InterDigital Q2 Earnings Call Highlights

Key Points

• InterDigital exceeded its second-quarter outlook, reporting $260.2 million in revenue, $184.1 million in adjusted EBITDA and $4.62 in non-GAAP diluted EPS. Results included $103.7 million in catch-up revenue and benefited from recurring licensing growth.
• The company raised its full-year 2026 guidance to $775 million–$845 million in revenue, $469 million–$529 million in adjusted EBITDA and $10.85–$12.81 in non-GAAP EPS. Annualized recurring revenue reached a record $625.7 million, up 13% year over year.
• An Amazon patent-license agreement covering devices and services such as Prime Video resolved all pending litigation, though final economics will be determined through 18–24 months of binding arbitration. InterDigital also secured injunctions against Disney over HEVC patents and signed additional IoT and EV-charging licenses.

InterDigital NASDAQ: IDCC reported second-quarter 2026 results that exceeded its prior outlook, supported by growth in recurring licensing revenue and a new patent-license agreement with Amazon covering devices and services, including Prime Video.

Revenue totaled $260.2 million for the quarter, above the company’s guidance range of $139 million to $143 million. Adjusted EBITDA was $184.1 million, compared with prior guidance of $67 million to $73 million, while non-GAAP diluted earnings per share reached $4.62, above the company’s forecast of $1.41 to $1.60.

The company raised its full-year 2026 revenue guidance to a range of $775 million to $845 million, from a previous range of $675 million to $775 million. It now expects adjusted EBITDA of $469 million to $529 million and non-GAAP EPS of $10.85 to $12.81.

Amazon Agreement Supports Streaming Strategy

President and CEO Liren Chen said InterDigital’s annualized recurring revenue rose 13% from a year earlier to a record $625.7 million, keeping the company on track toward its stated goal of more than $1 billion in ARR by 2030.

A key development during the period was an agreement for Amazon to enter into a patent license covering its devices and services, including Prime Video. Final terms, including the value of the agreement, will be determined through binding arbitration, which InterDigital expects to take roughly 18 to 24 months. The agreement also resolved all pending litigation between the companies.

Chen characterized the arrangement as an important milestone for the company’s streaming and cloud-services licensing program, which InterDigital has said could generate more than $300 million in ARR by 2030.

Chief Financial Officer Rich Brezski said the company recognizes Amazon-related revenue under GAAP using a conservative estimate of the consideration it expects to receive while arbitration is pending. If the final award differs from cumulative revenue recognized during the process, InterDigital will record an adjustment after the award is finalized.

Brezski said the approach is similar to the company’s treatment of its Samsung license while that agreement’s final terms were being arbitrated. InterDigital currently expects any eventual adjustment tied to Amazon to be more likely to increase, rather than reduce, revenue already recognized, though he said the arbitration outcome cannot be assured.

Quarterly Revenue Included Catch-Up Payments

Second-quarter revenue included $103.7 million of catch-up revenue. By licensing program, smartphone revenue was $122.7 million, consumer electronics, Internet of Things and automotive revenue was $27.5 million, and streaming and cloud services contributed $110 million.

GAAP diluted EPS was $3.40. The company generated $82.5 million in cash from operations and $66.6 million in free cash flow, which Brezski said was consistent with expectations for collections on receivables associated with agreements signed in the first quarter.

Operating expenses increased $25.8 million from a year earlier, primarily due to higher intellectual-property enforcement costs and performance-based compensation, Brezski said. Despite those costs, adjusted EBITDA margin was 71%, compared with the roughly 50% margin implied by the company’s prior outlook.

InterDigital returned $41.1 million to shareholders during the quarter, including $23 million in share repurchases and $18 million in dividends. It ended the quarter with $1.1 billion in cash equivalents and short-term investments.

Disney Injunctions and Additional Licensing Deals

Chen also highlighted progress in InterDigital’s enforcement actions against Disney. During the quarter, Europe’s Unified Patent Court granted an injunction after finding that Disney infringed a patent related to HEVC video-encoding technology and confirming the patent’s validity, according to the company. The ruling applies across 11 European Union countries, including France, Germany, Italy and the Netherlands.

InterDigital said it received a second UPC injunction against Disney last week involving another HEVC video-encoding patent. Chen said the court again found Disney to be an unwilling licensee and found that InterDigital had acted fairly in licensing negotiations. The company said it is working with the court to enforce the injunctions and believes they will help support a long-term license agreement with Disney.

During the question-and-answer session, Chen said InterDigital was continuing negotiations with other major subscription-video-on-demand and advertising-supported streaming providers. He said the company prefers bilateral negotiations over litigation and did not provide an update on potential additional enforcement actions.

Outside streaming, InterDigital signed a new IoT licensing agreement with a fintech company covering point-of-sale devices and its cellular and Wi-Fi patents. After the quarter ended, it also signed a license with EV-charger maker KEBA covering cellular and Wi-Fi technology.

Third-Quarter Outlook

For the third quarter, InterDigital expects $154 million to $158 million in revenue from existing contracts. Revenue from any new agreements or enforcement decisions would be additive, Brezski said. Based solely on existing contracts, the company expects an adjusted EBITDA margin of approximately 57% and non-GAAP diluted EPS of $1.94 to $2.13.

Brezski said InterDigital also expects another strong quarter of free cash flow, driven by scheduled payments under existing agreements. He added that moving the Amazon matter to arbitration could make enforcement more efficient than a multi-jurisdictional litigation campaign, although the company continues to have other enforcement actions underway.

About InterDigital (NASDAQ:IDCC)

InterDigital, Inc is a mobile and video technology research and development company that designs and licenses wireless communications and video compression innovations. Its patent portfolio encompasses key standards across 3G, 4G LTE and 5G wireless networks, as well as video and multimedia technologies. By focusing on fundamental technology creation rather than device manufacturing, InterDigital delivers core intellectual property to smartphone manufacturers, chipset vendors and telecommunications operators worldwide.

The company's principal services include patent licensing, technology evaluation and consulting.

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