Qualcomm Inc. (NASDAQ:QCOM)

The financial data for the company reveals distinct trends in profitability, capital efficiency, and economic value creation over the six-year period examined.

Net Operating Profit After Taxes (NOPAT)

NOPAT exhibited fluctuations during the period. Initially, there was a decline from 5,963 million USD in 2019 to 4,798 million USD in 2020, followed by a strong recovery and substantial growth reaching a peak of 13,145 million USD in 2022. However, this peak was not sustained, as NOPAT dropped sharply to 5,865 million USD in 2023, before rising again to 8,262 million USD in 2024. This pattern indicates periods of volatility in operational profitability, with a notable rebound after the 2023 dip.

Cost of Capital

The cost of capital showed a gradual upward trend throughout the period. Starting at 15.59% in 2019, it increased steadily to 16.86% in 2024. This rising cost of capital suggests a growing expense or risk associated with the company’s investment base, which could impact investment decisions and valuation assessments.

Invested Capital

The invested capital decreased from 21,089 million USD in 2019 to 17,459 million USD in 2020, indicating potential divestitures or capital efficiency improvements initially. Following this, there was a sustained increase through 2023, reaching 31,383 million USD, before a slight decline to 30,887 million USD in 2024. The overall trend points to significant growth in the asset base deployed for operations, with a peak in 2023.

Economic Profit

Economic profit, which measures value created above the cost of capital, echoed the pattern of NOPAT but with more pronounced variability. It decreased from 2,675 million USD in 2019 to 1,961 million USD in 2020, then escalated sharply to 8,384 million USD in 2022. Subsequently, economic profit plunged to 734 million USD in 2023, reflecting a near erosion of value creation, before recovering to 3,056 million USD in 2024. This signifies challenges in consistently generating returns exceeding capital costs, especially evident in the 2023 financial year.

In summary, the company experienced growth and contraction cycles in profitability and economic value, with operational profit and economic profit peaking notably in 2022 before facing a significant setback in 2023. Despite a steady increase in the cost of capital and a generally growing invested capital base, the ability to convert investments into economic profit showed variability, highlighting areas for potential strategic focus to stabilize and enhance value creation going forward.

The financial data reveals notable fluctuations in both net income and net operating profit after taxes (NOPAT) over the analyzed six-year period.

Net Income

Net income demonstrated a general upward trajectory from 2019 through 2022, with a marked increase from $4,386 million in 2019 to $12,936 million in 2022. This indicates a strong growth phase during these years.

However, in 2023, net income experienced a significant decline, dropping to $7,232 million, which is approximately a 44% decrease from the previous year. This suggests a material change in profitability or potential challenges faced during this period.

In 2024, net income recovered to $10,142 million, indicating a rebound though still below the peak achieved in 2022.

Net Operating Profit After Taxes (NOPAT)

NOPAT followed a somewhat similar pattern to net income, initially decreasing from $5,963 million in 2019 to $4,798 million in 2020, which contrasts with the initial increase in net income for 2020. This may reflect operational challenges or higher effective tax rates impacting after-tax operating profit in that year.

From 2020 onwards, NOPAT increased substantially to reach its peak of $13,145 million in 2022, consistent with the peak seen in net income, indicating strong operating performance.

In 2023, NOPAT dropped sharply to $5,865 million, representing a more pronounced decline compared to net income for the same period. This could suggest operational inefficiencies, increased costs, or other factors adversely impacting core operations.

By 2024, NOPAT improved to $8,262 million, showing partial recovery though remaining significantly below the 2022 peak.

Overall, the data indicates strong growth up to 2022 followed by a considerable dip in 2023 in both net income and NOPAT. The subsequent recovery in 2024, while positive, does not fully restore performance to prior peak levels. The larger proportional decline and slower recovery in NOPAT compared to net income in the downturn suggest that underlying operating profitability was particularly affected during the challenging period.

Income tax provision from continuing operations

The income tax provision experienced a significant decline from 3,095 million USD in 2019 to 521 million USD in 2020. Following this sharp decrease, the provision saw a moderate recovery, rising to 1,231 million USD in 2021 and further increasing to 2,012 million USD in 2022. However, in the subsequent years, it sharply declined again to 104 million USD in 2023, before slightly rebounding to 226 million USD in 2024. This pattern suggests considerable volatility in the tax expense, with substantial fluctuations over the period examined.

Cash operating taxes

Cash operating taxes demonstrated a somewhat different trend compared to the income tax provision. After a decrease from 1,167 million USD in 2019 to 793 million USD in 2020, cash operating taxes increased significantly to 1,484 million USD in 2021 and continued to rise to 2,189 million USD in 2022. Although there was a decline in 2023 to 1,803 million USD, cash operating taxes increased again to 2,127 million USD in 2024. Overall, this indicates a generally upward trend in cash operating taxes over the timeframe, with occasional decreases but a recovery subsequent to those declines.

Comparative observations

The divergence between income tax provision and cash operating taxes is notable. While the income tax provision shows high variability and generally lower levels in recent years, cash operating taxes have trended upwards, suggesting possible timing differences or adjustments affecting the provision relative to actual tax cash outflows. The disparity between accrued tax expense and cash taxes paid might warrant further investigation to understand tax accounting policies or one-time tax impacts during this period.

Total Reported Debt & Leases

The total reported debt and leases exhibit a slightly decreasing trend over the analyzed periods. Starting from US$16,287 million in 2019, the figure shows minor fluctuations but generally moves downward to US$15,440 million by 2024. This reflects a moderate reduction in leverage or financial obligations over time.

Stockholders’ Equity

Stockholders’ equity demonstrates a strong upward trajectory throughout the periods. Beginning at US$4,909 million in 2019, equity increases significantly each year, reaching US$26,274 million in 2024. This substantial rise indicates a growing value attributable to shareholders, possibly due to profitable operations, retained earnings accumulation, or capital injections.

Invested Capital

Invested capital presents a more variable pattern with an overall increase. It starts at US$21,089 million in 2019, decreases to a low of US$17,459 million in 2020, then rises steadily to a peak of US$31,383 million in 2023, before a slight decline to US$30,887 million in 2024. This suggests increased investment in the company's operational assets or business expansions with some stabilization in the final year.

Insights

The data indicates a strengthening equity base and relatively stable or diminishing debt levels, which could enhance the company's financial stability and creditworthiness. The upward movement in invested capital corresponds with the growth in equity, implying that the company is reinvesting funds to support expansion or operational capacity. The moderate decline in invested capital in the last period may suggest a phase of consolidation or optimization of asset deployment.

Economic Profit

The economic profit showed significant fluctuations over the observed periods. Starting at $2,675 million, there was a decrease to $1,961 million in the following year. This was followed by a substantial increase, peaking at $8,384 million in 2022. However, the profit sharply declined to $734 million in 2023, before partially recovering to $3,056 million by 2024. The trend indicates volatility with a notable peak in 2022 and a recovery phase after a steep drop.

Invested Capital

The invested capital exhibited a consistent growth trend over the time span. Initially recorded at $21,089 million, it slightly decreased to $17,459 million the next year but then increased steadily, reaching $30,887 million by 2024. This trend suggests sustained capital investment and expansion efforts despite minor fluctuations.

Economic Spread Ratio

This ratio generally mirrors the pattern of economic profit but with more pronounced variations. Beginning at 12.68%, it slightly fell to 11.23% before sharply rising to a high of 28.78% in 2022. A drastic decline followed, dropping to 2.34% in 2023, then rebounding to 9.89% in 2024. This ratio’s variability reflects changing returns relative to invested capital, highlighting periods of high profitability and efficiency interspersed with substantial downturns.

The financial data presents key performance indicators over six consecutive years, revealing notable fluctuations and trends in economic profit, adjusted revenues, and economic profit margin.

Adjusted Revenues

Adjusted revenues exhibit a general upward trend from 2019 through 2024, increasing from $23,878 million in 2019 to $38,955 million in 2024. The revenue peaked in 2022 at $43,737 million, followed by a decline in 2023 to $35,699 million, and a subsequent recovery in 2024. This pattern indicates volatility likely influenced by external market conditions.

Economic Profit

Economic profit presents significant volatility over the analyzed years. Starting at $2,675 million in 2019, the value dropped to $1,961 million in 2020, before sharply increasing to a peak of $8,384 million in 2022. 2023 saw a steep decline to $734 million, recovering partially to $3,056 million in 2024. This suggests fluctuations in underlying economic profitability despite rising revenues.

Economic Profit Margin

The economic profit margin correlates with the trends observed in economic profit. The margin started at 11.2% in 2019, dipped to 8.48% in 2020, and reached a maximum of 19.17% in 2022. A pronounced decline to 2.06% occurred in 2023, followed by an increase to 7.85% in 2024. The margin's volatility highlights sensitivity in the company’s profit efficiency relative to revenues.

Overall, while adjusted revenues show long-term growth with some volatility, economic profit and economic profit margin experience more pronounced fluctuations. The peak in 2022 across all metrics reflects a period of strong profitability, but subsequent decreases in 2023 indicate challenges that impacted economic returns despite relatively high revenue levels. The partial recovery in 2024 suggests an improving but still unstable profitability outlook.