Ben Reitzes

Ben Reitzes asked for the order of magnitude of the sequential improvement in AI server margins in Q3, and whether this trend, including increased product attached, is expected to continue into Q4.

Answer

Jeff Clarke (COO, Dell Technologies) explained that Q3 AI server margins improved as expected, due to the absence of one-time costs (expedites, supply chain reconfiguration) from Q2 and the completion of early aggressive GB200 deals. Margins moved into the mid-single-digit range, which Dell is confident can be maintained. He also noted that a broader and more diverse customer mix across a greater range of solutions contributed to margin improvement.

Ben Reitzes asked for the order of magnitude of sequential improvement in AI server margins and whether this trend is expected to continue into Q4, including any increase in high-margin product attachments.

Answer

COO Jeff Clarke explained that AI server margins improved sequentially in Q3 due to the absence of one-time costs from Q2 and the ability to add differentiation in GB200 and GB300 designs, moving margins into the mid-single-digit range, which is expected to continue. He also noted a positive shift in customer mix.

Ben Reitzes of Melius Research asked for specifics on why AI server margins are expected to improve, their potential magnitude, and whether an increased attach rate of other products is the primary driver.

Answer

Jeff Clarke, Vice Chairman and COO, outlined several reasons for the expected AI margin improvement. He noted that one-time Q2 costs for expediting materials will not recur. Furthermore, margins will benefit from value engineering, the scaling of the business, and an expanding enterprise customer base, which provides greater opportunities to attach higher-margin networking, storage, and services. He also stressed that an improved overall business mix, with a recovery in more profitable traditional servers and storage, will lift total ISG margins.

Ben Reitzes of Melius Research sought clarification on the second-half guidance for AI servers. He pointed out that if Dell ships nearly $9 billion in the first half, the full-year guidance implies a significant slowdown in the second half. He asked whether this reflects conservatism or the expected 'lumpiness' of demand, and also requested more detail on the expected moderation in traditional ISG and CSG.

Answer

Jeff Clarke, Vice Chairman and COO, clarified that first-half AI server shipments are expected to be closer to $9 billion ($1.8B in Q1 and a guided $7B in Q2). He reiterated that the pipeline is growing but emphasized it's early in the year. CFO Yvonne McGill added that the company is being thoughtful and holding its full-year guidance steady for now, given the dynamic macro environment, while remaining excited about the AI opportunity.

Ben Reitzes of Melius Research asked if competitor issues were a key reason for the surge in Dell's AI pipeline and sought clarity on storage growth expectations for fiscal '26.

Answer

Executive Jeffrey Clarke attributed the pipeline growth to Dell's differentiated offer, including co-engineering, rapid deployment speed, and comprehensive solutions, rather than competitor stumbles. Both Clarke and Yvonne McGill stated they expect the storage market to grow in fiscal '26 and for Dell to gain share with its IP portfolio.

Ben Reitzes asked about NVIDIA's plans for its significant free cash flow, specifically the allocation between stock buybacks and strategic ecosystem investments, and the criteria for deals like Anthropic and OpenAI.

Answer

Jensen Huang, President and CEO, NVIDIA, outlined three priorities: funding growth and securing the supply chain, continuing stock buybacks, and strategic ecosystem investments. He explained that investments in companies like OpenAI and Anthropic aim to expand CUDA's reach, deepen technical partnerships, and secure a share in 'once-in-a-generation' companies, expecting extraordinary returns.

Ben Reitzes inquired about NVIDIA's plans for its substantial free cash flow, specifically the allocation between stock buybacks and ecosystem investments, and the criteria for deals like those with Anthropic and OpenAI.

Answer

Jensen Huang, President and CEO, NVIDIA, explained that cash is primarily used to fund growth and secure a resilient supply chain, with continued stock buybacks. He clarified that ecosystem investments, such as with OpenAI and Anthropic, are strategic partnerships aimed at expanding CUDA's reach, fostering co-development, supporting rapid growth, and securing a share in highly consequential, once-in-a-generation companies.

Ben Reitzes of Melius Research asked for more detail on the $3-4 trillion data center infrastructure spending forecast by the end of the decade, questioning if it implies over $2 trillion in compute spend and what NVIDIA's potential share could be. He also inquired about potential bottlenecks, such as power, in reaching that scale.

Answer

Founder, President, CEO & Director Jensen Huang justified the forecast by highlighting that the top four hyperscalers' CapEx has already doubled to $600 billion annually in just two years. He stated that NVIDIA's share of a gigawatt AI factory is about 35% of the total cost. Huang emphasized that NVIDIA is an AI infrastructure company and that its focus on performance-per-watt is critical to overcoming power limitations, as it directly translates to higher revenue generation for data center operators.

Ben Reitzes from Melius Research LLC asked for confirmation that the Q2 guidance implies stronger-than-expected performance in the non-China business, given the $8 billion H20 headwind. He also questioned if recent positive developments give management more conviction in sequential growth through the year.

Answer

EVP and CFO Colette Kress affirmed that strong Blackwell growth and improving supply are offsetting the H20 headwind in the Q2 guidance. President and CEO Jensen Huang detailed four 'positive surprises' boosting his conviction: the surge in reasoning AI demand, the rescinded AI diffusion rule enabling sovereign AI, enterprise AI being 'ready to take off,' and the growth of industrial AI.

Ben Reitzes asked for more details on Cisco's confidence in multi-year cycles, specifically what factors are driving this outlook and which key cycles are most significant.

Answer

Chuck Robbins, Chairman and CEO, explained that multi-year cycles are driven by the refresh opportunity for enterprise routing, Wi-Fi 7, and campus switches. He cited the end-of-support for older Catalyst series (4K and 6K), faster ramp-up of new products compared to historical launches, and customer focus on modernizing network infrastructure for AI workloads. He also highlighted the unique advantage of fusing security deeply into the network.

Ben Reitzes asked for more details on Cisco's confidence in multi-year campus refresh cycles, specifically what factors are driving this outlook and which key cycles are most significant.

Answer

Chairman and CEO Chuck Robbins explained that the refresh is driven by the end-of-support for older Catalyst switching generations (4K, 6K) and older Wi-Fi, with new products (enterprise routing, Wi-Fi 7, campus switches) ramping faster than historical launches. He highlighted customer focus on modernizing for AI workloads and the unique advantage of Cisco's integrated security and networking platforms for agentic workflows.

Ben Reitzes of Melius Research LLC challenged the security segment's performance, asking if the long-term 15-17% growth target is still appropriate. He also inquired about Cisco's partnerships beyond NVIDIA, specifically with AMD on sovereign AI deals.

Answer

CEO Chuck Robbins defended the security strategy, noting double-digit order growth ex-US Federal and over 20% growth in new products. He believes they will exit FY26 near or on a path to the target. He also confirmed a 'very, very tight partnership' with AMD on certain sovereign deals to deliver integrated solutions.

Ben Reitzes asked about the data center opportunity, suggesting that if Qualcomm is holding a special event to update on it, it implies a material, multi-billion dollar opportunity, potentially larger than the smallest target ($2 billion for XR) outlined at the last analyst day.

Answer

CEO Cristiano Amon confirmed that the data center opportunity presents a potential multi-billion dollar revenue opportunity in a couple of years, representing upside to previous targets. He also noted that the XR market is taking off very fast, especially AI smart glasses, and is significantly ahead of prior guidance, presenting significant upside.

Ben Reitzes asked for clarification on the data center opportunity, suggesting that a special event for an update implies a multi-billion dollar opportunity, potentially larger than the smallest targets (e.g., XR at $2 billion) outlined at the last Investor Day.

Answer

CEO Cristiano Amon confirmed that success in the data center area presents a potential multi-billion dollar revenue opportunity within a couple of years. He also noted that the XR market, especially AI smart glasses, is taking off very fast and is significantly ahead of prior guidance, representing a very significant upside opportunity.

Ben Reitzes of Melius Research LLC inquired about Qualcomm's M&A strategy for the data center, asking if more tuck-in acquisitions like AlphaWave or even a larger deal could be expected. He also asked for more color on the growing use of AI on Android and its long-term implications versus Apple.

Answer

President & CEO Cristiano Amon stated that the current focus is on closing the AlphaWave deal and executing the product roadmap, though the company always evaluates opportunities. He also expressed optimism about AI on Android, citing a 3x increase in Galaxy AI usage from S24 to S25, and believes it will drive upgrade cycles and expand the market.

Ben Reitzes inquired about Arista's confidence in participating in large infrastructure builds by private companies like OpenAI and Anthropic, which are affiliated with cloud titans, and how this opportunity is evolving as 2025 concludes.

Answer

Jayshree Ullal, CEO and Chairperson, expressed strong confidence, highlighting Arista's success in scale-out GPU deployments and its growing role in new gigawatt-scale AI infrastructure builds, particularly in scale-out and scale-across use cases. She anticipates participation in scale-up by 2027 and sees AI as a major driver for exceeding the $10 billion goal and reaching $15 billion in three years.

Ben Reitzes inquired about Arista Networks' confidence in participating in large builds by private companies (hyperscalers) affiliated with cloud titans, and whether anything is changing or evolving that impacts this confidence as 2025 concludes.

Answer

Jayshree Ullal, Arista Networks' CEO and Chairperson, highlighted Arista's AI success in scale-out deployments and future opportunities in scale-up and scale-across. She noted the influence of LLM players on infrastructure design and Arista's role as a relevant participant, particularly in scale-out and scale-across, with scale-up expected to materialize more in 2027. She expressed confidence in exceeding the $10 billion goal and aiming for $15 billion in three years, with AI being a significant contributor.

Ben Reitzes asked for an update on iPhone performance in China, including December quarter trends and whether Apple has 'turned the corner' in the region, and sought clarification on the drivers of the strong services revenue, specifically if tax payments or antitrust rulings contributed, or if it was purely organic outperformance.

Answer

CEO Tim Cook reported strong store traffic and reception for the iPhone 17 family in China, expecting a return to growth in Q1. CFO Kevan Parekh clarified that the services revenue performance was entirely organically driven, with no impact from tax payments or antitrust rulings, and saw broad-based strength across categories and geographies.

Ben Reitzes asked for insights into iPhone performance in China for the December quarter, questioning if Apple has turned a corner in the region, and sought clarification on the drivers of the services revenue upside, specifically if non-organic factors like tax payments or antitrust rulings contributed.

Answer

CEO Tim Cook expressed pleasure with early iPhone 17 reception in China, noting significant store traffic increases and expecting a return to growth in Q1. CFO Kevan Parekh confirmed that the strong services performance was entirely organically driven, with no tax-related impact or influence from the Google antitrust trial, and highlighted broad-based growth across categories and geographies.

Ben Reitzes questioned Apple's confidence in launching a more personalized Siri next year and its connection to increased AI investment. He also challenged the revenue guidance, asking why growth would decelerate from 10% to mid-to-high single digits when the Services segment growth is expected to remain stable.

Answer

CEO Tim Cook affirmed that Apple is making good progress on Siri and expects to release the new features next year, noting significant growth in AI investment and reallocation of internal resources. SVP & CFO Kevan Parekh explained the revenue guidance deceleration by citing a one-point tariff-related demand pull-forward in Q3 and a difficult year-over-year comparison in Q4 due to last year's iPad launches.

Ben Reitzes asked about the fourth quarter gross margin guidance, specifically the impact of the asset sale and higher manufacturing costs, and inquired about the communications segment dynamics, including potential Q4 upside from a major customer and any offsets from Android or conservatism in the guidance.

Answer

CFO Megan Faust explained that normalizing for the asset sale, the sequential incremental flow-through was in line with their financial model (around 30%). She noted that higher material content in Q4, compared to a deeper communications drop last year, was impacting the margin. CEO Giel Rutten stated that the communications segment was guided down slightly in Q4, with continued strength in Android and a slight tapering off in the iOS ecosystem, reflecting current forecasts.

Ben Reitzes of Melius Research LLC questioned the Q3 communications guidance versus normal seasonality, its sustainability into Q4, and sought confirmation on re-winning business on the iOS side. He also asked to clarify the normalized SG&A run rate.

Answer

CEO Giel Rutten confirmed that the recovery of the iOS socket is proceeding as planned and is factored into the outlook. He cautioned that Q4 visibility is low due to market uncertainty, making normal seasonality an unreliable predictor. CFO Megan Faust added that Q3 Communications growth will be very strong, but offset by flat Consumer revenue. She also confirmed that excluding the one-time $32 million contingent payment, operating expenses were in line with guidance and that this level represents a normal run rate for the second half of the year.

Ben Reitzes from Melius Research requested an update on the Nvidia collaboration, including product timing, customer feedback, and the materiality of the relationship. He also inquired about Intel's AI strategy for the inference market, specifically whether it leans more towards partnering or leveraging proprietary Intel IP.

Answer

CEO Pat Gelsinger highlighted the Nvidia collaboration as a multi-year engineering effort combining x86 and accelerated computing via NVLink to create new AI-optimized products for data centers and PCs, representing an incremental TAM opportunity. For the inference market, Mr. Gelsinger stated Intel is revitalizing x86 for purpose-built AI CPUs/GPUs, focusing on power-efficient agentic/physical AI, and plans to partner with both incumbents and emerging companies.

Ben Reitzes from Melius Research requested an update on the Nvidia relationship, including product timing, customer feedback, and its materiality. He also asked about Intel's AI strategy for the inference market, specifically whether it leans more towards partnering or leveraging specific Intel IP, or a 'Switzerland approach' with multiple players.

Answer

CEO Pat Gelsinger highlighted the Nvidia collaboration as a multi-year engineering effort to create new custom data center and PC products optimized for AI, connecting Intel's x86 and Nvidia's accelerated computing via NVLink, expanding Intel's TAM. He stated that Intel's AI strategy for inference involves revitalizing x86 for purpose-built CPUs/GPUs, focusing on power-efficient agentic AI, and partnering with incumbents and emerging companies. CFO David Zinsner added that the Nvidia partnership is special because it expands Intel's TAM rather than attacking existing markets.

Ben Reitzes from Melius Research LLC asked about the expected trend for the server business in Q3 and when market share losses might dissipate. He also requested that Lip-Bu Tan expand on Intel's AI strategy.

Answer

CFO David Zinsner stated that while the company isn't where it wants to be competitively in servers, products like Granite and Diamond Rapids represent continuous improvement, and share has held up well due to the strength of the x86 ecosystem. CEO Lip-Bu Tan elaborated on the AI strategy, noting a focus on inference and agentic AI, moving from silicon up to a full system and software stack. He emphasized understanding workloads first and then designing the stack to optimize for them.

Ben Reitzes inquired about the expected trend for the server business in Q3, the outlook for market share stabilization, and asked for more details on the company's evolving AI strategy.

Answer

CFO David Zinsner noted that while the server portfolio is still being improved, upcoming products like Granite and Diamond Rapids should enhance their competitive position. CEO Lip-Bu Tan outlined that the AI strategy will focus on inference and agentic AI, employing a full-stack approach (system, software, silicon) that leverages the core x86 franchise to become a 'compute platform of choice'.

Ben Reitzes inquired about the expected acceleration of IBM's reported Software growth in Q4, potentially above 10%, and its outlook for 2026. He specifically asked if double-digit growth could be maintained or accelerated next year, considering the wrap of the HashiCorp acquisition in March and Red Hat's recent deceleration.

Answer

Arvind Krishna, IBM's Chairman, President, and Chief Executive Officer, provided a detailed breakdown for 2026: Red Hat is expected to return to mid-teens growth, Transaction Processing to grow in low single digits, Automation to maintain double-digit growth (even after HashiCorp wrap), and Data and AI to grow mid to high single digits. He also noted that M&A is expected to contribute a couple of points of growth. Jim Kavanaugh, IBM's Senior Vice President and Chief Financial Officer, reinforced confidence in the Software model, citing a positive market backdrop, portfolio alignment to high-growth areas, a $23 billion ARR book of business, and accelerating Red Hat bookings. He stated that 2025 organic growth is approaching 6%+, with 3-4 points from inorganic contributions, and expects the model to hold for 2026.

Ben Reitzes, Managing Director and Head of Technology Research at Melius Research, inquired about the expected acceleration of reported software growth in Q4, potentially above 10%, and whether IBM anticipates maintaining double-digit software growth or even accelerating it into 2026, considering the wrap-up of HashiCorp acquisition and Red Hat's recent deceleration.

Answer

Arvind Krishna, IBM's Chairman, President, and Chief Executive Officer, detailed expectations for each software segment: Red Hat is projected to return to mid-teens growth in 2026 due to strong signings; transaction processing is expected to grow in low single digits next year; automation, while benefiting from HashiCorp, is anticipated to remain in double digits; and data and AI portfolio to continue mid-to-high single-digit growth. He noted that IBM's model includes a couple of points of growth from acquired revenue. Jim Kavanaugh, IBM's Senior Vice President and Chief Financial Officer, reinforced confidence for 2026, citing an attractive TAM, a repositioned portfolio aligned to higher-growth markets, a $23 billion ARR book of business, new generative AI innovation, accelerating Red Hat bookings, and continued M&A strategy. He also highlighted the strong monetization opportunity from IBM Z17's higher capacity.

Ben Reitzes asked why IBM was not raising its full-year revenue guidance, given the strong quarterly performance, improved economic outlook, and better-than-expected free cash flow.

Answer

SVP & CFO James Kavanaugh responded that while the company is more confident, it is also raising other key metrics. He noted they are increasing the annual run-rate productivity savings goal to $4.5 billion, raising the operating margin expansion outlook to about one point, and lifting the free cash flow forecast to above $13.5 billion. He stated that while there is upside, the company prefers to remain prudent with half the year remaining.

Ben Reitzes asked about the progress and dialogue with the remaining three prospects beyond the four current customers, inquiring about their momentum into 2027 and the status of the 'million units' goal for these seven entities.

Answer

Hock Tan, President and CEO, declined to provide specific color on prospects due to unpredictable production timelines but confirmed they are real and closely engaged. He reiterated that the 'million units' goal applies to the now four qualified customers, not the prospects.

Ben Reitzes from Melius Research LLC asked about the drivers behind the particularly strong AI networking results in the quarter and inquired about the expected timing for the new Tomahawk 6 switch to begin contributing to revenue growth.

Answer

CEO Hock Tan explained that AI networking growth is closely tied to AI accelerator deployments. He noted a "pleasantly surprised" observation of much higher switch density in scale-up deployments (5-10x more than scale-out), which kept networking's share of AI revenue high at 40%. Regarding the Tomahawk 6, he confirmed "tremendous demand" and strong interest, though current shipments are limited to proof-of-concept units.

Ben Reitzes of Melius Research LLC asked about the particularly strong performance in AI networking during the quarter, seeking to understand the specific drivers and the expected timing for the new Tomahawk 6 switch to begin contributing to growth.

Answer

CEO Hock Tan explained that AI networking's strength is tied to accelerator deployments and was pleasantly surprised by the high density of switches in 'scale-up' architectures, which is 5-10 times greater than in 'scale-out'. This kept networking's share of AI revenue at a robust 40%. He added that while there is tremendous demand for the new Tomahawk 6 switch, it is currently only shipping for proof-of-concept evaluations.

Ben Reitzes sought to confirm that the nearly $1 billion sequential revenue growth guided for Q3 is primarily from GPUs, and asked if MI308 shipments to China could resume at their previous run rate immediately upon license approval.

Answer

EVP, CFO & Treasurer Jean Hu confirmed that the strong MI355 ramp is the majority driver of the sequential growth, supplemented by increases in the Client and Embedded segments. Chair and CEO Lisa Su clarified that MI308 shipments to China would take time to ramp post-license approval and would not be a significant Q3 contributor.

Ben Reitzes of Melius Research asked for confirmation that the nearly $1 billion sequential revenue growth guided for Q3 is primarily from GPUs. He also questioned how quickly the MI308 business in China could ramp back to its previous run rate if and when export licenses are approved.

Answer

CFO Jean Hu confirmed that the 'majority' of the strong sequential growth is driven by the MI355 ramp, but also highlighted that the Client and Embedded segments are expected to contribute to the growth. CEO Lisa Su clarified that any ramp of MI308 in China would 'take some time' following license approval, given the current date and the work-in-process nature of the inventory, making a significant Q3 contribution unlikely.

Ben Reitzes of Melius Research LLC inquired about the significant increase in capital expenditures, asking for details on spending and the rationale behind forecasting over $25 billion for the next fiscal year.

Answer

CEO Safra Catz clarified that the CapEx is for revenue-generating data center equipment to meet immense demand, and she suggested the $25 billion forecast might be understated. CTO Larry Ellison reinforced this, describing demand as 'astronomical' and 'insatiable,' with customers requesting all available capacity globally. He also confirmed that Oracle is not currently facing issues with GPU supply.

Ben Reitzes of Melius Research asked for confirmation that AI revenue would grow sequentially throughout the year and questioned if progress in the custom business still supported the company's long-term $15 billion data center revenue target for calendar 2028.

Answer

Matthew Murphy, Chairman and CEO, implied that continued sequential growth was a fair assumption given current momentum. Regarding the long-term target, he stated that Marvell is tracking "extremely well" toward its 20% market share goal, with both market share and the total addressable market (TAM) growing faster than the required rate. He expressed strong confidence in achieving the goal, noting the TAM itself appears larger than when first estimated.