Mandeep Chawla: And just to build on that, Thanos. So, the growth that we saw in the first quarter that you’re seeing in comms is the — being started off by our largest customer. What we’re encouraged with is that, the growth that we’re seeing in comms going into Q2 is now spreading to the rest of the hyperscaler customers. And so, while the point you made is very valid as you look at the first quarter, when we’re looking at it in terms of the full year, we are seeing growth across a number of customers, not just one or two.
Thanos Moschopoulos: Okay. That’s helpful. And with respect to margins, maybe it’s too early to talk about 2025, but as we think about the fact that you’ve got this weakness in capital equipment and industrial, which might improve later in the year and into next year. And then, you’ve got the growing HPS mix. Is there any reason for why we should not expect margins to be sustainable or to expand next year? Any offsetting constraints which you think about?
Mandeep Chawla: Yes, I’ll start off and Rob can add-on if needed. We’re happy with the way that the margins are coming together. Clearly, 6.2% in the first quarter, highest in our history. And the outlook now that we’re providing at 6.1% up year-over-year. And when achieved will be the highest in the company’s history. From a mixed perspective, hyperscaler margins, because of the level of complexity that is involved, is accretive to the overall company. And so, as we continue to grow hyperscaler revenues we are looking to maintain CCS margins plus or minus a little bit. The opportunity I think as you talk about for next year really goes to ATS. So our outlook for ATS right now is to be below 5% on a full year basis. They did 4.7% in the first quarter.
But to your point, as the demand returns in capital equipment, which is profitable by the way, but as the demand comes back we get leverage benefits. And as industrial, which is a strong margin business, contributes more, both of those will help expand margins in ATS. And so, we think that we have some opportunities going into 2025.
Thanos Moschopoulos: Great. I’ll pass the line. Thank you.
Mandeep Chawla: Thanks, Thanos.
Rob Mionis: Thanks.
Operator: Thank you so much. Your next question comes from the line of Jesse Pytlak of Cormark Securities. Please go ahead.
Jesse Pytlak: Hey, good morning. When you think about the increased guidance for 2024 in the context of the numbers you laid out for 2025 and 2026 at the November Investor Day. Is the increase really — is it just, like you said, the pie getting bigger or is there some demand that’s maybe being pulled forward?
Mandeep Chawla: Yes. Hi, Jesse. First of all, welcome to the call, and really pleased to see Cormark providing some coverage. To answer your question, the demand signals continue to be healthy across the hyperscalers. To say that pull-ins are not happening probably wouldn’t be accurate because, as you see, we came in at above the high end of our guidance range in Q2 — excuse me, in Q1. And some of that was fulfilling demand that dropped in as we went through the quarter. As Rob had talked about, because it’s not a 12-month rolling forecast, we don’t have clear visibility to how that revenue that may have been out a few quarters is getting backfilled. But at the higher customer level, we’re not seeing shifts in the demand patterns.
And so, what that would imply is that, yes, we’re continuing to see strong growth in the back half of this year as we talked about at the beginning of the Q&A, double digit growth rates. The demand signals continue to be positive for data center deployments going into 2025. But then to your point, we’re already now ahead or pretty close to what our 2025 outlook was in April of 2024. And so, we’ll wait for six months to really give a better outlook for 2025. But right now, we’re not feeling like it’s feeling from 2025. The demand signals just seem to be that the overall tide is rising.
Jesse Pytlak: Okay, that’s helpful. And then can you just comment a little bit on what you’re seeing in the networking side of things, kind of beyond the hyperscalers, more in the traditional cloud space?
Rob Mionis: Yes. Most of our networking business is actually going to the cloud providers in terms of 400G and 800G switches. On the OEM side, we are seeing continued softness as the industry burns through some excess inventory. We do see some of that recovering in the back half of the year.
Mandeep Chawla: Yes. As you know, the OEM side of the business are exposed not just to hyperscalers, but also to small-medium businesses and those capital type of deployments have been impacted from the macroeconomic conditions, but we don’t believe that that demand is going to be permanently gone, but there does continue to be a slowdown outside of the hyperscaler market.
Jesse Pytlak: Okay I’ll pass the line.
Mandeep Chawla: Thanks, Jesse.
Rob Mionis: Thanks Jesse.
Operator: Thank you so much. Your next question comes from the line of Paul Treiber of RBC Capital Markets. Your line is now open.
Paul Treiber: Thanks and good morning. You’ve been very successful with your largest customer over the last couple years or you’re going to have. What’s your visibility and strategy to try to replicate that degree of success with other hyperscaler customers?
Rob Mionis: I would say we are actually replicating that success with other customers. And we have very strong positions with the majority of the big hyperscalers. We’ve won a number of new programs with those hyperscalers that are either in development or currently in ramping. So we’re not solely reliant on that one customer. And we have actually very healthy portfolios across a number of hyperscalers and across a number of platforms within those hyperscalers. It just so happens that our number one customer happens to be in heavy investment mode right now and those are driving some of the concentration numbers. Over time, those investment levels might come down, but other hyperscaler investment levels will increase. So our overall hyperscaler portfolio is actually very, very healthy.
