Q2 2026 Semtech Corp Earnings Call

Interim results conference call.

Participants on today's call, our Hangzhou, our president and Chief Executive Officer, and Mark <unk>, Our executive Vice President and Chief Financial Officer.

Speaker #3: Good day, and thank you for standing by. Welcome to Semtech Corporation's second quarter, fiscal year 2026 earnings conference call. At this time, all participants are in a listen-only mode.

Before we begin the prepared remarks, I would like to highlight upcoming investor events, including the Deutsche Bank Technology Conference on August 27th.

Speaker #3: After management's remarks, there will be a question-and-answer session. Please be advised that today's conference call is being recorded. I would now like to hand the call over to Mitch Haas, Senior Vice President of Investor Relations for Semtech.

Benchmark TMT conference on September <unk> the <unk>.

J P Morgan rising tech leaders for them on September 4th.

And the Piper Sandler growth Frontier as conference on September 10th.

Today after market close we released our run audited results for the second quarter of fiscal year, 2026, which are posted it along with an earnings call presentation to our Investor Relations website at investors Dot <unk> Dot com.

Speaker #3: Thank you. Please go ahead.

Speaker #4: Thank you, and welcome to Semtech's second quarter 2026 financial results conference call. Participants on today's call are Hong Hou, our President and Chief Executive Officer, and Mark Lin, our Executive Vice President and Chief Financial Officer.

Mitch Haas: Thank you and welcome to Semtech Corporation's second quarter 2026 financial results conference call. Participants on today's call are Hong Hou, our President and Chief Executive Officer, and Mark Lin, our Executive Vice President and Chief Financial Officer. Before we begin the prepared remarks, I would like to highlight upcoming investor events, including the Deutsche Bank Technology Conference on August 27th, The Benchmark Company TMT Conference on September 3rd, the JP Morgan Rising Tech Leaders Forum on September 4th, and the Piper Sandler Growth Frontiers Conference on September 10th. The day after market close, we released the unaudited results for the second quarter fiscal year 2026, which are posted along with an earnings call presentation to our investor relations website at investors.semtech.com. Today's call will include various remarks about future expectations, plans, and prospects, which comprise forward-looking statements.

Today's call will include various remarks about future expectations plans and prospects, which comprise forward looking statements.

Speaker #4: Before we begin the prepared remarks, I would like to highlight upcoming investor events, including the Deutsche Bank Technology Conference on August 27th, the Benchmark TMT Conference on September 3rd, the JP Morgan Rising Tech Leaders Forum on September 4th, and the Piper Sandler Gold Frontiers Conference on September 10th.

These refer to todays press release and slide two of the earnings presentation.

As well as the risk factors section of our most recent annual report on Form 10-K.

For a number of risk factors that could cause our actual results and events to differ materially from those anticipated or projected on this call.

You should consider these risk factors in conjunction with our forward looking statements we.

Speaker #4: Today, after market close, we will release the run-audited results for the second quarter of fiscal year 2026, which are posted along with an earnings call presentation to our investor relations website at investors.semtech.com.

We will refer primarily to non-GAAP financial measures during today's call. Please see today's press release and slide three of the earnings presentation for important information regarding notes on a non-GAAP financial presentation.

Speaker #4: Today's call will include various remarks about future expectations, plans, and prospects, which comprise forward-looking statements. Please refer to today's press release and slide 2 of the earnings presentation, as well as the risk factors section of our most recent Annual Report on Form 10-K.

The press release and earnings presentation also include reconciliations of our GAAP and non-GAAP financial measures with that I will turn the call over to Hong.

Mitch Haas: Please refer to today's press release and slide two of the earnings presentation, as well as the risk factors section of our most recent annual report on Form 10-K for a number of risk factors that could cause our actual results and events to differ materially from those anticipated or projected on this call. You should consider these risk factors in conjunction with our forward-looking statements. We will refer primarily to non-GAAP financial measures during today's call. Please see today's press release and slide three of the earnings presentation for important information regarding notes on our non-GAAP financial presentation. The press release and earnings presentation also include reconciliations of our GAAP and non-GAAP financial measures. With that, I will turn the call over to Hong.

Thank you Mitch and good afternoon to all of you joining today.

There are some tech team made solid progress again this quarter with a sequential increases across each end market leader.

Speaker #4: For a number of risk factors that could cause our actual results in advance to differ materially from those anticipated or projected on this call.

Speaker #4: You should consider these risk factors in conjunction with our forward-looking statements. We will refer primarily to non-GAAP financial measures during today's call. Please see today's press release and Slide 3 of the earnings presentation for important information regarding notes on our non-GAAP financial presentation.

Leading to a record net sales.

We also delivered sequential improvement.

Adjusted gross profit operating income and earnings per share.

<unk> our financial profile.

Executing on the R&D roadmap that we believe establishes a foundation for long term goals.

Speaker #4: The press release and earnings presentation also include reconciliations of our GAAP and non-GAAP financial measures. With that, I will turn the call over to Hong.

They completed mining one year tenure at some tech CEO and reflecting on the three priorities I outlined in our earnings call a year ago.

Speaker #5: Thank you, Mitch, and good afternoon to all of you joining today. The SEMTECH team made solid progress again this quarter, with sequential increases across each end market, leading to record net sales.

Hong Hou: Thank you, Mitch, and a good afternoon to all of you joining today. The Semtech team made solid progress again this quarter with sequential increases across each end market, leading to record net sales. We also delivered sequential improvement in adjusted gross profit, operating income, and earnings per share, strengthening our financial profile while executing on the R&D roadmap that we believe establishes a foundation for long-term growth. I completed my one-year tenure as Semtech CEO, and reflecting on the three priorities I outlined in our earnings call a year ago, we have made tremendous progress. First, on strengthening the balance sheet.

Have made tremendous progress.

First on.

Strengthening the balance sheet.

At the end of Q2, we have reduced debt by $879 million from the time I started as CEO.

Speaker #5: We also delivered sequential improvement in adjusted gross profit, operating income, and earnings per share, strengthening our financial profile while executing on the R&D roadmap that we believe establishes a foundation for long-term growth.

Resulting in a year over year quarterly interest expense reduction of 80% and.

And a substantial net leverage ratio improvement.

One six times at the close of Q2, 2006, <unk> to $8 eight times a year ago.

Speaker #5: We completed my one-year tenure as SEMTECH's CEO, and reflecting on the three priorities I outlined in our earnings call a year ago, we have made tremendous progress.

This strong improvement to our financial Foundation allows us to focus on growth drivers for our business.

Speaker #5: First, by strengthening the balance sheet, at the end of Q2, we have reduced debt by $879 million from the time I started as CEO, resulting in a year-over-year quarterly interest expense reduction of 80 percent.

Second.

On rationalizing the portfolio and increasing investments in our core assets I'm.

Hong Hou: At the end of Q2, we have reduced debt by $879 million from the time I started as a CEO, resulting in a year-over-year quarterly interest expense reduction of 80% and a substantial net leverage ratio improvement, 1.6 times at the close of Q2 2026, compared to 8.8 times a year ago. This strong improvement to our financial foundation allows us to focus on growth drivers for our business. Second, on rationalizing the portfolio and increasing investment in the core assets, I'm happy to report that the core assets we have delineated, namely Data Center, LoRa, and PerSe, each strongly contributed to our net sales momentum throughout the year. With increased R&D investment into these core areas, we anticipate further acceleration of our momentum. Third, revitalizing our winning culture. This is an area of progress of which I'm most proud.

I am happy to report that the core assets, we have delineated, namely data center flora in the per se each strongly contributed to our net sales momentum throughout the year.

Speaker #5: And a substantial net leverage ratio improvement, 1.6 times at the close of Q2 2026, compared to 8.8 times a year ago. This strong improvement to our financial foundation allows us to focus on growth drivers for our business. Second, on rationalizing the portfolio and increasing investment in the core assets, I'm happy to report that the core assets we have delineated, namely data center, LoRa, and Percy, each strongly contributed to our net sales momentum throughout the year.

With the increased R&D investments into this core areas, we anticipate further acceleration of our momentum.

Third revitalizing our winning culture.

This is the area of progress of which most of the crowd.

By strong engagement with employees through frequent site visits.

Our active get formation Acescence small group and a one on one meetings as well as regular and transparent communications, we provided much needed clarity in the company's vision strategy and priorities.

Speaker #5: With the increased R&D investment into these core areas, we anticipate further acceleration of our momentum. Third, revitalizing our winning culture—this is an area of progress of which I'm most proud.

Following a call to action.

Finally, instilling a culture of a customer intimacy.

Operational discipline and strong execution.

<unk>, we have made a great progress on achieving roadmap alignments with our key customers through significantly improved customer engagement.

Speaker #5: By strong engagement with employees through frequent site visits, interactive information sessions, small group and one-on-one meetings, as well as regular and transparent communications, we provided much-needed clarity in the company's vision, strategy, and priorities.

Hong Hou: By strong engagement with employees through frequent site visits, interactive information sessions, small group and one-on-one meetings, as well as regular and transparent communications, we provided much-needed clarity in the company's vision, strategy, and priorities following a call to action. By instilling a culture of customer intimacy, operational discipline, and strong execution, we believe we have made great progress on achieving roadmap alignments with our key customers through significantly improved customer engagement, securing new product design wins, and delivering strong financial performance. I'd like to extend my sincere gratitude to the senior leadership and all of our fellow employees for their resilience, dedication, and commitment to Semtech's rising initiative. Going forward, the priority of portfolio optimization is further elevated. We have managed our non-core assets back to a growth trajectory, and combined with the market tailwinds, we believe these assets represent a very compelling business to the rescuer.

Security and new product design wins, and delivering strong financial performance.

I'd like to extend my sincere gratitude to the senior leadership and all of our silo employees for their resilience dedication and commitment to some Texas rising initiative.

Speaker #5: Following a call to action, by instilling a culture of customer intimacy, operational discipline, and strong execution, we believe we have made great progress on achieving roadmap alignment with our key customers through significantly improved customer engagement, securing new product design wins, and delivering strong financial performance.

Going forward the price.

IDL portfolio optimization is a further elevated.

We have managed our non core assets back to up your growth trajectory and combined with our market <unk>. We believe this assets represent a very compelling business to the right sugar.

We believe we are well positioned to further transform <unk> into a higher and more profitable company.

Speaker #5: I would like to extend my sincere gratitude to the senior leadership and all of our fellow employees for their resilience, dedication, and commitment to Semtech's rising initiative.

Now, let me move that discussions to our end markets.

For Q2 infrastructure net sales were $73 4 million up 1% sequentially and up 39% year over year.

Speaker #5: Going forward, the priority of portfolio optimization is further elevated. We have managed our non-core assets back to a growth trajectory, and combined with a market tailwind, we believe this asset represents a very compelling business to the right shooter.

Infrastructure revenue benefited from record revenues in our data center business.

Net sales for data center reached a record of $52 2 million.

Up 1% sequentially and up 92% year over a year.

Speaker #5: We believe we are well-positioned to further transform Semtech into a higher growth and more profitable company. Now, let me move the discussions to our end market.

Hong Hou: We believe we are well positioned to further transform Semtech Corporation into a higher growth and more profitable company. Now, let me move the discussions to our end markets. For Q2, infrastructure net sales were $73.4 million, up 1% sequentially, and up 39% year-over-year. Infrastructure revenue growth benefited from record revenues in our Data Center business. Net sales for Data Center reached a record $52.2 million, up 1% sequentially, and up 92% year-over-year, benefiting from our broad portfolio. FiberEdge products achieved the record net sales, offsetting the CopperEdge AirPocket from the initial rack deployment at our anchor customer. Based on Q2 performance, we expect continued strong opportunities for FiberEdge demand for the remainder of calendar year 2025 and beyond from our optical module customers serving North America cloud service providers or CSPs.

Benefiting from our broad portfolio.

Cyber etch product achieved a record net sales offsetting the copper etch air pocket from the initial <unk> deployment.

Speaker #5: For Q2, infrastructure net sales were $73.4 million, up 1 percent sequentially and up 39 percent year-over-year. Infrastructure revenue growth benefited from record revenues in our data center business.

At our anchor customer.

Based on Q2 performance, we expect continued strong opportunities for fabric <unk> demand for the remainder of calendar year 2025, and beyond from our optical module customers, serving North America cloud service providers.

Speaker #5: Net sales for the data center reached a record $52.2 million, up 1 percent sequentially and up 92 percent year-over-year. Benefiting from our broad portfolio, CyberEdge products achieved record net sales, offsetting the CopperEdge AirPocket from the initial rack deployment at our anchor customer.

Asps.

This conviction is supported by our direct ecosystem engagement.

Which correlates with the increases in the data center Capex forecast from multiple Hyperscale orders.

Operators and enterprises.

During Q2 bookings and forecast from our optical module customers, serving China as base. The Csp's will generally costless due to limits on CPU availability.

Speaker #5: Based on Q2 performance, we expect continued strong opportunities for CyberEdge demand for the remainder of calendar year 2025 and beyond from our optical module customers serving North American cloud service providers (CSPs).

That said, we have started to see an accelerated data center bookings over the past several weeks for this market.

Speaker #5: This conviction is supported by our direct ecosystem engagement, which correlates with the increases in the data center CapEx forecast from multiple hyperscalers, solvent operators, and enterprises.

Hong Hou: This conviction is supported by our direct ecosystem engagement, which correlates with increases in the Data Center CAPEX forecast from multiple hyperscalers, solvent operators, and enterprises. During Q2, bookings and forecasts from our optical module customers serving China-based CSPs were generally cautious due to limits on GPU availability. That said, we have started seeing accelerated Data Center bookings over the past several weeks for this market. Looking ahead to the next several quarters, we expect the Data Center market to continue its multi-year growth cycle. The market is shifting to higher data rates to support increased compute and network interconnect bandwidth, resulting in strong demand for our FiberEdge 800G TIAs, moving rapidly from 400G. Beyond 800G, we are supporting multiple customers on their 1.6T transceiver designs with both TIAs and drivers.

Looking ahead to the next several quarters, we expect the data center market to continue with a multiyear growth cycle.

The market is shifting to higher data rates to support the increased compute and networking interconnect bandwidth.

Speaker #5: During Q2, bookings and forecasts from our optical module customers serving China-based CSPs were generally cautious due to limits on GPU availability. That said, we have started seeing accelerated data center bookings over the past several weeks for this market.

Resulting in strong demand for our fiber etch 800 gig tiaa's moving rapidly from 400 gig.

Beyond 800 gig, we're sub <unk> multiple customers under 160 transceiver designs with both <unk> and drivers.

We currently expect a volume ramps to start in the first half of 2026.

Speaker #5: Looking ahead to the next several quarters, we expect the data center market to continue its multi-year growth cycle. The market is shifting to higher data rates to support the increased compute and network interconnect bandwidth.

Commensurate with that throughout of deployments of 160 switches.

Well the shift to a higher speed to achieve high bandwidth is that given.

It is increasingly important to deliver this bandwidth using low power and low latency networks interconnect.

Speaker #5: Resulting in strong demand for our CyberEdge 800G TIAs, moving rapidly from 400G. Beyond 800G, we are supporting multiple customers on their 1.6T transceiver designs, with both TIAs and drivers.

<unk> analogue expertise allows us to deliver a high performance compute and again creates a storage capacity constraints.

Constraining our budget for networking.

Speaker #5: We currently expect volume ramps to start in the first half of 2026, commensurate with the broad deployment of 1.6T switches. While the shift to higher speed to achieve high bandwidth is a given, it is increasingly important to deliver this bandwidth using low power and a low latency network interconnect.

Hong Hou: We currently expect volume ramps to start in the first half of 2026, commensurate with the broad deployment of 1.6T switches. While the shift to higher speed to achieve high bandwidth is a given, it is increasingly important to deliver this bandwidth using low power and a low latency network interconnect. Semtech Corporation's analog expertise allows CSPs to deliver high-performance compute, and it increases storage capacity while constraining our budget for networking. On the optical side, we have secured several LPO design wins with our TIAs in 400 gig and 800 gig transceivers. We believe we have secured the lion's shares of the TIAs in the most optical transceivers. Our 800 gig LPO laser drivers were specifically designed to comply with all LPO MSA requirements, and we believe it is the only compliant driver in the market.

On the optical side.

We have secured several LPL design wins.

Without <unk> in the 400 gig and 800 gig transceivers.

We believe we have secured the lion's shares of the TIAA is in the most optical transceivers.

Our 800 gig laser drivers was specifically designed to comply with all LPL MSA requirements.

Speaker #5: SEMTECH's analog expertise allows CSPs to deliver high-performance compute and increased storage capacity while constraining power budgets for networking. On the optical side, we have secured several LPO design wins, with our TIAs in 400 gig and 800 gig transceivers.

And we believe it is the only compliant dry bring into market.

Several optical module customers are conducting design and testing of our drivers on their transceivers.

We are engaged with a three after leading hyper scalar is with our 800 gig <unk> solution and expect revenues to begin ramping in Q4 of this year.

Speaker #5: We believe we have secured line shares of the TIAs in the most optical transceivers. Our 800 gig LPO laser drivers were specifically designed to comply with all LPO MSA requirements.

We are accelerating our R&D roadmap.

And our targeting 19, 160, LPL drivers and TIAA is available for sampling before the end of the year.

Speaker #5: And we believe it is the only compliant driver in the market. Several optical module customers are conducting design-in and testing of our drivers on their transceivers.

Another high bandwidth and low power solution is a tougher etch for ACC and onboard lenient equalizer.

Hong Hou: Several optical module customers are conducting design and testing of our drivers on their transceivers. We are engaged with three of the leading hyperscalers with our 800 gig LPO solution and expect revenues to begin ramping in Q4 of this year. We are accelerating our R&D roadmap and are targeting making 1.6T LPO drivers and TIAs available for sampling before the end of the year. Another high bandwidth and low power solution is a CopperEdge for ACC and onboard linial equalizer. During the quarter, we delivered 800 gig and 1.6T ACC cables to multiple hyperscalers and enterprise customers for testing and qualification. Those customers are seeing benefits of strong signal integrity, lower latency, and importantly, much lower power consumption, as much as 90% below competing DSP-based AEC solutions, while offering lighter and more flexible cables, as well as a significantly longer reach compared to direct-attached copper cables.

During the quarter, we delivered 800 gig and 160 ACC cables to a multiple hyper scaler and enterprise customers for testing and qualification.

Speaker #5: We are engaged with three of the leading hyperscalers with our 800-gig LPO solution and expect revenues to begin ramping in Q4 of this year.

Those customers are seeing benefits of a strong signal integrity, lower latency and importantly, much lower power consumption.

Speaker #5: We are accelerating our R&D roadmap and are targeting making 1.6T LPO drivers and TIAs available for sampling before the end of the year. Another high-bandwidth and low-power solution is the CopperEdge for ACC and onboard linear equalizer.

As much as 90% below competing DSP based ADC solutions well.

While offering lighter and more flexible cables as well as a significantly longer reach compared to direct attach copper cables.

We continue closely engagement with our anchor customer for their future Rex platforms using copper edge.

Speaker #5: During the quarter, we delivered 800G and 1.6T ACC cables to multiple hyperscaler and enterprise customers for testing and qualification. Those customers are seeing benefits of strong signal integrity, lower latency, and, importantly, much lower power consumption.

160, optical transceivers using our fiber X product.

We are on track and expect to launch ACC was at U S. Hyperscale customers during calendar year 2026.

Speaker #5: As much as 90% below competing DSP-based AEC solutions, while offering lighter and more flexible cables, as well as significantly longer reach compared to direct attached copper cables.

Currently we are enabling all of the major cable suppliers all of which have began initial qualification at multiple hyperscale.

As datacenter topology continues to evolve.

Speaker #5: We continue close engagement with our anchor customer for their future rack platforms using CopperEdge and 1.6T optical transceivers using our CyberEdge product. We are on track and expect to launch ACC with U.S. hyperscaler customers during calendar year 2026.

We see copper remaining foundational elements.

Hong Hou: We continue close engagement with our anchor customers for their future rack platforms using CopperEdge and 1.6T optical transceivers using our FiberEdge product. We are on track and expect to launch ACC with U.S. hyperscaler customers during calendar year 2026. Currently, we are enabling all the major cable suppliers, all of which have begun initial qualification at multiple hyperscalers. As data center topology continues to evolve, we see copper remaining a foundational element of next-generation data center interconnect, particularly for short bridge links, where its cost, power efficiency, speed, and reliability are unmatched. With the bandwidth requirements increasing from 400 gig to 800 gig, 1.6T and beyond, advances in active copper technologies are extending the reach and offering significant power savings, making copper an essential complement to optical solutions.

<unk> generation datacenter units and mix.

<unk> on the four short reach links where it's cost however, our efficiency speed and reliability are unmatched.

With the bandwidth requirements, increasing from 400 gig to 800 gig 160 and beyond.

Speaker #5: Currently, we are enabling all the major cable suppliers, all of which have begun initial qualification at multiple hyperscalers. As data center topology continues to evolve, we see copper remaining a foundational element of next-generation data center interconnects.

Advances in active copper technologies are extending the reach and offering significantly power savings.

Making copper essential complement to optical solutions.

In high performance computing and AI clusters tougher.

Operating enables low latency energy efficiency connections at a rash and ROE level, where optics that drives longer routes needs.

Speaker #5: Particularly for short-reach links, where cost, power efficiency, speed, and reliability are unmatched. With a bandwidth requirement increasing from 400 gig to 800 gig, 1.6T, and beyond, advances in active copper technologies are extending the reach and offering significant power savings, making copper an essential complement to optical solutions.

By leveraging our 20 plus years of experience in analog data Center solutions.

We are helping our customers achieve the performance efficiency and scalability demands of today's and Tomorrow's data center with a comprehensive product portfolio.

<unk> line speeds from 10 gig to 400 gig with a line count from one to eight channels.

Speaker #5: In high-performance computing and AI clusters, copper enables low latency, energy-efficient connections at the rack and row level, while optics address longer reach needs.

Hong Hou: In high-performance computing and AI clusters, copper enables low latency, energy efficiency connections at the rack and row level, where optics address longer bridge needs. By leveraging our 20-plus years of experience in analog Data Center solutions, we are helping our customers achieve the performance, efficiency, and scalability demands of today's and tomorrow's Data Center with a comprehensive product portfolio addressing line speeds from 10 gig to 400 gig with a line count from one to eight channels. Moving forward, the momentum in FiberEdge, combined with our emerging CopperEdge and LPO opportunities, all supported by the strong Data Center CAPEX spending, positions our Data Center business for strong growth. Now, moving to our high-end consumer end market, net sales for Q2 were $41.2 million, up 16% sequentially, and up 11% year-over-year.

Moving forward the momentum in fiber edge.

Combined with our emerging tougher etch and <unk> opportunities.

All supported by the strong data center Capex spending.

Speaker #5: By leveraging our 20-plus years of experience in analog data center solutions, we are helping our customers achieve the performance, efficiency, and scalability demands of today's and tomorrow's data center with a comprehensive product portfolio.

This is our data center business for strong growth.

Now moving to our high end consumer end market.

Net sales for Q2.

$41 $2 million.

Up 16% sequentially and up 11% year over year.

Speaker #5: Addressing line speeds from 10 Gig to 400 Gig with a line count from 1 to 8 channels. Moving forward, the momentum in CyberEdge, combined with our emerging CopperEdge and LPO opportunities, all supported by the strong data center CapEx spending, positions our data center business for strong growth.

Net sales for the end consumer TBS or $29 $9 million.

Up 22% sequentially and up 15% year over year consistent with the seasonality.

Associated with the smartphone unit ramps.

And our strong content across multiple customers.

This is.

Succeeds overall.

Speaker #5: Now, moving to our high-end consumer end market, net sales for Q2 were $41.2 million, up 16 percent sequentially and up 11 percent year-over-year.

The handset volumes.

Aligning with our belief that <unk> is gaining content and the market share stemming from our market, leading performance and supply chain excellence.

Designed for ultra high capacitance sensitivity and faster response times, thus devices safeguard displays as well as price speed interfaces setup.

Speaker #5: Net sales in consumer TVS were $29.9 million, up 22 percent sequentially and up 15 percent year-over-year. This is consistent with the seasonality associated with the smartphone unit reps, and our strong content across multiple customers.

Hong Hou: Net sales in consumer TVS were $29.9 million, up 22% sequentially, and up 15% year-over-year, consistent with the seasonality associated with the smartphone unit ramps and our strong content across multiple customers. This growth exceeds overall growth in the handset volumes, aligning with our belief that Semtech Corporation is gaining content and market share, stemming from our market-leading performance and supply chain excellence. Designed for ultra-high capacitance sensitivity and fast response times, this device's safeguard displays, as well as high-speed interfaces such as HDMI, USB, and DisplayPort, without compromising signal integrity or performance. This makes them ideal for use in smart TVs, game consoles, laptops, wearables, and mobile devices. Leading global consumer electronics brands integrate Semtech Corporation's TVS technology into their products to ensure device performance, durability, and reliability.

<unk> USB and display for us without compromising signal integrity our performance.

This makes them ideal for UC and smart Tvs game consoles laptops, Wearables and mobile devices.

Speaker #5: This growth exceeds overall growth in the handset volumes, aligning with our belief that Semtech is gaining content and market share, stemming from our market-leading performance and supply chain excellence.

Leading global consumer electronics spreads you integrate <unk> technology into their products to ensure device performance durability and reliability.

Speaker #5: Designed for ultra-high capacitance sensitivity and fast response times, this device safeguards displays, as well as high-speed interfaces such as HDMI, USB, and DisplayPort, without compromising signal integrity or performance.

In addition, our per Se sensing technology is being increasingly deployed across a growing range of applications from consumer electronics to.

Automotive and industrial markets.

In devices, such as smartphones and laptops computers.

Speaker #5: This makes them ideal for use in smart TVs, game consoles, laptops, wearables, and mobile devices. Leading global consumer electronics brands integrate Semtech's TVS technology into their products to ensure device performance, durability, and reliability.

Our specific absorption rate standards are becoming more stringent.

<unk> enables intelligent power management by detecting proximity and optimizing RF performance to meet regulatory requirements without compromising that user experience.

Speaker #5: In addition, our Percy sensing technology is being increasingly deployed across a growing range of applications, from consumer electronics to automotive and industrial markets. In devices such as smartphones and laptop computers, where specific absorption rate standards are becoming more stringent, Percy enables intelligent power management by detecting proximity and optimizing RF performance to meet regulatory requirements.

Hong Hou: In addition, our PerSe sensing technology is being increasingly deployed across a growing range of applications, from consumer electronics to automotive and industrial markets. In devices such as smartphones and laptop computers, where specific absorption rate standards are becoming more stringent, PerSe enables intelligent power management by detecting proximity and optimizing RF performance to meet regulatory requirements without compromising the user experience. In addition, PerSe enables precise gesture control with ultra-low power consumption, both of which are highly valued for wearables such as a headset and smart glasses. We are actively engaged in design discussions with a broad range of customers in both smart glasses and smartphone platforms, supporting both existing designs and new launches over the coming quarters. Moving towards industrial end market, Q2 industrial net sales were $143 million, up slightly sequentially, in line with our outlook, and up 14% year-over-year.

In addition personnel enables precise jet structuring 12 with ultra low power consumption.

Both of which are highly valued saw wearables, such as handsets and smart glasses.

We are actively engaged in design discussions with a broad range of customers in both smart glasses and smartphone platforms supporting both existing designs and new launches over the coming quarters.

Moving to us industrial end market.

Speaker #5: Without compromising the user experience, Percy enables precise gesture control with ultra-low power consumption, both of which are highly valued for wearables such as headsets and smart glasses.

Q2, industrial net sales were $143 million.

Slightly sequentially.

In line with our outlook and up 14% year over year.

Industrial net sales our Lora enabled solutions.

It was $36 9 million.

Speaker #5: We are actively engaged in design discussions with a broad range of customers in both smart glasses and smartphone platforms, supporting both existing designs and the new launches over the coming quarters.

Down, 5% sequentially and up 29% year over year supported by continued expense and across several end markets and again multiple applications.

Flora offers a unique combination of long range connectivity.

Speaker #5: Moving towards the industrial end market, Q2 industrial net sales were $1.43 million, up slightly sequentially, in line with our outlook, and up 14 percent year-over-year.

Low power consumption and robust performance in challenging environments.

Its ability to transmit data over several kilometers while operating in four years on a single battery charge makes it ideal for predictive maintenance.

Speaker #5: Within industrial, net sales of LoRa-enabled solutions were $36.9 million, down 5 percent sequentially, and up 29 percent year-over-year. Supported by continued expansion across several end markets and in multiple applications, LoRa offers a unique combination of long-range connectivity, low power consumption, and robust performance in challenging environments.

Hong Hou: Within industrial, net sales of LoRa-enabled solutions were $36.9 million, down 5% sequentially, and up 29% year-over-year, supported by continued expansion across several end markets and in multiple applications. LoRa offers a unique combination of long-range connectivity, low power consumption, and robust performance in challenging environments. Its ability to transmit data over several kilometers while operating for years on a single battery charge makes it ideal for predictive maintenance, asset tracking, energy management, and smart city infrastructure. It also enables cost-effective and secure monitoring and control of equipment, infrastructure, and environmental conditions over large areas. We are seeing growth in applications including home security systems, smart appliances, pet and personal treasures, and community-based environmental sensors. In addition, our recent generation LoRa chips offer dual-band capability, 2.4 gigahertz and ISM frequencies, to enhance bandwidth.

Asset tracking energy and instrument and the smart city infrastructure.

It also enables cost effective NFC cure monitoring.

And the control of the equipment infrastructure and the environmental conditions over large areas.

We are seeing growth in applications, including home security systems Smart appliances.

<unk> personal tractors and community based and environmental sensors.

Speaker #5: Its ability to transmit data over several kilometers while operating for years on a single battery charge makes it ideal for predictive maintenance, asset tracking, energy management, and smart city infrastructure.

In addition, our recent general recent Lora chips offer dual band capability.

0.4, gigahertz and the ISN frequencies.

Enhanced bandwidth.

Speaker #5: It also enables cost-effective and secure monitoring and control of equipment, infrastructure, and environmental conditions over large areas. We are seeing growth in applications including home security systems, smart appliances, pet and personal treasures, and community-based environmental sensors.

This capability is supporting a new generation of connected devices that require reliable low power communication without the complexity and the expenses of traditional networks.

The capability is facilitating lower as adoption in emerging low altitude economy, including drone delivery aerial surveying and an emergency rescue.

Speaker #5: In addition, our recent generation LoRa chips offer dual-band capability—2.4 gigahertz and ISM frequencies—to enhance bandwidth. This capability supports a new generation of connected devices that require reliable low-power communication without the complexity and expenses of traditional networks.

<unk> is especially well suited for this variance.

It combines long range communication.

Low power consumption and a strong signal resilience three factors for critical area of our operations.

Hong Hou: This capability is supporting a new generation of connected devices that require reliable, low-power communication without the complexity and expenses of traditional networks. Dual-band capability is facilitating LoRa's adoption in emerging low-altitude economies, including drone delivery, aerial surveying, and emergency rescue. LoRa is especially well suited for this environment as it combines long-range communication, low power consumption, and strong signal resilience, three factors critical for aerial operations. LoRa technology is used to provide reliable telemetry and sensor data transmission even beyond visual line of sight. This allows operators to gather real-time insights without relying solely on high bandwidth short bridge video links. Our IoT Systems hardware business recorded Q2 net sales of $64.8 million, up 2% sequentially, and up 24% year-over-year.

Lora technology is used to provide a reliable telemetry and sensor data transmission, even beyond visual line of sight.

This will allows operators to gather real time insights without relying solely on high bandwidth short.

Speaker #5: Dual-band capability is facilitating LoRa's adoption in the emerging low-altitude economy, including drone delivery, aerial surveying, and emergency rescue. LoRa is especially well-suited for this environment, as it combines long-range communication, low power consumption, and strong signal resilience—three factors critical for aerial operations.

Video links.

Our Iot systems hardware business recorded a Q2 net sales of $64 $8 million.

Up 2% sequentially and up 24% year over year.

Bookings via our hardware business continues to be strong.

Over 40% year over year due to both the broad market recovery as well as our position as a leading north American supplier.

Speaker #5: LoRa technology is used to provide reliable telemetry and sensor data transmission, even beyond visual line of sight. This allows operators to gather real-time insights without relying solely on high-bandwidth, short-reach video links.

We see strong <unk> momentum at the Iot transitions from <unk> with a growth in both bookings and design wins.

We believe we hold a leadership position with the <unk> Reg cap.

Speaker #5: Our IoT systems hardware business recorded Q2 net sales of $64.8 million, up 2 percent sequentially and up 24 percent year-over-year. Bookings in our hardware business continue to be strong, up over 40 percent year-over-year.

And are progressing well again launching Qualcomm based platforms in the coming year.

We continue to lead the <unk> L PWA advancing satellite Iot Sue non terrestrial networks.

Hong Hou: Bookings in our hardware business continue to be strong, over 40% year-over-year, due to both the broad market recovery as well as our position as a leading North American supplier. We see strong 5G momentum as IoT transitions from 4G with growth in both bookings and design wins. We believe we hold a leadership position with 5G RedCap and are progressing well in launching Qualcomm-based platforms in the coming year. We continue to lead in 5G LPWA, advancing satellite IoT through non-terrestrial network, or NTN, which opens up new opportunities for global connectivity. For router and gateways, our partnership ecosystem continues gaining momentum. As announced in June, several of our products, including our flagship XR60 5G router, achieved Verizon Frontline verified status. We now support Verizon's Frontline Network slice, a dedicated 5G highway for the first responders. This opened up significant opportunities in public safety, where mission-critical connectivity is paramount.

It.

Which opens up new opportunities for global connectivity.

Speaker #5: Due to both the broad market recovery and our position as a leading North American supplier, we see strong 5G momentum as IoT transitions from 4G, with a growth in both bookings and design wins.

While our routers and gateways.

Our partnership ecosystem continues gaining momentum.

As announced in June several of our products, including our flagship XR 65, G router achieved that Verizon frontline verified status with.

Speaker #5: We believe we hold a leadership position with 5G rack cap and are progressing well in launching Qualcomm-based platforms in the coming year. We continue to lead in 5G LPWA, advancing satellite IoT through non-terrestrial network (NTN), which opens up new opportunities for global connectivity.

We now support where ryzen frontline networks slides.

Dedicated <unk> highway for the first responders.

This opens up significant opportunities in public safety.

We're mission critical connectivity is paramount.

In July we hosted an errand linked partner summit in Dallas.

Speaker #5: For broader gateways and our partnership ecosystem, momentum continues to gain. As announced in June, several of our products, including our flagship XR60 5G router, achieved Verizon Frontline verified status.

We shared our product roadmap and showcased a range of compelling use cases in public safety public transit utility oil.

On the gas as well as the government applications.

Our various partnerships represent a fundamental steps as way evolved from a product vendor to a solution provider of choice for mission critical applications.

Speaker #5: We now support Verizon's Frontline network slice, a dedicated 5G highway for first responders. This has opened up significant opportunities in public safety, where mission-critical connectivity is paramount.

In summary, we delivered another quarter of strong financial performance in Q2.

Reflecting both the strength of our core business and the disciplined execution of our strategy.

Speaker #5: In July, we hosted an AirLink partner summit in Dallas. We shared our product roadmap and showcased a range of compelling use cases in public safety, public transit, utilities, oil and gas, as well as government applications.

Hong Hou: In July, we hosted an AirLink partner summit in Dallas. We shared our product roadmap and showcased a range of compelling use cases in public safety, public transit, utility, oil, and gas, as well as government applications. Our various partnerships represent fundamental steps as we evolve from a product vendor to a solution provider of choice for mission-critical applications. In summary, we delivered another quarter of strong financial performance in Q2, reflecting both the strength of our core business and the disciplined execution of our strategy. At the same time, we continue to invest in our R&D, which will fuel future growth, ensuring our technology remains at the forefront of the market requirement and customer expectations. With that, I will now turn the call to Mark for additional detail on our financial results and our outlook for the third quarter of FY26. Mark?

At the same time, we continue to invest in R&D.

Which will fuel future geos, ensuring our technology remains at the forefront of the market requirements and our customer expectations.

Speaker #5: Our various partnerships represent fundamental steps as we evolve from a product vendor to a solution provider of choice for mission-critical applications. In summary, we delivered another quarter of strong financial performance in Q2, reflecting both the strength of our core business and the disciplined execution of our strategy.

With that I will now turn the call to Mark for additional detail on our financial results and the outlook for the third quarter of FY 'twenty six.

Mark.

Thank you Heng.

I am pleased to report that for Q2 net sales were a record $257 6 million.

Above the midpoint of our outlook up 20% year over year, and the sixth consecutive quarter of growth.

Speaker #5: At the same time, we continue to invest in our R&D, which will fuel future growth, ensuring our technology remains at the forefront of market requirements and customer expectations.

Net sales trends by end market reportable segment and geographic region are included on slide 16 of the earnings presentation.

Adjusted gross margin was 53, 2% down 30 basis points sequentially and up 280 basis points year over year and above the midpoint of our outlook.

Speaker #5: With that, I will now turn the call to Mark for additional detail on our financial results and our outlook for the third quarter of FY26.

Semiconductor products adjusted gross margin was 67%.

Speaker #5: Mark?

Sequentially from 63, 7% and up.

Speaker #6: Thank you, Hong. I am pleased to report that for Q2, net sales were a record $257.6 million, above the midpoint of our outlook, up 20 percent year-over-year, and the sixth consecutive quarter of growth.

Mark Lin: Thank you, Hong. I am pleased to report that for Q2, net sales were a record $257.6 million, above the midpoint of our outlook, up 20% year-over-year, and the sixth consecutive quarter of growth. Net sales trends by end market, reportable segment, and geographic region are included on slide 16 of the earnings presentation. Adjusted gross margin was 53.2%, down 30 basis points sequentially, and up 280 basis points year-over-year, and above the midpoint of our outlook. Semiconductor products' adjusted gross margin was 60.7%, down sequentially from 63.7%, and up year-over-year from 59.2%. Looking at the adjusted gross margin dynamics in more detail, high-end consumer sales were seasonally higher in Q2, which has a modest negative impact on product mix. Product mix within signal integrity was impacted by higher sales of telecommunications products, as well as a forecasted decline in corporate revenue.

Up year over year from 59, 2%.

Looking at the adjusted gross margin dynamics in more detail.

High end consumer sales were seasonally higher in Q2, which has a modest negative impact on product mix.

Speaker #6: Net sales trends by end market, reportable segment, and geographic region are included on slide 16 of the earnings presentation. Addressing gross margin was 53.2 percent, down 30 basis points sequentially, and up 280 basis points year-over-year, and above the midpoint of our outlook.

Mix within signal integrity was impacted by higher sales of telecommunications products as well as a forecasted decline in corporate revenue.

Iot systems and connectivity adjusted gross margin benefited from higher sales of routers and gateways with Q2 at 39, 5% improving sequentially from 34, 4% and up year over year from 35, 4%.

Speaker #6: Semiconductor products adjusted gross margin was 60.7%, down sequentially from 63.7%, and up year-over-year from 59.2%. Looking at the adjusted gross margin dynamics in more detail, high-end consumer sales were seasonally higher in Q2, which has a modest negative impact on product mix.

Adjusted net operating expenses were $88 4 million within our guidance range.

Adjusted operating income was $48 $6 million, resulting in an adjusted operating margin of 18, 8% up 460 basis points year over year.

Speaker #6: Product mix within signal integrity was impacted by higher sales of telecommunications products, as well as the forecasted decline in copper edge revenue. IoT systems and connectivity adjusted gross margin benefited from higher sales of routers and gateways, with Q2 at 39.5 percent, improving sequentially from 34.4 percent and up year-over-year from 35.4 percent.

Adjusted EBITDA was $56 5 million up 39% year over year and adjusted EBITDA margin was 21, 9% up 310 basis points year over year.

Mark Lin: IoT Systems and connectivity adjusted gross margin benefited from higher sales of routers and gateways, with Q2 at 39.5%, improving sequentially from 34.4% and up year-over-year from 35.4%. Adjusted net operating expenses were $88.4 million, within our guidance range. Adjusted operating income was $48.6 million, resulting in an adjusted operating margin of 18.8%, up 460 basis points year-over-year. Adjusted EBITDA was $56.5 million, up 39% year-over-year, and adjusted EBITDA margin was 21.9%, up 310 basis points year-over-year. Adjusted net interest expense was $4.1 million, down 80% year-over-year. Annualizing the Q2 amount, adjusted net interest expense is well under a single quarter's expense from just a year ago. This has allowed us to accelerate investment in strategic, high-growth areas of our business while driving earnings growth and cash flow.

Adjusted net interest expense was $4 $1 million.

80% year over year.

Annualized in the Q2 amount adjusted net interest expense is well under a single quarter's expense from just a year ago.

Speaker #6: Adjusted net operating expenses were $88.4 million, within our guidance range. Addressing operating income was $48.6 million, resulting in an adjusted operating margin of 18.8 percent.

This has allowed us to accelerate investment in strategic high growth areas of our business, while driving earnings growth and cash flow.

Q2, adjusted net interest expense decreased sequentially from $5 million reflective of our continued prioritization of using free cash flow to repay debt.

Speaker #6: Up 460 basis points year-over-year. Addressing EBITDA was $56.5 million, up 39 percent year-over-year, and adjusted EBITDA margin was 21.9 percent, up 310 basis points year-over-year.

Yeah.

Other net nonoperating expenses were $1 $3 million.

Primarily from foreign exchange revaluation losses reflect a weaker U S dollar during the quarter.

Speaker #6: Addressing net interest expense was $4.1 million, down 80 percent year-over-year. Annualizing the Q2 amount, adjusted net interest expense is well under a single quarter's expense from just a year ago.

We recorded adjusted diluted earnings per share of <unk> 41.

Up from 38 in Q1, and a substantial improvement from 11 recorded a year ago.

Speaker #6: This has allowed us to accelerate investment in strategic, high-growth areas of our business while driving earnings growth and cash flow. Q2 adjusted net interest expense decreased sequentially from $5 million, reflective of our continued prioritization of using free cash flow to repay debt.

In the second quarter, we recorded a noncash $41 9 million goodwill impairment charge from our connected services business that are reflected in our GAAP results.

Mark Lin: Q2 adjusted net interest expense decreased sequentially from $5 million, reflective of our continued prioritization of using free cash flow to repay debt. Other net non-operating expenses were $1.3 million, primarily from foreign exchange revaluation losses, reflective of a weaker U.S. dollar during the quarter. We recorded adjusted diluted earnings per share of $0.41, up from $0.38 in Q1, and a substantial improvement from $0.11 recorded a year ago. In the second quarter, we recorded a non-cash $41.9 million goodwill impairment charge from our connected services business that is reflected in our GAAP results. While net sales for this business remained stable, down 1% year-over-year and up 3% sequentially, these results did not meet our internal earnings forecasts and resulted in a reassessment of this business's goodwill balance. Operating cash flow for Q2 was $44.4 million, sequentially up 60% from $27.8 million and up from -$5 million a year ago.

Net sales for this business remains stable down 1% year over year and up 3% sequentially. These results did not meet our internal earnings forecast that resulted in a reassessment of this businesses goodwill balance.

Speaker #6: Other net non-operating expenses were $1.3 million, primarily from foreign exchange revaluation losses, reflective of a weaker U.S. dollar during the quarter. We recorded adjusted earnings per share of $0.41, up from $0.38 in Q1, and a substantial improvement from $0.11 recorded a year ago.

Yeah.

Operating cash flow for Q2 was $44 4 million.

Sequentially up 60% from $27 $8 million and up from negative $5 million a year ago.

Free cash flow for Q2 reflected similar growth of $41 $5 million sequentially up 59% from $26 $2 million and up from negative $8 4 million a year ago.

Speaker #6: In the second quarter, we recorded a non-cash $41.9 million goodwill impairment charge from our connected services business, which was reflected in our GAAP results.

We ended Q2 with a cash and cash equivalents balance of $168 6 million.

Speaker #6: While net sales for this business remained stable, down 1 percent year-over-year and up 3 percent sequentially, these results did not meet our internal earnings forecast and resulted in a reassessment of this business's goodwill balance.

Up $12 $1 million from Q1, while making optional principal prepayments of $25 million on our term loan.

At the end of Q2 net debt sequentially decreased $37 1 million to $359 1 million.

Speaker #6: Operating cash flow for Q2 was $44.4 million, sequentially up 60 percent from $27.8 million, and up from negative $5 million a year ago.

Along with debt reduction strong business performance contributed to an adjusted net leverage ratio of one six as of the close of Q2 down sequentially from $1 nine and down year over year from $1 eight.

Speaker #6: Free cash flow for Q2 reflected similar growth at $41.5 million, sequentially up 59 percent from $26.2 million and up from negative $8.4 million a year ago.

Mark Lin: Free cash flow for Q2 reflected similar growth at $41.5 million, sequentially up 59% from $26.2 million and up from -$8.4 million a year ago. We ended Q2 with a cash and cash equivalents balance of $168.6 million, up $12.1 million from Q1, while making optional principal prepayments of $25 million on our term loan. At the end of Q2, net debt sequentially decreased $37.1 million to $359.1 million. Along with debt reduction, strong business performance contributed to an adjusted net leverage ratio of 1.6 as of the close of Q2, down sequentially from 1.9 and down year-over-year from 8.8. Now, turning to our third quarter outlook, we currently expect net sales of $266 million plus or minus $5 million, up 12% year-over-year at the midpoint. We expect net sales from our infrastructure end market to increase sequentially, including growth in Data Center.

Now turning to our third quarter outlook.

We currently expect net sales of $266 million, plus or minus $5 million of.

Speaker #6: We ended Q2 with a cash and cash equivalents balance of $168.6 million, up $12.1 million from Q1, while making optional principal prepayments of $25 million on our term loan.

A 12% year over year at the midpoint.

We expect net sales from an infrastructure end market to increase sequentially, including growth in data center.

Speaker #6: At the end of Q2, net debt sequentially decreased by $37.1 million to $359.1 million. Along with debt reduction, strong business performance contributed to an adjusted net leverage ratio of 1.6 as of the close of Q2, down sequentially from 1.9 and down year-over-year from 8.8.

We expect net sales from our high end consumer end market to be up reflective of typical seasonality as well as content gains.

We expect net sales from our industrial end market to be slightly up with Laura about flat sequentially combined with growth in our Iot business.

Based on unexpected product mix and net sales levels, we expect adjusted gross margin to be 53.0% plus or minus 50 basis points to 60 basis point improvement year over year at the midpoint.

Speaker #6: Now, turning to our third quarter outlook. We currently expect net sales of $266 million, plus or minus $5 million, up 12 percent year-over-year at the midpoint.

Adjusted net operating expenses are expected to be $88 8 million plus or minus $1 million, resulting in an adjusted operating margin at the midpoint of 19, 6%, a 130 basis point improvement year over year.

Speaker #6: We expect net sales from our infrastructure end market to increase sequentially, including growth in data centers. We expect net sales from our high-end consumer end market to be up, reflective of typical seasonality as well as content gains.

Mark Lin: We expect net sales from our high-end consumer end market to be up, reflective of typical seasonality as well as content gains. We expect net sales from an industrial end market to be slightly up, with LoRa about flat sequentially, combined with growth in our IoT cellular business. Based on expected product mix and net sales levels, we expect adjusted gross margin to be 53.0%, plus or minus 50 basis points, a 60 basis point improvement year-over-year at the midpoint. Adjusted net operating expenses are expected to be $88.8 million, plus or minus $1 million, resulting in an adjusted operating margin at the midpoint of 19.6%, a 130 basis point improvement year-over-year. Adjusted EBITDA is expected to be $60 million, plus or minus $3 million, resulting in an adjusted EBITDA margin at the midpoint of 22.5%, a 90 basis point improvement year-over-year.

Adjusted EBITDA is expected to be $60 million, plus or minus $3 million, resulting in an adjusted EBITDA margin at the midpoint of 22, 5%, a 90 basis point improvement year over year.

Speaker #6: We expect net sales from our industrial end market to be slightly up, with LoRa about flat sequentially, combined with growth in our IoT cellular business.

Speaker #6: Based on expected product mix and net sales levels, we expect adjusted gross margin to be 53.0 percent, plus or minus 50 basis points, a 60 basis point improvement year-over-year at the midpoint.

We expect adjusted interest and other expense net to be $5 million benefiting from leverage based pricing on a term loan that aligns a lower interest rate to a lower leverage ratio.

Speaker #6: Addressing net operating expenses, which are expected to be $88.8 million, plus or minus $1 million, results in an adjusted operating margin at the midpoint of 19.6 percent, reflecting a 130 basis point improvement year-over-year.

We expect an adjusted normalized income tax rate of 15% consistent with Q2.

These amounts are expected to result in adjusted diluted earnings per share of <unk> 44.

Plus or minus <unk> <unk> based on a weighted average share count of $91 6 million shares.

Speaker #6: Addressing EBITDA is expected to be $60 million, plus or minus $3 million, resulting in an adjusted EBITDA margin at the midpoint of 22.5 percent, a 90 basis point improvement year-over-year.

Thank you Mark we can now turn the call back over to the operator for the question and answer session.

Thank you.

Speaker #6: We expect adjusted interest and other expense net to be $5 million, benefiting from leverage-based pricing on our term loan that aligns a lower interest rate to a lower leverage ratio.

Mark Lin: We expect adjusted interest and other expense net to be $5 million, benefiting from leverage-based pricing on our term loan that aligns a lower interest rate to a lower leverage ratio. We expect an adjusted normalized income tax rate of 15%, consistent with Q2. These amounts are expected to result in adjusted diluted earnings per share of $0.44, plus or minus $0.03, based on a weighted average share count of 91.6 million shares.

We will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.

Information to all indicate that your line is in the question queue. You May press star two to remove yourself from the queue for participants using speaker equipment that may be necessary to pick up the handset before pressing the star keys.

Speaker #6: We expect an adjusted normalized income tax rate of 15 percent, consistent with Q2. These amounts are expected to result in adjusted diluted earnings per share of $0.44, plus or minus $0.03, based on a weighted average share count of 91.6 million shares.

One moment, while we poll for questions.

And our first question comes from the line of harsh Kumar with Piper Sandler. Please proceed with your question.

Speaker #7: Thank you, Mark. We can now turn the call back over to the operator for the question-and-answer session.

Mitch Haas: Thank you, Mark. We can now turn the call back over to the operator for the question and answer session.

First of all congratulations on very solid very steady results.

Hong I did have a question on <unk> opportunity and the timing for it.

Speaker #8: Thank you. With that, we'll now be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone.

Mark Lin: Thank you. With that, we will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment while we poll for questions. Our first question comes from the line of Harsh Kumar with Piper Sandler. Please proceed with your question.

Not too long ago, a competitor sort of suggested that that timing maybe imminent that they were basically in commercial production.

Speaker #8: Keep that. A confirmation tone will indicate that your line is in the question queue. You may press *2 to remove yourself from the queue.

Curious off you're talking about fourth quarter. So I was curious about how you see the progression through the year.

Speaker #8: For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment while we pull for questions.

Is there a possibility that <unk> could be people and maybe it could come earlier or are you just in different sort of customers and maybe even a different slightly different timeline.

Speaker #8: And our first question comes from the line of Harsh Kumar with Piper Sandler. Please proceed with your question.

Thank you for the question yes.

Speaker #9: First of all, congratulations on very solid, very steady results. Hong, I did have a question on the LPO opportunity and the timing for it. Not too long ago, our competitor sort of suggested that that timing may be imminent, as they were basically in commercial production.

Hong Hou: First of all, congratulations on very solid, very steady results. Hong, I did have a question on Linear Pluggable Optics (LPO) opportunity and the timing for it. Not too long ago, our competitor suggested that that timing may be imminent, that they were basically in commercial production. I was curious of, you know, you are talking about Q4, so I was curious about how you see the progression through the year. Is there a possibility that Linear Pluggable Optics (LPO) could be preponed? Maybe it could come earlier, or are you just in different sort of customers and maybe with a different, slightly different timeline?

Yes, it's a L. P O we have been engaging with a broader customer base for applications.

For <unk> in the U S and in China, and the different stage of testing and qualification, but one thing is good that our ti as had been in pretty much every transceiver manufacturers design and qualification.

Speaker #9: I was curious, you know, you're talking about the fourth quarter, so I was curious about how you see the progression throughout the year. Is there a possibility that LPO could be preponed? Maybe it could come earlier?

As for timing on that.

There are some of them will start deploy in Q4, and some I wouldn't say the imminent right now.

Speaker #9: Or are you just in a different sort of customers and maybe with a slightly different timeline? Harsh, thank you for the question. Yeah, it's an LPO. We have been engaging with a broader customer base for applications, you know, for CSPs in the U.S. and in China.

Hong Hou: Thank you for the question. The LPO, we have been engaging with a broader customer base for applications for CSPs in the U.S. and in China, and they are at a different stage of testing and qualification. One thing is good that our TIAs have been in pretty much every transceiver manufacturer's design and qualification. As for timing, some of them will start deploying in Q4, and some, I wouldn't say the imminent right now is the small volume. Because we have a broad product portfolio and our TIA has already been designed in a DSP-based real-time solution already, we don't see the incrementally higher demand due to the LPO just yet. We do expect the Q4 they will start deploying. So we have the design wins in 800G and also 400G for DR4s, and that one may already start in a volume.

The small small volume and because we have a broad product portfolio and now <unk> has already been designed in the DSP based <unk>.

<unk> solution already we don't see the incremental incrementally higher demand due to the L. P. O just yet, but we do expect that Q4, there will start and deployed.

Speaker #9: And they are at a different stage of testing and qualification. But one thing is good: our TIAs have been in pretty much every transceiver manufacturer's design and qualification.

So we have that design wins in 800 gig and also 400 gig for Dr. Fours and that one is may already start volume.

Speaker #9: as for timing, that, you know, there's some of them will start deploy in, Q4 and some I wouldn't say the imminent right now is, the small, small volume, and because we have a broad product portfolio, and our TIA has already been designed, you know, DSP-based, real-time solution already, we don't see the incremental incrementally higher, demand, due to the LPO just yet, but we do expect the Q4, they will start, deploy.

Understood and then maybe I could ask.

You're about the general state of the data center spend Youre right. We have a set of a networking player you have parts and modules and cables you'd talk to obviously a lot of large companies.

I was curious I wanted to see where your level of enthusiasm, Arizona continued data center spend.

These days as you talk to these large hyper scanners in the large networking players.

Speaker #9: So, we have the design wins in 800 Gig and also 400 Gig for DR4s. And that one may already start, you know, volume.

Yes. Thank you for that question, yes, we do engage without direct customers we serve.

The module manufacturers, but we also you engage with the CSP in the U S and also in China.

Speaker #9: Understood, Hong. And then, maybe I could, you know, ask you about the general state of the data center spend. You're a sort of a networking player; you have parts and modules and cables. You talk to, obviously, a lot of large companies. I was curious; I wanted to see where your level of enthusiasm is on the continued data center spend these days as you talk to these large hyperscalers and the large networking players.

Hong Hou: Understood, Hong. Then maybe I could ask you about the general state of the Data Center spend. You are a sort of a networking player. You have pods and modules and cables. You talk to, obviously, a lot of large companies. I was curious. I wanted to see where your level of enthusiasm is on the continued Data Center spend these days as you talk to these large hyperscalers and the large networking players.

We all read the same news and earnings report.

Csp's.

We have strong conviction and therefore accounts to increase their capex spending to expand our data center capacity and upgrades for our AI capability.

And we see that from our direct to customers and very strong forecast for 2026 and beyond so we will be benefiting from this tremendous backdrop on the other hand again, China. The csp's as I discussed in the prepared remark the first part of Q2.

Speaker #9: Yeah, thank you for that question. Yes, we do engage with our direct customers, which are the module manufacturers, but we also engage with the CSPs in the U.S. and also in China.

Hong Hou: Yeah, thank you for that question. Yes, we do engage with our direct customers, which are the module manufacturers, but we also engage with the CSPs in the U.S. and also in China. We all read the same news and earnings report. The CSPs, they have strong conviction and the forecast to increase the CAPEX spending to expand the Data Center capacity and upgrade for AI capabilities. We are seeing that from our direct customers, a very strong forecast for 2026 and beyond. So we will be benefiting from this tremendous backdrop. On the other hand, in China, the CSPs, as I discussed in the prepared remark, the first part of Q2, they tend to be a little bit cautious due to the limit to the GPU availability. But in the last several weeks, they have come back and the booking activity has improved pretty significantly.

And they tend to be a little bit cautious due to the limit to the GPU availability.

Speaker #9: We all read the same news and the earnings report. The CSPs have strong conviction and the forecast is to increase the CapEx spending to expand the data center capacity and upgrade for data and AI capability.

In the last several weeks and they have come back and booking activity has improved pretty significantly and a forecast for that 2000 and for remaining of 25 and 2026, it's very optimistic as well so we see the market.

Speaker #9: And we see that, from our direct customers, there is a very strong forecast for 2026 and beyond. So, we will be benefiting from this tremendous backdrop.

Really a very has a very.

Optimistic tongue and we seeing the result from the new business opportunities and the bookings.

Speaker #9: On the other hand, in China, the CSPs, as I discussed in the prepared remarks, the first part of Q2, they tend to be a little bit cautious due to the limit to the GPU availability.

Because we are supplying electronic components you may hear some pockets they were limited by.

So yeah, MAU or other components, but it's not for us our PMD physical media devices designed for to support <unk> support year MAU and also supports silicon photonics modulators. So we don't see that constrained at this point, but we do plan.

Speaker #9: But in the last several weeks, they have come back, and the booking activity has improved pretty significantly. The forecast for the remainder of 2025 and 2026 is very optimistic as well.

Hong Hou: The forecast for the remaining of 2025 and 2026 is very optimistic as well. So we see the market really has a very optimistic tone, and we are seeing the result from the new business opportunities and the booking. Because we are supplying electronic components, you may hear some pockets they were limited by, so EML or other components, but it is not for us. Our PMD, physical media devices, are designed to support the Wixos, support EML, and also support silicon photonics modulators. So we do not see the constraint at this point, but we do plan ahead to add more testers and backend OCAT capacity in anticipation of a pretty significant ramp for 2026 and beyond.

Speaker #9: So we see the market really has a very optimistic tone, and we're seeing the results from the new business opportunities and the bookings.

I had to add more testers and backend all set here.

<unk>.

Anticipation of pretty significant ramp for 2026 and beyond.

Speaker #9: And, because we are supplying electronic components, you may hear some pockets that were limited by, say, EML or other components, but it's not for us.

Understood. Thank you so much.

Thank you.

Thank you.

And our next question comes from the line of Joe Moore with Morgan Stanley. Please proceed with your question.

Speaker #9: Our PMD, physical media devices, are designed to support the Vixos, support EML, and also support silicon photonics modulators. So we don't see the constraint at this point, but we do plan ahead to add more testers and backend OSI capacity in anticipation of a pretty significant ramp for 2026 and beyond.

Great. Thank you you talked about your outlook for copper edge.

Can you give us a little bit more color. How confident are you in seeing broader adoption and when you talk about hyperscale customers you know what types of.

Projects are you working on there. Thank you.

Thank you Joe.

So we have been talking to customers over the last three or four quarters in <unk>.

Covered pretty brown ground have been.

Speaker #9: Understood, Hong. Thank you so much. Thank you.

Hong Hou: Understood, Hong. Thank you so much.

Engaging with over 20 customers in the entire ecosystem. So certainly the awareness level right now is has significantly increased.

Hong Hou: Thank you.

Speaker #8: Thank you. And our next question comes from the line of Joe Moore with Morgan Stanley. Please proceed with your question.

Mark Lin: Thank you. Our next question comes from the line of Joe Moore with Morgan Stanley. Please proceed with your question.

And we work with our cable customers very closely ends up four or five key ones. They all have all 100 gig per line, our 800 gig cables.

Speaker #10: Great. Thank you. You talked about your outlook for Copper Edge. Can you give us a little bit more color? How confident are you in seeing broader adoption? And when you talked about hyperscale customers, you know, what types of projects are you working on there?

Analyst: Great, thank you. You talked about your outlook for CopperEdge. Can you give us a little bit more color? How confident are you in seeing broader adoption? When you talked about hyperscale customers, what types of projects are you working on there? Thank you.

And 200 gig per loan Oh, 160 cables is central to different Csp's and enterprise customers.

Speaker #10: Thank you.

Speaker #9: Yeah, thank you, Joe. So, we have been talking to customers over the last three to four quarters, and we covered a pretty broad ground.

Hong Hou: Yeah, thank you, Joe. So we have been talking to customers over the last three, four quarters, and we covered a pretty broad ground. We have been engaging with over 20 customers in the entire ecosystem. Certainly, the awareness level right now has significantly increased. We work with our cable customers very closely. The four or five key ones, they all have 100 gig per line or 800 gig cables, and 200 gig per line or 1.6T cables sampled to different CSPs and enterprise customers. We see strong traction. They definitely see the advantage of low power, more flexible, and higher signal integrity, and a longer reach than DAC cable. They are designed in one case for scale-up, similar to our anchor customer, to interconnect the different processors, ASICs, in one cluster.

We are seeing.

Strong tracks, they definitely see the advantage of lower power more flexible and hired 6 million integrity and the longer rates than deck cable and they are designed in in one case for scale up similar to our anchor customer two units.

Speaker #9: I have been engaging with over 20 customers in the entire ecosystem. So certainly, the awareness level right now has significantly increased. We work with our cable customers very closely; the four or five key ones, they all have our 100 Gbps per line or 800 Gbps cables, and 200 Gbps per line or 1.6 Tbps cables.

Different processors Asics in one cluster and avoid more applications in scale out.

To interconnect save from the server to top of the rack.

Speaker #9: They sample to different CSPs and enterprise customers. We're seeing strong traction. They definitely see the advantage of low power, more flexibility, higher signal integrity, and a longer reach than deck cable.

<unk> also observed that the back plane to replace the tax cables.

So we see the use cases that you replaced that cable we see the use cases to replace a ECS.

And all of those applications are to take advantage of update that.

Speaker #9: And they are designed, in one case, for scale-up, similar to our anchor customer, to interconnect the different processors and ASICs in one cluster.

That unique property like a low power consumption high 6 million integrity and extended reach compared with it that way.

We also have customers use the leader equalizers for onboard applications to improve the signal integrity and stretch it a rich.

Speaker #9: And with more applications, in scale out, to interconnect, say from the servers to the top of the rack, and also serve the backline to replace the deck cables.

Hong Hou: There were more applications in scale-out to interconnect, say, from the servers to the top of the rack, and also serve as the backplane to replace the DAC cables. We see the use cases to replace the DAC cable. We see the use cases to replace AECs. All of those applications are to take advantage of the unique property, like low power consumption, high signal integrity, and extended reach compared to the DAC. We also have customers use the linear equalizers for onboard applications to improve the signal integrity and stretch the reach from the ASIC to, say, front of the panel or pluggable ports. We'll see probably a couple of hyperscalers to drive to the high volume ramp first, either Q4 or the beginning of 2026. For 1.6T cables, the timing of ramp will be coinciding with a switch.

The ASIC to say frown panel applicable ports.

So we will see probably a couple of.

Speaker #9: So, you know, we see the use cases where you replace deck cable; we see the use cases to replace AECs. And all of those applications are to take advantage of the unique properties like low power consumption, high signal integrity, and extended reach compared to the deck.

Hyper scalar is to drive to the high volume ramp first.

Either Q4 or the beginning of 2026.

For 160 cables the timing of ramp.

B co inside with a switch if you don't have to 100 gig port you don't really need a connectivity to connect the ports.

Speaker #9: We also have customers using the linear equalizers for onboard applications to improve signal integrity and stretch the reach from the ASIC to, say, the front of the panel or pluggable ports.

For 800 gig or 100 gig per lane tables, we start seeing some of that demand and they are getting a primary reason for the latter part of this year.

Speaker #9: So, we'll see probably a couple of hyperscalers driving the high volume ramp first, either in Q4 or the beginning of 2026. For 1.6T cables, the timing of the ramp will coincide with a switch; if you don't have a 200 gig port, you don't really need connectivity to connect a port.

Great. Thank you for that and then separately are you seeing any supply constraints on 160 Opex.

The $1 60 upticks, Joe at this point.

We don't see a strong volume the volume demand, yet and but every module manufacturer.

Designing their optical modules using different dsp's using different <unk>, which we provide.

Hong Hou: If you don't have 200 gig ports, you don't really need connectivity to connect the ports. For 800 gig or 100 gig per line cables, we start seeing some of the demand and are getting preparation for the latter part of this year.

Speaker #9: But for 800 gig or 100 gig per line cables, we are starting to see some of the demand and are getting prepared for the latter part of this year.

Provide.

There are customers, they all require different pitches and different.

Configuration for packaging waste, so we support a wide range of demand, but the volume ramp and there's going to be like in 2026.

Speaker #10: Great. Thank you for that. And then separately, are you seeing any supply constraints on 1.6T optics?

Analyst: Great. Thank you for that. Separately, are you seeing any supply constraints on 1.6T optics?

At this point the ports that would require 160 connectivity there are only two from two major.

Speaker #9: The 1.6T optics, Joe, at this point, we don't see the strong volume demand yet. But every module manufacturer is designing their optical modules using different DSPs and different PMDs, which we provide. You know, their customers all require different pitches and different configurations for packaging.

Hong Hou: The 1.6T optics, Joe, at this point, we do not see the strong volume demand yet. But every module manufacturer is designing their optical modules using different DSPs, using different PMDs, which we provide. Their customers, they all require different pitches and different configurations for packaging. So we support a wide range of demand. But the volume ramp is going to be like in 2026. At this point, the ports that would require 1.6T connectivities, there are only two from two major ASIC manufacturers. One is making GPU, one is making switches. So you can imagine the timing of when they start the volume deployment.

ASIC manufacturers, one is making GPU once making switches. So you can imagine the timing of.

When they.

Start the <unk>.

Deployment.

Great. Thank you.

So the bottom line, we don't see a constraint from outside.

Thank you.

Speaker #9: So we support a wide range of demand, but the volume ramp is going to be significant in 2026. At this point, the port would require 1.6T connectivities.

Thank you and the next question comes from Timothy Arcuri with UBS. Please proceed with your question.

Alright. This is gino on for Tim.

So just a question on Lora it looks like results came in strong ahead of the 30% to $35 million range. You previously mentioned be seeing significant contributions from other applications of Lora.

Speaker #9: There are only two from two major ASIC manufacturers. One is making GPUs, and the other is making switches. So you can imagine the timing of when they start the volume deployment.

Do you do you expect to see more of performing at the same level in the next few quarters.

Speaker #10: Great. Thank you.

Yes. Thank you for the question. That's a great question certainly we're very pleased about the demand of Laura we think that we are on the right track in providing enhanced capability by the new product for example, the dual band in addition to <unk> baseband way provides.

Analyst: Great, thank you.

Speaker #9: So, the bottom line is, we don't see the constraint from outside. Thank you.

Hong Hou: The bottom line, we don't see the constraint from outside. Thank you.

Speaker #8: Thank you. And the next question comes from Timothy Artiri with UBS. Please proceed with your question.

Mark Lin: Thank you. The next question comes from Timothy Artieri with UBS. Please proceed with your question.

Speaker #11: Hi, this is Dino on for Tim. So, just a question on LoRa. It looks like results came in strong, ahead of the $30 to $35 million range you previously mentioned.

Analyst: Hi, this is Dino on for Tim. Just a question on LoRa. It looks like results came in strong ahead of the $30 million to $35 million range you previously mentioned. Are you seeing significant contributions from other applications of LoRa? Do you expect to see LoRa performing at the same level in the next few quarters?

The device capability to run on two four gigahertz band as well.

That is.

Speaker #11: Are you seeing significant contributions from other applications of LoRa? And do you expect to see LoRa performing at the same level in the next few quarters?

To provide enhanced bandwidth of data right.

Got.

At a tradeoff of a transmission distance, but the lower already cover hundreds of kilometers. So it's not a big trade off and by increase the bandwidth we unlocked a range of applications. For example, the low altitude economy drone deliveries.

Speaker #9: Yeah, thank you for the question. That's a great question. Certainly, we are very pleased about the demand for LoRa. We think we are on the right track.

Hong Hou: Thank you for the question. That is a great question. Certainly, we are very pleased about the demand of LoRa. We think we are on the right track in providing enhanced capability by the new product. For example, the dual-band, in addition to ISM-based band, we provide the device capability to run on 2.4 gigahertz band as well. What that does is to provide enhanced bandwidth of data rate, but at a trade-off, a transmission distance. LoRa can already cover hundreds of kilometers, so it is not a big trade-off. By increasing the bandwidth, we unlocked a range of applications. For example, the low-altitude economies, drone deliveries, and even some applications related to edge AI, for example, parking meters, they can get a still picture snap and using the enhanced bandwidth to transmit the pictures back and add an archive.

Speaker #9: In providing enhanced capability by the new product, for example, the dual-band in addition to ISM baseband, we provide the device capability to run on the 2.4 gigahertz band as well.

And.

So even some applications related to edge AI and for example parking meters and they can getting.

Speaker #9: What that does is, is to provide enhanced bandwidth of data rate. but at a at a trade-off, a transmission distance, but the LoRa can already cover hundreds of kilometers so it's not a big trade-off.

A still picture snap and using enhanced bandwidth to transmit the pictures back in at the archives.

So we also had a lower a plus that basically lower a plus.

Other RF protocols by companies and you can.

Speaker #9: And by increased the bandwidth, we unlocked a range of, applications, for example, the low, altitude economy, drone delivery, and, so, so even some applications related to edge AI and, for example, parking meters and they can get in at, a steel picture snap and using enhanced bandwidth to transmit the pictures back and at an archive.

Address at different applications that traditionally Laura alone cannot address so is this a new technologists really open up new market opportunities and we are very pleased to see that the lora.

To have a very strong demand we didn't mention that as a matter of fact, the end node number of end node, we shipped last quarter, It's a historic record.

So going forward, we think.

Speaker #9: So we also had the LoRa Plus that basically combines LoRa with other RF protocols. By this combination, you can address different applications that traditionally LoRa alone cannot address.

Hong Hou: We also had the LoRa Plus that basically LoRa plus other RF protocols. By combination, you can address different applications that traditionally LoRa alone cannot address. This new technology has really opened up new market opportunities, and we are very pleased to see that the LoRa continues to have a very strong demand. We did not mention that. As a matter of fact, the number of end nodes we shipped last quarter is a historic record. Going forward, we think, right now gives us a confidence and conviction. We expect the LoRa revenue on a quarterly basis to be between $30 million to $40 million. Certainly, it is going to be an increase from our original belief from $30 million to $35 million.

Right now gives us a confidence and conviction, we expect the lower revenue on a quarterly basis to be between $30 million to $40 million.

<unk>.

So it certainly is going to be an increase from our original belief from 30% to 35.

Speaker #9: So, this new technology has really opened up new market opportunities. We're very pleased to see that the LoRa technology continues to have a very strong demand.

Great. Thank you.

Thank you.

And our next question comes from the line of <unk>.

Speaker #9: We did mention that, as a matter of fact, the number of end nodes we shipped last quarter is a historic record. So, going forward, we think, you know, right now gives us confidence and conviction.

In Bolton with Needham and company. Please proceed with your question.

Hey, guys. Thanks for taking my questions. Congratulations on the results and outlook I guess I wanted to follow up on the HCC opportunity just to understand timing. It sounds like you still expect on some ACC revenue potentially in the fiscal fourth quarter ending January and if I heard.

Speaker #9: We expect the LoRa revenue, on a quarterly basis, to be between $30 million to $40 million. You know, so certainly, it's going to be an increase from our original belief of $30 million to $35 million.

Your your answer to the previous question it sounds like.

800 gig 100 gig per lane Hec potentially for scale up is the first application to ramp.

Speaker #11: Great. Thank you.

Mark Lin: Great, thank you.

Speaker #9: Thank you.

Hong Hou: Thank you.

Speaker #8: And our next question comes from the line of Quinn Bolton with Needham & Company. Please proceed with your question.

Mark Lin: Our next question comes from the line of Quinn Bolton with Needham & Company. Please proceed with your question.

So that may confuse to use that for 800 gig is ifs for dinner Tonight, yeah in.

Speaker #10: Hey, guys. Thanks for taking my questions. Congratulations on the results and outlook. I guess I wanted to follow up on the ECC opportunity just to understand timing.

In the back plane and there also be treated Rex.

Analyst: Hey, guys, thanks for taking my questions. Congratulations on the results and outlook. I guess I wanted to follow up on the ACC opportunity just to understand timing. It sounds like you still expect, Hong, some ACC revenue potentially in the fiscal fourth quarter ending January. If I heard your answer to the previous question, it sounds like 800G or 100G per lane ACCs potentially for scale-up is the first application to ramp.

Historically, they you said there is that that's cable.

Speaker #10: It sounds like you still expect Hong, some ECC revenue potentially in the fiscal fourth quarter ending January. And if I heard your answer to the previous question, it sounds like 800 gig or 100 gig per line ECCs potentially for scale-up.

They can reach the data read out for 100 gigabit, even 200 gigabit per lane, but.

The cable was at 26 stage.

Very rigid.

Using their words.

Richard is a rod.

When you bend a little bit.

Speaker #10: Is the first application to ramp?

The compromise that 6 million integrity.

Speaker #9: So, Quinn, I may confuse you that for 800 gig, if for the interconnect, yeah, in the backplane and they're also between racks, historically they use a very thick cable.

So in that they will still call just scale out applications.

Hong Hou: Quinn, I may confuse you. For 800G, it is for the interconnect, yeah, in the backplane, and they are also between racks. Historically, they use a very DAC cable. They can reach the data rate of 100 gigabit, even 200 gigabit per lane. But the cable was a 26-gauge, very rigid, you know, using their words, you know, like as rigid as a rod. When you bend a little bit, you compromise the signal integrity. In that, they will still call the scale-out applications for different interconnected, different switches. Right now, the one we designed in for 200 gig per lane and 1.6T application is a scale-up between different racks for ASICs. The customer is finding more applications in scale-out to, you know, in the backplane to interconnect, say, for example, from the NIC card to the top of the rack.

For different interconnect that different switches.

And right now it's a one way designed in for 200 gig per loan and $1 60 application, it's a scale up between different racks for Asics.

Speaker #9: they can reach the data rate of 100 gigabit even 200 gigabit per line. But, the cable was a 26 gigs, very rigid, you know, using their words in like a as rigid as a rod.

And the customers finding more applications.

In scale out.

Too.

Back plane to get her to make say for example from.

Speaker #9: So when you bend a little bit, you compromise the signal integrity. In that, they will still call it a scale-out application for different interconnects at different switches.

Net card to the top of the rack.

In many cases.

Within the topology of the switch fabric.

They are just replacing that that cable with ACC because of the flexibility better signal integrity and incrementally higher power than that cable, but is not really.

Speaker #9: And, right now, the one we designed for 200 gig per line and 1.6T application is a scale-up between different racks for ASICs.

Taking out.

Any additional power budget.

Speaker #9: And, the customers are finding more applications in scale-out, to, you know, in the backplane to interconnect, say, for example, from the NIC card to the top of the rack.

Okay.

I'm just just just so unclear the $1 60, or 200 gig per lane cables. They thought a lot of those would depend on broadcom Tomahawk six switch that enabled 200 gig per lane.

Speaker #9: And in many cases, they, within the topology of the switch fabric, are just replacing the deck cable with ECC because of the flexibility, better signal integrity, and incrementally higher power than deck cable. But it's not really taking out any additional power budget.

Hong Hou: In many cases, within the topology of the switch fabric, they are just replacing the DAC cable with ACC because of the flexibility, better signal integrity, and incrementally higher power than DAC cable, but it is not really taking out any additional power budget.

So are there are applications for $1 60 ACC.

Ramp before availability of that switch or do your 100 gig designs ramp.

In the fourth quarter before availability of debt.

Switch platform from Broadcom.

Right. So the world even demand will start from 100 gig.

Speaker #10: Okay. I guess, Hong, just so I'm clear, the 1.6T or 200 gig per line cables—I thought a lot of those would depend on Broadcom's Tomahawk 6 switch that enabled 200 gig per line.

Analyst: Okay. I guess, Hong, just so I am clear, the 1.6T or 200 gig per lane cables, I thought a lot of those would depend on Broadcom's Tomahawk 6 switch that enabled 200 gig per lane. Are there applications for 1.6T ACCs that ramp before availability of that switch, or do your 100 gig designs ramp in the fourth quarter before availability of that Ethernet switch platform from Broadcom?

The deal with <unk>.

I would say in Q4, and then the 200 gig first applications to volume is going to be the scale up between Essex.

Speaker #10: So, are there applications for 1.6T ECCs that ramp before the availability of that switch, or do your 100 Gig designs ramp, you know, in the fourth quarter before the availability of that Ethernet switch platform from Broadcom?

Then that will be followed by 200 gig per lane scale out application as you correctly pointed out when the switch die more available in volume and you need to be interconnecting between the Nic card to the top of the rack.

Got it okay that makes that makes sense and then I guess I wanted to switch I know the data center business is driving a lot of growth, but you've mentioned that per se business and.

Speaker #9: Right. So the volume demand will start from 100 gig first, the per line. I would say in Q4 and then the 200 gig first applications to volume is going to be the scale up between ASICs.

Hong Hou: The volume demand will start from 100 gig first per lane, I would say, in Q4. Then the 200 gig first applications to volume is going to be the scale-up between ASICs. That will be followed by 200 gig per lane scale-out application, as you correctly pointed out, when the switch die is more available in volume and you need to be interconnecting between the NIC card to the top of the rack.

And engagements in sort of new smart glass platforms.

As well as smartphone platforms and I'm just wondering if you could give us your outlook for the ramp up per se I think you've got a smart glass platform that you're on today. That's already achieved high volume do you see continued growth in smart glasses and any comments you can make on per se adoption in the smartphone segment would be would be helpful. Thanks, Sean Yes.

Speaker #9: Then that will be followed by 200 gig per line scale-out application. As you correctly pointed out, when the switch dies, more is available in volume.

Speaker #9: And you need to be interconnecting between the NIC card to the top of the rack.

Thank you, yes, so so quint a per se devices has been a the industry standard for smartphone and you know that for almost all the smartphone manufacturers were there and where are you in that.

Speaker #10: Got it. Okay. That makes sense. And then I wanted to switch. I know the data center business is driving a lot of growth, but you mentioned the per se business and engagements in sort of new smart glass platforms.

Analyst: Got it. Okay, that makes sense. I wanted to switch. I know the Data Center business is driving a lot of growth, but you mentioned the PerSe business and engagements in sort of new smart glass platforms as well as smartphone platforms. I am just wondering if you could give us your outlook for the ramp of PerSe. I think you have got a smart glass platform that you are on today that is already achieved high volume. Do you see continued growth in smart glasses and any comments you can make on PerSe adoption in the smartphone segment would be helpful. Thanks, Hong.

That process silver getting in to the last one the major what.

Speaker #10: As well as smartphone platforms, I'm just wondering if you could give us your outlook for the ramp of Per Se. I think you've got a smart glass platform that you're on today that's already achieved high volume.

As for the applications in the smart wearable smart glasses suddenly a lead customer is this matter rebound glasses.

Speaker #10: Do you see continued growth in smart glasses and and any comments you can make on per se adoption in the smartphone segment would be would be helpful.

And there are several other platforms they use basically the same functionality.

Speaker #10: Thanks, Hong.

And by that do that different ways and link to their own large language model for AI applications and we are there.

Speaker #9: Yeah, thank you. Yeah, so so Quinn, the per se devices, has been a the industry standard for smartphone and you know that for almost all the smartphone manufacturers where they're where in, the process of getting into the last one and the major one.

Hong Hou: Thank you. Quinn, the PerSe devices have been the industry standard for smartphone. You know that for almost all the smartphone manufacturers, we are there. We are in the process of getting into the last one, the major one. As for the applications in the smart wearables, the smart glasses, certainly our lead customer is this Meta Ray-Ban glasses. There are several other platforms that use basically the same functionality, but do the different ways and link to their own large language model for AI applications. We are there. The smart wearables continue to evolve and demand more functionalities. We are engaging with this broad range of customers and designing next generations. That is a next generation product. That is an area we feel like it can evolve into a pretty sizable market, and we are in the forefront of it.

And our smart wearable continue to evolve and demand more functionalities.

So we are you engaging with this broad range of customers and design being next generations. So that's our next generation products. So that is the area. We feel like it can evolve into a pretty sizeable market and we're in the forefront of it.

Speaker #9: As for the applications in smart wearables, the smart glasses, certainly a lead customer is the Meta Ray-Ban glasses. There are several other platforms that use basically the same functionality, but they do so in different ways linked to their own large language model for AI applications.

Excellent. Thank you all and thank you Mark.

Thanks Luca.

Thank you.

Our next question comes from the line of Christopher Rolland with Us.

Susquehanna International Group. Please proceed with your question.

Speaker #9: And we are there. And the smart wearables continue to evolve and demand more functionalities. And so we are engaging with this broad range of customers and designing the next generations.

Hi, guys. Thanks for the question so.

So I do you know it might be a little early for January guidance, but are seasonally I do believe historically that's been down.

Speaker #9: So that's next-generation products. That is the area we feel can evolve into a pretty sizable market, and we're at the forefront of it.

Are there is there a wide way or broad way to think about kind of.

Seasonality or how we should think about January like could you outgrow typical seasonality given the <unk> ramp or the ACC ramp just any broad kind of milestones or things to think about for January.

Speaker #10: Excellent. Thank you, Hong. Thank you, Mark.

Analyst: Excellent. Thank you, Hong. Thank you, Mark.

Speaker #9: Thank you, Quinn.

Hong Hou: Thank you, Quinn.

Speaker #8: Thank you. And our next question comes from the line of Christopher Rowland with Susquehanna International Group. Please proceed with your question.

Mark Lin: Thank you. Our next question comes from the line of Christopher Rolland with Susquehanna International Group. Please proceed with your question.

Speaker #10: Hi, guys. Thanks for the question. I do know it might be a little early for January guidance, but seasonally, I do believe historically that's been down.

Yes, Chris.

Analyst: Hi, guys. Thanks for the question. I do know it might be a little early for January guidance, but seasonally, I do believe historically that has been down. Is there a wide way or broad way to think about seasonality or how we should think about January? Could you outgrow typical seasonality given the LPO ramp or the ACC ramp? Just any broad milestones or things to think about for January.

So we provided our outlook for Q3, and our end market commentary should help investors formulae.

Thoughts for growth in the out periods Youre correct.

High end consumer sales do drill down in Q4, we don't really see a change to that particular trend on the high end consumer net sales were $41 $2 million in Q2.

Speaker #10: are there is there a wide way or broad way to think about kind of, how seasonality or how we should think about January? Like, could you outgrow typical seasonality given the LPO ramp or the ECC ramp?

It's a multiyear high.

16% sequentially up.

11% year over year, so, while we're getting design wins and market share, which allows us to grow above market rates.

Speaker #10: Just any broad kind of milestones or things to think about for January.

So Q4 is just a seasonally drill down not not of weakness at all in any of the business our industrial end market performing well we've heard from some industry bellwethers on these trends.

Speaker #9: Yeah, Chris. You know, we provided our outlook for Q3, and our end market commentary should help investors formulate thoughts for growth in the out periods.

Mark Lin: Yeah, Chris, you know, so we provided our outlook for Q3, and our end market commentary should help investors formulate thoughts for growth in the out periods. You're correct. You know, high-end consumer sales do trail down in Q4. We don't really see a change to that particular trend. High-end consumer net sales were $41.2 million in Q2. That's a multi-year high, up 16% sequentially, up 11% year-over-year. So while we're gaining design wins and market share, which allows us to grow above market rates, I still view Q4 as just a seasonally trailed down, not a weakness at all in any of the business.

ISC business is performing well with a 40% <unk> transition as a tailwind there and in infrastructure data center is definitely a growth engine and all of the commentary that the Hong is provided in our prepared remarks.

Speaker #9: You're correct; you know, high-end consumer sales do trail down in Q4. We don't really see a change to that particular trend. I mean, high-end consumer net sales were $41.2 million in Q2.

For the Q&A.

Speaker #9: That's a multi-year high, up 16 percent sequentially and up 11 percent year-over-year. So, what we're gaining are design wins and market share, which allows us to grow above market rates. I still view Q4 as just a seasonal trail down, not weakness at all in any of the business.

Until now.

We do have a very broad portfolio.

Fiber edge shipments were up.

Three times compared to a year ago.

And anything that we talk about in terms of <unk> would.

It would be incremental and ACC is definitely incremental to that to.

To that ramp.

Okay.

Speaker #9: Our industrial end market is performing well. We've heard from some industry fellows on these trends. ISC business is performing well, you know, for the 4G to 5G transition is a tailwind there.

Mitch Haas: industrial market is performing well. We have heard from some industry fellow weathers on these trends. The ISC business is performing well. The 4G to 5G transition is a tailwind there. In infrastructure, Data Centers are definitely a growth engine. All the commentary that Hong Hou has provided in our prepared remarks and for the Q&A up until now, we do have a very broad portfolio. FiberEdge shipments were up about three times compared to a year ago. Anything that we talk about in terms of LPO would be incremental, and ACC is definitely incremental to that ramp.

That's fantastic. Thank you so much maybe for the my second question. I think you guys said you were down to one six times leverage pretty incredible from where you guys were just a couple of years ago.

Speaker #9: And in infrastructure, data centers are definitely a growth engine. You know, all the commentary that Hong has provided in our prepared remarks and for the Q&A, up until now.

But my specific question is what does this mean for the odds of doing a potential acquisition and or what does this mean for the odds for doing a potential divestiture.

Speaker #9: You know, we do have a very broad portfolio. Fiber Edge shipments were up about three times compared to a year ago. And anything that we talk about in terms of LPO would be incremental in ECC is definitely incremental to that ramp.

Yes, so Chris.

Definitely we're pretty excited about the progress we have made not a couple of years ago, even as recently as a year ago. Our leveraged ratio was eight eight acts.

Speaker #8: That's fantastic. Thank you so much. For my second question, I think you mentioned you were down to 1.6 times leverage. That's pretty incredible from where you were just a couple of years ago.

Mark Lin: is fantastic. Thank you so much. Maybe for my second question, I think you guys said you were down to 1.6 times net leverage. Pretty incredible from where you guys were just a couple of years ago. My specific question is, what does this mean for the odds of doing a potential acquisition or what does this mean for the odds for doing a potential divestiture? Thanks.

Certainly.

It's a huge improvement.

This improved financial Foundation allows us to go more aggressive in capturing the opportunities several geos through close engagement with our customers, we have identified and many great opportunities.

Opportunities.

And we have been able to balance the R&D spending with our bottom line over the last year and I think we are.

Hong Hou: Yeah, so Chris, you know, that's definitely we're pretty excited about the progress we have made. A couple of years ago, even as recent as a year ago, our leverage ratio was at 8.8x. That's a huge improvement. This improved financial foundation allows us to go more aggressive in capturing the opportunities of growth. Through close engagement with the customers, we have identified many great growth opportunities. We have been able to balance the R&D spending with our bottom line over the last year. I think we are striking a right balance. We're increasing R&D spending in a core area by 20% sequentially, while still maintaining and delivering the good bottom line performance. Going forward, we'll continue to invest in the core areas. There might be some opportunities when we analyze our portfolio. We're seeing we can apply, you know, technology leverage, customer leverage, or operational leverage.

Striking the right balance and were increasing R&D spending in our core area by 20% sequentially, while still maintaining delivering good bottom line performance.

Going forward, we'll continue to invest in the core areas and there might be some opportunities when we analyze our portfolio. We're seeing when we can apply technology leverage customer and leverage our operational leverage we're seeing some wired we have some capability.

To do small tuck ins.

And but you know that.

The highest priority for us is do the portfolio optimization, we decide you know what.

What are the areas that we wanted to get in we have the board support will continue that strategy going forward.

So hopefully that answered your question with definitely the core noncore delineation is not just a paper exercise is really our north star to aside the priority for us.

Thanks, Hong and congrats on the results.

Hong Hou: We're seeing some void. We have some capability to do small talk-ins. That's the highest priority for us is still the portfolio optimization. We decide, you know, what the areas we wanted to get in. We have the board support. We'll continue the strategy going forward. Hopefully that answers your question. We're definitely the core and non-core delineation is not just a paper exercise. It's really our North Star to set the priority for us.

Thank you.

And our next question comes from the line of Rich Schafer with Oppenheimer. Please proceed with your question.

Yes.

Great.

Got a question on Tri Ed I'm, just curious what the outlook is for the Pam for the triage business.

As the industry sort of seems to be focusing more on 100, G and Twitter G lanes and.

I guess, how do you what are your plans for that business, how do you view that tri edge opportunity.

If we're going to be a growth driver for shrinking.

Mitch Haas: Thanks, Hong, and congrats on the results.

Rich. Thank you for your great question. So the Tri edge has been our traditional offering so basically.

Hong Hou: Thank you.

Mitch Haas: Our next question comes from the line of Rich Schafer with Oppenheimer. Please proceed with your question.

Integrated product with their drivers and Tia as to integrated without clock and data recovery. One so you can almost say.

Mitch Haas: Yeah, thanks. Thanks, Hong. I have got a question on Tri-Edge. I am just curious what the outlook is for the PAM4, the Tri-Edge business as the industry seems to be focusing more on 100G and 200G lanes. I guess how do you, what are your plans for that business? How do you view that Tri-Edge opportunity? Is PAM4 going to be a growth driver for Semtech Corporation?

It's oxymoron that day.

Analog the emergence of the DSP.

We offered a product at a 50 gig pellet per line to give say four channel will be 200 gig aggregated bandwidth.

And if there's a channel will be 400 gig aggregated bandwidth so our customers are.

Hong Hou: Rich, thank you for your great question. Tri-Edge has been our traditional offering. It is basically an integrated product with the drivers and TIAs integrated with our clock and data recovery ones. You can almost say it is oxymoron, that the analog version of the DSP. We offered our product at a 50 gig per lane to give, say, four channels will be 200 gig aggregated bandwidth. If it is an eight channel, it will be 400 gig aggregated bandwidth. Our customers, more particularly in China, and also one of the CSPs in the U.S., has been using our Tri-Edge in the AOC cables, active optical cables for 400 gig and 200 gig. That has been going on in a limited basis. One big CSP is in the U.S. and are giving us the forecast and start ramping up, by using the Tri-Edge in the AOC applications for 400 gig.

More particularly in China and also one of the CSP in the U S has been using our tri edge <unk>.

The Aoc cables active optical cables for 400 gig and 200 gig.

So that has been going on in a limited basis and.

But one big Csp's here in the U S and are giving us a forecast and start ramping up.

By using their tri edge in the Aoc applications for 400 gig.

So our plan is that we will continue to push that envelope to make that payment for 50 gig more up to 200 gig we're gonna be skipping 100 gig Pam four because this is a little too late for that the beauty of the 200 gig.

Try at CVR based is going to be continue to deliver low power.

Uh, we offered our product at 50 gig per line. To give, say, 4 channels will be 200 gig aggregated bandwidth, and if this is 8 channels, it will be 400 gig aggregated bandwidth. So our customers, more particularly in China, and also one of the CSPs in the US, has been using our Triage in the AOC, cables active optical cables for 400 gig and 200 gig.

<unk>.

Consumption and had the advantage of both.

Equalizing in the frequency domain and re timing in time domain, so that I'd say on a roadmap and under development.

Hong Hou: Our plan is that we will continue to push that envelope to make the PAM4 50 gig move up to 200 gig. We are going to be skipping 100 gig PAM4 because this is a little too late for that. The beauty of the 200 gig Tri-Edge CDR-based is going to continue to deliver low power consumption and have the advantage of both equalizing in the frequency domain and retiming in the time domain. That is on our roadmap and under development. We believe when the 1.6T transceivers are launched, and the very next thing, you know, they will be first driving for volume and then later on driving for cost reduction and the power reduction. We will catch that wave of providing low cost, low power version of the Tri-Edge.

So, uh, one big CSP is in the U.S. and is giving us the forecast in start, ramping up by using the triage in the AOC applications for 400 gig.

We believe when the 160 Transceivers on launched.

And the very next thing you know they will be first driving for volume and then later on driving for cost reduction and the power reduction. So we'll catch that wave of providing low cost low power version of the Tri edge.

So our plan is that we'll continue to push that envelope to make the PAM for...

And hopefully be taken a suite, that's sort of what that opportunity looks like in any sense.

50 gig more up to 200 gig. We're going to be skipping 100 gig PAM because this is a little too late for that. The beauty of the 2008 Tri-Edge CDR-based is going to be continued to deliver low power.

That market could be or is it just too early.

So rich right now and it's a little early to do that and by the way will be basically using when we were evaluating market opportunity in order to determine if this is a viable R&D project, which just makes it that Samsung say for example, if we can chip away, 5% to 10% of one.

60 transceiver market.

From the <unk> solutions that will be well worth a while for the market opportunity is really.

Consumption and had advantage of both equalizing in the frequency domain and re timing in time domain. So that is a on our road map and in, under development, we believe when the 1.60, um, transceivers are launched. And uh, very next thing you know, they will be first driving for volume and then later on driving for cost reduction and the power reduction. So we will catch that wave of providing low cost low power version of the triage

Mitch Haas: Hong, have you taken a swing at what that opportunity looks like and any sense of how big that market could be, or is it just too early?

Really really great.

I'd say, it's a tentative to the DSP and.

And how long have you taken a swing at at sort of what that opportunity looks like, and any sense of how, how big that that market could be or is it just too early?

Hong Hou: Rich, right now it is a little early to do that. But we will be basically using when we were evaluating market opportunity in order to determine if this is a viable R&D project. We just make the assumption, say, for example, if we can chip away 5% to 10% of 1.6T transceiver market, from the retimed solutions, that will be well worthwhile, for the market opportunity. It is really, really, really great, as an alternative, to the DSPs. I think it is going to be as customers seeing a better signal integrity, lower power performance. Again, just like the LPO, there is going to be more acceptance. Because the low power is a key attribute to the optical connectivity in the future.

So I think it's going to be as customers seeing better.

Signal integrity and lower power performance.

Again, just like the L. P O, there's going to be more acceptance and because of the low power is a key attribute to the optical connectivity in the future.

Great Thanks for level.

Thank you.

Okay.

Operator next question.

Thank you.

Our next question comes from the line of Cody Acree with the Benchmark Company. Please proceed with your question.

So rich right now is a little early to do that and but we will be basically using 1. We were evaluating Market opportunity in order to determine if this is a liable R&D project. We just make that something. Say for example, if we can Chip Away 5 to 10% of 1.6, T transceiver Market uh, from the Real Time solutions, that would be well worth a while uh for you know, the market opportunity. It's really really uh, really really great um for a as a as a alternative uh tool that dsps. So I think you know, it's going to be as uh customers seeing at better.

Yes, thanks, guys for taking my questions and congrats on the progress.

Uh, signal integrity, lower power performance.

Can you just go back to your ACC commentary on the cloud service providers.

Mentioned expecting that to begin early 'twenty six.

Again, just like the LPO, there's going to be more acceptance, and because of the lower power, it is a key attribute to the optical connectivity in the future.

Is that any reset of timing from earlier expectation of ACC diversification in Q4 or was that always the case, the delineation between CSP and the cable providers.

Mitch Haas: Great. Thanks a lot, Hong.

Great. Thanks a lot.

Hong Hou: Thank you.

Thank you.

Thank you for the question. So we are always at a you know.

Mitch Haas: Operator, next question.

Operator. Next question.

Timing wise for the volume ramp is it going to be going through the platform architecture. The platform architecture of our customers and we will go with the appliance they need in there for example in this case the switch timing of the switch availability as you probably know in herd.

Mark Lin: Thank you. Our next question comes from the line of Cody Acree with The Benchmark Company. Please proceed with your question.

Mitch Haas: Yeah, thanks guys for taking my questions and congrats on the progress. Hong, can you just go back to your ACC commentary on the cloud service providers? You mentioned, expecting that to begin early 2026. Is that any reset of timing from earlier expectation of ACC diversification in Q4, or was that always the case, the delineation between CSPs and the cable providers?

Thank you. And our next question comes from the line of Cody Acree with the Benchmark Company. Please proceed with your question.

To be pushed out a little bit.

So that is the one thing we found during Q2 and but as I said.

There are two other use cases for example, 100 gig per line 800 gig ACC cable that independent of that timing, we believe that ramp will start in Q4 for that flavor and another one is a 200 gig per line at 160 <unk>.

Yeah, thanks guys for taking my questions and congrats on the progress. Uh, how can we just go back to your ACC commentary on the cloud service providers? You mentioned expecting that to begin early 2026. Is that any reset of timing from earlier expectations of ACC diversification in Q4, or was that always the case—the delineation between CSPs and the cable providers?

Hong Hou: Cody, thank you for the question. We are always at the, you know, the timing-wise for the volume ramp is going to be going through the platform architecture. The platform architecture of our customers will go with the appliance they need in there. For example, in this case, the switch, timing of the switch availability, as you probably know and heard, is going to be pushed out a little bit. That is the one thing we found, you know, during Q2. As I said, there are two other use cases. For example, 100 gig per lane, 800 gig ACC cable. That's independent of that timing. We believe that ramp will start in Q4 for that flavor. Another one is a 200 gig per lane and 1.6T cable for scale-up, between different racks of ASICs. That will also march along the line timeline in Q4.

Cable for scale up.

Between different racks of Asics that will also March along the line timeline.

Q4, so when you start ramping back.

From a very low level, two pretty sizable level the timing does matter a lot because its ramp up slope is pretty high. The good thing is that we have gone through that type of ramp in the past in supporting the anchor customer we have the confidence that we'll be able to.

Cody, thank you for the question. So, we are always at the, you know, the timing wise for the Lolly run is going to be going through the platform architecture. The platform architecture of our customers will go with the appliance they need in their, for example. In this case, the switch timing of the switch availability, as you probably know and have heard, is going to be pushed out a little bit. So that is the one thing we found, you know, during Q2. But as I said, there are two other use cases, for example, 100 Gig per...

Support the market adequately.

Excellent thanks for that and Mark can you give us any of your outlook on your gross margin expectations for the next couple of quarters and also your opex spending trends.

So.

Hong Hou: When you start ramping back, you know, from a very low level to a pretty sizable level, the timing does matter a lot because the ramp-up slope is pretty high. The good thing is that we have gone through that type of ramp in the past in supporting the anchor customer. We have the confidence that we will be able to support the market adequately.

We have the guide for the following quarter and really.

As we've stated we're very mixed driven but the good part of their quota is that.

Strong faster growing portion of our business are accretive to mix, especially within data center.

But that said, we also provide the areas of growth for our Iot cellular business, which as you know.

A little bit of a headwind and also within Q3, we do have a little bit of a headwind from high end consumer but overall.

Mitch Haas: Excellent. Thank you for that. Mark, can you give us any of your outlook on your gross margin expectations for the next couple of quarters, also your OpEx spending trends?

800 gig ACC cable that independent of that timing, we believe that ramp will start in Q4 for that flavor. Another 1 is a 200 gig per length and 1.6t, uh, cable for scale up, uh, between different racks of A6 that will also March along the line timeline, uh, in Q4. So when you start ramping back, you know, uh, from very low level to pretty sizable level. The timing uh does matter a lot because it's ramped up, slope is pretty high. The good thing is that we have gone through that type of ramp in the past in supporting the anchor, customer, we have the confidence that we'll be able to support the market. Uh, adequately.

Excellent, thank you for that.

Particular business to support the.

The industrial.

<unk> business as well, which has pretty good gross margin. So overall pretty good operating margin.

Of your outlook on your gross margin expectations for the next couple of quarters, and also your Opex spending trends.

Mitch Haas: We have the guide for the following quarter. As we have stated, we are very mix-driven. The good part there, Cody, is that the strong, the faster growing portion of our business are creative to mix, especially within Data Center. That said, we also provide the areas of growth for our IoT cellular business, which is a little bit of a headwind. Also within Q3, we do have a little bit of a headwind from high-end consumer. Overall, that particular business does support the industrial TVS business as well, which has pretty good gross margins. Overall, pretty good operating margin. Again, mix-driven. Our commentary is that we do look at opportunities to invest in near-term growth areas. We have a pretty strong portfolio that we are developing, but we are very cognizant of R&D spend.

But again mix driven.

Opex.

I think our commentary is that we do look at opportunities to.

To invest in near term growth areas, we have a pretty strong portfolio that we're developing but we are very cognizant of.

R&D spend and.

We'll try to keep that underway I should say, we expect to keep that under control, but again theres, some really really great opportunities out there for them, but for us to invest in some very good organic growth opportunities.

So any thoughts on R&D growth as you go forward.

Yeah, so, uh, we, we have the, the guide for the following quarter, and really we, as, as we've stated, we're very mixed driven. Uh, but the good part is there. Cody, is that, uh, the strong, the faster growing portion of our business are creative, uh, to mix especially within data center. Uh, but that said, you know, we also provide the, the areas of growth for our, our iot cellular business, which is, you know, a little bit of a headwind and also within Q3, you know, we do have a, a little bit of a headwind from high-end consumer. But overall that, that particular business does support the, uh, the uh,

Yeah.

So we've got adult one one quarter you can just expect us to be prudent and not overspend.

The industrial uh TVs business as well, which has pretty good gross margin. So overall, pretty good operating margin.

And maybe we'll just leave it at that.

Okay. Thank you guys.

Thank you.

Sure.

And our next question comes from the line of tore Svanberg with Stifel. Please proceed with your question.

Mitch Haas: We will try to keep that under, I should say, we expect to keep that under control. Again, there are some really, really great opportunities out there for us to invest in some very good organic growth opportunities.

Yes, Thank you Mark.

Does it just take a step back.

And ask about sort of the general business environment from a linearity perspective is there sort of any color you could share with us on linearity of sales and especially on bookings.

But again, mixed driven, uh, Opex. Um, I think our commentary is that, you know, we do look at opportunities, uh, to invest in near-term growth areas, we have a pretty strong portfolio that we're developing, but we are very cognizant of, uh, of R&D spent and, uh, you know, we, we'll try to keep that under we I should say we we expect to keep that under control. Uh, but again, there's some really, really great opportunities out there for invest for us to invest in some very good organic growth opportunities.

Mitch Haas: So, any thoughts on R&D growth as you go forward?

So, any thoughts on R&D growth as you go forward?

Mitch Haas: Cody, we have got it out that one quarter. You can just expect us to be prudent and not overspend. Maybe we will just leave it at that.

Yes, so tori. Thank you for your question. So we are seeing pretty strong booking activities datacenter area lower and per se, even though consumer.

Mitch Haas: Okay. Thank you, guys.

According. So we've got it out that 1 1 quarter. Uh you can just expect us to to be prudent and and not overspend. Um and maybe we'll just leave it at that.

Mitch Haas: Thank you.

Okay, thank you guys.

Thank you.

High end consumer TBS.

Mark Lin: Our next question comes from the line of Tore Svanberg with Stifel. Please receive your question.

It was very strong the industrial for the modules, we have the tailwind the booking activity is very strong so that's where the linearity from quarter to quarter. You always have this different product mix thing, but I will say.

And our next question comes from the line of Tore Swanberg with Stifel. Please proceed with your question.

Hong Hou: Yes, thank you, Hong, Mark. I wanted to just take a step back and ask about the general business environment from a linearity perspective. Is there any color you could share with us on linearity of sales and especially on bookings?

Very rarely you have a few things are seem to be aligning up in supporting a very positive momentum and that is now and I feel like I really.

Yes, um, thank you, Hong, Mark. Um, I wanted to just take a step back, um, and um, ask about sort of the general business environment. From a linearity perspective, is there sort of any color you could share with us on the linearity of sales and especially on bookings?

Hong Hou: Tore, thank you for your question. We are seeing pretty strong booking activities. Data Center area, LoRa, in PerSe, even the consumer, high-end consumer TVS is very strong. The industrial for the modules, we have the tailwind, the booking activity is very strong. As for the linearity, from quarter to quarter, you always have this different product mix thing. I will say, very rarely you have a few things all seem to be lining up in supporting a very positive momentum. That is now. I feel like I am really good about the future quarters.

Good about to future quarters.

Very good and as my follow up I, just sort of clarification question on Lpl's or you said.

You expect three leading hyperscale has to be an 800 gig production in Q4 of this year are those three hyper scaler, all U S or the U S and China.

So three hyperscale or is it two or in the U S and one in.

In China, So first a L. P. O. This is really just the early inning.

And L. P O transition into take over some of the DSP based.

Yeah. So, uh, Tori. Thank you for your question. So, we are seeing pretty strong booking activities data center area, lower, uh, in per se, even the consumer, um, high-end consumer TVs. Um, it's a very strong, the industrial in for the modules, we have the Tailwind. The booking activity is very strong. So as for the linearity, you know, from quarter to quarter, you always have this different product mix thing. But I would say, you know, with very rarely you have a few things all seem to be lining up in supporting a very positive momentum.

Transceiver market share is inevitable.

And that is now. And I feel like I really, uh...

And the beauty for that for US as you know its a state where the DSP based we have TIAA content if transition over to LPL based our Sam is going to be that both will have date driver of content as well so the timing to us.

Good about the future quarters.

Hong Hou: Very good. As my follow-up, I had a sort of clarification question on LPO. You said you expect three leading hyperscalers to be in 800G production in Q4 of this year. Are those three hyperscalers all U.S., or is that U.S. and China?

It's important but it's not a super sensitive because we already have your incumbent for a DSP based <unk>.

Very good. And as my follow-up, I just sort of have a clarification question. So you said you expect three leading hyperscalers to be in 800G production in Q4 this year. Are those three hyperscalers all U.S. companies, or does that include both the U.S. and China?

Hong Hou: Three hyperscalers, two are in the U.S. and one in China. But the LPO, this is really just an early inning. The LPO transition to take over some of the DSP-based transceiver market share is inevitable. The beauty for that for us is, you know, if you stay with the DSP-based, we have TIA content. If transition over to LPO-based, our SEM is going to be doubled. We will have the driver content as well. The timing to us is important, but it is not super sensitive because we are already an incumbent for DSP-based transceivers.

<unk>.

Sounds good congrats on the results.

So, three hyperecalers; two are in the U.S. and one in China. So, uh, but the LPO, this is really just an early ending.

Thank you.

Thank you and our final question comes from the line of Craig Ellis with B Riley Securities. Please proceed with your question.

Thanks for sneaking me in guys.

I wanted to go back to the opening part of your prepared comments when you talked about things accomplished in your first year, but really use that as an opportunity to ask you. What you would like to see the business accomplish in your second year.

Really as you look at.

The infrastructure business from where you werent today.

And the lpo transition and to take over some of the DSP based. Um transceiver market, share is inevitable. And the beauty for that for us is you know if you stay with the DSP based, we have Tia content if transition over to lpo based, our Sam is going to be doubled. You know, we will have the driver content as well. So the timing uh, to us, um, is important, but it's not as super sensitive because we already incumbent for dsp-based. Um, transceivers.

Hong Hou: Sounds good. And congrats on the results.

Would you be happy with the business accomplishing over the next four quarters.

Hong Hou: Thank you.

Sounds good, and congrats on the results.

Thank you.

Mark Lin: Thank you. Our final question comes from the line of Craig Ellis with B. Riley Securities. Please proceed with your question.

Either from a product standpoint, a scale up standpoint et cetera, just some qualitative color on where we would be from where we are would be really helpful. Thank you.

Thank you. And our final question comes from the line of Craig Ellis with B. Riley Securities. Please proceed with your question.

Hong Hou: Thanks for sneaking me in, guys. Hong, I wanted to go back to the opening part of your prepared comments where you talked about things accomplished in your first year, but really use that as an opportunity to ask you what you would like to see the business accomplish in your second year, especially as you look at the infrastructure business from where you are today. What would you be happy with the business accomplishing over the next four quarters, either from a product standpoint, a scale-up standpoint, et cetera? Just some qualitative color on where we would be from where we are would be really helpful. Thank you.

Thanks.

Thank you Craig.

If I say it largely broad brush the second year because of a better improved financial foundations. We can go more aggressive in their first year, even some of the opportunities we uncovered but where you have to balance the bottom line with an investment in R&D and so that's one.

One thing the second thing is some of their R&D spending we have in the first year is it going to be start showing the results and momentum for the second year. So I don't want to Miss again, if the first year, we play some catch up game.

Second year I wanted to be out Brian leads the market with the solutions out there.

Uh, either from a product standpoint, a scale-up standpoint, etc., just some qualitative color on where we would be from where we are would be really helpful. Thank you.

Hong Hou: Thank you, Craig. If I say largely broad brush, the second year, because of the better improved financial foundations, we can go more aggressive. The first year, even some of the opportunities we uncovered, we have to balance the bottom line with the investment in R&D. That is one thing. The second thing is some of the R&D spending we have in the first year is going to start showing the results and momentum for the second year. I do not want to miss again if the first year we play some catch-up game, the second year I want it to be outright lead the market with the solutions out there.

Got it and if you look at the breadth of the business hung or one of the strength of the business across its different product groups, whether it be.

Copper and fiber et cetera, any significant evolutions, we should be looking at that you're trying to draw.

I think what we focus instead of focus each.

<unk> product lines, and we Fortunately, we have that broader portfolio, we focus on one simple principle with the market needs higher bandwidth lower power lower latency and lower accounts that entire offering of our portfolio is focused on the very fundamental attributes.

Thank thank. Thank you Craig. Um, if I say largely broad brush the second year because of better improved Financial foundations, we can go more aggressive and the first year, even some of the opportunities we uncovered, but we have to balance the bottom line with the investment in R&D. And so that's 1 Thing. The second thing is, some of the R&D spending we have in the first year is going to be start showing the results and momentum for the second year, so I don't want to miss again. If the first year, we play some catch-up game.

The second year, I wanted to outright lead the market with the solutions out there.

Hong Hou: Got it. As you look at the breadth of the business, Hong, or the strength of the business across its different product groups, whether it be, you know, CopperEdge, FiberEdge, et cetera, any significant evolutions we should be looking at that you're trying to drive?

Can offer to their customers.

Thanks, Tom.

Thank you.

Thank you.

There are no further questions at this time I would like to turn the call back to Mitch Haws for closing remarks.

Got it. And they should look at the breadth of the business, or the strength of the business across its different product groups, whether it be, you know, Copper Edge, Fiber Edge, etc. Any significant evolution we should be looking at that. You're trying to drive.

Hong Hou: I think what we focus instead of focusing on each product line, and we fortunately have a broader portfolio, we focus on one simple principle. The market needs higher bandwidth, lower power, lower latency, and lower cost, that the entire offering of our portfolio is focused on the very fundamental attributes we can offer to the customers.

That concludes today's call. Thanks to all of you for joining us today, and we look forward to seeing at various investor events over the coming weeks.

Yeah.

I think what we focus on, instead of focusing on each product line, is that we fortunately have a broader portfolio. We focus on one simple principle: the market needs higher bandwidth, lower power, lower latency, and lower cost. The entire offering of our portfolio is focused on these very fundamental attributes that we can offer to the customers.

Hong Hou: Thanks, Hong.

Thanks Tom.

Hong Hou: Thank you.

Thank you.

Mark Lin: Thank you. With that, there are no further questions at this time. I would like to turn the call back to Mitch Haas for closing remarks.

Thank you. And with that, there are no further questions at this time. I would like to turn the call back to Mitch Hos for closing remarks.

Mitch Haas: That concludes today's call. Thanks to all of you for joining us today. We look forward to seeing you at various investor events over the coming weeks.

That concludes today's call. Thanks to all of you for joining us today, and we look forward to seeing you at various investor events over the coming weeks.

Mark Lin: Thank you. With that, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time. Have a wonderful day.

Thank you. And with that, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time. Have a wonderful day.