Last Update 05 Feb 26

Fair value Increased 12%

IDCC: LG Licensing And 2026 Outlook Will Support Higher Margin Profile

Narrative Update

Analysts have lifted their price target on InterDigital from about $412 to roughly $463, citing updated assumptions that include modest revenue growth, a higher projected profit margin near 44%, and a lower future P/E, informed in part by recent research following the LG deal and a raised 2026 outlook.

Analyst Commentary

Analysts are updating their views on InterDigital following the LG agreement and the raised 2026 outlook, with most of the discussion centering on how the new assumptions for revenue, margins and future P/E might affect the valuation and execution risk.

Bullish Takeaways

Bullish analysts see the LG deal as validation of InterDigital's licensing model, which they view as helpful for supporting the higher profit margin assumption near 44% in their forecasts.
The raised 2026 outlook is cited as a reason to support the higher price target near $463, as analysts tie those projections to expectations for stronger execution on the current licensing pipeline.
Some bullish analysts argue that using a lower future P/E in their models still results in a price target above the current level. They interpret this as room for valuation upside if the company meets its revenue and margin assumptions.
The combination of modest revenue growth assumptions and higher margins is framed by bullish analysts as a way to support cash generation and earnings quality, which they see as important for sustaining the revised target range.

Bearish Takeaways

Bearish analysts point out that the valuation case relies heavily on the raised 2026 outlook. In their view, this leaves little room for execution missteps if licensing agreements, including the LG deal, deliver below current expectations.
The use of a lower future P/E in updated models is seen by some as a recognition of potential risks around long term growth. They suggest that multiples could compress further if revenue or margins track below the current 44% assumption.
There is caution that modest revenue growth assumptions might limit upside to earnings if costs rise faster than planned. This could pressure the margin outlook that underpins the higher price target.
Some bearish analysts highlight that a reliance on a small number of large licensing agreements can introduce lumpiness in results. In their view, this could make it harder for the company to consistently align reported performance with the raised 2026 guidance path.

What's in the News

InterDigital issued full year 2026 guidance, with expected revenue of US$675 million to US$775 million and diluted EPS of US$5.77 to US$8.51 (company guidance).
The company 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 (company announcement).
InterDigital renewed a worldwide, non exclusive, royalty bearing license with a major Chinese vendor for five years, covering smartphones and other cellular enabled devices under its standard essential cellular, Wi Fi and HEVC patents (company announcement).

Valuation Changes

Fair Value: The price target estimate has risen from about US$412 to roughly US$462.67.
Discount Rate: The assumed discount rate has edged down slightly from 8.61% to about 8.59%.
Revenue Growth: The revenue outlook has shifted from a 12.82% decline to modest growth of about 0.80%.
Net Profit Margin: The forecast profit margin has moved higher from roughly 30.38% to about 44.43%.
Future P/E: The assumed future P/E multiple has been cut roughly in half, from about 70.61x to around 35.05x.

Optimism around growth in recurring revenue, contract renewals, and expansion into new markets may overstate the sustainability and trajectory of future earnings.
Investor assumptions of seamless diversification and high-margin growth ignore potential headwinds from regulatory, technological, and competitive pressures and uncertain monetization outside core smartphone licensing.
Strong licensing deals with major smartphone and PC manufacturers, successful market diversification, and leadership in wireless standards drive revenue stability and position for long-term growth.

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 recent 67% uplift in the Samsung license and an all-time high annualized recurring revenue, driven by multi-year agreements with major OEMs, have set highly optimistic expectations for continued outsized growth in future contract renewals, potentially inflating valuation multiples and overstating sustainable revenue trajectory.
Investors may be projecting accelerated licensing expansion into non-smartphone verticals (such as automotive, industrial IoT, smart cities, and healthcare) due to the widely anticipated proliferation of connected devices-however, actual monetization and revenue ramp from these adjacent markets remain unproven and could fall short of aggressive assumptions.
The onset of 6G development and InterDigital's leadership in standards bodies are being viewed as a near-certain catalyst for extending royalty streams and patent value; markets may be embedding rapid and broad 6G adoption into forward earnings, though the timing and market scope remain highly speculative.
Expectations for continued high-margin growth and minimal incremental cost in expanding into new verticals or renewing large contracts may underestimate future R&D needs, compliance costs, and risks of margin pressure from regulatory, competitive, or technological changes, possibly leading to eventual net margin disappointment.
The exceptionally strong catch-up revenues and historical use of litigation and arbitration to secure large payments may be interpreted by investors as recurring and repeatable, but as regulatory scrutiny on patent licensing models (e.g., FRAND reforms) intensifies globally, future lump-sum payments and catch-up opportunities are at risk, potentially distorting normalized earnings and cash flow visibility.

InterDigital Earnings and Revenue Growth

InterDigital Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming InterDigital's revenue will decrease by 10.8% annually over the next 3 years.
Analysts assume that profit margins will shrink from 51.9% today to 27.4% in 3 years time.
Analysts expect earnings to reach $173.4 million (and earnings per share of $8.95) by about September 2028, down from $463.5 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 53.1x on those 2028 earnings, up from 17.0x today. This future PE is greater 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 secured an 8-year, more-than-$1 billion license agreement with Samsung, the world's largest smartphone manufacturer, representing a 67% increase over the prior agreement, which not only boosts recurring revenue but also sets a higher royal baseline for future contract renewals, potentially supporting stronger revenue growth and higher net margins.
InterDigital now has leading smartphone manufacturers Apple and Samsung licensed through the end of the decade, covering almost 80% of the global smartphone market and bringing smartphone annualized recurring revenue (ARR) to a record $465 million, greatly enhancing revenue stability and reducing earnings volatility.
The company is making rapid progress expanding into Consumer Electronics and IoT markets, exemplified by a recent HP agreement (now over 50% of the PC market under license) and a 175% increase in CE and IoT program revenue in Q2, which points to successful diversification and growing addressable market, supporting topline growth and reducing cyclicality.
InterDigital is actively leading development and standards-setting for 6G and integration of AI into cellular networks, positioning it at the forefront of future wireless technology trends that are expected to drive new verticals such as industrial IoT, smart cities, health care, and automotive, creating significant future licensing and revenue opportunities.
With a business model exhibiting high incremental margins-where major license or renewal agreements can be close to 100% gross margin and significant free cash flow (expected to nearly double to over $400 million in 2025)-the company's strong operational leverage, active share repurchases, and increased dividends enhance its ability to deliver higher earnings per share and shareholder returns over the long-term.

Valuation

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

The analysts have a consensus price target of $266.5 for InterDigital based on their expectations of its future earnings growth, profit margins and other risk factors. 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 analyst's consensus, you'd need to believe that by 2028, revenues will be $633.9 million, earnings will come to $173.4 million, and it would be trading on a PE ratio of 53.1x, assuming you use a discount rate of 8.6%.
Given the current share price of $305.7, the analyst price target of $266.5 is 14.7% 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

AnalystConsensusTarget 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 AnalystConsensusTarget 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 AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

New License Deals And Raised Outlook Will Drive Next Phase Of Risk