Corning Inc (GLW) Q3 2026 Earnings Call Transcript

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Third Quarter 26 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. You will then hear an automated message advising your hand is raised. And to withdraw your question, please press *11 again. Please be advised that today's conference is being recorded. I would like now to turn the conference over to Christopher Keenan, Director of Investor Relations. Please go ahead.

Christopher Keenan: Thank you, and good morning. Welcome to Corning's Third Quarter 26 Earnings Call. With me today are Wendell Weeks, Chairman, Chief Executive Officer and President and Edward A. Schlesinger, Executive Vice President and Chief Financial Officer. I would like to remind you that today's remarks contain forward looking statements that fall within the meaning of the Private Securities Litigation Reform Act of 2 thousand. These statements involve risks, uncertainties, and other factors that could cause actual results to differ materially. These factors are detailed in the company's financial reports. You should also note that we will be discussing our consolidated results using core performance measures unless we specifically indicate our comments relate to GAAP data. Our core performance measures are non-GAAP measures, used by management to analyze the business. For the third quarter, the difference between GAAP and core EPS principally reflects adjustments for hedged exposures. Along with discrete tax items. A reconciliation of core results to the comparable GAAP value can be found in the Investor Relations section of our website at corning.com. You may also access core results on our website with downloadable financials in the interactive Analyst Center. Supporting slides are being shown live on our webcast and we encourage you to follow along. They are also available on our website for downloading. And with that, I will turn the call over to Wendell.

Wendell Weeks: Thank you, Christopher, and good morning, everyone. Today, we announced outstanding third quarter results. Year over year. We grew sales 19% to $5.1 billion and grew EPS significantly faster at 36% to 91¢, both exceeding guidance. We expanded gross margin 150-basis-points to 40.5%. We increased operating margin 310-basis-points to 22.7% And we improved ROIC 330-basis-points to 16.7%. All while delivering $661 million of free cash flow after investing over $500 million in capacity to support future growth. Overall, a great quarter. And we expect our strong performance to continue. For the fourth quarter, we expect to grow sales about 19% year over year, to a range of $5.2 billion to $5.3 billion and to grow EPS by about 36% year over year to a range of 96¢ to $1. So let's put our very strong results and outlook in the context of our SpringBoard journey. In May of this year, we upgraded and extended our SpringBoard plan to grow our annualized sales run rate to $20 billion by the end of 26, $30 billion by the end of 28, and $40 billion by the end of 2030. We shared that we were entering a new phase of accelerating growth. We planned for our compound annual growth rate to increase to 19% beginning in 2027-2030. After already growing at a robust 15% CAGR for the first 3 years of SpringBoard. That is a 400 basis point acceleration. In the third quarter, we already began to grow 19% year over year. To $5.1 billion That is an annualized run rate of $20.3 billion And looking ahead to quarter 4, if you take the midpoint of our guidance, we will grow 19% again. To $5.25 billion That is an annualized run rate of $21 billion So just 1 quarter after upgrading our plan, we are exceeding our springboard target of a $20 billion run rate by the end of 26. And we are already demonstrating the accelerated growth rate anticipated for the next phase of our plan. Interestingly, today's earnings call actually marks the 3-year anniversary of when we introduced SpringBoard to all of you. So let's briefly look back on our journey and review what we have accomplished. Together. In the first 3 years of SpringBoard, from our starting point through quarter 4 of 2026, we will grow sales 60%. And grow EPS much faster at over 150% And along the way, we are significantly enhancing our financial profile. Nearly doubling ROIC, and more than tripling full year free cash flow. Altogether, we have established a strong launch point for the next phase of SpringBoard. Looking ahead. We plan to double sales from $20 billion to $40 billion grow EPS significantly faster than sales expand ROIC, all while delivering robust free cash flow, even as we continue to invest to capture growth. So if you liked the first phase of springboard, you are going to love the next 1. Importantly, we already have many of the critical customer relationships and long term agreements in place that underpin our growth outlook. Each relationship is unique. But they do have 2 common characteristics. The first is a focus on technology. and co-innovation. We share our technology and development plans with each other This allows us to help our customers achieve their vision. Secondly, we seek to appropriately share risks and rewards as we deliver that vision. Our customers are counting on us to provide the right products, at the right time. So we take on the nontrivial responsibility of meeting challenging performance standards, and production ramps. They take on the responsibility for how much of our products that they need Because, of course, they are best positioned to make that determination. We use multiple mechanisms to achieve the appropriate balance of mutual obligations. Depending on the unique circumstances of our customers and their requirements. Of us. 1 example of a tool that we have used successfully in our glass and solar businesses and have now applied in optical communications is to have our customers provide upfront cash to fund our capacity. We then simply return the cash to our customers as they purchase committed volume. This helps to both de risk our capacity investments and give our customers supply chain assurance. You can see this dynamic already at work in our financials. In the first phase of SpringBoard, we more than tripled our full year free cash flow while investing strongly in new capacity. Looking ahead to the new springboard phase of accelerating growth, we are seeking to continue to increase free cash flow and improve our financial profile. Even as we invest to double the size of the company. Edward will share more color on this in a few minutes. We feel blessed to have these types of foundational relationships with our customers. They extend from our long standing model of invent, make, and serve. This fundamental approach has governed us for 175 years. And will continue to guide us well into the future. We invest in innovation to invent products that enable transformative. We create and build manufacturing platforms to deliver higher quality and lower cost than anyone else in the world. All to serve our customers over decades-long. When we get this right, our customers become enduring partners. Giving us the opportunity to solve their challenges and help create their own extraordinary products that delight their customers in turn. So after 175 years, we are once again in a moment where we have the opportunity to apply our longstanding principled approach to value creation. For our customers for our people, for our communities, and importantly, for our shareholders. We are delighted to have you with us on that journey.

Edward A. Schlesinger: Thank you, Wendell. Good morning, everyone. We delivered an outstanding third quarter. And our results demonstrate the acceleration of growth outlined in our 20-30-40 SpringBoard plan. Year over year in Q3, sales grew 19% to $5.1 billion and EPS increased 36% to 91¢ both above our guided ranges. We expanded gross margin 150-basis-points to 40.5%, Operating margin grew 310 basis points to 22.7%, ROIC grew 33 basis points to 16.7%, and we delivered strong free cash flow of $661 million even as we continue to invest to capture robust demand. Now moving to our segments. Our results were led by optical communications. Sales were $2.4 billion up 44% year over year. Net income was $532 million, up 80% year over year. With the segment again delivering record profitability. Enterprise grew sales 84% year over year with Gen AI product sales growing more than 100% year over year, significantly outpacing GPU unit growth. This was driven by the rapid and broader adoption of our innovations, and enabled by our steady capacity additions. At the launch of SpringBoard, our enterprise sales run rate was $1.4 billion. Since that time, we have quadrupled enterprise sales to a $6 billion run rate. And keep in mind, our growth is driven by scale out. As optical penetrates the scale up portion of the network, our revenue opportunity will increase dramatically. In carrier, sales grew 4% year over year driven by growth in data center During the quarter, we announced long term customer agreements with Zayo, Verizon, and AT&T to deliver fiber, and connectivity solutions in support of their network expansions across broadband and data center interconnect. Collectively, these agreements serve as an excellent proof point for our long term opportunity in carrier, and give us confidence that our opportunity in DCI is bigger than the $1 billion target we have previously communicated. Moving to glass innovations. The successful execution of our more Corning strategy helped us outperform our end markets, which were significantly impacted by memory prices. Looking at the market, in the third quarter, TV units were down 4%, while notebooks and handhelds were down about 20%. Our third quarter sales were $1.5 billion down $54 million or 3%. Year over year. Net income was $328 million, down 10% year over year. Looking ahead, we expect to continue executing our more Corning strategy For example, we continue advancing our nearly 20 year partnership with Apple. By the end of 2026, all the cover glass for iPhone, including iPhone Duo, and Apple Watch, sold worldwide will be produced at our Harrodsburg, Kentucky facility. Additionally, we recently announced a price adjustment for our display glass substrates that will begin to take effect in the fourth quarter to address a weaker yen environment, and rising costs such as critical materials and energy. In automotive, our sales were up 4% year over year. Recovery in North American Class 8 truck market more than offset the impact from the light duty vehicle market, which was down 3%. Net income of $67 million was down 1% year over year. Looking ahead, we remain focused on our more Corning content strategy. In solar, Q3 sales were $436 million up $117 million or 37% year over year. The segment reported a net loss of $7 million We continue to ramp production at our wafer and module facilities albeit at a slower pace than anticipated. As our productivity improves, so will our output, and profitability. Demand remains strong, and the market preference for US made solar products continues to strengthen. Recent US trade action under section 32 of the Trade Expansion Act of 1.96 thousand improves the overall pricing environment and demand for Corning's solar products. Overall, we are making solid progress building a more than $3 billion revenue stream in solar with profitability above the corporate average. Sales in life sciences and emerging growth businesses were up 1% year over year as our Life Sciences business outperformed the end market. Net income was down $13 million year over year due to investments in emerging growth programs. Shifting to our outlook. In the fourth quarter, we expect sales to grow approximately 19% year over year, to a range of $5.2 billion to $5.3 billion and EPS to grow approximately 36% year over year to a range of 96¢-$1 As we move to our next phase of SpringBoard, we have a really compelling opportunity in front of us. We plan to double the size of the company from 20 billion to $40 billion by the end of 2030. We grow organically by inventing products that enable transformative technologies and we create and build manufacturing platforms to deliver higher quality, and lower costs than anyone else in the world. Historically, this meant we invest capital upfront before the revenue and free cash flow shows up. And then we have high returns and generate strong free cash flow, down the road. We have been steadily improving that model by appropriately sharing the risk and responsibility of investments with our customers. Many such long term customer agreements underpin our growth. We use multiple mechanisms in our agreements to achieve the appropriate balance of mutual obligations. Depending upon the unique circumstances of our customers, and their requirements of us. 1 tool we use is for our customers to provide the cash upfront. And then we return that cash as they purchase the committed volume. We have successfully used this tool in our glass and solar businesses and are now applying it in optical communications. This both provides our customers with supply chain certainty while securing our revenue, returns and free cash flow. You can see this dynamic already at work in our financials. There is a line in our operating cash flow labeled customer deposits. For the first 9 months of the year, that amount was $639 million. This line includes upfront cash we receive from our customers during the period net of the cash returned to customers from previous deposits as they purchased their committed volumes. At a macro level, this mechanism smooths the cash impact of our capacity additions helping fund the upfront investment and then returning customer deposits from the operating cash flow generated by our profitable delivery of the volume. You can already see this in effect in our cash flows, We generated $2.3 billion of free cash flow over the first 9 months of this year, while we steadily invested $1.3 billion in CapEx to add capacity supporting the growth outlined in SpringBoard. As we have previously shared in 2026, we are planning to invest approximately $2 billion in CapEx primarily to support the growth in optical communications. We plan to keep this flywheel going as we enter new, accelerating growth phase of SpringBoard, We seek to continue to increase free cash flow and further improve our financial profile even as we invest to double the size of the company. Given our increasing free cash flow, this takes us to capital allocation. Our philosophy is to prioritize investing in organic growth opportunities that drive significant returns. Our shareholders have validated that this creates the most value for them. And this remains a priority. We will continue to maintain a strong and efficient balance sheet. And we are in great shape. We have 1 of the longest debt tenures in the 500. Our current average debt maturity is more than 20 years and we have no significant debt maturity coming due in any given year. We also expect to continue our strong track record of returning excess cash to shareholders. We already have a strong dividend, and therefore, as we go forward, our primary vehicle for returning cash to shareholders will be share buybacks. Now before we move to Q&A, let me reiterate my key takeaways. We have had great success to date with SpringBoard. We delivered significant growth and dramatically enhanced our financial profile. We also built a strong foundation with our capabilities, manufacturing platforms, and our deep customer relationships. From this foundation, our growth will accelerate. Our third quarter results and fourth quarter outlook already demonstrate the momentum we expect in the next phase of springboard. We expect to double our sales from 20 billion to $40 billion by the end of 2030, to grow EPS much faster than sales and to improve our financial profile even further. We expect our free cash flow to grow, through the planning cycle even as we invest. In total, we are focused on creating significant value for our shareholders, and we look forward to updating you on our journey. And with that, I will turn things back over to Christopher for Q&A.

Christopher Keenan: Thank you, Edward. Operator, we are ready for the first question.

Operator: Press *1 on your telephone and wait for your name to be announced. To withdraw your question. Please press *1. The first question comes from Joshua Spector with UBS. Your line is open.

Josh Spector: I wanted to ask on just the optical margin cadence. I do not know, Edward or Wendell, when you guys feel comfortable to talk about margin on a forward view at all. Clearly, your investments are picking up Your incremental pretax margins are still in kind of 40% or higher range. Is this something you have confidence yet to be able to talk about and give a target some point in the near future?

Edward A. Schlesinger: So thanks for the question, Joshua. So I would agree. I think we have done a really nice job as we have been growing optical. To improve our net income margin. I will use that as sort of a the vector to think about. We were in the mid teens. We are now in the low 20s. I certainly think there is an opportunity for us to continue to improve from there. And, obviously, that has driven the company's operating margin significantly. We have grown that you know, into the low twenties as well. And, again, I think we feel good about our environment. The thing I would say is we are gonna be adding capacity in optical to grow. As we have shared, we are also still building a solar business, and, you know, that is actually still negatively impacting or dragging our margins a little bit. So I do not know that we are quite yet ready to put out a new target, but I think you should think of us as continuing to be where we are at and making progress from there as we grow.

Josh Spector: Thanks. that is helpful. And if I could just follow-up, just in terms of corporate costs, that seems to be a thing people are nitpicking on this morning. You know, you are about $50 million-ish lower year on year. That was kind of a big part of why Q3 was in line. Is there something going on there between the allocations between corporate and the segments? And what is the assumption in the fourth quarter, please?

Edward A. Schlesinger: Yeah. there is nothing going on. I mean, we mentioned on our second quarter call, and it continues here in our third quarter, that our variable compensation expense. So we pay for performance. And we have a number of tools that we use to do that. And the and the compensation expense is a little above what I would say are normalized levels. We saw that in the second quarter. We see that here in the third quarter. It probably levels off. I do not think it accelerates in the fourth quarter. And then, you know, it resets as we go into the subsequent year. So I view operating expenses, which in general is what sits in that corporate expenses bucket, as being a leverage point for us as we grow. I think we will continue to be able to leverage our operating expenses They will grow slower than our sales. Okay.

Josh Spector: Thank you.

Wendell Weeks: Thanks, Joshua. Thanks. Thank you.

Operator: And our next question will come from Asiya Merchant with Citi. Your line is open.

Asiya Merchant: Great. Thank you for taking my call. Just a couple of quick questions here. Wendell, you talked about you know, at CNBC earlier this morning about Gen AI related demand. there is just been a lot of. You know, concerns in the market about the durability of this demand, whether it is financing or any other kind of various constraints that are out there. Just. You are standing firm with your springboard. There was a large growth factor associated with optical. Just if you can talk about how you are thinking about these various constraints and how you factor that into your SpringBoard.

Wendell Weeks: Thanks for the question, Asiya. What she's referring to, those of you who did not have a chance to see CNBC this morning, is 1 of the things that I talked about is sort of an important document that is been filed in this last week, which is Anthropic's-1. And you see a number of interesting things in that. But through my 3 main takeaways are the tremendous growth, is there. Second, is the implied profitability of their inference tokens, which is that primary driver for what it is their customers use as inference, and that looks very profitable. And their comment that their #1 constraint is now and will continue to be compute and we provide the networking. For that compute. What we see in our demand Asiya, is a continued press from our customers to do more and more. And as a result, what you see us doing when we are doing these multiyear agreements is asking those customers Our customers are primarily the major hyperscalers given our long-standing relationships. Help us fund and secure that capacity so that we can be assured of that demand and we reduce any amount of risk to our shareholders. So I do not think I have gotten 1 call yet that has been for anything else other than more of our new products faster, and broader. Does that answer your question, or did you have something deeper behind that Asiya?

Asiya Merchant: No. No. that is great. And just on the scale-up, Edward, I know you talked about the scale-up opportunity being significantly greater You guys talked about it at your Investor Day as well. Just any updates, you know, there is been just a lot of chatter around all the various events that have happened around optical and scale up Just any more color on how you are thinking about photonics as a map through 2030 and any other color for you as well on the photonics road map. Thank you.

Wendell Weeks: that is a great question, Asiya. So for those of you who do not follow this closely, Asiya is asking about scale up. As Ted said, our demand is primarily driven by what is called scale out. Connecting those GPUs out down the rows to every other GPU that sits in the cluster. it is about 16 fibers per GPU in today's architectures. 100% of the current scale of architectures are copper. If that was 100% optical, with scale-up, you increase to a 160 fibers per GPU. So that is a 10-fold increase. And so the question then becomes, how fast is that gonna happen? What percent of the GPUs will be connected by optical scale up? And given its strong leverage on our finances, because obviously, a 10x increase in demand per GPU would have a significant impact. On our financials given our position. This is what drives the, quite appropriate, fascination with time So we said in the May IR event was we expected optical scale-up to begin to accelerate in 2028. We continue to believe that strongly. We are on the inside of that ecosystem. I know people hear different things about different particular components. And will this be delayed, and will that be delayed This is just classic technology development. We continue to be quite convicted that this accelerates in 2028. Great. Thank you. Great. Next question.

Operator: The next question comes from Meta Marshall with Morgan Stanley. Your line is open.

Meta Marshall: Thanks. Maybe, Wendell, maybe expanding on that, if you could just speak to kind of the battle that you guys are having in terms of being able to fulfill carrier versus enterprise and maybe just how. If there is a battle there to figure out how to make those allocations. And then maybe second for Edward, just I believe in previous quarters, you would kind of contextualize what the solar overhang was, just if you were willing to lay that out. Thanks.

Wendell Weeks: So we have been we started so early. That we. it is why you have been able to see our revenues. They seem to increase so smoothly because we started on the capacity early. You are correct. That especially our newest high density products are surprising us with the speed and breadth of their adoption. And that our traditional carrier customers now really want this product in their DCI architectures because they can fit 2 to 4 more times fiber in the same conduit. And at the same time, Gen AI is why we developed the dense products as we try to increase the amount of fibers per GPU that also has a strong demand for those products. And so what is really causing the tension is people want that newest product and we are still ramping that up to be the product across all of our platforms. The way we sort that out is centered around the long standing nature of the relationships, those that are going on for decades. We tend to prioritize those customers And then as well, when we have to add capacity, we have a natural sort toward quality because we ask them to contribute to those capacity ads. This will tend to shift our allocation, shift the percent of our revenue that goes to those folks who have the resources to help us fund that capacity. Does that make sense to you?

Meta Marshall: Yeah. That does.

Edward A. Schlesinger: Yeah. So I will take the second question. Meta. The first thing I want to point out is I think the most important thing on solar, the most important takeaway I think for folks is the section 32 ruling, which took place in the third quarter. That actually has a very nice impact on the pricing environment and also indexes to demand for US-made solar products. So that is us. Think that is a really important thing. It actually continues to strengthen our view in the ability to build a more than $3 billion business with nice profitability. So I think that is important. You know, as we said on the call, we continue to make slow, steady progress on our ability to make and sell the products that we make. So we make polysilicon, wafers, and modules in The US. And we had sort of, I will call it, bottomed out in the second quarter, and we are around the same level here. In the third quarter. So the drag, if you will, or the EPS or margin impact in the third quarter is similar to what we saw in the second quarter, and we would expect it to slowly improve from this level as we go through 2027. And then, you know, depending on our ability to you know, inflect up on our productivity, that will really drive the profitability aspect of the business.

Meta Marshall: Great. Thank you so much.

Wendell Weeks: Thank you.

Operator: And the next question is going to come from Joseph Cardoso with JPMorgan. Your line is open.

Analyst: Hello. Good morning. This is Mark Vartanian on for Joseph Cardoso. Thanks for taking my question. I guess the first question kind of piggybacks on the supply question with regards to accelerating top line growth from 17% in Q2 to 19% in Q3, and then high teens exiting the year and going into next year, how much of that is driven by demand versus new capacity coming online? How do. How should we just think about the broader demand supply dynamics there? And then I have a follow-up. Thank you.

Wendell Weeks: Things are tight. And so as you see our revenue increasing, certainly, it is bringing on our new capacity. Is part and parcel of that. And we have the capacity plans in place that are already well underway to support that accelerating growth that you see in the next phase of SpringBoard. As we move from this 15% CAGR during the first 3 years to 19% from 2027 through. Throughout the end of our springboard planning period. And so it will be both The other thing that also helps us on the revenue is basically realized price. Overall, price is going up, but more importantly, as we develop these new products that create a lot of value for our customers then we tend to split that value creation with our customers that allows us to get more revenue per element of capacity. Did that answer your question, Mark?

Analyst: Yeah. That. that is super helpful. And then follow-up would be on Carrier where, historically, you framed growth around mid single digits. This quarter, you signed Verizon and AT&T on top of Lumen. and Zayo. How are you thinking about carrier growth into 2027? With the acceleration primarily be driven by DCI in the long haul or is fiber-to-the-home also a substantial contributor? Thank you.

Edward A. Schlesinger: Yeah. Thanks, Mark. For sure, data center is the bigger opportunity in the carrier space. I would expect that to drive nice growth as we go into next year and then beyond that. As we shared, we had originally said we thought that DCI could be a billion dollar business by the end of the decade. We will clearly exceed both the timing and the magnitude of that target. We have not yet set a new target because I think there is a lot of activity in that space, so we will take some time and sort of lay that out and come back and talk about it later. I would also say that fiber to the home will continue to be a growth driver. I think you will see deployments certainly by the large carriers in that space. We are very well positioned for that as well. Got it. Thank you.

Wendell Weeks: Thank you.

Operator: And the next question will come from Wamsi Mohan with Bank of America. Your line is open.

Wamsi Mohan: Yes. Thank you so much. I have 2 as well Maybe first on the customer deposits. Can you help us think through how much of the $2 billion of 2026 CapEx, was funded by customers, and how does that share change into 2027 and beyond? And if you sort of look at the free cash flow dynamic I understand it right, you. You are gonna repay deposits as customers take volume. So how much does it sort of create a headwind for free cash flows as you look into 2027 and 2028? and I have a follow-up. Thank you.

Edward A. Schlesinger: Thanks, Wamsi. And also congrats on the marathon. Saw some photos of you at the wine glass marathon. So on the customer funding, what I would say is not all of our capital is you know, for optical or towards our growth. Some of it is maintenance of business. So if I sort of exclude that part, you know, the maintenance of business part, the majority of our capital is funded by the long term agreements that we have signed. And that will kind of you know, over the long term, that will kind of even out. It may not match exactly in any given quarter, We generally would get cash before we are spending the capital. You know, the cash flow question, which I tried to explain today a little bit, but let me elaborate a little bit more, I think is really the important 1. So for us, what we are seeking to do is as we grow and invest to continue to increase our free cash flow through the planning cycle. You saw that You know, you have. You have been seeing that in 2026. Clearly, year to date, we are in a great position. And even as we return that cash, we expect to be able to continue to grow our free cash flow nicely because we will be generating a nice return nice level of profit, and cash on the volume we are selling. And then, therefore, we are returning a portion of that via that incremental operating cash flow. So it sort of smooths out our cash flow, reduces the volatility over time, and it allows us to grow free cash flow as we continue to grow sales. So that is how you should think about it.

Wamsi Mohan: Okay. Thing. Thanks that so much, and thanks. I appreciate the comment. On the display price increases, how large is the increase and how much shows up in Q4? Is that fully offset sort of the weaker yen because you did have a little step down in display profitability in the quarter? Are we back to normal by Q4? Does it take a little longer for it to flow through?

Edward A. Schlesinger: Yes. So first of all, on the timing, we are you know, we are implementing those increases now. They should begin to take place in the fourth quarter, but I do not think you should expect that to be a significant impact in the quarter. They are really geared around 2027 and beyond. As you know, the yen has been weak, and there are other input costs where we are seeing some level of inflation. We shared, back in May that we had sort of derisked our long term plan and taken the yen to $1.50. We continue to hedge, and we hope to do better than that in our hedging, but that is sort of why we are making these price increases. We are not disclosing the specific amount of the increase, but, you know, you can think of it as similar to what we have done the last few times we have done it. Thank you so much.

Wendell Weeks: Thank you.

Operator: And our next question comes from George Notter with Wolfe Research. Your line is open.

George Notter: Hi, guys. Thanks a lot. Wendell, I wanted to ask about your perspective on the Chinese fiber in your business. I assume you are gonna talk to you know, tariffs and, you know, shipping costs keeping Chinese fiber out of the markets that you play in, certainly, there is geopolitical concerns. Certainly, there is your LTAs and co-innovation with our customers. But at the same time, the market is just so asymmetric in terms of supply and demand. and I guess what I am asking is: are you seeing fiber from China? And what is your perspective on that potential impact in your business?

Wendell Weeks: I think it is actually a great question, George. In terms of the percent of the market that we see exposure to Chinese fiber, that has been dropping, actually. Now as to a lot of different things, not the least of which is more and more of the fiber is being consumed in pretty complicated connectivity of product sets. with a high degree of integration. And once it becomes integrated, its shipping costs become a lot higher. Right? And the tariff cost becomes a lot higher. So it is not quite as easy as just shipping spools of fiber around. Because you have so much of the value sitting in connectivity. Now that being said, we always. We compete in China. Against the Chinese players. And what we always count on for the long term is being the highest-quality, lowest cost biggest producer in the world. And we continue to expand those advantages. So for now, we are not seeing it as a significant competitive pressure, but we are always preparing for the moment when that could happen. Thank you. Thank you.

Operator: And our next question is going to come from Matt Niknam with Truist. Your line is open.

Analyst: Hey, congrats on the quarter. Thanks so much for taking the questions. I will continue the theme and just ask 2 quick ones, if I could. First, on the fourth quarter outlook, maybe, Edward, if you can help us unpack the outlook, for the 5.2 billion to $5.3 billion sales just across the different segments? And then maybe a follow on for that as well. You filed for a 2 billion ATM equity program a few months ago. You have got 2.5 billion in cash on the balance sheet. The business is obviously generating additional, incremental cash flow. So if you can speak to the rationale for setting up the ATM, what would make you effectively use it relative to debt or other sort of customer prepaids? Thank you.

Edward A. Schlesinger: Yeah. And, Matt, just want to make sure I caught your first question. Specifically, are you asking about the content of the sales growth like, where it is coming from in the fourth quarter? that is right across the different segments. Any relative changes relative to 3Q. Gotcha. Yeah. I think, for sure, you know, we expect to have a really robust quarter in optical communications. That will drive the lion's share of our growth year over year as we shared, you know, our. The AI data center component of our enterprise business grew 100%. I think we really are seeing very strong demand, and that is going to drive a lot of growth. I think solar will continue to also drive growth as we bring capacity on, and then that should start to impact our earnings as we improve our productivity. Again, I think of that as slow and steady, but it will certainly be a growth driver so probably pretty similar dynamics to what you saw in the third quarter. You know? And, on the ATM, I think of it as housekeeping for us. We have a shelf registration for debt. This is very much like a shelf registration for equity. So we have no intention of doing anything at this time. But it just. It allows us to use this as a tool if we ever need to do that in the future. As you know, the. what is important to us is having a very strong balance sheet We invest over long cycles in innovation. And we are growing a lot now, and obviously, we are adding capacity. But there are a lot of technology opportunities for us, and we wanna make sure that no matter what happens in the external environment, we can continue to invest through any kind of cycle. So we always do things that help improve our balance sheet, and this is just a housekeeping thing for us to have on the shelf.

Analyst: Thank you.

Wendell Weeks: Thank you.

Operator: And the next question's gonna come from Martin Yang with Oppenheimer. Your line is open.

Martin Yang: Hi, thank you for taking my question. On solar's profitability in the medium term. Your operating corporate operating margin keeps improving, and you have the goal of solar getting to corporate average. Towards the end of 27, I just want to make sure that goal is still intact. And that you are referring to this continued trajectory of a corporate average to solar is meeting that moving target, or is it Solar's margin profile getting to the previous corporate average compared to the most recent 1.

Edward A. Schlesinger: Yeah. I think in general, currently, solar is below our corporate operating margin, so it is creating a drag. As we improve productivity, that profitability will improve. And I think it will be slow and steady. And, you know, we feel great about the business overall, and the section 32 ruling also very favorable. To the pricing environment, which is a nice impact in general for margins. I do not know. You know, I think you should just think about it as continuing to help our overall corporate average as it improves. You know, if we continue to move that number up, it is certainly possible that solar, you know, gets there. But I think of, you know, if we get above 20% in solar, it will significantly improve our overall corporate average.

Wendell Weeks: it is a positive sort of question in that will our corporate average improve faster than we can the ultimate level of profitability we can deliver. So that would be a really good problem to have, both of them racing for increased profitability. Thanks, Wendell. that is it for me.

Operator: Thank you. As a reminder, to ask a question, please press *1 on your telephone. Our next question will come from John Roberts with Mizuho. Your line is open.

John Roberts: Thank you. We usually think of Starlink as a competitive threat. But would their new move towards terrestrial, do they become a frenemy? and maybe with their data centers, they become more than a frenemy. Could you maybe give us some thoughts on that?

Wendell Weeks: Well, that is exactly. So we are fans of LEO, and of low-Earth orbit. A, because we have some content on those. But b, you are right on the right area. Which is now we will be able to connect people, especially in more sparsely populated areas, or sparsely populated areas, as well as any 'soft' spots in the network that you cannot easily reach with a shared architecture. that is gonna increase the bandwidth as they go more and more in data centers. That becomes a big driver for our product as well. And as you quite rightly point out, the data has to land in a network and that data as it lands is certainly fiber optics. So in general, we are very positive on LEO, and I think you are looking at it right. And then about the frenemy part. I think an important part of the mosaic, and we like customers.

John Roberts: And then, Edward, the yen hedge went from 98% down to 94%. Is there a plan to lower that over time by about 4% per quarter?

Edward A. Schlesinger: No. No plans, John. We do our best to hedge the majority of our exposure in any given quarter. That moves around a little bit. Depending on what happens in the quarter. But, you know, the goal is to you know, be as hedged up, if you will, as we can be practically. Thank you.

Wendell Weeks: Thank you.

Operator: I am showing no further questions at this time. I will now turn the call back over to Christopher for closing remarks.

Christopher Keenan: Thank you for joining us. And before we close, I want to let everyone know that we will be attending the UBS Global Technology and AI Conference on December 1st, Additionally, we will be scheduling management visits to investor offices in select cities. Finally, a web replay of today's call will be available on our site starting later this morning. Once again, thank you all for joining us.

Operator: Operator, that concludes our call. Please disconnect all lines. Thank you for participating, and you may now disconnect.