Q2 2025 Advanced Energy Industries Inc Earnings Call
Greetings, welcome to Advanced Energy's second quarter 2025 earnings conference call.
This time all participants are in listening mode.
A question-and-answer session will follow the formal presentation.
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please note that this conference is being recorded.
Vice president of strategic marketing and investor relations.
Thank you, Mr. Mock, you may now begin?
Thank you, operator. Good afternoon everyone, welcome to Advanced Energy second quarter 2025 earnings conference call.
With me today. Uh Steve Kelly, I'll president and CEO and Paul Odom. Our Executive Vice President and CFO
You can find today's earnings, press release and presentation on our website at ervans andy.com.
Before we begin, let me remind you that today's call contains four forward-looking statements that are subject to risk and uncertainty, which could cause actual results to differ materially and are not guaranteed for future performance.
Information concerning. These risks can be found in our SEC filings.
Forward-looking statements are based on management's estimates as of today, August 5, 2025, and the company assumes no obligation to update them.
Any Targets beyond the current quarter presented. Today should not be interpreted as guidance.
On today's call our financial results are presented on a, non-gaap financial basis, unless otherwise specified.
Exclude from our non-gaap results are stock. Compensation advertising acquisition relay costs facility infrastructure and other transaction costs, restructuring and assessment. Impairment charges and unrealized foreign exchange gain or loss.
Detailed reconciliation between our gaap and non-gaap results can be found in today's press release.
With that, let me pause the call to our president CEO, Steve Kelly.
Thanks everyone. Good afternoon everyone, and thanks for joining the call.
Second quarter Revenue, exceeded the high end of our guidance range.
Driven by strong demand for advanced energy data center power solutions.
We also benefited from increased demand in industrial and medical.
Posting, our first sequential growth in that market since 2023.
On the year of year basis.
Second quarter revenue grew 21%, marking our third consecutive quarter of year-over-year growth.
Earnings per share also came in at the higher end of guidance.
Our business diversification strategy.
Which is focused on 3, distinctive.
He's driving more consistent. Profitability and cash flow.
We have been mitigating cycle risk.
By participating in multiple growth markets.
Each with its own characteristics.
The strategy is playing out nicely this year.
With our success in Data Center.
Compensating for softness and Industrial and medical.
Semiconductor has performed well for AE.
with mid single-digit growth expected this year after a growth year in 2024,
Our improved profitability and cash flow.
Our allowing us to make the technology and capacity Investments, necessary to fuel long-term profitable growth.
These Investments give confidence to our customers.
That Advanced Energy has the technology roadmap.
And Manufacturing expertise.
Necessary to support their long-term success.
In Data Center.
Our high-efficiency, high-power density products have proven ideal for AI applications.
This year, we have won a number of Next Generation programs, which are expected to support further growth in 2026.
In semiconductor.
Customer interests in our evos Everest.
And navx platforms is very strong.
We expect to more than double revenue from these Platforms in 2025.
As initial wins go into early stages of production.
We believe that these winds will drive Revenue growth in 2026 and Beyond.
As Leading Edge Fab processes ramp to volume.
In industrial and medical.
We've invested heavily in new products.
A new website.
And a robust sales and channel effort.
The result.
Is that we have secured a record number of design wins.
some of which are turning into revenue this year,
Looking forward.
We expect that these wins will accelerate our growth in inm allowing us to gain market share.
in addition, with the closure of our last China Factory in June,
we are making good progress on our gross margin Improvement program.
We continue to expect gross margins to approach 40%.
Exiting 2025.
The Tariff environment continues to be very dynamic.
Actions we are taking to mitigate the impact of tariffs include.
Qualifying products in our Mexicali facility under USMCA.
Leveraging, our Geographic footprint?
And finally optimizing our supply chain and Logistics.
We will continue to work with our customers to mitigate costs as the environment evolves.
Now, let me provide some color on each of our markets.
Second quarter, semiconductor Revenue was solid.
Although Revenue was down sequentially.
A group double digits year on year.
On the new product front.
We had another quarter of robust evos and error shipments.
As some early design, winds began the transition to low volume production.
These transitions are important, milestones.
Validating the progress our customers are making with their end customers.
During the second quarter, we also secured 2 new significant etch and deposition wins.
For Leading Edge processes.
Customers value, the capabilities of our new technologies.
As well as our ability to quickly tailor solutions to meet their process requirements.
In data center computing.
Revenue, jumped nearly 50% sequentially and almost doubled year on year.
As we ran, hyperscale design wins.
And captured increased demand.
We believe this new level of demand will continue for several quarters to come.
in addition.
We have already won a number of Next Generation designs, which are scheduled to ramp in 2026.
Our primary focus in this market continues to be serving our key. Hyperscale customers with Leading Edge Solutions.
We also see an expanding set of AI related opportunities at Enterprise and other customers.
Where we could leverage existing technology blocks.
To quickly deliver Solutions.
We expect these new opportunities to drive, incremental growth in 2026 and Beyond.
In industrial Medical.
Second quarter, Revenue grew sequentially, but was down year on year.
Inm total backlog. Grew this quarter for the first time since the beginning of 2023.
In distribution.
Which accounts for roughly half of our income revenue.
Sell in.
And resales increased quarter over quarter.
Channel inventories decreased for the fifth quarter in a row.
These encouraging data points.
Support our view that AE's income will continue to improve from this point forward.
On the design wind front.
We secured wins and medical imaging.
Robotics.
Process control.
And Mero.
Our digital marketing Investments are also yielding results.
since launching our new website at late 2023,
We have secured over 300. Inm design wins.
which originated as website, inquiries
Our partnership with key distributors.
Is also expanding our ability to reach a broad set of small and medium-sized inm customers.
Telecom and networking Revenue was flat sequentially.
During the quarter.
We won a Next Generation Telecom design that leveraged our leading position in this market.
In addition.
We see AI driving New Opportunities For Us in networking.
Now, for some closing thoughts.
We are capturing opportunities in the dynamic Market environment, in our delivery and upsize to our expectations for the year.
Following a strong second quarter.
We expect to operate around this new.
Higher level of Revenue, and the second half.
Resulting in an overall 2025 revenue growth of approximately 17%.
And data center.
Based on higher demand levels.
And the success of our new products.
We now expect to grow revenue over 80% in 2025.
Semiconductor revenue is now projected to grow bid, single digits in 2025.
With revenue from our next Generation. Plasma Power Products expected to double.
Correction period.
Demand is recovering.
With a stronger order book driving higher sequential revenue in the second half.
Looking beyond the near-term.
We are very excited about our growth prospects.
With strong customer, pull for our new products.
We are well positioned to gain share.
Our efforts to structurally improve manufacturing. Costs are yielding tangible results.
We remain confident in our ability to achieve our growth margin goals. Despite added tariff costs,
Finally.
We continue to actively pursue our acquisition strategy and have a solid pipeline of potential opportunities.
Paul will now provide more detail financial information.
Thank you, Steve and good afternoon everyone.
Second quarter, revenue of 442 million was just above the high end of our guidance driven, by upside in the data center Computing Market.
Gross margin improved slightly quarter-over-quarter and was in line with our target, despite several headwinds.
Operating margin increased by 110 basis points sequentially, as we grew revenue faster than operating expenses.
As a result, we delivered earnings per share of $1.50, up 76% from last year and at the highest level since 2022.
During the quarter, we continue to execute our new product, strategies added capacity to meet growing data center, demand.
completed final production in our China Factory and strengthened our capital structure,
Now let's review our financial results in more detail.
Second quarter, total revenue is 442 million up, 9% sequentially and 21% year-over-year.
Revenue in the semiconductor Market of 210 million was up 11% over last year, but down 6% sequentially.
Q2 semiconductor sales declined slightly more than anticipated as we saw customers shift delivery schedules to mitigate the near-term impact of tariffs, partially offset by higher service revenue.
Data center, Computing revenue is 142 million up. 47%, quarter over quarter and 94% year-over-year.
During the quarter, we captured upside demand for our new data center Power Solutions.
Industrial and medical revenue of $69 million increased 7% sequentially but was still 13% below last year.
We believe this Market has passed the bottom given increased backlog. Improved customer, inventory and encouraging data points from our distributors.
Telecom and networking Revenue was 22 million flat C. Quarter over quarter as anticipated.
Gross margin was 38.1% up to 20 basis points sequentially. Despite increased terrific expenses and production ramp costs,
We were able to partially offset these headwinds by taking actions to manage our manufacturing costs on higher volumes.
We're encouraged by the progress, we're making on gross margin Improvement. As excluding the impact of tariffs. Gross margin would have been over 39%.
Operating expenses were 104 million up to 5 million from last quarter on higher spending on new product activities and annual salary increases.
However, Opex as a percent of Revenue declined, almost 100 basis points sequentially and 260 basis points. Year-over-year demonstrating The Leverage in our model.
Operating income for the quarter was 65 million.
Depreciation was $10 million and are adjusted ibida. Was 74 million.
Other income increased sequentially to million dollars primarily due to higher investment income in our Deferred Compensation Plan.
For Q2, our non-gaap tax rate was 15.3% below. Our estimate of 19% on favorable. Mix of earnings better visibility for optimizing, the impact of the global minimum tax and favorable discrete items,
As a result second quarter EPS was a $150.50 per share, compared to a dollar 23 in the previous quarter and 85 cents a year ago.
turning now, to the balance sheet,
Total cash and cash. Equivalents at the end of the second quarter was 714 million with net cash of 147 million.
In response to market volatility, we repurchased 23 million of our common stock at an average price of $83.83 per share.
Cash flow from continuing operations was $47 million.
Inventory turns were flat sequentially at 2.7 times, but total inventory of $398 million was up 8% sequentially, driven by the strong increase in demand.
This increase was more than offset by higher payables with DPO at 63 days.
Receivables increased about 10%, or $27 million, on higher revenue.
DSO was flat at 62 days.
During the second quarter, we paid $4 million in dividends and invested 28 million in capex.
The higher capital spending is consistent with our expectation of increased investments over the next several quarters to support growth in the data center market infrastructure capability and our factory consolidation strategies.
Despite increased working capital and capex. Free cash flow in Q2 grew, 21% sequentially.
In addition, during the quarter, we extended the maturity date of our undrawn credit facility of 600 million.
From September 2026 to May 2030 while maintaining substantially the same favorable terms as our 2019 agreement.
Before moving on to guidance, let me provide more color on the impact of tariffs on AE.
The tariff environment continues to be very dynamic, making the overall impact difficult to predict.
For Q2, tariff costs were higher than we initially expected.
However, we are implementing multiple mitigation strategies with our customers that should help reduce the Tariff impact.
Combined with other operational actions, we continue to believe that we are on track to achieve our long-term margin and operating goals.
Looking forward. The expected impact of tariffs as we understand them today is Incorporated in our guidance.
Turning now to our guidance.
Following our very strong Q2 results, we expect, Q3 Revenue to be similar to Q2 and for Q4 to grow sequentially.
This Outlook would translate to approximately 17% growth for the year.
We expect Q3 semiconductor Revenue to be down slightly versus Q2 based on customer forecasts.
Given first-half results and our updated outlook, we now project semiconductor revenue to grow mid-single digits in 2025.
For data center computing, we expect demand to remain at or above Q2 levels in the second half.
As a result, we've increased our 2025 annual growth projection for data center from 50% to more than 80%.
We believe the industrial Medical Market has passed the bottom and expect modest sequential growth in both Q3 and Q4.
Paste by the impact of tariffs on the broader economy.
Telecom Network Revenue should remain in the low, 20 million dollar level.
as a result, we're forecasting, our third quarter Revenue to be approximately 440 million,
Plus or minus 20 million.
We expect gross margins in the third quarter to improve to around 38.5%, mainly driven by the initial benefits of the closure of our final China Factory.
As we realize the full benefit of the factory closure and improved Factory efficiency. We expect gross margins to be between 39 and 40%, exiting the year, including the impact of tariffs.
We expect operating expenses to be up slightly on higher variable costs giving the stronger full year performance.
And other incomes should return to the million dollar range.
The tax rate is expected to be 17 to 18% on optimization of our model going forward.
As a result, we expect Q3 non-gaap earnings per share to be a $145 plus, or minus 25 cents.
Before opening up for questions, I want to highlight a few important points.
We participate in solid growth markets that can operate on different Cycles which should enable us to live a more robust and consistent Financial results over time.
We Believe, increasing demand and data center technology investments in semiconductor and Market recovery in industrial, and medical will drive overall Revenue growth for AE in 2025 and 2026.
Design win momentum driven, by our Leading Edge Products, which we expect to enable us to outgrow our markets.
From a profitability perspective, we grew revenue in the second quarter 21% year-over-year, but we grew EPS 76%.
Driven by gross margin expansion of 280 basis points and the overall leverage in our model.
This performance demonstrates the opportunity for AE to accelerate earnings growth as we improve margins and increase Revenue going forward.
Beyond the benefits of exiting China for manufacturing, that will fully kick in by Q4.
We Believe further production efficiency and new product. Mix will enable us to continue to achieve our long-term margin and financial goals despite the higher cost of tariffs.
Lastly, with a solid balance sheet and strong cash flow generation. We will continue to look for strategic Acquisitions to add scope and leverage our scale.
With that, we will take your questions, operator.
Thank you at. At this time we'll be conducting a question and answer session.
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1 moment, please. While we pull for our first question.
The first question is from the line of Chris Sankar with GD, calan please receive your questions. Yeah. Hi thanks for taking my question. And can you guys have a great result? Uh Steve I just had 1 question. You kind of mentioned about sustainability of the data center demand and if I Flatline your 142 million in Q2 uh through the rest of the year, obviously you're going to grow over 80%. I'm just going to curious. Um, how sustainable is this run rate? Because historically Data Center used to be very lumpy. So I understand AI has changed things. Is this more a structural change? Is there? Any market share again? How to think about the sustainability of data centers? Revenues going forward? Thank you.
Yeah, thanks for the question, Chris. Um,
Yeah, looking forward. We think these revenues are sustainable into 2026.
Um, and the reason is, um, the hyperscalers are continuing to invest at a very high rate. So we've seen what they spent this year and what they intend to spend next year and that's supported by the forecast that we're receiving uh from our customers.
Um you know particularly the AE, um, you see a high frequency uh of change in this market because each of the gpus that comes out, typically, on a yearly basis, usually requires more power.
And so uh that means each Power Solutions probably a little bit more expensive.
Uh, and you have to work very closely with the customer, uh, which is, uh, what we're doing. So our win rate is quite high. Um, we're also seeing some ancillary opportunities, um, appear that uh, complement what we're doing with uh, with our large hyperscale customers. So, we think some of those opportunities may kick in uh, in 2026.
And I think probably, uh, one of the more important aspects of this business is the willingness to invest.
Uh, not just in and development, but also in, uh, Factory capacity. So we continue to to spend, uh, to expand our capacity, uh, to, to serve the market.
Thanks a lot. Still appreciate it.
Hey, Chris.
Our next question is from the line of Steve Barger with keybanc capital markets, please receive your questions.
Hey thanks. Uh, good afternoon.
Steve, could you talk about content per server or content per rack for an AI data center versus a traditional DC? And are you modeling the business based on where you see that hyperscaler CapEx going? How do you put together a forecast with demand like this?
yes, Steve, um,
The the content of any Ida Center for us, um, is much higher because the power consumption is much higher.
So, so typically you're looking at, uh, you know, 5 to 10x the power consumption of a of a non AI data center, so that's all good news for us now. Now, the way we model our future, uh, revenue is based on customer forecast.
And so we have uh we have a select group of customers that we work closely with and they give us forecasts which are updated. Um
every quarter, if not more frequently, quite frankly,
Our base level. And then we add in a few other opportunities, um, where we can reuse our technology blocks, which we developed for our large, hyperscale customers. And that's how we come up with the forecast.
Is that 5 to 10x? Power consumption, translate into 5 to 10x revenue for you. Is that a linear relationship or how, how does that scale uh as the power demand goes up
Yeah, unfortunately, it doesn't scale, uh, on a linear basis. Uh, it's definitely higher. You know, I don't have a figure of Merit for you, but we noticed that each successive generation uh, ends up. Uh, costing a bit more and leads to better asps for Advanced Energy.
Got it and then just uh a quick follow-up.
you talked about low volume production, uh,
For some of the new products on slide 5, which is great to see, do you expect that to turn into a stronger program next year? And are these design wins for your normal customers, or are you finding new customers who are also embracing the technology?
Yeah, I think what you're referring to are are wins in the semiconductor uh processing area. Yes.
Yeah, yeah. So so I I think that the significance of the fact that we're going into low rate initial production on some of those wins, is it, uh, confirms that our customers have been successful at their customers, uh, who are The Fab operators
And so, what we see this year is, you know, more than doubling of the new product revenue in semiconductor.
And that's in you know, that's into the tens of millions uh range.
And then we see that really um, catalyzing significant growth starting next year. And as these new, uh, Leading Edge processes, go to volume, both on the, the logic, uh, part of the, uh, of the equation as well as as the memory side.
Thanks very much.
Thank you, Steve.
The next question is from the line of Joe huache with Wells Fargo. Please just to see if there are questions.
Yeah. Thanks for taking the questions, uh, on the semiconductor business. I think you talked about mid single digit growth now for 2025 and last quarter, you were talking about 10%. So wondering, if you could help us understand like what's changed there or or expand upon what's changed there, and then, you know, relative to, I think 1 of your customers talking about second half or first half being flattish, it looks like you're going to be down. 67%
Yeah, yeah, I I think I think we're we're a little bit optimistic, uh, coming out of q1. We had just come off a very strong quarter. Um, what we've seen um, is, you know, I think the tariffs are starting to influence some of the ordering behavior from our customers as they eat into their own inventory and they they move things around right to optimize um, versus the, the Tariff regimes.
Uh, the second is, you know, based on what we've heard from, um, our customers and also reading other earnings call transcripts. Um, you know, China seems to be slowing down and I think, uh, trailing a nice logic in general, you know, across, uh, uh, China as well as non-china or geographies is slowing.
And finally, there's been a little bit of, uh, concern. On the DM side, the growth seems to have slowed a bit.
Uh, but, you know, looking at our Revenue levels. Um, that were generating, uh, in 2025 for Semiconductor, we're really actually quite pleased with the revenue level and if you take out 2022, which was the co recovery year, uh, these are the highest levels we've ever had and semiconductor. So we're operating in about 200 million dollars a quarter, which is, uh, quite healthy for us.
Got it. As a as a follow-up on the Tariff front, you know. I think it. You Quantified it over 100 basis points of of gross, margin headwind this quarter. I guess, what, what's the expectation that I can understand appreciate that? The terrorists are moving around quite, you know frequently. But what's the expectation embedded within the guidance for that impact, this quarter and what's the right? I guess Revenue level to think about being at 40% now.
Yeah, thanks. Thanks for the question, Joe. So we we we're projecting that tariffs level will stay at this level or a little higher. As we look into Q3 and probably through Q4. Um, that means that we have some mitigation actions that were kicking in over. The course of Q2 that largely offset, the increased rates that we've seen announced in, uh, you know, last week.
in terms of how this is,
Yeah, I think I I'll start with um you know we're close to we're close to that 450 million Mark as it is today and certainly at that level, if you excluded tariffs, we we're very comfortable that we'd be over 40% so it's probably trending up another 20 million dollars or so, on top of that that offsets that 100 roughly 100 basis points of tariff impact.
Thank you.
Our next question is from the line of Brian chin. Its default, please receive your questions.
Mr. Chin, your line for a question is perhaps on mute.
All right. I can you hear me? Okay, sorry about that.
Yep, we can hear you great. Um, thanks for letting us out a few questions. What? What is the accurate?
Believe that.
What you've shipped to date and data center is more in support of you know quote unquote Legacy h200 h100 Computing racks where you know looking forward, you know gb200 GB. 300 um there's there's obviously a multiplier effect in terms of power per rack. So even off of a a very strong 2025 revenue and data center, wouldn't that give you a lot of confidence um just in terms of directional growth and maybe even magnitude next year?
Yeah, so Brian, I don't have a specifics as far as you know where all of our power supplies are going and you know to what uh GP gpus are tied to. But what I can say is that we have 1 uh a number of new designs uh this year, we'll ramp to volume next year.
And we're actually working now on on designs that were ramped up volume in 27. So I think we're keeping up, um, you know, it's basically a very, uh, rapid design cycle now.
Uh, where we have to work closely with the customer, uh, so that they can, uh, they can hit their design Windows, um, based on these new gpus. So it's a, it's a very Dynamic environment, but we're winning at a very high rate.
Got it, and it's fair to characterize it that way.
you may not be adding many new customers but you you out I just
Yeah, I think I think uh, I wouldn't say we're adding many new customers Brian, but I would say, within the customer base that we address, uh, we're adding more and more projects. So, so our risk is somewhat mitigated by the number of projects we're engaged in.
Yeah. We're ALS able to reuse a lot of Technology from generation to generation which which allows us, you know to to turn these new designs quickly.
I think moving forward.
Um, we will be able to engage in some ancillary opportunities.
Uh, where we could reuse technology blocks we've developed for other other customers. Um, but at the end of the day, um, the limiting factor for many of these um, customers is going to be engineering bandwidth. So we have to make sure we don't overextend ourselves and that we service our main customers to the best of our abilities.
Thank you.
The next question is from line of Jimmer shooty with any company, please assist you with your questions.
All right, thanks, excuse me. Uh, good afternoon, um,
is there any way to characterize the margin profile of the new design ones in uh, in data center relative to some of the Legacy data center products, you've sold into this Market
Yeah, I think the best way to think about that Jim if you go back to or 3 years ago, you know, we talked about this Market being you know, highly dilutive. And if you go back a year or 2 before that you could see the numbers from what we acquired Artisan at which had margins overall in the low 20s and it had that included in which was above our corporate model. So uh it's it's been historically quite diluted as we've talked.
Talked about over time, we've been able to rationalize the portfolio and our new, our new products are much closer to the corporate average. So on balance, we're not at the corporate average, um, at this point. But the dilutive impact is, is much less. In fact, we've said that, you know, as the mix shifts around, we we kind of expect that to live within a band of, you know, plus or minus 50 basis points. And of course, this quarter, our percentage of data center Revenue was up, I think 8 points, um, or something quite a lot.
Out without any problems. Um and so I think that that demonstrates that, you know, we're we're approaching, you know, the corporate average there
That's helpful. Uh, Paul and Steve you you've talked about uh these ancillary opportunities looking out to 2026. Is there any way of of sizing that? I mean these, I would think these have been Enterprise customers you've been selling to, but this is now being driven by by the AI demand. Is that fair way to characterize it?
Yeah, that's a good way to characterize it. Jim, uh, there's Enterprise customers and some other new customers that have appeared, um, and generally, we'll entertain those opportunities where we could do so without stretching or Engineers too far. So we try to reuse as much as possible and, uh, and execute. Um, we're also installing a lot of new capacity, uh, in our factories in the Philippines and Mexico to support these opportunities not just for our biggest customers, but also some of the smaller ones
Got it. Thanks and just 1 other quick question. Just maybe you switch over to inm. Um, has there been or is there any impact from the recent design wins in inm, on the growth that you're expecting in the second half? Or is that what you're seeing? Is that, mainly the market recovery? And these design wins are more of a 26 story.
I think it's a bit of both. Um, obviously the Market's gone through an extended correction period and we're starting to see, uh, stocking orders. We're starting to see orders from customers. We haven't seen orders from in, in quite some time. So that's more due to the market. But in addition, you know, we're seeing some of these winds that we've recorded over the past. Uh, say 2 years, you know, start to contribute to our Revenue growth in the second half of this year. I think you'll see that accelerate next year because we have quite a backlog of design wins and the dynamic is that most customers, you know, they're working through their inventory and uh, and they're waiting for that inventory to clear before they ramped their their new products.
So we we think, you know, 26 is going to be a, you know, a good year for industrial medical and we think we're going to gain share next year and and into 27.
Great. Thank you.
Our next question is from the line of Mark Miller with Benchmark. Please just see you with your questions.
I'm just wondering if you can uh give us some feeling or if you're seeing any any pull-ins from data uh Center of customers or any double ordering, or if if inventory levels, if if they're overstocking inventory and anticipation of demand,
Yeah, Mark, you know, we don't see that quite frankly, um, and, um, and data center would certainly be an expedited, but, uh, you know, that's because the demand continues to increase, um, in industrial Medical.
what we see right now is that uh, most customers um, are still recovering from the
The supply chain shock, you know, associated with the coid, supply chain issues. And so there there's a reluctance to, to, uh, to put in place inventory as a as insurance.
Um, I also think there's a lot of uncertainty about the terrorists themselves and so I think people are taking a wait and see attitude, and, and they're trying to match their orders to real demand.
We're starting to see.
Are.
Press pricing and then pricing start on to improve.
Uh, any feeling about, you know, in terms of Nan improvements next year, if that would be an opportunity for you.
You know, for us, we're less exposed to Nan than to the other parts of semiconductor. Um, so where where we're most, uh, excited is for leading us logic, um, as well as dramm because, uh, you know, that that's where our products are being evaluated and that's where they're going to go into into production next year. I think we're also participating in Nan but there's really less activity there as far as cap.
Capacity additions—there's some upgrade activity going on, but that's not a big area for us at this point in time.
Thank you.
Thank you.
If you'd like to ask a question at this time, you may press star 1 from your telephone keypad.
The next question is from the line of Scott, Graham with C Port research Partners, please, receive your questions.
Hey, good evening and congratulations. On a good quarter.
Um and uh navx maybe be able to quantify a little bit. What that's meaning to send me was that maybe half of the growth year-over-year in that segment, is that something you can tell us?
Yeah, it's a good question, Scott. You know, it's difficult for us to quantify that for a number of reasons, competitively, but what we said is, we expect that number to double. Um, you know, from last year, what we call revenue from those 3 products, and Steve just commented that it's in, the double digit. Millions of Revenue, this this year. So, we always expected it to be, you know, a slow start because of the way these products ramp and that it would contribute a little bit to growth in the second half. I think separately, we said, you know, think in the 1% range or 1 to 2%. But, you know, we expect that to pick up next year as these products move out of this early production phase and into more of a ramp
Phase. So we're encouraged by the progress. We're seeing in that regard. I think it's following that normal process. Um and the good news we continue to have a lot of irons in the fire um on a number of of of applications and a number of uh customers who are, you know, still working through that qualification process.
Uh, thank you. Um,
Industrial and medical. I was hoping that, you know, certainly with 50% of sales through distributors.
I assume that they're showing you POS data and I was hoping you'd be able to share that with us.
Yeah, what what we've shared is that, you know, for 5 quarter, now our sales into the channel have been less than the sales, um, out for the retail data, right? Um, so that's led to a decrease in inventory, and I think an increase willingness from distribution to the stock, um, products, particularly new products. So, I think that the trend is favorable, it's just, uh, it's obviously taking some time for
The Distributors to work down their inventories and also for the end customers to work through their inventories. But what we see now is that some in customers have have uh, have worked through them. Others have not. And so, that's why we think, uh, the recovery in inm is going to be, uh, gradual.
The other issue there in inm is the Tariff impact.
and so a lot of the industrial medical customers tend to be smaller medium-sized and they're not in a great position to mitigate some of the tariffs
Got it. Thank you.
Thank you.
at this time, this will conclude our question and answer session and we'll also conclude today's conference
Ladies and gentlemen, we do thank you for your participation. This concludes today's conference. You may now disconnect your lines and have a wonderful day.