Arteris NASDAQ: AIP reported record first-quarter results for 2026, with management pointing to strong demand tied to artificial intelligence chips, data center infrastructure, automotive systems and cybersecurity as key drivers of growth.
Chief Executive Officer K. Charles Janac said the quarter was “robust” for Arteris, as annual contract value plus royalties reached a record $92.8 million, up 39% from a year earlier. The company also posted record revenue, royalties and revenue backlog during the quarter ended March 31, 2026.
“AI integration into all types of electronics from data centers to edge devices and physical AI systems is increasing the demand for advanced connectivity and security products,” Janac said, adding that two-thirds of Arteris’ customer engagements are now tied to AI chips.
Revenue Rises 39% as Royalties Accelerate
Chief Financial Officer Nick Hawkins said total revenue for the first quarter was $22.9 million, up 39% year over year and above the high end of the company’s guidance range. Trailing 12-month royalties reached $7.9 million, up 67% year over year and a record for the company.
Hawkins said Arteris’ royalty base is becoming more diversified, with large royalty reporters in automotive, consumer, enterprise computing, and aerospace and defense. The number of customers reporting more than $250,000 in quarterly royalties increased to three from one a year earlier.
Remaining performance obligations, or contracted future revenue, totaled $118 million at quarter-end, up 33% year over year. Hawkins said Arteris expects just over half of that amount to be recognized as revenue in the 12 months beginning April 1, 2026.
Non-GAAP gross profit was $20.1 million, representing an 87% gross margin. GAAP gross profit was $19.7 million, representing an 86% gross margin. Hawkins said the GAAP result reflected, for the first time, subcontractor costs included as cost of revenue for certain security government contracts.
Non-GAAP operating loss was $2.5 million, while GAAP operating loss was $9.3 million, compared with a GAAP operating loss of $7.7 million in the prior-year period. Non-GAAP net loss was $1.2 million, or $0.03 per diluted share. GAAP net loss was $8 million, or $0.17 per diluted share.
Data Center and Automotive Remain Key Demand Areas
Janac said enterprise computing, including data centers, high-performance computing and high-bandwidth memory, was again the largest contributor to licensing activity in the quarter. He said a leading global hyperscaler expanded its use of Arteris’ Network-on-Chip technology for next-generation data center chips, and another leading global memory supplier is using Arteris system IP to accelerate memory chip development.
Automotive also remained a strong sector, Janac said. He cited a first-quarter deal with Renesas, which increased its licenses and deployed Arteris system IP for Renesas’ R-Car Gen 5 SoC series. According to Janac, that system-on-chip is tailored for advanced driver assistance and automated driving systems and uses Arteris’ Network-on-Chip technology for silicon data movement.
In communications, Janac said a leading European 5G and 6G communications equipment company expanded its use of Arteris technology. In aerospace and defense, he said a leading U.S. space infrastructure company expanded its use of Arteris for next-generation space applications.
During the question-and-answer portion of the call, Hawkins said data center and high-bandwidth memory design cycles are generally faster than automotive, typically around two to three years, compared with up to six years in some automotive cases. Janac said data center licensing is growing, while automotive is expected to remain a strong royalty generator due to volume.
Hawkins said enterprise computing is now Arteris’ largest vertical by license generation, slightly ahead of automotive, with both in the 30% to 35% range. He added that aerospace and defense is approaching 10% of annual contract value, partly due to the acquisition of Cycuity.
Cycuity Acquisition Adds Cybersecurity Focus
Janac said Arteris broadened its system IP portfolio through the acquisition of Cycuity, a chip cybersecurity company. He said the technology helps identify and mitigate cybersecurity vulnerabilities during chip development before mass production.
Janac said a top-five U.S.-based hyperscaler that is already an Arteris customer licensed Arteris security technology in the first quarter to help address cybersecurity risks. He added that Arteris is seeing interest from customers in data center, aerospace and defense, consumer, automotive and communications markets.
In response to an analyst question, Janac said the Cycuity acquisition was still in its early stages, having started in mid-January, but that government orders were completed and commercial opportunities were emerging in the second quarter. “We think that this acquisition is gonna turn out just fine,” he said, adding that Arteris believes its more than 200 customers can use the Cycuity product.
Company Raises 2026 Outlook
Hawkins said Arteris is seeing continued strength in semiconductors and signs of an upward market trend cycle. The company raised its full-year outlook for 2026 on both top- and bottom-line metrics.
- Second-quarter 2026 outlook: ACV plus royalties of $95 million to $99 million, revenue of $23 million to $24 million, and a non-GAAP operating loss of $3 million to $2 million.
- Full-year 2026 outlook: ACV plus royalties exiting the year at $102 million to $106 million, revenue of $91 million to $95 million, and a non-GAAP operating loss of $8.5 million to $4.5 million.
- Free cash flow: Full-year non-GAAP free cash flow is expected to be positive $5 million to positive $9 million.
Hawkins said full-year revenue guidance is $2 million higher than prior guidance and represents 32% year-over-year growth at the midpoint. He also said Arteris expects to report a non-GAAP operating profit for a period as early as the fourth quarter of 2026.
Arteris ended the quarter with $41.9 million in cash, cash equivalents and investments, and no financial debt. Free cash flow was negative $7.4 million in the first quarter, including about $3 million in deal consideration elements and fees related to the Cycuity acquisition.
CFO to Retire in August
Arteris also announced that Hawkins will retire as CFO effective Aug. 31, 2026. Janac said Hawkins will participate in the company’s second-quarter report and then serve as an adviser to help with the transition.
“Nick leaves the company in great shape with no debt, positive free cash flow, and major contributions to three acquisitions,” Janac said.
Hawkins said it had been “a rewarding and enjoyable experience” to help lead Arteris through its development, including its initial public offering and M&A activity. He said the company is now cash flow positive and “transitioning to profitability this year.”
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.
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