Michael Ng

Michael Ng asked about the new listing agent referral program, specifically how it might translate into market share gains, who bears the referral fee, and its impact on commission rates. He also inquired about the exclusivity of the Rocket and Redfin partnership.

Answer

CEO Robert Reffkin confirmed that the Rocket and Redfin partnership is exclusive. Regarding the listing agent referral program, he explained that it offers agents flexibility to decide when and to whom buyer inquiries on their listings are routed. To honor listing agents who route inquiries to others, a 10% referral fee would be paid back to them by the buyer agents.

Michael Ng inquired about the mechanics and potential market share impact of the new listing agent referral program, including who bears the referral fee, and whether the Rocket partnership is exclusive.

Answer

Robert Reffkin, Founder and CEO, explained that the listing agent referral program offers flexibility for agents to manage buyer inquiries, with a 10% referral fee paid by the buyer agent to the listing agent for referred leads. He confirmed that the Rocket Redfin partnership is exclusive.

Michael Ng of Goldman Sachs inquired about any observable changes in commission rates, as reflected by revenue as a percentage of GTV. He also asked for the outlook on agent net additions for the remainder of the year, considering the overall shrinkage of agents in the industry.

Answer

CFO Kalani Reelitz reported that commission rates have remained stable year-over-year with no significant degradation. He also noted that while the industry is losing agents, Compass continues to see strong recruiting momentum, with a baseline expectation of 600-700 principal agent net adds annually, with potential upside from boutique brokerage 'walkovers'.

Michael Ng inquired about agent churn trends during the quarter, asking if there were any unusual drivers. He also asked what Compass considers the primary yardstick for success for its 3-phase marketing strategy, such as agent recruitment or market share gains.

Answer

CEO Robert Reffkin defined success for the 3-phase strategy as giving agents a competitive edge to outperform the market, secure more listings, and achieve better terms for sellers. CFO Kalani Reelitz addressed churn, stating it was in line with historical levels and consistent with the prior year. He noted that Q1 is typically the highest churn quarter due to the annual agent renewal process.

Michael Ng asked about the long-term vision for Compass's inventory strategy, questioning if success is primarily about attracting agents or if it could evolve into new revenue streams like licensing fees to portals.

Answer

CEO Robert Reffkin described the long-term vision as making Compass known as the premier brokerage for maximizing a home's sale value. He believes this reputation will naturally attract top agents, drive transactions, and enable reinvestment in the platform. He framed the strategy as empowering agents against restrictive industry rules, ensuring the agent, not a third party, dictates the future of real estate marketing.

Michael Ng asked about the key drivers behind the strong organic principal agent net additions in the third quarter and inquired about the company's outlook for agent growth in the foreseeable future.

Answer

CEO Robert Reffkin attributed the growth to a rebuilt culture, superior agent training, a strong technology platform, and an improved brand perception of stability. Executive Kalani Reelitz added that the company expects to continue adding over 700 principal agents organically each quarter, which is a key pillar of its '30-30' growth strategy.

Michael Ng inquired about the philosophy behind Arista's new customer segmentations (Cloud and AI Titans, AI and Specialty Providers) and whether it signals opportunities in areas like Oracle and Neoclouds. He also asked about the remaining revenue percentage after accounting for Cloud and AI Titans and the top two customers, implying a new hyperscaler approaching 10%.

Answer

CEO Jayshree Ullal clarified the math, stating that after the top two customers (16% and 26%), 6% of the Cloud and AI Titans segment remains. She defined Cloud and AI Titans as very large-scale customers with over 1 million servers and 100,000 GPUs, focusing on models and XPUs. The shift to AI and Specialty Providers (e.g., Oracle's AI Acceleron) reflects customers with a heavily AI-centric strategy, distinct from traditional cloud offerings.

Michael Ng asked about the philosophy behind Arista's new customer segmentations (Cloud and AI Titans, AI and Specialty Providers), and if this signals more opportunities with entities like Oracle and Neoclouds. He also inquired about the implication of the remaining 12% of Cloud and AI revenue (after accounting for the two largest customers), suggesting a new hyperscaler might be approaching 10%.

Answer

Jayshree Ullal, Arista's Chairperson and CEO, clarified that Cloud and AI Titans are large-scale customers with over 1 million servers and 100,000 GPUs, focused on models and XPUs. The AI and Specialty Providers category was created due to customers like Oracle, whose strategy shifted to be heavily AI-centric, creating a dual personality between OCI and pure AI. She corrected the math, stating the remaining percentage was 6%, not 12%.

Michael Ng asked about Arista Networks' positioning in full rack solutions, whether it will be a partnership model, and how the company plans to address the growing convergence between compute and networking.

Answer

Jayshree Ullal, Arista Networks' CEO and Chairperson, highlighted that Andy Bechtolsheim is personally driving rack projects, with Arista involved in early designs for cabling, co-packaging, power, cooling, and XPU connections. She mentioned the UEC and ESUN specs and the potential for a Blue Box JDM model involving IP and reference designs.

Michael Ng inquired about Arista's strategic positioning for full rack solutions and its approach to the growing convergence of compute and networking, particularly concerning potential partnership models.

Answer

Jayshree Ullal, CEO and Chairperson, highlighted Arista's involvement in early designs for full rack solutions, driven by Andy Bechtolsheim, and their role in integrating cabling, power, cooling, and network connections for various accelerators. She mentioned the importance of Ethernet standards like UEC and ESUN, and the potential for JDM (Joint Design Manufacturing) models.

Michael Ng from Goldman Sachs asked for more details on the growth in deferred revenue and its impact on the guidance increase, and also inquired about the confidence in achieving the $10 billion revenue target for 2026.

Answer

CFO Chantelle Breithaupt linked the deferred revenue growth to new products, new use cases like AI, and customer acceptance clauses. CEO Jayshree Ullal added that the complexity of AI deployments is extending these cycles. Regarding the 2026 target, she expressed high confidence, stating the goal is to achieve $10 billion in revenue two years ahead of the previous 2028 schedule.

Michael Ng asked for more details on management's increased confidence in reaching its $10 billion revenue target sooner than expected, and how this optimism is balanced with current market uncertainties.

Answer

CEO Jayshree Ullal referenced her November 2023 Analyst Day projection that achieving the next $5 billion in revenue would be faster than the nine years it took to reach the first $5 billion. The current business momentum reinforces this accelerated timeline.

Michael Ng inquired about the rollout timing for Arista's AI back-end switches and whether their deployment is contingent on the availability of next-generation GPUs or custom ASICs.

Answer

CEO Jayshree Ullal confirmed Arista's commitment to four of its five major AI cluster projects, with one stalled due to GPU and funding issues. For the active projects, she noted that three customers are expected to deploy a cumulative 100,000 GPUs this year, proceeding with current technology while awaiting next-generation chips. The fourth customer is in a pilot phase, migrating from InfiniBand to Ethernet, with production anticipated next year.

Michael Ng asked about the strength in residential broadband ARPU, noting it was nearly $77 and potentially the second highest on record, and whether this serves as a good baseline for 2026. He also inquired about expectations for video programming costs per subscriber in 2026, considering factors like skinny bundles and carriage disputes.

Answer

CFO Marc Sirota explained that residential ARPU grew 0.4% year-over-year, overcoming video headwinds with strong connectivity and other ARPU expansion, driven by broadband. He noted 43% of customers now take one gig services or higher, reflecting discipline in retention and pricing. Chairman and CEO Dennis Mathew added that improved command over ARPU erosion and strategic acquisition pricing contribute to discipline. Regarding video programming costs, Mathew stated a laser focus on data-driven negotiations for flexibility and value, while Sirota highlighted a 16% reduction in programming costs in Q4 and a 15% reduction for the full year, with programming costs per subscriber down almost 3% due to optimized packaging and new 'skinnier' tiers.

Michael Ng inquired about the strength of residential broadband ARPU in Q4 2025, whether it serves as a good baseline for 2026, and expectations for video programming costs per subscriber in 2026, including opportunities for reduction.

Answer

CFO Marc Sirota attributed residential ARPU growth to product mix, increased penetration of 1-gig services, and disciplined retention and pricing strategies, noting it was a trade-off for subscriber numbers. Chairman and CEO Dennis Mathew added that improved command over ARPU erosion and targeted rate events contribute to discipline. Dennis Mathew and Marc Sirota emphasized a laser focus on video programming costs, renegotiating agreements with data-driven insights, and achieving a 16% reduction in Q4 programming costs, leading to higher absolute video profitability in 2025 compared to 2022 despite revenue declines.

Michael Ng asked about the drivers behind Cisco's EBIT margin outperformance in the quarter, specifically if it was due to cost savings or a mixed benefit from hyperscale customers. He also revisited the Q3 gross margin comments, asking if the 'timing' implication means more pricing actions to recover commodity cost inflation or relates to the mix of AI revenue.

Answer

Mark Patterson (CFO, Cisco Systems) attributed the EBIT margin outperformance (34.6%, highest in four quarters) to strong execution, financial prudence in expenditures, and a determination to drive profitability, evidenced by EPS growing faster than revenue. Regarding gross margin timing, he explained that the measures (price increases, T&Cs modifications) take time to run through, and their impact will be seen over time.

Michael Ng asked about the drivers behind Cisco's EBIT margin outperformance in the quarter, specifically whether it was due to cost savings or a mixed benefit from hyperscale customers. He also sought clarification on the April quarter's gross margins, asking if the 'timing' comment implies more pricing actions or a shift in AI revenue mix.

Answer

CFO Mark Patterson stated that the operating income percentage of 34.6% was the highest in four quarters, reflecting strong execution and financial prudence, with EPS growing faster than the top line. Regarding gross margins, he explained that the timing comment refers to the time it takes for measures like price increases and modifications to terms and conditions with partners and customers to fully impact results.

Michael Ng of Goldman Sachs Group, Inc. asked how the over $2 billion in FY2025 AI orders translated into revenue for the year and how to think about the revenue conversion in FY2026. He also requested a breakdown of networking orders by sub-segment.

Answer

CEO Chuck Robbins highlighted the broad strength in the web-scale business, with four customers growing orders in triple digits. CFO Mark Patterson specified that approximately $1 billion of the AI infrastructure orders were recognized as revenue in fiscal 2025. The company did not provide a detailed sub-segment breakdown for networking orders.

Michael Ng of Goldman Sachs inquired about the specific drivers of the strong networking orders, questioning the contribution from the WiFi 7 cycle versus a broader recovery, and asked for the company's organic revenue growth rate excluding Splunk.

Answer

CEO Chuck Robbins attributed the strength to broad-based demand across enterprise switching, data center switching, enterprise routing, and WiFi 7, which he sees as a 12-to-18-month cycle. CFO Scott Herren declined to provide an organic growth figure, stating that Splunk is now fully integrated and considered part of the company's baseline run rate.

Michael Ng from Goldman Sachs asked about the drivers behind the strong networking orders, questioning if it was a broad recovery or a product cycle like WiFi 7, and requested the company's organic revenue growth rate excluding Splunk.

Answer

CEO Chuck Robbins attributed the networking strength to broad-based demand across enterprise switching, data center switching, routing, and WiFi 7, which he expects to be a 12-to-18-month cycle. CFO Scott Herren declined to provide an organic growth rate, stating that Splunk is now fully integrated and considered part of the company's baseline run rate.

Michael Ng from Goldman Sachs requested details on the first seven-figure Hypershield deal, including its nature and customer reception. He also asked for the organic security order growth figure, excluding Splunk, and for qualitative commentary on security trends.

Answer

CEO Chuck Robbins revealed the Hypershield deal was with a large financial institution, calling it a positive sign of the technology's viability. He explained that organic security orders grew in the low-to-mid single digits but would have been in the mid-to-high teens if not for spending delays in the U.S. Federal sector. Robbins highlighted that over 1,000 customers have now deployed Cisco's new security products like XDR and Secure Access, indicating strong adoption.

Michael Ng requested an update on Sweetwater One and Sweetwater Two energization dates and how the ERCOT batch process affects customer contract negotiations for those sites. He also asked about the expected recognition timeline for the $2.3 billion of annualized revenue run rate (ARR) from the Microsoft contract and Prince George.

Answer

Kent Draper, Chief Commercial Officer, confirmed Sweetwater 1 is on track for Q2 energization (1.4 GW capacity) and expects the ERCOT batch process to clarify real megawatts, potentially aiding customer discussions. He added that Prince George revenue is already operational and ramping, while Microsoft contract revenue will come online progressively over the year, commencing Q2.

Michael Ng from Goldman Sachs asked for an update on the Sweetwater One and Two energization dates, whether the ERCOT batch process affected customer contract negotiations for these sites, and when the $2.3 billion of annualized revenue run rate (ARR) from Microsoft and British Columbia is expected to commence in the P&L.

Answer

Kent Draper, CCO, confirmed Sweetwater One is on track to energize in Q2 FY2026, capable of 1.4GW, and expects the batching process to clarify real megawatts, aiding future customer discussions. He also stated that a decent proportion of the British Columbia ARR is already operational, with Microsoft contract revenues progressively coming online starting Q2 FY2026.

Michael Ng asked about the new strategic and legacy segment reporting, specifically what products are included in 'strategic' (e.g., what 'grow' products were excluded like VoIP), and the assumptions for strategic revenue growth and legacy revenue declines leading to 2028 business revenue growth inflection.

Answer

Chris Stansbury, CFO, explained that 'grow' items excluded from 'strategic' were specific declining product lines, such as lower capacity connectivity, which are now considered legacy. Products moved from 'nurture' to 'strategic' include digitally delivered services like Ethernet on Demand and VPN on Demand. He anticipates the mix shift to favor the strategic bucket, growing from 52%, with more details to be shared at Investor Day.

Michael Ng asked for clarification on Lumen's new strategic and legacy segment reporting, specifically what constitutes the strategic segment, which 'grow' items were excluded (e.g., VoIP), and the assumptions for strategic revenue growth and legacy revenue declines leading to the 2028 business revenue inflection.

Answer

Chris Stansbury, CFO, explained that the strategic segment includes modern forms of connectivity, while specific declining product lines (e.g., lower capacity connectivity) were moved to legacy. Digitally delivered products like Ethernet on Demand and VPN on Demand were moved from 'nurture' to 'strategic.' He anticipates the strategic segment's mix to grow from 52% and promised a more detailed view at the upcoming Investor Day.

Michael Ng (Goldman Sachs) asked about Charter Communications' operating expense growth for the upcoming year and investment opportunities, specifically how the company balances commitments to EBITDA growth with accelerating momentum in video, streaming app inclusions, and Spectrum Mobile, while also realizing efficiencies.

Answer

Chris Winfrey, President and CEO, stated that Charter has already made significant investments in pricing, U.S.-based sales/service, and technology platforms, which now allow for increased efficiency while continuing to innovate. Jessica Fischer, CFO, added that she expects cost to service customers to be slightly down due to operational improvements and technology utilization, and marketing/residential sales expense growth to be meaningfully slower this year, reflecting past investments and efforts to drive efficient market messaging.

Michael Ng asked how Charter balances operating expense growth and investment opportunities in video, mobile, and convergence with commitments to EBITDA growth and efficiency realizations.

Answer

President and CEO Chris Winfrey stated that Charter has already made significant investments in pricing, U.S.-based sales/service, and technology platforms, which now enable increasing efficiency while still innovating. CFO Jessica Fischer added that cost to service customers is expected to be slightly down year-over-year due to operational improvements and technology use. Marketing and residential sales expense growth is also anticipated to be slower due to prior investments and refined messaging.

Michael Ng of Goldman Sachs inquired about the investments required to achieve Verizon's strong 2026 postpaid phone outlook, specifically whether improvements would stem more from churn reduction or increased marketing and promotions for gross adds. He also asked for details on the raised fiber passings target of 40-50 million over the medium term, seeking insight into new opportunities.

Answer

CEO Dan Schulman explained that the 2026 postpaid phone target is achievable without excessive promotions, emphasizing churn reduction (e.g., 5 basis points reduction covers half the target) by avoiding price increases without corresponding value, improving customer experience, and leveraging convergence opportunities like Fixed Wireless Access and Frontier acquisition synergies. CFO Tony Skiadas added that the increased fiber passings target reflects optimism in convergence, with plans for at least 2 million organic passings annually and potential inorganic growth.

Michael Ng asked about the investments required to drive postpaid phone subscriber growth, specifically whether improvements would come from churn reduction or increased marketing and promotions. He also inquired about the rationale behind raising the fiber passings outlook to 40-50 million over the medium term, seeking details on opportunities within or outside the existing footprint.

Answer

CEO Dan Schulman explained that Verizon achieved 616,000 postpaid phone net adds in Q4 2025 in a fiscally responsible manner, without core base price increases. For 2026, Verizon targets 750,000 to 1 million postpaid net adds, which is 2-3 times last year's total but still a modest portion of the market, achievable without excessive promotions. He highlighted that a 5 basis point reduction in churn would achieve half the target. Schulman noted that past price increases without corresponding value led to a 25 basis point churn increase over three years, resulting in 2.25 million lost net adds and over $3 billion in potential revenue, a practice Verizon will cease. Investments in customer experience, leveraging $5 billion in OpEx savings, and convergence opportunities (Fixed Wireless Access, Frontier acquisition) are key. The Frontier acquisition, Tillman partnership, and Starry acquisition (for MDUs) contribute to the increased fiber passings target, with plans for at least 2 million organic passings annually and consideration for inorganic growth/partnerships.

Michael Ng of Goldman Sachs inquired about the investments required to achieve Verizon's strong postpaid phone outlook for 2026, specifically asking whether improvements would stem more from churn reduction or increased marketing and promotions to drive gross additions. He also asked about the rationale behind raising the fiber passings outlook to 40-50 million, seeking details on in-footprint versus out-of-footprint opportunities.

Answer

CEO Dan Schulman explained that the 2026 postpaid phone target is achievable without over-reliance on promotions or pricing, emphasizing that a 5 basis point churn reduction alone would meet half the target. He highlighted strategies like avoiding price increases without value, improving customer experience, and leveraging convergence opportunities (Fixed Wireless Access, Frontier acquisition) to reduce churn and drive net adds. CFO Tony Skiadas added that the Frontier acquisition, Tillman partnership, and Starry acquisition contribute to the expanded fiber passing goal, with plans for at least 2 million organic passings annually and potential inorganic growth.

Michael Ng asked about parallels between Verizon and PayPal that inform CEO Dan Schulman's view on improvement opportunities, identifying areas needing a 'change agent.' He also inquired if Verizon's perks and 'my plan' strategy aligns with a 'super app' approach and its strategic importance.

Answer

CEO Dan Schulman drew parallels with PayPal's shift to a 'customer champion' model, emphasizing addressing pain points, delighting customers, funding investments through cost cuts, and cultural transformation to reclaim market leadership. He deferred specific comments on a 'super app' strategy, stating it's early days for developing detailed value proposition thoughts.

Michael Ng of Goldman Sachs asked about parallels between Verizon and PayPal that inform CEO Dan Schulman's view on improvement opportunities, identifying areas most in need of change. He also inquired if Verizon's perks and myPlan strategy, resembling a super app, is central to its strategic blueprint and its key benefits.

Answer

CEO Dan Schulman drew parallels with PayPal's shift to being a "customer champion," emphasizing hard work, challenging the business model, and addressing pain points to unlock growth. He noted Verizon's team's desire to reclaim market leadership by focusing on customers and efficiency. Regarding the super app strategy, he indicated that specific thoughts are still developing, with more details to be shared in January.

Michael Ng asked for insights into any specific tough comparisons for product categories in the March quarter, given the strong revenue growth outlook of 13%-16%, referencing previous launches like MacBook Air with M4 and iPhone 16e. He also inquired about new growth opportunities in services advertising, specifically mentioning new ad slots in the App Store and potential expansion to Maps or TV.

Answer

CFO Kevan Parekh stated there were no particular comp issues to note for the March quarter, unlike the difficult Mac comparison in the previous quarter, attributing the outlook to a continuation of the strong cycle, subject to supply constraints. For services, Kevan Parekh highlighted broad-based performance with all-time records in advertising, music, payment, and cloud services, mentioning new Wallet features like Digital ID and additional App Store search ads as exciting opportunities, underpinned by the 2.5 billion active device installed base.

Michael Ng requested further details on the drivers of the services revenue acceleration, including potential impacts from cross-selling with new iPhone launches, installed base growth, and bundling initiatives like Apple One. He also inquired about shifts in iPhone sell-through trends between upgraders and switchers, the role of U.S. carrier promotional activity, and channel inventory levels.

Answer

CFO Kevan Parekh stated that the services strength was broad-based across categories and geographies, not attributable to a single factor, and expressed satisfaction with the overall result. CEO Tim Cook confirmed a September quarter record for iPhone upgraders, noted it was too early to comment on iPhone 17 switcher trends, and mentioned that channel inventory ended the quarter at the low end of the target range due to supply constraints on several iPhone 16 and 17 models.

Michael Ng asked for more details on the drivers behind the acceleration in services revenue growth, such as cross-selling with new iPhone launches, install base growth, or bundling initiatives like Apple One and Apple Care One. He also inquired about shifts in iPhone sell-through trends between upgraders and switchers, the impact of U.S. carrier promotional activity, and channel inventory levels.

Answer

CFO Kevan Parekh stated that the services acceleration was not due to one single factor but rather broad-based strength across categories and geographies. CEO Tim Cook noted a September quarter record for upgraders but deemed it too early to comment on the iPhone 17 cycle's mix of upgraders versus switchers. He also mentioned that channel inventory ended at the low end of the targeted range due to strong demand and supply constraints on several iPhone 17 models.

Michael Ng inquired about the drivers behind record upgrade rates for iPhone, Mac, and Watch, questioning if it was due to product strength or a growing installed base. He also asked for details on the notable increase in capital expenditures and whether it was primarily driven by AI investments or supply chain diversification.

Answer

CEO Tim Cook attributed the record upgrades directly to product strength, particularly the iPhone 16 family and the performance of Apple Silicon in Macs, while estimating a minor one-point demand pull-forward from tariff discussions. SVP & CFO Kevan Parekh confirmed that a significant portion of the increased CapEx is driven by investments in AI, including private cloud compute and first-party data centers, as part of a hybrid investment strategy.

Michael Ng inquired about Apple's strategic responses to trade policy uncertainty, including inventory management and pricing philosophy. He also asked for more detail on the factors that drove the sequential and year-over-year decline in product gross margins.

Answer

CEO Tim Cook stated that Apple is actively engaged in tariff discussions and praised the operational team's work in optimizing the supply chain, but had nothing to announce on pricing. CFO Kevan Parekh detailed that the 340 basis point sequential decline in product gross margin was driven by mix, seasonal loss of leverage, and foreign exchange, partially offset by cost savings. The 70 basis point year-over-year decline was attributed to a different product mix and foreign exchange.

Michael Ng asked about the drivers behind the record number of iPhone upgraders and inquired about the impact of the thin form factor of the new iPad Pro M4 on sales.

Answer

CEO Tim Cook attributed the record iPhone upgrades to compelling features, noting that the iPhone 16 family outperformed the 15 and that markets with Apple Intelligence saw better results. On iPad, he said the 15% growth was driven more by iPad Air and the entry-level model, and highlighted that over half of buyers were new to the product.

Michael Ng inquired about the early feedback for Apple Intelligence and its potential contribution to the strong iPhone performance, and also asked about the capital expenditure outlook, particularly concerning investments in private cloud compute.

Answer

CEO Tim Cook shared positive feedback on Apple Intelligence, noting that iOS 18.1 adoption was twice as fast as the previous year's update, indicating strong user interest. He outlined a phased rollout of new features. CFO Luca Maestri explained Apple's hybrid data center model and confirmed that all necessary investments for AI-related CapEx are being made, directing investors to the 10-K for specific figures.

Michael Ng from Goldman Sachs asked for more details on this year's broadband investments, clarifying if they primarily focus on customer relationships and pricing or CapEx. He also inquired about a potential shift in strategy towards Premium Unlimited plans, especially considering the upcoming Apple iPhone cycle.

Answer

Steve Crone, CEO of Connectivity & Platforms, explained that broadband investments lean heavily into the go-to-market pricing strategy, simplifying tiers, making them all-inclusive (driving gateway adoption), lowering everyday prices, and leveraging free wireless lines for increased customer lifetime value and loyalty. Mike Cavanagh, Co-CEO, clarified that the investment language refers to putting more value to the customer through pricing and packaging, impacting EBITDA rather than CapEx. He added that while free lines aim for broad exposure, Premium Unlimited plans target higher-end market segments, and the company is pleased with early results, allowing for future strategic leaning. Brian Roberts, Chairman and CEO, concluded by expressing confidence in the new team's energy and start.

Michael Ng from Goldman Sachs asked for clarification on Comcast's broadband investments this year, specifically whether they are focused more on customer relationships and pricing or CapEx. He also inquired about a potential shift in strategy towards premium unlimited wireless plans, considering opportunities like the Apple iPhone cycle.

Answer

Mike Cavanagh, Co-CEO, clarified that broadband investment primarily leans into the go-to-market pricing strategy, including simplified tiers, all-inclusive gateways, lower everyday prices, and the free wireless line promotion, rather than CapEx. Brian Roberts, Chairman and CEO, added that this investment is about delivering more value to the customer and is reflected in EBITDA. Mike Cavanagh also discussed the strategic intent behind premium unlimited plans to compete across all market segments, expressing satisfaction with early results and the opportunity to further lean into this space.

Michael Lang from Goldman Sachs asked for more details on the trajectory of Connectivity and Platforms (CMP) EBITDA for the next year, specifically focusing on OpEx investments in CPE, sales, marketing, and customer service supporting the business reset.

Answer

Dave Watson, CEO of Comcast, stated that investments are being made in sales channels, marketing, and customer experience improvements to support the new pricing strategy. Jason Armstrong, CFO of Comcast, added that the team is aggressively pursuing cost rationalization, including realignment of divisional structures and cutting management layers, though much of these savings are being reinvested into the pivot.

Michael Lang inquired about the expected trajectory of Connectivity and Platforms (CMP) EBITDA for the next year, specifically focusing on OpEx investments in CPE, sales, marketing, and customer service supporting the business reset.

Answer

Dave Watson (CEO, Comcast) explained that the aggressive revenue approach, including new packaging and transparent pricing, involves investment in sales channels, marketing, and customer experience improvements. Jason Armstrong (CFO, Comcast) added that the team is actively pursuing cost rationalization and cutting layers, but much of these savings are being reinvested into the strategic pivot.

Michael Ng asked about the potential for 'everyday pricing' to be a drag on ARPU growth and whether domestic broadband net additions are returning to traditional seasonal patterns.

Answer

David Watson, CEO of Connectivity & Platforms, explained the focus is on aggressively rolling out new pricing to both new and existing customers to improve long-term value and retention. He also confirmed a trend towards more predictable seasonality. CFO Jason Armstrong added that while broadband ARPU growth of 3.5% will moderate in the near term, it is expected to remain healthy.

Michael Ng posed two questions on broadband: one on the potential drag from new 'everyday pricing' on ARPU growth, and another on whether domestic broadband net adds are returning to traditional seasonal patterns.

Answer

David Watson, CEO of Connectivity & Platforms, explained that while the new pricing is initially focused on new customers, it will be aggressively offered to the existing base to improve long-term stability. He also confirmed a trend towards more predictable seasonality, with the company positioned for the important Q3 back-to-school period. CFO & Treasurer Jason Armstrong added that while ARPU growth will moderate from its current 3.5% rate, it is expected to remain healthy.

Michael Ng questioned the drivers behind the quarter's 3.3% broadband ARPU growth and asked for an updated outlook on the long-term 3-4% ARPU growth target in light of new strategies like the 5-year price lock.

Answer

David Watson, President and CEO of Comcast Cable, stated that the company can still achieve healthy broadband ARPU growth despite new initiatives like the 5-year price lock, which he described as a tactical investment rather than a broad repricing. He emphasized the long-term goal is to reduce churn and increase customer lifetime value by moving away from deep upfront discounts to a model of long-term price certainty, which will create future upside.

Michael Ng asked for the outlook on domestic broadband ARPU, questioning if growth should accelerate given recent price increases. He also requested details on the free cash flow forecast for the upcoming year, considering moving parts like cash taxes and capital expenditures.

Answer

CEO of Comcast Cable David Watson stated that while he expects continued 'healthy' ARPU growth, the primary focus is on maximizing overall broadband and convergence revenue. CFO Jason Armstrong provided a detailed free cash flow outlook, noting a strong 2024 baseline, an expected one-time cash tax tailwind of roughly $2 billion in 2025, and continued working capital headwinds of approximately $1.5-$2.0 billion tied to growth initiatives. He also confirmed that cable capital intensity is expected to remain around 10%, with some relief coming from the completion of the Epic Universe construction.

Michael Ng asked about the profitability of the record-setting Paris Olympics and its quantifiable impact on broadband net additions. He also questioned the drivers behind the strong performance in video net adds and programming costs during the quarter.

Answer

President Michael Cavanagh and CEO Brian Roberts confirmed the Paris Olympics were profitable and exceeded expectations, calling it a proud moment for the company. Executive Vice President David Watson noted the Olympics were a contributor to broadband strength but did not provide a specific number. He attributed the improvement in video trends to stabilized churn, aided by mobile bundling, and the successful rollout of the 'NOW' portfolio of video products.

Michael Ng inquired if the capital intensity in the business has changed, specifically asking if the $1 billion CapEx supports 2%-2.5% revenue over time, implying a path to $40 billion-$50 billion of revenue, or if the capital intensity has shifted.

Answer

Mandeep Chawla (CFO) clarified that the majority of CapEx is growth-related, with about $70-$80 million for maintenance. He stated that the sizable investment is tied to programs already won, expected to generate material revenue in 2027 and 2028. He emphasized that CapEx is project-level and would moderate once growth investments are complete, as Celestica is an ROIC-driven company.

Michael Ng asked if the capital intensity in the business has changed, and if the $1 billion CapEx supports 2%-2.5% revenue over time, implying a path to $40 billion-$50 billion of revenue, or if the capital intensity has shifted.

Answer

CFO Mandeep Chawla clarified that the majority of CapEx is growth-oriented, tied to specific programs already won, expected to generate material revenue in 2027 and 2028. He emphasized that CapEx is project-level and would moderate once growth investments are complete, reiterating the company's ROIC-driven focus on strong profitability and disciplined investment.

Michael Ng asked about the key drivers for the projected EBITDA growth inflection to 5%+ in 2028, specifically whether it's due to accelerating Advanced Connectivity EBITDA growth or improving legacy declines, and the linearity of growth for 2027. He also inquired about the strong mobility service margins in Q4 2025, any specific cost impacts, and key cost initiatives for the next year.

Answer

CFO Pascal Desroches attributed the EBITDA acceleration to moderating acquisition and integration costs for Lumen, increasing penetration of Lumen assets, and reduced dilution from the legacy footprint. He noted that strong mobility service margins were a result of effective cost management not tied to customer growth, with significant underlying savings from AI, digital initiatives, and legacy decommissioning. Desroches expects over $4 billion in cost savings over the next three years.

Michael Ng (Goldman Sachs) asked about the key drivers behind AT&T's projected EBITDA growth inflection to 5%+ in 2028, specifically whether it's due to accelerating advanced EBITDA growth or improving legacy declines, and the linearity of this growth over the next three years. He also inquired about the strong mobility service margins in Q4 2025, asking for impactful cost factors and key cost initiatives for the next year.

Answer

CFO Pascal Desroches explained that the EBITDA acceleration is driven by moderating acquisition and integration costs for Lumen assets, increasing penetration of those assets, and a diminishing dilutive effect from the legacy footprint. Regarding mobility service margins, Desroches attributed the strength to effective management of non-customer growth costs, significant underlying cost savings in 2025 despite higher customer acquisition and advertising, and ongoing productivity gains from AI, digital initiatives, and legacy decommissioning. He reiterated the expectation of over $4 billion in cost savings over the next three years.

Michael Ng asked about AT&T's confidence in the accretion from the Lumen fiber assets and EchoStar spectrum licenses, detailing the key buckets for the EchoStar acquisition. He also requested an update on Gigapower's progress, including new ISP partners and the risk of wholesale partners meeting targets for the 60 million fiber homes.

Answer

Chairman and CEO John Stankey confirmed no change in confidence regarding accretion, with data supporting conservative modeling for Lumen assets and Gigapower scaling as expected, with AT&T remaining the anchor provider. For EchoStar, accretion drivers include deferred capital, an improved wholesale play (Boost migration), and scaling Internet Air. CFO Pascal Desroches highlighted the significant value pool from the 50%+ mobility attachment rate for fixed wireless, even before aggressive marketing.

Michael Ng inquired about AT&T's increased confidence in the accretion from the Lumen fiber assets and EchoStar spectrum licenses, asking for details on the key drivers of accretion from the EchoStar spectrum, including AT&T Internet Air expansion, infrastructure deployment, cash tax savings, and the Boost hybrid MNO.

Answer

Chairman and CEO John Stankey stated that AT&T's confidence remains consistent, with data points supporting conservative modeling for both transactions. He noted that Lumen asset diligence was thorough, and Gigapower's scaling outside the footprint validates their assumptions for converged product success. For EchoStar, accretion drivers include deferred capital due to network depth, improved wholesale play with Boost migrating customers, and enhanced AT&T Internet Air scaling in non-fiber areas. CFO Pascal Desroches highlighted the strong mobility attachment rate (over 50%) for AT&T Internet Air, even before significant marketing, as a key value pool.

Michael Ng asked about the systems revenue outlook, specifically the implied mid-teens growth for the full year and potential deceleration in the second half. He also questioned why the EPS upgrade for the full year did not reflect more flow-through from the top-line upside.

Answer

Cooper Werner, EVP and CFO of F5, explained that the implied deceleration in the second half of the year is a measured approach due to being early in the fiscal year, not an indication of an expected slowdown, as underlying pipeline and momentum remain strong. Regarding the EPS upgrade, he cited a modest reduction in gross margin guidance due to anticipated rising memory costs and targeted investments in future growth (sales capacity, roadmap, XOps capabilities) for FY2027 and beyond.

Michael Ng asked about the systems revenue outlook, specifically the implied mid-teens growth for the full year and any factors that might drive deceleration relative to the strong Q1. He also questioned why the full-year EPS upgrade matched the Q1 beat, asking about incremental costs preventing more top-line upside from flowing to the bottom line.

Answer

Cooper Werner, EVP and CFO, explained that the implied deceleration in systems revenue for the second half (4-5% vs. 7% in H1) is a measured approach due to being early in the year and macro fluidity, not specific slowdowns. Regarding EPS, he cited a modest reduction in gross margin guidance due to rising memory costs and targeted investments in future growth (sales capacity, roadmap, xOps, analytics, API discovery) for FY27 and beyond, leveraging the current year's strong outlook.

Michael Ng asked about the implied OpEx growth for fiscal 2026, inquiring if it includes additional costs from the data breach, internal system investments, or free Falcon EDR subscriptions. He also asked what percentage of F5's revenue comes from F5 BIG-IP.

Answer

Cooper Werner (EVP and CFO, F5) stated that F5 does not break out revenue by product line but confirmed BIG-IP is the highest revenue product. He noted that F5 has aggressively invested in cybersecurity, more than doubling investment in the last three years, and continued investment was already planned for FY2026. Additional costs related to incident remediation, including the Falcon EDR subscriptions, are either covered by cyber insurance or accounted for as one-time expenses.

Michael Ng asked about the implied OpEx growth for fiscal 2026, questioning if it includes additional costs related to the data breach, internal system investments, or free Falcon EDR subscriptions. He also asked for the percentage of F5's revenue derived from F5 BIG-IP.

Answer

Cooper Werner, EVP and CFO, stated that F5 does not break out revenue by product line, but BIG-IP is the highest revenue product. He confirmed that F5 has aggressively invested in cybersecurity over the last three years, with additional investments incorporated into FY26 planning. Remediation costs, including the Falcon EDR offering, are either covered by cyber insurance or accounted for as separate one-time expenses.

Michael Ng of Goldman Sachs asked for more detail on the iSeries and VIPRION installed base, which constitutes 50% of the total, and the typical price uplift upon migration to newer platforms. He also questioned the software renewal cycle's implications for growth in fiscal 2026, given the large renewal base in 2025.

Answer

EVP and CFO Cooper Werner confirmed the iSeries and VIPRION families represent over half the installed base, creating a durable refresh opportunity leading up to their 2026 and 2027 end-of-support dates. He noted a general 5% price increase with a larger uplift on rSeries. For software, he explained that due to the 3-year cycle, FY26 will face a 'math headwind' from a smaller renewal base compared to FY25, but the company still sees opportunities to drive growth through expansion.

Michael Ng from Goldman Sachs asked for more detail on the iSeries and VIPRION installed base, which represents over 50% of the total, and the typical price uplift when customers migrate to the newer rSeries and VELOS platforms. He also inquired about the software renewal cycle and its implications for growth in fiscal year 2026.

Answer

CFO Cooper Werner confirmed the iSeries and VIPRION families are over half the installed base, representing a durable refresh opportunity into 2026 and 2027. He noted a general 5% price increase, with a slightly larger increase on the rSeries due to its superior performance. Regarding FY26, he explained that due to the 3-year renewal cadence, the renewal base will be smaller, creating a 'math headwind,' but the company still sees opportunities to drive growth through expansion.

Asked for color on the seasonally strong perpetual license revenue and the performance of the U.S. federal business.

Answer

The strong Q1 perpetual revenue is a recurring seasonal trend, particularly with service providers who favor CapEx models, and not necessarily a new run rate. The U.S. federal business was solid in Q1 with a healthy pipeline.

Michael Ng asked about the expected cadence of subscription revenue, noting an implied sequential decline into Q1, and questioned if the FY25 outlook assumes a similar level of renewal expansion seen in Q4.

Answer

SVP of Finance and incoming CFO Cooper Werner explained that any implied sequential software decline is due to the timing of the renewal base, which is weighted more heavily to the second half of fiscal 2025. He confirmed that the company has adjusted its assumptions to account for the continued strength in renewal expansions, which is factored into the full-year growth outlook.

Michael Ng asked for more details on HP's growing base of services, subscriptions, and software, clarifying if the comment referred specifically to workforce solutions or print subscriptions, and how HP plans to grow this type of business in the future. He also followed up on the $0.30 EPS headwind from memory costs, asking about the gross impact, confidence in mitigations, and any similar tightness or inflation in PCB components.

Answer

CEO Enrique Lores confirmed the comment applies across the board, citing solid growth in consumer subscriptions (Instant Ink approaching $1 billion), workforce solutions (PCs as a service), and software businesses. CFO Karen Parkhill emphasized the focus on driving greater growth in less cyclical, more stable, higher-margin recurring revenue, making it a priority for product innovation, business models, and capital allocation. Enrique Lores stated the gross impact of memory costs is significantly larger than $0.30, expressing high confidence in mitigation actions and a conservative guide. He noted that memory and storage are the biggest impact areas, with no shortages in other components, and HP is in a good supply position for memory/storage due to relationships and contracts.

Michael Ng asked for more details on HP's growing base of contractual services, subscriptions, and software, inquiring if the comment was specific to workforce solutions or print subscriptions, and how HP plans to grow this business. He also followed up on the $0.30 EPS headwind from memory, asking about the gross impact, confidence in mitigations, and any similar tightness or inflation in other components like PCBs.

Answer

Enrique Lores, CEO, confirmed the comment applies across the board, citing solid growth in consumer subscriptions (Instant Ink approaching $1 billion), workforce solutions (PCs as a service), and strong software business performance. Karen Parkhill, CFO, emphasized this focus on less cyclical, more stable, higher-margin recurring revenue as a key priority for future growth and capital allocation, expecting a gradual transition. Regarding memory, Mr. Lores indicated that memory costs are 15-18% of PC cost, implying a gross impact significantly larger than the $0.30 net headwind. He expressed high confidence in mitigations, noting a prudent approach to the full-year guide. He confirmed that memory and storage are the primary areas of impact, with no current shortages in other components like PCBs.

Michael Ng asked for an outlook on the aggressive pricing environment and soft office demand within the Print segment. He also requested clarification on capital allocation, specifically whether HP would resume returning 100% of free cash flow to shareholders next quarter given its leverage ratio.

Answer

CEO Enrique Lores stated that HP expects the aggressive pricing in Print to continue, as competitor price hikes have not stuck, but believes it is temporary since printing volumes remain stable. CFO Karen Parkhill clarified that gross leverage was still slightly above 2.0x in Q3 but is improving. She anticipates more share repurchase activity 'soon' and expects leverage to improve further in fiscal 2026, which would enable a return to the full free cash flow return policy.

Michael Ng asked for clarification on Personal Systems (PS) margins, seeking confirmation of the full-year target range and the key variables. He also questioned whether HP observed any demand pull-forward in Q2 due to anticipated tariffs.

Answer

CFO Karen Parkhill confirmed the full-year PS margin is expected to be within the 5-7% range, likely in the lower half due to the Q2 impact, with sequential improvement expected. CEO Enrique Lores stated that while some demand pull-in occurred, it was minimal, accounting for less than one percentage point of overall revenue growth and was not a factor for the Print segment.

Michael Ng of Goldman Sachs asked what specific element of the PC market improved to warrant a better outlook and requested an expansion on the Human acquisition and HP's intelligent device ecosystem strategy.

Answer

CEO Enrique Lores attributed the confidence to HP's own momentum, highlighting the 10% commercial growth in Q1. Regarding the Human acquisition, he described it as a strategic move to acquire talent and IP to accelerate the 'future of work' strategy. The assets will be used to deploy AI at the edge and create seamless 'better-together' experiences, starting with PC and conference room connectivity.

Michael Ng of Goldman Sachs asked if HP's price and cost reductions in the Print segment would lead to continued unit growth in FY25. He also inquired about historical enterprise behavior regarding Windows end-of-life deadlines and the use of extended support.

Answer

CEO Enrique Lores responded that while the goal is to grow profitable share, the overall Print market is expected to decline slightly in FY25, making it hard to predict unit growth. On the PC refresh, he stated that historically, companies do respond to the hard deadline, which is why HP expects an acceleration of upgrades through 2025, especially in the second half.

Michael Ng of Goldman Sachs asked for details on the strategy of placing more print hardware at the expense of margins and for an update on key print KPIs. He also inquired if the weakness in consumer PCs was worsening sequentially.

Answer

CEO Enrique Lores clarified the strategy is to place profitable units, which was enabled by hardware cost reductions, leading to market share gains. He confirmed continued growth in Instant Ink subscribers and that profit-upfront units remain around 50% of the mix. Regarding consumer PCs, he noted that while Q4 will be seasonally stronger than Q3, the growth rate will be lower than historical patterns due to general market softness, not a worsening trend.

Michael Eng followed up on commodity cost recovery, asking if Dell expects to benefit from strategically purchased commodities at below-market costs and for how long, and if there are opportunities to reprice longer-term commercial contracts or if existing contracts inhibit pricing flexibility.

Answer

Jeff Clarke (COO, Dell Technologies) clarified that Dell must honor existing contracts. He emphasized that the challenge is not just cost but also scarcity of parts. Dell's primary goal is to secure material and then price it commensurate with its value. He highlighted Dell's direct model advantages in adjusting demand, reconfiguring products, and dynamically pricing for transactional businesses. Clarke stated that Dell's ability to recover costs is better than in normal times, amplified by the scarcity of parts, and that all tools are actively being used to achieve the best outcome.

Michael Ng of Goldman Sachs asked for more detail on the factors that impacted traditional server and storage performance in the quarter, specifically questioning the role of federal demand and any notable sequential margin changes.

Answer

Jeff Clarke, Vice Chairman and COO, confirmed that the weakness in North American traditional server demand seen in April continued through Q2, and that a downturn in federal spending also had an impact. For storage, he cited slower demand from large accounts in North America. While highlighting the strength of Dell's IP portfolio, he noted a headwind from HCI customers being thoughtful about their next infrastructure purchases. He did not comment on specific sequential margin changes for those products.

Michael Ng from Goldman Sachs posed a two-part question on AI servers. First, he asked if the full-year profit outlook for AI servers was effectively raised, given that the overall company guidance was reiterated despite lower profit assumptions for other segments. Second, he requested more detail on the AI server orders booked in the quarter, such as key customer types or technologies.

Answer

CFO Yvonne McGill explained that the full-year margin rate expectation is down, reflecting lower profitability in traditional servers and CSG, but AI server revenue is accretive in absolute dollars. Jeff Clarke, Vice Chairman and COO, reiterated this point, stating AI drives operating income dollar growth even if it dilutes the overall rate. Regarding orders, Clarke noted a mix of CSP and enterprise customers, with enterprise growing faster, and a technology mix including both Hopper and Blackwell GPUs with ARM and x86 processors.

Michael Ng requested a breakdown of the drivers behind the flat year-over-year ISG margin outlook, given the significant and presumably dilutive growth of 50% in AI server revenue.

Answer

COO and Vice Chairman Jeffrey Clarke explained that Dell will hold ISG margins flat while growing AI servers to at least $15 billion by leveraging its storage and traditional server businesses. Key drivers include improved storage operating margins from scale, a pivot to higher-margin Dell IP storage like PowerStore, and growing the customer base for PowerFlex and PowerScale. He also noted that traditional servers are seeing higher revenue per unit due to richer configurations, which helps offset AI server margin dilution.

Michael Ng from Goldman Sachs questioned why AI server revenue is expected to be down sequentially in Q4 despite strong backlog growth, and asked if the current backlog is unusually high.

Answer

Executive Jeffrey Clarke clarified that the slight sequential dip in Q4 AI shipments is a direct result of the Q3 order mix shifting dramatically to the new Blackwell platform, which is still ramping production. He emphasized that the 5-quarter pipeline grew over 50%, indicating the opportunity is expanding, not contracting.

Michael Ng asked about the drivers of the Q3 ISG revenue guidance, which implies a sequential decline, and the impact of recent partnerships (Nutanix, NVIDIA SuperPOD) on the storage business.

Answer

CFO Yvonne McGill confirmed the guidance implies a sequential dip in AI server revenue, though she noted they are ready to ship more if supply and customer readiness align. COO Jeffrey Clarke positioned the Nutanix partnership as providing customer choice for HCI, while highlighting the NVIDIA SuperPOD certification for PowerScale as essential for high-performance AI workloads, which he sees as a key growth and margin driver.

Michael Ng asked about the combined revenue headwind from Penguin Edge and hyperscale hardware for the upcoming fiscal year, its impact on Advanced Computing, and the strategic rationale for exiting the Penguin Edge business. He also sought insights into key momentum areas for Advanced Computing and the reasons for the wider guidance range.

Answer

Mark Adams, President and CEO, explained that the Penguin Edge exit was driven by two large customers winding down on a prior product generation, not a strategic choice. Nate Olmstead, SVP and CFO, confirmed the 14% total company revenue headwind translates to roughly a 28-30% impact on Advanced Computing. Mark Adams highlighted growing pipeline opportunities and new customer additions in enterprise, federal, and education sectors as key drivers for Advanced Computing. Nate Olmstead added that the 75% growth in HPC AI from non-hyperscalers in FY25 was a positive indicator.

Michael Ng asked about the combined revenue impact of winding down the Penguin Edge business and the absence of hyperscale hardware sales for the upcoming fiscal year, specifically how the 14% total company headwind translates to Advanced Computing. He also sought insight into the key areas driving momentum for Advanced Computing's underlying growth and the reasons for the wider revenue outlook range.

Answer

Mark Adams, President and CEO, explained that the Penguin Edge wind-down was due to two major clients not renewing prior-generation products, not a strategic choice. Nate Olmstead, SVP and CFO, confirmed that the 14% total company headwind implies a 28%-30% impact on Advanced Computing revenue from FY2025. Mark Adams further elaborated that momentum comes from customer diversification, targeting enterprise, federal, and education sectors, converting a growing pipeline into bookings and revenue. Nate Olmstead highlighted the 75% growth in HPC AI business from non-hyperscalers in FY2025 as a positive indicator for continued fast growth.

Michael Ng asked two questions regarding TD SYNNEX's HIVE business: the progress in onboarding new customers beyond its two primary clients, and whether the growth in HIVE volumes is predominantly driven by traditional server solutions or by AI server-side deployments.

Answer

CFO Marshall Witt stated that TD SYNNEX is making good progress in diversifying its HIVE portfolio and expanding its customer base beyond the top two, with a healthy and growing pipeline, actively seeking more customers in the 'Super 6' and beyond. CEO Patrick Zammit clarified that the current growth is primarily coming from networking and traditional compute, with some GPU projects in the pipeline, but these are not the main drivers for Q3 and the majority of Q4.

Michael Ng of Goldman Sachs asked about the progress in onboarding new HYVE customers beyond the top two and whether the growth in HYVE volumes is primarily driven by traditional server or AI server demand.

Answer

CFO Marshall Witt stated that TD SYNNEX continues to make good progress in diversifying its HYVE portfolio and pipeline, seeking more customers in the 'Super 6' and beyond. CEO Patrick Zammit clarified that the growth in Q3 and the majority of Q4 is primarily from networking and traditional compute, with some GPU projects in the pipeline.

Michael Ng posed two questions regarding the HIVE business: first, about the progress in onboarding new customers beyond the existing top two, and second, whether the growth in HIVE volumes is predominantly driven by traditional server demand or AI server demand.

Answer

CFO Marshall Witt stated that TD SYNNEX is making good progress in expanding its presence in HIVE, ODM/CM, and data center supply chain management through new 'programs,' maintaining a healthy and strong pipeline, and actively seeking to diversify its customer portfolio beyond the 'Super 6.' CEO Patrick Zammit clarified that the current growth in HIVE is primarily from networking and traditional compute, with GPU projects for AI servers in the pipeline, but not yet the main driver for Q3 and the majority of Q4 demand.

Michael Ng from Goldman Sachs asked for two clarifications on Hyve: whether the customer with the demand pause was the legacy customer or the newer one, and if the strategic buy business was the primary driver of the issues.

Answer

CFO Marshall Witt confirmed the temporary demand pause was with the newer customer that ramped last year, attributing it to forecasting precision. He also affirmed that the strategic procurement business was a key factor, as a large component purchase intended for Q1 shipment was delayed into Q2.

Michael Ng asked for color on the PC and peripherals recovery, including potential reseller pre-buying ahead of tariffs, and also questioned the path to achieving the medium-term free cash flow target and the outlook for the cost-to-gross-profit ratio.

Answer

CEO Patrick Zammit attributed the PC recovery to the Windows 10 refresh cycle and an aged installed base, particularly in the commercial segment, while downplaying the impact of tariff speculation. CFO Marshall Witt reaffirmed the fiscal '25 free cash flow target of $1.1 billion and the medium-term aspiration of $1.5 billion. He projected the cost-to-gross-profit percentage would hold around 59% in the first half of the year with slight improvement expected in the second half.

Michael Ng asked for more detail on the Endpoint Solutions business, specifically regarding PC market trends, the contribution from AI PCs, and the reasons for the segment's gross margin decline.

Answer

CEO Patrick Zammit confirmed the PC market has returned to low single-digit growth, slightly more muted than expected. He noted that the impact from AI PCs is still relatively low but anticipates an acceleration in the first half of next year as new mid-range models become available. He also cited the Windows 11 refresh as a continuing tailwind for the PC market.

Michael Ng asked if WBD is revisiting its strategy for DC-related theme parks and live events, given the success of properties like Harry Potter. He also requested details on the restructuring of an HBO Max U.S. distribution deal mentioned in the shareholder letter.

Answer

President & CEO David Zaslav confirmed WBD sees significant untapped value in monetizing its IP through licensing for parks and events, citing regained DC rights and a lucrative deal in Abu Dhabi. CFO Gunnar Wiedenfels explained the distribution deal renewal with a former affiliate involved adjusted rates, which will temper revenue growth for 12 months before reaccelerating in 2026 with new international launches.

Michael Ng questioned if WBD is revisiting its DC franchise strategy for theme parks and live events, and asked for details on the HBO Max U.S. distribution deal restructuring mentioned in the shareholder letter.

Answer

President & CEO David Zaslav confirmed WBD sees untapped value in DC consumer products and is exploring licensing opportunities for experiences, having regained some rights from Six Flags. CFO Gunnar Wiedenfels explained the distribution deal restructuring was with a former affiliate, causing a near-term revenue headwind that will be lapped in 12 months, with growth expected to reaccelerate in 2026.

Michael Ng asked for a breakdown of the expected 35 million DTC subscriber growth by 2026 between domestic and international markets, and inquired if the associated ARPU would be flat or decline in the near term.

Answer

CEO David Zaslav indicated the U.S. market is mature and the primary growth driver is global scaling. CEO of Global Streaming and Games JB Perrette confirmed a large portion of subscriber growth will be international. Perrette also stated that near-term ARPU will likely see some deterioration due to the ad-lite rollout, expansion into lower-ARPU regions, and aggressive pricing on hard bundles to gain scale, but he expressed confidence in a return to ARPU growth long-term.

Michael Ng from Goldman Sachs inquired about the third-quarter revenue growth expectations for the endpoint and advanced solutions segments, and the impact of China's mobility subsidies on top-line growth.

Answer

EVP & CFO Mike Zilis projected mid-single-digit growth for Client and Endpoint Solutions and low-to-mid single-digit growth for Advanced Solutions in Q3, noting the guidance reflects a 1-2% top-line impact from the recent cyber incident. Regarding China, he acknowledged some demand pull-forward from stimulus but couldn't quantify it. CEO Paul Bay added that strong mobility growth in the Asia Pacific region has been a consistent trend for several quarters.

Michael Ng inquired about the drivers of the strong 8% per capita spending growth in domestic theme parks, specifically asking about the mix of attendance between local, out-of-state, and international visitors.

Answer

CFO Hugh Johnston acknowledged that visitor mix is a factor in per caps but stated there were no material trends to note regarding international versus domestic visitors. He expressed satisfaction with both per cap growth and attendance levels, especially given new competitive offerings, and reiterated the strategy is balanced growth in both metrics.

Michael Ng asked about the key learnings from the Disney Treasure cruise ship launch and for an update on the level of international visitation to domestic theme parks.

Answer

CEO Robert Iger stated that the strategy of deeply embedding high-quality Disney IP into the ships has led to 'sky high' guest ratings for the Treasure, a successful formula that will be applied to future vessels. CFO Hugh Johnston reported that while international visitation to U.S. parks has not fully recovered to pre-COVID levels, it remains in the double-digits and any mix impact is being more than offset by strong domestic attendance.

Michael Ng asked about the strategy behind adding the SportsCenter Daily Show to Disney+ instead of the ESPN flagship service. He also inquired about the observed benefits of live content on streaming metrics like gross adds and churn, and Disney's competitive advantage in live production.

Answer

CEO Bob Iger explained that live programming is highly attractive and a key advantage for Disney. He clarified that placing an ESPN tile on the Disney+ home screen was a strategic move to increase user engagement, reduce churn, and serve as an introductory funnel to drive subscriptions to the full ESPN flagship service upon its launch, creating a fully integrated one-app experience.

Michael Ng requested the specific revenue concentrations for the four greater-than-10% customers in fiscal 2025 and asked if the Q1 fiscal 2026 gross margin guidance is a good proxy for the full year.

Answer

CFO David Weigand disclosed that the four large customers represented 21%, 11%, 11%, and 11% of fiscal 2025 revenue. He declined to provide a full-year margin forecast but reiterated that the company is optimistic about margin improvement driven by DCBBS and its fast time-to-market capabilities.

Michael Ng asked for an update on Supermicro's midterm demand outlook and whether the company would reiterate its previous $40 billion revenue target for fiscal year 2026. He also sought details on any demand differences between HGX systems and full NVL72 racks.

Answer

CEO Charles Liang expressed strong confidence in midterm and long-term growth, citing high demand for Blackwell products and the new DCBBS total solutions. However, he declined to provide guidance for fiscal 2026 due to current tariff and macroeconomic uncertainty. He noted strong demand for both GB200 NVL72 and B200 liquid-cooled systems, with some customer deployment delays tied to data center readiness.

Michael Ng inquired about the basis for the $40 billion fiscal 2026 revenue outlook, asking for details on the backlog, pipeline, or product roadmap that supports this confidence. He also asked about the sales mix between Blackwell and Hopper servers during the quarter and whether it was affected by supply chain issues.

Answer

CEO Charles Liang stated that the $40 billion forecast for fiscal 2026 is a conservative estimate based on a projected 65% growth rate, similar to past performance. He highlighted that production capacity is underutilized, with the U.S. at 55%, Taiwan at 60%, and Malaysia at only 1%, providing ample room for expansion. Regarding product mix, Liang confirmed that both Hopper and Blackwell products are shipping, with Blackwell (B200 and GB200) seeing strong new order momentum, but declined to provide a specific percentage breakdown.

Michael Ng asked about the reasons for revenue coming in at the lower end of guidance, whether the company is experiencing market share loss due to delayed financial filings, and for an update on the full-year revenue guidance.

Answer

CEO Charles Liang stated the primary reason for the revenue result was customers pausing orders while waiting for the next generation of GPU chips. He affirmed the company's production capacity and liquid cooling solutions are ready for the new products. CFO David Weigand confirmed that the company is not providing annual guidance at this time.

Michael Ng requested an update on the company's digital investment levels for the current and next fiscal year, and asked about future plans for the Fox lot in Century City after Disney vacates.

Answer

CFO Steve Tomsic clarified that digital investment, which was in the mid-$300 million range in fiscal 2024, is expected to decrease in fiscal 2025 as Tubi's profitability improves. CEO Lachlan Murdoch added that Disney is only vacating office space, which represents less than a third of the lot's total office space, not the in-demand sound stages. He expressed confidence in their ability to re-lease the valuable real estate.

Michael Ng asked about the improving subscriber decline trends, questioning if this was due to skinny bundle inclusion and whether Fox expects to outperform the market going forward. He also sought an update on the full-year forecast for digital investment losses.

Answer

Executive Chair and CEO Lachlan Murdoch noted the positive subscriber trend but stated it was too early to attribute it solely to skinny bundles, suggesting sports seasonality may also be a factor. He stressed that Fox's portfolio is well-represented in these new bundles, making them financially positive for the company. CFO Steven Tomsic confirmed they are on track to meet the full-year target for reduced digital investment, despite a planned increase in Tubi marketing spend for the Super Bowl in Q3.

Michael Ng asked for details on the EBITDA bridge for the Television segment for fiscal 2025, specifically whether the outlook for digital losses had improved given Tubi's outperformance, and to flag other key drivers.

Answer

CFO Steve Tomsic outlined a positive outlook for the TV segment, driven by a cyclical political advertising tailwind and strong MLB postseason performance. He noted a Q2 headwind from NFL scheduling and higher college sports costs, offset by the absence of WWE expenses. He highlighted the Super Bowl in Q3 as highly cash-flow accretive and a favorable Q4 comp without major soccer tournaments, concluding the segment has a 'really nice tailwind.'

Michael Ing asked about the drivers behind Tubi's strong mid-teens revenue growth despite heightened competition, and requested an update on the level of digital investment losses in fiscal 2024 and the outlook for fiscal 2025.

Answer

Executive Chair and CEO Lachlan Murdoch attributed Tubi's momentum to its brand strength, reach, and ability to maintain pricing even as new competitors increased ad supply. CFO Steve Tomsic specified that Tubi's investment was in the mid-$200 million range in FY24, consistent with FY23. For FY25, he expects slightly less investment at Tubi, which will contribute to improved EBITDA for the overall digital portfolio.

Michael Ng asked if there are any meaningful margin differences for AI services versus the core Evidence.com platform and requested an outlook on the typical state and local government budget flush.

Answer

CFO Brittany Bagley stated there are no meaningful margin differences to factor in, and that the AI Era Plan fits within the company's expectation for software gross margins to be above 80%. President Joshua Isner commented that Axon is not seeing much difference in the state and local budget environment, as most of its business relates to operational expenditures rather than capital purchases, which are more sensitive to grant funding cycles.

Michael Ng asked about expectations for bookings growth in 2025 after a strong $5 billion year and inquired about the drivers behind the record sequential increase in Axon Evidence and cloud services revenue in Q4.

Answer

President Joshua Isner explained the goal is for bookings growth to mirror revenue growth, supported by a healthy pipeline. CFO Brittany Bagley attributed the strong sequential cloud revenue to normal seasonality, where software revenue recognition lags strong Q3 and Q4 bookings, along with a minor contribution from the Dedrone acquisition.

Michael Ng requested insight into 2025 bookings growth expectations following a strong 2024 and asked about the key drivers behind the record sequential increase in Axon Evidence and cloud services revenue.

Answer

Joshua Isner, President, stated that the goal is for bookings growth to mirror the company's strong revenue growth rate, supported by a very healthy pipeline. Brittany Bagley, CFO, attributed the cloud revenue surge to normal seasonality where software revenue recognition in Q4 and Q1 typically follows strong bookings in Q3 and Q4, combined with strong user and product adoption.

Michael Ng sought confirmation on the outlook for a record Q4 bookings quarter and asked for color on its drivers. He also followed up on TASER, asking if the T10 adoption cycle could be faster than T7's and inquiring about the ASP uplift.

Answer

EVP Joshua Isner confirmed he is "very confident" in a record Q4 bookings quarter, driven by broad-based execution across all business segments rather than a single large deal. On TASER adoption, Isner stated the goal is to upgrade the entire legacy fleet to T10, viewing it as a "massive leap forward" in technology, rather than targeting a specific percentage like 85%.

Michael Ng from The Goldman Sachs Group, Inc. inquired about the key drivers behind the 40% contribution margin from asset-light services and whether this is a sustainable long-term target. He also asked about potential product changes to reduce working capital.

Answer

CEO Brian Bair stated that while the current high percentage is partly due to lower home-buying volume, the long-term goal is to grow asset-light channels, like the rapidly expanding Renovate service, to be a significant part of the business. CFO Peter Knag added that the company is developing a contingency plan involving cost cuts and operational shifts to preserve cash but was not ready to provide specifics.

Michael Ng asked for perspective on potential changes to the 'clear cooperation' rule in real estate and how Offerpad might respond, particularly regarding exclusive off-market inventory.

Answer

CEO Brian Bair acknowledged that backend agent commissions are Offerpad's highest pass-through cost. He stated that in the current market with fewer buyers, the company is choosing to leverage the agent community to help sell homes, providing them with clear, non-negotiable commission structures. Bair indicated that while things are settling, Offerpad will continue to evaluate its commission strategy based on market conditions, aiming to be a reliable partner for agents.

Michael Ng asked about the momentum of AI systems orders during the quarter, noting the total implied a slowdown after a strong start, and also requested clarification on any unusual items affecting the free cash flow outlook.

Answer

CEO Antonio Neri attributed the order pattern to the lumpy nature of the AI business but stressed that Q1 AI orders were double those of Q4, indicating strong overall momentum, particularly in the enterprise segment. CFO Marie Myers clarified that the FY25 free cash flow outlook includes a $400 million cash impact from restructuring, combining $250 million from the new program with carryover from prior initiatives.

Michael Ng of Goldman Sachs asked about the product and services mix within AI systems, noting the growing share of services in new orders versus the low amount of services revenue recognized to date, and if this will improve Server margins.

Answer

CEO Antonio Neri expressed satisfaction with the services attachment momentum, which he expects to grow with enterprise adoption of offerings like HPE Private Cloud AI. He explained that most services revenue is deferred and recognized over the contract's life, and affirmed that as this revenue is recognized, it is expected to be accretive to the Server segment's gross margin.

Michael Ng asked for more detail on the drivers of DTC marketing efficiencies and inquired if programming charges from earlier in the year provided a cost amortization benefit in the quarter.

Answer

CFO Naveen Chopra attributed the marketing efficiencies to a diverse go-to-market strategy that includes direct channels, platform partners, and hard bundles, which lowers acquisition costs and churn. He acknowledged a future benefit from programming charges but emphasized that top-line growth and marketing improvements are the key profitability drivers.

Michael Ng asked if Zillow sees opportunities to expand its successful rentals marketing campaign in 2025 and what risks the company foresees from potential changes to the MLS 'clear cooperation' policy.

Answer

CEO Jeremy Wacksman confirmed the success of the rentals demand efforts. CFO Jeremy Hofmann added that marketing will continue to be part of the mix to accelerate growth in the rentals business. Regarding 'clear cooperation,' Wacksman reiterated Zillow's advocacy for open access to listings, stating that pulling listings into private networks is bad for consumers and agents, but that Zillow would find ways to get inventory regardless.

Michael Ng asked about the Rentals business, questioning if the successful marketing campaign could be expanded in 2025 and its potential impact on OpEx. He also asked about risks related to potential changes in MLS 'clear cooperation' rules.

Answer

CEO Jeremy Wacksman credited the marketing campaign and realtor.com partnership for driving renter audience growth and, consequently, a 38% YoY increase in multifamily revenue. CFO Jeremy Hoffman noted marketing will remain a lever to accelerate growth. On 'clear cooperation,' Wacksman stated Zillow's principle is free access to all listings, arguing that limiting access is bad for consumers and agents, though Zillow would still secure inventory for its platform.

Inquired about the drivers behind the strong growth in services revenue, particularly in maintenance and professional services, and asked for the specific percentage of the product order decline in the quarter.

Answer

The services business strength is driven by both the core maintenance/professional services and a growing contribution from SaaS. The growth in the maintenance business is a lagging indicator of strong product sales over the past few years, which expanded the installed base. Regarding product orders, they came in as expected, and the year-over-year rate of decline improved compared to prior quarters and is expected to lessen further in Q4. A specific decline percentage was not provided.

Michael Ng requested a breakdown of the drivers behind the company's industry outperformance, an explanation for improved film rent margins, and clarification on the EBITDA impact of a 2018 accounting change.

Answer

CFO David Ownby detailed the outperformance drivers: large format screens (+4% vs industry -15%), recliners (+1300 bps vs industry), and high-grossing acquired theaters. He noted film rent improved due to the overall box office decline. He also confirmed the 2018 accounting change would imply a non-cash $35 million increase to adjusted EBITDA.