Earnings call transcript: Rambus Q2 2025 misses EPS, stock rises

Rambus Inc. reported its second-quarter 2025 earnings on July 28, revealing a mixed financial performance. The company missed earnings per share (EPS) expectations with an EPS of $0.53 against a forecast of $0.58, reflecting an 8.62% negative surprise. However, revenue came in above expectations at $172.2 million, surpassing the forecasted $166.97 million. Despite the EPS miss, Rambus stock rose by 2.21% to $63.6 in aftermarket trading, driven by strong revenue figures and optimistic forward guidance. According to InvestingPro data, the company maintains impressive gross profit margins of 81.92% and holds more cash than debt on its balance sheet, demonstrating robust financial health with an overall score of "GREAT."

Key Takeaways

• Rambus reported Q2 revenue of $172.2 million, exceeding expectations.
• EPS fell short of forecasts, coming in at $0.53 versus the expected $0.58.
• Stock price increased by 2.21% in aftermarket trading.
• Strong product revenue growth, especially in AI and data center markets.
• Positive outlook with projected double-digit sequential product revenue growth in Q3.

Company Performance

Rambus demonstrated robust performance in Q2 2025, with revenue surpassing expectations largely due to a 43% year-over-year growth in product revenue. The company has maintained its momentum with its fifth consecutive quarter of product revenue growth, marking a significant achievement in a competitive semiconductor market. This performance aligns with broader industry trends, where demand for high-speed connectivity and memory solutions is driven by AI advancements and increased data center needs. The company’s strong execution is reflected in its 30.13% revenue growth over the last twelve months, with InvestingPro analysis indicating the stock is currently undervalued based on its Fair Value assessment.

Financial Highlights

• Revenue: $172.2 million, 3.13% above forecast
• EPS: $0.53, missing forecast by 8.62%
• Non-GAAP Net Income: $67.1 million
• Cash from Operations: $94 million, a record for the company
• Cash and Equivalents: $594.8 million

Earnings vs. Forecast

Rambus’s actual EPS of $0.53 fell short of the forecasted $0.58, marking an 8.62% negative surprise. In contrast, the company exceeded revenue expectations with $172.2 million against a forecast of $166.97 million, a positive surprise of 3.13%. This mixed result reflects the company’s strong revenue growth, offset by challenges in maintaining profit margins at expected levels.

Market Reaction

Despite the EPS miss, Rambus’s stock rose by 2.21% to $63.6 in aftermarket trading. The stock’s movement reflects investor confidence in the company’s robust revenue performance and optimistic future outlook. The stock’s current price remains within its 52-week range of $37.42 to $70.05, suggesting stability and potential for further growth as the company continues to capitalize on the AI and data center markets. InvestingPro subscribers have access to 13 additional ProTips and comprehensive analysis, including detailed insights on the company’s valuation metrics and growth potential. The Pro Research Report available on InvestingPro provides deep-dive analysis of Rambus’s market position and future prospects.

Outlook & Guidance

Looking ahead, Rambus projects Q3 revenue between $172 million and $178 million, with expectations of double-digit sequential product revenue growth. The company is strategically focusing on expanding its product portfolio, particularly in AI and data center markets, with new product contributions expected to grow significantly. The MRDIMM market, projected to reach $600 million by 2026, presents a substantial opportunity for Rambus.

Executive Commentary

CEO Luke Seraphin highlighted the quarter’s success, stating, "Q2 was a standout quarter for Rambus." He emphasized the strategic focus on advancing system memory bandwidth and capacity, noting, "The data center will continue to undergo profound transformation driven by exponential growth of AI workloads."

Risks and Challenges

• Supply Chain Disruptions: Potential delays in product delivery could impact revenue.
• Market Saturation: Increasing competition in the semiconductor market may pressure margins.
• Macroeconomic Pressures: Economic downturns could affect overall demand for tech products.
• Technological Advancements: Rapid changes in technology require continuous innovation.

Q&A

During the earnings call, analysts inquired about Rambus’s momentum in new product introductions and the potential of ARM CPU platforms. The company confirmed its strategic focus on AI-focused ASICs and highlighted opportunities in both client and server memory markets, underscoring the importance of continued innovation and market adaptation.

Full transcript - Rambus Inc (RMBS) Q2 2025:

Conference Operator: Welcome to the Randus Second Quarter Fiscal Year twenty twenty five 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 question and answer session. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Desmond Lynch, Chief Financial Officer.

You may begin your conference.

Desmond Lynch, Chief Financial Officer, Rambus: Thank you, operator, and welcome to the Rambus second quarter twenty twenty five results conference call. I’m Desmond Blench, Chief Financial Officer at Rambus, and on the call with me today is Luke Seraphin, our CEO. The press release for the results that we will be discussing today has been filed with the SEC on Form eight ks. We are webcasting this call along with the slides that we will reference during portions of today’s call. A replay of this call can be accessed on our website beginning today at five 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 and the effects of ASC six zero six on reported revenue amongst other items. These statements are subject to risks and uncertainties that may be discussed during this call and are more fully described in the documents we file with the SEC, including our eight 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 in 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 and our slide presentation and on our website at rambus.com on the Investor Relations page under Financial Releases. In addition, we will continue to provide operational metrics such as licensing billings to give our investors better insight into our operational performance. The order of our call today will be as follows: Luke will start with an overview of the business, I will discuss our financial results and then we will end with Q and A. I’ll now turn the call over to Luke to provide an overview of the quarter.

Luke?

Luke Seraphin, CEO, Rambus: Thank you, Des. Good afternoon, everyone, and thank you for joining our second quarter conference call. Rambus delivered a very strong second quarter, exceeding expectations for both revenue and earnings, while continuing momentum in our growth initiatives. This achievement was driven by our memory interface chip business outpacing the market with 43% year over year growth and another quarter of record product revenue. The strong performance highlights our sustained leadership in core DDR5 products as we continue to execute on our strategic road map of Signal and Power Integrity Solutions and to drive the adoption of our new products.

We also generated record cash from operations of $94,000,000 showcasing the efficiency of our execution and the robustness of our business model. Our balanced portfolio and diverse revenue streams across chips, silicon IP and patent licensing position us exceptionally well in the market. They also provide stability in a dynamic microenvironment and enable our continued product investment to drive long term growth. Our chip business continues to be a key growth engine for the company with Q2 marking our fifth consecutive quarter of product revenue growth. As I mentioned in my opening remarks, we delivered a historic quarter of record product revenue.

Our strength in DDR5 continues to be a cornerstone of our success with increased sales of our core products driving above market growth. Looking forward to Q3, we expect our ongoing LCD market share leadership combined with early contributions from new products to drive double digit sequential product revenue growth. We have growing traction for the record number of new products introduced throughout last year with chips progressing through the respective stages of customer qualification and adoption. Additionally, we remain actively involved in the definition of future generation products with the industry. As we look further into the future, we are also very pleased that our industry standard MRDIMM chipset is advancing on schedule and we are excited about its role in meeting the growing memory performance requirements of next generation server workloads.

Going beyond servers, we recently launched our client memory module chipset for AIPCs. With that introduction, we are proud to now offer chipsets for all JEDx standard TDR5 and LPDDR5 modules. Our client chip solutions waterfall our proven server class technology into new applications and extend our reach into next generation high performance PCs, opening up a growing market opportunity in the coming years. Our expanding product offerings support the next wave of high performance computing platforms in servers and client systems. Through ongoing leadership in RCDs and growing traction across our portfolio of new products, we expect continued momentum and long term growth.

Turning to Silicon IP, we delivered solid results in Q2 and we remain on track for long term growth. AI and data center applications continue to drive strong demand for our high speed memory and interconnect IP as well as our security IP. Our IP solutions are foundational to enabling the performance and security required by next generation accelerated computing ICs. We are seeing strong demand and design win momentum across our portfolio led by best in class HVM4 and PCIe seven solutions. Now as we look ahead for the company, the data center will continue to undergo profound transformation driven by exponential growth of AI workloads and the increasing complexity of high speed performance computing.

Across the ecosystem, the shift towards scalable heterogeneous compute architectures is accelerating demand for novel high performance memory solutions and enabling technologies. These trends align directly with Rambus’ long term strategy. We are strategically focused on advancing system memory bandwidth and capacity through groundbreaking memory, connectivity and power management solutions. These capabilities are foundational to enabling the next generation of AI and HPC platforms. We have built a roadmap that addresses the increasing technical demands of data intensive applications.

Our leadership in signal and power integrity, core to enabling robust high performance memory subsystems, places us at the heart of this transformation. With our strong balance sheet and ongoing focused investments, Rambus is poised to capitalize on these secular growth trends. In closing, Q2 was a standout quarter for Rambus. We achieved excellent financial results, delivered record product revenue and continued to execute on our road map. We are excited to enter the second half of the year with strong momentum and we expect another quarter of record product revenue with double digit growth in Q3.

Our leadership in DDR5, increasing customer traction for new products and strong business model position us well for continued success and long term profitable growth. As always, I want to thank our customers, partners and employees for their continued support. And with that, I’ll turn the call over to Dez to walk through the financials. Dez?

Desmond Lynch, Chief Financial Officer, Rambus: Thank you, Luke. I’d like to begin with a summary of our financial results for the second quarter on Slide three. We delivered a strong quarter exceeding our expectations for both revenue and earnings. Our chip business continued to drive our growth as we delivered record results marking our fifth consecutive quarter of product revenue growth. In addition, our diversified portfolio generated record quarterly cash from operations of $94,000,000 Our ability to consistently generate cash is a key aspect of our strategy and enables us to continually invest in initiatives that fuel our long term growth.

Let me now provide you a summary of our non GAAP income statement on Slide five. Revenue for the second quarter was $172,200,000 which was above our expectations. Royalty revenue was $68,600,000 while licensing billings were $66,400,000 The difference between licensing billings and royalty revenue mainly relates to timing as we do not always recognize revenue in the same quarter as we bill our customers. Product revenue was $81,300,000 as we delivered another quarter of record product revenue. This represents a 7% sequential increase and a 43% year over year growth driven by continued strength in DDR5 products.

Contract and other revenue was $22,300,000 consisting predominantly 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 royalty revenue as well as in licensing billings. Total operating costs, including cost of goods sold for the quarter were $93,200,000 Operating expenses of $60,400,000 were in line with our expectations. Interest and other income for the second quarter was $4,800,000 Using an assumed flat tax rate of 20% for non GAAP pre tax income, non GAAP net income for the quarter was $67,100,000 Now let me turn to the balance sheet details on Slide six. We ended the quarter with cash, cash equivalents and marketable securities totaling $594,800,000 up from Q1, primarily driven by record cash from operations of $94,400,000 Second quarter capital expenditures were $10,400,000 while depreciation expense was $7,400,000 We delivered $84,000,000 of free cash flow in the quarter.

We consistently delivered value to our stockholders as we continued our stock repurchase program in the quarter. Let me now review our non GAAP outlook for the third quarter on Slide seven. As a reminder, the forward looking guidance reflects our current best estimates at this time and our actual results could differ materially from what I’m about to review. The economic environment remains a dynamic environment and we continue to actively monitor the situation. In addition to the non GAAP financial outlook under ASC six zero six, we also provide information on licensing billings, which is an operational metric that reflects amounts invoiced to our licensing customers during the period adjusted for certain differences.

We expect revenue in the third quarter to be between $172,000,000 and $178,000,000 We expect royalty revenue to be between 57,000,000 and $63,000,000 and licensing billings between $58,000,000 and $64,000,000 We expect Q3 non GAAP total operating costs, which includes COGS to be between $98,000,000 and $94,000,000 We expect Q3 capital expenditures to be approximately $12,000,000 Non GAAP operating results for the third quarter is expected to be between a profit of $74 and $84,000,000 For non GAAP interest and other income and expense, we expect $5,000,000 of interest income. We expect the pro form a tax rate to be 20% with non GAAP tax expenses to be between $15,800,000 and $17,800,000 in Q3. We expect Q3 share count to be 108,500,000 diluted shares outstanding. Overall, we anticipate the Q3 non GAAP earnings per share range between $0.58 and $0.66 Let me finish with a summary on Slide eight. In closing, I am pleased with our strong financial results and ongoing execution.

Our diversified portfolio and disciplined business model continues to drive profitable growth with strong cash generation. Our robust balance sheet allows us to invest in market expansion opportunities in the data center and AI, while consistently delivering value to our stockholders. Before I open the call up to Q and A, I would like to thank our employees for their continued teamwork and execution. With that, I’ll turn the call back to our operator to begin Q and A. Could we have our first question?

Conference Operator: Of course. Our first question comes from the line of Aaron Rakers with Wells Fargo. Your line is now open.

Aaron Rakers, Analyst, Wells Fargo: Yes. Thanks for taking the question. I’ll just ask my question and my follow-up together here. I guess first on product revenue line, strong growth up 43.5% year over year. I’m curious, Luke, how do we think about the contribution from the RCDs, positioning?

I think your target has been 40% market share in D5 and where we’re at as far as seeing the ramp of the PMIC opportunity? And then as the follow-up real quickly, can you just remind us again, as we think about Granite Rapids from Intel, from a CPU perspective and we look at the road map going forward, is the expectation that we see continual memory channel expansion with next generation platforms, I. E, moving from 12 to 16 and so on going forward? Thank you.

Luke Seraphin, CEO, Rambus: Thank you, Aaron. To your first question, yes, we’re very pleased with the growth of our product business with this 43% year over year growth in the second quarter. RCD remains very strong for us. And our belief is that we continue to gain share with the expansion of DDR5 in the market. We were slightly above 40% share at the 2024, and we expect to continue to gain share this year.

And we do start to see the contribution for new chips, power management chips, but all the chips that we’re introducing to the market. It’s still modest. It represents low single digit contribution to the product revenue in Q3, but it’s going to grow to mid to upper single digit contribution in Q3, sorry, is low single digit in Q2. And we do see momentum there. So it’s modest, but we do see momentum across the board.

And as we said, we have different stages of qualification and adoption of the different products in the market, and we feel very comfortable with the momentum there. With respect to the different platforms, our partners continue to roll out platforms. We do sell cheap ahead of the platform deployment. So, to the platform you mentioned, we’re starting to see volume shipments of products on the RCD side. We do believe that in addition to the Intel platform, AMD and the ARM based platforms are also going to roll out products that will create demand for our DDR5, RCD chips.

And the fact that these platforms are transitioning from 12 channels to 16 channel is also going to create further demand for DDR5 in the quarters and years to come. So that’s a good news for us. Thank you.

Conference Operator: Thank you for your questions. Our next question comes from the line of Gary Mobley with Loop Capital. Your line is now open.

Gary Mobley, Analyst, Loop Capital: Hey guys. Thank you. Thanks for taking my question. I had some questions about the PC market. I know it’s not what everybody is focused on, but if I’m not mistaken, your newly introduced PMIC products are geared towards Panther Lake.

And with that launch imminent, can you share with us whether or not you’ve got any visibility into the PMIC sales into the PC market ramping this year or next? And are you generating yet any client clock driver revenue from the PC market?

Luke Seraphin, CEO, Rambus: Thank you, Gary. Yes. As we said in earlier calls, we do see the requirements that we initially or historically saw in the data center flowing into high end PCs and the need for the equivalent of an LCD or the equivalent of the power management chip flowing into the high end PC market. So we introduced the clock driver last year and we are starting to see modest traction. Modest traction not because the product is not successful, it’s just the market is limited at this point in time.

It really targets the very high end speed layer of the market and over time it’s going to slow down all the segments of the market. We were encouraged with the reception of our PMIC products into the data center and that’s why we announced PMIC products for the client market, a Gen two PMIC for DIMMs in the client market as well as an LP CAM solutions for the PC market. So we’re planting the seeds in a market that we think is going to be very fertile going forward. But that’s going to address the high end PC markets first and then slow down. So we do expect the contributions from these client markets to start to be visible in 2026.

When this year, we’re going to just see the initial shipments of qualification and preproduction orders.

Gary Mobley, Analyst, Loop Capital: All right. Thanks, Luke. As a follow-up, I wanted to quickly ask about inventory. It appears as though your dollars of inventory are getting lean and days of inventory, especially lean. And so the reason I bring this up is, you know, are your lead times extending?

And and if they are, is there a motivation for your memory customers to start to maybe sort of ensure or hedge against that in the form of higher inventory?

Desmond Lynch, Chief Financial Officer, Rambus: Hi, Gary. It’s Dave here. That’s a good question. Our inventory levels in Q2 came down to about one hundred and twenty days, which was mainly driven by more finished goods inventory at the end

Luke Seraphin, CEO, Rambus: of the

Desmond Lynch, Chief Financial Officer, Rambus: quarter. It’s important to note that our inventory holding at June 30, it’s just a snapshot in time and really based upon our current view of demand, we will have sufficient inventory to support our customers’ demand through at the end of the year. We do have long term relationships with our supply chain partners and they are fully supportive of our growth plans going forward into 2026 and beyond. As we look ahead, given our expanding product portfolio and strong cash generation, we are comfortable with holding more strategic inventory on our balance sheet and this is something we’ll definitely endeavor to do here over the next couple of quarters. As it relates to lead times, I would say that they remain within sort of normal sort of levels and consistent with sort of prior quarters from there, Gary.

Luke Seraphin, CEO, Rambus: Thanks, guys. Thanks, Gary.

Conference Operator: Thank you for your questions. Our next question comes from the line of Kevin Cassidy with Rosenblatt Securities. Your line is now open.

Kevin Cassidy, Analyst, Rosenblatt Securities: Thank you and congratulations on the great results. The AI ASIC market is exploding and it’s called the XPU. Can you say how that ASIC market might be changing the demand for your silicon IP?

Luke Seraphin, CEO, Rambus: Thanks, Kevin. Yes, sure. What we see with the AI market exploding and the emergence of these XPU solutions, ASIC solutions is that the need for, you know, very high speed connectivity and the need for very high speed, you know, memory interfaces increases and accelerates. And, you know, that translates, you know, for us into an acceleration of our developments for solutions such as HBM4, HBM4E as well as PCIe seven. So we are engaged with customers.

These markets tended to be a bit like the RCD market. Everything is accelerating. But we do have, you know, several engagements on these leading edge technologies on the HVM four and the PCIe seven in particular, as well as for the security solutions. So the the need to actually secure data when it sits into those chips or secure data when it moves around between those chips is becoming critically important. So that’s also giving traction to the sales of our silicon IP in the security area.

Kevin Cassidy, Analyst, Rosenblatt Securities: Okay, great. Thanks for that detail. Maybe a more mundane discussion is that there have been announcements for DDR4 end of life. Does that change anything for Rambus? Or I guess a couple of years ago, we had an inventory issue.

So I guess that’s out of the way now. But what does it mean going forward?

Luke Seraphin, CEO, Rambus: It doesn’t change much for us. DDR5 sales remain very limited. And this has been our message for several quarters now. And we don’t see that picture changing. We do see slowly inventories going down in the market.

We hear about the last time buy orders. We expect DDR4 demand to remain low, even decreasing and maybe it’s going be on a case by case basis when people work through these last time buy orders.

Kevin Cassidy, Analyst, Rosenblatt Securities: Okay, great. Thanks. Congratulations again.

Luke Seraphin, CEO, Rambus: Thank you, Kevin. Thanks, Kevin.

Conference Operator: Thank you for your questions. Our next question comes from the line of Mehdi Hosseini with SIG. Your line is now open.

Mehdi Hosseini, Analyst, SIG: Yes. Thanks for taking my question. I wanted to better understand the mix of the product revenue, especially given the increased contribution from the companionship. How should I think about the DDR5 RCD chip or RCD buffer chip versus a companionship? How is that mix evolving?

Luke Seraphin, CEO, Rambus: The way to look at it is we introduced a lot of products and there are different stages of introduction and qualification with our customers. But in Q2, these new products represented low single digit contribution in percentage terms of our product revenue. And when we look at Q3, that contribution in terms of percentage is probably going to be mid to upper single digit percentage of our product revenue. Revenue. So as I said earlier, we planted the seeds, we see traction and we’re very happy with the traction with our customers.

The contribution today is modest, but we do see very strong momentum in terms of adoption of these products.

Mehdi Hosseini, Analyst, SIG: Got you. Thanks for that clarification. Would that increased contribution continue into year end?

Luke Seraphin, CEO, Rambus: Yes. It will continue in the year end. You know, we again, we’re still in the phase of, you know, introduction, pre production of these products. So, you know, when we look at, the view of our product revenue for Q4, we’re comfortable with where the Street sees us and we see a slightly higher contribution from our new products. But the real thing is going to be 2026 when the platforms are in full swing into the market.

Mehdi Hosseini, Analyst, SIG: Okay. All right. If I may squeeze my second question, I want to better understand the same kind of a diversification in your silicon IP. There was a significant improvement on a Q over Q basis of almost 6,000,000 Is that driven by HPM4? If not, what is driving that sequential increase in silicon IP?

And and and if the if HPM4 was not a factor, when should we expect customers to come back and and buy more IP for that specific application, HBM4?

Desmond Lynch, Chief Financial Officer, Rambus: Hi, Mehdi. It’s Des here. We’re really pleased with the performance of our silicon IP business, which delivered strong results in the first half of the year. And we’re really on track to meet our sort of annual growth expectations for the full year from here. What I would say is when you look at the different revenue categories of contract and other and licensing billings, these can move around on each sort of quarter, which is really dependent upon the IP that we are selling to customers.

So what you did see in Q2 is an increase in our contract and other sort of line, which represents more customizable IP been sold. And we saw the corresponding sort of decline on the licensing billings line, which is off the shelf IP. But what we really see here is a really strong momentum in the business, which has really been led by the memory controller solutions of HBM4, PCIe seven and also nice traction on the leading edge security IP solutions. But overall, for the full year, we do expect the business to grow in line with our overall sort of expectations from here.

Mehdi Hosseini, Analyst, SIG: Thank you, guys.

Luke Seraphin, CEO, Rambus: Thanks, Mehdi.

Conference Operator: Thank you for your questions. Our next question comes from the line of Talia Winkler with Evercore. Your line is now open.

Talia Winkler, Analyst, Evercore: Hi, thank you for taking my question. My first one is about the MRDIMM opportunity. Look, I was wondering if you can help us with an update on how you guys see that market and maybe sort of the ultimate proportion of the CPU market that might be using that technology.

Luke Seraphin, CEO, Rambus: Yes. So MRDIMM is staged to enter the market towards the 2026. Depending on the availability of platforms, this is not the next generation platform, but the one after. But it’s important to engage with customer very early on. So, you know, at this point in time, you know, we’re very pleased with the progress we’re making with our customers in terms of, you know, design winning and and engagements on the qualification side.

But that will contribute to the revenue towards the 2026 and beyond. You remember, the MRDIMM content is much larger than, you know, the content of the standard RDIMM for DDR5 because the RCD is more complex, the power management chip is more complex, but you also have 10 dB chips that were not present on the standard, you know, DIMM. So we’re very excited with the progress, but that’s going to have an impact in twenty twenty six second half and beyond. The market is difficult to assess at this point in time, but we expect in full swing, it could represent about $600,000,000 market for MRDIM that you can compare to a market for RDIM today, which is about $800,000,000 So that’s a significant growth potential in terms of SAM, but that’s something that’s going to happen 2026, the second half and beyond.

Talia Winkler, Analyst, Evercore: Thank you. That’s very helpful. And then my second question is around ARM CPUs. If you could help us understand if there’s a little bit of a trade off from the standpoint of units of the CPUs and the channel count, if you guys view the ARM CPU market different from x86?

Luke Seraphin, CEO, Rambus: We we kind of agnostic as to, you know, the CPU that is being used. Certainly, you know, different, I I would I would say, providers, know, offer different number of channels. We kind of take that into account when we estimate the market size. But for us the very fact that people are developing chips based on ARM that are in competition with the x86 platforms is a good thing. It creates tension in the market, competition in the market that is good for the rollout of higher speed RCDs and companionship solutions.

So we’re kind of agnostic, but we see this in a positive way.

Talia Winkler, Analyst, Evercore: Thank you.

Luke Seraphin, CEO, Rambus: Thank you.

Conference Operator: Thank you for your question. Our next question comes from the line of Tristan Gerra with Baird. Your line is now open.

Luke Seraphin, CEO, Rambus: Hi, good afternoon.

Tristan Gerra, Analyst, Baird: Is it fair to assume that the customized IP that you sold in the quarter that is more related to custom ASIC? And also when you talk about the contribution going from low single digit to mid to upper single digit this quarter from new product, I’m assuming companionship is really the vast majority of that increase and is that more on the Granite Rapid platform?

Luke Seraphin, CEO, Rambus: Yes. To your second question, it’s a combination. We introduced eight new products last year, mostly companion chips. The chips that we introduced this year, you know, our companion chips for the client space, mostly in the power management area. And and, you know, different customers are at different stages.

So, you know, when we mentioned this low single digit going to mid to upper single digit, you know, these are all these new chips that we introduced mostly companionships. Your first question was could you repeat your first question,

Tristan Gerra, Analyst, Baird: please? Customized IP? Yeah. Yeah. It was regarding the customized IP and whether this was related to custom ASIC?

Luke Seraphin, CEO, Rambus: Yeah. Mostly, it’s custom ASIC. It’s it’s, you know, it’s people developing their own chips to address the demands of the AI market. You know, there’s a lot of interest now for, you know, AI insurance in particular, which drives, you know, the need for, you know, AI chips for high speed interfaces. So, yeah, it’s mostly, you know, it’s it’s mostly for for, you know, for ASICs, you know, ranging from, you know, startup companies, you know, that want to enter that market all the way up to, more established companies that already have a footprint into that market.

Tristan Gerra, Analyst, Baird: Okay. And then just as a quick follow-up, what is typically the time line between when you collect this customized IP versus the timing when the custom ASIC is ramping? And the reason I’m asking is because there is a number of hyperscalers that are at different stages of ramping custom ASICs over the next couple of years. And I think you’ve mentioned that increasing customized IP was happening in the quarter, but not necessarily sustainable or lumpy, but shouldn’t we see an increase medium term from customized IP revenue over the next in the medium term into next year?

Luke Seraphin, CEO, Rambus: Yes, that’s a good question. Typically, IP business is a licensing business. So our customers pay us when we deliver the IP for a license for one use or several use depending on the contracts. So we typically see the revenue, it depends, you know, twelve to twenty four months before the products ramp in ramp into the market. So, you know, our current sales address chips that are going to be in the market in a couple of years from now.

And that’s why we do see demand for these leading edge technologies. People are using looking at HVM4, HVM4, your PCIe seven for the next generation of products and we’re going to be on that. I would say leading edge as we move forward. Then it depends on how successful these customers are. They are customers that have been developing chips for, you know, many years, and and we’ll continue on that path with us.

You know? And and and start up companies, you know, they they are more and more start up companies, you you know, paying licenses to us as they move forward. Whether their chips are going to be successful or not, it’s a different question. But again, it’s important for us to have the revenue recognized at the time we sell the license when they actually decide to use these leading edge technologies into their products.

Tristan Gerra, Analyst, Baird: Great. Thank you very much.

Luke Seraphin, CEO, Rambus: Thank you.

Conference Operator: Thank you your question. At this time apologies, We have a follow-up question from the line of Mehdi Hosseini with Zix. Your line is now open.

Luke Seraphin, CEO, Rambus: Yes.

Mehdi Hosseini, Analyst, SIG: Thanks for taking my follow-up. When I look into next year 2026 and 2027, I want to better understand how you’re thinking about the opportunities associated with the client market, PC market versus CXL. It seems like CXL three point zero is more like a late twenty six. If it doesn’t push out again, would the incremental opportunity from PC market be enough, be large enough to offset if there is more push out in CXL adoption?

Luke Seraphin, CEO, Rambus: So thank you Mehdi. The way we look at it is that you’re correct CXL may push out even further, but we do see MRD really being the solution that is going to be adopted in for use case that has to do with memory expansion in particular. So on the data center side, we have high expectations for the deployment of MRDIMM. As I said, with revenue in the 2627, but I think that would address a lot of the use cases that CXL was supposed to address in terms of chip business. Now clients are different.

Clients, there’s not really a CXN market for client at this point in time or small for chips per se. But the client business for us, we really see these as an extension of our companionship market for the data center. As we said earlier, the technical requirements that we’re going to find in high end client systems are very similar to the ones that we currently find in data centers. So this is going to be a driver for SAM expansion for truck driver chips and power management chips into the client business. So that’s a different area of growth for us, different than the MRDIMM in the data center space.

Got it. Thank you. Thank you.

Conference Operator: Thank you for your question. At this time, there are no further questions. This will conclude the question and answer session. I would now like to turn the conference back over to the company.

Luke Seraphin, CEO, Rambus: Thank you to everyone who has joined us today for your continued interest and time. We look forward to speaking with you again soon. Have a great day.

Conference Operator: Thank you. This now concludes today’s conference.

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