CEVA, Inc. (CEVA) Q2 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call reveals a mixed performance with declining revenue and increasing losses, despite some positive trends in IoT shipments. The lowering of revenue guidance and higher-than-expected expenses contribute to a negative sentiment. While there is optimism in AI and NPU licensing, the lack of specific guidance and declining margins overshadow these positives. The Q&A section also highlights management's reluctance to provide detailed future guidance, adding uncertainty. Overall, the combination of financial underperformance and cautious outlook leads to a negative sentiment, likely resulting in a stock price decline.

Key Financial Performance

Revenue for Q2 2025 $25.7 million, down 10% year-over-year from $28.4 million. The decline was primarily due to a catch-up in licensing revenue recognized in Q2 2024 following a slip in Q1 2024.

Licensing and related revenue for Q2 2025 $15 million, representing 59% of total revenue, down 13% year-over-year. The decline was attributed to the catch-up in licensing revenue in Q2 2024.

Royalty revenue for Q2 2025 $10.7 million, representing 41% of total revenue, up 16% sequentially but down 5% year-over-year. The year-over-year decline was due to lackluster smartphone sales at the lower end of the market.

Gross margins for Q2 2025 86% on GAAP and 87% on non-GAAP basis, compared to 90% and 91% respectively a year ago. The decline was due to higher employee-related benefit provisions and strategic investments in AI.

GAAP operating expenses for Q2 2025 $26.6 million, above guidance due to higher employee-related benefit provisions and strategic investments in AI.

Non-GAAP operating expenses for Q2 2025 $21.6 million, slightly above guidance for the same reasons as GAAP operating expenses.

GAAP operating loss for Q2 2025 $4.5 million, compared to a GAAP operating loss of $35,000 in Q2 2024. The increase in loss was due to higher operating expenses.

GAAP net loss for Q2 2025 $3.7 million, with a diluted loss per share of $0.15, compared to a net loss of $0.3 million and diluted loss per share of $0.01 in Q2 2024. The increase in loss was due to higher operating expenses and lower revenue.

Non-GAAP net income for Q2 2025 $1.8 million, with a diluted income per share of $0.07, compared to $4.2 million and $0.17 respectively in Q2 2024. The decline was due to lower revenue and higher expenses.

Shipped units by CEVA's licensees in Q2 2025 488 million units, up 16% sequentially and 6% year-over-year. Consumer IoT shipments were up 60% year-over-year, while industrial IoT shipments were down 16% year-over-year.

Bluetooth shipments in Q2 2025 254 million units, down 5% year-over-year from 266 million units.

Cellular IoT shipments in Q2 2025 66 million units, up 66% year-over-year, reaching an all-time record high.

Wi-Fi shipments in Q2 2025 62 million units, up 80% year-over-year from 35 million units. Wi-Fi 6 shipments were up 113% year-over-year.

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Operating Highlights

Edge AI NPUs: Secured 4 strategic high-impact NPU customer agreements, including NeuPro-Nano and NeuPro-M deals for audio in embedded applications and diverse use cases. AI is being integrated into earbuds, hearing aids, smart speakers, and smartwatches for advanced functionalities.

Automotive DSPs: Secured 2 strategic agreements, including a licensing deal with Qualcomm for V2X solutions and a sensor fusion DSP for a U.S. customer developing a 4D radar platform.

Infrastructure and Data Centers: Expanding NPU business into these markets to address performance and efficiency challenges in AI workloads.

Consumer IoT: Strong growth with record-high cellular IoT and Wi-Fi 6 shipments, up 21% sequentially and 60% year-over-year.

Licensing Revenue: Achieved $15 million in licensing revenue, reflecting a 13% year-over-year decline but a 5% increase for the first half of 2025 compared to 2024.

Royalty Revenue: Reported $10.7 million in royalty revenue, a 16% sequential increase but a 5% year-over-year decline. Consumer IoT shipments showed strong growth.

AI Integration: AI is becoming central to CEVA's offerings, with significant contributions to licensing revenue and integration into various consumer and industrial products.

Long-term Investments: Continued investments in AI and new technologies to enrich the IP portfolio and maintain leadership in the semiconductor industry.

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Risk or Challenges

Revenue Decline: Revenue for Q2 2025 was $25.7 million, down 10% compared to the same quarter last year. Licensing revenue declined 13% year-over-year, and royalty revenue decreased by 5% year-over-year.

Smartphone Market Weakness: Year-over-year royalty revenue decline was attributed to lackluster smartphone sales, particularly at the lower end of the market, which impacted overall revenue.

Operating Loss: GAAP operating loss for Q2 2025 was $4.5 million, a significant increase compared to a loss of $35,000 in the same period last year.

Increased Operating Expenses: Total GAAP operating expenses for Q2 2025 were $26.6 million, above guidance due to higher employee-related benefit provisions and strategic investments in AI.

Industrial IoT Market Decline: Shipments in the industrial IoT market were down 16% year-over-year, indicating softness in this segment.

Dependence on Seasonal Trends: Royalty revenue is historically stronger in the second half of the year due to seasonality, which could pose risks if seasonal demand does not materialize as expected.

Competitive Pressures in AI and Connectivity: CEVA faces competitive pressures in expanding its AI and connectivity IP portfolio, which requires significant investment and innovation to maintain market leadership.

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Guidance & Outlook

Revenue Guidance: Total revenue for Q3 2025 is expected to be between $26 million to $30 million. The company maintains its overall revenue growth guidance for 2025, driven by strong licensing execution and anticipated growth in royalties.

Gross Margin: Gross margin for Q3 2025 is expected to be approximately 87% on a GAAP basis and 88% on a non-GAAP basis, reflecting a 1% increase from Q2 2025.

Operating Expenses: GAAP operating expenses for Q3 2025 are expected to range between $26 million to $27 million, while non-GAAP operating expenses are projected to be between $21 million to $22 million.

Royalty Revenue: Sequential growth in royalty revenue is anticipated for the second half of 2025, particularly in Q4, driven by seasonality, new product deployments, and share gains at a U.S. OEM smartphone customer using CEVA's technology for their in-house 5G modem.

Licensing Revenue: The licensing pipeline for Edge AI prospects remains healthy, with strong execution expected to continue in the second half of 2025.

Market Trends: Growth is expected in cellular IoT and Wi-Fi 6 product lines, with record-high shipments anticipated. Smartphone royalties are also expected to grow in the second half of 2025.

Net Income and EPS: The company expects a double-digit percentage increase in non-GAAP net income and fully diluted non-GAAP EPS for 2025 compared to 2024.

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Shareholder Return Plan

Share Buyback Program: In the second quarter this year, we were more active on our buyback program and repurchased 300,000 shares for approximately $6.2 million. As of today, around 725,000 shares are still available for repurchase under the repurchase program as expanded in November of last year.

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Key Q&A

Q:As licensing in NPUs increases, does this suggest higher value ICs and potential acceleration in royalty revenues?

A:Yes, the management sees great momentum in licensing NPUs and expects better economics and meaningful increases in royalty per unit due to the complexity and needs of the technology.

Q:Is the time from licensing to royalty longer with more complex designs, and will the product lifecycle shorten due to the fast-moving AI market?

A:Typically, the time from licensing to royalty is 18-24 months. For consumer products, it can be shorter (18 months), while complex systems may take 24 months. The lifecycle depends on the system; consumer devices have typical cycles, while infrastructure systems have longer tails.

Q:What is the contribution of flagship smartphone customers to royalty streams in the second half and beyond 2026?

A:Management has not provided guidance for 2026 but expects the success of their technology to continue ramping up. Historically, Q4 has been the strongest quarter for high-volume, low-cost smartphones.

Q:What gives CEVA a scaled opportunity in Edge AI, and what is the potential for data center applications?

A:CEVA provides a scalable platform for NPUs, from low to high performance, and offers a complete SDK software stack for easy integration. Their edge NPU solutions are optimized for low power and high performance, with some applicability for cloud inference AI.

Q:Are the new products mentioned last quarter already working, and are there any new products expected by year-end?

A:Yes, new AI products launched last year are gaining traction, with record-high licensing in Q2. CEVA continues to enhance its portfolio with new features and technologies, including cellular IoT and Wi-Fi 6.

Q:What is the outlook for shipments in various segments, including smartphones, industrial, consumer IoT, and infrastructure?

A:Smartphones and industrial segments are expected to show strong sequential growth in the second half, despite overall softness. Consumer IoT and infrastructure are performing well, with strong growth expected, particularly in Wi-Fi 6 and cellular IoT.

Q:What contributed to the decline in Bluetooth shipments this quarter, and will Bluetooth show year-over-year growth?

A:The decline was minor and attributed to customer mix. Management expects sequential growth in the second half and year-over-year growth for Bluetooth, Wi-Fi, and cellular IoT shipments.

Q:Review of Unclear Management Responses

A:Management avoided providing specific guidance for 2026 regarding flagship smartphone customer contributions and used general statements about historical trends and expectations. Additionally, they did not provide detailed reasons for the minor decline in Bluetooth shipments, attributing it to customer mix without further elaboration.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

CEVA Transcript

CEVA, Inc. (CEVA) Q3 2025 Earnings Call Transcript

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The earnings call highlights strong financial performance with record shipments in cellular IoT and Wi-Fi, improved gross margins, and optimistic guidance for future royalty revenue growth. Despite a GAAP net loss, the company shows a positive trend in non-GAAP metrics. Q&A insights reveal promising partnerships, particularly with Microchip, and strong customer interest in new technologies. The lack of specific guidance details is a minor concern, but overall, the positive financial metrics and strategic developments indicate a likely positive stock reaction.

CEVA, Inc. (CEVA) Q2 2025 Earnings Call Transcript

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CEVA, Inc. (CEVA) Q1 2025 Earnings Call Transcript

Unknown5-7

The earnings call reveals mixed signals: while total revenue and licensing revenue have grown, royalty revenue has declined, and there's a GAAP operating loss. The cautious revenue guidance and lack of a share repurchase program are concerning. Although there are positive signs in Wi-Fi royalties and licensing, economic uncertainty and a cautious approach impact sentiment negatively. The Q&A highlights management's lack of clarity on key competitive metrics, adding to uncertainty. Overall, the negative aspects outweigh the positives, suggesting a negative market reaction.

CEVA, Inc. (CEVA) Q3 2024 Earnings Call Transcript

Positive11-8

The earnings call reveals strong financial performance with a 13% revenue increase, a significant rise in non-GAAP net income, and a healthy cash position. The Q&A indicates a robust pipeline and strategic focus on expanding Wi-Fi and AI capabilities. Despite some margin concerns, the positive guidance, share repurchase program, and strategic agreements suggest a positive outlook. The market is likely to react positively, with a predicted stock price movement of 2% to 8% over the next two weeks, given the company's strategic initiatives and financial health.

CEVA Report

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