Chuck Mattera: Yes. Good morning, Chris.
Christopher Rolland: Hi. Great. Thanks for the question and congrats on the results. I just have one clarification and one question. First, the clarification, the primary gating issue on AI is 800 gig VCSELs. I just want to make sure whether I got that right or not. And then secondly, I wanted to talk about telco. So we’re seeing more and more kind of weak data points coming out for telco, but it kind of feels like maybe you’re going to tell us that could be in the rearview mirror for you guys. So is December the clear bottom there? Are you expecting to kind of grow through the year here? And what — where can we kind of normalize out on a quarterly run rate for telecom looking forward? Thanks.
Chuck Mattera: Okay, Chris. So Giovanni will clarify your question regarding VCSELs Magnus will take the telecom question. Giovanni?
Giovanni Barbarossa: Yes. So the — let me clarify, try to be clear. No, it’s not, okay? So we don’t have a challenge from a supply standpoint from the VCSEL standpoint. Of course, when you ramp a production of transceiver modules, there’s a number of other things that need to happen, including tests, automation of assembly lines, new processes. And of course, there is also external supply chain, particularly around ICs, that will impact our ability to ramp. So everything is coming together. And based on the demand — the demand is definitely stronger than what we could supply. We are capacity-limited but not necessarily from a device standpoint, but just as an overall ability to ramp to the volumes that we have been held by supplies by the — by our customers in terms of the most recent forecast versus previous forecast.
We are realigned with road maps. We know exactly what the customers are looking for, for next-generation products. And so we will adapt our internal supply chain to keep up with the demand. Currently, we don’t have experience — going back to your first question, we don’t experience a challenge from a VCSEL production standpoint. And I want also to recall that we have capacity — superior capacity for both internal and external suppliers. So we don’t — we can manage that as we need to support our own transceiver business, obviously, as a priority (ph).
Chuck Mattera: Thanks, Giovanni. Magnus, would you take the telecom question?
Magnus Bengtsson: Sure. Good morning, Chris. So in telecom, we saw growth in the December quarter over the October quarter by about 20%. And if we look out for the balance of the fiscal year, we expect double-digit growth second half over first half. And beyond that, in ’25, as the market improves we expect additional growth, both from the market coming back but also a lot of the engagement we have with customers on design wins for new products.
Chuck Mattera: Great. Thanks, Magnus. Thanks for your question, Chris.
Christopher Rolland: Thanks, guys.
Operator: Thanks. One moment for our next question. It comes from the line of Mark Miller with The Benchmark Company. Please proceed.
Mark Miller: Thank you for the question and congrats on your progress. Just was wondering in terms of new applications for VCSELs in terms of automotive and other applications. What are you looking at over the next 12 months or so?
Chuck Mattera: Great. Good morning, Mark. Julie, will you take that one?
Julie Sheridan Eng: Sure. Yes. So VCSELs in addition to the datacom market, it can be used in the sensing market. Obviously, we’re in the sensing world and mobile phone application. And then in addition to that, you can use VCSELs for all kind of other sensing, including in a vehicle, potentially in health applications, so many potential future applications of VCSELs in sensing.
Mark Miller: Thank you.
Chuck Mattera: Thanks, Julie. Thank you, Mark.
Operator: Thank you. One moment for our next question, please. Comes from the line of Tim Savageaux with Northland Capital Markets. Please proceed.
Tim Savageaux: Hi. Good morning. Again, sorry if I might have missed this earlier. But you talked about 800 gig transceiver shipments at about 100 million in the quarter kind of doubling sequentially. Do you have an outlook for where you expect that number to go either in fiscal Q3 or by year end? And I’ll follow up from there. Thanks.
Chuck Mattera: Yeah. Okay, Tim. Thanks for your question. Tim, what we said that you have missed is what I said is I expect our shipments in Q3 to be greater than Q2 and in Q4 greater than Q3. We’re on a ramp. It’s going up and to the right.
Tim Savageaux: Okay. Well, if I might maybe follow up on that a little bit. I mean, you’re talking about fairly modest sequential growth here for Q3 and growth in telecom. So I guess, are you looking for — and even if you look at your Q2 results, it seems like the lower speed stuff might have come down pretty good. So you’re seeing some offsets there. Is sort of that the dynamic for overall datacom revenue or what are the puts and takes as — or is that ramp slowing a bit, I guess, from the [Multiple Speakers]
Chuck Mattera: It really is an insightful question. Meta Marshall had the same question and Sanjai tried to address it. Let’s let him take another pass at it.
Sanjai Parthasarathi: Okay. So thanks for the question, Tim. Good morning. So in terms of the market, the market — the fastest growing segment of the market is 800G and above, which is really AI. We just redid our forecast, it’s growing at a 65% CAGR in the next five years, Tim. So it’s a very sharply growing market and we expect — we aim to grow faster than that market. Now the traditional networking market is certainly not growing at that clip, and we are not really factoring a significant rebound in our non-AI, if you will, market growth or our revenue growth. So a lot of our revenue growth is coming from AI-related applications. Hopefully, that’s clear.
Chuck Mattera: Thank you, Sanjai.
Tim Savageaux: Thanks, appreciate it.
Chuck Mattera: Yeah. Thanks, Tim.
Operator: One moment for our next question. And it’s from Ananda Baruah, Ananda Baruah with Loop Capital. Please proceed.
Ananda Baruah: Yeah. Good morning, guys. Thanks for taking the question and congrats on the strong execution. Yeah, actually, just a follow-up there, Sanjai, clarification. Is that the — I guess, what is 65% growth over the next five years specifically?
Sanjai Parthasarathi: Hi, Ananda. Good morning. It is the growth of 800G and above transceivers, datacom trounces from calendar ’23 to calendar ’28. It’s at a 65% cap.
Ananda Baruah: I got it. Super helpful. And I guess my question is, any way to think about yet the transceiver opportunity for genAI outside of the hyperscale complex? And so specifically, I’m thinking at telcos and on-premise, say, like Fortune 1000 sites. And that’s it for me
Chuck Mattera: Okay. Good morning, Ananda. Julie will take the next one.
Julie Sheridan Eng: All right. Good morning, Ananda. Yeah. So the — obviously, the biggest deployments are the biggest web scale. And as time goes on that spreads out, as you point out, to other smaller entities that could either host services or people may choose to have their services on-premise to that diversified customer base, similar actually to the Ethernet market. And then — so the genAI — I forgot the second part of the question.
Paul Silverstein: With regard to — will it spill over to telecom.
Julie Sheridan Eng: Thank you. Yes, eventually, it all spills over to telecom because all that data that’s getting generated inside has to go somewhere. So we do believe that, that will impact our telecom revenue in a positive way over time should impact eventually also non-AI datacom revenue. And then finally, something that might not be so direct of a comparison, but these genAI chips require the most advanced process nodes, and that’s beneficial to our industrial segment for our semi-cap inspection lasers.
Chuck Mattera: Thanks, Julie. Ananda, I would add that besides datacom and telecom verticals, we have a semi-cap equipment business, and it’s also underpinning the growth in AI by providing new tools, including laser-based tools and engineered material tools to OEMs that have to build the equipment to make the devices. I mean, we have it surrounded.
