CEVA Inc. (NASDAQ: CEVA) reported second-quarter FY26 revenue of $29 million, a 13% year-over-year increase. The semiconductor IP provider raised its full-year revenue growth outlook to 13-15%, citing strong licensing momentum and improving royalty trends.

Financial Performance

Licensing and related revenue drove the top-line growth, rising 21% YoY to $18.2 million. This segment accounted for 63% of total revenue, marking the strongest licensing quarter in three years. Royalty revenue increased 17% sequentially to $10.8 million, supported by wireless connectivity and automotive AI deployments.

*Derived from stated percentages where absolute prior-year figures were not explicitly provided in source text for revenue total, but royalty was explicit. Note: Source states Q2FY25 royalty was $10.7M. Q2FY26 Revenue is $29M (+13% YoY implies ~$25.66M prior).

Gross margin remained robust at 87% on a GAAP basis and 88% non-GAAP. Non-GAAP operating income expanded to $3.1 million from $0.8 million in the prior-year period, reflecting an operating margin expansion from 3% to 11%. Net financial income fell to $1 million from $2.1 million due to foreign exchange effects on Israeli shekel-denominated lease obligations.

What the Numbers Show

The divergence between licensing and royalty growth highlights a strategic shift toward platform-based engagements. While licensing revenue surged 21%, royalty revenue grew only marginally YoY (from $10.7 million to $10.8 million), despite a 17% sequential jump. This suggests that recent large-scale platform deals are driving immediate upfront licensing fees rather than immediate per-unit royalty accruals, which typically lag production ramps. The company’s emphasis on "complete chip builds" and subsystems over individual IP blocks supports this interpretation, as these complex deals often involve higher initial licensing values with longer-term royalty payoffs.

Operational Highlights

CEVA signed 10 licensing agreements in the quarter, including two with first-time customers and two directly with OEMs. A significant AI licensing deal with a global computing platform company for its NPU IP was highlighted as strategically important for long-term royalty prospects.

Shipment volumes totaled 567 million CEVA-powered devices, up 16% YoY. Key breakdowns include:

• Consumer IoT: 487 million units (up from 409 million)
• Mobile Handset Modems: 61 million units (up from 55 million)
• Cellular IoT: 68 million units (record high, up 3% YoY)
• Wi-Fi: 80 million units (up 28% YoY)

Industrial IoT shipments declined to 19 million units from 24 million, though industrial royalty revenues rose 7% due to a richer mix of higher-value products like automotive and AI.

Outlook and Balance Sheet

The company ended the quarter with approximately $221 million in cash, cash equivalents, and marketable securities. Days sales outstanding stood at 70 days. Operating cash flow was $5.8 million.

For the full year, CEVA expects non-GAAP operating income to increase approximately 70% YoY and non-GAAP net income to rise about 50%. Third-quarter revenue guidance is set between $30.5 million and $34.5 million, with non-GAAP operating expenses expected to remain similar to Q2 levels.

CEVA Logistics reported second-quarter adjusted earnings per share (EPS) of $0.08, surpassing analyst consensus estimates of $0.07 by 14.29 percent. The result marks a 14.29 percent increase over the $0.07 per share reported in the same period last year. Quarterly sales reached $29.033 million, beating the analyst consensus estimate of $28.170 million by 3.06 percent, representing a 13.07 percent year-over-year increase. Following the results, analysts revised their price targets, with Rosenblatt raising its target to $49 and Oppenheimer lowering its to $38.

Financial Performance

The company’s financial results for the quarter exceeded market expectations on both revenue and earnings metrics. The following table outlines the key figures against analyst estimates and prior-year comparisons:

Analyst Reactions and Guidance

Following the earnings announcement, CEVA shares gained 1.2% to $32.29 in pre-market trading. Analysts adjusted their outlooks based on the performance:

• Rosenblatt analyst Kevin Cassidy maintained a Buy rating and raised the price target from $45 to $49.
• Oppenheimer analyst Martin Yang maintained an Outperform rating but lowered the price target from $42 to $38.

Management Commentary

Amir Panush, Chief Executive Officer of CEVA, attributed the strong performance to specific segment growth. "We delivered another strong quarter, with revenue increasing 13% year over year, fueled by licensing and related revenue growing 21% to its highest level in three years," Panush said. He noted that these results reflect the growing strategic importance of proven silicon and software IP as customers accelerate increasingly complex AI and connectivity technologies that enable Physical AI.

What the Numbers Show

The simultaneous beat on both revenue and earnings suggests operational efficiency gains rather than one-time adjustments driving the profit improvement. With sales growing at a slightly faster pace (13.07%) than the estimate gap (3.06%), the company appears to have captured more volume or pricing power than anticipated. The 14.29% rise in EPS mirrors the revenue growth rate closely, indicating that margin expansion was not the primary driver; instead, the earnings growth was largely proportional to the top-line increase, reflecting stable operating leverage during the quarter. The divergence in analyst sentiment—Rosenblatt raising its target while Oppenheimer lowers it—suggests differing views on how much of this licensing-driven growth is sustainable versus cyclical.