Summary of AIP Q2 2026 Earnings Call

1Key Financial Results and Metrics

Total Revenue: $24.1 million, up 46% year-over-year, exceeding guidance.

Annual Contract Value (ACV) plus Royalties: $99.5 million, a record high, representing a 44% year-over-year increase.

Remaining Performance Obligations (RPO): $135 million, another all-time high.

Non-GAAP Gross Profit: $21 million (87% gross margin); GAAP Gross Profit: $20.5 million (85% gross margin).

Non-GAAP Operating Loss: $4.6 million; GAAP Operating Loss: $13.9 million.

Non-GAAP Net Loss: $4.7 million ($0.10 per share); GAAP Net Loss: $14.1 million ($0.30 per share).

Cash Position: $123 million in cash equivalents and investments, with no financial debt.

Free Cash Flow: Positive $8.6 million for the quarter, bringing the trailing 12-month total to positive $6.8 million.

2Strategic Updates and Business Highlights

Record Performance: Achieved record revenues, royalties, and RPO backlog, driven by strong demand in enterprise computing and automotive sectors.

Customer Diversification: No single customer accounted for more than 10% of revenue in H1 2026.

AI and HPC Demand: Increased design activity in AI and high-performance computing (HPC) workloads, with significant contributions from data center chip development.

Partnerships: Expanded collaboration with Arm on cybersecurity solutions through Cycuity, enhancing their hardware security assurance capabilities.

Product Adoption: Strong momentum in customer adoption of new technologies, particularly in cybersecurity and automation solutions.

3Forward Guidance and Outlook

Q3 2026 Guidance: Expect ACV plus royalties of $99 million to $103 million and revenue of $24 million to $25 million.

Full-Year 2026 Guidance: Raised revenue guidance to $95 million to $98 million (37% year-over-year increase at midpoint) and ACV plus royalties to $102 million to $106 million.

Profitability Outlook: Anticipate a path to non-GAAP operating profit as early as Q4 2026, supported by strong revenue growth and expense discipline.

4Bad News, Challenges, or Points of Concern

Increased Operating Expenses: Non-GAAP operating expenses were impacted by higher payroll taxes related to RSU vesting, totaling $1.7 million.

Royalty Revenue Fluctuations: Noted a slight dip in royalty revenue in the quarter, attributed to customer supply chain issues and inventory adjustments.

Market Competition: Concerns about competitive pressures in the semiconductor space, particularly in the context of rapidly evolving AI and HPC demands.

5Notable Q&A Insights

Partnership with Arm: The collaboration with Arm on Cycuity is a greenfield opportunity aimed at enhancing cybersecurity in CPU designs, with potential for expansion but currently non-royalty bearing.

Customer Dynamics: Insights into a significant win with a US semiconductor design house, indicating a shift in customer reliance on Arteris for ASIC designs tailored for hyperscalers.

China Automotive Market: Li Auto's deployment of Arteris technology is expected to contribute to royalties, with a ramp-up anticipated over the next few years as the Chinese EV market grows.

Future Royalty Trends: Long-term royalty growth is expected to stabilize at a CAGR of high thirties to low forties percent, despite recent fluctuations. Overall, Arteris reported strong financial performance in Q2 2026, driven by robust demand across various sectors, particularly in AI and HPC. However, the company faces challenges related to rising operating expenses and fluctuations in royalty revenue. The outlook remains positive, with expectations for continued growth and a path to profitability.