Third-quarter 2026 earnings call, November 11, 2026

New growth plan moves Valens beyond premium-only positioning

Valens Semiconductor used its third-quarter call to lay out a new growth strategy. CEO Yoram Salinger described it as "a meaningful shift in how Valens approaches the market." The company has historically sold only high-performance, premium-priced connectivity chipsets. It now intends to build on that base while expanding into higher-volume mainstream segments in both of its core markets, audio-video and automotive. Salinger said the plan "expands the markets we can serve, increases the value we can capture per deployment and creates additional growth opportunities beyond our traditional premium applications."

Audio-video: embedding chips in devices and selling finished products

In audio-video, which Salinger called the company's "mature foundation," the underlying market grows at a moderate pace. Valens intends to grow considerably faster than the market through two layers. Management frames the driver as "Video Everywhere": a modern meeting room may hold multiple displays, cameras, interactive devices and USB peripherals that must all connect to a central processor, often over distances standard cables cannot support. Today that typically means an external extension box, cable and power supply for each peripheral, which adds cost and complexity.

The first layer is embedding Valens chipsets directly into new product categories such as cameras, video bars, touch controllers and room PCs, which removes the need for external boxes. Existing Valens solutions were designed for maximum bandwidth and reach. Embedded use requires a smaller, lower-power and cheaper part, which is why the company developed the VS6310, announced last week. Salinger said it is "optimized for lower bandwidth, shorter distances and significantly lower power consumption," and described these as "deliberate trade-offs that allow us to address product categories that were previously beyond our reach." He said each device category in the room is a separate market opportunity with its own manufacturers and product cycles, and that Valens plans to bring its connectivity into each of them "over the coming years." As an early proof point, he cited Crestron's Collab Compute Room PC, launched a few months ago with HDBaseT embedded.

The second layer is a move up the value chain. Until now Valens sold a chipset, an OEM designed a product around it, and Valens captured value only at that first step. The company now plans to sell finished system-level products to distributors and, in some cases, directly to installers and integrators. It is drawing on the product engineering and manufacturing capabilities it gained through the 2024 acquisition of Acroname. It is also adding a software layer that combines Valens link monitoring and performance analytics with Acroname's BrainStem technology. The planned catalog includes dongles, extender boxes, active cables, mini extenders and adapters. Salinger said that for Valens "every new product represents another opportunity to expand our market reach, capture more value and ultimately sell more chipsets."

Management pointed to two precedents. In 2024 the company developed a USB and power extension solution for a leading video conferencing manufacturer. Last year it created a joint USB 3 and 4K video extension solution with a companion chip, which has "already seen significant revenue commitments." Salinger said the company is now turning these case-by-case successes into "a systematic engine for growth."

Margin impact: management sees no 2027 effect from audio-video moves

Quinn Bolton of Needham asked whether lower-cost mainstream chips and system-level products would pressure semiconductor-like margins. Salinger said the two audio-video growth layers would not affect gross margin in 2027. For system-level products such as active cables and dongles, he said, "we believe we could maintain the gross margin. And if there is going to be an impact, it's not going to be substantial impacting our overall gross margin." He did not quantify the longer-term effect.

Automotive: onsemi collaboration targets the mainstream camera market

The most concrete new development was the strategic collaboration with onsemi, announced in late September, to bring MIPI A-PHY into mainstream automotive. A typical automotive camera today contains two chips, an image sensor and a serializer. The two companies are developing a solution that integrates A-PHY connectivity directly into a 3-megapixel image sensor, eliminating the separate serializer, reducing component count, simplifying camera design and lowering cost. Valens expects the partnership to give OEMs a "credible second source" for A-PHY, which management listed as a key barrier to adoption alongside caution about new technology in safety-critical systems and the premium pricing of the current solution.

In response to a question from Bolton, Salinger clarified the structure. Engineering work has been under way for several months. The product will be an onsemi chip produced in onsemi's fab. As Salinger put it, "it's a technological collaboration, which at the end of the day, would be marketed to the market by onsemi and ourselves, but it's going to be an onsemi product." He did not describe the commercial terms between the companies.

Salinger said Valens already addresses 8-megapixel front ADAS cameras with its VA7000, including through a collaboration with Sony. The larger volume opportunity is in mainstream 3-megapixel cameras used for surround view, side and rear ADAS and electronic mirrors. He said the premium segment is a relatively small portion of the overall automotive camera market. Valens has secured four A-PHY design wins, with production expected to begin in 2027. Its VA6000 chipset has been in Mercedes-Benz passenger vehicles since 2020. Salinger acknowledged that A-PHY adoption "has remained largely concentrated in premium automotive applications."

Third-quarter results: revenue above guidance, led by a sharp automotive rebound

Revenue was $21.9 million, above the guided range of $21.3 million to $21.7 million. That compares with $18.1 million in the second quarter and $17.3 million a year earlier, up about 21% sequentially and 27% year over year. Cross-industry business revenue was $14.0 million, about 65% of the total, versus $13.1 million in the second quarter and $13.2 million a year ago. Automotive revenue reached $7.9 million, about 35% of the total, up from $5.0 million in the prior quarter and $4.1 million a year earlier.

Asked whether the automotive level was sustainable or included one-time items, CFO Karine Pinto-Flomenboim said Valens is in all Mercedes-Benz passenger models and is therefore "subjected directly to the sales and the demand done by Mercedes-Benz." She noted some quarterly seasonality between the second and third quarters. She said management expects to see this level continue, "based on Mercedes-Benz demand."

Management also pointed to product launches on its latest chipsets, the VS3000 and VS6320, from SCT, Bluestream and Atlona. Jabra launched its Reach product in September, which connects a laptop to a meeting room's camera, displays, microphones and speakers through a single USB-C cable with HDBaseT at its core. Salinger called it "another important endorsement of the technology."

Margins: automotive improves, cross-industry slips, and supply costs are a flagged risk

GAAP gross margin was 62.2%, above the 60% to 62% guidance, compared with 61.5% in the second quarter and 63.0% a year ago. Non-GAAP gross margin was 64.4%, versus 64.3% in the prior quarter and 66.7% a year earlier. The segment picture diverged. Automotive gross margin rose to 53.9% from 41.5% in the second quarter and 43.2% a year ago, driven by lower testing facility expenses incurred to support production requirements and by product mix. Cross-industry gross margin fell to 66.8% from 69.2% in the second quarter and 69.1% a year ago, which management attributed to product mix.

On the outlook, Pinto-Flomenboim told Trevor Bowers of Oppenheimer that testing costs cannot be forecast and that the company has "supply management additional costs related, which we cannot forecast." She said margins are expected to stay at the levels seen to date, with more revenue from more profitable automotive models providing a slight lift. She added that the company cannot foresee expenses from supply management issues. Responding to David Storms of Stonegate on the cross-industry margin, she said the company is "doing a lot of work in order to maintain this and mitigate it" but that "currently, we don't know if it will add additional costs."

Operating expenses, tape-out costs and losses

Operating expenses were $19.9 million, versus $19.1 million in the second quarter and $19.0 million a year earlier. R&D was $10.8 million, up from $10.1 million in the second quarter, driven by tape-out costs for a new chip. SG&A was $9.2 million, versus $9.0 million in the second quarter and $7.4 million a year ago. The year-over-year increase mainly reflected insurance claim income from a batch production incident recognized last year.

Pinto-Flomenboim said the current tape-out was a lower-cost shuttle run. She said the company is in the full design process for its new VS500 product and expects "much more significant tape-out costs" once development of that process is finalized. Those costs will be built into the guidance for next year.

The GAAP net loss narrowed to $5.5 million, or $0.05 per share, from $8.1 million in the second quarter and $7.3 million a year ago. The non-GAAP loss was $0.02 per share. Adjusted EBITDA was a loss of $2.7 million, better than the guided loss of $2.8 million to $3.4 million, and compared with losses of $4.2 million in the second quarter and $4.3 million a year earlier.

Balance sheet and guidance

Cash, cash equivalents and short-term deposits were $74.7 million with no debt, down from $83.4 million at the end of June and $92.6 million at the end of 2025. Management attributed the decline primarily to timing, since higher revenue recognized late in the quarter is expected to be collected in the fourth quarter under standard payment terms. Inventory rose to $13.1 million from $12.5 million at the end of June and $10.1 million at the end of 2025.

Valens reaffirmed full-year 2026 revenue guidance of $78 million to $81 million, now saying it expects to land toward the upper end of the range. Full-year adjusted EBITDA is expected to be a loss of $12.9 million to $14.9 million.