Thank you all for joining us today for Quanta's first quarter 2025 earnings conference call. My name is Carrie Liu. I'm the research analyst covering Quanta at Citi, and we'll be moderating today's call. Joining us on the call today are Mr. C. C. Leung, Vice Chairman and President, Mr. Elton Yang, CFO and spokesperson, as well as Carol and Ale from the IR team. We will begin with the prepared remarks and financial overview from Carol, followed by a Q&A session. Without further ado, I will now turn it over to Carol. Carol, please go ahead.
Thank you, Carrie. Good day and welcome to Quanta Computer's first quarter 2025 earnings results conference call. The call is hosted by Citi Global Markets Taiwan Securities. The presentation material for today's call is available to the public online and on Quanta's website at www.quanta.tw/ir-session. This is Carol. I'm joined today by Quanta's management, Mr. C. C. Leung, our Vice Chairman and President, Mr. Elton Yang, Chief Financial Officer and Senior Vice President in Quanta's IR team. In a moment, we will start with the financial presentation. After that, the management will host a Q&A to share our views about the business and industry outlook. During this call, we will be making forward-looking statements, which are predictions, projections, and other statements about future events. These statements are based upon our current expectations and assumptions that are subject to lots of risks and uncertainties.
As such, the actual results will differ purely from our forecasts. We also have no obligation to update or revise any forward-looking statements. For now, let's walk through the financials. We delivered another record-breaking quarter in first quarter 2025. We sell gross profits according to targets and net profits, reaching all-time highs. This strong performance provides a solid foundation for the year ahead, which we anticipate will be shaped by both significant growth opportunities and evolving challenges. Revenue for the quarter was NT$ 486 billion, up 16.4% quarter on quarter and 87.6% year over year, respectively. Thanks to slightly better supply conditions for the latest AI servers, along with stronger landing baggage demand for general compute servers and Notebooks, we saw strong sales momentum throughout the quarter.
Total shipments totaled 10.8 million units for the quarter, representing a 2.7% decline from the previous quarter but a 2.9% increase compared to the same period last year. This outcome surpassed our expectations of a double-digit sequential decline. We attribute the strong shipments to customers pulling forward demand at the end of the quarter due to the uncertainties surrounding U.S. tariffs. The company's gross profits reached NT$ 38.5 billion, growing 23.8% quarter on quarter and 75.3% year on year. Gross margin for the quarter was 7.92%, representing a 48 basis point increase quarter on quarter and 65 basis point decline year over year. The margin improvement was largely driven by strong demand for general compute servers and a lighter magnitude of margin dilution from high-end AI servers for slower ramp. Additionally, a reduced sales contribution from Notebooks also helped margins.
As servers outgrew other product categories, the sales contribution from servers reached 65%-70%, while the sales share of Notebooks was further diluted to below 25% this quarter. Operating profits hit an all-time high of NT$24.6 billion this quarter, representing a 62.3% increase sequentially. Year over year, profit more than doubled, up 110% from NT$11.7 billion a year ago, making a strong NT$12.9 billion increase. The operating margin of the quarter was an all-time high of 5.07%, up 143 basis points quarter on quarter and 60 basis points year on year. Operating expenses were NT$13.9 billion for the quarter, went down from record level of NT$15.9 billion in fourth quarter 2024, or 12.8% sequentially. On a year-over-year basis, OPEX increased by 35.4%, primarily due to R&D expenses associated with AI development.
Supported by strong sales momentum, OPEX ratio improved to 2.86%, down 96% quarter on quarter, and is 110 basis points from a year ago, reflecting solid operating leverage. Non-operating income for first quarter was NT$ 616.9 million. The primary items include net borrowing skill of NT$ 2.1 million and net interest expenses of NT$ 1 million. Stepping down the income statement, the net income after tax was a record NT$ 19.5 billion, increased by 22.8% quarter on quarter and 61.6% year over year. The net margin after tax was 4.01%, which grew 21 basis points quarter on quarter and declined 65 basis points year over year, respectively. The tax rate for the quarter was 22.1%, and only above concluded an all-time high of earnings per share of NT$ 5.06 for the quarter, representing a sequential increase of 94% and a surge of NT$ 1.93 from a year ago.
Turning to the balance sheet, cash and short-term investments slightly increased to NT$215 billion, from NT$201 billion at the end of last quarter. Account receivables reached an all-time high of NT$451 billion, from NT$371 billion in the previous quarter, reflecting the sales growth. Inventory rose to a record NT$277 billion this quarter, mainly driven by customer requests to pour in components early in preparation of accelerated AI server shipments in the coming quarter. The shareholders' equity attributed to the parent company was around NT$193 billion, down from NT$222 billion at the end of the previous quarter, due to the deduction of cash dividends of NT$50.2 billion on a secure basis. Let's now discuss the ongoing plans for responding to U.S. trade policy, as we highlighted in previous calls. Quanta's business strategy is built on three key pillars: advanced R&D, precise marketing, and manufacturing resilience.
Among these, manufacturing resilience has proven to be a competitive advantage in today's volatile market environment. Quanta's manufacturing resilience is rooted in our extensive global manufacturing capabilities. We gently R&D breakthroughs into commercial products quickly and cost-effectively, enabling customers to capitalize on emerging market opportunities. Our flexible and scalable production infrastructure allows us to adapt to shifting customer demands and evolving global trade dynamics. Our production network now spans nine major sites worldwide: one in Taiwan, two in China, Shanghai and Chongqing, two in Southeast Asia, Thailand and Vietnam, two in the U.S., Tennessee and California, one in Mexico, and one in Germany. The global presence allows us to offer agile, regionally optimized manufacturing solutions. Specifically, to address tariff-related challenges for AI production, our Mexico facility has the flexibility to realize timely expansions, from focusing solely on manufacturing of automotive-related products to scaling up AI server manufacturing capabilities as needed.
This adds extra flexibility to support our final system assembly operations in the U.S., alongside our existing AI production facilities in Taiwan and Thailand. If the policy conditions are clear and customers are ready to move quickly, we can complete mass production readiness within just a few months. This positions us to effectively support downstream production at our U.S. site and respond quickly to market demand. Reflecting the continuing capacity expansion and relocation, our CapEx for first quarter reached NT$ 4.7 billion, up from NT$ 2.6 billion in the same period last year. In line with this momentum, we revised our four-year CapEx budget to NT$ 20 billion. We'd like to provide some commentary here on several factors that will impact our business performance in second quarter and the remainder of 2025.
Driven by customer pulling in orders during a period of short-term tariff pause and ongoing manufacturing relocation, we expect that the strong notebook shipment momentum seen in first quarter to carry into second quarter, then result in a high single-digit sequential growth with upside potential. However, this demand is somehow front-loaded. We could see a more muted seasonal pattern in the second half of the year. At this point, visibility beyond 90 days remains limited due to ongoing macro and industry uncertainties. We'll provide more coverage on four-year guidance when additional clarity is available. For auto business, we are shifting our focus and investment away from low-value, commoditized, and volume-driven products like most modules and sensors. Instead, we are prioritizing resources for the development of high-value and content-rich products such as advanced ADAS, car computers, and inverters.
To navigate the current auto market uncertainty, this strategical move of resources through relocation will help bolster our competitiveness for the upcoming recovery. Considering evolving revenue mix, driven by the accelerated shipment of new generation AI server racks with higher ASP relative to lower ASP AI models, general compute servers, Notebooks, auto, and other product categories, we anticipate some degree of margin dilution moving forward. The new generation of AI servers went to mass production in May first quarter, while still in a slower ramp pace due to supply time scale. On top of that, the demand for the lower ASP AI models remains strong and contributing to the overall AI shipments, as customers are urging for timely deployment of their AI infrastructure. We are seeing strong demand and limited supply on AI.
Given that revenues are tied to the timing of shipments of respective projects, we could see variability in server revenue growth rates, depending on ASP mix and individual customer delivery schedules. Servers were the largest contributors, driving the sales momentum in the first quarter, with robust growth from both AI servers and general compute servers. AI server sales exceeded 60% of overall server sales, and their contribution will further increase in the second quarter. The sales of AI servers grew more than double from a year ago, in good shape to realize a substantial four-year growth for 2025. Currency exchange fluctuations are another uncertain factor that could impact our quarterly performance. Over the years, we've established a hedging mechanism to manage this risk as a regular course of business, monitoring our net position exposed to the exchange rate fluctuations on a daily basis.
In general, most of our account receivables and computables are denominated in U.S. dollars. The exchange rates tend to offset each other. Even during the recent turmoil in the forex market, our hedging strategy has proven effective for our growing business, and the risk remains manageable. Overall, we believe the product mix has a greater impact on our margins than currency exchange fluctuations. To close, we are pleased to present another remarkable quarter to our investors, and the first quarter results provided a great start to the year. Though the outlook for the second half remains unclear, we are set for a better second quarter, thanks to our employees and management team for their dedication in achieving the unprecedented outcome. That enables Quanta to consistently make our way for a balance between delivering satisfactory shareholders' returns and investing in our long-term goals.
Recently, Quanta's board of directors has resolved a record cash dividend payout of NT$ 50.2 billion for fiscal year 2024 earnings distribution. The management also executed several rounds of capital investment in our manufacturing sites in North America. The investment helped exercise the expansion of capacity and product production relocation, specifically for AI server manufacturing. The expansion is providing us additional flexibility to respond to the U.S. tariff policy. We are seeing CSP customers maintain heavy investment in AI compute and data center infrastructure. The recent CapEx guidance from U.S. hyperscalers confirmed that they are either maintaining or raising CapEx for AI spending for 2025, despite following high base last year. As such, the accelerating AI shipment presents a major tailwind for the year. We keep working closely with our customers in an agile and nimble manner to effectively make the necessary adjustments to adapt changes.
Over the decades, Quanta has had solid track records in facilitating proven strategies, smart investments, and excel operational execution to navigate through fluctuation environments. As we scale our global presence, we remain focused on driving improvements in productivity, efficiency, and utilization to help offset the growth in expenses and manage associated risks. Overall, we remain cautiously optimistic of our business for the rest of the year. We are confident in our ability to stay on a growth trajectory, with profit expansion continuing to outpace cost increases. We believe that Quanta has captured well to capture value through continued investment, innovation, and strategic partnerships in the rise of AI. That concludes the reviews of the first quarter results and business outlook. We will now open the call to Q&A. Please finish your questions to one-on-one follow-up. Thank you for taking time. Now, may we introduce the first question, please?
Yeah, sure. Thank you very much, Carol, for the financial overview. We will now begin the Q&A session. If you would like to ask a question, please use the raise hand function, and we will call on you in order. As a reminder, please limit yourself to one question and one follow-up to allow greater participation. Thank you for your cooperation. Let's go to our first question. Randy, please go ahead.
Hey, yes. Thank you for asking the call. My first question, we wanted to ask on the second quarter outlook. First, after the strong first quarter, you had a 20% dip to start April. Curious if you could give a view as we go through if you're seeing an acceleration, how you view overall growth for second quarter.
If you could split that between the AI, the higher ASP AI racks versus lower ASP AI server, and then also for expectation on continued strength from general server.
Thanks, Randy, for your questions. As Carol touched on in the previous remarks, the new generation of the high ASP AI server will kick in in this quarter. We are expecting the percentage will keep growing among the split between the AI server to total server will rise from 60% in the first quarter to keep by going to 70% as we set targets for this year. We keep seeing more high ASP product contribution into. That is why I mentioned about there are some dilution for our gross margins on the same directions. That is our AI server situation for second quarter.
Okay. I will just ask in the follow-up, and it will be a two-part follow-up.
If you could give a view, the general server, what drove the strength in first quarter? It's been kind of a stable market, but how much was share gain? How much do you see that market continuing? The second part of my follow-up, I actually wanted to ask about the GPU supply demands. I think you mentioned tight supply of GPUs, but we've seen a lot of delays on the racks, but actually chip production smoother. I'm curious where the constraints are on GPU, like if you're getting enough availability, whether for the high AI server, high ASP AI server, or constraints with prioritization there waiting for those racks, the low ASP server. Just curious why supply constraints given the delays and where you're seeing those constraints.
Let me put another way around for you to answer your question. First, for these customers to deploy the data center throughout. Keep going up. The demand is very strong. They'll pick up when it's available in the market. In the first quarter, due to the certification from the high ASP of the server, the reason is the customer employs more current versions of the AI server. There's an allocation between order between the high ASP and low ASP, whether to talk about the share gain or share loss. Let me put it the other way around for your reference. The demand's still there. Demand's still intact. Customers just do the reallocation between the GPU, the readiness, so they can move on to the next version or current version. That's dynamic.
Moving to the second quarter, the supply of the high ASPs is getting better and better, just due to the availability from the chip vendor, whether from the customer demand. Customer demand is still over there. It is still intact. It is still very strong. It is kind of dynamic to relocate different splits between the high ASP and low ASP AI server.
Thank you. If you could comment on the general server outlook, then I will drop back to the queue.
They keep going, but in this quarter, the high ASP server, the growth rate should be better than the low ASP server, relatively.
Yes, thank you very much.
Thank you, Randy. The next question will be coming from Howard. Howard, please go ahead.
Hello. Hi. Yeah. Can you hear me? Yeah. Great. Congratulations on the quarter.
My first question is on Notebook. I wanted to ask, I was a bit surprised that Notebook was less than 25% of total revenues in the first quarter. I guess my first question is, are we seeing a pretty strong kind of recovery in terms of Chromebook shipments in Q1?
No, you start now allocate to the Chromebook. Chromebook is still coming back to the regular pattern, only 10% plus, minus something only. It is a key portion of our total Notebook shipments.
Okay. Got it. Real quick, just in terms of the 2025 kind of guidance by segment, just to touch back on what you guys guided for the last time, you guys said that AI revenues will grow triple-digit year on year, and general server will be flat year on year, and automotive will be up single-digit year on year.
Are these guidance still unchanged three months later today?
By far. We are here contribution to over 70%. Over the three digits is still unchecked. Okay. General server looking slightly better from flat digit to flat up. Okay. For the year-on-year basis. Okay.
Got it. One last question from me, and I just wanted to clarify maybe your answer to one of Randy's questions earlier. Looking at the lower ASP AI server product, you mentioned Q1 demand was quite strong. Is it fair to assume that that demand will continue to remain that strong for the remainder of the year, or are you expecting demand for the lower ASP AI servers to fall off in the coming quarters?
It is still growing, as I mentioned. There are two dynamics for your reference, First, for the allocation between the split between the high ASP and low ASP split of the server, but still the availability. We still see the low ASP general server still keep growing, but the percentage may be below to the high ASP server for the quarters.
Okay. Got it. Still growing, but growing at a slower pace. Got it. Thank you. I'll jump back to the queue. Thank you so much.
Thank you, Howard. The next question will be coming from Angela. Angela, please go ahead.
Hello. Can you hear me?
Yeah. Angela, please go ahead.
Oh, okay. Thank you for taking my question. Just a follow-up question regarding the AI server. Can you give us the definition of the low ASP and high ASP of the AI server? Not that sure what that means, low ASP AI server demand is strong in the first quarter. That's my follow-up question first.
Yeah, that's the definition. What is it like? No. That's the current version of the GPU or next generation of GPU, but due to the different infrastructure, they have a different price tag. The next generation now is kicking in this quarter, it is the high ASP because the current GB200 stocks.
Okay. Oh, okay. It means Hopper is the lower ASP AI server, and the Blackwell GB is the high ASP AI server. Am I right?
Yeah. To some extent, yes.
Okay. Thanks for clarification. Okay. Thanks for clarification. We think your AI server is a self-paying buy-and-sell model. Based on accounting principle, if you buy the GPU from clients by CSPs and assemble and sell to them, will you book yourself in the value, including GPU, CPU, or will you have a net deducting the major chip with the other net value only? That is the question. Follow-up.
That is a mix depending on the customer's requirement. If it is a confinement model, then we will offset the key components on the cost. If it is a buy-and-sell model, then we will cover everything. That is a mix among our customers. The major alignment part of our business is still buy-and-sell models.
Okay. Based on your clients' current model, is the mix of the confined higher or the buy-and-sell higher?
The line part of business is buy-and-sell models.
Okay. I see. Okay. Last question is that regarding major part, the buy-and-sell. Okay. Thanks. The last question is regarding the first quarter financial about the non-op. It's quite rare to see that your interest net expense in the first quarter. Can you explain the major reason, and will this condition last into the following quarters? Okay. Thank you.
Yeah. The business is still going. We can see the growing account receivable, inventory. There were working capital hungry. That's also one of the strengths, advantage. Our balance sheet, our income is going to accommodate. To win the business, also expense of your soaring working capital need. As a result, you need to have additional interest expense to cover the soaring working capital need. The customer requires you to pull in the GPU. That means you need to prepare more working capital to accommodate.
The only few players, that's one of the key reasons the only few players can in this industry is to working with the CSP for this type of product, for this type of business.
Okay. Makes sense. Do we need to expect that this situation will continue when your GB or AI, high ASP AI sales growing up? That will see this kind of situation continuously.
That could be predicted. That is how we do funding this working capital need. Okay. You can look for any low funding cost vehicle to maybe can lower down the over interest expense going forward. Okay. I think there's a big season in the first half. When it's renting out, giving this business model, then that definitely comes to more working capital need. Okay. That's as a result with a higher interest expense.
Okay. Thanks. Very thankful for your answer.
Thank you, Angela. Next question will be coming from Albert. Albert, please go ahead.
Thanks, Carrie, for hosting the call and congrats management on the strong result. My first question is, based on what you're saying, the CSP customer may build a lot of Hopper HGX in first quarter, and now we are ramping up the Doppler server into second quarter. My question is, how will Quanta see customer preference in Doppler HGX versus GB server configuration? Is it fair to say GB is a preferred solution by CSP in Doppler generation? If customer may face some issue in GB server, is it possible for CSP customer to switch back and buy Blackwell HGX? Or it's not doable because their design is mainly for GB?
Thank you. Thanks, Albert, for your question. Customer virtually, customer. Different AI production platforms.
They have a huge AI demand. They can accommodate different types of compute needs, starting from the H200, GB200, or GB300. They have different types of production platforms. From a Quanta perspective, we cannot speak for the customer or speak for the vendors. Not only that, what we can do is to meet the customer's requirement at the right timing, right cost, and right sale. That is why I mentioned that we are doing the allocation between the high or low ASP AI server. Quanta, we can say we are ready for every type of product. Customer is subject to how they are to go up their AI production platform. We cannot speak for them, but we work for sure as we can accommodate what their requirement is. Whether they can scale well or not, which we do not have ideas.
What we can do is we can get ready at the best price for them. That is TCO leadership product for them.
That is very clear. Thank you. My follow-up question is, Carol mentioned Notebook will grow like high single-digit with working shops going second quarter. You also mentioned that the Hopper or HGX server will grow, but probably at a slower rate versus GB, which means AI server will accelerate into second quarter. We see these two. That means probably we will see more than 10% "revenue growth" in second quarter. Is it a fair solution? Is it a fair argument? If that is the case, second quarter can be easily like NT$55 billion, but April revenue is only NT$15 billion. Why is there a big show for it in April?
Is there a specific reason, and we are expecting a huge jump in May and June? Thank you.
However, again, thanks for your question. Firstly, in our customer practice, we do not care about the revenue growth rate, electricity and electricity. What we can say is we see the Notebook is going better, and high ASP server we are kicking in this quarter. Again, this is still a known swing factor about how the customer to allocate between the high ASP and low ASP as well as the readiness of the chips from chip vendors. So there is a swing factor over there. Anyhow, we are expecting.
Elton?
Carrie?
Yes. Hi. Hi, Elton. I think we lost you for a couple of seconds.
Oh, really? Okay. Just touched on about for the. We do not provide a direct revenue for the revenue growth rate based on our customer practice.
What we can say is we see the better Notebook pulling from the customer for the second quarter. We are expecting business, the high ASP server, we're kicking this quarter. Again, it's also due to the readiness of the chip vendors and the customer plan to allocate between the high ASP and low ASP server split. We are looking for that and what the information we have now for second quarter.
Understood. That's very clear. Thank you, Elton. Congrats again on the strong result. I'll go back to the queue.
Thank you, Albert.
Thank you, Albert. Next question will be coming from Sky. Sky, please go ahead.
Thank you for taking my question. I just want to know that many workplace automaker and companies are collaborating with Earth Automotive Project.
Sky, it typically takes three to five years to go from project initiate to mass production. I'd like to ask, is there a chance that our automotive business could reach $1 trillion level in three to five years later?
It's kind of touched on in the preferred time. The EV business probably facing some certain hiccup in this year due to the macroeconomy, due to the tariff issues, due to the inflation issues. That's why I mentioned we are changing our strategy to migrate from the low ASP product to high-value ASP product. We're expecting the revenue growth to package for this year. We're still expecting, we're still excited about this outlook for the EV business onwards. We're still seeing that should be in the next one or two years another growth driver for Quanta onwards. Hello?
Thank you, Elton, for the comments. We will move on to the next question. Randy, please go ahead. Yeah.
Thank you. My follow-up question, you mentioned some of the high ASP server is subject to the chip reliability availability. Could you discuss more on the hardware? I mean, there have been comments about yield ramp for the past few months. If you could talk about what you're seeing from the ability to manufacture and improve yields, how smoothly you see that ramp up. As we go toward GB300, originally there was optimism at GTC about some of the design changes on the new architecture, but it looks like we'll keep with Bianca. How are you seeing the transition to GB300 if that ramps up, say, later third quarter or fourth quarter?
Personally, we don't comment about a rumor. Definitely, if that's a wholesale, we are more than happy. That's going to be easier for the renting schedule and improve the yield rates.
Again, we do not speak for our vendors. What we understand is that most of the key issue has been solved for the GB200s. What the customer will change in their migration plan, we do not know. As I mentioned, customer has their own adoption plan, and they will ever change it. We always have flexibility to meet the customer's requirements.
Okay. Great. That is clear. Okay. I wanted to ask a follow-up on margins. I know you cannot guide explicit, but you are coming off a high base, both growth and operating margin. Maybe a couple of things around it because if you could give a direction for OpEx growth and then also whether it is kind of an ability to maintain operating margin, even though gross margin comes down, you can, with the scale-up, maintain that. Sorry, the second part, wanted to ask for FX.
Is there a sensitivity on revenue and cost from that NT dollar recent appreciation? How much if that would have any impact, or that's kind of a natural hedge to the gross and operating margin?
Okay. Thanks, Randy. For your first question about our OP margin, maybe I may put it too because every quarter has different product mix. So there are different leverages. So operating may be up and down. For the overall OP expenses, we are managed to make sure the growth of the OP expenses, the growth rate is below our sales growth rate. Secondly, it probably slightly above our next year total of about NT$49 billion something. Okay. That's happened. Done. In the second quarter, we still need to put more effort to ready for the GB300s. We are expecting the R&D expenses will should be raised as well.
More than I hope for conservative sake, we're still willing to say that some of the pressure for the OP margins in the second quarter, even though they have a leverage for our top line. For the second part of your question about FX, I also love to have some metrics to come on a linear forecast. How many % of NTD appreciate, then we'll come out how many % impact our margins. Basically, we're on a different wave of ground. Okay. There's a lot of swing factor among that. That's what I mentioned. We have a major hedging for our AI and AP. Secondly, we have a dynamic hedging mechanism. We don't live in a naked position. We will always monitor on a daily basis. Hopefully, we can manage well. The swing is very big.
Anyhow, we still see kind of manageable and controllable based on our regular basis of the hedging activities.
Okay. Great. Thanks a lot.
Thank you, Randy.
Thank you. Our next question comes from Keeling. Keeling, please go ahead.
Yes. Thank you for taking my question. I'm asking on the margin side. For OPM, I think we mentioned that in 2Q, our R&D expense could increase on GB200 ramp. Does that mean our second quarter OPM will also have pressure quarter on quarter, a gross margin pressure because of product mix?
Yeah. I guess touched on about that. Yes.
On the overall long-term view, when high ASP AI servers like GB200 reach a certain scale, and we also have certain experience ramping that, would you say those AI servers OPM is higher or lower than current OPM level?
This is a dynamic industry. We'll keep the next generation of the new CPU in the market. We'll keep the new ID expenses to make sure Quanta ahead of a competitor to come out, set out a product. Just what I mentioned, we're more likely to provide the guided overall OP expenses for the full year, basically for your modeling, your forecast. What I'm saying, next year, we have NT$49 billion something for overall OPEX. This year, probably half down the NT$49 billion. Again, our goal is to make sure our expense growth rate is below our revenue growth rate. That's our overall goal. The next goal is to increase absolute margin dollar. I think the product mix can change from time to time. We can substitute the product mix and substitute the new product ramping out.
There is a lot of variability about the OP margins. It is probably to give you another dimension for you to model your forecast.
Okay. Thank you. Just a quick follow-up on previous question about GB200 assembly yield. Are we seeing any issues with that, or is it mainly the chip supply issue that we are seeing to ramp GB200?
Thanks for your question. I do not want to comment about what the vendor's performance is. Okay. What we are keen about is what the demand and the timing are. Our customer, we do not buy directly from the chip vendor. We buy from our customers. The customer gives out a schedule, and we discuss what the schedule is. This is what I mentioned. We are not a model maker. Their customer is a chip maker. Our customer will buy from based on the buy-sale model. We buy from CSP.
The key thing for us is how to discuss what the timing, the quantity they can provide, and what to allocate our resources, allocate our product among the H200 or GB200 or GB300. Those are different dynamics. When you talk about the vendors, we are facing about the CSP instead of the chip makers.
I see. Thank you. I'll get back to the queue.
Thank you.
Thank you. Due to time constraint, our last question will be coming from Kevin. Kevin, please go ahead.
Yeah. Thank you for accepting my question and congratulate on the outstanding quarter. My first question is about the visibility. As you have already mentioned, the visibility for NBPC for those consumer products remains very limited for the second half. I want to ask about what is your visibility?
What is the order visibility of your server, especially for AI, high ASP or low ASP server business for the second half? What do you think the future will be for this industry? It has been a very strong growth during the past year in 2025. Do you think the momentum will remain for the year to come? That's my first question.
Personally, definitely, the visibility is getting better. That's why we're kicking in this quarter. Again, on war, we still substitute the availability from chip makers. Whether for the outlook for 2026, actually, all the CSPs and earnings call already tell you. They keep their investment. They keep a lot of cashbacks. They are also looking forward to the growth rate for 2026. Maybe growth rate is lower, but 2026 still keeps growing.
That's why I keep talking the demand there, the demand impact. But substitute what availability about the chips. They will come up. Customer will decide what to allocate the product because they keep wanting to provide AI service. They want to keep deploying the blowout of a data center. They do not hold the pace.
Okay. Yeah. Understood. Can we assume that we have full visibility for server business for second half this year?
We're happy for that. We're looking for that. We're in for that.
Yeah. Okay. Understood. My final follow-up is about the automotive business. As you already mentioned, it still will be our momentum for the next year to go. Yeah. I just wanted to understand the percentage contribution we are expecting for the auto business for years to come because we have mentioned it may be high single, maybe reach double digit. Yeah.
We all see that the growth momentum for the high ASP server is very strong. The percentage-wise, it seemed to be diluted. Any new comments on this percentage contribution for the years to come for auto business?
Again, it is still single digit for the fund for the years. Okay. If we all agree, 2026 is still going year for the server. We are not expecting the EV business will outgrow the server business in 2026. I would say 2026 is still single digit for the AV business for the next years.
Okay. Yeah. Understood. Maybe we will see it in 2027 when we will see the percentage may be larger.
I totally agree because there is a long certification process. What we can do is to make sure we keep going along with the key buyer, key brand, key AV player. We are still working with them.
That is why today we touched on the expenses in our Germany. One of the key purposes is to provide a service to our customer in the Euro continentals. Again, all this, no matter the EV or server, we need to prepare upfront and take time to work with the customer to win the customer's trust, to come out with the cost-least product for them. That is why you can get a low hanging fruit when market comes out, when product comes out in the market. That is Quanta DNA and Quanta strategy.
Yeah. Understood. Sorry. May I have the final follow-up, like our dividend policy? We have very good dividend for this year, but you have already mentioned that the CapEx seems to be much higher than what we expected for this year. I would like to ask about the future dividend policy.
It depends on how the business grows. Again, if you look at our back, about what we've been doing in the dividend policy, we're always looking at the balance between the cash reserve for the CapEx, for the R&D, and also to return to our shareholders. It could be something of volatility. If you're looking back, we're able to pay 80% of our earnings to our shareholders. That's our track record.
Yeah. Perfect. Thank you very much.
Thank you. Kevin. Elton, I know we are running out of time, but maybe just one very quick question from me regarding GB200. The system complexity has obviously raised the bar for ODMs. Order allocation has been highly concentrated on leading suppliers, including Quanta.
As we migrate to GB300 or even next generation, do you expect to see any competitive landscape changes, or do you expect again more market share?
Again, what with the customer? Closely working with the customer. How many provide the design for them and provide the most? Again, competition is always there. We get used to that. We also assume there is a competition over there. We do not fear any competition. Who can provide a fixed cost? Who can provide the leadership product? Who can provide the TCO product? They can win the orders. Quanta gets used to that. Quanta will keep working with the key chip makers. Make sure we are going along with them. Also, fully unpack what the CSPs need.
No matter how they change their strategy, if you know customer well upfront, then you know how to design product for them, then we can keep winning the orders from them. Again, this is market practice. And Quanta in this business, for decades, we migrated from the notebook, from the regular server to the AI server for the EV, or even for the next new product, the same DNA, same strategy. We see that we get used to the customer from decades ago to make sure we know the product, we know the customer. We come out and the computing design is still our DNA. We make sure we can keep winning the order from the customers. That is our strategy. That is our DNA.
Understood. Before we close, I'd like to thank the management team for their time and insights today. C.C. and Elton, any final remarks to share?
Thank you for your concern about Quanta. As time passes, we will still continue to do our best on the next development. Technology has always stuck. That is our obligation. We can only work closely with our customers to know any possibility that we could do.
Great. Thank you again, C.C., Elton, Carol, and Ale. Thanks to everyone who joined us on the call today. If you have any additional follow-ups, please reach out to Quanta's IR team or me, Carrie, from Citi. That concludes today's call. Thank you and have a great day.
Thank you. Thank you.