SiTime Corp Stock

Okay. Good afternoon, everybody. Welcome to the Goldman Sachs Communacopia Technology Conference. My name is Jim Schneider. I'm the semiconductor analyst here at Goldman Sachs. It's my pleasure to welcome SiTime CEO, Rajesh Vashist; and CFO, Beth Howe, to the stage today. Welcome to you both.

Thank you.

Thank you.

Before we get started, the company has asked me to read -- remind you that today's discussion includes forward-looking statements that involve risks, uncertainties and assumptions, which are further described in SiTime's SEC filings, including SiTime's most recent Form 10-Q, and actual results could vary materially and adversely from those anticipated or implied. SiTime assumes no obligation and does not intend to update any such forward-looking statements. For more information, please visit SiTime's Investor Relations website at investor.sitime.com. That was quick. Okay.

So let's start off on big picture strategy question. Rajesh, Beth, maybe start off with kind of a brief kind of like view on the company, but specifically explain the role of precision timing, specifically MEMS-based timing in advanced applications and what's been driving the shift away from quartz-based timing?

Yes. So to take a little bit of credit, about 20 years ago, we saw and believed that there was an increase in throughput, decrease in latency, decrease in face noise, tougher environment and we felt that timing had to be a solution presented to customers. So that was the bet we made, and that bet has proven true when we went public in 2019, but it's become even more true in the last few years as the pace of innovation along those axes has increased so dramatically.

So precision timing is essentially the heartbeat. It's the rising -- it's literally a square wave, which shows up so that a CPU, GPU, TPU, WiFi, wireless, modem or whatever other ASIC knows when to be on and when to not be on. And given the throughputs, given the rates, it becomes really important, really critical. Yes. So our most expensive chip, not in military application, sells for about $50. Our lowest priced chip sells for around $0.35, $0.40.

Great. Okay. So now the CED segment that includes data center represents the majority of your revenue now, I think, 65% -- 64% last quarter. Can you run through us kind of the increasing importance of precision timing, specifically in data centers? What's the key driver for SiTime in terms of content and your outlook for that segment?

Right. In general, we grow in about 4 different ways. In general, we grow because the end customer units grow, easy. We grow because ASP grows because functionality grows. We grow because the number of chips per unit of system grows. We also grow, of course, when we get new opportunities, new applications.

And so the great thing about the data center AI business is that they're firing on all cylinders and they're firing on all cylinders at a very high rate of innovation and speed. And so we are in the GPU, the TPU, the CPU. We are along with the switches. We're sitting next to the NIC cards. We are in the smart cables. We are in the pluggable optical modules. And the new generations of these products are moving fast. And with our acquisition of the clocking business as well as our own road map, the revenue opportunities are growing dramatically in that segment. When we went public, we were probably in that space. There was no data center AI space, but there was a data center business, which was around $800 million in SAM. Today, that would be probably close to $3 billion in SAM, opportunity. So it's an amazing opportunity, but half our business is not in this space, as you indicated, outside that.

Yes. You recently completed the acquisition of the Renesas IC clock business. Can you maybe articulate the strategy behind why you decided to make that acquisition and how that kind of bolsters or augments your position in the market?

Yes. So we always knew we wanted a clocking business because it's a complement to the oscillator business we have. The oscillator business is generating the frequency. The clocking business is disseminating or spreading the frequency. And in that business, we know that the most best brand name, the best technology, the best team was in Renesas, which used to be IDT, which used to be ICS. So it's a 25- to 30-year history. So that was the best business to buy, and we were fortunate that we were able to get that. So it was the golden property, if you will.

Yes. Now longer term, how do you think about competition in the overall MEMS timing market? Because this is a category you mentioned you created in many ways, but it's no longer small. I mean this is a target now. So how realistic is potential for new competitors to kind of enter the market in a much more meaningful way?

So while we have to give a lot of credit to our MEMS technology. Our MEMS technology is really just a way of enabling precision timing. At the highest level, we are thinking of timing, precision timing as a system solution, solving system problems for about 500 different applications. So MEMS unlocks that, but we also have advances in digital design, analog design, packaging, testing, building and infrastructure. And I see our 500, 600 engineers involved in all aspects of that. And that makes us the biggest team. That makes us the most focused team. And the best part is we're focused on the most innovative parts, the most differentiated parts of this business. So we're not interested in a me-too part of this business. We want only the best parts, which has allowed us to go from 45% gross margins at IPO to 67% last quarter.

Yes. Good place to kind of move to the end markets, I think. So I want to touch on a few of those, starting with CED and specifically data centers, as I touched on earlier. You discussed the data center end market and the critical role that precision timing plays. On the 800 gig to 1.6T transition, can you qualitatively or quantitatively kind of describe the incremental opportunity that drives for SiTime?

Overall, the optical module business in a couple of years is probably $0.5 billion for us. So it's big, very large. We expected -- we joined this business in 400, where we were about 40% of the market share. In 1.6, we probably double that, close to double that. The ASPs have gone from around $1 to 40%, 50% growth. And this market has become more and more important. Eventually, the 3.2, which is already in design win will probably get to be even more in market share as it gets to higher frequencies, lower jitter, greater resilience to temperature. So I think that's a perfect market for what we are doing.

Got it. Now talk a little bit about your customer mix in the data center. How should investors sort of think about penetration levels alongside different numbers of the chip providers in AI servers among the different hyperscale customers and sort of talk through that, if you can?

Sure. Maybe I'll talk a little bit about. So one of the beauties of SiTime is the diversity of our applications, the diversity of our customer base. So if I think about CED and the data center, we have a broad range of customers, the optical and transceivers across a wide range of providers, but also the hyperscalers, the neo clouds, the sovereigns. So really, we think about all of those as our customers. And in addition, selling into the other semiconductor providers as well as the OEMs that are providing different kinds of solutions, SoCs, as well as systems to those hyperscalers and other AI and data center customers.

Yes. And then -- can you say anything about sort of like position in GPUs versus ASICs versus other kind of chips?

Yes. So we have design wins across all of those. If I think about GPUs and CPUs, you have timing and clocking on the trays there, NIC cards, the timing associated with those. Switches, you have multiple chips with typically maybe $20, $25 worth of content in a typical switch. So our ASPs range from $1 to $2 at the low end to $4 to $7 up to $10 for certain higher-end oscillators. The clock ASPs run in the typically $4, $6 kind of range. And so different solutions will have different combinations of buffers, clocks, XOs as well as TCXOs and OCXOs depending on the configuration. And then as you build those up into racks, you can see multiple hundreds of dollars worth of content in racks and sometimes up to over $1,000 of timing content in certain rack configurations.

Okay. And then lastly, related to CED, you previously talked about beginning to move from sort of discrete components to chiplets, advanced substrates, modules, things that get you to higher performance and compute density. So how large of an incremental opportunity do these kind of system solutions represent? And when could we see the first ones launched?

Yes. That can be rather large. We think it could be anything from $1 billion to $1.5 billion more of SAM. The reason for all of this, of course, is because timing needs to get closer, timing needs to get more clean. The signal needs to be less attenuated. And just like in power, you have VPD vertical delivery, we think there's a concept called VTD, which is getting closer and closer to the chip either below embedded in the substrate or above. And I think that this could start as early as '28, maybe '29. But I think this is a long-term trend that continues in the market. And I think only SiTime has the technology to make this happen in the way that we are making it happening.

And would that be completely incremental? Or is that more sort of like partially cannibalistic relative to your...

I think it's mostly incremental simply because that becomes something that gets used at the very high end. But one of the things that Beth was also saying was that -- there are new opportunities, whether it's in sovereign data centers or enterprise data centers. In our case, we're not very well penetrated, for example, in Chinese data centers. There are opportunities in those areas as well. So I think there's a lot of incremental business for us. And that is why when you think of timing TAM, we see it doubling almost between now $12 billion, $11 billion in -- by the end of the decade, which is faster than we would have expected. We would normally expect it to do that in 7, 8, 10 years, but we think it's going to happen in the next 4, 5 years.

So $25 billion by 2030.

Give or take, it could be a little bit less, maybe $22 billion or so, but significantly higher.

Okay. Yes.

Because you see the semiconductor business itself is going from $700 billion, as you know, to pick your number, $1.6 trillion to $2 trillion.

Yes.

And if that's true, then timing needs to scale along with it.

Understand. Okay. So I want to turn to the mobile IoT and consumer market. You've been a beneficiary of your largest customer transition to internal modems. We got some new products today. I think clearly, you're seeing the benefit of that product transition in your Q2 with 80% sequential growth in that segment. So if you think within that market, how are you thinking about the revenue trajectory through the back half of this year as your customer continues to ramp that internal modem in those devices? And then is it still reasonable to expect traditional seasonality in that business in the first quarter of '27?

Starting with the last one, yes, we do expect a little bit of a slowdown, as you rightly point out, in the consumer market in Q1. But at the same time, growth continues in Q3 and Q4. And then the size of the business next year, even though the seasonality down in Q1, is much bigger because it's the first full year of, in my opinion, 100% internal modem business next year. It could be a little bit less than that, but I think it's 100% internal modem next year. So I think it's a very good business, very solid business. We, in addition, continue to get design wins in other areas. We also think that the number of opportunities will grow under the new management because I think there's -- we're expecting for more hardware innovation and centric around the product innovation piece coming up. So yes, we expect lots of new good products.

Yes. And then -- but to clarify, once you get to that kind of elevated full run rate of fully penetrated...

It can grow after that.

Yes, you grow units then.

Yes.

Okay.

That's right.

Okay. Moving to auto and industrial. I think we've mostly heard constructive commentary from the broad-based analog suppliers. Maybe speak to how that segment is performing for you and sort of what you expect in the near term there?

Yes. Actually, in a sense, it's almost the heartbeat of the company because it personifies the diversity between automotive, industrial, military, aerospace, defense. It personifies the importance of timing and that business grows at -- grew last quarter at more than 50% growth rate. So in a sense, it embodies that ASPs grow, business grows, units grow. And we think that the military aerospace business alone could be $100 million shortly, followed quickly by the auto business. And then the industrial market is doing very well indeed. For example, in new markets like recently, we started to push into smart grids, and we see incremental SAM of a couple of hundred million coming from smart grids alone. Yes.

Yes. And do you, in the medium term, expect that sort of aerospace and defense will grow above the rate of...

Absolutely.

Okay. I just want to know.

Absolutely, probably about doubling.

Yes. Double the growth or doubling?

Doubling for a couple of years to come.

Oh, I see. Okay. Very good. Okay. And then sort of on physical and AI and robotics, you said in the past, I think there could be up to $20 in precision timing per humanoid robot. Can you maybe elaborate on how that changes as a function of dexterity? And how should we think about -- investors think about the overall SAM for humanoids going out, let's say, 10 years or so?

Yes. Well, that's a super exciting business. I've seen reports of $1.5 trillion market for humanoid robotics in 10 years, exactly 2035. We haven't seen a single working robot in production yet. So there is that skepticism. On the other hand, we know that these things are coming, just generally. In general, timing anywhere there's an actuator motor, anywhere there's a sensing element, anywhere there's movement, anywhere there is for a 130-pound humanoid or 100-pound humanoid robot, that becomes super critical, super important. So right now, we are at a pretty basic level of precision timing inside those. I think that's going to expand very much. And I think it is going to be a slow before we get to the hockey stick. So I think looking at '28 for a good year for that would be my goal.

Yes.

Yes.

Yes. Okay. I want to circle back to Renesas, which we touched on earlier. That closed early this summer. On your last earnings call, you guided to $85 million in revenue contribution from that business just for Q3. That's way above what you talked about in terms of the $300 million annualized run rate you talked about at the time of the acquisition not so long ago. So help us understand how we should think about sort of the near and longer-term growth trajectory for that clock IC business.

Yes. So it's had a tremendous clock growth and that growth, I think, continues. In fact, in some ways, if we could get more product in the supply chain, that's one place where we are constrained working through Renesas and the TSAs. We could probably be significantly higher than that number. I think it's also fair to say that next year is probably very similar to that growth rate of well above 50%, maybe in the 60%, 70%, even 80% range for that CPD business. That is, by the way, without that much help from SiTime. And then we suspect that with a sales force of the size we have, about 100 people exiting this year, I think it gets even faster for next year and even more so continues into 2029.

And so like to that point, what changes have you made? What progress are you seeing in terms of the sales force to enable that cross-selling?

First of all, we have a sales force that is astonishingly for them completely focused on timing. So they haven't had that opportunity. Second, we are opening up the road map. So instead of being constricted to 1 or 2 products coming out a year, we are going to 3, 4, 5 products coming out. And then finally, we are bringing in that systems thinking, which has not been there because they've been a clocking company, they've been doing clocking into it. As a consequence, we found opportunities where they have dragged us into very large organizations where we didn't have much penetration in the hyperscalers, one of the large hyperscalers. And there's been opportunities for SiTime to take them in into some chip companies where they haven't penetrated very well. We feel very good about the integration. A whole -- all the people who were in the group came across to SiTime, and we feel that they're pretty satisfied. Obviously, there are some challenges in getting the systems to work, the IT systems, the quoting systems and so on. Nothing unusual there. We just have to work our way through it.

And then given that you've kind of talked about your plans to build this segment around that business, what are your plans around the OpEx ramp required to support all that?

So we talked about on our call in August, the OpEx for Q3 was -- guidance was $80 million to $85 million, and that incorporates both the addition of the TPD business as well as our own kind of organic growth that we want to sustain. And so as we think about integrating TPD into our overall timing business and basically growing all of that. So adding sales people to sell not only the Renesas TPD, but also our own timing products, adding R&D to continue to kind of the flywheel of innovation that we have in our -- across all of our businesses now, having the infrastructure in place. So as I think about growing OpEx to support this growing business, but still having a lot of operating leverage in the model and growing revenue faster than that so that you still see that flow through to the bottom line.

Got it. Okay. And then maybe continuing on the financial theme for a moment. In the context of those long-term financial targets, you laid out previously 25% to 30% annual revenue growth at 60% to 65% gross margin, over 30% op margin. You've already well exceeded these with gross margins in the high 60s now margins in the mid-30s. So do you believe you can kind of sustain the long-term growth rates you previously laid out even off of this elevated base of performance?

So if we think about those growth rates, I think we put out those as long-term targets across cycles. Clearly, at certain points in the cycles, we're going to well exceed that as we are now. And as Rajesh has talked about, we expect that we will be growing above those levels for some time now from a revenue perspective. And we want to continue to take advantage of all -- not only AI, but also what's going on in aero and defense and industrial and consumer as well to continue to grow the business rapidly. From a gross margin perspective, we do expect to keep at least 65% gross margins and Q2 was 67%. The outlook I gave on the August call was for 68% for Q3. So in that kind of range, we do think that we have sustainable gross margins and then operating leverage in the model to flow that through to the bottom line, as you said, 34% in Q2 and expect to be at that or better in the next -- as we go looking forward.

Not too shabby. Okay. So I mean, you mentioned supply chain, Rajesh. That's an area, I think, of increasing investor focus and concern around semis, broadly speaking. And I think there's some level of question around MEMS in particular, given your exposure to Bosch as a supplier. So maybe help us understand that part of the supply chain, the MEMS part of the supply chain. I think a lot of people are not so familiar with that. The level of confidence that you can actually get enough supply in the event you continue to perform at this level.

Yes. So I feel very, very comfortable about that. As I was telling somebody, it's not my top 20 things to worry about. But Bosch has been a partner of SiTime since 2007, actually a little bit even earlier than that, but certainly since 2007. We are the only MEMS non-Bosch company there. In other words, they're a captive fab. They're not supposed to be merchant fab. They're doing some other business. So it's a very good business for them. It's a fantastic place for them to us develop our technology. I fully expect that as our 2027, 10-year deal with them sort of comes off, there'll be another one that will extend the time. So very confident with them, great partners, great technology. Yes, very happy with that.

Not in your top 20. That's really. Okay. So in conjunction with the Renesas acquisition, you also issued some debt. Maybe walk us through the elements of that recent convert bond issuance. What drove the decision to pursue the convert market? And how does that tie in with your overall capital structure strategy?

So we issued our inaugural debt here in conjunction with the acquisition of the Renesas timing business. It was a 5-year 0 coupon note, $1.35 billion, 50% premium and then 150% capped call. So really feel good about the capital structure we have in place, preserving liquidity, being able to complete the acquisition. And with the revenue growth and cash flow that we'll be generating, expect to bring the net debt position back down under 2x within 24 months, if not before.

Okay. Not bad. So then building on that, maybe talk a little bit more, expand on capital allocation for a second. How would you sort of weigh the opportunity to sort of prepay some of the 2031 notes against returning capital to shareholders in the form of buybacks, et cetera, or maybe thinking about even other options for M&A or just organically invest in the business? I mean it's kind of a broad spectrum of options, but sort of over the next, say, 3 to 4 years, how do you think about that?

So as we think about our capital allocation and using the cash flow that we're going to be generating from the business, first and foremost, we want to be investing back in the business. And so investing in R&D, investing in our own business to grow and continue that flywheel of innovation that we are on. We may look at M&A from time to time. I think that we are just now completing our second acquisition. They want to make sure we get that integrated. And if we see an opportunity, we want to be ready to take advantage of that. And those are really the primary focuses for us. I think where we are as a business, probably less in the share buybacks at this point in time and really about growth and innovation and reinvesting in the business.

Okay. Maybe just kind of a final question. You covered a lot of ground here today. But let's say we're back on stage here in 5 years. What do you think is going to be the thing that investors are most surprised about looking back in time in terms of where you stand with respect to the story?

I don't think that -- well, taking the heat of investors and putting myself under it for a little bit. When we went public, I would not have said that we would be a $20 billion market cap company in 6 years. So giving the investors a little bit of cover, I don't think the investors understand the growth opportunities ahead of us. Perhaps because it's a little very diverse story. People are used to vertical companies or they used to horizontal companies. They used to be able to connect the dots. And it's a challenge for them to understand what is timing and why is it so broad? And why can't I build my model with precision? Well, that's a feature and a bug. It's a bug because they can't do it. It's a feature because it's going to give so many opportunities that this time around, we're not going to undershoot. We're going to be several billion dollars of revenue, and that will be at the kind of gross margins and net profit that we're talking about, which I think could be -- potentially produce another NPS or even at a bigger scale. That's the part that is relatively underappreciated.

Very interesting. Well, I was hoping to see that growth trajectory materialize. So thank you both for being here. We really appreciate it. Thank you.

Thank you very much.

Thanks.

Good afternoon, and welcome to SiTime's Second Quarter 2026 Financial Results Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of today's conference call, instructions. As a reminder, this conference call is being recorded today, August 5, 2026, and I would now like to turn the call over to Brett Perry of Shelton Group Investor Relations. Brett, please go ahead.

Thank you, Olivia. Good afternoon, and welcome to today's conference call to discuss SiTime's Second Quarter 2026 Financial Results. Joining us on today's call from SiTime are Rajesh Vashist, Chief Executive Officer; and Beth Howell, Chief Financial Officer. .

Before we begin, I'd like to point out that during the course of this call, the company may make forward-looking statements regarding expected future results, including financial position, strategy and plans, future operations, the timing market and other areas of discussion. It's not possible for the company's management to predict all risks nor can the company assess the impact of all factors on its business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements.

In light of these risks, uncertainties and assumptions, the forward-looking events discussed during this call may not occur, and actual results could differ materially and adversely from those anticipated or implied. Neither the company nor any person assumes responsibility for the accuracy and completeness of the forward-looking statements. The company undertakes no obligation to publicly update forward-looking statements for any reason after the date of this conference call to conform statements to actual results or to changes in the company's expectations.

For more detailed information on risks associated with the business, we refer you to the risk factors described in the company's annual report on Form 10-K for the year ended December 31, 2025, as well as the company's subsequent filings with the SEC, including the company's quarterly reports on Form 10-Q.

During the call, management will refer to non-GAAP financial measures, which are considered to be an important measure of company performance. These non-GAAP financial measures are provided in addition to and not as a substitute for nor superior to, measures of financial performance prepared in accordance with U.S. GAAP.

This GAAP to non-GAAP reconciliation includes stock-based compensation expense, amortization of acquired intangibles, amortization of financing related transaction costs and acquired and acquisition-related expenses, which include transaction and certain other cash costs associated with business acquisition as well as changes in the estimated fair value of earnout liabilities and accretion of acquisition consideration payable.

Please refer to the company's press release issued earlier today for a detailed reconciliation between GAAP and non-GAAP financial results. Unless otherwise specifically noted, all comparisons made during today's conference call are year-over-year comparisons with the corresponding year ago period.

With that, it's now my pleasure to turn the call over to SiTime's CEO. Rajesh, please go ahead.

Thanks, Brett. Good afternoon, and thank you for joining us today. Today, I'm happy to introduce you to an expanded SiTime. We started with a simple vision, high-performance systems need high performance resilient timing or precision timing. We have delivered on that vision with the most compelling differentiated portfolio in the industry, that is oscillators, resonators and clocks. And we're the only company that is doing so.

The outstanding financial results that we are reporting reflect SiTime's success. The second quarter was truly exceptional. Revenue was $157.4 million, up 127% year-over-year. Gross margins were 67.1%, up 8.9 points. Operating margin was 34%, up from 10% a year ago. And net income was $65.7 million or $2.34 per diluted share, up 400%.

This strength is evidenced across all our end markets. Every BU, or business unit, grew more than 50% year-over-year. And every region grew more than 50%. Some were over 100%. Other markets of strength, book-to-bill, order size, ASPs all grew on a higher-value product mix. Channel inventory held on to a tight target levels, reflecting strong pull-through.

Now that many customers are placing orders 12 to 18 months in advance, our visibility into 2027 keeps improving. Other indicators that point to future demand, such as average design in value and funnel size grew significantly.

Our communications, enterprise and data center business, or CED, is again the engine of our growth, but not the only one. CED grew 181% year-over-year and crossed $100 million in quarterly revenue, our ninth consecutive quarter of triple-digit growth. We expect CEDs rapid growth to continue with several drivers behind it.

The first driver is increasing bandwidth. The move to 1.6 terabit in optical modules is driven by the need for more networking in the data center. In 2027, we expect our 1.6T revenue to grow by 100%, while 800G also grow significantly. In both these applications, which we expect will be a combined $450 million of SAM in '27, SiTime has significant market share. These modules need higher frequencies and performance, which fits closely with SiTime's value propositions.

The second driver is the further adoption of synchronization by hyperscalers across both compute and networking nodes in the data center. This has increased demand for our elite family of Super TCXOs, adding several hundred dollars of content with data center rack.

The third driver is the expansion of AI data centers spending beyond traditional hyperscalers. SiTime products are now being used by new OEMs and ODMs, bringing demand that did not exist before this.

We've talked several times about the diverse nature of SiTime's business, and a strong example is AI beyond data center and into cars, humanoid robots, drones and personal devices, each of which opens a new opportunity for our precision timing.

In all types of vehicles, including agricultural and heavy equipment, our content increases significantly as more AI-based autonomous driving is built into the system. Positional accuracy is key to autonomous driving of $400 million SAM, and it depends upon precision timing. Customers choose SiTime devices for resilience that delivers up to 10x better positional accuracy.

In defense, we see a significant opportunity in assured PNT, which has positioned navigation and timing, a $400 million market where timing keeps working when GPS does not. As jamming and spoofing become prevalent, GPS-dependent platforms need a local timing backup that can be trusted. This is exactly where our Precision Timing shines. Our devices enable systems to be immune to spoofing and extend PNT validity. This opens a retrofit opportunity across the installed base as defense spending increases worldwide.

In mobile, IoT and consumer or MIC, [ DU ], personal AI devices, smart glasses, wearables, hearables, health devices are an emerging growth area. Since January, we have added significant oscillator opportunities to our funnel in these applications. and our [ Titan ] resonators continue gaining traction with partners and OEMs. Mobile demand continues to grow with visibility through 2027 and and our MIC [ BU ] funnel is now over $1.2 billion.

On July 1, we closed the acquisition of Renesas' timing business, well ahead of our year-end goal. We call this business our Timing Products Division, or TPD. To the TPD team worldwide, we say to you that you're in the right place for your talents and ambition. So welcome home.

This 20-year clocking franchise is a highly respected provider of clocking products. Over its evolution from ICS to IDT to Renesas, this business has consistently delivered architectures and the engineers are known for their technical prowess.

Take two examples, [ Semco and VersaClock ] two proven clock families with many generations of products that are now part of our portfolio. [ Center ] clock has led the industry in Jira performance and features for over 20 years. [ Versaclock ] used across CED and industrial applications, has offered the best balance of power, jitter size and programmable flexibility for 25 years.

Buffers, which are usually considered less differentiated, are over $100 million in revenue for TPD with a broad customer base. TBD's formula for success is to consistently lead the industry by 12 to 18 months in new architectures and performance. This business serves 10,000 customers with 70% gross margins and nearly 70% of the revenue coming from CED.

The same factors that are driving the growth in SiTime CED business also helped TBD. Our previous guidance of $300 million in revenue in the 12 months post close, indicated a growth of 40% over the 2025 revenue. And while it's still early times, we expect that TPD could grow at a higher rate. This acquisition accelerates SiTime's parts to $1 billion in revenue. It moves us closer to a goal to be the timing in every important system in the world.

I'd like to leave you with where our innovation is heading in the future. We're moving timing from a discrete component to something that's integrated into the heart of the system through chiplets, advanced substrates and modules that enable higher performance and compute density.

In CED, we think that it's -- this expands our SAM by $2.5 billion by 2030 in opportunities that do not exist today. As AI moves outward from the center into physical edge and personal systems, we expect this integration of timing will build similar higher-value opportunities as well.

The opportunity in front of us has never been clearer, Modern electronics run on precision timing, a category we created. We lead it to get with the strongest portfolio, the best customers and the balance sheet to invest through cycles and intend to lead it in the foreseeable future.

Thank you. Beth?

Thanks, Rajesh. Today, I'll walk through our second quarter 2026 results, and then I'll provide our outlook for the third quarter. As a reminder, my remarks focus on non-GAAP financial results, which are reconciled to GAAP in our press release, unless otherwise noted. Q2 was another strong quarter and demonstrates the power of our model as revenue scales. .

Revenue was $157.4 million, up 127% year-over-year and 39% sequentially. This performance was driven by broad strength across the businesses, led by communications, enterprise and data center or CED. CED revenue was $101.2 million, up 181% year-over-year and up 34% sequentially. Growth in this segment continues to reflect expanding demand for Precision Timing across AI infrastructure, including optical [ mocucles ], switches, accelerators and related high-performance systems.

Automotive, industrial and aerospace defense revenue was $24.8 million, up 51% year-over-year and 18% sequentially. The with continued adoption of precision timing across automotive, industrial automation and defense applications. Mobile, IoT and consumer revenue was $31.4 million, up 85% year-over-year and 89% sequentially, reflecting strong sequential growth from our large consumer customer, which delivered revenue of $22.8 million in the quarter.

Second quarter gross margin was 67.1%, up 8.9 percentage points year-over-year and 2.6 points sequentially. The year-over-year improvement was driven by product mix as well as better manufacturing absorption. Sequentially, the improvement was primarily driven by better manufacturing absorption.

Importantly, the quarter reinforces the margin scalability of the model as we grow in high-value applications where Precision Timing is increasingly critical to system performance.

Operating expenses in the quarter were $52.1 million, consisting of $25.6 million in R&D and $26.5 million in SG&A. The increase of $18.8 million year-over-year reflects continued investment in growth, including personnel, product roadmap investments, revenue-linked go-to-market expenses and acquisition readiness. We are being deliberate in these investments to scale capabilities to support a substantially larger business while maintaining strong operating discipline.

Operating income was $53.5 million or 34% of revenue compared with 10% of revenue a year ago and 28% in Q1. Other income totaled $12.2 million. The increase was driven by interest income earned on the proceeds from our May convertible notes offering prior to the July 1 close of the acquisition. Going forward, this benefit will not recur at these levels as those proceeds were used to fund the cash consideration for the acquisition.

Non-GAAP net income was $65.7 million and non-GAAP earnings per share were $2.34. These results reflect strong revenue growth, expanded gross margin and continued operating leverage.

Looking at the balance sheet and capital structure. During the quarter, we completed our first convertible notes offering, issuing $1.35 billion of zero coupon convertible senior notes due 2031. This financing helped fund the cash portion of the Renesas timing acquisition while preserving significant financial flexibility.

Turning to working capital. DSO was 51 days compared with 44 days in Q1, primarily due to the timing of shipments in the quarter. Inventory increased to $103.9 million to support Q3 demand. During the quarter, cash flow from operations more than doubled to $40 million, up from $15.3 million a year ago. Capital expenditures totaled $12.9 million and free cash flow was $27.1 million.

Overall, we exited the quarter with the acquisition funded, continued positive cash generation and the financial flexibility to support the next phase of growth.

On July 1, we closed the acquisition of the Renesas Timing business or TPD. As we integrate this business, our priorities are clear. enhance the customer experience, expand supply and move the business on to SiTime's operating platform. This is a transformational acquisition for us, and we are encouraged by the progress we have made in the months since we closed. Our transition services agreement with Renesas provides continuity while we transfer customer relationships, manage the supply chain transition and expand our infrastructure to run this business as part of SiTime.

While carve-outs of this scale are complex, we have an active partnership with Renesas to execute the transition plan, including manufacturing and test dependencies during the TSA period. Our commercial teams are already working with customers and partners to transition customer backlog, support existing programs and position the combined portfolio for the long term. I am confident in our ability to execute on the integration and realize the value of this acquisition.

Now looking ahead to the outlook for the third quarter. Since we closed the acquisition of TPD on July 1, the September outlook reflects our expectations for the performance of the combined business. For the third quarter, we expect revenue of $285 million to $295 million. Within this, I expect the SiTime revenue, excluding TPD to increase to $200 million to $210 million or increased 30% sequentially at the midpoint.

This is a step-change in growth that reflects both the strength of our backlog and the confidence customers are signaling in their own demand forecast, particularly in CED. That confidence is translating into improved visibility, further reinforcing our expectation for sustained momentum throughout the year.

For the newly acquired TPD business, we expect revenue of approximately $85 million. In addition, for the combined SiTime business, including TPD, we expect gross margin to be approximately 68%, plus or minus 1 point; operating expenses in the range of $80 million to [ $88 million ] as we continue to invest in growth, interest income of approximately $4 million and a share count of approximately 32.8 million shares, which includes approximately 3.6 million shares issued in conjunction with the TPD acquisition. As a result, we expect Q3 non-GAAP EPS to be in the range of $3.50 to $3.65 per share.

In closing, Q2 reflects the continued strength of our core business and the scalability of our financial model. We delivered significant revenue growth, expanded gross margins and increased operating profitability while continuing to invest for the future.

With the Renesas timing acquisition now closed, we are ending the next phase of SiTime's growth with a broader portfolio, expanded customer reach and a stronger financial platform. We remain focused on disciplined execution, clear integration milestones and building SiTime's leadership as the premier pure-play Precision Timing company.

With that, I'll hand the call back to the operator to open the line for questions.

[Operator Instructions] Our first question comes from the line of Quinn Bolton of Needham & Company.

Congratulations on the very strong outlook in -- especially on a run rate basis. Looking like you'll get to about a $1.2 billion annualized run rate very, very soon. I guess, Beth, just a quick clarification before my two questions. Could you repeat the OpEx guidance? Maybe just my line, but it cut out there. And so I just want to make sure I had the right OpEx guide for Q3 on a combined basis. .

Absolutely. We expect OpEx of $80 million to $85 million for the combined company.

Perfect. I wanted then to come back to the TPD acquisition when you announced the deal at the beginning of the year, you thought in the 12 months post close, you would hit a $300 million annualized run rate. With $85 million in Q1, you're already tracking probably $40 million above that and I guess as you expect growth going forward.

So can you say what's changed over the last 6 or so months that makes that acquisition even stronger from a revenue contribution perspective?

Sure. In terms of the TPD, what we've seen is continued strength in their business. Recall that about 75% of their revenue comes from what we call CED. And actually, as we were doing our diligence, we were a little surprised, frankly, by the modest growth rate expectations and results that they had, had. And they continue to see strong performance as we've gone through the year in Q2 and into Q3. And so the outlook that we see for the second half reflects that.

And I think you're right, we're well on our way to exceeding that $300 million. But it's early days as well, and we're still working through the integration. And so as we get to know this business better, I think we'll have more to say about the outlook for the business.

And then the last question is as we look to integrate TPD into our models, how do you expect to sort of report revenue going forward? Will TPD be included in your -- the CED bucket, the auto, industrial, [ mil Arrow ] and then IoT consumer? Will you break it out separately?

And to the extent that you just included into the 3 existing buckets, can you give us a sense -- it sounds like about 75% of TPD comes into CED. How does the other 25 split? Is it mostly in the industrial auto? Or is there some consumer IoT in the TPD revenue stream. SP537529683 Sure, Clint. So the business is?

The remaining business is the auto aero industrial. They do not have a consumer business, so it will split roughly 75-25 between CED and auto, aero, industrial. We wanted to give you visibility as we're just now assuming the business in terms of the TPD. But going forward, we will expect to integrate it into the overall SiTime business.

Our next question comes from the line of Tore Vanberg of Stifel.

Rajesh, congrats on the strong results and the closure of the Renesas acquisition. So how should we think about growth by segment into Q3? I mean I know you're obviously splitting the new acquisition and also core SiTime. But with the sort of traditional SiTime segment, how should we think about growth in each one for the September quarter?

Sure. Let me focus on the side time ex TPD first because we've got the most visibility to that, as you can imagine, we're just now beginning the integration, the backlog, getting to understand their customers. But if I think about the side time business, excluding TPD, it's rolling out similar to what we discussed earlier. We expect the CED business to continue to show strong growth and again, triple-digit growth again in Q3. We also expect strong growth from all the businesses,

AID continuing to show a similar growth. And then consumer, as we've talked about, we expect to pick up significantly in the third quarter, given that that's typically, as we're getting ready for holiday, back half tends to be much stronger for our consumer business versus the front half. And so we'd expect really strong growth in that. Also, we expect our large consumer customer to continue to roll out the new products, our products into their next generation, and so that will drive growth as well.

That's very helpful. And as my follow-up for you, Rajesh, you said something at the end of your prepared remarks that really caught my attention. You talked about moving from discrete to more integrated solutions, chiplets, modules and so on. I assume these are significantly higher ASP products.

So just curious, when should we start to see material revenue of some of those newer products?

So Tore, you're always the one to get all the messages. So congratulations on doing that. Yes. The two things that are going to happen. What that's happening -- what's the meta issue is that performance is going up, throughput is going up, latency is going down. And delivering timing to the exact place that is needed is important without signal degradation and timings. And we see this coming, whether it happens to companies that do it on the wafer level itself or think of it as some version of vertical timing delivery, this is coming. And SiTime is pioneering some of it.

And the ASPs may go up, but more importantly, the density of use goes up. they're just more used. And perhaps as you're right, ASP will also go up. But we think that it adds, as I said, a significant amount of money in the billions by 2030.

Our next question comes from the line of Timothy Arcuri of UBS.

Beth, can you just give us some sense of sort of how the segments are going to grow? I know I'm not asking for the guidance and that's being looked at for Q3, but more like the core SiTime business versus TPD, are they going to grow at similar rates, would you say, looking out the next few quarters? Or is there anything you would point out that would cause TPDs to grow faster than the core business?

Well, as we look at it, I think both from a segment perspective, as I said earlier, I expect that the CED business, the core SiTime CED business to be the fastest growing as we continue to see the growth opportunities across AI, not only in data center, but as we think about inference computing and all the different areas as well as some growth in telecom and the rest of CED.

With respect to the consumer business, we talked about that the biggest growth there will be the design win that we have as that proliferates across that customer's platform, and that will drive really significant growth in second half of '26 but also into '27.

When it comes to the TPD business, we are in very early stages of integrating that business. And at this point, as I talked about in my prepared remarks, we do have significant TSAs with Renesas as we begin that process, including the manufacturing supply chain test we are relying on them for the next several quarters for the production. And so we're working really closely with them.

We have seen from customers there is a lot of constraints in the business, in the supply chain. And so we're working with them to improve that over the coming quarters. And as that improves, we should be able to see more growth with that business. But that's what we've got to work through here in the coming quarter.

And then, Rajesh, I know that the Bosch agreement expires, I think, next March, I want to say. So I know you plan to renew it. But does -- the acquisition of TPD, does it change anything? And sort of how to -- just any updates you might have there?

Yes, Tim. There is no impact. The clocks, fundamentally, typical clocks don't use any resonators, MEMS or otherwise. Now TPD does have a small court-based oscillated business, which we are happy to continue to have grow or flourish as need be. But our agreement with them is, as you point out, up for renewal, I think you will find that we should have zero problems in doing that. Bosch is a close partner and we expect no issues on that, and it should be done relatively soon here. .

Our next question comes from the line of Chris Caso of Wolfe Research.

This is Nicolas [ Wellman ] on for Chris. You mentioned that customers are placing orders 12 to 18 months in advance and that you have improved visibility. I was wondering if you would be able to make any early comments on the rate pace of growth in the next year. Particularly in CED, give us any early thoughts on how the trajectory looks next year for the core CED SiTime business?

I think in general, we have always maintained that our investors should think about a multiyear growth of SiTime at 30% growth rate, give or take. Now when an AI comes in or a phone business comes in, I think those get accelerated, like we are seeing. So I think it's pretty safe to say that a 30%, maybe a little bit higher is our multiyear think, 5, 6, 7, 8-year growth rate. .

In '27, we see no signs of slowdown. So we see the impact of AI not just in CED, but also for TPD because 70% of the business is with data center and other AI, as I said, for our other two businesses to continue. So I think safe to say we see '27 as a year of also of significant growth.

And maybe for my follow-up, could you speak briefly about the gross margin puts and takes heading into the third quarter and maybe over the next few quarters and kind of help us understand what the biggest drivers of gross margin performance in Q2 and then into Q3?

So as I talked in our prepared remarks, the gross margins, we expect those to stay kind of above the 65% threshold in the next -- in the coming quarters, probably in the range of the 67%, 68% that we were talking about for Q2 and Q3. The drivers of that are really the increased manufacturing operating leverage manufacturing absorption, combined with product mix.

And we get product mix benefits not only from our CED business, but also the addition of the TPD business. And that, frankly, more than offsets the headwinds that we have with the bigger -- higher mix of consumer business in the second half and those combined to give us those kinds of gross margins. And I expect the gross margins to kind of be in that range in the coming quarters as well.

[Operator Instructions] Our next question comes from the line of Jim Schneider with Goldman Sachs.

I was wondering if you can maybe talk a little bit about the data center design win pipeline, Rajesh, if you think about what has driven your growth, both in terms of new server design wins and also market share gains. Would you expect to be able to deliver further sort of new platform design wins and further market share gains? And maybe talk about how much is market share gain for you versus your competitors and how much is growth of precision timing within the overall TAM for AI server specifically.

So I'm going to include the optical module business as part of it. And basically, there is definitely market share gain in optical modules as we go from 800 to 1.60. Our market share is significantly higher with those with higher ASPs. So that is helpful at the same time when 800G is also growing quite significantly.

In the actual racks itself, we talked about the need for synchronization. And synchronization, among other things, requires much higher precision SiTime oscillators, TCXOs, the highest ones that we have; and the ASP of that and the numbers used because they are used more intensity as well to enable synchronization, which means you're synchronizing multiple places in the system. That gives us the several hundred dollars of content per data center rack that we talked about.

And in general, I think there is also a broadening of the data center market beyond the traditional hyperscalers, whether it is a growth in enterprise data centers or a growth in captive data centers or the neocloud or indeed the sovereign data centers. I think all of those are contributing to significant growth overall in the business and the market.

And then maybe one for Beth. Given the change in mix and your very strong outlook for the September quarter, can you maybe give us a little bit of help on how you would expect each of the end markets to track in terms of either sequential or year-over growth.

So as we think about the markets -- and for now, I'll talk about the zz markets, excluding TPD. Just as I said earlier -- we're just a month into that integration. So when we think about the traditional SiTime CED, I would expect that again to be more than doubling or triple-digit growth in Q3, again or maybe -- and be a very strong quarter for the CED business.

Like I said, I expect strong growth to continue for our aero auto industrial, similar to what we've been seeing on a year-over-year basis in the first half of the year. I expect that kind of growth rate to continue.

And then I expect the year-over-year growth rate for the consumer business to actually accelerate in the second half and be significantly faster growth in Q3 than we've seen in the earlier part of the year, driven primarily by the proliferation of the design win that we have with our large consumer customer. I think there's a lot of information in the marketplace about the speed with which they're rolling out that design, and we would expect that to be reflected in our Q3 results as well.

Our next call comes from the line of Suji Desilva.

Congratulations on the results here. For the Renesas product line acquired, any thoughts on when you might have combined company products in the roadmap? Is that something that we should look for? Or is that really kind of done through system integration type efforts?

Yes. I mean it really is just 30 days. So -- but we already have some ideas. We think that -- SiTime already has unique products, which are integrated clocks with oscillators or clocks with resonators that makes it unique. And we think that, that's an easy level of integration that is likely to happen in the future coming quarters. Easy in the sense conceptually easy. It's not easy to do. It's a new product and so on, but it's conceptually easy.

I think that there is collaboration of a different nature, which is probably even more valuable and that is that some of the people at TPD have been in the clocking business since the old days of ICS. We're going back 26 years, 25 years. And so they have a very deep understanding of system architecture, clock architecture, clock trees, some of the issues with signals that I think is going to change the way we develop our products, at least some of our products and be very, very beneficial.

So I think we are definitely expecting, right -- for now, we have -- we are not integrating the TPD Group into SiTime. We're having them run independently as it were, reporting to one of our very senior executives. But in a relatively short time in some quarters, we expect that, that integration -- after we have understood better with their strengths and our strengths, how we can combine them organizationally.

But in any case, we already are deeply connected. I think that the sense of welcome that they have bought from SiTime and the sense of hanging out with their brethren as it were, who are into timing and timing only is a good thing all around. Very happy with the way the integration has gone so far.

Great. No, that sounds very promising. And then my other question, Rajesh, a couple of times in the Q&A, you've noted the term density in terms of your deployment. So I'm just curious, as you get what's driving the need for that, if you double-click down? Is it that there are larger GPU clusters and need to sync more GPUs and each other?

And if so, is your content growing simply on a numerical basis with higher GPU cluster counts? Or is there more of a factor there than just that?

Well, on the density issue, you're absolutely right. It is, in fact, based the way you said. But additionally, it's not just more oscillators in GPUs and TPUs and CPUs, but also all around the subsystem all around the racks in the switches, there's more of it; in the accelerated cards, is more of it.

In other words, the signal cannot afford to be out of sync anywhere as it makes its way through the rack it needs to be in sync and therefore, get a very very accurate clock along the way, very accurate frequencies along the way.

There is also, of course, the use case in which the level of -- we have TCXO, super TCXOs, we have emerging clock products that are some kind of a combination of them with even higher [ rate fees ].

So I think we are able to bring products that customers have not seen before because of our broad technology portfolio. And I expect that density, ASP and greater usage are all going to contribute to our growth in that business.

I'm showing no further questions at this time, and I would like to now turn it back to Rajesh for closing remarks. .

Well, thank you all very much. I think the results speak for themselves. It's a seminal time for SiTime. It's clearly an inflection point. We're hitting greater run rates of revenue. We're doing it highly profitably. We're doing it with diverse technologies in diverse markets with diverse products. As a leader, as a creator of a category, I think we are super well positioned. So thank you for being part of this journey. .

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Good day, and thank you for standing by. Welcome to SiTime's First Quarter 2026 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Leanne Sievers, President of Shelton Group. Please go ahead.

Thank you, James. Good afternoon, and welcome to today's conference call for SiTime's First Quarter 2026 Financial Results. Joining us on today's call from SiTime are Rajesh Vashist, Chief Executive Officer; and Beth Howe, Chief Financial Officer.

Before we begin, I'd like to point out that during the course of this call, the company may make forward-looking statements regarding expected future results, including financial position, strategy and plans, future operations, the timing market and other areas of discussion. It's not possible for the company's management to predict all risks nor can the company assess the impact of all factors on its business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements.

In light of these risks, uncertainties and assumptions, the forward-looking events discussed during this call may not occur, and actual results could differ materially and adversely from those anticipated or implied. Neither the company nor any person assumes responsibility for the accuracy and completeness of forward-looking statements. The company undertakes no obligation to publicly update forward-looking statements for any reason after the date of this call to conform statements to actual results or to changes in the company's expectations. For more detailed information on risks associated with the business, we refer you to the risk factors described in the company's annual report on Form 10-K for the year ended December 31, 2025, as well as the company's subsequent filings with the SEC, including the company's quarterly reports on Form 10-Q.

During the call, management will refer to non-GAAP financial measures, which are considered to be an important measure of company performance. These non-GAAP financial measures are provided in addition to and not as a substitute for or superior to measures of financial performance prepared in accordance with U.S. GAAP. This GAAP to non-GAAP reconciliation includes stock-based compensation expense, amortization of acquired intangibles and acquisition-related expenses, which include transaction and certain other cash costs associated with business acquisition as well as changes in the estimated fair value of earn-out liabilities and accretion of acquisition consideration payable.

Please refer to the company's press release issued earlier today for a detailed reconciliation between GAAP and non-GAAP financial results. Unless otherwise specifically noted, all comparisons made during this webcast are year-over-year comparisons with the corresponding year ago period. With that, it's now my pleasure to turn the call over to SiTime's CEO. Rajesh, please go ahead.

Thanks, Leanne. Good afternoon and thank you for joining us today. We had a very strong start to 2026 driven by AI infrastructure and the significantly increased demand for precision timing.

In 2010, SiTime saw an opportunity in the highly fragmented commodity-oriented timing industry. We forecasted then that timing would grow rapidly and become even more critical. We approached the problem from a systems view and built differentiated platforms delivering high performance, resilience and reliability. In other words, we created the category of precision timing, which has become important in hundreds of applications. I'm deeply satisfied with how successful precision timing has become as seen by the scale of our growth and the speed at which we have achieved it.

Today, with precision timing, SiTime addresses a $4 billion TAM in the $11 billion timing total available market in the high-growth areas of physical and infrastructure AI, autonomy, mobility and high-speed communications. I believe that these achievements have established SiTime as a key player in semiconductors. As far as our financial model goes, we can say promises made, promises kept in all key financial metrics. Our long-term financial model was 25% to 30% of annual revenue growth, and we have significantly exceeded it. We also set targets of 65% gross margin and 30% operating margin, which we expect to achieve in second quarter Q2 2026. I believe that these metrics are sustainable as they come from highly differentiated products that deliver high value and therefore, high ASPs and gross margins.

Moving on to the numbers. We delivered $113.6 million in Q1 2026, up 88% year-over-year. Earnings per share increased fivefold from $0.26 to $1.44. Gross margin reached 64.5%, up 7.1%, and operating margin was 28%. Growth was strong across all the regions, ranging from 30% to 140%. It's no surprise that our CED business unit led growth in Q1 2026. CED grew 158% year-over-year, marking our eighth consecutive quarter of triple-digit percentage growth, and we see this high-growth trend continuing. Our book-to-bill is growing with pull-through from the channel keeping inventories at the desired target.

Here are some details. CED benefits from the deployment of inference infrastructure and increased networking bandwidth within the data center. On inference infrastructure built on newer XPUs, it needs 2 to 4x more timing content per system than in training infrastructure. GPU utilization in inference workloads is now 20% to 40% and is targeted to get to 50% to 60%. Here, time synchronization plays a critical role in achieving higher GPU utilization and SiTime benefits from its products being used in this application. This emphasis on synchronization is driving demand for high ASP and high-margin products. Elite and Elite RF Super TCXOs are widely deployed in AI infrastructure, and we have recently exceeded and extended our leadership with the new Elite 2 Super TCXO family. This newer Elite 2 delivers up to 3x better synchronization performance compared to Elite, which was already significantly better than quartz oscillators.

With increasing demand, this class of product addresses a $1.5 billion of cumulative SAM over the next 5 years. As hyperscalers increase networking bandwidth within the data center, we expect to see meaningful adoption of 1.6 terabit optical modules in 2026. Higher frequencies and the need for more resilient performance are driving demand of our advanced oscillators at a higher price than those used in 800G. At the same time, we expect to see continued strong shipment of oscillators for 400G and 800G for at least the next 2 years. On CPO or co-packaged optics, in our discussion with customers, we see even greater strength, for example, in CPO switches, where timing content can be up to 3x higher.

Finishing up on the telecom part of CED, we see increasing convergence between AI and advanced telecom infrastructures, especially in 5G RAN or radio access networks and demand from new applications such as FWA or fixed wireless access. AI-enabled telecom designs contain 3x higher timing content, primarily from high ASP oscillators and clocks. Our aerospace and defense business is another good example of the need for precision timing. Our success in LEO or low earth orbit satellites enables global connectivity, navigation and broadband access. LEO satellites have up to $2,000 of STM content per satellite, and we expect 7,000 to 10,000 LEO satellite launches over the next 3 years. With up to 15,000 LEO satellites deployed over the next 10 years, we see a strong outlook on this business.

Defense P&T, also known as positioning, navigation and timing systems, satellite communications, autonomous drones and smart munitions have already used SiTime products. We expect to benefit from recent increases in government spending to replenish supply and increase output where many of these are in high volumes. Our aerospace defense funnel is about $0.5 billion in lifetime revenue and our funnel to revenue conversion in this business is twice that of other businesses. We are well on track to achieve $100 million in aerospace defense revenue over the next few years with an expanded road map and strong customer relationships.

In mobile, IoT and consumer, revenue momentum continues as our largest consumer customer is expected to expand deployments across additional platforms. At other consumer customers, AI categories such as smart glasses, personal productivity devices and hearables are driving demand for ultra small, low-power, high-accuracy timing. This is where Titan resonators are gaining strong traction with semiconductor partners and OEMs and the funnel has grown to $400 million since introduction. On a separate note, our announced Renesas acquisition remains on track, and we continue to be optimistic about this combination.

As we experience rapid growth, we continue to invest in people, systems and technology that makes us more productive, delivering even more valuable products faster. We expect to continue to drive durable revenue and deepen customer relationships. We're now entering SiTime's next phase of growth from a position of strength, and I'm confident in our trajectory and very excited about what lies ahead for SiTime. Beth? Thanks, Rajesh.

Today, I'll walk through our first quarter 2026 results, and then I'll provide our outlook for the second quarter. As a reminder, my remarks focus on non-GAAP financial results, which are reconciled to GAAP in our press release. Our first quarter results underscore the scalability and discipline of our operating model. We delivered strong revenue growth, expanded gross margins and demonstrated meaningful operating leverage, growing revenue 88% and expanding operating margins by 25% versus the year ago quarter. These results build on leverage we have demonstrated over multiple quarters and Q1 reinforces the durability of our model as we scale.

This performance was driven by strong execution in the quarter with revenue of $113.6 million, up 88% year-on-year. Sequentially, revenue was essentially flat with Q4, significantly better than anticipated at the beginning of the quarter, primarily driven by stronger-than-expected demand in AI data center applications. Communications enterprise and data center revenue was $75.7 million or 66.6% of total revenue, growing 158% year-over-year and 17% sequentially. This growth reflects the breadth of demand across AI infrastructure, including optical modules, switches, SmartNICs and accelerator platforms.

Automotive, industrial and aerospace defense revenue was $21.2 million or 18.7% of total revenue, up 51% year-on-year. Within this sector, aerospace and defense was the fastest-growing area with all 3 subsectors benefiting from the accelerating adoption of precision timing across autonomous systems, defense modernization and industrial automation. Mobile, IoT and consumer revenue was $16.7 million or 14.7% of total revenue, down 1% year-over-year, with our largest consumer customer contributing $10.2 million for the quarter. First quarter gross margin was 64.5%, an increase of 7.1 percentage points year-over-year. The improvement was driven by 2 factors. Roughly half of the increase was driven by favorable product mix of higher-margin products, reflecting strong CED growth, which carries higher above-average gross margins, combined with a lower mix of consumer products. The other half was driven by product cost improvements and better manufacturing absorption on higher revenue.

Operating expenses for the quarter were $41.5 million, consisting of $21.5 million of R&D and $20 million of SG&A. This reflects intentional investments to support our growth, including higher headcount and variable compensation tied to revenue performance as well as continued investments in our long-term road map. Operating income for the quarter was $31.8 million, an increase of $29.8 million year-over-year. Operating margins expanded by 25 percentage points from 3% in Q1 2025 to 28% this quarter. We are investing with conviction in the business and are delivering clear operating leverage as we do so. Interest and other income was $7.1 million and non-GAAP net income was $38.1 million. Earnings per share increased more than fivefold to $1.44 per share compared to $0.26 per share a year ago.

Let me now turn to the balance sheet. Accounts receivables ended the quarter at $55 million and days sales outstanding were 44 days, up from 36 days in Q4 as revenue linearity normalized. Inventory increased to $91.1 million in Q1, up from $81.6 million in Q4, in line with revenue growth. During the quarter, cash flow from operations more than doubled to $31.2 million, up from $15 million a year ago. We ended Q1 with strong liquidity position of $789 million in cash and short-term investments.

Now let me turn to our outlook. This outlook is for SiTime and does not assume any benefit from the acquisition of the Renesas timing business, which has not yet closed. I'll start with a few comments on the full year and then move to the June quarter. For the full year, we are increasing our revenue growth expectations to at least 80%, well above our prior expectations and our long-term target growth rate of 25% to 30%. This step change in growth reflects both the depth of our order book and the confidence customers are singling in their own demand forecast, particularly in CED. That confidence is translating into improved visibility, reinforcing our expectation for sustained momentum throughout the year.

For the June quarter, we expect revenue to be in the range of $140 million to $150 million, up more than 100% year-on-year. gross margin to be approximately 65%, plus/minus 1 point given our expected product mix for Q2. Operating expenses expected to be in the range of $46 million to $47 million as we continue to invest in growth. We expect interest income of approximately $5 million and a share count of approximately $27.5 million shares. As a result, we expect Q2 non-GAAP EPS to be in the range of $1.85 to $2 per share.

In closing, our first quarter results underscore the scalability and discipline of our operating model. These results build on the leverage we have demonstrated over multiple quarters and reflect strong education execution across our end markets. As we look ahead, we are confident in our ability to scale efficiently, deliver sustained profitability and execute on the opportunities in front of us. With that, I'll hand it back to the operator to open the line for questions. Operator?

[Operator Instructions] Our first question comes from the line of Tim Arcuri from UBS.

Rajesh, can you just talk about -- I mean, it sounds like CEV is white hot in June and then the rest of the year as well. Can you talk about specifically what that's from? Is it all XPU related? Is it optical related? Maybe you could just kind of double-click on that for us.

Sure thing. Yes. So basically, it's two things that I said are leading it. One is the inference infrastructure, all the XPUs, the switches, the inference workloads, those are growing as well as our content is growing in units, but also the ASPs are growing. The second one is, of course, the networking bandwidth within the data center, in other words, optical modules and everything connectivity, including active cabling, especially with the growth of the 1.6 terabit optical modules, which is growing, as we said the last time at a higher rate than we had anticipated last year. So as you said, everything is doing really well. But I must say that so is the rest of our business so that just to put in a plug for that, our other businesses are going very well as well.

And then, Beth, I just wanted to ask about gross margin into the back half of the year. I know your large customer will come back. That will probably pull margins down a little bit, but the CED mix is definitely much higher. So do you think -- I mean, maybe margins come down a little bit off of the June level, but can you give us some puts and takes to think about into the back half of the year off of the June margin level?

Thanks, Tim. Great question. So as you noted, there are a couple of puts and takes in our gross margins. We certainly benefited in Q1 from kind of the double benefit of a stronger mix of CED, which has those higher gross margins and a lower mix of consumer. As we move through the year, we would expect consumer to be a larger portion of the mix in the back half, which might modulate gross margins a bit just based on mix. But overall, we still expect gross margins to be above that 60% level and kind of well into this range. But it may modulate a bit, but still very -- toward the higher end of our target range.

Our next question comes from the line of Tore Svanberg from Stifel.

On the very strong results. I guess my first question is on the Q2 guidance. It looks like 28% sequential growth at the midpoint. Can you maybe talk a little bit about the 3 segments and how you expect them to perform in the June quarter?

Yes. Thanks, Tore. Basically, I think the growth that we have seen, the pattern of growth we saw in Q1 continues in Q2. I think that the CED business continues to grow at its fast pace. The military, aerospace, defense, industrial, automotive business continues at the speed with which it has been growing. It's not growing, of course, as high as the CD, but it grows strongly all through the year. And finally, our mobile and consumer business, is obviously going to be, as noted earlier, significantly stronger in the second half of the year, but it does grow over the Q1 sort of part of the business. Basically, SiTime is demonstrating its diversified nature of our business. I also talked about telecom at that point of view, just to say that in the world of AI, we -- it's not just only about the data center, it's about different kinds of AI, including the AI in, for example, the fixed wireless or the RAN radio access network businesses.

Very good. And as my follow-up, there's obviously a lot of focus on high precision timing for the right reasons. But I think perhaps what is overlooked sometimes is your business model and your supply chain. I remember back in the pandemic years, you gained a lot of share because you actually had capacity while your competitors didn't. And I know it's probably still a bit early, but it does feel like we're getting into sort of a similar environment again now with capacity being tight in a lot of different places. So I'm just wondering if your supply chain, the uniqueness of that supply chain is allowing you to gain even more share during the current up cycle.

Right. Yes. Our capacity in short is very solid. We feel very good about it. As you know, we have our MEMS chips, and we have which come from Bosch. And we have our analog chips, which are in the older geometries like 180 nanometers, 150, 130 nanometers, which comes mostly from TSMC. All of those are in good shape. I think we have some challenges from time to time in the back end, particularly with the OSATs because of the volume, as you noted, but there's nothing there that's beyond the usual execution issues that we can't solve. So we feel pretty good about it.

Back in 2025, early '25 and maybe even late '24, we made a number of changes around automation in the back end, around the use of AI in our test programs and characterization that have given us particular speed. And I'd like to note that, that has made us significantly more productive with less CapEx than would typically be needed. So not only are we a purveyor of products that help in the AI rollout, we are starting to significantly improve productivity by the use of AI in the back end, but in significantly other areas as well.

Our next question comes from the line of Quinn Bolton from Needham & Company.

Congratulations on the really nice outlook. Richard, you touched on it in your script, I was hoping you might be able to expand on why the inferencing drives even greater demand for precision timing and the synchronization requirements. You mentioned, I think, if I heard you right, that the inferencing content could be 2 to 4x the training content. And so -- in the past, I think you've talked about on some of the training racks, you might have had high hundreds of dollars of content. Wondering if you might be able to give us what you think your content per rack might be for an inferencing rack. -- certainly it sounds like it could reach into the 1,000-plus range.

Yes. I mean, look, what we see is that there is a greater need for GPU utilization and lower latency and higher throughput. All of those are dependent upon just the bare performance, the clear performance requirements around stability, around jitter, around phase noise reduction -- and then as you noted, around synchronization. So we said basically that it's not that there's anything particularly critical about inference that's driving it. It always does. It's just that there's a lot more inference work happening and the workloads are expected to get up to significant utilizations of up to 50% to 60%, driving the use case for synchronization. This is a story we've talked about in other areas before. It's just maybe that it didn't come through that this is something that we expect to keep on happening more and more.

The other part is that we are adding products like Elite to Super TCXO that are higher priced, higher performance, higher throughput and better synchronization than our previous generations of products. So we are accelerating our performance as well as the need for more of these products in volume.

And so it sounds like it's kind of both an ASP as well as the unit driver to deliver that better synchronization and higher GPU utilization.

That's right. And we expect to continue at significant levels.

Perfect. And then just, I guess, quickly on the gross margin, Beth, the revenue step-up in Q2 certainly seems like you'd be getting some pretty good absorption of any fixed costs. And so is there any particular headwind to gross margin in the second quarter? It sounds like CED is going to lead growth, which I think would be a net positive for margins. So I just want to make sure, are there any sort of offsets? Does the consumer really start to pick up in June? Or anything else keep that margin from expanding further than the 50 basis points you guided to?

Thanks for the question, Quinn. So as we look at it, we did have some benefits in Q1 that drove a little bit higher gross margin. And so sometimes you can't anticipate those. And as we think about Q2 and certainly the back half of the year, we do expect a more normalized mix of consumer, which does have lower gross margins. And so again, a little bit of some benefits in Q1, combined with the mix in Q2 is really what's driving it.

Our next question comes from the line of Chris Caso from Wolfe Research.

I guess the first question, Rajesh, is maybe what's changed here that's shifted things into higher gear. And I think what you said was the combination of units, content and pricing. And I think I'm sure you would have anticipated qualitatively what's been going on for some time, which one of those elements is what's kind of causing the inflection here? Or perhaps it's a combination of all 3? Interested in your view on that.

Yes. Chris, you're absolutely right. We have seen this coming, but seeing it coming and having it happen in the time frame with the speed and the volume that's been happening has been very gratifying to see. As you know, we have a variety of customers. We sell to GPUs, XPUs, TPUs and then we sell into the switches in the AI business and then finally, in the connectivity part of it with more than 15 to 20 module makers and others that are involved in this technology.

So I think it's a very broad overview, and we just see a groundswell across the numbers, the units, the ASPs and more other customers coming into the fray. We've always indicated that some of the customers are better penetrated than others. And I guess now we're starting to penetrate the ones that we hadn't done as good a job as previously. So it's really just all around, as you indicated, and it's just happening now.

Right. And I guess the last part of your answer kind of dovetails to my next question, which would be sort of a share of TAM. And maybe you could speak to the extent to which your penetration of some of those other customers has helped here? And is this something that you'd expect as you go through the year, sort of a step change in revenue at some point as you bring some other customers on? Is it more gradual than that? And how much has new customer penetration helped drive these numbers?

Yes. New customer penetration has certainly helped, but expanding share within older customers because we were never fully penetrated, and we're still not fully penetrated in all our customers, particularly in the AI space. So expanding where we were has been important, increases in ASP, increases in volumes. There is some benefit to -- particularly in the module business, where the volumes have soared recently, and we see that some of our competitors using older technologies have been unable to keep up with it. This is different from the '21, '22.

It's more that SiTime continues now to be an established player of high-quality products. And so we get to be one of the first go-to's as our customers find that they need more and more product. So I don't think that this is going to stop. I think that we see this continuing because of the SiTime focus in all this. Our oscillators are gaining traction at higher ASPs. Our clocks, even though we have a relatively smaller portfolio of around 50 clocks is finding greater traction. I think the focus of the company, we also, in recent months, have added more salespeople and business people. We have talked about that in the past before. So we are able to handle better our businesses. In short, we're coming to a tipping point of this company where just the native SiTime business pre the acquisition is really showing its strength. And we wanted to indicate that we see that as a stand-alone business of the business we've been in for the last 6, 7 years since we went public as a very strong business, and we wanted to send that message out.

Our next question comes from the line of Gary Mobley from Loop Capital.

And let me also extend my congratulations on the solid results. I wanted to start out with a multipart question on the Renesas Clock business. I realize this is an asset carve-out for Renesas. And hence, when you announced the acquisition, you were uncertain about the expenses you would take on other than the 160 engineers. And so my question is, do you have a better handle on the OpEx that you're taking on from this asset purchase? And then I guess, unrelated to that, have you gotten any initial feedback from customers? And any idea of perhaps some additional sales synergies from this acquisition?

Gary, maybe I'll start with that question in terms of the -- as we've gotten to know the acquisition a little bit and some of the cost structure. So we are still in our planning phase for integration, and that's moving on track. We do feel that we -- the modeling that we did in terms of the cost structure, it's kind of -- as we get to know it, it's panning out kind of roughly where we thought it would be. Again, I think that's going to be an evolving conversation between now and close and then once we close the deal.

But no unexpected surprises in terms of the cost structure for this business. I think we are going to make some more investments like we talked about. So investing in CapEx for new equipment, both to support the growth that we want to drive in that business as well as just to refresh and modernize. I think we really want to kind of the care and feeding of that business and make some investments there. And so that is our expectation. But that's in line with what we said in February. So all on track there. The customer feedback I've heard from our sales and others has been positive so far. But maybe, Rajesh, do you want to comment a little bit on customer feedback?

Yes. So first, before I do that, I'll just add that as you point out, we're getting about 150-odd people, mostly engineers in development centers. So I think there's a clear need to invest in some more engineering. There are some marketing people. There are some sales FAEs that I think we see a clear need to invest significantly more than has been in the past, which is natural because we're pretty much focused on this business. But obviously, those investments have been comprehended in the previous guidance, certainly when we announced the deal, and we feel pretty good about it. So no surprises there.

On the customer side, equally, we've had some customers conversations, which are, I would say, almost universally positive. People see SiTime as, again, the focus helps the fact that we have a significantly large portfolio of products in a space that customers of that timing business are not used to, which is the oscillator business. Recall that they are complementary. The oscillators from SiTime, which make up a bulk of our business versus the clocking business, which comes from the Renesas timing division. So I think customers universally see that as complementary business and no changes there.

The other thing I must add is that we see positive responses from the team that's coming across, which is also good to see because we do really value the team, and we want to -- and we see its value from past years that they've added in the business part of it. So all in all, going well, looking forward to closing this deal out.

I hate to be the one to nitpick after such a strong quarter and guide. But looking at your mobile IoT and consumer business and your largest customer, it looks like both were down slightly on a year-on-year basis. Is that a reflection of the market or anything purposeful perhaps against maybe some supply constraints? Any color there would be helpful.

Gary, this is Beth. Sure. So if we look at our mobile consumer business, really, the customers in that sector continue to be very large, in some cases, hundreds of billions of dollars in revenue on their own. These are all very large customers. And so $1 million or $2 million here or there between quarters really isn't an indication of anything other than timing of shipments. Also recall that a year ago, our large consumer customer is when they launched the new modem. And so the timing a year ago also plays into that a little bit. But again, I think it's $1 million or so in a very -- kind of customers with very large revenue. So I wouldn't read much into it.

And just to add a little bit more to that, we see no messages there. It's pretty typical for that kind of business to be slower in this part. and would be particularly strong in the second half. In general, we think that our businesses fire at different times, and that is the strength of the company, that diversity of the fact that they can be stronger in different quarters is actually part of what I think adds value to the SiTime business. We're very satisfied with it.

Our next question comes from the line of Jim Schneider from Goldman Sachs.

Rajesh, you mentioned a number of things driving the upside, whether that be increased traction to customers you didn't already have a strong relationship with before as well as 1.6T networking and just an increased intensity in content for inference. If you were sort of -- I know it may be hard to disaggregate those, but if you were to have to disaggregate them, which would you say of those factors is the strongest driver of the upside?

You rightly pointed out. I think it's very difficult to do that. I think in the CED business, the AI business, the AI part, recall that it's communications, enterprise and data center. The data center part, all of it is doing really, really well. It's really hard to pull them apart. But I also wanted to indicate that communications and hence, the conversation around the telecom piece is doing well.

As I noted earlier, the mobile IoT and consumer is somewhat cyclical inside the year, and it will do well in the year, very well even in the year. It's just that it's a little bit slower in the first quarter as it normally is. And then the military, aerospace, defense, automotive, industrial is the sort of the strong middle, which keeps everything going at a sort of a steady pace. So all of these businesses are doing very well according to the world outside, according to macro events or all of that. We see no issues around supply chain in particular. I know some people have said that in the past as a semiconductor company. So we want to be very clear about that. We see strength in our supply chain. And we don't see any fundamental issues or macro issues or external issues that can trip us up as of now.

That's helpful. And then maybe one for Beth. Clearly, you're going to be at model in Q2. Going forward from there, philosophically, how are you thinking about the OpEx trajectory for the business? Would you -- with the increased revenue and gross margins, maybe allow the model to sort of float higher with more earnings fall through? Or are there specific R&D projects you want to focus on that would kind of keep us at the sort of 30% op margin level?

Thanks, Jim. As we look at our investments, we do want to invest for growth. And I think even as we were reaccelerating our op margins and building back to these levels, we were still investing. And as Rajesh was talking about, I think we see a lot of opportunities to address more salespeople and FAEs to go after more of these opportunities to continue to invest in engineering to be able to build more products faster. So we're going to continue to invest in the business. And in fact, if anything, maybe want to invest a little bit more. If I think about over the last 2 years, 2.5 years, we've invested well under that kind of 50% of revenue growth mark.

And so as we look forward, we definitely want to make sure that we are capturing the growth and investing appropriately to go drive that. I think discipline will remain our MO, but investing for growth is clearly the priority.

And at the rates of growth that we're talking about, we indicated around 80% or more. I mean, it kind of gets hard to spend some of the money even if you want to. And a bunch of it is going to be spent on hiring more engineers, more business people, more support people. But we are quite careful in how we do that, both in the speed at which we do it, but also in the quality and the dedication of finding the dedicated employees that we truly want to be leaders in the company.

And maybe said another way, there's still operating leverage in the model, and we expect to continue to drive that operating leverage. And at the same time, we want to make sure we're investing so that we can drive those opportunities.

Our next question comes from the line of Suji Desilva from ROTH Capital.

Congratulations on the progress. So I want to double-click on your strength in CD and optical modules. Maybe you can help us distinguish, Rajesh, which customers adopted earlier than others more aggressively? And in this particular instance of the 10, 12, 15, 20 rather, what was the reason some jumped in earlier? I'm just curious here.

Well, now when we go back earlier to this, we're talking 2 years ago earlier, it was clear to many of the people at the 800 level that they couldn't find enough product, a, to satisfy their demand. This is in the oscillators. And b, they couldn't find the quality, the reliability and the performance that was needed. While the performance was always about better phase noise and better -- I'm sorry, better jitter and better stability. It was also about finding the quality and the reliability of the product. So that happened with the higher volume guys coming out of Asia, as you know. But that trend has continued in the United States with the suppliers.

And I think it's kind of a worldwide trend for us as we get to 1.6, and we are one of the few people that has both the performance characteristics and the ability to ramp up quickly with high quality, high reliability to the upsides that are seen in the business.

Okay. And then a quick follow-up on this. I think you might have started to answer this, but with the strength in the optical module, you could assume -- you can imagine this is a rising tide lifts all boats. But I'm wondering, is there also a situation where your precision products versus what's in the market are creating kind of have and have nots, particularly as you get to something like 1.6T where you become something people need to have to be competitive. I'd be curious if that's a factor here versus really just strength overall in demand.

Yes. I think there is strength overall in demand, Suji. And I certainly believe from a very bronchial point of view that SiTime enables a level of performance that is not possible, but I shouldn't overstate it either because there are credible suppliers even at the 1.6T level. I think it's just that combination of performance high reliability and resilience and the supply chain that in the end, people keep on coming back to.

Now recall that SiTime's prices are higher because we sell at a premium for all those reasons. And so we are continuing to be always sharing our business with most other suppliers in quartz oscillators, in particular, in the optical module market. But we are very comfortable with that because we know that when it comes to support for these customers, SiTime is very strongly positioned. So all in all, I think we're very happy with where we are.

Thank you. This concludes the question-and-answer session. I would now like to turn it back to Rajesh Vashist for closing remarks.

Well, thank you. I am, again, deeply satisfied with where we are. We got to where in our financial model, much quicker, stronger than we ever thought, but I'm very, very happy about that. I'm also very happy that our precision timing category, creating a category in semiconductors of products is really hard to do because there's so many good people that play in this business. But the SiTime has done that successfully since IPO, I think it's a great testament to all the hard work that our team puts in, and I'm deeply proud of where we are today because of the work they do. So I'll leave you with that thought and basically say we're looking forward to our coming quarters, and we expect to talk to you all soon. Thank you so much.

Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect. Thank you.

All right. Great. Well, welcome, everybody or Welcome back rather. Marco Lagos. I am the Head of U.S. Semiconductor Investment Banking for Morgan Stanley. And I'm honored to have with me today Rajesh Vashist and Beth Howe, CEO and CFO of SiTime with us today.

Before we get started, the company has asked me to remind you that today's discussion includes forward-looking statements that involve risks, uncertainties and assumptions, which are further described in SiTime's SEC filings, including SiTime's most recent Form 10-K and that actual results could differ materially and adversely from those anticipated or implied. SiTime assumes no obligation and does not intend to update any such forward-looking statements. For more information, please visit SiTime's Investor Relations page at investor.sitime.com. All right. I'm glad I didn't memorize that.

So Rajesh and Beth, thank you for being here. I guess let's start with sort of some of the basics. Just top level, timing is often described as a small component, but it's a mission-critical one. If you'll permit me an analogy, and you can tell me if it's a terrible one, in data center, if data center is the concert hall, control and orchestration software are the sheet music, storage is the percussion section, power is the brass section, et cetera, et cetera, timing is the conductor.

Well, I love that. I should use that...

All right, there you go. You don't even have -- I won't even pay you a royalty, that's great.

So can you explain why timing, performance, reliability and programmability matter so much?

Yes. I mean, the whole thing with timing at the highest level is that it's been the least understood part of components. And frankly, there hasn't been a timing company. I remember when we went public in 2019, people wanted to know what is timing because there wasn't one company that was dedicated to it. So one of the things, one of the innovations, if you will, of SiTime right at the top has been that we declared that we will deliver all timing that is hard to do, that's differentiated. We call it Precision Timing. And that's a secular story. That's a secular growth story.

SiTime does really think that we are the heartbeat of all electronics. In some cases, it doesn't really matter. My favorite example where it doesn't matter is a remote control. We may get irritated with remote control. If it doesn't work one or two times, but nothing happens, nothing negative happens. But in a satellite it matters, in ADAS it does, in data centers it does. People who build phones are very obsessed with the quality of the timing. The programmability is a natural evolution of being semiconductors versus non-semiconductors.

So while we're -- our innovation is to be focused on timing exclusively as business on technology, it is replacing non-silicon quartz, which is a passive material with silicon MEMS, Microelectronic Mechanical Systems. And that's the biggest technical innovation that just changes the game.

Fantastic. And we'll get into that in a minute, put a pin in it and just take a step back and talk about the big picture, right? You've gone through a lot of change since the IPO in 2019. From your perspective, what is the most important investors should understand today about the company from where it was a few years ago? And what's kind of been the biggest surprise to you in the evolution of the company?

Well, qualitatively, no surprises. We always knew timing was critical. We always knew that wherever there was great communications, great compute and any functionality that was important, timing was going to be important. What has taken me by surprise, of course, is, I think, everybody else, is the growth of automated driving. The growth of compute, see AI, the growth of embodied AI, see robots and such. That massive growth has sort of changed -- has just changed everything.

But in general, we always knew that timing is diverse. Timing, when I started at SiTime pre-revenue, it was a 30% company, and we were one of six start-ups, and there were three other larger companies at that time IDT, Silicon Labs, Maxim. So it was a crowded field and all the others bailed by 2011 or '12. But at that time, the view that semiconductors needs to replace non-semiconductors was very clear. And we're the only ones who have successfully done it. So that's not a surprise.

The adoption has been a surprise. Some of the use cases have been a surprise. But the market has gone from $5 billion in 2005 to $11 billion and a decade from now, it will probably double again. SiTime is a small player in this business, but we are an important player in Precision Timing, which is high-performance timing under tough environmental conditions, which is happening, of course, a lot.

Okay. So let's get into that a little bit. So your core differentiation and competitive moat, right? So from a technology standpoint, what aspects of SiTime's MEMS-based architecture are hardest for competitors to replicate? And how does the moat strengthen as systems become more complex?

Right. So we started with the first moat, which you're talking about the MEMS, but we also have significant differentiation in our analog because we're an analog semiconductor company. And then we have significant differentiation in the -- putting it together as a system because we take two chips and put them together and make a system out of it. And then after that, we have several others. But back to the MEMS piece, MEMS is hard to do, and those who get it done right, stay in pole position, look at Bosch in sensors, look at Old HP, then Avago, now Broadcom, in filters, look at TI in mirrors and display. So what the hard part of MEMS is not just the design, which is important, but also the fact that you have to build the process itself. So in other words, SiTime innovated and built its own process all these years ago. And it's portable, it's our IP. We carry it with us, and we have innovated on 6 generations with it.

And finally, there are no tools to do MEMS design. There are no tools to do with this. You can't go to a Synopsys or Cadence to get these. So SiTime, little known fact, rolls its own tools. And as a team, a rather large team of physicists, mathematicians, material science and software people who build this environment. Think of a mini Ansys inside the organization. And then there's the analog, then there's a system piece. So all of these translate to a lot of IP, but also a lot of trade secrets and knowledge.

Got it. So -- and this is probably as much a financial as a management question, but how do you prioritize your time and where you put the investment in all these different parts of the development with the complexity of it? Like how do you puzzle through that?

You want to take a shot at it?

Well, I think in terms of investing, it really is -- so for me, investing not only in ensuring that we've got a strong financial foundation, compliance, but also being helping to grow the business. So thinking about our investment models, our ROI, how do we make trade-offs in terms of our R&D investments and working with our engineering teams to prioritize and to find capacity to invest in the different areas because I think as we will talk about that diversity of applications gives us lots of areas to invest in. And so how do we think about platform investments and then derivatives to invest in taking that platform into specific application areas, whether it's AI or ADAS or industrial and robotics. And so thinking about that.

And then also investing in our people because as we're growing very quickly, one of the key things we have to do is really invest in our talent and our people and being able to enable and empower them because at the end of the day, they're the ones that are -- whether it's innovating or making financial decisions. And so that's really important as well.

That's terrific. And look, I think everything starts at the top, both from a management standpoint, but also from a financial standpoint. So as you think about pricing power and value capture, right, customers increasingly care about the system-level performance rather than component-level cost. How do you think about value-based pricing in timing devices?

So for us, our North Star is differentiation, differentiation, differentiation. Our North Star is providing a value that customers can't get. So we go the opposite of value pricing. We go premium pricing. We basically tell the customer, if you can find this product somewhere else, you should not buy from us. And I know that my sales guys don't actually do that. They shiver, when I say all that because they think that's really stupid to say, but that's what I want them to say. They don't really listen to me, but that's what I tell them to do.

The premium pricing is a gift that keeps on giving because what happens is to those customers that do want the product are willing to pay the premium pricing, the product is highly differentiated by definition. Otherwise, they wouldn't buy it. What that does is it gets their specs, their requirements, get our engineers super excited because they are building something that otherwise can't be built. So we give them challenges, this much face noise, that much jitter, this size, that power, these functionalities. And they get very excited about it, and that's the best thing we can do for an engineer to get them excited about building great product that nobody else can build.

And that circles back to a pole position back at the customer, premium pricing, more investment. So it's how we filter our opportunities. We're also -- once we find a value proposition that's important, we don't give up on it. In other words, we started on Titan resonators, which were stand-alone resonators about 15 years ago, and it was a huge challenge to build something which was 125 the size of a crystal, but had equal or better performance and behaved like it, taken us almost 15 years, at least 6 years of concentrated performance to do that, and we've reached the level of performance that Quartz Crystal is at, but smaller size, lower power, better performance in other ways.

But we're not done. We're headed to getting an order of magnitude better in performance in the coming years already. So once we find something like that, we just keep on going at it, and that's how we make our investment.

So it's a bit of a virtuous cycle?

Yes, that's right.

That's great. Okay. So back to sort of structural stuff. So tailwinds, what secular trends are most important to SiTime's long-term growth? And how do those trends specifically translate into timing content growth?

So in general, we grow when more units are shipped, of course, whatever design-in. But we also grow because we think that the density of chips -- of timing chips per use case increases. In other words, if there was one phone, one chip, timing chip that we had in a phone 5 years ago, now when we have a phone design win, we have two chips in it. So density increases as the system gets richer, more complex. But then the ASP also goes up because the functionality increases. And so SiTime's ASP trend, we never -- we don't talk about it much because it doesn't help us talking about it, but the trend has been significantly high over time.

But overall, wherever there's more AI, wherever there's more compute, wherever there's more communication, wherever there's secure communication, wherever there's a need for small size, low power, SiTime's timing chips really come into play in Precision Timing. That's our secular tailwind.

So without AI, without big things that are happening in the world, we still commit for the next several years to be a 25% to 30% growth company. All of these other factors like AI or a phone or a car -- self-driving car, take it up. So that last year, we grew at 61%. The year before that, we grew at 41%. So we're beating our "standard growth" rate for the last few years. And hopefully, that continues for some time.

Yes. You've definitely inverted that growth curve a little bit the last few years. So that's great. So this is going to shock you, but I want to talk about AI a little bit more. AI and high-performance data centers are extremely sensitive to synchronization, right? We talked about the conductor. Latency, reliability matter. Can you walk us through why timing is critical in the data center environment specific and how your products enable higher performance and scalability?

Yes. I mean one stat that I got, I don't know if it's still true, maybe a little dated, is that the GPU is idle 30% of the time, and that is because it's not getting fed enough data at the right time. And so all we are trying to do is to increase the data throughput. When we talk about better jitter, better phase noise, better stability, we're basically saying that the rates are so high that the timing needs get to be more and more tight.

So better timing enables better throughput, enables better latency, enables synchronization is another part of it. And that is kind of a bit of an insatiable requirement. 400 gig, we had a play, not that much. 800, it went up in terms of needing SiTime. At 1.60, we're talking about higher frequency, lower jitter, to the extent we can be smaller size. So all of these things play exactly along with us in favor.

And we talked about sort of content expansion as part of the story, right, as things evolve. So with accelerators, networking equipment, memory architecture is evolving, your dollar content per system, how is it changing over time? And where are you seeing the biggest step-ups as it relates to those?

Yes, 3 generations ago, we were probably at $200 per rack, fully populated. Three generations later, we're probably $500 to $700 per rack. The density is increasing, which means more timing gets to be more localized because if you're sending the timing signal too far in relatively noisy environments, it degrades, as you know, and so it's not very useful. Just as people talk about vertical power delivery, there's conversations around vertical timing delivery because there isn't room to be sending it horizontally. So timing would land up being sort of on the other side of the board as it were. Co-packaging is one example of wanting to get into that. There's a lot of new accelerators that are coming on the horizon, they aren't playing out yet.

But I think SiTime gets to win no matter what. We hear this ding dong between, oh, is optical happening? Is it not happening? Is copper in trouble? Whatever. On the one hand, there's Credo kicking the ball out of the ballpark. But on the other hand, SiTime gets to play no matter what. And the need for more precise timing, lower latency, greater synchronization, greater stability, better phase noise, lower power, smaller size.

Yes. And the beauty of it is you mentioned, Credo, you don't compete with folks like that, you orchestrate...

Yes, they're customers. Almost all of them, whether it's people in the optical world or OCS world, we're talking about some of those people earlier before this conversation, they are all customers of SiTime.

That's wonderful. So without getting into customer specifics, how should investors think about design win cycles and revenue ramps in AI and cloud infrastructure? Are these multiyear type platforms?

They typically are multiyear platforms, at least 2 to 3 years. But of course, what NVIDIA has achieved is cutting development times in half. So what we thought we had 2 years to do something, but Jensen tells us, no, we have to do it in 1 year. So we are on that cycle. Maybe it gets even shorter. We are continuing to use AI for some of the development work, not a lot, but some. We'll probably use a lot more in the future.

And our problem has been that we haven't paid as much attention to some of the customers as we probably should because we're still relatively a small company. Last year, we were only $330 million, and the basic consensus has us at only for $460 million, $470 million, sub-$500 million. Of course, we always hope to do better, but that's kind of where we are. So we're investing in salespeople, business people, as much as we're investing in engineering.

That's terrific. So I guess you've talked a little bit about the resource decision, the opportunity costs, sort of decisions that you have to make about markets -- about customers in the market. What can you touch on about other end markets like auto, military, aerospace, defense, industrial? What momentum are you excited about beyond...

Yes. So one of the lesser known ideas, like I've said before, is an understanding that SiTime is a very broad-based company. We have anywhere from 400 to 500 applications at any one point in time. Most of them grow at 15%, 10%, 20%. And then there is about 5% that grow at 30%, 40%, 50%, 60%. So for example, right now, we really are looking at ADAS, robotaxis. A Level 3 uses -- car uses timing to the tune of $5, $6, $7. A Level 4 gets to use it to the tune of $30, $35 or even more. So again, because of autonomous driving, that's one.

I think embodied AI or embodied LLMs, robots, humane robots, there's not many shipping, but we think we have content in that. Clearly, mill aerospace defense with the geopolitics as we see them, whether it is smart fuses, smart munitions, communications, missiles, drones, we're in a bunch of those. That's very exciting. And we do, in fact, have, as I said, 400 to 500 applications. So there's always something happening that's very exciting. And of course, there's always a phone, which is a big booster of revenue when it hits whenever that happens.

Right. So I guess, with regards to that, right, proof is in the pudding. You've seen -- your pricing is premium pricing. Your revenue growth curve is bizarrely inverted and that you're growing -- your velocity is accelerating every year. Those are great things, but there's also been a transformation in the revenue composition. Why don't you talk about that a little bit, Beth, and kind of what that business looked like a few years ago versus the business mix today by end market?

Yes. We're really excited about the transformation. At IPO, we were about 65% consumer mobile business and about 12% in, we call our Communications, Enterprise and Datacenter. We fast forward to 2024, they were all about equal kind of 1/3 of the business each. And here in 2025, now 53% of the business or just north of half is our Communications, Enterprise and Datacenter driven by AI. And we're really excited about that in terms of both the opportunities to invest with some of those waves in terms of the technology, but also in terms of the value we provide, whether it's ASP or our margins, those are all accretive businesses, and we're moving in the direction of those more accretive businesses, which is really exciting for us.

And in addition, from an investment perspective, as we think about platforms, we invested several years ago in these products that are now what is really generating that revenue in AI and data center and are able to take those platforms and also have derivatives for some of these other application areas, whether it's automotive or industrial or aerospace as well. And so really being able to leverage those investments into multiple opportunities that are both high growth as well as high value for us.

Got it. Well, look, this is the end of a very exciting month for you folks. Great earnings call. And then obviously, right on top of that, the Renesas' Timing division acquisition. Why don't we spend just 1 minute or 2 on your recently announced acquisition. Why was that acquisition so critical to your strategy? And how does it change your long-term trajectory?

Yes. Well, pretty much when we went public in 2019, November, somebody said, if you did M&A, what would you do M&A in? And I said, I'd acquire a clocking timing division of one of these four large companies, and I rattled off the four larger names. Clearly, at that time and now the biggest, the brightest, the most gold-plated version of that business is, in fact, the Renesas' Timing business at scale in gross margin, in the quality of the customers. And I always like to remind people that this is the IDT business that they acquired a certain company called ICS, which was run by one Hock Tan, and he took that public and sold it to IDT at that time for the -- principally sum of around $1.2 billion, $1.3 billion. So it has very great antecedents.

For us, as a pure-play timing company, as a company that plays just one song, it's very important to play it very well. So having a customer, especially the CED customers, especially the industrial, the automotive customers, they all consume resonators and oscillators, which is the bulk of our revenue, but they also consume clocks. In fact, they're part of complementary set. SiTime has very little clocks, and it takes a long time to build a clock timing portfolio. And the old IDT, Renesas business has a very large business. Last year, they did close to $200 million, a little bit more than $200 million, and perhaps they'll do close to something significantly maybe closer to $300 million or if not that, somewhere in that ZIP code.

So the customer consumes both of them. They need the frequency production with the oscillator and they need to disseminate with the clock. So therefore, it makes complete sense as a complementary product for a company which has very little clocking business to acquire a business, which is very little oscillator business and put them together in one play.

What also makes it really interesting for us is that 70%, 75% is, in fact, in the CED business. They're quite strong in communications, which is with Ericsson, Nokia and others, they're quite strong with the enterprise with Cisco and Juniper and Arista. And they are also strong in data center, not so much in optical and connectivity because that's not a clock play, but in all the rest of it. So it fits in really well. It gives us a very good profile, allows us to sell to those customers where we are not strong. We talked about that a little bit earlier and allows us to take their products to the customers where we are strong with.

It's a North America team mostly. So that's good between Ottawa, San Jose and Tempe, Arizona. So that's good. I mean, it's a team that was there with IDT mostly. They have longevity. And as you know, in analog design, you need that kind of long understanding of the technology. I've met some of the people. I think they're an exceptional team. We're very excited.

So in the spirit of sort of preserving brand equity with an acquisition, it's difficult to do. One thing that's always differentiated you is the focus on MEMS, right, as part of the Precision Timing. You look at this business, it is traditionally quartz-based with some MEMS oscillators. How do you see sort of that fitting? What was kind of cost-benefit analysis of saying, hey, I'm buying something that's quartz. It's a little different than what I have today, but it's worth a price...

But it's important to note that out of the $200-odd million they did last year, only $10 million used any frequency. In other words, all they did was $10-or-so million of quartz, which is a very small amount, right, out of all of that. They actually have no -- most clocks have no need for MEMS or quartz, that is why the problem has shifted on to the customer. And so what we would do is we would make that customer decision so much easier to do in this. Financially, of course, clocks are high gross margin, we're talking 70% to 75% gross margin and a very relatively high net -- well, actually very high net operating margin.

So I think this would make us not only strategically viable in terms of having the clock piece, along with resonators and oscillators, but it would also change the profile of a margin, take us close to our highest level gross margin aspiration of 65% and take us significantly higher than -- we've always said we want to be in the 30% net profit, net operating margin will take us to that and maybe even beyond.

That's great. And so look, I think this acquisition does change the competitive landscape and timing. Can you talk a little bit about how it does that, especially when you look at larger but legacy incumbents and any emerging competitors? How does this deal post-closing change that landscape?

Yes. It's important to note that no matter what, even after the scale, there are $300 million going to $450 million and change. Their $250-or-so million is still about a $700 million business and an $11 billion business. So it's a small portion in terms of numbers, but there are some pretty formidable competitors out there in clocking. We're talking about Texas Instruments. We're talking about Skyworks, we're talking about Microchip, three big names come to mind. In the oscillator market, we've always competed with some big names like Murata and Kyocera and some of the other guys out of Japan and Taiwan.

So it's a hypercompetitive market. There's 40 purveyors of oscillators and resonators. There's about 10 purveyors of clocks. So I think the market dynamics don't change much. Where it changes is where people are interested in Precision Timing, which is such a small portion of the market. And there, it allows us to bring clocks to them, which always have our precision oscillators. As of now, we don't see any credible companies that are showing up. There's a start-up that's been trying to do that. There are some of the larger companies in Japan that have stated that they want to do it. We always welcome competition, because one of the ways to make it easy for investors is to show us competing with the big competitors so that they can see how well we stack up. Unfortunately, there aren't too many people in this space, in that Precision Timing space, which is, of course, a category we created. It didn't exist before SiTime showed up.

Yes. And it says something to the staying power of the company, the amount of time you've been able to compete. So Beth, back to you just to close out on the acquisition. So from your perspective, the CFO perspective, how should investors think about margin profile, integration costs, the path to value creation from this deal? What does a successful deal look like to you in 24 months or 36 months?

Yes. So as Rajesh talked about, we're really excited about this deal. Clearly, the strategic rationale as he's articulated, but also the financial rationale. This is a business that's $200-plus million in revenue with customers that many of them -- this business has been in clocking for roughly 30 years. It's a 70-plus percent gross margin with very attractive operating margins. So it is very accretive to our overall business model. We're excited about that.

We're also excited about the opportunity to invest in this business. It's been a -- it's a small division within a very large company. And so there's -- they get a specific amount of budget every year, and that's kind of where they're constrained to. We're excited to bring them into the SiTime portfolio and be able to invest in this business, invest for growth, invest in their product portfolios. Again, modestly, I think we can get great returns to drive that growth of this $200-plus million at 70% gross margins, driving strong cash flow for the overall business. So an exciting business model from that perspective.

That's great. So you touched on growth. And earlier, we talked about sort of this great historical growth curve that you've had. What is the long-term growth trajectory look like from here? How do investors think beyond near-term cycles? What are the key drivers of sustainable revenue and earnings growth...

Yes. So we're still committed to that 25% to 30% growth because, frankly, the more we dig, the more we find, the more we see the need for precision-based timing. We continue to be focused on timing and timing alone, which is a strength of the company. There are timing pieces, which have nothing to do with components, may have to do with timing modules, may have to do with timing systems, perhaps lower-end atomic clocks, perhaps middle range to higher range at atomic clocks, we could be in timing IP, we could be in timing software.

So we just see that the customers' challenge around high-end timing is underserved, and that nobody has seen this opportunity the way SiTime has seen it. So we intend to keep on moving in that direction and investing in it. We think that our base market, our resonators, oscillators and clock market doubles in a decade.

If I look at it and I look at some of the great analog companies, I think SiTime has potential to be one of those in a few decades.

I will be great to see that. But before we kind of -- just one more question here, but why don't we open it up for questions from the audience.

Okay. All right. So as we're talking about sort of the future here, what do you think the biggest risks are to the story? Technically, technology, competition, macro? And how are you sort of set up to manage through those things?

Yes. I think macro is in today's world, clearly, the biggest problem when we went public in 2019, there was no COVID. And it's been one thing after another between COVID, the Russian war, geopolitics, China, the threat to Taiwan. Supply chains were never talked about. I've been in this business now for 43 years. Supply chains becoming so critical where you can't take them for granted anymore the way we did. We thought they were automatic. I think that's the case. And now, in general, the world is in a divided state. And I think servicing all of that becomes the biggest challenge. To me, that's the biggest challenge.

As far as SiTime is concerned, we see a very clear path to success. We see a very clear path to growth. We see a very clear path to differentiation regardless of whatever competition comes in, simply because we have a game plan and the amount of focus we put into it has been rewarded. It's sort of good to look back and see that from 2007 when I arrived, we were [indiscernible] invested company. In 2014, we sold ourselves to a Japanese company called MegaChips, and we were part of them for about 5 or 6 years. And then improbably, we spun ourselves out of MegaChips and went public again, how often does that happen? So we know what our future is. We know what our destiny is, and we're very focused on that.

That's wonderful. So just last takeaway for investors. Say, one of these folks today decides aren't in today, decide to come in today and invest in the company. What do you hope they'll say that the company got right in 5 years?

I think what they would say or should say or should see or experience is that the company fulfilled its promise of being this highly differentiated timing solution for highly differentiated markets. And I think if they did that, they'd be astonished by the breadth of our diversity of our business because one of the things we see today in semiconductor is very verticalized companies. And my vision has always been for SiTime from the get-go of building a highly diverse business, very profitable, high growth, very predictable revenue.

So that sounds pretty good. All right. With that, we'll leave it there. Thanks very much, everybody.

Thank you.

Thank you.

Good afternoon, and welcome to SiTime's Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded today, February 4, 2026.

I would now like to turn the conference over to Brett Perry of Shelton Group Investor Relations. Brett, please go ahead.

Thank you, Towanda. Good afternoon, and welcome to today's conference call to discuss SiTime's Fourth Quarter and Full Year 2025 financial results as well as SiTime's proposed acquisition of Renesas' timing business.

Joining us on today's call from SiTime are Rajesh Vashist, Chief Executive Officer; and Beth Howe, Chief Financial Officer. Please note, in addition to the respective press releases issued this afternoon, a supplemental slide deck related to the proposed acquisition is available on the Investor Relations section of the company's website at investors.sitime.com.

Before we begin, I'd like to point out that during the course of this call, the company may make forward-looking statements regarding expected future results, including financial position, strategy and plans, future operations, the timing market and other areas of discussion. It is not possible for the company's management to predict all risks nor can the company assess the impact of all factors on its business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements.

In light of these risks, uncertainties and assumptions, the forward-looking events discussed during this call may not occur, and actual results could differ materially and adversely from those anticipated or implied. Neither the company nor any person assumes responsibility for the accuracy and completeness of the forward-looking statements. The company undertakes no obligation to publicly update forward-looking statements for any reason after the date of today's call to conform statements to actual results or to changes in the company's expectations.

For detailed information on risks associated with the business, we refer you to the risk factors described in the company's annual report on Form 10-K for the year ended December 31, 2025 as well as the company's filings with the SEC, including the company's quarterly report on Form 10-Q for the quarter ended September 30, 2025.

During the call, management will refer to non-GAAP financial measures, which are considered to be an important measure of company performance. These non-GAAP financial measures are provided in addition to and not as a substitute for nor superior to measures of financial performance prepared in accordance with U.S. GAAP. The GAAP to non-GAAP reconciliation includes stock-based compensation expense, amortization of acquired intangibles and acquisition-related expenses, which include transaction and certain other cash costs associated with business acquisition as well as changes in the estimated fair value of earn-out liabilities and accretion of acquisition consideration payable. Please refer to the company's press release issued earlier today for a detailed reconciliation between GAAP and non-GAAP financial results.

With that, it's now my pleasure to turn the call over to SiTime's CEO. Rajesh, please go ahead.

Thank you, Brett. Good afternoon, everyone. Thank you for joining us today. We have a lot to talk about. We announced exceptional results for 2025, and we also announced a transformational acquisition. I'll begin with our business and our performance and then I'll turn to the transaction.

Q4 2025 was another exceptional quarter for SiTime. We delivered $113.3 million in Q4, up 66% year-over-year, and earnings per share tripled from $0.48 to $1.53.

In Q4, every end customer segment grew year-on-year as did every region.

Gross margins in the quarter grew significantly up 61.2%. I'm particularly pleased about this achievement. In the beginning of 2025, we said we would exit the year at greater than 60% gross margins and we achieved it.

We predicted this expansion of gross margins because we anticipated mix changes to higher value products, and we reduced new product costs as they moved into volume production. For all of 2025, we delivered $326.7 million, up 61% year-over-year. Every end customer segment and region showed growth. Earnings per share more than tripled from $0.93 to $3.20.

Demand remaining -- remained very strong exiting the year, which is an indication of significant future growth in 2026. While we don't usually discuss our book-to-bill, we wanted to give you a metric of the demand strength across our customer base as we go into a strong year. So our book-to-bill was over 1.5 at the end of Q4, and we have excellent visibility for the year.

Channel health remained solid exiting 2025. Distributor and contract manufacturer inventory levels were in line with our target, reflecting strong sell-through and disciplined supply management. Design win momentum remains solid across all end customer segments and regions and other indication of growth in 2026 and beyond.

Q4 growth was again led by Comms, Enterprise, Data Center, CED business, which grew 160% year-over-year. This marks the seventh consecutive quarter of over 100% year-over-year growth. Additionally, our 2026 CED forecast has grown since our last earnings call, driven by increases in AI CapEx spending.

The 2x to 4x increase in computing power of the new XPUs GPUs, CPUs is driving the need for faster networking infrastructure and accelerating the adoption of 1.6 terabit optical modules. Our customers have recently increased their 2026 forecast for our oscillators used in 1.6T optical modules by 50%, which is over and above the increase that we reported in November. This move to 1.6T drives the need for higher clocking frequencies from our oscillators, for which we get higher ASPs or average selling prices. The increase in 1.6T modules notwithstanding demand for oscillators used in 800G optical module continues to remain strong.

In parallel to the increase in bandwidth of networking infrastructure, the hyperscalers are deploying more XPUs for training as well as getting ready for inference. Since November, this trend has driven a 50% increase in 2026 forecast of our Super TCXOs, which are used in both computing infrastructure and the supporting smart NICs or network interface cards.

SiTime's goal has always been to deliver predictable revenue growth. At IPO, CED was just 12% of our revenue and then we created a strategic plan expand it to 40% to 50%. Since then, our focused investments in product development as well as customer acquisition have paid off handsomely. CED today makes up 53% of our revenue, and that is exactly where we want to be.

I'm also very pleased that a large portion of this revenue comes from high-value products reflecting the sustained benefit that we bring to our customers. Our CED strategy laid the foundation of our success today, and we're using this as a blueprint for rapid growth in our other businesses.

We continue to grow across all other end segments. Aerospace, defense, automotive and industrial are all benefiting from increased adoption of autonomous systems in physical AI where systems perceive, reason and interact in the physical world in real time. These systems need accurate positioning, sensor fusion, motor control and precise synchronization where precision timing is essential. For example, in humanoid robots, we see up to $20 of our precision timing products, and robotaxis and level 4 ADAS or self-driving cars require up to $15 of precision timing content.

In defense, where worldwide spending is accelerating, our product resilience is driving adoption in a variety of applications. In the next few years, we expect that each of our automotive, defense and industrial business to exceed $100 million annually.

Entering 2026, demand drivers remain firmly in place. Our strategy remains unchanged to lead in high-value precision timing applications, deliver differentiated system-level solutions and scale our operating model to drive a long-term value creation.

The combination of deep engagement in AI infrastructure and broad participation across diverse segments positions us exceptionally well for continued growth. I'm confident in our trajectory and excited about the opportunities ahead.

With that, I'll now turn the call over to Beth, our CFO, to review financial details. After which, we'll be happy to take your questions.

Thanks, Rajesh. Today, I'll walk through our fourth quarter and full year 2025 results, and then I'll provide our outlook for the first quarter of fiscal 2026. As a reminder, my remarks focus on non-GAAP financial results, which are reconciled to GAAP in our press release.

Fiscal 2025 has been a pivotal year for the company, one in which we delivered exceptional revenue growth, expanded gross margins and demonstrated meaningful operating leverage. Our results reflect the scalability of our operating model, the strength of demand across our target customer segments and the growing strategic value of our products and solutions.

For the full year, revenue reached $326.7 million, an increase of 61% from the prior year. Gross margins for the year were 59.3% and operating expenses were $135 million.

Non-GAAP operating profit was $58.6 million, an increase of $58 million year-on-year or 18% of revenue. For fiscal 2025, our non-GAAP earnings per share more than tripled to $3.20. Cash flow from operations was $87.2 million for the year, a strong improvement compared to $23.2 million in 2024, reflecting the combined benefit of higher revenue, richer mix and disciplined expense management. Overall, our momentum reflects a company operating with focus, efficiency and increasing strategic impact.

Turning to our fourth quarter results. Q4 was a milestone quarter for the company as we surpassed $100 million in quarterly revenue for the first time and generated operating margins of 30%. Revenue in Q4 was $113.3 million, up 66% year-over-year and 36% sequentially. Revenue was significantly higher than expected as customer demand continued to strengthen in the quarter.

Communications, Enterprise and Data Center continued to be the primary growth engine, contributing $64.6 million or 57% of total revenue and rising 160% year-over-year. Growth in this segment was broad-based and driven by multiple customers across AI and data centers.

Automotive, industrial and aerospace delivered $24.5 million or 22% of revenue, increasing 19% year-over-year. And consumer, IoT and mobile revenue was $24.2 million or 21% of total revenue, up 7% year-on-year with our largest consumer customer contributing $17 million for the quarter.

Gross margins in Q4 were 61.2%, representing a 240 basis point improvement year-over-year and ending the year above 60% as we had forecast at the beginning of 2025. The increase was primarily driven by continued mix shift toward higher-margin products. Improving manufacturing overhead absorption also contributed meaningfully to the margin expansion.

Operating expenses for the quarter were $35.5 million, consisting of $19 million in R&D and $16.5 million in SG&A. This was in line with expectations and driven by higher headcount, variable compensation tied to revenue performance and continued investments to support our long-term road map.

Operating income for the quarter was $34 million, an increase of $26 million year-over-year, demonstrating strong leverage and discipline in our cost structure as revenue scales. Interest and other income and expense was $7.4 million. Non-GAAP net income was $41.3 million or $1.53 per share more than triple the $0.48 reported a year ago.

Now let me turn to the balance sheet. Accounts receivables ended the quarter at $45 million, with days sales outstanding at 36 days, up from 24 days in Q3 as linearity returned to more normal patterns.

Inventory declined to $81.7 million from $86.7 million in Q3, driven by customer shipments during the quarter and continued focus on inventory management.

During the quarter, we generated $25.4 million in cash from operations. We also invested $12.6 million in capital expenditures. Finally, we paid $42.2 million to Aura, including the final payment for die deliveries. We ended the quarter with strong liquidity position of $808 million in cash and short-term investments.

Now let me move to our outlook for the March quarter. Because of the acquisition of Renesas' timing business is not expected to close in Q1, it has no impact on our guidance. Looking ahead to Q1, we expect first quarter seasonality to be less than our historical average and that our Comms, Enterprise, Data Center or CED business will grow sequentially.

Since consumer is typically down seasonally sequentially in the first quarter, the higher mix of CED and the lower mix of consumer is also expected to contribute to stronger gross margins in Q1. Thus, we project revenue in the range of $101 million to $104 million, up roughly 70% year-over-year at the midpoint. Gross margin to be approximately 62% plus/minus 0.5 point given our expected product mix for Q1. Operating expenses in the range of $39 million to $40 million, interest income of approximately $7 million and a share count of 27 million to 27.5 million shares. As a result, we expect Q1 non-GAAP earnings per share to be in the range of $1.10 to $1.17.

With that, I'll hand the call back to Rajesh to discuss our intent to acquire Renesas' timing business. Rajesh?

Thanks, Beth. To reflect a little bit, over the past 2 decades, SiTime created the precision timing category and fundamentally transform the timing market by delivering highly differentiated products that solve customers' tough timing problems. Along the journey, there were a handful of defining inflection points. Acquiring Renesas' timing business is perhaps the largest and one of the most exciting. This business similar to SiTime has a differentiated broad product portfolio, except that's in clocks where we have a small footprint. Additionally, they have an enviable financial profile, a respected team and a 30-year heritage that started as ICS, IDT and finally Renesas. We are really glad to have this business as part of SiTime.

We've always said that customers need complete timing solutions, which include oscillators, resonators and clocks. Our oscillators and resonators are semiconductors MEMS-based and we have been investing in this technology for the past 20 years. To grow SiTime's clock business, we invested in our own development. In parallel in 2023, we acquired Aura's clock products, which had leadership IP and 50 clock products.

Now Renesas' timing business takes us to scale in clocking. They are the preeminent brand with 500 highly differentiated clock products. Because they're focused on clocking in CED, industrial and automotive, they complement our high-performance oscillator revenue. The 160 engineers that come over to SiTime at close gives us an opportunity to build an exciting road map of products that would not have been previously possible. With this acquisition, our revenue mix continues its transformation and increases scale in CED. On a pro forma basis, our 2025 CED revenue will almost double with Renesas 2025 AI data center comms revenue. To this, we'll add our rapid organic growth in 2026 and combine it with their growth.

The breadth and diversity of our customers will grow significantly with this acquisition, along with faster access to customers that we would have secured only several years in the future. This acceleration of customers will include 10 hyperscalers, 7 AI server leaders, 10 networking and communication vendors and leading automotive OEMs and Tier 1s and leaders in mobile IoT and consumer.

On Renesas' and SiTime's common customers, there is minimal product overlap, and we have an opportunity to generate new revenue by selling our differentiated oscillators to them. It's an unprecedented opportunity for both SiTime and our customers to collaborate and build on our 20- and 30-year heritage to reach an extraordinary level of success in precision timing.

This is also an exceptional business with great financials. It's expected to add $300 million in the 12 months after close with approximately 70% in gross margins. 75% of the revenue comes from the fast-growing CED segment, which is strategically important to us. It also maintains SiTime's long-term growth rate of 25% to 30%.

This acquisition is a monumental milestone towards fulfilling our vision to transform the timing market, solved our customers' toughest timing challenges and accelerate our path to $1 billion in revenue. We see remarkable opportunities ahead, and we are more excited than ever about the future of SiTime.

I'll turn the call over to Beth to provide more details. Beth?

Thanks, Rajesh. Building on Rajesh's overview of the strategic rationale, I'll walk through how this acquisition strengthens our financial profile and accelerates our long-term growth trajectory. What is most compelling is the alignment between the strategic value of this business and its financial contribution, both of which meaningfully enhance SiTime's scale, profitability and cash generation capacity.

Financially, this acquisition significantly elevates SiTime's revenue profile, margin structure and cash flow potential. Approximately 75% of the acquired revenue comes from our Comms, Enterprise, Data Center sector, a fast growing and strategically important segment for our long-term success. The remainder is diversified across automotive and industrial, further expanding our reach into durable attractive applications across timing. As we integrate the business, we intend to invest in go-to-market capabilities to fully capture these opportunities. Importantly, as Rajesh mentioned, our long-term annual revenue growth target of 25% to 30% remains firmly intact.

The acquired portfolio operates with approximately 70% gross margins, reflecting the value and differentiation of the products. This positions SiTime to reach the upper end of our 60% to 65% long-term gross margin target more quickly while expanding operating margins to above 30% as we scale and benefit from increased operating leverage.

The transaction is also expected to be accretive to SiTime's non-GAAP EPS in the first full year post close. And finally, with the combination of our organic growth and the attractive profitability of the acquired business, we expect to generate meaningful cash flow.

We have structured this transaction to maintain financial strength and flexibility. Under the terms of the agreement, SiTime will acquire certain assets related to the Renesas' timing business for $1.5 billion in cash and approximately 4.13 million newly issued SiTime shares, subject to potential adjustments and a 15% symmetrical collar determined by the 10-day volume adjusted weighted average share price as of the 3 days prior to the execution of the agreement.

We plan to finance the cash portion using a combination of cash on hand and approximately $900 million of committed debt financing from Wells Fargo. Given the strong free cash flow generation of the combined business, we have a clear path to reducing leverage to under 2x within 24 months following the closing.

The transaction is expected to close by the end of 2026, subject to the satisfaction of customary closing conditions, including applicable regulatory approvals. We are thrilled to announce the intent to acquire this highly complementary preeminent clocking business as we enter the next phase of our transformation. The combination strengthens our strategic position, accelerates our financial performance and enhances our long-term value creation potential.

With that, I'll open the call for questions. Operator?

[Operator Instructions] Our first question comes from the line of Tore Svanberg with Stifel.

Rajesh and Beth, congratulations on the strong results and especially on this highly strategic acquisition. I guess my first question on the core business. So you talked about a book-to-bill of 1.5. I know you're not going to give us guidance sort of by segment, but could you give us a sense for where the most of those bookings are coming from as those bookings obviously generalize -- generate revenues for the year?

Well, it's no surprise that most of those bookings will come from CED because of the tremendous growth in CED and I think that our customers are seeing the growth going out through the year through 2026 and many of them are booking in advance of real demand -- of demand. I don't mean they're ahead of it. I mean they're on top of it. And I think -- but the others are not lagging behind. We still continue to see our diversified growth in all the other BUs as well, but it just happens to be that just because of its scale, the CED is a bigger portion.

Very good. And as a follow-up, I had a question on the acquisition and how this is going to play out. So again, it sounds like 75% of the renew is aligned with your CED mix, which is great. I guess that means that there's end markets or applications that Renesas is targeting that did not come with the acquisition, but you also mentioned that you might be able to participate in some of those with your resonated products. So I was just hoping if you could elaborate a little bit on that, especially on the timing of that potential additional growth engine.

So just to be clear, we're getting 100% of the timing business. Whatever is in the timing business that's called TPD, Timing Products Division is coming over to SiTime. There isn't any business which is being left behind.

The integration possibility that we are exploring through the MOU is a completely different one than timing. As you may know, Renesas is a prominent player in the MCU business and the microcontroller business, and there's an opportunity for SiTime's resonators, the Titan family of product to be integrated in their microcontrollers. And that's the one we are exploring. There's a several billion dollar revenue that they get from the MCUs and we are exploring that and being a timing partner to Renesas.

Another way of thinking about this story is that given the fact that their CEO is joining SiTime's Board at the closing, this becomes really quite a partnership. This makes sure that not only are we a supplier to them, but we are also a partner to them as we go through the integration process and the TSAs and so on. So that's what gives me a lot of confidence in the success and the integration of this business.

Our next question comes from the line of Quinn Bolton with Needham & Company.

Rajesh and Beth, I'll offer my congratulations, both on the strong results as well as the acquisition. I guess, like Tore, I wanted to start with a question on the core business. You talked about demand strengthening through the fourth quarter, the book-to-bill of 1.5. You guys have been growing the Comms business at over 100% for 7 consecutive quarters. And so I guess, Rajesh, I know you're not guiding to 2026, but certainly feels like the growth engines are there to drive better than your long-term average 25% to 30% growth rate in the core business in 2026. So just wondering, as you think about what the core business can do in 2026, is there any framework you might be able to provide for sort of that overall growth rate in 2026.

Well, qualitatively -- and I'll have Beth jump in to give you the level of specificity that she wants to give you. Qualitatively, that's absolutely true. we've been growing. We grew in '24 at 40%. We grew in '25 at north of 60%. The business continues. You see Google spending, you see Meta spending. There is no stopping in the AI data center world. And then there is the inference part of it or the LLMs come to physical reality, whether it's humanoid robots or other kinds of ideas around that. So I expect that this is a series of growth years coming from the AI business even beyond data centers. But I'll let Beth add what she thinks.

Sure. Thanks, Rajesh. No, I think we do expect it to continue to be led by our Comms, Enterprise, Data Center, as Rajesh talked about. As he also alluded, I think we do see opportunities across automotive, industrial and aerospace and some specific opportunities, especially within aerospace, off a small base. But given the increase in drones and other kinds of defense applications, we see a lot of opportunity there.

And then finally, in the consumer space, we do expect to see continued growth there as some of our design wins ramp in 2026. And so those are all some of the opportunities and tailwinds we see for the year. And so we're really excited about 2026 and where we can go from here and in terms of the opportunities.

Excellent. The question I had on the acquisition, obviously, Renesas is one of the preeminent players in the clocking business. I'm wondering on a lot of the boards or sockets where Renesas plays, are they typically paired up with cores, oscillators representing an opportunity for you to cross sell? Or do you feel like the SiTime MEMS oscillators are already pretty well placed on a lot of the Boards where Renesas timing or clock products are currently used? I'm just trying to get a better sense for how much cross-selling opportunity do you see bringing these 2 businesses under one roof.

Yes, you exactly put your finger on it, Quinn. We had very little -- we have some reasonably solid overlap on customers. But typically, on products, there's very little. So to your point, they are designed in clocking where the solution is quartz crystal. And this gives us tremendous opportunity to expose the values of our semiconductor differentiated MEMS-based solutions to the customers and see how we can get design wins for the future.

So this is the cross-selling opportunity one way, but there's also a cross-selling opportunity another way because we have design wins in AI, in GPUs, and accelerator cards and switches, where it's not our clock that's in there, the SiTime native clocks. It is either their clock or the clock of somebody -- of another competitor. So that gives us the next iteration, it gives us another opportunity to present the customer with a value proposition of an integrated solution.

It's, of course, not physically integrated. It is notionally integrated or put together, as making it easy for the customer to use it as well as to get the performance they need and of course, the source of supply, which is critical in all of these situations where they need to have one source of supply, so some things are not out of whack in that. So yes, clearly, that is the case.

And one last quick one for Beth. On the regulatory front, would you expect to require China SAMR approval to close? Or do you think you do not need China SAMR to close the transaction?

Thanks for the question. So we are going through the required regulatory processes in the countries that have jurisdiction. At this point in time, we do not expect to need SAMR as part of those regulatory approvals.

Our next question comes from the line of Jim Schneider with Goldman Sachs.

First of all, on the synergies with Renesas, can you maybe talk a little bit more about within the data center, the specific synergies between your products on the oscillator side and what Renesas is doing perhaps on the memory side or otherwise? And beyond the cross-sell, do you expect there could be some consolidation of overall Board timing content away from other suppliers toward a more holistic solution? In other words, is there a way that you could provide a more holistic solution between the 2 of you that maybe would be disadvantageous using another supplier?

Right. So to be very clear, there is no product other than timing that we are going to be bringing into this. So you mentioned memory somewhat onto the site. We have no influence on that. We have no connection with that. We're only working on one thing and one thing only, which is a timing product division, which used to belong to IDT. Before that, to ICS. So it's a timing business that we are acquiring and our influence in timing.

But the point that you made, Jim, is a very good one, which is that today, we have products that are oscillators and resonators on one side and clocks on the other. With their 160 engineers, with our almost double that number of engineers, I think we would be able to address the issues of density, power, resilience, higher throughput by delivering solutions, by delivering products that are somehow integrated, not just physically integrated, but somehow integrated to deliver vastly superior solutions because the need for performance, for jitter, for high speed, for throughput, for lower latencies, for lower power, those remain undiminished, not just in AI and data centers where they are extreme, but in all other areas, including consumer, including military aerospace, defense.

In terms of the one part of AI, where clock is not being used right now, and we'll have to see whether there's a place for it is in the whole optical networking, in the cabling, in the smart cables and the retimers. Typically, those are not using clocks, those are oscillators. But either way, there's an enormous opportunity because, as you know, the market is $11 billion for all timing and SiTime is only a very small portion of it.

And Renesas, large as it is, the timing business, it's still also a very small portion of it. There's a significant amount of competitors out there, and it gives us an ability to influence at the highest level, the highest differentiated, most performance-centric customers allows us to influence that.

That's helpful. And then relative to the model for 2026, maybe give us a little bit of help on 2 vectors. One, on the 1.5x book-to-bill, can you give us a sense about the duration of that backlog? Is that 6, 12, 18 months or longer? And then separately, talk about what the relative expected growth rate will be in the mobile and consumer business, do you think you can sort of match the growth rate you put up in 2025.

Maybe I'll start with that one, Jim. So in terms of the book-to-bill, I think Rajesh talked about the fact that we are seeing customers maybe book out a little longer, but typically, that's well within 12 months. We see a lot of ordering over the next couple of quarters. But we are seeing some customers book meaningfully in the second half already as well. But I would say definitely weighted to Q1 and Q2 in terms of that.

As far as our consumer business, again, there's a lot of activity there, and we've got a design win that we do expect to ramp meaningfully in -- as we go through the year. And so I think that will drive a lot of the performance of that sector. stand for our next question.

Our next question comes from the line of Tom O'Malley with Barclays.

Looking at your long-term gross margin model, 60% to 65%, you're saying the acquisition adds potentially to the high end of that, if I look at your business stand-alone, over the last year, you've had 2 quarters where your incremental gross margins are dropping through at 68% and 70%. You obviously have a mix factor that's helping the gross margins in the March quarter. But as we look at 2026, should we be thinking about something a little bit ahead of that original target just because of the mix of business moving more towards AI? Anything you can help us with on the margin side as we look through '26.

So as we think about -- I'll start with the gross margin. So mix will be the biggest driver of gross margins in the year. And so I think there's a couple of factors that are contributing to that. the CED growth and mix clearly is a very favorable component of that mix. Then the other is the consumer business. So in quarters where the consumer business is a lower percentage of the total, that is a tailwind to gross margins.

In quarters where you see a stronger mix of consumer, that can be a bit of an offset to those strong CED gross margins. So that will -- as we go through the year, I do expect that mix between those two to be the biggest driver of the gross margin in the quarter.

And then if I think about operating margin, I do expect to continue to see favorable operating leverage in the model. So I do expect to continue to grow revenue faster than operating expenses. We do want to continue to invest in the business in a disciplined way to really be able to capture all the growth that we've been talking about.

And so we do want to make investments both in our go-to-market as well as R&D to continue to have these world-class platforms in order to be able to deliver value to customers, but there is still meaningful operating leverage in the business.

Helpful. And then on the acquisition, I just wanted to understand the OpEx side. Could you maybe give us the split of OpEx between R&D and SG&A of the acquired asset? And then when you look at areas where you can see synergies, could you maybe give us some feel for COGS or OpEx where you could see some of the costs coming out?

So in terms of the transaction that we announced today, we are acquiring the assets from Renesas of their timing division, as Rajesh talked about. So this is a carve-out, and we are acquiring just those specific assets. And we will be -- once we close the acquisition, we will be integrating that into our own -- our business and our manufacturing operations and taking those over. They have a similar kind of OSAT model as we do. And so that will be really the focus for us. We'll talk more about the specifics of the model and the cost structure once we get to close.

Our next question comes from the line of Chris Caso with Wolfe Research.

Yes. Thank you. First question is on the business as you go into '26 with regard to content. And can you speak to the content gains that you realized on the 1.6T platforms? And then what do you think will be the growth rate of those 1.6T platforms? How meaningful is that as a part of your business as you go through '26, given those content gains?

Yes. Chris, the content gains on the 1.6, I think, is going to be pretty good. It may not be -- we mentioned it's in the tens of percent, up in ASP. And there is an increased number of units being deployed on that far more than we had thought on our last call in November. So we have -- we are very optimistic about that business.

But at the same time, our business and other optical modules like 800 we called out continues as well as in some of the lower ones. So I think this is a very healthy business. We are designed into a large number of suppliers in the optical module, but also in the AECs, the active cables as well as in the retimer business. So the whole networking part of this business of SiTime is very strong.

As a follow-up, just a question on the transaction. And you speak about the combined business staying on your 25% to 30% growth targets for the existing business. Obviously, you've been growing at a faster rate than that now. So as you go forward, within that 25% to 30%, are you expecting -- is basically each business growing at that 35% -- I'm sorry, 25% to 30% going forward? And maybe you could talk about the growth rate of that business that had been within Renesas in the past. Have that been steadily growing at that 25% to 30% rate?

Yes. We've always maintained that resonators -- I mean, sorry, oscillators or a system business because it has a resonator and it has a clock. So it's a system business. And in this in -- excuse me, again, oscillators are being used in some places where clocks are not. So for example, in military aerospace, defense, oscillators tend to be used over that. Earlier, I just mentioned, certain use cases in networking, in AI, the optical modules and such where there isn't a use case yet for clocks.

But in general, I think, therefore, clocking is a slower growth business than oscillators are. So I think we will get a very good growth rate for the combined business because as you mentioned, we are indeed in our oscillator-based business, which is most of our business today is quite a high-growth business since '24. But we think that adding the clocking business, even though it grows at a somewhat slower rate still keeps growing at such a healthy rate that we are 25% to 30%. We're very confident on that for the combined business that is.

Our next question comes from the line of Suji Desilva with ROTH Capital.

Rajesh, Beth, congratulations on this transaction. Great news. I was curious, yes, I read the MOU with Renesas as part of this transaction and the I guess, the integration of the resonator into the microcontroller SoC products of Renesas. I'm curious, is that ahead of the rest of the industry or other folks? Or are you working with other folks on similar efforts? Just curious how that is positioned competitively.

So as you know -- thank you. As you know, the Titan family of products is a breakthrough family. There isn't any other resonator in any technology at that level of quality, reliability, size, power and use case. So many customers, many semiconductor customers and many system customers are looking at designing it in. And as we have mentioned in the past, it's a somewhat slower design win, particularly when it goes into somebody else's chips, right? So I think it takes a little bit longer to get the design win.

Certainly, there's nothing exclusive about this, but -- and we're talking to them. But I think that they are ahead of making this commitment. And I think this is -- as you see in the remarks by their CEO, Shibata, that they are using this as a way to pivot the sale to SiTime of the timing business and the MOU as a way to pivot deeper into their -- what they are calling their core business in embedded compute. So I think it's a win-win for both of us. And certainly, as a potential customer of SiTime, that becomes a bit of a flagship design win, if and when it happens.

Okay. Helpful color, Rajesh. And then in CED, you've talked about it a lot. The usual suspects growing here, pluggables, AECs, retimers. I'm wondering if there's any other applications which are emerging in growth above and beyond those that you'd call out with the strong growth there or whether it remains those kind of the ones we kind of already know roughly.

Yes. So once we know, there are no new categories, but they're new design wins and the density -- we've always maintained -- our growth story comes from 3 legs. One is whatever design wins we have, the end product sells more units. right? So that's one. The second is there's an upgrade in functionality from win to win and there's an upgrade in density of chips used in a particular functionality.

So what we are experiencing now in some of these with our native clock products, is that there were design wins along with oscillators and there were more of clocks. And then there were more clocks being used in a design win. So I think that trend continues.

And finally, there's a new use case for our products that didn't exist. An example would be an L4, ADAS or indeed, even the retimers, which didn't need our level of performance sometime back.

Our next question comes from the line of Gary Mobley with Loop Capital.

Everybody, let me extend my congratulations as well. I wanted to ask about the strong growth that you're seeing and the ability to support that growth from a supply chain perspective. Are there any capacity constraints that you see now or on the horizon that are causing your order lead times to extend? And I guess, conversely, do you see a situation where some of your crystal-based competitors are struggling to fill surging demand, which seems to be industry-wide? And are you able to take advantage of that with your quick turns, I guess, supply chain?

We know of no data that shows that crystal suppliers are struggling. It may be, but we don't know that. But what I can say is that just on the merits of the SiTime programmability, SiTime supply chain, the integrity of that given semiconductors and specifically the quality and reliability of our products, SiTime is the preferred solution even when there isn't a performance requirement. In fact, we get to charge a premium on our products even when there is no performance simply based on our quality, reliability, support, programmability.

We think that we don't have to rely upon anybody's struggle or weakness. We think we rely on our strength, our value proposition is strong and sustainable, and customers are recognizing that with every passing quarter, if you will. And we keep on adding to our customer base both in existing customers and existing applications, but also new applications.

So we feel generally very confident in our supply chain. We had some challenges in the beginning of last year when we were trying to launch new products at the same time when demand was surging, but we're more than caught up in Q3, Q4, and we look forward with a lot of confidence to this year in terms of supply chain.

And I think the other thing, we continue to work very closely with our supply chain partners as we see kind of the industry evolving and are mindful of our cost and working very closely with them to ensure that we can continue to secure the supply that we need and the lines that we need. And again, watch the cost as well as we see the tightening that I think everybody is seeing.

As my follow-up, I want to ask about a few details on the acquisition or the asset carve-out. Just to confirm, this is a fabless business model. And related, is there any foundry crossover? And I just want to confirm that most of the engineering team, I presume, is down the street from SiTime's headquarters, correct?

Well, starting with the engineering team, it is located mostly in North America. There is a large group in Ottawa, which is the IDT group. Ottawa seems to have a long time ago, Zarlink also. So there's a nice pool of people that we could hire from in analog design.

The next one, as you rightly point out, is right here in South San Jose and available. And the third one, which is rather large as well, is in Tempe, Arizona, and we're looking forward to that as a new location for us. They also have some people in Shanghai, which is new, and then there's people across some parts of Asia and smaller numbers.

In terms of the other question, which was around fabless, actually, it's a really very good match. They're mostly -- they are all IDT. And therefore, they are TSMC 0.18 micron, which is fantastic since TSMC is already a great supplier to SiTime. And also, they are with GlobalFoundries in the 55-nanometer, which is great.

On the back end, there's almost complete great connection with ASC and CARSM and some of the others in Asia. So we are very confident that we can make this the back end and the supply chain work really well.

Ladies and gentlemen, I am showing no further questions in the queue. I would now like to turn the call back over to Rajesh for closing remarks.

Look, this has been a long time coming, and we've been on the spot. When we raised money, many of you asked us what it's for. And we've always been very clear that our next M&A would be in timing. It would be at scale. It would be equal to or better than our gross margins. It would be equal to or better than our net profit margins and it would not take down the growth rate of 25% to 30% that SiTime's long-term growth model. I think we have fulfilled that on every count. And not only have we been able to get a clocking business, there couldn't be -- there isn't one. There isn't a better clocking business than this in the world.

The coming together of all of this, by our standards makes us a big company, but we'd still be a pretty small company in the large timing business. The timing business is $10 billion, $11 billion, and it grows at 5% to 6% year-on-year. At the end of these 10 years, we'll probably be $17 billion, $18 billion in size. And SiTime has a long way to go to get to be a large player.

Coincidentally or by design, we don't intend to be a large player. We're not a market share game. We have a value, differentiation, high-growth game. And so I really look forward, given our spectacular results and our outlook for 2026, plus this new acquisition, whenever it closes, to create a $1 billion company that is solely dedicated to solving tough timing problems of our customers. Timing, as we know, is the heartbeat of all electronics and SiTime is dedicated to it. Thank you.

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.

Okay. We're going to get started. I'm Tim Arcuri. I'm the semi and semi equipment analyst here UBS. Very pleased to have SiTime next. With SiTime, we have Rajesh Vashist, who is the CEO; and we have Beth Howe, who is the CFO. So thank you to both of you.

Thank you.

Very happy to be here.

So before we start, I have to read a statement. Before we get started, the company asked me to remind you that today's discussion includes forward-looking statements that involve risks, uncertainties and assumptions which are further described in SiTime's SEC filings, including SiTime's most recent Form 10-K and that actual results could differ materially and adversely from those anticipated or implied. SiTime assumes no obligation and does not intend to update any such forward-looking statements. For more information, please visit SiTime's Investor Relations webpage at sitime.com.

Okay. Great. So let's just start out with the fact that you've had a very impressive growth story, particularly in data center over the past year. I think it's gone a little bit underappreciated until very recently by many investors. And can you just first start in data center and remind people where you play?

Yes. So thank you for having us. SiTime has 3 businesses -- business units. One of them is CED -- hello. Yes. So one of them is CED, which stands for Communications, Enterprise and Data Center. So data center is part of that. The short answer is we are pretty much everywhere because precision timing, the category we invented is everywhere. We are in the XPU, the GPU, CPU, APU, TPU part of the business. We are in the switches. We are in the accelerator cards. We are in the networking piece with the optical modules, the smart cables. So sort of everywhere.

And within -- can you remind investors why MEMS timing is so important in data center? And just generally, can you just speak generally to why timing is so important?

So timing, as we famously say, is the heartbeat of all electronics. So for people for whom it's a little hard to understand what it exactly does, think of it as a metronome, think of it as every semiconductor in a system, processor, communications, anything, power management, they need to know what is the reference point at which they need to fire, at which they not need to send a signal and not send a signal.

And so we send out famously a square wave. It literally is a square wave, looks like that. It's a timing square wave. And based on the edges of that square wave, they have to decide how to fire. So now in a simple thing like TV remote control, it doesn't really matter if you miss it or flub it a few times. But anywhere where timing is critical, think a satellite, think a weapon system, think an ADAS, think data center, communications, it's very, very important. So we sell products that are in the tens of cents, let's call it, $0.30, all the way to $3 to $30 to $300 depending upon the timing.

So timing -- precision timing in particular, you mentioned MEMS. We invented this technology called MEMS back from 2007 to 2015, '12. And we competed with a lot of companies, some large companies, some small companies. But in the end, we're the only ones who have shipped, let's call it, 4 billion units or so to date in cumulative. The next level companies have shipped maybe 100 million, maybe 120 million units.

So the better way of thinking about SiTime is, yes, we have MEMS technology, but we have analog technology. We have systems technology. What we see ourselves is, Tim, as the timing company. So timing, wherever it's needed, that's where we want to play, highly differentiated timing.

And can you talk about just the 2 parts of the market. So talk about oscillators and clocks.

Yes. Actually, there are 3 parts of it, getting to 10 billion units -- dollar, excuse me, as a TAM. So where we started was oscillators. Oscillators are made up of a resonator, at least one resonator and a clock integrated into one. So we built that. We did it because it was the shortest way of getting to the market. It's the highest order bit. It's a system play.

Then we split out and we got into clocks both natively and through acquisition. And recently, we've gotten to stand-alone resonators. So when we talk about the $11 billion market, it's about $4 billion, $4.5 billion resonators, dollars, $4.5 billion oscillators, and the remaining is clocks.

And can you just talk how bundling your MEMS oscillators with Aura's clocking portfolio that you acquired, how you're -- how that helps?

Yes. So it turns out that the clocks that are sold independently are typically very early in the system thinking. So a system engineer picks a processor, picks an architecture and very quickly picks a clocking architecture. So that means that clocks get decided on by the customer before oscillators get decided. So by acquiring the Aura product and by building our own clocks, we get further up the food chain in making the decision-making and then we can show up with our oscillators.

And that's a unique thing because as of now, there are no companies that do clocks at scale and do oscillators and resonators at scale. The market is divided in 2 out of the $11 billion. There are clocks -- there's clocks that's mostly semiconductor companies, and there's oscillators and resonators, which is mostly quartz companies, and we're the only one that does it all.

Yes. So let's actually talk about the competitive landscape. So from 2019 until now, you're still the only timing company. But back a long time ago, several tried to get into the market, all the analog companies, Maxim and IDT back at the time and slab. And the MEMS piece really is the key to all of this figuring out how to do these moving parts in silicon. So can you speak to sort of what your moat is? How difficult it would be and how long it would take to -- for someone to replicate what you do?

So while it's true that MEMS is the defining technology at the level at which we are playing at the level of performance that we are playing, the analog mixed signal becomes super, super important. So SiTime is an analog semiconductor company. And then putting the 2 together which is, call it, make it the systems piece, makes it an even more challenging thing. So SiTime does have all 3 now.

But rewinding the clock back to when I showed up in 2007 to a 30% company pre-revenue -- at that time, the MEMS technology getting that right was very critical, very important. And there are 3 aspects to getting MEMS right. One, MEMS doesn't have a process other than the one you build yourself. In other words, SiTime has built its own MEMS process. We're on the fifth, call it, the sixth generation of that process. We make it at Bosch, but we tell them how to make it. It's our process. It's not their process. We tell them do this, do this, do this.

So that's important. The design is important because its material science goes into it, the design of the resonator is critical. And finally, there are no tools. So there's no synopsis. There's no cadence tools. So SiTime uniquely rolls our own tools. So we have several engineers that are material science, software, physicists, mathematicians that build our own tools with which we design. So that's all only in the MEMS.

Then, of course, as I mentioned, the analog, we are experts in PLLs, we're experts in oscillators, in mixed-signal circuits. And then we have experts in putting it all together. So I think the moat is around IP, actually patents, but it's also around know-how and the years of doing that. And one interesting thing back to the MEMS, when I look at other MEMS companies in other non-timing areas, Tim, once they're established, the way they -- SiTime has been established, they tend to be always top of the heap. Think Broadcom, [ ex ] Avago -- think Avago before that from HP, think of Bosch, think of all these other companies that have established themselves.

And are there pieces that you don't have from an M&A perspective? Are there areas that you could acquire? I mean, you did this recent deal with Aura, but are there other areas where you could consolidate?

Well, clearly, clocks, we're pretty small. We're sub-$20 million in revenue right now. And as I said, the market is about $1.5 billion. So we're clearly relatively small. Our Aura deal was very successful in getting us design wins, but the design wins have taken their time as we expected.

So clearly, in the clocking area, that's an opportunity. There's an opportunity in software. There are various synchronization softwares. We got some of it through Aura, some we've rolled ourselves. There are opportunities in modules. There may be opportunities in IP. So there's quite a few opportunities to -- for M&A.

And so I just want to go back to data center. Is there sort of a rule of thumb? We've talked about this, but can you sort of go through what your content is within the rack? If we hear on NVIDIA rack, for example, is there a way to sort of aggregate what the content per rack is? People want these like handy numbers to say, "Oh, they're shipping NVIDIA rack, how much SiTime content is there in that rack?

Yes. I think Beth has a pretty good handle on it.

So as you think about the racks and it really varies across, right? So NVIDIA is unique in that they're building an integrated rack themselves. And as you think about this timing content really along 2 different vectors, compute vector, so CPU, GPU, XPU as well as in the networking fabric. And timing is critical in both. But if you have to kind of pick networking is really where you see the benefits of our precision timing, whether it's in NIC cards, whether it's in optical modules, whether it's in the switches as you look.

And so there's content across all of those different elements of a data rack there. And it really would vary from product to product or rack to rack. But you can think of certain racks where we've got high penetration and really well penetrated across the topology, that can be multiple hundreds of dollars in a fully integrated rack.

And can you just talk, Rajesh, about just the MEMS piece of it and how really you're the only one doing it in silicon and how everyone else is using quartz. And can you just talk about how -- just how there's the capacity benefit because you get a 120,000 die per wafer. They have fixed volume. So it's a lot more flexible for you than that. I mean, there's a lot of factors there, but can you talk about those?

Sure. So back in 2010, as you said, there were those 3 large companies, but there were also 5 start-ups and SiTime was the sixth start-up that competed. So we had a lot of competition. And collectively, all these other companies spent $300 million to $400 million and about 7, 8 years and they kind of gave up. They gave up because they weren't focused enough on the 3 elements of MEMS that we talked about, the process, the design and the tools. SiTime was and we came through. So that we established.

Going forward, what happens is the MEMS part, and I wish we could show it is about 1/10 the size of a quartz crystal. And that's a big benefit on its own, oh, okay, it's smaller, so that's good. But what's really good about it is it's also small in mass, which means it's got low thermal mass. It's got low mass for shock and vibration. In other words, it's very, very much more resilient to shock, to vibration, to temperature movement to temperature changes.

And so what SiTime does is it delivers a uniquely stable reference through the MEMS product. And of course, it's much smaller and it's lower power. Also because it's semiconductors, it's built in a very, very clean environment. And so the quality and the reliability product is exceptionally bigger. It's 10 or 20x better than, in some cases, as much as 100x better than quartz. Quartz is just not semiconductor. Semiconductors is the cleanest product known to humankind so far. So we get all the benefits of semiconductors, plus we are an analog company. We combine these, and we have a very unique product.

Can we pivot to the consumer opportunities? You're being carried along at a large consumer company with their internal modem. So I just wonder if you can talk about that?

Sure. You want to go?

Sure. So we have a large customer and that's been reported that we do have 2 chips in their internally developed modem, and we've worked with them for a long time, really excited about that. The innovations that really went into that, as Rajesh was talking about oscillators and clocks. We've basically married those 2 into a single system for them, along with another oscillator that we sell as part of the modem. It's been -- the teardowns have shown that they're in 2 products right now with the internal modem the 16e and the 17 Air.

And I think we see a lot of opportunities as we head into 2026 for our consumer business as that proliferates into additional products that we've got great growth opportunities from that customer as well as other consumer customers that buy our oscillators.

And when we think about the complexity and you have -- your timing gets more complex with new PCIe. So PCIe shouldn't affect timing complexity much, I guess, but can you kind of talk about how the frequency changes is helping you?

Well, first of all, as frequency goes higher, it's generally harder for quartz crystal to get to that same level of frequency, although they've done a phenomenal job of coming up from the last 10 years. So they do a pretty good job, but not at the levels that they can -- that we're talking, say, 625 megahertz. That's a hard frequency for them to hit.

But beyond that, I think the throughput that we're talking about and the latencies we're talking about are very differentiated in our product. And finally, quartz crystal doesn't hold its stability as well as a MEMS product does because quartz crystal has, they call it, [ HOPs and POPs ] where it starts vibrating at different frequencies, which throws the system off. And the SiTime ability to stick to the frequency is exceptionally great. And that's why it's a chosen product in -- particularly at 800 gigabit and 1.6 terabit optical modules, for example.

And can you -- going back to what you talked about within data center, is the opportunity bigger in the compute tray or more within scale-up and scale-out networking as the racks get more dense and the clusters become larger? And you did mention some ASP numbers. But maybe along the lines, are you engaged with all the different rack vendors now?

Yes. So as we talked about, the opportunity is probably bigger in the network topology of the network fabric as we look across the opportunities. There are timing with CPUs or XPUs, on the trades. But if we think about NIC cards or optical modules or switches, there's really timing content, precision timing is really required across all the different elements of the network topology. And one of the great things about SiTime is we're addressing this AI opportunity is that we're working with most of the different players, right? So 10, 15 different cable providers, the different hyperscaler.

So we've really got relationships kind of across that ecosystem, if you will. And so we think about optical module makers and the various ones there. We think about some of the switch players. And as you said, the content can vary from $1 to $2 ASPs for some of the optical modules. As you go into some of the switch, you can have $7, $10 parts -- and so as you go up the stack, you can have meaningful content across the networking topologies.

And just going back to this most recently reported quarter, it was a watershed quarter, I would say. Is there any concern that there might be a little like advanced procurement of your solutions? And there could be any digestion on the other side?

Not from our side. We're very clear that we did see that in the 2022, 2023 shortages time frame. And we've got very sensitized to it painfully, I would say. So we've been very diligent about checking not just the disties and the OEMs, but also the contract manufacturers all the way that we can. And we think that this is real demand and it's bolstered by our customers when they put out their numbers, we can see that, right? When we see Accredo publishing banner numbers yesterday, we can see as they're a customer of ours, we can see that, that is very much in consonance with the actual numbers put out.

And can you talk about the potential for more oscillator opportunities? You're still a relatively small player in the market. And I think Titan is probably not going to be until late '26, I think?

That's right.

So can you just talk about sort of the ramp of the oscillator opportunity and how that rounds out our portfolio?

Yes. I think as you rightly point out, we're still a small company. Analysts have us at around $300-odd million this year, which is a significant growth here from last year, but it's still a relatively small number. The best way for investors, I urge them to think about SiTime is to think about SiTime as a player across markets. It turns out that data centers are big right now and a big lift for us. But we are also in the C part of the CED. We are in the communication systems within enterprise systems.

Moving from there to what we call IAD, industrial, automotive and defense, we have pretty decent automotive business. We have a decent-sized industrial business, and we have a small but very growing, very, very profitable defense business, think drones, smart fuses, missiles. In automotive, we are very big on ADAS. The more it gets towards Level 3, Level 4, Level 3.5 to 4, our content increases in radar, LiDAR, cameras.

And in industrial, if you want to put robotics and humanized robots, we think that's a great opportunity. We have several design wins in the big names known there. And finally, as Beth talked about, one very popular phone, but consumer products like watches, smart watches, a variety of home use case like doorbells and so on. So highly diversified and growing across all of it. So that's why we think given our SAM of around $3 billion to $4 billion, given our TAM of around $11 billion, which will probably double in the next decade, I think we have a great opportunity ahead of us.

Just in terms of a large modem company, a large merchant -- modem supplier, they -- all their timing is in quartz. However, they're also talking about building out their own racks for data center. Now they're pushing into data centers. So is that an opportunity for you to actually penetrate that customer and sort of turn the tide and say, "Hey, you think so."

We think so. We think that they're very open to using not home-made technology in many areas. You know that they have a big automotive push as well. So we think there are many opportunities all around. Most people don't have religion around this because we don't -- we think we're not for everybody. We're for the highly differentiated products. So we're still only 10% of our SAM and 3% of our TAM. So we have a long way to go, but SiTime has the highly differentiated, premium priced. We are always higher priced. So we have high gross margins. We guided towards 60% for this quarter and 60% gross margins for a high-growth company. I think that's pretty good.

Very good. Beth, so I wanted to talk about how to think about seasonality and particularly as you go into March because normal seasonal March seems to be down 10% to 15%. But you're also ramping this modem opportunity, you're ramping in data center. So how should we think about how much like normal seasonal really is a factor for your business?

Yes, I think it's a great question that folks maybe don't always understand. Actually, our historical seasonality, if you look kind of 3, 5 years, is more closer to 20%, 19%, 20%, 21% sequential declines from Q4 to Q1. As we've changed the complexion of the business, and we've got higher CED, the data centers, I think it is moving more to the range you said around the kind of 10% to 15% sequentials as we see -- there's a number of factors that go into that of not just our consumer business, but also in the early in the year, you see that across different customer bases. And so I think that's a reasonable assumption for the March quarter.

And relative to the consumer modem opportunity that we talked about, how much of a headwind would it be if they end up relying more on merchant modem for longer for your business? I mean, obviously, you want to see them adopt their own modem as quickly as possible. But how much of a headwind do you think for your business?

Yes, it's probably not much. It's a meaningful part of our business, but there's so much growth in the other parts of our business that it's okay.

And maybe also on to auto and industrial. It sounds like much of the secular growth is more in 2027. And just can you talk about why MEMS is important in those markets and just as important in those markets versus in data center?

Yes. Because as you rightly point out, most of the high level of Level 3, Level 3.5, 4, that's when they are emerging. They're merging in '27, which is where we play in ADAS. We also have another initiative around safety. SiTime has a product called FailSafe, which is the first of its kind. It's a safety-oriented think of run flat tires, which fail, get punctured but still run for 50 miles or so. SiTime is coming up with this new category of product, which would make sure that timing in an ADAS system is FailSafe. That's an axis of development that is pretty innovative and hard to do, and we're one of the ones doing it. So we have high hopes for that.

Great. I also wanted to talk about cash, and I want to talk about CapEx. So over the past few quarters, CapEx was a lot higher than the mid-20% range before coming down to like 6% in the most recently reported quarter. Why would CapEx have been that high for such -- for a fabless company? And maybe is it fair to assume that CapEx is going to stay below 10% going forward?

Well as we think about CapEx, we really think about the investments we need to make in the business. And so as you rightfully said, over the last couple of quarters, we did have elevated CapEx as we were ramping our new products and basically preparing our supply chain for those productions as we ramp into mass production for several of these new products. And so when it's important to make the investments, we will do that. In the second half of this year, we said it would step down meaningfully and it has.

And so as we think about it longer term, we're going to continue to invest in R&D for tools and our labs as we bring new products to market. And also on the supply chain where it makes sense for some of our unique tooling that we talked about or where we want to make investments for some of these new products in order to support the production ramp at those OSATs, we'll make those investments. But it's really based on those new products and what we think we need to do in terms of the right ROI to basically drive the revenue that we want to drive.

And I would imagine that the consumer gross margins are lower. So as this modem opportunity becomes a greater piece of your mix, I mean, it depends on how fast that grows versus the data center stuff, obviously. But does that become a headwind to you being able to get margins above 61%? Can you kind of talk about the relative margins between the different segments?

Sure. So as we talked about earlier, as we guided for 60% in Q4. As we think about margins over the long term, really, that's why the mix is really the biggest driver of our margins. We think about our data center, our AI business being accretive margins. And why as we continue to grow that very significantly, it does provide us the opportunity to continue to expand margins.

As you rightly pointed out, the consumer business does tend to be more dilutive. So in certain quarters where that may be a bigger component of the business, then you may see some impact from that. But over time, we do believe we can continue to expand gross margins, both in terms of our product mix, and also as we grow the revenue, right, the leverage on the manufacturing overhead and being able to see some benefit there as well. So really, our long-term plan is to continue to expand the gross margins over time.

Great. And I guess maybe we can -- I just wanted to end on -- you're not guiding '26. But this year, I mean, your growth is going to exceed 50%. So I would think you can grow at least in a similar range next year, but given how strong data center is. But can you just talk about the puts and takes? I'm not asking you to guide next year, but just talk about the puts and takes on your growth rate next year versus this year. Do you think you can grow 50% next year again?

Well, we haven't guided for '26 quite yet. I'll try to get them in there. We do see a lot of opportunity and strong growth across our segments. We've been talking about over the last 25, 30 minutes in terms of AI and data center, in terms of consumer and industrial, automotive, defense, all of those create opportunities for us across our different markets. So we see lots of vectors of growth that are going to support really strong growth for 2026. So if I look at the strong momentum in the marketplace. I look at our design wins, our product funnel, all of those things, I think, give us a lot of confidence for a really strong 2026.

Great. Well, this is a very interesting story. So I really appreciate you time.

Thank you very much.

Thank you.

Thank you.

Thanks so much.

Good afternoon, and welcome to SiTime's Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded today, November 5, 2025. I would now like to turn the call over to Brett Perry of Shelton Group Investor Relations. Brett, please go ahead.

Thank you, Ari. Good afternoon, and welcome to SiTime's Third Quarter 2025 Financial Results Conference Call. Joining us on today's call from SiTime are Rajesh Vashist, Chief Executive Officer, and Beth Howe, Chief Financial Officer.

Before we begin, I'd like to point out that during the course of this call, the company may make forward-looking statements regarding expected future results, including financial position, strategy and plans, future operations, the timing market and other areas of discussion. It's not possible for the company's management to predict all risks nor can the company assess the impact of all factors on its business or the extent to which any factors or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. In light of these risks, uncertainties and assumptions, the forward-looking events discussed during this call may not occur, and actual results could differ materially and adversely from those anticipated or implied. Neither the company nor any person assumes responsibility for the accuracy and completeness of the forward-looking statements. The company undertakes no obligation to publicly update forward-looking statements for any reason after the date of today's conference call to conform statements to actual results or to changes in the company's expectations.

For more detailed information on risks associated with the business, we refer you to the risk factors described in the 10-K filed on February 14, 2025, as well as the company's subsequent filings with the Securities and Exchange Commission. During the call, management will refer to non-GAAP financial measures, which are considered to be an important measure of company performance. These non-GAAP financial measures are provided in addition to and not as a substitute for nor superior to measures of financial performance prepared in accordance with U.S. GAAP. This GAAP to non-GAAP reconciliation includes stock-based compensation expense, amortization of acquired intangibles and acquisition-related expenses, which include transaction and certain other costs -- cash costs associated with business acquisition as well as changes in the estimated fair value of contingent consideration and earn-out liabilities. We refer you to the company's press release issued earlier today for a detailed reconciliation between GAAP and non-GAAP financial results.

With that, it's now my pleasure to turn the call over to SiTime's CEO, Rajesh. Please go ahead.

Thank you, Brett. Good afternoon, everyone. It's a pleasure to connect with you all again. We value the trust of our long-standing shareholders and extend a warm welcome to those joining the SiTime journey. As AI becomes more prevalent, it drives the need for better timing and synchronization, which in turn propels faster growth for precision timing. Our key applications are centered around AI, including networking and computing hardware in clusters, XPUs, GPUs, CPUs, et cetera, for inference, personal AI computers and AI-based next-generation communications equipment. Here, as well as in all our other end markets, SiTime provides differentiation with resilient performance and reliability.

Q3 2025 was a milestone quarter in SiTime's history with revenue of $83.6 million, up 45% year-over-year, an increase in gross margins to 58.8% and EPS more than doubling to $0.87. Exceptionally strong bookings reinforce our outlook for continued growth momentum. Our growth is playing out geographically as well. In Q3, we saw double-digit percentage growth in every region. We continue with design win momentum across all our end customer segments, highlighting the broad demand for our products. In Q3, demand from CED, communications, enterprise and datacenter customers surged with segment revenue up 115% year-over-year. This marks the sixth consecutive quarter of triple-digit growth in CED and represents 51% of our revenue in Q3.

We expect our growth to continue at a fast pace driven by 3 trends. First, we will generate more revenue with our oscillators and clock generators in existing design as their shipments increase. Examples include Elite and Elite RF oscillators, which enable better synchronization for lower latency and higher GPU efficiency. Second, we continue to win new designs, which will generate new revenue. For example, optical module bandwidth is doubling to the 1.6 terabit level, and these new modules are beginning to ramp now. Demand for the 1.6 terabit modules has recently doubled, indicating a sharp transition to 1.6 terabit technology in first half 2026. Additionally, SiTime's oscillator ASPs in this application are higher because of the higher frequency and performance requirements. The third reason is that CED orders are coming in with shorter lead times. With the supply chain preparedness and product architecture, SiTime has better availability and is doing a great job in fulfilling this demand. Our funnel is growing rapidly as well, particularly in clocks, where it has quadrupled to $300 million in the past year. All of these trends are giving us higher confidence for 2026.

Moving to aerospace defense, precise timing is critical. For example, our Endura oscillators enable synchronized movement and robust communications. With GPS becoming increasingly compromised, localized signing with our highest performance oscillators provides essential holdover capability for continued operations. In automotive, our recently launched Chorus clock generator is ramping at top ADAS car companies and is integrating into leading L4 and Robotaxi designs. Our product road map features failsafe technology, which advances safety-first design with high stability timing and predictable failover for L4 autonomy.

And finally, in mobile IoT consumer, we expect strong growth from our Symphonic clock generator in mobile applications in the coming year. We are very excited to introduce the Titan Platform, a breakthrough that marks SiTime entry into the $4 billion stand-alone resonator market. Titan opens an incremental $400 million SAM or serviceable market today, which we expect to grow to $1 billion by 2028. This platform is the result of more than 2 decades of innovation, hundreds of millions of dollars in investment and 6 generations of MEMS technology. Over that time, we've improved resonator performance by 100x, and we see another 10 to 20x improvement within reach as we continue to innovate. Titan fundamentally transforms the resonator market. First, it eliminates the need for stand-alone board-level resonators, which is a persistent challenge for customers by enabling semiconductor level packaging and integration. Second, it creates long-lived revenue streams for these semiconductor companies that integrate Titan and deliver more value to their customers. We believe Titan and our resonated road map puts SiTime years ahead of the industry. Our leadership will enable a new class of electronics that are smaller, lower power and higher performance, setting the stage for the next wave of innovation.

Across the business, robust demand and a healthy funnel position, it positions us well for continued strong growth. We remain committed to further investing in R&D, deepening customer engagement and strengthening operating leverage. SiTime is well positioned for enduring success. I look forward to the opportunities ahead and to sharing our continued progress.

I'll now turn the call over to Beth to discuss our financial results in more detail. Beth?

Thanks, Rajesh, and good afternoon, everyone. Today, I'll walk through our third quarter fiscal 2025 results and then provide our outlook for the fourth quarter. As a reminder, I'll focus on non-GAAP financials, which are reconciled to GAAP in our press release.

Q3 reflects the continued execution of our strategic priorities. Our performance demonstrates the strength of our diversified products and applications, the scalability of our operating model and the growing demand for our differentiated solutions. In the third quarter, revenue increased 45% year-on-year to $83.6 million, driven by revenue in communications enterprise datacenter, which grew 115% year-over-year to $42.1 million. Sales into the automotive, industrial and defense market totaled $20.2 million, up 14% year-on-year. And sales into the mobile IoT and consumer market increased 4% year-on-year to $21.3 million, of which our large consumer end customer represented $15.3 million. In terms of the mix of revenue, the communication enterprise datacenter market represented 51% of revenue, while the mobile IoT consumer market represented 25% of revenue and the automotive industrial defense market represented 24% of revenue. Q3 non-GAAP gross margin was 58.8%, up 70 basis points year-on-year due to improving product mix and favorable product cost. Total non-GAAP operating expenses increased 14% year-on-year to $33.7 million.

For the quarter, R&D expense was $18.5 million and SG&A expense was $15.2 million as we invested in both sales and marketing. We continue to be disciplined while investing for future growth. Q3 non-GAAP operating income was $15.4 million, an improvement of $11.4 million or 12 percentage points versus the same quarter a year ago. Q3 non-GAAP net income was $23.4 million or 28% of revenue, and non-GAAP earnings per share more than doubled year-over-year to $0.87.

Turning to the balance sheet. Accounts receivable were $22.5 million, with DSO improving to 24 days versus 35 days in Q2 due to better revenue linearity. Inventory at the end of the quarter was $86.7 million compared to $84.1 million in Q2 as we continue to maintain strong inventory for assurance of supply. During the quarter, cash from operations more than doubled sequentially to $31.4 million. As expected, capital expenditures stepped down in Q3 to $5.1 million. We ended the quarter with $810 million in cash and short-term investments.

Now I'd like to provide our outlook for the December quarter. For Q4, we expect revenue of $100 million to $103 million, gross margins of 60% to 60.5%, operating expenses of $35 million to $36 million, interest income of $7 million to $7.5 million and diluted share count of approximately 27 million shares. As a result, we expect fourth quarter non-GAAP EPS to be in the range of $1.16 to $1.21 per share. In closing, our third quarter performance and outlook for Q4 reflect the strong top line momentum and the meaningful operating leverage in our model as we scale. We are executing on our strategy to lead in high-growth, high-value markets. Our diversified portfolio continues to gain traction across AI, automotive, industrial, defense and consumer sectors, reinforcing the strength of our multi-market approach. Operational discipline remains a cornerstone as evidenced by the expanding gross margins and significant increase in operating income. With a robust product pipeline and deepening customer engagement, we are well-positioned to drive sustained growth, operating leverage and long-term shareholder value.

With that, I'll open it up for questions. Operator?

[Operator Instructions] Our first question comes from the line of Tore Svanberg of Stifel.

Congrats on the record revenue and the very strong outlook. Could you give us a sense for what's driving the strength in Q4? I mean I assume CED is going to continue to be a strong growth driver. But yes, on a relative basis, could you talk about the 3 segments into Q4, please?

Sure. I'll start there, Tore. So, we do see a kind of continuation of trends and sequential growth in each of our segments. for Q4. No surprise, the AI and datacenter business continues to lead the growth in terms of the strength of the markets. But we are continuing to see adoption of our new mobile Symphonic product as well as performance in aerospace and defense as we look into Q4.

And as my follow-up, a question for you, Rajesh. So now that you've got clocks getting design win, you got the resonator product line. I'm just wondering how that serves to pull in more oscillator opportunities for you as well. Because my understanding is sometimes you get drawn in with more components, especially as you get design wins for clocks and resonators. So, any color you could add there, please?

Yes. Thanks for that, Tore. The clocks definitely do bring the oscillators or oscillators bring in more clocks. But in spite of the very, very robust funnel that we have in clocks, we're still a relatively small player in the clock cycle. So, I think it will probably be for it to be able to pull in our oscillators to significant levels. That's probably out for about 1 year, 1.5 years at least. As far as Titan, the resonator pulling us in, I think that's definitely not going to have any meaningful revenue until late '26 or '27 even going out in the future. I think the main reason for talking about these is to indicate that SiTime has really established its position as a broad-based timing supplier, which makes us completely unique. There is nobody else that has oscillators as strongly as we do have, blocks rising and resonators coming in for the future and bringing in a lot of strategic value to the customers. So, we just wanted to expose that to investors to get them to understand how far we have come in the last couple of years in building ourselves out.

[Operator Instructions] Our next question comes from the line of Quinn Bolton of Needham & Company.

Congratulations on the results and outlook. I guess I just wanted to come back for just I might have missed some of your initial comments on the Titan resonator market. But obviously, I think historically, resonators have kind of sold at lower price points than clocks and oscillators. And so, I'm just wondering, as that business ramps, I think you said late '26 into 2027. Can you give us a sense what's the margin profile of the Titan family? And is that sort of aligned with your kind of roughly 60% gross margin that you guided to for the fourth quarter?

You're exactly right, Quinn. The ASPs are definitely lower. They're lower than oscillators typically, and they're lower than clocks typically. But as I say, it really shows up in volume because that $4 billion resonator market is a 40-billion-unit market or more. So, the ASPs are low. We're talking $0.20 or below, but the gross margins are definitely in the 60% regime and in fact, probably higher. And yes, so the design wins are typically would be in tens of millions of units level design wins.

And then you've kind of filled out the timing portfolio, and I realize you may have additional product lines you can add to oscillators or clocks. But I guess I just wanted to think about you guys raised roughly $400 million sort of in the third quarter, looking to M&A. Can you just give us any updated thoughts on M&A? I think there have been some assets that have been rumored for sale, divisions of larger analog companies. Any thoughts on like atomic clocks, there's been some acquisitions of atomic clock companies announced over the past couple of months. And so just any updated thoughts on what you might be thinking on further enhancing the product portfolio through M&A?

Yes. We certainly are interested in M&A. And I think we're looking to get scale. Unfortunately, the atomic clock business, particularly the ones you may be referring to are quite far out in revenue terms. So, while very interesting technologically and certainly something which is a gleam in our eye, I think we would be looking more near-term for M&A that actually has some impact.

Our next question comes from the line of Tore Svanberg of Stifel.

Just a few follow-ups. First of all, Beth, the gross margin is pretty strong, 60%, 60.5%. I assume that is, again, mix driven. But is there also sort of a scale element here? So, as you get over $100 million a quarter revenue, just naturally the gross margin higher? And where could we eventually go here?

Thanks for the question, Tore. So, as we've talked about, our target is to have 60-plus percent gross margins, and we're getting there in Q4. Product mix and ASP definitely plays a part as CED has grown, those have very attractive ASPs and margins for us. So as that business has become 50%, 51% of the mix, that is positive for us as well. And then we will always continue to work on our cost, and that is also benefited by the scale. So, I think if I look at it, product mix is definitely helping us as we mix to more and more CED and then the scale and cost components also play a role.

And then my last question is for -- back to you, Rajesh. Could you just give us an update on where you stand with your go-to-market strategy? I think in the past, you've put together some efforts to work a little bit closer with the hyperscalers, maybe even closer to some of the bigger chip players that sell to those hyperscalers. So, any update there would be helpful.

Yes. I think we're continuing to make significant progress, particularly in the semiconductor area. I think we also see the entry of new people in the market. who are not your typical players, I mean, notably Oracle and of course, OpenAI and so on. So, I think we are looking at the whole ecosystem. And as the timing company that is focused on high-end timing, differentiated timing, those are clearly customers that we're looking at moving into. And what we find ourselves is that we -- as there's more performance, less latency, smaller size, lower power, there's a greater need for SiTime products. And I think the 1.6 terabit per second is a great example of that. In the last couple of calls when we've talked, we've seen that further out in time, but we see an acceleration among many of these technologies. So, it looks really good.

Our next question comes from the line of Chris Caso of Wolfe Research.

I guess the first question is with regard to the customer base, can you give us some sense right now of, obviously, AI datacenter is what's driving a lot of this right now. How much of that market are you able to address with the reach that you have now with the sales and the engineering and the customer relationships right now? And what can you do to expand that into the areas where you just don't have penetration right now as a smaller player in what's a very big market?

Yes. I think just to be very clear, Chris, we are in the early innings of all of this. If you look at the ecosystem that we are selling to, we're selling to semiconductor companies, as noted. We're selling to the hyperscalers. We're selling to the OEMs that are working on it. We're selling to the ODMs. We're selling to the module makers. We're selling to the active cable makers. So SiTime has almost an embarrassment of riches, and we are building ourselves up and hence, the comment on both making significant efforts in R&D as we see the need for greater and greater product needs that are 1, 2 years out even, and then, of course, into the channel strategy, not only directly addressing the OEMs, but also the hyperscalers, as we mentioned, and increasing significantly our geographic footprint, both in -- in all geographies, actually, in the United States, in Asia and as well as in Europe. So, I think it's -- we are actually on a very fast growth curve in adding resources in R&D and development as well as in marketing and sales to address all these markets. But it's early innings.

For my follow-up, could you talk a bit about content? And you mentioned earlier on the call, the 1.6T transition. What does that transition do to timing content -- to your content on the board? And what else should we be watching as potential content drivers within that CED segment?

Yes. So that's probably one of the easiest ones to talk about because it's one where we see higher volumes, and we see the significant increase in ASPs and average selling prices. So that's relatively an easy one. But also in the switches, also in the accelerator cards, the connectivity cards, whether they're PCIe or the UCX or any of the other technology, I think it really comes into full force. We also think that there is a future road map where timing, the whole conversation around chiplets is starting to get very interesting. As we look forward out into the future, it's not happening now, but it's happening out in the future. I think that gets very interesting, significantly increasing content as we go forward.

[Operator Instructions] Our next question comes from the line of Quinn Bolton of Needham & Company.

A couple of follow-ups. I guess the first one, the CED business, up well over 100% with the fourth quarter guidance. I guess I'm just wondering, can you talk anything about visibility, lead times in that business? Are you starting to see any shortages of other components that could constrain that business or maybe on the flip, if things are tight, do you think there may be any hoarding or inventory stocking starting to take place in the CED business? And then I've got a quick follow-up.

Yes. I mean we're -- in our business, we certainly don't think there's hoarding. In our business, we certainly don't think that there's any shortages in the sense that SiTime, back to my prepared comments, we have built up a robust value chain, a robust supply chain, and we were able to move because of our programmability and our focus on this market. So, we were good in getting to that. We do hear rumors of some of the optical components that are in shortage. But I don't think that anybody is holding back because we see quite a significant increase in volumes. But so far, that's about it. We've also, of course, heard of substrate shortages, but I think that's sort of fairly common knowledge. Nothing that's very particular to timing.

And then I guess kind of just wondering if you had any updated thoughts sort of on just what you would now maybe call typical seasonal trends as we start thinking about modeling 2026. When you were less driven by CED and maybe a little bit more mobile IoT focused, you saw pretty strong seasonality in the March quarter. Wondering if you think that seasonal pattern starts to mitigate a little bit with the business mixing to CED? Or would you still think the March quarter is down kind of 10%, 15%, maybe more just due to seasonal factors. Just any sort of thoughts on what seasonality may now be?

Quinn, this is Beth. Maybe I'll start there. So, as I think about seasonality, we do still see some seasonality in our business. So, I still do expect that we'll see that pattern from Q4 to Q1. That being said, overall, our business is being driven by kind of the strong demand we're seeing across our portfolio. I think we've talked a lot about CEB and AI and the ongoing demand there as well as demand in the other segments. So again, there will -- I would expect there's still kind of seasonality as you were describing. But I also, there's a number of things that are going on that can mitigate that. I think I'd also keep in mind, as we've talked about before, that in any given quarter, we service some very, very big customers. And so, you also can sometimes, from time to time see a little bit of shifting between quarters just depending on where that demand falls and when they make the orders that is just -- there's nothing to be read into that other than just when the orders shipped. So hopefully, that gives you some insights about seasonality. But I do continue to expect that we'll see that seasonal Q4 to Q1 that we've seen in the past.

This concludes our question-and-answer session. I would now like to turn it back to management for closing remarks.

Well, thank you all very much. We are really, really pleased to be able to put out these stellar results. I think we see significant growth coming, and we are very, very happy to have you guys along for the ride. So, thank you very much.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.