Q1 2024 Astera Labs Earnings Call

Regina: Thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Estera Labs first quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.

Thank you for standing by my name is Regina and I will be your conference operator today at this time I would like to welcome everyone to the sterile labs first quarter 'twenty 'twenty four earnings conference call. All lines have been placed on mute to prevent any background noise. After management remarks, there will be a question and answer session.

Regina: After management remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, press star one again. We do ask that you please limit your questions to two. I will now turn the call over to Leslie Green, Investor Relations for Estera Labs. Leslie, you may begin.

Regina: If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad, if you'd like to withdraw your question Press Star. One again, we do ask that you. Please limit your question Institute I will now turn the call over to Leslie Green Investor Relations for US There are labs Leslie you may begin.

Leslie Green: Thank you, Regina. Good afternoon, everyone, and welcome to the Estera Labs first quarter 2024 earnings call. Joining us today on the call are Jitendra Mohan, Chief Executive Officer and Co-Founder, Sanjay Jagendra, President, Chief Operating Officer, and Co-Founder, and Mike Tait, Chief Financial Officer. Before we get started, I would like to remind everyone that certain comments made in this call today may include forward-looking statements regarding, among other things, expected future financial results, strategies and plans, future operations, and the markets in which we operate.

Leslie Green: Thank you Regina good afternoon, everyone and welcome to the if there are labs first quarter 'twenty 'twenty four earnings call joining us today on the call RJ tender Mohan Chief Executive Officer, and cofounder, John J, J Chandra President Chief operating officer, and cofounder and Mike <unk>, Chief Financial Officer before we get started I would like to.

Leslie Green: These forward-looking statements reflect management's current beliefs, expectations, and assumptions about future events, which are inherently subject to risks and uncertainties that are discussed in detail in today's earnings release and in the periodic reports and filings we file from time to time with the SEC, including the risks set forth in the final perspectives relating to our IPO. It is not possible for the company's management to predict all risks and uncertainties that could have an impact on these forward-looking statements or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statement.

Leslie Green: To remind everyone that certain comments made in this call. Today may include forward looking statements regarding among other things expected future financial results strategy and plans future operations and the markets in which we operate these forward looking statements reflect management's current beliefs expectations and assumptions about few.

Leslie Green: Sure events, which are inherently subject to risks and uncertainties that are discussed in detail in today's earnings release and in the periodic reports and filings that we filed from time to time with the SEC, including the risks set forth in the final prospectus relating to our IPO. It is not possible for the company's management to predict all rich.

Leslie Green: And uncertainties that could have an impact on these forward looking statements or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward looking statements in light of these risks uncertainties and assumptions the results events or circumstances reflected in the forward looking statement.

Leslie Green: In light of these risks, uncertainties, and assumptions, the results, events, or circumstances reflected in the forward-looking statements discussed during this call may not occur, and actual results could differ materially from those anticipated or implied. All of our statements are made based on information available to management as of today, and the company undertakes no obligation to update such statements after the date of this call to conform to them as a result of new information, future events, or changes in our expectations, except as required by law.

Leslie Green: As discussed during this call may not occur and actual results could differ materially from those anticipated or implied all of our statements are made based on information available to management as of today and the company undertakes no obligation to update such statements. After the date of this call to conform to the east as a result of.

Leslie Green: New information future events or changes in our expectations, except as required by law also during this call we will refer to certain non-GAAP financial measures, which we considered to be an important measure of the company's performance. These non-GAAP financial measures are provided in addition to and not as a substitute for or superior.

Leslie Green: Also, during this call, we will refer to certain non-GAAP financial measures, which we consider to be an important measure of the company's performance. These non-GAAP financial measures are provided in addition to, and not as a substitute for, or superior to, financial results prepared in accordance with U.S. GAAP. A discussion of why we use non-GAAP financial measures and reconciliations between our GAAP and non-GAAP financial measures is available in the earnings release we issued today, which can be accessed through the Investor Relations portion of our website and will also be included in our filings with the SEC, which will also be accessible through the Investor Relations portion of our website. With that, I would like to turn the call over to Jitendra Mohan, CEO of Estera Jitendra?

Jitendra Mohan: To financial results prepared in accordance with U S GAAP.

Leslie Green: A discussion of why we use non-GAAP financial measures and reconciliations between our GAAP and non-GAAP financial measures is available in the earnings release, we issued today, which can be accessed through the investor relations portion of our website and will also be included in our filings with the SEC, which will also be accessible through the investor relations.

Jitendra Mohan: Portion of our website with that I would like to turn the call over to just headroom Mohan CEO of it's their labs to tender.

Jitendra Mohan: Good afternoon, everyone, and thanks for joining our first earnings conference call as a public company. This year is off to a great start, with Estera Labs seeing strong and continued momentum, along with the successful execution of our IPO in March.

Jitendra Mohan: Thank you Leslie.

Jitendra Mohan: Good afternoon, everyone and thanks for joining our first earnings conference call as a public company.

Jitendra Mohan: <unk> is off to a bad start we'd have 10, I love seeing strong and continued momentum along with the successful execution of our IPO in March.

Jitendra Mohan: First and foremost, I would like to thank our investors, customers, partners, suppliers, and employees for their steadfast support over the past six years. We have built Estera Labs from the ground up to address the connectivity bottlenecks to unlock the full potential of AI in the cloud. With your help, we've been able to scale the company and deliver innovative technology solutions to the leading hyperscalers and AI platform providers worldwide. But our work is only just beginning.

Jitendra Mohan: Foremost I would like to thank God investors customers partners suppliers and employees for their steadfast support over the past six years.

Jitendra Mohan: Yes.

Jitendra Mohan: Elapsed from the ground up to address the connectivity bottlenecks to unlock the full potential of AI and the cloud.

Jitendra Mohan: Have you been able to scale the company and deliver innovative technology solutions with a leading hyperscale to us and are back from providers worldwide.

Jitendra Mohan: But what I can only just beginning.

Jitendra Mohan: We are supporting the accelerated pace of AI infrastructure deployments with leading hyperscalers by developing new product categories while also exploring new market segments. Looking at industry reports over the past several weeks, it is clear that we remain in the early stages of a transformative investment cycle by our customers to build out the next generation of infrastructure that is needed to support their AI roadmap. According to recent earnings reports, on a consolidated basis, CapEx spent during the first quarter for the four largest U.S. hyperscalers grew by roughly 45 percent year-on-year to nearly $50 billion. Qualitative commentary implies continued quarterly growth in CapEx for this group through the balance of the year.

Jitendra Mohan: Supporting the accelerated pace of your infrastructure deployments with leading Hyperscale.

Jitendra Mohan: By developing new product categories, while also exploring new market segments.

Jitendra Mohan: Looking at industrial reports over the past several weeks. It is clear that we remain in the early stages of a transformative investment cycle by our customers.

Jitendra Mohan: The next generation of infrastructure that is needed to support that AI and roadmaps.

Jitendra Mohan: According to the extent that the ports on a consolidated basis Capex spend during the first quarter. We're the fourth largest U S. Hyperscale us grew by roughly 45% year on year to nearly $50 billion.

Jitendra Mohan: Well if you the commentary implies continued quarterly growth in Capex for these groups to the balance of the year.

Jitendra Mohan: This is truly an exciting time for technology innovators within the cloud and AI infrastructure market, and we believe Estera Labs is well positioned to benefit from these growing investment trends. Against the strong industry backdrop, Estera Labs delivers strong Q1 results with record revenue, a strong non-GAAP operating margin, and positive operating cash flows, while also introducing two new products. Our revenue in Q1 was $65.3 million, up 29% from the previous quarter, and up 269% from the same period last year. Our non-GAAP operating margin was 24.3%, and we delivered 10 cents of pro forma non-GAAP diluted earnings per share.

Jitendra Mohan: This is truly an exciting time for technology innovators within the cloud and AI infrastructure market and we believe it is well positioned to benefit from these growing investment trends.

Jitendra Mohan: Against this strong industry backdrop.

Jitendra Mohan: <unk> delivered strong Q1 results with record revenue strong non-GAAP operating margin positive operating cash flows while also introducing two new products.

Jitendra Mohan: Revenue in Q1 was $65 2 million up 29% from the previous quarter and up 269% from the same period in 2023.

Jitendra Mohan: non-GAAP operating margin was 24, 3% and we delivered 10 cents a pro forma non-GAAP diluted earnings per share.

Jitendra Mohan: I will now provide some commentary around our position in this rapidly evolving AI market. Then I will turn the call over to Sanjay to discuss new products in our growth strategy. Finally, Mike will provide additional details on our Q1 results and our Q2 financial guidance.

Speaker Change: I will now provide some commentary around our position in this rapidly evolving market.

Jitendra Mohan: Then I will turn the call over to Sanjay to discuss new products and our growth strategy.

Sanjay: Finally, Mike will provide additional details on our Q1 results and our Q2 financial guidance.

Jitendra Mohan: Comcast AI model sizes continue doubling about every six months, fueling the demand for high-performance AI platforms running in the cloud. Modern GPUs and AI accelerators are phenomenally good at computation, but without equally fast connectivity, they remain highly underutilized. Technology innovation within the AI accelerator market has been moving forward at an incredible pace, and the number and variety of architectures continues to expand to handle trillion-parameter models while improving AI infrastructure utilization. We continue to see our hyperscaler customers utilize the latest merchant GPUs and proprietary AI accelerators to compose unique data center-scale AI infrastructure. However, no two clouds are the same.

Speaker Change: Okay. Martin sorry. This continued doubling about every six months fueling the demand for high performance platforms running in the cloud.

Jitendra Mohan: <unk> Gpus and AI accelerators are phenomenally, good at compute but without equally connectivity they remain highly underutilized.

Jitendra Mohan: Technology innovation within the accelerated market has been moving forward at an incredible pace and the number and variety of architectures continues to expand 200 trillion pedometers models.

Jitendra Mohan: Moving to ear infrastructure utilization.

Jitendra Mohan: We continue to see our hyperscale customers utilize the latest Muslim Gpus and proprietary AI accelerators to compose unique data center scale AI infrastructure.

Jitendra Mohan: However, nobu clouds are the same.

Jitendra Mohan: The major hyperscalers are architecting their systems to deliver maximum AI performance based on their specific cloud infrastructure requirements, from power and cooling to connectivity. We are working alongside our customers to ensure these complex and different architectures achieve maximum performance and operate reliably even as data rates continue to double. As systems continue to move data faster and grow in complexity, we expect to see our average dollar content per AI platform increase, and even more so with the new products we have in development.

Jitendra Mohan: The major Hyperscale architected their systems to deliver maximum performance based on their specific cloud infrastructure requirements.

Jitendra Mohan: Power and cooling to connectivity.

Jitendra Mohan: We are working alongside our customers to ensure these complex and different architectures achieve maximum performance and operate reliably even as data rates continuing to double.

Jitendra Mohan: As a systems continued to move data faster and growing complexity, we expect to see dollar content Bloody air platform increase and even more so with the new products we have in development.

Jitendra Mohan: Our conviction in maintaining and strengthening our leadership position in the market is rooted in our comprehensive intelligent connectivity platform and our deep customer partnership. The foundation of our platform consists of semiconductor-based and software-defined connectivity ICs, modules, and boards, which all support our Cosmos software solution. We provide customers with a complete customizable solution, including tips, hardware, and software, which maximizes flexibility without performance penalties, delivers deep fleet management capabilities, and matches space with the ever-quickening product introduction cycles of our customers.

Jitendra Mohan: Our conviction in maintaining and strengthening our leadership position in the market is rooted in our comprehensive intelligent connectivity platform and our deep customer partnerships.

Jitendra Mohan: The foundation of our platform consists of semiconductor based and software defined connectivity Ics modules and boards, which all support our Cosmos software suite.

Jitendra Mohan: We provide customers with a complete customize able solution chips hardware and software, which maximizes flexibility without performance penalties delivers deep fleet management capabilities and matches pace with the ever quickening product introduction cycles of our customers.

Jitendra Mohan: Not only does Cosmos software run on our entire product portfolio, but it is also integrated within our customers' operating stacks to deliver seamless customization, optimization, and monitoring. Today, Estera Labs is focused on three core technology standards: PCI Express, Ethernet, and Compute Express Link. They're shipping three separate product families, all generating revenue and in various stages of adoption and deployment, supporting these different connectivity protocols. Let me touch upon each of these critical data center connectivity standards and how we support them with our differentiated solutions. First, we share express.

Jitendra Mohan: Not only does cost more software run on our entire product portfolio, but it is also integrated within our customers' operating stats to deliver a seamless customization optimization and monitoring.

Jitendra Mohan: Today instead allows is focused on three core technology standards.

Jitendra Mohan: Press Ethernet and compute express link.

Jitendra Mohan: This shipping three separate product families all generating revenue and in various stages of adoption and deployment supporting these different connectivity protocols.

Jitendra Mohan: Let me touch upon each of these critical data center connectivity standards, and how we support them with our differentiated solutions.

Speaker Change: First we can't express.

Jitendra Mohan: PCIe is the native interface on all AI accelerators, TPUs, and GPUs, and it's the most prevalent protocol for moving data at high bandwidth and low latency inside servers. Today, we see PCIe Gen5 getting widely deployed in AI services. These AI servers are becoming increasingly complex. Faster signal speeds in combination with complex server topologies are driving significant signal integrity challenges. To help solve these problems, our hyperscalers and AI.

Jitendra Mohan: CCA is the native interface, and all AI accelerators, Cpus and Gpus and is the most prevalent protocol for moving data at high bandwidth and low latency type service.

Jitendra Mohan: Today, we see pcie Gen five getting widely deployed in AI servers.

Jitendra Mohan: The Air service is becoming increasingly complex.

Jitendra Mohan: Foster signal speeds in combination with complex server topologies are driving significant signal integrity challenges.

Jitendra Mohan: Solve these problems on Hyperscale and <unk>.

Jitendra Mohan: Accelerator customers utilize our PCIe smart DSP retimers to extend the reach of PCIe Gen5 between various components within a heterogeneous computer architecture. Our Aries product family represents the gold standard in the industry for performance, robustness, and flexibility, and is the most widely deployed solution in the market today. Our leadership position, with millions of critical data links running through our Ares re-timers and our Cosmos software, enables us to do something more, become the eyes and ears to monitor the connectivity infrastructure and help fleet managers ensure their AI infrastructure is operating at peak utilization.

Jitendra Mohan: Accelerated customers utilize our pcie smart VSP retailers too.

Jitendra Mohan: In terms of each of Pcie Gen five between various components within the heterogeneous compute architecture.

Jitendra Mohan: Our <unk> family represents the gold standard in the industry for performance robustness and flexibility and is the most widely deployed solution in the market today.

Jitendra Mohan: Our leadership position with millions of critical data links running through our <unk> Z timeless and our Cosmos software enables us to do something more we can be or even years to monitor the connectivity infrastructure and help fleet managers and sure. There are infrastructure is operating at peak utilization.

Jitendra Mohan: Deep diagnostics and monitoring capabilities in our chips and extensive fleet management features in our Cosmos software, which are deployed together in our customers' fleets, have become a material differentiator for us. Our Cosmos software provides the easiest and fastest path to deploy the next generation of our devices. We see AI workloads and newer GPUs driving the transition from PCIe Gen5 running at 32 gigabits per second per lane to PCIe Gen6 running at 64 gigabits per second per lane. Our customers are evaluating our Gen6 solutions now, and we expect them to make design decisions in the next six to nine months.

Jitendra Mohan: In diagnostics and monitoring capabilities in our chips and extensive fleet management features in our Cosmos software, which are the right together and our customers fleets have become a material differentiator for us.

Jitendra Mohan: Cosmos software provides the easiest and fastest path to deploy the next generation of our devices.

Jitendra Mohan: We see <unk> workloads are newer gpus driving the transition from Pcie Gen 532 gigabit per second per lane to Pcie Gen. Six learning 64 gigabit per second per lane.

Jitendra Mohan: Our customers that are evaluating our gen. Six solutions now and we expect them to make design decisions in the next six to nine months.

Jitendra Mohan: In addition, while we see our ARIES devices being heavily deployed today for interconnecting AI accelerators with CPUs and networking, we also expect our ARIES devices to play an increasing role in back-end fabrics, interconnecting AI accelerators to each other in AI clusters. Next, let's talk about Ethernet. The Ethernet protocol is extensively deployed to build large-scale networks within data centers. Today, Ethernet makes up the vast majority of connections between servers and top-of

Jitendra Mohan: In addition, while we CRA these devices being heavily deployed today for interconnecting AI accelerators with Cpus in networking. We also expect that <unk> devices to play an increasing role in backend Pathics interconnecting AI accelerators to each other in the AG clusters.

Jitendra Mohan: Next let's talk about Ethernet.

Jitendra Mohan: The Ethernet protocol as extensively deployed to build large scale networks within data centers.

Jitendra Mohan: Good day Ethernet makes up the vast majority of connections between servers and top of rack switches.

Jitendra Mohan: Driven by AI workloads' insatiable need for speed, Ethernet data rates are doubling roughly every two years, and we expect the transition from 400-gigabit Ethernet to 800-gigabit Ethernet to take place later in 2025. 800 gigabit Ethernet is based on 100 gigabits per second per lane signaling rate, which is facing tremendous pressure on conventional passive cabling solutions. Like our PCIe retimers, our portfolio of Taurus Ethernet retimers helps relieve these connectivity bottlenecks by overcoming reach, signal integrity, and bandwidth issues by enabling robust 100 gigabit per lane connectivity over copper. Unlike our ALES portfolio, which is largely sold in a chip format, we sell our TORUS portfolio largely in the form of smart cable modules that are assembled into active electrical cables by our cable partners.

Jitendra Mohan: Driven by AI workloads in fascia will need for speed Ethernet data rates are doubling roughly every two years and we expect the transition from 400 gig Ethernet to 800 gig Ethernet to take place later in 2025.

Jitendra Mohan: The 800 gig Ethernet is based on 100 gigabit per second per lane signaling rig, which is creating tremendous pressure on commercial passive cabling solutions.

Jitendra Mohan: <unk> our portfolio of stores Ethernet the diners helps relieve these connectivity bottlenecks by overcoming reach signal integrity and bandwidth issues.

Jitendra Mohan: Labeling robust 100 gig per lane connectivity over copper.

Jitendra Mohan: Unlike our <unk> portfolio, which is largely sold in the chip farmer, we sell our tortoise portfolio largely in the form of smart cable modules that are assembled into active electrical cables by our cable partners.

Sanjay Jagendra: This approach allows us to focus on our strengths and fully leverage our Cosmos software suite to offer customization, easy qualification, deep telemetry, and field upgrades to our customers. At the same time, this model enables our cable partners to continue to excel at bringing the best cabling technology to our common end customers. We expect 400 gigabit deployments based on our Taurus smart cable modules to begin to ramp in the back half of 2024.

Jitendra Mohan: This approach allows us to focus on our strengths and fully leverage our cosmos software suite to offer customization easy qualification deep telemetry and field upgrades to our customers.

Sanjay Jagendra: At the same time this model enables our cable partners to continue to excel at bringing the best gambling technology to our common customers.

Sanjay Jagendra: We expect 400 gig deployments based on our taught us mark gable modules to begin to ramp in the back half of 2024.

Sanjay Jagendra: We see the transition to 800-gigabit Ethernet starting to happen in 2025, resulting in broad demand for AECs to both scale up and scale out AI infrastructure and strong growth for our Taurus Ethernet smart cable module portfolio over the coming years. CXL is a low-latency, cache-coherent protocol that runs on top of PCIe protocols. TXL provides an open standard for disaggregating memory from computer memory. TXL allows you to balance memory bandwidth and capacity requirements independently from compute requirements, resulting in better utilization of compute infrastructure.

Sanjay Jagendra: We see the transition to 800 gig Ethernet starting to happen in 2025, resulting in broad demand for Acs to both scale up and scale out infrastructure and strong growth for our daughters, Ethernet Smart cable margin portfolio over the coming years.

Sanjay Jagendra: Lastly, as computer Express link our CSO.

Sanjay Jagendra: <unk> is a low latency cache coherent protocol, which runs on top of Pcie protocol.

Sanjay Jagendra: <unk> provides an open standard for this aggregating memory from compute.

Sanjay Jagendra: <unk> allows you to balance the memory bandwidth and capacity requirements independently from compute requirements, resulting in better utilization of compute infrastructure.

Sanjay Jagendra: Over the next several years, data center platform architects plan to utilize PXL technology to solve memory bandwidth and capacity bottlenecks that are being exacerbated by the exponential increase in compute capability of CPUs and GPUs. Major hyperscalers are actively exploring different applications of CXL memory expansion. While the adoption of CXL technology is currently in its infancy, we do expect to see increased deployments with the introduction of next-generation CXL-capable data center server CPUs, such as Granite Rapids, Turing, and others.

Sanjay Jagendra: Over the next several years datacenter platform marketing plan to utilize <unk> technology to solve memory bandwidth and capacity bottlenecks that are being exacerbated by the exponential increase in compute capability of Cpus and Gpus.

Sanjay Jagendra: Major Hyperscale us are actively exploring different application of CSL memory expansion.

Sanjay Jagendra: While the adoption of <unk> technology is currently in its infancy, we do expect to see increased deployments with the introduction of next generation DSL capable data centers server Cpus, such as Grand Rapids children and others.

Sanjay Jagendra: Our first-to-market portfolio of LeoCXL memory connectivity controllers is very well positioned to enable our customers to overcome memory bottlenecks and deliver significant benefits to their end customers. We have worked closely with our hyperscaler customers and CPU partners to optimize our solution to seamlessly deliver these benefits without any application-level software changes. Furthermore, we have used our Cosmos software to include significant learnings we have had over the last 18 months and to customize our LEO memory expansion solution to the differing requirements of each hyperscaler.

Sanjay Jagendra: Our first to market portfolio of <unk> memory connectivity controllers is very well positioned to enable our customers to overcome memory bottlenecks and deliver significant benefits to their end customers.

Sanjay Jagendra: We have worked closely with our hyperscale customers and CPU partners to optimize our solution to seamlessly deliver these benefits without any application level software changes.

Sanjay Jagendra: Furthermore, we have views us cost more software to include significant learnings we've had over the last 18 months and to customize our Leo memory expansion solution to the differing requirements from each hyper scaler.

Sanjay Jagendra: We anticipate memory expansion will be the first high-volume use case that will drive design wins into volume production in 2025. We remain very excited about the potential of CXL in data center applications and believe that most new CPUs will support CXL, and hyperscalers will increasingly deploy innovative solutions based on CXL. With that, let me turn the call over to our President and CEO, Sanjay Gajendra, to discuss some of our recent product announcements and our long-term growth strategy.

Sanjay Jagendra: We anticipate memory expansion will be the first high volume use case that will drive design wins into volume production in 2025 timeframe.

Sanjay Gajendra: We remain very excited about the potential of <unk> XL and data center applications and believe that most new Cpus, which supports EXL and Hyperscale us will increasingly deploy innovative solutions based on <unk>.

Sanjay Gajendra: With that let me turn the call over to our President and COO Sanjay agenda to discuss some of our recent product announcements and our long term growth strategy.

Sanjay Jagendra: Thanks Chitindra, and good afternoon everyone. Sera Labs is well positioned to demonstrate long-term growth through a combination of three factors. One, we have a strong secular tailwind with increased AI infrastructure investment. Two, the next generation of products within existing product lines is gaining traction, and third, the introduction of new products. Over the past three months, we announced two new and significant products that play an important role in enabling next-generation AI platforms and provide incremental revenue opportunities as early as the second half of 2024.

Sanjay Gajendra: Thanks, Jason and good afternoon, everyone.

Sanjay Jagendra: <unk> labs is well positioned to demonstrate long term growth through a combination of three factors. One we have a strong secular tailwind with increased AI infrastructure investment to the next generation of products Britain existing product lines are gaining traction.

Sanjay Jagendra: And third the introduction of new product lines.

Sanjay Jagendra: For the past three months, we announced two new and significant products that play an important role in enabling next generation AI platforms and provide incremental revenue opportunities as early as the second half of 2024.

Sanjay Jagendra: First, we expanded our widely-deployed, field-proven ARIES Smart DSP retimer portfolio with the introduction and public demonstration of our ARIES 6 PCIe retimer that delivers robust, low-power PCIe Gen 6 and CXL3 connectivity between next-generation GPUs, AI accelerators, CPUs, NICs, and CXL memory controllers. Ares VI is the third generation of our PCIe smart retimer portfolio and provides the bandwidth required to support data-intensive AI workloads while maximizing utilization of next-generation GPUs operating at 64 gigabits per second per link.

Sanjay Jagendra: First we expanded our widely deployed <unk> 80, smart DSP the time, our portfolio with the introduction and public demonstration of our 86 PCI E. Tyler that delivered robust low power Pcie Gen six and <unk>.

Sanjay Jagendra: Connectivity between next generation Gpus.

Sanjay Jagendra: Accelerators, Cpus Nicks and CSL memory controllers.

Sanjay Jagendra: <unk> six is the third generation of our PCI Smart re timer portfolio and provides the bandwidth required to support data intensive AI workloads, while maximizing utilization of next generation Gpus operating at 64 gigabit per second prudently.

Sanjay Jagendra: Fully compatible with our field-deployed Cosmos software suite, AD6 incorporates the tribal knowledge we have acquired over the past four years by partnering and enabling hyperscalers to deploy AI infrastructure in the cloud. ARES VI also enables a seamless upgrade path from current PCIe Gen5-based platforms to next-generation PCIe Gen6-based platforms for our customers. With 86, we demonstrated the industry's lowest power at 11 watts at Gen 6 in a full 16-lane configuration running at 64 gigabits per second per lane, significantly lower than our competitors and even lower than our own Ares Gen 5 data.

Sanjay Jagendra: Fully compatible with our field deployed cost more software suite.

Sanjay Jagendra: 86 incorporates the tribal knowledge, we have acquired over the past four years by partnering and enabling Hyperscale is to deploy AI infrastructure in the cloud.

Sanjay Jagendra: 86 also enables the seamless upgrade path from current Pcie Gen. Five based platforms to next generation Pcie Gen six based platforms for our customers.

Sanjay Jagendra: With 86% with demonstrated industry's lowest power at 11 watts at Gen. Six in full 16 lane configuration running at 64 gigabit per second per lane significantly lower than our competitors and even lower than our own <unk> Gen. Five this timeline.

Sanjay Jagendra: Through collaboration with leading providers of GPUs and CPUs, such as AMD, ARM, Intel, and NVIDIA, AD6 is being rigorously tested at Astera's cloud-scale Introp Lab and on customers' platforms to minimize inter-operation risk, lower system development cost, and reduce time to market. AD6 was demonstrated at NVIDIA's GTC event during the week of March 18.

Sanjay Jagendra: Through collaboration with leading providers of Gpus, and Cpus, such as AMD or Intel and Nvidia 86 has been rigorously tested at a state as cloud scaled in trop lab and in customers' platforms to minimize inter operation risk lower CIS.

Sanjay Jagendra: Some development cost and reduce time to market. It is six was demonstrated at Nvidia GTC event during the week of March 18th.

Sanjay Jagendra: 86 is currently sampling to leading AI and cloud infrastructure providers, and we expect initial volume ramps to begin in 2025. We also announced the introduction and sampling of our ARIES PCIe and CXL smart cable modules for active electrical cables, or AECs, to support robust and long reach, up to 7 meters for copper cable connectivity. This is 3x the standard reach defined in the PCIe spec.

Sanjay Jagendra: 86 is currently sampling two leading AI and cloud infrastructure providers and we expect initial volume ramp to begin in 2025.

Sanjay Jagendra: We also announced the introduction and sampling of our <unk> Pcie and <unk> smart cable modules for active electrical cables or auc's to support robust and long reach up to 70 meters copper cable connectivity. This is CX the stand.

Sanjay Jagendra: Reach defined in the Pcie spec.

Sanjay Jagendra: Our new PCIe AAC solution is designed for GPU clustering applications by extending PCIe back-end fabric deployments to multiple racks. This new Aries product category expands our market opportunity from within the rack to across the rack. As with our entire product portfolio, ARIES smart cable modules support our Cosmos software suite to deliver a powerful yet familiar array of link monitoring, fleet management, and RAS tools, which are customizable to meet the diverse needs of our hyperscaler customers.

Sanjay Jagendra: Our new Pcie AAC solution is designed for GPU clustering applications by extending pcie backend fabric deployment to multiple racks.

Sanjay Jagendra: New it is product category expands our market opportunity from within the rack to across racks.

Sanjay Jagendra: As with our entire product portfolio. It is smart cable module support our cost more software suite to deliver a powerful yet familiar array of link monitoring fleet management, and RASK tools, which are customizable for diverse needs of our hyperscale customers.

Sanjay Jagendra: We leveraged our expertise in silicon, hardware, and software to deliver a complete solution in record time, and we expect initial shipments to begin later this year for the PCIe AACs. We believe this new ARIES product announcement represents another concrete example of Estera Labs driving the PCI ecosystem with technological leadership through an intelligent connectivity platform that includes silicon chips, hardware modules, and the Cosmos software suite. Over the coming quarters, we anticipate ongoing generational product upgrades to existing product lines and the introduction of new product categories developed from the ground up to fully utilize the performance and productivity capabilities of generative AI.

Sanjay Jagendra: We leveraged our expertise in silicon hardware and software to deliver a complete solution in record time, and we expect initial shipments to begin later this year for the Pcie Acs.

Sanjay Jagendra: We believe this new <unk> product announcement represents another concrete example of a stellar labs driving the pcie ecosystem with technology leadership with an intelligent connectivity platform that includes silicon chips hardware modules and costs more software suite.

Sanjay Jagendra: Over the coming quarters, we anticipate ongoing generational product upgrades to existing product lines and introduction of new product categories developed from the ground up to fully utilize the performance and productivity capabilities of generating AI.

Sanjay Jagendra: In summary, over the past few years, we have built a great team that is delivering technology that is foundational to deploying AI infrastructure at scale. We have gained the trust and support of our world-class customer base by executing, innovating, and delivering on our commitments. These tight relationships are resulting in new product developments and an enhanced technology roadmap for Estera. We look forward to continued collaboration with our partners as a new era unfolds driven by AI applications. With that, I will turn the call over to our CFO, Mike Tate, who will discuss our Q1 Financial Results and Q2 Outlook.

Sanjay Jagendra: In summary over the past few years, we have built a great team that is delivering technology that is foundational to deploying AI infrastructure that scale.

Mike Tate: We have gained the trust and support of our World class customer base by executing innovating and delivering to our commitments.

Mike Tate: These tight relationships are resulting in new product developments and enhanced technology roadmap for our sterile.

Mike Tate: We look forward to continued collaboration with our partners at the new era unfolds driven by AI applications.

Mike Tate: With that I will turn the call over to our CFO, Mike <unk>, who will discuss our Q1 financial results and Q2 outlook.

Mike Tait: Thanks, Sanjay, and thanks to everyone for joining us. This overview of our Q1 financial results and Q2 guidance will be on a non-GAAP basis. The primary difference in the Stera Labs non-GAAP metrics is stock-based compensation and the related income tax effect. Please refer to today's press release available in the Investor Relations section of our website for more details on both our GAAP and non-GAAP Q2 financial outlook, as well as the reconciliation of our GAAP to non-GAAP financial measures presented on this call.

Mike Tate: Thanks, Sanjay and thanks to everyone for joining this overview of our Q1 financial results and Q2 guidance will be on a non-GAAP basis.

Mike Tait: The primary difference in our sterile <unk> non-GAAP metrics to stock based compensation and the related income tax effects. Please refer to today's press release available on the Investor Relations section of our website for more details on both our GAAP and non-GAAP Q2 financial outlook as well as a reconciliation of our GAAP.

Mike Tait: GAAP to non-GAAP financial measures presented on this call.

Mike Tait: For Q1 of 2024, Estera Labs delivered record quarterly revenue of $65.3 million, which was up 29% versus the previous quarter and 269% higher than revenue in Q1 of 2023. During the quarter, we ship products to all the major hyperscalers and AI accelerator manufacturers. We recognize revenues across all three of our product families during the quarter, with ARI's products being the largest contributor. Ares enjoyed solid momentum in AI-based platforms, as customers continue to introduce and ramp their PCIE Gen 5 capable AI systems, along with overall strong unit growth due to the industry's growing investment in generative AI.

Mike Tait: For Q1 of 2020 for sterile labs delivered record quarterly revenue of $65 3 million, which was up 29% versus the previous quarter and 269% higher than the revenue in Q1 of 2023.

Mike Tait: During the quarter, we shipped products to all of the major Hyperscale and AI accelerator manufacturers.

Mike Tait: We recognize revenues across all three of our product families during the quarter with Aries products being the largest contributor.

Mike Tait: <unk> enjoyed solid momentum in AI based platforms as customers continue to introduce and ramp their pcie Gen. Five capable AI systems, along with overall strong unit growth with the industry's growing investment and generated AI.

Mike Tait: Also, we continue to make good progress with our TORS and LEO product lines, which are in the early phases of revenue contribution. In Q1, Taurus revenues were primarily shipping into 200 gigabit Ethernet-based systems, and we expect Taurus revenues to sequentially track higher as we progress through 2024, as we also begin to ship into 400 gigabit Ethernet-based systems. Q1 LEO revenues were largely from customers purchasing pre-products volumes for the development of their next generation CXL capable compute platforms expected to launch late this year with the next server CPU refresh cycle. Q1 non-gap gross margins were 78.2% and were up 90 basis points compared with 77.3% in Q4 2023. The positive gross margin performance during the quarter was driven by a healthy product mix.

Mike Tait: Also we continue to make good progress with our tourist and Leo product lines, which are in the early phases of revenue contribution in.

Mike Tait: In Q1 tourist revenues were primarily shipping into 200 gig Ethernet based systems, and we expect tourist revenues to sequentially tracked higher as we progress through 2024 as we also began to ship into 400 gig Ethernet based systems Q.

Mike Tait: Q1, <unk> revenues were largely from customers purchasing pre production volumes for the development of their next generation CSL capable compute platforms.

Mike Tait: <unk> to launch late this year with the next server CPU refresh cycle.

Mike Tait: Q1, non-GAAP gross margins was 78, 2% and was up 90 basis points compared with 77, 3% in Q4 of 2023 to positive gross margin performance during the quarter was driven by healthy product mix.

Mike Tait: Non-GAAP operating expenses for Q1 were $35.2 million, up from $27 million in the previous quarter. For non-GAAP operating expenses, R&D expense was $22.9 million, sales and marketing expense was $6 million, and general and administration expenses were $6.3 million. Non-GAAP operating expenses during Q1 increased largely due to a combination of increased headcount and incremental costs associated with being a public company.

Mike Tait: non-GAAP operating expenses for Q1 were $35 2 million up from $27 million in the previous quarter with non-GAAP operating expenses R&D expense was $22 9 million sales and marketing expense was $6 million in general and administration expenses were $6 3 million.

Mike Tait: non-GAAP operating expenses during Q1 increased largely due to a combination of increased head count and incremental costs associated with being a public company.

Mike Tait: The largest delta between non-GAAP and GAAP operating expenses in Q1 with stock based compensation recognized in connection with our recent IPO and its associated employer payroll taxes and to a lesser extent, our normal quarterly stock based compensation expense.

Mike Tait: non-GAAP operating margins for Q1 was 24, 3% as revenues scaled in proportion with our operating expenses on a sequential basis.

Mike Tait: The largest delta between non-GAAP and GAAP operating expenses in Q1 was stock-based compensation recognized in connection with our recent IPO and its associated employer payroll taxes, and to a lesser extent, our normal quarterly stock-based compensation expense. Non-GAAP operating margins for Q1 were 24.3% as revenues scaled in proportion with our operating expenses on a sequential basis. Interest income in Q1 was $2.6 million, and our non-GAAP tax provision was $4.1 million for the quarter, which represents a tax rate of 22% on a non-GAAP basis.

Mike Tait: Interest income in Q1 was $2 6 million.

Mike Tait: Our non-GAAP tax provision was $4 1 million for the quarter, which represents a tax rate of 22% on a non-GAAP basis.

Mike Tait: Pro forma non-GAP fully diluted share count for Q1 was 147.5 million shares. Our pro forma non-gap diluted earnings per share for the quarter was 10 cents. The Performa non-GAAP diluted shares include the assumed conversion of our preferred stock for the entire quarter, while our GAAP share count only includes the conversion of our preferred stock for the step period following our March IPO. Going forward, given that all the preferred stock has now been converted to common stock upon our IPO, those preferred shares will be fully included in the share count for both GAAP and non-GAAP. Cash flow from operating activities for Q1 was $3.7 million, and we ended the quarter with cash, cash equivalents, and marketable securities at just over $800 million.

Mike Tait: Pro forma non-GAAP fully diluted share count for Q1 was 147 5 million shares.

Mike Tait: Our pro forma non-GAAP diluted earnings per share for the quarter was 10.

Mike Tait: So pro forma non-GAAP diluted shares includes the assumed conversion of our preferred stock for the entire quarter, while our GAAP share count only includes the conversion of our preferred stock for the stub period following our March IPO.

Mike Tait: Going forward given that all of the preferred stock has now been converted to common stock upon our IPO those preferred shares will be fully included in the share count for both GAAP and non-GAAP.

Mike Tait: Cash flow from operating activities for Q1 was $3 $7 million and we ended the quarter with cash cash equivalents and marketable securities of just over $800 million.

Mike Tait: Now turning to our guidance for Q2 of fiscal 2024, we expect Q2 revenues to increase from Q1 levels within a range of 10 to 12% sequentially. We believe our ARI product family will continue to be the largest component of revenue and will be the primary driver of sequential growth in Q2. Within the ARIES product family, we expect the growth to be driven by increased unit demand for AI servers, as well as a ramp of new product designs with our customers.

Speaker Change: Now turning to our guidance for Q2 of fiscal 2024.

Mike Tait: We expect Q2 revenues to increase from Q1 levels within a range of 10% to 12% sequentially.

Mike Tait: We believe our Aries product family will continue to be the largest component of revenue and will be the primary driver of sequential growth in Q2.

Mike Tait: Within the Aries product time tailor product family, we expect the growth to be driven by increased unit demand for AI servers as well as the ramp of new product designs with our customers.

Mike Tait: We expect non-gap growth margins to be approximately 77% given a modest increase in hardware shipments relative to standalone ICs. We believe as our hardware solutions grow as a percentage of revenue over the coming quarters, our gross margins will begin to trend towards our long-term gross margin model of 70%. We expect non-gap operating expenses to be approximately 40 million as we remain aggressive in expanding our R&D resource pool across headcount and intellectual property while also scaling our back office function.

Mike Tait: We expect non-GAAP gross margins to be approximately 77% given a modest increase in hardware shipments relative to.

Mike Tait: Standalone Ics.

Mike Tait: We believe as our hardware solutions grow as a percentage of revenue over the coming quarters. Our gross margins will begin to trend towards our long term gross margin model of 70%.

Mike Tait: We expect non-GAAP operating expenses to be approximately $40 million as we remain aggressive in expanding our R&D resource pool across head count and intellectual property, while also scaling our back half back office functions.

Mike Tait: Interest income is expected to be $9 million. Our non-GAAP tax rate should be approximately 23%. And our non-GAAP fully diluted share count is expected to be approximately 180 million shares. Adding this all up, we are expecting non-GAAP fully diluted earnings per share of approximately $0.11. This concludes our prepared remarks. Once again, we very much appreciate everyone joining the call, and now we open the line for questions. Operator?

Mike Tait: Interest income is expected to be $9 million, our non-GAAP tax rate should be approximately 23% and our non-GAAP fully diluted share count is expected to be approximately 180 million shares.

Mike Tait: Adding this all up we are expecting non-GAAP fully diluted earnings per share of approximately <unk> 11.

Mike Tait: This concludes our prepared remarks once again, we very much appreciate everyone joining the call and now we open the lines for questions operator.

Regina: At this time, I would like to remind everyone that in order to ask a question, press star then the number one on your telephone keypad. Again, we ask that you please limit your questions to two. Our first question will come from the line of Harlan Sir with JP Morgan. Please go ahead.

Speaker Change: At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad again, we ask that you. Please limit your questions to queue. Our first question will come from the line of Harlan sur with Jpmorgan. Please go ahead.

Harlan Sir: Good afternoon and congratulations on the strong results and guidance post your first quarter as a public company. As you guys mentioned, there are many new AI XPU programs coming to the market, GPU, ASIC AI chip programs, and accelerators. In terms of total XPU shipments this year, I think only half are going to be NVIDIA-based, so it is starting to broaden out. The good news is obviously the Estera team has exposure to all of these XPU programs.

Harlan Sir: Good afternoon, and congratulations on the strong results and guidance.

Harlan Sir: Posted first quarter as a public company.

Harlan Sir: Mentioned, many new AI SBU programs coming to the market GPU ASIC chip program with accelerators in terms of total XP shipments. This year I think only half is going to be in video base. So it is starting to broaden out. The good news is obviously the <unk> has exposure to all of these.

Harlan Sir: <unk>.

Harlan Sir: Program. It does seem that the peso deploying these <unk> platforms has accelerated even over the past few months. So how much of the strong results in guidance is due to this acceleration broadening and clustered customer deployments.

Harlan Sir: It does seem that the pace of deploying these XPU platforms has accelerated even over the past few months. So how much of the strong results and guidance is due to this acceleration and broadening in customer deployments? How much is more just kind of higher content of retimers versus your prior expectations? And then do you guys see the strong momentum continuing into the second half of this year?

Harlan Sir: Much is more just kind of higher content of re timers versus your prior expectation and then do you guys see this strong momentum continue into second half of this year.

Mike Tait: Thanks, Arlene. This is Mike.

Harlan Sir: Thanks, Charlie this is Mike.

Harlan Sir: We started shipping into AI servers really in Q3 of last year. So it's just in the early innings.

Mike Tait: We started shipping AI servers really in Q3 of last year, so it's just in the early innings. A lot of our customers have not fully deployed their AI systems, so we're seeing incremental growth just from adding on the different platforms that we have design wins in. But it's in a backdrop where there's clearly growing investment in AIs as well, so overall unit growth is also playing out. But as we look at the balance of this year, there's still a lot of programs that have not ramped up yet. So we have high confidence that the Gen 5 Ares platform has a lot of growth ahead of it, and that continues into 2026 – sorry, 2025 as well.

Mike Tait: A lot of our customers have not fully deployed their AI system. So we're seeing incremental growth just from adding on to different platforms that we have design wins and but it's on a in a backdrop, where theres clearly a growing investment in AI as well as the overall unit growth is also playing out as we look at to the balance of this.

Mike Tait: Year, Theres still a lot of programs that have not.

Mike Tait: <unk>. So we have high confidence that the Gen. Five Ares platform has a lot of.

Mike Tait: Growth ahead of it.

Mike Tait: And that continues into 2026, I'm, sorry, 2025 as well.

Harlan Sir: I appreciate that. And as you mentioned, there's been a lot of focus on next-gen PCIe Gen 6 platforms, right, obviously with the rollout of NVIDIA's Blackwell-based platform. And obviously, you know, with any market that is viewed as fast-growing, you are going to track competitors. We have seen, you know, some announcements by competitors. We know most of the Gen 5 design wins have already been locked up by the Estera team.

Speaker Change: No I appreciate that and as you mentioned, there's been a lot of focus on Nextgen Pcie Gen six platforms with obviously with the rollout of and videos.

Harlan Sir: Blackwell based platform.

Harlan Sir: Firstly with <unk>.

Harlan Sir: A market that is viewed as fast growing you are going to attract competitors we have seen.

Harlan Sir: Tom allow stone.

Harlan Sir: By competitors, we know most of the Gen. Five design wins have already been locked up by the <unk>.

Harlan Sir: <unk> been working with customers as you mentioned on Gen six.

Harlan Sir: You've been working with customers, as you mentioned, on Gen 6 for some time now. Maybe, how do you compare the customer engagement momentum on Gen 6 versus the same period back when you were working with customers on Gen 5?

Harlan Sir: For some time now maybe how do you compare the cut.

Harlan Sir: Estimate engagement momentum on Gen six versus the same period back when you were working with customers on Gen five.

Sanjay Jagendra: Good question, Howland. Sanjay here. Let me take that.

Harlan Sir: Good question Hollander, Sanjay here limited debt.

Sanjay Jagendra: So, like you correctly said, Gen 5 has still got a lot of legs on it. Let's be very clear on that. Like Mike noted, we do have platforms that are still ramping up and still to come. So from that standpoint, we do expect Gen 5 to be with us for some time. And in terms of Gen 6, again, it's driven by the pace of innovation that's happening on the AI side. There is, as you probably know, the GPUs are not fully utilized.

Sanjay Jagendra: So like you correctly said Gen. Five is still a lot of legs on it let's be very clear on that like Mike noted we do have.

Sanjay Jagendra: Platform.

Sanjay Jagendra: Still ramping and still to come so to that standpoint, we do expect gen five to be with us for some time and.

Sanjay Jagendra: And in terms of Gen. Six again, it's driven by the pace of innovation that's happening on the AI side that is.

Sanjay Jagendra: As you probably noticed the Gpus are not fully utilized some reports put it at around 50%. So there's still a lot of growth in terms of.

Sanjay Jagendra: Some reports put it at around 50%. So there's still a lot of growth in terms of connectivity, which is essentially holding it back. Meaning there's a pace and a need to adopt faster speeds and links. So with NVIDIA announcing their Blackwell platform, those are the first set of GPUs that have Gen 6 on that. So to that standpoint, we do expect some of those deployments to happen in 2025, but in general, others are not far behind based on public information that's out there.

Sanjay Jagendra: Connectivity, which is essentially a holding it back right, meaning there is a piece and a need to adopt faster speeds and links.

Sanjay Jagendra: No.

Sanjay Jagendra: Good.

Sanjay Jagendra: Nvidia announcing their Blackwell platform. Those are the first set of Gpus that have gen six on that.

Sanjay Jagendra: Of that 10 point, we do expect some of those deployments to happen in 2025, but in general others are not far behind.

Sanjay Jagendra: Based upon public information that's out there. So we do expect the cycle time for Gen six or adoption to perhaps be a little bit shorter than gen. Five, especially on the AI server application more so than the general purpose compute which is still going to be lagging when it comes to pcie Gen six.

Sanjay Jagendra: So we do expect the cycle time for Gen 6 adoption to perhaps be a little bit shorter than Gen 5, especially for the AI server application, more so than the general purpose compute, which is still going to be lagging when it comes to PCIe Gen 6 adoption.

Sanjay Jagendra: Option.

Operator: Your next question will come from the line.

Sanjay Jagendra: Your next question will come from the line of Joe Moore with Morgan Stanley. Please go ahead.

Operator: Great, thank you. Following on from that, can you talk about PCIe Gen 5 in general purpose servers? It seems like, you know, if I look at the CPU penetration of Gen 5, we're still at a pretty early stage.

Speaker Change: Great. Thank you.

Speaker Change: Following on from that.

Speaker Change: Can you talk about PCI Gen five and general purpose servers. It seems like if I look at the CPU penetration of Gen. Five we're still at a pretty early stage.

Speaker Change: Growth from general purpose, and what are the applications driving that.

Sanjay Jagendra: Absolutely. Primarily on general-purpose compute, the main places where the PCIe timer gets used tend to be on storage connectivity, where you have SSDs that are on the back of the server. So to that standpoint, again, there are two things that have been holding it back, or three things, perhaps. One is just the focus on AI. I mean, most of the dollars are going to the AI server application compared to general computing.

Speaker Change: Yes, absolutely and in primarily on the general purpose compute the main places where.

Sanjay Jagendra: The PCI time will gets used tends to be on the storage connectivity, where you have ssds that are on the back of the server.

Sanjay Jagendra: That standpoint again, it's there are two things that have been holding it back or three things. Perhaps one is just the focus on AI I mean, most of the dollars are going to the AI. So we're application compared to general compute. The second thing is just the ecosystem readiness for Gen. Five primarily on the SSD side, which is starting to evolve.

Sanjay Jagendra: The second thing is just the ecosystem readiness for Gen5, primarily on the SSD side, which is starting to evolve with many of the major SSD NVMe players providing or ramping up on Gen5-based NVMe drives. The third one really has been the CPU platforms. If you think about it, both Intel and AMD, they're all on the cusp of introducing their next significant platform, whether it is Granite Rapids for Intel or Turin for AMD.

Sanjay Jagendra: But.

Sanjay Jagendra: Many of the major SSD nvme players, providing or ramping up on Gen five based.

Sanjay Jagendra: Nvme drives the third one really has been the CPU platforms. If you think about it both from Intel and AMD that all on the cusp of introducing the next significant.

Sanjay Jagendra: Platform, whether it is granted capex for for Intel or Julian from AMD. So that is expected to drive the introduction of new platform and if you combine that with the ssds being ready for Gen. Five and based on the design wins that we already have you can expect that those things would be.

Sanjay Jagendra: So that is expected to drive the introduction of new platforms. And if you combine that with the SSDs being ready for Gen5, and based on the design wins that we already have, you can expect that those things will be a contributing factor as dollars start flowing back into the compute, general purpose.

Sanjay Jagendra: Contributing factor as dollar start pulling back into the compute segment.

Sanjay Jagendra: General purpose computing.

Operator: Great, thank you. And for my follow-up question... You just mentioned Granite Rapids and Turin, which are the first kind of volume platform supporting CXL2. What are you hearing in terms of, you know, the CPUs will be out, but what will be the initial adoption, and how quickly do you think that technology could roll out in 2025?

Speaker Change: Great. Thank you and for my follow up.

Speaker Change: You just mentioned Grand Rapids in Turin, which are the first kind of volume platform supporting <unk>. What are you hearing in terms of.

Operator: The Cpus will be out, but what will be the initial adoption.

Operator: And how quickly do you think that technology can rollout in 2025.

Sanjay Jagendra: Let me start off by saying CXL; every hyperscaler is in some shape or form evaluating and working with the technology, so it's well and alive. I think where the focus really has been in terms of CXL is on the memory expansion use case, specifically for CPUs, and the expansion could be for reasons like adding more memory for large database applications, more capacity memory. And the second use case, of course, is for more memory bandwidth, which is for HPC-type applications.

Speaker Change: Yes, let me start off by saying, you'll see excel every hyperscale to us is in some shape or form eval.

Sanjay Jagendra: Evaluating and working with the technology. So it's well on the line I think where the focus really has been in terms of <unk> is on the memory expansion use case, specifically for Cpus and the expansion could be for reasons like adding more memory for large database applications.

Sanjay Jagendra: More capacity.

Sanjay Jagendra: Memory and the second use case of causes for more memory bandwidth, which are for HBC type of applications.

Sanjay Jagendra: So the thing that's been holding back CXL is the availability of CPUs that support CXL at a production quality level. That will change with Granite Rapids and Turing being available. So at this point, what we can say is that we've been providing chips for quite some time. We've been in pre-production and supported the various different evaluation POC type of activities that have taken place with our hyperscaler customers. So to that standpoint, we do expect revenue to start coming in 2025 from the memory expansion use case for CXL.

Sanjay Jagendra: The thing that's been holding back is the availability of Cpus that supports EXL had a production quality level that will change with Gannett rapid tooling being available. So at this point what we can say is that we have been providing chips for quite some time, we've been in preproduction and some.

Sanjay Jagendra: <unk> the.

Sanjay Jagendra: The various different.

Sanjay Jagendra: Evaluation POC type of activities that have happened with our hyperscale customers. So to that standpoint, we do expect revenue to start coming in in 2025 from memory expansion used case for EXL.

Operator: Your next question will come from the line of Tori Spenberg with Stiefel. Please go ahead.

Sanjay Jagendra: Your next question will come from the line of Torrey Sandberg with Stifel. Please go ahead.

Tori Spenberg: Yes, thank you, and let me add my congratulations. My first question is about Gen 6 PCI. So Sanjay, you just mentioned that the design-in cycle is going to be shorter than Gen 5. Now, since it's backwards compatible with your Gen 5, and especially given the Cosmos software platform, should we assume that you will basically retain most of those sockets that you already had in Gen 5, and then obviously some new ones as well for Gen 6?

Tori Spenberg: Yes, Thank you and let me add my congratulations my first question is on.

Tori Spenberg: Gen six PCI. So Sanjay you just mentioned that the designing cycle is going to be shorter than gen. Five now since it's backwards.

Tori Spenberg: Compatible for your Gen, five and especially given the cost small software platform should we assume that you will basically retain most of those sockets that you already had in Gen. Five and then obviously, some new ones as well for Gentex.

Sanjay Jagendra: So that's the goal for the company. We have the Cosmos software, and like I noted, PCI Express is one of those protocols that, unlike Ethernet, tends to be a little messy, meaning it's something that's been around for a long time.

Sanjay Jagendra: So that is the that's the goal for the company, we have the costs more software and like noted piece.

Sanjay Jagendra: PCI Express is one of those protocols, which unlike Ethernet tends to be a little messy, meaning it's something that's been around for a long time, it's a great technology, but it also requires a lot of handholding and for US what has happened is being in the in the customers' platforms, bringing up.

Sanjay Jagendra: It's a great technology, but it also requires a lot of hand-holding. And for us, what has happened is being on the customers' platforms, bringing up systems that ramp up to millions of devices, has allowed us to understand what the nuances are, what works, what doesn't work, and how do you make the link perform at the highest rate. So that tribal knowledge is something that we have captured within the Cosmos software that we built, running both on our chips as well as customers' platforms.

Sanjay Jagendra: In our systems that ramp up to millions of devices has allowed us to understand what are the nuances what works what doesn't work how do you make the link perform at the highest grade. So that title knowledge is something that we are captured within the cosmos software that we build running both on our chip.

Sanjay Jagendra: As well as customers platforms. So we do expect that.

Sanjay Jagendra: So we do expect that as Gen 6 starts to materialize, a lot of those learnings will be carried over. Now, you're right that there's been a lot of competition that has come in as well. But we believe that when it comes to competition, they could have a similar product to us. But no matter what, there is a slow time that's essential when it comes to connectivity-type chips, just given the interoperation and getting the kinks out and so on.

Sanjay Jagendra: As Gen. Six starts to materialize lot of those learnings will be carried over now youre right that theres been a lot of competition that has come in as well, but we believe that when it comes to competition. They could have a similar product like us, but no matter. What there is full time, that's essentially when it comes.

Sanjay Jagendra: Two connectivity type of chips, just given the inter operation and getting the Kinks out and Salon, meaning you can have a perfect chip yet target sailing system. The reason for that is the complexity of the system and how PCI Express standard as defined so that standpoint, I agree with what you said in the sense that we have.

Sanjay Jagendra: Meaning you could have a perfect chip yet have a failing system. The reason for that is the complexity of the system and how the PCI Express standard is defined. So to that standpoint, I agree with what you said in the sense that we have the leading position now in the retimer market for PCIe. And we expect to build on that, both with the new features we have added to PCIe Gen 6 or the 86 product line and also the tribal knowledge that we have built by working with our partners over the last three, four years.

Sanjay Jagendra: The leading position now in the lead time on market for Pcie, and we expect to build on that both with the new features we have added and pcie Gen six or the 86 product line and also the tribal knowledge that we have built by working with our partners over the last three four years.

Tori Spenberg: That's a great perspective. And as my follow-up, I had a question on AEC. It sounds like that business is going to start ramping late this year. First of all, is that with multiple cable partners? And then, related to that, are you the only company today that has an AEC at seven meters?

Speaker Change: That's great perspective, and as my follow up I had a question on AUC. It sounds like that business is going to start ramping late this year.

Tori Spenberg: First of all is that with multiple cable partners.

Tori Spenberg: And then related to that are you the only company today that have.

Tori Spenberg: On AUC at seven meters.

Sanjay Jagendra: I don't know about the only customer. I would probably request that you need to do some research on it to see where the competition is. But from a re-timer standpoint, which goes on this, we do have a leading position. So based on that, I would imagine that we are the main provider here, both based on that and the customer traction that we're seeing. So this one is an interesting use case.

Speaker Change: Yes, I don't know about the only customer.

Sanjay Jagendra: I would probably to close maybe you need to do some research on it on where the competition is but from a three timeless time point, which goes on this we do have a leading position so based on that I would.

Sanjay Jagendra: Imagine that we are the.

Sanjay Jagendra: We are the main provider here, both based on that and the customer traction that we're seeing so this one is an interesting use case.

Sanjay Jagendra: So far, PCI Express, as you know, was defined to be inside the server. But what is happening now, and this is why we're excited about PCIe AECs, is that now we are opening up a new front in terms of clustering GPUs, meaning interconnecting accelerators. That is where the AECs will play.

Sanjay Jagendra: So far PCI Express is known was defined to be in sight.

Sanjay Jagendra: The server, but what is happening now and this is why we are excited about pcie Acs is that now we are opening up a new front in terms of clustering Gpus.

Sanjay Jagendra: Meaning interconnecting accelerators that is where the auc's would play and that is a new opportunity that goes along with the Ethernet Acs that debt.

Sanjay Jagendra: And that is a new opportunity that goes along with the Ethernet AECs that we already provide, which are also used for interconnecting GPUs on the back end network. So overall, we do believe that combining our PCIe AEC solution and the Ethernet AEC solution, we're well set for some of these evolving trends. And our revenue, we expect to start coming in during the latter half of this year. And on PCIe, again, we do believe we are the only one, just to make sure I clarify what I initially said, just that I don't know if there is someone else talking about it that's not yet in the public domain.

Sanjay Jagendra: We already provide which are also used for interconnecting gpus on the Bakken network. So overall, we do believe that.

Sanjay Jagendra: Combining our pcie solution and Ethernet AC solution, we are well set for some of these evolving trends and.

Sanjay Jagendra: Our revenue, we expect to start coming in for the later half of this year and on Pcie again, we do believe we are the only one just to make sure I clarify what I. Initially said just I don't know if there is someone else talking about it that's not yet in the public domain.

Operator: Your next question will come from the line of Blaine Curtis with Jeffries. Please go ahead.

Sanjay Jagendra: Your next question will come from the line of Blayne Curtis with Jefferies. Please go ahead.

Blaine Curtis: Hey, good afternoon. Thanks for taking my questions. Maybe the first one for you, Jitender. I'm just curious.

Blaine Curtis: Hey, good afternoon, thanks for taking my questions.

Blaine Curtis: You mentioned the right architectures. I think Harlan asked about them. I was just kind of curious about, you know, obviously, you have a lead customer and there are a lot of CPU to GPU connections. That's the nature of the market; who has the volume. But I'm curious, you mentioned back, you know, the back-end fabrics a lot. I'm kind of curious, is that still conceptual, or are you seeing designs for it? And maybe just talk about the widening out of just applications for what the retumbers are doing.

Blaine Curtis: Maybe first one for you to tender or just curious you mentioned right architectures I think Harlan asked on I was just kind of curious about obviously the lead customer and <unk> connections.

Blaine Curtis: First is the nature of the market, who has the volume, but I am curious you mentioned back the.

Blaine Curtis: Backend fabrics the bonds kind of curious is that still conceptual or are you seeing designs for it and maybe just talk about the widening out of just applications for what the <unk> are being used for.

Jitendra Mohan: Great question. So, there are many applications where we use retimers. Of course, we are most known for the connectivity from the GPU to the head node. That is where a lot of deployments are happening.

Speaker Change: Yeah, Great question so.

Blaine Curtis: There are many applications will be used to retire unless of course, we are most known for the connectivity from the GPU to be head node that is where a lot of the deployments are happening.

Jitendra Mohan: But these new applications also speak to how rapidly AI systems are evolving. Every few months, we see a new AI platform come out, and that opens up additional opportunities for us. And one of those is to cluster GPUs together. There are two main protocols that are used in addition to NVLink, of course, which are used to cluster GPUs. That is PCA Express and Ethernet. And, as Sanjay just mentioned, we now have solutions available to interconnect GPUs together. whether they are for PC Express and our Ethernet.

Jitendra Mohan: These new applications also speak to how rapidly the AIA systems are evolving.

Jitendra Mohan: Very few months, we see a new aircraft form come up and that opens up additional opportunities for us and one of those is to cluster Gpus together.

Jitendra Mohan: There are two main protocols that are used in addition to and willing of course, which are used to cluster Gpus <unk> Express and Ethernet and Sunday I. Just mentioned, we now have solutions available to interconnect Gpus together, whether therefore, PCI express and our Ethernet.

Jitendra Mohan: Specifically, in the case of PCI Express, some of our customers who want to use PCI Express for clustering GPUs together are now able to do so using our PC Express re-timers, which are offered in the form of an active electrical cable. So this business is going to be in addition to the sustaining business that we have today in connecting GPUs to head nodes. Now we are connecting GPUs together in a cluster.

Jitendra Mohan: Specifically in the case of PCI Express so if our customers will want to use PCI Express four clustering Gpus together are now able to do so are using our pega express retailers, which are offered in the form of inactive electrical cable. So this business is going to be in addition to the sustaining business that we have today and connecting Gpus.

Jitendra Mohan: To add nodes now we're connecting Gpus together in a cluster.

Jitendra Mohan: And as you know, these are very, you know, intense, very dense mesh connections. So they can grow very rapidly. So we are very excited about where this will grow and about starting with some revenue contributions late this year.

Jitendra Mohan: These are very <unk>.

Jitendra Mohan: In terms very dense mesh connections. So they can grow very very rapidly. So we are very excited about where this will go.

Jitendra Mohan: Starting with some revenue contributions later this year.

Blaine Curtis: Thanks. And then maybe a question for Mike: the gross margin remained quite high. You said it was mixed. I mean, maybe you're just being kind of conservative with the IPO. But I was just kind of curious, did the mix come in? I mean, I think it's mostly retirees. I know as the other products start to ramp, that'll be the headwinds. I'm just kind of wondering what you think about the rest of the year? Should we kind of just have it kind of come down with the mix gradually as those new products ramp off this 77 that you're guiding to?

Speaker Change: Thanks, and then maybe a question for Mike the gross margin remain quite high you said it was mix I mean, maybe youre, just being kind of conservative with the IPO, but I was just kind of curious to the mix come in I mean, I think it's most of the re timers I know, whereas the other products start to ramp that will be the headwind. So I'm just kind of how do you think about the rest.

Mike Tait: The year should we kind of just having kind of come down with mix gradually as those new products ramp off the 77% Youre guiding to.

Mike Tait: Yeah, so just to remind everybody, our standalone ICs carry a pretty high margin relative to our hardware solutions. So when the mix gets a little more balanced with hardware versus standalone ICs, we're expecting our long-term gross margins to trend to 70 percent. In Q1, we were heavily weighted to standalone ICs, a very favorable mix, and that's how we enjoyed the strong gross margins. As we go through the balance of this year and into next year, we will see an increasing mix of our modules and also add-in cards for CXL as well. So we think we'll have a gradual trend down towards a long-term model over time as that mix changes.

Speaker Change: Yes so.

Blaine Curtis: Just to remind everybody.

Mike Tait: Our standalone Ics or carry a pretty high margin relative to our hardware solutions. So when the mix gets a little more.

Mike Tait: <unk> with hardware versus Standalone Ics.

Mike Tait: We're expecting our long term gross margins to trend to 70% in Q1, we were heavily weighted to Standalone Ics very favorable mix and Thats. How we enjoyed the strong gross margins as we go through the balance of this year and into next year, we will see an increasing mix of our modules and also.

Mike Tait: Add in cards for <unk> as well. So we think we will have a gradual trend down towards our long term model over time.

Mike Tait: As that mix changes.

Operator: Your next question will come from the line of Thomas O'Malley with Barclays. Please go ahead.

Mike Tait: Your next question will come from the line of Thomas O'malley with Barclays. Please go ahead.

Thomas O'malley: Hey, guys, thanks for taking my question. Mike, I just wanted to ask, I know you may not be giving segment details specifically, but could you talk about what you're able to and what contributed to the revenue in the quarter and then looking out into June? Could you talk about, from a revenue mix perspective, maybe some sequential help on what's growing? Obviously, the non-ICU business is growing just given the fact that gross margins are pressured a bit, but just any color on the segments would be helpful.

Thomas O'malley: Hey, guys. Thanks for taking my question, Mike I, just wanted to ask I know you may not be giving segment details specifically, but could you talk about what you are able to what contributed to the revenue in the quarter and then looking out into June could you talk about from a revenue mix perspective, maybe some sequential help on what's growing obviously.

Thomas O'malley: Non IC business is growing just given the fact that gross margins are.

Thomas O'malley: A bit but just any color on the segments would be helpful to start.

Mike Tait: Sure. So, as I mentioned, we started shipping to AI server platforms in volume in Q3, and a lot of our customers are still in ramp mode to the extent we've been shipping for the past couple quarters, but there are still a lot of designs that haven't even begun to ramp. So we're still in the early phases, and if we look out in time, we see the Gen 5 piece of it in AI continuing to grow into next year as well.

Thomas O'malley: Sure.

Mike Tait: So as I mentioned, we started shipping into AI server platforms in volume in Q3, and a lot of our.

Mike Tait: Customers are still in the ramp mode to extent, we've been shipping.

Mike Tait: For the past couple of quarters, but theres still a lot of designs that have even begun to ramp. So we're still in the early phases that as well.

Mike Tait: Look out in time, we see the Gen five piece of it and AI continue to grow into next year as well.

Mike Tait: So as you look into Q2, the growth that we're guiding to is still largely driven by the Ares Gen 5 deployment in AI servers, both for existing platforms with increased unit volumes, but also new customers beginning their ramps as well.

Mike Tait: So as you look into Q2 the growth that we're guiding to is still largely driven by the <unk> Gen five deployment and AI servers, both for existing platform with increased unit volumes, but also the new new customers beginning their ramps as well.

Thomas O'malley: helpful. And then just a broader one.

Mike Tait: Helpful and then.

Mike Tait: Just a broader one.

Mike Tait: With Nvidia there, they're referencing your JV 200 architecture, becoming a bigger percent of the mix.

Thomas O'malley: In talking with NVIDIA, they're referencing their GV200 architecture becoming a bigger percent of the mix, NVLink 72 being more of the deployments that hyperscalers are taking. When you look at the Hopper architecture versus the Blackwell architecture and their NV72 platform, where they're using NVLink amongst their GPUs, can you talk about the puts and takes when it comes to your retiming product? Do you see an attach rate that's any different than the current generation?

Thomas O'malley: <unk> 72 being more of the deployments with Hyperscale orders are taking when you look at the Hopper architecture versus the blackmail architecture.

Thomas O'malley: <unk> hundred 72 platform, where they're using a new link amongst our Gpus can you talk about the puts and takes when it comes to timing product do you see an attach rate that's any different than the current generation.

Jitendra Mohan: And let me let me take that. Great question. First, let me say that we are just at the beginning phases of AI. You will continue to see new architectures being produced by AI platform providers at a very rapid pace to just match up with the growth of AI models. And on top of that, you'll see innovative ways that hyperscalers will deploy these platforms in their clouds. So as these architectures evolve, so will the connectivity challenges.

Speaker Change: Yeah, Let me let me take a quick question first.

Thomas O'malley: First let me say that we are just at the beginning phases of it.

Jitendra Mohan: We will continue to see new architectures being produced by air platform providers.

Jitendra Mohan: The rapid pace it doesn't match up with the growth in AI models and on top of that we will see innovative ways that hyperscale is will they apply these platforms in the cloud.

Jitendra Mohan: These architectures evolve so too will be connectivity challenges.

Jitendra Mohan: Some challenges are going to be incremental, and some are going to be completely new. And so, what we believe is given the increasing speeds and increasing complexities of these new platforms, we do expect our dollar content per year platform to increase over time. We see these developments providing us with good tailwinds going forward into the future. So now, to your question about the GP200 specifically, well, first of all, we cannot speak about specific customer architectures.

Jitendra Mohan: LNG, we are going to be incremental and some are going to be completely new.

Jitendra Mohan: What we believe is given the increasing speeds, including complexities with these new platform. We do expect our dollar content per aircraft when we increase over time.

Jitendra Mohan: These development, providing us good tailwind going here into the future.

Jitendra Mohan: Now to your question about GBP 100, specifically first of all we cannot speak about specific customer architectures.

Jitendra Mohan: But here is something that is very clear to see. As AI platform providers produce these new architectures, hyperscalers will choose different form factors to deploy them. And in that way, no two clouds are the same.

Jitendra Mohan: But it is something that is very clear to see.

Jitendra Mohan: <unk> platform provides us produces new architectures. The hyperscale is will choose different contractors to deploy them and then that way not to close on the sale.

Jitendra Mohan: Each hyperscaler has a unique requirement, and unique constraints to deploy these AI platforms, and we are working with all of them to enable these deployments. This combination of new platforms and very cloud-specific deployment strategies presents great opportunities for our PCIe connectivity portfolio. And to that point, as Sanjay mentioned, we announced the sampling of our Gen6 retimer during GDC. If you look at our press release, you will see broad support from AI platform providers. But to this day, to the best of our knowledge, we are still the only one sampling a Gen6 solution.

Jitendra Mohan: <unk> has a unique requirement unit constrained to deploy their platforms and we are working with all of them to enable these deployments.

Jitendra Mohan: The combination of new platforms, and very cloud specific deployment start to view it presents great opportunities for our PTA connectivity portfolio.

Jitendra Mohan: And to that point.

Jitendra Mohan: Sanjay mentioned, we announced sampling of our Gen. Six <unk> during GTC. If you look at our press release, you will see that.

Jitendra Mohan: Broad support from air platform providers and to this day to the best of our knowledge. We are still the only one sampling agency solutions.

Jitendra Mohan: So on the whole, given the fact that, you know, speeds are increasing, complexity is increasing, and, in fact, the pace of innovation is growing as well, these all play to our strengths. And we have customers coming to us for new approaches to solve these problems. So we feel very good about the potential to grow our PCI connectivity.

Jitendra Mohan: So on the whole given the fact that speeds are increasing complexity is increasing.

Jitendra Mohan: The pace of innovation is going up as well. These all play to our strengths and we have customers coming to us for new approaches to solve these problems.

Jitendra Mohan: We feel very good about the potential to grow our pcie connectivity business.

Operator: Your next question will come from the line of Quinn Bolton with Needham. Please go ahead.

Jitendra Mohan: Your next question will come from the line of Quinn Bolton with Needham. Please go ahead.

Quinn Bolton: Hey guys, let me offer my congratulations on the nice results and outlook. I just want to follow up on the use of PCI Express in the GPU-to-GPU backend networks. I think that's something you know, historically, you excluded from your TAM, but it looks like it's becoming an opportunity here and starts to ramp in the second half of this year. I'm wondering if you could just talk about the breadth of some of the custom AI accelerators that are choosing PCI Express as their interconnect over, say, Ethernet, and then I've got a follow-up.

Quinn Bolton: Hey, guys. Let me offer my congratulations on the nice results and outlook I just wanted to follow up on the use of PCI Express in the GPU to GPU backend networks, I think thats something historically, you had excluded from your Tam, but it looks like it's becoming.

Quinn Bolton: An opportunity here and it starts to ramp in the second half of this year I'm wondering if you could just talk about the breadth of some of the custom AI accelerators that are choosing PCI express as their interconnect over say Ethernet and then I've got a follow up.

Sanjay Jagendra: Sabia, again, great question. So just to kind of follow up on the response that we provided before, there are two, three dominant protocols that are used to cluster GPUs together. The one that's most well known, of course, is NVLink, which is what NVIDIA uses and is appropriate to the Intel architecture. The other two are Ethernet and PCI Express. We do see some of our customers using PCI Express, and I think it would not be appropriate to say who, but certainly PCI Express is a fairly common protocol.

Speaker Change: Again good question, so just to kind of follow up the response that we provided before.

Sanjay Jagendra: There are two key dominant protocols that are used to cluster Gpus together the onewest most of a lot of courses and we link which is what the video users that Mr proprietary interface.

Sanjay Jagendra: The other two are Ethernet and PCI Express, we do see some of our customers using Pega express it I think if not be appropriate to say who.

Sanjay Jagendra: Suddenly PC express is a fairly common protocol. It is the one that's natively found on all Gpus and Cpus and others.

Sanjay Jagendra: It is the one that's natively found on all GPUs and CPUs and other data center components. Ethernet is also very popular, and to the extent that a particular customer chooses to use Ethernet or PCI Express, we are able to support them both with our solutions. The Ares PCIe retimer family, as well as the Taurus Ethernet retimer. We do expect these to make meaningful contributions to our revenue. As I mentioned, starting with the end of this year and then, of course, continuing into next

Sanjay Jagendra: Data Center components Ethernet is also very popular and to the extent that a particular customer chooses to use Ethernet RPC Express we are able to support them both with our solutions.

Sanjay Jagendra: <unk> anytime a family as well as the <unk>.

Sanjay Jagendra: Ethernet regardless.

Sanjay Jagendra: We do expect base to make meaningful contributions to our revenue.

Sanjay Jagendra: As I mentioned, starting with the end of this year and then of course continuing into next year.

Quinn Bolton: Perfect. And my second question is, you guys have talked about, you know, introduction of new products as, you know, new TAM expansion activity, and I'm not going to ask you to introduce them today, but just, you know, in terms of timing as we think out, are these new products, you know, the timeline sort of introduction later this year, 2025, with revenue ramp in 2026, is that the general framework investors should be thinking about the new products that you've discussed?

Speaker Change: Perfect and my second question is you guys have talked about.

Quinn Bolton: The introduction of new products is.

Quinn Bolton: New Tam expansion activity and I'm not going to ask you to introduce them today, but just in terms of timing as we think out are these new products.

Quinn Bolton: Timeline sort of introduction later this year or 2025 with revenue ramp in 2026 is that the general framework investors should be thinking about the new products that you've discussed.

Sanjay Jagendra: Again, I think we as a company don't talk about unreleased products or the timing of them, but what I can share with you is the following. First, we've been very fortunate to be in the front row seat of AI deployment and enjoy a great relationship with the hyperscalers and AI platform providers. So we get to see a lot; we get to hear a lot in terms of some of the requirements. So clearly, we are gonna be developing products that address the bottlenecks, whether it is on the data side, the network side, or on the memory side.

Quinn Bolton: Again, I think we as a company we don't talk about <unk> products, the timing of it but what I can share with you is the following.

Sanjay Jagendra: First.

Sanjay Jagendra: And we've been very fortunate to be in the front row seat of.

Sanjay Jagendra: AI deployment.

Sanjay Jagendra: And enjoy a great relationship with the Hyperscale is an AI platform providers. So we.

Sanjay Jagendra: We get to see a lot we get to hear a lot in terms of some of the requirements. So clearly we are going to be.

Sanjay Jagendra: Developing products that address the bottlenecks, whether it is on the data side network side or on the memory side. So we are working on similar products that you can imagine that will all be developed ground up for AI infrastructure and enable.

Sanjay Jagendra: So we are working on several products, as you can imagine that will all be developed from the ground up for AI infrastructure and enable connectivity solutions that will deploy the AI applications sooner. There is a lot going on, a lot of new infrastructure, a lot of new GPU announcements, and CPU announcements. So you can imagine, given the pace of this market and the changes that are upcoming, we do anticipate that these will all start having a meaningful impact and incremental revenue impact on our business.

Sanjay Jagendra: Activity solutions that will deploy the.

Sanjay Jagendra: The AI applications sooner.

Sanjay Jagendra: There is lot going on a lot of new infrastructure, a lot of new GPU announcements CPU announcement. So you can imagine given the pace of this market and the changes that are upcoming we do anticipate that this will all start having meaningful impact and incremental revenue impact to our business.

Operator: Your next question will come from the line across Seymour with Deutsche Bank; please go ahead.

Sanjay Jagendra: Your next question will come from the line of Ross Seymore with Deutsche Bank. Please go ahead.

Ross Seymour: Hi guys, thanks for the question. I wanted to go into the ASIC versus GPU side of things. As ASICs start to penetrate this market to certain degrees, how does that change, if any, the retimer camp that you would have? And I guess even the competitive dynamic in that equation, considering one of the biggest ASIC suppliers is also an aspiring competitor of yours.

Seymour: Hi, guys. Thanks for my ask a question I wanted to go into the ASIC versus GPU side of things as <unk> start to penetrate this market.

Ross Seymour: To certain degrees, how does that change if any the re timer.

Ross Seymour: Tam that you would have and I guess, even the competitive dynamic in that equation considering one of the biggest ASIC suppliers is also an aspiring competitor of yours.

Jitendra Mohan: So, great question again, you know, let me just refer back to what I said, which is that we will see more and more different solutions come to the market to address the evolving AI requirements. Some of them are going to be GPUs from known AI providers like NVIDIA, AMD, and others, and some others will be custom-built ASICs that are built typically by hyperscalers, whether they are AWS or Microsoft or Google and others. The requirements for these two systems are common in some ways, but they do differ.

Speaker Change: So great Great question again.

Jitendra Mohan: Let me refer back to what I said, which is we will see more and more different solutions come to the market to address the evolving requirements.

Jitendra Mohan: Them are going to be Gpus from the Cologne air providers, like Nvidia or AMD and others.

Jitendra Mohan: This will be custom built apex.

Jitendra Mohan: Typically by Hyperscale is whether they are AWS, Microsoft Google and others are in the requirements for these new systems are common in some ways, but they do differ for example, what particular type of back end connectivity they use and exactly what are the ins and outs that are going into each of these ships. The good news is with the breadth of our portfolio.

Jitendra Mohan: You know, for example, what particular type of back-end connectivity they use and exactly what are the ins and outs that are going into each of these chips. The good news is, with the breadth of the portfolio that we have and the close engagement with several ASIC providers as well as the GPU providers, we understand the challenges of these systems very well. And not only are we providing solutions that address those today with the current generation, but we are engaged with them very closely on the next generation, on the upcoming platforms, whether they are GPU-based or ASIC-based, to provide these solutions. You know, a great example was the ARIES SCM, where we enabled, using our trusted solution for PCI Express re-timers, we enabled a new way of connecting some of these ASICs on the

Jitendra Mohan: We have in the close engagement with the.

Jitendra Mohan: Several ASIC providers as well as the GPU providers, we understand the challenges of these systems very well.

Jitendra Mohan: And not only are we providing solutions that address those today with the current generation. We are engaged with them very closely on the next generation on the upcoming platforms, whether they're GPU based our database to provide these solutions.

Jitendra Mohan: Great example was the <unk>.

Jitendra Mohan: <unk> SCM.

Jitendra Mohan: April using a trusted solution for PT X Y Z demos, we enabled a new way of connecting some of these asics on the backend network.

Jitendra Mohan: And just maybe if I can add to that one way to visualize connectivity market or sub system as the Nova system within the human anatomy. It's.

Sanjay Jagendra: So maybe if I can add to that, you know, one way to visualize the connectivity market or subsystem is a nervous system within the human anatomy. It's one of those things where you don't want to mess with it.

Sanjay Jagendra: One of those things, where you don't want to mess with that yes, there will be ASIC windows sale options are off the shelf once the novelist system is built tested, especially like what rehab the blood where the nervous system that we have built is specifically done for AI application.

Sanjay Jagendra: Yes, there will be ASIC vendors, and there will be options off the shelf. Once the nervous system is built and tested, especially like what we have developed where the nervous system that we built is specifically done for AI applications, and there's a lot of qualification, a lot of software investment that hypers have done, and they want to reuse that across different kinds of topologies, whether it's ASIC based or merchant silicon based. And we do see that trend happening when we look at customers that we're engaged with today. And for protocols like PCI Express, Ethernet, and CXL, and especially various Terraplice, these are standards-based. So to that end, whatever end processor architecture is being used, we believe that we will stand to gain.

Sanjay Jagendra: And there is lot of qualification a lot of software investment that that Hyperscale is have done and they want to reuse that across different kinds of topologies, whether it's basic beta store or merchant silicon based and we do see that trend happening when we look at customers that fit engaged with today and four protocols like PCI.

Sanjay Jagendra: Experts Ethernet and <unk>, and especially with our setup. Please these are standard space.

Sanjay Jagendra: To that standpoint, whatever and foster architecture is being used.

Sanjay Jagendra: We believe that we will stand to gain from that.

Ross Seymour: Thanks for that. I guess as my follow-up, one quick one for Mike, how should we think about OPEX beyond the second quarter? I know there's a bigger step up there with a full quarter of being a publicly traded company, etc., but just walk us through your OPEX plans for the rest of the year or even to the target.

Speaker Change: Thanks for that I guess as my follow up one quick one for Mike how should we think about opex beyond the second quarter I know, there's a bigger step up there with a full quarter of being a publicly traded company et cetera, but just walk us through your opex plans for the rest of year or even to the target.

Mike Tait: Yeah, I mean, thanks, Russ. We are continuing to try to invest quite a bit in headcount, particularly in R&D. There are so many opportunities ahead of us that we love to get a jump on those products and also improve the time to market. That being said, we're pretty selective on who we bring into the company, so that will just slow down our growth. And we believe our OPEX, although it's going to be increasing, will probably not increase at that rate of revenue over the near and long term. And that's why we feel good about a long-term operating margin of 40%. So over time, we do feel confident we could trend in that direction, even with increasing investment in OPEX.

Speaker Change: Thanks Ross.

Mike Tait: We are continuing to try to invest quite a bit in headcount, particularly in R&D. There is so many opportunities ahead of us.

Mike Tait: <unk>.

Mike Tait: We love to to get a jump on those products and also improve the.

Mike Tait: The time to market that.

Mike Tait: That being said were pretty.

Mike Tait: Selective on who we bring into the company so that will just meter our growth and.

Mike Tait: We believe our opex, although it's going to be increasing we'll probably not increase at a rate of revenue over the near and long term and that's why we feel good about our long term operating margin model of 40%. So over time, we do.

Mike Tait: Were confident we could trend that direction, even with increasing investment.

Mike Tait: Opex.

Operator: Your next question will come from the line of Sujitha Silva with Roth M.K.M. Please go ahead. All right, you're termed.

Speaker Change: Your next question will come from the line of CBD to Silva with Robin km. Please go ahead.

Sujitha Silva: Hi Chitendra, Sanjay, and Mike, congrats on the first quarter here. On the back-end, the addressable market here that's non-NVLink, I'm trying to understand if the PCIe and Ethernet opportunities there will be adopted at a similar pace out of the gate, or whether PCIe would lead that adoption in the non-NVLink back-end opportunities.

Sujitha Silva: So generous Andre Mike Congrats on the first quarter here.

Sujitha Silva: And on the back end the addressable market here Thats non envy land I'm trying understand if the pcie and Ethernet opportunities there will be adopted at a similar pace out of the gate or whether PCI would lead that adoption.

Sujitha Silva: The non envy link back end opportunity.

Speaker Change: It's hard to say at this point just because there is so much of development going on here I mean, you can imagine the non Nvidia ecosystem.

Sujitha Silva: Now Dave will rely on standards technologies, whether it is PCI express our Ethernet and the advantage of PCI Express is that it's low latency.

Sujitha Silva: Significantly low latency compared to Ethernet. So there are some benefits to that.

Sujitha Silva: And there are certain extensions that people consider to add on top of PCI Express when it comes to the.

Sujitha Silva: The proprietary implementation. So overall, we do see this.

Sanjay Jagendra: [inaudible] significantly lower latency compared to Ethernet. So there are some benefits to that. And there are certain extensions that people consider adding on top of PCI Express when it comes to the proprietary implementation. So overall, we do see this from a technological standpoint, and PCI Express will have that advantage. Now, Ethernet has also been around for a while. So we'll have to wait and see how all of this develops over the next, let's say, six to 18 months.

Sujitha Silva: From a technology standpoint, PCI Express will have that advantage now Ethernet also has been around so we'll have to wait and see how all of this develops over the next let's say six to 18 months.

Jitendra Mohan: I think the good news for us in some ways is that we don't have to pick, we don't have to decide which one. We have chips, we have hardware, and we have software. So we have customers that come to us and say, hey, I need this for my new AI platform. Can you build me that?

Sanjay Jagendra: Yes, <unk> been very good news for us in some ways is that we don't have to pick we don't have to decide which one.

Jitendra Mohan: We have chips, we have hardware and we have software. So we have customers that come to us and say hey, I need this format in our new AIA platform kidney Bermuda and that's what we've been doing.

Jitendra Mohan: And that's what we've been doing.

Jitendra Mohan: Okay, Great and then a question perhaps for Mike the initial AAC programs ramping maybe a few customers. This year appears customers next year and maybe perhaps all of them. This year, but do you perceive that those would be larger lumpier program based ramps, Mike or will those be steady kind of build outs in servers a service group.

Sujitha Silva: Another question perhaps for Mike, the initial AEC programs ramping up, maybe a few customers this year, a few customers next year, or maybe perhaps all of them this year. But do you perceive that those will be larger, lumpier program-based ramps, Mike, or will those be steady, kind of build out to the server's growth?

Mike Tait: I think the product ramps will mirror other product ramps. Well, they'll gradually build over a few quarters to hit a steady state. If you layer on top of each other, it just continues to build a nice growing revenue profile. So as you look at Taurus in 2024, we're shipping 200 gigabytes right now. Then in the back half, we start to ship 400 gigabytes. If you look into 2025, 800 gigabytes, which is ultimately the biggest opportunity for a much broader set of customers, will be when the market really becomes very large. Your next question will come from the line of Richard Shannon with Craig Hallam. Please go ahead.

Mike Tait: I think the product ramps will mirror other product groups will gradually build over a few quarters to the hit steady state and if you layer on top of each other just continues to build a nice growing revenue profile.

Richard Shannon: As you look at tourists in 2024, we're shipping 200 gig right now.

Mike Tait: And then in the back half we start to ship 400 gig and then if you look into 2025 800 gig, which is ultimately the biggest opportunity in a much broader set of customers.

Mike Tait: It will be when the market really.

Mike Tait: Becomes very large.

Mike Tait: Your next question will come from the line of Richard Shannon with Craig Hallum. Please go ahead.

Operator: Well, hi guys. Thanks for taking the time to answer my questions. Well, congratulations. I'm coming out public here. I guess I want to follow up on a couple of topics here that have been hidden, including Suji's question here about the PC Express AEC opportunity. Are these design wins, or are these the kind of pre-design wind ramps you're talking about this year? And I guess ultimately my question on this topic here is, can this opportunity, these PC Express AECs, become as big as your family in the foreseeable future?

Richard Shannon: Hi, guys. Thanks for taking my question as well congratulations on kind of the public here I guess I wanted to follow up on.

Operator: On.

Operator: A couple of topics here that hit earnings, including Judy's question here about the Pizza Express AC opportunity are these design wins or are these kind of pre design win ramps you were talking about this year and I guess ultimately my question on this topic. Here is is can this opportunity. These piece expert agencies become as big as.

Operator: Your family.

Operator: In the foreseeable future.

Richard Shannon: Yeah, so these are design wins to qualify. We have been shipping this, we announced this, we demonstrated this at public forums. So to that standpoint, it's an opportunity that we're excited about, and like we noted early on, we do expect it to start contributing revenue in the latter half of this year.

Speaker Change: Yes. So these are design wins to clarify we have been shipping this be announces with amongst state Texas at at.

Richard Shannon: As public forums, so from that standpoint.

Richard Shannon: An opportunity that could excited about and likely noted early on we do expect it to start contributing revenue for later half of this year.

Sanjay Jagendra: Okay, perfect. Thank you.

Speaker Change: Okay perfect. Thank you and then second question is on <unk> I think you mentioned a couple of applications here, maybe if you can.

Richard Shannon: And the second question is on CXL. I think you've mentioned a couple of applications here. Maybe if you could kind of express the breadth of interest here across hyperscalers and other customers for the ones you mentioned. And also for the next ones that are a little bit more expansive in nature, how do you see the testing and speccing out of those? Are those coming to market at the time you're hoping for? Or is there a little bit more development required to get those to market?

Speaker Change: Kind of expressed the breadth of interest share across hyperscale or some other customers for the ones you mentioned and also for the for the next ones that are a little bit more expansive in nature, how do you see the testing and.

Richard Shannon: <unk> out of those or are those coming to market at the time you are hoping for is there a little bit more in development required to get those to market.

Richard Shannon: Okay.

Sanjay Jagendra: Yeah, so there are two questions. Let me take the first one, which is the CXL side. In CXL, there are four main use cases to keep in mind: memory expansion, memory tiering, where you're trying to go for a TCO type of angle, memory pooling, and what are called memory drives that Samsung and others are providing. We believe memory drives are more suitable for enterprise customers, and the first three are more suitable for cloud-scale deployment.

Richard Shannon: Yes, so the.

Speaker Change: There are two questions. There let me take the first one which is the <unk> sales side.

Sanjay Jagendra: And there, again, memory pooling is something that's further out in time, in our belief, just because it requires software changes. So the ones that are more sort of short-term, medium-term are memory expansion and memory tiering. And like I noted early on, all the major hyperscalers, at least in the U.S., are all engaged in the CXL technology, but it is going to be a matter of time with both CPUs being available and dollars being available from a general-purpose compute standpoint.

Sanjay Jagendra: <unk> there are four main used cases to keep in mind memory expansion memory, tearing where youre trying to go for a PC or type of angle memory pooling and what is called as it's mainly drives that Samsung and others are providing we believe memory drives are more suitable for the enterprise cut.

Sanjay Jagendra: Tumors and that is the first three are more suitable for cloud scale deployment and there again memory pooling is something thats further out in time is our belief just because it requires software changes so the ones that are more sort of short term.

Sanjay Jagendra: Medium term is memory expansion and.

Sanjay Jagendra: Mainly TNA and like noted early on all the major Hyperscale is at least in the U S are all engaged on the CX technology.

Sanjay Jagendra: But it is going to be a matter of time with both Cpus being available in dollars being available from a general purpose compute standpoint.

Sanjay Jagendra: Okay, and then in terms of your second question, was that more about new products? Was that the context for it? Yes. Yeah, so again, we don't talk about the exact time frame, but you can imagine our last product we announced was a little over a year ago, so our engineers have not been quite as busy, so they've been working hard. So, to that end, you know, we are working very diligently and hard based upon a lot of interest and engagement from customers that we've already been working with.

Speaker Change: Okay, and then in terms of.

Sanjay Jagendra: Second question was was that more on new products was that the context for it.

Sanjay Jagendra: Yes.

Sanjay Jagendra: Yes. So again, we don't talk about the exact timeframe, but you can imagine our last product we announced was.

Sanjay Jagendra: Little over a year ago. So our engineers have not been quite so they've been working hard.

Sanjay Jagendra: But that standpoint, we are working very diligently and hard based upon a lot of interest and.

Sanjay Jagendra: Engagement from customers that we've already been working with.

Operator: There are no further questions at this time. I'll turn the call back over to Leslie Green for closing remarks.

Sanjay Jagendra: And there are no further questions at this time I will turn the call back over to Leslie Green for closing remarks.

Leslie Green: Thank you, everyone, for your participation and questions. We look forward to seeing many of you at various financial conferences this summer and updating you on our progress during our Q2 earnings conference call.

Leslie Green: Thank you everyone for your participation and questions. We look forward to seeing many of you at various financial conferences. This summer and updating you on our progress on our Q2 earnings conference call. Thank you.

Operator: Thank you, guys. Thank you. This concludes today's conference call. You may now disconnect.

Leslie Green: Thank you guys. Thank you concludes today's this concludes today's conference call you may now disconnect.

Operator: [music].

Operator: Yes.

Operator: Okay.

Operator: Yeah.