Executive Summary

Q2 2025 delivered revenue at the top end of guidance ($16.50M, +13% YoY) and record KPIs (ACV+royalties $69.1M; RPO $99.3M, +28% YoY), but EPS was slightly below consensus as higher OpEx—largely FX-driven—offset gross-margin strength .
Versus S&P Global consensus*, revenue was a small beat ($16.50M vs $16.35M*), while Primary EPS missed modestly (-$0.11 vs -$0.0975*); EBITDA was below consensus due to operating spending and FX *.
Guidance: Q3 revenue $16.8–$17.2M and FY 2025 revenue $66–$70M were reiterated/tightened; FY non-GAAP operating loss widened to $10.5–$15.5M (from $7.0–$14.0M prior), citing FX headwinds .
Strategic catalysts: AMD licensed FlexGen for high-performance AI chiplets; Arteris expanded multi-die/UCIe support and launched Magillem Packaging—strengthening AI and chiplet positioning and likely investor focus on medium-term ACV and RPO trajectory .

What Went Well and What Went Wrong

What Went Well
- Record ACV+royalties ($69.1M) and RPO ($99.3M), underscoring demand and backlog visibility; CEO: “record Annual Contract Value plus royalties... RPO... year-over-year increase of 28%” .
- Strategic wins: AMD licensed FlexGen “for high-performance data transport for its chiplets powering AI” across a broad product set; CEO highlighted FlexGen as “breakthrough technology” recognized with an AI Breakthrough Award .
- Platform expansion: broadened UCIe/AMBA support, EDA collaborations (Synopsys/Cadence), and RISC‑V partnerships; launch of Magillem Packaging to automate IP packaging for chiplets/SoCs .
What Went Wrong
- EPS/EBITDA missed consensus* despite revenue beat, reflecting higher non-GAAP OpEx from FX; CFO: “OpEx is currently running higher... as a result of the weaker U.S. Dollar” *.
- Operating loss widened YoY (GAAP -$8.25M vs -$7.44M), with elevated R&D and sales investment to support growth and new product development .
- Free cash flow turned negative in Q2 (-$2.84M) versus positive in Q1, tied to working-capital timing and capital purchases .

Financial Results

Quarterly P&L summary (oldest → newest)

Metric	Q4 2024	Q1 2025	Q2 2025
Revenue ($USD Millions)	$15.49	$16.53	$16.50
Gross Margin % (GAAP)	90%	91%	89%
Gross Margin % (Non-GAAP)	91%	92%	91%
Operating Loss (GAAP, $M)	$(7.10)	$(7.71)	$(8.25)
Operating Loss (Non-GAAP, $M)	$(2.76)	$(3.18)	$(3.53)
Net Loss (GAAP, $M)	$(8.20)	$(8.12)	$(9.13)
EPS (GAAP)	$(0.20)	$(0.20)	$(0.22)
Net Loss (Non-GAAP, $M)	$(3.86)	$(3.59)	$(4.42)
EPS (Non-GAAP)	$(0.10)	$(0.09)	$(0.11)

YoY: Q2 2025 revenue +13% YoY; non-GAAP operating loss flat YoY (both -$3.5M) .

Revenue breakdown by type (oldest → newest)

Metric	Q4 2024	Q1 2025	Q2 2025
Licensing, support & maintenance ($M)	$14.02	$15.34	$15.09
Variable royalties & other ($M)	$1.47	$1.20	$1.41
Total Revenue ($M)	$15.49	$16.53	$16.50

Key KPIs and liquidity (oldest → newest)

Metric	Q4 2024	Q1 2025	Q2 2025
ACV + Royalties ($M)	$65.1	$66.8	$69.1
Remaining Performance Obligations (RPO, $M)	$88.4	$88.9	$99.3
Confirmed Design Starts (#)	—	—	25
Free Cash Flow ($M)	—	$2.68	$(2.84)
Cash, Cash Equivalents & Investments ($M)	~$52.35 (13.68+30.16+8.50)	~$55.09 (16.37+25.94+12.78)	$53.9

Consensus vs Actual (S&P Global; oldest → newest)

Metric	Q4 2024 Estimate*	Q4 2024 Actual	Q1 2025 Estimate*	Q1 2025 Actual	Q2 2025 Estimate*	Q2 2025 Actual
Revenue ($M)	$15.43*	$15.49	$15.93*	$16.53	$16.35*	$16.50
Primary EPS	$(0.1075)*	$(0.10)	$(0.0925)*	$(0.09)	$(0.0975)*	$(0.11)
EBITDA ($M)	$(2.61)*	$(6.21)	$(2.49)*	$(6.86)	$(2.72)*	$(7.40)

Values marked with * are from S&P Global.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
ACV + royalties ($M)	FY 2025	$71.0–$79.0	$72.0–$78.0	Narrowed; midpoint slightly lower
Revenue ($M)	FY 2025	$65.0–$71.0	$66.0–$70.0	Tightened; midpoint broadly unchanged
Non-GAAP operating loss ($M)	FY 2025	$7.0–$14.0	$10.5–$15.5	Widened/worsened (FX-driven)
Free cash flow ($M)	FY 2025	$0.0–$8.0	$1.0–$7.0	Range narrowed
ACV + royalties ($M)	Q3 2025	—	$69.5–$72.5	New
Revenue ($M)	Q3 2025	—	$16.8–$17.2	New
Non-GAAP operating loss ($M)	Q3 2025	—	$3.0–$4.0	New
Free cash flow ($M)	Q3 2025	—	$0.5–$3.5	New

Management attributed FY non-GAAP operating loss widening primarily to weaker USD vs EUR increasing OpEx .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4’24 and Q1’25)	Current Period (Q2’25)	Trend
AI/technology initiatives	FlexGen launch; record ACV+royalties; added major OEMs; Intel Foundry alliances	AMD licensed FlexGen; >2 dozen FlexGen evaluations; AI Breakthrough Award	Strengthening adoption/validation
Multi-die/chiplets & UCIe	Early chiplet momentum; ecosystem building	Expanded multi-die solution; broader UCIe/AMBA support; EDA collaborations	Capability expansion
Product performance	Magillem/CSRCompiler licenses at top customers	Magillem Packaging launched to automate IP packaging	Toolchain build-out
Macro/FX	Noted macro uncertainty; positive FCF in Q1	FX increased OpEx; assuming prevailing FX for 2025 guidance	FX headwind to OpEx
Customer outsourcing	Strengthening interest in commercial System IP	“Promising signs of accelerated interest… increase their outsourcing”	Demand tailwind
Chiplet adoption levels	—	~600–700 SoCs; ~30 heterogeneous chiplet projects (~5%); rising to ~30% over next years	Early innings, rising
Regulatory/legal	NST case: claims dismissed without prejudice (WD Tex.)	No new claims; monitoring	Stable/legal overhang reduced

Management Commentary

CEO on growth drivers: “Record Annual Contract Value plus royalties of $69.1 million… RPO of $99.3 million… we remain confident in Arteris’ long-term growth opportunity” .
CEO on AMD: “FlexGen… provide high performance data transport in AMD chiplets powering AI… will be used… across AMD’s broad portfolio” .
CFO on execution and margin: “We had a strong second quarter… revenue… at the top end of our guidance… Non-GAAP gross margin 91%” .
CFO on guidance and FX: “OpEx is currently running higher… as a result of the weaker U.S. Dollar… we have assumed… prevailing foreign exchange rates remain at these levels” .

Q&A Highlights

AMD scope and rationale: AMD extensively evaluated FlexGen vs alternatives and chose it to augment Infinity Fabric for non-coherent applications; multi-license, multi-product use including AI data center chiplet SoCs .
Timing/magnitude: The AMD “whale” deal was contemplated in prior guidance; Arteris typically has “one or two” major deals per quarter .
Chiplet market: ~30 heterogeneous chiplet projects observed now (~5% of ~600–700 SoCs), expected to rise toward ~30% of design starts over the next couple years .
Book-to-bill: Management doesn’t monitor explicitly, but characterized RPO growth to nearly $100M (+28% YoY) as a strong leading indicator .

Estimates Context

Q2 revenue beat: $16.50M actual vs $16.35M consensus* *.
EPS miss: Primary EPS -$0.11 actual vs -$0.0975 consensus* *.
EBITDA miss: -$7.40M actual vs -$2.72M consensus* *.
FY 2025 consensus currently ~$68.97M revenue*, consistent with company’s $66–$70M guidance *.
Values marked with * are from S&P Global.

Key Takeaways for Investors

Execution remains solid: revenue at the high end and record ACV/RPO support durable top-line growth into 2H, while non-GAAP gross margins stay >90% .
Near-term EPS risk skewed to OpEx/FX: FY non-GAAP operating loss widened due to FX; monitor EUR/USD and hiring cadence vs sales conversion .
Strategic positioning improving: AMD FlexGen validation and expanded multi-die/UCIe ecosystem should enhance win rates in AI, automotive, and HPC chiplets .
Watch free cash flow trajectory: Q1 positive FCF flipped to Q2 negative; FY FCF guide $1–$7M implies improved working-capital dynamics in 2H .
KPI momentum is the stock’s narrative: Sustained RPO growth (+28% YoY) and rising ACV+royalties underpin visibility; design starts (25 in Q2) support future royalties .
Estimates likely to tighten: Modest revenue beats and margin investments suggest consensus EPS adjustments may lag; monitor sell-side revisions post-call *.
Medium-term thesis: Commercial System IP outsourcing cycle (AI/chiplets complexity) favors Arteris’ portfolio; investors should focus on ACV pipelines, ecosystem partnerships, and conversion of FlexGen evaluations into revenue .

Notes: 
- All quantitative data and guidance are sourced from Arteris’ Q2 2025 8-K/press release and 10-Q, and the Q2 2025 earnings call transcript as cited. 
- Consensus estimates marked with * are retrieved from S&P Global.

Arteris, Inc. (AIP)·Q2 2025 Earnings Summary