Silvaco Group, Inc. Common Stock (SVCO) | The Buildout — AI Infrastructure
The Verdict
Silvaco sells software and licensable circuit designs to the engineers who develop semiconductor manufacturing processes and design chips. Its TCAD tools simulate how a fabrication process will behave, its EDA tools help design and sign off circuits, and its semiconductor IP business licenses pre-built, standards-qualified circuit blocks that designers buy rather than build. The piece that touches AI is FTCO, an AI/ML workflow inside TCAD that builds a computer model — a 'digital twin' — of a manufacturing process so customers can simulate fabrication in real time. The company's argument is that AI-driven process complexity makes physical pilot wafers impractical, so process development has to move to simulation.
| Market Cap | — |
| Revenue (TTM) | $73M |
| Revenue Growth | +32.0% |
| EBITDA Margin (TTM) | -24.9% |
| Net Cash | $11M |
| Earnings Beats | 3 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- The cost transformation is in the run-rate: $20 million in annualized spending reductions fully executed, non-GAAP operating expenses down three consecutive quarters, and a $635,000 non-GAAP operating profit in Q2 FY2026 — the first since late 2024.
- IP revenue grew 238% year-on-year in Q2 FY2026 on record IP bookings and revenue; management expects about $20 million of IP revenue in 2026 and says the pipeline is up more than 4x over the last year.
- Non-GAAP gross margin was 86.8% in Q2 FY2026, up more than 12 percentage points year-on-year, and management guides to a mid-to-upper-80s range going forward.
- Three AI-manufacturing partnerships were announced in one quarter: NVIDIA (GPU-accelerated digital twins), Dassault Systèmes SIMULIA (interoperable digital-twin workflows), and Micron, which is also investing $10 million in a Silvaco convertible note.
- Remaining performance obligations were $46.6 million as of March 31, 2026, with about 52% expected to be recognized over the next 12 months.
What We’re Watching
- Q4 is carrying the year. Q3 FY2026 revenue is guided below the $17.8M Q2 actual, and the FY2026 guide of above $70 million depends on a Q4 renewal season management itself calls seasonal. A roughly $5.0 million purchase order slipped from Q3 into Q4 in 2024.
- FTCO has not inflected. The CFO said the company has not 'really hit that inflection in the S-curve,' FTCO deployments are anonymized, and no neighbor transcript in the source material names Silvaco or FTCO.
- Bookings missed. Q2 FY2026 bookings of $16.2 million landed below the prior quarter's $19M ±10% guide and fell about 5.8% sequentially, even as revenue and profitability were delivered.
- Governance items are unresolved: an auditor change filed 2026-05-27, a shareholder investigation announcement dated 2026-05-26, and retained prior material-weakness language in the 10-Q.
The operating thesis strengthened this quarter. Management delivered the non-GAAP operating profitability it promised, IP reaccelerated sharply, and three credible partners — NVIDIA, Dassault Systèmes, and Micron — signed on to the AI-manufacturing story. But the reported growth is coming from IP, not from the AI-facing FTCO product, and the flagship long-term driver is still pre-inflection by management's own admission. The year's revenue guide rests on a single seasonal quarter. The open question is whether the FTCO adoption curve is real but early, preserving the long-dated option, or simply slow.
Earnings
Silvaco reported Q2 FY2026 revenue of $17.8 million, up 48% year-on-year and flat sequentially. GAAP gross margin was 85.2%, down 124 basis points sequentially on mix but up more than 14 percentage points year-on-year; non-GAAP gross margin was 86.8%. Non-GAAP operating profit was $635,000, the first since late 2024, while the GAAP operating loss narrowed to $4 million. IP revenue grew 238% year-on-year on record IP bookings and revenue.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $18M | $18M | $12M | +48.3% |
| Gross margin | 85.2% | 81.0% | 70.9% | +1430bps |
| EBITDA | −$2M | −$3M | −$9M | −84.0% |
| EPS | $-0.11 | $-0.19 | $-0.32 | −65.1% |
| Bookings | $16.2M | $17.2M | n/a | +25% YoY |
| Non-GAAP operating profit | $635K | -$471K | n/a | — |
We haven't really hit that inflection in the S-curve, if you will, in FTCO.— Chris Zegarelli, Chief Financial Officer, 2026-08-06
Management tone: Management's tone moved from promising to delivering. On the Q1 call the company said it expected non-GAAP operating profitability in Q2; on the Q2 call it reported $635,000 of it. FTCO framing was tempered even as the quarter's new FTCO customer was closed — the CFO said the business had not really hit its inflection. Management presented the three new partnerships as validation and distribution rather than near-term revenue, and conceded in Q&A that the guide reflects a timing shift rather than a raised outlook: 'Q3 a little bit below consensus, Q4 would be above.' Operating-cash-flow language slipped from 'by Q3' to 'later in the year,' and EDA moved from 'stability in the short term and then a return to growth' to 'less of a major driver than the other two.'
Management Guidance
Q3 FY2026 is guided to bookings of $18M ±10%, revenue of $17M ±10%, non-GAAP gross margin of about 88%, and non-GAAP operating expenses of $14.5M ±5%. Q4 FY2026 is guided to record revenue — clarified in Q&A as the highest quarter ever, above the prior ~$18.7 million record — with continuing non-GAAP operating profitability. FY2026 revenue is guided above $70 million. For FY2027, management points to double-digit revenue growth, non-GAAP operating profitability, and positive cash flow from operations, with a loose frame that 'plus 10% gets you closer to high 70s or 80 on the year in 2027.' Gross margins are guided to remain in the mid-to-upper 80s, and IP has the potential to double year-on-year in 2026 to about $20 million. Positive operating cash flow is now expected later in 2026, a shift from the earlier 'by Q3.'
Trajectory
Revenue has gone roughly flat sequentially: $18.7 million in Q3 FY2025, $18.3 million in Q4 FY2025, then $17.8 million in each of Q1 and Q2 FY2026. The year-on-year picture is different — Q2 FY2026 revenue rose 48% — but the code-computed trajectory signal reads decelerating on the sequential series. Margins are moving the other way: GAAP gross margin was 85.2% in Q2 FY2026, up more than 14 percentage points year-on-year though down 124 basis points sequentially on mix. EBITDA is still negative at -$1.5 million in Q2 FY2026, improved from -$9.4 million a year earlier and -$5.5 million in Q4 FY2025. The improvement is coming from cost reductions and a mix shift toward IP, not from topline growth. Trailing-twelve-month revenue is $72.6 million with EBITDA of -$18.1 million.
The Model
The model projects FY+1 revenue of $72.1 million and EBITDA of -$2 million, a -2.5% margin. For FY+2 it projects revenue of $80.0 million and EBITDA of $3 million, a 4.0% margin. Near term, the anchor is management's own FY2026 guide of revenue above $70 million and a record Q4 built on renewal seasonality. Further out, the swing factors are whether the IP pipeline converts into a durable baseline and whether FTCO adoption accelerates beyond the current cadence of about one new customer per quarter.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $63M | $72M | $80M |
| YoY Growth | — | +14.3% | +11.0% |
| EBITDA | −$42M | −$2M | $3M |
| EBITDA Margin | -67.0% | -2.5% | 4.0% |
Projections are the median of 5 independent model runs. The model’s revenue sits 2.8% below analyst consensus.
Q3 FY2026 is guided to bookings of $18M ±10%, revenue of $17M ±10%, non-GAAP gross margin of about 88%, and non-GAAP operating expenses of $14.5M ±5%. Q4 FY2026 is guided to record revenue — clarified in Q&A as the highest quarter ever, above the prior ~$18.7 million record — with continuing non-GAAP operating profitability. FY2026 revenue is guided above $70 million. For FY2027, management points to double-digit revenue growth, non-GAAP operating profitability, and positive cash flow from operations, with a loose frame that 'plus 10% gets you closer to high 70s or 80 on the year in 2027.' Gross margins are guided to remain in the mid-to-upper 80s, and IP has the potential to double year-on-year in 2026 to about $20 million. Positive operating cash flow is now expected later in 2026, a shift from the earlier 'by Q3.'
What Could Go Right — and Wrong
- FTCO adoption accelerates past the current cadence of about one new customer per quarter, moving the workflow from pre-inflection to visible license expansion.
- The IP pipeline, up more than 4x over the last year, converts — making the roughly $20 million of expected 2026 IP revenue a new baseline rather than a one-year step-up.
- The Q4 renewal season lands as guided, FY2026 revenue clears $70 million, and operating cash flow turns positive later in the year.
- The NVIDIA and Dassault collaborations produce deliverable workflows in customer use, and the open equipment-maker OEM channel is added.
- The $10 million revolver closes and the governance items — the auditor change and the shareholder investigation — resolve without escalation.
- Q4 renewals slip, breaking the FY2026 guide of revenue above $70 million and undercutting the FY2027 double-digit frame; the 10-Q documents a ~$5.0 million purchase order that slipped from Q3 into Q4 in 2024.
- Bookings stay below revenue for two or more quarters, inverting the momentum curve after Q2's $16.2 million print missed its guided range.
- FTCO remains pre-inflection and no large partner ever names Silvaco or FTCO in its own disclosures, leaving the flagship growth claim externally unconfirmed.
- EDA keeps declining from 23% of revenue, concentrating the entire story on IP and a pre-inflection FTCO.
- Cash burn re-accelerates, the $10 million revolver stays unconfirmed, and the unresolved governance items escalate.
Looking Ahead
Over the next 12 months the near-term question is the back-half revenue shape: Q3 is guided lower sequentially, and Q4 is guided to a record quarter and the highest quarter ever. The quarterly FTCO customer announcements, the IP ramp toward about $20 million, and whether operating cash flow turns positive later in 2026 are the operating tests. The governance items — an auditor change and a shareholder investigation — date to May 2026 and were not addressed on the Q2 call.
- Q3 FY2026Q3 results — Tests the back-half guide and whether Q2's bookings shortfall was a one-off.
- Q4 FY2026Q4 renewal season — FY2026 revenue above $70M depends on seasonal renewals landing.
- Q4 FY2026Record-revenue quarter — Guided as the highest quarter ever, above the prior ~$18.7M.
- Through year-endMore FTCO customers — About one new FTCO customer per quarter, expected to accelerate.
- FY2027FY2027 outlook — Double-digit revenue growth, non-GAAP profitability, positive cash flow.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $60M | $63M | $73M | +5.5% |
| Gross Margin | 79.0% | 77.7% | 81.8% | 135bps |
| EBITDA | −$39M | −$42M | −$18M | -8.5% |
| EBITDA Margin | -65.2% | -67.0% | -24.9% | 182bps |
| Net Income | −$39M | −$41M | −$22M | -4.6% |
| Free Cash Flow | −$88M | −$34M | −$34M | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)81.8%
- EBITDA Margin (TTM)-24.9%
- Net Margin (TTM)-30.4%
- ROIC-26.6%
- SBC / Revenue16.9%
The Company
Silvaco sells the software engineers use to develop semiconductor manufacturing processes and design chips, not chips themselves. It describes itself as 'a provider of technology computer aided design (TCAD) software, electronic data automation (EDA) software and semiconductor intellectual property (SIP).' Its TCAD tools simulate how a fabrication process behaves, its EDA tools provide signoff design and standard-cell library creation, and its SIP business licenses hard and soft IP, foundational libraries, and embedded memory technologies. The piece that touches AI is FTCO, an AI/ML workflow inside TCAD that the 10-K describes as using manufacturing and simulated data to create a computer model — a 'digital twin' — of manufacturing processes that can simulate the fabrication process in 'real time.'
Silvaco is fabless and asset-light. All properties are leased, led by a roughly 11,118-square-foot Santa Clara headquarters under a lease expiring April 2028, with additional U.S. offices in Colorado and Georgia and international offices in China, Egypt, France, Japan, Korea, Singapore, Taiwan, the United Kingdom, and Vietnam. The 10-Q notes that the Santa Clara, UK, and France office leases are related-party leases with entities controlled by a principal stockholder or board member. It reports a single operating and reportable segment even though it discloses TCAD, EDA, and SIP revenue splits. Capital goes to research and development and, increasingly, to GPU hardware for its own simulation infrastructure — a direction management says will continue without giving a dollar figure.
Business Segments
Competitive Landscape
The 10-K states plainly: 'We compete most frequently with Synopsys, Inc., Siemens EDA, and Cadence, Inc.' The broader named set includes Keysight, Schrödinger, CEVA, Zuken, Huada Empyrean, M31, and Primarius Technologies, plus customers' own internal EDA capabilities. The 10-Q warns that competitors have 'substantially greater financial, technical, and engineering resources' and that AI-native companies and large technology companies may enter adjacent software markets using their own AI expertise and datasets. Management's counter is that physics-based models and standards-qualified IP still have to be bought, but the source material contains no third-party confirmation of that claim.
- Synopsys, Inc.Named in the 10-K as one of the three competitors Silvaco faces most frequently. The 10-Q states competitors have substantially greater financial, technical, and engineering resources.
- Siemens EDANamed in the 10-K as one of the three competitors Silvaco faces most frequently; not otherwise discussed.
- Cadence, Inc.Named in the 10-K as one of the three competitors Silvaco faces most frequently. The 10-Q states competitors have substantially greater financial, technical, and engineering resources.
- KeysightNamed in filings; not discussed.
- CEVANamed in filings; not discussed.
Supply Chain
Silvaco is a fabless software and IP vendor with no manufacturing supply chain in the physical sense. Its disclosed inputs are licensed third-party technology and GPU compute; the more useful read is the demand signal from customers and partners.
More on SVCO: Earnings recap