Optical Communications Growth
Q: Will gen AI boost Optical Communications growth significantly?
A: Management expects gen AI to drive strong growth in their Optical Communications segment, with a 25% compound annual growth rate through 2027 in the Enterprise portion. Current momentum is even faster, and they will update their guidance at the investor event in Q1 next year. "

Margin Expansion
Q: Can gross margins improve beyond current levels?
A: Gross margins reached over 39% due to operating leverage from higher sales without adding capacity. Management believes there's opportunity to go higher, aiming for a 20% operating margin target by the end of 2026, though not every quarter may be up. " "

Display Price Increases
Q: How are customers responding to display price hikes?
A: Customers are experiencing a double-digit price increase in the second half of the year. This aims to maintain stable U.S. dollar net income, delivering a 25% net income margin next year and generating $900 million to $950 million in net income. Management remains confident in achieving this despite challenges in raising prices. " "

CapEx Plans
Q: Will CapEx increase with sales growth?
A: Management does not anticipate a significant increase in capital investments to deliver the Springboard plan. Current capital is focused on productivity improvements and reconfiguring factories. Unless moving towards an $8 billion revenue run rate, capital plans will remain relatively modest. " "

Free Cash Flow Strength
Q: Is strong free cash flow sustainable?
A: The company generated strong free cash flow in Q3 due to higher income conversion and lower capital spending. While every quarter may not reach this level, management expects to continue generating strong free cash flow going forward. "

Hemlock Semiconductor Outlook
Q: How will the CHIPS Act grant impact Hemlock?
A: They received a CHIPS grant to potentially build additional semiconductor capacity, which is a great opportunity. While it may not impact sales through 2026, it's an upside opportunity for the future. " "

Carrier Segment Recovery
Q: Will carrier sales return to past levels soon?
A: It's too early to confidently predict a carrier segment rebound. Recent customer announcements are encouraging, but more evidence is needed before declaring a market turn. Management will monitor developments closely.

Optical Margins Potential
Q: Can Optical margins exceed historic levels?
A: As sales approach peak levels and capacity is filled, management expects Optical margins to improve beyond current levels. They believe margins will accrete as they grow and utilize existing capacity.

OpEx Expectations
Q: Will elevated OpEx levels moderate soon?
A: OpEx was temporarily elevated in Q3 due to catch-up accruals from increased performance. While they won't have catch-up accruals in Q4, OpEx is expected to remain temporarily elevated in the fourth quarter. "

Hemlock Milestones Timing
Q: Any updates on Hemlock business milestones?
A: Progress continues on milestones to launch a new solar map, significantly contributing to the Springboard plan. Detailed updates are expected at the investor event in the first quarter of next year. "