Executive Summary / Key Takeaways

• CEVA is strategically transforming into a diversified IP leader for the "Smart Edge," focusing on enabling devices to Connect, Sense, and Infer data across high-growth markets like consumer IoT, automotive, and industrial.
• Q1 2025 results showed robust 32% year-over-year growth in licensing revenue driven by strategic deals in Wi-Fi 7, Edge AI (ADAS), and spatial audio, validating the company's technology leadership and strategic focus.
• Despite a 14% year-over-year decline in Q1 2025 royalty revenue due to softness in low-cost smartphones and a slower industrial customer ramp, underlying shipment volumes increased 13%, and Wi-Fi royalties saw a significant 183% jump driven by Wi-Fi 6 ASP uplift.
• Management lowered full-year 2025 revenue growth guidance from high-single digits to low-single digits, reflecting Q1 performance and increased macroeconomic uncertainty, but expense control is expected to drive double-digit non-GAAP profit growth.
• CEVA leverages its differentiated DSP and NPU technology, multi-protocol wireless platforms, and integrated software to build a competitive moat based on power efficiency, performance, and ease of integration, positioning it favorably against broader IP providers and specialized competitors in key edge AI and connectivity niches.

Powering Intelligence at the Edge: CEVA's Strategic Evolution

CEVA, Inc. is an intellectual property (IP) licensing company deeply embedded in the semiconductor ecosystem, providing foundational silicon and software solutions that enable intelligence and connectivity in a vast array of electronic devices. With a history stretching back to 1999 and operating under the CEVA name since 2003, the company has become a trusted partner, shipping its IP in over 19 billion smart edge products to date, including approximately 2 billion in 2024 alone. This extensive reach underscores its established position, particularly in wireless connectivity.

In recent years, CEVA has strategically sharpened its focus, positioning itself as a key enabler for the burgeoning "Smart Edge." This strategy, articulated in late 2023, centers on providing IP solutions across three critical pillars: Connect, Sense, and Infer. This aligns CEVA's portfolio – spanning advanced wireless communications, sensor fusion processors, and scalable Edge AI NPUs – with the demands of high-growth markets like consumer Internet of Things (IoT), automotive, industrial, and infrastructure, capitalizing on the accelerating AI super-cycle.

Within the competitive landscape, CEVA operates alongside larger, more diversified IP and EDA tool providers like Synopsys (SNPS) and Cadence Design Systems (CDNS), as well as major semiconductor players with internal IP development like Qualcomm (QCOM) (particularly in wireless) and NVIDIA (NVDA) (via ARM (ARM), in AI and general processing cores). While these competitors often offer broader portfolios or end-to-end chip solutions, CEVA carves out its niche by specializing in highly optimized, power-efficient DSP and NPU architectures, coupled with comprehensive wireless platforms and embedded software. CEVA claims a significant 67% share of the wireless connectivity IP design revenue market in 2023, according to IPnest, suggesting a leadership position in its core domain despite the presence of formidable rivals. The company's ability to offer integrated solutions across Connect, Sense, and Infer is a key differentiator, aiming to provide a "one-stop-shop" for customers seeking to add these capabilities to their chips.

Technological Edge: The Foundation of CEVA's Moat

CEVA's competitive advantage is fundamentally rooted in its differentiated technology, particularly its specialized digital signal processors (DSPs) and neural processing units (NPUs), along with its comprehensive wireless platforms.

At its core, CEVA's DSP technology, such as the Ceva-BX and Ceva-XC families, is designed for extreme power efficiency and high performance in signal processing tasks critical for communication, audio, and sensing. This efficiency is a tangible benefit, allowing devices to perform complex tasks with lower energy consumption, crucial for battery-powered IoT devices and power-sensitive automotive or industrial applications. While precise, directly comparable power consumption metrics across all competitor architectures are not always publicly detailed, CEVA's heritage in low-power design for billions of mobile and IoT devices provides a strong foundation for its claims of efficiency leadership in specific workloads.

In wireless connectivity, CEVA offers a broad portfolio spanning Bluetooth, Wi-Fi (up to Wi-Fi 7), UWB, and 5G-Advanced. The strategic significance here lies not just in individual standards but in the ability to offer multi-protocol solutions like the new Ceva-Waves Links. This integration capability simplifies design for customers and can lead to better performance by optimizing co-existence, offering a tangible benefit over licensing disparate IPs. The company's leadership in licensing newer standards like Wi-Fi 6 (over 40 customers) is already translating into financial benefits; in Q1 2025, Wi-Fi royalties surged 183% year-over-year on only a 12% unit increase, directly attributed to the higher average selling prices (ASPs) commanded by Wi-Fi 6 compared to older generations. This demonstrates how technological migration directly impacts royalty revenue per unit.

The "Infer" pillar is powered by CEVA's NeuPro NPU family, including the NeuPro-M for higher performance and the recently introduced NeuPro-Nano for embedded AI (TinyML). The NeuPro-Nano is specifically designed for cost- and power-constrained devices, featuring innovations like Ceva NetSqueeze to reduce memory footprint. This positions CEVA to capitalize on the massive projected growth in TinyML, where ABI Research forecasts over 50% of shipments will be powered by dedicated hardware by 2030. The recent NeuPro-M win with automotive semiconductor Nextchip for ADAS solutions validates the technology's capability for demanding applications like processing vision transformers, a key technique for advanced automotive safety. This win is expected to "propel significant additional design" opportunities.

CEVA's R&D efforts are clearly aimed at enhancing these core technologies and integrating them. Developments like the Ceva-XC22 multi-thread DSP for 5G-RAN and the RealSpace spatial audio software (which secured a deal with a leading PC OEM in Q1 2025) demonstrate a focus on high-value, performance-critical applications. The strategic customization work mentioned in recent quarters, while temporarily impacting gross margins, is viewed as an investment to secure high-value 5G-Advanced deals and build leverageable IP for future licensing.

The "so what" for investors is that this differentiated technology portfolio, particularly the combination of power-efficient processing, comprehensive wireless, and specialized Edge AI, provides CEVA with a strong competitive moat in specific market niches. It enables the company to win strategic licensing deals with leading semiconductor companies and OEMs, command potentially higher royalty rates as customers ramp production with newer, higher-value IP generations (like Wi-Fi 6/7 and 5G), and cross-sell its portfolio (e.g., adding an NPU to a connectivity chip), driving higher revenue per device shipped by its licensees.

Strategic Execution and Financial Performance

CEVA's strategic focus on Connect, Sense, and Infer is translating into tangible business outcomes, albeit with sensitivity to broader market conditions. The company's business model relies on upfront licensing fees for IP access and recurring royalties based on units shipped by licensees.

In the first quarter of 2025, total revenue reached $24.2 million, a 10% increase year-over-year. This growth was primarily fueled by a robust 32% increase in licensing and related revenues to $15.0 million. This licensing strength underscores the market's demand for CEVA's latest technologies, with strategic wins in Wi-Fi 7, Edge AI for automotive ADAS (NeuPro-M with Nextchip), and spatial audio for PC headsets highlighting the traction across the company's core pillars. Licensing represented 62% of total revenue in Q1 2025, up from 52% in Q1 2024, indicating strong sales execution despite macroeconomic uncertainty.

However, royalty revenue in Q1 2025 declined 14% year-over-year to $9.2 million, representing 38% of total revenue (down from 48%). Management attributed this primarily to softer-than-expected shipments in the low-cost smartphone market and a slower product ramp from a specific industrial customer compared to the prior year. Despite this, the underlying unit volume shipped by licensees increased 13% year-over-year to 420 million units, suggesting that while some specific customer ramps faced headwinds, overall adoption of CEVA-powered chips continues to grow. The significant 183% jump in Wi-Fi royalties, driven by the Wi-Fi 6 ASP uplift, partially offset weakness elsewhere and serves as a positive indicator for future royalty trends as more customers transition to newer standards. The receipt of the first royalty report from a leading U.S. OEM for their in-house 5G modem in Q1 2025 is a notable milestone, anticipated to become a meaningful long-term royalty stream.

Financially, CEVA reported a GAAP operating loss of $4.4 million and a GAAP net loss of $3.3 million ($0.14 per share) in Q1 2025. This compares to a GAAP operating loss of $5.0 million and a GAAP net loss of $5.4 million ($0.23 per share) in Q1 2024, showing some improvement in GAAP profitability. Non-GAAP net income for Q1 2025 was $1.4 million ($0.06 per share), a significant improvement from a non-GAAP net loss of $1.3 million ($0.05 per share) in Q1 2024. This non-GAAP improvement reflects the impact of higher revenue and disciplined expense management.

Gross margin was 86% on a GAAP basis in Q1 2025, down from 89% in Q1 2024. This decrease was primarily due to higher cost of revenues ($3.5 million vs. $2.5 million), which included strategically beneficial customization work for 5G-Advanced deals. While this impacts short-term margins, it is viewed as an investment in securing high-value, long-term royalty streams. Operating expenses totaled $25.1 million in Q1 2025, a slight increase from $24.5 million in Q1 2024, reflecting higher personnel and professional services costs, partially offset by the allocation of customization work to cost of revenues.

Looking at the trailing twelve months (TTM) ending Q1 2025, CEVA's financial profile reflects the recent period of investment and market adjustments. TTM revenue is approximately $106.9 million, with a TTM GAAP net loss of around $8.8 million. TTM GAAP gross profit margin is approximately 87.3%, while TTM GAAP operating margin is around -6.5%. TTM operating cash flow is positive at $3.5 million, but TTM free cash flow is slightly negative at -$7.7 million, reflecting capital expenditures and changes in working capital. The balance sheet remains solid, with $158.3 million in cash, equivalents, and marketable securities as of March 31, 2025, providing sufficient liquidity to fund operations for at least the next 12 months and support potential strategic investments like M&A (as indicated by the S3 shelf filing).

Outlook, Risks, and Competitive Positioning

CEVA's outlook for 2025 is shaped by the interplay of its strategic momentum, the ramp-up of new royalty streams, and external macroeconomic uncertainties. Following the Q1 results, management adopted a more cautious stance, lowering the full-year 2025 revenue growth guidance from a high-single digit range to a low-single digit range over 2024 annual revenues. This adjustment reflects the slower-than-anticipated start to the year, particularly in royalties, and increased uncertainty in the global economy, including potential indirect impacts of trade policies on consumer demand.

Despite the lowered top-line guidance, management expects to maintain tight control over expenses, forecasting overall expense levels (COGS + OpEx) to be in-line with 2024 levels ($96 million to $100 million), with non-GAAP OpEx slightly lower. This disciplined approach is anticipated to drive double-digit percentage growth in non-GAAP operating income, operating margins, net income, and EPS relative to 2024, albeit at a lower percentage than previously guided.

For the second quarter of 2025, CEVA forecasts total revenue between $23.7 million and $27.7 million. Royalty revenue is expected to see sequential growth in Q2, driven by typical seasonality and the anticipated expansion of shipments incorporating the CEVA-powered 5G smartphone modem from a leading U.S. OEM. GAAP OpEx is guided between $25.1 million and $26.1 million, with non-GAAP OpEx between $20.3 million and $21.3 million.

Key drivers for future growth include the continued ramp of customers with newer Wi-Fi 6 and Wi-Fi 7 IP, the expansion of cellular IoT shipments, and the anticipated long-term royalty stream from the U.S. OEM's 5G modem. Licensing momentum is expected to continue, particularly in industrial IoT and consumer IoT, as well as new use cases for sensing and AI solutions. The company remains optimistic about the long-term potential of its royalty business, supported by steady market adoption and demand for its technologies.

However, significant risks persist. Customer concentration remains a factor, with a limited number of customers expected to generate a significant portion of future revenues, making CEVA susceptible to changes in their product roadmaps or market performance. While not directly impacted by tariffs, the indirect effect of global trade policies and macroeconomic volatility on overall consumer and industrial demand could negatively impact both licensing decisions and royalty volumes. The instability in the Middle East, while not currently causing material disruption, poses a risk if it escalates and impacts operations or employee availability in Israel. Currency fluctuations also introduce variability in financial results.

In the competitive arena, CEVA's strategy is to leverage its technological specialization to compete effectively. Against broader players like NVIDIA (ARM), Synopsys, and Cadence Design Systems, CEVA's focus on power-efficient, integrated IP for specific edge workloads provides a performance and efficiency edge that resonates with customers building differentiated products, particularly in power-sensitive IoT. While these larger competitors have greater scale, broader ecosystems, and significantly larger cash reserves (e.g., NVIDIA's $27B+ TTM operating cash flow vs. CEVA's $3.5M TTM), CEVA's niche expertise and direct customer engagement allow it to capture design wins in targeted areas. Against wireless specialists like Qualcomm, CEVA competes by offering IP components for customers building their own chips, emphasizing flexibility and optimization for specific applications (e.g., NB-IoT efficiency). CEVA's claim of being the sole provider of a comprehensive 5G-Advanced modem platform IP positions it uniquely in that emerging market. The company's ability to cross-sell its Connect, Sense, and Infer IP is crucial for increasing value per deal and competing against players who may only offer one piece of the puzzle.

Conclusion

CEVA is executing a focused strategy to become a leading IP provider for the Smart Edge, leveraging its differentiated technology portfolio across connectivity, sensing, and inference. While the first quarter of 2025 highlighted the company's licensing strength and strategic wins in key growth areas like Wi-Fi 7 and Edge AI for ADAS, it also underscored the near-term sensitivity of its royalty business to specific customer ramps and broader macroeconomic headwinds. The lowered full-year guidance reflects this cautious stance.

However, the underlying trends of increasing unit volumes, the ramp-up of higher-ASP Wi-Fi 6 royalties, and the anticipated contribution from the new 5G OEM royalty stream provide positive momentum for the royalty business moving forward. Coupled with disciplined expense management, CEVA is positioned to deliver improved profitability in 2025 despite a more modest top-line growth forecast. The company's technological leadership in power-efficient DSPs, specialized NPUs, and integrated wireless platforms remains its core competitive advantage, enabling it to secure strategic partnerships and capture opportunities in the expanding Edge AI and IoT markets. For investors, CEVA represents an opportunity to invest in a specialized IP player positioned in secular growth markets, with the key factors to watch being the successful ramp of new royalty streams, continued licensing execution, and the impact of the external economic environment on customer demand.