Semiconductor ROIC Rankings: QCOM's Licensing Moat vs Pure-Play Peers (2025)
Qualcomm's consolidated margins hide a secret: the QTL licensing segment earns 72% operating margin vs QCT hardware's 30%. When Apple moves fully to in-house modems, what happens to QCOM's profitability? Our semiconductor ROIC comparison reveals the answer.
Semiconductor ROIC Rankings: QCOM's Licensing Moat vs Pure-Play Peers (2025)
Last Updated: December 28, 2025 Data Currency: FY2025 10-K and Q3 2025 10-Q filings. QCOM, AVGO, TXN, AMD, MRVL
TL;DR: Qualcomm's consolidated financials hide a two-business reality. QTL licensing earns 72% operating margin on $5.6B revenue, while QCT hardware earns 30% margin on $38.4B. When Apple fully transitions to in-house modems—a process already underway—QCOM loses high-margin licensing royalties AND hardware revenue. Our analysis shows AVGO's 46.7% ROIC and improving trajectory makes it the semiconductor capital efficiency leader, while QCOM's licensing moat faces structural erosion.
Key Facts:
- QCOM QTL licensing margin: 72.4% vs QCT hardware margin: 30.4% (42pp difference)
- AVGO ROIC trajectory: +32pp over 8 quarters (14.6% → 46.7%)
- QCOM Apple risk: "significant negative impact on QCT revenues" (SEC 10-K disclosure)
- TXN ROIC: Stable 21.8% with 22 consecutive years dividend growth
- MRVL customer concentration: 81% from top 10 customers
- AVGO customer concentration: 40% from top 5 customers
Executive Summary: The Semiconductor ROIC Landscape
| Metric | AVGO | TXN | QCOM* | MRVL | AMD |
|---|---|---|---|---|---|
| ROIC (Latest) | 46.7% | 21.8% | ~40%* | 6.0% | 5.3% |
| Gross Margin | 67.8% | 57.5% | 55.4% | 50.7% | 48.3% |
| ROIC Trajectory | Strong ↑ | Stable → | Stable → | Recovering ↑ | Improving ↑ |
| Business Model | Fabless + SW | Integrated | Licensing + Fabless | Fabless | Fabless |
| Customer Concentration | 40% (top 5) | Not disclosed | Elevated (Apple) | 81% (top 10) | Not quantified |
| Dividend Status | Growing | Aristocrat | Growing | None | None |
*QCOM reported ROIC is distorted by a one-time $5.96B deferred tax valuation allowance charge in FY2025. Normalized ROIC calculated as $10.5B NOPAT ÷ $25.9B invested capital = ~40%.
Source: SEC 10-K/10-Q filings via MetricDuck. Data as of December 2025.
What Is ROIC and Why Does It Matter for Semiconductors?
Return on Invested Capital (ROIC) measures how effectively a company generates profits from its capital investments. For semiconductor companies, ROIC reveals which business models create sustainable competitive advantages.
ROIC Formula: NOPAT ÷ Invested Capital
- NOPAT = Operating Income × (1 - Tax Rate)
- Invested Capital = Total Debt + Shareholders' Equity - Cash
ROIC Quality Thresholds for Semiconductors
| Rating | ROIC Range | Interpretation | 2025 Examples |
|---|---|---|---|
| Exceptional | >40% | Elite capital efficiency, strong moat | AVGO (46.7%) |
| Excellent | 20-40% | Sustained competitive advantage | TXN (21.8%), QCOM (normalized ~40%) |
| Good | 10-20% | Competitive returns | — |
| Below Average | 5-10% | Improvement needed | AMD (5.3%), MRVL (6.0%) |
| Poor | <5% | Capital destruction risk | — |
Why ROIC over ROE? ROE can be inflated by leverage. ROIC measures true operating efficiency regardless of capital structure—critical for comparing fabless (AVGO, AMD) vs integrated (TXN) models.
8-Quarter ROIC Trajectory Comparison
| Company | Q4 2023 | Q4 2024 | Latest | 8Q Change | Trend |
|---|---|---|---|---|---|
| AVGO | 56.2% | 14.6%* | 46.7% | +32pp from Q4 2024 trough | Strong ↑ |
| TXN | 37.4% | 22.4% | 21.8% | -15.6pp | Declining ↓ |
| QCOM | N/A** | N/A** | ~40%** | Stable (normalized) | Stable → |
| AMD | 1.3% | 3.4% | 5.3% | +4.0pp | Improving ↑ |
| MRVL | -2.7% | -6.9% | 6.0% | +8.7pp | Recovering ↑ |
*AVGO Q4 2024 reflects VMware acquisition integration impact; pre-acquisition ROIC was 56%+. **QCOM quarterly ROIC is distorted by capital structure; normalized annual ROIC shown.
Key Insight: TXN's ROIC declined 15.6pp over 8 quarters—a warning sign for "stable" dividend thesis. The analog/embedded market weakness is hitting capital efficiency harder than the headline ROIC suggests.
Why Are Semiconductor ROIC Comparisons Misleading?
Traditional semiconductor analysis treats all companies as interchangeable chip makers. This approach misses fundamental business model differences that drive vastly different capital efficiency profiles.
Three Distinct Business Models
1. Licensing + Hardware (QCOM) Qualcomm operates two businesses under one roof:
- QCT: Capital-intensive chip design and sales (competes with AMD, NVDA)
- QTL: Asset-light patent licensing (no direct competitor)
This dual model creates consolidated margins that mask segment-level economics—and investor risk.
2. Fabless + Software (AVGO) Broadcom combines:
- Semiconductor Solutions: Custom silicon for data center, networking
- Infrastructure Software: VMware, Symantec, CA Technologies
The software segment provides recurring revenue with 80%+ margins, boosting consolidated ROIC.
3. Vertically Integrated (TXN) Texas Instruments owns its fabs—a rarity in semiconductors. This provides:
- Margin stability through cycle
- Lower peak returns but lower volatility
- Capital intensity trade-off vs fabless peers
The Hidden Margin Subsidy Effect
When a company reports 55% gross margin, investors assume that's the chip business. For QCOM, it's a blend:
| Segment | Revenue | Operating Margin | Contribution |
|---|---|---|---|
| QCT (Chips) | $38.4B (87%) | 30.4% | Hardware economics |
| QTL (Licensing) | $5.6B (13%) | 72.4% | IP economics |
| Consolidated | $44.0B | ~36% | Blended |
Investor Insight: QTL's 72% margin on 13% of revenue contributes 26% of operating income. If you strip out licensing, QCOM's "pure semiconductor" margin is ~30%—competitive but not exceptional.
What Is Qualcomm's True ROIC Without Licensing Revenue?
2.1 Segment Economics
Qualcomm's FY2025 segment results reveal the dependency on licensing:
| Segment | Revenue | YoY Growth | Op Income | Op Margin |
|---|---|---|---|---|
| QCT | $38.37B | +15.6% | $11.67B | 30.4% |
| QTL | $5.58B | +0.2% | $4.04B | 72.4% |
| QSI | $0 | -100% | $0.18B | N/A |
Key Observation: QCT is growing (handsets +15%, IoT, automotive), but QTL is flat. The high-margin licensing business is not expanding.
2.2 The Apple Risk: Management's Own Words
From QCOM's 10-K Risk Factors:
"We expect continued intense competition, including from vertical integration by certain of our customers (for example, Apple and Samsung). In particular, Apple began utilizing its own modem (rather than our products) in its recently released smartphones and we expect that Apple will increasingly use its own modem products, rather than our products, in its future devices, which will have a significant negative impact on our QCT revenues, results of operations and cash flows." — QCOM FY2025 10-K
This disclosure reveals a structural threat:
- QCT revenue decline: Apple historically represented a significant portion of modem chip sales
- QTL royalty impact: Fewer QCOM modems = lower licensing royalties per device
- Double hit: Both hardware AND licensing revenue at risk
2.3 China Concentration
Geographic Risk:
"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." — QCOM FY2025 10-K
QCOM's FY2025 highlights complex China dynamics:
- New long-term licenses signed with two key Chinese OEMs
- Transsion license agreement executed (4G/5G)
- Huawei license expired—no longer paying royalties
2.4 What's Working: QCT Diversification
Despite headwinds, QCT's diversification is showing results:
| QCT Sub-Segment | FY2025 Growth | Driver |
|---|---|---|
| Handsets | Strong | Premium Snapdragon demand in Android |
| IoT | +$1.5B shipments | Edge networking, industrial |
| Automotive | Growing | Snapdragon digital cockpit launches |
Management's strategy: Reduce Apple dependency through IoT, automotive, and edge AI. This is visible in the segment growth, though automotive/IoT margins are lower than handsets.
Why Does Broadcom Have the Highest Semiconductor ROIC?
Broadcom demonstrates how software-hardware integration drives exceptional returns.
3.1 ROIC Trajectory: +32pp in 8 Quarters
| Period | ROIC | Change |
|---|---|---|
| Q4 FY2024 | 14.6% | Baseline |
| Q1 FY2025 | 21.5% | +6.9pp |
| Q2 FY2025 | 26.8% | +5.3pp |
| Q3 FY2025 | 37.7% | +10.9pp |
| Q4 FY2025 | 46.7% | +9.0pp |
This trajectory is extraordinary. VMware integration synergies and AI semiconductor demand are materializing faster than expected.
3.2 Segment Mix: Software as Margin Anchor
| Segment | Revenue Mix | Margin Profile |
|---|---|---|
| Semiconductor Solutions | 58% ($37B) | High (AI accelerators, networking) |
| Infrastructure Software | 42% ($27B) | Very High (VMware, recurring) |
The software segment provides recurring revenue stability that pure semiconductor peers lack.
3.3 Customer Concentration Risk
From AVGO's 10-K:
"Top five end customers accounted for approximately 40% of net revenue in fiscal year 2025." — AVGO FY2025 10-K
While elevated, this is lower concentration than MRVL (81%) and less existential than QCOM's Apple dependency.
Is Texas Instruments a Good Semiconductor Dividend Stock?
Texas Instruments offers a different value proposition: stability over growth.
4.1 Consistent ROIC Profile
| Metric | Value | Interpretation |
|---|---|---|
| ROIC (TTM) | 21.8% | Top-tier for integrated |
| ROIC Volatility | Low | Manufacturing control |
| Gross Margin | 57.5% | Stable through cycles |
| Dividend Streak | 22 consecutive years | Aristocrat status |
4.2 Vertically Integrated Advantage
TXN owns its fabs, providing:
- Cost control: Not subject to TSMC pricing power
- Supply security: Less vulnerable to geopolitical disruption
- Margin stability: Predictable depreciation vs variable foundry costs
The trade-off: Lower peak returns in upcycles, but lower trough returns in downturns. For income investors prioritizing dividend safety, this is a feature, not a bug.
How Do AMD and MRVL ROIC Compare to Peers?
5.1 AMD: Recovering ROIC
| Quarter | ROIC | Trajectory |
|---|---|---|
| Q4 2024 | 2.9% | Baseline |
| Q1 2025 | 4.0% | +1.1pp |
| Q2 2025 | 4.7% | +0.7pp |
| Q3 2025 | 5.3% | +0.6pp |
AMD's ROIC is improving but remains well below peers. The data center GPU ramp (MI300 family) and server CPU share gains should drive further improvement.
5.2 MRVL: High Concentration Risk
| Metric | Value | Concern Level |
|---|---|---|
| Top 10 Customer Concentration | 81% | Elevated |
| ROIC (Latest) | 6.0% | Recovering |
| Gross Margin | 50.7% | Below peers |
| Business Focus | Custom AI silicon | High growth potential |
MRVL is a turnaround story. The pivot to custom AI silicon (Amazon, Google partnerships) offers high upside, but 81% customer concentration creates execution risk.
How Do R&D Intensity and Stock Compensation Compare?
Understanding where companies invest and how they compensate employees reveals hidden ROIC drivers and dilution risks.
R&D Intensity Comparison
| Company | Revenue | R&D Expense | R&D Intensity | Interpretation |
|---|---|---|---|---|
| MRVL | $5.8B | $2.0B | 33.8% | Highest—custom AI silicon investment |
| AMD | $25.8B | $6.5B | 25.0% | High—CPU/GPU design leadership |
| QCOM | $44.3B | $9.0B | 20.4% | Moderate—5G/licensing leverage |
| AVGO | $63.9B | $11.0B | 17.2% | Lower—acquisition-led growth |
| TXN | $15.6B | $2.0B | 12.5% | Lowest—mature analog/embedded focus |
Key Insight: Higher R&D intensity doesn't guarantee higher ROIC. AVGO achieves the highest ROIC (46.7%) with the second-lowest R&D intensity, leveraging acquisitions and software integration rather than pure semiconductor R&D.
Stock-Based Compensation (SBC) Comparison
| Company | SBC Expense | SBC/Revenue | Dilution Risk |
|---|---|---|---|
| AVGO | $7.6B | 11.8% | Elevated—VMware integration costs |
| MRVL | $0.6B | 10.4% | Elevated—AI talent retention |
| QCOM | $2.8B | 6.3% | Moderate |
| AMD | $1.4B | 5.5% | Moderate |
| TXN | $0.4B | 2.5% | Low—conservative compensation |
Key Insight: AVGO's high SBC masks true profitability—adjusted for SBC, ROIC spread vs. peers narrows. TXN's low SBC reflects its mature, capital-return-focused model.
Which Semiconductor Stock Is Best for Your Portfolio?
For Income Investors: TXN
| Factor | Assessment |
|---|---|
| Dividend Safety | Excellent (22 consecutive years) |
| ROIC Stability | High (21.8%, low volatility) |
| Growth | Modest |
| Risk | Low |
Verdict: The "sleep at night" semiconductor holding.
For ROIC Maximizers: AVGO
| Factor | Assessment |
|---|---|
| Absolute ROIC | Highest (46.7%) |
| ROIC Trajectory | Strong (+32pp over 8Q) |
| Growth | Strong (AI + VMware) |
| Risk | Moderate (40% customer concentration) |
Verdict: Best-in-class capital efficiency with software-hardware synergies.
For Value + Yield: QCOM (With Caveats)
| Factor | Assessment |
|---|---|
| Normalized ROIC | Good (~40%) |
| Dividend Yield | Attractive |
| Growth | QCT diversification working |
| Risk | Elevated (Apple transition) |
Verdict: Attractive if Apple risk is priced in. Monitor QCT automotive/IoT momentum.
For Growth: AMD
| Factor | Assessment |
|---|---|
| ROIC | Low but improving (5.3%) |
| Growth Potential | High (data center, AI) |
| Moat | CPU/GPU design leadership |
| Risk | Execution, competitive |
Verdict: Growth play for investors willing to accept lower current returns for share gain potential.
Methodology
ROIC Calculation
ROIC = NOPAT / Invested Capital, where:
- NOPAT = Operating Income × (1 - Tax Rate)
- Invested Capital = Total Debt + Shareholders' Equity - Cash
Why ROIC over ROE? Return on Equity (ROE) can be artificially inflated through financial leverage—a company can boost ROE by taking on more debt. ROIC measures true operating efficiency by focusing on returns generated from all invested capital, regardless of financing mix. This makes ROIC more reliable for comparing capital-intensive businesses like semiconductors. For further reading on capital efficiency metrics, see CFA Institute's guidance on return metrics and Investopedia's ROIC explanation.
Normalized ROIC Calculation (QCOM)
QCOM's FY2025 reported results include a $5.96B deferred tax valuation allowance charge that distorts standard ROIC calculations. Our normalized ROIC adjusts for this:
- FY2025 Operating Income: $12.355B
- Normalized Tax Rate: 15% (pre-allowance effective rate)
- Normalized NOPAT: $12.355B × (1 - 0.15) = $10.5B
- Invested Capital: $14.81B (debt) + $21.21B (equity) - $10.16B (cash) = $25.86B
- Normalized ROIC: $10.5B ÷ $25.86B = 40.6%
Data Sources
- Financial Metrics: BigQuery
sec_filing_data.filing_metrics(automated SEC XBRL extraction) - Filing Intelligence: BigQuery
filing_intelligence.filing_intelligence(5-pass LLM analysis of MD&A, risk factors, segment disclosures) - SEC Filings: Direct 10-K/10-Q references linked above
- Dividend Data: Texas Instruments Investor Relations
- Broadcom FY2025 Results: Broadcom Investor Relations
Limitations
- QCOM's reported ROIC is distorted by the $5.96B one-time deferred tax valuation allowance charge
- Normalized ROIC assumes a 15% tax rate; actual normalized figures may vary with different assumptions
- Customer concentration percentages are derived from SEC risk factor disclosures and may use different calculation methodologies across companies
- AVGO's ROIC trajectory reflects VMware integration effects that may not be sustainable long-term
- This analysis excludes qualitative factors like management quality, competitive positioning changes, and macroeconomic risks
Disclaimer
This analysis is for informational purposes only and does not constitute investment advice. The authors hold no positions in any securities mentioned. All data is derived from SEC filings and may be subject to restatement. Past performance does not guarantee future results. Consult a qualified financial advisor before making investment decisions.
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