Good day and thank you for standing by. Welcome to the onsemi First Quarter 2026 Earnings Conference Call. At this time all participants are in a listen only mode. After the speaker's presentation there will be a question-and-answer session. To ask a question during this session you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Parag Agarwal, Vice President of Investor Relations and Corporate Development. Please go ahead. Thank you, Daniel. Good afternoon and thank you for joining onsemi's first quarter results conference call. I am joined today by Hassane El-Khoury, our President and CEO, and Thad Trent, our CFO. This call is being webcast on the investor relations section of our website at www.onsemi.com. A replay of this webcast, along with our first quarter earnings release, will be available on our website approximately one hour following this conference call, and the recorded webcast will be available for approximately 30 days following this conference call. Additional information is posted on the investor relations section of our website. Our earnings release and this presentation includes certain non-GAAP financial measures. The consolidation of these non-GAAP financial measures to the most directly comparable GAAP financial measures and a discussion of certain limitations when using non-GAAP financial measures are included in our earnings release, which is posted separately on our website in the investor relations section. During the course of this conference call, we'll make projections or other forward-looking statements regarding future events or the future financial performance of the company. We wish to caution that such statements are subject to risks and uncertainties that could cause actual events or results to differ materially from projections. Important factors that can affect our business, including factors that could cause actual results to differ materially from our forward-looking statements, are described in our most recent Form 10-K, Form 10-Q, and other filings with the Securities and Exchange Commission, and in our earnings release for the first quarter. Our estimates or other forward-looking statements might change, and the company assumes no obligation to update forward-looking statements to reflect actual results, change assumptions, or other events that may occur, except as required by law. Now, let me turn it over to Hassane. Hassane? Thank you, Parag. Good afternoon to everyone on the call, and thank you for joining us. This quarter marks a clear inflection point for onsemi. Improving demand signals, accelerating AI data center growth, and sustained gross margin expansion demonstrate that the structural changes we made over the past several years are now translating into tangible financial results. We delivered revenue of $1.51 billion and non-GAAP diluted earnings per share of $0.64, both above the midpoint of guidance, driven by growth in AI data center. We expanded gross margin for the third consecutive quarter to 38.5% while returning meaningful capital to shareholders. As volumes recover and new products ramp, our focused portfolio and lean cost structure are driving the operating leverage we designed this model to deliver. Turning to the demand environment, we saw a clear improvement as the quarter progressed, with strengthening order patterns and an increase in short lead time orders. Taken together, these signals give us confidence that this cycle has found its low point, and we are now on a path to recovery. On the new products front, our execution on Treo continues to accelerate as the platform moves from product proliferation into ramping revenue and design wins. In the first quarter, revenue increased more than 2.5 x sequentially, and we saw broader adoption across high-volume automotive, industrial, and AI applications, with Treo design wins supporting the transition to software-defined vehicles. Programs in our funnel include zonal architectures built on 10BASE-T1S paired with SmartFETs, auto ADAS park assist system using ultrasonic sensing, power management for AI client platforms, and inductive position sensing for humanoids and advanced automation use cases. These wins reinforce Treo's penetration as customers move to a more centralized compute model with zonal for a scalable software architecture and require a faster time to market. Our Treo-based driver ICs and inductive position sensing, combined with our gallium nitride products, deliver high power density, efficiency, and ease of use in humanoid applications, AI data centers, and automotive. Our overall GaN solutions design funnel, which includes vertical GaN, now exceeds $1.5 billion, supported by a rich product portfolio spanning 40 volts- 1,200 volts. 10 products are already sampling, with another 20 sampling in the second half of 2026. With a balanced model that combines internal GaN development and foundry partnerships, we have a differentiated roadmap and resilient supply chain that positions us to begin ramping in these markets with revenue starting in 2027. Diving deeper into automotive, in the first quarter, we began production shipments of our Treo-based and 10BASE-T1S Ethernet solutions for a leading North American customer's next-generation zonal architecture. The platform integrates more than 30 Treo devices, enabling end-zone connectivity. Higher energy costs are accelerating EV demand, with cost-optimized EV platforms driving increased adoption of IGBT-based traction inverter solutions. Our latest generation IGBTs deliver a compelling balance of performance, efficiency, and cost, complementing our silicon carbide wins, particularly in front axle applications. During the quarter, we were awarded a new IGBT-based traction inverter program with a North American OEM that is transitioning to direct semiconductor sourcing. As the industry transitions to 900 volt EV architectures led by Chinese OEMs, we are the preferred power solution and are already in production at customers in their next generation of EV platforms, enabling flash charging and higher efficiency for a longer drive range. Our China automotive revenue grew year over year in Q1, despite a decline in the China passenger vehicle market of 6% for the same period. Our silicon carbide share of new EV models deployed at the 2026 Beijing Auto Show in April is approximately 55%. Recent expanded collaborations with Geely and NIO highlight our role in enabling these customers to scale globally with their next-generation 900 volt platforms. The latest reports from the China Association of Automobile Manufacturers highlight continued strength in new energy vehicle exports in the first quarter, supporting our view that EV adoption is extending beyond the China domestic market. With ongoing fuel supply disruption and elevated energy costs, we expect demand for high-efficiency EV platforms and silicon carbide content to remain durable, supporting long-term growth opportunities for onsemi in automotive power globally. Turning to AI data centers, our revenue grew more than 30% quarter-over-quarter, nearly double our expected growth rate entering the quarter, driven by a broader adoption across the power tree with multiple XPU vendors and all the leading hyperscalers. Looking ahead, we now expect our AI data center revenue to double year-over-year in 2026. As the only broad-based U.S. semiconductor-- power semiconductor supplier, onsemi continues to build a leading position in AI data centers across the full set of power capabilities required to modernize the power tree, including high voltage conversion, intelligent power stages, protection and control, and system-level integration from the grid to the processor. As policymakers push for greater transparency in the U.S. data center energy use, it reinforces a trend we have been aligned with for some time. onsemi's power portfolio helps hyperscalers overcome power density and efficiency constraints, reducing losses from the grid to the processor. We are engaged with all major power supply vendors serving every major AI hyperscaler. With Flex Power, for example, our partnership now spans more than 30 active programs across intermediate bus converters, power supplies, battery backup, super capacitors, and next-generation 800 volt DC architectures. The AI halo effect continues to drive incremental demand in adjacent infrastructure markets, particularly energy storage systems, as rising energy costs and declining battery prices accelerate project economics. Driven by our differentiated SiC hybrid modules, we are seeing renewed growth in our string ESS and microgrid business globally from China to North America. We now expect to outpace the power semiconductor growth for this market in 2026, with more than 40% revenue growth year-over-year and a market share approaching 60%, and are now ramping revenue for a large U.S. OEM's microgrid deployment. Our announcement with Sineng Electric highlights our hybrid power integrated modules, combining EliteSiC technology and FS7 IGBTs, enabling higher efficiency and higher power density for utility-scale solar inverters and liquid-cooled energy storage platforms. These solutions deliver the best system-level electrical and thermal performance and reinforce our position as a technology partner of choice as customers scale next-generation renewable and storage deployments. Turning to sensing, we are delivering a multimodal sensing capability that customers can deploy across industrial autonomy, automotive sensing, and emerging robotics applications. We secured a meaningful design win with a leading global robotics platform where our high-resolution image sensor and Indirect Time-of-Flight technology were selected to enable reliable depth perception and navigation in autonomous systems. Our roadmap spans complementary modalities, including high-resolution imaging, depth, and other sensing approaches like SWIR that are designed to work together with automotive-grade reliability and long lifetime performance. As we move forward, we are encouraged by improving market conditions and the momentum we are seeing across our highest value applications. Our continued evolution towards a product and solution-centric portfolio, combined with disciplined investment decisions and our fab right actions, is strengthening our operating model and enhancing margin durability. We are executing a clear strategy with deeper customer intimacy and a portfolio aligned to the most important long-term power and sensing transitions. This positions us well to deliver sustainable growth, expanding profitability, and long-term value creation. I'll now turn it over to Thad to give you more details on our results and guidance for the second quarter. Thanks, Hassane. The improving market conditions are coming through in our financial results and outlook as demand visibility improves. This year, we expect the impact of the structural changes we have made to become increasingly visible in our results. With a leaner cost structure, a more focused portfolio, and differentiated power and sensing investments, we have built a model that delivers strong operating leverage with incremental revenue driving expanded margins, earnings, and free cash flow. In the first quarter, order patterns and improving backlog visibility indicate that we are moving away from the bottom of the cycle, and we are on a path to recovery. We delivered revenue of $1.51 billion, better than normal seasonality, and non-GAAP earnings per share is $0.64, both above the midpoint of our guidance. We expanded non-GAAP gross margin for the third consecutive quarter to 38.5%, and we expect sequential gross margin expansion throughout the year. We returned $346 million to shareholders through opportunistic share repurchases, representing nearly 160% of free cash flow. Q1 revenue was $1.51 billion, down 1% versus the fourth quarter and up 5% year-over-year. As expected, there was roughly $50 million of planned non-core exits in the quarter. Turning to the end markets, automotive revenue was $797 million in the first quarter, roughly flat quarter-over-quarter, and grew nearly 5% year-over-year, marking the first year-over-year growth after seven quarters of decline. We continue to see stabilization in the automotive market, and we now believe we're shipping to natural demand. China electric vehicle programs continue to outperform other regions, driven by a strong export market. Industrial revenue was $417 million, down 6% sequentially, ahead of our expectations. We saw broad-based strength across our traditional industrial business for the second consecutive quarter, partially offset by typical Chinese New Year seasonality. Our AI data center business is accelerating, with Q1 revenue growing more than 30% quarter-over-quarter and doubling year-over-year, reflecting platform ramps and expanding engagement across the power tree. We expect our 2026 AI data center revenue to double compared to full year 2025. For the first quarter, total revenue for the other category was $299 million, an increase 3% quarter-over-quarter due to AI data center strength. Looking at the first quarter split between the business units, revenue for the Power Solutions Group, or PSG, was $737 million, an increase of 2% quarter-over-quarter and 14% year-over-year. Revenue for the Analog and Mixed-Signal Group, or AMG, was $540 million, a decrease of 3% quarter-over-quarter and 5% year-over-year. Revenue for the Intelligent Sensing Group, or ISG, was $236 million, a 5% decrease quarter-over-quarter and a 1% increase over the same quarter last year. Moving to gross margin in the first quarter, GAAP and non-GAAP gross margin of 38.5% increased sequentially in a seasonally down quarter. The improvement in gross margin is a result of the structural changes we have made over the last several years that have improved our manufacturing performance. Manufacturing utilization increased sequentially to 77% as we ramped production quickly to respond to stronger demand signals in the quarter. In Q2, we expect utilization to be flat to up slightly. Given the improving demand outlook and our ongoing fab right actions, we expect sequential gross margin expansion throughout the year. GAAP operating expenses were $637 million, including $329 million in restructuring expenses. non-GAAP operating expenses were $294 million, a decrease of 7% from Q1 2025, driven by cost optimization actions. GAAP operating margin for the quarter was negative 3.5%, and non-GAAP operating margin was 19.1%. Our GAAP tax rate was 26.2%. Non-GAAP tax rate was 15%. Diluted GAAP loss per share was $0.08. Non-GAAP earnings per share was $0.64. GAAP diluted share count was 394 million shares. Non-GAAP diluted share count was 396 million shares. We opportunistically purchased $346 million of shares at an average price of $60.54. Turning to the balance sheet, cash and short-term investments was approximately $2.4 billion, with total liquidity of $3.9 billion, including $1.5 billion undrawn on our revolver. Cash from operations was $239 million. Free cash flow was $217 million. Capital expenditures were $22 million, or 1.4% of revenue. Inventory increased by $60 million to 201 days from 192 days in Q4. The sequential increase was a result of higher internal loadings and customer commitments. This includes 75 days of strategic inventory, which is down from 76 days in Q4 as we continue to deplete this inventory over the next two years. Excluding the strategic builds, our base inventory is at 126 days. Distribution inventory was flat at 10.8 weeks. Looking forward, let me provide the key elements of our non-GAAP guidance for the second quarter of 2026. As a reminder, today's press release contains a table detailing our GAAP and non-GAAP guidance. We anticipate Q2 revenue will be in the range of $1.535 billion-$1.635 billion. We expect to exit an incremental $30 million-$40 million of non-core revenue in the second quarter. Excluding these exits, our revenue is expected to increase approximately 7% at the midpoint and be above seasonal. Our non-GAAP gross margin is expected to be between 38% and 40%, which includes share-based compensation of $6 million. Non-GAAP operating expenses are expected to be between $287 million and $302 million, which includes share-based compensation of $28 million. We anticipate our non-GAAP other income to be a net benefit of $6 million, with our interest income exceeding interest expense. We expect our non-GAAP tax rate to be approximately 15%, and our non-GAAP diluted share count is expected to be approximately 394 million shares. This results in an anticipated non-GAAP earnings per share in the range of $0.65-$0.77. We expect capital expenditures in the range of $25 million-$35 million. To wrap up, our first quarter results demonstrate continued execution and the operating leverage embedded in our model. I would like to thank our teams around the world for their commitment to excellence. Looking ahead, as our end markets continue to recover, we expect to deliver sequential gross and operating margin expansion throughout 2026. I'd like to turn the call back over to Daniel to open it up for questions. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. In the interest of time, we ask that you please limit yourself to one question and one follow-up. Please stand by while we compile the Q&A roster. Our first question comes from Ross Seymore with Deutsche Bank. Your line is open. Hi, guys. Thanks for letting me ask a question. I guess for my first one, Hassane, one for you. Cyclical conditions are clearly getting better, but I think the structural and secular stuff is more important to investors when they think about ON. You rattled off a bunch in your preamble, whether it be the AI data center, the electrical grid, the zonal, there's a whole bunch of them. How do you think those are really going to show through to investors? When do those become the dominant driver of revenue that we can really see externally? I'll take them one at a time. If you think about the AI data center, you're gonna start seeing that. Well, you're already seeing it in 2026. You know, if you recall, we entered the year thinking we're gonna be in the high teens' growth, sequential growth for AI data center. We ended up at 30%. You see the strength is starting already to come in. For the year, doubling our revenue from last year. That's gonna be a top-line growth. For the, call it the zonal, the 10BASE-T1S, and so on, that's all really related to the Treo traction that we've been talking about. That's already been seen, obviously, in the revenue with the 2.5x increase that I talked about. More importantly, that's going to start showing up in the top line as we progress in 2026, 2027, 2028 towards that $1 billion in 2030. That's more important that it's gonna come with the margin expansion that this product line will offer, not just the top line. If you recall, the margin range for the Treo product is 60%-70% gross margin. You can think about it as both a top line driver, but also a gross margin driver. That's gonna be both on the AI data center and the auto with the zonal. Other opportunities, obviously, in the as they progress for the AI halo effect that I talked about, you will see that in the industrial business. I already talked about just that side of the business growing 40% year-over-year. As the rest of industrial starts to grow, you're gonna start seeing that as a reflection of our overall industrial business. Overall, I would say investors are gonna see a lot of the growth in the right markets and the right applications, both from a top line, but more importantly, the margin expansion. Even in 2026, Thad, in his prepared remarks, talked about margin expansion throughout 2026. You're gonna already start to see that shift. That's all a lot of the portfolio rationalization and the manufacturing work that we've been doing is starting to reflect. Thanks for that. I guess as my follow-up, it's a good segue to the gross margin side for Thad. The top line is significantly better. You talked about the loadings being better. Can you just update us on what the levers are on the gross margin side? I guess where I'm getting at is, a lot of things are heading in the right direction, but people expect a little bit more stair steps than kind of a slow linear ramp on the gross margin side. Is that something we should expect in the second half of the year? If not, when will those larger steps start to be apparent? Yeah. Look, we expect expansion throughout the year as we're seeing the favorability from our fab right activities that we've been taking through 2025. As utilization improves, you know, you'll see that as well. We've also had some headwinds on cost input costs going up, our pricing actions are now going to offset that as we think about later in this year. You know, Ross, the puts and takes are similar to what we've talked in the past, right? It's utilization. You think about every point of utilization as being 25-30 basis points of gross margin improvement. We think longer term, there's another 200 basis points of action or improvement from the fab right initiatives that we're driving. Hassane just talked about favorable mix. I think, you know, you're gonna see over 200 basis points, longer term in impact to gross margin there. Then, you know, we divested the fabs back in 2022. I don't think we're gonna see that here in 2026, but in 2027, you should start to see some impact from that. Longer term, that's another 200 basis points. When you start to stack it up, you know, you can get over 50% when you do the math. Look, we expect expansion throughout the remainder of this year and probably larger step functions than what you saw here in the first quarter. Mm-hmm. Thank you. Our next question comes from Vivek Arya with Bank of America. Your line is open. Thanks for taking my question. Hassane, for the first one, last year we saw the analog industry had, you know, decent first half, and then things started to get a little more muted in the second half. How do you think this year's second half plays out? Is this year, you know, can it be different than what we saw last year? What are you seeing in terms of your customer discussions, you know, your demand visibility? Because you mentioned a lot of, you know, positive words, right? Demand inflection and, you know, demand strengthening and whatnot. Just how do you think this year's second half plays out? Like, should we be expecting seasonal, better than seasonal trends in the second half? How should we think about the second half of this year? Yeah, look, I don't wanna guide the outlook from a seasonality perspective. Let me give you how the year's laying out. The signs, the signals that I look at, whether it's book to bill, whether it's order pattern, lead times, et cetera, all these are pointing in the right direction. We are expecting the second half to outgrow the first half. I'm not talking about flattish. I'm talking about, you know, good outlook that we have based on all the customer. It is driven by programs that we started ramping already, which will continue to ramp. You can think about it as we've gotten, you know, one quarter, and then we're gonna get the rest of the quarters as the ramp happens, whether it's AI data center, I talked about automotive, driven primarily in China. Those models that I referenced with 55% being with onsemi, silicon carbide, those just got released. Those will be in production in the second half. You can start seeing a lot of the leading indicators of a solid ordering pattern, and you can extend that to, I mentioned AI data center. You can extend that to the industrial. All of these positive patterns started and will continue through the second half of the year. That was not the sentiment that I personally had, last year. In contrast, we see a much better outlook than we did last year. Got it. For my follow-up on the AI data center, you mentioned that grew 30% sequentially. How big is it for ON right now? Is it something like, I don't know, mid-single-digit percent of sales? You know, there's a lot of interest in that segment. If you could help, you know, give us some range on how large that segment is. Do you think you have the scale and the internal resources to become an important player in that segment? Do you think you will need, you know, some inorganic resources to help you become a more important player in the AI data center segment? Thank you. Sure. Let me first tackle the first one. As far as overall, you know, we talked last year about $250 million in AI revenue. I just mentioned that we will be doubling that this year. That's pretty healthy growth given, you know, where we started. However, I will say one thing. We have all the technologies and all the power technologies from the wall, call it, to the core, both inside the data center, which is the revenue that we report, but also outside the data center, which we report under the industrial. From a technology perspective, I feel very good. You know, we've done some inorganic acquisitions in 2025. Those are playing to our advantage. We talked about the Aura semi acquisition. We did the JFET silicon carbide acquisition. All of these are pieces of that puzzle that gave us a very well-rounded power technology platform that we can deliver. Of course, Treo is a very big player on internal technology for the AI data center. Those together cover the technology. From a team, you've seen our, obviously our actions on OpEx, but both Thad and I have always said we are very focused on capital or R&D allocation in the areas of growth. That's where they are going. To answer your question directly, we absolutely have the focus that we need to be a major player in power for AI data center. Thank you. Thank you. Our next question comes from Quinn Bolton with Needham & Co. Your line is open. Hey, this is Neil Young. I'm for Quinn Bolton. Thank you for letting me ask you a question. You talked about addressing the full AI data center power tree, you know, from the energy infrastructure UPS, rack-level power and point of load. Sort of as architectures move towards higher voltage distribution, how should we think about the biggest incremental content opportunities for onsemi? You know, is the larger dollar opportunity still outside and at the rack or, you know, the Vcore point of load side, is that becoming a more material contributor? I have a follow-up. Thank you. Yeah. Sure. If you think about, I guess I'll cover it from the rack or 800 volt or HVDC all the way to, call it the outlet, if you will. There's more incremental dollars for us, which is exactly where we play. Outside of the data center, you can think about a very large opportunity for us with SST, Solid-State Transformers as well. That is forward-looking and incremental to the opportunity we have today. To break it down, there's more incremental opportunity from where we are today for the high voltage all the way to the infrastructure, if I include the Solid-State Transformers. Also within the rack, you can't forget that today, at the rack today, you can think about a 120 kW rack at $9,500. At the 800 volt or high voltage rack, we're thinking about $115,000 content. Although our content is almost 10x inside the rack, there is additional incremental content from the rack all the way to the infrastructure that we also participate in, 'cause this is all high voltage, which is exactly right in our sweet spot. Great, thanks. Then, you know, you noted the company's moved beyond the cyclical trough while automotive inventory digestion largely been behind you or is behind you. As automotive begins to recover, how much of the improvement are you seeing is, you know, true unit demand normalization versus content growth from silicon carbide, image sensors, zonal architecture, et cetera? You know, you talked about China, but beyond China, are you seeing any meaningful differences by regions? Thanks. Yes. Let me answer the question, the regional question first. Obviously, China, very healthy automotive, followed by North America, followed by Europe, if you think about it from a recovery and a health. As far as your question about content, I think we absolutely leverage more content than SAR, because if you look at the global SAR, global SAR is flat, maybe slightly down or slightly up, depending on what outlook you look at. To give you an example, what I had in my prepared remarks, I talked about China specifically, given you brought it up. Q1 is seasonally down. The number of passenger vehicle was down 6%. Our revenue was actually up. Therefore, that tells you it is a content story. In certain areas, it is a share gain story as well. We are both gaining share but also gaining more and more content. I talked about 10BASE-T1S for zonal architecture with an OEM in North America. That is a net new content that did not exist about a year ago because zonal is new, 10BASE-T1S or Ethernet base is new. That is content that we are adding to an existing SAR as vehicles upgrade to a software-defined vehicle. More importantly, we are more leveraged to content than SAR, but in certain areas, we are gaining share. Thank you. Our next question comes from Joshua Buchalter with TD Cowen. Your line is open. Hey, guys. Thanks for taking my question. Maybe following up on some of the previous ones about data center. As we think about the doubling this year, can you help us understand, you know, how much of that is from GaN, how much from silicon carbide? And are we at the point where we can expect any contribution from Treo in the data center, or are some of those lower voltage applications more of a 2027 and beyond story? Thank you. Yeah. Look, we're not breaking it down to that level by product family. But I will tell you it is everywhere from the low voltage all the way through the high voltage. That includes, you know, mixed signal analog or on the GPU or XPU side for, I'd call it low voltage, but high power, along with silicon carbide and Silicon Carbide JFET, and of course, our medium and high voltage silicon anywhere in between. You know, we keep focusing on onsemi as the only U.S.-based supplier with the breadth of power technologies that we can offer, and that is starting to come to bear. You know, I gave the example of the applications with Flex power. That gives you an indication of the breadth of our approach. It is not just tied to a single, call it XPU. It is with ASiC vendors as well as hyperscalers. The breadth is what we are leveraging. That's where the growth came in better than we expected as they proliferate and where the 2026 outlook is to double. Okay. Thank you for the color there. Then, for a follow-up, you know, I think entering the year you gave us sort of a growth algorithm of take whatever we think for the industry growth and take 5% of that off for the business exits. Is that still the right way to think about it? And in particular, the reason I ask is, you know, a few years ago when you were walking away from some of this business, it took you longer than anticipated because the pricing environment was better and, your customers didn't react as you expected them to. Any risk of that happening again this year or, you know, has anything changed with that old growth algorithm overall? Thank you. Yeah, Josh, this is Thad. No, no change. As I said, we've exited approximately $50 million in Q1. There's another piece here, $30 million-$40 million here in Q2. If you annualize that, you know, you roughly get to that $300 million that we planned on exiting. So we're done at the end of 2026. So your the algorithm is still true. Take the market growth rate, take 5% off, and, you know, that would be our comparable. But the way that we're seeing it right now is we've got line of sight to that, and we're executing to those exits. I don't plan on that changing here in the next. Well, I don't plan on that changing for the rest of this year. Thank you. Thank you. Our next question comes from Vijay Rakesh with Mizuho. Your line is open. Yeah, hi. Thanks, Hassane and Thad. Just a quick question on the auto industrial trends. Any thought on how you see that progressing and how that trends in the June quarter into the back half? Let me, let me give the end market for Q2, cause I'm sure that question will come up. Automotive in Q2, we think will be roughly flat. You know, as I said, we think we're shipping to natural demand. We haven't seen the full recovery or the replenishment cycle in automotive yet. If that were to happen, you know, later in the year, that's gonna be a good thing. You know, right now in Q2, we're looking at flat. For our industrial business, we're looking up mid-single digit percentage wise. That'll be driven by the broad industrial, kind of our traditional market that has been growing the last two quarters sequentially. Our other market, which includes our AI data center, will be up mid-teen percentages quarter-on-quarter. Got it. As you look at the gross margin into 2027, you mentioned the puts and takes. Any thoughts on how we should think about like EFK margin in utilization improving? Are there any exits that are still left in the core business, I guess? That's it. Thank you. As I mentioned on the previous question, there won't be further exits beyond 2026. EFK is in our calculation. We are at 77% utilized. We took utilization up quickly within the quarter to support the strong demand signals that we were getting, which is a good sign. I expect it to be, you know, flat to up here in Q2, if the market continues to recover, we'll see some slight improvement over time. We're gonna basically match our utilization to whatever the demand signal is through the remainder of this year. That utilization obviously is the biggest factor in driving gross margin expansion, and that's why we're comfortable that with incremental expansion through the remainder of the year. Thank you. Our next question comes from Gary Mobley with Loop Capital. Your line is open. Hi, guys. Thanks for taking my question. Let me extend my congratulations. I'm sure you're pleased with the upturn in the cycle, so to speak, and the secular drivers as well. I wanted to ask about utilization. I assume it's gonna be trending above 80% broadly across all your manufacturing assets exiting 2026. At what point do you need to take up your capital intensity above the 5% level you've been, you know, running at for a while now, to support the growth in 2027 and 2028? Gary, I don't anticipate any change to our capital intensity. I expect it to be in the mid-single digit percentage of revenue for the foreseeable future, and that goes into 2027 as well. If you think about where we are today, to get to fully utilized for us, which is just over 90%, let's call it low 90s, we've got to have revenue that's 25%-30% higher than where we are today. Once we hit that, we start flexing to the outside as well. We actually have a lot of capacity here, and that's why, as we sit here today, we don't look at having to bring on capacity. Just to give you an example, Treo is already ramping out of East Fishkill. That investment has been made a few years ago. A lot of the investment we've made over the past, call it two to three years, is to build the capacity that we need for the new products, which are what is ramping today, like the Treo, like the AI data center for silicon carbide or the JFET, et cetera. It's not about, you know, adding more capacity, it's about utilizing the capacity we already invested in, and that's the leverage in our model, with the fall through at the, you know, mid-single digit CapEx. Got it. That's actually helpful. Thanks, guys. For my follow-up, I wanted to ask about pricing. You did mention passing along some inflationary pressures in your supply chain onto your customers. How pervasive are those pressures? Or asked differently, how pervasive are your pricing adjustments as we, you know, look forward over the next few quarters? Yeah. There's a couple of things. Coming into the year, the pricing environment is better than we anticipated walking into the year. There is some, obviously, when you talk about the commodities and the energy pricing or energy costs, that we're passing that to customers as a just a matter of fact. In areas where we are fully constrained, those are more surgical based on the technologies that we are constrained on. It's not a one-size-fits-all. It is either a cost offset, material cost offset or a call it the allocation methodology that comes with the pricing adjustment, those are more surgical than broad. Gary, we're already seeing the impact of input costs being higher in the P&L, although we're not seeing the impact of the higher pricing yet. It just takes a while for that to become effective and hit the P&L. Again, in the second half, we think you'll start to see that pricing impact show through on the margin line. Thank you. Our next question comes from Christopher Rolland with Susquehanna. Your line is open. Thanks, guys, so much for the question. I think in the press release, you talked about some AI wins, both with chip guys as well as hyperscalers. I was wondering if perhaps you could elaborate a little bit more there. Is this like a vertical power delivery or VRMs or Vcore solutions, or is this something else? When you say the chip guys, are you talking about like GPUs or merchant XPUs? Any other details here would be great. Yeah. I guess I have to see what the level of detail I would give. Let me give you the what are wins and what the reference is for. The reference is across the XPU, so whether it's GPU or CPU, the power delivery right at the GPU in whatever form that is required, whether it's an SBS or anything else. If you keep going from that point and you go outside to, you know, the rest of the rack, you have the medium and high voltage discrete FETs integrated analog mixed signal. When you get more on the power boxes, whether it's the UPS and so on, like I mentioned with Flex Power, those are across a multitude of technologies that we offer, whether it's silicon carbide MOSFET, or silicon carbide JFET. It changes as you get from the low voltage, which is more integrated mixed-signal power, all the way to discrete or module level high voltage power as you get out to the, I guess, the outside of the rack. It's across the board really. We don't break it out by which one. My view is it's across the power tree because our broad portfolio. Thank you, Hassane. Sorry, one more thing. When I talk about hyperscalers, obviously with the hyperscalers, it's a lot of it is in the power domain. When you get to the power domain, it's a power rack. A UPS is a UPS with the defined output for the hyperscaler. We work with the likes of Flex Power across all hyperscalers, it is architecturally defined with the hyperscaler. That gives you kind of a little bit on the breadth, but also the go-to-market. Thanks for the clarity there, Hassane. Maybe secondly, just geographically, it looked like EU and Japan bounced back a little bit here. Maybe you could just talk about what you're seeing geographically and if there are any differences in the recovery. No, I think from a, it depends on the market and the geography. You know, automotive, obviously automotive strength in China. We have industrial AI strength in North America, so these days it's hard to talk about regional without talking about markets specifically that drive the regions. It's no longer a regional conversation. It is more a market. You can think about Europe, you know, the automotive market has not really recovered, so you can think about it as being going sideways, and that really matches what our customers, all the OEMs have been reporting. Industrial is better than we expected. North America is AI. Auto is better than we expected with the certain names in North America, so we're doing very well there. Industrial and is doing well and starting the recovery. That really depends on non-regional, but it's more market dependent. Looking forward, you know, I talked about we're resuming the aggressive growth in the energy storage or renewable energy side of the business in industrial with the 40% growth. That's going to be fueling the second half of the year as that comes back to recovery. That's primarily in North America and China. Daniel, are you there? Tom, your line is open. Hey, guys. There was something funky with the line there. Thanks for taking my question. I wanted to ask about the channel. Channel was flat into the quarter. When you look into the second half of the year, you're seeing some more robust trends in your business. Can you talk about your appetite to potentially expand the channel? The second one I'll kind of wrap into one question is just around the direct customers. There was a time during the pandemic where we went from just in time to just in case, and it feels like we've moved away from that as inventory has burned down. As you're seeing a recovery, are you seeing customers move more towards building back up inventory? Do you see that kind of being something that you're gonna have to carry on your balance sheet in the future? Thank you. Tom, on the channel, we've been running, you know, nine to 11 weeks in our sweet spot. We were at 10.8 weeks last quarter, consistent with Q4. I expect it to remain at this level. Now, the good news is we've been investing in inventory in the channel. We did take it up early last year for the mass market. What we've seen is that mass market revenue going through distribution grew quarter-on-quarter and year-on-year, and that's what we wanna see. Just as a reminder, about half of the business through the distribution channel is fulfillment, where we own that customer. What we really focus on is where the distributors do demand creation, and we're seeing growth there. As we go through the year, we'll watch the demand signals, obviously, and we'll match that. If it goes up, it's because we have to seed that market, you know, for a future revenue ramp, right? You've got to have that inventory sitting out there. Right now, line of sight is to keep it kind of in this 10 to 11 weeks. Look, as far as this, just in time, just in case, you know, whatever acronym people wanna use in the industry, that's all cool. At the end of the day, if you don't place your orders with enough visibility, you're not gonna get your order. Some technologies are already on allocation, and we just said the automotive has not seen a recovery. Technology is technology, whether it goes in AI data center or automotive. We've been pushing for getting the backlog. Backlog is starting to layer in and lead times are starting to extend. My view is it's irrelevant what model the industry is gonna end up landing at. We're not gonna carry all of it on our balance sheet. What we are carrying is our width on our balance sheet, and we will ship it as fast and as quickly as we get the orders. That's our view of the just in time and just in case. Thank you both. Thank you. Our next question comes from Joe Moore with Morgan Stanley. Your line is open. Yeah. I mean, on the same lines, are you seeing any kind of lead time extensions? Are you seeing any hotspots, just anything like that? I know at our conference you had talked about maybe the automotive OEMs looking to take on some inventory because the tier ones weren't. Just anything around that and any anxiety that you see around the inventory situation? Joe, our lead times have stretched slightly. In Q4 we were around 23 weeks. Q1 we're about 26 weeks, it's gone out just slightly here. That's across the board, kind of on average. What we are seeing is a number of orders coming in inside of lead time and expedites. I think that's, you know, kind of this market recovering faster than many had expected. That's we took utilization up quickly trying to match that as fast as we can. I'll let you comment on the inventory. No, I think, obviously some of the OEMs, you heard in my prepared remarks, some of the OEMs are starting to do directed or direct semiconductor sourcing. Whether they hold inventory or we have an agreement with them at a cost associated with it, that will be an operational decision. I do think the anxiety is there. I am starting to get calls. We are on allocation in certain technologies. I'm very clear about that. How they resolve it, whether they hold it now or they force the tier one, we'll see. That is, the strength is not yet shown in automotive, but it will come, and it will come with even stronger allocation with the automotive market, given that AI data center has been showing a ton of strength. Great. Thank you so much. Thank you. Our next question comes from Jim Schneider with Goldman Sachs. Your line is open. Good evening. Thanks for taking my question. Maybe related to the last one, I was wondering if you could kind of broadly characterize your customers' willingness to take up the OEMs to take up their own internal inventory. Are we starting to see that already in the industrial sector but not yet in automotive? Are there any other areas where you're starting to see that behavior? Thank you. No, I don't think, I don't think you're already seeing that. I'll give you obviously the other ones. AI data center, there's no inventory. It's all going to end consumption or end build out. Industrial, I think it's a ramp. We can see the deployment, whether it's energy storage system or the standard industrial. A lot of my peers talked about that. That is not an inventory build. That is an actual end demand recovering. Automotive, you know, Thad talked about it. We're shipping to natural demand. I don't believe there's inventory being built out. How they protect from shortages like, you know, we know is we're headed to or will happen, that is a question for them about how do they wanna put it on their balance sheet or really wait in line? We'll see how that plays out when automotive starts to show, a little bit more strength. Thanks. Then just as a follow-up, about capital allocation, you've done a very good job of opportunistically buying back shares when the stock price is low. With the stock price having recovered quite nicely up here, how are you thinking about the calculus for incremental buybacks versus other things to do with the capital? Thank you. Well, just as a reminder, the capital allocation now is after investing in our business. Right after making the R&D investments that we've been doing, the CapEx investments, and then we've been returning 100% of our free cash flow to our shareholders. Last quarter was 160%. Over time, our goal is to return 100%. You know, you can see that we will flex up at times that when we think there's a dislocation. You know, as I noted, we were buying last quarter at an average share price of $60.54, so you saw us flex up and, you know. Over a longer period of time, you should think about 100% of our free cash flow being returned to shareholders. Thank you. Thank you. Our final question comes from Harlan Sur with JPMorgan. Your line is open. Hey, good afternoon, guys. Thanks for taking my question. You know, for a while now, you've been giving us metrics on customer comps in your mass market business. It's actually, I feel like, been a good sort of leading indicator of the typical improvement dynamics, right? I I recall a discussion a couple quarters ago, I think you actually reiterated it today, that mass market is roughly 25% of your disti business, kind of small to medium sized customers. Your disti business was strong this quarter, right? It was almost up, like, 24%-25% year-over-year. How much of this was mass market strength? Then for the mass market, are you guys targeting Treo for, like, more general-purpose catalog for some of these customers as well? Yeah. The, the mass market, as I highlighted earlier, was up quarter-on-quarter and year-on-year, so it's about a 35% growth. You know, that's accelerating. I think a few quarters ago, we said it was about a 30% growth. You can see that is accelerating as we've been seeding the distribution channel with the right inventory for that mass market. For, for the Treo, absolutely. Treo is a very virtual platform, and as in my prepared remarks and really in conversations we've had in general about Treo, it is an analog and mixed-signal platform upon which we build a lot of solutions and products. All these products are all application specific products that are definitely for the mass market. We don't make ASICs or custom chips. We make chips to solve specific problems for customers, and we do deploy those in the mass market through our distribution channel and distribution network. Absolutely, Treo is part of our broad mass market push. I appreciate that. You know, during the downturn/stabilization period last year, you guys really focused on building your portfolio of products, right, across your power portfolio, your mixed-signal analog portfolio. Two of those acquisitions, right, Aura, vGaN from NexGen. I think you were targeting to have products into the market in the first half of this year for Vcore sampling of your vGaN products. Is the team executing to this? With Vcore, you know, I think as you mentioned, I mean, there's a pretty sizable market opportunity, especially on the CPU side, where we see all these new server CPU SKUs, x86, custom ARM CPUs in the data center. Is the team seeing quite a bit of strong interest for your new multi-phase controller/regulator products? 100%. We're full focused on it. We have a dedicated team that does and covers that, not just from a go-to-market, but from a product. There's complete focus on it. It is, like you said, a very large opportunity. By the way, it's the same focus that we have across the company, across the whole power tree. Definitely, at the, call it at the GPU level or on the board level, blade level, for sure, there's a focus across all technologies. Now, the vGaN is more on the high voltage. I mentioned last time we are sampling vGaN, and we're on track to continue to do that with revenue, starting 2027, and that's still on track as I talked about it, I think, in the fourth quarter when we announced it. Thank you. This concludes the question-and-answer session. I would now like to turn it back to Hassane El-Khoury, President and CEO, for closing remarks. Thank you for joining us on the call. Before we close, I'd like to recognize the extraordinary efforts of our global teams. Over the past several quarters, they have navigated one of the most challenging cycles our industry has seen while continuing to execute, invest, and move the company forward. Their focus, resilience, and commitment are what have positioned onsemi to deliver consistently today and to perform even more strongly as conditions continue to improve. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.