Vivek Arya

Vivek Arya asked about the potential path forward for Micron's gross margins, questioning if they could reach 70% or 75% given current record levels and the expanding margins of their customers. He also sought clarification on the 'sold out' status for HBM, specifically if it implies an inability to upside production or if it's based on current forecasts.

Answer

Mark Murphy (CFO) attributed record gross margins to AI-driven demand, leadership technology, operational efficiency, capital discipline, and structural supply constraints. He expects margins to increase gradually beyond 2026, driven by market conditions, deployment to premium products, and cost performance. Sumit Sadana (Chief Business Officer) confirmed HBM supply for 2026 is sold out with volume and price agreements, noting that while upside supply can be placed quickly, the overall unmet demand is significant. Manish Bhatia (EVP of Global Operations) added that HBM and DRAM share the 1-beta node, and HBM4 yield ramp is expected to be faster than HBM3E 12-high.

Vivek Arya inquired about Micron's non-HBM DRAM bit growth, NAND/Flash bit shipment guidance for the current quarter, the company's strategy for allocating capacity between conventional DRAM and HBM given improving profitability, the attach rate of high-capacity and high-performance ESSDs on AI servers, the potential trajectory for gross margins beyond current record levels, and the flexibility in HBM production to meet potential upside demand from customers. He also asked about the OPEX trajectory for the next couple of quarters.

Answer

Mark Murphy (CFO) detailed plans for 20% bit shipment growth in fiscal 2026 through efficiency and node transitions, noting modest sequential bit growth in Q1 and Q2, with revenue primarily price-driven. He also provided OPEX guidance, expecting it to be flattish in Q3 relative to Q2, then up in Q4. Sumit Sadana (Chief Business Officer) explained that demand significantly outstrips supply across all segments, leading to strategic allocation towards data centers while maintaining diversification. He highlighted growing attach rates for QLC and Gen 6 SSDs in AI servers, further boosted by HDD shortages. Mark Murphy (CFO) added that the SSD business surpassed $1 billion in Q1 2026 with expected acceleration. Regarding gross margins, Mark Murphy (CFO) attributed record levels to AI demand, technology leadership, and supply constraints, anticipating further gradual expansion. Sumit Sadana (Chief Business Officer) confirmed HBM supply for 2026 is sold out with agreements, but upside supply can be quickly placed, emphasizing substantial unmet demand. Manish Bhatia (EVP of Global Operations) noted shared fab output between HBM and DRAM and expected faster HBM4 yield ramps.

Vivek Arya asked at what point increasing memory prices might impact demand for electronics, specifically for consumer and traditional enterprise products outside of the data center and AI markets. He questioned if Micron foresees any elasticity or impact on demand in 2026 and how this might shape memory pricing for the coming year.

Answer

CEO Sanjay Mehrotra acknowledged that some consumer markets, like smartphones and PCs, might see unit demand or mix adjustments impacted by memory prices, but these factors are accounted for in Micron's forecasts. He emphasized that even with these considerations, a very tight supply environment persists. Sanjay Mehrotra highlighted that AI experiences, from data center to edge devices, fundamentally require more memory, and insufficient memory would impact AI functionality, driving customers to seek long-term supply access.

Vivek Arya from Bank of America Corporation asked at what point increasing memory prices might impact demand for electronics outside of the data center and AI markets, specifically for consumer and traditional enterprise products, and how this elasticity might shape memory pricing in 2026.

Answer

CEO Sanjay Mehrotra acknowledged that some consumer market unit demand might be impacted by semiconductor and memory prices, leading to potential mix adjustments by customers in smartphones and PCs. However, he emphasized that these impacts are accounted for in Micron's forecasts, which still project a very tight supply environment. Sanjay highlighted that AI experiences, from data center to edge devices, necessitate more memory, and insufficient memory impacts AI functionality, driving customers to seek long-term supply access.

Vivek Arya asked about the expected transition timeline from HBM3 to HBM4, including the crossover point, and the pricing direction for HBM3E in 2026. He also questioned the potential for further gross margin expansion beyond the 51.5% guidance for Q1, particularly for the Cloud Memory Business Unit (CMBU).

Answer

CEO Sanjay Mehrotra stated that HBM4 production would ramp in line with customer demand, with first shipments in calendar Q2 2026, and that Micron's HBM share is expected to grow in 2026. He did not comment on HBM3E pricing direction but noted that agreements for most 2026 supply are complete. CFO Mark Murphy projected sequential gross margin improvement from Q1 to Q2, driven by tight DRAM supply, improving NAND, favorable mix, and cost performance, highlighting durable demand-supply factors and healthy margins for both HBM and non-HBM in 2026.

Vivek Arya asked about the expected transition timeline from HBM3E to HBM4, including the crossover point, and sought clarification on the pricing direction for HBM3E in 2026 and its potential impact on Micron's market share. He also inquired about the conceptual trajectory of consolidated gross margins beyond Q1, and the potential for further expansion in the Cloud Memory Business Unit's already strong gross and operating margins.

Answer

Sanjay Mehrotra, Chairman, President & CEO, stated that HBM4 production would ramp in line with customer demands, with first production shipments in CQ2 2026, and confirmed HBM3E pricing agreements for the vast majority of 2026 supply, noting a tight supply environment. Mark Murphy, EVP & CFO, indicated expectations for sequential gross margin improvement from Q1 to Q2, driven by tight DRAM supply, improving NAND business, favorable mix, and strong cost performance, reiterating healthy margins for both HBM and non-HBM in 2026.

Vivek Arya asked about the expected transition timeline from HBM3E to HBM4, including the crossover point in the next year. He also inquired about the pricing direction for HBM3E in 2026 and whether Micron's HBM3E market share is expected to change.

Answer

Sanjay Mehrotra, CEO, stated that HBM4 production ramp would align with customer timing, with first production shipments in calendar Q2 2026 and ramping through the second half of 2026. He highlighted Micron's HBM4 as an industry-leading product with the highest performance and low power. He confirmed that Micron's HBM share is expected to grow in 2026. While not commenting on the specific pricing direction for HBM3E, he noted that pricing agreements for the vast majority of 2026 HBM3E supply are already concluded, and discussions for HBM4 are ongoing. He anticipates a healthy demand-supply environment for overall DRAM in 2026, benefiting profitability across HBM and non-HBM products. Mark Murphy, CFO, added that gross margins are expected to improve sequentially from Q1 to Q2, driven by tight DRAM supply, improving NAND, favorable product mix, and strong cost performance. He reiterated durable demand-supply factors, including increasing data center spend, improving traditional server demand, and constrained supply due to node transitions and capacity limitations, expecting healthy margins for both HBM and non-HBM in 2026.

Vivek Arya of Bank of America asked about the key drivers for the sequential upside in gross margins, whether the current level represents a new baseline, and the potential puts and takes for margins in subsequent quarters.

Answer

Executive VP & CFO Mark Murphy attributed the Q3 gross margin beat to better-than-expected pricing, which offset a higher consumer-oriented mix. For the Q4 forecast, he explained that margins benefit from this new pricing baseline plus a favorable mix shift towards DRAM and data center products. While not providing specific forward guidance beyond Q4, Murphy stated the market environment remains constructive, inventories are tight, and he expects gross margins can continue to improve by optimizing the product mix.

Inquired about the drivers for the sequential gross margin upside, whether the current level represents a new baseline, and the potential factors affecting margins in the quarters beyond Q4.

Answer

The Q3 gross margin beat was driven by better-than-expected pricing. The strong Q4 guidance reflects a rebaselining of the business, further boosted by a favorable product mix (more DRAM and data center revenue). While not providing specific guidance beyond Q4, the business trajectory is positive with a constructive market, tight inventories, and a focus on pricing and shifting to higher-value products, suggesting gross margins can continue to improve.

Vivek Arya inquired about the drivers for the increased High Bandwidth Memory (HBM) Total Addressable Market (TAM) forecast and Micron's capacity flexibility. He also asked for details on gross margin headwinds from start-up costs and the impact of shipping higher-cost inventory.

Answer

Chief Business Officer Sumit Sadana explained the HBM TAM increase is driven by a combination of robust shipments, a faster shift to 12-high stacks, and higher ASPs. CFO Mark Murphy quantified start-up costs as modest (under 30-40 bps effect exiting the year) but increasing through fiscal '26. Murphy also noted that previously written-down inventories have cleared, but some higher-cost NAND inventories from underutilization will pass through in Q4 and into '26.

Vivek Arya asked about Broadcom's $73 billion AI backlog delivery timeline and the evolution of XPU content and share at its largest customer, addressing concerns about customer-owned tooling.

Answer

Hock Tan (President and CEO) clarified the $73 billion AI backlog is for delivery over the next 18 months, with expectations for more bookings. He dismissed the 'customer tooling' hypothesis as overblown, emphasizing the strategic, multi-year journey for custom AI accelerators due to their superior performance compared to general-purpose GPUs.

Vivek Arya asked about Broadcom's AI revenue backlog projections for fiscal year 2026 and the evolution of Broadcom's XPU content and share with its largest hyperscale customers amidst discussions of customer-owned tooling.

Answer

Hock Tan (President and CEO, Broadcom) clarified the $73 billion AI backlog for the next 18 months is a current snapshot, with expectations for more bookings. He also addressed the 'customer tooling' hypothesis, stating that custom AI accelerators offer significant performance advantages over general-purpose GPUs and that the trend of customers developing their own XPUs is a multi-year strategic journey, not a short-term transactional move, and he believes the hypothesis of widespread customer-owned tooling is overblown.

Vivek Arya asked for quantification of the new fiscal 2026 AI guidance, specifically if it's 60% growth plus the $10 billion mentioned, and how the custom XPU versus networking mix is expected to evolve for fiscal 2026.

Answer

Hock Tan, President and CEO, clarified that the 2026 AI growth rate is expected to accelerate beyond the 50-60% seen in 2025, describing it as a 'fairly material improvement' without providing a specific number. He expects the networking percentage of the AI revenue pool to decline in 2026 due to increased XPU share from existing and the new fourth customer.

Vivek Arya of Bank of America asked a two-part question: first, whether strong networking results implied weaker-than-expected custom processor (XPU) performance, and second, what milestones investors should watch for new XPU customer prospects to convert to revenue.

Answer

CEO Hock Tan dismissed the first part, stating that XPU performance is on its expected trajectory with no softness. On the second part, he reiterated that Broadcom is not updating its 2027 outlook or providing timelines for prospects, noting that an update is unlikely before 2026. He emphasized the call's focus was on providing visibility into the 2026 growth trajectory.

Vivek Arya from Bank of America asked if the strong networking results implied a weaker-than-expected quarter for custom silicon (XPUs), given the overall AI result was in line. He also requested key milestones for converting the pipeline of four XPU prospects into revenue.

Answer

CEO Hock Tan refuted the suggestion of XPU softness, asserting that its performance was on the expected trajectory. Regarding new customers, he stated that Broadcom would not provide updates on prospects until they become revenue-generating customers and that the company was not updating its 2027 outlook at this time, reiterating the call's focus was on providing visibility into the 2026 growth path.

Asked how Broadcom's AI opportunity and market share would be affected if the market shifts more towards inference workloads, and whether this would change the TAM or favor GPUs over XPUs.

Answer

Hock Tan clarified that Broadcom's XPU portfolio already addresses both training and inference with different chip architectures. He confirmed that the $60 billion to $90 billion TAM includes both workloads, though he acknowledged that the larger portion of the revenue currently comes from training.

Vivek Arya asked for the estimated AI SAM for 2024 to provide a baseline for the company's $12.2 billion in sales, its market share assumptions, and the resulting impact of AI's growth on semiconductor gross margins.

Answer

President and CEO Hock Tan estimated the 2024 SAM for his three key hyperscale customers was between $15 billion and $20 billion. He acknowledged that while the mix shift towards AI will dilute semiconductor gross margins, the substantial revenue growth will leverage fixed costs, leading to an overall improvement in operating margins.

Vivek Arya asked for clarification on Broadcom's AI revenue mix between compute and networking for Q3 and Q4, and inquired about the company's confidence and visibility for AI revenue growth into fiscal 2025.

Answer

CFO Kirsten Spears confirmed that the AI revenue mix was approximately two-thirds compute and one-third networking in Q3, with a similar trend expected for Q4. She also stated that while not providing specific guidance, Broadcom expects fiscal 2025 to show continued strong growth in AI revenue.

Vivek Arya from Bank of America Corporation questioned whether the IP business is de-risked, comparing annualized Q4 IP revenue to the modest growth forecast for fiscal year 2026, and asked about the sequential recovery. He also inquired about the absolute dollar assumption for China sales relative to fiscal year 2025 and whether the EDA and IP businesses can achieve double-digit growth amidst ongoing China restrictions.

Answer

Sassine Ghazi, CEO of Synopsys, advised against quarter-by-quarter analysis for the lumpy IP business, expressing confidence in the portfolio and stating that previously communicated headwinds for 2026 have been de-risked. Shelagh Glaser, CFO, noted IP revenue would be back-half loaded due to HPC title availability. For China, Ghazi expects a challenging environment, with the FY26 guide reflecting a pragmatic, de-risked view. He maintained that long-term double-digit EDA growth is achievable through complexity, joint solutions, and Agentic AI, despite China's impact.

Vivek Arya inquired about the growth rate of design starts observed in the past year and the assumptions for this metric in the forecast. He also asked about the size of Synopsys's largest customer in FY24 and how any potential restructuring at that customer is factored into the outlook.

Answer

CEO Sassine Ghazi stated that silicon investments from hyperscalers and their semiconductor suppliers have been increasing for the last 3-5 years and are not expected to slow in FY25. Regarding the largest customer, he explained that while multiyear EDA contracts provide stability, the timing of IP and hardware revenue can be lumpy and shift based on project roadmaps. This dynamic is factored into the FY25 guidance and its 45%-55% first-half/second-half revenue split.

Vivek Arya inquired about Synopsys's progress in monetizing AI to lift core EDA growth from 12% to 14% and asked for the near-term outlook for the EDA segment's growth rate, which has been around 9% year-to-date.

Answer

CEO Sassine Ghazi detailed the progress of AI tools, noting DSO.ai is capturing a 20% uplift, while VSO.ai is in early monetization and ASO.ai is in evaluation. He clarified that achieving the 12-14% growth target has no specific timeframe but is supported by the value delivered. Regarding near-term growth, both Ghazi and CFO Shelagh Glaser advised looking at trailing-twelve-month (TTM) growth, which is 10%, cautioning that quarterly figures can be skewed by tough comparisons, like the 23% growth in Q3 of the prior year.

Vivek Arya questioned why Marvell correlates its optics business growth to Cloud CapEx rather than the faster growth of AI accelerators, and whether the 20% custom growth is driven by a second customer or continued growth with the first, given the second customer's historical ramp patterns.

Answer

Chairman and CEO Matt Murphy clarified that Cloud CapEx serves as a broad proxy for the investment community, but the optics business is fundamentally driven by AI acceleration, which grows faster than CapEx. For custom growth, the 20% projection is primarily from the current lead customer's product transition and initial XPU-attached ramps, with significant contribution from the next larger XPU customer expected mainly in fiscal 2028, leading to a doubling of that business.

Vivek Arya asked two questions: first, why Marvell correlates its optics business growth to Cloud CapEx instead of the faster-growing AI accelerators; and second, regarding the 'at least 20%' custom growth for next year, whether it's driven by the second customer coming on board or growth with the first, noting the second customer's lack of history with big ASIC program ramps.

Answer

Matt Murphy (Chairman and CEO) clarified that correlating optics to Cloud CapEx was a broad proxy for the investment community, but agreed that the optics business is fundamentally driven by AI and AI acceleration, which grows faster. For custom growth, he stated that the 'at least 20%' for next year is primarily driven by the current business and a product transition with the lead customer, along with XPU-attached programs kicking in. He reiterated that the next bigger XPU customer's contribution is mostly for FY2028, leading to the doubling from FY2027 to FY2028.

Vivek Arya of Bank of America asked if Marvell's data center growth could accelerate year-over-year in Q4 and whether the company has the visibility to grow its custom business in line with the broader industry's 50-60% growth expectations for next year.

Answer

Chairman & CEO Matt Murphy declined to provide a specific annual or Q4 data center growth forecast but reiterated confidence in the business momentum. He highlighted that the custom business will be up in the second half versus the first and pointed to the significant recovery in the enterprise networking and carrier infrastructure segments, whose annualized run rate is rebounding from a low of $900 million to an implied $1.7 billion in the Q3 guide.

Vivek Arya of Bank of America inquired about the next-generation 3-nanometer AI XPU programs, asking about the direction of content value and whether Marvell has exclusivity, given recent supply chain reports.

Answer

Chairman and CEO Matt Murphy clarified that supply chain sources have an incomplete view. He affirmed Marvell is the incumbent on the current AI XPU, has secured 3nm wafer and advanced packaging capacity for the follow-on program to start production in 2026, and expects revenue from this key customer to continue growing. Murphy acknowledged that given the massive volumes, customers may pursue multiple paths but reiterated confidence in Marvell's multi-generational growth.

Vivek Arya from Bank of America requested a quantitative breakdown of AI versus non-AI revenue within the data center segment for Q4 and Q1, and questioned why the segment's growth appeared modest relative to the spending of its largest customers.

Answer

Matthew Murphy, Chairman and CEO, addressed the growth question by highlighting strong recent performance, including 25% sequential data center growth in both Q3 and Q4. He clarified that for Q4, AI revenue constituted more than half of the data center segment. He further detailed that within data center revenue, electro-optics represents about half, while custom silicon has grown to approximately 25%.

Vivek Arya inquired about the quantification of Marvell's AI revenues for fiscal years 2025 and 2026, and whether the growth outlook is determined more by demand visibility or supply constraints.

Answer

CEO Matt Murphy stated that AI revenue for fiscal 2025 is tracking "significantly ahead" of the initial $1.5 billion target by "hundreds of millions of dollars." He confirmed that the outlook for fiscal 2026 is also stronger than the original $2.5 billion forecast. Murphy clarified that this robust growth is driven by strong customer demand, noting that Marvell has successfully secured the necessary supply chain capacity to meet its plans and potential upside.

Vivek Arya asked for an assessment of the competitive landscape in two key AI areas: the DSP market as it moves to 200-gig per lane, and the custom compute market, particularly regarding potential challenges from Taiwanese competitors.

Answer

CEO Matt Murphy stated that while the DSP market is competitive, Marvell maintains a high market share due to its complete platform (DSPs, TIAs, drivers), strong execution, and partnerships. For custom silicon, he argued that success requires a full platform of IP and proven execution on complex chips, which positions Marvell strongly against competitors, noting they have one large, capable competitor in this area.

Vivek Arya inquired about the current and future applications of AECs by core customers, and the potential impact of co-packaged optics (CPO) on AEC usage. He also asked about the ASP lift from 100 to 200 gig per lane compared to the 50 to 100 gig transition, and any changes in the competitive landscape at 200 gig.

Answer

President and CEO Bill Brennan outlined current AEC applications including front-end network, scale-out, and switch racks, noting that the scale-up network remains a high-volume opportunity. He expressed skepticism about CPO's near-term impact due to known pitfalls in reliability, serviceability, and cost, stating Credo's focus on optimized power and reliability solutions. Regarding ASPs, Bill Brennan explained that they are complex, depending on connectors, devices, and length, but confirmed an expected uplift with transitions to faster lane speeds like 100 and 200 gig.

Vivek Arya inquired about the revenue contribution from Credo's top three customers, the drivers behind the fiscal 2026 revenue forecast, and the rationale for the Q1 gross margin guidance.

Answer

CFO Dan Fleming disclosed that the top three customers contributed 61%, 12%, and 11% of Q4 revenue, respectively. He noted that while a linear projection for FY26 revenue is the current best estimate, two new hyperscalers are expected to ramp in the second half. Fleming explained that gross margin expansion isn't always linear due to mix, but the company expects margins to remain at or above the high end of its long-term model. He also stated that CapEx may double in the upcoming fiscal year.

Vivek Arya inquired about the revenue concentration with Credo's largest customer, the adoption stage of Active Electrical Cables (AECs) at that customer, and the growth outlook for the rest of the business. He also asked how a market shift toward AI inference might affect connectivity needs and the AEC opportunity.

Answer

CFO Dan Fleming confirmed the largest customer was 86% of revenue in Q3, calling it an "outlier" and projecting 3-4 customers would exceed 10% of revenue in the coming year based on forecasts. CEO William Brennan added that this ramp confirms the AEC market TAM and Credo's leadership. He noted that three hyperscalers are in volume production with two more qualifying for fiscal '26. Brennan also stated that a growing inference market would likely represent a larger opportunity for AECs due to the sheer number of deployments.

Vivek Arya questioned what was driving the revenue inflection point now, especially since some next-generation GPU launches were delayed. He also requested details on the three 10% customers, including their revenue contribution and growth outlook.

Answer

CEO William Brennan explained the inflection is driven by the execution of long-term deployment plans using existing, established architectures, not next-gen products. CFO Dan Fleming detailed the 10% customers for Q2: the first hyperscaler (Microsoft) at 11%, a second hyperscaler at 33%, and an emerging hyperscaler at 14%. Fleming noted the second customer is the primary driver for the strong second-half outlook.

Vivek Arya inquired about Analog Devices' near-term Q1 guidance, segment-specific strength, and the broader macro perspective influencing the strong fiscal year 2026 sales growth outlook.

Answer

CFO Richard Puccio detailed the Q1 outlook, expecting industrial to be up mid-single digits and communications up 10% above seasonal, while auto is projected down mid-single digits. CEO Vincent Roche expressed confidence in broad-based growth for FY26, led by industrial and communications, driven by lean inventories, data center CapEx, and strong content growth in aerospace & defense and ATE, despite macro uncertainties.

Vivek Arya asked if the 'green shoots' in the industrial sector suggest ADI could achieve seasonal or above-seasonal growth in the upcoming Q1, and requested clarification on normal Q1 seasonality.

Answer

EVP & CFO Richard Puccio indicated that while ADI does not guide for Q1, the company expects to grow at a seasonal rate, which is typically down in the low single digits. CEO & Chair Vincent Roche added that industrial momentum will be strong, aided by the eventual normalization of customer inventories.

Vivek Arya inquired about the extent to which Analog Devices is currently undershipping end demand during its cyclical upturn and asked for a timeline for when sales will normalize, particularly for the industrial segment.

Answer

CEO Vincent Roche confirmed the company is in a cyclical upturn and has intentionally kept channel inventory lean, especially in industrial. Executive Richard Puccio quantified the current undershipment at over 10% below low-end consumption. He stated that with the guided 10% sequential growth for Industrial in Q3, the company expects to be shipping in line with end demand for that segment.

Vivek Arya from Bank of America Securities sought clarification on the 'long-term model growth' target and asked about the extent of inventory normalization, questioning if it applied to both distributors and OEMs across all end markets.

Answer

CEO Vincent Roche confirmed that inventory normalization is occurring across direct and distribution channels and is being observed at top customers. CFO Rich Puccio clarified the long-term growth model targets around 10% annually, with potential upside. Executive Michael Lucarelli added that based on normalizing trends, key markets could perform at the high end of typical seasonality in Q3.

Vivek Arya questioned the strength of the Industrial segment's recovery, noting its modest Q4 growth and Q1 guidance, and asked what would drive above-seasonal growth in fiscal 2025.

Answer

CFO Rich Puccio acknowledged Q4 Industrial was lower than expected due to broad market weakness and a decision to reduce channel inventory. However, he expressed confidence in the recovery, noting ADI has been undershipping end demand for 18 months. He anticipates this will fuel growth in the remainder of fiscal 2025, with the pace dependent on the macro environment.

Vivek Arya asked about NVIDIA's assumptions for content per gigawatt (GW) within the $500 billion forecast and, for the longer-term $3-$4 trillion Data Center market by 2030, how much would require vendor financing versus customer/government/enterprise cash flows.

Answer

Jensen Huang, President and CEO, NVIDIA, stated that NVIDIA's content per GW increases with each generation (e.g., Blackwell at $30B±, Rubin higher), emphasizing Performance per watt for TCO improvement. He noted that current Hyperscaler investments for Accelerated Computing and Generative AI are largely cash flow funded, while Agentic AI and broader industry adoption will drive new, independently funded infrastructure builds.

Vivek Arya from Bank of America sought clarification on the conditions required to ship the projected $2-5 billion of H20 products to China and the sustainable pace of that business. He also asked about the competitive landscape, particularly the threat from ASICs and how customers are managing their use of merchant silicon versus custom ASICs.

Answer

EVP & CFO Colette Kress stated that while there is interest and initial licenses for H20 shipments, ongoing geopolitical discussions create uncertainty. Founder, President, CEO & Director Jensen Huang addressed competition by emphasizing that NVIDIA provides a full-stack, co-designed AI infrastructure solution, not just a chip. He argued that the complexity of AI factories, rapid model evolution, and the need for high performance-per-watt in power-limited data centers make NVIDIA's versatile platform superior to specialized ASICs.

Vivek Arya from Bank of America Securities sought clarification on the full financial impact of the China H20 export controls beyond Q2 and asked for perspective on the long-term AI spending trajectory, including the possibility of digestion periods.

Answer

EVP and CFO Colette Kress confirmed a Q2 revenue headwind of approximately $8 billion from lost H20 orders and noted the future loss of a nearly $50 billion addressable market in China. President and CEO Jensen Huang described the current AI build-out as being in its 'very early stages,' viewing it as essential infrastructure for every country and industry, suggesting a prolonged growth cycle across cloud, enterprise, telco, and industrial sectors.

Vivek Arya of Bank of America Securities asked if Q1 represents the bottom for gross margins and what provides confidence that strong demand can be sustained into the next year.

Answer

EVP and CFO Colette Kress confirmed that gross margins will be in the low 70s during the initial Blackwell ramp as the company prioritizes expediting manufacturing, with an expected return to the mid-70s later in the year. President and CEO Jensen Huang added that confidence in sustained demand comes from visible data center capital investments, the fundamental software shift to AI, strong partner forecasts, and emerging growth waves like Agentic, Physical, and Sovereign AI.

Vivek Arya from Bank of America Securities sought clarification on the gross margin recovery timeline and asked when a 'digestion phase' might occur in the current hardware deployment cycle.

Answer

CFO Colette Kress affirmed that reaching mid-70s gross margins in the second half of calendar 2025 is a 'reasonable assumption or goal'. CEO Jensen Huang argued that a digestion phase is unlikely until the world's $1 trillion data center infrastructure is modernized for machine learning. He stressed that the creation of a new 'AI factory' industry, similar to the emergence of the iPhone, will drive demand for several years.

Vivek Arya inquired about the recently announced Blackwell GPU mask change, its impact on the production timeline, and how NVIDIA can still ship several billion dollars of Blackwell in Q4.

Answer

President and CEO Jensen Huang confirmed the mask change is complete with no functional alterations. He stated that functional samples of Blackwell and Grace Blackwell are currently shipping to partners, with over 100 system types being enabled. Mr. Huang clarified that full production shipments are on track to begin in Q4.

Vivek Arya questioned the basis for Microchip's confidence in expecting above-seasonal growth for the next three quarters, given low lead times and macro cross-currents. He also asked about the drivers of December's gross margin increase, utilization ramp levels, and target inventory levels.

Answer

President and CEO Steve Sanghi attributed confidence to strong March quarter backlog visibility, the anticipated closing of the sell-in/sell-through gap, and the seasonal strength of June and September quarters. CFO Eric Bjornholt explained that gross margin improvement is due to managing manufacturing output and a planned fab ramp, with a long-term gross margin target of 65%.

Vivek Arya questioned the basis for Microchip's confidence in expecting above-seasonal growth for the next three quarters (March, June, September 2026), given low lead times and macro cross-currents, and then asked about the drivers for December's gross margin increase, specifically regarding utilization levels and target inventory days.

Answer

President and CEO Steve Sanghi cited strong March quarter backlog visibility and booking rates, along with expected closure of the sell-in/sell-through gap and customer inventory replenishment, as drivers for future confidence. He also noted June and September are historically strong quarters. CFO Eric Bjornholt explained that gross margin improvement is due to increasing manufacturing output, with plans to continue ramping fabs based on environment, but did not specify target inventory days or exact utilization percentages.

Vivek Arya asked about the strength of Microchip's recovery, questioning if the 5% sequential growth guidance for September is above seasonal and what that implies for future quarters. He also inquired about the macro environment and potential tariff impacts, contrasting Microchip's optimism with caution from peers.

Answer

CEO Steve Sanghi stated that the September guidance is "well above seasonal," which is typically around 3%. He expects to remain above seasonal in the December and March quarters as well. Sanghi attributed the strong performance to a "trifecta effect" of inventory correction across the supply chain, which he believes is a more significant driver than any tariff-related pull-ins. He estimated tariff impacts were minimal, in the mid-to-high single-digit millions, and noted that Microchip's sales decline was steeper than peers, leading to a stronger rebound.

Vivek Arya asked for clarification on the seasonality of the September quarter's 5% sequential growth guidance and inquired about the macro environment and potential tariff impacts compared to peers.

Answer

CEO Steve Sanghi characterized the guidance as "well above seasonal" and attributed the strong recovery to Microchip's unique inventory correction dynamics, not significant tariff pull-ins. He explained that after a deeper downturn due to their PSP program, the company is now benefiting from a "trifecta effect" of inventory normalization across the supply chain, and estimated direct tariff impacts were minimal.

Vivek Arya asked why March quarter gross margins were at the lower end of guidance despite higher sales, what the pricing environment assumption is for the year, and for any visibility into the September quarter.

Answer

CFO J. Bjornholt attributed the lower gross margin to aggressive inventory reduction efforts, which resulted in low factory utilization and high reserve charges. CEO Steve Sanghi stated the company assumes a mid-single-digit price decrease for the year. Regarding September, Sanghi expressed optimism, noting the quarter's backlog is currently tracking higher than the June quarter's was at the same point in time.

Vivek Arya asked for details on where inventory remains most elevated by end market or product, and whether this is a Microchip-specific issue. He also inquired about the company's medium-term earnings power.

Answer

CEO Steve Sanghi explained that high inventory is broad-based across all end markets. He noted that direct customer inventory is higher than distribution inventory partly because Microchip dismantled its non-cancellable order program later than competitors. Regarding earnings power, both Sanghi and CFO Eric Bjornholt stated they do not guide long-term but are focused on a 9-point plan, with more details on the long-term model to be shared on March 3. They believe Microchip is positioned for above-market growth once the inventory correction ends.

Vivek Arya inquired why the correction in microcontrollers and industrial markets seems more severe for Microchip and sought confidence that this is a cyclical issue rather than company-specific share loss. He also asked about the assumed level of turns business for the December quarter.

Answer

CEO Ganesh Moorthy attributed the severity to an asynchronous cycle and an inventory overhang from customers who had become overly optimistic. He affirmed his confidence comes from strong customer design-in programs, stating it's a market correction, not share loss. Executive J. Bjornholt noted that while they don't break out turns, the amount needed for the guidance is within historical norms for the company to execute on.

Vivek Arya sought clarification on SoftBank's contribution to Q2 revenue, projections for Q3 and Q4, the sustainability of this quarterly rate, and potential cannibalization of licensing streams if Arm moves into physical chips or chiplets.

Answer

CFO Jason Child clarified that SoftBank's contribution increased by $52 million to $178 million in Q2, which is a good run rate. He explained that this revenue comprises license and design services, noting its lower margin. He discussed potential future revenue streams (royalties or gross revenue from chip sales) and acknowledged potential cannibalization of current license/design services, but emphasized the durable nature of the revenue as part of a larger effort involving OpenAI and other Stargate partners.

Vivek Arya requested clarification on the SoftBank contribution to revenue in Q2, projections for Q3 and Q4, the sustainability of this revenue stream, and whether a move into physical chips or chiplets as part of Stargate could cannibalize existing licensing revenue.

Answer

Jason Child, Arm's Chief Financial Officer, clarified that the SoftBank contribution was $178 million in Q2, an increase of $52 million from Q1, and indicated this is a good run rate. He explained that this revenue comprises licenses and design services (funded R&D) and that while future product shipments could introduce different revenue streams (royalties, chip sales) that might be somewhat cannibalistic, they could also lead to successive product generations and stacked royalties. He emphasized it as durable revenue, part of a larger effort with OpenAI and other Stargate partners.

Vivek Arya from Bank of America questioned why Q1 royalty growth was at the lower end of the prior 25-30% guidance and if the 10-15% sequential growth forecast for Q3/Q4 remains valid.

Answer

CFO Jason Child explained that royalty growth was at the lower end of the range due to slightly weaker-than-expected growth in the smartphone market, although Arm still grew an order of magnitude faster than the market. He indicated the forecast for the rest of the year is largely unchanged but they will continue to monitor the smartphone sector.

Vivek Arya from Bank of America asked about the licensing business, including the cause for a modest Q4 miss versus some expectations, whether strong ACV growth is sustainable, and any potential impact from tariffs on China licensing.

Answer

CEO Rene Haas highlighted a record year for licensing, driven by strong CSS demand and accelerated AI product cycles. CFO Jason Child clarified that Q4's 53% YoY license growth met internal expectations. He advised that while ACV is currently high at 15% due to AI, the sustainable long-term growth target remains in the mid-to-high single-digit range.

Vivek Arya questioned why v9 adoption as a percentage of royalty revenue has stalled at 25%, contrary to prior expectations of steady quarterly growth, and asked if this creates a future upside driver.

Answer

CFO Jason Child acknowledged the stall was surprising but framed it as a positive, indicating a longer growth runway as they still expect v9 to reach 60-70% of royalties. He attributed the flat percentage to stronger-than-expected v8 growth and advised focusing on overall royalty growth, which has met or exceeded expectations.

Vivek Arya questioned the slight reduction in the full-year royalty growth outlook and asked why the Armv9 royalty contribution stalled at 25% quarter-over-quarter despite strong smartphone performance.

Answer

CEO Rene Haas explained that v9 adoption is strong and not always linear quarter-to-quarter. He emphasized a key distinction for v9: unlike prior versions, royalty rates will continue to increase throughout the v9 lifecycle. This is driven by value-based pricing on generational product improvements and the adoption of higher-royalty CSS products, preventing the royalty growth from plateauing as v9 adoption matures.

Vivek Arya inquired about the CPU/GPU revenue mix in Q3 and Q4, AMD's strategy for managing the transition from MI355 to MI400 series, and the expected growth trajectory for MI355 in the first half of 2026. He also asked about OpenAI's multi-vendor engagement strategy, AMD's visibility into the initial deployment, and how the partnership might broaden into 2027.

Answer

Dr. Lisa Su, Chair and CEO, highlighted strong Q3 data center performance driven by both server and data center AI, noting the successful MI355 ramp and strengthening server CPU sales. She projected continued MI355 ramp in H1 2026, followed by a sharper MI450 series ramp in H2 2026. Regarding OpenAI, Dr. Su expressed excitement for the significant, multi-quarter planning underway for power and supply chain, confirming good visibility into the MI450 ramp.

Vivek Arya asked about the CPU/GPU mix in Q3 and Q4, the transition from MI355 to MI400 in 2026, and the sustainability of growth in the first half of 2026. He also inquired about OpenAI's ability to engage with multiple vendors simultaneously, AMD's visibility into the OpenAI engagement, and how the partnership might broaden into 2027.

Answer

Lisa Su, Chair and CEO of AMD, highlighted strong Q3 data center performance, driven by MI355 ramp and strengthening server CPU sales, without MI308 revenue. She expects MI355 to continue ramping in H1 2026, with MI450 (MI400 series) ramping sharper in H2 2026, anticipating a very good demand environment. Regarding OpenAI, Lisa Su emphasized the significant, multi-quarter planning for power and supply chain, confirming good visibility into the MI450 ramp.

Vivek Arya inquired about the potential size of the sovereign AI opportunity for AMD in 2026 and asked about the gross margin profile of the MI accelerator products, including when they might become accretive to corporate margins.

Answer

Chair and CEO Lisa Su described sovereign AI as an 'additive opportunity,' highlighting the appeal of AMD's open ecosystem. EVP, CFO & Treasurer Jean Hu explained that while MI product gross margin is currently below the corporate average, the focus is on market expansion and TCO, with margins expected to improve over the long term through operational efficiencies rather than at a specific revenue level.

Vivek Arya from Bank of America asked for help in sizing the sovereign AI opportunity for AMD in 2026, questioning if it is incremental to existing business. He also inquired about the gross margin profile of the MI accelerator products and at what sales level they might become accretive to the corporate average.

Answer

CEO Lisa Su characterized the sovereign AI opportunity as 'additive' and significant, highlighting that AMD's open ecosystem is a key differentiator for these customers. CFO Jean Hu addressed margins, explaining that the current priority is capturing market share and revenue growth. She noted that while MI product margins are currently below the corporate average, they are expected to improve over the long term through operational efficiencies, emphasizing the focus on growing gross margin dollars.

Vivek Arya inquired about the sequential growth of AMD's GPU sales in Q1, the role of the MI308, and the full-year 2025 growth prospects for the GPU business given the new China restrictions. He also asked about the long-term AI TAM, focusing on the China market and potential AI diffusion rules.

Answer

CEO Lisa Su stated that the Data Center GPU business will 'absolutely' grow by strong double digits for the full year, despite the China headwind. She noted Q1 GPU revenue was down modestly from Q4, as expected, with MI325 and MI300 making up the majority. Regarding the long-term TAM, Su explained that the $500 billion forecast had already factored in some limitations on leading-edge GPU sales to China. She added that AMD is actively working with the government on AI diffusion rules to balance national security with the U.S. tech industry's global leadership.

Vivek Arya asked why AMD is not providing a specific 2025 Data Center GPU forecast as it did in 2024 and whether the business could grow at the previously guided 60% CAGR. He also asked for perspective on the impact of innovations like DeepSeek on the semiconductor market and the GPU vs. ASIC debate.

Answer

CEO Lisa Su explained that with the business now at scale (over $5B), guidance will be at the segment level. She expressed confidence in growing to 'tens of billions' over the next few years, fueled by a strong roadmap. Su views model innovations like DeepSeek as positive for AI adoption and bullish for the compute cycle. She believes GPUs will remain the larger part of the TAM due to their programmability, though ASICs are an important part of the market and AMD's semi-custom portfolio.

Vivek Arya asked how AMD addresses the investor perception that its AI accelerators are a generation behind the competition and whether it can gain share without closing that gap. He also questioned the drivers of the strong Client segment growth and the sustainability of its ASP strength into 2025.

Answer

CEO Dr. Lisa Su countered the perception, stating that while MI300 launched after H100, AMD's accelerated roadmap is closing the gap, with MI325 set to compete well with H200 and MI350 with Blackwell. For the Client segment, she attributed the outperformance to strength in the desktop channel where AMD has high share and momentum from new AI PC launches. She sees an opportunity to grow share in 2025 in both consumer and enterprise.

Vivek Arya asked about the company's outlook on Q1 seasonality and overall growth in 2026 compared to three months prior, and also questioned the implications of flat to slightly down utilization in Q4 on Q1 gross margins.

Answer

Hassane El-Khoury, President and CEO, stated there was no change in the outlook from three months ago. Thad Trent, CFO, explained that Q3 utilization increased to 74% due to building die bank inventory for the mass market, with Q4 utilization expected to be flat to slightly down as these builds complete. He noted normal Q4 seasonality (flat to down 2%) and typical Q1 seasonality (down 2-3%), adding that utilization impacts on the P&L have a couple-quarter delay.

Vivek Arya inquired about ON Semiconductor's outlook on Q1 seasonality and overall growth for 2026, comparing it to expectations three months prior. He also asked for clarification on utilization rates and their potential impact on gross margins in Q1, given the expected flat to slightly down utilization in Q4.

Answer

Hassane El-Khoury, President, CEO, and Director, ON Semiconductor, stated that the outlook for Q1 seasonality and 2026 growth remains unchanged from three months ago. He explained that Q3 utilization increased to 74% due to building die bank inventory for the mass market, with Q4 utilization expected to decrease as these builds complete. Thad Trent, CFO, ON Semiconductor, added that utilization impacts the P&L with a couple-quarter delay and that Q4 guidance aligns with normal seasonality (flat to down 2%), with Q1 typically down 2-3%. Mr. El-Khoury noted potential gross margin tailwinds as utilization improves over time.

Vivek Arya inquired about the Q2 results, specifically the softness in the industrial segment and the strength in the 'Other' category, asking if AI data center was the primary driver. He also questioned why Onsemi's automotive recovery appears slower than its peers.

Answer

CFO Thad Trent confirmed that the industrial segment's softness was due to a slight decline in traditional industrial markets. He affirmed that the AI data center business, which doubled year-over-year, was the significant contributor to growth in the 'Other' category. President and CEO Hassane El-Khoury attributed the automotive segment's performance to weakness in Europe and North America, ongoing portfolio rationalization, and slower-than-expected EV ramps, noting that Onsemi's auto business bottomed in Q2 and is guided to grow in Q3.

Vivek Arya questioned the change in pricing strategy, from 'pricing to value' to accepting low single-digit declines, and asked for the gross margin outlook for the second half of the year.

Answer

CEO Hassane El-Khoury clarified that using pricing is a tactical tool to defend and increase share in a prolonged downturn, not a fundamental change in strategy, and that it is not the primary driver of the Q2 revenue outlook. CFO Thad Trent projected that gross margins would likely remain in a tight range around the Q2 guidance midpoint for the rest of the year, with significant improvement dependent on a market recovery and subsequent utilization increases in late 2025 and into 2026.

Vivek Arya from Bank of America Securities asked for clarification on Q1 sequential trends for the automotive, industrial, and other segments, details on unfavorable mix, and any early outlook on Q2 seasonality. He also sought guidance on establishing a proper long-term baseline for the automotive business.

Answer

CFO Thad Trent projected Q1 automotive revenue to be down 25% or more, with industrial and other segments down mid-to-high single digits. CEO Hassane El-Khoury declined to comment on Q2 seasonality due to limited visibility and geopolitical uncertainty. Regarding the automotive baseline, El-Khoury stated that historical comparisons are difficult due to significant portfolio shifts to higher-value products like silicon carbide, but the long-term growth model remains SAAR plus high-single-digit to low-teens growth.

Vivek Arya inquired about the outlook for Q1 pricing discussions with customers and questioned the strategy of increasing distribution inventory during a soft macroeconomic period, asking if it could create a future overhang.

Answer

CEO Hassane El-Khoury explained that onsemi's strategy is to price based on value and it will walk away from deals based solely on the lowest price, dismissing the idea of a 'Q1 pricing cliff.' He and CFO Thad Trent clarified that the distribution inventory increase is a strategic move to serve the high-margin mass market, which has grown its customer count by 15% YoY, and is tightly managed to prevent overhang.

Vivek Arya asked about the implications for NXP's automotive business in 2026 if global auto production remains flat, with only China OEMs and EVs growing. He questioned the content lift net of pricing and if auto could remain within NXP's long-term model. He also asked CFO Bill Betz if gross margin improvements are solely volume-driven or if new products and portfolio mix contribute.

Answer

President and CEO Rafael Sotomayor reframed the automotive discussion, stating that car production is not the primary driver for NXP, as content growth significantly outweighs SAR growth. He emphasized that inventory normalization and content growth provide an optimistic outlook for NXP's auto business in 2026. CFO Bill Betz confirmed that new product ramps are accretive to gross margins, alongside volume. He noted that mix (serving over 10,000 SKUs) is a key factor, and the hybrid manufacturing strategy (moving to 300mm) will provide a 200 basis point lift beyond 2027. Short-term, NXP offsets price concessions through cost efficiencies and productivity, aiming to reduce gross margin variability by becoming less fixed-cost.

Vivek Arya questioned the implications for NXP if the 2026 auto market sees growth in China OEMs and EVs but flat performance elsewhere, asking what content lift could provide net of pricing, and if auto could conceptually remain within NXP's long-term model. He also asked about the drivers of gross margins, specifically if volume alone is sufficient or if new products and portfolio mix provide additional benefits.

Answer

Rafael Sotomayor, President and CEO, reframed the auto drivers, stating that content growth significantly outweighs SAR growth, and production remains stable. He emphasized that cyclicality stems from supply chain inventory dynamics, and normalization of inventory combined with content growth provides an optimistic view for NXP's auto business in 2026. Bill Betz, CFO, confirmed that new product ramps are accretive and mix is a key driver, with NXP serving over 10,000 SKUs. He highlighted that the hybrid manufacturing strategy, moving to 300mm, will yield a 200 basis points gross margin improvement beyond 2027. In the short term, cost efficiencies and productivity offset price concessions, and a reduction in fixed costs (below 20% in five years) will further reduce gross margin variability.

Vivek Arya questioned why NXP's Q3 automotive forecast appears more conservative than some peers, asked about the financial contribution from recent acquisitions, and inquired about the potential gross margin outlook for Q4.

Answer

CEO Kurt Sievers explained that NXP's automotive business is accelerating significantly on a sequential basis, driven by the end of inventory destocking at Western Tier-1 customers, which allows NXP to ship closer to end demand. For Q4, he suggested modeling historical seasonality (flat to slightly up) but noted potential upside from channel inventory replenishment. CFO Bill Betz added that Q4 gross margin would depend on utilization rates, which could increase if business signals strengthen, and reiterated the long-term model of 100 bps margin expansion per $1B of incremental revenue.

Vivek Arya from Bank of America asked for a comparison of NXP's automotive recovery pace versus peers, the timing for year-over-year growth in auto, the financial contribution of acquisitions, and the potential gross margin trajectory for Q4.

Answer

CEO Kurt Sievers highlighted that NXP's auto business is accelerating sequentially, driven by the moderation of inventory burn at Western Tier 1s, which is the key factor for improvement. He noted the TTTech Auto acquisition is immaterial to revenue but is fully included in the Q3 OpEx guide. For Q4, he suggested modeling flat-to-slightly-up revenue based on historical seasonality. CFO Bill Betz added that for every $1B in incremental revenue, gross margins should improve by about 100 basis points on a full-year basis.

Vivek Arya asked to reconcile the 'green shoots' commentary with Q1 results where Auto and Industrial were slightly soft, and questioned the outlook for NXP's auto business given forecasts for a decline in light vehicle production.

Answer

CEO Kurt Sievers explained that Q1 softness in Auto/Industrial was due to specific timing issues in China and Japan, and while he sees 'early innings of cycle recovery,' he is not calling a full cycle turn. Regarding vehicle production, he acknowledged the forecasted decline but stressed that NXP's growth is driven by significant content increases in areas like radar and electrification, which are more impactful than overall production volumes.

Vivek Arya of Bank of America Securities asked if NXP has seen changes in automotive customer behavior due to potential tariffs and requested a hypothetical framework for modeling gross margins and OpEx for the full year.

Answer

CEO Kurt Sievers stated that potential tariffs are not reflected in the company's guidance, noting that any impact from proposed China tariffs would be 'completely immaterial' to NXP. CFO Bill Betz advised that for modeling purposes, analysts should refer to historical performance at similar revenue levels, as there are too many moving parts to provide a specific framework.

Vivek Arya asked about NXP's content exposure in Chinese vehicles versus Western ones and questioned if the strength in China was sustainable or related to pre-buying.

Answer

CEO Kurt Sievers stated that content in high-end Chinese cars is similar to Western premium vehicles and is growing faster due to quicker innovation cycles. He asserted that the strength is not pre-buying but is driven by the fundamental success and competitiveness of the Chinese auto industry, particularly in EVs, where penetration reached 46% in September. Executive Jeff Palmer later clarified that the Q1 seasonal outlook was for the total company, not specific segments.

Vivek Arya inquired about the drivers behind Cadence's IP business achieving over 20% growth for the second consecutive year, its sustainability, and how its performance compares to competitors' concerns regarding IP visibility and business models.

Answer

President and CEO Anirudh Devgan highlighted the IP business's profitability, driven by Tensilica's software-like margins, and its strategic focus on AI, HPC, and chiplet architectures at advanced nodes. He also noted strong partnerships with multiple leading foundries and competitive PPA advantages. Devgan expressed optimism for the IP business to grow faster than Cadence's average for the next three years.

Vivek Arya asked about the strong growth in Cadence's IP business, which is tracking over 20% for the second year, seeking insight into its drivers, sustainability, and visibility, especially in contrast to competitors' concerns about their own IP segments.

Answer

President and CEO Anirudh Devgan explained that the IP business is more profitable due to Tensilica and its focus on AI, HPC, and chiplet architectures at advanced nodes. He highlighted strong partnerships with multiple foundries (TSMC, Samsung, Intel, Rapidus) and increasing customer demand for Cadence's competitively superior PPA in design IP, expressing optimism for continued growth above Cadence's average.

Vivek Arya of Bank of America asked for clarification on the near-term and long-term revenue impact from China, including the outlook for the full year.

Answer

SVP & CFO John Wall indicated that while the company's guidance remains prudent, it is now difficult to see China's full-year revenue remaining flat and that it will likely increase slightly over the prior year. President & CEO Anirudh Devgan added that long-term, China's percentage of revenue may stay similar or decline slightly, not due to weakness in China but because of exceptionally strong growth in other regions like the US, Japan, and Korea.

Vivek Arya questioned Cadence's opportunity for market share gains at Intel, noting that Intel has historically been a relative weak spot for the company while a key peer has significant exposure.

Answer

CEO Anirudh Devgan agreed that Intel has been a weak spot for Cadence historically. He expressed that recent strategic changes at Intel present a great opportunity for deeper engagement and partnership. He confirmed that discussions have already begun and framed it as a key area for improvement, similar to the progress being made in their IP business.

Vivek Arya from Bank of America Securities questioned why recurring revenue growth appeared to be decelerating despite a strong market for AI and other advanced products.

Answer

CFO John Wall cited the flat-for-2025 China revenue assumption as a headwind to recurring growth. He also noted the revenue mix is shifting towards 80% recurring, reflecting faster growth in upfront businesses like IP and hardware. CEO Anirudh Devgan emphasized the significant turnaround in the IP business, which grew approximately 30% in 2024, driven by a stronger portfolio and increased customer demand.

Vivek Arya asked about the company's revenue lumpiness and whether investors could expect a smoother 2025, questioning if the Q4 exit run rate is sustainable. He also inquired about the new 'core EDA' metric and the long-term growth outlook for the System Design & Analysis (SDA) business.

Answer

CEO Anirudh Devgan and CFO John Wall characterized Q3 as a 'back to normal' quarter after an atypical first half. Wall explained that 'core EDA' combines three business groups to provide a clearer performance view due to product bundling. He noted that while it's too early to guide for 2025, the SDA business is currently the company's strongest growing segment.

Vivek Arya sought clarification on Lam Research's statistic of $8 billion in WFE for every $100 billion in data center investment, asking about the semiconductor content within that $100 billion, the implied WFE intensity in an AI environment, and Lam's specific opportunity within the $8 billion. He also inquired about the progress on the $40 billion TAM for NAND upgrades, including the amount completed by year-end and the expected drivers for 2026 NAND growth.

Answer

President and CEO Tim Archer and EVP and CFO Doug Bettinger explained that the $8 billion represents WFE, and while the precise semiconductor content of the $100 billion data center spend is unknown, it includes GPUs, HBM, and enterprise SSDs. They highlighted Lam Research's growing Serviceable Available Market (SAM) as a percentage of WFE at leading-edge nodes due to etch and deposition intensity. For NAND upgrades, Tim Archer noted that higher bit demand has accelerated the pace, with upgrades expected to remain strong and predominantly focused through 2026, as they are the lowest cost and easiest way to achieve higher performance.

Vivek Arya inquired about the WFE intensity in AI data centers, specifically asking how much of the $100 billion data center spend is semiconductor-related and what Lam Research's opportunity is within the estimated $8 billion WFE for every $100 billion data center investment. He also sought an update on the progress of the $40 billion NAND upgrade TAM, including completion status and the expected drivers for NAND growth in 2026.

Answer

Tim Archer, President and CEO, clarified that the $8 billion represents WFE, and Lam's Served Available Market (SAM) as a percentage of WFE increases at leading-edge nodes (from low 30% to high 30%). Doug Bettinger, Executive Vice President and CFO, could not provide a precise semiconductor content figure for the $100 billion data center spend but confirmed it's significant. For NAND, Tim Archer noted accelerated upgrade demand due to higher bit demand, with upgrades expected to remain strong into 2026, dominating over new capacity additions.

Vivek Arya asked for clarification on why the CSBG business is expected to be flat in 2025 and inquired about the anticipated growth rate for operating expenses (OpEx).

Answer

EVP & CFO Douglas Bettinger explained the flat CSBG outlook is due to a weaker year for the Reliant product line being offset by strong spending on upgrades. For OpEx, he stated that while spending will increase for R&D and digital transformation, the company plans to deliver operating leverage, meaning revenue should grow faster than expenses. He did not provide a specific annual growth rate.

Vivek Arya asked about the outlook for China revenue levels beyond the guided Q4 decline and what prompted the revised 2025 view for the region. He also followed up on gross margins, questioning the drivers of the Q3 beat and whether 47% should be considered a new baseline.

Answer

CFO Douglas Bettinger clarified that while China's revenue contribution is moderating, the business is 'not going away.' He attributed the Q4 gross margin guidance of 47% to customer mix headwinds but noted that this level is supported by underlying operational efficiencies. CEO Timothy Archer added that China's normalization as a percentage of revenue was expected as other key markets for Lam strengthen.

Vivek Arya with Bank of America Corporation inquired about Ambiq's definition of edge AI, the current percentage of sales attributed to it, and the anticipated evolution of this mix, including potential Average Selling Price (ASP) benefits. He also asked about the timeline and potential acceleration for Ambiq's SPOT IP licensing opportunities, identifying specific use cases.

Answer

CEO Fumihide Asaka clarified that edge AI is expanding across medical, industrial, personal devices, smart homes, and buildings, noting that most customers already leverage intelligence, with over half the business utilizing on-device intelligence. Regarding IP licensing, Mr. Asaka identified data centers, automotive, and mobile devices as potential beneficiaries, suggesting that increased R&D resources and funding could accelerate the development of the 12-nm SPOT platform.

Vivek Arya from Bank of America inquired about Ambiq Micro's definition of edge AI, its current sales contribution, expected evolution, and potential ASP benefits. He also asked about accelerating the development and licensing of SPOT technology for new applications.

Answer

Fumihide Esaka (CEO & Director, Ambiq Micro) clarified that edge AI is expanding across medical, industrial, personal, and smart home devices, estimating over half of current business uses intelligence. He identified data centers, automotive, and mobile as key markets for SPOT IP licensing, noting that increased R&D and a dedicated 12-nanometer SPOT platform team could accelerate development.

Vivek Arya asked for an outlook on sequential growth into Q1 and for fiscal 2026, questioning if strong DRAM growth could be sufficient to drive overall company growth if China remains weak.

Answer

CFO Brice Hill stated that due to lower visibility and later customer commitments, the company could not provide specific color on Q1. He acknowledged that the dynamic for fiscal 2026 will be whether strength in DRAM and leading-edge logic can offset an expectedly lower year in China, similar to the situation in fiscal 2025, but did not provide a definitive forecast.

Vivek Arya asked for context on Applied's ~7% growth rate versus peers' double-digit growth, requesting the size of the ICAPS business, whether it has bottomed, and trends in China versus non-China ICAPS demand.

Answer

CFO Brice Hill stated that China semiconductor business (equipment and services) constitutes a mid-20s percentage of total company revenue and that Applied is well-positioned for the growing 28nm investment cycle in the region. CEO Gary Dickerson added that while ICAPS is expected to grow mid-to-high single digits long-term, the company is strongly positioned in the primary AI growth drivers like high-performance logic and DRAM.

Vivek Arya contrasted Applied's 7% growth rate with the double-digit growth of peers, attributing the difference to higher ICAPS exposure. He asked for the current size of the ICAPS business, whether it has bottomed, and for trends in China versus non-China ICAPS demand.

Answer

CFO Brice Hill stated that China's semiconductor business, including equipment and services, constitutes a mid-20s percentage of total company revenue. He noted that China's investment is shifting towards 28-nanometer, a node where Applied is well-positioned. CEO Gary Dickerson emphasized the company's strength in key AI growth drivers and expressed optimism for ICAPS, citing a multi-year focus and a pipeline of new products to expand their addressable market.

Vivek Arya posed a long-term conceptual question regarding WFE intensity, asking whether materials engineering would gain share from lithography if overall WFE grows in line with semiconductor industry sales.

Answer

CEO Gary Dickerson explained that major technology inflections like Gate-All-Around, backside power, 3D DRAM, and advanced packaging are increasingly driven by materials engineering, not just lithography. He stated that these new architectures increase the relative spending on materials engineering, positioning Applied to capture more value.

Vivek Arya asked how Applied Materials is accounting for the market dichotomy in leading-edge foundry, where one player is performing exceptionally well while others are not, and whether the company's strong outlook is dependent on that single successful player.

Answer

CFO Brice Hill explained that their forecasts are based on total end-market demand for leading-edge capacity, independent of which specific foundry fulfills it, so their overall expectations remain unchanged. CEO Gary Dickerson added that the primary driver for all customers is the need for energy-efficient computing for AI, which requires architectural inflections like gate-all-around and backside power. He emphasized that Applied is well-positioned to benefit from these transitions across the entire market, providing a tailwind regardless of individual customer performance.

Vivek Arya questioned the decelerating sequential growth in the data center and communications segment, given the acceleration in AI deployments. He also asked for quantification of the Q4 gross margin FX headwind and the outlook for reaching the 40% gross margin target.

Answer

CEO Jim Anderson attributed quarterly fluctuations to customer lumpiness but pointed to the full-year fiscal 2025 data center growth of over 60% as evidence of share gains. CFO Sherri Luther explained that unfavorable FX was the primary reason for the sequential gross margin decline and that without it, the margin would have exceeded guidance. She expressed high confidence in achieving the long-term target of over 42% gross margin, supported by ongoing initiatives and the favorable impact of the new Apple agreement.

Michael Mani, on behalf of Vivek Arya, asked about Coherent's expected market share for the 1.6T ramp and the pattern of customer adoption. He also requested details on the gross margin guidance, including any tariff impacts, the biggest drivers for future expansion, and progress on pricing optimization.

Answer

CEO James Anderson noted it's too early to discuss 1.6T market share but expects adoption to start with a small number of customers before expanding, similar to the 800G cycle. CFO Sherri Luther confirmed the gross margin guide incorporates the current tariff environment, which is not significant. She stated future improvements will come from company-wide product cost reductions and pricing optimization, which is primarily focused on the industrial business, and that more detail would be provided at the upcoming Investor Day.

Vivek Arya inquired about the current size of the cloud module business and its required contribution to reach the $600 million quarterly revenue target, as well as the gross margin outlook for the next quarter and at that target run rate.

Answer

President and CEO Michael Hurlston noted that while the cloud module business grew 50%, its growth is not the primary driver to the $600 million target, which will be led by components and OCS. CFO Wajid Ali projected a slight gross margin increase in Q1 and expects margins to be at the high end of the 37-40% range when the company reaches $600 million in quarterly revenue.

Vivek Arya from Bank of America sought clarification on Q4 expectations, including the contribution from non-wafer revenue, the tailwind from depreciation, and whether the 30% gross margin exit rate was still achievable. He also asked about the risk of excess inventory in the automotive segment.

Answer

CFO John Hollister estimated Q4 non-wafer revenue would be around 12-13% and that mix, non-wafer revenue, and utilization/depreciation could each add roughly a point to margin, showing strong progress toward the 30% goal. CEO Tim Breen addressed the auto market, stating that strong, secular content growth is the primary driver and that semiconductor inventories at the Tier-1 level are actually quite low, mitigating risk.

Vivek Arya questioned if exiting 2025 at a 30% gross margin is still the target and what sequential growth would be required to achieve it. He also asked for clarification on the mid-single-digit wafer ASP decline, contrasting it with customers' commentary, and requested an apples-to-apples price decline figure.

Answer

CEO Timothy Breen expressed long-term confidence in margin expansion due to differentiated technology ramps, customer depth, and an efficient manufacturing footprint. CFO John Hollister confirmed that exiting 2025 at 30% gross margin remains possible, driven by higher utilization, lower depreciation costs, and improving product mix. He clarified that the ASP decline is primarily due to mix changes and the roll-off of underutilization payments, not broad pricing pressure.

Vivek Arya of Bank of America Securities questioned if a ~2% full-year sales growth was a reasonable assumption based on Q1 guidance and asked for a detailed bridge of the gross margin drivers for 2025, including the impact of lower depreciation, pricing, and utilization.

Answer

CFO John Hollister reiterated guidance for sequential growth through 2025 but declined to confirm a specific full-year rate. He detailed that the path to a 30% exit gross margin is driven by improved utilization, structural cost optimization, and a significant ~$250 million year-over-year reduction in D&A costs, rather than underutilization payments which were a factor in the prior year. CEO Thomas Caulfield added that richer mix from new design wins will also contribute to profitability.

An analyst on behalf of Vivek Arya of Bank of America Securities asked for clarification on the Q4 guidance, questioning how it aligns with the full-year outlook for flat smart mobile and high-single-digit auto growth. They also asked about smart mobile demand trends given market weakness. A follow-up question concerned the gross margin outlook as prepayment benefits diminish.

Answer

CFO John Hollister explained that year-over-year declines in the IoT and Communications Infrastructure segments would round out the Q4 guidance. CBO Niels Anderskouv noted that GF is bucking the trend in smart mobile due to its strong RF portfolio and design win momentum. Regarding gross margin, an executive stated that its future progression would be driven by natural factors like improved factory utilization, cost recovery initiatives, and a more accretive business mix.

Vivek Arya of Bank of America questioned how process control intensity is evolving with the industry's shift to High Bandwidth Memory (HBM) and asked for a quantification of the benefit. He also asked about the gross margin outlook and mitigation plans for tariff impacts.

Answer

President & CEO Rick Wallace qualitatively described that HBM's valuable, complex die with less redundancy drives higher inspection needs. EVP & CFO Bren Higgins quantified this, stating that the move to HBM adds about 100 basis points of process control intensity on top of the 100 bps gained from the EUV transition. Regarding margins, Higgins noted the full-year 62.5% target implies a Q4 uptick and that the company is exploring process changes to mitigate the guided 50-100 basis point tariff headwind.

Vivek Arya of Bank of America inquired about the quantifiable benefits to KLA from the industry's shift to High Bandwidth Memory (HBM), and asked for the near- and medium-term gross margin outlook, including tariff mitigation plans.

Answer

President & CEO Rick Wallace qualitatively described that HBM requires higher process control due to more valuable die, less redundancy, and higher reliability needs. EVP & CFO Bren Higgins quantified this, stating that HBM could add another 100 basis points of process control intensity on top of the 100 bps gained from EUV adoption in DRAM. Regarding margins, Higgins guided to an uptick in Q4 to reach the full-year 2025 target of 62.5% and stated the tariff headwind is 50-100 bps, which they are working to mitigate through process improvements and leveraging free trade zones.

Vivek Arya questioned the China revenue mix trajectory for the year, sought details on the timing of the $500 million export control impact, and asked about the key indicators management is watching for the 2026 WFE outlook.

Answer

CFO Bren Higgins confirmed the full-year China revenue mix is expected in the high 20s to 30% range, though quarterly results will be lumpy. He maintained the $500 million export control impact estimate for the year. CEO Richard Wallace identified the AI infrastructure build-out, HBM, and advanced packaging as key drivers for 2026, noting that current silicon capacity plans still appear to understate end-market demand.

Vivek Arya asked about the breadth of leading-edge investment strength, questioning if it was driven by a single foundry, and inquired about KLA's China revenue exposure, its outlook for the coming quarters, and its potential vulnerability to restrictions.

Answer

CEO Rick Wallace clarified that leading-edge demand is driven by end-customer needs for AI chips, not the number of foundries. CFO Bren Higgins added that China revenue, which was 42% in the September quarter, is expected to decline to the mid-30% range in the December quarter and normalize around 30% in 2025 due to customer digestion of prior investments. Higgins declined to speculate on potential future export controls.

Vivek Arya inquired about the drivers behind the Q1 gross margin beat and the path to 50%, as well as management's view on the automotive demand recovery compared to 90 days ago.

Answer

CFO Derek D'Antilio attributed the strong Q1 gross margin drop-through to the timing of supplier cost-downs and projected a 60-65% drop-through going forward, driven by utilization. CEO Michael Doogue expressed increased optimism on auto demand, citing an upward revision in industry production forecasts and a marked increase in customer expedite requests to prevent line-down situations, signaling a strengthening recovery.

Vivek Arya of Bank of America asked for a quantification of the AI compute business in Q2, a breakdown between compute and networking, and the timeline for potential GPU testing wins. He also inquired about the financial contribution from the Quantify Photonics acquisition and the outlook for Q4.

Answer

President & CEO Greg Smith stated that a potential GPU win would likely have a modest impact in 2026 and build over time. CFO Sanjay Mehta quantified Q2 compute as roughly 20% of SoC revenue and noted Quantify Photonics is in the Product Test group with minimal Q2 impact. Both executives confirmed expectations for strong sequential growth in Q3 and Q4, with Q4 2025 expected to be significantly stronger than Q4 2024 for the total company.

Duksan Jang, on behalf of Vivek Arya, asked if the compute business is expected to remain on track with Analyst Day projections given the lack of pushouts, and whether the robotics segment is still anticipated to outgrow its industrial peers.

Answer

CEO Greg Smith stated that while the near-term view for compute is unchanged from the Analyst Day, there is significant uncertainty in the second half. For robotics, he affirmed the goal is to outgrow traditional automation by targeting the underpenetrated advanced robotics market, but acknowledged the current sluggish macro environment is a headwind that necessitated the recent restructuring to lower the segment's breakeven point.

Vivek Arya questioned the significant slowdown in the compute TAM growth forecast for 2025 after strong growth in 2024, and asked how to reconcile that with the company's strong second-half growth expectations.

Answer

CEO Greg Smith explained the compute TAM slowdown is due to increasing test efficiency and maturity for existing devices, which limits equipment demand despite a hot end market. CFO Sanjay Mehta and Smith clarified that Teradyne's second-half growth is driven by market share gains, new part introductions requiring new capacity, and a back-half recovery in the automotive, industrial, and mobile segments, not just compute.

Vivek Arya asked for clarification on why the semiconductor test TAM is increasing while Teradyne's Q4 and Q1 sales outlook is below Q3. He also questioned the Robotics business's slow 5% CAGR over the last five years and what is needed to achieve the 20-30% growth forecast.

Answer

CEO Greg Smith attributed the TAM increase to strong AI-related demand and better visibility into the China market served by local suppliers, which has less impact on Teradyne. Regarding Robotics, he acknowledged the difficult industrial macro environment, including a two-year PMI contraction. He stated the company has been improving its go-to-market channels (OEM solutions up 50% YTD) and expanding its product line (new heavy payload robots), positioning it to outgrow peers by 15-20% in a normal market.

Vivek Arya asked about server CPU competition, citing a reported ASP decline and the long-term threat from ARM. He also requested a rule-of-thumb for gross margin flow-through on potential revenue growth next year.

Answer

CEO Lip-Bu Tan acknowledged past mistakes in the high-end server market, particularly regarding multithreading, and stated the company is focused on closing the performance gap by working closely with customers. CFO David Zinsner provided a gross margin rule of thumb, suggesting a 40% to 60% fall-through rate on incremental revenue next year.

Vivek Arya from Bank of America asked about the competitive environment in the server CPU market, citing ASP pressure and the threat from ARM. He also asked for a rule of thumb on gross margin flow-through for next year.

Answer

CEO Lip-Bu Tan acknowledged past mistakes in the high-end server market, specifically on multithreading, and stated the company is doubling down to narrow the performance gap by listening closely to customer workload requirements. CFO David Zinsner provided a rule of thumb for next year's gross margin, suggesting a 40% to 60% flow-through on incremental revenue, hopefully at the higher end of that range.

Vivek Arya from Bank of America Securities asked for a realistic timeline for Intel's turnaround, the key metrics for measuring progress, and questioned the long-term viability of the IDM structure given the foundry's financial performance.

Answer

CEO Lip-Bu Tan emphasized there is 'no quick fix' and that progress will be measured by delivering best-in-class, power-efficient products on schedule. Regarding the IDM model, he stressed a balanced approach where the foundry must serve internal and external customers effectively, while also viewing TSMC as a collaborative partner to create win-win situations.

Vivek Arya of Bank of America Securities asked whether competitor share gains in the data center are due to design or manufacturing, and if more outsourcing could help Intel recover share. He also requested guidance on how to model the growing non-controlling interest (NCI) and its impact on EPS.

Answer

Michelle C. Holthaus, Interim Co-CEO, acknowledged a data center competitive gap and affirmed she would use external foundries for future data center products if it ensures the best product, performance, and market timing. CFO and Interim Co-CEO David Zinsner clarified that the non-controlling interest (NCI) includes multiple partnerships, provided guidance for 2025 and 2026, and confirmed it is a deduction for non-GAAP EPS.

Vivek Arya sought clarity on the 2025 financial outlook, questioning the 3-5% top-line growth trend and whether the Q4 gross margin is a good proxy for 2025. He also asked about Intel's data center AI strategy and the risk of CPU commoditization.

Answer

CFO David Zinsner clarified that the 3-5% growth is an internal planning metric, not formal guidance, and that Q4's 39.5% gross margin is a 'clean' starting point for 2025 models, though H2'25 will face headwinds. CEO Pat Gelsinger outlined a three-pronged AI strategy: leveraging Xeon as the AI 'head node,' promoting a 'CPU plus Gaudi' accelerator model for enterprises, and revitalizing the x86 architecture through a new ecosystem advisory group.

Vivek Arya challenged the change in outlook, referencing prior management comments from a May conference that implied H2 2025 would accelerate, which seems to conflict with the Q3 guide. He followed up by asking for conceptual guidance on Q4 seasonality.

Answer

CEO Haviv Ilan explained the cautious Q3 outlook by noting that the industrial market ran 'a little hot' in Q2 and that there was a significant pull-in from China. VP & Head of IR Mike Beckman provided specific data on China's strong sequential and year-over-year growth. For Q4, Beckman reiterated the company's typical seasonal patterns but declined to provide specific guidance for the quarter.

Vivek Arya of Bank of America Securities asked about factory utilization and its impact on gross margins, given that inventory increased despite previous guidance for lower loadings. He also sought clarity on which segments were driving the strong Q2 outlook.

Answer

CFO Rafael Lizardi explained that Q1 gross margin exceeded expectations due to higher revenue, a favorable mix of industrial products, and factory loadings that were higher than the base case. He guided for factory loadings to increase slightly in Q2, with gross margin also expected to rise. CEO Haviv Ilan added that the strong Q2 outlook is primarily driven by the continued strengthening of the industrial market, a trend observed for several months, along with stable growth in automotive.

Vivek Arya of Bank of America Securities asked for an explanation of the 30% sequential growth in personal electronics amid a weak macro environment. He also questioned the path to reaching 2022 revenue levels by 2026 and the timing for above-seasonal growth.

Answer

CEO Haviv Ilan explained that personal electronics is recovering from a very low trough after peaking in Q3 2021 and that TI is now recapturing sockets it previously couldn't supply. Regarding a broader recovery, he noted that while PE, enterprise, and communications are recovering, the larger industrial and automotive markets need to join for significant growth.

On behalf of Vivek Arya, an analyst asked if Skyworks plans to re-engage more deeply with the broader Android ecosystem due to rising AI-driven complexity, and inquired about the engagement timeline for future models with its largest customer.

Answer

CEO Philip Brace explained that the company's Android strategy is ROI-based, focusing on opportunities where they can get paid for the value they deliver. Regarding its largest customer, he noted that engagement is a deep, long-term, and continuous process, and the best way to secure future business and hedge against losses is through clean execution and delivering the best products.

An associate on behalf of Vivek Arya asked about Skyworks' long-term strategy for China, especially with a competitor reportedly exiting that market, and the potential impact of tariffs. He also inquired about the outlook for seasonality into the June quarter.

Answer

CFO Kris Sennesael reiterated their selective strategy for China and Samsung, focusing on the high-end market where high-performance RF is required, and noted that design win momentum is turning into revenue. Regarding the upcoming June quarter, he stated that he currently sees nothing different from normal seasonality.

On behalf of Vivek Arya, an analyst asked about the expected demand trends between Memory and Foundry/Logic for 2025 and the key drivers behind the Q1 gross margin expansion.

Answer

President and CEO Gabriel Waisman stated that advanced logic and advanced packaging are expected to lead growth in 2025, with the HBM segment also showing strength. CFO Guy Kizner affirmed commitment to the 57-59% non-GAAP gross margin target model, attributing quarterly fluctuations to product mix and noting that exceeding 60% is challenging and dependent on new product success.

Vivek Arya of Bank of America Securities questioned the path for Qorvo's Advanced Cellular Group (ACG) to return to growth after fiscal '26, given headwinds from China and competition. He also asked for details on the expected progression of gross margin and operating expenses through the year.

Answer

CEO Bob Bruggeworth clarified that ACG revenue is projected to decline in fiscal '26 before returning to growth in fiscal '27, driven by content gains at its largest customer and share in high-tier Android. CFO Grant Brown stated that gross margins will follow typical seasonal patterns, while non-GAAP OpEx is expected to average approximately $250 million per quarter in fiscal '26, with some normal variability.