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.

Economic Profit Trend

Economic profit exhibited a strong upward trend from 2020 to 2022, increasing from US$2,007 million to US$8,460 million. A substantial decrease was then observed in 2023, with economic profit falling to US$817 million. Subsequently, economic profit recovered in 2024 and 2025, reaching US$3,141 million and US$4,687 million respectively. This pattern suggests a sensitivity to changes in NOPAT, potentially influenced by external market conditions or internal operational factors.

NOPAT Analysis

NOPAT increased significantly from US$4,798 million in 2020 to US$13,145 million in 2022, indicating improved operational efficiency or increased revenue generation. The decline to US$5,865 million in 2023 represents a considerable reduction in profitability. The subsequent increases to US$8,262 million and US$9,896 million in 2024 and 2025 suggest a return to more favorable operating conditions.

Invested Capital and Cost of Capital

Invested capital generally increased from US$17,459 million in 2020 to US$31,383 million in 2023, indicating expansion or increased investment in assets. A slight decrease to US$30,887 million in 2024 was followed by a further increase to US$31,317 million in 2025. The cost of capital remained relatively consistent, fluctuating between 15.99% and 16.63% throughout the period. The slight increase in the cost of capital in the later years may reflect changes in market interest rates or the company’s risk profile.

The correlation between NOPAT and economic profit is evident. Periods of high NOPAT correspond with high economic profit, and vice versa. The relatively stable cost of capital suggests that changes in economic profit are primarily driven by fluctuations in NOPAT and, to a lesser extent, changes in invested capital.

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 exhibited substantial growth, followed by a sharp decline and subsequent recovery. A detailed examination of the trend reveals key insights into the company’s value creation performance.

Economic Spread Ratio Trend

In 2020, the economic spread ratio stood at 11.49%. This value increased considerably to 26.45% in 2021, indicating improved profitability relative to invested capital. The ratio continued to rise in 2022, reaching a peak of 29.04%. However, a dramatic decrease occurred in 2023, with the ratio falling to 2.60%. This represents a substantial reduction in the spread between return on invested capital and the cost of capital. The ratio began to recover in 2024, increasing to 10.17%, and continued this upward trajectory in 2025, reaching 14.97%.

The observed pattern suggests a period of strong value creation in 2021 and 2022, followed by a significant underperformance in 2023. The subsequent recovery in 2024 and 2025 indicates a return towards improved value generation, although not reaching the levels observed in the earlier period. The fluctuations in the economic spread ratio are likely correlated with changes in economic profit and invested capital.

Relationship to Economic Profit and Invested Capital

The decline in the economic spread ratio in 2023 coincides with a significant decrease in economic profit, from US$8,460 million in 2022 to US$817 million in 2023. While invested capital continued to increase in 2023, the lower economic profit resulted in a substantially reduced spread. The recovery in the ratio in 2024 and 2025 is associated with increases in economic profit, even as invested capital remained relatively stable.

The company’s ability to maintain or improve the economic spread ratio in future periods will be crucial for sustained value creation. Monitoring the interplay between economic profit and invested capital will be essential for understanding the drivers of this ratio and identifying potential areas for improvement.

The economic profit margin exhibited significant fluctuation over the observed period. Initial years demonstrated a strong upward trajectory, followed by a substantial decline and subsequent recovery.

Economic Profit Margin Trend

The economic profit margin began at 8.67% in 2020 and increased considerably to 15.93% in 2021. This positive trend continued into 2022, reaching a peak of 19.34%. A dramatic decrease was then observed in 2023, with the margin falling to 2.29%. The margin partially recovered in 2024 to 8.06%, and continued to improve in 2025, reaching 10.57%.

The economic profit margin’s movement closely mirrors that of economic profit. The substantial decline in 2023 corresponds with a significant reduction in economic profit, suggesting a strong relationship between overall profitability and the margin. The subsequent increases in both economic profit and margin in 2024 and 2025 indicate a return to improved performance.

Relationship to Adjusted Revenues

Adjusted revenues increased consistently from 2020 to 2022, aligning with the rise in economic profit margin. However, in 2023, adjusted revenues decreased while the economic profit margin experienced its most significant drop. This suggests that the decline in margin was not solely attributable to revenue changes, but also to factors impacting profitability. Revenues then increased in both 2024 and 2025, coinciding with the margin’s recovery.

The volatility in the economic profit margin warrants further investigation. While the recovery in the latter years is encouraging, the sharp decline in 2023 highlights potential vulnerabilities in the company’s ability to translate revenue growth into economic profit. Continued monitoring of this metric, alongside a detailed analysis of the underlying cost structure and capital efficiency, is recommended.