Lenovo Contract Wins And CPU Partnerships Will Drive Expansion

Key Takeaways

• Strategic partnerships and integration into OEM software stacks drive expanded customer base, recurring revenues, and predictable earnings with higher software margins.
  
• Alignment with industry trends and multi-device monetization positions the company for scalable growth and leadership in AI sensor solutions across new markets.
  
• Heavy reliance on key OEM partners, emerging technology threats, cost pressures, financial constraints, and regulatory risks all threaten growth, profitability, and market access.

Catalysts

An artificial intelligence (AI) software company, engages in the provision of AI virtual smart sensors for the smartphone, laptop, Internet of Things, and automotive markets in Norway, the United States, China, South Korea, Taiwan, and Japan.

• The recent multimillion NOK contracts with a leading global PC/laptop manufacturer (Lenovo) provide a strong long-term foundation for wider and more seamless deployment of Elliptic's AI Virtual Smart Sensor platform, significantly expanding the company's customer base beyond smartphones and positioning revenue for substantial growth as adoption scales across more laptop models and accessories.
  
• Industry-wide momentum toward touchless interfaces and device interconnectivity-fueled by remote work trends and demand for intuitive multi-device experiences-aligns with Elliptic's software-based sensing technology, supporting future growth in top-line revenue as OEMs prioritize enhanced user experiences.
  
• Transition to integration within OEMs' proprietary software stacks increases customer stickiness and likelihood of recurring license fees, improving the predictability and durability of revenues while supporting higher software margins and steady net earnings growth.
  
• Ongoing expansion into dual-sensor deployments per device and per-accessory licensing creates multiple monetization opportunities per hardware unit, directly benefiting both revenue and earnings scalability due to the company's stable cost base.
  
• The company's progress in enlarging platform integration with all major CPU vendors (Intel, AMD, Qualcomm, NVIDIA) positions Elliptic at the center of the emerging trend toward AI-powered sensor fusion, increasing the addressable market, driving future contract wins, and supporting long-term revenue and earnings acceleration.

Elliptic Laboratories Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Elliptic Laboratories's revenue will grow by 53.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from -10.6% today to 47.0% in 3 years time.
• Analysts expect earnings to reach NOK 214.8 million (and earnings per share of NOK 1.02) by about September 2028, up from NOK -13.4 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 11.3x on those 2028 earnings, up from -78.5x today. This future PE is lower than the current PE for the NO Software industry at 35.9x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.67%, as per the Simply Wall St company report.

Elliptic Laboratories Future Earnings Per Share Growth

Risks

• High customer concentration, particularly reliance on large OEMs like Lenovo and smartphone partners such as Xiaomi and Vivo, exposes Elliptic Laboratories to the risk of revenue disruption if a key partner adopts alternative solutions or reduces device rollouts, which could significantly impact revenues and earnings.
  
• Rapid advancements in alternative sensing technologies-including AI-powered computer vision, radar, and multi-modal sensor fusion-pose a risk of Elliptic's ultrasound-based software becoming less competitive or obsolete, potentially dampening product demand and long-term revenue growth.
  
• Hardware commoditization trends in smartphones and laptops, coupled with OEM cost-cutting pressures, may result in device makers deprioritizing advanced user-experience features like Elliptic's sensors to maintain margins, undercutting licensing revenue growth.
  
• Negative operating cash flow and limited cash reserves (NOK 57 million as of Q2 2025), if sustained, could restrict Elliptic's ability to invest adequately in R&D and innovation, thereby increasing the risk that operating expenses may eventually outpace revenue growth and squeeze net margins.
  
• Geopolitical risks and rising international data privacy regulations may limit market access (particularly in China) or restrict the collection and processing of sensor data, potentially reducing Elliptic's accessible market and impacting long-term revenues and earnings.

Valuation

• The analysts have a consensus price target of NOK18.5 for Elliptic Laboratories based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be NOK457.3 million, earnings will come to NOK214.8 million, and it would be trading on a PE ratio of 11.3x, assuming you use a discount rate of 7.7%.
  
• Given the current share price of NOK10.0, the analyst price target of NOK18.5 is 45.9% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.