Mobileye Global Inc. (MBLY) Earnings

Management highlights

### Core Business Performance - Core ADAS business remains a strong, profitable foundation, with volume growth outpacing broader OEM production. Secular growth drivers include expansion in India, growing China OEM exports to emerging markets, and new customer design wins. - ASP growth from broader adoption of more advanced ADAS features is expected to begin in 2028. Mobileye continues to win high-volume mass-market design wins across core customer programs. - Mobileye won the high-volume 2027 cloud-enhanced ADAS program from Stellantis, while Stellantis awarded lower-volume, higher-risk advanced programs to other suppliers, consistent with OEMs' current approach to risk allocation: Mobileye wins where scale, reliability, and production readiness are prioritized. ### Advanced Technology and Robotaxi Strategy - Public rider testing with safety drivers for the Volkswagen Moya Robotaxi program, using Mobileye's self-driving system, has launched in Hamburg, Germany, hitting a key program milestone. - Mobileye is launching a fully vertically integrated Robotaxi offering, controlling all parts of the value chain, targeting a 2027 launch in at least one U.S. city. This strategy leverages the existing self-driving technology developed over multiple years, and was enabled by growing technology confidence, clear commercial demand data, strong unit economics under Mobileye's cost structure, supportive regulation, and slower-than-expected scaling from current market leaders that creates time for Mobileye to build its ecosystem. - The Movit (formerly Moovit) division will restructure, reducing B2B headcount to focus on supporting the new integrated Robotaxi strategy. Cross-functional Mobileye-Movit teams have been formed to leverage Movit's existing mobility expertise, and the Mobileye logo will be added to the Movit consumer app in the U.S. to build brand recognition. - The vertical strategy creates multiple go-to-market options: operating an independent service, deploying on third-party platforms, or selling validated driverless vehicles to operators with recurring revenue from ride fares. It also enables faster validation and software update cycles outside of OEM development timelines. ### Leadership Transition - Founder and CEO Amnon Shashua will step down once a successor is appointed. Shashua will remain focused on long-term technology strategy, innovation, and new opportunities like humanoid robotics after the transition. - The transition comes as Mobileye enters a new phase: the core OEM ADAS business is mature, while Robotaxi and humanoid robotics (built on the same physical AI foundation) require new operational and go-to-market models that will benefit from a new leader focused on scaling these new opportunities. - The board has formed a search committee and is casting a wide net for a new CEO to lead Mobileye over the next decade of growth. ### Humanoid Robotics Development - Humanoid robotics is a key long-term opportunity, with commercial B2C first deployment targeted for 2028. The hardware roadmap is on track: V3.2 prototype is complete, V3.5 will launch in one month, and the volume production V4 model will be ready in Q1 2027. - Development is focused on B2C home use cases first, to narrow product definition before expanding to B2B custom applications. Simulation and machine learning development is on track to integrate all required capabilities for the V4 launch in 2027, with a target of ~500 units produced for initial deployment in 2028.

Guidance

- Full-year 2026 revenue guidance is increased to a midpoint of $1.995 billion, with a range implying 4% to 7% year-over-year revenue growth, outperforming the expected 4.5% production volume decline for Mobileye's top 10 customers. The midpoint assumes just over 39 million total IQ units for the full year, an increase of almost 1 million units from prior guidance, driven by upside from China OEM export volumes. - Full-year adjusted operating income guidance is increased to a midpoint of $395 million, up from a prior midpoint of $210 million. The full-year guidance includes an expected $180 million to $200 million total benefit from the new Israeli R&D incentive. The guidance range widened slightly due to added potential volatility from the R&D credit. Higher operating income from the R&D credit and higher revenue is partially offset by increased expenses for the new Robotaxi initiative and modest FX-related cost increases. - Full-year 2026 non-GAAP operating expenses are expected to be ~$910 billion at the midpoint, including the expected R&D credit benefit. The 2026 effective tax rate is expected to be 8% to 10%, and will increase to ~15% starting in 2027 due to OECD Pillar 2 rules, which is already incorporated into consensus street estimates. - Full-year 2026 Supervision shipments are maintained at slightly below 60,000 units, with first half upside from inventory building offset by expected lower shipments in the second half. Some high-ASP advanced product samples are pushed out to 2027, partially offsetting volume upside in core IQ. - Q3 2026 is expected to have 9.3 to 9.5 million IQ units, with year-over-year revenue declining 5% to 6%. Gross margin is expected to be slightly below Q2 levels based on current order mix, and operating expenses (excluding the R&D incentive) will be slightly higher than Q2 due to typical seasonality. - Mobileye has deployed $24 million for its share buyback program YTD, at an average purchase price of $9.37, and expects to maintain or increase this pace for the remainder of the year subject to market conditions.

Segment performance

Mobileye reports only consolidated segment results for the core ADAS/IQ business and advanced product lines in Q2 2026: 1. Core IQ (ADAS) Segment: Q2 2026 volume was ~10 million units, 3% higher year-over-year, outperforming top 10 customer production volume by more than 8 percentage points. Volume was above management expectations, driven by higher OEM share, higher ADAS attach rates in emerging markets, and upside from China OEM export volumes. First half 2026 total IQ volume is above the 9 million quarterly average seen in 2025. Q2 2026 revenue for the total company was $508 million, flat year-over-year, with core IQ volume growth offset by modestly lower average selling price (ASP) from the higher mix of lower-priced China OEM export volume. 2. Advanced Product (Supervision) Segment: Q2 2026 shipments were ~20,000 units, above expectations, bringing first half 2026 total shipments to just over 40,000 units, against end-market vehicle demand of ~30,000 units. The excess volume reflects intentional customer inventory building to mitigate component shortage risks, which will be consumed in the second half of 2026. Supervision has higher per-unit pricing than core ADAS, with gross profit per unit for cloud-enhanced ADAS (an advanced offering) roughly equivalent to surround ADAS and more than double base ADAS. 3. Overall Company: Q2 2026 adjusted operating income was $155 million, up 46% year-over-year, with adjusted operating margin of 31%, up 10 percentage points year-over-year. This benefit is largely driven by a $93 million R&D credit from Israel's new incentive law, with 50% of the credit for Q2 2026 and 50% for a retroactive Q1 2026 impact recognized in Q2. First half 2026 total revenue is up 13% year-over-year, against a 3% production volume decline for core customers, with first half adjusted operating margin of 23%, up 6 percentage points year-over-year. First half 2026 operating cash flow was $210 million, which remains robust even after excluding the non-cash near-term impact of the R&D credit.

Risks & headwinds

- Quarterly recognition of the new Israeli R&D incentive can be volatile, depending on meeting regulatory thresholds, qualifying R&D expenditure levels in Israel, exchange rate fluctuations, and changes in Intel's controlling ownership stake in Mobileye. If Intel ceases to be the controlling shareholder, the R&D benefit would be cut roughly in half, though Mobileye would still retain a large benefit due to its concentration of R&D activity in Israel's preferred Jerusalem region. - The R&D credit's cash inflow is delayed two years behind accounting recognition, with the 2026 credit benefit expected to be received starting in 2028. - Memory price increases in the semiconductor supply chain impact the Supervision segment (which purchases memory for its full ECUs), though all observed price increases have been fully passed through to customers to date, and Supervision represents a small share of total revenue, limiting margin impact. - Robotaxi vertical integration requires significant capital expenditure for vehicle procurement and infrastructure, even though Mobileye expects strong ROI and multiple funding options. Scaling the Robotaxi business depends on successful commercial deployment, regulatory approval, and market acceptance, which carry inherent uncertainty. - The CEO succession process carries inherent execution risk, and there is no set timeline for appointing a new leader. - Chinese domestic ADAS competitors are targeting expansion into global export markets, which could create increased competitive pressure for Mobileye's core business over time.

Analyst Q&A

• Q: Why has Mobileye shifted to a vertically integrated Robotaxi strategy, after previously avoiding owning fleets, and how do partners view this change? /

  A: The business environment and key barriers to vertical integration have changed substantially in recent years: level 4-ready base vehicles are now available, fleet management software can be built efficiently with modern AI, and the sensor/compute stack has matured. The business case is now clear: the company projects conservative annual revenue of $125,000 per Robotaxi, with total vehicle cost below $100,000, creating strong profitable ROI. The strategy also provides maximum go-to-market flexibility, allowing full vertical integration in some regions, partnership with existing transport networks in others, or licensing to third-party operators. Mobileye can fund the first 10,000 to 20,000 vehicles with existing cash and operating cash flow, and will explore external funding as scaling progresses. Existing partners have reacted positively, as the move signals doubled-down investment in Robotaxi technology development.

• Q: What is the sustainability of the new Israeli R&D credit benefit, and what happens to the benefit if Intel reduces its controlling stake? /

  A: The R&D credit is a permanent, sustainable incentive that replaces the previous reduced corporate tax rate for Israeli tech companies, which was eliminated following the implementation of OECD Pillar 2. Under current Intel ownership, Mobileye qualifies for the maximum benefit level of $180 to $200 million per year. If Intel ceases to be the controlling shareholder, Mobileye would still qualify for roughly half the current benefit (~$100 million per year) due to its high concentration of R&D activity in the preferred Jerusalem region, which is still a large benefit relative to most other Israeli tech firms.

• Q: Could you update on the Chinese market and competitive threat from local Chinese ADAS competitors expanding globally? /

  A: Mobileye has seen strong volume upside from leading Chinese OEMs (including Geely and Chery) that are rapidly expanding their export volumes, and these OEMs have continued to select Mobileye for their export programs, a strong vote of confidence in Mobileye's technology for global markets. While Chinese local competitors have announced export ambitions, to date there have been very few successful launches of Chinese ADAS solutions in major developed markets like Europe, the U.S., Japan, or Korea. Mobileye remains confident in its competitive position in non-Chinese global markets.

• Q: What is the current status of the VW Moya Robotaxi program, and what is the timeline for the 100,000 vehicle order? /

  A: The Orlando commercial driverless launch remains on track for the end of 2026, with a recent end-to-end system demonstration meeting all required KPIs. The LA commercial launch is scheduled for the second half of 2027. It is too early to give precise volume forecasts for the 100,000 vehicle target; if technology performance meets expectations, volume could end up exceeding the original target. Mobileye's relationship with Volkswagen remains robust across all programs (ADAS, supervision, and Robotaxi), and the company has no new information on Volkswagen's restructuring beyond public reports.