Operator : Welcome to the Corning Incorporated Second Quarter 2026 Earnings Call. Please be advised that today's conference is being recorded. It is my pleasure to introduce to you, Chris Keenan, Director of Investor Relations.
Christopher Keenan : Thank you, Carmen. Good morning, and welcome to Corning's Second Quarter 2026 Earnings Call. With me today are Wendell Weeks, Chairman, Chief Executive Officer and President; and Ed Schlesinger, Executive Vice President and Chief Financial Officer. I'd like to remind you that today's remarks contain forward-looking statements that fall within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks, uncertainties and other factors that could cause actual results to differ materially. These factors are detailed in the company's financial reports. You should also note that we will be discussing our consolidated results using core performance measures, unless we specifically indicate our comments relate to GAAP data. Our core performance measures are non-GAAP measures used by management to analyze the business. For the second quarter, differences between GAAP and core EPS principally reflects adjustments for hedged exposures along with largely noncash discrete tax items and restructuring and impairment charges. A reconciliation of core results to the comparable GAAP value can be found in the Investor Relations section of our website at corning.com. You may also access core results on our website with downloadable financials in the Interactive Analyst Center. Supporting slides are being shown live on our webcast, and we encourage you to follow along. They are also available on our website for downloading. And now I'll turn the call over to Wendell.
Wendell Weeks : Thank you, Chris, and good morning, everyone. Today, we announced outstanding second quarter results that demonstrated progress on our newly upgraded Springboard plan. Now for those of you who have been on the SpringBoard journey with us, you'll recall that we launched SpringBoard from quarter 4 2023 with an annualized sales run rate of $13 billion. Over the past 2.5 years, we have significantly increased our sales, and we have successfully transformed the financial profile of the company. Our plan is to now grow our annualized sales run rate to $20 billion by the end of 2026, $30 billion by the end of 2028, and $40 billion by the end of 2030. We're entering a new phase of accelerating growth. We expect to deliver a sales CAGR of 19% and from quarter 4 2026 to quarter 4 2030, while growing earnings faster than sales, with significantly higher returns on invested capital and substantially more free cash flow. With that context, let me get into the second quarter results. Year-over-year, in the quarter, sales grew 17% to $4.74 billion. EPS grew 30% to $0.78. Gross margin expanded 120 basis points to 39.6%. Operating margin expanded 190 basis points to 20.9%, ROIC expanded 180 basis points to 14.9%, and we grew free cash flow to $1.42 billion. Our results were led by Optical Communications where we grew sales 32% year-over-year to over $2 billion, and net income grew 77% to $438 million. We continue to see strong demand for our Gen AI products and enterprise networks and our orders are accelerating. From the beginning of SpringBoard, we have more than tripled enterprise sales. In quarter 2, we grew sales 65% year-over-year to $1.27 billion. And our Gen AI product sales nearly doubled. Keep in mind, this is all just scale out. We're not yet seeing scale up or photonics in our results. All together, we're pursuing a significant opportunity in optical communications, and I will go into more detail in just a moment. Turning to solar. Our sales grew 90% year-over-year, and we completed an extended maintenance shutdown and equipment upgrade at our solar wafer facility. We expect our sales and profitability to improve in the third quarter. Also in the quarter, we continued the drumbeat of major customers choosing to adopt our latest innovations and support the expansion of our manufacturing platforms to accelerate both their and our growth plans. To recap our progress, last year, Apple expanded our long-standing relationship, committing to produce 100% of iPhone and Apple Watch Cover glass at our Kentucky facility. In quarter 1, Corning and Meta announced a multiyear up to $6 billion agreement to support Meta's apps, technologies and AI ambitions using our newest innovations in optical fiber, cable and connectivity solutions. Then in May, NVIDIA now is a multiyear commercial and technology partnership with Corning to dramatically expand US-based manufacturing of the advanced optical connectivity solutions needed to power next-generation AI infrastructure. In June, Amazon announced a multibillion dollar agreement with Corning under which will supply the optical fiber, cable and connectivity solutions that power Amazon's expanding data center infrastructure across the United States. These deep customer partnerships support extraordinary growth that has been outlined in our upgraded springboard plan that we shared at our May investor event. Now as most of you know, we provided a whole lot of exciting news in detail at that event. And I encourage you to check out the presentations on our website if you were not able to attend. This morning, I'll share just a very quick recap of the key takeaways. Our internal springboard plan is to grow our annualized sales run rate to $20 billion by the end of 2026, $30 billion by the end of 2028, and $40 billion by the end of 2030. To keep it simple, we're thinking of this as our springboard 20-30-40 plan. As a reminder, our internal plans are the output of the strategic planning process we run with each of our market access platforms. These are actual business plans. We set our objectives and compensation based upon those plans. When our businesses submit plans to corporate, they factor in a variety of probable listed outcomes. They try to account for the known unknowns. The business plans aim for a 70% confidence interval, which means based on their analysis, there is a 70% chance that they will deliver sales greater than or equal to that number. We then translate our internal plan into a corporate level risk-adjusted high confidence plan for investors, which Ed will recap in just a few minutes. I'll share some of the key assumptions in our internal plan. For 2027 to 2030, we incorporated a forward rate of JPY 150 per U.S. dollar to account for a weaker yen. We plan for flat TV, IT and smartphone end markets, and the impact of higher memory price. We planned for a declining ICE demand, offset by increasing Corning auto content. We also plan to capture a larger solar opportunity with an upgraded sales outlook. We included new innovations and form factors in Gorilla Glass and we see accelerating growth in fiber-to-the-home, and data center interconnect in Carrier. With that context, let's look at our growth across the company. To start out lift the chart to show you our total revenue base. We are entering a phase of accelerating growth. For the first phase of Springboard, ending in quarter 4 2026, we expect to deliver an attractive sales CAGR of 15% along with a dramatically enhanced financial profile. Looking at quarter 2 2026 versus the start of Springboard. We doubled EPS and expanded operating margin 460 basis points and ROIC 610 basis points. So overall, we have an excellent launch point for highly profitable future growth. From that large point, as we enter 2027, we expect our growth rate to accelerate to a CAGR of 19%, a 400 basis point increase. We expect consumer electronics, solar, carrier, auto and life sciences, all to grow. In aggregate, we are planning for a mid-single-digit CAGR in those maps. We plan to introduce our springboard approach of frequent updates for investors with deeper dives into individual maps as they hit significant milestones. At our May event, we had just reached such milestones in enterprise and photonics. And so that was the focus of our presentations. We're working in a fast-moving space and a variety of perspectives on future AI network architectures. Our fundamental views haven't changed since we presented in May. Also, I want to reiterate the key takeaways. Starting in enterprise. We have the opportunity to grow faster than the rate of GPU growth, driven by the technical drivers that increase optical in the data center. At the most basic level, assuming no changes to the network, we would grow as GPUs will -- now you will have your own opinion on what the rate of growth of GP use will be. The insight that we'd like to reiterate today is some of the potential network changes that offer us the opportunity to grow faster than GPUs in our enterprise map. And we will cover the technical drivers, the logic and the impact of each. The first driver is cluster size growth. The logic is that cluster sizes greater than 130,000 GPUs will require a third optical layer. As clusters grow, that is good for our content opportunity. As shown here, once cluster sizes get above 130,000 GPUs, we exceed the network scale capability that can be achieved with a 512 rated switch with 2 layers. This requires adding a third layer. Basically, 3 layers divided by 2 layers yields 50% more content per GPU for very large clusters. These large clusters are a fast-growing segment of AI factories. Therefore, cluster size growth is a positive for Corning relative to GPU growth. So let's turn to the second driver. The second driver is bandwidth growth. Historically, GPU and ASIC bandwidth doubles about every 2 years. We link them through a combination of lane rates and number of lanes. Typically, this is a neutral to positive impact depending on SerDes cycles. We increased bandwidth either by increasing land rate or SerDes, which would have a neutral impact on fiber content or by increasing the quantity of lanes, which can have a positive impact on fiber content. You can see that when we move from Hopper to Blackwell, the SerDes stayed the same at 100G, but the bandwidth needed to double, thus requiring that we increase the fibers from 8 to 16, doubling the amount of content. As we are moving into the Rubin era of GPU architectures, we see a jump in SerDes to 200G. Thus, we're able to keep the lane quantity consistent, resulting in a neutral impact on fiber content. Feynman likely won't be the primary system until the 2029, 2030 time frame. There is still a lot we don't know about it. But if it follows past patterns, and stays at 200G, the number of lanes would double, bandwidth doubles, and that would double fiber again or 400G SerDes is available, the fiber content would be neutral or no change. Likewise, there are other optical schemes, which can be used to increase fiber efficiency, such as BiDi and WDM, which can also reduce the need to increase the number of fibers per GPU. This has yet to be adjudicated. Now we'll know more in a year or so. But the main takeaway is bandwidth is neutral or positive for us. In our 20-30-40 Springboard plan, we assumed the impact of bandwidth on fiber count per GPU to be neutral. The third driver is scale up. Today, this is 100% copper, but optical is beginning to penetrate the scale-up network. This adds an entirely new optical network. And while the timing of adoption and penetration are very difficult to predict the size of the opportunity for an increase in optical content is quite large. First, let's consider what has been announced regarding optical scaling. Recently, NVIDIA announced a Vera Rubin Ultra configuration, which will scale up to 576 GPUs in 8 separate racks. Each rack will have 72 Rubin Ultra GPUs, which are interconnected with copper and then extended rack-to-rack with direct optical connections. This is a transition step to optical that is effectively a hybrid system approach to scale up. Optical is now playing a role. The percent of optical ports has not yet been announced publicly. What has been announced is the scale-out bandwidth of 1.6 terabits per second and the scale up bandwidth for the individual GPU, which will be 14.4 terabits per second. So let's bracket the opportunity. At the lowest end, we can assume 100% of the scale-up network will be done as it is today and that's copper. What this translates to is the same opportunity that we have today which is no fiber in the scale-up and 16 fibers per GPU in scale out. Now let's compare that to a fully optical scale-up system. We take the 14.4 terabits per second bandwidth for scale-up and the 1.6 terabits per second bandwidth for scale out, and divide them by the 200G SerDes. This will translate into 72 lanes and 8 lanes, respectively, each requiring 2 fibers. This results in 144 fibers needed to support the scale up bandwidth and 16 fibers to support this scale out bandwidth. When we combine these demands, we get a total fiber content of 160 fibers per GPU, which is 10x the amount of fibers of the current scale out network. What we know for sure is neither of those cases will be the hybrid system that was just announced. It will be somewhere in between. To be exact on the opportunity, we would need to both know the percent of optical ports in the offering and to know what extent these new hybrid optical scale-up nodes penetrate AI factories, who, regretfully, I can't share the first. because it's confidential. And no one knows for sure what the answer is to the second question, which is just how successful will these be? But it is clearly a very large opportunity for us. And this is a topic that generates much technical debate, and you'll be able to get your own point of view by engaging with experts. When I put all of these technical drivers together, recalculate that the demand for optical content per GPU in our enterprise map will increase by 1.3x to 1.5x by 2028. As we head into 2030, we see the potential that, that number could have much, much higher. Much of that increase is driven by the scale-up opportunity quickly increasing, which leads us to the next incremental opportunity inside the box. Scale-Up also supercharges our opportunity and our new Photonics map, which serves a new class of customers. We are bringing optics inside the box for a new generation of technology for co-packaged optics and near package optics. Although these technologies will likely start with Scale-Out, it is clear that scale of drives a dramatic increase in the size of the opportunity. Optical Scale-Up is new technology that will likely have an exponential adoption curve leading to timing challenges that are difficult to predict. Based on our assumptions and our discussions and agreements with customers, we believe we have the opportunity for a $10 billion market access platform by 2030. Essentially, new inside-the-box optical functions create the opportunity for Corning passive photonics to manage light. Historically, we have had no inside-the-box content. What's happening here is that because of the potential for improvement of latency, faceplate density, power and reliability, customers are looking for the opportunity to move away from pluggables and toward co-packaged optics and near package optics. So as you can see in this diagram, light creation, modulation and delivery of being coated optical signal now move inside the box at the Silicon Photonic Optical Engine. And everything in yellow is potential Corning content where none existed inside the box before. This creates an opportunity for Corning to supply the passive photonics required to move and manage the light. Well, we just walked through a lot of information together. Obviously, this is a greatly abbreviated version of the entire presentation we shared at our May investor event. Again, I'd encourage you to catch up on the full presentation on our website if you haven't seen it. Before I turn it over to Ed, let me just recap the main takeaways that I'd like to leave you with today. We delivered a great second quarter, demonstrating the progress on our 20-30-40 Springboard plan. We plan to grow our annualized sales run rate to $20 billion by the end of 2026, $30 billion by the end of 2028, and $40 billion by the end of 2030. We're entering the new phase of accelerating growth. We expect to deliver a sales CAGR of 19% from quarter 4 2026 to quarter 4 2030, while growing earnings faster than sales. with significantly higher returns on invested capital and substantially more free cash flow. We expect growth across the company highlighted by significant opportunities in our enterprise networks and photonics maps. In enterprise, we expect to capture strong growth as data center cluster size increases in scale-out and optical scale up takes hold. And in our new Photonics map, we plan to build a $10 billion revenue stream by 2030. We continue to deepen relationships with industry leaders, most recently with Amazon and NVIDIA in these long-term partnerships support our extraordinary growth opportunity. We're obviously living through a very exciting time for the company. We plan to continue our Springboard approach of frequent updates for investors with deeper dives into the individual maps as they hit significant milestones. And I look forward to updating you as we make progress on our journey to doubling the company over the next several years. We are so glad that you're on this journey with us. With that, I'll turn things over to Ed. Ed?
Edward Schlesinger : Thank you, Wendell. Good morning, everyone. I'm very pleased with our strong second quarter results. We delivered another quarter of double-digit year-over-year sales growth while continuing to improve our financial profile. Year-over-year in Q2, sales grew 17% to $4.74 billion, and EPS increased 30% to $0.78 per share, both above our guided range. Operating margin grew 190 basis points to 20.9%. ROIC was up 180 basis points to 14.9% and we delivered free cash flow of $1.42 billion. Turning to the segments and starting with Optical Communications. Sales were $2.07 billion, up 32% year-over-year. Net income was $438 million, up 77% year-over-year. The segment delivered record profitability in the second quarter with NPAT as a percent of sales of 21%. Sales in Enterprise grew 65% year-over-year, driven by continued strong demand for our Gen AI innovations and our orders are accelerating. The portion of enterprise sales related to AI data centers nearly doubled in the quarter. Carrier sales grew 1% year-over-year in the second quarter. Longer term, in carrier, we expect to grow sales mid-single digits driven by fiber-to-the-home deployments and data center interconnect. Across optical communications, we continue to expand and strengthen strategic agreements across our key customer base, reinforcing Corning's position as a critical supplier to next-generation AI and broadband infrastructure. Moving to Glass innovations. Second quarter sales were $1.46 billion, up $20 million or 1% year-over-year, primarily driven by higher display glass sales. Net income was $354 million, up 9% year-over-year. Now we've received a lot of questions about the impact of memory prices. For the full year, we expect memory prices to impact the handheld market with units to be down a mid-teens percentage. Despite these headwinds, we expect Gorilla Glass sales to outperform the end market driven by strong demand for our innovations and our position in the premium segment of the market. We saw this dynamic in the first half of the year as well. Even in a down market, our More Corning strategy to increase our content per device with products like glass ceramics or products for foldable displays, makes a positive difference. In the display market, the impact of memory prices is expected to be less significant. In fact, as component costs increase TV brands and panel makers are shifting to higher price and larger-size TVs, which favors Corning with our strong position in Gen 10.5 glass. And in advanced optics, we expect strong demand for advanced memory to support long-term demand from chip makers and semiconductor equipment suppliers for our solutions. In our Automotive segment, Q2 sales were $471 million, up 2% year-over-year. Net income of $82 million was up 4% year-over-year. Our sales to the automotive market were up 2% and driven by more Corning content outperformed the global automotive vehicle market, which was down 2%. Diesel sales grew 3% year-over-year and 13% sequentially driven by improving North American Class 8 orders. Looking ahead, we remain focused on our More Corning content strategy. we expect underlying secular trends favorable to Corning to remain intact and drive adoption of larger and higher resolution in-vehicle displays as well as new emission control products. In solar, Q2 sales were $438 million, up $207 million or 90% year-over-year. The segment reported a net loss of $7 million. In Q2, as expected, we experienced an additional $30 million of expense versus Q1 as our solar wafer factory underwent an extended maintenance shutdown transitioning to a permanent power system while repairing and upgrading production equipment. Customer demand is strong across the map and we expect sales and profit to improve beginning in the third quarter. Overall, in the business, we continue to secure long-term customer commitments for polysilicon, wafers and modules. The market preference for U.S.-made solar products continues to strengthen, supported by ongoing trade and tax policy developments and other government initiatives to advance domestic manufacturing. Corning remains well positioned in this area as we are the only U.S.-based polysilicon and wafer manufacturer. And we remain firmly on track to build our solar business into a $3 billion revenue stream with profitability above the corporate average. Sales in Life Sciences and emerging growth businesses were up 8% sequentially, driven by strong performance in our life sciences research business, and net income was up 13% sequentially. Shifting to our outlook. In the third quarter, we expect sales to grow approximately 16% year-over-year to a range of $4.9 billion to $5 billion and core EPS to grow approximately 28% year-over-year to a range of $0.85 to $0.89. In our solar business, we expect sales and profit to improve beginning in the third quarter. For CapEx, we expect to increase our investment run rate into Q3 and Q4, and to invest approximately $2 billion for the year to support the compelling growth plan Wendell just described in optical communications. For the full year, we remain on track to generate significantly more free cash flow year-over-year while continuing to invest in our growth opportunities alongside our customers. Now before we move to Q&A, let me turn back to our Springboard plan for a moment. I'll start by reiterating how we translate our internal plan into our high confidence plan to aid with your investment decisions. Our internal springboard plan is to grow our annualized sales run rate to $20 billion by the end of 2026, $30 billion by the end of 2028, and $40 billion by the end of 2030, with earnings growing faster than sales. Our high confidence plan is to grow sales to an annualized run rate of $27 billion by the end of 2028 and $35 billion by the end of 2030. Interestingly, in either case, we expect to double the size of the company by the end of 2030. If we achieve our internal plan, we'll double our sales run rate from Q4 '26 through Q4 2030. Our high confidence plan doubles our run rate from Q4 2025 through Q4 2030. And as a reminder on how the plans work, our internal plans are the output of the strategic planning process we run with each of our market access platforms. These are actual business plans. We set our objectives and compensation upon these plans. To arrive at our high confidence plan, we take our internal plans and further risk adjust them. At the corporate level, we seek to probabilistically adjust for factors, including macroeconomic slowdowns, changes in government policy, timing of multiple secular trends and the rate of adoption for our related innovations. One of the most significant areas we are adjusting for is the timing on Scale-Up of the network. This impacts both enterprise and photonics. Adoption of optical Scale-Up into AI factories is a significant technical change. The overall size of the opportunity is dramatic, but calling the timing is challenging. We will get smarter about this with each passing month. And as we've done throughout Springboard, we'll provide updates and milestones that help you as investors track against both plans. Overall, we have an excellent launch point for highly profitable future growth. If you compare the Q2 2026 results we shared today with our Q4 2023 Springboard starting point, we have increased sales by 45%, improved operating margin by 460 basis points, grew EPS 100% and expanded ROIC by 610 basis points. So we are operating from a very strong financial profile, and we expect that financial profile to improve from here. Our plan is to grow sales at a 19% CAGR from Q4 of '26 to Q4 2030. You can expect us to continue to run at or above 20% operating margin even as we continue to invest to capture all of the growth. We'll come back later this year to give you an update on how we're thinking about operating margin. And we've been growing EPS faster than sales, and we expect that to continue. We've significantly improved ROIC to approximately 15%, and we expect to continue improving ROIC into the high teens through the planning cycle. And most importantly, we expect free cash flow to grow significantly. Typically, when we invest organically, we invest significant amounts of capital upfront which means we take risk before the revenue and free cash flow shows up. As part of Springboard, we are deepening key customer relationships with long-term agreements to more appropriately share the risk and cost of our acquired expansions with our customers. So the results will be attractive and we expect free cash flow to grow even as we invest to capture the higher sales. Overall, we've outlined a compelling new plan to further enhance our financial profile. The performance and progress on key milestones that we just shared for Q2 show we are off to a strong start, and we look forward to continuing to update you on the significant value creation opportunity. With that, I will turn things back over to Chris for Q&A.
Christopher Keenan : Thank you, Ed. Operator, we're ready for the first question.
Operator : Our first question that comes from Asiya Merchant with Citi.
Asiya Merchant : A great set of results here. If I can just dig into Wendell and the second half growth expectations, you're especially into 4Q as we look into your 3Q guide, you have improving optical capacity that's ramping and the solar facility migration that you talked about seems to have done its bid in the second quarter. Why should 4Q, assuming an exit run rate of $5 billion a year, why is there just very limited 4Q growth? Is there something in the other markets that we should be thinking about?
Edward Schlesinger : Thanks, Asiya. So first of all, as we shared, we expect to continue to increase our sales significantly from our current run rate sort of through the next planning cycle to get from a $20 billion run rate to $30 million, to $40 million over the next 4 years or so. In the third quarter, our guide implies that we might actually get to that $20 billion that we put out for the end of this year, a quarter or so early, and then we expect to continue to grow from there. And I think most importantly, we've been growing at a mid-teens growth rate year-over-year, call it, 15% or so. We're starting to see that growth rate accelerate, and we actually expect our growth rate from the end of this year through the end of the planning cycle to also accelerate up to closer to 20%, our CAGR is 19%. So I don't think we're implying anything specific with respect to any of our other maps. I think a lot of the growth will come from enterprise and Photonics as we've shared. And certainly, we expect solar to grow from our current levels.
Wendell Weeks : Just to normal, simpler so is just in May, we provided that we get to the $20 billion run rate by quarter 4. And our growth rates are just going better. And so it looks like we could hit it a quarter early, and we didn't want to upgrade our springboard plan again after just doing it in May. So when we get around to updating and providing quarter 4 guide, we'll do that. Meanwhile, there's no implied message.
Asiya Merchant : Great. If I can just ask one more on optical margins here. It looks like that should be ramping nicely here in the second half. You do have capacity hopefully ramping to meet demand and it seems like orders are accelerating here, especially on the AI side. Just if you can help us think about how we should think about margins and net income margins in Optical, that would be great.
Edward Schlesinger : Yes. Thanks, Asiya. So last quarter, we got to 20%. This quarter, we're over 20%, a significant improvement from where we were when we first started the Springboard plan I think we'll continue to see nice growth in optical, and we can certainly see margin expansion as well.
Operator : Next question comes from Josh Spector with UBS.
Joshua Spector : So I want to ask about your Investor Day update. I mean, appreciating you just went through a pretty big rehash of that. But to be crystal clear here, I mean, has anything changed now versus 2 months ago? And specifically thinking about photonics and Scale-Up just -- there's been a lot of industry chatter around supply chain readiness for this and potential delays. I mean it seems like you're reiterating that Photonics could be $1 billion-plus business potentially next year. do you still have your visibility to that? And would you characterize anything differently today versus 2 months ago?
Wendell Weeks : So what you're hearing from us is we see no changes to our fundamental belief that we just shared with you in May. Yes, there has been much industry speculation on the exact timing of when everything begins and that's fair enough. You have to understand, when we provide that Springboard plan, we're adjusting for different probabilities of different timings and different content opportunities. And what we're doing is we're basing that set of judgments with an understanding of the different ways different product sets and timing can go. So we see no real change inside the real ecosystem. There is much less drama and what it looks like from the people outside of it. We're doing the steady work that it takes to build a $10 billion new photonics platform and bringing a significant new technical node to overall AI, which is scale up, which is where the biggest opportunity is for us. And it's just inside the ecosystem, there's just way less change than from what sort of gets speculated on because all of us on the inside know the various trade-offs we can make to still deliver Scale-Up depending on what happens with other component suppliers and ship dynamics. Does that make sense, Josh?
Joshua Spector : Yes. That makes sense. I appreciate that.
Wendell Weeks : And I don't think we guided anything for next year on Photonics, just to be clear, right? You're -- we gave the longer term, $10 billion. We gave the chart and what the growth is. But we've yet to provide a specific number for you in Photonics. So the $1 billion photonics analysis that you've done, I get it. I get how you get to those numbers. We'll update sort of each quarter as we go, and we're giving you the long-term photonics plan that we presented in our 20-30-40 plan.
Operator : It comes from George Notter with Wolfe Research.
George Notter : I was just curious about the mixture of the optical business that's covered under long-term agreements. I'm wondering what that looks like right now. I'm wondering what that looks like maybe a year from now. And then I guess I assume you guys are going to be more aggressive on pricing in the optical business for customers that are not under LTAs. I'm just curious about where that stands right now, what kind of pricing increases are you taking? Any perspective there would be great.
Wendell Weeks : Thanks for the question, George. You can't expect us to continue to increase the amount of long-term agreements that we enter into because all of our significant capacity moves are backed by those type of agreements as we seek to appropriately share the risk and rewards of the incredibly strong growth in our capabilities that our customers want. So that will be a steadily increasing drumbeat. Sometimes, the customers want to be public, and then we announce, sometimes not. But that workflow continues and we continue to see more and more customers wanting more and more from us and that they're willing to commit to underpin any investments that we need to make. That's the first part of your question. Did I answer that to your satisfaction, George, before -- that's great.
George Notter : Yes. I'm just curious about like is this a minor piece of the overall optics business, a major piece of the overall optics business it smaller than a breadbox...
Wendell Weeks : Will be the lion share of our optical business because when I say that you're going to underpin any major capacity expansion will be underpinned by these agreements that appropriately share the sort of risk and rewards given our rate of growth, just the math that, that is just going to be the overwhelming part of our overall optical business. Does that make sense?
George Notter : Yes, that makes sense. And then on pricing?
Wendell Weeks : So now we'll do pricing. I didn't forget the second part of your question, George. Let's just sort of start with what we see in the results, and then we'll talk about how do we do it, right? So what you just want to, Ed just ran through with you is you saw Opto sales up about 30% and net income up almost 80%. So you see dramatically improving profitability, right? Now how we do that isn't just about increasing the price of bare fiber the price is higher, but that really isn't how we're driving that profitability improvement. We create value by delivering innovations in fiber cable connectivity and to dramatically reduce our customers' cost to increase their speed of deployment or increase the reliability of their networks. And then when we create value for our customers with our innovations, we get to keep a portion of that value of the innovation. And that is what's driving this really significant increase in profitability that you see. I would expect that to continue. Implied in your question is also a question of sort of how much demand versus how much supply. We continue to have the enviable situation of if we could make more, we could sell more. And especially if we could make more of our most innovative products, we see nothing but growing appetite for these new high-density product sets that we started on so long ago that are definitely gaining and accelerating in their adoption rate.
Operator : It comes from the line of Wamsi Mohan with Bank of America.
Wamsi Mohan : I was wondering if you could maybe drill down a little bit more into the moving pieces of guidance for Q3. At the consolidated level, at the midpoint, you have a point of deceleration implied in your Q3 guide? And I hear all the positives around your longer-term story around reacceleration Q2 was obviously underpinned by very strong optical enterprise strength. So the question is really, do you expect that strength to continue? I think, Wendell, you might have mentioned that AI was potentially a double in related sales were double in -- is that a trend that you expect to sustain here into Q3, Q4 as well? Or are there other moving pieces that are creating a slight shortfall within Q3??
Edward Schlesinger : Wamsi, thanks for the question. So our guide for Q3 is not intended to imply any deceleration in growth. I think it's similar -- it's intended to imply similar year-over-year growth as we had in Q2. And then as we've shared longer term, we expect that growth rate to actually accelerate. So that's sort of how you should think about it in total. And for sure, enterprise growth is a significant component of that as you go into Q3.
Wamsi Mohan : Are there anything add in there that any end markets that are going to track below seasonal for any particular reason as you think about Q3? And maybe I'll just ask this as well. You grew enterprise sales by $300 million roughly quarter-on-quarter Q1 to Q2, but your net margin didn't see a lot of operating leverage. What were some of the offsets to that leverage that you might get with that level of increase in sales?
Edward Schlesinger : Yes. So on your -- the first part of your question, I would say, as I shared in my prepared remarks, I think the areas that maybe aren't going to grow at normal seasonality would be things that might be impacted by memory like the handheld market, in general, will be significantly weaker than the first half of the year, we will outperform that market because we'll sell more content per device into the market. But certainly, that could have an impact automotive market remains relatively muted, but I don't know that it has a huge impact on seasonality, but those are similar dynamics to what you saw in the second quarter. And then on margins, I think we continue -- I think Wendell's description of margins, specifically in optical is really compelling from our perspective, and we expect those margins to continue to increase as we grow and sell more of our new innovations, and we're able to capture more value. And again, Corning's overall operating margin continues to expand as we grow as well.
Operator : Our next question comes from the line of Joseph Cardoso with JPM.
Joseph Cardoso : I know there's a few assumptions here. But when I do the rough back of the envelope in half on the 3Q guide, it implies a pretty nice uptick in both gross and operating margins and a nice improvement in the associated incrementals there. First, is that fair directionally? And then second, if so, what are the moving pieces driving the Step-Up into 3Q? And how should we think about the sustainability there, just given in the prepared remarks, kind of sticking with the operating margin target of 20%-plus. Just trying to wrap back that a little bit more.
Edward Schlesinger : Yes, Joe, I think your assessment is correct. And one thing I would call out is we expect our solar business to improve profit and profitability from Q2 to Q3 as we've gotten past this cycle of improving our manufacturing performance there. So that is definitely a driver. And as we've shared maybe more broadly, even going back to our IR event in May, we expect to be at or above the 20% operating margin target. We had set a couple of years ago. We haven't set a new target. We'll come back later this year. We'll talk a little bit about that. But I think the things to consider are we're still ramping that solar business, so that's not fully done. So profitability will continue to improve. We want to see that. We want to get a little bit more of that behind us. And then we have to build a very significant photonics business as we see the scale up of the network and Photonics kicking in. And we also want to continue to see that. We feel great about our profitability. But before we would change our target, we just want to have a little bit more experience behind us.
Operator : It comes from the line of Meta Marshall with Morgan Stanley.
Meta Marshall : Great. Maybe just on the carrier business for a second. Is that a reflection of just challenging comps in terms of some of the newer customers that were ramping last year. Is that reallocation of some of the enterprise share? Just trying to get a little bit of insight into this quarter's results versus kind of your indications that, that would still be mid-single-digit growth. And then maybe adding on to that, there's been a lot of talk about kind of new incremental investments made in kind of reinforcing some of those lines or adding new kind of incremental long-haul capacity? Just any commentary about participation there?
Wendell Weeks : So just customer timing what you're seeing in the quarter. If you look at the first half sort of this year of 2026 versus the first half of 2025, sales are up about 17% in Carrier, about $0.25 billion. So just the way Carriers work, what project is happening when in our timing of what we're doing with that particular customer. But so we're not seeing anything in Carrier where we're not -- where we don't see a growing set of demand, both in DCI, as you mentioned, but also in fiber to the home. So that's going to continue to be a nice growth rate. Did that address your question?
Meta Marshall : Yes. And just -- I mean, there has been conversations with Verizon and Google, just incremental projects that are coming online. And do you view those as ability to participating in those as kind of extra growth opportunities?
Wendell Weeks : I put that in the same -- in the same category at the commentary we just had in enterprise. So we have Customers really want our new product sets, right, as much as we can do. So any and all of those new opportunities that are coming to us almost always first. And then so we have a good amount of demand. And what we're trying to do is make sure that we're positioning to continue to build these great customer franchises that are just going to last for decades, and give us the opportunity to innovate and create value and give our investors the chance to count on a long-term annuity. And that's what tends to drive our customer choice.
Christopher Keenan : Last question, please.
Operator : It comes from Mehdi Hosseini with Susquehanna.
Mehdi Hosseini : Most of the good ones have already been asked. So I have 2 follow-up. Starting with window, there is increased effort to bring semiconductor manufacturing into U.S. We do have a raw wafer manufacturer former NMC. And in that context, I'm just wondering, why not allocate a larger portion of your polysilicon to electronic grade where there's a clear path to better profitability and it kind of fits into making U.S.A. thing? And I have a follow-up.
Wendell Weeks : I think to your point, we would expect more and more of our product set to -- we're going to increase the amount of poly in the semi, especially in the highest grade semi going forward. So that, we will continue. As a percent of our overall mix of revenue, so is just so much bigger in terms of volume. But we will -- I think your advice is good, and you should expect us to continue to increase our participation in the highest grade of semi poly.
Mehdi Hosseini : Okay. All right. And that should help with a better profitability for Solar Division. And then second question -- thank you so much for all the details as it relates to optical, and you provided a lot of insight that could actually be applied to the whole supply chain. What I want to get from you is, to what extent a scale-up and fiber array unit is already done into a Springboard? You were into a lot of details, but I'm a little bit confused how much of that is baked into your Springboard program.
Wendell Weeks : So I can totally understand where some of the confusion can come from. Because we have -- the every of the fiber to the sort of face plate in enterprise, and that is a huge increase potentially with Scale-Up and then what we do is what we call photonics is what's inside the face plate, which among many other things, is also what you referred to as an FAU harness or fiber ray unit harness. So that is what we're putting in that photonics number -- at Photonics map which you see at $10 billion. The FAUs are part of that. There's a lot more content than just those within that photonics map. The best way to understand that is if you take a look at that diagram I showed you, that all the yellow, that's all potential Corning content and that will give you a good picture of the variety of different products within it. I'm sorry, go on.
Mehdi Hosseini : Sorry to interrupt you. So the $10 billion baseline assumption does include some of the opportunities highlighting the yellow color on Slide 26. But there could be upside or this is just based on the assumption, we don't know the slope of the adoption?
Wendell Weeks : Yes, a lot that depends -- the biggest driver here is going to be, if you're on the right question, which is what percent of the ports are optical, right? And then how successful is optical Scale-Up in AI factories. And that dynamic you're just seeing you're going to have 2 parts to Scale-Up, which is why we pay such close attention to it, which is both the dramatic increase in our enterprise products, as well as the dramatic increase in our inside-the-box or photonics products. And that's why I laid out exactly the technical drivers that you can keep an eye on as an investor and talk to people, to develop a point of view because the answers to those questions drive how much faster than GPU growth do we grow.
Christopher Keenan : Well, thank you for joining us. And before we close, I wanted to let everyone know that we will be attending Citi's 2026 Global TMT Conference on September 9. Additionally, we'll be scheduling management visits to investor offices in [indiscernible] cities. And finally, a web replay of today's call will be available on our site starting later this morning. Once again, thank you all for joining us. Operator, that concludes our call. Please disconnect all lines.
Operator : Thank you. You may now disconnect.
