Ruplu Bhattacharya

Ruplu Bhattacharya from Bank of America asked about Super Micro's total manufacturing footprint capacity, both currently and when fully utilized, and at what point the company decides to add more capacity. He also requested an update on the Malaysia plant's status, specifically if it is now building racks. As a follow-up, he inquired about the outlook for working capital, cash conversion cycle, and free cash flow with the large project ramping, and if Super Micro would need to tap capital markets.

Answer

David Weigand, CFO, stated that Super Micro has a worldwide rack capacity of 6,000 racks per month and confirmed that the Malaysia plant is starting to ramp up production. Charles Liang, Founder, President, and CEO, added that the capacity, if everything runs smoothly, could support over $100 billion in revenue, but emphasized a conservative approach due to the new Blackwell Ultra platform requiring careful design and burn-in. Regarding working capital, Mr. Weigand mentioned that the company has implemented a $1.8 billion accounts receivable sale program and other initiatives to meet working capital needs, expressing confidence in their ability to execute without doubts. Mr. Liang clarified that Super Micro will control revenue growth based on cash flow.

Ruplu Bhattacharya inquired about Super Micro's core strategy, asking whether the focus is on revenue growth and market share or on margin expansion, and questioned the opportunity presented by sovereign AI deals.

Answer

CEO Charles Liang stated the company can achieve both revenue growth and margin expansion by providing total solutions like its Data Center Building Block Solution (DCBBS), software, and services. Regarding sovereign AI, he sees a significant opportunity to help countries build their AI infrastructure. CFO David Weigand added that while it's early to forecast specific margins, they are optimistic about the upside from selling more complete solutions.

Ruplu Bhattacharya asked if industry gross margins are facing secular pressure and whether liquid cooling is a defensible competitive advantage or becoming commoditized. He also inquired about Super Micro's strategy to penetrate the enterprise and sovereign AI markets, particularly for customers lacking large engineering teams, and the potential impact of new, efficient AI models.

Answer

CFO David Weigand responded that Super Micro's advantage comes from being first-to-market with high-quality, high-performance solutions like the GB200, not just liquid cooling. CEO Charles Liang added that while many talk about Direct Liquid Cooling (DLC), Super Micro has proven high-volume deployment experience, shipping an estimated 60% of worldwide DLC solutions last year. Regarding strategy, Liang stated that the market won't shrink due to efficient models and that Super Micro's established enterprise presence, service teams, and end-to-end solutions position it well for growth in that segment.

Ruplu Bhattacharya questioned the outlook for core segment margins over the next couple of quarters and the possibility of reaching above 4% in fiscal year 2026. He also asked about Farnell's margins, specifically if they can continue to grow with flat European revenue, and the role of demand creation revenues and IP&E as meaningful drivers for margin upside.

Answer

Ken Jacobson (CFO) expressed caution on calling FY2026 core margins above 4%, noting that Asia representing 50% of the business makes achieving that target longer-term, but expects seasonal mix shifts in the second half to improve gross margins. For Farnell, he explained that product mix (on-board components vs. test/measurement/MRO) is more impactful than regional mix, seeing runway for gross margin improvement as the market recovers. Phil Gallagher (CEO) added that IP&E constitutes 15%-20% of total components business and demand creation 28%-33% of revenue, both offering 300-400 bps incremental margin, though with associated higher costs.

Ruplu Bhattacharya from Bank of America asked about the sustainability of strong performance in Asia, the resulting impact on margins, initiatives to improve Farnell's profitability, and whether the industry inventory correction has bottomed out.

Answer

CEO Phil Gallagher expressed confidence in Asia's continued performance, noting it has historically led recoveries, and acknowledged the margin mix shift is a mathematical result of Asia's growth relative to other regions. For Farnell, he highlighted leadership changes, cost reductions, and digital investments as key improvement drivers, with a goal of continuous margin improvement. CFO Ken Jacobson added that regional gross margins are fundamentally stable and that Farnell's recovery could help lift overall margins. Regarding the market cycle, Phil Gallagher stated they are getting close to the bottom, citing positive indicators like improving book-to-bill ratios, increased turns business, and declining inventory days at suppliers and customers.

Ruplu Bhattacharya asked about controllable factors for improving operating margins, particularly at Farnell and in the core business, and also inquired about capital return strategy, M&A, and market share.

Answer

CFO Ken Jacobson highlighted cost controls, leveraging the Avnet customer base for Farnell, and focusing on higher-margin offerings like demand creation and IP&E for the core business. CEO Phil Gallagher emphasized the new Chief Digital Officer's role in boosting higher-margin online sales. On capital allocation, Jacobson confirmed continued dividends and buybacks, while Gallagher noted that organic growth is the priority over M&A, though strategic acquisitions are considered.

Ruplu Bhattacharya from Bank of America asked for management's view on the current stage of the market correction and its expected duration. He also inquired about any observable impact from the WT Micro and Future Electronics merger and sought details on Farnell's operating margin, specifically the sequential impact from FX versus product mix.

Answer

CEO Phil Gallagher estimated the market correction would likely continue for another one or two quarters, with a potential turn in early 2025. He declined to comment on competitors like WT Micro and Future. CFO Ken Jacobson addressed the Farnell margin, stating that foreign exchange had a negative impact of approximately 150 to 200 basis points sequentially. He reiterated that a return to double-digit margins is achievable with a market recovery, which would drive sales growth and a more favorable mix of on-the-board components.

Ruplu Bhattacharya inquired about the full-year revenue guidance increase of $500 million, noting the $150 million beat in Q2 and $350 million upside in the second half. He questioned why the data center revenue guidance was not raised despite strong commentary. He also asked about the mix of custom versus merchant silicon in the cloud business, Flex's potential involvement in new GPU rack launches by AMD, and how the data center business would benefit from large projects by companies like OpenAI, Broadcom, AMD, and Nvidia.

Answer

CEO Revathi Advaithi clarified that data center is not a reporting segment and its full-year guidance is provided at the start of the year, not updated quarterly. She emphasized that the 'at least 35%' growth is very strong and will likely be better, with a full update at year-end. Regarding the cloud business, Ms. Advaithi stated Flex significantly benefits from hyperscale and new cloud players, driving growth. She noted that Flex tends to perform well in custom silicon due to the specialization and complexity involved, but participates in both custom and merchant markets. She expressed strong confidence in future growth rates, which will be reflected in updated guidance during the May investor day.

Ruplu Bhattacharya asked about the full-year revenue guidance increase, specifically why the data center revenue guidance wasn't raised despite strong commentary, and inquired about the mix of custom versus merchant silicon in the cloud business and Flex's potential participation in new GPU rack projects.

Answer

CEO Revathi Advaithi clarified that data center guidance is only updated annually, confirming it would be 'at least 35%' and likely better. She noted Flex's strong performance in custom silicon due to specialization and expressed bullishness about future cloud growth, with updated guidance expected in May. CFO Kevin Krumm had nothing to add.

Ruplu Bhattacharya requested details on the tariff impact embedded in the full-year guidance for revenue, margin, and EPS. He also asked for a rank-ordering of expected growth across end markets within the Reliability and Agility segments and how this influences investment priorities.

Answer

CFO Kevin Krumm stated the guidance includes the June tariff view, which is a pass-through cost that doesn't materially affect revenue growth rates but does act as a headwind to margin percentages. CEO Revathi Advaithi reiterated that investment priorities follow growth, with data center (cloud and power) receiving the most significant share, followed by other strong areas like healthcare and networking. She confirmed the outlook for weaker markets like auto and consumer remains unchanged.

Ruplu Bhattacharya requested details on the customer set driving the 30% growth forecast for the data center business and asked about the margin impact of the increasing use of customer-sourced inventory (CSI) models.

Answer

CEO Revathi Advaithi expressed high confidence in the 30% growth, citing a diversified customer base that includes multiple hyperscalers, smaller cloud players, and key silicon providers. CFO Kevin Krumm clarified that while CSI models are most common in the cloud business, they are not exclusive to it. He noted these models provide a positive percentage margin impact, but emphasized that margins are expected to grow even without this effect.

Ruplu Bhattacharya asked about Flex's capacity to handle potential manufacturing shifts to the U.S., inquiring about available space and the feasibility of lowering landed costs through automation. He also sought a deeper dive into the data center business, asking about the target audience post-Crown acquisition, whether growth relies on new customers, and the current customer concentration. Finally, he asked new CFO Kevin Krumm for his early thoughts on capital returns, specifically mentioning dividends.

Answer

CEO Revathi Advaithi stated that Flex has extensive experience moving manufacturing and that U.S. space is not a constraint, though labor could be. She expressed optimism that automation and AI will continue to lower U.S. landed costs. On data centers, Advaithi clarified that Flex already serves most major hyperscalers and colos, so growth will come from expanding the portfolio (like with Crown and JetCool) with existing customers. CFO Kevin Krumm noted it was early for him to comment definitively on capital allocation but affirmed the current priorities of organic growth, opportunistic M&A, and share buybacks remain appropriate.

Ruplu Bhattacharya inquired about the sustainability of the 40% year-over-year growth in the data center business, the strategy for future growth via M&A versus organic efforts, and whether the power business should be considered integral to Flex or a potential spin-off candidate. He also asked for the drivers behind the company's confidence in its full-year operating margin guidance despite near-term revenue challenges.

Answer

CEO Revathi Advaithi clarified that the 40% growth applies to the entire data center portfolio (cloud and power) and is driven by strong macro trends and Flex's unique, vertically integrated 'grid to chip' capabilities. She stated the business is synergistic to the overall Flex portfolio and not a spin-off candidate, with growth coming from both organic execution and strategic M&A. Interim CFO Jaime Martinez added that confidence in margins stems from successful program ramps in high-value areas like auto and data center, a favorable business mix, and strong operational cost management.

Ruplu Bhattacharya's final question for Andre Valentine concerned the reduced free cash flow guidance, the rationale for increasing the dividend, and the outlook for capital returns going forward.

Answer

CFO Andre Valentine stated optimism for increased free cash flow in 2026, driven by the completion of integration activities, lower cash interest from debt repayment, and continued top-line growth and margin progress. He explained that the Q4 guidance drop was due to margin pressures. For capital allocation, he outlined a balanced approach: prioritizing debt repayment, supporting the dividend, and continuing the share repurchase program, with a focus on debt repayment for next year. The dividend increase reflects confidence in strong and growing free cash flow and appreciation from investors for annual increases.

Ruplu Bhattacharya's final question for Andre Valentine concerned the reduction in free cash flow guidance, the outlook for free cash flow going forward, the rationale behind the dividend increase, and future capital allocation priorities.

Answer

Andre Valentine, CFO, stated optimism for increased free cash flow in 2026, driven by the end of integration activities, lower cash interest, top-line growth, and margin progress. He attributed the Q4 guidance drop to margin pressures. He outlined capital allocation priorities as balanced: debt repayment, supporting the dividend, and continuing the share repurchase program, with a likely prioritization of debt repayment next year. The dividend increase reflects investor appreciation, annual increase cadence, and confidence in strong free cash flow generation.

Ruplu Bhattacharya questioned Concentrix's risk management strategy, asking about the decision criteria for making transformational investments for clients, the expected ROI, and long-term benefits. He also inquired about the IX suite's $50 million incremental investment, the expectation to reach break-even in fiscal Q4, future investment levels, and criteria for adjusting spend. Finally, Bhattacharya asked about the rationale for the reduced free cash flow guidance, the outlook for future free cash flow, the dividend increase, and future capital allocation priorities.

Answer

President and CEO Chris Caldwell explained that transformational investments are made with long-term, strategic clients with whom Concentrix has deep relationships and significant growth opportunities, prioritizing long-term share gains over short-term pain. He confirmed the IX suite is on track to be modestly accretive by the end of Q4, with continued investment tied to revenue growth and scalability. CFO Andre Valentine attributed the reduced free cash flow guidance to Q3 margin pressures but expressed optimism for 2026 due to reduced integration spending and lower cash interest. He stated that capital allocation priorities remain balanced, focusing on debt repayment, supporting the dividend, and share repurchases, with the dividend increase reflecting confidence in strong free cash flow generation.

Ruplu Bhattacharya of Bank of America asked about the revenue outlook for the iX AI offerings, the rationale for the full-year margin guide reduction, the drivers of Q3 margin improvement, and the general operating environment, including sales cycles and business headwinds.

Answer

President & CEO Chris Caldwell stated that the company is not moderating its AI spend, as the iX suite is on track to be accretive by Q4 without further investment. CFO Andre Valentine explained that Q3 margin improvement will come from the tariff-related costs not repeating, program scaling, and improved AI economics. Caldwell added that the operating environment is favorable for complex, integrated deals. He quantified offshoring and the de-investment in commodity work as temporary headwinds of approximately 1.5-2% each.

Ruplu Bhattacharya sought to quantify the planned spending on AI investments for the year and asked about the conversion status of GenAI proof-of-concepts. He also questioned the decision to maintain full-year guidance after a strong Q1 beat.

Answer

CEO Christopher Caldwell stated that the incremental AI spend from 2024 is now scaling down as planned. He confirmed many POCs are ongoing or in deployment and reiterated that GenAI is a net positive for revenue in 2025. CFO Andre Valentine explained that maintaining full-year guidance is a conservative approach early in the year, also noting minor margin pressure in Q2 from new business ramp costs.

Ruplu Bhattacharya asked about the ROI metrics for the $100M GenAI investment, the margin impact of new products, the timeline for margin benefits from offshoring, and if advanced AI models alter the company's long-term disruption thesis.

Answer

CEO Christopher Caldwell stated the GenAI investment is measured by achieving an accretive ROI by the end of 2025 and is not a permanent run rate. CFO Andre Valentine noted it takes 2-3 quarters to realize margin benefits from offshoring. Caldwell added that despite advanced AI, clients remain cautious about fully automated high-value interactions, and Concentrix is winning more complex work as it automates simpler tasks, validating its strategy.

Ruplu Bhattacharya inquired about Jabil's AI growth drivers across core rack manufacturing, optical transceivers, and switching, addressing investor concerns about potential share shifts in data center and AI, and asking for insights into segment margins.

Answer

Matt Crowley, EVP of Intelligent Infrastructure, Jabil, reported 25% year-on-year AI revenue growth, expecting strong performance across capital equipment, cloud/data center, and networking/communications. He highlighted triple-digit growth in data center infrastructure and expressed confidence in gaining, not losing, market share. Ruplu Bhattacharya also asked about healthcare growth, specifically in devices, equipment, or drug delivery, and the impact of any delays at the Croatia facility on FY26 margins and beyond. Steve Borges, EVP of Regulated Industries, Jabil, confirmed the Croatia facility is on track with no delays, and new wins in medical devices, CGMs, and auto injectors (including GLP-1s and biologics) are expected to drive healthcare growth at or above 5%. Mike Dastoor, CEO, Jabil Inc., clarified that Croatia was always planned as an FY27 event. Finally, Ruplu Bhattacharya asked about CEO Mike Dastoor's meeting with Indian Prime Minister Sri Narendra Modi and Jabil's investment prioritization between the U.S. and India, considering tariffs. Mike Dastoor described a positive, pro-business meeting, acknowledging India's domestic demand and manufacturing strength, but emphasized the U.S. as a priority, citing Jabil's expanded U.S. footprint and new North Carolina facility for AI growth.

Ruplu Bhattacharya asked about Jabil's AI growth drivers, potential share shifts in data center and AI, and segment margins. He also inquired about healthcare growth, the status of the Croatia facility, and the impact on FY26 margins. Finally, he questioned Jabil's meeting with the Indian Prime Minister and investment prioritization between the U.S. and India.

Answer

Matt Crowley (EVP - Global Business Units, Jabil) highlighted 25% AI revenue growth, with triple-digit growth in data center infrastructure, and stated Jabil is gaining, not losing, share. Steve Borges (EVP - Global Business Units, Jabil) and Mike Dastoor (Director & CEO, Jabil) confirmed the Croatia facility is on track for FY27, with no delays, and noted new wins in medical devices, CGMs, and auto injectors. Mike Dastoor also described a positive, pro-business meeting in India, while emphasizing the U.S. as a priority for manufacturing investment with over 30 sites and a new North Carolina facility.

Ruplu Bhattacharya from Bank of America inquired about Jabil's AI growth drivers, specifically asking which areas like rack manufacturing, optical transceivers, or switching are expected to see the most growth. He also addressed investor concerns regarding potential market share loss in data center and AI, and sought clarification on segment margins. Additionally, he asked about healthcare growth areas, the status of the Croatia facility and its margin impact, and CEO Mike Dastoor's meeting with the Indian Prime Minister, including investment prioritization between the U.S. and India.

Answer

Matt Crowley, EVP of Intelligent Infrastructure, confirmed a 25% year-on-year AI revenue growth, projecting $11.2 billion, noting strong growth across capital equipment, cloud and data center infrastructure (especially triple-digit growth in data center infrastructure), and networking/communications, asserting Jabil is gaining, not losing, market share. Steve Borges, EVP of Regulated Industries, clarified that the Croatia facility is on track with no delays, expected to ramp in late FY27, highlighting growth in med devices, CGMs, and auto injectors (GLP-1s and biologics). Mike Dastoor, CEO, described the meeting with the Indian PM as very positive, emphasizing Jabil's prioritization of U.S. manufacturing while still focusing on both regions.

Ruplu Bhattacharya asked for the growth outlook for AI-related revenues beyond fiscal 2025, a margin ranking for Intelligent Infrastructure sub-segments, the path to achieving 6%+ operating margins, and Jabil's view on key risks and capital allocation priorities.

Answer

CEO Mike Dastoor deferred long-term AI growth guidance but noted margins vary, with capital equipment and networking being accretive while 5G is dilutive. He outlined a path to 6% margins via improved utilization, SG&A leverage, and business mix. He identified underperforming EV and renewables markets as minor risks, and confirmed that share buybacks remain the primary capital allocation strategy, supplemented by capability-driven M&A.

Ruplu Bhattacharya inquired about Jabil's U.S. manufacturing footprint and its capacity to support production shifts, the growth outlook for AI and silicon photonics, and the rationale behind the reduced forecast for networking.

Answer

CEO Mike Dastoor highlighted Jabil's extensive U.S. presence with 30 sites and proven ability to rapidly scale operations. He raised the AI-related revenue forecast to $7.5 billion for FY25, a 40% year-over-year increase, driven by data center infrastructure. Dastoor also noted strong progress in silicon photonics, leveraging an Intel acquisition, with 1.6T capabilities to be showcased soon. The networking forecast adjustment was attributed to softness in the 5G end market, not AI-related hardware.

Ruplu Bhattacharya inquired about Jabil's U.S. manufacturing footprint and its capacity to support production shifts amid potential tariffs. He also asked for details on the growth opportunity in cloud and AI revenues, specifically regarding silicon photonics in Gujarat, and questioned the reasons for the slightly lowered forecast for networking and healthcare in fiscal 2025.

Answer

Chief Executive Officer Mike Dastoor confirmed Jabil's strong U.S. position with 30 sites and proven ability to rapidly scale operations. He raised the AI-related revenue forecast to $7.5 billion for FY25, a 40% year-over-year increase, driven by data center infrastructure. Dastoor highlighted the silicon photonics capabilities gained from the Intel acquisition and noted the networking forecast reduction was specific to the 5G infrastructure market, not AI-related hardware.

Ruplu Bhattacharya inquired about the fiscal 2025 margin outlook for each business segment, the potential for AI-related revenue to exceed previous guidance, and the company's capital allocation plans, including the cadence of buybacks and the strategy behind the recent Mikros Technologies acquisition.

Answer

CEO Mike Dastoor stated that all three segments are expected to have margins north of 5%, with Regulated Industries having significant upside once EV and renewables recover. He also confirmed that the AI revenue forecast for FY25 has been raised to $6.5 billion, driven by strength in semi-cap and data cloud infrastructure. CFO Greg Hebard reiterated the commitment to return 80% of free cash flow via buybacks, completing the current authorization in FY25. Dastoor added that the Mikros acquisition was for its liquid cooling engineering capabilities to create a vertical solution, not for its immediate revenue.

Asked about the growth outlook for the cloud and data center infrastructure segment, the seemingly low growth forecast for healthcare and details on GLP-1 drug impacts, and questions regarding global factory utilization and potential restructuring.

Answer

Management confirmed strong 12% growth in intelligent infrastructure driven by data centers, despite cyclical semi-cap and 5G businesses. The healthcare market is growing 3-4%; Jabil was impacted by GLP-1 drugs affecting surgeries but is now winning business for GLP-1 injectors, with new wins in diabetes care ramping in FY26/27. Factory utilization is currently low at ~70%, creating a 20-30 bps margin headwind, but the company is not restructuring sites as it expects markets to recover.

Speaking for Wamsi Mohan, Ruplu Bhattacharya of BofA Securities asked about the strength of FlashBlade E and its impact on product gross margins, and whether hyperscaler investments affect the Direct Flash Module (DFM) density roadmap.

Answer

CTO Rob Lee addressed the first part, stating that Q2 strength was broad-based across the portfolio, not just from FlashBlade E, with margins benefiting from product mix and pricing discipline. CEO Charles Giancarlo answered the second part, confirming that the DFM density roadmap positively impacts gross margins, as does software innovation like enhanced data reduction, making it a combined hardware and software benefit.

Ruplu Bhattacharya of Bank of America asked about the drivers for the Q3 gross margin outlook, the competitive environment in India, the extent of AI-driven hardware sales, and how to quantify the revenue impact of the xVantage platform.

Answer

EVP & CFO Mike Zilis cited a normalizing product mix, the absence of a Q2 one-time charge, and an improving competitive landscape in India as drivers for the stronger Q3 margin outlook. CEO Paul Bay noted that while most PC refresh is not yet AI-driven, the company is seeing opportunistic GPU deals. He declined to give a specific revenue figure for xVantage but highlighted key metrics like a 200% year-over-year increase in self-service orders.

Ruplu Bhattacharya questioned whether gross margins could grow year-over-year in the second half of 2025 and asked for an outlook on working capital and free cash flow, considering potential inventory pre-buys.

Answer

CFO Mike Zilis explained that gross margin pressure is expected to continue due to a mix shift towards large customers and the Asia Pacific region, which are lower margin. He noted that a rebound in SMB or a stronger mix of Advanced Solutions could provide upside. On working capital, Zilis confirmed opportunistic pre-buys but highlighted that working capital days still improved year-over-year. CEO Paul Bay added that despite pre-buys, working capital days improved by four days, indicating smart, strategic inventory management.

Ruplu Bhattacharya of Bank of America inquired about the overall IT distribution market growth rate, Ingram's market share performance, and whether the intense pricing competition was isolated to India.

Answer

CEO Paul Bay detailed regional performance, highlighting that while the competitive environment in India is particularly intense, leading them to walk away from unprofitable deals, the focus remains on quality of revenue. CFO Michael Zilis added that while India is the most 'irrational,' the market is competitive globally, and the strategy is to grow higher-margin businesses above the market rate.

Ruplu Bhattacharya of Bank of America inquired about the Newport fab's gross margin impact, the drivers behind the sequential decline in MOSFET gross margins, the mechanics of US tariffs on its products, and the company's M&A strategy.

Answer

EVP & CFO David McConnell addressed the Newport fab's margin impact, noting the Q2 outperformance was due to strong execution and the Q3 guidance reflects some uncertainty as production ramps. McConnell also explained that Q2 MOSFET margin weakness was due to temporary manufacturing inefficiencies, which have been corrected, and expects margins to improve to 17-18% by year-end, excluding Newport. President and CEO Joel Smejkal clarified that less than 4% of revenue is impacted by US tariffs on China-made goods and affirmed that Vishay continues to evaluate M&A opportunities in both semiconductors and passives to fill portfolio gaps and increase customer presence.

Ruplu Bhattacharya inquired about Vishay's distribution channel dynamics, including inventory levels and SKU expansion progress. He also sought clarification on the financial impact of new tariffs on revenue and gross margins, and asked about the production ramp and margin drag from the Newport facility.

Answer

President and CEO Joel Smejkal stated that SKU expansion in distribution is ongoing and that inventory weeks have declined in the Americas and Europe, indicating healthy POS. Regarding tariffs, CFO David McConnell explained the Q2 guidance assumes a ~30 basis point gross margin reduction from tariff pass-throughs. Joel Smejkal added that Vishay is offering customers alternative manufacturing locations to mitigate tariff impacts. On the Newport fab, management confirmed it is targeting gross margin neutrality in H1 2026 and will have a 175-200 basis point drag on gross margin in Q2 2025.

Ruplu Bhattacharya asked about the state of inventory in the distribution channel, pricing power in passives and actives, and details on the 2025 CapEx plan, including total new capacity. He also questioned capital allocation priorities for 2025 given the negative free cash flow forecast and inquired about the expected regional revenue mix, particularly between a weak Europe and strong Asia.

Answer

President and CEO Joel Smejkal confirmed that distribution inventory is stable at 27 weeks and is considered 'fresh,' though Europe has inventory to work through in Q1. He stated pricing is competitive and that 2025 CapEx of $300M-$350M will be modulated based on order flow and subcontractor availability. CFO David McConnell reiterated the commitment to the dividend and opportunistic buybacks in 2025 but did not commit to a specific return amount. Joel Smejkal added that the company is focused on gaining share in Europe despite softness, while continuing to support high growth in Asia.

Ruplu Bhattacharya of BofA Securities inquired about the state of distribution inventory, key growth drivers for 2025, the current pricing environment, the long-term product mix, and priorities for capital allocation.

Answer

President and CEO Joel Smejkal explained that passives inventory is nearing normalization, while semiconductors will take until Q1 2025. He identified smart grid infrastructure, AI, and military/aerospace as key growth areas. Smejkal noted the pricing environment is stable and that both commodity and specialty product lines are expected to grow. CFO David McConnell added that the primary use of cash is funding the strategic plan, including the Newport expansion, while maintaining the commitment to shareholder returns.

Ruplu Bhattacharya from Bank of America inquired if the client device refresh cycle includes upgrades to AI PCs and if AI is driving data center demand. He also asked for an update on CDW's M&A strategy and areas of focus.

Answer

Chair & CEO Chris Leahy stated the client refresh is primarily driven by the Windows 10 end-of-life, with AI PC adoption still in its early stages. She confirmed AI is a key part of infrastructure conversations and that customer urgency is at an 'inflection point.' Regarding M&A, she reiterated a focus on high-growth, services-led capabilities in areas like AI, cloud, and security to enhance their full-stack strategy.

Ruplu Bhattacharya asked for clarity on the core business gross margin (excluding netted-down items) and questioned how the demand pull-forward in Education and weakness in Federal would impact seasonality.

Answer

CFO Albert Miralles confirmed that non-netted down gross margins were down slightly year-over-year, attributing it almost entirely to a product mix shift into client devices. CEO Christine Leahy and CFO Albert Miralles explained that the Education strength was a pull-forward from Q2 and that Federal spending will be muted, leading them to expect a sub-seasonal Q2.

Ruplu Bhattacharya asked if the Q4 growth in the Small Business segment signals a broader market recovery and inquired about the outlook for core business gross margins in fiscal 2025.

Answer

CEO Christine Leahy described the SMB performance as a sign of stabilization rather than a full rebound, remaining 'cautiously optimistic' as customers are still cautious. CFO Al Miralles stated he expects the core (non-netted down) gross margin to hold 'reasonably firm' in 2025, supported by modest growth in solutions hardware and attached services.

Ruplu Bhattacharya of Bank of America requested a deeper explanation for the Enterprise Computing Solutions (ECS) segment's margin performance, which appeared to decline despite strong sales. He also asked about the outlook for the EMEA components business and the source of confidence for the strong Q3 components guidance.

Answer

CEO Sean Kerins clarified that ECS operating margins should be viewed on a billings basis, where they were stable year-over-year, as sales-based figures can be misleading due to accounting rules. CFO Raj Agrawal added that the prior-year quarter included a $20 million one-time benefit that skewed the comparison. Regarding components, Mr. Kerins expressed confidence in the Q3 forecast due to a backlog that grew substantially and extended further into Q4 and Q1. Rick Marano, President of Global Components, added that strong fundamentals and vertical market trends in aerospace, defense, and transportation support the positive outlook.

Ruplu Bhattacharya from Bank of America questioned the basis for management's view of being in the 'late innings' of the inventory correction and asked for the Q1 margin outlook for the Components and ECS segments.

Answer

President and CEO Sean Kerins cited declining ecosystem inventory, a stabilizing book-to-bill ratio near parity, and new business wins as positive indicators, adding no specific component type has material excess. CFO Raj Agrawal and Kerins explained that while gross margins are expected to be stable, overall operating margin will be impacted by seasonality in ECS and negative leverage in Components. They expect year-over-year operating margin expansion in the ECS business.

Ruplu Bhattacharya from Bank of America asked about product line performance in the ECS business, the reasons for the extended inventory correction in components, and the company's key areas for future investment to ensure a stronger position post-recovery.

Answer

CEO Sean Kerins highlighted strength in hybrid cloud and infrastructure software within ECS, which is driving gross profit dollar growth. He attributed the prolonged components correction to a slower-than-expected demand recovery and broad-based excess inventory. For future growth, Kerins identified continued investment in the mass market, value-added supply chain and design services, and the ArrowSphere digital platform.

Ruplu Bhattacharya from Bank of America asked about the ZT Systems acquisition, questioning if the $5-6 billion annual revenue run rate is still accurate and inquiring about plans to turn around and grow the business, including potential hiring for sales and engineering. He also asked about the reason for the guided Q4 revenue slowdown and the sustainability of the strong Q3 CPS margins.

Answer

Chairman & CEO Jure Sola expressed increased excitement for the ZT deal, citing strong customer interest and ZT's advanced capabilities. He confirmed they are investing in sales and technical support to drive growth. Regarding the Q4 outlook, he noted it's a difficult year-over-year comparison and that the business is now more stable with positive customer forecasts. EVP & CFO Jon Faust reaffirmed the $5-6 billion revenue run rate for ZT at closing and explained that the strong CPS margin was driven by favorable mix and strategic investments, not one-time items, with a target of over 15%.

Ruplu Bhattacharya asked about the potential for demand pull-forward in Q2 due to tariffs, the prudence of the full-year revenue guidance, the reasons for a sequential increase in gross inventory, and the demand trends within the communications end market, specifically for optical, routing/switching, and wireless.

Answer

Chairman and CEO Jure Sola stated there was no major demand pull-forward related to tariffs, as customers are still assessing the situation. He noted the full-year guidance is prudent given the dynamic environment but remains optimistic about Q4 and beyond, citing a major program push-out as a factor. Regarding communications, he confirmed inventory levels are normalizing and saw strong Q2 demand in high-end routers, switches, and optical networks, which he expects to continue. EVP and CFO Jon Faust addressed inventory, explaining the company focuses on net inventory, which improved year-over-year, and that the current build supports future growth, with turns at a healthy 5.9x.

Ruplu Bhattacharya asked about the key drivers for the fiscal 2025 high single-digit revenue growth guidance, specifically the contribution from the cloud infrastructure business. He also inquired about the status of the inventory correction in the Communications segment and the expected pace of the new $300 million share buyback program.

Answer

Jure Sola (executive) clarified that growth is diversified across all key markets, not just cloud, and detailed Sanmina's end-to-end capabilities in the cloud space. He also stated the communications inventory correction is in its final stages. CFO Jonathan Faust added that Communications and Cloud grew 15% YoY in Q1 and that while M&A and organic growth are priorities, share repurchases remain an attractive option given the stock's valuation.

Ruplu Bhattacharya asked for clarification on the Cloud segment's revenue performance, its specific growth drivers for fiscal 2025, and trends in the communications and optical businesses, particularly regarding inventory correction. He also inquired about the expected progression of operating margins and the company's priorities for cash allocation and M&A.

Answer

Chairman and CEO Jure Sola explained that the fiscal 2024 Cloud revenue dip was due to customer inventory correction but expressed strong optimism for growth in fiscal 2025, driven by high-performance networks and new AI-related data center programs. He noted the inventory correction in communications is nearing its end. EVP and CFO Jon Faust added that operating margins should expand in fiscal 2025 through revenue growth and operating leverage, despite recent targeted investments in R&D, strategic opportunities, and the workforce. Faust reiterated that capital allocation priorities remain focused on organic growth, strategic M&A, and opportunistic share repurchases.

Ruplu Bhattacharya sought an update on the Hyve issues mentioned last quarter regarding a customer demand shortfall and inventory. He also questioned the cautious outlook given strong Q1/Q2 growth and asked if the company is currently seeing weakness or just anticipating it.

Answer

CFO Marshall Witt confirmed that Hyve's working capital situation is improving as expected and will continue to unwind. CEO Patrick Zammit explained the Q3 guidance reflects a tougher year-over-year comparison and macro uncertainty from tariffs and geopolitical issues. He clarified that June trends are in line with guidance and no specific weakness is being seen yet, but the outlook remains prudently cautious.

Ruplu Bhattacharya of Bank of America inquired about potential pre-buying ahead of tariffs, the viability of achieving mid-single-digit billings growth each quarter for the rest of the year, and the expected gross-to-net revenue adjustment percentage.

Answer

CEO Patrick Zammit stated that the impact of tariffs on pre-buying has been limited, with PC growth primarily driven by refresh cycles. CFO Marshall Witt reaffirmed the full-year mid-single-digit growth outlook, expecting distribution to perform at or above that rate in Q2 while Hyve will be slightly down. He projected the gross-to-net adjustment would stabilize in the 28% to 30% range for the next three quarters.

Ruplu Bhattacharya asked for the expected relative growth between Endpoint and Advanced Solutions in fiscal '25. He later followed up on whether new customer ramps create Hyve margin headwinds and about plans for inorganic growth in software and services.

Answer

CFO Marshall Witt stated that while they don't guide by segment, the expectation is for both Endpoint and Advanced Solutions to grow. CEO Patrick Zammit added that networking recovery should help Advanced Solutions. On the follow-up, Marshall Witt noted that while a new customer's margins are normalizing, broader investments in Hyve's footprint will create some headwinds. Patrick Zammit described software and services as a mostly organic growth opportunity, though acquisitions would be considered if they meet strategic and financial criteria, deferring further details on services to the upcoming Investor Day.

Ruplu Bhattacharya asked about investment priorities over the next year, including platform enhancements and the AI line card, and also inquired about capital allocation priorities between M&A, buybacks, and debt reduction.

Answer

CEO Patrick Zammit stated that key technology investments will be in platforms, particularly for as-a-service offerings, now that major ERP conversions are complete. He believes the current line card is well-positioned for AI. On capital allocation, Zammit confirmed M&A remains an opportunity, citing a disciplined approach and successful integration track record. CFO Marshall Witt added that the company remains committed to its 50/50 capital return policy and plans to continue share repurchases, noting leverage is within the target range.

Ruplu Bhattacharya of Bank of America asked about the pricing environment, competitive share gains against VMware, the performance of renewals versus land-and-expand, and the pipeline for large deals and the available-to-renew (ATR) pool.

Answer

President and CEO Rajiv Ramaswami stated that the pricing environment has been stable and that strong new logo growth and high AHV hypervisor adoption are key indicators of share gains. CFO Rukmini Sivaraman noted that Q3 saw strong new logos, good expansion, and solid renewals. She added that the large deal pipeline remains robust, which can cause variability, and that the ATR pool continues to grow.

Ruplu Bhattacharya of Bank of America asked about the quantifiable benefits from the AWS partnership and the contributions from Cisco and Dell to new logo growth. He also questioned why the guided Q3 sequential revenue decline is less severe than the prior year's and if this indicates a permanent shift in seasonality.

Answer

CEO Rajiv Ramaswami cited early traction with AWS in migrating customers from VMware Cloud on AWS, called Cisco a 'good contributor' to new logos, and noted Dell's contribution is still small but growing. CFO Rukmini Sivaraman attributed the stronger Q3 outlook to good Q2 performance but stated it was too early to declare a permanent change in seasonality, pointing to the variability of renewal cohorts.

Ruplu Bhattacharya, on behalf of Wamsi Mohan from Bank of America, asked about the growth trajectory of the available-to-renew (ATR) pool for fiscal 2025 and beyond. He also inquired about the drivers of the strong Q1 free cash flow and its expected progression.

Answer

CFO Rukmini Sivaraman stated that the ATR pool is expected to grow nicely in fiscal 2025 and continue that strong growth over the next few years. Regarding free cash flow, she noted there were no significant one-time items in Q1 and reminded that expenses are expected to ramp through the year. She emphasized that FCF can have quarter-to-quarter variability, which is why they only guide annually.

Ruplu Bhattacharya, on for Wamsi Mohan, asked about the demand and pricing environment, the trade-off between market share gains and margins, the cadence of FY25 free cash flow, and implications for long-term targets.

Answer

President and CEO Rajiv Ramaswami described the demand environment as stable but with elongated sales cycles. He confirmed Nutanix is using promotions and partnerships to drive share gains while protecting margins. CFO Rukmini Sivaraman highlighted the strong FY25 free cash flow guidance but did not provide a quarterly cadence. She also declined to update the FY27 targets from the 2023 Investor Day, reiterating a focus on durable growth and expanding margins.

Ruplu Bhattacharya, for Wamsi Mohan of Bank of America, asked about 2025 product investment areas, growth expectations for the 'scalers plus' cohort, the cause of increased payables, and what Q4 ARR would have been under the old calculation method.

Answer

CEO Padmanabhan Srinivasan detailed plans to enhance core cloud capabilities for large customers and simplify the Gen AI platform. Executive Matt Steinfort attributed the payables increase to accelerated equipment purchases for the Atlanta data center. He confirmed ARR would have been higher under the old method but the new quarterly average approach provides a more stable metric.

Ruplu Bhattacharya, on for Wamsi Mohan, asked for quantification of headwinds in the public cloud subscription business and details on the all-flash conversion of the installed base.

Answer

CFO Mike Berry explained that the subscription business is declining by design as customers strategically shift to first-party and marketplace services, which now represent the vast majority of the cloud business. CEO George Kurian stated that 40% of the installed base has converted to all-flash and that new business is balanced between new and existing customers, declining to break out QLC mix.

Ruplu Bhattacharya asked about the impact of the Trade Desk integration on fill rates and CPMs, and requested a ranking of investment priorities across original content, programmatic advertising, and international expansion.

Answer

President of Roku Media Charlie Collier stated that programmatic integrations do not equate to margin degradation, as Roku's diverse inventory allows it to manage pricing across the value chain. CFO Dan Jedda prioritized investments, ranking platform monetization (programmatic, home screen, subscriptions) and international scale as top priorities. He clarified that original content is not a major cost driver, as most of The Roku Channel's content is licensed on a variable revenue-share basis.