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DATE

Oct. 26, 2026

CALL PARTICIPANTS

• Chief Financial Officer - Sumeet Gagneja
• President and Chief Executive Officer - Luc Seraphin

TAKEAWAYS

• Total Revenue -- $218.3 million, representing 22% growth year over year driven by record product and contract revenue.
• Product Revenue -- $114.3 million, increasing 22% year over year due to leadership in DDR5 RCDs and adoption of new generation products.
• Non-GAAP Diluted EPS -- $0.84, up 35% year over year and exceeding the top end of the company's guidance range.
• Royalties Revenue -- $77.0 million, reflecting stable contributions from the company's patent and licensing portfolio.
• Contract and Other Revenue -- $27.0 million, up 35% year over year primarily fueled by silicon IP design wins.
• Cash from Operations -- $102.5 million, reaching a record high for the company supported by strong customer demand.
• Cash and Marketable Securities -- $776.9 million, a decrease of $48.0 million from the prior quarter following common stock repurchases.
• Share Repurchases -- $135.4 million, including the completion of a $100 million accelerated share repurchase program.
• Q4 Revenue Guidance -- $227 million to $233 million, reflecting management's expectation of continued momentum in AI infrastructure.
• Q4 Product Revenue Guidance -- $127 million to $133 million, representing 34% growth year over year at the midpoint.
• Inventory -- $87.2 million, an increase of $12 million sequentially to support future product ramps and provide supply assurance.
• Non-GAAP Operating Margin -- 47%, an improvement from 44% in the prior-year period due to disciplined execution.
• Full-Year 2026 Revenue Outlook -- 18% growth over 2025, with product revenue expected to grow approximately 24% year over year.
• Full-Year 2026 Non-GAAP EPS Outlook -- 24% growth over the previous year, as indicated by management's midpoint guidance.
• MRDIMM Market Opportunity -- $600 million, though management noted the ramp will be shallower than standard RCD generations due to staggered platform launches.
• Silicon IP Growth Rate -- 10% to 15% annually, with 2026 performance trending toward the higher end of that range.
• Q4 Capital Expenditures -- Approximately $8 million, focused on infrastructure and growth investments.
• Non-GAAP Product Gross Margin -- 60.4% in the third quarter, trending toward the lower end of the 60% to 63% range due to supply chain input costs.
• Companion Chip Revenue -- Low double-digit percentage of product revenue, growing sequentially as new generations are adopted.

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RISKS

• Gagneja stated, "the margin trending towards the lower end is primarily driven by the supply chain input cost," when explaining why product gross margins were at the bottom of the target range.
• Seraphin stated that "supply will remain tight" into 2027, requiring the company to work early with partners to meet growing customer demand.
• Management noted that achieving the fourth quarter revenue range "will require that the Company sign customer agreements for various product sales and solutions licensing."
• Seraphin noted a trend of "memory de-specing" where customers decrease the capacity of individual modules due to memory economics.

SUMMARY

Rambus Inc. (RMBS +5.45%) reported record third-quarter revenue and earnings, driven by the expansion of AI training and inference requirements in data center infrastructure. Management reported that increasing complexity in semiconductor development is lifting demand for the company’s DDR5 memory interface chips and silicon intellectual property. To address the move toward more distributed architectures, the company introduced new power management and security solutions designed for next-generation server platforms. Rambus utilized its strong cash flow to complete a $100 million accelerated share repurchase program while increasing inventory to mitigate ongoing supply chain tightness.

• The company announced a strategic investment in ChipAgents to utilize agentic AI design platforms to accelerate chip and IP development.
• Management reported that CPU-to-GPU ratios are rising, which Seraphin stated is "driving requirements for more main memory bandwidth and capacity across the data center."
• Rambus is sampling its sixth-generation RCD, which supports DDR5 9600, to customers in the data center ecosystem.
• The company expanded its security portfolio with a new root of trust solution supporting the Caliptra specification for data center SoCs.
• Management expects first-half 2027 demand to remain strong, though seasonal patterns between the first and second half of the year are expected to persist.

INDUSTRY GLOSSARY

• RCD: Registering Clock Driver, a chip used on server memory modules to buffer command and address signals to improve signal integrity.
• DDR5: Double Data Rate 5, the latest generation of synchronous dynamic random-access memory (SDRAM) designed for high performance.
• LPDDR6: Low Power Double Data Rate 6, an upcoming high-speed, low-power memory standard.
• SOCAMM2: Small Outline Compression Attached Memory Module, a compact memory module format being adapted for server and AI applications.
• PMIC: Power Management Integrated Circuit, a chip that manages power requirements on a memory module.
• MRDIMM: Multi-Ranked Dual In-line Memory Module, a technology that increases memory bandwidth by multiplexing data across multiple ranks.
• Root of Trust: A hardware-based security foundation that provides a trusted environment for system operations.
• Caliptra: An open-source silicon root of trust specification for data center class systems-on-chip (SoCs).

Full Conference Call Transcript

Operator: Welcome to the Rambus Third Quarter Fiscal Year 2026 Earnings Conference Call. [Operator Instructions] 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 your conference.

Sumeet Gagneja: 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 file 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?

Luc Seraphin: 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 road map 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 road map 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 of 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 road map, recently expanding our product portfolio with an industry-leading PMIC for the upcoming LPDDR6 SOCAMM2.

Earlier this year, we introduced our first SOCAMM2 chipset that supports LPDDR5X. This new PMIC solution extends our server memory product road map 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 road map 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 long-time 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 ChipAgents, a fellow industry pioneer and leader in agentic AI design platforms. We see great opportunities to leverage the ChipAgents AI native design flows to accelerate our road map 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's leadership role in next generation of 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 road map 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?

Sumeet Gagneja: 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 consist 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 non-GAAP tax rate at 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 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 $124 million and $120 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: [Operator Instructions] Your first question comes from the line of Kevin Garrigan with Jefferies.

Kevin Garrigan: Congrats on the results. 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 other areas like companion chip ramps or any initial MRDIMM shipments?

Luc Seraphin: Thanks, Kevin. Yes, we were really pleased with the results for Q3 and the growth for Q4, 34% year-over-year. We always saw that 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 approximately low double-digit percentage of our product revenue and that it would grow sequentially quarter-over-quarter. We see this happening. MRDIMM remains very modest, actually. We have shipped MRDIMM for Qual and preproduction 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 core, I would say, RCD and companion chips.

Kevin Garrigan: Okay. Great. And then as a follow-up, just on the MRDIMM opportunity. So the RCD playbook was always about being first to market and qualifying early. One of your competitors was designed for 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: The difference with MRDIMM is that it's associated with 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 production 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 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-specing. It's not that people decrease the number of modules, but they tend to decrease 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 tend to have lower capacity and it's due to the economics of the memory at this point in time. So between the memory economics, the stage 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 the standard ramp of an RCD product.

Operator: Your next question comes from the line of Gary Mobley with StoneX.

Gary Mobley: 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 strong market environment and your existing backlog, how would you call out the seasonality of the first half of the year? Were you seeing 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: 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 chip ramp in earnest, for example, a 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. I think this is not going down. So we're quite optimistic for 2027. The demand is strengthening. We have a better visibility into our backlog 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: As my follow-up, I wanted 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 give us any color on that? And then with respect to 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 hyperscalers developing custom silicon, like what we've seen with some of the other competitors in the IP space?

Luc Seraphin: Yes. 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 revenue and the revenue growth. We are engaging 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, for example, what we described in our last call with the 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 7.0, IP PCIe 7.0 switch.

HBM4, 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 system. So as part of our thinking for silicon IP, we have that notion of working more and more with our partners 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 this type 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 is definitely a great trend for us. I'll let Sumeet answer on the numbers, yes.

Sumeet Gagneja: Yes. Thanks, Luc. And just to add to that, Gary. So yes, so we've said our silicon IP business 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 the strong momentum in the design wins. 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.

Operator: Your next question comes from the line of Sebastien Naji with William Blair.

Sebastien Cyrus Naji: 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 SOCAMM2 content that you had announced in April? I think it was 2 voltage regulators and an SPD hub. And then when do you expect maybe some initial revenue for that product?

Luc Seraphin: Thanks, Sebastien. I would say that I'll be a bit discreet about the exact content on this SOCAMM2 because it's not -- the final spec has not been released yet. So I'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 SOCAMM that we announced earlier this year to this new generation of SOCAMM2, 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 SOCAMM solutions, they provide a very good solution for these areas of AI where power performance is really, really important. But this is a small portion of the market, and that's going to be continuing -- that's continued to be the case between the first version of SOCAMM2 and the SOCAMM2. The SOCAMM2 will hit the market probably in 2028. And the way to look at it is we see the development of the AI infrastructure as 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. This is what we've done in the past that explains, for example, our performance in Q4 this year that are 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 of this year. This is going to be the same with SOCAMM. SOCAMM 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.

Sebastien Cyrus Naji: Great. Okay. That's very helpful. And then maybe my second question or my follow-up for Sumeet on gross margins. It 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 chip 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: Yes. Thanks for the question, Sebastien. Yes. So our gross margin historically has been this tight band, 60% to 63%. And you're right, in the Q3 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 we've been very successful in offsetting that cost 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 the setup going into Q4, but the investments and the cost reductions we have done especially in our operations side, there may be a slight uptick in the gross margin in Q4, but it's not material, but it's still within the 60% to 63%. On a full year basis, it's more important to look at from the gross margin perspective. We expect 2026 to be right in the middle of that 60% to 63% range.

Operator: Your next question comes from the line of Mark Lipacis with Evercore.

Mark Lipacis: I had 2. I was hoping you could just talk about lead times from your own suppliers and any -- 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? And 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?

Luc Seraphin: 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 2 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, the first approximation, our lead times 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.

Mark Lipacis: 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: It's very hard to determine. We see -- what we see is that people place backlog earlier than what they used to a quarter ago or 2 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.

Operator: Your next question comes from the line of Tristan Gerra with Baird.

Tristan Gerra: 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 little 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 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 longer-term agreements or anything that customers are trying to set up to ensure supply from here?

Luc Seraphin: 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. 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 Gerra: Great. And then as a quick follow-up, I wanted to explore the difference in content opportunity medium term for x86 CPU and stand-alone Vera and kind of come up with maybe a 4x content in x86 CPU for you versus what you would get on the SOCAMM2 side with -- 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 of CPUs next year and the years beyond?

Luc Seraphin: Yes. Thank you, Tristan. The way we look at it and the reason we are excited about this AI infrastructure deployment 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 SOCAMM 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 SOCAMM.

But you have higher growth in the traditional servers with a refresh necessary in order to continue to develop the range of applications, or range of standard applications, we have higher growth in agentic, standard CPUs as well for orchestration, tools management, memory management. So in aggregate, if you take the head nodes where you can have SOCAMM 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 SOCAMM 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 SOCAMM 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 heterogeneous systems, 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.

Operator: Your next question comes from the line of Kevin Cassidy with Rosenblatt Securities.

Kevin Cassidy: I'll echo the congratulations on a great quarter. Just -- 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 if -- any way, does this help you to win more modules on those designs as they come into production?

Luc Seraphin: Thanks, Kevin. We're really excited with these 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 as a consequence of that, that helps us develop -- continue to develop the right road map of products for these types of products.

But it also gives us insight as to the overall architecture of their systems and where DIMM are going to be used, where LP is going to be used and why, what generation of DDR is going to be used and why. It just gives us that channel of information. It's almost through the 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 different types of modules.

Kevin Cassidy: Right. And it seems like a big advantage over your 2 competitors that don't have 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: Yes, 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 or increase inventory even in Q4, similar level to like we built in Q3 and Q2.

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: Thank you to everyone who has joined us today for your continued interest 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.