Hello, and welcome to the 31st Deutsche Bank Depositary Receipts Virtual investor conference, DB VIC. My name is Zafar Aziz from the DR Investor Relations Advisory Team at Deutsche Bank. I am pleased to announce our next presentation will be from Infineon Technologies. Please note, all of today's presentations will be recorded at adr.db.com. At this point, I am pleased to welcome our speaker from Infineon Technologies.
A very warm welcome from Munich, Germany, Infineon's headquarters, and good morning to everyone listening in. Thanks a lot to Deutsche Bank for having me here on the virtual stage, and happy to familiarize you with the Infineon equity story. We are in the business of making chips, the silicon sort, that is. So, turning sand into technology, in essence. These are the building blocks of many of the applications of modern society. Infineon has been doing so for a quarter of a century now, and as you can see here in our quarterly evolution over the last 15 years, showing revenue and operating result, to a certain degree, successful. What this picture should show you or tell you are two points. On the one hand side, it is a cyclical industry, it is a cyclical business, so there are some ups and downs.
On the other hand side, you are seeing here how we have developed successfully and how we have steered the company in the direction of profitable growth. There have been many more ups and longer and more profound ups than downs. The last quarter, the September quarter, actually was a record quarter for Infineon, with turnover of EUR 4.7 billion. Two days ago, we had our annual earnings call, given that Infineon's fiscal year ends in September. Let us take two different lenses to look at our business. The first one is the divisional one, or how do we break down our business into segments? Infineon operates in three different segments. It is Automotive, Edge Systems, and Power Systems, as a reflection of our corporate strategy. In Automotive, as you can see, around half of our turnover, of our revenue, is accruing.
In Automotive, we are helping cars to become electrified and smarter, digitalized, connected. We are going to spend a bit of time on this area, and in particular, how it relates to profitable growth. The Edge Systems, which is about 20% of our revenue, is about enabling smart, seamless, and trusted human and technology interactions, connected smart systems that make our life easier and more intelligent. We are here speaking about areas like robotics, edge AI, smart home applications, just to name a few examples. 30+ percent of our revenue we are doing in the Power Systems segment, the division that controls power flows from the infrastructure, from the grid side, all the way to data centers and to end applications. Here, we are loosely speaking about energy flowing more efficiently, reliably, and at scale.
This is, as I mentioned, the divisional side or the divisional lens through Infineon, with about a 50/20/30 split when you look at our three business divisions. Another way of looking at us is through the lens of growth areas. We have identified five key growth areas, which are resulting in strong secular or structural growth. These are, and you see here our revenue breakdown for the just concluded fiscal year 2026, in order of relevance, AI and data center, the software-defined vehicle, e-mobility, robotics and edge AI, and power infrastructure. Taken together, they are already good for around 50% or half of our overall revenue base. We have identified these growth drivers as they are structural or secular, which means that in each of the cases, strong content growth is what is driving our business.
It is less the number of applications that is driving the business, so it is less a question of how many units of end applications are being sold, and it is more a question of how many and what type of semiconductors goes into these end applications. I would like to take the next couple of minutes to illustrate this point along the three business divisions. Let us start with Automotive. Infineon is the world's number one Automotive semiconductor manufacturer. We have, for years, commanded the number one spot, or the pole position in Automotive lingo, and this is so on the back of a broadly diversified and deeply differentiating portfolio. As you can see on the upper right-hand side, we are either number one or number two in all the world's global car markets, with relatively homogeneous market shares. In particular, also in China, we are number one.
China is the world's biggest car market, and it is by far the biggest electric car market, which will become relevant when we move to our next chart. In Automotive, in each of the cars that you are driving, you literally will find hundreds of different semiconductors, of very different types, of very different configuration specifics, and turnovers. We are number one in MCUs, that stands for microcontrollers. We are also number one in power flows throughout the Automotive, throughout the car, and we are one of the leaders in sensors. These three categories are the building blocks of modern vehicles. I spoke about content being relevant and beating units in terms of procuring and driving our business. Let me illustrate this with this admittedly busy chart.
Let us actually start in the bottom right-hand corner, where you see the number of vehicles projected to hover around the 90 million mark for annual car production now and in future. So we do not predict, and market researchers likewise, we do not predict a strong growth of units, vehicles, cars in this respect. However, as you see on the left-hand side, it is the content that is strongly increasing. In other words, the units and values of semiconductors if and when these cars are changing their shape. An ICE vehicle, or internal combustion engine vehicle, has around about $750, maybe $800 of semiconductor content. That is the average car. When you speak about an electric car or a BEV, a battery electric vehicle, that content, the semiconductor content is almost doubling. In particular, it is the power semiconductor content that is increasing by a much larger factor.
An electric car obviously has a battery and electric motors and needs electric propulsion, so we need power semiconductors to convert, invert, steer, and manage the electricity. If that car becomes connected, smarter, intelligent, if new E/E architectures are being deployed, for those of you a little bit more familiar with the topic, we are talking about zone controllers, domain controllers, and new E/E architectures, the content, the value of semiconductors is increasing even more, at the high end to $2,000, $2,500 of semiconductor content per car. As you can see from these little rings on the right-hand side, market researchers predict that electric as well as autonomous, automated, digital vehicles are strongly growing over time, and that is what is driving Infineon's business on the Automotive side. As mentioned, half of our business is in Automotive.
The other half has to do with, broadly speaking, the power flow of modern infrastructure all the way down to applications. What you can see here graphically depicted is the power flow from left to right, all the way from the infrastructure, from where energy is generated, be it through conventional, but more and more renewable sources such as wind and solar, through power infrastructure, where energy needs to get transmitted, stored, converted, inverted to certain lower voltages. Then we have here, as this is the key building block of modern infrastructure, a data center. It can be a classic data center, but more and more, we are realistically speaking about AI data centers, where Infineon is the leading force in providing power from the grid to the core. So the entire power flow through a data center, in a data center, powering racks, powering server motherboards, powering AI processors.
That is the fine art of electronics, if you wish, because we are driving highly challenging power loads into processor generations that keep changing every 18 - 24 months. What is this data center ultimately going to do? It is producing tokens, it is producing relevant AI tools, and these are being used on the physical side for generating specific outputs like large language models, agentic AI, more and more so also physical AI. A car, if you wish, a modern car, a self-driving vehicle, could be called an edge AI device. A robot, or your connected smart fridge at home, all of that is part of one conjoined infrastructure. We are deriving tremendous growth out of this revolution, one could say. As you saw on one of the previous charts, data centers is among the strongest growth drivers for Infineon.
14% of our revenue in fiscal 2026 pertained to the topic of data centers, EUR 2.2 billion. We predict to grow that significantly into our fiscal 2027. Close to EUR 4 billion of revenue we anticipate to generate out of this business alone. As a function of a broad product portfolio, of being the leading architecture partners to hyperscalers, to AI customers and to the whole ecosystem of artificial intelligence. It is a very broad-based business, with a certain tilt to the U.S., but globally addressing a large market. The same kind of content versus unit picture applies also here. We see a higher increasing bill of materials, as we say, so semiconductor content going into ever more potent, ever more powerful data center is what is driving the business. We are measuring this as content per watt or dollars per kilowatt.
You can see here that with each kilowatt, we are addressing a content of around $175. Therefore, you can scale it along the projected gigawatt build-outs, and then you can see what is actually driving this business and how structural it is becoming in nature. I was mentioning that the AI data center side is only useful, of course, when we deploy the output to specific use cases. One of the interesting and, over time, arising applications will be robots, in particular, or as one kind of it, humanoid robots. For a humanoid robot, the content opportunity is very strong. In other words, the semiconductors going into such a robot are meanwhile becoming equally comparable to the level of content we generate with cars, if you remember one of the previous pictures.
Infineon is unique in the sense of addressing various disciplines from compute to power, from security to connectivity, analog and sensing, all taken together up to $1,000 per robot is the addressable content for Infineon. Summing it all up in my introductory remarks, we are addressing modern society's big growth trends in terms of electrification, e-mobility, security. We are doing so with an unrivaled portfolio, with strength in manufacturing, in design, in capabilities. We have been successfully driving Infineon's profitable growth. Rolling the film forward, we have just given capital markets a very ambitious and challenging outlook for the coming fiscal year, which you see on this page. For the coming quarter, for the one we are in, we are seeing basically flattish quarter-over-quarter revenue with a strong operating result. We call it a Segment Result margin. That's the operating result.
More importantly, arguably, is the full-year view onto FY 2027. We will see more than 20% growth to a turnover level of around EUR 20 billion, underpinned by AI data centers, by Automotive, by power systems infrastructure. Our gross margin and our operating result margin will see strong expansion. Growth needs to be profitable, for sure. We will expand the gross margin on the back of rising volumes, positive favorable pricing, and also some structural measures which we have been taking to a mid to high 40% level, the operating margin to a mid 20% level. We strongly invest to retain our competitive moat and to keep the competitive differentiation of Infineon at a high level. So we are going to invest as a function of customer demand between EUR 3 billion and EUR 3.5 billion to retain our competitive edge. That said, we anticipate strong free cash flow generation.
We have two different metrics for that. The adjusted one is EUR 2.2 billion, which we anticipating. So summing it all up, we are geared for strong growth. We are looking towards significantly creating value with profitable growth along these areas of AI data centers, Automotive, and our infrastructure. In the future, new growth areas like robotics will emerge. With this, I would conclude my introductory remarks, and I have already a couple of questions from you. Please keep sending them in. I will look at them, go through them, and try my best to respond. So, let's look. One question here is about, what advantage is hardest for competitors to replicate? So in other words, what is the competitive moat, so to say? What's the competitive differentiation? I would call out a few of them. The breadth and depth of portfolio. Why?
Because semiconductors, they come in so many different shapes and sizes. You want to be able, as a semiconductor producer, to be able to offer system solutions to your customers. That means you have to master different disciplines. It's a little bit comparable to a decathlon. You can be the best sprinter, you can be the best javelin thrower, but you want to master different disciplines, because only when you do that, you are able to put complex and value-creating system solutions in the hand of your customers. Those disciplines could be things like compute, connectivity, security, and power, enhanced by software, glued together by software. We are seeing this, for instance, on the Automotive side. We oftentimes go out to Automotive customers, and we sell them entire solutions as opposed to mere components.
Another competitive advantage, one that sets us apart, is our in-house manufacturing at scale, at quality, with a controlled internal chain of factories. About 60% of our revenue is manufactured in our own fabs, and we master all relevant technologies. in the beginning, I had a chart showing you silicon, sand. Of course, there are different materials, and we master all relevant materials in our industry. These are silicon carbide, gallium nitride, with in-house fabs. Innovation is the third one. We are spending significant amounts on R&D to keep running faster, you could say, compared to competitors. It's about how fast you bring innovation to your customers. That's a piece of value creation. Let's look at further questions. What is the view, someone here is asking, regarding the sustainability of AI and data center power demand? Obviously, a very pertinent question.
I take it that most of you are dialed in from the US, so I anticipate the background of the question might be the midterm election and the risk of backlash and regulation, call it that way, against additional data center build-out. Well, if we look at our order books, we are sold out for 2027. We are what we call on allocation. In other words, we are hand-to-mouth, and the supply is limited. We could do more than the EUR 4 billion revenue, which I called out for data center, based on the demand that we are seeing right now. Data center build-outs are not, of course, just happening in individual states, but it's a global business. It's a global affair.
We predict, actually, the number of tokens being produced to rise, and that is what's ultimately driving the request for power, demand for installations, again, on a global level, wherever that is occurring. We have no indications for a structural slowdown of these build-outs. However, we are definitely watchful and monitoring, and we are securing our business. Why or how we are doing that? We are going out to customers, and we conclude long-term agreements with them. We ask them for commitments. We sign up long-term agreements with them, with some skin in the game on the part of customers. That can be prepayments, that can be committed volumes. And I mentioned that we are predicting investments to lie in a certain corridor between EUR 3 billion and EUR 3.5 billion.
We will reach the upper end only if and when demand into 2028, 2029 really becomes apparent and becomes predictable, and our confidence level there is going to be high. Another question here is about the Automotive exposure and the pace of recovery in that industry. I welcome that question very much because recently, much of our discussion has been AI data centers-centric. We like that business a lot. On the other hand side, I would like to remind investors that along our predictions, AI data centers is going to be 20% of Infineon's revenue in 2027. In other words, 80% are occurring outside of the AI data centers, and Automotive is also growing strong. We predict a mid-teens year-over-year growth rate for Automotive. The key driver is content gains, more and more cars becoming electric and connected, and that happening around the globe.
Another area where we derive growth from is market share gains, as well as a certain restocking on the part of our Automotive customers. We are coming out of a period where Automotive customers have brought down their inventory for basically two consecutive years. We are now seeing more and more willingness on the side of Automotive customers to secure supply further out. In other words, to engage in a healthy refilling of their stock levels, and therefore, see a very healthy upturn trend in Automotive. Now, coming back to AI data centers again, can you help us understand the ramp cadence of Infineon's AI power semi-manufacturing capacity in 2027? How fast can new capacity, for example, Dresden, be brought online?
Dresden is one of our big front-end fabs, the places where we manufacture chips, and we just, at the best point in time, opened a new facility there in summer. A new facility means a clean room is now available to us with a tremendous revenue capacity. Once filled, it will be good for about EUR 5 billion, or euros, I should rather say, of incremental revenue. Now, filling such a big clean room, of course, takes time. We anticipate that actually AI will be helpful in that, not just because it drives demand, but also it is a use case for us filling or planning the machinery and the floor. It will be already attributing additional revenue for our 2027 prediction, going from EUR 2.2 billion - 4 billion of revenue. A significant part, maybe half of the increment, is coming already from the new Dresden site.
You see from that, it is very relevant. Next question. From a capital allocation perspective, how do you balance expanding capacity today with preserving the flexibility to pursue the next major growth opportunity? We think organic growth is actually what's driving the highest return, and hence creates most value for investors. The strategic decisions we are making are about new fab investments. I just mentioned Dresden coming at just the right point in time. If you recall my very first chart, or one of the first charts, the long history chart, you've seen that we derive such strong structural growth from our key drivers that the thing that we have to get right is basically timing. We want to run a balanced business portfolio. Dresden is a perfect case to prove that point. It is not going to be an AI-only fab.
It is, in fact, going to be Infineon's most versatile fab in history. We have different technologies under one roof, all, by the way, fully automated on so-called 12-inch wafers, so the highest level of scale and cost efficiency you can get these days. We are consciously building capacities for more than one, more than two, more than three growth areas. We are investing in so-called capabilities to drive our system play, as explained earlier on. Back to cars. How exposed are you to a slowdown in EV adoption and to Chinese local competition? Well, look, the Chinese market, believe it or not, has been the strongest regional grower for Infineon's Automotive business in the recent past. In fact, in 2026, we grew twice as fast compared with the other region.
This is on the back of our system competency, the deep and broad product portfolio that we bring to market. We are tightly connected to leading Chinese customers and help them in their drive addressing global car markets. The domestic China car market has been pretty weak and continues to be so. However, Chinese vehicles are appearing on more and more international roads. As a global leader in Automotive semiconductors, Chinese customers, end customers, Automotive OEMs, are very happy to work with us when it comes to reliability, quality, and system capability, international Automotive grade certifications. So, we think that investing in innovation, investing in system capability, is one recipe to keep our share growing for the Chinese industry. Time for one more question before we wrap up. I see a long queue of questions there. Let me pick one of them.
AI sales again, so we do a good ping-pong between Automotive and AI here. Data center business are almost doubling into 2027. What needs to happen for that business to sustain strong growth? Well, on the one-hand side, yes, clearly we do depend on further build-outs. We do depend on AI becoming more and more useful and on proliferation of data centers and of more gigawatt build-outs to happen. On the other-hand side, we do see that new architectures in terms of power flow are emerging, and these new architectures will bring higher bill of materials. So, through innovation, through new product categories, through new materials, we will, over time, expand our bill of materials. I mentioned the figure of $175 per kilowatt. We see that clearly rising as we go into the coming years.
Growth will actually be boosted from two avenues, data center build-out, as well as on a global scale, as well as content increases through new architectures, 800-volt solid-state transformers, new material such as gallium nitride, to just bring out a few buzzwords. We are coming up against time. I hope this was informative and helpful to you. Please feel free to reach out to us in the Infineon investor relations team. You can write us at investor.relations@infineon.com, and me and my team, we shall be happy to stay connected and answer your questions. Have a good day ahead. Bye-bye, and thank you.