4Q Outlook and Product Transition
Q: Simon Leopold from Raymond James asked what is built into the 4Q 800G and 1.6T expectations given the customer transition and manufacturing delays.
A: Stefan Murry explained that 800G growth continues, but 1.6T revenue is limited by material supply constraints following the faster-than-expected customer shift.
Q: Simon Leopold from Raymond James asked for an update on capacity linearity given the shift in the $471 million monthly revenue run rate target to the end of 2027.
A: Stefan Murry suggested linearizing growth throughout the year, while Thompson Lin noted they are moving from roughly $100 million per month in Q4 to $470 million per month by the end of 2027.
Q: Simon Leopold from Raymond James asked if customers are having second thoughts about AI investments following the election.
A: Stefan Murry stated they have heard no such concerns, and Thompson Lin added that demand exceeds their capacity for at least the next 18 months.
Financing and Capital Allocation
Q: George Notter from Wolfe Research asked about the strategy for financing the business given the current share price.
A: Stefan Murry said they are leaning more on debt than equity, and Thompson Lin noted they secured a $1,200 million bank loan and expect future profitability to support operations.
Q: George Notter from Wolfe Research asked if there is an opportunity to get customer prepayments.
A: Stefan Murry said it is part of discussions but less likely than in the past, though it remains a possibility for newer technologies like CPO.
Q: George Notter from Wolfe Research asked about the magnitude of CapEx for next year.
A: Thompson Lin clarified that CapEx will not necessarily be higher next year, as it depends on customer demand and construction schedules.
Supply Chain and Manufacturing
Q: Ryan Koontz from Needham & Co. asked about supply constraints for indium phosphide and DSPs.
A: Stefan Murry stated indium phosphide supply is sufficient through 2027, while DSPs are a significant limitation for 1.6T that should improve in the first quarter. Thompson Lin added they are qualifying additional suppliers.
Q: Ryan Koontz from Needham & Co. asked if the power issues at the new facility are related to the election or macro environment.
A: Stefan Murry clarified that the power issues are logistics challenges regarding transformers and cables, unrelated to the election.
Q: Ryan Koontz from Needham & Co. asked about the industry implications of the Lumentum and Marvell combination.
A: Stefan Murry said the consolidation highlights the scale of the AI optics opportunity and validates their position as an independent supplier.
Long-Term Agreements and Capacity
Q: Michael Genovese from Rosenblatt Securities asked about the benefits of the LTA.
A: Stefan Murry explained that the LTA provides multiyear visibility and allows for confident capacity investment, despite the trade-off of locked-in pricing.
Q: Michael Genovese from Rosenblatt Securities asked about the confidence in demand and the ability to sell all produced capacity.
A: Stefan Murry reiterated that demand is exceptional and they likely cannot meet all of it through next year.
Q: Michael Genovese from Rosenblatt Securities asked for an update on high-power laser testing and competitive positioning.
A: Thompson Lin stated they have the best power efficiency among suppliers and are qualifying with 4 to 5 customers, while noting a second LTA is in the final stage.
Substrate Supply and Revenue Targets
Q: Tim Savageaux from Northland Capital Markets asked if the recent substrate agreement is sufficient to support the 2027 revenue targets.
A: Thompson Lin confirmed it is sufficient and noted they are working with 6 suppliers total.
Q: Tim Savageaux from Northland Capital Markets asked how many hyperscale customers they are shipping 800G to and for revenue targets for 800G and 1.6T.
A: Thompson Lin said they have 2 major hyperscale customers, and Stefan Murry noted 800G will drive most growth, with 1.6T adding meaningful revenue.
