Mobileye Global Inc.

Greetings and welcome to the Mobileye Second Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone pad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dan Gauss, Chief Communications Officer. Thank you, Mr. Gauss. You may begin.

Thanks, Maria. Hello, everyone, and welcome to Mobileye Second Quarter 2025 Earnings Conference Call for the period ending June 28, 2025. Please note that today's discussion contains forward-looking statements based on the business environment as we currently see it. Such statements involve risks and uncertainties. Please refer to the accompanying press release, which includes additional information on the 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 CEO and President, and Nimrod Nuhustan, Mobileye's EVP of Business Development and Strategy. Unfortunately, our CFO, Maron Chamash, recently experienced a death in her family and will not be joining the call today. I'm sure everyone listening joins me in wishing the best to Maron and her family. For today's earnings call, I will essentially take on Maron's role. Thanks, and now I'll turn the call over to Amnon.

Hello, everyone, and thanks for joining our earnings call. Starting with the results, Q2 revenue was up 15% year over year as demand for the IQ was strong across regions and OEMs. Adjusted operating income was up 34% and adjusted operating margin rose 3.2 to 21%. Q2 was a good display of the strong operating leverage created by our business model. On a year over year basis, more than 40% of the revenue growth converted to operating income. Compared to Q1, nearly 70% of the higher revenue dropped to operating income. Operating cash flow was again a highlight, over $200 million for the quarter and over $300 million for the first half, about 33% of revenue. Our ADAS business is highly cash generative and we are maintaining strong working capital discipline. The core ADAS business is performing well with volumes at or above $8.5 million per quarter for the last four periods. And we are raising our full year revenue outlook by 4% and our adjusted operating income outlook by 14% at the midpoint. Our core ADAS business truly illustrates that mobilize an execution machine. IQ6 Lite will be the future high volume chip for this segment and the ramp up of that new system has been seamless. Only one year after the first SOP, we already have IQ6 Lite based systems on the road in North America, Europe, China, Japan and India. On the advanced product side, we are the only OEM neutral platform that is cost efficient and scalable and has a credible technology path to eyes of autonomy in both privately owned vehicles and robotaxis. All four of our advanced products surround ADAS, supervision, chauffeur and drive, share common elements including the IQ6 high inference chip, major portions of the perception and policy AI stacks, REM, crowd source driving intelligence, our safety frameworks and the company's data and validation infrastructure. This common backbone creates many synergies for us and our customers, enables us to develop and execute all four solutions simultaneously and leaves us agnostic to whether the market moves faster in one way or another. Whereas a couple of years ago OEMs were primarily focused on supervision, we are now seeing broad momentum across our portfolio from next generation ADAS to full point A to point B, eyes on hands free to level three systems and to robotaxi. The IQ6 high based surround ADAS system continues to develop as the next generation of standardized driving assist on high volume vehicles platforms. This system addresses multiple objectives in a cost efficient package. It's designed to meet stricter late decade safety standards, enables highway hands free performance for a lower cost than current systems and supports OEM goals to consolidate ECUs and to integrate technology on a single SOC. In recent months we have seen growing demand from OEMs to shift away from already sourced single camera programs towards our multi camera surround ADAS bundle. Overall opportunities to substantially grow content per vehicle in the ADAS space have improved over the last six months. Supervision activity remains robust but lack of competitive pressure is enabling OEMs to continue to take their time with decision making. Meanwhile, chauffeur has generated multiple new OEM prospects that sees eyes off on highway as a breakthrough feature that allows drivers to reclaim their time during commutes. The central question around eyes off consumer AV programs is simply technological maturity. How likely is it for a technology provider like Mobili to execute a system with human level safety and an expansive ODD? In this context, our four production programs with Volkswagen Group are significant strategic assets. They showcase our rapid progress in transforming our core technologies into scalable products. Our ability to demonstrate these products to other customers including production level hardware and software associated KPIs is an important proof point that our competitors do not have and will drive increasing competitive pressure as we approach launch. Turning to RoboTaxi, Waymo's achievement of 25% market share in San Francisco despite offering no time or cost advantage over human driven alternatives is very encouraging and has reignited industry enthusiasm. When you look at the RoboTaxi opportunity, two pillars are critical, safety and scalability. On safety, this means reaching the meantime between failures that exceed human statistics as well as other critical safety standards. Safety has long been a strength of Mobili supported by foundational innovations like our RSS model which we developed in 2017 and the PGF, our recently published framework for fusing multiple subsystems. Once safety goals have been reached, the second pillar is scalability. The name of the game here is how fast can you scale? This should be evaluated across three different vectors. The first scalability vector is geographic. How fast can you expand from city to city? REM is a huge asset here. The second is cost. What are all the all in operating costs of the system? Our in-house design compute, imaging radar, efficient AI, supply chain synergies, these all combine to create significant cost efficiency advantages relative to the competition. Finally, scalability also entails production capacity and business model. The fact that we work in partnership with OEMs that produce vehicles where our system is integrated during the mass production line rather than being uplifted in a different facility after the vehicle has been produced is very important. This approach allows us to be capital light but it's not just about capital light. It also allows us to scale fast. Even if we had all the capital to go and purchase 100,000 vehicles and then build production plans that would uplift the self-driving technology, it would have slowed us down. We are working with Volkswagen, of course, but also Hollon, which has a production facility underway and have advanced engagements with other high-scale OEMs. On the operations and distribution side, we have arrangements with Volkswagen's mobility arm, Moya, and Japanese fleet manager, Marubeni, to provide operations and the customer-facing technology. Finally, we have announced real engagements with demand generators, Uber and Lyft in the US, and public transport operators in Europe to provide a demand platform. All of these actors have skin in the game, which is also important to drive scale. So, Mobili, with the kind of partnerships that we're building, is in a very good position to scale rapidly once we start commercial deployment in 2026. In terms of a technology update on RoboTaxi, we recently successfully transitioned into our full production hardware inside the ID.Buzz test vehicle. The meantime between failure of performance is tracking well to the KPIs that were laid out at the start of the program. We expect to reach our KPI goals by the end of 2025, then start adding teleoperations, and then remove the driver in 2026. So, it's all on track. In summary, the opportunity set in front of us today is larger, broader, deeper, and more urgent than it was when we went public in 2022. OEMs are indicating increased clarity in planning and decision making. Near-term volumes are strong. The demand for both higher performance and lower cost is intensifying. And eyes of performance, whether for personal cars or RoboTaxi, is no longer seen as a science experiment, but as an achievable and commercially viable product. This is exactly where Mobili thrives. I'll turn the call over to Dan to cover the finance section.

Thank you, Amnon. Before I begin, please be aware that all my comments on profitability will refer to non-GAAP measurements. The primary exclusion in Mobili's non-GAAP numbers is amortization of intangible assets, which is mainly related to Intel's acquisition of Mobili in 2017. We also exclude stock-based compensation. Our Q2 results significantly exceeded the color we provided on the Q1 2025 earnings call in April, and were slightly better than our pre-release numbers from earlier this month. Revenue was up 15% year over year versus the outlook of plus 7%. The strength was due to several factors. Multiple OEMs, including China OEMs, showed modest outperformance, which, taken together, contributed to significant overall gains. Supervision volume was also a bit stronger than expected, as production of the vehicles we are on is running better than expected year to date. I'll spend a minute on inventory as we continue to monitor it closely. Based on our discussions with customers, inventory was relatively tight entering the year, and there was some direction from certain OEMs to increase safety stocks due to the volatile macro environment. Even so, a variety of analyses we run on a regular basis indicates that shipments were relatively consistent with demand on a -to-date basis. To frame it, IQ volumes in the second half of 2024 were 17.8 million units, and inventory ended the year at a low level. Volumes in the first half of 2025 were 18.1 million, and what we believe was a comparable demand environment to the second half of last year. We continue to believe that inventory at our customers remains well aligned with underlying demand. Turning to gross margin, it was down slightly year over year versus Q1. Gross margins are stable by product and by region. The exact results, however, depend on mix of China volumes in the ADAS business and supervision. Each of those segments carries gross margins somewhat lower than the corporate average. Supervision in particular was a higher percentage of revenue in Q2 versus Q1, causing a bit of a gross margin reduction. Operating expenses were up 7% year over year and flat compared to Q1 versus the prior outlook that indicated Q2 OPEX would be slightly higher than Q1. As Amnon mentioned, operating cash flow was over $300 million in the first half. This is primarily due to strong cash flow from the core business. However, we've also managed tight control over the working capital accounts, particularly balance sheet inventory, which came down by about $90 million in the first half. We're now well aligned with our six-month target on balance sheet inventory and we expect working capital to be more cash neutral in the back half. Turning to the full year guidance, we are increasing the revenue midpoint by 4% and the adjusted operating income midpoint by 14%. On the last call, we noted that the implied step down in second half 2025 revenue versus the first half did not reflect any specific indication of production weakness. But rather a cautious stance given the elevated uncertainty around automotive tariffs at the time. Since then, while tariffs remain in place, the actual impact on production and consumer demand appears rather limited and third party forecasts have risen since April. Our current outlook releases some of the conservatism in Q3 as visibility is high at this point. That said, visibility into Q4 remains more limited, as is always the case in July, and we believe it's prudent to maintain a cautious stance and a wider than usual range for that Q4 period. To be 100% clear, the business is performing very well. We are not seeing any tangible headwinds and we've not received any indications from customers that Q4 volumes will weaken. We are simply choosing to remain conservative beyond the very near term. Our full year outlook is based on IQ volumes of 33.5 million to 35.5 million, up from 32 to 34 million previously. As noted above, supervision volumes are running better than expected and we're modestly raising the outlook to about 40,000 units at the midpoint versus the prior outlook in the low 20,000s. We expect gross margins to be up about half a point year over year in 2025. This is slightly worse than our prior outlook, but this is simply due to supervision and China IQ being a bit of a higher percentage of revenue. Adjusted operating expenses do not typically flex according to revenue and remain in line with our prior expectations. We continue to expect an increase of about 7% year over year to slightly below $1 billion. Looking at the balance of the year, we would expect Q3 to be somewhat higher than Q4, consistent with historical seasonality. Turning to Q3, we expect to deliver approximately 8.7 million to 9.3 million IQ units and for our revenue to be roughly flat on a year over year basis. We expect gross margins to be slightly below the Q2 levels and for operating expenses to be seasonally higher in Q3 versus Q2, aligned with previous expectations. Thank you and we will now take your questions.

Operator, can you please generate the queue?

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. We ask analysts to limit themselves to one question and a follow-up to ensure that others have the same opportunity to do so. For participants using speaker equipment, it may be necessary to pick up your handsets before pressing the star keys. One moment please while we poll for questions. Our first question comes from Chris McNally with Evercore ISI. Please proceed with your question.

Thanks so much, team. Maybe we could just double-click your comment around the higher momentum at Chaufer, maybe a little bit of slower momentum on supervision decision-making. How much do you think this is OEMs having more of a question around their own pricing ability to pass through a level 2 plus product versus something else? I think we've all seen this sort of delay in implementation and there is some fear that we're seeing these products given away almost for free in China, so a lack of clarity, let's say, for how OEMs would price such a product. We would love your thoughts on that.

I think there is lack of competitive pressure for these systems in Europe and the US. You see these systems a lot in China and outside of China it's only the Tesla FSD. OEMs have seen the Tesla FSD for more than a decade, so we need more competitive pressure to kind of bring OEMs to a sense of urgency. I think the last news about penetration rates of Tesla FSD are encouraging. It's more than 25% take rate and it looks like it's climbing. I think the news are good in terms of public interest in these kinds of features and willing to pay for them. But regardless, OEMs are still in planning stage because it's not only the level 2 plus supervision, there is a chauffeur. They want to be part, they want to have skin in the game in a robot taxi, not just produce cars and sell them to the likes of Waymode and others. They want skin in the game in the robot taxi domain. It's all part of planning. There is surround ADAS, whether it should take over the front-facing camera or just be a premium product. There's a lot of planning to do, but the more we deep dive into it, I think that planning phase is coming to a close. We see a lot of activity by OEMs talking about supervision, but in addition also surround ADAS and chauffeur and with a number of high scalers OEMs also about the robot taxi.

If I may add this, sorry, I just may add one comment. We recently started inviting OEMs to see our generation 2 supervision system. Which is now operational in various locations and shows our IQ6 platform with new technologies. We've seen increased interest and pretty much a lot of excitement by OEMs to see these demonstrations. It's another positive momentum around supervision. So it's not just the competitive pressure, it's also seeing more evidence to our generation 2 system and how it performs in the field that now is available. It's been so in the past few weeks and so far it's been very successful.

That's really helpful. My quick follow-up, is it fair to characterize or paraphrase as the flag slide that you showed in December is more of an implementation delay rather than a full pause on supervision and that you still see supervision as essentially the stepping stone for a lot of these OEM programs into chauffeur given the software overlapping. It's obviously additional hardware needed for chauffeur.

Nimrod, start and I'll complement if necessary.

I don't think that necessarily we have suggested that supervision is a prerequisite for chauffeur. I think that what remains true is that there is a consensus that is from our perspective amongst OEMs that chauffeur is a very compelling value proposition for consumers. As Amnon said in his opening comments, it's a question of whether or not the technology is mature and at what price and in which timeline. We are making consistent progress not just in chauffeur directly but also through RoboTaxi, which is showing a lot more about our robustness and the maturity of our technologies for ISO, for no driver, which requires very high precision levels. The more we're making progress, the more we are convincing OEMs that this is a technology that is for here and now and not for the next five years. Therefore, we see some OEMs that are considering going straight to chauffeur for the let's say 2027-28 timeframes. I think what we have learned is that the OEMs are a spectrum of needs and interest and planning strategies. Our strategy is that our products are playing on the complete spectrum of solutions. We can offer the entire product portfolio like we have with Volkswagen. We can offer parts of it. What's important is that we're progressing towards SOPs, towards launching these products in the market regardless of how OEMs are thinking about their planning. The more we make progress, the more we can convince them that the technologies are mature, which product makes the most sense for their segments and so on.

I mentioned that we have a start-up production 2027 with Audi on chauffeur. It's on track and there's also a number of homologation steps that also we have passed. As time goes by, the maturity level of this system is now becoming more and more evident and that should bring OEMs to the table and get convinced that the maturity level is good enough to start thinking about the production program for chauffeur.

Thank you, Chris.

Our next question comes from James Picarola with BNP Parabas. Please proceed with your question.

Hi, everyone. Just starting with supervision, the guide for 40,000 units, a near doubling of the expectation for the full year. Can you just speak to what's driving that, how the relationship is trending with ZEACR and then just looking ahead, any thoughts on the timing for next year concerning the portionality launches for supervision and chauffeur? Thanks.

We took a very conservative

stance on supervision volumes for this year. Since then, what we've seen is ZEACR 009 for export markets has been selling more vehicles than we probably expected. Pulse Star IV production and demand has been pretty good as well. I think key here is that any ZEACR vehicles that are being shipped outside of China are still using the supervision system, which indicates the maturity of our system for non-China markets. But yeah, I think it's just a reflection of conservative start of the year and production of these vehicles running better than expected.

As for the Porsche and Audi, the start of production is the end of 2026, so the effect on revenue should be seen in 2027. We see 2027 as really an inflection year in terms of revenue where supervision by Porsche and Audi and we believe more would come out. Robotaxi will start generating revenue as well because we are removing the driver mid of 2026 and we have a very strong plan of availability. So in 2027 is really the inflection year in terms of revenue.

Yeah, and if we look at the kind of consensus expectations for supervision in 2026, it can be almost exclusively covered by the current vehicles in production.

Got it. That's helpful. And just my follow-up, in regard to the recent secondary offering tied to Intel's stake, how should we think about any future intentions there in the potential time frame?

Dan, you want to take this and I'll complement?

Yeah, no, I think Intel's shown quite a bit of patience with their stake in Mobileye. They hadn't sold any shares for two years. They still maintain more than 80% ownership. I think they've made public comments that they have a very strong view of the potential of Mobileye and want to participate in that upside. We weren't really surprised that they'd want to sell some shares after the next couple of years, but we can't really speak to any future plans that they have. Thank you. Thank you, James.

Our next question comes from George Gianricchus with Canaccord Genuity. Please proceed with your question.

Everyone, thank you for taking my questions. I'd like to concentrate a little bit on RoboTaxi. I think you sort of characterized the interest as accelerating from OEMs and deploying your solution. Can you just help us understand a little bit about what you're seeing in the marketplace, the potential for new wins, and what the competitive set looks like when you're offering your solution to OEMs? Thank you.

Well, we have a relationship with the Volkswagen on the ID buzz where Moja is the operator and customer facing. There's also deals with the Uber regarding this platform. The volume expectation towards the end of the decade is very substantial. There is a hold on with a platform called Mover. We already have the prototypes equipped with our system and testing. It should come out six months later. Also, volume projections are very high. In addition, we have a relationship with Marubeni. We're working with additional OEMs to supply vehicles both for Moja and also for Moverbeni. Hopefully, we'll be able to update the market soon about additional OEMs. But Volkswagen alone is a very high volume opportunity for RoboTaxi.

I

just wanted to add maybe a little bit more color on what we're seeing in the market and the competitive environment. I think that we need to distinguish between the US and Europe in that regard, which are our two primary markets for the first launches. In the US, of course, there's Waymo and Tesla that have been making statements about this. Beyond these two, as a technology provider that can provide the full self-driving system, which includes the hardware, the software, AI technologies, and so on in a scalable way, in a cost-efficient way that will leave enough room for all players involved to generate a profit, we're seeing Mobileye as a unique company at this stage. Waymo and Tesla, of course, have their own business model of being vertically integrated at this stage. For the OEMs that want to basically build a business of producing RoboTaxis in a serious production fashion and then find a business model with the demand generators, we're the primary, if not the only candidate at this stage, at least from what we're seeing. In Europe, I think that we are in the pole position in the race. Just recently, the German Chancellor took a test drive with the IDBus vehicle with Mobileye technology in Germany, which is putting a lot more public attention and some political attention into enabling RoboTaxis in Europe. In that sense, being partnering with Volkswagen is hugely beneficial for our interests.

As a follow-up, can you just, on the RoboTaxi business, help us understand a little bit more about the business model opportunity, the price per system, and also particularly the potential for you to participate in the revenue per mile as you deploy these systems and if that can be replicated across OEMs?

We receive revenue for the system and we receive recurring revenue as a cost per mile. We have both, maybe in the future, we could reduce the cost of the system and add more in terms of the contribution of per mile, but even the current setup is very good in terms of the revenue potential, the recurring revenue potential

over time. Thank you. Thank you, George.

Our next question comes from Dan Levy with Barclays. Please proceed with your question.

Hi. Thank you for taking the questions. I wanted to just first start with a question on the near-term IQ shipments and maybe you could just give a bit more color on where the strength is coming from specifically the trends within China which had obviously been quite weak in 2H, but it seems like the last couple quarters have been pretty good. What's the right run rate to think of now from China, both from the domestics and from the multinationals there?

I can start on that. Go ahead. So I mean, I think from an overall comment, it was difficult to analyze the IQ volume growth the last year or so because of some disruptions on inventory and China. Now you're starting to really be able to analyze it. So in Q2, if we adjust for inventory digestion last year, volume grew around 13% year over year in Q2 for IQ volume and our top 10 customers were minus 3%. So significant growth over market. If you look at the Q3 outlook, it's for growth around 5% year or top 10 customers are minus 2%. So this kind of comparison to our top 10 customers, it's starting to show up as kind of very favorable for us. On China, the China business has been running better. We did slightly over a million units in the back half of last year. We thought we would do around a million in the first half. That was the outlook. We did more like 1.5. So there was some upside there. We're not assuming that type of volume for the back half just because we don't have as much visibility and we want to stay conservative. But it does look like that's a fairly stable run rate for us. But yeah, I think overall, the revenue outperformance has been pretty broad based. If you look at kind of all of our top 10 customers, for most of them, there was at least a bit of outperformance. It added up to a bigger number. There was outperformance in China. There was outperformance in supervision. So it's all pretty broad based.

Oh, okay. Great. Thank you. The second question is, as you're ramping on your efforts in Drive, wanted to get a sense of the type of resource allocation. And I go back to the CMD you had last year where I think you gave a pie chart of your spend that 11% of your spend is on Drive. It seems like your efforts are accelerating here. Can you just give us a sense of how extensive the resource requirement is on Drive and what this could do on the OPEX the next couple of years?

Well, our OPEX grows substantially in 2023, also grew in 2024. We see the OPEX as more or less flattish in the coming years. That means all the growth to prepare for Drive and Chauffeur and supervision to the transition from Tier 2 to Tier 1 on some of the programs like with the Porsche and Audi. All of that accounts for the growth that we have already experienced. So we don't see substantial growth in the near future in terms of OPEX growth.

Great. Thank you.

Thank you, Dan.

Our next question comes from Samit Chatterjee with JP Morgan Chase.

Please thanks for taking my question. This is MP on for Samit Chatterjee. So I just wanted to double click on the imaging radar deal which you did during the quarter and how should we think about the size of that particular business? And will you be open to doing more similar deals in future where you will be selling individual components other than full systems? And I have a follow-up.

Yes.

So the imaging radar for us is a strategic sensor. The deal we had with that particular OEM is just for the sensor. It's a very reputable OEM and we thought that this would drive credibility because the RFQ phase was very lengthy and all competitors of imaging radars participated and our radar was shining through. So we thought it as a separate sensor but we do not expect to do that in the future. It's part of the bundle of eyes of systems on chauffeur and drive. For example, the IDBAS has five of our imaging radars as front-facing imaging radar and corner imaging radars. And we believe that all future chauffeur programs will have our imaging radar because it allows you to get the speed that you need in terms of highway driving. You need to see hazards very far away, more than 150 meters away and the sensor that we have can do that in a very high resolution and high dynamic range. And it's simply an enabler for eyes of systems at scale. So it's part of a bundle. We don't see it as another source of business

as a sensor business.

Okay got it. And another question which I had was regarding the 2027 ramp. So you will be ramping on supervision, chauffeur and drive in that year. Any way to understand like which will be the biggest driver of those and how will you rank out of those opportunities in 2027?

So we have the 2027, the chauffeur and the supervision we mentioned in the past as more than 19 car models coming out with those systems. We're not yet ready to make a guidance for 2027. In terms of drive, there is a significant plan of expansion to multiple cities starting from end of 2026 both in Europe and in the US. So it should drive substantial growth. We're not in a position to put a dollar number to it right now.

Exactly. But I think what's new here is that we do now expect drive to be a significant contributor in 2027 and that's a reflection of the confidence we have in commercial deployment sometime during 2026.

Thank you MP.

Our next question comes from Vijay Ratch with Muzuho Securities. Please proceed with your question.

Yeah, just a quick question on supervision. Obviously a nice upside here. You raised to 40k from Europe. Any thoughts on how calendar 26 should shape up in terms of units for supervision, especially some of the newer ramps?

We're not really ready to talk about specific expectations for 2026. Like I said, we're essentially kind of marking to market the end production of the vehicles that have supervision today. This still doesn't include any US volume for Polestar 4. They did start producing that vehicle in Korea. So there's a tariff in Korea from vehicles produced in Korea, but it's not 100% like it is from China. So they should be able to launch in the US and we think that that'll create some growth for next year as well. The export volume of ZEACR has been probably a little bit better than expected this year. We would expect that to grow a bit next year as well. So it should be some growth in 2026 from the existing vehicles and we'll have more to say about the overall supervision volumes when we get to 2026.

Got it. And then just a quick housekeeping question on the inventory side. I know IQ you raised from midpoint of 33 million to 34 million here. So definitely seeing some improvement. But if you were to look at the inventory level just to, I know it's tough because every OEM has a different inventory level, but if you normalize that, how does that inventory level compare now towards last quarter or last year just to get some idea of where the levels are? Thanks.

Do you want to start, Nirmaraj?

Okay. Yeah. So I don't think that we can disclose like to our levels that the OEMs are keeping themselves as like the safety stock. But in general, we've been in line with what is a, we can consider modest compared to historic periods. So the way we are kind of analyzing this is in multiple ways. We have direct information coming from our tier one customers that they get direct information from their OEMs. We also cross-reference this with the third party analysis on the overall industry vehicle production compared to our sales. So we keep a very close track of this and we keep our eyes on this on a weekly basis.

Thank you.

Yeah. I think that's right. The finance and sales teams have done a great job of you know, developing tools to, as well as kind of direct feedback from the tier ones and everything looks like it was pretty flattish from the end of 2024 until now.

Our next question comes from Adam Jonas with Morgan Stanley. Please proceed with your question.

Hi, thanks everybody. So I'm just looking at your capex here, $28 million for the first half of the year. If I annualize that, that's obviously down substantially year on year. But even if it's flat, and I think consensus has you guys spending around 100, maybe 110 million bucks this year, your capex has basically not moved. It's declined over a number of years and it really makes Mobilize stand out as for a physical AI hard tech company really in the thick of so many exciting programs, collecting data, growing the fleet. How do you do it? Like where is your capex spending on compute? How much compute do you have? Because it would strike me that your compute needs and your AI capex needs would somehow scale at least proportionate to the amount of data that you're feeding into your simulation data centers. So tell me where I'm wrong there. How are you able to do it? Or is your message we just don't need compute like others and that guys like Elon and Jensen are wrong? Then I have a follow up.

Well, we need compute. We have compute both on prem and also on the cloud. Our cloud spending has slightly reduced and I cannot reveal those numbers, but it's in the tens of millions, a large number of tens of millions. And in favor of on prem, more GPUs. But we have a different philosophy on how to spend money on compute than what you hear from our competitors. And we have very good systems, very good performance. Our IQ 6 generation, our generation 2, supervision and chauffeur and drive is really top notch. If you look at our drive vehicle, there are more than 100 ID buzzes. There has been a lot of demonstrations of journalists both in Europe and also in the US. As New World mentioned just last week, the Chancellor of Germany dropped ID buzz. Performance is very, very good. And we know how to train the models in a way that is more efficient.

Okay, appreciate that. As a follow up, what is your simulation stack? What does it look like? How much synthetic data are you using to reduce costs for training on edge cases? Because that also seems to be for the problems that you're solving. And we talked about humanoids, but even in autonomous cars, very, very important. Love to hear your views there. Thanks, Amdab.

Okay, yeah, it's a very good question. When we think about simulation, there are two types of simulation. There is photorealistic simulation. We use photorealistic simulation in order to simulate edge cases. For example, putting a cow on the

road. Amdab? Amdab, you want to unmute?

Amdab, you went on mute.

Just when it was getting good.

We were trying to reconnect him. I think he dropped out. So we just need to reconnect him.

Okay. Okay, one moment. You can hear you again,

Amdab.

I'm on your back.

We lost you at the simulated cow. Okay, I'm

back.

Yeah, you were saying there

are

two types of simulation.

Yeah, so two types of simulation. One is photorealistic in order to emulate edge cases. Say you have a car falling off from a truck on the road. These things, you don't need to wait until you find them in the physical world. You can put them in a photorealistic simulator, and we have very powerful photorealistic simulators. Another type of simulation is to simulate the driving policy. This is a piece of technology. Maybe we'll talk about it more at next year's CES that we developed. We call it ACI, artificial community intelligence, where we have a simulator, not a photorealistic, a synthetic simulator, simulating hundreds of road users over billions of miles of simulation. We run billions of miles overnight, and we use that in order to train the driving policy. That amount of compute that you need there is way below the amount of compute if you would train it on photorealistic simulations, and it's much more efficient. Those are the two types of simulations we use.

Thank you, Adam.

Our next question comes from Chiraz Patil with Wolf Research. Please proceed with your question.

Hey, thanks so much for taking the questions. Emna and Dan, maybe, can you guys talk about the typical lead time between securing awards in surround ADAS and launching programs? I believe it's typically two to three years. Given the timing of the new ADAS standards in Europe, which I think is 2028, that would suggest OEMs need to secure contracts in the next 12 to 18 months. Is that the kind of timeline we should be thinking about in terms of potential awards?

When we're talking about Western OEMs, a timeline is typically two years, 2.5 years from nomination to start of production. Okay,

that's helpful. If these standards are coming on in 2028, it would suggest they would be needed to secure these awards in 2026, something like that.

Yeah, Nimrod, do you want to add?

I think the majority of the RFQs that we have, and we have RFQs with multiple OEMs, and the majority of our customers are engaging with us on this solution, these RFQs aim for 27, 28 SOPs. So that's the current plan that we're seeing.

Okay. Then on RoboTaxis, there are a large number of AV developers in the space. And some of the ride-through operators, such as Uber, are striking agreements with multiple players for their platforms. I'm curious how you gain confidence in the number of vehicles that Mobileye will be supporting either on an Uber or a Lyft type of platform. Nimrod, do you want to take this?

Yeah, I think that, first of all, it makes sense for companies like Uber, who face pressure and questions from investors about their strategy for RoboTaxis as a potential threat for their business, to maximize their chances of being one of the winners in this space. I think that we're at the beginning of the adoption curve. And longer term, we believe that winning solutions will be the most cost-efficient, geographically scalable, with the highest performance, highest availability rates. And we believe that our products are inherently at the pole position in these axes. And so today, there might be some announcements and statements with pretty much everything that can be a potential contender. But we think that within not a lot of time, there will be a separation between a very selected few companies that will have advantages in these economic scalability, geographic scalability, the availability of the service, and the others. Because if you think about this, we're still not at the stage of even thinking about, for example, how many charges do you need to do per day for the vehicle? It still doesn't play any factor. And our system is roughly 20% in power consumption compared to Waymo's. So these are just small things that today don't play a role, because it's still a question of, can you do it or can't you do it? We're at the cusp of getting to, how well can you do it? How efficiently can you do it? And our system is designed to be excelling these parameters. So that's where we get the confidence that ultimately we will be one of these two or three companies that will see the highest volume of robotaxi services.

Okay, great. Thank you. Thanks, Shreyas.

Our next question comes from Joe Speck with UBS. Please proceed with your question.

Thanks, everyone. Maybe just sticking on drive and robotaxi online, if you could, you gave us some things here on sort of what commercial deployment looks like. You have to finalize the vehicle, then there's tele-ops, and there's the remove the driver in 26. So I was wondering if you could add any more color in terms of maybe where you first see that happening in US or Europe. And then, and also, like, maybe how much input do you really have here in terms of things such as the size of the geo-fence, the number of vehicles, like when the driver is actually removed? Like, how does that relationship with your partners work?

Well, the leading partner is the Volkswagen ADMT division, and we have a very tight cooperation. We work very well together. The driver would be removed in the first city. It is not a liberty to say the name of the city, but there is very concrete plans in terms of how the driver would be removed, the design of the tele-operators. We have a very unique design of tele-operators that allows for scale. So going from, say, one tele-operator per vehicle to quickly going to one to X, one operator for X vehicles to scale that very fast using technology, certain cloud computing technology that will enable us to scale it. And it will all start in middle of 2026 with that first city in the US.

Okay. And then the second question is, there was a report this morning that Volkswagen is looking for capital at their autonomous unit and offering a minority stake in this subsidiary that they're searching for strategic or financial investors. Like, I'm not asking you to comment specifically on that potential offering, but is a strategic investment in a partner something mobile I would consider here as you look to scale drive?

Yeah, I think it's a very good development. I think also Google did that for Waymo, even though Google has deep pockets and can fund Waymo without any external funding. I think it's a very good development. We support it and we will seriously consider also participating as an investor.

Thank you. Thank you, Joe. Maria, this will be our last question, the next one coming up.

Okay. Our next question, our last question then is from Colin Roosh with Oppenheimer. Please proceed with your question.

Thanks so much, guys. You know, given the leverage that you're seeing off of the compound AI platform, can you talk a little bit about the cadence of learning that you're seeing, put some metrics around it, you know, potentially talk about the reduction in hallucinations that you're seeing in the systems at this point?

Yeah, we don't have hallucinations. Hallucinations is a metric for large language models. What our KPI is, is it's me time between failure. And that is very important in drive, because that's the only way to remove the driver that you reach an MTBF, which corresponds to a very strict KPI. And we are on track. All the indications are that by the end of this year, we'll be at the MTBF that will enable to remove the driver. And then for the next six months until we actually remove the driver, we'll be working on the teleoperation technology and then start removing the driver. But all our KPIs for MTBF and other safety measures are all on track.

Thanks so much. And this the last one here is around potential for, you know, reduction on cost of the perception suite. You know, as you look at, you know, not only your own internal reduction in cost, but, you know, sourcing other elements, you know, how quickly you can start driving some cost out of the system as you get into 27, 28 and start seeing some incremental volumes.

Well, the cost of our system, we're talking about drive, the cost of our system is already very lean. We have the cameras, which doesn't cost much. We have our ECU with the 4IQ6 high, you know, it doesn't cost much. We have imaging radars, which we produce, you know, hundreds of dollars overall. We have ladders that are supplied by InnoViz, also very reasonable cost. If you look towards the end of the decade, there is a possibility with just having two layers of redundancy cameras and the imaging radars and reducing the number of ladders or, you know, could be another cost reduction. Another cost reduction towards the end of the decade is moving from IQ6 to IQ7. That will be another element of cost reduction, but it's not really a very meaningful cost reduction. We are already starting with a very lean cost platform.

Great. Thanks so much,

guys. We have reached the end of our question and answer session, and I would now like to turn the floor back over to Mr. Gowles for closing comments.

Thanks, Maria, and thanks to everyone for joining the call. We will see you again at the Q3 earnings call in October. Thank you very much.

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