Financial Data and Key Metrics Changes - Net sales for the December quarter were $1.186 billion, up 4% sequentially and 15.6% year-over-year, exceeding original guidance [4][15] - Non-GAAP gross margin was 60.5%, up 379 basis points sequentially, while GAAP gross margin was 59.6% [5][16] - Non-GAAP net income was $252.8 million, with earnings per diluted share at $0.44, which was $0.04 above the high end of original guidance [5] - Total operating expenses were $555.2 million, with non-GAAP operating income at 28.5% of sales [5][16] - Cash flow from operating activities was $341.4 million, with adjusted free cash flow at $305.6 million [7][8] Business Line Data and Key Metrics Changes - Sales growth primarily came from networking, data center, FPGA, and licensing business units, while microcontroller and analog businesses were flat sequentially [15] - Distribution sell-through was $11.7 million higher than sell-in, indicating a reduction in distributor inventory [15] Market Data and Key Metrics Changes - Net sales increased sequentially in the Americas and Europe, while remaining flat in Asia [15] - The strongest sales performance was noted in the aerospace and defense sector, as well as networking data center solutions [16] Company Strategy and Development Direction - The company is focusing on modernizing connectivity solutions in automotive and industrial markets, particularly through Ethernet-based architectures [10][12] - A strategic collaboration with Hyundai Motor Group was announced to integrate 10BASE-T1S solutions into next-generation vehicle platforms [12] - The company aims to leverage its comprehensive Ethernet portfolio to capture opportunities in Industry 4.0 and automotive modernization cycles [13][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery across most end markets, including automotive, industrial, communication, and data center sectors [16] - The company anticipates net sales for the March quarter to be $1.26 billion ±$20 million, representing a 6.2% sequential growth and up 29.8% year-over-year [20] - Management noted challenges with lead times and substrate availability but remains optimistic about future growth [19] Other Important Information - The company expects to maintain a non-GAAP tax rate of about 10% for fiscal year 2026 [6] - Total debt decreased by $12.1 million sequentially, with net debt down by $26 million [8] - Capital expenditures for fiscal year 2026 are expected to be at or below $100 million [9] Q&A Session Summary Question: How should the continued strength versus seasonality be viewed? - Management indicated that distribution inventory is largely corrected, with strong backlog and bookings contributing to confidence in growth [24] Question: Update on inventory reserve and underutilization charges? - Management expects inventory reserves to normalize, with underutilization charges continuing to decline gradually [26] Question: Clarification on December's microcontroller and analog segments? - The upside in December was primarily driven by stronger performance in product segments, not licensing [30] Question: Thoughts on customer inventory behavior? - Management noted that while customers are not restocking yet, they are buying at consumption rates as inventories normalize [40] Question: Backlog for the June quarter? - Management reported that January bookings were strong, and the June quarter backlog is higher than the March quarter backlog at the same point in time [46] Question: FPGA business growth? - The FPGA segment is experiencing significant growth, with the company gaining market share [83]