Silicon Laboratories Inc Q3 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Tore Svanberg - Stifel, Nicolaus & Company Inc - Analyst : Congrats on the progress here. My first question is on the gross margin guidance for Q4, Dean. So you talked about the onetime benefit. Maybe you could clarify exactly what that is. Even without that benefit, gross margin is up pretty significantly. I think you mentioned mix was the main reason. Just wondering how we should think about that dynamic, especially going into 2026, just given how much higher the gross margin guidance was?

Question: Tore Svanberg - Stifel, Nicolaus & Company Inc - Analyst : That's very helpful. And just my follow-up is for Matt. Matt, you talked about the Works with conference and you introduced those 2 new tools. And particularly interested in the SDK-based Studio AI that you announced. I'm just trying to understand what that means for you financially over time because obviously, this is going to really accelerate the way third-party developers design a new product. So sort of any financial impact you could talk about from that new tool would be really interesting.

Question: Christopher Rolland - Susquehanna Financial Group LLLP - Analyst : I guess mine are around both channel and customer inventories, which you did address in the prepared remarks. I guess, first of all, good job on filling the disti channel a little bit more here. I was wondering what your expectations are there? Could we eventually get to the 70, 75 target? And how long might that take? And on the customer side, you guys talked about kind of the lowest days ever. Perhaps if you could -- I know this isn't a perfect science, but if you could talk about a range, and obviously, we're at the bottom of the range, but your expectations for customer replenishment as well over the next few quarters?

Question: Christopher Rolland - Susquehanna Financial Group LLLP - Analyst : Excellent. And without being too specific, maybe broad strokes for next year for '26, how you guys see that setting up, I guess, starting in March, I think you guys are you seasonally buck some of the other guys that are down in March. Perhaps if you could give us the setup for that year and which products are you kind of most excited about or do you think are going to carry growth the best through '26?

Question: Cody Acree - Benchmark Company LLC - Analyst : Congrats on the great numbers. Dean, if you can maybe talk a bit about the gross margin incremental for Q4, even with the onetime and just the sequential bump is much more than I would think just normal mix shift would entail. So can you just talk about the details of the drivers sequentially?

Question: Cody Acree - Benchmark Company LLC - Analyst : Sure. And then I guess just any directional color on your different segments, Home, Life and I&C?

Question: Kyle Bleustein - Barclays Bank - Analyst : This is Kyle Bleustein on for Tom O'Malley. I wanted to dig into the gross margin commentary a little bit more. I was just kind of curious like what has changed since the Analyst Day? Like has the product mix surprised you at all? And then when you're talking about it being stable for the next few quarters and coming back down, is that again on the mix side? Or is there anything to do with pricing? Just kind of your thoughts there?

Question: Kyle Bleustein - Barclays Bank - Analyst : Okay. That's helpful. And then just for my follow-up, can you kind of give an update on how the Series 3 rollout is going, either like expected percent of the mix? And then just overall, as that kind of ramps into your product portfolio, how we should think about overall pricing trends?

Question: N. Quinn Bolton - Needham & Company LLC - Analyst : Congratulations on the nice outlook, especially on the margin side. I wanted to just come back to the active asset tracking, Matt, that you talked about in the prepared comments. It sounds like it could be a pretty meaningful opportunity. In the past, you guys have talked about CGM, smart meters, ESL as 3 of your more company-specific product ramps that can drive outsized growth. Wondering, would you start thinking about active asset tracking as maybe a fourth company-specific driver? Or would you not put it in the same sort of magnitude as the other 3 that you've previously talked about?

Question: N. Quinn Bolton - Needham & Company LLC - Analyst : And Matt, just maybe a quick follow-up there. Was that the Bluetooth-6, I think it's channel sounding technology that's the basis for that active asset tracking? Or is that another wireless technology?

Question: N. Quinn Bolton - Needham & Company LLC - Analyst : Okay. Great. And then a follow-up question, just I think in the past, you thought the CGM could get to 10% of revenue by Q4 of '25 to the second quarter of 2026. Is that time line still sort of in the cards for the continuous glucose monitors?

Question: Joseph Moore - Morgan Stanley - Analyst : Congrats on the good margin performance here. I wonder if you could talk about sort of inorganic opportunities at the Analyst Day, you said that you were open to that. Is that still something that you're contemplating? It seems like you have a lot of organic growth here. Just how are you thinking about M&A opportunities?

Question: Joseph Moore - Morgan Stanley - Analyst : That's very helpful. And then with regards to your customers kind of drawing down inventory to these lower levels, I guess, just do you have conversations about some of the geopolitics of the situation? And I just -- I know you're not impacted by stuff like Nexperia, but it seems like that's creating line down situations. Like did the customers sort of feel like, okay, given these geopolitical uncertainties, I need to hold more inventory? Or just -- I don't think we've seen a lot of that activity, and I'm a little surprised that we haven't.

Question: Peter Peng - JPMorgan Chase & Co - Analyst : Just a follow-up to that point. So you guys are above $200 million in revenue levels and your end customers' inventories are decreasing. Do you still -- do you believe you're still kind of undershipping to end demand? And if so, how much?

Question: Peter Peng - JPMorgan Chase & Co - Analyst : Got it. Okay. And then my follow-up is just on your Wi-Fi. Can you probably share some updates on that and some program ramps? And maybe how you're thinking about that trajectory over the next year or 2?