Mobileye Global Inc.

Greetings and welcome to the Mobileye fourth quarter and full year 2025 earnings call. At this time, all participants are on 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 keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dan Gals. Mr. Gals, please go ahead.

Thank you, Donna. Hello, everyone. Welcome to a mobilized fourth quarter and full year 2025 earnings conference call for the period ending December 27th, 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 specific factors that could cause actual results to differ materially. Additionally, on this call, we will refer to both GAAP and non-GAAP figures. A reconciliation of GAAP to non-GAAP financial measures is provided in our posted earnings release. Joining us on the call today, as usual, are Professor Amnon Shashua, Mobilize CEO and President, Moran Shemesh, Mobilize CFO, and Nimrod Nihishtan, Mobilize EVP of Business Development and Strategy. Thanks, and now I'll turn the call over to Amnon. Thank you, Amnon.

Hello, everyone, and thank you for joining our earnings call. As I look back on 2025, there are a number of meaningful positives to highlight, both for our company and the industry. In a very uncertain geopolitical environment, demand for our products came in higher than expected throughout 2025, demonstrating the resilience of the auto industry and our product offerings. Results were quite strong, with revenue up 15%, adjusted operating profit up 45% and operating cash flow up more than 50%. The industry began to clarify the structure and features of the next generation of ADAS for mass market vehicles. Several forces are coming together here. Demand for incremental safety, demand for convenience in the form of highway hands-off driving, and the need to consolidate the technology on a single ECU to keep the system's cost low. Mobileye's IQ6 Hi chip is very well positioned, and we won the first two major programs with two of the biggest fixed OEMs in the world. Waymo's commercialization provided a number of supporting proof points on consumer acceptance and demand for autonomous mobility services. This led to a major uptick in demand signals from transportation network companies and public transport groups, which led to an expansion of expected volume through our Volkswagen ecosystem to 100,000 units by 2033. We are now one year closer to the launch of our advanced products with the Volkswagen Group. We expect the first major public milestone to be removal of the safety drivers in Moya's Robotaxi fleet in 2026. We are implementing a unique first think, slow think structure to our advanced products that we believe accelerates both precision and scalability. This includes novel technologies like vision language semantic action models and artificial community intelligence. And finally, Mobileye took a decisive step to expand its footprint into the humanoid robotics field with acquisition of Menti Robotics. Menti has achieved a fully vertically integrated, low cost, highly capable robot that has a clear path to commercialization into the structured environments of industrial and logistics services fields and with its distinctive technology to cater to unstructured environments like home use cases. Aside from our 2025 results, we detailed all of these areas in my CES talk on January 6th. I encourage anyone with an interest in Mobileye or just physical AI in general to make sure to view that presentation. Turning to guidance, Moran will spend some time on it, but I'll address it briefly. We're encouraged by the volume growth we are expecting despite global auto production that's expected to be flattish again. And while we don't expect the volume levels of Q1 to be sustained throughout the year, it's a strong signal for the year and all the flows for Q1 has been rising for the last month or two. Turning to technology. At CS, I talked a bit about the debate around approach, specifically this concept of data in, commands out, which is a false debate because no legitimate actors in our field are actually doing that. There's always a need for structure and architecture, and everyone's architectures have evolved, given advancements in AI over the last few years, including ours. We introduced two new innovations that are accelerating our path to precision, scalable autonomous vehicles. One is artificial community intelligence, referred to as ACI. This is a simulation concept using a self-play reinforcement learning technique that we're using to train our planning engine, also known as driving policy. This is the first ever productization of a technique proposed in academic research. A strong motivation for ACI is that the sample complexity for planning is much higher than for perception because the multi-agent nature of driving or actions that you take will impact the actions of other world users. Therefore, the amount of data one needs to collect could be unwieldy even for large data collection fleets. As a solution, we have created simulators that can achieve one billion hours of training overnight. Mobileye has unique advantages here since our REM maps, which cover much of the globe, can be used as a realistic and diverse baseline structure for the training. The other advantage is we have developed sophisticated sim-to-real techniques that have the required understanding of the noise model of our perception engine when transferring the driving policy to the real world. That sim-to-real technology is also very relevant to humanoid robotics and will be a key area of technology sharing between Mobileye and Minty. We also introduced a fast-think, slow-think concept that utilizes specialized vision language models to provide contextual information and to address robustness to vehicle decision making. This is not necessarily about safety. It's more about understanding the semantics of complex scenes. For example, a scene where a policeman signals that the road he would like to take is blocked. The safety layer ensures that we won't hit the policeman, but we also need to understand the scene, figure out that we shouldn't try to overtake the policeman, but rather we should either wait or take a different route. This is what slow thinking gives. Since this is not safety critical, the contextual information can be inputted into the system at a lower frequency than perception, which is typically analyzed at 10 frames per second. Structuring our architecture with fast think and slow think components saves compute and even brings use of cloud-based compute into the pictures. As a result, we can put a very sophisticated VLM on the in-car compute, but call on much bigger VLMs in the cloud when the situation warrants. This has very positive effects on the mean time between intervention metrics, but can also eventually lead to scalability benefits in terms of cars per teleoperator, as the VLM can replace a human teleoperator in many cases. Turning briefly to our announced acquisition of Minty Robotics, Most of the AI that humans are using every day is in the digital world. The two main applications of AI in the physical world are autonomous vehicles and robotics. It makes sense for these two expressions of physical AI to be together because there's a great deal of technology overlap. Both extensively use computer vision and control, fast, slow thinking concepts, make heavy use of VLMs, and extensive simple real-life techniques. Menti itself, compared to other companies we evaluated, has a superior combination of strengths, including a high level of vertical integration, a pure AI approach with the ability to demonstrate high-level capabilities with no teleoperation, a design strategy that results in an optimized cost versus usefulness ratio, and above all, a distinctive AI technique to do continuous on-the-job learning from passive demonstrations. a truly practical approach to capitalize on the most near-term industrial and logistics markets, and then expand to more challenging markets over time. We believe access to mobilized tools, simulation, and data training infrastructure will accelerate Minty's development. And the number of technologies developed for robots, such as self-play simulation and sim-to-real techniques, can also bolster mobilized AV development. Finally, There is potential for catalysts as we continue to demonstrate the strong capabilities of the Menti robot and execute on customer proof-of-concept work in the near term. I'll now turn the call over to Moran.

Thank you, Amnon, and thanks for joining the call, everyone. Before I begin, please be aware that all my comments on profitability will refer to non-GAAP measurements. The primary excuse is mobilized non-GAAP numbers. is amortization of intangible assets, which is mainly related to interest acquisition of Mobila in 2017. We also exclude toxic computations. Our full-year 2025 revenue of $1.9 billion slightly exceeded the high end of our prior guidance. Full-year revenue was up 15% year-over-year compared to our original guidance of 6% growth at the midpoint. It was a very good year where a combination of minor upside in global production trends IQ program launches and higher than expected ADAS and supervision volumes from China OEMs led to significant growth. Full year adjusted operating income was $280 million, up 45% year-over-year, and margin was 15%, up about 300 basis points versus 2004. The fourth quarter included a non-recurring expense of $7 million related to workforce efficiency initiatives we undertook in Q4. That expense was not part of our guidance as of the October earnings call. So if you exclude that, adjusted operating income would have also been slightly above the high end of the guidance. Like I said earlier, we saw consistent positive revision from our customers throughout 2025, and we've continued to see that over the last month or two during our 2026 planning process. 2025 IQ volume was $35.6 million across the full year, which was well above our original expectations of 32 to 34 million. We've seen a fairly consistent demand trend of 9 million units per quarter, with some minor fluctuations across quarters. For example, in 2025, Q2 and Q3 were higher than trend. Q1 and Q4 were a bit lower. One more point on Q4 before turning to the future. Modest upside to the high end of of our prior guidance was related to higher than expected supervision. IQ volume was consistent with the high end of our guidance of about 8.2 million units. This level at the start of the quarter looked a bit below the demand trend that our customers desired to end the year within inventory. But the demand trend in Q4 ended up higher than we expected. As a result, we believe that inventory at our tier one customers ended 2025 extremely low. We believe there is some level of adjusting safety stock that will occur in Q1 to get back to normal levels. We expect about 10 million IQ units shipped in Q1, which supports an outlook of approximately 19% year-over-year growth in the first quarter. After that, customer forecasts indicate a reversion to the trend of slightly above 9 million units per quarter. Turning to the four-year guidance, we are expecting revenue in the range of $1.9 billion to $1.98 billion, representing flattish to 5% growth. The midpoint of our guidance incorporates RQ volume of slightly above 37 million units, which again consists of 10 million units in Q1, and an assumption of a bit over 9 million per quarter in the balance of the year. If we look specifically at our top 10 customers, We are assuming that their overall production is down 2%, but our volume with those customers is up 6% at the midpoint. This includes about 700,000 units for a new OEM program that requires two IQ4 chips per car. That program is clearly a positive, and we will generate higher gross profit in dollars per vehicle. But since the second chip is lower priced relative to the first, it has an impact on overall ASP and gross margins. For Chinese OEMs, we are expecting a decline of about half a million units compared to 2025, which was a bit above 3 million. We are encouraged by the significant growth in China OEM volumes in 2025. It aligns with their export volume growth, the area where our business is the strongest with those customers. We see no reason why that wouldn't continue into 2026. We prefer to remain conservative given we only have a short-term visibility into order flow with China OEMs. Gross margin will be done somehow on a year-over-year basis, driven by continuation of IQ5-related cost headwinds. We discussed this on the October earnings call as an impact to the second half of 2025 that would continue through 2026, and then will gradually decline beginning in 2027. We also have modest vehicle mix headwinds and the impact of the dual-chip program mentioned above. Turning to operating expenses, 2025 ended up at $1.003 billion. This was slightly above our original budget of $995 million, accounted for by the non-recurring termination-related bookings in Q4 mentioned above. In 2026, we are expecting around $1.1 billion, or 10% growth. The underlying growth in OPEC with approximately 5% consisting of normal salary and benefit inflation, as well as additional infrastructure to support execution of the advanced products in 2026 and 2027. On top of that, we are including many R&D expenses. Finally, we are experiencing an FX headwind related to appreciation of the Israeli currency versus the U.S. dollar, which meaningfully raises our headcount costs in dollar terms. This is being mostly offset by the workforce efficiency initiative noted above, but not completely. To conclude, we are almost one month into 2026 and continue to see positive demand signals from our customers on the core business. As Amnon discussed, we are also seeing very good execution progress ahead of a large number of advanced product launches over the coming one to two years, as well as accelerating momentum and customer demand for next-gen higher ASP ADAS and transformative robot accessibility.

Thank you, and we will now take your questions.

Thank you. The floor is now open for questions. If you would like to ask a question, please press star 1 on your telephone keypad at this time. 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. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. We do ask that you please limit yourself to one question and one follow-up to allow as many people the opportunity to ask as possible. Again, that's star one to register a question at this time. Our first question today is coming from George Genericus of Canaccord Genuity. Please go ahead.

Hi, everyone. Thank you so much for taking my questions. I'd like to ask first maybe on your view on the competitive environment, particularly in light of some announcements at CES from NVIDIA and others, just your view on what's happening in the advanced autonomous solution space.

Thank you. So I think that we have been

We've obviously seen a lot more announcements and excitement around advanced solutions and autonomous driving in general, and also robotics. It was one of the key things at CES this year for everyone who attended. We still believe that we are closer to launching our advanced products than other competitors. And this is one of our strongest advantages, combined with the maturity of our technologies and the advances of our technologies. And we are, as we said, one year closer to launching a spectrum of products that spans from surround data, supervision, chauffeur, and robotaxi, starting from 26 and through 2027. We believe this will be a major transformation for positioning mobile in the market. It's having proven products on the field. Right now, there is a lot of demos, a lot of referral to technologies and emerging technologies, and there is some, we think, noise. and maybe simplistic description of some of these technologies and how useful they could be for a reliable system. There is a recent announcement by NVIDIA about their open source model, Alphamayo, that they announced and supposedly given others the ability to, Amin will maybe want to say a word about this, but we don't see that as something that changes kind of our positioning in the market, really.

Thank you. And maybe I can ask a follow-up on Menti specifically.

I mean, you mentioned yourself that there were a significant amount of startups and competitors at CES in the humanoid space. Maybe a synopsis, a brief bullet point or two as to what the differentiation for Menti will be as you try to attack the marketplace and commercialize the product. Thank you.

I think that a lot of startups, mostly in China, but a lot of startups in the area of the humanoid, many of the demonstrations that you see out there are tele-operated. To win this game, you need to have a fully autonomous control of the robot, from perception to action to understanding the theme, having an AI stack that can control the robot autonomously. And this is what Minty has been demonstrating quite consistently over the past year, year and a half. And the RPCS, I showed a number of clips. MNT is also fully vertically integrated with the design of the actuators, the gear, the AI itself, all the software components and the electronics, which is crucial if you want to have a true end-to-end system. Another I would say a distinctive element is the ability to do continuous learning. So Menti has developed an AI technology that allows the robot to passively view a human performing the task and imitate that task in a very, very short period of time without having any special equipment, no VR goggles or special suit, just passively observing a human performing the task. This is, I think, very important as we move from structured to unstructured environments like home use. So taking everything together, we have here a company that is both thinking practical, what is going to be the first domain launch, which is structured environments like home like fulfillment centers, assembly, assembly plants, retail, and also developing the technology for the next deployment for unstructured environments like home use, fully vertically integrated, very strong in AI components, whether it's reinforcement learning, simulations, sim to wheels. um very strong very interesting overlap technology overlap with mobilizers can go both ways and synergies so overall this is a very good step for mobilize to uh to take a decisive steps towards owning physical ai in its full scope if i may add to this um i think to kind of differentiate between the uh the different actors mentee are as we know

probably the only Western human and robot company that is actively engaging with customers on proof of concepts and pilots that involve pure AI operations with no remote operation. It shows something about the advancement of the use of robots in a setting that a customer is willing to evaluate and deploy in a kind of a non-sterile setting. Unlike maybe some hype videos that show something on a YouTube clip, this is an actual testing environment. This is a different stage of maturity and having engagements with potential customers. And we believe that through integrating mobilized technologies, we have obviously strong strength in computer vision, in AI using cameras, and using sensor fusion, and designing systems for safety and reliability, and how to integrate systems in a very cost-efficient manner and efficient computing. All of these will help them even accelerate the progress they made so far.

Thank you. Thank you, George. Next question, please.

Thank you. The next question is coming from Mark Delaney of Goldman Sachs. Please go ahead.

Yes. Good morning. Good afternoon. Thank you very much for taking the questions. For Surround ADAS, the company's already reported on some strong momentum. You spoke about the two big OEMs that have already been committed and given serious production awards. As you look at the opportunity set in 2026, could you give a bit more details on the number of OEMs you're engaged with for Surround ADAS and how many might be able to convert into awards this year?

I think the important point about Surround ADAS is that this is a product that addresses a very clear pain point for customers and for OEMs. In the sense that it simplifies the system, it reduces costs, it provides advanced functionality, it meets future regulation, so it ticks most of the boxes that OEMs want to tick for the high-volume vehicle segments in the upcoming years. Therefore, the first OEM that we announced with Volkswagen was kind of starting a trend that created a flywheel effect of more and more OEMs being interested. Now, having announced the second design win, we now have two out of the top six OEMs in the planet. in major markets adopting this and launching this in a few years, this has definitely created a stronger realization amongst other OEMs that this has to happen for them also, at least to some degree. We've seen an increase in the amount of engagements we have. I don't want to predict timing and quantities, but we're definitely encouraged by the increase in different engagements we have with multiple OEMs across our customer base. And we also believe that we have inherent advantages for this product category because it requires a very reliable system performance, very high safety standards, advanced functionalities like hands-free driving in primary roads and so on, but also be extremely cost-efficient. And just to give you some sense, these two programs we won are going to be integrated in kind of a standard fit across the highest volume vehicle categories for these two OEMs. So every dollar counts, and also the implications for the OEMs to adopt this product means how much conviction they have that they need such a product for, you know, it's not a balloon project in a small amount of vehicles, you know, that if it fails, then, you know, nothing happens. If this project is delayed, for example, this is obviously affecting the entire vehicle portfolio. So it shows about the confidence they have in Mobileye, how much conviction they have in this product, and it's definitely an encouraging sign.

Thanks. My other question was on Menti. Given the announcement and engagements that you've had with potential future customers and industry participants, can you help us better understand to what extent it's catalyzed additional interest in partnering with Menti Robotics, including opportunities to have your humanoid robots in factory and commercial environments to gather data? As you think about that 2028 commercialization target you shared at CES, how important is that data collection and gathering for hitting that timeframe? Thank you.

I think it's a very interesting question. We've had two weeks since the announcement at CES, and I've received reach-outs from a significant number of customers asking about our interest and readiness to support onsite pilots and food concepts and kind of starting from our industrialization partners that want to contribute in manufacturing and components because they understand we do the food robot, starting from that and really trying to attract us to work with them for manufacturing and for for all of our industrial partners, whether it's Tier 1s, OEMs, and others that want to see how they can work with Mobileye in integrating robots into their logistics centers, warehouses, manufacturing lines. The need is definitely there, and for them, it made perfect sense. I think one of the encouraging signs that we've seen is that already at CES, we've had meetings with OEMs, and in most of these meetings, it came up as, you know, let's take a follow-up and schedule when we can actually talk about a plan to deploy this in our in our environment. And I think that the fact that they know Mobileye from the automotive business and they trust the standards of the company, and that they have a need for, in the longer term, finding solutions for human labor that is becoming a bigger and bigger problem for them, especially in developed countries, this gives them an easier path to evaluate a new technology with a partner they trust, as opposed to working with a startup in human knowledge that who knows what you can get from them and whether or not they can deliver. And definitely, we're leveraging these relationships. So, we definitely think of this as an area to continue to develop in the next few months.

Thank you. Thank you, Mark. Next question, please.

Our next question is coming from Chris McNally of Evercore ISI. Please go ahead.

Good morning. This is for Chris McNally. Thanks for taking the questions. Amnon, you've made this sandwich analogy for ADAS and AV demand, basically with high demand first round at the low end or drive at the high end. If we could focus on just drive for the time being. You guys announced VW Moya, one of the two big partners, Marabeni, and an unnamed OEM. But the forecast is for a fleet of 100,000 AVs by 2033, obviously a bit of a ways away. So my question, can we get a sense for what the near-term demand for your drive system might be for just like the next two to three years, 27, 28, or on phase one for a growing, on the growing list of cities?

Well, we announced together with Moya six cities, to expand to six cities in 2027, and that includes also Los Angeles together with Uber, We have another high-volume program with the Holon that will come six months later, have also its expansion. As the CEO of ADMP on stage mentioned that they foresee about 100,000 vehicles in the next eight years. Now, numbers of the rollout will depend on the success of 2027, deployment of the first six cities, but we are talking about thousands of vehicles this time.

Just to add to this, I think, you know, it may be somewhat challenging to understand what it means, 100,000, because it sounds like a big number. I think what we're taking away from this, what it means is that Volkswagen having placed the manufacturing capacity to produce as many vehicles as needed. The 100,000, if we're successful in 2026 and 2027 and then in 2028, which we have high confidence in our chances, means that 100,000 can also be a small number in hindsight. The manufacturing capacity they have and the funding they've pulled into this in the past few years to build everything needed to produce robot axes in scale, eventually it's Volkswagen. So they can produce 10,000 per year, 50,000 per year, 75,000 per year. when the demand will be there. And the demand from mobility operators, TNCs, municipalities is far greater than tens of thousands per year globally. Once the technology gets to this maturity level and allows quick economic and geographic expansion, which we believe we have clear advantages in, then the numbers will, the demand will not be a problem. We have a partner that can scale and give the supply at the best extent possible.

Understood. And just how do we think about like the volume for a phase one launch? Should that be like 1,000 to like 1,500 like Waymo in San Francisco?

You can think of it as a few hundreds of vehicles per city as a good testing, as a good measuring stick. You know, just also seeing how Waymo roll out, that's roughly the numbers they've had. In some cities it's 200, some cities it's close to 500. That's a sufficient number to kind of facilitate for the mobility demand in that city and also to build a meaningful business. And that's also roughly what we're planning.

Thanks, John. Just one last follow-up. Do the AV customers pay for anything before the purchase of the $45,000 drive content, like R&D in advance? Or do you get any protection if their volumes are less than planned?

Without going into the details of our contracts, we are receiving, we're delivering samples and engineering samples throughout the year, and there is an engineering budget that covers the direct engineering costs and development costs. So there is definitely a good amount of investment well before the commercialization. So I think when we have high confidence in our chances of getting to driverless, I think we're not that concerned about the downside potential.

Okay, thank you so much.

Thank you. The next question is coming from Joseph Spack of UBS. Please go ahead.

Thanks. Hello, everyone. Just to maybe talk about a couple of more near-term things. Obviously, memory has become a larger issue and concern in the automotive industry, and I know or I believe you don't really buy a lot of that memory directly, but clearly it is used in the modules at your tier one customers to assemble, to sort of ship on to the OEMs. So I'm just curious, you know, what you're hearing from your customers and the supply chain as to whether this is really a pricing issue, is it an availability issue? Is there any sort of volume risk embedded in your outlook? Because even if it's a pricing issue, I guess, do you see any risk of decontenting?

So as you said, Joe, the exposure that we have is not direct because we're not purchasing a lot of these units. It's mostly indirect through the fact that our Tier 1 customers are purchasing memory components. What we've been doing in the past few months, and we have been actively working on this, I think, well before it was a public knowledge that this dynamics is developing, is to create, kind of maximizing our supply of these components and working with multiple vendors to ensure that we have enough flexibility to kind of mitigate the direct cost impact from specific vendors, and that we will be able to ensure that vehicle manufacturing will not be impacted by these fluctuations. And we haven't, I think that like we did last year, our forecast for this year is maybe opting for the conservative side. You can see the difference between Q1 and other quarters. It does make in some level of, you know, understanding that there is some volatility in the industry. So we want it to be on the more conservative side. But we haven't seen any, let's say, direct evidence or indication that there is an imminent change to volume as a consequence. But we will keep close monitoring on this as it develops. And we're doing everything in our power with our tier one partners to create the availability of these components.

Thank you. The second question, just on, you mentioned some of the appreciation of the shekel. And I know you give very helpful exposure in your 10Qs on what a change in that currency can do to your cost base. But I believe also like at this time a year ago or earlier in 25, you made a comment on one of the calls about how a lot of the costs on the shekel were hedged. So did something change with the hedging strategy? Like maybe you could just sort of update us on sort of why it's a little bit maybe more of an issue now than you thought a year ago.

Yeah. So I will start with 2025. So we have a hedging plan. that basically cause that we can meet our OPEX expectation for 2025. So for example, for the second half of 2025, the rate that we had in our financials was like 5% or 6% favorable than the average market rate. And these are transactions that we made in the beginning of 2025. But as the appreciation of the shekel continues, into 2026, and we're talking about, I think, 10 or 12% in the last year, we still have hedging in place for 2026. So we are more than 50% hedged on our payroll expenses at a favorable rate. But the risk is obviously heavier as the duration gets bigger. But we took it into account in our guidance. So we took into account some further hedging, but it will be at a less favorable rate. The fact that we are already more than 50% hedge, I think we're in a good place in terms of the rate, but it's still the year-on-year impact because it's a significant impact. It's worth mentioning.

Okay. Thank you. That's helpful. Appreciate it. Thank you, Joe. Next question, please.

The next question is coming from Aaron Rakers of Wells Fargo. Please go ahead.

Yeah, thanks for taking the question. I want to kind of double click on the Porsche and VW and the Audi kind of programs. I'm curious as you kind of thought about your guidance for this year, I think the initial expectation was maybe early volumes on Porsche late this year. Just give me an update on where we stand on some of those programs and how we should think about volumes, appreciating that I think 2026 in the past has been more characterized as an execution year.

2026 is an execution year. The supervision on Porsche and Audi should start Q1 next year, Q1 2027. There was some pushback of deadlines unrelated to us that pushed the SOP to the first quarter of 2027.

to add something more and just to say that it didn't really change the plans of the project it's just a one month change between december 26 to february 27 so it's not not really material it's and we think made clear in previous calls as well that we do not expect meaningful volumes from these programs in 2026. right right appreciate that and then

And then as a quick follow-up, in the prepared comments, you talked about, you know, inventory levels at your customers, your major OEMs being fairly lean. I know you've guided 10 million, you know, IQ units this quarter. I'm just curious, can you kind of, you know, go a little bit deeper on what you're seeing as far as the inventory levels your customers are holding? And, you know, do you expect any replenishment when you gave the unit expectations for this year? Or is it more, you know, lean inventories continue? I'm just curious to how you kind of bake that into your guidance. Thank you.

So I think for what we're seeing, and I mentioned it also in the remarks, we're seeing increased demand in terms of order flow for 2025 and higher than expectation. 2026 is constantly increasing in terms of production. What happened specifically in Q4 was also that the orders were relatively low in the first place. December is a slow month in ordering. It's a short month with holidays, etc., So it was low, and then production level came up even higher. So it basically means that we believe the inventory levels that our customers are not reaching their inventory target at the end of 2025. So they are tighter than usual, and it has some impact on Q1. But again, we're also seeing very good demand. The 2026 production levels are going up. But yeah, Q1 does have some impact. of Q4 low volume combined with heavier or bigger demand.

Thank you. Thank you, Erin.

Thank you. The next question is coming from Edison Yu of Deutsche Bank. Please go ahead.

Hi. Thank you for taking our questions. I want to follow up on a Menti Can you give us a sense of what are the next steps with some of these customers you're talking with? I know you mentioned proof of concept. Are you going to basically ship maybe a few units, and then if that turns out well, you'll ship 30, 40, and then much more? How do we think about that, those next steps to commercialization?

I believe that 2026 is going to be maybe high tens of units in terms of POCs. 2027 should be more, and 2028 should be even further. 2027, we go also into production with a production partner. So 2026 is tens of units. What we would like also is to have, in addition to the POCs, Also, to produce more units for the sake of mobilizing to start experimenting with robots, not only maintaining themselves. Again, it's going to be a high double-digit number of robots in 2026.

Maybe just to add, from the viewpoint of the customers in these pilots, the purpose is to start with a smaller amount of robots that perform specific tasks for their kind of outlining and you just go to the logistics center, for example, and there is a few shelves with boxes and human beings today are moving boxes according to their, you know, to their instructions and so forth. And basically they want to see how robots can perform over a certain period of time. What's the precision, you know, reliability, durability, maintenance, and so on. And, you know, gradually afterwards, expand this to more and more tasks and in larger volumes. You know, we are talking about companies that employ tens of thousands of employees today in these types of positions. So, I think, again, it's going to be a question of supply, and that's why it's so important to have a manufacturing partner, as Amnon said, that already in 27 is able to produce robots in a serious production manner, which is important both for costs and also for scale.

Understood. Appreciate the color. A follow-up on On RoboTaxi, obviously there's a lot of excitement coming out of CS. Has your view on owning more of the, shall we say, ecosystem changed at all? And I say this in the context of, you obviously have a lot of parties involved. Could that kind of hinder the speed of deployment or some of the logistical aspects? And obviously, it would require capital, but I think that's not that big of an issue anymore. Thanks.

I think that the current arrangements we have with Volkswagen and Moya is really optimized for volume of deployments. So going right now more vertically integrated is not going to increase the volume of the deployment, which is something perhaps to be considered towards the end of the decade or further than that. I think what we have in place is really optimal to where Mobileye is at. Mobileye will be producing the self-driving system as a Tier 1, taking responsibility not only for the electronics but also for the sensors, Of course, the software stack and all the validation and the revenue per vehicle plus recurring revenue per mile is very, very attractive. The focus is execution now.

Thank you very much. Thank you, Edison.

Thank you. The next question is coming from Tom Narayan of RBC Capital Markets. Please go ahead.

Thanks a lot, guys. The first one I have is on the 26, I guess, adjusted operating expenses. I think you guys said it's up $100 million. And I know that FX was mentioned, some other issues. But then the one that I'm wondering if that's the biggest piece of it, Is the mentee R&D? Or maybe it's consolidating mentees if it's operating at a loss? Just curious how we should think about that OPEX going higher. What's really, you know, the biggest driver of that? And I both.

Okay, so I think I've mentioned that we have incorporated Menti R&D into our guidance. So the guidance includes, in terms of operating expenses, mainly 5% of regular inflation enhancement or compendium, and the additional portion is Menti R&D. So these are the significant two items. I also mentioned we have also a headwind from the ethics rate, but that is mostly offset by the efficiencies initiatives we did in Q4. So, I hope that answers your question.

Yeah, just to follow up, I mean, I think that's pretty clear, but just to follow up, like, you know, we do expect to have normal OPEX inflation per year of around 5%. This relates to you know, salary and benefit inflation, as well as kind of additional infrastructure to support the, you know, the AV activities and the advanced product activities. That's normal. On top of that, this year, we are assuming consolidation of the mentee R&D expenses. You know, we talked about that as somewhere in the, you know, lower single digits, but, you know, probably think, you know, towards, you know, 4% type of thing. And additionally, we do have this FX headwind, which is mostly offset by the workforce initiative we did in the fourth quarter, but not completely. So that should give you a decent walk from 2025 to 2026.

Yeah, I think you described it quite accurately, right? But take into account that also... growing in terms of being a tier one position with our programs with Porsche and Audi and Drive. And sometimes you need to make adjustments in terms of increasing your headcount. Again, this is non-material compared to the overall OPEX of what it adds. Few percentage. So take the walkthrough that you mentioned, which was quite accurate. An accurate, you know, few percentage of growth that we need to account for when we are taking a Tier 1 position and investing heavily into the future. So two years ago, we calculated our OPEX growth, but we cannot be precise to the single percent in an area which is experiencing rapid growth.

Got it. And for a follow-up on Menti, and I know this is very early to ask this question, but I mean, look, we're seeing the market's reaction to the potential news from Hyundai with Boston Dynamics and the credit that Hyundai is getting. Is this something you guys might think about in maybe the distant future? I don't know, about trying to crystallize the value. Right now, there's so much appetite for the capital market, certainly. Is this something you could consider, you know, monetizing Menti in some way? Or do you believe that, you know, together as a combined entity that, you know, that's how you kind of view the business?

I think that the market is taking some time to internalize the news of the acquisition or the news of Mobileye entering into Humanoid. I do believe that in some, you know, near future, This would create the dividends, the like of what's happened between Hyundai and Boston Dynamics. Menti has all the potential to make big steps forward, has demonstrated quite a mature technology, as the clips that I have shown and the clips that they have on their website. And together with Mobileye, they can make rapid steps forward. Now, whether we're going to see this dividend in a month or whether we're going to see this in a year, I don't know, but it has the potential to capitalize the same benefits that Hyundai is receiving from this. Got it.

Thank you. Thanks, Tom.

Thank you. The next question is coming from Colin Rush of Oppenheimer. Please go ahead.

Thanks so much guys. You know, can you talk a little bit about the near term pricing dynamics on IQ? I'm just curious, you know, how much movement there really is as you see some of these larger volumes move through in the first part of the year and how we should think about that trend into the balance.

So maybe if you refer to the IQ prices, volume or prices, I didn't get the question.

I'm concerned about pricing as you ship the higher volume here and then how the pricing transfers the balance of the year as you normalize that.

Yeah, so the pricing every year is affected by the mix of IQs. And as you know, the IQs have different generations with different software features and software packages. And this has somewhat of a different price, but overall, on average, There is no, let's say, meaningful change in the prices. There is a different mix this year compared to last year, as Noam said in her remarks, where we see higher volumes of IQ5-based ADAS products, and IQ5 has somewhat of a higher cost, but still it's advanced products with meaningful volumes this year compared to last year. So this does have some impact, but it's all natural mix.

And also the second chip that I mentioned, the second chip that I mentioned combined, the fact that the second chip is at a lower price than the first one, so it's higher gross profit per vehicle, but lower ASP. I think that the combined natural mix that Nimrod mentioned and second chip impacts is approximately like 80 cents or so year on year.

Yeah, but just to clarify, this second chip where the car has two IT4 chips, this is a one-off It's not that we see a trend having two IQ chips in the car with one of the IQ chips at the discounted price. This is what we call a bridge. This is a bridge towards IQ6 flight. The carmaker wanted to meet certain regulatory environments that IQ4 alone could not meet. Therefore, a second IQ4 was added. But again, this is a one-off. We don't expect it to be a 10.

Okay, perfect. Thanks, guys. And as you think about doing the driver demonstration here later this year, can you talk about the regulatory process and any bottlenecks or hurdles that are still remaining here, things that are of concern that you guys are focused on getting ready to do that demonstration? Sure.

Well, in the U.S., it's self-certification. We have stringent KPIs in terms of meantime between failures that we are meeting towards going driverless. Outside of the U.S., there's homologation, and as we mentioned, together with Volkswagen, homologation will occur in 2027 outside of the U.S.

But nothing on a regional basis or city basis that you guys are concerned about?

No, we don't see. And actually, the homologation in Europe will have a strong tailwind, given that the vehicles are produced by Volkswagen, Level 4 vehicles, and our cooperation together with AD&T and Moya and Volkswagen will allow us to go through the homologation in a much easier way than if we were doing it alone.

And this is a significant entry barrier to the European markets. It involves a lot of activities and direct engagements with regulatory bodies that we are already doing with Volkswagen. So getting this approval in 2027, as Amir mentioned, will also separate us in the European market from others.

Yeah, it's an important point. And just to clarify on the timing of homologation, we're saying that it will be completed in 2027 and start in 2026. And the six cities commercialized in 2027 that Volkswagen talked about includes some European cities, which is going to require the homologation process to be completed.

Thanks so much, guys. Appreciate it. Thank you, Colin.

Thank you. We are asking remaining analysts to please ask your question and your follow-up at the same time. Our next question is coming from Joshua Buckhalter of TD Cowan. Please go ahead.

Hey, guys. Thanks for taking my questions, I guess, both at once. I guess to start, you highlighted the potential for conversions on surround ADAS this year, but you haven't made the same comments about supervision and chauffeur. Maybe you can provide an update there. Are you guys de-emphasizing that in your go-to-market and conversations with customers? And then for my follow-up that's on a completely unrelated topic, Adnan, you've touched on this in the CES presentation, but I was hoping you could provide some more details about... specifically how your IQ roadmap is going to accelerate mentees, time to market, and perhaps as important, you know, how much software development is needed to move further into robotics, you know, given IQ's design specifically for autos. Thank you.

So we have multiple engagements also on supervision to refer, so there's definitely an active engagement there with the markets. Just to put things in perspective, our relationship with Volkswagen Group with the different brands on these products started maybe in 2021. And it took us a couple of years to kind of cross all the items that is needed. And we are also focused now on opportunities that have a meaningful business potential. as opposed to smaller scientific projects that some OEMs are trying to explore. Maybe in some cases it's in-house development that they're doing, and they want to allocate one car in the future and see if it works. We're trying to focus on opportunities that present significant volumes, multiple vehicle models, with concrete timelines so that we can scale the products. We're not looking for the first opportunity. We want to scale, and we have several of those. I don't want to predict timing, but we are encouraged by the activity there.

We feel that it's too early to talk about IQ chips on humanoid robots. We think this is a longer term, this is a longer horizon issue. Currently, the robots are based on NVIDIA chips and we see that, we are very proud of that relationship and we see that going on for the foreseeable future. Now, when we go into really high-volume production where every cent counts, then I think IQ8, IQ9 could be quite relevant, but it's not in the foreseeable future.

Okay, thank you both.

Thank you. We're showing time for one final questioner. Our last question is coming from Simic Chatterjee of J.P. Morgan. Please go ahead.

Hi, thank you for taking my question. This is MP on first formic Chatterjee. My first one would be like since you said that Porsche and Audi programs are now pushed out to 1Q27, will Drive or Robotaxi be the biggest swing factor for 2026 revenues? And on that itself, like any updated thoughts on the monetization for Drive in terms of upfront revenues versus recurring consumption-based revenues? And for my follow-up, I want, sorry, for my follow-up, I wanted to ask on the second surrounded as customer. you said that there could be a potential decision for the second architecture with this customer in one queue. If that happens, will that potentially double your pipeline with that customer? That's it. Thank you.

MP, the answer to your first question is that we did not expect any meaningful impact from the advanced products in 2026. We've been saying that for the last several quarters. So there's no change related to what you talked about.

And we did not account for drive revenue in 2026 guidance. So there is no, it's not in the guidance. Regarding the second question on the second design for SWAN ADAS. So the discussions are obviously ongoing and we are making good progress. And again, don't want to go into predicting time, but we continue to work on this and it's progressing.

Thank you, MP.

Thank you. At this time, I would like to turn the floor back over to Mr. Galves for closing comments.

Thanks, everyone, for tuning in to our earnings call, and we'll talk to you next quarter. Thank you very much.

Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.