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Arteris, Inc. (AIP)·Q3 2025 Earnings Summary

Executive Summary

  • Arteris delivered Q3 2025 revenue of $17.4M, up 18% y/y and 5% q/q, and non-GAAP EPS of -$0.09, both slightly ahead of S&P Global consensus (rev $17.0M*, EPS -$0.0925*) .
  • Commercial momentum remained strong: ACV+royalties reached a record $74.9M (+24% y/y) and RPO topped $100M for the first time at $104.7M (+34% y/y), underscoring forward visibility .
  • Q4 revenue guidance ($18.4–$18.8M) aligns with consensus ($18.55M*), while FY25 guidance was raised by ~$1M for both revenue and ACV+royalties; FY25 FCF range narrowed to $2.5–$5.5M .
  • Management highlighted AI as over half of licensing dollars in Q3 and deepening wins with AMD (incremental licenses) and Altera (broader portfolio adoption), reinforcing the AI/data center and chiplet narratives that could support estimate revisions and multiple expansion .
  • Positive cash execution continued with Q3 free cash flow of +$2.5M and cash/investments of $56.2M with no debt, providing flexibility for continued R&D and go-to-market investments .

What Went Well and What Went Wrong

What Went Well

  • Record commercial KPIs: ACV+royalties $74.9M (+24% y/y) and RPO $104.7M (+34% y/y), signaling sustained demand and backlog strength .
  • Strategic AI/chiplet traction: AI accounted for over half of licensing dollars; AMD ordered additional FlexGen licenses; Altera broadened adoption (FlexGen, Encore/FlexNoC, Magillem), validating product differentiation in multi-die architectures .
  • Cash discipline: Q3 free cash flow +$2.5M (14% of revenue), above guidance midpoint; management reiterated operating leverage via flat G&A on a non-GAAP basis for ~3 years .

Selected quotes:

  • “AI applications accounted for over half of our licensing dollars in the third quarter…” — CEO .
  • “We expect ACV plus royalties of $74–$78M and revenue of $18.4–$18.8M for Q4; FY25 revenue $68.8–$69.2M, both up $1M vs prior guidance.” — CFO .

What Went Wrong

  • Profitability still negative: GAAP operating loss widened to $(8.7)M (vs $(7.9)M y/y); non-GAAP operating loss $(3.5)M (roughly flat y/y), reflecting continued R&D and sales investments .
  • OpEx mix: Sales & marketing rose to $6.85M from $4.96M y/y; management continues reinvestment to drive growth; earlier quarters noted FX headwinds to OpEx, highlighting cost pressure sensitivity .
  • Royalties remain a smaller revenue component near term; management reiterated 3–6 year lag from design start to volume; royalty inflection building but more pronounced beyond 2026–2028 .

Financial Results

Headline P&L and Margins (chronological: Q3 2024 → Q2 2025 → Q3 2025)

MetricQ3 2024Q2 2025Q3 2025
Revenue ($M)$14.713 $16.502 $17.408
GAAP Gross Margin (%)90% 89% 90%
Non-GAAP Gross Margin (%)92% 91% 91%
GAAP Operating Loss ($M)$(7.919) $(8.248) $(8.714)
Non-GAAP Operating Loss ($M)$(3.312) $(3.534) $(3.541)
GAAP EPS (diluted)$(0.20) $(0.22) $(0.21)
Non-GAAP EPS (diluted)$(0.08) $(0.11) $(0.09)
  • Management characterized Q3 revenue +5% q/q and +18% y/y; non-GAAP gross margin at 91% and non-GAAP op loss of $(3.5)M were in line with guidance .

Segment/Revenue Mix

Revenue Detail ($M)Q3 2024Q2 2025Q3 2025
Licensing, Support & Maintenance$13.507 $15.088 $15.896
Variable Royalties & Other$1.206 $1.414 $1.512
Total Revenue$14.713 $16.502 $17.408
  • Trailing 12-month variable royalties grew 36% y/y into Q3, diversifying beyond a single customer; five customers now collectively exceed the prior 2020 royalty concentration from HiSilicon .

KPIs, Cash, and Shares

KPI / BalanceQ1 2025Q2 2025Q3 2025
ACV + Royalties ($M)$66.8 (+15% y/y) $69.1 (+15% y/y) $74.9 (+24% y/y)
RPO ($M)$88.9 (+19% y/y) $99.3 (+28% y/y) $104.7 (+34% y/y)
Free Cash Flow ($M)$2.677 $(2.840) $2.471
Cash, Cash Equivalents & Investments ($M)$55.1 $53.9 $56.2; no financial debt
Weighted Avg Shares (diluted)40.85M 41.82M 42.74M

Actuals vs S&P Global Consensus (Q3 2025) and Look-ahead (Q4 2025)

MetricQ3 2025 ActualQ3 2025 ConsensusBeat/MissQ4 2025 Company GuideQ4 2025 Consensus
Revenue ($M)$17.408 $17.0*+$0.41M$18.4–$18.8 $18.55*
Primary EPS$(0.09) $(0.0925)*+$0.0025N/A$(0.0675)*

*Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious Guidance (8/5/25)Current Guidance (11/4/25)Change
ACV + Royalties ($M)FY 2025 exit$72.0–$78.0 $74.0–$78.0 Raised (low end +$2M)
Revenue ($M)FY 2025$66.0–$70.0 $68.8–$69.2 Raised (narrowed, +$1M midpoint)
Non-GAAP Op Loss ($M)FY 2025$(10.5)–$(15.5) $(12.5)–$(13.5) Narrowed (centered)
Free Cash Flow ($M)FY 2025$1.0–$7.0 $2.5–$5.5 Narrowed (midpoint modestly higher)
ACV + Royalties ($M)Q4 2025N/A$74.0–$78.0 New
Revenue ($M)Q4 2025N/A$18.4–$18.8 New
Non-GAAP Op Loss ($M)Q4 2025N/A$(2.3)–$(3.3) New
Free Cash Flow ($M)Q4 2025N/A$0.2–$3.2 New

CFO color: “ACV+royalties and revenue both increased by $1M vs prior FY25 guidance; RPO +34% y/y supports outlook” .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current (Q3 2025)Trend
AI/Technology InitiativesQ1: >20 FlexGen evals; AI a major driver across data center/edge; awards and Magillem updates . Q2: AMD licensed FlexGen; expanded multi-die/UCIe; more FlexGen installs .AI >50% of licensing dollars in Q3; AMD ordered additional licenses; Altera expanding use across portfolio .Strengthening AI demand and validation with tier-1s.
Chiplets/Multi-dieQ1: Joined Intel Foundry/Chiplet alliances; IMEC Automotive Chiplet Forum . Q2: Expanded multi-die solution; collaborations with Synopsys/Cadence; UCIe support .Continued multi-die traction incl. IO Hub chiplet wins (2V Systems); UALink membership for AI data movement .Expanding ecosystem and customer adoption.
End-Markets (Automotive/Enterprise)Q1: Auto robust; microcontroller entry; 10 auto OEMs as direct customers . Q2: Highest growth in auto and enterprise; enterprise fastest-growing royalty segment .Added automotive/industrial FlexGen customers (Dream Chip, leading auto OEM, NanoXplore) .Auto and enterprise remain growth engines.
RoyaltiesQ1: Near-term royalties small; lag from design to volume noted . Q2: Royalty growth fastest in enterprise .TTM variable royalties +36% y/y; diversification across 5 major payers .Inflecting and diversifying, multi-year runway.
Macro/FX/TariffsQ1: Cautious on tariffs/macro; FX could lift OpEx by ~$1M if USD remains weak . Q2: Reiterated FX headwind; widened ranges .Q3 focused on operational execution; no new macro changes called out .Macro risk noted earlier; Q3 tone more constructive.
Outsourcing TrendQ1: Large customers shifting next-gen system IP to commercial vendors; scarcity of NoC engineers . Q2: AMD validation expected to accelerate adoption .“Promising signs of accelerated interest” in outsourcing system IP to Arteris .Building tailwind for pipeline and ACV.

Management Commentary

  • Strategy and positioning: “As AI adoption accelerates and system complexity grows with the rise of chiplet-based, multi-die SoC architectures, we believe Arteris’ deep expertise and proven technology uniquely position us to capture these transformative opportunities.” — CEO .
  • AI/customer momentum: “AI applications accounted for over half of our licensing dollars in the third quarter… AMD has ordered additional licenses… Altera… licensed Magillem… and FlexGen.” — CEO .
  • Operating discipline: “We are delivering operating leverage by controlling G&A spending, which has now remained broadly flat on a non-GAAP basis for over three years.” — CFO .
  • Outlook rationale: “We remain encouraged by our strong deal execution, witnessed by the 34% year-over-year growth in RPO… seeing promising signs of accelerated interest to increase outsourcing of system IP products to Arteris.” — CFO .

Q&A Highlights

  • Deeper penetration at tier-1s: Management sees continued opportunities to expand within Altera beyond SoC parts and across multiple AMD groups following initial FlexGen adoption .
  • UALink pathway: Some consortium members already customers; Arteris developing tech to support scale-up data center solutions consistent with UALink protocols .
  • Royalty inflection: TTM variable royalties +36% y/y with diversification to five major payers; management expects accelerated royalty growth over next few years with larger inflection by ~2028 .
  • Data center vs edge: Long term, data center could be ~25–35% of business; currently ~50% of design starts are AI-related; FlexGen accretive to ASP and royalties but royalty monetization varies by end-market volumes and timelines .
  • Bookings disclosure: Management declines to provide bookings detail, emphasizing potential lumpiness with large customers and preference to focus on RPO as leading indicator .

Estimates Context

  • Q3 2025: Revenue $17.408M vs $17.0M* consensus; Primary EPS -$0.09 vs -$0.0925* — small beat on both. Management also called out +5% q/q and +18% y/y revenue growth .
  • Q4 2025: Company revenue guidance $18.4–$18.8M brackets consensus $18.55M*; no EPS guidance provided by company; Primary EPS consensus -$0.0675* .
  • FY 2025: Company raised revenue and ACV+royalties guidance (see table). S&P Global FY25 EPS/Revenue consensus was not available in tool output beyond FY24; we note unavailability and rely on company guidance .

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Commercial momentum and backlog strength: Record ACV+royalties ($74.9M, +24% y/y) and RPO ($104.7M, +34% y/y) reinforce multi-quarter visibility and support for a sustained growth trajectory .
  • AI/chiplet leadership gaining validation: Incremental AMD orders and expanded Altera adoption, plus UALink participation, bolster Arteris’ positioning in high-performance, multi-die data movement — a key secular driver .
  • Near-term financials improving at the margin: Q3 revenue and non-GAAP EPS modestly beat consensus; Q4 revenue guide aligns with the Street; FY25 raised on revenue and ACV+royalties with narrowed ranges, indicating higher confidence .
  • Royalties turning up: TTM royalties +36% y/y with improved diversification; model leverage should improve as royalties compound, albeit with multi-year lags from design starts .
  • Cash-positive execution supports investments: Q3 free cash flow +$2.5M and $56.2M cash/investments with no debt enable continued R&D and sales investments to capture demand .
  • Watch list catalysts: Continued FlexGen wins (especially in higher-volume segments), additional Tier-1 disclosures, and royalty ramp evidence could drive estimate revisions and stock reaction; monitor macro/FX given prior quarters’ noted sensitivities .

Appendix: Additional Relevant Press Releases (Q3 2025)

  • Whalechip selected FlexNoC 5 for near-memory computing ASICs targeting AI/ADAS/servers; underscores Arteris’ role in performance/power/area optimization for complex SoCs .

Sources

  • Q3 2025 8-K and press release with financials, KPIs, guidance and reconciliations .
  • Q3 2025 earnings call transcript (prepared remarks & Q&A) .
  • Q2 2025 8-K and call (prior guidance and themes) .
  • Q1 2025 8-K and call (baseline and themes) .
  • Whalechip press release (product traction) .

S&P Global estimates: Q3 2025 and Q4 2025 revenue and EPS consensus used above (see “Estimates Context”). Values marked with * are retrieved from S&P Global.