Mobileye Global Inc. (NASDAQ:MBLY) Q1 2025 - Earnings Conference Call April 24, 2025 8:00 AM ET

Company Participants

Dan Galves - Chief Communications Officer
Prof. Amnon Shashua - President, Chief Executive Officer
Moran Shemesh - Chief Financial Officer
Nimrod Nehushtan - EVP of Business Development, Strategy

Conference Call Participants

Joe Spak - UBS
Joshua Buchalter - TD Cowen
Shreyas Patel - Wolfe Research
Adam Jonas - Morgan Stanley
Antoine Chkaiban - New Street Research
Mark Delaney - Goldman Sachs
Aaron Rakers - Wells Fargo
Gary Mobley - Loop Capital
Edison Yu - Deutsche Bank
Tom Narayan - RBC

Operator

Greetings, and welcome to the Mobileye Global Inc. First Quarter 2025 Earnings 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 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dan Galves.

Mr. . Galves, you may begin.

Dan Galves

Thanks, Stacy. Hello, everyone, and welcome to Mobileye Global Inc. First Quarter 2025 Earnings Conference Call for the period ending March 29, 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 are Prof. . Amnon Shashua, Mobileye's CEO and President, and Moran Shemesh, Mobileye's CFO.

Also joining today for the Q&A session is Nimrod Nehushtan, Mobileye EVP of Business Development and Strategy. Thanks, and now I'll turn the call over to Amnon.

Amnon Shashua

Hello, everyone, and thanks for joining our earnings call. Starting with the results, Q1 was closely aligned with our expectations. Revenue was up 83% year over year compared to the unusually low Q1 of last year. Due to the meaningfully that drove kind of inventory in Q1 2024, operating margins recovered sharply on a year-over-year basis due to the higher revenue.

Operating expense growth was 14% in Q1, which should moderate to middle single digits on average in the balance of the year as the current R&D infrastructure is sufficient to execute all the advanced products and programs that will come online over the next several years. Operating cash flow was again a highlight at $109 million in Q1. Business trends for our core single-chip front camera driving assist systems were fundamentally strong in Q1, both in terms of current supply demand and design wins for future volume.

In Q1, volume was 8.5% million units, and we expect Q2 volume to be about 7% higher and for Q2 revenue to be up approximately 7% year over year. After a volatile 2024, Q1 volumes and Q2 orders have been quite stable, with some upward variance from China OEMs compared to our original expectation. Turning to the macro environment, clearly, global light vehicle production in 2025 has become significantly more uncertain as the industry grapples with new trade friction.

We are fortunate that the simplicity of our supply chain, where our customers are the importers of our product, means that we should not directly incur any material tariff costs. Nevertheless, we will be affected by any negative impact on global production volumes and consumer spending resulting from these trade issues. What we know today is that Q1 results were solid, due to order flow being above original expectations and consistent for the last couple of months.

We have seen no deterioration in forward production schedules from our customers. We also know that our original outlook included a level of conservatism that was intended to reflect the risk of macro deterioration in the second half of 2025. Given expected first-half volumes, our own analysis of the direct impact of current tariffs on our customers, and analysis by third parties like S&P Global, we continue to see a strong potential to perform within the guiding range for the full year 2025.

Of course, there is potential for price elasticity and other economic effects on auto consumers, but this is beyond our ability to analyze at this time. Turning to the longer term, design win activity was very brisk in this quarter. This trend tends to be bumpy, but if we compare to the projected future volumes from design wins in all of 2024, the design wins in Q1 are already at around 85% of what was achieved last year.

Additionally, we are seeing potential for an inflection point in the value per unit of mass-market driving systems. Our technology is now included in Ford BlueCruise, and this cloud-enhanced function will also be adopted by a Korean OEM in future programs based on a large program we won in Q1. A potentially bigger tailwind for Mobileye Global Inc. is the trend towards multicamera setups going mainstream in the coming years due to more stringent future safety requirements and the need to provide highway hands-free driving on mass-market vehicles for OEMs to remain competitive. BYD boosted that trend with their God's Eye announcement, which was a clear message to the industry that highway hands-free driving will likely feature on mainstream vehicles in the coming years.

Mobileye's surround ADAS through the IQ6 tie is the perfect solution for that space. We announced our first design win with Volkswagen during the quarter. Technology functionality and efficiency are just as important as prior years, and we have the only offering that can support all perception, mapping, driving policy, and driving function from a single SOC on a single ECU, fully upgradable over the air.

This shares a common technology backbone with our more advanced product, which supports a cost-efficient modular product portfolio for OEMs across all vehicle segments. Mobileye Global Inc. is a true one-stop shop, and this really aligns with OEM software-defined vehicle architecture consolidation goals. We are also seeing substantial opportunities from new customers.

During the quarter, we achieved our first design win in about eight years with a particular European OEM. We are also seeing traction from our imaging radar product, where the first design win outside of the driving product line is imminent with another European OEM. This OEM is expected to choose our imaging radar as an enabler of a high highway level three solution, which is a testament to the differentiation of the sensor and a big vote of confidence in our software and drive products in general.

OEM decision-making for supervision and chauffeur remains slower than we would like, but we continue to make progress with a number of OEMs, including two new top 10 global OEM prospects in the past few months. Execution on the Porsche and Audi programs remains on track, and we are looking forward to providing first prototype demos of these systems in the second half of 2025. That will be the first opportunity for external audiences to experience the new IQ6 high-based software and hardware in a production-intensive environment.

Our Mobileye Drive self-driving system for robotaxi business continues to accelerate. We announced the next step with Lyft during the quarter, announcing Dallas as the geography for initial operation, Marubeni as the owner-operator, and Lyft as the demand platform. We expect to choose and announce the vehicle OEM in the coming months.

In a completely fresh development, simultaneous to the beginning of this earnings call, Volkswagen and Uber issued a joint release announcing the two companies have agreed to integrate Mobileye Drive-enabled ID. BUZZ robotaxis onto the Uber ride-hailing network in Los Angeles starting in 2026. This is an excellent example of the ecosystem approach we are taking in this business, which we believe has significant scale benefits.

As we have discussed before, we are working with Volkswagen to integrate the Mobileye Drive self-driving system into Volkswagen ID. BUZZ on the same assembly line as normal vehicles, and that's able to be scaled up or down rapidly. In this agreement, Volkswagen's mobility arm, MOIA, will act as the fleet management system provider of the vehicles, and the Uber network will be the demand-generating platform.

Our ecosystem approach is capital-light for us, and it puts the responsibility for each layer of this business into actors that have relevant competencies and the ability to add value. On the technology front, our low-cost sensor set, efficient compute, and generalizable AI software are expected to enable rapid scaling across geographies and at compelling price points for the go-to-market strategy. Finally, we congratulate another of our global taxi production partners, Holon, for booking an order from the Jacksonville Transit Authority to purchase the Holon Urban autonomous shuttle, which is enabled by Mobileye Drive.

Thanks, and I will turn the call over to Moran.

Moran Shemesh

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 exclusion in Mobileye's non-GAAP numbers is the amortization of intangible assets, which is mainly related to Intel's acquisition of Mobileye in 2017.

We also exclude stock-based compensation. Our Q1 results slightly exceeded the color we provided on the Q4 2024 earnings call in January, primarily due to modestly higher volume from Chinese OEMs and lower-than-expected operating expenses due to efficiencies in facilities and operations, along with some timing-related items. Revenue was up 83% year over year, with a high level of growth due to normalized volume in Q1 2025 compared to Q1 of 2024, which was impacted by meaningful inventory digestion by our Tier 1 customers.

Year-over-year comparisons will be more relevant going forward as we believe supply and demand will be well-aligned in the back half of 2024. On a sequential basis, Q1 gross margin was up slightly versus Q4 2024 on a lower percentage of supervision revenue, while IQ gross margins were largely unchanged. Operating expenses were up somewhat versus Q4 as expected.

This is related to some higher payroll expenses due to lower reserve duty refunds in Q1 and slight headcount growth. Higher spending on the robotaxi project, higher marketing spend due to participation in industry events, and other items that are largely timing-related. We continue to expect approximately 7% year-over-year growth in adjusted operating expenses in 2025 compared to $926 million in 2024.

We expect Q2 to be slightly higher than Q1, and for Q3 to likely be the highest quarter of the year. We do not expect global macro issues to impact our operating expenses materially, as the majority is focused on the development of technology that supports our advanced products. We will continue to look for opportunities for efficiency as we always do.

As it relates to tariffs, we are fortunate that our supply chain is pretty simple. IQ chips for vehicle production in the US are imported by our customers, not by Mobileye Global Inc. Therefore, we should experience no direct P&L impact from tariff payments. We also have no material currency exposure on our revenue, and our cost exposure to the new Israeli shekel is largely hedged at this point.

A bit more detail on our geographic exposure. We believe a very significant portion of our chips supplied to Europe and Asia Pacific are used for local consumption rather than for export to the US. Approximately 25% of our chips are shipped by our customers directly to the US and are currently exempt from import tariffs, and 20% to China, where we believe it is used for local production.

Although tariffs on auto components are not directly favored by us, we will fully cooperate with our customers in the next few months to optimize their production needs and potentially make minor changes to logistical infrastructure to mitigate the overall cost. While there is no direct impact, we, of course, will be exposed to any negative impact on vehicle production volume driven by supply impacts related to tariff costs on vehicles and components imported to the US, as well as potential consumer demand impact from higher vehicle pricing or general weakening in economic conditions. S&P IHS published a new forecast last week that implies global production deterioration of around 2% in the balance of 2025.

For our specific customer exposures, this would translate to a bit below 1 million lower IQ units in the balance of 2025, but this is just one data point. We have independently been reviewing the sector tariffs that apply to the automotive industry, vehicles, and auto parts, to map the potential risk. Our baseline view is that a scenario incorporating production shutdowns of imported vehicles that are unprofitable under the new tariff regime, in combination with demand-related impact from higher vehicle pricing in general, could potentially drive a 3% to 7% reduction in the volumes of our top 10 customers, which translates to about 1.1% to 2.2% million units annualized.

This is, of course, very difficult to predict as the mix of sales in terms of OEMs and brands might change dramatically because of tariffs, and the potential for shifting production sites and regions could mitigate the initial impact. The bottom line is that prior to recent tariff-related developments, our regional outlook already assumed a more conservative view of 2025 production and customers than our customers and S&P Global. Even after the most recent forecast reduction by S&P to reflect the current tariff regime, or our own somewhat more negative analysis, our original expectations remain valid.

We will continue to monitor the situation closely given the current complete vehicle tariffs and vehicle component tariffs scheduled to begin on May 3 and the potential for reciprocal tariffs after the 90-day period. Turning to Q2, we expect to deliver approximately 8.7% million to 9.3% million IQ units and for our revenue to be up approximately 7% year over year at the midpoint of the revenue range. We expect gross margin to be at or slightly below the Q1 level, and for operating expenses to be seasonally higher in Q2 versus Q1, in line with our previous expectations.

Thank you, and we will now take your questions.

Operator

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press *1 on your telephone keypad.

A confirmation tone will indicate your line is in the question queue. You may press *2 to remove your question from the queue. Your first question comes from Joseph Spak with UBS.

Please go ahead.

Joseph Spak

Thank you. Good morning, everyone. I guess, a couple of things.

Maybe just to start with the VW Uber announcement. I know it's early days, but how do you envision that working. Is that you sort of selling a system. Do you think there is sort of an ongoing potential payment from you for rides.

Or how should we think about that evolving.

Amnon Shashua

So the business model is such that Mobileye Global Inc. is delivering the self-driving system, which includes the ECU, the hardware, the software for the self-driving software, and the radar sensors. So there's a one-time payment per car on these components. In addition, there is a recurring license fee that is a derivative of the overall utilization of the fleet.

So the more the fleet is driving, the more revenue we are generating, in addition to the one-time payment for the system. Volkswagen's role is to provide and produce the self-driving cars with Mobileye Drive system installed in the manufacturing line. And Uber is the demand generator that can offer self-driving service through their application to the consumer audience.

Basically, the advantage that we have in this business model is the fact that we have a very geographically scalable technology as well as economically scalable technology. We come from a very cost-efficient design to begin with, that can be easily scaled not just within Los Angeles, which is the first market mentioned in this announcement, but also, of course, afterwards continued expansion to additional locations. And Volkswagen, who are a very high-volume vehicle manufacturer, can quickly scale the amount of robotaxis they produce in the manufacturing line as demand increases over time.

So overall, we think that there are, and of course, Uber is a very well-renowned demand generator, probably the leading one in the US and globally. So, we think the key ingredients necessary to become a very competitive and leading driving service in the US in the next couple of years.

Joseph Spak

Great. Thanks. And then just maybe one more near term just on the 2Q outlook and the units you just indicated.

I think it's stronger certainly than where the street was. It's, I think, above 1Q levels as well. Do you, I know you sort of talked about some of your own checks and work to sort of get comfortable with where orders are and production and inventory.

But do you get the sense that there's a little bit of, you know, ordering ahead of maybe some uncertainty and that there's they're willing to carry a little bit more, you know, inventory in the channel.

Moran Shemesh

Yeah. So I must say we cannot indicate anything specific for Q2 of a sense of urgency, and orders have been pretty stable. As of February.

And even at the beginning of this year, we kind of in our forecast, predict around 8.5% million in Q1. So it's 8.5% to 9 million units per quarter. That's what we are also seeing in the last three quarters.

So also in the second half of 2024, it was between 8.5% and 9 million. So this is something pretty normal for now. When we started the year, we kind of based our focus again on demand, which indicates no inventory or excess inventory at our customers.

So we see orders aligned with that. We have more visibility maybe towards the end of the quarter, but there's nothing specific we can indicate.

Joseph Spak

Yeah. So just to summarize, you know, if there is any pull ahead in this number, nothing's really changed since February, and it wouldn't be very material versus kind of what we're seeing in end-user demand.

Moran Shemesh

Thanks for that. Appreciate it.

Joseph Spak

Thanks, Joe. Next question, please.

Operator

Joshua Buchalter with TD Cowen. Please go ahead.

Joshua Buchalter

Hey, guys. Thank you for taking my question, and congrats on the stellar results. Yes, I wanted to maybe follow-up on that previous one.

I mean, the back half guide implies, you know, a pretty sub-seasonal end of the year. I guess, any way you could walk us through how much of that is conservatism on units versus share loss by your engaged customers and maybe any sort of haircutting that you guys are doing to account for the uncertainty. Thank you.

Dan Galves

Thanks, Josh. This is Dan. I'll take that one.

So yeah. I mean, the kind of the way our business works is we have kind of full visibility, you know, three months ahead, something like that, and then we for the couple of quarters beyond that, that can really change at any time. We haven't seen any change in the back half.

You know, but, you know, obviously, kind of uncertainty has risen, so, you know, we don't want to get ahead of our skis. You know, yeah, the fact that we're going to do kind of more than 50% of the guide, you know, the full-year guide in the first half is certainly a good sign, and we have no reason to think necessarily that demand is going to fall in the back half. But just, you know, given the current environment, we didn't really want to get ahead of ourselves.

Amnon Shashua

Totally. We took provisions that demand will go down. Right.

I mean, because we started our guide at the beginning of the year in a very conservative manner. So even if demand falls, so far, we feel that we meet the range of the guidance.

Dan Galves

But we're not getting any clear indication that it will fall. That's kind of the point.

Joshua Buchalter

Got it. No. Thank you.

That's pragmatic and makes a lot of sense. I guess a follow-up. I guess how would you characterize your customers' engagement and design activity.

I mean, you mentioned, I think, you had 85% of last year's design wins in the first half. I mean, your OEM customers have been, I think, slower than we all expected to move in particular with advanced ADAS products. Like, how do you see the current environment impacting their appetite to invest in new technology.

Because I could see it going either way. And any more color you could provide within the 85% that your design wins year to date. Any sort of directional indicators across base ADAS versus surround vision, surround supervision, chauffeur.

Thank you.

Amnon Shashua

Yeah. I can take that. So what we're seeing so far is a very strong continued strong demand from our customers to source our products for future generations.

That comprises the majority of the 85% or the volumes that we won during Q1. And it's a mixture of surrounding ADAS and basic ADAS products. We are pretty much in a position of solidifying our position with our top 10 customers for years to come after these design wins.

When it comes to sourcing advanced products, I think it makes sense that the previous couple of months have created maybe somewhat of a delay in some of the decision-making because of urgent matters that they need to address regarding tariffs. I think it makes sense. What did not change is their understanding of the necessity of having advanced products in the future.

And competition is moving forward for each OEM. And just recently, Tesla continued to double down on their commitment to long-term autonomous driving in their product and again stressing the significance of self-driving technologies in the future, in the near future. And that, of course, continues to apply a lot of pressure on OEMs to move forward.

During this quarter, we have had two engagements with two of our top 10 customers that started with surround ADAS and now we're expanding to level three and level two plus plus to show for a supervision evaluation. That have kind of moved through the pipeline to more advanced stages of evaluation. And we're reaching convergence with a couple of other opportunities.

So we still see movement in the right direction, and we're seeing also more and more interest in specifically level three eyes-off driving targeting the end of 2027, roughly speaking, with big OEMs. . So that is also an encouraging sign that even though uncertain times, they are still committed to the long-term prospect of energy driving in the future for them, and they are working with us to make progress in that front.

Joshua Buchalter

Thank you.

Operator

Next question, Luke Schuch with Baird. Please go ahead.

Luke Schuch

First, maybe if we could just talk about what's going on in China right now and the fact that things have been trending better the last couple of quarters. I know you haven't read into that too much today, but now it's just an accumulation of data points. Are you better able to tease out what's going on with those customers.

Amnon Shashua

I think that our focus now in China is supporting our Chinese OEMs on the global export and also on the local market. And then we are outperforming our initial expectation. So roughly 20 to 30% market share is quite stable.

On the advanced product, we see opportunities after we start rebuilding our second-generation product, which is going to be based on IQ6. So this is sometimes closer to the end of the year and of now. So our business development on our advanced product is more focused on Western customers and not in China. In China, we're focused on ADAS and also supporting our Western OEMs, Porsche and Audi, in their launch of Supervision Chauffeur also in China at the end of 2026 and then 2027.

Moran Shemesh

Just to give some sense on the numbers for China, so we started 2024 with relatively low numbers, so we sold approximately 400,000 units. And then from the second half of 2024, we're seeing increased volume. So in the second half, 1.2% million units.

We were still conservative at the beginning of the year with the guidance, so we were aiming for approximately 500,000 units a quarter. And we are seeing demand more than that in the first and also the second quarter. So in terms of the guidance versus the beginning of the year, it's some source of upside.

Luke Schuch

All very helpful. Thank you. And then just a quick one.

The imaging radar award, you believe is imminent, are you implying that that is a potential chauffeur award as well.

Amnon Shashua

No. This particular award is just for the sensor itself. We have additional opportunities for the imaging radar bundled with the Chauffeur product, but that is separate.

Luke Schuch

Understood. Thank you.

Operator

Next question, Shreyas Patil with Wolfe Research. Please go ahead.

Shreyas Patil

Hey. Thanks so much for taking the question. Maybe just back on the 2025 guidance.

I think previously, you had talked about an expectation of share gains or ADAS penetration increase embedded in the '25 guide. And I'm wondering if you're still seeing that at the moment. I understand that overall production expectations that you've embedded are still consistent with what we're seeing in production.

But I'm just wondering if you're also seeing ADAS penetration increases or share gains as well.

Moran Shemesh

Yeah. So as you mentioned, about the global production, at the midpoint of our guidance, we kind of now aligned with party forecasts. Forecast of approximately 7% are top 10 customers.

As for the incremental units from new launches and Mobileye's share gains within our top customers, I mentioned in January, so we are expecting 1.4% million units. That looks in line with expectation and maybe even ramping up a bit faster than expected. So we're still, this is still a source of additional units.

And also the China expectations, which were more conservative at the beginning of the year, and we're seeing an upside also for China OEMs. ..

Shreyas Patil

Okay. Great. And then maybe on just trying to think through the opportunity that you see here in Mobileye Drive.

You know, the deal that was announced today with Uber just comes off the heels of a similar program with Lyft. So I'm wondering if we should see this as an indication of momentum accelerating in robotaxi deployment broadly. And if that's the case, obviously, Uber and Lyft are the two largest players in the US, but I'm wondering if there are other opportunities in the pipeline as well, maybe in other markets.

Amnon Shashua

Yeah. So definitely, we're seeing accelerated momentum and increased interest and demand, and it seems a broader realization in the industry that robotaxi and self-driving services are here. It's not a question of if, it's a question of when and how much.

And we are a very attractive partner in the sense that our products are scalable, cost-efficient, can be deployed globally in all major markets in the near future. So Volkswagen is our kind of leading partner, strategic partner for producing robotaxi cars from assembly lines in scale that can be quickly ramped up according to demand. Partnering with Lyft and Uber, the two biggest mobility operators in the US, is very, very important to quickly reach the pockets of millions of consumers.

As probably you can imagine. But in addition to this, we're also working on launching in Europe beyond just the US in similar timeframes. Again, partnering with Volkswagen, a very strong European OEM allows us to be very one of the earliest, if not the first, to launch in Europe.

Partnering with Holon gives us another angle of transportation in different, maybe slightly different use cases. And beyond all of those, we're still, we're also working with additional OEMs that are very interested in this business model, car manufacturers, to produce level four cars on their manufacturing lines, partnering with Mobileye's self-driving technology with Mobileye Drive. And then once Mobileye can bring to the table the mobility operators, it really opens the door for more OEMs that are interested in a similar model.

And if we think about making a revolution of robotaxis, it's about scale. That's the next big thing. And the scale is not just a hundred, a few hundreds of cars. It's thousands and then tens of thousands, hundreds of thousands of cars in Europe and the US.

And to get there, we are partnering with the most scalable OEMs on the planet. So that's kind of our strategy, and we do see very, very accelerated momentum in the past three to six months, I would say.

Shreyas Patil

Great. Thanks.

Operator

Next question, Adam Jonas with Morgan Stanley.

Adam Jonas

Hey, everybody. Just a couple of questions. First is a bit of a maybe this might sound oddball, quirky technical, but we're hearing from some that the GenAI has helped possibly increase the value of dashcam video capture that could be really relevant to the ability for an Uber and Lyft leader or other fleets to capture data.

Obviously, it's not the same fidelity and in the same sensor modality and connected to the computers, the way your systems is very sophisticated way are. But I was curious if you really if you subscribe to that, that at least some level, the coefficient of value that you might apply this aftermarket dashcam video capturing footage from around the vehicle who's driving around might have some improved value given the AI GenAI revolution going on. The first question.

Thanks.

Amnon Shashua

But in terms of data collection from vehicles, we have what we call REM 1.0%, which is sending images to the cloud, sending some condensed data to the cloud. We have been developing a new generation of REM, which we call Supreme REM, which is based on sending pictures, still very low bandwidth, but sending pictures to the cloud. And we'll have much to talk about in the coming months or year about this new way, about this new technology.

So there's quite a lot of progress in terms of what kind of data, at what frequency of data, volume of data you can start extracting from vehicles and still meet also regulatory approvals. There's privacy concerns. There's all sorts of issues there.

And we're really on it with the new technologies, and the new approaches and all of that will meet our 2027 launches of and drive and so on.

Adam Jonas

Okay. So I'm not just basically, it's not a bullshit question is what you're saying.

Amnon Shashua

No. No. No.

You never have those questions. No. No.

I disagree.

Adam Jonas

Okay. And a follow-up. I'm just curious.

Given so much other activity in other sectors outside of automotive, in terms of data capture, I think you'd agree with the belief that anything that any machine that can be automated will be automated and cars are just one modality of many, many thousands potentially of other modalities. I'm just I'd be interested if Mobileye is allocating or there's any change to allocation, even if it's a small level, of your R&D and advanced development work on markets outside of automotive at this time. Thank you.

Amnon Shashua

Yes. I'll say yes, but I cannot expand further. We are exploring, but we are still at the exploration stage of looking at additional growth engines in the physical AI space.

Thank you, Adam.

Operator

Next question, Antoine Chkaiban with New Street Research. Please go ahead.

Antoine Chkaiban

Hi, good afternoon. Thanks for taking my question. I'd like to follow-up on the announcement with Lyft to debut Mobileye-powered robotaxis in Dallas in 2026.

I was wondering how do you expect the rollout to play out. It seems that the goal is to eventually deploy thousands of vehicles across multiple cities. So any color you can provide on the economics of the deal and the pace of deployment, the shape of the ramp would be very helpful.

Thank you.

Amnon Shashua

Yeah. Maybe I would address the general rollout of robotaxi fleets without addressing the specific project. There is only so much we can expand on this project at this stage.

Generally, we are working in a few stages. We start with the development and testing stages in which we deploy dozens of vehicles driving around the designated area repeatedly. And of course, there's a combination of offline and online validation processes that are necessary to make sure that the quality of service is at the right, the highest level possible, of course, making sure that we can meet the safety standards, the mean time between interventions, in this designated area.

Afterwards, there is a certain stage of pilot programs in which we're using the safety drivers at the start but still opening the doors for users to experience the service and getting feedback. That's still the magnitude. It's still in the dozens.

Then it gradually expands to maybe small hundreds of vehicles. After that, there is an early stage of driverless activities. And then it becomes a full commercial service.

And this process can take a few months or it can take maybe a year or so of working through the different stages of this activity. We have already been working on this in the US in certain cities in the past two years for early testing. And 2025 is a really important year for us in robotaxi development because we are expanding the scale significantly of Mobileye Drive Systems driving in the US in different cities and really becoming, seeing more statistical data for more statistical analysis of our performance and seeing very impressive results and improvement towards the goal in getting to these launches.

Dan Galves

Let me talk about the economic refresh and reiterate.

Amnon Shashua

Yeah. And then when it comes to the economics, again, just to make sure it's clear, Mobileye's product is the ECU. And the ECU is the hardware and the software.

We get a payment one time for that per car. And then there is a recurring license fee for the operation of each and every robotaxi vehicle according to its availability and usage. So the more you can think of it as a percentage of every dollar per mile that consumers pay for a self-driving system with Mobileye that is enabled by Mobileye Drive.

Antoine Chkaiban

Great. Thanks a lot for the detailed answer. And maybe as a quick follow-up.

So on the cloud-enhanced ADAS announcement with the Korean OEM, can you maybe provide some color on the volumes this could represent, the timing and shape of the ramp. And may you remind us of the overall design win status for cloud-enhanced.

Amnon Shashua

Yep. So normally, cloud-enhanced ADAS is integrated within high-volume projects. So it's a front camera-based system that is now uploading data and downloading data from our REM database.

And that is very important for us because the REM database is using us not just to improve the quality of our base ADAS product, but also to it's kind of the backbone for our advanced products. Supervision, surrounding supervision, chauffeur, and drive. So our strategy is to have an ecosystem of OEMs that are contributing data and benefiting from the data of multiple OEMs and then having a very, very good coverage and refresh rate globally that all of the OEMs that are in this ecosystem can enjoy for the different products.

So adding more high-volume OEMs to this ecosystem is essential, of course, to these purposes. And the rollout is within the near future. Let's say.

You know, to go beyond that.

Antoine Chkaiban

Thank you, Antoine.

Operator

Next question, Mark Delaney, Goldman Sachs.

Mark Delaney

Yes. Thank you very much for taking my questions. For Mobileye Drive, I think both the Uber and Lyft agreements target operations beginning in 2026.

Can you speak to how development is going to meet that time frame. And taking a step back and thinking about Drive more holistically, it's been a small contributor to the company's revenue. But as you think out to '26 and 2027, do you think Mobileye Drive revenue is going to become a meaningful part of Mobileye's overall financials.

Amnon Shashua

Yes. In terms of development, we have shifted all the hardware to IQ6 I a few months ago. The ECU called the Drive 64.

And it's meeting all our targets for the end of 2026 launch of the driverless robotaxis. So we are on target there. With the statistics, with driving.

We have been driving in Europe and in Austin, Texas. And we are gradually expanding the testing with many dozens of vehicles in multiple sites. In terms of revenue, the contracts we have talked about tens of thousands of vehicles, right.

Spread over till the end of the decade. So we are talking about meaningful revenue coming out of this business. And the last few months, the potential for more than what we have contracted.

So it could be somewhere around, you know, 5 figure or 6 figure in terms of volume of cars till the end of the decade. So it could be very meaningful in terms of revenue to the company. The upfront price bank.

Yeah. Front and also the license fee for your.

Moran Shemesh

Just to clarify that we are expecting the meaningful revenue per year to start from '27 onwards. And not in '26. And when we think about the potential, so today, there is only a small fraction of the percent of miles driven by people in the US that is autonomous.

And although it becomes more and more pervasive in more cities, and others that are proclaiming to launch the services, we're still scratching the surface. As we envision the next few years towards the end of the decade, we believe this number will significantly grow, and we believe that we'll be one of the maybe two or three enablers for that. But realistic to have only two or three and not 20 or 30.

In that stage. And the volumes to facilitate for the demand in the US and Europe for mobility services is the tens of thousands, hundreds of thousands, potentially millions of vehicles. This is why partnering with OEMs that can scale is so important.

Mark Delaney

Very helpful. Thanks. My other question was on the consumer vehicle part of the business.

You mentioned in the prepared comments that potential new awards with Supervision and Chauffeur, I think you are going somewhat slower than you'd liked. Why do you think that is. And maybe help us better understand as you think about the opportunity set with supervision and chauffeur.

You talked about five OEMs being in more advanced stages of evaluation at your last Investor Day. Are those five all still active. Or has there been any changes there.

Thank you.

Amnon Shashua

Yeah. So I think there are some macro events that are obviously contributing to the delays or to the longer decision-making process than originally expected. The past two to three months have been very turbulent for the industry in general.

That probably served a significant role in taking more time to make these decisions. We still have a lot of confidence in the engagements we have. We see progress made.

We're moving through the ropes of the different stages and getting to concrete stages. Receiving official RFQs, and getting to negotiation statuses. We're getting closer to convergence with several of these opportunities that we mentioned in the IR day.

So I think overall, we still have confidence we have in supervision as for remains as high as it's been. We just need to be patient to make sure that we are doing the right things with the OEMs and you know, many things can happen in the next week, but we don't think we should be predicting when will happen, but it's realistic to converge. And I think in the last couple of months, there have been two new engagements that we did not anticipate at the Capital Markets Day.

Back in December. And they are very meaningful in terms of the breadth, both supervision and the chauffeur. So I think 2025 is going to be a good year for those advanced products.

Thank you, Mark.

Operator

Next question, Aaron Rakers with Wells Fargo.

Aaron Rakers

Yes. Thanks for taking the question. Kind of building off that last, you know, thinking about that slide that you'd given at the Analyst Day, you know, thinking about chauffeur and supervision, I think in total, there were seven kind of moving possibly to the right.

I guess, just to be clear, those seven still exist. Maybe it's taking a little bit longer, and now you would add two new OEMs to that list. I just kind of thinking about that progression of those OEM opportunities.

Is that fair.

Amnon Shashua

Yeah. So I think that what has changed is that the nature of the discussion might change. The flags are still there.

So in some cases, it's been expanding the discussion from a single product line to multiple product lines that have in three of these engagements. I think the most consistent trend is that there is a growing interest in level three products that are targeting the end of 2027, early 2028 SOPs. It seems to be now a very, very strategic product for several big OEMs.

. That was maybe not as evident in our discussions in the IR day. And in some cases, maybe we have moved from a high flame to low flame discussion. Maybe in one particular case.

But in general, we still have the same long-term confidence that this business is building. Our focus right now is partnering with OEMs that will allow us to scale our next-gen product based on IQ6, which we are now developing, and we have a lot of confidence in our ability to do so.

Aaron Rakers

And then as a quick follow-up, thinking about the Uber and Lyft relationship and the one-time payment, I also know back at the Analyst Day, you highlighted kind of a chart that showed, you know, blended ASP going from $55 to upward to $200 by the end of, call it, late decade. How do we kind of cross that relative to the Uber and Lyft opportunity, you know, versus that $200. You know, any context of that one-time, you know, ASP opportunity with those engagements.

Amnon Shashua

Yeah. I think that chart that you referred to does not take into account the commercial potential of the Mobileye Drive partnership with Lyft, Uber that we just announced. And it's pure upside to that.

So I think that in most of the analysis we showed about future revenue growth, we took an extremely conservative assessment of drive progression. So in previous numbers that we shared, it was not reflected. The consumer.

Dan Galves

Any part on the ASP. I'm sorry. I'm sorry. Sorry.

I just to just add a comment. This chart was focused on how will a consumer car, a passenger car, look like. So today, it's $55.

That's what the chart said. But today, for that OEM, a passenger car is worth $55 for Mobileye, and with a gradual adoption of our advanced products that are designed for passenger cars, that number can grow from $55 to roughly $200 plus dollars.

Amnon Shashua

It did not reflect any robotaxi business.

Dan Galves

What we said about the robotaxi business in the past is kind of the upfront cost is in the 5 figures. Plus. You know.

Like.

Aaron Rakers

With healthy margins. With healthy margins. So it's a completely different business model because you're talking about generating revenue per mile, you know, across, you know, hundreds of thousands of miles vehicle.

So the and you're talking about replacing, you know, a human driver, which can cost, you know, $80,000 to $90,000 a year if you think about two shifts of drivers. So it's kind of a different business model and it's just a completely different revenue per unit.

Aaron Rakers

Yep. Thank you. Thank you, Aaron.

Operator

Next question, Gary Mobley with Loop Capital. Please go ahead.

Gary Mobley

Thanks for sneaking in my question. The European OEM that you mentioned in your press release that you haven't done business with since 2016, what drove that reengagement. And is this a redundant application for their internal chip or just any sort of color you can give on that.

Amnon Shashua

Yeah. So going as detailed as possible given the nature of this business, it is not a redundant product. It is to practically source Mobileye's solution as their ADAS solution in future projects.

So basically going back to a Mobileye solution after almost nine years of not having mutual design wins. Which we see as another testament of our product advantages and position in the market as the market leader in this segment. And we don't know all the details, but you know, we can assume that it's mostly about the performance versus cost superiority that we have.

Gary Mobley

That's helpful. Just a quick follow-up. Are you reaffirming your non-GAAP gross margin for fiscal year 2025 of 150 basis point improvement over the prior year.

Moran Shemesh

Yeah. So we are still anticipating an increase in gross margin. The mix of supervision and IQ is different than 2025.

And so we're still expecting an upside of approximately 100 basis points in 2025 versus 2024.

Dan Galves

Yeah. I think China volumes are a little bit lower margin for us. So as the China volumes kind of outperform a bit, that leads to, like, a little bit less upside than or, you know, increase than we were expecting.

But very, very small.

Gary Mobley

Thank you very much.

Operator

Thanks, Gary. Next question, Edison Yu with Deutsche Bank. Please go ahead.

Edison Yu

Hey. Thank you for taking our question. Wanted to come back on robotaxi.

How do you think about the performance threshold for drive in the US deployments. Obviously, now you have Uber as well. Is there some level where you need to kind of prove or they need to feel comfortable with that it'll achieve before you can really get these deployments ramping up.

Amnon Shashua

Well, we have clear metrics with our customers that show superior to human-level performance and are on track to meeting those metrics.

Moran Shemesh

Yeah. There is a constant mutual evaluation of the performance from also in the development stage, and we're seeing, let's say, very strong progression towards this target. And this is the basis of taking the decision to take the next step and go into the commercial deployment stage.

Edison Yu

Gotcha. And is it the same threshold for both the two deployments, or are there actually nuances depending on who you're working with at Uber or Lyft.

Moran Shemesh

No. That's the same threshold.

Edison Yu

Okay. And just one quick one. From a liability perspective, has that been kind of hashed out.

Who is kind of liable if for or yeah, who is sort of liable if anything kind of if there's an accident or something. Is that been hashed out already, or is that TBD.

Moran Shemesh

So these aspects are behind them. Without going into the deep.

Edison Yu

Okay. Thank you.

Operator

Thanks, Edison. Next question, Tom Narayan with RBC. Please go ahead.

Tom Narayan

Hi. Thanks for taking the question. The first one has to do with Surround ADAS versus supervision. It looks like we have, yes, Surround ADAS with the VW mass market brands, supervision for the VW's premium brands.

But, obviously, we noticed some of the premium OEMs, Mercedes, BMW, trying to develop their own autonomy. Just how do we think about supervision going forward given this potential headwind. Is it that maybe we should be contemplating Surround ADAS being the kind of bigger category winner for you guys, as opposed to supervision. Or do you just see a migration as the mass market players over time kind of migrate towards supervision from surround ADAS.

Amnon Shashua

We see Surround ADAS as the next level of ADAS. So the migration is from front-facing camera to surround ADAS. And this is driven by increased regulatory requirements on the future ADAS systems both in Europe and in the US.

The 2028 and 2029 regimes are very challenging and require multiple cameras. You know, a front-facing camera would not be enough. So the surround ADAS is really the new ADAS going forward.

Supervision has the same shares the same sensor set in terms of cameras with the chauffeur and drive. So supervision is the next step going from eyes on to eyes off in a hands-free driving that can drive everywhere, urban and highway. Supervision has also added advantage of generating data.

So because it's the same sensor set, you can start with a supervision system, use that as a data generator example, uploading events, uploading the data, you write all sorts of probe functions and you upload the data. You use that data to go further and develop the level three and level four. So there is a space for supervision and the holy grail is level three.

Chauffeur is really the if you look at where things should converge to in terms of consumer cars, it's level three, and then later expanding the LDD to level four.

Tom Narayan

Okay. Just to clarify, so you're not seeing a change in how you guys see the adoption being maybe more towards surround ADAS or supervision. Rather, it's just the migration.

Moran Shemesh

No. And the way we analyze this is by evaluating the vehicle models and different with different price points for each product category. So practically different segments of the vehicle lines that are targeting Surround ADAS and supervision or chauffeur.

Tom Narayan

Okay. And my follow-up had to do with I guess, the commentary on the Tesla earnings call earlier this week. On general AI versus kind of sensor-based mapping.

I know you guys have talked a lot about this. We heard a lot about this at the investor day. But they referenced specifically their FSD rollout in China.

And how it has progressed, in their words, very quickly without knowing the country-specific dynamics, driving dynamic habits, etcetera. Just curious to how you think about maybe their commentary on the general AI approach camera versus alternative. Thanks.

Amnon Shashua

Well, we're all using AI. Now there's I think we should stop all this typing. Everyone is using AI. Everyone is using GenAI.

So all this hype I think we should stop. But to the point, there's a lot that simulators can add. So for example, in our launch in China, traffic lights are completely different than what you see in the West.

There is a traffic lights are digital where you have a at every place, and we cannot send data from China outside of China. But we replicated this in a simulator. And then we used the simulators in order to train our system.

We use simulators a lot. To compensate, to mitigate, the fact that we cannot use data in China, and then this is kind of standard technique. Everyone is using it.

And I think we should do hyping thing. Really.

Tom Narayan

Thank you.

Operator

Thank you. I would like to turn the floor over to Dan for closing remarks.

Dan Galves

We've run out of time. Thanks, everyone, for joining the call and we will talk to you again next quarter. Thanks very much.

Operator

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines at this time.