Arteris, Inc.

ARTERIS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS

Arteris, Inc. was incorporated in Delaware on April 12, 2004. Arteris, Inc. and its subsidiaries (collectively, the Company or Arteris) develop and license Network-on-Chip (NoC) interconnect intellectual property (IP), System-on-Chip (SoC) and related software solutions used in the design of semiconductor chips and chiplets incorporated in a broad range of end products. The Company also provides hardware security verification software solutions, IP support and maintenance, professional services, training and on-site support to assist customers with the development and use of its technologies. The Company is headquartered in Campbell, California and has offices in the United States, France, Poland, Japan, South Korea, Taiwan and China.

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) for interim financial information and do not include all disclosures normally required in annual consolidated financial statements prepared in accordance with GAAP. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2025 and the related notes included in the Company’s Form 10-K filed on February 12, 2026 (2025 Form 10-K) with the U.S. Securities and Exchange Commission (SEC). The December 31, 2025 condensed consolidated balance sheet was derived from the audited consolidated financial statements as of that date. In management’s opinion, the unaudited interim consolidated financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the unaudited condensed consolidated financial statements.

The operating results for the three and nine months ended September 30, 2026 are not necessarily indicative of the results to be expected for the full year or any other future interim or annual period.

Reclassifications

Certain prior period amounts were reclassified to conform to the current period presentation. These reclassifications did not have an impact on previously reported amounts.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of Arteris, Inc. and its wholly-owned subsidiaries. All intercompany transactions and accounts have been eliminated.

Segment Information

The Company operates as a single operating segment. The chief operating decision maker (CODM) is the Company’s Chief Executive Officer, who makes resource allocation decisions and assesses performance based on financial information presented on a consolidated basis, accompanied by disaggregated revenue information. Accordingly, the Company has determined that it has a single reportable segment and operating segment.

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates relate to, among others, revenue recognition, the useful lives of assets, assessment of recoverability of property, plant and equipment, fair value of investments, impairment of the equity method investment, fair values of goodwill and other intangible assets, including impairments, leases, allowance for credit losses, deferred tax assets and related valuation allowance, stock-based compensation, potential reserves relating to litigation and tax matters, collectability of certain receivables, fair value and amortization of deferred income, fair value of contingent consideration liability arising out of the Cycuity acquisition, as well as other accruals or reserves. Actual results could differ from those estimates and such differences may be material to the unaudited condensed consolidated financial statements.

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments purchased with original maturities of three months or less from the purchase date to be cash equivalents. The Company’s cash equivalents include deposits in money market accounts which were unrestricted as to withdrawal or use and are stated at fair value. As of September 30, 2026, cash and cash equivalents consisted primarily of checking, savings, money market accounts and highly liquid investments with original maturities of three months or less. Interest earned on cash and cash equivalents is included in other income (expense), net in the unaudited condensed consolidated statements of operations.

As of both September 30, 2026 and December 31, 2025, the Company’s restricted cash balance was $0.3 million. The Company’s restricted cash balance as of September 30, 2026 was primarily related to a letter of credit for its facility lease agreement and collateralized cash for corporate credit cards. Restricted cash, current is included in prepaid expenses and other current assets and restricted cash, noncurrent is included in other assets on the consolidated balance sheets.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and cash equivalents, investments and accounts receivable. Cash is currently held infour financial institutions that the Company believes are creditworthy. Cash held at these financial institutions generally exceeds federally insured limits. The Company is exposed to credit risk in the event of default by the financial institutions holding its cash, cash equivalents, and investments to the extent recorded in the balance sheet. The Company has not experienced any losses to date related to these concentrations.

The Company’s accounts receivable are derived principally from revenue earned from customers located in the Americas, Europe, Middle East and Asia Pacific regions.

Accounts receivable from the Company’s major customers representing 10% or more of total accounts receivable was as follows:

• Customer accounted for less than 10% of total accounts receivable at period end.

Revenue from the Company’s major customers representing 10% or more of total revenue was as follows:

• Customer accounted for less than 10% of total revenue in the period.

Business Combination of Cycuity

On January 14, 2026 (the Acquisition Date), the Company completed the acquisition of Cycuity (the Acquisition) for approximately $43.1 million, consisting of cash of $15.1 million, the Company’s common stock with a fair value of $19.0 million and earn-out consideration with a fair value of $9.0 million as of the Acquisition Date. For additional information regarding the fair value of the contingent consideration liability, see Note 6, Fair Value Measurements. The Company accounted for the acquisition of Cycuity by applying the acquisition method of accounting for business combinations. See Note 7, Business Combination.

Significant Accounting Policies

There have been no significant changes to the Company’s significant accounting policies during the nine months ended September 30, 2026 from those disclosed in the annual consolidated financial statements for the year ended December 31, 2025, except for the following.

Business Combinations

The Company allocates the purchase price to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values. The excess of the purchase price over the fair value of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. These estimates are based on information obtained from management of the acquired companies, the Company’s assessment of this information, and historical experience. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired customers, acquired technology, and trade names from a market participant perspective, useful lives, and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. In addition, unanticipated events and circumstances may occur that may affect the accuracy or validity of such estimates, and if such events occur, the Company may be required to adjust the value allocated to acquired assets or assumed liabilities. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the Company’s consolidated statements of operations. Acquisition-related costs, such as advisory, legal, accounting, valuation, other professional or consulting fees and integration costs, are expensed as incurred.

Stock-based Compensation

The Company measures equity-classified stock-based awards, including stock options, restricted stock units (RSUs), and starting in the three months ended March 31, 2026, performance stock units (PSUs), granted to employees, directors, and non-employees based on the grant-date fair value. Stock-based compensation expense for awards with service-based vesting is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of such awards, as a component of operating expenses within the consolidated statements of operations. The Company accounts for forfeitures related to these awards as they occur.

The fair value of RSUs granted is measured as the fair value per share of the Company’s common stock on the date of grant.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. This valuation model for stock-based compensation expense requires the Company to make assumptions and judgments about the variables used in the calculation including the expected term, the volatility of the Company’s common stock, and an assumed risk-free interest rate.

For PSUs that include a market condition, the Company determines the grant-date fair value of the award using a Monte Carlo valuation model and recognizes compensation cost on a straight-line basis over the requisite service period. Stock-based compensation expense for PSUs that include market conditions is based on the grant-date fair value and is recognized regardless of whether the market condition is ultimately achieved.

For PSUs that include both a market condition and a performance condition, the Company determines the grant-date fair value of the award using a Monte Carlo valuation model. Compensation cost is recognized on a straight-line basis over the requisite service period when achievement of the performance condition is probable and is reversed if that condition is not achieved. Once the requisite service has been rendered and the performance condition has been satisfied, stock-based compensation expense is retained regardless of the outcome of the market condition.

The Company adopted the 2021 Employee Stock Purchase Plan (the 2021 ESPP) effective on October 26, 2021. The 2021 ESPP provides for six-month offering periods beginning May 22 and November 22 of each year, and each offering period consists of a six-month purchase period. Eligible employees are entitled to purchase common stock at the end ofsix-month offering periods, by means of limited payroll deductions, at a 15% discount from the fair market value of the common stock as of specific dates.

The fair value of shares of common stock to be issued under the 2021 ESPP is estimated using the Black-Scholes option pricing model, which is impacted by the fair value of the Company’s common stock, as well as changes in assumptions regarding a number of subjective variables. These variables include the expected common stock price volatility over the term of the awards, the expected term of the awards, and the risk-free interest rate. Stock-based compensation expense for ESPP awards is recognized on a straight-line basis over the term of each ESPP offering period.

Revenue Recognition

The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, and subsequently issued additional related ASUs (Topic 606). The Company recognizes revenue as it transfers control of deliverables (software and services) to its customers in an amount reflecting the consideration to which it expects to be entitled. To recognize revenues, the Company applies the following five-step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied. The Company accounts for a contract when it has approval and commitment from all parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. The Company applies judgment in determining the customer’s ability and intention to pay based on a variety of factors including the customers’ historical payment experience.

Nature of Products and Services

The Company’s revenue is primarily derived from licensing intellectual property, licensing software, support and maintenance services, professional services, training services, and royalties.

Design Solutions

Interconnect Solutions product arrangements provide customers the right to software licenses, services, and support and maintenance. The Company enters into licensing arrangements with customers that typically range fromtwo tothree years and generally consist of delivery of a design license that grants the customer the right to use the IP to design a contractually defined number of products, a right to access the benefits of its proprietary software tool (RTL), and support and maintenance services that provide the customer a significant benefit from ongoing access to Corporate Application Engineers (CAE) and Field Application Engineers (FAE) (collectively, Application Engineering Support Services) to perform certain verifications including benchmark performance, simulations and ultimately, through the RTL, instantiate designs into silicon over the design term.

Application Engineering Support Services are integral and fundamental to the customer’s ability to derive its intended benefit from the IP. Besides Application Engineering Support Services, support and maintenance services also consist of a stand-ready obligation to provide technical support and software updates over the support term. Generally, the first year of technical support and software updates are bundled with and into the license fee, with a customer option to renew additional years of support throughout the license term. However, the Company typically continues to provide technical support and software updates throughout the license term even if the customer does not renew these services in subsequent years, making the license term and support and maintenance term co-terminus.

Considering the nature of the combined license and assisting the Company’s customers in applying its IP technology in its customers’ development environment and the relative significance thereof, the Company has concluded that its promise to provide an Interconnect Solutions IP license is not distinct from its obligation to provide the Application Engineering Support Services and benefits of the RTL. Customers cannot benefit from the design license on its own; the Interconnect Solutions IP, RTL, and the Application Engineering Support Services serve to fulfill its commitment to the customer, as they represent inputs to a single, combined performance obligation that commences upon the later of the arrangement effective date or transfer of the software license. Further, although technical support and software updates is a distinct performance obligation, it is accounted for as if it were part of a single performance obligation that includes the licenses, RTL and Application Engineering Support Services because the technical support and updates are provided in practice for the same period of time and have the same time-based pattern of transfer to the customer as the combined design license, RTL, and Application Engineering Support Services. Therefore, revenue from Interconnect Solutions IP licensing arrangements is recognized ratably over the design term.

Revenues that are derived from the sale of a licensee’s products that incorporate the Company’s IP are classified as royalty revenues. Royalty revenues are recognized during the quarter in which the sale of the product incorporating the Company’s IP occurs and are included in variable royalties in the consolidated statements of operations. Royalties are calculated either as a percentage of the revenues received by a licensee’s sale of products incorporating the Company’s IP or on a per unit basis, as specified in the agreements with the licensees. For the majority of the Company’s royalty revenues, it receives the actual sales data from its customers after the quarter ends and accounts for it as unbilled receivables. In such instances, the Company recognizes royalty revenues based on its estimation of the customers’ sales during the quarter.

SoC Integration Automation Software Solutions

The Company’s SoC Integration Automation software solutions, CSRCompiler and hardware security verification software product arrangements provide customers the right to software licenses, software updates and technical support. The software licenses are time-based licenses with terms generally ranging fromone tothree years. These arrangements generally havetwo distinct performance obligations that consist of transferring the licensed software and the support and maintenance service. Support and maintenance services consist of a stand-ready obligation to provide technical support and software updates over the support term. Majority of the Company’s SoC Integration Automation software solutions contracts include termination rights that allow the customer to cancel and receive a pro-rata refund on support and maintenance services at the end of each month of the contract period, which results in a ratable recognition of the related license revenue over the contract term. The Company records obligations for refunds in accrued expenses and other current liabilities on the consolidated balance sheets.

Hardware Security Verification Software

The Company’s hardware security verification software product arrangements, which were derived from the acquisition of Cycuity that closed in January 2026, provide customers the right to software licenses, software updates and technical support. The software licenses are time-based licenses with terms generally ranging fromone tothree years and generally provide the customer with limited rights to receive certain quantities of licensed software. In addition to the licenses, the arrangements also include support and maintenance services, provided by Application Engineering Support Services, which include frequent updates and upgrades to maintain the utility of the software due to rapid changes in technology. Updates are generally made available throughout the entire term of the arrangement. The updates provide continued access to evolving technology as customers’ designs migrate to more advanced nodes and as customers’ technological requirements evolve. The Company concluded that its hardware security verification software product licenses are not distinct from its obligation to provide unspecified software updates to the licensed software throughout the license term. Such updates represent inputs to a single, combined performance obligation, commencing upon the later of the arrangement effective date or transfer of control of the software license, leading to ratable recognition of the related license revenue over the contract term.

Professional Services

The Company’s agreements may include service elements (other than maintenance and support services). These services include training, design assistance, and consulting, and may include implementation, integration, or security verification. Such services are typically provided by the Company or by third-party subcontractors under contracts and task orders with the U.S. government for which the Company acts as the prime contractor. Labor and services performed by third-party subcontractors related to contracts with the U.S. government are recognized as professional services revenue. The related costs are recorded as cost of revenue in the same period in which the associated revenue is recognized. Professional services agreements are invoiced on a fixed fee or time and materials basis. Revenue is recognized over the period the services are provided, generally on a cost-to-cost basis.

Multiple Performance Obligations

Most of the Company’s contracts with customers contain multiple performance obligations. For these contracts, the Company accounts for individual performance obligations separately, if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis, which are estimated considering multiple factors including observable industry pricing practices and internal pricing strategies and objectives. Standalone selling prices of professional services are typically estimated based on observable transactions when these services are sold on a standalone basis.

Transaction Price

Revenue is recognized when, or as, control of a promised product or service transfers to a customer, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring those products or services. If the consideration promised in a contract includes a variable amount, the Company estimates the amount to which it expects to be entitled using either the expected value or most likely amount method, to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur. Generally, the transaction price of the Company’s contracts is fixed at the inception of the contract, except for variable royalties. The Company’s contracts generally do not include terms that could cause variability in the transaction price.

The Company assesses the timing of the transfer of goods or services to the customer as compared to the timing of payments to determine whether a significant financing component exists. As a practical expedient, the Company does not assess the existence of a significant financing component when the difference between payment and transfer of deliverables is a year or less. If the difference in timing arises for reasons other than the provision of finance to either the customer or the Company, no financing component is deemed to exist. When contracts involve a significant financing component, the Company adjusts the promised amount of consideration for the effects of the time value of money if the timing of payments agreed to by the parties to the contract (either explicitly or implicitly) provide the customer with a significant benefit of financing.

The Company reports revenue net of any revenue-based taxes assessed by governmental authorities that are imposed on and concurrent with specific revenue-producing transactions.

In instances where foreign licensees withhold and remit taxes to local authorities in accordance with local laws and regulations, the Company recognizes and presents revenue on a gross basis and includes the withholding tax in income tax expense.

Flexible Spending Accounts

Some customers enter into a non-cancelable flexible spending account agreement (FSA) whereby the customer commits to a fixed dollar amount over a specified period of time that can be used to purchase from a list of the Company’s products or services. These agreements do not meet the definition of a revenue contract until the customer executes a separate order to identify the required products and services that it is purchasing. Each separate order under the agreement is treated as an individual contract and accounted for based on the respective performance obligations included within the FSA.

Contract Modifications

The Company’s contracts may be modified to add, remove or change existing performance obligations. The accounting for modifications to the Company’s contracts involves assessing whether the products and services added to an existing contract are distinct and whether the pricing is at the standalone selling price. Products and services added that are not distinct are accounted for on a cumulative catch-up basis, while those that are distinct are accounted for prospectively, either as a separate contract if the additional services are priced at the standalone selling price, or as a termination of the existing contract and creation of a new contract if not priced at the standalone selling price. The Company’s more significant contract modifications include extensions of the design license term and the purchase of additional years of support and maintenance.

Judgments

The Company’s contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together requires significant judgment. Judgment is also required to determine the standalone selling price for each distinct performance obligation.

Contract Balances

The timing of revenue recognition may differ from the timing of invoicing to customers, and these timing differences result in contract assets (unbilled receivables) or contract liabilities (deferred revenue) on the Company’s consolidated balance sheets. The Company records a contract asset when revenue is recognized prior to invoicing, and it has an unconditional right to invoice and receive payment. The Company records deferred revenue when it invoices customers and revenue is not yet recognized. Customers are generally invoiced in single or annual amounts, although some customers are invoiced more frequently over time.

The Company capitalizes sales commissions as costs of obtaining a contract when they are incremental and, if they are expected to be recovered, amortized in a manner consistent with the pattern of transfer of the good or service to which the asset relates.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (Topic 326), which provides all entities with a practical expedient to assume that current conditions as of the balance sheet date do not change for the remaining life of current accounts receivable and contract assets. This ASU is effective for fiscal years beginning after December 15, 2025 and interim reporting periods within those annual reporting periods, with early adoption permitted. The adoption of ASU 2025-05 did not have a significant impact on the Company’s consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2025, the FASB issued ASU 2025-12, Codification Improvements, to address suggestions received from stakeholders on the ASC and to make other incremental improvements to GAAP. The update represents changes to the Codification that (1) clarify, (2) correct errors, or (3) make other improvements that are intended to make it easier to understand and apply. The guidance is effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, to amend the guidance in Topic 270. The update provides clarifications intended to improve the consistency and usability of interim disclosure requirements, including a comprehensive listing of required interim disclosures and a new disclosure principle for reporting material events occurring after the most recent annual period. The amendments do not change the underlying objectives of interim reporting but are designed to enhance clarity in application. This ASU is effective for fiscal years beginning after December 15, 2027 and interim reporting periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures.

In December 2025, the FASB issued ASU 2025-10, Accounting for Government Grants Received by Business Entities. This ASU establishes the accounting and presentation for government grants received by a business entity under Government Grants (Topic 832). This ASU is effective for fiscal years beginning after December 15, 2028 and interim reporting periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures.

In September 2025, the FASB issued ASU 2025-06, Targeted Improvements to the Accounting for Internal-Use Software, which modernizes the accounting for internal-use software costs and clarifies criteria for capitalization. This ASU is effective for fiscal years beginning after December 15, 2027 and interim reporting periods within those annual reporting periods, with early adoption permitted as of the beginning of an annual period. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, and in January 2025, the FASB issued ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures, which requires incremental disclosures to disaggregate certain income statement expense line items on an annual and interim basis. ASU 2024-03, as clarified by ASU 2025-01, is effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of adopting these ASUs on its consolidated financial statements and disclosures.

3. REVENUE

Disaggregated Revenue

The following table shows revenue by product and services groups (in thousands):

Contract Balances

The following table provides information about accounts receivable, net, contract assets and deferred revenue (in thousands):

The Company recognized revenue of $20.5 million and $13.6 million for the three months ended September 30, 2026 and 2025, respectively, and $49.3 million and $35.4 million for the nine months ended September 30, 2026 and 2025, respectively, that was included in the deferred revenue balance at the beginning of the respective periods. Contract assets, current, are included in prepaid expenses and other current assets on the condensed consolidated balance sheets.

As of September 30, 2026, non-cancelable contracted but unsatisfied or partially satisfied performance obligations that have not yet been recognized were $131.3 million, which include deferred revenue, amounts that will be invoiced and recognized as revenues in future periods and FSA commitments, from customers where actual product selection and quantities of specific products are to be determined by customers at a future period. The Company expects to recognize $69.0 million of this balance over the next 12 months and the remainder thereafter. FSA commitments amounted to $2.4 million and $3.8 million as of September 30, 2026 and December 31, 2025, respectively. The Company has elected to exclude the potential future royalty receipts from these amounts.

Costs of Obtaining a Contract with a Customer

Total capitalized direct commission costs were as follows (in thousands):

Amortization of capitalized sales commissions was $1.2 million and $0.9 million for the three months ended September 30, 2026 and 2025, and $3.5 million and $2.6 million for the nine months ended September 30, 2026 and 2025, respectively, and are included in sales and marketing expense in the unaudited condensed consolidated statements of operations.

4. NET LOSS PER SHARE

The following table presents the calculation of basic and diluted net loss per share attributable to common stockholders (in thousands, except share and per share data):

Since the Company was in a loss position for all periods presented, the diluted earnings per share was equal to the basic earnings per share as the effect of potentially dilutive securities would have been antidilutive.

The following table summarizes the potentially dilutive securities that were excluded from the calculation of diluted earnings per share because they would be anti-dilutive:

5. INVESTMENTS

The following tables summarize the fair value and amortized cost of the Company’s cash equivalents and available-for-sale securities by major security type (in thousands):

The maturity dates of the Company’s investments are as follows (in thousands):

As of both September 30, 2026 and December 31, 2025, the unrealized losses for available-for-sale investments were non-credit related and the Company does not intend to sell the investments that were in an unrealized loss position, nor does it foresee or project that it will be required to sell those investments before recovery of their amortized cost basis, which may be at maturity. Thus, as of both September 30, 2026 and December 31, 2025, no allowance for credit losses or impairment losses for the Company’s investments were recorded.

6. FAIR VALUE MEASUREMENTS

Assets Measured and Recorded at Fair Value on a Non-Recurring Basis

Equity method investments, and certain non-financial assets, such as intangible assets are remeasured at fair value only if an impairment or observable price adjustment is recognized in the current period.

Financial Instruments Not Recorded at Fair Value on a Recurring Basis

Financial instruments not recorded at fair value on a recurring basis include vendor financing arrangements. The carrying value of the vendor financing agreements was $4.3 million and $1.6 million as of September 30, 2026 and December 31, 2025, respectively. The Company’s vendor financing arrangements are classified within Level 2 because these borrowings are not actively traded and have a variable interest rate structure based upon the Company’s incremental borrowing rate. The estimated fair values of these financial instruments approximate their carrying values.

Financial Instruments Recorded at Fair Value on a Recurring Basis

The following tables summarize the Company’s financial assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

Money market funds are highly liquid investments and are actively traded. The fair value is based on quoted prices for identical assets in active markets and therefore classified as Level 1 of the fair value hierarchy.

The Company’s other investments are considered Level 2 financial instruments as their fair values are determined using inputs that are directly or indirectly observable in active or less active markets.

Cycuity-related Contingent Consideration Liability

Contingent consideration liability is based on the achievement of specified bookings targets during the earn-out period from the Acquisition Date through December 31, 2026 in connection with the Cycuity acquisition. The estimated fair value of the contingent consideration liability is determined using a Monte Carlo simulation model using significant unobservable fair value inputs and is therefore classified as a Level 3 measurement. The assumptions used in the calculation are based on the achievement of specified bookings targets over the term of the contingent earn-out period, expected volatility, and discount rate. The estimates of fair value are uncertain and changes in any of the estimated inputs used will result in significant adjustments to the fair value. As of September 30, 2026, the Company used a volatility rate of 33.0% and a risk-free rate of 3.8%.

The following table sets forth a summary of the changes in the fair value of the contingent consideration liability (in thousands):

There were no transfers between levels during the periods presented.

7. BUSINESS COMBINATION

Cycuity Acquisition

On January 14, 2026, the Company completed the acquisition of Cycuity for approximately $43.1 million, consisting of cash of $15.1 million, the Company’s common stock with a fair value of $19.0 million and earn-out consideration with a fair value of $9.0 million as of the Acquisition Date.

Prior to the acquisition, Cycuity was a privately held provider and domain expert of semiconductor cybersecurity assurance technology. By combining innovative system IP from Arteris with leading silicon hardware security assurance technology from Cycuity, the acquisition positions Arteris to address the growing concern around hardware security. The Acquisition has been accounted for in accordance with the acquisition method of accounting for business combinations with the Company as the accounting acquirer.

The preliminary purchase price consideration allocated to the assets acquired and liabilities assumed for the Acquisition is as follows (in thousands):

In connection with the Acquisition, the Company issued 1,096,280 shares of the Company’s common stock. Additionally, the former holders of Cycuity equity securities obtained the right to receive additional contingent consideration of up to $12.0 million. The contingent consideration is based on the achievement of specified bookings targets during the earn-out period from the Acquisition Date through December 31, 2026, and, if earned, will be payable no later than March 31, 2027. Earn-out payments will be settled in cash for in-the-money option holders and unaccredited investors and in shares of the Company’s common stock for accredited equity holders and warrant holders. The contingent consideration has been accounted for as part of the business combination and was recognized at its acquisition-date fair value as a component of total purchase consideration. The contingent consideration is remeasured at fair value at each reporting date, with change in fair value recognized in earnings until the contingency is resolved, and is included in accrued expenses and other current liabilities on the condensed consolidated balance sheets.

Certain outstanding option awards granted by Cycuity were accelerated as a result of the acquisition and paid in cash. As a result, the fair value of these accelerated option awards of $0.2 million was recognized as a post-combination expense, included in stock-based compensation expense for the nine months ended September 30, 2026.

The Company incurred acquisition-related expenses associated with the Acquisition of $0.8 million for the nine months ended September 30, 2026, which were expensed as incurred in the unaudited condensed consolidated statements of operations.

The purchase price is allocated to identifiable assets acquired and liabilities assumed based on their fair values on the Acquisition Date, including measurement period adjustment, as follows (in thousands):

The Company may obtain additional information about facts and circumstances that existed as of the Acquisition Date during the remainder of the measurement period, which may not exceed 12 months from the Acquisition Date. Changes to amounts recorded as assets and liabilities may result in a corresponding adjustment to goodwill during the respective measurement period.

The following table summarizes the fair value of the identifiable intangible assets acquired (in thousands) and useful lives:

The fair value of the acquired developed technology intangible assets was determined primarily using the excess earnings method. The fair value of the acquired customer relationships intangible assets was determined using the with-and-without method. The fair value of the acquired trade name intangible assets was determined using the relief-from-royalty method.

Goodwill generated from this business combination is attributed to synergies between the Company and Cycuity’s respective products and services. The Company does not have any tax basis in the total goodwill of $31.0 million and the goodwill is non-deductible for income tax purposes. The Company recorded a one-time non-cash income tax benefit of $4.1 million in the condensed consolidated statement of operations for the nine months ended September 30, 2026, related to the release of a portion of the valuation allowance as a result of the acquired intangibles. The revenue and earnings of the acquired business have been included in the Company’s results since the Acquisition Date.

Pro forma results of operations for the acquisition have not been presented because they are not material to the Company's consolidated results of operations.

8. INTANGIBLE ASSETS AND GOODWILL

Intangible assets, net

Intangible assets, net consisted of the following as of September 30, 2026 (in thousands):

Intangible assets, net consisted of the following as of December 31, 2025 (in thousands):

Amortization expense of intangible assets was $0.8 million and $0.3 million for the three months ended September 30, 2026 and 2025, respectively, and $2.3 million and $0.7 million for the nine months ended September 30, 2026 and 2025, respectively.

The expected future amortization expense of these intangible assets as of September 30, 2026 is as follows (in thousands):

Goodwill

Goodwill was $35.2 million and $4.2 million as of September 30, 2026 and December 31, 2025. No goodwill impairments were recorded during the three and nine months ended September 30, 2026 and 2025.

9. LEASES

The Company leases its offices and data center hosting space at various locations under operating lease agreements expiring at various dates through 2035. Under the terms of these agreements, the Company also bears the costs for certain insurance, property tax, and maintenance. The terms of certain lease agreements provide for increasing rental payments at fixed intervals.

Total operating lease related costs were as follows (in thousands):

The weighted-average remaining term of the Company’s operating leases was 4.8 years and 3.8 years as of September 30, 2026 and December 31, 2025, respectively. The weighted-average discount rate used to measure the present value of the operating lease liabilities was 8.5% as of September 30, 2026 and 10.0% as of December 31, 2025. Cash payments made related to operating lease liabilities were $0.4 million for both the three months ended September 30, 2026 and 2025, respectively, and $1.3 million and $1.2 million for the nine months ended September 30, 2026 and 2025, respectively.

Maturities of operating lease liabilities as of September 30, 2026 were as follows (in thousands):

10. BORROWINGS

Vendor financing arrangements—The Company has various vendor financing arrangements with extended payment terms on the purchase of software licenses and equipment. In order to determine the present value of the commitments, the Company used an imputed interest rate of 7.0% as of September 30, 2026 and 10.0% as of December 31, 2025, which is an estimate based on the Company’s collateralized borrowing rate.

Expected cash flows related to vendor financing arrangements as of September 30, 2026 were as follows (in thousands):

11. COMMITMENTS AND CONTINGENCIES

Indemnifications—The Company often enters into limited indemnification provisions in license agreements in the ordinary course of the Company’s licensing business. Pursuant to these provisions, which are often inserted into license agreements in the semiconductor IP and software licensing industries, the Company agrees to indemnify, hold harmless, and reimburse the indemnified parties up to a capped amount for losses suffered or incurred by such indemnified parties due to third-party claims if such claims are determined to be caused by the Company. The term of these indemnification provisions is generally either for a term of years or perpetual, in each case beginning on the execution date of the agreement. The Company has also agreed to indemnify under indemnity agreements with its directors and officers, to the extent legally permissible, against liabilities incurred in connection with any action in which such individual may be involved by reason of such individual being or having been a director or officer, other than certain liabilities arising from willful misconduct of the individual.

The Company has incurred no actual payment obligations from these above-noted indemnification provisions and director and officer indemnity agreements for the three and nine months ended September 30, 2026 and 2025 and the unaudited condensed consolidated financial statements do not include liabilities for any potential indemnity-related obligations as of September 30, 2026 and December 31, 2025.

Legal—The Company has been and will continue to be subject to legal proceedings and claims.

In the normal course of business, the Company may receive inquiries or become involved in legal disputes regarding such litigation matters. The resolution of these matters often develops over time and expectations can change as a result of new findings, rulings, appeals or settlement arrangements. These matters are subject to inherent uncertainties and management’s view of these matters may change in the future. Pursuant to ASC 450, Contingencies, the Company makes a provision for a liability relating to legal matters when it is both probable that a liability has been incurred, and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter.

Significant judgment is required in both the determination of probability and determination as to whether a loss is reasonably estimable. Intellectual property claims are inherently unpredictable and may have a material adverse effect on the Company’s financial position, results of operations, or cash flows. Due to the inherent uncertainties and complex technical issues arising from this or any intellectual property litigation, the Company cannot predict or guarantee any result of, and cannot reasonably estimate liability, if any, or range of loss that could result from such intellectual property litigation. Future revisions to such estimates could materially impact the Company’s results.

In December 2022, the Company received a complaint filed by Network System Technologies, LLC (NST) against the Company and another defendant in the semiconductor industry in the United States District Court for the Western District of Texas alleging intellectual property infringement of certain NST products. Additional complaints were filed in the Eastern District of Texas against certain companies, including some customers of the Company. On September 4, 2024, the court in the Western District of Texas dismissed without prejudice all claims against the Company. The court will maintain jurisdiction solely for the purpose of enforcing discovery in relation to the remaining defendant’s litigation. As of September 30, 2026, no new claims against the Company in connection with this matter have been made, nor have any new customer indemnity claims been received. The Company will continue to monitor this matter.

On October 14, 2025, NST filed patent infringement complaints against three customers of the Company. The Company is not a named party to these lawsuits; however, the complaints refer to the Company’s interconnect technology. As of September 30, 2026, the Company has denied all claims for indemnification, and it is not possible to determine the potential costs and legal expenses or the extent of any further customer indemnity claims. The Company will continue to monitor this matter.

The Company has no material contractual non-cancelable commitments as of both September 30, 2026 and December 31, 2025.

12. COMMON STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

Common Stock

Holders of common stock are entitled toone vote per share and to receive dividends and, upon liquidation or dissolution, are entitled to receive all assets available for distribution to common stockholders. The common stock has no preemptive or other subscription rights and there are no redemption or sinking fund provisions with respect to such shares. Common stock is subordinate to the preferred stock with respect to dividend rights and rights upon liquidation, winding-up, and dissolution of the Company. In connection with its Initial Public Offering in October 2021, the Company amended and restated its certificate of incorporation to authorize 300,000,000 shares of common stock.

Stock Repurchases

There wereno repurchased shares for both the three months ended September 30, 2026 and 2025.

Sales of Common Stock Under At-the-Market Offering

In December 2025, the Company filed a Registration Statement on Form S-3 covering the offering of up to $200.0 million of common stock, preferred stock, debt securities, warrants and units, which was declared effective by the SEC on December 23, 2025 (the S-3 Registration Statement). On December 11, 2025, the Company also entered into an Open Market Sales Agreement (the Sales Agreement) with Jefferies LLC as sales agent to sell shares of the Company’s common stock, from time to time, with aggregate gross sales proceeds of up to $75.0 million pursuant to the S-3 Registration Statement as an “at-the-market” offering under the Securities Act (the 2025 ATM Offering Program). During the nine months ended September 30, 2026, the Company utilized the 2025 ATM Offering Program and sold 2,111,123 shares of common stock for gross proceeds of $75.0 million, before deducting commissions and offering-related costs of $3.0 million, thereby fully exhausting the aggregate amount of common stock that may be sold pursuant to the Sales Agreement. Net proceeds of $72.0 million from these sales were recorded in additional paid-in capital within stockholders’ equity.

13. STOCK-BASED COMPENSATION PLANS AND STOCK-BASED COMPENSATION

2021 Stock Plan

The Company adopted the 2021 Incentive Award Plan (the 2021 Plan) effective October 26, 2021. The 2021 Plan provides for a variety of stock-based compensation awards, including stock options, stock appreciation rights (SARs), restricted stock awards, RSUs, performance bonus awards, performance stock unit awards, dividend equivalents, or other stock or cash-based awards.

Following the effectiveness of the 2021 Plan, the Company will not make any further grants under the Arteris, Inc. 2016 Incentive Plan (the 2016 Plan). However, the 2016 Plan will continue to govern the terms and conditions of the outstanding awards granted under this plan. Shares of common stock subject to awards granted under the 2016 Plan that are forfeited or lapse unexercised and withheld to cover taxes which following the effective date of the 2021 Plan are not issued under the 2016 Plan will be available for issuance under the 2021 Plan.

On November 13, 2025, the Company approved a PSU agreement for use in connection with the granting of PSUs under the 2021 Plan.

2022 Employment Inducement Incentive Plan

The Company adopted the 2022 Employment Inducement Incentive Plan (the 2022 Inducement Plan) effective November 3, 2022, pursuant to which it reserved 2,000,000 shares of its common stock. In February 2026, the 2022 Inducement Plan was amended and restated to increase the common stock available for issuance under the plan to 3,603,403 shares. The 2022 Inducement Plan provides for a variety of stock-based compensation awards, including stock options, SARs, restricted stock awards, restricted stock unit awards, performance bonus awards, performance stock unit awards, dividend equivalents, or other stock and cash-based awards. Awards under the 2022 Inducement Plan can only be made to newly hired employees.

Restricted and Performance Stock Units and Awards

The following table summarizes the restricted and performance stock unit activities under the 2016 Plan, the 2021 Plan and the 2022 Inducement Plan:

The Company granted 2,337,051 and 1,811,012 restricted stock units during the nine months ended September 30, 2026 and 2025, respectively. The total grant-date fair value of restricted stock units vested was $14.3 million and $14.8 million during the nine months ended September 30, 2026 and 2025, respectively.

As of September 30, 2026, there was $66.9 million of unamortized stock-based compensation cost related to unvested restricted stock units, which is expected to be recognized over a weighted-average period of 3.2 years.

The Company granted 107,452 PSUs to its executive officers during the nine months ended September 30, 2026. As of September 30, 2026, there was $1.6 million of unamortized stock-based compensation cost related to unvested performance stock units, which is expected to be recognized over a weighted-average period of 3.0 years.

Certain PSUs granted during the nine months ended September 30, 2026 are eligible to vest based on the relative performance of the Company’s common stock (Total Stockholder Return or TSR), compared to the performance of the Russell 2000 Index (the Index), during the specified three-year performance period. These PSUs have a payout percentage in the range of 0% to 200% of the recipient’s target award, which is calculated based on the difference between the Company’s TSR and the Index TSR over thethree-year performance period, subject to the recipient’s continuous employment with the Company through the third anniversary of the award’s grant date. The payout will be capped at 100% if the Company's TSR is negative. During the three months ended September 30, 2026, the Company also granted PSUs that are contingent on achieving performance conditions related to the Company’s revenue, market conditions based on the Company’s stock price by designated dates and continued service. The fair value of all PSUs granted is estimated using the Monte Carlo simulation model.

Stock Options

The aggregate intrinsic value of the options exercised for the nine months ended September 30, 2026 and 2025 was $13.1 million and $3.3 million, respectively. The total grant-date fair value of options vested was $0.5 million for both the nine months ended September 30, 2026 and 2025.

As of September 30, 2026, there was $1.6 million of unamortized stock-based compensation cost related to unvested stock options, which is expected to be recognized over a weighted-average period of 2.6 years.

2021 Employee Stock Purchase Plan

The Company adopted the 2021 Employee Stock Purchase Plan (the 2021 ESPP) effective on October 26, 2021. The 2021 ESPP enables eligible employees of the Company to purchase shares of common stock at a discount to fair market value. The 2021 ESPP provides for six-month offering periods beginning May 22 and November 22 of each year, and each offering period consists of asix-month purchase period. The first offering period began on May 22, 2024 and ended on November 21, 2024. During the nine months ended September 30, 2026,56,311 shares of common stock were purchased under the 2021 ESPP. As of September 30, 2026,2,196,092 shares of common stock were available for future issuance under the 2021 ESPP.

On each purchase date, eligible employees are entitled to purchase the shares at a price per share equal to 85% of the lesser of (1) the fair market value of the Company’s common stock on the offering date or (2) the fair market value of Company’s common stock on the purchase date.

As of September 30, 2026, there was $0.1 million of unamortized stock-based compensation cost related to ESPP, which is expected to be recognized over a weighted-average period of 0.1 years.

Stock-based Compensation

Stock-based compensation expense is recorded on a departmental basis, based on the classification of the award holder. The following table presents the amount of stock-based compensation related to stock-based awards to employees on the Company’s unaudited condensed consolidated statements of operations (in thousands):

During the three months ended September 30, 2026, the Company recorded stock-based compensation expense of $2.3 million related to the modification of RSUs and options.

14. EQUITY METHOD INVESTMENT

On February 21, 2022, Arteris IP (Hong Kong) Ltd. (AHK), a wholly-owned subsidiary of the Company, entered into a Share Purchase and Shareholders Agreement (the SPA) with certain investors and Ningbo Transchip Information Consulting Partnership (Limited Partnership) (Management Co), pursuant to which the Company, certain investors and Management Co subscribed to the registered capital of Transchip Technology (Nanjing) Co., Ltd. (Transchip).

In September 2025, Transchip entered into a convertible bond investment agreement along with certain investors, under which Transchip received approximately $5.6 million as a loan in October 2025. During the three months ended June 30, 2026, $4.4 million of the loan was converted into Transchip’s equity. The Company did not provide funding under this agreement. In addition, Transchip granted stock awards to certain of its employees in February 2026. As a result of these transactions, the Company’s ownership of Transchip’s registered capital based on issued and outstanding shares decreased from 42.7% as of December 31, 2025 to 33.2% as of September 30, 2026, and the Company’s ownership interest of Transchip’s registered capital reduced from 35.0% as of December 31, 2025 to 32.2% on a fully diluted basis as of September 30, 2026.

No additional losses were recognized for the three months ended September 30, 2026 as the carrying value associated with the equity method investment in Transchip waszero as of September 30, 2026. The Company’s loss from its proportionate share of its equity method investment in Transchip was $0.5 million for the three months ended September 30, 2025, and $3.0 million and $2.1 million for the nine months ended September 30, 2026 and 2025, respectively.

15. INCOME TAXES

Beginning in the three months ended March 31, 2026, the Company’s tax provision for interim periods was determined using a discrete effective tax rate method, as allowed by ASC Topic 740-270, Income Taxes, Interim Reporting. The Company’s tax provision for interim periods was previously determined using an estimated annual effective tax rate which was adjusted for discrete items occurring during the periods presented. The Company determined that due to the sensitivity of the estimated annual effective tax rate to changes in withholding taxes, the use of the historical method would not provide a reliable estimate for the nine months ended September 30, 2026.

The Company’s effective tax rate was a benefit of 6.1% and an expense of 6.0% for the nine months ended September 30, 2026 and 2025, respectively. The Company’s $2.2 million income tax benefit for the nine months ended September 30, 2026 varied from the amount computed using the U.S. statutory tax rate of 21.0% primarily due to the partial valuation allowance release in connection with the Cycuity acquisition and foreign tax rate differentials. The $1.5 million income tax expense for the nine months ended September 30, 2025 varied from the amount computed using the U.S. statutory tax rate of 21.0% due to the geographic mix of worldwide earnings which are taxed at different rates and the impact of losses in jurisdictions with full valuation allowances.

The Company’s management continuously evaluates the need for a valuation allowance and, as of September 30, 2026, concluded that a full valuation allowance on its federal, state, and certain foreign jurisdictions’ deferred tax assets was still appropriate.

16. RELATED PARTY TRANSACTIONS

The Company defines related parties as directors, executive officers, nominees for director and stockholders that have significant influence over the Company, or are a greater than 10% beneficial owner of the Company’s capital and their affiliates or immediate family members. Transchip, an equity method investee of the Company, is also deemed as a related party.

On November 15, 2024, the Company entered into a design services licensing collaboration agreement with Transchip. This arrangement gives Transchip a non-exclusive license right to make design house offerings using certain of the Company's products. The Company retains the manufacturing and royalty-related rights in relation to the Company’s products used in the design house offerings.

During the three months ended March 31, 2025, the Company delivered athree-year term license to Transchip under this arrangement. The Company received payment of $0.7 million and recognized revenue of $0.2 million during the nine months ended September 30, 2026.

K. Charles Janac, the Company’s Chief Executive Officer, invested $0.3 million of his own funds in a private equity financing of an AI chatbot startup, Biflow AI Inc. (Biflow). Following his investment, Mr. Janac controls less than 5% of the outstanding equity of Biflow, on an as-converted basis. In addition, Mr. Janac is also an advisor to Biflow. Biflow was co-founded by a son of one of the Company’s employees, an executive vice president. In September 2025, the Company entered into a separately negotiated agreement with Biflow to provide chatbot services and paid $0.1 million to Biflow under the agreement during the nine months ended September 30, 2026. In April 2026, the Company entered into an amendment to the September 2025 agreement with Biflow to provide additional services to the Company for an amount of $0.1 million through March 2027.

17. SEGMENT AND GEOGRAPHIC INFORMATION

The Company operates inone reportable segment, as more fully described in Note 2. The Company’s CODM reviews and allocates resources using the Company’s financial performance, primarily the net loss presented in the consolidated statements of operations. Other financial performance measures include Annual Contract Value (ACV), ACV plus royalties and remaining performance obligations. The CODM is regularly provided with only the consolidated expenses as noted on the face of the consolidated statements of operations, that are considered as significant expenses. Interest expense and other income (expense), net as presented in the consolidated statements of operations are not considered as significant expenses.