Netlist Books $85.4 Million as Samsung Fees Land, Micron Next

Netlist posted $85.4 million of net income in its fiscal third quarter, its first profit powered by license fees from Samsung, after settling its long-running memory patent disputes with Samsung and Micron. Third-quarter net sales rose 149% year over year to $105.1 million, split between $60.2 million of product sales and $44.9 million of license fees under the Samsung agreement. A year earlier the company lost $7.0 million.

The profit deserves careful reading. About half of it came from a $44.0 million income tax benefit, booked after Netlist released part of the valuation allowance on its deferred tax assets. Operating income was $40.6 million. The company offered no financial outlook.

CEO C.K. Hong credited the hardware side. "Year-over-year product revenue growth was driven by strong demand from customers in AI and data center applications," he said.

What does the Samsung deal actually pay?

The $44.9 million of license revenue combines two streams: $12.0 million from Samsung's upfront fee, which Netlist spreads over 20 quarters, and the first $32.9 million gross quarterly fee. The economics are unusually clean. License revenue carries no cost of sales, which lifted the gross margin to 65.5%. The margin on product sales alone was 40%, up from 4% a year earlier.

The underlying agreement, signed Aug. 4, runs five years. Samsung pays a $200 million upfront fee net of Korean withholding tax, plus up to $27.5 million net per quarter for 20 quarters, for up to $750 million in total. Netlist also secured the right to buy up to $300 million a year of DRAM and NAND from Samsung under a parallel five-year supply agreement.

Litigation is never free. Intellectual property legal fees more than tripled to $16.2 million for the quarter.

How did product sales perform?

Net product sales of $60.2 million rose 43% from a year earlier, driven by low-profile memory subsystem sales, but fell sharply from $109.8 million in the second quarter. The pattern inside that figure is notable. RDIMMs and discrete memory components powered growth earlier in the year — rising $117.8 million over the first nine months — yet came in $4.5 million below their year-earlier level in the third quarter.

The quarterly trajectory, from company filings and MLQ.ai's SEC-derived financials:

• Q3 2025: product sales $42.2 million, no license fees, gross profit $1.8 million, net loss $7.0 million
• Q2 2026: product sales $109.8 million, no license fees, gross profit $22.9 million, net income $1.4 million
• Q3 2026: product sales $60.2 million, license fees $44.9 million, gross profit $68.9 million, net income $85.4 million

Who pays next, and what cases remain?

Micron joined the settlement roster on Oct. 5. It will pay $30 million per quarter for 20 quarters, from the fourth quarter of 2026 through the third quarter of 2031 — $600 million in total — and bought 10 million Netlist shares for $1 million. A Samsung affiliate bought 10 million shares on identical terms in August. Equity at a token price is an unusual sweetener. Both sides now hold a small stake in the licensor they once fought.

The court picture is clearing. The Samsung cases in U.S. district courts and at the International Trade Commission have been dismissed, and Netlist and Micron have jointly moved to dismiss theirs. One matter survives: Netlist's 2009 patent suit against Google in the Northern District of California, stayed since 2022, remains pending.

With Micron payments starting this quarter and Samsung fees running through 20 quarters, Netlist enters fiscal 2027 with $327.7 million of cash, equivalents and restricted cash — up from $40.7 million at the end of June — and a revenue base that no longer depends entirely on selling memory modules.