Q2 2025 Silicom Ltd Earnings Call
Operator: Ladies and gentlemen, thank you for standing by. The conference will begin shortly.
Ladies and gentlemen, thank you for standing by the conference will begin shortly.
Speaker 4: I see another school turned around. He's got his shoes over at the AAA.
Turn it around.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Silicom second quarter 2025 results conference call. All participants are present in listen-only mode. Following management's formal presentation, instructions will be given for the question and answer session. As a reminder, this conference is being recorded. You should have all received by now the company's press release. If you have not received it, please contact Silicom's investor relations team at EK Global Investor Relations at 1-212-378-8040 or view it in the news section of the company's website, www.silicom-usa.com. I would now like to hand over the call to Mr. Kenny Green of EK Global Investor Relations. Mr. Green, would you like to begin, please?
Ladies and gentlemen, thank you for standing by. Welcome to the Silicon. Second quarter, 2025 results conference call. All participants are present in listen-only mode, following Management's, formal, presentation, instructions will be given for the question and answer session. As a reminder, this conference is being recorded, you should have all received by. Now, the company's press release, if you have not received it, please contact silicon's investor relations team at EKGs, Global investor relations at 1 2112 3788040 or view it in the new section of the company's website.
Kenny Green: Thank you, operator. I would like to welcome all of you to Silicom's quarterly results conference call. Before we start, I would like to draw your attention to the following safe harbor statement. This conference call contains forward-looking statements. Such statements may include, but are not limited to, anticipated future financial and operating results and Silicom's outlook and prospects. Those statements are based on management's current beliefs, expectations, and assumptions, which may be affected by subsequent business, political, environmental, regulatory, economic, and other conditions. They are subject to known and unknown risks and uncertainties and other factors, many of which are outside Silicom's control, which might cause actual results to differ materially from expectations expressed or implied in the forward-looking statements.
I would now like to hand over the call to Mr. Kenny Greene of EK, Global investor relations. Mr. Green, would you like to begin please? Thank you, operator. I would like to welcome all of you to silicon's quarterly results conference call. Before we start, I would like to draw your attention to the following Safe Harbor State Room.
Kenny Green: These include, but are not limited to, Silicom's increasing dependence for substantial revenue growth on the number of limited customers, the speed and extent to which Silicom solutions are adopted by relevant markets, difficulties in the commercializing and marketing of Silicom's products and services, maintaining and protecting brand recognition, protection of intellectual property, competition, disruptions to manufacturing and sales and marketing, development and customer support activities, the impact of war in Israel and in Ukraine, rising inflation, changing interest rates, volatile exchange rates, as well as any other continuing or new effects resulting from the COVID-19 pandemic and global economic uncertainty, which may impact customer demand through customers exercising greater caution and selectivity with their short-term IT investment plans. The factors noted are not exhausted.
This conference call contains forward-looking statements, such statements may include, but are not are not limited to anticipated future financial and operating results. And silicon's, Outlook and prosperity. Those statements are based on Management's current beliefs, expectations, and assumptions, which may be affected by subsequent business, political environmental regulatory, economic, and other conditions, and our subject to known and unknown risks and uncertainties, in other factors. Many of which are outside telecoms control, which might cause actual results to different materially from expectations expressed or implied in the forward-looking statements.
These include but are not limited to silicon's. Increasing dependence for substantial Revenue growth. On the lumber of limited customers, the speed and extent to, which silicon Solutions are adopted by relevant, markets difficulties in the commercializing, and marketing of silicon's products. And services, maintaining, and protecting brand recognition, protection of intellectual property, competition, disruptions to manufacturing and sales and marketing development and customer support activities, the impact of what in Israel. And in Ukraine, Rising inflation, changing interest rates, volatile exchange rates.
Kenny Green: Further information about the company's business, including information about factors that could materially affect Silicom's results of operations and financial conditions, are discussed in Silicom's annual report on Form 20th and other documents filed by the company, and that they be subsequently filed by the company from time to time with the Securities and Exchange Commission. Therefore, there can be no assurance that actual future results will not differ significantly from anticipated results. Consequently, investors are reminded not to rely on these forward-looking statements. Silicom does not undertake to update any forward-looking statement as a result of new information or future events or developments, except as may be required by law. In addition, following the company's disclosure of certain non-GAAP financial measures in today's earnings release, such non-GAAP financial measures will be discussed during this call.
As well as any other continuing or new effects resulting from the co 19 pandemic, and global economic uncertainty, which may impact. Customer demand through customers, exercising greater caution and selectivity with their short-term, it investment plans, the factors noted are not exhausted.
Further information about the company's business, including information about factors that could materially affect silicon's results of operations, and financial conditions. I'll discuss in silicon's annual report on form 20th and other documents filed by the company and that may be subsequently filed by the company from time to time with the Securities and Exchange Commission. Therefore, there can be no assurance that actual future results are not differ significantly from anticipated results. Consequently investors are reminded not to rely on these forward-looking statements.
Be required by law.
Kenny Green: Such non-GAAP measures are used by management to make strategic decisions, forecast future results, and evaluate the company's current performance. Management believes that the presentation of these non-GAAP financial measures are useful to investors' understanding and assessment of the company's ongoing core operations and prospects for the future. Unless otherwise stated, it should be assumed that the financials discussed in this conference call will be on a non-GAAP basis. Non-GAAP financial measures disclosed by management and provided as additional information to investors to provide them with an alternative method for assessing the company's financial condition and operating results. These measures are not in accordance with or a substitute for GAAP. A full reconciliation of non-GAAP to GAAP financial measures are included in today's earnings release, which you can find on Silicom's website. And with me on the line today are Mr. Liron Eizenman, President and CEO, and Mr.
Management believes that the presentation of these non-gaap Financial measures are useful to investors understanding, and assessment of the company's ongoing core operations and prospects for the future. Unless otherwise stated it should be assumed that the financial discuss. In this conference call will be on a non-gaap basis. Non-gaap Financial measures disclosed by management and provided as additional information to investors to provide them with an alternative method for assessing the company's Financial condition and operating results. These measures are not in accordance with a substitute for Gap. A full reconciliation of non-gaap to get financial measures are included in the dates earnings release which you can find on silicon's website.
Kenny Green: Eran Gilad, CFO. Liron will begin with an overview of the results, followed by Eran, who will provide the analysis of the financials. We'll then turn the call over to the question and answer session. And with that, I would now like to hand the call over to Liron. Liron, please go ahead.
Liron Eizenman: Thank you, Kenny. I would like to welcome everyone to our conference call to discuss the results of the second quarter of 2025. We are pleased with the progress made in the second quarter of 2025 and happy to report another quarter of execution ahead of our strategic plan, including strong design win momentum, success across all our product lines, and excellent cash flow. Furthermore, we are pleased with our design win momentum, which is tracking ahead of our expectations. Since the beginning of the year, we have achieved five major new design wins with important new customers as well as existing ones, building an impressive mid-to-long-term pipeline that puts us with close reach of our goal of seven to nine design wins for 2025 as a whole.
And with me on the line today. I'm Mr. Leon Eisenman, and president, and CEO, and Mr. On will begin with an overview of the results. Followed by Iran Hall, provide, the analysis for financials. We will then send the call over to the question and answer session. And with that, I would now like to hand the call over to LeRon LeRon, please go ahead
Liron Eizenman: We see design win as the most tangible indicator of our progress, as well as our breadth and depth of our design win opportunity funnel. The renewed focus on our core product lines, coupled with deep relationships with our customers and potential new customers, has created a solid pipeline positioning us for future growth. We expect to continue to convert this pipeline to further design wins throughout 2025 and beyond. We are successfully advancing and meeting our milestones with our various customers and projects and are increasingly optimistic about our ability to achieve double-digit revenue growth in 2026 and beyond, thereby delivering significant value for our shareholders. In terms of the financial results for the quarter, we delivered revenue of $15 million at the midpoint of our guidance range. Our balance sheet has remained very strong, and during the quarter, we increased our cash and equivalents by $3 million.
Thank you. Kenny. I would like to welcome everyone to our conference call to discuss the results of the second quarter of 2025. We are pleased with the progress made in the second quarter of 2025 and happy to report. Another quarter of execution ahead, of our strategic plan, including strong design win, momentum success across all our product lines and excellent cash flow. Furthermore, we are pleased with our design win momentum which is tracking ahead of our expectations. Since the beginning of the year we have achieved 5 major new design wins with the important new customers as well as existing ones building an impressive me to long-term pipeline that puts us with close reach of our goal of 7, to 9 designs for 2025 as a whole,
We see design rings as the most tangible indicator of our progress, as well as our breadth and depth of our design wind opportunity fund.
The renewed focus on our core product lines, coupled with deep relationships with our customers and potential new customers, has created a solid pipeline positioning us for future growth. We expect to continue to convert this pipeline to further design wins throughout 2025 and beyond.
We are successfully advancing and meeting our Milestones with our various customers and projects and are increasingly optimistic about our ability to achieve double digit, Revenue growth in 2026 and Beyond thereby, delivering significant value for our shareholders. In terms of the financial results for the quarter. We delivered revenue of 15 million dollars at the midpoint of our guidance range.
Liron Eizenman: At June end, our working capital and marketable securities totaled $116 million, including $80 million in cash, deposits, and highly rated bonds, with no debt representing approximately $20 per share. This ensures we can maintain adequate investment in our business and growth engines without compromise going forward. In the second quarter, we secured three significant design wins, one with a Fortune 500 cloud-based service provider for our FPGA SmartNIC, one with a global network test equipment leader for our 100-gigabit NICs, and one with a US-based edge networking provider for our advanced edge system. The three demonstrate the breadth of our product portfolio, as well as the depth of our customer relationships and our ability to foster new ones. Importantly, those wins span across all our major product lines: edge systems, FPGA SmartNICs, and high-performance NICs, reflecting the relevance of our solution across diverse market needs.
Our balance sheet has remained very strong. And during the quarter, we increased our cash and equivalents by $3 million at June end, our working capital and marketable, securities totaled, 116 million, including 80 million dollars, in cash deposits and highly rated bonds with no debt representing approximately $20 per share.
This ensures, we can maintain adequate investment in our business and growth engines without compromise going forward.
Liron Eizenman: This diversity of new design wins across product categories and customer types is a key factor in building a strong and balanced growth foundation. A recent design win with a US-based edge networking provider demonstrated the strength of our reputation as a trusted technology partner. The customer selected our customized edge device to enhance scalability, security, and efficiency. Initial deployments are expected by year-end 2025, with full ramp-up in 2026. This customer is also exploring multiple additional projects, each with $1 million plus potential in annual revenues, and another customized edge product for a separate use case with a potential of $7 million at full run rate. Following a year-long technical evaluation, we achieved a major design win for our FPGA SmartNIC solution with a new Fortune 500 cloud-based service provider in North America. This win reflects the superior performance and reliability of our technology.
In the second quarter, we secured 3 significant design wins 1 with a Fortune. 500 cloud-based service provider for our fpga smartnic, 1 with a Global Network, test equipment, leader, for 100 gigabit, nics, and 1 with the us-based edge, networking provider, for our Advanced Edge system, the 3 demonstrators, the breadth of our product portfolio, as well, as the depth of our customer relationships, and our ability to Foster new ones. Importantly, those winds spend around all our major product lines at AT Systems fpga smart next and high performance, Nicks reflecting the relevance of our solution across diverse Market needs this diversity of new design. Wins across product categories. And customer types is a key factor in building a strong and balanced growth Foundation.
A recent design, mean with the us-based edge, networking provider demonstrating the strength of our reputation as a trusted technology partner.
The customer selected or customized Edge device to enhance scalability security, and efficiency initial. Deployments are expected by year, end 2025 with full ramp up in 2026. This customer is also exploring multiple additional projects each with $1 million plus potential in annual revenues and another customized Edge product, for a separate, use case with the potential of 7 million dollars at full run rate.
Following a year a year long. Technical evaluation. We achieved a major design with with our for our spj smart mix solution with a new Fortune 500 cloud-based service provider in North America.
Liron Eizenman: Initial deliveries are planned for late 2025, with full ramp-up throughout 2026 and an annual revenue potential of $4 million. This design win positions us as a strategic technology partner to one of the most influential players in the cloud services industry. We view this as just the beginning of a broader relationship with the opportunity to supply additional components and systems on a global scale. We also achieved a new design win with a global leader in advanced networking testing equipment and a longstanding customer of ours, selecting our 100-gig NIC for their next-generation platform. This expands our relationship with this important customer, as we now provide both cards and systems, positioning us to participate in the majority of their future hardware tenders. Initial purchases orders have been placed, with mass deployment expected in early 2026, with a revenue potential of $2.5 million at full ramp-up.
Technology initial deliveries are planned for late 2025 with full ramp up, truth throughout 2026 and an annual revenue, potential of 4 million. This design win position us as a strategic technology partner to 1 of the most influential players in the cloud services and Industry. We view this as just the beginning of a broader relationship with opportunity to supply additional components and systems on a global scale.
Liron Eizenman: This win underscores the innovation and reliability of our high-performance NIC portfolio and our abilities to meet stringent performance and tight cost requirements. Customers like this form the backbone of our long-term growth strategy, building steady, long-term relationships that lead to multiple revenue streams down the road. Each of those wins represents a combination of many months and even years of work. They reflect the core of our strategy, building new and deepening long-term relationships that evolve into multiple high-value engagements, creating reliable and diversified revenue streams for a broad range of Silicom products. Beyond their own recurring revenue potential, those wins open the door to additional opportunities with the same customers and provide strong referrals for new customers, further strengthening our position in key markets.
We also achieved a new design win with the global leader in advanced networking, testing equipment, and a long-standing customer of ours selecting our 100 Gig NIC for their further Next Generation platform. This expands our relationship with this important customer, as we now provide both cards and systems, positioning us to participate in the majority of their future hardware tenders. Initial purchase orders have been placed, with mass deployment expected in early 2026, and the revenue potential of $2.5 million at full ramp-up. This win underscores the innovation and reliability of our high-performance NIC portfolio and our abilities to meet stringent performance and tight cost requirements that customers like this form. They are the backbone of our long-term growth strategy, building steady long-term relationships that lead to multiple revenue streams down the road. Each of those wins represents a combination of many months and even years of work, and they reflect the core of our strategy: building new and deepening long-term relationships.
Liron Eizenman: Together with a growing pipeline of potential customers evaluating our product, those achievements strengthen our confidence in meeting our target of seven to nine design wins during 2025. While their financial impact in the current year will be modest, they lay the groundwork for significant double-digit growth in years to come, with the potential to exceed our strategic goals sooner if current opportunities ramp up faster than expected. Our pipeline of opportunities at the input of our design win funnel has never been broader, with opportunities across all our product lines, including edge systems, SmartNICs, and FPGA, spanning both new and existing customers across multiple industries. We believe that in the coming years, we expect to see more of those opportunities transform into design wins, while continuously adding new opportunities at the entry point of the funnel.
That evolved into multiple high value engagements, creating reliable and diversified revenue streams for a broad range of silicon products beyond their own recurring Revenue potential. Those winds open the door to additional opportunities with the same customers and provide strong referrals for new customers further. Strengthening our position in key markets.
Together with the growing pipeline of potential customers, evaluating our product, those achievements strengthen our confidence. In meeting our Target of 7 to 9 design wins during 2025, while their financial impact in the current year will be modest. They lay the ground, the groundwork for significant double-digit growth in years to come with the potential to exceed. Our strategic goals sooner if current opportunities run up faster than expected,
Liron Eizenman: I urge you to review our investor presentation, which includes examples of opportunities in our pipeline, as well as examples of those that have successfully passed through the funnel and become design wins. We believe that this dynamic process will continue to accelerate. Considering the strong pipeline, growing design win momentum, and given our strong execution on all aspects of the strategy, we are well on track and even performing ahead of our expectations. Our overall goal is to create significant value for our shareholders, with EPS of about $3 on revenues between $150 and $160 million. A faster-than-forecasted deal closure or ramp-up of ongoing projects may help us accelerate the timeline, and we are fully focused on making that happen. Growth for full year 2025 is expected to be in the low single digits, with a double-digit annual growth rate materializing gradually from 2026.
Our pipeline of opportunities that the input of our design will funnel has never been broader with opportunities across all our product lines, including ad systems, smart links, and sdga spending, both new and existing customers across multiple Industries. We believe that in the coming years, we expect to see more of those opportunity to transform into design wins, while continuously adding new opportunities at the entry point of the family.
I urge you to review our investor presentation which includes examples of opportunities in our pipeline, as well as examples of those that have successfully passed through the funnel and become designers. We believe that this Dynamic process will continue to accelerate
Considering the strong pipeline growing design, win momentum and giving our strong execution on all aspects of the strategy we are well on track and even performing ahead of our expectations. Our overall goal is to create significant value for our shareholders with EPS of about 3 dollars on revenues between 150 and 160 million a faster than forecasted Bill closure or ramp up of ongoing projects. May help us accelerate the timeline and we are fully focused on making that happen.
Liron Eizenman: We expect that revenues for the third quarter of 2025 will range from $15 to $16 million. In summary, we are pleased with our progress. We are executing ahead of our strategic plan, ensuring strong design win momentum, supported by a robust pipeline across all our product lines and excellent cash flow. With a strong balance sheet, a proven track record of design wins with top-tier customers, and an experienced, highly dedicated team, we are confident in our ability to continue executing on our strategic plan. As such, we are even more optimistic about our ability to achieve double-digit revenue growth in 2026 and beyond, thereby delivering significant value for our shareholders. We remain focused on creating value for both our customers and our shareholders. We look forward to updating you on our progress as we move through the second half of 2025.
Liron Eizenman: With that, I will now hand over the call to Eran for a detailed review of the quarter results. Eran, please go ahead.
Growth for full year. 2025 expected to be in the low. Single digits with a double digit. Annual growth rate, materializing, gradually from 2026. We expect that revenues for the third quarter of 2025 will range from 15 to 16 million dollars in summary. We are pleased with our progress. We are executing ahead of our strategic plan and showing strong design with momentum supported by a robust pipeline across all our product lines, and excellent cash flow with a strong balance sheet, a proven track record of design wins with top tier customers and an experienced highly dedicated team. We are confident in our ability to continue executing on a strategic on a strategic plan. As such, we are even more optimistic about our ability to achieve double digit, Revenue growth in 2026 and Beyond thereby, delivering significant value for our shareholders. We remain focused on creating value for both. Our customers and our shareholders, we look forward to updating you on our progress as we move through the second half of 2025 with that. I will now hand off.
Eran Gilad: Thank you, Liron, and good day to everyone. Revenues for the second quarter of 2025 were $15 million, 4% ahead of the $14.5 million reported in the second quarter of last year. The geographical revenue breakdown over the last 12 months was as follows: North America, 74%; Europe and Israel, 16%; Far East and the rest of the world, 10%. During the last 12 months, we had one 10% plus customer, which accounted for about 15% of our revenues. I will be presenting the rest of the financial results on a non-GAAP basis, which excludes the non-cash compensation expenses in respect of options and RSUs granted to directors, officers, and employees, taxes on amortization of acquired intangible assets, as well as lease liabilities financial expenses. For the full reconciliation from GAAP to non-GAAP numbers, please refer to the press release we issued earlier today.
Over to call to Iran for a little review of the quarter results. Iran, please go ahead.
Thank You, Leon and good day to everyone.
Revenues for the second quarter of 2025, where 15 million dollars.
4% ahead of the 14.5 million reported in the second quarter of last year.
Of the world, 10%.
During the last 12 months, we had 1 10 plus customer, which accounted for about 15% of our revenues.
I would be presenting the rest of the financial results on a non Gap basis with which excludes the non-cash compensation expenses in respect of options and rsus.
Granted to the rectors officers and employees taxes on a motivation of acquired intangible assets as well as lease liabilities Financial expenses.
For the full reconciliation from gaap to non-gaap numbers. Please refer to the press release. We issued earlier today.
Eran Gilad: Gross profit for the second quarter of 2025 was $4.8 million, representing a gross margin of 31.9% compared to a gross profit of $4.3 million, or a gross margin of 29.7% in the second quarter of 2024. While I note that our short-to-mid-term expected gross margin range remains between 27% to 32%, we are very pleased with achieving a gross margin at the higher end of this range, ahead of our strategic plan model. Operating expenses in the second quarter of 2025 were $7.2 million, compared with $6.7 million reported in the second quarter of 2024. Our operating expenses in the quarter were higher than expected due to the relatively weaker US dollar, the currency in which we report, versus the Israeli shekel and the Danish krone, the main currencies in which a large portion of our expenses are generated.
Gross profit for the second quarter of 2025 was 4.8 million representing, a gross margin of 31.9% compared to a gross profit of 4.3 million, or gross margin of 29.7%. In the second quarter of 2024.
while I note that our short to midterm expected gross margin range remains between 27 to 32%, we are very pleased with achieving a gross margin at the higher end of this range ahead of our strategic plan model,
operating expenses in the second quarter of 2025 were 7.2 million compared with 6.7 million reported in the second quarter of 2024.
Our operating expenses in the quarter were higher than expected due to the relatively weaker US dollar the currency in which we report versus the Israeli shackle and the Danish strong. The main currencies in which a lot of portion of our expenses are generated.
Eran Gilad: Operating loss for the second quarter of 2025 was $2.4 million, compared to an operating net loss of $2.4 million as reported in the second quarter of 2024. Net loss for the quarter was $2 million, compared to a net loss of $0.9 million in the second quarter of 2024. Loss per share in the quarter was $0.35. This is compared with a loss per share of $0.14 as reported in the second quarter of last year. Now, turning to the balance sheet, as of June 30, 2025, our working capital and marketable securities amounted to $116 million, including $41 million in high-quality inventory and $80 million in cash, cash equivalents, and highly rated marketable securities with no debt. That ends my summary. I would like to hand back over to the operator for a questions and answers session. Operator?
Operating loss for the second quarter of 2025 was 2.4 million compared to an operating net loss of 2.4 million as reported in the second quarter 2024.
Net loss for the quarter was 2 million dollars compared to a net loss of 0.9 million in the second quarter of 2024.
Loss per share in the quarter was 35 cents. This is compared with loss per share of 14. Cents has reported in the second quarter of last year.
Now, turning to the balance sheet as of June 30th, 2025 our work in capital and marketable, Security is amounted to 116 million dollars, including 41 million in high quality inventory and 80 million dollars in cash, cash, equivalents and highly rated marketable, Securities with no debt.
That ends my summary. I would like to end back over to the operator for a questions and answers session cooperator.
Operator: Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. If you have a question, please press star one. If you wish to cancel your request, please press star two. If you are using speaker equipment, kindly lift the handset before pressing the numbers. Your questions will be polled in the order they are received. Please stand by while we poll for your questions. The first question is from Brian Koontz of Needham & Co. Please go ahead.
Thank you, ladies and gentlemen. At this time, we will begin the question and answer session. If you have a question, please press star 1, if you wish to cancel your request, please press star 2. If you're using speaker equipment, kindly lift. The handset, before pressing the numbers, your questions will be pulled in the order. They are received please stand by while we pause for your questions.
The first question is from Ryan Coons of needam and Co, please go ahead.
Ryan Koontz: Great, thanks. And nice updates on the design wins. I wanted to ask about some of your end markets here. I mean, the biggest one appears to be the security market, and that's a key driver for several of your design wins across some of your sectors here. Are you seeing changes in that market in terms of share shifts among your customers or this recent big acquisition that went down for Palo Alto for Cyber? Do you see consolidation or any of those shifts affecting your opportunities, either improving or declining opportunities there?
Great, thanks, and, um, nice updates on the design wins. I want to ask about some of your end markets here. I mean, some of what we have, the biggest one appears to be the security market, and um.
That's a key driver for several of your design wins crusts over your sectors here. Um, are you seeing you know, changes in that market in terms of share shifts among your customers? Or this, you know, this recent, uh, big acquisition that went down for a pilot Alto for, um,
Or cyber. Um yeah. Do you see consolidation or, you know, those gifts affecting your opportunities, you know, either, um, improving or, or declining opportunities there.
Liron Eizenman: So, yeah, I mean, you're right. The security market is a very important market for us, and we don't see any impact for that. If anything, we just see the cybersecurity market keeps growing and growing by pretty much every research, I think. And we see evaluations of companies, and we see revenues of companies. So we are very happy that we are part of this market, and we don't see anything of that sort due to any consolidation right now.
And we see evaluations of companies and we see revenues of companies. So we are very happy that we are part of this market and we don't see any anything of that sort due to any consolidation right now.
Ryan Koontz: Great. And I'll follow up to that too about I saw that the ADC market also is another important area. And I saw F5's results last night, but they're seeing a real shift away from software-based solutions over back to hardware, actually. And I wonder if that affects many of your opportunities in the ADC market as they move to hardware-based solutions a little more predominantly.
Great. And not a follow up for that too. About, I saw that the uh, the ADC Market uh, also is another important area, and obviously saw f5's results last night, but they're seeing a real shift away from software based Solutions over back to Hardware, actually. Um, and I wonder if that affects many of your opportunities in the ADC Market as they move to Hardware based Solutions a little more predominantly.
Liron Eizenman: I mean, yeah, I mean, the F5 results last night, I think, is a very good, maybe, reference to see that many, many companies are looking at hardware more and more. I mean, and we have many new products coming up for this market. If it's post-quantum ciphers, which is a very important thing that will become basically mandatory in the near future, and we have a solution for that to accelerate it over hardware solutions. Yeah, in the SASE market, we have many customers as well, and we see this networking plus security market exploding pretty much. Everyone needs hardware, different type of hardware, more acceleration on the hardware side as traffic becomes more challenging and encrypted and quantum encrypted in some cases. We see needs for special switches, and we're definitely working in that area to have interesting products later this year.
Um, I mean, we I mean, yeah, I mean the A5 results last night is, is I think is a very good. Uh, uh, maybe reference to see that many many companies are looking at how we're more and more. Uh, look. I mean, and we have many new products coming up for this Market. If it's post-quantum, ciphers, which is a very important thing that will become basically mandatory in the near future. And we have a solution for that to accelerate that over Hardware. Um, maybe Solutions. Uh, yeah. In The Sassy Market, we had many customers as well. And we see this uh networking plus security Market exploding. Pretty much everyone needs Hardware different type of Hardware more acceleration on the hardware side is traffic. Uh, you know, becomes more challenging encrypted and uh um you know, Quantum encrypted in some cases. Um, we see needs for
Liron Eizenman: So we see there's a lot of excitement for us in this market and the opportunities that will come up. And definitely, not only software, as we said, definitely on the hardware side for this market.
For special switches, we are definitely working in that area to have interesting products later this year. We see a lot of excitement for us in this market and the opportunities that will come up. And, definitely, you know, not only software, as we said, but definitely on the hardware side for this market.
Ryan Koontz: Great. And then lastly, just touching on AI, we're seeing a lot of shifts in the kind of big public cloud builders away from traditional cloud infrastructure over to AI clusters, just really large CapEx shifts. And I wonder if that affects many of your market opportunities. I saw you have a very large AI data infrastructure opportunity there. And how do you think about how AI affects your TAM going forward?
Great. And then uh, lastly just touching on you know, AI. We're seeing a lot of shifts in the kind of big public Cloud Builders um away from traditional Cloud infrastructure over to uh AI clusters. Um, just really a large gap back shifts and I wonder if that affects many of your Market opportunities, I saw you have a very large, uh, AI data infrastructure opportunity there and how you think about how AI affects your your Tam, uh, going forward.
Liron Eizenman: I think it can affect it significantly. And we are looking at that market. We already have several products that fit into this market, and we are thinking more and more and seeing that the new AI architectures in training and inference, both on the edge and both on the data center, require certain acceleration and certain systems that we are able to build specifically on FPGA. FPGA could be dramatic here in order to provide solutions that simply do not exist today. And we think we have the right team and the right know-how how to build those products. We're already discussing with potential customers. So this could become significant as well for Silicom.
I think it can affect it. Uh, significantly. And we are looking at that market, we already have several products that fit into this Market. Um, and we're thinking more and more and seeing that this that the new AI architectures in training and inference both on the edge and both on the data center. We acquired certain acceleration and certain systems that we are able to build specifically on fpga fpga could be dramatic here in order to provide solutions that simply do not exist today and we think we have the right team and the right know-how how, how to build those products. We're already discussing with potential customers, so this could become significant.
As well for silicon.
Ryan Koontz: Great. Maybe one last one, if I can squeeze it in. Just the competitive environment, you're seeing many shifts there. Are there any impacts on your gross margin expectations for the business?
gravy maybe 1 last 1, if I can squeeze it in just the competitive environment you see many shifts there or any impacts on your gross margin expectations for business
Liron Eizenman: Not so much. Nothing I think we should report at the moment.
Not so much. Nothing. I think we should report to the moment.
Ryan Koontz: Okay. Thanks so much. That's all I've got.
Liron Eizenman: Thank you.
Okay, thanks so much. It's all good.
Thank you.
Operator: If there are any additional questions, please press star one. If you want to cancel your request, please press star two. Please stand by while we poll for more questions. There are no further questions at this time. Before I ask Mr. Eizenman to go ahead with his closing statement, I would like to remind participants that a replay of this call will be available by tomorrow on Silicom's website, www.silicom-usa.com. Mr. Eizenman, would you like to go ahead with your closing statement?
if there are any additional questions, please press star 1,
if you want to cancel your request, please press star 2, please stand by while we pull for more questions.
There are no further questions at this time. Before I ask Mr. Eizenman to go ahead with his closing statement, I would like to remind participants that a replay of this call will be available by tomorrow on Silicom's website, www.silicom.com. Mr. Eizenman, would you like to go ahead with your closing statement?
Liron Eizenman: Thank you, operator. Thank you, everybody, for joining the call and your interest in Silicom. We look forward to hosting you on our next call in three months. Good day.
Operator: Thank you. This concludes Silicom's second quarter 2025 results conference call. Thank you for your participation. You may go ahead and disconnect.
Thank you, operator. Thank you everybody for joining the call, and your interest in Silicon. We look forward to hosting you on our next calling 3 months. Good day.
Thank you. This concludes silicon's second quarter, 2025 results conference call. Thank you for your participation. You may go ahead and disconnect.