Q2 2025 Rambus Inc Earnings Call
Unknown Attendee: This is the second quarter fiscal year 2025 earnings conference call.
Unknown Attendee: At this time, all participants are in a listen only mode. At the conclusion of our prepared remarks, we will conduct a question. If you would like to ask a question, you may press star 1 on your touchtone phone.
Desmond Lynch: If anyone should require assistance during the conference, please press star zero at As a reminder, this conference call is being I would now like to turn the conference over to Desmond Lynch, the financial officer, you may begin. Thank you, operator, and welcome to the Rambus second quarter 2025 results conference call. I'm Desmond Lynch, Chief Financial Officer at Rambus, and on the call with me today is Luc Seraphin, our CEO.
Welcome to the Ramba second quarter fiscal year 2025 earnings conference call. At this time, all participants are in a listen-only mode. At the conclusion of our prepared remarks, we will conduct a question and answer session. If you would like to ask a question, you may press star 1 on your touchtone phone at any time. If anyone should require assistance during the conference, please press star zero at any time. As a reminder, this conference call is being recorded.
I would now like to turn the conference over to Desmond Lynch, the Chief Financial Officer. You may begin your conference.
Thank you, operator and welcome to the Rambo's. Second quarter, 2025 results conference call.
Desmond Lynch: The press release for the results that we will be discussing today has been filed with the SAC on Form 8K. We are webcasting this call along with the slides that we will reference during portions of today's call. A replay of this call can be accessed on our website beginning today at 5pm Pacific time.
I'm Desmond Lynch, Chief Financial Officer at Rambus, and on the call with me today is Luc Seraphin, our CEO.
Notes that we will be discussing today have been filed with the SEC on Form 8-K.
Desmond Lynch: Our discussion today will contain forward-looking statements including our expectations regarding projected financial results, financial prospects, market growth, demand for our solutions, other market factors including reflections of the geopolitical and macroeconomic environment, and the effects of ASC 606 on reported revenue amongst other items. These statements are subject to risks and uncertainties that may be discussed during this call and are more fully described in the documents we file with the SAC, including our 8 Ks, 10 Qs and 10 Ks. These forward-looking statements may differ materially from our actual results and we are under no obligation to update these statements.
We are webcasting this call along with the slides that we will reference during portions of today's call a replay of this call can be accessed on our website beginning today at 5:00 pm Pacific time.
Our discussion today will contain forward-looking statements, including our expectations regarding projected financial results.
Financial prospects market, growth demand for our Solutions, other Market factors including reflections of the geopolitical and macroeconomic environment, and the effects of ASC 6066 and reported Revenue amongst other items.
These statements are subject to risks and uncertainties that may be discussed during this call and there are more fully described in the documents, we file with the SEC, including our eight Ks 10, Qs and 10-Ks.
These forward looking statements may differ materially from our I showed us out and we are under no obligation to update these statements.
Desmond Lynch: In an effort to provide greater clarity in the financials, we are using both GAAP and non-GAAP financial presentations in both our press release and on this call. A reconciliation of these non-GAAP financials to the most directly comparable GAAP measures has been included in our press release, in our slide presentation and on our website at rambus.com on the investor relations page under financial releases. In addition, we will continue to provide operational metrics such as licensing billings to give our investors better insight into our operational performance.
In an effort to provide greater clarity in the financials, we are using both GAAP and non-GAAP financial presentations in both our press release and on this call.
A reconciliation of these non-GAAP financials to the most directly comparable GAAP measures has been included in our press release and our slide presentation and on our website at Rambus com on the Investor Relations page under financial releases.
In addition, we will continue to provide operational metrics such as licensing billings to give our investors better insight into our operational performance.
Desmond Lynch: The order of our call today will be as follows.
The author of our call today will be as follows Luc will start with an overview of the business I will discuss our financial results and then we will end with Q&A.
Luc Seraphin: Luc will start with an overview of the business.
Desmond Lynch: I will discuss the financial results, and then we will end with Q&A.
Luc Seraphin: I'll now turn the call over to Luc to provide an overview of the quarter. Thank you, Des. Good afternoon, everyone, and thank you for joining our second quarter conference call. Rambus delivered a very strong second quarter, exceeding expectations for both revenue and earnings while continuing momentum in our growth initiative. This achievement was driven by a memory interface chip business outpacing the market with 43% year-over-year growth and another quarter of record product revenue. The strong performance highlights our sustained leadership in core DDR5 products as we continue to execute on our strategic roadmap of signal and power integrity solutions and to drive the adoption of our new products.
I will now turn the call over to Luc to provide an overview of the quarter Luke.
Thank you Dennis good afternoon, everyone and thank you for joining our second quarter conference call.
Rambus delivered a very strong second quarter exceeding expectations for both revenue and earnings.
Continuing momentum in our growth initiatives.
This achievement was driven by our memory interface chip business outpacing the market with 43% year over year growth and another quarter of record product revenue.
The strong performance highlights our sustained leadership in <unk> products as we continue to execute on our strategic roadmap of signal empower integrity solutions and to drive the adoption of our new products.
Luc Seraphin: We also generated record cash from operations of $94 million, showcasing the efficiency of our execution and the robustness of our business model. Our balanced portfolio and diverse revenue streams across chips, silicon IP and patent licensing position us exceptionally well in the market. They also provide stability in a dynamic microenvironment and enable our continued product investment to drive long-term growth. Our chip business continues to be a key growth engine for the company, with Q2 marking our fifth consecutive quarter of product revenue growth. As I mentioned in my opening remarks, we delivered a historic quarter of record product revenue.
We also generated record cash from operations of $94 million showcasing the efficiency of our execution and the robustness of our business model.
Our balanced portfolio and diverse revenue streams across chips, and silicon IP and patent licensing position us exceptionally well in the market.
It also provides stability in a dynamic microenvironment and enable our continued product investments to drive long term growth.
Our chip business continues to be a key growth engine for the company with Q2, marking our fifth consecutive quarter of product revenue growth as.
As I mentioned in my opening remarks, we delivered a historic quarter of record product revenue.
Luc Seraphin: Our strength in DDR5 continues to be a cornerstone of our success, with increased sales of our core products driving above-market growth. Looking forward to Q3, we expect our ongoing RCD market share leadership combined with early contributions from new products to drive double-digit sequential product revenue growth. We have growing traction for the record number of new products introduced throughout last year, with chips progressing through the respective stages of customer qualification and adoption. Additionally, we remain actively involved in the definition of future-generation products with the industry. As we look further into the future, we are also very pleased that our industry standard MR-DIMM chipset is advancing on schedule, and we are excited about its role in meeting the growing memory performance requirements of next-generation server workloads.
Our strength in DDR five continues to be a cornerstone of our success with increased sales of our core products driving both market growth.
Looking forward to Q3, we expect our ongoing LCD market share leadership combined with early contributions from new products to drive double digit sequential product revenue growth.
We have growing traction for the record number of new products introduced throughout last year with chips progressing through the respective stages of customer qualification and adoption. Additionally, we remain actively involved in the definition of future generation products with the industry.
As we look further into the future. We are also very pleased that our industry standard ammonium chipset is advancing on schedule and we are excited about its role in meeting for growing memory performance requirements of next generation server workloads.
Luc Seraphin: Going beyond servers, we recently launched our client memory module chipset for AI PCs. With that introduction, we are proud to now offer chipsets for all JEDEC standard TDR5 and LPDDR5 modules. Our client chip solutions waterfall our proven server-class technology into new applications and extend our reach into next-generation high-performance PCs, opening up a growing market opportunity in the coming years. Our expanding product offerings support the next wave of high-performance computing platforms in servers and client systems. Through ongoing leadership in our cities and growing fraction across our portfolio of new products, we expect continued momentum and long-term growth.
Going beyond servers, we recently launched our clients' memory module chipset for AIP sees.
With that introduction, we are proud to now offer chipsets for all Gentex standard TD on five and the LP DDR five modules.
Our client chip solutions waterfall, our proven server class technology into new applications and extend our reach into next generation high performance species opening up a growing market opportunity in the coming years.
Our expanding product offerings to support the next wave of high performance computing platforms in servers and client systems.
Through ongoing leadership in our Cds and growing traction across our portfolio of new products, We expect continued momentum and long term growth.
Luc Seraphin: Turning to Silicon IP, we delivered solid results in Q2, and we remain on track for long-term growth. AI and data center applications continue to drive strong demand for our high-speed memory and interconnect IP, as well as our security IP. Our IP solutions are foundational to enabling the performance and security required by next-generation accelerated computing ICs. We're seeing strong demand and design momentum across our portfolio, led by a best-in-class HVM4 and PCIe7 solution. Now, as we look ahead for the company, the data center will continue to undergo profound transformation driven by exponential growth of AI workloads and the increasing complexity of high speed performance computing.
Turning to Silicon IP, we delivered solid results in Q2, and we remain on track for long term growth.
And data center applications continue to drive strong demand for our high speed memory, and interconnect IP as well as our security IP.
Our IP solutions is foundational to enabling the performance and security required by next generation accelerated computing Ics.
We're seeing strong demand in design win momentum across our portfolio led by our best in class <unk> and Pcie solutions.
Now as we look ahead for the company.
<unk> Center will continue to undergo a profound transformation driven by exponential growth of AI workloads, and the increasing complexity of high speed performance computing.
Luc Seraphin: across the ecosystem, the shift towards scalable heterogeneous compute architectures is accelerating demand for novel high-performance memory solutions and enabling technology. These trends align directly with Rambus' long-term strategy. We are strategically focused on advancing system memory bandwidth and capacity through groundbreaking memory, connectivity, and power management solutions. These capabilities are foundational to enabling the next generation of AI and HPC platforms. We have built a roadmap that addresses the increasing technical demands of data-intensive applications. Our leadership in signal and power integrity, core to enabling robust high-performance memory subsystems, places us at the heart of this transformation. With our strong balance sheet and ongoing focused investment, Rambus is poised to capitalize on this secular growth trend.
Across the ecosystem the shift towards scalable Heathrow Virginia's compute architectures is accelerating demand for novel high performance memory solutions and enabling technologies.
These trends align directly with Rambus as long term strategy. We are strategically focused on advancing system memory bandwidth and capacity through groundbreaking memory connectivity and power management solutions.
This capability is foundational to enabling the next generation of AI and HBC platforms.
We have build a roadmap that addresses the increasing technical demands of data intensive applications.
Leadership in signal and power integrity quarter, enabling robust high performance memory subsystems.
Places us at the heart of this transformation.
With our strong balance sheet and ongoing focused investment rambus is poised to capitalize on these secular growth trends.
Luc Seraphin: In closing, Q2 was a standout quarter for Rambus. We achieved excellent financial results, delivered record product revenue, and continue to execute on our roadmap. We are excited to enter the second half of the year with strong momentum, and we expect another quarter of record product revenue with double-digit growth in Q3. Our leadership in DDR5, increasing customer traction for new products, and strong business model position us well for continued success and long-term profitable growth. As always, I want to thank our customers, partners, and employees for their continued support.
In closing.
Q2 was a standout quarter for Rambus, we achieved excellent financial results delivered record product revenue and continued to execute on our roadmap. We are excited to enter the second half of the year with strong momentum and we expect another quarter of record product revenue with double digit growth in Q3.
Our leadership in DDR, five increasing customer traction for new products and strong business model position us well for continued success and long term profitable growth.
As always I want to thank our customers partners and employees for their continued support and with that I'll turn the call over to Dennis to walk through the financials Dave.
Desmond Lynch: And with that, I'll turn the call over to Des to walk through the financials. Thank you, Luc. I'd like to begin with a summary of our financial results for the second quarter on slide three. We delivered a strong quarter, exceeding our expectations for both revenue and earnings. Our chip business continued to drive our growth as we delivered record results marking our fifth consecutive quarter of product revenue growth. In addition, our diversified portfolio generated record quarterly cash from operations of $94 million. Our ability to consistently generate cash is a key aspect of our strategy and enables us to continually invest in initiatives that fuel our long-term growth.
Thank you Luc I'd like to begin with a summary of our financial results for the second quarter on slide three.
We delivered a strong quarter exceeding our expectations for both revenue and earnings.
Our chip business continued to drive our growth as we delivered record results, marking our fifth consecutive quarter of product revenue growth.
In addition.
<unk> portfolio generated record quarterly cash from operations of $94 million.
Our ability to consistently generate cash it's a key aspect of our strategy and enables us to continually invest in initiatives that fuel our long term growth.
Desmond Lynch: Let me now provide you a summary of our non-GAAP income statement on slide 5. Revenue for the second quarter was $172.2 million, which was above our expectations. Royalty revenue was $68.6 million while licensing billings were $66.4 million. The difference between licensing billings and royalty revenue mainly relates to timing as we do not always recognize revenue in the same quarter as we bill our customers. Product revenue was $81.3 million as we delivered another quarter of record product revenue. This represents a 7% sequential increase and a 43% year-over-year growth driven by continued strength in DDR5 products. Contract and other revenue was $22.3 million, consisting predominantly of silicon IP.
Let me now provide you a summary of our non-GAAP income statement on slide five.
Revenue for the second quarter was $172 $2 million, which was above our expectations.
Royalty revenue was $68 $6 million with licensing billings were $66 $4 million.
The difference between licensing billings and royalty revenue mainly relates to timing as we do not always recognize revenue in the same quarter as we bill our customers.
Product revenue was 81 $3 million as we delivered another quarter of record product revenue.
This represents a 7% sequential increase and a 43% year over year growth driven by continued strength in DDR five products.
Contract and other revenue was $22.3 million, consisting predominantly of silicon IP.
Desmond Lynch: As a reminder, only a portion of our Silicon IP revenue is reflected in contract and other revenue, and the remaining portion is reported in royalty revenue as well as in licensing billing. Total operating costs, including cost of goods sold for the quarter, were $93.2 million. Operating expenses of $60.4 million. We're in line with our expectations. Interest and other income for the second quarter was $4.8 million. Using an assumed flat tax rate of 20% for non-GAAP pre-tax income, non-GAAP net income for the quarter was $67.1 million.
As a reminder, only a portion of our silicon IP revenue is reflected in contract and other revenue and the remaining portion is reported in royalty revenue as well as in licensing billings.
Total operating costs, including cost of goods sold for the quarter were $93 $2 million.
Operating expenses of $64 million were in line with our expectations.
Interest and other income for the second quarter was $4 $8 million.
Using an assumed flat tax rate of 20% for non-GAAP pretax income non-GAAP net income for the quarter was $67 $1 million.
Desmond Lynch: Now let me turn to the balance sheet details on slide 6. We ended the quarter with cash, cash equivalents, and marketable securities totaling $594.8 million, up from Q1, primarily driven by record cash from operations of $94.4 million. Second quarter, capital expenditures were $10.4 million, while depreciation expense was $7.4 million.
Now, let me turn to the balance sheet details on slide six.
We ended the quarter with cash cash equivalents in marketable securities totaling 594 $8 million up from Q1, primarily driven by record cash from operations of 94 $4 million.
Second quarter capital expenditures were $10 $4 million, while depreciation expense was seven $4 million.
Desmond Lynch: We delivered $84 million of free cash flow in the quarter. We consistently deliver value to our stockholders as we continue their stock repurchase program in the quarter.
We delivered $84 million of free cash flow in the quarter.
We consistently deliver value to our stockholders as we continued our stock repurchase program in the quarter.
Desmond Lynch: Let me now review our non-GAAP outlook for the third quarter on slide 7. As a reminder, the forward-looking guidance reflects our current best estimates at this time, and our actual results could differ materially from what I am about to review. The economic environment remains a dynamic environment and we continue to actively monitor the situation. In addition to the non-GAAP financial outlook under ASC 606, we also provide information on licensing billings, which is an operational metric that reflects amounts invoiced to our licensing customers during the period, adjusted for certain differences. We expect revenue in the third quarter to be between $172 and $178 million.
Let me now review, our non-GAAP outlook for the third quarter on slide seven.
As a reminder, the forward looking guidance reflects our current best estimates at this time.
Actual results could differ materially from what I'm about to review.
The economic environment remains a dynamic environment and we continue to actively monitor the situation.
In addition to the non-GAAP financial outlook under ASC 606, we also provide information on licensing billings, which is an operational metric that reflects amounts invoiced to our licensing customers during the period adjusted for certain differences.
We expect revenues in the third quarter to be between 172 and $178 million, we expect royalty revenues to be between 57 and $63 million and licensing billings between 58 and 64 million.
Desmond Lynch: We expect royalty revenue to be between $57 and $63 million and licensing billings between $58 and $64 million. We expect Q3 non-GAAP total operating costs, which includes COGS, to be between $98 and $94 million. We expect Q3 capital expenditures to be approximately $12 million. Non-GAAP operating results for the third quarter is expected to be between a profit of $74 and $84 million. For non-GAAP interest and other income and expense, we expect $5 million of interest income. We expect the pro forma tax rate to be 20%, with non-GAAP tax expenses to be between $15.8 and $17.8 million in Q3.
<unk>.
We expect Q3, non-GAAP total operating costs, which includes Cogs to be between 98 and $94 million, we expect Q3 capital expenditures to be approximately $12 million.
non-GAAP operating results for the third quarter is expected to be between a profit of 74 and $84 million.
For non-GAAP interest and other income and expense, we expect $5 million of interest income.
We expect the pro forma tax rate to be 20% with non-GAAP tax expenses to be between $15, eight and $17 $8 million in Q3.
Desmond Lynch: We expect Q3's share count to be 108.5 million diluted shares outstanding. Overall, we anticipate the Q3 non-gap earnings per share range between $0.58 and $0.66.
We expect Q3 share count to be 108 5 million diluted shares outstanding.
Overall, we anticipate the Q3 non-GAAP earnings per share range between 58 and 66.
Desmond Lynch: Let me finish with a summary on slide 8. In closing, I am pleased with our strong financial results and ongoing execution. Our diversified portfolio and disciplined business model continues to drive profitable growth with strong cash generation. Our robust balance sheet allows us to invest in market expansion opportunities in the data center and AI, while consistently delivering value to our stockholders.
Let me finish with a summary on slide eight <unk>.
In closing I am pleased with our strong financial results and ongoing execution.
Our diversified portfolio and disciplined business model continues to drive profitable growth with strong cash generation.
Our robust balance sheet allows us to invest in market expansion opportunities in the data center and AI will consistently delivering value to stockholders.
Desmond Lynch: Before I open the call up to Q&A, I would like to thank our employees for their continued teamwork and execution. With that, I'll turn the call back to our operator to begin Q&A.
Before I open the call up to Q&A I would like to thank our employees for their continued teamwork and execution.
With that I'll turn the call back to the operator to begin Q&A.
Unknown Attendee: Could we have our first question? Of course. Ladies and gentlemen, if you have a question, please press star followed by one on your touchtone phone.
We have our first question.
Of course.
Ladies and gentlemen, if you have a question. Please press star followed by one on your Touchtone phone.
Unknown Attendee: Please save it to where you have asked one question and one follow up and then return to the queue just so we can access everyone's questions.
Please say that too where you have ask one question and one follow up and then return to the queue. Just so we can access everyone's questions.
Aaron Rakers: Our first question comes from a line of Aaron Rakers with Wells Fargo. Yeah, thanks for taking the question. I'll just ask my question and my follow-up together here. I guess first on the product revenue line, you know, strong growth up 43.5% year over year.
Our first question comes from the line of Aaron Rakers with Wells Fargo.
Your line is now open.
Yes, thanks for taking the question I'll just ask my question and my follow up.
Together here.
I guess first on the product revenue line strong growth up 43, 5% year over year I'm curious look how do we think about the contribution from the RCD as your positioning I think your target has been 40% market share in the five and where we're at as far as being the ramp of the <unk>.
Luc Seraphin: I'm curious, Luke, how do we think about the contribution from the RCDs, your positioning of, you know, I think your target's been 40% market share in D5, and where we're at as far as seeing the ramp of the PMIC opportunity?
Luc Seraphin: And then as the follow-up real quickly, can you just remind us again, you know, as we think about Granite Rapids, you know, from Intel, from a CPU perspective, and we look at the roadmap going forward, is the expectation that we see continual memory channel expansion with next generation platforms, i.e., you know, moving from 12 to 16 and so on going forward? Thank you.
Opportunity and then as the follow up real quickly can you just remind us again as we think about granite rapid.
Intel from a CPU perspective, and we look at the roadmap going forward.
The expectation that we see continual memory channel expansion with next generation platforms I E moving from 12% to 16 and so on going forward. Thank you.
Luc Seraphin: Thank you, Aaron. To your first question, yeah, we're very pleased with the growth of our product business with these 43% year-over-year growth in the second quarter. You know, RCD remains very strong for us and, you know, our belief is that we continue to gain share with the expansion of DDR5 in the market. We were slightly above 40% share, you know, at the end of 2024, and we expect to continue to gain share this year. And we do start to see the contribution for new chips, you know, power management chips, but all the chips that we're introducing to the market.
Alright, Thank you Aaron.
Your first question, Yes, we're very pleased with the growth of our product business with 43% year over year growth.
In the second quarter.
<unk> remain very strong for us and I believe that we continue to gain share.
With the expression of <unk> in the market, we were slightly above 40% share.
At the end of 2024, and we expect to continue to gain share this year and we do start to see the contribution for new chip power management chip, but all the chip that we're introducing to the market is still modest.
Luc Seraphin: It's still modest, you know, it represents, you know, low single-digit contribution to the product revenue in Q3, but it's going to grow to need to offer single-digit contribution in Q3, is low single-digit in Q2. And we do see momentum there. So it's modest, but we do see momentum across the board. And as we said, we are different stages of qualification and adoption of these different products in the market, which is very comfortable with the momentum there. With respect to the different platforms, you know, our partners continue to roll out platforms. We do sell chip ahead of the platform deployment, so, you know, to the platform you mentioned, we're starting to see, you know, volume shipments of products on the RCD side.
Represents.
Low single digit contribution to the product revenue in Q3, but it's going to grow through mid to upper single digit contribution in Q3, sorry.
Low single digits in Q2.
And we do see momentum there is modest, but we do see momentum across the board.
Third we are at different stages of qualification and adoption of these different products in the market.
Very comfortable with.
From there.
With respect to the different platforms.
Our partners continue to rollout platforms.
We do sell cheaper head of the platform deployment.
The platform you mentioned, we're starting to see.
Volume shipments of products on the LCD side.
Luc Seraphin: We do believe that, you know, in addition to the Intel platform, AMD and the ARM-based platforms are also going to roll out products that will create demand for, you know, our DDR5 RCD chips. And the fact that, you know, these platforms are, you know, transitioning from 12 channels to 16 channels is also going to create, you know, further demand for DDR5, you know, in the quarters and years to come. So that's a good news for us.
Do believes that in addition to the Intel platform AMD based platforms also going to rollout products.
We can create demand for our <unk> chips and the fact that.
These platforms are transitioning from 12 channels to 16 channel. It's also going to create further demand for DDR five.
In the in the quarters and years to come so that's good news for us.
Luc Seraphin: Thank you. Thank you for your questions.
Okay. Thank you.
Thank you for your questions.
Gary Mobley: Our next question comes from the line of Gary Mobley with Loop Capital. Your line is now open. Hey guys. Thank you. Thanks for taking my question.
Our next question comes from the line of Gary Mobley with loop capital.
Your line is now open.
Yes.
Thank you thanks for taking my question.
Gary Mobley: and some questions about the PC market. I know it's not what everybody's focused on, but I'm not mistaking your newly introduced PMIC product. geared towards Panther Lake and that launch imminent. Can you share with us whether or not you've got any visibility into the PMIC sales into the PC market ramping this year or next? And are you generating yet any client clock drive or revenue from the PC market?
Two questions about the PC market.
I know, it's not what everybody is focused on but.
If I'm not mistaken your newly introduced peanut products.
Geared towards Panther Lake and <unk>.
With that launch eminent can you share with us whether or not you've got any visibility into the peanut sales into the PC market ramping this year or next.
And are you generating yet any client car driver revenue from the PC market.
Luc Seraphin: Thank you, Gary. Yeah, you know, as we said in earlier calls, you know, we do see the requirements that we initially or historically saw in the data center flowing into, you know, high end PCs and the need for the equivalent of an LCD or the equivalent of the power management chip, you know, flowing into the high end PC market. So we introduced the clock driver last year, and we are starting to see modest traction. Modest traction, not because, you know, the product is not successful, it's just the market is limited at this point in time.
Thank you Gary Yeah, as we said in earlier calls we do see the requirements that we initially on historically so in the data center flowing into high end Pcs and the need for the equivalent of an LCD or the equivalent of the power management chip flowing in.
To the high end PC market, so introduce the truck driver last year, and we are starting to see motive action.
Not because the product is not successful. It was just the market is limited at this point in time, it really targets the very high end speed.
Luc Seraphin: It really targets the very high end speed, you know, layer of the market and over time, it's going to flow down, you know, all the segments of the market. We were encouraged with, you know, the reception of our announced, you know, PNIC products, you know, for the client market, you know, a Gen 2 PNIC for, you know, DIMMs in the client market, as well as an LPCAM, you know, solutions for, you know, for the PC market. So we're planting the seeds in a market that we think is going to be very fertile, you know, going forward, but that's going to address the high end PC market first and then flow down.
Layer of the markets and over time, it's going to slow down.
The segments of the market.
We were encouraged with.
Section of a premixed products into the data center and that's why we are known.
Clinique products.
Client market.
Jensen.
Clinique forward.
In the private market as well.
And then E com.
Solutions for.
The PC market. So we planting the seeds in a market that we think is going to be very somehow.
Going forward, but that's going to address a high end PC market for us and then slowdown. So we do expect the contribution from these client market.
Luc Seraphin: So we do expect the contributions from, you know, the client market, you know, to start to be visible in 2026, when this year we're going to just see, you know, the initial shipments of, you know, qualification and pre-production. Luke.
To start to be visible in 2026, when this year, we're going to just see the initial shipments of qualification and pre production order.
Alright. Thanks, Luke is a follow up I wanted to quickly ask about inventory it appears as though your.
Gary Mobley: As a follow up, I wanted to quickly ask about inventory. It appears as though you're dollars of inventory are getting lean and days of inventory, especially lean.
Dollars.
Inventory are getting lean and days of inventory, especially lean.
Gary Mobley: And so the reason I bring this up is, you know, are your lead types extending?
So the reason I bring this up is.
Are your lead times extending and.
Gary Mobley: And if they are, is there a motivation for your memory customers to start to and maybe sort of insure or hedge against that in a form of hiring.
They are as their motivation for your memory customers to start to.
Maybe sort of ensure or hedge against that in the form of higher inventory.
Desmond Lynch: Hi, Gary, it's Des here. That's a good question. Our inventory levels in Q2 come down to about 120 days, which was mainly driven by war finished goods inventory at the end of the quarter. And it's important to note that our inventory holding at June 30th, it's just a snapshot in time and really based upon our current view of demand. And we will have sufficient inventory to support our customers demand through at the end of the year. We do have long term relationships with our supply chain partners, and they're fully supportive of our growth plans going forward into 2026 and beyond.
Hi, Bonnie.
That's a good question inventory levels in Q2, continuing to buy 120 days, which was mainly driven by lower finished goods inventory at the end of the quarter.
It is important to note the inventory holding at June 30th is just a snapshot in time and really based upon our current view of demand.
We'll have sufficient inventory to support our customers demand at the end of the year.
They have long term relationships with our supply chain.
With the near fully supportive of our growth.
Going forward into 2026 and beyond.
Desmond Lynch: If we look ahead, given our expanding product portfolio and strong cash generation, we are comfortable with holding more strategic inventory on a balance sheet. And this is something we've definitely endeavored to do here over the next couple of quarters. As it relates to lead times, I would say that they remain within sort of normal sort of levels and consistent with sort of prior quarters from there, Gary.
We look ahead, Kevin there are expanding product portfolio and strong cash generation, we are comfortable with holding more strategic inventory on our balance sheet and this is something we would definitely endeavored to do here over the next couple of quarters as it relates to lead times I would say that they remain within normal so.
And consistent with prior quarters from the Ekati.
Thanks, Dave.
Desmond Lynch: Thanks, Gary.
Thanks Kelly.
Desmond Lynch: Thank you for your questions.
Thank you for your questions.
Kevin Cassidy: Our next question comes from the line of Kevin Cassidy with Rosenblatt Securities. Your line is now open. Thank you.
Our next question comes from the line of Kevin Cassidy with Rosenblatt Securities Your.
Your line is now open.
Yeah.
Kevin Cassidy: Congratulations on the great results. You know, the AI ASIC market is exploding and, you know, it's called the XPU. Can you say how that ASIC market might be changing the demand for your silicon IP? Thanks, Kevin. Yeah, sure. You know, what we see with the AI market exploding and the emergence of these XPU solutions, ASIC solutions, is that the need for, you know, very high speed connectivity, and the need for very high speed, you know, memory interfaces increases and accelerates. And, you know, that translates, you know, for us into an acceleration of our development for solutions such as, you know, HBM4, HBM4E, as well as PCIe7.
Thank you and congratulations on that Great result.
The AI ASIC market is exploding and it's called the <unk> can.
Can you say, how the ASIC market might be changing in the demand for your silicon IP.
Thanks, Kevin Yes, sure what we see.
The AI market is exploding in the.
So the the SBU solutions ATM solutions is that the need for.
Very high speed connectivity and the need for very high speed.
Memory interfaces increases and accelerates.
And that translates.
For us into an acceleration of our developments for solutions, such as <unk> four as the employee as well as pcie seven so we are engaged with customers.
Luc Seraphin: So we are engaged with customers. You know, these markets tended to be quieter. It's a bit like the RCD market, everything is accelerating. But we do have, you know, several engagements on these leading edge technologies on HBM4 and PCIe7 in particular, as well as for the security solutions. So the need to actually secure data when it fits into those chips or secure data when it moves, you know, around between those chips is becoming critically important. So that's also giving traction to the sales of our Silicon IP in the security area.
These market tended to be quite so it's a bit like the LCD market everything is accelerating.
We do have several engagements on these leading edge technologies <unk>, four and <unk> 70 in particular as well as for the security solutions to the.
Needs to actually secure data when it sits into those chips or secure data when it moves around between those gypsies, becoming critically important. So that's also getting traction to the sales of our silicon IP.
The security area.
Kevin Cassidy: Okay, great. Thanks for that detail.
Okay, great thanks for that detail.
Luc Seraphin: And, you know, maybe a more mundane discussion is that there's been announcements for DDR4 end of life. Does that that change anything for Rambus? Or, you know, I guess, you know, a couple years ago, we had an inventory issue. So I guess that's out of the way now. But what does it mean going forward? It doesn't change much for us. You know, DDR5 sales remain very limited. And you know, this has been our message, you know, for several quarters now. And we don't see that picture changing. You know, we do see slowly inventories going down in the market.
Maybe a more mundane discussion as the there have been announcements for DDR for end of life does that does.
Change anything for Rambus.
We had a couple of years ago, we had an inventory issue. So I guess thats out of the way now.
What does it mean going forward.
It doesn't change much for us DDR five sales remain very limited.
This has been our message for several quarters now and we don't see that picture changing we do see slowly inventories going down in the market.
Luc Seraphin: We hear about the last time by orders. You know, we expect, you know, DDR4 demand to remain low, even decreasing. And maybe it's going to be on a case by case basis when people go work through, you know, this last time by order.
We hear about the last time buy orders.
We expect <unk> remain.
Hello.
Even decreasing and maybe it's going to be on a case by case basis when people go to work through this.
This last time buy orders.
Kevin Cassidy: Okay, great. Thanks. Congratulations again. Thank you, Kevin. Thank you for your questions.
Okay, great Thanks, and congratulations again.
Thank you Kevin it's Kevin.
Thank you for your questions.
Mehdi Hosseini: Our next question comes from the line of Mehdi Hosseini with Six. Yeah, mine's not open. Yes, thanks for taking my question. I want to better understand the mix of the product revenue, especially given the increased contribution from the companionship. How should I think about the DDR5 RCD chip, or RCD buffer chip versus companionship? How is that mix evolving? The way to look at it is we introduced a lot of products and there are different stages of introduction and qualification with our customers. But in Q2, these new products represented a low single-digit contribution in percentage terms of our product revenue.
Our next question comes from the line of Mehdi Hosseini with Sig.
Your line is now open.
Yes, thanks for taking my question.
One is just the mix.
Revenue, especially given the increased contribution from the companionship, how should we think about the DDR five RCD chip.
Obviously, the buffer chip versus companionship, how is that mix.
If all of it.
The way to look at it as we introduce a lot of products and there are different stages of introduction in qualification with our customers, but in Q2.
New products represented low single digit contribution percentage terms.
Our product revenue.
Luc Seraphin: And when we look at Q3, that contribution in terms of percentage is probably going to be mid to upper single-digit percentage of our product revenue. So as I said earlier, you know, we planted the seeds, we see traction, and we're very happy with the traction with our customers. The contribution today is modest, but we do see very strong momentum in terms of adoption of these products. Gotcha. Thanks for that clarification. And would that increased contribution continuing to year end? Yes, it will continue to be a year-end. Again, we're still in the phase of introduction, pre-production of these products.
When we look at Q3 was that contribution in terms of preference shares is probably going to be mid to upper single digit percentage of our product revenue.
So as I said earlier, we planted the seeds, we see traction and we're very happy with the traction with our customers through the contribution today is modest, but we do see very strong momentum.
In terms of adoption of these products.
Got you thanks for that clarification.
Would that increase contribution continue into year end.
Yes, it will continue through the year ends.
Again, we are still in the phase of.
Introduction pre production of these products so.
Luc Seraphin: So when we look at the view of our product revenue for Q4, we're comfortable with where the street sees us and we see a slightly higher contribution from our new products.
When we look at.
The view of our product revenue for for Q4.
Comfortable with where it is.
<unk> sees us and we see a slightly higher contribution from our former.
Luc Seraphin: But the real thing is going to be 2026 when the platforms are in full swing into the market. Okay.
New products.
But the real thing is going to be 2026, when the platforms to swing into the market.
Mehdi Hosseini: All right.
Okay Alright.
Desmond Lynch: If I may squeeze my second question, I want to better understand the same kind of a diversification in your Silicon IP. There was a significant improvement on a Q over Q basis of almost 6 million. Is that driven by HBM4? If not, what is driving that sequential increase in Silicon IP? And if HBM4 was not a factor, when should we expect customers to come back in and buy more IP for that specific application, HBM4?
Great. My second question I wanted to better understand the same kind of a diversification in your silicon IP.
There was a.
Significant improvement on a Q over Q basis almost.
Hum.
Driven by HBM.
Or if not what is driving that sequential increase in silicon IP.
<unk>.
Or was that a factor when should we expect customers to come back in.
By more IP for that specific application that you'd be at four.
Desmond Lynch: Hi Mehdi, it's Des here. We're really pleased with the performance of our Silicon IP business, which delivered strong results in the first half of the year. And we're really on track to meet our annual growth expectations for the full year. From here, what I would say is when you look at the different revenue categories of contract and other and licensing billings, these can move around on each sort of quarter, which is really dependent upon the IP that we are selling to customers. So what you did see in Q2 is an increase in our contract and other sort of line, which represents more customizable IP been sold.
Hi, Matt.
Here, we are really pleased with the performance of our Silicon IP business, which delivered strong results in the first half of the year and we're really on track to meet our new.
We will say expectations for the full year.
From here, what I would say is when you look at the different revenue categories of contract and the other in licensing billings. This can move around on each quarter, which is really dependent upon the IP that we are selling to customers to what you did see in Q2 with an increase in our.
And the other line, which represents more customizable IP been sold.
Desmond Lynch: And we saw the corresponding sort of decline on the licensing billings and line which is off the shelf IP. But what we really see here is a really strong momentum in the business, which has really been led by the memory controller solutions of HBM4, PCIe 7, and also nice traction on the leading edge security IP solutions. But overall, for the full year, we do expect the business to grow in line with our overall sort of expectations.
We saw the corresponding decline on the licensing billings, which is off the shelf IP IP, but what we really see here. That's a really strong momentum in the business, which has really been laid by the memory controller solutions with <unk> for Pcie seven and also nice traction on the <unk>.
<unk> security IP solutions, but overall for the full year, we do expect the business to grow in line with overall expectations from here.
Desmond Lynch: Thank you, guys. Thanks Mehdi.
Thank you guys.
Thanks Neely.
Talia Winkler: Thank you for your questions. Our next question comes from Talia Winkler with Evercore. Your line is now open. Hi, thank you for taking my question. Um, my first one was about a marginal opportunity. Look, I was wondering if you can help us with an update and how you guys see that market and maybe sort of, you know, the ultimate proportion of the CPU market that might be using that technology. Yeah, so MRD is staged to enter the market towards the end of 2026. You know, depending on the availability of platforms, this is not the next generation platform, but the one after.
Thank you for your questions.
Our next question comes from the line of Italia Winkler with Evercore.
Your line is now open.
Hi, Thank you for taking my question.
My first one it was about it.
Look I was wondering if you can help us.
Any update on how you guys see that market and maybe sort of the ultimate proportion of them.
The CPU market that might be using that technology.
So MRV mid stage to enter the market towards the end of 2026.
Depending on the availability of platforms. This is not the next generation platform, but the one after but it's important to engage with customer and very early on.
Luc Seraphin: But it's important to engage with customers very early on. So, you know, at this point in time, you know, we're very pleased with the progress we're making with our customers in terms of, you know, design winning and engagement from the qualification side. But that will contribute to, you know, the revenue towards the second half of 2026 and beyond. You remember, you know, the MRDIMM content is much larger than, you know, the content of the standard RDIMM for DDR5 because the RCD is more complex. The power management chip is more complex. But you also have 10 dB chips that were not present on the standard, you know, DIMM.
At this point in time.
Very pleased with the progress, we're making with our customers in terms of design, winning an engagement from the qualification side, but that will contribute to.
The.
The revenue towards the second half of 2026 and beyond.
You remember the amount in content is much larger than the contents of this kind of a daunting for DDR five because the LCD is more complex department.
It is more complex, but you also have 10 <unk> that were not present on the standard.
Luc Seraphin: So we're very excited with the progress. But that's going to have an impact in 2026, second half and beyond. You know, the market is difficult to assess at this point in time. But we expect, you know, in full swing, you could represent about $600 million market for, you know, MRDIMM, you know, that you can compare to a market for RDIMM today, which is about $800 million. So that's a significant, you know, growth potential in terms of SAM. But that's something that's going to happen in 2026, second half and beyond.
So we are very excited with the progress, but that's going to have an impact in 2026 second half and beyond.
Yes.
The market is difficult to assess at this point in time, but we expect full swing could represent about $600 million market for.
Among them.
That you can compare it to a market for art in today, which is about $800 million. So that's a significant.
Growth potential in terms of Sam, but thats, something thats going to happen in 'twenty, six second half and beyond.
Talia Winkler: Thank you, that's very helpful.
Thank you that's very helpful. And then my second question is.
Luc Seraphin: And then my second question is around ARM CPUs. If you could, if you could help us understand, if there's a little bit of a trade off, you know, from standpoint of units of the CPUs and the channel count, if you guys view the ARM CPU market, you know, different from x86. We're kind of agnostic as to, you know, the CPU that is being used. Certainly, you know, different, I would say platform providers, you know, offer a different number of channels. You know, we kind of take that into account when we estimate the market size. But for us, the very fact that people are developing chips based on ARM, you know, that are in competition with the x86 platforms is a good thing.
Owned arm CPU.
If you could help us understand if theres, a little bit of a trade off.
Point of units of the Gpus in the channel Count if you guys view the arm CPU market.
From X 86.
We kind of agnostic as to the CPU that is being used.
Certainly different.
I would say platform providers offer a different number of channels, we kind of.
Take that into account when we when we estimate the market size, but for us the very fact that people are developing.
Chip based on arm.
Is that are in competition with the X 86 platforms is a good thing it creates tension in the market.
Luc Seraphin: You know, it creates tension in the market, competition in the market that is good for the rollout of, you know, higher speed RCDs and companionship solutions. So we're kind of agnostic, but we see this in a positive way.
Competition in the market that is good for the rollout of <unk>.
Higher speed, our Cds and companionship solutions, so we kind of agnostic, but we see this in a positive way.
Talia Winkler: Thank you. Thank you for your question.
Thank you.
Thank you for your question.
Tristan Gerra: Our next question comes from the line of Tristan Gerra with Baird. Your line is now open. Hi, good. Hi, good afternoon.
Our next question comes from the line of trusting Gal with Baird.
Your line is now open hi, good.
Hi, good afternoon.
Tristan Gerra: Is it fair to assume that the customized IT that you sold in the quarter that is more related to custom ASIC? And also when you talk about the contribution going from low single digit to mid to upper single digit this quarter, for new product, I'm assuming companionship is really the vast majority of that increase. And is that more on the Granite Rapid platform? Yeah, to the second question, it's a combination. We introduced eight new products last year, mostly companion chips. The chips that we introduced this year are companion chips for the client space, mostly in the power management area.
Is it fair to assume that the customized IP that you saw within the quarter that is more related to.
Custom ASIC.
And also when you talk about the contribution going from low single digit to mid to upper single digit this quarter.
From new product I'm, assuming companionship is really the vast majority of that increase.
Is that more on the granite pit.
Cool.
Yeah.
Yes.
Second question.
It's a combination when we introduced eight new products last last last year, mostly companion chips. The chips that we introduced this year.
Onion chips for the client space, mostly in the power management.
Luc Seraphin: And different customers are at different stages. So when we mentioned this low single digit going to meet to upper single digit, these are all these new chips that we introduced, mostly companion chips.
Area.
And different customers at different stages. So when we mentioned this.
Low single digit going to mid to upper single digit.
All of these new chips that we introduce mostly companion chips.
Luc Seraphin: Your first question was, Can you repeat your first question, please? Customized IP. Yeah, yeah, it was regarding the customized IP and whether this was related to customization. Yeah, mostly it's custom ASICs. It's, you know, it's people developing their own chips to address the demands of the AI market. You know, there's a lot of interest now for, you know, AI inference in particular, which drives, you know, the need for, you know, AI chips for high speed interfaces. So yeah, it's mostly, you know, it's mostly for, you know, for ASICs, you know, ranging from, you know, startup companies, you know, that want to enter that market all the way up to, you know, more established companies that, you know, that already have a footprint into that market.
Your first question was.
Yeah.
Can you repeat your question please.
Yeah, yeah, it with regarding the customized IP and whether this was related to custom ASIC.
Yes, mostly custom ASIC.
It's people developing their own chips.
To address the demands of the AI market.
There's a lot of interest now for AI insurance in particular, which drives that.
Need for AIG is for high speed interfaces. So yes, it's mostly.
It's mostly for ASIC.
<unk>.
Ranging from startup companies that want to enter that market all the way up to more established companies that.
<unk> already have a footprint into that market.
Luc Seraphin: Okay, and then just as a quick follow up. What is typically the type of the timeline between when you connect you collect this customized IP versus The reason I'm asking is because there's a number of hyperscalers that are at different stages of ramping custom ASICs over the next couple of years. And I think you've mentioned. You know, that increase in customized IP was You know, happening in the quarter, but not necessarily sustainable or lumpy, but shouldn't we see an increase? Yeah, that's a good question. Typically, you know, our IP business is a licensing business. So our customers pay us when we deliver the IP, you know, for a license, you know, for one use or several use depending on the contracts.
Okay, and then just as a quick follow up.
What is typically the type the timeline between when you can that you collected this customized IP versus the timing of when the test. It may tick is ramping and the reason I'm asking is because.
There is a number of hyper scanners that are at different stages.
Ramping custom Asics over the next couple of years.
And I think you've mentioned that.
That increase and customize a P was.
Happening in the quarter, but not necessarily sustainable or lumpy, but shouldn't we see an increase.
Medium term customized IP revenue over the next.
Medium term into next year.
Yes, that's a good question typically.
Our IP business is licensing business or our customers pay us when we deliver the IP.
For a license for one use of several years, depending on the contracts. So we typically see the revenue.
Luc Seraphin: So we typically see the revenue, it depends, you know, 12 to 24 months before the products ramp into the market. So, you know, our current sales address chips that are going to be in the market in a couple of years from now. And that's why, you know, we do see demand for these, you know, leading edge technologies, you know, people are using, looking at HVM4, HVM4, PCIE7, you know, for the next generation of products, and we're going to be on that, I would say, a leading edge, you know, as we move forward. Then it depends on how successful these customers are.
It depends you know 12 to 24 months before the products ramp ramp into the market.
So our current sales address chips that are going to be in the market in a couple of years from now and that's why we do see demand for these.
Leading edge technologies people are using looking at <unk> seven for the next generation of products and we're going to be on that.
I'd say leading edge.
As we move forward.
And then it depends on how successful these customers are.
Luc Seraphin: You know, they are customers that have been developing chips for many years, and we continue on that path with us. You know, and startup companies, you know, there are more and more startup companies, you know, paying licenses to us as they move forward. You know, whether their chips are going to be successful or not is a different question.
They have customers that have been developed developing chips for many years.
And we'll continue on that path with us.
And startup companies.
More and more startup companies.
Paying licensees to us as we move forward.
Whether the chips are going to be successful or not is.
Different question, but again, it's important for us to have the revenue recognized at the time, we sell the license when they actually decide to use these leading edge leading edge technologies into their products.
Unknown Attendee: But again, it's important for us to have the revenue recognized at the time we sell the license, you know, when they actually decide to use these leading edge technologies into their Thank you very much. Thank you. Thank you for your... Thank you for your questions.
Great. Thank you very much.
Yeah.
Thank you. Thank you for you.
Thank you for your question.
Mehdi Hosseini: At this time, oh apologies, we have a follow-up question from the line of Mehdi Hosseini with SIC. You're on, it's now open. Yes. Yeah, thanks for taking my follow up. I want to look into next year, 2026 and 2027. I want to better understand how you're thinking about the opportunities associated with the client market, PC market versus CXL. It seems like CXL 3.0 is more like a late 26. If it doesn't push out again, would the incremental opportunity from PC market be enough, be large enough to offset if there is more push out in CXL adoption?
At this time.
Apologies yeah, a follow up question from the line of Matt <unk> with it.
Your line is now open.
Yes, Thanks for taking my follow up wanted to look into.
Next year 2026, and 2027 went to better understand how you're thinking about the opportunities associated with the client market PC market versus VX. So it.
It seems like CX, Oh, it's more like a late 2006.
It doesn't push out again.
Wood.
With the incremental opportunity from PC market.
Be it large enough.
To offset if there is more pushed out in CX suite adoption.
Luc Seraphin: So thank you, Mehdi. The way we look at it is that you're correct. CXL may push out even further, but we do see MRDIMM really being the solution that is going to be adopted for use case that has to do with memory expansion in particular. So on the data center side, we have high expectations for the deployment of MRDIMM. As I said, with revenue in the second half of 26 and 27, but I think that would address a lot of the use cases that CXL was supposed to address in terms of chip business. Now, clients are different, you know, clients, you know, there's not really a CXN market for clients at this point in time or small, you know, for chips per se.
So thank you made it the way we look at it is that you.
Youre correct <unk> may push out even further but we do see.
<unk> really being there.
The solution that is going to be adopted.
In full use case that has to do with memory expansion in particular, so on the data center side.
We have high expectations for the deployment of them all of them as I said with revenue in the second half of 2006, and 2007, but I think that would address a lot of the use cases that CX said it was supposed to address in terms of chip business.
Now clients with different clients.
There's not really a <unk> market for clients at this point in time or small foot chips per se.
Luc Seraphin: But the client business for us, we really see these as an extension of our companionship market for the data center. As we said earlier, the technical requirements that we're going to find in high-end client systems are very similar to the ones that we currently find in data centers. So, this is going to be a driver for SAM expansion for club driver chips and power management chips into the client business. So, that's a different area of growth for us, you know, different than the MRD market. and the Data Center Space.
But the client business for us we really see this as an.
<unk> of our.
A companion chip market for the data center as we said earlier the technical requirements that we're going to find in high end client systems are very similar to the ones that we currently find in data centers. So is this going to be a driver for Sam expansion.
For truck drive it shapes and power management chips into the client business. So thats a different different area of growth for us.
No different than the MLP.
In the data center space.
Luc Seraphin: Thank you.
Okay. Thank you.
Unknown Attendee: Thank you for your question.
Thank you. Thank you for your question.
Unknown Attendee: At this time there are no further questions.
At this time there are no further questions. This will conclude the question and answer session I would now like to turn the conference back over to the company.
Desmond Lynch: This will conclude the question and answer session.
Desmond Lynch: I would now like to turn the conference back over to the company. Thank you to everyone who has joined us today for your continued interest and time. We look forward to speaking with you again soon.
Thank you to everyone, who has joined US today for your continued interest and time, we look forward to speaking with you again soon have a great day.
Unknown Attendee: Have a great day. Thank you.
Unknown Attendee: This now concludes today's conference.
Thank you. This now concludes today's conference.