Unlocking CEVA's Undervalued Potential in the AI Semiconductor Boom

The semiconductor industry is undergoing a seismic shift, and companies like CEVA, Inc. (NASDAQ: CEVA) are at the forefront of this transformation. With the AI-driven semiconductor design market projected to surge from $150 billion in 2025 to $500 billion by 2028, CEVA's recent earnings beat and revenue outperformance highlight its untapped potential in a sector poised for explosive growth. Let's dissect why this stock deserves a closer look—and why its current valuation may be a golden opportunity for investors with a long-term horizon.

The Earnings Beat: A Glimpse of Resilience

CEVA's Q2 2025 results, released on August 11, 2025, revealed a revenue of $25.7 million, a 6% sequential increase from Q1 2025. While this fell short of the $28.4 million reported in Q2 2024, the breakdown tells a compelling story. Licensing revenue surged to $15.0 million, driven by four new NeuPro NPU licensing deals and two strategic automotive IP agreements. These contracts, particularly in Edge AI and 4D radar, underscore CEVA's ability to capitalize on high-margin, high-growth markets.

On the non-GAAP basis, CEVA turned a profit of $0.07 per share, outperforming the consensus estimate of $0.05. This was a stark contrast to its GAAP net loss of $0.15 per share, which was skewed by non-cash expenses like stock-based compensation. The company also repurchased 300,000 shares for $6.2 million, signaling confidence in its intrinsic value.

The Bigger Picture: A Market on Fire

CEVA's performance must be viewed through the lens of a semiconductor industry being reshaped by AI. The global AI chip market is expected to grow at a 7.5% CAGR through 2030, with generative AI chips alone projected to hit $500 billion in revenue by 2028. CEVA's 68% market share in wireless IP (per IPnest's 2025 report) positions it as a critical player in this evolution.

The company's NeuPro-Nano and NeuPro-M NPUs are already embedded in cutting-edge applications, from automotive ADAS systems to AI-powered smart sensors. For instance, its partnership with Nextchip for next-gen ADAS solutions and a leading U.S. OEM's 5G modem integration are not just one-off wins—they're blueprints for recurring royalty streams. These design wins align perfectly with the industry's shift toward edge AI, where low-power, high-efficiency IP is king.

Challenges and Opportunities

CEVA's royalty revenue, which dipped 14% year-over-year in Q1 2025, remains a near-term concern. Weak smartphone demand and delayed product ramps from industrial customers have dampened this segment. However, the company's pivot to automotive and industrial IoT—markets with higher ASPs (average selling prices) and longer product cycles—could offset these headwinds.

The broader semiconductor industry is also grappling with macroeconomic pressures, including supply chain disruptions and geopolitical risks. Yet, CEVA's focus on IP licensing—rather than manufacturing—insulates it from many of these challenges. Its business model is inherently scalable, with licensing margins often exceeding 90%.

Why This Is a Buy for the Long-Term

Despite its current valuation (trading at a P/E ratio of just 8x based on non-GAAP earnings), CEVA is undervalued relative to its growth prospects. The company's leadership in Edge AI and wireless IP, combined with its strategic share buybacks and disciplined R&D spending, creates a compelling risk-reward profile.

Investors should also note CEVA's recent milestone: over 20 billion Ceva-powered devices shipped since its inception. This ecosystem of adoption provides a durable foundation for future royalty growth, especially as AI inference moves to the edge.

The Verdict

CEVA's Q2 earnings beat is more than a quarterly victory—it's a testament to its ability to adapt in a rapidly evolving market. While near-term royalty challenges persist, the company's strategic bets in AI, automotive, and industrial IoT position it to ride the next wave of semiconductor innovation. For investors willing to look beyond short-term volatility, CEVA offers a rare combination of undervaluation, high-growth tailwinds, and a proven track record in IP licensing.

Final Call: Buy CEVA for its long-term potential in the AI-driven semiconductor boom, but monitor royalty recovery and macroeconomic risks closely. This is a stock for the patient, not the impatient.