“Overall, we feel good about navigating this transition and continuing to improve our gross margin.”

In context

“Jean Hu (Executive Vice President, Chief Financial Officer and Treasurer): Tom, thank you for that. Gross margin is primarily driven by business mix. We're pleased with our gross margin progress in the first half of 2026 and our guidance for Q3 2026. For 2027 there are a few puts and takes. As Lisa mentioned, our server business is expanding significantly with the increased TAM and the pace of our business growth, which is accretive to overall gross margin. The pace of the data center AI ramp is also important because from a revenue opportunity perspective, data center AI adds significant revenue and gross profit; however, gross margin for data center AI is slightly below corporate average. The mix will determine how we progress through 2027. Overall, we feel good about navigating this transition and continuing to improve our gross margin. Additionally, our Embedded business is recovering significantly and should provide additional tailwind on gross margin in 2027. So I feel really good about that.”