Earnings call transcript: Arteris Q2 2025 sees stock surge on revenue beat

Arteris Inc. (ARTRS) reported its second-quarter 2025 earnings with results that exceeded revenue expectations. The company posted a revenue of $16.5 million, surpassing the forecast of $16.35 million. The earnings per share (EPS) came in at -$0.11, slightly below the predicted -$0.10. According to InvestingPro data, the company maintains impressive gross profit margins of 90.18% and currently appears overvalued based on its Fair Value analysis. The stock surged by 37.57% in aftermarket trading, reflecting positive investor sentiment driven by the revenue beat and strategic developments.

Key Takeaways

• Arteris reported a 13% year-over-year increase in revenue, reaching $16.5 million.
• The company’s stock price rose by 37.57% in aftermarket trading.
• Arteris launched new products and won an AI Engineering Innovation Award.
• The company maintained a strong cash position with $53.9 million in cash and investments.

Company Performance

Arteris demonstrated solid performance in Q2 2025, with revenue growing by 13% compared to the same quarter last year. This growth was driven by increased demand in enterprise computing and automotive applications. The company’s strategic partnerships with industry leaders like AMD and Synopsys have bolstered its competitive position in the semiconductor market.

Financial Highlights

• Revenue: $16.5 million, up 13% year-over-year.
• Annual Contract Value (ACV) plus royalties: $69.1 million, up 15% year-over-year.
• Non-GAAP gross margin: 91%.
• Non-GAAP operating loss: $3.5 million, flat year-over-year.
• Cash and investments: $53.9 million.

Earnings vs. Forecast

Arteris reported an EPS of -$0.11, slightly missing the forecast of -$0.10, resulting in a 10% negative surprise. However, the revenue of $16.5 million exceeded the forecast of $16.35 million, providing a positive surprise of 0.92%.

Market Reaction

Following the earnings announcement, Arteris’ stock price increased by 37.57%, closing at $14.2 in aftermarket trading. This movement reflects investor optimism, likely fueled by the company’s revenue beat and strategic advancements. InvestingPro data shows analyst price targets ranging from $9 to $16, with a consensus recommendation of 1.5 (Strong Buy). The stock’s price is nearing its 52-week high of $14.29, indicating strong market confidence despite an overall weak Financial Health Score of 1.72 out of 5.

Outlook & Guidance

For Q3 2025, Arteris projects revenue between $16.8 million and $17.2 million, with a non-GAAP operating loss of $3 million to $4 million. The full-year 2025 guidance includes revenue of $66 million to $70 million and a non-GAAP operating loss of $10.5 million to $15.5 million.

Executive Commentary

CEO Charlie Janik stated, "We believe FlexGen is a breakthrough technology in terms optimization of SOC data movement." CFO Nick Hawkins added, "Despite the near-term impacts of foreign exchange fluctuations, we remain encouraged by our strong deal execution."

Risks and Challenges

• Economic uncertainty could impact future deal closures.
• Foreign exchange fluctuations may affect financial results.
• Increasing competition in the semiconductor market.
• Dependency on strategic partnerships for growth.
• Potential supply chain disruptions in the technology sector.

Q&A

During the earnings call, analysts inquired about the AMD deal and its potential impact on revenue. Arteris confirmed that FlexGen sales are anticipated to grow in the second half of the year. Additionally, no deal cancellations or delays were reported, despite economic uncertainties.

Full transcript - Arteris Inc (AIP) Q2 2025:

Conference Operator: Good afternoon, everyone, and welcome to the Artery’s Second Quarter twenty twenty five Earnings Call. Please note that this call is being recorded and simultaneously webcast. All material contained in the webcast is sole property and copyright of Arteris Inc. With all rights reserved. For opening remarks and introductions, I will now turn the call over to Erica Mannion of Saphyr Investor Relations.

Please go ahead.

Erica Mannion, Investor Relations, Saphyr Investor Relations: Thank you, and good afternoon. With me today from Arteris are Charlie Janik, Chief Executive Officer and Nick Hawkins, Chief Financial Officer. Charlie will begin with a brief review of the business results for the second quarter ended 06/30/2025. Nick will review the financial results for the second quarter, followed by the company’s outlook for the third quarter and the full year of 2025. We will then open the call for questions.

Before we begin, I’d like to remind you that management will make statements during this call that are forward looking statements within the meaning of federal securities laws. These statements are based on management’s current expectations and assumptions and involve material risks and uncertainties that could cause actual results or events to differ materially from those anticipated, and you should not place undue reliance on forward looking statements. Additional information regarding these risks, uncertainties and factors that could cause actual results to differ appear in the press release Arteris issued today and in the documents and reports filed by Arteris from time to time with the Securities and Exchange Commission. Please note, during this call, we will cite certain non GAAP measures, including, among others, non GAAP net loss, non GAAP net loss per share, and free cash flow, which are not measures prepared in accordance with U. S.

GAAP. These non GAAP measures are presented as we believe that they provide investors with a means of evaluating and understanding how the company’s management evaluates the company’s operating performance. These non GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with U. S. GAAP.

A reconciliation of these non GAAP measures to the nearest GAAP measure can be found in the press release for the quarter ended 06/30/2025. In addition, for a definition of certain of the key performance indicators used in this presentation, such as annual contract value, confirmed design starts, and remaining performance obligations, please see the press release for the quarter ended 06/30/2025. These key performance indicators are presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with GAAP and may differ from similarly titled metrics or measures used by other companies, securities analysts or investors. Listeners who do not have a copy of the press release for the quarter ended 06/30/2025, may obtain a copy by visiting the Investor Relations section of the company’s website. In addition, management will be referring to Q2 twenty twenty five earnings presentation, which can be found in the Investor Relations section of the company’s website under the Events and Presentations tab.

Now, I will turn the call over to Charlie.

Charlie Janik, Chief Executive Officer, Arteris Inc.: Thank you, Erica, and thanks to everyone for joining us on our call today. In the 2025, we achieved record annual contract value plus royalties of 69,100,000.0 We exited the quarter with $99,300,000 in remaining performance obligations or RPO, highlighting the growing demand for our system IP technology. During the second quarter, we saw increased adoption, particularly in enterprise computing and automotive applications, driven largely by proliferation of AI computing, where the speed and reliability of data movement enabled by Arteris is paramount. One of these strategic wins was AMD, a global leader in high performance and adaptive computing and a top 10 semiconductor company by revenue, we signed an agreement to utilize our TerrAs FlexGen Smart Network on Chip IP, the technology we announced earlier this year. FlexGen will aim to provide high performance data transport in AMD chiplets powering AI across AMD’s broad portfolio which spans from data centers to edge and end devices.

It will also be used in combination with AMD null Fabric Interconnect underscoring the increasing complexity of modern SoCs and chipper based architectures which now require multiple highly specialized interconnects or NOCs. In addition to the AMD relationship, we now have over two dozen FlexGen installations at multiple customers and anticipate that this product will contribute to our revenue over time. We believe FlexGen is a breakthrough technology in terms optimization of SOC data movement. I’m proud that Arteris was recently recognized in the eighth Annual AI Breakthrough Awards with Flexgen winning the AI Engineering Innovation Award from among the over 5,000 global nominations. FlexGen was recognized for its ability to successfully automate critical aspects of NOC IP creation, ensuring rapid correct by design interconnect fabrics that optimize performance and efficiency of AI driven SoCs.

Another recent AI related customer win was RealChip, a established semiconductor provider that specializes in developing processors for high bandwidth applications including cloud servers, interconnect computing and blockchain computing among others. As the semiconductor industry accelerates efforts to increase performance and efficiency especially driven by AI workloads, we are seeing a growing shift from traditional monolithic chips toward multi die or chiplet architectures in the AI era. Consequently, during the second quarter, we announced an expansion of our multi die solution, which we believe delivers further foundational technology for rapid chiplet based innovation. This includes broader standard support for the Universal Chiplet Interconnect Express or UCIE, collaboration and extended support for ARM and BA protocols, chiplet interface collaborations with Synopsys and Cadence, and RISC V ecosystem support with partners such as Andes, SiFive and PenStorant. Moreover, the Arteris expanded multi die solution has been developed in close partnership with key customers who are increasingly designing chiplets such as Renaissance.

For example, Arteris technologies is used to provide underlying data transport and connectivity in the fifth generation of the RCAR automotive silicon developed by the high performance computing SoC business unit. Arteris multi die solutions help Renesas deliver on the integration and scalability offered by multi die SoCs as AI applications push the limit of performance and power efficiency. Lastly, as the number of triplets in multi die SoCs increases, so does the underlying number of individual IP blocks. As such, it becomes increasingly important to properly and reliably package and prepare hundreds or even thousands of these IP components for effective integration and reuse across SoCs, chiplets and complex IP subsystems. To capitalize on this trend in the second quarter, we announced Magilan Packaging, a new software product designed to automate IP packaging to simplify and speed up the process of assembling silicon chiplets and chips.

Utilizing the latest version of the IEEE sixteen eighty five IP exact standard, Magellan packaging is designed to work seamlessly with industry tools and silicon IP with the goal of helping companies meet increasing design demands while reducing costly errors and delays associated with integrating an ever growing number of IP blocks and the associated rising system complexity. We believe the scale and scope of our opportunity remain robust, supported by our current products and strong product pipeline of new silicon system IP technologies as well as growing relationships with the largest and most advanced electronics companies in the world. Our customers continue to innovate in exciting high growth areas, including across multiple applications of AI from data centers to the edge, autonomous driving, advanced communications, consumer and industrial use cases. While we continue to diligently monitor the current global economic uncertainty, this did not lead to any deal cancellations or delays in the second quarter. In addition, we are seeing opportunities for customers to accelerate outsourcing of their system IP needs to our tariffs in order to accelerate their products time to market, reduce their own costs and increase their operating efficiencies.

Nick will cover these impacts more when he discusses our guidance. With that, I’d like to turn it over to Nick to discuss our financial results in more detail.

Nick Hawkins, Chief Financial Officer, Arteris Inc.: Thank you, Charlie, and good afternoon, everyone. As I review our second quarter results today, please note that I’ll be referring to GAAP as well as non GAAP metrics. Reconciliation of GAAP to non GAAP financials is included in today’s earnings release, which is available on our website. Also as a reminder, I will be referring to the 2Q twenty twenty five earnings presentation, which can be found on the Investor Relations section of our company’s website under the Events and Presentations tab. We had a strong second quarter characterized by meeting or beating our guidance on all key financial metrics.

Turning to slide five of the presentation. Total revenue for the second quarter was $16,500,000 up 13% year over year and at the top end of our guidance range. At the end of the second quarter, annual contract value, or ACV, plus royalties was $69,100,000 up 15% year over year, above the midpoint of our guidance range and a record high for the company. Remaining Performance Obligations or RPO at the end of the second quarter were $99,300,000 representing a 28% year over year increase, once again a new high. Non GAAP gross profit for the quarter was $15,000,000 representing a gross margin of 91%.

GAAP gross profit in the quarter was $14,800,000 representing a gross margin of 89%. Now turning to slide six. Non GAAP operating expense in the quarter was $18,600,000 roughly flat sequentially and 10% higher year over year. We continue to scale investments in our R and D and field application engineering teams that drive technology innovations and solution support. Total GAAP operating expense for the second quarter was $23,000,000 representing a 12% year over year increase.

As we look ahead, we plan to focus spending on strategically critical areas, in particular to help drive new product development, enhance customer support and expand the geographic and key account reach of our global sales team. We believe that these ongoing investments can help accelerate our top line growth in the coming years. At the same time, we are delivering operating leverage by controlling our G and A spending, which has remained broadly flat on a non GAAP basis for approximately three years. Non GAAP operating loss in the quarter was $3,500,000 in line with our guidance and flat year over year. GAAP operating loss for the second quarter was $8,200,000 compared to a loss of $7,400,000 in the prior year period.

Non GAAP net loss for the quarter was $4,400,000 or diluted net loss per share of $0.11 based on approximately 41,800,000.0 weighted average diluted shares outstanding. GAAP net loss for the quarter was $9,100,000 or diluted net loss per share of $0.22 Moving to Slide seven and turning to the balance sheet and cash flow. We ended the quarter with $53,900,000 in cash, cash equivalents and investments and have no financial debt. Free cash flow, which includes capital expenditure was negative $2,800,000 for the second quarter, approximately at the midpoint of our guidance range. I would now like to turn to the outlook for our third quarter and the full year 2025 and refer now to Slide eight.

For the 2025, we expect ACB plus royalties of $69,500,000 to $72,500,000 revenue of $16,800,000 to $17,200,000 with non GAAP operating loss of 3,000,000 to $4,000,000 and non GAAP free cash flow of $500,000 to $3,500,000 For the full year 2025, our guidance is as follows: ACV plus royalties to exit 2025 at $72,000,000 to $78,000,000 revenue of $66,000,000 to $70,000,000 non GAAP operating loss of between $10,500,000 to $15,500,000 and non GAAP free cash flow of $1,000,000 to $7,000,000 Our OpEx is currently running higher than previously expected, predominantly as a result of the weaker U. S. Dollar, especially against the euro. Although the U. S.

Dollar has strengthened somewhat in recent days, in assessing our non GAAP operating loss guidance, we have assumed that the recent prevailing foreign exchange rates remain at these levels for the remainder of 2025. Despite the near term impacts of foreign exchange fluctuations, we remain encouraged by our strong deal execution, witnessed by the 28% year over year growth in RPO at the end of the second quarter. Reiterating the point raised earlier by Charlie, we are seeing promising signs of accelerated interest by some major customers to increase their outsourcing of system IP products to Arteris. With that, I will turn the call back to the operator for the Q and A portion of our call. Operator?

Conference Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. One moment please for your first question. Your first question comes from the line of Joshua Buchelter from TD Cowen. Your line is now open.

Please go ahead.

Joshua Buchelter, Analyst, TD Cowen: Hey, guys. Thank you for taking my questions and congrats on the results on the AMD announcement yesterday. I want to ask about that. Any details you can share on the scope? The press release names pretty much all of their products.

I believe AMD had been an existing partner of yours. So maybe you could talk through how they’re using your IP and they’ve been providing chiplets for a while. So what are you guys bringing to the table and what led them to need to use you guys more expansively going forward? Thank you.

Nick Hawkins, Chief Financial Officer, Arteris Inc.: I know whether we have lost Charlie. Charlie, you’re on mute.

Charlie Janik, Chief Executive Officer, Arteris Inc.: Apologies. Sorry about that. Thank you. So, so, in February, we announced the FlexShin product, which basically allows higher levels of productivity and also some advantages in PPA in terms of wire length. Basically, AMD extensively evaluated this product, including some benchmarks against competitive alternatives and they basically chose that as the best product for them going forward.

So what we bring to the table is the new innovative flexion technology and AMD basically decided to apply it to a variety of products, including AI data center chiplets.

Joshua Buchelter, Analyst, TD Cowen: Okay, thank you. And then for my follow-up, how should we think about this layering into the model from a timeline and magnitude perspective? I believe FlexGen has an ASP that’s up 30% gen to gen. So how meaningful this can this be to the model? Thank you and congrats again.

Nick Hawkins, Chief Financial Officer, Arteris Inc.: Alex, am I I speak to that one?

Kevin Yergin, Analyst, Rosenblatt Securities: Yeah. Please. Yes.

Nick Hawkins, Chief Financial Officer, Arteris Inc.: So hi, Josh. Thanks for joining. Great to speak to you again. The the we we do We do secure a fairly decent number of what we refer to as whale deals, major deals in a year. This is one of those.

When we formed when we put our guidance out at the end of the first quarter, this was this deal was already in the works. This has been in the works for many months. And so it was already baked into guidance at that point. I wouldn’t want you to think this is the only big deal. We have.

We have one or two every quarter major deals. So this is already contemplated when we guided previously. It’s very helpful though.

Joshua Buchelter, Analyst, TD Cowen: Okay. I will leave it there. Thank you and congratulations again.

Nick Hawkins, Chief Financial Officer, Arteris Inc.: Thanks.

Conference Operator: Your next question comes from the line of Kevin Yergin from Rosenblatt Securities. Your line is now open. Please go ahead.

Kevin Yergin, Analyst, Rosenblatt Securities: Yes. Hey, Charlie and Nick, congrats on the solid results. I was kind of wondering, can you comment on whether the decision by AMD was because they’re looking to disband their internal team or if this was more surrounding just kind of not being able to hit performance metrics so they’re looking for another solution?

Charlie Janik, Chief Executive Officer, Arteris Inc.: Not at all. So as we mentioned, FlexGen is going to work with the AMD’s null Fabric, which is their cash coherent solutions, which is made internally. So I basically the decision that AMD came to is that they are going to continue to use their very capable cash coherent fabric and that they are going to augment that with the with the Arteris technology for their non coherent applications so it’s a mix and match approach.

Kevin Yergin, Analyst, Rosenblatt Securities: Got it. Okay. That makes sense. And then as a follow-up, you guys previously noted about 20 customers were experimenting with FlexGen and you talked about how large customers are looking to accelerate adoption of our Terrus product. Is there anything else that you guys can do to get these customers over the finish line or are you pretty much kind of waiting in the wings for them to make a decision?

Joshua Buchelter, Analyst, TD Cowen: Yeah, I mean,

Charlie Janik, Chief Executive Officer, Arteris Inc.: phlegm gen involves in certain senses changes in methodologies. And so some of these evaluations are faster than others, but there’s a fair number of phlegogens in the wild, as we said, more than two dozen, and we anticipate that they’re going to result in sales starting in the second half in addition to the AMD deal.

Nick Hawkins, Chief Financial Officer, Arteris Inc.: Okay, great. Appreciate it. I’d add something really quick, Kevin. This is Nick again, And welcome to Cole. Thank you for joining.

The validation by such a great company as AMD on this technology will certainly be helpful to our cause.

Kevin Yergin, Analyst, Rosenblatt Securities: Yeah. No. I I completely agree. I mean, the pioneer of of the chiplet era is is huge. Okay.

Perfect. I I appreciate the color. Thanks, guys.

Nick Hawkins, Chief Financial Officer, Arteris Inc.: Guys.

Conference Operator: For your next question, it’ll come from the line of Gus Richard from Northland. Your line is now open. Please go ahead.

Gus Richard, Analyst, Northland: Yes, thanks for taking the question. Just in terms of I’m sorry to keep on asking about AMD. Is this primarily for triplet implementations or heterogeneous implementations?

Charlie Janik, Chief Executive Officer, Arteris Inc.: I think it’s gonna be used in variety of products. But one of the ones that is certainly going to be used is on AI, a data center AI oriented chiplets, chiplet SoCs. But, you know, it’s a it’s a multi license deal, and so it’s gonna be used on on a variety of products, but chiplets are simply one of them.

Gus Richard, Analyst, Northland: Got it. Got it. And then just can you give us a little bit of an update on sort of how many heterogeneous chiplet projects you see out there now?

Charlie Janik, Chief Executive Officer, Arteris Inc.: So, what we see and what a lot of people see is a little bit different. There’s about 600 to 700 SoCs out there. And at this time, we’re seeing probably 30 projects right now. So there’s probably more than that, but what we see is about 30. So it’s about 5% of total, but we are anticipating that over the next couple of years, chiplet projects are going to be probably 30% of the overall SOC design starts.

But today we see maybe 5% of that number.

Gus Richard, Analyst, Northland: Okay. And that’s chiplets in general, not heterogeneous chiplets.

Charlie Janik, Chief Executive Officer, Arteris Inc.: That’s, So you’re asking a question because homogeneous chiplets have been in production for a while, right? This be more in the heterogeneous chiplet category.

Gus Richard, Analyst, Northland: Got it. And then one for you, Nick, just then I’ll go. Just looking at RPO and a couple of other things, it looks like book to bill was probably north of 1.5 in the quarter. Is that a fair guess?

Nick Hawkins, Chief Financial Officer, Arteris Inc.: Yes, I don’t really monitor book to bill specifically. And so I certainly wouldn’t comment on that one, Gus. But it is a very positive indicator to have your leading indicator of growth, which is the way we characterize RPO essentially is our backlog of future revenue to grow to nearly $100,000,000 and 28% year over year is a great outcome.

Gus Richard, Analyst, Northland: Got it. Thanks so much.

Conference Operator: There are no further questions at this time. Please continue, Mr. Charlie Janak.

Charlie Janik, Chief Executive Officer, Arteris Inc.: Yes. So we’d like to thank you for your interest in Arteris. We look forward to meeting with you in the upcoming investor conferences that we’re participating in through the next couple of months. And we look forward to updating you all on our business progress in the course to come. So thank you very much for your support.

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