Michael Genovese: Okay. Perfect. And then, well, I guess, is there an opportunity here with other GPU makers to make the same kind of product for I guess one or two or three other companies out there that also make GPUs? Is that an opportunity that you’re pursuing?
Seamus Grady: Yes, it is. And we think we’re well-positioned. We have a very strong track record of producing transceivers generally, but these very high speed, low power, low latency, short reach transceivers, we have a very good reputation. We’re very good at this. And we think we’re the leader. We’re the leader in terms of service, delivery, quality, and also we believe our costs are the most. So, we think we’re very well-positioned to capture more business in that space from other — as other companies push into that space and start to capture market share, they will all need optical interconnect. We think we’re in a good position to help them.
Michael Genovese: Yeah. Great. And then last question for me. I guess, is when we think about sort of what comes next as you go from the GPUs to the top of rack switches and then out to other parts of the data center and you need longer cables and sort of discrete 800G transceivers. My question is, do you see yourself participating in that market with direct relationships with the end customer, or should we think about you participating in that market through your more traditional datacom transceiver customers who will clearly need help to ramp up to the volumes they need to get to? How should we think about that? These longer reach datacom transceivers evolving for you?
Seamus Grady: Yeah. So, we think probably both, both directly with the large consumers of these devices, but also with the optical interconnect company. So, we think we can support both. We don’t have our own products, nor will we have, we’re not an ODM, we have no plans to have our own products. So that’s one of the things that’s a little bit different about Fabrinet is we’re not an ODM and we won’t be an ODM. But if one of the hyperscalers hypothetically, if they have their own design or if they have a design that they own that they want us to manufacture, we’d be happy to do that. But conversely, the traditional transceiver companies, we’re happy to support them as well. We support both. And I think that’s something that’s quite unique about us. We’re able to support both and we don’t have any kind of conflicts because we don’t have our own products that allows us to support both.
Michael Genovese: So, it sounds like we should probably think about datacom being larger than telecom for — I mean, we don’t have any expectations of telecom becoming larger than datacom at any particular point here. Do we? It seems like datacom will sort of stay larger. Is that correct?
Seamus Grady: I think so, yeah. We seem to have crossed over to the point where datacom is larger than telecom for us. And again, it’s driven by really a couple of things. The growth in AI, the cloudification of telecom generally, but also this inventory digestion. But the inventory digestion, of course, is temporary. That demand will come back. So for all those reasons, we think that datacom will continue to be larger for us at least than telecom.
Michael Genovese: Perfect. Thanks very much.
Seamus Grady: Thanks Mike.
Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Tim Savageaux with Northland Capital Markets. Your line is open.
Tim Savageaux: Thanks and good afternoon.
Seamus Grady: Hi, Tim.
Tim Savageaux: I don’t know if you — hi, Seamus. I don’t know if you touched on this, but can you — I mean, it seemed that’s going over to Jabil or associated with their acquisition of the Intel transceiver assets, but can you quantify the impact of that? I mean, I know it’s come down a lot, but it seems like it could still be significant. I don’t know, 10, 20 million bucks. Can we take a swing at that?
Seamus Grady: No. We wouldn’t be prepared to take a swing at that. I think if you — over the next couple of quarters, you’d see that 100-gig business decline and really that as that 100-gig business transfers out, but it’s factored into our guidance. So we — but I wouldn’t be prepared to put a number on it right now, Tim.
Tim Savageaux: Fair enough. At a higher level on the AI front, and you touched on this before, you had described the stage of this market with varying numbers of — the word vary to describe how early it was. Seems like we might’ve lost one here. So, I just want to get your kind of update on — now that you’ve ramped pretty substantially, where you think we are in terms of that market growth? And are we — we’re clearly less early than we were, but has your view changed over the last six months as to where we are from an AI data come growth stage or market perspective?
Seamus Grady: I think it depends on what your time horizon is. If your time horizon and the prism that you’re looking through is a quarter or two, then yeah, you’re probably right. We’re probably beyond that initial phase. But if your time horizon is much longer, I think we’re in the very early stages of this. So, you can add or subtract as many various as you like, but I still think we’re in the very, very early stages of this. And we’re just beginning to see what this explosive growth in AI and the infrastructure that’s required to power this network will do and what it will need in terms of optical interconnect. I think it’s because optical is the only way that you can get the speed and the bandwidth that you need to get the signals to move around.
You just can’t do it with traditional interconnect. So, I think there’s a kind of a paradigm shift to optical interconnect becoming kind of almost mainstream. And you have to have optical for this. There’s no other way to do it. So, I still think we’re in the very early stages. I’m still as optimistic as I was six or eight months ago. My view hasn’t changed on that. I think it’s amazing to see what these products can do and what they drive in terms of technology. And we’re just so excited to be a part of it and to be able to continue to produce, again, not just the current products that are powering the data centers, but also to be working on the next-generation products.
Tim Savageaux: Got it. And last one for me, and thanks for that. In terms of ZR, any more color on that? Are you back through previous peak levels in ZR? Are we now looking at getting over 10% of revenues or could you try and size that for us or give us any color of where we are now versus what we’ve seen in the past?
Csaba Sverha: Tim, let me take this, Tim. So Tim, we haven’t gotten back to the levels, high levels that we have been. Obviously, you have to be mindful about the inventory digestion in the industry. So — but we are excited to see that it returned to growth sequentially and the outlook is very promising for us. So, I think there is still a lot of runaway left on ZR to become significant growth drivers. So, I guess the narratives in our prepared remarks was about full with excitement because of the return to growth and the early signs of recovery of the industry. So — but it’s still far from where it could be and where it has been in the past.
Tim Savageaux: Okay. Thanks very much.
Seamus Grady: Thanks Tim.
Csaba Sverha: Thank you.
Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Dave Kang with B. Riley. Your line is open.
Dave Kang: Thank you. Good afternoon. My first question is on the telecom side. So, it sounds like, Seamus, you’re splitting that up, them up between DCI versus a traditional telecom. Just wondering if you can kind of what the mix is between DCI versus a traditional telecom.
Seamus Grady: Yeah. We haven’t actually broken out the mix that way. I guess the point I was making, Dave, was that the growth that we’re seeing in telecom is primarily coming from DCI and 400 ZR in our forecast. Traditional telecom is still somewhat flat and digesting inventory. But because the industry categorizes DCI into telecom, we are seeing some growth in telecom from DCI and 400 ZR, but we don’t actually break them out separately.
Dave Kang: Fair enough. But then is it fair to assume that traditional segment is still larger than DCI? I mean, if you look at like Cienas and Infineras of the world, traditional is certainly bigger than DCI.
Seamus Grady: Yes.
Dave Kang: Okay. And then just on the — go ahead.
Csaba Sverha: Bear in mind, Dave, that our traditional business includes system business. So, DCI being larger than our traditional telecom business would take a lot of growth. So just another…
Dave Kang: Got it. Yeah. And then just sticking with a traditional side, so you’re guiding telecom to be up sequentially, but just wondering, I’m assuming that’s mostly driven by DCI or ZR. How should we think about traditional? Is it going to be kind of flat or still down?
Csaba Sverha: Traditional would be still slightly down, Dave. So, the growth we are seeing, a modest improvement quarter-on-quarter is driven by DCI and ZR.
Dave Kang: Got it. And my second question is on DZS. You talked about them as new customer last year. Just wondering what the latest is. Have they become sort of a meaningful customer or still ramping? Any color would be appreciated.
Seamus Grady: We’ve transferred, let’s say, everything that was in the initial list of products that was slated to transfer. We’ve transferred everything now. So, the business from DZS is baked into our forecast and it’s in our actuals for last quarter. So that’s already wrapped. There’s other business we’re working hard on to win and grow with DZS, but that initial phase of business is already ramped at this point.
