DALLAS, TX -- August 12th, 2025 -- Valens Semiconductor Ltd.(NYSE:VLN): Stonegate Capital Partners updates their coverage on Valens Semiconductor Ltd. (NYSE:VLN). Valens Semiconductor posted 2Q25 revenue of $17.1M, above guidance of $16.5– $16.8M, marking its fifth consecutive quarter of growth and up from $16.8M in 1Q25 and $13.6M in 2Q24. GAAP gross margin was 63.5% (non-GAAP 67.2%), within guidance and up from 62.9% in 1Q25. Adjusted EBITDA loss of $(4.0)M was better than the expected $(4.9)–$(4.4)M range. While momentum remains strong, tariff impacts, most notable in automotives, continue to pose a headwind for the Company. Overall, we are impressed with the quarter, see an uncertain end to FY25, and expect steady growth through 2026 and beyond as ProAV inventories correct, the automotive outlook improves, and machine vision markets come into focus.
Company Updates:
Cross-Industry Business: Revenue of $12.8M (~75% of total revenues) increased from $11.7M in 1Q25 and $8.1M in 2Q24. Growth was supported by strong adoption of the VS3000 chipset in ProAV, where the number of end products using the chip rose from ~100 at year-end 2024 to ~150. We believe this kind of product growth is a strong indicator of how quickly adoption can take place in the industry. Awards at InfoComm events in Beijing and Orlando reinforced technology leadership, while partnerships such as D3 Embedded’s launch of the first MIPI A-PHY platform in industrial machine vision positioned VLN for long-term growth. CIB gross margin was 67.8, down from 69.1% in 1Q25 due to product mix.
Automotive Segment: Valens’ Automotive segment reported revenues of $4.3M, reflecting a sequential decrease from 1Q25 of $5.1 million and a y/y decrease from $5.5M. Continued weakness in the automotive market due to the current tariff environment was the primary driver of this decrease, though we expect gradual improvement over the coming quarters. Automotive gross margins notably improved to 50.5%, primarily due to optimized product costs.
Growth Strategy: Valens expanded its presence in industrial machine vision through integration of the VA7000 chipset, enabling next-generation factory automation and inspection systems. In the medical market, the Company advanced its endoscopy initiatives with roadshows, showcasing the chipset’s reliability and image quality advantages to leading industry players. Given the long term nature of getting qualified in the medical end market we expect that it will be several quarters before this initiative takes shape, however, once underway there is significant headroom in this market for Valen’s premium offerings. In the ProAV segment, Valens further strengthened its ecosystem through multiple customer product launches, award wins, and growing adoption of its chipsets, underscoring the Company’s technology leadership and positioning it for sustained long-term growth.
Strong Financial Position: VLN ended the second quarter with a solid financial standing, holding $102.7M in cash, cash equivalents, and short-term deposits, despite a $10.2M expenditure on share repurchases. While closely monitoring tariff developments and their potential market impacts, Valens maintains zero debt, further underscoring its financial resilience and readiness for future growth opportunities, including strategic acquisitions. We are encouraged by the Company’s strong balance sheet position and expect management to convey further capital priorities following more clarity in the macro environment.
Guidance: The Company expects 3Q25 revenue to range between $15.1M and $15.6M, and adjusted EBITDA loss to range between $(7.4)M and $(6.8)M with gross margins expected between 58.0% and 71.0%. Full year 2025 revenue guidance of $66.0M to $71.0M is a y/y gain of 18% at the midpoint.
Valuation: We use a DCF Model and EV/Revenue comp analysis to guide our valuation. Our DCF analysis produces a valuation range of $4.36 to $5.52 with a mid-point of $4.87. Our EV/Revenue valuation results in a range of $4.50 to $5.30 with a mid-point of $4.90.
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