Silvaco Group NASDAQ: SVCO reported second-quarter fiscal 2026 revenue growth of 48% year over year and returned to non-GAAP operating profitability, as the semiconductor software company highlighted expanding intellectual property sales, cost reductions and new partnerships focused on AI-enabled manufacturing.
Revenue totaled $17.8 million for the quarter, while bookings reached $16.2 million, up 48% and 25%, respectively, from a year earlier. Chief Financial Officer Chris Zegarelli said revenue increased across all product areas, with particularly strong performance in the company’s IP business.
“We delivered another sequential quarter of non-GAAP operating expense reductions,” CEO and Director Wally Rhines said. “We saw our first non-GAAP operating profit since late 2024” and delivered record bookings and revenue in IP products.
IP Business Leads Growth
Silvaco’s IP revenue rose 238% year over year in the second quarter, reaching a record level for the business. Rhines said the company expects IP revenue to double year over year in fiscal 2026, to approximately $20 million, supported by an IP pipeline that has increased more than fourfold over the past year.
The company attributed part of the IP business momentum to assets acquired through Mixel, as well as its efforts to improve development efficiency, add AI capabilities and increase sales activity. Rhines said the addressable market for the company’s IP products exceeds $1 billion.
Management described IP as the company’s principal near-term growth driver, while identifying its Fab Technology Co-optimization, or FTCO, offering as a longer-term opportunity. FTCO combines AI with physics-based simulation to help semiconductor manufacturers develop and optimize processes virtually.
Silvaco won another new FTCO customer during the quarter, according to Zegarelli. Rhines said the engagement generated some upfront license revenue and involved a traditional semiconductor manufacturer. He added that FTCO adoption is expected to expand as customers use the technology across more process and design applications.
Partnerships Target AI Manufacturing
Silvaco announced three strategic partnerships that management said strengthen its position in AI-enabled manufacturing and process development.
- NVIDIA: Silvaco is collaborating with NVIDIA to integrate accelerated computing, CUDA-X and AI frameworks with Silvaco’s physics-based simulation portfolio. The companies aim to support digital twins that could reduce simulation cycles from weeks to days.
- Dassault Systèmes: The company is working with Dassault Systèmes’ SIMULIA unit on interoperable simulation workflows spanning reactor-scale plasma simulation, semiconductor process modeling and structural stress analysis. Rhines said the relationship could provide access to customers that Silvaco has not traditionally served.
- Micron: Micron invested $10 million in a Silvaco convertible note that closed during the third quarter. The companies also agreed to deepen their collaboration on FTCO technology and future process-development capabilities.
Rhines said NVIDIA provides computing infrastructure, while Silvaco contributes physics-based models that can generate synthetic data for digital twins and surrogate models. He said accelerated GPU computing can allow the company to generate more data more quickly, supporting virtual manufacturing models that can provide rapid answers to process-development questions.
Management also said AI is improving internal productivity. Rhines cited examples including prototyping that has accelerated by as much as 30 times, source-code analysis by up to 11 times, scripting by about 10 times and debugging by up to five times. The company is also developing AI-enabled products, including an enhanced version of Utmost that it said can reduce time to model by up to 50%.
Margins Improve as Spending Falls
Silvaco reported a GAAP gross margin of 85.2% and a non-GAAP gross margin of 86.8%. Both measures declined sequentially because of revenue mix but improved substantially from the prior year, aided by restructuring actions, Zegarelli said. The company expects gross margins to remain in the mid-to-upper 80% range going forward.
GAAP operating expenses fell 8.7% sequentially to $19.2 million, while non-GAAP operating expenses declined 7.8% to $14.8 million, below the midpoint of management’s guidance. Zegarelli said Silvaco has completed its targeted $20 million in annualized spending reductions.
The company posted a GAAP operating loss of $4 million, an improvement from the prior quarter. Non-GAAP operating profit was $635,000, compared with a loss in the prior quarter. GAAP net loss was $3.7 million, or $0.11 per share, while non-GAAP net income was $315,000, or $0.01 per share.
Cash and cash equivalents totaled $13 million at quarter-end, up nearly 20% sequentially. The balance did not include the $10 million Micron convertible note, which closed after the quarter ended. Operating cash use was $5.5 million, including roughly $1.8 million of one-time items such as severance payments. Excluding those items, cash used in operations would have been $3.7 million, Zegarelli said.
Outlook Calls for Record Fourth Quarter
For the third quarter, Silvaco forecast bookings of $18 million, plus or minus 10%; revenue of $17 million, plus or minus 10%; non-GAAP gross margin of about 88%; and non-GAAP operating expenses of $14.5 million, plus or minus 5%.
Management said the third quarter is typically seasonally softer for the TCAD business, while the fourth quarter has historically been stronger because of customer renewals. Zegarelli said the company expects fourth-quarter revenue to exceed its prior record quarterly revenue of about $18.7 million.
Silvaco expects fiscal 2026 revenue to exceed $70 million. For fiscal 2027, management forecast double-digit revenue growth, continued non-GAAP operating profitability and positive cash flow from operations. Zegarelli said the company’s pipeline and expected fourth-quarter performance provide confidence in that outlook, while Rhines said IP is expected to drive near-term expansion and FTCO could become a larger contributor over time.
About Silvaco Group (NASDAQ:SVCO)
Silvaco Group, Inc is a provider of electronic design automation (EDA) software and semiconductor intellectual property (IP) solutions. Founded in 1984 and headquartered in Santa Clara, California, the company offers a suite of tools for process and device simulation, circuit design, verification, and physical implementation. Silvaco's core product lines include technology computer-aided design (TCAD) for process modeling, SPICE circuit simulators for analog and digital analysis, and layout and parasitic extraction tools for physical verification.
In addition to its EDA software, Silvaco delivers semiconductor IP in areas such as memory compilers, interface IP (including USB, PCI Express and DDR), and embedded analog/mixed-signal cores.
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