Last Update 08 Dec 25

IDCC: Recurring Licensing Wins Will Drive Smartphone And Streaming Upside

Analysts have nudged their price targets for InterDigital higher, with recent increases of $20 and $25 helping support an updated valuation around $412 per share. They point to stronger recurring revenue, new smartphone licensing wins, and growing confidence in the large streaming opportunity as key drivers.

Analyst Commentary

Bullish analysts highlight that recent price target increases reflect growing conviction in InterDigital's ability to execute across its core licensing verticals, particularly as new smartphone agreements and streaming initiatives begin to scale. The uplift in recurring revenue forecasts and extended visibility into annual recurring revenue are seen as key supports for a higher valuation multiple.

Following the latest quarter, bullish analysts point to a solid beat and an in line outlook for annual recurring revenue as evidence that the company is steadily putting together the pieces needed to capture the large streaming opportunity, while also deepening its footprint in smartphones and consumer electronics.

Bullish Takeaways

Recent price target hikes, including moves toward the mid to high $400s per share, are described as being driven by confidence that InterDigital can sustain double digit growth in recurring revenue and expand its valuation multiple.
New multiyear smartphone licensing agreements with large Chinese vendors are described as increasing annual recurring revenue, with analysts modeling incremental quarterly recurring revenue and one time catch up revenue that support near term earnings upside.
Raised outlooks for upcoming quarters, including higher revenue guidance tied to new licenses, are cited as reinforcing the view that execution in smartphones is tracking ahead of prior expectations and reducing risk in forward growth estimates.
Analysts describe the large streaming video licensing opportunity as a meaningful medium term growth driver and argue that early progress across all three key verticals strengthens the case for ongoing multiple expansion.

Bearish Takeaways

More cautious analysts maintain a neutral stance despite higher price targets and note that a portion of the recent upside is already reflected in the share price and that valuation assumes continued flawless execution.
There is concern that revenue growth remains heavily dependent on successfully securing and renewing large licensing agreements, which can be lumpy and introduce volatility into quarterly results.
Some see risk that expectations for streaming and broader consumer electronics licensing could take longer than anticipated to fully materialize. In their view, this would pressure the premium growth assumptions embedded in forward estimates.
Rising long term forecasts for revenue and earnings are seen as heightening the risk that any slowdown in deal activity or delays in closing new partnerships could trigger multiple compression from current target levels.

What's in the News

Raised third quarter 2025 guidance, now expecting revenue of $155 million to $159 million and diluted EPS of $1.39 to $1.56, up from prior ranges of $136 million to $140 million and $0.94 to $1.11 respectively (Corporate Guidance: Raised).
Issued new guidance for fourth quarter and full year 2025, targeting Q4 revenue of $144 million to $148 million and full year revenue of $820 million to $824 million, with full year diluted EPS of $11.27 to $11.50 (Corporate Guidance: New/Confirmed).
Approved a 17% increase in the quarterly dividend to $0.70 per share, effective with the fourth quarter 2025 payment, and declared a $0.70 dividend payable on October 22, 2025 to shareholders of record on October 8, 2025 (Dividend Increases).
Reported progress on its long running share repurchase program, buying back 171,529 shares for $50.24 million between July 1 and October 30, 2025, and completing total repurchases of 18,308,679 shares for $1.23 billion under the plan launched in 2014 (Buyback Tranche Update).
Announced renewed and new licensing deals, including a renewed patent license with Sharp covering 4G, 5G, Wi Fi, and HEVC technologies, a new license with a home and commercial EV charger manufacturer, and a U.S. Department of War contract to lead AI driven spectrum coexistence research with partners DeepSig and Skylark Wireless (Client Announcements).

Valuation Changes

Fair Value Estimate, unchanged at approximately $412 per share, indicating no material shift in the base case intrinsic valuation.
Discount Rate, risen slightly from about 8.56% to 8.61%, reflecting a modest increase in the required return applied to future cash flows.
Revenue Growth Assumption, effectively unchanged at roughly minus 12.82%, signaling no revised expectations for top line contraction in the current model.
Net Profit Margin, essentially flat at around 30.38%, indicating stable expectations for long term profitability.
Future P/E Multiple, risen slightly from about 70.5x to 70.6x, suggesting a marginally higher valuation multiple applied to projected earnings.

Optimism around growth in recurring revenue, contract renewals, and expansion into new markets may overstate the sustainability and trajectory of future earnings.
Investor assumptions of seamless diversification and high-margin growth ignore potential headwinds from regulatory, technological, and competitive pressures and uncertain monetization outside core smartphone licensing.
Strong licensing deals with major smartphone and PC manufacturers, successful market diversification, and leadership in wireless standards drive revenue stability and position for long-term growth.

Catalysts

About InterDigital

Operates as a global research and development company focuses on wireless, visual, artificial intelligence (AI), and related technologies.What are the underlying business or industry changes driving this perspective?

The recent 67% uplift in the Samsung license and an all-time high annualized recurring revenue, driven by multi-year agreements with major OEMs, have set highly optimistic expectations for continued outsized growth in future contract renewals, potentially inflating valuation multiples and overstating sustainable revenue trajectory.
Investors may be projecting accelerated licensing expansion into non-smartphone verticals (such as automotive, industrial IoT, smart cities, and healthcare) due to the widely anticipated proliferation of connected devices-however, actual monetization and revenue ramp from these adjacent markets remain unproven and could fall short of aggressive assumptions.
The onset of 6G development and InterDigital's leadership in standards bodies are being viewed as a near-certain catalyst for extending royalty streams and patent value; markets may be embedding rapid and broad 6G adoption into forward earnings, though the timing and market scope remain highly speculative.
Expectations for continued high-margin growth and minimal incremental cost in expanding into new verticals or renewing large contracts may underestimate future R&D needs, compliance costs, and risks of margin pressure from regulatory, competitive, or technological changes, possibly leading to eventual net margin disappointment.
The exceptionally strong catch-up revenues and historical use of litigation and arbitration to secure large payments may be interpreted by investors as recurring and repeatable, but as regulatory scrutiny on patent licensing models (e.g., FRAND reforms) intensifies globally, future lump-sum payments and catch-up opportunities are at risk, potentially distorting normalized earnings and cash flow visibility.

InterDigital Earnings and Revenue Growth

InterDigital Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming InterDigital's revenue will decrease by 10.8% annually over the next 3 years.
Analysts assume that profit margins will shrink from 51.9% today to 27.4% in 3 years time.
Analysts expect earnings to reach $173.4 million (and earnings per share of $8.95) by about September 2028, down from $463.5 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 53.1x on those 2028 earnings, up from 17.0x today. This future PE is greater than the current PE for the US Software industry at 36.2x.
Analysts expect the number of shares outstanding to grow by 1.81% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.58%, as per the Simply Wall St company report.

InterDigital Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The company has secured an 8-year, more-than-$1 billion license agreement with Samsung, the world's largest smartphone manufacturer, representing a 67% increase over the prior agreement, which not only boosts recurring revenue but also sets a higher royal baseline for future contract renewals, potentially supporting stronger revenue growth and higher net margins.
InterDigital now has leading smartphone manufacturers Apple and Samsung licensed through the end of the decade, covering almost 80% of the global smartphone market and bringing smartphone annualized recurring revenue (ARR) to a record $465 million, greatly enhancing revenue stability and reducing earnings volatility.
The company is making rapid progress expanding into Consumer Electronics and IoT markets, exemplified by a recent HP agreement (now over 50% of the PC market under license) and a 175% increase in CE and IoT program revenue in Q2, which points to successful diversification and growing addressable market, supporting topline growth and reducing cyclicality.
InterDigital is actively leading development and standards-setting for 6G and integration of AI into cellular networks, positioning it at the forefront of future wireless technology trends that are expected to drive new verticals such as industrial IoT, smart cities, health care, and automotive, creating significant future licensing and revenue opportunities.
With a business model exhibiting high incremental margins-where major license or renewal agreements can be close to 100% gross margin and significant free cash flow (expected to nearly double to over $400 million in 2025)-the company's strong operational leverage, active share repurchases, and increased dividends enhance its ability to deliver higher earnings per share and shareholder returns over the long-term.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $266.5 for InterDigital based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $311.0, and the most bearish reporting a price target of just $220.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $633.9 million, earnings will come to $173.4 million, and it would be trading on a PE ratio of 53.1x, assuming you use a discount rate of 8.6%.
Given the current share price of $305.7, the analyst price target of $266.5 is 14.7% lower.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

Have other thoughts on InterDigital?

Create your own narrative on this stock, and estimate its Fair Value using our Valuator tool.

Create Narrative

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

New License Deals And Raised Outlook Will Drive Next Phase Of Risk