Joe Quatrochi

Joe Quatrochi inquired about Arm's intention to acquire Dream Big Semiconductor, its strategic rationale, and how it integrates with Arm's plans to expand beyond its current platform offerings.

Answer

CEO Rene Haas explained that Dream Big Semiconductor possesses valuable intellectual property, particularly in Ethernet and RDMA controllers, which are crucial for high-speed communications in data centers. He stated that this acquisition would broaden Arm's offering to end customers and enhance its capabilities in scale-up and scale-out networking.

Joe Quatrochi asked for details regarding Arm's intention to acquire DreamBig Semiconductor, its strategic rationale, and how it aligns with Arm's broader plans to expand beyond its current platform into areas like chiplets or complex SOCs.

Answer

Rene Haas, Arm's Chief Executive Officer, explained that DreamBig Semiconductor possesses valuable intellectual property, particularly in Ethernet and RDMA controllers, which are critical for high-speed networking in data centers. He stated that this acquisition would help Arm broaden its offerings to customers and enhance its capabilities in high-speed communications.

Joe Quatrochi of Wells Fargo asked for context on the projection for Neoverse to reach nearly 50% market share in top hyperscalers, requesting last year's share for comparison.

Answer

CEO Rene Haas stated that share was approximately 18% last year. He attributed the rapid growth to nearly 50% to two factors: continued share gains in general-purpose cloud workloads and Arm's move from zero share to 'almost exclusive share' in NVIDIA's next-generation Grace Blackwell AI systems.

Joe Quatrochi asked for insights into the Q4 2025 end market guide, particularly regarding consumer seasonality and the expected sequential growth for enterprise data. He also inquired about the first design win for a full battery management system (BMS) solution on a robotics platform, its drivers, revenue opportunity, and future potential.

Answer

Michael Hsing (CEO and Founder) and Bernie Blegen (EVP and CFO) stated that nothing has fundamentally changed in their positioning since the last discussion, emphasizing the difficulty in predicting market movements. Michael Hsing expressed excitement about the robotics BMS design win, seeing it as a sign of the robotics world taking off. Tony Balow (VP of Finance) clarified that the revenue ramp for this specific win starts in 2026 and is not a near-term needle mover, but signifies future full solution design wins.

Joe Quatrochi of Wells Fargo asked for insights into the Q4 guidance, specifically regarding end market seasonality, such as consumer trends, and whether the previous expectation of high single-digit sequential growth for enterprise data in the December quarter still holds. He also inquired about the first design win for a full battery management system (BMS) solution on a robotics platform, seeking details on its drivers, revenue opportunity, and potential for future wins.

Answer

Michael Hsing, CEO and Founder, stated that predicting market trends is difficult, and MPS focuses on technology development and customer engagement. Bernie Blegen, EVP and CFO, added that MPS's positioning for the second half of the year remains fundamentally unchanged. Regarding the robotics BMS design win, Michael Hsing expressed excitement about the growing robotics market and the system MPS developed. Tony Balow, VP of Finance, clarified that the revenue ramp for this specific win is expected to start in 2026 and, while not a significant needle-mover initially, it signals a wave of future full solution design wins.

Joe Quatrochi asked for clarification on the advanced packaging process control intensity, specifically if the 'high teens' figure is accurate and how it's expected to evolve over time.

Answer

CFO Bren Higgins clarified that the intensity is not as high as 'high teens,' stating that KLA's share of the advanced packaging market is around 6% for 2025, up from 1% a few years ago, while KLA's share of the overall process control market is closer to 8%. He expects intensity to continue growing as densities shrink and processes become more complex, augmenting KLA's revenue growth.

Joe Quatrochi asked for clarification on the advanced packaging process control intensity, specifically if the 'high teens' figure is still accurate, and how KLA expects this intensity to evolve over time.

Answer

CFO Bren Higgins clarified that advanced packaging process control intensity is not as high as 'high teens.' He noted that KLA's share of the advanced packaging market is approaching 6% in 2025, up from 1% a few years ago, indicating an escalation in intensity due to changing requirements in high-performance computing. He expects this trend to continue as densities shrink and processes become more complex, augmenting KLA's revenue growth.

Joe Quatrochi of Wells Fargo asked how the increasing diversity of HPC designs impacts process control sample rates and inquired about the specific drivers for the expected record year in reticle inspection revenue.

Answer

President & CEO Rick Wallace explained that unlike traditional nodes with a single ramp, the high mix of designs at the leading edge creates a 'compounding of ramps,' sustaining high sample rates as each new device requires its own debugging and optimization. EVP & CFO Bren Higgins detailed that record reticle revenue is driven by legacy node tool demand in China, requalification needs in high-mix fabs, an increase in single-die reticles, and benefits from print check applications on their broadband plasma platforms.

Joe Quatrochi of Wells Fargo asked how the increasing diversity of HPC designs impacts process control sample rates and inquired about the drivers behind the expected record year for reticle inspection revenue.

Answer

President & CEO Rick Wallace explained that instead of a single ramp, there is now a 'compounding of ramps' as multiple designs enter high-volume manufacturing, sustaining high sample rates. He also noted that the high cost of advanced packages is driving 100% inspection, similar to reticles. EVP & CFO Bren Higgins detailed that record reticle revenue is driven by China's mask ecosystem investment, frequent requalification in high-mix fabs, and the need to inspect single-die reticles against a reference.

Joe Quatrochi asked for clarification on the OpEx dynamics, specifically why Q3 was better than expected but Q4 is projected to be worse, and if this relates to the Artisan deal timing or other factors.

Answer

SVP and CFO John Wall explained that the OpEx dynamics are primarily due to the timing of some hardware delivery shifting between Q3 and Q4. He noted that a small restructure benefited Q3, and healthy hardware gross margins in Q3 are partially offset in Q4 by new expenses from recent acquisitions.

Joe Quatrocchi asked for clarification on the OpEx dynamics, noting that Q3 was better than expected but Q4 is projected to be worse, and whether this relates to the timing of the Arm Artisan deal closing.

Answer

SVP and CFO John Wall explained that the OpEx timing is primarily related to hardware delivery shifts between Q3 and Q4. He mentioned that a small restructure benefited Q3, and healthy hardware gross margins were seen. The Q4 offset is due to new expenses from recent acquisitions.

Joe Quatrochi from Wells Fargo sought to quantify the impact of China restrictions on the RPO and clarify if the raised guidance was solely due to China.

Answer

SVP & CFO John Wall clarified that the increased full-year guidance reflects broad-based strength across all geographies, not just a change in the China outlook. He reiterated that while some China orders were excluded from the Q2 backlog, the company expects to end the year with a record backlog and a book-to-bill above one, driven by global demand.

Joe Quatrochi sought clarification on broadband connectivity seasonality for the December quarter, asking how this year compares to normal seasonality given past inventory dynamics.

Answer

CEO Kishore Seendripu explained that while seasonality varies, this year is different due to core recovery and strong cable growth. He highlighted strong growth for PON with a major North American carrier but expects overall broadband moderation after 80% year-over-year growth. CFO Steve Litchfield added that CapEx spending, new PON business, and DOCSIS 4.0 upgrades (50% content increase) provide a strong outlook beyond short-term moderation.

Joe Quatrochi asked about MaxLinear's expectations for the data center optical side in 2026, specifically how visibility and the pipeline of opportunities have changed since the previous quarter, given recent AI data center announcements. He also sought clarity on broadband connectivity seasonality in the December quarter, asking how this year's trend compares to normal seasonality, considering inventory dynamics.

Answer

CEO Kishore Seendripu explained that passing the threshold with major data centers on interops has generated momentum, leading to increased design win activity and a positive outlook for optical and wireless infrastructure growth next year. Regarding broadband, Dr. Seendripu noted that while seasonality can vary, this year is different due to core and cable recovery. He expects strong growth from PON due to a major telecom provider but anticipates overall broadband moderation after an 80% year-over-year growth. CFO Steve Litchfield added that while there's short-term moderation due to seasonality, the outlook for the next couple of years remains strong, driven by CapEx spending, new PON business, and meaningful content improvements from DOCSIS upgrades starting in late 2026.

Joe Quatrochi asked for clarification on ASML's updated positive commentary for 2026, specifically whether the more optimistic view is skewed towards DRAM or equally balanced with logic, and if the 'more customers benefiting from AI infrastructure build-out' comment primarily refers to DRAM. He also sought details on the puts and takes driving the Q4 gross margin guide, which is better than previously implied.

Answer

CFO Roger Dassen confirmed that the positive outlook for 2026 relates to both DRAM and advanced logic, driven by reduced uncertainty, including tariffs. He explained that the Q4 gross margin improvement is due to higher volume, a mix of good low NA sales offsetting High NA dilution, and a positive contribution from upgrade business in installed base management.

Joe Quatrochi from Wells Fargo asked what specifically changed in customer conversations over the last 90 days to increase uncertainty around the 2026 outlook. He also requested details on the drivers for the expected sequential gross margin decline in the second half of the year.

Answer

President & CEO Christophe Fouquet and EVP & CFO Roger Dassen explained that while a tariff pause was in effect 90 days ago, discussions have since intensified, creating significant uncertainty for customers planning US investments and for overall GDP forecasts. For gross margin, Roger Dassen cited three drivers for the H2 decline: the dilutive effect of more High-NA system revenue recognitions, lower high-margin upgrade revenue compared to H1, and the absence of one-off cost benefits seen in H1.

Joe Quatrochi from Wells Fargo asked about Synopsys's consideration of different IP business models, such as royalties, to address the demand for customized subsystems and the competitive landscape regarding time-to-market. He also inquired about the appropriate cash balance for managing debt paydown.

Answer

President and CEO Sassine Ghazi confirmed that Synopsys is exploring business models that include royalty components for subsystem-type deliveries, given the increasing customization demands and the need to capture appropriate value. CFO Shelagh Glaser stated that Synopsys maintains a cash balance well above its minimum operational needs, with plans to make interest payments this year and begin principal payments on term loans in fiscal year 2026, also noting future cash inflow from divestitures.

Joe Quatrochi inquired about Synopsys's consideration of different IP business models, such as royalties, to address time-to-market pressures and competition. He also asked about the optimal cash balance for debt paydown strategies.

Answer

President and CEO Sassine Ghazi confirmed ongoing discussions with customers about business models that include royalties for subsystem-type IP delivery, driven by increased customization. CFO Shelagh Glaser stated that Synopsys maintains a minimum cash balance, is currently well above it, and expects to begin principal payments on term loans next year, supplemented by cash from pending divestitures.

Joe Quatrochi followed up on the IP business model, asking if Synopsys is considering royalty-based models similar to competitors and how time-to-market and competition factor into the shift towards subsystems. He also asked Shelagh Glaser about the appropriate go-forward cash balance for debt paydown.

Answer

Sassine Ghazi, President, CEO & Director, Synopsys, confirmed that discussions with customers for subsystem-type deliveries are in early phases and do include some form of royalty, indicating a need for a different business model beyond NRE plus use fees to capture value from customization. Shelagh Glaser, CFO, stated that Synopsys maintains a minimum cash balance well above operational needs. She expects interest payments on debt this year and principal payments on term loans (due 2027/2028) to begin next year. Glaser also mentioned an upcoming cash inflow from the divestitures of the Optical Solutions Group and PowerArtist businesses once regulatory approval is finalized.

Joe Quatrochi asked about the ICAPS business outside of China, questioning if that segment has started to stabilize or if both China and non-China ICAPS should be viewed as a continued headwind.

Answer

CFO Brice Hill responded that while overall ICAPS utilization remains low, there are 'green shoots' of recovery. He noted a pickup in the industrial side and increased investments in rest-of-world ICAPS during the quarter, suggesting it is a 'space to watch' for stabilization and future growth.

Joe Quatrochi of Wells Fargo asked for clarification on the drivers of Q3 chemistry growth, questioning if it's above normal seasonality due to AI, and inquired if customers are optimizing inventory to avoid tariffs.

Answer

President and CEO John Lee explained that the seasonal growth is driven by consumer products, with AI demand acting as an additive that raises the overall base. He also stated that MKS has not seen customers optimizing inventory to avoid tariffs, believing they are buying to need due to the company's short lead times.

Joe Quatrochi of Wells Fargo and Company inquired about the drivers behind the more positive commentary on the EMEA region and the expected inventory trends for the upcoming quarter.

Answer

CEO Phil Gallagher explained that while they are not celebrating, there is more optimism for EMEA due to modestly returning bookings and a year-over-year and sequential increase in backlog. CFO Ken Jacobson added that inventory is expected to see a modest decline in the next quarter, driven by the EC business, even with sales guided slightly up. Phil Gallagher also noted that Avnet is balancing inventory reduction in certain commodities with strategic investments in other areas to service customers, aiming for inventory days in the mid-80s.

Joe Quatrochi of Wells Fargo asked for the reasons behind the lowered 2025 semiconductor growth forecast and questioned the expected impact of tariffs on gross margins going forward.

Answer

President and CEO Steve Kelley cited several factors for the revised semiconductor outlook: tariff-related shifts in customer ordering, a slowdown in China and trailing-edge logic, and some softness in DRAM. EVP and CFO Paul Oldham added that the tariff impact is expected to persist but is being actively mitigated. He noted that excluding tariffs, gross margin would have been over 39% in Q2.

Joe Quatrochi of Wells Fargo inquired about the interplay between Arrow's inventory levels and demand dynamics, particularly regarding readiness for a market recovery. He also asked for clarification on the implied margin guidance for the third quarter, considering the company's ongoing cost-saving initiatives.

Answer

CEO Sean Kerins stated that inventory is down over $1 billion from its peak and the company is at an inflection point where it will invest in working capital to support growth. CFO Raj Agrawal clarified that overall margins are expected to be relatively stable, with mix shifts pressuring gross margins but being offset by productivity savings. Mr. Kerins added that as the mass market recovers, which typically lags larger OEMs, gross margins and operating leverage will improve.

Joe Quatrochi asked about the forward demand picture, the dynamic between potential tariff-related pull-ins and organic recovery, and the composition of the industrial business, particularly clean energy.

Answer

CEO Michael Doogue highlighted positive business momentum with strong bookings and backlog, noting that customer concerns about shortages stem from real demand, not just tariffs. CFO Derek D'Antilio added that any tariff pull-in impact is immaterial. Regarding industrial, Mr. Doogue explained it's a diverse segment where current strength in data center and robotics is offsetting some softness in clean energy.