Wamsi Mohan

Wamsi Mohan from Bank of America asked CEO George Kurian about storage purchasing behavior, specifically if customers are pre-buying due to supply availability concerns or anticipated price increases. He also inquired about SSD supply availability for the next year, potential renegotiations of pricing by memory companies, and whether the negotiation window is shrinking.

Answer

CEO George Kurian clarified that Q3 results and Q4 guidance are not driven by pull-ins, but rather by expected momentum from improving European markets, reduced headwinds in the U.S. public sector, and large deals closing. He noted a favorable business outlook and durable IT spending, with customers prioritizing cyber resilience, cloud transformation, data center upgrades, and AI projects. Regarding SSD supply, Kurian stated NetApp is not experiencing any shortages and is not aware of upcoming ones, working closely with a broad base of suppliers and qualifying multiple components to ensure supply and competitive pricing in a dynamic environment.

Wamsi Mohan from Bank of America asked about purchasing behavior trends in storage, specifically if customers are pre-buying due to anticipated price increases or supply availability concerns. He also inquired about SSD supply availability for the next year, potential renegotiations of LTAs by memory companies, and whether the negotiation window is shrinking.

Answer

CEO George Kurian clarified that Q3 results and Q4 guidance were not driven by pull-ins, attributing momentum to improving European markets, reduced U.S. public sector headwinds, and large deals closing. He noted a favorable business outlook and durable IT spending, with customers prioritizing cyber resilience, cloud transformation, data center upgrades, and AI projects. Regarding SSD supply, George Kurian stated NetApp is not experiencing shortages and is not aware of upcoming ones, working closely with a broad base of suppliers and qualifying multiple components to ensure supply and competitive pricing in a dynamic environment.

Wamsi Mohan asked about the primary drivers of NetApp's market share capture, specifically whether it's more due to pricing flexibility from secured supply or product portfolio mix. He also inquired about the natural ceiling for public cloud gross margin and the trajectory of cash flow after a weak Q2.

Answer

George Kurian (CEO) stated that software and the data platform constitute the majority of value in transactions, with growing differentiation (cloud, cyber, data management) being a leading indicator. He noted flexible tools like Keystone and aggressive pricing are helpful for displacing competitors. Wissam Jabre (CFO) expressed comfort with the 80-85% public cloud gross margin range, noting a mix shift towards software, and attributed Q2 cash flow weakness to seasonality and a final transition tax payment.

Wamsi Mohan with Bank of America asked about the primary drivers of NetApp's market share capture, specifically whether it's more attributable to pricing flexibility or product portfolio mix, and inquired about the natural ceiling for public cloud gross margins and the trajectory of cash flow.

Answer

CEO George Kurian stated that the majority of value in transactions is in software and the data platform, with growing differentiation in cloud, cyber, and advanced data management being leading indicators. He added that flexible tools like Keystone and aggressive pricing are helpful for displacing competitors. CFO Wissam Jabre noted that public cloud gross margin is comfortable within the 80-85% target range, with a potential upward bias due to software mix shift, but it's too early to confirm. He explained that Q2 cash flow is typically lower due to seasonality and the final installment of a 2017 transition tax payment.

Wamsi Mohan from Bank of America Merrill Lynch sought clarification on the Q2 consolidated gross margin guide, asking how it could be sequentially lower if its components (product, cloud) are expected to improve. He also asked if operating leverage would continue into the second half of the year.

Answer

CFO Wissam Jabre explained that the Q2 gross margin guidance is essentially flat sequentially and that any potential pressure is due to revenue mix, as product revenue typically becomes a larger percentage of the total in Q2. CEO George Kurian advised not to read too much into the minor sequential change. Wissam Jabre confirmed that he anticipates operating leverage to continue improving in the back half of the year.

Wamsi Mohan from Bank of America Merrill Lynch sought clarification on the Q2 gross margin guide, which could be sequentially lower despite improving segment margins. He also asked if the current operating leverage would continue into the second half of the year.

Answer

CFO Wissam Jabre clarified that the Q2 gross margin guidance is essentially flattish sequentially, with any minor pressure stemming from a higher mix of product revenue, which is typical for Q2. CEO George Kurian advised not to read too much into the small sequential change. Jabre also confirmed that he anticipates operating leverage to continue through the back half of the year.

Wamsi Mohan from Bank of America Merrill Lynch sought details on the large AI infrastructure deals mentioned, including the types of customers involved and their potential growth contribution. He also asked if the full-year guidance was de-rated for macro factors beyond Q1 and requested quantification of any direct tariff impacts.

Answer

CEO George Kurian stated that the large AI deals are with major cloud and enterprise providers and are already factored into the FY26 outlook. He quantified the direct tariff impact as approximately 40 to 60 basis points on gross margin, which is included in the guidance. He emphasized that NetApp's diverse supply chain, with no final assembly in China, minimizes direct impact, with the main effect being indirect through customer caution.

Wamsi Mohan from Bank of America Merrill Lynch sought details on the large AI infrastructure deals mentioned, including whether they involve tier-two CSPs or hyperscalers and their potential growth contribution. He also asked if the full-year guidance was de-rated for macro factors beyond Q1 and inquired about the direct financial impact of tariffs.

Answer

CEO George Kurian confirmed the large AI deals are with major cloud and enterprise providers and are already factored into the fiscal 2026 outlook. He quantified the direct impact from current tariffs at 40 to 60 basis points on gross margin, which is included in the guidance. He emphasized that NetApp's diverse supply chain minimizes direct exposure, with the primary impact being increased customer caution.

Wamsi Mohan from Bank of America Merrill Lynch requested more details on the large AI infrastructure deals mentioned, including customer types and potential growth contribution. He also asked if the full-year guidance was being de-rated for macro reasons beyond Q1 and questioned the direct financial impact of tariffs.

Answer

CEO George Kurian confirmed that NetApp is working with very large cloud and enterprise providers on data modernization and AI infrastructure deals, which are factored into the guided sequential ramp for fiscal 2026. Regarding tariffs, he stated the direct impact is minimal, estimated at 40-60 basis points on gross margin for FY26, due to a diverse supply chain with no final assembly in China. The primary concern is the uncertainty tariffs create for customer demand, particularly in Europe's manufacturing sector.

Ruplu Bhattacharya, on behalf of Wamsi Mohan, asked about any incremental cost actions, the outlook for operating expenses, the expected trend for free cash flow in Q4, and the criteria for making future strategic SSD purchases.

Answer

CFO Michael Berry confirmed ongoing scrutiny of operating expenses, which are roughly flat year-over-year. He expects Q4 free cash flow to increase sequentially but remain below the prior year due to working capital headwinds from strategic buys and incentive payments. He stated that future strategic component pre-buys would only occur in the event of a 'material dislocation' in the NAND market, which is not currently anticipated.

Wamsi Mohan asked for details on all-flash traction across different market segments and competitive takeaways, and also questioned the drivers for the lower tax rate and the flow-through of higher revenue to operating profit.

Answer

CEO George Kurian detailed that capacity flash is the fastest-growing segment due to 10K drive displacement, while performance flash is competing well against high-end frame arrays. CFO Michael Berry explained that the tax rate was lowered due to a revised geographic income forecast. He noted that some Q1 OpEx underspend was shifted to the second half, impacting the immediate flow-through of revenue to operating profit, but reiterated confidence in full-year margin targets.

Wamsi Mohan asked about customer purchasing behavior following price increases, specifically regarding elasticity in CSG and ISG, any pull-forward behavior due to supply concerns, and a breakdown of the inventory step-up.

Answer

David Kennedy, Executive, Dell Technologies, addressed inventory, stating the cash conversion cycle remained flat at -32 days despite AI business expansion, reflecting diligence in working capital. Jeff Clarke, Vice Chairman and Chief Operating Officer, Dell Technologies, explained that for infrastructure, initial sticker shock quickly turned to concerns about supply access, driving aggressive moves by sophisticated customers to protect build-outs. In PCs, delayed price increases allowed for share gain due to channel inventory. He noted that customers understanding current prices are likely better than future prices has driven some pull-ahead, which will impact fixed IT budgets, potentially elongating replacement cycles later.

Wamsi Mohan from Bank of America asked about customer purchasing behavior in response to Dell's price increases, specifically if there was material elasticity in CSG and ISG, and if customers exhibited pull-forward behavior due to concerns about supply and escalating component costs. He also requested a breakdown of the inventory step-up.

Answer

Jeff Clarke explained that in infrastructure, after initial sticker shock, conversations quickly shifted to securing supply, leading customers to move aggressively to protect build-outs. In PCs, where channel inventory was inflated, Dell delayed price moves to gain share. However, the understanding that costs would rise likely drove some pull-ahead, though IT budgets are fixed, potentially elongating future replacement cycles. David Kennedy clarified that the inventory step-up was a function of the business's size, scale, and growth, particularly for AI shipments, while the cash conversion cycle remained flat.

Wamsi Mohan asked about Dell's strong conviction in its AI business for fiscal 2027, specifically how much of this growth is predicated on Neoclouds securing financing, and how much of rising commodity costs can be recovered through pricing versus OpEx reductions.

Answer

David Kennedy (CFO, Dell Technologies) highlighted the strong AI demand across Neoclouds, sovereign opportunities, and enterprises, evidenced by $12.3 billion in Q3 orders, $30 billion year-to-date, and a $18.4 billion backlog, with the five-quarter pipeline being multiples of that. Jeff Clarke (COO, Dell Technologies) added that Dell expects to ship nearly as much AI in Q4 as it did all of last year, reflecting the increasing need for compute. Regarding cost recovery, Clarke stated that while Dell typically recovers 2/3 of input costs in 90 days, the current 'extraordinary times' with commodity scarcity will allow Dell to do better, leveraging its direct model, long-term partner agreements, and real-time active management to mitigate impact.

Wamsi Mohan asked for more color on Dell's strong conviction in the AI business for fiscal 2027, particularly regarding the impact of financing issues at NeoClouds, and sought clarification on the potential recovery rate of increased commodity costs through pricing versus OpEx reductions.

Answer

CFO David Kennedy highlighted strong AI demand across NeoClouds, sovereign, and enterprise segments, with significant orders, backlog, and pipeline, supporting the FY2027 conviction. COO Jeff Clarke explained that Dell's direct model and supply chain expertise allow for better than normal recovery of commodity cost increases, exceeding the typical two-thirds in 90 days, through repricing, reconfiguring, and demand redirection, while actively managing real-time.

Wamsi Mohan of Bank of America Merrill Lynch asked for a breakdown of the factors expected to drive the significant improvement in profit flow-through in the third and fourth quarters.

Answer

CFO Yvonne McGill explained that the second-half profitability improvement is driven by several factors. She highlighted that the most significant contributor to the implied Q4 step-up is the normal seasonal acceleration in the higher-margin storage business, coupled with an increased mix of Dell's own IP. Additionally, she expects improved margin rates on AI servers, slightly higher profitability in CSG, growth in traditional servers, and continued reductions in operating expenses.

Wamsi Mohan of Bank of America Merrill Lynch asked for clarification on whether tariff impacts were included in the guidance. He also questioned the implied operating margin on incremental AI server revenue for Q2, which he calculated to be in the low single digits, and asked about the gross margin progression.

Answer

Jeff Clarke, Vice Chairman and COO, confirmed that the guidance includes all known tariff impacts and that the input cost environment is viewed as deflationary for Q2. He emphasized that incremental AI revenue drives significant gross margin and operating income *dollar* growth. CFO Yvonne McGill added that the Q2 guide implies a 10% quarter-over-quarter increase in gross margin dollars, with ISG expected to add approximately $5.3 billion in revenue and $500 million in operating income.

Wamsi Mohan asked for clarification on the fiscal '26 guidance, questioning how Dell expects to achieve 14% EPS growth while ISG and CSG margins are guided flat to down in a competitive environment, and inquired about the role of buybacks and any tariff assumptions.

Answer

CFO Yvonne McGill responded that the $103 billion revenue midpoint (up 8%) is driven by high-teens growth in ISG, fueled by $15 billion in AI server shipments and low-single-digit storage growth, plus mid-single-digit growth in CSG. McGill noted that OpEx will be down low-single digits due to ongoing efficiencies, and the company will continue to balance growth and profitability while managing the competitive landscape.

Wamsi Mohan from Bank of America requested clarification on the Q4 AI revenue outlook and asked about expectations for CSG margins in fiscal '26, including any potential tariff impacts.

Answer

Executive Yvonne McGill indicated that Q4 guidance accounts for the AI product mix, with margins expected to be consistent. For fiscal '26, she expressed optimism for CSG growth from the enterprise refresh but said it was too early for a specific margin guide. Jeffrey Clarke added that Q4 AI shipments would be 'slightly down' sequentially due to the Blackwell transition.

Wamsi Mohan questioned if the guided sequential decline in AI server revenue and flat backlog were due to Blackwell delays, and also asked about the margin profile for sovereign AI deals.

Answer

COO Jeffrey Clarke clarified that the backlog includes future technologies like Blackwell and that the guidance reflects customer deployment schedules and readiness, not just component supply. He noted the AI pipeline is multiples of the backlog. He also stated that the current pipeline does not yet include any sovereign AI opportunities of significant size, thus not addressing the margin question directly.

Wamsi Mohan asked about customer behavior given unpredictable supply, specifically if there was any pull-forward of demand, especially with a stronger first half and pricing not fully impacting Q1/Q2. He also inquired about potential demand destruction for the industry due to unprecedented price changes.

Answer

Charlie Giancarlo, Chairman and CEO, noted increased demand, higher win rates, and more 'franchise deals.' He expects some negative elasticity but not enough to offset industry-wide price increases, potentially increasing the total market. Tarek Robbiati, CFO, added that Q4 saw many large deals (over $5M grew 80% YoY), with linearity towards the quarter's end due to industry price increases. He quantified pull-ins as a 'mid-single digit' impact on Q1's growth rate and highlighted strong Evergreen//One demand, with RPO up 40%.

Wamsi Mohan from Bank of America asked about customer purchasing behavior amidst unpredictable supply, specifically if there was any pull-forward of demand given the strong first-half outlook and delayed impact of pricing, and whether these unprecedented price changes are causing any demand destruction for the industry.

Answer

Charlie Giancarlo, Chairman and CEO, noted increased demand, higher win rates, and more 'franchise deals.' He expects some negative elasticity but believes it won't fully offset price increases, potentially expanding the total market. Tarek Robbiati, Chief Financial Officer, added that large deals (over $5 million) grew 80% year-over-year in Q4, contributing to strong Q1. He quantified a mid-single-digit pull-in for Q1 growth and highlighted strong demand for Evergreen//One, evidenced by a 40% increase in RPO.

Wamsi Mohan from Bank of America questioned the lowest magnitude of earnings beat despite exceeding hyperscaler shipment forecasts, suggesting it might be due to higher investments. He sought clarification on whether this implies a potential year-over-year decline in operating margins for fiscal 2027, given the emphasis on increased investments.

Answer

CEO Charles Giancarlo reaffirmed Pure Storage's commitment to year-over-year operating margin expansion, noting the current year's performance is well above original guidance. CFO Tarek Robbiati highlighted the substantial Q4 FY26 operating profit growth (47% YOY at midpoint) and explained that increased investments in R&D, sales & marketing, and back-office systems are necessary to sustain growth into FY27, with expectations for continued operating profit growth and margin expansion beyond FY26.

Wamsi Mohan from Bank of America questioned the lowest magnitude of earnings beat despite high-margin hyperscaler revenue, asking if this implied a potential year-over-year decrease in operating margins for fiscal year 2027 due to increased investments, and sought clarity on the overall margin trajectory.

Answer

CEO Charles Giancarlo reiterated commitment to increasing operating margin year-over-year, noting that the current year's operating profit is expected to be substantially higher than the original flat guidance. CFO Tarek Robbiati emphasized substantial operating profit growth implied for Q4 FY26 (47% YOY at midpoint) and beyond, driven by enterprise opportunities. He stated that while investments in R&D, sales & marketing, and back-office systems would increase in dollar terms to sustain growth, operating profit is expected to grow, and operating profit margin expansion is anticipated beyond fiscal year 2026.

Wamsi Mohan of BofA Securities questioned why revenue growth is not projected to reaccelerate more meaningfully, given the company's aggressive push into the disk replacement market with its E family.

Answer

CEO Charles Giancarlo cited political uncertainty and a desire for a reasonable guide. CFO Kevan Krysler added that the guide assumes a consistent IT spending environment and that FY25 revenue benefited by ~1.5 points from Evergreen//One deals converting to traditional sales, making the FY26 guide a slight acceleration on a normalized basis.

Wamsi Mohan sought to clarify the hyperscaler deal's financials, asking if the 'significantly lower' revenue contribution compared to a capacity sale is solely due to the exclusion of hardware, or if software pricing per exabyte is also lower. He also asked if the double-digit exabyte forecast is from this single customer.

Answer

CFO Kevan Krysler confirmed the double-digit exabyte forecast for FY27 pertains to this single hyperscaler win. He clarified that the primary driver for the lower revenue contribution compared to a traditional capacity sale is the exclusion of hardware, though pricing at scale is a secondary factor.

Wamsi Mohan sought clarification on the actual memory pricing impact experienced in the first fiscal quarter, distinguishing it from the projected 100% sequential increase for the next quarter and the full-year expectation. He also asked about the nature of memory negotiations with suppliers, specifically if long-term agreements (LTAs) cover only volume or also pricing, whether the frequency of price negotiations has changed, and if there's a risk of supply shortfalls during the year.

Answer

Karen Parkhill, HP Inc.'s Chief Financial Officer, clarified that memory cost increases in Q1 were roughly in line with initial outlines, with the 100% sequential increase being a forward-looking expectation from Q1 to Q2, and further increases anticipated later in the year. She stated that HP has good relationships with long-term suppliers and believes it has the necessary supply. Regarding pricing, Karen Parkhill mentioned that HP works to lock in prices with suppliers on a rolling basis to help shape demand and inform pricing strategy.

Wamsi Mohan sought clarification on the actual memory pricing impact experienced in the first quarter, given the expectation of a 100% sequential increase in the next quarter and further increases. He also asked about the nature of memory negotiations with suppliers, specifically if Long-Term Agreements (LTAs) cover volume only or both volume and pricing, whether the frequency of price negotiations has changed, and if there's a risk of supply shortfalls during the year.

Answer

Karen Parkhill, CFO, clarified that Q1 memory cost increases were roughly in line with initial outlines, with the 100% sequential increase referring to Q1 to Q2 and further increases expected later in the year. She stated that HP has strong relationships with suppliers and has secured the necessary supply for its plans. Pricing with suppliers is locked in on a rolling basis to help shape demand and inform pricing strategy.

Wamsi Mohan asked about the flat year-over-year free cash flow guide for the next fiscal year despite margin pressures from memory pricing, inquiring about offsetting elements and the inclusion of restructuring charges. He also questioned HP's strategies to navigate the unprecedented rate of memory cost increases, focusing on price elasticity in a weaker consumer market, despecking, and other tactics to limit the $0.30 EPS impact.

Answer

Karen Parkhill, CFO, explained that free cash flow expectations are prudent, with slightly lower earnings offset by working capital improvements (favorable cash conversion cycle from growing PS business) and slightly lower CapEx and restructuring costs. Enrique Lores, CEO, confirmed that the $2.9 billion free cash flow guide includes approximately $250 million in restructuring charges. Regarding memory costs, Mr. Lores highlighted HP's scale, strong supply position, long-term agreements, and ability to qualify additional suppliers. He also mentioned leveraging portfolio breadth for despecking, using the Workforce Experience Platform for optimal configurations, managing low-end categories, and tactical pricing adjustments.

Wamsi Mohan asked about HP's flat free cash flow guidance for the upcoming fiscal year despite anticipated margin pressures from increased memory pricing, inquiring about offsetting elements and the inclusion of restructuring charges. He also questioned HP's strategies to navigate unprecedented memory price increases, focusing on price elasticity, despecking, and actions to limit the $0.30 EPS impact.

Answer

CFO Karen Parkhill explained that the free cash flow guidance reflects a prudent approach, with slightly lower earnings offset by working capital improvements from a growing Personal Systems business and reduced CapEx and restructuring costs. CEO Enrique Lores confirmed the inclusion of restructuring funds, with Karen Parkhill specifying $250 million for the year. Enrique Lores detailed mitigation strategies including HP's scale for supply position and supplier relationships, portfolio breadth for optimal configurations, the Workforce Experience Platform for tailored recommendations, managing low-end categories, and strategic pricing.

Wamsi Mohan highlighted the recent volatility in Print margins and asked if the long-term target range remains appropriate or should be adjusted higher. He also noted HP's PC outlook appears more optimistic than some industry data, asking if this implies market share gains and, if so, from where.

Answer

CEO Enrique Lores clarified that the Q3 Print margin dip was due to a predictable seasonal low in supplies mix, similar to last year, and reaffirmed the current long-term range to maintain strategic flexibility. Regarding PCs, he stated that HP's forecast is based on observed demand for Windows 11 and AI PCs, and the company's strategy is to gain profitable share by focusing on premium segments rather than pursuing volume for its own sake.

Wamsi Mohan requested a more detailed breakdown of HP's tariff mitigation strategy, asking to quantify the impact of pricing, cost actions, and supply chain shifts. He also questioned the long-term optimality of the new supply chain locations given the risk of reciprocal tariffs.

Answer

CEO Enrique Lores detailed mitigation efforts, including accelerating the manufacturing shift out of China, redesigning logistics networks, and implementing targeted price increases. CFO Karen Parkhill added that the Future Ready program will now deliver more savings sooner but declined to quantify the contribution of each mitigation lever. Mr. Lores addressed the supply chain risk by emphasizing the company's proven agility and ability to respond swiftly to any future changes.

Wamsi Mohan of Bank of America questioned the feasibility of the significant second-half earnings ramp given historical trends and macro uncertainty. He also sought clarification on the tariff rate included in guidance and HP's potential pricing strategy.

Answer

CFO Karen Parkhill attributed the confidence in the earnings ramp to improvements in both revenue (PC recovery, AI PC ramp) and costs (lower commodity costs, Future Ready savings). CEO Enrique Lores confirmed only the existing 10% China tariff is in the guide and stated that any supply chain cost advantage would be used strategically for either pricing or profit to drive profitable growth.

Wamsi Mohan from Bank of America questioned the Q1 FY25 EPS guidance, which is lower than the typical seasonal percentage of the full year, and asked why FY25 free cash flow guidance isn't higher given cost savings and PC market growth.

Answer

CFO Karen Parkhill attributed the lower Q1 EPS to seasonal volume declines and the timing of stock compensation expense, with about one-third hitting in Q1. She stated that free cash flow is expected to grow in line with earnings, with lower restructuring charges being offset by higher CapEx for growth. CEO Enrique Lores added that operating profit growth, not just buybacks, contributes to the overall EPS growth guidance.

Wamsi Mohan of Bank of America asked about the divergence between accelerating revenue and decelerating EPS growth, questioning if it was a structural issue. He also inquired why the free cash flow guidance remained unchanged despite a lower EPS outlook.

Answer

CEO Enrique Lores stated the divergence is not structural but a result of temporary competitive dynamics in the Print business. CFO Karen Parkhill explained that free cash flow guidance is maintained due to strong performance driven by sequential growth in Personal Systems, which has a negative cash conversion cycle. Interim CFO Tim Brown added that cash outlays for the 'Future Ready' program remain consistent with prior plans.

Wamsi Mohan asked about the visibility supporting the 30% growth projection, particularly given DigitalOcean's historical lack of long-term contracts, and requested a breakdown of drivers between infrastructure as a service (IaaS) and platform as a service (PaaS). He also inquired about the margin progression, specifically if near-term compression would persist through 2026 and return to 2025 levels in 2027.

Answer

CEO Paddy Srinivasan attributed confidence in growth to robust demand exceeding current supply, responsible and aggressive capacity ramping, and increasing RPO. He highlighted that inference workloads are typically paid by end customers of post-product market fit companies, providing strong visibility into real-world demand. CFO Matt Steinfort confirmed near-term pressure on gross margin due to capacity ramp, but emphasized that adjusted EBITDA and free cash flow margins are expected to remain strong, with an upward trajectory as utilization increases in 2027, despite a slight mix impact from lower AI margins.

Wamsi Mohan from Bank of America asked about the visibility supporting the 30% growth target, particularly given DigitalOcean's historical lack of long-term contracts, and requested a breakdown of drivers between IaaS and PaaS. He also inquired about the margin progression, specifically the near-term pressure in 2026 and expected recovery in 2027.

Answer

CEO Paddy Srinivasan attributed confidence in the 30% growth to robust demand exceeding current supply, responsible capacity ramp-up, and increasing RPO. He highlighted that inference workloads are typically paid by end customers, providing visibility from post-product market fit companies with real revenue. CFO Matt Steinfort explained that near-term pressure on gross margin and net income in 2026 is due to the timing of new capacity costs preceding revenue generation. He projected an upward trajectory for adjusted EBITDA and free cash flow margins as utilization increases in 2027, despite a mix impact from lower AI margins.

Wamsi Mohan of Bank of America Merrill Lynch asked about the volatility and journey of AI customers and inquired about any changes to the company's growth CapEx profile.

Answer

CEO Paddy Srinivasan explained that as the AI business shifts more towards inferencing, customers are more stable and expanding, having already found product-market fit, unlike the more transient training/fine-tuning customers seen previously. CFO Matt Steinfort reiterated that the top priority is investing in organic growth and pointed to the raised free cash flow margin guidance as proof of their ability to grow revenue while maintaining attractive margins and capital efficiency.

Wamsi Mohan from Bank of America inquired about Sensata's longer-term revenue potential, beyond the 2026 guidance, given the ongoing transformation and emphasis on growth as a core strategy.

Answer

CEO Stephan von Schuckmann expressed confidence in the real growth opportunities across all products and segments, highlighting the clear growth mandate per segment and the strong team in place to execute. He noted Sensata's return to growth in the second half of 2025 and optimism for 2027 and beyond.

Wamsi Mohan asked about Sensata's longer-term revenue potential and growth strategy, particularly how investors should perceive the ultimate revenue growth beyond the 2026 guidance, given the emphasis on growth as a key strategy.

Answer

Stephan von Schuckmann, CEO of Sensata Technologies, affirmed the reality of growth opportunities across all products and segments, highlighting a clear growth mandate for each segment and the capable team in place. He expressed optimism for continued growth in 2025, 2027, and beyond, noting Sensata's return to growth in the second half of 2025.

Wamsi Mohan asked for clarification on the drivers behind the forecasted $20 million to $30 million second-half revenue impact and questioned if the growth in Sensing Solutions was due to tariff-related demand pull-forward.

Answer

Chief Financial Officer Brian Roberts clarified the revenue impact is entirely due to forecasted automotive production cuts in North America. He and CEO Stephan Von Schuckmann explained that Sensing Solutions growth was not from tariff pull-ins but rather from new products like A2L gas leak detectors, noting that tariff uncertainty has actually put some industrial orders on hold in Q2.

Wamsi Mohan asked about the magnitude of downside risk Sensata has incorporated into its Q4 guidance relative to third-party forecasts and the expected impact on Q1 seasonality.

Answer

Executive Martha Sullivan stated that Sensata's Q4 guidance assumes vehicle production will be 200,000 to 300,000 units below third-party forecasts, particularly in North America and Europe. She added that the company does not expect significant market improvement in Q1 and anticipates normal cost seasonality.

Wamsi Mohan asked about the expected linearity for the year, specifically if normal seasonality is anticipated after Q1, and whether an acceleration into the second half should be expected from new initiatives, given previous comments that not much contribution is baked in.

Answer

CFO John Ederer clarified that for ARR (total and cloud), typical seasonality is expected, with more erosion in Q1 and growth building through the year, culminating in a strong Q4, with minimal impact from new products. He distinguished this from recurring revenue, which has anomalies due to the timing of upfront revenue recognition for on-premise business, leading to outsized Q1 growth but a potential 1-point headwind for the full year. President and CEO Steve McMillan addressed the board refreshment program, stating it's crucial for governance and that the company is pleased to work with Lynrock Lake to identify candidates like Melissa Fisher, who brings a valuable skill set. He confirmed a structured process for ongoing board refreshment throughout the year, focusing on skill mix.

Wamsi Mohan inquired about the linearity expected for 2026, specifically if normal seasonality is anticipated after Q1, and whether an acceleration into the back half of the year should be expected given new initiatives not fully baked into guidance.

Answer

John Ederer, CFO of Teradata, clarified that typical ARR seasonality (Q1 erosion, build-up through Q2/Q3, strong Q4 finish) is expected, with minimal impact from new products. He distinguished this from recurring revenue, which has anomalies due to upfront revenue timing for on-premise business, causing outsized Q1 growth but a full-year headwind from upfront revenue. Steve McMillan, President and CEO of Teradata, emphasized the importance of board refreshment for governance and expressed satisfaction with working with Lynrock Lake to identify candidates like Melissa Fisher, noting the ongoing structured process.

Wamsi Mohan asked about the revenue evolution and potential uplift from the Teradata AI Factory, seeking color on its pipeline and customer profile. He also requested a quantification of the deals pulled forward from Q3 into Q2 and whether this trend might persist.

Answer

President and CEO Steve McMillan described the AI Factory as a new capability for deploying AI solutions in hybrid environments, noting strong early interest and its potential to drive platform usage, but stated it's early days for revenue. CFO John Ederer did not quantify the deal pull-ins but explained they altered the growth curve for the year, causing a larger step-up in Q2, a flatter Q3, and another step-up in Q4, while reaffirming the full-year targets.

Wamsi Mohan of Bank of America questioned why potential tariff impacts on retail customers wouldn't slow Teradata down and asked for an update on 'boomerang' customers.

Answer

CEO Stephen McMillan emphasized the 'sticky' nature of Teradata, as it runs mission-critical processes and its revenue is based on fixed-capacity ARR contracts, providing clear line of sight. He added that customer interest in Teradata's new capabilities for on-prem consolidation and cloud cost optimization is strong, highlighting the differentiated hybrid platform.

Wamsi Mohan inquired about broader macro trends, customer spending expectations for 2025, and the cadence of large deals. He also asked about the pace of the AI business, noting that 20% of the pipeline has an active AI sales engagement.

Answer

CEO Stephen McMillan stated that business fundamentals remain strong, giving Teradata confidence in returning to total ARR growth in 2025. He noted that the company is expanding its addressable market with new AI capabilities. Regarding the AI pipeline, he emphasized that Teradata's ability to help customers operationalize AI at scale, beyond the proof-of-concept stage, is a key differentiator that will serve as a future tailwind.

Wamsi Mohan asked about the reported 14% services growth and the App Store's record December quarter, seeking confirmation on third-party data showing a notable deceleration in App Store growth to 7%. He inquired about the drivers of any deceleration and potential actions to reverse it. He also asked if Apple would consider using pricing as a lever, given unprecedented memory price moves, despite historically avoiding it unless for FX dislocation.

Answer

CFO Kevan Parekh reiterated a quarterly record on the App Store and broad-based growth across services categories and geographies, but declined to provide specific color on individual services categories. CEO Tim Cook declined to speculate on using pricing as a lever.

Wamsi Mohan asked about Apple's expectations for exiting the December quarter regarding iPhone supply constraints and the broader sustainability of mid-teens services growth rates, particularly given concerns about search volumes decelerating at the expense of AI.

Answer

CEO Tim Cook confirmed that the advertising category, a combination of third-party and first-party, set a record during the quarter but declined to provide a specific split, stating he was intentionally 'dodging the question' for competitive reasons.

Wamsi Mohan inquired about Apple's visibility on iPhone supply constraints, asking if they are expected to persist beyond the December quarter, and sought to understand the broader sustainability of mid-teens services growth rates given concerns about AI's impact on search volumes.

Answer

CEO Tim Cook clarified that iPhone constraints were due to underestimating demand for iPhone 16 and 17 models, not manufacturing capacity, and that the company exited Q4 with significant backorders. He noted that the advertising category (third-party and first-party combined) set a record during the quarter, but intentionally did not split out specific advertising components.

Wamsi Mohan asked about potential contingency plans if the current revenue share agreement with Google were to be disallowed by courts. He also inquired about Apple's high-level perspective on whether new AI-driven form factors could diminish the importance of screen-based devices like the iPhone.

Answer

CEO Tim Cook declined to speculate on the outcome of the court ruling or any subsequent actions regarding the Google agreement. On the topic of future devices, he expressed that given the iPhone's vast capabilities, it's difficult to see a world without it, suggesting that new form factors are more likely to be complementary rather than substitutional.

Wamsi Mohan asked how investors should think about the gross margin trajectory given increased sourcing from the U.S. and other supply chain shifts. He also inquired about observed developer behavior in Europe since the implementation of the Digital Markets Act (DMA) and alternate app stores.

Answer

CEO Tim Cook expressed excitement about increasing U.S. production, noting costs are already factored into current margins but declined to forecast beyond the current quarter. CFO Kevan Parekh added that Apple has a good track record of managing costs over a product's life. Regarding the DMA, Cook stated that its effects are already embedded in the reported results and guidance, as the act has been in effect for over a year, but he would not predict future impacts.

Wamsi Mohan asked about channel inventory levels across products and regions, particularly in China, and inquired about potential headwinds to the Services business from regulatory issues.

Answer

CEO Tim Cook stated Apple is comfortable with its worldwide channel inventory and clarified that inventory in China was reduced during the quarter. CFO Kevan Parekh responded to the services question by reiterating the segment's strength, noting its all-time record revenue and over 1 billion paid subscriptions.

Wamsi Mohan asked about the timeline for the global rollout of Apple Intelligence, inquiring how much of the installed base would have access in their native language within two years and what the gating factors are. He also asked about Apple's preparedness for potential future tariffs.

Answer

CEO Tim Cook detailed the rollout schedule, starting with U.S. English, expanding to other English-speaking countries in December, and adding more languages in April and throughout the year. He stated the primary gating factor is ensuring high quality while moving as quickly as possible. He declined to speculate on the question about potential tariffs.

Wamsi Mohan inquired about potential pressure on hybrid cloud growth and Red Hat Enterprise Linux due to higher memory pricing affecting server refresh cycles, and sought details on the expected cadence of pre-tax income (PTI) improvement throughout 2026, considering the mid-year Confluent acquisition and Q4 2025 productivity actions.

Answer

CEO Arvind Krishna addressed the server dynamics, noting that while DRAM prices are high due to HBM demand, AI demand also drives demand for normal servers, and Red Hat's market share movement and AI offerings (Red Hat AI, OpenShift AI) will provide tailwinds, mitigating any server refresh headwinds. CFO Jim Kavanaugh explained that PTI improvement in 2026 will be driven by portfolio mix, productivity initiatives (targeting $5.5 billion in annual run rate savings by end of 2026), and G&A scale leverage, with the skew of profitability expected to follow normal historical attainment, including double-digit profit and EPS growth in Q1.

Wamsi Mohan inquired about potential pressures on hybrid cloud growth from the server refresh cycle due to higher memory pricing, and its adverse effects on Red Hat Enterprise Linux. He also asked about the cadence of pre-tax income (PTI) improvement, particularly how it will progress given the mid-year Confluent acquisition and productivity actions taken in Q4 2025.

Answer

CEO Arvind Krishna stated that while memory prices are high due to HBM demand, he doesn't expect a headwind to hybrid cloud or Linux, as AI demand also drives normal server demand and Red Hat is gaining market share. CFO James Kavanaugh explained that 2026's 1-point margin growth will be driven by 0.5 point from revenue scale and 1 point from productivity, offsetting 0.5 point from portfolio mix. He confirmed that productivity initiatives, with a raised target of $5.5 billion in annual run rate savings by end of 2026, will drive the day, and the skew of profitability will follow normal historical attainment, with Q1 being consistent.

Wamsi Mohan, Senior Equity Research Analyst at Bank of America, asked about the financial impact of accelerating AI adoption on IBM's revenue, potential inflection into 2026, and impact of federal government shutdown. He also sought clarification on Q3 organic software growth and transaction processing expectations for year-end.

Answer

Arvind Krishna, IBM's Chairman, President, and Chief Executive Officer, stated that the federal government shutdown has had a de minimis impact on IBM due to the essential nature of its technology and consulting services. He confirmed that AI is a strong contributor, with a generative AI book of business exceeding $9.5 billion, including $1.5 billion in consulting for the quarter, and 200 consulting projects already using digital workers. Jim Kavanaugh, IBM's Senior Vice President and Chief Financial Officer, added that about two points of year-to-date software growth (8.5%) come from the GenAI book of business. He clarified that Q3 software growth of 9% accelerated three points organically, with transaction processing expected to return to growth in Q4, earlier than historical cycles, driven by strong IBM Z17 adoption.

Wamsi Mohan asked about the accelerating AI adoption, its potential financial impact on IBM's revenue, and whether an inflection point for meaningful upside in AI revenue is expected into 2026. He also sought IBM's quick thoughts on any material impact from a federal government shutdown in Q4 and requested clarification on Q3 organic software growth and year-end expectations for Transaction Processing.

Answer

Arvind Krishna, IBM's Chairman, President, and Chief Executive Officer, stated that a federal government shutdown would have a de minimis impact due to IBM's focus on essential services and subscription-based software. He emphasized AI's strong contribution, citing a book of business over $9.5 billion, with Consulting alone contributing $1.5 billion in the quarter, and AI fueling growth in OpenShift and Automation. Jim Kavanaugh, IBM's Senior Vice President and Chief Financial Officer, added that AI contributed about two points to software growth and highlighted Consulting's $7.5 billion book of business. He clarified that Q3 software organic growth accelerated by three points quarter-over-quarter and projected a return to growth for Transaction Processing in Q4, citing strong z17 mainframe cycle dynamics.

Wamsi Mohan asked for details on software trends, questioning the apparent deceleration in organic growth and seeking clarity on the factors that support the full-year guidance of approaching 10% growth.

Answer

SVP & CFO James Kavanaugh expressed increased confidence in the full-year software guidance. He detailed that Red Hat's growth accelerated to 14.5%, Automation is performing above model at 15% with strong HashiCorp synergies, and Data & AI has solid momentum. He explained that while Transaction Processing was down 2% as clients prioritized Z17 hardware, this strong hardware cycle creates a future software monetization opportunity, with a return to growth expected in the second half.

Wamsi Mohan requested a detailed breakdown of how IBM will achieve its 5%-plus full-year revenue growth guidance, specifically asking about the path to double-digit Software growth given tough comps for Red Hat and a slow start for Transaction Processing. He also asked if better Infrastructure performance would offset caution in Consulting.

Answer

CFO Jim Kavanaugh provided a bridge from Q1's 2% growth to the full-year 5%-plus target. He detailed a 2-point lift from the new mainframe cycle turning Infrastructure from a headwind to a tailwind, a 1-point contribution from M&A like HashiCorp, and another 0.5-point lift from Red Hat's expected reacceleration to mid-teens growth. He confirmed that the guidance prudently assumes no upside contribution from the Consulting segment.

Wamsi Mohan inquired about IBM's M&A strategy in a potentially more favorable regulatory environment, given its record cash flows, and also asked for thoughts on the implications of DeepSeek for IBM and the broader industry.

Answer

CEO Arvind Krishna stated that he anticipates a more rational regulatory environment, which would allow IBM to 'lean in' on M&A, utilizing its financial flexibility from strong cash flow. He noted the pending HashiCorp deal as a priority. Regarding DeepSeek, Krishna viewed it as a validation of IBM's long-held strategy that smaller, more efficient AI models are essential for enterprise deployment, citing their significant cost advantages.

Wamsi Mohan asked for clarification on two points: the apparent deterioration in the core consulting business given the growth in the AI book of business, and the conservative Q4 profit margin guidance despite strong year-to-date performance.

Answer

CFO Jim Kavanaugh explained that in Consulting, clients are pausing short-term, high-yield projects to fund long-term, lower-yield Gen AI transformations, impacting near-term revenue. Regarding profit, he noted the strong year-to-date performance is driven by portfolio mix and productivity, and described the Q4 guidance as prudent while expressing confidence in the full-year free cash flow outlook.

Wamsi Mohan inquired about the organic growth outlook, specifically the flattish projection excluding CCS, and how it balances enterprise-centric market declines with AI workload growth. He also sought color on whether AI growth is driven by more programs or increased units in existing programs, and insights from larger AI customers.

Answer

CEO Adam Norwitt acknowledged the traditional Q1 decline in base IT Datacom. He highlighted the broad nature of Amphenol's AI business, serving diverse customers across the AI stack, and noted that no single AI customer represented 10% of revenue in 2025. Norwitt discussed robust investment plans, technology upgrades requiring higher content interconnects, and expanded participation in fiber optics with CommScope.

Wamsi Mohan questioned the organic growth outlook (flattish excluding CCS), considering enterprise-centric market declines versus AI workload growth, and the nature of AI growth (more programs or units).

Answer

Adam Norwitt (CEO) acknowledged traditional Q1 IT datacom seasonality but emphasized the breadth of Amphenol's AI business across various customers (web-scale, equipment manufacturers, chip designers). He noted increasing investment plans, technology upgrades, and expanded participation with CommScope in fiber optics as drivers of AI growth.

Wamsi Mohan asked about Amphenol's opportunities in power solutions for AI-driven data centers, which are consuming significantly more power, and the specific products driving this growth. He also asked CFO Craig Lampo about the CapEx trajectory, noting it was slightly down sequentially despite expectations for flat.

Answer

CFO Craig Lampo stated that Q3 CapEx was within expectations, slightly below Q2, and anticipated similar or slightly higher CapEx in Q4, noting the company is growing into its capital spending. CEO Adam Norwitt highlighted the significant opportunity in power solutions for AI data centers, leveraging Amphenol's multi-decade expertise in high-power, high-voltage interconnects. He detailed involvement in complex assemblies, bus bars, and board-level products, focusing on efficiency and safety to optimize power delivery to GPUs.

Wamsi Mohan asked about the opportunity on the power side for AI-driven data centers, the specific products driving this, and the company's CapEx trajectory.

Answer

CFO Craig Lampo indicated CapEx spending was in line with expectations for Q3 and anticipated a similar or slightly higher range for Q4, growing into the 4% target. CEO Adam Norwitt highlighted Amphenol's long history in high-power interconnects, emphasizing products like complex assemblies, bus bars, and board-level connectors that ensure efficiency and safety for AI systems.

Wamsi Mohan from Bank of America Merrill Lynch asked if the 'shipping ahead' in AI was unique to Q2 or also occurred in Q1, and inquired about the level of visibility and volatility in the IT Datacom order book.

Answer

President & CEO R. Adam Norwitt clarified that the out-execution was 'more clear' in Q2. He explained that while AI orders have been strong for nearly a year, sometimes with longer visibility due to capital commitments, this can lead to lumpiness. He noted that the underlying book-to-bill for the quarter was close to 1:1 after accounting for the accelerated shipments.

Wamsi Mohan from Bank of America inquired about order linearity in IT Datacom, the risk of a disconnect between component shipments and end-product demand, and the mix of business between GPU and ASIC-based platforms.

Answer

CEO Adam Norwitt clarified that the company exceeded expectations for shipments but customers still wanted more, indicating robust demand, not a supply chain disconnect. Regarding platform mix, he stated that the AI-related growth (about two-thirds of the total) is predominantly tied to GPU or equivalent architectures for training and inference, while the non-AI business is spread across servers, networking, and storage.

Wamsi Mohan asked about AI supply chain dynamics, questioning if second-half AI revenues might moderate given record orders but lumpy CapEx, and requested visibility into H2 vs. H1 growth.

Answer

CEO R. Norwitt declined to provide a forecast beyond Q1 but expressed strong long-term confidence in Amphenol's AI position. He noted that while quarterly CapEx can be lumpy, the company is making significant investments. He pointed to the unseasonably strong Q1 guidance for the IT Datacom market (up mid-single-digits vs. a typical seasonal decline) as evidence of a very positive outlook entering 2025.

Wamsi Mohan asked about the nature of the strong orders, specifically regarding visibility and how far out the order book extends, questioning how much is for near-term versus longer-term fulfillment.

Answer

CEO R. Norwitt confirmed that the 'order aperture' has widened, especially in IT Datacom, defense, and commercial air. He linked this to securing longer-term orders to support increased capital investments. However, he assured that the vast majority of orders are for fulfillment within a couple of quarters and nothing is booked more than a year out.

Wamsi Mohan asked about the inclusion of similar long-term agreements with other major customers in the Springboard plan and inquired about supply constraints and pricing evolution in the optical fiber market, particularly for new high-density products.

Answer

Chairman and CEO Wendell Weeks stated that not all potential impacts of similar agreements are yet included in the Springboard plan, as they are still being concluded and financial impact will be seen from 2027-2028. He noted that while there's enough generic fiber globally, demand for Corning's new high-density optical products is very robust, leading to capacity expansion. He also indicated that the value created by these innovations should accrue to shareholders over time, improving profitability.

Wamsi Mohan asked about the inclusion of similar long-term agreements with other major customers in the Springboard plan, whether Corning is experiencing supply constraints in the optical fiber market, and the potential evolution of pricing for new high-density products.

Answer

Chairman and CEO Wendell Weeks explained that similar significant agreements are in process but not fully baked into the current Springboard upgrade, with financial impact expected from 2027-2028. He noted robust demand for Corning's new high-density optical products, leading to capacity expansion, and anticipated improved profitability as value from these innovations accrues to shareholders.

Wamsi Mohan questioned the pace of quarter-on-quarter revenue changes in the enterprise segment of Optical Communications, noting slower dollar increases compared to the previous year despite strong AI tailwinds. He also asked how Apple's investment in Harrodsburg might meaningfully change the economics (pricing or margins) for Corning's Specialty Materials cover glass products.

Answer

Chairman and Chief Executive Officer Wendell Weeks clarified that the primary reason for the sequential dollar increase difference year-over-year in enterprise revenue is the availability of incremental supply for specific SKUs, not a lack of demand, and this situation is expected to continue. Regarding Apple's investment, he stated that profitability in Mobile Consumer Electronics is driven by innovation adoption, and the long-term commitment and co-innovation center with Apple are expected to lead to new products and continued 'more Corning' benefits for investors.

Wamsi Mohan asked about the extent of customer pull-forward activity related to tariffs, its impact on the Q3 guide, and for context on the solar business outlook following recent legislative changes.

Answer

CFO Ed Schlesinger confirmed that some customers in Gorilla Glass and Display purchased ahead of tariffs, but this has been factored into the Q3 guidance with no change to the full-year outlook. CEO Wendell Weeks added that key U.S. manufacturing incentives for solar remain in place, supporting the company's strategy and growth prospects in that market.

Wamsi Mohan inquired about the extent of customer pull-forward activity due to tariffs in Q2 and Q3, and asked for an update on the solar business outlook following recent legislative changes.

Answer

EVP & CFO Ed Schlesinger confirmed tariff-related pull-forwards occurred in Gorilla Glass and Display, noting the Q3 guidance accounts for this normalization with no change to the full-year outlook. Chairman & CEO Wendell Weeks added that the core U.S. manufacturing incentives for solar remain intact, supporting their long-term strategy.

Wamsi Mohan of Bank of America asked about the nature of temporary capacity ramp costs in optical and solar, why the CapEx outlook remained unchanged, and sought clarity on the visibility of Gen AI orders amid concerns of a data center spending pullback.

Answer

EVP and CFO Ed Schlesinger clarified that the ramp costs are primarily operational expenses, such as hiring, rather than capital expenditures. Chairman and CEO Wendell Weeks added that for optical, costs relate to lower initial efficiency on new product lines. Regarding Gen AI, Weeks stated that recent detailed discussions with hyperscale customers have reinforced Corning's growth expectations, with demand focused on securing more of Corning's new products.

Wamsi Mohan of Bank of America asked for Corning's view on the impact of DeepSeek's AI advancements on AI infrastructure build-outs. He also asked for clarification on the new 120 yen core rate's stability and the drivers for the incremental CapEx.

Answer

Chairman and CEO Wendell Weeks asserted that innovations like DeepSeek have no negative impact on Corning's plan, as they are necessary for Gen AI's sustainability and do not reduce the need for advanced communications. EVP and CFO Ed Schlesinger confirmed the 120 yen rate is based on hedges for 2025-2026 and should be stable. He added that the ~$1.3B CapEx guide is in line with depreciation and does not imply significant new capacity additions.

Wamsi Mohan inquired about the drivers behind the impressive gross margin of over 39% and whether this level represents a new, higher normalized rate for the company.

Answer

CFO Ed Schlesinger explained that the margin strength was primarily due to operating leverage, as higher sales were delivered on an existing cost and capacity base. While cautioning that not every quarter will necessarily be up, he stated there is potential to go higher. CEO Wendell Weeks added this improvement is crucial for achieving their 20% operating margin target by the end of 2026.

Wamsi Mohan inquired about the specific drivers bridging the strong quarter-over-quarter gross margin improvement, asking for a breakdown between mix and price. He also questioned why pricing embedded in long-term agreements (LTAs) beyond calendar 2026 couldn't be significantly higher given the tight supply-demand environment.

Answer

CEO Dave Mosley explained that strong demand allows for better discussions on future pricing, with customers planning better for future supply. CFO Gianluca Romano reiterated expectations for sequential improvement in revenue and profitability throughout calendar 2026, indicating no change in the positive trend.

Wamsi Mohan inquired about the drivers bridging the strong quarter-over-quarter gross margin improvement, specifically dimensionalizing the contributions from mix and price, and the potential for higher pricing beyond 2026 given the tight supply-demand environment.

Answer

CEO Dave Mosley discussed the persistence of demand, noting that customers are planning better for future needs, leading to strong dialogues for long-term agreements. He acknowledged that industry supply has risen but demand remains strong. CFO Gianluca Romano reiterated expectations for sequential improvement in revenue and profitability throughout the calendar year.

Wamsi Mohan asked about Seagate's pricing strategy in the current constrained supply environment, including contractual lock-ins, intra-quarter flexibility, and why the dollar-per-terabyte decline remained consistent despite strong demand, particularly regarding HAMR versus non-HAMR differentials.

Answer

Dave Mosley, Chair and CEO, explained that Seagate aims for predictable economics through long-term contracts, with market adjustments occurring slowly over time. Gianluca Romano, CFO, clarified that while like-for-like product pricing slightly increases upon renegotiation, the overall average price per terabyte can decrease as customers transition to higher-capacity HAMR drives, which offer a lower price per terabyte.

Wamsi Mohan asked about Seagate's pricing management in the current constrained environment, including contractual lock-ins and flexibility, and why the dollar per terabyte decline remained consistent despite strong demand.

Answer

Seagate's Chair and CEO, Dave Mosley, stated that operations are predictable, with market adjustments occurring slowly over time. CFO Gianluca Romano explained that the consistent pricing strategy involves slight price increases for the same product during renegotiations, but a mix shift to higher capacity HAMR drives can lead to a slight decrease in average price per terabyte.

Wamsi Mohan from Bank of America Merrill Lynch asked about potential linearity issues, given the revenue guide and a jump in DSO, and questioned how well the HAMR capacity ramp is aligned with customer qualifications and demand.

Answer

CEO Dave Mosley noted that long-term planning dictates supply and the company is prioritizing product transitions. CFO Gianluca Romano added that demand exceeds supply, and some production capacity is being dedicated to customer qualifications for HAMR. He also highlighted that the EPS guidance reflects impacts from a higher tax rate and share count.

Wamsi Mohan questioned why the guided gross margin expansion for the June quarter wasn't more significant, given that nearline demand is expected to be up, unlike in the March quarter.

Answer

CFO Gianluca Romano emphasized that the continuous upward trend in profitability is the key takeaway and that price increases within contracts can vary by quarter based on negotiation timing. CEO Dave Mosley added that in Q3, the company had to prioritize certain segments due to supply constraints, a situation that is now easing, allowing for broader customer fulfillment.

Wamsi Mohan of Bank of America asked for clarification on the March quarter revenue baseline and questioned where Seagate stands in the current nearline demand cycle, given six quarters of strong growth versus historical patterns.

Answer

CEO Dave Mosley stated it's early to define the current recovery as a typical cycle due to the profound post-pandemic downturn. He highlighted that build-to-order discipline provides strong predictability. CFO Gianluca Romano added that while March revenue could have been higher absent the supply issue, the company expects overall improvement through the calendar year.

Wamsi Mohan from Bank of America inquired about Seagate's demand visibility under its build-to-order model for fiscal 2025, potential March quarter seasonality, and its competitive product positioning on drive capacity ahead of the full HAMR volume ramp.

Answer

CEO Dave Mosley affirmed the build-to-order model is providing good predictability and that the company is confident in its bookings for the next year, noting cloud inventory buffers remain low. He stated Seagate is already shipping leading capacity products, with CMR drives over 30 terabytes and SMR providing even higher capacities, expressing comfort with the current technology portfolio and its ability to get all qualifications and ramps completed.

Wamsi Mohan asked for granularity on TE Connectivity's AI programs, specifically whether they are NVIDIA-centric, TPU, or other ASIC-centric, and requested color on the content split between signal and power connectivity.

Answer

CEO Terrence Curtin stated that the company does not discuss customer-level details but confirmed that the growth is driven by hyperscaler programs, a continuation of past trends. He noted that content is broad across both power and data/signal spectrums, supporting next-generation architectures, and the momentum with hyperscale customers is strong.

Wamsi Mohan requested more specific details on TE Connectivity's AI programs, asking if they are NVIDIA-centric, TPU/ASIC-centric, and for a breakdown of content split between signal and power connectivity based on current orders.

Answer

CEO Terrence Curtin reiterated that TE Connectivity does not discuss customer-level details but confirmed that the growth is driven by hyperscaler programs, continuing the momentum seen to date. He stated that the content is broad across both power, data, and signal spectrums, aligning with next-generation architectures.

Wamsi Mohan of Bank of America asked for early thoughts on fiscal 2026, questioning if the current momentum and high-teens EPS growth could be sustained, particularly in the context of rising material costs.

Answer

CEO Terrence Curtin pointed to the upcoming Investor Day for a detailed outlook but highlighted that future earnings growth will be driven by volume fall-through on top of the company's proven operational structure. He emphasized that strong cash flow conversion, which will again be over 100% this year, provides optionality for shareholder returns and strategic acquisitions, creating levers to continue strong performance.

Wamsi Mohan questioned the outlook for automotive content growth for the year amid worsening production trends and asked for clarification on whether the 3% tariff cost impact includes indirect operational costs.

Answer

CEO Terrence Curtin explained that full-year auto content growth is expected to be at the low end of the 4-6% range, pressured by weakness in Europe, which is historically TE's highest content region. He clarified that the 3% cost impact is a direct tariff surcharge on specific imported products and does not include other operational or logistical costs.

Wamsi Mohan asked about TE Connectivity's strategy for potential tariffs and its posture on M&A, specifically inquiring if the company would consider larger deals beyond its typical 'bolt-on' acquisitions.

Answer

CEO Terrence Curtin addressed tariffs, explaining that TE would deploy its 2017 playbook, which includes adjusting logistics, moving manufacturing, and passing on costs to customers. CFO Heath Mitts handled the M&A question, clarifying that 'bolt-on' refers to strategic fit rather than size. He added that the M&A pipeline has increased and the company is actively pursuing opportunities.

Wamsi Mohan from Bank of America requested details on the nearly 10-point content outgrowth in Asia, asking for a breakdown between EV mix versus general electronification and whether these trends will sustain in fiscal 2025.

Answer

CEO Terrence Curtin explained that the significant outperformance in Asia, TE's largest region, is driven by both the strong momentum in EV production and increased data connectivity content across all vehicle powertrains. He noted that over 70% of EV/HEV production occurs in Asia, where TE is well-positioned. Curtin expects similar EV production unit growth in FY25, primarily driven by Asia, which should sustain the company's content growth.

Wamsi Mohan with Bank of America Corporation sought clarification on seasonality comments, specifically regarding the Q1 revenue outlook being consistent with historical seasonality despite push-outs from Q4. He asked if Q1 seasonality would have been worse without these push-outs and about the impact of AI server lumpiness on the second half of the fiscal year.

Answer

CFO Marie Myers clarified that Q1 revenue, including the Q4 push-outs, is in line with normal historic seasonality, with a projected 46% revenue in the first half and 54% in the second half. President and CEO Antonio Neri explained that AI conversion, particularly for sovereign and enterprise customers, involves longer lead times due to procurement processes, data center readiness, and sometimes future technology requirements. He noted that government-related deals and specific data center readiness issues contributed to push-outs, leading to expectations for the back end of the year to have the largest AI revenue conversion.

Wamsi Mohan requested a bridge for the full-year guidance, which implies revenue growth but an operating profit decline, asking for the specific headwind from tariffs and a breakdown of the free cash flow reduction.

Answer

CFO Marie Myers stated the full-year guidance includes a $0.07 per share negative impact from tariffs, with a concentrated $0.04 impact in Q2. Regarding the free cash flow decline to $1 billion, she identified the primary drivers as changes in working capital and cash charges related to the new cost efficiency program, with the tariff impact flowing through earnings.

Wamsi Mohan inquired about the current shape and composition of Hewlett Packard Enterprise's AI systems pipeline, particularly in light of the reported dip in the backlog during the quarter.

Answer

President and CEO Antonio Neri explained that the AI pipeline is a multiple of the current backlog, which now exceeds $3.5 billion. He noted that while model builders and hyperscalers remain the primary drivers, the enterprise AI pipeline is growing steadily with hundreds of customers. He highlighted that the HPE Private Cloud AI solution, co-engineered with NVIDIA, began closing its first deals in Q4 just seven weeks after becoming available.

Wamsi Mohan of Bank of America Merrill Lynch requested more detail on the composition of the AI systems backlog and asked for specific examples of enterprise AI projects being evaluated in key verticals like healthcare and financial services.

Answer

CEO Antonio Neri noted the AI pipeline is multiples of the current backlog, which is composed of mid-teens enterprise demand with the rest from service providers. He highlighted that enterprise use cases are maturing beyond chatbots to sophisticated applications in finance and manufacturing, which the HPE Private Cloud AI offering is designed to target.

Wamsi Mohan (represented by Rupalu) asked about SanDisk's bid growth expectations across data center, client, and consumer markets in the second half of the fiscal year, inquiring if product allocation is widespread and if orders are non-cancellable. She also sought details on the factors driving the strong gross margin expansion, including pricing, mix, and cost per gigabyte.

Answer

EVP and CFO Luis Visoso stated that SanDisk expects faster growth in the data center segment in the back half of the year, while continuing to make progress in consumer and edge markets. He confirmed that the majority of the strong gross margin expansion is driven by pricing improvements, noting that margins strengthened throughout the quarter. He also mentioned a 'little bit of a benefit' from lower cost per gigabyte as SanDisk shifts more into BICS8, contributing to the overall margin expansion.

Wamsi Mohan from Bank of America Merrill Lynch asked about the client segment growth outlook for the second half of the year and the company's strategy for navigating potential semiconductor tariffs, given its Japan-based manufacturing.

Answer

Chairman & CEO David Goeckeler reported seeing consistent demand signals from client customers with normalized inventory levels. Regarding tariffs, he stated that SanDisk is monitoring the dynamic situation closely and is confident in its ability to navigate potential changes with its global footprint.

Wamsi Mohan asked how the high concentration of cloud revenue (90%) might alter business seasonality and whether the company could grow through traditionally weak quarters. He also asked for the primary driver of recent incremental margin improvements.

Answer

CEO Irving Tan explained that traditional seasonality is less applicable now, as demand is driven by long-term hyperscaler CapEx and supported by 12-18 month LTAs. CFO Kris Sennesael and CEO Irving Tan both identified product mix as the most important margin driver, with Tan highlighting that shipments of the latest 26TB and 32TB drives more than doubled quarter-over-quarter.

Wamsi Mohan from Bank of America questioned whether the concern about an enterprise slowdown was based on actual order patterns or was merely anticipatory. He also asked for financial parameters for the upcoming 14-week September quarter.

Answer

CEO Irving Tan clarified that the concern is anticipatory, reflecting general market caution and commentary from other companies, rather than a slowdown in Western Digital's own order patterns. For the 14-week quarter, Interim CFO Don Bennett explained that while expenses will reflect the extra week, revenue is expected to follow typical seasonal patterns, and he declined to provide specific guidance.

Wamsi Mohan asked for a high-level view of the HDD cycle, questioning why guidance is for a sequential decline when demand exceeds supply, and sought an outlook for pricing and exabyte shipments in 2025. He also asked about the demand recovery assumptions behind the 'temporary weakness' in NAND.

Answer

Incoming Western Digital CEO Tiang Yew Tan and outgoing CEO David Goeckeler described the 2025 HDD outlook as robust despite minor quarterly variations, with pricing expected to be stable to slightly up. On the NAND side, Goeckeler expressed confidence in a 2025 recovery driven by PC and smartphone unit growth in the second half, stating the company will manage supply to support pricing until then.

Wamsi Mohan asked for the drivers behind the slight sequential decrease in guided gross margin at the midpoint and how the new 11-platter mass capacity drive is expected to impact margins through fiscal 2025.

Answer

CEO David Goeckeler explained that while new products like the 11-platter drive will eventually drive margin higher, they won't be deployed for a couple of quarters. He attributed the near-term margin outlook to flat HDD margins quarter-over-quarter and a slight dip in Flash margins due to a temporary cost increase, deviating from the typical cost-down trajectory.

Wamsi Mohan questioned if recent tariff news has altered customer order patterns or linearity, specifically looking for evidence of order pull-ins. He also asked for clarification on the 7-10% China tariff exposure and any potential cash flow impacts. Finally, he inquired about Avnet's visibility into components for AI-based systems.

Answer

CEO Philip Gallagher stated that there has not been a significant change in order patterns due to tariffs, though CFO Ken Jacobson quantified a modest pull-in benefit in Asia of around $100 million. Jacobson clarified that a significant portion of the China-originating product is not subject to U.S. tariffs and they do not foresee a major cash flow drag. Regarding AI, Gallagher noted visibility primarily in Asia, representing 3-5% of the region's business, and sees a future opportunity in 'AI on the edge'.