Last Update 22 Jan 26

Fair value Increased 63%

IDCC: Streaming And Licensing Execution Will Drive Upside To Elevated Expectations

Narrative update on InterDigital

Analysts have lifted their fair value estimate for InterDigital from US$260 to US$425, citing recent price target increases, Q3 performance commentary, and views that the company is better positioned to capture opportunities across its licensing and streaming verticals.

Analyst Commentary

Recent research points to a constructive view on InterDigital, with attention on how recent deals and licensing progress might feed into medium term expectations. One firm lifted its outlook for 2026 after the LG agreement, while Jefferies raised its price target to US$475 from US$450 following Q3 results, referring to opportunities across all three verticals and the potential in streaming.

For you as an investor, the key takeaway is that analysts are watching execution in licensing and streaming closely, and they are framing their views around how consistently InterDigital can translate current contracts and pipeline into recurring revenue over time.

Jefferies highlighted that Q3 results and Q4 annual recurring revenue guidance were broadly aligned with its expectations, and that the firm sees the company working to bring together its assets to address what it describes as a large streaming opportunity.

At the same time, even with supportive commentary, the stock remains tied to how management delivers against these expectations and to any changes in medium term assumptions that other, more cautious, research teams may adopt.

Bearish Takeaways

Bearish analysts may question whether recent licensing deals such as the LG agreement can be replicated at the same scale, which could limit upside to revenue assumptions if new contracts are slower to arrive.
Some cautious views can emerge around the timing and size of the streaming opportunity, with concerns that monetisation may take longer than bullish forecasts suggest, creating execution risk against current targets.
Bearish analysts might argue that expectations implied by higher fair value and price targets leave limited room for disappointment, so any miss on recurring revenue or contract renewals could trigger pressure on the valuation.
There can also be concern that growth across all three verticals does not progress evenly, which could lead to more conservative long term models and, in turn, more restrained price target revisions.

What's in the News

InterDigital issued earnings guidance for full year 2026, targeting revenue of US$675 million to US$775 million and diluted EPS of US$5.77 to US$8.51 (company guidance).
The company provided guidance for Q4 and full year 2025, with expected Q4 revenue of US$144 million to US$148 million and diluted EPS of US$0.72 to US$0.95, and full year 2025 revenue of US$820 million to US$824 million with diluted EPS of US$11.27 to US$11.50 (company guidance).
InterDigital signed a new patent license agreement with LG Electronics covering digital TVs and computer display monitors under its joint licensing program with Sony, including technologies such as ATSC 3.0, Wi Fi and video codecs (client announcement).
The company renewed a worldwide, non exclusive, royalty bearing license with a major Chinese vendor for five years, covering cellular products, including smartphones and other cellular enabled devices, under InterDigital's standard essential cellular, Wi Fi and HEVC patents (client announcement).
From July 1, 2025 to October 30, 2025, InterDigital repurchased 171,529 shares for US$50.24 million, and since the start of the buyback program announced on June 12, 2014, has repurchased 18,308,679 shares for US$1,225.97 million (buyback update).

Valuation Changes

Fair Value: the fair value estimate has risen materially from US$260 to US$425.
Discount Rate: the discount rate has edged down slightly from 8.60% to 8.58%.
Revenue Growth: the assumed revenue trend has shifted from a 17.81% decline to a 16.04% decline.
Profit Margin: the projected net profit margin has moved slightly higher from 26.60% to 26.84%.
Future P/E: the assumed future P/E multiple has increased from 60.71x to 92.22x.

Rising regulatory, legal, and geopolitical risks threaten InterDigital's ability to enforce or monetize its patents, increasing uncertainty and potentially compressing margins.
Shifting industry standards and emerging alternative technologies risk undermining the relevance and revenue potential of InterDigital's intellectual property portfolio.
Long-term deals with major tech firms, patent leadership, legal wins, and expansion into new tech markets position InterDigital for stable growth and reduced risk.

Catalysts

About InterDigital

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

The possibility of increasing global regulatory scrutiny and anti-trust actions around intellectual property could limit InterDigital's ability to enforce or fully monetize its patents, placing sustained pressure on recurring and catch-up revenue streams and compressing long-term margins if new restrictions are implemented.
A global shift away from proprietary, royalty-driven standards toward open-source technologies, particularly in wireless and IoT, threatens to erode the relevance of InterDigital's portfolio and undermine future top-line growth as more device manufacturers and service providers seek non-royalty alternatives.
Geopolitical fragmentation, including rising trade tensions, regional protectionism, and potential IP-related tariffs, may exclude InterDigital from strategically important international markets, shrinking its addressable market, increasing volatility in licensing income, and driving long-term revenue stagnation.
Growing legal and enforcement costs from protracted litigation and arbitration, especially as contracts expire or are challenged by powerful licensees, are likely to erode net margins, potentially causing unpredictable swings in earnings and reducing free cash flow available for shareholder returns.
The rise of alternative connectivity paradigms such as satellite networks, edge AI, and non-terrestrial standards-which may not rely on InterDigital's patents-risks commoditizing traditional mobile IP, lowering royalty rates across the board, and shrinking the company's long-term revenue base and profit potential.

InterDigital Earnings and Revenue Growth

InterDigital Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

This narrative explores a more pessimistic perspective on InterDigital compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
The bearish analysts are assuming InterDigital's revenue will decrease by 6.7% annually over the next 3 years.
The bearish analysts assume that profit margins will shrink from 51.9% today to 30.8% in 3 years time.
The bearish analysts expect earnings to reach $223.4 million (and earnings per share of $6.15) by about September 2028, down from $463.5 million today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 34.0x on those 2028 earnings, up from 16.6x today. This future PE is lower than the current PE for the US Software industry at 36.2x.
Analysts expect the number of shares outstanding to grow by 1.81% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.58%, as per the Simply Wall St company report.

InterDigital Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The company has locked in long-term license agreements with industry giants like Samsung and Apple through 2030, providing recurring revenue increases and significant revenue visibility, which improves stability in annual revenues and reduces downside risk to overall earnings.
InterDigital is expanding its reach into new growth areas beyond smartphones, such as consumer electronics, IoT, and video streaming, doubling PC market coverage and growing revenue outside its core market, which could help diversify risk and drive net margin expansion.
The accelerating development and leadership in 6G, including key roles in global standards bodies, positions InterDigital to monetize foundational technology in future cellular generations and adjacencies, supporting sustainable revenue and earnings growth over the long term.
The company's proven ability to win substantial legal disputes and obtain favorable arbitration outcomes as highlighted by the 67% increase in the Samsung agreement compared to the prior deal demonstrates pricing power and provides strong comparable contracts for future negotiations, likely improving royalty rates and boosting margins.
InterDigital's high-quality, broad patent portfolio has received top industry rankings, affirming the strength of its IP assets and its position as an innovation leader, which is a key competitive advantage that can help sustain high royalty revenue and robust free cash flow as global data, device, and connectivity demands increase.

Valuation

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

The assumed bearish price target for InterDigital is $220.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of InterDigital's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $311.0, and the most bearish reporting a price target of just $220.0.
In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $725.1 million, earnings will come to $223.4 million, and it would be trading on a PE ratio of 34.0x, assuming you use a discount rate of 8.6%.
Given the current share price of $298.25, the bearish analyst price target of $220.0 is 35.6% lower.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

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

Rising Anti-Trust And Open-Source Shifts Will Erode IP Value