Mobileye Global Inc. Q2 FY2025 Earnings Call

Greetings, and welcome to the Mobileye Second Quarter 2025 Earnings Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Daniel Galves, Chief Communications Officer. Thank you. Mr. Galves, you may begin.

Thanks, Maria. Hello, everyone, and welcome to Mobileye's Second Quarter 2025 Earnings Conference Call for the period ending June 28, 2025. Please note that today's discussion contains forward-looking statements based on the business environment as we currently see it. Such statements involve risks and uncertainties. Please refer to the accompanying press release, which includes additional information on the specific factors that could cause actual results to differ materially. Additionally, on this call, we will refer to both GAAP and non-GAAP figures. A reconciliation of GAAP to non-GAAP financial measures is provided in our posted earnings release. Joining us on the call today are Professor Amnon Shashua, Mobileye's CEO and President; and Nimrod Nehushtan, Mobileye's EVP of Business Development and Strategy. Unfortunately, our CFO, Moran Shemesh, recently experienced a death in her family and will not be joining the call today. I'm sure everyone listening joins me in wishing the best to Moran and her family. For today's earnings call, I will essentially take on Moran's role. Thanks. And now I'll turn the call over to Amnon.

Hello, everyone, and thanks for joining our earnings call. Starting with the results. Q2 revenue was up 15% year-over-year as demand for the IT was strong across regions and OEMs. Adjusted operating income was up 34% and adjusted operating margin rose 3 points to 21%. Q2 was a good display of the strong operating leverage created by our business model. On a year-over-year basis, more than 40% of the revenue growth converted to operating income compared to Q1, nearly 70% of the higher revenue dropped to operating income. Operating cash flow was again a highlight, over $200 million for the quarter and over $300 million for the first half, about 33% of revenue. Our ADAS business is highly cash generative, and we are maintaining strong working capital discipline. The core ADAS business is performing well, with volumes at or above 8.5 million per quarter for the last 4 periods, and we are raising our full year revenue outlook by 4%, and our adjusted operating income outlook by 14% at the midpoint. Our core ADAS business truly illustrates that we are an execution machine. EyeQ light will be the future high-volume chip for this segment, and the ramp-up of that new system has been seamless. Only 1 year after the first SOP, we already have EyeQ6 light-based systems on the road in North America, Europe, China, Japan, and India. On the advanced product side, we are the only OEM-neutral platform that is cost-efficient and scalable and has a credible technology path to hands-free autonomy in both privately owned vehicles and robotaxis. All four of our advanced products surround ADAS, supervision, Chauffeur, and Drive share common elements, including the EyeQ6 high inference chip, major portions of the perception and policy AI stack, REM crowdsourced driving intelligence, our safety frameworks, and the company's data and validation infrastructure. This common backbone creates many synergies for us and our customers, enables us to develop and execute all 4 solutions simultaneously, and leaves us agnostic to whether the market moves faster in one way or another, whereas a couple of years ago, OEMs were primarily focused on supervision. We are now seeing broad momentum across our portfolio from next-generation ADAS to full point A to point B eyes-off hands-free to Level 3 systems and to robotaxi. The EyeQ6 high-based surround ADAS system continues to develop as the next generation of standardized riding assist on high-volume vehicle platforms. This system addresses multiple objectives in a cost-efficient package. It's designed to meet stricter late-decade safety standards, enabled highway hands-free performance for a lower cost than current systems, and supports OEM goals to consolidate ECUs and integrate technology on a single SoC. In recent months, we have seen growing demand from OEMs to shift away from already sourced single camera programs toward our multi-camera surround ADAS Mando. Overall, opportunities to substantially grow content per vehicle in the ADAS space have improved over the last 6 months. Supervision activity remains robust, but lack of competitive pressure is enabling OEMs to continue to take their time with decision-making. Meanwhile, Chauffeur has generated multiple new OEM prospects that see eyes off on highway as a breakthrough feature that allows drivers to reclaim their time during commutes. The central question around eyes off consumer AV programs is simply technological maturity. How likely is it for a technology provider like Mobileye to execute a system with human-level safety and an expansive ODD? In this context, our 4 production programs with Volkswagen Group are significant strategic assets. They showcase our rapid progress in transforming our core technologies into scalable products. Our ability to demonstrate these products to other customers, including production-level hardware and software associated KPIs is an important proof point that our competitors do not have and will drive increasing competitive pressure as we approach launch. Turning to robotaxi. Waymo's achievement of 25% market share in San Francisco, despite offering no time or cost advantage over our human-driven alternatives, is very encouraging and has reignited industry enthusiasm. When you look at the robotaxi opportunity, two pillars are critical: safety and scalability. On safety, this means reaching the mean time between failures that exceeds human statistics as well as other critical safety standards. Safety has long been a strength of Mobileye, supported by foundational innovations like our RSS model, which we developed in 2017, and the PGF, our recently published framework for using multiple subsystems. Once safety goals have been reached, the second pillar is scalability. The name of the game here is how fast can you scale. This should be evaluated across three different vectors. The first scalability vector is geographic. How fast can you expand from city to city? REM is a huge asset here. The second is cost. What are the all-in operating costs of the system? Our in-house design, compute, imaging radar, and efficient AI supply chain synergies all combined create significant cost efficiency advantages relative to the competition. Finally, scalability also entails production capacity and business model. The fact that we work in partnership with OEMs that produce vehicles where our system is integrated during the mass production line, rather than being uplifted in a different facility after the vehicle has been produced, is very important. This approach allows us to be capital light, but it's not just about capital light. It also allows us to scale fast. Even if we had all the capital to go and purchase 100,000 vehicles and build production plans that would uplift the self-driving technology, it would have slowed us down. We are working with Volkswagen, of course, but also Holland, which has a production facility underway, and have advanced engagements with other high-scale OEMs. On the operations and distribution side, we have arrangements with Volkswagen's Mobility arm MOIA and Japanese fleet manager Marubeni, to provide operations and the customer-facing technology. Finally, we have announced re-engagement with demand generators, Uber and Lyft in the U.S. and public transport operators in Europe to provide the demand platform. All of these actors have skin in the game, which is also important to drive scale. So Mobileye, with the kind of partnerships that we are building, is in a very good position to scale rapidly once we start commercial deployment in 2026. In terms of a technology update on robotaxi, we recently successfully transitioned into our full production hardware inside the ID Buzz test vehicle. The mean time between failure performance is tracking well to the KPIs that were laid out at the start of the program. We expect to reach our KPI goals by the end of 2025, start adding tele-operations, and then remove the driver in 2026. So it's all on track. In summary, the opportunities set in front of us today are larger, broader, deeper, and more urgent than it was when we went public in 2022. OEMs are indicating increased clarity in planning and decision-making. Near-term volumes are strong. The demand for both higher performance and lower cost is intensifying, and eyes off performance, whether for personal cars or robotaxi, is no longer seen as a science experiment but as an achievable and commercially viable product. This is exactly where Mobileye thrives. I'll turn the call over to Dan to cover the finance section.

Thank you, Amnon. Before I begin, please be aware that all my comments on profitability will refer to non-GAAP measurements. The primary exclusion in our non-GAAP numbers is amortization of intangible assets, which is mainly related to Intel's acquisition of Mobileye in 2017. We also exclude stock-based compensation. Our Q2 results significantly exceeded the color we provided on the Q1 2025 earnings call in April, and were slightly better than our pre-release numbers from earlier this month. Revenue was up 15% year-over-year versus the outlook of plus 7%. The strength was due to several factors. Multiple OEMs, including Chinese OEMs, showed modest outperformance, which taken together contributed to significant overall gains. Supervision volume was also a bit stronger than expected as production of the vehicles we are on is running better than expected year-to-date. I'll spend a minute on inventory as we continue to monitor it closely. Based on our discussions with customers, inventory was relatively tight entering the year, and there was some direction from certain OEMs to increase safety stocks due to the volatile macro environment. Even so, a variety of analyses we run on a regular basis indicate that shipments were relatively consistent with demand on a year-to-date basis. To frame it, EyeQ volumes in the second half of 2024 were 17.8 million units and inventory ended the year at a low level. Volumes in the first half of 2025 were 18.1 million in what we believe was a comparable demand environment to the second half of last year. We continue to believe that inventory at our customers remains well aligned with underlying demand. Turning to gross margin. It was down slightly year-over-year and versus Q1. Gross margins are stable by product and by region. The exact results, however, depend on the mix of China volumes in the ADAS business and supervision, each of which carries gross margins somewhat lower than the corporate average. Supervision, in particular, was a higher percentage of revenue in Q2 versus Q1, causing a bit of a gross margin reduction. Operating expenses were up 7% year-over-year and flat compared to Q1, versus the prior outlook that indicated Q2 OpEx would be slightly higher than Q1. As Amnon mentioned, operating cash flow was over $300 million in the first half. This is primarily due to strong cash flow from the core business. However, we've also managed tight control over the working capital accounts, particularly balance sheet inventory, which came down by about $90 million in the first half. We're now well aligned with our 6-month target on balance sheet inventory, and we expect working capital to be more cash neutral in the back half. Turning to the full year guidance. We are increasing the revenue midpoint by 4% and the adjusted operating income midpoint by 14%. On the last call, we noted that the implied step-down in second half 2025 revenue versus the first half did not reflect any specific indication of production weakness, but rather a cautious stance given the elevated uncertainty around automotive tariffs at the time. Since then, while tariffs remain in place, the actual impact on production and consumer demand appears rather limited, and third-party forecasts have risen since April. Our current outlook releases some of the conservatism in Q3 as visibility is high at this point. That said, visibility into Q4 remains more limited, as is always the case in July, and we believe it's prudent to maintain a cautious stance and a wider-than-usual range for that Q4 period. To be 100% clear, the business is performing very well. We are not seeing any tangible headwinds and we've not received any indications from customers that Q4 volumes will weaken. We are simply choosing to remain conservative beyond the very near term. Our full year outlook is based on EyeQ volumes of 33.5 million to 35.5 million, up from 32 million to 34 million previously. As noted above, supervision volumes are running better than expected, and we're modestly raising the outlook to about 40,000 units at the midpoint versus the prior outlook in the low 20,000. We expect gross margins to be up about 0.5 points year-over-year in 2025. This is slightly worse than our prior outlook, but this is simply due to supervision and China EyeQ being a bit of a higher percentage of revenue. Adjusted operating expenses do not typically flex according to revenue and remain in line with our prior expectations. We continue to expect an increase of about 7% year-over-year to slightly below $1 billion. Looking at the balance of the year, we would expect Q3 to be somewhat higher than Q4, consistent with historical seasonality. Turning to Q3. We expect to deliver approximately 8.7 million to 9.3 million EyeQ units and for our revenue to be roughly flat on a year-over-year basis. We expect gross margins to be slightly below the Q2 levels and for operating expenses to be seasonally higher in Q3 versus Q2, aligned with previous expectations. Thank you, and we will now take your questions.

Our first question comes from Chris McNally with Evercore ISI.

Maybe we could just double-click on Amnon, your comment around sort of the higher momentum at Chauffeur, maybe a little bit of slow momentum on supervision decision-making. How much do you think this is sort of OEMs having more of a question around their own pricing ability to pass through sort of a Level 2 plus product versus something else? Because I think we've all seen this sort of delay in implementation, and there is some fear that we're seeing these products given away almost for free in China, a lack of clarity, let's say, for how OEMs would price such a product? I would love your thoughts on that.

I think there is a lack of competitive pressure for these systems in Europe and the U.S. You see these systems a lot in China. And outside of China, it's only the Tesla FSD, and the OEMs have seen the Tesla FSD for more than a decade. So we need more competitive pressure to kind of bring OEMs to a sense of urgency. I think the last news about penetration rates of Tesla FSD are encouraging. It's more than 25% take rate, and it looks like it's climbing. So I think the news is good in terms of public interest in these kinds of features and willing to pay for them. But regardless, OEMs are still in the planning stage because it's not only the Level 2 plus, the supervision, there is Chauffeur. They want to be part. They want to have skin in the game in robotaxi, not just produce cars and sell them to the likes of Waymo and others. They want skin in the game in the robotaxi domain. So it's all part of planning. There is around ADAS, whether it should take over the front-facing camera or just be a premium product. There's a lot of planning to do. But the more we deep-dive into it, the more we see that planning phase is coming to a close. So we see a lot of activity by OEMs talking about supervision, but in addition, also surround ADAS and Chauffeur, and with a number of high scalers OEMs also about robotaxi.

I would like to mention that we have recently begun inviting OEMs to view our Generation 2 supervision system, which is now operational in several locations and showcases our EyeQ6 platform with new technologies. We have observed a heightened interest and significant enthusiasm from OEMs regarding the demonstrations. This reflects positive momentum around supervision. It's not solely due to competitive pressure; we're also witnessing more evidence of how our Generation 2 system performs in the field, which has been available recently and has been quite successful.

That's really helpful. And just my quick follow-up. Is it fair to characterize, or paraphrase, as sort of the flag slide that you showed in December as more of an implementation delay rather than a full pause on supervision and that you still see supervision as essentially the stepping stone for a lot of these OEM programs into Chauffeur given the software overlap and just obviously additional hardware needed for Chauffeur?

Nimrod start, and I'll complement if necessary.

No, I don't think that necessarily we have suggested that supervision is a prerequisite for Chauffeur. I think that what remains true is that there is a consensus, at least from our perspective, amongst OEMs that Chauffeur is a very compelling value proposition for consumers. And as Amnon said in his opening comments, it's a question of whether or not the technology is mature and at what price and which timeline. We are making consistent progress not just in Chauffeur directly but also through robotaxi, which is showing a lot more about our robustness and the maturity of our technologies for eyes off with no driver, which requires very high precision levels. And the more we're making progress, the more we are convincing OEMs that this is a technology that is here and now and not for the next 5 years. Therefore, we see some OEMs that are considering going straight to Chauffeur for the let's say, 2027, '28 time frames. So I think what we have learned is that the OEMs are a spectrum of needs and interests and planning strategies. Our strategy is that our products are playing on the complete spectrum of solutions. And so we can offer the entire product portfolio like we do with Volkswagen, we can offer parts of it. But what's important is that we're progressing towards SOPs to launch these products in the market, regardless of how OEMs are thinking about their planning. The more we make progress, the more we can convince them that the technologies are mature, which product makes the most sense for their segments and so on.

Yes, I'll mention that we have a start of production in 2027 with Audi on Chauffeur, and it's on track, and there's also a number of homologation steps that also we have passed. So as time goes by, the maturity level of this system is now becoming more and more evident and that should bring OEMs to the table and get convinced that the maturity level is good enough to start thinking about the production program for Chauffeur.

Our next question comes from James Picariello with BNP Paribas.

Just starting with supervision, the guide for 40,000 units, a near doubling of the expectation for the full year. Can you just speak to what's driving that, how the relationship is trending with ZEEKR? And then just looking ahead, any thoughts on the timing for next year concerning the proportionality launches for supervision and Chauffeur?

Yes, we took a conservative stance on supervision volumes for this year. Since then, what we've seen is ZEEKR 009 for export markets has been selling more vehicles than we probably expected. Polestar 4 production and end demand have been pretty good as well. I think key here is that any ZEEKR vehicles that are being shipped outside of China are still using the supervision system, which kind of indicates the maturity of our system for kind of non-China markets. But yes, I think it's just a reflection of kind of a conservative start of the year and kind of production of these vehicles running better than expected.

Yes. As for the portion Audi, the standard production is the end of 2026. So the effect on revenue should be seen in 2027. We see 2027 as really an inflection year in terms of revenue, where supervision by Porsche and Audi, and we believe more would come out. Robotaxi will start generating revenue as well because we are removing the driver mid of 2026, and we have a very strong plan of scalability. So in 2027, it is really the inflection year in terms of revenue.

Yes. And if we look at the consensus expectations for Supervision in '26, it can be almost exclusively covered by the current vehicles in production.

Got it. That's helpful. And just my follow-up. In regard to the recent secondary offering, tied in tail stake, how should we think about any future intentions there and the potential time frame?

Dan, do you want to take this and I'll complement?

Yes. No, I think Intel has shown quite a bit of patience with their stake in Mobileye. They hadn't sold any shares for 2 years. They still maintain more than 80% ownership. I think they've made public comments that they have kind of a very strong view of the potential of Mobileye and want to participate in that upside. So we weren't really surprised that they'd want to sell some shares after the next couple of years, but we can't really speak to any future plans that they have.

Our next question comes from George Gianarikas with Canaccord Genuity.

I'd like to concentrate a little bit on robotaxi. I think you sort of characterized the interest as accelerating from OEMs and deploying your solution. Can you just help us understand a little bit about what you're seeing in the marketplace, the potential for new wins? And what the competitive set looks like when you're offering your solution to OEMs?

Well, we have a relationship with Volkswagen on the ID Buzz, where MOIA is the operator and customer-facing. There's also deals with Uber regarding this platform. The volume expectation towards the end of the decade is very substantial. There is a hold on with a platform called Mover. We already have prototypes equipped with our system and testing. It should come out 6 months later; also, volume productions projections are very high. In addition, we have a relationship with Marubeni. We are working with additional OEMs to supply vehicles both from MOIA and also for Marubeni, and hopefully, we'll be able to update the market soon about additional OEMs. But Volkswagen alone is a very high volume opportunity for robotaxis.

I wanted to provide some additional insights into the market and competitive landscape. It’s important to differentiate between the U.S. and Europe, which are our two main markets for initial launches. In the U.S., Waymo and Tesla have been vocal about their efforts. Beyond these companies, we see ourselves as a unique technology provider that can deliver a comprehensive self-driving system, including hardware, software, and AI technologies, in a scalable and cost-effective manner that allows all participants to be profitable. At this point, we believe we are the primary, if not the only, candidate for original equipment manufacturers looking to seriously produce robotaxis and establish business models with demand generators. In Europe, we find ourselves in a strong position. Recently, the German chancellor tested the ID Buzz equipped with Mobileye technology, drawing significant public and political attention to the potential for robotaxis in Europe. Our partnership with Volkswagen greatly enhances our interests in this area.

Okay. Just as a follow-up, can you help us understand a little bit more about the business model opportunity for the robotaxi, the price per system, and particularly the potential for you to participate in the revenue per mile as you deploy these systems and if that can be replicated across OEMs?

Yes. We receive revenue for the system, and we also receive recurring revenue or the cost per mile. We have both. Maybe in the future, we could reduce the cost of the system and add more in terms of the contribution of per mile, but even the current setup is very good in terms of revenue potential and the recurring revenue potential over time.

Our next question comes from Dan Levy with Barclays.

Wanted to just first start with a question on the near-term EyeQ shipments. And maybe you could just give a bit more color on where the strength is coming in from, and specifically, the trends within China, which had obviously been quite weak in 2H. But it seems like the last couple of quarters have been pretty good. What's the right run rate to think of now from China, both from the domestics and from the multinationals there?

I can start on that. So, I mean, I think from an overall comment, it was difficult to analyze the EyeQ volume growth the last year or so because of some disruptions on inventory in China. Now you're starting to really be able to analyze it. So in Q2, if we adjust for inventory digestion last year, volume grew around 13% year-over-year in Q2 for EyeQ volume. Our top 10 customers were down 3%. So significant growth over market. If you look at the Q3 outlook, it's for growth around 5% year-over-year. Our top 10 customers are down 2%. This kind of comparison to our top 10 customers is starting to show up as very favorable for us. On China, the China business has been running better. We did slightly over 1 million units in the back half of last year. We thought we would do around 1 million in the first half. That was our outlook. We did more like 1.5 million. So there was some upside there. We're not assuming that type of volume for the back half, just because we don't have as much visibility, and we want to stay conservative. But it does look like that's a fairly stable run rate for us. But yes, I think overall, the revenue outperformance has been pretty broad-based. If you look at kind of all of our top 10 customers, for most of them, there was at least a bit of outperformance, and it added up to a bigger number. There was outperformance in China; there was outperformance in supervision. So it's all pretty broad-based.

Okay. Great. The second question is, as you're ramping on your efforts in Drive, I wanted to get a sense of the type of resource allocation. I go back to the CMD you had last year where I think you gave the pie chart of your spend, 11% of your spend is on Drive. It seems like your efforts are accelerating here. Can you just give us a sense of how extensive the resource requirement is on Drive and what this could do on the OpEx in the next couple of years?

Well, our OpEx grew substantially in 2023, also grew in 2024. We see the OpEx as more or less flattish in the coming years. That means all the growth to prepare for Drive and Chauffeur and supervision to the transition from Tier 2 to Tier 1 on some of the programs like with the Porsche and Audi. All of that accounts for the growth that we have already experienced. So we don't see substantial growth in the near future in terms of OpEx growth.

Our next question comes from Samik Chatterjee with JPMorgan Chase.

This is MP on for Samik Chatterjee. So I just wanted to double-click on the Imaging RADAR deal, which you did during the quarter. And like how should we think about the size of that particular business? And like will you be open to doing more similar deals in the future where you will be selling individual components other than full systems? And I have a follow-up.

Yes. So the imaging radar for us is a strategic sensor. The deal we had with that particular OEM is just for the sensor. It's a very reputable OEM, and we thought that this would drive credibility because the RFQ phase was very lengthy and all competitors of imaging radars participated, and our radar was shining through. So we sold it as a separate sensor, but we do not expect to do that in the future. It's part of the bundle of eyes-off systems on Chauffeur and Drive. For example, the ID Bus has 5 of our imaging radars as a front-facing imaging grade and corner imaging radars. We believe that all future Chauffeur programs will have our imaging radar because it allows you to get the speed that you need in terms of highway driving. You need to see hazards very far away, more than 150 meters away, and the sensor that we have can do that in a very high resolution and high dynamic range, and it's simply an enabler for eyes-off systems at scale. So it's part of a bundle. We don't see it as another source of business as a sensor business.

Okay. Got it. And another question which I had was regarding the 2027 ramp. So you will be ramping on supervision Chauffeur and Drive in that year. Any way to understand which will be the biggest driver of those? And how will you rank out of those opportunities in '27?

So we have the 2027, the Chauffeur, and supervision. We mentioned in the past as more than 19 car models coming out with those systems. We're not yet ready to make guidance for 2027. In terms of Drive, there is a significant plan of expansion to multiple cities starting from the end of 2026, both in Europe and in the U.S. So it should drive substantial growth. We're not at a position to put a dollar number to it right now.

Exactly. But I think what's new here is that we do now expect Drive to be a significant contributor in 2027, and that's a reflection of the confidence we have in commercial deployment during sometime during 2026.

Our next question comes from Vijay Rakesh with Mizuho Securities.

Just a quick question on supervision. Obviously, a nice upside here. You raised to 40,000 from ZEEKR Europe. And sort of how Calendar '26 should shape up in terms of units for supervision, especially some of the newer ramps, and I have a follow-up.

We're not really ready to talk about specific expectations for 2026. Like I said, we're essentially kind of marking to market the end production of the vehicles that have supervision today. This still doesn't include any U.S. volume for Polestar 4. They did start producing that vehicle in Korea. So there's a tariff in Korea from vehicles produced in Korea, but it's not 100% like it is from China. So they should be able to launch in the U.S., and we think that will create some growth for next year as well. The export volume of ZEEKR has been probably a little bit better than expected this year. We would expect that to grow a bit next year as well. So it should be some growth in '26 from the existing vehicles, and we'll have more to say about kind of the overall supervision volumes like when we get to 2026.

Got it. Just a quick housekeeping question regarding inventory. I see that EyeQ has increased from the midpoint of $33 million to about $34 million, showing some improvement. However, if we examine the inventory levels, keeping in mind that each OEM has different inventory levels, how does the current inventory compare to last quarter or last year? This would help us understand where the levels stand.

Do you want to start Nimrod?

Yes. I can't disclose the specific inventory levels that the OEMs are maintaining as safety stock. However, overall, we've been aligned with what can be considered modest levels compared to historical periods. We are analyzing this through multiple methods. We receive direct information from our Tier 1 customers, who gather data from their OEMs. Additionally, we cross-reference this with third-party analyses of overall industry vehicle production in relation to our sales. We closely monitor this and will continue to do so on a weekly basis.

Yes. No, I think that's right. The finance and sales teams have done a great job of kind of developing tools to, as well as kind of direct feedback from the Tier 1s, and everything looks like it was pretty flat from the end of 2024 until now.

Our next question comes from Adam Jonas with Morgan Stanley.

Thanks, everyone. Amnon, I noticed your capital expenditures are at $28 million for the first half of the year. Annualized, that shows a significant decrease year-over-year. Consensus suggests you might spend around $100 million to $110 million this year. Your capital expenditures haven't really changed and have declined over the years, making Mobileye stand out as a physical AI hardware company involved in numerous exciting projects, collecting data and expanding the fleet. How is this possible? Where is your capital spending on computing? How much computing power do you have? It seems that as your data input grows for simulations and data centers, your computing and AI capital expenditure needs should increase proportionately. Can you clarify if I'm mistaken in this assumption? How are you managing this? Or is your position that you simply don't need as much computing as others, and that people like Elon and Jensen have it wrong? I have a follow-up question after that.

We require compute resources both on-premises and in the cloud. Our cloud expenditures have decreased slightly, although I cannot share specific figures, it amounts to tens of millions. We are prioritizing on-premises solutions, particularly with more GPUs. Our approach to compute spending differs from what you may hear from competitors. We possess robust systems and outstanding performance. Our EyeQ6 generation, along with our generation 2 supervision, Chauffeur, and Drive technologies, are excellent. For instance, our drive vehicle, the ID. Buzz, has over 100 units, and we have conducted numerous demonstrations for journalists in both Europe and the U.S. Recently, the Chancellor of Germany drove the ID. Buzz, and its performance has been exceptional. We have developed efficient methods for training our models.

Okay. Appreciate that. As a follow-up, what is your simulation stack? What does it look like? How much synthetic data are you using to reduce costs for training on edge cases, because that also seems to be for the problem that you're solving, and we talked about humanoid, but even in autonomous cars, very, very important. Love to hear your views there.

That's a great question. When considering simulation, we have two types. The first is photorealistic simulation, which we use to replicate edge cases, like placing a car on the road. This allows us to address issues before they arise in the real world using our advanced photorealistic simulators. The second type is focused on simulating the driving policy. We've developed a piece of technology known as ACI, or artificial community intelligence, which employs a synthetic simulator to simulate hundreds of road users over billions of miles of data. We can run billions of miles of simulation overnight to train the driving policy, making this approach significantly more efficient than training with photorealistic simulations. These are the two types of simulations that we utilize.

Our next question comes from Shreyas Patil with Wolfe Research.

Maybe could you guys talk about the typical lead time between securing awards and surround ADAS, and launching programs? I believe it's typically 2 to 3 years. So given the timing of the new ADAS standards in Europe, which I think is 2028, that would suggest OEMs need to secure contracts in the next 12 to 18 months. So is that the kind of timeline we should be thinking about, in terms of potential awards?

Yes. So when we're talking about Western OEMs, a timeline is typically 2 to 2.5 years from nomination to start of production.

Okay. That's helpful. So if the standards are coming on in 2028, it would suggest they would be needed to secure these awards in 2026, something like that?

Yes. Nimrod, do you want to add?

Yes. I think the majority of the RFQs that we have, and we have RFQs with multiple OEMs, the majority of our customers are engaging with us in this solution. These are things aimed for '27, '28 SOPs. So that's the current plans that we're seeing.

Okay. And then on robotaxis, there are a large number of AV developers in the space, and some of the rideshare operators such as Uber are striking agreements with multiple players for their platforms. So curious how you gain confidence in the number of vehicles that Mobileye will be supporting either on an Uber or a Lyft-type of platform.

Nimrod, do you want to take this?

Yes. I think that first of all, it makes sense for companies like Uber, who face pressure and questions from investors about their strategy for robotaxis as a potential threat to their business, to maximize their chances of being one of the winners in this space. I think that we're at the beginning of the adoption curve. Longer term, we believe that winning solutions will be the most cost-efficient, geographically scalable, with the highest performance and availability rates, and we believe that our products are inherently in the pole position in the axis. So today, there might be some announcements and statements with pretty much everything that can be a potential contender, but we think that within not a lot of time, there will be a separation between a very selected few companies that will have advantages in these economic scalability, geographic capability, the availability of the service and the others. Because if you think about this, we're still not at the stage of even thinking about, for example, how many charges they need to do per day for the vehicle. It doesn't play any factor. Our system is roughly 20% in power consumption compared to Waymo's. So these are just small things that today don't play a role because it's still a question of can you do it or can't you do it? We're at the cusp of getting to how well can you do it, how efficiently can you do it? Our system is designed to excel in these parameters. So that's where we get the confidence that ultimately, we will be one of these two, three companies that will see the highest volume of robotaxi services.

Our next question comes from Joe Spak with UBS.

Could you provide some insights on the commercial deployment of Drive and robotaxi? You need to finalize the vehicle, then there's the next step, followed by removing the driver in 2026. I'm interested in knowing where you expect this to occur first in the U.S. or Europe. Additionally, how much control do you have over aspects like the size of the geofence, the number of vehicles, and the timing for when the driver is removed? How does your collaboration with partners work in this context?

The leading partner is Volkswagen ADMT division. We have a very tight cooperation. We work very well together. The driver would be removed in the first city; it will be in the U.S. I'm not at liberty to say the name of the city, but there are very concrete plans in terms of how the driver would be removed, the design of tele-operators. We have a very unique design of tele-operators that allows for scale, going from, say, 1 tele-operator per vehicle to quickly going to 1 to X, 1 operator for X vehicles to scale that very fast using technology, certain cloud computing technology that will enable us to scale it. And it'll start in mid-2026 with that first city in the U.S.

Okay. And then the second question is, there was a report this morning that Volkswagen is looking for capital at their autonomous unit and offering a minority stake in the subsidiary that they're searching for strategic or financial investors. Like, I'm not asking you to comment specifically on that potential offering. But is a strategic investment in a partner something Mobileye would consider here as you look to scale Drive?

Yes. I think it's a very good development. I think also Google did that for Waymo, even though Google has deep pockets and confront Waymo without any external funding. I think it's a very good development we supported, and we will seriously consider participating as an investor.

Okay. Our next question is from Colin Rusch with Oppenheimer.

Given the leverage that you're seeing off of the compound platform. Can you talk a little bit about the cadence of learning that you're seeing, put some metrics around it, and potentially talk about the reduction in hallucinations that you're seeing in the system at this point?

Yes, we do not experience hallucinations. Hallucination is a metric used for large language models. Our key performance indicator is the mean time between failure, which is crucial in Drive because it is the only way to eliminate the driver required, in line with our strict KPIs. We are on track to meet our goals. All signs indicate that by the end of this year, we will reach a point that will allow us to remove the driver. For the following six months, we will focus on developing teleoperation technology before we actually remove the driver. All our KPIs for mean time between failure and other safety measures are on track.

And just the last one here is around the potential for reduction on cost of the perception suite. As you look at not only your own internal reduction in cost but sourcing other elements. Can you talk about how quickly you can start driving some cost out of the system as you get into '27, '28 and start seeing some incremental volumes ramp up?

Well, the cost of our system, we are talking about Drive. The cost of our system is already very lean. We have cameras, which don't cost much. We have our ECO with 4 EyeQ6 high, and it doesn't cost much. We have imaging radars, which we produce, it's hundreds of dollars overall. We have LADARs that are supplied by Innovis, also very reasonable cost. If you look towards the end of the decade, there is a possibility of just having 2 layers of redundancy cameras and the imaging radars and reducing the number of LADARs or reducing LADARs altogether. But this is something that's too early to say. That could be another cost reduction. Another cost reduction towards the end of the decade is moving from EyeQ6 to EyeQ7. That will be another element of cost reduction, but it's not really a very meaningful cost reduction. But we are already starting with a very lean cost platform.

We have reached the end of our question-and-answer session, and I would now like to turn the floor back over to Mr. Galves for closing comments.

Thanks, Maria, and thanks to everyone for joining the call. We will see you again at the Q3 earnings call in October. Thank you very much.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.