Matt Ramsay: Thanks. Appreciate the perspective.
Operator: The next question comes from Ambrish Srivastava of BMO. Please go ahead.
Ambrish Srivastava : Hi, thank you very much. Matt, I had a question on gross margin. You surprised us negatively early in the year, and then you gave us good counsel, don’t panic. And you’re back at 64%. So just wanted to think through for the next year and what’s the right way to think about the gross margin profile, given you have customer is coming in, but typically is lower margin than the corporate and maybe it’s not for you guys, but what’s the right year to think about the margin profile for the company near to medium term Matt? Thank you.
Matt Murphy: I’ll let Will take a victory lap on this one. So, Willem go ahead.
Willem Meintjes: Yes. Ambrish, so thanks for the question. So first of all, really pleased to be guiding back to 64% at the midpoint, right? I think the team internally has done a phenomenal job controlling what we can control in a pretty volatile environment. When we look at it to next year, we’ve been discussing some of the uncertainty on the recovery on some of our core businesses, right, enterprise networking and storage. And then also the timing and the scale of the ramp on custom. I’ll just remind you, prior to this last year, we scaled our carrier and custom business is very significantly while maintaining our gross margin, right? And so looking ahead at next year, if custom on a relative basis grow significantly more, yes, clearly, that would put pressure on our gross margin. However, our view is that they’ll be very accretive on operating margin and on EPS. So yes, so that’s how we’re looking at it. Hopefully, that’s helpful, Ambrish.
Ambrish Srivastava: It is. I had a quick clarification for you, Matt, sorry. You mentioned something about one to one pull attach rate for your business. I was just wondering what was it before. And kind of what has changed the — what has changed in the dynamic to push it to greater than one to one? Thank you.
Matt Murphy: Yes. Thanks, Ambrish. It’s been a little bit of a journey on this topic. I think if you go back two quarters ago, we were still we were still building models out for how to think about the attach rate and help investors size the opportunity. And we ball parked it at one point one to one initially. And subsequent to that, as we sort of look at the kind of — all of the optics through up into the switch and in the network. And we’ve — I think we’ve updated — I think we were really reiterating this. We’ve updated this number before that it had grown to greater than 1. I think that was more of a clarification we were doing. But initially, it was a little bit of how do we actually get our hands around how big this could be and people wanted to know, balance that against how many GPUs they thought were going to shift.
But I wouldn’t say that’s really incrementally new news. I think that was more of a reiteration, if you will, because it’s not just the optics attaching from the accelerators to the switch, but also in between switch layers, and that was sort of the nuance that I think we needed to clarify. So that’s the kind of rate on that one.
Operator: The next question comes from Harlan Sur of JPMorgan. Please go ahead.
Harlan Sur : Good afternoon. Thanks for taking my question. After 6 quarters of sequential shipment declines in nearline or capacity optimized HDDs by your customers, cloud and hyperscale excess inventory of drives appears to be normalizing. And then on top of that, you have cloud storage utilizations to keep on increasing. I think your storage customers are cautiously optimistic on sequential shipment improvements on their new 20 terabyte platforms. You guys are still shipping about half the rate of your pre-slowdown run rate on storage. I know you’ve been growing slightly sequentially the last few quarters. But are you guys starting to see signs of a sustainable pickup in data center stores moving into next year?
Matt Murphy: Yes. Thanks. I think this is one of those markets, Harlan, where any good news is good news. I mean it’s been very, very rough out there for that part of the electronics industry, and you certainly saw the impact on our revenues. Look, I’m encouraged to see the same reports of inventory coming down and some of the end customer commentary. We, I think, aren’t going to call this until we really see the backlog build again. I mean it’s come off the bottom and it’s grown a little bit. And it’s — but even if it’s sort of improving off the bottom, at least the end market side, it’s still kind of flattish units, right? I don’t think it’s necessarily off to the races. So we’re staying pretty cautious on this. We got hit pretty hard on the downside here, and we’re going to cautiously kind of guide our way back into that market normalizing.
But I will say the end market signs were hearing and seeing are positive, and it certainly gives us some hope for next year but we’re not ready to call any kind of recovery in that area with any certainty or timing. But it has come off the bottom and it’s continued to grow, which is a good thing.
Harlan Sur: Appreciate the color. Thanks, Matt.
Operator: The next question comes from Christopher Rolland of Susquehanna. Please go ahead.
Christopher Rolland : Hey guys, thanks for the question. I’m kind of hearing mixed signals on the custom silicon opportunity. And I just wanted you guys to clarify on that. I guess, first of all, are you guys above or below $200 million expectation you guys had for the year? Second, are you expecting this to kind of double off of that $200 million or even $600 million originally that had been an $800 million number you had discussed. And then third, where are we on that $800 million long-term goal that you had? Is that like a 2025, 2026 opportunity? Or is it something beyond that?
Matt Murphy: Got you. Yes, you’re going back to the original like 2021 Investor Day, hey, here’s kind of the custom silicon opportunity, which a couple of quarters back, we had reset to $200 million this year and then over time, getting to $800 million. I just want to clarify, that’s what you’re asking about?
