Q2 2025 MKS Inc Earnings Call
Good day and thank you for standing by. Welcome to the AKs, second quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session to ask a question during the session. You will need to press star 1, 1 on your telephone. You will then hear an automated message, advising. Your hand is raised to the draw your question. Please press star. 1 1 again, please be advised. That today's conference is being recorded. I would now like to hand the conference over to your first Speaker today, Parish MRA vice president of investor relations. Please go ahead.
Good morning everyone. I'm paritosh misra vice president of investor relations and I'm joined this morning by John Lee president and chief executive officer and RAM member Executive Vice President and Chief Financial Officer.
Yesterday after market closed, we released our financial reserves for the second quarter of 2025, which are posted to our investor website at investor MKS cam.
As a reminder, where is remarks about future expectations, plans, and prospects for MPS comprise forward-looking statements
Actual results May differ materially as a result of various important factors, including those discussed in yesterday's press release. Our most recent annual report on on 10K and our most recent quarterly report on form 10 Q.
These statements represent the company's expectations, only as of today and should not be relied upon as representing the company's estimates or views as of any date. Subsequently today. And the company, disclaims, any obligation to update these statements?
During the call, we will be discussing various non-GAAP financial measures.
Unless otherwise noted all income statement related, Financial measures will be non-gaap other than revenue and gross margin. Please refer to our firstly.
And the presentation materials posted to the investor relations section of our website for information regarding our non-gaap financial results and a reconciliations to our gaap measures.
Our investor website also provides a detailed breakout of revenues by End Market and Division.
Now, I'll turn the call over to John.
Thanks for talking. Good morning, everyone. And care has delivered excellent results in the second quarter highlighted by strong Revenue performance and solid profitability.
We executed well in delivering for our customers in a dynamic environment while continuing to manage our costs.
And since our last earnings call, we made 2 additional prepayments on our Term Loan totaling $200 million.
Demonstrating our continued ability to use healthy free cash flow to deliver the balance sheet.
Net earnings for delivered, share of a 177. We're at the high end of our guidance.
For gross margins while in line with our guidance reflect higher cost absorption due to terrorists.
however, we held the line well, and remain confident in our mitigation strategies
Ron will share more in his remarks.
I'll turn now to Q2 performance in our 3 and marks.
Starting with our semiconductor Market.
Revenue came in above the high end of our guidance.
With customer inventories, having largely normalized the benefited from very strong, man upgrade activity. That drove continued sequential momentum, and demand for our RF Power Solutions.
And we saw sequential improvement in our vacuum products business as well.
We continue to gain traction with our remote plasma and gas Delivery Solutions for advanced logic applications.
We also continue to execute well in our services business which is seeing strong growth as our customers increasingly rely on a higher value solutions for reliability and uptime.
Over the past couple of years we have expanded, our value added Services capabilities. And this combined with our larger install base is resulting in higher levels of growth
Services is a stable annuity like Revenue stream that delivers margins above our corporate average.
In the third quarter, we expect semiconductor Revenue to moderate on a sequential basis mainly due to anticipated lumpiness. In Nan upgrade activity,
we believe it is still relatively early in the upgrade cycle, but customer indications suggests that the pace of convergence will fluctuate from quarter to quarter.
Our semi Outlook represents a mid to high single digits, year-over-year growth rate for the quarter.
Putting us in a strong position to outperform wfe for the year based on available industry commentary and forecasts.
Electronics and packaging Revenue was well above the high end of our guidance.
The better than expected result was driven by strength in both chemistry and chemistry equipment.
Which more than offset normalization, of flexible. PCB. Drilling equipment, shipments, following a strong q1 as we noted in our last earnings call
Our products and Technologies, play a key role in, enabling the manufacturing of increasingly complex devices.
And that is validated by the momentum. We are seeing in advanced packaging and AI related applications.
This includes continued, strong orders for our chemistry and chemistry equipment solutions, for advanced multi-layer boards and high-density, interconnect boards related to AI applications, as well as several Advanced packaging and AI related, chemistry design things.
The trends, we're seeing demonstrate our unique capabilities and how we collaborate with customers to solve their most complex problems.
We expect revenue from our electronics and packaging Market to be up on a sequential basis.
And up double digits on a year-over-year basis in Q3.
This is particularly noteworthy in an environment where many analysts see fairly muted smartphone and PC growth.
Validating MKS is positioned in a market where a complex Electronics applications, like AI are driving growth.
We Believe revenue from our chemistry solutions will increase sequentially consistent with prior years. And we anticipate continued strength in our chemistry equipment business where we've already seen 4 consecutive quarters, strong orders. They would have historically, been a lumpy business,
We view equipment sales as a good leading indicator of future chemistry Revenue, given our high attachments.
Our specialty, industrial Market, Revenue was slightly above the midpoint of our guidance in Q2 within this Market, The Life, and Health Sciences, and research, and defense and markets, showed, modest sequential Improvement.
In industrial remains steady.
Notable orders in this business include dissolved gas Delivery Systems used in flat panel display Manufacturing.
Highlighting, how we are successfully leveraging, our R&D for Semiconductor and electronics, and packaging and markets into other areas of high technology.
We also secured multiple design wins for applications in areas, including research, and defense and Life and Health Sciences.
Looking ahead to Q3, we expect Revenue in our specially, industrial Market to be flattish.
Overall, we executed well and delivered strong financial results in Q2.
Our integrated portfolio of power, vacuum chemistries and photonics remains. Well positioned to capitalize on the advanced applications driving growth in our semicat area and electronics and packaging and marketing.
I'd like to thank our Global teams for their hard work in driving these results, and our full momentum in a dynamic Market environment.
And I'm happy to see the broader recognition. We have received
Recently US News and World Report named us a best company to work for in time, included us among America's best mid-sized companies.
With that, let me turn it over to Ron to run through the financial results. And third quarter guidance in more detail from
Thank you, John and good morning everyone. We delivered strong results in the second quarter driven by healthy demand. In our semiconductor and electronics and packaging and markets continued stability in our speciality industrial and market and disciplined execution.
Second quarter Revenue was 973 million up 4% sequentially, and up 10% year-over-year.
Second quarter, semiconductor Revenue was 432 million up 5% sequentially and 17% year-over-year. This result exceeded the high end of our expectations.
Sequential growth was driven by a healthier demand in our vacuum Solutions business while year-over-year growth. Reflected continued demand in our broad portfolio of Technologies enabling deposition and Edge applications.
Results also benefited from normalization of customer inventories and FX Tailwind.
Second quarter, electronics and packaging. Revenue was 266 million up 5% sequentially, and above the high end of our guidance.
This was driven by growth in our chemistry, and chemistry equipment business, partially offset, by lower demand for flexible PCB drilling equipment, which as we communicated on our last call was lower after a strong growth in q1.
We believe a small portion of the sequential Improvement in electronics and packaging, Revenue, reflects tariff related pool in demand. However, underlying demand Trends, remain favorable, especially as we gain Traction in Ai and more complex applications as John noted.
On a year-over-year basis, sales were up. 16% driven by growth in chemistry and chemistry and equipment and flexible PCB, drilling equipment sales.
Chemistry Revenue was up 10% year-over-year excluding the impact of FX and Palladium pass through continuing the strong growth trend from last year.
Chemistry is a large portion of our consumables and service revenue stream, which adds stability to our business and accounts for roughly 40% of our revenue.
in our specialty industrial business, second quarter Revenue was 275 million and increase of 2% sequentially and about a high end of all guidance, midpoint
Revenue was down 5% on a year-over-year basis. Primarily due to continued softness in the industrial Market, partially offset by Modest Improvement in research and defense.
Moving down the p&l. Second quarter, gross margin was 46.6%.
Just about the midpoint of our guidance.
The sequential decline was largely driven by incremental costs related to tariffs.
We estimate that incremental tariffs. Negatively impacted our gross margin by 115 basis points which was likely higher than expected reflecting the volatility in the Tariff landscape at the time of our projection in May
While the situation remains Dynamic, we have implemented a range of mitigation strategies over the past few months that we anticipate will be effective in limiting, the Tariff impact moving forward.
Second quarter, operating expenses were 251 million slightly favorable to our guidance demonstrating, our continued focus on managing our office as we balanced investing for growth with driving profitability.
second quarter, operating income was 202 million with an operating margin of 20.8%, this reflects the strong Revenue performance and Opex discipline that I highlighted
Second quarter, adjusted ether was 240 million, and above the high. End of our expectations, with adjusted key with the margin of 24.7%.
Net. Interest expenses was 46 million and slightly favorable to our guidance.
The second quarter effective tax rate was 18.2% which is consistent with our guidance.
Second quarter, net earnings were 119 million or $1.77 per diluted share. And at the high end of our guidance reflecting our strong financial performance.
Earnings and 14% of our Revenue.
We invested 29 million in capital expenditures in the quarter.
We continue to expect full year capex to fall within 4 to 5% of our Revenue.
We closed the quarter with approximately $1.3 billion of liquidity compared to cash and cash equivalents of $674 million and our undrawn revolving credit facility of $675 million.
We made a voluntary principal prepayment of 100 million in June and another hundred million dollars prepayment earlier this month.
To the main focus on executing our long-term capital allocation priorities of investing in organic growth opportunities while reducing our leverage through principal prepayment and working with our banking Partners to reduce our interest expenses as Market opportunities arise.
We accepted the quarter with gross debt of $4.5 billion and a net leverage ratio of 4 times.
Based on our trading, 12 months ago with of 945 million.
Our net leverage ratio improved slightly from the end of the prior quarter, reflecting our strong free cash flow and higher year-to-year adjusted even to ourselves.
Finally, during the second quarter, we paid a dividend of 22 cents per share or 15 million.
Let me now turn to our third quarter Outlook.
The guidance we are providing represents our best estimate, based on the dynamic trade environment, in which we are operating.
We expect revenue of 960 million plus or minus 40 million. We believe, our technology is integral to our customers success and we are designed into many of the advanced applications or product support.
By and Market, we expect semiconductor Revenue to be 405 million plus or minus 15 million revenue from electronics and packaging Market is expected to be 285 million plus, or minus 10 million, and revenue. From our speciality, industrial Market is expected to be 270 million plus or minus 15 million.
We are guiding gross margin of 46.5% plus or minus 100 basis points. Our estimated tariff impact is expected to be below 100 basis points marketing and improvement from Q2.
As I noted earlier, we have largely implemented our short-term. Mitigation strategies based on the current trade environment,
This environment has remained fluid.
But we are committed to optimizing our performance and offsetting these costs.
We expect third quarter. Operating expenses of 252 million plus or minus 5 million and adjusted ether of 232 million plus or minus 24 million
We expect a tax rate of a proximity 18% in the third quarter. We expect our fully a tax rate to be at the lower end of the 18- 20% range, we provided previously.
The new US tax bill was passed, subsequent to quarter end. We are currently evaluating the impact of this legislation which is not reflected in our guidance.
We expect third quarter net, earnings per diluted share of dollar ad plus or minus 29 cents.
We are pleased with our performance in the first half of the year.
Despite trade related challenges, our Revenue earnings per share and free cash flow in the first half of the year are up significantly relative to the prior year.
In the second half, we will continue to work on capitalizing on opportunities as we collaborate closely with our customers, maintain a disciplined cost structure and keep our focus on strong cash generation that will allow us to make the Investments necessary to support our long-term growth. And to continue to lower our average
With that operator, please open the call for Q&A.
Thank you. At this time. We will conduct a question and answer session as a reminder to ask a question. You'll need to press star 1, 1 on your telephone, and wait for your name to be announced.
To withdraw your question, please press *1 1. Again, please stand by while we compile the Q&A roster.
Our first question comes from Chris senar from TD Cowen. The floor is yours.
Think about, um, semi Revenue, Trends Beyond September, and are there anything that we need to keep in mind kind of like what you mentioned. There's some, you know, cue or queue walls, really with nand Etc.
Okay, good morning, Christian. Thanks for the question. Um, I think the way to think about it is that, um, the basic
WFC portfolio that we have is a growing year-over-year, and we believe it's growing faster than, than the market. So that's good. And, and the way I think about it is that there's a nand upgrade overlay over that you saw that result in a really strong Q2 but it can be lumpy. Um, and certainly, our customers are going to tell us when they need it. Uh, but longer term of course and they upgrade cycle is great for MKS. Given our long history in providing High aspect ratio dielectric Edge, power factor dielectric Edge, so I think that's the way to think about it. Uh, Chris kind of the base is pretty strong growing year over year for us. And then the man up can be lumpy and can, you know, make a quarter much higher or or flatter?
Got it. Thanks for the, uh, John. Let us do a quick follow-up, um, on the INTP side. I think your PCB business, you know, uh, three months ago you said they want to be a little slightly weaker than June because of the full ins of the tools in Mars. But then it looks like June came in better. I'm wondering if some of the PCB strength you're seeing has to do with more of downstream smartphones or how.
To think about the PCB business going forward.
Uh, but, uh, Q3 was still guiding higher.
All right. Thanks a lot. John. Thank you.
Thanks, Christian. Thank you for your question.
Our next question comes from the line of Steve Barger from keybanc Capital markets. The floor is yours.
Thanks, good morning.
Hey, John. I'm gonna stick with the, the chemistry equipment orders, and, and some of the momentum there, does it feel like that's the beginning of a sustainable Trend and what are you hearing from substrate manufacturers? In terms of capacity utilization and and how they're viewing growth? Whether it's from, you know, traditional products or AI related products?
Yeah, maybe I think the last 1 first to you, the substrate makers. Um, they are, uh, seeing High utilization rates, and we're seeing that in our chemistry business and it's, uh, fundamentally driven by AI. So no, no mystery there. Really Steve. I think your question about equipment. Um, traditionally. Historically, it's been a pretty lumpy business. Uh, we've seen now, 4 straight quarters of sustained, relatively High bookings. Uh, and then the shipments, I followed 4 chemistry equipment.
And uh, we believe most of that is related to demand for AI capacity.
Um, not necessarily in practice substrates, but in HDI and MLB that support that, uh, you know, that AI need. Um, and so having this really broad portfolio is really helpful for MCAST. You know, when ENT goes up, we benefit from that, especially given semi could be a little lumpy. Also, having the broad portfolio of chemistry and chemistry equipment really helps us deliver solutions faster and more completely to our customers.
Yeah, thanks for that. That's uh good detail and and I suspect you all have been engaged in strategic planning for next year. Um and certainly with things feeling, maybe a little bit better than last year. Any high-level thoughts on where you want to point the company, what your operational priorities are or anything in the portfolio. You know, that we should be thinking about
well, I think, uh, you know, some of the areas that we talked about that we're focused on to outgrow, um, in semi, for instance, world class, uh, Optics,
Uh, Power for high aspect ratio Edge, both in dielectric and conductor those remain. Um, and then, certainly our efforts in electronics and packaging, giving that a complete solution of chemistry chemistry equipment, uh, as well as laser equipment. So, I don't think those priorities really change. Those have been, you know, well, thought out long term priorities and uh, you starting to see some of that benefits that as those markets, uh, come back,
Great. Thank you.
Thank you for your question.
Our next question comes from Melissa Weathers from Joe Bank. The floor is yours.
Hi there. Thank you for taking my question. Um, I wanted to go back to the nand piece, uh, within the semis business and talk about that lumpiness. Um, I totally understand we're in the early Innings on that, upgrade cycle. Um, but I also know, there was a pretty large inventory overhang in that business, so
Like, could we see some inventory replenishment on that side of the business? Or is it really just that customers are are just pulling what they need and nothing more than that. So um, it should move pretty, uh, closely in line with demand.
Yeah, I think I would characterize it as a ladder Melissa just because, uh, inventory has burned. As you as we've said, in the past, also lead times are are much better now. In general, uh, getting the chips to make our power supplies, uh, you know, normalized lead times and so given that then I think it's probably going to be more tied together rather than a build up of inventory. Of course, during a large ramp, it's a very large ramp. And then, of course, you could see some build up of inventory. But right now, it feels like because our lead times are relatively back to normal. Um, we expect that uh we'd be shipping to demand.
Got it. Thank you. Um and then on the gross margin Outlook, I don't know if this is for John or uh, for Ron. But um, I know the chemistry's piece does uh, typically carry higher gross margins and the EMP business is supposed to grow pretty nicely. So, um, the moving, uh, pieces on that gross margin out, like why wouldn't you see more of an an uplift just from that, uh, higher chemistry's mix in the third quarter?
I understand this is from, I'll take that. So, so we, we did see, we do see, uh, a seasonal seasonality pick up and better chemistry.
Um, in Q3 and we are seeing the benefit of that from margin. However, we are also seeing higher equipment sales, which as, you know, comes with the lower gross margin. But we are very happy to have equipment business because it commits to, uh, future chemistry orders with high margin. So that, that equipment orders will sort of offset some of the mixed Advantage. We get from chemistry tariffs are a bit better as in order to include 3 compared to Q2, but then our volume is slightly lower than Q2.
So we are guiding margins relatively at the same levels.
Got it. Thank you.
Thank you for your question.
Our next question comes from Shane, Brett from Morgan Stanley. The floor is yours.
Thank you for letting me ask a questions, firstly, on enp. If I take your Q3 guide, you're talking about 20% year-over-year growth through Q3 which is well ahead of the GDP plus 300 basis points. You spoke about at your 2022 analyst day.
Just given the AI strength that you're seeing. Um, maybe in some Revenue synergies, with that attack, have your growth expectations for this business um materially changed since this since the analyst day. Thank you.
Yeah, Shane thanks for the question. Um, you know, I think it hasn't really changed. We're not updating you know our 5 year model yet. But I would say that uh, we are seeing that Advantage uh, driven by AI. I think we're seeing uh, the unique Advantage for MKS which is that we're providing more complete Solutions. So the chemistry Revenue organic, chemistry Revenue, we believe is also out growing some of our competitors quarter on quarter year-over-year. But also, in addition to that, we have equipment, uh, and which Mo, most of our competitors. It's not all don't have that. And that equipment, uh, we're finding is incredibly crucial for our customers to be able to deliver, the more complex, HDI and MLB processes needed for AI.
So uh we're benefiting from both of those right now. Um and then, you know, so we're in a great position to uh hit our long-term models.
Got it. Thank you. And as for my follow-up, so, this might be a bit of a long shot question, but there has been talks that the big GPU customer, may move from Co-op to co-op, um, but just including this inflection, how should sort of this inflection or are there any other inflections that may sort of significantly impact your business for the inp side? I'm going forward. Thank you.
right to the PCB, which is the HDI and the MLB um, traditionally our we've had a very strong position in HDI not only in chemistry but in equipment as you know
And we're seeing that as well, not driven by AI. So if the industry were to skip the substrate or some part of the issue were to skip the substrate, we believe that's actually a Tailwind for us because of our historic position there and because our tools are uniquely, uh, enabling for that HDI layer, and this goes back to the longer, uh, thesis that we have for the acquisition of that ASC.
If that were to happen, the HDI boards would have to become much more sophisticated smaller lines, smaller features, uh, many more layers and, uh, the whole idea there is in order to do that. You need that we believe combination of chemistry, knobs and equip equipment knobs to get there. So, uh, the industry is very flexible. They will always look for the, you know, most uh, economic solution. And this is certainly an area of interest for some companies.
Got it. Thank you very much.
Thanks Jane.
Thank you for your question.
Our next question comes from Peter Payne from JP Morgan. The floor is yours.
Hey guys, thanks for taking my question. Um, within your semiconductors um can you kind of provide some color on how the lethargy and inspection applications are doing? I think the last you update, I see you guys were kind of in this 300 million dollar Revenue, run rate. I mean any caller on on that.
If here I would say that uh we're not immune to, you know, cycles and World Classics either for lithography Metrology inspections. So as you know, it's been a little more muted and has been in the past, I would say this that the cycle is there are a little a little more muted. Um, so I would say that's 300 million range is still intact. Um, and uh, you know, maybe it might be pushed out a little bit in terms of growing from that, uh, but we're really happy with the design wins. We continue to participate with, with our customers we designed in, as you know, into the most advanced, uh, pieces of equipment in that market. Uh, and so, when the market returns, we'll, uh, we'll enjoy that that growth.
Got it, and then my files on in your the Trunks and package. If I look at from an absolute dollar, you know, year-over-year you guys didn't kind of been almost growing like 40 to 50 million dollars in terms of absolute year-over-year. Um, and, and you mentioned that, you know,
the smartphone and PC market, the relative is like, can I can I kind of correlate that this is all driven by AI applications? This, you know, 40 50 or is there any other stuff in there? That's driving that kind of year-over-year growth.
You have Peter. Uh, I think that's that's the right way to look at it. Uh, you know, we're happy with the year-over-year growth despite the fact that it's well known that certainly PCS and smartphones are still muted. Uh, and we saw that a year ago and AI was part of our growth but not as important or not. As big as you see it. Now, so PCS smartphones remain muted but we're out growing due to the fact that more and more of our business is targeted to Ai. And as I mentioned before, we not only have the chemistry but we have the equipment that's enabling AI.
Perfect, thank you.
Thanks Peter.
as a reminder, if you'd like to ask a question, please press star 1, 1 on your telephone,
Our next question comes from Joe konachi from Wells, Fargo. The floor is yours.
Hey thanks for taking the questions. Maybe just to follow up on that. I guess as I think about like the the expectations for chemistry growth in 3Q, um, it sounds like relatively seasonal. So do we assume that you know,
to get to seasonal. It's because you're seeing outperformance at Ai and and you know, your kind of traditional applications would be otherwise below seasonal growth.
Um, I think the way to think about it Joe uh, is that the seasonal growth is driven by consumer products so that's kind of that PC smartphone market and so that really hasn't changed too much. We said a little earlier to earlier question, it might have been a little pollen, but I was still seeing an uptick Q3 versus Q2, then overlay on top of all that is just the the growth in AI. So the seasonality is still driven by those consumer products. Joe
Okay, but I guess the the rate of growth is I mean, is it better than normal seasonality given that this added AI, you know?
Well, I think that's true. Uh, you know, the, the base, the foundation is much higher because there's a, you know, AI additive to it. Um, so yes, I think that's the way to think about it. And as a reminder, as, you know, Joe because of seasonality Q4, uh, for the consumer product cycle for chemistry is usually 1 of the lower quarters as well.
Yep. That that's helpful. Uh and maybe in as a follow up in the semi business just outside of the name lumpiness I mean, are you seeing customers? You know, we've heard customers kind of focusing more on inventory optimization versus buying, you know, incremental new components or keeping inventory flat just giving kind of the Tariff Dynamics and trying to avoid some of those are you seeing that in your business as well?
Yeah, I know, I, I think we saw some peers say that, uh, we hadn't really seen any of that show. Um, because our lead times are very low, uh, you know, our our, we believe our customers are buying to need, uh, rather than trying to optimize inventory. So, we didn't see any of that.
Thank you.
Thanks Joe.
Thank you for your question.
Our next question.
Comes from M Miller.
The floor is yours.
The next question comes from Mark Miller, the floor is yours.
Thank you for your questions. Uh, some of the laser firms are reporting that after many sluggish quarters that their their business is improving.
I'm just wondering what you're saying in your laser segment.
Yeah, no, I think, uh, our laser segment, uh, we continue to gain some design wins and some of the key, uh, key markets. Uh do you know I think we talked about a uh hbm dicing in the past but in general industrial lasers that remains relative to the muted Mark that has really no change from the several quarters before I think some of it is
Uh, just customers being a little more cautious, um, as well as you can see, from the pmis around the globe that it's still relatively balanced between, you know, growth and and contractions. So, no, we haven't really seen a lot of pick up there for lasers for industrial applications.
Terms of your key component suppliers are, are you seeing any price increases from them due to tariffs?
Um, you know, we partner with our suppliers as well as, with our customers, especially with tariffs. Uh, and so uh, you know, we're trying to find ways that both of us, uh, can reduce the impact of tariffs. So no 1's, trying to make money on this obviously. Uh, so I think it's been a collaborative, uh, you know, working relationship with our suppliers and we haven't really seen any impact, uh, uh, of tariffs and price increases from our partners there.
Thank you, thanks.
Thank you for the question.
Our next question comes from Jim Schneider from Goldman Sachs, the floor is yours.
Good morning. Thanks for taking my question. I was wondering if you could maybe focus on the the topic of of tariffs from a different angle for a moment. Um, first of all, can you talk about whether you've baked any relative conservatism into the September quarter guidance? Uh, based on some of the, the, the pollen commentary you you had earlier. And secondly, you know, as a result of uh, president Trump's announcement ON Semiconductor tariffs. Last night, I'm wondering if you see any kind of competitive Advantage for you, uh, you know, relative to your competitors, as a result of that or or kind of any other angle on that you can, you can foresee at this point. Thank you.
Hey, James, John, I'll take maybe the first 1, Ron can add, but uh, you know, the announcement last night was last night. And so, uh, it's hard to tell where that will end up, um, certainly, uh, broad Strokes. Uh, it's it's complex it may or may not impact our, you know, the entire semiconductor ecosystem. So, I, I would say, it's hard for us to tell right now that puts and takes. I would say in general, though, with respect to tariffs as Ron said, you know, we had more of an impact uh, in Q2, we're looking at less of an impact in Q3 as some of our mitigation actions start taking taking hold. Um, but it is a very Dynamic environment and things can change quickly, as you know. So, um, I think it's a little hard for us to to determine if there's any kind of competitive advantage or disadvantage with, uh, with what was announced last night. No problem, if you want to add anything to that. Yeah, I think I think you covered John. I'll just add that with regard to the guidance. There are 2 key variables. Here 1 is, the shifting.
The timing of our mitigation actions kicking in. So when we guide, we guide based on the best information we have at the, at the point at the point of time, based on the rules. We know, at that point. So I wouldn't say there's any conservatives involved into the guide, it's the best information we have at that point.
Thank you very much.
Thanks Jim.
Thank you for your question.
Again, as a reminder, if you'd like to ask a question, please press star 1, 1 on your telephone.
David Lou, the floor is yours. You may go.
Hi, thanks for taking my question. Um, I was wondering if you can provide a little bit more color on
on your HD imlb for AI applications, maybe to the extent, you have visibility whether
You know you see them going into Merchant gpus. Uh hyperscaler versus Neo clouds custom A6. Yeah. Any color you have their
It. If I think, uh, you know, in general, it's probably customers trying to get all that business. Uh, it's a little difficult for us to tell if it's going to particular parts of the AI food chain.
But I think in general, uh, many of our customers, um, need that capacity, many customers, uh, are trying to get into that market in a stronger sense and so they're building that capacity up and that's where we're seeing the equipment orders, uh, which have been, as we said, strong over the last several quarters. Um, so I think, uh, a little hard for us to tell, uh, you know, uh,
Specifically what that substrate or that HDR, MLB is going towards, but I think in general, HDI type chips require a lot more layers in HDI I'm more layers in MLB and that's why. And that is the application. These customers are asking for
Okay, thanks, um. And then maybe follow up on Optics. Uh,
Are you guys still seeing the 250, 260 range for fiscal 25? And then maybe 2026. Where do you guys see?
You investing in uh, your business. Thanks.
Yeah, David. This is um I would I would take I would keep the 250 to 260 as the range uh, for Q4. Um, we are not guiding Beyond Q3 but that's uh useful range to
To model. Um, as you saw in Q2 and our guidance for Q3, we are at the lower end of that rate. So Opex is something we take very seriously and try and manage. Um,
While making the Investments needed for the company's long-term success. So it's a balance between meeting a profitability and Investments to for long-term success.
But it's something which we watch very carefully.
Thank you.
Thank you for your question.
Our final question.
Comes from the line of Shane. Brett from Morgan Stanley. You may go ahead.
Thank you for letting me ask another question. I just have one. So in the June quarter, your specialty industrial business grew quarter over quarter for the first time since the June quarter of 2023. If I'm correct, I know you're guiding the September quarter down a touch sequentially, but are there any positive lead indicators in that business that you would call out? Thank you.
Hey Shane, I think you know our special industrial uh segment is made up of several different markets and I would say in general Industrials has been muted and remains muted. I would say that, um, defense has been a bright spot. It's grown quite a bit. Um, and Life and Health Sciences remains relatively stable, so lots of puts and takes, uh, but uh, I think those are the ones I would point out.
Thank you very much.
Thanks.
This concludes the question and answer portion of our session I would now like to turn it back to PTO misra vice president of investor relations for closing remarks. The floor is yours.
Thank you all for joining us today and for your interest in NPS Jenner you may close the call please.