What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2022-11-02 compared with 2021-11-03 · 151 added, 169 removed, 174 unchanged (65% of the section changed)

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Market Information and Dividends

Our common stock is traded on the NASDAQ Global Select Market (NASDAQ) under the symbol “QCOM.” At November 1, 2021, there were 6,511 holders of record of our common stock.

We intend to continue to pay quarterly cash dividends, subject to capital availability and our view that cash dividends are in the best interests of our stockholders.

Future dividends may be affected by, among other items, our views on potential future capital availability and requirements, including those relating to research and development, creation and expansion of sales and distribution channels, investments and acquisitions, legal and regulatory risks, withholding of payments by one or more of our significant licensees and/or customers, fines and/or adverse rulings by government agencies, courts or arbitrators in legal or regulatory matters, stock repurchase programs, debt issuances, changes in federal, state or foreign income tax law, trade and/or national security protection policies, volatility in economies and financial markets globally and changes to our business model.

Our common stock is traded on the NASDAQ Global Select Market (NASDAQ) under the symbol “QCOM.” At October 31, 2022, there were 6,349 holders of record of our common stock.

We currently intend to continue to pay quarterly cash dividends, subject to capital availability and our view that cash dividends are in the best interests of our stockholders.

Issuer Purchases of Equity Securities

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(1) Average Price Paid Per Share excludes cash paid for commissions.

(2) On July 26, 2018, we announced a stock repurchase program authorizing us to repurchase up to $30.0 billion of our common stock.

On October 12, 2021, we announced a new $10.0 billion stock repurchase authorization, which is in addition to the remaining repurchase authority of $0.9 billion under the aforementioned program.

The stock repurchase programs have no expiration date.

Since September 26, 2021, we repurchased and retired 5.4 million shares of common stock for $703 million.

(2) On October 12, 2021, we announced a stock repurchase program authorizing us to repurchase up to $10.0 billion of our common stock.

At September 25, 2022, $8.1 billion remained authorized for repurchase.

The stock repurchase program has no expiration date .

Shares withheld to satisfy statutory tax withholding requirements related to the vesting of share-based awards are not issued or considered stock repurchases under our stock repurchase program and, therefore, are excluded from the table above.

Unregistered Sales of Equity Securities

In January 2021, we entered into an Agreement and Plan of Merger (the Merger Agreement) for the acquisition of NuVia, Inc.

(NUVIA), which transaction closed in March 2021.

Pursuant to the Merger Agreement, we are obligated to issue shares of our common stock to three specific founders of NUVIA and certain affiliated entities of such founders from time to time upon the satisfaction of certain conditions specified in the Merger Agreement.

During the quarter ended September 26, 2021, we issued an aggregate of 104,499 additional shares of our common stock to the three founders of NUVIA and their affiliates, each of whom had advised us that he or such entity was an accredited investor.

In connection with our acquisition of NuVia, Inc.

(Nuvia), which closed in March 2021, we are obligated to issue shares of our common stock to three specific founders of Nuvia and certain affiliated entities of such founders from time to time upon the satisfaction of certain conditions.

During the quarter ended September 25, 2022, we issued an aggregate of 106,425 additional shares of our common stock to the founders of Nuvia and their affiliates, each of whom had advised us that he or such entity was an accredited investor.

These shares were issued in transactions not involving a public offering pursuant to the exemption from registration set forth in Section 4(a)(2) of the Securities Act.

Stock Performance Graph

The following graph compares the cumulative total stockholder return on our common stock, the Standard & Poor’s 500 Stock Index (S&P 500) and the NASDAQ-100 Index (NASDAQ-100) for the five years ended September 25, 2022.

The S&P 500 tracks the aggregate price performance of the equity securities of 500 United States companies selected by Standard & Poor’s Index Committee to include companies in leading industries and to reflect the United States stock market.

The NASDAQ-100 tracks the aggregate price performance of the 100 largest domestic and international non-financial securities listed on the NASDAQ Stock Market based on market capitalization.

Our common stock is a component of each of the S&P 500 and the NASDAQ-100.

The total return for our stock and for each index assumes that $100 was invested at the market close on the last trading day for our fiscal year ended September 24, 2017 and that all dividends were reinvested.

All returns are reported as of our fiscal year end, which is the last Sunday in September.

Stockholder returns over the indicated period are based on historical data and should not be considered indicative of future stockholder returns.

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations

In addition to historical information, the following discussion contains forward-looking statements that are subject to risks and uncertainties.

Actual results may differ materially from those referred to herein due to a number of factors, including but not limited to the risks described in “Part I, Item 1A.

Actual results may differ materially from those referred to herein due to a number of factors, including but not limited to those described in “Part I, Item 1A.

Risk Factors” and elsewhere in this Annual Report.

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Discussions of fiscal 2020 items and year-to-year comparisons between fiscal 2021 and 2020 that are not included in this Annual Report can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended September 26, 2021.

Fiscal 2021 Overview and Other Recent Events

Revenues were $33.6 billion, an increase of 43% compared to revenues of $23.5 billion in fiscal 2020, with net income of $9.0 billion, an increase of 74% compared to net income of $5.2 billion in fiscal 2020.

Highlights from fiscal 2021 and other recent events included:

• QCT revenues increased by 64% in fiscal 2021 compared to the prior year, primarily due to an increase in demand for 5G products across handsets and RFFE, in part reflecting a recovery from the negative impacts of COVID-19, along with higher automotive and IoT revenues.

• QTL revenues increased by 26% in fiscal 2021 compared to the prior year, primarily due to an increase in estimated sales of 3G/4G/5G-based multimode products, in part reflecting a recovery from the negative impacts of COVID-19.

• QSI earnings before income taxes increased by $927 million compared to the prior year, primarily due to higher net gains on investments.

• On March 16, 2021, we completed the acquisition of NUVIA for $1.1 billion, net of cash acquired.

NUVIA has certain in-process technologies and is comprised of a CPU (central processing unit) and technology design team with expertise in high performance processors, SoC (system-on-chip) and power management for compute-intensive devices and applications.

Upon completion of development, NUVIA’s technologies are expected to be integrated into certain QCT products.

• On March 26, 2021, the FTC’s deadline for filing a petition for certiorari with the U.S.

Supreme Court to seek review of the Ninth Circuit’s decision in our favor in United States Federal Trade Commission (FTC) v.

QUALCOMM Incorporated expired.

The case is now over.

• In October 2021, we and SSW Partners, a New York-based investment partnership, entered into a definitive agreement to acquire Veoneer, Inc.

(Veoneer) for $37.00 per share in cash, which values the estimated total cash consideration to be paid to Veoneer’s shareholders at approximately $4.5 billion.

At closing, SSW Partners will acquire all of the outstanding capital stock of Veoneer, shortly after which it will sell Veoneer’s Arriver business to Qualcomm and retain Veoneer’s Tier-1 automotive supplier businesses.

Following the close of the Arriver business sale, we intend to incorporate Arriver’s computer vision, drive policy and driver assistance technologies into our Snapdragon automotive platform to deliver an open and competitive ADAS platform for automakers and Tier-1 automotive suppliers.

Subject to the satisfaction of closing conditions, the acquisition is expected to close in 2022.

Our Business and Operating Segments

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Our QSI (Qualcomm Strategic Initiatives) reportable segment makes strategic investments.

We also have nonreportable segments, including QGOV (Qualcomm Government Technologies), our cloud AI inference processing initiative and other technology and service initiatives.

We also have nonreportable segments, including QGOV (Qualcomm Government Technologies) and our cloud AI inference processing initiative.

Our reportable segments are operated by QUALCOMM Incorporated and its direct and indirect subsidiaries.

QTL is operated by QUALCOMM Incorporated, which owns the vast majority of our patent portfolio.

Substantially all of our products and services businesses, including QCT, and substantially all of our engineering and research and development functions, are operated by Qualcomm Technologies, Inc.

(QTI), a wholly-owned subsidiary of QUALCOMM Incorporated, and QTI’s subsidiaries.

Neither QTI nor any of its subsidiaries has any right, power or authority to grant any licenses or other rights under or to any patents owned by QUALCOMM Incorporated.

Further information regarding our business and operating segments is provided in “Part I, Item 1.

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Further, the trends for QTL have been, and may in the future be, impacted by disputes and/or resolutions with licensees and/or governmental investigations or proceedings.

Fiscal 2022 Overview and Other Recent Events

Revenues were $44.2 billion, an increase of 32% compared to revenues of $33.6 billion in fiscal 2021, with net income of $12.9 billion, an increase of 43% compared to net income of $9.0 billion in fiscal 2021.

Highlights from fiscal 2022 and other recent events included:

• QCT revenues increased by 39% in fiscal 2022 compared to the prior year, primarily due to an increase in average selling prices and favorable mix toward higher-tier 5G products along with higher integrated circuit shipments in handsets, as well as higher IoT revenues.

• On June 15, 2022, the General Court of the European Union issued a ruling annulling in its entirety the European Commission’s (EC) 2018 decision, which previously imposed a fine of 997 million euros for which we had provided financial guarantees to satisfy the obligation in lieu of cash payment.

As a result, in the third quarter of fiscal 2022, we recorded a $1.1 billion benefit in other income and a $62 million reduction in interest expense resulting from the reversal of the accrued fine and the associated interest previously recorded.

See “Notes to Consolidated Financial Statements, Note 7.

Commitments and Contingencies.”

• On October 4, 2021, we and SSW Partners entered into a definitive agreement to acquire Veoneer, Inc.

The transaction closed on April 1, 2022.

We funded substantially all of the total cash consideration paid in the transaction, which was approximately $4.7 billion.

The operating results of the Non-Arriver businesses are reported as discontinued operations on a one quarter lag.

Additional information related to this acquisition is included in this Annual Report in “Notes to Consolidated Financial Statements, Note 9.

Acquisitions.”

Results of Operations

Revenues (in millions)

2021 2020 2021 vs.

2022 2021 Change

Equipment and services $ 37,171 $ 26,741 $ 10,430

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$ 44,200 $ 33,566 $ 10,634

The increase in revenues in fiscal 2021 was primarily due to:

+ $10.4 billion in higher equipment and services revenues from our QCT segment

+ $1.3 billion in higher licensing revenues from our QTL segment

- $1.8 billion in licensing revenues from Huawei recorded in the fourth quarter of fiscal 2020 resulting from amounts due under the settlement agreement signed in July 2020 and royalties for sales made in the March 2020 and June 2020 quarters under the new global patent license agreement signed in July 2020 (which were not allocated to our segment results)

The increase in revenues in fiscal 2022 was primarily due to $10.4 billion in higher equipment and services revenues and $216 million in higher licensing revenues from our QCT segment.

Costs and Expenses (in millions, except percentages)

2021 2020 2021 vs.

2022 2021 Change

Cost of revenues $ 18,635 $ 14,262 $ 4,373

Gross margin 58 % 58 %

Gross margin percentage decreased in fiscal 2021 primarily due to:

- decrease in licensing revenues from Huawei recorded in fiscal 2020 resulting from amounts due under the settlement agreement and royalties for sales made in the March 2020 and June 2020 quarters under the new global patent licensing agreement

- decrease in higher margin QTL licensing revenues in proportion to QCT revenues

Gross margin percentage remained flat in fiscal 2022 primarily due to:

+ increase in QCT gross margin

2021 2020 2021 vs.

- decrease in higher margin QTL licensing revenues in proportion to QCT revenues

2022 2021 Change

Research and development $ 8,194 $ 7,176 $ 1,018

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The increase in research and development expenses in fiscal 2022 was due to:

+ $793 million increase driven by higher costs related to the development of wireless and integrated circuit technologies (including 5G and application processor technologies), a portion of which was attributable to higher employee cash incentive program costs

+ $856 million increase driven by higher costs related to the development of wireless and integrated circuit technologies (including 5G and application processor technologies), primarily driven by an increase in employee-related expenses

+ $303 million increase in share-based compensation expense

+ $46 million increase in expenses driven by revaluation of our deferred compensation obligation on improved stock market performance (which resulted in a corresponding increase in net gains on deferred compensation plan assets within investment and other income, net due to the revaluation of the related assets)

2021 2020 2021 vs.

- $141 million decrease in expenses driven by revaluation of our deferred compensation obligation on lower relative stock market performance (which resulted in a corresponding increase in net losses on deferred compensation plan assets within investment and other (expense) income, net due to the revaluation of the related assets)

2022 2021 Change

Selling, general and administrative $ 2,570 $ 2,339 $ 231

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The increase in selling, general and administrative expenses in fiscal 2022 was primarily due to:

+ $164 million increase in employee-related expenses, a portion of which was attributable to higher employee cash incentive program costs

+ $110 million increase in acquisition-related expenses, primarily related to the Veoneer transaction

+ $94 million increase in employee-related expenses

+ $74 million increase in share-based compensation expense

+ $38 million increase in expenses driven by revaluation of our deferred compensation obligation on improved stock market performance (which resulted in a corresponding increase in net gains on deferred compensation plan assets within investment and other income, net due to the revaluation of the related assets)

+ $33 million increase in litigation costs

+ $32 million increase in sales and marketing expenses

- $73 million decrease in litigation costs

2021 2020 2021 vs.

- $127 million decrease in expenses driven by revaluation of our deferred compensation obligation on lower relative stock market performance

2022 2021 Change

Other (income) expense $ (1,059) $ — $ (1,059)

Other income in fiscal 2020 consisted of $28 million in gains related to a favorable legal settlement.

Interest Expense and Investment and Other Income, Net (in millions)

2021 2020 2021 vs.

Other income in fiscal 2022 consisted of a $1.1 billion benefit resulting from the 2018 EC fine reversal.

Interest Expense and Investment and Other (Expense) Income, Net (in millions)

2022 2021 Change

Interest expense $ 490 $ 559 $ (69)

Investment and other income, net

Investment and other (expense) income, net

Interest and dividend income $ 91 $ 83 $ 8

Net gains on marketable securities 427 198 229

Net (losses) gains on marketable securities (363) 427 (790)

Net gains on other investments 113 470 (357)

Net gains on deferred compensation plan assets 130 47 83

Net (losses) gains on deferred compensation plan assets (141) 130 (271)

Impairment losses on other investments (47) (33) (14)

Net (losses) gains on derivative instruments (14) 8 (22)

Equity in net earnings (losses) of investees 13 (21) 34

Net losses on foreign currency transactions (32) (25) (7)

Net losses on derivative instruments (37) (14) (23)

Equity in net (losses) earnings of investees (7) 13 (20)

Net gains (losses) on foreign currency transactions 19 (32) 51

$ (372) $ 1,044 $ (1,416)

Net gains on marketable securities for fiscal 2021 was primarily driven by the initial public offerings of certain QSI equity investments.

Net gains on other investments for fiscal 2021 was primarily driven by realized gains resulting from the sale of certain of our QSI non-marketable investments.

The impairment losses in fiscal 2020 were due in part to the impact COVID-19 had on certain of our investees.

A significant portion of the impairment losses related to our investment in OneWeb who filed for bankruptcy in the second quarter of fiscal 2020.

The decrease in interest expense in fiscal 2022 was primarily driven by a $62 million reversal of accrued interest recorded in the third quarter of fiscal 2022 related to the annulled 2018 EC fine.

Net losses on marketable securities in fiscal 2022 was primarily driven by the change in fair value of certain of our QSI marketable equity investments in early or growth stage companies.

Net gains on marketable securities in fiscal 2021 was primarily driven by the initial public offerings of certain QSI equity investments.

Net gains on other investments in fiscal 2021 was primarily driven by realized gains resulting from the sale of certain of our QSI non-marketable investments.

Income Tax Expense (in millions, except percentages)

The following table summarizes the primary factors that caused our annual tax provision to differ from the expected income tax provision at the U.S.

The following table summarizes the primary factors that caused our annual tax provision from continuing operations to differ from the expected income tax provision at the U.S.

federal statutory rate.

Substantially all of our income is in the U.S., of which a significant portion qualifies for preferential treatment as FDII (foreign-derived intangible income) at a 13% effective tax rate.

Substantially all of our income is taxed in the U.S., of which a significant portion qualifies for preferential treatment as FDII (foreign-derived intangible income) at a 13% effective tax rate.

Expected income tax provision at federal statutory tax rate $ 3,150 $ 2,158

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Excess tax benefit associated with share-based awards (257) (265)

Foreign currency losses related to foreign withholding tax receivable 243 12

Nontaxable reversal of 2018 EC fine (224) —

Benefit related to the research and development tax credit (224) (195)

Other 83 (91)

Income tax expense $ 2,012 $ 1,231

Effective tax rate 13 % 12 %

In the first quarter of fiscal 2021, the United States Treasury Department issued final regulations on the foreign tax credit, which generally are applicable beginning in fiscal 2021, with certain provisions retroactive to fiscal 2019.

As a result of these regulations, our fiscal 2021 effective tax rate increased by approximately 1%.

The retroactive impact resulting from these new regulations, which was related to fiscal 2019 and fiscal 2020 and recorded in fiscal 2021, was not significant.

Unrecognized tax benefits were $2.2 billion and $2.1 billion at September 25, 2022 and September 26, 2021, respectively.

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These examinations are at various stages with respect to assessments, claims, deficiencies and refunds.

We continually assess the likelihood and amount of potential adjustments and adjust the income tax provision, income taxes payable and deferred taxes in the period in which the facts give rise to a revision become known.

As of September 26, 2021, we believe that adequate amounts have been reserved for based on facts known.

At September 25, 2022, we believe our reserves are adequate based on facts known.

However, the final determination of tax audits and any related legal proceedings could materially differ from amounts reflected in our income tax provision and the related accruals.

The current U.S.

presidential administration and Congress have proposed to increase U.S.

tax rates and/or eliminate or reduce the FDII deduction.

Substantially all of our income is taxable in the U.S., of which a significant portion qualifies for preferential treatment as FDII.

If such proposals are enacted into law, our provision for income taxes, results of operations and cash flows would be adversely affected (potentially materially) beginning as early as the first quarter of fiscal 2022.

Beginning in fiscal 2023, for federal income tax purposes, we are required to capitalize and amortize domestic research and development expenditures over five years and foreign research and development expenditures over fifteen years.

Prior to such date, such expenditures are deducted as incurred.

If this requirement is not delayed or repealed, our cash flow generated from operations will be adversely affected due to significantly higher cash tax payments.

However, since the resulting deferred tax asset will be established at the statutory rate of 21% (rather than the effective rate of 13% to 16% after considering the FDII deduction), capitalization will favorably affect our provision for income taxes and results of operations.

The adverse cash flow impact and favorable tax provision impact will diminish in future years as capitalized research and development expenditures amortize.

In August 2022, the Inflation Reduction Act (IRA) was enacted in the United States, which included, among other items, a 15% book minimum tax on adjusted financial statement earnings beginning in fiscal 2024.

We do not expect this provision to have a material impact on our provision for income taxes, results of operations or cash flows.

If the requirement to capitalize and amortize research and development expenditures beginning in fiscal 2023 is delayed or repealed, our cash flows may be impacted in future years under the IRA.

Discontinued Operations (in millions)

2022 2021 Change

Discontinued operations, net of income taxes $ (50) $ — $ (50)

Discontinued operations in fiscal 2022 related to net losses from the Non-Arriver businesses.

Information regarding the Non-Arriver businesses is provided in this Annual Report in “Notes to Consolidated Financial Statements, Note 9.

Acquisitions.”

Segment Results

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QCT Segment (in millions, except percentages)

2021 2020 2021 vs.

2022 2021 Change

Handsets (1) $ 25,027 $ 16,830 $ 8,197

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(2) Includes all revenues from sales of 4G, 5G sub-6 and 5G millimeter wave RFFE products (a substantial portion of which are sold for use in mobile handsets) and excludes radio frequency transceiver components.

(3) Includes revenues from products sold for use in automobiles, including telematics, connectivity and digital cockpit.

(3) Includes revenues from products sold for use in automobiles, including connectivity, digital cockpit and advanced driver assistance and automated driving.

(4) Primarily includes products sold for use in the following industries and applications:

consumer (including computing, voice and music and XR), industrial (including handhelds, retail, transportation and logistics and utilities) and edge networking (including mobile broadband and wireless access points).

consumer (including computing, voice and music and XR), edge networking (including mobile broadband and wireless access points) and industrial (including handhelds, retail, transportation and logistics and utilities).

(5) Earnings (loss) before income taxes.

Substantially all of QCT’s revenues consist of equipment and services revenues, which were $37.0 billion and $26.6 billion in fiscal 2022 and 2021, respectively.

QCT handsets, automotive and IoT revenues mostly relate to sales of our stand-alone Mobile Data Modems, Snapdragon platforms (which include processors and modems), radio frequency transceiver, power management and wireless connectivity integrated chipsets.

QCT results for fiscal 2021 compared to the prior year reflect a recovery from the negative impacts of COVID-19.

QCT handsets, automotive and IoT revenues mostly relate to sales of our Snapdragon platforms (which include processors and modems), stand-alone Mobile Data Modems, radio frequency transceiver, power management and wireless connectivity integrated chipsets.

The increase in QCT revenues in fiscal 2022 was primarily due to:

+ higher handset revenues, primarily driven by $3.6 billion in higher chipset shipments and $2.6 billion in higher revenue per chipset, both of which were primarily due to an increase in demand for 5G products from Apple and other major OEMs

+ higher RFFE product revenues, driven by an increase in demand for 4G/5G products from Apple and other major OEMs

+ higher automotive revenues, primarily driven by an increase in demand for telematics and digital cockpit products

+ higher IoT revenues, driven by $1.7 billion in higher shipments across consumer, edge networking and industrial products and $378 million in revenue per unit due to an increase in demand for 5G

+ higher handset revenues, primarily driven by $6.6 billion in higher revenues per integrated circuit from increases in average selling prices and favorable mix toward higher-tier 5G products and $1.3 billion in higher integrated circuit shipments to major OEMs

+ higher RFFE revenues, driven by an increase in demand for 4G/5G products from major OEMs

+ higher automotive revenues, primarily driven by an increase in demand for digital cockpit products

+ higher IoT revenues across consumer, edge networking and industrial products, driven by a $951 million increase in demand, with the remaining increase of $941 million primarily due to favorable mix and higher average selling prices

QCT EBT as a percentage of revenues increased in fiscal 2022 due to:

+ higher revenues

+ higher gross margin percentage, primarily driven by favorable mix and higher average selling prices, partially offset by higher average unit costs, all of which were due to an increase in demand for 5G products

+ higher gross margin percentage, primarily driven by higher average selling price and favorable mix towards higher-tier 5G products, partially offset by higher product costs

- higher operating expenses, primarily driven by higher research and development expenses

QTL Segment (in millions, except percentages)

2021 2020 2021 vs.

2022 2021 Change

Licensing revenues $ 6,358 $ 6,320 $ 38

EBT 4,628 4,627 1

EBT as a % of revenues 73 % 68 % 5 points

In July 2020, we entered into a settlement agreement with Huawei to resolve our prior dispute related to the license agreement that expired on December 31, 2019.

We also entered into a new long-term, global patent license agreement that applies to sales of certain wireless products by Huawei beginning on January 1, 2020.

We did not record any QTL revenues for the first nine months of fiscal 2020 for royalties due on the sales of Huawei’s consumer wireless products.

Revenues of $1.8 billion recorded in the fourth quarter of fiscal 2020 resulting from the settlement agreement with Huawei and royalties for sales made in the March 2020 and June 2020 quarters under the new global patent license agreement with Huawei were not allocated to our segment results.

The increase in QTL licensing revenues in fiscal 2021 was due to:

+ $1.1 billion in estimated sales of 3G/4G/5G-based multimode products, primarily due to a recovery from the negative impacts of COVID-19 and as a result of not recognizing any QTL revenues for the first nine months of fiscal 2020 for royalties due on the sales of Huawei’s consumer wireless products

+ $273 million in higher estimated revenues per unit, primarily due to favorable OEM mix

- $103 million in lower royalty revenues recognized related to devices sold in prior periods

QTL EBT as a percentage of revenues increased in fiscal 2021 due to:

+ higher revenues

- higher operating expenses, primarily driven by higher research and development expenses

EBT as a % of revenues 73 % 73 % —

The increase in QTL licensing revenues in fiscal 2022 was primarily due to:

+ $308 million increase in estimated revenues per unit, which was primarily driven by favorable mix, including 5G

- $299 million decrease in estimated sales of 3G/4G/5G-based multimode products

QTL EBT as a percentage of revenues remained flat in fiscal 2022.

QSI Segment (in millions)

2021 2020 2021 vs.

2022 2021 Change

Equipment and services revenues $ 31 $ 45 $ (14)

EBT (279) 916 (1,195)

The increase in QSI EBT in fiscal 2021 was due to:

+ $575 million increase in net gains on investments, primarily driven by gains resulting from the initial public offerings of certain of our equity investments

+ $313 million decrease in impairment losses on other investments, of which a significant portion in fiscal 2020 related to our investment in OneWeb

+ $38 million increase in equity in net earnings of investees

The decrease in QSI EBT in fiscal 2022 was primarily due to a $1.1 billion decrease resulting from net losses on investments in fiscal 2022 compared to net gains on investments in fiscal 2021, which were primarily driven by the change in fair value of certain of our marketable equity investments in early or growth stage companies and lower realized gains resulting from the sale of certain of our non-marketable investments.

Looking Forward

In the coming years, we expect new consumer demand for 3G/4G/5G multimode and 5G products and services to continue to ramp around the world as we continue to transition from 3G/4G multimode and 4G products and services.

We believe that 5G will continue to drive adoption of certain technologies that are already commonly used in smartphones by industries and applications beyond mobile handsets, such as automotive and IoT.

In the coming years, we expect consumer demand for 3G/4G/5G multimode and 5G products and services to continue to ramp around the world as we continue to transition from 3G/4G multimode and 4G products and services.

We believe that 5G combined with high-performance, low-power processing and on-device intelligence will continue to drive adoption of certain technologies that are already commonly used in smartphones by industries and applications beyond mobile handsets, such as automotive and IoT.

We believe it is important that we remain a leader in 5G technology development, standardization, intellectual property creation and licensing, and a leading developer and supplier of 5G integrated circuit products in order to sustain and grow our business long term.

As we look forward to the next several quarters, our business may be impacted by the following key items:

• We expect QCT revenues to continue to be favorably impacted compared to fiscal 2021 due to increased demand across handset, RFFE, automotive and IoT revenue streams.

• While the semiconductor industry continues to experience certain capacity constraints, we have entered into several, and we expect to enter into additional, multi-year capacity purchase commitments with certain suppliers of our integrated circuit products in an effort to secure commitments for future supply, which we expect will allow us to continue to realize benefits from increased demand for integrated circuit products, particularly from certain Chinese OEMs as they continue to position to gain device share.

As we look forward to the next several quarters:

• We expect continued weakness in the macroeconomic environment (which will continue to negatively impact consumer demand for smartphones and other devices that incorporate our products and technologies) and our customers to draw down on their inventory (which is at elevated levels given the rapid deceleration in consumer demand and the easing of supply constraints, and which may take the next couple quarters to resolve), and that both of these dynamics will have a negative impact on our revenues, results of operations and cash flows compared to the prior year.

• While capacity constraints have largely abated, we expect to continue to see price increases from certain of our key semiconductor wafer suppliers.

• We expect commercial 5G network deployments and device launches will continue .

• We expect our research and development costs will increase compared to fiscal 2021, primarily due to increased investment towards advancements in 5G and application processor technologies and certain other long-term initiatives, as well as an increase in share-based compensation expense.

• We expect continued intense competition, particularly in China.

• Current U.S./China trade relations and/or national security protection policies may negatively impact our business, growth prospects and results of operations.

See “Risk Factors” in this Annual Report, including the Risk Factor entitled “ 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.”

• We currently do not expect a significant impact on our results of operations in the future due to COVID-19.

See “Risk Factors” in this Annual Report, including the Risk Factor titled “ 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.”

The degree to which the COVID-19 pandemic impacts our business, financial condition and results of operations will depend on future developments, which are highly uncertain.

See “Risk Factors” in this Annual Report, specifically the Risk Factor titled “ The coronavirus (COVID-19) pandemic had an adverse effect on our business and results of operations, and may continue to impact us in the future.”

In addition to the foregoing business and market-based matters, we continue to devote resources to working with and educating participants in the wireless industry and governments as to the benefits of our licensing program and our extensive technology investments in promoting a highly competitive and innovative wireless industry.

However, we expect that certain companies may be dissatisfied with the need to pay reasonable royalties for the use of our technologies and not welcome the success of our licensing program in enabling new, highly cost-effective competitors to their products.

See “Risk Factors” in this Annual Report, specifically the Risk Factor titled “ The COVID-19 pandemic, or a similar health crisis, may impact our business or results of operations in the future.”

In addition to the foregoing business and market-based matters, we continue to devote resources to working with and educating participants in the wireless industry and governments as to the benefits of our licensing programs and our extensive technology investments in promoting a highly competitive and innovative wireless industry.

However, we expect that certain companies may be dissatisfied with the need to pay reasonable royalties for the use of our technologies and not welcome the success of our licensing programs in enabling new, highly cost-effective competitors to their products.

Accordingly, such companies, and/or governments or regulators, may continue to challenge our business model in various forums throughout the world.

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2022 September 26,

Cash and cash equivalents (1) $ 2,773 $ 7,116 $ (4,343)

Marketable securities 3,609 5,298 (1,689)

Cash, cash equivalents and marketable securities $ 6,382 $ 12,414 $ (6,032)

Accounts receivable, net 3,579 4,003 (424)

Inventories 3,228 2,598 630

Short-term debt 2,044 500 1,544

Long-term debt 13,701 15,226 (1,525)

Noncurrent income taxes payable 1,713 1,872 (159)

(1) Excludes $326 million of cash and cash equivalents classified as held for sale (included in other current assets) at September 25, 2022.

2022 2021 Change

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Cash, cash equivalents and marketable securities.

The net increase in cash, cash equivalents and marketable securities was primarily due to net cash provided by operating activities (which includes $1.6 billion of cash outflows related to certain advance payments made to suppliers of our integrated circuit products under multi-year capacity commitments), $430 million increase in marketable securities resulting from initial public offerings of certain non-marketable equity investments, $347 million in proceeds from the issuance of common stock (primarily under our Employee Stock Purchase Plan) and $320 million in proceeds from other investments, partially offset by $3.4 billion in payments to repurchase shares of our common stock, $3.0 billion in cash dividends paid, $1.9 billion in capital expenditures, $1.4 billion in cash paid for acquisitions and other investments (primarily related to the acquisition of NUVIA) and $737 million in payments of tax withholdings related to the vesting of share-based awards.

Accounts receivable, net.

The decrease in accounts receivable was primarily due to payments received under the previously disclosed settlement agreement with Huawei.

The decrease in accounts receivable was also partially attributable to the timing of collection of payments from certain of our QTL licensees, partially offset by an increase in QCT accounts receivable resulting from an increase in QCT revenues in the fourth quarter of fiscal 2021 as compared to the fourth quarter of fiscal 2020.

The increase in inventories was primarily driven by the increase in demand for 5G products.

At September 26, 2021 , we had $15.5 billion of principal floating- and fixed-rate notes outstanding, $1.5 billion of which matures in May 2022.

The net decrease in cash, cash equivalents and marketable securities was primarily due to $4.9 billion in cash paid for acquisitions and other investments, net of cash acquired (primarily related to Veoneer), $3.2 billion in cash dividends paid, $3.1 billion in payments to repurchase shares of our common stock, $2.3 billion in capital expenditures and $766 million in payments of tax withholdings related to vesting of share-based awards.

This was partially offset by net cash provided by operating activities, which was negatively impacted by advanced payments of $2.3 billion made to suppliers of our integrated circuit products under multi-year capacity commitments (which were included within other current assets and other assets), as well as $4.5 billion of net changes in other operating assets and liabilities (excluding the reversal of the 2018 EC fine), primarily consisting of increased working capital requirements, including higher inventory and related operating liabilities and an increase in accounts receivable as a result of higher revenues combined with the timing of integrated circuit shipments during the period (net of an increase in amounts accrued for customer incentive arrangements recorded as a reduction to accounts receivable).

We may continue to see elevated working capital requirements in the near term.

In May 2022, we issued an aggregate principal amount of $1.5 billion of unsecured fixed-rate notes with varying maturities.

The net proceeds, together with cash on hand, were used to repay $1.5 billion of fixed-rate notes that matured in May 2022.

At September 25, 2022 , we had $15.4 billion of principal floating- and fixed-rate notes outstanding, $1.4 billion of which matures in January 2023.

The remaining debt has maturity dates in 2024 through 2052.

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At September 25, 2022 , we had $499 million of commercial paper outstanding.

On December 8, 2020, we entered into a Revolving Credit Facility replacing our prior Amended and Restated Revolving Credit Facility.

There were no outstanding borrowings under the Amended and Restated Revolving Credit Facility at the time of termination.

The Revolving Credit Facility provides for unsecured revolving facility loans, swing line loans and letters of credit in an aggregate amount of up to $4.5 billion, which expires on December 8, 2025.

We also have a Revolving Credit Facility, which provides for unsecured revolving facility loans, swing line loans and letters of credit in an aggregate amount of up to $4.5 billion, which expires on December 8, 2025.

At September 25, 2022 , no amounts were outstanding under the Revolving Credit Facility.

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At September 25, 2022 , we estimated remaining future payments of $1.7 billion for a one-time U.S.

repatriation tax accrued in fiscal 2018, after application of certain tax credits, which is payable in installments over the next five years.

repatriation tax accrued in fiscal 2018, after application of certain tax credits, which is payable in installments over the next four years.

At September 25, 2022 , other current liabilities included $207 million for the next installment due in January 2023.

Beginning in fiscal 2023, we are required to capitalize and amortize research and development expenditures for federal income tax purposes.

If this requirement is not delayed or repealed, our cash flow generated from operations will be adversely affected due to significantly higher cash tax payments in the near term.

Additional information regarding our income taxes is provided in this Annual Report in “Notes to Consolidated Financial Statements, Note 3.

Income Taxes.”

Acquisitions.

In October 2021, we and SSW Partners entered into a definitive agreement to acquire Veoneer for total estimated cash consideration of approximately $4.5 billion, substantially all of which will be funded by Qualcomm, and we paid a $110 million termination fee to Magna International Inc., on behalf of Veoneer.

Further, we have agreed to provide a

loan facility (or guarantee amounts provided by a third party) that provides financing to Veoneer of up to $480 million.

The acquisition is expected to close in 2022.

Information related to this definitive agreement to acquire Veoneer, including additional information related to certain contingent financing obligations, is included in this Annual Report in “Notes to Consolidated Financial Statements, Note 12.

Subsequent Events.” We expect to continue making strategic investments and acquisitions, the amounts of which could vary significantly, to open new opportunities for our technologies, obtain development resources, grow our patent portfolio or pursue new businesses.

Capital Return Program.

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2021 24 141.17 3,366 2.66 3,008 6,374

In fiscal 2018, we announced a stock repurchase program authorizing us to repurchase up to $30.0 billion of our common stock.

On October 12, 2021, we announced a new $10.0 billion stock repurchase authorization, which is in addition to the remaining repurchase authority of $0.9 billion under the aforementioned program.

The stock repurchase programs have no expiration date.

Since September 26, 2021, we repurchased and retired 5.4 million shares of common stock for $703 million.

On October 12, 2021, we announced a $10.0 billion stock repurchase program.

The stock repurchase program has no expiration date.

At September 25, 2022, $8.1 billion remained authorized for repurchase under our stock repurchase program.

Our stock repurchase programs are subject to periodic evaluations to determine when and if repurchases are in the best interests of our stockholders, and we may accelerate, suspend, delay or discontinue repurchases at any time.

On October 14, 2022, we announced a cash dividend of $0.75 per share on our common stock, payable on December 15, 2022 to stockholders of record as of the close of business on December 1, 2022.

We intend to continue to use cash dividends as a means of returning capital to stockholders, subject to capital availability and our view that cash dividends are in the best interests of our stockholders, among other factors.

We currently intend to continue to use cash dividends as a means of returning capital to stockholders, subject to capital availability and our view that cash dividends are in the best interests of our stockholders, among other factors.

Additional Capital Requirements .

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• Our purchase obligations at September 25, 2022 , which primarily relate to purchase commitments with certain suppliers of our integrated circuit products, including those under multi-year capacity commitments, and certain other expenses, some of which relate to research and development activities and capital expenditures, totaled $24.5 billion, of which, $13.3 billion is expected to be paid in the next 12 months.

We expect an increase in operating cash outflows as compared to fiscal 2021 as we make payments under the multi-year capacity commitments and as we enter into additional agreements with certain suppliers of our integrated circuit products.

• Our research and development expenditures were $7.2 billion in fiscal 2021 and $6.0 billion in fiscal 2020, and we expect to increase our investment in research and development in fiscal 2022, including in advancements in existing and new technologies and products.

We expect a significant decrease in advance payments made under our multi-year capacity commitments as compared to fiscal 2022.

• Our research and development expenditures were $8.2 billion in fiscal 2022 and $7.2 billion in fiscal 2021.

• Cash outflows for capital expenditures were $2.3 billion in fiscal 2022 and $1.9 billion in fiscal 2021.

We expect capital expenditures to increase in fiscal 2022 to support the increase in our manufacturing and production capacity needs.

• Amounts related to future lease payments for operating lease obligations at September 25, 2022 totaled $863 million, with $129 million expected to be paid within the next 12 months.

• At September 26, 2021, $1.5 billion was accrued related to two fines imposed by the EC (based on the exchange rate at September 26, 2021 , including related foreign currency gains and accrued interest).

We have provided financial guarantees in lieu of cash payment to satisfy the obligations while we appeal the EU’s decisions.

• We expect to continue making strategic investments and acquisitions, the amounts of which could vary significantly.

For further information related to our most recent acquisitions, including details regarding the Non-Arriver businesses presented as held for sale, see “Notes to Consolidated Financial Statements, Note 9.

Acquisitions” in this Annual Report.

Further, regulatory authorities in certain jurisdictions have investigated our business practices and instituted proceedings against us and they or other regulatory authorities may do so in the future.

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We base our estimates on historical and anticipated results and trends and on various other assumptions that we believe are reasonable under the circumstances, including assumptions as to future events.

By their nature, estimates are subject to an inherent degree of uncertainty.

Although we believe that our estimates and the assumptions supporting our assessments are reasonable, actual results that differ from our estimates could be material to our consolidated financial statements.

Refer to “Note 1.

By their nature, estimates are inherently subject to a degree of uncertainty.

Although we believe that our estimates and the assumptions supporting our assessments are reasonable, actual results could differ materially from our estimates and assumptions, and could be material to our consolidated financial statements.

In addition to our critical accounting estimates and policies below, refer to “Note 1.

Significant Accounting Policies” and “Note 2.

Composition of Certain Financial Statement Items” included in this Annual Report in “Notes to Consolidated Financial Statements” for further information on our critical accounting estimates and policies, which are as follows.

In addition, if the impact of changes in our critical accounting estimates are material or considered necessary to understand our results of operations for the periods presented, then such information is disclosed within this Annual Report in “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations, Results of Operations.”

Composition of Certain Financial Statement Items” included in this Annual Report in “Notes to Consolidated Financial Statements” for further information.

If the impact of changes in our critical accounting estimates are material or considered necessary to understand our results of operations for the periods presented, then such information is disclosed within this Annual Report in “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Revenue Recognition.

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We estimate and recognize sales-based royalties on such licensed products in the period in which the licensees’ sales occur, which is based largely on preliminary royalty estimates provided by our licensees.

For fiscal 2022 and

2021, actual amounts for sales-based royalties have been materially consistent with such estimates, and no significant reversals of revenues have been required as a result of adjustments to prior period royalty estimates.

Significant evaluation and judgment were required in determining the appropriate accounting for the settlement agreement and the global patent license agreement with Huawei, which were signed in the fourth quarter of fiscal 2020.

We considered, among other items, Huawei’s commitment to perform under such agreements (including Huawei’s intent and ability to pay amounts due), Huawei’s performance as of the date of assessment under the agreements (including timely payments made), Huawei’s then-current and projected financial condition (including the impact of enacted national security protection policies by the U.S.

government on Huawei’s business) and certain contractual protections that we obtained under these agreements.

In the fourth quarter of fiscal 2021, Huawei paid the final installment under the settlement agreement, and there were no changes to our previous judgments, estimates and initial evaluation related to the revenues recorded in fiscal 2020 under the settlement agreement.

Impairment of Non-marketable Equity Investments.

We monitor our investments for events or circumstances that could indicate impairment, including those that result from observable price adjustments.

In fiscal 2021, we recorded impairment losses on other investments (which primarily related to our non-marketable equity investments) of $33 million, a decrease of $372 million compared to fiscal 2020.

Significant evaluation and judgments were required in determining if the negative effects of COVID-19 indicated that such investments were impaired, and if so, the extent of such impairment.

In fiscal 2021, and to a lesser extent in fiscal 2022, significant evaluation and judgments were required in determining whether such investments were impaired due to the continuing effects of the COVID-19 pandemic (as well as the effects of other macroeconomic factors), and if so, the extent of such impairment.

This included, among other items:

(i) assessing the business impacts that COVID-19 had on our investees, including taking into consideration the investee’s industry and geographic location and the impact to its customers, suppliers and employees, as applicable, (ii) evaluating the investees’ ability to respond to the impacts of COVID-19, including any significant deterioration in the investee’s financial condition and cash flows, as well as assessing liquidity and/or going concern risks and (iii) considering any appreciation in fair value that has not been recognized in the carrying values of such investments.

Based on this evaluation, certain of our investments were impaired and written down to their estimated fair values in fiscal 2020 (a significant portion of which related to the full impairment of our investment in OneWeb, who filed for bankruptcy in the second quarter of fiscal 2020).

For a significant portion of the impairment losses recorded in 2020, the estimated fair values resulted in a full write-off of the carrying value.

In fiscal 2021, there were no significant impairment losses or adjustments to our previous judgments and estimates recorded.

We measure inventory at the lower of cost or net realizable value considering judgments related to future demand and market conditions, such as the impact of certain capacity constraints experienced across the semiconductor industry in fiscal 2021 and the impacts of COVID-19 in fiscal 2020.

For fiscal 2021 and 2020, the overall net effect on our operating results from changes in this estimate were not material.

Impairment of Goodwill and Long-Lived Assets .

We monitor our goodwill and long-lived assets for the existence of impairment indicators and apply judgments in the valuation methods and underlying assumptions utilized in such assessments.

During fiscal 2021 and fiscal 2020, impairment charges for long-lived assets were negligible.

(ii) evaluating the investees’ ability to respond to the impacts of COVID-19, including any significant deterioration in the investee’s financial condition and cash flows, as well as assessing liquidity and/or going concern risks;

and (iii) considering any appreciation in fair value that has not been recognized in the carrying values of such investments.

In fiscal 2022 and 2021, there were no significant impairment losses or adjustments to our previous judgments and estimates recorded.

We measure inventory at the lower of cost or net realizable value considering judgments and estimates related to future customer demand and other market conditions, such as the impact of certain capacity constraints experienced across the semiconductor industry through the third quarter of fiscal 2022 and in fiscal 2021, as well as the impact of the macroeconomic environment in fiscal 2022.

Although we believe these estimates are reasonable, any significant changes in customer demand that are less favorable than our previous estimates may require additional inventory write-downs and would be reflected in cost of sales resulting in a negative impact to our gross margin in that period.

For fiscal 2022 and 2021, the net effect from changes in this estimate and related reserves was less than 2% of cost of revenues during each period.

Impairment of Goodwill, Other Indefinite-Lived Assets and Long-Lived Assets .

We monitor our goodwill, other indefinite-lived assets and long-lived assets for the existence of impairment indicators and apply judgments in the valuation methods and underlying assumptions utilized in such assessments.

During fiscal 2022 and fiscal 2021, impairment charges for long-lived assets were not material.

Additionally, the estimated fair values of our QCT and QTL reporting units, based on our qualitative assessment, were substantially in excess of their respective carrying values at September 25, 2022.

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We make significant judgments and estimates in determining our provision for income taxes, including our assessment of our income tax positions given the uncertainties involved in the interpretation and application of complex tax laws and regulations in various taxing jurisdictions.

Recent Accounting Pronouncements

Information regarding recent accounting pronouncements and the impact of those pronouncements, if any, on our consolidated financial statements is provided in this Annual Report in “Notes to Consolidated Financial Statements, Note 1.

Significant Accounting Policies.”

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What changed 10-K

Item 5. Market for Registrant’s Common Equity