Arteris Maps AI, Data Center and Chiplet Growth Path Toward $250M Revenue Goal

Key Points

• Arteris says AI is not a standalone market but a feature spreading across end markets, with 67% of first-quarter design starts tied to AI and potentially rising to 80% as adoption broadens.
• The company expects data center business to grow faster than other segments, though it is more licensing-heavy than royalty-driven, and it sees chiplets becoming more important in AI and data center designs.
• Arteris reiterated its long-term plan to reach $250 million in revenue by 2030, with 2026 revenue guided to $95 million-$99 million and a path toward free cash flow positive and non-GAAP profitability.

Arteris NASDAQ: AIP outlined its view of the semiconductor system IP market, its growth strategy and its exposure to AI, data center and chiplet design trends during a TD Cowen TMT conference session with analyst Josh Buchalter.

The Arteris representative, identified by Buchalter as Charlie at the end of the session, said the company is focused on “system IP,” which he described as the part of a chip that moves and manages data. He said Arteris plays in network-on-chip technology, cache-coherent network-on-chip products, system-on-chip integration automation software and, following its January acquisition of Cycuity, hardware security assurance.

The presenter said Arteris has been public since 2021, has more than 350 employees and has IP that has shipped in about 4 billion chips used in commercial systems. He also said the company has a “blue-chip” customer base and a customer retention rate above 90%.

AI Seen as a Feature Across Markets

Asked by Buchalter how Arteris is tied to the AI theme, the Arteris representative said he does not view AI as a separate market. Instead, he said AI is becoming a feature across vertical markets.

He said Arteris disclosed on its first-quarter earnings call that 67% of design starts in the quarter were AI-related, and that figure could rise to 80% as AI becomes part of more end markets. He cautioned that some AI applications may not prove economical, but said that after the current hype subsides, AI will be discussed in the context of vertical applications rather than as a standalone market.

Automotive was cited as an example. The presenter said ADAS chips used for automated driving are effectively AI chips for automotive applications, even if customers describe them by their end use rather than as AI products.

Data Center Business Expected to Grow Faster, But Differently

Buchalter asked how much future royalty revenue could come from data center customers, given Arteris’ hyperscale engagements and its historical strength in automotive. The Arteris representative said data center royalties are expected to grow substantially and likely faster than other segments, but he emphasized that the data center is primarily a licensing business for Arteris.

By contrast, automotive, consumer and industrial markets were described as more royalty-driven. The presenter said data center chips are higher priced but less numerous than endpoint devices.

He also said design cycles differ significantly by market. Automotive royalties can last 10 years or more, while data center chips, particularly for AI inference, may generate royalties sooner but for shorter periods, potentially two to three years. He attributed that faster cycle to the rapid evolution of large language models and data center chip requirements.

Company Reiterates Financial Targets and Long-Term Plan

The Arteris representative said the company reported $71 million in revenue for 2025 and is targeting a longer-term revenue level of $250 million by 2030. He said the plan is built from three components: license growth, royalty growth and growth from two additional acquisitions.

For 2026, the presenter said Arteris expects revenue between $95 million and $99 million after “beat and raised” guidance by about $2 million in the most recent quarter. He also said the company expects to be free cash flow positive and is aiming to reach non-GAAP profitability in the fourth quarter while continuing to fund R&D.

He said Arteris’ royalty outlook is supported by customer design activity. The presenter said customers are likely to reach 1,000 design starts in the third quarter, and that only 16% of designs completed with Arteris IP are currently generating full royalties. He said more than 60% of designs are still waiting to generate royalties.

On revenue visibility, he said Arteris’ ratable revenue model gives the company a high degree of predictability. At the start of a year, he said roughly 75% to 80% of that year’s revenue is already on the balance sheet waiting to be amortized from remaining performance obligations.

Chiplets, AMD and Customer Engagements

The Arteris representative said chiplets are becoming more important, particularly in data center designs, but he pushed back on the idea that all chips will move to chiplet architectures. He estimated chiplets currently represent about 10% of design starts and could rise to about 30%.

He said Arteris is seeing chiplet adoption in PC client chips, data center chips and some automotive applications. The company’s 2026 product focus is chiplets, which the presenter described as a structure in which silicon is split across multiple dies combined into one system-on-chip package.

Buchalter also asked about Arteris’ engagement with AMD. The Arteris representative said AMD continues to use its internal Infinity Fabric for cache-coherent interconnect. He said Arteris provides non-coherent network-on-chip technology, chiplet connectivity and Magillem, coexisting with AMD’s internal technology. He said the relationship has expanded into subsequent deals in other parts of AMD, and that Arteris’ progress with AMD is tied more to the CPU side than the GPU side.

The presenter also named Intel, NXP and Samsung as large customers. He said Intel is one of Arteris’ largest customers, though he noted Intel is changing as it spins off Altera and Mobileye and focuses on areas including data center, chipsets and some AI.

Security Expansion Through Cycuity

Buchalter asked about the Cycuity acquisition and Arteris’ move into design-stage security. The Arteris representative said customers had asked the company to protect data movement from man-made attacks and help with cybersecurity certification such as ISO 21434.

He said Arteris wants to make security part of everything it does and that Cycuity gives the company a security product to sell to its existing customer base. He also said it could help Arteris enter the government market and serve companies that may not buy its system IP but still need security.

The presenter said Cycuity currently uses an EDA-style business model rather than a royalty model. He said the opportunity could grow if cybersecurity sign-off becomes part of broader verification suites, moving from relatively few licenses per customer to potentially hundreds of licenses per customer.

About Arteris NASDAQ: AIP

Arteris, Inc is a fabless semiconductor intellectual property (IP) company specializing in on-chip interconnect solutions and system IP for advanced integrated circuits. The company's core products include its FlexNoC network-on-chip (NoC) fabrics, Ncore cache coherent interconnect IP, and CodaCache memory subsystem IP. These technologies enable semiconductor and systems companies to design scalable, energy-efficient chips for applications ranging from automotive and artificial intelligence (AI) to 5G communications and high-performance computing.

Founded in 2003 and headquartered in Santa Clara, California, Arteris serves a global customer base across North America, Europe, and Asia.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.