Timothy Arcuri

Timothy Arcuri questioned why the September guidance wasn't stronger given record July bookings and expressed concern that encouraging longer-term orders could replicate the issues of the previous PSP cycle.

Answer

CEO Steve Sanghi clarified they are not asking customers to expedite shipments but to place cancellable, longer-term backlog to improve visibility, which is fundamentally different from the non-cancellable PSP program. CFO Eric Bjornholt and COO Richard Simoncic added that better visibility helps them plan capacity and better serve customers' own pull-in requests.

Timothy Arcuri questioned why the September growth guidance is only 5% despite bookings being the highest in three years, suggesting this implies a strong December quarter. He also asked how Microchip is managing customer communications about lengthening lead times to avoid repeating past issues like the PSP program.

Answer

CEO Steve Sanghi reiterated his expectation for above-seasonal growth in December and March but declined to provide specific numbers. On customer communication, he clarified they are not asking customers to expedite orders but to provide more backlog visibility (12-16 weeks) to help with planning. He stressed that unlike the PSP program, current orders are cancellable, giving customers full flexibility and avoiding a similar dynamic.

Timothy Arcuri asked if gross margins would be higher at a comparable revenue level (e.g., $1.5 billion) compared to the last cycle, given recent restructuring. He also asked for an estimate of consumption (sell-through) relative to the June quarter's revenue guidance.

Answer

CFO J. Bjornholt stated that while the cost structure is in good shape for the 65% long-term gross margin target, achieving higher margins at a specific revenue level depends on the slope of the recovery. CEO Steve Sanghi added that internal models show distribution sell-through will be higher than the guided sell-in revenue for June, and the gap between them will continue to close, driving future sales growth.

Timothy Arcuri asked for perspective on how long it might take for the distribution channel inventory to normalize and questioned at what revenue level the company would no longer be burdened by factory underutilization charges.

Answer

CEO Ganesh Moorthy explained that distribution inventory days are calculated on a backward-looking basis, making them less helpful in a steep decline. He noted that destocking is occurring at multiple downstream levels, making a timeline difficult to predict. Executive J. Bjornholt added that the end of underutilization charges isn't tied to a specific revenue number but depends on the recovery's slope, and that high inventory reserve charges could become a tailwind in the future.

Timothy Arcuri asked for an update on the license negotiation with Huawei, noting it seemed to be dragging on.

Answer

President of Qualcomm Technology Licensing and Global Affairs, Alex Rogers, stated there was no update, and discussions were still underway without anything substantive to add.

Timothy Arcuri requested an update on the ongoing license negotiation with Huawei.

Answer

President of Qualcomm Technology Licensing and Global Affairs, Alex Rogers, stated there was no update at this time, and discussions are still underway.

Timothy Arcuri asked about the outlook for the September quarter, questioning if factors beyond the macro environment would cause it to deviate from typical seasonality. He also inquired about the China business, asking how QUALCOMM weighs risks like tariffs and potential shifts by customers to competitors like MediaTek.

Answer

Akash Palkhiwala noted that while the macro environment is a key factor, QCT's Android, automotive, and IoT segments are expected to follow normal seasonality. He also reiterated the forecast for approximately 70% share in the fall 2025 launch of its largest customer. Cristiano Amon, President and CEO, stated that QUALCOMM's position in China remains strong due to its unique product offerings, which are crucial for the global ambitions of Chinese OEMs, and cited continued design win traction across all product categories.

Timothy Arcuri of UBS asked for an update on the modem supply situation with its largest customer (Apple) and tried to quantify the size of the PC business within the IoT segment for the December quarter.

Answer

CEO Cristiano Amon reiterated that there is no change in the company's assumptions regarding Apple, expecting 20% share for the 2026 launch and no business in 2027. CFO Akash Palkhiwala declined to break out PC revenue quarterly but highlighted the achievement of 10% share in the >$800 U.S. retail laptop market as a key progress metric.

Timothy Arcuri noted that the strong guidance for China Android growth seemed to imply a decline for Qualcomm's other major customers and asked if this could be a pull-forward of orders due to concerns about potential future tariffs.

Answer

CFO Akash Palkhiwala explicitly stated that the trend was not related to tariffs or any associated pull-forward. He explained the guidance reflects the specific launch schedules and chipset purchasing timelines of its customers and is not a direct statement on end-user sell-through or market share dynamics.

Timothy Arcuri asked how the OpenAI deal, announced a month prior, has influenced AMD's market position with other customers and if it has led to engagements that wouldn't have otherwise occurred. He also inquired about the risk of customer concentration, given OpenAI's potential to represent a significant portion of data center GPU revenue in 2027-2028.

Answer

Lisa Su, Chair and CEO of AMD, explained that the OpenAI deal, combined with the 'Helios' rack at Open Compute, has increased and accelerated customer interest, leading to broader and higher-scale engagements. She emphasized that a core strategy is to have a broad customer base, and AMD is dimensioning its supply chain to support multiple customers at similar scale in the 2027-2028 timeframe, aiming for diversification.

Timothy Arcuri asked how the OpenAI deal has influenced AMD's market position with other customers, specifically if it led to engagements with previously unengaged clients. He also raised concerns about potential single customer concentration risk, given OpenAI's potential to represent half of AMD's data center GPU revenue in 2027-2028.

Answer

Dr. Lisa Su, Chair and CEO, noted that the OpenAI deal, combined with the Helios rack showcase, has led to increased and accelerated customer interest and engagement at a higher scale. She emphasized AMD's foundational goal of having a broad customer base and confirmed that the supply chain is being dimensioned to support multiple customers at similar scale in the 2027-2028 timeframe.

Timothy Arcuri asked for more specific guidance on the Data Center GPU ramp in the second half of the year and questioned if the new developer cloud would be a material revenue contributor.

Answer

Chair and CEO Lisa Su confirmed a 'strong ramp' for the MI355 accelerator from Q2 into Q3 and continuing into Q4, driven by strong customer demand for at-scale deployments. She clarified that the developer cloud is intended to drive developer adoption and experience, not to be a meaningful revenue contributor in the near term.

Timothy Arcuri of UBS Group questioned the scale of the Data Center GPU ramp in the second half of the year, asking for guideposts for Q3 and the full year. He also asked if the newly announced developer cloud would be a material revenue contributor.

Answer

CEO Lisa Su confirmed a 'strong ramp' for the MI350 series from Q2 into Q3, with growth expected to continue into Q4. She noted that customer engagements for MI355 are for larger-scale deployments compared to the initial MI300 ramp. Dr. Su clarified that the developer cloud is primarily a tool to ease developer access to AMD GPUs and is not expected to be a meaningful revenue contributor in the near term.

Timothy Arcuri sought clarification on the Data Center GPU growth rate in Q1 2025, questioning if 'significant double-digit' was an understatement, and asked about the timing of the remaining revenue impact from the China export ban. He also inquired about the increase in inventory.

Answer

CEO Lisa Su reiterated that Data Center GPU performance was strong and in line with expectations. She clarified that the majority of the $1.5 billion full-year impact from China export controls would be realized in Q2 and Q3, with very little impact in Q4. CFO Jean Hu explained that the inventory build was intentional to support the strong ramp expected for Client and Server products, as well as the second-half Data Center GPU ramp, which has long lead times.

Timothy Arcuri inquired about the server CPU business, asking if increased competitive pricing could impact growth, and requested the Data Center GPU revenue figure for Q4 and its expected trajectory in Q1.

Answer

CFO Jean Hu expressed confidence in the server CPU business, citing a strong product portfolio that provides the best TCO, enabling continued growth in units, ASP, and market share despite a competitive environment. Regarding Q4 Data Center GPU, Hu noted server performance was stronger, and CEO Lisa Su added that the Data Center segment's performance in the first half of 2025 is expected to be consistent with the second half of 2024.

Timothy Arcuri sought to clarify the scale of the Data Center GPU business in Q3, suggesting a figure around $1.5 billion. He then asked about the potential shape of revenue growth in 2025, questioning if there was a risk of a pause as customers might await future rack-scale solutions.

Answer

CEO Dr. Lisa Su confirmed that Q3 Data Center GPU revenue was 'greater than $1.5 billion' and that the business is approaching the scale of the server CPU business. Regarding 2025, she expressed confidence in growth but noted the business 'might be lumpy' due to the timing of large-scale deployments by a concentrated set of customers, rather than a pause related to product cycles.

Timothy Arcuri inquired about the impact of BIS bands on Entegris' Q3 revenue, Q4 guidance, and potential effects in 2026, as well as the current utilization across all manufacturing sites and the decision to lower production.

Answer

CEO Dave Reeder stated that BIS bands did not impact Q3 revenue and are not expected to affect Q4 or 2026. He explained that Entegris has significant underutilized capacity due to past investments and local-for-local strategy. CFO Linda LaGorga added that selective inventory reduction in Q3, aimed at maximizing free cash flow, will continue in Q4 but to a lesser extent.

Timothy Arcuri from UBS Group asked for a numerical update on the previously mentioned $50 million China-related headwind and its remediation status. He also questioned why gross margins remain under pressure compared to 2024 levels despite growth in high-margin products, probing if new facility ramps were the sole cause.

Answer

CEO Bertrand Loy confirmed that Entegris recovered 'most of' the $50 million headwind in Q2 and that based on current information, there is no further headwind expected between June and September. CFO Linda LaGorga reiterated that margin pressures stem from a combination of trade uncertainty, inventory reduction efforts to boost free cash flow, and inefficiencies from localizing manufacturing, not just the new facility ramps.

Timothy Arcuri of UBS questioned how quickly the China revenue could be recovered, asking if this situation would accelerate the qualification of local Chinese competitors. He also sought to clarify the 'clean' Q2 revenue guidance ex-tariffs and asked for the company's current revenue exposure to NAND.

Answer

CEO Bertrand Loy expressed confidence that customers are eager to qualify Entegris's state-of-the-art manufacturing alternatives in Asia due to the unique value of its products. He confirmed that NAND exposure is currently about 10% of revenue and acknowledged that the analyst's directional math on a 'clean' revenue guide was 'not too far off' but declined to provide a specific figure.

Timothy Arcuri challenged the company's flat CapEx assumption for 2025, contrasting it with more bullish WFE forecasts from equipment companies. He also asked why Q4 gross margin was at the low end of guidance despite strong revenue.

Answer

CEO Bertrand Loy defended the flat CapEx view as a prudent assumption based on low-single-digit WFE growth offset by a decline in construction spending, emphasizing the company's focus on its controllable 4-5% outperformance. CFO Linda LaGorga explained that the Q4 gross margin result was due to product mix and reiterated the full-year 2025 outlook for 25-50 bps of margin expansion.

Timothy Arcuri asked about the potential impact of new U.S. export controls on China and the relative growth outlook for the company's realigned business segments in the fourth quarter.

Answer

CEO Bertrand Loy stated that Entegris is monitoring the evolving regulations but is not speculating on future rules, and no potential impact is factored into the guidance. For Q4, Loy expects the business comprising the newly combined MC and AMH divisions to be the fastest-growing segment, potentially reaching a record revenue level, with the MS division as the next fastest.

Timothy Arcuri asked for KLA's RPO (Remaining Performance Obligations) figure, noting it was $7.9 billion last quarter, and inquired about the current quarter's RPO. He also followed up on China revenue expectations for the December quarter, given previous guidance for a 10-15% decline for the year.

Answer

CFO Bren Higgins stated that KLA has changed its disclosure and no longer provides RPO quarterly, aligning with peer disclosures, but mentioned that lead times have normalized to 7-9 months. For China, he projected revenue to be in the high 20s percentage-wise for the December quarter, consistent with the annual trend of 30% plus or minus, and expects it to settle in the mid-20s for 2026 due to export restrictions and normalization.

Timothy Arcuri asked about KLA's RPO (Remaining Performance Obligations), noting it was $7.9 billion last quarter, and where it ended this quarter, assuming bookings were strong. He also followed up on China revenue, asking if it would be down to like 30-31% in December to meet the previously stated 10-15% decline for the year.

Answer

CFO Bren Higgins stated that KLA changed its disclosure and no longer reports RPO quarterly, aligning with industry peers. He mentioned that lead times have normalized to 7-9 months, consistent with historical levels. Regarding China, he projected it to be in the high 20s percentage-wise in the December quarter, consistent with the full-year expectation of around 30-31%. For 2026, China revenue is expected to settle in the mid-20s due to export restrictions and normalization.

Timothy Arcuri from UBS Group asked for the latest Remaining Performance Obligation (RPO) figure and an update on the full-year growth outlook for the services business.

Answer

EVP & CFO Bren Higgins stated that RPO will be approximately $7.9 billion, down about $1 billion, reflecting a normalization of lead times from 18 months down to around 8 months as the business shifts from long-backlog customers to long-standing customers with shorter order cycles. For the services business, President & CEO Rick Wallace and CFO Bren Higgins confirmed the outlook is for 10%+ growth for the year, with expectations for continued sequential growth through the calendar year, marking its 52nd consecutive quarter of year-over-year growth.

Timothy Arcuri of UBS Group asked for the latest Remaining Performance Obligation (RPO) figure, clarification on its sequential decline, and an update on the full-year outlook for the services business.

Answer

EVP & CFO Bren Higgins reported that RPO will be approximately $7.9 billion, with the decline reflecting a normalization of lead times from 18 months down to a more typical 6-8 months as they ship through backlog. President & CEO Rick Wallace confirmed the reduction was from shipments, not cancellations. For services, Wallace affirmed the business is on track for 10%+ growth for the year and expects continued sequential growth through December.

Timothy Arcuri challenged the math behind the semi-systems outlook, suggesting it implied a steep second-half decline. He also asked for the rationale behind changing the RPO reporting methodology and how the new practice will differ.

Answer

CFO Bren Higgins clarified that semi PC systems revenue is expected to be roughly flat in the second half versus the first. Regarding RPO, he explained the change aims to align with industry peers and reduce investor confusion. The new method will define RPO more like deferred revenue (for shipped products and signed contracts), with a broader backlog assessment provided annually in the 10-K.

Timothy Arcuri of UBS Group AG asked for the quarter's Remaining Performance Obligation (RPO) figure and the growth outlook for the EPC (Electronics, Packaging, and Components) segment for the upcoming year.

Answer

CFO Bren Higgins reported that RPO decreased by approximately $900 million, with half attributed to de-bookings from China regulations and the other half to high shipment levels. He projected mid-single-digit growth for the EPC segment, noting that the conclusion of flat panel display system shipments acts as a headwind to revenue but a tailwind to margins.

Timothy Arcuri pressed management on whether they were preemptively 'handicapping' their guidance for potential export controls, similar to peers. He also asked if KLA's outsized China growth in 2024 could lead to a more severe 'hangover' from a spending pull-forward.

Answer

CFO Bren Higgins stated that the quarterly guidance range is wide enough to accommodate various near-term scenarios but they do not build in assumptions for unannounced rules. He contextualized the 2024 China growth by noting KLA undergrew peers in 2023, suggesting a two-year view is more accurate and that some timing differences are due to early process control adoption in greenfield fabs.

Timothy Arcuri asked for clarification on the approximately $200 million upside in semiconductor test revenue for the December quarter guidance, specifically if it was evenly split between memory and SSD. He also inquired about the revenue shaping for 2026, particularly the lumpiness of memory, Q1 seasonality, and the overall loading for the upcoming year.

Answer

CEO Greg Smith clarified that the semiconductor test upside was more weighted towards compute and networking (two-thirds) and memory (one-third). CFO Sanjay Mehta and Mr. Smith indicated that 2026 revenue is expected to be up, driven by accelerating projects. They noted a shift in seasonality from historical mobile-driven patterns to lumpy compute projects, promising a more detailed update in January.

Timothy Arcuri sought clarification on the composition of the expected $200 million increase in semiconductor test revenue for Q4 2025, asking if it was evenly split between memory and SSD. He also asked about the revenue shaping for 2026, particularly regarding Q1 seasonality and overall loading, given the lumpiness of memory shipments.

Answer

CEO Greg Smith clarified that the Q4 upside was more like two-thirds from compute and networking and one-third from memory. CFO Sanjay Mehta and Mr. Smith indicated that 2026 revenue is expected to be up, with projects accelerating into Q4. They noted that seasonality is changing due to AI drivers replacing historical mobile launch patterns, and while Q4 set a new high watermark, demand for 2026 is robust but lumpy, with a detailed update expected in January.

Timothy Arcuri of UBS Group AG inquired about the robotics business, seeking to size the 'plan of record' opportunity and understand the impact of opening a US manufacturing facility. He also asked about the 2026 mobile market outlook given a customer's move to a new package.

Answer

President & CEO Greg Smith explained the US manufacturing facility is key to their large customer strategy, enhancing supply chain resilience. He stated the robotics win will be a 'needle mover' and a 'sizable fraction' of UR business in 2026, but not material in 2025. Regarding mobile, he expressed optimism for 2026 due to increased complexity from 2nm gate-all-around, new packaging, and wider memory buses, though mobile will be a smaller part of the overall mix due to compute strength.

Timothy Arcuri asked for details on the record-breaking robotics order mentioned in the prepared remarks, including the customer, application, and shipment timing. He also asked for any updates to the full-year TAM estimates provided at the Analyst Day.

Answer

CEO Greg Smith revealed the record order was from a large automotive customer for both MiR AMRs and UR cobots, validating the new combined go-to-market strategy. The robots are used for material handling and automating manual factory processes, with shipments spread across Q1 and Q2. CFO Sanjay Mehta stated that due to market uncertainty, the company is not updating its full-year TAM forecast at this time.

Timothy Arcuri questioned if the VIP test TAM forecast was too conservative given the large custom ASIC market projections, and asked about the long-term plan for the Industrial Automation business given its history of losses.

Answer

CEO Greg Smith responded that Teradyne's VIP TAM model is a bottoms-up forecast based on units and complexity, aligning with the lower end of custom ASIC market projections. Regarding robotics, Smith attributed recent performance to a long down cycle in industrial automation. CFO Sanjay Mehta clarified that the business was profitable from 2019-2022 and that the cumulative loss since 2019 is modest. The plan is to align OpEx for profitability even in weak conditions.

Timothy Arcuri asked if the Street's revenue growth projection of low-20s for next year is reasonable, given the company's guidance for low-teens OpEx growth and its stated goal of showing operating leverage. He also asked if a recent Amazon white paper on using cobots in warehouses represents a "green shoot" for the business.

Answer

CFO Sanjay Mehta confirmed the company plans for operating leverage in 2025 but noted the environment is dynamic and final plans are still in process. CEO Greg Smith added that the OpEx commentary was meant to set expectations, as investments are needed to pivot to new growth areas. Regarding the "green shoot," Smith agreed that applying AI to cobots for logistics, as seen in the white paper, is an exciting trend that broadens the addressable market and is a key area of opportunity.

Timothy Arcuri questioned why it would take another year to reach 50% HAMR exabyte crossover, despite multiple CSPs being qualified, and asked about buying heads from TDK.

Answer

Dave Mosley, Chair and CEO, explained that the lag is due to the supply chain and the time required for factory transitions and yield ramps for new products, even with qualifications complete. Gianluca Romano, CFO, added that HAMR's cycle time is not short. Dave Mosley clarified that Seagate is not buying HAMR heads from TDK, as TDK does not possess HAMR technology.

Timothy Arcuri questioned the HAMR crossover timeline, specifically why it would take another year to go from 15-20% to over 50% exabyte crossover, given that five CSPs are qualified and three more are expected in H1 2026.

Answer

Seagate's Chair and CEO, Dave Mosley, explained that there's a lag in the supply chain and factory transitions, and the ramp is dictated by yield improvements on new products. CFO Gianluca Romano reiterated the long cycle time required for HAMR ramp-up.

Timothy Arcuri from UBS sought clarification on a comment that capacity was 'booked out to mid-26,' asking what this visibility truly means and whether customers have the flexibility to push out orders.

Answer

CEO Dave Mosley explained that this visibility stems from deep customer collaboration on qualifying and ramping new products like Mozaic 4+, which requires long-term component planning. CFO Gianluca Romano reinforced this by stating they expect sequential increases in revenue and profitability through calendar 2025, implying the December quarter will be stronger.

Timothy Arcuri asked how much of the June quarter's guided revenue growth is a catch-up from the March quarter's supply shortfall. He also questioned how Seagate detects potential double ordering and whether its build-to-order agreements are enforceable.

Answer

CFO Gianluca Romano stated it is difficult to quantify the catch-up demand, as the unserved demand from March has shifted into future quarters. He and CEO Dave Mosley asserted there is no evidence of double ordering, explaining that the current environment is one where demand simply exceeds supply. The build-to-order model provides the necessary predictability for both Seagate and its customers.

Timothy Arcuri of UBS pressed for clarification on the $200 million supply impact, asking what management meant by the impact being 'limited to the March quarter' and if the revenue would be fully recovered in June.

Answer

CFO Gianluca Romano clarified that the $200 million represents a missed opportunity in the March quarter due to a lack of materials started in a prior period. He stated this revenue is 'not coming back' in a subsequent quarter, as it was an inability to meet March demand. CEO Dave Mosley added that they will be back to matching supply with demand in the June quarter.

Timothy Arcuri of UBS asked about the capacity outlook, questioning if growth would start to flatten given that factories are bumping up against maximum capacity, which would mean relying solely on technology transitions and pricing for further growth.

Answer

CEO Dave Mosley agreed with the premise, stating that exabyte capacity will be expanded primarily by transitioning to new products with higher aerial density, such as moving from 20 to 30 to 40 terabyte drives. This allows Seagate to ship more exabytes without adding significant physical drive, head, or media capacity, which in turn lowers cost per terabyte and supports the margin expansion model.

Timothy Arcuri from UBS questioned Intel's gross margins below 40% despite supply constraints, asking for a normalized gross margin if Intel were off older 10nm/7nm nodes and fully on 18A. He also sought an update on the data center roadmap, specifically regarding Diamond Rapids and Coral Rapids.

Answer

CFO David Zinsner explained that gross margins are impacted by the high cost of older processes and product quality/competitiveness, especially in data centers. He noted that moving to leading-edge nodes like Intel 3, 4, 18A, and 14A would materially drive gross margins up due to better cost structures and higher value, also benefiting from reduced stacked startup costs. CEO Pat Gelsinger updated that Diamond Rapids is receiving strong hyperscale feedback, and Coral Rapids, featuring SMT and micro-threading for higher performance, is in the definition stage.

Timothy Arcuri from UBS questioned why Intel's gross margins are below 40% despite being a high fixed-cost business facing constraints, attributing it to high wafer costs for Intel 10/7 and low 18A yields. He asked for a normalized gross margin estimate if Intel were off 10/7 and fully on 18A. He also requested an update on the data center roadmap, specifically Diamond Rapids' launch date and optimism around Coral Rapids.

Answer

CFO David Zinsner explained that negative Foundry gross margins from older processes and product quality issues (cost structure and competitiveness, especially in data center) are key factors. He noted that newer nodes (Intel 3, 4, 18A, 14A) have better cost structures and higher value, which will materially drive gross margins up, along with reduced startup costs as the cadence normalizes. CEO Pat Gelsinger stated that Diamond Rapids is receiving strong hyperscale feedback, and Coral Rapids, including SMT and micro-threading for higher performance, is in the definition stage, with the roadmap being worked out.

Timothy Arcuri questioned if hedging on the 14A process development could deter external foundry customers and asked for clarification on the potential magnitude of CapEx reduction for the next year.

Answer

CEO Lip-Bu Tan responded that the team is learning from past mistakes and engaging with customers early on 14A to build confidence, but reiterated that CapEx will only be deployed after securing volume commitments. CFO David Zinsner added that CapEx can decrease next year as Intel utilizes prior investments, and while maintenance CapEx is about half the current level, actual spending will be higher.

Timothy Arcuri from UBS Group questioned how Intel can build an external foundry business while hedging its commitment to the 14A process node. He also asked for clarification on how much CapEx could be cut next year.

Answer

CEO Lip-Bu Tan responded that the team is laser-focused on 14A's foundational elements and is engaging with customers early, applying lessons learned from 18A. He emphasized that capital expenditures will only be committed after seeing volume commitments from both internal and external customers. CFO David Zinsner added that while CapEx will come down next year due to better utilization of prior purchases, it is not a move to maintenance-only levels and will be higher than a simple sustaining number.

Timothy Arcuri from UBS questioned the underlying drivers of the Q1 gross margin beat, asked if the Q2 guidance could represent a new trough, and inquired about the strategy for announcing new third-party foundry customers.

Answer

CFO David Zinsner attributed the Q1 gross margin strength to higher-than-expected revenue and a favorable product mix toward Raptor Lake. CEO Lip-Bu Tan stated that the foundry's immediate priority is successfully ramping internal products like Panther Lake to build trust before focusing on external customers, emphasizing a customer-service mindset.

Timothy Arcuri of UBS requested clarification on the expected gross margin incrementals for the rest of the year from the Q1 low point. He also asked about a large cash outflow in the financing section and its relation to the true level of capital expenditures.

Answer

CFO and Interim Co-CEO David Zinsner guided to a 40-60% incremental gross margin fall-through for 2025, suppressed by product cost pressures, before returning to 60%+ in 2026. He explained that the lower 2025 CapEx forecast of $20 billion reflects better utilization of over $50 billion in existing 'assets under construction' and active management of supplier payment terms.

Timothy Arcuri inquired about the translation of Intel 18A's defect density to production yields and sought clarification on the extent of outsourcing for Panther Lake and Nova Lake tiles.

Answer

CEO Pat Gelsinger clarified that the current defect density for 18A is healthy for this stage of development but not yet at a high-volume production level, which is targeted for the second half of next year. He confirmed that for Panther Lake, over 70% of the silicon area is being brought back in-house, and while Nova Lake retains some flexibility, the vast majority is also committed to Intel Foundry, aligning with the 'bringing wafers home' strategy.

Tim Arcuri questioned the significant increase in Lam Research's December quarter guidance from $4.7 billion to $5.2 billion, seeking clarification on the source of this incremental revenue and whether it involved any pull-in from the first half of next year. He also asked for the rationale behind the expectation for China WFE to be down in 2026, given its unexpected strength in 2025.

Answer

Doug Bettinger, Executive Vice President and CFO, attributed the stronger December guidance to a slightly better WFE environment, particularly in high-bandwidth memory (HBM) in DRAM, and overall market strength, noting it would have been even higher without China restrictions. He did not believe it was a pull-in from H1 2026. Regarding China, he stated that while global multinationals would be strong, current plans indicate less spending from China in 2026.

Tim Arcuri asked about the significant increase in Lam Research's December quarter guidance, specifically the source of the incremental $400-$500 million, and whether any of this revenue was pulled in from the first half of 2026. He also questioned the confidence in China WFE spending declining in 2026, given past predictions that did not materialize and Lam's strong 2025 growth in the region.

Answer

EVP and CFO Doug Bettinger attributed the December quarter's stronger guidance to a slightly better WFE environment and increased high-bandwidth memory (HBM) investments, noting that it was not pulled in from H1 2026. Regarding China, Doug Bettinger stated that while global multinational spending would be strong, current plans indicate a reduction in domestic China WFE in 2026, acknowledging that past predictions for China had strengthened throughout the year.

Timothy Arcuri sought clarity on December quarter revenue expectations in light of the flat half-on-half WFE commentary and also asked about the outlook for 2026 WFE given recent CapEx adjustments by a major logic customer.

Answer

EVP and CFO Douglas Bittinger indicated that December quarter revenue would likely decline to a level similar to the March quarter, which is a factor in the lower gross margin guidance. President and CEO Timothy Archer declined to provide a 2026 WFE forecast but stressed that Lam is positioned to outperform due to long-term drivers like HBM, GAA, and advanced packaging, regardless of specific project timing.

Timothy Arcuri of UBS Group AG inquired about the December quarter revenue outlook, given the commentary on flat WFE and lower gross margins, and asked about the outlook for 2026 WFE in light of a major logic customer's CapEx reduction.

Answer

EVP and CFO Doug Bittinger indicated that Lam's December quarter revenue would likely be down, similar to the March quarter, which aligns with the flat half-on-half WFE view. President and CEO Timothy Archer declined to give a 2026 WFE forecast but expressed confidence in Lam's ability to outperform regardless of the macro environment, citing strong positioning in HBM, advanced packaging, gate-all-around, and NAND scaling.

Timothy Arcuri inquired about the gross margin outlook for 2025, considering the tailwind from the Malaysia facility and the China mix, and also asked for color on WFE growth by end market, specifically if NAND could double.

Answer

EVP & CFO Douglas Bettinger stated that gross margin will likely remain in a tight range, with headwinds from customer concentration being offset by the Asia operation strategy. Regarding WFE, Bettinger confirmed NAND spending will increase but was uncertain if it would double, noting some spending is from a customer Lam cannot service. He added that leading-edge foundry will be strong, and DRAM will remain at strong levels.

Timothy Arcuri inquired about the key factors influencing the 2025 WFE outlook, particularly concerning China's market dynamics, and asked if the increase in deferred revenue was linked to the Reliant systems business.

Answer

CEO Timothy Archer projected overall WFE growth in 2025 but noted that China's WFE and its share of Lam's revenue would likely decrease. He highlighted that key technology inflections driving growth are occurring outside of China. CFO Douglas Bettinger added that leading-edge logic and DRAM markets remain robust and confirmed that Reliant systems contributed to the growth in the Customer Support Business Group (CSBG) and deferred revenue.

Timothy Arcuri asked about the linearity of bookings throughout the third quarter of 2025, comparing it to the softening seen in the second quarter, and then inquired about the loadings assumed for the fourth quarter, the impact on cash gross margins, and the strategy for improving cash margins given current inventory levels.

Answer

CEO Haviv Ilan and Head of Investor Relations Mike Beckman explained that Q3 bookings were 'as expected' and not 'hectic' like Q2, with the turns business following a typical cyclical recovery. CEO Haviv Ilan and CFO Rafael Lizardi added that they are pleased with inventory levels and are adjusting loadings down in Q4 to maintain these levels, which, combined with lower revenue and higher depreciation, impacts gross margins.

Timothy Arcuri inquired about the linearity of bookings throughout the third quarter, comparing it to the softening observed in Q2, and then asked about the assumptions for Q4 loadings, the significant decline in cash gross margins, and the strategy to improve cash margins given current inventory levels.

Answer

CEO Haviv Ilan and Head of Investor Relations Mike Beckman clarified that Q3 bookings were 'as expected,' unlike Q2's volatility, with the 'turns' business following a typical cyclical recovery. Mr. Ilan explained that the company is pleased with its inventory position for customer support and is adjusting Q4 loadings down to maintain these levels, which impacts EPS due to lower revenue, higher depreciation, and reduced loadings.

Timothy Arcuri from UBS Financial Services Inc. questioned if the strong Q2 guidance was driven by customers pulling in orders ahead of potential tariffs and asked for an assessment of TI's exposure to retaliatory tariffs in China.

Answer

CEO Haviv Ilan clarified that the Q1 recovery was a broad-based industrial rebound due to low customer inventories, not tariff-related pull-ins. For Q2, while cautious, the company does not see a direct tariff impact in the data yet, though he acknowledged customers may want more inventory due to general anxiety. He stated that China-headquartered customers accounted for 20% of Q1 revenue and that TI is focused on providing 'geopolitically dependable capacity' and has significant flexibility with its global manufacturing footprint and consignment inventory to support these customers.

Timothy Arcuri of UBS questioned the unexpected growth in the automotive sector, its drivers in China, and the outlook for Q4. He also asked about the significant expected gross margin decline and potential factory loading reductions in the fourth quarter.

Answer

CEO Haviv Ilan attributed the automotive strength to a 20% sequential growth in China, driven by EV momentum, which he expects to continue. However, he noted continued weakness in the auto market outside of China. CFO Rafael Lizardi explained the Q4 gross margin pressure is due to lower revenue, continued depreciation increases from the new SM1 facility, and flat to slightly up OpEx.

Timothy Arcuri inquired about the sequential revenue breakdown between DRAM and NAND for the upcoming fiscal quarter, along with the gross margin drivers. He also asked for an update on the projected HBM Total Addressable Market (TAM) by 2028, given recent market developments, and the HBM outlook for 2026.

Answer

CFO Mark Murphy indicated a heavier DRAM mix for the first fiscal quarter, with a 580 basis point margin expansion driven by mix, pricing, and cost reductions, citing a constructive pricing environment and tight DRAM supply. CEO Sanjay Mehrotra clarified the HBM TAM projection of $100 billion by 2030, not 2028, and emphasized strong long-term growth, Micron's HBM4 leadership in performance and power efficiency, and the significant opportunity for memory in AI infrastructure spend.

Timothy Arcuri inquired about the sequential revenue split between DRAM and NAND for the upcoming quarter, along with gross margin drivers. He also asked for an updated HBM Total Addressable Market (TAM) forecast for 2028/2030, considering recent market developments, and the HBM outlook for the next fiscal year.

Answer

Mark Murphy, EVP & CFO, explained that the upcoming quarter would have a heavier DRAM mix, with gross margin expansion driven by mix, pricing, and cost reductions, citing a constructive pricing environment and tight DRAM supply. Sanjay Mehrotra, Chairman, President & CEO, reiterated the expectation for HBM TAM to reach $100 billion by 2030, emphasizing strong long-term growth and Micron's leadership in HBM4 with industry-leading performance and power efficiency.

Timothy Arcuri inquired about the sequential revenue split between DRAM and NAND in the fiscal Q1 guidance, along with the gross margin drivers. He also asked for an update on the HBM Total Addressable Market (TAM) forecast, specifically regarding the previously guided $100 billion by 2028, given recent market developments and investments, and the outlook for HBM in the next fiscal year.

Answer

Mark Murphy, CFO, explained that fiscal Q1 revenue growth would be driven by a heavier DRAM mix, with a 580 basis point margin expansion attributed to mix, pricing, and cost reductions. He highlighted a constructive pricing environment, tight DRAM supply, improving NAND, and robust demand across data center, traditional server, PC, smartphone, and auto markets, alongside structural supply tightness. Sanjay Mehrotra, CEO, clarified that the $100 billion HBM TAM projection was for 2030, not 2028, and reiterated expectations for HBM bit CAGR to outgrow overall DRAM. He emphasized Micron's strong HBM4 positioning with industry-leading performance (2.8 TB/s, >11 Gbps) and power efficiency, driven by increasing HBM value proposition and massive AI infrastructure investments, expressing confidence in HBM opportunities for 2026 and beyond.

Timothy Arcuri of UBS Group sought to understand the pricing dynamics, asking why overall DRAM ASP was down despite significant HBM revenue growth. He also inquired about the drivers behind the strong cost-per-bit reductions in both DRAM and NAND.

Answer

EVP and Chief Business Officer Sumit Sadana explained the blended DRAM ASP was impacted by a sharp mix shift towards lower-priced consumer markets (mobile, client) where shipment volumes surged. He clarified HBM pricing was steady and like-for-like pricing improved. EVP of Global Operations Manish Bhatia and CFO Mark Murphy attributed cost improvements to mix effects, on-track front-end reductions, and better-than-expected HBM yields.

Timothy Arcuri questioned the DRAM pricing dynamics, asking why blended ASP was down when high-priced HBM revenue grew significantly. He also asked for the reason behind the strong cost-down performance in both DRAM and NAND, which seemed better than expected.

Answer

EVP and Chief Business Officer Sumit Sadana explained that while HBM pricing was steady and like-for-like pricing improved, a sharp increase in shipments to lower-priced consumer end markets (mobile, client) caused the overall blended ASP to decline. Executive VP & CFO Mark Murphy and EVP of Global Operations Manish Bhatia noted that while front-end cost reductions are on track, the overall cost improvement was also heavily influenced by mix, along with better-than-expected yields on 12-high HBM.

Timothy Arcuri from UBS Group AG inquired about the scaling of the HBM Total Addressable Market (TAM) in relation to the accelerator market and whether there is a potential limit to HBM attachment on GPUs and ASICs.

Answer

Chairman, President & CEO Sanjay Mehrotra explained that HBM demand is growing robustly, with the market projected to expand from approximately $18 billion in calendar year 2025 to around $35 billion in 2025. He noted that HBM bit demand growth in 2026 will significantly outpace the overall DRAM industry. Mehrotra emphasized that the value proposition of HBM continues to strengthen with transitions to 12-high stacks, HBM4, and future custom HBM, and confirmed Micron is well-positioned, having already sampled its HBM4 products.

Asked about the scaling of the HBM Total Addressable Market (TAM) in relation to the accelerator market and whether there is a limit to HBM attachment on GPUs and ASICs.

Answer

The HBM market is projected to grow significantly, from approximately $18 billion in calendar year 2025 to $35 billion in 2025. HBM bit demand growth in 2026 will substantially exceed the overall DRAM industry growth. The value of HBM will continue to increase with transitions to 12-high stacks and HBM4, and future customization will further enhance its value proposition in accelerators. Micron is well-positioned, having already sampled HBM4 products.

Asked for a breakdown of the Q3 revenue guidance between DRAM and NAND, and questioned the gross margin trajectory, asking when margins would see a cleaner uplift from HBM and cost improvements.

Answer

The company indicated the bias of Q3 revenue growth is towards DRAM due to HBM and data center exposure, but did not provide a specific breakdown. They reiterated that Q4 gross margins would be up "somewhat" from Q3, with the long-term focus being on improving the product mix towards high-value solutions in both DRAM and NAND and managing costs.

Timothy Arcuri requested a breakdown of the fiscal Q3 revenue guidance, asking for the relative contribution from DRAM versus NAND. He also pressed on the gross margin trajectory, questioning if Q4 margins could recover to Q2 levels and when the financial benefits of HBM would be fully reflected.

Answer

CFO Mark Murphy declined to provide a specific revenue split for the Q3 guidance but indicated the growth would be biased toward DRAM, thanks to HBM and data center strength. Regarding margins, Murphy reiterated that Q4 gross margins would be "up somewhat" from Q3 but did not commit to a recovery to Q2 levels, highlighting that FY25 DRAM costs are expected to be flattish while NAND costs should see low-double-digit reductions. CEO Sanjay Mehrotra added that the company is focused on improving its product mix toward higher-profit pools.

Timothy Arcuri of UBS Group AG requested a baseline for the optics business given its double-digit growth guidance and asked for confirmation on whether total AI revenue (custom plus optics) would surpass 50% of company revenue in Q3.

Answer

Chairman & CEO Matt Murphy and CFO Willem Meintjes directed him to the Q4 FY25 data center mix (optics ~50%, custom ~25%) as a framework but stated they would not update the specific mix quarterly. Regarding the 50% milestone, Murphy confirmed the business is trending in that direction but did not have the precise calculation on hand to confirm if it would be achieved in Q3.

Timothy Arcuri from UBS Group asked for a breakdown of Data Center revenue, questioning if faster growth in lower-margin custom silicon impacted the gross margin, and requested an updated full-year AI revenue forecast.

Answer

Chairman and CEO Matt Murphy confirmed that the faster-growing custom silicon business runs at a lower gross margin, which impacts the overall mix. He did not provide a new annual forecast but noted that AI is on a trajectory to become the majority of Marvell's total company revenue. CFO Willem Meintjes added that the Q2 gross margin guide reflects this mix and expects a similar range in the second half.

Timothy Arcuri of UBS sought clarification on the data center revenue breakdown, asking if optics constituted half of AI revenue or half of total data center revenue. He also asked for a more precise definition of the term "very significantly" when describing how much Marvell would exceed its $2.5 billion AI revenue target for fiscal 2026.

Answer

Matthew Murphy, Chairman and CEO, clarified that the breakdown provided (half optics, 25% custom silicon) referred to the overall data center segment revenue. Regarding the fiscal 2026 AI revenue target, Murphy declined to provide a specific number but emphasized the strong momentum and suggested that the data center's overall contribution to Marvell's revenue (now 75%) serves as a strong indicator of the business's trajectory.

Timothy Arcuri requested more specific figures for AI revenue, asking for an estimate of AI revenue in the July quarter and a projection for the October quarter, including a potential breakdown for custom silicon.

Answer

CEO Matt Murphy declined to provide specific quarterly AI revenue figures but reiterated the full-year target of $1.5 billion, which he expects to significantly exceed. He reminded listeners that at the AI Day, the mix was projected to be two-thirds electro-optics and one-third custom silicon, and confirmed both are performing better than planned with custom silicon ramping strongly in the second half.

Timothy Arcuri from UBS Group followed up on the mention of a 50% CAGR for the AI market, asking about NVIDIA's visibility into next year and whether a 50% growth rate is a reasonable expectation for its Data Center business.

Answer

Founder, President, CEO & Director Jensen Huang responded that the company has 'very, very significant forecasts' from large customers for the upcoming year. He pointed to multiple growth vectors, including a surge in funding for AI startups, broader enterprise adoption via open-source models, and the emergence of industrial and robotics AI. Citing that current demand is extraordinarily high with products sold out, he suggested that growing into the $600 billion annual hyperscaler CapEx is a reasonable long-term outlook.

Timothy Arcuri of UBS Group questioned the outlook for the China market, asking if NVIDIA has an approved replacement for the H20 chip and whether the company can eventually return to its prior quarterly revenue run rate in the region.

Answer

President and CEO Jensen Huang stated that the latest export control limits make it 'impossible' to modify the Hopper architecture further for the China market, calling it the 'end of the road for Hopper.' He noted that while NVIDIA is exploring 'limited options,' the rules are very stringent, and the company has 'nothing to announce today' regarding a new compliant product.

Timothy Arcuri of UBS asked about the competitive balance between custom ASICs and merchant GPUs, and whether future infrastructure will feature heterogeneous clusters or remain distinct.

Answer

President and CEO Jensen Huang detailed NVIDIA's key differentiators, stating its architecture is more general-purpose, end-to-end, and accessible across all environments than narrow ASICs. He emphasized that NVIDIA's rapid performance gains directly translate to higher revenue for AI factories operating under fixed power budgets. Huang also stressed the complexity of the software ecosystem and NVIDIA's fast deployment speed as critical advantages, noting that simply designing a chip does not guarantee its deployment.

Timothy Arcuri of UBS asked about the ramp trajectory of Blackwell, questioning if it would cross over Hopper revenue in the April quarter and if that quarter would represent the trough for gross margins.

Answer

CFO Colette Kress confirmed that gross margins are expected to dip to the 'low 70s' during the initial Blackwell ramp before recovering to the 'mid-70s' as production scales. CEO Jensen Huang added that Hopper demand will remain strong for several quarters into next year, while Blackwell shipments will grow sequentially. He contextualized this within the long-term trends of modernizing the $1 trillion global data center infrastructure and building new 'AI factories'.

Timothy Arcuri asked about the shape of the Blackwell revenue ramp, questioning if liquid cooling requirements could be a gating factor, and also inquired about longer-term constraints like the power supply chain.

Answer

President and CEO Jensen Huang explained that Blackwell is offered in both air-cooled (HGX) and liquid-cooled (Grace Blackwell) configurations to meet diverse customer needs. He noted significant demand for liquid cooling as it enables 3-5x more AI throughput in power-limited data centers and offers a better TCO. He expressed confidence in the ramp, stating that the next trillion dollars of data center infrastructure will be accelerated, ensuring long-term demand.

Timothy Arcuri inquired about the strong growth in Analog Devices' Industrial segment, asking if the company is now shipping above consumption and whether the market has entered an inventory build phase.

Answer

EVP & CFO Richard Puccio stated that the Industrial segment's recovery is broad-based across all sectors and geographies. He clarified that channel inventories remain lean and that ADI believes end demand is still double-digits below consumption, indicating the strength is driven by a cyclical upturn, not channel fill.

Timothy Arcuri asked for a definition of 'normal seasonal' growth for Q2 and inquired about the book-to-bill trend when excluding the automotive segment.

Answer

Executive Michael Lucarelli defined normal Q2 seasonality as up low-to-mid single digits for the total company. CFO Rich Puccio addressed bookings, stating the overall book-to-bill was slightly below 1, which is normal for a seasonally lower Q1 outlook. He noted bookings were up in all regions except the Americas, reflecting a seasonal decline in Consumer.

Timothy Arcuri asked when capital deployment might shift from debt paydown to share repurchases and questioned the progress of the 'China for China' strategy, particularly with SMIC.

Answer

CFO Derek D'Antilio stated that debt repayment remains the most accretive use of capital and there are no current plans for broad-based share buybacks. CEO Michael Doogue confirmed the 'China for China' strategy is on track and competitively differentiating. He noted that while wafer transfers take time, customers are already leveraging their China-based back-end assembly and test capabilities.

Timothy Arcuri of UBS inquired about the progress of Allegro's 'China-for-China' supply chain strategy with SMIC and the factors impacting gross margin, particularly the lag between customer price reductions and internal cost savings.

Answer

CEO Michael Doogue confirmed the China-for-China initiative is progressing well, with meaningful revenue expected later in the year. He also explained that Q4 gross margins were affected by annual price negotiations occurring before vendor cost reductions could impact the P&L, a dynamic that takes about two quarters to normalize. He affirmed the long-term 60-65% variable contribution margin model remains intact.

Timothy Arcuri from UBS inquired about the relative performance outlook for magnetic sensors versus power ICs and the path back to mid-50s gross margins.

Answer

CEO Vineet Nargolwala noted that both product lines see broad-based momentum and often move together due to solution selling. CFO Derek D'Antilio added that both segments grew similarly in Q2. Regarding margins, D'Antilio reaffirmed the company's historical 65% incremental gross margin drop-through on revenue. He expressed confidence in reaching higher margins, driven by improved factory utilization, mix normalization, and the ramp of new, higher-margin products like TMR sensors and isolated gate drivers.

Timothy Arcuri of UBS Group asked about the competitive landscape for scale-up networking, referencing competing ecosystems like NVLink and questioning if Broadcom's Ethernet-based approach is an "ecosystem of one."

Answer

CEO Hock Tan countered that scale-up networking can be easily and effectively accomplished using open-standard Ethernet. He argued that there is no need to create new, proprietary protocols for a task that Ethernet already handles well. He expressed confidence that Ethernet, as the true open standard, will prevail in AI networking as it has in traditional networking.

Timothy Arcuri from UBS Group asked about the competitive landscape for AI scale-up networking, questioning if Broadcom's Ethernet is an 'ecosystem of one' against competing standards like UALink and the newly opened NVLink.

Answer

CEO Hock Tan dismissed concerns about competing proprietary protocols. He argued that open-standard, open-source Ethernet is fully capable of handling scale-up networking needs without requiring new systems. He expressed strong conviction that Ethernet will prevail in AI networking, just as it has in traditional networking for decades, because it is a proven, open standard.

Timothy Arcuri asked about the growth rate of Broadcom's AI revenue compared to the GPU compute market, questioning if the relationship would change next year, particularly as a key customer ramps a new custom ASIC.

Answer

President and CEO Hock Tan explained that Broadcom's AI business has a different trajectory from the merchant GPU market. He emphasized that Broadcom is focused on enabling large hyperscalers to build their own custom accelerators, a trend he believes will continue and grow over time, putting Broadcom on a different path than enterprise-focused GPU providers.

Timothy Arcuri from UBS sought to clarify the AI connectivity ramp, asking if CopperEdge revenue would be minimal until a large Q4 step-up. He also asked why guided gross margin is down sequentially while revenue is guided up.

Answer

President & CEO Hong Hou confirmed the demand 'air pocket' from the anchor CopperEdge customer but stated that revenue from new customers is expected to materialize in Q4 and ramp thereafter. EVP & CFO Mark Lin explained the gross margin guide is a reflection of expected product mix, which is the primary determinant of the company's margin profile.

Timothy Arcuri requested more precise timing on the anticipated revenue step-change within the data center segment and asked for an update on the portfolio rationalization plans, including how recent market uncertainty might affect the process and Semtech's price sensitivity.

Answer

President and CEO Hong Hou stated that while the overall data center portfolio is expected to grow quarter-over-quarter, the timing for a CopperEdge recovery at its anchor customer depends on their next-generation rack design timeline, which Semtech cannot control. Regarding portfolio rationalization, Hou emphasized that the company's balance sheet is significantly stronger, so there is no urgency to sell assets. He described the business as valuable, not distressed, and stated they will be patient for a buyer who recognizes the strategic synergy, noting recent tailwinds from competitors exiting the market.

Timothy Arcuri sought clarification on the expected full-year growth for the total AGS business, not just the 'core' services. He also asked if Applied Materials sees the WFE market as being first-half weighted this year, similar to its peers.

Answer

CFO Brice Hill clarified that while 'core' services will grow low-double-digits, the total AGS business growth will be 'much smaller' due to the decline in 200mm equipment sales. Regarding market weighting, he did not provide a direct H1/H2 forecast but highlighted the company's 7% year-to-date growth and durable demand trends.

Timothy Arcuri sought clarification on the expected full-year growth for the total Applied Global Services (AGS) business, not just the 'core' component. He also asked if Applied Materials sees the overall WFE market as being first-half weighted, in line with peer commentary.

Answer

CFO Brice Hill reiterated that the core services business will grow at a low double-digit rate, but the total AGS segment growth will be significantly smaller due to the decline in 200-millimeter equipment sales. He did not directly comment on market weighting but highlighted Applied's durable demand trends and 7% year-to-date growth.

Timothy Arcuri asked if Applied Materials gained WFE share in the previous year and how the company assesses the competitive headwind from domestic equipment suppliers in China.

Answer

CFO Brice Hill stated the company believes it gained share in all markets except for China, where local vendors have advantages due to trade rules. CEO Gary Dickerson added that Applied is well-positioned for share gains in leading-edge logic, DRAM, and packaging, and has a strong product pipeline to grow its available market in the ICAPS segment.

Timothy Arcuri questioned how much of the expected doubling of advanced node revenue would be incremental versus cannibalizing older nodes. He also asked about the long-term Wafer Fab Equipment (WFE) spending intensity required to support a $1 trillion semiconductor industry.

Answer

CFO Brice Hill clarified that the doubling of revenue from $2.5 billion is for shipments to gate-all-around (GAA) nodes, which are largely replacing spending on prior nodes. He noted the incremental market opportunity for GAA is about one-sixth higher per 100k wafer starts. Regarding WFE intensity, Hill expects it to remain in the mid-teens as a percentage of semiconductor revenue. CEO Gary Dickerson added that the increasing intensity of materials engineering provides a specific tailwind for Applied.

Speaking on behalf of Timothy Arcuri, an analyst asked for more detail on Qorvo's tariff mitigation steps and questioned how much of the June quarter guidance might be attributable to tariff-related demand pull-ins.

Answer

CFO Grant Brown reiterated that mitigation involves supply chain flexibility, alternative sources, and customer collaboration, emphasizing the key factor is the 'country of origin' designation from substantial transformation in Asia. Both Brown and David Fullwood, SVP of Sales and Marketing, stated that any pull-in activity has been modest and not meaningful, noting that initial customer anxiety has subsided as the situation became clearer.

On behalf of Timothy Arcuri, an analyst asked what changed in the guidance versus 90 days prior and inquired about potential pricing pressure at the largest customer, especially in light of tariffs.

Answer

CEO Philip Brace clarified that the guidance reflects a current view, not a change from a prior multi-quarter forecast, and that current trends appear seasonal. On pricing, he stated that it is a highly competitive market where they are always expected to deliver top performance at an aggressive cost, implying no fundamental change in the environment.

An associate on behalf of Timothy Arcuri asked about the competitive dynamics at the largest customer and whether the dual-sourcing strategy could potentially reverse in the future. He also asked for the percentage of revenue from the largest customer in the quarter.

Answer

CFO Kris Sennesael explained that winning business is based on having the best performance. If performance between competitors is very close on a large, expensive part, the customer may choose to dual-source. He stated their part was as good as the competitor's but not substantially better, leading to the decision. He also disclosed that the largest customer was 72% of revenue in the quarter.

Timothy Arcuri questioned the outlook for Skyworks' largest customer in the December quarter, probing for potential demand pull-ins to September. He also asked about the rationale behind the low level of share repurchases despite strong free cash flow.

Answer

CFO Kris Sennesael stated that demand from the largest customer was in line with expectations, with no pull-ins, and is expected to grow 5% to 10% sequentially in the December quarter. Regarding capital allocation, Sennesael highlighted the company's strong balance sheet and free cash flow, which provide optionality for M&A and shareholder returns. He noted the recent dividend increase and affirmed the long-term intent to return all excess cash to shareholders.

Timothy Arcuri of UBS asked if recent drive unit shipment levels represent a production ceiling and questioned why HDD LTAs would not be subject to the same customer over-ordering seen in the memory market.

Answer

CEO Irving Tan clarified that unit shipment levels are not a hard ceiling and fluctuate with product mix and yields. He distinguished the HDD market from memory, emphasizing a healthier supply-demand balance and a collaborative relationship with customers to ensure long-term innovation, noting that some LTAs now have associated purchase orders.

An analyst on behalf of Tim Arcuri asked if tight HDD supply is changing customer behavior regarding build-to-order (BTO) commitments. The follow-up question concerned the post-spin NAND strategy, asking if the new company would prioritize margins over market share, similar to the HDD business.

Answer

CFO Wissam Jabre confirmed no change in customer behavior, noting the pivot to BTO already provides a 52-week planning horizon. CEO David Goeckeler deferred the detailed NAND strategy question to the upcoming Investor Day but stated the current approach of actively managing supply to match demand signals is indicative of the future strategy.

Timothy Arcuri questioned the nature of HDD bookings, asking about the risk of customers placing 'shadow orders' and whether the 2-to-6 quarter agreements are binding 'take-or-pay' contracts.

Answer

CEO David Goeckeler explained that the industry is evolving from quarterly transactions to longer-term planning. He stated the current agreements are not take-or-pay but are focused on gaining high-integrity visibility into customer demand to align supply. He emphasized that it's in the mutual interest of WDC and its large hyperscaler partners to provide accurate demand signals to ensure market supply without creating excess capacity.