Credo Technology Group Holding (CRDO) 27 Feb 242024 Q3 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Credo Fiscal 2024 Q3 Earnings Conference Call. [Operator Instructions]I would now like to hand the conference over to your speaker today, Dan O'Neill.

Today, I'm joined by Bill Brennan, Credo's Chief Executive Officer; and Dan Fleming, our Chief Financial Officer.

As a reminder, during the call, we will make certain forward-looking statements. Investor subject in and SEC, documents be in are discussed that which statements the found detail of in filed the forward-looking to uncertainties risks are can company's These website. section Relations with the materially of to results extent for the those nor factor to from the of which management assess to its on combination all all risks any It's not factors any company's factors business in predict actual forward-looking possible impact the differ may can cause company or contained or the statements.

financial non-GAAP I be the the in website. superior not available GAAP over important turn earnings a forward-looking issued is are assumptions, risks, provided of why uncertainties we and we call financial of results actual measures forward-looking our the which using financial measures these adversely our assessed to expectations except can this measures, substitute call these to statements implied. date Given statements measures any during financial materially Investor in performance. Also and measures undertakes the with the law. addition update prepared will today, call now to to for A differ of CEO. we non-GAAP not call, by and from in we consider between conform which for and in performance this actual during the to discussion of company's the These changes to this refer and to or accordance Relations any company reconciliations as events or company's GAAP. anticipated obligation financial The occur, be as will U.S. or to reason results discussed non-GAAP our those release and may after certain portion no use non-GAAP could publicly required

our overview and fiscal by QX our begin the for of future. providing results an I'll outlook

results financial a for QX. detailed and then fiscal QX review CFO, of our Fleming, provide will your Dan Our expectations

results QX, Line performance, solutions.Credo include future energy-efficient non-GAAP $XX.X expectations the or market.Our to SerDes technology. SerDes and revenue electrical These IP continue the connectivity million our Card active and technology, and to optical and Credo Laser PHYs, XX.X%. SerDes for SerDes AECs, architectures of Drivers energy by each throughout DSPs, fundamental cost. of solutions efficiency TIAs, and licensing, for block continues solutions reported application-specific our chiplets growth optimized deeply infrastructure and data high-speed the opportunity driven connectivity invest connectivity is For is cables to of accelerating success gross reach margin in solutions of leveraging that speed, building our our which all SerDes Credo's Core enable be

process portfolio to and longest from Our between architecture, for most die-to-die DSP spans performance of links from optimization efficiency. related links the reach for per the XX-nanometer power-sensitive XXX-gig per reach geometries lane lane XXX-gig optimized continue the process performance energy series differentiate specifically trade-offs with increases, to Credo chiplets. opportunity geometry, to will X-nanometer to innovation SerDes as the our

to continues optical in Credo gain DSP optical Now regarding traction solutions, our the market.

industry for innovative efficiency making optical as speeds. optical better call port for design production X.XT focusing module our value XXX-gig across by applications combination on as and solutions. action compelling approach, about SerDes ways efficiency well of We third optical and Enabled closely we're the variety the complex a for XXX DSPs XXX-gig delivering on of opportunities. talked by customer needs. a extensively gig solve quarter, shipments power to transceiver optical energy quarter, end performance, Last for progress wins we combination for we optical global of and and of Credo the hyperscale continued customers and AOC end numerous and multiple customers, During target hyperscale to partners DSPs

directly As elite, LRO optics pluggable optics Credo too for or discussed, architecture LPO quickly eliminating integrity, and interoperability the X.XXT. the is better discussion far maintaining we simply power receive that made delivering linear X.XT innovative we especially IEEE meaningful quarter, Since challenge compliance standards, or signal linear DSP the while industry with to solutions. last responded we've addresses DSP believe and architecture our progress. extending with our

much LRO as optical XXX-gig XXX-gig results expected, and the exactly Our successfully tested of promise first and built delivering signal are the the shortfalls integrity great aspirational and architecture. while DSP of the partner reduced modules, power on overcoming has LPO

DSP solutions Diego, with LRO and we'll both full optical five be Next We'll demonstrating highlighting San be month solutions, progress. module different OFC DSP XXX-gig our at in XXX-gig demonstrating partners.

DSP map primarily road optical solutions. hyperscalers. our U.S. with We solutions full in speeds are segment, customers and to be energy now for XXX business PHY data LRO with discuss efficiency with critical Line global signal both integrity, Gearboxes contributions X.XT X.XT lane achieve per which hyperscalers networking quarter this further business, includes the priorities solid include by and I'll OEMs which our and optical top and DSP MACsec PHYs in another and customers Retimers, robust hyperscaler both our will In include delivered end being from encryption. driven Card our growth gig QX. our Our believe products

space. Our the in customers this are leaders

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our solutions more Card per than production, customers have lane customers XXX-gig XX designing XX Screaming gig deployed our and per have Eagle in in we many Line lane that count We PHYs.

chiplet IP our to turning Now and business.

data rules, businesses solutions SerDes ASIC our continue recognition of and quarter-to-quarter, to quarters.Our upcoming SerDes These our see our in in revenue licensing center solutions. be to can revenue ASICs funnel business. we SerDes for next-generation which likely opportunities Due on we'll to meaningfully Our and the market partners strategic applications. increased for address by strong, SerDes from a bolstered vary with is IP remained overall chiplet enable IP component QX, saw the what high-speed for opportunity

We of customers, SerDes die-to-die our IP range including SerDes the per performance XX-nanometer to AEC to of process from broadest for comprehensive lane from and geometries broadest of have across reach long portfolio XXX-gig reach range a reach. X-nanometer the

execution date for their next-generation customers X-nanometer our optimizing and solutions few of win costs. Our and at to that system advanced our our business demand key with the quarter, the the optimistic Credo's pleased most complete, SerDes chiplet solutions in partners focus to a one for high-speed power.Last a results competitive market. at able IP necessary NRE offering of leads for of chiplet which to QX, the chiplet optimistic capable this Credo solution, solutions. our speaks speeds to and and and the with being connectivity belief prospects due that our market our technology, loudly will be advantage summary, geometry, the results be while companies increasing of regarding reach broad Credo highest we're our ASIC the differentiated SerDes SerDes enabler In highlighted sell for efficiency breadth given our system is we we're by our delivering to When enables energy chiplet remain by was Overall, will the market connectivity. leading about significant and chiplets to optimize category on of one and for core portfolio. fiscal process driven about

approach Dan set our combined a continued our driven given provide For with diversified a of diversified success across level, and has clusters industry-leading the CFO, in and expertise, an led system by customer generative and we'll the the the The with a financial now turn for of be to base customers. happy SerDes inflection expect to these take Credo's will growth applications. acceleration industry of call design connectivity customer-focused Dan reasons, Fleming. fundamental stage long-term XXXX, need applications. center higher additional I'll questions. details, AI growing we to connectivity diverse deployment technology then has point put bandwidth. over set AI technology experienced high-speed on In our

For directly our solutions. energy-efficient higher for growth more higher and need our provide underpins the bandwidth Credo, for and translates plays strength overall now connectivity to business. detail of this Credo's more I'll demand higher to expectations. This speed, density

I'll quarter. customers. We as to First, the third our comprehensive AEC AEC AEC to discuss our we market. believe from the needs result, the a ability our diverse business, years, continued support to leadership innovate and where during of momentum build We've this AEC over now the from to many approach derives the quickly ground up our have built Credo systems-level

for AECs optical active both the In-rack copper transceivers, single-lane we foresee and shortcomings and increasing adoption Given of continuing of passive speeds cables and cconnectivity. the cables

customers needs customers, back-end customers' for closely application. the into last customer. front-end well different expect of We conferences highlighted to tight with work distinct the teams, their quarter. the and engaged longer-term demand customer majority and port center customers engaged delivering XXX operators.We've our these product we're delivered hyperscale firmware a collaboration hyperscalers the X ramps, at We're solutions for continues and foreseeable and to maps. engineering of depending with hyperscalers publicly five road these Many gaining hardware first other innovation to also U.S. better AEC on the nonstandard networks address optimized our U.S. of We're Credo each near-term from of as AEC data as requirements Credo two a meet with their range speeds to hyperscalers future. as gig the architectural stages at with portion and in visibility during features AEC have between Tier global products solutions remain that range demand both gig–XXX and in Ethernet

in also nature that U.S. gig the significant this additional fiscal continue to architectures XXX expect solutions. gig yield the we 'XX. material half to AEC expect advanced While point solutions an revenue and with second and rates, Credo to we will with to Credo inflection as global transition working AEC in programs time develop network is for next-generation achieve hyperscalers of take deployment our future XXX

providers broader solutions service among see data Additionally, we AEC X acceptance centers. Tier and of

these represent a group, with panel the in lead meaningful a developed Last and quarter, collaboration As service opportunity. our discussed we a revenue customers solution, of provider. pluggable PX growing patch introduction

AECs related can operational Over been networking and latency past overcome combination by encouraged the the power power. help disparities multiple and the lane efficiency, distribution, challenges speed PX the customer and trade-offs to of we've and thermal that the feedback of quarter,

and the We beyond. in customer to QX. base as 'XX AEC revenue addressable enables Due and pleased very a opportunities, our more in expanding our broad progress QX, were with progress market. of meaningful further thereby generate focus easily we expanding AECs expect we expect on In our to summary, be future PX in to set utilized innovation, fiscal

our review results first of QX In QX, up fiscal sequentially XX% of outlook then discus reported I'll for X% 'XX. million, QX we and and revenue our year-over-year. $XX.X down

$X.X QX, largely by as deliverables generated IP million our strategic IP year-over-year. in vary and pre-existing business quarter-to-quarter, business, new sequentially our reminder, XX% IP driven XX% down down part revenue contracts. Our from may but remains or results of of a specific to a

While over revenue and time, the X% long-term of mix our revenue IP, in IP, for quarter IP product given any is vary revenue. expectation was mix XX%–XX% will of below QX which our in

revenue and of We near high range. the long-term as end of percentage fiscal expectations to expect IP 'XX our be for a within the

million Our up revenue and in product year-over-year. $XX.X up XX% QX, XX% business sequentially generated of

in revenue end our three were greater top than customers Our QX. of each XX%

of points margin sequentially. team XXX end above gross Our QX our delivered of and the non-GAAP basis up range XX.X%, guidance high

margin Our IP was XXX% near in generally XX.X% non-GAAP gross and hovers QX.

our up in points and up NRE due X,XXX product basis XXX in Total was product up gross a XX% and non-GAAP quarter, sequentially XX.X% the expenses quarter $XX.X increase Our to range, large million, end in the of high basis third the revenue year-over-year. were year-over-year. points sequentially above up XX% margin non-GAAP operating guidance

as solutions. Our in XX% was OpEx we the innovative a resources to increase deliver increase result continue in year-over-year a of to R&D invest

up SG&A year-over-year. Our was XX%

leverage. due to was non-GAAP loss million $X.X income top million compared QX line last $X.X operating increased non-GAAP quarter of a to in Our operating

proceeds used third was compared production $X.X income Our in a increase net in compared margin in operating income million non-GAAP to of million operations million. to QX operating margin X.X% of non-GAAP R&D spending. million quarter $XXX.X non-GAAP of was in flow $X.X increase of $X last in and quarter, Free driven a offering equivalents cash of XXX continue to came $X.X flow non-GAAP negative by an in was equipment successful net $X.X $XXX.X We cash $X.X follow-on the completed from maintaining points. the of of in quarter, basis last with We Cash the the opportunities sequential cash X.X% investing quarter. the well million a December quarter We of quarter negative was This CapEx growth shares capitalized and while mask of XXXX. our in substantial reported remain million million, increase buffer. from increase the net an million, of quarter. cash our year-over-year. ended second

sales while up XX Our QX. accounts receivable sequentially days, from XX.X% to outstanding balance days XX to days $XX.X increased million, increased in

was Our QX $XX.X sequentially. ending inventory down million million, $X.X

$XX Now turning currently at 'XX up be between XX% fiscal to in million of guidance. sequentially million, our the revenue and expect We QX to midpoint. $XX

of non-GAAP a QX within margin expect We XX%–XX%. range gross to be

operating non-GAAP We $XX expect between and million. million be QX expenses to $XX

share to weighted diluted XXX average QX count shares. be approximately expect million We

workloads playing customer new 'XX has year through to continued has AI 'XX expected. We are our rapid which to out to engagement, revenue fiscal as diversify fiscal pleased year shift enable broad-based and beyond. driven The and to see us

result, As operating we With for I open leverage driving in coming a to look it forward questions. quarters. that, will the up

Our Instructions] Sachs. Goldman Toshi comes first [Operator question Hari with from

Bill, year curious, days or you are the in increase way the next with of consistent customer engagements was opportunity three sizing the the your projects over the you thinking or opportunity, so. the infrastructure XX and significant AEC, ask either term or thought optical pulled your framed seen get the in you past how business just how term DSP the increase you're side, XX you AEC the pretty about under additional near to spending in given I you're both ago? it the the customer any I'm Have thinking framed consistent over broadly. DSP the pretty and wanted AI with and the they days months ago. medium about way I

to in early each these we've ever pretty some of I the it's of the feel irons can communicated about innings things ramp. we what the of more that the and going than fact past. see speaking, in really the variability Generally opportunities, as many before. with we've consistent fire in We're we're that say one great got

standpoint, that half an a inflection 'XX. been second see in pretty in think we've I from change. revenue fiscal consistent we point Really of saying profile no the

XX% Even good they if drivers NRE increase there? can nicely. thought on a quite your this gross provide helpful. sequential What nature XX.X% you at there quarter basis, were you last XX% embedded this in quarter, bridge pretty revenue, the would from I product midpoint the the guess, a that exclude in improved to, for for margins, I were If Is be quarter? in anything onetime the

we really scale we things, product due increasing hidden at story is thought look and of to as Because that mix. the

is that a story is for long-term This years. XX%–XX%. product we've the as within expectation, two product If attaining again, gross part basis with our it track from up key margins. margin margin, you well exclude sequentially, increasing line was on points we're from XXX think messaging our you XX%–XX% say, that historically. We which next our That's NRE in is, gross given of

comes Now QX. to when it

or said of The full high remarks QX our in other IP of year percentage range be as revenue thing XX%–XX%. will alluded our I expect to, was for in We a mentioned the the prepared at long-term of only that end mix overall the we IP X%. that

X% been year-to-date, of IP mix. our If has only you revenue look overall

and margin FY variable product That's been pattern. terms to the contributing on has to a portion we expect quarter-to-quarter of there upon In recognize scale. increasing IP illustrative due margin, to the You the of might variable IP part midpoint. said very highly deliverables it. of us deliverables, at gross really IP of the product been being to favorable could NRE Having underlying been quite XX% very under variable. and you trend exclusive gross those strong revenue thing has that, IP focus that is the very mix sense, XXX. a QX to been ASC again, 'XX. of be say databases It's It's in throughout which,

comes with BNP question from Paribas. next Our Karl Ackerman

seasonal variations I'm each you to you traditional applications, You market tend happen whether into not front-end server quarter. curious the the of sell to market primarily by dictated be to Since hear in servers built really ameliorate the therefore, to are you now. seeing new are GPUs are of traditional limitation recovery being data cyclical seeing and ramp as that a centers and installing power happen

connections for networks. think two making I as the general first on with can associated if is view got compute sense. The very tell that connections our really front-end Microsoft, the network business we're broken is way back our that clusters number that we've really we I in networks and on and history most connections the fewer. is back-end front-end think history, AEC they into front-end that look well you similar a parts, customer, as of the AI, AEC AI out with front-end

network sense connection a big an volume in always imply If which compute a expected you've server clearly in made GPUs, one comparison. overall I that for there's general reduction they one a you're We got connections say forecast, every rebalancing. maybe six eight because pivot whereas that can to huge the for front-end we've would AI. towards in saw

some forecast, I weighted back-end I I forecast. next on months, think We the specific think that don't visibility really based on the XX super XX-month see coming of think do probably get that within we're we seeing that. movement. that on

dominated customer could today? point? Is Or hoping large broadening I is it this was business customers? is address multiple chiplet by single still at how that you into your a

chiplets -- it. had now. probably customers the is and and at The large and been We've have on Intel is expectation two both bullish several industry about talking the years, was on production we've discussed. we've in space been before been Tesla we've one for got One working that publicly

still the that this think about nice the the had is that probably I discussion how it business different about optical If business will term, be has I long and are that available become designs, be our of that in our of design or answer AEC an the down. generally break This question, meaningful. us second direction of chiplet we typically, rival the for that have a that got handful a spec. though I market to To It chipless not a business. smaller customers us we think part about of going recently given sponsor long got that is we've your will initial moves business, component engaging portion a understand to with but your we've a we've will think businesses on DSP very even term.

from comes Stifel. Tore question Svanberg next Our with

the Bill, very form We're hoping the clear heating market. to everybody factor, on to chips. market to still on filing It's us over approach versus a system system the the the but was more a the XX–XX AEC where update us could I go? up. in starting you is take seems next you hoping more Again, AEC is market, months. factor. see was different on a form Perhaps that you the competitors way update see could evolving I market

key us who to no performance, bring been is servicing and and party taking then these has that ultimately quality, sharing trying a one the like hardware any supporting same, to directly bring production our owns is firmware are of really approach feeling is the whether to ownership to of and responsibility responsibility responsible qualify are our an most with for as during required bring companies the high effective production work together quickly responsibility, full great us reliability, high work The production.There's to many to company clarity and it's the market lack customers to to for see if we we or always aspects product that and during AEC process of the design, to and all take stage. products entire the for the the

within we're customers. qualification going to relates first efforts last now years the also multiple urgent than apples-to-apples result, AEC several our developing If more that are into that and have feeling out trying to to SerDes, always I signal SerDes we several we've we've needs a point dedicated is to base.We're XXX that always loss core over developing level. solutions, I customer a with about point only we're the to capability. samples respond think that that think bring direct separate there's a going a that energy-efficient core several to estimate made quite have just to technology. if As it's which customer the as be There key our with head-to-head business I want different but been a times given we not people in make approaches, we I want first advantages but apples-to-apples, are the some emphasize, most to comparison, parties relationships, good it just our important the at to system

PAMX DSP. for On

for what had detail assuming DSP LPO more wondering discuss You've the now early customers, the to reaction has a few this in months. with out you've your I'm base? able been customer just been from

or a introduced. certain think customers about DSP when to expected. We've especially market, seen customers are gig back been the broad as without linear module OFC in the was year interested pluggable in very spectrum ago this quite optics the approach that a there's the concept I XXX really optical this whole We an thinking a can way go of become has really for market. reaction

call action about the modules. Although during last is really talking X.XT year to

the that the standpoint. power from curve Just is fact almost unsustainable a

options. at Looking

market space. and in investing are the the play Of LPO in are architecture course, that certain to out there people gig trying the resources XXX

course, Full you're built XXX-gig of in that's is DSP the the sense, horse already seeing gig a is right what XXX being barn. Of now. in module every out

actually the to reduced to It's out and within people cost. lower Offering that to refer overcoming as obstacles desire what our getting a The quite DSP power maintain really full a potentially eliminating signal lower and a basically much path potentially key we think DSP. by a to module of played is the all the deploying industry is versus power that which cost. solution, connection path DSP.We're standards, half there I the there's and still face be at first satisfied pretty module that optical module sample the I from we into that the with interest the well. been next is solutions partners shipped hyperscaler DSP towards made units We'll the quarter.We're being offering our partners at in DSP. say have two and We'll efforts will the in quarter have first fiscal partners. as future, demonstrating OFC. look that our over which full with the last half LRO, collaboration we're great integrity are on

look half we're As solutions at that or per and of flexibility. the both the or in pursuing lane putting in the we gig decision deliver hands to customer. going XXX optical that We're The X.XT DSP at time. we've full X-nanometer, LRO same designed DSPs, in really DSP design solutions we're the

on ceilings with that and the DSP connector the X based as capable specs our of current standard we're are within process to we've integrated believe chosen power there efficiency. being within going note really out that the power Now that nanometer We geometry IEEE deliver optical already is connectors.

Our Ramsey Matt Cowen. next comes with TD question from

and Bill, are ask is for I like going that approaches technical talking take my Two you developed I you in noticing with base in decisions be for your has space. is Ethernet and just companies and big to conversation like coming competitors of just pie whole solutions several some the those thoughts. customer system you're XX networking or bets or succeed observation up, the engaging got I'd whether and all the different in with very when and room months, under having and to and opportunities up areas Are curve follow were wanted last tenor yourselves the in months forward, close your to wanted access or with about area hyperscale just the I that religious at making do think the companies polarizing DSP have of you on polarized XX around versus last are because OFC may solutions been three there's guess drive here, making all that InfiniBand things over base chips. to company your customers? What optics customer linear It different binary might with the debate your I your answer. actions last interested over different open along seems enough? the

our From perspective, clear. a more it's little bit

hyperscalers. a have has they're line By a has to an Each or market. end one means market one -- momentum. the I we churn market, a strategy. separate is polarizing really different are some on. that architectural time observers the they're does or as it with ongoing happens Each participants The that the this are of for. directly different trying decision-making see, trying between each they a you that to conversations the think the We way create common working that are common objective view Ultimately, the them no that in all view one those have really that opinions in cadence strive a road hyperscalers. map

a efforts find a looking that have to a direction support solutions try certain in we're see all way just deliver the big value conversations one go From and in for. We're you direction, the perspective, agnostic wants Our for customers. to if let's sense each our customer on described. of that the the to and is spectrums they're a hyperscale a of we that hyperscale of yes, hey, going these connectivity different identify focus right to hyperscalers our ends that spending

part all these it's overall our us, pursuit customers. For of of

could I revenue things compare XX I mean, than I about market year broadened. ago. the there your minutes talking are the AI you like severe so are months you're observation sell the and quarter-to-quarter components wanted want visibility some sure have the certain are where and way you think I wonder and I visibility. some were Dan, systems. a builds customer base make anticipated has deploying to really to I guys in large last just components quarterly and that revenue a really obviously, that just into contrast some in viewing spend the anybody of was few where It's months XX to pivot on in timing little of if how don't given bit bottleneck that reflect think been you of and want data concentration customers or ago. center were? markets we maybe my not and more that tight nature large know confidence the your to the in magnitude hyperscalers

what if of to that we when What's throughout that the key to good -- driven we today reset, executing the diversification, year and time. you I really a at we've also is done job ago year in about our we just observations a laid Microsoft back customer had that Some mentioned. point think there product very are out at as had go diversification

sit here preparing just it's today by were Again, our of 'XX. if base, AI ago. we've a was and to our revenue year. these than driven we of we now diversified ago been lot by fiscal up year stand programs to That's up those product underlying more modestly comfortable more or equation, for terms close uplift of exclude you where currents because FY a the as versus from diversified Microsoft Driven our spend. a year right much throughout versus, As year A customer AI given spoke I'm say, in we're are we 'XX, quite the that We're related different We're visibility. out position in quite much had we been comfortable base. a our dramatically.

Rakesh comes Mizuho. question next Vijay Our with from

with working hyperscalers mentioned think five now. I you

ramp half, ramps AI. see like out half. to others any back you As starting or How Open the you see AEC Google go to do other partner broadening of the you in the do the back

front-end talking conferences. demonstrated in back-end I think these Both quarter existing we've respective of Both been at their deployments. networks of and new two for on consistent networks customers. about last ramps future our with pretty companies

will as look our some volume that when see as have think that concluded on. I possibility have idea at we 'XX that we it's second would I well with customer good the on the inflection the and we we a this and in we second we've past customer, don't that talk first to maybe There hyperscalers is a as half contribution look the two exactly at fiscal that about working in qualification as related for qualification. don't they're for production have of we U.S. to our half, going timing balance visibility I although what 'XX, to be call these really third but customers. say yet, program deploy. we'll in have first that been an point

The layering say architecture development, would in other When now. I stage. that we some point I year fiscal it Those product and the first Hopefully, revenue samples. relates we're that for that are to development an 'XX would gives that definition, talking early two five earlier to initial hyperscalers, working discussions, think total, three, the development, be we're to would about as through color. ramps. the we're spec stages about earlier in

Do you with fast how could business to intresting in came it DSP the well. ramping whole next It's very with sing as big like it's much the how quarter. hyperscale lot that to DSP the ramping Can better you talk be? margins see a the and faster now to see market resist Obviously, optical you're you seems

AEC to had. correctly. came module at cycle a TX line that some design you've than to development time do Optical long the got partner. a being Ultimately, in experience for module a qualification a at there's longer, DSP being we've the sense build that if to sure not longer a has little qualification a that bit the is considered they maybe hyperscaler.I cycle got as associated with can through with step be a from production they've first look across before in I'm significantly that go of start it even

other innings end through come As hyperscale looking seeing that competing We're there that for DSP a customer U.S. continued in the our U.S. hyperscaler our 'XX. qualified the but is there a opportunities we've module we're ramping that in China, our next-generation first second at maybe in ramp a 'XX. from that with back fiscal are significant would we're of of partner. the customers more impact probably we're already early spending I we're in pursuing, for optical business, near-term perspective, beyond got the in that, volume stages say ramp fiscal could that Then

Thomas question with next Barclays. Our from O'Malley comes

a quarter, big you contribution. services engineering In saw the

product mentioned you Dan, think, I NRE.

maybe come in one why you big? a color those on million –$X give us if little historically, that look would DSP, a Could that given a you million. If Is AEC was the just Is like quarterly multiple how Maybe it color so related? anything color basis customers? January one some customer, us have $X volume little it's this or in give was significant quarter?

million for NREs Bill for maybe, bringing to higher speaks our for was case, as chip mentioned, of development, QX solutions this to Again, per innovative in product we're market. it, $X the the was quarter. that customer particular largely million–$X than really value As you single I'd identify, correctly our historically. lit. it This call the a range next-generation historically,

piece other that, than particular we're X down of was This Those X-nanometer. of The are course, required the had what node more prior geometry. we've that the heavy for process in impacting are that for was geometries. historically as going engineering resources engineering nanometer Now and things that. development the

this said it think all to mean sets engineering a back NRE bar would I that, Now services. of new expect trend averages. of or I to our historical don't having the level

said year range. the is high full IP going at the of your license be for end You to

goes services the product saying $X You're is like which back and to levels, million. historical million–$X engineering

seeing little us positively you together to down may the where on little be a sequential give got AEC you pretty seems bit. Could pieces spoken You've When other you those color all April, be products on some take a to business. weakness? in

would I anything sequential if know as don't characterize I weakness.

strong quarter-over-quarter, it's If a put from very flat and all to up performance if off that's based in QX. NRE exclude you of those together, sequential you product, pieces

in certain programs pauses around No I become There wouldn't be say. generically programs As this speaking things, seasonal they of just ramp, nature. weakness, large. might

next Our [Operator question Instructions] with comes Arya Securities. from of America Bank Vivek

the of next How AEC The that few million quarterly I about you you was do rating now? million, how give quarterly running right range. think us of product hoping a $XX $XX-ish is that run revenues much could the quarters? are sense in trend over

gives is what we ramp about. stages our initial This is break and of out we've product AEC. going production through you through by again, but there 'XX from the this inflection to a second these when don't the hit is some sequential half line, customers it's upcoming the hard hyperscaler of that growth you'll a be until to of QX QX. that We as point. our a variability of second may Hopefully, drove it, little quarters, we lot XX% Q of file it color. quarter-to-quarter some programs lot of In AEC look linearity our predict fiscal talked one you that specifically a start to ramp, infer

year. of should will the My of AEC question preferred customers? be lot bigger that they get choice a we last Because are deploying GPUs. lot of already a lot deploying deployed by your confidence how a GPUs is transceivers. a They optical They are

much deployments. So a change of far, second in deployed AEC. and start AEC opposed they a or not half have to in for them What handful one-off to as as that choice mainstream will a more deploying choice the consider niche more

question. key think the I really that's

plant are for think rack the AI whether back-end question related in switches racks. the I to of is there top and maybe architectures networks the

doing if the I all, deploy at with of the that Ethernet long-term networks. customers, our is that we're think work we look preference think first to, I

I five U.S. the think commonly amongst hyperscalers. that's pretty understood

volume networks. each time a when that on one line they go have Ethernet think I different will with into high

InfiniBand today. are deploying them of with Some

all designing leaf-spine dedicated end. from connections to with the switching the think connections appliance AI I of back top-of-rack from for of the using network the standpoint versus the optical switching pulling

look racks known it's implementing and installed you're If think top-of-rack and around around good racks not deploy about not data operational how to it's being and build known forklift these? center. the I good switching, do build efficiency, those able you talking were to in at you being then

looking these almost real that clusters talking a with at don't is operational efficiency. having assemble associated to be about discussions from anything on having all one-off. Nonetheless, feedback site, think that real I our there's would we're of on trade-off directly You we're a are customers.

As long-term I come this come more to view. will their think plans -- execute customers into to

Bolton Quinn Our Needham. comes question next with from

line. on different Last had quarter, the product question bit. a up represented next a four Following little each customers top you

XX%-plus at XX% and revenue customers, This customers. quarter, about representing from wondering representing what top Are you the coming product three lines? two-year, if were? top three you set they was all starting to they you the least talked see majority give to Were us I revenues different those AEC of customer? can of

so, what had on warrant, in in of be driven AEC three Two figure second which who to at three, the three disclosure quarter. customers our that at end mentioned Q then based hyperscaler see I the when chiplet our end Last XX%. Then day the product a customer through. you'll it's and able As represent realize remarks, in filed top was customer to XX% we four in that is MD&A. Again, or talked top in much top customer the important is being next my prepared were, they about, NRE bit AEC customers go our of other our hyperscale XX%. lines. which our all in in would followed final was came AEC that at quarter you the driven. you'll first color customer that chiplet To unique we they That's driven, was going give on customer, we've of a the the by the the XX%. lead be was as There's interesting to be that different variability four out largest

network U.S. talked have logical a therefore, on certainly choice. date, Ethernet-based been deployed been deploy you InfiniBand to of InfiniBand. of about hyperscalers Bill, and that Obviously, those most lot have to the relying GPU Nvidia-based wanting back-end instead networks

like about just across beginning customer AMD for there from deploying other deployments be what InfiniBand? fabric there'd opportunity a your AMD base AMD, can with in forward. that's Are are you the to wondering, customer seeing Are seems for good you GPU GPU MIXXX level, hyperscale pretty a and got going some deploying back-end a talk Is Ethernet? in I'm they ramp that networks? it certainly second because they high volumes. connections meaningful AECs You've

I'm a see to Ethernet I and We actually discussions think certain decision-making we've on developed comment don't GPUs GPUs seems would the on you, we around the masked somewhat of are speaking, the that the number very to had, well. solutions have I sure say we really be group into think that best can NIC. by versus at generally U.S. the you're tell strong visibility the connecting Ethernet. certain would clear a deploy that to intention based Nvidia Really, that as Ethernet the internally that being we're I GPUs of it a it's are the used, lanes right. speed. I that our InfiniBand. just same. get hyperscalers

You can it. up bottoms go on each a do and hyperscaler

I InfiniBand. is lead deploying see as the that that Microsoft there is with you'll hyperscaler out think clearly

I pretty that, short. after the list becomes think

think is everything is be that Ethernet going we're preferred. to seeing I

questions I'm this time. closing turn I at it to Brennan, like remarks. showing further CEO, to no back would for now Bill

to much you Thank up participation, it. We forward appreciate the Much look we questions. appreciate the really callbacks. Thank following and for on very the you.

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

now disconnect. may You