Seamus Grady: So, the pace of capacity ads has been very strong, and we have been able to more than keep up with the demand. Any constraints we’ve seen, Alex, have been at the component level. From time to time, there are certain components that are in very high demand, so any constraints we’ve seen have been more in terms of component supply than actually our ability to manufacture. So, we’ve been able to keep up with the demand from a manufacturing point of view, and we’re continuing to add capacity. In terms of additional customers and maybe additional products, there’s really a couple of routes for us for additional business that’s fueled by AI. And when we say AI interconnect, we don’t mean things like DCI. We mean specific, short reach, low latency, low power optical interconnect that’s used specifically for these AI products.
We have, I would say, two ways that we see, or two causes for optimism in that space. One is our existing customer base. We’re working hard to make sure we win — obviously meet all the requirements for the current products, but also win the follow-on products and the next-generation products. So, we’re working very hard on that. And then in addition, there are a number of other customers who we’re working with to bring on new products. They’re probably a little bit further out, but we have more than one set of opportunities we’re working on. We have a number of customers that we’re working hard to win in the AI space.
Alex Henderson: So, just to be clear, you had said in the past that 10%, 15% to 25% quarter-to-quarter capacity growth was attainable over the next year. I think is that still the reasonable way to think about capacity growth?
Seamus Grady: I’m not sure that we talked about capacity growth in those terms. I mean, typically, we work with the customer to give us, again, on these new products, a long visibility so that we can put capacity in place. It’s quite an involved process working with the customer, with the equipment suppliers, some of these — some of this equipment is on very long lead times. So, it’s quite an involved process. We’ve been able to keep ahead of the capacity. So, our — sorry — keep ahead of the demand. We have not been constrained by demand in any way. And we have also not been constrained by capacity. So, I wouldn’t feel comfortable sizing it exactly at 20% or 25%, but what I would say is we remain confident we can keep capacity added ahead of demand.
Alex Henderson: Great. Thanks.
Seamus Grady: Thanks Alex.
Operator: Please stand by for our next question. Our next question comes from the line of Samik Chatterjee with JP Morgan. Your line is open.
Samik Chatterjee: Hi. Thanks for taking my questions. I have a couple. Maybe for the first one, you — relative to your datacom business, you had a sequential revenue growth of about $46 million this quarter. When you’re talking about the guidance for fiscal 3Q, it just appears to be the case that you’re talking about a more moderate sequential growth going from 2Q to 3Q. Just looking at the overall guidance as well, appears to be a bit more moderate than what you’ve seen in the past couple of quarters. So, just curious if that’s the case and what are the drivers there potentially? Is it the competence constraint that you talked about or is it the customer — more timing around the customer purchases or is it market share, any drivers that you can call out that’s driving more moderation there? Thank you.
Seamus Grady: Sure, thanks, Samik. Yeah. A couple of parts to the question and also a couple of parts to the answer. You’re correct that the datacom growth, we’re certainly calling out some moderation in our guidance, but still very healthy growth. Just to point out our overall growth, if you look, we have a track record, of course, of exceeding our guidance and we always work hard to make sure we do that. Our guidance right now for Q3, at the midpoint of the guidance, if we were to accomplish that at the midpoint of the guidance, we’d see us up 7.5% year-on-year in what has traditionally been a seasonally soft quarter. At the high-end of the guidance, we would be up 9% year-on-year. So, if we were to exceed the high-end of the guidance, double-digits growth year-on-year is not out of the question in Q3.
The quarter-on-quarter, the guidance we’ve given for Q3 contemplates a number of factors, one of which is the transfer out of the 100-gig Intel business will really begin in Q3. And the impact will really be in Q3 and in Q4. So that’s one factor that’s, if you like, factored into our guidance. Secondly, growth in datacom will moderate somewhat as our initial AI programs pass the initial part of the growth curve. So, as we get to the point where we’re beginning to lap ourselves with four consecutive quarters of growth, that growth will begin to moderate, albeit we’re working hard to win the follow on programs and the follow on products and the new products and other customers. But that initial phase of growth will begin to moderate. That said, we do believe we’re still fairly early in the overall AI cycle and that will continue to contribute to our performance for a long time.
And we do expect datacom to remain our biggest revenue contributor. It’s a little too early to call out specific future programs, new programs, and we don’t have anything to announce today, but we believe we’re very well-positioned to win additional AI programs. But to the specific question you asked in relation to the guidance, really a couple of factors, primarily the 100-gig business. And 100-gig has started to really taper off as well. We think that — the industry is transitioning to 400-gig probably quicker. So 100-gig is beginning to taper off and we’re going to be transferring that program out in Q3. And secondly, as I said, the growth in datacom will temporarily moderate as our initially AI programs begin to be lapped at this point, if that makes sense.
Samik Chatterjee: Yeah. Thank you for the color. And for my follow-up on the telecom business for fiscal 3Q, the takeaway that I had from your prepared remarks for sequential growth into 3Q was the growth driver are the ZR pluggables. If I can just maybe not ask for a guide, but sort of ask you for a bit more of a forward look, are the — is there enough pipeline that you see for growth in ZR pluggables to sort of drive you back to more sequential growth on a bit more sustainable basis beyond the March quarter? Or are we sort of seeing very limited or very moderate inventory related sort of headwinds at this point where the growth in ZR pluggables can be a bit more of a sustainable tailwind to drive you back to sequential growth there? Thank you.
Seamus Grady: Yeah. I think you hit the nail on the head. The growth in telecom is primarily driven by — let’s broadly call it ZR and DCI generally. That doesn’t mean that traditional telecom is going away far from it. The traditional telecom is really going through this inventory digestion. So, there is — but that said, there is a longer term trend. If you look at our mix and the shift in our mix to for the first time having more datacom and telecom, it’s really driven by the explosive growth we’ve seen in AI, but also the cloudification, the trend towards cloudification of telecom that’s underway, which lets telecoms — telcos leverage elastic cloud computing to scale their network capacity based on demand to meet the workload needs.
So that’s a trend that’s ongoing. But the growth we’re seeing, it is coming back to a little bit of growth, which is encouraging to see, but it’s primarily driven by ZR and DCI. We have a good pipeline of ZR, 400 ZR currently, but also some other follow on products that we’re working on with our customers. So, we’re quite optimistic about that. Again, ZR and DCI generally seems to be quite strong.
Samik Chatterjee: Thank you.
Operator: Thank you.
Seamus Grady: Thanks Samik.
Operator: [Operator Instructions] Please stand by for our next question. Our next question comes from the line of Mike Genovese with Rosenblatt Securities. Your line is open.
MichaelGenovese: Great. Thanks a lot. Seamus, do you have a sense of your market share in 800G cables for NVLink applications?
Seamus Grady: We do, but it’s not something we would be prepared to discuss publicly. We have a very good sense of it.
Michael Genovese: I mean, is it — but you can’t say, I mean, is it a 100% or less than a 100%?
Seamus Grady: Well, let’s say for — let me put it this way. For our main customers, for their own design products, we’re the only manufacturer. There are other interconnect solutions that they use, but for the product that they’ve designed themselves, we’re the only people who manufacture that. So, I mean, I guess you could say we have 100% market share.
Michael Genovese: Yeah. I guess, I’m just thinking for the very shortest application of just sort of GPU to GPU. I don’t know if there’s other cables out there. Are you aware of any others?
Seamus Grady: Other what?
Michael Genovese: Other competing products out there besides your own. Like, do they exist or are you the only one making the very, very short ones?
Seamus Grady: No, there are two other approved. Again, it’s our customer who decides what’s approved for that, let’s call it the socket. There are two other approved manufacturers, but those two companies have their own designs.
