QCOMQualcomm

See also the Risk Factors titled “Our business may suffer as a result of adverse rulings in governmental investigations or proceedings or other legal proceedings,” “Changes in our patent licensing practices, whether due to governmental investigations, legal challenges or otherwise, could adversely impact our business and results of operations,” “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,” “There are numerous risks associated with the operation and control of our manufacturing facilities, including a higher portion of fixed costs relative to a fabless model; environmental compliance and liability; impacts related to climate change; exposure to natural disasters, health crises, geopolitical conflicts and cyber-attacks; timely supply of equipment and materials; and various manufacturing issues,” and “Tax liabilities could adversely affect our results of operations.”

Our revenues and growth in revenues could be negatively impacted, our business may be harmed and our substantial investments in these technologies may not provide us an adequate return, if: our customers’ and licensees’ sales of products, particularly premium-tier handset products, products and services using these technologies, or average selling prices of such products, decline due to, for example, the maturity of smartphone penetration in developed regions, including China; our customers’ and licensees’ production and sales of products are impacted by supply constraints, or supply constraints or other factors increase the average selling prices of such products, causing a reduction in consumer demand; there is slower-than-expected adoption, or a lack of adoption, of our products and technologies in new and expanded industries including automotive, IoT and data center; we do not continue to maintain our intellectual property and technical leadership in 5G, including in ongoing 5G standardization efforts, or we fail to establish such leadership in future generations of wireless technology; we are unable to drive the adoption of our products and platform solutions into networks networks, devices, vehicles, data center infrastructure, industrial systems, robots and devices, including devices beyond mobile handsets; other connected endpoints; consumers’ rates of replacement of smartphones and other consumer devices decline; or there is a shift in consumer demand away from new devices in favor of refurbished or secondhand devices.

OEM concentrations; Competition in the semiconductor industry is affected by various factors that include, among others: customer concentrations in various segments (e.g., handsets and data center); vertical integration; competition in certain geographic regions; government intervention or support of national industries or competitors; geopolitical tensions, which may drive customer preference toward local suppliers; the ability to maintain product differentiation in light of evolving industry standards and speed of technological change (including the transition to smaller geometry process technologies, the demand for always on, always connected capabilities, the increasing use of AI and machine learning technologies and the need to run complex AI-based applications on devices and in data centers, and the need for related software and developer ecosystems); access to capacity in the supply chain; and value-added features that drive selling prices and consumer demand for new devices.

If our products products, software and other integrated solutions fail to perform to specifications, compete with the product quality quality, performance, efficiency or cost effectiveness of our competitors or meet quality or regulatory standards (including product safety and information security standards, which may differ by region, geography and industry, and which are particularly stringent in the automotive industry) or other standards (including sustainability of a particular industry or other application, we may be unable to successfully expand our business in that industry or application, and our growth could be limited.

In particular, our future growth depends in part on our ability to succeed in new and expanded product areas, and industries and applications beyond mobile handsets, applications, including in automotive, IoT and data center; our ability to develop leading and cost-effective technologies technologies, products, software and products full-stack platform solutions for these new areas; our ability to create, integrate and expanded product areas, industries scale developer ecosystems and applications; software platforms; and third parties incorporating our technologies technologies, products and products solutions into devices devices, vehicles, infrastructure, systems and services used in these product areas, industries and applications. areas.

Some of these current and potential competitors may have advantages over us that include, among others: motivation by our customers in certain circumstances to use our competitors’ integrated circuit products, to utilize their own internally-developed integrated circuit products and/or sell such products to others, or to utilize alternative technologies; lower cost structures or a willingness and ability to accept lower prices or lower margins for their products, particularly in China; foreign government support of other technologies, competitors or OEMs that sell devices that do not contain our products; better known brand names; ownership and control of manufacturing facilities and greater expertise in manufacturing processes; the development and sale of infrastructure equipment for wireless networks, which may enable such competitors to better optimize their integrated circuit products for performance on those networks; more extensive relationships with local distribution companies and OEMs in certain geographic regions (such as China); longer operating histories in industries and applications beyond mobile handsets (such as automotive, IoT and data center), including more established and/or stronger customer, vendor, distributor, developer or other channel relationships in such industries; and a more established presence in certain regions.

In addition, in order to successfully extend our technologies and products into new and expanded product areas, and industries and applications beyond mobile handsets, applications, we may need to transition to new business models or transform aspects of our organization, including moving from silicon products to more integrated hardware, software and platform solutions; developing direct relationships with new types of customers and ecosystem participants; expanding developer, channel and go-to-market capabilities; and operating in markets with different purchasing, deployment and support requirements, and we may not be successful in doing so.

We derive a significant portion of our revenues from Chinese OEMs customers and source certain critical integrated circuit products from non-Chinese OEMs that utilize our products in devices they sell into China (which has the largest number of smartphone users in the world); Chinese suppliers; our key foundry suppliers and their manufacturing foundries semiconductor assembly and assembly, test and other facilities service providers are primarily located in Taiwan and Korea; our manufacturing facilities for RFFE and RF products are located in China, Germany and Singapore; the primary warehouses where we store finished goods for fulfillment of customer orders are located in Singapore; and a significant portion of our workforce (including engineering and other technical personnel) is based in India.

The above is exacerbated by the fact that our products may be used, and perform critical functions, in various high-risk applications, including but not limited to: automobiles, including ADAS/AD functions; cameras and artificial intelligence, including home and enterprise security; home automation, including smoke and noxious gas detectors; medical condition monitoring; location and asset tracking and management, including wearables for child safety and elderly health; robotics, including public safety drones and autonomous municipality vehicles; and XR for treatment of phobias or PTSD, early detection of disorders or special needs, vehicles, among others.

However, our research, development and other investments in these new and expanded product areas, industries and applications, and corresponding technologies and products, as well as in our existing technologies and products and new technologies in mobile handsets, areas may not succeed because, among other reasons: we may not be issued patents on the technologies we develop; the technologies we develop may not be incorporated into relevant standards; new and expanded product areas, industries and applications beyond mobile handsets, applications, and consumer demand therein, may not develop or grow as anticipated; we may be unable to attract or retain employees with the necessary skills in such new and expanded product areas, industries and applications; our strategies or the strategies of our customers, licensees or partners may not be successful; alternate technologies technologies, architectures or products may be better or may reduce the advantages we anticipate from our investments; competitors’ technologies or products may be more cost effective, have more capabilities or fewer limitations or be brought to market faster than our new technologies or products; we may not be able to develop, or our competitors may have more established and/or stronger customer, vendor, distributor or other channel relationships; and competitors may have longer operating histories in industries and applications that are new to us.

Certain of our customers in China have developed, These OEMs may be incentivized to develop and others may in the future develop, use their own integrated circuit products and use such integrated circuit products in their devices rather than our products, including products due to pressure 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.

Competition in any or all of the industries in which we operate, or in any product areas or device tiers within such industries, may result in the loss of business or customers, customers or reduce average selling prices for our chipset products or the products of our customers and licensees, any of which would negatively impact our business, results of operations, cash flows and financial condition.

In addition, the timing and size of purchases by our significant such 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.

Similarly, we derive a significant portion of our handset revenues from certain Chinese OEMs.

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, results of operations, cash flows and financial condition could be materially adversely impacted.

The net decrease in cash, cash equivalents and marketable securities (including restricted cash) in fiscal 2025 2026 was primarily due to $8.8 $7.8 billion in payments to repurchase shares of our common stock, $3.8 $3.9 billion in cash dividends paid, $1.4 billion repayment of unsecured fixed-rate notes that matured in May 2025, $1.2 $2.5 billion in capital expenditures, expenditures (primarily to support our engineering infrastructure and the testing of our integrated circuits), $1.6 billion in cash paid for acquisitions and other investments and $1.1 billion in payments of tax withholdings related to the vesting of share-based awards and $743 million in cash paid for acquisitions and other investments. awards.

QSI EBT increased in fiscal 2025 2026 primarily due to $246 million in higher net gains from certain QSI equity method investments, $208 million in higher net gains from observable price changes on certain of our non-marketable equity investments and $148 million in 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.

Net changes in our operating assets and liabilities positively impacted decreased our operating cash flows primarily driven by an increase in fiscal 2025 primarily from inventory to secure supply and mitigate disruptions due to supply constraints, partially offset by a decrease in other assets driven by which was primarily due to the utilization of prior advanced supply agreement payments, partially offset by an increase in accounts receivables primarily driven by higher revenues. payments.

Key considerations in this assessment include the investee’s financial and liquidity position and business forecasts (including their ability to respond to any significant deterioration), industry performance, development and/or market acceptance of the investee’s products or technologies, as well as considering any appreciation in fair value that has not been recognized in the carrying values of such investments and other relevant events and factors.

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, Note 3.

Under the OBBB enacted in July 2025, As a result, we no longer expect to be subject to CAMT beginning in fiscal 2026 the foreseeable future, and therefore, we no longer now expect to realize substantially all of our existing federal deferred tax assets.

Other expenses in fiscal 2024 primarily 2026 consisted 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 a securities class action lawsuit. costs).

Gross margin percentage decreased in fiscal 2025 2026 primarily due to a decrease in the proportion of total revenues related to QTL licensing revenues (which have a higher QCT gross margin percentage contribution). percentage.

In particular, Apple began utilizing currently uses its own internally developed modem (rather than our products) in certain of its recently released smartphones and we expect that Apple will increasingly primarily use its own modem products, rather than our products, in its future devices, devices going forward, which will have a significant negative impact on our QCT revenues, results of operations and cash flows.

The OBBB includes included significant corporate tax reforms, including changes to the permanent reinstatement of deducting 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).

At September 28, 2025, 27, 2026, we had $15.1 billion of principal fixed-rate notes outstanding with maturity dates between 2027 and 2053. outstanding, $2.0 billion of which matures in 2027.

We monitor our investments, many of which are in early-stage companies, for events or circumstances that could indicate impairment, including those that result from observable price adjustments. including, among other factors, lower valuations in recently completed and anticipated financings.