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    AIP
    Earnings call· Jun 2026(Q2 FY26)

    Arteris Q2 FY26 earnings call AIP

    Aug 6, 2026 Source

    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

    8
    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

    Operational metrics

    21
    ACV plus royalties
    $99.5 millionup 44% year-on-year
    Q2 FY26

    exiting the quarter at $99.5 million, representing a 44% year-on-year increase.

    Trailing 12-month royalties
    $8.6 million65% higher year-over-year
    TTM Q2 FY26

    Notably, trailing 12-month royalties was $8.6 million, 65% higher year-over-year, setting a new record high.

    Trailing 12-month design starts
    21%higher year over year
    TTM Q2 FY26

    For the trailing 12 months to June 30, 2026, our customers reported 21% higher number of design starts year over year.

    Enterprise computing ACV plus royalties mix
    29%
    average over past 4 quarters

    Over the past four quarters, enterprise computing has made up an average of 29% of our terrorist ACV plus royalties

    Remaining Performance Obligation
    $135 millionanother all-time high
    Q2 FY26

    The remaining performance obligation to our IPO, which is our contracted future revenue at the end of the second quarter, totaled $135 million, another all-time high for our tariffs.

    RPO recognized in next 12 months
    just over half
    next 12 months from Q2 FY26

    We expect just over half our RPO at the end of the second quarter will be recognized as revenue in the 12 months starting July 1, 2026.

    Non-GAAP gross margin
    87%
    Q2 FY26

    Non-GAAP gross profit in the quarter was $21 million, representing a gross margin of 87%.

    GAAP gross margin
    85%
    Q2 FY26

    The net gross profit in the quarter was $20.5 million, representing a gross margin of 85%.

    Non-GAAP operating expense
    $25.5 millionslightly above trend
    Q2 FY26

    operating expense in the quarter was $25.5 million. Our OPEX was slightly above trend as a result of the RSU-driven payroll taxes that I mentioned earlier, together with higher commissions resulting from a very strong deal flow quarter.

    GAAP operating expense
    $34.4 million
    Q2 FY26

    Total gap operating expense for the second quarter was $34.4 million, which included acquisition-related expenses of $2.2 million.

    Non-GAAP operating loss
    $4.6 million
    Q2 FY26

    Non-GAAP operating loss in the quarter was $4.6 million.

    GAAP operating loss
    $13.9 million
    Q2 FY26

    GAAP operating loss for the quarter was $13.9 million.

    Non-GAAP net loss
    $4.7 million
    Q2 FY26

    Non-GAAP net loss in the quarter was $4.7 million

    Non-GAAP EPS
    $0.10
    Q2 FY26

    diluted net loss per share of 10 cents.

    GAAP net loss
    $14.1 million
    Q2 FY26

    Gap net loss in the quarter was $14.1 million

    GAAP EPS
    $0.30
    Q2 FY26

    diluted net loss per share of 30 cents.

    Cash and investments balance
    $123 million
    Q2 FY26

    We ended the quarter with $123 million in cash, cash equivalents and investments

    Cash increase
    $81.6 million
    Q2 FY26

    The overall $81.6 million increase in cash, cash equivalents and investments in the quarter was driven by the successful ATM execution, which raised approximately $72 million of net proceeds at an average price of over $35. coupled with $8.6 million positive free cash flow in the second quarter

    Operating expense growth rate model
    limit to approximately half revenue growth rate
    long-term

    As a reminder, our long-term operating leverage model is to limit our OPEX growth rate to approximately half our revenue growth rate.

    French employer payroll taxes on RSU vesting
    $1.7 millionunexpectedly high
    Q2 FY26

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

    Acquisition-related expenses
    $2.2 million
    Q2 FY26

    Total gap operating expense for the second quarter was $34.4 million, which included acquisition-related expenses of $2.2 million.

    Industry KPIs

    7
    MetricValueDetails
    Revenue growth$24.1 millionUSD
    Arr net new arr$99.5 millionUSD
    Rpo current rpo$135 million (total RPO); just over half (cRPO)USD
    Customer account countno single customer more than 10%% of revenue
    Large deal new logo metricsmultiple seven-figure dealsUSD
    Operating FCF margin rule of 4035.7%%
    Ai product adoption monetizationmajority of design starts

    Orderbook & backlog

    1
    Remaining Performance Obligation (RPO)$135 millionend of Q2 FY26

    all-time high

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

    Product announcements

    2
    ProductTypeDetails
    Cycuity hardware security assurance technologyexpansion
    FlexGen Smart NOC IPmilestone

    Deals & partnerships

    3
    CycuityAcquisition of semiconductor cybersecurity assurance provider

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

    ARMExpanded 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 IMECCollaboration 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

    1
    ATM programcompleted
    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

    5
    Unexpectedly high French employer payroll taxesQ2 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 contractsongoing

    much lower gross margin

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

    Higher sales and FA commissionsQ2 FY26

    significantly higher than thought

    Mitigation: Result of very strong deal flow quarter

    Sequential slowdown in royalty growth trajectoryQ2 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 shipmentspast 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

    5

    Non-GAAP Operating Profitability

    Q4 FY26
    CurrentNon-GAAP operating loss of $4.6 million in Q2 FY26
    TargetNon-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.

    Q&A highlights

    7

    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 read5 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    AI-generated summary of the company’s earnings call. Not investment advice.