管理層發言
Good day, and thank you for standing by. Welcome to NXP Second Quarter 2026 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Jeff Palmer, Senior Vice President of Investor Relations. Please go ahead.
Thank you, Lisa, and good morning, everyone. Welcome to NXP's second quarter earnings call. With me on the call today is Rafael Sotomayor, NXP's President and CEO; Bill Betz, our CFO; and Michael Lucarelli, our incoming Head of Investor Relations. The call today is being recorded and will be available for replay from our corporate website. Today's call will include forward-looking statements that involve risks and uncertainties that could cause NXP's results to differ materially from management's current expectations. These risks and uncertainties include, but are not limited to, statements regarding the macroeconomic impact on the specific end markets in which we operate, the sale of new and existing products and our expectations for the financial results for the third quarter of 2026. NXP undertakes no obligation to revise or update publicly any forward-looking statements. For a full disclosure of forward-looking statements, please refer to our press release. Additionally, we will refer to certain non-GAAP financial measures which are driven primarily by discrete events that management does not consider to be directly related to NXP's underlying core operating performance. Pursuant to Regulation G, NXP has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures in our second quarter 2026 earnings press release, which will be furnished to the SEC on Form 8-K and is available on NXP's website in the Investor Relations section at nxp.com. Now I'll turn the call over to Rafael.
Thank you, Jeff, and good afternoon. Our second quarter performance exceeded expectations once again as the strong momentum we saw in the first quarter continued into Q2, setting the stage for a strong second half. Demand improved across all end markets highlighted by strength in both our company-specific growth drivers and core business. This combination of secular and cyclical growth is enabling a durable revenue stream that expands margins and drives strong earnings growth. Second quarter revenue was $3.5 billion, up 19% year-over-year, non-GAAP operating margin of 35% and non-GAAP EPS of $3.61, all exceeding the midpoint of our guidance. All end markets and regions grew versus the prior year. Our company-specific growth drivers grew in the mid-20% range year-over-year, and represented roughly one-third of second quarter revenue. In addition, our core businesses increased in the high teens range year-over-year — that broad-based momentum is also contributing to our growth. Now turning to end market performance. In automotive, revenue was $1.94 billion, up 12% year-over-year and slightly above expectations. Adjusted for the sale of the MEMS sensor business earlier this year, automotive growth was up 17% year-over-year. The company-specific growth drivers grew in the low 20% range year-on-year and represented 47% of the auto business. Growth was driven primarily by software-defined vehicle, electrification and connectivity. SDV processor design wins continue to accelerate, including S32 and S32K series platforms. Additionally, we secured new design awards for our next-generation multi-gigabit Ethernet switches, purpose-built for SDV in-vehicle network architectures. These are multiyear platform commitments that expand NXP's content per vehicle. In industrial and IoT, revenue was $755 million, up 38% year-over-year and in line with our guidance. The company-specific growth drivers, which include our newest processing portfolio of i.MX and RT and MCX, grew at 40% year-on-year and represented 36% of the industrial and IoT business. Communication Infrastructure revenue was $452 million, up 41% year-over-year at the high end of guidance. Growth was driven by digital networking exposure to data center and continued ramps of our UCODE RFID products. And lastly, mobile revenue was $351 million, up 6% year-over-year and in line with guidance, reflecting normal midyear seasonal trends in our secure mobile transactions franchise. Now turning to our data center exposure. Ninety days ago, we quantified this exposure for the first time. To recap, 2025 revenue was approximately $200 million, and we expect to exceed $500 million in 2026. Our position is squarely in the control plane of AI infrastructure, the same domain where NXP has built deep expertise across vehicles and factories for decades, now operating at hyperscale infrastructure specifically in two franchises. First, top-of-rack switching to SmartNIC control anchored by our Layerscape family, which is ramping across leading hyperscalers. With every new data plane switch generation as speed increases, the control plane performance must also increase as there is simply more to manage, monitor and secure, hence we are accelerating our Layerscape roadmap to deliver the control plane performance each new generation demands. Customer engagement gives us confidence that these programs materially broaden our addressable content and extend the franchise well into the future. Second, the processes that control, monitor, cool and secure every component within a rack. Data center infrastructure is converging towards industrial-grade principles where reliability, real-time monitoring, control and zero tolerance for downtime is critical. NXP is uniquely positioned as these functions thrive on key industrial processing attributes, where our portfolio is differentiated. Now I want to address something fundamental. AI is moving from the cloud to the physical world into vehicles, factories and robots. It is moving directly into the markets where NXP already has leadership positions. Intelligence deployed at the edge demands real-time performance, ultra-low power and design-in safety and security. True physical intelligence also requires distributing AI workloads across multiple layers of the system, an architecture we call the Neural Axis, which is the foundation for deterministic and safe operation of physical AI. These are capabilities NXP has spent decades building. Our differentiated position rests in three areas: First, NXP offers the industry's broadest and most differentiated edge AI compute platform. Our portfolio places the right intelligence at the right layer from high-performance inference in our i.MX and S32N processors to real-time reflex and control in our S32K and i.MX RT families, all unified under our EiQ software environment. This has already translated into measurable growth. We estimate AI-enabled processors will represent approximately 15% of industrial and IoT processor revenue in 2026, more than doubling from last year. Second, physical AI is a system problem, not just a compute problem. Intelligent machines must sense, connect and act in real time. NXP is the only company that delivers all of this in one integrated trusted platform — something no compute-only competitor can replicate. Third, winning in physical AI requires reaching a highly fragmented market at scale. Unlike cloud AI, the edge spans thousands of applications and customers across automotive, industrial and IoT markets. NXP's ecosystem of distribution partners, reference designs and field support gives us unmatched reach into this market. Taken together — compute, system and reach — physical AI is already showing up in our revenue, and we expect it to accelerate. Now turning to the third quarter. The operational metrics we track to assess business health continued to strengthen, and our outlook is better than we anticipated 90 days ago. We are guiding third quarter revenue to $3.75 billion, up 21% year-over-year adjusted for the MEMS sensor sale and up 7% sequentially. We expect all regions and all end markets to be up sequentially, a reflection of expanded customer adoption of our differentiated portfolio. At the midpoint, we expect the following trends in our business during Q3. Automotive is expected to be up in the low double-digit percent range year-over-year and up in the mid-single-digit range sequentially. Adjusted for the sale of the MEMS sensor business, our guidance implies a high-teens percentage growth year-over-year. Industrial and IoT is expected to be up in the high 30% range year-over-year and up in the mid-single-digit range sequentially, continuing the strength we saw in Q2. Mobile is expected to be down in the mid-single-digit percent range year-over-year and up in the mid-teens range on a sequential basis. And finally, Communications infrastructure and other is expected to be about up about 50% year-over-year and up in the high single-digit range versus Q2 2026. What you saw this quarter — double-digit growth driven by company-specific growth drivers, and a 35% operating margin — is the compounding result of staying disciplined on the right priorities. And now I would like to pass the call to Bill for a review of our financial performance.
Thank you, Rafael, and good afternoon to everyone on today's call. Q2 was a strong quarter with record revenue of $3.5 billion, up 19% year-on-year and 10% sequentially. All end markets performed above the midpoint of guidance, led by our company-specific growth drivers in software-defined vehicles, electrification, industrial edge processing, connectivity and increasing data center content. Non-GAAP gross profit was $2.03 billion, an increase of $376 million or 23% year-on-year. Non-GAAP gross margin was 58%, in line with guidance and expanding approximately 150 basis points year-on-year and 90 basis points sequentially. Our gross margin performance reflects better product mix, improved factory utilization and solid fall-through on higher revenue. Non-GAAP operating expenses were $794 million or 22.7% of revenue within our long-term operating model. Non-GAAP operating profit was $1.23 billion, up 31% year-on-year. Non-GAAP operating margin was 35.1%, expanding 310 basis points year-on-year and 40 basis points above the midpoint of guidance. Taken together, our second quarter results demonstrate that the margin expansion we are delivering is structural, driven by product mix, factory utilization discipline and operational leverage across our fixed cost base. Below the line, non-GAAP interest expense was $87 million. Taxes were $205 million, noncontrolling interest was $15 million and results from equity accounted investees were a $3 million loss, collectively in line with guidance. This resulted in non-GAAP earnings per share of $3.61, $0.11 above guidance. Turning to changes in cash, debt and capital returns. Our balance sheet remains strong and provides flexibility to invest in our strategic priorities and hybrid manufacturing plans. We ended Q2 with $10.98 billion in total debt and $3.2 billion in cash. Net debt was $7.7 billion or 1.5x adjusted EBITDA, and our adjusted EBITDA interest coverage ratio was 15x. In Q2, we returned $360 million to our owners made up of $256 million in dividends and $104 million in share repurchases. We remain committed to our long-term capital allocation strategy balancing returns to shareholders with disciplined investments in the business to support long-term profitable growth. Turning to working capital. Our cash conversion cycle improved to 129 days from 140 days in Q1. Days of inventory improved to 156 from 165 days inclusive of approximately 9 days of prebuilds for our planned front-end factory consolidations. Receivables were 33 days, and payables were 60 days slightly better than last quarter. During the quarter, we generated $860 million in operating cash flow, which helped fund the $750 million debt retirement, $360 million of capital returns, $174 million into VSMC, $12 million into ESMC and $69 million of net CapEx. Taken together, we generated non-GAAP free cash flow of $791 million or approximately 23% of revenue. On a trailing 12-month basis, free cash flow was approximately $2.8 billion or 21% of revenue. Now turning to our expectations for Q3. We expect revenue of $3.75 billion plus or minus $100 million, which is up 18% year-on-year and 7% sequentially. We expect non-GAAP gross margin of 58.5%, plus or minus 50 basis points which is up 150 basis points year-on-year and up 50 basis points sequentially, driven by the higher revenue and our manufacturing utilization. We expect operating expenses of $810 million, plus or minus $10 million. At the midpoint, this results in a non-GAAP operating margin of 36.9%. Below the line, we expect non-GAAP financial expenses to be approximately $85 million and our non-GAAP tax rate to be 18%. We expect noncontrolling interest to be $15 million including $5 million losses in our equity accounted investees for VSMC and ESMC. This implies Q3 non-GAAP earnings per share of $4.11 at the midpoint. Turning to Q3 uses of cash. We expect capital expenditures to be approximately 3% of revenue with VSMC capacity access fee of $70 million and equity investment of $80 million. For ESMC, we expect equity investments of $30 million. This brings our cumulative investment in VSMC and ESMC to approximately $2.4 billion or about 70% of the total planned commitment across the two joint ventures. At the midpoint of our Q3 guidance, the year-to-date revenue was $10.4 billion, up 17% versus the same period in 2025 and consistent with a double-digit growth trajectory. Our growth continues to be driven by the compounding effect of our company-specific growth drivers and the return to expansion of our core franchises. We remain confident that we will deliver on our financial commitments. I would like to now turn the call back to the operator for your questions.
分析師問答
And our first question is coming from the line of Joe Moore of Morgan Stanley.
I was quite interested in the conversation about physical AI and how it's maybe changing your thinking and the products that you have aligned to that. Can you just talk to how that intersects customer interest areas like software-defined vehicles — are they thinking along those lines? And just how quickly do you think that this transforms into something that's more of a physical AI-driven market?
Yes. Thanks, Joe, for the question. The whole notion of cognification of the edge, whether it's industrial or automotive, the conversation is happening now. I don't think we will get a design win without having a very strong value proposition with respect to AI. So it's happening now. But everything starts before you put AI in the system; it starts with creating a software-defined system whether it's a vehicle or industrial. The beginning is how do you create a software-defined system, what is the platform, and then what is the overlay that you do with AI? It's already happening. One of the prepared remarks noted that AI-enabled products in industrial and IoT already composed approximately 15% of our processor revenue in that segment. I think this is going to become even more material and bigger as we go into 2027, and there is simply no activity with our customers today that does not include a material conversation around how AI is going to be deployed. On the automotive side: great question. For auto, this is where our secular story shows up very clearly. You saw in Q2 we're growing into the high teens, excluding the sensor business. For us, we actually see no restocking. What we see driving our revenue is content growth. Our accelerated growth drivers grew 22% this year, and they are becoming close to half of revenue. The driver is around content driven by an architecture transformation that SDV is doing within vehicles, and we have aligned a roadmap to lead this architecture shift towards SDV, which is still in early phases of adoption. So I don't think auto is about restocking; this is compounding on content and we're well positioned with our SDV roadmap.
And our next question is coming from the line of Matthew Prisco of Cantor.
Starting on the industrial side, can you maybe break down the trends you're seeing between the core industrial and the IoT side of the business? And also anything to highlight in this segment from a geographic demand perspective?
The industrial growth is quite strong and is growing in the high 30s. The industrial and IoT accelerated growth drivers were in the 40% range year-on-year for Q2. What's also happening is that the core business is coming back; our core business also grew in the high 30s. So very strong growth in industrial and IoT for a total growth for the quarter into the high 30s. This is now the second year we have been in the high 30s. This is a market that's performing quite well for us.
And then maybe the pricing side, how are you seeing that as a benefit today? And maybe how much of that is impacting the Q3 guide? And how are you thinking about pricing dynamics through the year?
I think your question highlights the inflationary pressure issue. Our first move is always to mitigate price pressure through operational efficiency. We did make some price adjustments to selected products. These adjustments are not across the board. Price for Q2 was essentially neutral. In Q3, our guide already incorporates an estimate, but we won't know the exact impact until much later.
And our next question is coming from the line of Francois Bouvignies of UBS.
My first question is on SDVs. Is it possible to get an update on where you are in terms of revenues? I believe you said that it represented $1 billion revenue in 2024, and you expect it to double to $2 billion in 2027 to reach your targets. You said SDV is doing very well with high growth. Can you help us quantify it for this year or the growth rate?
Just to recap, the accelerated growth drivers in automotive grew 22% in Q2 year-on-year, and they become close to 50% of the total revenue of the company. SDV is the highest-growing part of the accelerated growth drivers. Remember, we have radar, electrification, connectivity and SDV. SDV is the one performing best and is driving the architecture transformation in automotive. We're well positioned with respect to our roadmap. What's even more encouraging is that the current outperformance in auto is happening without our latest products — S32N 5-nanometer products and the S32K5 zonal products in 16-nanometer — which haven't even begun ramping yet and are still in the design-win phase. So we're quite encouraged about the performance of our SDV portfolio because there's more to come with the next-generation products.
And my follow-up would be: you guided automotive up mid-single digits quarter-on-quarter, which seems roughly in line with historical seasonality. So it doesn't translate to a strong sequential recovery when we look at the quarter-on-quarter pattern. Is there any drag limiting your growth in the quarter? Or could the sequential recovery come later?
The way we look at our business is increasingly driven by content growth from our accelerated drivers, which shows up year-over-year. You will always have sequentially blurred product ramps. The better way to look at it is year-over-year growth. We're guiding into Q3 for mid-teens growth year-over-year ex-sensor, which is quite strong and is above our model.
Our next question is coming from the line of Vivek Arya of Bank of America Securities.
Rafael, historically NXP visibility has been quarter-on-quarter plus or so. I'm curious how far your visibility extends right now? Which areas do you have better visibility into? And where do you see lead times stretching out?
Lead times are stretching out and visibility has improved across all end segments. We have better visibility into Q4 and into Q1. Visibility has improved throughout the year.
Maybe I'd just add to what Rafael said. Versus 90 days ago, some of the other health signals we measure internally have improved. Our backlog continues to grow quarter over quarter. We have a signal of 18 months out. Our distribution backlogs follow similar patterns to ours. Our book-to-bill ratio is above one and is above last quarter again. As lead times extend, customer escalations that we track in the quarter have doubled since last quarter. All the signals continue to improve versus 90 days ago. Late orders in the quarter continue to climb as well.
Got it. For my follow-up, can you remind us of how you view your typical seasonal pattern in Q4? Given the improved visibility, can you give some directional indication of how it might shape up? And you mentioned you're still comfortable with the 2027 outlook at a midpoint of around $16 billion. When you gave that outlook, data center wasn't expected to be a big driver, and now data center is larger. Is there a different way we should think about NXP prospects for 2027, including upside from data center?
Vivek, you're essentially asking for guidance beyond our one-quarter cadence. As you know, we guide one quarter at a time. I'll say we feel very good about what's happening with the business. The internal signals are all pointing in the right direction — backlog strength, book-to-bill above one, late orders. For 2027, we expect design-win ramps to climb. We like the momentum. We're not giving a Q4 number, but the momentum into Q3 continues into Q4. For 2027, the strength we have into 2026 translates to a strong 2027, and our confidence in our long-term growth rate has increased.
For 2027, think of it as a runway where the newest products in automotive have not launched yet and physical AI is still early. Design wins and heavy deployments have not even started in many cases. We view 2027 constructively and it underpins our long-term growth rates.
To add on physical AI, you referenced our Kinara acquisition. The design-win funnel we track grew last quarter to over $1 billion, and this quarter it's sitting over $1.5 billion in the funnel. We'll have to convert those into design wins, but that's a leading indicator. It's early innings for physical AI, and we're excited about it.
Just to add, the $1.5 billion pipeline represents over 200 unique and distinct customers, so it's very broad-based.
And our next question is coming from the line of Jim Schneider of Goldman Sachs.
I was wondering if you could reiterate the double-digit growth outlook you expressed last quarter for 2027 and specifically the roughly 60% gross margin level you expressed. Has anything changed that affects your confidence there, or is your confidence increased?
Jim, there's no change in what we previously said. We continue to see revenue improvements, and that's all intact. Related to gross margins, we feel very confident about hitting what we shared using our rule of thumb. You can see that play out in our results year-over-year — we've actually done a bit better. So everything is intact and links well to the higher revenues we plan for.
With respect to 2027, the right way to think about it is the runway ahead and our ability to compound into it. The newest products in automotive have not launched and physical AI is at early stages. We believe 2027 looks constructive and supports our long-term growth rates.
I'll build on that. Rafael mentioned physical AI and the 15% AI enablement more than doubling. Another metric we track is the Kinara design-win funnel engagement, which grew to over $1.5 billion. That's an early-stage but encouraging leading indicator.
We have the $1.5 billion pipeline representing over 200 unique customers.
The next question is coming from the line of Joshua Buchalter of TD Cowen.
Following up on Francois' question earlier: a couple of your peers have clearly called out restocking in the auto market. You were conservative with inventory through the past cycle. Is there anything about your portfolio that might make restocking happen later? Or is your comment that you aren't seeing restocking driven by conservatism on your part?
One unique thing about NXP is our company-specific growth drivers. About 47% of our auto revenue is coming from content that is typically larger than our core. We expect that to grow toward 50% next year. Related to restocking, we have a very good handle on distribution. We know what's going in and out. In Asia, a majority of customers go through the channel, but for Western Tier 1s we track directly and triangulate. Tier 1 working capital needs remain tight; we still see late orders and hand-to-mouth behavior. We monitor this carefully, but we have not seen a restocking effect specifically with our Western Tier 1s.
Okay. I appreciate that. I also wanted to ask about gross margins in the second half. From the last call, you mentioned utilization rates moving from the low 80s to the mid-80s; is that still the right metric to think about as the cycle continues? And on the Q3 gross margin guide, last quarter you called out wafer access fees that could impact you. Did those play a role in the quarter or the guide?
Our gross margins are doing well. From Q1 year-over-year, they're up 150 basis points. We plan to bring them into the mid-60s, which helps the second half. Regarding increased cost from foundries and access fees, we haven't seen that play out yet. That may be more of a factor in Q4 but more likely in 2027 when we enter new agreements with foundry partners.
We did see inflationary input costs on back-end items like piece parts, substrates and precious metals. In terms of wafers on the front end, we operate within an agreed envelope with our partners. As long as we operate within that envelope, we don't see tactical price increases. If we go outside that envelope, we would see price increases and would pass those along to customers.
Our next question is coming from the line of Tom O'Malley of Barclays.
I wanted to dive into the Kinara commentary. The funnel is expanding to $1.5 billion. We've seen a lot of acquisitions in the industry, like Synaptics and Hailo. Do you think those acquisitions target the same area you've targeted? And when you look at the TAM, can you help size what that market looks like in a couple of years since the funnel indicates it's a large opportunity?
Yes. The acquisitions you mentioned confirm the strategy: cognification of the edge is happening. You can't play without a strong AI platform and roadmap. We believe the AI asset we acquired and incorporated into NXP's roadmap is best-in-class. We've integrated that IP into monolithic integration in our i.MX processors and S32N platform in automotive. We're also discussing discrete NPUs that can attach to other platforms, even non-NXP. We're developing a complex AI software framework, which includes agentic AI, the way the edge becomes more autonomous. While others are acquiring assets and integrating them, we're evolving into the next phase of AI deployment and agentic AI.
On the auto side: around last quarter, there was great variation among your customers where some had very low weeks-in-inventory and others had more. Have you seen normalization toward an 11-week mark both at end customers and distributors, or is there still a disparity?
It's similar to what we've seen in previous quarters: there is dislocation between low and high, a mix driven by how customers control working capital. No change there. We track this carefully. In Q4 and Q1 we were shipping to real end demand and inventory digestion is behind us, but we have not seen pull-forwards or restocking efforts with Western Tier 1s.
The next question is coming from the line of Tore Svanberg of Stifel.
Congratulations on the record revenue. Rafael, I wanted to go back to the physical AI pipeline, the $1.5 billion. How broad-based is that? Is it across a few verticals or many different applications? Which applications should we assume will ramp earliest?
The excitement is broad-based. There are use cases across HMI where voice can replace mechanical or display buttons, visual and vision applications, predictive maintenance, and more. Physical AI deployment is broad-based, with very strong interest in industrial and strong interest in automotive in-cabin applications. This is a massive opportunity and a driver of content growth in industrial and an additional content driver for automotive.
As a follow-up, you're seeing great bookings momentum and demand, but there are capacity constraints for other components. Are customers constrained such that they want to do more but can't because of shortages of other components?
Yes, you can see impacts already. For example, our mobile business is down year-on-year even though it grew sequentially, and our market share position hasn't changed; this shows the impact of constraints. Memory constraints and other shortages are being discussed widely. Customers are designing around constraints with different products, packages and DDR types, and we are helping them manage these constraints. So in pockets, we do see constraints impacting demand.
The next question is coming from the line of William Stein of Truist Securities.
I wanted to ask about the interplay between backlog growth, lead times and customer intentions. If lead times were shorter, would you have shipped more? Are customers wanting more than you can deliver now and you're constrained, or are customers placing longer orders because of demand signals and longer lead times?
We see both. There are escalations and late orders, and inventory is coming down, but lead times for a big chunk of our portfolio have extended beyond 16 weeks versus last quarter. Customers are placing orders appropriately in line with lead times, but some are still trying to place late orders and struggle with it. So it's a combination: more demand than immediate supply in some areas and also customers ordering longer to secure supply.
Great. And a follow-up: geopolitical events like renewed activity in Iran or other developments — have you seen any change in the impact on your supply chain compared with recent months?
No, it's similar. We are seeing direct impact from higher input costs. We try to offset these operationally first, and if we can't, we protect our gross margins, which unfortunately means passing costs to customers. Indirectly, of course macro events can impact us, but the macro signals are relatively stable: PMIs and GDP have ticked up slightly. We see both macro and internal signals, and we aim to support customers and provide value.
And Lisa, we'll take our last question here today.
And that last question will be coming from the line of Chris Caso of Wolfe Research.
Just a follow-up on pricing. When pricing moved higher during the last cycle, you said it was neutral to gross margins. Is that the case today? In terms of what you're seeing with pricing, could you level set the magnitude? I know you said you'll wait to see the magnitude, but you've made assumptions for the Q3 guide.
Chris, let me tackle how we account for pricing. Pricing is not the primary driver of our model; the driver is content growth and architecture-led content per system. Pricing is a dynamic, strategic lever: we use it to capture value, increase market share, or offset input costs. We make selective price adjustments each quarter and provide an estimate in our next-quarter guide. This time is not different; Q3 guidance incorporates our estimate of selective pricing, but the main driver remains architecture-led content growth.
Typically, we update pricing once a year. At the beginning of this year, we said pricing would be down in the low single digits. By year-end, we'll update that and we expect it to be a bit better due to selective pricing to offset higher input costs. We have been disciplined. This is different from COVID, which was broad-based supply disruption; this is more inflationary now and we manage it accordingly.
Got it. And as a follow-up: you talked about AI-enabled processors. How does that value come to NXP? Is it higher content, higher ASPs for products that drive unit growth, market share, or a combination?
It is a combination. AI-enabled products have more content — higher-performance processors with AI inference, more software content and more enablement. Systems become more complex: more connectivity, more security, and in physical AI and robotics you must have functional safety. With agentic AI, there's also a richer software framework. For us, physical AI is an important driver of content growth and we intend to position our roadmap to capture this market.
Thank you. And that concludes the Q&A session for today. I would like to turn the call back over to Rafael, CEO, for closing remarks. Please go ahead.
Thank you, everyone, for joining us and for your thoughtful questions. I want to leave you with three thoughts: First, our growth is structural, driven by software-defined vehicles, physical AI at the industrial edge and a nascent data center franchise. Second, we're entering a decade-long adoption of physical AI, which is transforming industries. Through relentless innovation and customer intimacy, NXP is best positioned to meet this transformation. Third, our financial model is scaling exactly as designed. Margin expansion is structural, capital allocation is disciplined, and we are positioned to deliver expanding profitability and growing returns for years to come. The long-term opportunity for NXP has never been clearer. Thank you.
Thank you so much for joining. You may now disconnect.