Episode Details

InterDigital, Inc. (IDCC) Q2 2026 — Reported before the open July 30, 2026 (quarter ended June 30). Revenue $260.2M crushed the company's own $139-143M outlook — but FELL 13.4% from $300.6M. Net income $116.4M vs $180.6M; GAAP EPS $3.40 vs $5.35; non-GAAP EPS $4.62 vs $6.52. Adj. EBITDA $184.1M (71%) vs $236.7M (79%). Opex +27.1%. ARR hit a record $625.7M (+13.1%); catch-up was $103.7M, 40% of the print. FY26 guidance raised $85M to $775-845M. The stock jumped 16.2% and closed the week at $304.83. The framing nobody applied: the outlook explicitly EXCLUDES new agreements, so beating it 5x is not growing. All the upside was one item — $110.0M of first-ever Streaming and Cloud revenue from a June Amazon agreement whose final terms are STILL to be set by binding arbitration. THE CALL: AVOID (3/5, A RECORD RUN RATE, PRICED AS IF THE CATCH-UP RECURS) — base-case value ~$200.0 vs ~$304.83 today. KEY METRICS: - CALL: AVOID 3/5 — fair value ~$200 vs $304.83 (-34%). Normalised owner earnings ~$300M/yr (guided FY26 adj. EBITDA $499M less $61M stock comp, less ~$62M capex and capitalised patents, taxed ~18%), cross-checked against a 3-yr average FCF of ~$280M. DCF at 8% five yrs then 4%, 2% terminal, 10.5% = $4,891M EV + $723M net cash / 30.6M shares = $183; plus Lenovo optionality, ~$200. - THE SHARE COUNT SCREENS GET WRONG: basic shares are 25.831M ($7.87B cap), but 6.0M warrants struck at $105.43 are deep in the money at $304.83, so the real diluted count is 30.6M. True market value $9.33B, EV $8.60B — 29x owner earnings. REVERSE DCF: that needs ~15% growth for ten years; management targets 10%+. Of nine scenario cells, exactly ONE clears the price. - THE RECONCILIATION: $260.2M = $156.5M recurring + $103.7M catch-up (40%). Smartphone ARR is $491M = $122.75M/qtr against $122.7M reported, so smartphone was ALL recurring. Streaming ARR is $60M = $15.0M/qtr against $110.0M booked, so ~$95M (86%) of the Amazon line was catch-up — and the 10-Q confirms it: contracted revenue for 2027-2030 each rose EXACTLY $60.0M QoQ. - THE RAISE IS STILL A DECLINE: the FY26 midpoint of $810M is below 2025's actual $834M and 2024's $869M; guided non-GAAP EPS of $11.83 is 22.7% under the $15.31 delivered in 2025. Q3 guidance of $154-158M sits almost exactly on this quarter's $156.5M of recurring revenue — the run rate when nothing settles. - THE TABLE NOBODY READS: contracted royalties total $2.11B — 2027 $572.6M, 2028 $476.8M, 2029 $416.8M, 2030 $280.6M. It DECLINES 51% to 2030 against a $1B+ ARR target, so 72% is unsigned; and management's bridge takes Smartphone ARR (78% of the base) from $491M to ~$500M, 0.4%/yr. Bull counterweight: a year ago that table showed $425.3M for 2026 vs $810M now guided, a ~1.9x conversion. Street: Buy, $450 (+47.6%) — we ALIGN on the business and DIFFER on price. What to watch: Bullish: the Lenovo arbitration is heard in Q4 2026, licence retroactive to Jan 1 2024 (the comparable Samsung award was $1.05B over 8 years); a second Streaming licence — Disney is under two UPC injunctions across 11 countries; or an Amazon arbitration above the $60M/yr booked. Bearish: Samsung's ICC challenge succeeding; a Chinese global rate-setting ruling out of TCL's Shenzhen suits; or the Oct 29 print showing a clean $156M quarter with opex near $120M. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.