Ceva (NASDAQ:CEVA) reported a 2% increase in third-quarter revenue and forecast a record fourth quarter at the midpoint of its outlook, as growth in smartphone modem royalties and demand for artificial intelligence technology helped offset a delayed licensing agreement and pressure on consumer-device markets.
Revenue rose to $29.1 million from a year earlier, while customers shipped 623 million Ceva-powered devices, matching the company’s quarterly record. Royalty revenue increased 3% year over year and 18% sequentially to $12.7 million. Licensing and related revenue climbed 2% to $16.3 million.
Chief Executive Officer Amir Panush said licensing revenue fell short of the company’s expectations after a significant multiyear connectivity agreement with an existing strategic customer slipped into the fourth quarter. The agreement was signed early in that quarter, he said.
Ceva’s GAAP net loss narrowed to $2.3 million, or 8 cents per diluted share, from $2.5 million, or 10 cents per share, a year earlier. Non-GAAP net income increased 39% to $3.8 million, while non-GAAP diluted earnings per share rose 18% to 13 cents.
AI Licensing Reaches a Record
AI licensing revenue reached a quarterly record and represented more than 35% of licensing and related revenue. Ceva signed 10 agreements during the quarter, including three with first-time customers; six agreements were related to AI.
Panush said the company has expanded its NeuPro family of AI processors with NeuPro Ultra, targeting applications that include data center inference. A new customer selected NeuPro-M during the quarter for an AI infrastructure application intended to improve the efficiency of data center inference systems, he said.
The CEO said NeuPro Ultra is not intended to replace high-performance GPUs used for cloud training. Instead, potential customers include companies developing their own accelerators and memory or connectivity suppliers seeking to improve system efficiency.
Ceva expects initial NeuPro royalties around the end of 2026 or early 2027. Panush said several customers completed chip tape-outs in the third quarter, including a previously discussed large PC customer, and that more royalty volume is expected to ramp through 2027 and 2028.
Mobile and Wi-Fi Mix Support Royalties
Mobile shipments rose 19% year over year to 82 million units, and mobile royalty revenue increased 20%. Panush attributed part of the growth to a major U.S. customer’s internally developed modem entering high-volume production in mainstream flagship smartphones.
The contribution from that customer was relatively small in the third quarter because shipments began late in the period, Panush said. He expects a significant ramp in the fourth quarter and into 2027.
Ceva also reported 518 million consumer IoT shipments, up 4%, and 23 million industrial IoT shipments, up 120%. Wi-Fi shipments declined 6% to 78 million units, but higher-value Wi-Fi 6 products accounted for 57% of those units, compared with 24% a year earlier.
Chief Financial Officer Yaniv Arieli said the royalty contribution from Wi-Fi shipments more than doubled year over year despite the decline in units. Panush said more than 40 customers have licensed Ceva’s Wi-Fi 6 technology.
Management said strength in mobile and IoT was partly offset by memory-market headwinds affecting compute-intensive consumer devices, including smartphones, PCs and televisions. Panush said the broader smartphone market remained under pressure, although a lower-tier customer had gained share as its shipments improved sequentially.
Fourth-Quarter Outlook
Ceva forecast fourth-quarter revenue of $34 million to $38 million. At the $36 million midpoint, revenue would rise approximately 24% sequentially and reach a company quarterly record, according to management. Arieli also said non-GAAP diluted earnings per share are expected to more than double sequentially.
The outlook reflects an expected increase in smartphone modem royalties, typical fourth-quarter seasonality and the company’s licensing pipeline. Asked why the implied annual outlook had declined from the previous forecast, Panush cited pressure in compute-intensive markets and said the guidance reflected a disciplined assessment after the third quarter fell short of expectations.
At the midpoint of fourth-quarter guidance, Ceva expects full-year revenue growth of approximately 11%. The company also lowered its expected growth in full-year non-GAAP expenses, including cost of revenue and operating expenses, to approximately 7%, or $7 million, from its previous expectation of about 8%, or $8 million.
Ceva ended the quarter with approximately $221 million in cash equivalents, marketable securities and bank deposits. It generated $1.5 million in cash from operating activities during the quarter.
About Ceva (NASDAQ:CEVA)
Ceva, Inc is a semiconductor intellectual property (IP) company that develops and licenses technology used in connected devices. Rather than manufacturing chips, the company provides processor cores, software, and system-level IP that semiconductor companies and original equipment manufacturers can incorporate into their own products.
Its portfolio includes digital signal processor (DSP) cores and platforms for wireless communications, artificial intelligence, computer vision, audio and voice processing, imaging, and sensor applications.
