Mobileye Global Inc. (MBLY) Earnings Call Transcript & Summary

All right. Thanks for joining us, everyone. Very pleased to continue the day here with Mobileye. We have Dan Galves, the Chief Communications Officer from Mobileye, who I'm sure many of you are familiar with us. Dan, thanks again for joining us at this year's conference.

Thanks, Joe.

So a lot to talk about here. I think the Mobileye story is almost a sort of continual sort of evolution, right? You have the base ADAS products, which is sort of the core competency of the business. That was evolving more into SuperVision, which started to launch and then sort of for reasons we don't sort of need to go in here today sort of took a little bit of a backseat. And then you sort of have the surround ADAS sort of come in, which becomes maybe a more cost-effective solution, something that your customers think they can sort of implement a little bit more broadly. But then on the other side, right, you have the drive or the robotaxi business, and that seems to be where there's a lot of at least market and media enthusiasm for that business as we start to see some businesses scale. So I guess I just want to sort of to start the sort of conversation and talk to you, like how does the -- where is the company sort of focused right now? Is it really more on getting these surround wins with customers sort of across the finish line? Is it more on the robotaxi side? And then even on the robotaxi side, is it really sort of technological development or operational and process development that needs to get things out?

Yes. No, I mean I think that's a very good question. So I think from a business development perspective, a sales perspective, you tend to focus on the area where you have pull from whoever your customers are, other ecosystem players. And there's definitely a lot of pull right now for a next generation of ADAS systems for mass market vehicles that will bring vehicles to kind of the next level of safety that creates safer vehicles, but also meets future test criteria, which are getting more and more difficult, provides a system where consumers can take their hands and feet off the controls on the highway in a very kind of predictable, wide-ranging manner, automatic lane changes to create convenience and tech-forward systems, but those systems want to be much lower cost and more scalable than what are on the road today. So I think that the OEMs feel like that combination of sort of a have to do safety improvements combined with something that they believe will be attractive to consumers, consumers would pay extra for this technology, but not have to pay too much extra seems like kind of a very attractive place to be, and we're seeing a lot of traction there. And so there's a lot of effort going into marketing and getting design wins for that technology. I think on the robotaxi side, the pull -- I mean, the pull is certainly from investors, but the pull is also from demand generators like Uber and Lyft and Bolt as well as like public transit operators who see the potential for dealing with driver shortages and a more efficient transportation system. So you have a lot of pull from those players. and that's creating a lot of activity in that space. I think in that midrange of SuperVision and Chauffeur, which are kind of premium products for premium vehicles that don't really have like a half to do component to it is probably less traction than the other 2 right now. I think -- but the main priority of the company is not necessarily to get more design wins right now, it's to execute the ones we have because we do have production programs with Volkswagen Group for all 4 of these categories. And our view is if we do our job and kind of execute the products and have the performance that we're expecting that the OEMs are expecting that, that will drive more business for these technologies like across the board. So that's really, I think, a core focus of the company over the next year to 2 years.

So let's go back to sort of the surround ADAS. You obviously have the initial Volkswagen win, which starts in '27, right? And then last quarter, you sort of announced the nomination for sort of another surround ADAS. And I think there was sort of the implication that there's sort of -- that has sort of been opening up more and more conversations. So maybe you could just give us an update on sort of where some of those conversations stand. And look, I understand that these are large important decisions by these organizations. But like what is key? Like what are they really looking for to sort of get over the finish line here?

Yes. So I think that there were already like a number of active discussions before the second design win, but that one is I think it's a great demonstration of why the traction is happening to begin with, like this particular OEM believes that hands-free on highway driving is going to be a critical feature to offer to consumers, and it shouldn't be only on high-priced vehicles. This particular OEM has an existing sort of Gen 1 system like this that because of cost, never really could scale to lower-priced vehicles. And so their direction is that this technology would be on all of their cars eventually. I think that what we were told by them is compared to the kind of original plan, which was to have like an EyeQ6 Light for ADAS and then kind of go to the next generation of this Level 2+ system they had because of the cost efficiency of surround ADAS, because of the fact that you don't need as many sensors is that they were planning, we're saving them $1 billion. So for us, it's a very large kind of uptick in revenue with this particular OEM. But for them, it's a $1 billion cost savings, and it's kind of lowering -- relative to what they were planning to begin with, and they believe the performance will be better, and it will be kind of like a differentiating factor for their cars.

And do you think that dynamic where it's a revenue generation for you, but a cost savings for other -- for automakers can exist at other potential customers?

I think it definitely can because the original kind of direction for these Level 2+ systems was essentially split the -- create control for the OEM by splitting the supply chain. supply chain, source radars from one company, cameras from another company, chips from another company, certain software, DMS, but you end up with 4 or 5 different ECUs, too much cost and a group of technology providers that aren't really all on the same page. So this more of a vertically integrated system creates cost savings. So you're looking at a big revenue benefit to us, but a cost savings for the customers.

Okay. I guess then on the -- switching gears to the robotaxi side. I think one of the challenges here is, I think, that investors sort of want to understand not only where the technology stands but sort of what the business model ends up looking like. Because I think one sort of view here, right, and I know we were having this conversation a little bit earlier is that you could have great technology. But at the end of the day, it does seem like you're somewhat beholden to your customers in terms of sort of getting that technology out on the road. So maybe you disagree with that, maybe you don't. I'm curious to sort of get your views. But how do you sort of -- I guess, why did the business model evolve that way, A, B, like is there an opportunity to -- as there is sort of more demand for robotaxis and there is, I would still say, supply availability like I was just out on the West Coast and the Waymos are -- there are more of them there are everywhere. But like they are -- I would still say, probably not fully scaled, they're somewhat limited, and that's because, right, they are beholden to getting the Jaguars or the Zek, eventually the Hyundai sort of out there. Is there an opportunity for you to sort of take some vehicles, a small fleet, right, but just sort of show what you can do and almost force their hand to sort of move the needle forward with you?

It's a complicated question. I mean I think that it's easy to oversimplify this business and say, okay, you need somebody to produce the car, you need someone to develop and deploy the technology that makes it self-driving. You need someone to operate the car and you need a demand generator. I think where we're seeing the most uncertainty or like the most flux is in that kind of own and operate section because it's easy to think of it as like you finance cars, you put them into a fleet, you make sure that there's facilities to maintain and clean and charge them, and that's it. But like what about insurance? What about what about orchestration of the vehicles? I mean utilization is going to be the driver between profit and loss in this business. So how do you create software and orchestration to kind of optimize the utilization of these vehicles. Customer service, right? You need like a pretty massive customer service support system. So -- and then there's like questions of liability, like who's responsible, even like the cleaning solution. So you have a vehicle that's operating perfectly, but because the cleaning solution on one of the sensors broke, it gets in an accident. So is that the OEM who produces the car? What about if you upfit the vehicle at a kind of secondary center, who takes responsibility for all of that? And I think we're seeing OEMs be a little coy about kind of how -- do we just want to sell cars? Do we want to own and operate cars? What do we think about liability? That determines whether the system is integrated on the assembly line or somewhere else. The ride-hail players originally were just like bring us your cars and we'll put them on our network. Now they seem more open to that kind of owner-operator role. So -- and then like once you get the technology ready, I completely agree with your point, like you could be in a situation where the technology is ready, it's performing well, but because of logistical issues or being with a partner that missed a few things like that could really slow down your scaling. So -- and I don't think we want to be in a position where we're relying on 1 or 2 players to do that right. So we do think about -- I don't think we would ever be the owner-operator of the vehicles, but could you do something without OEMs where you just buy cars, you upfit them and then you take on a different partner that may be more of a neutral player, maybe not be a ride-hail player or an OEM but has these types of skills in orchestration and customer service and deep insurance ties and is willing to take a role in the integration of the system. So I think that, that's something that you can probably expect from us.

But even for -- whether it's you or whether it's one of your partners, right, even like getting 10, 20 vehicles out there. It's like not that big of a commitment, but can make a meaningful perception difference, right, and getting those vehicles out there. So I guess, like what is sort of the -- I mean, I know -- well, maybe you could just remind us, I guess, of the time line you sort of expect for sort of the initial sort of rollout of some of these vehicles, taking the driver out. And let me take a step back. Maybe you could just sort of, again, tell us where you think the technology stands right now? Is it ready? When will it be ready to sort of get to what, let's say, a Waymo can do today? And then what's sort of the process for getting cars out there, having -- doing rides with the safety monitor, taking the safety monitor out and scaling from there.

Right. So just to level set, we have about 150 vehicles operating in 6 or 7 different cities around the world. They all have someone behind the wheel, but different -- in different cities, there's multiple cities where there are like closed user groups, invite-only user groups that are taking rides. So it's more than just car with safety driver driving around, finding problems, reporting them, this type of thing. Our -- when we started the program with Volkswagen to integrate our drive system into ID. Buzz, it was about 2 years ago, and there was a time line and glide path that was intended to create milestones of performance. And the meantime between failure, I mean it's an upward sloping curve because you want long, long periods of time between failures. So we've been hitting these milestones consistently. Volkswagen is a tough customer, and they're evaluating it all the time. And we're on a glide path to get to the point where we have both agreed that you remove safety drivers when you hit this number by the middle of next year. I think we would do that first in a relatively kind of simple environment, validate the on-the-road system and then bring it to a market like Los Angeles where we have an engagement with Uber. So that's the goal is kind of by the middle of '26, have safety drivers removed in one area and go into more scaled commercialization by the end of the year. That's in the U.S. In Europe, there are actual kind of certification requirements for removing safety drivers, and it should be about a 1-year process and Volkswagen is at the point where they can start to undertake that. The technology is at a point where they can start to undertake that process now and try to complete it by the end of '26, and you could start to commercialize in Munich, Camburg, Berlin, Oslo in early '27.

I know this is a difficult question because there's limited available data. But I guess, like you're talking about sort of mean time between failures and you see the Waymo is out there, you see Tesla sort of trying to do something in Texas and maybe some other areas as well. Is it as simple as you think that Tesla and maybe even Waymo are just operating at a different level of risk tolerance than Volkswagen and maybe even yourselves? Or is there an actual delta in the technology at this point?

I think Waymo is the leader, right? It's not debatable. They spent a long time, had kind of long-term operations in different cities. And have been reported -- disclosing data that would indicate that their cars are experiencing less incidents than human-driven vehicles. So it's very impressive. It's still only 2,500 cars, approximately maybe it's 3,000 now. So it hasn't really scaled. They've been doing a good job expanding cities. It's impressive, and we think it's been a big benefit to us in terms of like activity and demand and these types of things. So I don't -- I think that they have a high -- I think that their risk tolerance is in a good place. I think Tesla is we don't really know what they're doing. I was in Austin a few weeks ago and talking to the team there, they were basically saying we like rarely ever see these Tesla robotaxis around. The public-facing data for FSD is -- has improved quite a bit, but it's still maybe 1,000 miles between critical intervention when our view is you need to be in kind of the 10 million mile range to be at human safety levels. So I think -- but they still have safety monitors in the vehicle. So I can't really speak -- so I think it's another point of we want our risk tolerance to be balanced and I think working with OEMs, like you could get yourself into a situation where you feel like you're ready, but the OEMs not decide they're not ready. So we also want to try to solve for that. We don't think that that's going to happen, but having multiple partners, maybe having your own fleet in order to at least create a catalyst where you're proving that you're on the road, no safety drivers operating because that's not just for investors, but for other customers, for other potential partners.

Right. Yes. I think it's interesting because like you did say Waymo is, again, still a relatively small amount of vehicles, but they -- it has -- in terms of even vehicles in certain locations, it has recently, I think, hit somewhat of an inflection, right, in terms of areas where they're either operating or will be operating soon. I'm curious if you think -- is that -- in some respects, like when they're entering these markets, right, they're helping pave the regulatory path. Does that make it easier for you as you sort of come to market with your partners to sort of be able to maybe not deal with some of the lumps and growing pains and costs associated with entering markets?

Yes. I mean we have a WhatsApp thread that is essentially just packed with whatever people can find out about Waymo because there's like a lot of lessons learned here. I mean even in -- I think there was some story about these kind of random things that you wouldn't...

Hopefully, not one way ran over the cat.

No. I mean you don't want to run over pets for sure. I'm kind of spacing that there was a story recently that was just an unusual thing for people to get annoyed about, right? So how do you -- so preparing for these things. So I think paving the regulatory environment, paving the expectation of consumers seeing that consumers are seem to be gravitating to these vehicles despite the fact that the cost is not lower, the time from point A to point B is not faster. It's probably slower. The wait times are longer, but people are -- they're still generating a lot of market share because there's benefits here. So yes, I think it's beneficial. And we feel like we have scaling advantages over Waymo that assuming the precision and the performance can get there along the time line that we're expecting, we believe that there's ways that for us to compete very well -- us and our partners to compete very well with Waymo in the coming years.

What about just -- I think this used to sort of come up a little bit more, but I'm curious whether this still comes up in some of your conversations and sort of what the company response is now just to sort of the CapEx question, which is that you look at what Tesla is spending. We don't really know what sort of Waymo is spending, but they obviously have sort of the parent company sort of balance sheet to sort of help with that. And you guys are relatively CapEx Light. So do you still not see that as an issue towards sort of progressing the technology? I mean I did note -- I think like last week, maybe there was that sort of AWS announcement you had. So I don't know whether that was new or incremental in terms of sort of data center space or usage. But maybe just sort of talk again about your sort of strategy there on the technology front and spending front.

Yes. I mean we're progressively growing the -- what we spend on cloud compute for training purposes. We're consistently spending $40 million, $50 million a year on GPUs for our on-prem data centers. We just don't think that money is the constraint here. We don't think it's -- training compute is a constraint on us. We don't think people -- ability to hire people is a constraint. I think on the robotaxi side, I mean, you could definitely have more test vehicles. But again, like generally, like the interventions and the difficult scenarios you're running into are -- the bulk of them are happening in specific scenarios. So having more vehicles out there driving, trying to encounter corner cases, we don't really think helps that much. So we don't see a big inflection coming in the CapEx or OpEx.

I should note to those in the audience, there's a QR code on your table. If you snap that, you'll be able to ask a question. It will show up here on my iPad, and I could ask Dan on your behalf. So please, if you have questions in the audience. feel free to submit them. Maybe let's sort of go back a little bit to sort of the here and the now. So last quarter, you raised the low end of the guidance. I think it implied about, call it, 8 million units for 4Q. That's a little bit -- or that is below, I think, sort of what you've been running on a sort of evenly annualized basis. Now I know there's been a lot of sort of seasonality and you sort of talked about maybe a little bit of destocking that sort of was occurring. But 3 weeks left in the year, sort of how are you feeling about that number?

Yes, we feel good. Like we haven't seen anything that would impact kind of the business that we thought would occur at the beginning of the quarter. We did -- the volume number in Q4 is lower than the rest of the year, but we're proud of kind of the tools and processes we put in place to really very closely monitor stock levels that are out in the channel, and we feel like we'll be shipping below demand in Q4, and that will lead to kind of a tight inventory situation to start 2026. And as we start to see like Q1 orders come in, I think that will be borne out.

Okay. So I guess, as you start thinking about '26, I know we'll sort of get your guidance here in a couple of months. But if you look at just sort of global production, I think SMB has it down a little bit. I know you sort of more reverted to your sort of top 10 customers because obviously, that global number includes a bunch of business that's sort of not really available to you. But I think also probably flat to sort of maybe down a little bit seems reasonable. And I think you're sort of still saying even in that environment, you think you'll be able to sort of outgrow mid-single digits or so. Is that still the algorithm we should think about?

Yes. Yes. We still -- we have market share kind of like embedded market share growth with certain of our customers because of programs we won a couple of years ago. I think that we probably wouldn't forecast it, but like the Chinese OEMs, like export volume has been growing. We've got a good kind of position there, especially for vehicles exported into Europe. I think India remains like a very...

When does this start to get meaningful? Because it's obviously a big opportunity. You've got some good alignment with customers there, but...

Yes. I mean, I think '27 is a year where you could start to see like multiple hundreds of thousands of units of growth. It's still smaller than that, but the planning for vehicle launches that happen towards the end of '26 and over the next couple of years is that ADAS is standard in some of those vehicles. So we do feel like that's a big growth opportunity for us. So yes, I think like that's similar to what happened this year was we grew about 5 points faster than our underlying customer production. And I think that's a reasonable way to look at the future as well for volume specifically.

And then on the SuperVision side, I think you've, again, sort of been fairly volatile. I think you sort of talked about maybe 12,000, 13,000 units a quarter. Is that still a reasonable baseline to think about?

Yes. Yes. We kind of closely look at kind of end market demand or volume for the vehicles that we're on because there's only a few of them. So it's like fairly easy to track. That set of vehicles was doing like 12,000 a quarter throughout most of 2025. It's actually gone up in the last few months to more like 15%, 16%. So maybe there's some upside in kind of what we did this year. But I think the positive is that all of those vehicles are doing pretty well in the marketplace. And so I think that business should stabilize.

Okay. When does -- is it '26? Or is there sort of more '27 when the mix of chips on sort of the base ADAS side of the business sort of starts to really kick in a little bit more and help?

Yes. So right now, the bulk of the volume is still EyeQ4. EyeQ5 will never be like a super high-volume chip, but I think this year, maybe it's 6% of the volume. And next year, it's going to be 10% or 11%, something like that. And then EyeQ6 Light will start ramping kind of very rapidly. It's already in production, but it will.

It's short cycle to EyeQ5, is that?

EyeQ5, like I wouldn't -- EyeQ5 was really developed for the first-gen SuperVision, but we created -- and that's the high version. We created a mid- version as well. It was never really intended to be a high-volume chip, but there's a few programs there. They're typically higher ASP, but also the cost is significantly higher. So anyway, I think that -- but EyeQ6 Light is -- the intent there was to maintain kind of typical pricing and typical margin, but for more performance for better features. And so EyeQ6 is not going to create higher ASP. EyeQ6 Light will not create higher ASP or higher margin. The margin on EyeQ5 is lower. So as that ramps up a little bit more next year, it creates a bit of a gross margin headwind. But yes, I think I wouldn't be expecting significant upward movement in ASP next year.

In '27?

In '26. '27, it will -- we will have some of that. Yes, '27 should be very good because you've got the initial kind of Porsche, Audi SuperVision launches happening kind of at the tail end of this year. Even if they got pushed a little bit, you'd still have significant volume in '27. You have the initial surround ADAS volumes in the back half of the year. You have initial Chauffeur volumes in the middle of the year. And if things go well with robotaxi this year, you could be getting into the thousands of units in '27.

And that's just with the MOIA Uber one? Or does that include the Lyft deals or...

I mean just with MOIA Uber, it could be in the thousands. But I think you also -- you have to consider the European volumes because there's really good demand in German cities in Oslo. There's good demand for the whole on shuttle as well. So you could start to see volumes there.

And remind us what the Lyft portion, when is that?

The Lyft portion is also targeted for the end of '26, but we haven't named an automaker yet. So I would expect maybe that gets pushed a little bit. But that's -- we're doing the work with Lyft now to create the interfaces between their network and our drive system, and that would be consistent for whatever vehicle it ends up going in.

Okay. You mentioned in Europe, but it also seems like on the robotaxi side in Europe, the competitive environment is a little bit different with the Chinese way more aggressive there of late. So how do you view that competition? And I guess, the Mobileye positioning versus the Chinese even from a geopolitical perspective?

Yes. I mean it's a very good question. We don't have great visibility on the Chinese technologies. We know that there's a decent amount of vehicles operating within these zones in Chinese cities. We know that there's been several announcements in the Middle East and in cities in Europe of launches, right? But like calling like putting 5 vehicles on the road with safety drivers a launch is not really -- that means we've launched in 10 cities starting 4 or 5 years ago. So I'm not trying to downplay it. I think we have like a lot of respect for the skill sets of these Chinese players. But beyond even geopolitical concerns, which nobody is really talking about in Europe yet, but we think that, that will ramp up at some point. I think that they've probably got a long way to go to develop technology that works in Europe. Even ZEEKR, which has a very good operating like supervised hands-free system in China, continues to use our SuperVision system for vehicles sold anywhere else besides China.

One more sort of nearer-term topic that's sort of become a little bit more -- a little bit louder, let's say, in some investor conversations over the past couple of days is just reports about potential memory shortages as the memory makers sort of shift their capacity to AI and higher-margin products. And I didn't mention ADAS is sort of one of the areas that could feel a little bit of a pinch. I mean what -- can you just sort of tell us sort of what you use, how you use it, are you sourcing it? Is it sort of the Tier 1 who's sort of sourcing it? And what's sort of your outlook? Like how real is sort of this fear? Could there actually be volume shortages? Or is it maybe -- does it maybe result in just some higher prices for the memory?

Yes. So in our core business, we sell a chip to Tier 1s and the Tier 1s put that chip on a circuit board and kind of install the camera. It's the circuit board that has the DRAM on it. So it's the Tier 1.

You're not responsible for sourcing.

We're not responsible for sourcing that. We have a good knowledge of kind of the entire design of the system. So we know kind of where DRAM is coming from. And we did start to hear about this a few weeks ago, got in touch with Tier 1s. We're setting up war rooms, task forces, like the industry is very good at doing that.

Mobilizing for a crisis.

Yes, mobilizing for a crisis, like there's been a few. What we're being told is they don't expect production impacts. like as we start to see Q1 orders come in, they're kind of in line with basically what we were expecting. So we don't see any impact in Q1, at least so far.

Okay. So -- but is it something that could become an issue in '26? Or is it maybe more '27? Like what type of insight do you have into that market in terms of when there might be some.

I think we don't know enough yet. I think we don't know enough yet. I think pricing is -- yes, like cost increases because it does seem like -- I guess what we've heard is there is enough capacity to support this business. But you may need to resource certain components to other producers of it, and that could take some time and maybe there's like pricing opportunities for those memory suppliers that could create some cost pressures, but it shouldn't affect us because we're not the source -- we're not sourcing it.

Maybe just to close here, Dan, I'm curious what sort of insight you could give us in terms of the conversations you're having with potential customers as they evaluate the competitive landscape in terms of willingness to look to competitor meaning auto competitor solutions. So obviously, Tesla and Elon has sort of talked about a willingness to sort of license out before. I think that has been an element of sort of a positive thesis for Tesla in some respects. I think you sort of -- Elon may have even recently sort of downplayed that a little bit saying like the automakers just aren't doing that. But then you still have other companies like Rivian saying like we're open to partnerships and. So how do you view that sort of slice of the competitive buy?

Yes. I mean I think it's always -- there's always a lot of challenges for OEM competitors to cooperate on kind of technology that's seen as strategic and advanced. I think like Elon's recent comments about, well, we did get companies reaching out, but they only wanted to do like a couple of thousand units, like that's actually kind of what we've been seeing, too. So some of these kind of discussions on SuperVision or Chauffeur that started out with we're going to put this on 5 or 6 platforms, and it's going to be hundreds of thousands of units a year. The decision kind of at the end of the day is like, well, we want to do more of a pilot project that would be on 1 vehicle, maybe 10,000 units over a few years, and that's not interesting to us. It's certainly not interesting to Tesla. But I think that this kind of lack of conviction in what to do with like significantly advanced premium ADAS systems is real. Yes, I don't -- I think that we're not seeing appetite by our customers to commit any real programs to like one of these start-ups that are out there or another OEM. Could you see things like with Nissan and Wayve at extremely small volumes a few years from now on a small scale? Yes, but it's -- I think we're at the point where we believe our products are ready for scale, and that's kind of what we're pursuing.

Great. Well, I think we're out of time. So thanks again for your time. Look forward to seeing you at CES again this year, and thanks for joining us again.

Thanks, Joe.

Take care.