Corning Inc (GLW)

Optical Growth Visibility
Q: How strong is your visibility into sustained growth in optical, especially Gen AI?
A: Our visibility for strong growth is relatively high, as we've been working directly with customers on customized systems based on their wiring diagrams for new data centers. We've been developing core components for the last few years and are already building some network needs ahead of installation. Positive word of mouth has led to new customers, driving upside variance. -

Optical Competitive Moat
Q: Is Corning's competitive moat in optical stronger now, particularly in enterprise?
A: Yes, we're building a moat driven by our new-to-the-world fiber cable and connectivity system, which only we can put together. Our new super high-density systems double the amount of light guides within the same volume while increasing performance. Our method is protected by intellectual property, increasing our competitive advantages. -

Springboard Opportunity and Lumen Agreement
Q: Can you split the $8B springboard opportunity between carrier and enterprise, and elaborate on the Lumen deal's revenue impact?
A: The majority of the opportunity comes from the enterprise segment due to Gen AI's impact on compute and networking needs. Regarding Lumen, it represents about 10% of our global fiber capacity, so taking 10% of expected optical revenue puts you in the zone for sizing. The Lumen deal is exciting as it validates increased fiber needs for Gen AI data centers. -

Further Similar Agreements
Q: Do you anticipate similar agreements with other carriers?
A: While we can't speculate, Lumen's adoption of our new technology—which doubles fiber capacity in existing conduits—is generating significant interest, potentially leading to more agreements. -

Enterprise Optical Growth Stability
Q: How can we be confident in steady enterprise optical growth given potential variability?
A: We've accounted for potential variability in our $5B springboard plan, adjusting probabilistically. In the near term, our visibility is high; we guided for enterprise to grow at 25%, but we achieved 40% growth in the first quarter post-guidance. We feel comfortable about the 25% guidance provided. -

Display Segment Price Adjustments
Q: Is there a display price increase assumed in Q3 guidance?
A: We're not specifically guiding any display price changes at this time because we're in discussions with customers about a currency-based price adjustment, but that doesn't mean there won't be an impact in Q3. -

Gross Margin Outlook
Q: What are the drivers for gross margin growth?
A: We have the capacity and technical capabilities in place to support higher sales without adding fixed costs. This will drive both gross margin and operating margin improvements as sales grow. There's room for gross margin to continue increasing; our guidance implies this for Q3. -

Display Utilization Rates and Market Share
Q: What's the expectation for panel maker utilization rates in Q3, and will currency adjustments impact glass market share?
A: Utilization rates increased significantly in Q2 and may run at the same level or slightly lower in Q3 to average out for the year. Regarding currency-based price adjustments, our goal is to maintain our net income margin at historical levels over the last five years, and we intend to hold our market share through our approach. -

Optical Profitability vs. Display
Q: How will optical revenue growth affect net income compared to display?
A: We can continue to have EPS growth outpacing sales, regardless of growth source, due to existing capacity and capabilities. Margins in the optical business, especially in the data center and AI spaces, are quite attractive and can be above 13% net income margin, higher than in the past. -

Carrier Segment Outlook
Q: How is the carrier side of optical performing and what's the trajectory?
A: Carrier business is increasing sequentially. Although down year-over-year due to prior inventory builds and current drawdowns, order rates are going up, and sales are up sequentially. Carrier order rates are approaching deployment rates, indicating an upward trend in year-over-year growth rates. -

Enterprise vs. Carrier Margins
Q: How do margins compare between enterprise and carrier in optical?
A: Enterprise margins are higher than carrier because it involves more customized connectivity systems. We share value created by reducing installation costs, leading to higher adoption and revenue share in enterprise. -

Carrier Inventory Normalization
Q: When do you expect carriers to align orders with deployments?
A: It's customer-specific, and we're not quite there yet. We'll make progress in Q3 but may not be fully aligned. We expect the gap to close relatively quickly and will update as we progress. -

Display Pricing and USD
Q: Will display price negotiations conclude by Q3, and could pricing move to USD?
A: We're in discussions and plan to update in September. We're engaging customers about moving to USD-based pricing or finding a way to appropriately share currency value changes. We aim to maintain profitability consistent with historical levels by pricing appropriately. -

Optical Architecture and Gen AI
Q: Does your current optical portfolio fit all hyperscaler deployments, and what's the outlook for traditional enterprise markets?
A: Our reported revenue comes from fiber optic connections between switches. There's ongoing work on whether server rack connections will become optical due to higher bit rates and distances. For traditional enterprise deployments and inference architectures, it's too early to determine predominant models. We'll share more as our understanding evolves. -

Competitive Differentiation in Optical
Q: What's unique about Corning's Gen AI optical solutions compared to competitors?
A: We participate at all levels, offering our new fiber to others and designing proprietary cables and connectors. Our unique advantage is reducing fiber diameter while improving optical performance without significant cost increases. Competitors often face performance decreases or higher costs when shrinking fiber. We aim for the majority of revenue from customized solutions adding value through reduced installation time. -