Let me walk you through how I arrived at these two numbers.
First assumption: Q2 2026 revenue bounces back to around $118 million. Q1 is the seasonal low point historically—last year Q2 jumped sharply off the Q1 base. Our customers are mostly fabs and design houses, and Q1 is when they're putting together budgets and locking down their pipelines; actual POs and revenue recognition typically don't show up until after Q2. So Q2 stepping up from Q1 is consistent with the pattern we've seen over the past several quarters. That said, I didn't dare pencil in last year's Q2 figure of $127 million—memory customers have clearly pulled back on capex pacing this year, project acceptance is slipping, you can feel it.
Second assumption: gross margin holds in the 83%–84% band, not snapping back to the 88.8% peak. The reason is the mix shift between our EDA licensing revenue and service revenue—services are gradually taking a bigger share, and services structurally carry lower gross margin. On top of that, in Q3 I'm modeling revenue up to $142 million (last year's Q4 had a high-base effect from a year-end concentrated project acceptance surge; we won't see that this year, though Q3 usually gets a small bump from university and research-institution procurement), and scale leverage will help gross margin a bit, but not enough to pull it back to 88%.
Third key point: on the opex side, I'm modeling "R&D investment stays heavy, sales expansion doesn't hit the brakes." Q1 lost over $13 million in a single quarter, and that investment cadence isn't something we'll voluntarily dial back in the near term—in DTCO, 3D IC, advanced memory modeling, if you don't burn cash on talent, you fall behind. So Q2 loses around $13.1 million and Q3 narrows to about $6.5 million, driven mainly by revenue scaling up and diluting the expense ratio—not by opex itself contracting.
The single biggest risk to call out: customer payment cycles. If the memory majors' yield projects keep getting pushed out and verification stages get stuck, revenue will step down another notch from this forecast; conversely, if wafer fab capex snaps back, we could come in more optimistic than this. The EDA industry looks stable on the surface, but quarter-to-quarter it can whipsaw pretty hard. The uncertainty band I'm holding for myself is roughly plus or minus 15%.
Bottom line: these two quarters are a "still burning, but not out of control" setup. Losses are narrowing, the trajectory is right, but every dollar needs to be watched.