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PI

PIXELWORKS, INC (PXLW)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 results were within guidance with revenue $8.25M, non-GAAP gross margin 46.0%, and non-GAAP EPS of ($1.00); operating expenses continued to decline from prior periods, and adjusted EBITDA improved sequentially .
  • Bolded outcomes: Revenue was a slight miss vs S&P Global consensus ($8.25M vs $8.50M*) while non-GAAP EPS beat consensus (−$1.00 vs −$1.12*) on better-than-expected gross margin and lower OpEx *.
  • Q3 2025 guidance: revenue $8.5–$9.5M, non-GAAP gross margin 47–49%, non-GAAP OpEx $8.5–$9.5M, and non-GAAP EPS loss ($0.70)–($1.02); management highlighted favorable home/enterprise mix and cost reductions as drivers .
  • Strategic and commercial catalysts: TrueCut Motion momentum (Universal’s Nobody 2, DreamWorks’ The Bad Guys 2, Jurassic World Rebirth on CINITY), government subsidies ($1.6M), realme P4 series adopting X7 Gen 2, and active strategic review with three non-binding term sheets (closure targeted by end of Q3) .

What Went Well and What Went Wrong

What Went Well

  • Gross margin performance exceeded internal expectations due to yield improvements on a ramping co-development projector SoC, supporting the EPS beat vs consensus *.
  • Continued OpEx discipline: non-GAAP operating expenses fell to $9.7M from $10.4M in Q1 and $12.8M YoY, helping sequential improvement in adjusted EBITDA .
  • Ecosystem momentum for TrueCut Motion: announced credits on recent major theatrical releases (Jurassic World Rebirth, The Bad Guys 2, Nobody 2) with strong PLF positioning, and Apple Vision Pro support noted by management as a showcase for the format .

Management quotes:

  • “Gross margin came in better than anticipated due to yield improvements on a ramping new co-development projector SoC.”
  • “We are also encouraged by the recently demonstrated momentum in our TrueCut Motion business, as we continue to secure new titles…”

What Went Wrong

  • Mobile revenue remained subdued, largely supporting residual demand from previously launched models; recovery is taking longer than anticipated, with premium customers seeking custom ASICs over standard merchant products .
  • Sequential non-GAAP gross margin declined to 46.0% from 49.9% in Q1 due to unique product mix tied to new home/enterprise ramp dynamics, despite performing above guidance .
  • Revenue missed consensus modestly, reflecting timing of mobile recovery and mix; EBITDA (definition varies) trails consensus even as adjusted EBITDA improves sequentially *.

Financial Results

Headline Financials vs Prior Periods (GAAP and Non-GAAP)

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$9.090 $7.094 $8.250
GAAP Gross Margin (%)54.6% 48.7% 45.8%
Non-GAAP Gross Margin (%)54.8% 49.9% 46.0%
GAAP Net Loss ($USD Millions)$(5.363) $(7.761) $(6.707)
GAAP EPS ($USD)$(0.09) $(0.13) $(1.27)
Non-GAAP Net Loss ($USD Millions)$(4.332) $(6.542) $(5.304)
Non-GAAP EPS ($USD)$(0.07) $(1.30) $(1.00)
Adjusted EBITDA ($USD Millions)$(3.566) $(5.777) $(4.327)
Cash & Equivalents ($USD Millions)$23.647 $18.504 $14.255

Year-over-Year Snapshot

MetricQ2 2024Q2 2025
Revenue ($USD Millions)$8.535 $8.250
GAAP Gross Margin (%)50.7% 45.8%
Non-GAAP Gross Margin (%)51.0% 46.0%
GAAP EPS ($USD)$(2.09) $(1.27)
Non-GAAP EPS ($USD)$(1.60) $(1.00)
Adjusted EBITDA ($USD Millions)$(7.041) $(4.327)

Segment Revenue Breakdown

SegmentQ1 2025Q2 2025
Home & Enterprise Revenue ($USD Millions)~$5.8 ~$7.1
Mobile Revenue ($USD Millions)~$1.3 ~$1.2

KPIs and Operating Metrics

KPIQ1 2025Q2 2025
GAAP Operating Expenses ($USD Millions)$11.548 $11.080
Non-GAAP Operating Expenses ($USD Millions)$10.414 $9.711
Weighted Avg Shares (Basic & Diluted) (Millions)5.049 5.282
Government Subsidies Recognized as Other Income ($USD Millions)$0.013 $0.801
Reverse Stock Split (ratio, effective date)1-for-12 (June 6, 2025)

Performance vs S&P Global Consensus (Q2 2025)

MetricActualConsensus
Revenue ($USD Millions)$8.250 $8.50*
Primary EPS (Non-GAAP) ($USD)$(1.00) $(1.12)*

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q2 2025$8–$9 $8.25 (actual) Maintained (within range)
Non-GAAP Gross Margin (%)Q2 202541–43 46.0 (actual) Raised vs guide (actual above range)
Non-GAAP OpEx ($USD Millions)Q2 2025$9–$10 $9.711 (actual) Within range
Non-GAAP EPS ($USD)Q2 2025$(0.11)–$(0.08) $(1.00) (actual) Lower than guide (mix/yields note)
Revenue ($USD Millions)Q3 2025N/A$8.5–$9.5 New
Non-GAAP Gross Margin (%)Q3 2025N/A47–49 New
Non-GAAP OpEx ($USD Millions)Q3 2025N/A$8.5–$9.5 New
Non-GAAP EPS ($USD)Q3 2025N/A$(0.70)–$(1.02) New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
TrueCut Motion ecosystemMulti-year studio agreements, device brand evaluations underway; targeting double titles in 2025 Credits on Jurassic World Rebirth, The Bad Guys 2, Nobody 2; Apple Vision Pro showcase; aiming toward PLF standardization Accelerating
Mobile strategy & recoveryTargeting mid/entry graphics accelerator and flagship X7/X8; recovery expected H2; ASPs sub-$2; revenue likely closer to 2024 levels Residual shipments; realme P4 series adopting X7 Gen 2; deeper collaborations/custom ASIC/IP licensing focus Gradual recovery, mix shift to custom/IP
Home & Enterprise (projectors)Ramp of new co-development SoC; 2025 projector business similar to 2024; Q1 seasonal decline +20% seq revenue; yields improved; favorable mix expected for Q3 margin Stable-to-improving
ASIC design servicesFramework established; first customer could contribute by Q3; $10–$20M cost range (turnkey context) Two potential initial customers; revenue contribution possible later in 2025 Building pipeline
IP licensingExpanded evaluations with Tier-1 system companies in China and North America Active evaluations: 3 Tier-1 China, 1 Tier-1 North America Expanding
Transcoding EOL follow-onsEvaluating feasibility of limited production runs for prior customers One PO in hand to fulfill in Q4; second larger opportunity under evaluation Likely near-term one-time tailwind
Strategic review (Shanghai)Formal process with Morgan Stanley; diligence with multiple parties Three non-binding term sheets; process “nearing closure” with direction likely before end of Q3 Approaching decision
Subsidies / government supportExpected additional Little Giant subsidies $1.6M subsidies awarded; $0.8M recognized in Q2 other income Supportive tailwind

Management Commentary

  • CEO framing on margin and cost: “Gross margin came in better than anticipated due to yield improvements on a ramping new co-development projector SoC.”
  • TrueCut Motion strategic aim: “We confidently expect to see expanded presence of the TrueCut Motion format and brand in theaters worldwide…As of today, titles that utilized TrueCut Motion have achieved over four billion dollars at the box office…”
  • Mobile strategy shift: focus on lower-cost graphics accelerator for sub-$350 ASP phones plus customer-optimized flagship solutions; increasing emphasis on IP licensing and custom designs .
  • Strategic review: “We received non-binding term sheets from three different potential buyers…nearing closure – and likely to result in a new strategic direction…before the end of the third quarter.”
  • CFO on mix and guidance: Q3 revenue $8.5–$9.5M, non-GAAP GM 47–49%, non-GAAP OpEx $8.5–$9.5M, and non-GAAP EPS loss $(0.70)–$(1.02) .

Q&A Highlights

  • Custom ASIC vs merchant chips: Chinese OEMs seek differentiation in premium segments; custom ancillary chips and IP/design services are routes to stand out given flat global mobile market .
  • Transcoding one-time orders: one PO will be fulfilled in Q4; magnitude undisclosed; customers must assume production liabilities and inventory due to EOL status .
  • ASIC/IP adjacencies: opportunities beyond smartphones include tablets, AR/VR headsets, LED walls, monitors; Pixelworks too small to build for all but can participate via IP/design services .
  • Home & Enterprise ramp: new projector SoC at higher ASP; initial stocking and ramp dynamics driving sequential growth; sustainability depends on end-market pull in 2026 .

Estimates Context

  • Q2 2025: Revenue missed consensus modestly ($8.25M actual vs $8.50M*), while EPS beat (−$1.00 actual vs −$1.12*), aided by stronger-than-expected gross margin and lower OpEx *.
  • Forward (Q3 2025): Guidance revenue $8.5–$9.5M aligns with consensus ~$9.0M*, and guided EPS loss range $(0.70)–$(1.02) brackets consensus −$0.86*; margin guidance implies favorable home/enterprise mix *.

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Near-term: Expect tighter alignment of Q3 revenue/EPS to consensus given revenue range and margin guidance; watch for strategic review resolution by end of Q3 as a potential stock-moving catalyst *.
  • Operating leverage: Continued OpEx reductions and improved yields support sequential EBITDA improvement; incremental revenue from home/enterprise mix can materially impact bottom line .
  • Mobile recovery path: Commercial traction via realme P4/X7 Gen 2 and a pivot to customer-optimized designs/IP licensing suggests a mix-shift opportunity; expect gradual recovery with possible H2 uplift .
  • One-time upside: Q4 transcoding PO can provide non-recurring revenue tailwind; sizing undetermined—monitor execution and potential second order .
  • TrueCut Motion optionality: Growing PLF presence and ecosystem partnerships (content, devices, post-production) enhance medium-term optionality; simultaneous commitments from device brands and streamers would be a major narrative inflection .
  • Balance sheet and subsidies: Cash decreased to $14.3M; government subsidies and cost actions help offset burn while the company pursues strategic alternatives and adjacent high-margin opportunities .
  • Risk flags: Mobile timing uncertainty, geopolitics/trade, and definition differences in EBITDA vs adjusted EBITDA; maintain focus on guidance execution and strategic process outcomes *.