Arteris is a buy, this analyst says

Roth Capital Partners analyst Suji Desilva initiated coverage of Arteris (Arteris Stock Quote, Chart, News, Analysts, Financials NASDAQ:AIP) with a “Buy” rating and US$40.00 target.

“We believe the company’s interconnect IP and automation/security software solutions can grow with increasing data movement demands on advanced AI/auto/chiplet-based designs,” Desilva said in an Aug. 4 report.

Arteris provides system intellectual property semiconductor technology that helps customers accelerate complex system-on-chip designs.

Desilva said the company’s network-on-chip intellectual property should gain traction as artificial intelligence and automotive chip designs become more complex. He also expects chiplet-based multi-chip modules to create further demand for Arteris’s interconnect IP.

The company’s software products for automation and security should also support growth beyond core IP offerings, he said.

Desilva noted Arteris grew revenue about 40% year-over-year in its most recent quarter, including 25% licensing growth. Quarterly royalties doubled, while last-12-month royalties approached a double-digit-million run rate.

The analyst said Arteris’s calendar 2026 guidance implies organic growth of about 25%, even after adjusting for a recent acquisition, with potential upside from AI semiconductor activity, market diversification and software expansion.

Desilva expects revenue growth of 20% to 25% in calendar 2027 and operating profitability by mid-2027. He said the company’s reported annual contract value of about US$80-million supports forward visibility.

His US$40.00 target is based on about 15 times calendar 2027 EV/sales, a premium to the technology peer average of nine times, reflecting expected licensing and royalty growth.

Risks include a slowdown in semiconductor roadmap investment, execution challenges tied to product development or acquisitions, competition from internal customer efforts and larger vendors, and higher-than-expected expenses.

Desilva expects Arteris to generate negative Adjusted EBITDA of US$3.2-million on revenue of US$94.7-million in fiscal 2026, improving to Adjusted EBITDA of US$9.0-million on revenue of US$115.2-million in fiscal 2027.

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