High Resolution Radar Design Wins Will Shape A Cautious Yet Constructive Long Term View

Catalysts

About Arbe Robotics

Arbe Robotics develops high resolution radar chipsets and systems for advanced driver assistance and autonomous driving, as well as nonautomotive uses such as defense, smart cities and maritime safety.

What are the underlying business or industry changes driving this perspective?

• Engagement with multiple European and Japanese OEMs for Level 3 and Level 4 programs could convert into design wins. However, extended decision timelines and postponed model launches may keep automotive radar revenue contributions modest for longer, which would weigh on revenue growth and delay operating leverage.
• The shift toward higher resolution radar for eyes off and hands off driving positions the company as a potential technology partner. At the same time, pricing pressure from OEMs on every component can cap average selling prices and compress gross margins even if volumes eventually scale.
• Nonautomotive demand in defense, smart cities and maritime applications introduces new verticals. These pilots and early orders may remain limited in size and duration, which could leave overall revenue small relative to an operating expense base of US$11.3 million in Q3 2025 and keep net losses elevated.
• Partnerships with an AI computing leader and Tier 1 suppliers signal interest in using the radar platform within full stack autonomous software. A slow transition from development kits and NRE to high volume production could constrain near term cash inflows, sustaining adjusted EBITDA losses such as the US$9.2 million loss reported in Q3 2025.
• Management targets four OEM design wins over the coming three quarters and references potential 2027 and 2028 production ramps. Any slippage in program timing or volume assumptions versus current expectations would limit revenue scale, slow any improvement in gross profit from the current loss making level and extend the period of reliance on the US$52.6 million cash balance.

Assumptions

How have these above catalysts been quantified?

• This narrative explores a more pessimistic perspective on Arbe Robotics compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Arbe Robotics's revenue will grow by 232.0% annually over the next 3 years.
• The bearish analysts are not forecasting that Arbe Robotics will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Arbe Robotics's profit margin will increase from -2183.4% to the average US Electronic industry of 6.7% in 3 years.
• If Arbe Robotics's profit margin were to converge on the industry average, you could expect earnings to reach $4.6 million (and earnings per share of $0.03) by about September 2029, up from -$41.0 million today.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 94.8x on those 2029 earnings, up from -2.4x today. This future PE is greater than the current PE for the US Electronic industry at 28.6x.
• The bearish analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.89%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Arbe is pursuing multiple OEM design wins for Level 3 and Level 4 programs, and management talks about being well positioned to be a key radar provider for a major European OEM. If even a portion of these wins convert into high volume production, revenue could scale from the current US$0.3 million quarterly level and shift the earnings profile more than a flat share price would suggest, particularly for revenue and earnings.
• The broader move toward high resolution radar for eyes off and hands off automated driving, plus data collection programs already using Arbe chipsets at premium European and Japanese OEMs, could support a larger role for radar content per vehicle over time. This may support higher long term revenue and improve net margins relative to expectations of a stagnant share price.
• Nonautomotive demand in defense, smart cities and maritime applications is already producing pilots, evaluation projects and new clients such as WATCHIT in boating. If these verticals continue to add new orders and repeat orders, they may create a more diverse and recurring revenue base that challenges the idea of limited earnings progress.
• Management highlights over US$52.6 million in net cash and a current quarterly operating expense base of US$11.3 million. If the company converts this cash runway into successful program ramps in 2027 and 2028 rather than prolonged losses, the shift from current operating loss of US$11.5 million and adjusted EBITDA loss of US$9.2 million could support a different valuation profile than a flat share price implies, affecting both net margins and earnings.
• Guidance for 4 OEM design wins in the coming 3 quarters and expectations for initial automotive revenues in 2027 with a ramp in 2028 set up clear catalysts. If decisions materialize faster than investors currently assume, or nonrecurring engineering revenue timing swings to the high end of the US$1 million to US$2 million 2025 range, the company could see stronger revenue visibility and improved sentiment that would be inconsistent with an unchanged share price, impacting revenue and earnings.

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Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bearish price target for Arbe Robotics is $2.0, which represents up to two standard deviations below the consensus price target of $2.75. This valuation is based on what can be assumed as the expectations of Arbe Robotics's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $3.5, and the most bearish reporting a price target of just $2.0.
• In order for you to agree with the more bearish analyst cohort, you'd need to believe that by 2029, revenues will be $68.7 million, earnings will come to $4.6 million, and it would be trading on a PE ratio of 94.8x, assuming you use a discount rate of 11.9%.
• Given the current share price of $0.78, the analyst price target of $2.0 is 60.8% 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.