Rambus Q3 2026 Earnings Call Transcript

Rambus (NASDAQ:RMBS) reported third-quarter financial results on Monday. The transcript from the company’s third-quarter earnings call has been provided below.

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View the webcast at https://events.q4inc.com/attendee/254362271

Summary

Rambus Inc reported a record high in Q3 revenue and non-GAAP earnings, driven by strong customer demand and product performance, with expectations for an even stronger Q4.

The company introduced new chip and silicon IP products for data center and AI infrastructure, and announced a strategic partnership to enhance AI-driven chip and IP design.

Rambus completed a $100 million accelerated share repurchase, reflecting confidence in its business model and commitment to returning value to shareholders.

Q3 product revenue reached $114 million, up 15% sequentially and 22% year over year, with DDR5 RCDs and new-generation products as key growth drivers.

The company’s silicon IP segment showed strong performance with key design wins, and Rambus anticipates continued growth in custom silicon development for AI.

Rambus projects Q4 revenue between $227 million and $233 million, with product revenue expected to grow by over 30% year over year.

The company is managing longer supply chain lead times by leveraging its balance sheet to build inventory, ensuring customer demand can be met.

Management expressed strong confidence in the long-term growth trajectory of AI infrastructure and data centers, and aims to drive sustainable growth and shareholder value.

Full Transcript

OPERATOR

Welcome to the Rambus third quarter fiscal year 2026 earnings conference call. At this time all participants are in a listen-only mode. At the conclusion of our prepared remarks, we will conduct a question and answer session. If you would like to ask a question, you may press star one on your touch-tone phone at any time. If anyone should require assistance during the conference, please press star zero at any time. As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Sumeet Gagneja, Chief Financial Officer. You may begin.

Sumeet Gagneja (Chief Financial Officer)

Thank you, Operator, and welcome to Rambus third quarter 2026 results conference call. I’m Sumeet Gagneja, Chief Financial Officer at Rambus. On the call with me today is Luc Seraphin, our CEO. The press release for the results that we will be discussing today has been filed with the SEC on Form 8-K. We are webcasting this call along with the slides that we will reference during portions of today’s call. A replay of this call will be available on our website beginning today at 5:00 p.m. Pacific Time.

Our discussion today will contain forward-looking statements including our expectations for projected financial results and prospects, market growth, demand for our solutions, and the potential effects of geopolitical and macroeconomic conditions. These statements are subject to risks and uncertainties that may be discussed during this call and are more fully described in our documents we filed with the SEC including our 8-Ks, 10-Qs and 10-Ks. These forward-looking statements may differ materially from our actual results and we are under no obligation to update these statements in our press release and on the call.

Today we present both GAAP and non-GAAP financial measures to provide greater clarity regarding our financial performance. A reconciliation of these non-GAAP financials to the most directly comparable GAAP measures has been included in our press release, in our slide presentation and on our website at rambus.com on the Investor Relations page under Financial Releases. The order of the call today will be as follows. Luc will begin with an overview of the business followed by my review of the financial results and then we’ll open the call to Q&A. I will now turn the call over to Luc to provide an overview of the quarter.

Luc Seraphin (President and Chief Executive Officer)

Thank you, Sumeet. Good afternoon, everyone, and thank you for joining us. In Q3 we delivered a truly exceptional quarter. Revenue and non-GAAP earnings both reached new record highs and exceeded the top end of our guidance ranges. Strong customer demand fueled record product revenue and cash from operations, and we expect an even stronger product performance in Q4. We introduced new chip and silicon IP products that extend our leadership in data center and AI infrastructure.

In addition, as complexity and pace accelerate in semiconductor development for AI, we are also investing in the tools and infrastructure that will keep us on the leading edge of technology. As such, we engaged with a fellow pioneer in the ecosystem and announced an exciting new partnership that propels us into the age of AI agent-driven chip and IP design. As we continue to invest in our future, we are also pleased to have completed a $100 million accelerated share repurchase.

This demonstrates the strength of our business model and our ability to return value to our stockholders while advancing our product roadmap to drive long-term growth. Taken together, the results and progress we delivered this quarter reflect the strength and long-term resilience of a strategy we have pursued over many years: investing in technology leadership, anticipating the key trends, transforming the data center, and positioning the company to capture the opportunities those trends create. Our strategy is producing strong results today while at the same time laying the foundation for future growth. As we outlined over previous quarters, AI continues to create strong tailwinds for Rambus across our businesses as frontier AI training continues to advance and inference scales across a growing range of applications.

Customers require increasingly sophisticated memory and infrastructure architectures to move, manage, and secure growing volumes of data. Agentic AI is accelerating this trend as deployments evolve toward more distributed and heterogeneous architectures that require greater coordination across systems. At the same time, orchestration of always-on workloads puts greater demands on the CPU, lifting CPU-to-GPU ratios and driving requirements for more main memory bandwidth and capacity across the data center.

The latest Agentic implementations amplify this need even further by assigning dedicated compute and memory resources to individual users or agents. All this creates accelerating demand for Rambus products and IP throughout the memory subsystem and across the broader infrastructure stack, while we continue to invest in the fundamental R&D and product roadmap required to address the ever-growing demand of memory management efficiency in the long run.

Now let me turn to the quarterly results. Starting with products, we delivered a new all-time high in quarterly product revenue, reaching approximately $114 million, up 15% sequentially and 22% year over year. Our leadership in DDR5 RCDs and growing adoption of new-generation products fueled our record results. We are seeing strong demand across multiple generations of RCDs, supporting our outlook for another record quarter of product revenue in Q4, which we expect to grow more than 30% year over year.

Looking ahead, we have a strong pipeline of products aligned with upcoming platform ramps, positioning us well for next generation server platforms. As part of that pipeline, we are pleased to share that our sixth-generation RCD, announced early in Q3, which supports DDR5-9600, is now sampling broadly with customers and is being very well received. We continue to execute successfully on our roadmap, recently expanding our product portfolio with an industry-leading PMIC for the upcoming LPDDR6 SoCam 2.

Earlier this year we introduced our first SoCam 2 chipset that supports LPDDR5X. This new PMIC solution extends our server memory product roadmap to LPDDR6 and reinforces our leadership in advanced server memory power management. It was developed in close collaboration with customers and ecosystem partners to enhance memory subsystem power efficiency and help scale tokens per watt for AI workloads. We identified early on that power management would be critical to the success of AI deployments and have been investing in this area for many years.

We are proud of our progress and continued leadership in this space. We have consistently said that as memory speeds increase and server architectures become more sophisticated and heterogeneous, the memory subsystem will require additional intelligence, power management, and control functionality. Our roadmap is designed to address this evolution across both DDR and LPDDR-based memory with timing management, power management, and security management creating opportunities for Rambus to participate in increasing module chip content over time.

In addition, DDR-based server platforms are expanding from 8 memory channels to 12 to 16 channels, increasing the maximum available memory bandwidth and capacity. This raises the number of modules supported in a server and amplifies demand as platforms progress. Today Rambus offers complete chipsets across all major industry-standard DDR5 and LPDDR server memory module architectures. This broad portfolio positions us well for future server platforms and allows customers to leverage Rambus solutions across a growing range of memory architectures and deployment models.

Looking ahead, we believe we are exceptionally well positioned for future server generations and for the continued expansion of memory-intensive AI infrastructure. Turning now to silicon IP, we delivered a very strong quarter with key design wins across our silicon IP portfolio. The strength of those wins, combined with expanding strategic engagement across the industry including custom silicon makers and hyperscalers, reinforces our confidence in the long-term growth opportunity for the silicon IP business and for Rambus. One of the defining characteristics of today’s market is the rapid growth of custom silicon.

The expansion of AI is fueling a new wave of custom silicon development. Hyperscalers, AI infrastructure providers, and emerging semiconductor companies are designing increasingly differentiated architectures and tailored silicon optimized for their own environments. These systems depend on advanced memory technologies, high-speed interconnects, and trusted security, creating significant opportunities for Rambus silicon IP. During the quarter we drove increasing ecosystem engagement and new tier-1 design wins for next-generation HBM.

Supported by our deep architectural engagements ahead of standards being finalized, we continue to see increasing interest in PCIe controller and switch IP for scale-up and scale-out connectivity solutions as customers seek higher levels of performance and efficiency across rapidly expanding AI infrastructure. The importance of bleeding-edge IP continues to increase as customers pursue differentiated performance, power efficiency, and time-to-market advantages.

As a result, we are engaging earlier in the architectural planning cycle with both our customers as well as our customers’ customers and participating in a broader set of strategic programs. Leading-edge memory and connectivity are fundamental to performance and, as AI infrastructure scales and becomes more heterogeneous, hardware-based security foundation is becoming fundamental. Agentic AI relies on distributed computing architectures that execute workloads across multiple systems, which increases the available attack surface for adversaries, a growing concern in the current environment.

As a pioneer and longtime leader in hardware-based security, Rambus IP solutions address that risk by providing a trusted foundation for the entire system and enhancing protection for valuable data and infrastructure. Building on our industry-leading security offerings, we recently added a new Root of Trust solution designed specifically for AI and data center deployments that supports the Caliptra specification. Caliptra was developed by key leading technology companies to establish a common hardware security foundation for data center-class SoCs and reflects the growing recognition that hardware-based security is essential for next-generation infrastructure.

Looking across both chips and silicon IP, we will continue to drive solutions that address the long-term foundation, memory performance, high-speed connectivity, and robust security demands of AI infrastructure. At the same time, we are harnessing AI to advance the underlying tools and development infrastructure that enable us to move faster, extend our leadership, and scale the business more effectively. As I mentioned at the beginning of the call, we recently announced a strategic investment and collaboration with Chip Agents, a fellow industry pioneer and leader in agentic AI design platforms.

We see great opportunities to leverage the Chip Agents AI-native design flows to accelerate our roadmap by speeding the pace of our chip and IP development, improving design quality, and enhancing engineering productivity across our organization. We believe this collaboration further strengthens our competitive position both for products and for IP and reinforces Rambus’ leadership role in next generation AI data center infrastructure. In summary, the company delivered an exceptional third quarter and we expect an even stronger Q4 as we continue to capitalize on the growing demand from AI. We achieved record revenue and earnings while expanding our chip and IP offerings, and at the same time we are investing in our development infrastructure to address the growing opportunities ahead. These results and decisions reflect the strength of our strategy and the continued alignment between Rambus technology and the most important trends shaping AI and data center infrastructure.

We are executing well and, more importantly, we are continuing to invest for the future and build on a strong foundation of technology, leadership, and customer partnerships. We are confident in our trajectory, our roadmap, and our ability to drive continued profitable growth in 2027 and beyond. As always, I want to thank our customers, partners, and employees for their continued trust and support, and with that, I’ll turn the call over to Sumeet.

Sumeet Gagneja (Chief Financial Officer)

Thank you, Luc, and good afternoon, everyone. We delivered an outstanding third quarter, achieving record revenue and earnings and record cash flow from operations. These results reflect the strength of our business model, growing demand for our products and technologies, and disciplined execution across the company. Consistent with our balanced capital allocation strategy, we completed a $100 million accelerated share repurchase program during the quarter.

The transaction demonstrates our confidence in the business and our commitment to returning capital to shareholders while preserving the flexibility to invest in the growth. Looking ahead, we believe Rambus is well positioned to capitalize on the secular growth in AI infrastructure, data centers, and advanced computing through the strength of our product and technology portfolio. With that, let me review our third quarter financial results. Third quarter revenue was $218 million, driven by strong product and contract revenue.

This represents growth of 22% year over year and 5% sequentially. Product revenue was $114 million, which is up 22% year over year and up 15% sequentially. Royalties revenue was 77 million, contract and Other revenue was $27 million, up 35% year over year and 13% sequentially. Contract and other revenue consists primarily of Silicon IP. As a reminder, only a portion of our Silicon IP revenue is reflected in contracts and other revenue and the remaining portion is reported in royalties revenue.

Total non-GAAP operating costs, including cost of goods sold, for the quarter were $116 million. Operating expenses were $70 million, down sequentially due to slightly lower R&D and SG&A expenses. Interest and other income for the quarter was $7 million, using a non-GAAP tax rate of 16%. Non-GAAP net income for the quarter was $91.7 million, resulting in Q3 non-GAAP earnings per share of $0.84, which is up 35% year over year and up 10% sequentially.

Now let me turn to the balance sheet details. We ended the third quarter with cash, cash equivalents and marketable securities of $777 million, down $48 million from Q2. Record cash flow from operations of $102 million were offset by $135 million of share repurchases, including the $100 million accelerated share repurchase program. Capital allocation remains a key priority for us. We intend to continue investing in the business while returning 40% to 50% of free cash flows to shareholders over time, supported by our strong balance sheet and continued cash generation.

Our capital allocation approach reflects our focus on driving shareholder value while investing in our growth and pursue the long-term opportunities ahead. We also leveraged the strength of our balance sheet to increase inventory by $12 million during the quarter, positioning us to support future product ramps and provide customers with greater supply assurance. Now let me turn to our non-GAAP outlook for the fourth quarter. As a reminder, the forward-looking guidance reflects our best estimates at this time and our actual results could differ materially from what I’m about to review. We expect fourth quarter revenue to be between $227 million and $233 million. Product revenue is expected to be between $127 million and $133 million; at the midpoint of the guidance, it is an increase of 34% year over year and an increase of 14% sequentially.

Royalties revenue is expected to be between $68 million and $74 million, and contract and other revenue is expected to be between $26 million and $32 million. We expect Q4 non-GAAP total operating costs, which include cost of sales, to be between $120 million and $124 million. We expect Q4 capital expenditures to be approximately $8 million. Non-GAAP operating profit for the fourth quarter is expected to be between a profit of $103 million and $113 million.

We expect fourth quarter interest and other income to be approximately $6.5 million. Assuming a non-GAAP tax rate of 16% and 109 million diluted shares outstanding, we expect fourth quarter non-GAAP earnings per share to be in the range from $0.84 to $0.92. At the midpoint of the guidance, this represents growth of 30% year over year and 5% sequentially. Overall, we are very pleased with our third quarter performance. Our record revenue, earnings and cash flow from operations demonstrate the breadth of our product and technology portfolio, the diversity of our revenue streams and the disciplined execution of our teams. The midpoint of our fourth quarter guidance implies that 2026 revenue will grow approximately 18% over 2025, including product revenue growth of approximately 24%. With our continued focus on driving growth and operating efficiency, we expect non-GAAP earnings per share to grow approximately 24% over 2025.

We remain focused on executing our strategy and capturing the opportunities created by AI infrastructure, data center and advanced computing markets. We are committed to translating these opportunities into sustainable growth, strong cash generation and long-term shareholder value. With that, I’ll turn the call back to the operator for Q&A. Operator, could we have our first question please?

OPERATOR

Thank you. Ladies and gentlemen, if you have a question, please press star one on your touchtone phone. Please limit yourself to one question and one follow-up. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Kevin Carrigan with Jefferies. Kevin, your line is open. Please go ahead.

Kevin Carrigan (Analyst)

Yeah. Hey team, thanks for taking my questions and congrats on the results. Hey, Luc. So Q3 product revenue growth was 22% year over year. The Q4 midpoint implies about 34%. And I know you talked about strong growth across RCD generations, but can you give us a sense of how much growth is coming from, you know, other areas like companion chip ramps or any initial MRDIMM shipments?

Luc Seraphin (President and Chief Executive Officer)

Thanks, Kevin. Yeah, we were really pleased with, you know, the results for Q3 and the growth for Q4, you know, 34% year over year. We always thought that, you know, the second half of the year would be stronger than the first half of the year. I would say it’s a combination of market demand going up and a lot of our products actually ramping into the market. The new generation of RCDs make the bulk of that. At the beginning of the year we said that our companion chips were, you know, approximately low double-digit percentage of our product revenue and that it would grow sequentially quarter by quarter.

We see that happening. MRDIMM remains, you know, very modest actually. You know, we have shipped MRDIMMs for qual and pre-production, you know, this year. The AMD platform is starting to ramp, so it’s still very modest. So we’re really, really pleased with this 34% year over year growth based on the, you know, the core, I would say RCD and companion chips.

Kevin Carrigan (Analyst)

Okay, great. And then as a follow-up just on the MRDIMM opportunity. So, you know, the RCD playbook was always about being first to market and qualifying early. You know, one of your competitors was designed into the first-generation MRDIMM platform. So what’s different about this next generation that gives you confidence that you can take a leadership position?

Luc Seraphin (President and Chief Executive Officer)

The difference with MRDIMM is that it’s associated with, you know, the launch of a platform that is very different than what we have all seen for the past few years. There’s only one platform that is supporting MRDIMM now, growing into the market. We don’t know what the portion of MRDIMM is going to be compared to the standard DIMM in that area. So it’s going to be a ramp, and we’re confident this ramp will happen. We still believe this is a great opportunity for us that, you know, we still size at $600 million in total, but the ramp will be shallower, in our opinion, than the other generations of products simply because all of the platforms are not ramping at the same time. This is a new technology and our customers have to adopt this technology and go through the initial stumbles.

There’s also this thing that we see in the market of memory de-speccing. It’s not that people decrease, you know, the number of modules, but they tend to decrease, you know, the capacity of each one of these modules. So we do see a growth of the number of modules in the market. That explains our growth in Q4, but we do see at the same time that each one of these modules tends to have lower capacity. And it’s due to the economics of the memory at this point in time.

So between the memory economics, you know, the staged ramp of the platforms and the introduction of new technology and supply associated with that, we see this as a great opportunity, but we see the ramp to be shallower than a standard ramp of an RCD product.

Kevin Carrigan (Analyst)

Yep, got it. Okay, perfect. Thanks for the color and congrats again on the results.

Luc Seraphin (President and Chief Executive Officer)

Thank you.

OPERATOR

Kevin, your next question comes from the line of Gary Mobley with StoneX. Gary, your line is open. Please go ahead.

Gary Mobley (Analyst)

Thank you. Good afternoon, gentlemen. Thanks for taking my question and congrats on strong execution as we navigate through the second half of the year. Clearly, the second half of the year is playing out with seasonal strength on the product side, as you had been communicating throughout the year. Based on what seems to be a strong market environment and your existing backlog, how would you call out the seasonality in the first half of the year?

Would you see something a little atypical, maybe slightly better than seasonal in the first half of the year? How do you see your visibility playing into the first half of the year on the product side?

Luc Seraphin (President and Chief Executive Officer)

Yes. So you’re correct, Gary. The second half of the year we have this seasonal effect that is advantageous to us. I would add to this for this year that I think we’re really pleased with the execution. We do see our companion chips ramp in earnest—for example, the new generation being adopted at a higher rate than they used to be. When we look into 2027, I would say that we see demand strengthening. You know, I think this is not going down. So we’re quite optimistic for, you know, 2027.

The demand is strengthening. We have a better visibility into our backlog, you know, going into 2027. I think we’re going to continue to see some sort of seasonality between the first half and the second half in 2027. But in aggregate we are confident with the health of the demand growth in 2027.

Gary Mobley (Analyst)

Thank you for that color. As my follow-up, I want to ask about the Silicon IP business. I think you’ve been communicating that this might be a $130 million annual business. I would assume that you’re maybe trending above that. Can you confirm or, you know, give us any color on that? And then with respect to, you know, custom ASIC development, do you see an opportunity, whether it be on high-speed SerDes interface IP, high-speed memory interface IP or security IP, to forge a long-term development arrangement with some of the, you know, hyperscalers developing custom silicon, like what we’ve seen with some of the other, you know, competitors in the IP space?

Luc Seraphin (President and Chief Executive Officer)

Yeah. So Gary, I’ll start with the second question about the potential for Silicon IP and then I’ll ask Sumeet to answer on the, you know, the revenue and the revenue growth. We are engaged more and more with the ecosystem on the Silicon IP because people are building more and more complex chips that require more and more complex integration, and on the bleeding edge of technology. This is, you know, for example, what we described in our last call with our engagement with a hyperscaler on next generation of memory.

So we see our confidence in the Silicon IP keeps increasing. If you look at our product rollout, we talk about PCIe 7 IP, PCIe 7 switch, you know, HBM4 and next generations of HBM, these dedicated security solutions for the data center. So we are engaged deeply with the ecosystem. That gives us the opportunity going forward to potentially continue to increase our portfolio, not only organically, but possibly inorganically, and also to partner with our customers to develop broader systems.

So as part of our thinking for Silicon IP, we have that notion of working more and more with our partners on, you know, on the system level. By the way, the announcement we made about agentic AI helps us do that. The ability to have agents work with us on integrating IP in much more complex systems is actually enabled by these types of things. So we’re building the infrastructure to do that. That’s the direction we are going into. It’s going to take us time, but that’s definitely a great trend for us.

Let Sumeet answer on the numbers.

Sumeet Gagneja (Chief Financial Officer)

Yeah, thanks, Luc. And just to add to that, Gary. So, yeah, we’ve said our Silicon IP business is around $130 million, growing at 10% to 15%. But like Luc said, our confidence has been building throughout the year and 2026 has been a great year for our Silicon IP business along with a strong momentum in the design win. So I would put it more like we’re growing more towards the higher end of that range. We’ve said 10% to 15% and we continue to make progress in all aspects from memory interface and security aspects.

Gary Mobley (Analyst)

Thank you both.

Luc Seraphin (President and Chief Executive Officer)

Thanks, Gary.

OPERATOR

Your next question comes from the line of Sebastian Naji with William Blair. Sebastian, your line is open. Please go ahead.

Sebastian Naji (Analyst)

Yeah, good afternoon and thanks for taking my questions. Maybe first I wanted to ask about the LPDDR6 PMIC that you announced. Could you maybe give us a sense for how that increases your dollar content per module versus the SoCam 2 content that you had announced in April? I think it was two voltage regulators and an SPD hub. And then when do you expect maybe some initial revenue for that product?

Luc Seraphin (President and Chief Executive Officer)

Thanks, Sebastian. I would say that I’ll be a bit discreet about the exact content on this SoCam 2 because the final spec has not been released yet. So you’d rather wait for the final spec to be released. But what I can say is that when you move from the first version of SoCam that we announced earlier this year to this new generation of SoCam, the content is increasing, the power management is more complex and as a result of that, the dollar content is going to increase from that first generation to that second generation.

The module performance itself is going to be much better as well, which will, I would say, trigger adoption at a higher level. But, as every one of these SoCam solutions, they provide a very good solution for these areas of AI where, you know, power performance is really, really important. But this is a small portion of the market and that’s going to continue to be the case between the first version of SoCam and this SoCam 2. The SoCam 2 will hit the market probably in 2028. And the way to look at it is, you know, we see the development of the AI infrastructure as, you know, having multiple horizons for us if you wish. We want to make sure that we develop those solutions way ahead of the market. And when they deploy in the market, then we are present with solutions that work. You know, this is what we’ve done, you know, in the past. That explains, for example, our performance in Q4 this year that is based a lot on the products we developed in the past.

They had little traction at the beginning, but they’re starting to show revenues in Q4 this year. This is going to be the same with SoCam. You know, SoCam is going to address a niche portion of the AI stack, AI infrastructure. But the adoption of LP is going to happen. It’s not going to happen fast. It’s not going to be the same content as the current content of standard memory. But it’s important for us to have that as part of our portfolio while we help our customers and ecosystem partners to deploy their solutions in the market.

Sebastian Naji (Analyst)

Great. Okay, that’s very helpful. Thank you, Luc. And then maybe my second question or my follow-up for Sumeet on gross margins. Looks like non-GAAP product gross margins were about 60.4 in Q3. That’s on the lower end of the, I think, 60 to 63% near-term range that you gave us. Could you maybe give us a sense for how much of the gap here is mix in terms of just more companion-ship revenue, next-generation RCDs with early yields versus how much of it is wafer, substrate, or OSAT cost inflation?

And then how should we think about Q4 product gross margins? Do they stay in that lower 60% area or can they move up a little bit?

Sumeet Gagneja (Chief Financial Officer)

Yeah, thanks for the question, Sebastian. Yeah, so our gross margin historically has been, despite band, 60 to 63%, and you’re right, in Q3 it was slightly above 60%. Our long-term target remains, which is 60 to 65%. In the near term, it’s really the margin trending towards the lower end is primarily driven by the supply chain input cost. And, you know, we’ve been very successful in offsetting that input cost by driving internal cost savings and keeping our product gross margin in the range of 60 to 63%.

In the near term, Q4, it’s the same sort of setup going into Q4. But with the investments and the cost reductions we have done, especially on our operations side, there may be a slight uptick in the gross margin in Q4, but it’s not material. It’s still within the 60 to 63%. On a full-year basis, it’s more important to look at it from the gross margin perspective. We expect 2026 to be right in the middle of that 60 to 63% range.

Sebastian Naji (Analyst)

Got it. Great. Thank you.

OPERATOR

Your next question comes from the line of Mark Lipisis with Evercore. Mark, your line is open. Please go ahead.

Mark Lipisis (Analyst)

Great. Thanks for taking my question. I had two. I was hoping you’d just talk about lead times from your own suppliers and, to the extent that you’re seeing tightening supply on the front end or the back-end foundry business. And then can you talk about lead times to your customers? Are there any stretching of lead times to your customers from you, and any indication that your customers downstream, or the supply chain downstream, is increasing their own inventories given how tight everything seems to be becoming?

Thank you.

Luc Seraphin (President and Chief Executive Officer)

Thanks, Mark. I’ll start and let Sumeet comment. I would say that on the supply side, we do see lead times increasing. We signaled this two calls ago. We were expecting this. But because we were expecting this, we also put in place plans to mitigate for that. So we lever our strong balance sheet to actually build inventory on products that we believe are going to grow substantially with our customers. And we’re in constant relationship with our suppliers to make sure that we use our balance sheet to make sure that we can supply to our customers.

So, yes, definitely longer lead times on the supply side, but it has not impacted our Q3 number and it will not impact the Q4 number that we just talked about. So we’ve been able to manage that, but we have to continue to do that. Our lead times, to a first approximation, to our customers have not increased at this point in time. But you understand that we are in constant discussions with them as well. The whole chain is tightening. The good thing is our business is very focused.

We have very strong partnerships with our customers, and we work with them in making sure that we can supply what they need. In summary, longer lead times on the supply side, we are using our balance sheet to deal with that. And at this point in time, we’ve not increased our lead times to our customers. And, look, thank you.

Mark Lipisis (Analyst)

And just to be clear, do you have the ability to see if customers or customers’ customers downstream are increasing their inventories, or is that like a black box to you and it’s really hard to determine?

Luc Seraphin (President and Chief Executive Officer)

It’s very hard to determine. You know, what we see is that people place backlog earlier than what they used to a quarter ago or two quarters ago. I think everyone understands the current situation, so we have better visibility in the backlog, but at the same time that gives us more opportunity to have a deeper, I would say, relationship with our customers. Once we understand the profile of their backlog, then it’s easier to work with them on how we can lead that backlog.

So we don’t see people building inventory, but we see people placing backlog.

Mark Lipisis (Analyst)

Gotcha. Very helpful. Thank you.

OPERATOR

Thank you, Malcolm. Your next question comes from the line of Tristan Jarrah with Baird. Tristan, your line is open. Please go ahead.

Tristan Jarrah (Analyst)

Hi, good afternoon. So, if I heard well, you mentioned that your revenue in the quarter and the guidance is not constrained by supply, so it probably provides a bit of an easy comp relative to the first half where you did face some supply issues. What’s your level of confidence that you can actually meet the accelerating demand that you described into next year? And, you know, I know you’re not guiding beyond this quarter, but do you think that the acceleration that you’re seeing in product revenue year over year is sustainable, or do you see supply as an issue again next year?

And is there any talk about, you know, longer-term agreements or anything that customers are trying to set up to ensure supply from you?

Luc Seraphin (President and Chief Executive Officer)

So we see demand—thank you, Tristan—we see demand strengthening into next year, and we started to work with our supply chain partners to meet what we believe is going to be required. In all honesty, this is something that we work on almost on a weekly basis. We try all avenues to support our customer base. So demand is strong going into 2027. Supply will remain tight. But as I said, as we did in 2026, we’re working early with our supply base to look at every knob we can turn to support our customer demand.

That’s how we look at this. The good news is that the demand for the products we have in our portfolio is strong. The demand for CPUs—this CPU-to-GPU ratio is going in our favor—you know, it’s known from our customers all the way down to our suppliers. And we’ll do our best to supply that growing demand into 2027.

Tristan Jarrah (Analyst)

Great. And as a quick follow-up, I wanted to explore the difference in content opportunity medium term for x86 CPU and standalone. I kind of come up with maybe a 4x content in x86 CPU for you versus what you would get on the SoCam 2 side. But are you quantifying at all what the opportunity is and the difference that you see in terms of opportunities on the x86 and the ARM-based side next year and the years beyond?

Luc Seraphin (President and Chief Executive Officer)

Yeah, thank you, Tristan. The way we look at it, and the reason we are excited about these AI infrastructure deployments, is that we look at this in an aggregate way. There are areas of AI, like if you take the head nodes, for example, where SoCam and LP memory can be used. It’s not always used, but it can be used. And that’s an opportunity for us from a technology standpoint. It allows us to develop our LP technology on all fronts. But in aggregate, you do have a growth in these head nodes that will create an opportunity for SoCam.

But you have higher growth in the traditional servers with a refresh necessary in order to continue to develop the range of standard applications. We have higher growth in agentic, you know, standard CPUs as well for orchestration tools, management, memory management. So in aggregate, if you take the head nodes where you can have SoCam, and if you take the standard servers and the agentic server, the whole market is growing, but the majority of the growth is coming from CPUs with standard memory subsystems. So that’s the way we look at it. We definitely don’t look at this as SoCam is cannibalizing the market for standard DIMM. It’s actually complementary. It makes the system more efficient. The standard memory subsystems are going to increase at a higher pace going into 2027.

And the head nodes will drive new technologies like SoCam to maximize this kind of application. So we see this as complementary, and that’s why we want to have solutions for all of that. We really want to be agnostic to the memory subsystems while the infrastructure for AI is growing in the market. Because as that infrastructure is growing in the market, we’re going to see it’s a heterogeneous system and it’s important that we have solutions for each one of those.

But the vast majority is going to continue to be CPU with standard DIMM configurations. Great, thank you very much. Thanks, Tristan.

OPERATOR

Your next question comes from the line of Kevin Cassidy with Rosenblatt Securities. Kevin, your line is open. Please go ahead.

Kevin Cassidy (Analyst)

Yes, thanks. And I’ll echo the congratulations on the great quarter. Just, you know, it’s interesting, as you mentioned about the custom chips and that you’re getting involved earlier into the design cycle. And I’m just wondering, does this help you to win more modules on those designs as they come into production?

Luc Seraphin (President and Chief Executive Officer)

Thanks, Kevin. We’re really excited with this silicon IP engagements with the ecosystem because they give us great insight into the architectural trends that these people are talking about. When we talk to hyperscalers with the opportunity for us to sell our silicon IP, we have insights into some of the architecture problems they’re trying to resolve and where they see the world going. And you know, as a consequence of that, you know, that helps us develop, continue to develop the right roadmap of products for, you know, these type of, you know, this type of products.

But it also gives us insight as to the overall architecture of their systems and you know, where DIMM are going to be used, where, you know, LP is going to be used, and why, you know, what generation of DDR is going to be used and why. It just gives us that, that channel of information. It’s almost, you know, through discussion and it gives us a good sense of the trends in terms of what type of technologies they are going to use, not only on the silicon IP side, but also in terms of how they will configure their systems with, with different types of modules.

Kevin Cassidy (Analyst)

Right. And that seems like a big advantage over your two competitors that don’t, don’t have an IP story. And maybe just on the inventory one more time, are you comfortable with the days of inventory now or should we expect to see that continue to increase even with the increasing demand next year?

Sumeet Gagneja (Chief Financial Officer)

Yeah, Kevin, good question. So inventory, as you mentioned, we’ve been growing inventory. This year in Q3 we grew it again, $12 million again, primarily leveraging the strength of our balance sheet to make sure we provide greater assurance to our customers in Q4 as well. Looking at, just like Luc mentioned throughout the call, like we have more visibility into the backlog and as demand is accelerating, we do plan to build increased inventory even in Q4, similar level to what we built in Q3 and Q2.

Kevin Cassidy (Analyst)

Okay, great. Thank you.

OPERATOR

At this time, there are no further questions. This concludes the question and answer session. I would like to turn the conference back over to the company for closing remarks.

Luc Seraphin (President and Chief Executive Officer)

Thank you to everyone who has joined us today for your continued interest in and support. We look forward to speaking with you again soon. Thank you.

OPERATOR

Thank you. This concludes today’s conference. You may now disconnect.

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