Industry Overview - The artificial intelligence (AI) infrastructure sector is experiencing significant growth, with a bullish demand scenario and a projected capital expenditure increase of 46% year-over-year, reaching $325 billion by 2025 [3][4]. - The total addressable global sovereign AI market is estimated to be $1.5 trillion, indicating vast opportunities for investment and development in various fields such as healthcare, energy, and cybersecurity [4]. Company Highlights Credo Technology Group Holding Ltd. (CRDO) - Credo Technology is focused on high-performance serial connectivity solutions, particularly in AI server markets, with its Active Electrical Cables (AEC) gaining traction due to their reliability [9][10]. - The company has achieved significant milestones, including an 800-gig transceiver DSP design win and the introduction of ultra-low-power optical DSPs, which are expected to enhance industry standards [11][14]. - CRDO anticipates a revenue growth rate of 85.8% and earnings growth of over 100% for the current fiscal year, with a 37% improvement in earnings estimates over the last 60 days [14]. Jabil Inc. (JBL) - Jabil is benefiting from strong momentum in AI-powered data center infrastructure and has a diversified product portfolio that enhances its resilience against macroeconomic disruptions [15][16]. - The company has a projected revenue growth rate of 5.6% and earnings growth of 17.8% for the next fiscal year, with an 8.4% increase in earnings estimates over the past 30 days [17]. Lumentum Holdings Inc. (LITE) - Lumentum designs and manufactures optical technologies that support AI applications, with a focus on high-speed telecommunications and data centers [18][20]. - The company has a strong collaboration with NVIDIA in developing photonic solutions, which are crucial for AI infrastructure [21]. - LITE expects a revenue growth rate of 32.8% and earnings growth of over 100% for the current fiscal year, with a slight improvement in earnings estimates recently [21].

Financial Data and Key Metrics Changes - Jabil reported Q3 net revenue of $7.8 billion, a 16% increase year over year, exceeding guidance by $800 million [5][10] - Core operating income reached $420 million with core operating margins at 5.4%, a 20 basis point improvement year over year [6][10] - Core diluted earnings per share for Q3 was $2.55, up 35% compared to the same quarter last year [6][10] Performance by Business Segment - Regulated Industries segment revenue was $3.1 billion, flat year over year, reflecting softness in EV and renewable markets [7] - Intelligent Infrastructure segment revenue was $3.4 billion, up approximately 51% year on year, driven by AI-related cloud and data center infrastructure demand [7][8] - Connected Living and Digital Commerce segment revenue was $1.3 billion, down approximately 7% year over year, mainly due to softness in consumer-driven products [8] Market Data and Key Metrics Changes - Inventory days decreased to 74 days, with cash flow from operations at $406 million for Q3 [9][10] - The company expects Q4 revenue for Regulated Industries to be $2.9 billion, down 5% year on year, while Intelligent Infrastructure is projected to grow to $3.3 billion, up approximately 42% year over year [11][12] Company Strategy and Development Direction - Jabil is focusing on expanding its U.S. manufacturing footprint, particularly in AI and data center infrastructure, with a planned investment of $500 million over several years [19][20] - The company aims to enhance core margins and optimize cash flow while returning value to shareholders through share repurchases [25][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate geopolitical uncertainties and highlighted the strength of its diversified portfolio [14][25] - The company raised its revenue guidance for fiscal 2025 to approximately $29 billion, expecting core diluted earnings per share of $9.33 for the year [25][26] Other Important Information - Jabil's debt to core EBITDA ratio is approximately 1.4 times, indicating a healthy balance sheet [10] - The company repurchased $339 million of its shares in Q3 and is on track to complete a $1 billion share repurchase authorization in Q4 [10] Q&A Session Summary Question: What is the expected growth in AI-related revenues for fiscal 2026 and beyond? - Management indicated that AI-related revenue is projected to reach approximately $8.5 billion for fiscal 2025, with further guidance to be provided in September [32][34] Question: What needs to happen for operating margins to reach 6% or more? - Management noted that improving capacity utilization and focusing on higher-margin business segments could help achieve this goal [37][39] Question: How is the company assessing risks related to strong sales potentially being due to pull-in buying? - Management clarified that the revenue beat was primarily in capital equipment and cloud data center infrastructure, with minimal tariff impact [42][43] Question: What is the focus of the new U.S. manufacturing investment? - The investment aims to diversify the customer base and expand capabilities in AI and data center infrastructure, not just support existing customers [46][47] Question: How does the company view capital allocation between M&A and buybacks? - Management emphasized a commitment to returning value to shareholders through buybacks while remaining open to strategic acquisitions that enhance capabilities [100][102]

Summary of Lumentum (LITE) FY Conference Call - May 13, 2025 Company Overview - **Company**: Lumentum (LITE) - **Industry**: Optical components and networking solutions Key Points Demand and Market Outlook - No observed slowdown in ordering patterns; book-to-bill remains positive [3][4] - Customer feedback indicates continued strong demand, with no anticipated slowdown in the next four to five quarters [3][4] - CapEx spending from cloud companies is expected to remain stable or improve in 2026 compared to 2025 [6][7] Tariff Impact and Mitigation Strategies - Tariffs have impacted margins by approximately 100 basis points, primarily due to reverse tariffs on imports from the U.S. to China [8][9] - Lumentum has manufacturing facilities in both China and Thailand, allowing for flexible supply chain management to mitigate tariff impacts [9][10] - Plans to scale up manufacturing in Thailand as a primary strategy to navigate potential tariff challenges [12][13] Industry Dynamics and Competitive Landscape - The optical industry has changed significantly since the sale of Finisar; Lumentum now has a higher component mix and a strong laser footprint [16][17] - Increased demand from U.S. hyperscalers for domestic suppliers due to security concerns is driving market dynamics [20] - The rate of change in the market is accelerating, favoring companies that invest in innovation [21] Business Strategy and Growth Areas - Near-term growth is expected from the transceiver market, where Lumentum currently holds a low single-digit market share [22] - Long-term strategy aims to shift focus towards higher-margin components, particularly co-packaged optics [23][24] - Vertical integration is seen as beneficial but not essential for improving margins in the transceiver business [25][28] Revenue Opportunities and Product Development - Optical Communication Systems (OCS) are expected to generate early revenue by the end of the calendar year, with material revenue anticipated in Q2 FY 2026 [55] - OCS offers advantages in cost, power consumption, and latency, making it a strong alternative to electrical solutions in data centers [54] - The company is exploring opportunities in industrial applications, particularly in semiconductor packaging, to improve profitability [63] Financial Performance and Margin Expectations - Current gross margins for transceivers are below desired levels, with expectations to reach low to mid-30s percentage [49][52] - Overall business margins are targeted to exceed 40% as the company shifts focus towards components [52][53] Conclusion - Lumentum is positioned to capitalize on strong demand in the optical components market, with strategic plans to navigate tariff impacts and enhance profitability through innovation and vertical integration. The company aims to leverage its manufacturing capabilities and market dynamics to achieve sustainable growth in the coming years.