Jim Schneider

Jim Schneider asked about Micron's capacity allocation strategy, specifically seeking a minimum floor level of production for mission-critical legacy applications like automotive and industrial, and a maximum comfortable level of data center exposure. He also sought clarification on the timeline for volume production capability from the Hiroshima clean room expansion.

Answer

Sumit Sadana (Chief Business Officer) explained that the overall market TAM is shifting towards data centers, influencing Micron's portfolio mix towards higher ROI products and driving increased share of industry profit. He affirmed investments in the Manassas fab to support long-lifecycle legacy products and acknowledged the difficulty in meeting all demand across segments, requiring careful assessment of customer needs. Manish Bhatia (EVP of Global Operations) stated that the Hiroshima clean room expansion would support future generations of DRAM technology, timed to new nodes, confirming it would not reach volume production in 2026.

Jim Schneider asked about Micron's capacity allocation for legacy and embedded applications like automotive, seeking insight into a minimum floor level of production for these mission-critical markets, and conversely, the maximum comfortable level of data center exposure. He also inquired about the timeline for volume production capability from the Hiroshima clean room expansion.

Answer

Sumit Sadana (Chief Business Officer) explained that the overall TAM is shifting towards data centers, and Micron's portfolio mix is moving towards higher ROI products, which is a tailwind for financial performance. He affirmed continued support for legacy products through investments in the Manassas, Virginia fab (modernizing with 1-alpha technology). He acknowledged the difficulty in meeting all demand across segments due to structural supply challenges, emphasizing assessing threshold supply levels and maintaining customer commitments. Manish Bhatia (EVP of Global Operations) clarified that the Hiroshima clean room expansion will support future generations of technology, timed for new nodes, and will not contribute to volume production in 2026.

Jim Schneider inquired whether Micron expects its HBM4 market share to be sustainably higher than its HBM3 share, given its performance benefits. He also asked for a breakdown of fiscal 2025 CAPEX between WFE and facility spend, and if that mix is expected to change significantly in the next year.

Answer

Sumit Sadana, EVP and Chief Business Officer, expressed confidence in Micron's HBM4 capabilities, citing industry-leading HBM3E performance and a stronger starting position for HBM4 volume support. He believes Micron's HBM4 has the highest performance among competitors and expects strong customer preference, anticipating HBM share shifts primarily between competitors. Mark Murphy, EVP & CFO, declined to provide a specific WFE versus facility CAPEX breakout, reiterating that the vast majority of spend is for DRAM construction and equipment. Manish Bhatia, EVP - Global Operations, added that Idaho fab production is expected in the second half of 2027, with investments also in technology transitions and optimizing production in Japan and Taiwan.

Jim Schneider asked if Micron expects its HBM4 market share to be sustainably higher than its HBM3 share, given the performance benefits. He also requested a breakdown of fiscal 2025 CAPEX between Wafer Fab Equipment (WFE) and facility spend, and any expected changes in this mix for the next fiscal year.

Answer

Sumit Sadana, EVP and Chief Business Officer, expressed confidence in Micron's HBM4 capabilities, citing industry-leading HBM3E performance and improved operational readiness for HBM4. He believes Micron's HBM4 offers the highest performance and expects strong customer preference, with any market share shifts likely occurring between competitors. Mark Murphy, CFO, declined to provide a specific CAPEX breakout but reiterated that the vast majority of spend is for DRAM construction and equipment. Manish Bhatia, EVP of Global Operations, added that Idaho fab production starts in H2 2027, with investments also focused on technology transitions and optimizing production in Japan and Taiwan.

Jim Schneider inquired if Micron expects its HBM4 market share to be sustainably higher than its HBM3 share, citing performance benefits. He also asked for a breakdown of fiscal 2025 CapEx between WFE and facility spend, and if this mix is expected to change significantly in fiscal 2026.

Answer

Sumit Sadana, Chief Business Officer, expressed confidence in Micron's HBM4 capabilities, noting its strong competitive positioning due to improved capacity and yields compared to the HBM3E ramp. He highlighted Micron's HBM4 as having the highest performance among competitors and anticipated customer preference. Mark Murphy, CFO, declined to provide a WFE versus facility CapEx breakout but reiterated that the vast majority of spend is for DRAM construction and equipment. Manish Bhatia, EVP of Global Operations, added that investments are also for technology transitions and optimizing production in Japan and Taiwan.

Jim Schneider asked for more precise calibration of Broadcom's AI revenue expectations for fiscal year 2026, specifically if the Q1 100% growth rate is indicative of the full year, and sought clarification on whether the $1 billion order for the fifth customer is OpenAI.

Answer

Hock Tan (President and CEO, Broadcom) stated that the AI backlog is dynamic and growing, with the $73 billion backlog for the next 18 months expected to increase. He indicated that the Q1 growth rate is strong and the trend is likely accelerating through 2026, but declined to give precise full-year guidance. He did not confirm the identity of the fifth customer but clarified that the OpenAI 10 GW announcement is an agreement for 2027-2029, separate from the XPU program with them, which is progressing rapidly.

Jim Schneider asked for a more precise calibration of Broadcom's AI revenue expectations for fiscal year 2026, specifically if the Q1 100% growth rate is indicative of the full year, and sought clarification on whether the $1 billion order for the fifth customer is related to OpenAI.

Answer

Hock Tan (President and CEO) stated that the AI backlog is dynamic and growing, making it difficult to give precise full-year 2026 guidance, but indicated an accelerating trend. He declined to confirm the identity of the fifth customer but acknowledged it's a real customer on a multi-year XPU journey.

Jim Schneider asked about the broader universe of potential custom chip prospects beyond the seven already identified, seeking insight into whether Broadcom sees additional opportunities for custom AI accelerators.

Answer

Hock Tan, President and CEO, explained that Broadcom focuses on the narrow LLM market, serving a few players driving frontier models, rather than the broader enterprise market. He confirmed the seven identified players (four customers, three prospects) are currently the extent of their focus, with careful qualification for any potential additional prospects.

Jim Schneider asked about the expected percentage of NVIDIA's shipments tied to AI inference in the next year and details on the upcoming Rubin CPX product, including its target market and TAM.

Answer

Jensen Huang, President and CEO, NVIDIA, explained that Rubin CPX is designed for long-context workloads, offering excellent performance per dollar and per watt. He noted that all three scaling laws (pre-training, post-training, inference) are scaling exponentially, making precise inference percentages hard to predict, but highlighted Grace Blackwell's significant inference leadership.

Jim Schneider asked about the expected percentage of NVIDIA's shipments tied to AI Inference in the coming year (previously ~40%) and sought context on the Rubin CPX product, its total addressable market (TAM), and target applications.

Answer

Jensen Huang, President and CEO, NVIDIA, explained that the Rubin CPX is designed for long-context workloads, offering excellent performance per dollar and per watt. Regarding Inference, he stated that while the exact percentage is hard to predict, he hopes it becomes a very large part of the market, highlighting Grace Blackwell's 10-15x higher Inference performance over H200, securing multi-year leadership.

Jim Schneider of Goldman Sachs asked for context on the upcoming Rubin product transition. He inquired about the incremental capabilities it will offer and whether the performance step-up will be larger, smaller, or similar to the leap seen with Blackwell.

Answer

Founder, President, CEO & Director Jensen Huang explained that NVIDIA's annual product cadence is designed to maximize customer revenue and reduce costs by consistently improving performance-per-watt. He noted Blackwell offered an order-of-magnitude leap for reasoning AI. While he deferred specific details on Rubin's capabilities to a future GTC event, he confirmed it contains 'a lot of great ideas' and that the company will continue its annual rhythm to drive customer success. He expects next year to be another record-breaking year.

Jim Schneider inquired about Sandisk's structural supply situation over the next couple of years, specifically whether expected supply would come from upgrades or new wafer capacity, and what factors would trigger a decision to add new wafer capacity. He also asked for an update on enterprise SSD qualifications and the company's market share ambitions for late 2026 or 2027.

Answer

Chairman and CEO David Goeckeler stated that Sandisk anticipates an undersupplied market extending beyond 2026, driven by long-term demand trends and capital investment. He clarified that the company is not currently discussing additional wafer capacity, focusing instead on increasing productivity through its strong Technology Roadmap and BiCS8 transition. Goeckeler expressed satisfaction with the Stargate program's qualifications and the broadening adoption of compute-focused enterprise SSDs, expecting sequential sales growth throughout FY 2026 and aiming for a fair share in the rapidly growing data center market.

Jim Schneider inquired about SanDisk's structural view on the supply situation over the next couple of years, specifically whether growth would come from upgrades or new wafer capacity, and what factors would trigger a decision to add wafer capacity. He also asked for an update on enterprise SSD qualifications, market share ambitions for 2026/2027, and the expected business size.

Answer

Chairman and CEO David Goeckeler reiterated the expectation of an undersupplied market extending beyond 2026, driven by long-term demand trends and limited capital investment. He stated that SanDisk is not currently considering adding wafer capacity, focusing instead on increasing productivity and bit supply through its strong technology roadmap, like the BICS8 transition. He expressed satisfaction with the enterprise SSD business, highlighting ongoing qualifications for Stargate products and broadening customer deployments, expecting increasing sequential sales throughout fiscal year 2026.

Jim Schneider asked about the material step-up in related party revenue, recent announcements regarding Stargate and SoftBank, and the evolving nature of their relationship and design activities.

Answer

CEO Rene Haas described Stargate as a significant opportunity for Arm to partner with SoftBank and its affiliates, providing technology for various aspects of data center buildouts, including compute, networking, power distribution, and assembly. He highlighted the collaborative efforts within the SoftBank family of companies on these designs.

Jim Schneider questioned the material step-up in related party revenue, seeking clarification on the nature of Arm's relationship and design activities with SoftBank, especially concerning recent Stargate announcements.

Answer

Rene Haas, Arm's Chief Executive Officer, described Stargate as a significant opportunity for Arm to partner with SoftBank and its affiliates, providing technology for various aspects of data center buildouts, including compute, networking, power distribution, and assembly. He emphasized the collaborative nature of the SoftBank family of companies on these designs.

Jim Schneider inquired about the dynamics in Skyworks' broad markets business, including the ongoing recovery, and sought clarification on the long-term structural growth rate, asking if a mid-teens or double-digit growth rate was achievable. He also asked about the expected OpEx growth rate.

Answer

Phil Brace, CEO and President of Skyworks, projected the broad markets business as a long-term 'double-digit grower,' driven by Wi-Fi 7 and 8 adoption, automotive connectivity and entertainment, and infrastructure/cloud opportunities in timing and power. He emphasized the company's focus on high-growth segments with longer revenue cycles. Regarding OpEx, Philip Carter, SVP and CFO, noted that the prior quarter's OpEx included an extra week ($7 million) and stated that while targeted investments would continue, they do not anticipate anything above normal inflation, maintaining spending discipline.

Jim Schneider asked about the dynamics in the broad markets business, specifically the long-term structural growth rate, and whether a mid-teens or double-digit growth rate is achievable. He also inquired about the expected OpEx growth rate, asking if the December run rate can be maintained into the first half of the next calendar year or if step-ups are anticipated.

Answer

Phil Brace, CEO and President, projected a long-term double-digit growth rate for the broad markets business, driven by Wi-Fi 7 and 8 adoption, automotive connectivity, and infrastructure/cloud opportunities in timing and power. Philip Carter, Senior Vice President and Chief Financial Officer, noted that the fourth quarter included an extra week, adding $7 million to OpEx. For the upcoming quarter, he anticipates targeted investments but no significant increases beyond normal inflation, maintaining spending discipline.

Jim Schneider (Goldman Sachs Group) asked about potential OpEx cost savings SBA contemplates to offset future interest expense headwinds. He also sought an update on the organic growth outlook for the Millicom acquisition, comparing current expectations to the initial underwriting at the time of diligence.

Answer

Brendan Cavanagh, President and CEO of SBA, acknowledged interest expense as a headwind due to refinancing low-cost debt. He stated SBA continuously seeks OpEx efficiencies, maintaining high margins through technology and minimal overhead additions for growth, citing the Millicom deal as an example. For Millicom, Mr. Cavanagh noted it's very early, but initial interest from other carriers suggests the acquisition might exceed initial growth models, with a clearer picture expected in a year.

Jim Schneider asked why customers are not restocking, specifically what OEMs would need to see to gain confidence for replenishment, and if this applies broadly to the distributor side. He also requested more visibility into the 'other' segment, noting strong data center performance but inquiring about any offsetting headwinds seen in the current quarter and going forward.

Answer

Hassane El-Khoury, President, CEO, and Director, ON Semiconductor, explained that distributors are seeing increased internal die bank inventory for the mass market. For OEMs, he stated that credible demand signals (consumer confidence) and geopolitical stabilization are necessary for restocking. Thad Trent, CFO, ON Semiconductor, projected the 'other' segment to be up mid to high single digits in Q4, driven by normal seasonality in non-core markets and AI data center growth. Mr. El-Khoury added that non-core business exits within the 'other' segment offset some growth, indicating very strong growth in strategic markets like AI data center.

Jim Schneider asked what OEMs and distributors would need to see to gain confidence and begin restocking inventory. He also sought more visibility on the 'other' segment, including headwinds offsetting data center growth and the forward outlook.

Answer

Hassane El-Khoury, President and CEO, stated that distributors are seeing die bank builds for the mass market. For OEMs, he indicated that a credible demand signal (consumer confidence) and geopolitical stabilization are necessary for restocking. Thad Trent, CFO, noted that the 'other' segment is expected to be up mid to high single digits in Q4, driven by normal seasonality in non-core markets and AI data center growth, with non-core exits offsetting some of this growth.

Jim Schneider sought more specific guidance for the industrial and 'Other' end markets in Q3, following the commentary on automotive growth. He also asked for the primary reasons behind the auto market weakness in the U.S. and Europe.

Answer

President and CEO Hassane El-Khoury clarified that all end markets—auto, industrial, and other—are expected to grow in Q3. CFO Thad Trent provided specifics, guiding for low-single-digit growth in auto and industrial, and mid-to-high single-digit growth in the 'Other' category, driven by AI. El-Khoury attributed the auto weakness in the West to a combination of factors including inventory, tariff uncertainty, and soft end-market demand.

Jim Schneider asked about CEO Dave Reeder's initial strategic priorities, specifically focusing on commercial and operational differences or improvements he plans to implement.

Answer

CEO Dave Reeder outlined commercial plans to expand the customer engagement model to ecosystem partners and mainstream logic, building on existing innovation. Operationally, he prioritized accelerating qualification and ramp-up of new facilities in Rock Rimmon and KSP South, with Rock Rimmon entering production this quarter and KSP South ramping volume in 2026. Regarding pricing, he emphasized value but declined to discuss specific pricing strategies.

Jim Schneider from Goldman Sachs asked for quantification of the gross margin headwinds from inventory management and operational inefficiencies, and when these pressures might ease. He also inquired about which underperforming end markets, like NAND or trailing-edge logic, are expected to recover first.

Answer

CFO Linda LaGorga attributed the margin pressure to the uncertain trade environment, decisions to manage inventory levels for better free cash flow, and inefficiencies from ramping new facilities in Taiwan and Colorado. She stated the long-term path to higher margins remains intact. CEO Bertrand Loy projected that mainstream logic would likely see the first signs of recovery, followed by NAND and traditional DRAM, likely next year.

Jim Schneider asked about Equinix's confidence in power availability and scheduling for its 12 xScale projects, the planning timeframe for these, and any changes in the anticipated use of power sources (grid vs. alternative).

Answer

Adaire Fox-Martin, President and CEO of Equinix, emphasized Equinix's 27-year history and strong relationships with utilities, which help navigate power constraints. She noted a shift in customer-supplier dynamics, often requiring CapEx investment to secure load ramps. Equinix's strong balance sheet enables it to meet these requirements. For recent land acquisitions, power is either fully committed or in advanced discussion stages, as Equinix avoids speculative land purchases. All 12 current xScale projects have secured power, indicating no constraint on their development.

Jim Schneider asked about Equinix's confidence in power availability and scheduling for its 12 xScale projects, the planning timeframe, and any changes in the anticipated use of power sources (grid vs. alternative).

Answer

Adaire Fox-Martin, President and CEO of Equinix, acknowledged the complexity of power but highlighted Equinix's 27-year history, strong utility relationships, and optimized energy use. She noted a shift where land acquisitions often involve contracts to secure load ramps, requiring CapEx investment, which Equinix can meet with its strong balance sheet. She confirmed that power for recent land acquisitions is either fully committed or in advanced discussions, and all 12 current xScale projects have secured power, indicating power is not a constraint for these developments.

Jim Schneider followed up on the diversification in KLA's leading-edge logic and foundry customer base, asking if this is primarily at the inquiry level or if it's already reflected in order books or informal forecasts. He also asked for a refresh on expectations for service growth in 2025 and whether it could accelerate in 2026.

Answer

CFO Bren Higgins confirmed that the diversification is reflected in order forecasts and informs KLA's views for next year, with collaborative discussions ongoing to help customers navigate and ramp capacity. Regarding service growth, Bren Higgins stated that it has been stronger than expected, benefiting from FX and increased utilization rates. He expects service growth to be in the target range of 12%-14% for both 2025 and 2026, driven by install base growth, increased tool lifetime, system complexity, acquired businesses, and new requirements from packaging and HBM.

Jim Schneider followed up on the diversification in KLA's leading-edge logic and foundry customer base, asking if this is primarily at the inquiry level or already reflected in order books or informal forecasts. He also asked for a refresh on expectations for mid-teens service growth in 2025 and whether it could accelerate next year.

Answer

CFO Bren Higgins confirmed that the diversification is being seen in order forecasts and informs KLA's views for next year, with collaborative discussions on ramping capacity. He stated that service growth for 2025 is expected to be in the target range of 12-14%, slightly stronger than anticipated, and expects it to remain in the same range for 2026, driven by install base growth, increased tool lifetime, system complexity, acquired businesses, and new opportunities in packaging and HBM.

Jim Schneider asked about the new business pipeline for smaller deals, inquiring if there's a significant uptick, and whether there are any pull-ins or extensions in the commencement dates for large deal new bookings.

Answer

CEO Ravi Singisetti explained that large deals are balanced between consolidation/productivity-led and AI innovation-led. He noted growth in digital engineering (8%), infrastructure-led AI (10%), and BPO (10%). He also observed discretionary small projects returning in financial services and healthcare, driven by AI-led spend, and a healthy pipeline for both large and small deals.

Jim Schneider asked about the new business pipeline for smaller deals, inquiring if there's a significant uptick, and whether there are any pull-ins or extensions in the commencement dates for large deal new bookings.

Answer

CEO Ravi Singisetti explained that large deals are balanced between consolidation/productivity-led and AI innovation-led. He noted growth in digital engineering (8%), infrastructure-led AI (10%), and BPO (10%). He also observed discretionary small projects returning in financial services and healthcare, driven by AI-led spend, and a healthy pipeline for both large and small deals.

Jim Schneider asked about expectations for Mobile SOC heading into next year, including directional improvement and the expected test time or content increase when moving to the N2 generation. He also inquired about the OPEX leverage expected in the model for 2026, specifically asking for the expected OPEX increase for every dollar or 10% of revenue increase.

Answer

CEO Greg Smith expressed optimism for Mobile SOC to be bigger in 2026 but noted uncertainty regarding magnitude, citing N2 complexity (double-digit test intensity increase), yield (not a tailwind), and unit volume (a big X factor for handset sales inflection). CFO Sanjay Mehta stated that the operating principle for 2026 is roughly 50% OPEX growth for every dollar of revenue growth, targeting this leverage.

Jim Schneider asked about expectations for Mobile SoC heading into 2026, specifically regarding directional improvement and the anticipated test time or content increase for the N2 generation. He also inquired about the expected OPEX leverage in the model for 2026, asking for the ratio of OPEX growth to revenue growth.

Answer

CEO Greg Smith stated that Mobile SoC has been at a low level, and the magnitude of 2026 improvement is uncertain. He identified three factors: complexity (N2 and WMCM driving double-digit test intensity increases), yield (not expected to be a tailwind), and unit volume (the biggest 'X factor'). CFO Sanjay Mehta clarified that the operating principle for OPEX leverage is roughly 50% OPEX growth for every dollar of revenue growth, a target they expect to meet in 2026.

Jim Schneider asked about Seagate's cost reduction expectations for calendar 2026, specifically if a mid-teens cost down is achievable with aggressive HAMR ramp, and the unit capacity implications of HAMR transitions.

Answer

Seagate's Chair and CEO, Dave Mosley, clarified that the focus is on pivoting from PMR to HAMR to add exabyte capacity, not unit capacity. CFO Gianluca Romano highlighted that the transition to higher capacity HAMR drives, especially 40TB, will boost cost per terabyte reduction in calendar 2026.

Jim Schneider asked about Seagate's expected cost reduction on a blended basis for calendar 2026, specifically if mid-teens reduction is achievable or if factors might alter this, and clarified the impact of dual-tracking HAMR versus conventional technologies on unit capacity.

Answer

Dave Mosley, Chair and CEO, clarified that Seagate's strategy involves pivoting existing PMR technology to HAMR to add exabyte capacity, rather than building more PMR units. Gianluca Romano, CFO, stated that significant cost per terabyte improvements in calendar 2026 will be driven by the transition to higher-capacity HAMR drives, particularly the 40-terabyte platform.

Jim Schneider asked for details on the scope and impact of American Tower's cost optimization program, including its flow through the model and considerations for sizing the opportunity, and why CoreSite's guidance remained consistent despite peers raising theirs.

Answer

EVP, CFO, and Treasurer Rod Smith highlighted that cost efficiencies are a strategic priority, contributing to a 300 basis point EBITDA margin expansion since 2020, and expects future opportunities to be incremental improvements. President and CEO Steve Vondran affirmed sustained double-digit growth for CoreSite, noting strong demand for hybrid cloud and AI-related workloads, and that current guidance was already accurate and well above initial underwriting assumptions. Rod Smith added that CoreSite has 296 MW of power available for future development and 42 MW under construction.

Jim Schneider inquired about the magnitude and implementation timeline of the cost optimization program, and why CoreSite's guidance remained consistent despite peers raising theirs and strong demand.

Answer

EVP, CFO, and Treasurer Rod Smith highlighted that cost efficiencies are a strategic priority, contributing to 300 basis points of EBITDA margin expansion since 2020. He noted future opportunities are incremental, driven by the new COO role focused on simplifying operations and bending the cost curve. President and CEO Steve Vondran stated CoreSite's consistent guidance reflects accurate prior expectations, sustained double-digit growth, and strong demand for hybrid cloud and AI workloads, with no underlying issues.

Jim Schneider asked about the expected tailwinds from integrating AI features into core EDA products over the next few years, seeking productivity metrics and how these translate into revenue or adoption rates.

Answer

President and CEO Anirudh Devgan highlighted Cadence's 'AI for design' strategy, citing SimAI's 5x-10x improvement in logic simulation efficiency and Cerebrus AI Studio's 4x productivity improvement and 22% PPA enhancement. He emphasized that AI is the next 10x automation for chip design, crucial for exponential workload growth, and adoption is strong, with monetization expected over two contract cycles.

Jim Schneider asked about the expected tailwinds from integrating AI features into core EDA products over the next few years, seeking specific productivity metrics and how these translate into revenue or adoption rates.

Answer

President and CEO Anirudh Devgan detailed Cadence's 'AI for design' strategy, citing examples like SimAI delivering 5-10x improvement in logic simulation efficiency and Cerebras AI Studio achieving 4x productivity and 22% PPA improvement. He noted that AI tool adoption is becoming standard, and while monetization takes time (typically two contract cycles), AI is crucial for the next 10x automation needed to manage exponential chip design complexity.

Jim Schneider, Senior Equity Analyst at Goldman Sachs, asked for elaboration on IBM's M&A strategy, specifically regarding target perspective, whether the company is thinking differently about portfolio or product pieces, or the potential size of transactions. He also inquired if IBM would consider undertaking a larger, more transformative transaction, not necessarily Red Hat scale, but of similar relative scale to its overall portfolio.

Answer

Arvind Krishna, IBM's Chairman, President, and Chief Executive Officer, reiterated that M&A is a crucial part of IBM's strategy, viewed over a multi-year window with significant financial flexibility (mid-20s billion over three years). He stated that IBM remains focused on hybrid cloud and AI, translating to hybrid, automation, and data & AI portfolios, citing examples like BLLM, HashiCorp, and DataStax acquisitions. Krishna outlined three key criteria for any substantial acquisition: strategic fit, synergy (higher growth rate within IBM due to geographic spread, bundling, faster deployment), and accretion to cash by the end of the second year. He confirmed that IBM would not rule out larger transactions if they meet all these criteria, emphasizing that size alone is not the driver, but rather the ability to enter new spaces, accelerate overall growth, and provide attractive free cash flow, as seen with Red Hat.

Jim Schneider asked about IBM's M&A strategy, specifically regarding target perspective, portfolio fit, product focus, and potential transaction size. He inquired if IBM would consider a larger, more transformative acquisition, perhaps of a similar scale to Red Hat, rather than solely focusing on smaller deals.

Answer

Arvind Krishna, IBM's Chairman, President, and Chief Executive Officer, emphasized M&A as a critical strategy, viewed over a multi-year window with mid-20s flexibility in excess cash flow over three years. He stated that IBM remains focused on hybrid cloud and AI, translating to Hybrid, Automation, and Data and AI portfolios, citing examples like B-LLM, HashiCorp, and DataStax. Mr. Krishna outlined three criteria for any acquisition of size: strategic fit, synergy (higher growth rate within IBM), and accretion to cash by the end of the second year. He noted that while IBM never rules anything out, any larger transaction must meet these stringent criteria, similar to how Red Hat allowed entry into a new space, accelerated IBM's growth, and offered an attractive free cash flow profile.

Jim Schneider asked about the potential for software growth to improve beyond current levels into 2026 and also inquired about trends in the consulting business, specifically booking duration and contract commencement times.

Answer

Chairman, President & CEO Arvind Krishna expressed confidence in 2026 software growth, expecting sustained momentum in Red Hat, Automation, and AI, with Transaction Processing returning to its model. SVP & CFO James Kavanaugh added that in Consulting, there are 'green shoots,' with backlog up 8% at spot rates and booking duration down six months, improving revenue realization. He noted that while overall signings were down on tough comps, net new business was up 13%.

Jim Schneider asked for Lam Research's current view on the NAND market, including any signs of accelerating orders or long-term forecasts from customers, and when these might impact financial results. He also questioned whether 2026 NAND growth would be primarily driven by upgrades or new tool installations.

Answer

President and CEO Tim Archer reiterated that the demand signal for NAND upgrades has accelerated due to higher bit demand. He expects Lam Research's NAND business to remain predominantly upgrade-focused through 2026, as upgrades offer the lowest cost and fastest way to achieve higher performance. While capacity additions might eventually be needed if demand remains high, upgrades to the existing installed base, combined with some new tools for higher layer counts, will be the primary drivers.

Jim Schneider inquired about observations in the NAND market, specifically if Lam Research is seeing an acceleration in NAND orders or initial signals from customers regarding longer-term forecasts, and when this might impact the numbers. He also asked whether 2026 NAND growth is expected to be led by upgrades or new tools.

Answer

Tim Archer, President and CEO, reiterated that demand signals suggest an acceleration in NAND upgrade spending due to higher bit demand. He expects Lam's business to remain predominantly upgrade-focused through 2026, as it's the lowest cost and easiest way to achieve higher performance growth. While some capacity additions may occur, upgrades are likely to lead.

Jim Schneider asked for clarification on the magnitude and timing of Accenture's projected headcount growth across all regions for the fiscal year, given ongoing business optimization actions. He also inquired about the net impact of internal AI adoption on utilization and gross margins, particularly given the 93% utilization rate.

Answer

CFO Angie Park stated that headcount is expected to grow across all markets based on demand, but no specific numbers were provided. CEO Julie Sweet clarified that the 93% utilization rate reflects demand momentum, not a structural change from AI, and is expected to fluctuate in the low 90s. She added that internal AI adoption drives efficiencies, which are already reflected in bookings and guidance, as Accenture leads by example for its clients.

Jim Schneider (Goldman Sachs) asked for clarification on the magnitude and timing of Accenture's expected headcount growth across all regions during the fiscal year, especially in the context of business optimization actions. He also inquired about the net impact of internal AI use on business optimization, workforce utilization (currently 93%), and potential effects on gross margins.

Answer

Chief Financial Officer Angie Park stated that Accenture expects headcount to grow across all markets based on demand, but did not provide a specific number or timing. Chair & CEO Julie Sweet clarified that the current 93% utilization reflects demand momentum and is expected to fluctuate in the low 90s, not indicating a structural change due to AI. She explained that internal AI adoption, particularly in platforms like GenLizard, drives efficiencies reflected in bookings and guidance, enabling Accenture to lead by example for clients.

Jim Schneider from Goldman Sachs Group, Inc. asked for clarification on the magnitude and timing of Accenture's expected headcount growth across all regions in the fiscal year, given ongoing business optimization actions. He also inquired about the net impact of internal AI use on business optimization, utilization, and gross margins.

Answer

CFO Angie Park stated that Accenture expects headcount to grow across all markets based on demand, but did not provide a specific number or timing. CEO Julie Sweet clarified that current utilization, which is in the low 90s, reflects demand momentum and is not structurally changed by AI. She explained that internal AI use, particularly in platforms like GenWizard, drives efficiencies reflected in bookings and guidance, enabling Accenture to lead by example for clients.

Jim Schneider of Goldman Sachs asked for an update on the bookings pipeline visibility, given the commentary about clients shifting from a 'pause' to a more proactive stance. He also asked about the drivers of recent gross margin pressure.

Answer

CEO Julie Sweet confirmed a strong overall pipeline heading into Q4, reflecting themes of cost optimization and digital core transformation, which supports the company's raised guidance. CFO Angie Park explained that while subcontractors were a factor in gross margin, they were not a material driver this quarter, and emphasized the company's focus on operating margin, which expanded 40 basis points.

Jim Schneider asked for an update on the bookings pipeline visibility given management's commentary on clients becoming more proactive, and also questioned the cause of recent gross margin pressure, particularly regarding subcontractors.

Answer

CEO Julie Sweet confirmed a strong overall pipeline going into Q4, consistent with the themes of cost optimization and digital core transformation, which supports the raised guidance. CFO Angie Park acknowledged that subcontractors can be a driver of gross margin changes but were not a material factor this quarter. She redirected focus to the strong operating margin expansion of 40 basis points, which is the primary metric the company manages to.

Jim Schneider of Goldman Sachs inquired about Marvell's capital allocation strategy, specifically the intended use of the $2.5 billion in proceeds from the automotive Ethernet divestiture and whether the company is open to selling other non-core business units.

Answer

Chairman & CEO Matt Murphy explained their strategy-first approach, which prioritizes investment in the data center and AI. CFO Willem Meintjes added that the proceeds provide flexibility for both opportunistic share buybacks and strategic tuck-in acquisitions to accelerate their AI roadmap. The company will continue its consistent free cash flow execution to drive buybacks.

Jim Schneider requested more detail on the automotive market, asking about the previously mentioned order pull-ins, their regional source, and the drivers behind the expected sequential decline in Q4.

Answer

EVP & CFO Richard Puccio confirmed that order acceleration occurred in Q2 (North America/Europe) and Q3 (China), likely driven by tariff concerns and expiring EV credits. He stated this pull-in is expected to unwind in Q4, causing the projected decline, but reiterated confidence in long-term growth from content and share gains.

Jim Schneider from Goldman Sachs asked about the expected impact of CPI and FX resets on organic growth heading into 2026 and potential positive offsets. He also questioned the rationale for further asset sales given the company is already approaching its leverage target.

Answer

EVP & CFO Steve Howden noted that while it's early for 2026 guidance, he expects continued leasing strength in Nigeria and Brazil to offset moderating CPI/FX resets. Chairman & CEO Sam Darwish and CFO Steve Howden both explained that further asset sales are being considered if they are value-accretive and align with the strategy to return capital to shareholders as leverage targets are met.

Jim Schneider from Goldman Sachs questioned the state of customer inventory levels in IoT and smartphones and their expected normalization timeline. He also asked about the strategic importance of the MIPS acquisition, including customer feedback and potential new revenue models.

Answer

CEO Tim Breen stated that the multi-year inventory digestion is nearing its end, though some modest upticks occurred in Q2. Regarding MIPS, he described it as a strategic fit that adds cutting-edge processor IP for the physical AI space and deepens customer engagement. CFO John Hollister added that MIPS is expected to contribute $50-100 million in high-margin annual revenue initially, with potential for hundreds of millions over time.

Jim Schneider questioned whether increased fiber investment from competitors alters Charter's multi-year CapEx outlook and asked about the potential for increased rural construction investments.

Answer

President & CEO Chris Winfrey stated that Charter's existing network evolution plan, which includes 'fiber on demand' capabilities, already addresses future competition, so there is no change to the CapEx outlook. He noted that while Charter will participate in future subsidy programs, the opportunity for new rural builds is smaller now due to significant construction already completed.

Jim Schneider from Goldman Sachs asked if Digital Realty has sufficient available inventory in its existing facilities for 2026 to accommodate the sustained momentum in zero-to-one megawatt bookings, which could potentially drive upside to 2026 financials.

Answer

CEO Andy Power confirmed that the company plans for continued growth and actively manages its inventory runway. He noted that while some core markets are supply-constrained, DLR's presence in over 50 metros and its strategy of repurposing larger expiring leases into colocation inventory provide the capacity needed to support customer growth.

Jim Schneider asked which end markets may have performed stronger than expected in Q2 and could be at risk of reverting in the second half of the year. He followed up by asking how the expected cash tax benefits might influence future capital return policies like buybacks or dividends.

Answer

CEO Haviv Ilan identified the industrial market as having run 'hotter' than expected in Q2, prompting caution for Q3. CFO Rafael Lizardi explained that while tax law changes will positively impact free cash flow, capital return decisions will continue to be balanced against factors like the ongoing high CapEx cycle, cash levels, and stock price, with the objective to return all free cash flow over time.

Jim Schneider from Goldman Sachs inquired about client priorities in the AI services market and whether the increased costs for growth ramps will eventually provide operating leverage.

Answer

CEO Bryce Maddock described a market shift in AI services toward more complex work, such as using subject matter experts to validate LLM outputs, with demand growing from both large players and new entrants. Regarding costs, he explained that the abrupt shift from cost-cutting to rapid expansion has led to inefficiencies, such as expedited facility build-outs and hiring incentives. These upfront investments and concessions made to win business are the primary cause of the temporary margin pressure.