Shane Brett

Shane Brett, Equity Research Analyst at Morgan Stanley, inquired about any changes in competitive dynamics for HBM sockets and how Camtek's market share with memory customers should be viewed. He also asked about Camtek's business with OSAT customers, given their significant CapEx announcements, and how the broadening of advanced packaging beyond leading foundries benefits the company.

Answer

COO Ramy Langer affirmed that Camtek has not lost market share in HBM and expects to increase it by penetrating more inspection and metrology steps through R&D advancements. Regarding OSATs, Langer highlighted that Camtek dominates this market, which constitutes about 50% of its business. He noted the movement of CoWoS and CoWoS-like technologies to OSATs, which significantly benefits Camtek, and emphasized the company's strong position with major players like TSMC in HBM and CoWoS.

Shane Brett (Morgan Stanley) inquired about competitive dynamics for HBM sockets and Camtek's market share, as well as the impact of broadening advanced packaging beyond leading foundries on Camtek's business with OSATs.

Answer

Ramy Langer (COO, Camtek) affirmed that Camtek has not lost market share in HBM and expects to increase it by penetrating more inspection and metrology steps. He also noted that the move of CoWoS-like technologies to OSATs, where Camtek is very strong and dominates, will significantly benefit the company, which already has strong positions with major HBM and CoWoS players.

Shane Brett asked whether chemistry revenue is expected to accelerate or decelerate in 2026, seeking to understand the balance between higher-growth AI-related chemistry and potential impacts from weaker consumer electronic sales. He also inquired about MKS's current capacity for E&P tools relative to existing demand, given that bookings were mentioned to be strong through the first half of 2026.

Answer

John Lee, President and Chief Executive Officer, noted the Q1 seasonality for consumer product chemistry due to Lunar New Year. He expects AI chemistry to continue growing, more than offsetting any slight decrease in PC and smartphone chemistry. Lee stated that MKS has added sufficient capacity for E&P tools without needing new factories, meeting customer timing demands even at elevated booking levels, and is not currently constraining customers.

Shane Brett asked whether chemistry revenue is anticipated to accelerate or decelerate in 2026, seeking to understand the balance between higher-growth AI and potential impacts from weaker consumer electronic sales. He also inquired about the current capacity for ENP (Electronics and Packaging) tools relative to existing demand, given previous statements about being booked through the first half of 2026.

Answer

President and CEO John Lee noted the Q1 seasonality for consumer product chemistry due to Lunar New Year, with consumer product chemistry expected to grow throughout the year, albeit potentially impacted by single-digit decreases in PCs and smartphones. However, he expects AI chemistry to continue growing and more than make up for any such decrease. Regarding ENP tooling, he stated that MKS has added capacity without needing new factories, meeting customer timing demands even at elevated levels, and current capacity is sufficient to avoid constraining customers.

Shane Brett of Morgan Stanley asked if strong E&P growth has changed long-term expectations, how a potential industry shift from COWAS to COWAP would impact the business, and what leading indicators exist for the Specialty Industrial segment.

Answer

President and CEO John Lee stated that while the long-term model isn't being updated, the AI-driven growth validates their strategy. He noted a shift to COWAP would be a tailwind, playing to MKS's strengths in complex HDI boards. For the industrial segment, he highlighted that while the overall market is muted, Defense has been a 'bright spot' and Life & Health Sciences remains stable.

Shane Brett of Morgan Stanley inquired about the impact of tariffs on gross margins, mitigation strategies, and any resulting changes in customer order patterns. He also asked for a preliminary outlook on the second half of the year, given the stronger-than-expected first half.

Answer

CFO Ram Mayampurath explained that MKS is mitigating tariff impacts through its global manufacturing footprint, resilient supply chain, and potential selective commercial actions, noting no top-line impact so far. CEO John Lee clarified the guidance incorporates a potential tariff impact of *up to* 100 basis points, not the full amount. Regarding the second half, Lee expressed satisfaction with first-half double-digit growth in Semi and E&P but noted that macroeconomic uncertainty from tariffs clouds the outlook for what would otherwise be a stable to improving demand environment.

Shane Brett from Morgan Stanley asked about the recent reduction in balance sheet inventory and the company's capacity to support a potential surge in demand given the increase in within-lead-time orders.

Answer

CEO John Lee expressed satisfaction with the progress made in reducing inventory toward more normalized levels. He explained that inventory was previously held at higher levels for strategic components to mitigate shortages seen in the last upturn. He affirmed that MKS is prepared to use working capital to build inventory ahead of any significant demand ramp.

Shane Brett, on for Joseph Moore, asked about the idiosyncratic gross margin tailwinds and headwinds envisioned for 2025. He also inquired about how MKS is positioned for the next NAND CapEx upcycle relative to the last one.

Answer

President and CEO John Lee identified higher volume as a key tailwind, expecting 50% gross margin flow-through, and noted the Atotech business continues to support profitability. He mentioned that while inflationary cost pressures have stabilized, they are not yet a tailwind. For the next NAND cycle, Lee affirmed MKS's leadership position in RF power for critical etch, expressing confidence they will benefit as they have in past cycles.

Shane Brett questioned Nova's share position in leading-edge logic, particularly concerning a major customer's increased 3-nanometer wafer production and the potential for further growth in Taiwan revenue. He also asked about the dynamics causing a moderation in advanced packaging revenue growth from 60% to low double digits.

Answer

Gaby Waisman, President and CEO, stated that Nova is well-positioned across all four players in Gate-All-Around, expecting increased momentum in 2026, and that any investment in advanced nodes is beneficial. For advanced packaging, she explained that it's a relatively new area for Nova with increasing product penetration and share gains, expecting strong double-digit growth this year, with HBM contributing a quarter to a third of that segment's revenue.

Shane Brett questioned Nova's share position in leading-edge logic, particularly concerning its largest customer's increased 3nm wafer production and the nearly 90% year-over-year growth in Taiwan revenue in 2025. He also asked about the moderation of advanced packaging revenue growth from 60% in 2025 to low double digits in 2026, seeking clarification on the underlying dynamics.

Answer

President and CEO Gaby Waisman stated Nova is well-positioned across all four players in Gate-All-Around, expecting increased momentum in 2026, and that investments in 3nm are beneficial. Regarding advanced packaging, she explained that it's a relatively new area for Nova, with strong double-digit growth expected this year as the company introduces more solutions and gains share, with HBM contributing a quarter to a third of this segment's revenue.

Shane Brett followed up on DRAM process control intensity, asking if it could approach advanced logic levels, given previous discussions about 100 basis point increases with EUV and HBM. He also asked about the process control intensity at broadening foundry customers and the potential for leading-edge logic growth in 2026.

Answer

CEO Rick Wallace stated that DRAM process control intensity is still a ways away from advanced logic due to the high mix of designs in logic, but he is encouraged by the positive trend driven by market requirements. He confirmed seeing broadening and increased intensity at foundry customers, noting it depends on technology node, die size, and mix. He expects the setup for 2027 in foundry logic to be remarkable, with more activity late in 2026.

Shane Brett followed up on DRAM comments, asking about KLA's memory growth expectations for next year relative to the strong December quarter guide, given memory customers' CapEx growth projections for 2026.

Answer

CFO Bren Higgins acknowledged that DRAM process control timing can differ from other products. He stated that 2025 has been a strong year for DRAM, and he expects 2026 to also be a growth year, with all top three customers increasing investment levels, driven by urgency around HBM pricing and the realization of more opportunity in memory.

Shane Brett followed up on DRAM, asking how KLA's memory growth expectations for next year compare to the strong December quarter DRAM guide, given memory customers' CapEx growth projections for 2026.

Answer

CFO Bren Higgins acknowledged that process control timing can influence product timing. He stated that 2025 has been a very strong year for DRAM, and he expects 2026 to also be a growth year, with all top three customers projected to increase DRAM investment. CEO Rick Wallace added that there is increased urgency on the DRAM front, driven by HBM pricing dynamics and the realization of more opportunity in memory due to the accelerating number of AI applications.

Shane Brett of Morgan Stanley asked for clarification on the September quarter's business mix, noting the sequential decline in memory seemed counterintuitive, and inquired about the company's progress towards its 2026 revenue target set at the 2022 Analyst Day.

Answer

EVP & CFO Bren Higgins clarified that the memory mix is a matter of timing, confirming that DRAM revenue will be stronger in the December quarter than in September. Regarding the 2026 target, President & CEO Rick Wallace explained that due to strong market share gains and growth in packaging, KLA does not need the original $125B WFE assumption to achieve its $14B revenue goal, suggesting WFE in the mid-$110s could be sufficient.

Shane Brett from Morgan Stanley asked for clarification on the September quarter's business mix, specifically the sequential decline in memory revenue, and inquired about progress towards the 2026 revenue target set at the 2022 Analyst Day.

Answer

EVP & CFO Bren Higgins explained the memory mix was simply a matter of project timing and revenue recognition, and that he expects to see an uptick in DRAM revenue in the December quarter. Regarding the 2026 target, Higgins stated that due to strong share of WFE and packaging growth, KLA does not need the originally assumed $125B WFE to hit the $14B revenue plan. He noted their share of WFE is approaching 8% (ex-packaging) versus the 7.25% originally modeled, and the underlying financial model is performing as expected, absent tariff effects.

Shane Brett asked if SoC test revenue is expected to accelerate from the strong December quarter into the first half of 2026, or if a seasonal decline or conservatism should be factored in. He also inquired about the historical and expected growth of NAND memory relative to DRAM, given its current low levels.

Answer

CFO Sanjay Mehta and CEO Greg Smith reiterated that projects are accelerating, with Q4 2025 being a new high watermark for memory and SoC. While demand for 2026 is expected to be robust, Mr. Smith cautioned against linear projections due to market lumpiness. Regarding memory, Mr. Mehta stated that NAND is currently 'really low' and tied to mobile industry growth. Mr. Smith added that Q3 memory was 75% DRAM and 25% Flash, with potential for Flash to strengthen in 2026 due to mobile protocol shifts and AI data center SSD demand, though it remains uncertain. Mr. Mehta noted that Flash TAM was more than double in 2020/2021 compared to now.

Shane Brett asked if SOC test is expected to accelerate from the strong December quarter into the first half of next year, or if seasonal declines or conservatism should be factored into the March quarter. He also inquired about the memory market, specifically NAND growth expectations, how low NAND has been this year relative to prior years, and the expected growth for the NAND portion of memory going forward.

Answer

CFO Sanjay Mehta and CEO Greg Smith reiterated project acceleration into Q4, with robust demand expected into 2026, but cautioned against linear extrapolation due to lumpiness and timing uncertainty. For memory, Mr. Mehta stated NAND is 'really low' and tied to mobile industry growth. Mr. Smith added that Q3 was 75% DRAM and 25% Flash, expecting a protocol shift in mobile and potential SSD demand for AI data centers to strengthen Flash in 2026. Mr. Mehta noted Flash TAM was more than double in 2020/2021 compared to now.

Shane Brett of Morgan Stanley sought to clarify the confidence level in the GPU opportunity, asking if it was a concrete win or still in discussion. He also asked about the customer breadth within the VIP compute business and visibility into further market share gains.

Answer

President & CEO Greg Smith reiterated it is not a win yet but an opportunity to compete where they have strong customer sponsorship for a dual-vendor strategy. He emphasized success depends on proving their value proposition. He described the VIP compute business as being driven by a few key customers ('less than six, more than one'), with the main prizes being CPU and AI accelerator designs.

Shane Brett asked about the catalysts needed to drive a recovery in NAND test demand and inquired about the current utilization levels of VIP testers, specifically at what point customers would need to buy new systems instead of upgrading existing ones.

Answer

CEO Greg Smith outlined that a NAND recovery would be driven by higher mobile unit volumes, increased storage in AI phones, and new interface standards. On utilization, he noted a clear upward trend, with an increase in new system orders for AI accelerators and a significant reduction in the number of idle, upgradable mobile testers compared to six months ago.

Shane Brett asked for finer details behind the revenue assumptions in the 2028 long-term model and questioned the visibility given the company's history of setting high targets.

Answer

CFO Sanjay Mehta outlined the model's CAGR assumptions of 12-17% for Test and 18-24% for Robotics, driven by AI-enabled SAM expansion in robotics and a segment-by-segment TAM analysis for test. CEO Greg Smith added that SOC growth is expected to be more linear, while memory growth will be lower due to the large 2024 increase. They also highlighted share gains and the growth of system-level test as key drivers supporting the model.

Shane Brett questioned the reduction in the full-year Gate-All-Around (GAA) revenue forecast from $5 billion to $4.5 billion, asking for characterization of Applied's market share and assurance that the reduction was not a share issue.

Answer

CEO Gary Dickerson responded with 'super high confidence' that the change is not a share issue. He reiterated that the transition to GAA and backside power increases Applied's revenue opportunity by 30% per wafer start. He emphasized that deep customer engagements and demand for integrated systems position the company to outperform and gain share as these critical AI-enabling nodes ramp.