Qualcomm : Second Quarter 2026 10-Q

About this update from Qualcomm Incorporated

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark one) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 29, 2026 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File Number 0-19528 QUALCOMM Incorporated (Exact name of registrant as specified in its charter) Delaware 95-3685934 (State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.) 5775 Morehouse Dr., San Diego, California 92121-1714 (Address of Principal Executive Offices) (Zip Code) (858) 587-1121 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, $0.0001 par value QCOM The Nasdaq Stock Market LLC Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. company ☐ Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting Emerging growth company If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ The number of shares outstanding of the registrant's common stock was 1,054 million at April 27, 2026. PART I. FINANCIAL INFORMATION QUALCOMM Incorporated Form 10-Q For the Quarter Ended March 29, 2026 Page Item 1. Condensed Consolidated Financial Statements (Unaudited) Condensed Consolidated Balance Sheets 4 Condensed Consolidated Statements of Operations 5 Condensed Consolidated Statements of Comprehensive Income 6 Condensed Consolidated Statements of Cash Flows 7 Condensed Consolidated Statements of Stockholders' Equity 8 Notes to Condensed Consolidated Financial Statements 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 18 Item 3. Quantitative and Qualitative Disclosures About Market Risk 26 Item 4. Controls and Procedures 26 PART II. OTHER INFORMATION Item 1. Legal Proceedings 27 Item 1A. Risk Factors 27 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 50 Item 3. Defaults Upon Senior Securities 50 Item 4. Mine Safety Disclosures 50 Item 5. Other Information 50 Item 6. Exhibits 51 SIGNATURES 52 ‌PART I. FINANCIAL INFORMATION ‌ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ‌QUALCOMM Incorporated CONDENSED CONSOLIDATED BALANCE SHEETS (In millions, except par value amounts) (Unaudited) March 29, 2026 September 28, 2025 ASSETS Current assets: Cash and cash equivalents $ 5,435 $ 5,520 Restricted cash - 2,323 Marketable securities 4,364 4,635 Accounts receivable, net 4,347 4,315 Inventories 7,368 6,526 Other current assets 1,598 2,435 Total current assets 23,112 25,754 Deferred tax assets 5,968 743 Property, plant and equipment, net 5,071 4,690 Goodwill 14,251 11,358 Other intangible assets, net 1,575 1,148 Other assets 7,159 6,450 Total assets $ 57,136 $ 50,143 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Trade accounts payable $ 2,973 $ 2,791 Payroll and other benefits related liabilities 1,370 1,839 Unearned revenues 323 358 Short-term debt 498 - Other current liabilities 4,603 4,156 Total current liabilities 9,767 9,144 Unearned revenues 70 71 Long-term debt 14,772 14,811 Other liabilities 5,249 4,911 Total liabilities 29,858 28,937 Preferred stock, $0.0001 par value; 8 shares authorized; none outstanding - - Common stock and paid-in capital, $0.0001 par value; 6,000 shares authorized; 1,059 and 1,074 shares issued and outstanding, respectively - - Retained earnings 26,901 20,646 Accumulated other comprehensive income 377 560 Total stockholders' equity 27,278 21,206 Total liabilities and stockholders' equity $ 57,136 $ 50,143 Commitments and contingencies (Note 5) Stockholders' equity: See accompanying notes. ‌QUALCOMM Incorporated CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share data) (Unaudited) Three Months Ended Six Months Ended March 29, 2026 March 30, 2025 March 29, 2026 March 30, 2025 Revenues: Equipment and services $ 9,060 $ 9,359 $ 19,526 $ 19,301 Licensing 1,539 1,620 3,325 3,348 Total revenues 10,599 10,979 22,851 22,649 Costs and expenses: Cost of revenues 4,900 4,937 10,468 10,098 Research and development 2,463 2,216 4,915 4,446 Selling, general and administrative 898 706 1,763 1,430 Other 29 - 29 - Total costs and expenses 8,290 7,859 17,175 15,974 Operating income 2,309 3,120 5,676 6,675 Interest expense (171) (163) (341) (326) Investment and other income, net 94 148 444 391 Income before income taxes 2,232 3,105 5,779 6,740 Income tax benefit (expense) 5,138 (293) 4,596 (748) Net income $ 7,370 $ 2,812 $ 10,375 $ 5,992 Basic earnings per share $ 6.92 $ 2.55 $ 9.71 $ 5.41 Diluted earnings per share $ 6.88 $ 2.52 $ 9.65 $ 5.36 Shares used in per share calculations: Basic 1,066 1,104 1,068 1,107 Diluted 1,072 1,115 1,075 1,118 See accompanying notes. ‌QUALCOMM Incorporated CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) (Unaudited) Three Months Ended Six Months Ended March 29, 2026 March 30, 2025 March 29, 2026 March 30, 2025 Net income $ 7,370 $ 2,812 $ 10,375 $ 5,992 Other comprehensive (loss) income, net of income taxes: Foreign currency translation (losses) gains (101) 82 (80) (134) Net unrealized (losses) gains on available-for-sale debt securities (7) 16 (5) (22) Net unrealized (losses) gains on derivative instruments (86) 23 (88) (36) Other reclassifications included in net income (4) 1 (10) - Total other comprehensive (loss) income (198) 122 (183) (192) Comprehensive income $ 7,172 $ 2,934 $ 10,192 $ 5,800 See accompanying notes. ‌QUALCOMM Incorporated CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) (Unaudited) Six Months Ended March 29, 2026 March 30, 2025 Operating Activities: Net income $ 10,375 $ 5,992 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense 806 833 Income tax provision less than income tax payments (5,857) (899) Share-based compensation expense 1,749 1,461 Net gains on marketable securities and other investments (47) (9) Equity in net earnings of investees (83) (16) Other items (47) (12) Changes in assets and liabilities: Accounts receivable, net 58 227 Inventories (802) 202 Other assets 1,019 299 Trade accounts payable 229 (97) Payroll, benefits and other liabilities 208 (773) Unearned revenues (194) (67) Net cash provided by operating activities 7,414 7,141 Investing Activities: Capital expenditures (1,082) (491) Purchases of debt and equity marketable securities (1,925) (3,326) Proceeds from sales and maturities of debt and equity marketable securities 1,985 2,155 Acquisitions and other investments, net of cash acquired (1,238) (341) Other items 38 43 Net cash used by investing activities (2,222) (1,960) Financing Activities: Proceeds from short-term debt 1,246 500 Repayment of short-term debt (750) (500) Repayment of debt of acquired company (174) - Proceeds from issuance of common stock - 201 Repurchases and retirements of common stock (5,442) (3,498) Dividends paid (1,895) (1,880) Payments of tax withholdings related to vesting of share-based awards (536) (609) Other items (24) (3) Net cash used by financing activities (7,575) (5,789) Effect of exchange rate changes on cash, cash equivalents and restricted cash (25) (38) Net decrease in total cash, cash equivalents and restricted cash (2,408) (646) Total cash and cash equivalents at beginning of period (including $2,323 classified as restricted cash at September 28, 2025) 7,843 7,849 Total cash and cash equivalents at end of period $ 5,435 $ 7,203 See accompanying notes. ‌QUALCOMM Incorporated CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In millions, except per share data) (Unaudited) Three Months Ended Six Months Ended March 29, 2026 March 30, 2025 March 29, 2026 March 30, 2025 Total stockholders' equity, beginning balance $ 23,073 $ 26,880 $ 21,206 $ 26,274 Common stock and paid-in capital: Balance at beginning of period $ - $ - $ - $ - Common stock issued under employee benefit plans - 200 - 201 Repurchases and retirements of common stock (743) (632) (3,243) (1,108) Share-based compensation 889 726 1,809 1,516 Tax withholdings related to vesting of share-based payments (256) (294) (536) (609) Common stock issued in acquisition 43 - 1,903 - Common stock issued to settle convertible debt 67 - 67 - Balance at end of period - - - - Retained earnings: Balance at beginning of period 22,498 26,607 20,646 25,687 Net income 7,370 2,812 10,375 5,992 Repurchases and retirements of common stock (1,992) (1,120) (2,161) (2,406) Dividends (975) (966) (1,959) (1,940) Balance at end of period 26,901 27,333 26,901 27,333 Accumulated other comprehensive income: Balance at beginning of period 575 273 560 587 Other comprehensive (loss) income (198) 122 (183) (192) Balance at end of period 377 395 377 395 Total stockholders' equity, ending balance $ 27,278 $ 27,728 $ 27,278 $ 27,728 Dividends per share announced $ 0.89 $ 0.85 $ 1.78 $ 1.70 See accompanying notes. QUALCOMM Incorporated NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ‌Note 1. Basis of Presentation and Significant Accounting Policies Update Financial Statement Preparation. These condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and the instructions to Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, the interim financial information includes all normal recurring adjustments necessary for a fair statement of the results for the interim periods. These condensed consolidated financial statements are unaudited and should be read in conjunction with our Annual Report on Form 10-K for our fiscal year ended September 28, 2025. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year. We operate and report using a 52-53 week fiscal year ending on the last Sunday in September. Each of the three and six months ended March 29, 2026 and March 30, 2025 included 13 weeks and 26 weeks, respectively. Our fiscal year for 2026 will include 52 weeks. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in our condensed consolidated financial statements and the accompanying notes. Actual results could differ from those estimates. Certain prior year amounts have been reclassified to conform to the current year presentation. Recent Accounting Pronouncements. Income Tax Disclosures: In December 2023, the FASB issued new requirements to disclose annually certain additional detailed income tax information related to the effective tax rate reconciliation and income taxes paid, among other items. We will adopt the new requirements for our annual periods starting in fiscal 2026, which can be applied on a retrospective or prospective basis. Income Statement - Expense Disaggregation Disclosures: In November 2024, the FASB issued new requirements to disclose certain additional expense information on an annual and interim basis, including (among other items) the amounts of purchases of inventory, employee compensation, depreciation and intangible asset amortization included within each income statement expense caption, as applicable. We will adopt the new requirements for our annual periods starting in fiscal 2028 (and interim periods thereafter) on a prospective basis. Note 2. Composition of Certain Financial Statement Items Inventories (in millions) March 29, 2026 September 28, 2025 Raw materials $ 580 $ 336 Work-in-process 4,346 3,985 Finished goods 2,442 2,205 $ 7,368 $ 6,526 We have multi-year capacity purchase commitments with certain suppliers of our integrated circuit products. Total advance payments related to multi-year capacity purchase commitments recorded on our condensed consolidated balance sheets at March 29, 2026 and September 28, 2025 were $782 million and $1.9 billion, respectively, of which $469 million and $1.5 billion were recorded in other current assets, respectively, and $313 million and $357 million were recorded in other assets, respectively. QUALCOMM Incorporated NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Other Current Liabilities (in millions) March 29, 2026 September 28, 2025 Customer incentives and other customer-related liabilities $ 2,865 $ 1,948 Income taxes payable 508 1,007 Other 1,230 1,201 $ 4,603 $ 4,156 Interest Rate Swaps. At March 29, 2026 and September 28, 2025, we had outstanding interest rate swaps with an aggregate notional amount of $5.0 billion and $3.6 billion, respectively, that are designated as fair value hedges and allow us to effectively convert fixed-rate payments into floating-rate payments on a portion of our outstanding long-term debt. Commercial Paper Program. We have an unsecured commercial paper program, which provides for the issuance of up to $4.5 billion of commercial paper. At March 29, 2026 and September 28, 2025, we had $498 million and no amounts, respectively, of outstanding commercial paper recorded as short-term debt. Revenues. We disaggregate our revenues by segment (Note 6), by products and services (as presented on our condensed consolidated statements of operations), and for our QCT (Qualcomm CDMA Technologies) segment, by revenue stream, which is based on the industry and application in which our products are sold (as presented below). In certain cases, the determination of QCT revenues by industry and application requires the use of certain assumptions. Substantially all of QCT's revenues consist of equipment revenues that are recognized at a point in time, and substantially all of QTL's (Qualcomm Technology Licensing) revenues represent licensing revenues that are recognized over time and are principally from royalties generated through our licensees' sales of mobile handsets. QCT revenue streams were as follows (in millions): Three Months Ended Six Months Ended March 29, 2026 March 30, 2025 March 29, 2026 March 30, 2025 Handsets (1) $ 6,024 $ 6,929 $ 13,848 $ 14,503 Automotive (2) 1,326 959 2,427 1,920 IoT (internet of things) (3) 1,726 1,581 3,414 3,130 Total QCT revenues $ 9,076 $ 9,469 $ 19,689 $ 19,553 Includes revenues from products sold for use in mobile handsets. Includes revenues from products sold for use in automobiles, including connectivity, digital cockpit and advanced driver assistance systems (ADAS) and automated driving (AD). Primarily includes products sold for use in the following industries and applications: consumer (including personal computers (PCs), extended reality (XR) and other personal computing devices), edge networking (including mobile broadband and wireless access points) and industrial (including handhelds, retail, tracking and logistics and utilities). Revenues recognized from performance obligations satisfied (or partially satisfied) in previous periods generally include certain sales-based royalty revenues related to system software, certain amounts related to customer incentives and licensing revenues recognized related to devices sold in prior periods (including revenues resulting from certain settlements and adjustments to prior period royalty estimates, which include the impact of the reporting by our licensees of actual royalties due) and were as follows (in millions): Three Months Ended Six Months Ended March 29, March 30, 2026 2025 March 29, 2026 March 30, 2025 Revenues recognized from previously satisfied performance obligations $ 132 $ 285 $ 313 $ 526 Remaining performance obligations, which are primarily included in unearned revenues (as presented on our condensed consolidated balance sheets), represent the aggregate amount of the transaction price of certain customer contracts yet to be recognized as revenues as of the end of the reporting period and exclude revenues related to (a) contracts that have an original expected duration of one year or less and (b) sales-based royalties (i.e., future royalty revenues) pursuant to our license QUALCOMM Incorporated NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) agreements. Our patent license agreements with key OEMs are generally long-term, with remaining terms expiring between fiscal 2027 and 2031. We generally seek to renew or renegotiate such license agreements prior to expiration. Concentrations. A significant portion of our revenues are concentrated with a small number of customers/licensees of our QCT and QTL segments. The comparability of customer/licensee concentrations for the periods presented are impacted by the timing of customer/licensee device launches and/or innovation cycles and other seasonal trends, among other fluctuations in demand. Revenues from each customer/licensee that were 10% or greater of total revenues were as follows: Three Months Ended Six Months Ended March 29, 2026 March 30, 2025 March 29, 2026 March 30, 2025 Customer/licensee (x) 24% 27% 20% 21% Customer/licensee (y) 22 18 24 21 Customer/licensee (z) * 10 * 12 *Less than 10% Other Income, Costs and Expenses. Other expenses in the three months and six months ended March 29, 2026 consisted of $29 million in restructuring and restructuring-related charges (substantially all of which related to severance costs). Investment and Other Income, Net (in millions) Three Months Ended Six Months Ended March 29, 2026 March 30, 2025 March 29, 2026 March 30, 2025 Interest and dividend income $ 113 $ 167 $ 250 $ 336 Net (losses) gains on marketable securities (64) 18 (120) 37 Net gains (losses) on other investments 7 (5) 217 26 Net losses on deferred compensation plan assets (56) (34) (13) (20) Impairment losses on other investments (12) (16) (23) (41) Equity in net earnings of investees 44 18 83 16 Other 62 - 50 37 $ 94 $ 148 $ 444 $ 391 Note 3. Income Taxes In the fourth quarter of fiscal 2025, tax reform legislation included in the One Big Beautiful Bill Act (OBBB) was enacted in the United States. The OBBB included significant corporate tax reforms, including changes to the foreign-derived deduction eligible income (FDDEI) regime and changes allowing domestic research and development (R&D) expenditures to be deducted as incurred beginning in fiscal 2026 (under prior law such expenditures were capitalized and amortized over five years). As a result, we expected to be perpetually subject to corporate alternative minimum tax (CAMT) and established a $5.7 billion valuation allowance on our federal deferred tax assets in fiscal 2025. In the second quarter of fiscal 2026, the U.S. Department of Treasury and the Internal Revenue Service issued Notice 2026-07, which, among other items, allows us to reduce CAMT by certain previously capitalized domestic R&D expenditures. As a result, we no longer expect to be subject to CAMT in the foreseeable future, and therefore, we now expect to realize our existing federal deferred tax assets. Accordingly, we released our valuation allowance on our federal deferred tax assets resulting in a $5.7 billion income tax benefit in the second quarter of fiscal 2026. Changes in future taxable income, tax laws and other factors may change our determination regarding whether we will be able to realize our deferred tax assets. We estimate our annual effective income tax rate to be 40% benefit for fiscal 2026, primarily due to the release of our valuation allowance on our federal deferred tax assets. Our annual effective income tax rate for fiscal 2026 also reflects a significant portion of our income qualifying as FDDEI taxable at a 13% effective tax rate and benefits from the federal research and development tax credit. Such benefits from FDDEI for fiscal 2026 will be reduced compared to fiscal 2025 as a result of the current deduction of domestic R&D expenditures under OBBB. However, it will have a favorable effect on our cash flows from operations due to significantly lower cash tax payments. QUALCOMM Incorporated NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Our effective tax rate for the second quarter of fiscal 2026 was 230% benefit, primarily due to the release of our valuation allowance on our federal deferred tax assets. Our effective tax rate for the second quarter of fiscal 2025 was 9%, primarily due to net discrete tax benefits. Note 4. Capital Stock Stock Repurchase Program. On March 17, 2026, we announced a new $20.0 billion stock repurchase program, which was in addition to the then-remaining repurchase authority of $2.1 billion under the previous program announced in November 2024. The stock repurchase programs have no expiration date. At March 29, 2026, $21.9 billion remained authorized for repurchase under our stock repurchase programs. Shares Outstanding. Shares of common stock outstanding at March 29, 2026 were as follows (in millions): Balance at September 28, 2025 1,074 Issued 19 Repurchased (34) Balance at March 29, 2026 1,059 Dividends. On March 17, 2026, we announced an increase in our quarterly dividend per share of common stock from $0.89 to $0.92, which is effective for dividends payable after March 26, 2026. Earnings Per Common Share. Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per share is computed by dividing net income by the combination of the weighted-average number of common shares outstanding and the weighted-average number of dilutive common share equivalents, primarily comprised of shares issuable under our share-based compensation plans, during the reporting period, using the treasury stock method. The following table provides information about the diluted earnings per share calculation (in millions): Three Months Ended Six Months Ended March 29, 2026 March 30, 2025 March 29, 2026 March 30, 2025 Dilutive common share equivalents included in diluted shares 6 10 7 11 Shares of common stock equivalents not included because the effect would be anti-dilutive or certain performance conditions were not satisfied at the end of the period 18 1 15 1 Note 5. Commitments and Contingencies Legal and Regulatory Proceedings. ParkerVision, Inc. v. QUALCOMM Incorporated: On May 1, 2014, ParkerVision, Inc. (ParkerVision) filed a complaint against us in the United States District Court for the Middle District of Florida alleging that certain of our products infringed seven ParkerVision patents. ParkerVision subsequently reduced the number of patents asserted to three. The asserted patents are now expired, and injunctive relief is no longer available. ParkerVision continues to seek damages related to the sale of many of our radio frequency (RF) products sold between 2008 and 2018. On March 23, 2022, the district court entered judgment in our favor on all claims and closed the case. ParkerVision appealed to the United States Court of Appeals for the Federal Circuit (Federal Circuit), and on September 6, 2024, the Federal Circuit reversed the judgment of the district court, citing certain substantive and procedural issues, and remanded the case to the district court for further proceedings. Following a claim construction ruling by the district court, the parties agreed to a stipulated judgment of non-infringement with respect to certain of ParkerVision's claims (Receiver Claims). On October 2, 2025, the court entered a final judgment in our favor with respect to the Receiver Claims and severed and stayed ParkerVision's remaining claims (Transmitter Claims), pending appeal of the court's claim construction ruling and resulting determination of non-infringement of the Receiver Claims. ParkerVision has appealed to the Federal Circuit. We intend to continue to vigorously defend ourselves in this matter. Arm Ltd. v. QUALCOMM Incorporated: On August 31, 2022, Arm Ltd. filed a complaint against us in the United States District Court for the District of Delaware. Our subsidiaries Qualcomm Technologies, Inc. and NuVia, Inc. (Nuvia) are also named in the complaint. The complaint alleges that following our acquisition of Nuvia, we and Nuvia breached Nuvia's QUALCOMM Incorporated NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Architecture License Agreement with Arm (the Nuvia ALA) by failing to comply with the termination obligations under the Nuvia ALA. Arm is seeking specific performance, including that we cease all use of and destroy any technology that was developed under the Nuvia ALA, including processor core technology (which Arm alleges includes our custom Qualcomm Oryon CPU cores). On September 30, 2022, we filed our Answer and Counterclaim in response to Arm's complaint denying Arm's claims. Our counterclaim seeks a declaratory judgment that we did not breach the Nuvia ALA or the Technology License Agreement between Nuvia and Arm, and that, following the acquisition of Nuvia, our architected cores (including all further developments, iterations or instantiations of the technology we acquired from Nuvia) and System-on-Chip (SoC) products incorporating such cores are fully licensed under our existing Architecture License Agreement with Arm (the Qualcomm ALA) and Technology License Agreement with Arm (the Qualcomm TLA). A trial was held beginning on December 16, 2024, and on December 20, 2024, the jury found that (i) Qualcomm did not breach the Nuvia ALA and (ii) Qualcomm CPUs that include designs acquired in the Nuvia acquisition are licensed under the Qualcomm ALA. The jury was unable to reach a verdict with respect to Arm's claim as to whether Nuvia breached the Nuvia ALA. The parties filed various post-trial motions, including motions for judgment as a matter of law. On September 30, 2025, the court entered a final judgment upholding the jury's verdict in favor of Qualcomm, granting judgment to Nuvia, and dismissing Arm's remaining claims. On October 1, 2025, Arm filed a notice of appeal to the United States Court of Appeals for the Third Circuit. We intend to continue to vigorously defend ourselves against Arm's claims in this matter. On April 18, 2024, we filed a separate complaint, captioned QUALCOMM Incorporated v. Arm Holdings plc f/k/a Arm Ltd., in the United States District Court for the District of Delaware. The complaint alleges that Arm has breached the Qualcomm ALA by failing to provide certain deliverables that Arm is obligated to provide. The complaint seeks an order that Arm comply with its contractual obligations, damages, and additional relief. On December 16, 2024, we filed a First Amended Complaint alleging additional causes of action based on Arm improperly seeking to terminate the Qualcomm ALA and improperly publicizing that it was seeking to terminate the Qualcomm ALA. On June 3, 2025, we filed a Second Amended Complaint to add a claim that Arm has breached the Qualcomm TLA by failing to provide license offers at commercially reasonable prices and terms. Arm has moved to dismiss our amended complaint. On January 8, 2026, we filed a substantially identical complaint against Arm Ltd., which was subsequently consolidated with the Arm Holdings plc complaint. Trial is scheduled to begin on October 5, 2026. On October 22, 2024, Arm provided us with a notice alleging that we have breached the Qualcomm ALA by marketing products that contain CPUs that Arm alleges use designs, technology and code created by Nuvia employees prior to our acquisition of Nuvia; by seeking support and verification from Arm for additional products that use such alleged designs, technology and code; and by suing Arm for breach of the Qualcomm ALA. Arm's notice asserts that it will have the right to terminate the Qualcomm ALA if such alleged breaches are not cured within 60 days of such notice. We disagree with Arm's allegations, including that we are, or have been, in breach of the Qualcomm ALA. On January 8, 2025, Arm notified us that it was withdrawing its October 22, 2024 notice of breach and indicated that it has no current plan to terminate the Qualcomm ALA, while reserving its rights pending the outcome of the ongoing litigation. Contingent Losses and Other Considerations: Litigation and investigations are inherently uncertain, and we face difficulties in evaluating or estimating likely outcomes or ranges of possible loss, particularly in antitrust and trade regulation investigations. We have not recorded any accrual at March 29, 2026 for contingent losses associated with the matters described above based on our belief that losses, while reasonably possible, are not probable. Further, any possible amount or range of loss cannot be reasonably estimated at this time. The unfavorable resolution of one or more of these matters could have a material adverse effect on our business, results of operations, financial condition or cash flows. We are engaged in numerous other legal actions not described above (including matters arising in the ordinary course of our business, such as those relating to employment matters or the initiation or defense of proceedings relating to intellectual property rights, among others) and, while there can be no assurance, we believe that the ultimate outcome of these other legal actions will not have a material adverse effect on our business, results of operations, financial condition or cash flows. Note 6. Segment Information We are organized on the basis of products and services and have three reportable segments. Our operating segments reflect the way our businesses and management/reporting structure are organized internally and the way our Chief Operating Decision Maker (CODM), who is our CEO, reviews financial information, makes operating decisions and assesses business performance. We also consider, among other items, the way budgets and forecasts are prepared and reviewed and the basis on which executive compensation is determined, as well as the similarities and the level of centralized resource planning within our operating segments, such as the nature of products, the level of shared products, technology and other resources, QUALCOMM Incorporated NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) production processes and customer base. We conduct business primarily through our QCT semiconductor business and our QTL licensing business. QCT develops and supplies integrated circuit platforms and system software with advanced connectivity and high-performance, low-power computing technologies for use in mobile devices; automotive systems for connectivity, digital cockpit and ADAS/AD; and IoT including consumer electronic devices, industrial devices and edge networking products. QTL grants licenses or otherwise provides rights to use portions of our intellectual property portfolio, which includes certain patent rights essential to and/or useful in the manufacture and sale of certain wireless products. Our QSI (Qualcomm Strategic Initiatives) reportable segment makes strategic investments. We also have nonreportable segments, including QGOV (Qualcomm Government Technologies) and our Data Center business. Our CODM uses revenues and earnings (loss) before income taxes (EBT) to evaluate performance and allocate resources for our segments primarily through our budget and forecasting process. Our CODM primarily uses these metrics by comparing actual results to forecasted and prior period results. Segment EBT includes the allocation of certain corporate expenses to the segments, including depreciation and amortization expense (as presented on the condensed consolidated statements of cash flows, the majority of which is allocated to QCT). Certain income and charges are not allocated to segments in our management reports because they are not considered in evaluating the segments' operating performance. Unallocated income and charges include certain interest expense, certain net investment income, share-based compensation, gains and losses on our deferred compensation plan liabilities and related assets, certain research and development (R&D) expenses, certain selling, general and administrative (SG&A) expenses and other expenses or income that were deemed to be not directly related to the businesses of the segments. Additionally, unallocated charges include amortization of certain intangible assets and certain other acquisition-related charges, third-party acquisition and integration services costs and certain other items, which may include major restructuring and restructuring-related costs, asset impairment charges and awards, settlements and/or damages arising from legal or regulatory matters and recognition of the step-up of inventories and property, plant and equipment to fair value. Our CODM does not evaluate our operating segments using discrete asset information. The table below presents revenues and EBT for reportable segments (in millions): Three Months Ended Six Months Ended March 29, 2026 March 30, 2025 March 29, 2026 March 30, 2025 QCT: Revenues $ 9,076 $ 9,469 $ 19,689 $ 19,553 Cost of revenues 4,700 4,834 10,145 9,898 Operating expenses (R&D and SG&A) 1,911 1,778 3,777 3,552 EBT $ 2,465 $ 2,857 $ 5,767 $ 6,103 QTL: Revenues $ 1,382 $ 1,319 $ 2,974 $ 2,854 Costs and expenses (1) 388 390 750 768 EBT $ 994 $ 929 $ 2,224 $ 2,086 QSI: Revenues $ - $ - $ - $ - Operating expenses 3 3 5 6 Investment and other (expense) income, net (27) 13 154 35 EBT $ (30) $ 10 $ 149 $ 29 Substantially all of QTL's costs and expenses are comprised of operating expenses. QUALCOMM Incorporated NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Consolidated revenues and EBT include the following reconciling items (in millions): Three Months Ended Six Months Ended March 29, 2026 March 30, 2025 March 29, 2026 March 30, 2025 Revenues Reportable segments $ 10,458 $ 10,788 $ 22,663 $ 22,407 Nonreportable segments 141 48 188 99 Unallocated revenues - 143 - 143 $ 10,599 $ 10,979 $ 22,851 $ 22,649 EBT Reportable segments $ 3,429 $ 3,796 $ 8,140 $ 8,218 Nonreportable segments (121) (7) (204) (6) Unallocated revenues - 143 - 143 Unallocated cost of revenues (95) (60) (178) (119) Unallocated R&D expenses (616) (558) (1,314) (1,156) Unallocated SG&A expenses (274) (184) (573) (372) Unallocated other expenses (29) - (29) - Unallocated interest expense (171) (163) (341) (326) Unallocated investment and other income, net 109 138 278 358 $ 2,232 $ 3,105 $ 5,779 $ 6,740 Certain revenues were not allocated to our segments in our management reports because they were not considered in evaluating segment results. Unallocated revenues in the second quarter and first six months of fiscal 2025 were comprised of licensing revenues resulting from a settlement of a licensing dispute in the second quarter of fiscal 2025. Note 7. Fair Value Measurements and Marketable Securities The following table presents our fair value hierarchy for assets and liabilities measured at fair value on a recurring basis at March 29, 2026 (in millions): Level 1 Level 2 Total Assets Cash equivalents $ 1,014 $ 515 $ 1,529 Marketable securities: Corporate bonds and notes - 3,266 3,266 Mortgage- and asset-backed securities - 863 863 U.S. Treasury securities and government-related securities 58 37 95 Equity securities 140 - 140 Total marketable securities 198 4,166 4,364 Derivative instruments - 36 36 Other investments (1) 1,138 - 1,138 Total assets measured at fair value $ 2,350 $ 4,717 $ 7,067 Liabilities Derivative instruments $ - $ 295 $ 295 Other liabilities (1) 1,134 - 1,134 Total liabilities measured at fair value $ 1,134 $ 295 $ 1,429 Other investments and other liabilities included in Level 1 are comprised of our deferred compensation plan assets and liabilities. QUALCOMM Incorporated NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Long-term Debt. At March 29, 2026, the aggregate fair value of our outstanding fixed-rate notes, based on Level 2 inputs, was approximately $13.7 billion. Marketable Securities. At March 29, 2026 and September 28, 2025, our marketable securities were all classified as current and were primarily comprised of available-for-sale debt securities (the vast majority of which were corporate bonds and notes). The contractual maturities of available-for-sale debt securities were as follows (in millions): March 29, 2026 Years to maturity Less than one year $ 870 One to five years 2,489 Five to ten years 2 No single maturity date 863 Total $ 4,224 Debt securities with no single maturity date included mortgage- and asset-backed securities. Note 8. Acquisitions Alphawave. On December 18, 2025 (the Closing Date), we completed the acquisition of Alphawave IP Group plc (Alphawave) for $2.3 billion, which primarily consisted of $1.8 billion of equity consideration from the issuance of 11 million shares of our common stock, which includes certain securities exchangeable for shares of our common stock (Exchangeable Shares), and $301 million of cash consideration. Alphawave develops high-speed wired connectivity technologies delivering IP, custom silicon and connectivity products. The acquisition is intended to further accelerate, and provide key assets for, our expansion into data centers. In connection with the acquisition, we issued Exchangeable Shares of Aqua ExchangeCo ULC, an indirect, wholly-owned subsidiary of QUALCOMM Incorporated, to certain Alphawave executives in exchange for their outstanding capital stock. The Exchangeable Shares (no par value; unlimited shares authorized; 4 million shares issued and outstanding as of March 29, 2026) are exchangeable for our common stock on a one-for-one basis and are substantially the economic equivalent of our common stock. The issued and outstanding Exchangeable Shares have been presented together with our common stock in our condensed consolidated financial statements. The Exchangeable Shares had an estimated fair value of $746 million, of which $453 million is included within the $2.3 billion purchase price and the remainder is subject to a four-year service requirement post-acquisition and will be recognized as compensation expense. The preliminary purchase price allocation shown below could change as the fair values of the tangible and intangible assets acquired and liabilities assumed, and the related income tax effects, are finalized during the remainder of the measurement period (which will not exceed 12 months from the Closing Date). The preliminary allocation of the purchase price to the assets acquired and liabilities assumed based on their fair values was as follows (in millions): Cash $ 51 Intangible assets subject to amortization 239 In-process research and development (IPR&D) 107 Goodwill 2,215 Other assets 283 Total assets 2,895 Convertible debt (1) (278) Other liabilities (343) Total liabilities (621) Net assets acquired $ 2,274 Alphawave's outstanding unsecured convertible bonds were settled in the second quarter of fiscal 2026. QUALCOMM Incorporated NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Goodwill related to this transaction was allocated to our Data Center operating segment and is not deductible for tax purposes. Goodwill is primarily attributable to assembled workforce which we expect will help accelerate our expansion into data centers, and certain revenue synergies expected to arise after the acquisition such as anticipated growth from new product sales. Acquired intangible assets subject to amortization primarily consists of completed technology that will be amortized on a straight-line basis over the weighted-average useful life of five years. We valued the completed technology and IPR&D using an income approach based on significant unobservable inputs. Pro forma results of operations have not been presented because the effects of this acquisition were not material to our consolidated results of operations. Other. During the first six months of fiscal 2026, we acquired six other businesses for a total accounting purchase price of $985 million. These acquisitions were primarily for the purpose of executing on certain products and technology that support our QCT business, including our diversification strategy. The acquired assets primarily consisted of $272 million of intangible assets and $698 million of goodwill, with $622 million allocated to our QCT segment and $76 million allocated to our Data Center operating segment, all of which is primarily attributable to assembled workforce and certain synergies expected to arise after the acquisitions. ‌ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This information should be read in conjunction with the condensed consolidated financial statements and the notes thereto included in "Part I, Item 1" of this Quarterly Report and with "Management's Discussion and Analysis of Financial Condition and Results of Operations" for the fiscal year ended September 28, 2025 contained in our 2025 Annual Report on Form 10-K. This Quarterly Report (including but not limited to this section titled Management's Discussion and Analysis of Financial Condition and Results of Operations) contains forward-looking statements. Words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "estimate," "may," "will," "would" and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this Quarterly Report. Additionally, statements concerning future matters such as our future business, prospects, results of operations or financial condition; research and development or technology investments; new or enhanced products, services or technologies; emerging industries or business models; design wins or product launches; industry, market or technology trends, dynamics or transitions; our expectations regarding future demand or supply conditions; strategic investments or acquisitions, and the anticipated timing or benefits thereof; legal or regulatory matters, including the expected impacts of recently enacted or pending tax or other regulatory changes; U.S./China trade or national security tensions; vertical integration by our customers; competition; annual effective tax rates; and other statements regarding matters that are not historical are also forward-looking statements. Although forward-looking statements in this Quarterly Report reflect our good faith judgment, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include without limitation those discussed under the heading "Risk Factors" below, as well as those discussed elsewhere in this Quarterly Report. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report. We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Quarterly Report. Readers are urged to carefully review and consider the various disclosures made in this Quarterly Report, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects. Second Quarter Fiscal 2026 Overview Revenues for the second quarter of fiscal 2026 were $10.6 billion, a decrease of 3% compared to the year ago quarter, with net income of $7.4 billion, an increase of 162% compared to the year ago quarter. Key items from the second quarter of fiscal 2026 included: QCT revenues decreased by 4% in the second quarter of fiscal 2026 compared to the year ago quarter due to lower handset revenues, partially offset by higher automotive and IoT revenues. QTL revenues increased by 5% in the second quarter of fiscal 2026 compared to the year ago quarter, primarily due to an increase in estimated revenues per unit, which was primarily driven by favorable mix. We recorded a $5.7 billion income tax benefit to release a valuation allowance in the second quarter of fiscal 2026 as we now expect to realize substantially all of our existing federal deferred tax assets as a result of additional guidance issued on corporate alternative minimum tax (CAMT) by the U.S. Department of Treasury and the Internal Revenue Service. Our Business and Operating Segments We develop and commercialize foundational technologies and products used across industries and applications from mobile devices to other areas including automotive and the internet of things (IoT). We derive revenues principally from sales of integrated circuit products and licensing our intellectual property, including patents and other rights. We are organized on the basis of products and services and have three reportable segments. We conduct business primarily through our QCT (Qualcomm CDMA Technologies) semiconductor business and our QTL (Qualcomm Technology Licensing) licensing business. Our QSI (Qualcomm Strategic Initiatives) reportable segment makes strategic investments. We also have nonreportable segments, including QGOV (Qualcomm Government Technologies) and our Data Center business. Our reportable segments are operated by QUALCOMM Incorporated and its direct and indirect subsidiaries. Substantially all of our products and services businesses, including QCT, and substantially all of our engineering and research and development functions are operated by Qualcomm Technologies, Inc. (QTI), a subsidiary of QUALCOMM Incorporated, and QTI's subsidiaries. QTL is operated by QUALCOMM Incorporated, which owns the vast majority of our patent portfolio. Neither QTI nor any of its subsidiaries has any right, power or authority to grant any licenses or other rights under or to any patents owned by QUALCOMM Incorporated. Seasonality. Many of our products and much of our intellectual property are incorporated into consumer wireless devices, which are subject to seasonality and other fluctuations in demand. Our revenues have historically fluctuated based on consumer demand for devices, as well as on the timing of customer/licensee device launches and/or innovation cycles (such as the transition to the next generation of wireless technologies). This has resulted in fluctuations in QCT revenues in advance of and during device launches incorporating our products and in QTL revenues when licensees' sales occur. These trends may or may not continue in the future. Further, the trends for QTL have been, and may in the future be, impacted by disputes and/or resolutions with licensees and/or governmental investigations or proceedings. Results of Operations Revenues (in millions) Three Months Ended Six Months Ended March 29, 2026 March 30, 2025 Change March 29, 2026 March 30, 2025 Change Equipment and services $ 9,060 $ 9,359 $ (299) $ 19,526 $ 19,301 $ 225 Licensing 1,539 1,620 (81) 3,325 3,348 (23) $ 10,599 $ 10,979 $ (380) $ 22,851 $ 22,649 $ 202 Second quarter 2026 vs. 2025 The decrease in revenues in the second quarter fiscal 2026 was primarily due to: $393 million in lower equipment and services revenues from our QCT segment $143 million in licensing revenues from a settlement of a licensing dispute in the second quarter of fiscal 2025, which was not allocated to our segment results + $97 million in higher equipment and services revenues from our Data Center segment, primarily driven by our acquisition of Alphawave in the first quarter of fiscal 2026 + $63 million in higher licensing revenues from our QTL segment First six months 2026 vs. 2025 The increase in revenues in the first six months of fiscal 2026 was primarily due to: + $135 million in higher equipment and services revenues from our QCT segment + $120 million in higher licensing revenues from our QTL segment + $94 million in higher equipment and services revenues from our Data Center segment, primarily driven by our acquisition of Alphawave in the first quarter of fiscal 2026 $143 million in licensing revenues from a settlement of a licensing dispute in the second quarter of fiscal 2025, which was not allocated to our segment results Costs and Expenses (in millions, except percentages) Three Months Ended Six Months Ended March 29, March 30, March 29, March 30, 2026 2025 Change 2026 2025 Change Cost of revenues $ 4,900 $ 4,937 $ (37) $ 10,468 $ 10,098 $ 370 Gross margin 54% 55% 54% 55% Second quarter and first six months 2026 vs. 2025 Gross margin percentage decreased in the second quarter and first six months of fiscal 2026 primarily due to a decrease in QCT gross margin percentage. Three Months Ended Six Months Ended March 29, March 30, March 29, March 30, 2026 2025 Change 2026 2025 Change Research and development $ 2,463 $ 2,216 $ 247 $ 4,915 $ 4,446 $ 469 % of revenues 23% 20% 22% 20% Second quarter 2026 vs. 2025 The increase in research and development expenses in the second quarter of fiscal 2026 was primarily due to: + $177 million increase driven by higher costs related to the development of wireless and integrated circuit technologies (including investments in key growth and diversification opportunities), primarily driven by an increase in employee-related expenses and lower non-recurring engineering cost reimbursements for product-related development work + $83 million increase in share-based compensation expense First six months 2026 vs. 2025 The increase in research and development expenses in the first six months of fiscal 2026 was primarily due to: + $298 million increase driven by higher costs related to the development of wireless and integrated circuit technologies (including investments in key growth and diversification opportunities), primarily driven by an increase in employee-related expenses + $168 million increase in share-based compensation expense We expect to continue investing in key growth and diversification initiatives. The increase in our share-based compensation expense includes the replacement of our annual cash incentive awards for fiscal 2026 and 2027 with a two-year equity award for our broader non-executive leadership team. This approach is designed to motivate and retain our team to execute our long-term diversification strategy, while further aligning their compensation with the interests of our stockholders. Three Months Ended Six Months Ended March 29, March 30, 2026 2025 Change March 29, 2026 March 30, 2025 Change Selling, general and administrative $ 898 $ 706 $ 192 $ 1,763 $ 1,430 $ 333 % of revenues 8% 6% 8% 6% Second quarter 2026 vs. 2025 The increase in selling, general and administrative expenses in the second quarter of fiscal 2026 was primarily due to: + $72 million increase in share-based compensation expense + $44 million increase in acquisition-related expenses First six months 2026 vs. 2025 The increase in selling, general and administrative expenses in the first six months of fiscal 2026 was primarily due to: + $123 million increase in share-based compensation expense + $84 million increase in acquisition-related expenses Interest Expense and Investment and Other Income, Net (in millions) Three Months Ended Six Months Ended March 29, March 30, March 29, March 30, 2026 2025 Change 2026 2025 Change Interest expense $ 171 $ 163 $ 8 $ 341 $ 326 $ 15 Investment and other income, net Interest and dividend income $ 113 $ 167 $ (54) $ 250 $ 336 $ (86) Net (losses) gains on marketable securities (64) 18 (82) (120) 37 (157) Net gains (losses) on other investments 7 (5) 12 217 26 191 Net losses on deferred compensation plan assets (56) (34) (22) (13) (20) 7 Impairment losses on other investments (12) (16) 4 (23) (41) 18 Equity in net earnings of investees 44 18 26 83 16 67 Other 62 - 62 50 37 13 $ 94 $ 148 $ (54) $ 444 $ 391 $ 53 Net losses on marketable securities in the second quarter and first six months of fiscal 2026 was primarily driven by the change in fair value of certain of our QSI marketable equity investments. Net gains on other investments in the first six months of fiscal 2026 was primarily driven by observable price changes on certain of our QSI non-marketable equity investments. Income Tax Expense (in millions, except percentages) The following table summarizes the primary factors that caused our income tax provision to differ from the expected income tax provision at the U.S. federal statutory rate: Three Months Ended Six Months Ended March 29, 2026 March 30, 2025 March 29, 2026 March 30, 2025 assets (5,724) - (5,724) - Benefit from foreign-derived deduction eligible income (FDDEI) (88) (300) (296) (660) Foreign currency loss (gain) related to foreign withholding tax receivable 63 (1) 121 165 Benefit related to the federal research and development tax credit (26) (45) (98) (119) Excess tax deficiency (benefit) associated with share-based awards 11 (39) (18) (77) Other 157 26 205 24 Expected income tax provision at federal statutory tax rate $ 469 $ 652 $ 1,214 $ 1,415 Benefit of releasing valuation allowance on federal deferred tax Income tax (benefit) expense $ (5,138) $ 293 $ (4,596) $ 748 Effective tax rate (230%) 9% (80%) 11% We estimate our annual effective income tax rate to be 40% benefit for fiscal 2026, which is lower than the U.S. federal statutory rate. Additional information regarding our annual effective income tax rate and income tax expense is provided in this Quarterly Report in "Notes to Condensed Consolidated Financial Statements, Note 3. Income Taxes." In the fourth quarter of fiscal 2025, tax reform legislation included in the One Big Beautiful Bill Act (OBBB) was enacted in the United States. The OBBB included significant corporate tax reforms, including changes to the foreign-derived deduction eligible income (FDDEI) regime and changes allowing domestic research and development (R&D) expenditures to be deducted as incurred beginning in fiscal 2026 (under prior law such expenditures were capitalized and amortized over five years). As a result, we expected to be perpetually subject to CAMT and established a $5.7 billion valuation allowance on our federal deferred tax assets in fiscal 2025. In the second quarter of fiscal 2026, the U.S. Department of Treasury and the Internal Revenue Service issued Notice 2026-07, which, among other items, allows us to reduce CAMT by certain previously capitalized domestic R&D expenditures. As a result, we no longer expect to be subject to CAMT in the foreseeable future, and therefore, we now expect to realize our existing federal deferred tax assets. Accordingly, we released our valuation allowance on our federal deferred tax assets resulting in a $5.7 billion income tax benefit in the second quarter of fiscal 2026. Changes in future taxable income, tax laws and other factors may change our determination regarding whether we will be able to realize our deferred tax assets. Unrecognized tax benefits were $2.9 billion and $2.7 billion at March 29, 2026 and September 28, 2025, respectively. We believe that it is reasonably possible that our unrecognized tax benefits will change within the next twelve months. Segment Results The following should be read in conjunction with our financial results for the second quarter of fiscal 2026 for each reportable segment included in this Quarterly Report in "Notes to Condensed Consolidated Financial Statements, Note 6. Segment Information." QCT Segment (in millions, except percentages) Three Months Ended Six Months Ended Revenues March 29, 2026 March 30, 2025 Change March 29, 2026 March 30, 2025 Change Handsets $ 6,024 $ 6,929 $ (905) $ 13,848 $ 14,503 $ (655) Automotive 1,326 959 367 2,427 1,920 507 IoT (internet of things) 1,726 1,581 145 3,414 3,130 284 Total revenues (1) $ 9,076 $ 9,469 $ (393) $ 19,689 $ 19,553 $ 136 EBT (2) $ 2,465 $ 2,857 $ (392) $ 5,767 $ 6,103 $ (336) EBT as a % of revenues 27% 30% -3 points 29% 31% -2 points Descriptions of our three QCT revenue streams can be found in this Quarterly Report in "Notes to Condensed Consolidated Financial Statements, Note 2. Composition of Certain Financial Statement Items." Earnings before income taxes. Substantially all of QCT's revenues consist of equipment and services revenues, which were $8.9 billion and $9.3 billion in the second quarter of fiscal 2026 and 2025, respectively, and $19.3 billion and $19.2 billion in the first six months of fiscal 2026 and 2025, respectively. QCT revenues mostly relate to sales of our Snapdragon and Dragonwing platforms (which include processors and modems), stand-alone Mobile Data Modems, radio frequency transceiver, power management and wireless connectivity integrated chipsets as well as sales of 4G, 5G sub 6 and 5G millimeter wave RFFE products. Second quarter 2026 vs. 2025 The decrease in QCT revenues in the second quarter of fiscal 2026 was primarily due to: - lower handsets revenues, primarily due to lower chipset shipments to certain major OEMs (primarily driven by customers adjusting build plans to reduce their inventory levels as a result of the negative effects of recent memory supply constraints and related price increases) + higher automotive revenues, due to $191 million in higher shipments primarily from new vehicle launches with our Snapdragon digital cockpit and advanced driver assistance and automated driving (ADAS/AD) products and a $176 million increase in revenues per unit driven by favorable mix and higher average selling prices + higher IoT revenues, primarily due to an increase in revenues per unit primarily driven by favorable mix QCT EBT as a percentage of revenues decreased in the second quarter of fiscal 2026 primarily due to: higher operating expenses, primarily driven by higher research and development and selling, general and administrative expenses lower gross margin, primarily driven by higher product cost, partially offset by higher average selling prices lower revenues First six months 2026 vs. 2025 The increase in QCT revenues in the first six months of fiscal 2026 was primarily due to: + higher automotive revenues, due to $328 million in higher shipments primarily from new vehicle launches with our Snapdragon digital cockpit and ADAS/AD products and a $179 million increase in revenues per unit driven by favorable mix and higher average selling prices + higher IoT revenues, primarily due to an increase in revenues per unit primarily driven by favorable mix lower handsets revenues, primarily due to lower chipset shipments to certain major OEMs (primarily driven by customers adjusting build plans to reduce their inventory levels as a result of the negative effects of recent memory supply constraints and related price increases) QCT EBT as a percentage of revenues decreased in the first six months of fiscal 2026 primarily due to: higher operating expenses, primarily driven by higher research and development and selling, general and administrative expenses lower gross margin, primarily driven by higher product cost, partially offset by higher average selling prices QTL Segment (in millions, except percentages) Three Months Ended Six Months Ended March 29, March 30, March 29, March 30, 2026 2025 Change 2026 2025 Change Licensing revenues $ 1,382 $ 1,319 $ 63 $ 2,974 $ 2,854 $ 120 EBT 994 929 65 2,224 2,086 138 EBT as a % of revenues 72% 70% 2 points 75% 73% 2 points Second quarter 2026 vs. 2025 The increase in QTL licensing revenues in the second quarter of fiscal 2026 was primarily due to an increase in estimated revenues per unit, which was primarily driven by favorable mix. QTL EBT as a percentage of revenues increased in the second quarter of fiscal 2026 primarily due to higher revenues. First six months 2026 vs. 2025 The increase in QTL licensing revenues in the first six months of fiscal 2026 was primarily due to an increase in estimated sales of cellular products. QTL EBT as a percentage of revenues increased in the first six months of fiscal 2026 primarily due to higher revenues. QSI Segment (in millions) Three Months Ended Six Months Ended March 29, March 30, 2026 2025 Change March 29, 2026 March 30, 2025 Change Revenues $ - $ - $ - $ - $ - $ - EBT (30) 10 (40) 149 29 120 Second quarter 2026 vs. 2025 QSI EBT decreased in the second quarter of fiscal 2026 primarily due to net losses from the change in fair value of certain of our marketable equity investments. First six months 2026 vs. 2025 QSI EBT increased in the first six months of fiscal 2026 primarily due to higher net gains from observable price changes on certain of our non-marketable equity investments and an increase in our share of earnings in equity method investments, partially offset by net losses from the change in fair value of certain of our marketable equity investments. Looking Forward We believe that on-device AI and high-performance, low-power computing combined with cellular technology (such as 5G) will continue to drive adoption of certain technologies that are already commonly used in smartphones by industries and applications beyond mobile handsets, such as automotive and IoT. We believe it is important that we remain a leader in such technology development, standardization, intellectual property creation and licensing, and a leading developer and supplier of integrated circuit products in order to sustain and grow our business long-term. As we look forward to the next several quarters: We expect recent memory supply constraints and related pricing increases to adversely affect demand from several handset OEMs, which will negatively impact our financial results. The extent to which these conditions may affect our business will depend on future developments, including memory supply availability, memory and device pricing dynamics and end-consumer demand for devices, all of which remain uncertain. We continue to monitor changes in global trade policy, including tariffs and related trade actions announced by the U.S., China and other countries. The degree to which such tariffs and other related actions impact our business, financial condition and results of operations will depend on future developments, which are uncertain. Changes to global trade policies may negatively impact demand, pricing and cost for our products and technologies, and contribute to the inherent uncertainties in estimating future customer demand, which may result in increased excess or obsolete inventory or reserve charges, negatively impacting our results of operations and cash flows. See "Risk Factors" in this Quarterly Report, including the Risk Factor titled " We operate in the highly cyclical semiconductor industry, which is subject to significant downturns. We are also susceptible to declines in global, regional and local economic conditions generally. Our stock price and financial results are subject to substantial quarterly and annual fluctuations due to these dynamics, among others." We expect leading process technology nodes to continue to drive product cost increases from certain of our key semiconductor wafer suppliers. We expect continued intense competition, including from vertical integration by certain of our customers (for example, Apple and Samsung). In particular, Apple utilizes its own modem (rather than our products) in certain of its smartphones and we expect that Apple will increasingly use its own modem products, rather than our products, in its future devices, which will have a significant negative impact on our QCT revenues, results of operations and cash flows. U.S./China trade relations and/or national security protection policies may negatively impact our business, growth prospects and results of operations. See "Risk Factors" in this Quarterly Report, including the Risk Factor titled " A significant portion of our business is concentrated in China, and the risks of such concentration are exacerbated by U.S./China trade and national security tensions. " We are also involved in certain legal proceedings, including those described in this Quarterly Report in "Notes to Condensed Consolidated Financial Statements, Note 5. Commitments and Contingencies." Litigation is inherently uncertain, and, while we intend to continue to vigorously defend ourselves in such matters, the unfavorable resolution of one or more of these matters could have a material adverse effect on our business, results of operations, financial condition or cash flows. In addition to the foregoing business and market-based matters, we continue to devote resources to working with and educating participants in the wireless industry and governments as to the benefits of our licensing programs and our extensive technology investments in promoting a highly competitive and innovative wireless industry. However, we expect that certain companies may be dissatisfied with the need to pay reasonable royalties for the use of our technologies and not welcome the success of our licensing programs in enabling new, highly cost-effective competitors to their products. Accordingly, such companies and/or governments or regulators may continue to challenge our business model in various forums throughout the world. Further discussion of risks related to our business is provided in the section titled "Risk Factors" included in this Quarterly Report. Liquidity and Capital Resources Our principal sources of liquidity are our existing cash, cash equivalents and marketable securities, cash generated from operations and cash provided by our debt programs. The following tables present selected financial information related to our liquidity at March 29, 2026 and September 28, 2025 and for the first six months of fiscal 2026 and 2025 (in millions): March 29, 2026 September 28, 2025 Change Cash, cash equivalents and marketable securities (including restricted cash) Cash and cash equivalents $ 5,435 $ 5,520 $ (85) Restricted cash (1) - 2,323 (2,323) Marketable securities 4,364 4,635 (271) $ 9,799 $ 12,478 $ (2,679) Debt (2) $ 15,270 $ 14,811 $ 459 In connection with the acquisition of Alphawave, which closed in the first quarter of fiscal 2026, we had agreed to restrict the use of approximately $2.3 billion of cash to be held for purposes of satisfying payment of the consideration to effect the acquisition. Additional information regarding our acquisition of Alphawave is provided in this Quarterly Report in "Notes to Condensed Consolidated Financial Statements, Note 8. Acquisitions." Includes our issued debt which is reported as long-term and $498 million of outstanding commercial paper reported as short-term debt as of March 29, 2026. At March 29, 2026, our credit facility was undrawn. Six Months Ended March 29, 2026 March 30, 2025 Change Net cash provided by operating activities $ 7,414 $ 7,141 $ 273 Net cash used by investing activities (2,222) (1,960) (262) Net cash used by financing activities (7,575) (5,789) (1,786) Cash, cash equivalents and marketable securities (including restricted cash). The net decrease in cash, cash equivalents and marketable securities (including restricted cash) for the first six months of fiscal 2026 was primarily due to $5.4 billion in payments to repurchase 34 million shares of our common stock (which includes repurchases that offset share issuances in connection with the acquisition of Alphawave), $1.9 billion in cash dividends paid, $1.2 billion in cash paid for acquisitions and other investments (net of cash acquired), $1.1 billion in capital expenditures and $536 million in payments of tax withholdings related to the vesting of share-based awards, partially offset by cash provided by operating activities and $496 million in net proceeds of commercial paper. During the first six months of fiscal 2026, income taxes paid were greater than our provision. This was primarily driven by the $5.7 billion release of our valuation allowance on federal deferred tax assets in the second quarter of fiscal 2026 and our final installment payment for a one-time U.S. repatriation tax accrued in fiscal 2018 of $663 million. The OBBB includes significant corporate tax reforms, including the permanent reinstatement of deducting domestic research and development expenditures as incurred beginning in fiscal 2026 (under prior law such expenditures were capitalized and amortized over five years). We expect this change will have a favorable effect on our cash flows from operations due to significantly lower cash tax payments. Net changes in our operating assets and liabilities for the first six months of fiscal 2026 positively impacted our operating cash flows primarily driven by a decrease in other assets primarily due to utilization of prior advanced supply agreement payments, partially offset by an increase in inventory reflecting certain customer demand impacts from memory supply constraints. Capital Return Program. Our stock repurchase program is subject to periodic evaluations to determine when and if repurchases are in the best interests of our stockholders, and we may accelerate, suspend, delay or discontinue repurchases at any time. We currently intend to continue to use cash dividends as a means of returning capital to stockholders, subject to capital availability and our view that cash dividends are in the best interests of our stockholders, among other factors. Additional information regarding our capital returns is provided in this Quarterly Report in "Notes to Condensed Consolidated Financial Statements, Note 4. Capital Stock." Additional Capital Requirements. Expected working and other capital requirements are described in our 2025 Annual Report on Form 10-K in "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations." At March 29, 2026, other than for the changes disclosed in the "Notes to Condensed Consolidated Financial Statements", "Looking Forward" and "Liquidity and Capital Resources" in this Quarterly Report, there have been no other material changes to our expected working and other capital requirements described in our 2025 Annual Report on Form 10-K. Further, regulatory authorities in certain jurisdictions have investigated our business practices and instituted proceedings against us and they or other regulatory authorities may do so in the future. Additionally, certain of our direct and indirect customers and licensees have pursued, and they or others may in the future pursue, litigation, arbitration or other strategies against us related to our business. Unfavorable resolutions of one or more of these matters have had and could in the future have a material adverse effect on our business, revenues, results of operations, financial condition and cash flows. See "Risk Factors" in this Quarterly Report. We believe, based on our current business plan and the facts and factors known by us, our cash, cash equivalents and marketable securities, our expected cash flow generated from operations and our expected financing activities will satisfy our working and other capital requirements for at least the next 12 months and thereafter for the foreseeable future. See "Risk Factors" in this Quarterly Report. Recent Accounting Guidance Information regarding recent accounting guidance and the impact of such guidance on our condensed consolidated financial statements is provided in this Quarterly Report in the "Notes to Condensed Consolidated Financial Statements, Note 1. Basis of Presentation and Significant Accounting Policies Update." ‌ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Financial market risks related to interest rates, equity prices and foreign currency exchange rates are described in our 2025 Annual Report on Form 10-K. At March 29, 2026, there have been no material changes to the financial market risks described at September 28, 2025. ‌ITEM 4. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report. Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting, as defined under Rule 13a-15(f) promulgated under the Exchange Act, in the second quarter of fiscal 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ‌PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS‌ Information regarding certain legal proceedings is provided in this Quarterly Report in "Notes to Condensed Consolidated Financial Statements, Note 5. Commitments and Contingencies." ‌ITEM 1A. RISK FACTORS You should consider each of the following factors in evaluating our business and our prospects, any of which could negatively impact our business, results of operations, cash flows and financial condition, and require significant management time and attention. Further, the risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently consider immaterial may also negatively impact our business, results of operations, cash flows and financial condition, and require significant management time and attention. In such cases, the trading price of our common stock could decline. You should also consider the other information set forth in this Quarterly Report in evaluating our business and our prospects, including but not limited to our financial statements and the related notes, and "Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations." References to "and," "or" and "and/or" should be read to include the others, as appropriate. Risk Factors Summary: RISKS RELATED TO OUR OPERATING BUSINESSES We derive a significant portion of our revenues from a small number of customers and licensees, and particularly from their sale of premium-tier handset devices. If revenues derived from these customers or licensees decrease or the timing of such revenues fluctuates, our business and results of operations could be negatively affected. Our business, particularly our semiconductor business, may suffer as a result of our customers vertically integrating (i.e., developing their own integrated circuit products). A significant portion of our business is concentrated in China, and the risks of such concentration are exacerbated by U.S./China trade and national security tensions. RISKS RELATED TO NEW INITIATIVES Our growth depends in part on our ability to extend our technologies and products into new and expanded product areas, and industries and applications beyond mobile handsets. Our research, development and other investments in these new and expanded product areas, industries and applications, and related technologies and products, as well as in our existing technologies and products, and new technologies, may not generate operating income or contribute to future results of operations that meet our expectations. We may engage in acquisitions and other strategic transactions or make investments, or be unable to consummate planned strategic acquisitions, which could adversely affect our results of operations or fail to enhance stockholder value. RISKS RELATED TO SUPPLY AND MANUFACTURING We depend on a limited number of third-party suppliers for the procurement, manufacture, assembly and testing of our products manufactured in a fabless production model. If we fail to execute supply strategies that provide supply assurance, technology leadership and reasonable margins, our business and results of operations may be harmed. We are also subject to order and shipment uncertainties that could negatively impact our results of operations. There are numerous risks associated with the operation and control of our manufacturing facilities, including a higher portion of fixed costs relative to a fabless model; environmental compliance and liability; impacts related to climate change; exposure to natural disasters, health crises, geopolitical conflicts and cyber-attacks; timely supply of equipment and materials; and various manufacturing issues. RISKS RELATED TO CYBERSECURITY OR MISAPPROPRIATION OF OUR CRITICAL INFORMATION Our business and operations could suffer in the event of security breaches of our IT systems, or other misappropriation of our technology, intellectual property or other proprietary or confidential information. RISKS RELATED TO HUMAN CAPITAL MANAGEMENT We may not be able to attract or retain qualified employees. RISKS SPECIFIC TO OUR LICENSING BUSINESS The continued and future success of our licensing programs requires us to continue to evolve our patent portfolio and to renew or renegotiate license agreements that are expiring. Efforts by some OEMs to avoid paying fair and reasonable royalties for the use of our intellectual property may require the investment of substantial management time and financial resources and may result in legal decisions or actions by governments, courts, regulators or agencies, Standards Development Organizations (SDOs) or other industry organizations that harm our business. Changes in our patent licensing practices, whether due to governmental investigations, legal challenges or otherwise, could adversely impact our business and results of operations. RISKS RELATED TO REGULATORY AND LEGAL CHALLENGES Our business may suffer as a result of adverse rulings in governmental investigations or proceedings or other legal proceedings. RISKS RELATED TO INDUSTRY DYNAMICS AND COMPETITION Our revenues depend on our customers' and licensees' sales of products and services based on cellular and other communications technologies, including 5G, and customer demand for our products based on these technologies. Our industry is subject to intense competition in an environment of rapid technological change. Our success depends in part on our ability to adapt to such change and compete effectively; and such change and competition could result in decreased demand for our products and technologies or declining average selling prices for our products or those of our customers or licensees. RISKS RELATED TO PRODUCT DEFECTS OR SECURITY VULNERABILITIES Failures in our products, or in the products of our customers or licensees, including those resulting from security vulnerabilities, defects or errors, could harm our business. RISKS RELATED TO INTELLECTUAL PROPERTY The enforcement and protection of our intellectual property may be expensive, could fail to prevent misappropriation or unauthorized use of our intellectual property, could result in the loss of our ability to enforce one or more patents, and could be adversely affected by changes in patent laws, by laws in certain foreign jurisdictions that may not effectively protect our intellectual property and by ineffective enforcement of laws in such jurisdictions. Claims by third parties that we infringe their intellectual property could adversely affect our business. Our use of open source software may harm our business. GENERAL RISK FACTORS We operate in the highly cyclical semiconductor industry, which is subject to significant downturns. We are also susceptible to declines in global, regional and local economic conditions generally. Our stock price and financial results are subject to substantial quarterly and annual fluctuations due to these dynamics, among others. Geopolitical conflicts, natural disasters, pandemics and other health crises, and other factors outside of our control, could significantly disrupt our business. Our business may suffer due to the impact of, or our failure to comply with, the various existing, new or amended laws, regulations, policies or standards to which we are subject. There are risks associated with our debt. Tax liabilities could adversely affect our results of operations. Risk Factors: RISKS RELATED TO OUR OPERATING BUSINESSES We derive a significant portion of our revenues from a small number of customers and licensees, and particularly from their sale of premium-tier handset devices. If revenues derived from these customers or licensees decrease or the timing of such revenues fluctuates, our business and results of operations could be negatively affected. We derive a significant portion of our revenues from a small number of customers and licensees, and particularly from their sale of premium-tier handset devices, and we expect this trend to continue in the foreseeable future. The mobile industry is experiencing and may continue to experience concentration of device share among a few companies, particularly at the premium tier, contributing to this trend. Certain Chinese original equipment manufacturers (OEMs) have increased and may continue to increase their device share in China and in certain regions outside of China, and we derive a significant portion of our revenues from a small number of these OEMs as well. See also "Notes to Condensed Consolidated Financial Statements, Note 2. Composition of Certain Financial Statement Items - Concentrations." In addition, a number of our largest customers have developed, are developing or may develop their own integrated circuit products, or may choose our competitors' integrated circuit products, which they have in the past utilized, currently utilize and may in the future utilize in some or all of their devices, rather than our products, which could significantly reduce the revenues we derive from these customers. See also the Risk Factor titled " Our business, particularly our semiconductor business, may suffer as a result of our customers vertically integrating (i.e., developing their own integrated circuit products) ." Further, political actions, including trade and/or national security protection policies (for example, tariffs and other controls on imports or exports), or other actions by governments, particularly the U.S. and Chinese governments, have in the past, currently are and could in the future limit or prevent us from transacting business with certain of our customers, limit, prevent or discourage those customers from transacting business with us, or make it more expensive to do so, any of which could also significantly reduce the revenues we derive from these customers. See also the Risk Factor titled " A significant portion of our business is concentrated in China, and the risks of such concentration are exacerbated by U.S./China trade and national security tensions ." The loss of any one of our significant customers, a reduction in the purchases of our products by any of these customers or the cancellation of significant purchases by any of these customers, whether due to the use of their own integrated circuit products or our competitors' integrated circuit products, government restrictions, a decline in global, regional or local economic conditions, a decline in consumer demand (or a shift in consumer demand away from new devices in favor of refurbished or secondhand devices) or for any other reasons, would reduce our revenues and could harm our ability to achieve or sustain expected results of operations. A delay of significant purchases, even if only temporary, would reduce our revenues in the period of the delay. Any such reduction in revenues would also impact our cash resources available for other purposes, such as research and development. In addition, the timing and size of purchases by our significant customers may be impacted by the timing of such customers' new or next generation product introductions, over which we have no control, and the timing and success of such introductions may cause our revenues and results of operations to fluctuate. We spend a significant amount of engineering and development time, funds and resources in understanding our key customers' feedback and/or specifications and attempt to incorporate such input into our product launches and technologies. These efforts may not require or result in purchase commitments from such customers or we may have lower purchases from such customers than expected, and consequently, we may not achieve the anticipated revenues from these efforts, or these efforts may result in non-recoverable costs. Further, the concentration of device share among a few companies, and the corresponding purchasing power of these companies, may result in lower prices for our products, which could have an adverse effect on our revenues and margins. Apple purchases our MDM (or thin modem) products, which do not include our integrated application processor technology, and which have lower revenue and margin contributions than our combined modem and application processor products. Consequently, to the extent Apple devices using our MDM products take share from our customers who purchase our integrated modem and application processor products, our revenues and margins may be negatively impacted. Additionally, we expect that Apple will increasingly use its own modem products, rather than our products, in its future devices, which will have a significant negative impact on our QCT revenues, results of operations and cash flows. The mobile industry has also from time to time experienced declines in sales or slowing growth in the premium-tier device segment. A reduction in sales of premium-tier devices, a reduction in sales of our premium-tier integrated circuit products (which have a higher revenue and margin contribution than our lower-tier integrated circuit products), a shift in share away from OEMs that utilize our premium-tier products, or a shift in consumer demand in favor of refurbished or secondhand devices, would reduce our revenues and margins and may harm our ability to achieve or sustain expected financial results. Any such reduction in revenues would also impact our cash resources available for other purposes, such as research and development. Further, while we derive a portion of our revenues from areas outside of mobile handsets, e.g., from industries such as automotive and IoT, certain product categories within those industries may in themselves be subject to high levels of customer concentration. Although we have many licensees, we derive a significant portion of our licensing revenues from a limited number of such licensees, which includes a number of Chinese OEMs. In the event that one or more of our significant licensees fail to meet their reporting and payment obligations, or we are unable to renew or modify one or more of their license agreements under similar terms as their existing agreements, our revenues, results of operations and cash flows would be adversely impacted. Moreover, the success of our core licensing business depends in part on the ability of our licensees to continue to develop, introduce and deliver high-volume products that achieve and sustain customer acceptance. We do not have control over the product development, sales efforts or pricing of products by our licensees, and our licensees might not be successful in these efforts. Reductions in sales of our licensees' products, or reductions in the average selling prices of such products without a sufficient increase in the volumes sold, would generally have an adverse effect on our licensing revenues. Our business, particularly our semiconductor business, may suffer as a result of our customers vertically integrating (i.e., developing their own integrated circuit products). Certain of our largest mobile handset customers (for example, Apple, Samsung and Xiaomi) develop their own integrated circuit products, which they have in the past utilized, and/or currently utilize, in certain of their devices. We expect such customers will in the future utilize their own integrated circuit products in some or all of their devices, rather than our products. In particular, we expect that Apple will increasingly use its own modem products, rather than our products, in its future devices, which will have a significant negative impact on our QCT revenues, results of operations and cash flows. Similarly, we derive a significant portion of our revenues from Chinese OEMs. Certain of our customers in China have developed, and others may in the future develop, their own integrated circuit products and use such integrated circuit products in their devices rather than our products, including due to pressure from or policies of the Chinese government (which has prioritized semiconductor self-sufficiency), concerns over losing access to our products as a result of actual, threatened or potential U.S. or Chinese government actions or policies, including trade protection or national security policies, or other reasons. See also the Risk Factor titled " A significant portion of our business is concentrated in China, and the risks of such concentration are exacerbated by U.S./China trade and national security tensions ." In addition, periodic supply/capacity constraints within the semiconductor industry may further incentivize our customers to vertically integrate in an effort to secure additional control over their supply chains. If our customers begin using their own integrated circuit products rather than our products in some or all of their devices, or increase their use of their own integrated circuit products from current levels, our business, results of operations, cash flows and financial condition could be materially adversely impacted. See also the Risk Factor titled " We derive a significant portion of our revenues from a small number of customers and licensees, and particularly from their sale of premium-tier handset devices. If revenues derived from these customers or licensees decrease or the timing of such revenues fluctuates, our business and results of operations could be negatively affected ." A significant portion of our business is concentrated in China, and the risks of such concentration are exacerbated by U.S./China trade and national security tensions. We derive a significant portion of our revenues from Chinese OEMs, and from non-Chinese OEMs that utilize our products in devices they sell into China, which has the largest number of smartphone users in the world. We also source certain critical integrated circuit products from Chinese suppliers. Due to various factors, including pressure, encouragement or incentives from, or policies of, the Chinese government (which has prioritized semiconductor self-sufficiency), concerns over losing access to our products as a result of actual, threatened or potential U.S. or Chinese government actions or policies, including trade protection or national security policies, or other reasons, some of our customers in China have developed, and others may in the future develop, their own integrated circuit products and use such integrated circuit products in their devices, or use our competitors' integrated circuit products in their devices, rather than our products, which could materially harm our business, results of operations, cash flows and financial condition. See also the Risk Factor titled "Our business, particularly our semiconductor business, may suffer as a result of our customers vertically integrating (i.e., developing their own integrated circuit products)." Political actions, including trade protection and national security policies of the U.S. and Chinese governments, such as tariffs, bans or placing companies on restricted entity lists, have in the past, currently are and could in the future limit or prevent us from transacting business with certain of our Chinese or Chinese-affiliated customers or suppliers, limit, prevent or discourage such customers or suppliers from transacting business with us, or make it more expensive to do so. Given our revenue concentration in China, if, due to actual, threatened or potential U.S. or Chinese government actions or policies: we were further limited in, or prohibited from, selling our integrated circuit products to Chinese or Chinese-affiliated customers; our non-Chinese OEM customers were limited in, or prohibited from, selling devices that incorporate our integrated circuit products into China; Chinese OEMs develop and use their own integrated circuit products or use our competitors' integrated circuit products in some or all of their devices rather than our integrated circuit products; Chinese tariffs on our integrated circuit products or on devices which incorporate our integrated circuit products made purchasing such products or devices more expensive to our Chinese customers or Chinese consumers; or our Chinese licensees delay or cease making payments of royalties they owe us, our business, results of operations, cash flows and financial condition could be materially harmed. For example, in May 2024, the U.S. Department of Commerce revoked the export license under which we previously sold 4G and certain other integrated circuit products to Huawei, which is one of the largest smartphone OEMs in China. Accordingly, we do not expect to receive any further product revenues from Huawei, and to the extent that Huawei's devices take share from OEMs that utilize our products (in China or elsewhere), our results of operations and cash flows could be further impacted. See also the Risk Factors titled " We derive a significant portion of our revenues from a small number of customers and licensees, and particularly from their sale of premium-tier handset devices. If revenues derived from these customers or licensees decrease or the timing of such revenues fluctuates, our business and results of operations could be negatively affected " and " Our business, particularly our semiconductor business, may suffer as a result of our customers vertically integrating (i.e., developing their own integrated circuit products). " Similarly, if, due to U.S. or Chinese government actions or policies, we were limited in or prohibited from obtaining critical integrated circuit products or manufacturing, assembly or test services from Chinese or Chinese-affiliated suppliers, or we or our customers were limited in or prohibited from selling in the United States products containing technologies with Chinese-origin content, our business, results of operations, cash flows and financial condition could be materially harmed. Finally, government policies in China that regulate the amount and timing of funds that may flow out of the country have impacted and may continue to impact the timing of our receipt of, and/or ability to receive, payments from our customers and licensees in China, which may negatively impact our cash flows. RISKS RELATED TO NEW INITIATIVES Our growth depends in part on our ability to extend our technologies and products into new and expanded product areas, and industries and applications beyond mobile handsets. Our research, development and other investments in these new and expanded product areas, industries and applications, and related technologies and products, as well as in our existing technologies and products, and new technologies, may not generate operating income or contribute to future results of operations that meet our expectations. While we continue to invest significant resources toward advancements of foundational technologies, including wireless connectivity, high-performance and low-power computing and on-device AI, we also invest in new and expanded product areas, and industries and applications beyond mobile handsets, by utilizing our existing technical and business expertise and through acquisitions or other strategic transactions. In particular, our future growth depends in part on our ability to succeed in new and expanded product areas, and industries and applications beyond mobile handsets, including in automotive, IoT and data center; our ability to develop leading and cost-effective technologies and products for these new and expanded product areas, industries and applications; and third parties incorporating our technologies and products into devices used in these product areas, industries and applications. Accordingly, we intend to continue to make substantial investments in these new and expanded product areas, industries and applications, and in developing related products and technologies. However, our research, development and other investments in these new and expanded product areas, industries and applications, and corresponding technologies and products, as well as in our existing technologies and products and new technologies in mobile handsets, may not succeed because, among other reasons: we may not be issued patents on the technologies we develop; the technologies we develop may not be incorporated into relevant standards; new and expanded product areas, industries and applications beyond mobile handsets, and consumer demand therein, may not develop or grow as anticipated; we may be unable to attract or retain employees with the necessary skills in such new and expanded product areas, industries and applications; our strategies or the strategies of our customers, licensees or partners may not be successful; alternate technologies or products may be better or may reduce the advantages we anticipate from our investments; competitors' technologies or products may be more cost effective, have more capabilities or fewer limitations or be brought to market faster than our new technologies or products; we may not be able to develop, or our competitors may have more established and/or stronger customer, vendor, distributor or other channel relationships; and competitors may have longer operating histories in industries and applications that are new to us. We may also underestimate the costs of, or overestimate the future revenues or margins that could result from, these investments, and these investments may not, ...

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