What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-04-24 compared with 2024-10-31 · 108 added, 174 removed, 300 unchanged (48% of the section changed)

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These technologies can be harnessed to deliver mission-critical capabilities at the edge and in the cloud, advancing the safety of road users, and revolutionizing the driving experience and the movement of people and goods globally.

As of September 28, 2024, our solutions had been installed in approximately 800 vehicle models (including local country, year, and other vehicle model variations), and our System-on-Chips (“SoCs”) had been deployed in approximately 190 million vehicles.

As of March 29, 2025, our solutions had been installed in approximately 1,200 vehicle models (including local country, year, and other vehicle model variations), and our System-on-Chips (“SoCs”) had been deployed in over 210 million vehicles.

We are actively working with more than 50 Original Equipment Manufacturers (“OEMs”) worldwide on the implementation of our ADAS solutions.

In the nine months ended September 28, 2024, we shipped approximately 19.8 million of our systems, the substantial majority of which were EyeQ TM SoCs.

This represents a decrease from the approximately 25.9 million of our systems that we shipped in the nine months ended September 30, 2023.

In the three months ended March 29, 2025, we shipped approximately 8.5 million of our systems, the substantial majority of which were EyeQ TM SoCs.

This represents an increase from the approximately 3.6 million of our systems that we shipped in the first three months of 2024, primarily due to the normalization of excess inventory at our Tier 1 customers that was previously used to satisfy demand during 2024.

We were founded in Israel in 1999.

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In addition, both Hezbollah and the Houthi movement have attacked military and civilian targets in Israel, to which Israel has responded, including through increased air and ground operations in Lebanon.

In addition, the Houthi movement has attacked international shipping lanes in the Red Sea.

Further, on April 13, 2024 and on October 1, 2024, Iran launched a series of drone and missile strikes against Israel, to which Israel has responded.

In addition, the Houthi movement has attacked international shipping lanes in the Red Sea, to which both Israel and the United States have responded.

Further, on April 13, 2024 and October 1, 2024, Iran launched a series of drone and missile strikes against Israel, to which Israel has responded.

How long and how severe the current conflict in Gaza, Northern Israel, Lebanon or the broader region becomes is unknown at this time and any continued clash among Israel, Hamas, Hezbollah, Iran or other countries or militant groups in the region may escalate in the future into a greater regional conflict.

To date, our operations have not been materially affected, although as of October 24, 2024 approximately 8.3% of our employees have been called to reserve duty in the Israel Defense Forces.

We expect that the current conflict in the Gaza Strip, Lebanon and the security escalation in Israel will not have a material impact on our business results in the short term.

However, since these are events beyond our control, their continuation or cessation may affect our expectations.

To date, our operations have not been materially affected, although as of April 15, 2025 approximately 3.8% of our employees have been called to reserve duty in the Israel Defense Forces.

We expect that the current conflict in the Gaza Strip, Lebanon and the broader region as well as the security escalation in Israel will not have a material impact on our business results in the short term.

However, since this is an event beyond our control, its continuation or cessation may affect our expectations.

We continue to monitor political and military developments closely and examine the consequences for our operations and assets.

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We currently derive substantially all of our revenue from our commercially deployed ADAS solutions, including our Premium ADAS solutions.

In the future, propelled by our next generation of EyeQ TM SoCs, our surround computer vision Mobileye SuperVision™ solution, productization of software-defined imaging radars and our True Redundancy™ architecture, we believe that we will be positioned to deliver an autonomous driving solution that can enable the mass adoption of AV.

In the future, propelled by our next generation of EyeQ TM SoCs, including our EyeQ TM 6 SoC, our Compound AI system architecture, including True Redundancy™, our surround computer vision Mobileye SuperVision™ solution, and our software-defined imaging radars, we believe that we will be positioned to deliver an autonomous driving solution that can enable the mass adoption of AV.

We generate the majority of our revenue from the sale of our EyeQ TM SoCs to OEMs through sales to Tier 1 automotive suppliers.

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As a result of our relationship with Intel, we have access to unique and differentiating technologies.

For example, we may license certain technologies from Intel that support the design and development of our software-defined radar, including Intel’s mmWave technologies.

For example, we may license certain technologies from Intel that support the design and development of our software-defined imaging radar, including Intel’s mmWave technologies.

Additionally, we intend to explore a collaboration with Intel on a technology platform to integrate our EyeQ TM SoC with Intel’s market leading central compute capability, with plans to utilize Intel Foundry Services’ advanced packaging capabilities.

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For example, towards the end of the first half of 2024, global automotive production forecasts weakened, which disproportionately impacted our core customers, primarily due to their continued market share losses in China.

We cannot be certain of the severity and length of the continued volatility and weakness in the global automotive market, including macro-factors impacting our sales to OEMs in China, and the extent of the adverse effect that such weakness and volatility will have on our results of operations, financial condition and business in the long term.

We cannot be certain of the severity and length of the continued volatility in the global automotive market, including macro factors impacting our sales to OEMs in China, and the extent of the adverse effect that such volatility could have on our results of operations, financial condition and business in the long term.

While automotive production has now recovered to approximately 2019 levels, current uncertain economic conditions and inflation may contribute to a reduction in consumer demand.

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This as well as lower than expected production at certain OEMs during 2023 led to the decision by our Tier 1 customers to prioritize in the first quarter of 2024 the utilization of excess inventory on hand before using new shipments to meet the demand of OEMs.

We estimate that our customers used the vast majority of this excess customer inventory in the first and second quarters of 2024, in accordance with our expectations, but there is no guarantee that orders will continue to normalize.

We estimate our customers used the vast majority of this excess customer inventory in 2024, in accordance with our expectations, but there is no guarantee that orders will remain normalized or that customers won't build up excess inventory in the future.

ADAS volumes have grown faster in recent years than the overall automotive market as ADAS penetration rates have increased, and we believe that we will continue to benefit from that trend.

However, our revenue of $1,164 million in the nine months ended September 28, 2024 was down 19% year-over-year, primarily due to the aforementioned utilization of excess inventory by our customers during the first half of 2024.

Continued or future constraint on global automotive production resulting from the effects of economic uncertainty, both global and in specific markets in which we operate, may be a limiting factor on our ability to increase revenue.

Our revenue of $438 million in the three months ended March 29, 2025 was up 83% year-over-year, primarily due to the unusually low volume caused by the usage of meaningful excess inventory at our Tier 1 customers to satisfy demand in the first quarter of 2024.

Continued or future constraints on global automotive production resulting from the effects of economic uncertainty, both global and in specific markets in which we operate, may be a limiting factor on our ability to increase revenue.

We expect to continue to capitalize on our strong and collaborative relationships with OEMs and Tier 1s to expand our presence in key markets and capture the long-term growth opportunities in those markets.

Trade policies, sanctions and import and export controls.

Trade policies and international disputes at times result in increased tariffs, trade barriers and other restrictions, which can increase our manufacturing costs, make our solutions less competitive, reduce demand for our solutions, limit our ability to sell to certain customers, limit our ability to procure raw components or raw materials or impede or slow the movement of our goods across borders.

In addition, tariffs could lead to higher prices for finished automobiles, which would reduce demand for automobiles and thus the market for our products.

On March 26, 2025, the United States imposed an additional 25% tariff on all imports of passenger vehicles, light vehicles, and certain automotive parts, such as engines, transmissions, powertrain parts and electrical components.

The tariff on finished vehicles went into effect on April 3, 2025 and the tariffs on automobile parts will enter into effect by May 3, 2025.

Further, on April 2, 2025, the United States announced a 10% tariff on all countries effective on April 5, 2025 as well as individualized higher tariff rates on countries with which the United States has proportionately large trade deficits in goods.

The United States has paused these "reciprocal tariffs" on certain countries as individual bilateral trade deals are negotiated, while increasing reciprocal tariff rates and other restrictions on countries that have responded with increased tariffs of their own, including the People's Republic of China.

As of the date of this report, there remains a high degree of uncertainty surrounding U.S.

trade policy, how it will be implemented, how other countries will react, and how it will ultimately impact our industry and business.

For example, our customers may shift orders for components and parts, including our solutions, prior to the automotive tariffs going into effect on May 3, 2025, thereby shifting demand for our solutions and corresponding revenue to earlier periods.

While we continually evaluate changes in U.S, trade policy and global reactions thereto, as well as our ability to mitigate their impact, these recent changes may negatively impact our customers and our business.

For additional information, see "Item IA - Risk Factors - We are subject to risk related to trade policies, sanctions, and import and export controls" in our 2024 Form 10-K.

Design wins with new and existing customers.

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Together with Tier 1 automotive suppliers, we work closely with OEMs to understand their solution requirements and have built close long-term relationships with them extending across multiple generations of EyeQ TM products, though there is no guarantee that our customers will purchase our solutions in any certain quantity or at any certain price even after we achieve design wins.

For example, in the third quarter of 2024 Zeekr announced their decision to utilize their in-house system instead of SuperVision TM for at least a major portion of production for their 001 model going forward.

For example, in the third quarter of 2024 Zeekr announced their decision to utilize their in-house system instead of SuperVision TM for at least a major portion of product for their 001 model going forward.

Investment in technology leadership and product development.

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We entered 2022 with significantly lower inventories of our EyeQ TM SoCs on our balance sheet as a result of the limited supply during 2021.

Further, STMicroelectronics, our sole supplier of EyeQ TM SoCs, was not able to meet our demand for EyeQ TM SoCs during 2022, causing further a significant reduction in our company-owned inventory level.

Further, STMicroelectronics, our sole supplier of EyeQ TM SoCs, was not able to meet our demand for EyeQ TM SoCs during 2022, causing a further significant reduction in our company-owned inventory level.

Starting in late 2022 and early 2023, such supply chain disruptions, raw material shortages, and manufacturing limitations abated and during 2023, we successfully increased levels of EyeQ TM SoC inventory on hand, mitigating the potential for future supply constraints to cause a shortfall of chips.

However, in the event of a reoccurrence of supply chain constraints, and subject to the duration and severity thereof, we may be required to operate with minimal or no inventory of EyeQ TM SoCs or SuperVision TM ECUs on hand.

However, in the event of a reoccurence of supply chain constraints, and subject to the duration and severity thereof, we may be required to operate with minimal or no inventory of EyeQ TM SoCs or SuperVision TM ECUs on hand.

As a result, we are substantially reliant on timely shipments of EyeQ TM SoCs from STMicroelectronics and ECUs from Quanta Computer (or other suppliers) to fulfill customer orders and if such a shortfall of chips or ECUs were to occur, we may be unable to offset future supply constraints through the use of inventory on hand.

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Although we cannot fully predict the length and the severity of the impact these pressures will have on a long-term basis, we do not anticipate that our current supply chain constraints would materially adversely affect our results of operations, capital resources, sales, profits, and liquidity on a long-term basis.

Public company expenses.

As a recently public company, we have implemented and will continue to implement additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies.

In particular, we expect our accounting, legal and personnel-related expenses to increase as we continue to establish more comprehensive compliance and governance functions and hire additional personnel to support such functions, maintain and review internal controls over financial reporting in accordance with the Sarbanes-Oxley Act, and prepare and distribute periodic reports in accordance with SEC rules.

Our financial statements will reflect the impact of these expenses.

We also expect the costs of our insurance, including directors’ and officers’ insurance and insurance coverage for AV activity, to increase as a result of higher premiums.

In addition, in connection with the Mobileye IPO, we established an equity incentive plan for purposes of granting share-based compensation awards to certain members of our senior management, to our non-employee directors and to employees, to incentivize their performance and align their interests with ours.

Equity compensation expenses.

In connection with the Mobileye IPO, we established an equity incentive plan for purposes of granting share-based compensation awards to certain members of our senior management, to our non-employee directors and to employees, to incentivize their performance and align their interests with ours.

Historically, grants of share-based compensation to our employees were made pursuant to Intel’s employee equity incentive plans, and such historical grants will continue based on their original vesting schedules.

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We currently derive substantially all of our revenue from our commercially deployed ADAS solutions including our Premium ADAS solutions.

We generate the majority of our revenue from the sale of our EyeQ TM SoCs to OEMs through sales to Tier 1 automotive suppliers that implement our product into vehicles, in which case our direct customer is the Tier 1 automotive supplier that is responsible for paying us for our products.

We generate the majority of our revenue from the sale of our EyeQ TM SoCs to OEMs primarily through sales to Tier 1 automotive suppliers that implement our product into vehicles, in which case our direct customer is the Tier 1 automotive supplier that is responsible for paying us for our products.

Because of the complex nature of our products and the need to customize and validate a product and to integrate it into the OEM’s overall ADAS system, we also have strong direct relationships with the OEMs.

EyeQ TM SoC sales represented approximately 86% and 89% of our revenue for the three months ended September 28, 2024 and September 30, 2023, respectively, and 83% and 90% of our revenue in the nine months ended September 28, 2024 and September 30, 2023, respectively.

Sales of our SuperVision™ product represented the majority of the remainder of our revenue for the three and nine months ended September 28, 2024 and also for the three and nine months ended September 30, 2023.

Revenue from the sale of our EyeQ TM products and SuperVision™ products is recognized at the time of product shipment from our facilities, as determined by the agreed-upon shipping terms.

EyeQ TM SoC sales represented approximately 94% and 72% of our revenue for the three months ended March 29, 2025 and March 30, 2024, respectively.

Revenue from the sale of our EyeQ TM products is recognized at the time of product shipment from our facilities, as determined by the agreed-upon shipping terms.

Our sales to any single Tier 1 automotive supplier typically cover more than one OEM and more than one production program from any OEM.

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Additional costs are royalty fees for the intellectual property that is included in the EyeQ TM SoC, personnel-related expenses, logistics and insurance costs and allocated overhead costs.

As we develop and sell full systems that include hardware beyond EyeQ TM SoCs, we expect that our gross margin will decrease because of the greater hardware content included in our solutions.

As we develop and sell full systems that include hardware beyond EyeQ TM SoCs, we expect that our gross margin will decrease over time because of the greater hardware content included in our solutions.

However, as a result of a higher expected selling price for such systems, we expect our gross profit per unit will increase on a dollar basis in future periods.

Research and Development Expenses, net

Research and development expenses primarily consist of expenses related to personnel related expenses, including share-based compensation, facilities, equipment and supplies for research and development activities, materials, parts and other prototype development, cloud computing services, consulting, and other professional services, including data labeling, quality assurance within the development programs, and allocated overhead costs.

Research and development expenses primarily consist of expenses associated with personnel related expenses, facilities, equipment and supplies for research and development activities, materials, parts and other prototype development, cloud computing services, consulting, and other professional services, quality assurance within the development programs, and allocated overhead costs.

We enter into best-efforts nonrefundable non-recurring engineering (“NRE”) arrangements pursuant to which we are reimbursed for a portion of the research and development expenses attributable to specific development programs.

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We intend to continue our significant investment in research and development activities to attain our strategic objectives.

Accordingly, we expect research and development expenses to increase in absolute dollars, but to gradually decrease as a percentage of total revenue, over time.

In the near term, we expect that our research and development expenses will increase compared to 2023, also as a percentage of total revenue, mainly due to additional research and development headcount and higher direct expenses that we expect to incur in connection with the development of our new EyeQ TM SoC generations, Premium Driver-Assist offerings and the productization of our AV solutions and active sensor suite.

Accordingly, we expect research and development expenses to increase in absolute dollars, but to gradually decrease as a percentage of total revenue.

The expected increase is mainly due to additional research and development headcount and higher direct expenses that we expect to incur in connection with the development of our new EyeQ TM SoC generations, Premium Driver-Assist offerings and the investment in software and hardware infrastructure for our AV solutions and active sensor suite.

Sales and Marketing Expenses

Sales and marketing expenses consist primarily of expenses associated with the amortization of acquired intangible assets, comprised of customer relationships and brands, personnel-related expenses, including share-based compensation of our sales force, as well as marketing expenses and allocated overhead costs.

We expect to increase our sales and marketing expenses as we continue our efforts to increase market awareness of the benefits of our solutions, but we expect sales and marketing expenses to decrease as a percentage of total revenue as our business grows.

We expect to increase our sales and marketing expenses over time, as we continue our efforts to increase market awareness of the benefits of our solutions, but we expect sales and marketing expenses to decrease as a percentage of total revenue as our business grows.

General and Administrative Expenses

General and administrative expenses consist of personnel-related expenses, including share-based compensation of our executive, insurance costs, as well as legal and accounting fees, litigation expenses, and fees for professional and contract services.

We expect our general and administrative expenses to increase moderately in absolute dollars but to decrease as a percentage of total revenue as our business grows.

The expected increase is mainly associated with the costs related to being a public company, including the need to hire more personnel to support compliance with SEC rules and regulations as well as increased premiums for directors’ and officers’ insurance and the increased use of share-based compensation for general and administrative personnel.

Goodwill Impairment

Goodwill impairment expenses consist of a non-cash impairment loss recognized for the goodwill of the "Mobileye" reporting unit in the three and nine months ended September 28, 2024, as a result of the impairment analysis the Company performed during the third quarter of 2024.

Other Financial Income (Expense), net

Other financial income (expense), net, consists primarily of income related to investments in money market funds, as well as income from short term deposits and fluctuations in value due to foreign exchange differences between our monetary assets and liabilities denominated in New Israeli Shekels and to a much lesser extent, the Euro, the Chinese Yuan, the Japanese Yen, and other currencies.

General and administrative expenses consist of personnel-related expenses, including share-based compensation of our executive, insurance costs, expenses associated with finance and legal departments, including legal and accounting fees, litigation expenses, and fees for professional and contract services.

We expect our general and administrative expenses to moderately increase in absolute dollars but to decrease as a percentage of total revenue as our business grows.

The expected increase is mainly associated with the costs related to being a public company, as well as increased premiums for directors’ and officers’ insurance and the increased use of share-based compensation for general and administrative personnel.

Financial Income (Expense), net

Financial income (expense), net, consists primarily of income related to investments in money market funds, as well as income from short term deposits, fair value revaluation of equity investments and fluctuations in value due to foreign exchange differences between our monetary assets and liabilities denominated in New Israeli Shekels and to a much lesser extent, the Euro, the Chinese Yuan, the Japanese Yen, and other currencies .

Benefit (provision) for income taxes

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Many non-US tax jurisdictions have either recently enacted legislation to adopt certain components of the Pillar Two Model Rules beginning in 2024 (including the European Union Member States), with the adoption of additional components in later years, or announced their plans to enact legislation in future years.

We are continuing to evaluate the impacts of enacted legislation and pending legislation to enact Pillar Two Model Rules in the non-US tax jurisdictions we operate in.

We are continuing to evaluate the impacts of enacted legislation and pending legislation to enact Pillar Two Model Rules in the non-US tax jurisdictions in which we operate.

The Company is a constituent entity of its Parent for Pillar Two purposes.

During the periods presented in our condensed consolidated financial statements, certain components of our business operations were included in the consolidated U.S.

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As a result, these operations are taxed both in the United States and Israel.

tax purposes, there are favorable future tax deductions from which we have not benefited due to a valuation allowance position.

If warranted, based on the assessment of verifiable evidence in support of the realization of the deferred tax assets, the valuation allowances may be released, resulting in a tax benefit.

tax purposes, there are favorable future tax deductions that we have not benefited due to a valuation allowance position.

If warranted, based on the assessment of verifiable evidence in support of the realization of deferred tax assets, the valuation allowances may be released, resulting in a tax benefit.

Realization of deferred tax assets is based on our judgment and various factors including reversal of deferred tax liabilities, the ability to generate future taxable income in jurisdictions where such assets have arisen, and potential tax planning strategies.

The valuation allowance for the periods presented in our condensed consolidated financial statements primarily relate to U.S.

The valuation allowance for the periods presented in our condensed consolidated financial statements primarily relates to U.S.

branch deferred tax assets not currently expected to be realized given that we have sustained recent losses based on the separate return method.

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Three months Ended

Nine months Ended

September 28, 2024

September 30, 2023

September 28, 2024

September 30, 2023

March 29, 2025

March 30, 2024

dollars in millions

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General and administrative

Goodwill impairment

Total operating expenses

Operating income (loss)

Other financial income (expense), net

Financial income (expense), net

Income (loss) before income taxes

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Three months Ended

Nine months Ended

dollars in millions

September 28, 2024

September 30, 2023

September 28, 2024

September 30, 2023

March 29, 2025

March 30, 2024

Cost of revenue

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Three months Ended

Nine months Ended

dollars in millions

September 28, 2024

September 30, 2023

September 28, 2024

September 30, 2023

Cost of revenue

March 29, 2025

March 30, 2024

Research and development, net

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Total share-based compensation

Comparison of the three and nine months ended September 28, 2024 and September 30, 2023

In the three months ended September 28, 2024, revenue decreased by $44 million, or 8%, compared to the three months ended September 30, 2023.

This decrease in revenue was primarily due to a decrease of $51 million or 11% in EyeQ TM SoC revenue mostly attributable to a 9% reduction in volume resulting from a reduction in units shipped to China OEM's, as well as modest declines in overall global vehicle production.

Average System Price, calculated as the sum of revenue related to EyeQ TM SoC and SuperVision TM systems divided by the number of systems delivered, decreased by 1%, due to a modestly unfavorable mix of EyeQ TM feature bundles as compared to the third quarter of 2023.

In the nine months ended September 28, 2024, revenue decreased by $278 million, or 19%, compared to the nine months ended September 30, 2023.

This decrease was primarily due to a decrease of $325 million, or 25%, in EyeQ TM SoC revenue attributable mainly to a 24% decrease in volume resulting from the usage of meaningful excess inventory previously accumulated at our Tier 1 customers to satisfy demand in the first half of 2024.

This was partially offset by an increase of $39 million in SuperVision TM related revenue.

Average System Price, calculated as the sum of revenue related to EyeQ TM and SuperVision TM systems divided by the number of systems delivered, increased by 4%, due to the higher percentage of SuperVision TM related revenue as compared to the first nine months ended September 30, 2023.

Comparison of the Three Months ended March 29, 2025 and March 30, 2024

In the three months ended March 29, 2025, revenue increased by $199 million, or 83%, compared to the three months ended March 30, 2024, due to an increase of $239 million, or 139%, in EyeQ TM SoC revenue, primarily attributable to a 139% increase in volume resulting from the unusually low volume caused by the usage of meaningful excess inventory at our Tier 1 customers to satisfy demand in the first quarter of 2024.

This was partially offset by a decrease of $43 million in SuperVision TM related revenue.

Average System Price, calculated as the sum of revenue related to EyeQ TM and SuperVision TM systems divided by the number of systems delivered, decreased by approximately 20%, primarily due to the lower percentage of SuperVision TM related revenue as compared to the first quarter of 2024.

Cost of Revenue

In the three months ended September 28, 2024, our cost of revenue decreased by $9 million, or 3% compared to the three months ended September 30, 2023.

This is due to a decrease of $9 million in manufacturing costs, mainly resulting from a decrease in sales of EyeQ TM SoC, as well as a cost reduction in manufacturing of SuperVision TM systems.

In the nine months ended September 28, 2024, our cost of revenue decreased by $75 million, or 10%, compared to the nine months ended September 30, 2023.

This decrease was primarily due to a decrease of $42 million in manufacturing costs mainly resulting from the decrease in sales of EyeQ TM SoC and a cost reduction in SuperVision TM systems, as well as a decrease of $29 million in amortization of intangible assets.

In the three months ended March 29, 2025, our cost of revenue increased by $46 million, or 25%, compared to the three months ended March 30, 2024, primarily due to an increase of $47 million in manufacturing costs, mainly resulting from the increase in sales of EyeQ TM systems, partially offset by the decrease in sales of SuperVision TM systems.

Gross Profit and margin

In the three months ended September 28 2024, our gross profit decreased by $35 million, or 13% compared to the three months ended September 30, 2023.

This decrease was primarily due to the reduction in sales of EyeQ TM systems, partially offset by an increase in gross profit of SuperVision TM systems, given the reduction in manufacturing costs.

In the nine months ended September 28 2024, our gross profit decreased by $203 million, or 29%, compared to the nine months ended September 30, 2023.

This decrease was primarily due to reduction in sales of EyeQ TM systems, partially offset by an increase in sales of SuperVision TM systems, as well as a decrease in amortization of intangible assets.

In the three months ended September 28 2024, our gross margin has decreased to 49% compared to 51% in the three months ended September 30, 2023.

This decrease was primarily due to the impact of the flat cost attributable to amortization of intangible assets as a percentage of revenue, as well as higher EyeQ-related costs per unit given a different mix of EyeQ generations sold.

This was partially offset by an increased profitability of our SuperVision TM systems given the reduction in manufacturing costs.

In the nine months ended September 28, 2024, our gross margin has decreased to 43% compared to 49% in the nine months ended September 30, 2023.

This was mainly due to the increase in the percentage of revenue attributable to SuperVision TM , as well as a higher impact of amortization of intangible assets as a percentage of revenue.

In addition, there was an increase in the average cost of our EyeQ TM SoC compared to the nine months ended September 30, 2023 since we entered 2023 with an opening balance of EyeQ TM SoC inventory that we previously acquired at lower-than-current prices.

In the three months ended March 29, 2025, our gross profit increased by $153 million, or 283%, compared to the three months ended March 30, 2024.

This increase was mainly driven by the increase in sales of EyeQ TM systems, attributable to the usage of meaningful inventory at our Tier 1 customers to satisfy demand which took place in the first quarter of 2024.

This was slightly offset by the decrease in sales of SuperVision TM systems.

Our gross margin increased from 23% for the three months ended March 30, 2024, to 47% for the three months ended March 29, 2025.

This increase was primarily due to the lower impact of amortization of intangible assets as a percentage of revenue as well as the decrease in the percentage of revenue attributable to SuperVision TM .

Research and Development Expenses, net

Research and development expenses, net, in the three months ended September 28, 2024, increased by $85 million, or 39%, compared to the three months ended September 30, 2023.

This increase was primarily due to an increase in payroll and related expenses, resulting from an increase in average research and development headcount of 369 employees, including an increase in share-based compensation, which was partially offset by military duty reserve refunds from the state of Israel.

In addition, there was an increase related to investments attributable to new product development and also an increase in depreciation costs associated with the new campus and additional sites.

Research and development expenses, net, in the nine months ended September 28, 2024 increased by $138 million, or 21%, compared to the nine months ended September 30, 2023.

This increase was mainly due to an increase in payroll and related expenses, resulting from an increase in average research and development headcount of 362 employees, including an increase in share-based compensation, which was partially offset by the military duty reserve refunds from the state of Israel.

In addition, there was an increase related to investments attributable to new product development and also an increase in depreciation costs associated with the new campus and additional sites, partially offset by higher NRE reimbursements.

Research and development expenses, net, in the three months ended March 29, 2025, increased by $32 million, or 13%, compared to the three months ended March 30, 2024.

This increase was primarily due to an increase in payroll and related expenses caused by average research and development headcount increase of 140 employees including higher stock based compensation and lower military duty reserve refunds from the state of Israel, lower NRE reimbursements caused by projects timing and higher depreciation expenses.

Sales and Marketing Expenses

Sales and marketing expenses remained flat in both the three and nine months ended September 28, 2024 compared to the three and nine months ended September 30, 2023.

Sales and marketing expenses in the three months ended March 29, 2025, decreased by $3 million, or 9%, compared to the three months ended March 30, 2024.

This decrease is mainly associated with a decrease in payroll and related expenses due to the wind down of the after market division that took place in 2024.

General and Administrative Expenses

General and administrative expenses remained flat in the three months ended September 28, 2024 compared to the three months ended September 30, 2023.

General and administrative expenses in the nine months ended September 28, 2024 decreased by $3 million or 5%, compared to the nine months ended September 30, 2023.

This decrease was mainly due to a decrease in share-based compensation expenses.

Goodwill Impairment

Goodwill impairment expenses were $2,695 million in the three and nine months ended September 28, 2024 and zero in the three and nine months ended September 30, 2023.

During the third quarter of 2024, the Company performed an interim quantitative goodwill impairment analysis for the "Mobileye" reporting unit, resulting in a non-cash impairment loss.

For further details, refer to Note 12 to the Condensed Consolidated Financial Statements included in this report.

Other Financial Income (expense), net

Other financial income, net, in the three months ended September 28, 2024 decreased by $1 million, or 7%, compared to the three months ended September 30, 2023.

This decrease was mainly due to exchange rate differences expense, partially offset by interest earned on short term bank deposits and fair value revaluation of equity investments.

Other financial income, net, in the nine months ended September 28, 2024 increased by $6 million, or 16%, compared to the nine months ended September 30, 2023.

This increase was mainly due to interest earned on short term bank deposits and a slight increase in interest earned on investment in money market funds.

General and administrative expenses in the three months ended March 29, 2025, increased by $3 million, or 20%, compared to the three months ended March 30, 2024.

This increase was primarily due to an increase in legal and corporate expenses.

Financial Income (expense), net

Financial income, net, in the three months ended March 29, 2025, was $18 million compared to $17 million in the three months ended March 30, 2024.

This increase was mainly due to an increase in interest earned on short term bank deposits, as well as an increase derived from the impact of fluctuations in foreign exchange rates, offset by a decrease in interest earned on investment in money market funds.

Benefit (Provision) for Income Tax

In the three months ended September 28, 2024 benefit for income tax was $78 million, compared to a $6 million provision for income tax in the three months ended September 30, 2023.

The change is mainly due to the deferred tax effect of goodwill impairment to the Mobileye reporting unit.

In the nine months ended September 28, 2024, benefit for income tax was $76 million, compared to a $22 million provision for income tax in the nine months ended September 30, 2023.

The change is mainly due to the deferred tax effect of goodwill impairment to the Mobileye reporting unit, as well as higher loss before income taxes.

Provision for income tax in the three months ended March 29, 2025, was $(3) million compared to a benefit for income tax of $3 million in the three months ended March 30, 2024, mainly due to a decrease in loss before income taxes in the three months ended March 29, 2025 compared to prior year period.

Liquidity and Capital Resources

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Our primary uses of funds have been for funding increases in headcount in our research and development departments, investments attributable to new product development, as well as for funding our capital expenditures.

Our capital expenditures have related mainly to data storage and other research and development projects related equipment and the construction of our new sites and campus and were $68 million and $75 million for the nine months ended September 28, 2024 and September 30, 2023, respectively.

Our capital expenditures have related mainly to data storage and other computer related equipment, expenditure related to research and development projects and to the construction of new sites and were $14 million and $22 million for the three months ended March 29, 2025 and March 30, 2024, respectively.

To fund our cash requirements in the ordinary course of business, we anticipate that we will continue to primarily rely on operating cash flows, supplemented by our total cash and cash equivalents.

We expect our total capital expenditures for 2024 to be relatively flat compared to our total capital expenditures in 2023.

We expect our total capital expenditures for 2025 to be higher compared to our total capital expenditures in 2024.

We continue to invest in equipment related to the development of our next generation products.

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The following table sets forth certain consolidated statements of cash flow data:

Nine months ended

Three months Ended

dollars in millions

September 28, 2024

September 30, 2023

March 29, 2025

March 30, 2024

Net cash provided by operating activities

Net cash provided by (used in) investing activities

Net cash used in investing activities

Net cash provided by (used in) financing activities

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Operating activities

For the nine months ended September 28, 2024 compared to the nine months ended September 30, 2023, the $89 million decrease in cash provided by operating activities was mainly due to an increase of $2,929 million in net loss, partially offset by $2,695 million of non-cash goodwill impairment loss as well as a decrease in accounts receivable due to reduction in revenue and a lower increase in inventories compared to prior year period during which the company rebuilt its strategic inventory of EyeQ chips.

For the three months ended March 29, 2025 compared to the three months ended March 30, 2024, the $69 million increase in cash provided by operating activities was mainly due to a decrease in net loss, a decrease in inventory and in other current assets compared to prior year period, largely offset by an increase in trade accounts receivable due to the increase in revenue.

Investing activities

Net cash used in investing activities in the nine months ended September 28, 2024 was $98 million, consisting mostly of capital expenditures and purchases of debt and equity investments.

Net cash used in investing activities in the nine months ended September 30, 2023 was $75 million consisting of capital expenditures.

Net cash used in investing activities in the three months ended March 29, 2025 and the three months ended March 30, 2024 was $25 million and $22 million, respectively, consisting of capital expenditures and debt investments.

Financing activities

Net cash used in financing activities in the nine months ended September 28, 2024 and the nine months ended September 30, 2023 was $16 million and $29 million, respectively, consisting of share-based compensation recharge payments made to Intel.

Net cash provided by (used in) financing activities in the three months ended March 29, 2025 and the three months ended March 30, 2024 was $3 million and ($4) million, respectively, consisting of share-based compensation recharge with Intel.

Liability in respect of employee rights upon retirement

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As a result, we do not recognize any liability for severance pay due to these employees and the deposits under Section 14 are not recorded as assets on the consolidated balance sheets.

Severance pay liability increased from $56 million as of December 30, 2023, to $62 million as of September 28, 2024, reflecting mainly the impact of annual salary increases.

Severance pay liability increased from $62 million as of December 28, 2024, to $63 million as of March 29, 2025.

Lease liabilities

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All leases are operating leases with fixed payment terms where some of the leases include annual increases to lease payments based on an index or a rate.

Lease liabilities, representing the present value of future lease payments, have increased from $51 million as of December 30, 2023 to $53 million as of September 28, 2024, reflecting mainly new lease contracts and amendments to existing agreements, partially offset by the progress in lease payments for existing arrangements.

We have several bank guarantees aggregating approximately $10 million as of September 28, 2024 (denominated in New Israeli Shekels) mainly in connection with lease agreements and import of vehicles.

Lease liabilities, representing the present value of future lease payments, have increased from $50 million as of December 28, 2024 to $53 million as of March 29, 2025, reflecting mainly new lease contracts, partially offset by the progress in lease payments for existing arrangements.

We have several bank guarantees aggregating approximately $14 million as of March 29, 2025 (denominated in New Israeli Shekels) mainly in connection with lease agreements and import of vehicles.

Non-GAAP Financial Measures

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For example, we use these non-GAAP financial measures to assess our pricing and sourcing strategy, in the preparation of our annual operating budget, and as a measure of our operating performance.

We believe that these non-GAAP financial measures, when taken collectively, may be helpful to investors because they allow for greater transparency into what measures our management uses in operating our business and measuring our performance, and enable comparison of financial trends and results between periods where items may vary independent of business performance.

We believe that these non-GAAP financial measures, when taken collectively, may be helpful to investors because they allow for greater transparency into what measures our management (and Intel’s management) uses in operating our business and measuring our performance, and enable comparison of financial trends and results between periods where items may vary independent of business performance.

The non-GAAP financial measures are presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly titled non-GAAP measures used by other companies.

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In addition, we also believe these adjustments enhance comparability of our financial performance against those of other technology companies.

Our non-GAAP financial measures reflect adjustments for amortization charges for our acquisition-related intangible assets, share-based compensation expense, impairment of goodwill as well as the related income tax effects where applicable.

Our non-GAAP financial measures reflect adjustments for amortization charges for our acquisition-related intangible assets, share-based compensation expense as well as the related income tax effects where applicable.

We exclude amortization charges for our acquisition-related intangible assets for purposes of calculating certain non-GAAP measures, although revenue is generated, in part, by these intangible assets, to eliminate the impact of these non-cash charges that are inconsistent in size and are significantly impacted by the timing and valuation of our acquisitions.

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Although we exclude share-based compensation expenses from our non-GAAP measures, equity compensation has been, and will continue to be, an important part of our future compensation strategy and a significant component of our future expenses, and may increase in future periods.

We believe that the exclusion of goodwill impairment is appropriate because it does not reflect our core operating performance, and excluding such non-cash impairment loss facilitates a useful evaluation of our performance and comparisons to past operating results.

Adjusted Gross Profit and Margin

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Three months Ended

Nine months Ended

September 28, 2024

September 30, 2023

September 28, 2024

September 30, 2023

March 29, 2025

March 30, 2024

dollars in millions

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However, as a result of a higher expected selling price for such systems, we expect our gross profit per unit will increase on a dollar basis.

Our Adjusted Gross Margin decreased from 69% for the three months ended September 30, 2023 to 68% for the three months ended September 28, 2024, primarily due to higher EyeQ-related costs per unit given a different mix of EyeQ generations sold.

In addition, an increase in the percentage of revenue attributable to SuperVision TM was partially offset by an increase in SuperVision TM gross margin given the reduction in manufacturing costs.

Our Adjusted Gross Margin decreased from 70% for the nine months ended September 30, 2023 to 67% for the nine months ended September 28, 2024.

The decrease was primarily due to the increase in the percentage of revenue attributable to SuperVision TM .

In addition there was an increase in the cost of our EyeQ TM SoCs compared to the nine months ended September 30, 2023 since we entered 2023 with an opening balance of EyeQ TM SoC inventory that we previously acquired at lower-than-current prices.

This cost increase was partially offset by an increase in SuperVision TM gross margin given the reduction in manufacturing costs.

Our Adjusted Gross Margin increased from 62% for the three months ended March 30, 2024 to 69% for the three months ended March 29, 2025.

The increase was primarily due to the increase in percentage of revenue attributable to EyeQ SoC.

Adjusted Operating Income (Loss) and Margin

We define Adjusted Operating Income (loss) as operating income (loss) presented in accordance with GAAP, adjusted to exclude amortization of acquisition related intangibles, share-based compensation expenses and impairment of goodwill.

We define Adjusted Operating Income (Loss) as operating income (loss) presented in accordance with GAAP, adjusted to exclude amortization of acquisition related intangibles and share-based compensation expense.

Operating Margin is calculated as operating income (loss) divided by total revenue, and Adjusted Operating Margin is calculated as Adjusted Operating Income (Loss) divided by total revenue.

1 unchanged sentence

Three months Ended

Nine months Ended

September 28, 2024

September 30, 2023

September 28, 2024

September 30, 2023

March 29, 2025

March 30, 2024

dollars in millions

2 unchanged sentences

Share-based compensation expense

goodwill impairment

Adjusted operating income and margin

The three months ended September 28, 2024 ended with an operating loss of $2,807 million compared to a $8 million operating income in the three months ended September 30, 2023.

The increase in operating loss was mainly due to the goodwill impairment loss recognized this quarter.

The nine months ended September 28, 2024 ended with an operating loss higher by $3,033 million compared to the nine months ended September 30, 2023, mainly due to the goodwill impairment loss recognized this quarter.

Our Adjusted Operating Income decreased by $104 million in the three months ended September 28, 2024 compared to the three months ended September 30, 2023, and by $354 million in the nine months ended September 28, 2024 compared to the nine months ended September 30, 2023.

The decrease in both periods was mainly due to an increase in operating expenses and a reduction in revenue.

Our Adjusted Operating Margin decreased from 34% for the three months ended September 30, 2023 to 16% for the three months ended September 28, 2024.

Our Adjusted Operating Margin decreased from 31% for the nine months ended September 30, 2023 to 8% for the nine months ended September 28, 2024.

The decrease in both periods is mainly due to higher operating expenses on a lower revenue base, in addition to the lower Adjusted Gross Margin.

Adjusted operating income (loss) and margin

Our Operating Loss decreased by $121 million in the three months ended March 29, 2025 compared to the three months ended March 30, 2024, mainly due the increase in gross profit, partially offset by a an increase in operating expenses.

We had an Adjusted Operating Income of $59 million in the three months ended March 29, 2025 compared to an Adjusted Operating Loss of $(65) in the three months ended March 30, 2024, mainly due to higher Adjusted Gross Profit, partially offset by an increase in operating expenses.

Our Adjusted Operating Margin increased from (27)% for the three months ended March 30, 2024 to 13% for the three months ended March 29, 2025, due to higher Adjusted Gross Margin and lower operating expenses as a percentage of revenue, given the unusually low revenue base in the first quarter of 2024.

Adjusted Net Income (Loss)

We define Adjusted Net Income (Loss) as net income (loss) presented in accordance with GAAP, adjusted to exclude amortization of acquisition related intangibles, share-based compensation expense, and impairment of goodwill as well as the related income tax effects.

We define Adjusted Net Income (Loss) as net income (loss) presented in accordance with GAAP, adjusted to exclude amortization of acquisition related intangibles and share-based compensation expense, as well as the related income tax effects.

Income tax effects have been calculated using the applicable statutory tax rate for each adjustment taking into consideration the associated valuation allowance impacts.

The adjustment for income tax effects consists primarily of the deferred tax impact of the amortization of acquired intangible assets and impairment of goodwill.

The adjustment for income tax effects consists primarily of the deferred tax impact of the amortization of acquired intangible assets.

Set forth below is the reconciliation of net income (loss) to Adjusted Net Income (Loss):

Three months Ended

Nine months Ended

September 28, 2024

September 30, 2023

September 28, 2024

September 30, 2023

March 29, 2025

March 30, 2024

dollars in millions

2 unchanged sentences

Share-based compensation expense

Expenses related to the IPO

goodwill impairment

Income tax effects

Adjusted net income

The three months ended September 28, 2024 ended with a net loss of $2,715 million compared to a $17 million net income in three months ended September 30, 2023.

Our net loss increased by $2,929 million in the nine months ended September 28, 2024, compared to the nine months ended September 30, 2023.

The increase in net loss in both periods is mainly due to the goodwill impairment loss recognized this quarter.

Our Adjusted Net Income decreased by $104 million in the three months ended September 28, 2024, compared to the three months ended September 30, 2023.

Our Adjusted Net Income decreased by $333 million in the nine months ended September 28, 2024, compared to the nine months ended September 30, 2023.

The decrease in both periods is primarily due to higher operating expense and lower revenue.

Adjusted net income (loss)

Our net loss decreased by $116 million in the three months ended March 29, 2025, compared the three months ended March 30, 2024, primarily due to the increase in gross profit, partially offset by a an increase in operating expenses.

We had an Adjusted Net Income of $63 in the three months ended March 29, 2025 compared to an Adjusted Net Loss of $(55) in the three months ended March 30, 2024, primarily due to the increase in Adjusted Gross Profit, partially offset by an increase in operating expenses.

Critical Accounting Policies and Estimates

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There have been no material changes to the Company’s critical accounting estimates since the 2024 Form 10-K.

As noted in the 2023 Form 10-K critical accounting policies, we regularly test our goodwill and intangible assets to make a judgment on whether facts and circumstances indicate that the carrying amount may not be recoverable and an impairment may be required.

These reviews can be affected by various factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our forecasts for specific product lines.

During the third quarter of 2024, the Company performed an interim quantitative goodwill impairment analysis for the "Mobileye" reporting unit due to the recent decline in the share price of the Company's Class A common stock and the corresponding decline in market capitalization, as well as macroeconomic and industry factors.

The quantitative impairment test estimates the fair value of the reporting unit using an income approach.

Significant inputs and assumptions incorporated in the valuation include business projections, estimated costs, terminal growth rate, and discount rate based on the reporting unit’s weighted average cost of capital.

The Company also assesses the reasonableness of the estimated fair value of the reporting unit by comparison to its market capitalization, including consideration of expected acquirer synergies, control premium, and the current market.

The results of the impairment analysis indicate that the fair value of the Mobileye reporting unit is below its carrying amount and therefore a non-cash impairment loss of $2,695 million ($2,613 million, net of tax), was recognized in the Condensed Consolidated Statements of Operations.

A 1% increase in the discount rate and a 0.5% decrease in terminal growth rate would result in an additional impairment of $1,493 million and $465 million, respectively.

Cautionary Note Regarding Forward-Looking Statements

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● uncertain events or assumptions, including statements relating to our estimated vehicle production and market opportunity, potential production volumes associated with design wins and other characterizations of future events or circumstances;

● effects of the COVID-19 pandemic and responses to future pandemics;

● availability, uses, sufficiency and cost of capital and capital resources, including expected returns to stockholders such as dividends, and the expected timing of future dividends;

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis