BizLink Holding Inc. (3665) Earnings Call Transcript & Summary

Okay. Good afternoon, and good morning. Welcome to join BizLink's Second Quarter Earnings Call hosted by UBS. I am Ally Chen, covering BizLink and the industrial sector in Taiwan. It's our honor to host BizLink management today. Now let me hand over the call to Mike Wang, the Senior IR Manager. Mike, please?

Thank you, Ally, for the intro. And once again, thank you to UBS for hosting our results call now. Good afternoon, everyone, and welcome to BizLink's Second Quarter 2026 Earnings Conference Call. My name is Mike Wang, Senior IR Manager. Joining me today are Roger Liang, our Chairman; Felix Teng, our CEO; and Charles Tsai, our CFO. Our earnings results were released earlier today and are available on our IR website, where you can download the latest earnings materials and access the call through MOPS. Today's call will begin with Felix, who will share strategic updates. Charles will then conclude with our financial highlights before we move to the Q&A session. You may submit your questions at any time through the public or private chat function, and we will address as many as time permits. Before we begin, please note that today's discussion may contain forward-looking statements based on our current expectations and are subject to risks and uncertainties. Actual results may differ materially. Please refer to the safe harbor notice in our earnings materials for further details. This call is being recorded and will be available on our IR website within 24 hours. With that, I would now like to turn the call over to Felix.

All right. Thank you, Mike. Good afternoon, everyone, and thank you for joining us. Before Charles discuss our second quarter financial performance, I would like to spend some time on how we see our markets evolving, what is changing in our customers' requirements and how BizLink is positioning itself for these changes. Over the past several years, BizLink has changed significantly. Connectors, cables and interconnect products remain important parts of our business, but they no longer fully describe where our business is heading. The more important question today is what engineering problems our customers need us to solve and whether we have the capabilities to solve them. AI infrastructure is entering a new phase. The first phase of this investment cycle was heavily focused on securing compute. That remains important, but the challenge is increasingly shifting towards deploying that compute at scale. As compute density rises, the infrastructure surrounding it has to keep pace. More power has to be delivered safely and efficiently. More data has to be -- have to move at higher speeds. Thermal and mechanical requirements are becoming more demanding. And increasingly, these systems need to be designed, manufactured and deployed together. This is why we continue to emphasize deployment first. The demand for compute is substantial, but compute only creates economic value after it is deployed and operating. The ability to deploy therefore depends not only on GPUs or accelerators, but on the availability and readiness of power, networking, cooling, mechanical infrastructure, facilities and utilities. As AI factories become larger, synchronization across the infrastructure layers become increasingly important. This also means deployment will not always be linear, thus, different points in the cycle, the constraints can shift from compute to networking, from networking to power or from equipment availability to facilities and utilities. This can create variability in procurement and deployment schedules even when the underlying requirement for this infrastructure remains strong. We believe this distinction between underlying demand and deployment timing is increasingly important. For BizLink, it also extends the opportunity. As performance requirements increase and systems become more complex, customers need suppliers that can address a broader range of engineering and manufacturing requirements. We have been building BizLink around that direction for several years. Well, how we frame the business. We do not view our strategy as building a collection of individual products. We view it as expanding the capability we can bring to customers. What began with traditional interconnect solutions has evolved to include power delivery, high-speed data connectivities, optical connectivities, engineering, new product introductions, advanced manufacturing and increasing broader system level integration. The value of this capability increases when they work together. Engineering allows us to engage earlier in the customers' deployment process. NPI converts engineering solution into products that can be qualified and manufactured reliably. Manufacturing allows those products to scale and system integration allows us to address a larger part of the customers' requirement. This is the direction in which we have been moving. We are already seeing this evolution across several business. In capital equipment, our scope has expanded from components towards higher-level assemblies and system integrations. Our engineering involvement is also increasingly -- increasing as customers engage us earlier in the development process. In HPC, we have expanded from traditional connectivity into higher-speed data solutions and increasingly sophisticated power solutions. Across the company, the common denominator is that our customers are asking us to do more. This is important strategically. The more capabilities we have, the more problems we can potentially solve. Earlier participation give us a better understanding of the customers' system requirements. And when we execute successfully, that creates opportunities to participate in more programs and more content over time. It also makes our business less dependent on the success of any single product or architecture. Individual products will change. Technology architectures will change. Customer requirements will change. Our objective is to build capabilities that remain relevant through those changes. This is one reason we have continued to expand both the depth of our products and the breadth of our capabilities. Greater product depth allow us to participate in more parts of our customers' system. Broader capabilities allow us to respond as the technology mix change. We do not need to predict every technology transition correctly. We need the engineering and manufacturing capabilities to remain relevant as those transitions occur. This is also why NPI has become increasingly important to BizLink. Engineering creates an opportunity, but engineering alone does not create revenue. The solution still has to be validated, qualified, industrialized and produced reliably at scale. NPI connects those stages. As our NPI capabilities strengthen, we can work with customers earlier, improve manufacturability, shorten the transition into volume production and build the operating knowledge required to support the program over its life cycle. This makes the relationship deeper than supplying an individual component. And as the system becomes more complex, customers increasingly value suppliers that can take on a broader part of that responsibility. This does not mean one supplier needs to do everything. It means the value of having suppliers with broader engineering, manufacturing and integration capabilities is increasing. That is where we want BizLink to compete. So what is changing? AI infrastructure provides the clearest example of the evolution today. Power requirements are rising rapidly as compute density increases. This is changing how power needs to be generated, transmitted and delivered all the way to the rack. At the rack level, the industry is evaluating multiple approaches, including higher temperature and higher voltage. We do not believe there will be one solution for every customer or every data center. Existing infrastructure matters, deployment schedules matters, reliability matters. The transition will, therefore, involve multiple power architecture operating at the same time. For BizLink, this is important because we are not dependent on one architecture winning. Our power capabilities span cables, busbars and increasingly higher power solutions. As customer requirements evolve, our objective is to support those requirements across different architectures. The direction is clear, more compute requires more power and higher power requirements create more engineering challenges throughout the infrastructure. These changes will also extend beyond the data center. The growth in AI-related electricity demand is accelerating investments across power generation, grid infrastructures and electrical equipment. As those systems become increasingly electrified, capabilities developed around power delivery, power management and higher density electrical systems can also become relevant to industrial automation, capital equipment and other end markets over time. Data connectivity is evolving in parallel. As compute clusters become larger, more data needs to move within and between those systems at higher speed. Copper continue to play an important role, particularly where distance and system architecture allow it. At the same time, optical connectivity becomes increasingly important as bandwidth requirements and transmission distances increase. We have capabilities in both. Our position in copper connectivity continues to evolve with higher-speed architectures, while XFS has materially expanded our optical capabilities. We do not see this as a simple transition from copper to optics. Different systems architectures will require different combinations of both, and those requirements will continue to evolve. For BizLink, the strategic point is straightforward. We can participate across power, copper and optics. This gives us more than additional content opportunities. It gives us greater flexibility as customer architectures evolve. If content shifts between technologies, our objective is to participate in the transition rather than depend on one technology outcome. As these infrastructure layers become more closely connected, that breadth becomes increasingly valuable. And importantly, we do not expect the industry to change every part of the infrastructure at the same time. Customers need to deploy. New technologies, therefore, have to coexist with existing infrastructure and architecture transitions will occur at different speeds, depending on the customers and applications. This reinforces our view of deployment first. The winning solution is not necessarily the newest architecture in isolation. It is a solution that allows customers to bring reliable compute capability capacity online at the scale and timing they require. Our execution strategy follows directly from these changes if customers' requirements are becoming broader, our capability needs to become broader as well. We continue to invest organically in engineering and NPI. We are expanding manufacturing capabilities and -- capacity and capabilities where customer demand supports those investments. We are increasing the level of system integrations we can provide, and we continue to evaluate strategic investments where acquiring an established capability can accelerate our progress. Our global footprint is an important part of this strategy. Customers increasingly require suppliers that can support them across multiple regions while maintaining consistent engineering, quality and manufacturing standards. We, therefore, continue to invest in our manufacturing network where we see sustained customer requirements. But strong demand does not mean we need to pursue every available opportunity. We remain selective in how we allocate capacity and capital. We prioritize programs where our capabilities, customers relationship and expected returns justify the resources required. This is particularly important in the current environment. We do not intend to build capacity simply because demand expectations are high. Capacity expansion needs to be supported by customers' requirements and attractive long-term economics. We also actively manage how existing capacity is used. As our business mix evolves, we can reallocate manufacturing space, equipment and organizational resources toward opportunities where we see stronger growth, greater strategic value or better returns. In some cases, this may mean allowing more mature business to roll off rather than adding capacity simply to preserve revenue. Our objective is, therefore, not to maximize revenues at any cost. It is to allocate our resources towards the opportunities where BizLink can create the greatest long-term value. This discipline is important because capacity decisions made during periods of very strong demand can affect returns for many years. We want to participate fully in the growth opportunities ahead of us without building the company around the assumption that every demand signal will continue, indefinitely. At the same time, we are seeing increasing opportunities to participate earlier in customer projects. Earlier engagements allow us to contribute more engineering value and give us a better understanding of how the complete system is evolving. The progression we are pursuing is clear. Earlier engineering engagement, stronger NPI, scalable manufacturing and broader system integration. This is also how we approach M&A. We evaluate acquisitions based on more than their immediate revenue contribution. We look for capabilities, technologies, customer relationships, geographic reach and other strategic strengths that can make BizLink more competitive over time. Increasingly, we also think about M&A through the durability of the capabilities we acquire. Individual products can have relatively short technology cycle. A strong engineering design or manufacturing capabilities can potentially remain relevant across multiple product generations, customers and end markets. That matters to how we allocate capital. We prefer strategic assets that strengthen what BizLink is capable of doing rather than simply adding exposure to a product that is attractive at one point in the cycle. The contemplated acquisition of Interplex Datacom fits our broader capability expansion framework. It should not be viewed as a change in BizLink's strategic direction, but rather as another step along the path we have been following for many years. Interplex Datacom's capability in mechanical engineering, precision manufacturing and design would implement BizLink's existing -- complement BizLink's existing strengths across electrical, optical, power and manufacturing engineering. Following closing, we believe this complementary capabilities will broaden the engineering and manufacturing capabilities available across the BizLink platform, particularly where mechanical and electrical requirements increasingly intersect. Because the transaction has not yet closed, Interplex Datacom remains a separate business, and we will, therefore, remain disciplined about what we discussed before closing. Our broader acquisition philosophy remains unchanged. We will continue to develop capabilities organically where that is the best approach. We will consider acquisitions when they can accelerate our strategy, and we will remain selective. The objective is not simply to make BizLink larger. The objective is to make BizLink more capable. So what this means going forward? Looking forward, we see a larger opportunity set for BizLink than we had several years ago. AI infrastructure is creating new requirements across power, data connectivity, thermal and mechanical systems. Semiconductor production equipment is becoming more complex and creating opportunities for greater engineering and system integration content. Industrial automation, transportation, health care and other markets continue to evolve towards higher level of electrification and automation. This market will not grow at the same rate every quarter. We also do not expect the current AI investment cycle to move in a straight line. The scale and pace of investment across AI infrastructure today are significant. We remain constructive on the structural opportunity, but investment cycle of this magnitude will include periods of acceleration and period of digestion. Our responsibility is not to predict every turn in that cycle. It is to ensure that BizLink is positioned to capture the upside while remaining resilient if conditions change. Our strategy is increasingly designed around that flexibility. We are building depth across products so that we can participate as customers' requirements move between technologies. We are building broader capabilities that can remain relevant across multiple products and markets. We are selective about the demand and capacity we pursue, and we continue to diversify the earnings base of the company. We do not need perfect visibility into every technology transition or every point in the investment cycle. We need the ability to adapt as those conditions change. We are not building our strategy on the assumption that today's rate of investment continue indefinitely. We are building the company so that we can capture the structural opportunities through different parts of the cycle. Across BizLink, our strategy remains consistent. We want to participate earlier. We want to solve more complex problems. We want to increase our content and value to customers, and we want to convert those capabilities into sustainable long-term growth. Our opportunity is no longer defined by any single product. It is increasingly defined by the range of problems BizLink is capable of solving. With that, I will turn the call over to Charles.

Thank you, Felix, and good afternoon, everyone. Felix has discussed how our opportunity set and capability are evolving. And I will focus on what that evolution means financially. Our second quarter performance, the economic of the business as we scale, the breadth of our growth drivers and how we're managing our capital structure following the recent fundraising. So for the second quarter of 2026, consolidated revenue was TWD 23.28 billion, representing a 37% year-over-year growth and 12% sequential growth. Gross profit was TWD 7.15 billion with gross margin of 30.73% compared with 28.77% in the first quarter. Operating profit was TWD 4.01 billion with operating margin of 17% compared with 14.9% in the first quarter. Net income attributable to shareholders was TWD 2.98 billion and EPS was TWD 15.28. Net income and EPS reached a new quarterly high. The second quarter showed a clear improvement from the first quarter. Revenue increased sequentially, utilization improved and the operational issues that affect our first quarter profitability began to normalize. Last quarter, we explained that gross margin was affected by several factors occurring at the same time, including product transition, customer deployment schedule, foreign exchange and business mix. During the second quarter, we focused on the areas that we can control. The first is cost efficiency. As volume improved, utilization improved with them, we continue working on manufacturing efficiency, material cost, productivity, execution across our operations. The second is operating expense efficiency. We continue to invest where necessary to support growth, but the organization also needs to become more efficient as the revenue base expands. Importantly, the improvement in the second quarter was not simply a function of higher volume. We also made progress in addressing the operational issues that affected the first quarter while continuing to improve manufacturing efficiency, material cost productivity and operating efficiency across the organization. The result this quarter show progress in both areas. We should also be clear about how we manage the business. Our objective is not to maximize gross margin in a particular quarter. Our business model is to deliver strong scale growth at healthy and sustainable margins. Margin will move from quarter-to-quarter because of product mix, customer mix, utilization, foreign exchange and program timing. We expect that. What matters is whether we can maintain reasonable profitability while expanding the absolute earnings and cash generation capacity of the company. The second quarter is a strong demonstration of that model. So BizLink today is materially larger than it was several years ago. For several years, we focused on improving the quality of the business. We improved gross margin. We improve operating efficiency. We maintain discipline around operating expenses. We improved cash generation, and we became more selective about where we deploy capital. Those priorities remain. But the next stage of BizLink's development is not about maximizing any one financial ratio. It's about maintaining healthy economics while continuing to scale. A healthy margin on the larger revenue base generates greater operating profit, greater net income and greater cash flow. That increased earning capacity give us more resources to invest in customer program, technology, capacity, people and strategic opportunities. The important point is that scale and profitability have to work together. Growth without adequate return does not create sustainable value. But maximizing margin by walking away from attractive growth opportunity is also not how we intend to manage that company. Our objective is to capture growth where we have a competitive advantage while maintaining disciplined profitability and returns. This is increasingly relevant because the composition of BizLink's business is changing. Our growth business are becoming larger. Our engineering content is increasing. Our system integration capability are expanding. And in several businesses, we are moving closer to the customer and participating in more of the value chain. This create opportunity to increase both the size and the quality of our earnings base. We're already seeing that financial impact of that evolution. We can see this change in how we engage with customers. Across several of our higher growth businesses, our participation is moving beyond individual components toward broader assembly subsystem and engineering solutions. We're also becoming involved earlier in customer development cycle and supporting more complex programs. This increased the value that we can provide to customers and expand the opportunity available to BizLink with each program. So what is changing? The source of the growth across BizLink are becoming broader. AI infrastructure remains one of our strongest structural growth drivers. The underlying demand for compute is -- remains strong. And as Felix discussed, the infrastructure required to deploy the compute is expanding across power, connectivity and other areas. Another important characteristic of this business is that we are participating across multiple technology generations at the same time. While today's generation is already contributing to our revenue and profit growth, our engineering team are working with customers on future platforms. In some areas, that work already extend beyond the next generation into N+2 solutions. So this matter because each generation is becoming more demanding. Power density is increasing, data speed are rising and system requirements are becoming more integrated. Early participation allow us to accumulate engineering knowledge, qualification, experience and customer trust that can carry forward into subsequent generations. As a result, the capabilities supporting today's earnings also help position us for future opportunities. At the same time, we do not assume that the current pace of AI infrastructure investment will continue in a straight line. Large investment cycle inevitably include changes in deployment timing, capacity digestion and shift in where capital is being directed. We do not need to predict exactly when those changes will occur. We need to manage BizLink so that we can continue creating value through them. That's start with the quality of the demand we choose to support. We do not need to address every unit of incoming demand. When demand is strong, it can be tempting to add capacity simply to capture additional revenue. We do not believe that is always the right decision. We evaluate the capital required, the expected return, the strategic importance of the program and whether existing resource can be redeployed before committing incremental capacity. This allows to participate in attractive growth without automatically converting every increase in demand into higher capital intensity. Over time, we intend to keep capital expenditure discipline relative to the scale of the business and broadly consistent with the way we have historically managed capital intensity. There may be periods where strategic investment justify higher spending, but the principle is clear. We will not build capacity simply because demand expectations are high. Capital has to be supported by customer requirements and expected returns. Product and capability depth provide another form of resilience as Felix discussed, broader participation across technologies give us greater flexibility as architecture evolves. From a financial perspective, that matter because our growth does not have to depend on one product or one technology outcome. The same principle apply to strategic investment. When we invest in capability that can support multiple product, customer or end market, we create more ways to generate return from that investment over time. We believe this is a more durable approach that -- than concentrating capital around narrow product opportunities simply because the demand is strong today. Capital equipment has become another important structural growth engine. AI is increasingly -- is increasing manufacturing complexity across advanced logic, memory and packaging, supporting continued investment in increasingly sophisticated semiconductor equipment. Our role in this market has expanded from component toward high-level assembly and system integration with deeper engineering engagement and participation in more complex, higher-value programs. This is already translating into accelerating growth with quarterly sales reaching a new level. Today, we have reasonable order visibility extending into the second half of 2027, while discussions with customers are already beginning to extend into 2028. We are preparing for the next stage of growth by deepening our engineering engagement and expanding our subsystem capabilities. We also see a gradual recovery across our broader industrial businesses. The recovery is not uniform and different end markets are moving at different speed, but the direction has improved. This gives us multiple source of growth rather than requiring one business to carry the entire company. Our diversification is, therefore, not simply defensive. It allows us to participate in multiple structural growth opportunity while giving us greater flexibility in where we allocate capital and capacity. So how we're executing. This brings me to a capital allocation and capital structure. Following our recent fundraising, I want to be clear about how we think about both. We manage our balance sheet against a clear internal financial framework. This framework is our North Star for how much leverage and liquidity we believe are appropriate for BizLink. We do not need the balance sheet to remain at exactly the same position at every point in time. Working capital changes, we invest in capacity. We pursue strategic opportunity, and there may therefore be a period where the balance sheet moves away from our preferred position. But we operate within defined guardrails. If the balance sheet moves outside of this guardrail, we will take the necessary steps to bring it back to our preferred position. That discipline does not change with market sentiment. This is how we intend to manage the company through different part of the cycle. Our recent financing reflects this philosophy. We had alternatives, including relying more heavily on debt financing. We chose not to do that. We believe maintaining a stable balance sheet is the right approach for BizLink, particularly as the size of our customer program and investment opportunity continue to increase. This is also why we chose to support our growth through a combination of equity and equity-linked capital. We believe that when capital is deployed well, it should create long-term value for our customers, our BizLinkers and the community where we operate as well as our shareholders. Over the years, as we execute our strategy, the value of BizLink has grown substantially and the market's recognition of that strategy has grown with it. Our responsibility is to continue earning that recognition by converting the capital entrusted to us into greater capability, stronger earnings and sustainable long-term value. Greater financial capacity expands our choices. It does not change our financial discipline or lower our return requirement. Our capital allocation priorities remain consistent. We first invest in the existing business where customer demand and expected return justify the investment. That includes working capital, engineering, technology, capacity, automation and NPI. But before adding capacity, we also evaluate whether existing resource can be used more effectively. As our business mix changes, we can shift resource away from more mature programs toward opportunity where we see stronger growth, greater strategic importance or better economics. This is how we manage capital intensity. We do not measure success by how much capacity we have, but by what the capacity allows the company to earn. Not every incremental dollar of revenue deserve the same amount of capital. We will remain selective and prioritize opportunities where customer importance, strategic fits and expected returns justify the resource required. We can see the result of this discipline in our returns as BizLink has grown, both our return on equity and return on investment capital have improved meaningfully over the past several years. We view this as an important measure of the quality of our growth. Our objective is not simply to make the company larger, but to deploy capital in ways that generate attractive return over time. Following our recent financing, that responsibility become even more important. We can now have greater financial capacity and our job is to convert that capital into capability and earnings while maintaining disciplined return. Capital allocation also extends beyond physical capacity. As BizLink grows, we need more than factory and equipment. We need engineers who can solve increasingly complex customer problems. NPI team, they can convert those solutions into scalable production, leaders capable of managing larger and more geographically diverse operations and digital system and processes that allow our team to operate efficiently across the global company. This investment may not produce immediate revenue, but they are necessary to support sustainable earnings growth. We also evaluate strategic opportunities through M&A. Our approach is increasingly capability led. We look for engineering, design, manufacturing, technology, customer or geographic capability that can strengthen the broader company. We prefer capability that can remain valuable across multiple product customers and technology cycles rather than building our strategy around any single product opportunity. The contemplated Interplex Datacom acquisition is one example of how we may deploy capital when we identify a strategic opportunity that meet our long-term objective and return criteria. As the transaction has not yet closed, Interplex Datacom remains a separate business and has not contributed to our reported results. Strategic opportunity do not necessarily appear when internally generated cash is most abundant. This is another reason we value maintaining financial flexibility. BizLink itself is becoming larger. Our customer programs are becoming larger and the investment required to support those opportunities are also increasing. A strong balance sheet give us the ability to act when an opportunity meet our strategic and return requirement without compromising the operating needs of the rest of the company. That is the purpose of financial capacity, not to spend more, but to ensure that capital availability does not become a constraint when the right opportunity appear. So looking forward, we believe BizLink is entering the next stage of its development from a much stronger position. The earning base is larger, our structural growth drivers are broader, our product and capability depth are greater, our engineering and manufacturing capability are deeper. Our customer relationship increasingly span more product, program, geography and our financial capacity has increased. Our responsibility is to convert those advantage into sustainable value. The process is straightforward. We need to convert customer opportunity into earnings. We need to convert earnings into cash. We need to allocate that capital with discipline, and we need to reinvest where we see attractive long-term returns. As we do that, we will maintain several discipline. We will remain selective about the demand we pursue. We will manage capital intensity rather than automatically adding capacity. We will continue reallocating resources as our business mix evolves. We will favor capability that can remain relevant as product and technology change, and we will manage the balance sheet against financial guardrails that we have established. This discipline becomes more important when markets are strong. The scale of investment occurring across AI infrastructure today is significant, and we remain constructive on the long-term opportunity, but we're not managing BizLink on the assumption that today's demand environment continue indefinitely. There will be a period of acceleration. There will be a period of digestion. Technology will change, and there will be changes in where the bottleneck sit. We do not need to predict each one. We need a business model that can adapt to them. This is why product and capability depth matter. This is why diversification matters. This is why capital discipline matter, and this is why we maintain financial guardrails. The second quarter give us greater confidence in this model. We have returned to sequential growth. Profitability has improved from the first quarter and our absolute earnings continue to demonstrate the benefit of greater scale. Looking further ahead, we remain constructive on AI infrastructure. We remain constructive on capital equipment. We're seeing improving conditions near across all parts of our industrial portfolio, and we continue to see opportunity to expand our content and capability across the customer end market we serve. We do not need every business to grow at the same rate every quarter. We need each business to create value over time, and we need to allocate capital toward the opportunity where BizLink has strongest competitive position and the most attractive returns. Our objective is clear: grow the earnings base, maintain healthy profitability, allocate capital selectively and preserve the strategic and financial flexibility required to keep investing through the cycle. This is how we intend to create sustainable long-term value for our shareholders. Thank you. So now let me turn the call over to Mike.

Thank you, Felix and Charles. This concludes our prepared statement section. Now let us begin the Q&A section. [Operator Instructions] I want to remind everyone that there will be no forward-looking quantitive comments. Looking at some of the questions, I think the one that we want to address first is the one on our competitive position. And this one to kind of give you an idea what sort of a summary of what's being asked, as competitors broaden their AI infrastructure portfolios, how do you think about BizLink's competitive position and ability to maintain or increase content? So for this one, I'd like to hand over to Roger to provide a little color on that.

All right. Thank you, Mike. We are seeing more competitors span across data connectivity, power and optics. Our strategy is not to pursue price for its own sake, but to build deeper positions where performance requirements are high, qualification is difficult and customer value reliability and the types of market. High-speed copper is a good example. Multiple generation of developers and qualification have built engineering know-how, manufacturing experience and customer relationships. That position has helped us accelerate into power and capability and the system level knowledge we build in power that support our development in optics. We therefore see copper, power and optics increasingly reinforcing one another. Being early matter because this market do not reset with every each generation. An incumbent supplier enter a next architecture with qualification history, customer relationship and manufacturing experience. Later entrants need to catch up while the technology itself continues moving forward. The increasing complexity of AI infrastructure made these steps more valuable. Higher data rates, higher power density and the liquid cooling increasingly require electrical, mechanical, thermal and manufacturing capability to work together. Customers need suppliers that can solve engineering problem, qualified solution and scale them reliably. We can also use targeted M&A to add complementary capability when that is faster or more effectively building everything organic. Combined with organic development, this can shorten our strategic road map. So we believe our advantage can compound over time. Being ahead today can help us enter the next generation early, move faster and potentially widen that lead as AI infrastructure becomes more complex.

Thank you, Roger, as well as thank you to those who put the question on competition. There seems a lot of interest on optics. So this is the next question. Can you update us on the progress of the optics business and how you see the opportunity developing over the next several years? So for this one, I'd like to hand it over to Felix.