Ruben Roy

Ruben Roy asked about the Optical Circuit Switch (OCS) momentum, specifically if the improving order backlog is still from a single customer or broadening. He also inquired about new applications for OCS beyond spine switch replacement, such as scale-across, optical scale-up, and network protection. Additionally, he asked if the 800 gig versus 1.6 terabit module mix is accelerating towards 1.6T.

Answer

President and CEO Michael Hurlston confirmed the OCS backlog of over $400 million is broad-based, coming from multiple customers, and sets up a significantly higher run rate for 2027. President, Global Business Units Wupen Yuen stated that the four dominant OCS applications (spine replacement, scale-across, optical scale-up, and network protection) remain unchanged and are covered by multiple customers. Michael Hurlston and Wupen Yuen noted that 1.6T is definitely accelerating faster than anticipated, with Lumentum seeing stronger growth in 1.6T for its business, even as 800 gig volumes continue to perform well.

Ruben Roy asked for clarification on the Optical Circuit Switch (OCS) momentum, specifically if the improving order backlog is still driven by a single customer or if it reflects broader demand from multiple customers. He also inquired about new applications for OCS beyond existing uses like spine switch replacement. In a follow-up, he asked if Lumentum's outlook on the 800 gig versus 1.6 terabit module mix has changed, particularly if there's an acceleration towards 1.6T.

Answer

Michael Hurlston, President and CEO, confirmed that the OCS backlog strength comes from multiple customers, not just one, with the $400 million backlog primarily for the second half of the year, setting up a higher run rate for 2027. Wupen Yuen, President, Global Business Units, stated that there are no changes to the primary OCS applications, which include spine replacement, scale-across, optical scale-up, and network protection, and these are covered by multiple customers. Regarding the module mix, Michael Hurlston noted that 1.6T is definitely accelerating faster than anticipated 90 days ago, with strong demand from several large customers. Wupen Yuen added that while 800 gig remains a large market, Lumentum's market share in 1.6T is higher, leading to a stronger growth trend for 1.6T business this calendar year.

Ruben Roy requested more details on the supply chain shortages, including which products are affected and the expected duration of the constraint. He also asked about the demand drivers and ramp timeline for 200-gig per lane EMLs.

Answer

President and CEO Alan Lowe specified that the supply shortages are affecting telecom products, particularly coherent components, due to a worldwide shortage of hermetic packages that will likely impact the March and June quarters. He confirmed that 200-gig EMLs are being designed into both 800G and 1.6T transceivers, with a significant production ramp expected in the second half of the calendar year. He also noted progress on developing high-power CW lasers for silicon photonics.

Ruben Roy asked if Celestica is seeing a shift towards HPS (High-Performance Solutions) design-led solutions and away from cost-plus models, particularly with the new 1.6T win and the Austin design center, and how this might impact margin perspective in 2027-2028.

Answer

Rob Mionis (President and CEO) confirmed that the engineering complexity of 1.6T and 3.2T programs is driving an increase in HPS engagements on the networking side. He also sees more opportunities for HPS and JDM (Joint Design Manufacturing) design-oriented AI/ML compute as it becomes more sophisticated. Mandeep Chawla (CFO) added that more of the switching portfolio should move towards HPS, which typically leads to better pricing due to embedded engineering, and they are happy with the margin profiles for 1.6T products.

Ruben Roy asked if Celestica is seeing a shift towards HPS (High-Performance Solutions) design-led solutions and away from cost-plus models, particularly with more complex switching technologies and the new design center in Austin, and how this might impact margin perspective in 2027-2028.

Answer

CEO Rob Mionis confirmed that at 1.6T and moving into 3.2T, the required engineering complexity is driving an increase in HPS engagements on the networking side. He also noted that on the AI/ML compute side, Celestica prefers to play in HPS and JDM (Joint Design Manufacturing) oriented solutions, seeing more opportunities as sophistication grows, with several pipeline projects to enhance HPS engagements.

Ruben Roy asked about Celestica's potential for additional operating leverage beyond 2026, how it's measured against strong revenue growth and increasing design activity, and thoughts on longer-term operating leverage. He also inquired about the multi-billion dollar new market opportunity for scale-up networking, Celestica's advantage relative to scale-out, and the competitive environment.

Answer

Mandeep Chawla (CFO) explained that operating leverage benefits from both operating leverage and positive mix, with opportunities for further margin expansion in both ATS (aiming above 6%) and CCS (driven by HPS products being accretive). Jason Phillips (President of Connectivity and Cloud Solutions) stated Celestica is well-positioned for scale-up networking due to incumbency and capability, leveraging its industry-leading position from scale-out, and has a large and growing funnel of opportunities.

Ruben Roy asked about Celestica's potential for additional operating leverage beyond 2026, considering strong revenue growth and increasing design activity, and sought thoughts on longer-term operating leverage. He also inquired about Celestica's advantage in scale-up networking relative to scale-out, the competitive environment, and how it might play out over the next several years.

Answer

Mandeep Chawla (CFO) stated that Celestica continues to see benefits from operating leverage and positive mix, with opportunities for further margin expansion in both ATS (targeting above 6%) and CCS (driven by HPS products being accretive). Jason Phillips (President of Connectivity and Cloud Solutions) affirmed Celestica's strong position in scale-up networking due to incumbency and capability, leveraging their industry-leading position from scale-out, and noted a large and growing funnel of opportunities.

Ruben Roy asked for insights into the implied Q4 momentum, which suggests a slight deceleration, and requested an update on the timing for 1.6T switch programs following recent silicon launches.

Answer

CFO Mandeep Chawla explained the Q4 outlook reflects a high-confidence view that accounts for potential uncertainties like material availability or tariff impacts, noting that underlying demand is higher. President and CEO Rob Mionis addressed 1.6T, confirming they received Tomahawk 6 samples in June and have several programs expected to generate revenue in 2026 and 2027, paced by silicon availability.

Ruben Roy asked how the ramp in the enterprise segment in the second half of 2025 would impact the company's exit rate on margins and requested details on the new optical transceiver win.

Answer

CFO Mandeep Chawla explained that margins are already stronger than anticipated, leading to the raised full-year guide, driven by a higher HPS mix that will continue. He also expects operating leverage benefits in the second half. President and CEO Rob Mionis described the optical win as a competitive victory for a complete 800G transceiver assembly, which provides optical proof points and white-label opportunities.

Ruben Roy inquired about the potential impact of recent large-scale program wins on future CapEx and manufacturing capacity. He also asked for more detail on how developments like the DeepSeek model could positively affect the long-term networking opportunity.

Answer

CFO Mandeep Chawla stated that the company is comfortable with its current capacity and expects CapEx to remain in the 1.5% to 2% of revenue range, sufficient to fund growth. President and CEO Rob Mionis explained that increased AI accessibility will fuel demand for high-bandwidth, low-latency networking, making it a positive long-term driver for their networking portfolio, which is agnostic to the specific AI models used.

Ruben Roy inquired about the evolving mix of Viavi Solutions' NSE business across service provider, data center, and aerospace & defense segments, and sought details on the growth drivers for the upcoming fiscal Q3.

Answer

CEO Oleg Khaykin updated the NSE business mix, noting a shift to approximately 40% service provider, 45% data center, and 15% aerospace & defense, driven by significant growth in data center and aerospace & defense. He highlighted strong demand from the data center ecosystem, including high-performance semis, optical modules, and NEMs, as well as emerging demand for fiber field instruments by hyperscalers. CFO Ilan Daskal and CEO Oleg Khaykin clarified that the recent restructuring plan is broad-based across multiple functions to improve efficiency, with some savings reinvested into higher-growth areas like data center and aerospace & defense.

Ruben Roy from Stifel inquired about the evolving mix of Viavi Solutions' NSE business across data center, aerospace and defense, and telco segments, seeking an update on the current percentages and the key drivers behind the strong Q3 growth guidance. He also asked about extended visibility for data center demand and the strategic impact of the recent restructuring plan.

Answer

Oleg Khaykin, President and CEO, detailed the updated NSE mix, highlighting the increasing dominance of data center and aerospace & defense segments, which now account for approximately 60% of the business. He attributed Q3's strong guidance to robust demand from the data center ecosystem, including fiber field instruments for hyperscalers, and continued growth in aerospace and defense. Khaykin confirmed improved visibility for data center demand, extending up to three quarters due to strategic partnerships. Ilan Daskal, CFO, and Khaykin clarified that the restructuring plan aims for operational efficiencies across functions, with savings partially reinvested into high-growth areas like data center and aerospace & defense.

Ruben Roy inquired about the impact of tariffs on the Q1 revenue guidance and the long-term visibility and competitive landscape for Viavi's data center and 1.6T test solutions.

Answer

President and CEO Oleg Khaykin explained that the tariff impact of approximately $1.5 million has been fully mitigated through pricing and supply chain adjustments. He noted that while 400G and 800G are the current volume drivers, the new 1.6T test solution is a key competitive differentiator that secures future business across the entire data center ecosystem, which he expects to become a larger market than traditional service providers.

Ruben Roy inquired about the tangible impact of U.S. tariffs, asking if revenue delays are already occurring, the percentage of revenue exposed, and the strategy for passing on the associated $3 million in costs.

Answer

CEO Oleg Khaykin stated that while no orders have been canceled, some purchase orders (POs) are being reapproved, creating potential delays. He estimated roughly 15% of revenue is subject to tariffs overall. Khaykin clarified that Viavi will absorb the $3 million cost for already-committed POs but will add a non-negotiable tariff adder to all new orders, a practice he sees as universal in the industry. CFO Ilan Daskal confirmed the $3 million impact is embedded in the guidance.

Ruben Roy inquired about the drivers of demand for fiber monitoring, asking if it was primarily telcos or if hyperscalers were becoming more involved. He also asked for visibility into the 800-gig shipment momentum and its potential market size, and questioned the company's appetite for further M&A following the Inertial Labs acquisition.

Answer

President and CEO Oleg Khaykin explained that fiber monitoring demand is broad-based from telcos but a new, emerging segment is hyperscalers who are monitoring fiber interconnects to protect their data center investments. He noted that 800-gig is the current workhorse, with 1.6-terabit entering R&D labs now. CFO Ilan Daskal and CEO Oleg Khaykin both affirmed that M&A remains a part of their capital allocation strategy, emphasizing that any potential deal must be accretive and appropriately priced.

Ruben Roy from Stifel Financial Corp. inquired about the linearity of bookings during the quarter, the drivers behind the sooner-than-expected recovery in wireless, and whether seasonality might change in the second half of the fiscal year.

Answer

President and CEO Oleg Khaykin explained that while some Q1 revenue was pushed out, there is significantly stronger engagement from service providers for future quarters, marking a "pivot" in behavior. He attributed this to aggressive fiber deployment plans from major carriers and a surprising resurgence from wireless operators, who are now accelerating 5G densification. CFO Ilan Daskal added that the company continues to monitor the macroeconomic environment, including interest rate dynamics.

Ruben Roy asked for longer-term insights on the Hanley acquisition, specifically its role in power distribution (including 800-volt direct current), its potential to increase content per rack and gain more server rack business, and whether Hanley owns the design of the power distribution. He also asked if there's any change in Jabil's thinking around overall spend in the Capital Equipment market relative to 90 days ago.

Answer

CEO Mike Dastoor highlighted Hanley's role as a services organization providing power and energy management solutions, with engineering expertise in power distribution, switchgear, and digital power management. He explained it allows Jabil to go vertical by deploying, installing, and maintaining switchgear built in Memphis, making it a highly accretive business. Dastoor also linked Hanley to the broader thermal management strategy, alongside the Mikros liquid cooling acquisition. For Capital Equipment, he noted that the automated testing equipment (back end) has been outperforming and continues to do so. He also mentioned seeing forward-looking signs of improvements in the WFE (Wafer Fab Equipment) side, driven by AI compute expansion and NAND factory upgrades, which could present an upside opportunity not yet included in the guidance.

Ruben Roy with Stifel sought a longer-term perspective on the Hanley Energy acquisition, specifically how it aligns with industry discussions around power distribution (e.g., 800-volt direct current, modularized power) and if it helps Jabil gain more server rack business or increases content per rack. He also asked if Hanley would own the design of power distribution. Additionally, he inquired about any changes in Jabil's outlook for overall capital equipment market spend compared to 90 days prior.

Answer

CEO Mike Dastoor highlighted the significance of thermal management, referencing the Mikros liquid cooling acquisition in 2024 as a game-changer for designing and engineering liquid cooling at various levels. He explained that Hanley Energy, a services organization, provides power and energy management solutions, with expertise in power distribution, switchgear, and energy monitoring. Hanley will enable Jabil to deploy, install, and maintain low/medium voltage switchgear built in Memphis, creating a highly accretive business by combining server rack services with deployment and maintenance. He confirmed Hanley is expected to close in early January. Regarding capital equipment, Mike Dastoor noted that automated testing equipment (back-end) has been outperforming and will continue to do so. He also mentioned seeing forward-looking signs of improvements in wafer fab equipment (WFE) due to AI compute expansion and NAND factory upgrades, which could present upside not yet included in the guidance.

Ruben Roy from Stifel inquired about the extent to which new use cases like Scale-across and DCOM are factored into Ciena's updated guidance, and sought more details on the new Scale-across opportunities, including their scale compared to initial wins.

Answer

CFO Marc Graff confirmed that all new opportunities, particularly the tripling of 'in and around data center' revenue contribution from low single digits in FY25 to low double digits in FY26, are fully included in the guidance. CEO Gary Smith explained that while the new Scale-across wins are significant (hundreds of millions each), their scale varies, and the ramp-up for all three hyperscalers is expected to begin in 2026, with substantial growth through 2027 and 2028, primarily U.S.-centric for training models.

Ruben Roy from Stifel inquired about the extent to which new use cases like Scale-across and DCOM are factored into Ciena's updated guidance, and sought more details on the new Scale-across opportunities, including their scale compared to initial wins.

Answer

CFO Marc Graff confirmed that all new opportunities, particularly the tripling of 'in and around data center' revenue contribution from low single digits in FY25 to low double digits in FY26, are fully included in the guidance. CEO Gary Smith explained that while the new Scale-across wins are significant (hundreds of millions each), their scale varies, and the ramp-up for all three hyperscalers is expected to begin in 2026, with substantial growth through 2027 and 2028, primarily U.S.-centric for training models.

Ruben Roy of Stifel Financial Corp. sought to confirm Ciena's unique competitive position for the GPU cluster opportunity and asked for more detail on the AI-related momentum for the Blue Planet software business.

Answer

Executive Advisor Scott McFeely affirmed that Ciena's leadership in coherent optics and its RLS line systems being the de facto standard gives the company an "unfair share" of the initial GPU cluster deployments. President and CEO Gary Smith explained that Blue Planet is strategically positioned for AI because its focus on network inventory federation provides the foundational data set necessary for service providers to implement effective AI-driven network automation.

Ruben Roy from Stifel asked for updated thoughts on the Huawei replacement opportunity across geographies and Ciena's perspective on Co-Packaged Optics (CPO) as a long-term opportunity or threat.

Answer

CEO Gary Smith described the Huawei replacement as a multi-year opportunity, primarily in Europe, where Ciena is winning more than its fair share. Executive Adviser Scott McFeely explained that CPO is a repackaging of IMDD technology, and Ciena sees an opportunity to participate with both its coherent technologies and potentially its component technologies, though this is a longer-term prospect not in current forecasts.

Ruben Roy asked for details on Ciena's strategy for selling optical components, particularly DSPs, and inquired about the competitive environment for DCI modules.

Answer

Executive Adviser Scott McFeely clarified that while Ciena is willing to sell disaggregated components, customers currently prefer to buy finished goods, either as systems or standalone plugs. He noted the competitive landscape for long-reach DCI is stable with Ciena leading, while in the newer metro DCI space, Ciena is rapidly gaining share with its WaveLogic 5 plugs and expects to lead with its upcoming 800-gig plug, for which it has won early bids.

Ruben Roy followed up on inventory, asking if levels would be considered normal after FY24. He also asked about the competitive advantages driving Ciena's momentum and wins with its 400G ZR pluggable products.

Answer

CFO Jim Moylan indicated that inventory levels would still be elevated at year-end and that while they won't return to historical highs of 6x turns, a target of 4-5x turns is more realistic long-term. Executive Adviser Scott McFeely explained that Ciena's 400G ZR wins are driven by superior performance in both reach and power consumption from its WaveLogic 5 Nano technology. As AI forces data centers to be more distributed, these performance metrics have become key differentiators.

Ruben Roy from Stifel Financial Corp. asked about Synopsys' China revenue, which remains significant, inquiring about the mix of business (core EDA, IP, hardware, Ansys) and whether the headwinds are broad-based or concentrated in specific areas. He also questioned if the current situation represents a reasonable floor for China revenue or if further declines are anticipated in the longer term.

Answer

Sassine Ghazi, CEO of Synopsys, clarified that the classic Synopsys business in China declined, while the Ansys portfolio performed well due to its broad, unrestricted market. He stated that the primary impact on classic Synopsys in China is the inability to sell advanced solutions due to entity lists and technology restrictions, particularly affecting IP. Ghazi noted that EDA is not losing share to direct peers but to local alternatives for restricted customers. He believes the FY26 guide has de-risked the China environment, with easier year-over-year comparisons expected post-2026 assuming no new restrictions.

Ruben Roy asked about the three primary challenges impacting Synopsys's IP business (export restrictions in China, issues with a major foundry customer, and roadmap/resource decisions), their specific impact in Q3, and the potential for these issues to be longer-term headwinds. He also inquired about the decline in operating margins and the path to the mid-40% long-term target.

Answer

President and CEO Sassine Ghazi detailed the prolonged impact of China's export restrictions beyond the initial six weeks, the market-driven challenges with a major foundry customer affecting expected returns, and the strategic pivot of IP resources towards higher-growth opportunities, including merging engineering teams for subsystem delivery. CFO Shelagh Glaser attributed the operating margin decline to IP business underperformance and continued roadmap investments, reaffirming the mid-40% long-term operating margin commitment.

Ruben Roy of Stifel inquired about the three primary challenges impacting Synopsys's IP business in Q3 2025—new export restrictions in China, issues with a major foundry customer, and internal roadmap/resource decisions—and their potential long-term implications, including the need for M&A. He also asked about the decline in operating margins and the path to achieving mid-40% long-term targets.

Answer

President and CEO Sassine Ghazi detailed how China's export restrictions and a major foundry customer's challenges significantly impacted Q3 IP revenue and are expected to continue into Q4, leading to a transitional year for IP. He explained that roadmap/resource allocation issues are being addressed by pivoting resources towards high-growth opportunities and merging engineering teams to accelerate subsystem and chiplet delivery. CFO Shelagh Glaser attributed the operating margin decline primarily to the IP business's underperformance and ongoing investments, reiterating commitment to the mid-40% long-term operating margin target.

Ruben Roy asked about the three primary challenges impacting the IP business: new export restrictions in China, issues with a major foundry customer, and internal roadmap/resource decisions. He also inquired about the potential need for M&A to address customer needs and the timeline for turning around the IP business. Additionally, he sought clarification on the decline in operating margins and the path to achieving the mid-40% long-term target.

Answer

Sassine Ghazi, President, CEO & Director, Synopsys, explained that the China export restrictions had a prolonged impact beyond the six-week period, affecting customer commitment. The foundry customer impact stemmed from unmet expectations for a return on significant IP investments due to market and customer-related reasons. He noted that roadmap/resource allocation issues, partly related to the foundry customer, involved prioritizing Edge AI opportunities which came at the cost of other foundry investments and data center IP delays. Ghazi detailed actions taken, such as merging engineering teams to accelerate subsystem and chiplet delivery, acknowledging that a turnaround would take time. Shelagh Glaser, CFO, attributed the operating margin decline primarily to the IP business's revenue downside, emphasizing continued investment in the IP roadmap for long-term growth and reaffirming the mid-40% long-term operating margin commitment.

Ruben Roy asked about the long-term implications of accelerating AI silicon designs, particularly regarding cloud-based EDA tools and potential business model shifts. He also inquired about the possibility of introducing royalty models for IP, especially for newer technologies like PCIe 6 or UCIe.

Answer

CEO Sassine Ghazi stated that Synopsys already supports accelerated compute on cloud platforms, allowing customers to burst usage, which the company monetizes effectively. On IP business models, he indicated that traditional interface IP will likely retain its use-based model. However, he sees future inflection points, such as the delivery of complex subsystems or chiplets, as opportunities to explore new models, including royalties, which customers are receptive to.

Ruben Roy asked about the long-term business impact of the trend toward contracting design cycles despite increasing chip complexity, and whether this phenomenon could expand beyond the leading edge of the industry.

Answer

CEO Sassine Ghazi explained that this trend is a significant shift from the traditional industry rhythm, driven by multi-die systems and the race to serve new markets. He noted this is great news for Synopsys, as it drives demand for advanced EDA, IP, and hardware verification. However, he suggested that the trend may be limited to customers who can afford the immense investment, skills, and resources required to keep pace with such acceleration.

Ruben Roy inquired about Cadence's collaboration with a customer on next-generation agentic AI solutions, asking if this is a widespread trend, its implications for monetization, and whether it involves custom or broader solutions.

Answer

President and CEO Anirudh Devgan explained that agentic AI is a new emerging area with massive investment, capable of automating the remaining 10% of manual chip design workflows like RTL development. He stated that monetization would occur through JEDI (Joint Enterprise Data and AI Platform), which combines standardized components with customer-specific data, deployable both on-prem and in the cloud. Devgan expressed optimism for agentic AI to automate mundane tasks.

Ruben Roy inquired about Cadence's collaboration with a customer on next-generation agentic AI solutions, asking if this is a widespread trend, its monetization implications, and whether it involves custom solutions versus a broader offering through the JedAI platform.

Answer

President and CEO Anirudh Devgan explained that agentic AI is a new emerging area, with massive investment focused on automating the remaining 10% of manual chip design workflow, such as RTL development. He stated that Cadence's JedAI platform is designed to be both standardized and customer-specific, allowing for unique solutions to be deployed either generally or localized at customer sites, making him optimistic about automating mundane tasks.

Ruben Roy from Stifel asked about the sustainability of the IP segment's strong growth, given its recent outperformance driven by AI and HPC.

Answer

President & CEO Anirudh Devgan expressed significant optimism for the IP business, stating he expects it to grow faster than the company average long-term. He cited several drivers: the rise of chiplet architectures, the emergence of at least four advanced-node foundries requiring IP, and Cadence's own increased investment and improved portfolio, including key acquisitions.

Ruben Roy asked if the recent accelerated pace of IP acquisitions is opportunistic or customer-driven, and requested an update on the long-term growth outlook for the IP segment.

Answer

CEO Anirudh Devgan described it as a combination of factors. The strong performance of Cadence's existing IP has led to customer demand for a broader portfolio, which in turn drives the search for suitable acquisitions. He cited the expanding foundry ecosystem and AI/3D-IC trends as key market drivers and stated he expects the IP segment to grow faster than the Cadence average.

Ruben Roy of Stifel asked if recent additions to the U.S. entity list were a factor in the company's prudent view on China for 2025.

Answer

CFO John Wall responded that the cautious outlook was based on general prudence rather than any specific changes to the entity list. He reiterated that after a down year in China in 2024—only the third in 25 years—it was sensible to assume a flat performance to de-risk the overall 2025 guidance.

Ruben Roy asked for more detail on the hardware portion of the strong Q4 bookings pipeline and whether the new product cycle has extended visibility. He also inquired about the product roadmap and customer demand related to the NVIDIA NeMo/NIM collaboration.

Answer

CFO John Wall stated that hardware visibility remains around six months, which provides a strong view at this point in the year, but a 2025 outlook depends on converting the Q4 pipeline. CEO Anirudh Devgan explained that the JedAI platform is the company's flexible, LLM-agnostic deployment vehicle for GenAI solutions, allowing customers to use various models and customize applications.

Ruben Roy asked about Plexus Corp.'s current customer conversations, focusing on visibility, the impact of tariffs, and inventory volatility. He also questioned the company's emphasis on power generation for data centers and AI, and sought clarification from Pat Jermain on the factors contributing to the potential to meet or exceed the 6% operating margin target in fiscal 2026.

Answer

Todd Kelsey, President and CEO, indicated that visibility is currently stable, with markets trending up and programs progressing well. He noted tariffs haven't caused product movement but influence sourcing for new programs. Todd Kelsey also confirmed increased focus on power generation for data centers and AI, citing recent awards. Pat Jermain, EVP and CFO, explained that achieving the 6% operating margin target relies on revenue growth for fixed cost leverage (despite higher incentive compensation), margin improvements at facilities like Thailand, and productivity gains from automation and continuous improvement efforts.

Ruben Roy inquired about the current state of customer conversations and visibility, particularly concerning tariffs and inventory volatility, and asked if Plexus is increasing its focus on power generation for data centers and AI. He also asked Pat Jermain about the factors influencing the ability to meet or exceed the 6% operating margin target in fiscal 2026.

Answer

Todd Kelsey, President and CEO, indicated that customer visibility seems stable, with markets trending up and programs progressing well. He noted that tariffs primarily influence sourcing for next-generation programs rather than moving existing products. Todd Kelsey confirmed an increased focus on power generation for data centers and AI, citing recent awards. Pat Jermain, EVP and CFO, explained that achieving the 6% operating margin target depends on revenue growth for fixed cost leverage (despite higher incentive compensation), rapid ramp-up of the Malaysia facility, margin improvements in Thailand, and ongoing productivity gains from automation and continuous improvement efforts.

Ruben Roy followed up on the tariff topic, asking if customers have started moving products, and sought clarification on whether the 'green shoots' in the Industrial sector were related to inventory correction or actual demand.

Answer

CEO Todd Kelsey responded that it is still early for tariff-related product moves, with customers largely waiting for a final outcome. He also explained that the industrial 'green shoots' are a result of customer inventory levels bottoming out, which translates to stronger demand signals for Plexus. Executive Shawn Harrison added that some small pockets are seeing end-demand strength beyond just inventory moderation.

Ruben Roy sought to clarify if recent changes in customer forecasts were broad-based or confined to known issues in aerospace and healthcare. He also asked if the growth in Engineering Solutions wins provides better visibility into future revenue ramps.

Answer

President and CEO Todd Kelsey clarified that forecast volatility is present in the Healthcare and Industrial sectors, while the Aerospace impact is specific to commercial production rates. Executive Shawn Harrison added that these changes were driven by market fluctuations, not political uncertainty. Todd Kelsey confirmed that the growth and diversification in Engineering Solutions 'definitely' provide better visibility, as these projects are strong predictors of future manufacturing wins and revenue.

Ruben Roy sought to confirm if the HLSI-II program was the primary driver for the upgraded 2025 A&D growth forecast and asked about any specific qualification milestones associated with the transition of amplifier manufacturing into a full production setup.

Answer

CFO Joe Corso confirmed that improved execution and increased capacity for the HLSI-II program were key factors in the upgraded forecast, creating a positive knock-on effect for development work. He emphasized, however, that the growth is broad-based, also including new laser sensing programs and international directed energy wins. VP of Corporate Development & Investor Relations John Marchetti clarified that the amplifier transition involves implementing internal controls and processes for manufacturing scalability, rather than new customer acceptance criteria, as the products are already being shipped.

Ruben Roy sought to confirm if the HLSI-II program was the primary driver for the raised 2025 A&D growth forecast and asked about specific qualification milestones associated with the amplifier production transition.

Answer

CFO Joseph Corso confirmed that improved execution and increased capacity for the HLSI-II program were key factors in the upgraded forecast, but also highlighted a knock-on effect on development work, progress in new laser sensing programs, and new international wins as contributors to the broad-based growth. VP of IR John Marchetti explained the amplifier transition involves implementing internal controls and processes for scaling, rather than new customer qualification milestones, as the products are already being shipped.

Ruben Roy from Stifel Financial Corp asked if D-Wave's timeline for bringing a gate model computer to market has accelerated, considering recent M&A commentary and customer feedback.

Answer

CEO Alan Baratz affirmed that the company's fundamental timeline has not changed, as he believes a commercially viable gate model system remains years away due to unsolved challenges in error correction and scaling. He clarified that the current focus is on de-risking the path and creating a concrete roadmap through R&D and potential acquisitions, rather than accelerating the launch date.

Ruben Roy of Stifel Financial Corp inquired about the key factors driving the Q3 guidance, the company's strategic focus within the defense market (high-power vs. low-power lasers), and the specific impact of inventory absorption on the gross margin outlook.

Answer

CEO Mark Gitin explained that the Q3 outlook is supported by a strong book-to-bill ratio and stabilizing industrial demand, though he remains 'cautiously optimistic.' He clarified that IPG's defense strategy is centered on its lower-power Crossbow system for small drones, not high-energy laser programs. CFO Timothy Mammen added that while manufacturing absorption improved, it still represents a roughly 500 basis point headwind to gross margin compared to peak efficiency.

Ruben Roy asked for more detail on the signs of business stabilization and strong bookings, inquiring about specific end markets, geographies, and the drivers of growth in China's e-mobility sector. He also followed up on the causes of near-term shipment delays and the potential duration of the gross margin impact from tariffs.

Answer

CEO Mark Gitin confirmed a book-to-bill ratio 'strongly above 1,' driven by e-mobility and micromachining in China, inventory normalization in Japan, and a new medical customer in the U.S. He clarified that shipment delays are due to IPG proactively shifting its manufacturing footprint to mitigate tariffs, not customer cancellations, with most orders expected to ship in Q3. CFO Timothy Mammen added that the gross margin impact should be significantly reduced by Q3 and eliminated by Q4 as the company reconfigures its supply chain.

Ruben Roy from Stifel, Nicolaus & Company inquired about IPG's strategic review, the balance between investing in new growth areas and defending the cutting market, and the outlook for the second half of 2025.

Answer

CEO Mark Gitin detailed a three-year plan focused on differentiation in urology and micromachining. For the cutting market, he highlighted a new, lower-cost, high-power laser platform designed to help OEM customers compete against Chinese systems. CFO Tim Mammen added that the Q4 book-to-bill was near 1, slightly impacted by delayed orders from Korea which are expected in Q1.

Ruben Roy of Stifel inquired about the demand environment, seeking details on the 1.0 book-to-bill ratio, booking linearity, and trends by geography or application. He also asked about the future OpEx impact of planned investments and the revenue percentage affected by the new high-power diode transition.

Answer

CEO Mark Gitin and an unnamed executive noted that demand has stabilized, with strength in welding offsetting macro weakness in cutting, particularly in Europe and North America. They confirmed bookings were weighted toward the end of the quarter. CFO Timothy Mammen added that while OpEx will see a near-term benefit from the Russia exit, overall expenses are expected to be slightly higher next year due to investments. He clarified the new diodes will initially benefit cutting applications (about 25% of revenue) before impacting up to 40% of sales over the next 12-15 months.

Ruben Roy of Stifel Financial Corp. asked about Lattice's positioning to benefit from growing AI infrastructure spend, particularly its 'companionship' opportunity with hyperscalers. He also inquired about the mix of new versus core products and the potential impact on gross margins.

Answer

CEO Ford Tamer confirmed strong positioning, citing 85% YoY growth in the server segment driven by increased cloud CapEx, higher attach rates, and rising ASPs. Tamer noted new products are on track to exceed a high-teens percentage of revenue in 2025. CFO Lorenzo Flores added that current gross margin levels are sustainable and will be supported by the eventual rebound in the industrial and automotive segment.

Ruben Roy asked for an update on channel inventory levels relative to the company's three-month target and whether there was any evidence of abnormal customer ordering or pull-ins due to tariff concerns.

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CFO Lorenzo A. Flores confirmed that reaching the channel inventory target will likely take a couple more quarters than previously expected. Both Flores and CEO Fouad Tamer stated they are not seeing any material changes in customer ordering behavior and that conversations with cloud customers confirm that current demand is strong and not artificially inflated.

Ruben Roy followed up on channel inventory, asking where levels exited Q1 relative to the company's three-month target. He also asked if management was observing any abnormal customer ordering behavior, such as pull-ins, due to tariff uncertainty.

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CFO Lorenzo A. Flores stated that Lattice has not disclosed the specific channel inventory level but confirmed it will take a couple more quarters to reach the target. He and CEO Fouad Tamer both affirmed they are not seeing any material changes in customer ordering behavior. Tamer added that public statements from cloud customers about their CapEx plans support the view that current demand is genuine.

Ruben Roy questioned the trend of AI driving shorter system design cycles, asking for more detail and whether this could accelerate the adoption of the Avant platform. He also sought clarity on current inventory levels and the path to reaching the mid-year target, reconciling this with the low single-digit growth forecast for 2025.

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CEO Ford Tamer clarified that the shorter design cycle trend refers to the faster cadence of accelerator and switch releases, creating opportunities for FPGAs to handle auxiliary functions. Regarding inventory, both Ford Tamer and CAO Tonya Stevens confirmed they are actively working to bring distributor inventory down to the target of three months by mid-2025, noting positive signs in consumption demand and a steady climb in the book-to-bill ratio.

Ruben Roy of Stifel asked if the rollout of the new Avant platform in 2025 has been impacted by industry headwinds. He also inquired about the outlook for the Communications sub-segment, noting signs of a potential market bottoming.

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CEO Ford Tamer stated there is 'no change on Avant,' with its design win funnel tracking ahead of the Nexus platform at a similar stage. He confirmed that the characterization of the Communications market bottoming is correct and expects that business to normalize and return to growth in the second half of 2025.

Ruben Roy of Stifel Financial Corp. asked for an update on TTM's capacity expansion in China for the data center market and inquired about the progress of customer diversification within that segment.

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President & CEO Thomas Edman confirmed that the planned 20% data center capacity expansion in China is largely complete, with ongoing qualification of new programs in Guangzhou and capability additions in Dongguan for new technologies. Edman stated that customer diversification in the data center space is progressing well, with TTM now well-spread among the major hyperscale and chip customers, balancing capacity between core and newer clients.

Ruben Roy of Stifel asked if the strong momentum in the Data Center and Networking segments could be attributed to customers pulling in orders to get ahead of potential future tariffs. He also inquired about the competitive landscape and opportunities for TTM's non-China facilities.

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CEO Thomas Edman responded that he does not see evidence of tariff-related pull-ins in the Data Center or Networking markets, attributing the strength to fundamental demand drivers like generative AI. Edman confirmed active conversations with customers about leveraging TTM's global footprint, including Penang, but noted that competitors are also building capacity in Southeast Asia, though TTM holds a first-mover advantage.

Asked for an update on the full-year outlook for commercial markets, whether the company can pass on tariff-related costs, and for an update on the progression of funded and unfunded A&D backlog.

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The full-year outlook for commercial markets remains weak, consistent with previous guidance. The ability to handle tariff costs is complex, involving a mix of passing on costs, shifting production, and other mitigations; the margin guidance range was widened to account for this uncertainty. No specific backlog numbers were provided, but the company is pleased with its execution, backlog levels, and growing pipeline.

Ruben Roy asked for an update on the full-year outlook for commercial markets, whether passing through tariff-related costs is an option, and for an update on the progression of funded and unfunded backlog.

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CFO Joe Corso stated the commercial market outlook remains unchanged, with Q1 microfabrication strength being a catch-up on prior orders. CEO Scott Keeney described tariff mitigation as a complex mix of passing on costs, shifting production, and leveraging A&D regulations. Joe Corso noted they widened the margin guidance range due to uncertainty but declined to provide a quarterly backlog update, confirming the pipeline remains healthy.

Ruben Roy asked for an update on the full-year outlook for the commercial markets, questioned if nLIGHT could pass through tariff-related cost increases, and inquired about the progression of funded and unfunded backlog.

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CFO Joe Corso confirmed the commercial market outlook is unchanged, with general weakness persisting despite a better Q1 in microfabrication due to fulfilling pent-up demand. CEO Scott Keeney described tariff cost pass-through as a complex issue with multiple mitigation levers, including shifting production. Regarding backlog, Joe Corso stated they are not providing a quarterly update but are pleased with the program execution and growing pipeline.

Ruben Roy asked about the progression of the A&D backlog, the expected normalized run-rate for the commercial business after a customer-specific bump in Q3, and whether the cessation of manufacturing in Shanghai was an acceleration of plans.

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CEO Scott Keeney confirmed the A&D backlog is progressing well and reflecting positive program news. CFO Joe Corso added that the microfabrication business is expected to return to the lower run-rate seen in early 2024, and the industrial business remains pressured. Corso also clarified that ending manufacturing in Shanghai was the final, planned step in a multi-year strategy to transition production to a contract manufacturer in Thailand and to their U.S. facility.

Ruben Roy inquired about the progression of the A&D backlog, sought clarification on the normalized run-rate for the commercial business into 2025, and asked if the cessation of manufacturing in Shanghai was an acceleration of previous plans.

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CEO Scott Keeney confirmed the A&D backlog is progressing well, with expansion in orders and design wins for critical programs. CFO Joe Corso added that the microfabrication business is expected to return to its prior, lower run-rate in Q4 and that industrial market pressure will continue into 2025. Corso also clarified that the Shanghai manufacturing exit was the final, planned step in a multi-quarter transition to facilities in the U.S. and a contract manufacturer in Thailand.

Ruben Roy of Stifel requested more detail on the visibility and growth trajectories for Qorvo's industrial, enterprise, and infrastructure markets. He also asked if the mix of OpEx spending would shift significantly away from the ACG segment.

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SVP Dave Fullwood highlighted growth opportunities from WiFi 7 and ultra-wideband in enterprise, power management in SSDs, strong ultra-wideband adoption in automotive, and significant content in LEO and direct-to-cell satellites. CFO Grant Brown explained that OpEx improvements are company-wide, though the recent workforce reduction was specifically targeted at the Android business to align with its updated product roadmap.

Ruben Roy asked about the potential impact of AI on the Edge IoT business, similar to its effect on smartphones. He also requested details on the quarter's impairment charge and the outlook for capital expenditures in fiscal 2025.

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CEO Liam K. Griffin confirmed they are engaged with key technology companies on AI applications in both smartphones and broad markets, citing design wins with partners like Mercedes and NETGEAR. CFO Kris Sennesael explained the impairment charge was a non-cash charge related to in-process R&D from the Silicon Labs I&A acquisition due to project timeline shifts. He projected that CapEx, which was low in fiscal 2024, would remain moderate in the mid-single-digit percentage of revenue range for fiscal 2025.

Ruben Roy asked about the company's 'build versus buy' philosophy, specifically regarding the potential to accelerate in-sourcing of components like EMLs, and sought clarity on whether the telecom upside was driven by DCI or traditional telecom.

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CEO James Anderson explained that the company's philosophy is to invest in internal development and vertical integration where it can create true differentiation for customers, otherwise leveraging the external ecosystem. He confirmed the telecom rebound was a combination of strength in both data center interconnect (DCI) and traditional telecom transport, though the company remains cautious on the overall market recovery.