How InterDigital Turns Its Intellectual Property Into Cold, Hard Cash

Innovation has led to huge gains for technology stocks in recent years, most notably with the rise of artificial intelligence. Many companies have come up with their own technological advances and applied them in their own businesses. However, InterDigital (NASDAQ: IDCC) follows a different business model, licensing out its technology to a host of customers rather than building its own proprietary products.

The first article in this series on InterDigital gave a brief overview of the IP-centered approach that the company has used to great success. Here, you'll learn more about the financial results that InterDigital has been able to generate from its licensing activities and what it has meant for long-term shareholders.

Image source: Getty Images.

Where the money is

A quick look at InterDigital's revenue over the years reveals interesting trends. The company's revenue tends to be quite lumpy, with licensees being willing to pay more at key moments of new technological adoption. After the initial surge, InterDigital often goes through a consolidation phase where revenue flattens out and even declines until the next new round of tech advances occurs. This cycle has played out several times, including in 2006, the early 2010s, and 2016.

However, the size of the most recent growth spurt for InterDigital has been quite noteworthy. Revenue more than doubled between 2021 and 2024 and remained strong during the first three quarters of 2025 as well. Net income has seen even bigger gains, going from $55 million in 2021 to almost $500 million over the past 12 months. Free cash flow has surged nearly sevenfold, going from $91 million to $630 million over the same span of roughly five years.

Who's licensing InterDigital's technology?

The most recent period of accelerated growth for InterDigital has come at a time when licensing momentum has been exceptionally strong. Deals from Sony (NYSE: SONY) and Vizio got the ball rolling in 2021, but InterDigital added lucrative business from Apple (NASDAQ: AAPL), Amazon (NASDAQ: AMZN), and General Motors (NYSE: GM) in 2022. From there, a healthy mix of consumer electronics companies, mobile service providers, and AI hyperscalers joined the client list, including Samsung and Ericsson (NASDAQ: ERIC) in 2023 and Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) and HP (NYSE: HPQ) after that.

New agreements have played a big role in InterDigital's growth, but the real test for the company is getting licensees to renew their contracts. InterDigital has enjoyed considerable success on that front recently, and the result has been annualized recurring revenue that has shot higher by nearly 50% since 2021.

How shareholders have benefited from InterDigital's efforts

Revenue growth of roughly 25% per year is one thing, but the most impressive part of InterDigital's financial success has been how it has leveraged rising sales into much faster gains in profits. In the four-year span from 2020 to 2024, InterDigital's adjusted earnings before interest, taxes, depreciation, and amortization has grown to 3.5 times what it started with. Adjusted earnings per share have risen even more quickly, with 6.5-times growth from $2.27 per share in 2020 to nearly $15 per share in 2024.

InterDigital has done a good job of including shareholders in its financial victories. The company's dividend yield is relatively low at 0.75%, but the latest per-share payout of $0.70 per quarter is double what it was just a few years ago and seven times what InterDigital paid shareholders during the early 2010s. Meanwhile, investors have also benefited from opportunistic stock repurchases from time to time. All told, InterDigital has returned about $1.9 billion in capital to shareholders between 2011 and 2024. That's an impressive amount for a company with a market capitalization of just over $8 billion.

InterDigital's recent wins have paid off for shareholders, but can the company keep tapping into favorable trends in technology? That's what you'll read about in the third and final article on InterDigital tomorrow, as we consider the IP specialist's place in the Voyager Portfolio.

Dan Caplinger has positions in Alphabet, Amazon, and Apple. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, and HP. The Motley Fool recommends General Motors. The Motley Fool has a disclosure policy.