QCOM 10-K & 10-Q changes, risk factors and insider trading

•We derive a significant portion of our revenues from a small number of customers and licensees, and particularly from their sale of premium tierpremium-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 tierpremium-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 Consolidated Financial Statements, Note 2. Composition of Certain Financial Statement Items - Concentrations.”

Further, political actions, including trade and/or national security protection policies,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), elevated inventory levels at our customers or otherwise, 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.

The mobile industry has also from time to time experienced declines in sales or slowing growth in the premium-tier device segment due to, among other factors, a maturing premium-tier smartphone industry in which demand is increasingly driven by new product launches and innovation cycles.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.

Although we have more than 300many 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.

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 devicesdevices. and weWe expect such customers will in the future utilize their own integrated circuit products in some or all of their devices, rather than our productsproducts. (andIn theyparticular, havewe andexpect maythat continueApple towill sellincreasingly theiruse integratedits circuitown productsmodem toproducts, thirdrather parties,than discretely or together with certain of their otherour products, in competitionits withfuture us).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 integrated circuit products, including due to pressure from or policies of the Chinese government (whosewhich Madehas in China 2025 campaign, announced in 2015, targeted 70%prioritized semiconductor self-sufficiency by 2025), concerns over losing access to our integrated circuit 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.”

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, revenues, results of operations, cash flows and financial positioncondition 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 tierpremium-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 Chinese OEMs, and from non-Chinese OEMs that utilize our integrated circuit 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 suppliersChinese in China.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, revenues, results of operations, cash flows and financial position.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 certain of our Chinesesuch 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 license fees they owe us, our business, revenues, results of operations, cash flows and financial position could be materially harmed. Similarly, if, due to U.S. or Chinese government actions or policies, we were limited in or prohibited from obtaining critical integrated circuit products from our suppliers in China, 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, revenues, results of operations, cash flows and financial position could be materially harmed. 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).”

We develop and commercialize foundational technologies and products used inacross industries and applications from mobile devices andto other wirelessareas products.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 (formerly referred to as our cloud computing processing initiative.initiative).

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 (for example, certain major handset OEMs accelerated their premium-tier device launches into the first quarter of fiscal 2025) 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.

Revenues were $39.0$44.3 billion, an increase of 9%14% compared to revenues of $35.8$39.0 billion in fiscal 2023,2024, with net income of $10.1$5.5 billion, ana increasedecrease of 40%45% compared to net income of $7.2$10.1 billion in fiscal 2023.2024. OurKey items from fiscal 2024 results2025 included:

•QCT revenues increased by 9%16% in fiscal 20242025 compared to the prior year, primarily due to higher handsetshandsets, IoT and automotive revenues, partially offset by lower IoT revenues.

•QTL revenues increasedremained byapproximately 5%flat in fiscal 20242025 compared to the prior year, primarily due to an increase in estimated sales of 3G/4G/5G-based multimode products.year.

+ $99$231 million increase in sales and marketing expenses (including investments in key growth and diversification initiatives)

+ $39$70 million increase in share-basedemployee-related compensation expenseexpenses

Other expenses in fiscal 20242025 consisted primarily of $107 million in restructuring and restructuring-related charges (substantially all of which related to severance costs) and a $75 million charge related to the settlement of the securities class action lawsuit.charges.

Other expenses in fiscal 20232024 primarily consisted of $712$107 million in total restructuring and restructuring-related charges (substantially all of which related to severance costs, resulting from certain cost reduction actions committed to in fiscal 2023costs) and a $150$75 million intangible asset impairment charge related to in-processthe researchsettlement andof development.a securities class action lawsuit.

The increase in interest and dividend income in fiscal 2024 was primarily due to higher interest rates earned on higher balances of interest-bearing securities. Net gains on other investments in fiscal 2024 was primarily driven by observable price changes on certain of our QSI non-marketable equity investments.

The following table summarizes the primary factors that caused our annual tax provision from continuing operations to differ from the expected income tax provision at the U.S. federal statutory rate. Substantially all of our income is taxed in the U.S., of which a significant portion qualifies for preferential treatment as foreign-derived intangible income (FDII) at a 13% effective tax rate.rate for the periods presented. Additional information regarding our annual effective tax rate (including discussion related to the impact of the requirement to capitalize research and development expenditures for federal income tax purposes, and the benefit related to the transfer of intellectual property between foreign subsidiaries in fiscal 2024) is provided in this Annual Report in “Notes to Consolidated Financial Statements, NotesNote 3. Income Taxes.”

(2) Earnings (loss) before income taxes.

Substantially all of QCT’s revenues consist of equipment and services revenues, which were $32.6$37.7 billion and $29.9$32.6 billion in fiscal 20242025 and 2023,2024, respectively. QCT handsets, automotive and IoT 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.

+ higher handsetsIoT revenues,revenues due to $2.8$1.5 billion in higher chipset shipments drivenacross byedge certainnetworking, majorconsumer OEMsand (primarilyindustrial driven by the normalization of customer inventory levels, which were elevated in the prior year),products, partially offset by $533 million in lower revenues per chipset primarily driven by unfavorable mix

+ higher automotive revenues, primarily driven by an increase in demandshipments from new vehicle launches with our Snapdragon digital cockpit and connectivity products

QCT EBT as a percentage of revenues increased in fiscal 20242025 primarily due to higher revenues.:

QSI EBT increased in fiscal 20242025 primarily due to higher net gains on marketable securities resulting from the initial public offerings of certain of our equity investments, partially offset by lower net gains from observable price changes on certain of our non-marketable equity investments.

We believe that 5Gon-device combinedAI withand high-performance, low-power computing andcombined on-devicewith artificialcellular intelligencetechnology (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 5Gsuch technology development, standardization, intellectual property creation and licensing, and a leading developer and supplier of 5G integrated circuit products in order to sustain and grow our business long-term.

•We expect transitions to new generations of leading process technology nodes to continue to drive product cost increases from certain of our key semiconductor wafer suppliers.

•Current U.S./China trade relations and/or national security protection policies may negatively impact our business, growth prospects and results of operations. See “Part I, Item 1A. Risk Factors” in this Annual 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 othercertain legal proceedings, including those described in this Annual Report in “Notes to Consolidated Financial Statements, Note 7. 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.

Our principal sources of liquidity are our existing cash, cash equivalents and marketable securities,securities (including restricted cash), cash generated from operations and cash provided by our debt programs, which we believe will satisfy our working and other capital requirements for at least the next 12 months based on our current business plans.

SecondThird Quarter Fiscal 2026 Overview

Revenues for the secondthird quarter of fiscal 2026 were $10.6$9.9 billion, a decrease of 3%4% compared to the year ago quarter, with net income of $7.4$2.0 billion, ana increasedecrease of 162%25% compared to the year ago quarter. Key items from the secondthird quarter of fiscal 2026 included:

•QCT revenues decreased by 4%5% in the secondthird 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 increaseddecreased by 5%3% in the secondthird 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.quarter.

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

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.

The decrease in revenues in the secondthird quarter of fiscal 2026 was primarily due to:

SecondThird quarter and first sixnine months 2026 vs. 2025

Gross margin percentage decreased in the secondthird quarter and first sixnine months of fiscal 2026 primarily due to a decrease in QCT gross margin percentage.

The increase in research and development expenses in the secondthird quarter of fiscal 2026 was primarily due to:

+ $177$244 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

The increase in selling, general and administrative expenses in the secondthird quarter of fiscal 2026 was primarily due to:

The increase in selling, general and administrative expenses in the first sixnine months of fiscal 2026 was primarily due to:

Net lossesgains on marketable securities in the secondthird quarter and first sixnine months of fiscal 2026 was primarily driven by the changeinitial inpublic fair valueofferings of certain of our QSI marketable equity investments.

Net gains on other investments in the first sixnine months of fiscal 2026 was primarily driven by observable price changes on certain of our QSI non-marketable equity investments. The increase in net earnings of investees in the first nine months of fiscal 2026 was primarily driven by an increase in our share of earnings in certain QSI equity method investments. The decrease in interest and dividend income in the first nine months of fiscal 2026 was primarily due to lower balances of interest-bearing securities.

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.

Unrecognized tax benefits were $2.9$3.0 billion and $2.7 billion at MarchJune 29,28, 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.

The following should be read in conjunction with our financial results for the secondthird quarter of fiscal 2026 for each reportable segment included in this Quarterly Report in “Notes to Condensed Consolidated Financial Statements, Note 6. Segment Information.”

Substantially all of QCT’s revenues consist of equipment and services revenues, which were $8.9$8.3 billion and $9.3$8.8 billion in the secondthird quarter of fiscal 2026 and 2025, respectively, and $19.3$27.7 billion and $19.2$28.0 billion in the first sixnine 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.

The decrease in QCT revenues in the secondthird quarter of fiscal 2026 was primarily due to:

+ higher automotive revenues, due to $191a $381 million increase in revenues per unit driven by favorable mix and higher average selling prices and $223 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

QCT EBT as a percentage of revenues decreased in the secondthird quarter of fiscal 2026 primarily due to:

The increasedecrease in QTL licensing revenues in the firstthird six monthsquarter of fiscal 2026 was primarily due to an increase in estimated sales of cellular products.: