Good morning, everyone. Welcome to the live audio webcast of FIT Hon Teng's 2025 third quarter results presentation. Today, we're honored to have Mr. Chris Liu, Chief Operating Officer and Chief Financial Officer for FIT Hon Teng, joining us. During the presentation, Chris will provide a financial overview of the third quarter ended 30th September 2025 and an outlook for the last quarter of the year. You can download our PowerPoint from the resources box below the webcast window. Kindly note that the language used in this audio webcast is English. If you have any questions for management, kindly submit your questions in English anytime through the Q&A panel.
Before I turn the call over to Chris, I'd like to first remind you that while FIT has taken every reasonable care in preparing today's presentation, the information and materials contained in it and discussed in the following Q&A session are all provided on an as-is basis and do not constitute investment advice. Management on today's call may also make forward-looking statements based on current expectations and assumptions, and those statements are subject to certain risks and uncertainties that could cause the actual results to differ materially. FIT will not be held liable for any damages arising from reliance placed on the information and forward-looking statements contained in the presentation and discussed during the Q&A session. For the full details of our disclaimer for this call, please refer to slide two of our PowerPoint. Slide three contains a brief agenda for today's call. Now, I'll pass it over to Chris. Thank you.
Thank you, Ray. Good morning and welcome to those joining us today. We should start on slide five. In the third quarter, our revenue grew by double digits, exceeding our high single-digit guidance. Revenue increased by 13% year-on-year, reaching $1.3 billion. This growth was primarily driven by robust demand for our AI products. Additionally, we saw steady contributions from mobile mobility as scheduled, while our performance in consumer interconnect and systems slightly exceeded expectations. With growing contributions from our AI-related portfolio, our cloud data center segment rose to a mid-teens percentage of overall revenue compared to low-teens level a year ago. As a result, our third-quarter gross profit margin reached a record high of 23.5%, further boosting annual gross margins. To support our global operations, our expense-to-sale ratio increased to 16.4% during this quarter. Despite higher expense,
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Impacted by our low-intelligent market demand due to module and specification replacement. I'm going to drop. Just turn into slide six. Turning to slide six, sorry for the technical interruptions. Turning to slide six for the breakdown of each segment. The overall quarterly performance was slightly ahead of guidance, supported again by ongoing AI demand and better-than-anticipated performance in the consumer electronics end market. Smartphone segments were in line, impacted by ongoing challenging market dynamics due to modules and specification replacement. As a result, we ended Q3 with a 20% decline consistent with guidance. Sales of high-speed and high-voltage AI connectivity solutions grew strongly compared to last year, driving a 33% increase in cloud data center segment revenue for the third quarter. While the consumer interconnect segment was flat in Q3, it outperformed prior guidance as our team worked closely and flexibly to cater to customer needs despite persistent tariff and supply chain uncertainty.
In the auto mobility segment, we made steady progress in integrating our Web mobility strategy just as we shared at FIT Tech Day, achieving 116% year-on-year growth, even with challenges across the automobile sector. For system products, the rebound in consumer demand supported a 3% increase in revenue during the quarter ahead of guidance. Growth in other segments was driven by inventory adjustments. Turning to slide eight. For 2025 full-year guidance, we maintained our revenue outlook, projecting a high single-digit increase while gross margin remained unchanged at around 20%, reflecting the successful strategy execution of an enhanced product mix. To capture further growth, we have reallocated resources to support new certification, product launches, and regional expansion. At the same time, we remain committed to cost optimization initiatives and achieving synergies. We have maintained our prior operating expense-to-sales ratio guidance at 17%-18%, with operating margin guidance remained unchanged.
Over the three periods, as we continue to advance our 3+3 transition strategy, we are confident in achieving consistent low double-digit growth in operating profit for the full year. While these factors may temporarily affect our near-term operating margin, we would like to share our longer-term financial targets in the following slides. Next, turning to slide nine. While system risks persist, we expect enduring market dynamics will play a bigger role in the year ahead. Beginning with the smartphone segment, the prevailing unfavorable conditions are expected to persist. We anticipate a high teens year-on-year decline for the final quarter, consistent with the high teens decline projected for the full year 2025. With ongoing investments in AI infrastructure and ramp-up of new AI server racks, we expected a high 20% increase in cloud data center segment for Q4.
Over the full year, as FIT captures more opportunities arising from AI on the general-purpose server with launches of next-gen platforms, the growth momentum will translate to over 30% for the full year. While we benefit from higher-than-anticipated demand for consumer interconnect last quarter, we foresee a slowdown in overall micro-conditions that will linger. Hence, we maintain our flat outlook in this segment for Q4 and over the full year. Our auto mobility, despite facing industry-wide headwinds, we continue to seize opportunities from transportation and realize more synergy from web mobility strategy. We anticipated a 40% increase in segment revenue for Q4 and Q4 2025. For system products, the indirect effects of system risks have continued to impact consumer sentiment for the festival season. As we readjusted capacity to align with prevailing uncertainty, we expect volume to be similar to last year in the fourth quarter.
Finally, the expected decline in the RF category is mainly due to cancellations of the TERRA heat pump division. Turning to slide 10. In response to the improvement in our supply chain status for the AI connectivity solutions, we have revised our revenue growth expectations. We now project top-line growth rising from the low 20s to the mid-20s range for fiscal year 2027 and for fiscal year 2028. The increased momentum in AI infrastructure development and platform upgrades continue to drive strong demand for our interconnectivity solutions. Having achieved the five-year target set under our 3+3 strategy ahead of schedule, we are now shifting our focus toward expanding the AI-related portion of our business portfolio. Accordingly, we would like to provide our long-term guidance for the cloud data center segment.
We expect it to reach a low 20s revenue mix in 2026 and further improve to the mid-20s and high 20s in 2027 and 2028 respectively. Turning to slide 12. Our schedule was packed during the last quarter, and we're delighted to share a quick recap of the many proactive business development initiatives our team undertook to promote our new offerings. During our inaugural FIT Tech Day 2025 in mid-September, we brought together leading experts and partners from our growing ecosystem. At the event, we proudly unveiled the web mobility brand. We emphasized our core product and technical strategy with a key message: "Data is the new oil," highlighting the increasing demand for data connectivities and high-power solutions in the mobility industry. By showcasing our auto mobility solution, we further demonstrated FIT's integrated connectivity capabilities and dynamic partnerships that enable customers to build AI-powered mobility solutions for the near future.
For those interested in staying updated on the latest developments and trends in software-defined and connected vehicles, we encourage you to use the QR code on this slide to access the event replay links. Turning vision into reality, we also anticipated trade shows in Saudi Arabia to further strengthen our collaboration with a new partner. We signed a strategic MOU with Al-Bassami Transport Group, a leading Saudi logistics company with an extensive commercial trucking operation. This partnership aimed to collaborate on the roll of EV charger installations across logistics hubs, paving the way for a more sustainable and connected future in transportation. Turning to slide 13. In September, in collaboration with Broadcom, we unveiled the industry's first 102.4 Tbps CPO connector at the China International Optoelectronics Exposition in Shenzhen. This solution supports Broadcom's Tomahawk 6, the latest Ethernet switch designed to power AI, machine learning, and high-performance computing networks.
Last month, we showcased our complete AI solutions, including the next-generation 224G high-speed CPC interconnects and 51.2T switch immersive cooling technology at the Open Compute Project Global Summit in San Jose. From data to power, we also introduced our high-voltage, high-current solutions. At the event, FIT's liquid cooling busbar and power busbar solutions were featured on NVIDIA's NR200 MG XWALK, demonstrating our strong ecosystem collaboration and engineering excellence. Over the three-day event, our booth attracted a strong engagement from leading customers, including all four major CSPs and key R&D leaders from strategic partners. The above business development and commercialization efforts are driving recurring orders for the next-gen higher-margin products, which will reinforce FIT's competitiveness to stay ahead of technological trends. On that note, we conclude our presentation today. Thank you.
Thank you, Chris. We're now ready to take some questions from the audience. As a reminder, you may submit a question by text by clicking the Q&A box in the webcast panel. Kindly submit all questions in English. There are some webcast questions on the line. Our first few questions come from Irene Yen from Morgan Stanley. The first question from her is, there's been talk about some progress in your backplane connector developments. Could you share more details?
Thank you, Irene. While we anticipate the market's interest in our ongoing development, as a general principle, we do not comment on individual products or specific clients. What we can say is our existing solutions continue to gain recognition from customers, supported by our leading technical capabilities and strong execution. We believe we are well positioned to achieve the targets set in our three-year guidance for the cloud and data center segment. We'll continue to uphold transparency through official announcements and investor briefings. Thank you.
Thank you. The second question from her is, there are rumors about NV72 and NV144 that some competitors have bypassed the patent restrictions and are developing in rack high-speed connectors, even moving toward keyboard cartridge designs. Is that true, and what impact would it have on FIT?
Again, we prefer not to comment on individual product-specific clients or competitor developments. Having said that, in high-speed interconnect areas such as backplane connectors and cable cartridge solutions, success depends not only on product design, but also on long-term reliability, integration capability, and ecosystem compatibility. FIT continues to focus on strengthening our core engineering capabilities and working closely with customers to align with next-generation system architectures. In those areas, we have made substantial progress and gained solid recognition from our customers.
Thank you, Chris. The third question from Irene is, regarding your AI-related high-power product portfolio, how far ahead are current customer orders secured, and how does the visibility support your upcoming ramp-up plans?
We continue to expand our market share achievement of our existing power products for AI racks, particularly those in the computing trade, continuing to increase steadily. At the same time, we have introduced a new range of high-voltage and high-power solutions showcased at the OCP Global Summit, including 800 V and 400 V power busbar systems, 400A and 100 A AC width connectors, and liquid cooling busbar related to 140 kW, and the UQDB floating module supporting 51.2T switch immersive cooling technology. Now, these new additions further strengthen our position in the next-generation power infrastructure and enhance customer confidence in FIT's engineering and execution capabilities.
Thank you, Chris. Our next few questions are from Karen Huang from Citi. The first question from her is, you mentioned at OCP that your power solutions are gaining more traction. Could you update us on customer adoption for these new power products and how they complement your existing offerings?
Thank you, Karen. Our power-related products used in compute trays have already been certified by several major global cloud and AI server customers, and some are now shipping steadily. Furthermore, as a design partner, we have made strong progress becoming the first source suppliers for key power solutions such as the liquid cooling busbar showcased at OCP Global Summit this year, which has been gaining an increasing share in the supply chain. Our next-generation products are also already in development.
Thank you. The next question from Karen is, congrats on the significant improvement in the AI segment. We noticed strong quarter-on-quarter growth in your AI shipments during Q3. How sustainable is this growth trend, and what are your expectations for the upcoming quarters?
New project ramp-up and the rising consumer demand primarily drove the strong quarter-on-quarter growth. In addition, we're able to capture more incremental opportunities across new platforms and keep hyperscale customers. The pace is likely to stabilize in the short term, but the growth trend remains clear. AI-related applications will continue to be the main catalyst next year.
Thank you, Chris. The third question from Karen is, could you break down your AI-related product mix a bit more? Which areas, connectors, cables, or power solutions are currently driving the most momentum?
Yeah, in the new AI architecture, we started with what we do best: connectors and cables within the compute tray. We are gradually achieving design wins for tray-to-tray solutions and expanding our portfolio toward rack-to-rack connectivity. Building on this foundation, we are capturing new AI server opportunities for next-generation solutions, offering a comprehensive suite that spans chip-to-chip connectors, next-generation high-speed connectors for compute boards, backplane connectors, and copper cables, as well as high-voltage and high-capacity power solutions. This full-spectrum capability allows FIT to serve as an integrated connectivity partner for the world's leading cloud and AI customers. Together, these solutions are FIT's complete layout in AI applications, supporting the growth of AI infrastructure across various regions and industries.
Thank you, Chris. Our next few questions are from Liu Zhe Long from Changjiang Zhengquan. The first question from him is, will NVIDIA's new cableless platform affect our MCIO business?
Thank you, Mr. Liu. While we're not able to comment on individual products or specific clients, regardless of how the architecture evolves, the growing demand for high-performance computing will continue to drive the need for reliable interconnect solutions. Connectors will remain a critical component within the compute tray and beyond.
Thank you. The next question from Mr. Liu is, there's a talk that FIT has made significant progress in the backplane connector business. How long does certification for AI products usually take, and will that make significant shipments for next year?
Based on our experience, the certification process generally takes several months, followed by a ramp-up phase that may vary by customer and platform. The overall timeline largely depends on customer qualification progress and platform readiness. At this point, we are working closely with customers to align our next-year shipment plans and ensure a smooth ramp-up process.
Thank you. The third question from Mr. Liu is, your expense ratio has remained relatively stable despite higher R&D spending. Could you elaborate on the key initiatives helping you manage operating efficiency?
We continue to enhance efficiency through automation, process optimization, and better resource allocation. Now, while our expense ratio has increased due to higher R&D and global expansion, these investments are necessary to support future growth and technology development. We remain disciplined in cost management and continue to identify areas for long-term operational improvement.
Thank you. Our next few questions are from Wang Jie from Zhongxin Jiantou . The first question is, the backplane connector market is becoming more competitive, especially with the new entrants. How does FIT differentiate itself and maintain leadership in this area?
Thank you, Wang Jie. Backplane connectors are highly technical and reliability-driven products. Our key advantage lies in vertical integration, from design and tooling to mass production, all controlled in-house. This structure allows us to respond quickly to design changes and ensure supply stability, which has earned FIT a strong reputation among top-tier cloud customers.
Thank you. The next question from Wang Jie is, turning to the automotive segment, you highlighted progress under the One Mobility Strategy. Could you elaborate on what specific improvements or milestones you've achieved so far?
We're in the process of consolidating and optimizing internal structure and operations, also improving service efficiency and qualities in the automotive segment. We'll elaborate more details next time.
Thank you. The last question from Wang Jie is, beyond AI and automotive, is FIT also investing in new applications such as robotics?
This is still an emerging area. We will stay open to exploring new technologies and partnerships as the market continues to grow. In this new field, we already have the capability to provide flex-resistant cable assemblies specifically designed for robotic applications, which represent a new growth revenue for FIT. We are also seeing a clear trend where our advanced cable connectors are increasingly being adopted in robotic-related solutions.
Thank you, Chris. Our next few questions are from Alicia from Guangfa Zhengquan. The first question from her is, for the Automotive One Mobility Plan, beyond Europe, which regions will you focus on? Is there a global multi-site expansion plan?
Thank you, Alicia. We do not have immediate plans for the new site expansion at this point. For now, our priority is to strengthen engagement with existing customers and make the best use of our current global footprint. We will continue to evaluate market conditions and customer needs before taking further steps.
Thank you. The second question from Alicia is, can FIT's revenue performance be benchmarked against the AI rack shipment volumes of your parent or sister companies within the group?
It is really not a straightforward component or cabinet-by-cabinet comparison because delivery schedules and stocking levels of components will not be the same. Therefore, the pace of finalized sampling will not happen in sync. Nonetheless, we will continue to move in a similar upward trend.
Thank you, Chris. The third question from Alicia is, do we have a plan to invest in the U.S.?
FIT already has an operational presence in the United States. Now, we're working closely with clients and broader supply chains to stay responsive to their needs. We remain open to further investments, which will be made in alignment with customer requirements and supply chain localization needs. We'll continue to strengthen our local presence to support key customer programs, while we also leverage Foxconn's extensive global footprint to ensure operational resilience.
Thank you, Chris. Ladies and gentlemen, as a reminder, you may submit a question by text by clicking the Q&A box in the webcast panel. I kindly ask you to submit all questions in English. We have some new questions just coming in. The first question is from Alex Ng. Regarding capacity expansion in India or Vietnam for U.S. customers, could you share updates with us?
I mean, I just answered the previous one. FIT already has an operation presence in the United States. We're working closely with clients and broader supply chains to really stay responsive to their needs. Really, our pace and right now, I'm very readily comfortable that we will be able to meet the current demands. In addition to that, we will be leveraging Foxconn's extensive global footprint to really ensure operational resilience.
Thank you, Chris. Let's give it a moment to see if we have any other questions. The next question is from Howard Cowell. The question is, any view on the impact of higher memory prices on consumer electronics demand? Will customers look to pressure FIT profitability to offset higher memory costs?
All I can say is, so far, the answer is no. We have not experienced pricing pressures from this particular trend.
Thank you, Chris. Our next question is also from Alex Ng. The question is regarding 2027 and 2028 revenue guidance upgrade. Can you elaborate on the key growth drivers that led to the upgrade? For cloud rev mix guidance, any details on major products FIT planned to launch?
For the AIs and S for the new product, we're really not able to comment on new products because we do not comment on specific products or clients. I'm sorry.
Thank you, Chris. As a reminder, ladies and gentlemen, if you'd like to ask a question, please kindly submit your question by text and enter your questions in the Q&A box. Kindly submit all questions in English. Let's give it a moment to see if we have any other questions.
Hi. We're able to provide industry-first launches of the 102.4 Tbps CPO external laser small form factor plugables.
Thank you, Chris. Our next question is, can you talk about your view of CPO adoption by the market? When do you think mass adoption will take place?
The answer is similar. We're able to provide really industry-first launch of the 102.4 Tbps CPO external laser small form factor pluggable.
Thank you. When do you expect the company to start delivering products on a large scale in the areas of liquid cooling and high-speed transceiver? Additionally, could you please share how the company's management views CPO and outlook for the optical module business?
The need is there. I mean, we see the needs are there, and we're confident that we already have developed solutions ready to address the client's needs. Definitely, this is an area of growth expectations or high expectations for us.
Thank you, Chris. The next question is, what is the gross margin for cloud business now, and what will its target be in 2026?
We do not disclose the details per segment, but definitely, they will be higher than our average.
Thank you, Chris. Our next question is, what are your views on cable designs for AI in the future, and how do you think that will impact your interconnectivity business?
While we're not able to comment on individual products or specific clients, regardless of how the architecture evolves, the growing demand for high-performance computing really will continue to drive the need for reliable interconnect solutions. Connectors will remain a critical component within the compute tray and beyond.
Thank you, Chris. Let's give it a moment to see if we have any other questions. Our next question is, what is the reason for the lack of growth in operating cash flow in the third quarter?
This has to do with the readiness for some of the product launches that we need to have certain raw material pooling. Also, to a certain extent, the overall reallocations or readjustments of production facilities where you also need to have safety stocks to make sure that your delivery to the clients remains smooth and without disruptions.
Thank you, Chris. Our next question is from Howard Cowell. The question is, we see the industry trend that rack form factors getting bigger, wider. Will this have a positive or negative impact on your interconnect cable business?
Definitely positive.
Thank you, Chris. Our next question is from Angela Xiang. The question is, can you have a sales weighting number related to AI in third quarter 2025 and in 2026 target?
The AI-related part of the business is already included in our cloud segments. AI is really one of the data centers, so it's in there when I disclose the numbers.
Great. Thank you, Chris. The next question is also from Angela Xiang. The question is, can you provide the content value FIT providing GB200, GB300, and VR200?
I'm sorry that we cannot comment on individual products on specific clients. Sorry.
Thank you, Chris. Our next question is also from Angela. The question is, what is cloud sales gross margin level now, and will it increase for a mixed issue?
The gross margin levels for the cloud sales definitely are above average. As that segment will grow, definitely, it will bring the mix up.
Thank you, Chris. Our next question is from Sisi Yuan. The question is, what is the reason for the significant year-on-year decline in total comprehensive income in the third quarter? Let's give it a moment as the management is preparing the answers.
Sorry. I mean, this is primarily related to Forex fluctuations on some of the functional currencies. That is the primary reason for it. Okay. Thank you.
Thank you, Chris. Ladies and gentlemen, as a reminder, you may submit a question by text by clicking the Q&A box in the webcast panel. Kindly submit all questions in English. There appear to be no more questions. This marks the end of today's presentation. I will now turn the conference to Chris for closing remarks.
Thank you, Ray. In summary, despite considerable headwinds in the consumer electronic industry, we focus on controllable and capturing opportunities from AI momentum and transitioning automobility to steadily enhance our financial performance this quarter. Looking into the final quarter for 2025, we continue to expand and promote our next-gen product portfolios. Thank you once again for supporting our company and for attending today's call.
Thank you, Chris. This concludes today's presentation. Thank you all very much for attending. You may now disconnect.