Arteris, Inc. (AIP)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 revenue was $16.5M, up 28% y/y, exceeding the top end of guidance and aided by ~$0.5M one-time revenue; non-GAAP EPS was $(0.09), non-GAAP gross margin 92% .
• Record ACV + royalties of $66.8M and RPO of $88.9M underscore demand momentum across enterprise computing, communications, and automotive; free cash flow was +$2.7M .
• Management widened FY25 guidance ranges (revenue $65–$71M; ACV exit $71–$79M; non-GAAP op loss $7–$14M; FCF $0–$8M) due to tariff/geopolitical uncertainty and FX headwinds (approx. $1M expense impact if USD weakness persists), while keeping midpoints broadly unchanged .
• Near-term stock narrative catalysts: accelerating AI and chiplet adoption (FlexGen in >20 evaluations, expected bookings 2H), record ACV/RPO, Intel Foundry Accelerator IP & Chiplet Alliance participation, and potential customer outsourcing tailwinds .

What Went Well and What Went Wrong

What Went Well

• Record ACV + royalties of $66.8M and RPO of $88.9M; “we delivered record annual contract value plus royalties of $66.8 million and generated $2.7 million in positive free cash flow” .
• Strength in AI and large accounts: “4 came from top 30 global technology companies… another was an expanded reorder from a top 5 technology company” and AI-related deals now account for “north of 55%” of business .
• FlexGen traction: >20 SoC projects evaluating; production status reached in Feb (FlexGen 1.2), expected to drive bookings and revenue ratably starting 2H 2025 .

What Went Wrong

• Macro/tariff uncertainty and FX headwinds: widened FY guidance ranges; ~40% of expenses in foreign currencies and euro appreciation could impact expenses by ~$1M if sustained .
• Non-GAAP operating expense up 9% q/q and 8% y/y (investment in R&D, FAE, sales; weaker USD effect), with GAAP operating loss of $(7.7)M .
• Potential short-term royalty headwinds amid tariff/geopolitical backdrop and confidence softness, though licensing remains robust; some project replanning in China .

Financial Results

Notes: Q1 revenue exceeded guidance top end and benefited from ~$0.5M one-time revenue; free cash flow benefited from early customer payments (reverse expected in Q2) .

Guidance Changes

Management cited tariff/geopolitical uncertainty and FX as reasons for widening ranges while maintaining midpoints broadly intact .

Earnings Call Themes & Trends

Management Commentary

• “In the first quarter, we delivered record annual contract value plus royalties of $66.8 million and generated $2.7 million in positive free cash flow… sustained demand… across enterprise computing, communications, and automotive” — K. Charles Janac, CEO .
• “Total revenue… $16.5 million, up 28% y/y, benefiting from approximately $0.5 million onetime revenue… ACV plus royalties… $66.8 million… RPO… $88.9 million” — Nick Hawkins, CFO .
• “AI-related deals now account for north of 55% of our total business… fastest-growing royalty segment is enterprise” — Nick Hawkins .
• “We… joined the Intel Foundry Accelerator Program… and became a founding member of the new Chiplet Alliance” — K. Charles Janac .
• “We… widened our top line guidance ranges” due to tariffs/geopolitics and FX; ~40% of expenses in foreign currencies with up to ~$1M potential expense impact if USD remains weak — Nick Hawkins .

Q&A Highlights

• Tariffs/geopolitics: Licensing pipeline remains robust; widened ranges reflect uncertainty; some China project replanning; potential short-term royalty headwinds .
• FlexGen commercialization: ~20 evaluations; production status in Feb; bookings expected 2H; revenue impact muted near-term due to ratable nature; benefits visible first in RPO/ACV .
• Outsourcing trend: Economics (~10x payback vs in-house) and talent scarcity driving shift to commercial system IP; steady licensing growth .
• Intel alliance: Expect additional business over next 12 months; positioning for 18A process and leadership in system IP for chiplet ecosystems .
• Standards: UCIe and IP-XACT/SystemVerilog seen as core to heterogeneous chiplet standardization over coming years .

Estimates Context

Estimates values retrieved from S&P Global.*

Implications: Revenue was above consensus and guidance top-end, aided by one-time revenue and early payments supporting FCF; EPS tracked consensus given investment in R&D/FAE and FX headwinds .

Key Takeaways for Investors

• Demand momentum remains strong: record ACV/RPO and AI-related deal mix (>55%) support sustained top-line growth into FY25/FY26 .
• Guidance ranges widened, midpoints intact: narrative tempered by tariffs/geopolitics and FX, but licensing pipeline and customer outsourcing trends provide offsets .
• FlexGen is a potential 2H 2025 booking driver and a 2026 revenue driver due to ratable recognition; watch ACV/RPO and upfront payments as early indicators .
• Enterprise AI and automotive are leading verticals; automotive OEM count at 10 signals deepening penetration and long-duration program exposure .
• Ecosystem positioning: Intel Foundry alliances and UCIe support strengthen Arteris’ role in multi-die/chiplet architectures, potentially expanding TAM and strategic wins .
• Capital discipline with growth investment: non-GAAP opex up on strategic hiring; G&A held broadly flat for ~3 years; near-term FCF to normalize after Q1 early payments .
• Trading lens: positive setup on AI/chiplet narrative and ACV/RPO prints; monitor macro/tariff headlines and FX as key variables driving guidance range realization .

Additional Relevant Press Releases (Q1 2025 window)

• Awards: Gold Stevie® (Most Innovative Tech Company), Gold (Technical Innovation of the Year for Ncore), Silver (NoC Tiling) .
• Earnings date announcement and call logistics (Apr 24) .
• Customer/tech momentum post-Q1: Expanded multi-die solution supporting UCIe; collaborations with Arm, Cadence, Synopsys; Renesas R-Car Gen5 leveraging Arteris — underscores chiplet/AI strategy .