Semiconductor Company's Q3 Revenue Hits Guidance Out of the Park
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Disclosures for Stonegate Capital Partners, Valens Semiconductor, November 12, 2025

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On November 12, 2025, Stonegate Capital Partners analyst Dave Storms, CFA, provided a research update on Valens Semiconductor (VLN:NYSE), with a valuation range of US$4.21 to US$5.62 and an average midpoint of US$4.88, representing 171% upside from the current share price at the time of the report sof US$1.80.

The update followed the company's third quarter 2025 results, which significantly exceeded guidance.

Third Quarter 2025 Financial Performance

Valens Semiconductor Ltd. reported third quarter 2025 revenue of US$17.3 million, significantly above guidance of US$15.1 million to US$15.6 million, marking the company's sixth consecutive quarter of growth. Revenue increased from US$17.1 million in the second quarter of 2025, and US$16.0 million in the third quarter of 2024.

GAAP gross margin was 63.0%, with non-GAAP gross margin of 66.7%, exceeding guidance while easing slightly from 63.5% in the second quarter. Adjusted EBITDA loss of negative US$4.3 million was better than the expected range of negative US$7.4 million to negative US$6.8 million.

The company stated that the current fixed cash cost of the business is approximately US$100 million per year. Inventory of US$82 million remained in line with the end of the second quarter of 2025.

Cross-Industry Business Segment Results

Revenue from the Cross-Industry Business segment reached US$13.2 million, representing approximately 75% of total revenues, increasing from US$12.8 million in the second quarter of 2025 and US$9.4 million in the third quarter of 2024. Growth was supported by strong adoption of the VS3000 chipset in professional audio-video applications.

Valens advanced growth vectors beyond professional audio-video, announcing the market's first end-to-end camera-to-processor MIPI A-PHY platform with D3 Embedded for industrial machine vision. The company also marked initial medical wins with three VA7000-based endoscopy products, including a first single-use 4K colonoscope.

Cross-Industry Business gross margin was 69.1%, up from 67.8% in the second quarter of 2025 due to product mix.

Automotive Segment Performance and Headwinds

The Automotive segment reported revenues of US$4.1 million, reflecting a sequential decrease from US$4.3 million in the second quarter of 2025 and a year-over-year decrease from US$6.6 million in the third quarter of 2024. Storms noted that "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 decreased to 43.2%, primarily due to product version mix and operational expenses related to a manufacturing line transition.

Strategic Growth Initiatives

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 initiative with the first three VA7000-based product launches. Storms expects "several quarters before meaningful revenue contribution, but the long-term headroom appears significant."

In professional audio-video, customer demand exceeded expectations and the portfolio continued to broaden across VS3000 and VS6320 use cases, reinforcing ecosystem strength and positioning the business for sustained growth.

Financial Position and Capital Allocation

Valens Semiconductor ended the third quarter with US$93.5 million in cash, cash equivalents, and short-term deposits, despite a US$3.6 million expenditure on share repurchases. The company maintains zero debt, with Storms noting this "underscores strong financial resilience and readiness to pursue growth opportunities, including strategic acquisitions."

Fourth Quarter and Full Year Guidance

The company expects fourth quarter 2025 revenue to range between US$18.2 million and US$18.9 million, and adjusted EBITDA loss to range between negative US$4.6 million and negative US$4.2 million, with gross margins expected between 58.0% and 60.0%. Full year 2025 revenue guidance of US$69.4 million to US$70.1 million represents a year-over-year gain of 20% at the midpoint.

Valuation Methodology and Long-Term Outlook

Storms employs both a discounted cash flow model and enterprise value to revenue comparable analysis to derive the valuation. The DCF analysis produces a valuation range of US$4.36 to US$5.63 with a midpoint of US$4.92, using a discount rate range of 9.5% to 10.5%. The enterprise value to revenue valuation results in a range of US$4.06 to US$5.62 with a midpoint of US$4.84, applying a multiple range of 4.0x to 6.0x.

The analyst projects fiscal year 2025 revenue of US$69.8 million, representing 21% growth year-over-year, with adjusted EBITDA loss of negative US$17.1 million and net income loss of negative US$30.3 million. For fiscal year 2026, Storms forecasts revenue of US$80.2 million, representing 15% growth, with adjusted EBITDA loss improving to negative US$14.6 million and net income loss of negative US$28.9 million.

Market Position and Industry Outlook

Valens is positioned as a leader in high-speed connectivity solutions for the audio-video and automotive markets. The company's HDBaseT technology enables the transmission of ultra-high-definition digital video, audio, Ethernet, USB, control signals, and power over a single cable. The MIPI A-PHY compliant chipsets support advanced driver-assistance systems and infotainment in the automotive sector.

The global semiconductor industry is forecasted to grow by 18.2% in 2024, reaching approximately US$630 billion. The video conferencing devices market is expected to grow at a 16.8% compound annual growth rate from 2023 to 2028 to US$7.7 billion. The automotive semiconductor market is experiencing rapid growth due to the increasing adoption of advanced driver-assistance systems and infotainment systems.

Investment Risks

Key downside risks include market cyclicality in the semiconductor industry, competitive landscape pressures requiring continuous innovation, and geopolitical and supply chain challenges. The semiconductor industry is known for its cyclical nature with periods of high demand followed by downturns. Valens operates in a highly competitive market where rapid technological advancements are the norm, requiring continuous innovation against larger, well-established competitors.

The company relies on a complex global supply chain, and disruptions such as shortages of raw materials, delays in production, or logistical issues can impact operations. Additionally, talent shortages and geopolitical tensions can affect the industry's stability and growth.

Analyst Outlook

Storms expects Valens to add US$30 million to US$40 million in revenue through potential merger and acquisition transactions by 2029, targeting companies that are revenue-generating with a path to profitability. The analyst projects the company will reach revenues of US$90 million to US$100 million in professional audio-video by 2029 with gross margins between 65% to 75%, revenues of US$35 million to US$50 million in industrial machine vision with gross margins of 55% to 65%, and revenues of US$65 million to US$110 million in automotive with gross profit margins between 35% to 45%.

With 102.5 million shares outstanding, a market capitalization of US$184.5 million, and an enterprise value of US$90.0 million, the stock trades within a 52-week range of US$1.49 to US$3.50 with an average daily volume of 783,814 shares.