Sean O'Loughlin

Sean O'Loughlin asked for background on the Amazon warrant agreement, including its exercise period and dollar amount, and whether it represents incremental revenue. He also inquired about the financial arrangement for NVLink Fusion agreements, specifically if it involves licensing fees or impacts ASP and margin profiles.

Answer

Mike Tate, CFO, stated the Amazon warrant agreement is a follow-on, involving 3.3 million shares tied to $6.5 billion in revenue milestones, resulting in a non-cash charge of about 2 points to gross margins quarterly starting Q2. Jitendra Mohan, CEO and Co-founder, noted that NVLink Fusion opens new opportunities in the NVLink ecosystem, being additive to existing plans, but deferred specific financial model details to hyperscalers or NVIDIA.

Sean O'Loughlin asked for background on the warrant agreement with Amazon, including its exercise period and dollar amount, whether it represents incremental business, and details on linearity. He also inquired about the financial arrangement for NVLink Fusion agreements with hyperscalers, specifically if it involves a direct license payment or incorporation into ASP/margin.

Answer

Mike Tate, CFO, stated he could not provide more details than publicly disclosed in the 8-K, but confirmed it demonstrates a strong relationship and is a follow-on warrant. Warrants are earned as revenue milestones ($6.5 billion) are achieved, resulting in a non-cash charge against revenue/gross margins (estimated 2 points/quarter starting Q2). Jitendra Mohan, CEO and Co-founder, noted that NVLink Fusion opens new, additive opportunities in the NVLink ecosystem, but deferred specific business model details to hyperscalers or NVIDIA due to NDAs.

Sean O'Loughlin asked for clarification on MACOM's CW laser customer commentary, specifically whether these customers are module makers or hyperscale-type customers. He also posed a 'blue-sky' question about the potential for LPO in front-haul applications, given LPO's typical suitability for short-reach data center uses and front-haul's generally longer-reach nature.

Answer

Stephen G. Daly, President and CEO, clarified that MACOM is primarily engaging with module maker customers first for CW lasers. Once module-level results and reliability data are satisfactory, they proceed with hyperscalers for approval. He noted this is an early but significant phase as MACOM now has a compliant laser. For LPO in front-haul, Mr. Daly explained that customers are exploring this to reduce cost and complexity, valuing LPO's low-latency, real-time transmission benefits. He added that as AI integrates into networks and moves to the edge, optical interconnects become more relevant, and MACOM is also involved in re-architecting remote radios to incorporate fiber.

Sean O'Loughlin sought clarification on MACOM's CW laser customers, asking if they are module makers or hyperscale customers. He also asked for more details on the potential application of Linear Pluggable Optics (LPO) in telecom fronthaul, given LPO is typically suited for short-reach applications, which fronthaul is not.

Answer

Stephen G. Daly, President and CEO, confirmed that MACOM is primarily engaging with module maker customers for CW lasers to ensure module-level results. The process involves collecting reliability data, after which module makers will seek approval from hyperscalers. He noted this is an early but significant phase, as a compliant laser was recently achieved. Regarding LPO in fronthaul, Mr. Daly explained that customers are exploring it to reduce network cost and complexity, valuing its low-latency, real-time transmission benefits. He mentioned ongoing design and trials, linking this interest to the increasing relevance of optical interconnects as AI permeates networks and moves towards the edge, and MACOM's involvement in re-architecting remote radios with fiber.

Sean O'Loughlin asked about the potential impact of a recent competitor merger on MACOM's competitive landscape, particularly outside the handset market. He also inquired if MACOM is observing or anticipating the effects of data center deployments and increased bandwidth on telecom access and long-haul networks.

Answer

Steve Daly, President and CEO, MACOM, stated no direct impact from the merger as MACOM is not in the handset market and the companies are not customers/suppliers, but noted potential opportunities from fab closures. Regarding telecom trends, Mr. Daly confirmed MACOM is working with RAN manufacturers and sees long-term potential for high-speed data movement, believing MACOM's high-speed, high-data rate, and high-frequency technologies position it well.

Sean O'Loughlin asked about the anticipated impact of a recent competitor merger on MACOM's competitive landscape, and inquired if MACOM is observing or anticipating the effects of AI deployments and data center builds on telecom access and long-haul networks, particularly regarding increased bandwidth and two-way inference traffic.

Answer

President and CEO Steve Daly congratulated the merging companies, stating no direct impact on MACOM as they are not in the handset business and neither company is a customer or supplier. He speculated that potential fab closures could create opportunities for MACOM. Regarding AI's impact on telecom, Mr. Daly confirmed MACOM's engagement with RAN manufacturers and understanding of front-haul networks, viewing increased bandwidth as a long-term trend where MACOM's high-speed, high-frequency technology is well-positioned.

Sean O'Loughlin asked about the Active LED Cable (ALC) technology and Credo's relationship with Hyperloom, specifically whether a non-ramp in 2027/2028 would be due to a technology or business problem. He also inquired if the Zero-flap Optics (ZF Optics) platform targets a specific line or lane rate, or if it is agnostic across 50, 100, and 200 gig per lane applications.

Answer

President and CEO Bill Brennan explained that Credo's interest in micro-LED technology for ALCs began a couple of years ago, leading to the acquisition of Hyperloom to bring the technology and team in-house for predictable time to market. He views the current stage as an execution play, with the technology well-developed, and expressed confidence in product launch in fiscal 2027 and initial ramps in fiscal 2028, seeing no major customer acceptance barriers. For ZF Optics, Bill Brennan confirmed it can be leveraged across various lane rates, with the first product targeting 100 gig per lane (800 gig ports) and a path to 1.6T, but adaptable to 50 gig per lane if a customer requires it.

Sean O'Loughlin asked about the AEC opportunity in front-end networking and any product differences versus back-end solutions. He also sought clarification on whether a previously mentioned 'emerging hyperscaler' is now one of the three customers in volume production.

Answer

CEO William Brennan explained that front-end networks exist for both general compute and AI clusters, but AI is driving faster lane speeds (100-gig and 200-gig). He confirmed Credo's largest customer uses its AECs for both front-end and back-end connections. Brennan also clarified that the previously mentioned 'emerging' hyperscaler is now classified as a full hyperscaler due to its spending and is one of the three customers in volume production.

Sean O'Loughlin asked about the expected Q4 data center growth, specifically the 'meaningful contribution' from LPO, and how LPO deployments are envisioned to enter the market—whether project-specific and lumpy, or a more gradual integration. He also questioned the Q4 gross margin outlook, particularly the mix shift within IoT, and potential headwinds from silicon photonics/germanium foundry capacity constraints.

Answer

President and CEO Hong Hou projected approximately 10% sequential data center growth in Q4, primarily from FiberEdge, with LPO contributing a meaningful mid-single-digit percentage. He noted ACC's contribution would remain nominal in Q4. Executive Vice President and CFO Mark Lin clarified that semiconductor gross margins (SIP, data center, LoRa, PerSe) are accretive, while IoT systems and connectivity (cellular modules) have lower gross margins, driving the Q4 consolidated gross margin outlook. Hong Hou addressed foundry capacity, emphasizing long-standing partnerships and co-planning processes to ensure component availability.

Speaking for Matt Ramsey, Sean O'Laughlin asked about the future of the traditional legacy video processor business and whether it could be a growth lever. He also inquired about the gross margin profile of new products on advanced nodes, considering potential foundry price increases.

Answer

CEO Fermi Wang stated that the company is no longer investing in new legacy video processors, so revenue is not expected to grow, but the rate of decline should slow significantly. CFO John Young addressed margins, stating they do not expect the profile to change significantly on new nodes. He reiterated the long-term target of 59-62%, which will be influenced more by the mix of business (like automotive) than by foundry costs.