Joshua Buchalter

Joshua Buchalter inquired about the biggest signs of demand recovery in the industrial segment, the balance between idiosyncratic growth drivers and cyclical recovery, and the near-term growth of industrial excluding ATE.

Answer

Richard Puccio, EVP and CFO, noted that industrial's book-to-bill was well above 1 (excluding pricing) in Q1, with double-digit year-over-year growth for four consecutive quarters. This is driven by strength across all industrial segments, including record quarters for ATE and Aerospace and Defense (one-third of industrial). The other two-thirds of industrial are 20% below previous peaks, showing cyclical momentum with improving PMIs and positive book-to-bill. He expects industrial to lead growth sequentially, up 20%+, with ATE growing over 30% sequentially.

Joshua Buchalter asked for details on where Analog Devices is seeing the biggest signs of demand recovery in the industrial segment, how much of this is idiosyncratic growth drivers, and the growth rate of industrial excluding ATE in the near term.

Answer

Richard Puccio, EVP and CFO, highlighted that industrial, ADI's most profitable business, has grown sequentially every quarter since the bottom, with Q1 book-to-bill well above 1 (excluding pricing impact). He noted four straight quarters of above-seasonal, double-digit year-over-year growth driven by strength across all industrial segments, including record quarters for ATE and Aerospace & Defense (one-third of industrial). The other two-thirds of industrial are still 20% below previous peaks, with improving PMIs and positive book-to-bill across all industrial sectors and geographies. The Q2 outlook for industrial is 20%+ sequential growth, led by ATE growing greater than 30% sequentially, with broad-based growth and normalized ordering patterns in the broad market industrial.

Joshua Buchalter asked about Analog Devices' confidence and visibility for Q2, lead times, and how overall visibility has changed with the shift towards more ADI-specific drivers like aerospace & defense and data center, given the press release's mention of uncertainty.

Answer

CFO Richard Puccio clarified that he confirmed historical Q2 seasonality, not guidance. He stated that visibility remains limited beyond the current quarter plus one, with most products having sub-13-week lead times and many short-lead-time orders. He acknowledged broad strength in ADI areas but noted no significant improvement in overall visibility over the last two years.

Joshua Buchalter asked why the revenue level needed to achieve a 70% gross margin seems to have shifted from a previously mentioned $2.7 billion to around $3.0 billion, and what has changed.

Answer

EVP & CFO Richard Puccio clarified that the previous modeling assumed a return to a 'more normal' industrial mix. He explained that in Q3, industrial was only 45% of revenue, below that normalized level. As the industrial mix is projected to rise to ~49% in Q4, the company expects to return to the 70% margin range.

Joshua Buchalter followed up on the industrial segment's strength, asking if management senses any end-customer restocking or if the recovery is purely based on end demand, given the outperformance relative to peers.

Answer

Executive Richard Puccio clarified that he wouldn't call it 'restocking,' but acknowledged that customers are purchasing more as they operate with lean inventories. He reiterated that ADI has been undershipping the industrial market for two years and expects to ship to demand in Q3. CEO Vincent Roche added that POS signals indicate a normalization between shipping and sell-through, suggesting a return to true demand patterns.

Joshua Buchalter of TD Cowen followed up on channel inventory, asking if guidance includes any channel refill given levels are below the target range, and what signals ADI needs to see before rebuilding inventory.

Answer

CFO Rich Puccio stated that the Q2 guidance assumes shipping to sell-through with no channel refill. He expressed comfort operating below the 7-8 week target as long as customer needs are met, noting ADI is balancing this by holding more inventory internally, especially in die banks. CEO Vincent Roche added that centralized inventory management has proven effective and will continue to be a guide.

Joshua Buchalter asked about factory utilization rates, noting ADI was unique in calling them out as higher, and how they are expected to trend in fiscal 2025.

Answer

CFO Rich Puccio attributed the ability to raise utilization to their agile, hybrid manufacturing model, which allows them to swing capacity back to internal fabs. He clarified that while utilization is still well below optimal levels, it has seen modest sequential increases for two quarters and is expected to continue increasing as revenue recovers through fiscal 2025.

Joshua Buchalter asked for a breakdown of growth drivers in the communications and computing segment in 2025, including key sockets and the impact of AI servers. He also sought clarification on new product revenue growth and its expected contribution in 2026.

Answer

Ford Tamer (CEO, Lattice Semiconductor) detailed server growth (85% YoY) as the fastest, followed by wired comms (61% overall comms). Within servers, AI servers were the fastest, driven by increasing CapEx, design wins with all GPUs/AI accelerators with increasing content per generation, and growing ASPs due to new applications. He confirmed new products reached the low-20s% of total revenue in 2025 and are expected to grow to the mid- to high-20s% in 2026.

Joshua Buchalter asked for a breakdown of the growth drivers in the communications and computing segment in 2025, specifically differentiating between server and wired comms, AI server versus traditional, and the impact of GPU, CPU, or ASIC. He also asked about the expected new product revenue percentage for 2026, given its strong growth in 2025.

Answer

CEO Ford Tamer detailed that server growth (85% YoY) was the fastest, followed by wired comms. Within servers, AI servers were the fastest-growing, driven by increasing CapEx (e.g., $500B to $740B for hyperscalers), design wins with all GPUs/AI accelerators with increasing content per generation, and growing ASPs from new applications like leakage detection. He confirmed new product revenue was in the low-20s% in 2025 and is expected to reach the mid-to-high 20s% in 2026.

Joshua Buchalter of TD Cowen inquired about any changes in customer order patterns from China amid recent geopolitical volatility. He also asked if new product growth was more tied to the faster-moving communications and computing market.

Answer

CFO Lorenzo Flores stated that the company has not seen any unusual order patterns from China and that strong overall bookings do not suggest a pull-in. CEO Ford Tamer clarified that they expect growth across both major end markets into next year, with industrial and auto expected to outperform as that segment recovers.

Joshua Buchalter asked if new product growth should be expected to accelerate in 2026 and sought clarification on the revenue ramp timing for the Avant platform, which he noted seemed to shift from 2026 to 2027.

Answer

CEO Fouad Tamer confirmed that new product revenue as a percentage of total revenue is expected to accelerate from high-teens in 2025 to the mid-20s in 2026. He clarified that the Avant ramp is a layering process, with different product variants impacting revenue in 2025, 2026, and 2027, which is a typical multi-year cycle for FPGAs.

Joshua Buchalter asked if new product growth is expected to accelerate in 2026 with the layering in of Nexus and Avant products. He also sought clarification on the timing of Avant's meaningful revenue contribution, noting a potential shift in commentary from 2026 to 2027.

Answer

CEO Fouad Tamer confirmed that new product revenue as a percentage of total revenue is expected to accelerate from mid-teens in 2024 to high-teens in 2025, and then to the mid-20s in 2026. He clarified that Avant's revenue will layer in over time, with some impact in 2025 and more variants contributing through 2026 and 2027, which is typical for long FPGA qualification cycles.

Joshua Buchalter asked for metrics on how new products like Avant and Nexus 2 are expected to contribute to growth in 2025, following their double-digit growth in 2024. He also inquired about the competitive environment for mid-range FPGAs now that the Avant families have been available for several quarters.

Answer

CEO Ford Tamer highlighted that new products (Nexus and Avant) grew from a single-digit percentage of revenue in 2023 to mid-teens in 2024 and are expected to continue growing. He expressed confidence in Avant's competitive position, stating its custom-made, low-power LUT4 architecture is ideally suited for the small-to-mid-range market and offers significant power and size benefits that customers value.

Joshua Buchalter of TD Cowen asked for clarification on the assumptions behind the low single-digit growth forecast for 2025 and whether the long-term 15-20% growth target remains valid. He also inquired about visibility into end-customer inventory levels.

Answer

CEO Ford Tamer reaffirmed the long-term 15-20% revenue growth target, expecting to return to that rate in 2026 after a flattish period through mid-2025. Both Tamer and Interim CFO Tonya Stevens noted that while visibility into the 10,000+ end customers is challenging, they have a better handle on it now and are actively managing distributor inventory down.

Joshua Buchalter asked for a breakdown of the factors influencing gross margins in Q1 2026, including utilization rates, pricing, and mix. He also requested an outlook by end market for Q1 2026, particularly for sequential growth in the automotive market.

Answer

CFO Thad Trent clarified that the Q1 2026 gross margin is expected to increase by 30 basis points sequentially, driven by FabRight initiatives offsetting typical seasonal declines. For Q1 2026, he projected automotive revenue to be roughly flat due to Chinese New Year, industrial revenue to be down low teens due to seasonality and lumpiness, and the 'other' category to be up low single digits, with AI data center growing high teens percent.

Joshua Buchalter requested an outlook by end market for Q1, particularly focusing on whether the automotive market is expected to grow sequentially.

Answer

CFO Thad Trent provided the Q1 outlook: automotive revenue is expected to be roughly flat due to Chinese New Year headwinds. Industrial revenue is projected to be down low teens due to seasonality and lumpiness in energy infrastructure. The 'other' category is expected to be up low single digits, driven by high-teens growth in AI data center, offset by seasonal declines and non-core exits.

Joshua Buchalter requested more color on ON Semiconductor's revenue by geography, specifically addressing the volatility seen in Q3 with strong growth in the Americas and a decline in China, and the underlying drivers. He also questioned the timing of building die bank inventory and increasing utilization rates ahead of potentially down seasonal quarters, asking for insight into the big-picture capacity planning.

Answer

Hassane El-Khoury, President, CEO, and Director, ON Semiconductor, referred to prepared remarks for geographical changes, noting some order movement between regions (e.g., a large customer shifting orders from Europe to Japan) but generally seeing normal patterns without significant underlying shifts. Regarding inventory, Mr. El-Khoury emphasized disciplined management, stating that base inventory is healthy at 112 days. The die bank build is specifically for the mass market, where customer count increased 20% year-over-year, justifying the investment to respond to demand changes. Thad Trent, CFO, ON Semiconductor, added that despite the die bank increase, overall inventory declined by $39 million quarter-on-quarter, representing a mixed shift for a better mass market profile.

Joshua Buchalter requested more color on revenue by geography, specifically the volatility with Americas up strongly and China down, and questioned the timing and strategy behind building die bank inventory ahead of seasonal downturns, including big-picture capacity planning.

Answer

Hassane El-Khoury, President and CEO, explained that some geographical shifts were due to order movements between regions (e.g., Japan vs. Europe), with the rest reflecting normal patterns. He clarified that the die bank inventory build is for the mass market, where customer count increased 20% year-over-year, and emphasized a disciplined approach to maintain healthy base inventory (112 days). Thad Trent, CFO, added that overall inventory still declined by $39 million quarter-on-quarter, representing a mix shift.

Joshua Buchalter asked for an update on inventory levels, questioning if they still expect a peak in Q2 followed by a decline, and sought commentary on the current pricing environment after previous mentions of more aggressive tactics.

Answer

CFO Thad Trent confirmed that inventory peaked in Q2 and is expected to decline through the rest of the year as strategic builds are consumed, which will be a tailwind to cash flow. He also clarified that utilization was flat quarter-over-quarter on a normalized basis. President and CEO Hassane El-Khoury stated that the pricing environment has been stable and within the company's expectations, with no new changes to report.

Joshua Buchalter asked for a reflection on the demand environment over the last few months and requested details on the Q1 restructuring charge and the current state of on-book and channel inventory.

Answer

CFO Thad Trent stated the quarter unfolded as expected, with early signs of stabilization in the industrial market. He explained the restructuring charge in gross margin was for inventory write-offs from manufacturing realignment. He confirmed on-book inventory is healthy at 119 days (excluding strategic builds) and should peak in Q2. CEO Hassane El-Khoury added that channel inventory is being managed with discipline.

Joshua Buchalter from TD Cowen requested more details on the drivers of the Q1 gross margin decline, specifically the unfavorable mix, and asked for metrics on inventory levels at automotive Tier 1 customers.

Answer

CFO Thad Trent broke down the Q1 gross margin decline: roughly half is from calculating under-absorption on a lower revenue base, 100 basis points from unfavorable product mix (due to softness in long-tail industrial), and the rest from lower utilization. CEO Hassane El-Khoury explained that Tier 1 inventory levels vary by customer and are a moving target as end demand deteriorates, making a single metric difficult, but confirmed onsemi is under-shipping to help deplete it.

Joshua Buchalter requested a more detailed breakdown of the low single-digit silicon carbide growth guidance and asked for commentary on the China auto market, given a peer's strong reported growth and concerns about potential pull-ins.

Answer

CEO Hassane El-Khoury declined to break down SiC growth by segment but noted that both North America and China were up, indicating regional share gains. He clarified that while onsemi's China auto business also grew, comparisons to peers may be difficult as onsemi's focus is on the drivetrain, where SiC plays a key role.

Joshua Buchalter asked about the handset outlook, inquiring about factors driving weakness beyond memory pricing, the reiterated Samsung share, the overall TAM for the year, and whether the current inventory correction is expected to conclude in the March quarter. He also followed up on the sharp acceleration in QCT Automotive revenue, asking about ADAS wins, drivers, and the durability of this higher watermark.

Answer

President and CEO Cristiano Amon and CFO Akash Palkhiwala clarified that the handset weakness is 100% related to memory availability and pricing, not macroeconomic indicators or demand, which remains strong. They noted memory suppliers' prioritization of HBM for AI data centers is impacting DRAM for handsets, leading OEMs, especially in China, to reduce chipset inventory. For automotive, Mr. Amon explained that the strong pipeline and new car launches are translating into record revenues, driven by share gains and traction with Snapdragon Digital Chassis, including ADAS wins and a broad partnership with Volkswagen Group, reinforcing confidence in fiscal 2029 targets.

Joshua Buchalter inquired about the handset market outlook, specifically asking about factors beyond memory pricing driving weakness, the expected Total Addressable Market (TAM) for the year, and if the current inventory correction is anticipated to conclude in the March quarter. He also followed up on the sharp acceleration in QCT automotive revenue, asking if ADAS wins are contributing and about the drivers and durability of this higher watermark.

Answer

Cristiano Amon, President and CEO of Qualcomm, clarified that the handset weakness is 100% related to memory availability, not macroeconomic indicators or consumer demand, which remain strong. He noted that DRAM availability for consumer electronics is down due to HBM prioritization for data centers, leading OEMs to adjust production. Akash Palkhiwala, CFO of Qualcomm, concurred. Amon also stated that the automotive pipeline continues to translate into record revenues and share gains, with the Flex platform gaining traction and major volume drivers achieving SOP. He confirmed increased traction with ADAS wins, contributing to the strong trajectory towards fiscal 2029 targets.

Joshua Buchalter inquired about the handset market, specifically Qualcomm's momentum in Android, and visibility into share with its lead Android customer (Samsung) given potential increased use of an internal modem.

Answer

CEO Cristiano Amon explained that the premium tier Android market is expanding, driving Qualcomm's content and ASP growth. He reiterated the financial assumption of a 75% share with Samsung for new Galaxy devices, noting that Qualcomm sometimes exceeds this, as seen with 100% share on Galaxy S25.

Joshua Buchalter inquired about Qualcomm's visibility into its share with a lead Android customer, specifically regarding potential internal modem usage, and the expected share over the next year.

Answer

CEO Cristiano Amon clarified that the premium-tier Android market is expanding, driving Qualcomm's content and ASP growth. He reiterated that the financial assumption for their relationship with Samsung (the lead Android customer) is a 75% share for new Galaxy devices, consistent with past years, despite sometimes achieving higher shares like 100% for Galaxy S25.

Joshua Buchalter of TD Cowen asked about the drivers for the 5% sequential growth forecast in the handset market, questioning if there was evidence of inventory pull-ins from China. He also sought more details on the scope of the data center engagement with a hyperscaler and the fiscal 2028 revenue timeline.

Answer

CFO & COO Akash Palkhiwala stated there is no evidence of a pull-in and attributed the handset strength to upcoming new product launches creating strong OEM demand. On the data center, President & CEO Cristiano Amon confirmed advanced discussions and ongoing product development, noting the AlphaWave acquisition is complementary but declined to share further customer specifics at this time.

Joshua Buchalter asked for details on the assumptions within QUALCOMM's handset market guidance, specifically regarding potential tariff-related order pull-ins and any changes in order patterns from its largest customer. He also inquired about any updates on Huawei royalty negotiations.

Answer

Akash Palkhiwala stated that the guidance reflects QUALCOMM's current assessment of tariffs, with no material direct impact or significant customer order pull-ins observed, citing a diversified global supply chain. Alexander Rogers, President of Qualcomm Technology Licensing, added that there were no new updates regarding the ongoing discussions with Huawei.

Joshua Buchalter of TD Cowen asked for clarification on the fiscal 2025 guidance for the QTL segment, specifically the assumptions for handset unit shipments and royalty rates that support the flat year-over-year outlook.

Answer

CFO Akash Palkhiwala explained that the guidance is based on an assumption of a flat to low single-digit growth for the overall handset market. He noted that this baseline forecast does not yet incorporate potential upside from China's subsidy programs or a faster AI-driven device replacement cycle.

Joshua Buchalter sought details on the automotive business, specifically its exposure to China and the revenue mix between infotainment and ADAS. He also asked about the sustainability of handset growth outside of Qualcomm's top two customers.

Answer

CFO Akash Palkhiwala described the auto design-win portfolio as geographically diverse and not reliant on a single region. He noted current revenue is mainly from cockpit solutions, with ADAS as a future growth driver. For handsets, he highlighted that growth is driven by content increases and a mix shift to premium tiers, which overcomes the loss of prior-year Huawei revenue.

Joshua Buchalter asked about the strong performance of AMD's client segment, concerns regarding inflationary memory costs and potential pull-ins, changes in order patterns, and the outlook for client growth and market health in 2026.

Answer

Dr. Lisa Su, Chairman and CEO, AMD, noted the client market's strong performance in 2025. For 2026, she anticipates the PC TAM to be slightly down due to inflationary pressures but believes AMD can still grow its PC business by focusing on enterprise and the premium segment of the market.

Joshua Buchalter asked about the client segment's strong Q4 performance, concerns regarding inflationary memory costs and potential pull-ins, and AMD's outlook for client growth and market health in 2026. He also inquired about the competitive implications of SRAM-based spatial architecture providers for lower latency inference and Instinct's positioning.

Answer

Dr. Lisa Su, Chairman and CEO, noted strong client performance in 2025 but expects the PC TAM to be 'down a bit' in 2026 due to inflationary pressures, with the second half subseasonal to the first half. Despite this, AMD aims to grow its PC business by focusing on enterprise and premium segments. Regarding SRAM-based architectures, Dr. Su views this as market maturation, emphasizing AMD's flexible chiplet and platform architecture to optimize for various workloads, including inference, with investments across the spectrum.

Joshua Buchalter asked about the sustainability of near-term strength in the CPU business, driven by AI workloads on general-purpose servers, and whether AMD is experiencing any supply constraints. He also questioned if the data center CPU business should be considered aseasonal or if normal seasonality is expected in the first half of next year. Additionally, he inquired about the competitive standing and breadth of support for ROCm 7, and areas needing further improvement.

Answer

Lisa Su, Chair and CEO of AMD, noted positive and broadening CPU demand for several quarters, with hyperscale clients forecasting significant CPU builds into 2026 due to AI workloads. She expects a positive and durable CPU demand environment into 2026, aligning with the Turin ramp. Jean Hu, EVP, CFO, and Treasurer of AMD, confirmed sufficient supplies for growth. Lisa Su highlighted significant progress with ROCm 7 in performance and framework support, ensuring a smooth customer experience, while acknowledging ongoing investment in libraries and the overall environment.

Joshua Buchalter inquired about the sustainability of the current CPU strength driven by AI workloads, potential supply constraints for AMD's CPU business, and whether the data center CPU segment should be considered aseasonal in the first half of 2026. He also asked for an update on ROCm 7's competitive position, breadth of developer support, and areas needing further improvement.

Answer

Dr. Lisa Su, Chair and CEO, confirmed a positive and durable CPU demand environment into 2026, driven by hyperscalers' significant CPU build forecasts for AI workloads and strong Turin ramp. Jean Hu, EVP, CFO, and Treasurer, assured that AMD has sufficient supplies. Dr. Su also highlighted significant progress with ROCm 7, noting improved performance, framework support, and a smooth developer experience, while acknowledging ongoing work to augment libraries.

Joshua Buchalter asked about supply chain lead times for the Instinct accelerator family and how AMD maintains a flat gross margin in Q3 despite a dilutive mix from the significant data center GPU ramp.

Answer

Chair and CEO Lisa Su stated that lead times are around 8-9 months and the supply chain is well-prepared. EVP, CFO & Treasurer Jean Hu explained that the dilutive impact of the MI350 ramp on gross margin is being offset by positive mix from the high-margin server business, growth in commercial PCs, and company-wide operational efficiencies.

Joshua Buchalter of TD Cowen inquired about the supply chain lead times for the Instinct MI350 and MI400 accelerators and the level of customer visibility required for large deployments. He also asked for an explanation of how Q3 gross margins are expected to remain flat sequentially despite a significant, margin-dilutive ramp in data center GPUs.

Answer

CEO Lisa Su noted that lead times are long, around 8-9 months, and that the company is working very closely with customers on co-engineering for future MI400 rack-scale deployments. CFO Jean Hu explained that the dilutive impact of the MI350 ramp in Q3 is being offset by several tailwinds, including strong sales of high-margin EPYC server CPUs, a richer product mix in the commercial PC business, and ongoing operational efficiencies.

Joshua Buchalter inquired about the drivers behind AMD's Q1 2025 outperformance and Q2 guidance, with a specific focus on the Client segment's strong growth and the performance of the Instinct AI accelerator business excluding China.

Answer

CEO Lisa Su attributed the Q1 strength to the Client, Gaming, and Data Center businesses, highlighting strong desktop ASPs and denying significant tariff-related pull-in for the Client segment. She noted the Q2 guide accounts for a $700M headwind from China export controls but expects continued strength elsewhere. On the Instinct ramp, Su stated Q1 performance was in line with expectations and expressed confidence in the MI350 launch, which is on track for mid-year and seeing high customer interest. CFO Jean Hu added that Q1 Client revenue was flattish sequentially despite a double-digit unit decline, driven by higher ASPs.

Joshua Buchalter asked for clarification on the MI350 timeline pull-in, questioning if it created a potential 'air pocket' in demand for H1 2025. He also inquired about the drivers of the strong Q4 Client segment growth and the risk of inventory buildup.

Answer

CEO Lisa Su stated the MI350 pull-in is an incremental positive and does not create an air pocket, as new MI300/MI325 deployments are slated for H1. Regarding the Client segment, Su attributed the strong Q4 to high sell-through and adoption of new products, particularly in desktop, not a substantial inventory build. She expressed confidence in growing Client revenue well ahead of the market in 2025.

Joshua Buchalter asked about the growth runway for Data Center GPUs within AMD's existing customer base. He also inquired how the upcoming MI325X and MI350 products could act as catalysts to expand revenue and workload adoption with these key partners.

Answer

CEO Dr. Lisa Su emphasized the significant progress made in 2024, growing the Data Center GPU forecast from $2B to over $5B by hitting key milestones in scale, reliability, and performance with major customers. She sees a strong opportunity to grow further within this existing base by expanding workloads, citing Meta's move into training as an example. She noted the strengthening product portfolio and improved ROCm software ecosystem are key catalysts for driving deeper engagement and adoption.

Joshua Buchalter asked for more details on the gross margin puts and takes for Q1 2026, particularly regarding utilization rates following die bank builds.

Answer

Bill Betz, CFO, explained that Q1 gross margins are performing to expectations, driven by annual low single-digit price concessions partially offset by normal operational efficiencies. He reiterated the rule of thumb of approximately 100 basis points expansion per $1 billion of revenue. Front-end utilizations were in the high 70s in Q4 2025 and will remain so in Q1 2026. Long-term, VSMC is expected to lift gross margins by 200 basis points by 2028. Prebuilds were 7 days at the end of 2025 and are expected to be 15-20 days by the end of 2026, with net inventory days decreasing throughout the year.

Joshua Buckalter sought clarification on NXP's statement about operating within its target model for 2026, specifically whether it implies 6-10% growth for the year or tracking towards that CAGR over a multi-year period. He also asked for more details on Q1 gross margin puts and takes, including utilization rates and the status of die bank builds.

Answer

Jeff Palmer, VP of Investor Relations, affirmed that the long-term model is intact and that NXP expects to accelerate through the next two years after the H1 2025 inventory digestion. Bill Betz, CFO, explained that Q1 gross margins are performing to expectations, driven by annual low single-digit price concessions partially offset by operational efficiencies. Front-end utilizations were in the high 70s in Q4 and will remain so in Q1. He also noted that pre-builds were 7 days at the end of 2025 and are expected to be 15-20 days by the end of 2026, with net inventory days decreasing throughout the year.

Joshua Buchalter noted NXP's positive industrial and IoT outlook compared to peers and asked if this difference is due to inventory management or product cycles, and what gives NXP confidence in the sustainability of this upcycle given late orders. He also requested color on the China auto market's performance in Q3 and expectations for Q4, including distribution's role and inventory levels.

Answer

President and CEO Rafael Sotomayor clarified that NXP's Industrial and IoT business has been challenging since 2022 and is still 20% below its peak, suggesting NXP is not a bellwether for the industry. He attributed NXP's performance to disciplined inventory management during the downcycle and company-specific drivers, including new demand and design wins in core industrial. For China auto, Mr. Sotomayor described it as a strong, dynamic, and competitive market with lean inventory levels and good customer traction. Executive Director and Advisor Kurt Sievers added that the majority of Asia/China auto is serviced through NXP's distribution channel, where NXP maintains a 'heavy hand' in management.

Joshua Buchalter asked NXP to elaborate on its Industrial & IoT outlook, which appeared more positive than peers, questioning if the difference was due to inventory management or product cycles, and the sustainability of the observed upcycle given late orders. He also inquired about the China auto market's performance in Q3 and Q4 expectations, including the role of distribution and inventory levels there.

Answer

Rafael Sotomayor, President and CEO, stated that NXP's Industrial & IoT business is still 20% below its 2022 peak and NXP is not a bellwether for the industry. He attributed NXP's improvement to disciplined inventory management and company-specific drivers, including design wins and new demand, contributing to a "sub upcycle." For China auto, Mr. Sotomayor noted a strong, dynamic, and competitive market driving innovation, with lean inventory levels and good customer traction. Kurt Sievers, Executive Director and Advisor, added that the majority of NXP's China auto business is serviced through the distribution channel, where NXP maintains strong channel management.

Joshua Buchalter asked how NXP could be certain that tariff-related pull-ins were not impacting results and questioned whether auto OEMs were sustaining investment in new technologies like software-defined vehicles (SDV).

Answer

CEO Kurt Sievers explained that NXP uses a disciplined process with AI-driven monitoring of order patterns to detect and discourage tariff-related pull-ins. He also confirmed that OEM investment in SDV is accelerating, as it is seen as a critical competitive tool for delivering consumer value and reducing costs, especially for Western OEMs competing with Chinese counterparts.

Joshua Buchalter of TD Cowen inquired about the signals NXP uses to ensure there are no tariff-related pull-ins and asked about auto OEM investment behavior regarding software-defined vehicles (SDV) amidst industry challenges.

Answer

CEO Kurt Sievers explained that NXP uses AI to monitor order patterns for deviations and directly questions customers about unusual activity, typically not supporting tariff-related pull-ins to maintain discipline. He stated that investment in SDV is accelerating, as it's a 'must-do' for Western OEMs to remain competitive on cost and features against Chinese players, positioning NXP's S32 family and related portfolio to capitalize on this trend.

Joshua Buchalter of TD Cowen asked if NXP expects to continue under-shipping end demand in Q2 and inquired how the TTTech Auto acquisition changes OEM conversations and competitive positioning.

Answer

CEO Kurt Sievers confirmed that a 'flat to slightly up' Q2 would mathematically mean NXP is still under-shipping end demand. Regarding the TTTech Auto acquisition, he explained it is a key strategic move that enables deeper co-design conversations with automotive OEMs on software-defined vehicle architectures, allowing NXP to move up the value stack and become a leading partner for these new platforms.

Joshua Buchalter asked why gross margins, after a long period of stability, are now de-levering with revenue and inquired about the progress of software-defined vehicle (SDV) engagements amid OEM volatility.

Answer

CFO Bill Betz attributed the gross margin decline primarily to lower revenue over a fixed cost structure, along with some negative mix impact. CEO Kurt Sievers affirmed that there is no change in SDV content assumptions and that traction with the S32 platform remains strong. He noted the key risk is not content adoption but the potential for lower unit production from Western OEMs compared to their more competitive Chinese counterparts.

Joshua Buchalter asked about the optimism surrounding current sensing in automotive, data center, and industrial, seeking to understand the mix between legacy Hall-effect and newer TMR technologies, particularly from the Crocus acquisition. He also inquired about Allegro's comfort with its current debt levels and its capital allocation strategy going forward.

Answer

President and CEO Mike Doogue stated that current sensing is the highest growth area for the market and Allegro, driven by power management needs. He noted that current revenues are predominantly from Hall sensors, where Allegro is pushing boundaries with optimized packaging and higher bandwidth. The 10 MHz TMR current sensor is a newer product, expanding capabilities beyond Hall, and is accelerating share gains, a strategy Allegro plans to replicate. CFO Derek D'Antilio reported $163 million in cash and a $285 million term loan, refinanced to SOFR + 175. With a net leverage ratio slightly below 1-to-1 exiting Q4, he indicated comfort with current debt levels and a strategy to balance liquidity with debt paydown to enhance EPS and shareholder value.

Joshua Buchalter asked for a breakdown of current sensing growth in auto, data center, and industrial, specifically the contribution from legacy Hall-effect versus TMR technology from the Crocus acquisition. He also inquired about Allegro MicroSystems' capital allocation strategy, given recent cash building without debt paydown.

Answer

Mike Doogue, President and CEO, highlighted current sensing as a high-growth area, with most revenue currently from Hall-effect sensors. He noted that the 10 MHz TMR current sensor is a newer product accelerating share gains beyond Hall IC capabilities. Derek D'Antilio, CFO, stated they built $40 million in cash, ending with $163 million, and with a net leverage ratio below 1-to-1, they will continue to balance liquidity with debt paydown.

Joshua Buchalter asked about the technology driving near-term confidence in automotive current sensors and for an update on the legacy (non-e-mobility) auto business.

Answer

CEO Michael Doogue clarified that recent current sensor innovations use Hall effect technology, but the future roadmap is pivoting strongly to TMR, with superior TMR products now sampling. Regarding the legacy auto business, Mr. Doogue attributed its recent softness to inventory dynamics and timing of purchases, stating there is no negative long-term signal and the business should be fine.

Joshua Buchalter of TD Cowen asked if new products in TMR and power are impacting the financial model enough to hit long-term growth targets and sought clarity on the timing of the announced $15 million restructuring savings.

Answer

CEO Michael Doogue expressed confidence in achieving the company's growth targets, citing strong momentum in high-growth markets like e-mobility, data center, and robotics. CFO Derek D'Antilio explained that the annualized $15 million in savings will begin in Q1 and phase in through FY26 and FY27, helping to offset planned OpEx increases and resulting in low single-digit OpEx growth for FY26.

Joshua Buchalter of TD Cowen sought confirmation that automotive inventory levels are now healthy, and asked about the competitive environment, the contribution from current sensing products, and the progress of the TMR business from the Crocus acquisition.

Answer

CEO Vineet Nargolwala confirmed that while some inventory hot spots remain, the overall risk is shifting toward potential shortages. He stated the competitive landscape is unchanged and highlighted strong momentum in current sensing and TMR products, with TMR expanding into medical applications and being sampled for automotive battery management systems. CFO Derek D'Antilio added that the company continues to invest in R&D while optimizing SG&A costs.

Speaking for Josh Buchalter, an analyst from TD Cowen inquired about the recovery in the industrial segment, asking to identify specific green shoots and future trends.

Answer

CEO Vineet Nargolwala highlighted positive momentum in the medical business, acquired via Crocus, and in select consumer applications. While he was hesitant to call a full broad-based recovery, citing a more likely timeline of calendar 2025, he noted that encouraging signs are emerging in order patterns. CFO Derek D'Antilio explained that Q3 gross margin is expected to expand despite lower revenue because a one-time quality charge from Q2 will not repeat and geographic mix will normalize.

Joshua Buchalter from TD Cowen requested more details on the data center business, including its exposure across power, embedded, and non-power analog components, and a medium-to-long-term growth outlook given its 70% growth. He also inquired about the current state of the analog industry cycle and whether Texas Instruments' U.S.-based capacity positions it to return to normal cash management and market share gains.

Answer

CEO Haviv Ilan and CFO Rafael Lizardi explained that the data center business is primarily analog, with strong contributions from both power and signal chain components, and Texas Instruments is expanding its opportunities through technology investments like the BCD process for high-power rails. Haviv Ilan acknowledged the slow recovery of the current cycle but expressed optimism that TI's strategic investments in capacity and inventory will continue to support customer needs and drive future growth, positioning the company well for market share gains.

Joshua Buchalter requested more details on the data center business, including its exposure across power, embedded, and non-power analog parts, and a medium-to-long-term growth outlook given its 70% year-over-year growth. He then asked if, with the current capacity in place, TI is positioned to regain market share, considering the slow recovery cycle.

Answer

CEO Haviv Ilan stated that most of the data center business is analog, with strong contributions from both power and signal chain. He highlighted significant opportunities across thousands of parts, including high-power V-core regulators, supported by TI's BCD process in Sherman, and expects continued growth as long as CapEx investment in data centers persists. Haviv Ilan acknowledged the slow recovery cycle but expressed optimism that TI's investments in capacity and inventory will serve them well, especially with increasing semiconductor content per system and data center growth, positioning them strongly for future demand.

Joshua Buchalter asked for an explanation of the weakness in the China auto market, questioning if it was due to share loss or inventory dynamics. He also asked if customers outside China were altering their buying behavior due to TI's geopolitically dependable U.S. manufacturing.

Answer

CEO Haviv Ilan attributed the China auto performance to an inventory correction after a period of very strong demand. VP & Head of IR Mike Beckman noted that all major auto regions performed similarly on a sequential basis. Regarding geopolitical supply, Ilan stated that while customers value TI's U.S. capacity, the opportunity has not fully materialized as many are in a 'wait and see' mode on tariffs.

Joshua Buchalter asked about the company's near-to-medium-term inventory target and whether the competitive landscape has changed as peers' supply constraints have eased.

Answer

Executive Rafael Lizardi stated the inventory goal is to maintain high customer service while minimizing obsolescence. He expects inventory to rise by about $100 million in Q1 and then stabilize. Executive Haviv Ilan responded that he has not seen a significant change in the competitive backdrop, noting that the market is always competitive during a down cycle but that TI is well-positioned to compete.

Joshua Buchalter asked about the potential for conversions on SuperVision and Chauffeur programs, inquiring if Mobileye is de-emphasizing these in customer conversations. He also asked how Mobileye's EyeQ roadmap will accelerate Mentee's time to market and the extent of software development needed for robotics, given EyeQ's automotive design.

Answer

Nimrod Nehushtan, EVP of Business Development and Strategy, confirmed multiple active engagements for SuperVision and Chauffeur, emphasizing a focus on opportunities with significant business potential (high volumes, multiple models, concrete timelines) rather than smaller scientific projects. Amnon Shashua, CEO and Founder, stated that it's too early to discuss EyeQ chips on humanoid robots, viewing it as a longer-term issue. He noted that Mentee currently uses NVIDIA chips and that EyeQ8/9 could become relevant for high-volume production where cost is critical, but not in the foreseeable future.

Joshua Buchalter asked for an update on SuperVision and Chauffeur design wins, questioning if Mobileye is de-emphasizing these products, and then inquired how the EyeQ roadmap will accelerate Mentee's time to market and the extent of software development needed for robotics given EyeQ's automotive design.

Answer

Nimrod Nehushtan (EVP of Business Development and Strategy, Mobileye) confirmed multiple active engagements for SuperVision Chauffeur, emphasizing Mobileye's focus on opportunities with significant business potential, volumes, and concrete timelines, rather than smaller scientific projects. Amnon Shashua (CEO and Founder, Mobileye) stated it's too early to discuss EyeQ chips on humanoid robots, viewing it as a longer-term issue. Mentee currently uses NVIDIA chips, and EyeQ8/EyeQ9 could become relevant for high-volume, cost-critical robotics production in the more distant future.

Joshua Buchalter questioned the 5% volume growth outperformance relative to top 10 customers, asking if this serves as a normalized unit growth benchmark for 2026 and beyond. He also sought insights into what OEMs require to commit to eyes-off engagements and a timeline for announcing new Chauffeur or SuperVision wins.

Answer

Dan Galves, Chief Communications Officer, suggested that growing 5% faster than top 10 OEMs is a fair range for future volume growth, driven by ADAS adoption and market share gains. Amnon Shashua, CEO and President, emphasized execution as the current focus, with significant software drops for SuperVision and Chauffeur expected in the coming months, aiming for production readiness in H1 2026 to enable new program wins. Nimrod Nehushtan, EVP of Business Development and Strategy, highlighted the achievement of B/C sample hardware and stable platforms, with focus now on AI innovation.

Joshua Buchalter asked if the 5% volume growth outperformance relative to top 10 customers, after normalizing for inventory, should be considered a normalized unit growth rate for 2026 and beyond. He also inquired about the momentum for eyes-off engagements and the expected timeline for announcing additional SuperVision or Chauffeur wins.

Answer

Dan Galves, Chief Communications Officer, explained that the 5 percentage point outperformance reflects ADAS adoption growth, increasing share, and emerging markets, suggesting a similar range is fair going forward. Amnon Shashua, CEO and President, emphasized that the current focus is on execution, with significant software drops and production readiness for SuperVision and Chauffeur expected by the first half of 2026, which should enable more new program wins. Nimrod Nehushtan, EVP of Business Development and Strategy, added that showing a mature production platform with the latest AI technologies is key for new engagements.

Joshua Buchalter asked for clarification on the full-year guidance, which implies a weaker second half, and inquired about the nature of customer engagement and design win activity for advanced products.

Answer

Executive Daniel Galves and CEO Amnon Shashua explained that the guidance reflects conservatism amid macro uncertainty, not a specific negative signal from customers. Shashua added that design win activity for core ADAS is very strong, and while advanced product decisions are slightly slower due to macro issues, new engagements with top-10 OEMs for Level 3 and Chauffeur are progressing.

Joshua Buchalter inquired about the 2025 outlook for SuperVision and Chauffeur volumes, given market uncertainties, and asked for an updated view on normalized growth for core ADAS in Western markets now that inventory issues have stabilized.

Answer

Executive Daniel Galves stated it's too early for specific 2025 guidance but suggested the H2 2024 EyeQ run rate is a better starting point. He expects Mobileye to outperform its top 10 customers' production by mid-single digits. An executive, likely EVP of Business Development and Strategy Nimrod Nehushtan, added that long-term ADAS growth will come from increased market share and new customer wins, with regulatory requirements providing a tailwind for average selling prices (ASPs).

Joshua Buchalter asked for further color on the confidence in strong results beyond the March quarter, specifically inquiring about the demand signals or inventory restocking expectations driving this outlook for two to four quarters into 2026, and then requested details on the go-to-market strategy and expected meaningful revenue contribution timeline for the 3-nanometer PCIe switch.

Answer

President and CEO Steve Sanghi cited several tailwinds post-December, including the closing of the sell-in/sell-through gap, normalization of distributor and direct customer inventories (currently buying less than consuming), and historically strong June and September quarters. Corporate VP of Data Center Solutions Business Unit Brian McCarson explained that the 3nm PCIe switch targets hyperscaler, enterprise OEM, and ODM customers, with a total available market exceeding $2 billion annually. He expects first revenue in 2027, with some appearing in late 2026, aligning with typical 12-18 month design win cycles.

Joshua Buchalter asked about the drivers behind Microchip's longer-term confidence for two to four quarters of strong results beyond March, considering current backlog and customer behavior. He also inquired about the go-to-market strategy, commercial engagement maturity, competitive positioning (performance vs. cost), and expected revenue contribution for the 3nm PCIe switch.

Answer

President and CEO Steve Sanghi reiterated confidence based on the anticipated closing of the sell-in/sell-through gap, direct customer inventory correction, and seasonally strong June/September quarters. Corporate VP of Data Center Solutions Business Unit Brian McCarson detailed the go-to-market strategy targeting hyperscalers, OEMs, and ODMs, emphasizing industry-leading features, with first revenue expected in late 2026 and 2027.

Joshua Buchalter asked about the signals management is watching to increase factory utilization and why they are confident December is the right time to do so, and also requested a rule of thumb for how margin charges will unwind.

Answer

CEO Steve Sanghi explained the decision to ramp factories in December is a mathematical necessity to avoid an impossibly steep ramp later, as current output is far below shipment rates. CFO Eric Bjornholt added that inventory write-down charges will likely decrease faster than underutilization charges, which will abate more gradually as factory ramps take time.

Joshua Buchalter asked what specific signals Microchip is looking for to justify raising factory utilization rates and why there is conviction that December is the right time. He also asked for any rules of thumb on how the underutilization and write-down charges are expected to unwind over time.

Answer

CEO Steve Sanghi explained the decision is based on a mathematical model forecasting future die needs against current inventory. He noted that production is so far below the shipment rate that they must begin ramping well before inventory is fully depleted to avoid an impossible-to-meet step-up in production later. CFO Eric Bjornholt added that inventory write-downs will likely decrease more quickly, while the reduction in underutilization charges will be more gradual as factory ramps take time.

Joshua Buchalter asked what has improved from a visibility standpoint to allow management to conclusively call a revenue bottom, given previously stated uncertainties.

Answer

CEO Steve Sanghi cited several factors providing increased confidence: 1) Distribution sell-through to end customers is now increasing after many quarters of decline. 2) Bookings rose significantly in the March quarter, with April's bookings being even stronger. 3) The starting backlog for the June quarter was higher than March's, and the current backlog for the September quarter is tracking even stronger, indicating sustained demand.

Joshua Buchalter asked for directional expectations on underutilization charges and inventory write-downs for the December quarter. He also inquired if the company is rethinking its relationship with the distribution channel post-cycle.

Answer

Executive J. Bjornholt stated he expects 'more of the same,' with continued low factory utilization and high inventory reserves, but noted the inventory consists of long-life products likely to sell in the future. CEO Ganesh Moorthy affirmed that channel partners remain an important part of their strategy, accounting for about 50% of sales and providing reach to a broad customer base.

Josh Buchalter asked about the Q3 2025 performance of end markets, specifically seeking updates on enterprise data guidance, and inquired about Michael Hsing's philosophical approach to the AI market given its concentration and MPS's diversified growth strategy.

Answer

Bernie Blegen (EVP and CFO) noted better-than-anticipated performance in enterprise data and industrial markets in Q3, with enterprise data seeing momentum into early next year due to new customers. Michael Hsing (CEO and Founder) added that recent growth stems from greenfield products released years ago. Regarding AI, Michael Hsing emphasized MPS's focus on demonstrating superior technology and customer service in any market segment, regardless of the specific AI company.

Josh Buchalter of Cowen inquired about the Q4 guidance, specifically the expected growth drivers and potential headwinds across end markets, with a focus on the enterprise data segment's performance outlook. He also asked about Michael Hsing's philosophical approach to the AI market, given past reservations about concentration and visibility, and how MPS selects opportunities in this rapidly evolving space.

Answer

Bernie Blegen, EVP and CFO, highlighted better-than-anticipated Q3 performance in enterprise data and industrial, noting momentum from new customer layering in enterprise data for Q4 and early next year. Michael Hsing, CEO and Founder, added that current growth stems from greenfield products launched 2-3 years prior, anticipating continued revenue enhancement. Regarding AI, Michael Hsing stated that MPS aims to be the best in any market segment with superior technology, customer service, quality, and shipments, engaging with both large and small companies to demonstrate their capabilities.

Joshua Buchalter asked for metrics on the contribution from new AI ASIC platforms in the second half of the year compared to the lead GPU customer. He then pivoted to ask about the cautious outlook for the Storage & Compute segment and the potential for further share gains in DDR5.

Answer

Founder, Chairman, President & CEO Michael Hsing deflected the AI contribution question, emphasizing the growth in the rest of the business. On Storage & Compute, EVP & CFO Bernie Blegen explained the caution stems from two atypically strong quarters and historical market volatility, not a change in competitive position. Hsing added that caution is relative, given the segment's projected 40-50% full-year growth.

Joshua Buchalter followed up on the storage and compute segment's 38% sequential growth, seeking assurance that it wasn't due to inventory build. He also asked for more detail on the source of increased confidence in the enterprise data segment for the second half.

Answer

CFO Bernie Blegen clarified that the strong Q1 in storage and compute was an anticipated 'atypical seasonal uplift.' CEO Michael R. Hsing and Vice President of Finance Tony Balow reiterated that growth was broad-based across memory, notebooks, and desktops. Regarding enterprise data, Hsing and Blegen explained that increased confidence comes from being closer to the second half, providing better visibility on design wins and qualifications across multiple customers.

Joshua Buchalter asked about the competitive environment for new hyperscale ASIC programs, specifically regarding dual-sourcing, and requested clues on the company-level growth outlook for 2025 and which segments would be the biggest contributors.

Answer

EVP and CFO Bernie Blegen explained that MPS's ability to innovate, its time-to-market, and overall performance give it a first-mover advantage, but customer sourcing decisions are ultimately out of their control. CEO Michael Hsing added that the timing of these ramps is uncertain. Regarding 2025 growth contributors, Michael Hsing emphasized the company's diversified growth strategy, stating that multiple segments are expected to ramp and if one area slows, another will pick up, consistent with their strategy for the last 25 years.

Joshua Buchalter asked for clarification on the Enterprise Data segment, seeking to understand the relative impact of customer ordering patterns versus second-sourcing. He also questioned whether this diversification is occurring on new or existing AI platforms and asked for a rule of thumb on MPS's content opportunity in new AI accelerators.

Answer

EVP and CFO Bernie Blegen reiterated that no share position change is expected in Q3/Q4, framing second-sourcing as a long-term function of being the market leader. CEO and Founder Michael Hsing added that new designs for tensor processors (TPUs/SoCs) are starting to ramp. Regarding content opportunity, Hsing declined to give a specific rule of thumb, instead emphasizing that MPS provides the best, most power-efficient solutions, and the market growth will naturally drive their revenue.

Joshua Buchalter from TD Cowen asked for more context on Intel's comments regarding fixed-function computing and supporting ASICs, inquiring if this strategy targets Foundry customers or new products, and the types of applications for custom silicon. He also asked if the improved balance sheet changed Intel's stance on potentially abandoning 14A development.

Answer

CEO Pat Gelsinger explained that central engineering is driving ASIC design to extend x86 IP reach and deliver purpose-built silicon for system/cloud customers, leveraging Foundry and packaging. Regarding 14A, Mr. Gelsinger stated that customer engagement has increased significantly since last quarter, leading to greater confidence in its development and attracting key talent.

Joshua Buchalter from TD Cowen asked for more context on Intel's comments regarding fixed-function computing and supporting more ASICs, inquiring whether this initiative targets potential foundry customers or internal products, and what types of applications would utilize custom silicon. He also asked if the improved balance sheet had changed Intel's stance or language regarding the potential abandonment of 14A, a topic from the previous quarter.

Answer

CEO Pat Gelsinger explained that the Central Engineering Group will enhance ASIC design, extending x86 IP reach and delivering purpose-built silicon for system, cloud, and enterprise customers, leveraging Foundry and packaging capabilities. He confirmed that engagement with 14A customers has increased since last quarter, leading to greater confidence in defining the technology, process, yield, and IP requirements, and attracting key talent.

Joshua Buchalter inquired about the momentum of scale-up Ethernet, its competitive standing against UA Link and PCIe solutions, the significance of Tomahawk Ultras for lower latency, and the potential size of the scale-up Ethernet opportunity for AI networking over the next year.

Answer

Hock Tan, President and CEO, emphasized that Broadcom's Ethernet solutions are disaggregated and open source, compatible with XPUs. He highlighted Ethernet's proven nature, ability to achieve low latency (better than NVLink/Infiniband), and the competition in the open-source system. He noted that for XPUs, it's all Ethernet, and hyperscalers use Ethernet for scale-out and increasingly for scale-across.

Joshua Buchalter from TD Cowen questioned the Q3 gross margin guidance, noting that the implied incremental margin seems low. He asked if factors beyond the mix shift to custom XPUs were at play and inquired about the long-term margin profile of the custom business.

Answer

CFO Kirsten Spears attributed the guided 130 basis point sequential decline in gross margin primarily to a higher mix of XPU revenue, which she reiterated has slightly lower margins. She confirmed no other factors were at play. CEO Hock Tan added that the analyst's simple analysis was "totally wrong."

Joshua Buchalter of TD Cowen asked for clarification on the Q3 gross margin guidance, noting the implied incremental margin seemed low, and inquired about the long-term margin profile of the growing custom silicon business.

Answer

CFO Kirsten Spears explained that the guided 130 basis point sequential decline in consolidated gross margin is primarily driven by a higher mix of custom accelerator (XPU) revenue, which has historically carried margins slightly lower than the corporate average. CEO Hock Tan added that the analysis is complex with many moving parts.

Joshua Buchalter asked for details on the scope of the new AMD agreement, questioning why AMD expanded its use of Arteris IP and how the deal, with FlexGen's higher ASP, would impact the financial model.

Answer

CEO K. Charles Janac explained that AMD chose Arteris's new FlexGen product after extensive evaluation due to its superior productivity and performance advantages for various products, including AI data center chiplets. CFO Nick Hawkins clarified that this significant deal was already factored into the company's existing financial guidance, as it is one of several major 'whale deals' Arteris secures regularly.

Joshua Buchalter of TD Cowen asked if Arteris is seeing direct changes in customer behavior due to the current tariff and trade environment, and inquired about the drivers for the expected revenue and ACV from the FlexGen platform in the second half of the year.

Answer

CEO Karel Janac acknowledged some project replanning in China but noted that the broader economic uncertainty is encouraging larger companies to outsource system IP to commercial vendors like Arteris, keeping licensing activity robust. CFO Nicholas Hawkins added that while the business pipeline is strong, guidance ranges were widened due to macro uncertainty. Regarding FlexGen, Mr. Janac highlighted positive feedback from over 20 customer projects evaluating the technology and its full production status, leading to confidence in second-half bookings and revenue. Mr. Hawkins clarified that the financial impact will appear first in RPO and ACV, with a more muted effect on 2025 revenue due to its ratable nature.

Joshua Buchalter of TD Cowen inquired about the impact of the challenging macroeconomic environment, specifically focusing on the dynamics of the China auto market and whether share shifts toward local vendors represent a net positive or headwind for Arteris. He also asked for more details on the contribution from the enterprise computing segment and its potential growth funnel.

Answer

CEO Karel Janac stated that Arteris's strategy is to engage with a wide range of customers, including start-ups, car manufacturers, and Tier 1s, ensuring they benefit regardless of market share shifts. He noted a strong presence in China with customers like NEO. CFO Nicholas Hawkins added that while key customer Mobileye faces headwinds, the impact on Arteris's full-year revenue is less than 1%. Regarding enterprise computing, Mr. Hawkins confirmed it is the largest revenue contributor at over 30%, driven by AI, with the broader AI/ML horizontal accounting for about 40% of total revenue.

Joshua Buchalter of TD Cowen inquired about any changes in customer order patterns, such as pull-ins, due to the geopolitical environment and sought clarification on the Mobileye foundry relationship with TSMC.

Answer

President & CEO Jean-Marc Chery stated there have been no order pull-ins and that the market is in an up-cycle, though the automotive landscape is less stable. Regarding Mobileye, he confirmed that while TSMC technology is used, ST handles the design and engineering support for IQ5, IQ6, and IQ7, and expects no revenue impact for the next three to five years.

Joshua Buchalter of TD Cowen inquired about any changes in customer order patterns or potential pull-ins due to the geopolitical environment, and asked for clarification on the Mobileye foundry relationship with TSMC.

Answer

President & CEO Jean-Marc Chery confirmed that no order pull-ins were observed in June and that the automotive market's dynamic is due to shifting competition, not geopolitical pull-ins. Regarding Mobileye, he clarified that ST has used TSMC's technology since the IQ5 generation for design and support, and the recent announcement does not change their revenue outlook for the next 3-5 years.

Joshua Buchalter asked for an update on downstream inventory levels in the distribution channel and inquired about ST's strategic positioning and manufacturing flexibility amid the changing global trade environment.

Answer

CFO Lorenzo Grandi reported that channel inventory decreased in Asia during Q1 but remained elevated in EMEA and the Americas, with a significant reduction expected in Q2. CEO Jean-Marc Chery detailed the company's long-standing 'China for China' strategy and other footprint adjustments, stating that ST is well-equipped to handle the current trade situation and has not observed any panic from customers.

Joshua Buchalter requested an update on channel inventory levels and asked if the outlook assumes a normalization during Q3. He also inquired about the drivers for the implied gross margin improvement in the fourth quarter.

Answer

Lorenzo Grandi, CFO, stated that distribution inventory levels did not improve in Q2 and are similar to Q1, with material improvement now expected in Q4. For the Q4 gross margin uplift, he identified improved product mix as the main driver, supplemented by a decline in unused capacity charges from the 350 basis point impact seen in Q3. He does not expect a positive impact from pricing.

Joshua Buchalter inquired about the competitive differentiation of Credo's Pilot software platform and asked for details on the infrastructure build-outs of the company's new, diversifying customer base.

Answer

CEO Bill Brennan described the Pilot software platform as a key differentiator, leveraging a decade of experience to provide customers with critical debug, telemetry, and diagnostic tools that enhance reliability and uptime. He stated that this platform provides visibility across all tiers of innovation, from SerDes IP to the full system. Regarding new customers, Brennan confirmed their initial ramps are primarily for AI deployments, with longer-term opportunities in disaggregated switching.

Joshua Buchalter inquired about the go-to-market strategy for optical DSPs and if the new 3nm 200-gig product marks a competitive step-change. He also asked about customer approaches to second-sourcing in the AEC market following a competitor's announcement.

Answer

CEO William Brennan clarified that near-term DSP growth will come from 50-gig and 100-gig per lane products, with the 200-gig opportunity being a longer-term play for fiscal '27. On competition, Brennan acknowledged customers want multiple AEC suppliers but stressed Credo's strategy of being first-to-market with customized, reliable solutions gives them a strong competitive position, even with the expectation of eventual second-sourcing.

Joshua Buchalter from TD Cowen asked for more detail on why a hyperscale customer might explore 'multiple tracks' for an ASIC, questioning if it's for different performance skews or entirely different workloads.

Answer

Chairman and CEO Matt Murphy politely declined to provide additional color on the topic beyond his previous statements, indicating he had shared the maximum detail possible for the call. He suggested that the upcoming AI Day might offer more discussion around different business models.

Joshua Buchalter of TD Cowen asked about the future growth potential for Infineon's automotive MCU market share and sought clarification on the expected gross margin decline in the second half of the fiscal year despite revenue growth.

Answer

CEO Jochen Hanebeck expressed expectations for further gains in auto MCU share, driven by the transition to the 40-nanometer generation where major design wins were secured, though the exact peak is hard to predict. CFO Sven Schneider explained the gross margin outlook, stating that while the full-year target is "around 40%," the second half might be slightly below that level if the tariff-related revenue haircut materializes, whereas the first half was slightly above. He also noted the currency impact on COGS is factored into their overall profitability rule of thumb.

Joshua Buchalter asked about the potential for further market share growth in the auto MCU business and sought clarification on the gross margin trajectory for the second half of the fiscal year.

Answer

CEO Jochen Hanebeck expressed expectations for some further gains in auto MCU market share, driven by the transition to the 40-nanometer generation, but noted it's difficult to predict the exact peak. CFO Sven Schneider clarified the "around 40%" gross margin guidance, suggesting the second half might be slightly below 40% if the tariff haircut materializes, while the first half was slightly above.

Lanny, on behalf of Joshua Buchalter from TD Cowen, asked for the reasons behind the guided sequential decline in the materials business and for an outlook on interest expense following recent capital raises.

Answer

CFO Neill Reynolds attributed the materials segment weakness to broader end-market softness and the timing of customer shipments as inventory is managed. On interest expense, Reynolds clarified that cash interest is expected to decrease in fiscal 2025 compared to fiscal 2024, partly due to restructuring customer refundable deposit (CRD) interest payments. This, combined with restructuring savings, is expected to improve operating cash burn.

Joshua Buchalter asked about the Mohawk Valley revenue ramp, seeking to confirm if the 2-3 quarter lag from utilization to revenue is still accurate, and inquired about the timeline to reach 30% utilization.

Answer

CFO Neill Reynolds confirmed the lag from wafer start to revenue is still a couple of quarters. He noted that revenue translation also depends on product mix, with Mohawk Valley being over 95% EV in the September quarter. He reiterated that 20% utilization with a heavy auto mix translates to roughly $80 million to $100 million in revenue.