Corning Incorporated

Thank you for standing by and welcome to the Corning Incorporated First Quarter 2025 earnings 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 place yourself into the Q&A queue, please press star 1-1 on your telephone. You will hear a message advising your hand is raised. To withdraw your question, simply press star 1-1 again. Please be advised that today's conference is being recorded. It is my pleasure to introduce to you Anne Nicholson, Vice President of Investor Relations.

Thank you, Carmen, and good morning. Welcome to Corning's first quarter 2025 earnings call. With me today are Wendell Weeks, Chairman and Chief Executive Officer, 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'll 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 first quarter, the difference between GAAP and core EPS primarily reflected non-cash -to-market losses associated with the company's translated earnings contracts and Japanese yen-denominated debt, as well as constant currency adjustments. As a reminder, the -to-market accounting has no impact on our cash flow. A reconciliation of core results to 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. We encourage you to follow along. They're also available on our website for downloading. And now I'll turn the call over to Wendell.

Thank you, Ann. Good morning, everyone. We delivered outstanding first quarter results that exceeded guidance. We grew sales 13% -over-year to $3.7 billion. We grew EPS more than three times the rate of sales to $0.54. We expanded operating margin 250 basis points -over-year to 18%. For quarter two, we're guiding continued strong -over-year sales growth. We expect our quarter two sales to be approximately $3.85 billion. Our quarter two EPS guidance of $0.55 to $0.59 includes the financial impact of existing tariffs, which is $0.01 to $0.02, and accelerated production ramp cost for our new products in optical communications and solar of about $0.03. Even including those items, we expect EPS to grow -over-year about 21%, three times faster than sales. Ed will explain more about our guidance later. Overall, we're coming off a strong year one of our springboard plan, and our results and guidance show we're off to a great start in year two. We just held an investor event in March to upgrade our springboard plan. Normally, I would focus my remarks on our strong progress and upcoming milestones. However, many investors requested that we address two questions that are on their minds. What is the financial impact of tariffs on Corning? And can you deliver your springboard plan if there is a macroeconomic downturn during the plan timeframe? So I want to start by answering both of those questions. And then I'll go into more detail on each before turning things over to Ed to discuss our quarter one results and outlook. Let's start with the financial impact of tariffs on Corning. First, our long-standing philosophy to locate our manufacturing operations close to our customers serves as a natural hedge against tariffs and mitigates the financial impact. Second, the direct financial impact of existing tariff structures, which are primarily between the U.S. and China, is only one to two cents per quarter. We've included that in our second quarter guidance. Third, based on our significant U.S. advanced manufacturing footprint, we're seeing early signs of stronger demand for our U.S.-made innovations. Next, can we deliver our springboard plan in a macroeconomic downturn? The simple answer is yes. And today we reiterate our confidence in our ability to deliver our recently upgraded high confidence springboard plan to add more than $4 billion in annualized sales and to achieve operating margin of 20% by the end of 2026. Our growth is primarily driven by powerful secular trends and more Corning content in our customers' offerings. And in order to provide you with a high confidence plan, we already applied a risk adjustment that accounts for multiple factors, including a potential macroeconomic slowdown. With that, let's dive into each answer, starting with tariffs. As I said a moment ago, our company has a long-standing philosophy to locate manufacturing operations close to our customers. We find that geographic proximity leads to better innovation and more delighted customers. This also has the benefit of serving as a natural hedge against global trade tensions and tariff structures. We apply this philosophy globally. As a result, the direct impact of current tariffs for us is minimal. To illustrate the point, let's take a look at the impact of the tariffs between the U.S. and China. In the U.S., we have a large advanced manufacturing footprint. This includes our optical communications business, where we have the largest fiber factory in the world in North Carolina. We also manufacture products for our automotive, life sciences, mobile consumer electronics, and solar businesses in the U.S. Almost all the products we sell in the U.S. originate from our 34 advanced manufacturing facilities in the U.S. In fact, nearly 90% of our U.S. revenue comes from products of U.S. origin. The majority of the remainder is generated from products that are fully compliant with U.S. MCA rules. Only 1% of the products we sell in the U.S. come from China. Now let's look at our approach for our customers in China. 80% of our sales in China we make in China or process in customs approved tax and duty free zones. 15% is made in region, for example in Korea and Taiwan. Only about 5% of our China sales are imported from the U.S. and subject to China tariff structures. And we will mitigate the impact of that exposure primarily by optimizing our supply chain to minimize tariffs and adjusting price where necessary. In total, we expect a direct impact of approximately $10 to $15 million or $0.01 to $0.02 for currently enacted tariffs in the second quarter. That is included in our guidance. Of course, we will seek to improve this through additional mitigation strategies. Ed will provide more detail on guidance. Bottom line, the direct impact of currently enacted tariffs is not significant for Corning. Interestingly, we are seeing early signs of stronger demand for our U.S. made innovations from our large advanced manufacturing footprint in the U.S. Our customers in optical communications, in solar, in mobile consumer electronics, and in life sciences are seeking to leverage our U.S. manufacturing footprint. And we expect to close and potentially announce commercial agreements in the coming months. Next, can we deliver the Springboard Plan in a macroeconomic downturn? As I previously stated, the simple answer is yes. Today, we reiterate our confidence in our ability to deliver the recently upgraded Springboard Plan. Let's walk through why. Our internal Springboard Plan is to add $6 billion in annualized sales run rate by the end of 2026. We have a significant sales opportunity. And our growth is fueled by powerful secular trends that I'll discuss in a moment. As a reminder, our Springboard base is quarter four of 2023 when sales were $3.27 billion or $13.1 billion annualized. Adding $6 billion in incremental annualized sales brings us to a $19 billion sales run rate by the end of 2026. That is the sales level we would expect to achieve if we deliver our internal Springboard Plan. Our internal plan is the output of the strategic planning process we run with each of our market access platforms. These are our 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 probabilistic outcomes. They try to account for the known unknowns. The business plans aim for a 70% confidence interval, which means that based on their analysis, there is a 70% chance that they will deliver sales greater than or equal to that number. What we wanted to do with Springboard was to provide an even higher confidence plan for our investors. So we take that internal plan and translate the opportunity into an investable thesis for all of you. At the corporate level, we seek to probabilistically adjust for factors including macroeconomic slowdowns, changes in government policy, and timing of multiple secular trends in our related innovations. Our corporate level risk adjustment is $2 billion. This is how we get to our $4 billion high confidence plan, annualized, that is a $17 billion sales run rate by the end of 2026. So let's unpack the macroeconomic component of that corporate level risk adjustment. We use third party forecast of potential macroeconomic slowdown scenarios. And we apply that to our demand planning model that underpins our $19 billion internal Springboard plan. That economic slowdown scenario would result in a sales run rate by the end of 2026 of a little less than $18 billion. Well within our $2 billion risk adjustment. We also run a shock case using the worst downturn over the last 25 years. That scenario results in an adjustment to our plan that is still within our $2 billion risk adjustment. In other words, when we constructed the high confidence plan, the impact of a potential economic slowdown was already built in. That being said, remember, we're innovators. We're not macroeconomists. We are not projecting a macroeconomic slowdown. We're simply providing this context for you to make your own decisions. I hope that's helpful to understand our risk adjustment as it pertains to a potential economic downturn. And that's one of the reasons that today we reiterate our high confidence plan to add more than $4 billion to our annual sales run rate by the end of 2026. We feel good about our innovations and the secular trends driving our growth. So now let's turn to those trends. We continue to see and hear reconfirming evidence that our secular trends are intact and remain relevant. We see it in our results and we see it in our order books. And we hear it in our detailed dialogues with our customers. In optical communications, we are seeing remarkable customer response to both our products used inside Gen. AI data centers as well as our innovations to interconnect AI data centers across the country. We shared some of our new products with you at our March Investor event. These products are driving positive customer response and rapid adoption. In our enterprise business, where we capture sales for inside the data center, adoption of our products drove a record $2 billion in sales last year. At our March IR event, we upgraded our four-year enterprise sales compound annual growth rate from 25 to 30 percent based on strong customer demand. In the first quarter, we continued to outperform with sales growth of 106 percent year over year. We've just completed detailed reviews with our major hyperscale customers that reconfirmed our growth expectations. And as you've also seen in recent public announcements from the top hyperscalers, they've reaffirmed their capital plans and they expect to continue to spend significant amount of capital in this space. Another way Gen. AI is fueling our growth is reflected in our carrier business. Last year, we introduced a set of innovations to interconnect AI data centers. We shared that we reached an agreement with Lumen Technologies to provide our new Gen. AI fiber and cable system that enables Lumen to fit anywhere from two to four times the amount of fiber into their existing conduit and the agreement reserved 10 percent of our global fiber capacity for 2025 and 2026. Last month, we announced that we have fully commercialized this product. We now have three industry-leading customers adopting the technology and our production tripled every month in the first quarter. So this innovation is now turning into a revenue stream to make a positive difference in our financials this year. We continue to feel strong positive customer response to our innovations and as a result, we're accelerating our ramp plans in the second quarter to meet growing demand. Additionally, in our carrier business, as you've seen from recent telecom earnings calls, our key customers have stated they like the economics of fiber and they remain committed to their fiber deployment plans. We believe they have completed drawing down inventory they built during the pandemic and the conditions are now in place for our carrier business to spring back to growth later this year. We saw the beginning of that in the first quarter. Turning to solar, in March we said we expect our new market access platform to grow from a billion-dollar business in 2024 to a -a-half billion-dollar business by 2028. Drivers include increased energy demand, favorable economics, and government policy focused on energy independence. We are commercializing our new Made in America ingot and wafer products this year. Our production will come online in the back half of this year. We said in March that for our entire platform, we had committed customers for 100% of our capacity available in 2025 and 80% of our capacity for the next five years. And recent trade actions are increasing new customer engagement. The goal of U.S. policy is to ensure domestic energy security. So our U.S. solar assets just became even more valuable. We're experiencing increasing demand for U.S. solar. As a result, we're accelerating our ramp of U.S. advanced manufacturing in our Midland, Michigan wafer facility. We're increasing our workforce to 1,500 manufacturing jobs from our previously announced ,100-person level. So recent events continue to validate our low-risk, high-return entry into the solar market. In display, we continue to expect TV screen size growth of about one inch a year. In March, we said that the price increases we implemented last year will help us deliver net income of $900 to $950 million in 2025 and to deliver net income margin of 25%. In the first quarter, the business marked net income of $243 million and net income margin of 26.9%. In automotive, we expect almost triple sales in our automotive glass business by 2026. A growth comes from more corning as automakers add more in-vehicle content. For example, larger, shaped, immersive, and high-resolution displays. Given the milestones we've achieved in our automotive glass business, we're graduating the business this quarter out of the emerging innovations group and into operations. It will be managed along with environmental technologies, forming a new segment called automotive. In mobile consumer electronics, our growth will be driven by demand for more corning content as customers adopt our new higher value innovations. In the first quarter, our major innovation streams remain on tap and we remain optimistic about adoption of our new technologies. We expect those innovations to drive growth as we enter 2026. In total, our secular trends remain consistent with our recently upgraded springboard plan. In summary, our growth trends remain intact. The direct impact of current tariffs to corning is not significant and our $2 billion risk adjustment should provide a sufficient buffer against potential economic downturns. So now, I'll turn it over to Ed to get into more detail on our results and outlook. Thank

you, Wendell. Good morning, everyone. As you just heard, our results and guidance show we're making great progress on our high-confidence springboard plan to add more than $4 billion in annualized sales and achieve an operating margin of 20% by the end of 2026. And as we successfully execute the plan, we continue to improve our return profile. Year over year in the first quarter, we grew sales 13% to $3.7 billion. We grew EPS 42% to $0.54. We expanded operating margin by 250 basis points to 18% and we expanded ROIC by 300 basis points to 11.6%. Looking ahead, we expect our momentum to continue. For the second quarter, we expect continued strong year over year sales growth with sales of approximately $3.85 billion and EPS in the range of $0.55 to $0.59. Again, growing significantly faster than sales. We expect to continue expanding our operating margin as we march toward our springboard target of 20% by the end of 2026 and we anticipate continued strong growth in our enterprise business driven by our new products for JAN AI. Two other things I want to note related to our second quarter guidance. First, our guidance factors in 1 to 2 cents for the expected direct impact of currently enacted tariffs. We plan to further mitigate this impact going forward, primarily by optimizing our supply chains and adjusting price where necessary. Second, we shared with you that we are accelerating our production ramp for new products, given high customer demand in both optical communications for our new JAN AI products for both inside and outside the data center and in solar for our new solar wafers. Our second quarter guidance includes temporarily higher costs associated with these ramps of about 3 cents. We expect the impact of these costs to dissipate as our production and sales increase in the second half of the year. Now, I'd like to share some more detail on what we're seeing in our businesses and then I'll review our capital allocation priorities as we expect to generate significant cash over the springboard time frame. In optical communications, first quarter sales were $1.4 billion, up 46% year over year. Net income for the first quarter was $201 million, up 101% year over year, reflecting strong incremental profit on the higher volume. Enterprise sales were $705 million for the quarter, up 106% year over year, driven by continued strong demand for our new JAN AI products for inside the data center. We're tracking ahead of our 2023 to 2027 enterprise sales CAGR of 30%. We also grew 11% year over year in our carrier business. The growth included sales of our new data center interconnecting products. Additionally, our carrier customers have completed drawing down inventory during the pandemic and the conditions are now in place for our carrier business to return to growth in 2025. And we are seeing the beginnings of that in the first quarter. Moving to display, first quarter sales were $905 million, up 4% year over year, on both volume and price increases. Net income was $243 million, .9% of sales. We successfully implemented double digit price increases in the second half of 2024 to ensure that we can maintain stable U.S. dollar net income in a weaker JAN environment. Our first quarter results provide the first proof point that we have achieved our objective. As a reminder, we hedged our Yen exposure for 2025 and 2026 with hedges in place beyond 2026. In 2025, we reset our Yen core rate to 120 Yen to the dollar, consistent with our hedge rate. We are not recasting our 2024 financials because we expect to maintain the same profitability in display at the new core rate. We remain confident that we can deliver net income of $900 million to $950 million in 2025 and net income margin of 25%, consistent with the last five years. Overall, we are maintaining our market, technology, and cost leadership while benefiting from market growth in a glass supply demand environment that is increasingly balanced too tight. Turning to specialty materials, first quarter sales were $501 million, up 10% year over year, driven by continued strong demand for premium glass for mobile devices. Net income grew 68% year over year to $74 million, reflecting strong incrementals on higher volumes, as well as strong demand for our premium glass innovations. Now, I'd like to take a moment to elaborate on our new automotive segment. Our automotive glass solutions business has been part of our Hemlock and Emerging Growth businesses, which is designed to launch early stage projects and growth opportunities. This is where our solar business currently resides. Beginning in Q1, we graduated our auto glass business, and together with our environmental technologies business, created a new segment named Automotive. We recast the comparative segment results for prior periods to align with our current reporting. Our environmental business has been an established leader in the industry for more than 50 years. Now we're leveraging that market access to drive more Corning Automotive glass into the market. We have several recent partnership and project announcements tied to automotive interiors and adjacencies and are making nice progress. With that, let me provide some color on what we're seeing right now in Automotive. In the first quarter, automotive sales were $440 million, down 10% year over year, primarily driven by continued softness in light and heavy duty European markets, as expected. The North America Class 8 market also continues to lag year over year following a strong Q1 2024. We remain confident that the underlying secular trends in automotive will be strong growth drivers for Corning as demand for more larger shaped immersive and higher resolution displays grows. Our segment change reflects our continued confidence. Turning to life sciences, on a year over year basis, first quarter sales of $234 million were down 1% and net income of $13 million was consistent. Finally, in Hemlock and Emerging Growth businesses, first quarter sales were $244 million, down 25% sequentially on normal seasonality. As I just explained, these results no longer include Automotive Glass Solutions, and we recast 2024 for this change. We're still reporting our solar business results in Hemlock and Emerging Growth businesses for the moment as we continue to ramp production for our new solar wafer products. We expect to grow our new solar map to a $2.5 billion revenue stream by 2028, and we expect a positive incremental impact on Corning's sales, profits, and cash flow starting in the second half of 2025. We are commercializing our new Made in America ingot and wafer products this year. We have committed customers for 100% of our capacity available in 2025 and 80% of our capacity for the next five years. We plan to update you on our solar sales and profits as we continue to make progress. With that, I'll shift from segment results to free cash flow. The first quarter was essentially break even. Normally, Q1 is negative, a seasonal low, driven by our typical compensation and working capital cycles. So, we're actually off to a great start in 2025 and expect to generate a significant amount of free cash flow this year, and we expect to invest approximately $1.3 billion on CapEx. And finally, let's move to capital allocation. As we shared with you in March, the upgrades to our internal and high confidence plans include higher sales and higher profit. We expect to convert that profit into more cash flow. As an early proof point, in year one of the plan, we grew free cash flow 42% for the full year 2024 versus the prior year. Always front and center to us is capital allocation. How do we choose to invest the expected higher cash flow? Companies do capital allocation in different ways. We prioritize investing for organic growth opportunities that drive significant returns, and we grow primarily through innovation. We believe this creates the most value for our shareholders over the long term. Our investors have confirmed this. As we see high return opportunities in the future, we will invest in those opportunities. We also seek to maintain a strong and efficient balance sheet. We're in great shape. We have one of the longest debt tenors in the S&P 500. Our current average debt maturity is about 23 years, with only about $1.2 billion in debt coming due over the next five years. And we have no significant debt coming due in any given year. Finally, we expect to continue our strong track record of returning excess cash to shareholders. We already have a strong dividend. Therefore, as we go forward, our primary vehicle for returning cash to shareholders will be share buybacks. We have an excellent track record. Over about the last decade, we repurchased 800 million shares. Close to a 50% reduction in our outstanding shares, which at today's share price has created $17 billion in value for our shareholders. Because of our growing confidence in Springboard, we started to buy back shares in the second quarter of 2024, and we have continued to do so since then. In the first quarter of 2025, we invested another $100 million in share repurchases, and we expect to continue buying back shares in the second quarter. So as I wrap up today, I'd like to reiterate the important points we've shared with you this morning. In Q1, we exceeded our guidance on both sales and EPS and continued to deliver strong sales growth while continuing to improve our return profile. And we expect another strong quarter as evidenced by our second quarter guidance, which factors in the expected direct impact of currently inactive tariffs and temporarily higher costs as we accelerate production ramps for our new GEN.AI products in optical communications and our new solar wafer products. Stepping back, we feel great about our progress on Springboard and we're energized about the tremendous opportunity for value creation we've built for our shareholders. Our internal Springboard plan adds $6 billion in annualized sales run rate by the end of 2026. The expected growth is driven by powerful secular trends, in particular GEN.AI and solar. And our risk adjusted high confidence plan adds more than $4 billion in annualized sales, and we continue to expect operating margin to improve to 20% by the end of 2026. Therefore, we expect to continue improving ROIC, growing EPS and strengthening cash flow. Our $2 billion risk adjustment provides a sufficient buffer for a macroeconomic downturn. I look forward to updating you on our progress. With that, I'll turn it back over to Anne.

Thank you, Ed. Okay, Carmen, we're ready for questions.

Thank you so much. And as a reminder to our audience, press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, simply press star 1-1 again. Please stand by for our first question, please. And it comes from the line of Stephen Fox with Fox Advisors. Please proceed.

Hi, good morning and thanks for all that detail. I guess for my question, Wendell, you talked a lot about the different aspects that could play out in this new world order. I guess the one that maybe you left out, I was wondering if you can touch on, is just your pricing power in uncertain markets and how you think all this plays out versus competition. Obviously, you got pricing sort of settled on the display side, but how do you think about just where you're at with some of the other key markets like solar and auto and especially optical? Thanks.

It's a great question, Steve. The most recent example we've had of our ability to pass cost, increasing cost onto our customers in the form of price, was part of the recovery from the pandemic where we successfully shared the impact of inflation with our customers. And so we're coming off of that knowledge and those tools. In this moment, we're actually seeing in solar because of the increased customer interest in U.S. solar and because of events in trade raising our potential realized price in that business and our customer dialogues. Similarly, our product sets in opto, the bulk of the growth is being driven by unique products. We haven't really been exposed to any tariff friction cost in those businesses. Should there be some changes or things like that, that fundamental competitive moat we have should serve us well. Automotive, as of yet, we just don't have enough exposure to tariff structures to have entered into direct dialogues with our customers. So more to be seen on that space. In general, we feel really good about the way our footprint naturally reduces our exposure to changing tariff structures and our relationships with our customers are such that we feel good about our ability to mitigate any impact that comes our way.

Great. That was very helpful. Thank you.

Thank you. One moment for our next question, please. It comes from the line of Juan Simoan with Bank of America. Please proceed.

Good morning. Thank you so much. You spoke about temporary capacity ramp costs in optical and solar, but your CAPEX outlook did not change. It stayed at $1.3 billion. So is this largely an OPEX ramp? Is it a pull forward of any demand that you're seeing or are there under the tower changes in CAPEX allocation? And if I could, could you also address maybe just your visibility in GNI orders? Obviously you had very strong growth, but there are some concerns around pullback in data center spending and just trying to get some sense from you if you're seeing anything different in your order patterns at all. Thank you so much.

Thanks, Wamsi. Great questions. Let me take the first one on the cost ramp. So as we bring up capacity, you heard Wendell talk about, for example, in solar, us adding 1,500 jobs. So we're bringing on fixed cost to actually get that capacity up and running. So until we're actually at scale producing at the level we're capable of and selling, we actually have a fixed cost that is embedded in our financials, and that's how we think about that cost drag. It remedies itself when we're actually at scale and selling, and in solar, for example, we believe that's in the second half. And then, you know, in optical, as an example, we are bringing on capacity, but where we're bringing it on is not really costly CAPEX. And so I think if you think about our CAPEX guide, we've reflected our view of what we think we need to be able to deliver the $6 billion and the $4 billion in our springboard plan as we go forward. We'll obviously continue to update you on that, but that's sort of how you should think about it.

Remember in springboard that what helps lead to the very powerful incrementals that you're actually seeing this print with EPS going up three times as fast as sales is that we already largely have the capacity and the capability in place to service the growth. So what tends to hit here is, let's say, let's, I thought Ed did an excellent job on solar, let's do Opto, is these are products that we're making for the very first time. So that the amount of throughput we're getting through those given lines that we're dedicating, we switch a line over to do these products, is a lower throughput, lower productivity than are more established. As those revenues grow, as we get better and better at making the product, which we do every week, we'd also see some of those friction costs drop away. Wamsi, did that answer your question effectively?

Yes, absolutely. That was super helpful, Wendell. And if you could comment on the visibility of JANI, I'd order it, too. That would be great. Thank you.

So we just completed our quarterly detailed dialogues with our major hyperscaler customers. And what we see is that is reinforcing of our growth estimates. I think what causes noise level to some extent is different players can alter their plans in various sort of subtle ways. But given the range of our customer footprint, what tends to happen is these will balance out so that in total what we see is continued reinforcement of our growth expectations. And by and large, the dialogues tend to be how can they get more of our new product sets and how can they take advantage of our advanced manufacturing footprint in the U.S. So those tend to be where all of our attention with our customers are is that we're not quite getting them as much as they would like from us. Now, that being said, it can be hard for us as those dialogues are happening to determine the difference between are we gaining share or is it increase in market. We tend to only be able to sort that out, usually in the rear view mirror, after we get into the next month or the month after to be able to reflect on what other people report. Was that helpful to you, Lonzi?

Yeah, that's great, Lionel. Thank you so much.

Next

question.

Thank you. One moment, please. It comes from Asea Merchant with Citi. Please proceed.

Oh, great. Thank you for taking my question. Just back on the comment on optical, you know, obviously very strong demand here. And I'm wondering, you know, is this an environment that's very supply constrained at this point? And if there is an opportunity, you know, to further press on pricing or further strengthen pointing mode in this segment. Thank you.

The answer is I think strategically you're right. Strategically you're right. I think it will be especially applicable to sort of the next generation of products we're introducing. So, more to come in that space. You see some of what you're talking about already reflected in the financials because you see the very rising profitability of our optical segment. That includes actions around that strategic centrality of what you're pointing out, Asea. If our next gen innovations are as competitively advantaged as we hope, we would believe that improvement in margin profile would continue.

Next question.

Thank you. It comes from the line of Asamik Charterjee with JP Morgan. Please proceed.

Hi. Thank you for taking my question. Wendell, thanks for all the prepared remarks in terms of tariffs as well as a potential sort of recession. Maybe Wendell, if I can ask you more in relation to what your customer conversations have been since liberation day tariffs and whether when you're sort of outlining the scenarios in relation to recession. Is that a discussion that's becoming more frequent with your customers and maybe even rates, tariffs? What are you seeing in terms of customer behavior since liberation day tariffs? Has that really changed compared to prior to that? Adding on to that in terms of capital investment plans, when we think about your solar ramp, how should we think about sort of the flexibility in that plan? Or if we were to go into a more significant downturn, how should we think about flexibility around moderating that plan? Thank

you. On the first one, what we're experiencing was in that sort of third area that I spoke about on tariffs is we're seeing early evidence of increasing demand from our existing and new customers for our advanced manufacturing platforms in the U.S. These are significant. These dialogues are ongoing. We would hope to close some of those agreements and potentially they're significant enough that we would share those publicly in the coming months. Once again, because of the fundamentals of Springboard, we have available capacity here in the U.S. And so we would expect that incremental demand to come in at really strong profitability performance as well. So what our dialogues with our customers tend to be about is less capital risk because we have that in place and more we want to have very long-term commitments from them because what the exact tariff structure becomes over time is difficult to predict at this moment. So as we allocate that capacity, we want it to be with folks who have a long-term commitment to U.S. based sourcing. Does that make sense, Semik? Is that responsive to your question?

Yes, and specifically on Sogolur, is that when you think about your plan there, is it sensitive to the macro or given the long-term nature, should we think of it as largely you can continue on that plan? Thank you.

Yes, Samik, maybe I'll take that one. I think a couple of thoughts. First, the need for energy is somewhat insulated from the macro. And as Wendell said, we're seeing a demand for U.S. sourced solar. That actually, that demand is increasing. I think that's somewhat, again, insulated from the macro. In fact, we may actually have some further commercial announcements in the near term. When we were with you in March, we actually shared that our capacity for the wafer facility we're building and actually all of our solar capacity is essentially sold out for this year, what we believe we can make. We're obviously trying to make more. And then we have 80% of that capacity sold out for the next five years. And in this space, we generally use tools like long-term supply agreements with -or-pay provisions. So I think, again, this is an area where we feel really good about the growth trajectory from where we are now as we go forward. And I don't think the macro environment has a significant impact on that. A

way to think about the strategic situation of where our demand is, we've got about 40, 50 gigawatts in that range of solar was installed and will be installed this year in the U.S. Our plan has less to do with that growing as it does as import substitution. Today, the part of the value chain that we're moving into has close to 0% of the ingots and wafers and polysilicon that are installed in the U.S. today come from the U.S. Our strategic plan is that we would like to take double-digit sort of share of that product that is installed in the U.S. for U.S. source. So it's less about macroeconomics and it's more about the success of our low-risk, high-return entry strategy, which is why with the current sets of trade dynamics in a number of different areas in which trade action is taking place, it has made that job of share substitution from imported product to domestically produced product a little bit easier and a little bit more valuable.

Thank you. Thanks, Waldecolle.

Thank you. Please. It comes from the line of Mehdi Hosseini with Susquehanna International Group. Please proceed.

Yes. Thanks for taking my question. A couple of follow-ups. Wendell, can you tell me what you hear from your panel customers regarding end market demand? Obviously, the TV is part of the consumer electronics. It's very sensitive to macro trends and I was wondering what you're hearing from your customers. I don't have a follow-up.

Sure. Hey, Mehdi. This is Ed. So our view of the display market is that units for the year will essentially be flat, roughly 207 million, somewhere in that zone. We do expect there to be growth in the glass market driven by screen size increasing somewhere in the zone of about an inch. In the first quarter, I would say that China's stimulus has had some impact on demand, but we're not necessarily hearing anything that would take us off of our view of the numbers I gave you for the end market at

this point

in time.

So a follow-up here. Given your reported Q1 and assuming that there is a price increase embedded and your outlook for a flat-ish volume shipment, does that imply significant uptake starting in Q2?

So what we're seeing in Q1 is, as you know, we did the price movements in conjunction with a move to the new core rate so that we would have the same profitability in U.S. dollars, and that's what we're seeing in quarter one. On the volume side, quarter one panel maker utilization was a little higher than we would have expected for normal seasonality. So that could be that some folks were building some ahead of any trade actions. What we've done is we have reflected in our quarter two guide that panel maker utilization would fall some towards the end of the quarter to correct for any sort of movement one way or the other in supply chain. Overall, what we're seeing in this market is that glass supply and demand are in balance and relatively tight, and we don't see any reason at this time to raise our forecast that television unit demand would stay where it's at. We're just assuming all the sort of evens itself out and that our growth is primarily driven through diagonal growth.

Great. Thanks for the details, Wendell. And actually, going back to Ed, you talked about having confidence with a strong free cash flow. You're investing in operation, given your $1.3 billion capex. You have also done really well in bidding and raising. So given that context, why not step up and be more aggressive with buyback? What is holding you back? If you're so confident with the springboard and how you actually execute it better than expected, why not reflect that in a more aggressive buyback? Any thoughts?

Thanks for that question, Mehdi. Just as a reminder, we started buying back shares in the second quarter of last year. We've continued to do that every quarter, and we bought back $100 million in the first quarter, and we certainly expect to continue to buy back our shares. I think for us, we like to maintain a really strong balance sheet, so that's important. And as we go forward and generate that cash, I think you should expect us to continue to buy back shares. That will be our primary vehicle for which we return cash to shareholders.

Thank

you. All right. One more question.

Thank you so much, and it comes from the line of John Roberts with Mizuho. Please proceed.

Thank you. I think of tariffs a little bit like Scope 1, 2, and 3 emissions. You're one to two cents. That's basically Scope 1 and 2, and there's nothing from Scope 3 or tariff impact on your customers in there,

right? What we try to do is instead say if our customers have a tariff-based impact or the macro economies have a tariff-based impact, we try to capture that in our overall risk adjustment. What we see for most of our customers is their degree of supply chain sophistication is extremely high. And that they, what our main dialogues with them is how they can shift to be able to optimize around tariffs. So given that, it's hard to predict sector by sector and customer by customer exactly how their tariff profile will look. So instead, we try to put all that into our risk adjustments and capture that in total and then how that would impact our demand scenarios. And then something like... Yeah. I'm sorry. Go on,

John. I was going to say something like a customer moving their production from China to India that's there. Is that something that would be material to Corning or how would you have to adjust for that?

So we started a number of years ago to be able to effectively build the channel to finish our products in India to be able to support our customers' thoughtful moves to different regions. Similarly, for different customers, we've done the same thing for long-standing positions with Samsung and Vietnam. All there's... What we try to do is it takes a while to get these change in place and our production in place. So we try to preemptively prepare for it. As far as a shift to India versus a shift to China, either one of those, we will capture the revenue from those and we are already in place to be able to supply it.

Great.

Thank

you very

much. Thank you so much. And this concludes our Q&A session. And I will turn it back to Ann Nicholson.

Great. Thanks, everybody, for joining us today. Before we close, I wanted to let you know that we're going to attend the JPMorgan Annual Global Technology Media and Communications Conference on May 14th. Additionally, we'll be scheduling management visits to offices in select cities. Finally, a replay of today's call will be available on our site starting later this morning. Once again, thanks for joining. Operator, that concludes our call. Please disconnect all lines.

Thank you all for participating. You may now disconnect.