Q2 2027 Semtech Corp Earnings Call

August 25, 2026

Speaker #1: To Cemtex Q2 2027 financial results conference call. Participants on today's conference call are Hong Ho, President and Chief Executive Officer, and Mark Lin, Executive Vice President and Chief Financial Officer.

Speaker #1: Before we begin the prepared remarks, I would like to highlight upcoming investor events including the Citibank Global TMT Conference on September 8, and the Benchmark TMT and JP Morgan Rising Tech Leaders Forum, both on September 10 in New York City.

Speaker #1: In addition, we hope you'll attend our investor event in San Jose on October 15, during which we'll provide an in-depth overview of Cemtex strategy, differentiated technology portfolio, key growth opportunities and long-term financial targets.

Speaker #1: Good day, and thank you for standing by. Welcome to Semtech Corp's second quarter 2027 earnings conference call. At this time, all participants are on a listen-only mode.

Speaker #1: Following our prepared remarks, there will be a question-and-answer session. Please be advised that today's conference call is being recorded. I would now like to hand the conference over to Mitch Haws, Senior Vice President of Investor Relations for Semtech.

Speaker #1: The event will also feature panel discussion, moderated by Morgan Stanley, with industry luminaries from the 650 Group, Meta, and General Catalyst. A question-and-answer session, product demonstration, and opportunities for in-person attendees to engage with members of the Cemtech management will also be part of the agenda.

Speaker #1: Please go ahead.

Speaker #2: Thank you, and welcome to SEMTECH's second quarter 2027 financial results conference call. Participants on today's call are Hong Hou, President and Chief Executive Officer; and Mark Lin, Executive Vice President and Chief Financial Officer.

Speaker #1: Today, after the market close, we released our unaudited results for the Q2 end of July 26, 2026, which are posted along with an earnings call presentation, to our investor relations website at investors.cemtech.com.

Speaker #2: Before we begin the prepared remarks, I would like to highlight upcoming investor events, including the Citibank Global TMT Conference on September 8, and the Benchmark TMT and J.P. Morgan Rising Tech Leaders Forum, both on September 10 in New York City.

Speaker #1: Today's call will include various remarks about future expectations, plans and prospects, which comprise forward-looking statements. Please refer to today's press release and see slide 2 of the earnings presentation, as well as the risk factors section of our most recent annual report on Form 10-K, for a number of risk factors that could cause our actual results and events to differ materially from those anticipated or projected on today's call.

Speaker #2: In addition, we hope you'll attend our investor event in San Jose on October 15, during which we'll provide an in-depth overview of Semtech's strategy, differentiated technology portfolio, key growth opportunities, and long-term financial targets.

Speaker #1: You should consider these risk factors in conjunction with our other forward-looking statements. We will refer primarily to non-gap financial measures during today's call, and we'll also be referring to results for our Q2 of fiscal year 2027 unless otherwise noted.

Speaker #2: The event will also feature a panel discussion, moderated by Morgan Stanley, with industry luminaries from 650 Group, Meta, and General Catalyst. A question-and-answer session, product demonstration, and opportunities for in-person attendees to engage with members of the Semtech management team will also be part of the agenda.

Speaker #1: Please see today's press release and slides 3 and 4 of the earnings presentation for information regarding notes on our non-gap financial presentation. The press release and earnings presentation also include reconciliations of our gap and non-gap financial measures.

Speaker #2: Today, after the market close, we released our unaudited results for the second quarter ended July 26, 2026, which are posted along with an earnings call presentation to our investor relations website at investors.semtech.com.

Speaker #1: With that, I will turn the call over to Hong.

Speaker #2: Today's call will include various remarks about future expectations, plans, and prospects, which comprise forward-looking statements. Please refer to today's press release and see slide 2 of the earnings presentation, as well as the risk factors section of our most recent annual report on Form 10-K, for a number of risk factors that could cause our actual results and events to differ materially from those anticipated or projected on today's call.

Speaker #2: Thank you, Mitch. Good afternoon to all of you joining today. The Cemtech team executed exceptionally well this quarter, delivering record revenue across all key focus areas: earnings, leverage, debt continue to outpace revenue growth, and a significant progress on portfolio optimization.

Speaker #2: Revenue was $342 million, growing 33% year over year, and we delivered strong operating leverage with earnings per share of $71, growing 73% year over year, more than twice as fast as revenue growth.

Speaker #2: You should consider these risk factors in conjunction with our other forward-looking statements. We will refer primarily to non-GAAP financial measures during today's call, and we'll also be referring to results for our second quarter of fiscal year 2027, unless otherwise noted.

Speaker #2: Please see today's press release and slides 3 and 4 of the earnings presentation for information regarding notes on our non-GAAP financial presentation. The press release and earnings presentation also include reconciliations of our GAAP and non-GAAP financial measures.

Speaker #2: We are the center of one of the most significant infrastructure build-outs in history, and our portfolio plays an essential role: we are well-aligned with the ramp-to-1.60, complementing 800-gig growth, and demand signals that we are strengthening across every part of data center portfolio, copper, fabric, and photonics.

Speaker #1: With that.

Speaker #2: I will turn the call over to Hong.

Speaker #3: Thank you, Mitch. Good afternoon to all of you joining today. The Semtech team executed exceptionally well this quarter, delivering record revenue across all key focus areas, earnings leverage that continues to outpace revenue growth, and significant progress on portfolio optimization.

Speaker #2: We expect this momentum to carry through the second half of the year and into fiscal 2028. We're also reshaping Cemtech with purpose. The announced sale of our cellular module business is a significant step in our portfolio optimization, allowing us to more sharply focus on our core growth areas.

Speaker #3: Revenue was $342 million, growing 33% year over year, and we delivered strong operating leverage, with earnings per share of $0.71, growing 73% year over year—more than twice as fast as revenue growth.

Speaker #2: We are growing in our focus areas: sharpening the portfolio and driving operating leverage with the same goal in mind. Building a predictable high margin and high return business.

Speaker #3: We are at the center of one of the most significant infrastructure build-outs in history, and our portfolio plays an essential role. We are well-aligned with the ramp to $1.60, complementing the $800 gig growth, and seeing demand signals that are strengthening across every part of our data center portfolio.

Speaker #2: Now, let me move on a discussion to our end market. Infrastructure net sales were $124 million, up 25% sequentially, and $69% year over year.

Speaker #2: Driven by outstanding performance in our data center business. Data center revenue was a record $100 million, up 39% sequentially and 91% year over year.

Speaker #3: Copper, fiber, and photonics—we expect this momentum to carry through the second half of the year and into fiscal 2028. We're also reshaping Semtech with purpose.

Speaker #2: Supported by continued strength in 800-gig 1.60 copper edge and the start of a 1.60 fiber edge ramp. Our fiber edge TIA and drivers solutions remaining exceptionally strong demand.

Speaker #3: The announced sale of our cellular module business is a significant step in our portfolio optimization, allowing us to focus more sharply on our core growth areas.

Speaker #2: And we continue to deepen our engagement across all the leading hyperscalers, we are now designing to every module provider in our target markets. Several on our sole source basis.

Speaker #3: We are growing in our focus areas, sharpening the portfolio, and driving operating leverage with the same goal in mind—building a predictable, high-margin, and high-return business.

Speaker #3: Now, let me move on to a discussion of our end market. Infrastructure net sales were $124 million, up 25% sequentially and 69% year over year.

Speaker #2: A reflection of a technology differentiation and the supply availability we bring across both fully re-timed and a linear. Architectures. We're also seeing increasing engagement from a broader array of customers on emerging technologies like MPO and XPO, and a networking ecosystem looks to us to align and help define the next generation of high-density low-power optical architectures in our shared technology roadmap.

Speaker #3: Driven by outstanding performance in our data center business. Data center revenue was a record $100 million, up 39% sequentially and 91% year over year.

Speaker #3: Supported by continued strength in 800 gig, $1.60 copper edge, and the start of a $1.60 fiber edge ramp. Our fiber edge TIA and driver solutions remain in exceptionally strong demand.

Speaker #2: On copper edge, we believe our linear equalizer solutions are the de facto industry standard. Copper edge products up to 1.60 are solutions that are ready for volume deployment.

Speaker #3: And we continue to deepen our engagement across all the leading hyperscalers. We are now designing into every module provider in our target markets, several on a sole source basis.

Speaker #2: We are currently engaging across a number of hyperscalers in cable and onboard applications and in design interface at all bandwidth up to 3.2T. Thanks to linear equalizers, compelling advantage in link margin performance and power savings.

Speaker #3: A reflection of a technology differentiation and the supply availability we bring across both fully retimed and linear architectures. We're also seeing increasing engagement from a broader array of customers on emerging technologies like MPO and XPO, and a networking ecosystem looks to us to align and help define the next generation of high-density, low-power optical architectures in our shared technology roadmap.

Speaker #2: Based on strong market demand and a design win momentum, we expect continued revenue growth of a 1.60 portfolio, with the fiber edge expected to exceed 50% market share by the end of the fiscal year and the copper edge already taking the lines share of the linear equalizer market.

Speaker #2: We have made excellent progress in our photonic portfolio, broadening our customer base in both gain chips and high-power CW lasers, addressing both high-speed transceivers and CPO scale-up applications.

Speaker #3: On copper edge, we believe our linear equalizer solutions are the de facto industry standard. Copper edge products up to $1.60 are solutions that are ready for volume deployment.

Speaker #3: We are currently engaging across a number of hyperscalers in cable and onboard applications, and in design interface at all bandwidths up to 3.2T. Thanks to linear equalizers, we offer a compelling advantage in link margin performance and power savings.

Speaker #2: Feedback from customer evaluations of our high-power CW laser for coherent light and 1.60 transceiver applications has been very positive. Citing differentiating over temperature performance and the power efficiency.

Speaker #2: We expect revenue contribution of CW lasers for transceivers to start in the first half of fiscal 2028. We're also pleased to have brought onboard photo diode design resources, headed by an industry leader, expanding our photonic portfolio to PD arrays in the near future.

Speaker #3: Based on strong market demand and design win momentum, we expect continued revenue growth of our $1.60 portfolio, with the fiber edge expected to exceed 50% market share by the end of the fiscal year, and the copper edge already taking the lion's share of the linear equalizer market.

Speaker #2: Our combined PD and TIA design team has already engaged with the key customers and we expect to deliver co-optimized high-performance solutions. Our photonic portfolio now spans gain chips, high-power lasers, semiconductor optical amplifiers, and high-speed photo diodes, for scale-up, scale-out, and scale across data center connectivity applications.

Speaker #3: We have made excellent progress in our photonic portfolio, broadening our customer base in both gain chips and high-power CW lasers, addressing both high-speed transceivers and CPO scale-up applications.

Speaker #3: Feedback from customer evaluations of our high-power CW laser for coherent light and 1.6T transceiver applications has been very positive, citing differentiating over-temperature performance and power efficiency.

Speaker #2: With this expanded portfolio, we are positioned to develop new growth drivers and grow our content per transceiver from high single-digit dollars to high double-digit dollars at the industry transitions from 800-gig to 3.2T, cementing our position as a true solution provider.

Speaker #3: We expect revenue contribution from CW lasers for transceivers to start in the first half of fiscal 2028. We're also pleased to have brought onboard photodiode design resources, headed by an industry leader, expanding our photonic portfolio to PD arrays in the near future.

Speaker #2: Our capacity expansion plan, our team executed very well, securing equipment deliveries for this fiscal year and acquiring clean room space to fulfill strong customer demand.

Speaker #3: Our combined PD and TIA design team has already engaged with key customers, and we expect to deliver co-optimized, high-performance solutions. Our photonic portfolio now spans gain chips, high-power lasers, semiconductor optical amplifiers, and high-speed photodiodes for scale-up, scale-out, and scale-across data center connectivity applications.

Speaker #2: In less than 6 months, we completed a series of photonic acquisitions procured fab equipment, expanded clean room space, and onboarded exceptional management and technical talent.

Speaker #2: We have established a solid foothold in the photonic space and set the path for strong future growth. Given record backlog we carry into the third quarter, we project a 45% sequential revenue growth in data center, representing approximately $160% growth over the same period last year.

Speaker #3: With this expanded portfolio, we are positioned to develop new growth drivers and grow our content per transceiver from high single-digit dollars to high double-digit dollars as the industry transitions from $800 gig to $3.2T, cementing our position as a true solution provider.

Speaker #2: We expect accelerating year-over-year growth into fourth quarter and continued momentum throughout fiscal 2028. Now, moving to our high-end consumer end market. Net sales for Q2 were $39 million, up 2% sequentially and down 5% year over year.

Speaker #3: Our capacity expansion plan—our team executed very well, securing equipment deliveries for this fiscal year and acquiring clean room space to fulfill strong customer demand.

Speaker #3: In less than six months, we completed a series of photonic acquisitions, procured fab equipment, expanded clean room space, and onboarded exceptional management and technical talent.

Speaker #2: Our TVS business grew sequentially and remains very resilient in light of memory-constrained pricing across the industry. Revenue growth continued to benefit from our strong share at a premium brand handset manufacturers.

Speaker #3: We have established a solid foothold in the photonic space and set the path for strong future growth. Given the record backlog we carry into the third quarter, we project a 45% sequential revenue growth in data center, representing approximately 160% growth over the same period last year.

Speaker #2: Where we are expanding our content per device. Shared switch our newest circuit protection solution is opening a new layer of TVS opportunity. Addressing a gap at the rugged mobile devices and high-performance portable systems pushed towards more demanding power and reliability standards.

Speaker #3: We expect accelerating year-over-year growth into the fourth quarter and continued momentum throughout fiscal 2028. Now, moving to our high-end consumer end market. Net sales for Q2 were $39 million, up 2% sequentially and down 5% year over year.

Speaker #2: Our per se capacity sensor design and pipeline continues to grow in specific absorption rate smart variable and other consumer applications, expanding with the lead customers on a broadening range of applications.

Speaker #2: The combined capacitive and force sensing offerings elevate our value proposition, strengthen customer retention, and pooling through sensors and TVS sales within the same customer base.

Speaker #3: Our TVS business grew sequentially and remains very resilient in light of memory constraint pressure across the industry. Revenue growth continued to benefit from our strong share at premium brand handset manufacturers.

Speaker #2: We expect our design win pipeline to support the long-term growth for this business. Now, moving to our industrial end market. Q2 industrial net sales were $179 million.

Speaker #3: We are expanding our content per device. Shared Switch, our newest circuit protection solution, is opening a new layer of TVS opportunity—addressing a gap as rugged mobile devices and high-performance portable systems are pushed toward more demanding power and reliability standards.

Speaker #2: Up 16% sequentially and up 25% year over year. Driven by another record quarter for LoRa. a. LoRa enabled net sales were $58 million, up 31% sequentially and up 58% year over year, another all-time record.

Speaker #3: Our per se capacity sensor design and pipeline continue to grow in specific absorption rate, smart variable, and other consumer applications, expanding with the lead customers on a broadening range of applications.

Speaker #2: Our LoRa Gen 4 platform with a LoRa Plus other RF protocols continues to gain market traction. And we expect it will be key driver for the future growth.

Speaker #3: The combined capacitive and force sensing offerings elevate our value proposition, strengthen customer retention, and enable pooling through sensors and TVS sales within the same customer base.

Speaker #2: Gen 4 also delivers dual-band capability and expands data throughput to 2.6 megabit per second, while preserving the sensitivity multi-protocol flexibility and ultra-low power consumption that defines a LoRa advantage.

Speaker #3: We expect our design win pipeline to support long-term growth for this business. Now, moving to our industrial end market—Q2 industrial net sales were $179 million.

Speaker #2: This feature set enables new class of edge AI applications, while maintaining the long battery life and extended reach that our customers depend on. And opens up a incremental application verticals within smart home and security.

Speaker #3: Up 16% sequentially and up 25% year over year, driven by another record quarter for LoRa. LoRa-enabled net sales were $58 million, up 31% sequentially and up 58% year over year—another all-time record.

Speaker #2: We also continue to see LoRaWAN expand into new use cases. In public safety, sensors can now transmit high-fidelity audio for AI-based verification rather than simple alerts.

Speaker #3: Our LoRa Gen 4 platform, which combines LoRa with other RF protocols, continues to gain market traction, and we expect it will be a key driver for future growth.

Speaker #2: And in industrial environments, our work with industry leaders demonstrates how LoRaWAN and edge AI together enable predictive maintenance at a level of the detail that legacy low-power sensors could not support.

Speaker #3: Gen 4 also delivers dual-band capability and expands data throughput to 2.6 megabits per second, while preserving the sensitivity, multi-protocol flexibility, and ultra-low power consumption that define a LoRa advantage.

Speaker #2: Amazon sidewalk continues to build momentum. Following Rin's launch of a new line of LoRa-based sensors in the US, Sidewalk is now expanding internationally, starting with Canada and Mexico, with Europe, Australia, and Japan expected to follow.

Speaker #3: This feature set enables a new class of edge AI applications, while maintaining the long battery life and extended reach that our customers depend on, and opens up incremental application verticals within smart home and security.

Speaker #2: This is a meaningful step towards mass market consumer adoption at Amazon's scale. Together, our three pillars LoRaWAN for industrial or commercial deployments, LoRa Plus with a multi-protocol flexibility for smart home and security, and the Amazon sidewalk for mass market consumer applications continue to create a solid framework for growth.

Speaker #3: We also continue to see LoRaWAN expand into new use cases. In public safety, sensors can now transmit high-fidelity audio for AI-based verification rather than simple alerts.

Speaker #3: And in industrial environments, our work with industry leaders demonstrates how LoRaWAN and edge AI, together, enable predictive maintenance at a level of detail that legacy low-power sensors could not support.

Speaker #2: We project another all-time high for LoRa revenue in Q3, with a growth of about 15% sequentially equating to year-over-year growth about 65%. Our IoT systems and connectivity business recorded Q2 net sales of $98 million, up 11% sequentially and year over year.

Speaker #3: Amazon Sidewalk continues to build momentum. Following Ring's launch of a new line of LoRa-based sensors in the U.S., Sidewalk is now expanding internationally, starting with Canada and Mexico, with Europe, Australia, and Japan expected to follow.

Speaker #2: Our air linked routers saw strong new business activity across mission-critical applications, driven by growing engagement with the national carrier partners on 5G standalone networks slicing.

Speaker #3: This is a meaningful step towards mass market consumer adoption at Amazon's scale. Together, our three pillars—LoRaWAN for industrial or commercial deployments, LoRa Plus with multi-protocol flexibility for smart home and security, and the Amazon Sidewalk for mass market consumer applications—continue to create a solid framework for growth.

Speaker #2: This momentum was reinforced by our RX 400 and EX 400 5G red-capped routers moving into full-scale production this quarter. With Rin's continued to convert into shipment across a broad range of customers, we also continue to invest in air linked software platform to provide new security and device management capabilities.

Speaker #3: We project another all-time high for LoRa revenue in Q3, with growth of about 15% sequentially, equating to year-over-year growth of about 65%. Our IoT systems and connectivity business recorded Q2 net sales of $98 million, up 11% sequentially and year over year.

Speaker #2: This capabilities are giving mission-critical customers greater visibility and control as they manage larger more complex deployments. Reflecting our broader commitment to software R&D as a way to deliver more capability and values to our customers over time.

Speaker #3: Our AirLink routers saw strong new business activity across mission-critical applications, driven by growing engagement with national carrier partners on 5G standalone network slicing.

Speaker #2: In summary, our second quarter results reflect a significant progress in Semtex transformation, including a strong winning culture. But to be clear, the progress we are making is just the foundation.

Speaker #3: This momentum was reinforced by our RX 400 and EX 400 5G Red Cap routers moving into full-scale production this quarter, with wins continuing to convert into shipments across a broad range of customers.

Speaker #2: Not a finish line. Our priorities for fiscal 2027 remain the same and are straightforward. First, supporting our unprecedented backlog and a drilled opportunities. We are actively securing incremental capacity for fiscal 2028 and beyond.

Speaker #3: We also continue to invest in AirLink's software platform to provide new security and device management capabilities. These capabilities are giving mission-critical customers greater visibility and control as they manage larger, more complex deployments.

Speaker #2: Second, intensifying R&D investment to support customer technology roadmaps in a rapidly advancing market and adding new growth drivers specifically in solution offerings for lasers, photo diodes, drivers, and TIAs for 3.2T coherent light, XPO, MPO, and CPO applications.

Speaker #3: Reflecting our broader commitment to software R&D as a way to deliver more capability and value to our customers over time. In summary, our second quarter results reflect significant progress in Semtech's transformation, including a strong, winning culture.

Speaker #2: And third, continuing portfolio optimization. We see this as a continuous journey and there's more work ahead of us as we reshape Semtech. This is a such an exciting time for Semtech.

Speaker #3: But to be clear, the progress we are making is just the foundation, not a finish line. Our priorities for fiscal 2027 remain the same and are straightforward.

Speaker #2: The business is just starting to inflect and the opportunities ahead has never been more compelling. With that, I will turn the call over to Mark for additional details on our financial results and our third quarter outlook.

Speaker #3: First, supporting our unprecedented backlog and growth opportunities. We are actively securing incremental capacity for fiscal 2028 and beyond. Second, intensifying R&D investment to support customer technology roadmaps in a rapidly advancing market, and then adding new growth drivers, specifically in solution offerings for lasers, photodiodes, drivers, and TIAs for 3.2T coherent light, XPO, MPO, and CPO applications.

Speaker #2: Mark,

Speaker #1: Thank you, Hong. For Q2, we recorded our 10th consecutive quarter of net sales growth with record net sales of $342 million. Above the high end of our outlook range.

Speaker #1: Net sales grew 17% sequentially and 33% year over year. Reflective of leverage in our operating model, we reported adjusted diluted earnings per share of $71.

Speaker #1: Which increased at over two times the rate of net sales growth on both the sequential and year-over-year basis. Net sales trends by end market, reportable segment, and geographic region are included in the accompanying earnings presentation.

Speaker #3: And third, continuing portfolio optimization. We see this as a continuous journey, and there's more work ahead of us as we reshape Semtech. This is such an exciting time for Semtech.

Speaker #1: Adjusted gross margin was $54.5%, up 150 basis points sequentially, and at the high end of our outlook. Total semiconductor products gross margin was $62.8%, up 210 basis points sequentially, and above the high end of our outlook.

Speaker #3: The business is just starting to inflect, and the opportunities ahead have never been more compelling. With that, I will turn the call over to Mark for additional details on our financial results and our third quarter outlook.

Speaker #1: Reflecting particularly strong contribution from $1.60 fiber edge and copper edge, and continued growth from our LoRa portfolio. We announced the signing of a definitive agreement to divest our cellular module business, which is recorded as held for sale on the Q2 balance sheet.

Speaker #3: Mark.

Speaker #2: Thank you, Hong. For Q2, we recorded our 10th consecutive quarter of net sales growth, with record net sales of $342 million—above the high end of our outlook range.

Speaker #1: To facilitate comparability for our go forward business, we added an adjusted gross margin disclosure in our earnings release and earnings presentation that excludes the held for sale business.

Speaker #2: Net sales grew 17% sequentially and 33% year over year. Reflective of leverage in our operating model, we reported adjusted diluted earnings per share of $0.71, which increased at over two times the rate of net sales growth on both the sequential and year-over-year basis.

Speaker #1: Excluding the cellular module business, Q2 adjusted gross margin was $59.7%, or $520 basis points, above consolidated gross margin. Reflecting the magnitude of the structural shift on top of the $150 basis points of sequential consolidated gross margin improvement.

Speaker #2: Net sales trends by end market, reportable segment, and geographic region are included in the accompanying earnings presentation. Adjusted gross margin was 54.5%, up 150 basis points sequentially, and at the high end of our outlook.

Speaker #1: We expect to provide a gross margin outlook including and excluding the cellular module business until the close of the divestiture, which is expected to occur in the fourth quarter of the current fiscal year.

Speaker #2: Total semiconductor products gross margin was 62.8%, up 210 basis points sequentially and above the high end of our outlook, reflecting particularly strong contributions from 1.6T FiberEdge and CopperEdge, and continued growth from our LoRa portfolio.

Speaker #1: We also expect the transaction to be EPS neutral on a non-gap basis. Adjusted net operating expenses were $103 million, below the low end of our guidance range, reflecting timing of project related expenses.

Speaker #2: We announced the signing of a definitive agreement to divest our cellular module business, which is recorded as held for sale on the Q2 balance sheet.

Speaker #1: Demonstrating the operating leverage in our business, a number of metrics were favorable to the high end of our guidance range, including adjusted operating income of $84 million, adjusted operating margin of $24.4%, adjusted EBITDA of $91 million, and adjusted EBITDA margin of $26.6%.

Speaker #2: To facilitate comparability for our go-forward business, we added an adjusted gross margin disclosure in our earnings release and earnings presentation that excludes the held-for-sale business.

Speaker #2: Excluding the cellular module business, Q2 adjusted gross margin was 59.7%, or 520 basis points above consolidated gross margin, reflecting the magnitude of the structural shift on top of the 150 basis points of sequential consolidated gross margin improvement.

Speaker #1: Reflective of capital structure changes, Semtech remained in a net interest income position in Q2. We recorded adjusted diluted earnings per share of $71, above the high end of our guidance range, up 39% sequentially, and up 73% year over year.

Speaker #2: We expect to provide a gross margin outlook, including and excluding the cellular module business, until the close of the divestiture, which is expected to occur in the fourth quarter of the current fiscal year.

Speaker #1: Operating cash flow for Q2 was $69 million, up 90% sequentially from $36 million, and up 55% from $44 million a year ago. Free cash flow for Q2 was $61 million.

Speaker #2: We also expect the transaction to be EPS-neutral on a non-GAAP basis. Adjusted net operating expenses were $103 million, below the low end of our guidance range, reflecting timing of project-related expenses.

Speaker #1: Up $119% sequentially from $28 million and up 48% from $42 million a year ago. Capex was 2% of net sales, and includes expenditures to grow fab capacity supporting gain ships and CW lasers.

Speaker #2: Demonstrating the operating leverage in our business, a number of metrics were favorable to the high end of our guidance range, including adjusted operating income of $84 million, adjusted operating margin of 24.4%, adjusted EBITDA of $91 million, and adjusted EBITDA margin of 26.6%.

Speaker #1: We expect capex to grow as a percentage of sales but to remain manageable and generally be below 5% of net sales. Though timing of construction and equipment delivery could increase this percentage slightly on a single quarter basis.

Speaker #1: Our Q2 ending cash and cash equivalence balance was $204 million, and the principal amount of debt was $503 million. And net leverage ratio was 1.1.

Speaker #2: Reflective of capital structure changes, Semtech remained in a net interest income position in Q2. We recorded adjusted diluted earnings per share of $0.71, above the high end of our guidance range, up 39% sequentially, and up 73% year over year.

Speaker #1: Now turning to our outlook for the third quarter of fiscal year 2027. We currently expect net sales of $410 million, plus or minus $5 million.

Speaker #2: Operating cash flow for Q2 was $69 million, up 90% sequentially from $36 million, and up 55% from $44 million a year ago. Free cash flow for Q2 was $61 million.

Speaker #1: Up 20% sequentially and up 54% year over year at the midpoint, with growth expected across each of our segments. We expect net sales from our infrastructure end market to increase sequentially, with projected sequential data center growth of 45%, or $160% year over year, with continued strong contribution from our HR gig portfolio and a meaningful ramp in $1.60 copper edge and fiber edge.

Speaker #2: Up 119% sequentially from $28 million, and up 48% from $42 million a year ago. CapEx was 2% of net sales and includes expenditures to grow fab capacity supporting GaN chips and CW lasers.

Speaker #2: We expect CapEx to grow as a percentage of sales, but to remain manageable and generally be below 5% of net sales. Though, the timing of construction and equipment delivery could increase this percentage slightly on a single-quarter basis.

Speaker #1: We expect net sales from our high-end consumer end market to increase, benefiting from seasonal trends market share gain in our TVS products and contributions from our sensing portfolio.

Speaker #1: We expect net sales from our industrial end market to broadly grow, with LoRa revenue increasing about 15% sequentially and 65% year over year. Based on expected product mix and net sales levels, we expect adjusted gross margin to be $58.3%, plus or minus $100 basis points.

Speaker #2: Our Q2 ending cash and cash equivalents balance was $204 million, and the principal amount of debt was $503 million. The net leverage ratio was 1.1.

Speaker #2: Now, turning to our outlook for the third quarter of fiscal year 2027, we currently expect net sales of $410 million, plus or minus $5 million.

Speaker #1: At the midpoint, this equates to an increase of $380 basis points sequentially and $530 basis points year over year. Our gross margin outlook excluding the cellular module business is expected to be 63.9% at the midpoint, an incremental $560 basis points from the midpoint of the consolidated adjusted gross margin outlook.

Speaker #2: Up 20% sequentially and up 54% year over year at the midpoint, with growth expected across each of our segments. We expect net sales from our infrastructure end market to increase sequentially, with projected sequential data center growth of 45%, or 160% year over year, with continued strong contribution from our HR-Gig portfolio and a meaningful ramp in 1.60 CopperEdge and FiberEdge.

Speaker #1: Adjusted net operating expenses are expected to be $112 million, plus or minus $3 million. Included in this outlook is increased R&D spend to accelerate time to market on key data center projects, along with SG&A that declines as a percentage of revenue.

Speaker #2: We expect net sales from our high-end consumer end market to increase, benefiting from seasonal trends, market share gain in our TVS products, and contributions from our sensing portfolio.

Speaker #1: We have demonstrated strong returns on our R&D investment and believe we remain prudent on SG&A spend. This results in consolidated adjusted operating margin at the midpoint of 31%, up 660 basis points sequentially and up $1,040 basis points year over year.

Speaker #2: We expect net sales from our industrial end market to broadly grow, with LoRa revenue increasing about 15% sequentially and 65% year over year. Based on expected product mix and net sales levels, we expect adjusted gross margin to be 58.3%, plus or minus 100 basis points.

Speaker #1: Adjusted EBITDA is expected to be $134 million, plus or minus $4 million, resulting in adjusted EBITDA margin at the midpoint of 32.8%, up 620 basis points sequentially and up 930 basis points year over year.

Speaker #2: At the midpoint, this equates to an increase of 380 basis points sequentially and 530 basis points year over year. Our gross margin outlook, excluding the cellular module business, is expected to be 63.9% at the midpoint, an incremental 560 basis points from the midpoint of the consolidated adjusted gross margin outlook.

Speaker #1: We expect adjusted interest and other expenses net to be approximately half a million dollars. We expect an adjusted normalized income tax rate of 18%, reflecting geographic mix of income.

Speaker #2: Adjusted net operating expenses are expected to be $112 million, plus or minus $3 million. Included in this outlook is increased R&D spend to accelerate time to market on key data center projects, along with SG&A that declines as a percentage of revenue.

Speaker #1: These amounts are expected to result in adjusted diluted earnings per share of $1.05, plus or minus $0.03, up 48% sequentially and up $119% year over year at the midpoint, more than two times revenue growth.

Speaker #1: Based on expected weighted average share count of 99 million shares. I look forward to providing our financial framework and multi-year outlook at our upcoming investor event on October 15th.

Speaker #2: We have demonstrated strong returns on our R&D investment and believe we remain prudent on SG&A spend. This results in consolidated adjusted operating margin at the midpoint of 31%, up 660 basis points sequentially and up 1,040 basis points year over year.

Speaker #1: We expect the framework will highlight the operating leverage in our business model, namely increasing gross margin reflecting strong contributions from data center and LoRa.

Speaker #2: Adjusted EBITDA is expected to be $134 million, plus or minus $4 million, resulting in an adjusted EBITDA margin at the midpoint of 32.8%—up 620 basis points sequentially and up 930 basis points year over year.

Speaker #1: Operating margin that grows with scale and with discipline spend in G&A helping to support R&D investment. And a structural shift in margins, following the cellular module divestiture.

Speaker #1: All of which are expected to support strong EPS, EBITDA, and cash flow metrics. With that, I'll turn it back to Mitch.

Speaker #2: We expect adjusted interest and other expenses, net, to be approximately $0.5 million. We expect an adjusted normalized income tax rate of 18%, reflecting the geographic mix of income.

Speaker #2: Thank you, Mark. We can now turn the call back over to the operator for the question and answer session.

Speaker #2: These amounts are expected to result in adjusted diluted earnings per share of $1.05, plus or minus $0.03, up 48% sequentially and up 119% year over year at the midpoint—more than two times revenue growth.

Speaker #3: Thank you. Well, now we conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad.

Speaker #3: A confirmation tone will indicate your line is in the question queue. You may press star two to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.

Speaker #2: Based on the expected weighted average share count of 99 million shares, I look forward to providing our financial framework and multi-year outlook at our upcoming investor event on October 15th.

Speaker #3: One moment, please, while we pull for questions. Thank you. Our first question is from Quinn Bolton with Needham and Company.

Speaker #2: We expect the framework will highlight the operating leverage in our business model, namely increasing gross margin reflecting strong contributions from Data Center and LoRa.

Speaker #4: Hey, guys. Congratulations on the strong results. Hong, you mentioned needing to go out and secure capacity for fiscal 20 sorry, calendar 2028 and beyond.

Speaker #2: Operating margin that grows with scale and with disciplined spend in G&A, helping to support R&D investment. And a structural shift in margins following the cellular module divestiture.

Speaker #4: But the data center business, I think, have guided up 160% year on year in the third fiscal quarter. Sounds like it accelerates in the fourth fiscal quarter.

Speaker #2: All of which are expected to support strong EPS, EBITDA, and cash flow metrics. With that, I'll turn it back to Mitch.

Speaker #4: How are you feeling near term about capacity and your ability to support continued upside in the data center business? And then I've got to follow on data center question.

Speaker #1: Thank you, Mark. We can now turn the call back over to the operator for the question-and-answer session.

Speaker #3: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad.

Speaker #1: We anticipated a very rapid data center revenue growth. We started about a year and a half ago. And thanks to that work, we're able to have enough capacity in the near term to support a customer ramp and also some drop in orders.

Speaker #3: One moment, please, while we pull for questions. Thank you. Our first question is from Quinn Bolton with Needham & Company.

Speaker #1: So that allow us to expand our market share. Now, with the strong booking momentum and record backlog, we see the capacity we have secured may not be enough in supporting the FY28.

Speaker #4: Hey, guys. Congratulations on the strong results. Hong, you mentioned needing to go out and secure capacity for fiscal—sorry, calendar—2028 and beyond.

Speaker #4: But the data center business, I think, has guided up 160% year over year in the third fiscal quarter. Sounds like it accelerates in the fourth fiscal quarter.

Speaker #1: The site, especially second half of FY28. So working with our manufacturing partners, both for front end and back end back end means the OSAT from testing to a packaging and die separation testing.

Speaker #4: How are you feeling near-term about capacity and your ability to support continued upside in the data center business? And then I've got a follow-up data center question.

Speaker #1: Working with the manufacturing partner to increase the capacity. The great news is that we have the financial capability to work with our partners to jointly increase the capacity allocation to some tech.

Speaker #2: We anticipated very rapid data center revenue growth. We started about a year and a half ago, and thanks to that work, we're able to have enough capacity in the near term to support a customer ramp and also some drop in orders.

Speaker #4: I guess maybe quickly just Hong, does that would you anticipate that requiring wafer pre-purchases or any kind of similar pre-purchases of back end capacity?

Speaker #4: And it might follow on question was just it seems like there's growing discussion of NPO solutions across the ASIC landscape. And I think even at the largest GPU provider, as we look into the next 12 to 24 months, can you just give us a brief outline of how Semtech is positioned to support the NPO market?

Speaker #2: So that allows us to expand our market share. Now, with strong booking momentum and a record backlog, we see the capacity we have secured may not be enough to support FY28.

Speaker #2: The site, especially the second half of FY28. So, working with our manufacturing partners, both for front end and back end—back end means the OSAT, from testing to packaging and die separation testing—working with the manufacturing partner to increase the capacity.

Speaker #4: Is it develops? Thank you.

Speaker #1: Yeah. Thank you. So yeah, the increase of capacity for the back end is primarily increase the tester capacity by adding more testers and also getting additional manufacturing partners qualified to mitigate the potential geopolitical risk.

Speaker #2: The great news is that we have the financial capability to work with our partners to jointly increase the capacity allocation to some technology.

Speaker #1: On the front end, we have been working with the leading partner in increasing capacity we are mobilizing all different ways in increasing the prepayment or the CapEx or some other means.

Speaker #4: I guess maybe quickly, just Hong, would you anticipate that requiring wafer pre-purchases or any kind of similar pre-purchases of back-end capacity?

Speaker #4: And my follow-on question was just, it seems like there's growing discussion of NPO solutions across the ASIC landscape. And I think even at the largest GPU provider, as we look into the next 12 to 24 months, can you just give us a brief outline of how Semtech is positioned to support the NPO market?

Speaker #1: But I think our goal are the same, to bring additional capacity to support the growth. As for your question about NPO, yes, absolutely. That's a strong trend.

Speaker #1: The primary driver is to increase the bandwidth density. And as a data total capacity increase dramatically while storeline space limited, they need to have the density high density packaging.

Speaker #4: Is it develops? Thank you.

Speaker #2: Yeah, thank you. So, yeah, the increase of capacity for the back end is primarily to increase the tester capacity by adding more testers, and also getting additional manufacturing partners qualified to mitigate the potential geopolitical risk.

Speaker #1: We're going to be benefiting from that. We currently engaging I don't know, 10, 15 different programs with all the module manufacturers and some of them we directly tied to the end customers.

Speaker #1: So net net, we're going to be benefiting from that. We are already leading provider of TIA arrays in our laser arrays, especially the linearized version of excellent as well.

Speaker #2: On the front end, we have been working with the leading partner in increasing capacity. We are mobilizing in all different ways to increase the prepayment or the CapEx, or through some other means.

Speaker #1: So I just talked about our initiative to start photodiode arrays and by co-optimization, between TIAs and photodiode, we're going to bring to our customers even better solutions.

Speaker #2: But I think our goals are the same: to bring additional capacity to support the growth. As for your question about NPO, yes, absolutely. That's a strong trend.

Speaker #1: So it's a great opportunity for us. That can be translated into a new growth driver for us in the future.

Speaker #2: Its primary driver is to increase the bandwidth density. And as the total data capacity increases dramatically while storage space is limited, they need to have high density packaging.

Speaker #4: Excellent. Thank you.

Speaker #1: Thank you, Quinn.

Speaker #3: Our next question is from Rick Schaefer with Oppenheimer and Company.

Speaker #2: We're going to be benefiting from that. We are currently engaging, I don't know, 10 to 15 different programs with all the module manufacturers, and some of them are directly tied to the end customers.

Speaker #5: Thanks. I'll add my congratulations to you guys. Great quarter and even better outlook. If I could, I'll just start with a quick one on LoRA.

Speaker #5: I mean, the run rate there was barely 150 million just a year ago. I mean, we heard your guide on that, Hong. I mean, that's getting close to 60 million a quarter now.

Speaker #2: So net-net, we're going to be benefiting from that. We are already a leading provider of TIA arrays and our laser arrays, especially the linear arrays, are excellent as well.

Speaker #5: So well over the 150 just in the last 12 months. So is 20% still the right bogey? Because I think you're going to be doing about three times that growth in the third quarter.

Speaker #2: So, I just talked about our initiative to start photodiode arrays, and by co-optimization between TIAs and the photodiode, we're going to bring to our customers even better solutions.

Speaker #1: We certainly smashed the 20% ceiling with the Q3. If it's just at the we're saying sequential growth of 15% year over year will be translating into 65%.

Speaker #2: So it's a great opportunity for us. That can be translated into a new growth driver for us in the future.

Speaker #1: So that is a certainly higher than 20%. And we benefited from now three pillars of growth, not just the traditional LoRA1 in supporting the industrial and commercial applications.

Speaker #4: Excellent. Thank you.

Speaker #2: Thank you, Quinn.

Speaker #3: Our next question is from Rick Schaefer with Oppenheimer.

Speaker #1: But also LoRA plus in security and smart home, smart buildings. And now with the Amazon and rain the sidewalk and rain strong engagement. And their plan to deploy internationally start from North America expanding into Europe and Australia.

Speaker #1: We see that is going to be a strong growth driver as well. So I do expect year over year growth. It's going to be better than 20% going forward.

12 months. So is 20% still the right bogey? Because I think you're going to be doing about three times that growth in the third quarter.

Speaker #1: And it's sustainable.

Speaker #5: Thanks, Hong. And if I could, I'd wonder just a little bit more color on FIFO. Obviously, you're investing in capacity there. I think you've talked about tripling that capacity by the end of the year.

Speaker #5: So I didn't know if you could level set us on where we are in the process, if there's any sense of a design funnel or revenue funnel or anything you could share on that.

We certainly smashed the 20% ceiling uh with the Q3 you know, if it's just the at the you know, we're saying sequential growth of 15% year-over-year will be translating into 65%. So um that is a certainly higher than 20% and we benefited from now.

Speaker #5: And then as part of your answer, I'd be curious. I mean, folks are talking about CW laser, channel densities, really rising, right, going up.

Speaker #5: So I'm curious, how much does that pull the need or create the need for higher density drivers and TIAs? And then if so, what does that do to the complexity and the barriers to entry there for your competition?

Speaker #2: engagement. And their plan to deploy internationally starts from North America, expanding into Europe and Australia. We see that as going to be a strong growth driver as well.

Speaker #1: Yeah. So first, we start with the FIFO acquisition. Certainly, we have been the proud owner of that asset for the last five, six months.

Speaker #2: So, I do expect year-over-year growth. It's going to be better than 20% going forward, and it's sustainable.

Speaker #1: We have made tremendous progress in upgrade the line and also getting more wafer start reaching out to the customers and with the Semtech behind the asset, the customer confidence level has improved dramatically.

Speaker #5: Thanks, Hong. And if I could, I'd like just a little bit more color on FIFO. Obviously, you're investing in capacity there. I think you've talked about tripling that capacity by the end of the year.

Speaker #5: So, I didn't know if you could level set us on where we are in the process, if there's any sense of a design funnel or revenue funnel, or anything you could share on that.

Speaker #1: So we're not only with the three-anchor customers increasing their yeah, they are increasing the demand, but we are able to expand into other key customers on the game chips.

Speaker #5: And then, as part of your answer, I'd be curious—I mean, folks are talking about C2B laser channel densities really rising, right? Going up.

Speaker #5: So, I'm curious, how much does that—

Speaker #1: Now we have been as I mentioned in the prepared remarks, sending high-power lasers to five, six module manufacturers that have been evaluating and really satisfied, really very excited about our best power conversion efficiency in the beam performance and over temperature performance.

Rick Fearon: But truthfully, how much does that pull the need or create the need for higher density drivers and TIAs? And if so, what does that do to the complexity and the barriers to entry there for your competition?

Rick Schafer: But truthfully, how much does that pull the need or create the need for higher density drivers and TIAs? And if so, what does that do to the complexity and the barriers to entry there for your competition?

Speaker #1: Those are pretty ideal in having one CW laser split into four channels or eight channels for high bandwidth transceivers like 1.6T and 3.2T. We also have the product we start sampling to customers on semiconductor optical amplifiers.

Hong Hou: Yeah. So first, we start with the HieFo acquisition. Certainly, we have been the proud owner of that asset for the last five, six months. We have made tremendous progress in upgrade the line and also getting more wafer starts, reaching out to the customers. And with Semtech behind the asset, the customer confidence level has improved dramatically. So we are not only with the three anchor customers, they are increasing the demand, but we are able to expand into other key customers on the gain chips. Now we have been, as I mentioned in the prepared remarks, sending high power lasers to five, six module manufacturers. They have been evaluating and really satisfied, really very excited about our best power conversion efficiency in the beam performance and over temperature performance.

Yeah, so, uh, first we start with the hypo acquisition. Um, certainly, uh, we have been a proud owner of that asset for the last five or six months. We have made tremendous progress in up. Um,

Speaker #1: That's almost like a game chip. You get them push current through, you will get an amplification. So that is a foundation. We are using and the capacity is limited, as I mentioned.

Speaker #1: We are going to be increasing capacity by bringing more testers in the back end first. Then for the fab capacity, we're just fortunate to be able to acquire a already fully facilitized fab in a close proximity to the current facility.

Uh, upgrade the Lion and, uh, also getting more wafer starts, reaching out to the customers, and, uh, with the, you know, some tech behind the asset, you know, the customer confidence level has improved dramatically. Uh, so we're not only with the three anchor customers increasing their—yeah, they are increasing the demand—but we are able to expand into other key customers on the game chips.

Now, we have been, as I mentioned in the prepared remarks, sending high-power lasers,

Speaker #1: So that allow us to increase the fab capacity by three to four X by the end of the year. So we on track for that.

Speaker #1: As for MPO, the high density certainly when you do the high density, the spacing between different elements is become smaller. When you go high speed, the crosstalk and all the other performance, the packaging need is different.

Hong Hou: Those are pretty ideal in having one CW laser split into four channels or eight channels for high bandwidth transceivers, like 1.6T and 3.2T. We also have the product we start sampling to customers on semiconductor optical amplifiers. That is almost like a gain chip. You get them push current through, you will get amplification. So that is the foundation we are using. And the capacity is limited, as I mentioned. We are going to be increasing capacity by bringing more testers in the back end first. Then for the fab capacity, we are just fortunate to be able to acquire a already fully facilitized fab in a close proximity to the current facility. So that allow us to increase the fab capacity by 3 to 4x by the end of the year. So we are on track for that.

To uh 5 6 small you manufacturers. They have been evaluating and really satisfied, really, very excited about. Um our best power conversion efficiency in the beam performance and over temperature performance. Those are the pretty ideal in having 1, CW, laser split into 4 channels

Speaker #1: It's representing another new set of challenges that's why we expand not only from the fiber edge to photonics. That will allow us to do co-optimization to improve signal integrity.

Or 8 channels for high bandwidth transceivers like 1.6t and 3.2t. Um, we also have the product we start sampling to customers ON Semiconductor Optical amplifiers. That's almost like a game chip. You get the um the the get them. Um,

Speaker #1: And definitely the industry is welcoming our move and we have increasing engagement with the module manufacturers in hyperscalers because of that expanded capability.

Speaker #5: Thanks, Hong.

Speaker #1: Thank you, Rick.

Speaker #3: Our next question is from Sean O'Laughlin with TD Cowan.

Speaker #6: Hey, guys. I'll add my congratulations on obviously some really strong momentum across the business here. I wanted to start with just a quick just a high-level question on data center strength.

Hong Hou: As for MPO, the high density, certainly, when you do the high density, the spacing between different elements becomes smaller. When you go high speed, the cross talk and all the other performance, the packaging need is different. It is representing another new set of challenges. That is why we expand not only from the FiberEdge to photonics. That will allow us to do co-optimization to improve signal integrity. And definitely, the industry is welcoming our move, and we have increasing engagement with module manufacturers and hyperscalers because of that expanded capability.

Push current through, you'll get amplification. So that is the foundation. We are, um, using it and the capacity is limited. As I mentioned, we are going to be increasing capacity by bringing more testers in on the back end first. Then, for the fab capacity, we're just fortunate to be able to, uh, to, uh, acquire an already, um, fully facilitated fab in close proximity to the current facility. Um, so that will allow us to increase the fab capacity by three to four times by the end of the year. So we're on track for that.

Speaker #6: Really strong outlook in the forward quarter and talking about acceleration through the back half. But I think in your prepared remarks, both Hong and Mark, you both mentioned the copper edge in a high-volume ramp.

Speaker #6: I think that aligns with some of your past comments. But maybe you could just talk about how to think about the contributors to growth and how that aligns with some of your commentary on TIA share towards the end of this year on 1.6T.

That's for MPO, the high density. Uh, certainly. Um, when you do the high density, the spacing between different elements becomes smaller. When you go high speed, it's cross talk and all the other performance. The packaging need is different, is representing another new set of challenges. That's why we expand not only on—from the fabric edge to photonics—that will allow us to do co-optim to improve.

Speaker #6: Thanks.

Speaker #1: Yeah. Thank you, Sean. And that's a good question. So maybe I will use this opportunity to just review the progress we have made in expanding our portfolio in the data center play.

6 million in integrity, and definitely the industry as well is welcoming our move. We have increasing engagement with the module manufacturers and hyperscalers because of that expanded capability.

Rick Fearon: Thanks, Hong.

Rick Schafer: Thanks, Hong.

Hong Hou: Thank you, Rick.

Right. So

Speaker #1: So we certainly the reason the investment community over-indexing on copper edge is because that's the first time I think the investment community paid attention to Semtech two years ago.

Thank you, Rick.

Operator: Our next question is from Sean McLaughlin with TD Cowen.

Operator: Our next question is from Sean O'Loughlin with TD Cowen.

Our next question is from Sean Locklin with TD Cowen.

Sean McLaughlin: Hey, guys. I will add my congratulations on obviously some really strong momentum across the business here. I wanted to start with just a high level question on data center strength. Really strong outlook in the forward quarter and talking about acceleration through the back half. I think in your prepared remarks, both Hong and Mark, you both mentioned the CopperEdge in a high volume ramp. I think that aligns with some of your past comments, but maybe you could just talk about how to think about the contributors to growth and how that aligns with some of your commentary on TIA share towards the end of this year on 1.6T. Thanks.

Sean O'Loughlin: Hey, guys. I will add my congratulations on obviously some really strong momentum across the business here. I wanted to start with just a high level question on data center strength. Really strong outlook in the forward quarter and talking about acceleration through the back half. I think in your prepared remarks, both Hong and Mark, you both mentioned the CopperEdge in a high volume ramp. I think that aligns with some of your past comments, but maybe you could just talk about how to think about the contributors to growth and how that aligns with some of your commentary on TIA share towards the end of this year on 1.6T. Thanks.

Speaker #1: We developed this redriver or leading equalizer solution which can be embedded in ACC cable to interconnect two adjacent racks. And so that continue to be a really de facto standard for the industry for 1.6T, 2.4T, 3.2T, and going forward.

Hey guys, uh, I'll add my congratulations on on obviously, some really strong moments in the process of business here. I I wanted to start with um, just a quick just a high level question on data center strength, you know?

Really strong outlook in the forward quarter and talking about acceleration through the back half. But I think in your prepared remarks, both Hong and Mark, you both mentioned,

The.

Speaker #1: Copper scale up continues to gain momentum. Especially linear equalizer onboard. So we got the multiple engagement in some of them will reach the finish line in the near term.

Uh, copper Edge.

Speaker #1: Second area, the fiber edge, two years ago, 800 gig, we have the market share about 18%. So over the two years, we have grown the market share well over 50% for 800 gig.

Hong Hou: Yeah. Thank you, Sean, and that's a good question. I will use this opportunity to just review the progress we have made in expanding our portfolio in the data center play. Certainly, the reason the investment community over-indexing on CopperEdge is because that's the first time, I think, the investment community paid attention to Semtech. 2 years ago, we developed this reDriver or linear equalizer solution, which can be embedded in ACC cable to interconnect 2 adjacent racks. That continued to be a really de facto standard for the industry for 1.6T, 2.4T, 3.2T, and going forward. Copper scale-up continues to gain momentum, especially linear equalizer onboard. We got the multiple engagement, and some of them will reach the finish line in the near term. Second area, the FiberEdge. 2 years ago, 800G, we had a market share about 18%.

In a high-volume ramp. I think that aligns with some of your past comments, but maybe you could just talk about how to think about the contributors to growth, and how that aligns with some of your commentary on Tia share in it towards the end of this year, on $1.6T. Thanks.

Speaker #1: 1.6T is just in selecting. So 1.6T, as I said, in the prepared remarks, we are expecting to exit this fiscal year by January with better than 50% of market share.

Speaker #1: So now you see the fiber edge area not only we are gaining shares the volume has increased dramatically for 800 gig, for example, transceivers from two years ago what 20 million units a year to this year probably 90 million units a year.

Who adjacent Rex?

Speaker #1: We're gaining shares. We benefit from increased volume and we are expanding the product offerings 800 gig and 1.6T and drivers. Driver revenue is to come.

And so that continued to be a really defective standard for the industry for 1.6, 2.4, 3,

Speaker #1: We got a wonderful product in the evaluation. We'll be contributing to the revenue very meaningfully. A few months ago, we acquired HIFO and marked the beginning of our journey into the photonic area.

Uh, copper scale-up continues to gain momentum, especially with the linear equalizer on board. Um, so we've got multiple engagements, and some of them will reach the finish line in the near term.

Speaker #1: And we're going to be expanding and having meaningful play in that area as well. So now I'd like to encourage everyone to look at the data center play for Semtech is not just the copper edge.

Hong Hou: Over the 2 years, we have grown the market share well over 50% for 800G. 1.6T is just inflection. 1.6T, as I said in the prepared remarks, we are expecting to exit this fiscal year by January with better than 50% of market share. Now you see the FiberEdge area, not only we are gaining shares. The volume has increased dramatically for 800G, for example, transceivers from 2 years ago, what, 20 million units a year to this year, probably 90 million units a year. We gain in shares, we benefit from the increase in volume, and we are expanding the product offerings, 800G and 1.6T, and drivers. The driver revenue is to come. We got a wonderful product in the evaluation, will be contributing to the revenue very meaningfully.

Second area, the fiber edge. Two years ago: 800 gig. We have a market share of about 18%.

So, over the two years, we have grown the market share to well over 50% for 800 gig.

Speaker #1: Copper edge will definitely be a significant part of the data center revenue. But think about the fiber edge, the leading share of the TIA and drivers and photonics offering from game chip to lasers to photo diodes to SOAs.

1.60—it's just in selecting. So 1.6T, as I said in the prepared remarks, we are expecting to exit this fiscal year by January with better than 50% of market share.

Speaker #1: So we're going to be continue to expanding our portfolio. To become a key player in this area.

Speaker #6: Great. Thanks for all that, Color Hong. And if just if I could ask a follow-up and get Mark into the party here. The gross margin expansion quarter over quarter is striking even if you're just looking at the consolidated and not isolating the held for sale business.

So, now you see the fiber edge area. Not only are we getting shares, but the volume has increased dramatically for, uh, 800-gig, for example, transceivers. From two years ago, it was 20 million units a year; this year, it's probably 90 million units a year.

Speaker #6: Just wondering I guess question on how much of that can be thought of as mix and if data center continues to stay at this percent of revenue is that something we should expect levels that we should expect to continue or is there some one-time thing and then maybe as part of that just talk about the capacity expansion and you've heard some of your suppliers talk about what they're seeing on the pricing side and what's giving you confidence on the margin sustainability.

Hong Hou: Few months ago, we acquired HieFo and marked the beginning of our journey into the photonic area, and we're going to be expanding and having meaningful play in that area as well. Now, I'd like to encourage everyone to look at the data center play for Semtech is not just the CopperEdge. CopperEdge will definitely be a significant part of the data center revenue. But think about the FiberEdge, the leading share of the TIA and drivers and photonics offering from gain chip to lasers to photodiodes to SOAs. We're going to be continued to expanding our portfolio to become a key player in this area.

We can ensure we benefit from the increase in volume, and we are expanding the product offerings—800 gig and 1.6T—and drivers. Driver revenue is to come. We’ve got the wonderful product in evaluation, which will be contributing to the revenue very meaningfully.

A few months ago, we acquired Hypo and marked the beginning of our journey into the photonic area, and we're going to be expanding and having meaningful play in that area as well. So now, you know, I'd like to encourage everyone to look at the data center play for Semtech as not just a copper edge. Copper edge will definitely be a significant part of the data center revenue, but think about...

Speaker #1: Yeah, Sean. I can address that and try to address that. Well, so the silver server module business expect will result in over 500 basis points of gross margin improvement.

Speaker #1: That's the structural change. That's a significant structural change that we see in our gross margin profile. And I provided some detail in my prepared remarks, but I think it's helpful to walk through those figures again.

The Fiber Edge that's leading share of the TIA and drivers and photonics offering from gain chip to lasers to photodiodes to SoCs. So we're going to continue to expand our portfolio to, um, to become a key player in this area.

Sean McLaughlin: Great. Thanks for all that, Kah-ler Hong. If I could ask a follow-up and get Mark into the party here. The gross margin expansion quarter-over-quarter is striking, even if you're just looking at the consolidated and not isolating the held for sale business. Just wondering, I guess, question on how much of that can be thought of as mix, and if data center continues to stay at this percent of revenue, is that something we should expect, levels that we should expect to continue, or is there some one-time thing? Then maybe, as part of that, just talk about the capacity expansion and, you've heard some of your suppliers talk about what they're seeing on the pricing side and what's giving you confidence on the margin sustainability.

Sean O'Loughlin: Great. Thanks for all that, Color Hong. If I could ask a follow-up and get Mark into the party here. The gross margin expansion quarter-over-quarter is striking, even if you're just looking at the consolidated and not isolating the held for sale business. Just wondering, I guess, question on how much of that can be thought of as mix, and if data center continues to stay at this percent of revenue, is that something we should expect, levels that we should expect to continue, or is there some one-time thing? Then maybe, as part of that, just talk about the capacity expansion and, you've heard some of your suppliers talk about what they're seeing on the pricing side and what's giving you confidence on the margin sustainability.

Speaker #1: So from Q1 to Q2, our consolidated addressed gross margins increased from 53% to 54.5%. That's 150 basis points largely on mix. Q2 addressed gross margin excluding modules was 59.7%, which is an incremental 520 basis point increase.

Speaker #1: Then we move to our Q3 guide. Our consolidated addressed gross margins are projected to increase from 54.5% to 58.3%. 380 basis point increase. And then on top of that, we add 560 basis points to arrive in addressed gross margin guide excluding the modules at 63.9%.

Great, thanks for all that caller Hong. And and if just, if I could ask a follow-up and and get Mark into the party here, I, you know, the gross margin expansion quarter of a quarter is um, striking even if you're just looking at the Consolidated and not isolating the health for sale business, um, just wondering, I guess the question on how much of that, you know, can be thought of as mix. And if, you know,

Speaker #1: So you have the 500 basis point plus gross margin improvement just based on the structural change. But the 150 basis point to 380 basis points, that's mix.

Mark Lin: Yeah, Sean, I can address that, try to address that. Well, the sale of the server module business, I expect, will result in over 500 basis points of gross margin improvement. That is the structural change. That is a significant structural change that we see in our gross margin profile. I provided some detail in my prepared remarks, but I think it is helpful to walk through those figures again. From Q1 to Q2, our consolidated adjusted gross margins increased from 53% to 54.5%. That is 150 basis points, largely on mix. Q2 adjusted gross margin, excluding modules, was 59.7%, which is an incremental 520 basis point increase. We move to our Q3 guide. Our consolidated adjusted gross margins are projected to increase from 54.5% to 58.3%, 380 basis point increase.

Data center continues to stay at this percent of Revenue. Is that something we should expect, you know, levels that we should expect to to continue or is there some, you know, 1 time thing? And then maybe as part of that, just talk about the capacity expansion and and you know, you've heard some of your suppliers talk about what they're seeing on the pricing side and um, you know, what's giving you confidence on on the margin sustainability.

Speaker #2: I think a good starting point post-investiture is that 64% gross margin.

Speaker #1: And as you're seeing the mix change, I mean, mix is quite a powerful driver for Semtech. As 1.6T continues to inflect as LoRa a continues a strong growth and 800 gig maybe just to briefly address pricing, right?

Yeah, Sean, I can address that and try to address that well. So, the Silver Cellular module business, I expect, will result in over 500 basis points of gross margin improvement. That's the structural change—that's a significant, durable change—that we see in our gross margin profile.

Speaker #1: We're not really seeing price erosion at 800 gig. That all compounds into some very strong mix changes. Which is that 150 to 380 basis points that we demonstrated in Q2 and Q3.

And you know, I provided some detail in my prepared remarks, but I think it's helpful to walk through these figures again. So, from Q1 to Q2, our consolidated gross margins increased from 53% to 54.5%. That's 150 basis points, largely on mix.

Speaker #6: Thanks. Really helpful and congrats again, guys.

Q2 adjusted gross margin excluding modules was 59.7%, which is an incremental, uh, 520 basis point increase.

Speaker #1: Thanks, Sean.

Speaker #3: Our next question is from Christopher Roland with Sus Mohana.

Speaker #4: Thanks for the question, guys. So this was kind of asked, but maybe more simply, the data center guide, or next quarter's guide driven by data center, what exactly are what did you not anticipate that is driving this?

Mark Lin: On top of that, we add 560 basis points to arrive an adjusted gross margin guide, excluding the modules at 63.9%. So you have the 500 basis point plus gross margin improvement just based on the structural change. But the 150 basis point to 380 basis points, that is mix. I think a good starting point post-divestiture is that 64% gross margin. As you are seeing the mix change, I mean, mix is quite a powerful driver for Semtech. As 1.6T continues to inflect, as LoRa continues the strong growth and 800G, maybe just to briefly address pricing, right? We are not really seeing price erosion to 800G. That all compounds into some very strong mix changes, which is that 150 to 380 basis points that we demonstrated in Q2 and Q3.

Then we moved to our Q3 guide. Our consolidated adjusted gross margins are projected to increase from 54.5% to 58.3%, a 380 basis point increase.

And then, on top of that, we add 560 basis points to arrive at, and address, the gross margin guide, excluding the models, at 63.9%. So you have the 500 basis points plus, you know, uh, gross margin improvement, just based on, you know, the structural change.

Speaker #4: Is it the 1.6T cycle? Is it LPO? Is it really that TIA attached that you're talking about? Or is it copper edge? What kind of drove the marginal upside versus perhaps your expectations or even the street's expectation?

But the 150 basis points to 380 basis points—that's mixed.

I think a good starting point, post the best for, is that 64% gross margin. And as you're seeing, you know, the mix change—I mean, mix is quite a powerful driver for Semtech.

Speaker #4: Guys like me.

Speaker #1: Yeah. Chris, that's a good question. So if we would look at the data center portfolio, we know 800 gig is going very well. We've got a line share and we continue the volume increase.

Strong.

Uh, mixed changes, which is that 150 to 380 basis points that we demonstrated in Q2 and Q3.

Sean McLaughlin: Thanks. Really helpful, and congrats again, guys.

Sean O'Loughlin: Thanks. Really helpful, and congrats again, guys.

Thanks, really helpful. And congrats again, guys.

Mark Lin: Thanks, Sean.

Operator: Our next question is from Christopher Rolland with Susquehanna.

Thanks a lot.

Speaker #1: We also know the copper edge 1.6T timing that has been largely on track and going with the schedule. If you say upside came from a little bit earlier in selection, for 1.6T fiber edge, we know we are intensely engagement with all module manufacturers, as I said, and their customers.

Our next question is from Christopher Rowland with Susquehanna.

Christopher Rolland: Thanks for the question, guys. This was kind of asked, but maybe more simply, the data center guide or next quarter's guide driven by data center. What did you not anticipate that is driving this? Is it the 1.6T cycle? Is it LPO? Is it really that TIA attach that you are talking about, or is it CopperEdge? What drove the marginal upside versus perhaps your expectations or even the street's expectation, guys like me?

Thanks for the question, guys. So, this was kind of asked, but maybe more simply—the data center guide, or next quarter's guide, is that driven by Data Center?

Speaker #1: So we were just not very sure about the qualification timing and that's why we're a little conservative in guiding one for Q2 at the time.

Speaker #1: Now we have all the backlog and the customers want parts tomorrow. So we definitely have a very high confidence and conviction for Q3 and Q4.

Uh, what what exactly are like, what? What did you not anticipate? Um, that, that is driving. This is it, the 1.6t cycle, is it lpo? Is it really that Tia, uh, attached that you're you're talking about, or is it copper Edge?

Speaker #1: So if you say what's different from a few months ago, I mean, it's just the qualification timing. When customers need a solution, they go out of the way.

Hong Hou: Yeah, Chris, that's a good question. If we would look at the data center portfolio, we know 800G is going very well. We got a line share and we continue the volume increase. We also know the CopperEdge 1.6T timing that has been largely on track and going with the schedule. If you say upside came from a little bit earlier selection for 1.6T FiberEdge, we know we are in intense engagement with all module manufacturers, as I said, and their customers. We were just not very sure about the qualification timing, and that's why we were a little conservative in guiding for Q2 at the time. Now we have all the backlog, and the customers want parts tomorrow. We definitely have a very high confidence and conviction for Q3 and Q4.

Um, what? What drove the marginal upside versus perhaps your expectations, or even the Street's expectations—guys like me.

Speaker #1: They accelerate the pace of new technology adoption. So that is I think that before but this is really in a way unprecedented in from the hyperscalers to module manufacturers to the technology providers, component providers.

Speaker #1: We're working all together to accelerate that pace.

Speaker #4: Thank you.

Speaker #1: Does that make sense?

Speaker #4: Yeah, that totally makes sense. And then perhaps a follow-up, just as you ramp HIFO, excuse me, and you have all these new products coming into this portfolio and you talked about getting to high double-digit per transceiver content for you guys.

Yeah. Chris that's a, a good question. So, um, if you would look at the data center portfolio, uh, we know 800 gig is going very well. Um, you know, we got a line share and we, we continue the volume increase. We also know the copper Edge 1.6t timing that has been largely on track and going with the schedule. If you say upside came from a little bit earlier in selection from 1.6, fiber Edge, we know we are in intensity engagement with all module manufacturers. As I said, I said, you know, and their customers

Speaker #4: Can you walk us through just a timeframe of when you expect these products to ship in volume to the market, whether it's these high power CW modules, photo diodes, SOAs, or anything else?

Hong Hou: If you say what's different from a few months ago, it's just the qualification timing. When customers need a solution, they go out of the way, they accelerate the pace of new technology adoption. I've seen that before, but this is really, in a way, unprecedented from the hyperscalers to module manufacturers, to the technology providers, component providers, working all together to accelerate that pace.

So we were just not very sure about the qualification timing and that's why we're a little conservative in guiding, uh, 1. Uh, for for Q2 at that time. Now, we have we have all the backlog and the customers want Parts tomorrow. So we definitely have a very high confidence and conviction for Q3 and Q4. Um, so, you know, if you say what's different from a few months ago, I mean that's just the qualification timing. When customers need a solution,

Speaker #4: That that acquisition will be able to provide.

Speaker #1: Yeah. So Chris, we only got into this area as I said, for five months or so. We certainly have a great plan and great ambition.

Speaker #1: Right now, the ongoing product shipping in volume is again chip and we're going to be having the CW high power CW lasers and SOA available for sampling and qualification from the customer side.

No, out of the way they accelerate the pace of uh uh, new technology, uh, adoption. So that is a I send that before. But this is really in a way unprecedented in the from the hyperscalers, to module manufacturers to the technology providers component providers. They're working all together to accelerate that pace

Christopher Rolland: Thank you, Hong.

Hong Hou: Does that make sense?

Christopher Rolland: Yeah. That totally makes sense. Then perhaps a follow-up. Just as you ramp HieFo, excuse me, and you have all these new products coming into this portfolio, and you talked about getting to high double digit per transceiver content for you guys. Can you walk us through just a timeframe of when you expect these products to ship in volume to the market? Whether it is these high-power CW modules, photodiodes, SOAs, or anything else that that acquisition will be able to provide.

Speaker #1: In a couple of months, but the significant increase in content in optical transceivers, as we said before, is more like 3.2T. Because we see the ramp of the fiber edge for 1.6T, that means the customers already wrapping up the qualification and getting ready for volume production.

Thank you. Does that make sense? Uh, yeah, yeah. That makes that totally makes sense. Um, and then perhaps a follow-up, uh, just as you ramp, uh, hifo. Uh, hi folks, excuse me. Um,

Uh, and you have all these new products coming into this portfolio. And you talked about getting the high double-digit, uh, per transceiver content for you guys.

Speaker #1: If they don't have a solution now, they probably be late. We wanted to catch the next wave so that the 3.2T and the good old high power CW laser works still is the most needed for that application.

Hong Hou: Yeah. So Chris, we only got into this area, as I said, for five months or so. We certainly have a great plan and great ambition. Right now, the ongoing product shipping and volume is again, shipped. We are going to be having the high-power CW lasers and SOA available for sampling and qualification from the customer side in a couple of months. But the significant increase in content in optical transceivers, as we said before, is more like it is 3.2T. Because we see the ramp of the FiberEdge for 1.6T, that means the customer is already ramping up the qualification and getting ready for volume production. If they do not have a solution now, they would probably be late. We wanted to catch the next wave, so that is a 3.2T. The good old high-power CW laser works still, is the most needed for that application.

Speaker #1: By then, we wanted to make a photo diode available as well because when the data rate going higher than 200 gig and need every bit of help from electronic component and photonic component, so the co-optimization allows us to provide a cross-reference design solution to customers that is also very much needed for 3.2T.

Can you walk us through just a timeframe of when you expect these products to ship in volume to the market, uh, whether whether it's these high power, CW, modules photo diodes SOS, uh, and, or, or, or anything else. Um, uh, that, that, that that acquisition will be able to provide

Yeah. So Chris, you know, we only got into this area as I said, you know, in for 5 months or so we certainly have a great plan and great ambition. Um, right now the ongoing product stripping in loading is a game chip and we're going to be um, having the uh,

Speaker #1: So to answer your question, really the significant content increase in one optical transceivers will be coincide with the 3.2T transceiver cut in.

the CW, high-power CW, lasers, and S SOA available, uh, for sampling and qualification from the C for customer side. Um, you know, in a couple of months.

and, but the significant

Speaker #4: Thank you, Hung.

Speaker #1: Thank you.

Speaker #3: Our next question is from Harsh Kumar with BMO Capital.

Speaker #5: Yeah. Hey, Hung, Mark, and Mitch, congratulations on stellar quarter and stellar guide. I had a one multi-pod and then another follow-up. Hung, you talked about 3.2 being the catalyst for your products catching growth.

Speaker #5: Could you talk about what the timing for 3.2 is? As you see it in the field? And then I want to push back on your commentary a little bit as well.

Hong Hou: By then, we wanted to make a photodiode available as well, because when the data rate is going higher than 200 gig, you need every bit of help from electronic component and photonic component. The co-optimization allows us to provide a cross-reference design solution to customers that is also very much needed for 3.2T. To answer your question, really, the significant content increase in one optical transceivers will be coincide with a 3.2T transceiver cut in.

Speaker #5: You talked about your content going from high single to kind of high double digits. But when I look at all that you have in the pipeline, photo detectors and gain chips and drivers, etc., I would think the content would be more than teens.

Speaker #5: Are you just being somewhat cautious here or is there any other reason for that commentary?

Speaker #1: Harsh, first of all, thank you for initiate the coverage and we look forward to working with you with your new platform. So probably I confused you that high double digit means 80, 90 instead of 18, 19.

By then, um, we wanted to make a photo diode available as well because when the data rate going higher than 200 gig in need every bit of help from Electronic Component and photonic component. So the co-optim allows us to provide a cross reference design to solution to customers. That is also very much needed for 3.2t. So to answer your question, really the significant content increase in 1 article transceivers is it will be coincide with the 3.2t. Um, transceiver cut in

Christopher Rolland: Thank you, Hong.

Hong Hou: Thank you.

Thank you.

Operator: Our next question is from Harsh Kumar with BMO Capital Markets.

Speaker #5: Okay, okay, okay. Okay.

Harsh Kumar: Yeah. Hey, Hong, Mark, and Mitch. Congratulations on stellar quarter and stellar guide. I had one multi-part and then another follow-up. Hong, you talked about 3.2T being the catalyst for your products catching growth. Could you talk about what the timing for 3.2T is, as you see it in the field? I want to push back on your commentary a little bit as well. You talked about your content going from high single to high double digits. When I look at all that you have in the pipeline, photodetectors and gain chips and drivers, et cetera, I would think the content would be more than teens. Are you just being somewhat cautious here or is there any other reason for that commentary?

Our next question is from Harsh Kumar with BMO Capital Markets.

Speaker #1: So that's a content we're talking about.

Speaker #5: Oh, no, no. Thank you. Thank you for that clarification. Appreciate it. And 3.2T timing, Hung.

Speaker #1: 3.2T timing, I would say probably in an 18 months or so, but I think the design window will start opening up at about in 12 months period of time.

Speaker #1: So then the early movers, they're probably be 18 months from now into but I think the meaningful deployment will start probably in two years.

Speaker #1: 1.6T, even 800 gig will have a really very healthy runway over the next two years.

Yeah. Hey um, Hong Mark and Mitch. Congratulations on Stellar quarter and Stellar guide. I had a I had a 1 multi pod and then, another follow-up. Um, hung, you talked about 3.2 being the Catalyst for your products catching growth. Could you talk about what the timing for 3.2 is is, as you see it in the field and then I want to push back on your commentary a little bit as well. You talked about your content going from high single to kind of high double digits. But when I look at all that you have in the pipeline photo detectors and you know game chips and divers Etc I would think the content.

Speaker #5: Thank you, Hung. And then for my follow-up, if I can ask you about ACC and LPO, the reason why I'm asking you is you're coming out as a clear leader in those two technologies.

Hong Hou: Harsh, first of all, thank you for initiate the coverage, and we look forward to working with you, with your new platform. Probably I confused you, that high double digit means 80, 90 instead of 18, 19.

Would it be more than teens? Um, are you just being somewhat cautious here, or is there any other reason for that commentary?

uh, first of all,

Speaker #5: You talked about it, I think, a little bit more positively in this call. Can you help us still get an idea of what we should expect the growth rate to be, let's say, exiting this year or at some point in time next year?

Harsh Kumar: Okay. Great.

Hong Hou: That's the content we're talking about.

Speaker #5: What can these two businesses do?

Hong Hou: That's the content we're talking about.

Speaker #1: Yeah. So the ACC, we definitely have the clear visibility with the leading hyperscalers we are going to be having the volume deployment start from Q4.

Harsh Kumar: Oh, no. Thank you for that clarification. Appreciate it.

You know, thank you for initiating the coverage, and we look forward to working with you, uh, with your new platform. Um, so probably I confused you—the high double digit means 80 or 90 instead of 18 or 19. Okay, okay, okay, okay. Okay, great. So that's, uh, that's the content we're talking about.

Oh, no, no. Thank you. Thank you for that clarification. I appreciate it.

Harsh Kumar: 3.2T timing, Hong?

Hong Hou: 3.2T timing, I would say probably in another 18 months or so. I think the design window will start opening up in about a 12 months period of time. The early movers, they will probably be 18 months from now. But I think the meaningful deployment will start probably in 2 years. 1.6T, even 800G, will have a really very healthy runway over the next 2 years.

And 3.23 timing Hall.

Speaker #1: But right now, all the cable manufacturers are ordering and increasing quarter over quarter. But the inflection is going to be start from the Q4.

Speaker #1: Then in the meantime, we're seeing so many design activities of linear equalizer on board. So dynamics, we start understanding this emerging market better now.

Speaker #1: ACC adoption, it's more coincide with the new platform design. So they wouldn't be yanking out the AEC currently in use and to put in ACC, but the linear equalizers on board design is happened on the board level.

Harsh Kumar: Thank you, Hong. For my follow-up, if I can ask you about ACC and LPO. The reason why I am asking you is you are coming out as the clear leader in those two technologies. You talked about it, I think, a little bit more positively in this call. Can you help us still get an idea of what we should expect the growth rate to be, let us say, exiting this year or at some point in time next year? What can these two businesses do?

3.2 T timing. I would say probably in the 18th or so, but I think the design window will start opening up at about uh in 12 months period of time. So then the early movers they'll probably be 18 months uh from now and uh but I think the meaningful deployment will start probably in 2 years. 1.60 even 800 gig will have a a really very healthy Runway over the next 2 years.

Speaker #1: So we got a lot of activities. We continue to be very bullish on that market. As for LPO, it's almost we had a meaningful revenue from Q1 and that has been increasing moderately.

Hong Hou: Yep. The ACC, we definitely have the clear visibility with the leading hyperscalers. We are going to be having the volume deployment start from Q4. Right now, all the cable manufacturers are ordering and increasing quarter over quarter. The inflection is going to start from the Q4. In the meantime, we are seeing so many design activities of linear equalizer on board. Dynamics, we start understanding this emerging market better now. ACC adoption is more Coherent side with a new platform design. They would not be yanking out the AEC currently in use to put in ACC. The linear equalizers on board design is happening on the board level. We got a lot of activities. We continue to be very bullish on that market. As for LPO, it is almost we had a meaningful revenue from Q1, and that has been increasing moderately.

Thank you Hong. And then for my follow-up if I can ask you about ACC and lpo. Um you know the reason why I'm asking you you're coming out as a clear leader in those 2 Technologies. You you talked about it, I think a little bit more positively in this call. Can you help us still get an idea of what we should expect the growth rate to be? Let's say exiting this year or at some point in time next year, what can this what can these 2 businesses do?

Speaker #1: But that deployment really get the industry give them the confidence of the linear architecture and it works really well. So that evolve into MPO and some form of CPO, then even the XPO is including the LPO form with the linear equalizer well, the linear architecture instead of re-timed.

Yep. So the ACC we definitely have a clear visibility with the leading hyperscalers. Um, you know, we are going to be having the low limb deployment start from. Um,

Speaker #1: So I think in the future, the LPO impact not only at the standalone transceiver, but also the proof of the concept approval technology getting incorporated in more integrated form factor like MPO.

Q4, but right now, you know, all the cable manufacturers are ordering and, uh, increasing quarter over quarter. But, uh, they can flex in. It's going to start from Q4. Um, then in the meantime, we see so many design activities.

Speaker #5: Understood. Thank you so much. Congratulations again.

Speaker #1: Thank you, Harsh.

Speaker #3: Our next question is from Joe Moore with Morgan Stanley.

Speaker #6: Hey, thank you.

Speaker #5: Thank you.

Speaker #6: Congratulations. Hey, guys. Can you talk about the strength in 800 gig you talked about that persisting for a while? What's your visibility into that?

Of linear equalizer on board the Dynamics. We start understanding this Emerging Market better now. Um, you know, ACC adoption. It's more coincide with the new platform design, so they wouldn't be yanking out to the aec currently in use and to put in ACC. But the linear equalizers, um, on board. Design is happening on the board level. So we got a lot of activities. We

We continue to be very bullish on that market.

Speaker #6: I know 1.6T is the big ramp, but 800 seems quite strong. Can you talk about that dynamic a little bit?

Hong Hou: That deployment really gave the industry, gave them the confidence of the linear architecture, and it works really well. That evolved into MPO and some form of CPO. Even the XPO is including the LPO form with a linear equalizer, the linear architecture instead of retimed. I think in the future, the LPO impact not only as a standalone transceiver, but also the proof of the concept, approval of the technology get incorporated in more integrated form factor like MPO.

As for LPO, um, it's almost like, you know, we had meaningful revenue from Q1, and that has been increasing moderately.

Speaker #1: Yeah. So Joe, we enter into the year for 800 gig the industry is forecasting 50 million transceiver units to be consumed. Now we are here in the number 80, 90 million.

But that deployment really, uh, gets the industry.

Speaker #1: And we have a very healthy backlog for fiber edge to support 800 gig. And that is a continue and we just getting pick into our new booking report this morning.

Speaker #1: So existing customers, they're increasing the demand. Now decreasing. In the meantime, the 1.6T is just starting and so the Q3 will be the first quarter for us to really have a pretty significant revenue.

Harsh Kumar: Understood. Thank you so much. Congratulations again.

I think that in the future, the LPO impact will not only be at the standalone transceiver, but also, uh, the proof of the concept approval of the technology getting incorporated in more integrated form factors like MPO.

Hong Hou: Thank you, Harsh.

Understood. Thank you so much. Congratulations again.

Thank you, harsh.

Operator: Our next question is from Joe Moore with Morgan Stanley.

Speaker #1: As I said, between 1.6T fiber edge and 1.6T copper edge, we will have that there will be surpassing 50% of total data center revenue.

Our next question is from Joe Moore with Morgan Stanley.

Joe Moore: Great. Thank you.

Hong Hou: Hi, Joe.

Joe Moore: Congratulations. Hey, guys. Can you talk about the strength in 800G? You talked about that persisting for a while. What's your visibility into that? I know 1.6T is the big ramp, but 800 seems quite shrunk. Can you talk about that dynamic a little bit?

Great. Thank you. Uh,

Hey, guys. Um, can you, um—

Speaker #1: So 1.6T is gaining a lot of momentum and gaining momentum fast.

Speaker #6: I think that's very helpful. Thank you. And then can you just discuss like for like pricing? Are you seeing any changes really in any part of your business, whether it's particularly on the optical side, any change in pricing there to know?

Hong Hou: Yeah. Joe, we enter into the year for 800G. The industry is forecasting 50 million transceiver units to be consumed. Now we are hearing the number 80, 90 million, and we have a very healthy backlog for FiberEdge to support 800G, and that is continuing. We are just getting peek into our new booking report this morning. Existing customers, they are increasing the demand, not decreasing. In the meantime, the 1.6T is just starting, so Q3 will be the first quarter for us to really have a pretty significant revenue. As I said, between 1.6T FiberEdge and 1.6T CopperEdge, they will be surpassing 50% of total data center revenue. So 1.6T is gaining a lot of momentum and gaining momentum fast.

Talk about the strength in 800 gig, you talked about that persisting for a while. Um, you know what's your visibility into that? I know 1.60 is the is the big ramp but 800 seems quite strong. Can we talk about that Dynamic a little bit?

Speaker #1: Yeah. So pricing is very favorable. Typically, as I said before, you offer 2X performance, you may be able to get 100% premium in the beginning, but instead of at a lower level.

Speaker #1: But right now, availability is more important to the customers than the pricing. It's almost there are no erosion to be expected in the near term and at least not for any others we booked in the backlog.

Yep. So Joe, you know, we enter into the year for 800 gig. The industry is forecasting. 50 million transceiver units to be consumed. Now, we are here in the number of 80 90 million. And, uh, we have a very healthy backlog for fiber Edge, to support 800 gig. And that is a continued. And so, it's just getting a pick into our new booking report, uh, this morning. So existing customers their increasing, uh, the demand now, decreasing in the meantime, the 1.6 T. It just starting. And so, the Q3 will

Speaker #1: Our cost is increasing slightly and we are able to in most of the cases work with the customers and pass along the cost to them.

Speaker #1: But we are here to build long-term relationship with our customers. We are very mindful and not being viewed as using the seller advantage to go to our customers.

This will be the first quarter for us to really have a pretty significant revenue. As I said, between 1.65 fiber edge and 1.6T copper edge, we will have that—there will be surpassing 50% of total data center revenue. So 1.6T is gaining a lot of momentum and gaining momentum fast.

Joe Moore: I think that is very helpful. Thank you. Can you just discuss like-for-like pricing? Are you seeing any changes really in any part of your business, whether it is particularly on the optical side, any change in pricing there that you know of?

Speaker #1: We're working with them in a partnership fashion. But we are able to pass along the cost increases so that's why when Mark talk about the gross margin, we're expecting the trend to continue to grow because of favorable product mix and the new product we have a higher gross margin.

Hong Hou: Yeah. Pricing is very favorable. Typically, as I said before, you offer 2x performance, you may be able to get 100% premium in the beginning, but it settles at a lower level. But right now, availability is more important to the customers than the pricing. It is almost, there is no erosion to be expected in the near term, at least not for any orders we booked in the backlog. Our cost is increasing slightly, and we are able to, in most of the cases, work with the customers and pass along the cost to them. But we are here to build long-term relationship with our customers. We are very mindful of not being viewed as using the seller advantage to gouge our customers. We are working with them in a partnership fashion, but we are able to pass along the cost increases.

I think that's very helpful. Thank you. And then, um, can you just discuss, uh, like for like pricing, are you seeing any changes really in any part of your business? Whether it's particularly, um, on the optical side, any any change in in, in pricing there, you know?

Speaker #6: Great. Thank you.

Yes, so pricing is very favorable. Um, typically, as I said before, you offer 2x performance, you, you know, you may be able to get—

Speaker #1: Thank you, Joe.

Speaker #3: Our next question is from Tori Svanberg with Stifel.

Speaker #6: Yes. Thank you. And congratulations on the record quarter. Hong, so you're going to be at a half billion run rate. In data center next quarter, I'm just curious as we sort of think about a billion in data center revenue, how should we think about the mix between fiber edge, copper edge, and all the new products that are coming online?

Uh, 100% premium in the beginning but it settles at a lower level. Um, but right now availability is more important to the customers and then the pricing, it's almost. Um, there are no erosion to be um, expected in the near term and at least are not for any others, we booked in the backlog.

Um, our cost.

Speaker #1: So that's probably the one we're going to be providing more detail October investor day. Because we plan to get the different the TAM for the different applications and our market share so that you can have a more comprehensive view for multi-year model.

Hong Hou: That is why when Mark talked about the gross margin, we are expecting the trend to continue to grow because of favorable product mix. In the new product, we have a higher gross margin.

Speaker #1: Yeah. I hope you can come to that event. Sorry.

Speaker #6: So it sounds good. And as a follow-up and a similar question for Mark. So X modem, we'll be at 64% gross margin. How should we think about the margin contribution from some of the newer products like PD, CW lasers, and so on and so forth?

Uh is increasing slightly and uh we are able to in most of the cases work with the customers and pass along the cost to them. And but we are here to build long-term relationship with with our customers. We are very Mindful and not being viewed as using, um, the seller Advantage, you know, to to count our customers or working with them, in our partnership fashion, but we are able to pass along the costing increases. So that's why. When Mark talked about like those margin, we're expecting the trend to continue to grow because of favorable. Um,

Joe Moore: Great. Thank you.

Product mix in the new product. We have a higher, uh, sales market.

Hong Hou: Thank you, Joe.

Great. Thank you.

Thank you, Joe.

Speaker #6: Are they going to be at that corporate average or perhaps even above? Thanks.

Operator: Our next question is from Tore Svanberg with Stifel.

Speaker #1: Oh, they should be above. So all the areas, it's that you just mentioned. CW lasers especially. They're at a data center gross margin, which is accretive to that corporate gross margin average.

Our next question is from Tori Swanberg with Stifel.

Tore Svanberg: Yes. Thank you, and congratulations on the record quarter. Hong, so you are going to be at a half billion run rate in data center next quarter. I am just curious, as we sort of think about USD 1 billion in data center revenue, how should we think about the mix between FiberEdge, CopperEdge, and all the new products that are coming online?

Speaker #6: Perfect. Congrats again.

Speaker #1: Thank you. Thank you.

Speaker #3: Our next question is from Craig Ellis with B. Reilly Securities.

Speaker #7: Yeah. Congratulations on the stellar performance. And thanks for sneaking me in, guys. I wanted to look at the business through the 1.6T lens. So this sort of follows up on part of what you got to with Joe, but can you clarify what you're looking for as things get going in the third quarter as a percent of mix?

Hong Hou: So that is probably the one we are going to be providing more detail October investor day, because we plan to get the TAM for the different applications and our market share so that you can have a more comprehensive view for multi-year model. I hope you can

Yes, thank you. And congratulations on the on the record quarter. Um, Hong. So you're going to be at a half billion run rate, uh, in in data center, next quarter. Um, I'm just curious as as we sort of think about a billion in data center Revenue. Um, how should we think about the mix between Fabrics copper Edge and, you know, all the new products that are coming online?

So that's probably the one. We're going to be providing more details, you know, at the October Investor Day, because we plan to get the different, uh, the TAM for the different applications and our market share, so that you can have a more comprehensive view for a multi-year model. Yeah.

Tore Svanberg: Yeah, I will come

Hong Hou: come to that event. Sorry.

Speaker #7: And then Hong, it sounds like we're starting stronger in fiber edge and copper edge comes along. So how would mix evolve for 1.6T as a percent of total as we look out to next year?

Tore Svanberg: Sounds good. As a follow-up, and a similar question for Mark. X modem will be at 64% gross margin. How should we think about the margin contribution from some of the newer products like PD, CW lasers, and so on and so forth? Are they going to be at that corporate average or perhaps even above? Thanks.

Speaker #1: So Craig, thank you for the question. In Q4, Q3, the 1.6T is already surpassing 50%. I can just only imagine that is going to be continue to grow.

Mark Lin: They should be above. All the areas that you just mentioned, CW lasers especially, they are at a data center gross margin, which is accretive to that corporate gross margin average.

Speaker #1: North of 50%. But 800 gig continue to be very strong and we have the tri-edge legacy product continue to kicking very strong. So but the trend is going to be growing the percentage of 1.60 is going to be higher and higher.

That that you just mentioned, uh, CW lasers especially—they're at a data center gross margin, which is accretive to that corporate gross margin average.

Tore Svanberg: Perfect. Congrats again.

Mark Lin: Thank you.

Hong Hou: Thank you.

Perfect, congrats again.

Thank you. Thank you.

Operator: Our next question is from Craig Ellis with B. Riley Securities.

Our next question is from Craig Ellis with B. Riley Securities.

Craig Ellis: Yeah. Congratulations on the stellar performance, and thanks for sneaking me in, guys. I wanted to look at the business through the 1.6T lens, this sort of follows up on part of what you got to with Joe. Can you clarify what you're looking for as things get going in Q3 as a percent of mix? Then Hong, it sounds like we're starting stronger in FiberEdge and CopperEdge comes along. So how would mix evolve for 1.6T as a percent of total as we look out to next year?

Speaker #7: Got it. Thanks, Hong. And then I wanted to go back to your comments where you indicated that beyond the near-term 45% Q1, Q growth for data center in the third quarter and the 160% year-on-year growth, we could see acceleration and the comment on backlog just suggests that you've got tremendous visibility out into fiscal 28.

Speaker #7: Can you comment on where that would be relatively greater and what some of the interactions are like with customers that are booking out that far?

Yeah. Congratulations on the stellar performance, and thanks for speaking in, guys. I wanted to look at the business through the 1.6T lens. So this sort of follows up on part of what you got to with Joe, but can you clarify what you're looking for as things get going in the third quarter, as a percent of mix? And then, Hong, it sounds like we're starting stronger in fiber edge and copper edge comes along. So how would mix evolve for 1.6T as a percent of total, as we look out to next year?

Hong Hou: So, Craig, thank you for the question. In Q3, the 1.6T is already surpassing 50%. I can just only imagine that it's going to continue to grow north of 50%. But 800G continues to be very strong, and we have the Tri-Edge legacy product continue to ticking very strong. But the trend is going to be growing, the percentage of 1.6T is going to be higher and higher.

Speaker #7: Is it really just you becoming a lot more strategic to the roadmap or is it that supply sufficiency point? Just help us see what you're seeing.

Speaker #7: Thanks so much.

Speaker #1: Yeah. Thank you, Craig. In that sense, I think it's all of above. And I see that our product performance is great and we can provide availability and also we are providing excellent services.

So, uh, Craig, thank you for the question Yen Q4. Uh, Q3 the 1.60 is already surpassing 50%. I can just only imagine that is going to be continued to grow, uh, north of 50%. Uh, but 800 gig continue to be very strong and we have the Triads uh, Legacy product that continue to kicking, you know, very strong. So,

Speaker #1: So that has been the key drivers for us to gain shares.

But the trend is going to be, uh, growing. The percentage of 1.60 is going to be higher and higher.

Craig Ellis: Got it. Thanks, Hong. Then I wanted to go back to your comments where you indicated that, beyond the near term, 45% quarter-on-quarter growth per data center in Q3 and the 160% year-on-year growth, we could see acceleration. The comment on backlog just suggests that you've got tremendous visibility out into fiscal 2028. Can you comment on where that would be relatively greater and what some of the interactions are like with customers that are booking out that far? Is it really just you becoming a lot more strategic to the roadmap, or is it that supply sufficiency point? Just help us see what you're seeing. Thanks so much.

Speaker #7: Thanks, Hong. Good luck, guys.

Speaker #1: Thank you.

Speaker #3: Our next question is from Cody Ackery with the Benchmark Company.

Speaker #8: Hey, thanks, guys. You take my questions and congrats on the progress. Hong, maybe the bookings and backlog accelerating, here in the second half, any quick thoughts on what kind of how long into 28 does that backlog extend and any thoughts on what kind of growth that might support next year?

Speaker #1: So the backlog for the remaining of this fiscal year, I would say for our target is how all booked. And for the next year, we probably over 70% there.

Hong Hou: Yeah. Thank you, Craig. I think it is all of the above. You see that our product performance is great, and we can provide availability, and also, we are providing excellent services. So that has been the key drivers for us to gain shares.

Speaker #1: But the momentum is so strong. So we are going out to get more capacity secured. And so far, I would say the visibility side for the next fiscal year we feel very confident about it.

Got it. Thanks hung. And then I wanted to go back to your comments where you indicated that um, Beyond uh, the near-term, uh, 45% Q on Q growth per Data Center and the third quarter. And the 160% year-on-year growth, we could see acceleration and and the comment on backlog just suggests that you've got tremendous visibility out into physical 28. Can you comment on where that would be relatively greater and what some of the interactions are like with customers that are booking out that far? Is it really just you becoming a lot more strategic to the road map or or is it that Supply sufficiency point just help us. See what you're seeing. Thanks so much.

Speaker #8: Do you think, Hong, that you have upside to with that capacity addition effort? Do you think there's room in the industry for you to secure more and to continue those service upside?

Yeah, thank you, Craig. And that's, I think it's all of the above. I see our product performance is great and we can provide availability. Also, we are providing excellent services, so that has been the key driver for us to gain shares.

Craig Ellis: Thanks, Hong. Good luck, guys.

Hong Hou: Thank you.

Thanks Hong. Good luck, guys.

Thank you.

Operator: Our next question is from Cody Acree with The Benchmark Company.

Speaker #1: Yeah. Between 50% and 100%, there's room for that. And we definitely wanted to be able to provide our customers for the product they need.

Cody Acree: Hey, thanks, guys, for taking my questions, and, congrats on the progress. Hong, maybe just follow up on the last question. With the bookings and backlog accelerating here in H2, any quick thoughts on how long into 2028 does that backlog extend? And any thoughts on what kind of growth that might support next year?

Our next question is from Cody Acree with The Benchmark Company.

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

Speaker #8: And then lastly, you've had a lot of success with your lead hyperscalers for ACC. Any thoughts on the expansion beyond that lead hyperscaler? How broadly do you think this gets adopted?

Speaker #8: And maybe what are some of the challenges left to full adoption? Is it interoperability? Support or cable qualifications?

Hong. Uh, maybe just follow up on the last question with the bookings and backlog accelerating, uh, here in the second half, uh, any uh, quick thoughts on what kind of uh, how, how long into 28 does that backlog extend and any thoughts on what kind of growth that might support next year.

Hong Hou: The backlog for the remaining of this fiscal year, I would say for our targets is all booked. For the next year, we probably over 70% there. But the momentum is so strong, we are going out to get more capacity secured. So far, I would say the visibility side, for the next fiscal year, we feel very confident about it.

Speaker #1: So yeah, at this point for them the availability and the interoperability probably more important for them. We have not seen many activities in driving us to interrupt with other industry participants.

Cody Acree: Do you think, Hong, that you have upside to, with that capacity addition effort, do you think there is room in the industry for you to secure more and to continue the service upside?

So the uh, you know, the backlog for the remaining of this fiscal year, I would say, for a Target. So all all booked and uh, for the next year we probably, you know, over 70% there and but the momentum is so strong. So we are going out to get more uh capacity. Uh, see keyword and uh, so far I will say the visibility side, you know, for the next fiscal year, we feel very confident about it.

Speaker #8: Any thoughts on breadth of adoption?

Do you think, how long do you have?

Speaker #1: So it's going to be more with time it's going to be broader and we'll start with the leading one and there are multiple engagement.

Side to, uh, with that capacity. In addition, effort, do you think that

Hong Hou: Yeah. Between 50% and 100%, there is room for that. We definitely wanted to be able to provide our customers for the product they need.

There's room in the industry for you to secure more and to, uh, to continue to, uh, service upside.

Speaker #1: It's an ongoing. Some of them is going to be going to be reaching to the finish line. So I guess we're at a time, right?

Cody Acree: And then lastly, you have had a lot of success with your lead hyperscalers for ACC. Any thoughts on the expansion beyond that lead hyperscaler? How broadly do you think this gets adopted, and maybe what are some of the challenges left to full adoption? Is it interoperability, support, or cable qualifications?

Yeah, as it being June 15th and 100%, there's room for that, and we definitely wanted to, uh, be able to provide our customers with the product they need.

Speaker #1: But I do encourage I know we still have some in the queue, but come to our October 15th investors event. So we definitely wanted to provide very comprehensive information on our technology roadmap, differentiation TAM or share, and multi-year model so that will help you to build a multi-year financial model for us.

Hong Hou: So yeah. At this point, for them, the availability, then the interoperability, probably more important for them. We have not seen many activities in driving us to interop with other industry participants.

Hyperscalers for ACC. Uh, any thoughts on the expansion beyond that lead? Hyperscaler how broadly do you think this gets adopted and maybe what are the some of the challenges left to uh to full adoption? Is it interoperability? You know support or uh cable qualifications

Speaker #8: Thank you.

Speaker #1: Thank you.

Speaker #3: Thank you. Our last question is from Scott Searle with Roth Capital Partners.

Speaker #7: Hey, good afternoon. Thanks for sneaking me in. Congrats on the quarter and incredible outlook in terms of data center and LoRa. Data center has been covered pretty thoroughly.

We have not seen many activities in, uh, driving us to interact with, uh, other industry participants.

Cody Acree: Any thoughts on breadth of adoption?

Speaker #7: So maybe hopping over to LoRa for a second. Just in terms of could you calibrate us quickly? You've been moving away from the China mix.

Any thoughts on, on breadth of adoption?

Hong Hou: So with time, it is going to be broader, and we will start with the leading one and their multiple engagement is ongoing. Some of them is going to be reaching to the finish line. So I guess, we are at the time, right? But I do encourage, I know we still have some in the queue, but come to our 15 October investors event. So we definitely wanted to provide very comprehensive information on our technology roadmap, differentiation, TAM, our share, and multi-year model. So that will help you to build a multi-year financial model for us.

Speaker #7: It had been down under 50%. I want to just have a better idea about how that would progressing in the July quarter. And looking at the growth that you've seen from the first quarter to guidance now in the third quarter, it's up 50%.

Speaker #7: How big is Amazon now factoring into that? Are they over a 10% customer and kind of stack ranking the guidance into the third quarter?

So it's going to be more, it's with time. You know it's going to be broader and we'll start with the leading 1 and there are multiple engagement. Uh, it's um in ongoing. Some of them is going to be um um going to be reaching uh to the finish line.

Speaker #7: Is that mostly Amazon? Is it LoRa Plus? Is it something else that's really driving the outlook? And lastly, to follow up now on the IoT side of the equation, with modules now on the path to be divested, other elements have arguably periodically been core and then non-core on the router gateway and the IoT platform front.

Speaker #7: I'm wondering what the current thoughts are in terms of their continued inclusion as a core portion of Semtech going forward. Thanks.

Cody Acree: Thank you.

So I guess uh, we're at the time, right? But I do encourage. I know, we still have some in the cube, but um, come to our October 15th investors event. So we definitely uh, wanted to provide very comprehensive information on our technology road map, differentiation Tam, or share and multi-year model. So that will help you to build a multi-year financial model for us.

Hong Hou: Thank you.

Thank you.

Operator: Thank you. Our last question is from Scott Searle with ROTH Capital Partners.

Speaker #1: Thank you, Scott. On LoRa and the majority of the revenue is still LoRa one and LoRa Plus is a start kicking in probably representing about 20 to 25 percent of total revenue mix.

Scott Searle: Hey, good afternoon. Thanks for sneaking me in. Congrats on the quarter and incredible outlook in terms of data center and LoRa. Data center has been covered pretty thoroughly, so maybe hopping over to LoRa for a second. Just in terms of, could you calibrate us quickly? You have been moving away from the China mix. It had been down under 50%. I want to just have a better idea about how that was progressing in the July quarter. In looking at the growth that you have seen from the Q1 to guidance now in the Q3, it is up 50%. How big is Amazon now factoring into that? Are they over a 10% customer and kind of stack ranking the guidance into the Q3? Is that mostly Amazon? Is it LoRa Plus? Is it something else that is really driving the outlook?

Thank you. Our last question is from Scott Sorl with Roth Capital Partners.

Speaker #1: And Sidewalk is still at this point is nominal in this year. We'll probably be pricing good digit. But to get a lot of potential once we are able to piggyback into the consumer at an Amazon scale.

Speaker #1: As for the portfolio optimization, as we mentioned, it's a continued journey and so far we like the portfolio we have after the divestiture and but we'll continue to evaluate additions or optimization effort.

Scott Searle: Lastly, to follow up now on the IoT side of the equation, with modules now on the path to be divested. Other elements have arguably periodically been core and then non-core on the router gateway and the IoT platform front. I am wondering what the current thoughts are in terms of their continued inclusion as a core portion of Semtech going forward. Thanks.

Speaker #1: But we are focused on getting the current deal to the finish line and so which lead to the closing of the sale of the cellular module business.

Hey, good afternoon. Thanks for stinking me in, uh, congrats on the quarter and, uh, incredible Outlook. In terms of data center and Lower Rock. Um, data center has been covered pretty thoroughly so maybe hopping over to lower for a second. Just in terms of uh could you calibrate as quickly. Um, you've been moving away from the China mix, um, it had been down under 50%, I want to just have a better idea about how that would progressing in the July quarter and and looking at the growth that you've seen from the first quarter to guidance. Now in the third quarter, it's up 50%, um, how big is Amazon now factoring into that? Are they over a 10% customer and kind of Stack ranking the guidance into the third quarter. Is that is that mostly Amazon? Um, is it low rep? Plus, uh, is it something else that it's really driving the Outlook. And lastly, um, to to follow up now on the, uh, the iot side of the equation, uh, with modules now on the path to be divested. Um, other elements have arguably periodically been core and then non-core on the router, Gateway, in the iot platform front, I'm wondering what the current thoughts are in terms of

Speaker #7: Great. Thanks so much and congrats again.

Speaker #1: Thank you.

Hong Hou: Thank you, Scott. On LoRa, the majority of the revenue is still LoRaWAN. LoRa Plus started kicking in probably representing about 20% to 25% of total revenue mix. Sidewalk is still, at this point, nominal. This year will probably be high single digit, but again, a lot of potential once we are able to piggyback into the consumer at an Amazon scale. As for the portfolio optimization, as we mentioned, it is a continued journey. So far we like the portfolio we have after the divestiture, but we will continue to evaluate additions or optimization effort. We are focused on getting the current deal to the finish line, which led to the closing of the sale of the cellular module business.

Their continued inclusion as a core portion of Semtech going forward. Thanks.

Speaker #3: Thank you. There are no further questions at this time. I'd like to hand the floor back over to Mitch Hawes for any closing comments.

Speaker #8: Thanks, Paul. That concludes today's call. We look forward to seeing you at various investor events during the quarter. Including our analyst day on October 15th.

Thank you. Uh, Scott and Laura and the majority of the revenue is still uh lower 1 and um, and Laura plus is a start, uh, kicking in. Probably representing about 20 to 25% of the total revenue mix and the sidewalk is still at this point. It's a nominal and this year will probably be high single digit.

But to get a lot of potential, once we are able to piggy back into the consumer and at Amazon's uh scale as for the um, portfolio optimization. As we mentioned, it's a continued journey. And so far, we like the portfolio. We have after the the vesture and but we will continue to evaluate Edition. So, um, our optimization effort, uh, but we are focused on getting the current deal to the finish line. And so, which lead to the closing of U of the sale of the fellow module business.

Scott Searle: Great. Thanks so much, and congrats again.

Great. Thanks so much, and congrats again.

Hong Hou: Thank you.

Thank you.

Operator: Thank you. There are no further questions at this time. I would like to hand the floor back over to Mitch Haws for any closing comments.

Mitch Haws: Thanks, Paul. That concludes today's call. We look forward to seeing you at various investor events during the quarter, including our Analyst Day on 15 October. With that, good afternoon, everyone.

Thank you. There are no further questions at this time. I'd like to hand the floor back over to Mitch Halls for any closing comments.

Thanks, Paul. That concludes today's call. We look forward to seeing you at various investor events during the quarter, including our Analyst Day on October 15th. With that, good afternoon, everyone.

Operator: This concludes today's conference. You may disconnect your line.

This concludes today's conference. You may disconnect your line.