Infineon Tech AG

conference here on our site, in our video studio and on our live stream. We are glad you could join us. Infineon met expectations in the 2025 fiscal year despite challenging macroeconomic and geopolitical conditions. The year was characterized by prolonged weakness in the majority of our target markets. End customers and distribution partners have significantly reduced their inventory levels. In view of geopolitical instability, and the ongoing turbulence of tariffs, our customers are cautious about the future development of demand. This has led to last-minute ordering behavior for semiconductors. In addition, unfavorable currency effects have slowed our revenue growth for several quarters now. Given the ongoing geopolitical and tariff-related uncertainties, it is difficult to predict how strong and how broad the upturn in the semiconductor markets will be in the 2026 fiscal year. Therefore, we are adopting a prudent outlook. Our priorities at Infineon remain unchanged. Firstly, we are leveraging existing opportunities for profitable growth and are expanding our production capacities in a very targeted manner to this end. Secondly, we are making focused and forward-looking investments in future technologies and in our expertise. Thirdly, we are keeping our expenditures under control. We remain confident on our medium to long-term development. We are making good progress on improving our cost competitiveness. At the same time, we are accelerating innovations with clear customer benefits and strengthening our position in growth markets such as software-defined vehicles and AI data centers. I'll come back to this. Infineon is well positioned for a coming market upswing. Before we look ahead, let us first take a brief look at our business development in the past fiscal year. In the fourth quarter, group revenue increased to €3,943,000,000. This is an increase of 6% compared to the previous quarter, despite a stronger headwind due to the weaker US dollar. The exchange rate rose from 1.14 to 1.17 US dollars per euro. As expected, the fourth quarter was the strongest in the 2025 fiscal year in terms of revenue. we were able to increase the segment result to 717 million euros. This segment result margin reached 18.2% compared to 18.0% in the previous quarter. This slight improvement is mainly due to higher sales volume. This enabled us to compensate for the unfavorable currency development. For the 2025 fiscal year, revenue amounts to 14,662,000,000 euros. This is a decrease of 2% compared to the 2024 fiscal year. The weaker US dollar was an important factor in this development. At constant currencies, our revenue would have remained almost stable compared to the previous year. This is a respectable result for a fiscal year that was characterized by substantial inventory corrections on the part of customers and by unprecedented trade conflicts. The segment result margin reached 17.5% after 20.8% in the 2024 fiscal year. Hence, the margin was in the forecasted high teens percent range. We were able to partially offset price declines, negative currency effects and rising idle costs with positive margin effects from our structural improvement program StepUp. The free cash flow was minus 1 billion 51 million euros. The adjusted free cash flow, which excludes investments in large front-end buildings and major acquisitions such as Marvel's automotive Ethernet business, amounted to plus 1 billion 803 million euros. This corresponds to approximately 12.3% of revenue. All three figures were in the lower range of our target operating model applicable during cyclical downturns. In a world full of uncertainty, Infineon remains on course. This is primarily due to the commitment of our teams worldwide. On behalf of the entire management board team, I would like to thank all our employees for their strong performance. Their commitment, passion and collaboration are key to Infineon's success, even and especially during challenging times. Together we have achieved much, and together we are also tackling the current fiscal year, creating new things and shaping the future of our company. Esteemed viewers, our dividend policy is aimed at paying out an unchanged dividend, even in the event of stagnating or declining earnings. we will propose a stable dividend of 35 euro cents per share to Infineon's shareholders at the upcoming annual general meeting. We want our shareholders to participate appropriately in Infineon's success, and at the same time, we want to maintain the financial leeway necessary to further develop our company for the future. By doing so, we are focusing on promising growth areas, especially in the field of artificial intelligence. AI will continue to drive the structural need for semiconductors and the demand for our solutions in the coming years. AI functionalities are indeed evolving at an incredible pace. They are changing industries and penetrating all areas of life. Generative AI, which can generate images, text, code and more, is increasingly being complemented by agentic AI, artificial intelligence that can perceive, reason, plan and act. And the next big development step is already in sight. Physical AI. It enables autonomous systems, for example cars or humanoid robots, to perceive and understand the physical world and carry out complex actions. The use of AI requires enormous computing power that far exceeds the capacities of existing data centers. These requirements are increasing rapidly. Even before 2030, capacities of one megawatt and more per IT rack will be required. To put this into perspective, one megawatt is equivalent to the power of around 500 clothes irons. The large US tech companies in particular are driving the construction of specialized AI data centers worldwide. These data centers are reaching power levels in the gigawatt range, so we're talking about the power of 500,000 irons and upwards. One gigawatt is roughly equivalent to the full load of a nuclear power plant reactor unit. Meta, Amazon, Alphabet and Microsoft plan to invest over 300 billion US dollars in AI technologies and infrastructure this year. The announced projects alone represent an estimated output of up to 10 gigawatts. More will follow suit. Power is the backbone of every AI data center. There is no AI without efficient power electronics. We supply fitting and scalable power solutions for the entire energy conversion chain, from the power grid to the AI processor in the data center. Infineon is a clear leader in this field. We are also rapidly developing our range of efficient and scalable solutions at fast pace. In doing so, we are working closely with leading companies in the industry. An excellent example is our collaboration with NVIDIA in the development of a centralized 800-volt power supply architecture for future AI data centers. The new system architecture significantly improves energy efficient power distribution in the data center and enables an even more efficient power conversion directly at the AI chip. As a technology leader, we want to shape the rapidly growing market in the coming years. The fact that our solutions address an urgent and growing demand is also reflected in our business performance. We were able to almost triple our revenues from power supply solutions for AI data centers in the 2025 fiscal year, reaching over 700 million euros. This is around 100 million euros more than we had forecast, despite negative currency effects. We are also raising our revenue forecast for the 2026 fiscal year from 1 billion euros to around 1.5 billion euros, which would mean more than doubling the revenues the previous fiscal year. We also expect dynamic medium-term growth in this area. We expect the addressable market for Infineon to reach 8 to 12 billion euros by the end of the decade. In addition, AI is increasingly developing beyond centralized cloud systems. Edge AI, the intelligent processing and analysis of data directly in the device or in its immediate vicinity, is becoming an important driver for our business. Infineon supports developers of Edge AI applications with a complete system based on our specialized microcontroller PSoC Edge, which combines machine learning, advanced human-machine interaction, low energy consumption, and integrated security. Added to this are our complementary sensor portfolio and our own edge AI development platform, DeepCraft. By doing so, we offer a comprehensive set of hardware and software solutions for easy implementation of AI functionalities in IoT devices. Our customers can either develop their own AI models from scratch or integrate ready-made models and solutions into their products, thereby reducing time to market. As already mentioned, we are on the verge of the next big technological step in AI evolution, physical AI. Take cars as an example. With the trend towards software-defined vehicles, the automotive industry is paving the way to a new era of mobility. Software supported by AI is at the heart of the vehicle. This enables new automated driving functions and enhanced safety features. Issues can be resolved without the need for a visit to the car repair shop, simply via software updates over the air. Software-defined vehicles lead to a new level of flexibility and efficiency. However, the necessary change of vehicle architecture is complex. conventional electric and electronic vehicle architectures with a large number of distributor control units in the vehicle will not be enough. The automotive industry is therefore moving towards a more centralized approach. Infineon is playing a key role in this development. We are working together closely with many customers and partners to drive the development of software-defined vehicles around the world. In addition to our system expertise, we benefit from our global market leadership in automotive semiconductors. We have consistently expanded our position in recent years. Our rapidly growing business of microcontrollers for automotive applications has contributed significantly to this development. These products are becoming increasingly important for controlling various critical vehicle functions in software-defined vehicles. We want to expand our leading position in microcontrollers for the automotive industry. The acquisition of the automotive Ethernet business of the US company Marvell Technology, which we successfully completed last summer, was strategically important to this end. Ethernet is a key technology in software-defined vehicles. The technology is a perfect addition to our existing product portfolio. In combination with our AURIX microcontroller, it lets us offer a comprehensive product range that includes both communication solutions and real-time control. In addition to the car, Ethernet technology is also essential to promising applications in the Internet of Things, especially for humanoid robots. Dear viewers, Infineon is shaping the future with solutions that deliver added value to the economy and society. One technology with great potential for value creation is quantum computing, likely the next disruptive technology to follow artificial intelligence. Quantum computers use the laws of quantum mechanics to solve certain particularly complex tasks much more efficiently and quickly than conventional computers can. This opens up completely new possibilities in various application areas, from materials research to developing new drugs and optimizing supply chains. At Infineon, we have key competencies for quantum computing. Our strategic partners include Quantinium, a company on which NVIDIA also holds a stake, and IonQ, the quantum company with the highest market value at present. Together, we are now taking the technology from the lab into application, pushing the boundaries of quantum computing. I'd like to offer deeper insight by sharing voices from our partners in academia and industry. Please take a look for yourself.

Quantum computing is a proposal for how to use the laws of physics to solve certain specific problems much, much faster than we know how to solve them with conventional computers.

in a way that we could never approximate it through our creation of digital semiconductor-based computing.