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

Greetings, and welcome to Mobileye's First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dan Galves. Mr. Galves, you may begin.

Thank you, Maria. Hello, everyone, and welcome to Mobileye's First Quarter 2026 Earnings Conference Call for the period ending March 28, 2026. Please note that today's discussion contains forward-looking statements based on the business environment as we currently see it, including regarding our future financial outlook. Such statements involve risks and uncertainties. Please refer to the accompanying press release, which includes additional information on the specific factors that could cause actual results to differ materially. Additionally, on this call, we will refer to both GAAP and non-GAAP figures. A reconciliation of GAAP to non-GAAP financial measures is provided in our posted earnings release. Joining us on the call today are Professor Amnon Shashua, Mobileye's CEO and President; Moran Shemesh, Mobileye's CFO; and Nimrod Nehushtan, Mobileye's Executive Vice President of Business Development and Strategy. Thanks. And now I'll turn the call over to Amnon.

Thank you, Dan. Hello, everyone, and thanks for joining our earnings call. We delivered very good results in the first quarter. Revenue was up 27% year-over-year. Adjusted operating income was up 61% and our operating cash flow was again strong at $75 million despite working capital timing that was a modest drag. We have seen upward pressure on demand for our EyeQ product for the last several quarters. That continued in Q1 and is what we expect for Q2 as well. As a result of higher volume and revenue in Q1, we have raised our 2026 outlook towards the high end of our original guidance, leaving the outlook for the remaining 3 quarters essentially unchanged. The geopolitical and economic environment remains volatile, but based on our visibility for Q2, we believe there is sufficient conservatism baked into the second half. Diving deeper into the drivers of our business, our ADAS business is very strong with very high margins and cash generation. Design wins over the last several years have secured our position with our main customers over the long term. India looks like a meaningful growth opportunity and our focus over the last couple of years on supporting Chinese OEMs on their export ambitions is paying dividends. Finally, the surround ADAS segment gives us the opportunity to replace many of these base ADAS programs with much higher average selling prices over time. On our advanced product portfolio, the current priority remains execution, and that is going very well. We have a number of production programs running in parallel, 2 of which start production in the relative near term. These are SuperVision with Porsche and the Drive robotaxi with MOIA, the Volkswagen Group's autonomy division. For both programs, Mobileye is responsible for the development of comprehensive advanced ADAS and autonomy platforms, integrating hardware, software, data and maps into a complete system that must be probably safe, predictable and verifiable. These solutions need to meet tens of thousands of requirements set by the automaker and need to be homologated to automotive grade standards. Each program gives us the ability to prove that Mobileye is the leader in developing and executing complex AI-based systems in the physical world at global scale, systems that can be validated under strict standards, something that many companies talk about, but few besides us are actually executing on this vision. Specific updates as it relates to SuperVision are as follows: progress is strong with performance tracking well to our objectives. As a concrete example, 6 weeks ago, we had the first OEM directed drives in the U.S. for this system, having only tested in Germany and Israel previously. Our first task was a 2,000-plus kilometer drive in a vehicle equipped with production EyeQ6 High SoC and ETU hardware with the latest software engines integrated into the production architecture. We had no prior knowledge of the route, which was across a diverse set of urban, suburban and highway road types and severe weather, including heavy snow. The SuperVision system performance was outstanding with very few interventions encountered. This was an important proof point for our out-of-the-box performance and ability to generalize to a brand-new geography. We have a couple of more software releases to make and then expect to have the capability to demonstrate to other potential customers in the various key geographies. On robotaxi, we continue to make rapid progress. In Q1, Volkswagen announced the start of pre-series production of the ID. Buzz autonomous vehicle in its Hanover facility with vehicles coming off the regular assembly line with Mobileye's fully integrated self-driving system. Volkswagen ability to produce fully integrated robotaxis at scale from an active automotive production line is very unique. MOIA, the Volkswagen division that will deploy these vehicles announced that testing has begun in L.A. for the Uber collaboration. They also announced today that Orlando is the first launch city in collaboration with BA. For both of these efforts, the path to commercialization is as follows: we continue the current process of testing, data collection and validation. Once we achieve sufficient proof points, we'll begin accepting commercial riders with a safety driver until the required level of performance has been proven that allows us to remove the safety driver. That is the point where the scaling advantages of our approach, including crowdsourced mapping, our deep and diverse global data set and Volkswagen ability to ramp up production rapidly will be self-evident in terms of ability to expand geographic areas of operation more rapidly than competitors. And it's another opportunity for Mobileye to prove its end-to-end capability in terms of executing complex physical AI systems at scale. All of this experience over the next 2, 3 quarters would feed back to further improvements and fine-tuning to be ready for scaling in Europe once the ID bud is fully homologated and certified, which is targeted for the first half of 2027. Turning to the Mentee side, components of the version 3.2 of the robot have arrived and will demonstrate incremental capability soon. The hardware road map for version 4 is nearly complete and is expected to be ready for demonstration by early 2027. This will be the version that we expect to commercialize for initial use cases and market entry and will be cost and weight optimized and offer enhanced dexterity and manipulation capabilities. Finally, on the buyback we announced this morning, we are a cash-generative company, which is unique in this space. That gives us the ability to pursue growth opportunities like we did with Mentee, but also be opportunistic with our equity. While we are making strong progress on our advanced products and conversion of our large future revenue pipeline, the reality of automotive development time lines and OEM confidentiality agreements limit what we can disclose publicly. In an environment where technology competitors are generating significant news flow, we believe that this lack of visibility has weighed on our stock price. While we continue to execute, we see an opportunity to deploy cash towards share repurchase, which will benefit all shareholders by partially offsetting dilution from stock-based compensation and addressing dilution from the MT transaction at significantly more attractive prices than those embedded at closing. I'll now turn the call over to Moran.

Thank you, Amnon, and thanks for joining the call, everyone. Before I begin, please be aware that all my comments on profitability will refer to non-GAAP measurements. The exclusion 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. This quarter, we also excluded the goodwill impairment loss referenced in the press release and transaction costs associated with the Mentee acquisition, which closed in early February. First quarter revenue of $558 million was up 27% year-over-year. This compared to the indication we gave on the January call of about 19% growth. We had assumed shipments of approximately 10 million EyeQ units in the quarter, including some recovery of safety stocks at customers, which has ended 2025 at a very low level. The uptake in the quarter was a combination of higher share and higher ADAS shipment rates at core Western customers and more meaningfully from robust Chinese OEMs volume from the export market, a segment where we have higher share than we do on Chinese OEMs vehicles sold domestically. Adjusted operating income was $95 million, up 61% year-over-year. Adjusted operating margin was 17% up about 4 percentage points versus Q1 2025. Profitability was largely as expected. Strong mix to our top 10 customers was a bit of a tailwind, offsetting the higher China OEM volumes, which typically carry lower pricing and profitability. Operating expenses were as expected, representing about 25% of our full year expectation of around $1.1 billion and were up versus Q4, mainly due to engineering reimbursement timing that relate to production program milestones and also the consolidation of Monte expenses as of early February. As I noted on the January call, we've been seeing consistent positive revisions from our customers throughout 2025, and that continued in the first quarter of the year. we continue to expect that underlying demand trend is in the low 9 million units per quarter. Q1 was a bit above that, even excluding the adjustment of safety stock at our customers, but we prefer to continue to forecast a reversion to that low 9 million unit trend over the balance of 2026, particularly given the geopolitical and economic volatility that Amnon mentioned earlier. Turning to full year guidance. We are increasing the revenue outlook to $1.975 billion at the midpoint, which implies 4% year-over-year growth. This is underpinned by about 38 million EyeQ units, which is up a little less than $1 million from the prior outlook, accounting for the upside in Q1. A bit more granularity on the volume is that the forecast assumes the current S&P production forecast of our top 10 customers, which is currently minus 3.5% year-on-year. It also assumes that the run rate of China OEM volume in the second half of 2026 comes down meaningfully from the first half levels. We aren't sure what will happen, but given low visibility on that part of the business, we prefer to stay conservative. We are increasing our outlook for adjusted operating income to $210 million at the midpoint, up from $195 million in the prior outlook. The 2 items impacting revenue to income conversion are: number one, a good portion of the incremental revenue is related to China OEM volume, which converts at lower revenue per unit and profitability than the rest of our volume. Number two, on the SuperVision side, volume is consistent with our prior outlook, but we do have some incremental costs for the ECU, particularly related to memory. Our assumption of operating expenses are unchanged at approximately 10% year-over-year growth to around $1.1 billion. Finally, on the full year, we have now provided an outlook for GAAP operating income. At the time of the January call, the impact of the amortization and stock-based comp from the Monte acquisition was not able to be estimated precisely. Now it is. The only thing to note is a reminder that only a portion of the shares issued as part of the acquisition will show up in the share count this year. That is because the majority are tied to vesting requirements for the Mentee family. Therefore, the relevant accruals are included in the projected share-based compensation expenses referred to in the guidance. Another important point to note is that while there will be share-based compensation expense and some impact to the share count associated with these shares in 2026, it will be gradual as full vesting only occurs for 50% of the shares in 2028 and the remainder in 2030. Turning up to second quarter. We are assuming about 9.3 million EyeQ units and for revenue to decrease approximately 6% on a year-over-year basis. We would expect gross margin to be slightly below Q1 levels based on the mix of orders we are seeing currently and for operating expenses to be consistent with Q1 levels, maybe slightly down. To conclude, we are almost 4 months into 2026 and continue to see positive demand signals from our customers on the core business. As Amnon discussed, we are also seeing very good execution progress ahead of a large number of advanced product launches over the coming 1 to 2 years, which we expect to create significant growth for the company. Finally, I am pleased that we are able to begin a share buyback program as we believe it takes advantage of the strong cash flow of our business and benefits our shareholders by offsetting a portion of RSU issuance, which is a critical part of Mobileye's employee compensation structure. Thank you, and we will now take your questions.

[Operator Instructions] Our first question comes from Edison Yu with Deutsche Bank.

This is [indiscernible] on for Edison. First question is on the ADAS side. It seems like the year's guide is raised reflective of the 1Q beat. So just curious what conditions you're seeing now on the channel and customer, you've given us some guidance for the rest of the quarter. So can you just refresh some of that to reflect what you're seeing in the first half of the second quarter?

I think that basically, in terms of the guidance, we are reaffirming our guidance from January call and adjusting it for the upside that we're seeing in Q1 as we don't anticipate this upside to impact the rest of the year. So that's the main reason. And as for the upside, I can briefly mention what we're seeing. So first on the China OEM export volumes, we're seeing -- I think that half -- probably half of the upside is coming from there. We're seeing very strong demand for both Q1 and also incorporated into Q2. For the second half, we're still conservative and this market is volatile, but we're seeing very good demand on that and some of our customers have very significant year-on-year growth on exports. Secondly, ADAS treatment trad is increasing in 2026 for our top OEM customers. We're seeing constant demand here throughout the year. So this is, I think, unchanged from our January call. And third thing is the safety stock inventory adjustment for our customers. We talked about it that 2025 ended at very low level, even below 3 weeks or so. And they have now increased their safety stock to approximately 4, 5 weeks, which is kind of normal. And we don't anticipate this volume to reverse this year as it's kind of normal stock they need for their ongoing shipments.

Just to add on the macro side that there are a few tailwind effects that we are benefiting from. The first one is the increase in export volumes by the Chinese OEMs that our strong customers. Interestingly, these volumes are in emerging markets like Asia and South America and are not necessarily competing with the European volumes that we have. So we can benefit from an overall increase in volumes. The second is that we have increased our market share in our key customers. Although we have been in the majority of the volumes of our top 10 customers, it wasn't necessarily 90-plus percent in all of them and gradually over the past 2 years, we have been increasing our market share, replacing older solutions by competitors. So that is also a tailwind effect. And overall, we don't anticipate these 2 trends to weaken. We expect them to continue as they were, and it's kind of what stands behind the revision to the guidance.

That's very helpful. A follow-up on Mentee. I was wondering if you can give us an update on the progress made thus far? And would it be reasonable to assume some kind of proof of concept later in the year with external customers?

We we're making progress in 2 fronts. One is the hardware. What we have shown a month or 2 ago was version 3.1 -- version 3.2 is being assembled now, better dexterity, improved hands as well. Software-wise, we are integrating VLMs into the system, designing tasks that are more targeted to home use tasks or to B2C domains. Version, we have another version 3.5 of the hardware in 2 months from now and version 4, which is the hardware to go into mass production should be ready by end of this year, early next year. Regarding the proof of concept, we are still analyzing the domains. Part of our analysis is the viability of the B2C model rather than B2B or starting B2C and then B2B. So we're still analyzing the opportunities of the use cases that we are building for the robots.

Our next question comes from Chris McNally with Evercore ISI.

Amnon, just wanted to focus on the upcoming KPIs for the Driver Out, as mentioned in Los Angeles and Florida and maybe what's to come after Driver Out with respect to commercial scale. So if I divide it into 2 parts. On the Driver Out, what's left in your time line to validate the service for that fall in Q4 launch, as you mentioned?

So our milestones for the Driver Out is first to start validation on the final Level 4 vehicle. So there is still a few more months until we get the final vehicle ready for series production, then we'll start the validation. Also, there are some things that we need to close with the remote operators to make sure that everything there is running as we plan. And then we start with commercial drives with a safety driver and towards the end of the year to remove the driver. And we are on track with all our plans in that area. What comes after that? Well, we will see. Our first priority is driver out on an SDS system that is fully homologated, both software and hardware, automotive grade. This is a huge moat. This is very, very important. Once we get that, the second is scale. We want to see 2027, at least 6 cities, hundreds of vehicles at minimum. That's the next real big milestone. And then we'll look at the market and see whether we need to simply remain an STS provider, which at the moment is our plan A or to extend our vertical integration. We'll see what happens by end of 2027.

Perfectly clear. And I think you basically hit on the first part of my follow-up. But if we take the second, I think we all understand Driver Out is not really the end of AV development or service. So could we talk about the original -- the ODD expansion, will the first commercial service go on the highways? And how do we think about those AV improvements, which are non-safety critical, smoothness of the ride and essentially your service getting better as it ramps in 2027 in the U.S.

No, we're talking about robotaxi. So robotaxi is full deep urban point-to-point in cities. We have the capability also to support highways, but we will start in deep urban inside cities and then gradually expand into highways as well. In terms of comfort, this is part of our KPIs today. I don't see us coming out with a commercial service that doesn't have the necessary comfort level of driving. But of course, the most important is the safety level. But we are in our KPIs, measuring also what would be called [indiscernible], making sure that at the comfort level, we are also meeting our KPIs. So all of that should be in 2026. 2027 is more focused on scaling, both scaling number of vehicles, also reducing the ratio between teleoperators to vehicles. That will be the goal for 2027.

Our next question comes from Joe Spak, UBS.

One quick follow-up on the guidance and then a bigger question, Amnon. On the guidance, I know you mentioned that one of the reasons for the EBIT flow-through versus the revenue flow-through was some of the China mix. But if I understood correctly, I thought the better China volume was in the first quarter and that you're still assuming sort of that low 9 sort of pace globally for the rest of the year. So maybe just could help me understand some of that conversion. And if you could, I think you mentioned 2Q is still trending pretty well there. So maybe some even more near-term expectations on the quarter.

I'll give it to Moran.

Yes. Yes. So I think for the China OEMs that you mentioned, it's not just in the first quarter, it's also in the second quarter. So in terms of the years -- in the year, the portion of China OEM has increased in a few hundreds of thousands of chips, which impacts, of course, the conversion of revenue to profitability and also the export volume in China is for a lower ASP than what we sell in the West. So that's for the guidance clarification.

Just to add to this to clarify, these China export volumes do have lower ASP. However, they are for new markets that today -- until today, we did not have any sales in. So it's not that there is a competition between higher ASP, higher-margin European business, for example, or American business for us that now comes from a lower ASP from China. These China volumes go to, let's say, blue oceans when it comes to ADAS penetration. So it's a net gain for us.

Okay. And then just, I guess, to follow up on Chris' prior question with the Drive product. Like I appreciate the commentary on the KPIs, but like what's really like the process like here between the different parties? Like where does sign off on some -- like moving to the next phase lie? Is it with you? Is it MOIA with the TNC? And then you did briefly sneak in there at the end that you'd look after these launches, whether it makes sense to remain an SDS player or extend that vertical integration. I mean the latter would clearly give you more freedom. Is there anything that prevents you from doing that from a partnership or exclusivity perspective?

No, nothing prevents us to pursue the right business direction. It also depends on how the future plays out? Are there going to be 1 or 2 STS suppliers out there, which is our current assumption? Or there are going to be multiple. If they are going to be multiple, maybe the right business decision is to go more vertically integrated. But it's too early to tell. Right now, our focus is on the STS, on the driver route, the STS, the hardware, the software, the driver route, the roadmap shift, the operation, there's lots going on there, the maps, making sure that the maps scale so that we can scale quickly from city to city during 2027. That is the focus of the company. We have no limitations on how to pursue our business model. And as for the first part of your question, the driver out eventually depends on the customer, which is MOIA and Volkswagen. We are supplying the technology. We do not determine when the driver would be out, but our KPIs and milestones of both parties are targeting end of 2026.

Our next question comes from Josh Buchalter with TD Cowen.

I'll start with one on the model. I'm a little confused on the ASP trends implied in the guidance. So you mentioned China tends to be lower ASP. But if I sort of run this low 9 million EyeQ shipments per quarter through the rest of the year, it implies ASPs continuing to trend down through the rest of the year despite China becoming a lower part of the mix and potentially some advanced ADAS solutions later in the year. Can you help walk me through the ASP trends through the year? And if we should indeed be modeling low 9 million EyeQ shipments per quarter through 2026?

Yes. So I believe in January earnings call, we discussed ASP with regards to the second chip that we have this year. We have approximately -- we have a program and one specific program with a dual chip when the second chip is discounted. We have approximately 800,000 units this year. So this is an ASP headwind of like $0.80. And with the China OEMs, we did increase, as I mentioned before, the China portion in terms of volume for 2026. So this is an additional maybe $0.30 or $0.40 decrease in ASP since our last estimation, although volume has increased significantly. That's the explanation.

Yes. I think it's pretty -- it's difficult to be precise about it because there's other parts of the business as well. And just to be clear, we're not assuming additional advanced product launches for this year.

Okay. And then maybe a bigger picture one. Amnan, given your position in the industry, I was hoping you could maybe reflect on how the regulatory environment for autonomous mobility broadly and robotaxis has changed over the last year. And when we should expect that to be a more meaningful part of Mobileye's model?

In the U.S., it's a self certification. which is very convenient to start ramping up. In Europe, the bar is much higher in terms of homologation, and this is the advantage of our partnership with Moa and Volkswagen that they take the homologation part to homologate the vehicles in Europe. And I believe that as robotaxis will start proliferating from the thousands of units to tens of thousands to hundreds of thousands, we would see more regulation coming in everywhere, not only in Europe, but also in the U.S. So having a very clear and precise and crisp definition of safety. In our case, it's RSS and PGF stuff that we talked about back in the past is very important to prepare the company towards an environment in which the regulatory profile is going to be much more stringent.

If I may add to this, I think that if you see the communications from other companies on robotaxi launches, it's primarily either in China or in the U.S. You see much less noise or news, sorry, coming for European market. We think that some of the reasons for that is because of the regulatory requirements in Europe that we are -- that we've been actively working on with VW over the past 1.5 years almost. Through this engagement, we have exposure to what -- how regulators view this business. And they do require specific APIs and very detailed explanations on validation concepts and testing methodologies and how can you overcome different unexpected events and safety assurances, et cetera, that is much more nuanced than just the high-level technological debate that is being made on public stages. So I think we have a significant advantage in being fairly advanced in this process. And this will prove, we believe, as a competitive advantage in the next few years as being one of the only, if not the only robotaxi enabler in the European market, which in and of itself has potential of tens of millions of commuters.

Our next question comes from George Gianarikas with Canaccord Genuity.

I was wondering if you could comment on some of the recent traction that NVIDIA has seen with their reference design and what your pitch is to OEMs in terms of total cost of ownership and why they should pick your solution?

At the end of the day, it's a combination of performance and cost. If you refer to Alphamayo, we downloaded Alphamayo. It doesn't seem like a production-worthy system. It's something nice to play with, but it's not anywhere close to production worthy. Whether an OEM can take it and upgrade it or refine it for production worthy system is yet to be seen. I would add that 2016, NVIDIA had something similar with pixel labeling that they announced open source for the automotive industry, OEMs, nothing really -- there was no real traction for it. Bringing something into production is tough. Taking a demoware or taking a nice demo into production, there is a death valley in between. And this is something that Mobileye is very good at. This 2,000-kilometer expedition that I mentioned in my script, it's very meaningful. It's an OEM taking a number of competing systems. One of them is the Mobileye system with Porsche, which is not yet ready. It's maturing over time. It's maturing this year to be ready for start of production, but it's not yet fully matured. And doing a 2,000-kilometer expedition without us knowing the route in advance in very significant weather conditions, bad weather conditions, urban, suburban, highways, day and night and snow and our system really excels. So this shows that going from demo to production is an art. It's a science and art and something that Mobileye excels. So it's not just a matter of here's an open source network that does something cool. Can we then refine it and bring it to production. Just to mention that the production program we have with an OEM has about 600 require 60,000 requirements. This is what it takes to go from a demo to a production vehicle. And this is one of the strengths of Mobileye, not only that we are experts in AI, that we built an AI systems, we're experts in machine learning. We have the cost-optimized solutions. We know how to bring stuff into series production. And this is difficult.

And maybe as a follow-up, there's a lot written about Volkswagen and their future strategy. I was just wondering if you could please comment on your relationship there and their commitment to deploy your solutions over time.

Yes, I can take this. So I think ultimately, the reality today is that all of the upcoming SOPs, product launches across all brands of Volkswagen Group mostly, spanning from base ADAS in lower-priced vehicles to robotaxi and everything in between, all of the upcoming SOPs are with Mobileye products. And this is the plan of record. It has been a plan of record in the past couple of years, and it did not change. If anything, we managed to expand our business with Volkswagen in these 2 years, also winning strategic projects for the base segment, introducing to our leaders for the first time with Volkswagen Group on very high-volume vehicles. And we are seeing kind of pulling additional vehicle platforms to the already nominated products we have with them. So I think we need to kind of distinguish between some like news that comes out for -- that serve certain interest to the realities of their planning schedules. And our experience in this industry shows that the first thing to change if there is indeed a decision to take a different product is these planning schedules. And they did not change. If anything, they change for the better for Mobileye. So we're not seeing any evidence of change, of course. We're not seeing risk to our existing projects as a consequence. Of course, we need to finish the execution and to get to the SOP date, but the business opportunity remains very, very significant for us when we will finish this execution.

Our next question comes from Shreyas Patil with Wolfe Research.