Sequans Communications: Focused Execution In A Growing Market

Summary Sequans is a focused IoT chipmaker with sticky products, strong customer relationships, and a $480M pipeline, positioning it well in a fast-growing market. Revenue and margins are trending positively, with product sales up 42% YoY and recurring licensing income providing stability despite ongoing cash burn. The company’s bold Bitcoin treasury strategy adds long-term optionality, but does not distract from its core IoT business or financial health. Valuation is fair for a high-leverage IoT play; I’m leaning buy as module ramp, licensing growth, and cost control could drive future upside. Introduction I like companies that know exactly what they do and stay in their lane, and Sequans Communications S.A. ( SQNS ) is one of them. It’s a fabless semiconductor company that builds 4G and 5G chips and modules for IoT devices. These aren’t chips for phones or laptops. They’re built for devices that need reliable, low-power, always-on connectivity: things like smart meters, industrial sensors, and asset trackers. The business has two main parts. The first is the hardware side (cellular IoT chipsets and fully integrated modules), with products like the Monarch 2 and Calliope 2. The second is a growing platform business that includes licensing, embedded software, and support services. Most customers come to Sequans for more than the silicon, though, because it offers the full package: security, carrier certification, software stacks, and long-term support. That means that the company has sticky products, which is crucial, especially in regulated and utility-focused markets. Also, Sequans is doing a great job focusing on the main growth drivers. Think winning long-cycle deals in smart grid deployments, public infrastructure, and connected industrial systems. It’s already working with names like Microchip, Renesas, and NTT Docomo, and according to what I found in the company’s latest investor presentation , it has a three-year pipeline worth around $480 million. More than half of that is already locked in through design wins. In my view, the most important thing to consider is the big picture. The cellular IoT market is growing fast, and Sequans is still relatively early in its monetization arc. Still, we have signs that the company has carved out a clear position in that space. It’s steadily expanding its share, particularly in those verticals that care about performance, longevity, and compliance. That’s what gives the company leverage over time. One more thing: the company has also added Bitcoin to its balance sheet as a long-term treasury asset. I don’t think that changes the core business story, but it reflects how management is thinking about long-term value and asymmetric upside. Financial Momentum & Product Ramp I like seeing a consistent story, and Sequans has shown that over the last few quarters. Author: SQNS Revenue Trends If we look at the data above, we can see that over the past five quarters, revenue has moved in the right direction, even if it’s not been a straight line. It went from $6.1 million in Q1 2024 to $11 million in Q4, before pulling back to $8.1 million in Q1 2025. That drop looks like seasonality to me, not weakness. On the product side, it looks like demand is picking up. Product revenue grew 42% year over year in Q1, hitting $3.5 million, and now makes up about 44% of the total. That’s important because this is the higher-volume, higher-visibility part of the business. Simply put, the more Monarch 2 and Calliope 2 units in the field, the more leverage Sequans gets from scale. License and service revenue came in at $4.5 million. That is up 25% from a year ago. To be clear, it isn’t flashy growth, but it’s consistent, and it gives the company something a lot of small chipmakers don’t have: recurring revenue and real software margins. Now, speaking of margins, gross margin has stayed strong, too. It’s not gone below 64% over the last 5 quarters, and the company even recorded a peak of 84% back in June 2024 (Q2 24). Q1 2025 landed at 64.5%, which is more than respectable for a company that is still scaling its product shipments. If we look at costs, the picture is also encouraging. Operating spend dropped to $11 million in Q1 25 , and management says they’re aiming to get that below $10 million per quarter soon. That will help to offset the cash burn we’re seeing, which came in at about $6 to $7 million this past quarter. Cash is at $45.9 million. In my opinion, that should be just about adequate, for now, but it also puts some pressure on the company’s execution. All the same, the plan is to increase product volume and licensing revenue, so if those happen, we will see the cash burn start to reduce, and that should stretch out Sequans’ runway a bit longer. All things considered, then, the trend lines look good. Sales are growing year over year, margins are holding up, and costs are coming down. That’s the kind of setup I like to see when I’m leaning Buy. Capital Strategy: The Bitcoin Move Is An Interesting One I think this Bitcoin treasury move is fascinating on several levels. It doesn’t change anything about Sequans’s core business, but it says a lot about how the company thinks. The company raised close to $384 million in a private placement earlier this year , with about half of that coming from equity and the rest from convertible debentures. The money wasn’t raised for R&D, manufacturing, or M&A. It was raised to buy Bitcoin and hold it as a Treasury reserve. As of July 10, 2025, the company has already bought 370 BTC, and management says they’re targeting up to 3,000 BTC over time. If they can pull it off, that would put Sequans near the top of the list of corporate Bitcoin holders, just behind names like MicroStrategy. Not to worry, the purchases are handled through Coinbase Prime, so the custody is institutional-grade. But what matters to me isn’t the platform. It’s the message. The Bitcoin move is a Treasury strategy . According to management, they clearly see Bitcoin as a long-term store of value, and they’re using it to strengthen the balance sheet. Now, the capital raise is done, and the company’s operations are still fully funded, so this doesn’t threaten the business. If Bitcoin appreciates, that adds value. If it doesn’t, the core IoT business stays untouched. What I also like is how this decision fits the company’s mindset. Sequans has always been a lean operator, and it definitely pushes that angle publicly. It sells to long-cycle customers, avoids flashy product pivots, and targets markets where performance and reliability matter. In my view, that is the same kind of thinking that is behind this move. It looks like management has decided that they’re planning for a future where having a hard, global reserve asset on the books gives them optionality. Now, I have a few questions about the validity of cryptocurrency as a long-term store of value, but I’m not going to discuss them here. More importantly, I think it’s reasonable to consider questions like whether this Bitcoin reserve will eventually support more flexible financing or allow them to self-fund future projects without dilution. Maybe. Alternatively, could it attract investors who want exposure to both hard assets and growth-stage tech? Possibly. I’m not building the buy case around Bitcoin, but I think it gives Sequans a bit more long-term leverage than the market seems to be pricing in. Growth Catalysts: What Could Fuel the Next Leg Up I highlighted a few of these in the intro and financial sections, but I thought I’d just discuss them here, too. Module Volume Ramp (Monarch 2 & Calliope 2) I believe this is core to the thesis. These latest-generation modules are finally shipping at scale. We’ve seen product revenue jump 42% year over year in Q1. If Monarch 2 and Calliope 2 continue rolling into commercial deployments across smart meters, trackers, and IoT devices, that will form the basis for sustainable growth. Industrial & IoT Vertical Tailwinds Sequans is focused on reliable, long-life devices. The global cellular IoT module market has a 27% CAGR between 2024 and 2034 , and it looks like industrial customers (utilities, smart buildings, and fleet operators) are moving to cellular connectivity. From all indications, then, Sequans is in a fantastic position to gain even more market share with its low-power, ultra-reliable modules designed for multi-year battery life and rugged environments. Platform Pipeline Conversion ($480 Million) Finally, the company has a real revenue pipeline that is tied to multi-year uses and recurring deployments. As of Q1 2025, over half of that $480 million pipeline is in confirmed design wins. That gives me confidence we’re not banking on vaporware. If even half of that converts over the next two years, we’re looking at a sizable growth boost. Valuation Check: Reasonable for the Risk Sequans is still a relatively small-cap company, but it’s not flying under the radar anymore. As of July 12, the stock trades around $4.50, and that number reflects the sharp rise we’ve seen in recent weeks. A lot of it is probably tied to the Bitcoin news, so let’s look at the multiples. At that price, the company is valued at just under three times trailing revenue. To be fair, it might sound rich, especially for a company that isn’t profitable yet, but I think there’s more to the story. Seeking Alpha: SQNS Stock Chart I’m not looking at Sequans through the lens of a typical hardware company. This is a platform business in the making. Yes, it sells chips and modules, but it also earns recurring licensing revenue, provides embedded software, and supports long-cycle deployments. That gives it margin potential and visibility that most low-end chipmakers don’t have. Seeking Alpha The current price-to-sales multiple of ~2.9x puts it a bit closer to the higher end of the IoT module space. Peer companies like u-blox ( UBLXF ) and even Sierra Wireless (before it got acquired) usually trade between 1x and 2x sales, albeit the former is currently at 3.35x. Still, those businesses are heavier on hardware, thinner on software, and less focused on long-life industrial use cases. Sequans is worth the current price, in my view, because it’s playing in a more defensible corner of the market. What we don’t have yet are clean earnings or EBITDA figures. The company is still investing in growth, and it’s not breaking even. So there’s no EV/EBITDA metric that really tells the full story right now. What we can work with are the signs: a narrowing operating loss, a clear path to cash efficiency, and a backlog of high-quality contracts that could convert into revenue over the next few quarters. No, the stock isn’t cheap, but for what it is (a small, strategic, high-leverage play on cellular IoT), I think the current price is fair. The valuation reflects the early payoff of a long-term plan. If the module ramp stays on track and licensing revenue continues to grow, this multiple will start to look conservative in hindsight. The Risks These are the things I’m watching most closely: Module adoption could stall if Monarch 2 or Calliope 2 don’t scale as expected, revenue growth slows, and the story weakens. Sequans isn’t profitable yet. Margins are solid, but the company is still burning cash. It needs to keep expenses tight while growing revenue, or the cash runway becomes much shorter. Bitcoin volatility hits the balance sheet. Holding Bitcoin adds optionality, but also adds noise. If the price crashes, it won’t affect operations directly, but it may scare investors and complicate financing. Investor Takeaway I’m leaning towards a Buy on Sequans because I see a focused business doing the hard things well. It’s growing product revenue, building recurring licensing income, and keeping margins healthy. We can also throw in a sticky customer base, growing end markets, and the company has a real shot at reaching cash efficiency over the next few quarters. Again, the Bitcoin strategy doesn’t drive this thesis, but it tells me that management is thinking long-term, bold, and unafraid of optionality. That’s a mindset I like, as long as it doesn’t distract from execution.

Source: Seeking Alpha