Arteris Inc

Company Overview

Business Model: Arteris, Inc. is a leading provider of semiconductor system IP, including interconnect and other intellectual property (collectively, System IP) technology. The company's System IP manages on-chip communications and IP block deployments across chiplets, single-die, and multi-die System-on-Chip (SoC) semiconductors. It connects various semiconductor IP blocks such as processors, memory, and logic via multiple Network-on-Chips (NoCs) to meet functional design goals, performance, and power requirements, while addressing design complexity with efficient and lower-cost solutions. Revenue is primarily generated through license, support and maintenance fees, and royalties. The company also provides SoC Integration Automation software solutions and Hardware Security Verification Software Products.

Market Position: Arteris, Inc. is recognized as a pioneer and global leader in NoC IP technology, having been founded in 2003. Its solutions have been incorporated into over four billion production SoCs since inception. Key competitive advantages include deep technical expertise, the ability to accelerate customers' time to market, improved SoC performance and security, and lower customer research and development and SoC unit costs. The company maintains a high customer retention rate of approximately 90% and has established a "Connected by Arteris" ecosystem through collaborations with industry-leading partners like Arm, Cadence Design Systems, and Synopsys. Its interconnect IP is designed to meet the highest automotive safety integrity level (ASIL D) of the ISO 26262 standard, positioning it strongly in mission-critical markets.

Recent Strategic Developments:

• Cycuity, Inc. Acquisition: On January 14, 2026, Arteris, Inc. completed the acquisition of Cycuity, Inc., a provider of semiconductor security verification software products. The aggregate consideration is up to $45.0 million, comprising $13.5 million in cash and $19.5 million in common stock upon closing, with an additional $12.0 million payable in common stock contingent upon Cycuity achieving specified booking milestones for the 2026 calendar year. This acquisition strengthens the product portfolio by enabling chip designers to mitigate hardware chip-level security risks.
• Product Innovation: In 2025, the company released FlexGen, an innovative non-coherent NoC IP product that leverages AI-driven automation to create high-performance NoC designs, reducing manual iteration, wire-length, and power consumption.
• Multi-Die Solutions Expansion: In 2025, Arteris, Inc. announced the expansion of its multi-die solution, providing foundational technology for rapid chiplet-based innovation.
• Automotive Certifications & Partnerships: In 2023, its Ncore cache coherent interconnect achieved ISO 26262 certification up to ASIL-D. In 2022, the company entered into an Arm automotive agreement to service growing customer needs in automotive microcontrollers and SoCs.
• Prior Acquisitions: Acquisitions of Magillem in 2020 and Semifore, Inc. in 2022 significantly enhanced SoC integration automation capabilities.

Geographic Footprint: Arteris, Inc. operates globally with principal executive offices in Campbell, California, and additional offices in the United States (Austin, Texas), France, Poland, China, South Korea, Japan, and Taiwan.

• Revenue by Customer Location (Year Ended December 31, 2025):
  • Asia Pacific: 47.6% (including China at 24.5% and Korea at 12.1%)
  • Americas: 41.5% (including United States at 39.7%)
  • Europe and the Middle East: 10.9%

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 90.2%
• Operating Margin: (46.9)%
• Net Margin: (49.2)%

Investment in Growth:

• R&D Expenditure: $49.9 million (70.7% of revenue)
• Capital Expenditures: $1.4 million
• Strategic Investments: The acquisition of Cycuity, Inc. for up to $45.0 million (including $13.5 million cash and $19.5 million in common stock upon closing, plus $12.0 million contingent upon milestones).

Business Segment Analysis

Arteris, Inc. operates as a single operating segment. The Chief Executive Officer, as the chief operating decision maker, makes resource allocation decisions and assesses performance based on financial information presented on a consolidated basis, accompanied by disaggregated revenue information.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: None for the years ended December 31, 2025, and 2024.
• Dividend Payments: Arteris, Inc. has never declared or paid cash dividends and does not anticipate doing so in the foreseeable future.
• Future Capital Return Commitments: No specific future capital return commitments were disclosed.

Balance Sheet Position:

• Cash and Equivalents: $33.9 million (as of December 31, 2025)
• Total Debt: $1.6 million (vendor financing arrangements, current and noncurrent, as of December 31, 2025)
• Net Cash Position: $32.3 million (as of December 31, 2025)
• Credit Rating: Not disclosed.
• Debt Maturity Profile: Vendor financing arrangements mature through 2027, with $1.2 million due in 2026 and $0.5 million in 2027. The imputed interest rate for these arrangements is 10.0%.

Cash Flow Generation:

• Operating Cash Flow: $6.7 million (2025)
• Free Cash Flow: $5.3 million (2025)
• Cash Conversion Metrics: Deferred revenue increased by $19.7 million in 2025, indicating strong upfront collections or contract structuring. Remaining Performance Obligations (RPO) were $116.8 million as of December 31, 2025, with $56.8 million expected to be recognized over the next 12 months.

Operational Excellence

Production & Service Model: Arteris, Inc.'s operational model centers on the development, licensing, and support of semiconductor IP and software. The company provides design licenses for its interconnect IP, granting customers the right to use the IP to design a contractually defined number of products. This is complemented by access to proprietary software tools (RTL) and extensive Application Engineering Support Services (Corporate Application Engineers and Field Application Engineers) for verification, performance benchmarking, simulations, and design instantiation into silicon. Support and maintenance services, including technical support and software updates, are integral and typically co-terminus with the license term. Royalty revenues are recognized based on the sale of licensee's products incorporating Arteris, Inc.'s IP.

Supply Chain Architecture: Arteris, Inc.'s "supply chain" is primarily focused on technology integration and strategic partnerships rather than physical manufacturing. Key Suppliers & Partners:

• IP Companies: Collaborates with leading IP providers such as Arm, SiFive, MIPS, Synopsys, Cadence Design Systems, Semidynamics, Andes, and Codasip (RISC-V IP vendors) to ensure compatibility and integration with their processor portfolios and protocols.
• EDA Companies: Works with Electronic Design Automation (EDA) companies like Synopsys, Cadence Design Systems, and Siemens to provide prepackaged interfaces to their design tools (simulators, modeling systems, logic, and physical synthesis tools).
• Semiconductor Foundries: Supports major foundries including TSMC and Intel Foundry.
• Acquired Technologies: Integrates technologies from acquired entities like Magillem, Semifore, Inc., and Cycuity, Inc. to enhance its System IP and SoC Integration Automation offerings.

Facility Network:

• Manufacturing: Not applicable, as Arteris, Inc. is an IP and software provider.
• Research & Development: Operates R&D centers globally, with 170 development engineers (as of December 31, 2025) focused on IP hardware, software, verification, testing, and methodology development. Key locations include the United States, France, Poland, China, South Korea, and Japan.
• Distribution: Software and IP are licensed and delivered digitally, with no physical distribution network.

Operational Metrics:

• Confirmed Design Starts: 83 in 2025, an increase from 76 in 2024, indicating growing customer engagement in new semiconductor designs.
• Customer Retention Rate: Historically maintained an average customer retention rate of approximately 90%.
• R&D Headcount: 170 engineers as of December 31, 2025, with 112 dedicated to interconnect IP development and 58 to SoC Integration Automation software solutions.

Market Access & Customer Relationships

Go-to-Market Strategy: Arteris, Inc. employs a direct sales and engagement model, working closely with customers throughout the SoC design lifecycle. The strategy emphasizes early engagement and collaboration to meet specific customer needs and gather insights for future product development. Distribution Channels:

• Direct Sales: Maintains a global sales presence with offices and personnel in the United States, China, France, South Korea, Japan, and Israel. Sales cycles typically range from six to twelve months or longer, with repeat customers experiencing shorter cycles.
• Channel Partners: While not a primary sales channel, strategic collaborations with IP and EDA vendors facilitate integration within joint customers' design flows, effectively expanding market reach.
• Digital Platforms: Supports digital delivery of its software and IP solutions.

Customer Portfolio: Arteris, Inc. serves a diverse and global customer base, including semiconductor manufacturers, OEMs, hyperscale system houses, and semiconductor design houses. Enterprise Customers:

• Tier 1 Clients: Established relationships with prominent market leaders such as Mobileye, Renesas, Socionext, NXP, BMW, and Bosch.
• Strategic Partnerships: Engages in strategic collaborations, including an automotive agreement with Arm, to integrate its interconnect IP with Arm processor IPs in heterogeneous environments.
• Customer Concentration: In 2025, one customer (Customer C) represented 13% of total revenue. Geographic Revenue Distribution:
• Asia Pacific: Accounted for 47.6% of total revenue in 2025, with China contributing 24.5% and Korea 12.1%.
• Americas: Represented 41.5% of total revenue in 2025, with the United States contributing 39.7%.
• Europe, Middle East: Accounted for 10.9% of total revenue in 2025.
• Growth Markets: Focuses on high-growth markets such as aerospace and defense, automotive, communications (wired and wireless), consumer electronics, enterprise computing, and industrial, driven by increasing SoC sophistication and the demands of AI/ML technologies.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The semiconductor industry is characterized by rapid technological change, increasing integration levels (from integrated circuits to SoCs and multi-die systems), and escalating design complexity and costs. There is a pronounced shift towards licensing third-party IP due to the benefits of cost reduction, product differentiation, and accelerated time to market. The advent of Artificial Intelligence (AI) and Generative AI is further transforming the industry, driving increased adoption of Network-on-Chip (NoC) technologies and the transition to multi-die SoCs. The System IP market, in which Arteris, Inc. operates, is focused on enabling high-performing, safe, secure, and error-free data movement within these complex chip architectures.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors:

• Internal Development Teams: A significant portion of competition comes from large semiconductor companies that develop their own interconnect IP solutions internally.
• Arm: A key competitor in the interconnect IP market, although Arteris, Inc. also engages in complementary collaborations with Arm, particularly for automotive solutions and integration with Arm processor IPs.
• Cadence Design Systems: Competes in the broader IP integration solutions market.
• Smaller Third-Party Providers: Other companies offering specialized IP integration solutions.

Emerging Competitive Threats:

• New Entrants: While Arteris, Inc.'s extensive R&D investment and long market development cycles create high barriers to entry, new entrants could emerge.
• Disruptive Technologies: Rapid technological advancements and AI innovations could lead to new, alternative solutions.
• Alternative Architectures: Customers may opt for multi-chip, off-the-shelf chip solutions as an alternative to highly integrated chipsets.
• Open-Source Solutions: The emergence of free and open-source software could pose a competitive threat in the SoC Integration Automation software segment.

Competitive Response Strategy: Arteris, Inc. addresses competitive pressures by:

• Continuous Innovation: Committing to at least one major new product or technology addition annually, alongside multiple product enhancement releases, driven by substantial R&D investment.
• Strategic Acquisitions: Pursuing selective acquisitions, such as Cycuity, Inc., to expand its System IP product portfolio and address new market needs like hardware security.
• Deep Customer Integration: Leveraging its long history of interconnect IP design to deliver customer-specific features, deepening relationships and increasing switching costs for customers.
• Ecosystem Neutrality: Providing an unbiased, standards-based interconnect infrastructure that supports a broad range of IP and EDA vendors, solidifying its role as a trusted, technology-agnostic provider.
• Global Support: Offering comprehensive global support with highly skilled application engineers who act as critical advisors to customer design teams.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• Competition: Faces significant competition from larger companies with substantial resources (e.g., Arm, Cadence Design Systems) and internal IP development teams within customer organizations. Rapid technological change, product obsolescence, and pricing pressures are constant challenges.
• Technology Disruption: Failure to anticipate and lead critical product development cycles or to timely introduce new/enhanced IP solutions (e.g., for smaller die size, lower power, higher frequency, critical net latency) could result in product obsolescence and loss of competitive position.
• Customer Acceptance & Design Wins: Reliance on customers to incorporate Arteris, Inc.'s IP into their end products and for those products to achieve market acceptance. Long design cycles (typically 1-3 years) and time to mass production (1-5 years for royalties) introduce significant delays and uncertainty in revenue generation.
• End Market Dependence: Business success is highly dependent on general economic growth and stability, and specific growth within target markets (aerospace and defense, automotive, communications, consumer electronics, enterprise computing, and industrial). Downturns, supply chain disruptions, or shifts in demand (e.g., for autonomous driving) could adversely affect demand for products and royalty revenue.
• Third-Party IP Market Acceptance: Future growth depends on the continued market acceptance of the third-party licensable IP model and a shift in customer preference away from in-house development.
• Seasonality: Historically experiences lower new license agreements in the first and second calendar quarters, leading to quarterly fluctuations in results.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Supplier Dependency: Reliance on licenses to third-party software and intellectual property (e.g., Qualcomm for FlexNoC). Inability to obtain or renew licenses on reasonable terms, or the termination of such licenses (e.g., due to a change of control), could disrupt business and harm financial results.
• Geographic Concentration: Operations and revenue concentration in certain regions (e.g., 24.5% of 2025 revenue from China) expose the company to specific economic, political, legal, and social risks within those jurisdictions.
• Capacity Constraints: During periods of significant market upturns, the inability to rapidly expand its workforce, procure adequate resources, or locate suitable third-party suppliers could limit the company's ability to meet increased demand.
• Product Quality & Support: Software products frequently contain errors or defects. Any product errors, defects, or allegations of quality issues could negatively affect performance, delay product releases, harm reputation, increase service costs, and expose the company to liability. Failure to provide timely and effective customer support could also damage customer relationships and retention.

Financial & Regulatory Risks

Market & Financial Risks:

• Net Losses & Profitability: Has a history of net losses ($34.7 million in 2025, $33.6 million in 2024) and an accumulated deficit of $171.6 million as of December 31, 2025. There is no assurance of achieving or maintaining profitability in the future.
• Licensing Revenue Volatility: Revenue from licensing agreements can fluctuate significantly from period to period based on the timing, duration, and dollar amount of deals, making revenue difficult to predict.
• Royalty Rate Decreases: Royalty payments, which constituted 9% of 2025 revenue, could decrease due to reductions in customer sales prices, competitive pressures, or market conditions (e.g., in consumer electronics).
• Capital Raising: The ability to raise additional capital in the future may be limited, potentially hindering the execution of growth strategies.
• Currency Exchange Risk: Exposure to volatile movements in foreign currency exchange rates (e.g., Euro) can negatively affect the value of earnings and expenditures denominated in other currencies.
• Counterparty Risk: Economic downturns or other business factors could impact the financial health of counterparties, potentially affecting their ability to fulfill financial and other obligations to Arteris, Inc.
• Acquisition Risks: Acquisitions (Magillem, Semifore, Inc., Cycuity, Inc.) involve inherent financial, accounting, managerial, operational, legal, and regulatory risks, including integration challenges, potential underperformance, and the assumption of unknown liabilities. Regulatory & Compliance Risks:
• Government Regulations: Subject to a wide array of U.S. and international regulations (e.g., FCC, FTC, DOJ, CPSC, OSHA, EPA, FCPA, export controls, AI regulations). Non-compliance could lead to investigations, sanctions, fines, and reputational harm.
• Export Controls & Sanctions: U.S. export controls (EAR, OFAC) and French export controls limit the export of products and technology to certain countries/entities (e.g., China). Recent and future changes in regulations (e.g., BIS restrictions on semiconductor exports to China) can significantly impact business, revenue, and customer relationships.
• Data Privacy & Security: Subject to evolving data protection and privacy laws globally (e.g., CCPA/CPRA, GDPR, UK GDPR, PIPL, CSL, DSL in China). Non-compliance could result in substantial fines, litigation, regulatory investigations, and reputational damage.
• Tax Law Changes: Changes in tax laws or regulations in the jurisdictions of operation, or in their interpretation (e.g., OECD BEPS project), could significantly increase the effective tax rate and reduce cash flow.
• NOL Carryforward Limitations: The ability to use net operating loss (NOL) carryforwards ($7.0 million federal, $20.1 million state as of December 31, 2025) and tax credits to offset future taxable income may be limited by "ownership change" provisions (Sections 382 and 383 of the Internal Revenue Code).

Geopolitical & External Risks

Geopolitical Exposure:

• International Operations: Dependence on international customers and operations (60.3% of 2025 revenue from outside U.S.) exposes the company to political, regulatory, trade policy, operational, financial, and political risks in various countries.
• China Risks: Significant revenue from China (24.5% in 2025) exposes the company to increased political tensions, government controls, legal system uncertainties (particularly regarding IP protection), and rapidly changing export and trade regulations. The U.S. Outbound Investment Security Program and COINS Act of 2025 further restrict investments in certain Chinese technology sectors.
• Global Conflicts: Geopolitical conflicts (e.g., Russia-Ukraine, Israel-Iran) can impact customer engineering resources, design schedules, purchasing decisions, and overall market stability.
• Trade Relations: Changes in U.S. trade and tariff policies (e.g., tariffs on China, EU) and retaliatory measures by trading partners could adversely impact global sales and operations.
• Cybersecurity Threats: Increasing frequency and sophistication of cybersecurity attacks pose a continuous risk to the company's information technology systems, potentially leading to service interruptions, data loss, excessive costs, or reputational harm.

Innovation & Technology Leadership

Research & Development Focus: Arteris, Inc. maintains a strong commitment to research and development, allocating a significant portion of its operating expenses to this area. The R&D strategy focuses on continuous innovation to address the evolving complexities of SoC design and expand its product offerings. Core Technology Areas:

• Network-on-Chip (NoC) IP: Pioneer in leveraging networking technology for on-chip communications, developing configurable IP that optimizes performance, power consumption, and silicon area for complex SoCs.
• SoC Integration Automation Software: Develops solutions for efficient packaging, reuse, and integration of IP blocks, adhering to the IP-XACT (IEEE 1685) standard. Key products include Magillem Connectivity, Magillem Registers, and CSRCompiler, which streamline hardware-software integration.
• Hardware Security Verification Software: A growing focus area, significantly enhanced by the Cycuity, Inc. acquisition, providing tools like Cycuity Radix-S, Radix-M, and Radix-ST to identify and mitigate hardware chip-level security vulnerabilities.
• NoC Interface IP: Actively developing additional data plane and control plane capabilities, such as memory schedulers, last-level caches (CodaCache), SoC data observability, and SoC debug IPs, to integrate directly with its interconnect IPs. Innovation Pipeline:
• The company aims for continuous innovation, with a strategy to introduce at least one major new product or technology addition annually, alongside multiple product enhancement releases.
• Recent innovations include FlexGen (2025), a non-coherent NoC IP product that uses AI-driven automation for high-performance designs, and expanded multi-die solutions for chiplet-based innovation.

Intellectual Property Portfolio:

• Patent Strategy: Protects its proprietary technology and innovations through a combination of patents, trade secrets, copyrights, and trademarks. As of December 31, 2025, Arteris, Inc. held 115 allowed or issued patents worldwide (88 U.S., 10 China, 6 South Korea, 4 U.K., 4 Europe, 3 Japan), with expiration dates generally between 2035 and 2043. Additionally, it had 146 pending patent applications globally.
• Licensing Programs: Generates revenue by licensing its proprietary technology and deployment tools to a broad range of semiconductor and system companies.
• IP Litigation: The company is subject to patent infringement claims, including ongoing litigation related to Network System Technologies, LLC, which could entail significant costs and management attention.

Technology Partnerships:

• Strategic Alliances: Forms strategic alliances with leading IP companies (e.g., Arm, SiFive, MIPS, Synopsys, Cadence Design Systems) and EDA companies (e.g., Synopsys, Cadence Design Systems, Siemens) to ensure interoperability and provide prepackaged interfaces to their tools. This approach solidifies its position as a neutral, technology-agnostic provider within the semiconductor industry.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: The company is highly dependent on the continued services of its executive officers and key personnel, particularly K. Charles Janac, its President, Chief Executive Officer, and Chairman. No specific succession planning details were disclosed in the filing.

Board Composition: The board of directors considers cybersecurity risk as part of its risk oversight function and receives periodic briefings from management on the cyber risk management program. The board is classified with three-year staggered terms, which may defer or delay changes in control.

Human Capital Strategy

Workforce Composition:

• Total Employees: 299 as of December 31, 2025.
• Geographic Distribution:
  • France: 150
  • United States: 96
  • China: 21
  • Poland: 12
  • South Korea: 8
  • Japan: 6
  • Elsewhere: 6
• Skill Mix: The workforce includes 170 employees in Research and Development (112 for interconnect IP development and 58 for SoC Integration Automation software solutions), 81 in Sales and Marketing, and 48 in Administration.

Talent Management: Acquisition & Retention:

• Hiring Strategy: Focuses on recruiting highly skilled engineers with expertise in SoC design, acknowledging intense competition for such personnel.
• Retention Metrics: Not explicitly disclosed, but employees are generally not bound by non-competition agreements, highlighting the importance of other retention strategies.
• Employee Value Proposition: Utilizes equity incentive plans (2016 Stock Plan, 2021 Stock Plan, 2022 Employment Inducement Incentive Plan) and the 2021 Employee Stock Purchase Plan (ESPP) to attract, retain, and motivate employees, consultants, and directors through stock-based compensation. Diversity & Development:
• Diversity Metrics: Not explicitly disclosed in the filing.
• Development Programs: Not explicitly detailed, but the company's R&D investment implies ongoing skill development for its engineering teams.
• Culture & Engagement: Employee relations are considered good, with no history of work stoppages. Employees in France are subject to a collective bargaining agreement.

Environmental & Social Impact

No material information explicitly stated in the provided 10-K filing regarding specific environmental commitments, climate strategy, emissions targets, carbon neutrality, renewable energy, supply chain sustainability, or social impact initiatives. The filing mentions "social and environmental responsibility regulations, policies and provisions" as a risk factor, indicating awareness of these areas but no specific programs or metrics.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends: Arteris, Inc. typically experiences seasonal fluctuations in sales, with the number of new license agreements generally lower in the first and second calendar quarters.
• Economic Sensitivity: The company's business is highly sensitive to general economic conditions and the demand for products in its customers' end markets (aerospace and defense, automotive, communications, consumer electronics, enterprise computing, and industrial). Economic downturns, supply chain disruptions, or shifts in end-user demand can adversely affect revenue.
• Industry Cycles: The semiconductor industry is inherently cyclical, characterized by rapid technological change, product obsolescence, price erosion, evolving standards, short product life cycles, and fluctuations in product supply and demand.

Planning & Forecasting: The company's revenue from royalties is difficult to predict due to the substantial time lag between a new license agreement and the sale of the customer's end product, which is subject to numerous external factors. The company monitors market demand and trends to inform its product development and sales efforts.

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations:

• U.S. Agencies: Subject to regulation by various U.S. governmental agencies, including the Federal Communications Commission (radio frequency emissions), Federal Trade Commission and Department of Justice (anti-trust, consumer protection), Consumer Products Safety Commission (product safety), Occupational Safety and Health Administration (worker safety), and Environmental Protection Agency (environmental protection).
• Employment Matters: Subject to federal, state, and foreign employment and labor laws and regulations, including those related to working conditions, wages, anti-discrimination, and termination.
• Artificial Intelligence Regulations: Subject to evolving regulations concerning artificial intelligence. International Compliance:
• Anti-Corruption & Anti-Bribery: Operations are subject to the U.S. Foreign Corrupt Practices Act (FCPA), U.S. domestic bribery statute, U.S. Travel Act, USA PATRIOT Act, and anti-corruption laws in other countries where business is conducted.
• Import/Export Controls: Products and technology are subject to U.S. export controls (U.S. Department of Commerce’s Export Administration Regulations (EAR), U.S. Treasury Department’s Office of Foreign Assets Controls (OFAC)) and French export controls. These regulations may limit exports, require authorizations, and prohibit sales to embargoed or sanctioned countries, regions, governments, persons, and entities.
• Data Privacy & Security: Subject to numerous state, federal, and foreign laws, regulations, and standards regarding security, data protection, and privacy, including the California Consumer Privacy Act (CCPA) as amended by the California Privacy Rights Act (CPRA), the EU General Data Protection Regulation (GDPR), the U.K. General Data Protection Regulation (UK GDPR), and China's Personal Information Protection Law (PIPL), Cybersecurity Law (CSL), and Data Security Law (DSL).

Trade & Export Controls:

• Export Restrictions: The U.S. government has significantly modified and expanded export controls on semiconductor products and equipment, particularly targeting China (e.g., BIS regulations in October 2022, October 2023, April 2024, and December 2024). These restrictions impose broad end-use and other limitations on doing business with certain customers and facilities in China involved in advanced computing and semiconductor manufacturing.
• Sanctions Compliance: Compliance with U.S. sanctions laws and restricted party lists (e.g., Entity List, Specially Designated Nationals) is required.
• Outbound Investment Security Program: The U.S. Department of the Treasury’s Outbound Investment Security Program (effective January 2, 2025) and the Comprehensive Outbound Investment National Security (COINS) Act of 2025 (signed December 18, 2025) prohibit or require notification of certain outbound investments by U.S. persons into Chinese entities engaged in specific national security technologies (semiconductors, quantum information technologies, and artificial intelligence).

Legal Proceedings:

• Patent Infringement: Arteris, Inc. is involved in ongoing litigation related to patent infringement claims. Network System Technologies, LLC filed a complaint against Arteris, Inc. (dismissed without prejudice in September 2024) and subsequently filed new patent infringement complaints against three of Arteris, Inc.'s customers in October 2025, referencing Arteris, Inc.'s interconnect technology.
• Indemnification: The company often enters into limited indemnification provisions in license agreements, which could result in substantial and material expenses if customers face litigation related to the use of its technology.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: The provision for income taxes was $1.5 million for the year ended December 31, 2025, and $2.5 million for the year ended December 31, 2024.
• Geographic Tax Planning: Operates as a multinational business, subject to income and other taxes in the United States and various foreign jurisdictions. Undistributed earnings of foreign subsidiaries are considered permanently reinvested, and no deferred taxes have been provided thereon.
• Tax Reform Impact: Accounted for the tax effects of the U.S. One Big Beautiful Bill Act of 2025 (enacted July 4, 2025), which had an immaterial impact on its consolidated financial statements. The company is also subject to potential future changes arising from the Organization for Economic Co-operation and Development's (OECD) Base Erosion and Profit Shifting (BEPS) project.
• Net Operating Losses (NOLs): As of December 31, 2025, Arteris, Inc. had $7.0 million in federal net operating loss carryforwards (indefinite carryforward) and approximately $20.1 million in state net operating loss carryforwards (expiring starting 2030). Utilization of these NOLs and federal/state R&D tax credits ($8.2 million federal, $5.2 million California) is subject to annual limitations due to "ownership change" provisions of the Internal Revenue Code.

Insurance & Risk Transfer

Risk Management Framework:

• Insurance Coverage: Arteris, Inc. maintains cyber liability and business interruption insurance, which is renewed annually. However, there is no assurance that this insurance will be sufficient to cover all potential financial, legal, business, or reputational losses that may arise from system interruptions or security breaches.
• Risk Transfer Mechanisms: The company enters into limited indemnification provisions in its license agreements, which are customary in the semiconductor IP and software licensing industries. These provisions typically cap the amount of indemnification for third-party claims caused by Arteris, Inc.