Will deeper customer engagement result in more custom IP or standard products, and how will this impact royalty rates?

CEVA expects more custom solutions and demands from the market. The royalty per unit is anticipated to be significantly higher for these complete/custom offerings compared to component IP, citing the strategic AI deal as an example of higher royalty per unit. “Going back to your point on royalty, it's actually where we see significant potential increase of those royalty as the royalty per unit that we can extract by providing the custom offering and the complete offering is meaningfully higher than a component IP.”

What are the best near-term application opportunities for CEVA in the edge AI market?

Management identified high-end compute edge markets like PC and mobile, deep entrenchment in automotive for ADAS systems, and increasingly robotics and humanoids as key near-term opportunities for edge AI. “So we definitely see that in the high-end compute edge markets, wherever it's, you know, the PC, the mobile, those type of application. We also see it right now entrenched very, very deeply in the automotive for either system. And what we will see more is into robotics humanized.”

Is CEVA seeing any additional momentum in its NPU licensing business following the acquisition of AHRQ by GlobalFoundries?

Management views the AHRQ acquisition as a tailwind for CEVA's NPU product line, creating a more favorable competitive landscape, especially in the US and Western markets. They believe it helps CEVA compete better and noted a strategic deal this quarter as part of this momentum. “Yes, definitely we see it as a tailwind for our business moving forward, especially for NPU and NUCO and product line, where the competition will be more favorable for us.”

CEVA

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

Earnings call· Jun 2026 (Q2 FY26)· Information Technology· Aug 10, 2026

Source: earnings call transcript

Executive summary

CEVA Q2 FY26 — Strong Licensing & Diversified Royalty Growth

CEVA delivered a strong quarter driven by robust licensing activity, particularly from broader platform engagements and a strategic AI deal, alongside a sequential recovery in diversified royalty revenue. The company is well-positioned for long-term growth as intelligence migrates to the edge and customers increasingly adopt complete platform solutions, leading to increased content per design and future royalty opportunities. This momentum has translated into significant non-GAAP profitability expansion and a raised full-year outlook.

Highlights

Revenue increased 13% year-over-year to $29 million.
Licensing and related revenue grew 21% year-over-year to $18.2 million, reaching its highest level in three years.
Non-GAAP operating income increased to $3.1 million, up from $0.8 million in the prior year, with non-GAAP operating margins expanding to 11% from 3%.
Non-GAAP net income increased 28% year-over-year to $2.3 million, and non-GAAP diluted EPS increased to 8 cents from 7 cents.
Customer shipments of CEVA-powered devices increased 16% year-over-year to 567 million units.

Concerns

Net financial income was $1 million, below guidance of $1.7 million, primarily due to foreign exchange effects related to Israeli shekel-denominated lease obligations.
Income tax expenses were approximately $1.8 million, slightly above guidance.
Industrial IoT shipments decreased to 19 million units compared to 24 million units in the prior year.
Bluetooth shipments decreased 16% year-over-year to 295 million units.
Memory pricing dynamics and broader supply constraints remain important variables for the second half of the year.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year 2026 revenue growth	increase between 13% and 15% over 2025 high materiality	FY26 · 2026	High
Full-year 2026 non-GAAP operating income growth	increase approximately 70% year over year high materiality	FY26 · 2026	High
Full-year 2026 non-GAAP net income growth	increase approximately 50% high materiality	FY26 · 2026	High
Full-year 2026 total non-operating cost of revenues and operating expenses increase	approximately 8% on an annual basis over 2025 medium materiality	FY26 · 2026	High
Q3 FY26 Revenue	$30.5 million to $34.5 million high materiality	Q3 · 2026	High
Q3 FY26 Gross margin (GAAP)	approximately 87% medium materiality	Q3 · 2026	High
Q3 FY26 Gross margin (non-GAAP)	approximately 88% medium materiality	Q3 · 2026	High
Q3 FY26 GAAP operating expenses	between $28.2 and $29.2 million medium materiality	Q3 · 2026	High
Q3 FY26 Non-GAAP operating expenses	between $22.5 to $23.5 million medium materiality	Q3 · 2026	High
Q3 FY26 Net financial income	approximately $2 million low materiality	Q3 · 2026	High
Q3 FY26 Income tax expense	approximately $1.9 million low materiality	Q3 · 2026	High
Q3 FY26 Weighted average diluted share count (GAAP)	approximately 28.2 million shares low materiality	Q3 · 2026	High
Q3 FY26 Weighted average diluted share count (non-GAAP)	approximately 30 million shares low materiality	Q3 · 2026	High
Second half 2026 revenue	stronger than the first medium materiality	H2 FY26 · 2026	High
Bluetooth HDT royalties	start towards the end of this year medium materiality	end of 2026	High

Product announcements

Product	Type	Timeline	Details
Microsoft certified Real Space Elevate embedded application software	launch	—

Deals & partnerships

leading global AI and computing platform company Selected CEVA's 4M NPUIP for its next-generation custom AI silicon.

CEVA announced a strategically significant AI licensing agreement where a leading global AI and computing platform company selected CEVA's 4M NPUIP for its next-generation custom AI silicon. This customer develops both hardware and operating systems, enabling deeper collaboration and optimization of the AI software stack for its models, applications, and workloads. This agreement reflects a trend of companies leveraging proven AI IP to reduce development risk and accelerate time to market, rather than developing every component internally. The expertise gained will strengthen CEVA's hardware and software roadmaps for future customers. Production is expected in 1.5 to 2 years from engagement start. This deal was one of 10 licensing agreements signed in the quarter, including two with first-time customers and two directly with OEMs. This deal is expected to drive significantly higher royalty per unit than typical NPU offerings due to the level of integration and customization. Management sees this as a tailwind for CEVA's NPU business, especially in the US and Western markets, following the AHRQ acquisition by GlobalFoundries. AI revenue is about 20% of total revenue and continues to be a significant part of the business. This deal is expected to contribute to the overall licensing and related revenue growth, which is already stronger than expected in the first half of the year. The company has a strong pipeline for these types of deals and believes it has achieved a step function with adding AI.

high-volume US Semiconductor company Adopted a complete chip built on CEVA's Wi-Fi 6 and Bluetooth Low Energy IP.

A high-volume US Semiconductor company chose to adopt a complete chip built on CEVA's Wi-Fi 6 and Bluetooth Low Energy IP, originally developed in partnership with another CEVA customer. This decision reflects a preference for production-proven, complete solutions over internal development or licensing individual component IP. This type of engagement expands both the scope and value of CEVA's relationship, increasing content per design, deepening integration, and creating larger, longer-term customer relationships with increased royalty opportunities.

another US customer Expanded relationship by adapting CEVA's complete baseband processing subsystem.

Another US customer expanded a relationship that began with a single baseband component by adapting CEVA's complete baseband processing subsystem. This demonstrates the trend of customers leveraging proven subsystem IP to reduce engineering effort, execution risk, and accelerate time to market. This specific subsystem is a WAN or wireless access subsystem with complete satellite configuration, excluding the RF component. This type of engagement expands both the scope and value of CEVA's relationship, increasing content per design, deepening integration, and creating larger, longer-term customer relationships with increased royalty opportunities.

Risks & headwinds

Foreign exchange effects on Israeli shekel-denominated lease obligations Q2 FY26

Net financial income was $1 million, below guidance of $1.7 million

Income tax expenses slightly above guidance Q2 FY26

$1.8 million

Memory pricing dynamics and broader supply constraints Second half 2026

Remain important in the script variables

Mitigation:Management expects continued seasonality expansion despite challenges, particularly for low-end smartphones which need less memory than high-end devices.

Lower Industrial IoT unit volume Q2 FY26

19 million units compared to 24 million units YoY

Mitigation:Offset by a richer mix of higher value products, leading to a 7% YoY increase in industrial royalty revenues.

Bluetooth shipments decrease Q2 FY26

Decreased 16% YoY to 295 million units

Mitigation:Overall wireless connectivity remains strong, with Wi-Fi and Cellular IoT showing growth.

What to watch in Q3 FY26

Full-year revenue growth

FY26

Current 12% growth (previous expectation)

Target 13% to 15% over 2025

Why it matters

Indicates overall business momentum and market demand, reflecting the impact of strong licensing and royalty trends.

We now expect 2026 revenue to increase between 13 and 15 percent over 2025, compared with our previous expectation of 12 percent growth that we shared at the end of the first quarter.

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

Q&A highlights

Is the trend of large companies bringing wireless design in-house and seeking integrated solutions a long-term trend, and what does it mean for CEVA?

Management confirmed this is a positive long-term trend. It leads to meaningfully higher licensing and future royalty per unit, stronger customer stickiness, and makes it easier for customers to choose CEVA's IP over internal development. It also creates opportunities for new licensing deals with technology enhancements.

“Yes, that's definitely a very positive trend. It actually brings three additional values for us. One, on the agreement itself, the licensing agreement, what we see both the licensing as well as the future royalty is meaningfully higher than just setting the component IP.”

asked by Kevin Cassidy · answered by Amir Panoush

2 min read 5 chapters

Detailed narrative

Strategic AI Licensing Agreement

CEVA secured a strategically significant AI licensing agreement with a leading global AI and computing platform company for its 4M NPUIP. This deal marks a new category of AI customers for CEVA, moving beyond semiconductor companies and device OEMs. The collaboration involves optimizing both the NPU hardware and the AI software stack, providing valuable expertise that will enhance CEVA's hardware and software roadmaps for future offerings.

This reflects an industry trend where large engineering organizations leverage proven AI IP to accelerate time to market and focus internal resources on differentiation.

Shift to Platform Solutions

The company is observing a growing trend of customers adopting complete platform solutions rather than individual IP blocks. This was demonstrated by a high-volume US semiconductor company choosing a full chip built on CEVA's Wi-Fi 6 and Bluetooth Low Energy IP, and another US customer expanding its relationship to a complete baseband processing subsystem.

This approach reduces engineering effort and execution risk for customers, while for CEVA, it expands the scope and value of engagements, increases content per design, deepens integration, and enhances long-term royalty opportunities.

Diversified Royalty Business Growth

Royalty revenue increased sequentially and year-over-year, driven by continuous momentum across wireless connectivity, ramping automotive AI programs, and market share gains in smartphones. Wireless connectivity, including Wi-Fi and cellular IoT, showed healthy year-over-year growth, with cellular IoT reaching a record 68 million units.

Despite a decrease in Industrial IoT unit volumes, royalty revenues from this segment increased 7% year-over-year due to a richer mix of higher-value products, including automotive AI and wireless infrastructure.

Operating Leverage and Profitability Expansion

CEVA demonstrated significant operating leverage, with non-GAAP operating income increasing to $3.1 million (11% margin) from $0.8 million (3% margin) in the prior year. This improvement was driven by stronger revenue growth and disciplined expense management, including maintaining non-GAAP operating expenses at the low end of guidance.

This strong performance led to a raised full-year outlook for non-GAAP operating income growth of approximately 70% and non-GAAP net income growth of approximately 50%.

Smartphone Market Dynamics and Outlook

The company reported improving smartphone royalties, stemming from stronger market share in entry-level smartphones and continued expansion in the premier tier. Unisoc, a key Chinese customer, is transitioning to 5G and securing numerous design wins with brands like Vivo and Xiaomi, which is expected to benefit CEVA through higher average selling prices (ASPs) and increased volume.

Management anticipates continued seasonal expansion in the second half, despite ongoing memory allocation challenges in the mobile market.

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