Qualcomm v. Arm: the jury returns Tuesday, but the judge holds the $1.5 billion royalty call

A Delaware jury deliberated about four hours on Friday without a verdict↗ in Qualcomm's▼−0.35% — Qualcomm, down 0.35 percent today breach suit against Arm▼−3.40% — Arm, down 3.40 percent today, and returns on Tuesday, October 13. ¹ Qualcomm says Arm withheld software patches and design tools, charged outside a clause meant to keep it within 10% of Arm's lowest price, and leaked a 2024 breach letter to the press, a leak Qualcomm values at $170 million of lost Meta▼−0.41% — Meta, down 0.41 percent today business. ¹²

A five-year holiday, not a verdict

The remedy matters more than the verdict. Qualcomm asked Judge Maryellen Noreika before trial to rule that a breach suspends its royalty payments to Arm for five years; she has not ruled, and Arm calls the penalty unenforceable. ¹ Analysts put those royalties near $300 million a year, which makes the clause a $1.5 billion lever. ²

The dependence runs one way. Qualcomm paid Arm about $443 million, license fees included, in the fiscal year ended March 31↗, 9% of Arm's $4.92 billion revenue and close to half of its $908 million operating income; the same payment is about 4% of Qualcomm's $10.43 billion. ³

The June quarter shows the exposure

Arm booked $1.29 billion of revenue in the quarter ended June 30, up 22%: $715 million of royalties and $574 million of licensing, of which SoftBank, Arm's majority owner, paid $193 million and is expected to keep paying about $200 million a quarter. ⁴²⁵

Both halves took a hit this month. OpenAIPVT$1.18T — OpenAI, private, latest valuation $1.18T, signed for Arm's new AGI data center processor in an order whose size has not been disclosed, was reported to be running near $50 billion of annualized revenue↗, not the roughly $70 billion assumed, because the earlier figure counted partners' gross revenue. ⁵⁶

The 2033 license is what is being priced

Qualcomm's architecture license runs to 2033, and the fight behind the suit is what it pays for what comes after. ¹ Cristiano Amon testified that Arm's proposed royalty step from v9 to v10 is a 1,800% increase, and that a 2013 cap of $1.88 per chip, written for processors with at least five cores, now lands on 288-core server designs. ²³

Arm's lawyer told jurors Qualcomm was "not harmed in the least" and blamed Meta's own pivot toward AI glasses for the lost deal value. ¹² The judge still owes a good-faith ruling from the bench trial that ran alongside the jury case, and the FTC opened a licensing probe in May↗. ¹²

The window runs to November 4

Arm reached it falling: $275.29 on October 8, down 6.48% as the OpenAI recount hit chip stocks↗, about 3% more on Friday while the Nasdaq rose, near 300 times earnings. ⁵⁷⁸ Eliyan, the chiplet startup valued at $1 billion in July, has drawn takeover interest; Arm previously held preliminary acquisition discussions with it and invested $5 million, without placing a formal bid. ⁹ Fiscal Q2 lands on November 4, the Street at $1.38 billion of revenue. ⁷

What each ruling is worth

A breach finding plus an enforced holiday takes roughly $300 million a year off Arm's royalty line, against $908 million of operating income last fiscal year; a no-breach verdict defers the fight to the 2033 renewal. ²³ Of the two questions, the clause is the one Arm holders should watch. ³ A breach alone buys Qualcomm a damages claim; the clause buys five years without the royalty bill. The window to position closes Tuesday, when the jury returns. ¹