Asiya Merchant

Asiya Merchant from Citi asked CEO George Kurian about NetApp's opportunities to win business with neoclouds (sovereign or regional cloud providers), distinct from hyperscalers, and any traction observed in this customer segment.

Answer

CEO George Kurian confirmed growing interest from neoclouds, particularly since the introduction of the AFX solution. He cited a significant win in a large Asian neocloud this quarter with AFX in its first quarter of availability. Kurian explained that NetApp is working with other neoclouds to offer a differentiated value proposition, leveraging its proven cloud-ready data services, multi-tenancy, integrated security, performance, scale, and hybrid use cases, which are highly relevant for enterprises adopting AI in these environments. He noted that while it's an early stage, NetApp is making a focused effort and is encouraged by the initial results.

Asiya Merchant from Citi asked about NetApp's opportunities to win business with neoclouds (sovereign or non-hyperscaler clouds) and any traction observed in this customer segment.

Answer

CEO George Kurian confirmed growing interest in neoclouds since the introduction of the AFX solution, citing a win in a large Asian neocloud in its first quarter of availability. He highlighted NetApp's differentiated value proposition, including cloud-ready data services (multi-tenancy, integrated security), performance, scale, and hybrid use cases for enterprise AI, noting it's an early but focused effort with encouraging signs.

Asiya Merchant with Citigroup inquired about the mix shift assumptions underpinning the higher overall gross margin guidance, specifically asking for embedded public cloud revenue growth expectations for the third quarter.

Answer

CFO Wissam Jabre stated that NetApp does not guide to that level of granularity but indicated that public cloud gross margin is comfortable within the 80-85% range. He added that public cloud revenue growth is expected to be very much in line with what has been seen over the past couple of quarters.

Asiya Merchant asked about the factors embedded in NetApp's higher overall gross margin guide, specifically concerning the mix and public cloud revenue growth expectations for the third quarter.

Answer

Wissam Jabre (CFO) stated NetApp does not guide to that level of granularity but reiterated comfort with product gross margin expectations and public cloud operating within the 80-85% range. He expected public cloud revenue growth to be in line with the past couple of quarters.

Asiya Merchant from Citigroup Inc. inquired about NetApp's hypervisor offerings and strategy, particularly in the context of competitors like Nutanix and the ongoing market disruption from VMware's licensing changes.

Answer

CEO George Kurian stated that NetApp's strategy is to support a broad range of hypervisors that its customers want to use, encompassing both on-premises solutions and the native tools of cloud hyperscalers. He emphasized the company's goal is to operate with as many platforms as clients require.

Asiya Merchant from Citigroup Global Markets Inc. asked about NetApp's offerings and strategy for hypervisors, particularly in the context of Nutanix and the market disruption from VMware's licensing changes.

Answer

CEO George Kurian stated that NetApp's strategy is to support a broad range of hypervisors, both on-premises and in the cloud, based on customer demand. He affirmed the company's commitment to operate with as many hypervisor platforms as its clients want to use.

Asiya Merchant inquired about the current penetration rate of all-flash systems into NetApp's installed base and whether recent wins are primarily from converting existing customers or acquiring net new ones.

Answer

CEO George Kurian reported that all-flash penetration of the installed base is now at 43%. He explained that because this percentage only increases modestly each quarter despite strong flash sales, it indicates that a 'preponderant part' of the all-flash business comes from winning net new footprints and new logos, not just from refreshing existing hybrid systems.

Asiya Merchant inquired about the impact of the macroeconomic environment on the full-year revenue growth forecast and sought an update on enterprise AI adoption.

Answer

CEO George Kurian stated that the macro environment is unchanged and the company's growth outlook is based on strong execution and its product portfolio, independent of broader economic conditions. He added that while enterprise AI is in its early stages, NetApp secured over 100 wins for AI and data lake modernization, with the larger opportunity still ahead.

Asiya Merchant requested an update on the hyperscaler opportunity beyond the first announcement, given the new structured model, and details on the nature of investments being made to explore these opportunities.

Answer

Charlie Giancarlo, Chairman and CEO, stated that Everpure is engaged in engineering test environments with multiple hyperscalers, with progress proceeding well, but certainty on certification or specific build-out dates is not yet available. Rob Lee, CTO and Growth Officer, added that investments are primarily focused on R&D to support hyperscaler growth and scaling the supply chain.

Asiya Merchant from Citigroup asked CEO Charlie Giancarlo for an updated perspective on the NeoCloud opportunity, inquiring if Pure Storage's thinking has evolved and how it relates to recent product offerings, particularly given its previously described nuanced nature compared to the hyperscaler market.

Answer

CEO Charles Giancarlo clarified that the "hyperscale opportunity" involves sales into traditional structured storage, while the "AI market" focuses on specialized products like FlashBlade S and Exa for NeoClouds and AI environments. He noted Pure Storage's advanced position in the AI market with FlashBlade S and strong interest in FlashBlade Exa for NeoClouds.

Asiya Merchant from Citigroup asked for an update on Pure Storage's perspective on the NeoCloud opportunity, inquiring if its nuanced view relative to hyperscalers had changed, and how it related to current product offerings.

Answer

CEO Charles Giancarlo clarified the distinction: hyperscale opportunity involves selling into traditional structured storage environments (often used for AI but not specialized), while the AI market (NeoClouds, Sovereign Clouds) involves specialized FlashBlade products like FlashBlade//S and FlashBlade//EXA. He noted that Pure Storage is further along in scaling sales into the AI environment with hundreds of FlashBlade//S customers tied to GPUs, and FlashBlade//EXA is now seeing good interest in the NeoCloud environment.

Asiya Merchant of Citigroup Global Markets Inc. asked for guidance on the expected revenue split between product and subscription services and the outlook for subscription gross margins.

Answer

CFO Tarek Robbiati explained that the revenue mix is determined by the relative growth rates of product and subscription revenues, with product growth being influenced by high-margin software and royalty streams. CEO Charles Giancarlo added that forecasting the mix is challenging because customers can choose between upfront product purchases and as-a-service subscriptions like Evergreen One, which impacts in-quarter revenue recognition differently.

Asiya Merchant of Citigroup Inc. asked about the company's confidence in improving product gross margins and whether NAND prebuys would be necessary to achieve the guidance.

Answer

CEO Charles Giancarlo expressed confidence, stating that Pure has a high skill at managing NAND pricing. He explained they are constantly in the market and will use a mix of prebuys and spot market purchases when advantageous, but they do not announce these actions specifically.

Asiya Merchant asked about the outlook for Evergreen TCV, inquiring about expectations for it to return to double-digit growth in calendar 2025, given the current trend of customers shifting to traditional product sales due to OpEx pressures.

Answer

CFO Kevan Krysler noted that the dynamic of larger Evergreen//One deals (over $5M) is consistent with prior expectations, but smaller deals saw a meaningful shift to CapEx. He stated that he would wait to see how Q4 plays out before providing specific guidance for the next year, but reiterated the belief that the shift is not a sustained trend.

Asiya Merchant asked for the basis of management's confidence in achieving the second-half ramp required to meet the revised $500 million Evergreen//One TCV forecast.

Answer

CFO Kevan Krysler explained that the forecast assumes continued strong performance in the high-velocity business, even with a reduced contribution from larger deals. He noted that the implied second-half ramp is only slightly higher than the company's typical seasonality for traditional sales, making the target achievable.

Asiya Merchant asked if hyperscalers were engaging Amphenol to secure supply, similar to a competitor's agreement with Meta, and what this would mean for Amphenol's investment strategy and the value of the CCS deal.

Answer

Adam Norwitt (CEO) confirmed strong orders for both Amphenol and the newly acquired CommScope business, noting its positive book-to-bill. He highlighted the improved valuation of the CommScope acquisition due to its strong momentum and emphasized Amphenol's willingness to make prudent investments to support CommScope's growth, unlike its previous balance sheet-constrained owner.

Asiya Merchant asked about the sources of extra value creation in non-AI end markets that can sustain incremental margins, and the competitive dynamics across all markets.

Answer

CEO Adam Norwitt explained that increased electronics intensity in customer products across all markets (e.g., autonomous farming, defense, mining) drives demand for complex interconnect systems, creating value. He emphasized Amphenol's competitive advantage through technology, manufacturing capability, and agile, decentralized culture.

Asiya Merchant asked for clarification on where Amphenol is creating additional value in non-AI end markets to sustain incremental margins, given the increasing complexity of interconnects. She also inquired about the company's perspective on competitive dynamics across all its end markets, including IT Data Communications.

Answer

CEO Adam Norwitt reiterated that interconnects are creating more value across all end markets, not just AI, due to the increasing intensity of electronics in products like autonomous farming, mining equipment, and defense systems. Regarding competition, he acknowledged its presence across all segments but asserted Amphenol's sustainable advantage through superior technology, manufacturing capability, and the company's agile, entrepreneurial culture, enabling them to outperform.

Asiya Merchant of Citigroup asked for more detail on the Industrial market's strong performance, particularly the organic growth in Europe, and whether this market's momentum could disproportionately boost incremental margins.

Answer

President & CEO R. Adam Norwitt confirmed strong, broad-based performance in the Industrial market, including double-digit organic growth in Europe and strength across sub-segments like medical and factory automation. However, he cautioned against assuming a disproportionate margin impact, stating that the company achieves strong profitability across all its markets.

Asiya Merchant from Citigroup requested more detail on the performance of the non-AI portions of the business, asking where the strength was coming from and about the forward-looking visibility.

Answer

CEO Adam Norwitt clarified that strength was broad-based, not just from AI. He noted that within IT Datacom, the non-AI business also showed "outstanding growth." He estimated that roughly two-thirds of the year-over-year IT Datacom growth was from AI, implying the remaining one-third was from the strong base business. He stated that even excluding the entire IT Datacom market, the rest of the company delivered excellent organic growth.

Asiya Merchant requested more detail on the improving demand trends in the industrial end market, asking where specifically the company is seeing strength and about the linearity of the improvement.

Answer

CEO R. Norwitt noted the company was pleased to see 6% organic growth in the industrial market. He identified strength in medical, rail mass transit, and alternative energy, with particularly robust growth in industrial instrumentation, which includes test equipment for semiconductor manufacturing. However, he remained cautious about calling a full recovery, citing continued uncertainty in the European market.

Asiya Merchant asked about the duration of the current elevated capital expenditure cycle, particularly in relation to supporting the growth in the IT Datacom segment.

Answer

CFO Craig Lampo confirmed that CapEx levels would remain elevated in Q4 to support strong demand in IT Datacom and defense. While not providing 2025 guidance, he reiterated the company's long-term target of 3-4% of sales and stated that no structural changes to this expectation have occurred, despite the near-term increase.

Asiya Merchant asked if the scale-up opportunity (CPO) for optical is included in the current Springboard outlook through 2028, and inquired about the margins for the solar business within the updated Springboard plan.

Answer

Chairman and CEO Wendell Weeks clarified that a significant revenue amount for scale-up (CPO) is not included in the current Springboard upgrade, viewing it as a potential upside depending on timing, which is difficult to predict. EVP and CFO Ed Schlesinger explained that the solar business ramp is currently a drag on margins and profit (estimated $0.03-$0.05 impact in Q1), but sales and profitability are expected to improve through 2026, aiming for margins at or above the Corning average by 2028.

Asiya Merchant inquired whether the scale-up opportunity for CPO (Co-Packaged Optics) is included in Corning's outlook through 2028 or if it's a longer-term opportunity. She also asked about the margins for the ramping solar business within the updated Springboard plan.

Answer

Chairman and CEO Wendell Weeks clarified that a significant revenue amount for CPO scale-up is not included in the current Springboard upgrade through 2028, viewing it as a potential upside beyond that timeframe due to timing uncertainties. EVP and CFO Ed Schlesinger explained that the solar business ramp is currently a drag on margins (estimated $0.03-$0.05 in Q1), but they expect sales and profitability to improve through 2026, aiming for margins at or above the Corning average by 2028.

Asiya Merchant inquired about the outlook for incremental operating margins beyond Q4, given that the Springboard operating margin target of 20% is being achieved a year ahead of schedule. She also asked about the expected growth rates in the Automotive segment, particularly concerning upcoming 2026 emissions regulations.

Answer

Executive Vice President and Chief Financial Officer Ed Schlesinger expressed satisfaction with the operating margin expansion, noting that future improvements would come as solar ramp costs subside. He stated that while the 20% target was met, the focus remains on continued sales growth, improving ROIC, and free cash flow, with potential for higher margins in the future. For Automotive, he mentioned current sales are impacted by a weaker heavy-duty market but expects Automotive Glass to drive growth, with U.S. emissions regulations impacting from late 2026 for 2027 model years.

Asiya Merchant inquired about potential supply constraints and pricing power in the Optical Communications segment, and asked when the financial benefits of productivity ramps would be fully reflected in margins.

Answer

Chairman & CEO Wendell Weeks acknowledged that supply for new products is currently 'tight' and that while new pricing was introduced, the margin benefit has been temporarily absorbed by startup costs. EVP & CFO Ed Schlesinger added that despite these costs, the segment's net income is already growing faster than sales, and he expects margins to continue improving.

Asiya Merchant questioned if Corning is facing supply constraints in Optical Communications, its ability to exercise pricing power, and when the margin benefits from new product ramps would become more visible in financial results.

Answer

CEO Wendell Weeks acknowledged that new products are currently supply-constrained and that while new pricing was introduced, the margin benefit has been largely offset by ramp-up costs. CFO Ed Schlesinger added that despite these costs, the Optical Communications segment's net income is already growing faster than sales, indicating margin expansion is underway and expected to continue.

Asiya Merchant from Citigroup Inc. questioned whether the strong demand in Optical Communications is creating a supply-constrained environment and if this presents an opportunity for Corning to exert more pricing power or strengthen its competitive moat.

Answer

Chairman and CEO Wendell Weeks affirmed this strategic view, noting it is especially relevant for Corning's next-generation products. He pointed to the rising profitability in the Optical segment as existing proof of this dynamic. He expressed optimism that if their next-gen innovations are as competitively advantaged as anticipated, the segment's margin profile would continue to improve.

Asiya Merchant of Citi inquired about the outlook for net income margins in the Optical Communications segment amid strong demand and asked about expectations for free cash flow margins as the company progresses on its Springboard plan.

Answer

EVP and CFO Ed Schlesinger stated that while Q4 Optical margins were slightly impacted by costs to support higher sales, he expects margins to accrete upwards in 2025. Regarding cash flow, he highlighted the strong 42% YoY growth in 2024 and expects continued improvement, noting that a Q4 build in working capital due to the sales ramp bodes well for 2025.

Asiya Merchant asked about customer response to Display pricing actions, expectations for future increases, and how elevated operating expenses might moderate in Q4.

Answer

CEO Wendell Weeks expressed confidence in the H2 2024 double-digit price increase, which aims to stabilize profitability and achieve a 25% net income margin. CFO Ed Schlesinger explained that Q3 OpEx included a nine-month variable compensation catch-up accrual. While this catch-up won't repeat, he expects OpEx to remain temporarily elevated in Q4 due to continued strong performance.

Asiya Merchant asked about potential upside to HAMR rollout targets for fiscal years 2026 and 2027, and how blended cost reductions would progress, particularly with the ramp of Mozaic 4.

Answer

CFO Gianluca Romano expressed satisfaction with the HAMR transition, noting qualification with six out of eight top cloud service providers and the ongoing qualification of the 4 TB per disk (40 TB per drive) product. He anticipates that the high-volume ramp of the 40 TB drive will favorably impact costs, leading to a significant reduction in cost per terabyte and contributing to further gross margin increases.

Asiya Merchant inquired about potential upside to Seagate's HAMR rollout targets for fiscal years 2026 and 2027. She also asked for insights into blended cost reductions, particularly with the ramp of Mozaic 4 HAMR drives.

Answer

CFO Gianluca Romano expressed satisfaction with the HAMR transition, noting qualification with six out of eight top cloud service providers and the ongoing qualification of the 4 TB per disk (40 TB per drive) product. He confirmed that the 40 TB drive ramp would favorably impact costs and significantly reduce cost per TB, contributing to further gross margin increases.

Asiya Merchant inquired about the visibility and confidence in AI inferencing demand growth through calendar year 2027, specifically asking about driving applications and how this demand might impact typical March quarter seasonality.

Answer

Dave Mosley, Chair and CEO, highlighted the explosion of video content and AI-generated videos as key drivers for storage demand, noting the difficulty in precise short-term predictions but overall excitement. Gianluca Romano, CFO, suggested that with data center revenue comprising 80% of total revenue, the impact of traditional seasonality, including the March quarter, is likely to be lower than in the past.

Asiya Merchant inquired about the visibility of AI inference demand, the applications driving confidence through calendar 2027, and how to think about typical March quarter seasonality given strong AI inferencing demand.

Answer

Seagate's Chair and CEO, Dave Mosley, noted that video content, including AI-generated video, is a major driver of demand, though predicting its exact progression is challenging. CFO Gianluca Romano added that with data center revenue at 80% of total, the impact of seasonality is likely lower than in the past.

Asiya Merchant from Citigroup asked for details on the demand drivers from AI inference workloads in both cloud and edge environments and how this might affect the company's exabyte growth projections.

Answer

CEO Dave Mosley explained that cloud AI demand is driven by large video properties and diverse datasets. At the edge, he noted growth from video applications in settings like factories and hospitals, with a trend toward saving more data snapshots. He confirmed Seagate is sticking to its mid-twenties exabyte CAGR forecast, while watching for new data-heavy viral applications at the edge.

Asiya Merchant inquired about the progress of HAMR qualifications with additional customers, the technology's contribution to March quarter results, and its expected role in bit shipments through calendar 2025.

Answer

CEO Dave Mosley confirmed that the HAMR ramp is on schedule, with one major cloud service provider (CSP) qualification nearly complete and several others in progress. CFO Gianluca Romano added that the March quarter's revenue upside was driven by higher-than-expected HAMR product volume, noting the technology is ramping very rapidly.

Asiya Merchant of Citi asked about Seagate's appropriate long-term gross margin target, noting that the company is already executing well above its previously stated range, especially with the ramp of HAMR technology.

Answer

CFO Gianluca Romano advised against focusing on the old gross margin range, stating it did not include the impact of HAMR technology and that a new model would be discussed at a future Analyst Day. CEO Dave Mosley added that strong margins are necessary to fund the R&D required to deliver the future product roadmap that customers demand.

Asiya Merchant of Citigroup inquired about the near-term impact of the HAMR ramp on gross margins, asking if it would be dilutive initially due to low volumes and ramp-up costs before becoming a long-term driver of margin expansion.

Answer

CEO Dave Mosley stated the company's goal is for HAMR to be accretive to gross margin from the start, as they must be paid for the technology to justify displacing existing PMR production from largely full factories. CFO Gianluca Romano added that at similar volumes, HAMR's cost per terabyte is already below PMR's, providing a cost advantage, and there is no reason HAMR should not be accretive in the short term.

Asiya Merchant asked about Logitech's confidence in achieving its long-term growth targets beyond fiscal year 2026, considering macro factors like memory availability and PC demand, and inquired about the sustainability of strong gross margins given consumer spending concerns.

Answer

CEO Hanneke Faber expressed encouragement by business momentum, noting Logitech's historical ability to outperform PC sales by 300-500 basis points due to the large installed base opportunity for peripherals. She also stated that memory availability issues would not materially affect Logitech's portfolio or supply. CFO Matteo Anversa highlighted the team's outstanding execution in maintaining a 43.5% gross margin despite tariffs, attributing it to brand strength, continuous innovation (e.g., MX Master 4), and product cost reduction efforts.

Asiya Merchant asked about Logitech's confidence in long-term growth targets beyond fiscal year 2026, given macro factors like memory affecting PC demand, and inquired about the future outlook for gross margins amidst consumer spending concerns.

Answer

Hanneke Faber, CEO, expressed encouragement by business momentum and the company's ability to perform well in dynamic environments, noting that memory availability issues primarily affect only a portion of video conferencing products and are being mitigated. She highlighted the significant opportunity in the existing PC installed base for peripherals. Matteo Anversa, CFO, emphasized the team's strong execution in maintaining gross margins, citing brand strength, continuous innovation, and product cost reduction as foundational elements, while acknowledging rising commodity prices.

Asiya Merchant from Citigroup inquired about the U.S. consumer market uncertainty, particularly in gaming, asking if price increases contributed to the decline and how improving trends in the Americas, including gaming, influenced the Q3 guidance, especially given better sell-through than sell-in.

Answer

CEO Hanneke Faber explained that while B2B and gaming markets in Europe/Asia-Pacific were strong, the Americas gaming market declined mid-single digits in Q2, but trends improved later in the quarter, leading to cautious optimism for holiday recovery. CFO Matteo Anversa detailed the Q3 outlook, expecting Asia-Pacific and EMEA to continue strong growth, with North America's performance (flat to slightly positive vs. slightly negative) forming the bookends of the guidance. Faber added that premium products and B2B saw little impact from price increases, while entry-priced gaming products experienced some, which is being managed with targeted promotions.

Asiya Merchant asked about the U.S. consumer uncertainty, specifically relating to the gaming market decline, the impact of price increases, and the rationale behind the Q3 guidance given improving trends.

Answer

CEO Hanneke Faber explained that while the North American gaming market declined mid-single digits in Q2, trends improved as the quarter progressed, and they are cautiously optimistic for recovery in the holiday quarter due to new game releases and innovation. CFO Matteo Anversa detailed the Q3 outlook, expecting strong performance in Asia-Pacific and EMEA, with North America's performance (ranging from slightly negative to flat/positive) being the key variable. Hanneke Faber added that price increases had minimal impact on premium and B2B products but some effect on entry-priced gaming products, which is being managed with targeted promotions.

Asiya Merchant from Citigroup Global Markets Inc. requested a detailed breakdown of the gross margin guidance, including the effects of inventory reserves and tariffs, and asked about the margin trajectory for the rest of the fiscal year.

Answer

CFO Matteo Anversa provided a detailed walk-through of the gross margin. For Q1, the 120 bps year-over-year decline was driven by a ~100 bps tariff impact (net 50 bps after pricing) and a 50 bps pressure from a prior-year inventory reserve release. For Q2, he guided to 41-42%, explaining that a 200-300 bps negative tariff impact will be mostly offset by a 200 bps positive pricing impact. He stated it was premature to comment on the margin trajectory beyond Q2 due to market volatility.

Asiya Merchant asked for a detailed breakdown of the Q1 gross margin guidance, specifically the impacts from tariffs, inventory, and recent price increases, and also inquired about early customer reactions to the new pricing.

Answer

CFO Matteo Anversa explained the Q1 gross margin guide of 41-42% reflects a ~200 basis point negative impact from tariffs and a ~100 bps negative impact from the absence of prior inventory reserve releases. This is partially offset by a ~100 bps positive impact from targeted price increases, which average about 10% on U.S. products. CEO Hanneke Faber added that it is too early to gauge customer reaction to the mid-April price hikes but believes the company's strong brand provides pricing power.

Asiya Merchant inquired about the sustainability of Logitech's high gross margins, the specific sequential drivers for the Q2 outperformance, and the long-term margin outlook, particularly as B2B efforts increase.

Answer

CFO Matteo Anversa explained that the strong Q2 gross margin of 44.1% was driven by sustained product cost reductions and the successful sale of previously reserved inventory. He stated that while these cost reduction efforts are durable, the benefit from selling reserved inventory is not expected to repeat at the same level in the second half. For the full fiscal year, he guided for gross margins to be in the 42% to 43% range, noting that the second half will see some pressure from higher freight costs and typical holiday season promotional intensity.

Asiya Merchant asked for clarification on the sequential EPS guide, which is slightly down despite flat sales, inquiring about any below-operating-income items. She also asked about drivers for further expansion in incremental operating margins.

Answer

CFO Heath Mitts attributed the sequential EPS difference from Q1 to Q2 primarily to $0.04-$0.05 of higher tax and interest expense. He reiterated confidence in achieving 30% or better incremental flow-through for the full year in both segments, driven by volume leverage and reduced operating footprint, particularly in Western Europe, which helps lower fixed costs and improve operating margins.

Asiya Merchant asked for clarification on TE Connectivity's EPS guidance, which is slightly down quarter-over-quarter despite flat sales, inquiring about any below-operating-income items contributing to this, and the drivers for further expansion in incremental operating margins.

Answer

CFO Heath Mitts attributed the Q1 to Q2 EPS difference primarily to $0.04-$0.05 of higher tax and interest expense. He reaffirmed confidence in achieving 30% or better incremental margins for the full year, driven by volume leverage and the reduction of fixed costs from optimizing the operating footprint, particularly in Western Europe.

Asiya Merchant asked about the book-to-bill ratio, particularly in the industrial segment, given the strong momentum in Digital Data & Devices and other segments. She inquired if a book-to-bill below one (calculated at 0.96) is a metric investors should focus on and how it relates to the company's guidance.

Answer

CEO Terrence Curtin advised looking at overall order levels, noting that sequential seasonality, particularly factory shutdowns around holidays in Western regions, typically leads to a step-down from Q4 to Q1. He highlighted that $4.7 billion in orders in Q4 against a $4.5 billion Q1 sales guide is very healthy, suggesting that the trend into a seasonally slower quarter is the more relevant perspective than a single book-to-bill ratio.

Asiya Merchant from Citigroup asked for early thoughts on the impact of recent legislative bills and how TE would use its capital allocation optionality, particularly regarding the M&A pipeline.

Answer

CEO Terrence Curtin noted that as a global company, TE is focused on customer innovation and its localization strategy, and while some legislation may help, the company's key trends are global. CFO Heath Mitts added that the M&A pipeline looks good for bolt-on acquisitions of various sizes, particularly in the fragmented industrial space, and the company is well-positioned with a strong balance sheet to pursue them.

Asiya Merchant inquired about the trajectory for the Commercial Transportation business, asking when a recovery might occur and how that would impact the Transportation segment's high margins.

Answer

CEO Terrence Curtin stated that the commercial transportation market remains soft in Europe and North America, with stable but weak orders. He noted that upcoming 2027 emission standard changes in North America could create an inflection point for a recovery, but the timing is uncertain. He confirmed that when volume returns, the high-margin nature of this business would provide a strong positive lift to segment profitability.

Asiya Merchant inquired about TE Connectivity's role in the co-packaged optics opportunity within the AI space and how the company views this trend long-term.

Answer

CEO Terrence Curtin clarified that TE does not participate in co-packaged optics. He emphasized that the company's strength lies in copper connectivity, which will remain essential even as data center architectures evolve to a hybrid approach. He noted that TE's current AI revenue forecast already accounts for this architectural evolution and that solving harder engineering problems is a core strength.

Asiya Merchant with Citigroup Inc. asked about the reflection of the H3C asset sale in the company's Other Income and Expense (OINE), noting that the OINE figure provided did not appear to have changed from the analyst day.

Answer

CFO Marie Myers confirmed that all aspects related to the H3C sale are factored into the OINE numbers provided in her prepared remarks, as this transaction was planned for fiscal year 2026.

Asiya Merchant asked for more detail on enterprise AI services, including whether it's a growing portion of orders, what specific services are in demand, and where HPE is securing wins.

Answer

President and CEO Antonio Neri confirmed that AI-related services orders grew quarter-over-quarter. He detailed the engagement model across 'day 0' (use case definition), 'day 1' (design/implementation), and 'day 2' (operations). He emphasized the value of partnerships like Deloitte for a business-process approach and highlighted the HPE Private Cloud AI offering as a key solution for enterprises seeking expertise and faster time-to-value, which will drive continued services growth and margin improvement.

Asiya Merchant asked about Dell's outlook for the storage business, particularly the potential for a quicker inflection towards more Dell IP storage and faster unwinding of HCI storage, given the server demand and commodity headwinds.

Answer

CFO David Kennedy reiterated expectations for continued Dell IP storage growth in Q4, driving margin improvement. COO Jeff Clarke emphasized the successful pivot to Dell IP, noting increased mix, improved margins, and double-digit growth in all-flash arrays and PowerStore. He outlined the strategy focusing on Dell Private Cloud, AI/unstructured storage, and cyber resilience, all driven by Dell IP assets.

Asiya Merchant asked about the outlook for the storage business, specifically the potential for a quicker inflection towards Dell IP storage and its positive impact on margins, and if the unwinding of HCI storage could accelerate faster than previously communicated.

Answer

David Kennedy (CFO, Dell Technologies) reiterated expectations for continued Dell IP storage growth in Q4, driving sequential margin improvement. Jeff Clarke (COO, Dell Technologies) emphasized that the pivot to Dell IP is serving Dell well, with increasing mix and improving margins. He highlighted double-digit growth in the all-flash array portfolio (PowerMax, PowerScale, PowerStore, ObjectScale, PowerFlex) for two consecutive quarters, and PowerStore's seven quarters of growth (six double-digit). He outlined Dell's strategy around Dell Private Cloud, AI/unstructured storage, and cyber resilience, all driven by Dell IP assets.

Asiya Merchant from Citigroup asked about the PC business, seeking the source of Dell's confidence in gaining share and improving profitability in the second half, and whether the PC refresh momentum would sustain into calendar 2026.

Answer

Jeff Clarke, Vice Chairman and COO, expressed confidence that the PC refresh cycle driven by the Windows 10 end-of-life will extend into the next year, as a large portion of the installed base remains to be upgraded. He acknowledged that Dell's share performance has not been consistent enough and stated the organization is focused on outperforming the market and taking share, pointing to a newly launched entry-level commercial notebook as a sign of their commitment to winning.

Asiya Merchant from Citigroup inquired about the competitive landscape, particularly given the macro environment and Dell's decision not to raise prices amid tariff discussions. She asked if the guidance reflects heightened competitive intensity or is primarily a reflection of prudence due to observed customer behavior.

Answer

Jeff Clarke, Vice Chairman and COO, characterized the competitive environment as largely stable and consistent. He noted that while large bids remain aggressive, transactional pricing has been disciplined. The main issue impacting the quarter was not a change in competitive behavior but rather the demand slowdown in North America during the last few weeks. He confirmed Dell mitigated tariff impacts without raising list prices, weathering the dynamic environment effectively.

Asiya Merchant asked about the mix of enterprise and sovereign customers within Dell's AI pipeline and backlog, how that mix has changed recently, and how much of the associated services attach is factored into the fiscal '26 guide.

Answer

COO and Vice Chairman Jeffrey Clarke confirmed the AI pipeline has a healthy and growing mix of both CSP and enterprise customers, with the enterprise component and customer base growing quarter-over-quarter across sectors like education, tech, and government. He stated that the 'at least $15 billion' AI server shipment forecast is an all-inclusive number that factors in the attach of services (professional, deployment, installation), networking, and storage to the best of the company's ability.

Asiya Merchant from Citigroup asked about the customer concentration within the AI backlog and orders, and inquired about Dell's market share ambitions in the projected AI TAM for calendar '25.

Answer

Executive Jeffrey Clarke acknowledged the business is weighted towards Tier 2 cloud providers but highlighted that Dell has now sold AI solutions to over 2,000 unique enterprise customers. He noted the enterprise portion of the pipeline is growing at a faster rate, representing a significant long-term opportunity as companies move from experimentation to production.

Asiya Merchant asked for more detail on the demand indicators and pipeline visibility that support Dell's optimism for Client Solutions Group (CSG) growth in the fourth quarter and into calendar 2025.

Answer

COO Jeffrey Clarke stated that while the PC refresh cycle is starting later than initially expected, confidence remains high. He cited a large, aging installed base from the COVID era, the fixed end-of-life date for Windows 10, and the introduction of new AI-enabled PCs and applications as key drivers for a recovery weighted toward the end of the year and into 2025.

Asiya Merchant sought clarification on SanDisk's revenue guidance, specifically the split between pricing and bit growth, and inquired about the confidence drivers for edge device growth (PCs and mobile phones) in calendar year 2026, noting that some unit growth expectations seemed higher than industry forecasts.

Answer

EVP and CFO Luis Visoso clarified that most of the revenue growth in the quarter will be pricing-driven, with double-digit price increases and low single-digit bit growth. Chairman and CEO David Goeckeler explained that confidence in edge growth stems from slight unit increases in phones combined with double-digit content per unit growth, and flat-to-slightly-up PC units with mid-single-digit average capacity growth. He highlighted the diversified nature of the NAND market with strong growth across data center, edge, and consumer segments.

Asiya Merchant sought clarification on the Q2 revenue guide of $2.6 billion (midpoint), noting that it implies low-double-digit growth while pricing is also expected to be up low-double-digits, and asked about the expected bit growth. She also inquired about Sandisk's confidence in edge device growth, particularly PCs and mobile phones, for calendar year 2026, given unit growth expectations.

Answer

EVP and CFO Luis Visoso clarified that the Q2 revenue guide reflects double-digit pricing increases and mid-single-digit bit growth, with most of the revenue growth being pricing-driven. Chairman and CEO David Goeckeler expressed confidence in edge device growth for 2026, citing slightly up phone units with double-digit content per unit growth, and PCs flat to slightly up with mid-single-digit average capacity growth. He highlighted the diversified nature of the NAND market with strong growth across data center, edge, and consumer segments.

Asiya Merchant from Citigroup asked how high-capacity QLC SSDs for AI might alter the long-term bit growth outlook and questioned the potential impact of an aggressive Chinese competitor on the current supply-demand balance.

Answer

Chairman & CEO David Goeckeler clarified that demand from AI workloads and high-capacity SSDs is already factored into their overall model, which continues to show an undersupplied market through 2026. He added that all competitors' activities are included in their supply forecasts, and the market has successfully absorbed recent shipments.

Asiya Merchant from Citigroup inquired about the components driving Super Micro's strong $13 billion order pipeline and the factors contributing to the robust order outlook embedded in the guidance. She also asked for insights into the expected gross margin trajectory and the OpEx required to support such a strong revenue outlook throughout the fiscal year, and sought details on the customer breakdown for the $13 billion orders.

Answer

Charles Liang, Founder, President, and CEO, attributed the strong revenue to GPU product lines like Blackwell Ultra, AMD MI350/355, B300, and RTX. He also emphasized the strategy of providing end-to-end data center solutions, including DCBBS and services, to enhance customer value and profit margins. David Weigand, CFO, noted conservative gross margin guidance for the current quarter due to ramping a new product line at mega scale, but expects improvement in future quarters. He reiterated the historical sub-5% OpEx target while acknowledging increased investment in infrastructure. Mr. Liang added that growing from $5-6 billion to $10 billion quarterly involves global capacity expansion and hiring, which will lead to more efficient resource leverage and improved profitability with DCBBS maturity. Mr. Weigand stated that the $13 billion orders include some of the 'best customers in the world,' with two 10%+ customers this year, but did not disclose specific customer names.

Asiya Merchant inquired about the components driving the strong $13 billion order pipeline, the expected sequential revenue growth post-fiscal Q2, and how gross margins and OpEx are projected to evolve throughout the year to support this outlook.

Answer

Charles Liang, Founder, President, and CEO, attributed strong revenue to GPU product lines like NVIDIA Blackwell Ultra, AMD MI350/355, B300, and RTX, emphasizing the strategy to provide end-to-end data center solutions (DCBBS) for higher profit margins. David Weigand, CFO, explained that Q2 gross margins are conservative due to ramping a new mega-scale product line and cluster, but are expected to improve in future quarters. He also noted that OpEx would remain below 5% of revenue while increasing to strengthen infrastructure.

Asiya Merchant asked about Supermicro's order visibility and potential revenue impact from upcoming AI diffusion rules, given investor concerns. She also requested insight into how the company is thinking about gross margins for fiscal 2026, particularly with the rollout of its second-generation direct liquid cooling (DLC) solutions.

Answer

CEO Charles Liang responded that demand continues to grow, supported by capacity expansion in the U.S., Taiwan, and Malaysia, and that the company will continue to gain market share despite potential tariff impacts. CFO David Weigand acknowledged headwinds from diffusion rules and tariffs but stated the company is well-positioned as a U.S.-based manufacturer and first-to-market provider, while declining to give a specific forecast for fiscal '26 margins.

Asiya Merchant of Citigroup Global Markets Inc. asked about the drivers behind the year-over-year decrease in gross profit margins, questioning if it was due to competitive pricing on infrastructure products and where the margin might bottom out.

Answer

CFO Al Miralles clarified that the non-netted down margin was actually up 10 basis points sequentially. He explained the year-over-year decline was driven by two factors: dilution from a lower mix of 100%-margin netted-down revenue and a higher mix of large enterprise deals that carry lower margins. He reiterated that the full-year gross margin guide remains consistent with 2024 levels.

Asiya Merchant requested details on the strong performance in the Healthcare segment, asking if the growth was specific to CDW's execution and what the outlook is for this channel for the rest of 2025.

Answer

CEO Christine Leahy attributed the robust Healthcare results to CDW-specific strategic investments in its sales organization, technology experts, and go-to-market strategy. She noted that key drivers for the quarter included an uptick in client devices, accelerated cloud adoption by healthcare organizations, and strong demand for security solutions.

Asiya Merchant asked for an update on the potential for an enterprise slowdown due to tariffs and how the company ensures that current strong demand is not a tariff-related pull-forward.

Answer

CEO Irving Tan stated that the feared enterprise slowdown has not materialized. He expressed confidence that there is no demand pull-forward, citing stable in-quarter linearity, demand matching long-term customer forecasts, and a very tight supply environment that limits the ability to deliver upside.

Asiya Merchant of Citigroup raised concerns about the potential for double ordering from hyperscalers and asked why gross margins were not guided to a more significant step-up given the strong revenue outlook.

Answer

CEO Irving Tan stated that the company sees no evidence of double ordering, attributing this to a tight supply-demand environment and order patterns that align with LTA visibility. He explained that the focus for margin expansion is on delivering innovation and TCO benefits to customers, from which strong margins will naturally follow, rather than targeting a specific number.

Asiya Merchant asked for an update on inventory levels at hyperscalers and questioned how the HDD supply chain is positioned to meet the anticipated rising demand.

Answer

Incoming Western Digital CEO Tiang Yew Tan clarified that the Q3 guidance reflects order timing rather than a change in visibility, stating they have a good view of customer inventory. He expressed confidence in the operations team's ability to manage the tight supply chain, which is aided by the greater visibility provided by the build-to-order model.

Asiya Merchant asked if the typical seasonality seen in the Flash business during the March quarter should also be expected for the HDD business, given its recent strength.

Answer

CEO David Goeckeler confirmed that it would be a reasonable assumption to expect some seasonality on the HDD side in the March quarter as well, similar to what is typically seen in Flash.

Asiya Merchant questioned the drivers of AI PC adoption, asking about key applications and the expected impact of pricing and mix on Personal Systems growth. She also requested an explanation for the revised free cash flow guidance and the primary factors affecting cash flow margins.

Answer

CEO Enrique Lores highlighted that over 100 ISVs are developing applications for AI PCs, driving commercial demand, and reiterated the goal for AI PCs to be over 25% of the PC mix by year-end with a 10-20% price premium. CFO Karen Parkhill explained the free cash flow guidance was lowered in line with earnings and a smaller-than-expected improvement in working capital. Mr. Lores added this was a temporary effect of diversifying the supply chain to new locations.

Asiya Merchant from Citigroup asked for the outlook and key growth drivers for HP's "growth businesses," which constituted about 20% of revenue in FY24.

Answer

CEO Enrique Lores stated these businesses are expected to continue growing faster than the overall company. He highlighted drivers such as growing subscriber numbers in consumer services (like the 'all-in' plan), strong momentum in Workforce Solutions (like Device as a Service), and continued growth in hybrid systems as the commercial market recovers. He framed this within the broader strategy of leading the "future of work."

Asiya Merchant from Citigroup asked for more detail on the revenue trends for accessories and materials, which saw an improved decline, versus connected machines, which saw a larger decline. She also questioned the level of promotional intensity in the broader crafting market.

Answer

CFO Kimball Shill explained that the improved performance in Accessories & Materials was primarily due to easier year-over-year comparisons, and the company is not yet calling an inflection point. For Connected Machines, the 11% revenue decline was driven by provisions for deeper Q4 promotions; gross sales were actually up slightly. Shill noted that promotions are broad across the crafting category and that while Cricut's promotions generate uplift, baseline demand remains weaker than expected when not on promotion. CEO Ashish Arora added that this reinforces their hypothesis that consumers are waiting for deals, shaping their Q4 strategy.

Asiya Merchant asked about the drivers of recent international growth and its expected trajectory. She also sought to reconcile the accelerating decline in Connected Machines revenue with management's confidence in generating a positive ROI from deeper promotions.

Answer

CFO Kimball Shill explained that international performance is mixed, with strength in France and MESA and a Q4 recovery in the U.K., but challenges in markets like Australia. He noted that 2025 marketing spend will target key international markets. Regarding Connected Machines, he stated that confidence in a turnaround is driven by the combined effect of sustained awareness marketing, deeper promotions, new product launches, and a focus on affordability.

Asiya Merchant from Citigroup inquired about the current competitive dynamics, retailer and e-tailer stocking activity, and the status of a specific retailer that had previously pushed out orders. She also asked about the company's cash flow outlook and whether it anticipates needing a cash infusion to meet its working capital and operating expense needs.

Answer

CFO Julie Zeiler stated that iRobot continues to see a very aggressive and competitive environment and a sluggish market for consumer durable goods, consistent with previous commentary. She noted the company is working with all retail partners on re-engagement but had no specific updates. On liquidity, Zeiler emphasized that careful cash management is a significant focus, and the company aims for modest positive cash flow in Q3 and Q4. Executive Vice President Glen Weinstein added that while market dynamics differ by jurisdiction, the market is highly competitive in all regions.

The analyst inquired about the reasons for the projected weakness in first-half revenue and asked about the timing and potential for further operational expense reductions beyond what was announced.

Answer

The weak first half is attributed to the timing of large customer orders shifting to the second half and ongoing channel optimization efforts, particularly internationally. The majority of the announced operational expense reductions will be implemented in the first half of the year, primarily in Q1, with the company continuously looking for more efficiencies.