Steven Fox

Steven Fox followed up on the Reliability segment margins, noting strong sequential incremental margins (approximately 20% on a $250 million sales increase quarter-over-quarter), and asked for more detail on the drivers. In a subsequent question, he asked Revathi Advaithi to react to a Wall Street Journal headline about 'US Manufacturing in Retreat' based on Flex's observations in the US.

Answer

Kevin Krumm (CFO, Flex) reiterated that the strong Q3 margin performance, both sequentially and year-on-year, was primarily due to continued mix impacts and growth in the power business, along with sustained margin improvement in the Core Industrial business. Revathi Advaithi (CEO, Flex) stated that Flex is not observing a retreat in US manufacturing; instead, the company is investing in its US capacity, receiving numerous inbound requests for future US projects, and making most of its investments in North America (US and Mexico).

Steven Fox highlighted Flex's strong incremental margins from Q2 to Q3 (approximately 20%) and asked for a deeper explanation of the drivers. He also sought Flex's reaction to a Wall Street Journal headline about 'U.S. Manufacturing in Retreat' and what the company is observing in the U.S.

Answer

Kevin Krumm (CFO, Flex) reiterated that the strong sequential margin performance was due to continued mix impacts and growth in the power business, along with ongoing margin improvement in the core industrial business. Revathi Advaithi (CEO, Flex) stated that Flex is not observing a retreat in U.S. manufacturing; they are investing in U.S. capacity, receiving numerous inbound requests for U.S. projects, and their largest investments are in North America (U.S. and Mexico).

Steven Fox noted the implied accelerating growth into the fourth quarter of the fiscal year and asked if this momentum is expected to continue into the next fiscal year (FY2027), and what factors, particularly AI, are driving it. He also asked about the automotive market, which was previously a strong growth area, inquiring about the path to returning to growth and requesting more color on the new compute wins mentioned.

Answer

CFO Kevin Kesse confirmed expectations for accelerating growth into Q4, driven by the underlying data center business (especially power growing above the data center average), medical device, and capital equipment. He expects this momentum to continue into the first half of FY2027. CEO Revathi Advaithi stated that Flex is being thoughtful with automotive projections, noting stabilizing trends and the benefit of being platform-agnostic (EV/ICE) due to continued investment in power electronics across all platforms. She added that compute wins occur across all platforms. Ms. Advaithi emphasized that Flex will continue to invest and grow in the automotive business if it shows the expected returns, balancing it with growth from other vectors.

Steven Fox asked if the accelerating growth implied for the fiscal fourth quarter could serve as a base for continued growth into the next fiscal year, driven by AI, and inquired about the path for the automotive segment to return to growth, including details on new compute wins.

Answer

CFO Kevin Krumm confirmed expectations for accelerating Q4 growth, driven by data center (especially power), medical devices, and capital equipment, anticipating this momentum to continue into early FY2027. CEO Revathi Advaithi discussed the automotive business stabilizing, highlighting platform-agnostic compute wins (ICE, hybrid, EV) and emphasizing that future investment and growth in automotive depend on achieving expected returns.

Steven Fox asked for an update on the capacity constraints mentioned in the prior quarter, particularly for the data center business, and when the company expects to catch up with demand. He also asked if there were any emerging 'green shoots' in non-data center markets like automotive or industrial.

Answer

CEO Revathi Advaithi framed the high demand as a 'good problem,' highlighting investments in new facilities in Dallas and Poland to manage growth. She stated the 35% data center growth demonstrates their ability to add capacity effectively. For other markets, she noted automotive and industrial are performing in line with their conservative expectations, and pointed to specific strength from share gains in networking and robust demand for medical devices.

Steven Fox inquired about how Flex's scale advantages in the data center market are expected to manifest in fiscal 2026 and asked for the outlook on inventory and working capital's impact on cash flow.

Answer

CEO Revathi Advaithi explained that Flex's scale advantage stems from its unique ability to combine compute and power solutions, offering vertically integrated IT rack integration and deep engineering design for power systems. CFO Kevin Krumm stated that inventory levels have normalized and, while some improvement is expected, the significant cash generation from inventory reduction seen in prior years will lessen. He noted this informs the 80%+ free cash flow conversion target for fiscal 2026.

Steven Fox asked for more color on the "tailored solutions" Flex provides to hyperscalers, inquiring how this customization is contributing to growth and margins. He also asked about the medical business, seeking to understand the relative strength of medical devices and when the medical equipment part of the business might see a recovery.

Answer

CEO Revathi Advaithi explained that each hyperscaler has unique configurations for their racks and power applications, and Flex's ability to engineer and customize these complex products is a key differentiator. She noted that recent acquisitions like JetCool enhance this capability. Regarding the medical business, Advaithi stated that medical device growth is strong, driven by smaller form factors and chronic disease management, and she expects this to continue. She mentioned that the medical equipment market has begun to stabilize after post-COVID inventory digestion and should continue to do so through calendar '25.

Steven Fox inquired about the potential upside in the total addressable market (TAM) for the industrial business and the impact of new bookings in space applications on future growth. He also sought clarification on the drivers behind the Q4 gross margin expansion and the expected slope of the Semi-Cap recovery.

Answer

David Moezidis, President, explained that the industrial TAM is broad, encompassing subsectors like HVAC, transportation, agriculture, construction, and building management, with opportunities across various company sizes. He noted that space bookings would contribute to the A&D sector, with significant impact expected in 2027 after moderating in 2026. Bryan Schumaker, CFO, and Jeff Benck, CEO, attributed Q4 gross margin expansion to plant leverage and overall mix rather than a specific mix factor, acknowledging Q1 seasonality. David Moezidis, President, and Jeff Benck, CEO, stated they are still assessing the exact slope of the Semi-Cap recovery, noting that orders can be accelerated within 1-3 months.

Steven Fox inquired about the expansion of the Total Addressable Market (TAM) in the industrial business and the impact of new space bookings on future growth. He also sought clarification on the factors contributing to the Q4 gross margin expansion, particularly the role of mix versus volume leverage, given Semi-Cap's sales decline. Finally, he asked for insights into the expected slope and timeline for the Semi-Cap recovery based on customer feedback.

Answer

President David Moezidis explained that the industrial segment's broad nature allows participation in diverse subsectors like HVAC, transportation, and agriculture. For space applications, he noted strong bookings momentum contributing to the A&D sector, with ramps expected to show in 2027. CFO Bryan Schumaker stated that Q4 gross margin expansion was due to plant leverage and overall mix, not specific mix factors. CEO Jeff Benck added that Q1 seasonality and lower-margin sectors can influence margins. David Moezidis mentioned they are still working through Semi-Cap recovery details, seeing forecast adjustments for an earlier pickup, with more clarity expected soon. Jeff Benck noted Q4 softness was expected, and while the snap-back is positive, they are cautious about how the year will fill in.

Steven Fox from Fox Advisors, LLC inquired about the recovery in the Advanced Computing & Communications (ACNC) sector, focusing on Benchmark's competitive advantages in liquid cooling and the potential scale of the rebound. He also asked about the Semi-Cap market, seeking to distinguish between the impacts of China restrictions versus other end-market factors.

Answer

CEO Jeff Benck explained that Benchmark's expertise in water cooling for High-Performance Computing (HPC) is now securing wins in AI data center builds, with ramps expected in Q4 2025 and growth continuing into 2026. Regarding the Semi-Cap sector, Benck stated that a combination of delayed fab build-outs and government restrictions on sales to China are pressuring the recovery. He affirmed that Benchmark is outperforming the market and using this period to increase its vertical integration capabilities.

Steven Fox of Fox Advisors sought confirmation on the full-year revenue outlook, which projects a mid-single-digit decline in H1 followed by a mid-single-digit increase in H2. He also asked which sectors would drive the second-half recovery, for an update on high-performance computing (HPC) program ramps, and for clarity on the strong Semi-Cap growth despite market headwinds.

Answer

CFO Bryan Schumaker confirmed the H1/H2 revenue trajectory, highlighting an expected recovery in Medical and late-year growth in AC&C as key drivers for the second half, along with continued strength in A&D and Semi-Cap. CEO Jeff Benck added that the next-generation HPC platform ramp has been delayed into next year, though smaller systems may provide some fill-in work. He attributed the robust Semi-Cap growth to market share gains, which are currently balancing headwinds from China sales restrictions.

Steven Fox noted management's positive tone and asked about the potential for operating leverage from existing capacity as markets recover. He also questioned if the new Penang building investment would create a drag on margins and sought more details on the recent wins in precision machining and engineering.

Answer

CEO Jeff Benck acknowledged that Benchmark has available capacity from recent expansions in Mexico, Romania, and Penang, which presents an opportunity for more leverage as utilization increases. He stated that the impact from the new Penang facility investment is not expected to be a significant drag on results. Benck also highlighted that the company's investment in vertical integration, such as building large frames and complex subassemblies in its Penang facility, is a key differentiator that is attracting OEM customers.

Steven Fox of Fox Advisors inquired about any signs of recovery in underperforming markets like Industrial and Medical, and asked for more color on the engineering services business, questioning if its increased mention signaled a strategic shift.

Answer

CEO Jeff Benck identified 'green shoots' in the Industrial sector, expecting a return to year-over-year growth in Q4, but noted the Medical downturn seems more prolonged. Regarding engineering, Benck clarified that while there was a high number of wins in the quarter, the focus is not new. He emphasized that product development engineering is a core, high-value differentiator that leads to subsequent manufacturing contracts and is a key area of internal focus.

Steven Fox asked about Fabrinet's chances of improving its position from a second source to a larger share in the hyperscale business, given the substantial ramp, and if there was a second program with that customer expected to ramp. He also inquired about the dollar/baht currency issue, specifically the expected EPS drag for the current quarter compared to the $0.09 drag reported in the previous quarter.

Answer

Seamus Grady, Chairman and CEO, confirmed that Fabrinet is ramping multiple products for the hyperscale customer and is reasonably confident in growing the business further by executing well and earning a larger share. Csaba Sverha, Chief Financial Officer, stated that the exchange rate environment remains unfavorable, with an anticipated $3 million drag (or $0.09 per share) in the prior quarter and similar headwinds expected in the current quarter's gross margin (20-30 basis points). He expressed hope to offset this through continued operating leverage.

Steven Fox asked for more color on Fabrinet's chances of improving its second-source position with the hyperscale HPC customer, given the substantial ramp, and if there was a potential second program with that customer. He also inquired about the dollar/Baht currency issue, specifically how the EPS drag for the current quarter compares to the $0.09 drag reported in the previous quarter.

Answer

Seamus Grady, Chairman and CEO, confirmed Fabrinet is ramping multiple products for the hyperscale customer and is reasonably confident in growing the business further by executing well and earning more share. Csaba Sverha, CFO, stated that the exchange rate environment remains unfavorable, with a similar impact expected in Q3 as the $3 million drag in Q2 (or $0.09 per share), and an anticipated 20-30 basis point headwind on gross margin, which Fabrinet aims to offset through operating leverage.

Steven Fox requested an explanation for the better-than-expected Q4 gross margins and asked for an update on the momentum in the Data Center Interconnect (DCI) business, including any new customer contributions.

Answer

CFO Csaba Sverha attributed the Q4 margin beat to strong operational execution on existing business, which offset some costs from new program ramps. CEO Seamus Grady added that DCI demand remains robust and durable. Sverha clarified that DCI growth is primarily from existing customers and 400ZR products, and that the major new program wins are in the broader telecom and new HPC categories.

An analyst, identified as Steven Fox, asked for more color on the margin headwinds from ramping multiple large programs like 1.6T, Amazon, and ZR, and when these might become tailwinds. He also questioned whether the Amazon agreement would preclude or potentially help Fabrinet in pursuing other cloud customers.

Answer

CEO Seamus Grady characterized the margin headwinds from start-up costs as very temporary, typically lasting only for the initial ramp quarter. He emphasized that the long-term growth drivers remain intact, with major ramps for 1.6T, Ciena, and Amazon all expected in fiscal 2026. He also stated that the Amazon relationship is not exclusive and should help Fabrinet pursue other cloud providers, serving as a proof point of their capabilities.

Steven Fox asked about the revenue per exabyte in the quarter compared to previous periods, specifically how much of the change is attributable to product mix. He also inquired about the company's success in exceeding planned exabyte deliveries through quicker customer qualifications or internal efficiencies.

Answer

Kris Sennesael, CFO, and Irving Tan, CEO, attributed the revenue per exabyte trend primarily to strong demand from the cloud segment and hyperscale customers, noting stable pricing that was up single-digit last quarter and year-over-year. Kris Sennesael, CFO, reported 215 exabytes delivered, a 22% year-over-year increase, largely driven by the cloud portfolio and the shipment of over 3.5 million units of current ePMR products, reflecting their stability, quality, and scalability.

Steven Fox requested commentary on Western Digital's revenue per exabyte in the current quarter compared to the previous quarter and a year ago, specifically asking how much of the change is attributable to product mix. He also inquired about the company's success in delivering more exabytes than initially planned, whether through quicker customer qualifications or internal efficiencies.

Answer

CFO Kris Sennesael explained that the cloud segment, driven by strong hyperscale customer demand, is the primary factor influencing revenue per exabyte, noting stable pricing (up single-digit last quarter and year-over-year). He reported that Western Digital delivered 215 exabytes, a 22% year-over-year increase, largely driven by the cloud portfolio. He highlighted the shipment of over 3.5 million units of current ePMR products (up to 32TB) as a testament to their stability, quality, and scalability, with plans to ramp next-generation ePMR and HAMR to meet demand.

Steven Fox from Fox Advisors asked for an assessment of the quarter's strong free cash flow performance and future metrics. He also inquired about how the company is managing its non-cloud and non-enterprise businesses amid strong data center demand.

Answer

Interim CFO Don Bennett highlighted that strong free cash flow is key to executing on capital allocation priorities, including deleveraging and shareholder returns. CEO Irving Tan assured that non-cloud markets are not being deemphasized, noting their supply chains are managed separately and that the company continues to seek growth opportunities in those areas.

Steven Fox asked for more detail on the manufacturing efficiencies being achieved in the HDD business, such as from debottlenecking and product mix changes.

Answer

CFO Wissam Jabre explained that the company has numerous ongoing cost reduction programs, including yield improvements throughout the manufacturing process. He stated that a fair assumption for annual cost improvements would be in the mid-to-high single-digit percentage range, though this can vary with capacity point changes.

Steven Fox asked for clarification on Celestica's position and competition within the supply chain for AI/ML compute programs with its largest customer (Google/TPUs), and how the company is expanding to support more programs in this area.

Answer

CEO Rob Mionis emphatically stated that the partnership with Google has never been stronger or more integrated, with no indication of new market entrants. He clarified that Celestica is not sole-sourced but is a primary source for TPU programs, with share awarded based on strong performance. He added that capacity expansion supports Google's current and future TPU generations, as well as growth from other hyperscalers and digital natives.

Steven Fox asked for clarification on Celestica's position in the supply chain for AI/ML compute programs with its largest customer (Google), specifically regarding competition and whether the company is expanding directly to support more programs.

Answer

Rob Mionis (President and CEO) emphatically stated that the partnership with Google has never been stronger or more integrated, with no indication of new entrants. He clarified that Celestica is not sole-sourced but a primary source for TPU programs, with share awarded based on strong performance. He added that capacity expansion supports Google and growth from other hyperscalers and digital natives. Mandeep Chawla (CFO) added that if Google's TPU product is adopted beyond Google itself, Celestica, as their preferred manufacturing partner, expects to support that increased demand through Google's supply chain.

Steven Fox asked about the future direction of the HPS business margins, considering future programs, vertical integration, and excluding consignment changes, and the reasons behind this direction.

Answer

Mandeep Chawla (CFO) stated that HPS R&D spend is increasing significantly, reflecting engagement. He noted that HPS, primarily switching, is a $5 billion portfolio where Celestica makes very good margins, accretive to CCS (8.3%), even with silicon included. He added that compute programs are currently consigned, but Celestica is paid for engineering value.

Steven Fox asked about the direction of the HPS business margins, excluding consignment activities, given future programs and potential vertical integration, and why.

Answer

Mandeep Chawla (CFO) highlighted significant R&D investments in HPS, with the portfolio expected to be about $5 billion in 2025, mostly switching (turnkey including silicon), yielding margins accretive to CCS (8.3%). He noted strong growth in networking and emerging compute, with compute programs currently consigned, but Celestica is paid for engineering value.

Steven Fox followed up on production capacity in Richardson and Monterrey, asking for clarification on revenue figures and the specific 'capabilities' outside North America that are hard to replicate. He also asked for more color on the semi-cap market outlook.

Answer

President and CEO Rob Mionis confirmed the revenue figures: Monterrey is at an $800 million run rate, and Richardson will have a year-end exit rate of about $800 million. Both he and CFO Mandeep Chawla clarified that 'capabilities' refer to specialized engineering talent and complex processes like liquid cooling automation developed over many years in facilities like Thailand. On the semi-cap market, Rob Mionis noted it will have a very good year, but growth is first-half loaded.

Steven Fox asked for a high-level view on how recent landmark wins, characterized by greater customer diversity and RAC complexity, are transforming the business model from EMS towards ODM/OEM. He also requested specifics on the liquid cooling technology being deployed.

Answer

President and CEO Rob Mionis described the company's evolution as moving beyond ODM and being 'well on our way to be a product company in the OEM section.' He and CFO Mandeep Chawla explained that the liquid cooling solutions leverage Celestica's IP at both the chip and RAC levels, with a key differentiator being the proven ability to produce these complex systems at scale.

Steven Fox from Fox Advisors, LLC asked about the risks and opportunities for the ATS segment to return to its 10% revenue growth target. He also requested a big-picture perspective on the strategy to increase wallet share within the CCS business, particularly by providing more complete rack-level solutions and services.

Answer

Todd Cooper, President of ATS, explained that the Industrial segment's recovery from customer inventory burn-down is key to returning to 10% growth, with stabilization underway. He also noted strong prospects in Capital Equipment and a doubling of the HealthTech business expected over 3-4 years based on new program ramps. Jason Phillips, President of CCS, detailed the strategy for rack-level solutions, emphasizing Celestica's progression from storage to a leading position in high-end networking and now AI/ML compute, with a focus on system-level innovation and rack-level orchestration to enable customers.

Steven Fox asked about the big-picture management challenges Amphenol faces after a period of strong growth, specifically mentioning automation, higher metals prices, and supply chain constraints, and how the company addresses these as demand broadens.

Answer

CEO Adam Norwitt attributed Amphenol's success to its entrepreneurial culture and 100 operating groups, which empower general managers to address challenges like supply chain issues, metals costs, and geopolitics. He emphasized that this decentralized approach, supported by collaboration, enables teams to 'make it happen,' even when doubling business size or setting up new factories and automation, highlighting the strategic expansion of operating groups four years prior.

Steven Fox asked about the management challenges associated with rapid growth (38% organically), including adding automation, higher metals prices, and supply chain constraints, and how Amphenol addresses these.

Answer

Adam Norwitt (CEO) attributed Amphenol's ability to manage rapid growth to its decentralized structure of 100 operating groups, each empowered to deal with challenges like supply chain, metal costs, and geopolitics. He emphasized the entrepreneurial culture, internal automation capabilities, and the recent expansion of operating groups to strengthen this model.

Steven Fox from Fox Advisors, LLC followed up on the margin discussion, asking for details on how the sales mix is becoming richer and what specific changes in the technology roadmap are driving higher profitability.

Answer

President & CEO R. Adam Norwitt explained that while high growth in IT Datacom is a factor, the shift to higher-value technology is occurring across the entire company, including in the defense, industrial, and automotive markets. He emphasized that this broad-based value creation, combined with a disciplined cost culture, underpins the company's confidence in achieving higher margins.

Steven Fox of Fox Advisors LLC asked for details on Amphenol's transceiver portfolio, inquiring about its contribution to the IT Datacom business and the company's underlying strategy.

Answer

CEO Adam Norwitt declined to discuss a specific product line in detail but confirmed that active and passive optics are a key part of the broad IT Datacom portfolio, alongside high-speed copper and power products. He noted the company has been building its active optics capabilities for 5-6 years through acquisitions and internal initiatives and is "very happy" with its progress and participation in this complex, high-engineering space.

Steven Fox asked for a 'report card' on Amphenol's outperformance in the automotive and mobile devices markets during 2024, and whether this level of outperformance is now the norm.

Answer

CEO R. Norwitt confirmed that outperforming these markets has been a consistent trend for years. In automotive, growth is driven by the secular expansion of electronics content and Amphenol's ability to win a large share. In mobile devices, success comes from a broad product portfolio and superior execution agility. He views 2024 as a continuation of these long-standing company strengths, not an anomaly.

Steven Fox requested a breakdown of the drivers for the full-year high single-digit growth forecast in the mobile devices market, asking about the split between content gains and market growth.

Answer

CEO R. Norwitt attributed the strong performance to the team's ability to expand content in next-generation devices, including connectors, antennas, and mechanisms. He emphasized that as hardware innovation adds value, Amphenol's opportunity grows. He noted the market's volatility and the expansion from phones to a broader ecosystem of wearables and hearables.

Steven Fox asked about Corning's strategy regarding increasing U.S./North America production for optical assets and its implications for international markets, and how positive optical operating margin developments might influence the overall corporate average.

Answer

Chairman and CEO Wendell Weeks stated that Corning's global sales mix (60% international, 40% U.S.) is expected to continue, with factory locations driven by customer proximity. EVP and CFO Ed Schlesinger explained that improving operating margin was a primary Springboard goal, with optical significantly contributing (18% net income margin). He indicated that while the corporate operating margin is likely to exceed 20% at times, the focus is now on improving ROIC and capturing growth, rather than setting a new margin target.

Steven Fox asked about Corning's increasing focus on U.S./North America production and its implications for international markets. He also asked for clues on how the positive outlook for optical's operating margin might influence the overall corporate average.

Answer

Chairman and CEO Wendell Weeks stated that Corning's sales are about 60% outside the U.S. and 40% in, a mix expected to continue, with factory locations driven by customer proximity. EVP and CFO Ed Schlesinger noted that improving operating margin and cash generation was a huge component of Springboard, with optical's net income margin now at 18%. He indicated that while a new target isn't being set, it's highly likely the operating margin will go above 20%, focusing on ROIC and cash generation.

Steven Fox asked about the key internal and external inflection points investors should watch for that would signal the next wave of demand for Corning's longer-term fiber opportunities, such as data center scale-up and DCI (Data Center Interconnect).

Answer

Chairman & CEO Wendell Weeks identified key inflection points as public announcements from partners like Nvidia and Broadcom naming Corning in their CPO platforms. For DCI, he advised watching for more customers announcing their adoption of Corning's advanced optical technology to showcase their network advantages.

Steven Fox asked about the key internal and external inflection points that investors should watch for to signal the next wave of demand in fiber, particularly for scale-up and Data Center Interconnect (DCI) opportunities.

Answer

CEO Wendell Weeks advised watching for announcements from key partners like Broadcom and Nvidia naming Corning in their co-packaged optics (CPO) platforms. For DCI, he indicated that investors should look for additional customer announcements, as they will want to publicly highlight their use of Corning's latest optical technology to show a competitive advantage.

Steven Fox from Fox Advisors LLC inquired about Corning's pricing power in uncertain markets, particularly concerning the impact of tariffs on key segments like solar, automotive, and optical communications.

Answer

Chairman and CEO Wendell Weeks explained that Corning has a successful track record of passing on costs, as seen during post-pandemic inflation. He noted that for solar, strong demand for U.S.-sourced products is improving potential pricing. For optical, unique new products are the primary growth drivers and have not yet faced significant tariff friction. He concluded that the company's global manufacturing footprint and strong customer relationships provide confidence in their ability to mitigate future tariff impacts.

Steven Fox asked for context on the strong Q3 free cash flow and its future sustainability, as well as for perspective on momentum in the cloud side of the optical business.

Answer

CFO Ed Schlesinger attributed the strong free cash flow to converting growing income to cash without significant new capital spending, a trend he expects to continue. CEO Wendell Weeks noted that while the Enterprise optical business is growing much faster than its 25% CAGR target through 2027, they will provide an updated long-term outlook at their Q1 investor event.

Steven Fox inquired about the 22% year-over-year increase in average capacity per drive and whether Seagate is actively accelerating this mix-up in response to tighter supply to better serve customers' petabyte needs. He also asked for a report card on the HAMR transition timelines outlined at the previous Analyst Day.

Answer

CEO Dave Mosley confirmed that Seagate's goal is to mix up, driven by long wafer fab lead times requiring predictable planning with customers through LTAs. He stated that the company is on or slightly ahead of its HAMR transition plan, with customer behavioral changes (pulling hard for more exabytes) helping to accelerate qualifications and roadmap alignment.

Steven Fox inquired about the 22% year-over-year increase in average capacity per drive, asking if Seagate is actively accelerating this mix shift due to tighter supply, and requested a report card on the HAMR transition timelines outlined at the previous Analyst Day.

Answer

CEO Dave Mosley confirmed that Seagate's goal is to increase mix, noting that long lead times necessitate predictable delivery for customers through LTAs. He stated that engineering resources are focused on product transitions to maximize exabytes. Regarding HAMR timelines, he reported being on plan or slightly ahead, with strong customer pull aiding quick qualifications and roadmap alignment.

Steven Fox asked if hard disk drives are becoming a bottleneck for cloud expansion plans, the legitimacy of this concern, and what strategies cloud providers might employ to leverage existing capacity and keep Seagate on track.

Answer

Dave Mosley, Chair and CEO, stated that he doesn't view it as an immediate problem but rather a driver for customers to engage in predictable long-term planning. He emphasized that Seagate's focus is on bringing more exabyte capacity through product transitions, and there's no evidence of architectural changes by cloud providers.

Steven Fox asked about the legitimacy of hard disk drives becoming a bottleneck for cloud expansion next year, and what cloud providers could do to leverage existing capacity to manage through that period.

Answer

Seagate's Chair and CEO, Dave Mosley, stated that the industry cannot quickly bring on more supply, and customers are focusing on predictable long-term plans. He noted no evidence of architecture changes, emphasizing that the issue is a temporal problem that will be addressed as more exabyte capacity comes online through transitions.

Steven Fox of Fox Advisors, LLC asked about any potential seasonality to consider for the upcoming fiscal year and requested an explanation for the increase in accounts receivable during the quarter.

Answer

CEO Dave Mosley noted that seasonality in the business is diminishing. CFO Gianluca Romano added that while March is typically the lowest quarter, the effect is lessening. He explained that receivables were up simply because the company did not engage in any factoring this quarter due to already strong free cash flow.

Steven Fox of Fox Advisors inquired about the evolution of the HAMR technology ramp, asking how the customer mix and ramp speed might change as Seagate progresses to higher capacities like 36 terabytes.

Answer

CEO Dave Mosley indicated that learnings from the initial, challenging ramp should shorten future productization cycles. He noted that the company is already shipping 36TB samples and is aggressively driving technology transitions, as aerial density leadership is what provides value to customers and the company.

Steven Fox of Fox Advisors LLC followed up on the capacity topic, asking how Seagate could manage a potential upside demand cycle in enterprise and VIA markets over the next year, given that production is already near full capacity.

Answer

CEO Dave Mosley explained that any significant increase in drive unit demand would require adding supply, which has a very long lead time, and the company remains cautious. He noted that CapEx at 4% of revenue primarily funds technology transitions, which provide small, slow capacity additions. The primary path to satisfying more exabytes is through technology transitions to higher capacity drives, not by adding significant new unit capacity.

Steven Fox inquired about the operating margin performance, specifically how Sanmina managed to maintain a 6% operating margin and the factors contributing to this, including the definition of 'mix.' He also asked for more details on ZT Systems' recent wins for later in the year, their nature (accelerated compute vs. legacy), and the reasons behind Sanmina's confidence in achieving significant revenue growth.

Answer

Jon Faust (EVP and CFO) attributed the strong operating margin to favorable mix (components, products, services), operational efficiencies, SG&A management, and growth in accretive businesses, noting that the core strategy remains unchanged. Jure Sola (Chairman and CEO) emphasized execution, strong customer relationships, and positioning for future technology as key drivers for ZT Systems' wins, highlighting significant investments in capacity for 2027 and 2028.

Steven Fox inquired about the drivers behind Sanmina's operating margin performance, noting it was better in the quarter and potentially flattish next quarter, and how the company plans to maintain the 6% handle. He also asked for clarification on whether 'mix' refers to components/products/services or across certain markets, and sought more details on ZT Systems' wins for later in the year, specifically if they are all accelerated compute-related and the basis for confidence in reaching $14 billion on a path to $16 billion in revenue.

Answer

Jon Faust, EVP and CFO, attributed the operating margin to favorable mix, operational efficiencies in both IMS and CPS, and disciplined SG&A cost management, noting that margin-accretive investments in CPS are coming online. He clarified that 'mix' primarily refers to components, products, and services. Jure Sola, Chairman and CEO, emphasized that investments are targeting higher-margin, sustainable businesses. For ZT Systems, Jure Sola highlighted execution, strong customer relationships, and positioning for complex systems as key to winning, while Jon Faust added that accelerated compute offers the most growth potential, but all aspects of the business are being invested in. Jure Sola also mentioned significant capital expenditures for future growth in 2027-2028.

Steven Fox of Fox Advisors, LLC inquired about the inventory risk associated with the ZT Systems acquisition, specifically concerning the potential for inheriting lagging generation GPU inventory and whether there is a final valuation before closing. He also asked for more detail on the record CPS margin and how that segment is contributing to growth across served markets.

Answer

EVP & CFO Jon Faust addressed the inventory risk, stating there is a ~$2 billion working capital target, primarily inventory, which has been thoroughly evaluated with AMD and ZT to ensure it's supported by customer demand. Chairman & CEO Jure Sola elaborated on the CPS segment's performance, noting their target is now above 15% margin, driven by strength in defense-related advanced PCBs, data center mechanicals like liquid cooling racks, and investments in optical modules and custom memory.

Steven Fox inquired about the specific nature of the planned second-half investments in capacity and technology in India, the U.S., and Mexico. He also asked for an update on Sanmina's progress in rack integration and its strategy for penetrating the competitive cloud provider market.

Answer

Chairman and CEO Jure Sola detailed the expansion plans, highlighting significant growth opportunities in India for both domestic and export markets, particularly for data centers, with a new facility expected by October/November. He also mentioned capacity additions for high-tech printed circuit boards and mechanical systems in North America. On rack integration, Sola noted the company is building on its existing ODM server/storage and mechanical systems capabilities to expand organically into full system integration and testing for data center computing. EVP and CFO Jon Faust added that the investments cover both capacity and capabilities for more complex programs, clarifying the CapEx guidance to be around 2% of revenue for the full year.

Steven Fox requested more specific details on the positive and negative mix drivers that influenced gross margins during the quarter. He also asked for further insight into Sanmina's role and strategy regarding the future of cloud computing architectures.

Answer

CFO Jonathan Faust explained that IMS segment margins benefited from a favorable mix of high-end programs and operational efficiencies. The CPS segment margin was slightly down year-over-year due to a couple of lower-margin programs but remains strong. Jure Sola (executive) added that for cloud, Sanmina is expanding its role from components to providing fully integrated, high-value racks with liquid cooling, which is a key growth opportunity.

Steven Fox followed up on supply chain questions, asking for clarification on the timeline for passing through higher metal costs and TE Connectivity's confidence in maintaining capacity to keep up with broadening demand and rapid AI growth through this fiscal year and into the next.

Answer

CFO Heath Mitts stated that TE Connectivity has improved its agility in passing on inflationary pricing more quickly, with direct OEM discussions and channel sales allowing for timely adjustments. CEO Terrence Curtin added that AI ramps are program-specific, and capacity elsewhere is in a good spot, with ongoing additions in recovering areas like ACL and ICT, and growth areas like Energy and Aerospace, ensuring support for increasing demand.

Steven Fox followed up on supply chain questions, asking for clarification on the timeline for passing through higher metal costs and the company's overall capacity to keep up with broadening demand, including fast-growing AI.

Answer

CFO Heath Mitts stated that the company has improved its agility in passing on pricing for inflationary measures more quickly, with certain channels being easier and OEM discussions being reopened. CEO Terrence Curtin added that capacity is in a good spot, with AI ramps being program-specific. He noted that areas like ACL and ICT have recovering capacity, while investments are being made to expand capacity in energy and aerospace to support strong demand and increased airframer builds.

Steven Fox of Fox Advisors asked about the 80% growth in AI, questioning how successful TE has been in keeping up with demand and what future investments in capacity or product expansion are planned.

Answer

CEO Terrence Curtin stated that the company has been investing ahead of demand, with CapEx up almost 30% this year, the vast majority of which is for AI. He emphasized that scaling from $300 million to $800 million with new, cutting-edge products is a testament to the team's execution. He confirmed TE is continuously looking to expand flex capacity to support future growth.

Steven Fox asked about TE Connectivity's pricing power going forward, considering potential demand weakness at large OEMs and the competitive landscape.

Answer

CEO Terrence Curtin explained that TE's pricing was neutral overall before recent tariffs, with positive pricing in Industrial offset by slightly negative pricing in Transportation. He expects future pricing to be dictated by input costs and tariff recovery. He also highlighted that TE's ability to offer value through mitigation actions, such as localization and tool moves, is a key part of their customer conversations beyond just price.

Steven Fox sought more color on the traditional industrial markets, asking if the noted 'sideways stabilization' in automation and controls represented a change from the prior quarter and where regional improvements might occur.

Answer

CEO Terrence Curtin confirmed that the stabilization is more tangible now than 90 days prior, with channel inventory issues largely resolved. He pointed to upward order momentum in Japan and China, a sideways trend in the U.S., and continued weakness in Europe. He characterized the overall stability as a positive first step toward potential future growth.

Steven Fox of Fox Advisors asked for clarification on the new two-segment reporting structure, seeking insights into expected growth and margin expansion for the new Transportation and Industrial segments.

Answer

CEO Terrence Curtin stated that detailed recast financials will be provided via an 8-K later in the quarter. CFO Heath Mitts added that the Transportation segment's profile remains largely unchanged, targeting 20% or better margins. The new, larger Industrial segment, which combines the old Industrial and Communications segments, finished FY24 in the high-teens and represents the biggest opportunity for margin improvement in FY25, with a mid-term goal of reaching 20%.

Steven Fox asked for a breakdown of Micron's CapEx spending between facilities, equipment, and construction, and how this mix might change between 2026 and 2027.

Answer

Mark Murphy (CFO) stated that while specific breakdowns for 2027 were not provided, total CapEx for 2027 would be up versus 2026. He indicated that construction CapEx is planned to roughly double from fiscal 2025 to 2026, driven by projects in Idaho, Japan, and Singapore. He also noted CapEx as a percentage of sales was below 35% in Q1 and guided to mid-20s for Q2, with strengthening free cash flow. Manish Bhatia (EVP of Global Operations) added that investments include equipping the India assembly site, which is ramping to production in early calendar 2026.

Steven Fox inquired about the breakdown of Micron's CapEx spending, specifically the mix between facilities, equipment, and construction, and how this mix is projected to evolve between fiscal 2026 and 2027.

Answer

Mark Murphy (CFO) indicated that total CapEx for 2027 would increase compared to 2026, with construction CapEx planned to roughly double from fiscal 2025 to 2026, driven by projects in Idaho, Japan, Singapore, and India. He also noted CapEx as a percentage of sales was below 35% in Q1 and in the mid-20s for Q2, alongside strong free cash flow generation. Manish Bhatia (EVP of Global Operations) added details on equipping the India assembly site transitioning to production in early calendar 2026.

Steven Fox asked about the prospects for Jabil to invest more aggressively to accelerate growth in the steady and high-margin healthcare business, especially given the strong growth in Cloud. He also inquired about Jabil's capacity planning beyond the current fiscal year for the Cloud business, considering previous warnings about bottlenecks and the current ahead-of-schedule retrofitting and larger pipeline.

Answer

CEO Mike Dastoor confirmed that Jabil is constantly evaluating M&A and B2B activities in the healthcare space, viewing it as a 'steady business with higher margins, long product life cycles, and steady cash flows' that offers great diversification and is an exciting area for deals. Regarding Cloud capacity, Dastoor explained that the retrofitting for liquid cooling on the East Coast factory is ahead of schedule, with upside coming from surplus capacity in Mexico and a combination of existing and new capacity in India. He also mentioned the North Carolina facility coming online soon, pre-fitted for liquid cooling, and potential expansion in Memphis, all while maintaining the CapEx outlook of 1.5% to 2% of revenue for FY26.

Steven Fox from Fox Advisors asked about Jabil's healthcare business, noting its steady performance and good margins, and inquired about the prospects for more aggressive investment or M&A to accelerate its growth. He also questioned how Jabil plans to meet the growing demand and growth expectations in the cloud business, particularly regarding capacity planning beyond the current fiscal year, given previous warnings about bottlenecks and the current ahead-of-schedule retrofitting efforts.

Answer

CEO Mike Dastoor stated that Jabil is constantly evaluating M&A activity and B2B discussions in the healthcare space, viewing it as a steady business with higher margins, long product life cycles, and stable cash flows, making it an exciting area for deals focused on adding capabilities. For the cloud business, Mike Dastoor clarified that the retrofitting on the East Coast hyperscaler factory is ahead of schedule, with upside coming from existing capacity in Mexico and India, and new capacity in North Carolina. He also mentioned potential expansions in Memphis and confirmed that the CapEx outlook remains consistent at 1.5%-2% of revenue for FY26.

Steven Fox from Fox Advisors asked Jabil to elaborate on the operating margin guidance for the new fiscal year, specifically how a $1.5 billion sales increase translates to only a 20 basis point margin expansion, and the various factors influencing this guidance. He also sought further color on the impact of product pruning and AI investments on Jabil's margins, and inquired about Jabil's positioning in chillers and power management products compared to OEM competitors.

Answer

Greg Hebard, CFO, attributed the 20 basis point margin pickup to an improving business mix, while acknowledging a 20-25 basis point headwind from unutilized capacity outside the U.S. Andy Priestley, EVP of Connected Living and Digital Commerce, explained that the deliberate shift from lower-margin, commoditized products to engineering-led, margin-accretive ones positively impacts overall margins. Mike Dastoor, CEO, reiterated that mix, efficiency (including AI/automation), and capacity utilization are driving towards the 6%+ target. Matt Crowley, EVP of Intelligent Infrastructure, stated that Jabil focuses on building capabilities to configure and support global scale, which customers prefer over an OEM approach, highlighting triple-digit growth in this business.

Steven Fox asked for a detailed breakdown of Jabil's operating margin guidance for the new fiscal year, noting sales growth of $1.5 billion and a 20 basis point margin expansion, and inquired about the material impact of product pruning and AI investments on the 5.6% margin target. He also questioned how Jabil's data center capabilities (chillers, power management) compare to OEM competitors, particularly regarding margins.

Answer

Greg Hebard, CFO, Jabil, attributed the 20 basis point margin pickup to improved business mix, while acknowledging 20-25 basis points of headwinds from unutilized capacity outside the U.S. He noted a more balanced first half/second half margin shape, with margins increasing through the year. Andy Priestley, EVP of Connected Living and Digital Commerce, Jabil, explained that product pruning in CLDC, shifting to higher-margin, engineering-led products, positively impacts margins despite revenue decline. Mike Dastoor, CEO, Jabil Inc., reiterated the company's march towards a 6%+ target, driven by better mix, efficiency (expecting 10 bps annually from automation/AI), and improved capacity utilization. Matt Crowley, EVP of Intelligent Infrastructure, Jabil, stated Jabil's focus on configuring and supporting global scale for data center customers, which he believes differentiates them from OEM approaches, and highlighted triple-digit growth in this business.

Steven Fox asked for an explanation of why Intelligent Infrastructure margins were flat quarter-over-quarter despite significant revenue growth, and how the company is managing its rapid expansion in AI-related capacity.

Answer

CFO Greg Hebard explained that margins were impacted by incremental investments needed to support the rapid growth. CEO Mike Dastoor added that a mix shift, including the dilutive impact of the 5G business, also played a role. Regarding expansion, Dastoor emphasized that the team is in constant dialogue with a growing customer base and that the new site is critical for showcasing Jabil's full end-to-end capabilities to win new business.

Steven Fox of Fox Advisors LLC asked for an expansion on the accelerating deployment of GPU racks and liquid cooling, and how Jabil's ability to deliver higher yields at launch provides a competitive advantage. He also inquired about the outlook for the Auto and Transport segment, questioning the confidence in the EV forecast and potential offsets.

Answer

Chief Executive Officer Mike Dastoor explained that higher yields are driven by Jabil's deep design, architecture, and engineering collaboration with hyperscalers. He noted the recent liquid cooling acquisition is opening many doors for customized solutions, though its potential is not yet in the forecast. Regarding automotive, Dastoor stated they are being prudent with the EV outlook but characterized it as having puts and takes, with offsets from Chinese OEMs and power components, rather than being a 'melting ice cube'.

Steven Fox requested more color on the acceleration of GPU racks and liquid cooling, particularly how Jabil achieves higher yields at launch. He also asked about the company's confidence in its outlook for the automotive and EV market.

Answer

CEO Mike Dastoor explained that higher yields are a result of Jabil's deep engagement in design, architecture, and engineering with its hyperscaler customers. He added that a recent liquid cooling acquisition is creating significant new opportunities. Regarding the automotive segment, Dastoor stated that while they are being prudent on the EV outlook, weakness is being offset by strength with Chinese OEMs and in power-related products, characterizing the situation as balanced rather than a 'melting ice cube.'

Asked about the company's U.S. manufacturing footprint, its capacity to handle production shifts, and the business implications of its largest cloud customer adopting new custom silicon.

Answer

Jabil has ramped battery management and cloud infrastructure in the U.S., where it has 30 sites and is well-positioned to manage further production shifts, though significant moves would require some capacity expansion. The move to custom silicon by a major cloud customer is seen as a future growth driver, particularly for FY26 and beyond.

Steven Fox inquired about Jabil's U.S. manufacturing footprint, asking for color on recent program moves and the company's capacity to handle urgent production shifts. He also asked about the implications for Jabil as its largest cloud customer transitions to new custom silicon.

Answer

CEO Mike Dastoor noted that recent U.S. ramps were primarily in battery management and data cloud infrastructure. He affirmed that Jabil, with 30 U.S. sites, is well-positioned for any production shifts and can expand capacity quickly if needed. Regarding the custom silicon transition, Dastoor stated that while it's early, he expects it to be a driver of future growth and new business for Jabil, particularly in FY26 and beyond, further strengthening the customer relationship.

Asked about the near-term negative leverage from the automotive business and Jabil's long-term positioning amid industry shifts, and also requested details on the drivers for the impressive fiscal year 2025 free cash flow target.

Answer

Management acknowledged short-term automotive headwinds from interest rates and tariffs, creating some negative leverage, but remains positive on long-term EV growth (25-30% through 2030) and noted Jabil's agility in repurposing capacity (e.g., Croatia factory shifting to healthcare). The $1.2 billion free cash flow target is driven by a planned reduction in working capital days and a ~$200 million year-over-year decrease in CapEx.

Steven Fox with Fox Advisors inquired about the risk of potential supply shortages in the next fiscal year impacting overall demand or NetApp's ability to ship products, and questioned the sustainability of future pricing strategies given component cost dynamics.

Answer

CEO George Kurian clarified that NetApp has not indicated any supply shortages, but rather has secured supply commitments and pricing through the end of the fiscal year. He expressed confidence in the company's ability to guarantee supply and stated that historically, when commodity prices rise, pricing actions are taken to share increases with customers, a strategy NetApp has experience with.

Steven Fox inquired about the risk of supply shortages impacting NetApp's demand or ability to ship in the coming year and the sustainability of its pricing strategy.

Answer

George Kurian (CEO) clarified that NetApp has secured supply commitments and pricing through the fiscal year-end, not that there are current shortages. He expressed confidence in managing supply and pricing, noting that historically, commodity price increases are typically passed through to customers.

Steven Fox of Fox Advisors, LLC asked about the margin pressure from higher input costs included in the guidance. He also challenged the conservative 3% growth guidance, asking for perspective on the size of the cautious areas (public sector, industrial Europe) relative to growth drivers like AI.

Answer

CEO George Kurian clarified the guidance is about 4% growth excluding the Spot divestiture, compared to 5% in FY25. He sized the US public sector as a low-teens percentage of business and EMEA as a 'decent chunk,' attributing caution to a lack of visibility on geopolitical and budget timing. CFO Wissam Jabre confirmed the guidance includes a 40-60 basis point impact from input costs and tariffs, which the company will aim to mitigate.

Steven Fox of Fox Advisors, LLC asked about the degree of margin pressure from higher input costs included in the annual guidance. He also challenged the conservative 3% revenue growth forecast, asking for perspective on the size of the cautious areas (public sector, industrial Europe) relative to the strong momentum in AI and market share gains.

Answer

CEO George Kurian clarified the guidance is about 4% growth excluding the Spot divestiture. He contextualized the cautious areas, noting the US public sector is a low-teens percentage of business and EMEA is a 'decent chunk,' both facing budget uncertainty. CFO Wissam Jabre confirmed the guidance includes a 40-60 basis point gross margin impact from input costs and tariffs, which the company is actively working to mitigate.

Steven Fox of Fox Advisors, LLC asked about the margin pressure from passing through higher input costs included in the guidance. He also pushed back on the conservative 3% revenue growth guidance for FY26, seeking to understand the relative size of the cautious areas versus the growth drivers like AI.

Answer

CEO George Kurian defended the guidance as prudent, noting a one-point headwind from the Spot divestiture, resulting in 4% underlying growth. He highlighted concerns in the US public sector (low-teens % of business) and EMEA. CFO Wissam Jabre confirmed the guidance reflects a 40-60 basis point gross margin impact from input costs/tariffs, which the company will work to mitigate with its agile supply chain.

Steven Fox asked if NetApp's strategic component pre-buys have affected the competitive environment and questioned if the company's outlook on declining NAND pricing was too optimistic, given some suppliers see a market bottom.

Answer

CEO George Kurian asserted that NetApp's primary competitive differentiator is its software and hybrid cloud strategy, not component costs. He stated that the company is closely aligned with all major NAND suppliers and feels confident in its ability to navigate the dynamic market, implying their pricing outlook is well-informed by these deep relationships.

Steven Fox asked for more detail on how the partnership with Google Cloud is driving business with highly regulated customers.

Answer

CEO George Kurian explained that the partnership expanded from public cloud to Google Distributed Cloud, allowing customers to use the Google stack in their own data centers. He described this as entirely wallet-expanding for NetApp, providing a consistent data experience across on-premise and cloud environments, with good early momentum in regulated industries.

Steven Fox asked about competitive dynamics and where NetApp is seeing the most significant market share gains compared to 90 days ago.

Answer

CEO George Kurian highlighted continued momentum from improved focus and execution. He pointed to share gains in the cloud storage portfolio due to broader workload support and deeper hyperscaler integration. In the flash portfolio, he emphasized strong results in block storage, where NetApp is demonstrating price-performance leadership and winning against competitors' high-end and midrange products.

Steven Fox from Fox Advisors questioned Instacart's rationale for pursuing international expansion at this juncture, rather than solely focusing on strengthening its US advantages, and expressed concerns about potentially larger future investments.

Answer

CEO Chris Rogers explained that it's the right time to explore international markets, as retailers abroad face similar challenges to those in North America. He emphasized an enterprise-led strategy using existing products like Storefront Pro, Caper Carts, and FoodStorm, with a disciplined approach to expenses. CFO Emily Reuter clarified that this approach differs from building a marketplace solution, implying a different investment profile.

Steven Fox questioned the rationale behind Instacart pursuing international expansion at this point, rather than solely focusing on its U.S. advantages, considering the potential for larger future investments.

Answer

CEO Chris Rogers stated it's the right moment, having established a strong North American base, as retailers abroad face similar challenges. Instacart will use existing products (Storefront Pro, Caper, FoodStorm) and invest in go-to-market/localization with discipline. CFO Emily Reuter clarified it's an enterprise-led solution, not building a new marketplace, which has a different investment profile.

Steven Fox of Fox Advisors inquired about the company's personalization efforts and what KPIs are used to measure their success. He also asked for clarification on operating cash flow dynamics, particularly whether second-half trends are typically seasonal.

Answer

CEO & Chair Fidji Simo detailed that personalization is a key advantage, leveraging 13 years of data for features like AI-driven pairings and personalized shopping aisles. Success is measured by increased cart sizes, item discovery, and improved conversion of new and lapsed customers. CFO Emily Reuter clarified that cash flow is less seasonal and more subject to quarter-to-quarter fluctuations from factors like the timing of retailer payments and the longer payback periods for categories like alcohol and EBT SNAP.

Steven Fox asked a high-level question about whether the collective success of Instacart's various initiatives could lead to an acceleration in top-line growth over the next one to two years as they mature.

Answer

CEO Fidji Simo, while not providing long-term guidance, pointed to strong leading indicators that support future growth. These include robust new user acquisition, increasing order frequency from existing users, deeper Instacart+ penetration, and a defensible competitive lead. She expressed confidence these fundamentals enable reinvestment to accelerate the industry's shift online.

Steven Fox asked about the potential structure and values of long-term agreements with cloud customers, including considerations for sharing cyclical risk, cash, or CapEx, and how these agreements might impact customers not fortunate enough to secure such long-term supply.

Answer

Chairman and CEO David Goeckeler stated it's too early to provide specific details on the structure of long-term agreements. He emphasized that the key dynamic is large data center customers proactively reaching out for supply discussions extending into 2027, which represents a significant shift. Goeckeler views this as a very healthy sign, especially given Sandisk's long-range investment decisions in R&D and technology nodes, and indicated that the specifics of these relationships are in early stages of conversation.

Steven Fox asked about the potential dynamics of long-term agreements (LTAs) in the NAND market, given the historic demand from cloud providers. He inquired about potential values in these negotiations, such as sharing cyclical risk, cash, or CapEx, and how such agreements might impact customers not securing long-term supply.

Answer

Chairman and CEO David Goeckeler stated that it's too early to provide detailed specifics on LTA negotiations. He emphasized that the key development is large data center customers proactively reaching out for multi-year supply discussions, extending into 2027. He views this as a very healthy sign, especially given SanDisk's long-range CapEx and R&D investments, and indicated that the exact structure of these relationships is still in early stages of discussion.

Steven Fox of Fox Research inquired about the outlook for underutilization charges beyond the guided quarter and how quickly they might dissipate. He also asked about any potential supply chain bottlenecks, aside from tariffs, that could impact the business.

Answer

CFO Luis Visoso explained that while operating at 100% capacity is the long-term goal, the current underutilization is a tactical and prudent decision. He stated the company will adjust over time as supply and demand balance. Regarding the supply chain, he confirmed no significant bottlenecks are foreseen and that the chain is operating efficiently with sourcing flexibility.

Steven Fox of Fox Advisors, LLC requested more details on the $60 million in Q1 startup costs, including what they are related to, the expected return timeline, and whether the amount was consistent with prior expectations.

Answer

EVP & CFO Luis Visoso confirmed the costs were in line with previous plans. He explained they relate to the BIX-eight node transition, covering cleanroom preparation, tool relocation, and energy usage before production begins. These are temporary costs that will either be eliminated or absorbed into inventory once the fab is operational.

Steven Fox asked about the outlook for underutilization charges beyond the current quarter and whether there were any potential supply chain bottlenecks to be aware of, aside from tariffs.

Answer

Executive Luis Visoso characterized the underutilization charges as a tactical and temporary measure, stating the company's long-term goal is to operate at 100% capacity once the market is balanced. He also confirmed they see no other significant supply chain bottlenecks, noting their front-end in Japan and back-end facilities in Malaysia and China are operating efficiently and are well-positioned to manage global sourcing.

Steven Fox asked for more details on the fourth quarter gross margin, specifically regarding year-over-year manufacturing costs and ongoing material content mix pressures into next year. He then inquired about the increased $7 billion investment for the Arizona campus, its implications for Amkor's long-term opportunities, and any nearer-term business benefits.

Answer

CFO Megan Faust attributed Q4 gross margin constraints to higher manufacturing costs for leading-edge advanced technologies (due to overhead/CapEx ahead of scale, expected to improve by 2026) and an unfavorable year-over-year product mix with less material content decline. President and CEO Giel Rutten explained the Arizona investment increase is solely due to increased demand for U.S. manufacturing from multiple customers and foundry partners, requiring scaled capacity and a second facility, not higher construction costs.

Steven Fox asked for more details on the Q4 gross margin, specifically the impact of year-over-year manufacturing costs and material content mix, and how these pressures might extend into next year. He also questioned the rationale behind the increased $7 billion investment for the Arizona campus, its long-term implications, and any nearer-term business opportunities it might create.

Answer

CFO Megan Faust attributed Q4 gross margin constraints to higher manufacturing costs from leading-edge advanced technologies (ahead of scale) and an unfavorable year-over-year product mix, with a more stable advanced SiP. CEO Giel Rutten explained the increased Arizona investment was driven by growing interest in U.S. manufacturing from multiple customers and a foundry partner, necessitating scaled capacity aligned with demand, and was not due to higher construction costs.

Steven Fox asked for a high-level view of the market assumptions underpinning the second-half forecast, specifically for edge devices and traditional auto markets, and also inquired about the timing of receiving CHIPS Act grants.

Answer

CEO Giel Rutten explained the belief that the progression of AI to edge devices will drive a hardware upgrade cycle, positioning Amkor to capture future opportunities. CFO Megan Faust stated that CHIPS Act grants are tied to project milestones through 2026 and material funds are not expected in 2025. The total project could be a $2 billion investment, with up to $800 million in potential offsets from grants and tax credits over time.

Steven Fox sought clarification on the company's expectation to accelerate towards 9%-12% revenue growth, asking if it implies a ramp towards the end of the fiscal year and what the biggest wild cards are. He also asked for more details on the nature and focus of the company's investments, particularly if they are primarily centered around Penang and their impact on margins.

Answer

Todd Kelsey, President and CEO, clarified that the revenue growth acceleration is expected to be more linear than a 'hockey stick' ramp, with wild cards including continued modest end market improvement and sustained focus on new program ramps. Oliver Mihm, COO, detailed that investments, consistent with prior year's CapEx, are less about new buildings and more about operational efficiency and revenue growth, such as IT for CMMC compliance, warehouse automation, and automated material robots. Todd Kelsey added that while there's a near-term margin drag from the new Penang site, it's not a long-term issue and these investments will quickly provide productivity improvements.

Steven Fox asked for clarification on Plexus Corp.'s expectation to accelerate towards 9-12% revenue growth, specifically if this implies a ramp in the second half of the year, and what the main wild cards are. He also sought more details on the company's investments, asking if they are primarily focused on Penang, what other significant investment areas exist, and if these investments are causing an unusual drag on margins.

Answer

Todd Kelsey, President and CEO, described the revenue acceleration as a linear ramp, not a 'hockey stick,' with wild cards being continued modest end market improvement and focus on new program ramps. Oliver Mihm, COO, detailed investments beyond Penang, including IT infrastructure for CMMC compliance, warehouse automation (with significant efficiency gains), machine performance optimization, and automated material robots, all aimed at operational efficiency. Todd Kelsey clarified that while there's a near-term margin drag from the new Penang site, it will be quickly overcome, and other investments are expected to provide future productivity improvements.

Steven Fox requested more details on the significant healthcare sustaining services win, including its ramp timeline, and asked about the potential to reach 6% operating margins sooner than previously expected.

Answer

CEO Todd Kelsey described the healthcare win as involving a single-use component for capital equipment that will ramp over 2-3 quarters with potential for future growth. Regarding margins, he credited faster-than-anticipated benefits from operational efficiencies and a strong services mix for the possibility of reaching a 6% operating margin as soon as Q3.

Steven Fox inquired about the revenue and profitability trends in Europe and asked how the new U.S. administration might influence the attractiveness of certain end markets, such as electrification.

Answer

EVP and COO Oliver Mihm explained that Europe's revenue decline reflects broader market trends, with macroeconomic industrial softness hitting the region particularly hard. EVP and CFO Patrick Jermain added that regional profitability is improving due to restructuring and better utilization. President and CEO Todd Kelsey acknowledged that policy changes could impact end markets and noted that the company is evaluating its market focus as part of its strategic planning, considering potential shifts in favored industries.

Steven Fox followed up on the demand pull-ins, asking if any macro conclusions could be drawn and whether the dynamic would prevent Plexus from achieving 10% revenue growth in fiscal 2025. He also requested details on the 'program volatility' with two industrial customers.

Answer

President and CEO Todd Kelsey stated that double-digit growth for fiscal 2025 now looks difficult, with the company projecting mid-single-digit growth instead. EVP and COO Oliver Mihm identified strength in the space and SemiCap subsectors as macro themes from the pull-ins. Regarding program volatility, he described the issues as one-off situations where the end demand is 'not perishable.'

Steven Fox of Fox Advisors, LLC asked for an outlook on supply chain dynamics for the remainder of the fiscal year, including factors like expedites, deflationary pressures, and capacity shifts.

Answer

Jeff Clarke, Vice Chairman and COO, stated that he expects the deflationary input cost environment from Q2 to flatten in the second half. He also clarified that specific costs incurred in Q2 to expedite materials and reconfigure the supply chain for new AI server deployments were one-time in nature and are not expected to recur in Q3 or Q4. He added that the company has managed tariff complexities well without impacting customers.

Steven Fox of Fox Advisors asked for more detail on the underlying dynamics of the 4% storage revenue growth, including the sales mix and margin performance within the segment.

Answer

Executive Jeffrey Clarke explained that growth was driven by demand for PowerStore and PowerFlex, alongside the new PowerScale F710 and F910. He highlighted a strategic focus on Dell's own IP portfolio (PowerMax, PowerStore, PowerScale, etc.) and its channel program to drive profitability. Yvonne McGill added that Q4 is seasonally the strongest for storage.

Steven Fox asked for a high-level perspective on Dell's pricing power and its ability to defend against new and existing competitors across its broad portfolio.

Answer

COO Jeffrey Clarke acknowledged the industry is always competitive but outlined Dell's key advantages. These include its broad market coverage via direct and channel sales, an unmatched supply chain, significant R&D investment leading to numerous market-leading positions, and a comprehensive services organization that can manage complex deployments like AI, which differentiates Dell from competitors.

Steven Fox asked about the potential long-term size of the fleet business as a percentage of billings and requested clarification on what management considers to be 'predictable growth rates' for EVs.

Answer

CFO Mansi Khetani projected that the fleet business could grow to represent about one-third of total revenue over time, supported by a doubling of opportunities in the pipeline. CEO Rick Wilmer pointed to positive EV adoption signs like lower lease prices and favorable J.D. Power survey data, while also acknowledging that auto OEMs are still evaluating their transition to fully electric vehicles.

Steven Fox asked if the company was seeing any buyer hesitancy related to the political environment and requested a deeper dive into the sources of gross margin improvement, specifically between software and hardware.

Answer

Executive Richard Wilmer stated there has been "literally zero change" in customer buying behavior. CFO Mansi Khetani explained that while product mix can cause fluctuations, hardware margins are expected to improve steadily, with a more significant uplift around the middle of next year from the benefits of Asian manufacturing.

Steven Fox asked for a breakdown of the strong free cash flow performance, questioning if there were any one-time items and seeking color on the organic progress.

Answer

CFO Erin Brewer confirmed there were no unusual one-time items in the quarter's free cash flow. She emphasized Lyft's focus on the trailing twelve-month figure ($993 million) to smooth out quarterly variations. She reiterated that FCF dynamics are driven by business growth and the timing of insurance accruals versus cash payments, with no change to the underlying factors.

Steven Fox requested a deeper dive into the Q2 guidance for ride growth and monetization, asking about consumer spending risks and key drivers. He also followed up on the resilience of the business in a potential downturn.

Answer

CFO Erin Brewer stated the Q2 guide accounts for various scenarios and expects continued momentum from underpenetrated markets. Both she and CEO David Risher confirmed they see no signs of weakening consumer spending in their data. Risher elaborated on the business's resilience, citing rideshare's role as a daily necessity, the stability of services versus goods, and the platform's function as a flexible earnings source for drivers.

Steven Fox of Fox Advisors, LLC sought more color on the broadband and fiber business performance amid a mixed market. He also asked how copper price volatility is factored into guidance and the lag time for passing through costs.

Answer

CEO Ashish Chand reported that fiber sales reached 50% of broadband revenue, driven by DOCSIS upgrades and fiber-to-the-home projects, leading to a strong 1.14 book-to-bill ratio. CFO Jeremy Parks noted that guidance assumes current copper prices and explained there is a roughly two-month lag to implement price changes, which aligns with the company's inventory holding period, effectively matching cost and price timing.

Steven Fox of Fox Advisors LLC asked about the "low-hanging fruit" for Belden in the U.S. reshoring trend and how it would drive specific product sales. He also requested an update on the broadband market's performance and spending expectations for the year.

Answer

CEO Ashish Chand identified the low-hanging fruit as the complete digitization of operations across various verticals, upgrading legacy infrastructure, a trend accelerated by reshoring. Regarding broadband, he noted year-over-year growth and the completion of channel inventory digestion. He stated that customer DOCSIS rollouts remain intact and Belden's goal is to increase its fiber content and leverage its Precision Optical acquisition.

Steven Fox sought clarification on end-market dynamics, asking if the 'neutral customer posture' applies across all markets and questioning the apparent contradiction between weakness in EMEA and a pickup in discrete manufacturing. He also asked for perspective on the mix shift towards the Solutions business.

Answer

CEO Ashish Chand clarified that Q4's double-digit growth in discrete manufacturing was driven by the Americas and APAC, occurring despite some EMEA weakness. He noted that energy and process markets are expected to remain strong, while other manufacturing sectors are more cautious. Regarding the Solutions business, Chand stated it represented 10-12% of sales for the year and emphasized the strategy of leveraging a common technology stack across verticals, such as using energy-sector tech in mass transit.

Steven Fox asked for details on the drivers of market share gains in the enterprise fiber business and inquired about the outlook for the copper-based structured cabling business within enterprise networks.

Answer

President and CEO Chuck Treadway attributed data center growth to strong demand for products like MPO connectors and raceways, noting the business grew nearly 100% YoY in Q4. CFO Kyle Lorentzen explained that the copper structured cabling business experienced an inventory normalization cycle in 2024 and is positioned for growth as a technology leader. Treadway clarified that 'structured cabling' now encompasses both fiber and copper solutions for buildings.

Steven Fox asked for guidance on normalized EBITDA margins for the core business segments (CCS, NICS, ANS) given recent volatility and high levels in CCS. He also sought context on why the current backlog level is considered normal relative to sales.

Answer

CFO Kyle Lorentzen projected more modest margin improvements for CCS, but expects strong margin recovery in NICS and ANS as revenues rebound, potentially returning to 2021-2022 levels. He explained the current backlog is considered normal because the business historically operates on short lead times of a few weeks; the higher backlogs of 2021-2022 were an anomaly caused by supply chain constraints.

Steven Fox asked for a ranking of the best international growth regions in the quarter and for reasons behind the sustained backlog visibility and growth.

Answer

Howard Wenger, President, identified Latin America, Europe, and Australia as the standout international regions for the quarter. He attributed the company's sustained success and visibility to a 'flight to quality,' where customers are choosing Nextracker as a trusted, differentiated brand with proven technology, a strong balance sheet, and a deep commitment to customer service and innovation.

Steven Fox asked about the working capital implications for 2025 as the Lucid Gravity ramps up production. He also inquired about the specific milestones or thresholds that need to be achieved with the Air and Gravity models before the company can confidently proceed with the Midsize platform.

Answer

Interim CFO Gagan Dhingra deferred specific 2025 working capital guidance to the Q4 call but reiterated that current funding provides a runway well into 2026. CEO & CTO Peter Rawlinson clarified that the Midsize program is not contingent on future milestones, stating that a large engineering team is already dedicated to the project and its 'Atlas' powertrain. He confirmed the factory in Saudi Arabia is already under construction for a late 2026 start of production, positioning it as a critical part of the company's scaling strategy.

Steven Fox asked for more detail on the heavy vehicle off-road (HVOR) market, including where the market is in its cycle and how the current downturn compares to previous ones.

Answer

Executives Martha Sullivan and Brian Roberts noted the HVOR slowdown began in H2 2024 and has accelerated, with third-party forecasts from KGP now showing a 20% year-over-year decline for on-road trucks in North America and Europe. They expressed hope that the market is nearing a bottom but stated the timing of a recovery is uncertain.

An analyst from TD Cowen inquired about the expected quarterly progression of the Windows 10 end-of-life refresh cycle and whether commercial customers were delaying purchases in anticipation of Intel's new processors.

Answer

CEO Enrique Lores stated that the majority of the commercial PC refresh is still ahead and is gaining momentum, as reflected in a growing sales funnel. He explicitly said they are not seeing customers wait for new Intel processors; on the contrary, commercial momentum was strong in Q3 and is expected to continue, indicating the refresh is actively underway.

Inquired about the practical execution of scaling up with a major customer like PFG, including the fueling infrastructure plan, and questioned the company's capacity to manage the large number of upcoming vehicle trials.

Answer

The executive explained the phased approach with PFG, starting with the current 5 trucks, moving to a tranche of 15, and then an option for 30 more. He detailed that mobile fuelers can support the initial scale-up before transitioning to a permanent on-site fueling station. Regarding the 25 trials, confidence was expressed due to the geographic concentration of trials (mostly California and Alberta), which simplifies logistics for support and fueling, and the strong initial performance of the Class 8 truck validates the technology.