Corning Aktie

Good morning, everyone. Welcome to the fireside chat with Corning, and I have the pleasure of hosting Hal Nelson, who's the SVP and Chief Operating Officer; and Edward Schlesinger, who is the EVP and Chief Financial Officer. So thank you both for coming to the conference, and thank you to the audience as well for being here. Maybe it's a good time just given that you just did your investor event. So we'll focus a lot on that in terms of the discussion here.

You just did the investor event on May 6, where you extended your Springboard plans through 2030 with a $40 billion sales target. Can you just help investors understand the building blocks and sequencing as they think from your trajectory from the $20 billion revenue to $40 billion revenue?

Yes, thanks. So first of all, thanks for having us. It's great to be here. Thanks for everyone attending. So maybe before I answer that question, just to go back for those that maybe haven't followed, about 2 years ago, 2.5 years ago, we launched a growth plan. We called it Springboard. We were about a $13 billion company. Our operating margin was around 16%, and we had put a significant amount of capacity in place across most of our businesses. And we had expected to fill that capacity, grow sales and improve our margins. We had set a target of growing sales, about $8 billion from that level, so getting to -- from $13 billion to $21 billion by the end of 2028. And we've clearly been tracking well ahead of that plan.

A lot of that growth has come from our enterprise business, which supplies passive optics into the data center space. Additionally, we've improved our margin. We're running at about a 20% margin today, and we did that a lot earlier than we expected. So that's kind of where we're at today. And as Samik mentioned, we held an investor event. Hopefully, some of you listened in or attended. If not, it's available on our IR website. We expect our sales run rate, which today is probably around an $18 billion run rate, $20 billion by the end of this year to go to $30 billion by 2028 and $40 billion by the end of 2030.

And we -- I would say there are sort of 3 things I'd call out. First and foremost, the enterprise business, which has driven a lot of the growth to where we are today. We expect that to continue as data centers continue to get built out, larger data centers, larger clusters, scale out, driving a lot of that growth. We'll start to see some scale up in the enterprise space as well in this time window. And I think that will continue to drive the enterprise business at a rate of growth significantly above the rate of GPU growth, somewhere in the 1.5x the rate of GPU growth is what we would expect certainly for the next couple of 3 years.

The second thing is if you take the rest of our businesses and you kind of just put them all together, we expect to actually generate a pretty significant amount of growth, call it, mid-single-digit growth. Our carrier business in the optical space, we expect that growth to be driven by data center interconnect as well as fiber-to-the-home. We're building a solar business. I'm sure we'll talk a little bit about that. That will drive some growth. We also have our Gorilla business and our Advanced Optics business, which is part of what we call glass innovations now, and that will drive growth.

And then lastly, we're starting to see the early phases of photonics or co-packaged optics, near-packaged optics. We expect that to start in this window of time and to accelerate through the 2030 period. So that's what really drives the growth. And we put out that plan. We also put out a high confidence plan where we expect that $40 billion to be somewhere between, let's say, $35 billion and $40 billion by the end of 2030.

Okay. Great. That's great. You are now extending to 2030, the Springboard plan and taking a forward look to the end of the decade. Clearly, one of the questions that's sort of in investor minds is what's driving your confidence to forecast that sort of time period out, right? When you think about the AI investment cycle, to have the confidence that it sustains into 2030, what are the indications you're getting from your customers? How much forward visibility are you getting to give you that confidence into 2030 time frame?

Yes. I mean, I think all the market projections that you all follow and we follow, hyperscale CapEx continues to go up, certainly for the next several years, larger clusters, NVIDIA has talked about going optical in their network, certainly at least to start in a hybrid way. And I think that underpins a lot of our confidence. The most important thing is we've signed a number of long-term agreements, 3, in particular, with hyperscalers. We talked about the one with Meta in detail back in January, and then we just signed a long-term agreement with NVIDIA. So a lot of our confidence comes from what we're seeing in the market space, what we're hearing from our customers and what our customers are willing to do with respect to signing up for taking capacity that we'll put in place.

Yes. I think I might also add that when we announced these plans and these expectations, they're based on a history of us having work with a preferred seat at the table of our key customers, where we've been spending time developing those products. We've been spending time preparing to scale out the supply chain. And when we have high confidence and agreements in place, that allow us to move forward and communicate externally, then that's what we do. .

Okay. Okay. So maybe on that front, you did have the announcement with NVIDIA recently. And maybe to get more details around the sort of around the agreement itself. Can you flesh out what is the total magnitude of the capital support that NVIDIA is willing to provide, I think, some of the release that you had talked about a 10x connectivity capacity improvement -- increase, 50% increase in fiber capacity. So how should we think about the amount of capital support that the customer is willing to provide on that front?

Yes. So as you mentioned, we announced in the NVIDIA agreement that we're adding 50% to our U.S. fiber footprint, and we're adding 10x to our connectivity footprint. And a lot of that is underpinned by demand from NVIDIA. NVIDIA is actually providing a multibillion dollar prepayment to support that capital deployment and they're making an equity investment. They purchased through pre-funded warrants, 3 million shares. They have the ability to purchase up to another 15 million shares. So I think that funding will support the capital. They've also committed to minimum commitments to take a lot of the capacity we're putting in place. And I think most importantly, when I think about these agreements is that we have a technology partnership as part of the agreement, and that allows us to understand their technology road map to continue to innovate. And as Hal mentioned, we didn't sort of show up and sign the agreement. We've been working on this relationship and the product sets and technology that we would need to be able to supply the supply chain for quite some time.

How exclusive are these agreements? I think one of the concerns as much as everybody likes to see the customers sort of provide capital support, one of the concerns has been NVIDIA is engaging with everyone on the optics side and locking up capacity, which might exclude some of the other companies. So how engaged are you with other semiconductor companies similar to NVIDIA? And are these agreements exclusive?

Yes, we have the ability to supply everyone in, I'll call it, the OEM CPU space or server space. So there's no exclusivity in that respect. We do have specifics in each of our agreements that are exclusive for the particular customer, but we're -- we'll be able to continue to supply across the entire supply chain.

Okay. Okay. So we should expect customer diversification to play out as it generally has been with you historically.

Yes.

Great. So maybe moving forward with the announcement you also had with the hyperscaler engagements. I think a couple of weeks ago when you had the investor event, you did update us that you have now 3 different hyperscalers, including meta, which was the one you first announced for capacity ramp dedicated to scale out fiber. Can you outline the size of the 3 hyperscaler engagements put together? How are these agreements similar or dissimilar to each other, the ones -- the 3 that you've signed?

Yes, they're all similar size and duration to the Meta agreement. We typically defer to our customers in terms of what we go public with. So we let them drive that discussion. Meta wanted to do that. So we had that event back in January, we actually had a factory opening event I think it was end of March. So you may see more public announcements come out from us. But generally, those are the -- we're looking to sign longer-term agreements that allow us to have this technology relationship in there.

Okay. So when we think about the capacity increase that you need to do for these hyperscaler customers relative to what you've now promised to do on account of the NVIDIA agreement? Do they -- are these sort of overlapping agreements and it's the same capacity increase that's been underwritten by these customers? Or do these separate capacity agreements in the sense you do a separate 50% increase for NVIDIA and the hyperscaler capacity increases on top of that?

Actually, I think it's pretty simple and straightforward. I mean as we've shared, we've been deploying capacity and making those investments for some time, particularly as we talked about last year, and it's across all dimensions of fiber, cable and connectivity, and it's particularly focused at those customers where we have the long-term agreements in place to ensure that they're providing some commitment to that capacity for us that we deploy, and then we'll be able to deploy that capacity for the hyperscalers to build out the optical connectivity and be able to supply the components that NVIDIA needs for their compute and their architecture. And so it's as simple as that.

Okay. Okay. Got it. Moving to the other big item that you discussed at the investor event, the $10 billion photonics TAM or as you call it, MAP, right, by 2030, you're some -- expecting also some of that map to materialize in 2027. Can you highlight firstly what's driving the incremental confidence in the overall $10 billion map? And how to think about the likelihood of the realization that you're thinking in 2027 specifically, which is a lot more near term than medium term?

Yes, sure. You're right. We did make an announcement about our new Photonics MAP. And of course, the reason we did was because of the confidence. And we haven't just come upon that. We've been working on that for some time with critical customers. And you saw one of the announcements from NVIDIA. And so what the industry is expecting to see with the build-out of CPO, NPO, co-packaged optics, near-packaged optics is to move first into scale-out architectures and then it will find its way into scale-up architectures. And that's really because what those customers are seeking is to find lower latency, higher faceplate density with all the connections that need to get made, lower power and particularly higher reliability. And so what you really have to decide and think about in that $10 billion opportunity is, first, who's moving in scale-out and who's moving in scale-up to go inside the box on both of those fronts into what extent.

And our confidence really stems from the customer agreements that we now have in place. The demand pull that is being placed on us, and you saw a little bit of that with the announcement from NVIDIA on their commitment of what they're doing and what they want us to do for them.

Yes. One other thing I would add, we put out a plan in time because that's just how it works, right? We gave you a, call it, a 5-year window, '26 through the end of 2030 and we made a lot of assumptions in there. And when you have a mature business and you're seeing a wave of growth, whether it's secular or otherwise, it's a little easier to predict the timing versus a complete change in the way something is going to work. So in this case, you're changing an entire supply chain in a window of time. We have high confidence that the supply chain is going to move. NVIDIA has announced that they're going to go optical. I think you're going to see others follow over time. But again, we picked the window to give you this plan. So there's definitely a lot of variability around that photonics opportunity.

So first, we sort of derisk that plan a little bit by taking some sales out in the '28 and 2030 period. And a lot of that risk adjustment relates to the timing of how you see that inflection in Photonics. But that goes the other way, too. It certainly could be faster than what we have in our plan. I mean we are just trying to give a plan that we think has a reasonably high confidence so that you guys can underwrite that. And I think we'll start to see that in the '27 time frame, and we'll know more -- like every quarter that goes by, we'll know a little bit more about how the entire supply chain evolves because it's not just Corning, it's not just NVIDIA. There are a lot of other players that have to make all of that happen. And we'll be able to provide you with a little bit more certainty. But we feel good about the magnitude, and I certainly feel good about growth well beyond 2030, but we just try to give you a shorter-term window to think about.

So -- and let me just follow up on that. you have a revenue contribution that you're expecting in 2027, does the shipment start in 2027 or this year?

I think it's probably too early to say that, but I would say, assume more 2027.

Okay. So in terms of what you've done previously with your Springboard plans, for example, is as you've got closer and more visibility, you've reduced the risk adjustment. So in terms of this Photonics MAP, your higher confidence really builds probably once you start in 2027 with those deployments, and we can potentially see some of that risk adjustment coming down to your high confidence plan.

I think that's right. I think we know investors are really interested in this space. We're obviously not the only supplier who's talking about it. You'll learn more I think about the market at large and what NVIDIA and other OEMs plan to do, and we will certainly share our perspective as we move through the year.

Great. So we discussed a lot about the volume ramps and what you're doing with capacity, investors are also focused on pricing. So maybe as you referenced the 1.5x, just help us go a bit more forward, that's more scale-out, how do you think about the longer-term content opportunity as you move into scale-up and then we can go into more pricing-based.

Yes. Okay. Let's do that. Let's start where you sit outside the box with scale-out and scale-up opportunity. And that's really mostly in the dimension of what we consider our enterprise business. And what we tried to do was provide to your point, some expectation of our growth rates relative to GPU build-out, right? And so the way we think about it is if you're thinking of where we are now, in its simplest form, we could grow linear with GPUs. However, there are a number of technical trends that we think drive us to have a more accelerated growth relative to that and a couple of them I'll mention. Number 1 is really on the scale-out dimension that you alluded to. We see data centers moving to a higher and larger cluster size, right? So that growth rate is pretty substantial.

And where we really begin to see a break point, where the industry sees a breakpoint is when you begin to cluster greater than 130,000 GPUs. And the reason that becomes important is because you move from what is a current sort of 2-layer scale-out switch configuration with a leaf and a spine to a 3-layer configuration with a leaf and a spine and a super spine. So if you just went simply with that in simplified mathematics, we would grow 50% more when you see cluster size that go greater than 130,000. And right? And we see that, and we talked a little bit about the percentage of that. That's sort of number 1.

Number 2 is where we really pay particular attention to is bandwidth, right, like we all do. And so what we have historically seen, right, is bandwidth for GPUs and for the ASIC has historically doubled every couple of years, right? And then -- so we've got to figure out how you make those connections and between the lane rate or lane speed and the number of lanes, right? And with the SerDes driving that, we've made some assumptions about where that goes and what it tells us is that we're likely neutral to positive with the amount of fibers and connections that occur through what people are now seeing with GPUs and switch bandwidth and SerDes and so forth. So that's sort of number 2.

Then number 3 is what you alluded to as scale-up. Today, scale-up is essentially 100% copper, right? We have no space there. But as we talked about earlier, people are moving. There's already been an announcement from NVIDIA publicly that they said they're moving, right, to scale-up in a hybrid form. And so what you see is the opportunity to take those nodes and make a larger node, and that provides a substantial amount of connectivity for us. That is really one where you kind of have to decide back to Ed's point around what do you believe about the timing of when they're going to deploy scale-up? Who's going to do it? When are they going to do it? And how deep are they going optically? Are they going from 0% copper to 100% optical, where on that continuum are they going to be?

And those are some of the assumptions that you need to make in your modeling. We've developed our own view and particularly have insight from what our customers are telling us they want and need from us. I think when we talked about all of those 3 dimensions, what we see as a particular line of sight more in the near term that tells us, you put all those together, and we think that we can grow at somewhere between 1.3 to 1.5x the rate of GPUs. And then you go on the -- that's through '28. And then on the other side of that, we've made some assumptions, but there's some potential significant upside considering the factors that I talked about if the deployment is greater. So those are the drivers. That's the reason that we're seeing the build-out and the customer agreements that you're seeing us talk about or the pull that is validating what I just said.

So you do have this opportunity around content growth on a per GPU basis. Outside of that, I mean, at this point, we can see demand is pretty strong. Every part of the supply chain is starting to get constrained. How should investors think about opportunities around like-for-like pricing relative to content growth. And historically, this was an industry where you didn't really get as much pricing on the same technology. So how -- is that going to change at some point in the future?

Well, yes, pricing. I think that we are seeing pricing opportunities here given the strong demand. I think we see the pricing opportunities, though, most prominent when we're bringing forth new innovative products, right? And the reason that is so is because our intent is to make sure that we develop products that are valuable to our customers, either they are enabling them to meet some type of performance criteria or they're enabling them to provide a lower total system cost. For whatever reason, we want to bring value to that customer. And in that case, we think that's when it's appropriate for us to share the value. They get benefit, we get benefit because what's important is what Ed alluded to earlier, is that we want to establish a long-term relationship with those customers, which gives us a preferred seat at the table when they're designing their products, when they're designing their architectures and they're telling us about the problems that they need help solving.

And that's when we create value, and that's what we are good at. I think that's sort of how we think about pricing. It's a relationship-based staying with creating value. Secondarily, on the pricing front, I think the other thing that -- where we see value is mostly along the price cost margin dimension when you think about us being an integrated supplier in making fiber, cable and connectivity, all of ourselves. And in that case, that allows us to buy from ourselves, create additional value and opportunity in the margin space there.

Okay. Just a quick follow-up there to the first aspect where you're looking at fiber and connectivity but maybe selling that more disaggregated to your customer rather than a full solution and innovation-led pricing is where you see the opportunity? Do you see it more in fiber or more in connectivity products?

I think we actually see it across all 3, right? And I think you see it fiber, cable, connectivity. And everybody is moving to a more dense solution for a variety of reasons, right? So you have in fiber where we're creating smaller diameter fibers, right, lighter weight, more dense. In cable, higher number of fibers per cable, and that's bringing substantial amount of value because you can then put multiples in the DUC that you weren't putting before. And then on the connectivity front, we're seeing the need for more connectivity on the faceplate so we need denser, form factor connectors. So across all of those dimensions, I think, we're innovating to bring value.

Great. So maybe just trying to wrap up here on optical. You have talked about the DCI opportunity being $1 billion by the end of the decade with 3 industry-leading customers that you're engaged with. Firstly, has that ramp met your own expectations? And should we be expecting a rebuild of the long-haul networks eventually materializing at some point because we all know sort of these investments in the network go in a more cyclical fashion. Are you already planning for those with your customers?

Yes. So we're public with 1 of those customers, that's Lumen. They actually talked about our arrangement on their earnings call. I think it was back at the beginning of February. So we've extended and upsized that arrangement with them. I think in general, it's met our expectations. I certainly think the $1 billion is a very realistic run rate. Maybe it happens before the decade, maybe end of the decade, maybe it happens by the end of the decade. And certainly, it could be larger. I think we are definitely seeing parts of the long-haul network get rebuilt, whether it's a full on rebuild and how sustainable that is probably still TBD as all of these large data centers get put in place.

Okay. Let's move to solar before we run out of time because I definitely want to discuss that as well. Last year, we outlined a $2.5 billion solar revenue target by 2028. Now you've raised it at the investor event to around $3 billion. What's the primary change in that -- driving that outlook? How much of the raise is that you ramped better than expected versus I think when you gave that target, you were not really in the module business, which you're now in? So just help us break that down.

I can do it. The -- for solar, I think you're correct, we are seeing some strategic momentum on the commercial front, on the policy front, on the demand front. And just to ground everyone is that there are sort of 3 components or segments of our solar opportunity. There's the polysilicon, there's the wafers and the modules. And with respect to polysilicon, we just put in incremental capacity last year to support the build-out that's sold out, and that's creating value already. So we're really pleased with that. On the modules, you alluded to, yes, we actually acquired module operation last year. We are now up and ramp that capacity to a place where we're sort of nearing where we expect it to be. And it's performing now -- and so between polysilicon and modules, both of those businesses, I'd say, are creating incremental revenue and performing at or above our corporate average for margin and profitability.

Then you go to wafers, wafers is a little bit more complex. And if you think about it, wafers, we started, well, 2 years ago, kind of 2 years ago this time, it was dirt, right? So in that period of time, we have built a factory 1.2 million square foot factory and have ramped that, produced our very first wafers at the end of last year and are continuing that ramp as we speak. And we expect that ramp sort of to continue through the back half of the year. And when that ramp continues, the product is sold, and we'll begin to remove some of those incremental costs that we're experiencing due to the ramp and the build-out. And so we'd expect to see that improve through the back half of the year. And so I would say we're quite optimistic about what we've seen in solar and are seeing it in sort of a better light than when we first launched into it with the original projections.

Got it. And you outlined the trajectory of near-term margins, what you're seeing in the individual parts of it. But your longer-term margin aspirations in this business and particularly how dictated is it going to be by legislation or policy and tariffs as well in terms of how you think about longer-term margins?

Yes. Legislation, tariffs, policy all play a role. And I would say, so far, what we're seeing is tailwinds for pricing with respect to those elements. And really, it comes down to right upfront, there's a preference for domestic supply. And the primary reason there is a preference for domestic supply today is in order for you to access the 45x incentives, those are -- maybe many of you are familiar, the 45x are the production tax credits that have been provided for producing solar in the U.S. To receive those credits, you also have to adhere to FEOC regulations or Foreign Entity Of Concern requirements. And so with that preference towards U.S. content, we're definitely seeing tailwinds for being a U.S. manufacturer there.

Okay. Okay. You have talked about the U.S. manufacturing being a key differentiation as well. Wendell has talked about it quite a bit, clearly shows in optical what you're announcing in terms of agreements is helping in solar as well. Where -- what are the other areas you would highlight where it is turning out to be a differentiation and would be a tailwind to your financials?

Yes. Actually, one of my favorite topics is our advantage from a manufacturing and advanced manufacturing standpoint, both globally as well as in the U.S. I know your question was specifically to the U.S., your question was specifically outside of optical and solar, but I'm going to emphasize a couple of points on optical and solar before I get to your question because I think it's important to understand and give perspective for our manufacturing prowess. If you think about optical first and foremost, and Ed mentioned this before, is that we have the largest lowest-cost manufacturer of fiber in the world in the state of North Carolina. Soon, we'll have the largest cable manufacturing in the world in the state of North Carolina. So a very prominent position there. In solar, we talked about what we were doing, but what I would also pivot to is that in solar, we -- I mentioned we're providing the polysilicon. Well it just so happens we're also providing the polysilicon for the semiconductor industry and semiconductor wafers.

We are the only U.S. flag and one of only a handful of companies in the entire world that can produce polysilicon for semiconductors at the quality levels necessary for them to perform. And so when you take both of those businesses, optical and solar, that you asked me not to talk about, we are building out in North Carolina, we are building out in Michigan, we are building out in Texas, we are building out in Arizona, right? Okay. So now to your question right? The other areas -- we also have other proof points. We talked about before the announcement that Apple made just last year for us to produce 100% of their watch and their cover glass for their iPhones sold anywhere in the world, and that is going to be produced in the state of Kentucky at Harrodsburg. And so we're deploying that advanced manufacturing platform and capability there. Great example. I think another area that flies under the radar a little bit for us is in the semiconductor space.

We make a lot of precision optics for photolithography, for photomask, et cetera. We're building out that capacity in New York State, for example. And so I could keep going. But I guess what I would say is that we have 34 manufacturing platforms across 15 different states in the U.S. And I think that's a great example of our ability to manufacture in the U.S., reshore manufacturing here and compete on a global stage.

Thank you. Thanks for the details there. So maybe before we run out of time, just going back to the Springboard plans and taking a more longer-term view here. It feels that you're migrating to a different phase of Springboard, where the first phase of Springboard, you didn't really require that much heavy capital investment to support the growth, which you had highlighted when you initially rolled out those plans. It feels like going forward, there's going to be a sizable investment in capacity to now pursue that growth that you're outlining. What changes should investors expect in this transition and how should we think about free cash flow conversion during this sort of second phase of Springboard?

I may start and then you can jump in. I think that the way to think about it is that from a capacity standpoint is what we're trying to do with Springboard in this next phase of accelerating growth, as you said, is to make sure that we continue to enhance our financial profile of the company while we double it, right? And in order for us to do that, that means that we need to execute these long-term customer agreements that we've talked about so that there is a sharing in the risk and a sharing in the cost. And so what we intend to have those agreements do is to create a higher degree of assurance of both the revenue inflow and the funding of those investments to support it. And if we do those things with that capacity deployment, then we're going to deliver higher revenues with cash following it. Sorry to interrupt, but you...

No, that's great. And the thing I would add from a financial perspective is we really like the profile we have, and we want to keep it and make it better despite wanting to invest and grow. And maybe just a couple of highlights. We grew about 15% -- the last few years, we've got a growth rate projection of about 19%. So we expect our growth to accelerate. We moved our operating margin from 16% to 20%. We expect to be at or above that 20%, even while we continue to invest. We moved -- the one that I'm most proud about kind of the level of passion that Hal has on manufacturing is return on invested capital. We were 10% or so. We're now mid-teens. We'll get to the high teens for sure. We might be able to do better than that.

And if I think about the best value creation a company like us can have is when we can deploy capital and get a 20% return on that and grow the company at almost 20%. That's a great value creation mechanism. So we want to maintain the profile we have today and improve upon that even though we'll have to do some investments. So we'll derisk those investments by getting some cash upfront from customers or other arrangements, but we'll also look to ensure we price right, we move up the value chain, we sell more solutions, we improve our mix and things like that, which we'll continue to improve that profile. Ultimately, maybe a simple way to think about cash flow conversion because that's really what matters in the end is that we'll improve our conversion because most of the incremental net income will add and net income should grow faster than sales, that will convert to cash at almost 100%, right? So if we're converting that incremental income at close to 100%, then we'll move our overall conversion up, and that's kind of the model we want to run in this growth phase.

Got it. Interesting. Great. We've run out of time. I know there are a lot more things to talk about, but thank you for coming to the conference. Thank you to the audience as well.

Thank you.

Thank you.

Good morning. It's my pleasure to welcome you to Corning's investor event at the New York Stock Exchange. I'd also like to extend a welcome to everyone joining us by webcast.

Now before we begin our formal presentations, 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. Now these factors are detailed in the company's financial reports.

You should also note that we'll be discussing our 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. You can find a reconciliation of core results to the comparable GAAP value on the Investor Relations section of our website at corning.com.

Now we have an exciting agenda for you today. First, Wendell Weeks, Chairman, Chief Executive Officer and President, will kick off with an upgrade to and an extension of our Springboard plan and announce a new phase of accelerating growth for Corning. Second, you'll hear from Mike O'Day, Senior Vice President and General Manager of Optical Communications, who will detail our latest growth opportunities within Enterprise and Photonics.

Third, Ed Schlesinger, Executive Vice President and Chief Financial Officer, will share a financial perspective on what you've heard today. And lastly, Wendell will come back on stage to close out the formal presentations. From there, we'll move to Q&A. And following Q&A, attendees at the stock exchange will have the opportunity to connect with presenters and other Corning leaders at the demo exhibits. So we hope you enjoy the day, and we look forward to engaging with you.

And now I'll turn the podium over to Wendell Weeks.

Welcome, everyone. It's great to have you here with us today. And obviously, as you've seen, we have a lot of exciting news to share. Even better, you're going to get a chance to see some of the key innovations that are driving our success. And more importantly, you're going to get a chance to meet some of the people who help bringing it all to life.

So let's jump right into the headlines. Corning is entering a new phase of accelerating organic growth in 2027, driven by growth across our market access platforms. We are upgrading and extending our Springboard plan to achieve a $40 billion annualized sales run rate by the end of 2030. So today, we will focus on our overall corporate outlook for this exciting period, and we'll also take a deeper dive into the technical trends driving our new Photonics MAP as well as the stronger growth in our enterprise networks market access platform.

Before we get started, I'll also note that we just announced a long-term technology and commercial partnership with NVIDIA. Needless to say, this partnership creates a significant opportunity for growth for new innovations and for new advanced manufacturing platforms, including many here right here in the U.S. It also highlights our opportunity with our new GenAI OEM customers, and you'll hear more about our Photonics MAP throughout the day. So we have a lot to talk about.

Let's get started with the upgrade to our Springboard plan. 2.5 years ago, when we introduced Springboard, we shared both our internal plan and a high confidence plan. As a reminder, our internal plans, which I will focus on today, are the output of the strategic planning process that we run with each of our market access platforms.

Now these are our actual business plans. And we set our objectives and our compensation based upon those plans. When our businesses submit plans to corporate, they factor in a variety of probabilistic outcomes. They try to account for the known unknowns. We then apply a corporate level risk adjustment to translate our internal plans into a high confidence plan for our investors, which Ed is going to cover in more detail later today. At the corporate level, we seek to probabilistically adjust for factors including macroeconomics, changes in government policy and timing of multiple secular trends and our related innovations and their potential success.

Now when we introduced Springboard, we were running at a $13 billion annualized sales run rate in the fourth quarter of 2023. And we shared our plan to capture a significant sales opportunity driven by cyclical and secular trends. We shared our internal plan to capture a $5 billion revenue spring by the end of 2026, leading us to an $18 billion revenue run rate.

Importantly, we also shared that since we already had the required production capacity and technical capabilities in place to deliver the sales growth and the cost and capital were already reflected in our financials, we expected to deliver powerful incrementals. And we shared a target to improve operating margin from 16% to 20% by the end of 2026. And we said we plan to grow EPS faster than sales. And we also shared our plan to add $8 billion by the end of 2028, leading to a $21 billion run rate. And we also shared by market access platform, where our growth would come from. And we provided updates as we reached key milestones.

Two years into Springboard, we've outperformed our plan, and we have transformed the financial profile of the company. We grew our sales run rate by 35%. We expanded operating margin by 390 basis points to 20.2%. We grew EPS 85% to $0.72, and we expanded ROIC 540 basis points to 14.2%. We also nearly doubled free cash flow in 2025 to $1.72 billion from $880 million in 2023.

So overall, we established a new launch point for highly profitable future growth. On our January earnings call, we had just closed out 2025 at a $17.6 billion run rate. We upgraded our internal Springboard plan to add $6.5 billion by the end of this year, which would bring us to a $20 billion run rate. We also upgraded our internal plan to add $11 billion by the end of 2028, which would bring us to a $24 billion run rate.

And that is where we pick up today. In 2027, we are entering a new phase of Springboard with accelerating organic growth. So we are upgrading our Springboard plan and extending it through 2030. First, we are going to need a bigger scale for the upgrade. We are again upgrading our Springboard plan to now reach a $30 billion run rate by the end of 2028. That is a new spring of $17 billion, a significant increase from the $11 billion spring that we just shared with you all in January. And just by the way, it's more than double our original $8 billion spring for this time period. We are also extending our plan. We believe we can become a $40 billion company by the end of 2030. That's a $27 billion spring from the start of Springboard.

So here's the complete plan. Springboard is entering a phase of accelerating organic growth. And we delivered a CAGR of 15% in the first phase of Springboard. Entering 2027, we expect to grow at a CAGR of 19%. That is a 400 basis point acceleration. And that is why we're here today. We're providing a significant upgrade.

So let's just take a moment. That's a lot to take in. That's a very big set of numbers and a pretty significant amount of change. We have growth drivers across all of our market access platforms, but we're not going to dive into everything today. We plan to continue our established Springboard approach of just very frequent updates for our investors, with deeper dives into individual MAPs as they hit significant milestones.

So today, I'm going to just share some of the macro drivers of the plan. And we are going to dive into our Enterprise and Photonics MAPs. Then Ed will share how we think about our high confidence plan, profitability and capital allocation.

Let's start with some of the key assumptions in our plan. For 2027 to 2030, we incorporated a forward rate of JPY 150 per U.S. dollar to account for the weaker yen. We planned for flat TV, IT, smartphone end markets and the impact of higher memory price. We planned for declining ICE demand offset by increasing Corning auto content. We also plan to capture a larger solar opportunity with an upgraded sales outlook, overcoming near-term ramp challenges. We included new innovations and form factors and Gorilla Glass. And we see accelerating growth in fiber-to-the-home and data center interconnect in our carrier MAP.

So with that broad context, let's unpack our Springboard upgrade just a little bit further. In the broadest terms, this is what we think our company will look like. First, as we just shared in our assumptions, we expect Consumer Electronics, Solar, Carrier, Auto and Life Sciences all to grow. In aggregate, we are planning for a mid-single-digit CAGR for those MAPs. As I said today, we're going to do a deeper dive into the technical drivers behind our opportunity for growth in Enterprise and Photonics. And you will also hear more about this from Mike in just a moment.

Now what I'd like to do now is address some of those drivers in a more macro way. Our focus today will be on GPU cluster size increasing very rapidly and scale out, the optical scale-up network beginning and Corning optics moving inside the box. So starting in Enterprise, we have the opportunity to grow faster than the rate of GPU growth, driven by the technical factors that increase optical in the data center.

So at the most basic level, assuming no changes to the network, we would grow as GPUs grow. Remember, in these networks, each GPU must be connected to every other GPU, and that is what establishes the neural network. Now you all will have your own opinion on what the rate of growth of GPUs will be. Now the insights that we'd like to share today is some of the potential network changes that offer us the opportunity to grow faster than GPUs in our Enterprise MAP to begin. And we will cover the technical drivers, the logic and the impact of each.

Now the first driver is cluster size growth. The logic is that cluster sizes greater than 130,000 GPUs will require a third optical layer. As clusters grow, that is good for our content opportunity. When clusters get larger than 130,000 GPUs, a third switch layer is added to connect all of the GPUs to each other.

Now let's take a deeper look at how this actually works. As shown here, once cluster sizes get above 130,000 GPUs, we exceed the network scale capability that can be achieved with a 512 [ radix ] switch with 2 layers. That adds a third layer. Basically, 3 layers divided by 2 layers yields 50% more content. Now Mike will be up in a moment to talk about how we think about the mix of larger clusters for data center builds in the future based upon our own models. But overall, cluster size growth is a positive impact relative to GPU growth.

So let's turn to the second driver. The second driver is bandwidth growth. Historically, GPU and ASIC bandwidth doubles about every 2 years. Now we link those together through a combination of lane rate and number of lanes. Typically, this is a neutral to positive impact, depending on SerDes cycles. Now we increase bandwidth either by increasing the lane rate or SerDes, which would have a neutral impact on fiber content. Or you can increase the quantity of lanes, which has a positive impact on fiber content.

Now you can see when we move from [ Hopper ] to Blackwell, the SerDes stayed the same at 100G, but the bandwidth needed to double, thus requiring that we increase the fibers from 8 to 16, doubling the amount of our potential optical connectivity content. Now as we are moving into the Rubin era of GPU architectures, we see a jump in SerDes to 200G. Thus, we're able to keep the lane quantity consistent, resulting in a neutral impact on fiber content.

Now [ Fineman ] likely won't be the primary system until the '29-'30 time frame. There's still a lot that we don't know about it, but we do know that its bandwidth will double. And if it follows past patterns and stays at 200G, the number of lanes would double as that bandwidth doubles, and that would double fiber again. Or if 400G SerDes is available and reliable, the fiber content would be neutral or no change. Likewise, there are always other optical schemes which can be used to try to increase fiber efficiency, such as [ by die ], which can also reduce the need to increase optical content. All of this is yet to be adjudicated. Now we'll know a lot more in a year or so. But the main takeaway is that bandwidth is neutral or very positive for us.

The third driver is scale up. Today, this is 100% copper, but optical is beginning to penetrate the scale-up network. And this adds an entirely new optical network. And while the timing of adoption and penetration are very difficult to predict, the size of the opportunity for an increase in optical content is quite large.

First, let's consider together what has been announced regarding optical scale-up. Recently, NVIDIA announced a Vera Rubin Ultra configuration, which will scale up to 576 GPUs in 8 separate racks. Now each rack will have 72 Rubin Ultra GPUs, which are interconnected with copper and then extended rack to rack with direct optical connections. This is a transition step to optical that is effectively, a hybrid system. And this hybrid system is what has been announced as an approach to scale up. So optical is now playing a role.

The percent of optical ports has not yet been announced publicly. What has been announced is the scale-out bandwidth of 1.6 terabits per second and the scale-up bandwidth for the individual GPU, which will be 14.4 terabits per second. Now with those 2 pieces of data, we can bracket the opportunity. At the lowest end, we can assume 100% of the scale-up network will be done as it is today, and that's with copper.

What this translates to is the same opportunity we have today, which is low fiber in scale-up and 16 fibers per GPU in scale out. At 200G SerDes, this will translate into 8 lines for scale-out and 72 lines -- lanes for scale up. Now let's compare that to a fully optical scale-up system. We take the same 14.4 terabits per second bandwidth for scale up and the 1.6 terabits per second bandwidth for scale out, and we divide them by 200G SerDes. This will translate into 72 lanes and 8 lanes, respectively, each requiring 2 fibers. This results in 144 fibers needed to support the scale-up bandwidth and 16 fibers to support the scale-out bandwidth. Now when we combine these demands, we get a total fiber content of 160 fibers per GPU, which is 10x the amount of fibers of the current scale-out network.

Now what do we know for sure? Well, we know that neither of those two cases will be the hybrid system that was just announced. It will be somewhere in between. To be exact on the opportunity, we would need to know both the percent of optical ports in the offering and to what extent these new hybrid optical scale-up nodes penetrate the AI factories of the future.

Now regretfully, I cannot share with you the first because it's confidential. And no one knows for sure what the answer is to the second, which is how successful will these be. But it is clearly a very large opportunity for us. And this is a topic that generates much technical debate. And you will be able to get your own point of view by engaging with experts. Now when I put all of these technical drivers together and focus on the near term, we calculate that the demand for optical content per GPU in our enterprise MAP will increase by 1.3x to 1.5x by 2028.

Now as we head into 2030, you can see, as I have shared, that number could head much higher. Now much of this is driven by the scale-up opportunity very quickly increasing, which leads us to our next incremental opportunity to that enterprise growth, and it takes us inside the box. So I just walked you through how scale-up creates a significant opportunity for us in our connectivity business and enterprise.

Scale-up also supercharges our opportunity to bring our optics expertise inside the box. And that is what our new Photonics MAP is all about. The Photonics MAP serves as our platform for serving a new class of customers. We're bringing optics inside the box for a new generation of technology for co-packaged optics and what's called near-package optics.

Now although these technologies will get their start in the scale-out network, it is clear that scale-up drives a dramatic increase in size and scale. Optical scale-up is new tech that will likely have an exponential adoption curve, which is great. But that also leads to significant timing challenges that are very difficult to predict when this starts, and its rate of penetration drive very large range of potential outcomes.

Based on our assumptions and our discussions with customers, we believe we have the opportunity for a new $10 billion MAP by 2030. Essentially, new inside-the-box optical functions create the opportunity for Corning passive photonics to manage light. Historically, we've had no inside-the-box content. And what's happening here, as you'll hear from Mike in a moment, is that because of the potential for improvement for latency, for face plate density, power and reliability, customers are looking for the opportunity to move away from pluggables and toward co-packaged optics and near-package optics.

So as you can see in this diagram, light creation, modulation and delivery of the encoded optical signal move inside the box at the silicon photonic optical engine. Everything you see here in yellow is potential Corning content, where none existed inside the box before. And this creates an opportunity for Corning to supply these passive photonics required to move and manage the light. Obviously, a very exciting time.

So let me pass it over to Mike to explain more. Mike?

Thank you, Wendell, and good morning, everyone. I'm excited to be with you today during a moment of extraordinary opportunity in our Optical Communications business. And I'll walk you through how we're going to capture these opportunities and deliver our upgraded Springboard plan. Today, we'll focus on our Enterprise and Photonics market access platforms that fuel the majority of our near-term growth.

We'll cover 3 drivers for our upgrade. First, as AI models grow more complex, they need larger GPU clusters. This growth requires a new scale-out optical layer. Second, inferencing workloads put latency at center stage. And this creates a new optical network called scale up. And finally, we are bringing Corning content inside the box all the way to the chip with co-packaged optics. This is the foundation for our new Photonics MAP.

So let's jump in. We'll start with the first driver I mentioned, network scale-out and the rapid increase in GPU cluster size. The development of larger, more complex AI models is driving a 10x increase in parameters each year. This exponential growth in AI workloads is outpacing individual GPU memory and compute capabilities. Training the models faster and inferencing more tokens per second requires massive parallel processing, where immense models and data sets are distributed across multiple GPUs. This parallel processing is what drives scale out of the network, creating the need for bigger GPU clusters.

For NVIDIA, there are now 4 main scaling laws driving the need for more intelligent AI infrastructure. In this case, intelligence means bigger, smarter and more efficient clusters built for more capable GPUs. The first 2 scaling laws are both training related and have been around for some time: pretraining, where models are trained on enormous data sets, and post-training, where models are refined for specific tasks and improved reasoning.

But more recently, inference has started to drive the need for larger GPU clusters. We see this in test time scaling with longer thinking to generate better results from a mixture of experts' models and the latest development, which is Agentic scaling, where AI systems communicate with each other directly. Both require larger low-latency domains and massive memory at scale.

In response to these scaling laws, leading tech companies are moving from AI data centers containing tens of thousands of GPUs to AI factories with hundreds of thousands of GPUs, and eventually, cluster sizes of more than 1 million. Not that long ago, many clusters could fit into a single modestly sized data center. But as cluster growth continues, we are starting to see extremely large campuses purpose-built to house AI factories in a single location. The sampling that you see on the chart of leading clusters over the years shows how quickly cluster size has grown and how projects in the pipeline continue to scale higher.

And this leads to our scale-out opportunity hypothesis. Not only will we see more and more GPUs deployed, but they will aggregate into increasingly large clusters. If true, we would expect to see more power coming online with evidence that campuses are growing in their ability to support larger clusters. And this is exactly what we are seeing. Most sources project that new incremental AI power coming online per year will double from '25 to 2028. Likewise, the rate of GPUs deployed over this period roughly follows the same trajectory.

Now this is especially interesting for Corning because as clusters grow faster than the net switch bandwidth, we need to connect those large GPU clusters by adding another layer to the network. Most scale-out networks today have 2 optical switching layers. A 2-layer network starts at the GPU, and every GPU has a fiber connection to the leaf switch at the end of the row. This is called the GPU to leaf link and is Layer 1. Layer 2 connects the leaf switch to the spine switch, and this link typically travels down the data hall to aggregate all the rows together in an overhead cable trace system.

Now with the latest switches, a network can remain at 2 layers up to 130,000 GPUs. However, when a cluster grows beyond this, it forces a third layer in a nonblocking architecture. And when this third layer is needed, it means More Corning, increasing our content by 50% as we go from 2 layers to 3. You often see this third layer connecting many data halls as you stitch together multiple 2-layer networks. And in doing so, you create a massive cluster of GPUs.

To quantify how much of the market needs an additional switching layer, we analyzed leading data center construction data sets. And these show how much power is being concentrated into large campuses that can support bigger GPU clusters. We then built a proprietary model from this data and assumed that campus power could support a single campus GPU cluster. And based on recent giga campus announcements and the requirements of frontier AI models, we expected this amount to rise in the future. And you can see what we learned. We will continue to use our model to project the real-world growth in cluster size and therefore, the growing More Corning opportunity.

Now let's turn to our next optical network, scale up. The optical scale-up network drives significant improvements in latency. And when it comes to AI inferencing, latency is more critical than ever as AI nodes increase. Inference is the new AI workload, and the industry's understanding of the infrastructure required to support inferencing has rapidly evolved due to 4 recent developments.

First, mixture of experts models, which require more memory and bandwidth for complex communication and synchronization; prefill and decode, which needs lower latency and higher throughput; reasoning models requiring more GPUs in the low latency domain; and logistic systems with massive memory and storage requirements. Now these new inference workloads must operate in a larger low-latency GPU domain with significant amounts of memory to maximize tokens per second. And this is why node sizes are increasing.

Now what is a node? A node is a collective of GPUs acting as one large accelerator interconnected by a high bandwidth, low latency, all-to-all scale-up network. Today, a node is combined to a single rack with a maximum of 72 GPUs connected through a copper scale-up network with about 120 nanoseconds of data transfer latency.

To create larger nodes, we need to connect more GPUs. So you might ask, can I connect more NVL72 racks through the scale-out network to create a bigger node? Yes, but communication between racks via the scale-out network incurs a greater than 10x latency penalty of 1,500 nanoseconds or even more, which causes data transfer and synchronization delays that reduce GPU utilization and overall cluster performance. And this is what limits the current low-latency domain to a 72 GPU node.

Another approach, the subject of much, much debate right now, is extending the low-latency copper network, scale-up network between racks to create bigger nodes. You might ask, well, will that work? Well, it might be feasible for a 2-rack 144 GPU system and maybe even a 288 GPU scale-up network. But the latency requirements, data rates and distances involved for 576 GPUs and eventually 1,152 GPU multi-rack nodes push these lengths beyond 100 gigabit meters per second. And that's when the application crosses what we call the electrical to optical divide. Now at that point, copper simply runs out of gas. And we move beyond the practical limits of copper, and the transition to optical becomes inevitable.

Now the new Rubin Ultra NVL576 platform solves these problems by leveraging a new optical scale-up network between racks using the Dragonfly architecture you see in the bottom left. This expands the low latency domain from 72 to 576 GPUs. And latency within this multi-rack node is only 320 nanoseconds. That's a greater than 5x improvement compared to the scale-out network.

And the addition of these optical links to the scale-up network creates an incremental opportunity for Corning. And what does that look like? Well, everywhere you see yellow, you see Corning. And when we add the optical scale-up network to interconnect all the switches in every GPU rack, well, we add a lot more yellow.

And as you heard from Wendell, there is much debate across the industry around the timing and implementation of optical scale up, what we call outside the box, especially around the year 2028, which is considered the starting point by many. You have to make your own assumptions here, but here is how we are thinking about it. First, customers have to make a basic yes or no decision. Will they adopt any multi-rack optical scale up? If the answer is yes, then they have adopted optical scale-up. And this is where views on timing vary significantly. Our point of view is that adoption begins to accelerate in the 2028 to 2030 time period. And by 2030, that yes or no decision for optical scale-up will shift more towards yes due to the factors I just covered.

Second, we need to consider this. When people talk about optical scale up, sometimes they're talking about the number of ports that will be optical. The first phase of adoption will likely have hybrid optical and copper in the scale-up switch, but this varies widely by customer. And even with a portion of the ports being optical on the switch, this adds significantly more opportunity than the third scale-out layer that I just told you about. You'll likely be hearing a lot more about optical scale-up as we expect significant technical developments in the near future. Now as Wendell shared earlier, these technical drivers behind scale out and scale up create an opportunity for Corning to grow our Enterprise segment 1.3x to 1.5x faster than GPU growth. And this is what drives our confidence in upgrading our enterprise Springboard plan today.

Now let's move to our newest opportunity inside the box. Our newest growth engine is co-packaged or near packaged optics, part of a newly formed market access platform that we're calling Photonics. And this new Photonics MAP will leverage Corning's best-in-the-world expertise in fiber, cable and connectivity to capture emerging GenAI growth opportunities by bringing Corning optics into the box.

So what is driving the adoption of CPO switches? Latency, power, density and reliability. We discussed the importance of latency in the previous section. And as you know, power is usually cited as the biggest bottleneck for AI deployments. Space also matters. You don't want to take up valuable rack space with switches that are bigger than they need to be.

But reliability is perhaps the most critical. Think of this. If a link stops working, it can make a GPU go idle, which can bring down an entire node of over 500 or 1,000 GPUs. And that can impact the utilization and performance per watt of the entire cluster. So what's happening? In a traditional switch with pluggable transceivers, light creation, modulation and the delivery of the encoded optical signal take place outside the box at the pluggable transceiver where Corning products typically connect today.

So historically, we've had no inside-the-box content. In a co-packaged or near-packaged optics switch, the functionality of the pluggable transceiver moves inside the box and is performed by a silicon photonic optical engine. And this creates an opportunity for Corning to supply all the passive photonics required to move and manage the light. And in this diagram, everything that you see in yellow is Corning content, whereas none existed inside the box before. And you'll get a chance to see this technology a little later in our demo room.

Now we are innovating in this space faster than ever before, and we are tackling those pieces in the priority that our customers indicate they need, creating an exciting time for our business. We're introducing new products, connecting with new customers and establishing a new market access platform.

So let's look a bit more closely at the potential of this business. Several variables determine what happens from here. First, it depends on when CPO is launched. Like optical scale up, there is much debate among market participants, especially in the near term. But most would agree that it will begin and scale out as early as next year.

Second, you must decide how much of the market will need optical scale up and decide to adopt it. Many think that it begins in earnest in 2028. And by 2030, co-packaged optics inflects towards becoming the predominant solution for scale-up switches. Now, we will see. But regardless of when, count on us to be ready. We have gone through a few of our assumptions today, but not all of them. In total, this is very difficult to assess with traditional modeling techniques. Ultimately, you'll have to decide your point of view on the timing and speed of adoption. But if we're correct on these two things, we see the inside-the-box opportunity adding an incremental $10 billion of revenue by 2030.

So I hope you come away today with a clear sense of the magnitude of the opportunity ahead of us. Our Springboard upgrade reflects the size of that opportunity and our confidence that we'll capture this growth faster than the market. Here's why. At the top of our list is our commitment to innovation. As fiber counts grow inside the data center, space becomes a premium. Today, we have the densest inside plant cables in the industry by 20% to 30%. And over the next year, we'll more than double that leadership with new innovations we've been working on for the new links. And we'll do it with our advantaged smaller diameter fiber and new ribbon technology.

Next is our manufacturing scale and cost leadership. We operate the largest optical fiber factory in the world, and we just broke ground on what will be the largest cable manufacturing facility in the world, both in North Carolina. And most importantly, we serve our customers not only with unmatched product solutions, but with enhanced engineering support and a diverse global supply chain that enables us to deliver custom solutions at scale faster than our competition. More than ever, our customers are depending on us, as you've seen over the last year with announcements from partners such as Meta, as well as the exciting partnership with NVIDIA that we announced this morning. We're honored to deepen our long-lasting trust-based relationships with our customers as we support their growth.

Lastly, as we celebrate 175 years of innovation at Corning, we are entering a period of extraordinary momentum as we do our part to advance the most important technology trend of my lifetime. What can you expect from us along the way as we experience a continued period of growth? We're going to continue to live our values. We'll stay humble, and we will focus on continuing to delight our customers while taking care of our people. Above all, we'll keep our eyes on the growth ahead of us, looking to the future as we build understanding of our customers and markets, innovating to solve their future problems and earning a leadership position in everything that we do.

So thank you again for the opportunity to be with you here today. Now I'll turn it over to Ed.

All right. Thanks, Mike, and good morning, everyone. It's great to be together today and see many familiar faces and welcome some new ones to our story at a really exciting time for the company.

What I plan to share with you today is the following: First, we are entering a new phase of accelerating growth. I will provide some context around how we're thinking about that growth from an internal plan perspective and how that translates into our high confidence plan for the same time periods. Second, I will talk about how we plan to invest to capture all of the growth and what it means for free cash flow. And finally, I will provide some perspective on what this means for our improving financial profile.

When we initially launched Springboard in Q4 of 2023, we set out a very compelling growth plan, and we're clearly outperforming those original expectations, and we've transformed our financial profile. We increased our annualized sales run rate from $13 billion in Q4 of '23 to $17.6 billion in Q4 of '25, achieving our target a year early. We also set a target to improve our operating margin to 20% by the end of '26. We believed profitability would grow faster than sales, leading to an improving return profile.

We achieved our operating margin target a year early. Operating margin expanded by 390 basis points to 20.2%. We grew EPS 85% to $0.72, and we expanded ROIC 540 basis points to 14.2%. We also nearly doubled free cash flow in 2025 to $1.75 billion from $880 million in 2023. So clearly, Springboard has been a tremendous success over the first 2 years of the plan. We are well positioned to create significant value as we go forward.

So with that context, let's move to today's Springboard upgrade. Our internal plan is to grow our annualized sales run rate to $30 billion by the end of 2028 and $40 billion by the end of 2030. And as a reminder, our internal plans are the output of the strategic planning process we run with each of our market access platforms, our actual business plans. We set our objectives and compensation based upon those plans.

When our businesses submit plans to corporate, they factor in a variety of probabilistic outcomes. They also try to account for the unknown -- for the known unknowns. For example, we have included a weaker yen rate in our planning, starting in 2027. We also accounted for flat demand in TVs, smartphones and IT and technical substitution from ICE to BEV in the auto market.

Now we also built a high confidence plan for the same time period. Our high confidence plan is to grow sales to an annualized run rate of $27 billion by the end of 2028 and $35 billion by the end of 2030. To arrive at our high confidence plan, we take our internal plans and risk adjust to translate the opportunity into an investable thesis for all of you. At the corporate level, we seek to probabilistically adjust for factors including macroeconomic slowdowns, changes in government policy, timing of multiple secular trends and the rate of adoption for our related innovations.

And as you heard today, one of the most significant areas we're adjusting for is the timing on scale-up of the network. This impacts both Enterprise and Photonics. We have significant technical development work to do as optical enters scale up within the AI network. The overall size of the opportunity is dramatic, but calling the timing is challenging. And we will get smarter about this with each passing month.

So the timing of when scale-up happens could have a significant impact to our numbers and determine whether we track to the internal plan or the high confidence plan. And as Wendell shared earlier today, if we track to the internal plan, we expect sales to grow at a 19% CAGR, which doubles the company from the end of 2026. In our high confidence plan, we took $5 billion out of sales for 2030 from our internal plan and $3 billion out for 2028. Those are big adjustments. But even with those adjustments, we still double the company from the end of 2025. So either way, we expect to double the size of the company.

To deliver the accelerating growth we expect in Springboard, we need to invest. And typically, when we grow organically, we invest significant capital upfront, which means we take risk before the revenue and free cash flow shows up. And then we have strong returns, and we generate a high return down the road. Now historically, we've had years where free cash flow doesn't grow as our investment increases.

What we're seeking to do with this new Springboard phase of accelerating growth is to have an improving financial profile even as we invest to double the size of the company. To accomplish this, one of the things we've done is sign a number of large long-term customer agreements. And what we're doing with these agreements, given our strong technology position, is to more appropriately 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 flow.

Our agreements include appropriate measures to ensure the revenue is there, that we get funding for our investments, or some combination. And for long-time followers of Corning, you would recognize the model as similar to our extremely successful Gen 10.5 agreements with our display customers, and most recently, Apple's $2.5 billion commitment to produce 100% of iPhone and Apple Watch cover glass in our Kentucky facility. So the results will be attractive, and we expect cash flow to grow through the planning period even as we invest to grow sales.

Now let me shift gears a bit and talk about the financial implications of the upgraded plan. Clearly, we are operating from a very strong financial profile. We've gone from a $13 billion sales run rate to a $17.6 billion run rate in 2 years. We've moved our operating margin above 20%, a target we set just 2 years ago, and we're running at about a $3 EPS rate. And one of the things we are most proud of is that we've improved our return on invested capital into the mid-teens. And as you know, Corning is a capital-intense company, so that is quite an accomplishment. And we are generating a lot more free cash flow.

Now we're entering the next phase of Springboard, accelerating growth. And as we've been sharing with you over the last few quarters and today, we have a number of really large long-term customers that underpin that growth. Our plans are to grow sales to a 19% CAGR from the end of '26 to the end of 2030.

And of course, one of the questions we get from investors is now that you've delivered on your 20% operating margin target a year early, can you continue to improve? And I think the simple answer is yes. As some of you have pointed out, we have a drag from the ramp of our Solar business, which is included in our current results. So this means we're actually already running above the 20% now.

Now we're not prepared to set a new target with you today, but we are highly confident that we will successfully ramp our Solar business, and we'll provide you with an update as we progress. And additionally, we're investing to build a new Photonics MAP, and we'll learn how things play out in that space over time. As CFO, I would like to see more data in both of those areas before we would set a new target. So we'll come back at the end of the year, and we'll give you an update. And in the meantime, you can expect us to run at or above a 20% operating margin even as we continue to invest. With respect to EPS, we've been growing faster than sales over the first 2 years of our plan, and we expect to continue to do that.

Now I want to pause again on ROIC. With a mid-teens ROIC and a 19% sales CAGR, we will create a significant amount of value. We have agreements in place that will help us improve our sales to asset ratio, provide tremendous value to our customers and allow our shareholders to share in that value. Additionally, we will continue to invent to create more value for our customers. Now we expect to continue improving ROIC into the high teens. We will come back at a later date to provide you with a more detailed update on how we're thinking about ROIC as well.

And finally, we delivered $1.7 billion in free cash flow in 2025. Historically, we would not expect cash flow to increase as we invest to capture organic growth. This time, as we invest, we expect our operating cash flow to grow at a rate that exceeds the increased capital spending. And therefore, we expect free cash flow to grow as we grow sales. So overall, we will continue to further enhance our financial profile.

Now that brings me to capital allocation. Our capital allocation philosophy is to prioritize -- to invest for 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. And clearly, right now, we are investing.

We also seek to maintain a strong and efficient balance sheet, and 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. And of course, we will continue to return excess cash to shareholders.

Now let me bring it all together before we close and go to Q&A. A little over 2 years ago, we launched Springboard, and it's been extremely successful. We have fundamentally transformed the financial profile of the company. Today, we've outlined a powerful set of growth opportunities and a compelling upgrade to our Springboard plan to further enhance our financial profile. Excitingly, we are building a much larger company with faster earnings growth, significantly higher returns on invested capital and substantially more free cash flow.

So thank you for coming today. And with that, let me turn it back to Wendell.

Thanks, Ed, and thanks, Mike. Those are both great. Thank you. Before we shift to Q&A, in case you haven't noticed, we're celebrating a significant milestone this year. It's Corning's 175th birthday. You're not going to spring into song? I mean, 175. Think about that for a moment. Here we are, a 175-year-old company. We're one of the 25 oldest companies on the S&P 500.

And here, we find ourselves once again in the center of one of the most important technological revolutions in history. Not at the periphery watching it happen, but actually helping to create it. So I just wanted to take a moment and say like, how cool is that? I mean, it's just so cool, and it's why I still skip to work every day. Yes, that's a funny image. For most companies, it would be extraordinary. Well, for Corning, well, let's just say it's not our first rodeo.

This morning, as you walked in, if you were paying close attention not to your phone, but as to what was around you, you passed by many of actually, the original products from some of our most influential inventions. You would have passed by the very first cathode ray tube for early TVs. You would have went by the very first low-loss optical fiber. And the glass for the first iPhone, to name a few. Actually, when you look at that iPhone, it's like hard to remember how clunky that thing was with that and when we thought we were helping change the world.

Amid all of these innovations, you may not have noticed this really humble lantern with the bright red lens. Now that lantern was actually our very first technical invention. And that is how we got our start in life-changing innovation roughly 150 years ago. And at that moment, we really established the sense of purpose and approach that has guided Corning ever since, passed on from generation to generation.

Now at that time, railroads used glass signal lanterns to direct train conductors. Red meant stop, and white meant safety or go. But because these were just ordinary glass lenses just painted red or kept transparent or white, they cause problems. They could be masked by steam, snow and dirt. And they were unreliable as temperatures fluctuated in cold weather. Red glass would crack, therefore, break and appear white. So rather than signaling a stop, what conductors saw was go. The results were devastating: collisions, derailments, fatalities, thousands of people. And it was a nationwide safety failure rooted in glass.

So as we looked at that problem, as we looked at that obstacle, we saw an opportunity, and we set out on an innovation journey. We hired our very first scientist who was actually not a glass guy, who was actually an expert in human perception. Because even back then, what we realized is our first job is to understand the problem deeply from the customer's point of view.

And we established our very first in-house laboratory for the study of signal lenses and signal colors. We improved the design of lenses on the railroad signal so they would be less susceptible to trapping debris. We analyzed the way light refracted through the series of exterior bevels, allowing beams to spread out in all directions. So our team repeated the phenomena with bevels on the inside of the lantern.

And this led to Corning's very first patent for the semaphore lens in 1877. There it is. Our innovation helped lanterns to have more luminosity, not only focusing the light, but also avoiding dirt and snow accumulation. Railroad signal engineers actually came to Corning to conduct the field test. And soon after, the Railroad Signal Association, that those cats right there, right, adopted standard specifications for the colors and test methods that were based on the work that Corning did. And when they're all meeting there, that's in Corning, New York. And that is actually the origin of what you see today in those red, yellow and green traffic lights that still, you pass.

Just as important, we also brought on our very first head of manufacturing back then to develop low-cost, high-volume manufacturing to bring this new series of innovations to the burgeoning railroad industry. This led to tremendous benefit, right, this project because we wanted to do very large scale, very low cost and allow the industry to adopt tremendously more safe transport. We saved thousands of lives. And interestingly, we continue to feel sort of the echoes of those folks in Corning's work 150 years later sort of through our daily life today.

And that fundamental model of invent, make and serve governs Corning at this very moment. We invest in innovation to invent products that enable transformative technologies. We invest in manufacturing platforms to make them at scale at the lowest cost and better than anyone else in the world. And we invest to serve our customers, to serve our communities and our investors by bringing those innovations to life, all while serving our people and providing the type of jobs that they can build lives around, that they can build communities around. And we do all of this so that our people can feel a deep sense of mission and purpose.

So thank you for being on this journey with us, and we look forward to another 175 years of life-changing innovation. So now let's go to Q&A so you can help us understand how we can serve you better. Please join us. So now that you've all learned about railroad signal lenses, pretty cool, right?

For Q&A, we would ask that you raise your hand, and we will bring a microphone over to you. And with that, we'll start with Asiya.

Great. Thank you. Great presentation, learned a lot today again. If I can just ask, you guys announced some pretty significant production capacity increases as part of the press release. Just help us understand, you talked about, obviously, fiber opportunities scale up, scale out and then Photonics further out into 2030. So how are you thinking about that CapEx increase that you talked about? If you can help us understand relative to the opportunity that was laid out today.

Ed, why don't you tackle that one?

Sure. So for this year, we have guided $1.7 billion in capital. We certainly could spend a little bit more than that. I would expect us to ramp from that level as we go into 2027, 2028. I won't go out farther than that, at least for now. But I think the most important thing is we expect operating cash flow growth to exceed that capital spending. So we expect free cash flow to continue to grow even as our CapEx goes up.

Another important thing which we've talked about a number of times, you've seen it in some of our announcements, is that we look to -- we seek to share the risk and the reward of the investments we're making with our customers. This helps us derisk the outcome of our investments. So most importantly, it improves the certainty of return on those investments, but it also helps to pay for some of that capital as we're putting that in the ground. And we will continue to use those tools. A number of our agreements include that.

So we won't share things that our customers don't want us to share. But if you think about operating cash flow outpacing CapEx, I think that's a good way to think about it.

Okay. So just the 50% increase in fiber production capacity, that is going out through 2030 through the Photonics platform? Or is that just near term through '28?

If you want to take that?

Yes. I'll -- on the 50% fiber increase in capacity that was announced today, we've been adding fiber capacity to support the growth that we've experienced over the last couple of years related to GenAI, and that continues through the end of the decade as we sign agreements like you saw this morning to support the growth in both scale-out and scale-up networks.

And just Wendell, if I could. You talked a lot about the GPU opportunity and the growth in content related to that, so that might -- what about ASICs? Like, how should I think about the content opportunity as we start to see custom ASIC?

Right. So we tried to do it -- first of all, did that explanation of how the various factors impacted us in relative growth -- we tried to take a pretty deep technical set of drivers and make it very understandable. Did we succeed to do that? Okay. Good.

So the way in which we built it sort of simply is, you are right in that the opportunity per ASIC also grows in general. If you just step back, fundamentally, the bandwidth per GPU [ NIC ] or the GPU bandwidth doubles every 2 years, as does the bandwidth for ASICs. So those same trends that you see are driven by the same -- we see the same opportunity in both.

And so what is the right thing to track? So it really is the rate, lane rate. So if you want to understand one thing on what gives you sort of a big multiplier, it would be progress in SerDes. And what SerDes is, is you -- that's what we use to go from a parallel set of signals, that then we serialize those and create a faster single signal. So a good way to think about it is if you had like 32 channels of 1 gigahertz, you're going to take and turn that into 1 channel of 32 gigahertz. By the way, this is analog, so it's challenging. This is nontrivial.

That rate increase, the more you increase that rate, that will tend to make bandwidth growth neutral for us on either ASICs or GPU. Usually, the bandwidth per ASIC or bandwidth per GPU doubles every 2 years, and SerDes doubles every 4. So therefore, you get these periods where -- and bandwidth of the total systems doubling every 2 years, you get these periods where the amount of fibers or the amount of lanes grows.

A big question for us for 2030 is will the SerDes stay for the [ Fineman ] class or the Tomahawk 7 class, if you want to know ASICs, [ Fineman ] class for GPUs. Will that use a 200 SerDes or a 400? If it follows past practice, [ Fineman ] and Tomahawk 7 will use 200, and that would double our opportunity for Mike's Enterprise business, right? That's very significant. But we don't know that yet. And so we'll keep a close eye on it, and it's hotly debated. You won't have a problem finding different points of view.

Thanks, Asiya. Next, let's go to Wamsi.

Wamsi Mohan, Bank of America. Great presentation, and great to see you guys at the middle of this innovation cycle again. The question really, Wendell, maybe is when you think about this opportunity ahead of you, the industry growth rates are very significant. And Corning is obviously getting some share of that industry growth rate.

So as you think about this competitive landscape in this new era of growth, what are some of the underlying assumptions you have with respect to how your growth would be relative to industry growth? And there is this element of pricing that seems to be fairly significant when you think about what some of your Japanese competitors are doing. And I'd be curious to think through beyond sort of the great content increase that you have alluded to, how you're thinking about pricing as well?

I'll handle price. I'll let Mike handle how does he view our skills stack up and our ability to grow relative to others with optical capabilities. So on price, where we choose to focus our efforts to improve our profitability is by inventing products that lower the cost of our customers dramatically, and then we split the value with them. That's the way we like to do it. So that this part of serving our customers is that what we want to do is constantly improve their delivered quality and constantly improve their economics. And then depending on the relative advantage that we create, creates a value capture opportunity.

So that is our ideal way to play, and that's where we focus most of our efforts. We don't focus on raising the price of our commodity product sets. Over here is an annuity and driving significant gains across big numbers and delighting customers. Over here, I have a demand/supply exploitation. And when you want to create the type of customer franchises we seek to create, memories are long.

And so that is our approach to that. We will improve our profitability, directly linked to our ability to invent, serve and then make it at lower cost. So how are you going to do versus your competitor?

Well, I'd like to maybe take the question relative to our competition. The way we think about this is we compare ourselves in the form of cost, capacity and product. Are we better, equal to or worse and maybe even a new category that's emerged over the last couple of years of how we serve our customers.

So let me just briefly talk through this. As you know, we are a vertically integrated passive optical supplier. We make the fiber, the cable and the connectivity. There's inherent value competitively to being integrated in all 3 because we can invent and we can make and we can apply our capacity and our people in the areas where most of the demand may sit.

So from a cost perspective, we strive to be the lowest cost in each of those categories, fiber, cable and connectivity, and we continue to work on that. And that is one domain of having an advantage is can you make things at an equal or lower cost than our competitors. And I would say, generally, we feel like we are in a good position there.

Capacity, as I mentioned in my presentation, the largest U.S. fiber maker in the world, cable maker in the world in terms of our capacity. And so we continue to invest as we grow our business and add to the key pieces of capacity that continues to give us the most advantage.

From a product perspective, our competitors are not idle. They continue to invent, and they have worked on, whether it's fiber, cables and connectors, but so have we. And we've been active in that space really over the last 4 or 5 years, a new fiber, a new cable and a new connector that really focused on density, creating better optical products, optical performing products in a smaller footprint. The reason that's necessary is for what we just shared today, the amount of fiber connections inside of a data center or inside of a conduit matter a lot more now than they have ever mattered before.

And so where we have and where we are creating product differentiation matters a lot right now. So across those categories, I like where we are positioned, both from a cost, capacity and a product differentiation perspective to be able to compete not only in our home turf, but all around the world where we choose to compete and pursue opportunities, whether it's with carrier customers or hyperscalers.

The last category I'll just touch briefly on, which has been a bit of a transformation in the Optical Communications business is how we engage with our customers. We leverage all of the capabilities that we have to serve them better, whether that's in presale, engineering design, to post-sale, to creative ways to shorten and shrink the supply chain and manage our global supply chain to be able to serve them better than our competition. And I think that's an increasingly important category that we're competing quite well on today, and we will continue to extend that advantage.

Mike likes his hand is what he's saying.

Let's go to Steve.

Steve Fox with Fox Advisors. Two questions. First for Ed, you explained well, why you want to hold steady on the gross -- the operating margin target for now. But there also seems like there's a lot of opportunities to expand margins. So without putting numbers on it, can you give us sort of some hints into whether it's mix, drop-down, OpEx, how margins can expand over time? And then I have a follow-up.

Sure. So significant increase in our operating margin over the last couple of years. And when -- if you remember back to the beginning of Springboard, we had capacity in place. We filled some of that capacity, and that's driven a good hunk of our margin improvement.

I would build a little bit on Wendell's answer on price. We've also moved up the value chain. We're selling more solutions, or the price or the margin on some of our new innovations is at a higher level than some of the products that replaces. And that's also been sort of a mix shift up in our operating margin, especially in Optical Communications. Their net income margin has significantly expanded over this time period as well.

So I think that's kind of where we are today. We still have some businesses where we have capacity that we could fill. So as that -- as those businesses grow, that should be accretive operating margin opportunity for us. I think we will also continue to be able to sell a better mix of things. Specifically in Enterprise and in Photonics, as we start to add some of those sales, that should also be a good mix improvement for us. And we seek to leverage OpEx, so to have sales grow faster than OpEx. So that could also be a leverage point for margins.

And I think we are very -- I think of a target as something we want to deliver. We have a very high conviction that we can deliver it and we want to deliver it versus how we guide you and how you think about our margins. And so I want your takeaway from today to be, we're at 20%, we can sustain 20%. We should be above 20%, even with the drag we have in ramping some of our new businesses. But before we go the next step and set a new target, we just want to have a little bit more data so that we pick the right target, and we feel we can achieve it with high confidence and sustain it for a period of time.

Great. That's very fair. And then, Wendell, you made a good case for why the Photonics forecast could be lumpy, hard to predict right now. But what about the Enterprise piece? I mean, all across the supply chain right now, you're seeing like an inflection point up for the second half of the year because of generational changes in racks. So I know there was a sort of a steady curve there. But can you describe maybe a little bit better, how Enterprise might grow over these next 3 years and where the lumpiness could be or the other inflection points?

I think in Mike's piece for that through '28 and what I shared, the sort of growth rate per GPU, that range, sort of 1.3 to 1.5. I agree with you, that is a more -- that has a tighter range to it, and we can feel pretty comfortable about our ability to grow at that rate above GPU growth.

So in the near term, I am with you, Steve. It's when you go out to 2030 in Enterprise that you've got to wrestle with what do you think happens on the [ Fineman ], Tomahawk 7 class bandwidth operations because that will be the next edge of the platform. And for that, there's just some open questions, and it gives you a little wider range to deal with. And finally, how big do clusters get.

And so we're happy to continue to share on those items. We wanted to give you the pieces so that you could develop a point of view. And then as Ed said, we're going to just keep getting smarter every month, and we'll be really open with you, Steve.

[ Mina ]?

Yes. Great. Maybe two questions. Mike, maybe for you. Just how you're thinking about the Carrier opportunity? That's traditionally been lower margin. You guys have endless kind of demand right now on the Enterprise side. Does that factor into kind of how you think about allocating resources between Enterprise and Carrier?

And then maybe just a clarifying point. I assume no, Wendell, just given the amount of times you said Tomahawk. But just does the NVIDIA relationship, like do they have right of first ability to product so that limits kind of your ability to work on CPO projects with other vendors?

Yes. Maybe I'll start with Carrier, your question about Carrier. We're actually feeling very good about our Carrier business right now, I'll start with that, because a couple of things have happened. Our home base and where most of our Carrier business happens is in North America, and we're positioned with the 2 largest fiber-to-the-home builders and have been historically. And they've recently announced their desire to pass another 50 million homes between now and the end of the decade, which creates nice, continued steady growth for fiber-to-the-home in our Carrier business.

Coupled with the fact that BEAD has finally actually happened. We've got our first orders. We've actually shipped our first products for BEAD, which has been long awaited in the industry, and we're pleased to see that. So we are well positioned for continued growth with broadband connectivity, particularly here in North America.

And as a result, I think with regard to your question around margins in Carrier and allocating how we're allocating things, carriers have been a long part of our Optical Communications business for many, many years. And we are not making choices to win with one customer and abandon the rest. We are working with all of our customers as we have for decades to ensure that we both enable the build-out of GenAI, but also get the unconnected connected broadband service.

One other comment. I just want to make sure. So we include data center interconnect in our Carrier business as well. So that will clearly be a growth driver, and it's really important for us to support that. So even though it ties to a different secular trend, I just want to make sure folks understand that we track it in our Carrier business.

Great. All of our customer technical relationships are confidential, so I can't share those details. What I can say is [ Hakan ] and I are old friends. And you don't really have to worry much about him getting what he needs.

Samik?

And thanks for the story about the lamp. I'll remember that, definitely.

Thank you. You get two questions.

I'll ask both at the same time, if you don't mind. So still trying to flesh out maybe a bit more details around the NVIDIA announcement you had this morning. Because my impression was the choices in terms of fiber are made by the hyperscalers. So in addition to maybe NVIDIA sort of investing in Corning, are there any other ramifications in terms of maybe early visibility into their product ramp, et cetera? Like, are you -- what else is included as part of this sort of engagement that you have a partnership that you're announcing? And is it still fair to think that hyperscalers eventually make the decision in terms of the fiber?

Secondarily, maybe this is more for Mike, the inside-the-box opportunity that you outlined, can you just sort of overall bucket that a bit more in terms of -- I'm assuming you're talking about the fiber unit, the polarizing fiber. How to think about that in terms of maybe content per GPU? And do you expect sort of all the pieces to be adopted pretty much as a solution? Or do you expect more sort of phased adoption of the different components?

Let me take a whack. I'll probably do both in some way, shape or form. I want to make sure I understand the first part of your question. Are you asking is, in the commercial and technical partnership and the equity relationship that we're entering into with NVIDIA. Did I hear you say that was -- you had a hunk of focus on what's happening in our hyperscale customers' connectivity and did it cover that? Or Photonics? Just be a little more specific.

So does the technical engagement with NVIDIA change in terms of visibility into their road map related to just being -- this being a capital commitment from them in terms of your capacity build?

Yes. So yes, because the way to think about NVIDIA here is it really underpins our Photonics MAP. And so as you understand what it is you're putting inside those box to interact with either the switch ASICs or the GPUs, right, that gives you deep insight as to what has to happen to the overall system to deliver the light between those pieces. So yes, you can expect us to be working to fundamentally reinvent the optical systems here as we go forward to the coming generations of product. Did that address your question? I want to make sure I got it. Okay.

Then as far as the content for Photonics, what are we going to do in there, et cetera. I think in the demo, a lot of that's going to help you. We're going to actually pop the top off of a switch and sort of show you the various things in there. We're deliberately not doing a per GPU here, because now we've got to identify which parts of that whole system are we going to do, right? It will be different, different switch architectures and different ones of our innovation. So we pretty deliberately walk by that one and instead say, when we put it all together qualitatively and quantitatively, we think we can build a $10 billion MAP in 2030.

John?

John Roberts, Mizuho. I always thought Corning's color was blue, but yellow seems to fit you. This is an optical meeting, but maybe you could give us some comments on the Solar business, how it evolves beyond the $2.5 billion out to 2030? Kind of what's the road map there?

Can you do it?

Sure. Yes. So John, a few things. First and foremost, we actually see the demand being really strong, and we would expect to be able to go over $3 billion of sales over that time frame, probably sooner than that. We may make decisions around whether or not we want to do more than that through capacity, but those decisions have not been made.

Right now, we've got sort of 3 components in that business. We have polysilicon, we have modules and we have wafers. And we had capacity adds and things to get done to be able to ramp those businesses to where they need to be to support that sales growth.

And so in polysilicon and modules, we've made excellent progress. They're essentially running at or above the corporate average on our profitability on that operating margin target we set. And for wafers, it's probably the most complex of the things we need to get done. And we made our first wafers back in the third quarter. I think it was September or so was the time frame, and we've actually ramped significantly to making hundreds of thousands of wafers a day. We got to get to more than 1 million, several million per day over time.

And we're making good progress, but we expect that to continue to take some time. That's what's causing our P&L drag, and that will kind of resolve itself as we go forward. And I think we're pretty excited about the, call it, the market environment, the GA environment, which really underpins the success of this business. I think that is something that has actually continued to improve over the last year or so.

Matt?

It's Matt Niknam from Truist. Two questions. One quick follow-up for Ed, just on the last question. So Solar, is the time frame to exceed $3 billion? Is that 2030 in line with the rest of the Springboard plan? And then bigger picture question, are there any supply chain headwinds, any data center delays that you're experiencing or your customers are experiencing today that you've baked into the new Springboard plan?

Yes. On the first one, yes, for sure, within the window of growth that we've shown you here, we expect to be able to get over $3 billion in Solar. You want to do the data center?

Yes. And with regard to the data center question and the supply chain, of course, I think many of the components to build a data center are in high demand right now, including our own gear, if you will. The one that gets talked about the most is certainly power.

And I would just tell you from the projects that we are engaged in with our customers all across building these large AI campuses, delays happen, certainly, weekly, monthly, all the time, but largely have been overcome and the construction continues and the demand for our products. And we see that through the demand of our products, and we are continuing to build and ship as much as we can make to keep the construction cycles going.

And if you want a little more insight into that, maybe when we go to the demo room, look for a tall redhead with a beard. We got him stark. He tracks this really closely for us. We used to try to pepper him with questions.

We'll do one last question in the back, Josh?

Josh Spector with UBS. I'm trying to squeeze in two questions here, if I can. And they're unrelated, but I'll ask them at the same time. Is that first, just the Photonics math that you laid out, very helpful with the range of scenarios, but can you help us understand what your base case is so we could judge whether that's conservative, aggressive, whether you want to talk about that as penetration rates or whatever the easiest way is to communicate that? And separately, on the whole yen-dollar assumption, are you assuming that Display earnings can maintain, meaning you get pricing to offset that from a bottom line perspective? Or is it too soon for us to be talking about that part of the equation?

Let's do the second one. You're actually in luck today. And maybe you too could link right after this. You have in the room, John Zhang, who runs our overall Glass Innovations piece. And you ought to have a good discussion with him, got to take advantage of you being here and talk about Display.

On the first one, we're being deliberately vague about that, mainly because we don't want to share confidential information of our customers. And if we give you more of the factors, we will end up disclosing inadvertently, you could back into what architectures are being used. And so we're just going to be really cautious. And that's why you saw me base everything and saw Mike base everything as this is what's been announced and then how you can think about what's been announced. We're going to let our customers lead in talking about that piece.

And as this -- as we grow up in this business a little bit more, they'll be a little more open, and then we can be a little bit more open. What you can count on us to do is turn their publicly disclosed information into an easy rubric for you to be able to understand what it means for us. So I apologize for the vagueness today, Josh.

Okay. Well, that concludes our Q&A session. For those of you in the room, I encourage you to make your way back to the demo area, where you'll be able to connect with more of the Corning leaders. Look forward to seeing you out there. Thanks, everyone.

Thank you.

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.

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.

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.

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.

Thank you, Ed. Operator, we're ready for the first question.

[Operator Instructions] The first question will come from John Roberts with Mizuho.

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?

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.

Okay. And then when you complete and you're fully ramped on solar, what would be the approximate breakdown between semiconductor wafers and modules?

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.

And primarily wafer?

It would be -- say that again, John?

Primarily wafer?

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.

Next question will come from Wamsi Mohan with Bank of America.

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 ].

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?

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.

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.

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.

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.

The next question comes from Josh Spector with UBS.

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?

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.

Our next question comes from Asiya Merchant with Citi.

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?

Why don't you take the second part first and then I'll tackle the long-term agreements.

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.

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?

Yes.

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.

The next question comes from Samik Chatterjee with JPMorgan.

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?

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.

Yes, please go ahead.

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?

Next question is from Meta Marshall with Morgan Stanley.

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.

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.

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?

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.

Next question is going to come from George Notter with Wolfe Research.

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.

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.

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.

Thank you. Last question?

And the last question is going to come from Martin Yang with Oppenheimer.

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?

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.

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.

And that will conclude our question-and-answer session. I will turn it back over to Chris for closing remarks.

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.

Thank you for participating. Everyone may now disconnect.

All right. While we all get situated, I will read the disclosures. The really boring stuff. For important disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative.

I'm Meta Marshall. For those who don't know me, I cover networking here at Morgan Stanley. We're delighted to have Corning here with us today Ed Schlesinger, CFO, EVP. And I'm going to kick off with you to kind of give some your own forward-looking statements and other context.

Thanks, Meta. Great to be here. Thanks for hosting us, and thanks for joining us here today. So I just want to make a reminder that I may make forward-looking statements today, and you should review our filings and our website to see potential reasons that actual results may differ materially from the perspectives that I offer.

And maybe just a few points of context sort of for the environment, we see ourselves in. I think it will help a little bit with Meta's questions. About 2 years ago, we rolled out a growth plan, we call Springboard. It's been extremely successful, we've actually upgraded the revenue targets in that plan twice. If you go back to the beginning of that plan through the end of last year, we've grown our sales about 40%, earnings more than twice that rate, almost 90%.

We've improved our operating margin about 4 points from about 16% to 20%, and we improved our ROIC into the mid-teens. And we think of that as a financial profile that we really like and we want to be able to grow our business from that profile. And just recently, we upgraded our sales outlook for the next 3 years, '26, '27, '28. We had originally expected to add about $8 billion of sales run rate from the beginning of our Springboard plan through 2028. That would get us to around a $21 billion company. We upgraded that by $3 billion to $11 billion kind of gets you to about a $24 billion company, we're starting to get close to being able to double the size of the company over a 5-year period of time.

A lot of drivers of that. I'm sure we'll talk about that with Meta today. Additionally, when we rolled out Springboard, we had talked about having capacity and technical capabilities in place to being able to support a significant amount more of growth. And in some of our businesses, we still have capacity, and we expect to fill that over time as we continue to grow. But in other places, we'll have to invest Optical Communications as a place we are investing today, and we will continue to invest to capture growth. That will be our primary vector for capital allocation.

And with that new financial profile, we expect our free cash flow to go up significantly, and we continue to expect to invest to grow organically. And maybe just 1 last comment. I think those of you who know us well know this, maybe some of you who are new to us don't. But this is our 175th anniversary as a company. You don't hear that too often, companies in their existing form don't typically exist that long. And we think the reason we're able to do that, and we seek another 175 years, by the way, is because we take a long-term view. We look to innovate and invest into secular trends where we believe our capabilities and skills, optics, glass, et cetera, really matter. We have other areas we're looking at today beyond Optical Communications. So we expect to continue to be able to do that. So thanks for being here. I'll turn it back to Meta.

I think I was recently going through my dishes of founded old Corning dish. So definitely a long-lived company. We're delighted to have you back here. We -- you guys weren't able to make TMT last year and just a lot has changed for Corning in the past couple of years. 2 years ago, we were still kind of coming out of that telco digestion, worrying about the yen, just how have you guys been able to position yourself to take kind of this outsized portion of the AI opportunity both in kind of today's markets, but kind of as these markets start developing?

Yes. Thank you. So we invented low-loss optical fiber commercialized at over 50 years ago. We've been in this space for a really long time. We look to capture the next technology nodes as we see them. And so in the data center, we saw the need for denser connectivity applications. We've been working on those applications 5, 6 years ago, we started doing that, getting ready for this inflection up in the data center space.

We commercialized new fibers, smaller fibers, cables, and connectors about the middle of 2024, we introduce those products into the market. And that's actually been extremely successful for us. I would say that the market itself has exceeded our expectations and our ability to sell into that market and win business has exceeded our expectations. So I think it's this long-term view and really being close with our customers that's been able do that.

Got it. ahead of earnings or the day before earnings, you announced kind of this long-term agreement with Meta significantly increasing the amount of fiber you sell to this customer. We're seeing the kind of a wide approach -- variety of approaches being taken in terms of pricing and tightness. Why have you favored maybe these long-term agreements versus maybe just kind of optimizing pricing today?

Yes. We really value long-standing customer relationships. I think it helps us to continue to innovate in a space. We do that in Optical Communications, but we do that in a lot of our other markets in Display. We do that, we do that in Gorilla. We're doing that in solar. We want to understand what our customers want and how we can help them, and that actually adds a lot of value relative to sort of a short-term pricing opportunity.

So a long-term contract also does something that's very important for us because we make things we have to put capital in the ground to be able to supply. We want to make sure we get a really compelling return on that capital, think of a greater than 20% ROIC on new capital that we put in the ground, and we want to be able to do that for a sustainable period of time.

So having customers co-invest with us, having them sign up for revenue commitments of some sort, derisks that investment that we make over time. And of course, price is very important, and we use price in the environment we're in as a way to ensure we have the right return on those investments.

Okay. Got it. You noted on earnings that there were other LTAs that you were working on. Just what -- where are we on this? When should we expect to have a better sense, do any of them start to include scale-up or kind of moving past into new markets?

Yes. Maybe starting with the first part. We continue to work on a number of long-term agreements we will defer to our customers in terms of how public we'll be with respect to those agreements, but I'm highly confident that we will have a lot of other arrangements that are similar to the Meta arrangement in this space.

Maybe on the second part of your question, you actually wrote a report, I thought it was a really good report, for those that haven't seen it, it came out last week. It sort of lays out the optical communication space. And I think terminology is important. So what we're primarily seeing demand for is in scale-out sort of more traditional data center architecture but a lot larger clusters and a lot more capacity, and that's driving the need for more connectivity.

We are starting to also see scale-across I don't think we're going to see scale-up probably for a couple of years. I mean, our view is it's sort of inflects up in '28 maybe and then it sort of continues to grow through the end of the decade. But you mentioned CPO, and I think CPO is actually going to be in scale-out and scale-up. And I think there's an opportunity to start to see some scale out CPO connectivity happen, maybe next year, maybe a little earlier than 2028.

What we're primarily signing up contracts for is the scale-out part of the network, but we are actually talking to a lot of folks about CPO, in particular, which may mean new innovations for us and different kinds of relationships in the ecosystem.

Just how are the kind of needs of that scale-up opportunity difference? And how can you guys continue to differentiate just like you've done on the scale-out opportunity?

Yes. So for scale-up or even for CPO in scale out, you're actually connecting different parts of the network, so you're going to need new types of connectors they may need to be even more dense than the connectors that exist today. There's going to be other components that are going to go closer to the chip set that will be optical. So it allows us to continue to expand into the supply chain. And I think in a lot of cases, and I would say, probably scale-up CPO, there's still a lot of work happening around what that architecture will actually look like.

Okay. Got it. And then, I mean, just a question. You clearly have a lot of demand right now. So just how are you prioritizing hyperscalers, neo clouds, just judging kind of what customer set kind of gets that prioritization.

Yes. I mean, all customers are important. We like to have these long-term relationships with important customers in a particular industry. Again, we do it in Optical and in other places, so I think it is more likely that you'll see long-term arrangements like the Meta deal with a hyperscaler or someone else in the supply chain, but of that scale versus, say, a neo cloud. That said, we're certainly selling to neo clouds and helping them build out their networks.

Okay. Maybe last question there. And just a different question that we get from investors. There's been a lot of attention right now to kind of this like spot market for fiber in Asia. And just kind of how do you guys think about kind of that long-term agreements versus kind of some of the spot pricing that we've seen being more elevated as of late?

Yes. I think we're advantaged in that we're the world's largest fiber cable connectivity maker. So we actually have our own fiber supply. We control that. That puts us at an advantage. And again, we innovate a lot. So we have a lot of product sets that others follow on with versus our leading with. And I think for capacity in general, we're adding connectivity capacity and cable capacity. We've been talking about that. We started doing that in the back half, and we'll continue to do that as we go into 2026 and so on.

As we look to make bigger investments, potentially fiber and other bigger cable investments, we'll ensure that we have a high confidence on the return in that investment, either someone's co-investing with us or they're committing to take the revenue or even better both of those aspects. I think it's highly likely we'll make those decisions in the near term. We may or may not talk about them in detail. It will depend a lot on the customer and how they're thinking about it.

Okay. Got it. Maybe jumping on to other agreements that you guys have on the scale across and kind of DCI side, you've had relationship with Lumen that you announced over a year ago and some of the new consortiums. Lumen is a clear revenue driver today. Just when do you see some of the new consortiums or just how to think about kind of where Lumen is and then where these new consortiums are in their build-out?

Yes. I think on scale-across, you probably saw Lumen announced their earnings, I think, a couple of weeks ago, 2, 3 weeks ago, they referenced expanding the relationship we have with them beyond the original deal that we had signed and that will increase our volume specifically with them as they continue to do a lot of that work. We have other customers in that space. We haven't talked publicly about those, so I can't specifically mention them. I think that is a nice business for us.

We had talked about going from essentially nothing to $1 billion opportunity by the end of the decade. I have high confidence in that. I think it certainly could happen faster, and it certainly could be larger than that. And the thing that we haven't talked about directly or seen as much directly as the hyperscalers themselves may wind up doing some of their own build-outs they may hire somebody to do the install, and that could be a direct customer for us as they build out their network. To date, I would say it's primarily more of the carriers that are doing the build outs.

Okay. With the data center business being higher margin, just how does it change how you guys think about resource allocation?

Yes. I think as a general matter, we will allocate capital to the best available opportunities. I don't think we're constrained to the point where we're not adding capital. We think of it -- I think in 2 ways, you have research, development, engineering, we're spending over $1 billion a year on that. We've got a number of top programs. We always ensure those top programs are funded well. Sometimes their -- program that's generating revenue now or in the near term, and sometimes it's a program that's several years out. We never under allocate capital there.

And then we have tens of programs beyond that, maybe 100 programs beyond that and we'll ensure that we allocate some capital to those programs, they may be small cost reduction like programs or they could be things that are a decade out that we believe highly in and we think there's a secular trend, and we want to make sure we're investing now to capture that. That's kind of our model for research, development and engineering, and we prioritize that spending kind of within that framework.

And then when we get into adding capital, putting capital in the ground, it's a little bit more expensive to do that, and we want to have a higher level of certainty. You don't want to build a factory and then have that factory sitting idle for a period of time. So we're definitely adding capital. I mean it's a little long-winded way. We're definitely prioritizing the data center space without a doubt, that is a place where we're putting capacity in the ground and investing technology, but there are other places where we're investing, and I don't want people to think that those opportunities aren't critical for us, let's say, for the next decade.

Okay. I often get this question from investors about whether you guys have too much share in fiber. And just does that kind of create some ceilings for you guys? I'm sure you also get that question from investors. And so just -- how are you thinking about that?

Yes. I mean the best way I think about the Optical Communications activity -- opportunity, I should say, today is the market for traditional data center, call it, scale-out is growing significantly. So putting market position share aside, huge market opportunity, then you have 2 components within that are not optical today. So it's less about share and market position and more about copper converting or converging to optics, and we believe that will happen. So it is a huge market opportunity that today we really don't have a share. We're not participating in that I think drives growth well beyond this next 3-year Springboard window of time.

Okay. Got it. We talked about earlier, you noted that the $3 billion increase to the Project Springboard targets for 2028. Only a portion of that was fiber. Is there a general way that we should be kind of thinking of the split of these businesses or just as we start to move on, off of some of the Optical business just kind of laying the framework for what that increase was?

Yes. So when we first rolled out our plan, we had kind of laid out broadly the areas that we thought would drive a lot of growth. I'm going back to like the beginning of 2024, and Optical was 1 of those areas we thought was a significant opportunity for us. So for sure, that opportunity is bigger. I think it's bigger just in general, more CapEx being spent by the hyperscalers than we would have thought at that time. I don't think that surprises anybody.

Additionally, I think the opportunity to take some real estate from copper and move it to optical is happening maybe a little sooner than we would have thought. I think the scale-across opportunity is also something that probably wasn't on our radar to the degree it is today. And that's driving a good hunk of why we upgraded our sales outlook. And I think we picked the window of time in the next 3 years, but I think you could go out farther than that and the growth would continue beyond that.

Our confidence in solar, which is another area that we've invested into is actually a lot higher today than it was 2 years ago. It's actually increased pretty significantly over time. So we feel really, really good about going from roughly $1 billion business to greater than $2.5 billion business in that space, at Corning level profitability.

We're not there today. We have a long way to go, and I think that will accrete up over several years, but that's another area that gave us confidence to be able to upgrade our plan. And then I think Specialty Materials, there are 3 things that sit in Specialty Materials that I think are important to note. You have Gorilla Glass think of smartphones and other devices in that space. We expect to be able to grow that business, and we have pretty good confidence in that.

We have a business we call Advanced Optics which makes specialty glass for a number of different market segments. Semiconductor equipment is a segment that we expect to be able to grow that business. And then aerospace and defense is another segment that we play in. Those are 2 smaller businesses but we would expect to have growth there. And so all of that combined is why we upgraded our plan.

Okay. You've talked about kind of already having hit the 20% operating targets that were part of Springboard. Just how are you thinking about the potential of increasing this target particularly as optics, which maybe has traditionally been lower margin as kind of a source of outsized growth.

Yes. So first of all, for us, this was a really important thing. We wanted to get our operating margin to 20%. We've been striving to do that for a while. So we feel great about it. It has really changed our ability to generate a lot more cash as we grow. So we believe that having that level of profitability is sort of a base. So we -- our operating margin may go above 20%. I think it will go above 20%. We may or may not set another target but I think you all should think of our ability to grow and the plan we laid out has double-digit sales growth for the next 3 years, at a 20% operating margin or better and that, that incremental growth would convert to cash at a very high rate, right? Think of almost like 100% conversion on cash.

That's the model that we want to run for the next several years. We're going to add capacity from time to time. And in any given time period when you add capacity, there could be an impact to your margin we're seeing that today actually in solar. So even though we're at 20%, we actually have a drag on our margin a little bit from capitalizing the solar business. So like I said, we like this pace. We think it's a great place to operate from. We could go higher. I think we will go higher, but we may or may not change our target in the near term.

Okay. Got it. we spent the vast majority of time talking about the fiber business. I'm sure there's more questions that we might get to. But I want to move on to the solar opportunity. You guys have talked a lot about this over the past couple of years. How are you progressing on kind of efforts to move that business beyond what has traditionally been the polysilicon business into the wafer business?

Yes. Maybe stepping back for those that aren't following what we do. We make polysilicon for the semiconductor space and the solar space. We've owned a part of Hemlock for, I don't know, 50 years or so, something along those we actually took majority ownership of that business in 2020. So we've expanded our polysilicon capacity. We have the ability to make more for the solar space, and we have the ability to make more and grow semiconductor space and the semiconductor space is really only 3 players that make polysilicon for that space.

In the solar space, we've got that capacity up and running. We've got to make it more efficient. So it's dragging our margin a little bit, and we'll do that over the next several quarters. But I feel good about our ability to sell and make the stuff that we have in the ground.

We -- about 2 to 3 years ago, we made a decision to go into the next step in the solar supply chain, which is to make wafers. We built a very large wafer facility right near our polysilicon facility and that facility is now up and running and producing wafers for the solar space. We have to continue to add equipment. So to get to the actual capacity level that we can produce. We still have several quarters before we get to that level. And we have to be able to run that asset at the right efficiency level so we get the right output from that facility.

And again, we'll do that over the next several quarters. We're making nice progress there, and I feel highly confident that we will achieve the outcome. And then additionally, last year, we acquired a modules business as the OBBB was put in place and there were certain regulations around who could own U.S. assets and benefit from any incentives in the solar space, we were able to acquire that business. And we've got maybe a little more than half of that capacity up and running, and we're making modules and selling modules will add the rest of that capacity in 2026.

So ways to go to get to our target, but I think we'll continue to make nice progress, and we're pretty much sold out. So I think it's mostly about us capacitizing the assets, getting them up and running at the right efficiency level and we should be able then to get to that $2.5 billion plus sales level. We Had originally set that target for kind of a 2028 time frame. I feel confident we're tracking a little better than that.

Okay. I mean there's been a lot of changes over the past couple of years between administrations, just in kind of treatment of green energy. There's been a lot of changes with tariffs. Just how are you viewing that solar opportunity in light of maybe some of the changes to either tariffs or kind of administration?

Yes. I think our view is it is a very important part of the energy build-out in the United States. It's essentially the lowest levelized cost of energy. It's relatively fast to put in place relative to other types of energy sources. And we expect it to be part of the grid going forward. I think it's more about the cost effectiveness of it than it is about the politics. And I think that's why it's stayed in place.

We will have capacity to supply maybe in the teens percent of the market, right? So we're not we don't need the market to grow from where it is. We mostly need to displace other sources of solar. And I feel confident we'll be able to do that.

Okay. Another announcement that's been a positive for you guys over the last year was with Apple, noting that 100% of the production of Gorilla Glass would be out of Kentucky -- for Apple would be out of Kentucky and securing share in future innovations. You already had meaningful share here, but just how did that agreement kind of change your planning process around Specialty Materials?

Yes. I think we're in a great position in general because we typically will make our products where our customers are. So we have a footprint in the United States. That's actually quite large because we've been serving customers out of that footprint for decades. Apple liked the ability to produce in the U.S., so that actually worked out really well for them and that sort of spun that agreement.

And I think the most important thing about the agreement is that there's a technology collaboration aspect to the agreement. So we're deeply embedded in their supply chain. We have been kind of since their onset, but actually, it allows us now to continue to do things that maybe others do for them today as we continue to innovate together. I think that's probably the most important aspect. But additionally, just being able to serve them to make all of the glass for their mobile devices and watches is critical for us to continue to sustain that profitability level in that segment.

Okay. I'm going to move on to some of the other businesses, but I wanted to open it up if there's any questions just on the optical business. Okay. I think we had -- we have a question just -- yes.

[indiscernible]

Yes. I think that opportunity is meaningful for us. I think we'll see on the timing.

[indiscernible]

Yes. We will come back and talk about this more, but I don't know how to do it if I think about CPO for scale out and up combined. But when we originally were thinking about scale up as a general matter, we have an enterprise business today. Last year, we did about $3 billion, I think a little over $3 billion. We think the scale-up CPO-like opportunity for us is at least 2 to 3x that business. So it's a significant market.

But the more I spend time on it, I think the more we spend time on it, with partners in the ecosystem, I think it's actually bigger than that. I think the timing is where I would be cautious. We're typically a little conservative on the timing. It takes time to change supply chains out. We could be wrong. We'll be ready if it's faster. But we -- so we could be wrong to the positive, but I just want to make sure people don't model this really high inflection rate for scale up.

[indiscernible]

Yes. I mean I'm referring to just our perspective. I mean, we've actually been working -- we've believed this was an inevitability for more than a decade. We have co-packaged optics prototypes that we've been working on since the mid-2015 time frame, maybe even earlier than that. So for us, it's mostly about when does the technology and the economics converge that it's actually cost neutrality or cheaper to do optics and as effective to do optics as it is today to do copper.

And we're seeing that happen faster than we would have thought. And I think, I'm certainly not an expert, but I think that is because of the adoption of these really powerful compute units at a high rate. If you go back 2 or 3 years, I don't know that anyone would have expected these tech generations to come as fast as they're coming today. So I think that's what's causing it.

[indiscernible]

So I don't know that I can answer your second question probably. We do have the controlling interest in US Conec. They make a lot of the ferrules and connectors for our products and for the optical space. They're the largest maker of various different -- I call it high density, multi-fiber connectors.

All right. Perfect. Maybe just kind of last question just in terms of kind of -- you've laid out kind of clearly some ROIC thresholds or just kind of prioritizations for optics investments. But just how are you thinking about kind of capital allocation in the coming years?

Yes. So philosophically, we invest organically. That's our primary driver of value for investors we try to prioritize our capital in that space. Within that space, we look to prioritize against the highest return, most certain opportunities. Clearly, we're prioritizing a lot of that capital today to optical communications.

But we're also thinking about things in the future, some example, semiconductor packaging is a place that we really like because it uses a lot of our core capabilities. So we think about prioritizing within that, but that is our primary vector. Because we invest long term and we really think long term, we want to have a strong balance sheet. So we always want to make sure our balance sheet is investment grade plus, if you will, and we'll ensure that we continue to manage a balance sheet like that.

We're in a good place today but that is really important because we never want to go through a cycle, an economic cycle where we can't invest. So we want to be able to use our balance sheet when we can. We did that actually through the pandemic period. We didn't have to cut our investments, and we didn't have to stop putting capital in place because we had a strong balance sheet, and we could do that.

And then, of course, we want to reward shareholders. We have a really strong dividend. We've been working to get our payout ratio down. I feel really good about where we are. We doubled our free cash flow from [ '23 to '25 ]. Our payout ratio is more like 50% I'd love to be sub-50% on the dividend because it just gives us more financial flexibility. And then, of course, we buy back shares, and we've proven that over the last decade, we do that opportunistically. We bought back maybe half or so of the shares outstanding company since the early 2000s time frame. That's how we think about it philosophically.

And then we look at where we think the closest in opportunities are, and we'll prioritize those from a research development and engineering perspective, we'll look for co-investment. We look for somebody wanting to sign up for our investments, and that actually will allow us to lean in a little bit more in a specific area.

All right. Well perfect. Ed, thanks so much for being here today and a little shout out for Ann. We will all miss you. So all right. Perfect. Thanks so much.

Thank you.

Ladies and gentlemen, thank you for standing by. Welcome to Corning Inc. Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. It is my pleasure to introduce to you, Ann Nicholson, Vice President of Investor Relations. Please go ahead.

Thank you, and good morning, everybody. Welcome to Corning's Fourth Quarter 2025 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'll 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 fourth quarter, differences between GAAP and core EPS included noncash mark-to-market adjustments associated with the company's translated earnings contracts and foreign denominated debt as well as constant currency adjustments. As a reminder, the mark-to-market accounting has no impact on our cash flow.

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.

Thank you, Ann, and good morning, everyone. Today, we announced fourth quarter and full year 2025 results. We delivered another excellent quarter. Year-over-year, sales grew 14% to $4.41 billion, and EPS grew 26% to $0.72. We expanded operating margin 170 basis points to 20.2%, achieving our Springboard target, a full year early and we expanded ROIC 150 basis points to 14.2%.

For the full year versus the prior year, we delivered double-digit sales growth with EPS growing twice as fast as sales and free cash flow growing 3x faster than sales. Today also marks the second anniversary of Springboard and the plan has certainly been a tremendous success to date. Since our quarter 4, 2023 launch point we have transformed the financial profile of our company.

We expanded operating margin by 390 basis points to 20.2%, we grew EPS 85% to $0.72, and we expanded ROIC 540 basis points to 14%. We also nearly doubled free cash flow in 2025 to $1.72 billion from $880 million in 2023. In total, we now have a highly profitable launch point for future growth. And excitingly, we have even stronger long-term growth ahead.

Today, we are upgrading our original Springboard plan to now add $11 billion in incremental annualized sales by the end of 2028, up from our original $8 billion. So we feel great about our position entering 2026. In quarter 1, we expect year-over-year growth to accelerate with core sales up approximately 15% to a range of $4.2 billion to $4.3 billion.

Looking at 2026, our internal Springboard plan now adds $6.5 billion in incremental annualized sales by the end of the year, up from our previous $6 billion plan and our high confident Springboard plan now adds $5.75 billion, up from our previous $4 billion plan. Quite simply, our strategies are working. We're seeing remarkable demand for our innovations and manufacturing capabilities and we see a larger long-term growth opportunity through 2026 and beyond.

Recently secured customer contracts including the one we just announced with Meta only increase our confidence. We've been getting a lot of questions about the meta agreement from our investors. So before I talk about SpringBoard in more detail, let me take a moment to outline the key elements.

Just yesterday, we announced that Corning and Meta announced a multiyear up to $6 billion agreement to support Meta's apps, technologies and AI ambitions using our newest innovations in optical fiber, cable and connectivity solutions. This long-term partnership with Meta reflects our commitment to develop, innovate and manufacture the critical technologies to power next-generation data centers here in the U.S.

Together with Meta, we're strengthened domestic supply chains and helping ensure that advanced data centers are built using U.S. innovation in U.S. Advanced Manufacturing. Meta will serve as the anchor customer for the expansion and upgrading our manufacturing and technology capabilities across our operations in North Carolina.

We are concluding similar long-term agreements with other major customers to dedicate capacity for them as well. Taken together, these agreements enable Corning to provide our customers with secure U.S. origin production of our most advanced gene high-density innovations.

Now we're also seeking to appropriately share the cost and risk of such expansions with our customers and restructure our agreements accordingly. These structures include components like customer prepayments and stringent long-term customer commitments to provide revenue assurance. 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. And most recently, Apple's $2.5 billion commitment to produce 100% of iPhone and Apple Watch cover glass in our Kentucky facility.

Basically, we're taking the proven approach in our glass businesses and applying it to optical communications. As a result, we will serve our customers grow organically and share risk appropriately so that we can deliver the strong returns for our investors that are outlined in our Springboard plan and underpin our upgraded plan.

So now let's talk more about the Springboard upgrade. I'll start with the basics of the plant. When we introduced Springboard in quarter 3 2023, we used this chart to explain our incremental sales opportunity using our quarter 4 projected sales of $3.25 billion as the starting point, which put us in a $13 billion annualized run rate. The y-axis represents incremental annualized sales above our quarter 4, 2023 run rate, and the x-axis represents time for the following 5 years.

Now let's fill in some numbers. Here's our original internal nonrisk-adjusted plan, which reflected potential growth of $8 billion in annualized sales run rate by the end of 2028 with $5 billion by the end of 2026. We took this opportunity and translated into a high confidence plan to help inform investors.

To do that, first, we focused on a 3-year time frame. Second, we probabilistically adjusted for different potential outcomes in each of our market access platforms, including market dynamics, timing of secular trends, successful adoption of our innovations as well as volume pricing and market share across all of our business. And of course, the potential that some of our markets may go through down cycles.

We purposely drew this as a wedge. We would try to guide every quarter for the next 12 quarters. We said it obviously won't be a straight line. But we were also not dealing with a hockey stick when we built the plan, we expected to see strong growth early, and we did. In March of last year, we upgraded our internal and high confidence plan by $1 billion to add $6 billion and $4 billion, respectively.

So as I previously noted, we made excellent progress and achieved our upgraded high confident sales target a full year ahead of plan, adding $4.6 billion of incremental annualized sales since the launch of SpringBoard. As you can see, we are also performing well against our internal plan. As we look ahead, we expect our strong momentum and progress to continue.

Of course, at its core, our Springboard plan was about more than our ability to grow organically. It was about enhancing our profitability base. We provided you with 1 metric to track our progress an operating margin target of 20% by the end of 2026. And as we executed Springboard, you can see that we expanded our operating margin significantly. In the fourth quarter, we achieved the 20% target of full year ahead of plan.

This is just one example of how significantly we have transformed the financial profile of the company over the past 2 years. To illustrate my point, let's compare a snapshot key metrics at the launch of Springboard versus today. In just 2 years, we've grown sales 35% to $4.4 billion. We've improved operating margin by 390 basis points to 20.2%, grown EPS 85% to $0.72 expanded ROIC 540 basis points to 14.2%. And for free cash flow, let's look at full year numbers. In 2025, we delivered $1.72 billion, and that's almost double what we delivered in 2023.

In total, the first 2 years of Springboard has simply been a tremendous success. We established a new base from which to launch another round of strong more profitable growth, and that takes us to our upgrade.

Let's look at the highlights of the sales growth we now anticipate having completed our recent planning cycle. First, as I showed you, our original Springboard plan added $8 billion incremental annualized sales through 2028. We are upgrading our internal plan to now add $11 billion in incremental annualized sales. This represents a double-digit growth rate from the quarter we just closed through the end of 2028.

This upgrade also impacts this year. Our internal plan now adds $6.5 billion in incremental annualized sales by the end of 2026, up from the previous $6 billion plan. Our high confidence plan now adds $5.75 billion in sales by the end of 2026, up from the previous $4 billion plan. You will note our increasing confidence in delivering our growth objectives. 2 years into the 3-year plan, we had key milestones and advanced strategic [ investitive ] like our announcements with Meta and Apple that increase our probability of success.

We feel really good about our performance going into year 3 of Springboard. To wrap things up this morning, as we mark the second anniversary of Springboard, the plan has clearly been a success. We've transformed the financial profile of our company, and we've established a powerful base for future growth. Excitingly, we are now pursuing an even larger growth opportunity on that and [ add ] profile with significantly higher returns.

We feel great about our position as we enter 2026. And this morning, we wanted to make sure that we shared our new top line growth numbers with you because it's such a significant upgrade. We'll get back to you in the coming months to do a more detailed review of our upgraded Springboard plan. We would like your input and ideas on the most helpful way to portray the plant and the associated metrics.

Really so interesting, isn't it? Here we are celebrating our 175th birthday as a company this year, a feat so few companies ever attain. I think it's pretty cool that we're on this exciting journey from our original Springboard launch at the end of 2023 to essentially doubling the size of the company in the coming years.

So thank you for joining us in this exciting out of Corning's history. I'm really looking forward to continuing the dialogue and updating you on our progress. Now let me turn things over to Ed for more detail on our results and outlook. Ed?

Thank you, Wendell. Good morning, everyone. In the fourth quarter, we delivered outstanding results that not only capped off a record year, but also illustrated the tremendous success of our springboard plan to date. So this morning, I will provide details on our performance, our upgraded springboard plan and our approach to capital allocation. Let's start with our results.

Year-over-year in Q4, sales grew 14% to a record $4.4 billion. EPS grew 26% to $0.72. Operating margin expanded 170 basis points to 20.2%. ROIC grew 150 basis points to 14.2%, and we delivered strong free cash flow of $732 million. We delivered both our high confidence sales plan and our operating margin target of 20%, a full year early.

For the full year, we grew sales 13% to a record $16.4 billion, grew more than twice as fast to sales at 29% to $2.52. Operating margin expanded 180 basis points to 19.3% and we delivered strong free cash flow of $1.7 billion.

Turning to our business segments. In Optical Communications, Q4 sales were $1.7 billion, up 24% year-over-year. Net income was $305 million, up 57% year-over-year and net income margin was 18%. For the full year, sales were $6.3 billion, up 35% year-over-year. Net income was $1 billion, up 71% year-over-year. The majority of growth in Optical was driven by the outstanding adoption of our new Gen AI products.

For the full year, our enterprise business where we capture sales for inside the data center, grew 61% year-over-year. And the hyperscale data center portion of our business grew significantly faster. We also saw year-over-year sales growth in our carrier networks business, which was up 15% for the full year. This growth was primarily driven by sales to interconnect data centers. The growth we are seeing in optical communications is an important component of the springboard upgrade we are providing today. We expect this segment to continue to drive significant growth. Our recent Meta announcement is a great proof point.

Moving to display. Fourth quarter sales were $955 million, and net income was $257 million. For the full year, we provided a target for net income in the range of $900 million to $950 million and net income margin of 25%. We exceeded both goals this year, delivering $993 million of net income and a net income margin of 27%. Looking ahead, in the first quarter, we expect the glass market and our volume to be down mid-single digits sequentially, in line with normal seasonality.

As a reminder, we successfully implemented double-digit price increases in the second half of 2024 to ensure we can maintain stable U.S. dollar net income in a weaker environment. We've hedged our exposure for 2026, and we have hedges in place beyond 2026 through 2030. We continue to expect to deliver annual net income of $900 million to $950 million with net income margin of approximately 25%, consistent with the last 5 years.

Turning to Specialty Materials. The business delivered a strong fourth quarter with sales up 6% year-over-year to $544 million and net income up 22% to $99 million. For the full year, we outperformed end markets with sales growing 10% to $2.2 billion and net income growing significantly faster at 41% to $367 million.

Results were driven by increased demand for premium products and growth in our Gorilla Glass Solutions business with industry-leading flagship devices featuring our latest cover materials. Looking ahead, we expect our More Corning content approach to increase demand for our innovations and manufacturing capabilities, and we anticipate significant growth in this segment as part of our upgraded Springboard plant.

Our expanded partnership with Apple creates a larger, longer-term growth driver. And we continue to innovate and advance the durability of our products to offer consumers industry-leading glass solutions for mobile device applications. A great recent example is the new Samsung Galaxy Fold, a multifolding device designed with our ultrathin bendable glass solution on the interior, Gorilla Glass Ceramic 2 on the exterior and camera lens covers featuring Gorilla Glass with [ DX].

Turning to automotive. Segment sales of $440 million were down slightly year-over-year in Q4 and for the full year, were down 3%. The heavy-duty diesel market in North America and Europe remained weak. Net income of $63 million was up 3% for the full year net income was up 7%, driven by strong manufacturing performance. For 2026, industry analysts forecast light-duty vehicle production to be flat to down slightly and for the heavy-duty market to remain flat. We remain focused on executing our More Corning growth strategy in automotive as additional content is required in upcoming vehicle emissions regulations and as technical glass and optics gained further adoption in vehicles.

Turning to Life Sciences. Full year sales of $972 million were consistent with the prior year and full year net income was $61 million. Finally, Hemlock and Emerging Growth businesses Q4 sales were $526 million, up 62% versus the prior year, driven by growth in polysilicon and module sales for the solar industry. Q4 net income of $1 million was down year-over-year as we have shared with you, we are ramping capacity to make additional polysilicon wafers and modules to build a much larger solar business.

The cost of that ramp is the primary drag on net income. As a reminder, we plan to build solar into a $2.5 billion revenue stream by 2028 with profitability levels at or above the Corning average.

Now let's turn to our outlook. For the first quarter, we expect year-over-year growth to accelerate with sales growing approximately 15% year-over-year to a range of $4.2 billion to $4.3 billion. We expect EPS to grow significantly faster at about 26% to a range of $0.66 to $0.70. As was the case Q4, our Q1 guidance includes the continued temporary impact of our solar ramp of approximately $0.03 to $0.05 as we continue to bring up capacity to meet demand. We expect our sales to increase and our profitability to improve as we move through the year.

For the full year, we expect capital expenditures to about $1.7 billion, a few hundred million dollars above our depreciation level. Even with that, 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.

Stepping back, as we marked the second anniversary of Springboard, the plan has been a tremendous success. Over the last 2 years, we fundamentally transformed the financial profile of the company. From Q4 2023 to Q4 2025, we expanded operating margin by 390 basis points to 20.2%. And grew EPS 85% to $0.72 and expanded ROIC 540 basis points to 14.2%. We also doubled full year free cash flow to $1.7 billion in 2025 versus the year of 2023.

We are operating from a much stronger profitability base you see the margin and cash improvements already reflected in our fourth quarter 2025 results. Additionally, you just heard from Wendell that we are upgrading our Springboard sales plan. Our internal plan now adds $11 billion in incremental annualized sales by the end of 2028, up from our original $8 billion plan.

To put this in perspective, when we started Springboard in Q4 2023, our annualized sales run rate was $13.1 billion. Delivering our internal Springboard plan puts our annualized sales run rate at $24 billion by the end of 2028. We almost doubled our sales run rate over this time period. Importantly, the combination of stronger sales growth with a dramatically enhanced financial profile will result in much more cash generation.

We are also upgrading our internal and high confidence plans for 2026. Our internal plan now adds $6.5 billion in incremental annualized sales by the end of 2026, up from our previous $6 billion plan. And our high confidence plan now adds $5.75 million incremental annualized sales by the end of 2026, up from our previous $4 billion plan. We've significantly closed the difference between the high confidence and internal plans because of our increased visibility the success of new products and customer commitments to our innovations.

One thing I'd like to note is that we are not changing our operating margin target at this time. We developed our original target to build an exciting, highly profitable platform to support higher growth returns on our innovations. At this level of profitability, we would be delighted with more growth. Our target is to continue to be at 20% or above on operating margin. And to help you with your modeling, we'll handle profitability expectations through our normal guidance process. We expect to share more with you about our upgraded Springboard plan in the coming months.

And since our upgraded plan will generate higher cash flows, I want to take a moment to share our approach to capital allocation. 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. So for the larger growth opportunity in our upgraded Springboard plan, we need to invest.

As we invest, we will use a variety of tools to share the cost and risk with our customers, including customer prepayments and stringent long-term customer commitments 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 21 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, therefore, as we go forward, our primary vehicle for returning excess cash to shareholders. will be share buybacks. We have an excellent track record. Over the last decade, we repurchased 800 million shares, close to a 50% reduction in our outstanding shares. Because of our growing confidence in springboard, we started to buy back shares again in the second quarter of 2024, and we have continued to do so every quarter since then, and we expect to continue buying back shares going forward.

Now before we move to Q&A, we just reported quite a lot of news. So let me reiterate the key takeaways. First, our current performance is outstanding. We delivered fantastic results for 2025, and we enter Q1 with exciting momentum and accelerating growth. Second, over the first 2 years of Springboard, we fundamentally transformed our financial profile, establishing a higher profitability base from which to grow going forward. And third, we now see an even larger growth opportunity.

Therefore, we just upgraded our springboard plan in both the near term and longer term. Because of our improved financial profile and higher growth expectations, we expect to generate significantly more cash as we go forward, creating a very compelling plan for shareholder value creation. I look forward to engaging with you to discuss our upgraded Springboard plan in more detail to get your input on the most helpful way to portray our plan and of course, to update you on our progress.

Now before we move to Q&A, I'm going to turn it back to Wendell for a moment.

Thanks, Ed. I just want to let everyone know that our beloved head of Investor Relations, Ann Nicholson will be retiring after 40 years, of exceptional service to Corning. Now [indiscernible] met and when she was a young process engineer, and I was a ship supervisor almost 39 years ago. We have followed each other through many roles in subsequent decades.

My personal favorite was she was my supervisory effectiveness [ instructor ] a long time ago. So yes, thank you for my success as a supervisor. More importantly, thank you for being such a good friend an adviser and trusted colleague and most importantly, thank you for showing what it means to be Corning blue.

Thank you, Wendell. All right, operator, we'll now turn it over to questions.

[Operator Instructions] And the first question will come from Wamsi Mohan with Bank of America.

Yes. Wendell, we'll all have to get together and share stories on this news. I guess, like on my question, you noted that there are similar long-term agreements with other major customers to dedicate capacity, can you help us think about if any of that is already baked into your Springboard plan?

And secondarily, the optical fiber market has been very tight globally. Would you say that you're experiencing supply constraints at the moment? And do you have a view on how pricing could evolve on the fiber side given these kind of constraints?

Okay. Let's start with the similar agreements to Meta that we are in the process of concluding. Okay. First, let's size them. They are of a similar size and scale each of them to the meta agreement. So very significant obviously. What is our approach to these of the Springboard plan? As you have noted, we tend to be very thoughtful and conservative as we get these upgrades.

So we have not yet included everything that those could mean because we have yet to conclude all of those agreements. And also remember, this we are dedicating capacity for these customers that we were in the process of building now. So we won't see the financial impact really until you get into '27 and then it will continue to build to 2028. So that is the way I would portray those. Before I get to the second question, Wamsi, did that address your question? And do you have any further follow-ups on that question?

No, that's good Wendell.

Okay. As far as the optical fiber market, I would say on a generic basis, it is our opinion that there is enough fiber in the world to meet demand. Now what our capacity expansions are about. It's about our new high-density products in fiber, in cable and in connectivity. And for those, we are experiencing a very, very robust demand. And that is why we continue to expand our capacity and improve our productivity in these products.

If we could make more of these new products, we could sell more. And it is for those type of products that we are dedicating these capacity through these agreements. Is that a good answer to your question?

Yes. Is there a pricing element, Wendell, though that we're not yet maybe seeing that potentially as you're talking about these fairly massive amounts of demand coming in, would that change the economics [ aren't ] pricing for you?

Yes. So what you'll tend to experience here is, over time, you'll see the mix impact of these more valuable innovations. These innovations enable our customers to have better and more reliable optical performance in about half the space with significantly reduced installation cost.

Whenever we create this much value usually some of that value creation will end up accruing to our shareholders. We would assume that, that will be so in this case as well as we begin to master our manufacturing of these product sets. So over time, the more valuable our innovations are, we would expect our profitability to improve.

Next question?

And our next question will come from Josh Spector with UBS.

Congrats, Ann. I wanted to ask first just on similar lines of the capacity that's being added. So if we think about Meta as a share of your enterprise sales today versus what this agreement implies are they going to disproportionately buy more from you after this agreement? And are you adding capacity to match that added sales? Or is it less than that, meaning your capacity might tighten a bit as it relates to this agreement?

Okay. So the first is sort of relatively scale last year, Ed, maybe help me with some of the numbers our enterprise business was about $3 billion for the year. Roughly 2/3 of that would be the hyperscalers, of which Meta was going.

Yes, that's right. We were a little over $3 billion in enterprise and Wendell's right. And I think a good note was our enterprise business in total grew 60%, the hyperscale portion of that grew almost double that rate in 2025.

So with this sort of significant agreement, you're obviously seeing continued very high growth into the future. Now you asked a question of because this means that relative to our other customers, Meta will be getting a lot more. I think was the thrust of your question. And what I just was sharing with you is we're concluding other similar size and scale agreements, several of them with other of our major customers.

So what I think we tend to think about it as is not so much a shift in what portion of our product set, our various customers is being overall, the pie is going to get much bigger and then people will decide sort of what slice of that they want. Does that address your question, Josh?

It does. I mean I guess what I'm trying to figure out here, does this -- so if we thought hyperscalers were going to grow at X percent and Meta within one of them, we're making something like that into our estimates of what your growth would be.

Does this -- it sounds like this kind of codifies that growth and maybe secures them some of that capacity as you grow into the future versus Corning capturing more share of that pie. That's what I want to make sure I understand is maybe you're capturing more share of that pie or not.

Thank you so much, Josh. So you will have your point of view on sort of the rate of optical growth in Gen AI and our hyperscalers. It is true that our new products and the reaction to those new products is increasing the demand for our products relative to the demand of others products, mainly because of the unique advantages these innovations are offering. Now how all that will shake out? I am not sure, but I like our hand a lot better than I would like anybody else's.

And the next question will come from Meta Marshall with Morgan Stanley.

And congrats on the quarter. I just wanted to ask kind of one clarifying question about the Meta deal. Just since you mentioned kind of expansions on high-capacity cable. Would any of what is kind of included in that deal be included in the carrier line item? Or is that all kind of being counted in enterprise today and going forward?

And then maybe on a second question, just if you could kind of give a sense of CapEx for the year as you start to kind of make out some of these capacity investments?

Well, first, I'd like to thank you for participating in that CNBC special that was done. I appreciate it. And then I'll turn it over to Ed for the answers to your questions.

Yes. So on the accounting of the Meta deal, you can think of our accounting protocol as when we're selling to a hyperscale or directly like Meta, we'll account for that in our enterprise business. And when we're selling to a carrier like Lumen or AT&T, for example, we account for that in our carrier business.

The only thing that gets a little bit may be confusing is that data center interconnect has typically, at least to date for us, long-haul data center interconnect has gone through carriers. So our customers, for example, Lumen are building out networks for data centers, we think of that as sort of outside the data center that sits in our carrier business, but the Meta deal would be all in enterprise. Does that make sense?

That does. Yes.

Okay. And I'm sorry, can you repeat your second part of the question?

Just the CapEx, how we should think about CapEx in terms of 2026?

Yes. So we plan to spend about $1.3 billion in CapEx. For reference, we spent a little under $1.4 billion this year. We -- our depreciation level happens to be around that $1.3 billion level. So we're spending a little bit more. In '26, we plan to spend a little bit more. That is good.

We have a lot of growth opportunities. We want to ensure that we invest for those opportunities. Optical is a place that think about where we'll direct a lot of that capital. And of course, as we shared on the call, we look to ensure we get a really strong return on those investments. Sometimes that gets accounted for by customers providing an upfront payment, sometimes that gets accounted for in the nature of our agreement with the customer. So that may show up in the operating cash flow, the cash section or against our capital, but you can think of us as spending around that $1.7 billion.

And our next question will come from George Notter with Wolfe Research.

Just to continue on that line of questioning. The $1.7 billion, does that include specific CapEx associated with the Meta project? Or is that just -- there's kind of a gross and a net number here, I think. I guess I'm trying to figure out -- I think the basic idea here for you guys is you're trying to get your customers to pay for more of your capital expansions or capacity expansions. And I guess I'm just trying to figure out how much of this is ascribed to the customer and how much of this is on Corning.

Yes. So as we've shared, we use a number of tools to derisk our investments. Sometimes, when we do an upfront payment from a customer, it goes against the capital and sometimes it actually doesn't. It may be a refundable down payment that they get through a take-or-pay mechanism or some other mechanism in the contract we don't disclose and we typically don't disclose the details of any specific agreements. But I can say that for sure, some of the capital we plan to spend in 2026 is for the Meta deal.

Got it. Okay. And then just one other question. Certainly, not every major customer, certainly, you'll have customers in the Optical business that won't sign contracts like this. I assume that with those other customers, those guys will be looking at price increases. Is that a part of the strategy here?

So first of all, to add on Ed, our plan with that $1.7 million we are integrating and the cash flows that we're thinking about. We're integrating all of the various customer agreements, we believe that we will complete and we're addressing that as thoughtfully as we can. So more to come in that space over time. But that is what we think will invest this year.

As far as our other customers -- well, for long-standing customers like our carrier customers, they are not related to these particular product sets. And so we will continue to serve them and serve them in an excellent way. And what we're seeking here is just to make sure that we have assured revenue streams against any capacity that is dedicated specifically to those customers that are scaling this rapidly.

And the next question will come from Steven Fox with Fox Advisors.

First of all, congrats to Ann. I'm pretty sure you could probably do another 40 years if you wanted to. But congrats and thanks for all your help.

I guess just on everything that was announced around optical. I was wondering if you could fill in the blanks on 2 things. One is you seem to be pushing more and more assets towards U.S. North America production. And I was curious how you feel about international markets for Corning in the coming years?

And secondly, Ed, I understand not changing the operating margin target yet for the company as a whole, but it seems like everything you talked about around Optical is pretty positive for Optical zone operating margins. So like maybe you could sort of give us some clues as to how that could influence the overall corporate average.

Let me start on the first one about the global mix of our sales. We today are about 60% outside the U.S. about 40 and we would expect something in that zone to continue. But what will really drive the location of our factories will tend to be where our customers are because we seek to locate close to them. So if a lot more gets built in the West on the AI side, then we would expect to have more of that be here.

If on the other side, in the glass side, let's say, are in our automotive emissions business or any of our other new innovations, more of that were to build in Asia, that's where would locate that manufacturing. And just remember, throughout all of this, what happens to us every year is we're continuously improving our productivity, which is where we tend to get the product to be able to support ever-increasing revenue.

And then if we don't have a revenue opportunity for that in the specific market, then what we seek to do is develop new markets for that capability like we did for Gorilla from display and then automotive from Gorilla. So that tends to be our approach with the dedication to the locations we build a factory. Ed?

Yes, Steve, on margins, I'm going to step back for a second, and then I'll come to your question. I think when we first created Springboard and launched it, improving our operating margin, our profitability and our cash generation was such a huge component of the plan because of where we were operating from our financial profile. We needed to get our returns up, we needed to generate more cash. And we significantly done that.

We feel great about it. Optical has actually been a huge component of that. We've been talking specifically about their net income margin over the last year or 2, and that's now at 18%, significantly above where it was when we started this plan. So I think that actually is a good sort of background for how we think about going forward.

So from here forward, I think you're right, it is highly likely that our operating margin goes above 20%. I could do that for periods of time, it could be nicely above 20%. But we really like a financial profile, and we want to focus on improving our return on invested capital, and we want to generate more cash. So we want to make sure we capture all the growth that we can in this next window of time. So that's primarily why we're not putting a new target out. We expect to be at 20% or above 20%, and we expect to grow significantly, and we think that return profile is very compelling.

Next question will come from Asiya Merchant with Citi.

And congrats again, Ann, on the retirement. You'll be missed. Wendell, if I may, a question for you on the optical side of things, you've talked a lot about CPO and the scale-up opportunity. So given the growth profile that you guys are talking about here with additional commitments from hyperscalers coming forth. Can you just remind us is scale up included in that outlook through, let's say, here through the [ '28]? Or are we looking at that opportunity further beyond?

So the straightforward answer before I give others more color is we do not have significant revenue amount for scale up included in this most recent Springboard upgrade. So that would be on top, depending on your opinion on timing.

For those of you who are less close to scale up, what Asiya is asking about is because transmitting information with photons is greater than 3x lower power usage than using electrons even in very short lengths in science switches or servers and that, that advantage increases dramatically, the longer you want to go or the higher the bit rate 20 times or more, there is a widespread deep technical effort going on to be able to bring more optics into the scale-up piece of the network closer and closer to the GPUs and inside of the boxes closer and closer to the switching.

Though I believe deeply the innovator in me believes deeply that it is inevitable that those links go to photons. And I also believe that our innovations will play a significant role in those new lengths. I believe that's inevitable. [ Calling ] timing is more difficult. There are scenarios where the timing would be within this -- the time period between now and 2028, there are scenarios where it will be primarily starting [indiscernible] 2028 and beyond.

What we seek to do with Springboard is to not over speculate. And if we don't have really a quite compelling evidence of the timing of something as significant and large as the scale of opportunity is, we will tend to view the time line from a conservative point of appeal. Does that answer your question?

Yes, that's great. If I may, one for Ed as well. Ed, you talked a little bit about operating margins for -- or net income margin for Optical. Can you just remind us like within the Springboard, how we should think about margins for the solar business that's ramping up here and expect it to, I think, drive margins which are at or accretive to corporate. So if you can just remind us where we are on that ramp and what it looks like within the updated Springboard?

Yes. Thanks. So as we've shared in Q4 and Q1, we're expecting sort of a similar situation is we're significantly ramping an extremely large factory and so there's a drag on our margins, our profit dollars as well. We sized that in the fourth quarter originally at about $0.03. It was a little more than that. In the first quarter, we expect to be in the $0.03 to $0.05 range.

So if you were to take that drag, just the drag part, not even the higher sales, and eliminate that from our financials, clearly, our margins would go up. Obviously, our profit dollars would go up. And specifically, that would hit in that Hemlock and Emerging Innovations segment, which is where we have solar.

So I think there's a nice opportunity for us there to improve margins as we continue to ramp. And we expect sales to go up and our profitability to improve through the year of 2026, and we expect to get this business to sort of size and scale, we would expect it including margins at or above the Corning average by 2028.

The next question will come from Tim Long with Barclays.

Two, if I could, as well. One on the optical side, if you could go back to the carrier piece. Just want to understand how you're thinking about this business going forward? I think historically, we've seen pretty big cycles here, a few good years and then some catch-up inventory whatever.

But now there's a lot more data center in that line. So when you think about the carrier business over the next few years, do you think that the cyclicality of the business has changed and it's a little bit more secular? Love your thoughts on that?

And then second, maybe if you could just touch on display. I think the end's moved back in the last few weeks, but it was getting up there. So Ed, if you could just talk, I get you're managing to that 25% and [ $900 million to $950 million ] of net income. Is there a scenario -- and I know you have hedges where we might need to see more price increases? Or where are we with the flow-through of the last set of price increases?

Yes. So on Carrier, I'll start there. In 2025, our business was up about 10%. Majority of that growth was data center interconnect. I certainly see the data center interconnect portion of -- or the carrier business being driven by data center interconnect spend. That said, I think you'll see fiber-to-the-home growth as well. So I do think carrier will grow over the next several years, and we factored in scenarios and how we think of that in our Springboard plan, but probably the largest driver data center interconnect. Does that answer your question?

Yes, yes, that's helpful. And then on to display.

Yes. And then on to display. So the way I think about display is our goal is to generate $900 million to $950 million of net income, cash out of that business. We did better than that this year. We were a little higher on income and our margin percent was above our target. And we expect to be able to maintain that, and we could certainly be above that at times, we can certainly be above that in 2026.

To the extent we need to adjust for weaker yen than what we have, and we have a [ 120 ] in there. We will do what we need to do on price or otherwise to ensure that we can deliver that level of profitability.

We'll take one last question.

Okay. And our last question comes from John Roberts with Mizuho.

And congrats as well, and I hope you're headed to someplace warm. What percent of bare fiber is currently used internally for cabling? And are you importing any bare fiber into the U.S.?

I don't actually know the answer to that question off the top of my head. Everybody is looking at me like I should. So John, let us take a moment to gather that information and we'll chat with you.

Great. Okay. So just quickly, thank everybody for joining us today. I wanted to let you know before we go that we're going to attend the Susquehanna Tech Conference on February 27 and the Morgan Stanley Tech Conference on March 3. 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. So thanks again for joining us and for the well wishes for me. Operator, that concludes our call. Please disconnect all lines.

Thank you for participating, and you may now disconnect.

Well, thank you, everybody, for joining. I appreciate your time. I wanted to give you an update on the exciting things that are going on at Ensurge today.

So as always, there's a safe harbor statement. I presume you understand what that is. I'm going to kick into the presentation.

So as we all know, AI is an era that is upon us right now, and devices are changing. They are becoming smaller, they're becoming smarter and they're becoming everywhere. As an example, in all of 2024, a total of 2 million smart glasses were sold, about half were by Meta. Six weeks later, it was reported that Meta has sold another 1 million with an annual capacity of 5x that amount. That's the new AI market.

Today's existing market of smart wearables is about 50% of that. So the application of microbatteries is not just in new devices but in existing devices. The hearing aid market is 50%, and they're miniaturizing and getting smaller. How are they getting smaller and how are they getting smarter? The chips are becoming more powerful and customers need them smaller. The battery plays a pivotal role.

In my first 2 months as CEO, I've been doing a listening tour of our customers and of the market. And what I've come to understand is there's a major problem that the market faces as companies try to develop new products that customers want. And that is the battery. The battery is old, it's big and it doesn't power for very long. The average Meta glasses user, even though the amount -- the stated amount says that it can charge up to 6 hours, on average, people are getting about 3 hours out of their glasses.

That's not enough. Think about the person with the hearing aid. Think about the heart implant. These are products that need better batteries. Our customers need us. And I've been in the industry for so long to know that there's a difference between need and want.

But we stand alone. Ensurge stands alone in this market where, on the left, it's niche markets that are very specialized and very specific and bespoke. On the right, this is last century's technology. So the companies that we're speaking to right now that want to work with us are using a very old technology that's not safe and it's completely insufficient for what today's requirements are.

Even our initial reference platform, our prototypes deliver more than 50% volumetric energy density over today's variants. That's just our reference platform. And as you might remember, the reference platform is a 75-micron product. It's already better than today's standard. And our launch product, which is a 10-micron, is on track to being 2 to 4x the power density of today's standard batteries.

If you look at us, if you stack us up next to the standard battery, not just the energy density, but the charge time is at least double that of today's standard batteries. And the speed as well at which you charge so you don't have to leave your smart ring or your watch or your device in the charging cycle for overnight. You can do it during the shower or during some other times.

Critically, it is safety. It is safe. It is a fundamentally safe product and unlike today's lithium-ion batteries with liquid electrolytes that have thermal runaway issues. Lastly, it's agile. It has a form factor that can move and design with these products that we are looking to develop with our end customers. And that is something that no battery today can support.

So the prior leadership team and Board may have had the team working on everything and anything all at once, and I can't speak to what they shared with you or what they promised you. I can tell you that I have over 25 years of real experience launching new products, and when I say something is real, it's real. And when I say that we've announced something, we've announced something. You will not see rumors or speculations from me. And honestly, I think that's an important thing for the company, that we get to credibility. We get to plans. We get to predictable, real results that we can stand on.

So today's products, the 75 micron, we're shipping. We're shipping product. We've shipped products to paid customers. This is the reference platform. This product is better than anything on the market. It is safe and it has also a high operating temperature range. So many of these sterilized applications in medical can't use lithium-ion and so they're strapped for a better battery. We've identified a launch partner and this product is real. So again, if prior leadership may have led you to believe that there wasn't anything there, I think they're completely misfounded.

The 10 micron, though, however, is our launch product. That one is a game changer. That one has a fantastic volumetric energy density, also enhances other customer product features such as the form factor which is agile, the power and, of course, the battery life. It unlocks new opportunities and we anticipate having demos by the end of the year.

Lastly, Corning. We have a relationship with Corning. We can now say the name Corning. This is an iconic company, and I'm excited to share more about that with you. It is game-changing. It unlocks new AI opportunities. The customers we've spoken to are very eager to get their hands on this product. This enables them to do what they need to do in a market that's changing extremely quickly for them. It allows traditional industries to rethink how they do smart sensors. Today's supply chains need more intelligence. They need batteries that last longer.

Medical device, there are so many applications. Defense, I had a CEO of a defense contractor come to me and say, "Please, let's work together because the battery is my biggest problem."

So to have a market that's primed like this and ready, this is exciting. And for us, we have landed this very important relationship and I'm very excited for what's to come for the company. And again, when I say landed, we've cleaned up that old mess. We have landed this opportunity and I'm very excited for it. And when I say we're shipping product, we're shipping product. And I'm excited for what's to come across all three platforms of our company. And to be clear, Corning adds to us. It doesn't replace. It adds a new feature of technology that unlocks new opportunities and brings us into new spots.

So a bit about Corning. This is a company that is an iconic company. It blends this tradition and industrial nature and experience with beloved products like Gorilla Glass into the Apple iPhones. It pairs that with this creativity and collaboration with companies as small as Ensurge and as new and as exciting as Ensurge. The collaboration is real. It's been going on for quite a while with the company, at least a couple of years from what I understand. And it is a very rich, very exciting partnership that the company has.

They bring a ribbon ceramic material and a process technology that can integrate into ours. They bring a cultural fit as well. They bring industrialized skill sets to our skill set of early-stage technology. There are some really exciting opportunities here from a strategic outcome in accelerating Ensurge, derisking Ensurge, adding people and process and know-how and this wonderful collaboration between companies large and small. They offer a performance that is unbeatable, and I'm so excited to be working with them.

What does this mean? So it's not just a passive investment. This is an active collaboration that we have started. There's a joint development agreement that is in multiple phases. We integrate their materials with our solid-state battery platform. And the goal is for this ultra-high power density output. And it's exciting across lots of different sectors. They'll provide know-how and process technology, process capability and also just a know-how of how to rapidly industrialize and scale production.

If you think about COVID, they were the ones behind the lightning speed at which they got vials to market for vaccines. They're applying the same know-how to Ensurge now into solid-state batteries. I know another company whose stock price went ballistic on the news of just a supply agreement. This is way more than just a supply agreement. This is collaboration. This is about working together toward the future. This is something that is about the people and the time. When you're developing new technologies, the one thing you never have enough of are people and time. And so to have their people and their time is truly something extraordinary.

And the investment as well, so the investment comes in two parts. The investment is an in-kind contribution for the people and the time that they put in, up to $5 million; as well as the option to invest in Ensurge up to $10 million. This is again greater than anything that has certainly been discussed in reality inside Ensurge and certainly is something that I'm quite excited about and I'd expect the investor base to be as well.

What it means is there is stack level integration. We integrate their cathode into our ability to do layering and to optimize the technology with our solid electrolyte and our electrode development. That stack level integration is key to ensuring that we get both the volumetric energy density and the other charging capabilities and lifetime capabilities out of the product while not completely substituting what Ensurge does well already, which is a stainless steel substrate. Again, this is additive, not replacing.

We also get to tap into Corning's fantastic process capability. They're a material science powerhouse, a company that knows technology and knows how to process it. And this is a know-how that is deeply ingrained into that company and is an area that already Ensurge has capability and an area for us to excel on together. The step change in energy density is the most exciting thing here, and this is something that is going to be an unbeatable product in the market. And manufacturability as well, the ability to scale into high-volume applications. Again this is a company with the know-how and the capability.

And so as well going to customers together, this brings credibility to Ensurge. When we go talk to these major companies around the world, I was recently sitting down with the CTO of a major wearables company. The need is there. There are questions. And so by bringing Corning with us, there is a credibility that comes and an ability for us to have a much more substantive conversation with these customers and an opportunity to get into their future product lines at a much faster clip.

So lastly, what is ahead for us? I'm extremely excited. Right now, we are shipping products. We're delivering to customers. And we're unlocking that by virtue of that 75-micron reference platform, a product that has step-out volumetric energy density and a lot of promise. We also are negotiating some long-term customer contracts. More to come on that. Mainly we're focused on quality. Right now, quality is our foundation. It might not sound sexy. It might not sound exciting. But I've got to tell you, from my experience, there's nothing more important than quality execution, and that is what we're focused on.

Coming into 2026, we're going to be focusing on scaling that. We're going to be growing our customer base. We're going to be going to customers and we're going to be securing more deals with them. We'll be able to demonstrate our performance, and we'll be starting to work and be building off of true production-based processes. Lastly, by the end of the year, we will be in commercial stage. We will be shipping commercial units. We will be validating our product. And we will be scaling our manufacturing into production level types of quantities and processes.

So across our proven platform, a quality foundation, partners who support us, partners as iconic and impressive and as involved as Corning, long-term customers who have already demonstrated a need and a desire to work with us and the opportunity to scale our production, I'm about as excited as I've ever been in my career. I don't think I would be anywhere else right now.

There is no place to be than Ensurge at this moment in time, when an AI is upon us, AI is on the dawn of requiring new products. And we are at the heart of that. We are right there. So this is a team with the credibility and the capability to execute. We've cleaned up the past, and now it's time to look forward. This is a new Ensurge. This is a new day, and this is a very exciting time for a very capable company.

With that, I'll answer a couple of questions. And I'll go into the chat. So bear with me while I read some of these questions.

Yes. So thank you for the presentation. Many are wondering how you progress the 28-layer design and how many charge cycles you've reached so far.

So on the 28-layer design, we have progressed. We have done quite a lot. We've developed and we built 28 layers both in terms of 75 micron and 10 micron. And we're getting very impressive cycling, especially on the 75 micron, a product that we've been developing for quite some time. We can pump that out [ in minutes ]. That one is charging quite well.

The 10-micron 28-layer as well, we're showing very promising results. And that one, the challenge of the 10 micron has been simply some process steps that we've actually solved. And showing very exciting results there and more to come on that.

When do we expect warrants to be exercised? And that is in the terms of the agreement, the agreement has a 2-year window for those to be exercised. And that is as far as we know.

And in terms of yield, defect rate, targets for cost per unit, these are very good questions about KPIs. And this is where the company has -- we do track KPIs internally. And frankly, I think the past management was focusing on everything and anything all at once, which means you can't focus on KPIs. And so with the team already we're working on metrics. We have metrics internally. And the more we can share with you, the better, and I look forward to that and that will come very soon.

Pardon me, there's a technical glitch. What's the time frame for developing this new battery with Corning? So it's a multiphase agreement. So in the next months, during the course 206, we will be developing a cell level demonstration and then, from that, a multi-layer battery.

Okay. Is there any other questions in English? I'll welcome any questions you might have.

All right. I'm not seeing any other English questions. I appreciate your time. I would say that right now is an exciting time to be at Ensurge. It's the very beginning of a new chapter for us, an opportunity for us to work with an iconic company, a company that's going to support us and to develop product that's going to truly change the face of AI at the edge and enable AI devices.

So thank you for your time. I really appreciate all the questions and welcome any follow-on in the days ahead. Thank you.

Ladies and gentlemen, thank you for standing by. Welcome to Corning Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. It is my pleasure to introduce you Ann Nicholson, Vice President of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to Corning's Third Quarter 2025 Conference 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 third quarter, differences between GAAP and core EPS include noncash mark-to-market adjustments associated with the company's translated earnings contracts and foreign denominated debt as well as constant currency adjustments. As a reminder, the mark-to-market accounting has no impact on our cash flow.

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. 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.

Thank you, Ann. Good morning, everyone. Today, we reported another excellent quarter. Year-over-year sales grew 14% and to $4.27 billion. EPS grew 24% to $0.67, again outpacing sales growth. Operating margin expanded 130 basis points to 19.6%. ROIC increased 160 basis points to 13.4%.

Free cash flow of $535 million puts us on track for another year of strong free cash flow growth. These results demonstrate the powerful profitable growth outlined in our SpringBoard plan. So I want to put our third quarter results in the context of that plan. In quarter 4 of 2023, we launched SpringBoard, which outlined our plan to significantly increase our sales as we captured important secular trends. We said we already have the required production capacity and technical capabilities in place to deliver the sales growth and the cost and capital are already reflected in our financials.

Therefore, we expect to deliver powerful incremental profit in cash flow, leading to our earnings growing much faster than sales. So as we approach the 2-year anniversary of Springboard, how are we doing. When we compare our third quarter 2025 results to our launch point, we grew sales 31%. We expanded operating margin by 330 basis points. We grew EPS 72% and more than twice the rate of sales growth.

We expanded ROIC by 460 basis points, and we generated strong free cash flow. Now let's compare our results to our upgraded springboard plan. We are tracking well above our high capitate plan, and we're tracking very well on our internal plan. Through the end of the third quarter, we've added $4 billion of incremental annualized sales since the launch of SpringBoard.

Looking ahead, we expect fourth quarter sales of $4.35 billion, which will add another $30 million to our annualized sales run rate. Of course, this plan is about more than sales growth. Our plan was also to dramatically improve our profitability by improving our operating margin from around 16% to 20% by the end of 2026. Let's see how we've done against that target.

As we executed SpringBoard, you can see that our operating margin expanded significantly. As we look to the fourth quarter, we now anticipate achieving the 20% target a full year ahead of plan. So since the beginning of SpringBoard, we have significantly increased our sales. We have grown operating profit at twice the rate of sales, and we have increased EPS and more than double the rate of sales.

Going forward, of course, we still expect the effects of seasonality, which you can see on the chart. But this is a powerful enhancement to our profitability that should translate into very attractive returns as we continue to grow sales. Stepping back, as we approach the second anniversary of SpringBoard, the plan has certainly been a tremendous success.

We've added $4 billion to our incremental annualized run rate, and we have significantly improved our profitability. Perhaps even more exciting is that we see much more growth and more springs ahead. Let me give you just a few quick examples of the opportunities we expect to add to our sales run rate. In mobile consumer electronics, I'm sure you all saw the recent announcement from Apple that committed $2.5 billion to produce 100% of iPhone and Apple Watch cover glass in the U.S. for the first time at our Harrodsburg, Kentucky facility.

This plant will become home to the world's largest and most advanced smartphone production line. And we will open a new Apple Corning innovation center there to deepen our co-innovation and play a key role in future generations of Apple products. In total, this creates a significantly larger longer-term spring for us in mobile consumer electronics.

In Optical Communications, we are expanding our innovation and technology leadership in Gen AI. First, in our enterprise business, where we report sales for inside the data center, we grew sales 58% year-over-year. And we'll share more detail. But the primary technical driver behind that growth is what the industry calls the scale out of the network.

That basically means that hyperscale customers are scaling out the GPU clusters with more and more connected AI nodes of server racks or simply put larger neural networks. Because each AI node is connected to the others in the cluster by fiber, this creates more volume for Corning. Now you only need to do a brief scan of the news each day to see that the scale-out opportunity is expanding dramatically.

We have plenty of growth ahead, and we expect demand for our innovations to continue to accelerate. We are not only the inventor of the world's first low-loss optical fiber in the technology leader in this space. We are also the largest producer by revenue of fiber cable and multi-fiber connectors in the world.

Importantly, we also have low-cost U.S.-based advanced manufacturing platforms for each of the critical components. This creates a unique Corning opportunity to support our hyperscale AI customers as they seek to build major U.S. data centers using U.S. origin products. There is more to come in this space. We're working to formalize customer agreements are so stay tuned.

Now let me shift to another significant opportunity we are pursuing in Gen AI driven by what the industry calls the scale up of the network. Hyperscalers are creating more capable nodes that move from less than 100 GPUs per node today to hundreds of GPUs per node in the future. Historically, an AI node has been within a single server rack. As hyperscalers scale up, AI nodes are shifting to stretch across multiple server racks.

This causes the distance to link these GPUs with in the node to get longer. This will eventually cause the links to reach about 100 gigabit per second meter what we call the electrical to optical frontier line, which roughly marks the point where fiber connections become more techno-economical than copper creating a large potential opportunity for us.

To help understand the size of this opportunity, a single black well life node has more than 70 GPUs with more than 1,200 links using more than 2 miles of copper. As that node scales up, those 2 miles will eventually be replaced by fiber connections. And those miles will grow over time as more and more GPUs are included in the AI node.

I'm sure you've seen an announcement regarding co-packaged optics or CPO. That is one of the technologies that helps activate this scale up opportunity for us. If we succeed technically, the scale-up opportunity could be 2x to 3x the size of our existing enterprise business. And we are working with key customers and partners on making that future a reality as well.

Another opportunity for growth tied to Gen AI is playing out in our carrier business. In the industry, this is referred to as DCI or data center interconnect. We introduced a high-density Gen AI fiber and cable system that enables customers to fit anywhere from 2x to 4x the amount of fiber into their existing conduit. And we have seen tremendous response to this product set.

We expect this business to scale rapidly, reaching $1 billion opportunity for us by the end of the decade. DCI also offers the opportunity for new, more radical innovations in this space. We recently strengthened our long-standing relationship with Microsoft announcing a collaboration to accelerate the production of their hollow core fiber.

Our fiber and cable manufacturing facilities in North Carolina will produce Microsoft's fiber as they seek to advance the performance and reliability of Azure's cloud and AI workloads. With Hollow Core technology, we're talking about cases where the difference between the speed of light through glass and the speed of light through air actually matters. This illustrates how important DCI could become as our customers look to decrease their latency.

This offers Corning the opportunity to innovate on new dimensions. Now let's shift to our solar business, where we are pursuing another powerful secular trend and expect to add to our run rate in quarter 4 and beyond. We've been seeking a low-risk, high-return entry into the solar industry for some time.

First, solar power is fundamentally about the efficient use of photons. And low-cost materials conversion platforms. Both are key opportunities for innovation that are right in our wheelhouse. Second, we are already a world leader in semiconductor polysilicon, which is simply a much purer form of the fundamental material used in solar.

Finally, we anticipated the growing need for a U.S. domestic solar supply chain, which is only accelerating with the advent of Gen AI and global tariff structures. We began this journey in 2020. And since then, we generated over $1 billion in cash in this platform. We funded the expansion of our manufacturing assets, with a growing cash flow generated from assets we acquired for less than $0.10 on the dollar, customer funding and government support all while generating positive cash flow every year.

As a result, we now have built a strong foundation for rapidly accelerating growth. We made process advancements to serve a higher-end chip segment in semiconductors, allowing us to drive continued growth in the most advanced segment of semiconductor chips. We activated idle assets to serve the need for domestic solar polysilicon.

And we added the capability to transform our polysilicon into higher value domestically made solar wafers, all integrated together on our campus in Michigan. We've sold out our polysilicon and wafer capacity in 2025 and now have more than 80% of our capacity committed for the next 5 years. And today, we're building on this progress with some excitingness.

Over the last 18 months, we have built the largest solar ingot and wafer facility in the United States, co-located with our polysilicon manufacturing facility in Hemlock, Michigan. It was a significant undertaking. To give you a sense of scale, the factory contains as much steel as the Salesforce Tower, San Francisco's tallest skyscraper.

This site is the equivalent of 60 football fields and the building itself occupies about 1/3 of that. Now we hope we can offer our investors the opportunity to visit the site soon. So you can see this terrific new factory for yourselves. We have grown the Corning family in Michigan. And as we speak, our folks are starting that big factory up. In this quarter, we expect to move from producing thousands of wafers a day to more than 1 million a day.

So needless to say, this is an exciting and stimulating time for us. As we've shared, we have committed customers for more than 80% of our capacity for the next 5 years. So our focus will be on our continued ramp to meet their needs. At the same time, we'll be applying our deep material science expertise to bring our more Corning content approach to bear and solar.

And applying our advanced manufacturing capabilities to establish ourselves as the global low-cost producer even as we're based in the U.S. Overall, we are thrilled with our progress in solar. In quarter 1 of this year, we generated $200 million of sales in this map. We expect to triple that run rate by 2027, adding $1.6 billion of new annualized revenue to Corning's earnings power as we march towards our goal of building a $2.5 billion revenue stream by the end of 2028.

So altogether, as we approach the second anniversary of SpringBoard, the plan has clearly been a tremendous success, and we have plenty of growth yet to come. With that, I'll turn it over to Ed for more detail on our results and outlook.

Thank you, Wendell. Good morning, everyone. We delivered outstanding third quarter results, reflecting strong sales growth and even stronger profit expansion across multiple businesses. Year-over-year in Q3, sales were up 14%, while EPS grew 24%. Operating margin expanded 130 basis points to 19.6% and ROIC grew 160 basis points to 13.4%, and we delivered strong free cash flow of $535 million.

First, I will provide more color on our Q3 results, then I will cover our Q4 expectations, both in the context of our springboard plan. With that, let me share some details on our Q3 results at the segment level, where you see some of our key springboard initiatives for sales growth and profit expansion hold. In Optical Communications, our growth was led by strong adoption of our new Gen AI products.

Third quarter sales grew 33% year-over-year to $1.65 billion, highlighted by 58% year-over-year growth in our Enterprise Networks business. Investors continue to ask us to size our Gen AI opportunity for inside the data center. We began to size the opportunity in early 2024 when we provided a 25% CAGR for 2023 to 2027 for our enterprise segment sales.

We upgraded the CAGR to 30% in the beginning of 2025. As a reminder, in 2023, we had a $1.3 billion enterprise business and almost half of that business was for hyperscale data centers. In Q3 of 2025, our enterprise business sales were $831 million or $3.3 billion annualized compared with 2023, that's a $2 billion increase in sales.

And essentially, all of that growth is related to the scale out of Gen AI networks. Clearly, we are growing much faster than the 30% CAGR we provided. This demonstrates the excellent response to our new Gen AI products, and we expect the growth to continue. We also saw another quarter of year-over-year sales growth in our Carrier Networks business.

As a reminder, we categorize sales of our products used to interconnect data centers in our carrier business. We applied our Gen AI innovations to this space with new high-density Gen AI fiber and cable that enables customers to fit anywhere from 2x to 4x the amount of fiber into their existing economy.

We began shipping these products in the first quarter. We doubled sales from first quarter levels in the second quarter, and we saw another significant sequential step-up in sales again in the third quarter. And we're still in the very beginning of this opportunity as we expect it to be a $1 billion business for us by the end of the decade.

Optical Communications net income for the third quarter grew twice as fast as sales, up 69% year-over-year to $295 million driven by the successful implementation of our springboard plan in both enterprise and carrier. Moving to display. We shared our expectations for the full year net income of $900 million to $950 million in 2025 and net income margin of 25%, consistent with the last 5 years.

We continue to expect to be at the high end of the $900 million to $950 million net income range and for net income margin to be at least 25%. In the third quarter, display sales were $939 million, and net income was $250 million, both up slightly from the prior quarter driven by stronger-than-expected panel maker utilization. Q3 price was consistent with the prior quarter. And for the full year, our expectations for the retail market remain unchanged.

We expect TV unit sales to be consistent with 2024 and TV screen size growth of about an inch. As a reminder, we successfully implemented double-digit price increases in the second half to ensure that we can maintain stable U.S. dollar net income in a weaker yen environment. We hedged our exposure for 2025 and 2026, and we have hedges in place beyond 2026.

In 2025, we reset our yen core rate to JPY 120 to the dollar, consistent with our hedge rate. We did not recast our 2024 financials because we expect to maintain the same profitability in display at the new core rate. Looking ahead, we expect glass market volume to be down slightly versus Q3 and we expect our Q4 glass pricing to be consistent with Q3.

In display, overall, we are maintaining our market, technology and cost leadership while benefiting from market growth and a glass supply-demand environment that is balanced to tight. Turning to Specialty Materials. The business delivered a terrific quarter and as you heard earlier, our announcement with Apple creates a larger, longer-term growth driver in mobile consumer electronics through SpringBoard and beyond.

In Q3, sales were up 13% year-over-year to $621 million, primarily driven by the successful adoption of our premium glass innovations for our customers' flagship product launches. Net income was up 57% year-over-year to $113 million on the strong incremental volume. Serving as a great proof point of the powerful incrementals outlined in our springboard plans.

Turning to automotive. As a reminder, in Q1, we graduated our auto glass business and together with our Environmental Technologies business created this segment. Automotive sales were $454 million, up 6% year-over-year, primarily driven by a stronger light-duty vehicle market in China, partially offset by lower heavy-duty diesel sales in North America.

Net income was $68 million, up 33% year, driven by strong manufacturing performance. Overall, we are focused on executing our more Corning growth strategy in automotive as additional content is required in upcoming vehicle emissions regulations and as technical glass and optics gain further adoption in vehicles.

Turning to Life Sciences. Sales were consistent with the prior year. Net income grew 7%. Finally, let's turn to Hemlock and emerging growth businesses. You heard an update on our new solar business from Wendell a few minutes ago. As a reminder, that business currently sits in this segment. We plan to build solar into a $2.5 billion revenue stream by 2028.

We are commercializing our new Made in America ingot and wafer products. Our new wafer facility came online in Q3, and we are ramping in Q4. We have committed customers for more than 80% of our capacity for the next 5 years. Segment sales were up 46% year-over-year, primarily driven by additional polysilicon capacity coming online and the ramp of our module operations.

As expected, net income reflected the ramp costs of our new solar products as we address significant customer demand. Now I'd like to take a moment to discuss operating expenses. In the quarter, was $826 million, which was above our normalized run rate. Included in Q3 OpEx was higher variable compensation expense, including stock compensation. The primary driver of the increase was the significant increase in our stock price in the quarter.

And as a reminder, we pay for performance, and we are performing well. Now let's turn to the fourth quarter outlook. In the fourth quarter, we expect to deliver sales of approximately $4.35 billion. Representing year-over-year growth of 12%, driven by strong adoption of our Gen AI products and by solar sales as we ramp wafer production.

We expect EPS to once again grow faster than sales to a range of $0.68 to $0.72. Our expectations include approximately $0.03 for the temporary impact of the continued solar ramp. You can clearly see from both our Q3 results and our Q4 outlook, we are significantly enhancing our return profile as we execute SpringBoard.

As a powerful proof point, we now anticipate achieving our SpringBoard operating margin of 20% in Q4 and a full year ahead of plan. We are very pleased to see that on strong sales growth, we have grown operating profit at twice the rate of sales. That's a 370 basis point improvement in operating margin from our Q4 2023 starting point.

With that, I'll shift from segment results to capital allocation. As we previously shared with you, our upgraded springboard plan includes higher sales and higher profit. We expect to convert that higher profit into more cash flow. And we've told you that as we grow sales, we expect profit to grow even faster, resulting in strong free cash flow generation.

The third quarter was another great proof point. We delivered free cash flow of $535 million. We expect full year 2025 free cash flow to be a significant step up from 2024. We expect to spend approximately $1.3 billion in CapEx in 2025. So how do we invest the expected higher cash flow?

Companies do capital allocation in different ways. We prioritize investing in organic growth opportunities that drive significant returns, and we grow primarily through innovation. We believe this creates the most value for our shareholders over the long term. Our investors have confirmed they see the value in this approach as we see high return opportunities in the future, we will invest in those opportunities.

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 21 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 Therefore, as we go forward, our primary vehicle for returning cash to shareholders will be share buybacks. We have an excellent track record. Over the last decade, we've repurchased 800 million shares close to a 50% reduction in our outstanding shares, which at today's share price has created approximately $50 billion in value for our shareholders.

Because of our growing confidence in SpringBoard, we started to buy back shares again in the second quarter of 2024, and we have continued to do so every quarter since then. And we expect to continue buying back shares going forward.

Now before we move to Q&A, I'd like to wrap up by reiterating a few things. When we originally launched SpringBoard in the fourth quarter of 2023, we provided you with a compelling financial plan. And as we approach the second anniversary of the plan, we are delivering compelling results.

From our starting point, we have grown sales 31% and expanded operating margin by 330 basis points on EPS, 72% more than twice the rate of sales growth. Expanded ROIC by 460 basis points and generated strong free cash flow. And in Q4, we expect to achieve our SpringBoard operating margin target of 20%, a year ahead of plan.

So we feel great about our progress and most importantly, we are positioned to capture strong growth well into the future.

With that, I'll turn it over to Ann.

Thanks, Ed. Operator, we're ready for the first question.

[Operator Instructions] Our first question comes from Josh Spector with UBS.

I just wanted to ask on the optical sales. I mean, obviously, a good quarter and good growth year-over-year. expectations were maybe a little bit higher based on some other kind of optical sales players into that supply chain. So I'm just curious if you could talk about any timing effects between 3Q, 4Q that may have impacted some sales? Or if this is kind of the right run rate we should be growing off of?

Josh, thanks for the question. So maybe what I would do is just start with something I shared when I was reading my remarks. As a reminder, our data center business, the business that's primarily growing through the new Gen AI products we've introduced, was about $1.3 billion in 2023 and our current run rate is about $3.3 billion.

So we've added $2 billion of sales in that space over about 7 quarters. So a significant amount of growth we expect that growth to continue. We also have a reasonable amount of growth that's accelerating data center interconnect space, and that's in our carrier business, and we also grew carrier about 14% in the third quarter year-over-year, so significant growth there as well.

So I think, we think of that as significantly outperforming hyperscale CapEx, we would size that if you use Deloro or some of the other firms that publish at about a 40% year-over-year level. So that's not sort of how we think about that business. The timing in any given quarter certainly can depend on specific customer plans.

Let me do a little more strategic and then address the specifics. I think -- do timing it from quarter-to-quarter, Josh best served there. I think to maybe follow up after the call with an -- and let's make sure that sort of how you're thinking about models and what's happening in a quarter, any given quarter is one place for us just to start, so we make sure we don't talk past each other.

What I'd add to add is sort of every time we're in a conversation with our customers, they want more from us. And things are quite tight right now. That being said, the reaction to our products is such that they want us to grow even more dramatically as they look ahead to the needs of their supply chain.

And so really, the dialogues between ourselves and our customers where they've really turned to is if we need to grow our capacity faster than we currently are. How can they step forward to derisk any capital that we have to invest because the way we look at this is the growth rates are just so high.

And as we seek to serve and delight our customers, is that we look to them to be able to help us with any sort of capacity investment and/or derisk that capital investment going forward for our shareholders. So it's hard for me to comment Josh and like any specific deltas quarter-to-quarter, I think those are best handled sort of with IR.

But if your question is, that do we see just a ton of growth here? The answer is yes, sir.

I appreciate that. Yes, I'll pass it on.

And the next question comes from Asiya Merchant with Citi.

Really powerful operating margin expansion growth here guided as well for 4Q. How should we think about -- given the growth that you guys are talking about, whether it's an optical auto, solar ramp, how should we think about incremental operating margins going beyond this fourth quarter here. And if there are any updates now to the SpringBoard operating margin target, given you're already achieving that a quarter ahead -- sorry, almost a year ahead in 4Q?

Asiya, thanks for the question. So first of all, we're really pleased with the performance we've had over the last 7 quarters. I think improving both our gross margin and our operating margin was a really key component of our springboard plan. And so we feel great about where we are.

And as I mentioned in our guide for both Q3 and Q4, we had some ramp costs associated with bringing our solar facility online. So at some point, those costs will go away. We'll be producing at full capacity and selling and that will help with our gross margin and our operating margin as well. And the way I think for now that we'd like you to think about our operating margin is it creates a really strong return profile for our business.

So we expect sales to continue to grow nicely as we go forward. We've got a 20% operating margin certainly could go higher than that. We'll come back and address that at some point later in the future. But if we're able to continue to grow our sales at that level, we'll continue to improve our return on invested capital, and we'll continue to improve our free cash flow.

So that's how I think investors and others should think about the financial profile of Corning going forward. Does that help?

No, that's great. And then just maybe on auto, how you guys are thinking about the upcoming emissions, whether it's a 2026 driver and kind of the growth rates we should expect in that segment.

Yes. So I would say in auto, right now, one thing I would point out is that our sales are impacted by a weaker heavy-duty market North America. At some point, that will bottom out and start to come back, and we'll start to see the growth we would expect like in our auto glass segment and in maybe other parts of the business, we'll see that live through just because heavy-duty will sort of stabilize and start to come back through the cycle.

And then yes, we do expect a couple of drivers of growth in this business. First, auto glass, we expect that business to continue to grow and drive growth through this year into next year and so on. And then I think the emissions regulations in the United States could start to impact us at the end of '26 for model years that start in 2027 and beyond.

And the next question is from John Roberts with Mizuho.

In solar, I think there was a large amount of downstream cell and panel inventory brought into the U.S. in advance of the new duties. Does that impact your ramp at all -- or do you accelerate as those downstream inventories are worked off?

John, I love your insights in this space. You are correct. That was indeed true. And as those inventories deplete. We're seeing really 2 impacts: a demand front, and as well sort of module pricing continuing to improve. So yes, we're seeing the dynamics that you're talking about. The core of our particular play is the need for U.S. origin product.

And as a result, most of our customers are signing up to us just for that. And so really on the margin, the particular overall industry dynamics that you're explaining don't hit us that dramatically because we're a preferred supplier as a U.S. player but your insights are right on, John.

And our next question comes from Sam Chatterjee with JPMorgan.

This is Joe Cardoso on for Samik. Maybe just for my first question here. Optical is clearly demonstrating strong revenue performance in the backdrop of these tailwinds but margins have also been impressive, tracking close to 18% in the quarter.

How should we think about the headroom for margins to continue to improve from here? And as you consider kind of the demand pipeline that you're seeing from your customers, how should we think about factors such as product mix as well as eventually capacity additions that could influence the trajectory here?

So I'll start, Joe, and then I'll let Ed add. I think you are on all of the right questions. You really are. So everything really comes down to the reaction to our innovations and the value they create. As our innovations create more and more value, it offers us the opportunity to continue to improve our profitability.

As well that we see the opportunity for continued growth here to be quite robust tied to those new product sets. And we'll provide a little more insight as we get a little bit further along in our customer dialogues with how we're going to approach capacity, risk reduction and strong commitments from our customers that will allow our customers that will allow us to provide high confidence guidance for our investors.

Yes, Joe. The only other thing I might add is, as we've shared the last several quarters, we have been adding capacity, we will continue to do that to meet demand. So there was -- have been some ramp costs in our optical business as we are able to make more sell more. That improves our margins.

You saw that nicely here in third quarter. And I think there's definitely some room above where we are to continue to grow from there.

Helpful color, guys. And then maybe for my second one, and then a similar vein, the Hemlock brand here. I'm just particularly interested in how we should think about margins for this business as well. Obviously, they're running a bit below last year's level as you kind of get through the early stages of the ramp.

But any way we should be thinking about the timing of margins here tracking back to those levels and then potentially surpassing it especially when we're considering the impact of tax credits and some of the other subsidies, which maybe at least from an investor standpoint, is a bit opaque in terms of how those should influence the margin trajectory as we kind of think about the business ramping going forward?

Yes. So maybe just stepping back, our goal here is to build a $2.5 billion business. So you can sort of take our current run rate and get to that -- how much incremental sales will add from there. We expect that business to be at or above the Corning operating margin level. So you can think of it as being a very nice margin business when we're fully up and running.

I think you'll see sort of incremental improvements as we add capacity and as we sell more. So I don't know that I would particularly call out timing in any given quarter, but we should just continue to improve kind of quarter-over-quarter as we go.

Yes. So Joe, let us sort of get through this quarter and the sort of crucial start-up time with wafers and maybe a little bit into Q1. And then we ought to be able to provide a little more help to you on how the factory is coming up and how we think of it for the coming year.

Right now, we're sort of making that jump between making thousands of wafers a day to try to make a 1 million a day, and that tends to focus our mind on the near term.

No, very fair guys.

Next question comes from George Notter with Wolfe Research.

I wanted to kind of talk a bit or ask a bit about the optical business in terms of just supply constraints. Talking with some folks around the industry, it sounds like you guys are no longer selling glass on an OEM basis to others. I assume it's because you've got more demand in your own internal glass needs than maybe you previously expected.

But is that actually the case? And then can you talk about what you're doing to expand capacity? I saw the expansion news in the Hickory facility this past week. I'm just wondering kind of where lead times are and what the capacity expansions look like?

I won't comment on our specific dialogues with our customers and what form they take our product at this stage. I would say, George, that you are correct in that. The demand for our products relative to our supply puts us in a situation where we are quite tight. And we have preexisting sort of ramps that we have been doing.

But now as we look to the accelerating demand from our customers, we're in dialogues with them about how to best set our manufacturing platform profile to serve them better. for the future? And how do we handle sort of the risk of that and how do we make sure that we derisk any investments that we make through commitments and/or funding from our customer set.

So that's where we are right now, George. More to come as those things start to come together.

Got it. And any comments on retail -- Yes, I was going to ask about lead times. Any comments there?

Got you. It really depends on the SKUs. There's no question though that -- everybody wants more from us faster, right? So in that way, we are seeking to improve our lead times because things are pretty tight.

That being said, we're able to -- we've been able to meet really unplanned for growth from our customers in terms of demand. And we bought a number of new customers have come on board for us because of the power of our innovations.

Next question comes from Wamsi Mohan with Bank of America.

Maybe to start in enterprise. If we look at the pace of quarter-on-quarter changes in revenues, it's a little bit below the same time frame last year, and that happened in Q2 and in Q3. And I'm wondering if we can just kind of dissect what the reason behind that might be given that the opportunity that you've highlighted here and the investments that you pointed to across multiple hyperscalers and data centers is just seeming to be very strong.

So maybe you could just put that in some context on how we should think about that flowing into the fourth quarter as well? And I have a follow-up.

So Wamsi, just to make sure that we understand you -- you made a comment about Q2 to Q3, both this year and then I thought you said last year. Could you just make your question? I just want to make sure we hear you correctly, Wamsi.

Right. Yes. No, Wendell, happy to clarify. I'm just saying that the incremental sequential dollar changes that you experienced from Q2 of '24 to Q3 of '24 was about $100 million in enterprise. This year, it's about $82 million. And last year, in the same time frames in Q1 to Q2 also.

It was a little bit higher last year versus this year. And I'm just wondering why the dollar increases are not accelerating as AI takes a little more.

I totally get it Wamsi, in a way, maybe ties to some of the stuff George was talking about. So as we take a look at the year over the year sequential quarter growth last year versus this year. And why isn't the dollars sort of the same? And is that a demand question or is it a supply question.

If that's where you're going, yes, it's how much incremental supply was available 1 quarter to the next is the primary driver of that. And we had a hunk more incremental supply in a particular SKU that enabled that jump last year. and this year. So in that way, I guess it's all timing is a way to think about it, but it's not a demand piece.

It's purely relative delta in supply between the years. Did that answer makes sense, Wamsi?

Yes. Maybe an just to follow up on that. Does that mean that like you are undershipping demand fairly significantly now in Q3? And does that lead to a catch-up in Q4?

I don't know how to think about undershipping demand. It's -- right now, if I could push more on my loading dock, our customers would take more. I mean that is just true. Right? And so we expect that situation to continue for the foreseeable future.

And so really, it's coming to a supply piece for us, what particular products undo a bottleneck at what particular time is driving more of what we put in a guide for our total revenue as a company than it is, can we sell more.

Any particular model, we'll try to help after the call a little more with modeling and sort of how we think about it and what those range of outcomes can be Wamsi. All right.

Okay. And if I could just quickly, obviously, very exciting news around Apple's investment in Harrisburg. Now that we're talking about Apple on the call, can we actually just -- can you help us think through the -- if the economics in specialty change meaningfully for warning either on pricing or margins of these cover glass products given sort of the, I guess, co-investment that is happening here.

The key thing that will drive our relative profitability in mobile consumer electronics will be the adoption of innovations and the rate of adoption of innovations. So for us, one of the most exciting things about the Apple announcement is a very long-term commitment and the co-innovation center that is going to be there.

And what you can look through to that is saying, you can expect a lot of amazing new products to come out of that collaboration. Usually, the more amazing the products are that we make, the more return benefit accrues to our investors and we would expect that historical approach, which we call more Corning to continue.

Operator, we've got time for one more question.

Okay. And the last question will come from Mehdi Hosseini with Susquehanna Financial Group.

Yes, most of the good questions have been asked. I'm just wondering, Wendell, as we look into the longer-term opportunity, especially given the success of the springboard plan, should we expected by '26, '27, the incremental revenue opportunities would be in the high single billion on a quarterly or $30 billion plus on an annualized basis.

And I'm just looking at the charge that you provide on a quarterly basis, and I'm just taking the same run rate and extended it into '27 and '28. And I have a follow-up.

So we'll update, we will owe you guys an update on SpringBoard given our strong performance. It seems like we upgrade our SpringBoard plans and then within just a couple of quarters, we performed so well that we get asked to update our spring forward plan again.

So as we look to early -- we're in the middle of that process that runs through the remainder of this year and into early next. And then we'll give you a good solid update on, but it is we see -- to your specific questions on run rates, why don't we sort of follow up on that after the call, so we can make sure we understand your math and everything that we've provided historically. Okay.

Got it. Okay. And just a quick follow-up. And this has to do with your strategy with solar and also the acquisition of a solar module manufacturing capacity from the last quarter. Should we assume that you would be able to make the entire solar module, including poly and the module itself as an affordable way so that everything is made in the U.S. and used by U.S. customers.

And I'm focusing more on affordability, especially given the fact that the subsidies are fast going away.

So the short answer is yes. In the value chain, what has -- our area of focus has been on ingots and wafers. And then yes, we also wanted to have a go-to-market position in modules, primarily because we have some new innovations to bring to that could increase the conversion efficiency and provide some of the best products or maybe BPAS product in the world for solar is our hope.

But the core of what we're doing, you've nailed it in one, which is we would like to see the U.S. supply chain that is able to make products that are competitive versus the landed basis of solar products made overseas by the time we were done with our efforts here. Our focus here on those areas that we can be really strong. We would rather source, I would say, the sell portion from other U.S. makers through time.

But one way or the other, we want to bring our innovation to bear so that the U.S. has domestically manufactured solar power because it's just going to be super important, especially we've been talking so much about AI. AI needs power, needs U.S. source power. This is yet suited for another super economical way for us to provide power, especially at speed.

Thank you, Wendell. And thank you, everybody, for joining us today. Before we close, I wanted to let everyone know that we're going to attend the UBS Global Technology and AI Conference on December 2. Additionally, we'll be scheduling management visits for 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.

This does conclude today's conference call. You may now disconnect.

All right. Good morning, everyone. Day 2 of Citi's Global TMT Conference. I am Asiya Merchant. I cover the tech hardware and tech supply chain here at Citi Research. So really excited to have Corning here. I have Ed here, the CFO of Corning. We have Corning's IR and members from the other management team as well in the audience.

Corning has been a great stock and this fireside here is questions that I've prepared. I'm going to leave some time for Q&A. However, I do request if you can please raise your hand so we can bring the mic to you.

So I'm going to turn it over to Ed first. He has some prepared comments, and then we'll get started.

Good morning, everyone. So first of all, it's great to be here today. Thanks for joining with us. I just want to note that I may make some forward-looking statements today and that you should review our filings on our website to see potential reasons that actual results may differ materially from the perspectives that I offer. So look forward to your questions, and thanks for joining.

All right. So I'll kick it off. We've been asking all our companies, especially companies like Corning that reported a very strong quarter with calendar 2Q. You guys are guiding to slight acceleration as well on the year-on-year growth rates. You're tracking well ahead of your risk-adjusted springboard plan. I think it's closer to sort of the internal plan that you have with your management.

Just Ed, as you sit here in calendar 3Q and you reflect on all the puts and takes that were to the demand, let's say, 6 months ago, right? I mean there was tariffs, there was AI rolling off. There was a whole bunch of other stuff, currencies, FX, all that stuff, you guys had yen exposure. Like how do you think about how demand has evolved over these past few months relative to kind of what your expectations are and as you're sitting here in calendar 3Q?

Yes. Thanks. So if I think about our markets sort of broadly and in general state, we came into the year thinking we would see growth in optical communications, some growth in specialty materials or mobile consumer electronics space and certainly some growth in display. And I think we haven't seen a significant change in the end market demand, certainly not in display or in specialty materials.

Automotive, sort of a flattish market for light-duty vehicles and down for heavy duty. And again, I don't think much has changed from the beginning of the year. The place that I would say is stronger or maybe has surprised us a little bit to the upside is in optical communications. In the carrier space, we've seen carriers essentially deplete all of the inventory they've had, which means they're buying now to their demand level, and we're starting to see their demand or their deployment levels go up a little bit. So that's a little better maybe than when we started the year.

I also think, of course, in the Gen AI space, we've just seen that demand continue to accelerate and grow. So as I think about the back half of the year, 6 months later, the demand environment, I would say, is better than we would have said coming into the year.

Okay. And there's always concerns about regulatory stuff. I mean we've heard a lot about China, U.S. geopolitical conflicts. Just if you can shed some light on that because I do know you have obviously fabs in China. How do you guys think about your exposure to China, just broadly speaking, given the context of geopolitical conflict?

Yes. I think a good way to think about Corning is, first of all, we tend to locate our manufacturing facilities where our customers are. It's acted as a nice buffer or insulated us very much from the tariffing environment. We've talked about that direct impact being very minimal, $0.01 to $0.02 in the second quarter is a good way to think about it, $10 million to $15 million of income, net income for us. Because of that, we tend to operate in an environment where the customers are making -- the products that we sell into are being made in that particular jurisdiction. So the geopolitics are less impactful for us really across the Board.

And we also are serving all of those markets. We actually have a big business that sells into China, certainly in display, consumer electronics and autos. And I don't think the environment has really impacted end market demand. So I talked a little bit about how we're seeing that demand really hasn't changed that much other than in optical accelerating. I don't think anything in terms of tariffs or just geopolitics has really changed the demand environment for us.

All right. Since you talked about domestic manufacturing, I think over the summer, you guys obviously had a positive announcement as it relates to your demand for domestic manufacturing. You talked about where you're seeing strength there. And you specifically talked about your investment -- the Apple is making investments in your plant in Kentucky, I believe, yes, where there is a lot of display glass right now that's being manufactured. Could you -- I mean, when we saw that press release, we're like, okay, you already do a lot for Apple. Obviously, you're on all the iPhones, et cetera. But just high level, help us understand how that's incremental to your business here because they've made investments for the long term here for you.

Yes. Maybe stepping back, we have 34 advanced manufacturing facilities in the United States. Really, the only one of our markets that isn't served out of the United States is the LCD, the display business. That's primarily an Asian-based business, China-based business. So we've actually seen an increase in inquiries and demand for our U.S. assets kind of across the Board. I'm sure we'll talk a little bit about solar. We're certainly seeing demand there. You saw the Apple announcement and maybe just a couple of comments on that announcement.

So Apple has committed $2.5 billion for us to make all of their cover glass and the glass for their watches, so cover glass for smartphones and the glass for their watches in our Kentucky facility, which is a significant increase in volume coming out of that facility. It allows us to invest in capital in technology and they're funding a lot of that investment for us.

It also allows us to increase our workforce in the U.S. and to leverage an asset that wasn't fully utilized. So all that is good. But the thing that I think is probably the most important thing is we're setting up an innovation center. So we'll co-innovate with Apple for future glass compositions, future devices, it allows us to essentially be really close to a very important customer, and they're very invested in this facility.

We'll move capacity to the U.S. We can use that capacity in other places, for example, in auto glass or other -- for other consumer electronics customers out of Asia. So I think it's actually good financially for us in the short term and midterm, but it's also really good in the long term because of the innovation component of that investment.

Okay. And just on that, does it free up R&D dollars that obviously Corning invests in, like you mentioned, auto glass, solar, optical. Does it free up R&D dollars that would have gone towards this consumer electronics to these other ventures that you have?

Yes, I think it's a good way to think about it. We like to invest long term. So regardless of the economic cycle, we try to preserve our RD&E dollars and even to some extent, our capital dollars. So we spend about $1 billion a year in RD&E regardless of sort of the economic environment because we want to make sure that we're ready for the next technological node in whatever industry we're serving or in certain industries where today, we're not necessarily participating.

So to the extent we can have customers co-innovate and help fund some of that, yes, it definitely allows us to take those dollars and put it in other places.

Okay. Just before we talk a little bit more about optical, I just want to understand recent geopolitical, I know you mentioned it hasn't been a much bigger this thing, but I think there was a press release or something out there yesterday about China, U.S. optical. Is this something -- I know your exposure to China and optical is probably negligible or very, very low, and you can correct me there. But on display, because you have fabs in China right next to your major panel customers, does this dynamic get affected by any of the antidumping that's coming for optical?

No. That announcement was specifically around optical fiber and that duty has -- that dumping duty has been in place before they're just sort of updating it. And the most important thing is we're making what we sell predominantly locally. So there's really not an exposure for us in any material way from that duty. It doesn't really change our environment or our outlook at all.

And just to be clear, your exposure on optical fiber to China is...?

Not that significant.

Yes. Okay. That's what I remember. All right. Switching to optical. I mean that's been obviously a great story for you guys here. You've seen some M&A in this business recently. We hosted Amphenol earlier yesterday as well. So just help us understand how material is this AI opportunity for Corning. Obviously, you've seen very strong growth. How sustainable is this growth over the next few years?

Yes. Maybe if I go back a little bit, we have an optical communications business that has two segments, Enterprise and Carrier. Our Enterprise segment is predominantly data centers. If you go back to 2023, it was about $1.3 billion or so in sales. Last year, that business grew about 50%. So $2 billion or so enterprise business. That growth was all driven by Gen AI data centers. That's the sort of way to think about it.

First half of this year, that level of growth continues. In fact, actually, we're growing at a higher rate than that in the first half of 2025. And we expect that growth to continue at a very good clip. We'll end the year with more than a $3 billion Enterprise business, right? So that kind of growth is what we're seeing today, and I think we have pretty good visibility for the next year to 2 years, and I would expect the growth to continue.

We put out a growth CAGR for this business about a year, maybe 16 months ago, that was 25% over a 4-year window. We upgraded that to 30% and we've been outperforming that. So at some point in time, we'll come and update how we think about it. We don't want to change that outlook quarterly. But clearly, we've undershot the opportunity size there.

Now I also think if you want to think midterm and long term, there's a couple of ways to think about it. First of all, what's driving the growth is what we call scale out, which is essentially just building larger data centers with bigger Gen AI clusters, more GPUs. That's what's really driving our growth. There's -- that's going to continue for -- certainly for the next several quarters, years and so on.

But there's an opportunity for scale up, which is optical replacing copper in the racks, kind of the early phases of co-packaged optics and then you have generations of technology after that. We also see that as a significant opportunity, at least as big an opportunity as our existing Enterprise business. So the ability to double or triple that Enterprise business by the end of the decade or certainly as you go into the beginning of the next decade.

So I think there's a significant amount of growth ahead of us. Now I always want to be thoughtful that it won't be a straight line of growth. We won't necessarily see 50% quarter-over-quarter or year-over-year every single quarter, but we think the market opportunity is significant. And that is really all inside the data center, and that's part of our Enterprise business. We also see growth outside the data center, data center interconnect or long-haul connecting data centers over long distances. We include those sales in our Carrier segment. So it's still Gen AI related driving growth, but not part of that enterprise growth math I just shared.

Okay. And then just to -- again, just talk about within the data centers, you have increased need for connectivity. Do you see -- as we transition, there's GPUs, there's a new GPU every year. There is also ASICs. Like anything you can help us understand about the content variability between the two as well as does each iteration of GPU, does that drive more connectivity content?

Yes. So -- in a Gen AI data center, what's driving the scale-out growth today is a combination of more GPUs and the fact that to run a neural network, you need to actually connect every GPU to every other GPU. So it creates like a web of connectivity. So there's sort of a content per device, if you want to think about it that way. There's an increase in content per device for us and you actually have more devices or more GPUs being installed. So as those technology generations increase, that also increases the amount of fiber connectors that need to go into the data center.

When you get into co-packaged optics, which is, again, generations from now in terms of technology, we see the increase coming additionally in just more fiber because today, some of that connectivity is copper. So you're sort of increasing the market opportunity because of the number of GPUs, the technology within the GPUs and then the fact that, that technology moves optics closer and closer to the box or eventually inside the box.

So AI has been a great tailwind for Corning for a lot of the other companies as well, but it's also very lumpy, right? And you can see a lot of companies talk about no transitions that are happening in GPU level that ends up eventually being a tailwind, but in the near term, could result in maybe underutilization of certain assets. So how do you manage that on the optical side for your business? Any kind of lumpiness? And what are you thinking about as we're doing these transitions with every chip iteration?

Yes. I mean, generally, philosophically, we want to have all our assets full. I mean that's kind of our mode. It's expensive to melt glass or to make fiber. So we want to put capacity in when we know we can sell it out. And we also philosophically look to get assistance from our customers to actually add capacity. So we've kind of made our business model, a lot about making sure others have sort of a vested interest in filling our capacity, whether it's in the form of some kind of a take-or-pay contract or cash upfront to help us put assets in. That's just philosophically how we think about it.

In optical communications, specifically, we have different types of capacity. We have connectorization, which is kind of what goes on the end of the fiber cables. That capacity is not that expensive, and we really don't want to run out of that. So we're willing to take a little bit more risk and ensure we can capacitize. In fact, with the new products we introduced for Gen AI, smaller fibers, smaller cables and smaller connectors, we're actually continuing to ramp that capacity. It's in our current run rate because, again, the demand has sort of exceeded our expectations, if I go back, let's say, a year, 1.5 years ago when we introduced these products.

When we add cable or we add fiber, in particular, the cost of doing that is a little bit higher. So we'll be very thoughtful about adding the next tranche of capacity, and we'll look to derisk it in some way, getting assistance to fund that capacity or ensuring that, that capacity is sold out. Right now, we're not necessarily planning to do that. But when we do that, we'll share our thoughts a little bit with you all on how we expect to sort of derisk it.

Because right now, you're still ramping, like you talked about.

Yes.

Okay. On the other side, on the DCI side, it was very interesting at your Investor Day where you showed where the data centers were previously just located in certain regions. Now they're being spread out across various geos, various cities just because of power needs. Just if you can click on that. I think the Fiber World Association had some very interesting comments on how big that business could be. And I know you've talked about it at your Investor Day as well.

So can you elaborate on how big this opportunity could be? It obviously sits within your carrier portion of your optical. But just if you can -- because this is something that's new, and that's not just the typical fiber-to-the-home broadband that carriers are deploying.

Yes. I think a simple way to think about it is it's essentially building a new long-haul network across the United States. We first started talking about it about a year ago, a little over a year ago, we signed a deal with Lumen. Lumen is well positioned because they have conduit in the ground, connecting a lot of major hubs across the United States, and we're supplying them with a set of products that allows them to install 2x to 4x the amount of fiber in those conduits as they normally would given the typical size of that long-haul cable with the advent.

So we essentially took the products we invented for inside the data center and converted that to outside the data center. Now we've actually seen that business continue to ramp, and we didn't really size it until pretty recently. We would say it's at least $1 billion opportunity for us by the end of the decade. And to give you some perspective, we just started shipping products in Q1 of this year, sales $25 million or so. We doubled our sales in Q2. We'll significantly increase our sales in Q3, and then we'll continue to ramp to that run rate over the next several quarters, years.

We definitely think there will be additional customers in this space, if you will. The end users are typically the hyperscalers that are putting in these large data centers. So I think the market opportunity is significant. We have the right technology. We're well positioned to serve it. And I think we'll continue to see that drive growth. And as you mentioned, it's in our carrier segment. So it's not part of that sort of size I gave for the Enterprise Business.

Okay. If we can talk a little bit about margins before we go into some of the other segments. There is room for margin expansion, clearly on the optical side as we see it, especially as you're ramping utilization in some of your fabs. So just help us understand what's the margin potential that we could see on the Optical segment?

Yes. I mean maybe for total Corning, we put out a target of 20% operating margin. We're getting pretty close to that target. If you take our Q3 guide and you kind of reverse engineer in operating margin, we're sort of getting pretty close to that level of margin. A lot of that expansion, when we first put out the target, we were about 16%. So just to give you some perspective of the increase. A lot of that has come from our Optical business as sales has significantly increased. It's also come as we filled capacity that was not being utilized, which gives us a great leverage point. In optical, in particular, we measure net income margin and our net income margin is kind of in the mid-teens. And I think there's room for that business to get to a 20% net income margin, which will continue to be accretive to Corning as we go forward.

Okay. Solar, that's another one where you're seeing some benefit from domestic manufacturing. People don't know a lot about solar. I think generally, when you talk Corning, you talk display, optical, autos. So just help us understand what's the benefit that Corning has because you have this domestic manufacturing, you have polysilicon? And how big could this business be?

Yes. So maybe for those that haven't followed, we have a business that makes polysilicon. We supply two industries, the semiconductor industry and the solar industry. That business about $1 billion or so, about half is for semiconductor and the rest for solar. We have been ramping and adding polysilicon capacity specifically for the solar space that's starting to come online here in the back half of 2025.

We're also moving downstream in the supply chain to make ingots and then those get cut into wafers. That's the next process step in making a solar module. We'll sell those wafers to cell makers and then those cells go into modules. That's kind of the supply chain in solar. So just to give you a sense of what we do.

We actually had a minority interest in this polysilicon business, and we were opportunistic and we're able to get the majority of that business in 2020. The ingots and wafers will also start to come online in the back half, probably fourth quarter and then really ramping as we go into 2026. So our run rate, about $1 billion a year, $250 million a quarter, we expect to grow that to about a $2.5 billion business by the end of 2027. Think of that as run rate end of 2027. So significant growth opportunity from our current run rate in the solar space.

We're seeing a lot of other companies bring their capabilities, cell making in particular, to the U.S. There's been a number of announcements for solar manufacturers that are going to build facilities in the U.S. That's good for us. We'll be the only wafer ingot wafer maker in the U.S. So having cell makers here is good. We recently announced a partnership with T1, which makes solar globally, but they don't manufacture in the U.S. They're going to manufacture cells and modules in the U.S. And we also have an agreement with a company called Suniva, same thing they're making cells in the U.S.

So we believe there's a great opportunity for us to get into the supply chain, which is what we like to do. And then eventually, we can innovate. And we think this is a space where we can bring our sort of innovation capabilities to continue to drive the life of a module or the cost of a cell or whatever it might be down and make the U.S. competitive. I think it's important -- two other points. I think it's important to note that there's probably 40 to 50 gigawatts of installed solar capacity in the U.S. every year. So it's a huge market. We will not have capacity to serve anywhere near that level of the market. So we don't necessarily need the market to grow to be really successful.

And then I think the other thing that is important to note is it's a very low cost of energy. So it's the lowest installed cost more or less of energy. So U.S. needing energy, we think this remains as a very critical source as we grow the power supply in the U.S. And then the OBBB, which was passed, I guess, now a couple of months ago, actually has some incentives in there for the incentives that matter to us, the production tax credits, those all remain in that OBBB as they were kind of prior to that new legislation.

Okay. That's an important point. So the installed capacity you don't think could be negatively impacted by any of the legislation that went around.

No. We see -- we actually see the industry capitalizing in the U.S. That's what we're seeing. So we think what's driving that is the cost of importing has gone up significantly. So it makes manufacturing in the U.S. more competitive. And I think because it's a low cost of installed energy, it's actually relatively quick to install large amounts of capacity relative to other sources. We see this as being a critical energy supply for the indefinite.

And just on margins, how does that compare to your other segments? And how does that kind of factor into your target for operating margins?

Yes. I think when this business is fully ramped, we should be at or above the Corning level of profitability.

Okay. All right. I'll ask one more on Display, and then we can open it up to questions. Display goes a lot into TVs, consumer electronics, laptops, et cetera. There's this -- and you guys are one of the leading manufacturers of display. You guys have successfully navigated through all the yen exposure. So just help us understand the concept of pull forward, how that's affected you guys on display? How do you see it for the back half of this year? And you guys sound pretty confident on these net income margins for the display. So what's driving the sustainability despite all the lumpiness with pull forwards perhaps and all the moving yen pieces?

Yes. Maybe I'll sort of break it apart. I think with respect to demand, I said at the beginning, our view on the retail market in display hasn't changed much. We don't think there's going to be much unit growth year-over-year. TV units has been relatively flat the last several years. But what drives growth in the market is screen size, and that continues to grow, give or take an inch a year, which actually adds low to mid-single-digit growth of glass into the industry. So that's how the market grows for us, and that affords us an opportunity to grow this business even though units are relatively flat.

We've navigated a lot of things, including panel making moving from places like Korea, Japan, Korea, Taiwan to China, which took place over the last 4 or 5 years. And I think you've got a relatively stable panel-making environment now with that predominantly being in China. And as you mentioned, we're located very close to our customers. We have three large Gen 10.5 glass manufacturing facilities in China. We're the market leader, lowest cost and highest best technology. And I think that allows us to sort of create a stable environment, manage our supply, keep supply and demand relatively tight. Our competitors are not very profitable, so they tend to try to do the same thing. So it's allowed us to raise price in a weak yen environment.

We've hedged out for '25 and '26. We've got some hedges in place beyond '26. So our goal is really to maintain our profitability at that 25% and have this business grow a little bit every year. And so far, we've executed that in '24 and '25 quite nicely.

Okay. And on the mobile consumer electronics, where you also have covered glass and touch glass there. Any interesting products that you see on the horizon that thinks that there's great innovation that's going on here that would increase the demand in that segment?

Yes. I mean I think -- so we're always innovating. And I think the things maybe shorter term, we could see more foldable phones. I mean I think the adoption of that, I'm not the right person to determine whether consumers ultimately adopt that. But to the extent that's adopted, I think that's a great opportunity for us. We're well positioned to take advantage of that. AR/VR probably out, I think, several years, I don't think you're going to necessarily see significant adoption, but that's certainly an area that's opportunity for us.

And then I think there's a lot of dialogue happening now and a lot of work on the innovation side on what are the next Gen AI user interfaces, what are the devices that ultimately either replace or supplement smartphones and we're also well positioned and working on a lot of technology there. So I think there's a nice pipeline of innovation. And of course, we continue to innovate for existing devices. And I mentioned the Apple relationship earlier.

So for us, we always want to bring new glass compositions and ceramic compositions to those devices to make the devices better to help our customers meet whatever their needs are. So I think there's good innovation there. We can't really talk about what our customers are specifically doing, but I think we feel like the specialty materials business has a nice growth trajectory. So it's a spring in like our overall in our springboard plan that is actually now starting to grow.

Okay. All right. Let me ask if there's any questions in the audience. I have one...

Amphenol is doing an acquisition of the CommScope fiber optic business. I think we'll bring them into more competition with you and scale out inside the AI data center. They've done a good job consolidating the scale-up copper market. Just any thoughts on their entrance into that market to scale out?

Yes. I think CommScope is a competitor today. We know them very well. We compete across all applications, carrier and enterprise with them. So I don't think it necessarily changes the environment for us in a significant way.

One more here.

I know there's tremendous growth coming in the data centers, but whatever happened to BEAD?

Yes. BEAD is actually still in place, and there are a number of states that are slowly leveraging the BEAD program to do rural broadband deployments. We are participating in some of those. I think it's clearly much slower in terms of the deployments than we might have said several years ago. I think the good news, whether it's BEAD or otherwise, our customers have committed to continuing to deploy fiber. A lot of the large telcos have recently talked about accelerating their deployments for fiber. I mentioned earlier that we're starting to see that a little bit now.

So I think if I take data center interconnect out of the carrier business and I think of the legacy carrier business, I think that could be a mid-to-high single-digit grower over the next several years. Some of that will be BEAD. I don't know that BEAD is going to be as huge a catalyst maybe as we might have said several years ago. But I think there's enough opportunity despite that.

A little bit on capital allocation, Ed. I know I always bug you on that one. So you guys have obviously a lot of demand. So you have to kind of balance of my cash flow that I generate, how much do I put into CapEx? Obviously, there is maintenance CapEx, but how much more can I put into growth CapEx? And how do I balance that and at the same time, make sure shareholders are happy with the returns?

Yes. So our approach to capital allocation is to ensure that we always can invest for organic growth. That's our primary vector for where we want to deploy our capital. We think it creates the most value. And generally, our shareholders are confirming that for us. So we do that. We preserve our research development dollars and we spend capital when we can. And as I mentioned earlier, we've really tried hard to derisk the capital aspect of that because that's when it gets pretty expensive when you start to put capital in the ground.

So we're going to continue to do that. We always want to maintain a strong balance sheet. We actually have a pretty strong balance sheet today, and investment-grade balance sheet. So to the extent we ever need to do anything with our balance sheet, we'll prioritize that as well, primarily because we want to invest over long cycles. So we never want to be over-levered at any point in time.

Then we take that remaining cash, and we like to reward shareholders. We have a very nice dividend. We pay out almost $1 billion a year on our dividend, and we are committed to paying that dividend. We haven't increased it the last several years because I'd like to grow our sort of cash flows and move the payout ratio down a little bit, maybe more like a 50% payout ratio on the dividend.

But at some point, we'll certainly look to do something there. And then, of course, we'll continue to buy back shares. We started buying back shares about 5 quarters ago, and we'll continue to do that as we go forward with our excess cash.

Now I didn't talk about M&A. I mean we're not -- we're organic growers, so that's our primary vector, but we certainly won't rule out looking at there's something for us to be opportunistic on, but not transformational M&A.

Okay. Great. We're almost up here on time. So I would like to thank Ed here. Thank you to Corning and good luck with the rest of your meetings.

Yes. Thanks, Asiya. Thank you all.

Ladies and gentlemen, thank you for standing by. Welcome to the Corning Inc. Second Quarter 2025 Earnings Call. [Operator Instructions]. Please be advised that today's conference is being recorded. It is my pleasure to introduce to you, Ann Nicholson, Vice President of Investor Relations. Please go ahead.

Thank you, and good morning, everybody. Welcome to Corning's Second Quarter 2025 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'll 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 second quarter, the difference between GAAP and core EPS primarily reflected noncash mark-to-market activity associated with the company's translated earnings contracts, foreign denominated debt and constant currency adjustments.

As a reminder, mark-to-market accounting has no impact on our cash flow. 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. 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.

Thank you, Ann. Good morning, everyone. We delivered outstanding second quarter results. Our record sales and EPS both exceeded guidance. Year-over-year, sales grew 12% to $4 billion. Earnings per share grew more than double the rate of sales to $0.60. Operating margin expanded 160 basis points to 19%. Return on invested capital grew 210 basis points to 13.1%, and free cash flow grew 28% to $451 million.

Overall, key secular trends and our More Corning content strategy, drive demand for our capabilities, and we continue to capture the powerful, profitable growth outlined in our recently upgraded Springboard plan. As we look ahead, we expect our strong Springboard performance to continue.

We're seeing a remarkable customer response to both our new Gen AI and U.S.-based solar products. and we're driving more Corning content into our mobile consumer electronics, display, automotive and optical communications platforms. We also expect an additional growth driver to emerge in the coming months as new and existing customers seek to leverage our large U.S. advanced manufacturing footprint. Overall, we are well positioned to deliver durable growth through 2026 and beyond.

But before we talk about the future, I'd like to take a moment to put our second quarter results in the context of our Springboard plant. We launched Springboard in quarter 4 2023, explaining our plan to dramatically improve our sales and enhance our return profile and to increase our operating margin by 400 basis points to 20% by the end of 2026.

We're now at the halfway point of our original Springboard plan. When we compare our second quarter 2025 results to our launch point, we grew sales 24%, adding more than $3 billion to our annualized run rate. We expanded operating margin by 270 basis points to 19% showing strong progress towards our target of 20%.

We grew EPS 54% more than twice the rate of sales. We expanded return on invested capital by 430 basis points, and we generated strong free cash flow. Clearly, this progress is impressive. And we expect our strong performance to continue.

So let's look at our journey so far. Our original internal Springboard plan, which was the output of the strategic planning process we run with each of our market access platforms, was to add $5 billion in incremental annualized sales by the end of 2026. These were our actual business plans. We set our objectives and our compensation based upon those plans.

When our businesses submit plans to corporate, they factor in a variety of probabilistic outcomes, they try to account for the known unknowns. The business plans aim for a 70% confidence interval. This means that based on their analysis, there is a 70% chance that they will deliver sales greater than or equal to that number.

We then provided a higher confidence plan for our investors. At the corporate level, we probabilistically adjusted for factors, including potential macroeconomic slowdowns, changes in government policy and timing of multiple secular trends and our related innovations. Our risk adjustment was $2 billion. This is how we got to our original $3 billion high confidence plan.

Remember, we purposely do this as a wedge. We weren't trying to guide every quarter for the next 12 quarters. It wouldn't be a straight line. That being said, our quarterly performance through 2024 demonstrates our powerful momentum. This chart illustrates that we are hitting or exceeding our critical milestones as sales tracked well above both our internal and high confidence plans through the first year. Our strategies are working and our customers are loving our innovations.

Given our progress in March of this year, we upgraded our internal and high confidence plan by $1 billion, had $6 billion and $4 billion, respectively. So now let's look at our most recent quarter. As you can see, we've added $3.1 billion of incremental annualized sales since the launch of Springbok. Looking ahead, we expect to add another $600 million to our annualized sales run rate in the third quarter.

At the halfway point of Springboard, we are on track and expect strong momentum going forward. Now let me share just a few examples of what is driving our growth. Gen AI is clearly a positive for us. First, in our enterprise business, where we report sales for inside the data center, we saw a record $2 billion in sales last year. In quarter 2, we grew enterprise sales 81% year-over-year. The primary technical driver behind that growth is what the industry calls the scale out of the network.

That basically means that hyperscale customers are scaling out the GPU clusters with more and more connected AI nodes of server rack or simply put larger neural networks. Because each AI node is connected to the others in the cluster by fiber. This creates more volume for Corning.

We also have another significant upside opportunity inside the data center, driven by what the industry calls the scale up of the network. Hyperscalers are creating more capable nodes that move from less than 100 GPUs per node today to hundreds of GPUs per node in the future. Historically, an AI node has been within a single server wrap. As hyperscalers scale up, AI nodes are shifting to stretch across multiple server racks.

This causes the distance to link these GPUs within the node to get longer. This will eventually cause the links to reach about 100 gigabit per second meter what we call the electrical to optical [ Frontier ] line, which roughly marks the point where fiber connections become more [ technical economical ] than copper, creating a large potential opportunity for us.

To help understand the size of this opportunity a single black well like node has more than 70 GPUs with more than 1,200 links using more than 2 miles of copper. As that node scales up, those 2 miles will eventually be replaced by fiber connections. And those miles will grow over time as more and more GPUs are included in the AI node.

I'm sure you've seen announcements regarding co-packaged optics for CPO. That is one of the technologies that help activate the scale-up opportunity for us. If we succeed technically, the scale-up opportunity is 2 to 3x the size of our existing $2 billion enterprise business. And we're working with key customers and partners as we speak, on making that future a reality.

Another opportunity for our growth tied to Gen AI is playing out in our carrier business. Now we've been studying this space for some time, and we've been seeing that most long-haul routes were approaching their maximum data rate capacity, creating a need for many new high-bandwidth low-latency lengths between cities and data center campuses. And this essentially requires a rebuild of the long-haul networks.

Our customers consider the long-haul rebuilds as they think about that technically and economically, they see great potential economic benefit from fitting more fibers into a given conduit. This means they prefer denser fiber optic cables. To create a high-density solution, we applied our core innovations from inside the data center to this outside plan challenge. We introduced this new technology package to connect data center campuses.

In the industry, this is referred to as DCI or Data Center Interconnect. We shared last year that we reached an agreement with Lumen Technologies to provide our new Gen AI fiber and cable system that enables Lumen to fit anywhere from 2 to 4x the amount of fiber into their existing conduit and the agreement reserved 10% of our global fiber capacity for 2025 and 2026.

We've now fully commercialized this product set and we have 3 industry-leading customers adopting the technology. That being said, we are just in the very beginning of this new market. We expect this business to scale rapidly, reaching a $1 billion opportunity for us by the end of the decade.

Now I'll turn to our growth opportunity in Solar. At our March IR event, we shared our low-risk, high-return strategy to reenter the solar market. We generated over $1 billion in cash from 2020 to 2024 in this platform. We funded the expansion of our manufacturing assets with the growing cash flow generated from the assets we acquired for less than $0.10 on the dollar, customer funding and government support, all while generating positive cash flow every year.

As a result, we have now built a strong foundation for rapidly accelerating growth. We made advancements to serve higher end ship segment in semiconductors, and we are on track to double our semiconductor business by the end of the decade. We activated idle assets to serve the need for domestic solar polysilicon. And we added the capability to transform our polysilicon into higher-value domestically made solar wafers, all integrated together on our campus in Michigan.

We now have committed customers for 100% of our polysilicon and wafer capacity available in 2025 and 80% of our capacity for the next 5 years. Because we built this platform so quietly while growing our cash flow, our new Solar MAP hasn't garnered much attention from investors relative to the significance of the opportunity. We expect to triple our sales run rate by 2027, adding $1.6 billion of new annualized revenue to Corning's earnings power.

Finally, we also expect an additional growth driver to emerge in the coming months, as new and existing customers seek to leverage our large U.S. advanced manufacturing footprint. It is still early days but this could become a major trend depending how trade policy turns out. Watch this space, and we'll keep you posted.

With that, I'll leave you with this. We delivered outstanding second quarter results that exceeded expectations. We've made great progress to date on our Springboard plan, halfway through the plan. We grew sales 24%, adding more than $3 billion to our annualized run rate. We expanded operating margin by 270 basis points to 19%, showing strong progress on our target of 20%.

We grew EPS 54% more than twice the rate of sales. We expanded return on invested capital by 430 basis points, and we generated strong free cash flow. And we're experiencing strong growth drivers that increase our confidence in maintaining our momentum to 2026 and beyond. Now I'll turn it over to Ed for more detail on our results and outlook.

Thank you, Wendell. Good morning, everyone. We delivered excellent second quarter results that exceeded the expectations we set in April. Year-over-year in Q2, sales were up 12%, while EPS grew 28%. Operating margin expanded 160 basis points to 19%. ROIC grew 210 basis points to 13.1% and free cash flow grew 28% to $451 million.

Looking ahead, we expect Q3 to be another strong quarter. We expect double-digit year-over-year sales and earnings growth, with sales of $4.2 billion and profit again growing faster than sales with EPS in the range of $0.63 to $0.67. We expect to continue expanding our operating margin as we march toward our springboard target of 20%.

We also anticipate continued strong growth in our enterprise business, driven by our new products for Gen AI, and we're advancing significant growth opportunities across the company, as Wendell just described. Two other points I want to note related to our third quarter guidance.

First, in Q3, our guidance again factors in about $0.01 to $0.02 for the impact of currently enacted tariffs, about the same level we saw in Q2. Our long-standing philosophy to locate our manufacturing operations close to our customers serves as a natural hedge against tariffs and mitigates the financial impact.

Second, we shared with you last quarter that we are accelerating our production ramp for new products. given high customer demand for our new Gen AI products for inside and outside the data center and for our new Solar offerings. Our third quarter guidance includes temporarily higher costs associated with these ramps of $0.02 to $0.03 in the quarter. We expect the impact of these costs to dissipate as our production and sales increase.

Overall, we feel great about our Springboard performance to date. As you can see by our guidance, we expect our momentum to continue and we're energized by the tremendous opportunity for value creation we've built for our shareholders. With that, let me share some more detail on what we're seeing in our businesses.

In Optical Communications, second quarter sales grew 41% year-over-year to $1.6 billion. Growth was led by strong adoption of our AI products in the enterprise space, which was up 81% year-over-year. We also saw strong growth in our carrier business, which was up 16% year-over-year. This was driven by 2 factors.

First, as a reminder, we categorize our Gen AI products that interconnect data centers in our carrier business. We began shipping these products in the first quarter. We doubled sales from first quarter levels in the second quarter. We're still in the very beginning of this opportunity. And as you heard from Wendell, this could be a $1 billion business for us by the end of the decade.

Additionally, carriers have completed drawing down inventory they built during the pandemic, and they are now purchasing at their rate of deployment. This also contributed to year-over-year sales growth in our carrier business. And as noted in recent public statements, carriers are planning to expand their fiber networks going forward. So this sets the stage for additional growth. Net income for the second quarter was $247 million, up 73% year-over-year with strong incremental profit on the additional volumes.

Moving to display. In the second quarter, sales were $898 million, and net income was $243 million, both consistent with the first quarter. For the full year, our expectations for the retail market remain unchanged. We expect TV unit sales to be consistent with 2024 and TV screen size growth of about an inch.

As a reminder, we successfully implemented double-digit price increases in the second half of 2024 to ensure that we can maintain stable U.S. dollar net income in a weaker yen environment. We hedged our yen exposure for 2025 and 2026 with hedges in place beyond 2026. In 2025, we reset our yen core rate to JPY 120 to the dollar, consistent with our hedge rate. We are not recasting our 2024 financials because we expect to maintain the same profitability in display at the new quarry.

We guided full year net income of $900 million to $950 million in 2025 and net income margin of 25%, consistent with the last 5 years. Clearly, we are tracking ahead of that guidance in the first half of 2025. We expect our profitability levels to continue in the second half and now expect to be at the high end of the $900 million to $950 million net income range and for margin to be at least 25%. Looking ahead, we expect the Q3 glass market and our volume to be similar to Q2 and for our pricing to be consistent sequentially.

In Display overall, we are maintaining our market technology and cost leadership while benefiting from market growth and a glass supply/demand environment that is balanced to tight.

Turning to Specialty Materials. Sales were up 9% year-over-year, primarily driven by continued adoption of our premium glass innovations in Gorilla Glass. Additionally, some OEM customers purchased in advance of anticipated tariffs. We expect OEMs to adjust their purchases in the second half of 2025 and have factored that into our Q3 guidance. Net income was up 29% year-over-year to $81 million, primarily driven by strong demand for our premium glass innovations.

Turning to Automotive. As a reminder, in Q1, we graduated our auto glass business and together with our Environmental Technologies business, created this segment. We ended 2023 with a triple-digit automotive glass business, and we expect it to triple by the end of 2026. In the second quarter, Automotive sales were $460 million, down 4% year-over-year, primarily driven by weaker light and heavy-duty markets in Europe and North America.

Net income was $79 million, up 11% year-over-year, driven by strong manufacturing performance offsetting lower sales. We're focused on executing our More Corning growth strategy in automotive as additional content is required in upcoming vehicle emissions regulations and as technical glass and optics gain further adoption in vehicles.

In Life Sciences, sales were consistent with the prior year and net income grew 6%.

And finally, in Hemlock and Emerging Growth Businesses, sales were up 31% year-over-year driven by increased solar and semiconductor polysilicon volume. Our new Solar business currently sits in this segment. We plan to build it into a $2.5 billion revenue stream by 2028.

We're commercializing our new made in America ingot and wafer products. We expect our new wafer facility to come online in Q3 and we expect to begin shipping later this year. We have committed customers for 100% of our polysilicon and wafer capacity available in 2025 and 80% of our capacity for the next 5 years. As we guided, our Q2 net income reflected the temporarily higher production ramp costs for our new Solar offerings.

With that, I'll shift from segment results to free cash flow. We continue making strong progress in 2025. In the second quarter, free cash flow grew 28% year-over-year to $451 million. We continue to expect to generate a significant amount of free cash flow this year, and we expect to invest approximately $1.3 billion in capital.

Moving to capital allocation. As we previously shared with you, our upgraded springboard plan includes higher sales and higher profit. We expect to convert that higher profit into more cash flow. And as I just noted, we're making nice progress.

So how do we choose to invest the expected higher cash flow? Companies do capital allocation in different ways. We prioritize investing in organic growth opportunities that drive significant returns and we grow primarily through innovation. We believe this creates the most value for our shareholders over the long term. Our investors have confirmed this. As we see high return opportunities in the future, we will invest in those opportunities.

We also seek to maintain a strong and efficient balance sheet. We're in great shape. We have one of the longest debt [ tenures ] in the S&P 500. Our current average debt maturity is about 21 years with only about $1.5 billion in debt coming due over the next 5 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. Therefore, as we go forward, our primary vehicle for returning cash to shareholders will be share buybacks.

And we have an excellent track record. Over about the last decade, we repurchased 800 million shares, close to a 50% reduction in our outstanding shares, which at today's share price has created $26 billion in value for our shareholders. Because of our growing confidence in Springboard, we started to buy back shares in the second quarter of 2024, and we've continued to do so since then. In the first quarter of 2025, we invested another $100 million in repurchases. In the second quarter, we continue to buy back shares, and we will expect to continue buying back shares in the third quarter.

So I'll quickly wrap up today. We delivered outstanding second quarter results, exceeding guidance with record sales and EPS. We expect Q3 to be another strong quarter with double-digit sales and earnings growth. Since the start of Springboard, we've significantly grown sales. We've grown EPS more than twice the rate of sales, and we are generating strong free cash flow. We've substantially improved our return profile. So overall, we feel great about our progress. With that, I'll turn it back to Ann.

Thanks, Ed. Okay. Operator, we're ready for our first question.

[Operator Instructions]. The first question will come from Wamsi Mohan with Bank of America.

Wendell, some of your customers are facing maybe more disruption than you are relative to tariffs. Can you comment on where you've seen pull-forward activity within that customer base, both in the second quarter and where you're expecting some of that might continue into the third quarter of this year as well? If you could just -- it's clear that something happened in specialty, but if you could share some color on that and if there are other markets where this is happening as well.

Wamsi, this is Ed. I'll take that one. So I think the 2 places in particular, where we did see some customers buying ahead of expected tariffs were in Gorilla, as we shared on the call and in display. We are expecting that to adjust in the second half. And in both of those spaces, we're not changing our view of the markets for the full year, the retail markets or the end markets. So we expect that to normalize. Now our guidance for Q3 and the way we're thinking about going forward factors that in.

Does that makes sense to you, Wamsi? So basically, we do our calculation and our estimates of what we think that is, right? And then we try to take it out of our next quarter guide. It may happen that way. It may not happen that way, but we try to conservatively portray what we see as supply chain.

Right. No, that makes sense. I guess just to clarify, you're saying that in Q2, you did see an uptick in specialty. So that impacts Q3, Q4 versus first half. But more specifically, are you seeing any impact in Q3 in your guide from a full par perspective as well, understanding that your full year didn't change? Does that mean that sequential trends in Q4 should be worse than normal?

No. What we did is -- we'll see what actually happens. But what you note, but Ed is saying, is it in -- I guess, since we did this in Q1 we had this question as well, which was do we see any effects from our customers trying to build supply chain ahead of tests. We said, yes, we see some. And what we do is remain an estimate of that, and then we basically put in our Q2 guide that the supply chain would be reduced.

So in other words, it depressed our revenue guide in our earnings guide for Q2. We're doing the same type thing here for Q3, which is we take a look at the first half, what do we think since we haven't changed our total year outlook. Or what do we think our customers have done to do any pull ahead, right? And then what we've done is we've actually reduced quarter 3 in our guide by what that amount is. So actually, just to be precise with you, we already tried to take that out of our Q3 guide. Does that make sense, Wamsi?

Absolutely. No, no, that's great. That makes a lot of sense, Wendell. And if I could, just -- could you share any color -- on you seem very, very bullish on the Solar opportunity. We just had some legislation passed that's taking away some of the incentives on renewables. Can you just put that in context for us we should be thinking about Corning, specifically your progress in that market?

Yes. If you look at the reconciliation bill, right? There's a lot of changes, but one thing didn't change, is that the U.S. government is continuing to incent a U.S. manufacturing of Solar products and its preference for domestic content. This plays out in a number of different ways in the actual test of the legislation.

But the core piece is that the hunks that we needed around the advanced manufacturing tax credits, they remained in place. And there were additions to various pieces of that encourage more domestic content, more U.S.-based manufacturing. And that was our long-term belief on what the vector would be is that there would be a requirement for U.S. manufacturing of energy, and that continues to be in place.

And the next question comes from John Roberts with Mizuho.

I'm looking at Slide 38, that's at the Solar and semiconductor profitability. You've got start-ups coming in the third quarter as well. So is the recovery in earnings fourth quarter? Or is it out into 2026. Can you give us a sense of kind of how long we'll be under these pressures from the startup expenses?

Yes, a couple of thoughts, John. Thanks for the question. So we shared we started up our wafer factory here in the second quarter. So we expected to have ramp costs for that. We're seeing that continue in the third quarter. We expect to commercialize our new wafer products in the third quarter and for that -- for those sales to start to ramp as we go into the fourth quarter, I think over time, the ramp costs will get better for 2 reasons.

We'll be actually running the factory at full utilization rates, and that will improve our output, but also we'll be selling product. So I don't know that it necessarily all is done by the end of the year, but I would expect it to continue to improve as we go through the year and into 2026.

And the next question will come from Samik Chatterjee with JPMorgan.

Wendell, maybe I'll ask you a broader one just on the Springboard plan here. If I'm looking at your wedges, based on Q3 guide, it looks like -- if you were to sort of look at where you're tracking relative to your plans, you're tracking more closer to the internal plan than the high conference plan.

So is there anything from the internal plan that you've sort of envisioned but did not really pan out as you sort of look at the status of things today? And then I'll take your sort of take you up on the high -- the forward opportunities that you talked about with customers looking to leverage Corning's manufacturing in the U.S.? And would that represent upside? And which verticals would you think that's more focused on?

Let's take a look at the second one first and then come back to your key question on the first. So the second one, I can't share too much right now, Samik. These are all confidential negotiations. But we have 34 factories in the U.S. We're engaged with a number of our major customers in a number of our maps to basically make a major commitment to U.S.-based manufacturing and to help us utilize those factories going forward.

Some are our current customers. Some are new to us. And we simply answers to the beginning of these. These negotiations should close out sometime in the pretty near future. So watch the space, my friend sometime in the next few months, we should be able to be a little more clear about the first [indiscernible]. So before I move to your first question, is that okay on the second, Samik?

Yes. I'll wait and watch on that one.

Okay. On the first one, [indiscernible] question. Of course, what has happened to us is a mix of a stronger positive reaction to many of our new products, and that has been more than offsetting some of the places where the secular trends were a little bit later are not as significant as we would have thought.

Let me give you a good example sort of our new sets of products for vendable devices. When we built the original plan, we had planned for a more significant uptick in terms of the popularity and placement of some of that foldable tax, and that's been delayed. And that's just an example. And in each of these different maps, you'll see a combination of those pieces where there were faster than we thought, and those where it went a little slower than we thought.

There's very few areas that come to mind for me where we're where we don't feel good about the fundamental secular trend that we were believing in. The other is always timing on cyclical return I'd say the carriers took a little bit longer to clear out their inventory build than we thought maybe a quarter or so, but that's now -- they're back to buying at deployment levels. So we've got a good foundation for their growth going forward. But those are some small examples. Those are the areas that you are looking for, Samik.

Yes. And maybe just then on -- if you aggregate all of that, is there any big missing pieces related to your internal plan to be high conference plan today? Are there any big chunks that you said sort of fell out from the internal plan initiative?

So I think which way you look at. So on the high confidence plan, absolutely not, right? Because that really -- remember, what we do is we built into that risk adjustments for big macroeconomic cycles, a variety of sort of being events that we wouldn't have necessarily in our business cycles.

In the internal plan, if what we're really seeing in that pattern, what we're trying to show is the graphic is that we are hitting or exceeding almost all of our critical milestones. So if anything, what we're seeing is building momentum. Now we have to see as some of the next layers of growth that we're planning for our Springboard continue.

If they do, then we'll have to deeply think about whether or not we will upgrade our plan again. But that would be a high-class problem. So let's wait and see how we do in the cover quarters.

The next question is from Steven Fox with Fox Advisors.

Can you hear me okay?

Yes.

Great. I guess, first of all, Wendell, I was wondering if you can give us your fiber market share by region at a couple of decimal points.

Too soon, [indiscernible].

But I did have a question on [ cyber ] that I think you can answer. You've mentioned a couple of longer-term sort of optionality around scale-out, DCI, et cetera. Some of those trends you're seeing more indications of, but you're talking longer term about them. I was wondering like what kind of internal and external inflection point should we be looking for that will then translate into those -- that sort of next wave of demand starting to take off?

So first of all, I appreciate the humor on my CNBC appearance this morning. Thank you, my friend. Secondly, what a great question. So what we look for is we are engaged right now with multiple innovation partners/customers. And what we're looking for is -- does our technology do we win that platform. Once we win those platforms, then it will be to those platforms then become the successful architecture for those particular chip sets in their deployment in servers.

I think the biggest thing you can look for is you'll see announcements by our customers and will be named as one of their partners. You just recently saw a couple of those, I forget when not that long ago from Broadcom and from NVIDIA, right, where they showed us as partners for some of their significant CPO platforms. So I think that will be the first indications that things are going well and that we're well positioned.

Then the next will be -- when does that architecture slide in. And that's a little bit tougher because within all the majors, which you have is the competing platforms do we switch to a photon based architecture, right, in the server racks for the AI nodes or how much burden we can press the electron-based ones and the copper-based ones. And that struggle will continue. But the key is to get positioned for that long-term innovation secular way when it happens. Is that responsive to your question, Steve?

Yes, very much. So I was just wondering on the DCI stuff, if there's anything else you would add there.

DCI, great question. Yes. you will see additional announcements in DCI. You'll see customers will want to talk about it because it's so important to them and they're trying to be able to position their offerings to their customers as being advantaged with the latest optical technology. So you will definitely see customers coming out on that front as well.

The next question is from Asiya Merchant with Citi.

Hopefully, you can hear me. Great results here. Just on the optical communications market, again, if I may, have you been experiencing any supply constraints there? And how should we think about pricing power here in the Optical segment, is there an opportunity for Corning to further strengthen their moat just given the technology advancements you have? And is that reflective in pricing currently?

Both excellent question/suggestion. Things are tight right now, mainly on our new product set. and we expect that to continue. As part of the new product introduction, we introduced pricing that would enhance our margin performance.

So far, a lot of that has been eaten up with these -- with our productivity start-ups ramping strongly. As you would have heard from Ed, when he lays out the sort of how many cents in EPS on start-up of some of the various elements of it. We would -- so in a way, you haven't seen the power of that pricing be reflected in our financials yet. So that's the most basic answer to your question.

Beyond that, to your suggestion, I think it's an excellent suggestion that we continue to evaluate that. This is a very fast-changing environment. The key for us is can we create enough value for our customers to using our tech is actually economically advantaged for them. If it's economically advantage for them, but then we usually come to some arrangement to split that value creation. So it's much more about the innovation than it is about short-term supply-demand leases. Is that responsive to your question?

That's great. And if I may No, that's great. Just on the productivity ramps that you guys have talked about. Just help us understand like when are we looking at that powerful margin performance that you're talking about actually being reflected? Like what are some milestones here that we need to be? I mean, is this an environment which is going to be continually tight just given the ramp that you guys are constantly ramping? Or is there some sort of line of sight where you see those ramps sort of pretty much business as normal and then you start to see big margin inflection?

Yes, Asiya, I would add to what Wendell said. So our optical communications business net income grew significantly faster than sales, both year-over-year and sequentially in the quarter. So despite us absorbing some of those ramp costs or productivity costs that Wendell talked about, we've made nice progress.

I believe our net income margin went up by about 1 point sequentially, and we'll continue to march up. I think it's a combination of us selling more for sure and us being able to make at the right level as we ramp for our new products. So I think there's room to run in optical, and we can actually continue to improve, but we've made some nice progress, and we expect to do that even in the third quarter, as we've guided these costs remaining.

And our next question comes from George Notter with Wolf Research.

I guess back on the same line of questioning. Look, I know you guys made a lot of investments in optical kind of coming off the supply chain crunch unfortunately going into the excess inventory situation. But there were facilities in Gilbert, I think a couple of facilities in Hickory, some Poland facilities you guys added. Can you give us a sense for where you are in terms of capacity in those places? Is there still a lot of excess utilization that you can kind of grow into? Or is most of that filled up at this point?

It depends on the components, right. I think the best way to think about this is we still have the opportunity to increase our utilization and therefore, help drive incrementals that you just heard from head. Right now, our strongest tightness is on our newest products in there as much as you would expect since they're new, right? Those tend to be quite tight.

We still believe we're in really good shape overall for our available capacity in our fiber assets and our cable assets is when you get more specific to some of these new high-density opportunities that we're feeling that strong tightness.

Got it. And then just as a quick follow-up --

More productive to meet all that demand. But if demand continues to increase, we'll sit down with our customers and we'll figure out what to do about that at the right time.

Could you give us a sense on lead times on some of those next-gen products? I'm thinking about some of the fiber connectivity pieces in the data center and then also some of the high-density fibers you're putting in long-haul optical networks. Is there a sense you could give us on lead times?

Yes. So the connectivity piece when we build those bespoke systems for each of the actual buildings that we're going into. That lead time is fast. We're built to be flexible and go at our customers' speed because that's what they need to be able to get their installations in place.

When you come to core componentry fiber cable and the connectors themselves test high-density offerings. That's a brand-new fiber, brand-new cable, brand-new connector, those we've actually been working on for years to be ready for this moment. And all you're seeing when you hear from [indiscernible] about we'd like to see that productivity increase is just ramping those faster and faster and then taking over pieces of equipment that we're making the older generation tech.

And so it's less about lead time, and it's more just about the rate of growth and how quickly we can turn over our equipment and make those strong modifications to that equipment to be able to manufacture our newest products. But we design them to be able to work on our fundamental manufacturing platforms.

The next question comes from Mehdi Hosseini with Susquehanna Finance Group.

Wendell, I want to go back to overall the strategy with the Hemlock. I see the disclosure that now you're involved in manufacturing poly [indiscernible] wafer and module. And in that context, can you elaborate how the mix is today, the mix of revenue between polysilicon wafer and module?

And what is the strategy here? Do you want to ramp the manufacturing of poly or do you want to be equally distributed or exposed to various parts of the Solar? And as a follow-up to that, how should we think about the capital intensity required for scaling that business unit compared to capital intensity for other business units?

Great question and good job noting modules. Our core approach to the low-risk, high-return strategy was to take advantage of the trend opportunity that we saw, that we believe strongly that by that policy there would be strong encouragement of American-made renewable energy as well as carbon-based energy and to put those advanced manufacturing plants here in America.

So we took a look at which of those areas or skills would fit both in the near term but also the long term for instance and modules. We have some significant innovations we'd like to try out in glass and thermal design in optical coatings that we believe that can significantly increase the conversion efficiency of solar to be able to innovate that effectively, we needed a [ module ] position.

Of course, in that module position in and of itself, we believe that will be strongly profitable for us, and modules are not capital intense and we could just bring our fundamental manufacturing expertise to bear. Our primary product that you see reflected in Poly, that is what we bought from semicon. We're now applying it to Solar. That is the bulk of the revenues that you see today. That was our business. We've been activating idle assets to do that and upgrading some assets to be able to do that.

Then we have wafers on our latest hunk of activated poly be transforming that into higher-value wafers. And that's what we're doing on that same base. So today, almost all that revenue you see in that segment is coming from poly, our basic entry point. You'll start to see hunk of the modules come in these coming quarters. And as you heard from Ed, you'll start to see our wafer facility ramp and turn into revenue starting in quarter 4.

And we don't have an overall balanced approach to say like we expect this much out of modules, this much out of wafers this much on poly. But in terms of volume, the most of the volume will be in poly. There'll be a lesser amount in wafers because we want to serve both the total market and then make sure there's a U.S. source of wafers. And then of that, only a portion of our wafers will end up in our modules.

It's a little like you've studied our optical communications approach, it's like that. We always believe in each of our component levels, each has to be competitive. So we will sell to our competitors on that next layer up. So our base hunk is fiber. We sell that to cablers all over the world. But then we also make our own cable for a significant amount of our fiber output, and we sell those cables to people who build connectorized systems all over the world.

But then we do an even less amount than we then do in our full connectorized system. So we're the only one who's fully integrated end-to-end, but we enable people along the way. The same approach in solar. Is that responsive to your question?

Yes, absolutely. And just, if I may, the capital intensity differences between Solar and the rest of the business units?

It's for a little like fiber optics, again, to keep that analogy. That final product modules is not capital intense at all, right? The most capital-intense would be the poly that we already have and wafer is in between kind of like cable. I think that's a good way to think about it.

We've got time for one last question.

And the last question will come from Josh Spector with UBS.

I wanted to follow up on some of the margin commentary earlier. I guess if I look at your 3Q guidance, it looks like it's around a 50% pretax EBIT margin incremental. You've been running closer to 25% to 30%.

So can you comment on the driver there? I would normally think seasonality in 3Q would probably be a higher incremental, but we talked about some pull forwards. So is this mix cost savings? Anything else you called out specifically?

Josh, thanks for the comments. So maybe backing up, we've started Springboard about 1.5 years ago, about halfway through our plan. And we've been kind of marching up on gross margin and on operating margin, we set that 20% operating margin target. We did 19% in the second quarter. And I think first of all, we have a lot of the capacity and the technical capabilities and the cost in place.

So as we grow our sales, we would expect to get really nice incrementals on those sales. In certain places, where we've had accelerated demand on some of our products and maybe we've added capability and added a little bit of cost, that's actually dragged the margin in those places, and we talked a little bit about that in Optical and in Solar.

And we continue to manage our operating expenses quite nicely. So as we think about going forward, in general, I think our Q3 guide reflects this. Our view is that we'll continue to expand our margins sort of step by step as we get to that 20% and then to the extent we get there, we'll provide an update on how we think about it going forward. So our third quarter guide really reflects higher sales and our managing of our cost structure as we continue to grow.

It's sort of core to Springboard, is that what we expect is because we have a lot of the capabilities -- technical capabilities and the manufacturing capacity in place. We expect to have really strong incrementals. And that is what's behind of the significant improvement in our return profile that we put in Springboard.

And I think all you're seeing is that we're making faster progress than we originally planned for. And so as you look at those numbers and you are working through your modeling, you're seeing enhanced profitability. And yes, you're not doing any math well.

Thanks, Josh. Thanks, Wendell. Okay. I'll wrap it up today. I want to thank everybody for joining us. Before we close, I'll let you know that we're planning to attend Citi's 2025 Global TMT Conference on September 4, and 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 for joining us. That concludes our call. Please disconnect all lines.

Thank you. This does conclude today's conference call. You may now disconnect.