William Stein • Truist Securities

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CEO Steve Sanghi stated the main point is that the 65% long-term target is achievable and advised against over-analyzing the small difference. Regarding the distribution gap, Mr. Sanghi said it would not be closed by September due to slow-moving inventory, with CFO Eric Bjornholt guessing it might align by the end of the fiscal year.

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CEO Steve Sanghi advised not to 'quibble about a percent here and there,' emphasizing the main point is that the 65% target is achievable as the 12 percentage points of temporary charges abate. CFO Eric Bjornholt added that new high-margin products should support margins. Regarding the channel, Sanghi stated that alignment will take more than one quarter due to slow-moving 'sludge' inventory, and they do not expect sell-in to equal sell-through in September.

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CEO Steve Sanghi clarified that the issue is not product competitiveness but pressure from the Chinese government to use local brands. The strategy was to offer Western-quality products under a local brand. This was complicated by a rule change defining origin by fab location, not assembly. CFO J. Bjornholt added that competition is primarily in lower-end standard products, not higher-end, more complex ones. The company is re-evaluating its approach.

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CEO Ganesh Moorthy clarified that green shoots reflect real consumption, as customers who had paused ordering are now returning and pulling in shipments. Regarding normalized demand, he stated the noise in the current cycle is too high to provide a useful number, just as they didn't raise targets at the cycle's peak. Executive J. Bjornholt added that their focus on megatrends and TSS is expected to drive market share gains over time.

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President and CEO Stephen Daly projected that MACOM is on a trajectory to exit fiscal 2026 with gross margins closer to 59%, making the 60% target more likely a fiscal 2027 event. For the Data Center segment, he advised against modeling another 48% growth year for fiscal 2026 but stated that, big picture, MACOM expects to continue delivering double-digit top-line growth with even faster bottom-line growth.

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President and CEO Stephen Daly attributed the Telecom strength to market share gains in a flat 5G market, growth in SATCOM, and recovery in cable infrastructure and 10G PON as inventory burn-down completes. He also noted strong demand for metro long-haul coherent solutions. For the industrial market, Daly stated that the weakness is due to soft end demand rather than just an inventory overhang.

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President and CEO Hassane El-Khoury explained that the chip vs. module trend is not new and is factored into their baseline; Onsemi wins on die performance regardless of format and offers flexibility. He also stated that the potential move to hybrid inverters by some customers is consistent with the company's long-held view, first shared at their Analyst Day, that different vehicle segments will use different technologies (full SiC, hybrid, or IGBT). This does not change their market perspective as they provide solutions across all technologies.

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Founder, Chairman, President & CEO Michael Hsing gave a detailed update: module business is growing well and is expected to be 10-15% of total revenue next year; data converters are slow-moving but part of a larger system solution; and e-motion has surpassed $100 million in recent years and has strong potential from AI-driven robotics. EVP & CFO Bernie Blegen added that channel inventories are lean, indicating they are meeting real demand.

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CFO Bernie Blegen and CEO Michael R. Hsing gave a direct 'No' to both questions about tariff impacts on Q2 guidance. Regarding new products, Hsing explained the strategy is to monetize the company's silicon-based know-how by offering higher-value solutions. He reported that these system-level offerings have been 'much, much welcomed' by very large companies, marking a key part of MPS's transformation into a full-service solutions provider.

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EVP and CFO Bernie Blegen declined to provide a precise figure for the enterprise data decline, pointing to the total Q1 outlook as the most reliable guide due to the company's diversification. Regarding MCUs, CEO Michael Hsing explained that while MPS doesn't sell them as standalone standard products, they are a key part of their evolution into a 'silicon-based solution company.' He noted that many ongoing projects and shipping products across various applications include MPS microcontrollers, often integrated into the solution.

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CEO and Founder Michael Hsing detailed MPS's broad involvement in home automation, including lighting, thermostats, and security actuators. He revealed that MPS is now making MCUs to act as a central brain and is selling complete, easy-to-use kits that he believes will change the building automation market. On data converters, Hsing confirmed the segment is growing, though revenue is still small due to long design cycles. He noted wins in industrial and medical markets and expects to gain more share as new standard product families roll out in the coming quarters.

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CEO Sean Kerins explained that inventory levels are normalizing among large OEM customers, driving replenishment orders. However, he noted that the mass market customer base still has inventory to destock, as they received components later in the shortage cycle. Regarding supply, Mr. Kerins confirmed that lead times have been stable for the past few quarters at pre-pandemic levels, without significant movement in either direction.

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President and CEO Sean Kerins explained that while there is still some excess inventory, current levels are in the 'right neighborhood,' partly due to a strategic commitment to the IP&E market. CFO Rajesh Agrawal noted inventory is down $1 billion from its peak. Regarding the ECS business, Kerins stated confidently that the strong results did not reflect order acceleration from tariff concerns, but rather continued momentum in cloud, hybrid cloud, and software, highlighting the underlying health of the business.

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President and CEO Sean Kerins explained that while inventory is taking longer to sell, there are no significant pockets of slow-moving stock. He noted the company focuses on inventory turns, which are approaching historical pre-pandemic rates. He added that customer inventories are believed to be slowly 'creeping down,' with a broader recovery dependent on the overall economic environment.

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CEO Sean Kerins stated that no significant supplier programmatic changes affected Q3 results or the Q4 outlook. He characterized the current customer mix, skewed towards larger OEMs, as typical for this stage of a market cycle, with the mass market lagging in recovery. Kerins emphasized that Arrow is well-positioned to benefit from any long-term channel consolidation and sees no changes altering its view of long-term market potential.

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CFO Jeremy Parks confirmed that sequential margins were impacted by the pass-through of higher copper and tariff costs, but stated the underlying incremental margin remains healthy at around 25%. CEO Ashish Chand explained that while the company is active in both data center "white space" and "gray space," it is being selective in the highly competitive white space market, focusing on where its IT/OT convergence strategy adds unique value.

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CEO Ashish Chand confirmed that customers are showing more long-term confidence in U.S. manufacturing, driving discussions around IT/OT converged backbones, though some near-term uncertainty exists. CFO Jeremy Parks clarified that while smart buildings orders were up 8% year-over-year, broadband orders showed stronger growth at 18% (or 12-13% organically).

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CEO Ashish Chand stated that the company did not experience any significant order pull-ins during Q4, noting that Belden's in-region manufacturing model mitigates customer concerns about tariffs. CFO Jeremy Parks added that the order backlog has been stable at just over $500 million for several quarters, meaning visibility into Q1 is not materially different than in a typical quarter. He reiterated the Q1 guide assumes normal sequential order patterns.

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CEO Ashish Chand and CFO Jeremy Parks confirmed that the Precision Optical acquisition closed at the end of Q2 and contributed approximately $34.5 million in revenue in Q3, aligning with expectations. They explained that while the Voleatech acquisition was small ($6 million price, <$1M revenue), it is strategically significant because it dramatically accelerates the unification of the security layer across all of Belden's active products. Regarding the industrial market rebound, Ashish Chand noted that while the discrete automation vertical remains weak, other verticals are showing strength due to Belden's integrated solution approach, suggesting a powerful rebound in those specific areas.

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President & CEO Thomas Edman clarified the new segments, noting the Commercial segment is primarily printed circuit boards (PCBs), while Aerospace & Defense is roughly 50% PCBs and 50% integrated electronics. He attributed the strong operating margin performance primarily to a favorable product mix. Edman projected that the Eau Claire facility's costs would be substantially higher, requiring customer commitments to absorb pricing at least 50% above China levels. He also disclosed that the operating margin drag from the Penang facility had increased to approximately 210 basis points.

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CEO Thomas Edman reported that the Penang facility generated $2.2 million in revenue in Q1 with an operating loss of approximately $11.5 million. He reiterated the goal of reaching breakeven, which requires $30-35 million in quarterly revenue, by the end of Q3. Regarding the A&D backlog, Edman explained the decline from $1.56 billion to $1.55 billion was minimal, with a near 1:1 book-to-bill of 0.96, and noted that strong operational execution helped reduce past-due orders.

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CEO Thomas Edman attributed the reduced seasonality to an increased Aerospace & Defense (A&D) revenue mix, the prior sale of the highly seasonal Mobility business, and stronger commercial customer relationships. Regarding the Penang facility, Edman stated that Q4 revenue was not material, Q1 revenue is expected to be in the $4 million range, and the company is still targeting Q3 for the facility to reach breakeven.

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CFO Daniel Boehle clarified the FX impact was an unhedged, non-cash translation loss on Asian balance sheets and that operational earnings were stronger than the nominal figures suggest. He stated the Penang facility's drag was a consistent 180 basis points on operating margins, with break-even still expected by mid-2025. CEO Thomas Edman added that customer qualifications are progressing steadily. Boehle further explained that once at break-even, the 180 bps quarterly drag would be eliminated.

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CEO Stephan von Schuckmann clarified the company's transformation goals, stating that 19% operating margin and 80% cash conversion are floors, not ceilings, with plans for continued margin expansion. He reiterated a target of returning to a 2-4% organic growth rate over the next 12-18 months by winning business across all key end markets.

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Executive Martha Sullivan confirmed the CEO search is expected to conclude within the previously guided 6-to-12-month timeframe. CFO Brian Roberts and Martha Sullivan added that it is too early to forecast 2025 auto production, and while important product launches are planned, market volatility could cause delays, making it prudent to wait before defining outgrowth expectations.

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CEO Lip-Bu Tan acknowledged Intel is behind in AI but aims to find differentiated areas to compete, leveraging its x86 strength, and confirmed they are 'very open' to pursuing an ASIC strategy for custom platforms. CFO David Zinsner clarified the write-downs were primarily impairments on older equipment being replaced, not significant inventory charges.

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CEO Lip-Bu Tan confirmed the goal is a full-stack solution, acknowledging Intel is behind but aims to find areas to differentiate, leveraging its x86 strength. He also affirmed that Intel is very open to working with system companies on purpose-built ASICs. CFO David Zinsner clarified the write-downs were primarily non-cash impairments on older-generation equipment that was replaced by newer tools, not significant inventory write-downs.

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CEO Elon Musk declined to share specific details about the lower-cost model but emphasized that the primary goal is to address affordability. He explained that xAI was created partly to attract AI engineers focused on Artificial Superintelligence (ASI) who might not join Tesla, preventing that talent from going to competitors and clarifying that Tesla's focus remains on real-world AI.

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SVP & CFO Craig Lampo acknowledged the exceptional performance, attributing it to strong organic growth and a shift towards higher-technology products. He stated that while some cost normalization is expected, the company is now targeting an incremental conversion margin of approximately 30%, a significant increase from the previous 25% target.

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CFO Craig Lampo acknowledged the excellent margin performance, driven by strong execution and operating leverage on higher sales. He stated that while the company is well-positioned to "modestly exceed" the historical 25% target this year, they want to remain prudent given the dynamic environment. He deferred on formally setting a new, higher target but expects to continue outperforming the 25% level in the near-to-midterm.

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CEO R. Norwitt confirmed that industrial automation is Europe-centric and sales were down year-over-year. However, he noted a 'smidgen of growth' on a sequential basis but cautioned against interpreting it as a sign of recovery. He expressed continued concern about the European industrial market, noting its link to the auto industry and that the timing of a broader recovery remains uncertain.

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CEO Terrence Curtin explained that the book-to-bill reflects a normal seasonal trend where automotive production typically declines sequentially from Q3 to Q4. He noted that global auto production is expected to fall from 21 million units in Q3 to 20 million in Q4, which is the primary driver and not a cause for concern, as it is factored into the company's strong Q4 guidance.

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CEO Terrence Curtin reiterated that TE did not see pull-ins from its AI customers. He stated the growth is a direct function of ramping production for programs already won across multiple hyperscalers. The confidence in the raised revenue forecast is based on direct customer demand signals and collaborative efforts to increase capacity.

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CEO Terrence Curtin explained that cross-licensing is a long-standing practice in the datacom industry, driven by customer needs for supply security during significant technology ramps. He viewed it as a collaborative effort necessary to meet customer demand and a positive indicator of a strong growth trend, rather than a negative for revenue or margins.

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CEO Terrence Curtin explained that the sequential order decline in Data & Devices is due to natural lumpiness, pointing to the combined $1 billion in orders over the past two quarters as the key indicator of strength. Regarding Sensors, he confirmed the company is continuing its portfolio pruning to focus on four key markets. These exits will create a headwind of approximately $50 million in sales in fiscal 2025, with the program expected to be completed by the end of that year.

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CEO Haviv Ilan explained that while the underlying cyclical recovery signal remains strong, Q2 contained 'noise' from tariff-related demand pull-ins, justifying a more responsible Q3 forecast. On AI, Ilan confirmed that TI's data center business is growing very well and that the company is developing new application-specific products to expand its share, viewing it as a potential tailwind for 2026 and beyond.

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CEO Haviv Ilan stated directly that recent growth was based on shipping more volume to customers, not price increases related to tariffs. Regarding competition, he acknowledged it is intensifying in China across all product types, not just general-purpose parts. However, he believes TI's competitive advantages—product breadth, quality, scale, and its 'geopolitically dependable' supply chain—are highly valued by Chinese customers who are currently focused on securing supply.

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Head of IR Dave Pahl stated that order rates behaved normally, increasing each month during the quarter without any large drop-offs. CEO Haviv Ilan added that with TI's short lead times and high inventory, visibility is low as customers buy in real-time. He noted there is likely little desire for customers to build their own inventory given TI's ability to supply parts on demand.

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CEO Hock Tan estimated that the renewal process is more than halfway complete. Based on typical three-year contract cycles, he projected that the conversion effort has "at least another year plus, maybe a year and a half to go" before the bulk of the customer base is transitioned.

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CEO Hock Tan explained that with typical VMware contracts lasting three years, the company is now 'more than halfway through the renewals.' Based on this, he estimated that the conversion process has at least another year to a year and a half remaining before it is largely complete.

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President and CEO Hock Tan affirmed that the company's M&A strategy remains unchanged. He stated that Broadcom is 'always open' to acquiring high-quality franchise assets in both semiconductors and infrastructure software, as long as they meet the company's stringent strategic and financial criteria.

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President and CEO Hock Tan stated that Broadcom does not focus on the enterprise AI market. He clarified that Broadcom's AI products, particularly custom accelerators and networking, are almost exclusively targeted at large hyperscalers and cloud platforms, so the company does not see the enterprise shift impacting its business.

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CEO Philip Gallagher described Farnell's performance as "encouraged," citing a plan that is driving efficiency and targeting a return to double-digit operating margins through steady improvement. On inventory, Gallagher defended its strategic value, stating that while they aim to reduce excess stock in specific areas, they will not sacrifice competitiveness. CFO Ken Jacobson added that while progress on inventory reduction has been modest, they expect further progress in the coming quarter.

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CFO Ken Jacobson clarified that foreign exchange had a minimal impact on the sales line but did help reduce working capital on the balance sheet. Regarding inventory, Jacobson explained it's a complex issue involving aged stock and lower demand, but not a high risk for major write-offs. CEO Phil Gallagher added that while inventory will continue to be reduced, the pace depends on market growth, and the company is still making strategic investments in necessary inventory while managing non-moving stock.

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CEO Phil Gallagher stated that Avnet is anticipating and modeling for a sales increase in the second half of its fiscal year. He agreed that the modest increase in turns business is likely more a function of customers delaying orders due to stable lead times rather than a sign of strengthening end demand. Gallagher then provided a high-level end-market breakdown: Industrial at 30-40%, Compute/Communications at 30-35%, Transportation at 10-15%, Consumer at 10-15%, and Aerospace & Defense at 5-10%.

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Executive Emily Yang provided a cautious Q1 outlook, citing ongoing inventory rebalancing in Automotive and Industrial and seasonal softness in Compute, Consumer, and Communication. Executive Brett Whitmire addressed operating leverage, stating he expects good leverage as revenue grows and that OpEx as a percentage of revenue should decline as the company benefits from its existing infrastructure and manufacturing footprint.

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Executive Emily Yang stated that for Q3, the revenue split was 64% distribution and 36% direct, compared to 63% and 37% in Q2. Executive Brett Whitmire noted a year-over-year pricing impact of approximately 10%. Regarding the outlook, Emily Yang explained that the Q4 guidance is better than the typical 5% seasonal decline. While visibility is limited, she expressed confidence that 2025 will be a growth year as markets recover. She also confirmed that typical Q1 seasonality is a 5% sequential decline.

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CEO Vince Roche outlined ADI's data center strategy, which includes power solutions for compute chips and control units like hot-swap supervisors. He highlighted traction in optical control solutions up to 1.6 terabits and emphasized an 'ecosystem game' approach, partnering with processor and data center companies on high-end energy solutions from the grid to the chip.

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CEO Kurt Sievers clarified that while the segment has a majority of its business in China, the weakness in the U.S. and Europe is severe. Furthermore, he explained that 80% of the segment's sales go through the distribution channel. NXP's strict discipline in keeping channel inventory low means it is fully exposed to the weak end demand in Western markets, which the strength in China was not large enough to overcompensate for.

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