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Arteris (AIP) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Information Technology· Aug 6, 2026

Source: earnings call transcript

Executive summary

Arteris, Inc. Q2 FY26 — Record ACV, Revenue, and RPO with Raised Full-Year Outlook

Arteris delivered a strong second quarter, achieving record ACV, revenue, and RPO, driven by robust licensed deal flow across key verticals like enterprise computing and automotive. The company raised its full-year revenue guidance, signaling continued market strength and customer engagement, and anticipates reaching non-GAAP operating profitability as early as Q4 FY26, despite some near-term operating expense pressures.

Highlights

5

  • Record annual contract value (ACV) plus royalties reached $99.5 million, representing a 44% year-on-year increase.

  • Record revenue of $24.1 million, up 46% year-over-year, exceeding the top end of guidance.

  • Record remaining performance obligation (RPO) totaled $135 million, marking an all-time high.

  • Trailing 12-month royalties grew to $8.6 million, 65% higher year-over-year.

  • Full-year 2026 revenue guidance was raised to $95 million to $98 million, an increase of $3.5 million from prior guidance.

Concerns

3

  • Non-GAAP operating income was negatively impacted by unexpectedly high employer payroll taxes related to French employee RSU vesting, totaling $1.7 million in the quarter.

  • Government work, which contributed to strong deal flow, carries a much lower gross margin compared to traditional organic or commercial business.

  • Sales and FA commissions were significantly higher than anticipated due to very strong deal flow, contributing to increased operating expenses.

Guidance & targets

CategoryTargetConfidence
Q3 FY26 ACV plus royalties
$99 million to $103 million
medium materiality
High
Q3 FY26 Revenue
$24 million to $25 million
high materiality
High
Q3 FY26 Non-GAAP operating loss
$3 million to $1 million
medium materiality
High
Full-year 2026 ACV plus royalties
$102 million to $106 million
medium materiality
High
Full-year 2026 Revenue
$95 million to $98 million
high materiality
High
Full-year 2026 Non-GAAP operating loss
$10 million to $7 million
medium materiality
High
Full-year 2026 Non-GAAP free cash flow
positive $5 million to positive $9 million
medium materiality
High
Non-GAAP operating profit
expected to report
high materiality
High

Orderbook & backlog

Remaining Performance Obligation (RPO) $135 million end of Q2 FY26

all-time high

just over half will be recognized as revenue in the 12 months starting July 1, 2026

Product announcements

ProductTypeDetails
Cycuity hardware security assurance technologyexpansion
FlexGen Smart NOC IPmilestone

Deals & partnerships

Cycuity Acquisition of semiconductor cybersecurity assurance provider

Following the acquisition of Cycuity earlier this year, which provides semiconductor cybersecurity assurance

ARM Expanded partnership for Cycuity hardware security assurance technology

we recently announced an expanded partnership with ARM. The Cycuity hardware security assurance technology is already in use by ARM during the design phase of selected CPUs. Moving forward, ARM engineering teams are expanding their adoption of security technology across additional next-generation processors

IC-Link by IMEC Collaboration to accelerate and simplify HPC chiplet and ASIC development

On the ecosystem front, we announced a collaboration with IC-Link by IMEC, which is IMEC's service provider for high-end ASICs and silicon photonics. Arteris technology will be deployed as part of their ongoing efforts to accelerate and simplify the development of next-generation HPC chiplets and ASIC chips.

Capital programs

ATM program completed
Spent to date: $72 million
Funding: equity

Benefit:support our ability to invest in industry-leading system IP products, global customer support, and additional Tuckin acquisitions

I'm happy also to announce that we have completed our ATM program, raising $72 million to support our ability to invest in industry-leading system IP products, global customer support, and additional Tuckin acquisitions.

Risks & headwinds

Unexpectedly high French employer payroll taxes Q2 FY26

$1.7 million impact on non-GAAP operating income

Mitigation:Taken into account in Q3 and full-year NGOI guidance

Lower gross margin from government contracts ongoing

much lower gross margin

Mitigation:Part of strong deal flow, contributing to revenue growth

Higher sales and FA commissions Q2 FY26

significantly higher than thought

Mitigation:Result of very strong deal flow quarter

Sequential slowdown in royalty growth trajectory Q2 FY26

slightly slower in a sequential quarter base

Mitigation:Trailing 12-month royalties still up 67% year-over-year, well above long-term CAGR

Customer logistical and supply chain issues impacting shipments past quarter

held back one quarter's worth of shipments

Mitigation:Customer has come back on stream; growth rate expected to rebound

What to watch in Q3 FY26

Non-GAAP Operating Profitability

Q4 FY26
Current Non-GAAP operating loss of $4.6 million in Q2 FY26
Target Non-GAAP operating profit

Why it matters

Achieving non-GAAP operating profitability is a key milestone for the company's path to sustained financial health and operating leverage.

we expect to report a non-GAAP operating profit. for a period as early as the fourth quarter in the current year.

Find out whether AIP delivers this. Inve re-checks your case every morning.

Q&A highlights

Is the ARM partnership a licensing deal, does it involve royalties, and did it displace a competitor or was it a greenfield opportunity?

The partnership is a greenfield opportunity, as there are few commercial solutions for Cycuity's offerings. ARM is using it to identify potential weaknesses in high-end designs, taking a leadership position in hardware security assurance. It is currently a non-royalty-bearing software EDA-type model, though future opportunities for fixing cybersecurity weaknesses may arise.

“So it is a greenfield opportunity. There isn't actually a whole lot of commercial solutions for what Psycuity does.”

asked by Kevin Gary Gama · answered by Unknown Speaker

2 min read 5 chapters

Detailed narrative

AI and HPC Demand Driving Growth

Rapidly evolving high-performance computing (HPC) workloads, particularly in AI, are fueling demand for more complex chips and chiplets. Arteris's products, which enable high-performance, efficient, safe, and secure data movement, are increasingly critical for data centers, smart edge devices, and physical AI systems. In Q2 FY26, the majority of customer design starts supported AI or HPC use cases, indicating a strong market alignment.

Customer Diversification and Strategic Wins

Arteris successfully diversified its customer base, with no single customer accounting for more than 10% of revenue in the first half of 2026. This was supported by significant licensed deal flow across key verticals, including enterprise computing, automotive, aerospace and defense, communications, consumer electronics, and industrial markets. Notable wins included a hyperscale cloud company standardizing on Arteris for infrastructure silicon system IP and a top US semiconductor design house utilizing FlexGen Smart Knock IP for custom ASICs.

Product Innovation and Ecosystem Expansion

The company demonstrated strong momentum with customer adoption of new technologies. The FlexGen Smart NOC IP continues to gain traction, securing multiple seven-figure deals in H1 FY26 due to its automation and efficiency benefits. Furthermore, Arteris announced an expanded partnership with ARM, integrating Cycuity hardware security assurance technology across ARM's next-generation processors, and collaborated with IC-Link by IMEC to accelerate HPC chiplet and ASIC development.

Financial Performance and Profitability Path

Arteris achieved record revenue of $24.1 million, up 46% year-over-year, and a record RPO of $135 million. The company reported positive free cash flow of $8.6 million for the quarter and $6.8 million for the trailing 12 months. Despite some near-term operating expense pressures from French payroll taxes and higher commissions, management reiterated its path to profitability, expecting to report non-GAAP operating profit as early as Q4 FY26.

CFO Transition and Leadership

Nick Hawkins will retire as CFO, with Saurabh Sinha joining on September 8th, 2026. Hawkins was commended for his leadership in guiding Arteris through its successful IPO, building a strong finance organization, consistently meeting financial guidance, and achieving positive free cash flow, thereby laying a solid foundation for future non-GAAP profitability.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.