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$1,576 million to US$7,737 million. A dramatic decrease was observed in 2023, with economic profit falling to US$38 million. Subsequently, economic profit rebounded in 2024 and 2025, reaching US$2,344 million and US$3,879 million respectively. This pattern suggests a sensitivity to changes in NOPAT, potentially influenced by external market conditions or internal operational factors.

NOPAT and Invested Capital Relationship

The increase in economic profit from 2020 to 2022 coincided with substantial growth in both NOPAT and invested capital. While invested capital continued to rise in 2023 and 2024, the sharp decline in NOPAT in 2023 resulted in a corresponding decrease in economic profit. The subsequent recovery in NOPAT in 2024 and 2025, alongside relatively stable invested capital, drove the observed increase in economic profit.

Cost of Capital Stability

The cost of capital remained relatively consistent throughout the period, fluctuating between 18.46% and 19.21%. The slight increase in the cost of capital in the later years may exert downward pressure on future economic profit if NOPAT growth does not keep pace. The consistency suggests a stable risk profile or effective capital structure management.

Overall, the economic profit performance is heavily influenced by NOPAT. While invested capital plays a role, the significant swings in NOPAT appear to be the primary driver of the observed trends. Continued monitoring of NOPAT and its underlying drivers is crucial for assessing future economic profit generation.

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 dramatic 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 9.03% in 2020, it rose to 23.96% in 2021 and peaked at 26.56% 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, suggesting efficient capital allocation and strong operational performance.

Significant Decline (2023)

A substantial decrease in the economic spread ratio occurred in 2023, falling to 0.12%. This sharp decline is directly linked to a dramatic reduction in economic profit, while invested capital remained relatively stable. This suggests a significant deterioration in profitability relative to the capital employed, potentially due to increased costs, decreased revenues, or a combination of both.

Recovery Phase (2024-2025)

The economic spread ratio began to recover in 2024, reaching 7.59%, and continued this trend into 2025, increasing to 12.39%. This recovery is associated with a rebound in economic profit. While invested capital remained relatively consistent, the improvement in economic profit indicates a restoration of the ability to generate returns above the cost of capital. The rate of increase from 2024 to 2025 suggests a strengthening of this positive trend.

Invested Capital Trend

Invested capital generally increased over the period, rising from US$17,459 million in 2020 to US$31,383 million in 2023, before stabilizing around US$31 million in 2024 and 2025. This indicates a period of capital investment followed by a period of consolidation. The relationship between invested capital and the economic spread ratio is not consistently linear, as evidenced by the 2023 decline despite continued investment.

In summary, the economic spread ratio experienced a period of robust growth, a severe contraction, and a subsequent recovery. The fluctuations are primarily driven by changes in economic profit, highlighting the importance of profitability in determining the value created from invested capital.

The economic profit margin exhibited significant fluctuation over the observed period. Initial values demonstrated a positive trend, 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 14.43% in 2021, and continued to rise, reaching a peak of 17.69% in 2022. A dramatic decrease was then observed in 2023, with the margin falling to 0.11%. The margin experienced a recovery in 2024, increasing to 6.02%, and continued this upward trajectory to 8.75% in 2025.

The economic profit margin’s movement closely mirrors the trend in economic profit. The substantial decline in 2023 directly corresponds with the significant reduction in economic profit during that year. The subsequent increases in both metrics in 2024 and 2025 suggest a return to improved profitability.

Relationship to Adjusted Revenues

Adjusted revenues generally increased from 2020 to 2022, aligning with the rising economic profit margin. While revenues decreased in 2023, the disproportionate drop in economic profit resulted in the extremely low margin. Revenues then increased in both 2024 and 2025, coinciding with the margin’s recovery, though not at the same rate as the initial revenue growth.

The volatility in the economic profit margin indicates a sensitivity to changes in economic profit relative to adjusted revenues. The company’s ability to translate revenue growth into economic profit appears to have varied considerably over the period, with 2023 representing a significant outlier.