Q3 2025 Earnings Call Transcript

Ladies and gentlemen, thank you for standing by. Welcome to Corning Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. It is my pleasure to introduce you, Ann Nicholson, Vice President of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to Corning's Third Quarter 2025 Conference 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 will be discussing our consolidated results using core performance measures, unless we specifically indicate our comments relate to GAAP data. Our core performance measures are non-GAAP measures used by management to analyze the business. For the third quarter, differences between GAAP and core EPS include noncash mark-to-market adjustments associated with the company's translated earnings contracts and foreign-denominated debt as well as constant currency adjustments.

As a reminder, the mark-to-market accounting has no impact on our cash flow. A reconciliation of core results to the comparable GAAP value can be found in the Investor Relations section of our website at corning.com. You may also access core results on our website with downloadable financials in the Interactive Analyst Center. Supporting slides are being shown live on our webcast.

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. Today, we reported another excellent quarter. Year-over-year, sales grew 14% to $4.27 billion.

EPS grew 24% to $0.67, again, outpacing sales growth. Operating margin expanded 130 basis points to 19.6%. ROIC increased 160 basis points to 13.4% and free cash flow of $535 million puts us on track for another year of strong free cash flow growth. These results demonstrate the powerful, profitable growth outlined in our Springboard plan.

So I want to put our third quarter results in the context of that plan. In quarter 4 of 2023, we launched Springboard, which outlined our plan to significantly increase our sales as we captured important secular trends. We said we already have the required production capacity and technical capabilities in place to deliver the sales growth and the cost and capital are already reflected in our financials. Therefore, we expect to deliver powerful incremental profit and cash flow, leading to our earnings growing much faster than sales.

So as we approach the 2-year anniversary of Springboard, how are we doing? When we compare our third quarter 2025 results to our launch point, we grew sales 31%. We expanded operating margin by 330 basis points. We grew EPS 72%, more than twice the rate of sales growth.

We expanded ROIC by 460 basis points, and we generated strong free cash flow. Now let's compare our results to our upgraded Springboard plan. We are tracking well above our high confidence plan, and we're tracking very well on our internal plan. Through the end of the third quarter, we've added $4 billion of incremental annualized sales since the launch of Springboard.

Looking ahead, we expect fourth quarter sales of $4.35 billion, which will add another $300 million to our annualized sales run rate. Of course, this plan is about more than sales growth. Our plan was also to dramatically improve our profitability by improving our operating margin from around 16% to 20% by the end of 2026. Let's see how we've done against that target. As we executed Springboard, you can see that our operating margin expanded significantly.

As we look to the fourth quarter, we now anticipate achieving the 20% target a full year ahead of plan. So since the beginning of Springboard, we have significantly increased our sales. We have grown operating profit at twice the rate of sales, and we have increased EPS more than double the rate of sales. Going forward, of course, we still expect the effects of seasonality, which you can see on the chart.

But this is a powerful enhancement to our profitability that should translate into very attractive returns as we continue to grow sales. Stepping back, as we approach the second anniversary of Springboard, the plan has certainly been a tremendous success. We've added $4 billion to our incremental annualized run rate, and we have significantly improved our profitability. Perhaps even more exciting is that we see much more growth and more springs ahead.

Let me give you just a few quick examples of the opportunities we expect to add to our sales run rate. In mobile consumer electronics, I'm sure you all saw the recent announcement from Apple that committed $2.5 billion to produce 100% of iPhone and Apple Watch cover glass in the U.S. for the first time at our Harrodsburg, Kentucky facility. This plant will become home to the world's largest and most advanced smartphone production line. And we will open a new Apple-Corning Innovation Center there to deepen our co-innovation and play a key role in future generations of Apple products.

In total, this creates a significantly larger, longer-term spring for us in mobile consumer electronics. In Optical Communications, we are expanding our innovation and technology leadership in Gen AI. First, in our enterprise business, where we report sales for inside the data center, we grew sales 58% year-over-year. Ann will share more detail.

But the primary technical driver behind that growth is what the industry calls the scale-out of the network. That basically means that hyperscale customers are scaling out the GPU clusters with more and more connected AI nodes of server racks or simply put larger neural networks. Because each AI node is connected to the others in the cluster by fiber, this creates more volume for Corning. Now you only need to do a brief scan of the news each day to see that the scale-out opportunity is expanding dramatically.

We have plenty of growth ahead, and we expect demand for our innovations to continue to accelerate. We are not only the inventor of the world's first low-loss optical fiber and the technology leader in this space, we are also the largest producer by revenue of fiber, cable and multi-fiber connectors in the world. Importantly, we also have low-cost, U.S.-based advanced manufacturing platforms for each of the critical components. This creates a unique Corning opportunity to support our hyperscale AI customers as they seek to build major U.S. data centers using U.S. origin products.

There is more to come in this space. We're working to formalize customer agreements so stay tuned. Now let me shift to another significant opportunity we are pursuing in Gen AI, driven by what the industry calls the scale up of the network. Hyperscalers are creating more capable nodes that move from less than 100 GPUs per node today to hundreds of GPUs per node in the future.

Historically, an AI node has been within a single server rack. As hyperscalers scale up, AI nodes are shifting to stretch across multiple server racks. This causes the distance to link these GPUs within the node to get longer. This will eventually cause the links to reach about 100 gigabit per second meter, what we call the electrical to optical frontier line, which roughly marks the point where fiber connections become more techno-economical than copper, creating a large potential opportunity for us.

To help understand the size of this opportunity, a single Blackwell-like node has more than 70 GPUs with more than 1,200 links using more than 2 miles of copper. As that node scales up, those 2 miles will eventually be replaced by fiber connections. And those miles will grow over time as more and more GPUs are included in the AI node. I'm sure you've seen announcement regarding co-packaged optics or CPO.

That is one of the technologies that helps activate this scale-up opportunity for us. If we succeed technically, the scale-up opportunity could be 2 to 3x the size of our existing enterprise business. And we are working with key customers and partners on making that future a reality as well. Another opportunity for growth tied to Gen AI is playing out in our carrier business.

In the industry, this is referred to as DCI or data center interconnect. We introduced a high-density Gen AI fiber and cable system that enables customers to fit anywhere from 2 to 4x the amount of fiber into their existing conduit. And we have seen tremendous response to this product set. We expect this business to scale rapidly, reaching a $1 billion opportunity for us by the end of the decade.

DCI also offers the opportunity for new, more radical innovations in this space. We recently strengthened our long-standing relationship with Microsoft, announcing a collaboration to accelerate the production of their hollow core fiber. Our fiber and cable manufacturing facilities in North Carolina will produce Microsoft's fiber as they seek to advance the performance and reliability of Azure's cloud and AI workloads. With hollow core technology, we're talking about cases where the difference between the speed of light through glass and the speed of light through air actually matters.

Now this illustrates how important DCI could become as our customers look to decrease their latency. This offers Corning the opportunity to innovate on new dimensions. Now let's shift to our solar business, where we are pursuing another powerful secular trend and expect to add to our run rate in quarter 4 and beyond. We've been seeking a low-risk, high-return entry into the solar industry for some time.

First, solar power is fundamentally about the efficient use of photons and low-cost materials conversion platforms. Both are key opportunities for innovation that are right in our wheelhouse. Second, we are already a world leader in semiconductor polysilicon, which is simply a much purer form of the fundamental material used in solar. Finally, we anticipated the growing need for a U.S. domestic solar supply chain, which is only accelerating with the advent of Gen AI and global tariff structures.

We began this journey in 2020. And since then, we generated over $1 billion in cash in this platform. We funded the expansion of our manufacturing assets with a growing cash flow generated from assets we acquired for less than $0.10 on the dollar, customer funding and government support, all while generating positive cash flow every year. As a result, we now have built a strong foundation for rapidly accelerating growth. We made process advancements to serve a higher-end chip segment in semiconductors, allowing us to drive continued growth in the most advanced segment of semiconductor chips.

We activated idle assets to serve the need for domestic solar polysilicon. And we added the capability to transform our polysilicon into higher-value, domestically made solar wafers, all integrated together on our campus in Michigan. We've sold out our polysilicon and wafer capacity in 2025 and now have more than 80% of our capacity committed for the next 5 years. And today, we're building on this progress with some exciting news.

Over the last 18 months, we have built the largest solar ingot and wafer facility in the United States, co-located with our polysilicon manufacturing facility in Hemlock, Michigan. It was a significant undertaking. To give you a sense of scale, the factory contains as much steel as the Salesforce Tower, San Francisco's tallest skyscraper. The site is the equivalent of 60 football fields, and the building itself occupies about 1/3 of that.

Now we hope we can offer our investors the opportunity to visit this site soon. So you can see this terrific new factory for yourselves. We have grown the Corning family in Michigan. And as we speak, our folks are starting that big factory up.

In this quarter, we expect to move from producing thousands of wafers a day to more than 1 million a day. So needless to say, this is an exciting and stimulating time for us. As we've shared, we have committed customers for more than 80% of our capacity for the next 5 years. So our focus will be on our continued ramp to meet their needs.

At the same time, we'll be applying our deep material science expertise to bring our more Corning content approach to bear in solar and applying our advanced manufacturing capabilities to establish ourselves as the global low-cost producer even as we're based in the U.S. Overall, we are thrilled with our progress in solar. In quarter 1 of this year, we generated $200 million of sales in this map. We expect to triple that run rate by 2027, adding $1.6 billion of new annualized revenue to Corning's earnings power as we march towards our goal of building a $2.5 billion revenue stream by the end of 2028. So altogether, as we approach the second anniversary of Springboard, the plan has clearly been a tremendous success, and we have plenty of growth yet to come.

With that, I'll turn it over to Ed for more detail on our results and outlook.

Thank you, Wendell. Good morning, everyone. We delivered outstanding third quarter results, reflecting strong sales growth and even stronger profit expansion across multiple businesses. Year-over-year in Q3, sales were up 14%, while EPS grew 24%.

Operating margin expanded 130 basis points to 19.6% ROIC grew 160 basis points to 13.4%, and we delivered strong free cash flow of $535 million. First, I will provide more color on our Q3 results, then I will cover our Q4 expectations, both in the context of our Springboard plan. With that, let me share some details on our Q3 results at the segment level, where you see some of our key Springboard initiatives for sales growth and profit expansion [indiscernible]. In Optical Communications, our growth was led by strong adoption of our new Gen AI products.

Third quarter sales grew 33% year-over-year to $1.65 billion, highlighted by 58% year-over-year growth in our enterprise networks business. Investors continue to ask us to size our Gen AI opportunity for inside the data center. We began to size the opportunity in early 2024 when we provided a 25% CAGR for 2023 to 2027 for our enterprise segment sales. We upgraded the CAGR to 30% in the beginning of 2025. As a reminder, in 2023, we had a $1.3 billion enterprise business and almost half of that business was for hyperscale data centers.

In Q3 of 2025, our enterprise business sales were $831 million or $3.3 billion annualized. Compared with 2023, that's a $2 billion increase in sales. And essentially all of that growth is related to the scale-out of Gen AI networks. Clearly, we are growing much faster than the 30% CAGR we provided.

This demonstrates the excellent response to our new Gen AI products, and we expect the growth to continue. We also saw another quarter of year-over-year sales growth in our carrier networks business. As a reminder, we categorize sales of our products used to interconnect data centers in our carrier business. We applied our Gen AI innovations to this space with new high-density Gen AI fiber and cable that enables customers to fit anywhere from 2 to 4x the amount of fiber into their existing conduit.

We began shipping these products in the first quarter. We doubled sales from first quarter levels in the second quarter, and we saw another significant sequential step-up in sales again in the third quarter. And we're still in the very beginning of this opportunity as we expect it to be a $1 billion business for us by the end of the decade. Optical Communications net income for the third quarter grew twice as fast as sales, up 69% year-over-year to $295 million, driven by the successful implementation of our Springboard plan in both enterprise and carrier.

Moving to Display. We shared our expectations for the full year net income of $900 million to $950 million in 2025 and net income margin of 25%, consistent with the last 5 years. We continue to expect to be at the high end of the $900 million to $950 million net income range and for net income margin to be at least 25%. In the third quarter, display sales were $939 million, and net income was $250 million, both up slightly from the prior quarter, driven by stronger-than-expected panel maker utilization.

Q3 price was consistent with the prior quarter. And for the full year, our expectations for the retail market remain unchanged. We expect TV unit sales to be consistent with 2024 and TV screen size growth of about an inch. As a reminder, 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 yen environment.

We hedged our exposure for 2025 and 2026, and we have hedges in place beyond 2026. In 2025, we reset our yen core rate to JPY 120 to the dollar, consistent with our hedge rate. We did not recast our 2024 financials because we expect to maintain the same profitability in display at the new core rate. Looking ahead, we expect glass market volume to be down slightly versus Q3, and we expect our Q4 glass pricing to be consistent with Q3. In Display, overall, we are maintaining our market, technology and cost leadership while benefiting from market growth and a glass supply-demand environment that is balanced to tight.

Turning to Specialty Materials. The business delivered a terrific quarter. And as you heard earlier, our announcement with Apple creates a larger longer-term growth driver in mobile consumer electronics through Springboard and beyond. In Q3, sales were up 13% year-over-year to $621 million. primarily driven by the successful adoption of our premium glass innovations for our customers' flagship product launches.

Net income was up 57% year-over-year to $113 million on the strong incremental volume, serving as a great proof point of the powerful incrementals outlined in our Springboard plan. Turning to Automotive. As a reminder, in Q1, we graduated our auto glass business and together with our Environmental Technologies business, created this segment. Automotive sales were $454 million, up 6% year-over-year, primarily driven by a stronger light-duty vehicle market in China, partially offset by lower heavy-duty diesel sales in North America.

Net income was $68 million, up 33% year-over-year, driven by strong manufacturing performance. Overall, we are focused on executing our more Corning growth strategy in Automotive as additional content is required in upcoming vehicle emissions regulations and as technical glass and optics gain further adoption in vehicles. Turning to Life Sciences. Sales were consistent with the prior year.

Net income grew 7%. Finally, let's turn to Hemlock and Emerging Growth Businesses. You heard an update on our new solar business from Wendell a few minutes ago. As a reminder, that business currently sits in this segment.

We plan to build solar into a $2.5 billion revenue stream by 2028. We are commercializing our new Made in America ingot and wafer products. Our new wafer facility came online in Q3, and we are ramping in Q4. We have committed customers for more than 80% of our capacity for the next 5 years. Segment sales were up 46% year-over-year, primarily driven by additional polysilicon capacity coming online and the ramp of our module operations. As expected, net income reflected the ramp costs of our new solar products as we address significant customer demand.

Now I'd like to take a moment to discuss operating expenses. In the quarter, OpEx was $826 million, which was above our normalized run rate. Included in Q3 OpEx was higher variable compensation expense, including stock compensation. The primary driver of the increase was the significant increase in our stock price in the quarter.

And as a reminder, we pay for performance, and we are performing well. Now let's turn to the fourth quarter outlook. In the fourth quarter, we expect to deliver sales of approximately $4.35 billion, representing year-over-year growth of 12%, driven by strong adoption of our Gen AI products and by solar sales as we ramp wafer production. We expect EPS to once again grow faster than sales to a range of $0.68 to $0.72. Our expectations include approximately $0.03 for the temporary impact of the continued solar ramp.

You can clearly see from both our Q3 results and our Q4 outlook, we are significantly enhancing our return profile as we execute Springboard. As a powerful proof point, we now anticipate achieving our Springboard operating margin of 20% in Q4, a full year ahead of plan. We are very pleased to see that on strong sales growth, we have grown operating profit at twice the rate of sales. That's a 370 basis point improvement in operating margin from our Q4 2023 starting point.

With that, I'll shift from segment results to capital allocation. As we previously shared with you, our upgraded Springboard plan includes higher sales and higher profit. We expect to convert that higher profit into more cash flow. And we've told you that as we grow sales, we expect profit to grow even faster, resulting in strong free cash flow generation.

The third quarter was another great proof point. We delivered free cash flow of $535 million. We expect full year 2025 free cash flow to be a significant step up from 2024. We expect to spend approximately $1.3 billion in CapEx in 2025. So how do we invest the expected higher cash flow? Companies do capital allocation in different ways.

We prioritize investing in 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 they see the value in this approach. 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 21 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 the last decade. We've repurchased 800 million shares, close to a 50% reduction in our outstanding shares, which at today's share price has created approximately $50 billion in value for our shareholders.

Because of our growing confidence in Springboard, we started to buy back shares again in the second quarter of 2024, and we have continued to do so every quarter since then. And we expect to continue buying back shares going forward. Now before we move to Q&A, I'd like to wrap up by reiterating a few things. When we originally launched Springboard in the fourth quarter of 2023, we provided you with a compelling financial plan.

And as we approach the second anniversary of the plan, we are delivering compelling results. From our starting point, we have grown sales 31%, expanded operating margin by 330 basis points, grown EPS 72%, more than twice the rate of sales growth, expanded ROIC by 460 basis points and generated strong free cash flow. And in Q4, we expect to achieve our Springboard operating margin target of 20%, a year ahead of plan. So we feel great about our progress.

And most importantly, we are positioned to capture strong growth well into the future. With that, I'll turn it over to Ann.

Thanks, Ed. Operator, we're ready for the first question.

[Operator Instructions] Our first question comes from Josh Spector with UBS.

I just wanted to ask on the optical sales. I mean, obviously, a good quarter and good growth year-over-year. I think expectations are maybe a little bit higher based on some other kind of optical sales players into that supply chain. So I'm just curious if you could talk about any timing effects between 3Q, 4Q that may have impacted some sales or if this is kind of the right run rate we should be growing off of?

Josh, thanks for the question. So maybe what I would do is just start with something I shared when I was reading my remarks. As a reminder, our data center business, the business that's primarily growing through the new Gen AI products we've introduced was about $1.3 billion in 2023, and our current run rate is about $3.3 billion. So we've added $2 billion of sales in that space over about 7 quarters.

So a significant amount of growth. We expect that growth to continue. We also have a reasonable amount of growth that's accelerating in the data center interconnect space, and that's in our carrier business, and we also grew carrier about 14% in the third quarter year-over-year. So significant growth there as well.

So I think we think of that as significantly outperforming hyperscale CapEx. We would size that if you use Dell'Oro or some of the other firms that publish at about a 40% year-over-year level. So that's not sort of how we think about that business. The timing in any given quarter certainly can depend on specific customer plans.

Let me do a little more strategic and then address the specifics. I think we do timing from quarter-to-quarter, Josh, best served there. I think to maybe follow up after the call with Ann and let's make sure that sort of how you're thinking about models and what's happening in a quarter -- any given quarter is one place for us to start, so we make sure we don't talk past each other. What I'd add to Ed is sort of every time we're in a conversation with our customers, they want more from us.

And things are quite tight right now. That being said, the reaction to our products is such that they want us to grow even more dramatically as they look ahead to the needs of their supply chain. And so really, in the dialogues between ourselves and our customers, they're -- where they've really turned to is if we need to grow our capacity faster than we currently are, how can they step forward to derisk any capital that we have to invest because the way we look at this is the growth rates are just so high. And as we seek to serve and delight our customers is that we look to them to be able to help us with any sort of capacity investment and/or derisk that capital investment going forward for our shareholders.

So it's hard for me to comment, Josh, like any specific deltas quarter-to-quarter. I think those are best handled sort of with IR. But if your question is that do we see just a ton of growth here? The answer is yes, sir.

And the next question comes from Asiya Merchant with Citi.

Really powerful operating margin expansion growth here guided as well for 4Q. How should we think about -- given the growth that you guys are talking about, whether it's in optical, auto, solar ramp, how should we think about incremental operating margins going beyond this fourth quarter here? And if there are any updates now to the Springboard operating margin target, given you're already achieving that a quarter ahead -- sorry, almost a year ahead in 4Q?

Asiya, thanks for the question. So first of all, we're really pleased with the performance we've had over the last 7 quarters. I think improving both our gross margin and our operating margin was a really key component of our Springboard plan. And so we feel great about where we are.

And as I mentioned, in our guide for both Q3 and Q4, we had some ramp costs associated with bringing our solar facility online. So at some point, those costs will go away. We'll be producing at full capacity and selling and that will help with our gross margin and our operating margin as well. And the way I think for now that we'd like you to think about our operating margin is it creates a really strong return profile for our business.

So we expect sales to continue to grow nicely as we go forward. We've got a 20% operating margin, certainly could go higher than that. We'll come back and address that at some point later in the future. But if we're able to continue to grow our sales at that level, we'll continue to improve our return on invested capital, and we'll continue to improve our free cash flow.

So that's how I think investors and others should think about the financial profile of Corning going forward. Does that help?

No, that's great. And then just maybe on auto, how you guys are thinking about the upcoming emissions, whether it's a 2026 driver and kind of the growth rates we should expect in that segment?

Yes. So I would say in auto, right now, one thing I would point out is that our sales are impacted by a weaker heavy market in North America. At some point, that will bottom out and start to come back, and we'll start to see the growth we would expect like in our auto glass segment and in maybe other parts of the business, we'll see that lift through just because heavy-duty will sort of stabilize and start to come back through the cycle. And then yes, we do expect a couple of drivers of growth in this business.

First, auto glass. We expect that business to continue to grow and drive growth through this year into next year and so on. And then I think the emissions regulations in the United States could start to impact us at the end of '26 for model years that start in 2027 and beyond.

And the next question is from John Roberts with Mizuho.

In solar, I think there was a large amount of downstream cell and panel inventory brought into the U.S. in advance of the new duties. Does that impact your ramp at all? Or do you accelerate as those downstream inventories are worked off?

John, I love your insights in this space. You are correct. That was indeed true. And as those inventories deplete, we're seeing really 2 impacts: a, demand front and as well sort of module pricing continuing to improve.

So yes, we're seeing the dynamics that you're talking about. The core of our particular play is the need for U.S. origin product. And as a result, most of our customers are signing up to us just for that. And so really, on the margin, the particular overall industry dynamics that you're explaining don't hit us that dramatically because we're a preferred supplier as a U.S. player.

But your insights are right on, John.

And our next question comes from Samik Chatterjee with JPMorgan.

This is Joe Cardoso on for Samik. Maybe just for my first question here. Optical is clearly demonstrating strong revenue performance in the backdrop of these AI tailwinds, but margins have also been impressive, tracking close to 18% in the quarter. How should we think about the headroom for margins to continue to improve from here?

And as you consider kind of the demand pipeline that you're seeing from your customers, how should we think about factors such as product mix as well as eventually capacity additions that could influence the trajectory here?

So I'll start, Joe, and then I'll let Ed add. I think you are on all of the right questions. You really are. So everything really comes down to the reaction to our innovations and the value they create.

As our innovations create more and more value, it offers us the opportunity to continue to improve our profitability as well that we see the opportunity for continued growth here to be quite robust tied to those new product sets. And we'll provide a little more insight as we get a little bit further along in our customer dialogues with how we're going to approach capacity risk reduction and strong commitments from our customers that will allow our customers that will allow us to provide high confidence guidance for our investors.

Yes, Joe, the only other thing I might add is, as we've shared the last several quarters, we have been adding capacity. We will continue to do that to meet demand. So there was or have been some ramp costs in our optical business as we are able to make more and sell more that improves our margins. You saw that nicely here in the third quarter.

And I think there's definitely some room above where we are to continue to grow from there.

Helpful color, guys. And then maybe for my second one and in a similar vein, the Hemlock ramp here, I'm just particularly interested in how we should think about margins for this business as well. Obviously, they're running a bit below last year's level as you kind of get through the early stages of the ramp. But any way we should be thinking about the timing of margins here tracking back to those levels and then potentially surpassing it, especially when we're considering the impact of tax credits and some of the other subsidies, which maybe at least from an investor standpoint is a bit opaque in terms of how those should influence the margin trajectory as we kind of think about the business ramping going forward?

Yes. So maybe just stepping back, our goal here is to build a $2.5 billion business. So you can sort of take our current run rate and get to that -- how much incremental sales we'll add from there. We expect that business to be at or above the Corning operating margin level.

So you can think of it as being a very nice margin business when we're fully up and running. I think you'll see sort of incremental improvements as we add capacity and as we sell more. So I don't know that I would particularly call out timing in any given quarter, but we should just continue to improve kind of quarter-over-quarter as we go.

Yes. So let us sort of get through this quarter and the sort of crucial start-up time with wafers and maybe a little bit into Q1. And then we ought to be able to provide a little more help to you on how the factory is coming up and how we think of it for the coming year. Right now, we're kind of making that jump between making thousands of wafers a day to trying to make 1 million a day, and that tends to focus our mind on the near term.

Next question comes from George Notter with Wolfe Research.

I wanted to kind of talk a bit or ask a bit about the optical business in terms of just supply constraints. Talking with some folks around the industry, it sounds like you guys are no longer selling glass on an OEM basis to others. I assume it's because you've got more demand in your own internal glass needs than maybe you previously expected. But is that actually the case?

And then can you talk about what you're doing to expand capacity? I saw the expansion news in the Hickory facility this past week. I'm just wondering kind of where lead times are and what the capacity expansions look like.

I won't comment on our specific on dialogues with our customers and what form they take our product on at this stage. I would say, George, that you are correct in that the demand for our products relative to our supply puts us in a situation where we are quite tight. And we have pre-existing sort of ramps that we have been doing. But now as we look to the accelerating demand from our customers, we're in dialogues with them about how to best set our manufacturing platform profile to serve them better for the future.

And how do we handle sort of the risk of that and how do we make sure that we derisk any investments that we make through commitments and/or funding from our customer set. So that's where we are right now, George. More to come as those things start to come together.

Got it. And any comments on lead times? Yes, I was going to ask about lead times. Any comments there?

It really depends on the SKUs. There's no question though that everybody wants more from us faster, right? So in that way, we are seeking to improve our lead times because things are pretty tight. That being said, we're able to -- we've been able to meet really unplanned for growth from our customers in terms of demand.

And we brought a number of new customers have come on board for us because of the power of our innovations.

Next question comes from Wamsi Mohan with Bank of America.

Maybe to start in enterprise, if we look at the pace of quarter-on-quarter changes in revenues, it's a little bit below the same time frame last year, and that happened in Q2 and in Q3. And I'm wondering if we can just kind of dissect what the reason behind that might be given that the opportunity that you've highlighted here and the investments that you pointed to across multiple hyperscalers and data centers is just seeming to be very strong. So maybe you could just put that in some context and how we should think about that flowing into the fourth quarter as well? And I have a follow-up.

So Wamsi, just to make sure that we understand you, you made a comment about Q2 to Q3, both this year? And then I thought you said last year. Could you just make your question? I just want to make sure we hear you correctly, Wamsi.

Right. Yes. No, Wendell, happy to clarify. I'm just saying that the incremental sequential dollar changes that you experienced from Q2 of '24 to Q3 of '24 was about $100 million in enterprise.

This year, it's about $82 million. And last year, in the same time frames in Q1 to Q2 also, it was a little bit higher last year versus this year. And I'm just wondering why the dollar increases are not accelerating as adoption of AI takes over more.

I totally get it, Wamsi, in a way, maybe ties to some of the stuff George was talking about. So as we take a look at the year over year -- sequential quarter growth last year versus this year? And why isn't the dollars sort of the same? And is that a demand question?

Or is it a supply question? If that's where you're going, yes, it's how much incremental supply was available one quarter to the next is the primary driver of that. And we had a hunk more incremental supply in a particular SKU that enabled that jump last year and this year. So in that way, I guess it's all timing is a way to think about it, but it's not a demand piece.

It's purely relative delta in supply between the years. Did that answer make sense, Wamsi?

Yes. Maybe, Wendell, just to follow up on that. Does that mean that like you are undershipping demand fairly significantly now in Q3? And does that lead to a catch-up in Q4?

So I don't know how to think about undershipping demand. It's -- right now, if I could put more on my loading dock, our customers would take more. I mean that is just true, right? And so we expect that situation to continue for the foreseeable future.

And so really, it's coming to a supply piece for us, what particular products undo a bottleneck at what particular time is driving more of what we put in a guide for our total revenue as a company than it is, can we sell more. Any particular model. We'll try to help after the call a little more with modeling and sort of how we think about it and what those range of outcomes can be, Wamsi. All right?

Okay. And if I could, just quickly, obviously, very exciting news around Apple's investment in Harrodsburg. Now that we're talking about Apple on the call, can we actually just -- can you help us think through the -- if the economics in specialty change meaningfully for Corning, either on pricing or margins of these cover glass products given sort of the, I guess, co-investment that is happening here?

So the key thing that will drive our relative profitability in mobile consumer electronics will be the adoption of innovations and the rate of adoption of innovations. So for us, one of the most exciting things about the Apple announcement is the very long-term commitment and the co-innovation center that is going to be there. And what you can look through to that is saying, you can expect a lot of amazing new products to come out of that collaboration. Usually, the more amazing the products are that we make, the more return benefit accrues to our investors.

And we would expect that historical approach, which we call -- more Corning to continue.

Operator, we've got time for one more question.

Okay. And the last question will come from Mehdi Hosseini with Susquehanna Financial Group.

Most of the good questions have been asked. I'm just wondering, Wendell, as we look into the longer-term opportunity, especially given the success of the Springboard plan, should we expect that by '26, '27, the incremental revenue opportunities would be in the high single billion on a quarterly or $30 billion plus on an annualized basis? And I'm just looking at the charts that you provide on a quarterly basis, and I'm just taking the same run rate and then extending it into '27 and '28. And I have a follow-up.

So we'll update -- we'll owe you guys an update on Springboard given our strong performance. It seems like we upgrade our Springboard plans. And then within just a couple of quarters, we performed so well that we get asked to update our Springboard plan again. So as we look to -- we're in the middle of that process that runs through the remainder of this year and into early next.

And then we'll give you a good solid update on what it is we see. To your specific questions on run rates, why don't we sort of follow up on that after the call so we can make sure we understand your math and everything that we've provided historically.

Got it. Okay. And just a quick follow-up, and this has to do with your strategy with solar and also the acquisition of the JA Solar module manufacturing capacity from the last quarter. Should we assume that you would be able to make the entire solar module, including poly and the module itself at an affordable way so that everything is made in U.S. and used by U.S. customers?

And I'm focusing more on affordability, especially given the fact that the subsidies are fast going away.

So the short answer is yes. In the value chain, what has -- our area of focus has been on ingots and wafers. And then yes, we also wanted to have a go-to-market position in modules, primarily because we have some new innovations to bring to that, that could increase the conversion efficiency and provide some of the best products or maybe the best product in the world for solar is our hope. But the core of what we're doing, you've nailed it in one, which is we would like to see the U.S. supply chain that is able to make products that are competitive versus the landed basis of solar products made overseas by the time we are done with our efforts here.

Our focus is going to be on those areas that we can be really strong. We would rather source, I would say, the cell portion from other U.S. makers through time. But one way or the other, we want to bring our innovation to bear so that the U.S. has domestically manufactured solar power because it's just going to be super important, especially we've been talking so much about AI. AI needs power, needs U.S. source power.

This is yet super -- another super economical way for us to provide power, especially in speed.

Thank you, Wendell. Thank you, Mehdi. And thank you, everybody, for joining us today. Before we close, I wanted to let everyone know that we're going to attend the UBS Global Technology and AI Conference on December 2. Additionally, we'll be scheduling management visits to investor offices in select cities.

Finally, a web replay of today's call will be available on our site starting later this morning. Once again, thank you all for joining us. Operator, that concludes our call. Please disconnect all lines.

This does conclude today's conference call. You may now disconnect.