Prepared remarks
Welcome to the Rambus Second Quarter Fiscal 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of our prepared remarks, we will conduct a Q&A session. If you would like to ask a question, you may press *1 on your touch-tone phone at any time. If anyone should require assistance during the conference, please press *0 at any time. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Sumeet Gagneja, Chief Financial Officer. You may begin your conference.
Thank you, operator. And welcome to the Rambus second quarter 2026 results conference call. I am Sumeet Gagneja, Chief Financial Officer at Rambus. And on the call today, with me is Luc Seraphin, our CEO. The press release for the results that we will be discussing today has been filed with the SEC on Form 8-K. We are webcasting 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, reflections on the geopolitical and macroeconomic environment, among other items. These statements are subject to risks and uncertainties that may be discussed during the call and more fully described in the documents we filed with the SEC, including our 8-Ks, 10-Qs, and 10-Ks. 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 GAAP and non-GAAP financial presentations in both our press release and on this call. A reconciliation of these non-GAAP financials to the most directly comparable GAAP measures has been included in our press release, in our slide presentation, and on our website at rambus.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 ASC 606, we have disclosed licensing billings, an operational metric that bridges the difference between GAAP revenue and actual billings to our licenses. This was an important metric in the initial year after ASC 606 adoption when the delta between royalties revenue and licensing billings was material. As the difference is now minimal and we expect it to remain small, we will focus our financial results and guidance on an ASC 606 revenue basis going forward. The order of the call today will be as follows. Luc will start with an overview of the business, I will discuss our financial results, and then we will end with Q&A. I will now turn the call over to Luc to provide an overview of the quarter. Luc?
Thank you, Sumeet. Good afternoon, everyone, and thank you for joining us. Before we begin, I would like to take a moment to welcome Sumeet Gagneja to his first earnings call as Rambus' Chief Financial Officer. Sumeet brings more than two decades of leadership experience in the semiconductor industry and a 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, Sumeet. With that, let's turn to our results. Rambus had an excellent second quarter, delivering a new all-time high in revenue and non-GAAP 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, disciplined execution, and sustained investments 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 agentic use cases scale, workloads are becoming more diverse, more persistent, and more memory intensive. To support these workloads, AI infrastructure deployments are becoming more complex and heterogeneous, 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 while increasing requirements for memory capacity, bandwidth, and power efficiency. These trends align directly with our strengths and are driving new opportunities for richer chip content and broader adoption of our industry-leading 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 RCDs, strong execution, and growing traction in new products. Looking ahead, we see increasing customer adoption and remain well positioned to support the ramp of next-generation platforms as they enter the market. We continue to execute well across our DDR5 roadmap. We expanded our portfolio with complete chipsets for DDR5-9600 client and server memory modules, further expanding 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 waterfall from the data center into high-performance client systems. For servers, our new DDR5-9600 RCD chipset built around our sixth-generation RCD and PMIC5030 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, there is increasing demand for novel memory architectures with application-specific performance, capacity, and power requirements. We are addressing these needs through products like our complete chipsets for MRDIMM and LPDDR5X SOCAMM2 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. This reinforces our opportunity for increased chip content and sustained growth in 2027 and beyond. Turning now to silicon IP, we delivered another strong quarter with increasing customer traction and key design wins across hyperscalers, custom silicon companies, and emerging AI semiconductor developers. As AI infrastructure scales, chip development cycles are accelerating, and performance requirements are pushing beyond industry-standard specifications. Customers are building advanced SoCs for high-performance AI systems, driving robust demand for our 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 1 U.S. hyperscaler for next-generation HBM in future AI chips. These engagements are a strong testament to the strategic importance of our premium IP 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 Rambus 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 Rambus proven security IP is foundational to enabling trusted high-performance data movement across distributed AI infrastructure. During the quarter, we also expanded our AI IP solutions with PCIe 7.0 switch IP, supporting 128 gigatransfers 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, Rambus IP is in great demand, enabling faster, more efficient, and more secure data movement. With our strong customer partnerships and deep architecture engagements, we are enabling the future of advanced AI hardware. In summary, Rambus delivered an excellent second quarter with record revenue and earnings. Our results reflect the strength of our product leadership, the depth of our customer relationships, and our ability to execute in markets that continue to present significant opportunities for growth. Looking ahead, we are well positioned for the major trends reshaping data center and AI infrastructure. As AI scales and agentic workloads drive greater demand for CPU-based servers and memory, Rambus 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 roadmap, 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 will turn the call over to Sumeet to walk us through the financials. Sumeet?
Thank you, Luc, 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 conviction: we have differentiated technology, deep customer relationships, and meaningful long-term growth opportunities ahead. As CFO, my focus is straightforward: drive profitable growth through disciplined 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 royalties revenue and licensing billings is now minimal, we will focus our financial results and guidance solely on an ASC 606 revenue basis. We delivered Q2 revenue and non-GAAP 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 royalties revenue. Product revenue was $99.2 million, which is up 22% year-over-year and up 13% sequentially. Royalties 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 revenue is reflected in contract and other revenue and the remaining portion is reported in royalties revenue. Total non-GAAP operating costs, including cost of goods sold, for the quarter were $113.7 million. Operating expenses of $73.5 million were up sequentially due to higher SG&A expenses. Interest and other income for the quarter was $6.8 million. Using an assumed non-GAAP tax rate of 16%, non-GAAP net income for the quarter was $84.4 million, resulting in Q2 non-GAAP 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 solid operating cash flow of $61 million, partially offset by $12 million in capital expenditures, and $9 million of net equity outflows. Inventory increased by $16 million during the quarter as we leverage the strength of our balance sheet to support future product ramps and provide customers with greater supply assurance in the coming quarters. Free cash flow in the quarter was $49 million. Let me now turn to our non-GAAP 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 am about to review. We expect revenue in the third quarter to be between $210 million and $216 million. We expect product revenue to be between $110 million and $116 million, a sequential increase of 14% at the midpoint of guidance. We expect royalties revenue to be between $69 million and $75 million and we expect contract and other revenues to be between $25 million and $31 million. We expect Q3 non-GAAP total operating cost, which includes cost of sales, to be between $115 million and $119 million. We expect Q3 capital expenditures to be $13 million. Non-GAAP operating results for the third quarter are expected to be between a profit of $91 million and $101 million. For non-GAAP interest and other income, we expect $7 million of interest income. Assuming a non-GAAP tax rate of 16%, and Q3 share count of 110 million diluted shares outstanding, we expect Q3 non-GAAP earnings 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 our revenue streams. Our third quarter outlook reflects continued sequential growth in both revenue and earnings per share supported by sustained momentum across the business. We remain firmly focused on driving long-term shareholder value through disciplined execution, thoughtful 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 Rambus. With that, I will turn the call back to our operator to begin Q&A. Could we have our first question, please?
Questions and answers
Thank you. Ladies and gentlemen, if you have a question, please press *1 on your touch-tone phone. We request that you limit yourself to one question and one follow-up. Your first question comes from the line of Kevin Cassidy with Rosenblatt Securities. Your line is open.
Yes. Congratulations on the great results. And thanks for taking my question. Just to confirm, did you have any capacity issues during the quarter? Any orders you were not able to meet?
Hi, Kevin. No. We did not have any issues in the second quarter. We continue to see tightness in the supply chain and lead times increasing, but we did not have any capacity issues in Q2. We have built strong relationships with our suppliers, and at this point in time we are able to serve the market demand.
Okay. Great. And since it is topical today, China-based CXMT had a big splash today. Is Rambus involved with CXMT either on the IP side or product side?
Yeah. It is great news for CXMT. I think they are going to be a strong player in the market. Every company that builds memory has to have a license agreement with us, and they are one of them. So we are very pleased with their success, and that will be a good thing for us in the long run as well.
Okay. Great. Thank you.
Your next question comes from the line of Sebastien Naji with William Blair. Your line is open.
Good afternoon. Thank you for taking my questions. Maybe first, could you update us on your expectation for MRDIMM, for the ramp of MRDIMM? AMD is in production with the Venice CPU today. It sounds like servers will start shipping in Q4. Are you starting to get any better visibility into how much of the market will go down the MRDIMM route versus sticking with more traditional RDIMMs?
Thank you. We do continue to see MRDIMM as a material opportunity. But as you said, the timing will be dependent on platform adoption—when the servers go to market and what percentage of MRDIMM they will use versus a standard DIMM. We are excited by the opportunity, but at this point in time we will not overstate the adoption curve before the platform actually ramps and we get feedback from the market. Contribution for Q4 will be minimal. We continue to ship to our customers for these early system buildups, and a more material contribution is expected in 2027 when both platforms from the CPU vendors ramp in earnest.
Got it. Okay, great, that is helpful. And then as a follow-up, one of the concerns we are hearing from investors is the risk of potentially over-ordering in this very tight memory supply environment. Are you seeing any signs of inventory buildup at your customers? Or what signals are you looking at that give you confidence this is not happening right now?
We do not see any signs of our customers building inventory for the concerns you expressed. That said, we are building some inventory on critical products that we believe are going to ramp in Q3, Q4, and early next year as we see lead times lengthening due to supply chain tightness. So no inventory buildup from our customers. We are building strategic inventory for products we expect will contribute to our growth in the next few quarters.
Great. Thank you, Luc.
Your next question comes from the line of Gary Mobley with Benchmark, a StoneX company. Your line is open.
Hi, guys. Thanks so much for taking my question, and let me extend my congratulations on the snapback in your product revenue. Now relating to that, I think you've historically seen seasonal strength in the second half of the year, and that is reflected in your Q3 guidance. You are obviously building inventory I assume in preparation to fill strong demand. We've also heard from the server processor supply chain that volumes continue to exceed expectations. I'm curious what kind of visibility you have currently versus last quarter, and what kind of visibility you have looking into the fourth quarter in terms of continued strength?
Thank you, Gary. Our confidence is continuing to build. One driver is the increased use of CPUs in agentic AI, which we sense with our customers. Our guide for Q3 shows another strong year-over-year increase compared to last year, which is encouraging. We want to be reasonable in guiding beyond one quarter for two reasons: timing of platform ramp-ups and supply tightness. We believe the second half will be stronger than the first half, similar to prior years, but we will continue to guide quarter by quarter.
Okay. Thanks for that color. And as a follow-up, I want to ask about the silicon IP business. If I'm not mistaken, you have guided that business around $130 million. You've consistently delivered upside to that number through the first half of the year. What is your most up-to-date view on the performance of the silicon IP business, whether expressed in growth or dollar terms?
We continue to see that business growing 10% to 15% a year. This is another business where our confidence is increasing. With inference and agentic AI gaining traction, we see many customers building custom solutions that use IP—on the interconnect side, security side, and memory side. Our strategy of staying at the leading edge of technology in interconnect, memory, and security IP allows us to engage early with customers and gives us longer-term visibility into growth. We are confident in the 10% to 15% growth outlook going forward, and we had a great quarter in Q2 in particular.
Excellent. Appreciate it.
Your next question comes from the line of Aaron Rakers with Wells Fargo. Your line is open.
Yeah. Thanks for taking the questions. I guess my first question is, earlier MRDIMM was asked about, but there is a lot of architecture activity in memory subsystems generally. I am curious, Luc, as you think about MRDIMMs, and juxtapose that relative to, say, CXL, what is the company's view on CXL now that we've seen Meta endorse the technology? There are suggestions other hyperscalers are excited about the model.
When it comes to CXL, we are very supportive of CXL as an important interconnect protocol. It will play a role in the AI evolution, particularly in agentic AI, for managing the memory stack—moving data from cold memory to hot memory. CXL is relevant to our silicon IP business. At the product chip level, we continue to see a fragmented market with many deployments looking like ASIC-like or customer-specific products. Our position remains to enable the ecosystem with our IP engagements and monitor product traction. We will continue to invest in standard products where we see the strongest market opportunity. For now, CXL looks like a custom ASIC product market to us, so we focus product investment on standard products and support CXL through our IP business.
That makes sense. And as a quick follow-up, you referenced in your prepared remarks that you were engaged with a hyperscaler on some IP for future generation programs. Is that changing the opportunity set of your business? Are hyperscalers being direct customers and driving incremental growth for Rambus?
That is a very good question. Hyperscalers are playing a growing role in defining their own architectures, whether they build products themselves or work with partners. They work very early with us, sometimes before specifications are complete, to ensure we can meet system requirements. Once a hyperscaler decides upon a particular implementation, it tends to proliferate into their ecosystem. This is one reason we feel confident in our IP business growth rate. Hyperscalers' involvement is increasing the strategic importance of our IP and design engagements.
Yep. Thank you.
Your next question comes from the line of Kevin Garrigan with Jefferies.
Yeah, hey team. Thanks for taking my questions, and congrats on the results. I may have missed it, but can you talk about how much of your revenue was from companion chips or new product revenue this quarter?
We indicated earlier that our new products were a low-double-digit percentage of product revenue in the first quarter, and we continue to be at that rate. We expect that to be in the mid-double-digits by the end of Q4. We are on that trajectory. These products must go through qualification with customers and the ecosystem, so it is not a step function, but we have momentum across the board and are happy with the performance.
Okay. Great. And I get questions about LPDDR-based servers. You now have your SOCAMM2 chipset, and I believe SOCAMM in general has lower content overall versus RDIMM and MRDIMM. As the industry potentially shifts towards more LPDDR-based server modules, does that cannibalize your RDIMM or MRDIMM opportunity at all?
I would not say the industry is shifting to LPDDR. We believe DDR will remain dominant where server-grade scale, capacity, reliability, and serviceability are required. LPDDR and SOCAMM are incremental opportunities for servers where power efficiency is very important. We see this as complementary. The AI market is becoming heterogeneous, and SOCAMM2 gives us a seat at the table. If LPDDR is adopted more in the future, we will continue to develop chipsets, and content can increase as complexity increases. In the short run, the revenue outlook is modest, but the strategic importance is high.
Yep. Okay, perfect. Thanks, Luc.
Your next question comes from the line of Tristan Gerra with Baird. Your line is open.
Hi. Good afternoon. The 20% year-over-year increase in product revenue that you provided— is that a good reflection of the unit demand you see for x86 CPUs in light of AMD raising their x86 CPU CAGR to 50% over the next several years? I understand that includes pricing. So is 20% a good proxy in terms of unit expectations for CPUs, and then on top of that you are layering additional channel counts?
Yes. The way we look at our business is unit-based more than dollar-based, as we do not see the same pricing dynamics as CPU or memory companies. We grew 20% year-over-year and expect similar year-over-year growth next quarter. The server market's view on unit demand has improved; what we thought was mid- to high-single-digit growth earlier is now double-digit. We believe we are growing faster than the market, driven by channel count increases and initial contribution of new products. Channel count changes are not step functions but secular and favorable trends.
Okay, great. And as my follow-up, for next year, could we see an acceleration from that 20% year-over-year growth given the dynamics you mentioned? Would you be able to get sufficient supply? And could you talk about any potential mix changes that might impact ASPs given DRAM supply constraints and the potential impact on DRAM content and CPU usage?
We do not guide beyond the current quarter because the data is dynamic. Looking into 2027, a few things matter: Gen 5 DDR5 will grow in earnest, and the market will move to 16 channels per CPU, which is positive. MRDIMM adoption is another upside, and companion chips and client contributions are growing. From a demand standpoint, the environment is very positive. However, supply constraints will continue in 2027; our suppliers expect this to last. Platform timing is also a factor—platform ramps often take longer than anticipated. We are prudent about platform timing and supply when evaluating our potential. Because we sell standard products, we do not see an opportunity for price increases right now; instead, we focus on staying competitive and increasing market share in the DIMM market.
Great. Very useful. Thank you very much.
Your next question comes from the line of Mark Lipacis with ISI. Your line is open.
Hi. Thanks for taking the questions. First, there is a framework to think about CPUs ramping in data centers along three dimensions: CPU head nodes next to GPUs or accelerators; CPUs as standalone agentic AI CPUs; and CPUs in standard server configurations supporting legacy workloads like databases. Should we think about a different framework for your silicon content opportunity in each of these categories, or does MRDIMM ramp more obviously in one of these versus the others? I have a follow-up after that.
That is a good framework. Each segment has its own requirements. In head nodes, there is interest in very high bandwidth and low power—one driver for SOCAMM. AI servers are often catalysts for the fastest technology and highest configurations, making them good candidates for MRDIMM solutions near GPUs or HBM-rich systems. Standard servers used for legacy or agentic AI workloads will have more standard solutions; in agentic AI, latency becomes very important, and servers may use the maximum number of channels to keep latency low. One of our strengths is understanding these trade-offs through our product and IP businesses. Our roadmap targets solutions for each segment, but we must also understand ramp profiles and supply constraints.
Okay. That is a helpful framework. The design win with the hyperscaler for a next-generation chip—just to be clear, is that a product design win for you, or is this IP?
It is an IP design win for a company that designs a product.
Got it. So it's an SoC design where you provide critical IP. Would that be a royalty-based opportunity for you or a license?
Like most of our silicon IP business, it is license-based, often multi-license. Anyone who uses that architecture in any product will present an opportunity for a license. It is not volume-based in the same way as a standard product business. The silicon IP business is typically license-based.
Okay. Very helpful. And the PCIe Gen 7 IP—what is the timeframe for seeing revenues from that product?
The PCIe Gen 7 opportunity follows a similar business model as the HBM controllers. Customers work with us early as specifications are finalized. It is a license opportunity that we could see translate into revenue in the coming quarters because licensing revenue can occur well ahead of end product shipments. Our IP business typically engages early, secures licenses, and then customers take 12 to 24 months to ship products incorporating that IP.
Your next question comes from the line of Mehdi Hosseini with SIG. Your line is open.
Yes. Thanks for taking my question. Looking at slide seven, it is exciting that the chipset for memory interface is diversified. What gives you confidence that this combined with additional silicon IP will help you accelerate growth? You've done a great job carving out market share in RCD companion chips. But as I look into next year and think about agentic AI and Arm-based solutions where channel count per CPU is not the highest priority, and with a number of exotic chipset architectures coming to market, what gives you confidence that you can actually grow revenue at a higher rate there? I have a follow-up.
We believe we have a strong secular setup for our business. Next year the market will be largely DDR5 as the transition from DDR4 to DDR5 completes. We continue to see acceleration of DDR5 subgenerations, which provides opportunities to grow share in our core business. Each generation is an opportunity to gain share—our Gen 6 roadmap follows Gen 5. Companion chips remain a significant growth opportunity; there is room to increase revenue from companion chips in 2027. MRDIMM, with higher silicon content on the module, is another vector, and client-side contributions are growing. The seeds we've planted over the last two years should produce a solid result in 2027. From the silicon IP side, the trend of hyperscalers defining architectures is a source of growth for us. The challenge will be supply chain tightness next year, but we are working with suppliers to address that.
Sure. If part of the strategy is to increase market share, does that mean your product gross margin will remain in the low 60s? That's what we've seen despite double-digit product revenue growth. Is there a trade-off here?
Our model remains 60% to 65% gross margin, and we do see quarter-to-quarter fluctuations. We prefer to view product margin on an annual basis because short-term supply constraints and mix can cause quarterly variability.
If I may add, Luc covered it well. On a quarterly basis our gross margin may fluctuate based on product mix and other factors. Recently we've been operating in the low 60% range, around 60% to 63%, but our long-term model of 60% to 65% remains intact.
Got it. Thanks for the details.
At this time, there are no further questions. This concludes the Q&A session. I would now like to turn the conference back over to the company.
I would like to thank everyone who has joined us today for your continued time and support. We look forward to speaking with you again soon. Thank you, everyone. This now concludes today's conference.