Pixelworks' Q3 2025: Contradictions Emerge on TrueCut Strategy, Geopolitical Impact, and Shanghai Subsidiary

Date of Call: November 11, 2025

Financials Results

• Revenue: $8.8M, up 6% sequentially from $8.3M and down ~7.4% YOY from $9.5M
• EPS: Non-GAAP net loss $3.8M, or $0.69 loss per share, improved from a $1.00 loss in prior quarter and $1.45 loss in Q3 2024
• Gross Margin: 49.9% non-GAAP, compared to 46% in Q2 2025 and 51.3% in Q3 2024

Business Commentary:

* Revenue Growth: - Pixelworks reported revenue of $8.8 million for Q3 2025, up 6% sequentially. - The growth was driven by increased sales in the home and enterprise market.

• Operating Expense Reduction:
• The company experienced a $3.1 million decrease in operating expenses year-over-year, with non-GAAP operating expenses of $9.2 million in Q3 2025.

• This reduction was a result of previously implemented cost reduction actions and ongoing expense management initiatives.

• Transaction with VeriSilicon:

• Pixelworks signed a definitive agreement to sell its Shanghai subsidiary to VeriSilicon for net cash proceeds of between $50 million and $60 million.
• The rationale behind the transaction includes unlocking value for shareholders, focusing on core strengths, and achieving financial flexibility.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted sequential revenue growth ("Revenue grew by 6% sequentially"), gross margin improvement ("improved to approximately 50%"), >60% reduction in cash burn YOY ("reduced cash burn from operations by more than 60% year-over-year"), and a proposed transaction expected to deliver $50–$60M in net cash proceeds to fund a focused, asset-light licensing strategy.

Q&A:

• Question from Sujeeva De Silva (ROTH Capital): Congratulations on the transformative transaction. So maybe you can start with the transaction itself. And maybe, Todd, you can help us bridge or Haley, the $133 million of consideration to the $50 million to $60 million you're going to get, just understanding what the amounts were and the circumstance of the, I guess, the minority shareholders receiving a portion of this?
  Response: Todd: Entity valued at RMB 950M (~$133M) but Pixelworks owns ~78%; redemption obligations to employees and preferred investors (who forego preferred returns for redemption), transaction/legal costs and ~10% Chinese withholding tax reduce net U.S. proceeds to about $50–$60M.

• Question from Sujeeva De Silva (ROTH Capital): Second question is really on the Shanghai subsidiary. Have you seen actual impact to the business in the last few weeks or months? Due to geopolitical just to understand that asset and this deal closing? Just to understand if there has been any impact there or whether it's more normal course?
  Response: Todd: For ~18 months we felt headwinds from local-preference policies disadvantaging a China entity majority‑owned by a U.S. public company; since announcing the deal, several opportunities have emerged that likely wouldn't have surfaced under prior ownership, suggesting the ownership change may alleviate those constraints.

• Question from Sujeeva De Silva (ROTH Capital): Just maybe give me the before and after this transaction, how you are running that business? And what -- if this question makes sense, what this transaction unlocks and how you will run the TrueCut opportunity here differently going forward, whether it's capital employees, customer discussions, anything of color there would help to kind of look forward to the pro forma business?
  Response: Todd: Prior investments in TrueCut were constrained by cash‑flow focus and China headwinds; post-transaction the company will be asset‑light with lower headcount and costs and intends to accelerate focused investment and evangelism of TrueCut to expand licensing and partner/device distribution.

Contradiction Point 1

TrueCut Business Strategy and Investment

It involves changes in the strategic approach to the TrueCut business, particularly regarding investment priorities and business model evolution, which could impact its growth trajectory and financial performance.

Can you clarify how the TrueCut business is being managed pre- and post-transaction? - Sujeeva De Silva (ROTH Capital)

20251112-2025 Q3: We have been running the business appropriately up to this point, but now we will focus on accelerating it. Evangelism will increase to bring the ecosystem together and drive adoption. - Todd DeBonis(CEO)

How will the TrueCut business operate pre- and post-transaction, and what changes are expected? - Sujeeva De Silva (ROTH Capital Partners, LLC, Research Division)

2025Q3: Before, TrueCut was run appropriately, focusing on cash flow and earnings growth. Post-transaction, Pixelworks will focus on accelerating investments in TrueCut. - Todd DeBonis(CEO)

Contradiction Point 2

Shanghai Subsidiary's Geopolitical Impact

It highlights differing perspectives on the impact of geopolitical factors on the Shanghai subsidiary, which could influence business operations and growth prospects.

Have you seen an impact on the business recently due to geopolitical factors? - Sujeeva De Silva (ROTH Capital)

20251112-2025 Q3: There is an undercurrent of a 'Delete America' policy, pressuring buyers towards local semiconductor companies. Pixelworks Shanghai felt this for 18 months. Since the deal announcement, we've seen new opportunities for the subsidiary that might not have come if the ownership had remained. - Todd DeBonis(CEO)

Has your Shanghai subsidiary experienced any business impact from geopolitical issues recently? - Sujeeva De Silva (ROTH Capital Partners, LLC, Research Division)

2025Q3: There is a policy, 'Delete A' or 'Delete America,' pushing for local semiconductor preference. Pixelworks felt this impact for the last 18 months. Some opportunities were lost, but others succeeded. - Todd DeBonis(CEO)

Contradiction Point 3

Geopolitical Impact on Business

It reflects differing perspectives on the impact of geopolitical factors on the company's operations and market opportunities.

Have you experienced an impact on the business recently due to geopolitical factors? - Sujeeva De Silva (ROTH Capital)

20251112-2025 Q3: There is an undercurrent of a 'Delete America' policy, pressuring buyers towards local semiconductor companies. Pixelworks Shanghai felt this for 18 months. Since the deal announcement, we've seen new opportunities for the subsidiary that might not have come if the ownership had remained. - Todd DeBonis(CEO)

How will Pixelworks be different after the Shanghai division restructuring? - Nicolas Emilio Doyle (Needham & Company)

2025Q2: It's too early to give any color on that, but I'll provide updates as soon as I can. - Todd DeBonis(CEO)

Contradiction Point 4

TrueCut Business Prioritization and Investment

It reveals differing priorities and investment strategies for the TrueCut business, which could impact its growth and market penetration.

How is the TrueCut business being operated pre- and post-transaction? - Sujeeva De Silva (ROTH Capital)

20251112-2025 Q3: We have been running the business appropriately up to this point, but now we will focus on accelerating it. Evangelism will increase to bring the ecosystem together and drive adoption. - Todd DeBonis(CEO)

How will Pixelworks differ strategically after restructuring its Shanghai division? - Nicolas Emilio Doyle (Needham & Company)

2025Q2: "Since the technology's success, investment may have been limited due to financial constraints. Post-transaction, resources can be directed towards TrueCut. - Todd DeBonis(CEO)

Contradiction Point 5

Geopolitical Impact on Business

It highlights how the company perceives and discusses the impact of geopolitical factors on its business operations, which can influence strategic decision-making and investor sentiment.

Have you seen any recent impact on the business from geopolitical factors? - Sujeeva De Silva (ROTH Capital)

20251112-2025 Q3: There is an undercurrent of a 'Delete America' policy, pressuring buyers towards local semiconductor companies. Pixelworks Shanghai felt this for 18 months. Since the deal announcement, we've seen new opportunities for the subsidiary that might not have come if the ownership had remained. - Todd DeBonis(CEO)

Could you provide the revenue levels and the portion of OpEx attributable to Shanghai to understand the operating model? - Suji Desilva (ROTH Capital)

2025Q1: Aside from that, we're not really seeing any impact on the business other than a few customers that we've had in the past that are taking a pause and trying to decide what their long-term strategy is regarding American semiconductor companies versus local semiconductor companies in their region. - Todd DeBonis(CEO)