Qualcomm Inc. (NASDAQ:QCOM)

The period demonstrates significant fluctuations in economic profit. Net operating profit after taxes (NOPAT) initially increased substantially, followed by a considerable decline, and then a recovery. Invested capital generally increased over the period, though with a slight decrease in one year. The cost of capital remained relatively stable, with a slight upward trend towards the end of the period. These factors combined to produce a volatile pattern in economic profit.

NOPAT Trend

NOPAT experienced substantial growth from 2020 to 2022, increasing from US$4,798 million to US$13,145 million. A significant decrease was then observed in 2023, with NOPAT falling to US$5,865 million. Subsequent years show a recovery, reaching US$8,262 million in 2024 and US$9,896 million in 2025.

Cost of Capital

The cost of capital remained relatively consistent throughout the observed period, fluctuating between 18.46% and 19.22%. A gradual increase is noticeable in the later years, moving from 18.57% in 2022 to 19.17% in 2024 and 19.22% in 2025. This suggests a potentially increasing risk profile or changing market conditions.

Invested Capital

Invested capital generally trended upward, increasing from US$17,459 million in 2020 to US$31,383 million in 2023. A slight decrease was recorded in 2024, with invested capital falling to US$30,887 million, before increasing again to US$31,317 million in 2025. The overall increase indicates expansion or reinvestment within the business.

Economic Profit Analysis

Economic profit mirrored the NOPAT trend, rising significantly from US$1,575 million in 2020 to US$7,735 million in 2022. The decline in NOPAT in 2023 resulted in a dramatic reduction in economic profit, falling to just US$36 million. Economic profit then recovered in subsequent years, reaching US$2,342 million in 2024 and US$3,877 million in 2025. The substantial fluctuations highlight the sensitivity of economic profit to changes in NOPAT, even with a relatively stable cost of capital and increasing invested capital.

The period demonstrates a strong correlation between NOPAT and economic profit. While invested capital increased overall, its impact on economic profit was less pronounced than the changes in NOPAT. The slight increase in the cost of capital towards the end of the period may contribute to future constraints on economic profit growth.

The financial data reveals notable fluctuations in key profitability metrics over the examined periods.

Net Income

Net income exhibited a strong upward trend from 2020 through 2022, increasing from $5,198 million to a peak of $12,936 million. However, this was followed by a sharp decline in 2023, dropping to $7,232 million. The figure partially recovered in 2024 to $10,142 million before decreasing again in 2025 to $5,541 million, indicating considerable volatility and inconsistency in net profit generation during the latter years.

Net Operating Profit After Taxes (NOPAT)

NOPAT followed a somewhat similar pattern but with distinct deviations. Starting at $4,798 million in 2020, it increased steadily to $13,145 million in 2022, slightly surpassing the net income peak. A significant decrease occurred in 2023, bringing NOPAT down to $5,865 million, which is a more pronounced drop compared to net income. In 2024, NOPAT rebounded to $8,262 million and further increased to $9,896 million in 2025. This partial recovery suggests improved operating efficiency or tax management despite the fluctuating net income.

Overall, the data reflects a period of strong profitability growth until 2022, followed by notable declines and subsequent recovery attempts. The divergence between net income and NOPAT trends in recent years could be indicative of changes in non-operating items, tax rates, or extraordinary gains or losses impacting net income figures more heavily than operating profits.

Income Tax Provision from Continuing Operations

The income tax provision demonstrates notable volatility over the analyzed periods. Initially, there is a substantial increase from 521 million US dollars in 2020 to a peak of 2012 million US dollars in 2022. This is followed by a sharp decrease to 104 million US dollars in 2023, indicating a significant reduction in tax expense or possibly tax strategies implemented during that fiscal year. Subsequently, the provision rises moderately to 226 million US dollars in 2024 and then exhibits a pronounced surge to 7122 million US dollars by 2025, suggesting a notable increase in taxable income or changes in tax regulations impacting the latest period.

Cash Operating Taxes

Cash operating taxes exhibit a generally increasing trend throughout the periods analyzed. Starting at 793 million US dollars in 2020, there is a consistent upward movement reaching 2632 million US dollars by 2025. Despite a smaller growth pace observed between 2022 and 2023, the overall trend reflects growing cash tax obligations, potentially linked to increased profitability, changes in tax payment timing, or alterations in operational cash flows influencing tax payments.

Summary of Taxation Trends

The overall taxation metrics show a divergence between accounting-based tax provisions and actual cash tax payments. While cash operating taxes increase steadily, the income tax provision is characterized by substantial fluctuations, pointing to possible temporary differences between accounting profit and taxable income or significant tax planning activities. The sharp increase in the income tax provision in 2025 compared to prior years warrants further examination to understand underlying causes such as changes in tax legislation, adjustments in deferred tax assets or liabilities, or extraordinary items affecting the tax expense.

Total Reported Debt & Leases

There is a relatively stable trend in total reported debt and leases over the observed period. The values fluctuate slightly around the range of approximately 15,400 to 16,300 million US dollars, with no significant upward or downward movement. This indicates a consistent level of indebtedness maintained by the company with minor reductions noted in the mid-term followed by a small increase towards the end.

Stockholders’ Equity

The stockholders’ equity shows a substantial and continuous growth over the majority of the periods reviewed, starting from about 6,077 million US dollars and reaching up to a peak of 26,274 million US dollars. After this peak, a notable decline occurs, dropping equity to approximately 21,206 million US dollars by the last period. This pattern suggests significant capital appreciation followed by some degree of capital reduction or loss retention in the most recent term.

Invested Capital

Invested capital demonstrates a clear upward trajectory from 17,459 million US dollars to over 31,000 million US dollars. The growth is pronounced particularly between the second and third periods, with a slight plateau and minor fluctuations observed between the later periods. Overall, this indicates ongoing capital investment or accumulation of net assets supporting the company’s operations.

Summary Insights

The company has maintained a steady level of debt, suggesting a controlled approach to leveraging. The marked increase in stockholders’ equity over four years reflects strong growth in net assets or retained earnings, though the subsequent decline may warrant investigation into recent operational or financial challenges. The consistent rise in invested capital points to sustained commitment to asset growth and operational capacity. The combined trends imply that while the company has generally expanded its capital base and maintained stable debt levels, recent fluctuations in equity highlight potential volatility in financial performance or market valuation.

The economic spread ratio demonstrates significant fluctuation over the observed period. Initially, the ratio exhibits a strong upward trend, followed by a substantial decline and subsequent recovery. A detailed examination of the period reveals distinct phases in performance.

Initial Growth (2020-2022)

From 2020 to 2022, the economic spread ratio increased consistently. Starting at 9.02% in 2020, it rose to 23.95% in 2021 and peaked at 26.55% in 2022. This indicates a growing ability to generate returns exceeding the cost of capital during this timeframe. This growth coincided with increases in both economic profit and invested capital.

Significant Decline (2023)

A dramatic decrease in the economic spread ratio occurred in 2023, falling to 0.12%. This substantial drop suggests a significant reduction in the company’s ability to generate returns above its cost of capital. The decline is directly linked to a sharp decrease in economic profit, despite a continued increase in invested capital.

Recovery and Continued Improvement (2024-2025)

The economic spread ratio began to recover in 2024, reaching 7.58%. This recovery continued into 2025, with the ratio increasing to 12.38%. The recovery is associated with an increase in economic profit, while invested capital remained relatively stable. This suggests improved efficiency in capital utilization and profitability.

Relationship to Economic Profit and Invested Capital

The economic spread ratio’s movements are closely tied to changes in economic profit and invested capital. The strong growth in the ratio from 2020 to 2022 reflects a period of robust economic profit generation alongside increasing investment. The 2023 decline highlights the sensitivity of the ratio to economic profit, as a substantial decrease in profit overwhelmed the increase in invested capital. The subsequent recovery demonstrates the ratio’s responsiveness to improvements in economic profit.

Overall, the economic spread ratio indicates a period of strong performance followed by a significant setback and a subsequent recovery. The ratio’s fluctuations underscore the importance of maintaining consistent profitability relative to invested capital.

The economic profit margin demonstrates significant fluctuation over the observed period. Initially, a strong upward trend is evident, followed by a substantial decline and subsequent recovery.

Economic Profit Margin Trend

In 2020, the economic profit margin stood at 6.81%. This figure increased considerably to 14.42% in 2021 and continued its ascent to a peak of 17.69% in 2022. A dramatic decrease occurred in 2023, with the margin falling to 0.10%. The margin then began to recover, reaching 6.01% in 2024 and further improving to 8.75% in 2025.

The economic profit margin’s movement closely mirrors that of economic profit. The substantial increase in economic profit from 2020 to 2022 directly correlates with the rising margin. The precipitous drop in economic profit in 2023 is reflected in the near-zero margin for that year. The subsequent increases in economic profit in 2024 and 2025 are accompanied by a corresponding rise in the economic profit margin.

Relationship to Adjusted Revenues

Adjusted revenues increased consistently from 2020 to 2023, growing from US$23,135 million to US$35,699 million. While revenues continued to grow in 2024 and 2025, reaching US$38,955 million and US$44,328 million respectively, the economic profit margin did not increase proportionally in those years, indicating that revenue growth alone did not drive profitability improvements to the same extent as in the earlier period.

The volatility in the economic profit margin suggests a sensitivity to factors impacting profitability beyond revenue generation. The significant decline in 2023 warrants further investigation to understand the underlying causes, such as increased costs or changes in capital allocation. The recovery in subsequent years indicates successful mitigation of these factors or improved operational efficiency.