Q2 FY2027 results
| Metric | Result | Change |
|---|---|---|
| Revenue | $2.739 billion | 37% YoY |
| Data Center Revenue | $2.17 billion | 46% YoY |
| Non-GAAP EPS | $0.94 | 40% YoY |
| Non-GAAP Gross Margin | 58.9% | Not stated |
| Non-GAAP Operating Margin | 36.6% | 180 basis points YoY |
Guidance and outlook
- Q3 FY2027 revenue is expected to be $3.15 billion, plus or minus 5%.
- Fiscal 2027 total revenue is projected to be approximately $12 billion.
- Fiscal 2028 total revenue is projected to be approximately $18 billion.
How management sounded
Confident (+8 on our -10 to +10 scale). Management raised revenue guidance for both fiscal 2027 and 2028 by significant amounts and highlighted accelerating growth in the data center segment. Management sounded more upbeat than on 92% of the 190 calls we cover; most companies sound positive on their own calls, so the comparison says more than the label.
Q&A summary
Custom Silicon and Warrants
Asked: Analysts asked about the scope of the new warrant agreement with a key hyperscaler and the contribution of XPU attach products.
Answer: Management stated the agreement is broad-based, covering inference accelerators, storage controllers, and network interface controllers, and noted that custom revenue is expected to more than double in fiscal 2028.
Scale-up Optics
Asked: Analysts inquired about the progress of scale-up optics and the Celestial AI photonic fabric solution.
Answer: Management noted that scale-up optics demand is accelerating faster than expected, with both NPO and CPO solutions contributing to the raised fiscal 2028 outlook.
CXL and Memory
Asked: Analysts asked about the evolution of CXL and its role in memory expansion.
Answer: Management described CXL as a home run for memory expansion and inferencing, noting that design wins have increased as customers seek to address memory scarcity.
Margins
Asked: Analysts questioned the impact of the custom silicon ramp on gross margins.
Answer: Management explained that while custom silicon creates a sequential headwind, the company expects to maintain gross margins in the current range and achieve the 38% to 40% operating margin target range by the end of the fiscal year.
What to watch before the next call
- Investor Day on October 6 in New York City for detailed long-term growth drivers.
- Execution of the expanded custom silicon programs with hyperscale customers.
- The transition of scale-up networking from copper to optical interconnects.
