the top five PC makers [2][5]. |
| Prices close to outcomes | Partial | Royalties scale with devices sold and services used, but most large deals are fixed-fee contracts set for years at a time [1][6]. The Samsung license, set by arbitration, totals $1.05B over eight years [6]. |
| R&D on the gate vs features | Pass | Research and portfolio development was 25.6% of nine-month revenue and feeds new standards work in 5G, Wi-Fi and video [1][3]. The company bought Deep Render, a video compression developer, and is integrating it [2]. |
Three passes and one partial. The strength is that the standards are the gate: a phone without cellular patents cannot be sold in most markets, and a streaming service that compresses video uses coding standards [1].
The weakness is price setting, because the rate is decided in negotiation, arbitration or court, not by the company alone [3].
3. Revenue jumps with catch-up payments, so recurring revenue is the better guide
| Measure | Value | Change |
|---|---|---|
| Fiscal 2021 revenue | $425.4M | +18.5%, our calculation [11] |
| Fiscal 2022 revenue | $457.8M | +7.6%, our calculation [11] |
| Fiscal 2023 revenue | $549.6M | +20.1%, our calculation [11] |
| Fiscal 2024 revenue | $868.5M | +58.0%, our calculation [11] |
| Fiscal 2025 revenue | $834.0M | -4.0%, our calculation [1][11] |
| Twelve months ended Sep 30, 2026 | $817.2M | Our calculation [1][3] |
| Q3 2026 revenue | $193.4M | +17%, company figure [2] |
The company discloses annualized recurring revenue, which it defines as quarterly revenue less catch-up revenue, multiplied by four [2]. That figure was $628.9M in the third quarter, up 7% from $588.0M [2].
Catch-up revenue, payments for sales before a license was signed, was $36.2M in the quarter against $17.7M a year earlier [2].
The fiscal 2025 total shows how lumpy the line is. A panel of International Chamber of Commerce arbitrators set Samsung's royalties in July 2025, and the deal added $119M of catch-up revenue in the second quarter of 2025 on top of $33M of recurring revenue [6].
The company said the award lifts Samsung's recurring revenue to about $131M a year, 67% more than the prior agreement [6].
Guidance for 2026 is $813M to $819M of revenue, based only on contracts already signed, against $834.0M in fiscal 2025 [1]
4. Phones are shrinking as a share, and televisions, PCs and streaming are filling the gap
Smartphone revenue fell 10% to $122.6M in the third quarter, while CE, IoT/Auto revenue rose 97% to $55.7M and Streaming and Cloud Services contributed $15.0M against nothing a year earlier [2]. In the quarter, Dell, Apple and Samsung each made up 10% or more of revenue, in that order [3].
In fiscal 2025 the three largest were Samsung, Apple and vivo [1].
The phone base is long-dated. The Apple license runs through Sep 30, 2029, the vivo license through Jun 30, 2028, and the Samsung license through Dec 31, 2030 [1][6].
In January 2026 the company renewed a five-year license with a major Chinese vendor covering cellular, Wi-Fi and video patents [7].
Growth outside phones depends on new licensees, most of whom resist. Dell agreed in September 2026 to binding arbitration over its license terms, Amazon agreed in June 2026 to drop pending suits and arbitrate, and the Lenovo arbitration hearing took place in October 2026 with a result expected in the first half of 2027 [3].
In the third quarter the company also signed an IoT license with KEBA, an electric vehicle charging company
5. Enforcement costs rose sharply as the company took on Disney
Licensing expense, which includes enforcement and revenue sharing, rose by $49.9M over nine months to $111.2M, driven by revenue share costs and enforcement costs [3]. Research and portfolio development rose to $168.9M from $154.2M on stock pay, personnel and depreciation [3].
Third quarter operating income was $99.4M on $193.4M of revenue, a 51.4% margin, against $75.8M and 46.0% a year earlier, our calculation [3][11]. Over nine months, operating income was $320.9M, or 48.7% of revenue, our calculation [3].
Net income for the quarter was $80.2M, against $67.5M [2].
These are high margins for any business, and they come from a model with few physical costs. The catch is that enforcement spending is the price of collecting royalties from companies that refuse to pay, and it rises before any revenue arrives [3].
6. Owners kept $191.7M after property spending, patent costs and all stock pay
| Period | Operating cash flow | Capex and patent costs | Stock pay | Owner cash |
|---|---|---|---|---|
| Fiscal 2020 | $163.5M | $42.4M | $10.4M | $110.6M [9][11] |
| Fiscal 2021 | $130.4M | $35.9M | $28.7M | $65.7M [9][11] |
| Fiscal 2022 | $286.0M | $42.8M | $22.1M | $221.2M [9][11] |
| Fiscal 2023 | $213.7M | $44.6M | $35.7M | $133.4M [1][11] |
| Fiscal 2024 | $271.5M | $58.7M | $46.0M | $166.8M [1][11] |
| Fiscal 2025 | $544.5M | $70.5M | $43.2M | $430.8M [1][11] |
| Twelve months ended Sep 30, 2026 | $312.4M | $60.4M | $60.3M | Our calculation [1][3] |
We treat capitalized patent costs, the cost of filing and prosecuting patents, the way we treat capitalized software at a software company, as a capital cost that comes out of owner cash [1][3]. Those costs were $54.6M in fiscal 2025 and $41.6M over the first nine months of 2026 [1][3].
Patent purchases, $2.4M in fiscal 2021, are left out as acquisitions [9].
Fiscal 2025 is inflated by the Samsung catch-up payment, and the latest twelve months are depressed by timing. Over nine months, receivables and contract assets used $188.4M of cash while deferred revenue added $98.7M [3].
Revenue booked but not yet collected should turn to cash in later quarters if licensees pay on schedule [3].
7. Debt repayment and dividends took most of the cash this year
Over nine months the company repaid $171.3M of debt, paid $54.2M of dividends and bought back $49.9M of stock [3]. In the third quarter alone, capital return was $121.2M: $18.7M of buybacks, $19.3M of dividends and $83.2M of debt reduction [2].
The quarterly dividend rose in the third quarter [2].
Cash and short-term investments were $1,122.6M at Sep 30, 2026, against debt of $307.0M, our calculation from the balance sheet [3]. The 3.50% convertible notes due 2027 had $296.7M of principal outstanding and are convertible during the fourth quarter of 2026, with settlement in cash, shares or both at the company's choice [2][3].
Shares outstanding were 25.8M at Sep 30, 2026, slightly higher than 25.7M at Dec 31, 2025, despite the buybacks [3]. Warrants covering 6.0M shares mature from September 2027 to April 2028 [2].
In fiscal 2025, diluted weighted shares were 34.5M against 25.8M basic, which shows how much the notes and warrants could add [1]
8. Customer concentration, court rulings and dilution are the main risks
Risks. Concentration: three licensees made up 10% or more of revenue each in fiscal 2025 and again in the third quarter [1][3].
Price setting: rates for Lenovo, Dell and Amazon will come from arbitration panels, which can land below the company's ask [3]. Dilution: the convertible notes and warrants could add shares if settled in stock [1][2].
Disney. The company has sued Disney over video coding and streaming patents in Brazil, California, Germany and the European Unified Patent Court, and says it has won injunctions in all eight patent cases decided so far [2][3].
Disney has answered with an antitrust suit in Delaware, in which the Justice Department's Antitrust Division filed a Statement of Interest in October 2025; the court stayed that case in September 2026 [3].
Not every ruling has gone one way. A California court held some claims of a subset of the asserted patents invalid in March 2026, and that case was stayed in June 2026 [3]
9. Six positive years and a net cash balance support a value above the recurring base
Owner cash has been positive for six straight years, from $110.6M in fiscal 2020 to $430.8M in fiscal 2025, and $191.7M over the latest twelve months, our calculation [1][9][11]. That record meets our standard for valuing the business on owner cash.
We value the business on recurring owner cash of about $120M to $155M a year, our estimate, applying the fiscal 2023 and 2024 owner cash margins of 24.3% and 19.2% to recurring revenue of $628.9M, plus net cash of $815.6M, our calculation [1][2][3]. The range assumes the convertible notes are settled from cash; settlement in shares would spread owner cash across more shares, and fiscal 2025 diluted shares were 34.5M against 25.8M basic [1].
Catch-up payments from pending arbitrations and the Disney cases are upside we do not count. That is why we buy, with conviction held at three because the price of each license is set by others.
10. Agents still need a device and a video stream, and both run on licensed standards
Tailwind. An agent that books, buys or watches on someone's behalf still runs on a phone, laptop or car with a cellular or Wi-Fi radio, and still moves video compressed with standard codecs [1].
The 10-K says the company believes its video patents are used in training generative video models and in storing and distributing what those models produce [1].
The streaming program is the clearest test. Streaming and Cloud Services revenue reached $15.0M in the third quarter from zero a year earlier [2].
If the Disney and Amazon disputes end in licenses, that program could become a third pillar beside phones and consumer devices [2][3].
The risk is that new codecs reduce reliance on the patents the company holds. The UPC case on Disney's new video codec, filed in August 2026, will show whether the patents reach the newer formats [3].
11. Liren Chen runs the company under an independent chair who has served since 2015
Liren Chen has been President and CEO and is a director; he beneficially owned 2.5% of shares, including options, as of the proxy [5]. Richard J.
Brezski is Chief Financial Officer and Treasurer, Julia C. Mattis is Chief Licensing Officer, Rajesh Pankaj is Chief Technology Officer, and Joshua D.
Schmidt is Chief Legal Officer and Corporate Secretary [5]. Former Chief Licensing Officer Eeva K.
Hakoranta stopped serving as an executive officer on Apr 4, 2025 [5].
Board. S.
Douglas Hutcheson, an independent director, has been Chairman since June 2015 [5]. In September 2025 the board's Human Capital Committee required executives to sign individual arbitration agreements to receive severance and change of control benefits [8].
Votes. At the Jun 10, 2026 meeting, John D.
Markley, Jr. drew 8.5% of votes cast against and John A.
Kritzmacher 3.2%, the pay vote drew 1.5% against, and a bylaw change limiting officers' personal liability drew 7.0% against, our calculations [4]. BlackRock held 15.9% and T.
12. The questions we would ask management, and the calls we are tracking
Question one: what share of the receivables built up this year will be collected by mid 2027?
Question two: will the convertible notes be settled in cash or shares?
Question three: what recurring revenue would a Disney license add?
Question four: how far does Smartphone revenue fall before the next phone renewals?
Question five: what is the plan for warrant dilution in 2027 and 2028? That answer sets our conviction.
Prediction one: 2026 revenue is at or above $813M (85%).
Prediction two: the Lenovo arbitration result is announced by Jun 30, 2027 (70%).
Prediction three: InterDigital signs a license or settlement with Disney by Dec 31, 2027 (50%).
Prediction four: Streaming and Cloud Services revenue exceeds $15.0M in at least one quarter by Sep 30, 2027 (60%).
Prediction five: twelve-month owner cash is above $150M at Jun 30, 2027 (70%).
Filing notes. Treasury stock rose to $2,441.4M from $1,830.0M over nine months while cash buybacks were $49.9M, and additional paid-in capital rose to $1,363.2M from $816.9M [3].
The release counts eight wins in eight Disney cases, while the 10-Q shows a German injunction stayed and some California claims held invalid [2][3]. Taxes paid on vesting stock units, $63.3M over nine months, exceeded buybacks
Bottom line: InterDigital collects tolls on standards, but others set the price
InterDigital owns patents inside the wireless and video standards that phones, PCs, televisions and streaming services must use, and owners kept $191.7M over the latest twelve months after property spending, patent costs and all stock pay, with six straight positive years [1][3][11]. Recurring revenue grew 7% in the third quarter while phones shrank and consumer devices and streaming grew [2].
We would move to Hold off if the Lenovo or Dell awards land well below the company's recent deals, or if Smartphone revenue falls more than 15% for two straight quarters. We would raise conviction if Disney or Amazon signs a streaming license, and move to Avoid if courts broadly reject the video patents.
Our call: Buy, conviction 3 of 5.
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