Silvaco (SVCO) Q3 2026 earnings review
Silvaco raises its sales outlook, while third-quarter profit slips back
Silvaco's customer orders rebounded on new factory-simulation deals, even as quarterly sales dipped and profit slipped back into a loss. Headline revenue fell 13% because last year included a one-time circuit-design contract, while sales across the rest of the chip-software maker jumped 43% by our math. Chief executive Walden Rhines signed a major new customer for its AI factory platform and lifted the fourth-quarter sales forecast to $22 million.
| Revenue outside circuit-design software | +43% headline revenue: $16.3M, -13% from a year ago |
|---|---|
| Gross bookings (customer orders) | $19.3M +19% from last quarter, above the $18.0M plan |
| Operating loss, excluding one-offs | -$1.0M +$0.6M profit last quarter |
| Q4 and 2027 revenue outlook | Raised Q4 middle of range: $22.0M (+21% from a year ago) |
⚖️ Verdict: 🟢 Bullish
The story got better because customer orders finally outpaced sales after two weak quarters, backing up a higher outlook for both this year and 2027. One caution: the company swung back to an operating loss excluding one-offs as chip building block sales cooled from the second quarter, and its rising cash balance came from a loan and stock sales rather than operations.
The question now is whether the fourth-quarter sales jump will turn Silvaco into a business that generates its own cash. Either the year-end renewal wave produces positive operating cash flow and validates the new 2027 growth plan, or upfront revenue recognition leaves the company burning cash and issuing more shares. Fourth-quarter cash flow and the quarterly filing's backlog figure will decide it.
🐂 Bull Case
Factory Software Orders Rebounded on New Wins
Silvaco sells technology computer-aided design (TCAD) software, which simulates how factories make chips, and Fab Technology Co-Optimization (FTCO), which uses artificial intelligence to speed up those simulations. After two slow quarters, customer orders — which the company calls bookings — bounced back to $19.3 million, beating the $18.0 million middle of its plan.
- TCAD bookings: $10.3 million, up 89% from a year ago on a major new FTCO customer
- Orders vs sales ratio: 1.18, up from 0.91 last quarter by our math
- Design software wins: four large customers bought Jivaro Pro, a tool that shrinks chip circuit files
Chief executive Walden Rhines also said the company "engaged with two of the largest global technology companies with our Agentic AI offerings". This rebound matters because orders had trailed sales for two quarters, which shrank the backlog. Bringing in 18% more in orders than it recognized in sales helps refill the pipeline ahead of the fourth-quarter renewal season.
What to watch: remaining performance obligations — total contracted backlog — in the quarterly filing. An increase from last quarter's $45.0 million would confirm that the new FTCO and Jivaro Pro orders added multi-year backlog.
Management Raised the Outlook for Q4 and 2027
"This acceleration highlights an inflection in the business rooted in changes we have made over the last year," chief executive Walden Rhines said. Three months ago, Silvaco promised that fourth-quarter sales would beat its prior record of $18.7 million and that 2026 sales would top $70 million.
Now the chip-software maker forecasts $22.0 million in fourth-quarter sales at the middle of the range, up 35% from the third quarter and 21% from a year ago. By our math, that puts full-year 2026 revenue at $73.9 million, up 17%. Rhines also lifted the 2027 sales growth target from at least 10% to "mid-to-high teens growth in 2027".
What to watch: fourth-quarter revenue against the $19.8 million bottom of the range. Even the low end beats the old $18.7 million record and proves genuine growth, because the year-ago quarter already included the acquired Mixel business.
🐻 Bear Case
Higher Cash Came From Loans and Stock Sales
"Net cash used in operations improved significantly in Q3, we ended Q3 with the most unrestricted cash on the balance sheet since Q2’25 and we are guiding to record revenue in Q4," finance chief Chris Zegarelli said. Cash and cash equivalents rose to $22.0 million from $13.0 million in June.
The business did not generate that cash. By our math, Silvaco still burned about $0.8 million in operating cash during the third quarter, bringing its nine-month cash burn to $17.3 million. Cash rose only because the company took in $10.0 million from a convertible loan from Micron and raised $11.6 million net from selling new shares over the first nine months.
What to watch: fourth-quarter operating cash flow in the annual report. A negative number during the peak renewal collection quarter would mean Silvaco still relies on issuing stock or debt to fund operations.
Chip Building Block Sales Fell From Last Quarter
Silvaco sells pre-designed chip building blocks — called semiconductor intellectual property (SIP) — largely from its August 2025 purchase of Mixel. That product line carried the company in the second quarter with $6.0 million in sales, and Silvaco also cut general and administrative overhead by 16.9 percentage points of revenue from a year ago.
In the third quarter, SIP sales dropped 32% from the second quarter to $4.1 million, even though the company "Sold our first internally developed MIPI controller with our industry-leading MIPI PHYs". Gross margin excluding one-offs also missed the 88% target at 85.3%, so Silvaco slipped back into a $1.0 million operating loss excluding one-offs after a $0.6 million profit last quarter.
What to watch: fourth-quarter SIP revenue against the $5.8 million needed, by our math, to reach management's earlier $20 million full-year target. A shortfall would show that chip building block growth is slowing now that the Mixel purchase is a year old.
Risks this quarter didn't answer
Three standing concerns around backlog, underlying growth, and trade restrictions could not be resolved from the earnings release alone.
- Total contracted backlog: not in the release, while balance-sheet deferred revenue fell another 8% from June to $11.7 million; the quarterly filing will show whether total backlog stopped sliding.
- Sales from businesses owned a year ago: Silvaco did not separate Mixel's contribution in the quarter the deal turned one year old; the filing's footnote will show true underlying growth.
- China trade exposure: China accounted for 17% of third-quarter revenue (down from 21% in Q2); any tightening of US export controls on chip software would test that revenue stream.
👓 Other Themes
Silvaco Reorganized Into Two Product Teams
The company "Streamlined business around two focused product teams – AI Manufacturing, which includes TCAD multiphysics, FTCO and related technologies and AI Design, which includes Semiconductor IP and complementary EDA solutions". It also brought back former chief executive David Dutton to run the sales organization. Neither step changes the numbers yet, though grouping products into two units could change how Silvaco reports segment sales next year.
💲 Other KPIs
Sales of circuit-design software fell 56% from a year ago, pulling total company revenue down 13%. The drop happened because the year-ago quarter included a one-time $10.4 million US contract. Outside of EDA, Silvaco's remaining revenue grew 43% from a year ago by our math.
Weighted average shares rose 12.4% from 30.2 million a year ago, and rose 2.9% from the second quarter. The increase comes from selling shares on the open market to fund operations, before counting any future conversion of the $10.0 million Micron loan.
Deferred revenue — cash customers have paid upfront for software and support not yet delivered — fell 8.2% from June and is down 26.4% since December 2025 by our math. Meanwhile, contract assets — revenue recognized before the customer is billed — rose 6.8% since December to $29.5 million.
🔮 Guidance
Raised. The $22.0 million middle of the range tops the prior $18.7 million floor and represents 35% growth from the third quarter and 20.5% growth from a year ago by our math. That puts full-year 2026 revenue at $73.9 million, up 17% and above the prior $70 million floor.
New. The plan calls for customer orders to rise 8.8% from the third quarter and 14.8% from a year ago at the $21.0 million middle of the range. Because fourth-quarter revenue is planned at $22.0 million, the middle of the plan points to an orders-to-sales ratio of 0.95.
New. Management expects gross margin excluding one-offs to rise to 88% from 85.3% in the third quarter. The company set the exact same 88% target for both the second and third quarters and fell short both times, delivering 86.8% and 85.3%.
New. Operating costs excluding one-offs are planned to rise from $14.9 million in the third quarter to $16.0 million at the middle of the range. Combined with the revenue and gross margin targets, the middle of the plan implies $3.4 million in fourth-quarter operating profit excluding one-offs by our math.
❓ Key Questions
Did total contracted backlog grow in the third quarter?
Orders beat sales by $3.0 million, but balance-sheet deferred revenue still fell by $1.0 million from June. Investors need the remaining performance obligations figure from the quarterly filing to see if multi-year backlog stopped shrinking.
Why did chip building block sales drop 32% from Q2?
SIP revenue fell from $6.0 million in the second quarter to $4.1 million in the third. Management did not say whether the drop was normal deal timing or whether the $20 million full-year SIP target still holds.
What was revenue growth excluding the Mixel acquisition?
Silvaco bought Mixel in August 2025, so the third quarter included one extra month of acquired revenue compared with a year ago. Without an exact split, readers cannot see how fast the older businesses grew on their own.
Did Silvaco sell more shares during the third quarter?
Nine-month proceeds from issuing stock rose to $12.2 million gross from $11.7 million in the first half. The quarterly filing will show how many shares were sold in the third quarter and at what price.