Financial Data and Key Metrics Changes - For Q3 FY2026, net sales were $267 million, representing a 4% sequential increase and a 13% year-over-year increase, driven by data center and LoRa portfolio momentum [5][22] - Adjusted operating margins grew by 180 basis points sequentially and 230 basis points year-over-year [5][23] - Adjusted diluted earnings per share were $0.48, up 17% sequentially and 85% year-over-year [5][26] - Adjusted EBITDA was $62.7 million, up 11% sequentially and 23% year-over-year, with an adjusted EBITDA margin of 23.5% [23][26] Business Line Data and Key Metrics Changes - Infrastructure net sales were $77.9 million, up 6% sequentially and 18% year-over-year, supported by data center business [7] - Data center net sales reached a record $56.2 million, up 8% sequentially and 30% year-over-year [8] - High-end consumer net sales for Q3 were $41.9 million, up 2% sequentially and 5% year-over-year [13] - Industrial net sales were $147.2 million, up 3% sequentially and 12% year-over-year, driven by strong LoRa performance [14] Market Data and Key Metrics Changes - The data center business is expected to see continued growth, with projections for a 10% sequential increase in Q4 [27] - The high-end consumer market is anticipated to decrease by about 3% sequentially in Q4, partially offset by market share gains [27] - The industrial end market is expected to remain flat, with growth in IoT systems and connectivity offsetting declines [27] Company Strategy and Development Direction - The company is focused on capturing growth opportunities in core assets and optimizing its portfolio, including the recent acquisition of the Force Sensing business [6][20] - The strategy includes leveraging R&D resources to expand the portfolio, particularly in LoRa and data center technologies [6][19] - The company aims to strengthen its market position in next-generation data center solutions and LoRa-based IoT applications [18][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth trajectory of the data center business, supported by strong demand and customer engagement [8][62] - The company anticipates a meaningful contribution from LPO in Q4, with expectations for continued design wins [46][60] - Management highlighted the importance of power efficiency in their solutions, positioning the company to lead in ultra-power-efficient technologies [18][19] Other Important Information - The company completed a $402.5 million convertible note offering, significantly reducing interest expenses and improving cash flow [24][25] - The adjusted net leverage ratio improved to 1.5, down from 7.2 year-over-year, reflecting strong business performance and debt reduction [27][26] Q&A Session Summary Question: Insights on CopperEdge ramping with lead CSP - Management indicated that CopperEdge is designed into three programs with a significant ramp expected starting mid-2026, which is seen as a catalyst for broader adoption [34][36] Question: Size of the ACC opportunity - Management noted that ACC is positioned between DAC and AEC, with a substantial total addressable market (TAM) and expected to capture a significant portion as deployment ramps up [38][39] Question: Growth expectations for LPO - Management expects LPO to contribute meaningfully in Q4, with a strong growth opportunity anticipated [44][46] Question: Gross margin outlook for Q4 - Management clarified that semiconductor gross margins are expected to remain healthy, driven by data center and LoRa growth, despite lower margins in IoT systems [50][51] Question: Force-sensing acquisition details - The force-sensing technology is expected to enhance the company's sensing portfolio, with integration already underway and first products shipped [65][68] Question: Divestiture of non-core assets - Management confirmed that interest from potential acquirers has increased, and the divestiture remains a top priority [82][84]

Financial Data and Key Metrics Changes - For Q3 FY2026, net sales were $267 million, representing a 4% sequential increase and a 13% year-over-year increase, driven by data center and LoRa portfolio momentum [5][22] - Adjusted operating margins grew by 180 basis points sequentially and 230 basis points year-over-year [5][23] - Adjusted diluted earnings per share were $0.48, up 17% sequentially and 85% year-over-year [5][26] - Adjusted EBITDA was $62.7 million, up 11% sequentially and 23% year-over-year, with an adjusted EBITDA margin of 23.5% [23][26] Business Line Data and Key Metrics Changes - Infrastructure net sales were $77.9 million, up 6% sequentially and 18% year-over-year, supported by data center business [7] - Data center net sales reached a record $56.2 million, up 8% sequentially and 30% year-over-year [8] - High-end consumer net sales for Q3 were $41.9 million, up 2% sequentially and 5% year-over-year [13] - Industrial net sales were $147.2 million, up 3% sequentially and 12% year-over-year, driven by strong LoRa performance [14] Market Data and Key Metrics Changes - The data center market is expected to see continued growth, with projections of approximately 10% sequential growth in Q4 [27] - The high-end consumer market is anticipated to decrease by about 3% sequentially, partially offset by market share gains [27] - The industrial end market is expected to remain flat, with growth in IoT systems and connectivity [27] Company Strategy and Development Direction - The company is focused on capturing growth opportunities in core assets and optimizing its portfolio, including the recent acquisition of the Force Sensing business [6][20] - The strategy includes leveraging R&D resources to expand the portfolio, particularly in LoRa and data center technologies [6][19] - The company aims to strengthen its culture and operational excellence while addressing margin disparities through divestitures of non-core assets [20][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand pipeline for data center solutions, particularly in AI CapEx and low-power solutions [8][9] - The company anticipates a meaningful contribution from LPO in Q4, with expectations of continued growth in the data center business [46] - Management highlighted the importance of power efficiency in their solutions, positioning the company to lead in ultra-power-efficient technologies [18] Other Important Information - The company completed a $402.5 million convertible note offering, significantly reducing interest expenses and improving cash flow [24][25] - The acquisition of the Force Sensing business is expected to enhance the company's sensing portfolio and create cross-selling opportunities [14][70] Q&A Session Summary Question: Insights on CopperEdge ramping with lead CSP - Management indicated that CopperEdge is designed into three programs with a ramp expected to start in mid-2026, which will serve as a catalyst for broader adoption among other CSPs [34][36] Question: Size of the ACC opportunity - Management noted that ACC is positioned between DAC and AEC, with significant potential to capture market share due to its power-saving advantages [38][39] Question: Growth expectations for LPO - Management expects LPO to contribute meaningfully in Q4, with a strong ramp anticipated throughout 2026 [46][62] Question: Force Sensing acquisition details - The force sensing technology enhances capabilities for smart wearables and computing, with integration already underway and first products shipped [66][70] Question: Gross margin outlook for ISC business - Management acknowledged that ISC gross margins are expected to be lower due to the mix of cellular modules, but semiconductor gross margins remain healthy [102][103]

Financial Data and Key Metrics Changes - For Q3 2026, net sales were $267 million, up 4% sequentially and up 13% year-over-year, driven by data center and LoRa portfolio momentum [4] - Adjusted operating margins grew 180 basis points sequentially and 230 basis points year-over-year [4] - Adjusted diluted earnings per share were $0.48, up 17% sequentially and 85% year-over-year [25] - Adjusted EBITDA was $62.7 million, up 11% sequentially and 23% year-over-year, with an adjusted EBITDA margin of 23.5% [22] Business Line Data and Key Metrics Changes - Infrastructure net sales were $77.9 million, up 6% sequentially and 18% year-over-year, supported by data center business [7] - Data center net sales reached a record $56.2 million, up 8% sequentially and 30% year-over-year [8] - High-end consumer net sales for Q3 were $41.9 million, up 2% sequentially and 5% year-over-year [12] - Industrial net sales were $147.2 million, up 3% sequentially and 12% year-over-year, driven by strong LoRa performance [13] Market Data and Key Metrics Changes - The data center business is expected to see continued growth, with projections for a 10% sequential increase in Q4 [26] - The high-end consumer market is anticipated to decrease by about 3% sequentially in Q4, partially offset by market share gains [26] - The industrial end market is expected to remain flat, with growth in IoT systems and connectivity [26] Company Strategy and Development Direction - The company is focused on capturing growth opportunities in core assets and optimizing its portfolio [19] - The acquisition of the Force Sensing business is expected to enhance the sensor portfolio and create cross-selling opportunities [5][13] - The company aims to lead in ultra-power-efficient solutions across high-bandwidth data center networking and IoT applications [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth trajectory of the data center business, supported by strong demand for low-power solutions [9][10] - The company is well-positioned to drive LoRa adoption with new capabilities and features [15] - Management highlighted the importance of maintaining a strong balance sheet and reducing interest expenses to support strategic investments [24] Other Important Information - The company completed a $402.5 million convertible note offering, significantly reducing annual interest expenses [23][24] - Operating cash flow for Q3 was $47.5 million, up 60% year-over-year, indicating strong cash generation [25] - The company is actively engaged in divesting non-core assets, with multiple indications of interest from potential acquirers [6][52] Q&A Session Summary Question: What is the outlook for CopperEdge with the lead CSP? - Management indicated that CopperEdge is designed into three programs, with a substantial ramp expected throughout fiscal year 2026 [30][31] Question: How does LPO fit into the market? - Management anticipates a meaningful contribution from LPO in Q4, with strong design wins expected [34] Question: What is the expected gross margin for Q4? - The semiconductor gross margin is projected to be 60.5%, with lower margins anticipated in the IoT systems and connectivity segment [57] Question: What has changed regarding the divestiture of non-core assets? - Management noted increased interest from potential acquirers due to improved geopolitical conditions and business opportunities [52] Question: What is the status of the ACC opportunity? - Management confirmed that there are no reliability issues with ACC, and the ramp is expected to begin in Q4 [60]

证券日报网讯 紫光股份11月21日在互动平台回答投资者提问时表示，公司深度布局高速光模块产业， 积极推进1.6T高性能光模块在稳定性与性价比上的双重突破，并持续完善光模块认证与测试体系，携手 产业链伙伴共同推动LPO在智算中心与互联网数据中心的规模化商用。 （编辑 王雪儿） ...

Core Insights - The global demand for computing power is expected to surge dramatically, with a forecasted increase of 100,000 times by 2035, driven by AI storage needs growing 500 times [5][6] - Chinese manufacturers are leading the midstream market globally, with companies like Zhongji Xuchuang and Xinyi Sheng achieving significant growth through technological advancements and strategic positioning [6][10] Industry Overview - Huawei's report highlights a shift from 9 billion people to 900 billion smart entities, marking a transition from mobile internet to smart entity internet [5] - The AI computing market is projected to reach $1.2 trillion by 2025, with China accounting for 38% of this market, primarily driven by smart driving, industrial AI, and medical imaging [6][10] Company Performance - Zhongji Xuchuang reported a revenue of 14.789 billion yuan in the first half of 2025, a year-on-year increase of 36.95%, with a net profit of 3.995 billion yuan, up 69.4% [7] - Xinyi Sheng experienced explosive growth, with a revenue of 10.437 billion yuan, a 282.64% increase, and a net profit of 3.942 billion yuan, up 355.68% [10] - Tianfu Communication achieved a revenue of 2.456 billion yuan, a 57.8% increase, with a 91% growth in active optical device business [10] Technological Advancements - The light module technology is evolving rapidly, with a focus on rate iteration, material innovation, and packaging breakthroughs [12] - The transition from 800G to 1.6T modules is becoming mainstream, with significant commercial advancements expected in the coming years [12][13] - Innovations such as CPO and LPO are set to address power consumption challenges while enhancing bandwidth density [13][14] Market Dynamics - The competitive landscape shows that Chinese companies dominate the global midstream market, with Zhongji Xuchuang and Xinyi Sheng ranking among the top three globally [10] - The strategic value of light modules as a core component of AI infrastructure is increasingly recognized, positioning Chinese firms favorably in the global competition [14]

Group 1: Financial Performance - The company achieved a revenue of 10.437 billion RMB in the first half of 2025, representing a year-on-year growth of 282.64% [3] - The net profit attributable to shareholders reached 3.942 billion RMB, with a year-on-year increase of 355.68% [3] - Growth in sales revenue and net profit is primarily driven by the continuous increase in AI-related computing power investments and the optimization of product structure, with a higher proportion of high-speed optical module products [3] Group 2: Market and Product Insights - The core reasons for the high growth in revenue in Q2 include sustained high industry demand, an increasing proportion of high-speed products, and a continuous rise in customer orders [3] - The company anticipates that the industry’s favorable conditions will continue based on current market and customer order demand [3] - The company plans to gradually ramp up the delivery of its 1.6T products starting in the second half of this year, with further increases expected next year [3] Group 3: Supply Chain and Production - The company maintains long-term partnerships with suppliers and has implemented proactive inventory management strategies to meet market demand [4] - The Thai factory's first phase was completed and put into production in the first half of 2025, with the second phase expected to be operational by early 2026 [4] - Current tariff policies have not significantly impacted the company's financials, and the company will continue to monitor changes in tariff policies [4] Group 4: Research and Development - The increase in R&D expenses in Q2 is attributed to the company's commitment to enhancing team capabilities and project development, which aligns with the growth of the business [4] - The company is focusing on new technologies and products, with expectations for an increase in the proportion of silicon photonic solutions in the second half of this year and into next year [4]

Core Viewpoint - The transition of data centers to Co-Packaged Optics (CPO) switches is inevitable, primarily driven by the power savings offered by CPO technology [1][2]. Group 1: CPO Technology and Market Trends - CPO technology is gaining traction as it significantly reduces power consumption, with potential savings of 30-50% compared to traditional optical devices [1][2]. - The industry has made substantial progress in CPO reliability over the past two years, making it a viable option for future high-speed data rates [2]. - The upcoming 400G SerDes generation may see CPO as the only feasible choice due to excessive insertion loss from traditional PCB traces and cables [2]. Group 2: Technical Integration of CPO - CPO solutions typically integrate electronic integrated circuits (EIC) and photonic integrated circuits (PIC) within the same package [3]. - Two main integration methods for optical engines within ASIC packages are the silicon interposer approach and the organic substrate approach [4][5]. - The silicon interposer method allows for high-density connections but complicates thermal management due to the proximity of high-power EICs [6]. - The organic substrate method offers better thermal isolation and modularity, allowing for independent testing of optical engines before assembly [7][8]. Group 3: Bandwidth Density and Performance - Bandwidth density, a critical metric for CPO solutions, measures the amount of data transmitted per millimeter along optical interfaces, typically expressed in Tbps/mm [9]. - Higher bandwidth density is essential to meet the explosive growth in bandwidth demand in data centers and high-performance computing systems [9]. Group 4: Competitive Landscape - Broadcom's Bailly CPO switch integrates eight 6.4 Tbps optical engines, achieving a total external bandwidth of 51.2 Tbps [12]. - NVIDIA's Quantum-X InfiniBand switch aims for higher scalability, targeting over 100 Tbps with advanced optical engine integration [17][18]. - Broadcom's next-generation switches are expected to reach 102.4 Tbps, while NVIDIA's architecture is designed for future demands of 200G SerDes and beyond [16][19]. Group 5: Power Efficiency and Thermal Management - Both Broadcom and NVIDIA report significant reductions in power consumption per bit with their CPO solutions, with Broadcom achieving approximately 5.5W per 800 Gb/s port compared to 15W for traditional modules [35]. - Effective cooling solutions, such as liquid cooling, are necessary to manage the heat generated by high-density ASIC packages [35][36]. Group 6: Future Directions and Challenges - The industry is exploring advanced coupling methods, such as vertical coupling and multi-core fibers, to enhance optical connectivity and bandwidth density [38][40]. - Challenges in deploying CPO include ecosystem disruption, operational complexity, and the need for robust reliability validation [42][43]. - CPO's prospects appear brighter in vertical scaling applications, where integrated solutions from single vendors can simplify procurement and deployment [45].

Financial Data and Key Metrics Changes - For Q1, net sales reached a record $251.1 million, up 22% year over year and above the midpoint of the outlook [21] - Adjusted gross margin was 53.5%, up 30 basis points sequentially and up 370 basis points year over year [21] - Adjusted operating income was $47.6 million, resulting in an adjusted operating margin of 19%, up 680 basis points year over year [22] - Adjusted EBITDA was $55.4 million, up 68% year over year, with an adjusted EBITDA margin of 22.1%, up 600 basis points year over year [22] - Adjusted diluted earnings per share were $0.38, up from $0.06 a year ago [23] Business Line Data and Key Metrics Changes - Infrastructure net sales were $72.8 million, up 5% sequentially and up 30% year over year [8] - Data center net sales were a record $51.6 million, up 3% sequentially and up 143% year over year [8] - High-end consumer net sales were $35.4 million, flat sequentially and up 3% year over year [12] - Industrial net sales were $142.8 million, down 3% sequentially but up 24% year over year [16] - LoRa enabled solutions within the industrial market had net sales of $38.9 million, up 5% sequentially and up 81% year over year [16] Market Data and Key Metrics Changes - The company expects short-term demand gaps in the CopperEdge segment but anticipates sustainable growth in the data center business due to capital expenditure growth by hyperscalers [9] - The IoT cellular portfolio is expected to benefit from growing 5G adoption rates, particularly in North America [18] - Connected services net sales remained stable, showcasing the deployment of AI tools for anomaly detection [19] Company Strategy and Development Direction - The company focuses on portfolio optimization, strategic investment in R&D, and driving margin expansion [7] - Management emphasizes the importance of solidifying a winning culture, accelerating innovation, and leveraging technology leadership to enhance shareholder value [20] - The company is optimistic about the second half of the fiscal year, expecting growth driven by fiber edge products and incremental opportunities from LPO and CopperEdge [90][94] Management's Comments on Operating Environment and Future Outlook - Management acknowledges macroeconomic uncertainties that may impact the timing of portfolio optimization initiatives but remains committed to strategic priorities [68] - The company is confident in its ability to navigate through dynamic tariff policies and maintain stable product flow across the semiconductor supply chain [7] - Management expects net sales for Q2 to be around $256 million, reflecting a 19% year-over-year increase at the midpoint [25] Other Important Information - The company recorded a net debt decrease of $14.8 million to $396.2 million, with a focus on debt reduction [24] - The company successfully amended its revolving credit facility to increase total borrowing capacity by $117.5 million [24] Q&A Session Summary Question: Insights on the cellular module business - Management noted that the cellular module business experienced a seasonal decline but expects revenue to accelerate in future quarters due to competitive dynamics [32][34] Question: Update on AI connectivity and CopperEdge - Management highlighted strong engagement with over 20 customers for CopperEdge, with expectations for revenue ramp-up by Q4 [41][44] Question: Trends in the core data center business - Management expressed optimism for growth in the core data center business, driven by fiber edge products and expected incremental revenue from LPO [55] Question: LoRa market outlook - Management indicated that while LoRa sales may moderate slightly, the business remains strong with a projected quarterly run rate of $30 million to $35 million [60] Question: Expectations for seasonality in the second half - Management noted that seasonality is expected in the high-end consumer segment, while other markets may not show obvious seasonal trends [80] Question: Insights on surge switch product - Management explained that surge switch provides additional protection and is being designed into various applications, enhancing dollar content compared to typical protection products [97][100]

Investment Rating - Maintain "Buy" rating for the industry [5] Core Viewpoints - The upcoming OFC 2025 conference will showcase cutting-edge optical communication technologies, focusing on 1.6T optical modules, 200G optical chips, CPO, MPO, and LPO technologies [21][22] - The collaboration between AI and optical communication technologies is creating a feedback loop that drives comprehensive computing power upgrades, enhancing data rates, reliability, and operational efficiency [24][25] - The report emphasizes the importance of low-power optical modules in meeting the demands of AI computing clusters, with advancements leading to a reduction in power consumption by 20% for new products [21][22] Summary by Sections Investment Strategy - Focus on the optical communication sector, particularly on leading companies such as Zhongji Xuchuang, Xinyi Sheng, and Tianfu Communication [7][13] - Recommendations include monitoring developments in AI infrastructure and optical modules [7][13] Market Review - The communication sector has experienced a decline, with the operator index performing relatively better than other segments [17][18] - Specific declines noted in various sub-sectors, with optical communication down by 3.5% [20] Technology Developments - CPO and MPO technologies are rapidly advancing, transitioning from theoretical solutions to scalable applications [22][23] - LPO products are undergoing continuous micro-innovations to meet the increasing demands of AI applications [22][23] Key Companies to Watch - Recommended companies include Zhongji Xuchuang, Xinyi Sheng, Tianfu Communication, and others in the optical module and AI infrastructure space [7][8]