Earnings Bytes

"For the second quarter of fiscal 2027, Marvell delivered record revenue of $2.739 billion, reflecting 13% sequential and 37% year-over-year growth. Revenue and non-GAAP earnings per share of $0.94 both exceeded the midpoint of guidance. As a result, we now expect overall Marvell revenue in fiscal 2027 to grow approximately 45% year-over-year to roughly $12 billion, up from our prior outlook of approximately $11.5 billion just one quarter ago. Putting it all together, we now expect fiscal 2028 revenue of approximately $18 billion, up $1.5 billion from the $16.5 billion outlook we provided just one quarter ago."

"The increase in our revenue outlook continues to be driven by our data center business, which we now expect to grow by approximately 60% this fiscal year, up from our prior expectation of approximately 50%. Importantly, this growth remains broad-based. Interconnect continues to lead the way, while our custom business is expected to ramp significantly in the second half."

"As a result, we now expect Marvell's data center revenue to grow more than 60% year- over- year in fiscal 2028, driven by strong growth across all of our key data center businesses. This includes custom more than doubling, as we indicated last quarter. We look forward to providing a deeper dive into the specific drivers of our longer-term growth at our Investor Day in New York City on October 6, but the key takeaway for today is clear. The strength of our data center business continues to exceed our prior expectations."

"The most recent example of this momentum is the 8-K we filed last week, disclosing an expanded commercial agreement and associated warrant with a key hyperscaler, one of the largest adopters of custom silicon. The warrant agreement encompasses custom programs already in execution that were awarded to Marvell over the past several years, new design wins, and future potential programs. The warrant structure reflects the scale and long-term potential of the relationship and further aligns common interests as our work together expands. It spans a broad range of custom silicon programs, including those that attach to the TPU ecosystem, such as AI inference accelerators, storage controllers, network interface controllers, memory interface controllers, and near memory compute."

"With respect to CXL, this investment we made organically over the years has really evolved, and it's turning out to be a home run for a couple of reasons. We're seeing this technology now getting deployed at multiple hyperscalers with varying architectures, by the way, in extremely high volumes. One is just the demands of inferencing require it. The other is what we're seeing is as a result of the scarcity that's out there in memory, customers are modifying and adjusting their plans to actually use more of this type of technology. This is continuing to have strong upward bias."

"While the transition in scale-up networks from copper to optics is expected to take several years, with both technologies coexisting, customers are aggressively planning scale-up optics deployments starting as early as next year. In addition to our ongoing success in CPO, we are also seeing a strong adoption of our NPO solutions at multiple customers. As a result, our fiscal 2028 revenue outlook for scale-up optics has increased meaningfully compared to prior expectations, positioning Marvell to be one of the largest enabler of NPO in AI infrastructure."

"Connectivity continues to be a critical enabler of AI performance, driven by robust demand for both our interconnect and switching products. Thus far, the largest driver of growth for these businesses has been for scale-out applications. On the optical DSP side, 800 G demand remains strong, while our 1.6 T business is ramping rapidly, a trend we expect to accelerate further in FY 2028. Within scale-out switching, our business remains on track to more than double this year, driven by a strong ramp in our 51.2 T products across a broadening array of customers."

"As a result, we expect significant operating leverage, with non-GAAP operating margin likely to enter our 38%-40% long-term target range in Q4 of this fiscal year. Looking ahead to fiscal 2028, we currently expect non-GAAP operating expenses to grow at roughly half the rate of revenue growth in percentage terms. This reflects continued investment against an expanding opportunity set, while yielding continued operating leverage to achieve the upper end of our target non-GAAP operating margin of 38%-40% as we progress through the year."

"Looking ahead to fiscal 2028, aggregate demand continues to accelerate, and our operations team is doing an outstanding job securing additional supply despite pervasive industry-wide constraints. As a result, we now expect Marvell's data center revenue to grow more than 60% year- over- year in fiscal 2028, driven by strong growth across all of our key data center businesses. Importantly, even as our revenue base becomes significantly larger, our growth rate is accelerating."

"You are right, we did define what we call the XPU attach category a couple of years back. Actually, we gave quite a detailed view of that in our June 2025 custom silicon event. I think all of our projections to date have been under called, meaning that that opportunity continues to get more and more significant. It is just massive for Marvell and game-changing at the sort of peak performance of what could be achieved now over the next six and a half years."

"Sales for the second quarter were $47.9 billion, an increase of 5.7% from the same period last year. Comp sales increased 1.7% from the same period last year, and comps in the U.S. increased 1.3%. Adjusted diluted earnings per share were $4.92 in the second quarter, compared to $4.68 in the second quarter last year. Our second quarter results exceeded our expectations, and our teams did a great job executing throughout a dynamic environment."

"In fact, this month, we launched Express Delivery nationwide with delivery on tens of thousands of products in three hours or less. In addition, we've evolved our appliance delivery model to better serve direct purchases. We now stock a select assortment of appliances that can reach our customers next day in certain markets. We are seeing a sales lift in these markets and will continue to lean in to broaden these efforts."

"A great example of how we're building on the momentum that we're seeing is through the evolution of Magic Apron. In addition to a website, now associates and customers can utilize this application in our aisles to navigate our stores more efficiently, find products within seconds, and ask questions about products and projects to feel more confident in their ability to complete a home improvement project. Customer feedback has been incredibly positive."

"Big-ticket comp transactions, those over $1,000, were positive 2.4% compared to the second quarter of last year. We were pleased with the performance we saw in portable power and patio. However, larger discretionary projects remain under pressure. During the second quarter, pro posted positive comps and outperformed DIY. We saw strength in DIY across many spring-related categories, including live goods, mulch, soils, hardscapes, storage, patio, and grills."

"Turning to total company online comp sales leveraging our digital platforms increased 11% compared to the second quarter of last year. This is the fifth quarter in a row with double-digit year-over-year growth, driven by our ongoing investments across our interconnected platforms. Delivering the best interconnected experience is a key component of our strategy, and our faster delivery speeds are resonating with customers and driving greater engagement."

"In the second quarter, we received IEEPA tariff refunds, which reduced our cost of goods sold by $685 million. While these refunds were received in the second quarter, they are being used to offset unplanned and rising cost pressures throughout the year. In the second quarter, our gross margin was 33.7%, an increase of approximately 25 basis points from the second quarter of last year, which was primarily driven by the benefit from the IEEPA tariff refund, largely offset by incremental cost pressures related to fuel, energy, and other product input costs."

"Housing turnover, just as one point in the economy that we watch, has been at historical lows. It has never been lower as a percentage of the housing stock. Every time we have seen it hit the sort of 3% of the housing stock changing hands, over history, it has always bounced up relatively quickly. We have seen housing turnover at these low levels for four years now. I do not think that we have seen much volatility from the recent increase in rates."

"The headline here for us this quarter is that our teams took share in a difficult environment. We're confident the investments that we've made are positioning us like no one else in the market. When we look out at the broader market, all the data that we see, what we hear from other constituents in the market is that there remains tremendous pressure on our sector and on anyone connected with housing. When we look at our results with that overlay, we're confident we're taking share."

"Yeah, no. Both Canada and Mexico out-comped the company, which was fantastic. I know we called out Canada last quarter, but it was great to see the acceleration in Canada. For the half, they just had a fabulous quarter and half where they positive comp in transactions and positive comp in units, which is fantastic. Mexico has just been on this great run, and they continue to be on a great run, and we are just continuing to see just great results from that team as well."

"The app was our highest growth surface on all of our digital surfaces, and that was exciting. That's ahead of the planned refresh that we told you we've got coming in the back half, which is great. Then on Magic Apron, we're getting millions of questions per month now on Magic Apron. It's continued to grow. It's been a great tool for our customers. We've had great feedback."

"A strong retail foundation alongside faster-growing businesses like Marketplace, advertising, and membership. The math is not simply one plus one equals two. The value comes from how these businesses work together, with each one strengthening the others and expanding what the company can do as a whole."

"Obviously, I have some passion around this point, but it's not just that our incremental margins are growing; they're growing at twice the rate of the overall margin of the business. I think that shows sort of how the earnings complexion of our business and the durability of that growth that we have will play into the future. Very excited about it."

"The Walmart U.S. team delivered more than 11,000 rollbacks during the quarter, up from 7,200 rollbacks at the end of the first quarter, demonstrating our commitment to price investment. We're investing heavily in price because customers need us to and because we believe it drives market share gains over time."

"We believe AI will improve nearly every part of our business by making shopping better and our associates' work easier. Sparky is a great example. The number of customers using Sparky is up 70% from last year, and the customers and members who use Sparky for shopping spend 40% more per order than others who do not."

"Importantly, we are raising in the face of more than $2 billion of incremental cost tied to higher fuel prices in arguably a softer consumer environment than in February, when we introduced our initial outlook. As such, we feel it is prudent to remain cautious by only raising the guide modestly."

"New in FY 2027, we cited a 100 basis points headwind to total comp sales from deflation and brand-to-generic transfers under the first year of Maximum Fair Price regulation. In Q2, this negative impact was closer to 125 basis points, and we've updated our estimate for FY 2027 impact to be similar at 125 basis points."

"We're building what we believe can be the most essential membership program for consumers and excited for what's ahead. The thing that people sometimes overlook when reflecting on our membership program is the incrementality that we see on GMV. Our members spend approximately four times more than non-members."

"Fast delivery in the U.S. grew 48% for the quarter. Speed matters, and we have a significant competitive advantage. Speed is not simply a fulfillment metric; it is an acquisition strategy. Customers who use fast delivery shop with us more frequently, they deepen engagement with us, and they are more likely to become Walmart+ members."

"Meal solutions, prepared food partnerships like the one we announced with Subway, and faster fulfillment allow us to participate in a much broader share of everyday food spending. This is an exciting opportunity, and we are just getting started."

"The more omni we become, the more important our stores become. Not less important, more important. Between in-store shopping and digital fulfillment, we have more unit volumes transacted through our stores than ever before, as they are the last-mile fulfillment nodes for 80% of our e-commerce orders and 100% of our fast deliveries."

"the way we thought about it was at the highest level, you're talking about roughly $50 billion of spend on a gigawatt data center, and with CPUs growing from 30 million cores to 120 million cores, and then we calculate out what the power consumption looks like, we save about half versus x86. That gets us roughly to that math of $20 billion."

"Looking out over years 2027-2031, 70% of revenues we're forecasting to collect are already covered with royalty rates set in contract. Even by fiscal 2031, the contracted base is still around 60%."

"I think that this market will grow in 2031, and don't ask me what year, Drew, this thing's gonna hit to a TAM of $200 billion, because I can't tell you exactly when that's gonna happen, except I absolutely to my core believe it is gonna happen. It's gonna happen, this hockey stick is gonna go up high."

"We think it's a really broad opportunity, and we don't think the future looks like the past, right? You can look backwards and say, 'Okay, you've got these guys doing chips and these guys doing IP, and I add up some of the parts and I can't get the math to work.' The math never works that way when you kinda look forward because things change relative to how architectures are developed and solutions are driven."

"The reality of even the CSS story is that some of these hyperscalers are literally just starting to deploy their products in earnest now. They've launched them, and they're really, really launching them, and we have visibility now into what their plans are, and that's what drives our sort of confidence level just in the base CSS business."

"You can see this in our results. At this point in time, as the base of the quarter that's ending this month, we now have achieved where 25% of our mobile royalties will be coming from CSS. We're not stopping there."

"Our ecosystem is massive. Rene already called out that we have 22+ million developers building on Arm. 22 million. I'm pretty sure that makes this the biggest software ecosystem there is. Now, when I think about this breadth, it covers our full platform."

"Increasing R&D combined with good execution creates a virtuous cycle of new products driving revenue growth. From here, we are forecasting mid-teens OpEx growth through FYE 31. We expect our revenue by FYE 31 to have grown by more than 2.5 times faster than our non-GAAP total costs."

"We already have a number of customers locked in, and we intend to expand that list. I think it's gonna be a very diverse customer base. To be able to stand up on the day of the launch with two very large companies in this space, Meta and OpenAI, and then some great partners that we showed on the video, SAP, Cloudflare, that's a pretty significant milestone."

"A few months ago, we had our Financial Analyst Day. You know, we put out an ambitious financial model to grow, you know, sort of 35% CAGR over, you know, sort of the next, you know, 3, 4, 5-year period. I think as we look at the market dynamics, as we look at the product dynamics, I think we are, you know, very much on track to that and, you know, with an ambitious target of, you know, over $20 of earnings per share in that timeframe."

"We were looking for a way to really, you know, turbocharge, you know, strategically, you know, deepen our relationship with Meta. That's what we announced a few weeks ago, really a 6 gigawatt long-term strategic partnership where we're actually doing a semi-custom GPU for Meta along with all of the rest of the work that we do with them on CPUs and other parts of the system. It was really a vertically integrated discussion in the sense that we started from the workload first and then worked through, you know, what is Meta trying to achieve with their workloads?"

"If you talk to our top customers, they're like, 'Wow, you know, Lisa, the, like, the demand for CPU compute sitting along AI was perhaps something that was under-forecasted.' We are in the process of catching up. I think it's a great time. You know, it's a great time because, you know, one, we were already, from an AMD standpoint, expanding our workload coverage, and then two, you're seeing the customer demand really strengthen as well."

"The tools are that good. I think the libraries are that good. Frankly, we're using AI extensively in that in that ecosystem building. When you go forward to MI450, you know, that's why this year is so exciting for us. It really is a huge step function in capability. It's something that we planned."

"We definitely have enough CoWoS capacity. I know that, you know, there's lots of people trying to check various things. The best thing I can tell you is we have the capacity, we have the technology, we have, you know, the deep customer relationships, we have the data center, you know, providers have allocated space for it, so we have to execute that ramp. We've always said the ramp is second half weighted. Think about it, you know, a little bit in Q3, but really ramping sharply, as we get into Q4."

"On the GPU side, it is still a little bit complicated. We were able to ship some MI308s last quarter, in the fourth quarter that we reported, and we talked about, you know, approximately $100 million this quarter. We're in the process of applying for licenses for the next generation of the MI325 chips. I think the Department of Commerce and the U.S. government are still going through the approval processes for that. It's very, very hard to predict, and for that reason we're not forecasting additional revenue going forward."

"The key with how we've designed, you know, these warrants is they're very, very performance-based. In some sense, both companies are incented to help each other win. You know, we win when Meta's foundational models are super successful, and they need lots and lots of chips. We are motivated to give them the best infrastructure for their workloads. They're motivated to ensure that our ecosystem is as strong as it can be."

"The impact that we're seeing is, you know, certainly the memory prices are affecting system prices. You see system prices going up. I will say that the enterprise demand on the data center side seems again, very durable. I am watching the impact on the PC market. You know, we would expect that there might be more, you know, sort of cost pressures, and as those cost pressures, they may change a little bit the PC market dynamics. We are expecting that in the second half of the year we may see a more muted, you know, part of the market just as memory prices are volatile."

"Back to your comment about, you know, are there, is it supply tightness? Yes, there is supply tightness. That's really because the market sizing is bigger than what we had forecasted, you know, 3 or 6 months ago. It always takes time for the supply chain to catch up with what the market wants. I can say that, you know, we are very, very well positioned from a supply standpoint to meet a large percentage of that demand."

"With Venice, like, every one of our large customers wants Venice the moment it comes out. That kinda gives you a sense of how good it is because if you have power to spend, you wanna spend your power on the best technology out there, you know, that's what Venice will be when it comes out."

"Firstly, we secured underwriting commitments for $3.6 billion of GPU financing at an interest rate of less than 6%. Together with customer prepayments, this provides funding coverage for approximately 95% of the GPU-related CapEx, supporting our $9.7 billion AI contract with Microsoft. Importantly, this financing package provides greater clarity to also advance a broader set of customer discussions."

"Operationally, execution is tracking well across the portfolio, and we expect to deliver 140,000 GPUs by the end of 2026, positioning us to deliver $3.4 billion in annualized run rate revenue. Based on capacity already contracted and the strong customer engagement for new deployments in Mackenzie and Canal Flats, we're on track to reach our targeted $3.4 billion ARR by the end of 2026."

"But to, to be clear on this, guys, like, crystal clear, the 2,000 MW is secure. Like, none of this batch stuff, none of the market chatter is influencing whether or not this 2,000 MW is available. We've got the signed interconnection agreement. It was signed in 2023. It's been there for years."

"When you've got scarcity around how many data centers you can physically bring online, every incremental 200 MW can deliver either $300 million-ish through a colocation or multiples of that in the $ billions under a cloud contract. So when we look at the monetization opportunity for our platform and growth for shareholders in creating value, the cloud opportunity creates a lot more upside, as we see it."

"Our $3.4 billion ARR target for the end of calendar 2026 reflects utilization of only around 10% of our 4.5 GW of secured grid-connected power capacity. That means the vast majority of our portfolio remains available to support additional deployments. With demand continuing to build, that secured capacity gives us the ability to keep engaging customers on new large-scale opportunities and to extend growth well beyond the 2026 target."

"As Dan mentioned, we've secured a new 1.6 GW data center campus in Oklahoma, further strengthening what is already one of the most differentiated power portfolios in the sector. The 2,000-acre Oklahoma site is a strong addition, with low latency connectivity to major network exchanges and ramp schedule commencing in 2028. As with Sweetwater, the MW for this new site in Oklahoma have been secured, which enables commercial discussions to progress meaningfully, anchored on firm, deliverable capacity."

"But, you know, one of the knocks on GPU cloud was the capital intensity of GPUs. So with the announcement today of the GPU financing, we've now secured 95% of the cost of the GPUs at an average interest rate of around 3% when you factor into the prepayment. So we essentially got the GPUs for next to nothing."

"If you think of A100s, H100s, you know, those are more than 5 years old and more than 3 years old, respectively now. Now, those chips are still effectively 100% utilized across the industry, and still earning very good rates of return against their original capital costs. So we continue to believe that these chips will have a long, economically useful lifetime, you know, in excess of the contract lengths that we're signing, even the Microsoft one at five years."

"Financial year to date, we have now secured $9.2 billion from customer prepayments, convertible notes, including the $2.3 billion issued in December, GPU leasing arrangements, and the dedicated GPU financing for the Microsoft contract. This diversity of capital sources allows us to scale with confidence."

"Vertical integration is one of IREN's most important competitive advantages. We design, build, and operate our own data centers, supported by in-house engineering, procurement, construction, technology, and operations teams. This structure gives us direct end-to-end control of our cloud offering and the ability to manage cost, timelines, and service quality."

"Sales of our glasses more than tripled last year, and we think that they're some of the fastest growing consumer electronics in history. Billions of people wear glasses or contacts for vision correction. I think that we're at a moment similar to when smartphones arrived, and it was clearly only a matter of time until all those flip phones became smartphones. It's hard to imagine a world in several years where most glasses that people wear aren't AI glasses."

"Since the beginning of 2025, we've seen a 30% increase in output per engineer, with the majority of that growth coming from the adoption of agentic coding, which saw a big jump in Q4. We’re seeing even stronger gains with power users of AI coding tools, whose output has increased 80% year-over-year. We expect this growth to accelerate through the next half."

"We anticipate 2026 capital expenditures, including principal payments on finance leases, to be in the range of $115-135 billion, with year-over-year growth driven by increased investment to support our Meta Superintelligence Labs efforts and core business. Despite the meaningful step up in infrastructure investment, in 2026 we expect to deliver operating income that is above 2025 operating income."

"For Reality Labs, we're directing most of our investment towards glasses and wearables going forward, while focusing on making Horizon a massive success on mobile and making VR a profitable ecosystem over the coming years. I expect Reality Labs losses this year to be similar to last year, and this will likely be the peak as we start to gradually reduce our losses going forward while continuing to execute on our vision."

"In the second half of 2025, our initiatives on Facebook to redistribute ads across users and sessions delivered a nearly 4x larger revenue impact than Facebook ad load increases. In Q4, we launched a new run-time model across Instagram Feed, Stories, and Reels, resulting in a 3% increase in conversion rates in Q4."

"We are now seeing a major AI acceleration. I expect 2026 to be a year where this wave accelerates even further on several fronts. We're starting to see agents really work. This will unlock the ability to build completely new products and transform how we work."

"Q4 total revenue was $59.9 billion, up 24% or 23% on a constant currency basis. Q4 Family of Apps ad revenue was $58.1 billion, up 24% or 23% on a constant currency basis. In Q4, the total number of ad impressions served across our services increased 18%. The average price per ad increased 6% year-over-year, benefiting from increased advertiser demand, largely driven by improved ad performance."

"I guess it’s probably also worth flagging because I don’t think either of us mentioned the Manus acquisition in the upfront comments, I mean that is going to -- is a good example of -- you have a significant number of businesses that already pay a subscription to basically use their tool to accelerate their business results and integrating that kind of thing into our ads and business manager, so that way we can just offer more integrated solutions for the many, many millions of businesses that use and rely on our platforms is going to be really powerful."

"One area we’re already seeing promise is with AI dubbing of videos into local languages. We are now supporting nine different languages, with hundreds of millions of people watching AI translated videos every day. This is already driving incremental time spent on Instagram and we plan to launch support for more languages over the course of this year."

"We do continue to be capacity constrained. Our teams have done a great job ramping up our infrastructure through the course of 2025. But demands for compute resources across the company have increased even faster than our supply. So we expect over the course of 2026 to have significantly more capacity this year as we add cloud. But we’ll likely still be constrained through much of 2026 until additional capacity from our own facilities comes online later in the year."

"We aligned in December 2025 with the European Commission on further changes to our consent model for personalized ads in Europe. So, in the coming days, users in Europe will see the changes to the less personalized ads user flow. We continue to think that our aligned solution goes far above and beyond what’s required by the DMA, and our appeal of the Commission’s decision will continue in the courts. And with this said, we can’t rule out that regulatory authorities or courts could seek further modifications to our less personalized ads offering. So, if that were to be the case, it’s possible that those changes could result in a materially worse user experience in the European Economic Area in Switzerland."

"We don’t manage to a target margin. We believe that we are in a very fortunate position as a business to both have very strong revenue growth and just healthy business overall coming into 2026, seeing strong revenue growth. And also, fortunate to have a lot of very compelling opportunities to both build what we believe is going to be transformative technology, but also user products and experiences that we believe over the long run will be not only very cool technological experiences, but also good business opportunities. So, we’re reinvesting a lot of the revenue into these opportunities now. Again, I think I mentioned this on the call, but they’re primarily in the form of either AI infrastructure or talent."

"Having said that, we have come into 2026 to date against a very healthy macro backdrop. I alluded to this on the first call, talking about how strong the holiday marketing season was. And we’ve seen the continued macro strength continue into the first weeks of 2026. We’ve also seen good results from the set of investments that we made in 2025, specifically to fund work to drive ad performance improvements and organic engagement initiatives."

"On engagement, video was the largest driver of engagement gains in Q4, with particular strength on Instagram, where Reels time grew more than 30% year-over-year globally. I’d also note that Facebook saw healthy double-digit growth in video time in Q4 as well. On ad load, the tailwinds that we had in Q4 were driven by the higher levels of ad load on both feed and video surfaces on Facebook and Instagram."

"In terms of where we are focused right now on driving down the cost of scaling compute, on silicon, that’s obviously one of the big cost drivers. We’re working to do that today through a variety of means, including diversifying our chip strategy so we can get the greatest cost efficiency for the workloads that we need to support. For example, we run a number of workloads with different requirements for compute, memory, and networking. And we’re focused on deploying the optimal chips for each of those workloads to deliver the best performance per watt and total cost of ownership. And we’re also continuing to expand our MTIA custom silicon program to support our core ranking and recommendation inference and training workloads."

"I'm pleased to report that Cadence delivered excellent results for the fourth quarter, closing an outstanding 2025 with 14% revenue growth and 45% operating margin for the year. We finished 2025 with a record backlog of $7.8 billion, well ahead of plan, reflecting broad-based portfolio strength and increasing contributions from our AI solutions."

"Last week, we launched ChipStack AI Super Agent, the world's first agentic AI solution for automating chip design and verification. It's built upon our proven, physically accurate product and provides up to 10x productivity improvement for various tasks, including design coding, generating test benches, and debugging. ChipStack has received compelling endorsements from Qualcomm, NVIDIA, Altera, and Tenstorrent, among others."

"So what we are saying instead is that, and you can see that in our results, we can see this in our discussion with customers, is that as we move to these agentic flows, it uses more of our software to get the job done rather than the other way around. Overall, to answer your question, we have seen absolutely no discussion with customers of reducing the usage. On the contrary, you know, all these AI tools are increasing the usage of our tools."

"Broad proliferation of Cadence Cerebrus continues, and adoption of our Cadence Cerebrus AI Studio is accelerating. Recently, Samsung US used it to tape out a SF2 design, achieving 4x productivity improvement. In custom and analog, our Spectre circuit simulator saw significant growth at leading AI and memory companies."

"We finished the year with very strong momentum on backlog, and we saw that strength right across the board, across all lines of business. And just a key transparency metric, you'll see in the CFO commentary that around 67% of 2026 revenue is coming from beginning backlog, and that gives us strong visibility into the multi-year recurring base."

"Our IP business saw strong momentum, with revenue growing nearly 25% in 2025, reflecting both the strength of our expanding IP portfolio and the critical role our star IP solutions play in the AI, HPC, and automotive verticals. We are seeing particularly strong adoption of our industry-leading memory IP solutions, including our groundbreaking LPDDR6 memory IP, which is enabling customers to achieve the memory performance and efficiency required for next generation AI workloads."

"The way we go to market with agentic AI will be different because this is a new tool category of something that EDA never automated. We will price it as like a virtual engineer or agent. So that would be, you know, extra business, and our customers are willing to spend on that because it is a, it is productivity improvement for them."

"And, and I've said before, like, what we are seeing at our customers, you know, they want to use more AI, and, and I think they will all, they will invest more in R&D. I think they will also hire more engineers, but as a percentage of spend, the more spend will go to automation and compute because the other thing which is unique to our end market is that the workload is exponential. If the chip goes from 100 billion now to 1 trillion in a few years, they need to do a lot more work, and then some of the work will be done by AI agents, you know, calling our base tool."

"I think, if you have a look at what we achieved in 2025, we achieved incremental margin of 59%, I think. And I think that points to the fact that there's no near-term ceiling on operating leverage for the company. Now, generally, you know, we're more prudent with our guide at the start of the year, and we try to build from there. But, so I think if you, if you compare the... The right compare for the 51% that's in the current guide is probably against what we would guide for incremental margin at the start of each year."