Mobileye Global (MBLY) Q2 2026 earnings call transcript

Joining us on the call today are Professor Amnon Shashua, Mobilize CEO and President, Maran Shemesh, Mobilize CFO, and Nimrod Nahushtan, Mobilize EVP of Business Development and Strategy. Thanks, and now I'll turn the call over to Amnon.

Thank you for joining, everyone. Mobileye's core business continues to perform very well in 2026, providing a strong foundation as we build towards upcoming advanced product launches. In the second quarter, IQ volume was up 3%, outperforming the volume of our top 10 customers by more than 8 percentage points. While ASP came in modestly below our expectations due to a higher contribution from China OEM export volume, revenue was essentially flat and still outperformed production at our top customers by roughly 5%. Profitability benefited from recognition of the new R&D credit law, which came into effect shortly after the end of Q1 and is retroactive to the beginning of 2026. Adjusted operating profit was up 46% year over year, and adjusted operating margin expanded by 10.31%.

Iran will get into detail on the credit law itself, but we view the benefits as sustainable. This policy was primarily designed to offset a higher Israeli corporate tax rate and to act as a retention tool to encourage continued R&D activity in Israel. Considering the R&D credits booked in Q2, also included in the Q1 impact, we think that the first half provides a more representative view of Mobileye's underlying performance. On that basis, results were very strong, with first half revenue up 13% year-over-year compared to our core customers' production volume decline of 3%. First half adjusted operating margin was 23%, up six points on a year-over-year basis. Cash flow remains robust with $210 million of operating cash flow generated in the first half of the year.

Overall, our current business is a robust, extremely profitable foundation. We see multiple secular drivers, including growth opportunities in India, China OEM exports into emerging markets, and new customers, all of which are supporting continued volume growth above the broader market, which surround ADAS as expected to drive ASP growth starting in 2020. Moreover, we continue to secure new design wins across virtually all of the high-volume, mass-market applications our core customers need.

When we move beyond high-volume ADAS into more advanced technology, such as point-to-point, eyes-on, hands-off, and level-three eyes-off, the pace of additional traction will depend in part on demonstrating real-world performance through upcoming supervision chauffeur and drive launches. We have been consistent on this point the last few quarters. Until OEMs see a vertically integrated supplier system performing at scale on the road, some are choosing to experiment with multi-supplier architectures that they integrate themselves, typically on lower volume programs where the commercial and operational risk is more contained. The recent Stellantis Awards are a good example of this dynamic. Mobileye won the high-volume 2027 program with cloud-enhanced ADAS, supporting highway-hands-free driving and cost-efficient package for the OEM, while a lower volume, later timing, and higher-risk program was awarded to other suppliers.

We view that outcome as consistent with how OEMs are allocating risk today. Mobileye continues to win where scale reliability and production readiness matters most, while some OEMs continue to test alternative architectures on platforms that carry less risk to their business. On cloud-enhanced ADAS specifically, this product provides an attractive economic bridge between base ADAS applications and more advanced autonomy, with gross profit per unit roughly equivalent to surround ADAS, and well more than double than of a base ADAS program.

On the robot taxi front, we remain encouraged by the progress with Volkswagen Group company Moya, both in terms of the performance testing of our self-driving system as well as the build-out of Moya's infrastructure. The program achieved a very recent milestone when Moya began public rider testing with safety drivers in Hamburg, Hamburg, Germany, in vehicles equipped with our self-driving system. We are looking forward to additional milestones throughout 26 and 27. As the confidence in our technology has grown, it has led to our decision to establish a fully vertically integrated robot taxi offering where Mobileye will control all aspects of the value chain. This initiative, which will proceed in parallel and leverage the same self-driving system technology we have been developing for the last several years, targets launch in 2027 in at least one U. S. city.

We believe this is a natural evolution to expand our potential share of this very large town. In addition to technology confidence, data from early-stage commercial services has clarified many question marks. Consumer demand has been strong. Revenue per vehicle is robust and will be profitable under our cost structure, and the regulatory environment is supported. We have also noted slower-than-expected scaling by the perceived leaders in the space, which we see as providing ample time for us to build our ecosystem. This combination of factors made this a very clear decision for us. We have already established a cross-functional team to build this business and are deeply engaged with subconstructors for the vehicle platform, self-driving system installation and vehicle uplift, and local logistics and infrastructure support.

Our MoveIt division is fully engaged and is a high-value asset for fleet supply demand optimization, trip planning, and rider engagement. We are forming joint Mobileye teams to leverage Mobileye's past proof-of-concept work with multiple mobility partners and accelerate development. Mobileye will restructure its resources, moving away and reducing headcount from the B2B side of its business, in order to later focus on this new strategy.

Finally, we will add the Mobileye logo to Mobileye app in the U. S. across hundreds of thousands of consumer users to enhance consumer recognition of the Mobileye brand. We see value in building the capability to participate across the entire Robotaxi value chain. But the most important action is responsibility for the vehicle as it comes out of the uplift facility as a fully validated driverless car. This opens up many go-to-market options for us, including operating the vehicles within our own service, deploying them on a third-party platform, or selling the vehicles to Robotaxi service operators with recurring revenues as the vehicle generates ride or fare. We also expect operating outside of an OEM to lead to more rapid validation and software update cycles.

Before turning it over to Moran, I'll say a few words on my decision to step down as CEO once we appoint a successor.

Mobileye is my brainchild. It started as an idea 27 years ago that machine learning can transform a monocular camera empowered by an appropriate system on chip into a system that can warn and mitigate imminent accidents at scale. Since then, we have delivered more than 250 million units of product, generated more than $13 billion of revenue, created thousands of jobs, and saved scores of lives by preventing and mitigating accidents.

We helped create an industry and changed how the world thinks about road safety. Eventually, fully autonomous driving became the overarching goal. Today, with supervision, chauffeur, and drive moving towards commercialization, Mobileye is entering a new phase. Our business that runs through automakers remains central to Mobileye. At the same time, robotics and humanoid robotics are major long-term opportunities built on the same physical AI foundation and require new operational models and new go-to-market strategies.

Our next decade may be even more ambitious than the prior 27 years. That is why I believe this is the right time to begin a search for a new CEO. The next leader should bring operating profiles to scale these opportunities and the mandate to lead the company to its next stage. This will be a singular opportunity to lead one of the most important physical AI companies in the world.

As for me, following the nomination of my successor, my goal is to contribute to the technology strategy, innovation, and long-term opportunities that can shape Mobileye's future. I'm proud of what we built, and I'm even more excited what comes next. I will turn the call over to Moran.

Thank you, Amir. Before I begin, please be aware that all my comments on profitability will refer to non-gap measurements. The exclusions in Mobileye non-GAAP numbers are typically amortization of intangible assets, which is mainly related to Intel's acquisition of Mobileye in 2017 and stock-based compensation, including the partial offsetting impact of the new R&D incentive loss. This year, we also exclude the goodwill impairment loss that occurred in Q1 and transaction costs associated with the Menti acquisition, which closed in early February. Second quarter revenue of $508 million was relatively flat compared to last year's Q2, which was our highest revenue quarter of 2025. Volume of $10 million was again above our expectation, driven by higher share within certain OEMs, higher ADA statement rates in emerging markets, and upside to China OEM export volume.

These three positive trends were consistent throughout the first half and pushed our volume above the approximate 9 million quarterly average we had experienced during 2025. On a sequential basis, we were down almost 1 million units from Q1 to Q2. It's important to remember that we believe Q1 included about 1 million of safety stock increase at customers. We believe that safety stock did not materially change during Q2, so underlying demand was basically flat from quarter to quarter.

Supervision deliveries of around 20,000 units were also above our expectations, with a little over 40,000 delivered in the first half, compared to end market demand for the vehicles of around 30,000. We do believe there is some intentional inventory building to protect against component shortages. This will be consumed during the second half. As such, we are incorporating a reduction in shipment volume in the second half of the year compared to the first and maintaining our outlook of slightly below 60,000 units. Adjusted operating income was $155 million, up 46% year-over-year. Adjusted operating margin was 31%, up about 10 percentage points versus Q2 2025. The income and margin growth was more than accounted for by recognition of $93 million contra-R&D expense related to an R&D incentive enacted by the Israel government during our Q2, as Amnon mentioned.

Approximately 50% of the benefit was related to Q2 and 50% related to the Q1 impact recognized in Q2. Regarding the R&D incentive, this new regime became low during RQ2, but is effective as of the beginning of 2026. After a deep analysis and consultations with a variety of groups, we arrived at a specific recognition for the first half and have enough clarity to incorporate further benefits in the back half of the year that are expected to be similar in magnitude to the first half. A couple of points of detail around this new item. It's obviously a large positive impact to our P&L that we expect to continue in future years. There is no end date to this regulation, although it's of course subject to future changes in the law.

There is potential for some volatility in the quarterly recognition of the incentive. It can be impacted by meeting recognition threshold, measurements of qualifying R&D expenditure incurred in Israel, and exchange rate differences. It would also be impacted if Intel were no longer a controlling shareholder of Mobileye. This is a cash benefit, but the timing of cash info is quite delayed compared to the accounting recognition. For example, we expect the cash impact of the benefit recognized in 2026 to occur two years later, gradually from the beginning of 2028. There is also expected to be some level of offset on the tax line, although not relative to street expectations, the Mobileye mid-term tax rate will be in the 20% range.

Currently, in 2026, our effective tax rate is expected to be in the 8% to 10% range, which is generally aligned with the cash tax rate. As a result of Israel implementation of the OECD Pillar 2 Global Minimum Tax Rule we would expect both P and cash tax rate to increase up to 15 percent potentially starting in 2027 Again we believe that the OECD Pillar 2 is a total of 10 of the P and cash tax rate to increase up to 15 potentially starting in 2027 Again we believe that it already incorporated into street estimations Turning to full-year guidance, we are increasing the full-year revenue outlook to $1.995 billion at midpoint and tightening the range, implying 4% to 7% revenue growth across the range.

We see this as a strong growth in core business, given that the production volume of our top 10 customers is expected to be down about 4.5%. Our outlook midpoint is underpined by a bit above 39 million IQ units, which is up almost 1 million units compared to our prior outlook. Partly offsetting the volume upside, coming mainly from China OEM export volume, is modestly lower expectations in the aftermarket and moving business, and some push out of advanced product samples, which carry very high per unit prices into 2027. Additionally, the approximately $10 million of higher-than-expected supervision revenue in Q2 is related to timing and results in a lowering of our supervision revenue expectation in the back half, as mentioned above.

We are increasing our outlook for adjusted operating income to $395 million at the midpoint, up from $210 million in the prior outlook. The guidance range for adjusted operating income actually widened slightly as the R&D incentive introduced an extra layer of potential volatility. We incorporate $180 to $200 million in our full-year outlook for this item. That positive impact, as well as contribution from higher revenue, is partially offset by some increase in expenses to support initial activities for our Robotex expansion and a very modest increase to operating expenses related primarily to foreign exchange.

Our assumption for full-year non-GAAP operating expenses is approximately $910 million at midpoint, including the expected $190 million R&D credit. Turning to third quarter, we are assuming between 9.3 to 9.5 million IQ units, and for revenue to decrease approximately 5 to 6 percent on a year-over-year basis, we would expect gross margin to be slightly below Q2 level, based on the mix of orders we are seeing currently. And for operating expenses excluding the R&D incentive to be slightly up from Q2 based on typical functionality of higher operating expenses in Q3. The R&D incentive will go down significantly in Q3 from Q2, since Q2 also includes the retroactive impact of Q1. To conclude, I am very pleased with the higher foundational margin of the business, as well as our ability to largely keep operating expenses consistent with our initial outlook, offsetting some fairly severe FX headwinds that we were mostly able to offset with our hedging program and operational efficiency.

At this point, we are approximately 85% hedge for the second half, which should continue to reduce volatility. Also, operating cash flow was over $200 million in the first half, giving that over $90 million of our adjusted operating profit was related to R&D incentive recognition with Q2, which won't be paid in cash for some time. This reflects very strong cash flow from the core business.

Finally, I was pleased with our initial execution of the share buyback program. We were able to deploy approximately $24 million at an average purchase price of $9.37. Subject to market condition and share price, we would expect to grow or maintain that pace over the course of the year. Thank you, and we will now take your questions.

Yeah, we can hear you. Okay, great. My first question is on your robo-taxi deployment. So, I understand that Mobileye is moving into a vertically integrated strategy, but I do remember Mobileye talking about not wanting to own the fleet itself a few years ago. Can you address any details on the strategy shift and how your partners are kind of reacting to the change in strategy? And I have a follow-up.

Yeah, so I think we can divide it into two. So first, in our IQ business, our exposure costs at least on the memory side is indirect, and we provide only the chip. And we haven't seen P&L impact of memory or cost increases this year. And on the supervision side, there is a memory component that we buy, and we have observed some price increases this year that we fully pass through to our customer. It means obviously some headwind in supervision gross margin, but still it's a relatively small portion of the activity. So it doesn't impact significantly the total gross margin.

I think overall the response is positive because it means that we are doubling down on development of Robotaxi, and the self-driving system is a core element in it. And this, I think, overweighs any other consideration there is there.

I think the Cenantis program is indeed an upgrade for an existing project that is already in production. And basically the decision was that the next startup production milestone for that program will introduce RAM through Cloud Enhanced Data, which is a relatively straightforward implementation compared to designing a completely new architecture, a new ECU with a completely new sensor set and so on. For the OEM, it's a very modest investment, and there is significant upside.

And for us, it's mostly about software. So again, it's an easy execution. And it does provide some tailwind in terms of the ASP for Stellantis, And their intent is to adopt this pretty much across the board for Stellantis vehicles effective 2027, gradually, of course, but ultimately getting to a standard-fit integration of REM in Stellantis fleet. And I think we've seen a couple more examples like this from OEMs that see this as kind of a low-hanging fruit.

And I think we are on pace to really expand our REM ecosystem as a consequence. The surround data is a little bit different because it does require a different design. So it's a new chip. It's IQ6 High. In that case, it's already an IQ6 Lite program with Stellantis. So for IQ6 High, it requires designing a new system and then integrating this, validating it, and then launching it. So I think it's a different profile, but we are encouraged by this win. Of course, it's an important milestone.

Yeah, I mean, that's what it means. The tax or benefit regime has changed now in Israel. So Israel used to give reduced tax rates to technology companies, and having this multinational minimum tax rate has changed the way the Israel government splits the benefit, and yet it's a positive for Mobileye.

Yeah and I just follow up This is Dan It more than slightly earnings positive especially compared to street estimates which are essentially that will have a tax rate of around 20 in future years So this incentive changes our R&D expense sustainably.

It does not change the way we'll pay taxes in terms of relative to street estimates.

Correct.

Thank you, Chris. We built a very strong foundation, and we are at the point of really a big phase transition in the company. From the point of view of solving problems, we believe that we've solved all the problems. We have a Gen 1 system being replaced by a Gen 2 software stack in about a month or so, being replaced by a Gen 3 system, which is incredibly sophisticated and incredibly advanced by end of year.

The KPIs for Robotaxi looks very good. We believe that we can start commercial deployment in Orlando by end of the year, as we said in the past. So I think the big problems are solved and are very close to final execution. Humanoid robotics is the next big thing, and we are still bullish on 2028 to be able to ship robots to the first use case, which we believe is going to be B2C and not B2B. So everything is ready from a technology point of view, but now this phase transition is more about operations. It's more about go-to markets. We need to explore new go-to markets, especially in the robotaxi, in humanoids. Operations infrastructure should expand in order to support robotaxi.

And then at the same time, AI is moving very, very fast. Now, I'm also contributing a lot of science into Mobileye, and I foresee that in the future it could be a stretch to continue to manage the daily operations and be strongly hands-on on this fast-moving train called AI. So it is the right time to find someone who will take the growth of the company, the operations, and the growth of the company, and keep me focused on the long-horizon thinking. So it's never a good time, but among all possible timeframes, I think now is the best time.

Yeah, so first question, yeah, this benefit is definitely sustainable. So over the past 10 years, Mobileye enjoyed, as a preferred technology company, 6% tax, which is very low in Israel, and it was very sustainable through all these years. Now when there's a new tax regime, this benefit is no longer relevant. So the way to give the incentive to tech companies is through this R&D credit, which is sustainable and comes to actually supersede the lower tax rate. So that's for the first question.

Second, on the Intel side, so Mobileye being part of Intel Group because of the revenue threshold, there's a revenue threshold of 10 billion Israeli shekel, is entitled of the highest bar of benefits, which is a grant rate of 25 to 30 percent. But if there is a change in the controlling structure or Intel is no longer in control of the shareholders, the benefit would be based on the location of the R&D activity. And since Mobileye is very much centralized in Israel and specifically in Jerusalem, which is the preferred area, and it's also entitled the very high bar of the benefit, it will be entitled bottom line to half of the grant we currently estimate. So $100 million approximately instead of $200 million.

That is still way high for most Israeli companies that have like maybe $10 million, $20 million, $30 million. That's the range because the Jerusalem impact is very significant and also our concentration in Israel also as a standalone company.

Thanks, Chris.

So, 2027, we see the Porsche supervision program starting to ramp up. But 2027, we don't anticipate a big volume. It only starts to ramp up. That's the big growth driver in 2027. There are RoboTaxi launches in 2027 with the Volkswagen Group and our own launches.

So I think that, as Mohan said earlier, we need to separate between our base ADAS business and the supervision one. Base ADAS, the overall system cost to the OEM is relatively modest, and the memory component is relatively small in that. And therefore, so far we haven't seen indications from the market that there is a change in volumes or order intake throughout the year and also for the upcoming few quarters.

In supervision, we are selling an ECU that does have memory components, and therefore we do purchase the memory, and therefore we incur the added cost, and we have transferred this to our customers. Again, as Iwan said, so far it was possible. Of course, we cannot really say where will memory prices will be in a year, but so far that has been the case. And overall, the volumes for supervision we're selling in 2026 comprise a smaller portion of the overall revenue of the company. So these fluctuations do not have a meaningful effect on the average gross margin or the profit. And I would also say, I mentioned it in my remarks, that's the reason we didn't increase the yearly forecast for supervision.

So basically, I think we shipped between 60% and 70% of the volume in the first half, and we didn't increase the yearly forecast because our customer maybe wanted to protect themselves. from the components issue, and there might be some, you know, headwind in the second half of the year. But in terms of revenue, we didn't increase the guidance for supervision.

Thank you, Aaron.

So the launch in Orlando is on track. We believe we will get to the KPIs by the end of the year. Last week, there was an event showing end-to-end, including the teleoperation and the customer facing, and the entire end-to-end driving experience was very, very successful, and KPIs are on track. LA is scheduled for 2027, so in terms of commercial driverless deployment, of course, testing will start early 2027. But the commercial driverless deployment is scheduled towards Q3, second half of the year, and additional cities.

As for the volume of 100,000, it is difficult to give precise numbers. But if the technology performs as we expect and the cost structure that we have and the Volkswagen production line of these vehicles, this number could eventually be lower than what could happen in reality. But it's difficult to say right now.

So, on the hardware side, we are on the robot called V3.2, which was assembled a few weeks ago with additional capabilities. V3.5 in about a month, and the model that is going to be produced in volume called V4 should be ready Q1 2027. On the software side, there's really accelerated development in terms of reinforcement learning across thousands of different settings and objects and use cases. It's all around home use. So we believe that the first deployment should be a B2C deployment and not a B2B deployment in order to focus on a precise product definition and not start customizing to each business requirement.

And then later start moving into B2B. And we believe that 2028 will build around 500 units to start.

It's difficult to speculate, but I think it's around the cost structure. That could be one reason for slow scaling. But no, you should ask those companies and not me. We believe that we have the right cost structure. We'll obviously not be the first in the market, but we believe that we can scale the fastest in this market. Therefore, the timing right now is really optimal.

Our relationship with Volkswagen is very robust. We have multiple programs, not only the program with the Moya. We have the chauffeur, we have the supervision. They are on track to commercialization. The first one is the supervision led by Porsche. With respect to Robotaxi, Volkswagen is undergoing changes. We don't know how this would affect the different branches or the different activities of Volkswagen, but so far our information is not different from what you have.

Well, a few years back, we were contemplating whether to go full vertical or just to be a technology supplier, and we opted on the safer route of being a technology supplier, and we have two major customers, the Volkswagen Group with Moya and the Holon Group. Today, we believe that the conditions are ripe to expand the position of not just technology supplier, but to go full vertical in order to diversify the opportunities. So, for example, from a revenue perspective, if we go full vertical, it's 5x per car. The fact that there is a CapEx investment is not something that should deter because there is a very strong ROI on this business, and there are multiple ways of funding it.

I would say that the first 10,000 to 20,000 vehicles, we can fund it using our own cash reserves and the operating cash for the next five years that we generate. But there are very attractive ways to create external funding, which we'll investigate as the time comes. So we're not that deterred by the CAPEX element of it, because the ROI of this business is very strong. And this is thanks to our competitors or the leaders and the perceived leaders in this space where we have more conviction, both in terms of the demand and in terms of what is the average revenue per car per year in order to build a business case. So this is why we decided that it is time to expand just from a self-driving system supplier to a full vertical operator.

Yeah, so regarding our China volume growth, we have been working over the years with a few of the leading Chinese OEMs in terms of volumes, Most notably, Gili and Cherry, two of our bigger customers in China. In the past couple of quarters, they have been increasing their export volumes in a very significant way, and that is the vast majority of these volumes is with the Mobileye system, our IQ.

So we have been benefiting from their successful exports into new markets, and they have also nominated us for future programs as well, which means that we see this as kind of a vote of confidence that the mobile system is the best one for them for the export markets, whether it's trying to penetrate Europe, but even if they're trying to sell into emerging markets, which again I think has been, this is the second year of steady growth in that regard, although a much more accelerated one this year.

Regarding the domestic market in China, so I think it's not new that there are Chinese, local Chinese competitors are talking, and working towards exporting. So far, we haven't really seen, maybe outside of specific examples in India or very smaller markets, we haven't really seen a successful launch of a Chinese solution in foreign markets. So, you know, without speaking too much into the future, so far it hasn't been the case that they are, you know, successfully launching in Europe or U. S. or Japan or Korea.

So we feel fairly confident in maintaining our position in those markets.

I think one other point from me, this is Dan, is that, you know, regarding the OEM export, the China OEM export business into emerging markets, like we're seeing a compounding effect where, you know, bringing these vehicles with good ADAS into emerging markets is pushing the legacy automakers to also increase their ADAS penetration rates in these markets. So, you know, it's a big reason why our growth over market is so good this year.

The board has assembled a search committee. Of course, I will help in the search. We are casting a wide net. So we're not specifying the profile of the person, he or she. And we want to look for the best CEO for the coming 10 years of growth of Mobileye.

As for humanoids, this is exactly the area which I want to focus more in terms of emerging technology. I believe that autonomous vehicle technology is largely sold. The programs that we have, I don't see any open scientific problem there. With regard to humanoids, I see a lot of potential, a lot of opportunities to innovate. This is an area that I would like to spend more of my time. And this timing is good. And your CEO will take care of the growth of the company, especially those areas in which the technology issues are solved. And I can focus on the long horizon thinking work with the mentee team in order to make sure that we have a successful launch in 2028.

Of course, we are open to expand. We will know better in 2027. In 2027, we plan to start with a fleet of 100 to 200 vehicles in a single city, which we more or less know what that city is. We'll expose it to the public when the time comes. The success of that deployment will determine how big of a fleet we want to have in the next five years. Some of it can be funded through our own cash, and some of it could be through external funding. But we will know better in 2027.

As for the market in the next five years of 300,000, 400,000 cards, it's not our estimation of what's happening. I think that the 17,000 that we talk about is quite a meaningful market share in the next five years.

So Porsche is leading the program in terms of the car models. It includes also Audi car models for the supervision.

So we have simulation infrastructure and foundation models, which are now focused on about 4,000 different objects that the robot needs to identify and plan a grasping trajectory towards it. And we are on track with that effort. And we're building also a stack of both imitation learning and reinforcement learning through simulation for the home use case, and that's also on track. So we believe that with the robots, the V4 robot in Q1 2027, we could have it all integrated. It will be running, in terms of the compute, will be running on an NVIDIA Tor, the latest chip NVIDIA has in this area.

And it will be strong enough to support all the needs that we have.

This is a conversation that will start in 2027. It's too early to have this conversation. I think it is best to first demonstrate this and have a certain better side for it and then have this kind of conversation. I believe there will be demand. And also our competitors are also focused on home use as a major market for them.

Thanks, Colin.

Thanks, Sherry, and thanks everyone for joining our Q2 earnings call. We'll talk to you again in three months. Thank you.