Arteris, Inc.

Arteris, Inc. is a leading provider of semiconductor system IP, including interconnect and other intellectual property (System IP) technology, which manages on-chip communications and IP block deployments across chiplets, single-die, and multi-die System-on-Chip (SoC) semiconductors. The company's proprietary System IP solutions connect various semiconductor IP blocks like processors, memory, and logic via multiple Network-on-Chips (NoCs) to meet functional design goals, performance, and power requirements, while addressing design complexity with efficient and lower-cost solutions. Founded in 2003, Arteris has pioneered NoC IP technology and expanded its business to provide hardware, software, documentation, support, and training under a license, support, and maintenance fee and a royalty business model. The company also serves customers further down the supply chain, such as system-level companies and original equipment manufacturers (OEMs). Arteris estimates its solutions have been incorporated into over four billion production SoCs since inception ¹.

The company's core business model revolves around licensing its System IP and SoC Integration Automation software solutions, coupled with ongoing support and maintenance, and earning royalties from the sale of products incorporating its IP. Revenue is primarily derived from technology license fees, software licenses, support and maintenance services, professional services, training services, and royalties. Licensing arrangements typically range from two to three years, with revenue recognized ratably over the design term for interconnect solutions IP, which includes software licenses, proprietary software tools (RTL), and Application Engineering Support Services. SoC Integration Automation software solutions also have time-based licenses, generally ranging from one to three years, with revenue recognized ratably over the contract term due to termination rights allowing pro-rata refunds on support and maintenance services. Royalty revenues are recognized during the quarter in which the sale of the product incorporating the IP occurs, calculated either as a percentage of revenues or on a per-unit basis.

Arteris offers three core product platforms: Network-on-Chip IP Products, SoC Integration Automation Software Solutions Products, and Hardware Security Verification Software Products. The Network-on-Chip IP Products include non-coherent NoC IP (FlexGen, FlexNoC, and FlexWay), cache-coherent NoC IP (Ncore), and NoC interface IP (CodaCache). FlexGen, FlexNoC, and FlexWay are silicon-proven interconnect IP products that convert on-chip communication signals into digital packets, allowing for enhanced performance and simplified connections. FlexGen, the most recently announced product, utilizes AI-driven automation to create high-performance NoC designs, reducing manual iteration, wire-length, and power. Ncore is a silicon-proven, cache-coherent interconnect IP product designed for multiprocessor systems using shared memory, offering scalability, configurability, and area-efficiency. CodaCache is a last-level cache semiconductor IP product used to minimize SoC data latency and improve performance.

The SoC Integration Automation Software Solutions Products, enhanced by the acquisitions of Magillem in 2020 and Semifore in 2022, include Magillem Connectivity and Magillem Registers and CSRCompiler. Magillem Connectivity streamlines the SoC integration process by packaging IPs using the IP-XACT standard, allowing users to build complex, correct-by-construction SoC designs. Magillem Registers and CSRCompiler automate the creation of the hardware/software interface, addressing integration challenges for SoCs where complex software algorithms control specialized processors and hardware accelerators. These tools have achieved "Tool Confidence Level" (TCL) certification from TUV Sud for use in mission-critical markets.

The Hardware Security Verification Software Products, strengthened by the acquisition of Cycuity in 2026, provide a systematic approach to hardware security verification. This suite includes Cycuity Radix-S, used during design creation and verification to detect and remediate security issues in IP blocks and subsystems; Cycuity Radix-M, which extends security verification to the SoC system-level by executing production firmware and software; and Cycuity Radix-ST, a static security analyzer that identifies potential design weaknesses early in the development lifecycle without requiring simulation or emulation. These products help customers identify security vulnerabilities and ensure compliance with growing cybersecurity standards.

For the fiscal year ended December 31, 2025, Arteris generated total revenue of $70.579 million ², an increase from $57.724 million ³ in 2024. Gross profit for 2025 was $63.684 million ⁴, representing a gross margin of 90% ⁵, consistent with the 90% ⁶ gross margin in 2024 on a gross profit of $51.762 million ⁷. Operating expenses totaled $96.821 million ⁸ in 2025, up from $83.358 million ⁹ in 2024. This resulted in a loss from operations of $33.137 million ¹⁰ in 2025, compared to $31.596 million ¹¹ in 2024. Net loss for 2025 was $34.746 million ¹², an increase from $33.638 million ¹³ in 2024. Basic and diluted EPS were both $(0.82) ¹⁴ in 2025, compared to $(0.86) ¹⁵ in 2024. Net cash provided by operating activities was $6.733 million ¹⁶ in 2025, a significant improvement from net cash used in operating activities of $0.720 million ¹⁷ in 2024. As of December 31, 2025, cash and cash equivalents were $33.901 million ¹⁸, and total debt, represented by vendor financing arrangements, was $1.618 million ¹⁹.

Year-over-year, total revenue increased by $12.855 million ²⁰, or 22% ²¹, from 2024 to 2025. Licensing, support, and maintenance revenue grew by $11.044 million ²², or 21% ²³, to $63.859 million ²⁴ in 2025, driven by new license arrangements with existing customers and the addition of new customers. Variable royalties increased by $2.191 million ²⁵, or 50% ²⁶, to $6.596 million ²⁷, primarily due to increased product sales from existing customers and a $0.3 million ²⁸ increase from a royalty audit. Other revenue decreased by $0.380 million ²⁹, or 75% ³⁰, to $0.124 million ³¹, mainly due to professional services revenue recognized in 2024 that did not recur in 2025. Cost of revenue increased by $0.9 million ³², or 16% ³³, to $6.895 million ³⁴, primarily due to higher employee-related expenses from increased application engineer headcount. Research and development expenses increased by $4.9 million ³⁵, or 11% ³⁶, to $49.908 million ³⁷, driven by investments in next-generation products, higher employee-related costs, stock-based compensation, and professional fees, partially offset by $0.9 million ³⁸ in R&D tax credits. Sales and marketing expenses rose by $6.0 million ³⁹, or 29% ⁴⁰, to $26.782 million ⁴¹, mainly due to increased headcount and stock-based compensation. General and administrative expenses increased by $2.6 million ⁴², or 15% ⁴³, to $20.131 million ⁴⁴, primarily due to legal and consulting services for acquisition-related activities and higher employee-related costs.

During the fiscal year 2025, Arteris announced the release of FlexGen, an innovative new non-coherent NoC IP product that builds upon FlexNoC expertise to automate the creation of high-performance network-on-chip designs, supported by AI-driven automation. In 2025, the company also announced the expansion of its multi-die solution, delivering foundational technology for rapid chiplet-based innovation. A significant operational development occurred on January 14, 2026, when Arteris completed the acquisition of Cycuity, Inc., a provider of semiconductor security verification technology. The aggregate consideration for Cycuity is up to $45.0 million ⁴⁵, including $13.5 million ⁴⁶ in cash and $19.5 million ⁴⁷ in common stock upon closing, and an additional $12.0 million ⁴⁸ in common stock contingent on achieving certain booking milestones for the 2026 calendar year. The acquisition was completed with a payment of $14.1 million ⁴⁹ in cash and the issuance of 1.1 million ⁵⁰ shares of common stock. This acquisition aims to strengthen Arteris's product portfolio by enabling chip designers to improve data movement security in chiplets and SoCs and address growing concerns about cyberattacks.

Arteris expects to incur further net losses in the short term as it continues to invest in its business. The company's long-term success is dependent upon its ability to successfully market its interconnect IP and SoC Integration Automation software solutions, develop new solutions, earn revenue, obtain additional capital when needed, and ultimately maintain profitable operations.

A major growth area for Arteris is leveraging its System IP technology leadership and focused research and development to provide solutions for the semiconductor industry that designs and builds complex SoCs. The company aims to address high-growth markets, including aerospace and defense, automotive, communications across wired and wireless, consumer electronics, enterprise computing, industrial, and AI/ML markets. Arteris plans to expand its customer base through ongoing System IP innovation and increased investment in sales and marketing. The company also intends to continue pursuing selective acquisitions and other strategic transactions, such as joint ventures, to acquire complementary solutions and accelerate growth.

Another significant growth opportunity lies in NoC Interface IP. As NoC IP carries the majority of data in an SoC, Arteris sees an opportunity to add additional customer value by developing data plane and control plane capabilities that attach directly to its interconnect IPs. The company currently offers NoC interface IP products such as a memory scheduler, last-level cache (CodaCache), SoC data observability, and SoC debug IPs. Arteris plans to further expand its product portfolio and market with additional control networks and subsystems, including clocking, register management, and interrupt networks, as well as power management, security, performance monitoring, and debug control subsystems. The integration of interconnect IP and NoC interface IPs is expected to provide end-to-end solutions for quality of service, system-level security, and SoC resilience, representing a natural expansion of the company's technical and business capabilities.

Operationally, Arteris anticipates that research and development expenses will continue to increase in absolute terms and as a percentage of revenue in the near term, reflecting ongoing investments in technology and new product design efforts. However, in the medium to longer term, while R&D expenses are expected to increase on an absolute basis, they are projected to decrease as a percentage of revenue as certain new products are launched. Sales and marketing expenses are also expected to increase in absolute terms but decrease as a percentage of revenue due to productivity improvements in sales processes. General and administrative expenses are expected to increase as the business grows but generally decrease as a percentage of revenue over the long term. The company expects to collect foreign R&D tax credits over a period of four years.

Arteris's supply chain posture and technology infrastructure investments are implicitly tied to its R&D efforts and acquisitions. The company's strategy includes delivering continuous innovation across both Interconnect IP and SoC Integration Automation software, with at least one major new product or major technology addition each year, a trend maintained since 2013. As of December 31, 2025, Arteris had 170 ⁵¹ development engineers on staff, with 112 ⁵² devoted to interconnect IP development and 58 ⁵³ to SoC Integration Automation software solutions. The company expects to continue experiencing hiring challenges, particularly for engineering resources.

Regarding capital allocation, Arteris spent $49.9 million ⁵⁴ on research and development in 2025, representing 71% ⁵⁵ of its revenue. The company believes its existing cash and cash equivalents, short-term investments, and cash provided by sales of its products will be sufficient to meet its expected working capital needs, capital expenditures, financial commitments, and other liquidity requirements for at least the next 12 months. In December 2025, Arteris filed a Registration Statement on Form S-3 covering the offering of up to $200.0 million ⁵⁶ of common stock, preferred stock, debt securities, warrants, and units, which was declared effective. Also in December 2025, the company entered into an Open Market Sales Agreement with Jefferies LLC to sell shares of common stock, from time to time, with aggregate gross sales proceeds of up to $75.0 million ⁵⁷ through an "at-the-market" offering. No shares were sold under this program in 2025. The company does not intend to pay cash dividends on its common stock for the foreseeable future, preferring to retain funds for business development and expansion.

Arteris explicitly flags several structural headwinds and execution risks to its growth plan. The company faces significant competition from larger companies and third-party providers, some of whom may develop IP solutions internally or bundle technologies at discounted prices. The nature of the design win process requires significant expenses without guaranteed revenue, and even with design wins, timely or sufficient margins are not assured. Failure to successfully carry out new IP interconnect, SoC integration automation, and other technology initiatives, or to anticipate technological changes, could harm the business. The company may need to invest more resources in R&D than anticipated, increasing operating expenses. Product errors or defects could expose Arteris to liability and harm its reputation, and failure to offer high-quality products and support could also negatively impact its standing.

Geographic, regulatory, and macro factors are also identified as constraints. Arteris's dependence on international customers and operations, with 60.3% ⁵⁸ of 2025 revenue from outside the United States and 24.5% ⁵⁹ from China, subjects it to regulatory, trade policy, operational, financial, and political risks. U.S. government trade restrictions, particularly those announced in October 2022, October 2023, and April 2024, and further expanded in December 2024, focusing on exports of semiconductor products and equipment to China, may limit or adversely impact the company's ability to license or support products to certain entities in China. These restrictions may lead to changes or delays in customer design projects and could decrease revenue. Changes in legislation and regulation in the U.S. and other countries, including new trade policies and tariffs, may increase costs or make it more difficult to export products. The cyclical nature of the semiconductor industry, including supply chain disruptions, can limit the company's ability to maintain or improve revenue. Downturns or volatility in general economic conditions, including geopolitical conflicts (e.g., Russia-Ukraine, Israel-Iran), inflation, and rising interest rates, could harm demand for products incorporating Arteris's solutions. The company also faces risks associated with doing business in China, including government influence, currency exchange restrictions, intellectual property protection uncertainties, and potential retaliatory legislation.

Arteris faces material risks including intense competition from larger companies and internal IP development by customers, which could lead to increased pressure on pricing and market share loss. The company has a history of net losses, with a net loss of $34.746 million ¹² in 2025, and may not achieve or maintain profitability. Its IP solutions are components of end products, meaning market acceptance of customer products is critical for generating license sales and royalty income, and design wins require significant upfront expenses without guarantee of revenue or sufficient margins. Dependence on market acceptance of third-party semiconductor IP and the cyclical nature of the semiconductor industry, including supply chain disruptions, pose further risks to revenue stability. Geopolitical tensions, particularly U.S. export controls on semiconductor products to China, could restrict sales to Chinese customers, who represented 24.5% ⁵⁹ of 2025 revenue, and lead to retaliatory measures. Cybersecurity threats are increasing in frequency and sophistication, posing risks of system interruptions, data loss, reputational harm, and significant costs, with potential fines of up to €20.0 million ⁶⁰ or 4% ⁶¹ of annual global turnover under GDPR. The company is also subject to various data protection, AI, and privacy laws globally, with non-compliance potentially leading to enforcement actions, litigation, and fines.

Management's message to shareholders emphasizes the company's position as a leading provider of System IP technology, integral to managing on-chip communications in complex SoCs. They highlight the company's pioneering role in NoC IP technology and its expansion into SoC Integration Automation and hardware security verification through strategic acquisitions like Cycuity. Management explicitly states that they expect to incur further net losses in the short term as they invest in the business. Key strategic priorities include leveraging System IP technology leadership and focused R&D to provide solutions for the semiconductor industry, addressing high-growth markets such as aerospace and defense, automotive, communications, consumer electronics, enterprise computing, industrial, and AI/ML. Furthermore, management is focused on expanding the customer base through ongoing System IP innovation and increased investment in sales and marketing, while also continuing to pursue selective acquisitions and other strategic transactions to acquire complementary solutions and accelerate growth. They also see a significant opportunity to increase value by developing additional data plane and control plane capabilities that attach directly to their interconnect IPs, expanding their NoC interface IP product portfolio.