Financial Data and Key Metrics Changes - Q3 2025 revenue was $1,220 million, exceeding guidance and up 8% sequentially and nearly 30% year over year [9][20] - Adjusted EPS for the quarter was $0.67, up 60% sequentially and 91% year over year, indicating expanded operating leverage [9][21] - Adjusted gross margin in Q3 was 41.9%, 90 basis points above guidance, driven by sales of previously reserved material and lower net tariff impacts [21] - Adjusted operating margin was 10.7%, up 270 basis points year on year [21] - Cash from operations was $174 million, with a free cash flow margin of 11% [22] Business Line Data and Key Metrics Changes - Strong demand was noted across both cloud provider and service provider segments, with two customers contributing over 10% of revenue [9][10] - The interconnects portfolio is expected to double revenue year over year in 2025, with significant orders already in place [14] - The RLS optical products and routers and switches showed strong performance, contributing to overall revenue growth [20] Market Data and Key Metrics Changes - Cloud providers are investing in AI at an unprecedented pace, with many increasing their expected spend on AI [12] - Service providers are seeing steady and sustainable investment patterns, particularly in North America and internationally [17] - The emergence of Neo scalers, including AI compute specialists and smaller data center providers, is creating new market opportunities [16] Company Strategy and Development Direction - The company is redirecting R&D investments towards coherent optical systems, interconnects, and innovative solutions like DCOM, while limiting investments in residential broadband access [18][25] - A reduction in headcount impacting approximately 4% to 5% of the workforce is being implemented to drive operational efficiencies [26] - The company expects to achieve approximately 17% year-on-year growth in fiscal 2026, with improving gross margins and a focus on AI-driven network investments [27] Management's Comments on Operating Environment and Future Outlook - Management believes the network is critical for the growth and monetization of AI, with a multiyear investment effort required for high-speed connectivity [10][29] - The company is positioned to capitalize on the growing demand for AI workloads and the associated network infrastructure [28] - Management expressed confidence in the durability of demand over the midterm horizon, supported by a strong order backlog [26][27] Other Important Information - The company repurchased 1 million shares for $81.8 million in Q3, with plans to repurchase an additional $85 million in Q4 [22][23] - A non-cash charge of approximately $90 million is expected in Q4 due to the redirection of R&D investments [25] Q&A Session Summary Question: Industry structure and gross margin outlook - Management noted that the industry structure has improved, allowing for better pricing power and expectations of gross margin improvement over time [32][33] Question: Neoscaler opportunity and growth composition - Management indicated that Neoscalers represent a net incremental opportunity that will scale over time, contributing to overall growth [41][43] Question: Gross margin drivers and tariff impacts - Management highlighted that gross margin improvements were driven by product mix and better tariff management, with expectations for continued improvements [52][55] Question: DCOM opportunity and backlog contribution - Management confirmed that the DCOM opportunity is expected to contribute hundreds of millions in revenue, with a strong backlog supporting future growth [116][117]

Group 1 - The sixth Western Digital Economy Expo was held in Xi'an, where the Industrial and Commercial Bank of China Xi'an Branch showcased its digital financial achievements, including smart terminals and digital platforms [1] - The bank has focused on enhancing customer service and empowering employees by integrating financial technology with business operations, improving data mining and analysis capabilities [3] - As of the end of May, the Xi'an region had over 6 million personal mobile banking customers, with a net increase of over 50,000 customers in the year [3] Group 2 - The Xi'an branch is developing an "online" and "ecological" service matrix to meet the needs of the real and digital economies, particularly in sectors like automotive finance and smart tourism [4] - In the tourism industry, the bank has created a digital financial platform for key scenic spots, enhancing operational efficiency and innovation capabilities [4] - The bank has installed foreign card POS machines in 1,698 merchants and launched a "pocket money" service at all branches to facilitate cashless payments for foreign visitors [4]