Blayne Curtis

Blayne Curtis from Jefferies asked for clarification on the 18% sequential growth in "other product revenue," specifically if it was driven by a license sale and if that benefit would repeat in the March quarter. He also questioned why gross margin guidance for March was relatively flat despite expected step-downs in inventory write-offs, seeking to understand the moving pieces.

Answer

Executive Chair Steve Sanghi explained that "other product revenue" includes licensing, FPGA, memory, and timing systems. He highlighted strong, sustainable growth in the memory business due to market share gains from competitors shifting capacity, and continued strength in FPGA, networking, connectivity, and data center. CFO Eric Bjornholt confirmed that the significant licensing benefit from the December quarter is not expected to repeat in March, acting as a headwind to gross margin. Despite this, the company is guiding to a 61% non-GAAP gross margin midpoint, up from 60.5%, with inventory reserves expected to normalize further.

Blayne Curtis asked for color on the 18% sequential move in 'other product revenue,' specifically if it was due to a license sale and if that benefit would repeat in March. He also questioned why gross margin guidance for March was relatively flat despite expectations for inventory write-offs to step down.

Answer

Steve Sanghi (Executive Chair) clarified that 'others' includes licensing, FPGA, memory, and timing systems, highlighting strength in memory due to market share gains. Eric Bjornholt (CFO) confirmed that the licensing benefit from December is not expected to repeat in March, acting as a gross margin headwind. Despite this, the midpoint of gross margin guidance is up, with inventory reserves expected to normalize further.

Blayne Curtis sought clarification on the expected timeline for inventory charges to 'go away sharply' by fiscal year-end, noting that December guidance suggests continuation, and then asked for a mathematical framework to project gross margin improvement from the reduction of these charges and utilization benefits over the next few quarters.

Answer

President and CEO Steve Sanghi explained that the weak December quarter delays the expected drop in charges, but he anticipates rapid reduction in stronger quarters as year-over-year sales growth improves, reversing the trend of declining 12-month sales. He affirmed that the 10.8 percentage point impact from charges in the September quarter represents the potential for gross margin improvement. CFO Eric Bjornholt added that inventory write-offs are expected to normalize quicker than underutilization charges, but neither will go to zero.

Blayne Curtis questioned why inventory charges were not decreasing as sharply as expected, especially with the December guidance, and how far out these charges might extend. He also asked for clarification on the gross margin math, specifically how reduced charges and utilization would contribute to future gross margin improvement.

Answer

President and CEO Steve Sanghi explained that the weak December quarter and a shift in product mix contributed to the persistence of charges, but he expects them to drop rapidly as year-over-year sales growth improves. CFO Eric Bjornholt clarified that while inventory write-offs will normalize quicker than underutilization, they never go to zero, and the company's long-term gross margin target remains 65%.

Blayne Curtis sought clarification on the timing of lead time extensions, asking if they are happening now or are an expectation for the future. He also asked if the level of 'turns' business required to meet the September guidance is different from the prior quarter, given the strong bookings.

Answer

CEO Steve Sanghi confirmed that while most lead times are still four to eight weeks, extensions are happening now in certain pockets, pushing to six to ten or even eight to twelve weeks due to constraints in lead frames, substrates, and subcontracting. He noted that July bookings were the highest in three years and that the turns requirement for the September quarter is 'about the same' as the previous quarter.

Blayne Curtis asked about the timing of lead time extensions and whether the level of turns business required to meet September guidance is different from the prior quarter, given strong July bookings.

Answer

CEO Steve Sanghi clarified that lead times have already extended in certain pockets from 4-8 weeks toward 6-12 weeks due to back-end constraints. He noted that July bookings were the highest in three years and that the turns requirement to meet the September guidance is about the same as it was for the June quarter.

Blayne Curtis asked about Microchip's MCU market share, noting its correction cadence differs from peers, and whether it expects to regain its pre-pandemic position. He also inquired about the company's 'China-for-China' strategy.

Answer

CEO Steve Sanghi affirmed that Microchip expects to gain market share as it recovers. Regarding the 'China-for-China' strategy, he explained that the original plan to use a local partner for assembly was complicated by a rule change defining a product's origin by its fabrication location. The company is now reassessing this strategy and has communicated to the U.S. government that current rules incentivize moving production out of the U.S.

Blayne Curtis inquired about the trajectory of gross margins, asking how long they might remain depressed before recovering. He also asked for perspective on Microchip's ability to outgrow the market.

Answer

CEO Steve Sanghi stated that more data on inventory and factory right-sizing would be provided on March 3. He emphasized that the current guided gross margin of 53% is strong despite low factory utilization and expects margins to return to historical levels. Regarding growth, Sanghi noted that design wins in megatrend areas are strong and that as customers work through inventory and resume new designs, the company is positioned for growth.

Blayne Curtis inquired about the 'uneven green shoots,' asking if any specific areas were improving and if the guidance reflected lower turns. He also asked about the trajectory for operating expenses over the next few quarters.

Answer

CEO Ganesh Moorthy identified continued strength in aerospace, defense, and the AI subset of data centers. Executive J. Bjornholt clarified that the guidance doesn't assume fewer turns, but rather reflects a lower starting backlog. He also confirmed that non-GAAP OpEx is guided to increase by about $8 million in December due to the reinstatement of salary cuts, and he expects OpEx dollars to rise again in the March quarter.

Blayne Curtis asked if the strength in MACOM's data center business, particularly in 1.6T analog components, is due to market share gains or overall market growth. He also asked for clarification on the impact of the convertible note settlement on share count and interest expense, and MACOM's capital return strategy, specifically regarding share buybacks, given the upcoming debt retirement.

Answer

Stephen G. Daly, President and CEO, clarified that the data center growth is primarily driven by overall market expansion and MACOM winning designs with new products, rather than significant market share gains. He highlighted MACOM's 200G per lane portfolio, competitive photodiodes, and progress on CW lasers for silicon photonics as key drivers, noting that CW lasers would represent new market share. Jack Kober, CFO, explained that shares for the convertible note settlement are already included in the fully diluted share count for Q2 guidance. He stated that the primary focus for capital allocation is the $161 million debt repayment in mid-March. Mr. Daly added that share buybacks are not currently being contemplated.

Blayne Curtis asked if the strong growth in MACOM's data center business, particularly in 1.6T, includes a market share gain aspect for analog components. He also asked Jack Kober for clarification on the impact of the convertible notes settlement on OI&E and MACOM's capital allocation strategy, specifically regarding share buybacks.

Answer

Stephen G. Daly, President and CEO, indicated that the data center growth is more driven by market expansion than significant share gains, as MACOM faces strong competition. Key growth drivers include the 200G per lane portfolio, photodiodes (where MACOM has a strong 200G PD), and future higher-speed PDs. He noted that CW lasers for silicon photonics, with two excited customers, would represent a market share gain as MACOM currently doesn't sell lasers into 1.6T applications. Jack Kober, CFO, confirmed that shares for the convertible notes settlement are included in the share count and that the primary capital allocation focus is the $161 million debt repayment in mid-March. Mr. Daly added that share buybacks are not being contemplated.

Blayne Curtis asked about the book-to-bill ratio, specifically if the 'just over one' figure was consistent across all segments or influenced by defense timing, and sought details on the expected 25-50 basis points gross margin improvement, differentiating contributions from the Lowell Speed Fab (RTP) versus overall volume increases.

Answer

President and CEO Steve Daly emphasized that the long-term book-to-bill (FY25 was 1.1) is more indicative than quarterly fluctuations, noting strong October bookings. Mr. Daly declined to discuss gross margins by individual fab due to business complexity and competitive reasons, highlighting a broader approach that includes external fabs. CFO Jack Kober added that the RTP fab conveyance was in line with expectations and de-risked the business.

Blayne Curtis inquired about the book-to-bill ratio, specifically whether the 'just over one' figure was consistent across all segments or influenced by timing, given strong fiscal 2026 growth comments. He also asked about the drivers of the 25-50 basis points gross margin improvement, distinguishing between fab-specific enhancements and overall volume increases.

Answer

Steve Daly, President and CEO, MACOM, noted the fiscal 2025 book-to-bill was a strong 1.1 and October bookings were excellent, advising against fixation on single-quarter figures due to market volatility. Regarding gross margins, Mr. Daly stated MACOM would not discuss fab-specific margins due to complexity and competitive reasons, emphasizing that external fabs also significantly contribute to overall corporate gross margins. Jack Kober, CFO, MACOM, added that RTP fab performance met expectations.

Blayne Curtis of Jefferies asked about the drivers behind the strong growth in the Industrial and Defense segment and whether MACOM is seeing any slowdown in its broader industrial business. He also inquired about the reason for the slight sequential decline guided for the Telecom segment in Q4.

Answer

President and CEO Stephen Daly clarified that the growth in the Industrial and Defense (IND) segment is primarily driven by defense, which has had a book-to-bill over one for several quarters. He noted that the industrial portion is small and not a bellwether for the market. Regarding Telecom, Daly stated the slight Q4 dip is 'noise level' and not meaningful, highlighting that the segment is expected to grow over 40% for the full year with strong secular trends in SATCOM and 5G.

Blayne Curtis requested clarification on the full-year Data Center growth forecast, which seemed to imply a sequential decline in Q4, and asked about the drivers behind the recent increase in operating expenses.

Answer

CFO John Kober clarified that the "mid-40s" growth for Data Center is a year-over-year fiscal 2025 estimate and that underlying demand supports growth into Q4, though the quarter is not yet guided. Kober explained the OpEx increase was due to strategic investments in R&D and business infrastructure like IT, and he expects the rate of increase to level off heading into Q4 and fiscal 2026.

Blayne Curtis sought to understand the moving parts of the gross margin, particularly the RF business improvement versus mix impact, and asked for clarification on the 800G to 1.6T optical transition commentary.

Answer

President and CEO Stephen Daly explained that while the acquired Wolfspeed RF business is improving its margin profile, the overall corporate gross margin is being negatively impacted by underutilization in the Lowell fab due to weakness in base MACOM's cable and wireless businesses. Regarding the optical transition, Daly clarified that a dip in concentrated 800G revenue at a lead customer will be offset by a ramp in 1.6T and a broadening of the 800G customer base, resulting in net growth for the data center segment.

Blayne Curtis questioned how SanDisk plans to manage OpEx, given sales doubling over two quarters and OpEx as a percentage of revenue halving. He asked if the company intends to accelerate R&D investment and inquired about the trajectory of the tax rate, considering dramatically higher profitability and a potential move towards 20%.

Answer

CFO Luis Visoso clarified that approximately 75% of OpEx is allocated to R&D, emphasizing innovation as the company's core. He noted that the current quarter's OpEx included a non-recurring benefit of about $35 million, and the current run rate is considered healthy and sustainable, balancing investment with efficiency. Regarding the tax rate, Luis explained that prior year losses, particularly in Malaysia, have been quickly consumed due to generating profits. He advised modeling the ongoing tax rate to hover around 14%-15%, slightly above current levels.

Blayne Curtis asked about SanDisk's OpEx management, given sales doubling over two quarters and OpEx as a percentage of revenue halving. He specifically questioned if R&D investment would accelerate and for an update on the tax rate, which was previously discussed to potentially reach 20%.

Answer

Luis Visoso (EVP and CFO) clarified that 75% of OpEx is R&D, emphasizing innovation. He explained a non-recurring benefit of approximately $35 million in the current quarter's OpEx due to a change in managing new product introductions. He stated that current OpEx levels are more sustainable run rates, with an ongoing focus on efficiency. For the tax rate, he noted that prior year losses have been quickly consumed due to generating profits, and the tax rate is expected to hover around 14%-15% on an ongoing basis.

Blayne Curtis asked for an update on the data center business, specifically regarding the pipeline for gate drivers and current sensors, when revenue from these areas might layer in, and the overall opportunity size. He also followed up on how the increasing percentage of data center sales in the overall mix might impact gross margins.

Answer

President and CEO Mike Doogue explained that fan drivers continue to be the largest component of the data center business, with current sensors growing nicely and contributing to record data center sales. He anticipates revenue from isolated gate drivers, currently in the design-in phase with major customers, to ramp in 18-24 months. CFO Derek D'Antilio clarified that while current motor drivers for fans are slightly below the fleet average gross margin, current sensors have slightly better margins. He expects overall data center margins to improve as the mix shifts towards current sensors and isolated gate drivers.

Blayne Curtis questioned the growth drivers within the data center business, specifically the role of fan drivers versus the emerging opportunities in gate drivers and current sensors, including their revenue ramp timeline. He also asked about the impact of the data center's increasing mix on gross margins.

Answer

Mike Doogue, President and CEO, confirmed fan drivers remain the largest component of data center sales, with current sensors showing significant growth. He anticipates gate driver revenue to ramp within 18-24 months. Derek D'Antilio, CFO, noted that while fan drivers are slightly below average gross margin, the increasing mix of higher-margin current sensors and isolated gate drivers will improve data center margins over time.

Blayne Curtis asked about the future growth drivers in e-mobility, including the timing of TMR and gate drivers, and questioned the materiality of the data center business.

Answer

CEO Michael Doogue identified increasing dollar content in ADAS and current sensors in EV as key drivers. He highlighted isolated gate drivers for silicon carbide as a major growth opportunity, noting that sampling has increased significantly. He confirmed data center is a key strategic area with an expanding content footprint, moving beyond fan drivers to current sensors and soon, gate drivers.

Blayne Curtis of Jefferies LLC asked about the outlook for absolute inventory levels, requested an update on the company's fab strategy and its impact on utilization, and sought more color on recent booking trends.

Answer

CFO Derek D'Antilio explained that Allegro will continue to build wafer and die bank inventory while reducing finished goods. He detailed the fab mix as primarily UMC and Polar, with TSMC playing a smaller role and a new fab being qualified in China. CEO Vineet Nargolwala noted that the book-to-bill ratio has been above one for a few months and bookings are up 50% year-over-year, signaling positive momentum.

Blayne Curtis of Jefferies questioned the sequential revenue decline guided for December after a strong September, asking what changed and how the auto and industrial segments were performing.

Answer

CEO Vineet Nargolwala explained that while the December guidance midpoint is above June's low, lingering inventory digestion and new production cuts in North America and Europe are creating near-term choppiness. He contrasted this with China, where sales grew 54% sequentially as inventory issues have been resolved. Nargolwala also highlighted a key design win for a GaN isolated gate driver, emphasizing its system cost and space-saving benefits.

Blayne Curtis asked for clarification on the delivery method for the $10 billion original deal, the follow-on order, and the fifth customer's order, specifically whether they involve XPU sales or full rack systems, and how Broadcom's own networking components would be integrated.

Answer

Hock Tan (President and CEO) clarified that for customer number four, Broadcom is selling a 'system' or 'rack' rather than just XPUs, taking full responsibility for the entire system, including key Broadcom components.

Blayne Curtis asked for clarification on the delivery method for the $10 billion original deal, the follow-on order, and the fifth customer, specifically whether Broadcom is delivering XPUs or full rack systems, and how the networking components are integrated.

Answer

Hock Tan (President and CEO, Broadcom) clarified that for customer number four, Broadcom is selling a 'system sale' or 'rack' with its key components, taking full responsibility for the entire system, which is no different from selling a chip in terms of certification and final ability to run.

Blayne Curtis of Jefferies Financial Group inquired about the scale-up networking opportunity, asking for visibility on the timing of shipping Ethernet-based scale-up networks to customers.

Answer

CEO Hock Tan stated that the scale-up market is "very rapidly converting to Ethernet now." He emphasized that for Broadcom's key hyperscale customers, the scale-up architecture is already predominantly based on Ethernet.

Blayne Curtis from Jefferies Financial Group inquired about the visibility and timing for Broadcom shipping Ethernet-based 'scale-up' networks to its major hyperscale customers.

Answer

CEO Hock Tan stated that the conversion to Ethernet for scale-up architectures is happening very rapidly. He emphasized that for Broadcom's key hyperscale customers, Ethernet is now very much the standard choice for scale-up deployments.

Blayne Curtis asked for clarification on AI networking revenue comprising 76% of total networking revenue and inquired about the relative growth trends of custom ASICs versus networking components in recent months.

Answer

President and CEO Hock Tan clarified that both custom AI accelerators (XPUs) and networking components were growing. He noted that shipments of AI networking components were particularly strong in the second half of fiscal 2024 and expects that momentum to continue into early fiscal 2025, ahead of a significant ramp in next-generation 3-nanometer XPUs in the second half of 2025.

Blayne Curtis asked for confirmation if Amazon is the lead customer for Marvell's photonic fabric technology, referencing an 8-K filing about a warrant for photonic fabric, and inquired about the expanding relationship with this customer.

Answer

Chairman and CEO Matt Murphy confirmed the 8-K filing represents an extension to the existing warrant agreement with AWS, specifically adding photonic fabric products. He expressed enthusiasm for the strong support from AWS in the acquisition press release and the opportunity to drive this technology forward with a lead Tier 1 hyperscaler, anticipating broader market adoption.

Blayne Curtis referenced an 8-K filing indicating a warrant granted to Amazon for photonic fabric and asked if Amazon was the lead customer, inquiring about the expanding relationship and its positive implications for engagement.

Answer

Matt Murphy (Chairman and CEO) confirmed the 8-K filing, describing it as an extension to the existing warrant agreement with AWS, adding a new 'swim lane' for photonic fabric products. He noted strong support from AWS in the press release for the acquisition and expressed excitement about the potential with this lead Tier 1 hyperscaler and the broader market. He also mentioned the aggressive $2 billion earnout target for the Celestial AI team through the end of fiscal 2029.

Blayne Curtis of Jefferies Financial Group asked about the sustainable gross margin for AI ASICs, questioning if the previously guided range is still accurate and how it might evolve with next-generation programs.

Answer

Chairman and CEO Matt Murphy explained that while the overall custom business margin is managed within the expected range, there is a mix. High-volume XPU programs have lower gross margins but generate substantial operating income. CFO Willem Meintjes added that all custom programs are accretive to operating margin, demonstrating the significant leverage in Marvell's model, as seen in recent EPS growth.

Blayne Curtis asked about the recovery in the enterprise and carrier segments, inquiring how quickly Marvell can return to a $2 billion-plus annual run rate and how broad-based the recovery is.

Answer

CEO Matt Murphy confirmed the goal to return to a $2 billion run rate, noting the recovery is progressing faster than anticipated with a mid-teens sequential growth forecast for Q4. He clarified that Marvell is still shipping below end-market consumption. The recovery in carrier is notably driven by Marvell-specific product cycles, such as a new base station processor socket, rather than a broad market rebound.

Blayne Curtis inquired about the Aries family's performance as ASIC platforms become more material next year, asking how it compares to the current retimer content.

Answer

Sanjay Gajendra, President, Co-Founder, and COO, stated that significant growth is expected for Aries revenue this year and next. He clarified that while Aries' ASP differs from Scorpio, Scorpio is expected to become the largest product line from a revenue standpoint, with an inflection point in 2026, driven by larger sockets and higher ASPs.

Blayne Curtis sought clarification on the drivers behind Astera Labs' significant Q3 revenue beat, specifically asking about the contributions from signal conditioning and SCM modules.

Answer

Mike Tate, CFO, attributed the Q3 beat to broad-based growth across all three product lines (Scorpio, Aries, and Taurus), noting that conservative guidance was due to the complexity of new programs. Sanjay Gajendra, President, Co-Founder, and COO, discussed the Aries family, projecting significant revenue growth this year and next. He clarified that while Aries' ASP differs from Scorpio, Scorpio is expected to become the largest product line by revenue in 2026, driven by multiple design wins, marking a transition to larger sockets and higher ASP business.

Blayne Curtis asked for more detail on the ramp of the Scorpio product line, which exceeded 10% of revenue ahead of schedule, and questioned if there were any material scale-up opportunities for Scorpio shipping in the current year.

Answer

CFO Mike Tate confirmed the Scorpio P series ramped ahead of schedule, establishing a new revenue base that will continue to grow. He clarified that the Scorpio X series for scale-up is expected to ramp to high volume during 2026, with current year shipments being predominantly pre-production volumes and not a material driver for the next couple of quarters.

Blayne Curtis asked for details on the scale-up connectivity opportunity, including the progression of dollar content per accelerator and the timeline for revenue before the UALink standard fully ramps. He also inquired about the growth and customer diversity of the Taurus product line.

Answer

CEO Jitendra Mohan described scale-up as a significant opportunity driven by Aries retimers and the new Scorpio X family, with UALink representing a future multi-billion dollar market where products would sample in 2026. CFO Mike Tate added that the Taurus 50-gig solution continues to grow with its lead customer, and expansion to a broader customer base is anticipated with the next-generation 100-gig technology.

Blayne Curtis asked about the strength of the Taurus product line, the gross margin outlook for 2025 as Scorpio ramps, and the design momentum and competitive landscape for the Scorpio product family.

Answer

CFO Michael Tate noted that a mix shift towards Taurus and Aries hardware modules brought Q4 gross margin to 74.1% and expects a similar level in H1 2025 before it trends toward the 70% long-term model. President and COO Sanjay Gajendra highlighted strong design momentum for both Scorpio P-Series and X-Series, driven by its ground-up architecture for AI. CEO Jitendra Mohan added that besides NVLink, competitors include Ethernet-based scale-up, but customers prefer PCIe for its lower latency, positioning Scorpio favorably.

Blayne Curtis from Jefferies sought clarification on the product mix that drove Q3's revenue upside and the specific strength drivers between third-party GPUs and custom AI accelerators. He also inquired about the expected gross margin profile of the new Scorpio product line.

Answer

CFO Michael Tate attributed the Q3 revenue beat primarily to the Aries product line, which saw strong ramps on platforms using both third-party GPUs and internally developed AI accelerators from multiple customers. Tate also stated that while Scorpio's margins will vary, the product line is not expected to impact the company's long-term gross margin target of 70%, though quarterly product mix will be an important factor.

Blayne Curtis inquired about the normal seasonal patterns for December (Q4), noting that auto has historically been up, and asked if the current guidance (down 1%) represents a new normal or if the company is undershipping the market. He also sought clarification on how AI growth impacts the industrial and 'other' revenue buckets, given that AI straddles both.

Answer

Thad Trent, CFO, ON Semiconductor, stated that the normal seasonal pattern for Q4 is flat to down 2%, and seeing seasonal patterns is a positive step towards recovery. He indicated that Q4 guidance projects auto and industrial to be down low single digits, while the 'other' bucket will be up mid to high single digits. Mr. Trent clarified that AI data center revenue is reported in the 'other' bucket, while energy storage and infrastructure related to AI, prior to the data center wall, are included in the industrial segment.

Blayne Curtis asked about the Q4 guidance of down 1% relative to normal seasonal patterns, particularly for automotive, and how the AI business impacts the industrial and 'other' revenue buckets.

Answer

Thad Trent, CFO, reiterated that the Q4 guidance aligns with the normal seasonal pattern of flat to down 2%, viewing it as a positive step towards recovery. He specified that Q4 automotive and industrial are expected to be down low single digits, while the 'other' bucket will be up mid to high single digits. Thad clarified that AI data center revenue is reported in the 'other' bucket, while energy storage and infrastructure prior to the data center wall are in the industrial segment.

Blayne Curtis asked for details on the repositioning of the Intelligent Sensing Group (ISG), including the strategy, rationale, and associated revenue impact, and whether this was incremental to previously announced product exits. He also asked about expectations for distribution inventory.

Answer

President and CEO Hassane El-Khoury explained the ISG strategy is to focus on high-value machine vision for applications like ADAS, rather than lower-differentiation human vision. CFO Thad Trent clarified the repositioning would result in a $50M to $100M revenue headwind in 2026, which is included within the overall 5% headwind from non-core exits. Trent also stated that distribution inventory is expected to remain within the target 9-11 week range.

Crawford Clark, on behalf of Blayne Curtis, asked for more detail on trends within the Industrial segment and for expectations regarding automotive demand by geography.

Answer

CEO Hassane El-Khoury noted that most industrial sub-markets are showing signs of recovery, expressing cautious optimism. For automotive, he highlighted strength in China driven by new EV ramps featuring onsemi's silicon carbide. CFO Thad Trent added that for Q2, industrial revenue is expected to grow mid-to-high single digits, while automotive is expected to decline by a high single-digit percentage.

Blayne Curtis of Jefferies asked if the exit from the $350-$400 million non-strategic business was factored into the March quarter guidance or if it would be an additional impact later. He also requested details on March quarter auto demand by geography.

Answer

CFO Thad Trent clarified that the exit from the non-strategic business would occur over a multi-quarter period and is not fully baked into the Q1 guidance; the pace depends on market pricing. CEO Hassane El-Khoury noted that while auto demand is expected to be down generally in Q1, the key factor is the post-Chinese New Year recovery in China, which drove prior growth but is now seeing extended shutdowns.

Blayne Curtis requested more detail on the geographic drivers of the automotive segment's growth and onsemi's positioning in China EVs. He also asked about the timing for revenue contribution from the data center business.

Answer

CEO Hassane El-Khoury identified China as the driver of strength in auto and silicon carbide, citing share gains from design wins that are now ramping. He also stated that while the data center business already has some revenue, new products like the T10 TrenchFET have secured design wins and are expected to contribute more significantly to revenue in 2025.

Blayne Curtis followed up on the DRAM comments, asking if the significant increase in DRAM capital intensity was always planned or if things have been pulled in. He also inquired about what factors are holding up capacity, such as fab space or demand uncertainty.

Answer

CEO Rick Wallace confirmed increased urgency on the DRAM front regarding timing, noting that HBM pricing dynamics are driving this. He expects higher investment levels from the top three DRAM customers in 2026 compared to 2025. He explained that the industry is realizing more opportunity in memory due to the accelerating number of AI applications, and that ramping the supply chain takes longer than making CapEx announcements.

Blayne Curtis followed up on DRAM comments, asking if the strong DRAM growth was always planned or if things have been pulled in, and sought more color on customer conversations regarding capacity, specifically what's holding it up (fab space or demand uncertainty).

Answer

CEO Rick Wallace noted a definite increase in urgency on the DRAM front, with expectations for higher investment levels from the top three customers in 2026 compared to 2025. He explained that the industry is realizing more opportunity in memory due to the rapid expansion of AI applications, leading to accelerated demand, and that ramping the supply chain takes longer than CapEx announcements.

Blayne Curtis sought clarification on KLA's 2025 WFE forecast, which he had misheard, and on the math behind the 2025 China outlook, which seemed to imply strong overall company growth.

Answer

CFO Bren Higgins corrected that KLA had updated its 2024 WFE forecast to the high-$90B range but did not provide a 2025 WFE number. CEO Rick Wallace clarified the strategic outlook, stating that KLA's confidence for 2025 is driven by a return to strong, leading-edge investment in advanced logic, HBM, and packaging, which they are seeing in customer conversations and accelerated shipment requests.

Blayne Curtis asked NXP to assess the balance between cyclical tailwinds and seasonality, noting that Q4 industrial performance seemed above typical seasonality and Q1 guidance was for normal seasonality. He inquired if the cyclical recovery was slowing and how NXP felt about different markets. He also asked about the drivers behind the mobile segment's performance, which appeared to be a record quarter.

Answer

Rafael Sotomayor, President and CEO, confirmed that Q4 industrial performance was above seasonality, and automotive was slightly better than pre-COVID seasonality. He stated that inventory digestion is nearly complete, and normalization is a significant factor. NXP is observing company-specific growth in Industrial & IoT, indicating elements of a "soft upcycle," and expressed slightly more optimism than the previous quarter. For Mobile, Mr. Sotomayor explained that NXP is a specialty player (wallet, custom analog), and the Q2-Q3-Q4 movements are primarily seasonal and reflect strength in specific customers.

Blayne Curtis asked about the balance between cyclical tailwinds and seasonality, noting that only Industrial seemed above typical seasonality in December and March guidance was normal. He questioned if the seasonal cyclical tailwind is slowing and how different markets are performing. He also inquired about the drivers behind what might be a record quarter for NXP's mobile segment.

Answer

President and CEO Rafael Sotomayor confirmed that Q4 Industrial was above seasonality, and Automotive was slightly better than pre-COVID seasonality, driven by nearing completion of inventory digestion. He described the current environment as a 'soft upcycle' with specific growth areas in Industrial and encouraging signs of true demand, making NXP 'slightly more optimistic' than last quarter. Regarding mobile, Mr. Sotomayor explained that NXP is a specialty player (wallet, custom analog), and the Q2-Q4 movements are primarily seasonal and due to strength in specific customers.

Blayne Curtis asked for clarification on the driver of China revenue strength in September, specifically whether it was multinational spending or domestic Chinese customers. He also inquired if the 'second half weighted' outlook for 2026 WFE applied across all segments or was more concentrated in foundry logic.

Answer

Doug Bettinger, Executive Vice President and CFO, clarified that the growth in China revenue for September was largely driven by the domestic Chinese customer base, with multinational spending remaining relatively steady. He stated that the 'second half weighted' description for 2026 WFE applies to the totality of industry spending, with more granularity to be provided on the December call.

Blayne Curtis asked for clarification on the primary driver of Lam Research's China revenue strength in the September quarter, specifically whether it was multinational spending as previously understood, or domestic Chinese customers. He also inquired if the 'second half weighted' outlook for 2026 WFE applied across all segments or was more concentrated in foundry logic.

Answer

EVP and CFO Doug Bettinger clarified that the growth in China revenue for the September quarter was largely driven by the domestic Chinese customer base, with multinational spending in China remaining relatively steady. Regarding the 2026 WFE outlook, Doug Bettinger stated that the 'second half weighted' description applies to the totality of industry spending, promising more granularity on the December call.

Blayne Curtis inquired about current trends in the DRAM market, particularly regarding HBM, and asked for more specific drivers behind the guided gross margin decline for the December quarter.

Answer

President and CEO Timothy Archer described HBM as a long-term tailwind, noting the transition to HBM4 expands WFE, and highlighted recent wins for the Aqara etch tool as a sign of share gains in DRAM. EVP and CFO Douglas Bittinger clarified the December margin guide reflects a combination of customer mix, product mix, incremental tariffs, and a lower overall revenue level.

Blayne Curtis of Jefferies Financial Group Inc. inquired about trends in the DRAM market, particularly concerning HBM, and asked for more clarification on the drivers for the lower December gross margin guidance.

Answer

CEO Timothy Archer noted that while HBM is a small part of total DRAM bits, it's a long-term tailwind, with the transition to HBM4 expanding WFE. He highlighted recent wins for Lam's new Aqara etch tool, signaling share gains in the growing DRAM market. CFO Doug Bittinger clarified that the December gross margin decline is due to a combination of less favorable customer and product mix, lower overall revenue, and incremental tariff impacts.

Blayne Curtis asked about customer conversations regarding tariffs, specifically if they are pulling in orders or rethinking capacity. He also asked if the gross margin guide includes tariff impacts.

Answer

CEO Timothy Archer noted that customers have not made significant changes to their long-term investment plans, which are driven by technology roadmaps rather than short-term tariff news. CFO Doug Bettinger confirmed that an impact from tariffs is factored into the June quarter's gross margin guidance of 49.5% but declined to quantify the specific amount.

Blayne Curtis sought to identify which business segment would see the largest impact from the projected sequential revenue decline in China. He also asked for clarification on the timing of the NAND upgrade cycle, questioning if it would begin this year or is strictly a 2025 event.

Answer

CFO Douglas Bettinger did not specify the segment but conceded it was 'possible' the CSBG group could be down, given the Reliant business's correlation to specialty node spending in China. CEO Timothy Archer clarified that the positive outlook for NAND technology upgrades is primarily a 2025 story, with specific timing to be determined by customer conversations.

Blayne Curtis from Jefferies Financial Group questioned the dynamics within the AI packaging segment, asking if the Q4 acceleration is from the main customer or broader OSATs, and sought clarity on the roadmap visibility for the next-gen Dragonfly given the current tool's limitations.

Answer

CEO Michael Plisinski stated the AI logic packaging acceleration is driven primarily by the existing main customer, supplemented by supporting orders from OSATs. Regarding the Dragonfly roadmap, he explained the new platform was designed years ago for more advanced front-end applications, giving it significant performance runway for packaging needs for several generations, with development done in close collaboration with the customer.

Blayne Curtis asked for details on what drove the significant growth in advanced nodes revenue in Q1 and requested an update on the full-year outlook for that business, referencing a previously mentioned range.

Answer

CEO Michael Plisinski attributed the Q1 strength to broad-based customer expansions in DRAM, NAND, and logic, combined with Onto gaining wallet share through its expanded product portfolio, including Iris films and integrated metrology. He confirmed that, based on the current outlook, the advanced nodes business is trending toward the higher end of the previously discussed full-year revenue range.

Blayne Curtis of Jefferies Financial Group asked for the expected revenue contribution from the newly closed Mixel acquisition for the rest of the year. He also questioned the confidence in maintaining the full-year guidance given year-to-date performance and inquired about the OpEx impact from Mixel.

Answer

CEO Babak Taheri and Senior Director of FP&A Dan Shaw stated that while Mixel revenue is not in the official guidance, they see a potential for $3 million to $5 million in additional revenue for the remainder of the year. They expressed confidence in the annual guidance, citing the expected closure of delayed POs. Babak Taheri noted that the OpEx impact from Mixel is still being analyzed, with more details to come on the next call.

Blayne Curtis inquired about the specific segment of the mobile business Navitas is exiting and whether the transition to PowerChIP would impact production volumes.

Answer

CEO Gene Sheridan clarified that the company is strategically reducing its focus on lower-power (45W, 65W), price-sensitive mobile chargers, particularly in China, to concentrate on high-value, ultra-fast chargers (100W+). He assured that the move to PowerChIP's 8-inch wafer platform will increase capacity and does not create any supply constraints; the revenue headwind is a deliberate strategic decision based on profitability.

Blayne Curtis inquired about Analog Devices' current manufacturing strategy regarding in-sourcing versus out-sourcing, especially in light of shifting supply chains, tariffs, and the need for geographic diversity.

Answer

CEO Vincent Roche explained that ADI is in a strong position with more than double its pre-pandemic capacity. He noted that internal CapEx was strategically focused on mature nodes (180nm and above), where external investment is scarce but which are critical for industrial and auto products. This 'hybrid' model provides resiliency and flexibility, with ADI partnering with foundries for finer geometry nodes while securing its broad-based business internally.

Blayne Curtis from Jefferies asked for more detail on the annual forecast from an end-market perspective and sought clarification on the outlook for operating expenses, particularly whether G&A is still expected to remain flat.

Answer

CEO Karel Janac identified AI as the highest-growth area, noting that AI-related projects accounted for about half of design starts in the quarter. He also expressed bullishness on automotive and the increasingly complex microcontroller market. CFO Nicholas Hawkins quantified that AI-related deals now represent over 55% of the business, with automotive and enterprise as the fastest-growing verticals. On OpEx, Mr. Hawkins confirmed that G&A spending has been broadly flat for three years and that strategic investments are being focused on R&D, sales, and field application engineering to drive top-line growth.

Blayne Curtis sought details on the outlook for HBM versus CoWoS applications within the HPC segment, including any differing geographic trends. He also asked about business trends outside of advanced packaging.

Answer

Executive Ramy Langer expressed long-term optimism for both HBM and CoWoS, citing AI servers and the expansion of CoWoS-like technologies to OSATs as key drivers. For business outside HPC, Langer detailed that 15-20% comes from other advanced packaging like fan-out, with the remaining ~35% from a mix of 2D applications, including a slight recovery in CMOS image sensors. He stressed that the overall inspection business is larger than 3D metrology.

Blayne Curtis asked for clarification on the HPC outlook, questioning if equipment orders are lumpy given incremental CoWoS capacity additions. He also asked about the sources of strength outside of HPC that are driving near-term growth.

Answer

Executive Ramy Langer acknowledged discussions about clean room space but stated that capacity additions are on track. He reiterated strong visibility for Q4 and Q1 growth. Langer clarified that HBM and chiplet business remains healthy, and that additional growth is coming from a pickup in CMOS image sensors, fan-out, and a broad base of smaller customers across various applications.

An analyst on for Blayne Curtis asked about the market traction of Coherent's internally produced EMLs for 800G transceivers and the associated capacity growth plans. A second question requested a breakdown of the upcoming quarter's guidance by business segment.

Answer

CEO James Anderson stated that traction for their internal EMLs is strong, as they are used in the majority of Coherent's EML-based transceivers. He reiterated that indium phosphide capacity has tripled year-over-year and the new 6-inch platform, starting production next quarter, will significantly lower costs and increase volume. For guidance, Anderson projected that the data center and communications segment would be sequentially up, while industrial-related markets would be sequentially down.

An analyst on behalf of Blayne Curtis of Jefferies asked about the transceiver business's strong growth, seeking details on the mix between EML and CW lasers and the strategy for in-sourcing versus external sourcing. They also questioned what the customer preference for CW lasers implies for the broader industry.

Answer

CEO Michael Hurlston clarified that near-term transceiver growth is driven by externally sourced CW lasers, with plans to incorporate their own lasers early next calendar year. He explained that while customers are using CW-based modules, Lumentum's internal EML capacity is completely sold out and allocated to component sales due to strong differentiation and pricing, with CW production being a strategic addition to participate in a broader market.

Blayne Curtis from Jefferies LLC asked for an update on prospects within the consumer IoT segment for the remainder of the year and sought clarification on the tax rate and other modeling items for Q2.

Answer

President and CEO Liren Chen outlined the consumer IoT strategy, focusing on smart TVs with targets like LG, TCL, and Hisense, and building on PC licensing momentum after the HP deal. He also noted progress in connected cars via the Avanti platform. CFO Rich Brezski explained the lower Q1 tax rate was due to a larger tax deduction from stock-based compensation and clarified the non-GAAP EPS denominator adjustment for the convertible debt.

Blayne Curtis followed up on the tariff situation, asking about order linearity and momentum. He also sought clarity on visibility for product revenue growth in the second half, tied to new server platforms.

Answer

CFO Desmond Lynch noted high backlog coverage of over 90% for Q2 and confirmed no unusual pull-forward of demand from customers. CEO Luc Seraphin added that companion chip revenue is expected to grow quarter-over-quarter in the second half, contingent on platform rollouts. He also stated that RCD demand remains robust, as any new platform delays would likely be offset by demand for prior-generation products, supporting the company's 40-50% market share goal.

Blayne Curtis inquired about the current revenue contribution from companion chips and asked about the timeline for the gap between licensing billings and royalty revenue under ASC 606 to converge.

Answer

CEO Luc Seraphin noted an inflection point for companion chip revenue is expected in H2 2025. CFO Desmond Lynch specified their current contribution is in the 'low single-digit' range of product revenue. Regarding ASC 606, Lynch confirmed the gap has narrowed significantly and expects only a small quarterly difference going forward.

Blayne Curtis from Jefferies asked for clarification on the Silicon IP business's growth rate and revenue lumpiness against its 10-15% target, and also questioned the contribution of DDR4 sales to the strong product revenue growth.

Answer

CFO Desmond Lynch reaffirmed the 10-15% annual growth target for Silicon IP, stating the business is on track for approximately 10% growth in 2024. CEO Luc Seraphin added that DDR4 sales remain modest, and the strong double-digit product growth is overwhelmingly driven by market share gains in DDR5, not a recovery in DDR4.

Blayne Curtis inquired about the timing of the inventory correction, asking when Impinj first sensed the issue and how the current correction compares to past cycles in terms of shape and recovery speed.

Answer

CFO Cary Baker explained the channel inventory build was due to a mix of demand and timing issues, with demand being the larger factor, citing an unanticipated pullback from a large logistics customer. CEO Chris Diorio added that the company took swift action upon seeing the slowdown and is better positioned than in past cycles with products like Gen2X and M800, but declined to predict the timing of the recovery. Cary Baker emphasized they are not guiding for Q2 and are prudently modeling zero turns for the endpoint IC business in Q1.

Blayne Curtis questioned why the sequential growth in the Data Center GPU business appears to be slowing and asked about any shifts in customer demand between training and inference workloads.

Answer

CEO Lisa Su explained that after tremendous growth in 2024, the business is now focused on new deployments and customer onboarding during a product transition period in H1, making the MI350 pull-in crucial. She noted that while customers appreciate AMD's inference performance, they also want to see it as a strong training solution, which aligns with the company's roadmap and investment focus.