Brian Chin

Brian Chin asked about the reasons why the recently announced VPA did not include both front-end and back-end investments, and the optionality within the VPA for shipping Gen 5 versus Gen 3 products.

Answer

Michael Plisinski (CEO) clarified that the VPA is specifically for Dragonfly® inspection, primarily involving current G3 products for aggressive ramps, with upgrade options for G5 offered but not assumed in the current agreement. Brian Chin also inquired about the contribution of new products and applications, such as 3D metrology, critical films, HSIR, and Atlas® G6, to this year's growth rates. Michael Plisinski (CEO) estimated that new products would contribute perhaps 10% or less to this year's growth through initial insertions and ramps, but anticipated a much larger impact in 2027 as they expand the company's total addressable market. Brian Chin further asked about the mix of FinFET spending with Gate-All-Around this year, its impact on advanced nodes foundry logic revenue, and if Gate-All-Around spending in 2027 would be a greater tailwind. Michael Plisinski (CEO) emphasized that Onto Innovation's business is primarily driven by the most challenging Gate-All-Around nodes, where the strongest demand is observed, noting that the attach rate for OCD was significantly lower for 5nm and above.

Brian Chin inquired about the reasons for the VPA not including both front-end and back-end, the optionality for Gen 5 versus Gen 3 within the VPA, and the expected contribution of new products like 3D metrology and critical films to this year's growth rates. He also asked about the mix of FinFET versus Gate-All-Around spending in advanced nodes and its impact on the business.

Answer

CEO Michael Plisinski clarified that the VPA includes various options, primarily focusing on current G3 products for aggressive ramps, with potential upgrade options for customers. He stated that new products, including HSIR and Atlas G6, represent early penetrations, contributing approximately 10% of the business this year and expanding the company's SAM into 2027. Mr. Plisinski emphasized that Onto Innovation's business is predominantly driven by the more challenging Gate-All-Around nodes, where demand is strongest, rather than FinFET nodes (5nm and above) which have a lower OCD attach rate.

Brian Chin of Stifel Financial Corp. asked about the drivers for the Q4 rise in Dragonfly subsurface inspection revenue, the strategic importance of the next-gen Dragonfly platform, and the reasons for the differing rebound strengths between advanced nodes and packaging in Q4.

Answer

CEO Michael Plisinski explained that the Q4 subsurface inspection demand is broad, coming from several customers across die stacking, 2.5D logic, specialty power devices, and wafer bonding applications. He described the next-gen Dragonfly as a "quite important" and significant platform for defending market position. The advanced nodes rebound, he noted, is fueled by increased wallet share and a major Q4 win with a new gate-all-around customer for both OCD and films metrology.

Brian Chin asked for quantification of the impact from reciprocal tariffs on Q2 and full-year shipments and sought more detail on the drivers behind the strong Q1 advanced nodes revenue.

Answer

CEO Michael Plisinski responded that there is currently no impact from reciprocal tariffs, but the company is accelerating its strategic move to establish manufacturing in Asia to mitigate future risk. He explained that the strong Q1 advanced nodes revenue was driven by planned, strong investments in memory and gate-all-around, not a pull-forward, and that a pause in memory spending is anticipated for Q3.

Brian Chin inquired whether process control intensity for HBM is declining or increasing with more complex stacks like 12-high and HBM4. He also asked about market share targets for the new $300 million incremental SAM in AI packaging.

Answer

CEO Michael Plisinski confirmed that process control intensity is increasing due to higher yield loss risks and the complexity of denser interconnects. For the new SAM, he explained that for certain products like EchoScan, they target a very high share due to a lack of alternatives, while for others like 3D bump inspection, they face a strong incumbent and any share gain would be positive.

Brian Chin inquired about the timing of TSMC's CoWoS capacity expansion, Onto's confidence in outgrowing WFE in 2025, details on a $10 million lithography pushout, and the company's ability to flex manufacturing capacity to meet potential surges in demand.

Answer

CEO Michael Plisinski expressed high confidence in revenue growth for the first half of 2025, driven by gate-all-around (GAA) and DRAM expansions. He confirmed the lithography delay was customer-driven and stated Onto is highly confident in outgrowing WFE in 2025, citing increased process control intensity in AI packaging. Plisinski affirmed that the company has significant manufacturing flexibility to increase output, noting they are not yet running full second or third shifts.

Brian Chin of Stifel inquired about the prevalence of accelerating demand, specifically whether it's concentrated in HBM or chiplet logic, and the timing of the larger step-up in demand (Q3 vs. Q4). He also asked for an update on the expected percentage of system shipments from newer platforms (Hawk or Eagle G5) for the year, customer decision points between Hawk and Eagle G5 for HBM4/HBM3E coexistence, and any observed reuse of existing systems impacting H1 shipments.

Answer

COO Ramy Langer clarified that the demand acceleration is primarily from high-performance computing and AI-related products, with the step-up expected in the second half, timing being customer-dependent. He stated that Hawk is targeted for high-end applications requiring very high throughputs and accuracies, especially for future 100nm and hybrid bonding applications, while Eagle G5 remains popular for its flexibility and ROI, particularly in OSATs. Langer noted that Hawk and G5 accounted for about 30% of revenues this year, with an expectation to reach at least 50% in 2026. He added that the transition to HBM4 is a significant opportunity due to increased metrology and inspection intensity.

Brian Chin (Stifel) inquired about the prevalence of accelerating demand, specifically whether it's more concentrated on HBM or Chiplet logic, and if the larger step-up in demand is expected in Q3 or Q4.

Answer

Ramy Langer (COO, Camtek) stated that the accelerating demand is prevalent across high-performance computing and AI-related products, with the larger step-up expected in the second half of the year, but the exact timing between Q3 and Q4 is customer-dependent.

Brian Chin asked for clarification on whether a 'solid' Q3 implies sequential growth, the expected CoWoS vs. HBM revenue split, and whether the mentioned 2027 HBM density change refers to hybrid bonding.

Answer

Executive Ramy Langer clarified that it was too early to provide specific Q3 guidance beyond 'solid' and that the company does not break out the HBM vs. CoWoS revenue mix. He explained the 2027 HBM change refers to a significant increase in memory capacity per GPU, not a manufacturing process like hybrid bonding. He added that hybrid bonding remains a future opportunity, with Camtek tools already in customer pilot lines.

Brian Chin asked about the expected increase in micro bumps for HBM4, whether system shipments would be stronger in 2026 versus 2025, and the suitability of the Hawk versus Eagle for HBM4. He also inquired about the planned capacity expansion at OSATs for CoWoS and the overall AI packaging TAM outlook for 2025.

Answer

Ramy Langer, an executive, responded that the Eagle platform remains the industry workhorse for HBM, though some customers might choose the Hawk for higher throughput. He affirmed that the combination of market expansion (CoWoS CAGR ~50%) and increasing complexity will grow Camtek's opportunity. While unable to quantify OSAT capacity, he confirmed significant sales to them. He definitively stated that Camtek expects the overall TAM for AI/HPC packaging to increase in 2025.

Brian Chin inquired about the timeline for resolving the 2.5D substrate supply bottleneck in 2025 and its potential impact on Q4/Q1 revenue. He also sought details on a new product's applications, addressable market, and revenue ramp, asking if it's tied to HBM4.

Answer

Executive Ramy Langer confirmed a positive HPC trend with strong visibility for Q4 2024 and Q1 2025 growth. He and CEO Rafi Amit described the new product as a high-end inspection system for advanced applications like hybrid bonding and fine-pitch micro bumps, which will significantly increase the company's total available market. Langer noted it was too early to link it to specific technologies like HBM4.

Brian Chin asked about Advanced Energy's semiconductor capital equipment (semi-CAP) growth expectations for 2026 relative to the industry's wafer fab equipment (WFE) growth, and if acceleration is anticipated in the second half. He also inquired about the data center segment's greater than 30% growth outlook, specifically regarding new versus existing customers, and optimism for strengthening volumes given hyperscaler CapEx increases.

Answer

CEO Steve Kelley highlighted Advanced Energy's strong positioning with eVoS, eVerest, and NavX technologies, driving structural share gains in semiconductor. He noted increased etch and deposition intensity, a larger installed base, and a surge in advanced logic and DRAM capacity, along with new system power wins, contributing to growth. For data center, Mr. Kelley clarified the forecast only includes existing customers, not second-wave, and expressed bullishness on the market, citing capacity expansions in the Philippines, Mexico, and Thailand, and engagement in 800-volt projects. He emphasized that rapid technological change benefits Advanced Energy.

Brian Chin asked about Advanced Energy's semiconductor capital equipment growth in relation to the industry's WFE growth, particularly anticipating acceleration in the second half. He also inquired about the data center segment's revised growth outlook, new customer contributions, and the optimism for existing customer volumes given hyperscaler CapEx increases.

Answer

Steve Kelley (CEO) highlighted Advanced Energy's strong position in semiconductor due to eVoS, Everest, and NavX technologies, driving structural share gains at advanced nodes and in system power. He confirmed the data center forecast of over 30% growth only includes existing customers, not second-wave demand, and noted significant capacity expansion in the Philippines, Mexico, and Thailand to support bullish hyperscaler CapEx and 800-volt projects.

Brian Chin from Stifel Financial Corp asked if current data center shipments are for legacy GPUs and whether the upcoming shift to newer platforms like GB200 implies a significant growth multiplier for AE.

Answer

President and CEO Steve Kelley did not specify which GPUs their products support but confirmed AE has won new designs that will ramp in 2026 and is already working on designs for 2027. He emphasized the rapid design cycle and AE's high win rate within its core customer base, noting that engineering bandwidth is a key factor in managing growth and new opportunities.

Brian Chin inquired about Advanced Energy's underlying assumption for the wafer fab equipment (WFE) market, the drivers for its own 10% semiconductor growth forecast, and which end markets are driving initial ramps for new plasma power products. He also asked for color on the potential tariff headwinds in the second half of the year.

Answer

CEO Stephen Kelley explained that their forecast assumes 0-5% WFE growth, with AE's outperformance driven by leading-edge process intensity and new product adoption, particularly in advanced logic and DRAM. Regarding tariffs, he noted that large semiconductor and data center customers manage this themselves. For other areas, the company's manufacturing footprint in Mexico (USMCA compliant) and the Philippines (lower tariff rates) provides a relative advantage, limiting direct exposure.

Brian Chin inquired about Advanced Energy's 2025 semiconductor revenue outlook, specifically whether a 10% year-over-year growth is a good frame of reference for outperforming the market. He also asked if new product designs are closely aligned with the NAND market and questioned if favorable chip pricing could support gross margin expansion.

Answer

CEO Stephen Kelley clarified that strong Q4 2024 performance moderated demand into Q1 2025, but confidence in outperforming the market for the full year comes from new product ramps in the second half. He noted that new technologies like eVoS and eVerest are seeing broad adoption across NAND, DRAM, and logic. Regarding component costs, Kelley stated that while prices are generally coming down, it varies by supplier. CFO Paul Oldham added that it's too early to bake material cost improvements into the gross margin plan, though it could become a tailwind.

Brian Chin inquired about the drivers for the Q3 and Q4 Semiconductor revenue upside, the mix between leading and trailing edge, the potential quarterly trend for the semi business in 2025, and whether AI demand could extend the Data Center growth cycle.

Answer

CEO Stephen Kelley explained that semiconductor growth was driven by both leading and trailing edge logic nodes, making a precise split difficult. He anticipates 2025 semi growth will be weighted towards the second half, driven by new product ramps. For Data Center, Kelley confirmed that AI is accelerating refresh cycles, which enhances the value of Advanced Energy's power density, efficiency, and reliability.

Brian Chin asked about the factors contributing to the $10 million increase in Ichor's Q1 revenue guidance midpoint since the last update. He also inquired about the company's expected growth relative to the industry's 15%-20% WFE forecast for the full year. Additionally, he questioned how the Q1 gross margin guidance incorporates the attributes needed to achieve the 15% gross margin target by the second half, and the pace of improvement from production levels and insourcing.

Answer

CEO Phil Barros explained that strengthening demand forecasts are making Ichor more bullish, positioning them to grow within or outperform the WFE range. Regarding gross margins, Phil Barros noted that temporary headwinds from relocating machining capacity in the first half will resolve by mid-year, leading to benefits and a linear progression towards the 15% target in the second half.

Brian Chin inquired about the reasons behind the improved Q1 revenue guidance compared to the previous month's update and Ichor's expected growth relative to the industry's WFE forecast of 15%-20%. He also asked about the gross margin trajectory, specifically what's embedded in the Q1 guidance and how quickly Ichor expects to reach the 15% gross margin target, considering current revenue levels.

Answer

CEO Phil Barros explained that demand has continued to strengthen weekly, leading to increased bullishness and the higher Q1 guidance. He stated that Ichor expects to grow within or outperform the 15%-20% WFE forecast. Regarding gross margins, Phil Barros noted that the Q1 guidance incorporates short-term headwinds from relocating machining capacity, which will be flushed through by the end of the first half, making the 15% gross margin target for the second half a good model, with incremental pickup in Q2 and a stronger second half.

Brian Chin asked for details on the Q2 gross margin miss, the cause of the hiring and retention issues, the reason for the OpEx uptick, and the outlook for the second half of the year. He also sought clarification on the new flow control qualification and which end market was affected by a customer push-out.

Answer

CEO Jeffrey Andreson explained that gross margins were impacted by hiring and retention challenges for off-shift, clean-room positions in their Minnesota facility, which limited the output of machined components. He clarified the OpEx increase was due to higher healthcare costs, not hiring. Andreson projected a very slight, low-single-digit decline in revenue for the second half, attributing it to timing, and confirmed the flow control qualification is for advanced logic applications.

Brian Chin asked for details on the revised annual revenue outlook, questioning which semiconductor segments were driving the change, and followed up on the Q1 gross margin miss, inquiring about the execution level of internal sourcing and the progress into Q2.

Answer

Executive Jeffrey Andreson explained the revenue outlook change was driven by softness in lithography, non-semi business, and silicon carbide, not core deposition and etch. Regarding gross margins, he attributed the miss to "growing pains" in managing inventory for internally sourced components, stating they achieved about 75-80% of the plan but had to buy more external supply than forecasted. He expressed confidence that the strategy is working and the trajectory will improve.

Brian Chin inquired about the revenue outlook for the remainder of 2025, questioning if the pull-forward of labor costs implied a more bullish view than stated. He also asked about the potential gross margin impact if revenue upside came from legacy gas panels.

Answer

Executive Jeffrey Andreson clarified that they anticipate Q2 revenue to be similar to Q1, with a modest increase in the second half. He explained that the resource additions are largely to support the internal ramp of proprietary components, which is outgrowing other revenue streams. Andreson added that while a heavier mix of legacy gas panels could slightly mute margin percentage, improved overhead absorption and the tailwind from new internal supply should effectively offset that mix issue.

Brian Chin followed up on the NAND recovery, asking if it was alleviating customer inventory overhangs. He also questioned if the flat Q1 2025 revenue outlook was mainly due to a step-down in China WFE and sought confirmation on the 25% incremental gross margin target for 2025.

Answer

Executive Jeffrey Andreson explained that for gas panels, there is no lag from NAND demand, but a slight lag may persist for components like weldments. He attributed the flat Q1 outlook more to a rebalancing in lithography and muted silicon carbide demand than just China. Executive Greg Swyt confirmed that modeling at least a 25% incremental gross margin flow-through for 2025 is appropriate.

Brian Chin asked for clarification on the Q1 revenue guide, specifically if probe card revenue is expected to increase by more than the $10 million sequential growth due to seasonal softness in systems, and the split of this increase between DRAM and foundry logic. He also inquired about the capacity constraints of FormFactor's advanced probe card peers and the expected timeline for their capacity to come online. Finally, he asked for the estimated TAM for AI GPU, XPU ASIC, and data center networking probe cards in 2025, FormFactor's share, and the expected growth rate for 2026.

Answer

CEO Mike Slessor confirmed that probe card revenue is expected to grow by more than $10 million sequentially, with roughly equal contributions from foundry/logic (driven by data center network switches) and DRAM (driven by HBM growth). He noted that major competitors are also transparent about needing to add capacity, but FormFactor is focused on its own urgent capacity expansion. He broadly estimated the AI opportunity SAM (GPU, custom ASIC, networking) to be in the hundreds of millions of dollars in 2025, growing faster than the overall industry, with FormFactor having share gain opportunities.

Brian Chin sought clarification on the Q1 revenue guidance, noting strong sequential performance in systems and flash probe cards in Q4 but expected seasonal softness in systems for Q1, asking if probe card revenue is projected to increase by more than $10 million sequentially and the breakdown of that increase between DRAM and foundry logic. He also asked about the capacity constraints faced by FormFactor's advanced probe card peers in DRAM or foundry logic, whether peer capacity is expected to come online in a similar timeframe, and FormFactor's strategy regarding its own capacity expansion. Finally, he requested an estimate of the AI GPU, XPU ASIC, and data center networking probe card Total Addressable Market (TAM) in 2025, FormFactor's share in that market last year, and whether the 2026 TAM growth rate is expected to be similar to that of AI accelerators (e.g., 50%+).

Answer

CEO Mike Slessor confirmed that systems are expected to be down seasonally, implying probe card business growth of more than $10 million sequentially, with roughly equal contributions from foundry and logic (driven by data center network switches) and DRAM (driven by HBM growth to a new record). He acknowledged that major competitors have also been transparent about needing to add capacity, but emphasized FormFactor's focus on its own urgent capacity expansion, including Farmers Branch, to capture incremental market share through its ability to deliver. He indicated that these AI-related areas are growing much faster than the overall industry, though he wouldn't commit to 50% growth, and estimated the 2025 SAM for these combined opportunities to be in the hundreds of millions of dollars, with expectations for continued growth and share gains in 2026 and beyond.

Brian Chin from Stifel Financial Corp. inquired about any residual HBM4 product ramp-up costs in the Q3 gross margin guidance, the potential for current business trends to persist into Q4, and the impact of HBM4's test intensity on future margin potential.

Answer

CFO Shai Shahar confirmed that no additional HBM ramp-up costs are assumed in the Q3 outlook, stating the issue was resolved. CEO Michael Slessor addressed broader trends, noting that while PC and mobile markets are tepid, the company is focusing on generative AI-driven areas like GPUs and custom ASICs. He added that HBM4 does offer opportunities for higher ASPs on high-speed cards due to increased test complexity and value delivery.

Brian Chin from Stifel inquired if a resurgence in older CPU platforms could dampen revenue potential and asked for an update on the development and adoption of more cost-competitive non-HBM DDR5 probe cards.

Answer

CEO Mike Slessor explained that for older designs, customers typically reuse existing probe cards from inventory, so a significant mix shift away from new designs would negatively impact revenue. He confirmed that HBM revenue is expected to grow year-over-year and that the new lower-cost DRAM architecture has shipped in pilot volumes to a beta customer, with the program progressing well.

Brian Chin inquired about the confidence in an overall demand increase through 2025 and whether it's reasonable to expect the Foundry & Logic business to return to a run rate of approximately $100 million per quarter, given new designs and customer qualifications.

Answer

CEO Mike Slessor affirmed his confidence in 2025 growth, driven by the transition to HBM4 which increases test intensity and complexity. He agreed that a return to a ~$100 million quarterly run rate for Foundry & Logic is a reasonable expectation, supported by a potential PC refresh cycle and revenue contributions from new customer qualifications.

Brian Chin asked about catalysts for GPU share gain, including platform differentiation, device complexity, and new test insertions. He also inquired about the new HDD customer, expected HDD test growth in 2026, and whether increasing complexity in semi-test is compelling IDMs to use external test platforms.

Answer

CEO Greg Smith identified catalysts for GPU share as Teradyne's resilient supply chain, superior tester reliability and uptime, next-generation instruments with increased power and memory, and better mission-mode testing capabilities. He confirmed the new HDD customer involves commercial test complementing in-house solutions, expecting HDD revenue to double between 2025 and 2026. Greg Smith noted that while one big player in SoC and one in memory currently have captive ATE strategies, the SoC landscape is likely to change over the next few years.

Brian Chin asked for an outline of key catalysts driving Teradyne's GPU share gains over the next few years, including platform differentiation, device power/complexity, and new test insertions. He also inquired about the new HDD customer, whether it represents commercial test replacing in-house solutions, 2026 HDD growth expectations, and the broader trend of IDMs adopting external test platforms.

Answer

CEO Greg Smith identified catalysts for GPU share as Teradyne's resilient supply chain, superior tester reliability and uptime (favored by OSATs), next-generation instruments with increased power and memory for test programs, and better capabilities for mission-mode testing. Regarding HDD, he confirmed it involves commercial test complementing internal solutions, with HDD revenue expected to double between 2025 and 2026. He noted that while some IDMs still use captive ATE (one big player in SoC, one in memory), the SoC trend might shift towards commercial platforms.

Brian Chin asked about the weighting of the AI accelerator business in the second half and Q4 of this year, and if AI accelerator revenue significantly exceeded expectations entering the year. He also inquired about industrial robotics, asking if Q4 is expected to show positive seasonality (QoQ) or approach flat on a year-over-year basis. For System Level Test (SLT), he asked if it's common to win an insertion towards the back end of the test queue or multiple subsequent insertions for a given accelerator chip.

Answer

CEO Greg Smith confirmed that compute (VIP and networking) revenue was stronger than expected, while mobile, auto, and industrial were weaker, with memory strengthening but less significantly than compute. For SLT, Mr. Smith stated there's an incumbency advantage once designed in for an AI accelerator due to upgradeability for subsequent part generations. CFO Sanjay Mehta expects a seasonal uplift for robotics in Q4 (QoQ increase) despite a weaker automation market, with Mr. Smith adding caution due to the high-turns nature of the business.

Brian Chin asked about the weighting of the AI accelerator business in the second half and Q4 2025, and if its revenue significantly exceeded initial expectations. He also inquired about expected seasonality for industrial robotics in Q4 and Q1, and the commonality of winning multiple subsequent insertions for SLT in accelerator chips.

Answer

CEO Greg Smith confirmed that AI accelerator revenue (compute, networking) was significantly higher than expected at the beginning of the year, offsetting weaker mobile and auto/industrial segments. For SLT, Mr. Smith stated that once designed in for an AI accelerator, there is an incumbency advantage due to the system's upgradeability. CFO Sanjay Mehta expects a seasonal uplift for robotics from Q3 to Q4, acknowledging the ongoing strategic shift and weaker automation market. Mr. Smith added that robotics revenue prediction is challenging due to its high-turns nature.

Brian Chin of Stifel asked for an updated sizing of the overall compute TAM and the VIP sub-segment for the current year, and whether Teradyne expects to maintain its 50% share in VIP. He also questioned if the recent uptick in test utilization rates was attributable to any supply chain pull-forward activity.

Answer

President & CEO Greg Smith stated that the VIP TAM is tough to call for 2025 due to Q4/Q1 bridging, but agreed there is upward pressure on previous estimates. He confirmed networking is an important and strengthening part of their 2025 compute revenue. He also noted that while customers may have pulled forward demand, it primarily increased utilization rather than driving significant new capacity buys for Teradyne.

Brian Chin sought clarification on whether the VIP TAM forecast from the Analyst Day included SLT and asked about the potential timing and impact of onshoring advanced back-end test and packaging facilities to the United States.

Answer

CEO Greg Smith confirmed the VIP TAM figures were for semiconductor ATE and did not include SLT, which he estimated could represent an additional 10-30% of that TAM. Regarding onshoring, he explained that while ship-to locations may change, the total demand for testers is driven by end-market chip volume, not manufacturing location, so the overall impact on Teradyne's business should be minimal.

Brian Chin requested the SOC test market size for 2024 and the end-market breakdown for the 2025 TAM. He also asked about current test cell utilization rates and the specifics of the robotics go-to-market consolidation.

Answer

CFO Sanjay Mehta provided the TAM breakdowns: $4.6B in 2024 and a projected $4.9B in 2025, detailing the compute, mobile, and auto/industrial components. CEO Greg Smith estimated that test utilization rose about 10% year-over-year in 2024 and that the business has passed a tipping point toward system sales over upgrades. He explained the robotics consolidation combines the sales, marketing, and service functions of UR and MiR into a single organization.

Brian Chin asked for the reason behind the upward revision to the industrial test TAM, a quantification of the mobile installed tester base that has been repurposed for other markets like AI, and the key considerations driving the VIP compute TAM opportunity for next year.

Answer

CEO Greg Smith confirmed the industrial TAM revision was due to better visibility into the market in China served by local suppliers. He quantified that over 100 testers have been repurposed to date, with over 200 expected by year-end, leading to higher utilization. For the VIP TAM, he noted the 2024 estimate of $300M was a positive surprise, putting upward pressure on the 2026 target of $500M, but cautioned the market is lumpy and constrained by HBM and advanced packaging availability.

Brian Chin asked about Penguin Solutions' maintained full-year outlook despite component changes, specifically inquiring about the expected sequential revenue decline for the February quarter, the segments driving this, and the impact of memory wafer supply constraints on the raised memory revenue growth forecast. He also asked for elaboration on how channel partnerships with CDW, NVIDIA, and SKT, along with sovereign cloud opportunities, are contributing to the Advanced Computing pipeline.

Answer

CEO Mark Adams explained that Penguin Solutions is effectively navigating memory supply constraints, allowing for more granular projections. He noted that new Advanced Computing customers, while exciting, introduce timing complexities for master agreements and purchase orders, impacting short-term predictability. CFO Nate Olmstead added that memory is stronger due to pricing and demand, while LED is weaker, and Advanced Computing is expected to be down sequentially in Q2, consistent with prior expectations, with strength anticipated in the second half. Mark Adams further detailed that CDW leverages Penguin's AI factory capabilities, the NVIDIA partnership is strengthening with enterprise deployments, SKT offers ongoing opportunities, and new large-scale sovereign cloud opportunities are in the pipeline.

Brian Chin inquired about Penguin Solutions' maintained full-year outlook despite component changes, specifically asking for details on fiscal first half versus second half revenue guidance, expected sequential decline in the February quarter, and which segments are driving this. He also asked about the raised memory revenue growth forecast (20%-35% year-over-year) and any potential shipping constraints given memory wafer supply limitations. Additionally, he sought elaboration on how channel partnerships with Dell, CDW, SKT, and sovereign cloud opportunities are contributing to the Advanced Computing pipeline.

Answer

Mark Adams, CEO, explained that Penguin Solutions is effectively navigating memory supply constraints, enabling a clearer forward projection for that business. He noted that new customer acquisitions in Advanced Computing involve longer lead times due to master agreement negotiations and component sourcing, leading to more cautious near-term predictability. Nate Olmstead, CFO, confirmed stronger memory performance due to pricing and demand, weaker LED sales due to broad-based softness and Chinese New Year, and expected sequential declines in LED and Advanced Computing for Q2, with strength anticipated in the second half. Mark Adams further detailed how CDW enhances Penguin's AI factory and managed services capabilities, NVIDIA strengthens enterprise deployment partnerships, SKT offers opportunities in and outside Korea, and new sovereign cloud deals are expanding the pipeline.

Brian Chin asked how much of the potential second-half 2026 acceleration is tied to new cleanroom space availability, given that some of KLA's tools are among the first to go into a greenfield fab. He also inquired about the extent to which KLA's continued optimism on advanced packaging growth involves expansion opportunities in HBM packaging, beyond its current strength in logic packaging.

Answer

CEO Rick Wallace stated that while space constraints could potentially affect some timing into the second half of 2026 and 2027 for new node ramps and memory fabs, it's not a significant factor as it stands today. Regarding advanced packaging, Rick Wallace expressed confidence in KLA's market share and positive trends in both logic and memory packaging, expecting this to continue into next year, driven by HBM packaging opportunities.

Brian Chin asked how much of the potential second-half 2026 acceleration is tied to new cleanroom space availability, given that some KLA tools are among the first in greenfield fabs. He also followed up on advanced packaging, asking how much of KLA's continued optimism for market and growth next year involves expansion opportunities in HBM packaging.

Answer

CEO Rick Wallace stated that while space constraints could potentially affect some timing into late 2026 and 2027 for new node ramps and memory fabs, it's not a big factor currently. He confirmed optimism for market share and growth in advanced packaging for both logic and memory segments, including HBM packaging, with positive trends expected to continue into next year.

Brian Chin of Stifel Financial Corp. asked if KLA's advanced packaging opportunity is still primarily in 2.5D packaging and whether the focus is more on inspection or metrology applications.

Answer

EVP & CFO Bren Higgins confirmed that most of the share gains to date have been in the logic area with CoWoS (2.5D), but noted that momentum is increasing in HBM. He clarified that the opportunity is currently more 'defect loaded' than metrology, as the larger design rules in packaging limit some metrology applications, while the high cost of failure drives incredibly high sampling rates for inspection to avoid missing defects.

Brian Chin of Stifel Financial Corp. asked if KLA's near-term advanced packaging opportunity is concentrated more in 2.5D packaging than HBM, and whether the opportunity is primarily in inspection versus metrology.

Answer

EVP & CFO Bren Higgins confirmed that most share gains to date have been in logic-based CoWoS (2.5D) packaging, though momentum in HBM is increasing. He also affirmed the opportunity is more 'defect loaded,' meaning inspection-heavy, because the high cost of failure drives very high inspection sampling rates, while larger design rules in packaging currently limit some metrology applications.

Brian Chin from Stifel Financial Corp. inquired about the level of R&D spending from leading-edge logic customers not expanding capacity and asked about the expected process control intensity change moving to the 16A node.

Answer

CEO Richard Wallace indicated that spending from these customers was 'derisked' in the 2025 plan, implying minimal contribution. CFO Bren Higgins noted it was too early to model 16A intensity but said underlying trends are favorable. Wallace added that new solutions are sometimes 'back-ported' to older nodes, increasing their intensity, which is a positive dynamic for KLA.

Brian Chin asked for a rough percentage-based partitioning of the $8 billion WFE spending (derived from $100 billion in AI investment) across advanced logic, DRAM, and NAND. He also inquired whether the industry needs to fully exhaust the $40 billion NAND upgrade TAM before capacity spending begins, or if these two types of investments could occur concurrently.

Answer

EVP and CFO Doug Bettinger stated that more than half of the $8 billion WFE is expected to come from memory (enterprise SSDs and high-bandwidth memory). President and CEO Tim Archer explained that the progression from NAND upgrades to capacity spending would be customer-specific. While upgrades are generally prioritized as the fastest and lowest-cost method, some capacity additions are already occurring, and concurrence between upgrades and new capacity builds is expected, particularly towards the latter part of the upgrade rollout.

Brian Chin asked for a rough partitioning of the $8 billion WFE spending for AI across advanced logic, DRAM, and NAND. He also questioned whether the $40 billion NAND upgrade TAM needs to be fully exhausted before capacity spending occurs, or if these two types of investments can be somewhat concurrent.

Answer

Doug Bettinger, Executive Vice President and CFO, stated that more than half of the $8 billion WFE for AI comes from memory (enterprise SSDs and HBM). Tim Archer, President and CEO, explained that the timing of NAND upgrades versus capacity spending is customer-by-customer, with some concurrency possible, especially towards the back end of the upgrade rollout. However, upgrades are generally prioritized as the fastest and lowest-cost means.

Brian Chin asked if a recent Vantex oxide etch win was for a 400-layer NAND application and whether the Reliant systems business within CSBG has now stabilized at a bottom.

Answer

President and CEO Timothy Archer described the Vantex win as a key 'multi-generational' decision enabling critical technologies like QLC, but did not specify a layer count. EVP and CFO Douglas Bittinger declined to decompose the CSBG outlook but confirmed that while upgrades are strong, the Reliant business is currently down.

Brian Chin of Stifel Financial Corp. asked for details on the Vantex oxide etch win, specifically if it was for a 400-layer application, and inquired if the Reliant systems business within CSBG has stabilized.

Answer

President and CEO Timothy Archer described the Vantex win as a key multi-generational decision, implying it covers current and future nodes, and highlighted its importance for enabling QLC NAND. EVP and CFO Doug Bittinger declined to decompose the forward-looking CSBG guidance but confirmed that upgrades are strong while Reliant is currently down, with the overall CSBG outlook for the year being modest growth.

Brian Chin inquired about the revenue potential for dry resist deposition, the timing of the announced win, and the impact of wafer bonding in NAND on Lam's spending capture rate.

Answer

EVP & CFO Douglas Bettinger called the dry resist win a major milestone that will generate revenue this year, though not 'huge dollars' initially. CEO Timothy Archer stated that wafer bonding has a minimal impact on Lam's high capture rate for upgrades, as Lam's core contribution is in the memory stack, and added complexity opens more opportunities for the company.

Brian Chin asked about potential further efficiencies in HBM3E assembly and packaging yields, and how these might impact the margin profile for 2026. He also inquired about the historical proportion of cloud and core enterprise server revenue when Micron last achieved 50%+ blended gross margins (2017-2018 timeframe) compared to its current mid-50% share, highlighting the structural shift due to AI.

Answer

Micron management stated that the biggest benefits in HBM3E 12-high ramp, including yield maturity, have largely occurred over the last couple of quarters, though continued opportunities exist. Sumit Sadana, Chief Business Officer, explained that historically, most market segments peaked around one-third of the total addressable market, but AI has radically changed the landscape, with the data center now exceeding half and continuing to grow. He noted that high-value-add components like HBM, high-capacity DIMMs, and LPDRAM for data centers alone accounted for $10 billion in fiscal 2025 revenue, driving overall industry tightness and profitability.

Brian Chin asked if there are further efficiencies in HBM3E assembly and packaging yields that could improve the margin profile for the next year, given past gains. He also inquired about the historical proportion of cloud and core enterprise server revenue compared to current levels, especially in the 2017-2018 timeframe, to understand the structural shift in the business.

Answer

Manish Bhatia, EVP - Global Operations, confirmed satisfaction with the HBM3E 12-high ramp, noting that the biggest part of yield and production capacity benefits has already occurred over the last couple of quarters. Sumit Sadana, EVP and Chief Business Officer, explained that historically, most segments peaked around a third of the total market. However, generative AI has radically changed the landscape, with the data center now exceeding half of the TAM and growing, representing a higher-value and higher-margin opportunity. He highlighted that HBM, high-capacity DIMMs, and LPDRAM for data centers alone accounted for $10 billion in fiscal 2025 revenue, indicating a significant and continuing shift.

Brian Chin asked about the efficiency gains and improvements in assembly and packaging yields for HBM3E 12-high, and their potential impact on the margin profile for the next year. He also inquired about the structural shift in Micron's business, specifically comparing the proportion of cloud and core enterprise server revenue (now mid-50% of sales) to the 2017-2018 timeframe when gross margins were similarly high.

Answer

Sumit Sadana, EVP and Chief Business Officer, expressed satisfaction with the HBM3E 12-high ramp, noting that yields reached maturity significantly faster than for 8-high, and the biggest part of the benefit has already occurred. Regarding the structural shift, Sumit Sadana explained that historically, most segments peaked around one-third of the total addressable market. However, AI has radically changed the landscape, with the data center segment now exceeding half of the market and continuing to grow at robust profitability levels. He highlighted that HBM, high-capacity DIMMs, and LPDRAM for data centers alone accounted for $10 billion in fiscal 2025, representing high-value-add portions of the portfolio, and this shift is driving industry tightness and profitability across all segments.

Brian Chin asked to quantify the contribution of strong DDR4 pricing to the Q4 gross margin guide and sought clarification on the DDR4 revenue exposure. He also questioned if the favorable product mix shift away from consumer would continue into fiscal Q1, providing a tailwind for margins.

Answer

Executive VP & CFO Mark Murphy stated that while positive, DDR4 pricing is not the primary driver of the Q4 margin expansion. EVP and Chief Business Officer Sumit Sadana clarified that DDR4 alone is a low single-digit percentage of revenue, while DDR4 and LPDDR4 combined are around 10%. Mark Murphy confirmed the favorable mix shift (more DRAM and data center) in Q4 and suggested gross margins could expand further in November due to lean inventories and a focus on pricing.

Brian Chin of Stifel asked to quantify the impact of strong DDR4 pricing on the Q4 gross margin guide and sought clarification on DDR4's revenue exposure. He also questioned if favorable mix shifts would continue to be a tailwind for gross margins into the next quarter (fiscal Q1).

Answer

EVP & CFO Mark Murphy stated that while positive, DDR4 pricing is not the primary driver of margin expansion; favorable mix (more DRAM and data center) is more significant. EVP and Chief Business Officer Sumit Sadana clarified DDR4 alone is a low single-digit percent of revenue. Mark Murphy confirmed they believe gross margins can expand in the November quarter, citing lean inventories and continued favorable mix.

Brian Chin asked for an update on the enterprise SSD market, including the drivers for the expected Q3 improvement. He also inquired if the competitive pricing pressure from Chinese suppliers on legacy DRAM is diminishing as the industry transitions to DDR5.

Answer

Chief Business Officer Sumit Sadana explained that customer inventory of data center SSDs was largely depleted in Q1 2025, and ordering patterns are expected to pick up, projecting record aggregate data center revenue in FQ3. Regarding China, Sadana clarified that recent supply pressure was primarily in DDR4/LP4, a segment where only about 10% of Micron's revenue is exposed, and confirmed DDR5 has not been in volume production from those suppliers.

Brian Chin sought to confirm that the commentary on non-linear demand and timing issues was focused on advanced foundry, not DRAM. He also asked for an estimate of the current installed capacity for Gate-All-Around (GAA).

Answer

CFO Brice Hill confirmed the non-linearity comments were directed at leading logic, not the strong DRAM market. He estimated that close to 100,000 wafer starts per month of GAA capacity will be in the field by the end of the quarter, characterizing it as being in the 'first three innings' of a build-out expected to exceed 300,000.

Brian Chin asked about the pacing of investments in advanced logic nodes like 2nm and 16-angstrom, questioning whether current geoeconomic concerns could cause customers to spread these investments over a longer period.

Answer

CFO Brice Hill responded by focusing on strong underlying demand, noting that the AI component of data center is growing at 40% and leading-edge fabs are at 100% utilization. He suggested that the strength of the new gate-all-around node, combined with these demand signals, points toward a significant and timely technology build-out.

Brian Chin asked about the investment pacing for upcoming advanced logic nodes like 2-nanometer. He questioned whether current geoeconomic concerns could cause customers to spread these significant investments over a longer period than previously anticipated.

Answer

CFO Brice Hill responded by emphasizing the strength of underlying demand, with data center growing 20%, the AI component growing 40%, and leading-edge fabs at 100% utilization. He pointed to the strong technology proposition of gate-all-around with backside power and recent customer announcements as signals that there is significant energy and momentum behind the roadmap, suggesting a robust build-out.

Brian Chin sought to reconcile a previously disclosed $549 million backlog reduction with the newly quantified $400 million revenue impact for the fiscal year from trade restrictions.

Answer

CFO Brice Hill confirmed the analyst's interpretation was correct, explaining that the $549 million figure represented the total backlog impact, which extended beyond one year. The portion impacting the current fiscal year was closer to the newly provided $400 million estimate, indicating no significant change in outlook.

Brian Chin asked if it's reasonable to expect China sales to fall below the 30% normalized level in 2025. He also asked for a comparison between ASML's upbeat view on lithography intensity for DRAM and Applied's messaging on materials-intensive inflections.

Answer

CFO Brice Hill responded that future China revenue levels will depend on the health of the ICAPS market, which constitutes the vast majority of their business there. CEO Gary Dickerson addressed the second question by stating the views are complementary. He stressed that Applied is deeply engaged with customers on future DRAM roadmaps like 4F squared and 3D DRAM, which are significantly more materials-engineering intensive, giving them high confidence that their share of spending will increase with these inflections.

Brian Chin of Stifel Financial Corp. asked for details on the $28 million order, including its quarterly timing and market drivers. He also inquired about the breadth of the business recovery beyond this single order and sought an update on the previously guided $30-40 million revenue contribution from new product wins for the year.

Answer

CFO Jeffrey Jones detailed the order's revenue recognition, with $4 million in Q2 and $12 million each in Q3 and Q4. CEO Luis Müller added that the order is for digital mobile applications and represents a business expansion with a key customer. Müller noted that while a seasonal Q4 slowdown is possible, order improvements were seen across most segments, indicating a broader recovery. He also confirmed Cohu is on track to achieve its new product revenue goals for the year.

Brian Chin inquired about the composition of the Q2 revenue guidance increase, specifically the split between recurring revenue and HBM inspection systems. He also asked if recent orders increased the full-year HBM revenue target and about the potential to add more customers for this application. Finally, he sought to connect the pickup in recurring revenue to potential timing for a recovery in equipment orders.

Answer

CFO Jeffrey Jones clarified that the Q2 revenue increase is split roughly 50/50 between systems and recurring revenue. CEO Luis Müller updated the full-year HBM revenue projection to about $8 million and noted that discussions have begun with a second potential customer. Müller explained that the rise in recurring revenue is a positive sign and should precede an improvement in utilization, which would be a key indicator for a broader capital equipment recovery.