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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________
FORM 10-Q
_____________________
(Mark one)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 27, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                      .
Commission File Number 0-19528
QUALCOMM Incorporated
(Exact name of registrant as specified in its charter)
Delaware 95-3685934
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
5775 Morehouse Dr., San Diego, California
 92121-1714
(Address of Principal Executive Offices)(Zip Code)
(858) 587-1121
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.0001 par value QCOMNasdaq Stock Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  No 
The number of shares outstanding of the registrant’s common stock was 1,120 million at April 25, 2022.



QUALCOMM Incorporated
Form 10-Q
For the Quarter Ended March 27, 2022
Page
3


Risk Factors Summary:
Our business is subject to numerous risks and uncertainties, including those described in the section labeled “Risk Factors” in “Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report. These risks include, but are not limited to, the following:
RISKS RELATED TO THE CORONAVIRUS (COVID-19) PANDEMIC
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.
RISKS RELATED TO OUR OPERATING BUSINESSES
We derive a significant portion of our revenues from a small number of customers and licensees, and particularly from their sale of premium tier devices. If revenues derived from these customers or licensees decrease or the timing of such revenues fluctuates, our business and results of operations could be negatively affected.
Our business, particularly our semiconductor business, may suffer as a result of our customers vertically integrating (i.e., developing their own integrated circuit products).
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.
RISKS RELATED TO NEW INITIATIVES
Our growth depends in part on our ability to extend our technologies and products into new and expanded product areas, and industries and applications beyond mobile handsets. Our research, development and other investments in these new and expanded product areas, industries and applications, and related technologies and products, as well as in our existing technologies and products, and new technologies, may not generate operating income or contribute to future results of operations that meet our expectations.
We may engage in acquisitions and other strategic transactions or make investments, or be unable to consummate planned strategic acquisitions, which could adversely affect our results of operations or fail to enhance stockholder value.
RISKS RELATED TO SUPPLY AND MANUFACTURING
We depend on a limited number of third-party suppliers for the procurement, manufacture, assembly and testing of our products manufactured in a fabless production model. If we fail to execute supply strategies that provide supply assurance, technology leadership and reasonable margins, our business and results of operations may be harmed. We are also subject to order and shipment uncertainties that could negatively impact our results of operations.
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 and cyber-attacks; timely supply of equipment and materials; and various manufacturing issues.
RISKS RELATED TO CYBERSECURITY OR MISAPPROPRIATION OF OUR CRITICAL INFORMATION
Our business and operations could suffer in the event of security breaches of our IT systems, or other misappropriation of our technology, intellectual property or other proprietary or confidential information.
RISKS RELATED TO HUMAN CAPITAL MANAGEMENT
We may not be able to attract and retain qualified employees, and our attempts to fully reopen our offices and operate under a hybrid working environment may not be successful.
RISKS SPECIFIC TO OUR LICENSING BUSINESS
The continued and future success of our licensing programs requires us to continue to evolve our patent portfolio and to renew or renegotiate license agreements that are expiring.
Efforts by some original equipment manufacturers (OEMs) to avoid paying fair and reasonable royalties for the use of our intellectual property may require the investment of substantial management time and financial resources and may result in legal decisions or actions by governments, courts, regulators or agencies, Standards Development Organizations (SDOs) or other industry organizations that harm our business.
4


Changes in our patent licensing practices, whether due to governmental investigations, legal challenges or otherwise, could adversely impact our business and results of operations.
RISKS RELATED TO REGULATORY AND LEGAL CHALLENGES
Our business may suffer as a result of adverse rulings in governmental investigations or proceedings.
RISKS RELATED TO INDUSTRY DYNAMICS AND COMPETITION
Our revenues depend on our customers’ and licensees’ sales of products and services based on CDMA, OFDMA and other communications technologies, including 5G, and customer demand for our products based on these technologies.
Our industry is subject to intense competition in an environment of rapid technological change. Our success depends in part on our ability to adapt to such change and compete effectively; and such change and competition could result in decreased demand for our products and technologies or declining average selling prices for our products or those of our customers or licensees.
RISKS RELATED TO PRODUCT DEFECTS OR SECURITY VULNERABILITIES
Failures in our products, or in the products of our customers or licensees, including those resulting from security vulnerabilities, defects or errors, could harm our business.
RISKS RELATED TO INTELLECTUAL PROPERTY
The enforcement and protection of our intellectual property may be expensive, could fail to prevent misappropriation or unauthorized use of our intellectual property, could result in the loss of our ability to enforce one or more patents, and could be adversely affected by changes in patent laws, by laws in certain foreign jurisdictions that may not effectively protect our intellectual property and by ineffective enforcement of laws in such jurisdictions.
Claims by other companies that we infringe their intellectual property could adversely affect our business.
Our use of open source software may harm our business.
GENERAL RISK FACTORS
We operate in the highly cyclical semiconductor industry, which is subject to significant downturns. We are also susceptible to declines in global, regional and local economic conditions generally. Our stock price and financial results are subject to substantial quarterly and annual fluctuations due to these dynamics, among others.
Our business may suffer due to the impact of, or our failure to comply with, the various existing, new or amended laws, regulations, policies or standards to which we are subject.
There are risks associated with our debt.
Tax liabilities could adversely affect our results of operations.
5


PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

QUALCOMM Incorporated
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except par value amounts)
(Unaudited)
March 27,
2022
September 26,
2021
ASSETS
Current assets:  
Cash and cash equivalents$7,173 $7,116 
Marketable securities4,373 5,298 
Accounts receivable, net4,084 3,579 
Inventories4,555 3,228 
Other current assets1,425 854 
Total current assets21,610 20,075 
Deferred tax assets1,545 1,591 
Property, plant and equipment, net4,893 4,559 
Goodwill7,261 7,246 
Other intangible assets, net1,258 1,458 
Other assets7,735 6,311 
Total assets$44,302 $41,240 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:  
Trade accounts payable$3,724 $2,750 
Payroll and other benefits related liabilities1,124 1,531 
Unearned revenues534 612 
Short-term debt3,485 2,044 
Other current liabilities4,565 5,014 
Total current liabilities13,432 11,951 
Unearned revenues228 364 
Income taxes payable1,479 1,713 
Long-term debt12,195 13,701 
Other liabilities3,640 3,561 
Total liabilities30,974 31,290 
Commitments and contingencies (Note 5)
Stockholders’ equity:  
Preferred stock, $0.0001 par value; 8 shares authorized; none outstanding
  
Common stock and paid-in capital, $0.0001 par value; 6,000 shares authorized; 1,122 and 1,125 shares issued and outstanding, respectively
  
Retained earnings13,113 9,822 
Accumulated other comprehensive income215 128 
Total stockholders’ equity13,328 9,950 
Total liabilities and stockholders’ equity$44,302 $41,240 
See accompanying notes.
6


QUALCOMM Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
 Three Months EndedSix Months Ended
March 27,
2022
March 28,
2021
March 27,
2022
March 28,
2021
Revenues:  
Equipment and services$9,417 $6,239 $18,098 $12,681 
Licensing1,747 1,696 3,770 3,489 
Total revenues11,164 7,935 21,868 16,170 
Costs and expenses:  
Cost of revenues4,648 3,432 8,951 6,921 
Research and development2,034 1,780 3,963 3,433 
Selling, general and administrative624 557 1,232 1,124 
Total costs and expenses7,306 5,769 14,146 11,478 
Operating income3,858 2,166 7,722 4,692 
Interest expense(137)(141)(275)(283)
Investment and other (expense) income, net(298)104 (158)323 
Income before income taxes3,423 2,129 7,289 4,732 
Income tax expense(489)(367)(956)(515)
Net income$2,934 $1,762 $6,333 $4,217 
Basic earnings per share$2.61 $1.55 $5.63 $3.72 
Diluted earnings per share$2.57 $1.53 $5.55 $3.66 
Shares used in per share calculations:  
Basic1,125 1,133 1,124 1,134 
Diluted1,140 1,151 1,141 1,154 
See accompanying notes.
7


QUALCOMM Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
(Unaudited)
Three Months EndedSix Months Ended
March 27,
2022
March 28,
2021
March 27,
2022
March 28,
2021
Net income
$2,934 $1,762 $6,333 $4,217 
Other comprehensive income (loss), net of income taxes:
Foreign currency translation (losses) gains(41)(33)(83)54 
Net unrealized losses on available-for-sale debt securities(61)(9)(80)(6)
Net unrealized gains on derivative instruments270 36 272 46 
Other losses   (3)
Certain reclassifications included in net income(11)(6)(22)(17)
Total other comprehensive income (loss)157 (12)87 74 
Comprehensive income$3,091 $1,750 $6,420 $4,291 
See accompanying notes.
8


QUALCOMM Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Six Months Ended
March 27,
2022
March 28,
2021
Operating Activities:
Net income $6,333 $4,217 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization expense834 751 
Income tax provision less than income tax payments(403)(235)
Share-based compensation expense994 814 
Net losses (gains) on marketable securities and other investments213 (301)
Other items, net(35)(32)
Changes in assets and liabilities:  
Accounts receivable, net(501)658 
Inventories(1,337)(60)
Other assets(1,812)(60)
Trade accounts payable979 291 
Payroll, benefits and other liabilities(371)148 
Unearned revenues(139)(105)
Net cash provided by operating activities4,755 6,086 
Investing Activities:  
Capital expenditures(1,074)(952)
Purchases of debt and equity marketable securities(936)(4,192)
Proceeds from sales and maturities of debt and equity marketable securities1,563 3,147 
Acquisitions and other investments, net of cash acquired(288)(1,236)
Proceeds from other investments97 167 
Other items, net 32 
Net cash used by investing activities(638)(3,034)
Financing Activities:
Proceeds from short-term debt1,462 1,579 
Repayment of short-term debt(1,462)(1,579)
Proceeds from issuance of common stock187 174 
Repurchases and retirements of common stock(2,129)(1,965)
Dividends paid(1,529)(1,473)
Payments of tax withholdings related to vesting of share-based awards(562)(501)
Other items, net(11)(23)
Net cash used by financing activities(4,044)(3,788)
Effect of exchange rate changes on cash and cash equivalents(16)29 
Net increase (decrease) in total cash and cash equivalents57 (707)
Total cash and cash equivalents at beginning of period7,116 6,707 
Total cash and cash equivalents at end of period$7,173 $6,000 
See accompanying notes.
9


QUALCOMM Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions, except per share data)
(Unaudited)
Three Months EndedSix Months Ended
March 27,
2022
March 28,
2021
March 27,
2022
March 28,
2021
Total stockholders’ equity, beginning balance
$11,333 $7,380 $9,950 $6,077 
Common stock and paid-in capital:
Balance at beginning of period$ $113 $ $586 
Common stock issued under employee benefit plans186 173 187 174 
Repurchases and retirements of common stock
(640)(685)(662)(1,129)
Share-based compensation
516 441 1,037 860 
Tax withholdings related to vesting of share-based payments
(62)(52)(562)(501)
Stock awards assumed in acquisition 10  10 
Balance at end of period
    
Retained earnings:
Balance at beginning of period
11,275 6,974 9,822 5,284 
Net income2,934 1,762 6,333 4,217 
Repurchases and retirements of common stock(311)(836)(1,467)(836)
Dividends(785)(757)(1,575)(1,522)
Balance at end of period
13,113 7,143 13,113 7,143 
Accumulated other comprehensive income:
Balance at beginning of period
58 293 128 207 
Other comprehensive income (loss)157 (12)87 74 
Balance at end of period
215 281 215 281 
Total stockholders’ equity, ending balance$13,328 $7,424 $13,328 $7,424 
Dividends per share announced$0.68 $0.65 $1.36 $1.30 
See accompanying notes.
10


QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1. Basis of Presentation and Significant Accounting Policies Update
Financial Statement Preparation. These condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and the instructions to Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, the interim financial information includes all normal recurring adjustments necessary for a fair statement of the results for the interim periods. These condensed consolidated financial statements are unaudited and should be read in conjunction with our Annual Report on Form 10-K for our fiscal year ended September 26, 2021. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year. We operate and report using a 52-53 week fiscal year ending on the last Sunday in September. Each of the three and six months ended March 27, 2022 and March 28, 2021 included 13 weeks and 26 weeks, respectively.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in our condensed consolidated financial statements and the accompanying notes. Actual results could differ from those estimates. Certain prior year amounts have been reclassified to conform to the current year presentation.
Note 2. Composition of Certain Financial Statement Items
Inventories (in millions)
March 27,
2022
September 26,
2021
Raw materials$253 $267 
Work-in-process2,517 1,475 
Finished goods1,785 1,486 
$4,555 $3,228 
Short-term Debt (in millions)
March 27,
2022
September 26,
2021
Commercial paper$500 $500 
Current portion of long-term debt2,985 1,544 
$3,485 $2,044 
Interest Rate Swaps. Beginning in the second quarter of fiscal 2022, we entered into interest rate swaps that are designated as fair value hedges and allow us to effectively convert fixed-rate payments into floating-rate payments on a portion of our outstanding long-term debt. We entered into these agreements, in part, to manage interest rate risk associated with our cash equivalents and marketable securities, in addition to changes in the fair value of our outstanding debt. At March 27, 2022, the notional amount of these swaps, which are denominated in U.S. dollars and mature between 2027 and 2032, was $1.6 billion. The fair value of these swaps, which is included in other noncurrent liabilities, was $74 million at March 27, 2022. The net gains and losses on the interest rate swaps, as well as the offsetting gains or losses on the related fixed-rate notes attributable to the hedged risks, are recognized in earnings as interest expense in the current period.
Revenues. We disaggregate our revenues by segment (Note 6), by products and services (as presented on our condensed consolidated statement of operations), and for our QCT (Qualcomm CDMA Technologies) segment, by revenue stream, which is based on the industry and application in which our products are sold (as presented below). In certain cases, the determination of QCT revenues by industry and application requires the use of certain assumptions. Substantially all of QCT’s revenues consist of equipment revenues that are recognized at a point in time, and substantially all of QTL’s (Qualcomm Technology Licensing) revenues represent licensing revenues that are recognized over time and are principally from royalties generated through our licensees’ sales of mobile handsets. QCT revenue streams were as follows (in millions):
11


QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Three Months EndedSix Months Ended
March 27,
2022
March 28,
2021
March 27,
2022
March 28,
2021
Handsets (1)$6,325 $4,065 $12,307 $8,281 
RFFE (2) 1,160 903 2,292 1,964 
Automotive (3)339 240 595 452 
IoT (internet of things) (4)1,724 1,073 3,201 2,117 
Total QCT revenues$9,548 $6,281 $18,395 $12,814 
(1) Includes revenues from products sold for use in mobile handsets, excluding RFFE (radio frequency front-end) components.
(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.
(4) Primarily includes products sold for use in the following industries and applications: 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).
Revenues recognized from performance obligations satisfied (or partially satisfied) in previous periods were as follows (in millions):
Three Months EndedSix Months Ended
March 27,
2022 (1)
March 28,
2021 (2)
March 27,
2022 (1)
March 28,
2021 (2)
Revenues recognized from previously satisfied performance obligations$185 $122 $367 $176 
(1) Primarily related to certain QCT sales-based royalty revenues related to system software, QTL royalty revenues recognized related to devices sold in prior periods (including adjustments to prior period royalty estimates, which includes the impact of the reporting by our licensees of actual royalties due) and certain QCT customer incentives.
(2) Primarily related to QTL royalty revenues recognized related to devices sold in prior periods (including adjustments to prior period royalty estimates, which includes the impact of the reporting by our licensees of actual royalties due) and certain QCT customer incentives.
Unearned revenues (which are considered contract liabilities) consist primarily of license fees for intellectual property with continuing performance obligations. In the six months ended March 27, 2022 and March 28, 2021, we recognized revenues of $340 million and $314 million, respectively, that were recorded as unearned revenues at September 26, 2021 and September 27, 2020, respectively.
Remaining performance obligations, substantially all of which are included in unearned revenues, represent the aggregate amount of the transaction price of certain customer contracts yet to be recognized as revenues as of the end of the reporting period and exclude revenues related to (a) contracts that have an original expected duration of one year or less and (b) sales-based royalties (i.e., future royalty revenues) pursuant to our license agreements. Our remaining performance obligations are primarily comprised of certain customer contracts for which we received license fees upfront. At March 27, 2022, we had $882 million of remaining performance obligations, of which $362 million, $362 million, $112 million, $42 million and $4 million was expected to be recognized as revenues for the remainder of fiscal 2022 and each of the subsequent four years from fiscal 2023 through 2026, respectively, and no amounts expected thereafter.
Concentrations. A significant portion of our revenues are concentrated with a small number of customers/licensees of our QCT and QTL segments. The comparability of customer/licensee concentrations for the interim periods presented are impacted by the timing of customer/licensees device launches and/or innovation cycles and other seasonal trends, among other fluctuations in demand. Revenues from each customer/licensee that were 10% or greater of total revenues were as follows:
12


QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Three Months EndedSix Months Ended
March 27,
2022
March 28,
2021
March 27,
2022
March 28,
2021
Customer/licensee (w)19 %16 %22 %25 %
Customer/licensee (x)19 16 19 14 
Customer/licensee (y)10 15 *13 
Customer/licensee (z)*13 *11 
* Less than 10%
Investment and Other (Expense) Income, Net (in millions)
Three Months EndedSix Months Ended
March 27,
2022
March 28,
2021
March 27,
2022
March 28,
2021
Interest and dividend income$20 $22 $37 $42 
Net (losses) gains on marketable securities(240)(85)(223)33 
Net (losses) gains on other investments(21)176 73 209 
Net (losses) gains on deferred compensation plan assets(43)23 (30)77 
Impairment losses on other investments(20)(15)(21)(16)
Net losses on derivative instruments (5)(17)(19)(7)
Equity in net earnings of investees10 12 17 11 
Net gains (losses) on foreign currency transactions1 (12)8 (26)
$(298)$104 $(158)$323 
Note 3. Income Taxes
We estimate our annual effective income tax rate to be 14% for fiscal 2022, which is lower than the U.S. federal statutory rate primarily due to a significant portion of our income qualifying for preferential treatment as foreign-derived intangible income (FDII) at a 13% effective tax rate, excess tax benefits associated with share-based awards and benefits from our federal research and development tax credit. Our effective tax rate for the second quarter of fiscal 2022 was 14%. Our effective tax rate of 17% for the second quarter of fiscal 2021 included $87 million of discrete net tax charges recorded in the second quarter of fiscal 2021, which principally related to a tax audit settlement with the Internal Revenue Service and foreign currency losses on a noncurrent receivable related to our refund claim of Korean withholding tax.
Unrecognized tax benefits were $2.1 billion at both March 27, 2022 and September 26, 2021 and primarily related to our refund claim of Korean withholding tax. If successful, the refund will result in a corresponding reduction in U.S. foreign tax credits. We expect that the total amount of unrecognized tax benefits at March 27, 2022 will increase in the next 12 months as licensees in Korea continue to withhold taxes on future payments due under their licensing agreements at a rate higher than we believe is owed; such increase is not expected to have a significant impact on our income tax provision.
Note 4. Capital Stock
Stock Repurchase Program. On October 12, 2021, we announced a new $10.0 billion stock repurchase program. This was in addition to the then remaining authority of $0.9 billion under the previous program. The stock repurchase programs have no expiration date. During the second quarter of fiscal 2022, we utilized the remaining repurchase authority under the previous program and began repurchases under the new program. At March 27, 2022, $9.1 billion remained authorized for repurchase under our stock repurchase program.
13


QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Shares Outstanding. Shares of common stock outstanding at March 27, 2022 were as follows (in millions):
Balance at September 26, 20211,125 
Issued11 
Repurchased(14)
Balance at March 27, 20221,122 
Dividends. On March 9, 2022, we announced a 10% increase in our quarterly dividend per share of common stock from $0.68 to $0.75, which is effective for dividends payable after March 24, 2022. On April 13, 2022, we announced a cash dividend of $0.75 per share on our common stock, payable on June 23, 2022 to stockholders of record as of the close of business on June 2, 2022.
Earnings Per Common Share. Basic earnings per common share is computed by dividing net income by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per share is computed by dividing net income by the combination of the weighted-average number of dilutive common share equivalents, comprised of shares issuable under our share-based compensation plans and the weighted-average number of common shares outstanding during the reporting period. The following table provides information about the diluted earnings per share calculation (in millions):
 Three Months EndedSix Months Ended
March 27,
2022
March 28,
2021
March 27,
2022
March 28,
2021
Dilutive common share equivalents included in diluted shares16 18 17 20 
Shares of common stock equivalents not included because the effect would be anti-dilutive or certain performance conditions were not satisfied at the end of the period    
Note 5. Commitments and Contingencies
Legal and Regulatory Proceedings.
Consolidated Securities Class Action Lawsuit: On January 23, 2017 and January 26, 2017, securities class action complaints were filed by purported stockholders of us in the United States District Court for the Southern District of California against us and certain of our then current and former officers and directors. The complaints alleged, among other things, that we violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 thereunder, by making false and misleading statements and omissions of material fact in connection with certain allegations that we are or were engaged in anticompetitive conduct. The complaints sought unspecified damages, interest, fees and costs. On May 4, 2017, the court consolidated the two actions. On July 3, 2017, the plaintiffs filed a consolidated amended complaint asserting the same basic theories of liability and requesting the same basic relief. On September 1, 2017, we filed a motion to dismiss the consolidated amended complaint, and on March 18, 2019, the court denied our motion. On January 15, 2020, we filed a motion for judgment on the pleadings, which the court denied on February 3, 2022. No trial date has been set. We believe the plaintiffs’ claims are without merit.
In re Qualcomm/Broadcom Merger Securities Litigation: On June 8, 2018 and June 26, 2018, securities class action complaints were filed by purported stockholders of us in the United States District Court for the Southern District of California against us and two of our then current officers. The complaints alleged, among other things, that we violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 thereunder, by failing to disclose that we had submitted a notice to the Committee on Foreign Investment in the United States (CFIUS) in January 2018. The complaints sought unspecified damages, interest, fees and costs. On March 18, 2019, the plaintiffs filed a consolidated complaint asserting the same basic theories of liability and requesting the same basic relief. On May 10, 2019, we filed a motion to dismiss the consolidated complaint, and on March 10, 2020, the court granted our motion. On May 11, 2020, the plaintiffs filed a second amended complaint, and on October 8, 2020, the court granted our motion to dismiss the case with prejudice. On November 7, 2020, the plaintiffs filed a notice of appeal with the United States Court of Appeals for the Ninth Circuit (Ninth Circuit), and a hearing on the appeal was held on November 16, 2021. On February 8, 2022, the Ninth Circuit affirmed the district court’s dismissal of the case.
14


QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Consumer Class Action Lawsuits: Since January 18, 2017, a number of consumer class action complaints have been filed against us in the United States District Courts for the Southern and Northern Districts of California, each on behalf of a putative class of purchasers of cellular phones and other cellular devices. In April 2017, the Judicial Panel on Multidistrict Litigation transferred the cases that had been filed in the Southern District of California to the Northern District of California. On July 11, 2017, the plaintiffs filed a consolidated amended complaint alleging that we violated California and federal antitrust and unfair competition laws by, among other things, refusing to license standard-essential patents to our competitors, conditioning the supply of certain of our baseband chipsets on the purchaser first agreeing to license our entire patent portfolio, entering into exclusive deals with companies, including Apple Inc., and charging unreasonably high royalties that do not comply with our commitments to standard setting organizations. The complaint seeks unspecified damages and disgorgement and/or restitution, as well as an order that we be enjoined from further unlawful conduct. On August 11, 2017, we filed a motion to dismiss the consolidated amended complaint. On November 10, 2017, the court denied our motion, except to the extent that certain claims seek damages under the Sherman Antitrust Act. On July 5, 2018, the plaintiffs filed a motion for class certification, and on September 27, 2018, the court granted that motion. On January 23, 2019, the Ninth Circuit granted us permission to appeal the court’s class certification order, and on January 24, 2019, the court stayed the case pending our appeal. On December 2, 2019, a hearing on our appeal of the class certification order was held before the Ninth Circuit, and on September 29, 2021, the Ninth Circuit vacated the district court’s class certification order, ruling that the court had failed to correctly assess the propriety of applying California law to a nationwide class. The Ninth Circuit remanded the case to the district court and instructed the court to consider the effect of United States Federal Trade Commission (FTC) v. QUALCOMM Incorporated (which the Ninth Circuit decided in favor of Qualcomm in August 2020) on this case. We believe the plaintiffs’ claims are without merit.
Since November 2017, several other consumer class action complaints have been filed against us in Canada (in the Ontario Superior Court of Justice, the Supreme Court of British Columbia and the Quebec Superior Court), Israel (in the Haifa District Court) and the United Kingdom (in the Competition Appeal Tribunal), each on behalf of a putative class of purchasers of cellular phones and other cellular devices, alleging violations of certain of those countries’ competition and consumer protection laws. The claims in these complaints are similar to those in the U.S. consumer class action complaints. The complaints seek damages. We believe the plaintiffs’ claims are without merit.
ParkerVision, Inc. v. QUALCOMM Incorporated: On May 1, 2014, ParkerVision filed a complaint against us in the United States District Court for the Middle District of Florida alleging that certain of our products infringed seven ParkerVision patents. On August 21, 2014, ParkerVision amended the complaint, alleging that we infringed 11 ParkerVision patents and sought damages and injunctive and other relief. ParkerVision subsequently reduced the number of patents asserted to three. The asserted patents are now expired, and injunctive relief is no longer available. ParkerVision continues to seek damages related to the sale of many of our radio frequency (RF) products sold between 2008 and 2018. On March 23, 2022, the court entered judgment in our favor on all claims and closed the case. On April 20, 2022, ParkerVision filed a notice of appeal to the United States Court of Appeals for the Federal Circuit. We believe that ParkerVision’s claims are without merit.
Korea Fair Trade Commission (KFTC) Investigation (2015): On March 17, 2015, the KFTC notified us that it was conducting an investigation of us relating to the Korean Monopoly Regulation and Fair Trade Act (MRFTA). On December 27, 2016, the KFTC announced that it had reached a decision in the investigation, finding that we violated provisions of the MRFTA. On January 22, 2017, we received the KFTC’s formal written decision, which found that the following conducts violate the MRFTA: (i) refusing to license, or imposing restrictions on licenses for, cellular communications standard-essential patents with competing modem chipset makers; (ii) conditioning the supply of modem chipsets to handset suppliers on their execution and performance of license agreements with us; and (iii) coercing agreement terms including portfolio license terms, royalty terms and free cross-grant terms in executing patent license agreements with handset makers. The KFTC’s decision orders us to: (a) upon request by modem chipset companies, engage in good-faith negotiations for patent license agreements, without offering unjustifiable conditions, and if necessary submit to a determination of terms by an independent third party; (b) not demand that handset companies execute and perform under patent license agreements as a precondition for purchasing modem chipsets; (c) not demand unjustifiable conditions in our license agreements with handset companies and, upon request, renegotiate existing patent license agreements; and (d) notify modem chipset companies and handset companies of the decision and order imposed on us and report to the KFTC new or amended agreements. According to the KFTC’s decision, the foregoing will apply to transactions between us and the following enterprises: (1) handset manufacturers headquartered in Korea and their affiliate companies; (2) enterprises that sell handsets in or to Korea and their affiliate companies; (3) enterprises that supply handsets to companies referred to in (2) above and the affiliate companies of such enterprises; (4) modem chipset manufacturers headquartered in Korea and their affiliate companies; and (5) enterprises
15


QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
that supply modem chipsets to companies referred to in (1), (2) or (3) above and the affiliate companies of such enterprises. The KFTC’s decision also imposed a fine of 1.03 trillion Korean won (approximately $927 million), which we paid on March 30, 2017.
On February 21, 2017, we filed an action in the Seoul High Court to cancel the KFTC’s decision. The Seoul High Court held hearings concluding on August 14, 2019, and on December 4, 2019, announced its judgment affirming certain portions of the KFTC’s decision and finding other portions of the KFTC’s decision unlawful. The Seoul High Court cancelled the KFTC’s remedial orders described in (c) above, and solely insofar as they correspond thereto, the Seoul High Court cancelled the KFTC’s remedial orders described in (d) above. The Seoul High Court dismissed the remainder of our action to cancel the KFTC’s decision. On December 19, 2019, we filed a notice of appeal to the Korea Supreme Court challenging those portions of the Seoul High Court decision that are not in our favor. The KFTC filed a notice of appeal to the Korea Supreme Court challenging the portions of the Seoul High Court decision that are not in its favor. Both we and the KFTC have filed briefs on the merits. The Korea Supreme Court has not yet ruled on our appeal or that of the KFTC. We believe that our business practices do not violate the MRFTA.
Korea Fair Trade Commission (KFTC) Investigation (2020): On June 8, 2020, the KFTC informed us that it was conducting an investigation of us relating to the MRFTA. The KFTC has not provided a formal notice on the scope of its investigation, but we believe it concerns our business practices in connection with our sale of radio frequency front-end (RFFE) components. We continue to cooperate with the KFTC as it conducts its investigation. If a violation is found, a broad range of remedies is potentially available to the KFTC, including imposing a fine (of up to 3% of our sales in the relevant markets during the alleged period of violation) and/or injunctive relief prohibiting or restricting certain business practices. It is difficult to predict the outcome of this matter or what remedies, if any, may be imposed by the KFTC. We believe that our business practices do not violate the MRFTA.
Icera Complaint to the European Commission (EC): On June 7, 2010, the EC notified and provided us with a redacted copy of a complaint filed with the EC by Icera, Inc. (subsequently acquired by Nvidia Corporation) alleging that we were engaged in anticompetitive activity. On July 16, 2015, the EC announced that it had initiated formal proceedings in this matter. On July 18, 2019, the EC issued a decision finding that between 2009 and 2011, we engaged in predatory pricing by selling certain baseband chipsets to two customers at prices below cost with the intention of hindering competition and imposed a fine of approximately 242 million euros. On October 1, 2019, we filed an appeal of the EC’s decision with the General Court of the European Union. The court has not yet ruled on our appeal. We believe that our business practices do not violate the European Union (EU) competition rules.
In the third quarter of fiscal 2019, we recorded a charge of $275 million to other expenses related to this EC fine. We provided a financial guarantee in the first quarter of fiscal 2020 to satisfy the obligation in lieu of cash payment while we appeal the EC’s decision. The fine is accruing interest at a rate of 1.50% per annum while it is outstanding. In the fourth quarter of fiscal 2019, we designated the liability as a hedge of our net investment in certain foreign subsidiaries, with gains and losses recorded in accumulated other comprehensive income as a component of the foreign currency translation adjustment. At March 27, 2022, the liability, including related foreign currency gains and accrued interest (which, to the extent they were not related to the net investment hedge, were recorded in investment and other income, net), was $276 million and included in other current liabilities.
European Commission (EC) Investigation: On October 15, 2014, the EC notified us that it was conducting an investigation of us relating to Articles 101 and/or 102 of the Treaty on the Functioning of the European Union (TFEU). On January 24, 2018, the EC issued a decision finding that pursuant to an agreement with Apple Inc. we paid significant amounts to Apple on the condition that it exclusively use our baseband chipsets in its smartphones and tablets, reducing Apple’s incentives to source baseband chipsets from our competitors and harming competition and innovation for certain baseband chipsets, and imposed a fine of 997 million euros. On April 6, 2018, we filed an appeal of the EC’s decision with the General Court of the European Union. From May 4, 2021 to May 6, 2021, a hearing on our appeal was held before the court. The court has announced that it will issue a decision on June 15, 2022. We believe that our business practices do not violate the EU competition rules.
16


QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In the first quarter of fiscal 2018, we recorded a charge of $1.2 billion to other expenses related to this EC fine. We provided financial guarantees in the third quarter of fiscal 2018 to satisfy the obligation in lieu of cash payment while we appeal the EC’s decision. The fine is accruing interest at a rate of 1.50% per annum while it is outstanding. In the first quarter of fiscal 2019, we designated the liability as a hedge of our net investment in certain foreign subsidiaries, with gains and losses recorded in accumulated other comprehensive income as a component of the foreign currency translation adjustment. At March 27, 2022, the liability, including related foreign currency gains and accrued interest (which, to the extent they were not related to the net investment hedge, were recorded in investment and other income, net), was $1.2 billion and included in other current liabilities.
Contingent Losses and Other Considerations: We will continue to vigorously defend ourselves in the foregoing matters. However, litigation and investigations are inherently uncertain, and we face difficulties in evaluating or estimating likely outcomes or ranges of possible loss, particularly in antitrust and trade regulation investigations. Other than with respect to the EC fines, we have not recorded any accrual at March 27, 2022 for contingent losses associated with these matters based on our belief that losses, while reasonably possible, are not probable. Further, any possible amount or range of loss cannot be reasonably estimated at this time. The unfavorable resolution of one or more of these matters could have a material adverse effect on our business, results of operations, financial condition or cash flows. We are engaged in numerous other legal actions not described above arising in the ordinary course of our business (for example, proceedings relating to employment matters or the initiation or defense of proceedings relating to intellectual property rights) and, while there can be no assurance, we believe that the ultimate outcome of these other legal actions will not have a material adverse effect on our business, results of operations, financial condition or cash flows.
Note 6. Segment Information
We are organized on the basis of products and services and have three reportable segments. Our operating segments reflect the way our businesses and management/reporting structure are organized internally and the way our Chief Operating Decision Maker (CODM), who is our CEO, reviews financial information, makes operating decisions and assesses business performance. We also consider, among other items, the way budgets and forecasts are prepared and reviewed and the basis on which executive compensation is determined, as well as the similarity of activities within our operating segments, such as the nature of products, the level of shared products, technology and other resources, production processes and customer base. We conduct business primarily through our QCT semiconductor business and our QTL licensing business. QCT develops and supplies integrated circuits and system software based on 3G/4G/5G and other technologies, including RFFE, for use in mobile devices, automotive systems for telematics, connectivity and digital cockpit and IoT including wireless networks, broadband gateway equipment, consumer electronic devices and industrial devices. QTL grants licenses or otherwise provides rights to use portions of our intellectual property portfolio, which includes certain patent rights essential to and/or useful in the manufacture and sale of certain wireless products. 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.
Our CODM allocates resources to and evaluates the performance of our segments based on revenues and earnings (loss) before income taxes (EBT). Segment EBT includes the allocation of certain corporate expenses to the segments, including depreciation and amortization expense related to unallocated corporate assets. Certain income and charges are not allocated to segments in our management reports because they are not considered in evaluating the segments’ operating performance. Unallocated income and charges include certain interest expense, certain net investment income, certain share-based compensation, gains and losses on our deferred compensation plan liabilities and related assets and certain research and development expenses, certain selling, general and administrative expenses and other expenses or income that were deemed to be not directly related to the businesses of the segments. Additionally, unallocated charges include recognition of the step-up of inventories and property, plant and equipment to fair value, amortization of certain intangible assets and certain other acquisition-related charges, third-party acquisition and integration services costs and certain other items, which may include major restructuring and restructuring-related costs, asset impairment charges and awards, settlements and/or damages arising from legal or regulatory matters. Our CODM does not evaluate our operating segments using discrete asset information.
17


QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The table below presents revenues and EBT for reportable segments (in millions):
Three Months EndedSix Months Ended
March 27,
2022
March 28,
2021
March 27,
2022
March 28,
2021
Revenues
QCT$9,548 $6,281 $18,395 $12,814 
QTL1,580 1,614 3,398 3,273 
QSI6 10 14 19 
Reconciling items30 30 61 64 
Total$11,164 $7,935 $21,868 $16,170 
EBT
QCT$3,340 $1,584 $6,455 $3,503 
QTL1,154 1,191 2,560 2,461 
QSI(269)98 (147)256 
Reconciling items(802)(744)(1,579)(1,488)
Total$3,423 $2,129 $7,289 $4,732 
Reconciling items for revenues and EBT in the previous table were as follows (in millions):
Three Months EndedSix Months Ended
March 27,
2022
March 28,
2021
March 27,
2022
March 28,
2021
Revenues
Nonreportable segments$30 $30 $61 $64 
EBT
Unallocated cost of revenues$(53)$(72)$(106)$(148)
Unallocated research and development expenses(433)(415)(886)(821)
Unallocated selling, general and administrative expenses(138)(113)(292)(291)
Unallocated interest expense(137)(141)(275)(282)
Unallocated investment and other (expense) income, net(34)14 (11)85 
Nonreportable segments(7)(17)(9)(31)
$(802)$(744)$(1,579)$(1,488)
Note 7. Acquisitions
Nuvia. On March 16, 2021, we completed the acquisition of NuVia, Inc. (NUVIA) for $1.1 billion (net of $174 million cash acquired), substantially all of which was paid in cash. In connection with the acquisition, we assumed or replaced unvested NUVIA stock awards with Qualcomm stock awards with an estimated fair value of $258 million, which have post-acquisition requisite service periods of up to four years. 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. We recorded $885 million of goodwill, which is not deductible for tax purposes and was allocated to our QCT segment for annual impairment testing purposes. Goodwill is primarily attributable to assembled workforce and certain revenue and cost synergies expected to arise after the acquisition. We also recorded a $247 million in-process research and development intangible asset related to a single project, which is expected to be completed in fiscal 2023 and, upon completion, will be amortized over its useful life, which is expected to be seven years. Our results of operations for fiscal 2021 included the operating results of NUVIA since the acquisition date, the amounts of which were not material.
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QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Veoneer. On October 4, 2021, we and SSW Partners, a New York-based investment partnership, entered into a definitive agreement (the Merger Agreement) to acquire Veoneer, Inc. (Veoneer) for $37.00 per share in cash. The transaction closed on April 1, 2022 (the Closing Date). Total cash consideration payable in the transaction, inclusive of (i) approximately $4.6 billion for amounts paid in respect of Veoneer’s outstanding capital stock and equity awards and amounts to be paid to settle Veoneer’s outstanding convertible senior notes due 2024; and (ii) the $110 million termination fee paid to Magna International Inc. (Magna) in the first quarter of fiscal 2022, was approximately $4.7 billion. On the Closing Date, SSW Partners acquired all of the outstanding capital stock of Veoneer, shortly after which it transferred Veoneer’s Arriver business to Qualcomm. We intend to incorporate Arriver’s computer vision, drive policy and driver assistance technologies into our Snapdragon automotive platform to deliver an integrated software SoC ADAS (advanced driver assistance systems) platform for automakers and Tier-1 automotive suppliers. SSW Partners retained Veoneer’s Tier-1 automotive supplier businesses, primarily consisting of the Active Safety and Restraint Control Systems businesses (the Non-Arriver businesses), which it intends to sell in one or more transactions.
We funded substantially all of the cash consideration payable in the transaction in exchange for (i) the Arriver business and (ii) the right to receive a majority of the proceeds upon the sale of the Non-Arriver businesses by SSW Partners. We have also agreed to provide certain funding of approximately $300 million to the Non-Arriver businesses while SSW Partners seeks a buyer(s). Such amounts, along with cash retained in the Non-Arriver business, are expected to be used to fund working and other near-term capital needs, as well as certain costs incurred in connection with the close of the acquisition.
Although we do not own or operate the Non-Arriver businesses, we have determined as of the Closing Date that we are the primary beneficiary, within the meaning of the Financial Accounting Standards Board (FASB) accounting guidance related to consolidation (ASC 810), of these businesses under the variable interest model. Accordingly, we will consolidate the Non-Arriver businesses on a one-quarter reporting lag starting from the Closing Date until such businesses are sold by SSW Partners. We expect to present the assets and liabilities of the Non-Arriver businesses as held for sale and its operating results as discontinued operations. We also expect to initially use a one-quarter reporting lag to consolidate the Arriver business within our consolidated financial statements, until certain integration activities are complete, which are expected to occur in the fourth quarter of fiscal 2022.
In accordance with the Merger Agreement, we paid to Magna a termination fee of $110 million in the first quarter of fiscal 2022 on behalf of Veoneer in connection with the termination of the previously announced agreement and plan of merger, dated as of July 22, 2021, by and among Magna and Veoneer. The termination fee was recorded in other noncurrent assets as advanced consideration for the acquisition at March 27, 2022 and was classified as cash used by investing activities in the condensed consolidated statements of cash flows in the six months ended March 27, 2022.
Our initial accounting for this business combination is currently underway. We expect to record and disclose the preliminary purchase price allocation in the third quarter of fiscal 2022.
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QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 8. Fair Value Measurements
The following table presents our fair value hierarchy for assets and liabilities measured at fair value on a recurring basis at March 27, 2022 (in millions):
Level 1Level 2Level 3Total
Assets    
Cash equivalents$4,823 $1,274 $ $6,097 
Marketable securities:    
Corporate bonds and notes 3,832  3,832 
Equity securities404   404 
Mortgage- and asset-backed securities 131  131 
U.S. Treasury securities and government-related securities 6  6 
Total marketable securities404 3,969  4,373 
Derivative instruments 196  196 
Other investments712  24 736 
Total assets measured at fair value$5,939 $5,439 $24 $11,402 
Liabilities    
Derivative instruments$ $83 $ $83 
Other liabilities711   711 
Total liabilities measured at fair value$711 $83 $ $794 
Long-term Debt. At March 27, 2022, the aggregate fair value of our outstanding floating- and fixed-rate notes, based on Level 2 inputs, was approximately $15.5 billion.
Note 9. Marketable Securities
Our marketable securities were all classified as current and were comprised as follows (in millions):
March 27,
2022
September 26,
2021
Available-for-sale debt securities:  
Corporate bonds and notes$3,832 $4,459 
Mortgage- and asset-backed securities131 147 
U.S. Treasury securities and government-related securities6 10 
Total available-for-sale debt securities3,969 4,616 
Equity securities
404 682 
Total marketable securities$4,373 $5,298 
The contractual maturities of available-for-sale debt securities were as follows (in millions):
March 27,
2022
Years to Maturity
Less than one year$682 
One to five years3,156 
No single maturity date131 
Total$3,969 
Debt securities with no single maturity date included mortgage- and asset-backed securities.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This information should be read in conjunction with the condensed consolidated financial statements and the notes thereto included in “Part I, Item 1” of this Quarterly Report and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the fiscal year ended September 26, 2021 contained in our 2021 Annual Report on Form 10-K.
This Quarterly Report (including but not limited to this section titled Management’s Discussion and Analysis of Financial Condition and Results of Operations) contains forward-looking statements. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “may,” “will,” “would” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this Quarterly Report. Additionally, statements concerning future matters such as our future business, prospects, results of operations, financial condition or research and development or technology investments; new or enhanced products, services or technologies; emerging industries or business models; design wins or product launches; industry, market, business, product, technology, commercial, competitive or consumer trends, including seasonality; the 5G transition; our expectations regarding future demand or supply conditions; strategic investments or acquisitions, and the anticipated timing or benefits thereof; potential impacts of the COVID-19 pandemic, legal or regulatory matters, U.S./China trade or national security tensions or vertical integration by our customers; competition; and other statements regarding matters that are not historical are also forward-looking statements.
Although forward-looking statements in this Quarterly Report reflect our good faith judgment, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include without limitation those discussed under the heading “Risk Factors” below, as well as those discussed elsewhere in this Quarterly Report. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report. We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Quarterly Report. Readers are urged to carefully review and consider the various disclosures made in this Quarterly Report, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.
Second Quarter Fiscal 2022 Overview and Other Recent Events
Revenues for the second quarter of fiscal 2022 were $11.2 billion, an increase of 41% compared to the year ago quarter, with net income of $2.9 billion, an increase of 67% compared to the year ago quarter. Highlights from the second quarter of fiscal 2022 and other recent events included:
QCT revenues increased by 52% in the second quarter of fiscal 2022 compared to the year ago quarter, primarily due to an increase in average selling prices and favorable mix toward higher-tier 5G products in handsets, along with higher IoT revenues.
On October 4, 2021, we and SSW Partners entered into a definitive agreement to acquire Veoneer, Inc. (Veoneer). The transaction closed on April 1, 2022. We funded substantially all of the total cash consideration payable in the transaction, which was approximately $4.7 billion (inclusive of approximately $4.6 billion for amounts paid in respect of Veoneer’s outstanding capital stock and equity awards and amounts to be paid to settle Veoneer’s outstanding convertible senior notes due 2024; and the $110 million termination fee paid to Magna in the first quarter of fiscal 2022), in exchange for (i) the Arriver business and (ii) the right to receive a majority of the proceeds upon the sale of the Non-Arriver businesses by SSW Partners. We intend to incorporate Arriver’s computer vision, drive policy and driver assistance technologies into our Snapdragon automotive platform to deliver an integrated software SoC ADAS (advanced driver assistance systems) platform for automakers and Tier-1 automotive suppliers. SSW Partners retained Veoneer’s Tier-1 automotive supplier businesses, which it intends to sell in one or more transactions. We will consolidate the Non-Arriver businesses starting from the Closing Date until such businesses are sold by SSW Partners. Additional information related to this acquisition is included in this Quarterly Report in “Notes to Condensed Consolidated Financial Statements, Note 7. Acquisitions.”
Our Business and Operating Segments
We develop and commercialize foundational technologies and products used in mobile devices and other wireless products. We derive revenues principally from sales of integrated circuit products and licensing our intellectual property, including patents and other rights.
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We are organized on the basis of products and services and have three reportable segments. We conduct business primarily through our QCT (Qualcomm CDMA Technologies) semiconductor business and our QTL (Qualcomm Technology Licensing) licensing business. 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.
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.
Seasonality. Many of our products and much of our intellectual property are incorporated into consumer wireless devices, which are subject to seasonality and other fluctuations in demand. Our revenues have historically fluctuated based on consumer demand for devices, as well as on the timing of customer/licensee device launches and/or innovation cycles (such as the transition to the next generation of wireless technologies). This has resulted in fluctuations in QCT revenues in advance of and during device launches incorporating our products and in QTL revenues when licensees’ sales occur. These trends may or may not continue in the future. 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.
Results of Operations
Revenues (in millions)
Three Months EndedSix Months Ended
March 27,
2022
March 28,
2021
ChangeMarch 27,
2022
March 28,
2021
Change
Equipment and services$9,417 $6,239 $3,178 $18,098 $12,681 $5,417 
Licensing1,747 1,696 51 3,770 3,489 281 
$11,164 $7,935 $3,229 $21,868 $16,170 $5,698 
Second quarter 2022 vs. 2021
The increase in revenues in the second quarter of fiscal 2022 was primarily due to:
+    $3.2 billion in higher equipment and services revenues from our QCT segment
First six months 2022 vs. 2021
The increase in revenues in the first six months of fiscal 2022 was primarily due to:
+    $5.4 billion in higher equipment and services revenues and $158 million in higher licensing revenues from our QCT segment
+    $125 million in higher licensing revenues from our QTL segment
Costs and Expenses (in millions, except percentages)
Three Months EndedSix Months Ended
March 27,
2022
March 28,
2021
ChangeMarch 27,
2022
March 28,
2021
Change
Cost of revenues $4,648 $3,432 $1,216 $8,951 $6,921 $2,030 
Gross margin58 %57 %59 %57 %
Second quarter and first six months 2022 vs. 2021
Gross margin percentage increased in the second quarter and first six months of fiscal 2022 primarily due to:
+    increase in QCT gross margin
-    decrease in higher margin QTL licensing revenues in proportion to QCT revenues
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Three Months EndedSix Months Ended
March 27,
2022
March 28,
2021
ChangeMarch 27,
2022
March 28,
2021
Change
Research and development$2,034 $1,780 $254 $3,963 $3,433 $530 
% of revenues18 %22 %18 %21 %
Second quarter 2022 vs. 2021
The increase in research and development expenses in the second quarter of fiscal 2022 was primarily due to:
+    $233 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
+    $65 million increase in share-based compensation expense
-    $44 million decrease in expenses driven by revaluation of our deferred compensation plan 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 income, net due to the revaluation of the related assets)
First six months 2022 vs. 2021
The increase in research and development expenses in the first six months of fiscal 2022 was primarily due to:
+    $430 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
+    $156 million increase in share-based compensation expense
-    $55 million decrease in expenses driven by revaluation of our deferred compensation plan obligation on lower relative stock market performance