AMBA 10-K & 10-Q changes, risk factors and insider trading

Our primary inventory warehouse is located in Hong Kong and may be affected by continued political, socialsocial, health and economic conditions in Hong Kong.

We face intense competition and expect competition to increase in the future, which could have an adverse effect on our market share, revenue and marketresults share.of operations.

A breach of our security systemssystems, or other security breaches or incidents with respect to our products, networks or systems, may have a material adverse effect on our business.

We may experience difficulties in transitioning to new wafer fabrication process technologies or in achieving higher levels of design integration, which may result in reduced manufacturing yields, delays in product deliveries and increased costs.

We are subject to numerous laws and regulatory compliance requirements, including Section 404 of the Sarbanes-Oxley Act of 2002, which are costly to comply with, and our failure to comply with these requirements could harm our business and operating results.

We sell our video and image processing system-on-a-chip, or SoC, solutions to original equipment manufacturers, or OEMs, who include our SoCs in their products, and to original design manufacturers, or ODMs, who include our SoCs in the products that they supply to OEMs. We generally refer to ODMs as our customers and OEMs as our end customers, except as otherwise indicated or as the context otherwise requires. Our SoCs are generally incorporated into our customers’ products at the design stage, which is referred to as a design win. As a result, we rely on OEMs to design our solutions into the products that they design and sell. Without these design wins, our business would be significantly harmed. We often incur significant expenditures developing a new SoC solution without any assurance that any OEM will select our solution for design into its own product. Once an OEM designs a competitor’s device into its product, it becomes significantly more difficult for us to sell our SoC solutions to that OEM because changing suppliers involves significant cost, time, effort and risk for the OEM. We anticipate that it will take longer and require more resources and greater expenditures to achieve design wins, and likely take longer to generate revenue from such design wins, in the new markets we are targeting, such as the OEM automotive and robotics markets, than our legacy camera markets. We also face certain competitive disadvantages in these markets relative to larger competitors that have significantly more resources and a longer history working with OEMs and ODMs in these markets. In addition, trade tensions and tariffs between the United States and China as well as potential new export restrictions may make it more difficult to secure future design wins with China customers.

IfOur target markets may not grow or develop as we currently expect, and if we fail to successfully penetrate new markets, including the automotive OEM and ADAS market, our revenue and financial condition could be harmed.

We believe that our future revenue growth, if any, significantly depends on our ability to expand within the Internet of Things, or IoT, cameraand automotive markets with our new artificial intelligence, or AI, computer vision SoC solutions, and penetrate, or further penetrate, the OEM automotive, robotics and industrial markets. Our AI computer vision SoC solutions have functionality that may also be applicable to other developing markets, such as processing of large language models (LLMs). Each of these markets presents distinct and substantial risks and, in many cases, requires us to develop new functionality or software to address the particular requirements of that market. The application of AI functionality in these markets is relatively new, and we may be unable to predict the timing or development of these markets with accuracy. If any of these markets do not develop as we currently anticipate, the technical requirements of these markets evolve in ways we do not anticipate, the development of such markets is delayed or impacted by factors outside of our control, or if we are unable to penetratepenetrate, or further penetrate, them successfully with our solutions, our revenue could decline and our financial condition would be negatively impacted. Some of these markets are primarily served by only a few large, multinational OEMs with substantial negotiating power relative to us and, in some instances, with internal solutions that are competitive to our products. Meeting the technical requirements and securing design wins with any of these companies requires a substantial investment of our time and resources and we cannot assure you that we will secure design wins from these or other companies or that we will achieve meaningful revenue from the sales of our solutions into these markets. In addition, we face competition from larger competitors with greater resources and more history in these markets, which may put us at a competitive disadvantage to these larger competitors. If we fail to penetrate these or other new markets we are targeting, our financial condition would likely suffer. Moreover, if we are successful in achieving design wins in these new markets, it will likely take longer to generate revenue from such design wins than in our traditional markets.

ManyMost of our productsSoCs, including all of our recently introduced SoCs, support AI functionality implemented in our customers’ products, such as object detection, classification and tracking, image processing, and terrain mapping. Our latest generation of products also enable us to address computationally intense AI applications for deep fusion, deep planning, multi-modal vision-language models (VLMs), and large language models (LLMs), vision-action models (VLAs) and reasoning models in edge devices. AI technologies are complex and rapidly evolving. The adoption of AI solutions may not develop in the manner or in the time periods we anticipate and, as the markets for AI solutions are still developing, demand for these products may be unpredictable and vary significantly from one period to another. These factors may adversely impact demand for our AI related products. In addition, compliance with evolving government regulations worldwide related to AI may increase the costs related to the development of AI products and solutions and limit global adoption, which may also adversely impact demand for our AI related products.

Our customers typically do not provide us with firm, long-term purchase commitments. A substantial majority of our sales are made on a purchase order basis, which customers may seek to cancel, change or delay their product purchase commitments with little or no notice to us. Because production lead times often exceed the amount of time required by our customers to fill their orders, we often must build SoCs in advance of receiving orders from customers, relying on an imperfect demand forecast to project volumes and product mix. As a result of a number of factors, including longer manufacturing times for our products and increased demandresult, from customerstime duringto fiscal year 2023,time, we increasedmay see an increase in our inventory levels. While these factors have subsided and our inventory conditions have generally returned to normal level, we may experience similar inventory level fluctuations in the future.

We derive a significant portion of our revenue from a limited number of ODMs who build products on behalf of a limited number of OEMs and from a limited number of OEMs to whom we ship directly. We anticipate that this customer concentration will continue for the foreseeable future. In fiscal year 2025,2026, the customer representing 10% or more of our revenue was WT Microelectronics Co., Ltd., or WT, which serves as our non-exclusive sales representative and fulfillment partner in Asia other than Japan, accounted for approximately 63%70% of total revenue. In addition, weWe believe that revenue from our top 10 end customers, either directly or through a distributor or an ODM, accounted for approximately 59%67% of our total revenue in fiscal year 2025.2026. Our largest end customer in fiscal year 2026 was Arashi Vision Inc. dba Insta360, or Arashi, for which we indirectly supply SoCs through WT to multiple ODMs that build products on behalf of Arashi. We believe that our operating results in the near term will continue to depend on sales to a relatively small number of customers and end customers. In the future, these customers may decide not to purchase our SoC solutions at all, may purchase fewer solutions than they did in the past or may alter their purchasing patterns. As substantially all of our sales to date have been made on a purchase order basis, these customers may cancel, change or delay product purchase commitments with little or no notice to us and often without penalty and may make our revenue volatile from period to period, which has happened in the past. The loss of a significant customer, or substantial reduction in purchases by a significant customer, could happen again at any time and without notice, and such loss would likely lead to unanticipated revenue shortfalls and excess inventory and otherwise harm our financial condition and results of operations. Moreover, because several of our largest OEM customers have a dominant position in their markets, a loss of a significant customer may not be easily replaced.

Our customers generally take a considerable amount of time to evaluate our solutions. The typical time from early engagement by our sales force to actual product introduction runs from nine12 to 1218 months for IoT markets and potentially significantly longer in the OEM automotive, robotics and industrial markets. The delays inherent in these lengthy sales cycles increase the risk that a customer will decide to cancel, curtail, reduce or delay its product plans, causing us to lose anticipated sales. In addition, any delay or cancellation of a customer’s plans could harm our financial results, as we may have incurred significant expense and generated no revenue. If we were unable to generate revenue after incurring substantial expenses to develop any of our solutions, our business would suffer.

Prior to purchasing our products, some of our customers, particularly in the automotive market, may require that our products and our third-party contractors undergo extensive qualification processes, which involve testing of our products in the customers’ systems, as well as testing for reliability of our products and our supply chain. This qualification process may take several months and qualification of a product by a customer does not assure any sales of the product to that customer. Even after successful qualification and sales of a product to a customer, a subsequent revision in our third-party contractors’ manufacturing or assembly process or our selection of a new supplier may require a new qualification process, which may result in delays and in our holding excess or obsolete inventory. After our products are qualified, it can take several months or more before the customer commences volume production of components or systems that incorporate our products. Despite these uncertainties, we devote substantial resources, including design, engineering, sales, marketing and management efforts, to qualify our products with customers in anticipation of sales. If we are unsuccessful or delayed in qualifying these products with a customer, sales of the products to the customer may be precluded or delayed, which may impede our growth and cause our business to suffer.

We face intense competition and expect competition to increase in the future, which could have an adverse effect on our market share, revenue and market share.profitability.

The global semiconductor market in general, and the computer vision and video/image processing markets in particular, are highly competitive. We compete in different target markets to various degrees on the basis of a number of competitive factors, including our solutions’ performance, features, energy efficiency, size, ease with which our solution may be integrated into our customers’ products, customer support, reliability and price, as well as on the basis of our reputation. We expect competition to increase and intensify as more and larger semiconductor companies enter our markets and as existing competitors improve or expand their product offerings. We also expect that the trend among large OEMs to seek to develop their own semiconductor solutions will continue and expand, particularly in camera markets experiencing consolidation, such as the IP security market. In addition, in our newer markets, such as the OEM automotive and robotics markets, we will face competition from larger competitors with greater resources, longer histories in these markets and established relationships with OEMs and ODMs. Once an OEM designs a competitor’s device into its product, it becomes significantly more difficult for us to sell our SoC solutions to that OEM because changing suppliers involves significant cost, time, effort and risk for the OEM. Increased competition could result in price pressure, reduced profitability and loss of market share, any of which could harm our business, revenue and operating results.

Our competitors range from large, international companies with greater resources offering a wide range of semiconductor products to smaller, nimble companies specializing in narrow markets. In the IoT market, our primary competitors include AMLogic Inc., Fuzhou Rockchip Electronics Co., Ltd., HiSilicon Technologies Co., Ltd., or HiSilicon, which is owned by Huawei Technologies Co., Ingenic Semiconductor Co., Ltd., Novatek Microelectronics Corp., or Novatek, NVIDIA Corporation, or NVIDIA, OmniVision Technologies, Inc., Qualcomm Incorporated, or Qualcomm, and SigmaStar Technology Corp., and Socionext Inc.Corp. In the automotive camera market, we compete against Allwinner Technology Co., Ltd., Horizon Robotics Inc., iCatch Technology, Inc., Mobileye, a subsidiary of Intel Corporation, Novatek, NVIDIA, NXP Semiconductors N.V., Qualcomm, Renesas Electronics Corporation, and Texas Instruments. Certain of our customers and suppliers also have divisions that produce products competitive with ours and other customers may seek to vertically integrate competitive solutions in the future. In addition, certain third-party developers of technology competitive to our solutions have licensed their technology, including image signal processing and computer vision IP, which potentially enables a greater number of competitors to offer competitive solutions.

A breach of our security systemssystems, or other security breaches or incidents with respect to our products, networks or systems, may have a material adverse effect on our business.

The semiconductor industry requires substantial investment in research and development in order to bring to market new and enhanced solutions. Our research and development expense was $226.1approximately $238.5 million, $215.1$226.1 million and $204.9$215.1 million in fiscal years 2025,2026, 20242025 and 2023,2024, respectively. In general, we expect to increase our research and development expenditures in future periods as compared to prior periods as part of our strategy of focusing on the development of innovative computerAI vision,inference video and image processing solutionsSoCs with increasedincreasing functionality,levels andof as we target key markets, such as the automotive OEM and robotics markets.functionality. We are unable to predict whether we will have sufficient resources to achieve the level of investment in research and development required to remain competitive. For example, development in the latest process nodes, such as 54 nanometer, or nm, or smaller, costs significantly more than required to develop in larger process nodes, such as 14 or 10nm.nodes. This added cost could prevent us from being able to achieve or maintain a technology advantage over larger competitors that have significantly more resources to invest in research and development. In addition, we cannot assure you that the technologies which are the focus of our research and development expenditures will become commercially successful or generate any revenue. In addition, the U.S. government recently introduced regulations that require notification of, or prohibit certain transactions with entities in China or with linkages to China, which could apply to certain intracompany activities between a U.S. based corporation and its China subsidiaries that support research and development activities, which could limit our ability to carry out certain research and development activities in China.

We believe our performance depends in large part on the talents and efforts of our senior management and other highly skilled individuals. Our future success depends on our continuing ability to identify, hire, develop, motivate, and retain highly skilled personnel for all areas of our organization. Our industry is characterized by high demand and intense competition for talent, particularly for engineering personnel. The pool of qualified candidates is limited, particularly in Silicon Valley and parts of Asia for very-large-scale integration, or VLSI, and artificial intelligence and computer visionAI engineers, and certain of our competitors and potential competitors with greater resources have directly targeted our employees. In addition, we also face competition in hiring artificial intelligence engineers, including from companies with which we do not directly compete. Our compensation arrangements, such as our equity award programs, may not always be successful in attracting new employees and retaining and motivating our existing senior executives and employees. Our continued ability to compete effectively, and to grow our business, depends on our ability to attract new employees and to retain and motivate our existing senior executives and employees.

Average selling prices of semiconductor products in the markets we serve have historically decreased over time, and we expect such declines to occur for our solutions over time. Our gross margins and financial results will suffer if we are unable to offset reductions in our average selling prices by reducing our costs, developing new or enhanced SoC solutions, such as our new inference AI computer vision-based solutions, on a timely basis with higher selling prices or gross margins, or increasing our sales volumes. Additionally, because we do not operate our own manufacturing, assembly or testing facilities, we may not be able to reduce our costs as rapidly as companies that operate their own facilities, and our costs may even increase, which could also reduce our gross margins. In the past, we have reduced the prices of our SoC solutions in anticipation of future competitive pricing pressures, to attract new customers or retain existing customers, new product introductions by us or our competitors and other factors. We expect that we will have to address pricing pressures again in the future, particularly in markets experiencing consolidation,consolidation or with respect to our larger end customers, which could require us to reduce the prices of our SoC solutions and harm our operating results.

Our business has, at times, grown rapidly in the past. Our future operating results depend to a large extent on our ability to successfully manage any expansion and growth, including the challenges of managing a company with an executive management team in the United States and the majority of its employees in Asia. We are increasing our investment in research and development and other functions to grow our business and address new markets, such as theindustrial, OEM automotiverobotics and roboticsintelligent markets.transportation systems.

The semiconductor industry is highly cyclical and is characterized by constant and rapid technological change, rapid product obsolescence, price erosion, evolving standards, short product life cycles and wide fluctuations in product supply and demand. Cyclical downturns have been characterized by diminished product demand, production overcapacity, high inventory levels and accelerated erosion of average selling prices, which could harm our business and operating results. We are dependent on the availability of third-party foundry and assembly capacity to manufacture and assemble our SoC solutions. None of our third-party foundry or assembly contractors has provided assurances that adequate capacity will be available to us in the future. The semiconductor industry recently experienced significant shortages of capacity, which resulted in a lengthening of the manufacturing lead time for our products. Such capacity shortages could negatively impact our ability to meet our customers’ demand for our products and have an adverse impact on our revenue, results of operations and customer relationships. We have also experienced, during times of supply chain capacity shortage, customers placing orders for our products that exceed their actual demand, which may lead to us manufacturing a surplus of products and could have a negative impact on our results of operations and cash reserves. RecentThere supplyare chainindications challengesthat the semiconductor industry may be facing shortages of capacity for certain components used by our customers and certain semiconductor assembly processes, which could have subsided,an weadverse mayimpact faceon similardemand supplyfor chainour challengesproducts, inincrease futureour periods.expenses, impact customer relationships and otherwise negatively impact our results of operations. Challenges may recur in future periods with changes in the macro-economic environment, including imposition of higher or additional tariffs by the U.S. Government on imports and new or additional restrictions on exports to foreign locations.

We aim to use the most advanced manufacturing process technology appropriate for our products that is available from our third-party foundries. As a result, we periodically evaluate the benefits of migrating our solutions to smaller geometry process technologies in order to improve performance and reduce costs. We may face difficulties, delays and increased expense as we transition our products to new processes, such as the 2nm2 nm process node, and potentially to new foundries. We currently depend on Samsung, as the principal foundry for our products, to transition to new processes successfully. We cannot assure you that Samsung will be able to effectively manage such transitions or that we will be able to maintain our relationship with Samsung or develop relationships with new foundries. Moreover, as we utilize more advanced process nodes beyond 5nm,5 nm, we are increasingly dependent upon a very small number of foundries currently available for certain advanced process technologies. If we or our foundry vendors experience significant delays in transitioning to smaller geometries or fail to efficiently implement transitions, we could experience reduced manufacturing yields, delays in product deliveries and increased costs, all of which could harm our relationships with our customers and our operating results.

We design our solutions to conform to a broad range of technology standards set by industry standards setting bodies, including video compression standards,standards includingsuch as MPEG-2, H.264 Advanced Video Coding (AVC) and H.265 High Efficiency Video Coding (HEVC), set by industry standards setting bodies such as ITU-T Video Coding Experts Group and the ISO/IEC Moving Picture Experts Group.. In addition, new or revised industry standards relating to AI technologies may impose additional requirements. Generally, our solutions comprise only a part of a cameracustomer’s device. All components of these devices must uniformly comply with industry standards in order to operate efficiently together. Some industry standards may not be widely adopted or implemented uniformly, and competing standards may emerge that may be preferred by our customers or by consumers. If our customers or the suppliers that provide other device components adopt new or competing industry standards with which our solutions are not compatible, or if the industry groups fail to adopt standards with which our solutions are compatible, our existing solutions would become less desirable to our customers. If our solutions are not in compliance with prevailing industry standards for a significant period of time, we could miss opportunities to achieve crucial design wins, which could harm our business.

As of January 31, 2025,2026, we had approximately $105.6$121.6 million invested in marketable debt securities. The marketable debt security investments primarily consisted of commercial paper, corporate bonds, asset-backed securities and U.S. government securities. We currently do not use derivative financial instruments to adjust our investment portfolio risk or income profile. These investments, as well as any cash deposited in bank accounts, are subject to general credit, liquidity, market and interest rate risks, which may be exacerbated by unusual events, such as the pandemics or widespread public health problems, the Eurozone crisis, the U.S. debt ceiling crisis, and imposition of tariffs, which affected various sectors of the financial markets and led to global credit and liquidity issues. We regularly maintain cash balances that are not insured or are in excess of the Federal Deposit Insurance Corporation’s (FDIC) insurance limit. If the global financial markets continue to experience volatility or deteriorate, our investment portfolio may be impacted and some or all of our investments may become illiquid or otherwise experience loss which could adversely impact our financial results and position. To the extent that we increase the amount of our security investments in the future, these risks would be exacerbated.

The semiconductor industry is subject to intense competitive pricing pressure from customers and competitors. Accordingly, any increase in the cost of our solutions, whether by adverse purchase price variances orvariances, adverse manufacturing cost variances,variances or supply chain disruptions, will reduce our gross margins and operating profit. We currently do not have long-term supply contracts with most of our primary third-party vendors, and we negotiate pricing with our main vendors on a purchase order-by-purchase order basis. Therefore, they are not obligated to perform services or supply product to us for any specific period, in any specific quantities, or at any specific price, except as may be provided in a particular purchase order. The ability of our foundry vendors to provide us with a product, which is solely sourced at each foundry, is limited by their available capacity, existing obligations and technological capabilities. Foundry capacity may not be available when we need it or at reasonable prices. None of our third-party foundry or assembly and test vendors have provided contractual assurances to us that adequate capacity will be available to us to meet our anticipated future demand for our solutions. We have experienced and may again experience in the future supply constraints at our primary foundry and assembly vendors resulting from industry wide supply chain challenges.

Our foundry and assembly and test vendors may allocate capacity to the production of other companies’ products while reducing deliveries to us on short notice. In particular, other companies that are larger and better financed than we are or that have long-term agreements with our foundry or assembly and test vendors may cause our foundry or assembly and test vendors to reallocate capacity to them, decreasing the capacity available to us. Converting or transferring manufacturing from a primary location or supplier to a backup provider could be expensive and would likely take at least two or more quarters. There are only a few foundries, including Samsung and Taiwan Semiconductor Manufacturing Co., Ltd., or TSMC, that are currently available for certain advanced process technologies that we utilize or may utilize, such as 10nm4 nm or 5nm.2 nm. Accordingly, as we continue to develop solutions in advanced process nodes, we will be increasingly dependent upon such foundries. The unavailability of one or both of these foundries could significantly impact our ability to produce our new products or delay production, which would negatively impact our business.

We sell a significant percentage of our solutions through a single distributor, WT, which serves as our non-exclusive sales representative and fulfillment partner in Asia other than Japan. Approximately 63%,70%, 53%63% and 57%53% of our revenue was derived from sales through WT for the fiscal years ended January 31, 2025,2026, 20242025 and 2023, respectively.2024. We anticipate that a significant portion of our revenue will continue to be derived from sales through WT in the foreseeable future. Our current agreement with WT is effective until January 2026,2029, unless it is terminated earlier by either party for any or no reason with 60 days written notice or by failure of the breaching party to cure a material breach within 30 days following written notice of such material breach by the non-breaching party. Our agreement with WT will automatically renew for additional successive 12-month terms unless at least 60 days before the end of the then-current term either party provides written notice to the other party that it elects not to renew the agreement. Termination of the relationship with WT, either by us or by WT, could result in a temporary or permanent loss of revenue. We may not be successful in finding suitable alternative distributors on satisfactory terms, or at all, and this could adversely affect our ability to effectively sell our solutions in certain geographical locations or to certain end customers. Furthermore, WT, or any successor or other distributors we do business with, may face issues obtaining credit, which could impair their ability to make timely payments to us.

We rely on third-party vendors to supply software development tools and intellectual property to us for the development of our new products, and we may be unable to obtain the tools necessary to develop or enhance new or existing products.

We rely on third-party software development tools to assist us in the design, simulation and verification of new products or product enhancements. To bring new products or product enhancements to market in a timely manner, or at all, we need software development tools that are sophisticated enough or technologically advanced enough to complete our design, simulations and verifications. We also rely upon third-party intellectual property to enable certain advanced features in our products. In the future, the design requirements necessary to meet consumer demands for more features and greater functionality from our solutions may exceed the capabilities of available intellectual property and software development tools. Unavailability of software development tools or intellectual property may result in our missing design cycles or losing design wins, either of which could result in a loss of market share or negatively impact our operating results.

Our development effortsroadmap areis focused on SoCs that provide human viewing, AI inference, and radar detectionbased functionalities.perception technologies that support the increasing automation and intelligence requirements of the Internet of Things (IoT), automotive, industrial, and robotics markets. As a result, we believe that our future revenue growth, if any, will significantly depend upon our ability to expand within camera markets with our AI technology, particularly in the Internet of Things, or IoT, markets, as well as emerging markets such as AI-enabled security cameras, AI-based driving applications, including driver monitoring systems, advanced blind spot detection, object detection, and deep learning algorithms for HD mapping solutions, automotive advanced driver assistance systems, or ADAS, applications, and industrial and robotics markets. We expect our research and development expenditures to increase in comparison to prior periods as we devote additional resources to the development of innovative video and image processing solutions with increased functionality, such as AI capabilities, and as we target new markets.

We recorded revenue of $284.9$390.7 million in fiscal year 2025,2026, an increase of 25.8%37.2% as compared to fiscal year 2024.2025. The increase in revenue was primarily attributable to higher product unit shipments driven by customers' new product ramps,and an increased percentage of our sales from higher valueaverage selling price AI inference processors which contributed toas a higherresult averageof sellinghigh price,demand asfor wellour asedge higherAI solutions, partially offset by lower nonrecurring engineering (NRE) project service revenue.

We recorded a loss from operations of $82.5 million in fiscal year 2026, as compared to a loss from operations of $126.6 million in fiscal year 2025, as compared to a loss from operations of $154.6 million in fiscal year 2024.2025. The reduction in operating losslosses was primarily attributable to higher revenue and consequently, higher gross profit, partially offset by an increase in operating expenses. The increase inincreased operating expenses primarily related to higher engineering-relatedpersonnel expenses,costs, including chipemployee developmentbenefits, costs,higher toolsengineering-related costs associated with the progress and equipmentnumber expensesof chips in development, higher facility-related costs from relocation of our headquarters in fiscal year 2026, as well as outsidehigher servicemarketing and travel expenses.

Ability to Develop and Introduce New or Enhanced Solutions. We operate in a dynamic environment characterized by rapidly changing technologies and technological obsolescence. To compete successfully, we must design, develop, market and sell enhanced solutions with increased levels of performance and functionality that meet the expectations of our customers, including advanced process technologies. As such, we continuously invest in our research and development projects, especially AI and computer vision technologies. However, failure to anticipate or timely develop new or enhanced solutions in response to technology shifts and trends could result in decreased revenue and our competitors achieving design wins we sought. In addition, our ability to successfully develop new and enhanced solutions depends on our continuing ability to hire, train, motivate and retain highly skilled engineers, which is not ensured. Moreover, any reliability or quality problems with our solutions could harm our reputation, increase additional development and replacement costs, and prevent us from retaining existing customers and attracting new customers.

Pricing, Product Cost and Margin. Our pricing and margins depend on a variety of factors, including the volumes and features of the solutions we provide to our customers. Additionally, we make significant investments in new solutions for both cost improvements and new features that we expect to drive revenue and maintain margins. In general, solutions incorporated into more complex configurations, such as those used in high-performance camera applications or, in the future, advanced driver assistance systems, have higher prices and higher gross margins as compared to solutions sold into lower-performing, more competitive camera applications. Our average selling price can vary by market and application due to market-specific supply and demand, the maturation of products launched in previous years andyears, the launch of new products by us or our competitors.competitors and by product mix.

Impact of Global Supply Chain Conditions on Our Business. Due in part to impacts of the COVID-19 pandemic, theThe semiconductor industry faced significant global supply chain challenges over the past few years. Supply chain issues can impact our business as they relate to both our suppliers and our customers. With respect to our suppliers, weWe have experiencedseen supply constraints for certain chips from Samsung Electronics Corporation and we may in the future experience similar issues. With respect to our customers, to the extent customers face supply chain issues with other components needed to pair with our products in order to produce their end products or otherwise take actions in an attempt to adjust their inventory levels, such customers may delay future orderscycles of our products or hold inventory of our products for longer periods of time. Recent supply chain challenges have subsided and we expect conditions to return to more stability in futurethe periods.past, However, challengeswhich may recur in future periods as well, with constant changes in the macro-economic environment, including potential retaliatory tariffs and restrictions on exports to foreign locations due to the recent imposition of tariffs by the U.S. Government on imports and restrictions on exports to foreign locations.imports.

Cost of Revenue and Gross Margin

Selling, general and administrative expense primarily consists of personnel costs, including salaries, stock-based compensation and employee benefits for our sales, marketing, finance, human resources, information technology and administrative personnel. The expense also includes amortization of trade name and customer relationships, professional service costs such as accounting, tax, or legal services, and allocated depreciation and facility expenses. We expect our selling, general and administrative expense to increase in absolute dollars as we continue to maintain the infrastructure and expand the size of our sales and marketing organization to support our business strategy of addressing new opportunities with our AI technology.technology, including, but not limited to, costs expected to be incurred on the expansion of an indirect sales channel.

Other income, net, consists primarily of interest income and yields from our cash deposits and debt security investments, realized gains and losses from equity and debt security investments, subsidies and grants issued by governments, as well as gains and losses from foreign currency transactions andtransaction remeasurements.

Research and development expense increased in fiscal year 2025,2026, as compared to fiscal year 2024,2025, primarily due to approximately $4.2$4.8 million of additional engineering-related expensescosts, including chip development cost and tools and equipment expense, associated with supportingthe our AI inference processorprogress and radar solutions, and $3.4 millionnumber of additionalchips SoCin development cost from our foundries associated with our chip development progress.development. The increase was also attributable to approximately $3.4$4.4 million of higher personnel costs, including employee benefits, and approximately $3.2 million of additional personnelfacility-related costs,costs includingallocated stock-basedassociated compensationwith expense, as a result of higher headcount in supportrelocation of our AIheadquarters strategy.in fiscal year 2026.

Research and development expense increased in fiscal year 2024,2025, as compared to fiscal year 2023,2024, primarily due to approximately $5.0$4.2 million of additional engineering-related expenses associated with supporting our AI inference processor and radar solutions, and $3.4 million of additional SoC development cost from our foundries associated with the progress, complexity and number of chips in development, $1.7 million of additional engineering-related expenses for supporting our AI-basedchip anddevelopment radarprogress. solutions,The asincrease wellwas asalso attributable to approximately $3.4 million of additional personnel costscosts, including stock-based compensation expense, as a result of increasedan stock-basedincrease compensationin and employee benefit programs.headcount.

Selling, general and administrative expense decreasedincreased in fiscal year 2025,2026, as compared to fiscal year 2024,2025, primarily due to approximately $3.0 million lower net personnel costs associated with departure of certain employees and $0.9$1.7 million of lowerhigher facility-relatedpersonnel expenses.costs, Theincluding decreaseemployee wasbenefits, partially offset byand approximately $0.3$0.7 million of additionalhigher professionalmarketing serviceand costs.travel expenses.

Selling, general and administrative expense decreased in fiscal year 2024,2025, as compared to fiscal year 2023,2024, primarily due to approximately $1.1$3.0 million of lower traveling,net salespersonnel support,costs professionalassociated servicewith departures of certain employees and $0.9 million of lower facility-related expenses. The decrease was alsopartially attributableoffset toby approximately $0.8$0.3 million lower personnel costs as a result of loweradditional headcount.professional service costs.

The increasemarginal decrease in other income, net, in fiscal year 2025,2026, as compared to fiscal year 2024,2025, was primarily due to ana approximately $1.2$0.6 million impairmentgovernment chargegrant relating to an equity investment recognizedreleased in the prior fiscal year 2025 that did not recur in the current fiscal year,year 2026, offset by approximately $0.9$0.6 million of higher interest income and yields from our cash deposits and debt security investments, as well as $0.8 million of net gains from a government grant and foreign currency transactions and remeasurements.investments.

Income tax expense increased in fiscal 2024,2026, as compared to fiscal year 2023,2025, primarily due to areduced one-timepre-tax charge of $22.7 million of valuation allowance against the Company’s remaining U.S. net deferred tax assets, a decrease in the proportion of profits generated in lower tax jurisdictionsloss and a decreasereduction in the benefit from FIN48income reservestax uponreserve the lapse of the statute of limitations,release, partially offset by a decrease in non-deductible stock-based compensation.

Fiscal year 20252026 compared to fiscal year 20242025: Cash provided by operating activities increased primarily due to lowerimproved netoperating loss adjusted for certain non-cash itemsresults and increased liabilities driven by higher cash advancesinflows from NREchanges projectsin andworking development funding, partially offset by lower collections of accounts receivable associated with the timing of sales and increased inventory purchases based on expected future demand from customers.capital.

Fiscal year 20242025 compared to fiscal year 20232024: Cash provided by operating activities decreasedincreased primarily due to higherimproved netoperating loss adjusted for certain non-cash items,results, partially offset by increasedhigher workingcash capitaloutflows as a result of betterchanges managementin onworking accounts receivable and liabilities, as well as decreased inventory purchases due to lower demand from customers.capital.

As of January 31, 2025,2026, we had cash, cash equivalents and marketable debt securities on hand of approximately $250.3$312.6 million, compared with approximately $219.9$250.3 million of cash, cash equivalents and marketable debt securities on hand as of January 31, 2024.2025.

Technology license obligations primarily represent future cash payments for noncancelable internal-use software licenses used in product design.

Capital commitment primarily represents future construction costcosts for our office building constructed in Parma, Italy.

Service commitment represents future cash payments for our IT infrastructure serviceservices fromand asupport thirdand party.maintenance for software licenses.

We also have lease obligations primarily for our worldwide office facilities. As of January 31, 2025,2026, these undiscounted lease payments were a total of $5.4$18.2 million, with $2.9$3.0 million due in the next 12 months. Refer to Note 8 Leases withinof Notes to Consolidated Financial Statements for further information.

We also enter into various project service agreements with certain customers, including development funding agreements subject to certain refund conditions. In determining whether a development funding agreement constitutes a contract with a customer, we assess whether the substantive and genuine financial risk has been transferred to the funding party and whether the services provided to the funding party are an output of our ordinary activities in exchange for consideration. These agreements may include multiple performance obligations, such as software development services, licensing of intellectual property and post-contract customer support, or PCS. These multiple performance obligations are highly interdependent, highly interrelated, are typically not sold separately and do not have standalone selling prices. They are all inputs to generate one combined output which is incorporating our SoC into the customer’s product. Accordingly, we determine that they are not separately identifiable and shall be treated as a single performance obligation. For fixed-priceproject service contracts containing variable consideration, we estimate variable consideration using the most likely amount method which we believe better predicts the amount of consideration to which we expect to be entitled. Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal of cumulative revenue recognized will not occur, in accordance with the variable consideration constraint. We recognize revenue on project service contracts, we recognize revenuecontracts either over time as services are provided using an input method based on contract costs incurred to date compared to total estimated contract cost, or at a point in time upon completion and acceptance by the customer, depending on the terms of the arrangement. For project service contracts that are billed at a fixed rate for each hour of service provided, we recognize revenue in the amount for which we have the right to invoice as we believe the amount invoiced directly corresponds with the value to the customer of our performance completed to date.

Timing of revenue recognition may differ from the timing of invoicing to our customers. We record contract assets when revenue is recognized prior to invoicing. Our contract assets are primarily related to the satisfied but unbilled performance obligations associated with project service agreements at the reporting date. As of January 31, 20252026 and 2024,2025, the contract assets for these unbilled receivables were not material, respectively. Our contract liabilities consist of deferred revenue. The deferred revenue is primarily related to the nonrecurring engineering charges that are either invoiced or paid but performance obligations are not satisfied, as well as the portion of a transaction price that exceeds the weighted average selling price for products sold to date under tiered-pricing contracts that contain material rights. The deferred revenue is expected to be recognized over the period when performance obligations are satisfied associated with project service agreements, or over the course of the contract when products are delivered for future pricing below the weighted average selling price of the contract. We also elect not to disclose the value of unsatisfied or partially unsatisfied performance obligations for contracts with original expected contract duration of one year or less, and elect to exclude amounts collected from customers for all sales taxes from the transaction price.

Our business and our industry isare subject to numerous risks and uncertainties, including those described in the following Risk Factors. These risks include, but are not limited to, the following:

We derive a significant portion of our revenue from a limited number of ODMs who build products on behalf of a limited number of OEMs and from a limited number of OEMs to whom we ship directly. We anticipate that this customer concentration will continue for the foreseeable future. In fiscal year 2026, the customer representing 10% or more of our revenue was WT Microelectronics Co., Ltd., or WT, which serves as our non-exclusive sales representative and fulfillment partner in Asia other than Japan, and accounted for approximately 70% of total revenue. For the threesix months ended AprilJuly 30,31, 2026, the customercustomers representing 10% or more of our revenue waswere WT,WT and Hakuto Co., Ltd., or Hakuto, a Japanese distributor, which accounted for approximately 61% and 10% of total revenue.revenue, respectively. In addition, we believe that revenue from our top 10 end customers, either directly or through a distributor or an ODM, accounted for approximately 67% of our total revenue in fiscal year 2026 and accounted for approximately 67% of our total revenue for the threesix months ended AprilJuly 30,31, 2026. Our largest end customer in fiscal year 2027 to date was Arashi Vision Inc. dba Insta360, or Arashi, for which we indirectly supply SoCs through WT to multiple ODMs that build products on behalf of Arashi. We believe that our operating results in the near term will continue to depend on sales to a relatively small number of customers and end customers. In the future, these customers may decide not to purchase our SoC solutions at all, may purchase fewer solutions than they did in the past or may alter their purchasing patterns. The loss of a significant customer, or substantial reduction in purchases by a significant customer, could happen again at any time and without notice, and such loss would likely lead to unanticipated revenue shortfalls and excess inventory and otherwise harm our financial condition and results of operations. Furthermore, any credit issues from WT could impair its ability to make timely payment to us. Moreover, because several of our largest OEM customers have a dominant position in their markets, a loss of a significant customer may not be easily replaced.

Security breaches and incidents, computer malware and computer hacking attacks have become more prevalent and sophisticated. These threats are constantly evolving, making it difficult to defend against or implement preventive measures, and we may face difficulties or delays in identifying and otherwise responding to any security breach or incident. The prevalence and use of new AI tools, both externally by third parties and internally by our employees, exacerbates these risks. Moreover, remote work by our personnel and remote access to our systems increase our cybersecurity risk profile. We expect to incur significant costs in an effort to detect and prevent security breaches and incidents, and any actual or perceived security breach or incident may require us to incur significant costs in notifying relevant persons and entities and may otherwise increase our costs and require us to expend substantial resources. Our policies and security measures cannot guarantee security, and our information technology (IT) infrastructure, including our networks and systems, may be vulnerable to security breaches and incidents, cyber-attacks, or fraud. Third parties have attempted, and will likely continue to attempt, to penetrate and/or infect our network and systems with malicious software and phishing attacks in an effort to gain access to our network and systems. Hackers or others may be able to penetrate our security controls, misappropriate or compromise our confidential information or that of third parties, deploy viruses, worms, ransomware or other malicious code, or cause damage or disruptions to our IT infrastructure. For portions of our IT infrastructure, we rely on offerings provided by third parties. These third-party offerings relate to, among other things, human resources, electronic communication services and some finance functions, and we are dependent on these third parties' security systems. These third parties are subject to similar, and in certain cases greater, security threats than we face. These third parties may also experience breaches, incidents, and attacks compromising or otherwise impacting their offerings, and their offerings may contain security vulnerabilities or malicious code, or otherwise detrimentally impact our systems. Any unauthorized access to, or other security breaches or incidents impacting, the systems of our service providers, or any computer viruses, ransomware or other malicious code in their data or software, could expose us to risks of unauthorized access to our IT infrastructure and loss, misappropriation, unavailability and other unauthorized processing of information. Security breaches and incidents may also result from non-technical means, such as employee or contractor malfeasance or negligence. Any security breach or incident or theft, misuse, loss, unavailability or other unauthorized processing of information, or the perception that any of these matters has occurred, could result in, among other things, damage to our reputation, allegations by our customers that we have not performed our contractual obligations, regulatory investigations and other proceedings, litigation and possible penalties, damages, and other liabilities, any of which could have a material adverse effect on our business, financial condition, our reputation, and our relationships with our customers and partners. We may also encounter or be subject to bugs, errors, or hacking or other events resulting in system interruptions or other disruptions, corruption or loss of data, an inability to accurately process or record transactions, and security or technical reliability issues. All of these could harm our ability to conduct core operating functions and could impact our internal control compliance efforts. Due to conflicts and geopolitical events, we and many third parties we work with are vulnerable to a heightened risk of cybersecurity attacks, and other means of causing security breaches and incidents from nation-state and affiliated actors. Further, theThe use of AI technologies may result in security breaches and incidentsincidents, and our use of AI technologies may create additional cybersecurity risks or increase cybersecurity risks, including risks of security breaches and incidents. Further, AI technologies may be used in connection with certain cybersecurity attacks and may increase the intensity or effectiveness of such attacks or otherwise create heightened cybersecurity risks.

The semiconductor industry requires substantial investment in research and development in order to bring to market new and enhanced solutions. Our research and development expense was approximately $238.5 million, $226.1 million and $215.1 million in fiscal years 2026, 2025 and 2024, respectively. For the threesix months ended AprilJuly 30,31, 2026, our research and development expense was approximately $58.1$108.7 million. In general, we expect to increase our research and development expenditures in future periods as compared to prior periods as part of our strategy of focusing on the development of innovative AI inference SoCs with increasing levels of functionality.functionality and as we target new markets. We are unable to predict whether we will have sufficient resources to achieve the level of investment in research and development required to remain competitive. For example, development in the latest process nodes, such as 4 nanometer, or nm, or smaller, costs significantly more than required to develop in larger process nodes. This added cost could prevent us from being able to achieve or maintain a technology advantage over larger competitors that have significantly more resources to invest in research and development. In addition, we cannot assure you that the technologies which are the focus of our research and development expenditures will become commercially successful or generate any revenue. In addition, the U.S. government recently introduced regulations that require notification of, or prohibit certain transactions with entities in China or with linkages to China, which could apply to certain intracompany activities between a U.S. based corporation and its China subsidiaries that support research and development activities, which could limit our ability to carry out certain research and development activities in China.

Deterioration of the financial condition of our distributors or customers could adversely impact our future revenues and collection of accounts receivable. For the fiscal year ended January 31, 2026, the customer representing 10% or more of revenue was WT, which accounted for approximately 70% of total revenue. For the threesix months ended AprilJuly 30,31, 2026, the customercustomers representing 10% or more of revenue waswere WT,WT and Hakuto, which accounted for approximately 61% and 10% of total revenue.revenue, respectively. As of April 30, 2026 and JanuaryJuly 31, 2026, accounts receivable with WT wasand Hakuto were approximately $18.7$17.2 million and $24.6$4.8 million, respectively. We regularly review the collectability and creditworthiness of our distributors and customers to determine an appropriate allowance for credit losses. Based on our review of our distributors and customers, we currently have only immaterial reserves for uncollectible accounts. If our uncollectible accounts, however, were to exceed our current or future allowance for credit losses, our operating results and cash flows would be negatively impacted.

The semiconductor industry is highly cyclical and is characterized by constant and rapid technological change, rapid product obsolescence, price erosion, evolving standards, short product life cycles and wide fluctuations in product supply and demand. Cyclical downturns have been characterized by diminished product demand, production overcapacity, high inventory levels and accelerated erosion of average selling prices, which could harm our business and operating results. We are dependent on the availability of third-party foundry and assembly capacity to manufacture and assemble our SoC solutions. None of our third-party foundry or assembly contractors has provided assurances that adequate capacity will be available to us in the future. The semiconductor industry recently experienced significant shortages of capacity, which resulted in a lengthening of the manufacturing lead time for our products. Such capacity shortages could negatively impact our ability to meet our customers’ demand for our products and have an adverse impact on our revenue, results of operations and customer relationships. We have also experienced, during times of supply chain capacity shortage, customers placing orders for our products that exceed their actual demand, which may lead to us manufacturing a surplus of products and could have a negative impact on our results of operations and cash reserves.reserves if they cancel their orders. The semiconductor industry is facing shortages of capacity for certain components used by our customers and certain semiconductor assembly processes, which could have an adverse impact on demand for our products, increase our expenses, impact customer relationships and otherwise negatively impact our results of operations. Challenges may recur in future periods with changes in the macro-economic environment, including imposition of higher or additional tariffs by the U.S. Government on imports and new or additional restrictions on exports to foreign locations.

Our sales have been historically denominated in U.S. dollars. An increase in the value of the U.S. dollar relative to the currencies of the countries in which our end customers operate could impair the ability of our end customers to cost-effectively integrate our SoCs into their devices which may materially affect the demand for our solutions and cause these end customers to reduce their orders, which would adversely affect our revenue and business. We may experience foreign exchange gains or losses due to the volatility of other currencies compared to the U.S. dollar. A significant portion of our solutions are sold to customers located outside the United States, primarily in Asia and we anticipate that this will continue. Sales to customers in Asia accounted for approximately 88%, 85% and 79% of our total revenue in fiscal years 2026, 2025 and 2024, respectively. For the threesix months ended AprilJuly 30,31, 2026, sales to customers in Asia accounted for approximately 84% of total revenue. Although a large percentage of our sales are made to customers in Asia, we believe that a significant number of the products designed by these customers and incorporating our SoCs are then sold to consumers globally. In addition, if in the future we sell products or purchase inventory in currencies other than the U.S. dollar, our exposure to foreign currency risk could become more significant.

As of AprilJuly 30,31, 2026, we had approximately $163.4$170.5 million invested in marketable debt securities. The marketable debt security investments primarily consisted of money market funds, corporate bonds, asset-backed securities, U.S. government securities and commercial paper. We currently do not use derivative financial instruments to adjust our investment portfolio risk or income profile. These investments, as well as any cash deposited in bank accounts, are subject to general credit, liquidity, market and interest rate risks, which may be exacerbated by unusual events, such as the pandemics or widespread public health problems, the Eurozone crisis, the U.S. debt ceiling crisis, and imposition of tariffs, which affected various sectors of the financial markets and led to global credit and liquidity issues. We regularly maintain cash balances that are not insured or are in excess of the Federal Deposit Insurance Corporation’s (FDIC) insurance limit. If the global financial markets continue to experience volatility or deteriorate, our investment portfolio may be impacted and some or all of our investments may become illiquid or otherwise experience loss which could adversely impact our financial results and position. To the extent that we increase the amount of our security investments in the future, these risks would be exacerbated.

The semiconductor industry is subject to intense competitive pricing pressure from customers and competitors. Accordingly, any increase in the cost of our solutions, whether by adverse purchase price variances, adverse manufacturing cost variances or supply chain disruptions, will reduce our gross margins and operating profit. We currently do not have long-term supply contracts with most of our primary third-party vendors, and we negotiate pricing with our main vendors on a purchase order-by-purchase order basis. Therefore, they are not obligated to perform services or supply product to us for any specific period, in any specific quantities, or at any specific price, except as may be provided in a particular purchase order. The ability of our foundry vendors to provide us with a product, which is solely sourced at each foundry, is limited by their available capacity, existing obligations and technological capabilities. Foundry capacity may not be available when we need it or at reasonable prices. None of our third-party foundry or assembly and test vendors have provided contractual assurances to us that adequate capacity will be available to us to meet our anticipated future demand for our solutions. We have experienced and may again experience in the future supply constraints at our primary foundry and assembly vendors resulting from industry wide supply chain challenges.challenges, which has and could again, negatively impact our revenue.

We sell a significant percentage of our solutions through a single distributor, WT, which serves as our non-exclusive sales representative and fulfillment partner in Asia other than Japan. Approximately 70%, 63% and 53% of our revenue was derived from sales through WT for the fiscal years ended January 31, 2026, 2025 and 2024, respectively, and approximately 61% of our revenue was derived from sales through WT for the threesix months ended AprilJuly 30,31, 2026. We anticipate that a significant portion of our revenue will continue to be derived from sales through WT in the foreseeable future. Our current agreement with WT is effective until January 2029, unless it is terminated earlier by either party for any or no reason with 60 days written notice or by failure of the breaching party to cure a material breach within 30 days following written notice of such material breach by the non-breaching party. Our agreement with WT will automatically renew for additional successive 12-month terms unless at least 60 days before the end of the then-current term either party provides written notice to the other party that it elects not to renew the agreement. Termination of the relationship with WT, either by us or by WT, could result in a temporary or permanent loss of revenue. We may not be successful in finding suitable alternative distributors on satisfactory terms, or at all, and this could adversely affect our ability to effectively sell our solutions in certain geographical locations or to certain end customers. Furthermore, WT, or any successor or other distributors we do business with, may face issues obtaining credit, which could impair their ability to make timely payments to us.

Because of the importance of software development tools to the development and enhancement of our solutions, our relationships with leaders in the computer-aided design industry, including Cadence Design Systems, Inc., Mentor Graphics CorporationCorporation, Imagination Technologies Ltd., and Synopsys, Inc., are critical to us. If these relationships are not successful, we may be unable to develop new products or product enhancements in a timely manner, which could result in a loss of market share, a decrease in revenue or negatively impact our operating results.

We have significant business operations in Taiwan, including 374380 employees as of AprilJuly 30,31, 2026, and many of our third-party manufacturing suppliers are located in Taiwan. Accordingly, our business, financial condition and results of operations may be affected by changes in governmental and economic policies in Taiwan, social instability and diplomatic and social developments in or affecting Taiwan due to its international political status. Although significant economic and cultural relations have been established between Taiwan and China, we cannot assure that relations between Taiwan and China will not face political or economic uncertainties in the future. Any deterioration in the relations between Taiwan and China, and other factors affecting military, political or economic conditions in Taiwan, could disrupt our business operations and materially and adversely affect our results of operations.

We recorded revenue of $100.4$108.1 million and $208.5 million for the three and six months ended AprilJuly 30,31, 2026, anrespectively. increaseThis represented increases of 16.9%13.2% and 14.9%, respectively, as compared to the same periodperiods in the prior fiscal year. The increaseincreases in revenue waswere primarily attributable to higher product unit shipments and an increased percentage of sales from higherour averagehigh selling pricepriced AI inference processors as a result of high demand for our edge AI solutions, partially offset by lower nonrecurring engineering (NRE) project service revenue.processors.

We recorded operating losses of $19.4$8.1 million and $27.6 million for the three and six months ended AprilJuly 30,31, 2026, respectively, as compared to operating losses of $25.9$22.0 million and $47.8 million for the three and six months ended AprilJuly 30,31, 2025.2025, respectively. The reductionreductions in operating losses waswere primarily attributable to higher revenue and,and consequently, higher gross profit, partiallyas offsetwell byas higherlower operating expenses. The increasedecreases in operating expenses primarily resultedrelated from higher payroll-related expenses asto a result$9.0 million reduction to research and development expense associated with the release of ana increasedeposit inliability headcount,following a development project termination, partially offset by higher engineering-related costs associated with the progress and number of chips in development, and higher marketing expense, partially offset by lower stock-based compensation expense.development.

We had cash outflows from operating activities of $25.6$25.9 million for the threesix months ended AprilJuly 30,31, 2026, as compared to cash inflows of $14.8$20.3 million for the threesix months ended AprilJuly 30,31, 2025. The decrease in cash flows from operating activities was mainly driven by higher cash outflows from changes in working capital, primarily due to increased inventory purchases, partially offset by improved operating results.

Impact of Global Supply Chain Conditions on Our Business. The semiconductor industry has faced significant global supply chain challenges over the past few years. Supply chain issues can impact our business as they relate to both our suppliers and our customers. WeRecently, there have seenbeen cycles oftightening supply chainconditions challengesfor memory chip components that our customers use in thetheir past,end products, which maycould recurhave inan futureimpact periodson astheir well,demand withfor our products. With constant changes in the macro-economic environment, including potential retaliatory tariffs and restrictions on exports to foreign locations due to the recent imposition of tariffs by the U.S. Government on imports.imports, we anticipate that supply chain challenges may recur in future periods.

We derive substantially all of our revenue from the sale of low power AI-based processing and video and image processing SoC solutions to IoT OEMs, IoT ODMs, automotive OEMs or Tier-1 automotive suppliers, either directly or through our distributors. A substantial portion of our revenue from sales was made indirectly through onetwo of our distributors, WT Microelectronics Co., Ltd., formerly Wintech Microelectronics Co., Ltd., or WT, which serves as our non-exclusive sales representative and fulfillment partner in Asia other than Japan.Japan, and Hakuto Co., Ltd., or Hakuto, a Japanese distributor.

We expect that our gross margin may fluctuate from period to period as a result of changes in customer mix, average selling price, product mix andmix, the introduction of new products by us or our competitors.competitors and changes in the amount of our inventory reserves. In general, solutions incorporated into more complex configurations, such as those used in high-performance cameras, and in future advanced automotive OEM applications, have had or are expected to have higher prices and higher gross margins, as compared to solutions sold into the lower-performance, more competitive camera applications. As semiconductor products mature and unit volumes sold to customers increase, their average selling prices typically decline. These declines may be paired with improvements in manufacturing yields and lower wafer, packaging and test costs, which offset some of the margin reduction that could result from lower selling prices.

Comparison of the Three and Six Months Ended AprilJuly 30,31, 2026 and 2025

Revenue increased for the three and six months ended AprilJuly 30,31, 2026, as compared to the same periodperiods in the prior fiscal year, primarily due to higher product unit shipments and an increased percentage of sales from higherour averagehigh selling pricepriced AI inference processors as a result of high demand for our edge AI solutions, partially offset by lower NRE project service revenue.processors.

Gross margin decreased for the three and six months ended AprilJuly 30,31, 2026, as compared to the same periodperiods in the prior fiscal year, primarily due to higher manufacturing costs associated with advanced process technologiestechnologies, andpartially additionaloffset chargesby fromfavorable adverseproduct purchase commitments.mix.

Research and development expense decreased for the three and six months ended AprilJuly 30,31, 2026, as compared to the same periodperiods in the prior fiscal year, primarily due to a $9.0 million reduction to research and development expense associated with the release of a deposit liability following a development project termination in the second quarter of fiscal year 2027, as well as approximately $3.9$2.8 million and $4.4 million, respectively, of lower stock-based compensation expense, partially offset by $2.3 million of higher payroll-relatedpersonnel-related expenses as a result of ana increasereduction in headcountheadcount. The decreases were partially offset by approximately $2.6 million and $0.9$3.5 millionmillion, respectively, of higheradditional engineering-related expenses associated with the progress and number of chips in development.

Selling, general and administrative expense increased for the three and six months ended AprilJuly 30,31, 2026, as compared to the same periodperiods in the prior fiscal year, primarily due to approximately $1.5$1.8 million and $3.5 million, respectively, of higher payroll-relatedmarketing and professional service expenses asassociated awith resultour ofbusiness anactivities. increaseThe inincreases headcount,were partially offset by $0.2approximately $0.3 million and $0.7 million, respectively, of lower stock-basedfacility-related compensation expense.costs.

The marginal decrease in other income, net, for the three and six months ended AprilJuly 30,31, 2026, as compared to the same periodperiods in the prior fiscal year, was primarily due to approximately $0.4$0.3 million and $0.7 million, respectively, of higher imputed interest expense associated with financing purchases of software licenses,license purchases. For the six months ended July 31, 2026, the decreased other income, net, was partially offset by an approximately $0.3$0.2 million subsidy received from a foreign government.

The increasedincreases in income tax expense for the three and six months ended AprilJuly 30,31, 2026, as compared to the same periodperiods in the prior fiscal year, waswere primarily due to a projected decreasedecreases in netloss lossbefore income taxes in the current fiscal year.

As of AprilJuly 30,31, 2026, we had cash, cash equivalents and marketable debt securities of approximately $277.8$272.3 million. We invest in highly-liquid, short-term marketable debt securities and hold these investments as available-for-sale securities. Refer to Note 2 of the Notes to Condensed Consolidated Financial Statements for additional information.

The decrease in cash flows from operating activities for the threesix months ended AprilJuly 30,31, 2026, as compared to the same period in the prior fiscal year, was mainly driven by higher cash outflows from changes in working capital, primarily due to increased inventory purchases, partially offset by improved operating results.

Net cash used in investing activities increased for the threesix months ended AprilJuly 30,31, 2026, as compared to the same period in the prior fiscal year, primarily due to approximately $30.7$37.8 million of additional funds invested in our security portfolio, partiallyand offset by $0.6$2.1 million of lowerhigher payments for purchases of capital assets and software licenses.

Net cash used in financing activities increased for the threesix months ended AprilJuly 30,31, 2026, as compared to the same period in the prior fiscal year, primarily due to an additional $2.7$1.3 million financing payment for the purchase of software licenses and $1.4 million of higher cash payment for the repurchase of our ordinary shares, partially offset by $1.0 million of additional cash received from stock compensation activities.

On May 27, 2026, our Board of Directors authorized a new share repurchase program for a total of $50.0 million commencing July 1, 2026 through June 30, 2027. The new repurchase program replaces the existing program that expires on June 30, 2026. Refer to Note 1610 of the Notes to Condensed Consolidated Financial Statements for additional information.

As of AprilJuly 30,31, 2026, we had purchase obligations with our independent contract manufacturers of $53.9$49.0 million.

As of AprilJuly 30,31, 2026, we did not engage in any off-balance sheet arrangements, including the use of structured finance, special purpose entities or variable interest entities.