Tape out our first, AI-native solution for the far edge. That will start to sample here, and we'll start to get revenues as we move through our fiscal 2027, and into our calendar 2027 timeframe. Very exciting story. Just to step back, Peter, if you look at our most recent results here, in our fiscal Q3, which ends in March, we printed $267 million in revenues, about $0.92 in terms of our earnings profile. Our guidance here for our fiscal Q4, our June quarter, the midpoint is at $280 million. Nice growth, sequentially, nice growth on a year-over-year basis. The midpoint in terms of our guidance for earnings was about $1.
The biggest drivers in terms of that growth have been around this Core IoT segment, where if you look at our Q3 results, you know, that business was up substantially on a year-over-year basis. And based on our Q4 guide, Core IoT will have six sequential quarters of growth, which is goodness in, in terms of where the business is.
Mm-hmm. Okay. Why don't we just kind of start with the near-term stuff, because that's been kind of more topical.
Sure.
At the top of investors' mind, your first half revenue is better than expected, right? And, you know, you're seeing signs of continued traction, but some could argue that this is driven by some of these pull-ins ahead of the, you know, expiration of the 90-day reciprocal tariff reprieve. So, maybe if you can walk us through the process of how you differentiate between pull-ins and genuine order improvements.
Yeah. I would say if you look at our commentary over the last few quarters, a couple of things, and maybe I'll just level set everybody in terms of some of the backdrop on the fundamentals. We look at a couple of things from a financial perspective. One, if you look at the distribution inventory for our customers and through the supply chain that we can see, that inventory level has continued to lean out over the last six to eight quarters. I would say it's now stabilized at levels that are pre-COVID level, so very lean overall in terms of the supply chain. That's one metric that we continue to look at. Now any orders that are on us really flow through to the business versus taking sales from the inventory channel. That's one positive.
Number two is if you look at overall backlog levels, and we track that on a weekly basis. What does that backlog look like entering any quarter? Entering our June quarter, we have very healthy backlog levels. The third piece is just overall bookings rate, and that's through all of the products that we sell to our customer base and continue to look at the crawl charts and looking at how bookings are progressing, not only for this quarter, but as we look out into our September quarter and beyond. I would say if we step back, the visibility is very, very good as we think about our June quarter, and visibility remains very healthy as we think about our September quarter as well.
In terms of your specific comment in terms of pull-ins and potential push-outs, we're not seeing that here today, as we look at our guidance for our June quarter. You know, if we look out in time, could that happen? I think the answer is potentially. In terms of the very near term, our June quarter, I would say that is real demand. Part of that is just because of the backlog levels entering the quarter. The backlog, when I even look out a month ago or so, the backlog levels were very healthy, pre any tariff discussions, in the April timeframe.
Great. It's encouraging to see the team beginning to build good visibility into the September quarter. How would you describe the customer discussion and how they have evolved since, you know, Liberation Day in early April?
Yeah. The customer dialogue continues to evolve over time. Even if we step back, there was a period of time, I would say, through mid-April where there was more uncertainty in terms of how the customers were going to react. They were also trying to figure out how they would adjust their supply chains to service demand around the globe. If I just step back and look at the tariff impact, one, there is no impact to us, or very, very, very minimal impact to us on a direct basis, because all or most of our solutions go into subsystems or systems servicing a global customer base and servicing large OEMs that typically have a very much of a global supply chain.
That's what we're seeing is the global customers figuring out and adjusting their supply chains throughout the world to see where they can best service their end customer base. For us, we have to be agile, we have to be nimble, we have to be disciplined in terms of servicing those customers and where they're gonna flex their supply chains around the globe.
Got it. One more near-term question for you. Current fundamentals sound like it's pretty strong: positive booking trends, lean customer inventories, strong sell-through activity. I think that said, there's kind of, you know, a lot of uncertainty. Just considering these two factors, how's the team thinking about the second half of the year?
Yeah. We guide one quarter ahead, right, in terms of the visibility we provide. As we talked about earlier today, visibility into our June quarter, our Q4, is very, very healthy. Very strong visibility there. As we think about even the September quarter, what I can say is the backlog levels as a starting point today are very healthy for the September quarter, and the bookings continue to progress. I think the one comment, and it is not a surprise, and it probably impacts, I would say, all semiconductor companies, is if you think about two quarters ahead or three quarters ahead, all the fundamentals that we have talked about in terms of the backlog levels, the bookings rate, the fact that the channel inventories are lean are all very good signs.
I think the one question that we all have is, is what does, is there any impact to the end demand? That's what we continue to monitor. We continue to work closely with our customers in regards to that. Will the tariffs have an impact to end demand? Who ultimately will pay for those tariffs? Is it gonna be the end consumer? Is it gonna be the end enterprise? How that can impact end demand? Now, if you step back, though, and you look at where the products are being consumed, you know, not all products are either consumed here in the U.S. and not all products are consumed in China, as an example. The rest of the world is such a large market.
For the most part, there's very little impact to tariffs on a direct basis in those end markets.
Okay. Just on the longer term, your design- win pipeline, I think that's a good reflection of what the long-term revenue growth could look like, right? Last year, your Core IoT fund grew at a rate of 30% year- over- year. Have you continued to see that strength into 2025? And maybe on that, can you just kind of rank the top three or four end markets where you're seeing the strongest design activity?
Sure. Happy to do it. I think you're spot on. If you look at it and we look at our overall pipeline, you know, we talk about the pipeline strength. Essentially, once a year, we give an update. We talked last about it in the September quarter, and you could assume that things continue to progress nicely. From a fundamental basis, if I look at our fiscal 2025, which ends in June, and you take the midpoint of our guidance for the June quarter, and we provide some of the detail by each of those markets, you can see that Core IoT's gonna have a very healthy year-over-year growth profile. Fiscal 2025 versus fiscal 2024, you're talking something like 50% + type of growth on a year-over-year basis.
That is where we expect to see continued strength as we think about over the next three to five years. That's where the pipeline continues to build in two primary categories. The two big drivers for our Core IoT business are one on the wireless side, and that is more near-term as we think about not only our calendar year 2025, but into calendar year 2026. That's gonna be a driver. There are two components there. There's one on the high-performance Wi-Fi side. When we think about Wi-Fi 7 and for applications that require a high level of rate over range or just video applications or higher throughput, for the IoT space, we think we're leaders there. That's a product set that we are sampling here.
It should contribute, towards the back half of this calendar year in terms of revenue, but really a calendar year 2026 and into 2027 story. The other piece in terms of the pipeline build and where we're gonna see growth, as we think about calendar year 2026 and beyond is on the broad market side, or embedded IoT side for Wi-Fi. If we look at that space, it's about a $3 billion SAM that we have not addressed before. Today, we're coming out with our first solution targeting that embedded IoT or broad market IoT space with connectivity solutions with our SYN4612 solution. Same timeframe. That's, you know, latter part of this calendar year in terms of early revenues, but really a 2026 and 2027 story. That's where the pipeline's also building on various applications.
It can be, on the home appliance side. It can be on wearables, those types of applications. Whereas the high-performance Wi-Fi can be in areas such as, you know, set-top boxes, streamers, drones, video cameras, security cameras, and the like. If we think more on a midterm basis, on the processor side, there's really kind of two levers as we think about the next three to five years. I would say the first lever is around operator solutions, where we have a strong business position today. We've talked about wins with folks like Deutsche Telekom, and the like. Those should begin ramping as we move into our calendar year 2026.
but it's really this Astra platform in our, in our first, you know, AI-native solution that is taping out here this year and sampling and, and should have revenues as we move through, and into our fiscal 2027, which is not too far away. That is where there's, there's a tremendous amount of excitement because we believe we're gonna have a solution that will have kind of world-class, inferencing per watt. If you look, for, for AI at the edge and at the far edge, the ability to deliver significant compute power at a, at a very low, power usage is gonna be, is gonna be very beneficial for a lot of battery-powered applications. That is an area, that is an area that we're focused on. That's, I would say, more of a storyline as we head into fiscal 2027 and beyond. Very exciting.
You look at those two solutions, you look at the connectivity solution, you look at the compute solution, those will be harmonized on a long-term basis. We think we have a unique position to prosecute that over the next three to five years.
Got it. Why don't we just kind of touch on some of those specific growth drivers that you mentioned in your Core IoT? With the Wi-Fi 7 upgrade cycle, you know, the ASPs is significant increase versus your Wi-Fi 6 or Wi-Fi 6E. As you kind of evaluate your design- win pipeline, how should we kind of, you know, anticipate the customer adoption curve over the next, you know, call it 12 months?
Yeah. So, you know, it's, we're early days, but what's exciting is, typically for some of these video-intensive applications within the IoT space, you can see somewhere, call it 20%-25% of that market will want the next-generation connectivity solution. They'll want that high-performance solution, whether it's in drone applications, surveillance applications, video-intensive applications, they're gonna want that uptake. That's where we should see that initial uptake. It's probably for that 20%-25% of the marketplace. From there, it can proliferate into other devices over time.
Okay.
Munjal, anything else to add there?
No, that's true. There'll be an ASP uplift also in the initial, as you highlighted. It's a combination of, you know, some penetration as Ken mentioned, and then, from an ASP uplift.
Just regarding your Astra IoT, you know, compute platform, you have an early mover advantage.
Correct.
You guys previously disclosed a $300 million pipeline. Your recent commentary from the earnings call suggests the momentum continues to be strong. Maybe if you can provide some details on what kind of applications are getting designed and if you have any updates on the pipeline.
Yeah. We won't give any specifics on the pipeline. We'll do that kind of on a yearly basis, but it continues to grow from what we quoted in that September timeframe. If you look at the applications, where is it? It's gonna be on applications such as wearables, home appliances, same thing, security cameras, video applications, set-top boxes, and the like. That's where we're seeing traction with the customer base today, because we have a unique capability within the company, not only with this next-gen architecture, but if you look at some of the foundational elements that we have in terms of video, in terms of voice, those are all very core to what AI needs in the future.
If we think about AI and you think about the consumer experience, you wanna be able to speak to the application, you wanna be able to have it recognize you from a video standpoint. Those are all capabilities we have inherently in the company.
Perfect. Let me just stop here and see if there's any questions. Okay. Okay. And then the other big growth driver is the broad market. You know, you successfully leveraged your high-performance wireless technology into a more power-optimized solution with the launch of your broad market chip. Maybe if you can provide some insight into the initial applications that you're ramping up with this new solution.
Yeah. The broad market is one where if you just step back and look at our overall wireless team, we have, call it 500-plus engineers that are focused on developing connectivity solutions for the IoT market. We think that's one of the largest teams out there dedicated to this IoT space. We built it up from scratch here over the last five or so years. We have a lot of that headcount in lower-cost regions, so very cost-effective over time. The broad market solution, that's our first entree. It opens up this $3 billion SAM that we've never targeted. It's our first solution. If you look at the die size and the performance aspects, still, you know, very much smaller die, which means a lower cost, but still at a very high performance spec for the IoT market.
This right now, in terms of where we are, this is really a calendar year 2026 story. We'll start to see some early revenues in the back half of this calendar year, but really a calendar year 2026 and into 2027 story. It is going in applications very similar for, like, other IoT applications. Think about the wearables, think about consumer appliances, think about security cameras, all of these devices that we touch and use every day. Those are the types of applications. It really enables our customers to have a relatively high-performance solution on the connectivity side at a much more cost-effective price point.
Mm-hmm. You have traditionally been very focused on the consumer segments of IoT, right? But, you know, you possess all the technology that can be leveraged into other vertical end markets, like industrial and so forth. Maybe if you can discuss some of the go-to-market initiatives and how the team plans to replicate this success in consumer IoT to other end markets.
Yeah. I would say if we think about both, and this probably ties both to our processor business as well as the connectivity solutions business as well. One of the areas that we're looking at, we've been very good, I would say, on a one-to-one relationship with very large customers. That's been the history, been very strong at supporting and building out that customer base over the last, you know, 20+ years. If you look at the IoT space and you look at these solutions and where and how we're going to continue to expand, it is really beyond, let's say, the top 20 customers that we service very well today and really going into the top 40, 50, 60 customers.
In order to do that, one of the areas that we have been investing in and we will continue to invest in as we think about the next 12, 18, 24 months is this go-to-market engine. That is not just feet on the street in terms of the sales team, but it is really building out the system architects, the FAEs, the collateral, the software that you need to support that larger customer base over time. Building out reference designs on the connectivity side, on also the computer, the processor side, building out overall solutions. These are all things that we are starting to invest in over the last 12 months, I would say, from a rec standpoint in terms of where we are making some initial and incremental investment. It has been on that go-to-market side.
You know, we've hired a team on the BD side to help expand with the processor business, and now we're starting to fill out some of those system architects as well to build some of these models and some of these solutions and reference designs for specific customers and specific applications. That's where you'll start to see us continue to invest. That's what we need for the broad market space for the connectivity solutions, as well as when we think of our Astra platform, targeting the far edge.
Great. Moving on to your enterprise and automotive segment, right? In your notebook PC, you have some content stuff of your user presence.
Oh yeah.
Detection technology. You're ramping up with your lead customer. Appears to be making pretty good progress with the second OEM. The content lift is approximately like $3 to $4. Maybe you could just talk about or help us understand what the, your expected attach rate over the next several years for, for the computers, for, for this presence detection technology and how you think about the revenue, revenue opportunity.
Yeah, sure. First, I mean, the team's done a great job in terms of essentially sweeping the house at one of the large OEMs, and now we're making our entree into the second OEM. From a customer standpoint, we're able to offer them a solution, because it's essentially an ASIC that has a much lower power consumption than other architectures out there and also enables the software. One of the things that we showcased at CES, and if any of you are attending COMPUTEX, you'll see it as well, is really what this application can do. It enables you not only from a power standpoint, but also from a security standpoint.
It enables the computer to recognize your face, recognize various characteristics from a video standpoint, hand motions and the like, that enable you to really interface more easily with your computer. Now, this is still early days. I think that's part of the thing that's very exciting. If you look at the uptake, it's probably in that, you call it 10%- 15%-20% range, in terms of the uptake today with one of the large three OEMs on the PC side. I think over time, as, you know, as AI becomes more relevant at the edge and the far edge, you're gonna see this proliferate into more of the PCs on a go-forward basis.
Early days today, but this is another significant opportunity in a verticalized solution of what we can do and deliver, for AI at the edge and the far edge. This is one of the exciting pieces of our story and one of the exciting technologies that the team's been able to develop, enhance, and execute on with two of the large OEMs. I'm hopeful here as we think about the next two years, we'll have all three.
Got it. Within your enterprise segment, you also have the stuff that's kind of leveraged to your, you know, traditional enterprise IT budgets, like your docking station.
Sure.
Your enterprise audio headsets. Those segments have improved, but they're still kind of 30%-40% below the peak levels of 2019. I understand that, you know, enterprise IT budgets are constrained, you know, given the reprioritization to AI, but is there anything structurally that would prevent you from returning to those 2019 revenue levels?
Yeah. If you look back and you look at our position in these, in the enterprise space, whether it's on the PCs or any of these enterprise applications like video interface and the like, we have a strong position. In those core markets, enterprise, automotive, even in the mobile side, for the areas that we compete, I would say these are franchise businesses for Synaptics where we're number one or number two in many of these markets. It's really a question of what those units come back to. I would say if you look at the pre-COVID levels, we should get back to those unit volumes over time. You know, one of the things that we've highlighted here on the last couple of calls is we still haven't seen this PC refresh cycle, right?
There's a lot of potential for that to happen, whether that's the back half of this year or into 2026, just based on the fact that the last refresh really occurred during COVID, during that 2021 timeframe and maybe into calendar year 2022. Whether it's Windows 10 coming offline, whether it's the fact that there are more AI PCs that are coming online, these are all opportunities for us. That would help in terms of overall consumption, not only for PCs, but peripherals that are attached to the PCs. One of the things that excites me is we have this RTO, right? Return to Office that is starting to happen when we think about the workforce.
I think about where we're based in Silicon Valley, but also, whether it's here in Boston or any of the metros in the U.S. and around the globe, you have a lot more folks going back into the office. One of the things I noticed in what we've invested in at Synaptics is, if you think about the conference rooms, if you think about the workspaces for individuals, as we have people coming back to the office, I think that that's an area that we should see further investments by the enterprise, as people come back into the office on a global basis, but here in the U.S. Those are some nice potential tailwinds.
We haven't seen that today, but I think as we think about the next 12 to 24 months, those can be some nice tailwinds to our business and overall enterprise spend.
Mm-hmm. Then your final segment, your smartphone segment, you know, the iOS headwind is finally away. And so.
Yes.
Now you're really just concentrated on the high-end Android space. You know, you are introducing your next-generation touch controllers, which offers lower power consumption and lower latency. Maybe if you can just give us, provide some expectations on how this might actually accelerate your revenue growth.
Sure.
You know, either through new share gains or content stuff up.
Yeah. Peter, spot on. If you look at it, we did have that headwind on that specific customer. That's behind us as of December in terms of our last sales to that customer of any size or scope. Our focus on a go-forward basis, where we've made great inroads and entree in terms of expansion, is on the high-end Android market. On the high-end Android, think of Korea, think of China. We've done a great job. That business continues to grow. If I look at where we are today relative to where we were expecting to be at the end of our last fiscal year, not too long ago in July of last year, we're well ahead of the pace that we were expecting.
That's kudos to the entire team at Synaptics. A lot of it is the fact that we are the leaders from a technology standpoint. Customers come to us because we differentiate where they need a high level of precision and quality in their solutions. They come to us and really wanna partner with us on the high-end touch side 'cause that's been one of the foundational elements and technologies of Synaptics over the last 20+ years. On a go-forward basis, this multi-frequency touch solution, we're in these POCs here. We've had POCs, but in this POC phase here, in this quarter and into next quarter. Those have great traction with the customer base. In essence, if you look at our solution today, we're in a lot of the candy bar phones, your normal Android high-end smartphones.
We're also in vertical solutions. Vertical fold devices where you have the vertical folds. What this architecture allows us to do is on the horizontal solution. When you think about a horizontal phone or any large screen touch, it's a new technology that essentially allows us to be not only a leader from a technology standpoint, but be very cost-effective. Just in terms of the horizontal foldable phones, you can see that it will essentially double our content that we have versus today because typically what happens is on those horizontal foldable phones, you have the one screen in the middle, but on the outer edge, you also have another screen. The customers tend to use one supplier for both. We're very excited about this technology.
We'll have some revenue as we move through calendar year 2026 and beyond. This architecture is very unique and it allows us to, over a period of time, develop technologies for large screen touch. It could be in the PC, it could be in the automotive space. Those are the areas that you'll see us continue to spend some of our R&D dollars to leverage this technology from just the foldable phones, but it's very, very good on any large screen touch devices. That's where we're gonna start to use the technology over a three- to five-year period.
Got it. It's an exciting time for Synaptics. We talked about so much new product cycles. Maybe if you just kind of tie it all up and just help us understand how over the next, you know, 12, 18 months, as these new product cycles begin to ramp, how that begins to layer into your top line revenue.
Yeah, sure. I mean, we guide typically just what, one quarter ahead, Peter. If you look at the long-term potential in these businesses, I would say for a lot of our franchise businesses, that is around the PC, around a lot of the enterprise applications, automotive, mobile, these historically, given that we are, and we have these franchise positions where we are number one, number two, you know, these are GDP plus businesses. On top of that, however, I think we have an ability to gain some incremental share, which we have shown here in the last couple of quarters, but also develop products that expand the SAM. We know these customers. If you look at the PC supply chain, if you look at the mobile supply chain, the automotive supply chain.
We're developing technologies that continue to expand our SAM in those markets and grow above those entitled growth rates over a long, long-term period. That is our goal. When we think about Core IoT, historically, that market has grown on a market basis in the neighborhood of that 15% range. Our goal is to grow, you know, much, much higher than that. What we've talked about at our last analyst day, I think in 2023, was could we grow at a rate that is, call it, 25%-30%.
That can happen, and the big drivers for us to execute to those types of growth rates is around the technologies that we outlined before on the connectivity side, not only to continue to expand our capabilities on the high-performance side, but opening up this new SAM with our broad markets solution for embedded IoT applications. Finally, on the processor side, where we're, as I mentioned, just developing and taping out this year our first AI-oriented solution for the far edge. That will really drive the growth as we think about 2020, our fiscal 2027 and beyond, not too far away. Those will be the main drivers of our growth as we think about the next three to five years, Peter. I don't know.
Mm-hmm.
Munjal, anything to add there?
No, I think you covered that very well.
Gross margin implications of all these new products, how does that, are these richer makes? How does that play into the gross margins?
Yeah, I would say if we think about, especially when we think about the processor business and the capabilities there and we think about the broad market space, those are nice margins in terms of the overall profile. Today, right, we guided to the June quarter at 53.5% gross margins plus or minus a bit. I think it's gonna be for us to drive the margins further. It's gonna be somewhat dependent on the mix and also kind of mix within the mix. We, even within the enterprise space, have certain products that have a richer mix overall. It's just driving those mix profiles over a long-term period.
What I would just say, if you just step back and look at the execution by the company, on a year-over-year basis, you know, one, you look at the Core IoT segment, that's been growing at a substantial rate. As I mentioned before, you just take the midpoint of our guidance, that would show that we're able to grow that business fiscal 2025 to fiscal 2024 by 50% +, which is significant. Two, if you look at the earnings power, I think this last quarter, we talked about our year-over-year earnings grew something like 70%. I think that's substantial. You're seeing nice fall through from the revenue growth that we've been able to showcase over the last 12 months.
Perfect. With that, that ends the session.
I really appreciate it.
Thank you so much.
Yeah, thanks everybody for joining.
Good job.
No questions.
Thanks. Appreciate it.