Q3 2025 ON Semiconductor Corp Earnings Call

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I'd like now to turn the conference over to Iraq, or Oracle Wall, Vice President of Investor Relations and corporate development. Please go ahead.

Thank you Michelle.

Good morning, and thank you for joining us for me headquarter of Colgate total.

The conference call.

Okay.

I'm joined today by telephone.

Corey.

Our president and CEO.

Patrick our CFO.

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Speaker #1: I would like to now turn the conference over to Parag Agarwal, Vice President of Investor Relations and Corporate Development. Please go ahead.

We wish to caution that such statements are subject to risks and uncertainties that could cause actual events or results to differ materially from predictions.

Speaker #2: Thank you, Michelle. Good morning, and thank you for joining the ON Semiconductor 2025 reserves conference call. I'm joined today by Hassane El, our President and CEO, and Thad Trent, our CFO.

Important factors that can affect our business, including factors that can cause actual results to differ materially from our forward. Looking statements are described in our most of them Form 10-K form 10, Qs and other filings with the Securities and Exchange Commission.

Speaker #2: This call is being webcast on the Investor Relations section of our website at www.onsemi.com. A replay of this webcast, along with our third-quarter earnings release, will be available on our website approximately one hour following this conference call. The recorded webcast will be available for approximately 30 days following this conference call.

In our earnings release for the third quarter.

Our estimates or other forward looking statements might change and the company assumes no obligation to update forward looking statements to reflect actual results.

These dozen options or are there any ones that America, except as required by law.

Now, let me turn it over to her son Hassan.

Speaker #2: Additional information is posted on the Investor Relations section of our website. Our earnings release and this presentation include certain non-GAAP financial measures. Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, and a discussion of certain limitations when using non-GAAP financial measures, are included in our earnings release, which is posted separately on our website in the Investor Relations section.

Thank you <unk> good morning, and thank you all for joining US we are pleased with our third quarter results, which reflect the strength of our strategy and the resilience of our business model.

Our third quarter results exceeded the midpoint of our guidance with revenue of $1 55 billion.

non-GAAP gross margin of 38% and earnings per share towards the high end of our range at 63.

We have been positioning the company for a market recovery and we believe we are well aligned to benefit as demand normalizes.

Speaker #2: During the course of this conference call, we'll make projections or other forward-looking statements regarding future events or the future financial performance of the company.

We're already seeing stabilization in automotive and industrial while continuing to grow in AI.

Our <unk> platform continues to scale across our core markets and our recent acquisitions are expanding our portfolio and accelerating our roadmap.

Speaker #2: We wish to caution that such statements are subject to risks and uncertainties that could cause actual events or results to differ materially from projections.

We are delivering solutions that help customers scale performance, while improving energy efficiency and system cost.

Speaker #2: Important factors that can affect our business, including factors that can cause actual results to differ materially from our forward-looking statements, are described in our most recent Form 10-K, Form 10-Qs, and other filings with the Securities and Exchange Commission, as well as in our earnings release for Q3.

The growing demand for high efficiency power delivery across our end markets of automotive industrial NII positions us for long term growth.

We remain committed to our gross margin expansion strategy through innovation with both organic and inorganic investments and differentiation and have achieved four significant milestones that I'd like to highlight.

Speaker #2: Our estimates or the forward-looking statements might change, and the company assumes no obligation to update forward-looking statements to reflect actual results, changed assumptions, or other events that may occur, except as required by law.

First is our <unk> platform, our new products continue to scale and our design funnel now exceeds $1 billion driven.

Driven by strong customer engagement across automotive industrial and AI infrastructure.

Speaker #2: Now, let me turn it over to Hassane. Hassane,

We remain on track to double the number of products sampling this year.

Speaker #3: Thank you, Parag. Good morning, and thank you all for joining us. We are pleased with our third-quarter results, which reflect the strength of our strategy and the resilience of our business model.

Teledyne technologies selected our <unk> platform to develop next generation products for infrared imaging systems.

<unk> process technology combines precision analog advanced digital and low voltage power features to meet the demands of infrared focal plane array systems used in aerospace defense and security applications.

Speaker #3: Our third-quarter results exceeded the midpoint of our guidance, with revenue of $1.55 billion, a non-GAAP gross margin of 38%, and earnings per share towards the high end of our range at $63.

Second is our vertical again or began.

Speaker #3: We have been positioning the company for a market recovery, and we believe we are well aligned to benefit as demand normalizes. We're already seeing stabilization in automotive and industrial, while continuing to grow in AI.

Last quarter I highlighted our strategic investment in our generation wide bandgap semiconductors.

Last week, we announced our <unk> platform develop on proprietary Gan on Gan architecture, and our Cherokees Fab in New York.

Began conducts current vertically through the chip, enabling higher operating voltages versus lateral again and faster switching and record power density.

It reduces energy loss by up to 50%, making it ideal for AI data centers, EDF renewable energy and aerospace defense and security.

Sampling is already underway with lead customers in automotive and AI.

This launch expands our leadership beyond silicon and silicon carbide, giving customers a future ready toolkit to meet rising performance and efficiency demands.

Third our cig Jfet continues to proliferate and we have been ramping revenue in AI data center for high current workloads. We're also seeing traction in aerospace defense and security, where our <unk> are now deployed in low orbit satellite platforms, delivering industry, leading radiation ruggedness and power density.

And fourth is our <unk> acquisition in Q3, we expanded our analog and mixed signal portfolio with the acquisition of <unk> power technology, and IP assets from RF semiconductor this transaction accelerates our roadmap for advanced multi face controllers and monolithic smart power stages, enabling.

US to close key gaps in our offering and deliver comprehensive solutions for the next generation AI data centers and compute platforms.

These new products will be integrated into our <unk> platform enhancing performance reliability and energy efficiency at the point of load and support X 86 and arm based architectures.

Amply begins this quarter with production release expected in early 2026.

Shifting to the demand environment, we are seeing stabilization in the near term with automotive, which grew 7% and industrial which grew 5% sequentially and our design wins in both markets continue to reflect a broad global engagement for.

Last week, we announced our vGan platform developed on proprietary GaN, on GaN architecture in our Syracuse Fab in New York. vGan conducts vertical current through the chip, enabling higher operating voltages versus lateral GaN, faster switching, and record power density.

It reduces energy loss by up to 50%, making it ideal for AI data centers, EVs, renewable energy, and aerospace defense and security.

Sampling is already underway, which will lead customers in automotive and AI.

For example, our industrial image sensor funnel is up 55% year over year with traction in factory automation and inspection.

We continue to ramp our AI revenue, which again approximately doubled year over year in Q3 and is now becoming material with almost $250 million expected in 2025.

This launch expands our leadership beyond silicon and silicon carbide, giving customers a future-ready toolkit to meet rising performance and efficiency demands.

Third, our SIG JFET continues to proliferate, and we have been ramping revenue in AI data centers for high current workloads.

Regionally our revenue in the Americas grew 22% sequentially from momentum in automotive and aerospace defense and security.

Japan was up 38% quarter over quarter, driven by traction in automotive and image sensing.

We're also seeing traction in aerospace, defense, and security, where our sick jets are now deployed in low-orbit satellite platforms, delivering industry-leading radiation ruggedness and power density.

Europe was down 4% as macro softness persisted, while China was down 7% sequentially.

And forth is our vCore acquisition. In Q3, we expanded our analog and mixed-signal portfolio with the acquisition of vCore power technology and IP assets from RS Semiconductor.

In China, we secured strategic wins in high voltage traction inverters with a leading tier one for multiple local Oems. We also expanded our position at Neal was sick for their traction invertor across their newest brand and with our eight megapixel image sensor for their Adas applications.

This transaction accelerates our roadmap for advanced, multi-phase controllers and monolithic smart power stages, enabling us to close key gaps in our offering and deliver comprehensive solutions for the next generation of AI data centers and compute platforms.

Yeah.

AI is shaping is reshaping the power landscape, both inside and outside the data center.

The International Energy agency projects that electricity demand from AI optimized data centers will quadruple by 2030, making power efficiency and density critical differentiators in areas where on semi leads on.

These new products will be integrated into our Trail platform, enhancing performance, reliability, and energy efficiency at the point of load, and supporting x86 and ARM-based architectures.

Sampling begins this quarter, with production release expected in early 2026.

Semi is intelligent power technologies spanning the full powertrain from solar and storage systems to UBS and rack level psus optimizing every what before it reaches the processor.

Shifting to the demand environment, we are seeing stabilization in the near term with Automotive, which grew 7%, and Industrial, which grew 5% sequentially. Our design wins in both markets continue to reflect a broad global engagement.

In Q3, we secured strategic wins in solar and energy storage platforms that are foundational to hyperscale AI deployments.

For example, our industrial image sensor funnel is up 55% year-over-year, with traction in factory automation and inspection.

Our latest generation of <unk> and sick and the most advanced hybrid modules were selected for high efficiency solar Inverters and energy storage systems or <unk> <unk>.

We continue to ramp our AI revenue, which again approximately doubled year-over-year in Q3 and is now becoming material, with almost $250 million expected in 2025.

Including wins with two of the leading utility solar inverter suppliers in China.

We also secured the next generation large scale stationary storage with a large OEM in the U S. As micro grid deployments are rapidly emerging as a key growth vector across our end markets.

Regionally, our revenue in America has grown 22% sequentially, driven by momentum in automotive, aerospace, defense, and security.

Japan was up 38% quarter over quarter, driven by traction in automotive and image sensing.

This business is reported under our industrial segment and we expect our latest generation feels stopped seven IGT revenue to increase in 2025 over 2024 with continued double digit growth expected in 2026.

Turning to the AI data center itself at the EPS level, a leading industrial OEM has integrated on semi sic MOSFET into their latest three phase UBS platform, where superior efficiency and power density or key differentiators.

In China, we secured strategic ones and high-voltage traction inverters with a leading Tier 1 for multiple local OEMs. We also expanded our position at NIO with the traction inverter across their newest brand and with our 8-megapixel image sensor for their ADAS applications.

AI is reshaping the power landscape both inside and outside the data center.

At the rack level, we secured multiple design wins across high efficient Cps used with our pets <unk> trench MOSFET and sick jfet into five five kilowatt AI server psus with top global PSU providers delivering best in class thermal performance.

Supply assurance and switching efficiency for Hyperscale deployment.

The International Energy Agency projects that electricity demand from AI-optimized data centers will quadruple by 2030, making power efficiency and density critical differentiators and an area where ON Semiconductor leads. ON Semiconductor's intelligent power technologies span the full power tree, from solar and storage systems to UPS and rack-level PSUs, optimizing every stage before it reaches the processor.

At the compute board level, we have introduced high efficiency smart power stages and secured design wins on multiple platforms with leading SBU providers.

In Q3, we secured strategic ones in solar and energy storage platforms that are foundational to hyperscale AI deployments.

The acquisition of IP from our semiconductor further strengthen our Sps and controller offerings for power to the core applications.

Our latest generation of IGBTs and SIC in the most advanced hybrid modules were selected for high-efficiency solar inverters and energy storage systems, or ESS.

Our collaboration with Nvidia is also accelerating the industry's transition to 800 volt DC power architecture critical for next generation AI data Center.

Including wins with two of the leading utility solar inverter suppliers in China.

These technology achievements and customer engagements reflect the strength of our differentiated power <unk> portfolios and our ability to deliver system level value in the high growth segments of our core markets.

We also secured the next generation, large-scale stationary storage with a large OEM in the U.S. as a microgrid. Deployments are rapidly emerging as a key growth vector across our end markets.

Let me now turn it over to fat to give you more detail on our results and guidance for the fourth quarter.

Thanks Hassan.

This business is reported under our industrial segment, and we expect our latest generation field. Stop 7, IG Revenue to increase in 2025 over 2024, with continued double-digit growth expected in 2026.

Our third quarter results were driven by disciplined execution and prudent management of the business.

We have made structural changes across our portfolio and our manufacturing footprint that will enable margin expansion at scale and position us for a market recovery. These.

Turning to the AI data center itself at the UPS level, a leading industrial OEM has integrated ON Semiconductor’s SIC MOSFET into their latest 3-phase UPS platform, where superior efficiency and power density were key differentiators.

These initiatives will continue in future quarters, and we are committed to extracting value for our fab right activities.

Our investments in next generation technologies, including Trayo, <unk> Silicon carbide, jfet and vertical can are reshaping our mix and strengthening our competitive advantage to further our leadership position.

At the rack level, we secured multiple design wins across high-efficiency PSUs with our SATs, T10 trench MOSFET, and SiC JFET into a 5.5 kilowatt AI server. PSUs with top global PSU providers are delivering best-in-class thermal performance.

In addition, we continue to return capital to our shareholders.

Supply assurance and switching efficiency for hyperscale deployment.

Year to date, we have repurchased $925 million of shares returning approximately 100% of our free cash flow to shareholders.

At the compute board level, we have introduced high-efficiency, smart power stages and secured design wins on multiple platforms with leading XPU providers.

Turning to the third quarter results, we exceeded the midpoint of our guidance with revenue of $1 $5 5 billion, increasing 6% over Q2.

The acquisition of IP from Auros Semiconductor further strengthened our SPS and controller offerings for power-to-the-core applications.

Automotive revenue was $787 million, which increased 7% sequentially driven by increases in Americas, China and Japan.

Our collaboration with Nvidia is also accelerating the industry's transition to 800-volt DC power architecture, critical for the next generation of AI data centers.

Revenue for industrial was $426 million up 5% sequentially, primarily driven by aerospace defense and security.

Outside of auto and industrial or other business increased 2% quarter over quarter with continued momentum in AI data center.

These technology achievements and customer engagements reflect the strength of our differentiated power and sensing portfolios and our ability to deliver system-level value in the high-growth segments of our core markets.

Let me now turn it over to that to give you more detail on our results and guidance for the fourth quarter.

Looking at the third quarter results between the business units, we saw sequential revenue growth in all three business units.

Thanks, Assan. Our third-quarter results were driven by disciplined execution and prudent management of the business.

Revenue for the power solutions group or PSG was $738 million, an increase of 6% quarter over quarter, and a decrease of 11% year over year.

We've made structural changes across our portfolio and our manufacturing footprint that will enable margin expansion at scale and position us for a market recovery.

Revenue for the analog and mixed signal group, our AMG was $583 million, an increase of 5% quarter over quarter, and a decrease of 11% year over year.

These initiatives will continue in future quarters, and we are committed to extracting value through our fabrite activities.

Revenue for the intelligent sensing group or ISG was $230 million, a 7% increase quarter over quarter and a decline of 18% over the same quarter last year as we strategically refocus this business.

Our investments in Next Generation Technologies, including Trejo Vore, silicon carbide, JFET, and vertical GaN, are reshaping our mix and strengthening our competitive advantage to further our leadership positions.

In addition, we continue to return capital to our shareholders.

Turning to gross margin in the third quarter GAAP gross margin was 37, 9% and non-GAAP gross margin was 38% or above.

Year to date, we have repurchased $925 million of shares, returning approximately 100% of our free cash flow to shareholders.

Above the midpoint of our guidance due to favorable mix within the quarter.

Manufacturing utilization was up compared to Q2 at 74% as we started to build die bank inventory to support the mass market, we expect utilization to be flat to down slightly in the fourth quarter as we complete these built.

Turning to the third quarter results, we exceeded the midpoint of our guidance, with revenue of $1.55 billion, increasing 6% over Q2.

Automotive revenue was $787 million, which increased 7% sequentially, driven by increases in the Americas, China, and Japan.

GAAP operating expenses were $323 million non.

non-GAAP operating expenses were $209 $91 million.

GAAP operating margin for the quarter was 17% and non-GAAP operating margin was 19, 2%.

Revenue for Industrial was $426 million, up 5% sequentially, primarily driven by aerospace, defense, and security.

Our GAAP tax rate was six 5% and non-GAAP tax rate was approximately 16%.

Outside of automotive and industrial, other business increased 2% quarter-over-quarter, with continued momentum in the AI data center.

Diluted GAAP earnings per share was <unk> 63, and non-GAAP earnings per share was also 63.

Looking at the third quarter results, we saw sequential revenue growth in all three business units.

GAAP and non-GAAP diluted share count was 408 million shares and we repurchased $325 million of shares in the third quarter.

Revenue for the Power Solutions Group, or PSG, was $738 million, an increase of 6% quarter-over-quarter and a decrease of 11% year-over-year.

Since launching our share repurchase program in February 2023, we have repurchased $2 1 billion.

And had approximately $861 million remaining on our authorization at the end of the quarter.

Revenue from the Analog and Mixed Signal Group (AMG) was $583 million, an increase of 5% quarter over quarter and a decrease of 11% year over year.

Turning to the balance sheet cash and short term investments was approximately $2 9 billion.

With total liquidity of $4 billion, including $1 1 billion Undrawn on our revolver.

Revenue for the Intelligent Sensing Group, or ISG, was $230 million, a 7% increase quarter-over-quarter, and a decline of 18% over the same quarter last year as we strategically refocus this business.

Cash from operations was $419 million and free cash flow was $372 million.

Our year to date free cash flow is 21% of revenue and we remain on track to deliver strong free cash flow margin for the full year.

Turning to gross margin in the third quarter, GAAP gross margin was 37.9%, and non-GAAP gross margin was 38%. This is a bit above the midpoint of our guidance due to a favorable mix within the quarter.

Capital expenditures were $46 million or 3% of revenue.

Manufacturing utilization was up compared to Q2 at 74%, as we started to build inventory to support the mass market.

Inventory decreased by 39 $39 million.

We expect utilization to be flat to down slightly in the fourth quarter as we complete these bills.

To 194 days from 208 days in Q2 this.

This includes 82 days of bridge inventory to support fab transitions and Silicon carbide down from 87 days in Q2, excluding the streets the strategic builds our base inventory is healthy at 112 days.

GAAP operating expenses were $323 million, while non-GAAP operating expenses were $2.991 billion.

Gap. Operating margin for the quarter was 17%, and non-GAAP operating margin was 19.2%.

Distribution inventory declined to $10 five weeks from 10 eight weeks in Q2 and within our target range of 9% to 11 weeks.

Our GAAP tax rate was 6.5%, and the non-GAAP tax rate was approximately 16%.

Diluted GAAP earnings per share were $0.63, and non-GAAP earnings per share were also $0.63.

Looking forward, let me provide you the key elements of our non-GAAP guidance for the fourth quarter.

As a reminder, today's press release contains a table detailing our GAAP and non-GAAP guidance.

GAAP and non-GAAP diluted share count was 408 million shares, and we repurchased 325 million shares in the third quarter.

Our guidance is inclusive of our current expectation that there is no material direct impact of tariffs announced as of today.

We anticipate Q4 revenue will be in the range of $1 48 billion to $1 $5 8 billion.

Since launching our share repurchase program in February 2023, we have repurchased $2.1 billion and had approximately $861 million remaining on our authorization at the end of the quarter.

Our non-GAAP gross margin is expected to be between 37% and 39% which includes share based compensation of $8 million.

Turning to the balance sheet, cash and short-term investments were approximately $2.9 billion, with total liquidity of $4 billion, including $1.1 billion in undrawn credit.

non-GAAP operating expenses are expected to be between 282 and $297 million, which includes share based compensation of $32 million.

Gas from operations was $419 million, and free cash flow was $372 million.

We anticipate our non-GAAP other income to be a net benefit of $7 million with our interest income exceeding interest expense.

Our year-to-date free cash flow is 21% of revenue, and we remain on track to deliver strong free cash flow margin for the full year.

Capital expenditures were $46 million, or 3% of revenue.

We expect our non-GAAP tax rate to be approximately 16% and our non-GAAP diluted share count is expected to be approximately 405 million shares.

Inventory decreased by $30 million, from 39 million to 194 days, down from 208 days in Q2.

This results in non-GAAP earnings per share in the range of 57 to <unk> 67.

We expect capital expenditures in the range of $20 million to $40 million.

This includes 82 days of bridge inventory to support Fab transitions and silicon carbide, down from 87 days in Q2.

To close we remain focused on disciplined execution and financial leverage.

Excluding the street, the strategic builds based inventory is healthy at 112 days.

The structural changes we have made across our portfolio operations and manufacturing footprint are driving margin expansion and positioning on semi for long term earnings power.

Distribution inventory declined to 10.5 weeks, down from 10.8 weeks in Q2, and remains within our target range of 9 to 11 weeks.

With over 100% of our year to date free cash flow returned to shareholders, we continue to prioritize capital efficiency and shareholder value, while investing in innovation and differentiation.

Looking forward, let me provide you the key elements of our non-GAAP guidance for the fourth quarter.

As a reminder, today's press release contains a table detailing our GAAP and non-GAAP guidance.

As the market stabilizes, we are well aligned to scale with demand and deliver sustainable growth.

Our guidance is inclusive of our current expectations that there is no material direct impact of terrorists announced as of today.

With that I'd like to turn the call back over to Michelle to open it up for Q&A.

We anticipate Q4 revenue will be in the range of $1.48 billion to $1.58 billion.

Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced.

To withdraw your question. Please press star one one again.

Our non-GAAP gross margin is expected to be between 37% and 39%, which includes share-based compensation of $8 million.

And our first question comes from Ross Seymore with Deutsche Bank. Your line is open.

Non-GAAP operating expenses are expected to be between $282 million and $297 million, which includes share-based compensation of $32 million.

Thanks, I'll ask a question guys first one I want to ask about the automotive side of things upside in the quarter nicely versus the low single digit guide that you had so Hassan I just wanted to get an update on what youre seeing in that end market what caused the upside and perhaps what's the sustainability of that sort of growth as you look into the fourth quarter, and then 2026 as well.

We anticipate our non-GAAP other income to be a net benefit of $7 million, with our interest income exceeding interest expense.

We expect our non-GAAP tax rate to be approximately 16%, and our non-GAAP diluted share count is expected to be approximately 405 million shares.

Yes.

So nothing nothing really out of the ordinary. It's you can think about the Q3 and Q4 as I do which what I've been talking about I look at the second half versus first half of the year the quarter on quarter Lumpiness as customers try as new designs ramp I wouldn't read anything much into it what we're seeing in automotive is really stabilization.

This results in non-GAAP earnings per share in the range of $0.57 to $0.67.

We expect capital expenditures in the range of $20 million to $40 million.

To close, we remain focused on discipline, execution, and financial leverage.

Which is a positive from from where we were.

So the quarter on quarter, I don't think I read anything into it as purely between seasonality and ramps as far as 2026 look we'll let you know as we get closer a lot of things going on out in the world. So we're not guiding specifically by market into 2026, but what I can tell you.

Factoring and footprint are driving margin expansion and positioning in semiconductors for long-term earnings power.

With over 100% of our year-to-date free cash flow returned to shareholders, we continue to prioritize capital efficiency and shareholder value while investing in innovation and differentiation.

As demand is stabilizing and we are starting to see seasonal trend.

As the market stabilizes, we are well aligned to scale with demand and deliver sustainable growth.

One thing I would highlight is we haven't seen a restocking cycle.

With that, I'd like to turn the call back over to Michelle to open it up for Q&A.

Yet so that's still out there.

Thank you. As a reminder, to ask a question, please press star, 1, 1, 1 on your telephone.

Thanks for that color I guess as my second question, perhaps a little bit of a longer term one <unk> for the first time I believe size of the AI business at about $250 million I think for this year as a whole so whatever that roughly 4% of sales.

To be announced, to withdraw your question, please press *1 1 1 again.

And our first question comes from Ross Seymour with Deutsche Bank. Your line is open.

Can you just talk about how on differentiation that you mentioned the collaboration lists and 800 volt with Nvidia and Thats great to be on that list, but there's 13 other folks on the list as well. So as you look at that market. How do you believe that $250 million will grow in what's the differentiation on delivers to drive that growth.

Thanks for asking questions, guys. Uh, the first one I want to ask about is the automotive side of things. Upside in the quarter nicely versus the low single-digit guide that you had. So, Hassan, I just wanted to get an update on what you're seeing in that end market, what caused the upside, and perhaps what's the sustainability of that sort of growth as you look into the fourth quarter and then 2026 as well.

Yes, so that's a very good question so overall.

We expect AI data center for us to continue to grow we look at ourselves as.

Really the share gainer from some of the companies that have been in that market longer than we have so being able to post.

$250 million or about $250 million revenues is pretty stellar.

See our investments accelerating in that across the whole powertrain.

From a customer perspective to answer your question more directly if you take the quote unquote crowded space of 13, or however, many companies.

And you look at who can go from.

Wall to core.

There's only two and we will we are to share gainer. We're one of the two so the way. We differentiate is we're one of the only companies that are able to support the power delivery from the high voltage all the way to the core.

Yeah, uh, so look nothing. Nothing really out of the ordinary. It's uh, you can think about the Q3 and Q4 as I do, which what I've been talking about. I look at the second half versus first half of the year, you know, the quarter on quarter lumpiness as customers try as a new designs ramp. I wouldn't read any much into it. What we're seeing in automotive is really stabilization, which is a positive from, uh, from where we were. Um, so the quote on quarter? I don't, I don't think I, I read anything into it. It's purely, uh, between seasonality and, uh, and, and ramps as far as 2026. Look, we'll let you know, as we get closer. Uh, a lot of things going on out in the world, uh, so we're not guiding specifically by marketing into 2026, but what I can tell you, is demand is stabilizing. We're starting to see, you know, a seasonal, uh, Trends. But 1 thing, I would highlight is we haven't seen a restocking cycle uh, yet. So that's that's still out there.

All with the product portfolio that we have that we've grown.

Our organically or even inorganically with the <unk> acquisition. So that's how we differentiate we have proven that differentiation.

Through our japheth silicon carbide through our AMG with the products that they have been delivering and the revenue growth that has doubled year on year every quarter in the first three quarters to deliver that number I gave in 2025 is really the proof of that.

Thanks for that color. I guess this is my second question. Uh, perhaps a little bit of a longer term 1 you for the first time, I believe size, the AI business at about 250 million dollars, I think for this year as a whole. So whatever the roughly 4% of sales, can you just talk about how on differentiates in that you mentioned the collaboration list on the 800 volt with Nvidia and that's great to be on that list but there's 13 other folks on the list as well. So as you look at that market, how do you believe that 250 million dollars will grow?

Thank you.

And what's the differentiation on, uh, delivers to what drives that growth?

And our next question will come from the Big ARIA with Bank of America. Your line is open.

Thanks for taking my question so.

Hassan I know, it's a little early and I'm not asking for a quantitative guidance, but I'm curious how you are thinking about.

Seasonality in Q1, and just the growth in 2006 overall versus how you thought about it three months ago.

Yeah, so, oh, that's a very good question. So overall, uh, we expect the AI data center for us to continue to grow. Uh, we look at ourselves as, uh, really the the shared Gainer from, uh, some of the, uh, the companies that have been in that market longer than we have so being able to post, uh, uh,

$250 million, or about $250 million in revenue, is pretty stellar. You can see our investments accelerating across the whole power tree.

No no change from where we were three months ago.

So still still with the same outlook same expectation.

Okay.

A follow up maybe on the utilization and gross margins I think you said something about utilization, perhaps flat to slightly down anything more to read into it and if you could just remind us what is your seasonal pattern in Q1 and that is some utilization had been from Q4, how does that kind of reflect.

So, from a customer perspective, to answer your question more directly, if you take that quote-unquote crowded space of 13, or however many companies, and you look at who can, uh, go from,

<unk> gross margins in Q1, just based on historical and seasonal trends. Thank you.

Yes, yes.

Our utilization increased to 74% in Q3 as I said in the prepared remarks, we've been building die bank inventory for the mass market. This is a market that we've talked about for.

Wall to core. Uh, there's only 2 and we will we are the share Gainer, we're 1 of the 2. So the way we differentiate is, we're 1 of the only companies that are able to support the power delivery, from the high voltage, all the way to the core, all with the product portfolio that we have that we've grown, uh, or organically, or even in organically with the vcore acquisition. So that's how we differentiate we have proven that the differentiation

Probably well over a year about we need to see that market. We've been doing it through the distribution channel that we've got a hold inventory in die bank for kind of quick turn.

Uh, through our JFET, uh, silicon carbide, through our AMG, with the products that they have been delivering and the revenue growth that has doubled year-on-year. You know, every quarter in the first three quarters to deliver that number I gave in 2025 is really the proof of that.

In that mass market that we need to we need to invest in.

Thank you.

I expect it to be down the utilization to be down in Q4, because we expect those builds to be completed so going back to kind of a normal.

and our next question will,

Vic ARA with Bank of America. Your line is open.

<unk> utilization rate from that point forward excuse me.

You can think about utilization and the impact on utilization as having a couple of quarter impact on the P&L Theres always a delay on that right. So if you think about going into next year and obviously, we're not providing any guidance at this point, but we think between Q4 and kind of the next couple of quarters, we're looking at seasonal patterns.

Uh, thanks for taking my question. Um, so Hassan I know it's, it's a little early and I'm not asking for quantitative, uh, guidance. But I'm curious how you are thinking about a seasonality in, uh, q1 and just growth in, uh, 26 overall versus how you thought about it, uh, 3 months ago.

No, no change from where we were, uh, three months ago.

If you take the midpoint of our guidance for Q4, it's directly in line with normal seasonality, which is typically flat to down 2% I think our the midpoint of our guidance is down about one 3%.

So still, still with the same outlook, same expectation.

And.

To answer your question about kind of what's the normal seasonality in Q1, it's typically down 2% to 3%.

So does that mean slightly lower gross margin in Q1 patent or just how should we be prepared based on that kind of seasonality is what's actually emerges.

We're not guiding that far out vivek.

For my, uh, follow-up, maybe on utilization and gross margins that. I think you said something about utilization, perhaps flat to slightly down. Anything, you know, more to read into it? And, uh, if you could just remind us, what is your seasonal pattern in Q1? And if there is, uh, some utilization headwind from Q4, how does that kind of reflect in, uh, gross margins in Q1? Just based on historical seasonal trends. Thank you.

But there is there is tailwind as the utilization improves overtime.

Thank you.

And our next question is going to come from Chris Danley with Citi. Your line is open.

Hey, Thanks, Jake I'm sure you've seen this ongoing soap opera Xperia.

Have you seen any impact to your business either directly or indirectly or do you anticipate any impact longer term from all of this stuff going on over there.

Look as you said there is there is a big impact it's too soon to call anything we're focusing really on the business setup really outlined but what I can say about that obviously as we have a lot of the same customers and we are <unk>.

Yeah, yeah. So our, um, our utilization increased to 74%, uh, in Q3, as I said, said, in the prepared remarks, we've been building D Bank inventory for the mass Market. This is a market that we've talked about for uh, probably well over a year about. We need to see that market. We've been doing it through the distribution Channel. Now, we've got a whole inventory in D bank for for kind of quick turns on that mass Market that we need to. Uh, we need to invest in. Uh, I expect it to be down the utilization to be down in Q4 because we expect those builds to be completed. So, going back to kind of a normal, a normalized, uh, utilization rate, um, from that point forward, excuse me.

Supporting our customers to the extent, we can and we will continue to do that with the complete portfolio not just.

The parts that may be impacted.

So I can say is I am not redirecting any changes from where we are but we are supporting customers as they requested.

You can think about utilization; the impact on utilization is having, uh, a couple of quarter impact, uh, on the P&L. There's always a delay on that, right? So if you think about going into next year, and obviously, we're not providing any guidance at this point, but we think between Q4 and kind of the next couple of quarters, we're looking at seasonal patterns.

Okay. Thanks, and for my follow up so it seems like the auto market is starting to do a little better than the industrial end market. We've seen this trend at several of your peers.

Um, if you take the, the midpoint of our guidance for Q4, it's, it's directly in line with normal seasonality, which is typically flat to down 2%. I think our the midpoint of our guidance is down about 1.3% and uh and the answer to your question about kind of, what's the normal seasonality in q1? It's typically down to 3%.

Going forward would you expect auto to keep outgrowing industrial for the next few slash several quarters.

I wouldn't I wouldn't put the two kind of.

So, does that mean a slightly lower gross margin in Q1? How should we be prepared based on if that kind of seasonality is what actually emerges?

I guess I wouldnt compared to two and read anything into the difference in <unk>.

Growth quarter on quarter.

Uh, look, we're not guiding that far out, VC, but you know there's Tailwind as the utilization improves over time.

Thank you.

Both of them have.

Both vectors that we are participating in but the lumpiness that you see between the two is purely a market timing or a buildout timing some of the industrial was.

And our next question is going to come from Chris Danley with City. Your line is open.

From some of the slowdown in the solar deploy.

<unk> deployment in China, that's temporary as you go from a tariff to a market pricing.

A shift in there.

Hey, thanks, gang. Um, I'm sure you've seen this, uh, ongoing soap opera, Xperia. Uh, have you seen any impact to your business, either directly or indirectly? Or do you anticipate any impact longer term from all this, um, stuff going on over there?

See that kind of a temporary and will continue to grow we talked about some of the industrial growing because of the AI data center power requirements that I highlighted like energy storage system, driven by AI, but we called those out in our industrial market. So thats some of the the growth vectors in industrial and automotive obviously.

It's our major market, we know about the growth vectors that we have there. So both are growing but the delta is purely market driven and macro driven.

Look, as, as you said, there's a, there's a big impact. It's, it's too soon to call. Uh, anything, we're focusing. Really? On, on the business setup, really outlined. But what I can say about that obviously is, uh, we have a lot of the same customers, and we are supporting our customers to the extent. We can and will continue to do that with the complete portfolio. Not just, uh, uh, the the parts that may be impacted

I wouldn't I wouldn't read anything into kind of the delta is in the few quarters here short term.

Uh, so I can say is I'm not redirecting any changes from where we are, uh, but we are supporting customers as they requested.

Alright, Thanks, Tim Thanks, Sean.

Yeah.

The next question will come from Blayne Curtis with Jefferies. Your line is open hey.

Hey, good morning, guys. Thanks for my question I, just want to ask about normal seasonal for December.

Your company has gone through a lot of changes, but I think in the past, particularly auto has been up in December. So I'm, just kind of curious how you're thinking about this guide which is down 1% do you feel like that is a more normal range for you or do you think you're under shipping the market.

Okay. Thanks hon. And for my follow-up. So it seems like the auto market is uh, starting to do a little better than the industrial land market. We've seen this trend at at Several of your peers. Um, going forward, would you expect Auto to keep out growing industrial for the next, uh, few slash several quarters.

I wouldn't, I wouldn't put the two kind of, uh, I guess I wouldn't compare the two and read anything into a difference in, uh, in, uh, uh growth quarter on quarter.

Yes.

As I mentioned, our normal seasonal pattern for Q4 is flat to down 2%.

It's very positive that we've gone from stabilization to now seeing seasonal patterns I think thats the step the first step to recovery.

As we think about the guidance here in Q4.

Uh, both of them have, uh, growth vectors that we are participating in. But, you know, the lumpiness that you see between the two is purely a market timing or a buildout timing. You know, some of the industrial was, uh, from, you know, some of the slowdown in the solar deployment in China. That's temporary, you know.

Both auto and industrial we think will be down low single digits. The other bucket will be up kind of mid to high single digits Hassan mentioned it right I don't think you should kind of read into the lumpiness of the autos, just because of the ramping of programs and timing but.

But that's.

That's how we kind of think about Q4 as it laid out right now.

Perfect and then I wanted to ask you about that AI Im assuming straddles industrial in this other bucket you have so I'm just kind of curious is there a way to think about as we try to layer on that growth how it impacts us to button.

Yes, so the AI the AI data center as reported in the other bucket.

As you go from a tariff to a market pricing, there's a shift in there. We see that kind of a temporary and it will continue to grow. We talked about some of the industrial growing because of the AI data center. Power requirements that I highlighted like energy storage system driven by AI but we call those out in our industrial market. So that's some of the the growth vectors in industrial and Automotive. Obviously it's it's our, uh, Major Market. We, you know, about the growth vectors that we have there. So, both are growing, but the Delta is purely Market driven and macro driven. Uh, so I wouldn't, I wouldn't read anything into kind of the the Deltas in the few Quarters here. Short term.

Everything prior to the data center wall is an industrial so think about all the energy storage and energy infrastructure that is sitting in industrial but AI data centers, specifically inside the four walls of the data center is in the other bucket.

All right. Thanks, and thanks, Son.

Got you thanks for that.

And our next question comes from Gary Mobley with loop capital. Your line is open.

Good morning, guys. Thanks for taking my question.

Last quarter it was communicated.

The next question will come from Blaine Curtis with Jeffrey. Your line is open. Hey, good morning, guys, thanks for taking my question. I just want to ask about the normal seasonal trends for December. Obviously, your company's gone through a lot of changes, but I think in the past, particularly Autos have been up in December. So I'm just kind of curious how you are thinking about this guidance, which is down 1%. Do you feel like that is a more normal range for you, or do you think you're under-shipping the market?

The specifics to the revenue headwind as you exit non core businesses, if I recall correctly. It was assumed to be a $200 million revenue headwind for this fiscal year 300 million for next year is there any change from that outlook.

No change.

For Q3, we exited about $45 million of non core exits that leaves about 55 year for Q4, that's right in line with our expectations and then you nailed it going into 'twenty six there's about 5% of the 2025 revenue that doesn't repeat so no change.

From what were what were talking about last quarter.

Great. Thank you.

And I guess Theres been some news maybe it's a few months old now about.

Yeah, so is is I mentioned or are normal seasonal pattern for Q4 is flat to down 2%. Um, I think it's very positive that we've gone from the stabilization to now seeing seasonal patterns. I think that's the step the first step to recovery. Um, as we think about the guidance there in Q4 uh, both Auto and Industrial, we think will be down low single digits. The other bucket will be up kind of mid to high single digits. Uh his son mentioned it right. I don't think you should kind of read into the lumpiness of the Autos just because of the the ramping of programs and and timing. But uh, but you know, that's that's how we kind of think about Q4. Is it laying out right now?

The big analog player raising prices.

How do you think that impacts sort of a <unk>.

<unk> reset as we transition to the next calendar year.

Perfect. And then I wanted to ask you about that AI. I'm assuming it straddles industrial and this other bucket you have. So I'm just kind of curious, is there a way to think about, as we try to layer on that growth, how it impacts those two buckets?

Alright.

We're expecting normal pricing behavior.

Yeah, so the AI data center is reported in the other bucket.

No.

The other company, you're talking about something specific to them or not but obviously things can change we are monitoring the situation always it's as you can imagine it's very dynamic out there, but right now we're not expecting any of that in 2026. So you can think about it.

Everything prior to the data center wall is industrial. So think about all the energy storage in energy infrastructure that's sitting in an industrial, but AI data center specifically, inside the four walls of the data center is in the other bucket.

Got you. Thanks a lot.

It does happen it will be upside.

Got it thank you guys.

And our next question comes from Gary Moby with Loop Capital. Your line is open.

And the next question will come from Quinn Bolton with Needham and company. Your line is open.

So im wondering if you could give us a little bit more detail on the V core power exactly what comes into the business with that acquisition I think in the script you mentioned.

<unk> core for <unk>, six and arm processors, obviously, there's a huge number of voltage regulators on the <unk> side to see core LP on that or does that come from the.

Morning, guys. Thanks for taking my question. I think in the last quarter, it was communicated the specifics to the revenue headwind as you exit nine core businesses. If I recall correctly, it was assumed to be a $200 million revenue headwind for this fiscal year and $300 million for next year. Is there any change from that outlook?

Testing on our product portfolio, and then I've got a follow up.

As you can think about it as a combination of both so the way we look at the acquisition is a complements the product offering that we are already offering with trail. It provides products also on the short term I talked about revenue generation coming here in 2026. So that gives you time to market, while we integrate those architectural.

No change. Um we for Q3 we exited about uh 45 million of non-core exits that leads about 55 here for Q4. That's right in line with our expectations and then you you nailed it. Going into 26. There's about 5% of the 2025 Revenue. That doesn't repeat. So no change from what we are. What we're uh

Talking about last quarter.

Product function into our base Trayo platform. So I'd say, it's a very synergistic approach that gives us the acquisition itself tie it to market and a long term. It gives us an architectural advantage from a performance perspective, once we leveraged a performance of trade or from a technology base.

Great, thank you. I guess there's been some news, maybe it's a few months old now, about the big analog player raising prices.

How do you think that impacts sort of a pricing reset as we transition to the next calendar year?

I,

So reading between the lines that are you taking those products as they are today into the market for 26% longer term youll redesign them using the trail platform to get better performance.

Yes, yes.

Got it and then just you guys mentioned the entry into the vertical began market can to date hasnt been used that much in the high power segments of the market I think because of reliability issues can you just address how do you feel the vertical Gan technology compares with lateral Gan on reliability.

I think we're we're expecting normal pricing Behavior. I don't I don't know if the the other company you're talking about is something specific to them or not. But obviously things, uh, can change. We're monitoring the situation always. It's as you can imagine. It's very Dynamic out there. Uh, but right now, we're not expecting any of that in 2026. So if you can think about it, as if it's anything does happen, it will be upside.

Got it. Thank you guys.

And the next question will come from Quinn Bolton with Naming Company. Your line is open.

Can you give us any sense on when do you think that might start to go into production.

Yes.

So I will tell the vertical Gan is better on the reliability side.

It has all the inherent feature.

<unk> features from the lateral again, but better on reliability from a die size perspective.

The one thing you need to understand the barrier for lateral again to be used in high voltage application has really been the fact that lateral again to get it to high voltage you have to go laterally, which makes the die size not.

Yes, I'm wondering if you could give us a little bit more detail on the decor power. Exactly what comes into the business with that acquisition? I think in the script you mentioned the core for x86 and ARM processors. Obviously, there's a huge number of voltage regulators on the xPU side. Does just the core help you on that or is it from the existing product portfolio? And then I got a follow-up.

Not competitive versus other similar functions.

When.

When.

When you look at the vertical Gan the current goes vertically.

Which means that we can go higher and higher voltage without increasing the die size. So not just from a performance perspective, but also from a commercial competitiveness perspective.

You can think about it as as a combination of both. So the way we look at the the acquisition is a compliments. The product offering that we're already offering with Trail, it provides products also in the short term you know, I talked about Revenue generation coming here in 2026 so that gives you time to Market while we integrate those architectural and product function into our base Trio platform. So it's a it's a very synergistic approach that gives us the acquisition itself time to Market.

Not just the reliability. So we believe we solved dose we're sampling we have lead customers in our.

And in the long term, it gives us an architectural advantage from a performance perspective. Once we leverage the performance of Trio from a technology base,

Both in AI and automotive so we're excited about about that we crack that code.

It is a breakthrough technology I don't believe anybody is able to sample such technology outside so it gives our customers the optionality.

So, reading between the lines, are you taking a tour of products that they are launching into the market for Q3 2025? But longer term, you'll redesign them using the Trail platform to get better performance.

To have really a broad portfolio of high voltage high efficiency products. So anytime you need high voltage and high switching frequency vertical again as the solution of the answer.

Thank you.

And our next question will come from Joe <unk> with Wells Fargo. Your line is open.

Okay. And then, just you guys mentioned that the entry into the vertical GaN market, to date, hasn't been used that much in the high power segments of the market, I think because of reliability issues. Can you just address how you feel the vertical GaN technology compares with lateral GaN on reliability? And can you give us any sense on when you think that might start to go into production?

Yes, thanks for taking the questions I was wondering with a quarter ago any sort of color you can provide on.

Yeah, so it's, uh, so I'll tell a vertical GAN is better on the reliability side. Uh, it has all the inherent, uh, features from the lateral GAN, but better on reliability from a dice size perspective.

Your expectations for Silicon carbide revenue growth this year.

We didn't provide.

Any guidance on silicon carbide, but I will tell you silicon carbide is coming in exactly where we expected.

We continued to gain share in.

Our end customers and our position in China remains unchanged as new products are ramping I mentioned a couple of examples here.

Uh, the one thing you need to understand is that the barrier for lateral devices to be used in high voltage applications has really been the fact that lateral devices, to get them to high voltage, you have to go laterally, which makes the die size not competitive versus other similar functions.

When, uh, when, uh, you look at the vertical GAN, the current goes vertically.

One is the neo launching a new brand, where we were designed into that new brand with silicon carbide.

And a broader deployment now in China, Evs through a leading tier one in China that gives us really exposure to beyond just the top 10 Oems that we've been engage.

So that that gives you a little bit of a <unk>.

Outlook for a feel into our penetration with silicon carbide will continue to increase and we will continue to gain share.

Which means that we can go higher and higher voltage without increasing the die size. So not just from a performance perspective, but also from a commercial competitiveness perspective. Uh, not just the reliability. So we believe we've solved those. We're sampling, we have lead customers in our uh uh, you know, both in Ai and Automotive. So we're uh, excited about about that that we cracked that code.

Thanks, and as a follow up I was wondering if you could talk about.

The Veda short lead time orders that Youre seeing and how that compares in the third quarter relative to the prior quarter and Youre seeing any increased visibility.

So.

Uh, it is a breakthrough technology. I don't believe anybody's able to sample such technology outside. So gives our customers the optionality uh uh to have really a broad portfolio of high uh, voltage high efficiency products. So anytime you need high voltage and high switching frequency vertical Gan is is the the solution the answer

Our lead times actually pushed out slightly we're kind of in the mid teens weeks, where we're up around 20 weeks or so now I don't think theres been a significant change to the short lead time orders at this point.

Thank you.

And our next question will come from Joe Cortrol with Wells Fargo. Your line is open.

Customers are are layering in backlog as they have visibility.

We probably have seen order patterns that continue to improve which gives us that.

Yeah, thanks for taking the questions. I was wondering what, you know, the quarter to go, any sort of color you could provide on, you know, your expectations for selling carbide revenue growth this year.

That confidence in the stabilization right now.

Okay.

Thank you.

And our next question will come from Josh Buchalter with TV Cowen Your line is open.

Hey, guys. Thank you for taking my question.

Hoping you could provide a little bit more color on our revenue by geography.

Seemed like there was a lot of volatility this quarter with Americas up so strongly.

And in particular, China down could you maybe elaborate on some of the drivers there was the Americas strength led by our lead customer and what's going on in China. Thank you.

Yes. So there is I think in our prepared remarks, we laid out.

Quarter over quarter changes on each of the markets now there is some kind of movement of orders between some geographies as well.

We, we didn't provide uh, uh, uh, any guidance on silicon carbide, but I'll tell you silicon carbide is coming in exactly, where we expected. Uh, we continue to gain share in uh, our end customers and our position in China remains unchanged, as new products are ramping. You know, I mentioned 1 1, couple of examples here, uh, 1 is the Neo launching a new brand, where we were designed into that. That new brand with silicon carbide, uh and uh a broader deployment now in China EVS through a leading Tier 1 in China that gives us really exposure to Beyond, just the top 10, oems that we've been engaged, uh, to so that.

A large customer is now placing orders out of Japan versus Europe. So I think if you normalize for that the Japan comes down slightly Europe goes up a little bit.

That gives you a little bit of an outlook or a feel into our penetration with silicon carbide. We will continue to increase and we will continue to gain share.

The rest of it I think is just kind of what we're seeing is a normal pattern at this point, so not a lot to read into those bigger swings.

Thanks, and as a follow-up, I was wondering if you could talk about, uh, you know, the rate of short lead time orders that you're seeing and how that compares in the third quarter relative to the prior quarter. And, you know, are you seeing any increased visibility?

Okay. Thank you and then.

Also hoping you could elaborate on why what Youre seeing now and why is the right time to start building up die bank inventory and taking utilization rates, especially ahead of a couple of balance seasonal quarters.

And maybe how we should think be thinking big picture about.

Your capacity planning with those utilization rates. Thank you.

Yes look we've been I think we've been very disciplined on utilization versus inventory versus outlook and demand I think we've proven the formula works, we're not sitting here on a ton of inventory our inventory our base inventory is actually.

So, so our uh, our lead times actually pushed out slightly, we're kind of in the mid- te weeks. We're we're up around uh, 20 weeks or so now. Um, I don't think there's been a, a significant change to the the short lead time orders at this point. Um, you know, customers are are layering in backlog as they have visibility. Um, we probably have seen, you know, hoarder patterns that continue to improve, which gives us that, uh, that confidence in the stabilization right now.

Thank you.

And our next question.

Josh.

Is open.

Closer to the low end of our target about 100, which is a 110 to 120 days.

<unk>.

I think we're sitting on 112.

112.

So the.

I think I had mentioned the die Bank inventory. We're building is really for the mass market for the last kind of two to three quarters. We have been consistently talking about how we're going to be growing our customer count increased almost 20% year on year just in the mass market.

Hey guys, thank you for taking my question. Um I was hoping you could provide a little bit more color on the revenue by geography. Uh you know they seem like there was a lot of volatility this quarter with America's up so strongly. Um, and in particular China down, could you maybe um, elaborate on some of the drivers. There was the America's strength led by your lead customer and yeah, what's going on in China? Thank you.

And therefore, the demand is there for that and we will make sure that we have it in die bank internally. So we can respond to changes in demand that usually come from from the mass market. So I think we do see the business justification for it.

But that doesn't mean that we're going to be building blinded, we will maintain our targets we will maintain inventory in all of our metrics within the range that we've previously outlined so I don't see this as business as usual.

So, so not a lot to read into those bigger swings.

Yes, and just to point out also that EBIT, even with that die Bank increase.

Our inventory actually declined quarter on quarter to $39 million. So it's a mix shift within our base inventory so to get a better profile of inventory for that mass market.

Okay, thank you. And then, um, I was also hoping you could elaborate on, you know, why what you're seeing now and why it's the right time to start building up die bank inventory and taking utilization rates off, especially ahead of, you know, a couple down seasonal quarters. Um, you know, maybe how we should be thinking big picture about your capacity planning with those utilization rates. Thank you.

Thank you Bill.

And the next question will come from tore Svanberg with Stifel. Your line is open.

Yes. Thank you.

Hassan with the recent acquisitions.

I know you have a slide that talks about power delivery from grid to processors and the content correct going from maybe a few thousand dollars today to maybe as much as $50000 by 27% or so.

Yeah. Look, we've been, I think we've been very disappointed on, uh, utilization, uh, versus inventory versus Outlook and demand, I think we've proven that the formula Works. We're not sitting here on a ton of inventory, our inventory, our base inventories, actually, uh, closer to the low end of our of our Target. You know, about a hundred which is 110 to 120, uh, days.

Do you have all the IP and all the building blocks right now to get there.

Or is this sort of more of an opportunity and you still need to build out a few more things before you get to those types of numbers.

I think with whatever we need call. It in the next couple of years.

We either have it or are working on it both organically and Inorganically, obviously that the ecosystem is evolving.

Things that are needed three or four years from now are slightly different.

I think we're sitting at like 112th at 12. Yep, 112. Uh, so the talk I think that mentioned the die bank inventory we're building is really for the mass market. You know, for the last kind of 2 or 3 quarters, we have been consistently talking about how we are going to be growing our customer count, increased almost 20% year on year, just in the mass market. Therefore, the demand is there for that, and we will make sure that we have it in die bank internally so we can respond to changes in demand that usually come.

We believe we have a very full portfolio of the IP that we need and we will be creating products very quickly based on that IP. So we have you can think about it as we have built a toolbox with all the IP and technology and we are quickly deploying products I mean, you've seen us double the number of products and trail overall.

Uh, from the mass market. So I think, uh, we do see the business justification for it. Uh, but that doesn't mean that we're going to be building, uh, blindly. We will maintain our targets, we will maintain, uh, inventory and all of our metrics within the range that we've, uh, appreciated the outlined. So I don't, I see this as business as usual, really.

Year on year, which we remain on track to do.

Youre going to see kind of that same mindset on.

AI data center, along with automotive and so on so are we do have the toolbox, we do have the IP.

We developed it internally and or acquired it and we will be deploying it to win in these markets to capture a lot of that share from the dollars you mentioned on the rack.

Yeah, and just to point out also that even with that debt increase, our inventory actually declined quarter over quarter by $39 million. So it's a mix shift within our base inventory. This creates a better profile of inventory for that mass market.

Thank you, both.

Great Great. Thank you for that and then as my follow up I wanted to just take a step back on began.

And the next question will come from Tours Fanburg with Stifel. Your line is open.

So could you just give us a little bit of history here.

I know, it's obviously in your own surface side, but.

How many years has been in development.

Maybe back to <unk> question when do you start to expect some revenues here because obviously this is a very unique approach again, so let me sort of historical context and future revenue contribution.

Most of those will be great to know.

Yes, thank you. Um, Hassan, with the recent acquisitions, um, I know you have a slide that talks about power delivery from grid to processors and, you know, the content per product going from maybe a few thousand dollars today to, you know, maybe as much as $50,000 by '27 or so. I mean, do you have all the IP and all the building blocks right now to get there, or is this sort of more of an opportunity, and you still need to build out a few more things before you get to those types of numbers?

Sure. So we started working on it through acquisition of IP and assets back in 2024.

Since then we have.

Turned on quote unquote turned on the fab.

Launched the first products first products from a.

Call it electrically.

Speaking are yielding are functioning therefore, we were very aggressive in our deployment with samples to customers.

We have lead customers in.

Our major markets of automotive Nai data centers that are currently evaluating the first generation samples and we're already working on the second generation. We expect revenue you can think about it into 2007 timeframe.

Great. Thank you so much.

And the next question will come from Christopher Roland with Susquehanna. Your line is open.

Thanks, so much for the question.

I think with whatever we need, call it in the next couple of years, uh, we either have it or are working on it, both organically and inorganically. Obviously, that that ecosystem is evolving, you know, things that are needed 3, 4 years from now are slightly different. Uh, we believe we have a very full portfolio of the IP that we need and we will be creating products very quickly based on that IP. So we have you can think about it. As we have built a a toolbox with all the IP and technology and we are quickly deploying products. I mean, you've seen us double the number of products and treyo overall a year on year which we remain on track to do. Uh, you're going to see kind of that same mindset on uh, AI data center along with automotive and so on. So our, we do have the toolbox, we do have the IP uh we developed it internally and or acquired it, and we will be uh deploying it to win in these markets to capture a lot of that, share from the dollars you mentioned on.

So yes, my my questions are really around.

The rack.

AI as well and this what seems like a bigger push over the last few quarters.

Just some of these applications that you mentioned.

I wanted to know if you could address could you do things like solid state Transformers, It sounds like Youre in the PSU.

48 volt bus converters I guess, the last one would be hot swaps as well.

Great great. Thank you for that. And and as my follow-up and I want to just take a step back on on vegan. Um, so. So could you just give us a little bit of History here? Um, I mean I know it's it's obviously in your own circus Pia Fab. But uh, you know, how many years has this been in development? Uh, you know, maybe like the Quinn's question, you know, when do you start to expect some revenues here because obviously this is a very unique approach again. So you know industry, historical context and and you know future

Do you address these or do you plan on addressing needs over the next few years.

I'm sure revenue contribution, uh, milestones would be great to know.

So we address every single one of them already.

Why not so when I referred to and we have an online too when we referred to our ability to address the powertrain.

That was my my answer before as far as how do we differentiate our ability to address already today, the whole power tree, including all of the IP and <unk>.

<unk> functionality required that you have mentioned some of them is the differentiation. We bring so the answer is yes to all we do that today and we will continue to expand that portfolio.

As we gained share.

Excellent and Hassan.

Major, uh, markets of Automotive nigh, uh, data centers that are currently evaluating the first generation samples and we're already working on the second generation. We expect Revenue. You can think about it in the 27 time frame.

Lee on Silicon carbide, as we kind of digest that growth outlook, perhaps you can talk about some of the moving parts like geographically or.

Great, thank you so much.

And the next question will come.

Nolan with Sasua, your line is open.

Or even across industries, and lastly, do you have the ability to convert to 300 millimeter wafers, we're hearing about the potential for new applications on 300.

Thanks so much for the question. Um, so yeah, my questions are really around AI as well, and this what seems like a bigger push over the last few quarters?

Yes, so well first off there's a lot of changes in the silicon carbide as new opportunities.

For example, a few years ago Silicon carbide in AI data centers was not even a conversation point today. It is and we are gaining share and really designed into.

The psus.

With our japheth and even our silicon carbide MOSFET. So those are new applications that are legacy with silicon carbide and automotive allowed us to really tackle very quickly and gained share with products we already have.

Um just some of these applications that you mentioned. Uh I I wanted to know if you could address. Um could you do things like solid state Transformers? It sounds like you're in the PSU. Um 48 volt Busken Burrs I guess the last 1 would be hot swaps as well. Uh do you address these or or or do you plan on addressing these over the next few years?

So we address every single 1 of them already. Uh, why not? So when I refer to and we have it online too, when we refer to our ability, to address the power tree.

In automotive specifically.

The silicon carbide approach was for battery electric vehicles or <unk>.

Now you see a.

Resurgence of.

And mix into plug in hybrids or range extender.

Evs.

Silicon carbide is now getting designed in even in plug in hybrids, which historically has been assumed to remain on IGT.

Uh, you know, that was my, my answer. Uh, before as far as how do we differentiate our ability to address already today? The whole power tree, including all of the uh uh IP and uh, functionality required, that you have mentioned. Some of them is the differentiation we bring. So the answer is yes to all, uh, we do that today and we will continue to expand that portfolio uh, as we gain share.

That's not the case and we are gaining share in the plug in hybrid market with our silicon carbide. So within the market itself. There is new opportunities and really breadth of opportunities that just a few years ago. When we started on this journey was not part of even our addressable market because it wasn't there as <unk>.

Far as geographical I would say I don't expect a change in the geographical outlook for silicon carbide, specifically because to a first order, it's going to match, where electrification, whether it's electric vehicles or plug in hybrid is going to come from and where the AI data.

Hassan uh, secondly, on silicon carbide, as we kind of digest that growth Outlook. Perhaps, you can talk about some of the moving Parts like geographically or uh, or or or or even across Industries. And lastly, do you have the ability to convert to 300? Mm Wafers. We're hearing about the potential for new applications on on 300.

Center deployments that are going to come from and that puts it strong in China and the U S and following behind that is Europe and Japan.

Yeah. So, uh, well, first off the, there's a lot of changes in the silicon carbide as new opportunities. Uh, uh, open up for example, a few years ago, silicon carbide in AI data, centers was not even a conversation point today, it is and we are uh, gaining share and really uh design into uh the the psus.

Excellent and 300 millimeter.

300 millimeter.

We've seen it but my point is it's too far from now I don't think 300 millimeter opens up new applications.

Just a it's a different call it throughput just like six to eight I've always said six to eight inch provides us.

Uh, with our JFET and even our silicon carbide MOSFETs, those are new applications that are, uh, legacy with, uh, uh, silicon carbide and automotive, allowed us to really tackle very quickly and gain share with products we already have.

Um, in automotive specifically, you know, the silicon carbide approach was for battery electric vehicles or BEVs.

Additional capacity from the number of die per wafer, we see the 300 millimeter the same but it's very very early in development today I wouldn't I wouldn't put that in.

And any short term models or anything but today, we have been just I'll use the opportunity to give you an update on our eight inch or <unk>.

<unk> is in production, we're running eight inch in our fab at 350 Micron thickness. So best best in class and we will be shipping production on track in 2006. So the eight inch is full.

<unk> and then we're always looking at what's next to come both from a device like the jfet or MOSFET, but also from a technology.

As now you see, uh, re Resurgence of, uh, uh, a mix into plug-in hybrids or range extender, uh, uh EVS, uh, silicon carbide is now getting designed in, even in, uh, plug-in hybrids, which historically has been assumed to remain on igbt. That's not the case, and we are gaining share in the plug-in hybrid Market with our silicon carbide. So, within the market itself, there's new opportunities and really breadth of opportunities. That just a few years ago, when we started on this journey, uh, was not part of even our our addressable Market. Because it wasn't there.

Thanks Hassan.

And the next question will come from Harlan sur with Jpmorgan. Your line is open.

Yes. Good morning, Thanks for taking my question back to the mass market strategy or long tail of small to medium sized customers. This has been a bright spot for the team made solid customer account improvements.

As far as geographical outlook, I would say I don't expect a change in the geographical outlook for silicon carbide specifically. Because, to a first order, it's going to match where the electrification, whether it's full electric vehicles or plug-in hybrids, is going to come from. And where the AI data center deployments are going to come from, and that puts it strong in the US and China.

Through distribution, which gross margins how big is this segment as a percent of your total distribution revenues and how did the sub segment due in the September quarter relative to your overall <unk> business.

And following behind that is Europe, then Japan.

Excellent 300. Mm.

So let me give you a breakdown of the distribution revenue that may help you get there.

So roughly about 58% of our business goes through distribution and about half of that fulfillment demand creation right. So if you think about that have not all of that is mass market. When we think about mass market, we're thinking small customers right.

We had.

On semi maybe maybe don't know their names their emerging customers that distributors do a good job of identifying the opportunity. So you can think about it as being a subset of that half maybe it's maybe it's 25% of the total distribution revenue somewhere in that kind of came.

But if you think about it if there are medium or large customer that distributor. We still have we still track that I wouldn't put that in the mass market.

Got it okay, and let's get to see the technology and portfolio expansion on the wide band gap with your protocol V Gan technology.

Today we have been just I'll use the opportunity to give you a update on our 8 inch. Our 8 inch is in production, we're running 8 inch in our Fab at 350, Micron thickness. So best best in class and we will be shipping production on track, uh, in 26. So the 8 in is is uh, full on and then we're always looking at what's next to come both from a device like the 6 j. A

As you mentioned I think Hassan looks like this was the technology that you acquired through the acquisition of Nexgen late last year did the acquisition also includes the he would Syracuse fab facility or was that already a part of our on and then it looks like they were able to develop this very differentiated technology, but not able to commercialize.

Thanks. Ah.

And the next question will come from Harland Sir with JPMorgan. Your line is open.

So what has the on semi team done to take the technology.

Yeah, good morning. Thanks for taking my question. Um, back to the mass market strategy, your long tail of small to medium-sized customers, you know, this has been a bright spot for the team, right? Solid customer account improvements.

<unk> proof of concept to commercialization.

Great question.

So yes.

The fab was not part of our base Fab you can think about it as a fab that came with the technology given the differentiation of the technology Youre absolutely right on.

It serves to distribute which close margins. How big is this segment as a percent of your photo distribution revenues? And how did this sub-segment do in the September quarter relative to your overall Disney business?

It's such a breakthrough in differentiated technology very difficult to make.

What the on semi team has broad is our ability to manufacture wideband gap and the team's capability to be able to scale new technologies very quickly and reach maturity very quickly then.

So, let me give you a breakdown of the distribution revenue that may help you get there. So, roughly about 58% of our business goes through distribution; about half of that is fulfillment and half is demand creation. Right? So, if you think about that half, not all of that is mass market. When we think about mass market, we're thinking small customers, right? Um, we at ON Semiconductor may...

Call It a startup.

By the way I will mirror this to what we've done with <unk> and Silicon carbide, if you recall.

I am questioning same conversations can you guys pull it off why would you pull up the others didn't and look where we are today.

You can think about it our capability has already been proven with the <unk> acquisition and building a franchise in a couple of years.

Maybe they don't know their names, right? They're emerging customers, the distributors. Do a good job of identifying the opportunity, so you can think about it as being a subset of that half. You know, maybe it's 25% of the total distribution revenue, somewhere in that kind of camp. If you think about it, if they're a medium or large customer, that distributor, we still have, um, you know, we still track that. I wouldn't put that in the mouse market.

That gives us leadership.

Can imagine that same muscle that same knowledge and that same team is going to do exactly that with <unk>.

Yes totally agree thank you Jose.

Okay.

And the next question will come from Jim Schneider with Goldman Sachs Sachs. Your line is open.

Good morning, Thanks for taking my question.

You talked about the fact that customers are not willing to restock at this point youre not seeing that effect could you maybe talk a little bit about.

Got it. Okay. And, um, it was good to see the technology and portfolio expansion on the wide bank gap with your vertical vegan technology. As you mentioned, I think Hassan looks like this was the technology that you acquired through the acquisition of NextGen late last year. Did the acquisition also include the Wood Syracuse Fab facility, or was that already a part of our on? And then it looks like they were able to develop this very differentiated technology but not able to commercialize it. So, what has the ON Semiconductor team done to take the technology beyond proof of concept to commercialization?

Great question.

When you speak to Oems, what they would need to see to get more confidence to re socgen is that broadly applicable to the distributor side as well.

Yes look.

First I'll answer the distributor I think distributors are from a mass market that said it we we.

Uh the Fab was not part of our base Fab you can think about it as as a a Fab that came with the technology given the differentiation of the technology. You're absolutely right on. Uh uh it's such a breakthrough and differentiated technology very difficult to make

We are.

Increasing our di Bang internally, because we want to be able to make sure we cede.

I call it the shelves as customers pull on the mass market. The OEM is slightly different Oems, what they need to see one as a credible demand signal think about consumer level confidence consumer level demand signal that people are going to buy cars or people are going to buy power tools or whatever the market is.

That has to be seen and the biggest thing that they want to see which we do also is stabilization and.

The geopolitical aspect of it.

They are working on shuffling and changing logistical models and manufacturing sites and so on they are not going to be <unk>.

Replenishing given the changes that they are going through so what I would say as consumer confidence and a geopolitical stabilization will start adding more and more confidence for Oems to restock.

What the on semi team has brought is our ability to manufacture wide band Gap and the team's capability to be able to scale new technologies, very quickly and reach maturity, very quickly then uh uh call it a startup. Uh, by the way, I will mirror this to. You know, what we've done with Gat and silicon carbide, if you recall, same questioning same conversations, can you guys pull it off? Why would you pull it? The others didn't, and look where we are today. Uh, you can think about it, our capability has already been proven with the GTAT acquisition and building a franchise in a couple of years, uh, that gives us leadership. You can imagine that same muscle that same knowledge, and that same team is going to do exactly that with vegan.

Yeah, totally agree. Thank you, Hassan.

Thank you and then maybe as a follow up.

And the next question will come.

Give us a little more visibility on what's happening with your other segment for a minute. It sounds like data center is doing very very well for you maybe talk about what some of the offsets are that might be headwinds you saw in this quarter and then maybe what youre seeing going forward. Thank you.

Tonight, or with Goldman Sachs.

Clean this open.

Good morning. Thanks for taking my question. Um, so you talked about the fact that customers are not willing to restock at this point, or you're not seeing that effect. Um, can you maybe talk a little bit about...

So for Q4, I mentioned that we think that other segment is going to be up mid to high single digits.

When you speak to OEMs, what they would need to see to get more confidence to restock, and is that broadly applicable to the distributor side as well?

There is some normal seasonality in our noncore markets. There that helped that you have AI data center, that's growing as well in that market.

I think those are the big drivers if you sum it up.

And then of course, we have the the exits that a lot of Atlanta into the other's bucket that is offsetting the growth.

So net net growing is actually it means the strategic market like AI data center and so on within that is growing very very nicely.

Thank you.

And the next question will come from Joe Moore with Morgan Stanley. Your line is open.

Great. Thank you I Wonder if you could give us some sense of the automotive market.

Region any.

Sort of different behaviors that you're seeing and I guess, particularly on China EV, there's been sort of a lot of noise in both directions can you just talk to the health of that market.

Yes look I think I think from a market and of course, we've always expected adjustments in that market I've always said, there's over 100 brands. So between consolidation between success and not success. The only strategy, we have which we've been executing to and it's worked very well for us is customer diverse.

Uh, that has to be seen. And the biggest, uh, thing that they want to see, which we do also, is stabilization in uh the geopolitical aspect of it. You know, as they're working on shuffling and changing logistical models and manufacturing sites and so on, they're not going to be uh, replenishing uh given the changes that they're going through. So what I would say is consumer confidence and geopolitical stabilization will start adding more and more confidence for OEMs to restock.

Suffocation, so you've heard us always adding new customers.

Leading customers in the top 10, which drive a lot of volume.

Thank you. And then maybe as a follow-up, you know, give us a little more visibility on what's happening with your other segments for the event? It sounds like data center is doing very, very well for you. Maybe talk about what some of the offsets are that might be headwinds you saw in this quarter, and then maybe what you're seeing going forward. Thank you.

And then secondary is trying to reach into that tail of Oems. So we're not sitting here picking winners or not winners in China. We want to have the majority of market share across the market and as share shift between them.

So, for Q4, I mentioned that we think that the Other Segments are going to be up mid to high single digits.

Now, there's some normal seasonality in our non-core markets that helps, and we have the AI data center that's growing as well in that market.

Our customer diversification strategy will work to our advantage, we have proven that very well over the last few years, we're gaining share consistently across a broad range of Oems and brands.

Um, I think those are the big drivers. If you sum it up,

And then, of course, we have the, uh, the exits that a lot of it lands into the others bucket, which does offset the growth.

Have have worked for us to really derisk, the lumpiness that you're referring.

But I don't see that as any change from the headlines.

So, net, net, growing is actually means the strategic market like AI Data Center, and so on. Within that, it is growing very, very nicely.

So our strategy is working and will continue to execute to that while we kind of fine tune and as things change because things do change rapidly.

Thank you.

And the next question will come from Joe Moore with Morgan Stanley. Your line is open.

Great. That's helpful. And then you addressed the next period situation, but I guess I'm just trying to figure out why that isn't a bigger deal we've listened to some of the tier one auto suppliers and they seem quite anxious about the situation like shouldnt that be a catalyst for them to start building up inventory to sort of.

Great. Thank you. I wonder if you could, um, give us some sense of the automotive market, um, by region. Any sort of different behaviors that you're seeing? And I guess, particularly on China, EV—there's been sort of a lot of noise in both directions. Can you just talk to the health of that market?

With the geopolitics of the situation or just one.

Why isn't that something that's that's a bigger deal for you guys in the next quarter or two.

Well.

We're here to support.

But I will make it.

I'll make a comment on the tier ones panicking.

I've been saying.

That inventory is low for the last two years, and we're draining inventory below critical levels, whether and xperia or not any trip into supply chain is going to cause a chain reaction and this is the proof.

Yeah, look, I think, I think from a market, of course, we've always expected adjustments in in that market. You know, I've always said there's over a hundred, uh, Brands. So between consolidation between, you know, success and and not success. The only strategy we have, which we've been executing to, and it's worked very well for us is customer diversification. So you've heard us uh always adding new and new customers uh uh, leading customers in the top 10, which drive a lot of volume.

The only way out of this is placed the backlog with visibility and we will start planning and shipping.

So we are seeing it we are responding to it.

And we will keep supporting it but regardless of how the next few quarters ago, we need the replenishment cycle, we need to make sure that the tier ones and Oems have safety stock in order to buffer any disruption that's the only solution.

We've learned the hard lesson in Covid and here we are again.

Yeah.

Yes very helpful. Thank you so much.

Uh, and then secondary is trying to reach into that tail of OEMs. So we're not sitting here picking winners or not winners in China. We want to have the majority market share across the market, and as you know, share shift between them are, uh, customer diversification strategy will work to our advantage. We've proven that very well over the last few years, where gaining share consistently across a broad range of, uh, OEMs and brands have worked for us to really de-risk the lumpiness that you're referring to. Uh, but I don't see that as any change from the headlines. Uh, so our strategy is working, and I will continue to execute that while we kind of fine-tune it as things change, because things do change rapidly.

And the next question will come from harsh Kumar with Piper Sandler Your line is open.

Okay guys. Thanks for squeezing me in Hassan if I can dare say that you've seen somewhat somewhat cautiously excited about your end markets for the fresh download a long time.

Great, that's helpful. And then you addressed an experienced situation? Um, but I guess I'm just trying to figure out why that isn't a bigger deal. You know, we've listened to some of the Tier 1 Auto.

So if I can ask your question auto two <unk> could you give us a hint of maybe what backlog or bookings, where I'm trying to gauge that relative to your stabilization comment.

suppliers and they seem quite anxious about the situation, like shouldn't that be the Catalyst for them to start building up inventory, to sort of deal with the geopolitics of the situation or just, you know, why, why isn't that something? That's, that's a bigger deal for you guys in the next quarter or 2.

And if you are talking about stabilization in auto then I'm looking at your 6% growth that you put up in the September quarter is that seasonal growth or is that better than seasonal growth and if it's better then of course won't go back.

Well, um, I I'm we're here to support but I will make a well I'll make a comment on the tier 1's panicking.

I've been saying that inventory is low for the last two years.

And we're draining inventory below critical levels.

Yes look I think I think I'll go back to the prior answer that I gave earlier I don't look at the quarter on quarter I would recommend you shouldnt either I got to look at it.

Whether an Xperia or not, any trip in the supply chain is going to cause a chain reaction, and this is the proof.

First half second half and we've always said the second half of the year is going to outgrow the first half of the year in our end markets remember auto we set the bottom was going to be in Q2, so that has been the.

The only way out of this is to place the backlog with visibility, and we will start planning and shipping.

Case, and we're going to grow from there grow meaning closer to demand, but no restocking yet so thats coming in exactly as we expected so that quarter on quarter I wouldn't talk about seasonality within markets and so on I will talk about the Lumpiness in project ramps some projects ramped in Q3.

So we are seeing it; we are responding to it. Uh, and we will keep supporting it. But regardless of how the next few quarters go,

We need the replenishment cycle. We need to make sure that the tier ones and OEMs have safety stock in order to buffer against any disruption. That's the only solution.

We've learned a hard lesson in Q3, and here we are again.

Very helpful. Thank you so much.

<unk> versus ramping in Q4, those I don't think our read on how the market is doing the visibility however, with stabilization, we get better visibility not where we would like to see it.

Line is open.

It improved.

We're getting better visibility, but again there is more work to do to get to get the visibility. So that's what I can tell you about where we are in automotive.

Okay, guys, thanks for squeezing me in. Hassan, if I can dare say, you seem somewhat cautiously excited about your market for the first time in a long time.

Cautious, but I am also looking at the data in order to just sounds like like I do our work is not done it's not all behind us.

But I think what.

What you've seen from US is we will manage to what we see and we will deliver the results that we promised.

That's the consistency of course, we all wish it were different.

So if I can ask you a question in Auto, it's a 2-part. Could you give us a hint of maybe what backlog or bookings were? I'm trying to gauge, you know, that relative to your stabilization comment. And if you are talking about stabilization in Auto, then I'm looking at your 6% odd growth that you put up in the September quarter. Is that seasonal growth, or is that better than seasonal growth? And if it's better, then of course, what goes bad?

We all wish it was way better than sometimes it is some of my peers did but we've been very consistent and we're going to continue to manage the company with discipline, whether an inventory cash flow.

Or really R&D investments and differentiated technologies.

Fair enough.

Maybe one for you Pat.

As as sort of you look at stabilization.

I understand you will need to ramp up your factories and fabs to be able to get to that 40% level, but is there a revenue number that I can think off where you start to get closer to that 40% number or is it just feeling a function of utilization I think it ebbs and flows depending on how much die bank inventory you're building.

Yes, its utilization driven right. So we've talked about.

Yeah. Look, I think I think I'll go back to the the prior answer that I that I gave earlier. I don't look at the code on a quarter. I I would recommend, you shouldn't either. Uh, I got to look at it. Uh, first half second half and we've always said the second half of the year is going to outgrow the first half of the year. In our end markets. Remember Auto, we said, the bottom was going to be in Q2 so that has been uh uh the case. And we're going to grow from there. Uh, grow, meaning closer to demand, but no restocking yet. So that's coming in exactly as we expected. So that quarter on quarter, I wouldn't talk about seasonality within markets and so on. I would talk about the lumpiness in, you know, project ramps some, uh, projects ramped in Q3 versus, uh, uh, ramping in Q4.

Every point of utilization is 25% to 30 basis points of gross margin improvement.

That still holds so.

As we look into 'twenty.

26 utilization is going to drive the margin.

Fair enough thanks, guys.

Thank you. This will conclude today's question and answer session I would now like to turn the call back over to Hassan for closing remarks.

Those I don't think are read on how the market is doing visibility. However, you know, with stabilization we get better, visibility not where we would like to see it. Uh but it improved uh and we're getting better visibility but again, there's more work to do to get to get the visibility. So that's what I would can tell you about where we are in in automotive, I'm I'm

Thank you all again for joining us today before we conclude the call I want to recognize the outstanding efforts of our global teams their focus on execution continue to drive our results and help us deliver for our customers and shareholders.

Cautious. But I am also looking at the data, uh, in order to to sound like I like I do, our work is not done, it's not all behind us. Uh, but I think, what, what you've seen from us is, we will manage to what we see, and we will deliver the results that we promise.

We're encouraged by the signs of stabilization across our core markets and remain focused on delivering differentiated solutions and operational excellence for our customers, who are committed to being a reliable and trusted partner and continue to raise the bar on how we support our success through technology leadership responsiveness and a deep understanding of their <unk>.

Uh, that's the consistency. Of course, we all wish it were different, uh, we all wish it was way better than sometimes it is. Some of my fears did, but we've been very consistent and we're going to continue to manage the company with discipline, whether in inventory, cash flow, or really, uh, R&D investments in differentiated technologies.

<unk> needs. We appreciate your continued support and look forward to updating you next quarter. Thank you.

This concludes today's conference call. Thank you for participating you may now disconnect.

Fair enough. Um, maybe 1 for you Tad. Um, as as sort of you look at stabilization, um, you know, I understand you'll need to ramp up your factories and Fabs to be able to get to that 40% level. But is there a revenue number that I can think of uh where you start to get close to that 40% number? Uh or is it just purely a function of utilization and it it es and flows.

Depending on how much data bank inventory you're building.

Yeah it's it's utilization driven, right? So we talked about every point of utilization is 25 to 30 basis points of gross margin Improvement that that math still holds. So uh you know, as we look into the 26, utilization is going to drive the the margin

right now. Thanks guys.

Thank you. This will conclude today's question-and-answer session. I would now like to turn the call back over to Hassan for closing remarks.

Thank you all again for joining us today. Before we conclude the call, I want to recognize the outstanding efforts of our global teams. Their focus and execution continue to drive our results and help us deliver for our customers and shareholders.

We're encouraged by the signs of stabilization across our core markets and remain focused on delivering differentiated solutions and operational excellence for our customers. We are committed to being a reliable and trusted partner and continue to raise the bar on how we support their success through technology leadership, responsiveness, and a deep understanding of their evolving needs. We appreciate your continued support and look forward to updating you next quarter. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.