Adeia's 2025 Q3 Earnings Call Contradictions: Revised Revenue Guidance, AMD Litigation Impact, and 2026 Growth Outlook Discrepancies

Date of Call: November 3, 2025

Financials Results

• Revenue: $87.3 million, in line with expectations

Guidance:

• 2025 revenue guidance narrowed to $360M–$380M due primarily to AMD litigation.
• Operating expenses expected $160M–$164M; Q4 litigation expense ~+$3M vs Q3.
• Interest expense $40M–$41M; other income $5.5M–$6.5M; non-GAAP tax rate ~23%.
• Adjusted EBITDA margin ~56%; full‑year capex ~$2M.
• Pipeline may produce upside beyond the range; unclosed opportunities likely to drive 2026 growth.

Business Commentary:

* Revenue and Revenue Guidance: - Adeia reported revenue of $87.3 million for Q3 2025, in line with expectations, and revised its full-year revenue guidance range to $360 million to $380 million. - The revision was due to the likelihood of not closing a license agreement with AMD this year, though opportunities remain for growth in 2026.

• Non-Pay TV Recurring Revenue Growth:
• Adeia's non-Pay TV recurring revenue was up 31% year-over-year for Q3.

• Growth was driven by expansion into new markets like e-commerce and semiconductors, with deals signed with companies such as Amazon, Paramount, and Sandisk.

• Product and Market Expansion:

• Adeia entered its third year as a standalone company and expanded beyond its core Pay TV business, signing deals with large semiconductor companies and OTT providers.

• This diversification has increased non-Pay TV recurring revenue, which was up 81% since separation.

• Litigation and Intellectual Property Protection:

• Adeia filed multiple patent infringement lawsuits against AMD for unauthorized use of its hybrid bonding and advanced process node technologies.

• The litigation aims to protect intellectual property and ensure Adeia realizes appropriate value for its investments in semiconductor technology.

• Operating Expense Management:

• Operating expenses for Q3 were $37.1 million, a 9% decrease from the prior quarter, primarily due to lower corporate administrative expenses and personnel costs.
• This decrease aligns with Adeia's ongoing cost-saving initiatives.

Sentiment Analysis:

Overall Tone: Neutral

• Management stated revenue was “in line with our expectations” and that “we remain confident in the strength of our business,” while also noting they “adjusted our 2025 full year revenue guidance primarily to reflect” AMD litigation. They repeatedly described a “strong” pipeline and long‑term confidence despite near‑term timing risk.

Q&A:

• Question from Scott Searle (ROTH Capital Partners, LLC, Research Division): Clarify any one‑time catch‑up fees in the quarter and please provide more color on pipeline deal types and how recurring revenue moves from Q3 to Q4 and into early 2026.
  Response: Q3 recurring revenue was modest (~$1M); management expects total recurring to rise from the mid‑$80M range to ~ $90M in Q4 driven by semiconductor and media deals, but timing is uncertain.

• Question from Scott Searle (ROTH Capital Partners, LLC, Research Division): Can you lay out timelines and milestones for the AMD litigation and whether it impacts dialogs with other semiconductor vendors?
  Response: Adeia filed two cases in the Western District of Texas; trials could occur in 2027; the 10 asserted patents (7 hybrid bonding) largely cover AMD's advanced products and extend beyond 2030 — management is confident in the case.

• Question from Hamed Khorsand (BWS Financial Inc.): Last quarter you said you could hit the upper end of guidance without AMD; why reduce guidance now and why no quarterly guidance?
  Response: The company provides annual (not quarterly) guidance; while the pipeline remains robust, AMD litigation narrowed near‑term paths so management prudently lowered the 2025 revenue range while retaining confidence in future opportunities.

• Question from Hamed Khorsand (BWS Financial Inc.): What in the pipeline gives you confidence you could see a ~$20M lift in a quarter that hasn't occurred this year?
  Response: Pipeline contains several large, complex (potentially nine‑figure) media and semiconductor opportunities — OTT, Canadian operators, additional semis and litigation outcomes — that could deliver sizable revenue, but timing/approval processes determine whether they land in 2025 or 2026.

• Question from Matthew Galinko (Maxim Group LLC, Research Division): Any implications for other semiconductor deals or renewals given the AMD litigation announcement?
  Response: Management believes litigation should not impede other deals; hybrid bonding adoption is accelerating across logic and memory, with many companies planning 2026+ launches, reinforcing the relevance of Adeia's patents.

• Question from Matthew Galinko (Maxim Group LLC, Research Division): If revenue grows in 2026, will operating expenses increase similarly or will you keep tight control?
  Response: They will invest modestly but remain disciplined; expect to grow the portfolio while keeping spending controlled and maintaining EBITDA margins near the ~60% range.

• Question from Madison de Paola (Rosenblatt Securities Inc., Research Division) on behalf of Kevin Cassidy: What is the timeline for licensing RapidCool and how does it differ from Microsoft's microfluidics?
  Response: RapidCool is early‑stage with mid‑to‑long‑term revenue potential and growing engagements; it bonds a cold plate to the chip (more plug‑and‑play) versus Microsoft's etching approach, which Adeia says has different technical tradeoffs.

Contradiction Point 1

Revenue Expectations and Guidance

It involves changes in revenue expectations and guidance, which are crucial for investor projections and company performance.

Were there one-time catch-up fees in the quarter? Also, does Q4's wide range of outcomes depend on deal signing timelines? - Scott Searle (ROTH Capital Partners, LLC, Research Division)

2025Q3: Revenue in 2025 is now anticipated to be approximately $680 million to $720 million, a decrease from the previous guidance of $750 million to $810 million due to the AMD litigation. - Keith Jones (CFO)

What are the key takeaways from today's call? Has the outlook for recurring revenue changed? Why wasn't guidance provided, given the Street's $100 million estimate? - Hamed Khorsand (BWS Financial Inc.)

2025Q2: The guidance range for revenue for the year is $750 million to $810 million. - Keith Jones (CFO)

Contradiction Point 2

Impact of AMD Litigation

It highlights differing perspectives on the impact of AMD litigation on the company's operations and pipeline, which could affect strategic planning and investor confidence.

Could you outline the litigation timeline and key milestones for AMD? Is this litigation affecting discussions with other semiconductor vendors, particularly regarding logic opportunities? - Scott Searle (ROTH Capital Partners, LLC, Research Division)

2025Q3: Litigation does not impact current discussions with other semiconductor vendors, and hybrid bonding is gaining traction in the industry, particularly in the logic space. - Paul Davis (CEO & Director)

Can you clarify the recurring vs. nonrecurring revenue and the revenue mix between media and semiconductor? - Scott Wallace Searle (ROTH Capital Partners, LLC, Research Division)

2025Q2: Our goal is still to close the semiconductor deal this year, but we have multiple paths to achieve revenue targets if it doesn't. We're prepared to take a different strategic direction with the customer if necessary. - Paul Davis (CEO & Director)

Contradiction Point 3

2026 Revenue Growth Expectations

It involves differing opinions on the company's revenue growth expectations for 2026, which could impact investor expectations and strategic planning.

Given your confidence in 2026 revenue growth, will operating expenses follow the revenue trend, or will you maintain strict spending controls in the near term? - Matthew Galinko (Maxim Group LLC, Research Division)

2025Q3: Revenue growth is expected in 2026 with a modest increase in spending, focusing on investment in R&D and portfolio growth. - Keith Jones (CFO)

Given your caution on spending and plans to reduce it, would you consider increasing R&D spending in H2 if larger deals are identified in Q3 or early Q4 and revenue trends improve by year-end? - Matthew Evan Galinko (Maxim Group LLC, Research Division)

2025Q2: Our focus is on closing deals this year within our revenue guidance range. How quarters shape up isn't as important as closing deals. - Keith A. Jones (CFO)

Contradiction Point 4

Impact of AMD Litigation on Revenue and Pipeline

It involves differing statements about the impact of AMD litigation on Adeia's revenue and pipeline, which could affect investor expectations and strategic planning.

Could you confirm the sequential increase in semiconductor revenue driven by 3D NAND opportunities? Could you outline the timeline and milestones for the AMD litigation and its impact on discussions with other semiconductor vendors regarding logic and chip-led opportunities? - Scott Searle (ROTH Capital Partners, LLC, Research Division)

2025Q3: The litigation does not impact current discussions with other semiconductor vendors, and hybrid bonding is gaining traction in the industry, particularly in the logic space. - Paul Davis (CEO)

Was the semiconductor announcement the major one you expected last year? - Hamed Khorsand (BWS Financial)

2025Q1: This semiconductor deal is smaller and not the one expected last year. However, it shows progress in hybrid bonding adoption, which may lead to more opportunities. - Paul Davis (CEO)

Contradiction Point 5

Guidance and Revenue Expectations

It involves differing statements about revenue expectations and guidance, which are critical for investors to assess financial performance and growth prospects.

Can you reconcile last quarter’s comments with this quarter’s? Last quarter you said you didn’t need AMD to hit the upper guidance range, but this quarter you cut guidance due to lacking AMD. If you met Q3 guidance despite the Street’s $100M expectation, why wasn’t guidance provided? - Hamed Khorsand (BWS Financial Inc.)

2025Q3: Adeia provides annual guidance only, not quarterly. Statements from last quarter remain valid, but the pipeline has narrowed due to AMD litigation. A prudent approach led to revised guidance, but significant opportunities exist in both media and semiconductor businesses for both 2025 and 2026. - Paul Davis (CEO)

Could the new US Professional Sports League for online streaming lead to sign-ups from other sports leagues? - Kevin Cassidy (Rosenblatt Securities)

2025Q1: Adeia expects revenue growth both in 2025 and 2026. We're raising our revenue guidance this year to a range of $580 million to $630 million, up $20 million at the midpoint. - Keith Jones (CFO)