InterDigital's Q3 2025: Contradictions Emerge on Samsung Revenue, Consumer IoT Focus, Disney Legal Action, and M&A Strategy

Date of Call: October 30, 2025

Financials Results

• Revenue: $165 million, up 28% year-over-year
• EPS: Non-GAAP EPS $2.55, up 56% year-over-year
• Operating Margin: Adjusted EBITDA margin 64%, up 14 percentage points year-over-year (from 50%)

Guidance:

• Q4 recurring revenue from existing contracts expected to be $144M–$148M.
• Full-year revenue from existing contracts expected to be $820M–$824M (before any new agreements).
• Q4 adjusted EBITDA margin (existing contracts) ~50% and Q4 non-GAAP diluted EPS $1.38–$1.63.
• Full-year (existing contracts) adjusted EBITDA margin ~70% and non-GAAP diluted EPS $14.57–$14.83.

Business Commentary:

• Revenue and License Growth:
• InterDigital reported revenue of $165 million for Q3, up 28% year-over-year, and increased annualized recurring revenue by 49% to an all-time high of almost $590 million.

• Growth was driven by completing the Samsung smartphone arbitration, signing new license agreements, and acquiring an AI startup.

• Dividend Increase and Shareholder Returns:

• InterDigital increased its dividend by 17% to $0.70 per share for Q3, and returned more than $130 million in capital to shareholders over the course of the year.

• The increase in shareholder returns was supported by strong financial performance and strategic investments.

• Licensing and Market Share Expansion:

• The company signed a new license with Honor, a top 10 smartphone vendor, increasing its annualized recurring revenue by $26 million.

• This helped InterDigital achieve over 85% of the total smartphone market under license, approaching its mid-term goal of $500 million in recurring revenue from smartphones by 2027.

• AI and Video Innovation:

• InterDigital completed the acquisition of AI startup Deep Render to strengthen its video compression expertise and further the development of AI-native video research.

• The acquisition is expected to enhance InterDigital's leadership in foundational research and broaden its IP position in AI and video technology.

• Award and Recognition:

• InterDigital was recognized by high-profile publications such as Newsweek, Fortune, and Time Magazine for its business success and growth strategy.
• Awards reflect the company's strong performance and strategic focus on research and innovation.

Sentiment Analysis:

Overall Tone: Positive

• Management called it "another outstanding quarter," reported revenue +28% YoY to $165M, ARR +49% YoY to $588M, adjusted EBITDA margin 64% (up 14 pts YoY), and highlighted license wins, a $1B+ Samsung arbitration and an AI acquisition.

Q&A:

• Question from Kevin Garrigan (Jefferies): Can you walk through consumer IoT prospects for the rest of the year/into 2026 and whether EV charging will be a significant contributor to ARR growth?
  Response: Smart TVs are the largest CE opportunity (licensed Samsung; targeting LG/Hisense/TCL); EV charging is an interesting, growing, heterogeneous market (Wi‑Fi and cellular variants) with upside but early and varied—potential contributor to ARR over time.

• Question from Kevin Garrigan (Jefferies): How will you integrate Deep Render with your video codec technology and are you pursuing other companies to complement streaming business?
  Response: Deep Render adds native AI video expertise and patents to accelerate AI‑native video research and standards participation; integration is strategic and we have a robust M&A pipeline but no additional deals to announce.

• Question from Scott Searle (ROTH Capital): Update on the Disney injunction and next steps; how is this impacting discussions with other streaming vendors?
  Response: Brazil preliminary injunction is in effect (appealed; Disney given until ~Nov 30); it's one step in a multi‑jurisdictional enforcement campaign with trials upcoming in Germany/UPC/US, and we view our legal position as strong.

• Question from Scott Searle (ROTH Capital): Has the injunction improved dialogue with Disney or other streaming vendors?
  Response: While specifics are under NDA, enforcement progress is drawing industry attention and strengthens InterDigital's negotiating position with streaming vendors.

• Question from Scott Searle (ROTH Capital): Does Deep Render primarily help existing streaming customers or expand product breadth (Edge AI, etc.) and how will you monetize it?
  Response: Deep Render currently has no revenue customers; its native AI end‑to‑end approach creates a new paradigm for video delivery, offering multiple future monetization options while the company focuses on leading tech and building patent position.

• Question from Scott Searle (ROTH Capital): Is there an explicit opportunity to license AI standalone and how aggressive will M&A be over the next 2–3 years?
  Response: InterDigital has deep AI capabilities and sees multiple potential AI monetization paths complementing its IP licensing; M&A pipeline is active but selective—high bar for targets and financial capacity to pursue larger opportunities.

• Question from Linda Lee (William Blair) on behalf of Arjun Bhatia: What other areas within your IP focus are you targeting via M&A?
  Response: Primary pillars remain wireless, radio and AI; we also consider adjacent areas that build long‑term competitive advantage and critical mass, evaluating both IP and technology‑driven targets.

• Question from Linda Lee (William Blair) on behalf of Arjun Bhatia: Can you give color and timeline on the Transcend litigation?
  Response: We launched multi‑jurisdictional litigation (UPC, India, Brazil) after years of negotiations; timelines vary by court, but enforcement aims to drive fair licensing and historically leads to bilateral agreements—exact dates are uncertain.

Contradiction Point 1

Samsung Revenue Impact

It impacts the revenue expectations and recurring revenue growth, which are critical for financial forecasting and investor expectations.

How should we think about the tax rate going forward considering the revenue contributions? - Kevin Garrigan(Jefferies)

2025Q3: Samsung has agreed to a 67% increase in its royalty rate across essentially their entire smartphone royalty program. - [Lawrence Chen](CEO)

What was Samsung's contribution to this quarter's $138 million recurring revenue? Did you expect Samsung to contribute to recurring revenue? - Tal Liani(BofA Securities, Research Division)

2025Q2: We had been booking Samsung at -- based on the prior agreement of $78 million. So we've basically been booking just shy of $20 million a quarter. - [Richard J. Brezski](CFO)

Contradiction Point 2

Focus on Consumer IoT Areas

It suggests differing priorities and focus areas for growth within the consumer IoT segment, which could impact strategic planning and market positioning.

What are your largest opportunities in consumer IoT, and is EV charging a major driver of ARR growth? - Kevin Garrigan (Jefferies)

2025Q3: InterDigital is seeing opportunities in multiple consumer electronics areas, with the largest being smart TVs. They have agreements with major TV makers. - [Lawrence Chen](CEO)

Can you discuss the consumer IoT segment and your outlook for the rest of the year? - Blayne Curtis (Jefferies)

2025Q1: We continue to focus on multiple pillars, including smart TVs, PCs, IoT, and connected cars. We've made significant progress with agreements like the Samsung TV deal and HP PC deal. - [Liren Chen](CEO)

Contradiction Point 3

Legal Action and Negotiations with Disney

It involves the progress and strategy regarding legal action against Disney, which affects potential revenue and partnerships for the company.

Can you update us on the Disney injunction and its impact on discussions with other streaming vendors? - Scott Searle (ROTH Capital Partners, LLC, Research Division)

2025Q3: InterDigital received an injunction in Brazil against Disney, supported by an independent expert. Disney has appealed the injunction, which is currently in effect until November 30. - [Lawrence Chen](CEO)

Could you clarify the legal action against Disney, including the timeline and involvement of other video streaming vendors? - Scott Searle (ROTH Capital Partners, LLC, Research Division)

2024Q4: InterDigital has been engaged with Disney in negotiations for over 2.5 years and decided to initiate legal action due to the lack of resolution. The process may take a considerable amount of time, with no specific timeline provided. - [Liren Chen](CEO)

Contradiction Point 4

M&A Strategy and Focus Areas

It reveals differing views on the company's M&A strategy and focus areas, which are critical for future growth and expansion.

What other areas within current technology IP focus areas are you targeting via M&A? - Linda Lee (William Blair)

2025Q3: InterDigital is looking into wireless, radio, and AI areas, but also considers adjacent opportunities. They aim for critical mass and long-term competitive advantage in their chosen fields. - [Lawrence Chen](CEO)

How do you envision reaching $500 million in recurring revenue through smartphone licensing? - Arjun Bhatia (William Blair)

2025Q1: We are not actively pursuing acquisitions for the foreseeable future. There are no pending acquisition discussions, not in the pipeline. - [Rich Brezski](CFO)