Ambarella, Inc.

Good day and thank you for standing by. Welcome to the Umbrella's third quarter fiscal year 2026 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, we'll open up the call for questions. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's call is being recorded. I will now attend the call over to your speaker, Luis Gajardi, Vice President, Corporate Development. Please go ahead.

Thank you, Victor. Good afternoon, and thank you for joining our third quarter fiscal year 2026 financial results conference call. On the call with me today is Dr. Fermi Wong, President and CEO, and John Young, CFO, The primary purpose of today's call is to provide you with information regarding the results for our third quarter fiscal year 2026. The discussions today and the responses to your questions will contain forward-looking statements regarding our projected financial results, financial prospects, market growth, and demand for our solutions, among other things. These statements are based on currently available information that's subject to risks, uncertainties, and assumptions. Should any of these risks or uncertainties materialize, or should our assumptions prove to be incorrect, our actual results could differ materially from these forward-looking statements. We're under no obligation to update these statements, these risks, uncertainties, and assumptions, as well as other information on potential risk factors that could affect our financial results. are more fully described in the documents we file with the SEC. Before starting the call, we hope to see you at one of the following investor events that we have scheduled during the fourth quarter. December 2nd and 3rd, we will be at the UBS Global Technology and AI Conference in Scottsdale. December 9th and 10th at NASDAQ's London Conference. January 6th, from 4 to 5.30 p.m. at our CES location, we'll be hosting a technology and product briefing. January 6 to 10, we'll be hosting more than a dozen cell site analyst tours of our CES demonstrations, again, at our CES location in Las Vegas, and January 17 at the Needham Conference in New York. Access to our third quarter, Fiscal year 2026 results, press release, transcripts, historical results, SEC filings, and a replay of today's call can be found on the investor relations page of our website. The content of today's call, as well as the materials posted on our website, are Amber Ellis property and cannot be reproduced or transcribed without our prior written consent. Fermi will now provide a business update for the quarter. John will review the financial results, and then we will be available for your questions. Fermi?

Thank you, Louis. Good afternoon, and thank you for joining our call today. Before we proceed, I want to let you know that last call, our co-founder and CEO will be stepping down from the board of directors to become our chief technology advisor. We'll continue to oversee our technology direction and development, but without management responsibilities and with reduced time commitment. Les and I have worked closely since 1994 across four companies. I'm grateful that Les will continue as my close partner for over 31 years and beyond, and he's truly the best I could wish for. I'm happy he will have it. more time to pursue his passions, but I will definitely miss our daily conversations on various topics. Turning to our fiscal third quarter, we are reporting another strong quarter with both revenue and non-GAAP EPS exceeding expectations. We achieved record quarterly revenue of $108.5 million, slightly above the high end of our guidance range. AGN revenue was we defined as a product that integrates one of our proprietary deep learning AI accelerators was about 80% of our total revenue representing our sixth consecutive quarter of a record age AI revenue. We have increased our fiscal 26 revenue guidance, which projects an all time fiscal year total revenue record for umbrella. The strength in our, In our average selling price and with breadth of demand, we are raising our fiscal 2026 value growth guidance for a range of 36 to 38%, or approximately $390 million at midpoint. This compares with our prior estimate provided on August 28th for 31% to 35% year-over-year growth, or approximately $379 million at midpoint. This results are very encouraging, but I'm even more excited about the AGI. There are three key factors behind our enthusiasm and our strong commitment to AGI. First, the breadth of application demanding AGI technology and our product is expanding. Second, the AI performance requirement for our product roadmap is expected to continue to rise driving robust new product cycles third our asp has been increasing and in the long run we continue to see an excellent opportunity to capture more value per design i'll elaborate on those points first ai at age is becoming more prevalent driving an increasing breadth of applications in both enterprise and consumer. Our AGI business started in enterprise security, followed by automotive safety, smart home, telematics, and more recently, the portable media market, which includes action camera, panorama cameras, and the body-worn cameras. Looking ahead, high-value instruments into the aerial film market, I expect it to commence this quarter, representing just the beginning of our realization of the large robotic market opportunity. There is also strong interest from existing and new customers in our age infrastructure products and roadmaps, and we are committed to develop this incremental opportunity. In addition, ADAS and the vehicle economy remain large markets that can leverage our technology to a very high degree. Second, we see a large opportunity to ask you at the age the increasingly complex AI technologies currently implemented at the core of the network or in the data center. The challenge and our opportunity is that the solutions used at the core of the network are not suitable for the age, where the age performance requirement is rising. In each market, low power consumption, real-time processing, privacy, security, small phone factors, thermal, network bandwidth efficiency, and low price points are critical. At Umbrella, we continue to invest heavily in our proprietary HAI SOC technology and products to support this unique and increasingly complex HAI requirements. For example, our 10-nanometer CB2 family supports CNN networks and our five nanometer embedding our third generation AI processors is scaling our customer into more complex CNN and the generative AI applications simultaneously. Third, we see an excellent opportunity to continue to increase our ASP. The shift from CPU workloads to high level of accelerated computing or AI is well underway. The adoption of increasingly complex data center technology for the age is another driver. Finally, the extension of roadblocks beyond age endpoints and into the age infrastructure and auto autonomy is also expected in particular to boast our ASP. For example, our ASOC-blended ASP in Q3 was up about 20% year-over-year, and as our third-generation AI SOCs and the overall new product become a more material portion of our revenue. we anticipate further increase in the value we earn per design wins. I will now describe some of the representative customer engagements that reflect the factors I just described. In the enterprise security market, we are very pleased to share a significant milestone with our customer, Sparsh, who became India's first security camera manufacturer to receive HTQC certification for its complete range of tests. At the heart of the collaboration is our CV28. This gives us a tremendous start to accelerate our adoption in a rapidly growing made-in-India market. Spun out of Bosch, announced the Autodome 7100i moving PTZ camera with the beauty AI analytics. Ultra HD image based on CV72. They have also announced their Dynan thermal security camera that is CB22. It runs their CNN models to detect and classify objects accurately up to 2,000 feet. Wakata announced their upcoming CB75-based AF64 access station pro, which enables secure physical access It has facial recognition, power to face unlock, a low-side traditional badge, and a mobile access method. The company also launched a new CR63E remote security camera that leverages the power efficiency of our CV75. They also expanded CV72-based multi-sensor security camera product line, including CH53, CH63, and CY63. Motorola has developed their original Halo 4 smart sensor on our CV25, which is an all-in-one environmental monitoring and security device that is designed for areas where cameras are restricted to detect events like smoke, fire, and audio anomalies. In the robotic smart home market, one of our customers, Whisker, announced the Literal Robot 5 Pro, Their first model with facial recognition has 429 vision equipped AI-powered camera based on our CB28. We are seeing great momentum in our portable video market with Arash who released two models this quarter. The X4 Air at just 165 grand is a new lightest compact 8K 360 action camera. It is based on CD5. and is first in the range to support 8K 30 frames per second active HDR. Arash also launched the latest version of their body-worn camera, Go Ultra. Based on CV52, it captures 4K P60 frames per second video and a 50 megapixel photo with improved performance even in low-light environments. In our automotive safety, data and telematics business, I would like to share some key customer wins during the quarter. Zeker, a unit GD, has developed their in-cabin DVR system, CV28, for the 9X full-size luxury model. A shop on expense, their global market presence, they have built all their driver management system for all their export models on CV28. Solera, a global leader of vehicle lifecycle management, announced their new ASR-5 AI-powered smart camera in October, based on our CV22. In a first for Solera, the ASR-5 camera is powered by AI+, AI, AI, human intelligence, a revolutionary approach in fleets and magics that combines AI-based analysis with human oversight to improve safety, efficiency, and operations. From this representative customer engagements I just described, the strength of our current product portfolio is currently represented. With seven example from the 10 nanometer CV2 family and seven example from our 5 nanometer generation, these products all available today offers customers a wide variety of options ranging from CNN to transform network processing. One to many sensor input support for multiple sensing modalities, all at a wide range of price points. Our new product roadmap will expand this portfolio further. In addition to our comprehensive and expanding AI SOC portfolio, another important distinguishing characteristic of our portfolio is the event BSI technology we offer to customers as of age. For example, 5-nanometer-based products represent more than 45% of our total Q3 revenue, with products based on more advanced nodes in development. In summary, the first three quarters of fiscal 26 are steps in the right direction with strong revenue growth, new product execution, profitability, and with our cumulative year-to-date free cash flow of almost 14.8%. We continue to hold at a large age serviceable available market of $12.9 billion by fiscal year 2031. We recognize the HDI market is still in an early innings of development and to successfully address this large set, we remain highly committed to our R&D investment that enable us to build upon our existing leadership position. I hope to see you January 6th at our CES 2026 product and the technology briefing, which will give you a chance to learn about new technologies and the products and meet both sides of our energy team. With that, John will now discuss the Q3 results and the Q4 outlook.

Thanks, Fermi. I'll now review the financial highlights for the third quarter of fiscal year 2026, ending October 31st, 2025. I will also provide a financial outlook for our fourth quarter of fiscal year 2026, ending January 31st, 2026. I'll be discussing non-GAAP results and ask that you refer to today's press release for a detailed reconciliation of GAAP to non-GAAP results. For non-GAAP reporting, we have eliminated stock-based compensation and acquisition-related expenses adjusted for the impact of taxes. For fiscal Q3, revenue was $108.5 million, above the high end of our price range, $100 to $108 million, up 13.5% from the prior quarter and up 31.2% year over year. Sequentially, automotive revenue increased in the low single digits and IOT increased in the mid-teens. with IoT growth led by the adoption of Edge AI in enterprise security and portable video applications. Non-GAAP gross margin for fiscal Q3 was 60.9%, slightly above the midpoint of our prior guidance range of 60 to 61.5%. Non-GAAP operating expense in Q3 was $55.3 million, slightly below the midpoint of our prior guidance range of $54 to $57 million. Q3 net interest and other income was $2.1 million. Q3 non-GAAP tax provision was approximately $900,000. We reported a non-GAAP net profit of $11.9 million or 27 cents per diluted share in Q3. Now, I will turn to our balance sheet and cash flow. Fiscal Q3 cash and marketable securities reached $295.3 million, increasing $34.1 million from the prior quarter and $68.8 million from the same quarter a year ago. Increased cash and marketable securities benefited primarily from operating cash flow associated with increased revenue. Receivables days sales outstanding decreased from 41 days in the prior quarter to 36 days, and days of inventory decreased from 85 to 76 days. Operating cash inflow was $34.3 million for the quarter. Capital expenditures for tangible and intangible assets were $2.9 million for the quarter. Free cash flow was $31.4 million. We had one logistics company representing 10% or more of our revenue. WC Microelectronics, a fulfillment partner in Taiwan that ships to multiple customers in Asia, came in at 70.2% of revenue for the third quarter. I will now discuss the outlook for the fourth quarter of fiscal year 2026. The breadth of our edge AI business is expanding together with strong unit volume and average selling prices. As a result in Q4, we forecast revenue in the range of 97 to $103 million or $100 million at the midpoint with a higher percentage of revenue coming from our high volume customers. Sequentially, Due to seasonality, we expect a mid-to-high single-digit decline in both our automotive and IoT businesses. We expect fiscal Q4 non-GAAP gross margin to be in the range of 59% to 60.5%. We expect non-GAAP OPEX in the fourth quarter to be in the range of $55 to $58 million, with the increase compared to Q3 driven primarily by employee-related and CES expenses. We estimate net interest and other income to be approximately $2 million, our non-GAAP tax expense to be approximately 600,000, and our diluted share count to be approximately 44.5 million shares. Thank you for joining our call today. And with that, I'll turn the call over to the operator for questions.

Thank you. And at this time, we'll conduct a question and answer session. As a reminder, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please leave yourself to one question and one follow-up in the interest of time. Please stand by while we compile the Q&A roster. One moment for our first question. Our first question will come from the line of Tor Svanberg from Stiefel. Your line is open.

Yes, thank you, and congrats on the record quarter. As my first question, when we think about that, you know, let's call it 36% to 38% growth for fiscal 26, how much of that is unit versus ASP? Because, you know, obviously, you know, CV now is becoming a pretty high percentage, but even within CV, obviously, you have ASP increases. So, yeah, just trying to understand how much of the growth has been driven by ASP versus unit.

Right. So I think both of them contribute to our growth. I would say I don't have an exact number. If I have to guess, it's probably half and a half. I think our unique growth definitely continues to contribute from the CV side. But ASP growth is also significant, like we talked about in the script. So I think that both of them contribute to our end results.

Yeah, thank you, Fermi. That's very helpful. And as my follow-up, you talked about the portable video market. Could you just, you know, add some more color there? I mean, it sounds like you have some new design wins. These are obviously AI-based drones, but just, you know, I know you've been in that market for a while, and obviously that market sort of faded, and now it seems to be coming back. So how should we just think about that market driving growth for Avirela going forward? Thank you. Right.

So in terms of portable, there are multiple different product lines there. I want to be a little bit more specific on that. In fact, we talk about action sports camera that you say we have been here for many years. And the new category is a panorama camera that Arash is famous for. And also we talk about drones that is also part of the portable video. But in addition to that, our wearable camera, web camera, video conferencing product, all of them are part of the portable device because that's where our customer focusing on. So overall, that's an area that providing a big portion of our growth this year. And we believe that this market is going to continue to grow. And in fact, I have to say that I'm surprised, a little surprised by the size of the market that's growing over the year, but definitely momentum is there. Our job is trying to not only secure our market share, but hopefully that we can grow some market share in the future.

Hey, Dorian, it's Louis. Just Technically, we call it portable video and other, so there's a lot of things in there, as Fermi said.

Yeah, thank you for that. Congrats again. Thank you.

Thank you. One moment for our next question. Our next question will come from Ross Seymour from Deutsche Bank. Your line is open.

Hi, guys. Thanks for asking a couple questions, and congrats to Lesk. I guess first, you talk about the breadth of your business, especially in the Edge IoT side of things, or Edge AI, IoT, whatever you guys are calling it now. Can you just talk about a little bit about the consumer versus kind of the enterprise side? Now, I guess where I'm going is the portable side is great, but we've seen volatility around any sort of consumer applications in years past and cycles past, and I just wondered how you're managing that in this instance.

Hey, Ross, it's Lewis. The split is roughly 50-50, 50% kind of enterprise CapEx driven and 50% consumer. And then within that 50% that's consumer, you've got some kind of consumer durable, things like, say, smart home cameras that get replaced every five or six years. But then you also have consumer discretionary, which I think is some of the more volatile things you were referring to. So, it's pretty evenly split at the highest level between the, you know, capex-driven markets and the consumer, but different types of consumer spending.

Okay, and I guess one for John. How are we thinking about gross margin as we look into next year, just conceptually what the pluses and minuses would be? I know you have the long-term target of the 59% to 62%. You're a little closer to the lower end of that in your fourth quarter guide. But just running through any of the puts and takes will be helpful.

Yeah, Ross, thanks. So, as you said, our long-term model is 59 to 62. And as we said in our Q4 guide, the composition of gross margin really depends on the contribution of our high-possibility customers. you know, whatever the gross margin is from quarter to quarter, that's a, at least in the near term, that's a primary driver. Great. Thank you.

Thank you. One moment for our next question. Our next question will come from Joe Moore from Morgan Stanley. Your line is open.

Yeah, great. Thank you. I also wanted to ask about that gross margin target and I guess just as you've kind of refocused to business around a lot of exciting opportunities, you know, is there any chance that to really fully participate in some of the consumer markets that you might accept lower gross margin in exchange for growth? And then I guess, you know, you've talked a lot on this call about average selling price, you know, sort of what's driving that focus, you know, is ASP versus, you know, kind of gross profit dollar per device, things like that.

yeah thanks so you know as far as the asp goes that that is primarily a function of the technology and features that that come with these more advanced technology tape outs that that we're doing and products that we're that we're developing on our roadmap as far as the gross margin goes um You know, like I said, 59 to 62, I think as far as consumer, on a case-by-case basis, depending on the volume that we see, the opportunities that we see, we're not opposed to gross margins that are maybe not strictly within the 59 to 62% range. But the goal at the corporate level is to, over the long term, stay in that range.

Great. Thank you for that. And then I guess, you know, there's a lot of enthusiasm for drones, which is a market that you've kind of been in in the past. Can you talk about, you know, what are the new elements of that market that probably, you know, might drive you to a higher content over time? You know, is it sort of you think about delivery drones and industrial drones and things like that? Is that a pretty big category for you down the road?

Right. So, first of all, we were big in the past, as you said, but we stopped in that market because of geopolitical situation, not because of our technology solutions. And this time we came back because we continue to believe a few things. First of all, there was a dominant player, but I think that in the U.S., the market is wide open at this point for everybody to fight in that capacity. So, with our video technology, particularly our paranormal camera that we help our customer to build is well suited for this space. So for the first of all, the driver for us is continue to provide the best video solution in the drone market. But more importantly, I think moving forward is all the drone going to be autonomous in the future. we can say today's drone is level two, and level three, level four drone is coming, and probably going to drive faster than a autonomous driving car. And we believe that in order to have a level three drone, that it would require really powerful chip, in addition to the video processing and that's really played to our strength also that our investment in autonomous driving directly applied to here so it's from the technology point of view the video processing plus ai uh is the key driver but as you said the today the biggest market uh opportunity for us is consumer for video capture but moving forward we start seeing opportunities on the commercial side, which are going to continue to drive the growth. So we are excited that, first of all, we have really technology that we think is differentiated in this market. But more importantly, the market, the service market for us is growing fast. So those are the two reasons that we feel excited about this market. Okay, thank you.

Thank you. One moment for our next question. Our next question will come from the line of Christopher Rowland from Susquehanna. Your line is open.

Hey, guys. Thanks for the question. Congrats on the results. I guess my first question is around an update perhaps for the infrastructure opportunity and the N1-655. Yeah.

Yeah. So, first of all, we announced our first design wins last quarter. And after that, we continue to see very strong design win activity and interest from different type of customers. In fact, in the last few months, we see customers who want using video-centric products. and also customers want to use N1655 for non-medial century products. So we are seeing wide range of opportunities. So, and we are also continue to see our chance to not only but also in the next, in the near future. So we are totally committed to this market with N1655 and the new roadmap that we will talk about in the future.

Thank you for me. And perhaps if there are any updates on two other opportunities, I guess the first would be the home security market with, you know, AI feature integration. And then the second would be any kind of design activity. I know it's further out, but around humanoid robots. I think that would be interesting as well.

Right. So, first of all, for the home security, I think we do have design wins with our CV75 that we haven't announced yet, but definitely it's in design. However, I think this is a market that's price sensitive, so I think the progress or the movement toward this Gen AI type of the home security camera, for a based on the uh camera solution not the cloud solution we are really focused on just age ai for this market um so with that i think that market is not developing as fast as we expected but we do have design wins we hope we can talk about sometime next year um from the human role i think this is a a long-term market that we definitely want to participate However, I think it will take time to get to a human ROI. I think there's multiple steps for robotic from today's situation to the human ROI. And I think, like I said, even drone, if you treat the drone like a robotic application, There's a level two to level five. I think your human role is like level five of the drones for your different application. But there's intermediate steps that we go through, and we definitely have design wind and also design activities in those steps that will lead us into the human role. I just want to be more specific. We're offering two types of solutions to the robotics today. One is for people only interested with the video technology. So they want to have a really powerful eye that not only can see the object, but also can do a quick object detection based on CN network. We have that kind of solution based on our CV2 family or CV72 solution. So that's one product line we're providing. The other product line we're providing to the robots is really a brand, right? So our N1655 type of solution can be a central processor for the robot any type of a robotic out there. So I think we're offering this solution. If we take time to develop a really central domain control, like an atomic driving car, that kind of solution will be required to do a human road solution in the future. Excellent. Thanks so much.

Thank you. One moment for our next question. Our next question will come from Suji De Silva from Roth Capital. Your line is open.

John, and Les, best of luck with the next step of your transition here. So maybe in the edge AI market, looking ahead to calendar 26 perhaps, which of the two or three segments would you describe as the highest kind of growth opportunity for you as a drones or other areas? Any color there would be helpful. Thanks.

I think drones, I think what we call that is going to be a growth area for us. And I also believe that even for the endpoint, we continue to see multiple opportunity coming up with different type of products. For example, wearable camera, we talk about this for many years. But right now, we are excited because wearable camera is not only for policemen anymore. We start seeing that goes to totally different commercial device. So that's just another example. that the technology becomes ready, you know, low power and also AI on the camera. All of that enable a new application for wearable camera. That's another really high growth area that we're seeing, and it's not only we're seeing that. If you follow our customers, you will see that our customers are seeing similar things. So those edge endpoints definitely is a growth area for us. But also want to bring your attention to the edge infrastructure we talked about last week. I think although that not immediately you're going to see high revenue growth, but I think long-term that will be a very important market for us, and we'll definitely cover our thoughts on H infrastructure at CES and give you more insight on our plan.

Okay. Great. Then for me, one specific question on drones. Do you have any visibility in your pipeline beyond consumer commercial perhaps into any government programs, or is that going to be – a separate part of the market handling that versus you guys.

In fact, all customers, in fact, it's not really us, it's all customers.

Right, right.

I think all the customers have the desire to serve multiple different segment, but most of the customers are focusing on consumer commercial, and I don't think that our usage is a real focus for most of our customers yet.

Okay, great. Thanks, Remy.

Thank you.

One moment for our next question. Our next question comes from Martin Yang from Opco. Your line is open.

Hi. Thank you for taking my question. First question on IoT, especially with growing customers like Rush. Could you maybe comment on this customer's growth? and its relative contribution to your overall ASP and margins?

Right. So, first of all, Aramco is, I think, the largest customer in our top ten list, and their revenue roughly doubled from last year to this year. But, you know, they are using multiple chips and selling to multiple ODMs. It's hard for us to track exactly their revenue contribution, but we have no doubt they are the largest customer right now.

Thank you. Another question on drones. So, when you're referring to next year's product, are those drones using your image processing capabilities, or do you expect them to deploy AI functions that relates to autonomous flying capabilities?

Both. I think that, like I said, you know, there are two types of solutions we're offering. just a video plus AI to apply CNPEP network for simple, simpler AI functions. But they will be definitely customer using our AI for flying to avoid objects, to avoid, to determine the flying path, so both of them.

Got it. Thank you for me. That's it for me.

Thank you. And one moment for our next question. Our next question will come from Quinn Bolton from Needham & Company. Your line is open.

Hey, guys. I know the folks in the business have sort of shifted to Edge AI and the future Edge infrastructure. But, you know, in the past, you gave us sort of an automotive funnel approach You haven't provided that, so just wondering how should we be thinking about, you know, how are you guys approaching the automotive market? Do you still see opportunities in Level 2+, or are you kind of deemphasizing some of the automotive applications?

Thank you for that question, because we did not decommit from that market. In fact, we continue to focus on market. We are engaging multiple OEM T1s at this point for a time driving Level 2, Level 2+, some even Level 3. So from an engineering activity and business development activity point of view, we are all in on this market. Definitely, from the funnel discussion point of view, like I said last quarter, we will provide a funnel discussion in the next quarter release about the one modification that we'll do. We will stop using probability weighted matrix. We are trying to give you just direct. opportunity we're looking at. So that will be the one change we're going to offer, but we will definitely provide more guidance on this, how we look at this market.

Got it. Thanks for that for me. And then I guess for John, you mentioned that sounds like the mix towards high-volume customers pushing the gross margin down to the lower half of your long-term range. Can you give us just beyond the January quarter, do you think that mix continues to be pretty with higher volume customers or do you see this as sort of a temporary shift just for the January quarter and it normalizes beyond that?

Thanks, Quinn. Yeah. At this point, we don't want to give a guide with regard, you know, beyond Q4. But I think that commentary with regard to Q4 is, you know, will continue to be relevant going forward. the ratio of high volume customers to the total revenue for the quarter.

Sorry, John, you cut out there a little bit. Did you say that the mix would stay pretty similar beyond January?

No. What I tried to say was that, you know, we don't want to make any guide beyond Q4, but that the commentary about Q4 with, you know, the ratio of high volume customers to the total revenue, that dynamic will continue to be a factor going forward. So to the extent that the high-volume folks are a higher percentage of the revenue, that will, you know, have its impact.

Got it. Okay. Thank you. Thank you. And once again, that's star 11 for any questions, star 11. One moment for our next follow-up. We have a follow-up question for Tor Sundberg. From Stifel, your line is open.

Yes, thank you. John, just a follow-up for you. So, you know, this year you guys demonstrated some pretty good operating leverage. I'm just thinking, as we look at fiscal 27 and OPEX growth, obviously you're not giving a growth target per se, but we should assume that OPEX would grow at a slower pace than revenue growth for fiscal 27?

Thanks, Tori. Yeah, we're not giving a guide at this point, but I think, you know, what we have said in the past, kind of as you articulated, is that long-term we expect to create operating leverage by having revenue and obviously gross profit outpace the increase in OPEX on a non-GAAP basis.

Great. Thank you.

Thank you. One moment for our next question. Our next question comes from Kevin Cassidy from Rosenblatt. Your line is open.

Yes, thanks for taking my question. Congratulations to Les for a legendary career. You know, again, I'm interested in that, but I want to know how much of your software and development that you've been able to work on with the automobiles for L2 to L4, can you apply, you know, is it a relatively easy market for you to transition into, or are there other software or other issues that would happen in robotics that isn't in automotive?

You know, I think, Kevin, you point out that it's really a great, great direction because, you know, like I continue to say, atomic driving is just a special kind of robot, and so is a drone. And in fact, if you look at the details of functions inside a car, you know, level three drone, and also robots, at the end, it's really a bunch of sensor fusion, and you make a decision on your environment, and you decide pattern planning, or even a car, drone, or some mobile robots moving around. From my point of view, a lot of howards have a commonality. And, in fact, a lot of software development, particularly on the sensor fusion side with the perception, there's a huge reuse on all the robotic applications. So, in fact, we definitely believe that a lot of our investment, both on the hardware and software side for atomic driving, will directly apply to all the future phone and other robotic applications that we're talking about.

Okay, great. Thanks.

Thank you. One moment for our next question. Our next question will come from Ross Seymour from Deutsche Bank. Your line is open.

Hi, guys. Thanks for asking a couple of follow-ups. On the consumer percentage being about half of your IoT business, what was that mix last fiscal year and a year ago?

I don't have that figure for you, but I would say – the dominant part of our mix was enterprise, CapEx-driven markets.

Got it. Thanks, Lewis. And I guess the follow-up to that, if the consumer business does sound like it has increased, does that change seasonality of your company? I know kind of the first and the fourth quarters tend to be, relatively speaking, the weakest sequentials, and then the mid-two quarters are the largest. Does that change at all, either directionally or kind of magnitude, just because consumer is a bigger portion than it used to be?

Yes, that's a very good point, and the answer is yes. I would look at, you know, next question is what's normal, and really the last three, four, five years hasn't been very normal. So, I'd look at the last 10 years, because those first five years and the 10 years did have more consumer like you're asking about. So, I'd look at the averages over that 10-year period rather than just the last two or three years, which really weren't normal.

And then maybe one last follow-up. How do we think about taxes, either dollars or percentages, next year and the year after? I know it kind of goes between the dollars and percentages, and the former might be more applicable, but just an idea of how we should think about that.

Yeah, thanks, Ross. We tend to think about it from a dollar's perspective as opposed to a rate based on the way the company is structured and where the profits are located in various jurisdictions internationally. So I would expect – well, the dollars will increase, but it won't be – they'll increase with revenue, but it won't be – a significant change to the story. I think on a full year basis, if you look at the rate on a non-GAAP basis, that will give you some indication to be able to model going forward, I would say. Thank you.

Thank you. That's all the time we have for question and answer session. I would like to turn it back over to Dr. Fermi Wong for any closing remarks.

Thank you, and thank you all for joining our call today, and I hope to see some of you during our January event at CES. Thank you.

Thank you for your participation in today's conference. This does include the program. You may now disconnect. Everyone, have a great day.