Fit Hon Teng Stock

Good morning, everyone. Welcome to the live audio webcast of FIT Hon Teng's First Quarter FY 2026 Results Announcement Presentation. Today, we're honored to have Mr. Chris Lu, Chief Operating Officer and Chief Financial Officer of FIT Hong Teng joining us today.

During the presentation, Chris will provide the financial highlights for the first quarter ended 31st March 2026 and outlook for 2026. You can download the PowerPoint from the resources box below the webcast window. Kindly note that the language for this audio webcast is English. If you have nay questions for the management kindly send me your questions in English anytime through the Q&A panel.

Before I turn the call over to Chris, I'd like to first remind you that while FIT has taken every reasonable care in preparing today's presentation, the information and materials containing it and discussed in the following Q&A session are all provided on an as is basis and does not constitute investment advice.

Management on today's call may also make forward-looking statements based on current expectations and assumptions, and those statements are subject to certain risks and uncertainties that could cause the actual results to differ materially.

FIT will not be held liable for any damages arising from reliance placed on the information and forward-looking statements contained in the presentation and discussed during the Q&A session. For the full details of our disclaimer for this call, please refer to Slide 2 of our PowerPoint. Slide 3 contains a brief agenda of today's call. Now I will pass it over to Chris. Thank you.

Thank you, Ray, and good morning to all joining us today. We will begin with Slide 5. The positive momentum in AI continues to drive our business expansion by capturing a larger share of the AI server market through the launch of new generation connectivity solutions, our revenue for the first quarter grew by 8.6% year-on-year, reaching USD 1.2 billion. Growing contributions from higher-margin AI-related portfolios also boost our financial performance. Gross profit increased 13.2% year-on-year during the period to USD 243 million.

The improved performance is reflected in an 83 basis point increase in our overall margin to 20% during this quarter despite the impact of increasing raw material costs during the period. Operating expenses rose 4.7% due to strategic R&D investments in AI solutions. However, ongoing efficiency improvements helped us reduce the OpEx ratio by 70 basis points compared to the previous year.

As a result, operating income reached USD 38 million in the first quarter, representing a nearly 90% year-on-year increase. While our operational efficiency led to a robust increase in operating income, the net income growth of 67% was dampened by foreign exchange headwinds.

Turning to Slide 6. Here is an overview of the performance for each segment. During the first quarter, robust AI demand driven by cloud service providers, together with healthy growth in system products helped offset the challenging conditions in the consumer interconnect segment. In line with prior guidance, we remained flat revenue from the smartphone segment in Q1 with stable shipment levels in mature market environment, driven by growing demand for AI server and infrastructure upgrades, cloud data centers continue to outperform, delivering a 58% increase during Q1 CSPs demand for next-generation AI platforms continues to increase.

The new product ramp-ups will help to strengthen our role as a key supplier in the AI industry supply chain. As a result of industry disruption due to memory constraints, consumer interconnect declined 12% in Q1 compared to last year, in line with our previous guidance. Industrial headwinds and the broader systemic risk have affected the global automotive market.

The automobility segment recorded a 5% decline in Q1 compared with our prior expectation of a high single-digit increase, primarily due to weaker-than-expected market demand. The system products segment performed in line with our guidance during the quarter with a 7% year-on-year growth, showing stable growth in the shipment of audio products.

For other segments, we saw a better-than-expected revenue due to higher precious metals and material pricing. Turning to Slide 8. Similar to last year, we continue to operate under very dynamic market conditions. Although there were many macroeconomic uncertainty and the systematic risk in Q1, we can still maintain our full year guidance based on robust AI demand. Turning to Slide 9. We update our full year and Q2 outlook based on recent industry developments.

In the smartphone segment, we maintained stable shipments and market share across established cable and component products. Accordingly, we keep our flat outlook for both Q2 and the full year. FIT is well positioned to capture additional AI server business opportunities throughout the year as we ramp up new platform launches. We expect that favorable AI momentum will carry into Q2, leading to a mid-40 and mid-70 year-on-year increase in cloud data center revenue for the second quarter and the full year, respectively.

As mentioned, we expect the elevated memory prices to continue impacting demand. As such, we lower revenue from consumer interconnect from a flat to a high teens decline for the second quarter, while maintaining a low single-digit decline for the full year with growing contribution from AI PC upgrade cycles. Similar, the outlook for the automobility segment remains challenging. We anticipate a soft market demand amid ongoing macro uncertainty and have therefore lowered our forecast from a mid-teens increase to a flat outlook for both Q2 and the year, reflecting industrial headwinds across the automotive industry.

Despite these external challenges, we continue to focus on improving efficiency and tightening internal execution. Specifically, we have driven organization and footprint optimization to deliver cost reductions and organic gross margin improvements. Furthermore, our core technology in high-voltage power distribution provides a solid foundation as we pivot towards the software-defined vehicle era, ensuring resilience and profitability in the shifting landscape.

We maintain our outlook for the System Products segment to deliver a low teens increase in Q2 on a full year basis, supported by continuous audio ramp-up and production agility improvements. Turning to Slide 10. Based on what we have mentioned so far, we remain positive on the growth momentum of cloud data center sectors over the next 3 years. Following our previous revisions to our long-term revenue mix guidance, cloud data center has already reached approximately 22% of revenue in the first quarter. This performance directly supports our expectation of achieving a mid-20% mix target for 2026.

Turning to Slide 12. We are delighted to share recaps of live demos of FIT's innovative interconnect solutions at NVIDIA GTC and OFC this March. We received strong feedback and engagement from analysts and investors during both events. Our unique expertise in copper and optical connectivity solutions enables us to offer holistic systems for multiple ecosystems.

We work closely with the world's AI ecosystem to ensure our R&D and technical standards for connectivity aligned with market demand. Some key highlights include XPO module that integrates high-bandwidth, high-density connectivity, enhanced liquid cooling and a new ELSFP laser module to support Broadcom's high-speed Tomahawk CPO architecture and an ultra-thin CPX500-pin socket solution codesigned with NTT for large-scale AI deployment.

Next, on Slide 13. We continue to broaden our next-gen portfolio that encompasses high-power solutions, high-speed connectors and liquid cooling solutions that catered to evolving AI server architectures. In this industrial event, we conducted a high-level discussions directly with CSP providers and deepened collaboration with AI ecosystem partners to capture business opportunities. It also reinforces our pivotal position in the AI supply chain and expands the higher-margin product mix to achieve our long-term financial metrics. In conclusion, we are making tangible progress to enhance our core capabilities and diversify our product aligned with our goal of achieving future profitability. This concludes our presentation today. Thank you.

Thank you, Chris. We're now ready to take some questions from the audience. We have some webcast questions on the line. Our first few questions come from Irene from Morgan Stanley. The first question from her is, we observed a strong 58% year-on-year growth in cloud and data center this quarter. And given the high demand for high-performance computing, could you clarify the growth contribution from AI servers versus traditional general purpose servers and how this trajectory looks for the rest of the year?

Thank you, Irene. Our cloud data center performance this quarter reflects a dual growth engine. Specifically, AI server-related revenue surged by 109% year-on-year, more than doubling as we ramp up high-speed interconnect and power solution for major CSP projects. Equally important, our general purpose server business remained robust with a 30% year-on-year growth, significantly outperforming the broader market demand.

For the second half of the year, we expect AI-related products to account for an even larger share of our revenue mix, supported by the ramp-up of next-generation platform. Moreover, we believe AI-related products within our 5G AIoT business will gradually surpass traditional server products and become the largest product category during the second half this year.

Thank you, Chris. The next question is following your OSP announcement regarding the 102.4T ELSFP external laser source module, when do you expect this to contribute to revenue? And how can we expect the TEM?

Regarding the 102.4T ELSFP solution, we're currently in deep co-design and validation phases with key ecosystem partners. We're on track to reach significant technical milestone by mid-2026. In terms of financial impact, we expect initial revenue contribution to begin in 2027 with a significant ramp-up in 2028 as CPU architectures become the industry standard for 1.6T and 3.2T applications. Market projections suggest TAM for this segment will exceed USD 1 billion during 2027, 2028.

Thank you, Chris. The next question is, there has been market discussion regarding the progress of your backplane solutions, including [ PB2 ] and other high-speed connectors. What is the expected time line for the revenue ramp-up?

We do not comment on specific products of individual customers. We remain closely aligned with the industry technology road map and key validation milestones. Our focus is to capture broader business opportunities in high-speed interconnects. Based on the current pace of development within the AI ecosystem, we expect the volume ramp-up for these next-generation solutions to materialize during the second half of 2026.

We have a couple of questions from Karen Huang from Citi. The first question is with power consumption for rack next gen AI platforms, power delivery has become a bottleneck. What is FIT's unique value proposition in high current busbars or power connectors?

Well, thank you, Karen. Well FIT's key strength lies in our ability to work closely with customers through fast and flexible support alongside strong development capabilities that enable us to quickly deliver customized solutions that meet evolving customer requirements.

Thank you, Chris. The next question is market discussions significant increase in interconnect content for upcoming AI architectures that -- improving, how does FIT view the dollar content opportunity per rack compared to previous generations?

While we do not disclose specific product detail for individual customers, we can provide perspective on the evolving AI architectural trends. This expansion is significantly driven by new business opportunities captured through our latest product developments, such as liquid busbars and powers.

In the upcoming AI architecture, we expect these new wins to elevate content per rack, highlighting our successful transition from a component supplier to a leading provider of system-level power and thermal solutions. With our early engagement and expanding portfolio, we're seeing increased participation across multiple AI platforms as they ramp up for mass production.

Thank you, Chris. The next question is, given your early engagement in AI connector programs, is it reasonable to expect FIT to secure a meaningful share, for example, 30% as these platforms ramp up?

No, while we do not provide specific information for individual components, by leveraging our co-development with the ecosystem and our proven mass production scale, our target to secure a meaningful market share remains consistent with our historical leadership in high-speed and high-power industries.

Thank you, Chris. We have questions from [indiscernible]. The first question is we've seen significant buzz in recent industry reports regarding the [ Verono ] connector stack for future AI platforms. Do you clarify FIT's strategic positioning here, specifically as architectures shift towards this proprietary designs, how does this impact your road map and growth trajectory heading into 2027?

Thank you very much, [indiscernible]. So we do not comment on specific design details. The industry shift toward high-density proprietary architectures align perfectly with FIT's technological road map. we're deeply engaged in the early-stage development of these next-generation solutions well ahead of broader market adoption. This high-level involvement not only reflects our R&D strength, but also effectively raises the entry barriers for new generation AI rack.

Thank you, Chris. Next question is, how does FIT view the evolving trend between copper and optical solutions in the AI cluster interconnect space? And how is the company's road map positioned to support this transition?

As AI cluster bandwidth and data transmission requirements continue to increase, copper solution will gradually approach their physical limitation in certain high-speed and long-distance applications. As a result, optical solutions are expected to become an increasingly important interconnect technology going forward.

FIT's road map remains closely aligned with customer needs, and we will continue to support customers with both copper and optical solutions based on different application requirements and technology transition.

Thank you, Chris. Next question is, looking at your CPO and silicon photonics progress, when should we expect these technologies to start contributing meaningfully to the FIT's revenue? Is it 2026 and 2027 story?

We're currently in a critical validation phase for ELSFP, upon the successful completion of the system level validation with our key customers, we will transition into the pilot production stage. From an industry cycle perspective, we expect 2026 to focus on technology adoption and initial deployments.

Significant revenue growth is projected to materialize in 2027, aligning with the global ramp-up of the 102.4T switch architectures. Our focus remains on ensuring technical maturity to perfectly match the deployment cadence of next-generation AI cluster.

Thank you, Chris. The next question is from Kate from UOB. The question is FIT is recognized as one of the few players capable of delivering FFD quick disconnect solutions. Can you share the status of your liquid cooling solutions? Does the company plan to leverage this advantage to expand into broader components like code plates?

We expect our liquid cooling solution to see significant growth in 2026. Our strategy is centered on connectivity components and module, where we deliver high-precision critical components with the highest technical barriers. Regarding portfolio expansion, our priority is to dominate mission-critical segments such as FFQD and liquid cooled power busbars.

By providing a specialized integration of power and thermal management, we solve the industry's most complex density challenges, ensuring a superior margin profile and long-term competitive advantage.

Thank you, Chris. The next question is, could you provide some color on the current progress of the keyboard carriage qualification and how we should think about the timing and visibility of future production ramps?

I'm sorry. We do not comment on specific products, but it is clear that we see a strong growth trajectory in our AI-related business over the coming years.

Thank you, Chris. Our next question is, could FIT provide more color on the outlook for the rack interconnect business in 2026 and 2027, particularly in terms of the key customer trends and technology transitions that may drive future growth?

As AI computing demand continues to increase, we believe the need for rack level and rack-to-rack interconnect solutions will also continue to grow alongside larger and more complex AI clusters. We remain positive on the long-term outlook for the rack interconnect market, driven by higher bandwidth requirements, increasing power density and ongoing AI infrastructure expansion. Given FIT's strong positioning in high-speed connectivity, we believe we are well positioned to capture these opportunities and will not be absent from any major industry transitions going forward.

Thank you, Chris. So our next few questions are from Mr. Wang from Everbuy Securities. The first question is, with increasing pricing competition in the smartphone market, do new modules, AI smartphones and foldable phones provide a significant increase in value creation?

Well, thank you, Mr. Wang. The increase in value is not significant. However, our market share in the smartphone segment remains in a stable leading position. These innovations have the potential to increase shipment volumes and benefit businesses.

Thank you, Chris. The next question is the automobility segment faced headwinds in early 2026. What is the strategy to improve profitability? And when do you expect this segment to reach breakeven?

Our focus remains on cost discipline and operational improvement in the near term. Our long-term path to profitability involve increasing value capture per vehicle, shifting from basic components to integrated high-value system within the One Mobility framework. We expect to reach breakeven by the end of 2028.

Thank you, Chris. Our next question is beyond the servers, what is FIT's progress in the robotics sector? And how does this align with your current client ecosystem?

Robotics is a natural extension of our high-speed and power connectivity expertise. We are collaborating with key ecosystem partners to develop interconnect solution for next-generation autonomous systems, which we expect to be a long-term growth in the future.

Thank you, Chris. Our next questions are from [ MS ] from CICC. The first question is, given the recent geopolitical tensions, how is FI mitigating potential risks to its supply chain or customer base?

Well, Foxconn Group has operations and manufacturing sites worldwide, which allow us to leverage this footprint and operational flexibility to better support customer needs based on geopolitical tensions.

The next question is, could you provide more color on your OpEx strategy for 2026, specifically as FIT pivots towards increasingly complex AI technologies, how should we think about the evolution of R&D spending?

Well, we remain comfortable with our OpEx ratio guidance of approximately 16% to 17% in 2026. And we will continue striving to optimize our operation -- operating expenses and improve overall cost efficiency. While developing next-generation AI solutions require continued R&D activities, we are forecasting to our strategic growth areas that can directly drive future revenue growth for FIT.

Our next few questions from Mr. Lu from [ Camgian]. First question is, given the current volatility in global commodity prices, specifically in industrial metals, how does FIT plan to sustain this upward margin trajectory through your product mix? And what is your comfort level for gross margins for the full year?

Thank you, Mr. Lu. While we are seeing some pressure from rising raw material costs, we work closely with both customers and suppliers to mitigate the impact of commodity volatility.

Thank you, Chris. And next question is looking at your strategic road map, where you need more capacity to support new growth engines such as audio and AI. Could you share your priorities for capital allocation and how this investment cycle positions FIT for 2027 and beyond.

We are currently in a pivotal investment cycle to capture the next wave of AI opportunities. Our capital allocation is strategically prioritized with significant resources dedicated to AI infrastructure and the remainder supporting our global manufacturing resilience. As for audio, our priority is enhancing operational efficiency and launch.

Looking towards 2027 and beyond, we will maintain full flexibility in our global footprint to meet evolving client needs. This strategic agility allows us to leverage our prepositioned assets to drive significant operating leverage. Such positioning ensures that our growth engines mature, we can efficiently scale operations and deliver sustained long-term value to our shareholders.

Our next few questions are from Howard Kao from Morgan Stanley. The first question is, congratulations on the quarter. With the growing TAM for Agentic AI, can you talk about your exposure in general server, which products with key contributions from general servers?

Thank you, Howard. While general server is good as expected. ID remains as one of our key segments. Our general purpose server business remained robust with a 30% year-on-year growth, significantly outperforming the broader market.

Thank you, Chris. The next question is, can you talk about your vision in data and power? Between these 2 segments, which segment will easier for FIT to take share and grow over the next 2 or 3 years?

Both power and data represents strong growth at this moment. So if we have to pick one, I will say data may have higher potential.

So following up on the engine question from earlier, do you think there could be upside to your 3-year long-term guidance?

It's really early to comment on 3-year guidance. Since we are really year 1 or not even quite year 1 yet, probably only really at the beginning of this. So it's very difficult to predict 3 years down the line. What I can say is so far, so good.

The next question is from Lucas Lu from [ Jo Capital ] And the question is, would you update the 1.6T optical receiver.

Well, thank you for asking. Well, in terms of financial impact, we expect initial revenue contribution really to begin maybe towards the back end of 2027 with a significant ramp-up in 2028 as really the CPU architectures become the standard for the 1.6T and 3.2T applications.

The next question is from Alex from CMBI. The question is, recently, we see a robust demand in [ see ] driven by inferring AI and AI agents. What's your view on the impact to FIT's consumer interconnect segment and other segments?

Thank you, Alex. We also see a strong demand of CPU. However, the constraints on memory limits the upside growth for the near to long-term -- it should be healthy.

The next question is from [indiscernible] from Titan Securities. The question is, could the company please elaborate further on its layout in optical connectivity as well as its collaboration with affiliated companies of Hon Group?

Thank you for asking. The optical connectivity will definitely become one of key driven AI industry going forward. However, it will take some time for the industry to evolve. So we're talking about something for the next 1 to 2 decades. FIT will definitely work closely with all partners in the on Group. That's really one of our competitive edge. Thank you.

The next question is from Alex Wang from SDIC Securities. The question is, what is current progress of It sample delivery for [ original ] connectors to client? And when is it expected to enter the official supply white list? Also, what are the customer validation and mass production schedule for the 1.6T optical modules and 1.24TTO ELSFP products?

Well, thank you, Alex. The connectors really is on track. Regarding the 102.4T ELSFP solutions, we're currently in the deep co-design and validation phases with our key ecosystem partners. We're on track to reach significant technical milestones by mid-2026.

The next question from Alex is, how can the company maintain its technological foresight in fields such as connectors, liquid cooling and optical interconnect and avoid the risk of market share loss caused by rapid technological iteration in AI server hardware.

Well, no one can guarantee success all the time. FIT understands all the risk coming with opportunities. We have to be always paranoid to stay competitive in the business. Now one of the things that we can say is we have many long years of collaboration with ecosystem partners. So by this close collaboration over the years, we tend to be able to pick up new technology trends probably slightly earlier than the rest of the field.

Our next couple of questions are from [indiscernible]from Huatai Securities. The first question is, Chris, can you provide more details on auto business as you just mentioned weaker-than-expected market conditions?

Well, thank you for the question. Well, the automotive sector suffered with all the macro uncertainties and we will focus on our business plan and really adapt to the market conditions. With us and our specific strategy in focusing on delivering value power-related solutions and connectivity solutions in the automotive businesses, we believe we have a very strong product offerings that will be valuable to the players.

The next question is also from [indiscernible]from Huatai Securities. The question is, did memory price hike affect some business performances?

We commented on our consumer interconnect segment. The constraint of memory will limit upside growth for the near term, but it should be healthy. It should be healthy.

The next question is from from [indiscernible] HSBC. And the question is, we've noticed competitors are already participating in CPC copper cable design. Could you update us on our current progress and share your view on the long-term industry trend for CPC...

Thank you very much for this question. First of all is we do have this technology, and I'm not at the liberty to comment anything further on this at this particular moment. And we will disclose the details later when it's more mature and ready to do so because we're bound by certain military constraints that we cannot disclose at this moment. Thank you very much.

[Operator Instructions]. So next question is also from [indiscernible] from HSBC. And the question is what is your view on the technology trend of POGO pins solutions in backplane connectors?

I'm sorry. We really cannot comment on specific product design that is applicable to our customers. And just rest assured that we're very closely aligned within the ecosystem, and we're working on the latest trend and standards. And if time matures and allow, we will definitely share more details with you.

So due to time constraints, this marks the end of the time. Thank you for participating. If you have any other questions, please contact our Investor Relations department. So now I'll pass it over to Chris for closing remarks.

Well, thank you, everyone, for all these questions. They're very, very good. Thank you very much. Now despite ongoing macroeconomic uncertainties, we remain confident in our long-term growth strategy and also our ability to capture opportunities driven by AI infrastructure expansion.

With our strong technology foundation, diversified product portfolio and also close collaboration with ecosystem partners, FIT is well positioned to strengthen its role in the evolving AI supply chain. Again, thank you once for joining us today and also for your continued support. We look forward to speaking with you again during our next earnings call for the second quarter, and have a great day. Thank you.

And now this concludes today's conference call. You may now disconnect.

Good morning, everyone, and welcome to the live audio webcast of FIT Hon Teng's Full Year 2025 Results Announcement Presentation. Today, we're honored to have Mr. Chris Lu, Chief Operating Officer and Chief Financial Officer of FIT Hon Teng joining us today. During the presentation, Chris will provide financial highlights for the year ended 31st December 2025 and the outlook for 2026. You can download the PowerPoint from the resources box below the webcast window. Kindly note that the language for this audio webcast is English.

[Operator Instructions]

Before I turn the call over to Chris, I'd like to first remind you that while FIT has taken every reasonable care in preparing today's presentation, the information and materials containing it and discussed in the following Q&A session are all provided on an as is basis and does not constitute investment advice. Management on today's call may also make forward-looking statements based on current expectations and assumptions, and those statements are subject to certain risks and uncertainties that could cause the actual results to differ materially.

FIT will not be held liable for any damages arising from reliance placed on the information and forward-looking statements contained in the presentation and discussed during the Q&A session. For the full details of our disclaimer for this call, please refer to Slide 2 of our PowerPoint. Slide 3 contains a brief agenda for today's call.

And now I'll pass it over to Chris. Thank you.

Thank you, Ray. Good morning, everyone. Thank you for joining us today. Let's start on Slide 5. In 2025, we maintained focus on enhancing our product mix and seizing new opportunities arising from AI infrastructure build-out and the mobility transition. Despite persistent systemic risk from geopolitical tensions, supply chain realignment and macroeconomic headwinds, we maintained our growth momentum.

Our performance was bolstered by robust AI demand and the consolidation of our mobility business. As a result, we achieved a 12.4% year-on-year increase in 2025 annual revenue. reaching USD 5 billion, setting a new record that exceeds our previous guidance. With increased contributions from AI-related products, our gross margin continued to expand, but was offset by fluctuations in commodity prices. As a result, gross margin increased by 70 basis points for the year, lower than prior guidance. Our gross profit grew 7.6% year-on-year, reaching a record of USD 946 million for the year.

To meet growing AI demand from customers, we brought forward investments, ramped up development and allocated more expenses to roll out overseas manufacturing facilities to meet a strong pickup in orders for AI-related components. Despite this, our expense ratio came in at 14.5%, better than prior guidance of 17% to 18%. And our operating margin also improved from 3.9% to 4.3%, thanks to increased production efficiency in our overseas facilities. Our net income increased 1.7% (sic) [ 1.9% ] to USD 157 million for 2025, which also -- which was affected by higher tax expenses compared to the previous year. Our strategic investments are strengthening our growth trajectory. I will soon share further developments in our expanding next-generation AI portfolio in later slides, which underpin FIT's competitive position.

Turning to Slide 6, which provides breakdown of our various segments for the full year. The Smartphones segment declined by 13%, driven by module replacements. However, the decrease was smaller than we had expected. Strong momentum in AI connectivity solutions and the ongoing delivery of new AI servers continue to be the main catalyst for the Cloud/Data Center segment as we expand from data solutions to power solutions. It recorded a strong double-digit growth, up 38% year-on-year for the full year. This was attributable to increased business from AI server upgrades and the introduction of new cable connectors for current mass production platforms, which also supported the higher demand for our established general-purpose server connectivity solutions.

Due to higher-than-expected demand in PC sector for the next-generation upgrades, revenue from the Consumer Interconnects segment increased by 7% year-on-year despite growing uncertainties in the supply chain. The Auto Mobility segment also saw continuing growth, rising by 94% year-on-year for the full year, driven by the steady integration and consolidation of Auto-Kabel business. Following these acquisitions, FIT One Mobility exposure in the automotive industry has strengthened considerably. Our System Products segment was impacted by slower demand for electronic accessories, resulting in a smaller revenue decline of 4%, which was better than prior guidance. This success is due to better-than-expected demand for wired phones from our major customers.

Turning to Slide 8. Looking ahead to fiscal year '26, the rapid adoption of AI technologies and applications, combined with certain shift in geopolitical and macro landscape are presenting us with both opportunities and challenges. We expect a low teens increase in top line revenue for 2026. While increasing contribution of AI-related shipments within our overall product mix will boost our overall margin, cost pressures from elevated precious metal prices will be a factor. Thus, we expect gross profit margin will remain around low 20s level, which is expected to drive low 30s increase in gross profit for the year.

Ongoing investments in R&D, certification and global scaling currently weigh on our sales expense ratio. However, these strategic commitments are vital for capturing emerging market opportunities and securing long-term market leadership. Nonetheless, we still expect corresponding 17% to 19% growth in operating profit for fiscal year 2026 driven by operational efficiency initiatives, particularly measures for further improved expense and costs associated with production facilities overseas.

Turning to Slide 9, where we update the guidance by key segments. We anticipate AI development trends will drive recovery in consumer electronics despite ongoing uncertainty in the overall business environment. Our earlier strategic transformation by investing in AI and Auto Mobility will continue to drive results for our customers and investors. In Smartphones, while we recognize rising prospect from newer high-end models, we expect the end market will still face similar industry-wide dynamics and market fluctuation. So our outlook remains conservative with a flat outlook for the full year. However, to address the impact of memory chip, some of the demand will slow down to the first half. So we should see a small pickup during Q1 of 2026.

FIT aligned with next-gen integrated AI module, we are excited about the pace of demand from AI platform transition to high-speed connectivity, energy efficiency and liquid cooling. New products that fulfill these segment requirements, stringent requirements are projected to support a strong double-digit growth, reaching approximately low 17% in Cloud and Networking segment revenue for 2026. While we expect another mid-double-digit increase during the first quarter, the highlight will be mass production ramp-up during the second half following validation of further industry certification.

For Consumer Interconnect, we foresee continuous upgrades in AI-related components for notebooks and computers, which is favorable for growth, but will be offset by supply shortages and price hikes in memory. As such, we will focus on profitability rather than volume growth. Thus, the outlook is a flat to low single-digit decline for the whole year, while supply chain constraints on memory will impact the projection for the first quarter with mid-teens decline for the Consumer Interconnect.

In Auto Mobility, upon launching the FIT One Mobility strategy last year, we will focus on consolidated resources from the German team together with the strategic alliance within Foxconn Group for cross-selling to meet growing demand from new energy vehicles and autonomous driving. We will further enhance our product mix and progress on strategic cooperation in the Middle East. These initiatives are expected to boost total product revenue where we expect high single-digit growth for the first quarter and full year of 2026.

Following our global expansion in the audio segment over the last year, we are currently strengthening our audio mass production agility and flexibility to support a pipeline of new production line. We expect a flat to low digit increase outlook for System Products during the first quarter of 2026, but a positive high single-digit to low double-digit recovery for the full year due to additional contributions from expanded overseas production. This will further maintain our revenue and resiliency for System Products and Consumer Interconnect.

Turning to Slide 10. Despite ongoing macro uncertainty, our multiyear outlook remains positive. As mentioned in previous slides, we continue to see strong momentum in AI server upgrades by hyperscalers over the next 3 years. With new certification in place, our Cloud/Data Center revenue is gaining momentum. And our forecast surges to approximately low 17% year-on-year growth this year. So we are raising our Cloud/Data Center revenue mix of fiscal year 2026 contribution guidance from the low 20s to the mid-20s. It is becoming an increasingly important contributor to overall performance. Therefore, we have revised our revenue mix expectations upward from low teens to high teens growth over the next 2 years.

News updates. Turning to Slide 12. Following a full schedule of demos and business development initiatives last year, we catch up with the latest AI development and evolving hardware technologies at a rapid pace. Let me share several major innovations and products unveiled by our team recently. Last month, during DesignCon 2026, we unveiled the next-generation 1.6T high-speed solutions and new architecture for 448G. We are well positioned to capture opportunities as the industry transitions to 448 Gbps per lane. These innovative designs specifically developed for AI and high-performance compute demand for hyperscalers AI cloud infrastructure have attracted a favorable feedback from key end users.

Next, on Slide 13, FIT continues to expand its comprehensive next-generation 5G AIoT interconnect solutions. Next week, at OFC 2026 in Los Angeles, our team will showcase the innovative 102.4T CPO external laser pluggable platform. This has been validated by NTT and aligns with the all photonic network road map. We invite you to visit us at Booth 1558 for a live demo. We are also actively exploring further laser collaborations within the CPO ecosystem to ensure FIT remains at the forefront of this technology shift. These commercialization efforts are driving recurring orders and will enhance FIT's innovation and competitiveness, ensuring we remain at the forefront of the technological trends.

Following our success at DesignCon 2026, we will showcase our latest solution at GTC. As a member of the Foxconn Group, we will leverage the group's vertical integration and bring our expertise in CMM [ buy ] to bear. By collaborating with industry-leading suppliers, FIT delivers high-performance, high-power precision components that meet customer demand for higher speed transmission and low loss power delivery. To learn more, please visit us at Foxconn Booth #1921.

In summary, the robust AI upgrade provides strong momentum to sustain growth. We will continue to monitor market and systemic conditions while maintaining the flexibility to meet customer demand. This concludes our presentation today. Thank you.

[Operator Instructions] There are some webcast questions on the line. Our first few questions came from [ Hao Yan Hui ] from [ Taitong ]. So the first question is, we noted that the fourth quarter '25 gross margin was impacted by rising precious metal costs. Looking ahead to 2026, could you share the company's strategy for managing material price volatility? Specifically, are there structural adjustments to mitigate the systematic risks?

Well, thank you very much, Ms. Hui. As a manufacturing-focused company, we prioritize operational excellence over financial hedging. We addressed cost fluctuation by optimizing our product mix and also enhancing supply chain agility to maintain a healthy profit profile. However, given the uncertainty in the international landscape, we'll continue to monitor the situation very closely.

So the next question is, given the optimistic growth guidance for 2026, the current dividend policy appears to maintain conservative approach. Could management elaborate on the strategic considerations behind retaining cash at this stage?

Yes. To capitalize on the transformative business opportunities in AI, as I stated earlier, we are prioritizing the reinvestment of our cash flow. Now we are reserving cash to support continued investment in AI-related products.

The next question is, the 2026 guidance suggests a strong expansion in operating profit. From the strategic perspective, how does the company plan to bridge the gap between revenue growth and margin enhancement?

Our growth path is anchored by the Cloud/Data Center segment. By leveraging our leadership in AI-related high-value components, we expect the ramp-up of mass production in the second half of the year to be the primary engine for margin expansion.

We have a couple of questions from Karen Huang from Citi. The first question is regarding FIT One Mobility OEM strategy, what are the key operational milestones for 2026? Are the current investments focused on capacity expansion or efficiency optimization?

Thank you very much, Ms. Huang. Our priority for OEM in 2026 is operational refinement. We're focused on enhancing yield rates and process efficiency to ensure that our automotive business contributes high-quality earnings to the group.

The next question is, beyond AI, what levers can the company pull to expand profit margins, especially given the cost pressures on legacy products?

We're shifting our portfolio toward high-margin products and reallocating capacity to high-voltage cables and high-speed components in new sectors such as robotics and mobility.

Our next few questions come from Irene from Morgan Stanley. The first question is the high double-digit growth target for the Cloud segment implies a significant inflection point in the second half of the year. Could you provide more color on the qualification status across various customer platforms? What gives the team confidence in the H2 acceleration?

Thank you, Irene. We do not comment on individual customers or specific products. Now we are working closely with major global clients and current qualifications are proceeding as planned. Our confidence in the H2 ramp-up stem from a clear production visibility we have once the -- we have seen these high-value AI component transition from certification to mass production.

The next question is, with the AI architectures shifting towards cableless designs, how is the company positioning its portfolio to capture new value? And do you foresee this next-generation solutions replacing existing products like MCIO?

Though we are not able to comment on individual customer or specific products, we can comment on industry trend. As AI clusters continue to scale and compute density increases, the industry will see significantly higher demand, not only for thermal management and high-speed interconnect solutions, but also for data transition capabilities to support increasing power density and data density. Now we view technological iterations as an opportunity. While architecture changes, the demand for signal integrity only increases. Solutions like our back plant connectors offer higher content value, ensuring FIT remains a key contributor across all mainstream AI platforms.

The next question is, there has been market discussion regarding the progress of your backplane solutions, including [ PHD2 ] and other high-speed connectors. Could you discuss the competitive moat for these products?

Sorry, we do not comment on individual customers or specific products. As a leading company in the connector sector, our true competitive moat lies in our speed to market and also our scale to readiness.

Our next 2 questions are from [ Huang Jie ] from [indiscernible]. The first question is market rumors suggest the [ Kabel ] connector uses FIT's exclusive solutions. What is the current status of your backplane solutions?

Well, thank you, Ms. [ Huang ]. As a matter of policy, we do not comment on individual customer or specific products. Now as a leader in the connector sector, our core strengths lie in our comprehensive high-speed signaling know-how and our ability to rapidly transition from R&D to mass production. We continue to develop advanced backplane solutions and progress is moving forward in alignment with various customer time lines. The true barrier to entry in this space really is the combination of ultra-high precision and speed to market. We leverage our top-tier tooling capabilities to meet the rigorous requirements of next-generation AI architecture while ensuring immediate scale-up readiness for our clients.

The next question is, following the successful qualification of the Power Whip series, what is the expected time line for its revenue ramp-up? How does it align with the broader AI power delivery infrastructure cycle?

Now having cleared the qualification phase, the Power Whip series is moving into mass production. We expect to see a meaningful revenue contribution in the second half of the year, directly addressing the surging power demands of AI compute clusters.

Our next couple of questions are from [ Leo ] from [ Chanjiang ]. The first question is, can you share the status of your liquid cooling solutions? Does the company intend to keep this technology focused on AI infrastructure? Or is there a plan to diversify into broader industrial cooling?

Thank you for the question. Now we expected our liquid cooling solution to see significant growth in 2026. Now our liquid cooling R&D is currently mainly committed to AI infrastructure. By combining our established expertise in Power Busbar, we have become one of the first supplier to develop liquid cooled Power Busbar solutions that are mass production ready. And we believe concentrating our resources on these high-growth sectors allow us to maximize our market share and maintain our technological edge in the data center space.

The next question is, what is your current engagement level across major AI platforms? Would you be part of the 224G or 1.6T cycle?

As a matter of company policy, we do not comment on individual customers or specific products. However, we can confirm that we are working closely with major global CSPs and leading IC design houses on 224G and 448G platform and also 1.6T specifications. Development progress is currently in line with expectations. FIT will not be absent from any major mainstream AI platform cycle. We remain a key contributor to the next generation of high-speed AI infrastructure.

Our next few questions are from [ Kate ] from UOB. The first question is, will the gross margins for AI-related products significantly outperform the company's historical average? How will this shift affect the overall margin profile?

Thank you, Kate. Products with high technical barriers generally offer better profit margins. Now as the contribution from AI expands, we expect it to enhance our overall gross margin structure.

The next question is with the rapid pace of product integrations in the AI sector, how is the company managing the resulting increase in R&D investment?

We believe these expenses is necessary investment to secure new business opportunities. By focusing on high-value products, we aim to ensure sustainable long-term returns on these investments.

Our next question is with increasing pricing competition in the Smartphones market, do new models, AI smartphones or foldable phones provide a significant increase in value creation?

The increase in value is not significant. However, our market share in the Smartphones segment remains in a leading position and stable. These innovations have the potential to increase shipment volume and benefit business.

Our next questions are from Tony from Huatai. First question is, Cloud and Networking growth drivers, Cloud and Networking segment delivered an impressive 37.6% year-on-year growth. And your long-term guidance suggests it will become a much larger piece of the revenue mix, reaching the mid-20s or low 30s by 2027, 2028. Beyond general AI server demand, what specific product lines such as high-speed connectors, cables or the new 1.6T high-speed solutions will be the primary growth drivers for this year?

Thank you, Tony. AI-related products will be our primary growth driver for this year. And we do not comment on individual customers and specific products. That's our policy.

The next question is acoustics business impairments and supply chain System Products regarding the acoustic business, the report notes a goodwill impairment of $29 million driven by rare earth raw material constraints, a weak consumer market and shifting trade policies. Could you elaborate on the underlying background here? Does this relate to the recent supply chain migrations and impact of U.S. tariff policies last year, such as moving production from Vietnam to India? And is this specifically tied to the AirPods product line?

Well, thank you for the question. Again, as a policy, we do not comment on particular customers or products. But having said that, these what we call disruptions, unfortunately, will persist for a period of time. The management feel by these disruption -- because of these disruptions, the business that we are currently under will need to be reevaluated. And in that revaluation process, we decided to write off the goodwill.

The next question is Smartphones revenue and next-gen upgrade Smartphones segment revenue declined by 12.6% year-on-year. Despite seemingly resilient overall volumes from key clients like Apple, was this primarily driven by ASP pressure or the mentioned changes in component architecture? Furthermore, the report mentions next-generation models technology upgrades are driving higher performance requirements. What specific component upgrades are you anticipating that will help reverse this revenue trend?

Thank you. Our market share in the Smartphones segment remains in a leading position and stable. Though there is technology migration to USB, these innovations have the potential to increase shipment volumes and benefit business.

Our next few questions are from Alex from CMBI. The first question is, FIT delivered strong revenue growth in 2025, but net profit was slightly dragged by product mix shift and lowered other income. Could you elaborate on the key drivers behind and whether you expect this to persist into 2026?

Unfortunately -- thank you very much for the question. Right, unfortunately, we experienced headwinds such as material constraints and shifting trade policies during the year, which caused the recognition of nonrecurring impairments. Our management will remain focused on global development, but we are generally optimistic of the near future.

The next question is to achieve the latest 2026 guidance to improve both gross margin and operating margin, what are the key initiatives in FIT strategy? And what milestones should we look for over the course of 2026?

Well, as I shared earlier on, AI focused on high margins and high-growth market. This will really drive the improvement in performance in gross margins, operating margins. And really, the milestone should be the [ MKT ] expansion progress and also new product [indiscernible].

Our next question is, in last earnings call, management raised the revenue growth guidance in 2027 and 2028 to be mid-20s. As we just upgrade Cloud/Data Center revenue mix forecast in 2026 to '28, is there any update on our 2027, '28 revenue growth guidance?

No, not at this moment. I mean we maintain our previous guidance on this, and we will update if any significant changes that we see.

[Operator Instructions] There are no questions on the line. So this marks the end of today's presentation. Thank you all for participating. If you have any other questions, please contact our Investor Relations department. Thank you.

Good morning, everyone. Welcome to the live audio webcast of FIT Hon Teng's 2025 Third Quarter Results Presentation. Today, we're honored to have Mr. Chris Lu, Chief Operating Officer and Chief Financial Officer of FIT Hon Teng joining us. During the presentation, Chris will provide a financial overview of the third quarter ended 30th September 2025 and outlook for the last quarter of the year. You can download our PowerPoint presentation from the resources box below the webcast window. Kindly note that the language used in this audio webcast is English. [Operator Instructions]

Before I turn the call over to Chris, I'd like to first remind you that while FIT has taken every reasonable care in preparing today's presentation, the information and materials containing it and discussed in the following Q&A session are all provided on an as is basis and do not constitute investment advice. Management on today's call may also make forward-looking statements based on current expectations and assumptions, and those statements are subject to certain risks and uncertainties that could cause the actual results to differ materially. FIT will not be held liable for any damages arising from reliance placed on the information and forward-looking statements contained in the presentation and discussed during the Q&A session. For the full details of our disclaimer for this call, please refer to Slide 2 of our PowerPoint. Slide 3 contains a brief agenda for today's call.

Now I'll pass it over to Chris. Thank you.

Thank you, Ray. Good morning, and welcome to those joining us today. We should start on Slide 5. In the third quarter, our revenue grew by double digits, exceeding our high single-digit guidance. Revenue increased by 13% year-on-year, reaching USD 1.3 billion. This growth was primarily driven by robust demand for our AI products. Additionally, we saw a steady contribution from Auto Mobility as scheduled, while our performance in Consumer Interconnects and Systems slightly exceeded expectations.

With growing contribution from our AI-related portfolio, our Cloud Data Center segment rose to a mid-teens percentage of overall revenue compared to low teens level a year ago. As a result, our third quarter gross profit margin reached a record high of 23.5%, further boosting annual gross margins. To support our global operations, our expense to sales ratio increased to 16.4% during this quarter.

Turning to Slide 6, for the breakdown of each segment. The overall quarterly performance was slightly ahead of guidance, supported again by ongoing AI demand and better than anticipated performance in the consumer electronics end markets. Smartphones segments were in line, impacted by ongoing challenging market dynamics due to modules and specification replacement. As a result, we ended the Q3 with a 20% decline, consistent with guidance. Sales of high end, high speed and high voltage AI connectivity solutions grew strongly compared to last year, driving 33% increase in cloud data center segments revenue for the third quarter.

While the Consumer Interconnect segment was flat in Q3, it outperformed prior guidance as our team worked closely and flexibly to cater to customer needs despite persistent tariff and supply chain uncertainty. In the Auto Mobility segment, we made steady progress in integrating our One Mobility strategy just as we shared at FIT Tech Day, achieving 116% year-on-year growth even with challenges across automobile sector. For system products, the robust -- the rebound in consumer demand supported a 3% increase in revenue during the quarter ahead of guidance. Growth in other segments was driven by inventory adjustments.

Turning to Slide 8. For 2025 full year guidance, we maintained our revenue outlook, projecting a high single-digit increase, while gross margin remained unchanged at around 20%, reflecting the successful strategy execution of an enhanced product mix. To capture further growth, we have reallocated resources to support new certification, product launches and regional expansion. At the same time, we remain committed to cost optimization initiatives and achieving synergies.

We have maintained our prior operating expense to sales ratio guidance at 17% to 18%, with operating margin guidance remained unchanged. Over the [indiscernible] period, as we continue to advance our 3+ 3 transition strategy, we are confident in achieving consistent low double-digit growth in operating profit for the full year. While these factors may temporarily affect our near-term operating margin, we would like to share our longer-term financial targets in the following slides.

Next, turning to Slide 9. While system risks persist, we expect the enduring market dynamics will play a longer role -- a bigger role in the year ahead. Beginning with the Smartphones segment, the prevailing unfavorable conditions are expected to persist. We anticipate a high teens year-on-year decline for the final quarter, consistent with the high teens decline projected for the full year 2025. With ongoing investments in AI infrastructure and ramp-up of new AI server racks, we expected a high 20 increase in cloud data center segment for Q4. Over the full year, as FIT captures more opportunities arising from AI on the general purpose server with launches of next-gen platforms, the growth momentum will translate to over 30% for the full year.

While we benefited from higher-than-anticipated demand for consumer interconnect last quarter, we foresee a slowdown in overall macro conditions that will linger. Hence, we maintained our flat outlook in this segment for Q4 and over the full year. On Auto Mobility, despite facing industry-wide headwinds, we continue to seize opportunities from transportation and realize more synergies from One Mobility strategy. We anticipated a 40% increase in segment revenue for Q4 2025.

For System Products, the indirect effects of system risk have continued to impact consumer sentiment for the festival season. As we readjusted capacity to align with prevailing uncertainty, we expect volume to be similar to last year in the fourth quarter. Finally, the expected decline in the [indiscernible] category is mainly due to cancellation of [indiscernible] heat pump division.

Turning to Slide 10. In response to the improvement in our supply chain status for the AI connectivity solutions, we have revised our revenue growth expectations. We now projected top line growth rising from the low 20s to the mid-20s range for fiscal year '27 and for fiscal year '28. The increased momentum in AI infrastructure development and platform upgrades continue to drive strong demand for our interconnectivity solutions. Having achieved the 5-year target set under our [ 3+ 3 strategy ] ahead of schedule, we are now shifting our focus toward expanding the AI-related portion of our business portfolio. Accordingly, we would like to provide our long-term guidance for the cloud data center segment. We expect it to reach a low 20s revenue mix in 2026 and further improve to the mid-20s and high 20s in 2027 and 2028, respectively.

Turning to Slide 12. Our schedule was packed during the last quarter, and we're delighted to share a quick recap of the many proactive business development initiatives our team undertook to promote our new offerings. During our inaugural FIT Tech Day 2025 in mid-September, we brought together leading experts and partners from our growing ecosystem. At the event, we proudly unveiled the One Mobility brand. We emphasized our core product and technical strategy with a key message, data is the new oil, highlighting the increasing demand for data connectivity and high-power solutions in the mobility industry.

By showcasing our Auto Mobility solution, we further demonstrated FIT's integrated connectivity capabilities and dynamic partnership that enable customers to build AI-powered mobility solution for the near future. For those interested in staying updated on the latest developments and trends in software-defined and connected vehicles, we encourage you to use the QR code on this slide to access the event replay link.

Turning vision into reality. We also participated in trade shows in Saudi Arabia to further strengthen our collaboration with a new partner. We signed a strategic MOU with Al Bassami Transport Group, a leading Saudi logistics company with an extensive commercial trucking operation. These partnerships aim to collaborate on the rollout of EV charger installations across logistics hubs, paving the way for a more sustainable and connected future in transportation.

Turning to Slide 13. In September, in collaboration with Broadcom, we unveiled the industry's first 102.4 Tbps CPO connector at the China International Optoelectronic Exposition in Shenzhen. This solution supports Broadcom Tomahawk-6, the latest Ethernet switch designed to power AI, machine learning and high-performance computing networks. Last month, we showcased our complete AI solutions, including the next-generation 224G high-speed CPC interconnects and 51.2T switch immersive cooling technology at the Open Compute Project Global Summit in San Jose from data to power.

We also introduced our high-voltage high current solutions. At the event, FIT's liquid cooling Busbar and power Busbar solutions were featured on NVIDIA's NR200NGX [ wall ], demonstrating our strong ecosystem collaboration and engineering excellence. Over the 3-day event, our booth attracted a strong engagement from leading customers, including all 4 major CSPs and key R&D leaders from strategic partners. The above business development and commercialization efforts are driving recurring orders for the next-gen higher-margin products, which will reinforce FIT's competitiveness to stay ahead of technological strengths. On that note, we conclude our presentation today. Thank you.

Thank you, Chris. We're now ready to take some questions from the audience. [Operator Instructions]

There are some webcast questions on the line. Our first few questions came from Irene Yen from Morgan Stanley. And the first question from her is, there's been talk about some progress in your backplane connector developments. Could you share more details?

Thank you, Irene. While we anticipate the market's interest in our ongoing development, as a general principle, we do not comment on individual products or specific clients. What we can say is our existing solutions continue to gain recognition from customers, supported by our leading technical capabilities and strong execution. We believe we are well positioned to achieve the target set in our 3-year guidance for the cloud and data center segment. We'll continue to uphold transparency through official announcements and investor briefing. Thank you.

The second question from her is, there are rumors about NV 72 and NV 144 that some competitors have bypassed the patent restrictions and are developing in rack high-speed connectors. Ever moving toward cable cartridge designs. Is that true? And what impact would it have on FIT?

Again, we prefer not to comment on individual product-specific clients or competitor development. Having said that, in high-speed interconnect areas such as backplane connectors and cable cartridge solutions, success depends not only on product design, but also on long-term reliability, integration capability and ecosystem compatibility. FIT continues to focus on strengthening our core engineering capabilities and working closely with customers to align with next-generation system architectures. In those areas, we have made substantial progress and gained solid recognition from our customers.

The third question from Irene is regarding your AI-related high-power product portfolio, how far ahead are current customer orders secured? And how does the visibility support your upcoming ramp-up plans?

We continue to expand our market share as shipments of our existing power products for AI racks, particularly those in the computing trade continue to increase steadily. At the same time, we have introduced a new range of high-voltage and high-power solutions showcased at the OCP Global Summit, including our 800V and 400V power Busbar systems, 400A and 100A AC Whip connectors and liquid cooling Busbar related to 140 kilowatts and UQDB Floating Module supporting 51.2 switch immersive cooling technology. Now these new additions further strengthen our position in the next-generation power infrastructure and enhance customer confidence in FIT's engineering and execution capabilities.

Our next few questions are from Karen Huang from Citi. The first question from her is, you mentioned at OCP that your power solutions are gaining more traction. So could you update us on customer adoption for these new power products and how they complement your existing offerings?

Thank you, Karen. Our power-related products used in compute trays have already been certified by several major global cloud and AI server customers, and some are now shipping steadily. Furthermore, as a design partner, we have made strong progress becoming the first source suppliers for key power solutions such as the liquid cooling Busbar showcase at OCP Global Summit this year, which has been gaining an increasing share in the supply chain. Our next-generation products are also already in development.

The next question from Karen is, congrats on the significant improvement in the AI segment. We noticed a strong quarter-on-quarter growth in your AI shipments during Q3. How sustainable is this growth trend? And what are your expectations for the upcoming quarters?

The new project ramp-up and the rising consumer demand primarily drove the strong quarter-on-quarter growth. In addition, we were able to capture more incremental opportunities across new platforms and key hyperscale customers. The pace is likely to stabilize in short term, but the growth trend remains clear. AI-related application will continue to be the main catalyst next year.

The third question from Karen is, could you break down your AI-related product mix a bit more? Which areas, connectors, cables or power solutions are currently driving the most momentum?

Yes. In the new AI architecture, we started with what we do best, connectors and cables within the compute tray. We are gradually achieving design wins for tray-to-tray solutions and expanding our portfolio toward rack-to-rack connectivity. Building on this foundation, we are capturing new AI server opportunities for next-generation solutions, offering a comprehensive suite that spans chip-to-chip connectors, next-generation high-speed connectors for compute boards, backplane connectors and copper cable as well as high-voltage and high-capacity power solutions. This full spectrum capability allows FIT to serve as an integrated connectivity partner for the world's leading cloud and AI customers. Together, these solutions help FIT's complete layout in AI applications, supporting the growth of AI infrastructure across various regions and industries.

Our next few questions are from [indiscernible] from [indiscernible]. The first question from him is, will NVIDIA's new cableless platform affect our MCIO business?

Thank you, Mr. [ Liu ]. While we're not able to comment on individual product or specific clients regardless of how the architecture evolves, the growing demand for high-performance computing will continue to drive the need for reliable interconnect solutions. Connectors will remain a critical component within the compute trade and beyond.

The next question from Mr. [ Liu ] is, there's a talk that FIT has made significant progress in the backplane connector business. How long does certification for AI products usually take? And will that make significant shipments for next year?

Based on our experience, the certification process generally takes several months, followed by a ramp-up phase that may vary by customer and platform. The overall time line largely depending on customer qualification progress and platform readiness. At this point, we are working closely with customers to align our next year's shipment plans and ensure a smooth ramp-up process.

The third question from Mr. [ Liu ] is your expense ratio has remained relatively stable despite higher R&D spending. Could you elaborate on the key initiatives helping you manage operating efficiency?

We continue to enhance efficiency through automation, process optimization and better resource allocation. While our expense ratio has increased due to higher R&D and global expansion, these investments are necessary to support future growth and technology development. We remain disciplined in cost management and continue to identify areas for long-term operational improvement.

Our next few questions are from [ Wang Ji ] from [indiscernible]. The first question is the backplane connector market is becoming more competitive, especially with the new entrants. How does FIT differentiate itself and maintain leadership in this area?

Well, thank you, [ Wang Ji ]. Backplane connectors are highly technical and reliability-driven products. Our key advantage lies in vertical integration. from design and tooling to mass production, all controlled in-house. This structure allow us to respond quickly to design changes and ensure supply stability, which has earned FIT a strong reputation among top-tier cloud customers.

The next question from [ Wang Ji ] is, turning to automotive segment, you highlighted progress under the One Mobility strategy. Could you elaborate on what specific improvements or milestones you've achieved so far?

We're in the process of consolidating and optimizing internal structure and operations, also improving service efficiency and qualities in automotive segment. We'll elaborate more details next time.

The last question from [ Wang Ji ] is beyond AI and automotive, is FIT also investing in new applications such as robotics?

Well, this is still an emerging area. We will stay open to exploring new technologies and partnerships as the market continues to grow. In this new field, we already have the capability to provide flex-resistant cable assembly specifically designed for robotic applications, which represent a new growth revenue for FIT. We are also seeing a clear trend where our advanced cable connectors are increasingly being adopted in robotic-related solutions.

Our next few questions from [ Alicia ] from [indiscernible]. The first question from her is, for the Automotive One ability plan, beyond Europe, which regions will you focus on? Is there a global multisite expansion plan?

Thank you, [ Alicia ]. Well, we don't have immediate plans for the new site expansion at this point. For now, our priority is to strengthen engagement with existing customers and make the best use of our current global footprint. We'll continue to evaluate market conditions and customer needs before taking further steps.

And second question from [ Alicia ] is that can FIT's revenue performance be benchmarked against the AI rack shipments volumes of your parent or sister companies within the group?

It is really not a straightforward component or cabinet-by-cabinet comparison because delivery schedules and stocking levels of components won't be the same. Therefore, the pace of finalized sampling won't happen in sync. Nonetheless, we'll continue to move in a similar upward trend.

The third question from [ Alicia ] is that do we have plan to invest in the U.S.A.?

FIT already has an operational presence in the United States. Now we're working closely with clients and broader supply chain to stay responsive to their needs. We remain open to further investments, which will be made in alignment with customer requirements and supply chain localization needs. We'll continue to strengthen our local presence to support key customer programs, while we're also leveraging Foxconn's extensive global footprint to ensure operational resilience.

[Operator Instructions] So we have some new questions just coming in. The first question is from [ Alex Ing ]. Regarding capacity expansion in India or Vietnam for U.S. customer, could you share updates with us?

I mean I just answered the previous one, similar -- FIT already has an operational presence in the United States. And we're working closely with clients and broader supply chain to really stay responsive to their needs. So really, our pace and right now, I'm relatively comfortable that we will be able to meet the current demand. In addition to that, we will be leveraging Foxconn's extensive global footprint to really ensure operational resilience.

Let's give it a moment to see if we have any other questions. The next question is from Howard Kao. The question is, any view on the impact of the higher memory prices on consumer electronics demand? Will customers look to pressure FIT profitability to offset higher memory costs?

All I can say is so far, the answer is no, we have not experienced pricing pressures from this particular trend.

Well, our next question is also from Alex. And the question is regarding 2027 and 2028 revenue guidance upgrade. Can you elaborate on the key growth drivers that led to the upgrade? For cloud rev mix guidance, any details on major products FIT plan to launch?

For the AIs and as for the new product, we're really not able to comment on new products because we do not comment on specific products or clients. I'm sorry.

[Operator Instructions] Let's give it a moment to see if we have any other questions.

We're able to provide industry first launches of the 102.4 Tbps CPO external laser small form factor pluggables.

Our next question is, can you talk about your view of CPO adoption by the market? When do you think mass adoption will take place?

The answer is similar. We're able to provide really industry first launch of the 102.4 Tbps CPO external laser small form factor pluggable.

And when do you expect the company to start delivering products on a large scale in the areas of liquid cooling and high-speed transceiver. Additionally, could you please share how the company's management views CPO and outlook for the optical module business?

The need is there. I mean we see the needs are there, and we're confident that we already have developed solutions ready to address the clients' needs. And definitely, this is an area of growth expectations or high expectation for us.

The next question is, what is the gross margin for cloud business now? And what will it target be in 2026?

Well, we don't disclose the details per segment, but definitely, this is -- they will be higher than our average.

Our next question is, what are your views on cableless designs for AI in the future? And how do you think that will impact your Interconnectivity business?

While we're not able to comment on individual product or specific client, regardless of how the architecture evolves, the growing demand for high-performance computing really will continue to drive the need for reliable interconnect solutions. Now connectors will remain a critical component within the compute trade and beyond.

Let's give it a moment to see if we have any other questions. Our next question is, what is the reason for the lack of growth in operating cash flow in the third quarter?

This has to do with the readiness for some of the product launches that we need to have, certain raw material pooling. And also to a certain extent, the overall reallocation or readjustment of production facilities, therefore, you also need to have safety stocks to make sure that your delivery to the clients remain smooth and without disruption.

Our next question is from Howard Kao. The question is, we see the industry trend that rack form factors getting bigger, wider. Will this have a positive or negative impact on your interconnect cable business?

Definitely positive.

Our next question is from [ Angela Shang ]. The question is, can you have a sales weighting number related to AI in third quarter 2025 and in 2026 target?

The AI related part of the business is including -- it's already included in our cloud segment as AI is really one of the data centers. So it's in there when I disclose the numbers.

The next question is also from [ Angela Shang ]. And the question is, can you provide the content value FIT providing GB200, GB300 and VR200?

Well, I'm sorry that we cannot comment on individual product specific clients, sorry.

Our next question is also from [ Angela ]. And the question is what is cloud sales gross margin level now? And will it increase for a mix issue?

The gross margin levels for the cloud sales definitely is above average. So as that segment will grow, definitely, it will bring the mix up.

Our next question is from [ Sue Shi Wen ]. And the question is, what is the reason for the significant year-on-year decline in total comprehensive income in the third quarter? Let's give a moment as the management is preparing the answers.

Sorry, I mean this is primarily related to ForEx fluctuations on some of the functional currencies. That is the primary reason for it.

[Operator Instructions] Well, there appear to be no more questions. This marks the end of today's presentation. I will now turn the conference to Chris for closing remarks.

Thank you, Ray. Well, in summary, despite considerable headwinds in the consumer electronic industry, we focus on controllable and capturing new opportunities from AI momentum and transition Auto Mobility to steadily enhance our financial performance this quarter. Looking into the final quarter for 2025, we continue to expand and promote our next-gen product portfolio. Thank you once again for supporting our company and for attending today's call.

Thank you, Chris. This concludes today's presentation, and thank you all very much for attending, and you may now disconnect.