CEVA Q1 FY2026: Licensing Strength Drives Revenue Beat, Guidance Points to Continued Growth

CEVA [CEVA] reported Q1 FY2026 revenue of $27.0 million, a 3.5% beat over the street estimate of $26.1 million. This performance is particularly noteworthy given the sequential decline of 13.6% from the prior quarter. The company's non-GAAP EPS of $0.04 also exceeded the street estimate of $0.02, albeit from a near-zero estimate base, making the percentage surprise less meaningful. According to CEO Yaniv Arieli, "Revenues for the first quarter increased 11% year-over-year to $27 million."

The revenue breakdown reveals that licensing and related revenue, which increased 18% year-over-year to $17.8 million, accounted for 66% of total revenues. This segment's strength is a positive indicator of CEVA's ability to capitalize on its intellectual property (IP) portfolio. Royalty revenues, which remained flat at $9.2 million, contributed 34% of total revenues, reflecting the stable nature of this revenue stream.

CEVA's gross margin for Q1 FY2026 was 85.8%, a slight improvement from the 85.6% reported in Q1 FY2025. This margin is consistent with the company's historical performance and reflects the high-margin nature of its licensing business. CFO Yaniv Arieli noted, "Gross margin is expected to be 87% on a GAAP basis and 88% on non-GAAP basis, excluding an aggregate $0.2 million of equity-based compensation expenses and $0.1 million of amortization of acquired intangibles."

Total GAAP operating expenses for the quarter were $28.4 million, just over the mid-range of guidance. Non-GAAP operating expenses, which exclude equity-based compensation, amortization of intangibles, and deal costs, were $23.0 million, also just over the mid-range of guidance. The company's GAAP operating loss for the quarter was $5.1 million, compared to $4.4 million in the same period last year. Non-GAAP operating margins and income were 2% of revenues and $0.5 million, respectively.

CEVA's performance is underpinned by strong market dynamics and customer momentum. The company's CEO, Amir Panush, highlighted the growing demand for intelligent connected devices, stating, "Against this backdrop, intelligent connected device shipments are expected to exceed 40 billion units annually by 2030, reinforcing the value of our Connect, Sense and infer strategy." This strategy focuses on providing comprehensive solutions for connectivity, sensing, and inference, which are critical components in the IoT ecosystem.

Specifically, CEVA's cellular IoT shipments increased 38% year-over-year to 66 million units, while Wi-Fi shipments reached a record 91 million units, up 158% year-over-year. These figures underscore the company's success in capturing market share in high-growth segments. Additionally, the company's strong licensing performance, with $17.8 million in licensing and related revenues, reflects the strength of its IP portfolio and the growing demand for its solutions.

CEVA's financial position remains strong, with cash equivalent balances, marketable securities, and bank deposits totaling approximately $216 million. This provides the company with significant financial flexibility to invest in growth opportunities and navigate market uncertainties.

The company's capital management strategy is reflected in its ongoing depreciation and amortization of $0.9 million and the purchase of fixed assets of $2.3 million, including approximately $1 million related to leasehold improvements. These investments support the company's long-term growth initiatives and operational efficiency.

For the second quarter of FY2026, CEVA expects revenues to be in the range of $26 million to $30 million, reflecting continued growth both sequentially and year-over-year. The company also expects gross margin to be 87% on a GAAP basis and 88% on a non-GAAP basis, with GAAP operating expenses in the range of $27.7 million to $28.7 million.

For the full year, CEVA now expects total revenue growth to be at the top end of its 8% to 12% range over 2025, with a typical seasonality profile of lower growth in the first half and stronger growth in the second half. This guidance is subject to memory pricing dynamics and supply conditions. CEO Amir Panush emphasized the company's long-term growth prospects, stating, "So overall, from a pattern and penetration in the marketplace, we expect, as we mentioned on other calls, right, that Wi-Fi shipments will reach very high volume above the $0.5 billion and more as we keep progressing and then basically augment very nicely our penetration with Bluetooth plus the combos."

CEVA's Q1 FY2026 earnings call maintained a positive tone, with sentiment and guidance tone scores of 0.46 and 0.57, respectively. The prepared remarks were particularly optimistic, with a sentiment score of 0.60, while the Q&A session was more balanced, with a sentiment score of 0.30. The company's AI optimism score of 0.59 and the forward-looking share of 60.2% indicate a focus on future growth opportunities and strategic initiatives.

Full call-over-call delivery metrics are in the tone history.

Compared to the previous quarter, the call showed a slight improvement in sentiment (+0.03) and guidance tone (+0.04), with a small increase in prepared sentiment (+0.10). However, the uncertainty index rose by 8.2, and the Q&A evasiveness index increased by 20.8, suggesting a more cautious approach to addressing investor questions. Despite these increases, the overall tone remained positive, reflecting the company's confidence in its growth trajectory.

CEVA's strong performance in licensing and related revenues has positive implications for its key customers, particularly in the IoT and connectivity segments. Samsung [005930.KS], which uses CEVA's DSP cores for LTE/5G modems, and MediaTek [2454.TW], which licenses CEVA-X DSP cores and subsystems, are likely to benefit from the growing demand for cellular IoT and Wi-Fi solutions. NXP [NXPI], which licenses CEVA's Bluetooth LE IP and SensPro AI DSP, and Broadcom [AVGO], which uses CEVA's DSP cores, are also positioned to capitalize on the increasing adoption of IoT devices.

Renesas [RNECY], which licenses CEVA's Wi-Fi 6 and Bluetooth IP and DSP for ITS, is another key customer that stands to gain from CEVA's strong performance. The record Wi-Fi shipments reported by CEVA are particularly significant for Renesas, as they indicate strong demand for Wi-Fi 6 solutions, which are expected to drive future growth in the IoT market.

In the context of its peers, CEVA's performance stands out in several areas. While the company's revenue growth of 11.5% year-over-year is solid, it is lower than the growth rates reported by some of its larger peers, such as NVIDIA [NVDA] (85.2%) and Meta [META] (33.1%). However, CEVA's gross margin of 85.8% is competitive, especially when compared to peers like MediaTek [2454.TW] (46.3%) and Sony [6526.T] (40.9%).

CEVA's focus on high-margin licensing and related revenues, combined with its strong customer relationships and market position, positions the company well for continued growth. The company's guidance for the full year, which points to revenue growth at the top end of its 8% to 12% range, is a positive indicator of its ability to navigate market challenges and capitalize on growth opportunities.

In conclusion, CEVA's Q1 FY2026 results demonstrate the company's ability to drive revenue growth through its strong licensing and related revenues. Despite a sequential decline in revenue, the company's guidance for the full year and its focus on high-growth segments like cellular IoT and Wi-Fi indicate a positive outlook. The company's strong financial position and strategic initiatives position it well to capitalize on the growing demand for intelligent connected devices and maintain its competitive edge in the market.