CEVA's Q3 2025 Earnings Call: Contradictions Unveiled on AI Pipeline, Bluetooth Market Dynamics, and Smartphone Market Recovery

Date of Call: November 10, 2025

Financials Results

• Revenue: $28.4M, up 4% YOY and up 11% sequentially
• EPS: $0.11 non-GAAP EPS (down from $0.14 in Q3 2024); GAAP diluted loss $0.10
• Gross Margin: 88% GAAP and 89% non-GAAP, compared to 85% GAAP and 87% non-GAAP in prior year
• Operating Margin: Non-GAAP operating margin 11% of revenue (up from 8% YOY); GAAP operating loss $2.1M vs $2.6M prior year

Guidance:

• Maintaining full-year revenue guidance, aligned with Street estimates
• Q4 revenue expected in the range of $29M to $33M
• Gross margin expected ~88% GAAP / ~89% non-GAAP (similar to Q3)
• GAAP OpEx expected $27M–$28M; Non-GAAP OpEx expected $22M–$23M
• Net interest income ~ $1.5M; taxes ~ $1.8M
• Share count expected ~25.8M

Business Commentary:

* Revenue and Earnings Performance: - CEVA reported revenue of $28.4 million for Q3 2025, up 4% year-over-year and 11% sequentially. - The growth was driven by strong licensing agreements in AI and connectivity, particularly with Microchip adopting the full NeuPro NPU portfolio.

• AI and Connectivity Growth:
• AI processor licensing contributed approximately one-third of CEVA's licensing revenue in Q2 and Q3 2025.

• This growth was fueled by strategic wins such as the partnership with Microchip and AI DSP agreements with leading consumer electronics and automotive companies.

• Cellular IoT and Wi-Fi Shipments:

• Cellular IoT shipments reached an all-time high of 69 million units, up 41% year-over-year.
• Wi-Fi shipments also hit a record high of 82 million units, up 73% year-over-year, driven by customer ramp-ups for next-generation standards like Wi-Fi 6.

• Automotive and V2X Growth:
• Two automotive customers started volume production of ADAS solutions based on CEVA's AI DSP, contributing to overall royalty growth.
• Additionally, a V2X customer acquired by Qualcomm has been ramping up, further driving royalty growth.

Sentiment Analysis:

Overall Tone: Positive

• "We are pleased to report a third quarter that exceeded our expectations on both revenue and non-GAAP EPS"; management highlighted AI-led licensing contributing roughly one-third of licensing revenue and record connectivity shipments, and CFO noted royalties up 6% YOY and 16% sequentially, supporting a constructive outlook.

Q&A:

• Question from Chris Reimer (Barclays Bank PLC): Looking at shipments, can you describe other segments and potential near-term ramp-ups?
  Response: Royalties are growing across mobile (low-tier sequential growth), Wi‑Fi (transition to Wi‑Fi6 with higher ASPs), cellular IoT (record shipments), automotive ADAS (two customers ramping), and V2X—together driving ongoing royalty growth.

• Question from Chris Reimer (Barclays Bank PLC): Any change in time to development/market for the Microchip partnership and other NPU deals?
  Response: Time‑to‑market is typical (~18–24 months from design to production); the Microchip deal follows the same 1–2 year design cycle to ramp.

• Question from Madison De Paola (Rosenblatt Securities): When will Microchip MPU shipments hit CEVA's royalty revenue and what is the license time frame?
  Response: The license is multi‑year; royalties typically emerge 2–3 years after design start as products are productized and ramped, consistent with prior IP cycles.

• Question from Martin Yang (Oppenheimer & Co.): Which Microchip product families/verticals will be prioritized and how attractive are those end markets?
  Response: The deal covers Microchip's full spectrum (embedded MCUs through infrastructure/data center NPUs); multiple programs across embedded, industrial, automotive and infrastructure are expected, but customer timing/details are not disclosed.

• Question from Martin Yang (Oppenheimer & Co.): Prospect of integrating NeuPro with your connectivity IPs and customer interest/productization status?
  Response: There is clear synergy and customer interest in bundling connectivity and NPU IP for embedded systems; CEVA has prior examples and expects continued combined design wins, supporting time‑to‑market, cost and power advantages.

• Question from David O'Connor (BNP Paribas): What was the competitive landscape for winning Microchip and why now; sustainability of AI pipeline?
  Response: CEVA competed against other IP vendors and won due to a unique combination of a full NPU portfolio, unified software stack, and strong power/price/performance optimizations; the AI/NPU pipeline has strengthened over recent quarters and supports sustained revenue upside over time.

• Question from David O'Connor (BNP Paribas): Will OpEx need to step up to support NeuPro AI momentum?
  Response: For Q4 no material OpEx step‑up is planned; management will evaluate 2026 investment levels, remaining disciplined while prepared to invest further if ROI and opportunities justify it.

Contradiction Point 1

AI Pipeline and Growth Momentum

It highlights fluctuations in the company's expectations regarding its AI pipeline and growth momentum, which are crucial for investor confidence and strategic planning.

Are other segments besides smartphones driving royalty growth? - Chris Reimer (Barclays Bank PLC, Research Division)

2025Q3: We see growth momentum in royalties from multiple segments. These include the recovery of the low-tier mobile market, increasing Wi-Fi shipment volumes with higher ASP per unit, record highs in cellular IoT, and automotive ADAS systems with two customers ramping volume production. - Amir Panush(CEO)

With increasing NPU licenses, does this indicate higher-value ICs? Will future royalty revenues show higher leverage or accelerated growth? - Kevin Edward Cassidy (Rosenblatt Securities)

2025Q2: On AI, I think Amir highlighted that this is a pivotal point in our business. For a long time, we've been talking about AI for the last year. We came out with a few products mid last year, the end of last year with new products around AI for the higher end and lower end markets and use cases. So that's something that the traction was record high for us in licensing in the second quarter, but we have seen a deal per quarter over the last 3 quarters before that. - Yaniv Arieli(CFO)

Contradiction Point 2

Bluetooth Market Dynamics

It involves differing perspectives on the growth and market dynamics of the Bluetooth segment, which is an important part of the company's product portfolio.

When will Microchip MPU shipments start impacting royalty revenue? What is the license duration? - Madison De Paola (Rosenblatt Securities)

2025Q3: There wasn't something specific this quarter that I will point to on the Bluetooth. I would say, generally speaking, we expect the second half good sequential growth for our Bluetooth technology as well. There is the shift that is coming right now to adopt more the Bluetooth 6.0 in production. Of course, we are already working on Bluetooth 7.0, which will drive significant growth for us in the '26, '27. So overall, it's very healthy for us. It can be a little bit the mix of our customers for this quarter, but nothing more than that. - Amir Panush(CEO)

What factors contributed to Bluetooth's year-over-year decline this quarter, and are there notable customer or market dynamics to consider? - Zhihua Yang (Oppenheimer)

2025Q2: In general, it was -- it's about 0.25 million devices, which is not that bad because annually last year, we powered 1.1 billion devices. And again, Q1 and Q2 tend to be slower than the second half of the year. So I think those -- that number will pick up in the next 2 quarters. - Yaniv Arieli(CFO)

Contradiction Point 3

AI NPU ADAS Win and Market Timing

It involves the timing and market positioning of a significant AI NPU ADAS win, which affects the company's revenue growth and market penetration strategy.

What was the competition for the Microchip deal? What caused the timing of the win? How sustainable is the AI pipeline? - David O'Connor (BNP Paribas, Research Division)

2025Q3: We believe most companies will license NPU technology rather than build their own. The win with Microchip was due to our comprehensive NPU portfolio, advanced software stack, and competitive architecture optimization. - Amir Panush(CEO)

Was the AI NPU ADAS win secured through a tier one supplier or directly with an OEM? Is there a comparable ASP increase with Wi-Fi 7 as seen when transitioning from Wi-Fi 5 to 6? - Kevin Cassidy (Rosenblatt Securities)

2025Q1: This is a significant design win as it validates technology for the automotive market. It's tied to an OEM already secured, with the solution part of an upcoming platform for multiple OEMs. - Amir Panush(CEO)

Contradiction Point 4

Low-End Smartphone Market Recovery

It involves the expected recovery timeline and factors influencing the low-end smartphone market, which is a crucial segment for the company's royalty revenue.

Are there other segments contributing to the strong royalty growth besides smartphones? - Chris Reimer (Barclays Bank PLC, Research Division)

2025Q3: We see growth momentum in royalties from multiple segments. These include the recovery of the low-tier mobile market, increasing Wi-Fi shipment volumes with higher ASP per unit, record highs in cellular IoT, and automotive ADAS systems with two customers ramping volume production. - Amir Panush(CEO)

What caused the low-end smartphone market's weakness, and do you expect a recovery? - David O'Connor (BNP Paribas)

2025Q1: A slower start was expected, but there's a planned sequential ramp-up. Softness is due to supply chain adjustments, not tariffs, as the customer ships mainly outside the US. Expectation is for continued ramp-up throughout the year. - Amir Panush(CEO)