Infineon Technologies Q1 2026 Infineon Technologies AG Earnings Call | AllMind AI Earnings | AllMind AI
Q1 2026 Infineon Technologies AG Earnings Call
Speaker #1: Morning, everyone. Welcome to the conference call for analysts and investors for Infineon's 2026 fiscal first-quarter results. Today's call will be hosted by Alexander Foltin, Executive Vice President Finance, Treasury, and Investor Relations at Infineon Technologies.
Operator: Everyone, welcome to the conference call for analysts and investors for Infineon's 2026 fiscal Q1 results. Today's call will be hosted by Alexander Foltin, Executive Vice President, Finance, Treasury, and Investor Relations at Infineon Technologies. As a reminder, this call is being recorded. This conference call contains forward-looking statements and/or assessments about the business, financial condition, performance, and strategy of the Infineon group. These statements and/or assessments are based on assumptions and management expectations resting upon currently available information and present estimates. They are subject to a multitude of uncertainties and risks, many of which are partially or entirely beyond Infineon's control. Infineon's actual business development, financial condition, performance, and strategy may therefore differ materially from what is discussed in this conference call. Beyond disclosure requirements stipulated by law, Infineon does not undertake any obligation to update forward-looking statements.
Operator: Everyone, welcome to the conference call for analysts and investors for Infineon's 2026 fiscal Q1 results. Today's call will be hosted by Alexander Foltin, Executive Vice President, Finance, Treasury, and Investor Relations at Infineon Technologies. As a reminder, this call is being recorded. This conference call contains forward-looking statements and/or assessments about the business, financial condition, performance, and strategy of the Infineon group. These statements and/or assessments are based on assumptions and management expectations resting upon currently available information and present estimates. They are subject to a multitude of uncertainties and risks, many of which are partially or entirely beyond Infineon's control. Infineon's actual business development, financial condition, performance, and strategy may therefore differ materially from what is discussed in this conference call. Beyond disclosure requirements stipulated by law, Infineon does not undertake any obligation to update forward-looking statements.
Speaker #1: As a reminder, this call is being recorded. This conference call contains forward-looking statements and/or assessments about the business, financial condition, performance, and strategy of the INFINEON Group.
Speaker #1: These statements and/or assessments are based on assumptions and management expectations resting upon currently available information and present estimates. They are uncertainties and risks, many of which are subject to a multitude of factors which are partially or entirely beyond INFINEON's control.
Speaker #1: INFINEON's actual business development, financial condition, performance, and strategy may therefore differ materially from what is discussed in this conference call. Beyond disclosure requirements stipulated by law, INFINEON does not undertake any obligation to update forward-looking statements.
Speaker #1: At this time, I'd like to turn the call over to Infineon. Please go ahead.
Operator: At this time, I'd like to turn the call over to Infineon. Please go ahead.
Operator: At this time, I'd like to turn the call over to Infineon. Please go ahead.
Speaker #1: ahead. Thank you,
Alexander Foltin: Thank you, Matilda. Good morning, ladies and gentlemen. Thank you for joining our first earnings call in 2026. New beginnings, tried and tested setup. At this call, you have our CEO, Jochen Hanebeck, our CFO, Sven Schneider, and our CMO, Andreas Urschitz. Jochen and Sven will provide an overview on the market situation and divisional performance, key financials, and of course, our outlook, with a spotlight on our AI business. After that, we will start our Q&A session. As usual, the illustrating slideshow is available at infineon.com/slides, and we will provide a PDF with Jochen's and Sven's introductory remarks in the course of the call on our website, namely infineon.com investor. This is also your go-to place for a recording of this conference call, including the aforementioned slides, a copy of our earnings press release, as well as our investor presentation. Now, Jochen, over to you.
Alexander Foltin: Thank you, Matilda. Good morning, ladies and gentlemen. Thank you for joining our first earnings call in 2026. New beginnings, tried and tested setup. At this call, you have our CEO, Jochen Hanebeck, our CFO, Sven Schneider, and our CMO, Andreas Urschitz. Jochen and Sven will provide an overview on the market situation and divisional performance, key financials, and of course, our outlook, with a spotlight on our AI business. After that, we will start our Q&A session. As usual, the illustrating slideshow is available at infineon.com/slides, and we will provide a PDF with Jochen's and Sven's introductory remarks in the course of the call on our website, namely infineon.com investor. This is also your go-to place for a recording of this conference call, including the aforementioned slides, a copy of our earnings press release, as well as our investor presentation. Now, Jochen, over to you.
Speaker #2: Matilda: Good morning, ladies and gentlemen. Thank you for joining our first earnings call in 2026. New beginnings? Tried and tested setup. At this call, you have our CEO, Jochen Hanebeck; our CFO, Sven Schneider; and our CMO, Andreas Urschitz.
Speaker #2: Jochen and Sven will provide an overview on the market situation and divisional performance, key financials, and, of course, our outlook with a spotlight on our AI business.
Speaker #2: After that, we will start our Q&A session. As usual, the illustrating slideshow is available at infineon.com/slides, and we will provide a PDF with Jochen's and Sven's introductory remarks in the course of the call on our website.
Speaker #2: Namely, infineon.com/investor. This is also your go-to place for a recording of this conference call, including the aforementioned slides, a copy of our earnings press release, as well as our investor presentation.
Speaker #2: And now, Jochen, over to
Speaker #2: Thank you, Alexander, and good
Jochen Hanebeck: Thank you, Alexander, and good morning, everyone. 2026 is barely more than a month old, and yet multiple dynamic geopolitical developments have unfolded, affecting our markets in various ways. At Infineon, the past few weeks have been eventful and successful. Already in our last earnings call, we discussed how the breadth and intensity of the recovery in semiconductor markets outside of AI would be challenging to predict in the light of very dynamic external circumstances. Near-term indicators, such as order intake or lead times, are now starting to align in a positive way, and visibility is improving. That said, we feel our view of a gradual and uneven recovery remains appropriate for the time being. In addition, setting a prudent bar has proved to be a sound approach to full-year forecasting in these times.
Jochen Hanebeck: Thank you, Alexander, and good morning, everyone. 2026 is barely more than a month old, and yet multiple dynamic geopolitical developments have unfolded, affecting our markets in various ways. At Infineon, the past few weeks have been eventful and successful. Already in our last earnings call, we discussed how the breadth and intensity of the recovery in semiconductor markets outside of AI would be challenging to predict in the light of very dynamic external circumstances. Near-term indicators, such as order intake or lead times, are now starting to align in a positive way, and visibility is improving. That said, we feel our view of a gradual and uneven recovery remains appropriate for the time being. In addition, setting a prudent bar has proved to be a sound approach to full-year forecasting in these times.
Speaker #3: Morning, everyone. 2026 is barely more than a month old, and yet multiple dynamic geopolitical developments have unfolded, affecting our markets in various ways. At Infineon, the past few weeks have been eventful and successful.
Speaker #3: Already in our last earnings call, we discussed how the breadth and intensity of the recovery in semiconductor markets outside of AI would be challenging to predict.
Speaker #3: In light of very dynamic external circumstances, near-term indicators such as order intake or lead times are now starting to align in a positive way, and visibility is improving.
Speaker #3: That said, we feel our view of a gradual approach is appropriate for the time being. In addition, setting a prudent bar has proved to be a sound approach to full-year forecasting in these times.
Speaker #3: Automotive and industrial markets are beyond the cyclical trough, but demand has yet to really inflect. Consumer compute, xAI, and communication markets are in the early innings of the upcycle.
Jochen Hanebeck: Automotive and industrial markets are beyond the cyclical trough, but demand has yet to really inflect. Consumer, compute, XAI, and communication markets are in the early innings of the upcycle. AI remains the clear standout, continuing extraordinary growth, propelled by sustained massive investment in data centers and related infrastructure. We will double down on the highly attractive opportunities opening up for Infineon as the leader in powering AI by ramping up capacities even faster than previously planned and pulling in related investments. At the same time, we are continuing to strategically build the best-in-class portfolio in the categories of power, analog, sensors, control, and connectivity, aligned to our leadership play in power systems and IoT.
Jochen Hanebeck: Automotive and industrial markets are beyond the cyclical trough, but demand has yet to really inflect. Consumer, compute, XAI, and communication markets are in the early innings of the upcycle. AI remains the clear standout, continuing extraordinary growth, propelled by sustained massive investment in data centers and related infrastructure. We will double down on the highly attractive opportunities opening up for Infineon as the leader in powering AI by ramping up capacities even faster than previously planned and pulling in related investments. At the same time, we are continuing to strategically build the best-in-class portfolio in the categories of power, analog, sensors, control, and connectivity, aligned to our leadership play in power systems and IoT.
Speaker #3: AI remains the clear standout. Continuing extraordinary growth, propelled by sustained, massive investment in data centers and related infrastructure. We will double down on the highly attractive opportunities opening up for Infineon as the leader in powering AI by ramping up capacities even faster than previously planned and pulling in related investments.
Speaker #3: At the same time, we are continuing to strategically build the best-in-class portfolio in the categories of power, analog and sensors, control, and connectivity, aligned to our leadership claim in power systems and IoT.
Speaker #3: With the addition of the non-optical analog mixed-signal sensor portfolio from AMS OSRAM, addressing automotive, industrial, and medical applications in equal parts, we are significantly strengthening our sensor capabilities and will be able to offer our customers even more comprehensive system solutions.
Jochen Hanebeck: With adding the non-optical analog mixed signal sensor portfolio from ams OSRAM, addressing automotive, industrial, and medical applications in equal parts, we are significantly strengthening our sensor capabilities and will be able to offer our customers even more comprehensive system solutions. More on both topics, accelerated AI investments and the acquisition of ams OSRAM sensors in the PSS section. As you can see, Infineon and the beginning of 2026 have one thing in common: speed. Our fiscal year 2026 saw a successful start pursuant to our guided numbers. Revenues in the December quarter came in at EUR 3,662 million. The sequential decline of 7% is basically in line with our usual seasonality. Compared to the same quarter one year earlier, our first fiscal quarter's revenue were up 7%.
Jochen Hanebeck: With adding the non-optical analog mixed signal sensor portfolio from ams OSRAM, addressing automotive, industrial, and medical applications in equal parts, we are significantly strengthening our sensor capabilities and will be able to offer our customers even more comprehensive system solutions. More on both topics, accelerated AI investments and the acquisition of ams OSRAM sensors in the PSS section. As you can see, Infineon and the beginning of 2026 have one thing in common: speed. Our fiscal year 2026 saw a successful start pursuant to our guided numbers. Revenues in the December quarter came in at EUR 3,662 million. The sequential decline of 7% is basically in line with our usual seasonality. Compared to the same quarter one year earlier, our first fiscal quarter's revenue were up 7%.
Speaker #3: More on both topics: accelerated AI investments and sensors in the PSS section. As you can see, INFINEON and the beginning of 2026 have one thing in common—speed.
Speaker #3: Our fiscal year 2026 saw a successful start pursuant to our guided numbers. Revenues in the December quarter came in at €3,662 million. The sequential decline of 7% is basically in line with our usual seasonality.
Speaker #3: Compared to the same quarter one year earlier, our first fiscal quarter's revenues were up 7%. On a currency-adjusted basis, annual growth would have been close to 14%, given that the US dollar has considerably weakened over the past 12 months.
Jochen Hanebeck: On a currency-adjusted basis, annual growth would have been close to 14%, given that the US dollar has considerably weakened over the past 12 months. Segment results for the December quarter amounted to EUR 655 million, corresponding to a resilient segment result margin of 17.9%, relatively stable compared to 18.2% in the quarter before. Sven will talk about the puts and takes in his section. Our order backlog increased by a good EUR 1 billion quarter-over-quarter, to around EUR 21 billion at the end of December. It is rising continuously now for around 6 months. Given that this number reflects price adjustments resulting from annual contract negotiations, the underlying uplift is stronger as recovery momentum is building. Now to our divisional review, starting with automotive.
Jochen Hanebeck: On a currency-adjusted basis, annual growth would have been close to 14%, given that the US dollar has considerably weakened over the past 12 months. Segment results for the December quarter amounted to EUR 655 million, corresponding to a resilient segment result margin of 17.9%, relatively stable compared to 18.2% in the quarter before. Sven will talk about the puts and takes in his section. Our order backlog increased by a good EUR 1 billion quarter-over-quarter, to around EUR 21 billion at the end of December. It is rising continuously now for around 6 months. Given that this number reflects price adjustments resulting from annual contract negotiations, the underlying uplift is stronger as recovery momentum is building. Now to our divisional review, starting with automotive.
Speaker #3: The segment result for the December quarter amounted to €655 million, corresponding to a resilient segment result margin of 17.9%. This is relatively stable compared to 18.2% in the quarter before.
Speaker #3: Sven will talk about the puts and takes in his section. Our order backlog increased by a good €1 billion quarter over quarter to around €21 billion at the end of December.
Speaker #3: It is rising continuously now. For that, this number reflects price around six months. Given adjustments resulting from annual contract negotiations, the underlying uplift is stronger as recovery momentum is building.
Speaker #3: Now to our divisional review, starting with Automotive. In the first quarter of the 2026 fiscal year, Automotive revenues amounted to €1,821 million, sequentially down by 5%, driven by usual seasonal order patterns and the anticipated pronounced inventory management by customers towards calendar year end.
Jochen Hanebeck: In Q1 of the 2026 fiscal year, automotive revenues amounted to EUR 1,821 million, sequentially down by 5%, driven by usual seasonal order patterns and the anticipated pronounced inventory management by customers towards calendar year end. On a year-over-year basis, automotive grew by 4%, which equates to about 10% at constant currencies. The segment result came in at EUR 403 million, with a segment result margin of 22.1%, relatively stable compared to the quarter before. Fall through from volume decline was mitigated by a lower underutilization cost, resulting from internal capacity transfers to AI-related products, as well as positive mix effects. Looking at the overall market development for automotive semiconductors in 2026, we continue to assess the situation in the same cautious manner as communicated in November.
Jochen Hanebeck: In Q1 of the 2026 fiscal year, automotive revenues amounted to EUR 1,821 million, sequentially down by 5%, driven by usual seasonal order patterns and the anticipated pronounced inventory management by customers towards calendar year end. On a year-over-year basis, automotive grew by 4%, which equates to about 10% at constant currencies. The segment result came in at EUR 403 million, with a segment result margin of 22.1%, relatively stable compared to the quarter before. Fall through from volume decline was mitigated by a lower underutilization cost, resulting from internal capacity transfers to AI-related products, as well as positive mix effects. Looking at the overall market development for automotive semiconductors in 2026, we continue to assess the situation in the same cautious manner as communicated in November.
Speaker #3: On a year-over-year basis, Automotive grew by 4%, which equates to about 10% at constant currencies. The segment result came in at €403 million, with a segment result margin of 22.1%.
Speaker #3: A relatively stable quarter compared to the quarter before. Fall-through from volume declines was mitigated by lower underutilization costs, resulting from internal capacity transfers to AI-related products.
Speaker #3: As well as positive mix effects. Looking at the overall market development for automotive semiconductors in 2026, we continue to assess the situation in the same cautious manner as communicated in November.
Jochen Hanebeck: Car volumes have thus far been tracking in line or slightly above expectations, while several uncertainties regarding momentum in China or the impact of US tariffs persist. Looking at secular content drivers, the near-term picture remains differentiated. E-mobility is challenged by headwinds like withdrawals and reduction of subsidies, and a generally less favorable regulatory background. Recent announcement, like the reintroduction of EV purchase incentives in Germany, will have a limited impact on the current year. In contrast, the transition to software-defined vehicles is gathering momentum, and more and more such models are being launched globally. Further trends supporting semiconductor growth, such as higher level ADAS, increased comfort features, and the upcoming introduction of the 48-volt architecture remain unabated. With our leading franchise of automotive solutions, Infineon is ideally positioned to serve customers across all the mentioned trends. Recognizing their different developments, we are actively shaping our business portfolio.
Jochen Hanebeck: Car volumes have thus far been tracking in line or slightly above expectations, while several uncertainties regarding momentum in China or the impact of US tariffs persist. Looking at secular content drivers, the near-term picture remains differentiated. E-mobility is challenged by headwinds like withdrawals and reduction of subsidies, and a generally less favorable regulatory background. Recent announcement, like the reintroduction of EV purchase incentives in Germany, will have a limited impact on the current year. In contrast, the transition to software-defined vehicles is gathering momentum, and more and more such models are being launched globally. Further trends supporting semiconductor growth, such as higher level ADAS, increased comfort features, and the upcoming introduction of the 48-volt architecture remain unabated. With our leading franchise of automotive solutions, Infineon is ideally positioned to serve customers across all the mentioned trends. Recognizing their different developments, we are actively shaping our business portfolio.
Speaker #3: We have thus far been tracking car volumes in line with or slightly above expectations. While several uncertainties regarding momentum in China or the impact of US tariffs persist.
Speaker #3: Looking at secular content drivers, the near-term picture remains differentiated. E-mobility is challenged by headwinds like withdrawals and reduction of subsidies, and a generally less favorable regulatory background.
Speaker #3: Recent announcements, like the reintroduction of EV purchase incentives in Germany, will have a limited impact on the current year. In contrast, the transition to software-defined vehicles is gathering momentum, and more and more such models are being launched globally.
Speaker #3: Further trends supporting semiconductor growth, such as higher-level ADRs, increased comfort features, and the upcoming introduction of the 48-volt architecture, remain unabated. With our leading franchise of automotive solutions, Infineon is ideally positioned to serve customers across all the mentioned trends.
Speaker #3: Recognizing their different developments, we are actively shaping our business portfolio. On the Power side, for electric vehicles, we are reducing our exposure to less differentiated silicon-based high-power parts for drivetrains.
Jochen Hanebeck: On the power side, for electric vehicles, we are reducing our exposure to less differentiated silicon-based, high-power parts for drivetrains, focusing instead more on silicon carbide, complemented by analog, sensor, control, and connectivity parts. On the side of software-defined vehicles, the recent addition of automotive Ethernet capabilities truly proves to be ideal to comprehensively support our broad customer base. Furthermore, our family of AURIX microcontrollers, which is defining the gold standard from zone to edge computing, is outgrowing the MCU market, and we expect several new platforms in 2026 to ramp. The innovative choice of Infineon's AURIX as safety host for their flagship autonomous driving domain controller units is another testimony to our global customer landscape. We also see consistent design-win momentum in our non-drivetrain, powertrain, and analog categories.
Jochen Hanebeck: On the power side, for electric vehicles, we are reducing our exposure to less differentiated silicon-based, high-power parts for drivetrains, focusing instead more on silicon carbide, complemented by analog, sensor, control, and connectivity parts. On the side of software-defined vehicles, the recent addition of automotive Ethernet capabilities truly proves to be ideal to comprehensively support our broad customer base. Furthermore, our family of AURIX microcontrollers, which is defining the gold standard from zone to edge computing, is outgrowing the MCU market, and we expect several new platforms in 2026 to ramp. The innovative choice of Infineon's AURIX as safety host for their flagship autonomous driving domain controller units is another testimony to our global customer landscape. We also see consistent design-win momentum in our non-drivetrain, powertrain, and analog categories.
Speaker #3: Focusing instead more on silicon carbide, complemented by analog sensor control and connectivity parts. On the side of software-defined vehicles, the recent addition of automotive Ethernet capabilities proves to be ideal to comprehensively support our broad customer base.
Speaker #3: Furthermore, our family of AURIX microcontrollers, which is defining the gold standard from zone to edge computing, is outgrowing the MCU market, and we expect several new platforms in 2026 to ramp.
Speaker #3: Lenovo's choice of Infineon's AURIX as safety host for their flagship autonomous driving domain controller units is another testimony to our global customer landscape. We also see consistent design-in momentum in our non-drivetrain, powertrain, and analog categories.
Speaker #3: This includes components for the latest 48-volt-based power stream for major American OEM platforms, as well as an upcoming functional, safe steer-by-wire system for a German premium OEM.
Jochen Hanebeck: This includes component for the latest 48 volt-based power stream for a major American OEM platform, as well as an upcoming functional, safe, steer-by-wire system for a German premium OEM. The design wins covers our line of automotive-grade MOSFETs, as well as related analog power management, ICs, and gate drivers, and of course, AURIX microcontrollers. Now to Green Industrial Power. Segment recorded revenues of EUR 349 million in the December quarter, which is typically the seasonally weakest one. All areas witnessed sequential declines, with the exception of grid infrastructure, where revenues rose substantially. With effect of the beginning of our running 2026 fiscal year, we merged our gate driver business with a high double-digit million EUR annual sales volume from GIP into PSS. Historic numbers have been adjusted accordingly.
Jochen Hanebeck: This includes component for the latest 48 volt-based power stream for a major American OEM platform, as well as an upcoming functional, safe, steer-by-wire system for a German premium OEM. The design wins covers our line of automotive-grade MOSFETs, as well as related analog power management, ICs, and gate drivers, and of course, AURIX microcontrollers. Now to Green Industrial Power. Segment recorded revenues of EUR 349 million in the December quarter, which is typically the seasonally weakest one. All areas witnessed sequential declines, with the exception of grid infrastructure, where revenues rose substantially. With effect of the beginning of our running 2026 fiscal year, we merged our gate driver business with a high double-digit million EUR annual sales volume from GIP into PSS. Historic numbers have been adjusted accordingly.
Speaker #3: The design wins cover our line of automotive-grade MOSFETs, as well as related analog power management ICs and gate drivers, and of course, AURIX microcontrollers.
Speaker #3: Now to Green Industrial Power. The segment recorded revenues of €349 million in the December quarter, which is typically the seasonally weakest one. All areas witnessed sequential declines with the exception of Grid Infrastructure, where revenues rose substantially.
Speaker #3: With effect at the beginning of our running 2026 fiscal year, we merged our gate driver business, with a high double-digit million-euro annual sales volume, from GIP into PSS.
Speaker #3: Historic numbers have been adjusted accordingly. Bearing this in mind, the like-for-like quarter-over-quarter revenue decline of GIP was a steep 21%, reflecting, besides seasonality, an ongoing challenging market environment.
Jochen Hanebeck: Bearing this in mind, the like-for-like, quarter-over-quarter revenue decline of GIP was a steep 21%, reflecting, besides seasonality, an ongoing challenging market environment. Correspondingly, the segment result of GIP dropped to EUR 31 million, equivalent to a segment result margin of 8.9%. Industrial markets revenues are closely correlated with global economic health. In the light of continuing macroeconomic uncertainties, only a shallow recovery for core industrial applications is expected in the near term. Similarly, there are no clear signs for an upswing in HVAC or home appliances. Regarding renewable energy generation, solar and wind installation are expected to stay on a high level, leading to a more or less flat inverter market. The picture on the grid infrastructure side is brighter and will support midterm growth.
Jochen Hanebeck: Bearing this in mind, the like-for-like, quarter-over-quarter revenue decline of GIP was a steep 21%, reflecting, besides seasonality, an ongoing challenging market environment. Correspondingly, the segment result of GIP dropped to EUR 31 million, equivalent to a segment result margin of 8.9%. Industrial markets revenues are closely correlated with global economic health. In the light of continuing macroeconomic uncertainties, only a shallow recovery for core industrial applications is expected in the near term. Similarly, there are no clear signs for an upswing in HVAC or home appliances. Regarding renewable energy generation, solar and wind installation are expected to stay on a high level, leading to a more or less flat inverter market. The picture on the grid infrastructure side is brighter and will support midterm growth.
Speaker #3: Correspondingly, the segment result of GIP dropped to €31 million, equivalent to a segment result margin of 8.9%. Industrial markets revenues are closely correlated with global economic health.
Speaker #3: In light of continuing macroeconomic uncertainties, only a shallow recovery for core industrial applications is expected in the near term. Similarly, there are no clear signs of an upswing in HVAC or home appliances.
Speaker #3: Regarding renewable energy generation, solar and wind installation are expected to stay at a high level, leading to a more or less flat inverter market.
Speaker #3: The picture on the grid infrastructure side is brighter and will support mid-term growth. Continuously rising investments into AI data centers and the higher share of renewables in the energy mix call for expanding, modernizing, and stabilizing the power grid.
Jochen Hanebeck: Continuously rising investments into AI data centers and the higher share of renewables in the energy mix call for expanding, modernizing, and stabilizing the power grid. High reliability is a key requirement here. Our product portfolio, in particular, our leading silicon carbide technology and related module offering, positions us optimally to benefit from grid upgrades. Such upgrades will involve applications like large-scale energy storage systems, uninterruptible power supplies, and solid-state circuit breakers, and solid-state transformers. Regarding the latter, we are engaged in dozens of customer projects with very promising midterm business potential. Let's now move to the Power and Sensor Systems segment. PSS posted revenues of EUR 1,171 million in the December quarter. The small sequential decline of 3% on a comparable basis, adjusted for the transfer of gate drivers from GIP, is the result of opposing developments.
Jochen Hanebeck: Continuously rising investments into AI data centers and the higher share of renewables in the energy mix call for expanding, modernizing, and stabilizing the power grid. High reliability is a key requirement here. Our product portfolio, in particular, our leading silicon carbide technology and related module offering, positions us optimally to benefit from grid upgrades. Such upgrades will involve applications like large-scale energy storage systems, uninterruptible power supplies, and solid-state circuit breakers, and solid-state transformers. Regarding the latter, we are engaged in dozens of customer projects with very promising midterm business potential. Let's now move to the Power and Sensor Systems segment. PSS posted revenues of EUR 1,171 million in the December quarter. The small sequential decline of 3% on a comparable basis, adjusted for the transfer of gate drivers from GIP, is the result of opposing developments.
Speaker #3: High reliability is a key requirement here. Our product portfolio, in particular our leading silicon carbide technology and related module offering, positions us optimally to benefit from grid upgrades.
Speaker #3: Such upgrades will involve applications like large-scale energy storage systems, uninterruptible power supplies, and solid-state circuit breakers and solid-state transformers. Regarding the latter, we are engaged in dozens of customer projects with very promising mid-term business potential.
Speaker #3: Let's now move to the Power and Sensor Systems segment. PSS printed revenues of €1,171 million in the December quarter. The small sequential decline of 3% on a comparable basis, adjusted for the transfer of gate drivers from GIP, is the result of opposing developments.
Speaker #3: On the one hand, power solutions for AI servers saw unabated, very strong momentum. On the other, smartphone components showed their usual negative, as we had flagged in our last earnings call. We faded out so-called fab fillers, which we had temporarily put in to utilize otherwise idle manufacturing capacities.
Jochen Hanebeck: On the one hand, power solutions for AI servers saw unabated, very strong momentum. On the other, smartphone components showed their usual negative seasonality. Furthermore, as we had flagged in our last earnings call, we faded out so-called fab fillers, which we had temporarily put in to utilize otherwise idle manufacturing capacities. These developments are also reflected in the margin trajectory of PSS. The segment result increased to EUR 204 million, corresponding to a segment result margin of 17.4% after 14.5% in the previous quarter. On the market side, demand for consumer, general compute, and communications applications show signs of a broader pickup, yet customer ordering behavior remains short-term oriented amid macroeconomic volatility. A vastly different dynamic applies to AI. Powering data centers constitutes an unprecedented growth opportunity. Infineon is at the forefront of it.
Jochen Hanebeck: On the one hand, power solutions for AI servers saw unabated, very strong momentum. On the other, smartphone components showed their usual negative seasonality. Furthermore, as we had flagged in our last earnings call, we faded out so-called fab fillers, which we had temporarily put in to utilize otherwise idle manufacturing capacities. These developments are also reflected in the margin trajectory of PSS. The segment result increased to EUR 204 million, corresponding to a segment result margin of 17.4% after 14.5% in the previous quarter. On the market side, demand for consumer, general compute, and communications applications show signs of a broader pickup, yet customer ordering behavior remains short-term oriented amid macroeconomic volatility. A vastly different dynamic applies to AI. Powering data centers constitutes an unprecedented growth opportunity. Infineon is at the forefront of it.
Speaker #3: These developments are also reflected in the margin trajectory of PSS. The segment result increased to €204 million, corresponding to a segment result margin of 17.4%, after 14.5% in the previous quarter.
Speaker #3: On the market side, demand for consumer general compute and communications applications shows signs of a broader pickup. Yet customer ordering behavior remains short-term oriented amid macroeconomic volatility.
Speaker #3: A vastly different dynamic applies to AI. Powering data centers constitutes an unprecedented growth opportunity. Infineon is at the forefront of it. Our unmatched portfolio breadth, system understanding, speed of innovation, and quality make us the partner of choice for all and delivery capability relevant GPU makers and cloud providers.
Jochen Hanebeck: Our unmatched portfolio breadth, system understanding, speed of innovation, quality, and delivery capability make us the partner of choice for all relevant GPU makers and cloud providers. Our revenues from AI power solutions keep growing steeply. We reconfirm our target of around EUR 1.5 billion for this fiscal year. This number is still supply limited, in other words, not capped by demand, but by how fast we and our manufacturing partners can bring up capacity. And let me be clear, in contrast to some peers, which in their disclosure, do not differentiate between AI and other enterprise data center business, the EUR 1.5 billion of Infineon are purely related to AI. Separately, we do another EUR 500 million, give or take, of classical data center revenues. Meanwhile, projections of build-outs of AI data centers and related infrastructure keep going up.
Jochen Hanebeck: Our unmatched portfolio breadth, system understanding, speed of innovation, quality, and delivery capability make us the partner of choice for all relevant GPU makers and cloud providers. Our revenues from AI power solutions keep growing steeply. We reconfirm our target of around EUR 1.5 billion for this fiscal year. This number is still supply limited, in other words, not capped by demand, but by how fast we and our manufacturing partners can bring up capacity. And let me be clear, in contrast to some peers, which in their disclosure, do not differentiate between AI and other enterprise data center business, the EUR 1.5 billion of Infineon are purely related to AI. Separately, we do another EUR 500 million, give or take, of classical data center revenues. Meanwhile, projections of build-outs of AI data centers and related infrastructure keep going up.
Speaker #3: AI power solutions keep growing steeply. We reconfirm our revenues from our target of around €1.5 billion for this fiscal year. This number is still supply limited.
Speaker #3: In other words, not capped by demand but by how fast we and our manufacturing partners can bring up capacity. And let me be clear, in contrast to some peers, which in their disclosure do not differentiate between AI and other enterprise data center business, Infineon are purely related—the €1.5 billion—to AI.
Speaker #3: Separately, we do another €500 million, give or take, of classical data center revenues. Meanwhile, projections of build-outs of AI data centers and related infrastructure keep going up.
Speaker #3: More and more, AI is showing tangible benefits and real-life use cases. Several of these we witness in our own company. For example, improving and speeding up chip design, software development, or customer engagement.
Jochen Hanebeck: More and more, AI is showing tangible benefits and real-life use cases. Several of these, we witness in our own company, for example, improving, speeding up chip design, software development, or customer engagement. The demand from our customers for the coming years is still going up quarter by quarter. Therefore, we are doubling down on AI. We have decided to pull in EUR 500 million this fiscal year to accelerate AI-related capacity increases in order to fuel growth beyond the running fiscal year. These investments, including the conversion of existing IGBT capacities, are capital efficient and will underpin our market leadership. Large part of them will be used for faster than originally planned ramp-up of our new power and analog mixed signal fab module in Dresden. Fortunately, we are able to accelerate the opening of the facility to this summer.
Jochen Hanebeck: More and more, AI is showing tangible benefits and real-life use cases. Several of these, we witness in our own company, for example, improving, speeding up chip design, software development, or customer engagement. The demand from our customers for the coming years is still going up quarter by quarter. Therefore, we are doubling down on AI. We have decided to pull in EUR 500 million this fiscal year to accelerate AI-related capacity increases in order to fuel growth beyond the running fiscal year. These investments, including the conversion of existing IGBT capacities, are capital efficient and will underpin our market leadership. Large part of them will be used for faster than originally planned ramp-up of our new power and analog mixed signal fab module in Dresden. Fortunately, we are able to accelerate the opening of the facility to this summer.
Speaker #3: The demand from our customers for the coming years is still going up quarter by quarter. Therefore, we are doubling down on AI. We have decided to pull in €500 million this fiscal year to accelerate AI-related capacity increases in order to fuel growth beyond the running fiscal year.
Speaker #3: These investments, including the conversion of existing IGBT capacities, are capital efficient and will underpin our market leadership. A large part of them will be used for the faster-than-originally-planned ramp-up of our new power and analog mixed-signal fab module in Dresden.
Speaker #3: Fortunately, we are able to accelerate the opening of the facility to this summer. With the additional capacity, we project to achieve AI-related revenues of around €2.5 billion in our 2027 fiscal year.
Jochen Hanebeck: With the additional capacity, we project to achieve AI-related revenues of around EUR 2.5 billion in our 2027 fiscal year. Said differently, we will add another EUR 1 billion of margin-accretive business next year, thus expanding our AI revenues by a factor of 10 within just 3 years. Let me also briefly comment on the announced acquisition of the non-optical analog mixed signal sensor portfolio from ams OSRAM. The transaction is a perfect strategic fit, as it will strengthen our position as a leader in sensors for automotive industrial markets through a complementary portfolio and extend our product range in medical applications. The acquired portfolio adds advanced mixed signal and medical imaging technologies that complement our strong position in high-precision sensing.
Jochen Hanebeck: With the additional capacity, we project to achieve AI-related revenues of around EUR 2.5 billion in our 2027 fiscal year. Said differently, we will add another EUR 1 billion of margin-accretive business next year, thus expanding our AI revenues by a factor of 10 within just 3 years. Let me also briefly comment on the announced acquisition of the non-optical analog mixed signal sensor portfolio from ams OSRAM. The transaction is a perfect strategic fit, as it will strengthen our position as a leader in sensors for automotive industrial markets through a complementary portfolio and extend our product range in medical applications. The acquired portfolio adds advanced mixed signal and medical imaging technologies that complement our strong position in high-precision sensing.
Speaker #3: Said differently, we will add another $1 billion of margin-accretive business next year, thus expanding our AI revenues by a factor of 10 within just three years.
Speaker #3: Let me also briefly comment on the announced acquisition of the non-optical analog mixed-signal sensor portfolio from AMS OSRAM. The transaction is a perfect strategic fit.
Speaker #3: As it will strengthen our position as a leader in sensors for automotive and industrial markets through a complementary product range in the medical portfolio, and extend our applications.
Speaker #3: The acquired portfolio adds advanced mixed-signal and medical imaging technologies that complement our strong position in high-precision sensing. The transaction is structured as a fabless asset deal with a purchase price of €570 million, covering sensor products, R&D capabilities, intellectual property, and equipment.
Jochen Hanebeck: The transaction is structured as a fabless asset deal with a purchase price of EUR 570 million, covering sensor products, R&D capabilities, intellectual property, and equipment. It is subject to customary closing conditions, including regulatory approval, and it is expected to close by Q2 of calendar year 2026. Around 230 highly skilled employees will join our sensor units and RF organization within the PSS division. The business is expected to generate around EUR 230 million in revenue in calendar year 2026. The transaction will be accretive to earnings per share right upon closing, with future synergies enabling substantial additional value creation. Therewith, our acquisition criteria for strategic, financial, and cultural fit are all fully met. Now to Connected Secure Systems.
Jochen Hanebeck: The transaction is structured as a fabless asset deal with a purchase price of EUR 570 million, covering sensor products, R&D capabilities, intellectual property, and equipment. It is subject to customary closing conditions, including regulatory approval, and it is expected to close by Q2 of calendar year 2026. Around 230 highly skilled employees will join our sensor units and RF organization within the PSS division. The business is expected to generate around EUR 230 million in revenue in calendar year 2026. The transaction will be accretive to earnings per share right upon closing, with future synergies enabling substantial additional value creation. Therewith, our acquisition criteria for strategic, financial, and cultural fit are all fully met. Now to Connected Secure Systems.
Speaker #3: It is subject to customary closing conditions, including regulatory approval, and is expected to close by the second quarter of calendar year 2026. Around 230 highly skilled employees will join our sensor units and RF organization within the PSS division.
Speaker #3: The business is expected to generate around €230 million in revenue in calendar year 2026. The transaction will be accretive to earnings per share right upon closing, with future synergies enabling substantial additional value creation.
Speaker #3: Therewith, our acquisition criteria for strategic, financial, and cultural fit are all fully met. Now to Connected Secure Systems. The revenue of CSS of €321 million constitutes a quarter-over-quarter decline of 13%, driven by a mix of seasonality and the fulfillment of CIA orders in the preceding quarter.
Jochen Hanebeck: The revenue of CSS of EUR 321 million constitutes a quarter-over-quarter decline of 13%, driven by a mix of seasonality and the fulfillment of Cypress orders in the preceding quarter. The segment result of CSS decreased to EUR 23 million, resulting in a segment result margin of 7.2%. The market for IoT solutions remains in the doldrums at present, with our macroeconomic risk and low consumer confidence weighing on recovery expectations. Over time, AI moving to the edge will open up more and more opportunities for innovative industrial and consumer applications. AI-enabled, secure, connected, low-power devices will proliferate. Market researchers project their number to reach 30 billion by 2030. By strengthening our hardware and software competencies in this field further, we are positioning Infineon optimally to reap structural growth opportunities. Take connectivity as an example.
Jochen Hanebeck: The revenue of CSS of EUR 321 million constitutes a quarter-over-quarter decline of 13%, driven by a mix of seasonality and the fulfillment of Cypress orders in the preceding quarter. The segment result of CSS decreased to EUR 23 million, resulting in a segment result margin of 7.2%. The market for IoT solutions remains in the doldrums at present, with our macroeconomic risk and low consumer confidence weighing on recovery expectations. Over time, AI moving to the edge will open up more and more opportunities for innovative industrial and consumer applications. AI-enabled, secure, connected, low-power devices will proliferate. Market researchers project their number to reach 30 billion by 2030. By strengthening our hardware and software competencies in this field further, we are positioning Infineon optimally to reap structural growth opportunities. Take connectivity as an example.
Speaker #3: The segment result of CSS decreased to €23 million, resulting in a segment result margin of 7.2%. The market for IoT solutions remains in the doldrums at present, with macroeconomic risk and low consumer confidence weighing on recovery expectations.
Speaker #3: Over time, AI moving to the edge will open up more and more opportunities for innovative industrial and consumer applications. AI-enabled, secure, connected, low-power devices will proliferate.
Speaker #3: Market researchers project their number to reach 30 billion by 2030. By strengthening our hardware and software competencies in this field further, we are positioning Infineon optimally to reap structural growth opportunities.
Speaker #3: Take connectivity as an example. We announced the industry's first Wi-Fi 7, 20-megahertz tri-radio device optimized for IoT. The new product integrates Wi-Fi 7, Bluetooth Low Energy, Thread, and Matter in a single device.
Jochen Hanebeck: We announced the industry-first Wi-Fi 7 20MHz tri-radio device optimized for IoT. The new product integrates Wi-Fi 7, Bluetooth Low Energy, Thread, and Matter in a single device. It has the lowest Wi-Fi connected standby power in the market and allows customers to achieve reliable performance for increasingly congested smart home and commercial environments. Now over to Sven, who will comment on our key financial figures.
Jochen Hanebeck: We announced the industry-first Wi-Fi 7 20MHz tri-radio device optimized for IoT. The new product integrates Wi-Fi 7, Bluetooth Low Energy, Thread, and Matter in a single device. It has the lowest Wi-Fi connected standby power in the market and allows customers to achieve reliable performance for increasingly congested smart home and commercial environments. Now over to Sven, who will comment on our key financial figures.
Speaker #3: It has the lowest Wi-Fi connected standby power in the market and allows customers to achieve reliable performance for increasingly congested smart home and commercial environments.
Speaker #3: Now over to Sven, who will comment on...
Speaker #3: Now over to Sven, who will comment on our key financials.
Sven Schneider: Thank you, Jochen, and good morning, everyone. Let me first highlight our margin development in the December quarter. Notwithstanding the sequential revenue decline, the adjusted gross margin expanded by 230 basis points to 43%, after 40.7% in the quarter before. The reported gross margin increased quarter-over-quarter from 38.1% to 39.9%. As predicted, the temporary fab fillers on the consumer side of PSS, which had burdened margin levels at group level by around 1 percentage point in the previous quarter, were ended. Furthermore, the margin was supported by improved productivity and by lower idle costs quarter-over-quarter. After a loading reduction in the previous quarter, we selectively increased fab loading and inventory levels again to be well prepared for the recovery in broader markets.
Sven Schneider: Thank you, Jochen, and good morning, everyone. Let me first highlight our margin development in the December quarter. Notwithstanding the sequential revenue decline, the adjusted gross margin expanded by 230 basis points to 43%, after 40.7% in the quarter before. The reported gross margin increased quarter-over-quarter from 38.1% to 39.9%. As predicted, the temporary fab fillers on the consumer side of PSS, which had burdened margin levels at group level by around 1 percentage point in the previous quarter, were ended. Furthermore, the margin was supported by improved productivity and by lower idle costs quarter-over-quarter. After a loading reduction in the previous quarter, we selectively increased fab loading and inventory levels again to be well prepared for the recovery in broader markets.
Speaker #2: Good morning, everyone. Let me first highlight our margin development in the December quarter. Notwithstanding the sequential revenue decline, the adjusted gross margin expanded by 230 basis points to 43%, after 40.7% in the quarter before.
Speaker #2: The reported gross margin increased quarter over quarter from 38.1% to 39.9%. As predicted, the temporary fab fillers on the consumer side of PSS, which had burned margin levels at group level by around 1 percentage point in the previous quarter, were ended.
Speaker #2: Furthermore, the margin was supported by improved productivity and by lower idle costs quarter over quarter. After loading reduction in the previous quarter, we selectively increased fab loading and inventory levels again to be well prepared for the recovery in broader markets.
Speaker #2: Offsetting the gross margin expansion somewhat was the increase in research and development expenses from €565 million to €626 million in the December quarter. While items like public funding or capitalization rates fluctuate and can distort quarterly comparisons, the underlying trend reflects our clear conviction that innovation remains key to our differentiation and hence value creation.
Sven Schneider: Offsetting the gross margin expansion somewhat was the increase in research and development expenses from EUR 565 million to EUR 626 million in the December quarter. While items like public funding or capitalization rates fluctuate and can distort quarterly comparisons, the underlying trend reflects our clear conviction that innovation remains key to our differentiation and hence, value creation. In the field of connectivity, we are further expanding our Brightline family of Ethernet switches and PHIs. Or think of the tri-band device for IoT, including Wi-Fi 7, that Jochen just mentioned. Unlike R&D, our selling, general, and administrative expenses remained practically flat, with EUR 409 million. Non-segment result charges for the first fiscal quarter amounted to EUR 267 million... The financial results for the December quarter amounted to -EUR 56 million after -EUR 64 million in the quarter before.
Sven Schneider: Offsetting the gross margin expansion somewhat was the increase in research and development expenses from EUR 565 million to EUR 626 million in the December quarter. While items like public funding or capitalization rates fluctuate and can distort quarterly comparisons, the underlying trend reflects our clear conviction that innovation remains key to our differentiation and hence, value creation. In the field of connectivity, we are further expanding our Brightline family of Ethernet switches and PHIs. Or think of the tri-band device for IoT, including Wi-Fi 7, that Jochen just mentioned. Unlike R&D, our selling, general, and administrative expenses remained practically flat, with EUR 409 million. Non-segment result charges for the first fiscal quarter amounted to EUR 267 million... The financial results for the December quarter amounted to -EUR 56 million after -EUR 64 million in the quarter before.
Speaker #2: In the field of connectivity, we are further expanding our Brightline family of Ethernet switches and FIEs. Or think of the tri-band device for IoT, including Wi-Fi 7, that Jochen just mentioned.
Speaker #2: Unlike R&D, our selling, general, and administrative expenses remained practically flat at €409 million. Non-segment result charges for the first fiscal quarter amounted to €267 million.
Speaker #2: The financial results for the December quarter amounted to minus €56 million, after minus €64 million in the quarter before. Income tax expense for the December quarter was €82 million, a noticeable decline from the €152 million in the quarter before, which had contained several valuation effects related to deferred taxes.
Sven Schneider: Income tax expense for the December quarter was EUR 82 million, a noticeable decline from the EUR 152 million in the quarter before, which had contained several valuation effects related to deferred taxes. The effective tax rate for the first quarter of our 2026 fiscal year was 24%. Cash taxes for the same period were EUR 70 million. Adjusting for PPA effects, the quarterly cash tax rate stood at 15%. Given typical time lags between prepayments and adjustments, we currently expect this rate to go up throughout the year towards 20% to 25%. Our investment in property, plant, and equipment, other intangible assets, and capitalized development costs increased quarter-over-quarter from 451 to EUR 582 million. Depreciation and amortization expenses, including acquisition-related non-segment result effects, amounted to EUR 478 million.
Sven Schneider: Income tax expense for the December quarter was EUR 82 million, a noticeable decline from the EUR 152 million in the quarter before, which had contained several valuation effects related to deferred taxes. The effective tax rate for the first quarter of our 2026 fiscal year was 24%. Cash taxes for the same period were EUR 70 million. Adjusting for PPA effects, the quarterly cash tax rate stood at 15%. Given typical time lags between prepayments and adjustments, we currently expect this rate to go up throughout the year towards 20% to 25%. Our investment in property, plant, and equipment, other intangible assets, and capitalized development costs increased quarter-over-quarter from 451 to EUR 582 million. Depreciation and amortization expenses, including acquisition-related non-segment result effects, amounted to EUR 478 million.
Speaker #2: The effective tax rate for the first quarter of our 2026 fiscal year was 24%. Cash taxes for the same period were €70 million.
Speaker #2: Adjusting for PPA effects, the quarterly cash tax rate stood at 15%. Given typical time lags between prepayments and adjustments, we currently expect this rate to go up throughout the year towards 20 to 25%.
Speaker #2: Our investments in property, plant and equipment, other intangible assets, and capitalized development costs increased quarter over quarter from €451 million to €582 million. Depreciation and amortization expenses, including acquisition-related non-segment result effects, amounted to €478 million.
Speaker #2: Our free cash flow in the quarter under report came in at minus €199 million. Given that the previous quarter's number was significantly influenced by the closing of the acquisition of Marvell's Ethernet business, a like-for-like comparison should consider the strong organic free cash flow of €904 million recorded in the September quarter.
Sven Schneider: Our free cash flow in the quarter under report came in at -EUR 199 million. Given that the previous quarter's number was significantly influenced by the closing of the acquisition of Marvell's Ethernet business, a like-for-like comparison should consider the strong organic free cash flow of EUR 904 million recorded in the September quarter. Compared to this figure, we saw a lower business volume, fewer public funding receipts, high investments, the payout of the bulk of annual variable compensation, and an overall negative working capital effect in the December quarter. The latter was mainly driven by the increase in on-books inventories. As mentioned earlier, their reach now being at 183 days. Now to our liquidity and leverage situation.
Sven Schneider: Our free cash flow in the quarter under report came in at -EUR 199 million. Given that the previous quarter's number was significantly influenced by the closing of the acquisition of Marvell's Ethernet business, a like-for-like comparison should consider the strong organic free cash flow of EUR 904 million recorded in the September quarter. Compared to this figure, we saw a lower business volume, fewer public funding receipts, high investments, the payout of the bulk of annual variable compensation, and an overall negative working capital effect in the December quarter. The latter was mainly driven by the increase in on-books inventories. As mentioned earlier, their reach now being at 183 days. Now to our liquidity and leverage situation.
Speaker #2: Compared to this figure, we saw a lower business volume, fewer public funding receipts, higher investments, the payout of the bulk of annual variable compensation, and an overall negative working capital effect in the December quarter.
Speaker #2: The latter was mainly driven by the increase in on-books inventories, as mentioned earlier; their reach now being at 183 days. Now to our liquidity and leverage situation.
Speaker #2: The negative quarterly free cash flow led to a decline in our gross cash position from around €2.1 billion to around €1.8 billion at the end of December.
Sven Schneider: The negative quarterly free cash flow led to a slight decline in our gross cash position from around EUR 2.1 billion to around 1.8 billion euros at the end of December. Gross debt remained unchanged at EUR 6.8 billion after the initial financing of the Marvell Ethernet acquisition in the previous quarter. The resulting net debt amounts to around EUR 5 billion. Our gross leverage remains around our self-defined threshold of 2x. Net leverage is corresponding to 1.4x. For funding the takeover of sensor activities from ams OSRAM, we plan to incur additional debt, so no equity, only debt, as part of our annual corporate financing plans. The transaction will add approximately 0.1x to our leverage at current cyclically subdued EBITDA levels.
Sven Schneider: The negative quarterly free cash flow led to a slight decline in our gross cash position from around EUR 2.1 billion to around 1.8 billion euros at the end of December. Gross debt remained unchanged at EUR 6.8 billion after the initial financing of the Marvell Ethernet acquisition in the previous quarter. The resulting net debt amounts to around EUR 5 billion. Our gross leverage remains around our self-defined threshold of 2x. Net leverage is corresponding to 1.4x. For funding the takeover of sensor activities from ams OSRAM, we plan to incur additional debt, so no equity, only debt, as part of our annual corporate financing plans. The transaction will add approximately 0.1x to our leverage at current cyclically subdued EBITDA levels.
Speaker #2: Gross debt remained unchanged at €6.8 billion after the initial financing of the Marvell Ethernet acquisition in the previous quarter. The resulting net debt amounts to around €5 billion.
Speaker #2: Our gross leverage remains around our self-defined threshold of two times; net leverage is corresponding to 1.4 times. For funding the takeover of sensory activities from AMS Osram, we plan to incur additional debt—so no equity, only debt—as part of our annual corporate financing plans.
Speaker #2: The transaction will add approximately 0.1 times to our leverage at current cyclically subdued EBITDA levels. I'm pleased to report that Standard & Poor's this morning have confirmed our rating at BBB+ with a stable outlook, including the AMS Osram sensor acquisition, reflecting our strong business profile and our conservative financial policy.
Sven Schneider: I'm pleased to report that Standard & Poor's this morning have confirmed our rating at BBB+ with stable outlook, including the ams OSRAM sensor acquisition, reflecting our strong business profile and our conservative financial policy. Back to the RoCE. Our after-tax reported return on capital employed came in at 5.2% for Q1 of our 2026 fiscal year. Before giving back to Jochen, who will comment on our outlook, just a quick reminder, our annual shareholders meeting will be in about two weeks from now on 19 February, here in Munich, for the first time in a physical format again after several years. You can, of course, also follow it online.
Sven Schneider: I'm pleased to report that Standard & Poor's this morning have confirmed our rating at BBB+ with stable outlook, including the ams OSRAM sensor acquisition, reflecting our strong business profile and our conservative financial policy. Back to the RoCE. Our after-tax reported return on capital employed came in at 5.2% for Q1 of our 2026 fiscal year. Before giving back to Jochen, who will comment on our outlook, just a quick reminder, our annual shareholders meeting will be in about two weeks from now on 19 February, here in Munich, for the first time in a physical format again after several years. You can, of course, also follow it online.
Speaker #2: Back to the ROSI. Our after-tax reported return on capital employed came in at 5.2% for the first quarter of our 2026 fiscal year. Before giving back to Jochen, we will comment on our outlook—just a quick reminder.
Speaker #2: Our annual shareholders' meeting will be in about two weeks from now, on the 19th of February, here in Munich, for the first time in a physical format again after several years.
Speaker #2: You can, of course, also follow online.
Speaker #1: Yeah, thank
Jochen Hanebeck: Yeah, thank you, Sven. Our outlook continues to be framed by our market view of a gradual and uneven recovery. Timing, pace, and slope of the cyclical upturn vary considerably across market segments. Despite persistent geopolitical and macroeconomic uncertainties, visibility is incrementally improving, as customers are putting in more and more orders for delivery in two, three quarters. This appears to be partly driven by fears of capacity spillover effects from booming AI, potentially resulting in supply tightness for similar products in non-AI areas. Inventory levels have generally normalized throughout automotive and industrial supply chains, yet customer confidence needs to further improve for a restocking. Against this background, we are, at this point in time, reiterating our annual outlook, which had been de-risked to account for the mentioned headwinds.
Jochen Hanebeck: Yeah, thank you, Sven. Our outlook continues to be framed by our market view of a gradual and uneven recovery. Timing, pace, and slope of the cyclical upturn vary considerably across market segments. Despite persistent geopolitical and macroeconomic uncertainties, visibility is incrementally improving, as customers are putting in more and more orders for delivery in two, three quarters. This appears to be partly driven by fears of capacity spillover effects from booming AI, potentially resulting in supply tightness for similar products in non-AI areas. Inventory levels have generally normalized throughout automotive and industrial supply chains, yet customer confidence needs to further improve for a restocking. Against this background, we are, at this point in time, reiterating our annual outlook, which had been de-risked to account for the mentioned headwinds.
Speaker #1: You, Sven. Our IT outlook continues to be framed by our market view of a gradual and uneven recovery. The timing, pace, and slope of the cyclical upturn vary considerably across market segments.
Speaker #1: Despite persistent geopolitical and macroeconomic uncertainties, visibility is incrementally improving as customers are putting in more and more orders for delivery in two to three quarters.
Speaker #1: This appears to be partly driven by fears of capacity spillover effects from booming AI, potentially resulting in supply tightness for similar products in non-AI areas.
Speaker #1: Inventory levels have generally normalized throughout automotive and industrial supply chains. Yet customer confidence needs to further improve for a restocking. Against this background, we are at this point in time, which had been de-risked to account for the mentioned headwinds.
Speaker #1: For the sake of clarity, our forecast does not include any effects from the pending acquisition of the sensor portfolio from AMS Osram. For the currently running March quarter, we predict revenues of around €3.8 billion, based on an unchanged assumption of a US dollar–euro exchange rate of 1.15.
Jochen Hanebeck: For the sake of clarity, our forecast does not include any effects from the pending acquisition of the sensor portfolio from ams OSRAM. For the currently running March quarter, we predict revenues of around EUR 3.8 billion based on an unchanged assumption of a US dollar/euro exchange rate of 1.15. By segment, revenue at ATV and CSS is expected to remain roughly stable quarter over quarter. For GIP, a moderate increase is expected, whereas PSS revenue should grow significantly. For the second fiscal quarter segment result margin, we expect a mid- to high-teens % level. As always, in this quarter, volume growth will be offset to some extent by contract-based annual price adjustments kicking in for the group; these are in line with our initial assumption of a low- to mid-single-digit decline, with considerable variance across the different businesses.
Jochen Hanebeck: For the sake of clarity, our forecast does not include any effects from the pending acquisition of the sensor portfolio from ams OSRAM. For the currently running March quarter, we predict revenues of around EUR 3.8 billion based on an unchanged assumption of a US dollar/euro exchange rate of 1.15. By segment, revenue at ATV and CSS is expected to remain roughly stable quarter over quarter. For GIP, a moderate increase is expected, whereas PSS revenue should grow significantly. For the second fiscal quarter segment result margin, we expect a mid- to high-teens % level. As always, in this quarter, volume growth will be offset to some extent by contract-based annual price adjustments kicking in for the group; these are in line with our initial assumption of a low- to mid-single-digit decline, with considerable variance across the different businesses.
Speaker #1: By segment, revenue at ATV and CSS is expected to remain roughly stable quarter over quarter. For GIP, a moderate increase is expected, whereas PSS revenue should grow significantly.
Speaker #1: For the second fiscal quarter, segment result margin, we expect a mid- to high-teens percentage level. As always in this quarter, volume growth will be offset to some extent by contract-based annual price adjustments kicking in.
Speaker #1: For the group, these are in line with our initial assumption of a low to mid single-digit decline, with considerable variance across the different businesses.
Speaker #1: For the full 2026 fiscal year, we continue to expect revenues to be moderately up compared to the previous fiscal year, based on an assumed US dollar–euro exchange rate of 1.15.
Jochen Hanebeck: For the full 2026 fiscal year, we continue to expect revenues to be moderately up compared to the previous fiscal year, based on an assumed US dollar euro exchange rate of 1.15. As a reminder, we expect our business segments to follow markedly different patterns. ATV should grow below group average. In contrast, we expect PSS to grow significantly faster, driven by very strong demand for our AI power solutions, for which we reconfirm our revenue assumptions of EUR 1.5 billion for this fiscal year. For GIP, we assume revenues to grow slightly year-over-year, whereas for CSS, we expect revenues to remain flat as IoT demand remains sluggish. Regarding profitability, we continue to expect our full year adjusted gross margin to come at a low 40s and our segment result margin to land at high teens % level.
Jochen Hanebeck: For the full 2026 fiscal year, we continue to expect revenues to be moderately up compared to the previous fiscal year, based on an assumed US dollar euro exchange rate of 1.15. As a reminder, we expect our business segments to follow markedly different patterns. ATV should grow below group average. In contrast, we expect PSS to grow significantly faster, driven by very strong demand for our AI power solutions, for which we reconfirm our revenue assumptions of EUR 1.5 billion for this fiscal year. For GIP, we assume revenues to grow slightly year-over-year, whereas for CSS, we expect revenues to remain flat as IoT demand remains sluggish. Regarding profitability, we continue to expect our full year adjusted gross margin to come at a low 40s and our segment result margin to land at high teens % level.
Speaker #1: As a reminder, we expect our business segments to follow markedly different patterns. ATV should grow below group average, in contrast. We expect PSS to grow significantly faster, driven by very strong demand for our power solutions, for AI. We reconfirm our revenue assumptions of €1.5 billion for this fiscal year.
Speaker #1: For GIP , we assume revenues to confirm our revenue assumptions of €1.5 billion . For this fiscal year . For we assume to revenues grow GIP , over year , whereas for CSS we expect revenues to be remained flat .
Speaker #1: IoT: As demand remains regarding sluggish profitability, we continue to expect our full-year adjusted gross margin to come in at the low 40s, and our segment margin to be at the high teens percent level.
Jochen Hanebeck: The adverse currency development, together with typical price decline, will work against the positive fall through effect from volume growth and further benefits from our step-up program. In this context, we announce today the completion of the divestiture of the former Cypress backend in Bangkok. We will pull in around EUR 500 million of investments related to powering AI to support steep revenue growth in the next fiscal year. As already mentioned, this will bring total investments in this fiscal year to around EUR 2.7 billion. As the majority of the additional equipment will arrive late in our fiscal year, there will be no material impact on our depreciation and amortization this, for which we anticipate a value of around EUR 2 billion.
Jochen Hanebeck: The adverse currency development, together with typical price decline, will work against the positive fall through effect from volume growth and further benefits from our step-up program. In this context, we announce today the completion of the divestiture of the former Cypress backend in Bangkok. We will pull in around EUR 500 million of investments related to powering AI to support steep revenue growth in the next fiscal year. As already mentioned, this will bring total investments in this fiscal year to around EUR 2.7 billion. As the majority of the additional equipment will arrive late in our fiscal year, there will be no material impact on our depreciation and amortization this, for which we anticipate a value of around EUR 2 billion.
Speaker #1: Adverse currency developments, together with the typical decline, will work against the positive fall-through effect from volume growth and further benefits from our Step Up program.
Speaker #1: In this context, we announced the divestiture today of the former Cyprus backend in Bangkok. We will pull in completion of the around €500 million of investments related to powering AI to support steep revenue growth next fiscal year.
Speaker #1: As already mentioned, this will bring total investments in this fiscal year to around €2.7 billion. As the majority of the additional equipment will arrive late in our fiscal, there will be no material impact on our depreciation and amortization this year, for which we anticipate a value for the year.
Jochen Hanebeck: This includes amortization of around EUR 400 million, resulting from purchase price allocations, mainly in connection with the acquisition of Cypress and Marvell's Ethernet business, which will be recognized in our non-segment results. For the free cash flow, we now expect a level of around 1 billion euros for fiscal year 2026, down from previously estimated EUR 1.1 billion. Given that the portion of the increased investment will be paid for within the running fiscal year, our adjusted free cash flow, net of investment into major front-end buildings and M&A transactions, is likewise expected to come in at a lower level and amount to around EUR 1.4 billion, after EUR 1.6 billion before. In the context of significant value creation from profitable AI growth. Ladies and gentlemen, let me summarize.
Jochen Hanebeck: This includes amortization of around EUR 400 million, resulting from purchase price allocations, mainly in connection with the acquisition of Cypress and Marvell's Ethernet business, which will be recognized in our non-segment results. For the free cash flow, we now expect a level of around 1 billion euros for fiscal year 2026, down from previously estimated EUR 1.1 billion. Given that the portion of the increased investment will be paid for within the running fiscal year, our adjusted free cash flow, net of investment into major front-end buildings and M&A transactions, is likewise expected to come in at a lower level and amount to around EUR 1.4 billion, after EUR 1.6 billion before. In the context of significant value creation from profitable AI growth. Ladies and gentlemen, let me summarize.
Speaker #1: around €2 billion . This includes amortization of around €400 million , resulting from purchase price allocations , mainly in connection with the acquisition of Cyprus and Marvel's Ethernet business , which will be recognized in our non segment results for the free cash flow .
Speaker #1: We now expect a level of around €1.0 billion for fiscal year '26, down from the previously estimated €1.1 billion. Given that a portion of the increased investment will be paid for within the running fiscal year, our adjusted free cash flow net of investments into end buildings and major M&A transactions is likewise expected to come in at a lower level and amount to around €1.4 billion.
Speaker #1: After €1.6 billion before. In the context of significant value creation from profitable AI growth. Ladies and gentlemen, let me summarize: the first quarter of our 2020 fiscal year came in at the better end of our guidance.
Jochen Hanebeck: Q1 of our 2026 fiscal year came in at the better end of our guidance, a result of the anticipated seasonality. Geopolitical crosscurrents and macroeconomic volatility continue to temper cyclical dynamics. Therefore, our base case of a gradual, uneven market recovery still fits well for the time being. We reiterate and confirm our outlook of moderate revenue growth, low 40s growth and high teens segment result margin for our 2026 fiscal year, a prudent base case. Within this guide, low growth is expected for automotive. Muted short-term xEV demand is more than offset by the trend towards software-defined vehicles. We shift our business focus accordingly. There is no AI without power, and we are doubling down on this unprecedented opportunity.
Jochen Hanebeck: Q1 of our 2026 fiscal year came in at the better end of our guidance, a result of the anticipated seasonality. Geopolitical crosscurrents and macroeconomic volatility continue to temper cyclical dynamics. Therefore, our base case of a gradual, uneven market recovery still fits well for the time being. We reiterate and confirm our outlook of moderate revenue growth, low 40s growth and high teens segment result margin for our 2026 fiscal year, a prudent base case. Within this guide, low growth is expected for automotive. Muted short-term xEV demand is more than offset by the trend towards software-defined vehicles. We shift our business focus accordingly. There is no AI without power, and we are doubling down on this unprecedented opportunity.
Speaker #1: A result of the anticipated seasonality , geopolitical crosscurrents , and macroeconomic volatility temper cyclical continue to dynamics . Therefore , our base case of a gradual , uneven market recovery still fits well for the time being .
Speaker #1: We reiterate and confirm our outlook of moderate revenue growth, low-40s gross margin, and high-teens segment result margin for our 2020 fiscal year.
Speaker #1: A prudent base case . Within this guide , low growth is expected for automotive muted short term demand is more than offset by the trend towards software defined vehicles .
Speaker #1: We shift our business focus accordingly . There is no AI without power and we are doubling down on this unprecedented opportunity . We we confirm revenue our targets of around €1.5 billion for fiscal 26 and around 2.5 billion in fiscal 27 , with the acquisition of the automotive , industrial and medical sensor portfolio from AMS , Osram , we strategically strengthened our unparalleled portfolio of power analog sensors and control , and connectivity solutions in line with our claim for leadership in power systems and IoT .
Jochen Hanebeck: We confirm our revenue targets of around EUR 1.5 billion for fiscal 2026 and around EUR 2.5 billion in fiscal 2027. With the acquisition of the automotive, industrial, and medical sensor portfolio from ams OSRAM, we strategically strengthen our unparalleled portfolio of power analog sensors and control and connectivity solutions in line with our claim for leadership in power systems and IoT. We optimally address, therefore, secular growth drivers and nurture profitable growth. Ladies and gentlemen, this concludes our introductory remarks, and we are now opening the call for your questions. Tried and tested procedure, we kindly ask you to limit yourself to one question and one follow-up. Operator, please start the Q&A session now.
Jochen Hanebeck: We confirm our revenue targets of around EUR 1.5 billion for fiscal 2026 and around EUR 2.5 billion in fiscal 2027. With the acquisition of the automotive, industrial, and medical sensor portfolio from ams OSRAM, we strategically strengthen our unparalleled portfolio of power analog sensors and control and connectivity solutions in line with our claim for leadership in power systems and IoT. We optimally address, therefore, secular growth drivers and nurture profitable growth. Ladies and gentlemen, this concludes our introductory remarks, and we are now opening the call for your questions. Tried and tested procedure, we kindly ask you to limit yourself to one question and one follow-up. Operator, please start the Q&A session now.
Speaker #1: We optimally address . Therefore , secular growth drivers and nurture profitable growth . and Ladies gentlemen , this concludes our introductory remarks . And we are now opening the call for your questions .
Speaker #1: Tried and tested procedure . We kindly ask you to limit yourself to one question and one follow up . Operator , please start the Q&A session now .
Operator: Thank you. Our question and answer session will be conducted electronically. If you would like to ask a question, simply press the star key followed by the number one on your telephone. If you are joining us today using a speakerphone, please ensure that your mute function is turned off. And we'll take our first question from Lee Simpson from Morgan Stanley. Please go ahead.
Operator: Thank you. Our question and answer session will be conducted electronically. If you would like to ask a question, simply press the star key followed by the number one on your telephone. If you are joining us today using a speakerphone, please ensure that your mute function is turned off. And we'll take our first question from Lee Simpson from Morgan Stanley. Please go ahead.
Speaker #2: Thank you. Our question and answer session will be conducted electronically. If you would like to ask a question, simply press number one on your telephone followed by the question. To do so, press the star key.
Speaker #2: If you are joining us using a speakerphone today, please ensure that your mute function is turned off. We will take our first question from Lee Simpson from Morgan Stanley.
Lee Simpson: Great, thanks for squeezing me in here. Jochen, maybe, maybe just kicking off on that data center sales guide. You know, as we, as we look at the landscape, there, there really aren't that many gigawatt scale capable racks, you know, racks that can be put into gigawatt clusters. There's maybe 2 today and maybe a third provider likely coming by that 2027 timeframe. So the sense here, looking at Infineon, is that you have some pretty solid and growing market share in support of that EUR 2.5 billion guide. Is that the right way to look at this, or is it more about the broadening incidence of new technologies, in particular, things like vertical power delivery?
Lee Simpson: Great, thanks for squeezing me in here. Jochen, maybe, maybe just kicking off on that data center sales guide. You know, as we, as we look at the landscape, there, there really aren't that many gigawatt scale capable racks, you know, racks that can be put into gigawatt clusters. There's maybe 2 today and maybe a third provider likely coming by that 2027 timeframe. So the sense here, looking at Infineon, is that you have some pretty solid and growing market share in support of that EUR 2.5 billion guide. Is that the right way to look at this, or is it more about the broadening incidence of new technologies, in particular, things like vertical power delivery?
Speaker #2: Please go ahead .
Speaker #3: Great . Thanks for squeezing me in here . Jochen . Maybe , maybe just kicking off on that data center sales guide . You know , as we as we look at the landscape , there really aren't that many gigawatt scale capable racks .
Speaker #3: racks that You know , can be put gigawatt into clusters . There's maybe two today and maybe a third provider , likely coming by 27 time frame .
Speaker #3: So the sense here that looking at Infineon is that you have some pretty solid and growing market share in support of that 2.5 billion guide .
Speaker #3: Is that the right way to look at this, or is it more about the broadening incidence of new technologies, in particular things like vertical power delivery?
Lee Simpson: And I think maybe just as a quick follow-up, just looking at that acquisition of ams OSRAM, it would seem you've taken in a pretty good mixed signal business. Could that be integrated into Kulim or Dresden? I mean, I guess what I'm looking here is trying to understand where the production integration gives you future synergies from this business. Thank you.
Lee Simpson: And I think maybe just as a quick follow-up, just looking at that acquisition of ams OSRAM, it would seem you've taken in a pretty good mixed signal business. Could that be integrated into Kulim or Dresden? I mean, I guess what I'm looking here is trying to understand where the production integration gives you future synergies from this business. Thank you.
Speaker #3: And I think maybe just as a quick up , just looking at that acquisition of AMS , Osram , it would seem you've you've taken in a pretty good mixed signal business .
Speaker #3: Could that be integrated into Coulomb or Dresden? I mean, I guess what I'm looking for here is trying to understand where the production integration gives you future synergies from this business.
Jochen Hanebeck: Roman. Okay, so I take the second, and then Andreas will talk about the first question, Lee. So ams OSRAM, indeed, a very attractive portfolio for a very attractive price, right? EUR 230 million in calendar year 2026 expected. The profitability was announced yesterday by the seller to be EUR 60 million, and we are paying EUR 570 million for a sticky mixed signal portfolio. Indeed we will, at first place, of course, integrate functionally, so R&D and so on, but we will also start to transfer high volume products into our facility in Kulim, and this way benefit from material value creations in this context.
Jochen Hanebeck: Roman. Okay, so I take the second, and then Andreas will talk about the first question, Lee. So ams OSRAM, indeed, a very attractive portfolio for a very attractive price, right? EUR 230 million in calendar year 2026 expected. The profitability was announced yesterday by the seller to be EUR 60 million, and we are paying EUR 570 million for a sticky mixed signal portfolio. Indeed we will, at first place, of course, integrate functionally, so R&D and so on, but we will also start to transfer high volume products into our facility in Kulim, and this way benefit from material value creations in this context.
Speaker #3: Thank you .
Speaker #1: Hang on . Okay . So I take the second and then Andreas will talk about the first question . Lee . So AMS Osram indeed a very attractive portfolio for a very attractive price .
Speaker #1: Right? $230 million in calendar year '26, expected. The profitability announced yesterday by the seller to be $60 million. And we are paying $570 million for a sticky mixed-signal portfolio.
Speaker #1: Indeed , we will at first place , of course , integrate functionally . R&D and so on , but also start to So we will transfer high volume products into our facility in Kulim .
Speaker #1: And this way, benefit from material value creations in this context. So, and that will, of course, take a while—a couple of years.
Jochen Hanebeck: So, that will, of course, take a while, a couple of years, but then, this will take the business to a very profitable part in our portfolio. And now, hand over to Andreas.
Jochen Hanebeck: So, that will, of course, take a while, a couple of years, but then, this will take the business to a very profitable part in our portfolio. And now, hand over to Andreas.
Speaker #1: But then this will take the business to a very profitable part in our portfolio. And now, we will hand over to Andreas. Coming back to the question on data centers.
Andreas Urschitz: Yeah, coming back to the question on data centers. So first, regarding data center capacity deployment, we see reality being pretty much in line with what is being also told by analysts. So just to give you an example, the Big Four data center operators, talking about AI data centers, in the US, have issued plans and are in deployment of these plans to double down in data center capacity in the upcoming one to two years. Having said that, we on the one hand side see an increase of data center capacity-driven demand for semiconductors that power these data centers. Second of which, we also see that accompanied by improvement of a GPU, GPU capability.
Andreas Urschitz: Yeah, coming back to the question on data centers. So first, regarding data center capacity deployment, we see reality being pretty much in line with what is being also told by analysts. So just to give you an example, the Big Four data center operators, talking about AI data centers, in the US, have issued plans and are in deployment of these plans to double down in data center capacity in the upcoming one to two years. Having said that, we on the one hand side see an increase of data center capacity-driven demand for semiconductors that power these data centers. Second of which, we also see that accompanied by improvement of a GPU, GPU capability.
Speaker #1: So first, regarding data center capacity deployment, we see a reality being pretty much in line with what is being also told by analysts.
Speaker #1: So just to give you an example, the big four data center operators talking about AI data centers in the US have issued plans and are in deployment of plans to double down in data center capacity in the upcoming one to two years.
Speaker #1: Having said that, we on the one hand side see an increase of data center capacity driven demand for semiconductors that power these data centers.
Speaker #1: Second of which , we also see that accompanied by improvement of GPU , GPU capability , it's just a rollout of next generation GPUs , which are , on the one hand side , more performant .
Andreas Urschitz: It's just a rollout of next generation GPUs, which are, on the one hand side, more performant, on the other hand side, also more power hungry. This results in higher power requirements and an increase of average power consumption per rack. So having said that, Infineon is benefiting from the strength of more data centers, plus higher power on the one hand side. On the other hand side, we're also benefiting from architecture changes in terms of customers moving from lateral power solutions at a fast pace towards what we call vertical power. And that has to do with huge power amounts and currents to be switched next to the processor. That results in vertical power becoming imperative to efficiently power GPUs of future generations.
Andreas Urschitz: It's just a rollout of next generation GPUs, which are, on the one hand side, more performant, on the other hand side, also more power hungry. This results in higher power requirements and an increase of average power consumption per rack. So having said that, Infineon is benefiting from the strength of more data centers, plus higher power on the one hand side. On the other hand side, we're also benefiting from architecture changes in terms of customers moving from lateral power solutions at a fast pace towards what we call vertical power. And that has to do with huge power amounts and currents to be switched next to the processor. That results in vertical power becoming imperative to efficiently power GPUs of future generations.
Speaker #1: On the other hand, they are also more power-hungry. This results in higher power requirements and an increase in average power consumption per rack.
Speaker #1: So, having said that, Infineon is benefiting from this trend of more data centers plus higher power. On the one hand side,
Speaker #1: On the other hand side , we are also benefiting from architecture changes in terms of customers moving from lateral power solutions at a we towards what fast pace vertical call power , and that has to do with huge power amounts and currents to be switched next to the processor .
Speaker #1: That results in a vertical power becoming imperative to efficiently power GPUs of future generations . And maybe let me add , so we are clearly benefiting here also from a broad customer portfolio , right ?
Jochen Hanebeck: And maybe let me add, so we are clearly benefiting here also from a broad customer portfolio, right? We are not only engaged with one or two, but with all hyperscalers and relevant GPU makers across the globe. And, for us, of course, the second stage part is giving us particular growth momentum. So we expect the share of the second stage in the overall numbers to increase over the quarters to come. As Andreas pointed out, that vertical power deliveries, the modules have a much higher value. And, again, we are here teaming up with all GPU makers or ASICs makers, whatever you want to call them.
Jochen Hanebeck: And maybe let me add, so we are clearly benefiting here also from a broad customer portfolio, right? We are not only engaged with one or two, but with all hyperscalers and relevant GPU makers across the globe. And, for us, of course, the second stage part is giving us particular growth momentum. So we expect the share of the second stage in the overall numbers to increase over the quarters to come. As Andreas pointed out, that vertical power deliveries, the modules have a much higher value. And, again, we are here teaming up with all GPU makers or ASICs makers, whatever you want to call them.
Speaker #1: are We not only engaged with 1 or 2 , but with all hyperscalers and relevant GPU makers across the globe . And for us , of course , the second stage part is giving us particular growth momentum .
Speaker #1: So we expect the share of the second stage in the overall numbers to increase over the quarters to come . As Andreas pointed out , that vertical power deliveries , modules much value the higher have a .
Speaker #1: And again , we are here teaming up with all GPU makers or Asics makers , whatever you want to call them .
Lee Simpson: Thank you very much.
Lee Simpson: Thank you very much.
Operator: The next question comes from the line of Joshua Buchalter from TD Cowen. Please go ahead.
Operator: The next question comes from the line of Joshua Buchalter from TD Cowen. Please go ahead.
Speaker #3: Thank you very much .
Speaker #2: The next question comes from the line of Joshua Buckhalter from TD Please go Cohen . ahead .
Joshua Buchalter: Hey, guys. Thank you for taking my questions. I also wanted to, you know, unsurprisingly, ask about data center power. You know, could you maybe any metrics you're able to provide on how much you think you're under-supplying this year? And, you know, are there any share implications of you guys being able to, or not being able to meet the full extent of your demand? And does the number for fiscal 2026, or excuse me, fiscal 2027 that you just gave, does that assume that you're able to meet demand, or are you still constrained with that 2.5 number? Thank you.
Joshua Buchalter: Hey, guys. Thank you for taking my questions. I also wanted to, you know, unsurprisingly, ask about data center power. You know, could you maybe any metrics you're able to provide on how much you think you're under-supplying this year? And, you know, are there any share implications of you guys being able to, or not being able to meet the full extent of your demand? And does the number for fiscal 2026, or excuse me, fiscal 2027 that you just gave, does that assume that you're able to meet demand, or are you still constrained with that 2.5 number? Thank you.
Speaker #4: guys . Thank Hey you for taking my questions . I also wanted to , you know , unsurprisingly , ask about data center power .
Speaker #4: Could you maybe provide any metrics you're able to on how much you think you're under-supplying this year? And are there any share implications for you guys?
Speaker #4: And being able to or not, full extent of your demand? Being able to, does the number for 2020, fiscal 2026? Excuse me?
Speaker #4: Fiscal 2027 that you just gave ? Does that assume that you're able to or are meet you still demand , constrained with that 2.5 number ?
Jochen Hanebeck: Yeah. This market is extremely dynamic. And first of all, we will try everything to serve our customers' demand to the maximum extent this year. This has to do with internal ramp-up of new capacity, but also very much conversion of IGBT capacity to leading-edge MOSFET capacity for the AI world. So here we have a task force running under the leadership of our COO to really capture the maximum value. The number for next year we came up is EUR 2.5 billion. This is not necessarily the max number, but also please keep in mind that these platforms which are launched pose very challenging technical situations, and we need to execute-...
Jochen Hanebeck: Yeah. This market is extremely dynamic. And first of all, we will try everything to serve our customers' demand to the maximum extent this year. This has to do with internal ramp-up of new capacity, but also very much conversion of IGBT capacity to leading-edge MOSFET capacity for the AI world. So here we have a task force running under the leadership of our COO to really capture the maximum value. The number for next year we came up is EUR 2.5 billion. This is not necessarily the max number, but also please keep in mind that these platforms which are launched pose very challenging technical situations, and we need to execute-...
Speaker #4: you .
Speaker #1: Yeah . This market is extremely dynamic . And first of all , we will try everything to serve our customers demand to the maximum extent .
Speaker #1: This year . This has to do with internal ramp up of new capacity , but also very much conversion of Igbt capacity to leading edge mOSFET capacity for the AI world .
Speaker #1: So here we have a task force running under the our leadership of to CEO really capture maximum value , the number for for next year .
Speaker #1: We came up is 2.5 billion . This is not necessarily the max number . But also please keep in mind that these platforms , which are launched pose very challenging , technical situations .
Jochen Hanebeck: On them. And, I think over time, we will be able to give more transparency on this. But, again, the biggest opportunity I've seen for the company in the last 30 years, but also a very challenging for the teams to capture technically with very demanding customers. So, at this point in time, I would like to leave it with this.
Jochen Hanebeck: On them. And, I think over time, we will be able to give more transparency on this. But, again, the biggest opportunity I've seen for the company in the last 30 years, but also a very challenging for the teams to capture technically with very demanding customers. So, at this point in time, I would like to leave it with this.
Speaker #1: And we need to execute on them. And I think over time we will be able to give more transparency on this. But again, the biggest opportunity I've seen for the company in the last 30 years, but also a very challenging one for the teams to capture technically, with very demanding customers.
Speaker #1: So, at this point in time, I would like to leave it with this.
Joshua Buchalter: Okay, thank you for the detail there. For my follow-up, I wanted to ask about gross margins. So, you know, it sounds like you, you took up utilization rates to build some inventory in the December quarter, and then that was reflected in the printed gross margins. So you're, you maintained the guide for the year, I believe, of low 40%, which kind of implies flat to down for the rest of the year. You know, is that a fair read, and sort of how are you thinking about managing utilization rates from here and inventory levels from here and the read through to gross margin? Thank you.
Joshua Buchalter: Okay, thank you for the detail there. For my follow-up, I wanted to ask about gross margins. So, you know, it sounds like you, you took up utilization rates to build some inventory in the December quarter, and then that was reflected in the printed gross margins. So you're, you maintained the guide for the year, I believe, of low 40%, which kind of implies flat to down for the rest of the year. You know, is that a fair read, and sort of how are you thinking about managing utilization rates from here and inventory levels from here and the read through to gross margin? Thank you.
Speaker #4: Okay . Thank you for the detail there . And then for my follow up , I wanted to ask about gross margins . So it sounds like you you took up utilization rates to build some inventory in the December quarter .
Speaker #4: And that was reflected in the printed gross margins maintain . You the guide for the year , I believe , of low 40% , which kind of flat implies to down for the rest of the year .
Speaker #4: Is that a fair read ? And how are you thinking about utilization managing utilization rates from an inventory levels from here the read and through the gross margin ?
Jochen Hanebeck: Yeah, on the underutilization, I will answer, and then Sven will take the effect on the gross margin level. But from a utilization point of view, you can assume that the 300 millimeter factories are or will be soon fully loaded as we are converting IGBT to AI MOSFETs. So that's happening as we speak. Then, of course, we still have some idle in non-AI related technologies. But also here, we are trying, or there will be a sort of. We expect a certain spillover or call it halo effect from this AI boom. Meaning that MOSFETs going into telecommunication or automotive will of course also see this demand.
Jochen Hanebeck: Yeah, on the underutilization, I will answer, and then Sven will take the effect on the gross margin level. But from a utilization point of view, you can assume that the 300 millimeter factories are or will be soon fully loaded as we are converting IGBT to AI MOSFETs. So that's happening as we speak. Then, of course, we still have some idle in non-AI related technologies. But also here, we are trying, or there will be a sort of. We expect a certain spillover or call it halo effect from this AI boom. Meaning that MOSFETs going into telecommunication or automotive will of course also see this demand.
Speaker #4: Thank you .
Speaker #1: On Yeah . the on the Underutilization I will answer . And then Sven will take the effect on the gross margin level . But from a utilization point of view , you can assume that the 300 millimeter factories will , are or will be fully loaded , as we are converting soon Igbt to AI MOSFETs .
Speaker #1: So that's happening as we speak . Then , of course , we still have some idle in Non-ai related technologies , but also here we are trying or there will be a sort of we expect a spill certain or call it halo effect from this AI boom , meaning that MOSFETs going into telecommunication or automotive will of course be also see this demand .
Jochen Hanebeck: So in other words, this MOSFET market below 100 volts, which is the main area we are talking about, is typically before AI a market of EUR 6 billion, $7 billion. And now this whole AI demand comes on top. Of course, you have to subtract then the module share, because the market is defined by die-in-a-package. But still, it's a very significant impact on this 6 to 7 billion, depending on the currency, market. And we expect this to have significant effects, and we are trying to serve customers with our leading-edge MOSFETs across all end markets ranging from AI to automotive to telecommunications in the best manner. But of course, here also, the supply-demand situation will be reflected in our pricing.
Jochen Hanebeck: So in other words, this MOSFET market below 100 volts, which is the main area we are talking about, is typically before AI a market of EUR 6 billion, $7 billion. And now this whole AI demand comes on top. Of course, you have to subtract then the module share, because the market is defined by die-in-a-package. But still, it's a very significant impact on this 6 to 7 billion, depending on the currency, market. And we expect this to have significant effects, and we are trying to serve customers with our leading-edge MOSFETs across all end markets ranging from AI to automotive to telecommunications in the best manner. But of course, here also, the supply-demand situation will be reflected in our pricing.
Speaker #1: So in other words , this mOSFET market below 100 volt , which is the main area we are talking about , is before typically AI , a market of €6 billion , $7 billion .
Speaker #1: And now this whole AI demand comes on top. Of course, you have to subtract, then the module share, because the market is defined by die in a package, but still, it's a very significant impact on this.
Speaker #1: 6 to 7 billion , depending on the currency market . And we expect this to have a significant effects . And we serve trying to are customers with our edge leading MOSFETs across all end markets , ranging from AI to automotive to telecommunications .
Speaker #1: But of in the best manner. Here also, the supply-demand situation will be reflected in our pricing.
Sven Schneider: Yeah, and maybe now some other information on the numbers, Josh. I mean, let us run through. First of all, there is a strong increase on the gross margin from Q4 to Q1, 230 basis points up. There is negative contribution from lower revenues, which has been overcompensated by the end of the fab fillers in the PSS division by more productivity and by lower idle, as you pointed out. You may recall that in Q4, in order to manage also inventory levels for the year-end, we have reduced loading, so idle went up. Now, we are back to a higher utilization rate, therefore, the idle is coming down. So that explains Q4, Q1. Now, for the, you're asking for the trend of the rest of the year.
Sven Schneider: Yeah, and maybe now some other information on the numbers, Josh. I mean, let us run through. First of all, there is a strong increase on the gross margin from Q4 to Q1, 230 basis points up. There is negative contribution from lower revenues, which has been overcompensated by the end of the fab fillers in the PSS division by more productivity and by lower idle, as you pointed out. You may recall that in Q4, in order to manage also inventory levels for the year-end, we have reduced loading, so idle went up. Now, we are back to a higher utilization rate, therefore, the idle is coming down. So that explains Q4, Q1. Now, for the, you're asking for the trend of the rest of the year.
Speaker #5: Yeah , and maybe now some some other information on the numbers . Josh I mean , let us run through , first of all , there is a strong increase on the gross margin from Q4 to Q1 , 230 basis points up .
Speaker #5: There is negative contribution from lower revenues , which has been overcompensated by the end of the fab fillers in the PS division by more productivity and by lower idle .
Speaker #5: As you pointed out , you may recall that in Q4 , in order manage also to inventory levels for the year end , we have reduced loading .
Speaker #5: went idle So up . Now we are back to higher utilization rate . Therefore , the idle is coming down . So that explains Q4 .
Sven Schneider: I mean, we are guiding for low 40s. I think, the 43 is in my mind consistent to such a guidance. And now it depends on the perspective on the different quarters. You are aware that in this fiscal quarter, there are these price agreements from especially automotive kicking in. On the other hand, there is continuous improvement on the productivity and step-up side. And if you think about the idle cost development, we are guiding down a bit compared to November in terms of idle, given that we are successful with the conversion of idling IGBT capacity. So the number is now in the ballpark of EUR 700 million for the full year, compared to EUR 800 million. I would say for modeling, take half for the first half and half for the second half.
Sven Schneider: I mean, we are guiding for low 40s. I think, the 43 is in my mind consistent to such a guidance. And now it depends on the perspective on the different quarters. You are aware that in this fiscal quarter, there are these price agreements from especially automotive kicking in. On the other hand, there is continuous improvement on the productivity and step-up side. And if you think about the idle cost development, we are guiding down a bit compared to November in terms of idle, given that we are successful with the conversion of idling IGBT capacity. So the number is now in the ballpark of EUR 700 million for the full year, compared to EUR 800 million. I would say for modeling, take half for the first half and half for the second half.
Speaker #5: Q1 . Now for the you are asking for the trend of the rest of the year . I mean , we are guiding for low 40s .
Speaker #5: I think the 43 is, is, is in my mind, consistent to such a guidance. And now it depends on the perspective on the different quarters.
Speaker #5: You are aware that in this fiscal quarter , there are these price agreements from especially automotive kicking in . On the other hand , there is continuous .
Speaker #5: Improvement on the productivity and step-up side. Think, and if you look at the idle cost development, we are guiding down a bit compared to November in terms of idle, given that we are successful with the conversion of idling IGBT now. So, the number is ballpark, in terms of capacity.
Speaker #5: 700 million for the full year , compared to 800 million . I would say , for modeling . Take half for the first half and half for the second half .
Sven Schneider: And now lastly, on inventories, you also asked for that one, because everything needs to be synchronized, as you rightly mentioned. Inventories in days are at 183, given also that Q1 is a seasonally weaker quarter. End of the year target should be again, 150 days range. So, this is how I would look at the equation for the quarters to come.
Sven Schneider: And now lastly, on inventories, you also asked for that one, because everything needs to be synchronized, as you rightly mentioned. Inventories in days are at 183, given also that Q1 is a seasonally weaker quarter. End of the year target should be again, 150 days range. So, this is how I would look at the equation for the quarters to come.
Speaker #5: And now lastly , on inventories , you also asked for that one because everything needs to be synchronized as you rightly mentioned , inventories in days are at 183 .
Speaker #5: Given also that Q1 is a seasonally weaker quarter, end of the year, the target should be again in the 150 days range. So this is how I would look at the equation for the quarters to come.
Joshua Buchalter: Thank you both for all the color.
Joshua Buchalter: Thank you both for all the color.
Operator: We now have a question from the line of Janardhan Menon from Jefferies. Please go ahead.
Operator: We now have a question from the line of Janardhan Menon from Jefferies. Please go ahead.
Speaker #4: Thank you both for all the color.
Janardan Menon: Hi, good morning, and thanks for taking the question. I just wanna look at your growth profile going forward, given this very strong AI growth that you're seeing. You have guided on your target model for more than 10%. But roughly the EUR 1 billion of additional revenue in 2020, FY 2027 is itself about 6% of growth for you in that year. So what I mean, the growth will probably, the contribution will probably decrease, you know, into subsequent years. But because of the very strong AI demand coming through, are we looking at a mid- to longer-term growth profile for Infineon, which is well above what you had previously put into your target model? Any commentary there would be great.
Janardan Menon: Hi, good morning, and thanks for taking the question. I just wanna look at your growth profile going forward, given this very strong AI growth that you're seeing. You have guided on your target model for more than 10%. But roughly the EUR 1 billion of additional revenue in 2020, FY 2027 is itself about 6% of growth for you in that year. So what I mean, the growth will probably, the contribution will probably decrease, you know, into subsequent years. But because of the very strong AI demand coming through, are we looking at a mid- to longer-term growth profile for Infineon, which is well above what you had previously put into your target model? Any commentary there would be great.
Speaker #2: We now have a question from the line of Janardan Menon from Jefferies . Please go ahead .
Speaker #6: Hi . Good morning . Thanks for taking the question . I just want to look at your growth profile very forward . Given this AI strong growth that you're you have seeing , guided on your target model for more than 10% .
Speaker #6: But roughly the 1 billion of additional revenue in FY 27 itself , 20 about 6% of growth for you in that year . So what I mean , the growth will probably the contribution will probably decrease .
Speaker #6: You know , into subsequent years . But because of the very strong AI demand coming through . Are we looking at a a mid to longer term growth profile for Infineon , which is well above what you had previously put into your target model ?
Janardan Menon: My short follow-up is just on the AI power side. You did make a comment that you are seeing demand from all GPU and data center makers globally. Just want to know about China. There is a lot of GPU activity there, a lot of data centers being put up there as well. Do you have a footprint for AI power solutions in that market, the domestic players? Or is your market very much in the US or the major US players? Thanks.
Janardan Menon: My short follow-up is just on the AI power side. You did make a comment that you are seeing demand from all GPU and data center makers globally. Just want to know about China. There is a lot of GPU activity there, a lot of data centers being put up there as well. Do you have a footprint for AI power solutions in that market, the domestic players? Or is your market very much in the US or the major US players? Thanks.
Speaker #6: commentary there Any would be My short follow up is just on the AI power side . You did make a comment that you are seeing demand from all GPU and data center makers globally .
Speaker #6: Just want to know about China . There is GPU a lot of activity there , a lot of data being put centers up there as Do well .
Speaker #6: Do you have a footprint for AI power solutions in that market to domestic players, or is your market very much in the US or with the major US players?
Jochen Hanebeck: Yeah, Andreas will take the second question, and I answer the first one. So we feel that our target operating model, calling for 10% over the cycle, and a 25% segment result margin, and please remember, that was stated at a dollar/euro exchange rate of 1 to 1, is still valid. And the growth in AI certainly helps. We also have given you numbers for the midterm. We have talked about a SAM of EUR 8 to 12 billion by the end of the decade. We have given indications on market shares, and I think this is what we can state at this moment in time, because for sure we cannot give yet a guidance for 2027 or beyond.
Jochen Hanebeck: Yeah, Andreas will take the second question, and I answer the first one. So we feel that our target operating model, calling for 10% over the cycle, and a 25% segment result margin, and please remember, that was stated at a dollar/euro exchange rate of 1 to 1, is still valid. And the growth in AI certainly helps. We also have given you numbers for the midterm. We have talked about a SAM of EUR 8 to 12 billion by the end of the decade. We have given indications on market shares, and I think this is what we can state at this moment in time, because for sure we cannot give yet a guidance for 2027 or beyond.
Speaker #6: Thanks .
Speaker #1: Yeah. Andreas will take the second question, and I will answer the first one. So we feel that our target operating model calls for 10% over the cycle and a 25% segment result margin.
Speaker #1: And please remember that was stated at a dollar euro exchange rate of 1 to 1 is still valid . And the in AI certainly helps .
Speaker #1: Also, we have given you numbers for the mid-term. We talked about the SEM of $8 to $12 billion by the end of the decade.
Speaker #1: We have given indications on , on , on , on market shares . And I think is what we this can state at this moment in time , because for sure , we cannot give yet a guidance for 27 or beyond .
Andreas Urschitz: In talking about the China data center market, John, let me just add on. Yes, so Infineon is engaged, obviously. Historically, we used to be very active already in the recent past in the hyperscaler business. The typical hyperscalers in China, as a matter of fact, also move fast into building AI data center infrastructure as well. So, as a function of this, Infineon is moving from its position in hyperscaling towards AI data center at pace with one of the same players. Plus also additionally, vertically integrated players that play in the league of large language model service providing, and so on and so forth. So also there we are. So in summary, yes, we are engaged in China.
Andreas Urschitz: In talking about the China data center market, John, let me just add on. Yes, so Infineon is engaged, obviously. Historically, we used to be very active already in the recent past in the hyperscaler business. The typical hyperscalers in China, as a matter of fact, also move fast into building AI data center infrastructure as well. So, as a function of this, Infineon is moving from its position in hyperscaling towards AI data center at pace with one of the same players. Plus also additionally, vertically integrated players that play in the league of large language model service providing, and so on and so forth. So also there we are. So in summary, yes, we are engaged in China.
Speaker #1: And talking about China .
Speaker #7: Data Center market , Jonathan , let me just add on . Yes . So Infineon is engaged obviously historically we used to be a very active already in the in the recent past in the hyperscaler business , the typical hyperscalers in China , as a matter of fact , also move fast into building AI center data infrastructure as well .
Speaker #7: So as a function of this , Infineon is from its moving position in Hyperscaling towards AI data center at pace with one at the same players , plus also .
Speaker #7: Vertically, additionally integrated players that play in the league of large language model service providers and so on and so forth. So, also there we are.
Janardan Menon: Thank you very much.
Janardan Menon: Thank you very much.
Speaker #7: So, in summary, yes, we are engaged in China.
Operator: The next question comes from the line of Didier Scemama from Bank of America. Please go ahead.
Operator: The next question comes from the line of Didier Scemama from Bank of America. Please go ahead.
Speaker #6: Thank you very much .
Didier Scemama: Yes, thank you. Good morning, gentlemen. I've got a first question on pricing, just wanting to understand a few things. You've got a few levers to pull, it feels. So first, I mean, clearly, with all the GPU customers you have, presumably you've got also the customer, easy customers, plus inferencing, where you also have content. And is that a lever you could pull already in 2026 in your AI business, if everybody wants the same chips? Obviously, for them, the ROI would be extremely positive if they could secure supply when the others cannot. And then related to that, I think, Jochen, you mentioned that for 48-volt MOSFET there is a bit of tension with your customers. So I just wondered, 'cause you've alluded also, you could, you know, situation is tense.
Didier Scemama: Yes, thank you. Good morning, gentlemen. I've got a first question on pricing, just wanting to understand a few things. You've got a few levers to pull, it feels. So first, I mean, clearly, with all the GPU customers you have, presumably you've got also the customer, easy customers, plus inferencing, where you also have content. And is that a lever you could pull already in 2026 in your AI business, if everybody wants the same chips? Obviously, for them, the ROI would be extremely positive if they could secure supply when the others cannot. And then related to that, I think, Jochen, you mentioned that for 48-volt MOSFET there is a bit of tension with your customers. So I just wondered, 'cause you've alluded also, you could, you know, situation is tense.
Speaker #2: The next question comes from the line of Didier Samama from Bank of America . Please go ahead .
Speaker #8: Yes . Thank you . Good morning gentlemen . I've got a first question on pricing . Just wanting to understand a few things .
Speaker #8: You've got a few levers to pull . It feels so mean first , I , clearly with all the GPU customers you have , you've got also the customers .
Speaker #8: Customers . Plus inferencing , where you also have content . And is that a level you could already pull in 26 in UAE business , if everybody wants the same chips .
Speaker #8: obviously And for them , the ROI would be extremely positive if they could secure supply when the others cannot and then related to that , Johan , mentioned you that for 48 volt mOSFET , there is a bit of tension with your customers .
Didier Scemama: Is that something you could potentially contemplate, raising pricing? And in that context, is that already reflected in your negotiation with tier ones? That would be great if you could give a bit of color on all these elements. In fact, if you could also comment on what your assumptions are for pricing for the full year. And I've got a quick follow-up. Thank you.
Didier Scemama: Is that something you could potentially contemplate, raising pricing? And in that context, is that already reflected in your negotiation with tier ones? That would be great if you could give a bit of color on all these elements. In fact, if you could also comment on what your assumptions are for pricing for the full year. And I've got a quick follow-up. Thank you.
Speaker #8: So I just wondered because you've alluded also , you could situationally stance is that you something could potentially contemplate raising pricing ? And in that context is that is that already reflected in your negotiations with tier one ?
Speaker #8: That would be great if you could give a bit of color on all these elements. In fact, if you could also comment on what your assumptions are for pricing for the full year.
Jochen Hanebeck: Yeah, Andreas speaking. So, let me first react on the pricing question as such, before I hand over to Sven to answer its implications in the P&L. So as far as pricing is concerned, Jochen said it before, we see this strong increase in AI-driven demand. Supply constraints are already here while we speak. There is a potential spillover of capacity resulting in supply tightness, also for similar such products. Again, Jochen mentioned medium voltage MOSFETs, just as one example, also outside AI. Therefore, as a matter of fact, pricing environments for affected product segments turn into more favorable territories. And, last but not least, we will adjust prices to reflect current market circumstances going forward.
Andreas Urschitz: Yeah, Andreas speaking. So, let me first react on the pricing question as such, before I hand over to Sven to answer its implications in the P&L. So as far as pricing is concerned, Jochen said it before, we see this strong increase in AI-driven demand. Supply constraints are already here while we speak. There is a potential spillover of capacity resulting in supply tightness, also for similar such products. Again, Jochen mentioned medium voltage MOSFETs, just as one example, also outside AI. Therefore, as a matter of fact, pricing environments for affected product segments turn into more favorable territories. And, last but not least, we will adjust prices to reflect current market circumstances going forward.
Speaker #8: And I've got a follow-up. Thank you.
Speaker #7: Yeah . Andreas speaking . So let me first react on the pricing question as such , before I hand over to Sven to answer .
Speaker #7: It's implications in the PNL . So as far as pricing is concerned , Johan said it before we see this strong increase in AI driven demand supply constraints are already here .
Speaker #7: Why we speak there is a potential spillover of capacity resulting in supply tightness . Also for similar such products . Again , Johan mentioned medium voltage MOSFETs .
Speaker #7: Just as one example . Also outside AI . Therefore , as a matter of fact , pricing environment for affected product segments turn into more favorable territories .
Jochen Hanebeck: As far as, so to say, that being translated into P&L effect is concerned, I hand it over to Sven.
Andreas Urschitz: As far as, so to say, that being translated into P&L effect is concerned, I hand it over to Sven.
Speaker #7: And last but not least , we will adjust prices to reflect current market going circumstances forward . As far as . So to say that being translated into PNL effects is concerned , I hand it over to Sven .
Andreas Urschitz: Yeah. Thank you, Andreas, and hi, Didier. So, let me be very clear here. It's our rule that we first want to conclude discussions with customers on pricing before we reflect it in the guidance. Therefore, the answer is, what Andreas was talking about is not included in this guidance. So this would be an upside, and there would be also contribution in 2026. But let's be also fair, talking puts and takes. We also need to see how the US dollar and how the commodity prices are developing for the remainder of the year. So there will be puts and takes. Therefore, from today's perspective, we believe it's the right guidance, but the additional pricing is not included.
Sven Schneider: Yeah. Thank you, Andreas, and hi, Didier. So, let me be very clear here. It's our rule that we first want to conclude discussions with customers on pricing before we reflect it in the guidance. Therefore, the answer is, what Andreas was talking about is not included in this guidance. So this would be an upside, and there would be also contribution in 2026. But let's be also fair, talking puts and takes. We also need to see how the US dollar and how the commodity prices are developing for the remainder of the year. So there will be puts and takes. Therefore, from today's perspective, we believe it's the right guidance, but the additional pricing is not included.
Speaker #5: Yeah, thank you, Andreas. And Heidi. So let me be very clear here. It's our rule that we first want to conclude discussions with customers on pricing before we reflect it in the guidance.
Speaker #5: Therefore, the answer is what Andreas was talking about is not included in this guidance. So this would be an upside, and there would be also contribution in '26.
Speaker #5: But let's also be fair, talking puts and takes. We also need to see how the dollar and how commodity prices are developing for the remainder of the year.
Speaker #5: So there will be puts and takes. Therefore, from today's perspective, we believe it's the right guidance. But the additional pricing is not included.
Didier Scemama: Fantastic. Very clear. Looking at another potential challenge, or at least a challenge, is the memory shortage situation. So what have you contemplated in your guidance for the full year, in particular, on the automotive side? I mean, are you assuming any, you know, volume disruption from the 91, 92 million global LVP, you know, I think consensus? Equally, are you seeing any despeccing of certain function, whether it's LDV or ADAS, given the potential negative impact it would have on the, on your automotive customers? Thank you.
Didier Scemama: Fantastic. Very clear. Looking at another potential challenge, or at least a challenge, is the memory shortage situation. So what have you contemplated in your guidance for the full year, in particular, on the automotive side? I mean, are you assuming any, you know, volume disruption from the 91, 92 million global LVP, you know, I think consensus? Equally, are you seeing any despeccing of certain function, whether it's LDV or ADAS, given the potential negative impact it would have on the, on your automotive customers? Thank you.
Speaker #8: Fantastic. Very clear. Maybe looking at another potential challenge, or at least a challenge, is the memory shortage situation. So, what have you contemplated in your guidance for the full year, and in particular on the automotive side?
Speaker #8: I mean , are you assuming any you volume disruption from the 9192 million global LVP ? You know , I think consensus equally .
Speaker #8: Are you seeing any packing of certain functions , whether it's SDV or Adas , given the potential negative would have the automotive customers ?
Sven Schneider: Yeah. You know, Didier, that we are not much present in, let's say, high DRAM content products like smartphones or laptops. Our share there is limited. In automotive, there might be an effect, but I still doubt a little bit that it has such a strong effect overall. But also, please keep in mind that we are somewhat, for various reasons, more conservative in our automotive sales guidance-- global sales guidance. So I would think that this covers any effect out of this DRAM or NAND topic as well.
Jochen Hanebeck: Yeah. You know, Didier, that we are not much present in, let's say, high DRAM content products like smartphones or laptops. Our share there is limited. In automotive, there might be an effect, but I still doubt a little bit that it has such a strong effect overall. But also, please keep in mind that we are somewhat, for various reasons, more conservative in our automotive sales guidance-- global sales guidance. So I would think that this covers any effect out of this DRAM or NAND topic as well.
Speaker #8: Thank you .
Speaker #1: Yeah . You know that we are not much present in , let's say , hi Dram content products like smartphones or laptops . Our share there is is limited .
Speaker #1: In automotive . There might be an effect , but I still doubt a little bit that it has such a strong effect overall , but also , please keep in mind that we are somewhat , for various reasons , more conservative in our automotive sales .
Speaker #1: Global sales guidance . So I would think that this covers any effect out of this Dram or an end topic as well .
Didier Scemama: Yeah, makes total sense. Thank you so much, guys.
Didier Scemama: Yeah, makes total sense. Thank you so much, guys.
Operator: We now have a question from the line of Sandeep Deshpande from JP Morgan. Please go ahead.
Operator: We now have a question from the line of Sandeep Deshpande from JP Morgan. Please go ahead.
Speaker #8: Total sense. Thank you. Yeah, makes so much sense, guys.
Sandeep Deshpande: Yeah. Hi. Hi, thank you for letting me on. My first question is regarding your guidance for the year. I mean, you have changed the guidance slightly on GIP, where you were previously saying moderate increase, you're saying slight increase on CSS, where you said slight increase, you're now saying flat. At the same time, for this year, you haven't changed the AI guidance, and so, I mean, there is no qualitative difference in your guidance on PSS. So how is it that the overall guidance for the year has remained unchanged?
Sandeep Deshpande: Yeah. Hi. Hi, thank you for letting me on. My first question is regarding your guidance for the year. I mean, you have changed the guidance slightly on GIP, where you were previously saying moderate increase, you're saying slight increase on CSS, where you said slight increase, you're now saying flat. At the same time, for this year, you haven't changed the AI guidance, and so, I mean, there is no qualitative difference in your guidance on PSS. So how is it that the overall guidance for the year has remained unchanged?
Speaker #2: We now have a question from the line of Morgan from J.P. Go ahead.
Speaker #2: Sandeep Yeah .
Speaker #9: Hi . you for Hi . Thank letting me on My . first question is regarding your guidance for the year . I mean , you have changed the guidance slightly on GIP , where you were previously saying moderate increase .
Speaker #9: You're saying 'slight increase' on CSS where you said 'slight increase.' You're now saying 'flat' at the same time for this year. You haven't changed the AI guidance.
Speaker #9: And so, I mean, there is no qualitative difference in your guidance on PSS. So, how is it that the guidance for the overall year has remained unchanged?
Sven Schneider: Hi, Sandeep. Yeah, I mean, you're always very accurate in your observations, so, everything you said is, is true, for the divisions. So why does, the two, why did the two changes on, on GIP and CSS not change the overall guidance? Just look at the relative contribution of both divisions, to the group. Two-thirds remain stable. Now, you can also turn the argument around and say, implicitly, we have upgraded the AI guidance, because we stick to EUR 1.5 billion, despite the fact that the dollar is weaker, which would be a counterargument. So basically, I would consider it to be, give or take, unchanged to November.
Sven Schneider: Hi, Sandeep. Yeah, I mean, you're always very accurate in your observations, so, everything you said is, is true, for the divisions. So why does, the two, why did the two changes on, on GIP and CSS not change the overall guidance? Just look at the relative contribution of both divisions, to the group. Two-thirds remain stable. Now, you can also turn the argument around and say, implicitly, we have upgraded the AI guidance, because we stick to EUR 1.5 billion, despite the fact that the dollar is weaker, which would be a counterargument. So basically, I would consider it to be, give or take, unchanged to November.
Speaker #5: Hi , Sandeep . Yeah , I mean , you're always very accurate in your observations . So everything you said is for the true divisions .
Speaker #5: So why does the two why did the two changes on on GIP and CSS not change the overall guidance the look of at divisions .
Speaker #5: both contribution to the group . A two thirds remain stable . Now you can also turn the argument around and say implicitly , we have upgraded the AI guidance because we stick to 1.5 billion , despite the fact that the dollar is weaker , which would be a counterargument .
Speaker #5: So basically, I would consider it to be, give or take, unchanged to November.
Sandeep Deshpande: I mean, just, you know, quickly on that, I mean, your FX effects, the guidance on FX has remained 1.15. So, I mean, how does that FX impact the guidance? Because, you know, I mean, then you should have raised the number, right, on, on AI, AI for this year.
Sandeep Deshpande: I mean, just, you know, quickly on that, I mean, your FX effects, the guidance on FX has remained 1.15. So, I mean, how does that FX impact the guidance? Because, you know, I mean, then you should have raised the number, right, on, on AI, AI for this year.
Speaker #9: I mean , just quickly on that . I mean , your effects , the guidance in the on FX has remained 1.15 . So I mean , how does that FX impact the guidance ?
Sven Schneider: Yeah. So Sandeep, again, that's of course always an important element, not only for you, but also for us in determining the right guidance. I mean, let's be, let's be very transparent here. First of all, we are living in volatile times for various reasons, and we cannot, and don't want to adjust the FX rate every time when the dollar moves up or down. We are now at 1.18 spot, yes. By the way, the Q1 was 1.16, where we were guiding for 1.15, and did even better in terms of revenue and profitability. So you are aware of our rule of thumb.
Sven Schneider: Yeah. So Sandeep, again, that's of course always an important element, not only for you, but also for us in determining the right guidance. I mean, let's be, let's be very transparent here. First of all, we are living in volatile times for various reasons, and we cannot, and don't want to adjust the FX rate every time when the dollar moves up or down. We are now at 1.18 spot, yes. By the way, the Q1 was 1.16, where we were guiding for 1.15, and did even better in terms of revenue and profitability. So you are aware of our rule of thumb.
Speaker #9: Because , you know , I mean , then you should have raised the number right on on AI for this year .
Speaker #5: Yeah . So Sandeep again , that's of course always an important element , not only for you but also for us in determining the right guidance .
Speaker #5: I mean , let's be let's be very here . transparent First of all , we are living in volatile times various for reasons , and we cannot and don't want to adjust the FX rate every time when the dollar moves up or down .
Speaker #5: We are now at 118 spot . Yes . By the way , the first quarter was 116 where we were guiding for 115 and did even better in terms of revenue and profitability .
Sven Schneider: So if we just assume now, for argument's sake, the dollar would stay at the 1.18 for the rest of the year, that would translate into the well-known, give or take, good EUR 200 million of revenue headwind and below 50 basis points margin headwinds. So therefore, from today's perspective, we do not see an immediate need to adjust the guidance for currencies. And we believe that our operative strength will allow us to compensate for negative currency effects to a certain degree. And I would stop here. The rest we need to see, as I have given up on forecasting dollar rates, to be honest.
Sven Schneider: So if we just assume now, for argument's sake, the dollar would stay at the 1.18 for the rest of the year, that would translate into the well-known, give or take, good EUR 200 million of revenue headwind and below 50 basis points margin headwinds. So therefore, from today's perspective, we do not see an immediate need to adjust the guidance for currencies. And we believe that our operative strength will allow us to compensate for negative currency effects to a certain degree. And I would stop here. The rest we need to see, as I have given up on forecasting dollar rates, to be honest.
Speaker #5: So, you are aware of our rule of thumb. So if we just assume now, for argument's sake, the dollar would stay at the 118 for the rest of the year.
Speaker #5: That would translate into the well-known, give or take, a good €200 million of revenue headwind. And below 50 basis points margin headwinds.
Speaker #5: So therefore, from today's perspective, we do not see an immediate need to adjust the guidance for currencies. And we believe that our operative strength will allow us to compensate for negative currency effects to a certain degree.
Speaker #5: And I would stop here. The rest we need to see. As I have given up on forecasting dollar rates, to be honest.
Sandeep Deshpande: Thank you. I mean, just my follow-up question is on AI again. When you guide to this EUR 2.5 billion, which is a very strong number, is this based on regular orders that you get in the rest of your business? Or do you have contracts signed and, and that there are some kind of agreements with your customers that this, this is the level of revenue that will occur? Or how is this negotiated between yourselves and your customers, that this revenue will come? Because the main customer there has, as you know, said publicly, they're gonna get new suppliers into the market by next year. So how are you definite? Because you are putting capacity in place for the customer.
Sandeep Deshpande: Thank you. I mean, just my follow-up question is on AI again. When you guide to this EUR 2.5 billion, which is a very strong number, is this based on regular orders that you get in the rest of your business? Or do you have contracts signed and, and that there are some kind of agreements with your customers that this, this is the level of revenue that will occur? Or how is this negotiated between yourselves and your customers, that this revenue will come? Because the main customer there has, as you know, said publicly, they're gonna get new suppliers into the market by next year. So how are you definite? Because you are putting capacity in place for the customer.
Speaker #9: Thank you . I mean , just my follow up question is on AI again , when you guide to this €2.5 billion , which is a very strong number , is this based on a regular orders that you get in the rest of your business , or do you have contracts signed and and that there kind of are some agreements with your customers that this this is the level of revenue that will occur or how is this negotiated between yourselves and your customers that this revenue will come because the main customer there has , as you know , said publicly , they're going to get new suppliers into the market by next year .
Sven Schneider: So, Sandeep, this is Jochen. There are no customer agreements at this moment in time, extending into 2027. But we see a strong interest from all players to come up with longer term agreements, potentially even CRAs. Because these customers all feel that this market might get into a supply shortage. And of course, here Infineon is very well positioned-
Jochen Hanebeck: So, Sandeep, this is Jochen. There are no customer agreements at this moment in time, extending into 2027. But we see a strong interest from all players to come up with longer term agreements, potentially even CRAs. Because these customers all feel that this market might get into a supply shortage. And of course, here Infineon is very well positioned-
Speaker #9: So, how are you? Definitely, because you are putting capacity in place for the customer.
Speaker #1: So Sandeep , this is John . There are no customer agreements at this moment in time extending into 27 . But we see a strong interest from all players to come up with longer term agreements , potentially even Cras , because these customers all feel that this market might get into a supply shortage .
Jochen Hanebeck: ... in terms of supply capabilities, given our Dresden facility which will kick in next year at the perfect moment in time. But again, I would like to say the EUR 2.5 billion is from our side, an estimate for next year. It's not necessarily the maximum, but we definitely also need to execute, especially all the technical challenges that are inherent to this sort of business with very risky customers. And again, please do not think about one customer only. We have a broad customer base. We have vertical power deliveries across many of them. So that drives revenue to the largest extent.
Jochen Hanebeck: ... in terms of supply capabilities, given our Dresden facility which will kick in next year at the perfect moment in time. But again, I would like to say the EUR 2.5 billion is from our side, an estimate for next year. It's not necessarily the maximum, but we definitely also need to execute, especially all the technical challenges that are inherent to this sort of business with very risky customers. And again, please do not think about one customer only. We have a broad customer base. We have vertical power deliveries across many of them. So that drives revenue to the largest extent.
Speaker #1: And of course , here Infineon is very well positioned in terms of supply capabilities , given our Dresden facility will , which will kick in next year at the perfect moment in time .
Speaker #1: But again, I would like to say the $2.5 billion is from our side—an estimate for next year. It's not necessarily the maximum, but we definitely also need to execute, especially as all the technical challenges are there that are inherent to our business with a very high risk.
Speaker #1: Customers . And again . Please do not think about one customer only . We have a broad customer base . We have vertical power deliveries across many of them , so that drives revenue to the largest extent .
Johannes Schaller: Thank you.
Sandeep Deshpande: Thank you.
Operator: The next question comes from the line of Alexander Duval from Goldman Sachs. Please go ahead.
Operator: The next question comes from the line of Alexander Duval from Goldman Sachs. Please go ahead.
Speaker #9: you Thank .
Alexander Duval: Yes, thank you so much for the question. Just to go back to the ams OSRAM deal. You referenced the solid profitability. I wondered if you could give us a sense of growth expectations, what's been seen historically there, and how you're thinking about that going forward? And then, going back to the automotive business, obviously there'd been discussion about China being somewhat weaker on the EV side. I wondered if you could give us some color about how that is balanced by what you're seeing in software-defined vehicles, which I think you highlighted is an area of strength. Many thanks.
Alexander Duval: Yes, thank you so much for the question. Just to go back to the ams OSRAM deal. You referenced the solid profitability. I wondered if you could give us a sense of growth expectations, what's been seen historically there, and how you're thinking about that going forward? And then, going back to the automotive business, obviously there'd been discussion about China being somewhat weaker on the EV side. I wondered if you could give us some color about how that is balanced by what you're seeing in software-defined vehicles, which I think you highlighted is an area of strength. Many thanks.
Speaker #2: The next question comes from the line of Alexandre Duval from Goldman Sachs. Please go ahead.
Speaker #10: Thank you so Yes . much for the question . Just to go back to the AMS , Osram deal , you referenced the solid profitability .
Speaker #10: I wondered if you could give us a sense of growth expectations . What's been seen historically there and how you're thinking about that going forward .
Speaker #10: And then going back to the automotive business . been discussion about China being somewhat weaker on the EV side if you could . give I wondered us some color about how that is balanced by what you're seeing in software defined vehicles , which I think you highlighted is an area of strength may .
Jochen Hanebeck: Yeah, thank you, Alexander. So, we said on ams OSRAM, this portfolio we are buying, I think the seller says EUR 220 million last year. We are saying EUR 230 million this year. Don't take that as a growth trajectory. We are always a bit cautious in this phase over from a seller to a buyer, how much inventory we really find then at the day of closing. I would consider this business clearly as a business in the high single digit growth area, much like other sensor players are also stating, probably close to 10%. On the second question, EV China, indeed, the EV market overall is in, I would say, even a turmoil.
Jochen Hanebeck: Yeah, thank you, Alexander. So, we said on ams OSRAM, this portfolio we are buying, I think the seller says EUR 220 million last year. We are saying EUR 230 million this year. Don't take that as a growth trajectory. We are always a bit cautious in this phase over from a seller to a buyer, how much inventory we really find then at the day of closing. I would consider this business clearly as a business in the high single digit growth area, much like other sensor players are also stating, probably close to 10%. On the second question, EV China, indeed, the EV market overall is in, I would say, even a turmoil.
Speaker #10: Thanks .
Speaker #1: Yeah . Thank you . Alexandre . So we said on AMS Osram this portfolio , we are buying , I think the the seller says 220 million .
Speaker #1: Last year, we are saying €230 million this year. Don't take that as a growth trajectory. We are always a bit cautious in this phase, over from a seller to a buyer.
Speaker #1: How much inventory we really find the day of closing, I would consider this business clearly as a business in the high single-digit growth area, much like sensor players, others are also stating, probably close to 10%.
Speaker #1: On the second question, EV China indeed, the EV market overall is in, I would say, even a turmoil. US situation known, European situation known, China.
Jochen Hanebeck: US situation known, European situation known. China, you ask for, we will see less growth in EVs than in the past. We see price erosion, and that's why we have decided to reduce the exposure on silicon-based inverter products, and rather focus on silicon carbide and take this IGBT capacity then to fuel our AI business. The overall high voltage or high power business within automotive is now about projected to be around 10% of the automotive business. So, we are defocusing part of that business, but, of course, the inverter and silicon carbide-based inverter are clearly a focus for the company.
Jochen Hanebeck: US situation known, European situation known. China, you ask for, we will see less growth in EVs than in the past. We see price erosion, and that's why we have decided to reduce the exposure on silicon-based inverter products, and rather focus on silicon carbide and take this IGBT capacity then to fuel our AI business. The overall high voltage or high power business within automotive is now about projected to be around 10% of the automotive business. So, we are defocusing part of that business, but, of course, the inverter and silicon carbide-based inverter are clearly a focus for the company.
Speaker #1: You asked for — we will see less growth in EVs than in the past. We see price erosion, and that's why we have decided to...
Speaker #1: Reduce the exposure on silicon-based inverter products and rather focus on silicon carbide. And take this IGBT capacity, then to fuel our AI business.
Speaker #1: The overall high power or high voltage business within automotive is now about projected to be around 10% of the automotive business . So we are .
Speaker #1: Focusing part of that business. But of course, the inverter and silicon carbide-based are— inverter clearly focused for the company, the.
Jochen Hanebeck: On the IGBT-based side, we have decided to go for a more margin-accretive path leading toward AI.
Jochen Hanebeck: On the IGBT-based side, we have decided to go for a more margin-accretive path leading toward AI.
Speaker #1: But on the IGBT side, we have decided to go for a more margin-accretive path, leading towards AI.
Alexander Duval: Thank you very much.
Alexander Duval: Thank you very much.
Operator: We now have a question from the line of Andrew Gardiner from Citi. Please go ahead.
Operator: We now have a question from the line of Andrew Gardiner from Citi. Please go ahead.
Speaker #10: Thank you very much .
Andrew Gardiner: Good morning, gentlemen. Thanks for taking the question. Another one on the AI side, if I could. I just, trying to sort of step back from what you have said in terms of being, supply constrained this year and that limiting the potential upside. I'm just wondering what you're hearing from the customers as to the relative degree of supply constraint across these products, across the market. I presume everybody is supply constrained, but I'm just wondering about your, let's say, your relative strength compared to the others. Even if you, even if you are supply constrained, are you in a, a relatively better position than some of the smaller peers, given your scale? And then also a quick clarifying question for you, Sven, on the cash flow guidance.
Andrew Gardiner: Good morning, gentlemen. Thanks for taking the question. Another one on the AI side, if I could. I just, trying to sort of step back from what you have said in terms of being, supply constrained this year and that limiting the potential upside. I'm just wondering what you're hearing from the customers as to the relative degree of supply constraint across these products, across the market. I presume everybody is supply constrained, but I'm just wondering about your, let's say, your relative strength compared to the others. Even if you, even if you are supply constrained, are you in a, a relatively better position than some of the smaller peers, given your scale? And then also a quick clarifying question for you, Sven, on the cash flow guidance.
Speaker #2: We now have a question from the line of Andrew Gardner from Citi. Please go ahead.
Speaker #11: Hi . Good morning , gentlemen . Thanks for taking the question . Another one on the AI side . If I could , just trying to sort of step back from what you have said in terms of being supply constrained this year and that potential limiting the upside , I'm just wondering what you're hearing from the customers as to the relative degree of supply constraint across these products , across the market .
Speaker #11: I everybody presume is supply constrained . I'm just wondering about your , let's say , your relative strength compared to the others . Even if you are supply constrained , are you in a relatively better position than some of the smaller peers given your scale ?
Andrew Gardiner: Operating profit, you've kept similar. You've raised CapEx by EUR 500 million, but you've only lowered the free cash flow by 200 on an adjusted basis, and 100 on a reported basis. What are the other moving parts within that, perhaps around working capital that is sort of causing the lesser impact at free cash flow? Thank you.
Andrew Gardiner: Operating profit, you've kept similar. You've raised CapEx by EUR 500 million, but you've only lowered the free cash flow by 200 on an adjusted basis, and 100 on a reported basis. What are the other moving parts within that, perhaps around working capital that is sort of causing the lesser impact at free cash flow? Thank you.
Speaker #11: And then also a quick clarifying question for you , Sven , on the cash flow guidance , operating profit you've kept similar . You've raised CapEx by 500 million , but you've only lowered the free cash flow by 200 on an adjusted basis and 100 on a reported basis .
Speaker #11: What are the other moving parts within that? Perhaps around working capital? That is causing the lesser impact at free cash flow?
Jochen Hanebeck: Yeah, on the Andrew, on the customer side, so first of all, I can repeat, all AI customers are basically interested now to engage with us on CRAs. I think we can update on the situation then in May, and they would not do this if they would get ample supply from other sources. Given Infineon's position in the power MOSFET market below 100 volts, I think it's safe to assume that, of course, they watch us. They watch our capability to supply, they watch our investments into more capacity.
Jochen Hanebeck: Yeah, on the Andrew, on the customer side, so first of all, I can repeat, all AI customers are basically interested now to engage with us on CRAs. I think we can update on the situation then in May, and they would not do this if they would get ample supply from other sources. Given Infineon's position in the power MOSFET market below 100 volts, I think it's safe to assume that, of course, they watch us. They watch our capability to supply, they watch our investments into more capacity.
Speaker #11: Thank you .
Speaker #1: On Yeah . the on the side . I , I can customer So first of all , repeat all I customers are basically interested now to engage with us on on on Cras .
Speaker #1: I think we can update on the situation then in May, and they would not do this if they would get ample supply from other sources.
Speaker #1: Given Infineon's position in the power mOSFET market , below 100 volt , I think it's safe to assume that , of course they watch us .
Jochen Hanebeck: And all of that is currently in discussions with relevant customers, how we can help them to not get into another bottleneck, as they have seen with other parts like memory. So very dynamic situation, and we will update here in May.
Speaker #1: They at our watch capability to supply . They watch at our investments into more capacity . And all of that is currently in discussions with relevant customers .
Jochen Hanebeck: And all of that is currently in discussions with relevant customers, how we can help them to not get into another bottleneck, as they have seen with other parts like memory. So very dynamic situation, and we will update here in May.
Speaker #1: How can we help them to not get into another bottleneck, as they have seen with other parts like memory? So, very dynamic situation, and we will update here in May.
Sven Schneider: Yeah, Andrew, thanks for the question. Again, spot on to the free cash flow. I mean, here are two answers to the question. Firstly, the spend, given the lead times of the equipment and the tools we are acquiring, means that some part of the additional invest in 2026 will probably only be paid in the beginning of next fiscal year. So that explains already part of the fact why not EUR 500 million lower free cash flow, which was your question. And secondly, to be very honest, it's an ambitious target to go to the 1 billion reported and 1.4 adjusted, given that we want to be as close as possible to the targets we have communicated so far.
Sven Schneider: Yeah, Andrew, thanks for the question. Again, spot on to the free cash flow. I mean, here are two answers to the question. Firstly, the spend, given the lead times of the equipment and the tools we are acquiring, means that some part of the additional invest in 2026 will probably only be paid in the beginning of next fiscal year. So that explains already part of the fact why not EUR 500 million lower free cash flow, which was your question. And secondly, to be very honest, it's an ambitious target to go to the 1 billion reported and 1.4 adjusted, given that we want to be as close as possible to the targets we have communicated so far.
Speaker #5: Yeah, Andrew, thanks for the question again. Spot on to the free cash flow. I mean, here are two answers to the question.
Speaker #5: Firstly , the spend given the lead times of of the equipment and the tools , we are we are acquiring means that some part of the additional invest in 26 will probably only be paid in the beginning of next fiscal year , so that explains part already of the fact .
Speaker #5: Why not 500 million lower free cash flow , which was your question . And secondly , to be very honest , ambitious it's an target to go to the to the 1 billion reported and 1.4 adjusted .
Sven Schneider: Yeah, that's not a walk in the park, but we are working on all areas, be it on investments, be it on inventory management, working capital, in order to support that. That, that's, that's the background behind the free cash flow target.
Sven Schneider: Yeah, that's not a walk in the park, but we are working on all areas, be it on investments, be it on inventory management, working capital, in order to support that. That, that's, that's the background behind the free cash flow target.
Speaker #5: Given that we want to be as close as possible to the targets we have communicated—not a walk in the park, but working so we are—that's in the far.
Speaker #5: Yeah , on all areas , be it on investments , be it on inventory management , working capital , in order to support that , that that's that's the behind background the cash flow free target .
Johannes Schaller: Thank you very much, both of you.
Andrew Gardiner: Thank you very much, both of you.
Operator: The next question comes from the line of Johannes Schaller from Deutsche Bank. Please go ahead.
Operator: The next question comes from the line of Johannes Schaller from Deutsche Bank. Please go ahead.
Speaker #11: Thank you very much, both of you.
Johannes Schaller: Yeah. Good morning. Thanks for taking my question. I wanted to zoom in a little bit more on the SDV side in automotive. Jochen, if I heard you correctly, I think you said that the demand in SDV is kind of compensating for the EV slowdown. I think Peter, end of last year, maybe more suggested a kind of gradual ramp over the course of this year with more momentum in the second half. So has anything changed here in terms of what you're seeing for timelines and the demand on the software-defined vehicle side? And then secondly, just on your sensor business now, I mean, you obviously regrouped the sensor assets. You now bought the AMS business. How should we think about your positioning in sensors for your end markets and, and also some future markets like robotics?
Johannes Schaller: Yeah. Good morning. Thanks for taking my question. I wanted to zoom in a little bit more on the SDV side in automotive. Jochen, if I heard you correctly, I think you said that the demand in SDV is kind of compensating for the EV slowdown. I think Peter, end of last year, maybe more suggested a kind of gradual ramp over the course of this year with more momentum in the second half. So has anything changed here in terms of what you're seeing for timelines and the demand on the software-defined vehicle side? And then secondly, just on your sensor business now, I mean, you obviously regrouped the sensor assets. You now bought the AMS business. How should we think about your positioning in sensors for your end markets and, and also some future markets like robotics?
Speaker #2: The next question comes from the line of Johannes Schaller from Deutsche Bank. Please go ahead.
Speaker #12: Yeah. Good morning. Thanks for taking my question. I wanted to zoom in a little bit more on the SDV side in automotive.
Speaker #12: If I heard you correctly , I think you said that the demand in SDV is kind of compensating for the EV slowdown , I think Peter , end of last year , maybe more suggested a kind of gradual ramp over the course of this year with more momentum in the second half .
Speaker #12: So has anything changed here in terms of what you're seeing for timelines and the demand on the software defined vehicle side ? And then secondly , just on your sensor business obviously you now , I mean , regrouped the sensor assets .
Speaker #12: You now bought the AMS business . How should we think about your positioning in sensors for your end markets ? And also some future markets like robotics ?
Johannes Schaller: Do you feel you're relatively well-positioned now, and maybe your M&A focus is shifting a little bit, or is there more to do here? Thank you.
Johannes Schaller: Do you feel you're relatively well-positioned now, and maybe your M&A focus is shifting a little bit, or is there more to do here? Thank you.
Speaker #12: Do you feel you’re relatively well positioned now, and maybe your M&A focus is shifting a little bit, or is there more to do here?
Jochen Hanebeck: Okay. So, Johannes, on the SDV ramps, you're correct. SDV ramps do not come by surprise. They are long-term planned. And I would not expect here within a year to see shifts. But the SDV ramps notionally, of course, fuel our revenue growth on the micro side, on the Ethernet side, on the power distribution side, all very good business. Whereas on the EV side, I mentioned the yeah, shortcomings in that area. On the sensor portfolio, we have taken a good step.
Jochen Hanebeck: Okay. So, Johannes, on the SDV ramps, you're correct. SDV ramps do not come by surprise. They are long-term planned. And I would not expect here within a year to see shifts. But the SDV ramps notionally, of course, fuel our revenue growth on the micro side, on the Ethernet side, on the power distribution side, all very good business. Whereas on the EV side, I mentioned the yeah, shortcomings in that area. On the sensor portfolio, we have taken a good step.
Speaker #12: Thank you .
Speaker #1: Okay , so Johan is on the SDV Rams . You're correct Stevie Rams do not come by surprise . There are long term planned and I would not expect here within a year to see shifts .
Speaker #1: But the STB ramps, notionally of course, fuel our revenue growth on the micro side, on the Ethernet side, on the power distribution side—all very good business.
Speaker #1: Whereas on the , I the EV mentioned . Yeah , shortcomings in that area on the . On the sensor portfolio , we have taken a good step .
Jochen Hanebeck: You have seen the slides depicting the very nicely complementary portfolio in terms of technologies being capacitive sensors, be it additional magnetic sensor, which are addressing applications we have not addressed yet within Infineon, and then, of course, the medical part. So sensors is for me an interesting area, but honestly a very an area where you really seldomly find an asset like we have found now with ams OSRAM. Typically, the valuations are very high. If you think about dedicated sensor players, they trade at up to 6 times revenue. We are buying here a business of 2.5 times of revenue.
Jochen Hanebeck: You have seen the slides depicting the very nicely complementary portfolio in terms of technologies being capacitive sensors, be it additional magnetic sensor, which are addressing applications we have not addressed yet within Infineon, and then, of course, the medical part. So sensors is for me an interesting area, but honestly a very an area where you really seldomly find an asset like we have found now with ams OSRAM. Typically, the valuations are very high. If you think about dedicated sensor players, they trade at up to 6 times revenue. We are buying here a business of 2.5 times of revenue.
Speaker #1: You have seen the slides depicting the very nicely complementary portfolio in terms of technologies being capacitive sensors, be it additional magnetic sensor, which are addressing applications we have not addressed yet within Infineon.
Speaker #1: And then of course , the medical part . So sensors keeps is , for me , an interesting area . But honestly , a very an area where you really seldomly like find have an now we with AMS , Osram .
Speaker #1: Typically the valuations are very high . If you think about dedicated sensor players , they trade at up to six times revenue . We are buying here a business of 2.5 times of revenue .
Jochen Hanebeck: So a unique opportunity, and that's why we decided to go for it. Again, any future acquisition needs to align with the three dimensions we have always talked about, strategic, functional, financially, and culturally. In this case, all tick marks, and future opportunities, we need to see how the market develops. But by now, 30% of our revenue is in the analog and sensor area, and that is even without the ams OSRAM. So I think we are building up here a very nice portfolio, and always aligned with our two major claims, being the leader in power systems and IoT.
Jochen Hanebeck: So a unique opportunity, and that's why we decided to go for it. Again, any future acquisition needs to align with the three dimensions we have always talked about, strategic, functional, financially, and culturally. In this case, all tick marks, and future opportunities, we need to see how the market develops. But by now, 30% of our revenue is in the analog and sensor area, and that is even without the ams OSRAM. So I think we are building up here a very nice portfolio, and always aligned with our two major claims, being the leader in power systems and IoT.
Speaker #1: So a unique opportunity and that's why we decided to go for it again . Any future acquisition needs to align with the three dimensions we have always talked about strategic , functional , financially and culturally in this case , all tick marks and future opportunities .
Speaker #1: We need to see how the market develops. But by now, 30% of our revenue is in the analog and sensor area.
Speaker #1: And that is even without the AMS, Osram. So I think we are building up here a nice, very varied portfolio and always aligned with our two major claims.
Jochen Hanebeck: So we are not buying assets across an area, but really targeted, and that helps here in this case a lot.
Jochen Hanebeck: So we are not buying assets across an area, but really targeted, and that helps here in this case a lot.
Speaker #1: Being the leader in power systems and IoT . So we are not buying assets across . An area , but really targeted and that helps here .
Johannes Schaller: Great. Thank you, Jochen.
Johannes Schaller: Great. Thank you, Jochen.
Operator: We now have a question from the line of Jacob Bluestone from BNP Paribas. Please go ahead.
Operator: We now have a question from the line of Jacob Bluestone from BNP Paribas. Please go ahead.
Speaker #1: In this case, a lot.
Speaker #12: Great, thank you, Johan.
Jacob Bluestone: Great. Thanks for taking the question. I had a question on industrial. I guess one of the sort of themes from the earnings season, listening to your peers, is the improvement in industrial, and that's not really what we've been hearing from you. And I appreciate there are differences in terms of product mix and how you allocate revenues as well between the different segments. But just interested in hearing your thoughts on what you're hearing from peers around industrial recovery versus, I guess, a sort of more stable message from you. And then I have a follow-up quickly after.
Jakob Bluestone: Great. Thanks for taking the question. I had a question on industrial. I guess one of the sort of themes from the earnings season, listening to your peers, is the improvement in industrial, and that's not really what we've been hearing from you. And I appreciate there are differences in terms of product mix and how you allocate revenues as well between the different segments. But just interested in hearing your thoughts on what you're hearing from peers around industrial recovery versus, I guess, a sort of more stable message from you. And then I have a follow-up quickly after.
Speaker #2: We now have a question from the line of Jakob Bluestone from BNP Paribas. Please go ahead.
Speaker #13: Great, thanks for taking the question. I had a question on industrial. I guess one of the sort of themes from the earnings season...
Speaker #13: Listening to your peers is the improvement in industrial , and that's not really what we've been hearing from you . And I . The differences in terms of product mix and how you allocate revenues as well between the different segments .
Speaker #13: hearing But just interested in your thoughts you're on hearing from peers around industrial recovery versus , I guess , a sort of more stable message from you .
Jochen Hanebeck: Yeah, thank you for the question. So indeed, our scope of industrial is slightly different. We have some business in automation, but that's not the big part. The big part is power infrastructure therein. The renewable part, the expectation is that in 2026, global installation of renewables will, in total volume, rather flatten off, and therefore will not contribute to a positive growth momentum. Whereas this subsection under power infrastructure, what we call grid infrastructure, that is clearly showing a strong growth already as we speak. But of course, it's only a share of the business. But we expect here, for years to come, demand matching also very nicely our capabilities in terms of high reliability solutions, and so on.
Jochen Hanebeck: Yeah, thank you for the question. So indeed, our scope of industrial is slightly different. We have some business in automation, but that's not the big part. The big part is power infrastructure therein. The renewable part, the expectation is that in 2026, global installation of renewables will, in total volume, rather flatten off, and therefore will not contribute to a positive growth momentum. Whereas this subsection under power infrastructure, what we call grid infrastructure, that is clearly showing a strong growth already as we speak. But of course, it's only a share of the business. But we expect here, for years to come, demand matching also very nicely our capabilities in terms of high reliability solutions, and so on.
Speaker #13: And then I have a follow-up quickly after.
Speaker #1: Yeah . Thank you for the question . So indeed , our scope of industrial is slightly different . We have some business and automation , but that's not the big part .
Speaker #1: The big part is power infrastructure . Therein . The renewable part , the is expectation that in 2026 , global installation of renewables will in in total volume rather flatten off .
Speaker #1: And therefore will not contribute to a positive growth momentum , whereas the subsection under power infrastructure , what we call grid infrastructure , that is clearly showing strong growth already as we speak .
Speaker #1: But of course, it's only a share of business. But we expect to be here for years to come. Demand is matching also very nicely.
Jochen Hanebeck: Whereas, PV, for example, there are some areas, like in the IGBT-based EV inverter, where we feel that the margin is less attractive. And we are also converting this IGBT capacity then towards AI in order to improve our margin profile.
Jochen Hanebeck: Whereas, PV, for example, there are some areas, like in the IGBT-based EV inverter, where we feel that the margin is less attractive. And we are also converting this IGBT capacity then towards AI in order to improve our margin profile.
Speaker #1: Our capabilities in terms of high reliability solutions and so on . Whereas PV , for example , there are some areas like in the Igbt based EV inverter where we feel that the margin is less attractive and we are also converting these Igbt capacity , then towards AI in order to improve our margin profile .
Jacob Bluestone: Thank you.
Jakob Bluestone: Thank you.
Jochen Hanebeck: On the grid infrastructure side, there are many interesting opportunities, ESS, solid-state transformer, solid-state circuit breakers, but they will play out in the mid-term, but very interesting stuff.
Jochen Hanebeck: On the grid infrastructure side, there are many interesting opportunities, ESS, solid-state transformer, solid-state circuit breakers, but they will play out in the mid-term, but very interesting stuff.
Speaker #1: And on the grid infrastructure side, there are many interesting opportunities: SS solid state transformer, solid state circuit breakers, but they will play out in the mid term.
Jacob Bluestone: Thank you. Then just a quick question on R&D. Your R&D's been sort of historically pretty steady at about EUR 550-ish per quarter, and then this quarter jumped quite sharply. Is that a sort of a lumpy one-off, or is this the new run rate for R&D spend?
Jakob Bluestone: Thank you. Then just a quick question on R&D. Your R&D's been sort of historically pretty steady at about EUR 550-ish per quarter, and then this quarter jumped quite sharply. Is that a sort of a lumpy one-off, or is this the new run rate for R&D spend?
Speaker #1: But very interesting stuff .
Speaker #13: Just a thank you. Now, quick question on R&D. Your R&D has been, sort of historically, pretty steady at about €550 million per quarter.
Speaker #13: And then this jumped quarter quite sharply. Is that a sort of a lumpy one-off, or is this the new run rate for R&D spend?
Sven Schneider: Look, Jacob, we—I think we are guiding nearly everything, not only a quarter for full fiscal year. We are now giving even revenue numbers for 27 for various rates. So, please understand that I do not now want to go into components of OpEx and guide them. As I said in the intro, I mean, there are very, very important innovation areas. This quarter, it was a lot about connectivity and software-defined vehicle and Ethernet. And if we see that, then we will invest the money. But I don't want to guide now a run rate. But, of course, that's clear. R&D needs to work within our target operating model, and that gives you, I think, some boundaries for what we are investing.
Sven Schneider: Look, Jacob, we—I think we are guiding nearly everything, not only a quarter for full fiscal year. We are now giving even revenue numbers for 27 for various rates. So, please understand that I do not now want to go into components of OpEx and guide them. As I said in the intro, I mean, there are very, very important innovation areas. This quarter, it was a lot about connectivity and software-defined vehicle and Ethernet. And if we see that, then we will invest the money. But I don't want to guide now a run rate. But, of course, that's clear. R&D needs to work within our target operating model, and that gives you, I think, some boundaries for what we are investing.
Speaker #5: Look, Jacob, I think we are guiding nearly everything, not only a quarter or the full fiscal year. We are now even giving revenue numbers for '27 at various rates.
Speaker #5: So please understand that I do not now want to go into components of OpEx and guide them . As I said in the intro , I mean , very , very there are important innovation areas .
Speaker #5: This this quarter , it was a lot about connectivity and and and software defined vehicle in Ethernet . And if we see that , then we will invest the money .
Speaker #5: But I want to guide now a run rate. But of course, that's clear. R&D needs to work within our target operating model.
Jochen Hanebeck: That was now the financial interpretation, and, and now comes the CEO, CTO, telling you that, of course, we are ramping up R&D in the AI space. I mean, that's obvious. To create such a revenue performance, we need also additional R&D. In the other areas, we are grosso modo rather stable, so not much on the hiring spree. And, of course, P&L effects like capitalization and funding also play a role in that regard.
Jochen Hanebeck: That was now the financial interpretation, and, and now comes the CEO, CTO, telling you that, of course, we are ramping up R&D in the AI space. I mean, that's obvious. To create such a revenue performance, we need also additional R&D. In the other areas, we are grosso modo rather stable, so not much on the hiring spree. And, of course, P&L effects like capitalization and funding also play a role in that regard.
Speaker #5: that gives you , I think , some And some boundaries for for what we are investing . .
Speaker #1: Now, that was the financial interpretation. And now comes the CEO, CTO telling you, of course, we are ramping up that in the R&D AI, that’s space.
Speaker #1: that's obvious . To I mean , create such a revenue performance , we need also additional R&D in the other areas we are gross motor rather stable .
Speaker #1: So, not on much of a hiring spree. And, of course, P&L effects like capitalization and funding also play a role in that regard.
Jacob Bluestone: Very clear. Thank you very much.
Jakob Bluestone: Very clear. Thank you very much.
Operator: The next question comes from the line of François Bouvignies from UBS. Please go ahead.
Operator: The next question comes from the line of François Bouvignies from UBS. Please go ahead.
Speaker #13: Clear. Thank you very, very much.
Speaker #14: Hi guys .
François Bouvignies: Thank you very much. I have two quick one. The first one is on the gross margin. I mean, quickly, Sven, if I look at your gross margin, I mean, 43% in Q1 is very strong. You get for low 40s. And if I look at your history, the 10 years history, you know, usually gross margin is up, you know, in H2 versus H1. In fact, it had only happened 2 that the gross margin was flat or lower, and it was during, you know, post-COVID, you know, margin under, or revenues under pressure. Otherwise, you know, consistently have higher gross margin.
François Bouvignies: Thank you very much. I have two quick one. The first one is on the gross margin. I mean, quickly, Sven, if I look at your gross margin, I mean, 43% in Q1 is very strong. You get for low 40s. And if I look at your history, the 10 years history, you know, usually gross margin is up, you know, in H2 versus H1. In fact, it had only happened 2 that the gross margin was flat or lower, and it was during, you know, post-COVID, you know, margin under, or revenues under pressure. Otherwise, you know, consistently have higher gross margin.
Speaker #2: question comes from The next the line of Francois Bouvignies from UBS . Please go ahead .
Speaker #15: Thank you very much . I have two quick ones . The first one is on the gross margin . I mean , quickly , Sven , if I look at your gross margin , I mean , 43% in Q1 is very strong .
Speaker #15: You guys for low 40s . And if I look at your history , the ten year history , you know , usually gross margin is up .
Speaker #15: You know , in H2 versus H1 . In fact , it had only happened twice . But the gross margin was flat or lower .
Speaker #15: And it was during , you know , post Covid , you know , margin on the revenues under pressure . Otherwise , you know , consistently have higher gross margin .
François Bouvignies: Based on what you said on the utilization rate or the unloading charges being flat through the year, H2 versus H1, I'm struggling to believe—not to believe, you know, like, that the gross margin will go up in H2. So I just wanted to have your perspective on that. My follow-up question is on the free cash flow. I mean, you obviously have this CapEx increasing, and you have this acquisition again. So all you see in terms of top-line recovery of the cycle plus the AI boom, when are we gonna see more free cash flow coming through? I mean, is 2027 a possible scenario after all this investment you are making right now ahead of it?
François Bouvignies: Based on what you said on the utilization rate or the unloading charges being flat through the year, H2 versus H1, I'm struggling to believe—not to believe, you know, like, that the gross margin will go up in H2. So I just wanted to have your perspective on that. My follow-up question is on the free cash flow. I mean, you obviously have this CapEx increasing, and you have this acquisition again. So all you see in terms of top-line recovery of the cycle plus the AI boom, when are we gonna see more free cash flow coming through? I mean, is 2027 a possible scenario after all this investment you are making right now ahead of it?
Speaker #15: And based on what you said on the utilization rate or the unloading charges being flat through the year, H2 versus H1, I'm struggling to believe, not to believe.
Speaker #15: You know, like that the gross margin will go up in H2. So, I just wanted to have your perspective on that.
Speaker #15: And my follow-up question is on flow. I mean, in cash, obviously you have this CapEx increasing and you have this acquisition again.
Speaker #15: So, all you see in terms of top-line recovery of the cycle, plus the AI boom, when are we going to see more free cash flow coming through?
François Bouvignies: Just to understand a bit, maybe the free cash flow dynamic to unlock what you see on the top line and margins.
François Bouvignies: Just to understand a bit, maybe the free cash flow dynamic to unlock what you see on the top line and margins.
Speaker #15: I mean , if 27 a possible scenario . After all this investment you are making right now ahead of it , just to understand a bit , maybe the free cash flow dynamic to unlock what you see on the top line and margins .
Sven Schneider: ... Yeah, thank you, François. I mean, on the, on the gross margin, I do not disagree with your statement to the historic patterns. They are, as you describe, and in, in normal years where you have the seasonally weakest quarter in terms of revenue in Q1, then usually you have the prices kicking in in Q2, and then you have a stronger second half, then this is, I think, a normal consequence. And I would not say that this year should be very different, but we also mentioned that there are some other things at play, like the US dollar, like the commodities, like the price increases Andreas was talking about. And now it really depends on when they will kick in, and then we can jointly look again at the gross margin development.
Sven Schneider: ... Yeah, thank you, François. I mean, on the, on the gross margin, I do not disagree with your statement to the historic patterns. They are, as you describe, and in, in normal years where you have the seasonally weakest quarter in terms of revenue in Q1, then usually you have the prices kicking in in Q2, and then you have a stronger second half, then this is, I think, a normal consequence. And I would not say that this year should be very different, but we also mentioned that there are some other things at play, like the US dollar, like the commodities, like the price increases Andreas was talking about. And now it really depends on when they will kick in, and then we can jointly look again at the gross margin development.
Speaker #5: Yeah . Thank you Francois . I mean , on the on the gross margin . I do not disagree with statement to the your historic patterns .
Speaker #5: They are, as you describe, and in normal years, where you have the seasonally weakest quarter in terms of revenue in Q1, then usually you have the prices kicking in in Q2, and then you have a stronger second half than this is.
Speaker #5: I think , a normal consequence . And I would not say that this year should be very different , but we also mentioned that there are some other things at play , like the dollar , like the commodities , like the price increases .
Speaker #5: Andreas was talking about it, and now it really depends on when they will kick in. And then we can jointly look again at the gross margin development for the free cash flow.
Sven Schneider: For the free cash flow, I mean, yes, it is this year, as I said already before, it's tight, given that, it's a year where many things come together. The non-AI business is not growing at the pace we wish it to be, given that the uncertainties remain, we call it the gradual and uneven recovery. Number two, we are investing into Dresden Module 4 and wide bandgap in Kulim, at the same time, and now we pull in AI investments. If you take all that together and we are still at the lower end of our CapEx free cash flow range, I think that shows the resilience and the attention we are paying now, asking for 27.
Sven Schneider: For the free cash flow, I mean, yes, it is this year, as I said already before, it's tight, given that, it's a year where many things come together. The non-AI business is not growing at the pace we wish it to be, given that the uncertainties remain, we call it the gradual and uneven recovery. Number two, we are investing into Dresden Module 4 and wide bandgap in Kulim, at the same time, and now we pull in AI investments. If you take all that together and we are still at the lower end of our CapEx free cash flow range, I think that shows the resilience and the attention we are paying now, asking for 27.
Speaker #5: I mean , yes , it is this year as we as I said already before , it's tight . Given that year it's a where many things come together , the non-ai business is is not growing at the pace we wish it to be .
Speaker #5: Given that the uncertainties remain, we call it the gradual and uneven recovery. Number two, we are investing into Dresden module four and wide bandgap and cooling at the same time.
Speaker #5: the And now we pull in AI investments . If you take all that together and we are still at the lower end of our CapEx , free cash flow range , I think that shows the resilience and the attention we are paying now .
Sven Schneider: Of course, if you paint a picture, just taking consensus numbers, that growth will be stronger next year, then there is, of course, a possibility that we will not stay at 150 days inventory levels for a long time. And of course, that would be very positive also for the free cash flow. I, I would probably stop there.
Sven Schneider: Of course, if you paint a picture, just taking consensus numbers, that growth will be stronger next year, then there is, of course, a possibility that we will not stay at 150 days inventory levels for a long time. And of course, that would be very positive also for the free cash flow. I, I would probably stop there.
Speaker #5: Asking for 27. Of course, if you paint a picture just taking consensus numbers, that growth will be stronger next year.
Speaker #5: Then there is , of course , a possibility that we will not stay at 150 days . Inventory levels for a long time .
Speaker #5: And of course , that would be a very positive . Also for the free cash flow , I would probably stop there .
Jochen Hanebeck: Yeah. And besides the inventory for next year, of course, then it will depend on our outlook for the following fiscal year. That is then already, what is it? 2028 fiscal year on AI. So if this boom continues, we will definitely want to participate in that boom as it is highly accretive revenue. So too early to really predict, but I would say, inventories related to especially automotive recovery, as well as further AI investments beyond the EUR 2.5 billion, will determine the free cash flow for the next fiscal year.
Jochen Hanebeck: Yeah. And besides the inventory for next year, of course, then it will depend on our outlook for the following fiscal year. That is then already, what is it? 2028 fiscal year on AI. So if this boom continues, we will definitely want to participate in that boom as it is highly accretive revenue. So too early to really predict, but I would say, inventories related to especially automotive recovery, as well as further AI investments beyond the EUR 2.5 billion, will determine the free cash flow for the next fiscal year.
Speaker #1: Yeah. And besides the inventory for next year, of course, then it will depend on our outlook for the following fiscal year.
Speaker #1: That is then already what is it , 2028 fiscal on year AI . So if this boom continues , we will definitely want to participate in that boom as it is highly accretive revenue .
Speaker #1: So, too early to really predict. But I would say inventories related to especially automotive recovery, as well as further AI investments beyond the $2.5 billion, will determine the free cash flow for the next fiscal year.
Andrew Gardiner: Thank you very much.
François Bouvignies: Thank you very much.
Jochen Hanebeck: Thanks, everyone. Ladies and gentlemen, after generous overtime, it's now the final whistle on our Q1 earnings call. Any further questions, please feel free to contact the investor relations team. Take care and have a good day.
Alexander Foltin: Thanks, everyone. Ladies and gentlemen, after generous overtime, it's now the final whistle on our Q1 earnings call. Any further questions, please feel free to contact the investor relations team. Take care and have a good day.
Speaker #15: Thank you very much .
Speaker #7: Thanks , everyone . Ladies and gentlemen , after overtime , it's now the final on our Q1 earnings call . Any further questions , please feel free to contact the Investor Relations team .
