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InterDigital (IDCC) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Information Technology· Jul 30, 2026

Source: earnings call transcript

Executive summary

InterDigital Q2 FY26 — Record ARR and Raised Full-Year Guidance

InterDigital delivered a strong second quarter, driven by significant progress in its streaming and cloud service licensing program, including a new agreement with Amazon and successful enforcement actions against Disney. The company raised its full-year guidance, reflecting continued business momentum and the leverage of its subscription-based licensing model. Management remains focused on executing its strategy to achieve its long-term ARR goals.

Highlights

5

  • Achieved revenue of $260 million, adjusted EBITDA of $184 million, and non-GAAP EPS of $4.62, all exceeding the top end of guidance.

  • Annualized Recurring Revenue (ARR) increased 13% year-over-year to a record $626 million.

  • Raised full-year 2026 guidance by $85 million at the midpoint, with revenue now expected between $775 million and $845 million.

  • Signed a new patent license agreement with Amazon covering devices and services, with final terms to be determined through arbitration.

  • Secured two injunctions against Disney from Europe's Unified Patent Court for patent infringement related to HEVC video encoding.

Concerns

1

  • Operating expenses increased $25.8 million year-over-year, primarily due to higher intellectual property enforcement costs and performance-based compensation.

Guidance & targets

CategoryTargetConfidence
Annualized Recurring Revenue (ARR)
$1 billion plus
high materiality
High
Streaming and cloud service licensing program ARR
$300 million plus
high materiality
High
Full-year 2026 revenue
$775 million to $845 million
high materiality
High
Full-year 2026 adjusted EBITDA
$469 million to $529 million
high materiality
High
Full-year 2026 non-GAAP EPS
$10.85 to $12.81
high materiality
High
Q3 Revenue from existing contracts
$154 million to $158 million
medium materiality
High
Q3 Adjusted EBITDA margin
about 57%
medium materiality
High
Q3 Non-GAAP diluted EPS
$1.94 to $2.13
medium materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Smartphone
Revenue from smartphone licensing program.
$122.7 million———
CE, IoT and auto
Revenue from consumer electronics, IoT, and automotive licensing programs.
$27.5 million———
Streaming and cloud services
Revenue from streaming and cloud services licensing program, including initial recognition from Amazon agreement.
$110 million———

IDCC operating KPIs by quarter

IDCC operating KPIs stated on its earnings calls, by fiscal quarter
KPI Mar 2026 Q1 FY26This call Jun 2026 Q2 FY26Change vs prior quarter
Annual recurring revenue (ARR)
$567M Our annualized recurring revenue is now at $567 million, up 13% year-over-year. Source: earnings call transcript
$625.7M Revenue included $103.7 million of catch-up revenue, while annualized recurring revenue, or ARR, increased 13% year-over-year to a record $625.7 million. Source: earnings call transcript
+10.4%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

Annualized Recurring Revenue (ARR) $625.7 million Q2 FY26 end

increased 13% year-over-year

Deals & partnerships

Amazon Patent license agreement covering devices and services, including Prime Video

Agreement resolves all pending litigations. Final terms, including value, to be determined through binding arbitration.

Fintech company IoT licensing agreement for point-of-sale devices, covering cellular and WiFi patents

New IoT licensing agreement in the payment space.

KEBA License for EV chargers, covering cellular and WiFi patents

New license closed after the end of the quarter for EV chargers.

Risks & headwinds

Increased Operating Expenses Q2 FY26

increased $25.8 million year-over-year

Arbitration Outcome Uncertainty for Amazon Agreement 18 to 24 months

final outcome cannot be assured

Mitigation:Company expects any adjustment to revenue at conclusion of process is more likely to increase rather than reduce recognized revenue.

What to watch in Q3 FY26

Amazon arbitration progress

Next quarter
Current Arbitration process initiated, revenue recognized based on estimate
Target Progress update on arbitration timeline and potential for final terms

Why it matters

The arbitration will determine the final value of the significant Amazon patent license agreement, impacting future revenue.

We expect the process will take roughly 18 months to 24 months to complete.

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Q&A highlights

What are the timelines and next steps for the Disney injunctions, and is the streaming market opportunity expanding beyond the initial $300M+ ARR by 2030 estimate?

Liren Chen explained the UPC process, highlighting the importance of HEVC patents and the court's finding of Disney as an unwilling licensee. He reiterated the $300M+ ARR by 2030 goal for streaming, emphasizing the 'plus' sign, indicating it's a milestone, not an endpoint.

“we do emphasize there's a plus sign to it. So this is not an endpoint. This is essentially a milestone point we see.”

asked by Scott Searle · answered by Lawrence Chen

2 min read 5 chapters

Detailed narrative

Amazon Patent License Agreement

InterDigital has agreed to enter into a patent license agreement with Amazon, covering Amazon's devices and services, including Prime Video. The final terms, including the value, will be determined through binding arbitration, a process expected to take 18 to 24 months. This agreement resolves all pending litigations between the parties. Revenue recognition for this agreement is based on a conservative estimate, with management anticipating potential upward adjustments upon arbitration conclusion.

Disney Enforcement Success

The company achieved significant legal victories against Disney, securing two injunctions from Europe's Unified Patent Court. These injunctions, applying across 11 EU countries, found Disney infringed InterDigital's HEVC video encoding patents and was an unwilling licensee. The court also affirmed InterDigital's fair licensing conduct. These actions have reportedly led to disruptions in Disney's 4K HD content in European markets, underscoring the foundational nature of InterDigital's technology.

IoT Licensing Expansion

InterDigital expanded its licensing reach into the Internet of Things (IoT) sector by signing new agreements. This includes a deal with a leading fintech company for point-of-sale devices and, post-quarter, with KEBA for EV chargers. Both agreements cover cellular and WiFi patents, demonstrating the broad applicability of InterDigital's technology across diverse and expanding verticals, signaling broader IoT opportunities ahead.

Research and Standard Leadership

The company continues to invest in its research engine and leadership in global standards, particularly in wireless, video, and AI. A senior wireless engineer was elected Vice Chair of a key 3GPP working group, contributing to 6G development. InterDigital maintains over 100 standard leadership positions, including multiple chair positions in 3GPP, solidifying its competitive advantage in defining key technology standards.

Capital Allocation and Balance Sheet Strength

InterDigital ended the quarter with a strong balance sheet, holding $1.1 billion in cash, cash equivalents, and short-term investments. The company returned $41.1 million to shareholders in Q2, comprising $23 million in share repurchases and $18 million in dividends. This capital allocation strategy balances ongoing investment in growth with maintaining a fortress balance sheet and returning excess capital to shareholders.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.