Jared Osteen

Jared Osteen inquired about Netlist's perspective on the current memory supply and demand environment, specifically how much is driven by DDR5 transition versus AI capacity, and the sufficiency of new fabs. He also asked about the demand environment and the sustainability of memory price increases for the remainder of 2026. Additionally, Osteen questioned the next steps for the stayed Micron case in the Western District of Texas following CAFC patent affirmations, the expected litigation expense cadence for 2026, and the revenue growth trajectory for Netlist's Lightning product line in 2026, including visibility into the proof-of-concept to order process.

Answer

CEO Chuck Hong explained that a global memory chip shortage, primarily driven by AI demand for HBM, is leading to significant ASP increases (3x-4x for OEM, 7x-8x for spot market DRAMs in the last six months). He anticipates these price increases will hold through 2026, offsetting lower unit volumes, and expects the shortage to persist until new fab capacity comes online in late 2027. Regarding litigation, Mr. Hong stated that Netlist's outside lawyers would initiate legal motions to unstay the Micron case in the Western District of Texas after the '314 and '608 patents were affirmed. He also noted strong traction and ramping sales for the Lightning product line in the system integrator market, with qualifications nearing completion at a major OEM, expecting continued growth throughout 2026. CFO Gail Sasaki added that litigation expenses for 2026 are expected to remain similar to 2025 levels, despite increased activity, as no major court cases are anticipated in 2026 beyond the ongoing ITC investigation.

Jared Osteen inquired about Netlist's perspective on the current memory supply and demand environment, specifically asking about the drivers (DDR5 transition vs. AI capacity) and the sufficiency of announced new fabs to meet future demand. He also asked about the demand environment and pricing trends for the remainder of the year, the next steps to unstay the Micron case in the Western District of Texas, litigation expense expectations for 2026, and the expected revenue growth for the Lightning product line in 2026, including the duration from proof-of-concept to material order.

Answer

CEO Chuck Hong explained that a global memory chip shortage, particularly for DRAM, is driven by AI demand, with HBM commitments diverting components. He noted that current capacity is insufficient, and the shortage is expected to persist until new fab capacity comes online in late 2027. He added that OEM DRAM pricing increased 3-4x and spot market pricing 7-8x in the last six months, expecting these increases to hold through the year, leading to higher revenues for companies securing DRAM supply. Regarding the Micron case, Mr. Hong confirmed it is now open to being unstayed due to appellate court affirmation of patents, and legal motions would be initiated. CFO Gail Sasaki stated that litigation expenses for 2026 are expected to be about the same as 2025. Mr. Hong also mentioned that Netlist is nearing the end of a 6-9 month qualification process with a major OEM for Lightning products and is already shipping in good volume to the system integrator market, anticipating continued growth.

Jared Osteen, on behalf of Rohit Kulkarni, asked about the substantial growth in the Business Plus offering, seeking to understand the evolution of how new customers are using the platform and the behavior of more mature client cohorts.

Answer

President and CEO Hayden Brown explained that Business Plus is successfully meeting a market need for larger SMBs, noting these clients convert faster and spend more. She highlighted that 35% of Business Plus clients in Q2 were new to Upwork, demonstrating its broad appeal. CFO Erica Gessert added that overall active client retention remains strong, with retained client spend growing 2% year-over-year, underscoring platform health.

Jared Osteen, on for Rohit Kulkarni, asked about the integration progress of the BlocksCAD and Second Avenue acquisitions, future M&A plans, customer feedback on the new 'Imagine' product for elementary schools, and high-growth sectors within the CTE market.

Answer

CEO Paul Kellenberger reported that BlocksCAD is fully integrated, while the Second Avenue integration is progressing well, with its team developing a new Career Explorer product for a back-to-school launch. He noted that initial feedback for the 'Imagine' product is very positive and that the company continues to evaluate future M&A. For CTE, he highlighted strong adoption in advanced manufacturing, AI, and robotics, where funding continues to flow freely.