Mobileye Global Inc

NASDAQ:MBLY

Earnings Call Analysis

Mobileye shows stable Q3 growth with optimistic 2025 outlook

Mobileye reported a strong Q3 2024 with an 11% increase in revenue from Q2, aligning with stable market demand. While year-over-year revenue declined 8%, mainly due to a 50% drop in shipments to Chinese OEMs, core business remained solid. They forecast 2024 revenue guidance at 28.4 to 28.8 million EyeQ units and 110,000 to 120,000 SuperVision units, with Q4 SuperVision expected around 15,000 units. Operating expenses are expected to average below Q3 levels in 2025. CEO Amnon Shashua emphasized the importance of their strategic partnerships, indicating potential for significant growth in 2026 and a reaffirmed cash position of $1.4 billion to support future expansion.

A Stabilizing Quarter Amid Challenges

In the third quarter of 2024, Mobileye reported a 11% increase in revenue sequentially compared to the second quarter, suggesting that inventory issues at customer sites have normalized. However, year-over-year revenue declined by 8%, primarily driven by a 9% reduction in EyeQ volumes and significant shipment drops—over 50%—to local original equipment manufacturers (OEMs) in China. Fortunately, for its top 10 customers, Mobileye performed well, experiencing only a 4% decline, which is better than the overall OEM production decline of about 9% for that period. With operating expenses annualized at slightly over $1 billion, there is an expectation of reduced costs moving forward as the company discontinues its LIDAR development and implements efficiency measures.

Cash Flow and Earnings Guidance

Mobileye's operating cash flow for Q3 was a commendable $126 million, indicative of strong operational momentum, particularly bolstered by an abatement in supply chain pressures. Analysts have forecasted a similar performance for Q4. The company's guidance points to projected total EyeQ volumes of between 28.4 million and 28.8 million units for 2024, with SuperVision volumes estimated between 110,000 and 120,000 units. Importantly, for Q4, SuperVision volumes are expected to hit around 15,000 units. Additionally, Mobileye plans to maintain its adjusted operating income guidance, narrowing the guidance range suggests a strategic fine-tuning in response to evolving market conditions.

Emphasis on Advanced Driver-Assistance Systems (ADAS)

Looking ahead, Mobileye's key strategic objectives remain focused on solidifying its long-term position within the ADAS space with core customers while exploring opportunities to bring in new clients. The company is keen on launching the EyeQ 6 products with expected enhancements in AI technology and software stack integration. The management expressed consistency in progressing relationship deepening with core customers, marking significant design wins across its advanced product portfolio, which includes SuperVision, Chauffeur, and Drive. This approach aims to not only secure existing relationships but also capture new growth opportunities throughout 2025.

Navigating the China Market Landscape

The significant reduction of shipments to local Chinese OEMs, now down over 50%, marks a pivotal shift for Mobileye as these OEMs become a smaller portion of their business. The reduced exposure presents a clearer path ahead, providing a more manageable base for comparisons moving forward. In fact, while the anticipated growth from these OEMs remains uncertain, the overall revenue contribution of China is projected to stabilize, removing much of the volatility historically associated with that market. Mobileye recognized that while the reliance on China has been diminished, ongoing engagements with European and North American clients are expected to drive growth.

Investments in Future Technologies

Mobileye is positioning itself for a robust future by streamlining expenses and reallocating financial resources. With $600 million of projected OpEx in non-GAAP operating expenses dedicated to products that are either in low volume production or pending launches, this indicates a scalable model capable of managing significantly higher revenue levels as it moves forward. The company possesses a strong cash position, with around $1.4 billion on hand, which it plans to deploy strategically—both for acquisitions and as a buffer for unexpected growth in demand for its products.

Near- and Long-Term Projections

While the guidance for 2025 remains vague due to the uncertainties surrounding the Chinese market and production dynamics, Mobileye expects to improve its revenue position, especially post-inventory adjustments. The anticipated growth in operational cash flow in 2025 relative to 2024 signifies an uplifting outlook. Additionally, the company's spending program—a projected $1 billion in operating expenses—will not significantly increase but will focus on executing current programs and launching new initiatives such as SuperVision and Chauffeur as they convert advanced product engagements into production agreements.

Conclusion: Confidence in the Competitive Landscape

As Mobileye continues to navigate a complex automotive technology landscape, its strategic maneuvers, operational efficiency, and focus on technology advancements place it in a favorable position against competition, particularly in the ADAS segment. The company's broad engagement with major global OEMs and its success in securing follow-on design wins reveal strong relationships that should bear fruit into the next decade. While external factors, particularly regarding the competitive nature of OEMs in China, introduce variability, Mobileye's robust operational capabilities and clear financial health underpin its ability to maneuver through these challenges effectively.

Earnings Call Transcript 2024-Q3

[Operator]

Greetings, and welcome to the Mobileye Third Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dan Galves. Mr. Galves, you may begin.

[Daniel Galves, executive]

Thanks, Paul. Hello, everyone, and welcome to Mobileye's Third Quarter 2024 Earnings Conference Call for the period ending September 28, 2024. 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 President and CEO; and Moran Shemesh, Mobileye's CFO. Also joining for the Q&A session is Nimrod Nehushtan, Mobileye's EVP of Business Development and Strategy. Thanks. And now I'll turn the call over to Amnon.

[Amnon Shashua, executive]

Hello, everyone, and thanks for joining our earnings call. Starting with the results. Q3 was closely aligned with our expectations, and the second half outlook overall has been stable. We view the 11% sequential increase in revenue as compared to Q2 as another sign that inventory at our customers has normalized. We believe our shipment volumes in Q3 were consistent with end market demand. On a year-over-year basis, the revenue decline in Q3 is fully accounted for by a 9% reduction in EyeQ, volumes. If we dig deeper, shipments to our top 10 customers were down about 4% globally. This was an outperformance versus those OEMs overall production decline of about 9% in Q3. Volume to automakers outside the top 10, mainly domestic China OEMs was down around 50%.

Comparisons in that area will get much easier in the future as China OEMs are now a smaller part of our business. Operating expenses annualized at slightly over $1 billion in Q3. Based on our action to discontinue in the in-house later development as well as other efficiency actions taken, I believe adjusted operating expenses can be below the Q3 annualized level in 2025. Operating cash flow of $126 million in Q3 was quite strong and performance should be similar in Q4. This compares to $70 million of operating cash flow in total over the first half of 2024.

Turning to the future. I would like to spend a few minutes reflecting on the strategic objectives that we established several years ago to guide Phase 1 of Mobileye's return to the public markets. Our objectives are as follows: secure our long-term ADAS position with core customers and look to expand into new customers when opportunities present themselves. Deploy EyeQ-based supervision in China as a proof point to our global customers and as a beachhead for advanced product growth. Develop and launch our EyeQ 6 based products on time and on quality including integration of cutting-edge AI technology and the software stack, deepen the relationships with our core customers by securing design wins with our advanced product portfolio, including, SuperVision, Chauffeur and Drive.

Lastly, maintain a high level of profitability. Now we have clearly experienced unforeseen headwinds that have impacted 2024 and 2025 market expectations. But in terms of the strategic objective, intended to set up us up for major top line growth and operating leverage in 2026 and beyond, we believe we have made substantial progress. First, in terms of ADAS, our top 10 customers represent more than 80% of our volume and approximately 50% of current global auto production.

If we look across 2022 through 2024, we have achieved follow-on ADAS design wins from all of these automakers. The vast majority of these projects extend our business with these OEMs into the early 2030s. Outside of China, we have seen no new or existing competitors emerge to challenge us for these customers. Second, the regulatory environment is creating unexpected additional tailwinds with end-of-decade testing protocols, adding very challenging scenarios that are expected to require analysis and processing of data from additional sensors. We believe the continued expansion of required ADAS performance benefits us as a technology leader and provide opportunities for higher ASP systems such as surround ADAS.

The successful launch of our SuperVision system in China was a critical proof point on our advanced products and our ability as a Tier 1. It was an important catalyst for the Volkswagen Group design wins, which in turn led to interest from other global customers. On that note, at the time of the IPO, we had engagements with 1 or 2 of our top 10 customers in terms of surround ADAS, SuperVision and so forth. Including the production programs with the Volkswagen Group, we now have advanced predesign win engagements with 9 out of the top 10 as well as a number of other OEMs.

Converting these predesign wins engagements into production agreements is critical to set us up for the second phase of our strategy. Beginning in the second half of 2026 where we expect the advanced products to lead to a major acceleration of growth for Mobileye. While exact timing is difficult to predict, we remain confident in conversion given C-suite endorsement to many of these engagements and actions by the OEMs that we believe signals strong commitment. Finally, in terms of EyeQ 6 high execution, we are increasingly confident in our AI-driven software stack, the hardware and the ECU in terms of providing the best combination globally of cost and performance measured by meantime between critical intervention.

The ability to demonstrate this performance to customers in world scenarios using the EyeQ 6 hardware has been a key driver of continued progress towards design wins. In terms of our technology, we recently posted presentations that myself and Shai reported earlier this month, representing what I believe is the deepest and most detailed exposure of our technology approach ever. It's 2 hours of content, so requires some commitment, but it lays out our compound AI approach, which we believe is the right methodology to take the general revolution in AI and tailor it to solve a specific problem like self-driving where precision matters most and edge compute is constrained.

It can be accessed on Mobileye's YouTube page or just reach out to Dan, and he'll send you a link. Finally, we are excited to host analysts and investors at our Capital Markets Day in Munich in December. We'll have real-world demonstrations of the current IT 5-based SuperVision system and our latest robotaxi vehicles to give you a sense of the current end production technology. Then we plan to go deep on specific technologies that are included in the EyeQ 6 high advanced product generation that will be used by Volkswagen Group and other global OEMs we're engaged with, where we can demonstrate significant improvements to the eyes on products, but even more importantly, line of sight to an intervention rate that supports eyes of driving in a scalable way.

These step change improvements are driven by meaningful integration of transformer-based architectures and end-to-end techniques across our stack, unique ways of utilizing our massive database and innovative approaches that reduce processing power needs at the edge. Additionally, we'll provide updates on the progress of our production programs with Volkswagen Group for SuperVision, Chauffeur and Drive the learnings of which we can -- which can be leveraged for other customers. Finally, we'll provide a comprehensive overview of the market landscape and the framework of how to value our advanced product design wins when they come. Thanks, and I will now turn the call over to Moran.

[Moran Rojansky, executive]

Thank you, Amnon, and thanks for joining the call, everyone. Before I begin, please be aware that all my comments on profitability will refer to non-GAAP measurements -- the primary exclusion in Mobileye's non-GAAP numbers is amortization of intangible assets, which is mainly related to Intel's acquisition of Mobileye in 2017. also exclude stock-based compensation and the goodwill impairment referenced in the earnings release. Our Q3 results slightly exceeded the Q3 outlook color we provided back in August. Revenue was down 8% year-over-year.

As Amnon mentioned, global production was down fairly significantly in the quarter, particularly for our top 10 customers. But the bigger factor was the significant decline in our volume to China OEM, which was down more than 50%. Gross margin was down 1 point. This was expected and mainly related to the combination of slightly lower EyeQ ASPs as well as higher EyeQ-related COGS per unit given a different mix of EyeQ generation sold. This was partially offset by higher supervision gross margin. Operating expenses were largely in line with expectations.

Higher headcount depreciation, program development expenses related to the VW Group SuperVision and Chauffeur program, Mobility as a Service, testing and customer support operations, and significantly higher spending on technologies approaching production spike -- imaging radar, have driven year-over-year increases throughout 2024. We also accrued about $5 million of restructuring expenses associated with the LIDAR unit closure in Q3. Looking ahead on OpEx, we expect to spend somehow less in Q4 than Q3. which should drive some modest improvement in operating margin.

More importantly, due to the LIDAR unit closure and relatively stable headcount expectations, we expect to be able to hold quarterly OpEx at or below the Q3 level on average in 2025, around $600 million of our non-GAAP operating expenses are dedicated to products that are either yet to launch or are at low volumes today. Given the scalability of our company, this means that the current level of OpEx is capable of supporting a much larger revenue level.

Turning to the guidance. We maintained a revenue and adjusted operating income guidance at the midpoint and narrowed the range. GAAP operating income is lower due to the goodwill impairment. The revenue guidance is based on total 2024 EyeQ volumes between 28.4 million and 28.8 million units and SuperVision between 110,000 to 120,000 units. As you are all likely aware, SuperVision is now only a portion of -- as of September 1. This was incorporated to our prior guidance, but the take rate appears somewhat lower than assumed. The SuperVision volume in Q4 is expected to be around 15,000 units, with half of that coming from.

We spent a lot of time on China on the prior earnings call. Now that the dust has settled a bit we thought it would be helpful to size the business. In terms of the Q3 results, shipments of EyeQ and SuperVision units into China represented about 20% of our overall revenue, excluding SuperVision units or vehicles sold outside China. This was split between IQ units to local China OEMs at about 3%. IQ units to non-Chinese OEMs producing in China at 12% and SuperVision for vehicles sold in China at about 5%. The -- in Q4, we expect China as a whole to represent a similar percentage of our revenue, but for SuperVision units for vehicles sold in China to represent about 2% of our revenue.

Please note that these numbers won't match exactly with the geographic revenue disclosure in the quarterly filing because all SuperVision units are currently shipped to China and included in that region in the quarterly disclosure. Whether the vehicles are sold domestically or exported. Turning to operating cash flow. The $106 million we generated in Q3 was higher than adjusted net income even if we adjust for working capital, which was an approximate of $30 million benefit in the quarter, we expect this dynamic to continue in the fourth quarter.

Lastly, in terms of the tax rate, we assume a non-GAAP effective tax rate of between 18% to 20% for 2024. Thank you, and we will now take your questions.

[Operator]

[Operator Instructions] Our first question is from Joshua Buchalter with TD Cowen.

[Joshua Buchalter, analyst]

I appreciate all the details you just gave on units in and out of China and around SuperVision and Chauffeur, I apologize for asking for more, but maybe you could talk about how you're thinking about, in particular, 2025 SuperVision and Chauffeur volumes, given all the moving parts and recognizing that there's a lot of uncertainty with regards to China.

[Daniel Galves, executive]

Thanks, Josh, for the question. This is Dan. It's too early to talk specifically about 2025. We're still working with our customers to understand the expected orders for next year, but I can make some high-level comments. We'd expect 2025 to benefit from resolution of the inventory digestion that happened in the first half of 2024. In other words, second half run rate in terms of EyeQ volume of around 35 million units is a better starting point than the actual shipments in 2024.

Then it's important to focus in on our top 10 customers, the expected production growth or decline of those customers in 2025. Many of these OEMs have been facing headwinds in China that also affect our volume. And we think it's reasonable to expect that to continue in 2025, but that would all be included in kind of whatever the production expectations are for those customers. Next, we'd expect to outperform the production of those customers in the mid-single-digit range as we continue to benefit from ADAS adoption growth and growing share within some of those customers.

For example, in Q3, we outperformed by a bit more than 5 points. We could also see headwinds from local China OEMs. However, our total shipments in 2024 are forecasted at around 1.5 million units. So any declines here would not be very material. Finally, on kind of the EyeQ side, we'd also suggest incorporating some buffer to reflect the risk macro volatility could lead to a reduction in third-party global auto forecast by the time we get to 2025. On SuperVision, again, we're still working with the customers to understand the expected orders for '25, this has been so volatile over the last 2 years that it's really impossible for us to have good visibility on 2025 volumes with any specificity at this time, also the materiality to near-term revenue is much lower today than it has been. We'll have more to say in January or potentially at the Investor Day in December on that.

[Joshua Buchalter, analyst]

I really appreciate all the color there. And I guess for my follow-up, it seems like things have stabilized from an inventory perspective, certainly in the West. And it also feels like this market in particular, for core ADAS is bifurcating into the west versus China? Recognize that, again, China is going to be volatile, and there's ongoing share dynamics there. Maybe you can give us a new sort of normalized what -- how are you thinking about core ADAS growth from either a unit or with both units and ASPs specifically at your Western customers, I'd be curious, again, now that things have stabilized to get a better feel for what normalized growth could look like specifically in core ADAS.

[Daniel Galves, executive]

Yes. I think it's kind of in my first answer, right? Like within our top 10 customers, we would continue to expect to outgrow their global production by mid-single digits because of growing share within those customers because of ADAS adoption growth and that would kind of bake in any kind of reductions that they would have in China, which I think it's already significantly smaller there than it has been.

[Unknown Executive]

I can add more -- so near term, the tailwind comes from going back to normal inventory levels, which we expect to start happening next year. Longer term, as Amnon mentioned in these comments, -- over the past 2 years, we have won the vast majority of business opened by our existing customers, which secures our position within these customers well into the next decade. And also, we have created opportunities to win core ADAS business with OEMs that are today, not our customers. So longer-term growth in volumes in ADAS will come from continuing to increase our market share with our existing customers as well as winning new business with OEMs that are today not in our customer base.

Our diverse product portfolio enables us to create new types of deals that are attracting OEMs that previously were not maybe or closer circle of OEMs. In addition to this, as Amnon also mentioned, the push from regulation to increase the content in ADAS requires more sophisticated software and more sophisticated sensor set to continue to be compliant with all Western regulation. This is also a good tailwind for our ASP in ADAS in the next few years. Hopefully, it answers the question.

[Operator]

Our next question is from Mark Delaney with Goldman Sachs.

[Mark Delaney, analyst]

Yes. First, I was hoping you could provide more detail on the customer engagements with your advanced solutions. Were there any decisions that went against Mobileye or have been meaningfully delayed into 2025 compared to 90 days ago. And can you share more color on the progress you're having with these engagements for your more advanced solutions, specifically around SuperVision and Chauffeur.

[Daniel Galves, executive]

Yes, I'll take this. So -- there has been no decision made against Mobileye in the past 90 days to answer your first question. And we'll continue to make progress with all of the engagements we've had and we also see more and more evidence that our OEM partners are deciding towards products and advanced product to be launched in the next few years and that our competitive position is probably the best suited to win in the majority of these opportunities. For example, some OEMs have already initiated the process of securing sensors and other components in the system that are necessary for our advanced solutions.

Other OEMs are now in the final stages of the commercial evaluation and the final negotiation rounds towards a decision, and we have not seen any material delay into the next year. As Amnon mentioned, it's decision-making time lines are a little bit dynamic, and it's not entirely in our control, but we do see that we make a continued progression towards decisions and that the OEMs are continuing to invest and to secure all the necessary elements to enable such a system in their next product launch.

[Mark Delaney, analyst]

My second question was just better understanding the cyclical and inventory environment. The company left its revenue guidance for the year unchanged. And that's despite continued weakness, especially from Western OEMs around production volumes for this year. Maybe you could talk a little bit more on how you see inventory at Tier 1s and/or at OEMs. I know you're tracking that much more closely and heard, Dan, your comments around outgrowth for next year, but do you want to check on how you guys see inventory levels? And is there any risk of inventory having been built up at your customers?

[Moran Rojansky, executive]

Yes. So the per se, we're very much encouraged by the trend of the year. So seeing a very significant increase from Q1 to Q2 than 11% from Q2 to Q3. kind of set our expectation or belief that the inventory issue is behind us on the first half. Also from Q3 to Q4, we do see a modest increase in EyeQ, but it's something that, again, is reflects normalized levels of inventory, and we believe reflects the market demand. So Q3 and Q4 are pretty similar, which again aims the inventory for the first half of the year.

As for your question on further production decrease that happened. So we had some change in mix between OEMs this year versus our last forecast. So for some OEMs that were used, but we had some product launches in the second part of the year. China, local OEMs have been a bit better. So there was some change in mix, but overall, it's aligned with our expectations.

[Operator]

Our next question is from Edison Yu with Deutsche Bank.

[Xin Yu, analyst]

First 1 is on the comments you made about 2026. Obviously, there's some very big programs launching again very important for the growth inflection, how are we feeling about the timing and sort of the take rates? I realize you're not preventing any specific, but obviously, we've seen some big program delays from some of the legacy OEMs. So wondering kind of your confidence level in those launches.

[Daniel Galves, executive]

Yes. So far, we are on track with the project milestones. So we continue to execute and meet all of the major milestones for integration. So from the execution standpoint, currently have good confidence in meeting the back half of 2026 and onwards product launches. Of course, there could be changes due to reasons unrelated to us directly. OEMs have their own considerations and can potentially lead to some delays. But at this point, we have -- our plans are intact and we continue to make progress on all fronts, and we'll provide more color on this in the Capital Market Day in December.

[Xin Yu, analyst]

Understood. And then just more of, I guess, on the AI side, obviously, there's been a lot of focus on interventions, disengagements, I think, especially of late as there's more coming out there who's been providing kind of constant metrics on that at least trying to. Can you just remind us how you're thinking about the thresholds for interventions in terms of the various levels of autonomous driving and kind of what sort of the time line or road map you kind of envision for performance to reach those thresholds.

[Unknown Executive]

Well, we believe that it's -- the notion is much more complex than just intervention rate. when you look about -- when you kind of classify failures, there are identifiable failures in the system, the reproducible failures in the system. There are black swans type of failure. So when you're looking about intervention rate, there are certain failures that you want to have a 0 intervention rate. For example, if an error or if a failure is you're producible, you want to fix it. and not have it to come surface again.

We are now at the point of publishing a very extensive and comprehensive safety outlook in which how -- in which the way fusion of sensors and the way intervention is measured would be made very explicit and we'll talk about it in our Capital Day -- Capital Market Day in December. Today's intervention rate in our SuperVision is measured by hours so roughly 10 hours or so. We have a line of sight for our supervision system on the EyeQ 6, the next generation of about 1,000 hours intervention rate just for the camera subsystem and then when you put together the active sensors, radars and front-facing Lidar will have another step function in terms of intervention rate, which is crucial for an eyes off system.

Now intervention rates of eyes off system at the end of the day, should be at least in the tens of thousands of hours of driving. It's hard for us to see and a credible eyes off a system with a lower intervention rate than that. And we are on track to achieving it. And more details would be presented at the Capital Markets Day and also the safety report, which would be published in about a month or so.

[Operator]

Our next question is from Dan Levy with Barclays.

[Unknown Analyst]

This is Trevor Young on for Dan today. Just first, I had a question around customer discussions and interest. As we've seen, if you've seen any meaningful changes in the interest in your advanced products associated where they cite potential competitive pressures from Tesla? And if there's been any changes post the robotaxi day.

[Unknown Executive]

Yes, I'll answer about the beta today. I think the test at robotaxi day reinforces what we have been seeing in the past months, which is the revival of the Robotaxi vision as a realistic end of world. This comes together with Waymo's new equity round, the high market cap of are the big investments in promising startups. Now this helps mobilize shine light on our own robotaxi activity which is based on production dissent with OEMs like Volkswagen's ADMT and the ID Base platform, Holo, Ruter by Benteler -- and VDL platform and Verne, which we announced a few months ago, and we have more in the pipeline. So the leading customer is AT&T on the ID bus platform and the development is moving well. Our goal of building an affordable self-driving system for power in global taxi is very advanced, and we'll make a deep dive demonstrations during the IR Day in December.

Now so far in the past year, we have been focusing our kind of discourse more on SuperVision and Chauffeur, but we have a very active and lively activity on robotaxi, this is something that we didn't talk much about in the last year, and we'll make a focus of it on our Capital Markets Day in December.

[Daniel Galves, executive]

And just to follow up on the implications and other OEMs as a result of Tesla's robotaxi. So we've seen the appetite from OEMs to similar systems before the robotaxi today. We see a realization amongst OEMs that next generation of driver-assist systems is going to be a step function improvement in capabilities and performance compared to today's system. And they also understand that technology companies, leading technology companies like Mobileye and Tesla make very, very quick progress towards this new generation.

And as a result, looking for most of our customers have it as a kind of within their brand identity to be top of the line in ADAS performance. It has been important for them for the past maybe 2 decades, and it will continue to be important to them, and they understand it. Now going to be required from them to do something completely different than a simple incremental improvement.

And we are being perceived in some cases, potentially the most relevant solution for the next 2 to 3 years, especially if you think about the chances of meeting SOP deadlines and with everything involved in this functional performance, execution of our project hardware design, software design and reputation, and this is really helping us to surface as a leading candidate in all of these engagements. And in addition, this robotaxi angle that Amnon just laid out, also created an opportunity with OEMs that also want to play into robotaxi in a similar way to how Volkswagen have a program with us and robotaxi.

We have another major global OEM that have started a similar activity with us. It's a little bit more early in the process, but it also is an encouraging sign of the push from the market.

[Unknown Analyst]

That's very helpful. Just as a follow-up, I appreciate you're not ready to give an outlook for 2025. But without getting into specifics numbers. Could you just help give us maybe a directional sense as to how 2025 SuperVision volumes will change from the 15,000 that you noted for 4Q including half of that coming from Pollstar 4 just as a sense of where the incremental -- or where the volumes are going to trend from that, if you will.

[Unknown Executive]

Yes. So I think that you've got the right starting point, right, is kind of what the current run rate is. And then you have to think that in terms of there are some upside potentials there -- we were only producing for that in the second half. You do have some new customer in 2025 as well, but visibility in terms of Chinese OEMs is very difficult to call. But then you also have downside risk as well in terms of you're working with Chinese OEMs that we -- again, we don't have much visibility on and startups.

So I think that looking at the current run rate, as a good starting point for 2025, but we really don't have enough information right now to get specific.

[Operator]

Our next question is from Adam Jonas with Morgan Stanley.

[Adam Jonas, analyst]

So you have the core ADAS annuity stream that is essentially 90% of your revenue today. And I think people on this call understand that, that will last, and they buy the view that you're renewing and growing enough with your existing customers and new customers to keep that annuity stream broadly stable, maybe growing maybe falling, but still something you can have visibility in the next decade. But are the earnings -- is the earnings power from an annuity stream combined basically to fund the CapEx and R&D required for those longer-term options really, really stepping up SuperVision, Chauffeur and Drive to support your customers -- and I guess it's more of a strategic question. When would we see the quantum of your spending step up? Is it a timing thing that it's kind of in sync with the wins that you would get in development? Would that require outside capital or working with a partner?

[Unknown Executive]

Look, we are -- if you analyze our spending, we're talking about $1 million -- $1 billion of OpEx. I think for 2025, we don't need more than that. There would be certain programs, SuperVision and Chauffeur that once we get the design win, we think we'll need some headcount increase in specific sites very local to those customers. But again, this is tens of millions of dollars of increase in budget. It's not something really immaterial. I think in terms of expenditure, we have all what we need to meet the goals and let's repeat the goals.

One is to maintain ADAS, and ADAS is an evolving field. The testing is becoming more and more complex. Programs are starting to require multiple sensors, what we call surround around ADAS. To support that -- to support the SuperVision, to support Chauffeur and to support Drive. And all of this is ongoing simultaneously, right? It's not that there is 1 area in which we're not supporting and the $1 billion we have in OpEx is completely sufficient to fuel our growth going forward. And just to give color, out of this $1 billion OpEx $600 million of it is purely on future investments in AI and things that are not related to supporting production -- current production programs.

So I think we are very well equipped to meeting all the future challenges with the level of income that we have. And even though we didn't give numbers for 2025, Clearly, we are expecting growth in 2025 in terms of revenue just because of the inventory issue that has been normalized. So and we expect our operating cash flow in 2025 to be higher than the operating cash flow in 2024. Not to mention that we have a war chest today of around $1.4 billion in cash to help us both in acquisitions and the unexpected growth that we'll need to have. I think we have all what we need to support our growth.

[Operator]

Our next question is from George Gianarikas with Canaccord Genuity.

[George Gianarikas, analyst]

I'm just curious as to whether there's been any progress on the segment that you've discussed in the past about emerging market chipsets. Wondering if you have any update there, any progress you made in some of your potential customers?

[Unknown Executive]

So if you -- George, if you refer to the lower cost solutions for emerging markets, if I understand correctly?

[George Gianarikas, analyst]

Yes, that's correct.

[Unknown Executive]

Yes. So we have been working with some of our Tier 1 partners on approving cost-optimized system specification that is really well optimized for emerging markets where kind of the software necessary for entry level and there is kind of a lower price point to start with. And we are on track to be production ready within a year with this lower cost system. It's not just our products that are being optimized, but also the components necessary for all products that are delivered by the Tier 1 partners, and we are well on track to this.

[George Gianarikas, analyst]

And maybe as a follow-up more of a technology -- go ahead, I'm sorry.

[Unknown Executive]

I just wanted to add 1 more sentence that we have been also winning a few important RFQs in India, which is 1 of the prominent emerging markets in automotive in ADAS specifically as we see more and more preparations towards future regulation coming up, and we are in a prime position to be leading the Indian market as well in a similar fashion to how we are leading global markets.

[George Gianarikas, analyst]

Maybe as a follow-up, just from a technology perspective, you've had a lot of announcements regarding imaging RADAR, FMCW, LiDAR. I'm just trying to be clear as to what where you think these sensor sets evolve over the next, call it, 5 to 10 to 15 years with regard to your road map, in the 20s, 30s, do you still envision vehicles that have all 3 sensor sets, cameras, radar and Lidar or do you think that your imaging radar is going to replace some of the Lidar optionality?

[Unknown Executive]

I think it's a very interesting question. But the answer I can give is on the speculative. We feel that imaging radar is key. This is why we put so much investment since 2018. And this area and building an imaging radar that is with a huge gap to anything else you see on the market or people are developing. And we'll have more news in the coming months to -- about our imaging radars. Our B samples are operating to the theoretical spec that we imagined a few years ago and the start of production of next year is on track. So I only believe that imaging radar is really a key sensor to complement the cameras.

In the coming years, there will be also a Lidar at least a front-facing bladder when you're talking about the programs and our drive programs. There are multiple Lidars providing a 360 coverage. Whether you would need Lidar saying the decades. I can imagine a world in which it's just cameras and imaging radars. But it's -- at the moment, it's speculative. So at the moment, we are using all 3 sensors, and we'll see how we -- how this will play out in the coming years.

Just to mention that our robotaxi activity, our imaging radars is an integral part of it, our 5 imaging radars in our robotaxi activity.

[Unknown Executive]

And just to follow up, we've seen I think the uniqueness of our imaging radar has attracted interest from players who are not in our customer base today, but have a strong interest in competing in reveres or eyes off space and have reached out to us specifically for this imaging radar. So just to signal kind of how it's being perceived in the market in its performance and uniqueness.

[Operator]

Our next question is from Antoine Chkaiban with New Street Research.

[Antoine Chkaiban, analyst]

So as you mentioned earlier -- started using its in-house software in September, running on NVIDIA hardware for the majority of -- sold in China. Can you maybe walk us through what happened there, how they were able to achieve that? How you see the performance of their in-house system may be measured in meantime between critical intervention compared to the 10 hours that you mentioned earlier for SuperVision.

[Unknown Executive]

I would say that Zika's in-house system it costs twice as much as ours and has similar performance. I don't want to get into the nuances where the performance is higher and where the performance is lower. I would say it's similar. But this tells you something that there's something strategic here. Now Zika was very open about their in-house development early on. While we didn't think so at the time, we now realize that no matter what we could have done, we would have been eventually replaced by the in-house system regardless of costs. Now there is a major top-down push in China for critical technologies to be developed locally and at any cost.

Nevertheless, we see further benefits gained from the relationship. First, we still have a fleet of about 300,000 Zika vehicles on the road that are generating feedback from consumers, and we use that to improve the overall software stack. The G and Zika relationship will continue to help us build our RAM in China, which is very important as our global customers want as efficient system that works globally.

And we still believe that this can be an important driver of business to Chinese OEMs over time. We are working on delivering a very sophisticated parking system to Zika in the coming months. China is very automated parking forward, I would say. And this work and collaboration will benefit us -- benefit us globally.

[Antoine Chkaiban, analyst]

And maybe as a quick follow-up. So can you elaborate on the challenges that you faced in building RAM in China. I believe you mentioned practical and regulatory hurdles in the past, can you maybe elaborate a bit more on this? And what gives you the confidence that you will overcome these challenges and offer competitive advanced products in China.

[Unknown Executive]

We have been working in China with the local map providers to make sure that our technology is fully compliant and meets all of the local standards, and we've been compliant since we started working in China and we will continue to do so, and this is how we manage to launch products in production.

[Operator]

Our next question is from John Babcock with Bank of America.

[Unknown Analyst]

So I guess my question partly tags along to that last 1 a little bit. But I guess what I'm wondering is, at what level of autonomy, I mean, recognizing there maybe isn't a specific gap between each one. But as you go from like Level 2 to Level 3 to Level 4 and ultimately, eventually, hopefully, level 5, is there a point at which you view the competitive environment as potentially getting less competitive over time? I mean I guess the question is, we've started to see a lot more competition in the -- or maybe not a lot, but more competition in the market in terms of some of these lower level offerings.

But as the market develops and as it gets more sophisticated, do you expect that as you get to higher level -- higher aspects of Level 3 and Level 4, that competitive environment maybe changes, so you have a higher competitive advantage. If you could just kind of talk about that, that would be helpful.

[Unknown Executive]

Well, I think what separates I would say, a nice demo from a production system in this areas of autonomy is safety. And safety is not just the word. It's not just the meantime between interventions. There's fill operations that are multiple they use. There's a validation. There are so many things going on there. And as you go up the stack of autonomy, the situation becomes more and more complicated because you need to reach very high precision.

And very high precision is something that you don't see in many products. so you see it in, say, aircraft on airplanes. You don't see it in day-by-day products like on your smart phone but in order to reach a high level of autonomy, you need a system where its precision is incredibly high. And reaching those high level of precisions with a cost of optimized product that can meet the consumer level demand is hugely challenging.

And I think Mobileye is really in the pole position to meet those requirements. On one hand, to reach very high precision. And on the second hand, be very cost-optimized both in terms of the silicon, in terms of the software, in terms of what kind of sensors are being used in terms of the infrastructure online and offline in terms of the efficiencies of algorithms. Some of those, we talked about at our AI day this 2-hour talk both me and Shai, elaborated what goes into our autonomy software stack in terms of efficiency and how we bring the precision to be at a production level.

So I think as we go up the stack, the level of competition should decrease and not increase because it's a very, very complex endeavor.

[Unknown Analyst]

And just to follow up, even in the entry segment of base ADAS, which is a market that has been developed over the course of the past 2 decades. We still -- we are still able to maintain a very significant leadership position in this segment. even though competitive pressure might have been coming and going, a lot of it because of our technology advantages, but also our reputation and our execution capabilities and there are more things that are involved in launching a product. And just in the past year, there have been a few articles about OEMs that needed to do recalls about because of safety issues in programs, they selected competing solutions even for the simpler systems.

So I think it's being realized more and more and as evident in the past 2 years, we have managed to win the vast majority of the businesses that our core customers have issued.

[Unknown Executive]

Yes. I would say also a case in point in this, if we are talking about base ADAS, case in point is that the recent euro NCAP rating of BYD's Auto3 driving a system where the rating was so low that it was the first time such a low rating was ever given, right? So this comes to show that even if you are looking at an entry level driving as this system, being able to meet the performance requirements, at least the performance requirements in Western countries, meeting those requirements is a very complex task, especially if you want to control costs.

[Daniel Galves, executive]

Yes. I mean just to kind of tie it all together because I think it's a really good question, John. Like the things that kind of reduce the competitive environment and probably our best for us are areas where you have clear performance requirements, regulatory standards and things like that and areas where your system requires like significantly high levels of precision.

[Unknown Analyst]

Right. And then just 1 quick one. Did you provide an update on supervision volumes for 3Q? I might have missed it.

[Daniel Galves, executive]

Yes, it was around 30,000 units.

[Operator]

Our next question is from Nick Doyle with Needham & Company.

[Unknown Analyst]

Nick Doyle on for Quinn Bolton. Just the first one. Did you guys have any thoughts on the news out -- achieving this 150,000 rides per week. Is that the type of goal you set for yourself? Or are you just thinking about it in a completely different way.

[Unknown Executive]

No, I think that news is very encouraging. And as I said before, when I mentioned Testa's robotaxi day, I think the latest success of Waymo is kind of creating a revival of interest in robotaxis. So I think this is very encouraging data. I think the next challenge in the robotaxi is not the number of autonomous rides is how to bring the economies at scale. So for example, there's tailor operation issues that question is how many people in the back office you have in order to support those drives, right? So there is system cost there. So I believe that over time, if the tailor operation activity would get reduced using more advanced technologies when I'm talking about off-line technologies, this could bring the economies even to a more attractive level.

But I think the industry now is on a very interesting trajectory.

[Unknown Analyst]

And then -- the other 1 is recent news base, is the new EU tariffs on the Chinese OEMs, is that incremental to the prior EyeQ or SuperVision unit volume expectations built in that you're talking about today?

[Unknown Executive]

Yes. I think that the European tariffs were expected and have already been kind of reflected in kind of the metrics we've been reporting today.

[Operator]

Our next question is from Aaron Rakers with Wells Fargo.

[Unknown Analyst]

This is Jake Wilhem on for Aaron. I was wondering if you could give a little additional color on the ASP drop you saw from IQ feature bundles how you see that changing heading into 2025? And maybe just talk a little bit about the mix within EyeQ.

[Moran Rojansky, executive]

Yes. So in terms of -- we don't anticipate any significant changes in the near-term trajectory. This year, we had a pretty volatile year in terms of mix within the EyeQ because of the inventory issues or the quantity, the volumes were very different between the quarters. So we saw some volatility within the quarter. But in terms of our trajectory for 2024 and also in the near term, we don't see any significant changes. Of course, there are some moving pieces like some positive, such high feature bundles versus negative pricing pressure in China. But overall, we don't anticipate some -- there.

[Unknown Analyst]

Okay. Maybe just a follow-up. I was wondering if you can give a little color maybe on the adoption rate for EyeQ, right. Do you see that cannibalizing supervision shipments in the future at all? Obviously, not as powerful.

[Unknown Executive]

So -- so EyeQ is our next-generation base ADAS tip that is very, very cost-optimized and power consumption optimized to support entry level of regulation, 5-star -- for the entry segment, and it's a different segment than the higher end, more advanced than ADAS solutions and we do not see cannibalization. We do see a very encouraging dynamics where our existing customer base are all adopting EyeQ 6 for the next-gen entry segments and it's been progressing steadily in that direction.

[Operator]

Thank you. There are no further questions at this time. I would like to hand the floor back over to Dan Galves for any closing comments.

[Daniel Galves, executive]

Thanks a lot, Paul. Thanks to everyone for joining the call. Thanks to the executive team, and we'll talk to you next quarter.

[Operator]

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