Corning Incorporated operates in optical communications, display, specialty materials, automotive, and life sciences businesses in the United States, Canada, Mexico, Japan, Taiwan, ...
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would like now to turn the conference over to Chris Keenan, Director of Investor Relations. Please go ahead. Unknown Executive: Thank you, and good morning. Welcome to Corning's First Quarter 2026 Earnings Call. With me today are Wendell Weeks, Chairman and Chief Executive Officer; and Ed Schlesinger, Executive Vice President and Chief Financial Officer. I'd like to remind you that today's remarks contain forward-looking statements that fall within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks, uncertainties and other factors that could cause actual results to differ materially. These factors are detailed in the company's financial reports. You should also note that we will be discussing our consolidated results using core performance measures unless we specifically indicate our comments relate to GAAP data. Our core performance measures are non-GAAP measures used by management to analyze the business. For the first quarter, differences between GAAP and core EPS include constant currency adjustments as well as primarily noncash items, including acquisition-related costs, discrete tax items and other tax-related adjustments and restructuring impairment and other charges and credits. A reconciliation of core results to the comparable GAAP value can be found in the Investor Relations section of our website at corning.com. You may also access core results on our website with downloadable financials in the Interactive Analyst Center. Supporting slides are being shown live on our webcast, and we encourage you to follow along. They're also available on our website for downloading. And now I'll turn the call over to Wendell. Wendell Weeks: Thank you, Chris, and good morning, everyone. Today, we announced excellent first quarter 2026 results. Year-over-year sales grew 18% to $4.35 billion. EPS grew 30% to $0.70. Operating margin expanded 220 basis points to 20.2%. Gross margin expanded 120 basis points to 39.1%, and ROIC expanded 190 basis points to 13.5%. These excellent results were led by Optical Communications and Solar. Our performance this quarter serves as yet another proof point of Springboard's powerful trajectory. Versus our quarter 4 2023 springboard starting point, we grew sales 33% and EPS 79%, and we expanded operating margin and ROIC by 390 basis points and 470 basis points, respectively. As you remember, on our last earnings call in January, we upgraded our internal Springboard plan to add $11 billion in incremental annualized sales by the end of 2028 from our quarter 4 2023 starting point. Now based on increasing demand for our innovations, we actually plan to upgrade again and extend our plan through 2030 at our investor event in New York City on May 6. We will share our improved Springboard plan and the key drivers as well as a particular focus on the latest developments in our Gen AI portfolio. So today, I want to get into more detail about our first quarter results and highlight some of the topics that we'll cover next week. I'll begin with Solar. In quarter 1, we grew solar sales 80% year-over-year. So let's talk about what's going on in this new market access platform. We have previously shared our goal to build a $2.5 billion revenue stream with profitability above the corporate average by 2028. We're making key strategic progress on the commercial and policy fronts. We now participate in the solar industry through 3 major manufacturing operations. First is solar polysilicon. We did a business where we had a minority ownership and we were receiving about $50 million a year in cash flow in the form of dividends. And we've turned it into almost a $1 billion revenue business, and we've been able to do all of this with customer funding and government support, all while generating positive cash flow every year. We activated idle assets to serve the need for domestic solar polysilicon. Now that, that capacity is online, you can see the incremental sales in our results. The business performed above our corporate operating margin target of 20% in the first quarter. Now the focus is on improving the productivity of our operations to further improve our throughput and profitability going forward. Moving down the value chain. We added the capability to transform our polysilicon into higher-value domestically made solar wafers, all integrated together on our campus in Michigan to leverage our advantage position in polysilicon. We built the largest solar ingot and wafer facility in the United States in just 18 months in order to establish a commercial footprint and to take advantage of government incentives in a very short time frame. Importantly, we have committed customers for our wafer output. Now we had to move fast. Part of that meant bringing up our facility on temporary power and water systems because we couldn't get the utilities to build the permanent systems on our schedule. Our ramp is running behind our ambitious plans. Our wafer facility will undergo an extended maintenance shutdown, and we will transition to a permanent power system and repair and upgrade production equipment to increase throughput in future quarters. To cover this transition, we have built into our second quarter guidance, $30 million of additional expense versus the first quarter. We've also successfully entered the module business. We saw that 90% of the mass in a solar panel is materials in which we have adjacent world-class capabilities. We make the best technical glass in the world. We apply coatings through our strength in vapor deposition, and we have long-standing leading position in polysilicon for semiconductor materials. So not only is this an opportunity that's right for innovation, but it's also right in our wheelhouse. Therefore, we acquired and ramped a module manufacturing facility in Arizona to position ourselves for innovation as we progress the business. That factory is now up and running. And you can see incremental sales from this operation in our results. Profitability in this business should cross over our corporate operating margin target of 20% in the second quarter. We are now in the midst of adding capacity to this operation. And as it comes online and gets through our start-up period, this will further accelerate our growth and profitability. Altogether, we are seeing strong strategic and commercial success across our solar market access platform. As a result, we will be increasing our sales plan for the solar map as part of our Springboard upgrade on May 6. Turning to Optical Communications. We saw robust demand across the business and continue to improve our productivity with year-over-year sales growth of 36%. In our Enterprise business, early in the quarter, we announced our multiyear up to $6 billion agreement with Meta to support their apps, technologies and AI ambitions using our newest innovations in optical fiber, cable and connectivity solutions. On our last call, I shared that we were in the process of concluding other agreements of the same size and duration as the Meta agreement. We now have concluded two more large long-term agreements with hyperscale customers. And they are each similar in size and duration to the Meta agreement. Now I know we will get questions on who the other customers are and the specifics of our arrangements. However, our philosophy is to let our customers decide when and where they choose to make announcements on their critical supply chain decisions. I can share that these deals are very significant, and they share the risk and rewards of the required expansions with our strategic customers. For long-time followers of Corning, you would recognize the model is quite similar to our extremely successful Gen 10.5 agreements with our display customers. We're taking the proven approach in our glass businesses and applying it to Optical Communications. Our partnership with Lumen Technologies in the carrier space is another good example of this approach. We previously shared our agreement with Lumen to provide our new Gen AI fiber and cable system that enables them to fit anywhere from 2 to 4x the amount of fiber into their existing conduit. In February, Lumen shared that we've expanded and extended our multiyear agreement to ensure they have access to the newest state-of-the-art fiber technology. Lumen and fiber-to-the-home contributed to carriers' growth in the quarter. You'll recall at the beginning of Springboard, we pointed out that fiber-to-the-home would recover strongly during the planning period. We are seeing just that in our sales. As noted in public statements, carriers are planning to expand their fiber networks going forward. The typical run rate for homes passed by our large carrier customers has increased about 50% since the beginning of Springboard. Overall, based on our strong progress in Optical, we will be upgrading our sales plan for the business through 2030 at our investor event next week. Obviously, we have a lot of news to share next week. As part of our activities, we are planning to ring the bell at the New York Stock Exchange to celebrate our 175th birthday the day after our May 6 event. It is perhaps fitting that as we celebrate 175 years, we will share a significant upgrade to our Springboard plan with all of you. Highlighting that we are in one of the most exciting growth periods in our long history. The demand for our innovation capabilities has never been stronger. We are seeing the power of our innovations drive growth across all our market access platforms. Thank you for being with us on this journey, and I look forward to seeing you next week. Edward Schlesinger: Thank you, Wendell. Good morning, everyone. Our strong first quarter results show continued excellent performance on our Springboard plant. We delivered our eighth consecutive quarter of year-over-year sales growth while continuing to enhance the financial profile of the company. Year-over-year in Q1 sales grew 18% to $4.35 billion and EPS increased 30% to $0.70 per share, both coming in at the high point of our guidance. Operating margin expanded 220 basis points to 20.2%. ROIC grew 190 basis points to 13.5% and we delivered robust free cash flow of $188 million. With that, let's look at our progress to date. Comparing our Q4 2023 Springboard starting point to Q1 2026, we grew sales 33%, improved operating margin by 390 basis points, grew EPS 79% and expanded ROIC 470 basis points. In total, this represents a significant enhancement to our financial profile and establishes a new base from which to launch another round of strong, more profitable growth and we see even stronger growth ahead. On our last call, we upgraded our internal Springboard plan to add $11 billion in incremental annualized sales by the end of 2028 and $6.5 billion by the end of 2026. Now we have another quarter behind us. And as you can see, sales came in above our guided range. I'll share more on our second quarter guidance in a moment, but you can see we expect to continue performing well on our upgraded plan. Overall, we're capturing significant sales growth with powerful incremental profit and cash flow, and we expect our momentum to build. Let's turn to our business segment results. Today, we announced changes to our segment reporting effective first quarter 2026 which better align with our current operating and management structure. Here's a breakdown. First, will now report the results of our Solar business in its own segment. Since the launch of Springboard, we've communicated that a key element of our plan is to build at least a $2.5 billion revenue stream in this space. Previously, we reported our solar business results within Hemlock and Emerging Growth Businesses. We've advanced the business to the point that it now warrants its own segment which will include our solar and semiconductor polysilicon sales as well as our wafer and module businesses. As Wendell shared with you, we are making key strategic progress on the commercial and policy fronts. We now participate in the solar industry through 3 major manufacturing operations polysilicon, wafers and modules. Our solar ramp continues with our polysilicon business performing above our 20% corporate operating margin target in the first quarter and our module business on track to cross over in the second quarter. Second, we are combining Display and Specialty Materials into a new segment called Glass Innovations. Included in this segment are our glass and glass ceramic businesses that primarily serve the consumer electronics and semiconductor industries. These businesses share core technologies, manufacturing capabilities and market access and we have aligned them under a unified management structure to increase operational flexibility, improve efficiency and strengthen our leadership positions in the markets we serve. Our Automotive and Optical Communications segments remain unchanged, and all other results will be grouped as Life Sciences and Emerging Growth Businesses. Now I'll turn to segment results. In Optical Communications, sales were $1.8 billion, up 36% year-over-year, driven by robust demand for Gen AI products. Net income was $387 million up 93% year-over-year. Sales in both enterprise and carrier rose 36% year-over-year. In Enterprise, building off our multiyear up to $6 billion agreement with Meta, we entered into large long-term agreements with two additional hyperscale customers, and we are working to conclude others. And in Carrier, we are seeing growth stemming from both data center interconnects and strong demand for fiber to the home. Moving to glass innovations. First quarter sales were $1.4 billion, up $14 million or 1% year-over-year. Net income was $324 million, up $7 million year-over-year. Net income margin for this new segment was 22.8%. Display glass volume for the quarter was down slightly sequentially better than our expectations of down mid-single digits. Demand for premium Gorilla Glass products remains resilient despite rising memory costs for our customers. We expect memory prices to significantly impact the market in 2026. We expect to outperform the market, driven by strong demand for our innovations. As part of a continued focus on innovation and technology leadership, we recently launched Corning Gorilla Glass ceramic 3. The latest example of how we are extending our material science capabilities to meet evolving device requirements. This reinforces the strength of Corning's innovation engine and our more Corning approach, translating advanced glass and ceramic science into higher-value applications that expand our long-term growth opportunities. And in the semiconductor market, we continue to see short-term and long-term opportunities for our advanced optics products driven by the secular growth drivers in high-performance computing and AI driven data center build-outs. As chip makers ramp up production to meet the demand around generative AI, we expect to see higher demand for our EUV lithography business. Longer term, we expect growth in this segment to be driven by the adoption of our glass innovations. Turning to automotive. Q1 sales were $437 million, down 1% year-over-year. The global automotive vehicle market was down 3%. Higher heavy-duty sales in Europe and India largely offset a weaker heavy-duty market in North America. Net income of $70 million was up $2 million or 3% year-over-year. We remain focused on executing our more Corning growth strategy as underlying secular trends that are favorable to Corning remain intact and will drive adoption of more larger and higher resolution displays as well as new emission control products across the global automotive market. And in solar, sales were $370 million, up $164 million or 80% year-over-year. Net income was $7 million, down $20 million year-over-year. As Wendell mentioned, we have a goal to build a $2.5 billion revenue stream in this map with profitability above the corporate average by 2028. We're making key strategic progress on the commercial and policy fronts. We participate in the solar industry through 3 major manufacturing operations, polysilicon wafers and modules. Our solar ramp continues with our polysilicon business performing above our 20% corporate operating margin target in the first quarter and our module business on track to cross over in the second quarter. Our first quarter actuals included about a $0.04 EPS impact as we continue to bring up solar wafer capacity to meet committed demand. Our second quarter forecast includes an incremental $30 million of expense versus the first quarter for an extended maintenance shutdown, including the transition to a permanent power system. We will repair, upgrade and modify our production equipment to increase throughput in future quarters. Sales in Life Sciences and emerging growth businesses were flat year-over-year. Net income improved year-over-year but was down sequentially. Now I'd like to take a moment to discuss operating expenses. In the quarter, was $823 million. Included in Q1 OpEx was higher variable compensation expense, including stock-based compensation. The primary driver the higher expense was the significant increase in our stock price in the quarter. So with that, let's turn to our outlook. In the second quarter, we expect to grow sales about 14% year-over-year to approximately $4.6 billion and to grow EPS about 25% year-over-year to a range of $0.73 to $0.77. And as I just mentioned, our second quarter forecast includes an additional $30 million of expense in Q2 versus Q1 as our solar wafer plant undergoes an extended maintenance shutdown. Even with the extended shutdown, we expect Q2 '26 to be one of the strongest quarters in a string of very strong quarters. For the full year, we expect to generate significantly more free cash flow year-over-year while continuing to invest strongly in our growth vectors aided by customer financial support. Now let me spend a minute on capital allocation. As we've previously shared, we prioritize investing in organic growth opportunities that drive significant returns. Overall, we believe this approach creates the most value for our shareholders over the long term. And our investors have confirmed they see the value in this approach. To deliver the larger growth opportunity in our upgraded Springboard plan, we need to invest. And as we invest, we will use a variety of tools to share the cost and risk of our required expansions with our customers to ensure we generate strong returns on our investments and secure our planned cash flows. We also seek to maintain a strong and efficient balance sheet. We're in great shape. We have one of the longest debt tenors in the S&P 500, our current average debt maturity is about 20 years, and we have no significant debt coming due in any given year. Finally, we expect to continue our strong track record of returning excess cash to shareholders. We already have a strong dividend. And therefore, as we go forward, our primary vehicle for returning cash will be share buybacks. Stepping back, we feel great about our progress on Springboard. Our performance is outstanding and we're energized about the tremendous opportunity for value creation for our shareholders. Since the start of Springboard, we've captured significant sales growth and we've transformed our financial profile, establishing a strong foundation for future growth. And we expect our momentum to build as we capture a strong set of opportunities across the company. At our May 6 investor event in New York City, we plan to upgrade and extend our Springboard plan through 2030, share the underlying growth drivers in our maps and detail the technical drivers of growth in our enterprise business as well as our new Photonics map. I look forward to sharing more with you next week at our investor event. And with that, I will turn things back over to Chris for Q&A. Unknown Executive: Thank you, Ed. Operator, we're ready for the first question. Operator: [Operator Instructions] The first question will come from John Roberts with Mizuho. John Ezekiel Roberts: On the new hyperscaler agreements, are there material glass fiber draw capacity expansions associated with that? Or maybe a different way, is the extension to 2030 going to involve glass draw capacity expansions? Wendell Weeks: These agreements taken in total are driving so much growth, John, that you're going to see expansion across all of our major optical operations, including expanding our fiber operations. What we seek to do with these arrangements is to make sure we're appropriately sharing the risk of the required expansions with our customers in a way that assures return to our shareholders. John Ezekiel Roberts: Okay. And then when you complete and you're fully ramped on solar, what would be the approximate breakdown between semiconductor wafers and modules? Edward Schlesinger: So I would say that we're running at about $0.5 billion semiconductor business. That business will continue to grow over time. And the remainder of all of that business or all of that segment and all the growth will come in the solar space. John Ezekiel Roberts: And primarily wafer? Wendell Weeks: It would be -- say that again, John? John Ezekiel Roberts: Primarily wafer? Wendell Weeks: Wafer and module. Both of those. And next week, we'll share a little more on that. What we're seeing is demand for our downstream manufacturing operations be so strong is that we will raise our sales plan above the $2.5 billion that we shared with you previously, John. Operator: Next question will come from Wamsi Mohan with Bank of America. Wamsi Mohan: I was wondering, Wendell, if you could maybe characterize the state of supply-demand balance in the Optical Communications market. We're hearing a lot of anecdotal talk about price increases. Some of your competitors internationally have raised prices within fiber. And so just curious how tight are you seeing the current state? Are you able to meet supply enough to meet the demand? And how are you seeing the evolution of pricing for both [ Optical Fiber and connect price cables ]. Wendell Weeks: So we are seeing a very robust demand for our innovation sets, Wamsi. What we're doing is entering into these very long-term agreements because the growth rate is accelerating so robustly, Wamsi. And so what we're doing is, given that we are going to be undertaking expansions across our opticals, what we seek to do is do 3 things that are buried in these big agreements. First, we're trying to serve all of our customers. And we're trying to get very balanced coverage so that we aren't dependent on any one model maker or any one AI cloud provider. Because though clearly, AI is going to make a powerful difference in worldwide economies, picking specific winners and losers I think, is problematic. So what we seek to do is take this very robust demand that we have, and we want to serve all of the customers and do it in a very balanced manner. And then as part of those, what we seek to do is appropriately share the risk of the required expansions to support this rapidly accelerating growth. So I'm just going to answer your question in sort of 3 layers. So that is the first layer, which is we -- given our strong profitability in this business, being able to meet the growth requirements and to derisk those for our shareholders is our top priority to do with the strong demand for our innovations. Second, you are correct that the pricing environment is clearly favorable for those who have capacity. Our approach to increasing our profitability though comes primarily from how do we uniquely innovate and how do we uniquely manufacture our products rather than focusing on price increases of commodity-based products. So what we try to do here is we're introducing these new innovations that you hear our customers talk about and hear us talk about. And what they do is they create more value for our customers by reducing their total installed cost. And then we share that value creation with them, which increases our profitability much more rapidly and sustainably over time than simply capturing any particular near-term move, whether it be on bare fiber or [indiscernible] cable or anything like that. Does that make sense to you, Wamsi, did I answer your question? Wamsi Mohan: Yes. No, that's helpful, Wendell. If I could just follow up on your very helpful analogy with display Gen 10.5 relative to the Optical business, I was wondering if you [ would venture ] to say that the margins that have historically been extremely strong in display, are we entering an environment in Optical where you could eclipse gross profit margins or [ up ] profit margins [indiscernible] in display given the strength and momentum and the size of the business. If you could extend that analogy there, that would be super helpful. Wendell Weeks: So the simple answer is yes. And what will be critical for that will be the rate of adoption and the value of the innovations that we create here and really the size of the competitive moats that we're able to build. Our goal is to create so much value that this becomes an all-time star for us as a company. So that's what we're seeking to do. Edward Schlesinger: And Wamsi, I would add one other thing, just I think that's important for you and investors to think about is we're a capital-intense company across all of our businesses. But if I think about Optical in general, it's a little less capital intense than a business like display where you're purely melting and forming glass. So your return on invested capital is high. And I think we will see that drive a lot of profit dollars and cash. So your financial model is a little different. It will require investment, but your return will be very high in that space. Wendell Weeks: I think that's super helpful, Wamsi. [indiscernible] is correctly making us describe what we mean by enhanced profitability. What we always are aiming at is the return on invested capital. So it's the totality of the financial model, both our asset turns as well as our margin percent. So in my answer, what I am driving at is the totality of that and that our return on invested capital in this business, we would like to see that exceed our glass businesses, and that's what we're aiming at. Operator: The next question comes from Josh Spector with UBS. Joshua Spector: I had two questions on margins, kind of a similar vein of thought here in that -- if I look at what you did in the first quarter, I mean, sequentially, your incremental margins were north of 50%, in Optical year-over-year, they're close to 40%. So I don't know if you can break that apart in terms of operating leverage versus price mix as the larger contributor to those two pieces. And then secondly, you've talked a lot about next week. You're going to talk more about Springboard, upgrade your sales plan. Do you expect to have a new margin target that you're going to put out there next week? Edward Schlesinger: So let me take the first one, Josh. I'm not going to break it apart into all those piece parts, but I will say that a large driver of what we're going to see in Optical, and we actually did have a great net income margin, which report for each of our segments in Q1 is the impact of moving to our new innovations and those products, I think as Wendell was sharing in his previous answer, that sort of moves us up in margin over time. In a way, it's like capturing price. It's a little different than comparing like apples-to-apples on price. If we can sell more solutions or new innovations, our margin goes up. We're certainly getting operating leverage and growing is certainly going to help. But I think that's a good way to think about it in Optical Communications. And I think rather than steal away anything from our next week event, hopefully, you'll tune in. And hopefully, we'll see you there, and we can talk about all the impacts of our financial profile and how we expect to see growth in the future. Operator: Our next question comes from Asiya Merchant with Citi. Asiya Merchant: Great. And a good set of numbers here, looking forward to seeing you guys next week. A question I've often got from investors this quarter about these long-term agreements with hyperscalers and model builders. Are you able to, kind of within these contracts, raise prices over the long term? Or how are you kind of factoring that in, given the extent of these multiyear agreements that could stretch over 3 to 5 years? And one more, if I can. The solar drag, I think you talked about an incremental $30 million here related to some power related stuff. When should we expect the drag on these expenses to be completed, both from what was happening in 1Q plus the incremental that you're talking about in 2Q? Wendell Weeks: Why don't you take the second part first and then I'll tackle the long-term agreements. Edward Schlesinger: So on solar, maybe just take a step back for a second. We're doing -- we have 3 big things we're doing, adding polysilicon capacity, module capacity and wafer capacity. And on polysilicon, we're in great shape. We will get better. We have an opportunity to drive more productivity and improve our profitability there, but that's not causing us any kind of a drag. And on modules, we're adding capacity but we're actually starting to get pretty close, and we'll cross through our corporate operating margin target of 20% in the second quarter, and we'll continue to add capacity there. So I think those two things are in a good place. In wafers, which is probably the most complex thing that we're trying to get done, that's really where the impact is. And what I tried to say my section of our prepared remarks was that we had a drag, which continues from ramping that facility and now we have the impact of this extended maintenance shutdown. When you take that in aggregate, it's probably close to $0.07 of EPS in the second quarter guide that we gave. So just -- so you have sort of that as we're all on the kind of same page. So it impacts our margin. It impacts our EPS. And it also reduces our sales because we're shut down for a period of time here, at least a couple of months, let's say, in the second quarter. And so our sales guide reflects that. It will get better. I think calling the exact timing of when we get to the operating margin target is very hard to do because we have a lot of work. I would expect it to sort of sequentially get better over time. So once we bring the factory back up online, that will have some impact in a positive way, and then we'll continue the ramp of adding all the capacity. Wendell Weeks: Just one before I shift to your first question is pricing environment looks very good for us in solar, demand environment looks very good for us in solar, policy environment looks very good to us in solar. 2 of the 3 manufacturing operations are tracking well against our plans. We just have to get transferred over to our permanent systems here. And we just got to get more productive in making ingots and wafers as we go forward. And so that will definitely happen. And whenever you ask an ops person like when will everything get better when we're already shut down, they will always say, Well, let me get up and running again. So after we pop out of this extended shutdown, we'll be able to be really clear with you last year. Is that okay on that one? And can I turn to the first question? Asiya Merchant: Yes. Wendell Weeks: Great. So what we're mainly focused on here is improving visibility. If you sit down with our key customers, the amount of growth of their growth that they would like us to take responsibility for is quite significant. And so what we seek to get visibility on is, first, what amount of demand do they actually have in total. And that sets for us to [indiscernible] sort of how we think about how we can help you on what our long-term sales look like and help ourselves as far as what would be appropriate plant and equipment to support those growths. Second thing we see visibility on is the product itself is -- the sets of products that we're introducing are continuing to change and innovate. And where the products are used is changing. One of the things we're going to sit down and talk about next week is there are new links within a back-end AI network that are going to fall into our space. So real clarity on what those products need to look like, what do we have to invent, what do we have to create and how we're going to make that is the next improving hunk of visibility. Then the piece after that is how do we approve [indiscernible] share the risk of any of our investments in talent and treasure so that we can assure our investors a super strong return. And those tend to dominate those dialogues. Those are more important financial drivers than once again sort of just what would be the increase on the bare fiber cost. Their fiber in and of itself is now turning much more into a component for us of our more innovative systems and an important component without doubt, but it is adoption the rate of adoption of those new product types that is going to be the key driver to our profitability and revenue growth. We'll try to share a little more of that next week, and that's why we're choosing to do a dive in that area. Operator: The next question comes from Samik Chatterjee with JPMorgan. Samik Chatterjee: Wendell, if I can just ask you to go back to your comments on the hyperscaler agreements. And curious, you mentioned this a few times in terms of sharing the risk with your customers. How should we think about what that actually implies? Does it imply sort of take-or-pay contracts? Does it imply capital commitment from them? What are you getting as part of these incremental hyperscale agreements to share the risk? And then with the initial agreement that you had with Meta, our impression with scale-up wasn't necessarily a part of that. It was primarily focused on scale-out. As you think about -- as we think about these two incremental hyperscaler wins today look very similar to that framework that Meta had? Or does it include scale up incrementally? Wendell Weeks: Samik, let's answer the sort of easy part of the question first and then the hard one. Okay. So the easy part. The simple answer is, yes, all of the above. You're going to see a blend that best meets our customers' utility preference curves for how they would like to share the risk. For us, what's just important is that we share that risk. And we have a variety of different tools to do it. And you've named a number of them. You have funding, you have guaranteed revenue, you can have price, right? You have all of the variety, you can have accelerating share agreements, you can have all sorts of things like that, all that are aimed at how do we appropriately share the risk. And different ones of our customers just have different risk profiles and different things they like from that overall tool set. So if you could be sitting in the room with us, which I'm sure you would like to do Samik, right? What you would see is us explaining that tool set and then them saying, okay, which do I like? What is the blend of that? How does that best meet my needs. Does that address your question? The first question, Samik? And then I'll do the hard part. Samik Chatterjee: Yes, please go ahead. Wendell Weeks: Okay. So scale out, scale up and then what happens as our products go inside the box. Things like CPO [ NPL ], what will be in our photonics map. So the way we think about this is that there is a set of products for us in fiber cable and connectivity that we seek to cover with our customers. Part of when I say what we do is we seek visibility on what exact products to make, what we are talking about is the first sort of phases of this have been aimed at scale out as you get -- because these are long-term agreements. As you get out longer term, what we're engaged with our customers about is how will your demand for our products change as more and more links fall to fiber optics. And that will tend to increase these commitment levels over time, above and beyond scale out. But when they happen is going to happen at different times for different customers just depending on their architecture choices. When we talk about Photonics, we're talking about creating a new map that is aimed at our OEM customers in Gen AI. So those will be separate again, right, from our agreements with our hyperscalers and incremental. Is that explanation helpful, Samik? Operator: Next question is from Meta Marshall with Morgan Stanley. Meta Marshall: Maybe just stepping to the carrier piece of the business for a second, probably the best quarter in a number of years. I guess I just wanted to get a sense of you mentioned fiber to the home plans increasing. Are you guys starting to see some of the [ demand ]? Do you think that you're gaining share in that market? Just a little bit more visibility to what you're seeing on the carrier side would be helpful as a starting point. Wendell Weeks: Speed is still quite small. And we will always secure a hunk of our capacity to be able to serve the underserved and [indiscernible] customers. But that's not what's really driving these numbers. What's driving it, and you actually see it a lot in the news now is just the ascendancy of fiber to the home. That versus other technologies that people used to ask me a lot about fixed wireless, right, hybrid fiber coax, whether satellites make a difference. And all you're just seeing is the ascendancy of our technology from the big carriers is what's primarily driving these numbers and they've been very public about it in their decisions, Meta. Meta Marshall: Got it. And then maybe just a follow-up question. I expect we'll hear more next week, but just within specialty, within Glass Innovations. Just -- are there any innovations coming this year that you would expect to drive kind of material upside to that business during this year? Wendell Weeks: Always so thoughtful when I answered this question because who I'll be [ interpreter ] or speaking for. Let me reflect on the appropriate way to answer that question. Thank you for the gift of giving me until next week to do so. Operator: Next question is going to come from George Notter with Wolfe Research. Unknown Analyst: It's Brendan Rogers on for George. A quick one. Can you guys share any more details on kind of the split between carrier and enterprise growth rates this quarter? A sense for like the relative size of those at this point or just broad strokes, enterprise versus carrier growth rates? And then another quick one on the Photonics platform that we should expect to hear next week. Are LTAs going to be kind of a mechanism that you guys are going to pursue there? Obviously, OEMs are different sort of customer set. So anything you could share there. Edward Schlesinger: Yes. I'll take the first one. So both carrier and enterprise grew 36% year-over-year in Q1. So just coincidentally, that equals the segment growth rate. Enterprise continues to grow really well, and we continue to outperform sort of the broader metrics, I would say, in that space. We'll certainly share more about that next week. In carrier may be building a little bit on what Wendell said, we had a great quarter. You've got fiber-to-the-home, you've got data center interconnect in there. I wouldn't take Q1's growth to be indicative of a growth rate for carrier because whatever happens in any given quarter or what happened in the prior year, and that quarter could have an impact on that rate, but we certainly expect to see growth in the carrier space over the horizon of our Springboard plan. And then on your second question, I think we'll address our new Photonics map in more detail next week, what's in there, how we're thinking about it, the growth drivers and how we expect that to play out over the next several years. Wendell Weeks: Yes. And but you'll really -- the change from previous dialogues that you've had with me has been that -- up until recently, I hadn't believed that we would begin -- we would see a significant increase in our revenues between now and 2028, from the scale-up portion of our network. Well, I should say it did not rise to the probability level that we felt comfortable of sharing that with you and saying you could count on that piece -- those pieces of the network falling our way. What has happened is technical progress at a number of very deep dialogues with key customers that has now increase the probability of the scale-up piece of the network, making a difference in the near term in our revenue outlook. And we will share what those -- what's driving that change on our part and that upgrade on our part with the really key technical drivers behind it so that our investors can get their own points of view around the adoption rate of those technologies. Unknown Executive: Thank you. Last question? Operator: And the last question is going to come from Martin Yang with Oppenheimer. Martin Yang: My question is on capital expenditure plan for the year. you haven't raised the CapEx plan despite the two new agreements. So were those two new agreements already incorporated when you originally gave the CapEx plan for the year? Or does that suggest the timing which means their CapEx ramp starts beyond 2026? Edward Schlesinger: Yes. Thanks, Martin. So we had given guidance last quarter that CapEx would be about $1.7 billion. We could be a little above that number this year. That's certainly true. As Wendell said earlier, we will definitely be investing across all of our product sets in optical. We have tools we use to share that investment with our customers. So to some extent, there's some impact in there. And then we'll certainly see investment continue into next year. And we'll share more next week on how we're thinking about it. Wendell Weeks: And the shorter version of this is when we share the CapEx [indiscernible] had in our mind that -- because we are -- these dialogues take a long time that we were going to be able to reach these agreements with our customers. And because of the demand is coming at us relatively rapidly, we would have had to have been in progress already on those expansions. So I think that is -- I agree with Ed's commentary on CapEx. I think going forward, what's intriguing will be how does the various funding and risk sharing work and how that impacts our overall cash flow. Overall, we feel very good about having accelerated cash flow and really not going through any sort of significant dip due to an investment cycle largely because of the risk-sharing agreements that we are seeking with our customers, if that is where you are aimed, which I bet it is. Operator: And that will conclude our question-and-answer session. I will turn it back over to Chris for closing remarks. Unknown Executive: Thank you for joining us. And before we close, I wanted to let everyone know that we'll be hosting an investor event at the New York Stock Exchange on May 6. We'll also be attending the JPMorgan Global Technology, Media and Communications Conference on May 19. And additionally, we'll be scheduling management visits to investor offices in select cities. Finally, a web replay of today's call will be available on our site starting later this morning. Once again, thank you all for joining us. Operator, that concludes our call. Please disconnect all lines. Operator: Thank you for participating. Everyone may now disconnect.
