Ross Seymore

Ross Seymore questioned the drivers behind the industrial segment's 20%+ sequential growth guidance, asking for a breakdown of how much is attributable to ASPs, secular trends, and cyclical factors.

Answer

Jeff Ambrosi, Senior Director and Head of Investor Relations, acknowledged the strong sequential growth but did not break out price by end market, noting some lift from price. He emphasized that industrial's book-to-bill was well above one (excluding pricing), with broad strength across regions and applications. He clarified that ATE and Aerospace & Defense (one-third of industrial) are driving new highs with clear end demand, while other parts of industrial, though currently cyclical, also have secular tailwinds in automation, energy, and healthcare. Vincent Roche, CEO and Chairman, added that the growth is a result of sustained investment and innovation in core ADI sectors, leading to strong price resiliency and long product life cycles.

Ross Seymore questioned the 20%+ industrial guidance, asking for a breakdown of how much is attributable to ASPs, secular trends, and cyclical factors.

Answer

Jeff Ambrosi, Senior Director and Head of Investor Relations, stated that while price contributes to growth, the industrial book-to-bill was well above one (excluding pricing) across regions and applications. He noted that ATE and Aerospace and Defense (roughly one-third of industrial) are driving new highs due to clear end-demand drivers. The other parts of industrial, while showing cyclical recovery as they are below past peaks, also benefit from secular tailwinds in automation, energy, and healthcare. Vincent Roche, CEO and Chairman, emphasized that industrial strength is a result of long-term innovation investments, strong price resiliency, and long product life cycles.

Ross Seymore asked for color on operating expenses (OpEx) for Q4 and, more importantly, how OpEx should be modeled relative to revenue in fiscal '26, given the variable compensation component.

Answer

EVP & CFO Richard Puccio explained that OpEx grew faster than normal in FY25 due to the normalization of variable compensation from a very low base in FY24. For FY26, he expects the rate of variable comp growth to decline, allowing for continued operating leverage in a revenue growth scenario as the baseline will be higher.

Ross Seymore asked a long-term question about whether the prior peak revenue of fiscal 2023 is attainable again and what factors would drive that.

Answer

CEO Vince Roche expressed confidence in reattaining prior peaks, citing a stronger portfolio, better customer relationships, and double-digit growth in the design win pipeline in fiscal 2024. He stated the belief that ADI's business is capable of double-digit growth through the rest of the decade and that fiscal 2025 will be a 'good down payment' on that future.

Ross Seymore asked about the supply side of the equation, including CapEx, areas of tightness, the pricing environment, and implications for sustained CapEx, then followed up on how these investments and the 'holistic technology solution provider' approach impact the long-term gross margin structure and OpEx intensity.

Answer

CEO Tim Breen highlighted strong demand and investment opportunities in differentiated technologies like silicon photonics, FDX, and silicon germanium, noting these are highly accretive and eligible for government support. CFO Sam Franklin added that 2025 net CapEx decreased 7% despite a 15% gross CapEx increase, due to $150 million in government grants. Mr. Franklin explained that Q4 gross margin expansion was driven by productivity, cost discipline, and a favorable mix shift from silicon photonics and automotive. He also noted OpEx increases are due to non-recurring legacy tool sales and strategic investments in IP acquisitions like MIPS and Synopsys processor IP.

Ross Seymore inquired about the supply side of GlobalFoundries' business, focusing on CapEx, areas of tightness, the pricing environment, and implications for sustained CapEx beyond 2026. He also asked how the company's investments and shift to a 'holistic technology solution provider' impact its long-term gross margin structure and OpEx intensity.

Answer

Tim Breen (CEO, GlobalFoundries) noted strong demand and tightness in differentiated technologies like silicon photonics, FDX, and silicon germanium, driving accretive CapEx within existing facilities, often supported by government grants. Sam Franklin (CFO, GlobalFoundries) added that 2025 CapEx was up 15% gross but down 7% net due to increased government support. Mr. Franklin explained that Q4 2025 margin improvement was driven by productivity, cost discipline, and a mix shift towards high-margin areas like silicon photonics and automotive. He detailed OpEx elements, including tactical (legacy tool sales) and strategic (inorganic plays like MIPS, Synopsys, R&D in new IP cores). Niels Anderskouv (President and COO, GlobalFoundries) affirmed the long-term goal of 40% gross margin.

Ross Seymour from Deutsche Bank inquired about GlobalFoundries' core differentiation in silicon photonics compared to foundry peers and the capital expenditure required to quintuple this business over the next five years. He also asked about the sequential assumptions for end markets in Q4, particularly smart mobile devices, potential unit share gains, and the timeline for this segment to return to year-over-year growth.

Answer

CEO Tim Breen highlighted GlobalFoundries' decade-long development in silicon photonics, emphasizing best-in-class device performance through innovation in device structure, material, and packaging, especially for copackaged optics. He also noted the strong ecosystem built around design support and critical components like the detachable fiber connector. Interim CFO Sam Franklin discussed CapEx, noting a historical range of 10-20% of revenue, with an expected pickup in 2026, particularly for highly valuable and CapEx-efficient photonics wafer production and packaging. Regarding Q4, Sam Franklin explained that strong year-over-year growth in automotive and communications infrastructure/data center, along with non-wafer revenue, offsets smart mobile and IoT declines. Tim Breen added that long-term smart mobile traction is focused on differentiated areas like audio, haptics, advanced display, and imaging, as well as new form factors like smart glasses.

Ross Seymour inquired about GlobalFoundries' long-term Silicon Photonics business, specifically its core differentiation against foundry peers and the capital expenditure required to quintuple its size over the next five years. He also asked about the fourth-quarter revenue guide's sequential assumptions for end markets, particularly Smart Mobile Devices, and when that segment might return to year-over-year growth.

Answer

CEO Tim Breen highlighted GF's decade-long development in Silicon Photonics, leading to best-in-class device performance through innovation in device structure, materials, and packaging, alongside an enabling ecosystem. Interim CFO Sam Franklin discussed CapEx moderation in recent years, anticipating a pickup in 2026, and noted the high value-accretive nature of Silicon Photonics wafers. For Smart Mobile Devices, Sam Franklin explained the year-over-year decline was due to one-time pricing adjustments with dual-source customers, expecting share gains going forward. Tim Breen added that GF is focused on differentiated areas like audio, haptics, advanced display, and smart glasses for long-term growth.

Ross Seymore of Deutsche Bank sought clarification on the company's confidence in full-year revenue growth, which implies a strong Q4, and the role of non-wafer revenue. He also asked about the impact of tariff-related inventory pull-ins and the duration of that headwind.

Answer

CFO John Hollister confirmed the base case for full-year growth and a strong Q4 driven by NRE programs and tape-outs. CEO Tim Breen explained that direct tariff-related pull-ins were not significant in Q2. He noted the broader, short-term impact is on consumer confidence, while the long-term strategic opportunity lies in customers diversifying their supply chains to GFS's global footprint, particularly in the U.S.

Ross Seymore asked for a breakdown of the second-quarter revenue guidance by end market. He also inquired about the company's general strategy for inorganic growth opportunities and M&A.

Answer

CFO John Hollister indicated that the sequential revenue improvement for Q2 is expected to be fairly well-distributed across end markets. CEO Timothy Breen explained that the M&A strategy is focused on accelerating the company's core strategy, particularly by adding value to its differentiated chip portfolio, similar to the previous acquisition of Tagor Technologies. President and COO Niels Anderskouv added that the company is well-positioned with $3.7 billion in cash and a $1 billion undrawn revolver.

Ross Seymore of Deutsche Bank inquired about any changes in U.S. customer behavior or design win activity related to geopolitical uncertainty and the CHIPS Act, and asked for the key drivers of the Q1 sequential revenue decline beyond normal seasonality.

Answer

CEO Thomas Caulfield and CBO Niels Anderskouv noted that geopolitical uncertainty is increasing the importance of supply chain diversification for customers, leading to more conversations about sourcing from GF's U.S. fabs, particularly in aerospace, defense, and data center. CFO John Hollister stated that the Q1 sequential revenue decline was primarily due to seasonality across various end markets and was not driven by any single large factor.

Ross Seymore asked about the factors driving GlobalFoundries' strong second-half 2024 performance despite broader market weakness, and how this positions the company for 2025. He also sought clarification on gross margin drivers, specifically the impact of LTA-related payments in Q4 and the outlook for 2025.

Answer

CEO Thomas Caulfield attributed the outperformance to GF's concentration in the smart mobile and automotive end markets, noting the latter is growing high single digits for the year due to content gains. For 2025, he expects an "up year" for GF, with Q1 2025 revenue growing year-over-year but declining sequentially from Q4 2024 at the high end of normal seasonality. CFO John Hollister confirmed that the absolute level of LTA-related benefits in Q4 would be similar to Q3 and that gross margin improved through 2024 net of these benefits due to operating leverage. He expects continued margin improvement with higher utilization in 2025.

Ross Seymore asked about the time to revenue for the increased OpEx investments, particularly for optical solutions, and for clarification on Scorpio's 2025 sales contribution (15% of sales) and its trajectory to become the largest product line.

Answer

Mike Tate, CFO, indicated that new technology development can yield revenue in 18-24 months, and optical investment is a long-term strategic move. He confirmed Scorpio exceeded 15% of 2025 sales, and with the X-Series ramp, it is on track to become the largest product line, while Aries, Taurus, and Leo are also growing.

Ross Seymore asked about the significant OpEx increase (approx. $100M run rate more), seeking clarity on the time to revenue for these investments, particularly whether the payoff aligns with the 2030 TAM numbers or if earlier returns are expected. He also asked for clarification on Scorpio family sales (15% of 2025 sales) and any updated targets for its growth rate and timing to become the biggest product line.

Answer

Mike Tate, CFO, stated that time to revenue for new technology can be 18-24 months for earlier opportunities, but optical development has been ongoing since inception. He emphasized building internal capabilities for optical, closely aligned with customer input. He confirmed Scorpio exceeded 15% of 2025 sales (vs. 10% bogie), driven by P-Series, with X-Series ramping materially in H2 2026. He expects Scorpio to become the biggest product line at some point, driving very good revenue growth, while Aries, Taurus, and Leo are also growing.

Ross Seymour asked about the diversification of the Scorpio business, particularly how the launch of Scorpio X will impact customer concentration over time.

Answer

Sanjay Gajendra, President, Co-Founder, and COO, emphasized Astera Labs' focus on diversifying product lines and customer base, acknowledging the concentrated hyperscaler market. He noted engagements with over 10 customer platforms for PCIe-based scale-up and future UALink, including third-party GPU and custom accelerator platforms. Mike Tate, CFO, addressed gross margin, explaining that the Q4 guidance of 75% reflects an increased mix of lower-margin Taurus hardware modules. He indicated that a broader product portfolio and rapid design cycles would lead to a wider range of product margins over the long term, aligning with the company's 70% long-term target while still expecting operating leverage.

Ross Seymour inquired about the gross margin trajectory, specifically the puts and takes that would drive it down from the mid-70s to the 70% long-term target, especially with scale-up architectures being accretive.

Answer

Mike Tate, CFO, explained that the Q4 guidance of 75% gross margin is due to an increased mix of Taurus hardware modules, which are margin dilutive compared to silicon. He added that longer-term, a broader product portfolio and fast design cycles will lead to a wider range of product margins, encouraging investors to consider the long-term model while expecting operating leverage from revenue growth.

Ross Seymore inquired about the customer profile for the Scorpio product family, how its 'anchor tenant' status is being leveraged to drive other business, and the drivers behind the strong gross margin and future tax rate.

Answer

President & COO Sanjay Gajendra detailed that Scorpio P serves a broad scale-out market while Scorpio X targets over 10 hyperscalers and AI platform providers for scale-up, pulling in other products. CFO Mike Tate explained that strong revenue drove margin upside, but growing hardware module sales will guide margins toward the 70% long-term target. He also clarified the Q3 tax rate of 20% is a catch-up, with a long-term rate expected around 13-15%.

Ross Seymore questioned the shift in focus from customer diversification to product diversification, asking how Astera's broadening portfolio is applied differently between custom ASIC and merchant GPU platforms. He also asked about the competitive landscape on the custom silicon side.

Answer

COO Sanjay Gajendra explained that the Scorpio X fabric switch is becoming a key 'anchor socket' in custom ASIC platforms, creating significant opportunities for Astera Labs to attach more products. He addressed competition by stating that hyperscalers value supply chain diversity and Astera's technological differentiation with its purpose-built AI solutions and COSMOS software, which ensures continued customer engagement.

Ross Seymore asked for a framework on customer and product diversification for 2025 compared to 2024, and also inquired about the gross margin trajectory for the second half of 2025.

Answer

CEO Jitendra Mohan described customer concentration as an 'occupational hazard' in the data center market, noting that while Astera ships to all hyperscalers, revenue mix can fluctuate based on each customer's technology adoption cadence. CFO Michael Tate indicated that the gross margin mix between hardware and silicon should remain at a similar level through the first half of the year, implying the hardware mix is not expected to increase as a percentage of total revenue during that period.

Ross Seymore from Deutsche Bank questioned the key drivers behind the strong ramp in business from custom AI accelerator platforms. He also sought to clarify if the previously discussed increase in dollar content per GPU was primarily due to the new Scorpio products.

Answer

President and COO Sanjay Gajendra explained that the custom AI accelerator ramp is driven by hyperscalers increasing investment in their own internal programs. He clarified that the rising dollar content per accelerator is due to both the natural ASP uplift from newer protocols like PCIe Gen 6 and the introduction of higher-value products like Scorpio.

Ross Seymore inquired about the weakness in the 'other category' revenue and when ON Semiconductor expects to move beyond seasonal revenue patterns. He also asked about the total addressable market (TAM) for AI data center revenue, its potential to reach 10% of sales, and ON Semiconductor's differentiation in this segment.

Answer

CFO Thad Trent clarified that excluding non-core exits, the company is already above seasonal trends. He explained that the 'other category' weakness was due to normal seasonality and $40 million in non-core exits, despite strength in AI data center. President and CEO Hassane El-Khoury expressed confidence in continued AI data center growth, highlighting ON Semiconductor's broad portfolio from high-voltage (800V/1200V) to low-voltage (SPS-type) devices, unique vertical GaN technology, and recent VCore acquisition as key differentiators.

Ross Seymore asked for a longer-term perspective on the AI data center business, including its total addressable market (TAM), potential as a percentage of sales, and ON Semiconductor's differentiation.

Answer

CEO Hassane El-Khoury expressed confidence in continued strong growth for AI data center, highlighting ON Semiconductor's broad portfolio covering high voltage (800V/1200V) to low voltage (SPS-type devices) with high efficiency. He emphasized the competitive advantage of vertical GaN for high power density and the strategic VCore acquisition in 2025, positioning the company for future high-voltage rail architectures.

Ross Seymore inquired about the automotive market's Q3 upside, its sustainability into Q4 and 2026, and the company's AI business, including its projected $250 million revenue for 2025 and ON's differentiation in this market.

Answer

Hassane El-Khoury, President and CEO, noted automotive stabilization, advising against reading too much into quarter-on-quarter lumpiness, and highlighted that a restocking cycle has not yet occurred. Regarding AI, Hassane and Thad Trent, CFO, emphasized ON's 'wall to core' differentiation, enabling power delivery from high voltage to the core, and pointed to the doubling of AI revenue year-over-year as proof of their JFET, silicon carbide, and AMG product strength.

Ross Seymore asked about the automotive market's Q3 upside compared to guidance, inquiring about the drivers and sustainability of this growth into Q4 and 2026. He also questioned ON Semiconductor's differentiation in the AI business, which is projected to reach $250 million in 2025, and how the company plans to drive further growth.

Answer

Hassane El-Khoury, President, CEO, and Director, ON Semiconductor, explained that Q3 and Q4 automotive performance should be viewed as part of the second half of the year, with quarter-on-quarter lumpiness driven by new design ramps rather than a significant market shift. He noted stabilization in demand but no restocking cycle yet. For AI, Mr. El-Khoury highlighted ON Semiconductor as a share gainer, one of only two companies capable of supporting power delivery from 'wall to core,' differentiating through JFET, Silicon Carbide, AMG products, and the VCORE acquisition, which has led to doubling revenue year-over-year.

Ross Seymore asked about the current cyclical environment, contrasting signs of stabilization with ongoing headwinds, and inquired when secular growth drivers like AI and Trejo would overcome the impact of business exits.

Answer

President and CEO Hassane El-Khoury noted signs of stabilization, with automotive bottoming in Q2 and expected to grow in Q3, but he remains cautious about calling a full recovery. He highlighted that the AI data center business has doubled year-over-year for the second consecutive quarter and the Trejo platform is gaining significant traction. CFO Thad Trent addressed gross margins, explaining the near-term caution on utilization and outlining the long-term path to the 53% target through improved utilization, FabRite initiatives, and a favorable product mix.

Ross Seymore asked why onsemi's Q2 revenue guidance appears conservative compared to peers and requested key metrics to model gross margin following the company's recent manufacturing realignment.

Answer

CEO Hassane El-Khoury explained that the flat revenue guidance is due to onsemi's specific end-market exposure, particularly to the automotive EV market outside of China, which has not yet recovered. CFO Thad Trent provided new gross margin metrics, stating that each point of utilization improvement now adds 25-30 basis points to gross margin, an increase from the previous 20-25 basis points. He noted that the full benefit of depreciation savings will not be seen until Q4 2025.

Ross Seymore of Bank of America Securities questioned the severity of the revenue decline, asking whether it was due to ON-specific issues versus end-market weakness, and if the product portfolio needed larger adjustments. He also inquired about the potential magnitude of planned structural cost actions.

Answer

CEO Hassane El-Khoury explained that the most significant decline was in the noncore business, where onsemi is intentionally avoiding price volatility, a consistent part of its strategy. CFO Thad Trent quantified this volatile noncore business at $350-$400 million. Regarding the cost actions, Trent stated that plans are still being developed and updates will be provided as they are finalized.

Ross Seymore asked whether the slowdown in the silicon carbide (SiC) business is a cyclical issue or a more concerning secular change, and questioned if onsemi can maintain its 45% gross margin floor amid weak demand and lower capital spending.

Answer

CEO Hassane El-Khoury stated the SiC slowdown is cyclical, tied to lumpy EV adoption rather than a long-term strategic shift, noting that planned vehicle models did launch. CFO Thad Trent confirmed no change to the 45% gross margin floor or 53% peak target, attributing the resilience at 65% utilization to cost optimization and the 'Fab Right' strategy.

Ross Seymore asked about potential supply issues (memory costs, availability) impacting Synaptics' mobile touch and PC businesses, and when Astra products are expected to become a meaningful tailwind for core IoT revenue and gross margins.

Answer

Rahul Patel, President and CEO, and Ken Rizvi, CFO, clarified that Synaptics' premium-tier mobile and enterprise PC segments are less affected by broader supply pressures, and their own supply constraints for mobile touch are easing. They confirmed Astra products are on track for meaningful revenue contribution in calendar 2027 and are expected to be accretive to gross margins.

Ross Seymore asked about potential supply issues with memory costs and availability affecting Synaptics' mobile touch and PC businesses, and when Astra products would become a meaningful tailwind for core IoT revenue and gross margins.

Answer

Rahul Patel, President and CEO, and Ken Rizvi, CFO, clarified that Synaptics' premium-tier mobile and enterprise PC segments are less impacted by memory-related supply pressures, and their own supply for touch products is easing. Rahul Patel added that Astra products are on track for meaningful revenue contribution in calendar 2027 and are expected to be accretive to gross margin.

Ross Seymore asked about the company's plans to reduce channel inventory given the Q4 bookings increase and Q1 growth guidance, and when high-power, automotive, data center, and GaN businesses will significantly impact aggregate revenues and accelerate growth.

Answer

CFO Nancy Erba stated that reducing channel inventory is a key objective for 2026, dependent on bookings and mix. CEO Jen Lloyd noted that GaN and high-power are already meaningful drivers, with automotive and data center expected to take more time to become material, likely a couple of years for data center.

Ross Seymore asked about the near-term outlook, specifically regarding the significant increase in Q4 bookings, the Q1 growth guidance, and the elevated channel inventory levels. He inquired about the company's plans to reduce inventory and its implications for Q1 sub-segment performance and the overall growth rate for the year. Additionally, he asked about the longer-term impact of high-power, automotive, data center, and GaN businesses on aggregate revenues and growth acceleration.

Answer

CFO Nancy Erba stated that inventory reduction is a key objective for 2026, dependent on Q1 and first-half bookings and mix. CEO Jen Lloyd added that the consumer business remains conservative due to headwinds, with potential upside from housing market improvements. For the longer term, Ms. Lloyd noted that GaN is already a meaningful driver, and high power is accelerating industrial growth. Automotive and data center are expected to take more time, with automotive design ramps pushing out and data center being a multi-year play. Ms. Erba emphasized cautious investments for 2026 despite planning for similar growth levels.

Ross Seymore asked for a segment breakdown for the Q3 guidance, inquired about the automotive revenue ramp and what constitutes 'material' revenue, and later followed up on channel inventory expectations and the interplay between seasonality and cyclicality for Q4.

Answer

CFO Sandeep Nayyar projected flattish results for the Industrial and Consumer segments in Q3, with minor growth from other areas. He noted appliance weakness is being offset by a video game design win. President and CEO Jen Lloyd confirmed automotive is on track for high single-digit millions in revenue this year. Sandeep Nayyar reiterated the goal of low tens of millions by 2026, which they consider 'meaningful'. For the follow-up, he stated he expects channel inventory to be flattish and noted that the current tariff-driven adjustment is overriding typical seasonality.

Ross Seymore asked about the ramp timing for key design wins, particularly in high-power industrial, and whether there were any changes unrelated to tariffs. He also inquired about the outlook for gross margin and operating expenses for the remainder of the year.

Answer

CEO Balu Balakrishnan clarified that a minor delay in a high-power program was customer-specific, not macro-related, and is expected to ramp in Q2. He affirmed that overall business trends and bookings remain normal and consistent with guidance. CFO Sandeep Nayyar reiterated the full-year non-GAAP gross margin forecast of approximately 55.5% and anticipated that operating margin would benefit from leverage as revenues increase in the second half of the year.

Ross Seymore asked for the most significant update on the end-market environment compared to a month ago and sought confirmation on whether all four business segments are still expected to grow in the upcoming year.

Answer

CEO Balu Balakrishnan highlighted that the biggest update is the expectation for significant growth in the industrial segment, driven by infrastructure projects, renewables, and high-power applications. Both Balu Balakrishnan and CFO Sandeep Nayyar confirmed that all four segments are expected to grow, with industrial projected to see the largest dollar increase, followed by consumer.

Ross Seymore asked about the percentage of Qualcomm's handset business in China, given it was cited as especially hit, and whether normal seasonality is expected after the March quarter step down. He also followed up on OpEx, asking if there would be adjustments after the March quarter increase or if investments would continue through current conditions.

Answer

CFO Akash Palkhiwala stated that Qualcomm does not break down revenue by region but noted that exposure to Chinese OEMs is less than their unit volume share due to the tiers they play in. He expects consumer demand seasonality to be consistent, but supply alignment will define financial forecasts. For OpEx, Mr. Palkhiwala indicated that the March quarter guidance is a reasonable proxy for the rest of the year, reiterating the framework of reducing investments in mature businesses to fund diversification and incremental expenses from acquisitions like Alphawave, maintaining discipline.

Ross Seymore inquired about the percentage of Qualcomm's handset business exposed to China, given it was cited as particularly affected by memory issues, and whether normal seasonality is expected after the March quarter's step down. He also asked about OpEx adjustments post-March quarter, considering memory market dynamics, and if Qualcomm is investing through this period.

Answer

Akash Palkhiwala, CFO of Qualcomm, stated that Qualcomm does not break down revenue by region but noted that exposure to Chinese OEMs is less than unit volume suggests due to tiering. He expects consumer demand seasonality to remain consistent, but supply alignment will define the financial forecast. Regarding OpEx, Palkhiwala indicated that the March quarter guidance is a reasonable proxy for the rest of the year, with a continued focus on reallocating investments from mature businesses to diversification priorities and funding acquisitions like Alphawave, while maintaining disciplined OpEx growth.

Ross Seymore of Deutsche Bank asked about the relationship with Samsung, specifically regarding its use of its own processors and whether Qualcomm expects to maintain 100% share in the Galaxy S series. He also inquired if the target for double-digit content increases in premium handsets still holds true.

Answer

President & CEO Cristiano Amon clarified the Samsung relationship has a new baseline share of 75%, with anything above that considered upside. CFO & COO Akash Palkhiwala confirmed strong content growth, noting the Android business grew ~10% in fiscal 2025, exceeding Investor Day targets, and that non-Apple QCT revenue has grown over 15% annually for two years.

Ross Seymore asked about the impact on operating expenses as QUALCOMM's share at its largest U.S. customer declines, and how the company's margin structure might change. He also inquired about the reasoning behind the decision to increase the capital return target to 100% of free cash flow.

Answer

Akash Palkhiwala explained that the OpEx strategy involves maintaining the current spending scale while transitioning investment from handsets to growth areas like automotive and IoT, with the goal of replacing the lost revenue over time. He noted the increased capital return reflects confidence in strong cash flow, a growing cash balance, and an opportunity to leverage the current stock price for buybacks while maintaining flexibility for M&A.

Ross Seymore of Deutsche Bank asked about the drivers of the IoT segment's performance, questioning if sequential declines were normal seasonality, and inquired if the strong QCT gross margin was structurally higher.

Answer

CFO Akash Palkhiwala clarified that the IoT segment's sequential profile is influenced by normal seasonality in consumer IoT post-holidays, while the industrial and edge networking sub-segments remain strong. He attributed the robust QCT gross margin to a favorable product mix from strong premium-tier handset volume, which can fluctuate.

Ross Seymore asked about the gross margin trajectory across MI300, MI400, and MI500 generations, specifically if it would go up, down, or show volatility, and AMD's focus on optimizing dollars versus percentages. He also inquired about the gaming segment's volatility, the expected magnitude of decline for 2026, and the annual trajectory with the next-gen Xbox ramping in 2027.

Answer

Jean Hu, EVP, CFO, and Treasurer, explained that each new generation generally offers more capabilities, so gross margin should progress higher over time, though initial ramps tend to be lower before improving with scale and yield. For gaming, she stated that 2026, being the seventh year of the current console cycle, is expected to see a significant double-digit decline in semi-custom revenue. Dr. Lisa Su, Chairman and CEO, added that a reversal of this trend is expected with the ramp of the new generation in 2027.

Ross Seymore inquired about the gross margin trajectory across the MI300, MI400, and MI500 generations, asking if there would be changes, volatility, or a general trend in gross margin percentages.

Answer

Jean Hu, EVP, CFO, and Treasurer, AMD, stated that each new generation offers more capabilities, which should generally lead to higher gross margins. However, she noted that gross margins tend to be lower at the beginning of a ramp and improve with scale, yield, and performance, resulting in dynamic gross margin progression.

Ross Seymore asked how AMD differentiates itself to secure multi-gigawatt deals like OpenAI's amidst competition from other GPU and ASIC vendors, aiming for initial 6 gigawatts and future expansion. He also inquired about the uniqueness of the warrant structure in the OpenAI deal and if AMD is open to similar creative equity vehicles for future partnerships.

Answer

Dr. Lisa Su, Chair and CEO, highlighted the global demand for AI compute and AMD's strong positioning with the MI450 series rack-scale solution, emphasizing its compute and memory performance for both inference and training. She cited differentiation through time to market, TCO, deep partnership, and future roadmap (MI500 and beyond). Dr. Su described the OpenAI warrant agreement as unique for its time, prioritizing deep, multi-year, multi-generation partnership and significant scale with aligned incentives, but noted AMD is open to other opportunities to bring its capabilities into the ecosystem.

Ross Seymore asked how AMD differentiates itself in multi-gigawatt AI deals, particularly with OpenAI engaging multiple GPU and ASIC vendors, to secure the initial 6 GW and potentially more. He also inquired if the unique warrant structure used in the OpenAI deal was a one-off or if AMD is open to similar creative equity vehicles for future partnerships.

Answer

Lisa Su, Chair and CEO of AMD, emphasized the global need for more AI compute, with MI450 series and rack-scale solutions being extremely strong products, well-positioned for inference and training due to compute and memory performance. Key differentiators include time to market, total cost of ownership, deep partnership, and future roadmap discussions (MI500 and beyond). She expressed optimism about capturing significant market share. Regarding the warrant structure with OpenAI, Lisa Su called it a 'unique agreement' for a 'unique time in AI,' prioritizing deep, multi-year, multi-generation partnership with aligned incentives. While unique, AMD is open to other creative opportunities to bring its capabilities to the ecosystem.

Ross Seymore asked how the MI355 adoption ramp compares to prior expectations and sought clarity on the seasonality outlook for the Client and Gaming businesses for the second half of the year.

Answer

Chair and CEO Lisa Su noted that MI355 adoption is 'a bit faster' than previously expected, with broad-based customer interest. For the second half, she guided to single-digit sequential growth for Client in Q3 and flattish for Gaming. She specified that the console business is expected to decline substantially in Q4, which would likely lead to a sequential decline for the overall Client and Gaming segment.

Ross Seymore from Deutsche Bank asked for an update on the MI355 accelerator ramp, specifically how customer adoption has trended compared to expectations from three months prior. He also requested guidance on the typical second-half seasonality for the Client and Gaming segments.

Answer

CEO Lisa Su stated that MI355 adoption is 'a bit faster' than previously expected, with broad-based customer interest. For the second half, she guided to single-digit sequential growth for the Client business in Q3 and flattish performance for Gaming. Dr. Su noted that for Q4, the console business is expected to decline substantially post-holiday build, which would likely cause the combined Client and Gaming segment to be down sequentially.

Ross Seymore inquired about the Embedded segment, asking for the drivers behind the company's confidence in a second-half recovery that would require significant sequential growth. He also asked for clarification on the full impact of the ZT Systems acquisition on operating expenses.

Answer

CFO Jean Hu explained that confidence in the Embedded segment's recovery comes from improving order patterns and book-to-bill ratios, particularly in the aerospace, defense, and test and measurement markets. She guided to a flattish Q2, with year-over-year growth expected to resume in Q3 and especially Q4. On OpEx, Hu confirmed the incremental quarterly expense from the ZT design team is about $50 million and that the company remains disciplined, expecting earnings to grow faster than revenue.

Ross Seymore asked for an update on the Embedded business, questioning the drivers behind its muted recovery in Q4 and the directional outlook for 2025. He also inquired about the EPYC server CPU business and whether the 'crowding out' effect from GPU spending was easing.

Answer

CEO Dr. Lisa Su explained the Embedded segment's recovery is mixed, with strength in test & emulation and aerospace, but continued softness in communications and industrial, leading to modest growth expectations for Q4 and 2025. Regarding EPYC, she noted the market environment has improved as cloud and enterprise customers resume spending, and AMD's strong product portfolio is driving share gains, complementing the AI opportunity rather than being crowded out.

Ross Seymour asked for an update on NXP's automotive accelerated growth drivers, specifically if the thesis has changed given flat auto performance for a few years, and how their growth rate is expected to evolve. He also inquired about the aggregate headwind from the MEMS divestiture and RF business exit, and if the MEMS headwind is included in the auto segment.

Answer

Rafael Sotomayor, President and CEO, explained that H1 2025 inventory digestion masked the true dynamics, causing accelerated drivers to be slightly below model but still growing ~10% in a flat auto year. He affirmed the thesis for these drivers is intact and stronger than ever. Bill Betz, CFO, stated the MEMS divestment is about $300 million per year, with $25 million recognized in Q1, impacting the auto end market. He added that the RF business will track similarly to digital networking, with new product development stopping but existing products remaining for at least two years. Jeff Palmer, VP of Investor Relations, clarified that in 2025, secure cards were over 50% of communications infrastructure, with digital network and RF Power each about 25%.

Ross Seymore followed up by asking NXP to quantify the aggregate headwind from the MEMS divestiture and the exit of the RF Power business for the current year, and where the MEMS headwind sits.

Answer

Bill Betz, CFO, stated that the MEMS sensor divestment represents approximately $300 million per year, with $25 million recognized in Q1, impacting the automotive end market. Rafael Sotomayor, President and CEO, clarified that the RF business, which will stop new product development, is expected to remain for at least two more years, similar to Digital Networking. He added that Secure Car was just over 50% of Communications Infrastructure in 2025, with Digital Networking and RF Power each about 25%.

Ross Seymore inquired about the specific factors that led to NXP's Q4 2025 guidance being better than anticipated 90 days prior, focusing on end markets, inventory, or regions. He also asked about the potential dollar contribution if distribution inventory reached the 11-week target and the triggers for this normalization.

Answer

Rafael Sotomayor, President and CEO, explained that Q4's 4% sequential growth surpassed the previous soft guide due to risks not materializing and continued soft recovery signals, particularly slight demand improvement in Industrial & IoT. Regarding inventory, Mr. Sotomayor advised against a direct dollar-to-week conversion, emphasizing strategic channel management for product mix. He noted that NXP is selectively staging products with high conviction of sell-through, causing inventory to fluctuate between 9 and 10 weeks, with the optimal 11-week level dependent on improved business conditions, potentially not in Q1 2026.

Ross Seymore asked about the specific factors contributing to NXP's better-than-expected fourth-quarter guidance compared to 90 days prior, inquiring about improvements across end markets, inventory, or regions. He also questioned the dollar impact of distribution inventory moving from 9 to 11 weeks and the triggers for reaching the target 11-week level.

Answer

President and CEO Rafael Sotomayor explained that Q4 guidance improved due to risks not materializing and continued signals of a soft recovery, with a strong order book and healthy distribution backlog. He highlighted slight demand improvement in Industrial and IoT. Regarding inventory, Mr. Sotomayor advised against a formulaic dollar-per-week calculation, emphasizing strategic channel management to ensure the right product mix for competitiveness. He noted NXP is selectively staging products with high sell-through conviction, and while 11 weeks remains the optimal target, its timing depends on improved visibility and confidence, not necessarily Q1.

Ross Seymore of Deutsche Bank inquired about the change in management's confidence regarding the cyclical recovery compared to the previous quarter and asked for details on gross margin drivers and the OpEx impact of pending acquisitions.

Answer

CEO Kurt Sievers stated that confidence in a new upcycle is 'clearly better' than 90 days ago, with all four tracked signals showing improvement. CFO Bill Betz explained that higher factory utilization had minimal impact on Q2 gross margins but is a factor for Q3. He also noted that while the two pending acquisitions will increase OpEx, the company has mechanisms to absorb much of the cost, though they may be 'a bit higher' if the deals close in the quarter.

Ross Seymore asked for an update on NXP's confidence in a cyclical recovery compared to the prior quarter and questioned the gross margin impact from increased fab utilization and the OpEx effect of pending acquisitions.

Answer

CEO Kurt Sievers stated that confidence in a cyclical recovery is "clearly better" than 90 days prior, citing strengthening signals like customer backlogs and order rates. CFO Bill Betz clarified that the gross margin impact from higher fab utilization was minimal in Q2 and would be small in Q3. He also noted that the OpEx from two smaller pending acquisitions could be largely absorbed, as their headcount is relatively small.

Ross Seymore asked how NXP is perceived by customers and governments regarding tariffs given its manufacturing footprint, and also inquired about trends and potential 'green shoots' in the Industrial & IoT business.

Answer

CEO Kurt Sievers stated that the direct impact of tariffs is immaterial, though the indirect impact is uncertain. He explained that NXP positions itself as a European company in China, which is seen as an opportunity, while complying with all U.S. regulations. For Industrial & IoT, he noted that while the segment is guided to grow, the strength is currently more from consumer IoT, driven by specific design wins in China, and was cautious about calling this a broad-based recovery for the core industrial sector.

Ross Seymore of Deutsche Bank questioned the drivers behind the surprisingly flat sequential guidance for the Industrial & IoT segment and asked if the accelerated end-of-life process for the Communication Infrastructure business is now complete.

Answer

CEO Kurt Sievers attributed the relative strength in Industrial & IoT to demand from Asia, particularly China, amplified by low channel inventory. Regarding Communication Infrastructure, he clarified that the end-of-life process for the digital networking products, which represent about 30% of the segment, is not complete and will continue to cause declines beyond Q1.

Ross Seymore asked about the sudden change in customer behavior that led to a weaker outlook and questioned the drivers behind the decline in gross margin.

Answer

CEO Kurt Sievers explained that an unexpected and broad weakness in the Industrial & IoT market emerged in August, which is now extending to the Western Automotive segment, causing Tier 1 customers to become more cautious and reduce inventory. CFO Bill Betz added that the Q3 gross margin miss was due to an unfavorable product mix, with weaker high-margin Industrial sales and stronger dilutive Mobile sales. He noted that factory utilization is in the low 70s and will be a headwind until revenues recover.

Ross Seymore asked about the competitive landscape on the optical side, specifically how MaxLinear's positioning is evolving from Keystone to Rushmore and if it's strengthening or facing more competitive pressure.

Answer

CEO Kishore Seendripu affirmed that MaxLinear's position is strengthening for the next-generation 1.6 terabit (Rushmore) and beyond (Big Sky 400 gigabit per lane) products, leveraging low-power implementation, integration, and RF mixed-signal skills. He acknowledged the value of incumbency in 800G. For the follow-up, Ross asked about the directional trajectory for both gross margin and OpEx for 2026. CFO Steve Litchfield expects gross margin improvement due to favorable product mix (infrastructure), aiming to exit the year starting with a 'six' (60%+), and anticipates OpEx to grow at about half the rate of the top line, possibly 4-5% this year.

Ross Seymore questioned MaxLinear's competitive landscape in optical DSP, specifically how its positioning evolves from Keystone to Rushmore, and whether it strengthens for 1.6T. He also asked about the expected trajectory for gross margins and OpEx growth in 2026.

Answer

Kishore Seendripu (CEO) affirmed that MaxLinear's position is strengthening for the next-generation 1.6 terabit Rushmore product, gaining ground against competitors, and expects to demonstrate capabilities with the Big Sky 400 gigabit per lane product. Steve Litchfield (CFO) indicated that gross margins are improving due to a favorable product mix, expecting to exit 2026 with margins starting with a 'six' (vs. 'five'), with Q1 guidance at 59.5% midpoint. He projected OpEx to grow at a lower rate than the top line, possibly 4%-5% this year.

Ross Seymore from Deutsche Bank inquired about the drivers behind the improving bookings and backlog, asking for color by end market or geography, and sought confirmation of the full-year 2025 non-GAAP operating expense target.

Answer

CFO Steven Litchfield confirmed that improving bookings and backlog are providing better visibility. He attributed the trend to both a cyclical recovery in markets like broadband and market share gains from new product ramps. He also reaffirmed the full-year 2025 non-GAAP OpEx target of $220 million to $225 million, expecting a modest downward trend through the year.

Ross Seymore inquired about the drivers behind the Q4 guidance, where infrastructure, connectivity, and industrial segments are expected to grow significantly while broadband declines. He also asked for an update on the progress of the previously announced operating expense reduction plan.

Answer

CFO and Chief Corporate Strategy Officer Steve Litchfield attributed the Q4 growth to improved demand across the board, particularly a strong, back-end loaded contribution from 800G optical products and a modest recovery in connectivity and industrial markets. He confirmed that the company is on track to achieve its targeted 20-25% year-over-year OpEx reduction for the next year, with the majority of cost savings already realized.

Ross Seymore with Deutsche Bank inquired about the significantly stronger-than-seasonal Q1 guidance, asking if any unique end market or geographic factors were driving this optimistic outlook compared to normal seasonality. He also followed up on the gross margin implications for Q1 and the full year, considering Q4's performance, utilization changes, and inventory levels.

Answer

CEO Haviv Ilan and CFO Rafael Lizardi explained that the Q1 guidance reflects continued recovery in the industrial market, strong growth in the data center segment, and improving order activity and backlog throughout Q4. Rafael Lizardi attributed the Q4 EPS beat to better revenue, end market mix, loadings, and OpEx, noting that Q1 gross margins would be influenced by low single-digit OpEx increases and demand-dependent loadings.

Ross Seymore asked about the significantly stronger-than-seasonal first-quarter guidance, inquiring about any unique drivers by end market or geography, and then followed up on the gross margin implications, including puts and takes for Q1, utilization, and inventory levels.

Answer

CEO Haviv Ilan and CFO Rafael Lizardi explained that the Q1 guidance reflects continuing recovery in industrial (up 18% year-over-year in Q4), sustained strength in data center (growing for seven consecutive quarters), and improving orders, backlog, and turns business throughout Q4. For gross margin, Rafael Lizardi noted Q4 EPS beat expectations due to better revenue, mix, loadings, and OpEx, and for Q1, OpEx is expected to be up low single digits, with loadings adjusted based on demand.

Ross Seymour asked about the flow-through of gross margin into next year, specifically regarding depreciation changes, utilization dynamics, and potential inventory headwinds in H1 2026. He also inquired about the company's general approach to OpEx for next year, including growth rates and R&D allocation, following recent restructuring.

Answer

CEO Haviv Ilan reiterated depreciation guidance ($1.8-$2B this year, $2.3-$2.7B next year at the lower end) and stated that lowering loadings now positions them well for inventory in 2026, with a focus on free cash flow per share growth. CFO Rafael Lizardi clarified that OpEx (excluding restructuring) is expected to be flat Q3 to Q4, and the company maintains a disciplined approach to R&D and SG&A allocation, prioritizing long-term growth opportunities in industrial, automotive, and data center markets.

Ross Seymour asked about the flow-through of gross margin into next year, specifically regarding depreciation and utilization dynamics, and if it would create a headwind in the first half of 2026. He also sought clarification on Q4 OpEx (excluding restructuring) and the general OpEx strategy for next year, including growth rates and absolute levels.

Answer

CEO Haviv Ilan and CFO Rafael Lizardi reiterated depreciation guidance for 2025 and 2026 (lower end of range), stating that current loading adjustments position them well for 2026, with a focus on free cash flow per share growth. CFO Rafael Lizardi confirmed Q4 OpEx would be flat to Q3 (excluding restructuring) and discussed disciplined allocation of R&D and SG&A to best opportunities, particularly in industrial, automotive, and data center markets.

Ross Seymore pressed further on the perceived shift in tone, asking what changed regarding the cycle's strength or tariff uncertainty to cause a more typical seasonal Q3 guide. He also requested an update on the CapEx and depreciation framework for 2025 and 2026.

Answer

CEO Haviv Ilan suggested that Q2 results were likely boosted by customers building inventory amid tariff uncertainty, a phenomenon that has since normalized, warranting a more prudent Q3 forecast. CFO Rafael Lizardi confirmed that the previously stated CapEx and depreciation guidance for 2025 and 2026 remains unchanged.

Ross Seymore questioned if the pricing environment had changed and asked about long-term market share gain expectations now that supply is no longer a major constraint.

Answer

Executive Haviv Ilan responded that the pricing environment remains stable, with like-for-like parts declining at a historical low-single-digit rate, though product mix has shifted. On market share, he emphasized it's a long-term measure and expressed confidence in TI's ability to compete and grow, highlighting the recent return to year-over-year growth in the analog business in Q4 after eight quarters of decline.

Ross Seymore of Deutsche Bank asked if the sharp cyclical rebound seen in China's auto business is indicative of what could happen in other regions. He also inquired about the structural drivers for operating expenses (OpEx) in 2025.

Answer

CEO Haviv Ilan suggested that China's market dynamics, including faster design cycles and inventory corrections, contribute to more accelerated cycles, but he expects all markets to eventually recover. CFO Rafael Lizardi outlined the 2025 OpEx strategy, stating that R&D investments will continue to grow while the focus for SG&A will be on efficiency, leading to slower growth in that area.

Ross Seymore from Deutsche Bank inquired about Intel's short-term supply improvements, including yield and seasonality, and long-term supply strategy for 14A and 18A, specifically when CapEx might be loosened for structurally higher demand.

Answer

David Zinsner, CFO, explained that yield and throughput improvements are key short-term drivers, offering high ROI without incremental capital. He noted CapEx is shifting from space to tools, increasing wafer starts across Intel 7, Intel 3, and 18A. Lip-Bu Tan, CEO, added that yield improvements are trending at 7-8% per month. For 14A, David Zinsner stated CapEx for capacity will only be unlocked once customer commitments are secured, expected in H2 2026 to H1 2027. Ross Seymore also asked for more precise guidance on full-year 2026 gross margin. David Zinsner attributed Q1 gross margin decline to lower revenue and the dilutive impact of Core Ultra Series 3 (Panther Lake) ramp. He expects improvements later in the year from better supply and Panther Lake's improving cost structure, targeting 40% gross margin from the current 34.5%.

Ross Seymore from Deutsche Bank inquired about Intel's short-term supply improvements, including yield and seasonality, and long-term CapEx strategy for 14A and 18A to meet future demand. He also asked for more precise guidance on full-year 2026 gross margins.

Answer

CFO David Zinsner explained that yield and throughput improvements are key short-term drivers, requiring no incremental capital. He noted CapEx is shifting from space to tools for Intel 7, 3, and 18A, with 14A capacity spend contingent on customer commitments in late 2026/early 2027. CEO Lip-Bu Tan added that yield improvements are trending at 7-8% per month but are not yet industry-leading. Zinsner further detailed that Q1 gross margin decline is due to lower revenue and the dilutive impact of Panther Lake's early ramp, expecting improvements as supply increases and Panther Lake's cost structure optimizes, targeting 40% gross margins.

Ross Seymore from Deutsche Bank inquired about the factors contributing to Intel's increased confidence in its Foundry business, specifically asking if recent collaborations, equity investments, or technical advancements in 18A and 14A processes were the primary drivers.

Answer

CEO Pat Gelsinger attributed increased confidence to the SoftBank investment supporting AI infrastructure demand and significant technical progress on Intel 18A and 14A, including predictable 18A yields and Fab 52's operational status. CFO David Zinsner added that while 2026 gross margins face headwinds from Altera's de-consolidation and initial Lunar Lake/Panther Lake costs, Foundry gross margins are expected to improve from scale and a shift to leading-edge nodes like 18A, Intel 4, and Intel 3.

Ross Seymore from Deutsche Bank inquired about the increased confidence in Intel Foundry's progress, specifically whether recent collaborations and equity investments or technical merits were the primary drivers. He also asked for a directional outlook on 2026 gross margins, focusing on Foundry's contribution and its impact on Intel products gross margin.

Answer

CEO Pat Gelsinger attributed increased confidence to SoftBank's infrastructure investments, steady progress on 18A and 14A yields, Fab 52 operations, and growing demand for advanced packaging. CFO David Zinsner noted that 2026 gross margins would face a headwind from Altera's de-consolidation but expected improvements from Foundry scale, leading-edge mix (18A, Intel 4/3), and better pricing, despite initial dilution from new products like Lunar Lake and Panther Lake.

Ross Seymore asked about the timeline for fixing the x86 business to build the necessary trust for the foundry strategy and inquired about the drivers for Q3 gross margin guidance and the longer-term outlook.

Answer

CEO Lip-Bu Tan stated that trust in the foundry will be built through consistent execution on the 18A process, with a key milestone being the Penta Lake launch by year-end. CFO David Zinsner explained that Q3 gross margins are pressured by the ramp of Lunar Lake and early costs for Panther Lake. He noted future tailwinds include higher volumes of Panther Lake, improving foundry margins, and better product pricing and cost structures.

Ross Seymore from Deutsche Bank asked about the timeline for rebuilding trust in Intel's x86 business to support its foundry ambitions and sought clarity on the drivers for Q3 gross margin and the outlook into next year.

Answer

CEO Lip-Bu Tan stated that rebuilding trust starts with execution on Intel 18A, where he sees steady progress and has increased confidence in launching the Panther Lake SKU by year-end. CFO David Zinsner explained the Q3 gross margin decline is predominantly driven by the ramp of Lunar Lake (due to in-package memory) and the initial, higher-cost ramp of Panther Lake. He noted that higher volumes for Panther Lake should become a tailwind for margins next year.

Ross Seymore of Deutsche Bank asked about balancing the need to fix the product roadmap with the imperative to fill Intel's own foundry capacity, and inquired about the key drivers for gross margin in 2025 and 2026.

Answer

CEO Lip-Bu Tan explained his focus is on flattening the organization to deliver superior products, noting that the product teams must use the best option, internal or external. CFO David Zinsner detailed gross margin pressures from the product mix shift to Lunar Lake and 18A start-up costs in 2025, but projected improvement in 2026 from Panther Lake's better margin profile and the benefits of in-sourcing wafers.

Ross Seymore of Deutsche Bank AG questioned the competitiveness of Intel's data center roadmap, asking how much Granite Rapids closes the gap and for an update on Clearwater Forest's timeline. He also inquired about the drivers behind the Q1 gross margin decline and the outlook for the full year.

Answer

Michelle C. Holthaus, Interim Co-CEO, stated it will take 1-2 years to regain a competitive footing in the data center, with Granite Rapids being a first step and Clearwater Forest now slated for H1 2026. CFO and Interim Co-CEO David Zinsner explained the Q1 gross margin dip was due to lower revenue and product cost pressures, but expects improvement through 2025 driven by a better EUV wafer mix from Intel Foundry.

Ross Seymore asked about the external metrics investors can use to track the Intel 18A ramp and for a chronological breakdown of gross margin performance, including the drivers for Q3's upside, Q4's decline, and the outlook for 2025.

Answer

CEO Pat Gelsinger stated that while 18A financial benefits are not expected until 2026, Intel will provide qualitative updates on progress, such as lifetime deal value (LDV) and new customer wins. CFO David Zinsner explained that Q3 gross margin upside was due to selling previously reserved inventory, a benefit that won't repeat in Q4. He added that Q4 margins will also be impacted by 18A start-up costs. For 2025, margins will face headwinds from the Lunar Lake product mix, which has memory integrated into the package.

Ross Seymore inquired whether the expansion of Broadcom's TPUs into a merchant go-to-market strategy for other customers represents a substitution effect for potential ASIC customers or a broadening of the overall market, and what the financial implications are.

Answer

Hock Tan (President and CEO, Broadcom) explained that the most common substitution for TPUs is merchant GPUs, not other custom ASICs. He emphasized that investing in a custom AI accelerator is a long-term strategic decision, distinct from transactional moves between GPUs and TPUs, and that customers committed to their own ASICs are unlikely to be deterred.

Ross Seymore inquired whether the expanded merchant go-to-market for TPUs represents a substitution effect for customers who might otherwise have pursued ASICs with Broadcom, or if it broadens the overall market.

Answer

Hock Tan (President and CEO) explained that the TPU's merchant availability primarily substitutes for general-purpose GPUs, not custom ASICs. He noted that investing in a custom accelerator is a long-term strategic decision, distinct from transactional moves between GPU and TPU.

Ross Seymore asked about the factors driving the significantly improved fiscal 2026 AI guidance, specifically inquiring if it's due to the new prospect becoming a qualified customer with a $10 billion backlog, stronger demand from existing customers, or a combination of both.

Answer

Hock Tan, President and CEO, explained that the accelerated outlook for 2026 AI revenue is a combination of increasing volumes from the three existing customers and the addition of a fourth significant customer, which will begin shipping strongly in early 2026 with substantial demand.

Ross Seymore from Deutsche Bank asked for more detail on the drivers behind the strong AI growth forecast for the next fiscal year, specifically questioning the role of inference and whether the confidence stems from custom processors (XPUs), connectivity, or both.

Answer

CEO Hock Tan confirmed that the optimistic outlook is driven by a combination of factors. He stated that Broadcom is seeing increased deployment of both custom XPUs and the associated networking components, noting that demand for XPUs is higher than originally anticipated. Tan explicitly highlighted that they are observing "much more inference now," which is contributing to this accelerated demand.

Ross Seymore of Deutsche Bank asked for more detail on the drivers behind the sustained AI growth forecast for fiscal 2026, specifically questioning the role of inference and whether the confidence stems from custom accelerators (XPUs), networking, or both.

Answer

CEO Hock Tan confirmed that the confidence in the 2026 AI growth trajectory is driven by a combination of factors. He highlighted an acceleration in the deployment of custom accelerators (XPUs) for inference workloads, which he noted is happening faster than originally anticipated, and stated that this goes hand-in-hand with increased demand for AI networking solutions.

Asked about the conversion rate from design engagements to large-scale deployment for XPU customers, given the industry debate over whether design wins always materialize into significant volume.

Answer

Hock Tan explained that Broadcom's definition of a 'design win' is when a product is produced and deployed at scale, a process that can take 1.5 to 2 years. He emphasized that Broadcom is highly selective, partnering only with customers who require sustainable, large volumes, which ensures a high conversion rate from engagement to deployment.

Ross Seymore asked about capital allocation plans for fiscal 2025, specifically how the company intends to use the 50% of free cash flow not allocated to dividends, probing the balance between debt paydown, buybacks, and potential M&A.

Answer

President and CEO Hock Tan and CFO Kirsten Spears both stated that the primary use of free cash flow beyond dividends will be to pay down debt and de-lever the balance sheet following the VMware acquisition. Spears specified a focus on reducing interest expense by targeting term loans, while Tan affirmed that debt reduction is the priority over M&A for now.

Ross Seymore inquired about the software segment, asking for the reason behind the apparent decline in classic Broadcom software revenue while VMware performed strongly, and whether the business is reaching a stable base for future growth.

Answer

President and CEO Hock Tan focused on VMware's successful business model transformation, highlighting the strong adoption of VMware Cloud Foundation (VCF) and accelerated bookings. He indicated this positive trend is expected to continue, driving future growth for the overall software segment.

Ross Seymore inquired about Marvell's implied $10 billion revenue target for the upcoming fiscal year and how it aligns with the company's longer-term fiscal 2029 growth objectives, particularly in the AI sector.

Answer

Chairman and CEO Matt Murphy confirmed the $10 billion revenue ballpark for the next fiscal year, noting it's based on Marvell's organic plan with expected sequential revenue growth each quarter, stronger in the second half. He detailed that the custom business is projected to double in fiscal 2028, interconnect to outgrow Cloud CapEx, and storage/switch/other to grow 10% in fiscal 2028, leading to an overall 40% data center growth in fiscal 2028 and 30% for Marvell. Celestial AI's contributions are expected to begin in fiscal 2029/2030, with visibility supported by customer planning.

Ross Seymore asked about Marvell's implied revenue target of approximately $10 billion for the next fiscal year (FY2027) and how this aligns with the longer-term fiscal 2029 targets, particularly for the AI business.

Answer

Matt Murphy (Chairman and CEO) confirmed the $10 billion revenue ballpark for FY2027, noting it's based on Marvell's organic plan with sequential revenue growth each quarter, stronger in the second half. He detailed the path to FY2028 and FY2029, expecting custom business to double in FY2028, interconnect to outgrow Cloud CapEx (potentially 20%+), and storage/switch/other data center to grow 10%. This leads to an estimated 40% data center growth in FY2028 and overall Marvell growth of another 30% in FY2028, building towards the long-term targets.

Ross Seymore of Deutsche Bank asked for more details on the forecasted lumpiness in Marvell's custom silicon business, specifically questioning the headwinds in Q3 and the drivers behind the expected strong recovery in Q4.

Answer

Chairman & CEO Matt Murphy explained that the Q3 softness is a normal, temporary 'digestion' period typical of large hyperscale build-outs. He reassured that the optics business remains strong, growing double-digits in Q3, and confirmed that the custom business is expected to see a strong rebound in Q4, resulting in overall growth for the second half of the fiscal year compared to the first.

Ross Seymore from Deutsche Bank asked about Marvell's engineering capacity to support a broader customer base for custom XPUs beyond its initial large customers, referencing competitors' claims of wider engagements.

Answer

Chairman and CEO Matt Murphy confirmed that Marvell has the capacity to expand its engagements, citing increased and reallocated R&D spending over the last few years. He stated Marvell is well-positioned to support multiple new programs and noted the emergence of a "next wave" of hyperscale-class customers who can benefit from custom silicon, with more details to be shared at the upcoming AI investor event.

Ross Seymore of Deutsche Bank asked for reconciliation between Marvell's stated confidence in growing its lead custom XPU customer revenue through fiscal 2027 and a competitor's claims of gaining market share with that same customer.

Answer

Matthew Murphy, Chairman and CEO, affirmed Marvell's confidence, citing the successful production ramp of the current-generation XPU and deep engagement on the next-generation product. Murphy stated unequivocally that Marvell expects revenue from this customer's custom XPUs to grow in fiscal 2026 and fiscal 2027. He declined to comment on the customer's potential work with other partners, focusing instead on Marvell's direct visibility into its own programs.

Ross Seymore asked for clarification on CEO Matt Murphy's commitment to Marvell amid media speculation and questioned if the customer diversification timeline for custom compute has changed since the AI Day.

Answer

CEO Matt Murphy unequivocally affirmed his commitment, stating, "I am all in, okay? On Marvell," highlighting his eight-year tenure and focus on the AI opportunity. Regarding diversification, he confirmed the strategy is on track, with multiple large-volume programs currently ramping with two different customers. He also noted that a third major customer program is progressing for the future, reinforcing confidence in their long-term custom silicon ambitions.

Ross Seymore asked about the factors influencing gross margin into the next fiscal year, considering the mix between lower-margin custom silicon and the recovering, higher-margin merchant business.

Answer

CFO Willem Meintjes projected that the current gross margin trend would continue into next year, with growth from merchant products and benefits from manufacturing absorption offsetting the mix impact from custom silicon. CEO Matt Murphy added that the ultimate gross margin level depends on the recovery pace of traditional core businesses, but emphasized confidence in achieving operating margin targets through disciplined OpEx management.

Ross Seymore inquired about the balance between consumer and enterprise applications within Ambarella's edge AI IoT business, and how the company manages the inherent volatility of consumer markets. He also asked for the gross margin outlook for the upcoming year, including factors influencing it relative to the 59-62% long-term target. In follow-up questions, he asked about the consumer percentage of IoT business in prior fiscal years, how an increased consumer mix might affect seasonality, and the expected non-GAAP tax provision in dollars for the next two fiscal years.

Answer

Louis Gerhardy, VP Corporate Development, stated the split is roughly 50/50 between enterprise CapEx-driven and consumer markets, with consumer including both durables and discretionary items. CFO John Young reiterated the 59-62% long-term gross margin target, noting that the mix of high-volume customers is a primary driver for quarterly fluctuations. In follow-up, Louis Gerhardy indicated that previously, enterprise was a dominant part of the mix, confirmed that an increased consumer mix would change seasonality, and suggested looking at 10-year averages for historical patterns. For taxes, Louis Gerhardy advised thinking in dollars, expecting an increase with revenue but not a significant change to the overall story, and to use the full-year non-GAAP rate for modeling.

Ross Seymore asked about the split between consumer and enterprise segments within Ambarella's Edge AI IoT business, expressing concern about potential volatility in consumer applications and how the company manages this risk. He also asked CFO John Young about the outlook for gross margin in the next fiscal year, considering the long-term target of 59% to 62% and the Q4 guide being at the lower end of that range, seeking insights into potential factors influencing it. Additionally, he inquired about the consumer-to-enterprise mix within the IoT business in the last fiscal year and a year ago, if increased consumer business changes the company's seasonality, and how to think about taxes (dollars or percentages) for the next two fiscal years.

Answer

Louis Gerhardy, VP of Corporate Development, stated the split is roughly 50% enterprise CapEx-driven and 50% consumer, further breaking down consumer into durables and discretionary items, acknowledging the latter's potential for volatility. He indicated that a dominant part of the mix in prior periods was enterprise, CapEx-driven markets, and confirmed that an increased consumer business does change the company's seasonality, suggesting looking at the average seasonality over the last 10 years. He advised thinking about taxes from a dollar perspective due to the company's international structure, expecting tax dollars to increase with revenue but not significantly alter the overall financial story. CFO John Young reiterated the long-term gross margin target of 59% to 62%, explaining that the quarterly gross margin is primarily driven by the contribution from high-volume customers, and that this dynamic will remain a factor going forward.

Ross Seymore asked if the policy-related conservatism in the full-year guide affects one business segment more than the other and requested details on how the company plans to achieve operating leverage.

Answer

CEO Fermi Wang clarified that the conservatism is geography-dependent, related to manufacturing locations, rather than market-dependent. Executive Louis Gerhardy added that for fiscal '26, IoT is expected to grow faster than auto, though both will grow. Gerhardy also explained that operating leverage will be driven primarily by revenue growth at healthy margins, combined with controlled OpEx.

Ross Seymore asked about the primary drivers for the strong Q3 revenue and Q4 guidance, questioning if it was a secular inflection or a cyclical rebound. He also inquired about the year-over-year decrease in the automotive revenue funnel and whether Ambarella's growth profile has shifted more toward IoT.

Answer

President and CEO Dr. Fermi Wang explained that Q3's strength was a mix of recovery from inventory correction and new product growth from the CV5 AI SoC, while Q4's outlook is driven by secular new product adoption. Regarding the auto funnel, Dr. Wang attributed the reduction to a slower-than-anticipated market adoption of Level 2+ systems, leading to project delays and cancellations, but affirmed long-term optimism for the CV3 platform.

Ross Seymore sought to distinguish the impact of the inventory burn ending versus new product ramps on the Q3 growth. He also asked about the expected relative growth rates of IoT versus automotive next year, the company's definition of seasonality, and the strategy for managing OpEx amid revenue growth to achieve profitability.

Answer

CEO Fermi Wang confirmed the inventory burn concluded in Q2 and that growth is now driven by CV5 ramps and CV22 normalization. He stated a personal belief that IoT will outgrow automotive next year, driven by the CV72 ramp. Executive Louis Gerhardy defined seasonality as Q2/Q3 being strong with Q4/Q1 typically down. CFO John Young added that the primary focus is achieving non-GAAP profitability, so OpEx growth will be managed carefully to deliver on the roadmap while driving leverage.

Ross Seymore questioned the increase in OPEX, Arm's exploration of new go-to-market methodologies like chiplets, and when more concrete information on strategy and return on investment would be provided.

Answer

CEO Rene Haas stated that while there's no specific timeline for product announcements, the significant R&D investment reflects the growing opportunity for Arm-based compute. CFO Jason Child added that announcements for full SOCs would occur only after achieving milestones such as tape-out, samples, and non-cancelable customer orders, as this would represent a new business for Arm.

Ross Seymore focused on Arm's operating expenses, particularly the step-up in Q3 guidance, and sought clarity on the timeline for Arm to transition from exploring new go-to-market methodologies like chiplets to a defined strategy with clear return on investment.

Answer

Rene Haas, Arm's Chief Executive Officer, stated that there was no specific timeline for product or technology announcements related to new solutions, but acknowledged the significant R&D investment required. He assured that revenue growth would continue to outpace OpEx increases. Jason Child, Arm's Chief Financial Officer, added that announcements for new businesses, such as full SOCs, would likely occur after achieving tape-out, samples, and non-cancelable customer orders.

Ross Seymore from Deutsche Bank asked a long-term strategic question about Arm's increasing trend of signing deals directly with OEMs, like the auto EV maker, and the potential implications for its TAM and relationships with traditional fabless semiconductor companies.

Answer

CEO Rene Haas explained that the move to custom silicon by OEMs is driven by a need for differentiation and the dominance of the Arm software ecosystem. He expects this trend of direct engagement to accelerate, especially with complex AI workloads, while affirming that the market for traditional fabless semiconductor companies will continue to exist.

Ross Seymore asked about the growth potential for Arm Total Access (ATA) agreements, questioning if the addressable market is now larger than previously thought and how to model its future growth.

Answer

CEO Rene Haas explained that the ATA model is scalable with different variations, making it suitable for the vast majority of Arm's customer base, thus expanding the potential market. He noted customers value the model for easy experimentation and fixed R&D costs. CFO Jason Child added that they are now over 50% of the way to their goal of having 80% of license revenue from ATA customers, and these contracts include ~7% annual price increases and renewal upsides.

Ross Seymore inquired about the impact of new ADAS design wins on MPS's automotive segment, specifically its percentage of total revenue, and how it influences growth, content, and diversity. He also asked about the gross margin implications of MPS's transition to a solution provider and the path to returning to upper 50% margins.

Answer

Bernie Blegen (EVP and CFO) and Michael Hsing (CEO and Founder) explained that ADAS, while considerably less than half of automotive revenue, creates a cascading effect for other technologies, with future growth expected from 48V and zonal electronics. Michael Hsing believes the solution provider model will not be a gross margin headwind, expecting improvement with volume and automated test systems. Bernie Blegen noted that short-term orders limit mix management, keeping gross margins in the mid-55% range for the foreseeable future.

Ross Seymore of Deutsche Bank asked about the automotive segment, focusing on the impact of an incremental ADAS design win amidst market choppiness. He sought clarification on ADAS's current revenue percentage compared to other automotive applications like USB, and how its increasing penetration influences growth, content, and diversity. He also inquired about the gross margin implications of MPS's transition from a chip-based to a solution provider, questioning if this shift would help or hinder the company's goal of returning to upper 50% gross margins.

Answer

Bernie Blegen, EVP and CFO, explained MPS's history of establishing a strong market presence with differentiated technology, noting that ADAS wins, particularly in EVs, showcase other technologies and lead to ramps in various applications. He expressed excitement about the transformation to 48V and zonal electronics. Michael Hsing, CEO and Founder, clarified that ADAS is considerably less than half of automotive revenue but anticipates significant growth. Regarding gross margins, Michael Hsing does not foresee a headwind, explaining that while building large systems initially creates issues, increased volume and automation (including MPS's own test equipment) will ultimately improve yield and gross margins over time.

Ross Seymore asked for a breakdown of the Enterprise Data segment, questioning the difference in growth rates between AI-related business and traditional server business. He also inquired about any evidence of tariff-related pull-in activity outside of enterprise data.

Answer

EVP & CFO Bernie Blegen responded that the lines between traditional CPU and AI are becoming blurry, making it difficult to separate their growth rates, but affirmed the overall outlook is very positive. Regarding tariffs, Blegen stated that the company believes the current demand is driven by the cycle itself, with insufficient information to confirm tariff-related behavior. Founder, Chairman, President & CEO Michael Hsing added that such factors are beyond their control.

Ross Seymore inquired about any significant segment performance divergences expected in the second-quarter guidance and asked about any observed changes in customer behavior, such as tariff-related order pull-ins.

Answer

CFO Bernie Blegen responded that the Q2 guidance anticipates a narrow variance of plus or minus 5% across all business segments, indicating broad-based strength with no major divergences. CEO Michael R. Hsing added that any tariff-related order shifts have been too small to be clearly identified, highlighting the overall consistency driven by the company's diversification. Vice President of Finance Tony Balow also noted other business drivers like AI PC are contributing to strength in computing.

Ross Seymore asked for an update on market share dynamics in the server CPU space and inquired about the growth drivers and business profile for the communications segment.

Answer

EVP and CFO Bernie Blegen responded that the lines between CPU and GPU are becoming blurry, making it difficult to comment on specific market share shifts, as many MPS products support both. CEO Michael Hsing added that MPS is gaining significant share on the server side and revenue will ramp as the market recovers. Regarding communications, Bernie Blegen confirmed that the primary area of strength and the key inflection point is in optical solutions, which is part of the broader data center opportunity.

Ross Seymore questioned the drivers behind the strong sequential growth in non-Enterprise Data segments, asking if it reflects a cyclical recovery or is specific to MPS's design wins. He also asked about the risk of pricing pressure from increased market supply and competition. Later, he inquired about inventory levels both internally and in the channel.

Answer

EVP and CFO Bernie Blegen explained the growth is a mix of both cyclical improvement and company-specific factors, highlighting new revenue from prior design wins in Communications and Automotive, plus an improved memory market. CEO and Founder Michael Hsing added that the growth was seen across the board. On pricing, Hsing stated that while competitors may lower prices, MPS competes on value and performance, not price. Regarding inventory, Blegen confirmed channel inventory days went down. Hsing added that internal inventory is at an "uncomfortable" low level due to high demand but doesn't foresee a shortage.

Ross Seymore of Deutsche Bank asked for an update on the RADAR and Vision design win ramps, their potential scale, and any impact from tariffs or macro uncertainty. He also questioned if entering adjacent markets would require significant new sales channel investment.

Answer

Co-Founder, CEO & Director Donald McClymont stated that tariff impact is minimal as most RADAR components ship outside the U.S. He highlighted a high ASP per car ($25-$30) and a potentially rapid ramp. He also confirmed that entering adjacent markets like quantum will not require a significant OpEx increase.

Ross Seymore asked about the primary uncertainties for the second-half 2025 product ramp, questioning whether the risk lies more with launch timing or launch volumes. He also sought to understand the impact of the company's restructuring on its previously announced $7 billion strategic backlog.

Answer

Executive Donald McClymont identified the steepness and timing of the ramp as the main wildcard, noting that while launch start points are fixed, the ramp-up speed is harder to predict. Regarding the backlog, McClymont stated the impact from restructuring is 'very minimal,' affecting non-ADAS programs with disappointing volumes. He estimated a minor short-term revenue impact of $2-3 million in the second half but affirmed the vast majority of the strategic backlog remains intact.

Ross Seymore asked about near-term business trends, questioning why indie is outperforming peers who are seeing worsening visibility, and requested details on the revenue bridge from 2024 to 2025, including key product drivers.

Answer

Executive Donald McClymont explained that indie is bucking the macro trend because previously delayed programs are now ramping, making its growth profile dependent on share gains rather than the overall market. He detailed that the bridge to 2025 consensus revenue will be driven by an even split between user experience and vision-based products, with a small contribution from radar in the second half.

Ross Seymore asked about the expected revenue trajectory during the transition to AI data centers and the potential gross margin structure for this new business focus.

Answer

CEO Gene Sheridan explained that Navitas anticipates 'softer' revenue in the near term as it reduces dependency on the mobile market. He noted that growth from 48V data center projects will begin layering in during 2026, with the more significant 800V opportunity ramping in 2027. Sheridan reiterated the long-term gross margin target of over 50%, driven by high-performance markets and cost efficiencies from the new 8-inch wafer partnership with PowerChIP.

Ross Seymore asked about the visibility into second-half growth, the timing and magnitude of the $450 million in design wins, and the company's operating expense plan and timeline for reaching EBITDA breakeven.

Answer

CEO Eugene Sheridan explained that the design wins will convert to revenue starting late this year, with the vast majority ramping in 2026. CFO Todd Glickman confirmed the non-GAAP OpEx target remains around $15.5 million per quarter and that the company still expects to reach EBITDA breakeven with quarterly revenues in the high $30 million range in 2026.

Ross Seymore asked about the timing of the cyclical bottom, the slope of the recovery, the performance of the silicon carbide business versus the broader market, and the competitive landscape regarding pricing and inventory.

Answer

CEO Gene Sheridan stated that Q1 2025 appears to be the cyclical bottom for Navitas, with a recovery expected in Q2 and healthy growth in the second half. He attributed the silicon carbide slowdown to weakness in EV, solar, and industrial markets, which is now stabilizing. Sheridan noted that while some ASP erosion occurred in SiC, the situation has improved, and the GaN market has not seen as dramatic an impact.