CEVA Inc. (NASDAQ: CEVA) stock plunged roughly 17% on August 11 as investors focused on weak royalty growth despite the chip IP company delivering better-than-expected second-quarter results.
Shares fell 15.7% to $32.60 on Monday after CEVA reported a quarterly earnings beat. The sell-off came despite stronger revenue, improved profitability and a raised full-year outlook.
CEVA posted Q2 revenue of $29.03 million, up 13.1% from $25.68 million a year earlier. Adjusted earnings reached $0.08 per share, beating the $0.07 analyst estimate.
Licensing and related revenue surged 21.3% year over year to $18.22 million, accounting for about 63% of total quarterly revenue.
The growth reflects rising demand for CEVA’s semiconductor intellectual property as companies expand AI capabilities across custom chips and connected devices.
During the quarter, an unnamed global AI and computing platform selected CEVA’s NeuPro-M neural processing unit for custom AI silicon.
However, investors are looking beyond licensing deals toward the royalties generated when those chips enter production.
Royalty revenue increased just 1.5% to $10.81 million from $10.66 million a year earlier. The sharp gap between licensing and royalty growth appears to be weighing on the stock.
CEVA expects its latest AI opportunities to take time to translate into significant royalty revenue.Management said the new AI program could take several quarters to reach tape-out, followed by potentially 18 to 24 months before production begins.
That means investors may have to wait before current AI design wins produce meaningful recurring royalties.Meanwhile, CEVA’s overall device shipments continued to grow. Customers shipped approximately 567 million CEVA-powered devices during the quarter, up 16% from about 489 million a year earlier.
Consumer IoT shipments increased roughly 19%, while Wi-Fi shipments jumped 28%. Bluetooth shipments also climbed 16%.
Industrial IoT shipments declined about 21%, although royalty revenue from the segment increased 7% as automotive AI and infrastructure products generated more revenue per unit.
Despite the stock’s sharp decline, CEVA raised its full-year expectations.The company now forecasts 2026 revenue growth of 13% to 15%, up from its previous 12% target. It also expects non-GAAP operating income to rise roughly 70% and non-GAAP net income to increase about 50%.
Third-quarter revenue is expected to reach $30.5 million to $34.5 million, while gross margin is projected to remain around 87%.
For CEVA investors, the main question is now how quickly its growing AI licensing pipeline can translate into production and recurring royalty revenue.
The company’s Q2 results show strong demand for its technology, but the relatively slow royalty growth highlights the long timeline between securing AI design wins and realizing their full financial benefit.
This version is leaner and more suitable for a fast-moving stock-news article while retaining the important numbers.
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