Rambus (RMBS) Q2 2026 earnings call transcript

Thank you, operator. And welcome to the Rambert second quarter of 2026 results conference call. I am Sumit Gargneja, Chief Financial Officer at Rambert's. And on the call today with me is Luke Carafen, R-C-E-O. The press released for the results that we will be discussing today has been filed with SSE on Form 8th State. We are webcast in this call along with the slides that we will reference during portions of today's call.

A replay of this call will be available on our website, beginning today at 5 p. m. Pacific time. Our discussion today will contain forward-looking statements, including our expectations regarding projected financial results, financial prospects, market growth, demand for our solutions, other market factors, including reflections of the geopolitical and macroeconomic environment amongst other items.

These statements are subject to risk and uncertainty that may be discussed during the call and more fully described in the documents we filed with SSE, including our 8th case, 10Qs and 10Ks. These forward-looking statements may differ materially from our actual results, and we are under no obligation to update these statements. In an effort to provide greater clarity on the financials, we are using both GAP and non-GAP financial presentations in both our press release and on this call.

A reconciliation of these non-GAP financials to the most directly comparable GAP measures has been included in our press release, in our flight presentation, and on our website at rampus. com on the investor relations page under financial releases. I would like to note a change in how we present our results going forward. Since the adoption of AASD6. x, we have disclosed licensing balance, an operational metric that bridges the difference between GAP revenue and actual balance to our licenses.

This was an important metric in the initial years after AASD6. x adoption when the desktop between 1C's revenue and licensing balance was material. As the difference is now minimal and we expect to remain soft, we will focus our financial results and guidance on an AASD6. x revenue basis going forward.

The order of the call today will be as follows. Luke will start with an overview of the business, I will discuss our financial results, and then we end with Q&As. I will now turn the call over to Luke to provide an overview of the portal. Luke?

Thank you, Samit. Good afternoon, everyone, and thank you for joining us. Before we begin, I'd like to take a moment to welcome Samit Kenija to his first earning score as Rambus Chief Financial Officer. Samit brings more than two decades of leadership experience in the semiconductor industry and the wealth of knowledge in the data center ecosystem. Since joining Rambus, he has quickly become a valued member of the leadership team, and we are very pleased to have him on board.

Welcome, Samit. With that, let's turn to our results. Rambus had an excellent second quarter, delivering a new all-time high in revenue and non-gap earnings and beating the high end of our guidance ranges. Fueled by record product revenue and strong contributions from our diversified revenue streams, this quarter marks the first time we have exceeded $200 million in revenue.

These results reflect our sustained execution and leadership across our expanding portfolio of chips and IP. We also generated solid cash from operations, underscoring the strength of our business model and enabling us to continue investing in our product roadmap to drive long-term growth. This combination of record performance, discipline, and execution, and sustained investment positions Rambus to capitalize on the exciting market trends in data center and AI. AI continues to drive a fundamental evolution in computing.

As inference and gigantic use cases fail, workloads are becoming more diverse, more persistent, and more memory-intensive. To support these workloads, AI infrastructure deployments are becoming more complex and it's a regime, combining a mix of traditional and AI server platforms. This is accelerating demand for CPU-based servers to support orchestration, data management, and real-time execution at scale when increasing requirements for memory, capacity bandwidth, and power efficiency.

These trends align directly with our clients and are driving new opportunities for richer chip content and broader adoption of our industry needing IP.

Now let me turn to our quarterly business results. Starting with chips, product revenue reached a new record of $99 million, up 22% year over year, and we expect another quarter of double-digit growth in Q3. This reflects our continued leadership in DDR5 RCD's strength execution and growing traction in new products. And looking ahead, we see increasing customer adoption and remain well-positioned to support the ramp of exploration platforms as they answer the market.

We continue to execute well across our DDR5 roadmap. We expanded our portfolio with complete chipsets for DDR5 9600 clients and server memory modules, further extending our leadership in high-speed memory interface solutions. Our new DDR5 9600 client chipset enables top-of-the-line performance for emerging AI PCs and leverages the same high-speed memory interface expertise we have developed across multiple generations of server platforms as technology requirements increasingly want to fall from the data center into high-performance client systems.

For servers, our new DDR5 9600 are the chipset built around a 6th generation RCD and Pinik 5030 supports the next level of memory performance required by advanced CPU-based server platforms.

As core counts, memory channels and bandwidth requirements increase, solutions like these are essential to enabling higher system throughput and power efficient performance.

Importantly, our server chip solutions support the expanding range of new and existing process and system architectures positioning us to benefit from increasing memory requirements across the industry. Together, these additions expand the breadth of our DDR5 roadmap and demonstrate our continued enablement of higher performance, improved signal integrity and advanced power management across both data center and client applications. As AI workloads continue to diversify, it is increasing demand for other memory architectures with application-specific performance, capacity and power requirements.

We are addressing these needs to put us like our complete chipset for MRDIM and LPDDR5 XLCan2 and remain on track to intercept the market as these architectures gain adoption.

Supported by active engagements across customers and ecosystem partners, we are expanding our roadmap of differentiated memory subsystem solutions to help shape the next generation of server modules.

These reinforces our opportunity to increase chip content and sustain growth in 2027 and beyond. Turning down to Silicon IP, we delivered another strong water with increasing customer traction and key design wins across hyperscalers, custom silicon companies and emerging AI's synagogues to developers.

As AI infrastructure scales, chip development cycles are accelerating and performance requirements are pushing beyond industry standard specifications. Customers are building advanced SLCs for high-performance AI systems, driving robust demand for differentiated IP solutions, spanning advanced memory, connectivity and security IP.

We also have a growing number of deep architectural engagements ahead of standards being finalized to help our customers be first to market with state-of-the-art performance. This includes an exciting design win with a tier one US hyperscaler for next-generation AGBM in future AI chips. These engagements are a great testament to the strategic importance of our premium IT portfolio.

The growth of custom silicon for acceleration and connectivity remains an important long-term trend, particularly among hyperscalers and leading AI infrastructure companies. As customers optimize hardware for their own workloads, software stacks and deployment requirements, they need RMBUS Advanced IP to help them deliver performance, power efficiency and reliability at scale.

Secure connectivity is also an increasingly important part of the overall architecture, and RMBUS proven security IP is foundational to enabling trusted high-performance data movements across distributed AI infrastructure. During the quarter, we also expanded our AI IP solutions with PCIe 7 Switch IP, supporting 128 giga-transur per second. This solution is designed to support the next generation of AI scale-up and scale-out architectures, where high bandwidth, low latency connectivity is critical to overall system performance.

As AI infrastructure scales, RMBUS IP is in great demand, enabling faster, more efficient and more secure data movements. With our strong customer partnerships and deep architecture engagements, we are enabling the future of advanced AI hardware. And our ability to execute in markets that continue to present significant opportunities for growth.

Looking ahead, we are well positioned for the major transfer-shaping data center and AI infrastructure. As AI scales, and agentic workloads drive greater demand for CPU-based servers and memory, RMBUS chip and IP are enabling the performance, connectivity and security customers need to build the next generations of advanced computing systems. We remain confident in our strategy, our word map and our ability to drive strong growth in 2026 and beyond.

As always, I want to thank our customers, partners and employees for their continued trust and support. Now, I turn the call over to Samit to work as student financials. Samit?

Thank you, Luke, and good afternoon, everyone. Before I turn to the quarter, I want to say how excited I am to be here and how much I have appreciated the warm welcome from the team. Having spent the past several weeks meeting with our employees and investors, I have come away with a clear connection. We have differentiated technology, deep customer relationships and meaningful long-term growth opportunities ahead.

As CFO, my focus is straightforward. Drive profitable growth through discipline financial execution, allocate capital thoughtfully, and provide shareholders with transparent and consistent communication.

Now, let me turn to our second quarter financial results. As I noted earlier, because the difference between what this revenue and licensing building is now minimal, we will focus our financial results and guidance solely on an ASC 6 or 6 revenue basis.

We delivered Q2 revenue and on-gap earnings per share, exceeding our Q2 guidance driven by strong contributions across our diversified revenue streams. Revenue for the second quarter was $207.4 million, which is up 20% year over year and up 15% sequentially, led by strong performances from our product and grantees revenue. Product revenue was 99.2 million, which is up 22% year over year and up 13% sequentially.

Royalty's revenue was 84.2 million, contract and other revenue was 24 million, consisting primarily of Silicon IP. As a reminder, only a portion of our Silicon IP revenues reflected in contract and other revenue, and the remaining portion is reported in Royalty's revenue. Total non-gap operating costs, including cost of goods sold for the quarter were $113.7 million.

Non-gap net income for the quarter was $84.4 million, resulting in Q2 non-gap earnings per share of $0.77, which is up 24% year over year and up 21% sequentially.

Now, let me turn to the balance sheet details. We ended the quarter with cash, cash equivalents and marketable securities totaling $825 million, up $39 million from Q1, with FOILED operating cash flow of $61 million, partially offset by $12 million in capital expenditures and $9 million of net at the outflows.

Inventory increased by $16 million during the quarter as we leveraged the strength of our balance sheet to support future product ramps and provide customers with greater supply assurance in the coming quarters.

Pre-cash flow in the quarter was $49 million. Let me now turn to our non-gap outlook for the third quarter. As a reminder, the forward-looking guidance reflects our best estimates at this time and our actual results could differ materially from what I'm about to review.

We expect revenue in the third quarter to be between $210 and $216 million. A sequential increase of 14% at the midpoint of guidance. We expect YT7 to be between $69 and $75 million, and we expect contract and other avenues to be between $25 and $31 million. We expect Q3 non-gap total operating costs, which include cost of sales to be between $119 and $115 million.

We expect Q3 capital expenditures to be approximately $13 million. Non-gap operating results for the third quarter are expected to be between a profit of $91 and $101 million. For non-gap interest and other income, we expect $7 million of interest income. We expect Q3 non-gap earning per share range between $0.75 and $0.82.

In closing, we delivered a strong quarter reflecting the diversification of our business and contributions across the revenue streams. Our third quarter outlook reflects continued sequential growth in both revenue and earning per share, supporting by sustained momentum across the business. We remain firmly focused on driving long-term shareholder value through discipline execution, partial capital allocation, and consistent operational performance.

Before we open the call to questions, I want to thank our employees for their continued dedication and execution, our customers for their trusted partnership, and our investors for their ongoing support and confidence in RAMAs.

With that, I'll turn the call back to our operator to begin Q&A. Could we have our first question, please?

Hi, Kevin. No, we didn't have any capacity issue in the second quarter. We continue to see tightness in the supply chain. We continue to see the lead times increasing, but we didn't have any capacity issue in Q2. We have built strong relationships with our suppliers. At this point in time, we are able to serve the market demand.

Yes, it's great news for CXMP. I think they're going to be a strong player in the market. Every company that builds memory has to have a licensed agreement with us, and they're one of them. So we're very pleased with the success, and that's going to be a good thing for us in the long run as well.

Yeah, thank you. You know, we do continue to see a margin as a material opportunity, but as you said, the timing is going to be dependent on the platform adoption, you know, when the servers go to market and whether those servers, you know, what percentage of M. R. Dim are they going to use as compared to standard Dim. So we are excited by the opportunity, but at this point in time, we will not over call the adoption curves before the platform actually ramps and we get feedback from, you know, from the market.

The contribution for Q4 is going to be minimal. We continue to ship to our customers, you know, for these early system build-ups and a more material contribution is going to happen in 2027 when both. Platforms from the CPU guys went in the market in earnest.

We don't see any signs of our customers building inventory for the concerns that you expressed. This is said, however, we are building some inventory on critical products that we believe are going to ramp in Q3, Q4 and early next year as we do see our lead times lengthening, you know, given the tightness in the supply chain. So no inventory build-up from our customers.

We build strategic inventory for the products that we believe are going to contribute to our growth in the next few quarters.

Thank you, Gary. I think our confidence is continuing to build. One of the reasons is the use of CPU in the genetic AI is certainly a demand driver, and we sense this, you know, with our customers. Our guide to Q3 shows another 20% growth year over year compared to last year. So this is a good sign as well.

We want to be reasonable, though, in terms of guiding beyond one quarter for two reasons. The same reasons one is the timing of ramp of the platform. So you have good things, but you know, they have to ramp. And the second one is the supply tightness. So we believe our second half is going to be stronger than our first half. We're going to see the same dynamic as we saw in prior years.

But we will continue to guide quarter by quarter.

So we continue to see that business growing 10 to 15% a year. I would say that this is another business where our confidence in that number is continuing to build. Again, with, you know, the inference and Jenkins coming up into the markets, we do see a lot of our customers building custom solutions that use IP, whether it's on the interconnect side or the security side or on the memory side.

So our confidence is building up and we're confident in this 10 to 15% growth going forward. We also, it gives us comfort as well in terms of the strategy we're using. We're trying to stay as a bleeding edge of technology on these interconnect memory or security IPs. And that allows us to engage with customers very, very early and gives us a longer term visibility into that growth.

So again, I would say we still see that business growing 10 to 15% a year. But our confidence in that growth continues to grow. We have a great quality in Q2 in particular, as you could see.

Yeah, thank you, Aaron. We have started with MR DIMM because we mentioned MR DIMM. You know, one of the excitements we show around MR DIMM is that it's a standard, you know, product defined by a ZEK, and it goes into an existing infrastructure.

So that's the excitement around MR DIMM. Now, when it comes to CXL, we are very supportive of CXL as a very important Internet protocol. And it's not a church, it's an interconnect protocol, excuse me.

And I think it's going to play a role, you know, in the AI evolution. In particular, in Agentic AI, it's going to play a role on, you know, managing the memory stack or the memory pyramid and moving from cold memory to hot memory. But that's still a, I would say, interconnect protocol and not a product. So it remains very, very relevant to our Silicon IP business.

Now, at the product chip level, because we actually talk to the people who build those products, we continue to see a fragmented market from the product standpoint with many deployments, you know, looking like a ZEK like or customer specific products. So our positions, you know, with respect to CXL remains the same. And we will continue to enable the ecosystem with our IP engagement, and that's why we're building confidence on our IP business, and we'll continue to monitor the traction there. But we will continue also to focus our product investment where we see, I would say, the strongest market opportunity for scaling and in particular on standard products. So again, we play a critical role in the deployment and the ecosystem for our IP business, and we're monitoring the product business.

At this point in time, we see this as a custom ASIC business that is fragmented for us, and for the product standpoint, we're going to invest into standard products at this point in time.

Yes, that's a very good question. I think the trend we see is that hyperscalers are playing a growing role in defining their own architectures, whether they build the products themselves or whether they have ASIC companies or product companies building the products for themselves, because they want to stay competitive and move fast. So their role in defining the architectures on complex subsystems, like the memory subsystems, is becoming more and more important.

So they work very early with us, for example, before even the specifications are complete, to make sure that we can meet their system requirements. And once this is done, they can use that to either build their own products or actually have semiconductor building their own products against those high-end specifications. And the trend that I see here is that these technologies actually proliferate. Once a hyperscaler has decided upon a particular implementation of a memory controller, for example, then that proliferates into their own ecosystem. And that, again, is one of the reasons we feel consonants in the growth rate of our IP business.

We continue, like, in the first quarter, you know, we indicated that, you know, our products, I would say these new products were in low double-digit percentage of the product revenue. We continue to be at that type of rate, and we continue to ram those products into the market. And it's going to be in the double-digit by the end of Q4. So we are on that trajectory.

And remember, this is on the growing, you know, revenue base for the product side. It's actually growing quite nicely, but it has to go through the qualification process with our customers, with our customers, customers, and ecosystem. So it's never going to be a step function, but we do have a momentum there, you know, across the board, and we're happy with the performance of those products.

That's a great question. I wouldn't say that the industry is shifting to LPDDR. I think, you know, LPDDR is actually an incremental opportunity, you know, for servers.

We believe that DDR will remain dominant, where, you know, server, grade scale, capacity, reliability, some stability are required. So that's going to be continuing to be dominant, you know, in the server space. But LPDDR and SOCAM have a role to play where power efficiency is really, really important. So we see these as complementary. You know, we talk a lot about, you know, the AI market becoming, if you're a genius, this is one aspect of that. So our SOCAM 2 gives us, you know, a seat at the table.

You know, we have a chip set for the current generation. To the extent that LPDDR is adopted more in the future with future generations, we will continue to develop chips there. And I think the content is going to continue to increase, you know, as the complexity increase. So we do see this as a, you know, as an opportunity.

We said in the last call, you know, the revenue outlook in the short run is modest, but the strategic importance is really high for us.

Thank you, Tristan. Yes, it's good that you remind that, you know, the way we look at our business is unit-based, more than dollar-based, as we do not see the same pricing dynamics than the CPU or the memory guys have. That's the nature of a standard product business. But if you look at our business, you know, we do 20% a year-over-year next quarter, we're going to see the same growth, type of growth year-over-year.

And in the first quarter, despite the manufacturing issue we had, you know, it was 15% higher than the same quarter or earlier. So, you know, we are on that trend. The server market, you know, view in terms of unit has changed positively. You know, I would say last quarter we would say was the need to high single digit growth. You know, now it's double digit growth. You know, Gautner mentions 12% growth.

So, you know, we believe that we're growing faster than that and it's coming from, you know, a combination of the channel counts, but also the initial contribution of new products. Remember, on the channel counts, we always make the same reflection. It's a great trend for us, but it's not a step function. You know, we had, you know, AMD at 12 channels and Intel moves from 8 to 12, then the whole market is going to move to 16.

So, all of that are pointing in the right direction and the secular trend is really, really good, but that's not a step function. So, I would say that we're growing faster than markets. We continue to believe we're growing faster than markets and all of these factors come into play.

So, we, as we said earlier, you know, we don't guide beyond, you know, the current quarter, the data is so dynamic. But I would say there are few things to take into consideration when we're looking into 2027. I think the Gen5 DDR5 is going to grow in earnest. So, you know, that's the time where the market will have moved to 16 channel per CPU, so that's a good thing. This is the trend we were talking about.

You know, this is also, as we said earlier, when MRD is going to start to kick in the market. So that's another good thing. And we continue to see, you know, growing contribution from our companionship and the client space. So, from a demand standpoint, you know, the environment is very positive when we look at 2027. This being said, the supply constraints will continue to be there in 2027.

You know, when we talk to our suppliers, you know, we work with them. That's the situation that is going to last with us, you know, for some time now. So, we have to take this into account when we look at the potential of our business, and as well as, you know, the platform timing, you know, by experience, we know that, you know, platform, you know, ramps typically take a little bit longer than what people anticipate.

So, you know, when we look and we guide, and again, we cannot guide you on one quarter. When we look at the business, we feel very comfortable with the underlying assumptions on the demand side, but we are prudent with respect to, you know, platform timing and supply in particular. You know, at this point in time, because we have standard products, we don't see any opportunity, I would say, for price increases, because this is what you were talking about.

But, you know, we want to stay competitive and maintain or continue to increase our share. In the dim markets.

Yeah, that's a good framework to look at this. I would say that, you know, every segment that you described has the own, you know, requirements, you know, in head-nosed, you know, we see sometimes the emergence level or where people are looking, I'm starting to look at, you know, very high bandwidth low power. You know, that was one of the drivers for the sold surround, around SOCAM. You know, in AI servers, you know, we typically see them as a catalyst for the adoption of the fastest technology and the highest. I would say configuration in terms of capacity.

So if we put the questions of platform ramps and DRAM pricing on the side for a moment, you know, that could be a good candidate for MRD impacts of solutions. You know, close to the GPU, the HBM where you need a lot of memory there, you know, that could be an option. And then, you know, standard servers, I would say whether they're used for a legacy or a genetic AI, you know, would have more, you know, standard solutions. In a genetic AI, the latency is becoming, you know, very, very important.

You know, you have to build the key value cache. But then once you have to pull from that key value cache, you know, as the latency becomes very, very important. And we see those servers actually using the maximum number of channels not necessarily with the highest, I would say, capacity to maintain that, you know, latency smaller or shorter.

So we, one of the strengths we have is, you know, we have a good understanding of those trade-offs, whether it's product business or, you know, IP business. And if you look at, you know, our roadmap, we're trying to have solutions for each one of those segments.

The question we have, as usual, is, you know, we have to, we have to understand, you know, the ramp profile of each one of them, as well as, I keep saying, the supply constraints we're going to have in 26 and 7.

It's an IP design line where a company that designs a product.

It's someone building a SOC, if you wish, or providing a spec for SOC for all this to build. And we provide critical IP in that SOC. But we see that trend, you know, with, with the requirements of AI, as it moves to agentic AI, the requirements for high speed or the best performance, I would say, are accelerating.

And, you know, this is a trend that we've seen that we're talking more and more directly to the hyperscalers and develop with them the architecture, and then it proliferates into people building the silicon. But this is an IP win.

Like, like most of our silicon IP business, it's a license or multi-license, meaning that, you know, anyone who's going to use that architecture in any product, you know, well, we have an opportunity for a license. So it's not volume-based, and typically the volumes might not be less or high, you know, on big chips, but it's a license base, which is typical with our silicon IP business.

And the silicon IP business market.

So it's a similar business model as the one we talked about, about, you know, EDM controllers. This is, again, a similar trend where customers are working with us ahead of the specifications being finalized, or, you know, ask the specifications that are being finalized. So it's a licensed opportunity for us, which we will see, you know, very quickly. I mean, in the coming quarters.

The computer has a licensing business, right? It doesn't need to rent in the market. It's very well ahead of all the end products renting in the market.

So you could get licensed revenues well ahead of the product shipping from that project, okay?

And that's typical for our IP business. We engage very early. We get the license as we engage. And then, you know, our customers build their chips, and you can take them, you know, 12, 18, 24 months before the product actually goes into the market. But we see the revenue much earlier than that. But what we see as well is the trend, because we understand what people are building and why they're building it. And that gives us a very good insight as to where the market is going.

Yes. Thank you, Maddy. I think, as we said earlier, we believe that we have a very small secular setup for our business. If you look at it and you look into next year, the market will be entirely DDR5, as we move from that transition from DDR4 to DDR5. We'd continue to see an acceleration of the DDR5 sub-generations, which gives us additional opportunities to grow share on the core business.

In the prepared remarks, we talked about introducing Gen6. Gen5 is not in market yet, and we introduced Gen6 for after that. So every generation gives us an opportunity to gain share. On the companionship, we have a great growth opportunity there. We talked about increasing the percentage of revenue from our companionship, but there's still a lot of room to increase that in 2027.

So that's another vector for us. And Maddy, with four times the content, the silicon content on the module, is another vector. And we're starting to see more and more platforms on the client side. So all the seeds that we have planted over the last two years are actually going to grow into something quite solid in 2027. I'm very confident in the setup from a demand standpoint. Now, if you look at the silicon IP business, although this is a license-based business, not a volume-based business, we do see this trend with hyperscalers defining their own products with advanced IP, which is also a source of growth for us. So I am confident that we can grow.

I know I studied that, but I say it again. I think the challenge next year for the industry, not only for us, it's going to be the tightness of the supply chain, but we're working with our suppliers to address that as early as we can.

Our model remains 60 to 65% and we do see, you know, fluctuations from quarter to quarter. You know, we like to see, you know, the product margin looked at on an annual basis at the end of the year because with short-term supply constraints, nicks and all of that, it can fit right from quarter to quarter.

So if I may add to that, let's recover. That's just to reinforce that, you know, on a quarterly basis, you may see that our gross margin may fluctuate based on product makes and other factors, but recently, as you know, we've been operating in the 60 to 60% gross margin, but a long-term model of 60 to 65 remains intact.

I'd like to thank everyone who has joined us today for your continued time and support, and we look forward to speaking with you again soon. Thank you.

Thanks, everyone.