SiTime Corporation Common Stock 2026 Q2 Earnings Call

Good afternoon, and welcome to today's conference call to discuss SiTime's second quarter 2026 financial results. Joining us on today's call from SiTime are Rajesh Vashist, Chief Executive Officer, and Beth Howe, Chief Financial Officer. Before we begin, I'd like to point out that during the course of this call, the company may make forward-looking statements regarding expected future results, including financial position, strategy and plans, future operations, the timing market, and other areas of discussion. It's not possible for the company's management to predict all risks, nor can the company assess the impact of all factors on its business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements.

In light of these risks, uncertainties and assumptions, the forward-looking events discussed during this call may not occur, and actual results could differ materially and adversely from those anticipated or implied. Neither the company nor any person assumes responsibility for the accuracy and completeness of forward-looking statements. The company undertakes no obligation to publicly update forward-looking statements for any reason after the date of this conference call to conform statements to actual results or to changes in the company's expectations. For more detailed information on risks associated with the business, we refer you to the risk factors described in the company's annual report on Form 10-K for the year ended December 31, 2025, as well as the company's subsequent filings with the SEC, including the company's quarterly reports on Form 10-Q.

During the call, management will refer to non-GAAP financial measures, which are considered to be an important measure of company performance. These non-GAAP financial measures are provided in addition to and not as a substitute for, nor superior to, measures of financial performance prepared in accordance with U.S. GAAP. This GAAP to non-GAAP reconciliation includes stock-based compensation expense, amortization of acquired intangibles, amortization of financing-related transaction costs, and acquisition-related expenses, which include transaction and certain other cash costs associated with business acquisition, as well as changes in the estimated fair value of earn-out liabilities and accretion of acquisition consideration payable. Please refer to the company's press release issued earlier today for a detailed reconciliation between GAAP and non-GAAP financial results. Unless otherwise specifically noted, all comparisons made during today's conference call are year-over-year comparisons with the corresponding year-ago period.

With that, it is now my pleasure to turn the call over to SiTime CEO, Rajesh. Please go ahead. Thanks, Brett.

Good afternoon, and thank you for joining us today. Today, I am happy to introduce you to an expanded SiTime. We started with a simple vision. High-performance systems need high-performance, resilient timing or precision timing. We have delivered on that vision with the most compelling differentiated portfolio in the industry. That is oscillators, resonators, and clocks, and we are the only company that is doing so. The outstanding financial results that we are reporting reflect SiTime success. The second quarter was truly exceptional. Revenue was $157.4 million, up 127% year-over-year. Gross margins were 67.1%, up 8.9%. Operating margin was 34%, up from 10% a year ago, and net income was $65.7 million, or $2.34 per diluted share, up 400%. This strength is evidenced across all our end markets. Every BU or business unit grew more than 50% year-over-year, and every region grew more than 50%.

Some were over 100%. Other markers of strength, book to bill, order size, ASPs, all grew on a higher value product mix. Channel inventory held on to our tight target levels, reflecting strong pull-through. Now that many customers are placing orders 12 to 18 months in advance, our visibility into 2027 keeps improving. Other indicators that point to future demand, such as average design-in value and funnel size, grew significantly. Our communications enterprise and data center business, or CED, is again the engine of our growth, but not the only one. CED grew 181% year-over-year and crossed $100 million in quarterly revenue, our ninth consecutive quarter of triple-digit growth. We expect CED's rapid growth to continue with several drivers behind it. The first driver is increasing bandwidth. The move to 1.6T terabit in optical modules is driven by the need for more networking in the data center.

In 2027, we expect our 1.6T revenue to grow by 100%, while 800G also grows significantly. In both these applications, which we expect will be a combined $450 million of SAM in 2027, SiTime has significant market share. These modules need higher frequencies and performance, which fits closely with SiTime's value propositions. The second driver is the further adoption of synchronization by hyperscalers across both compute and networking nodes in the data center. This has increased demand for our Elite family of Super-TCXOs, adding several hundred dollars of content per data center rack. The third driver is the expansion of AI data centers, spending beyond traditional hyperscalers. SiTime products are now being used by new OEMs and ODMs, bringing demand that did not exist before this.

We've talked several times about the diverse nature of SiTime's business, and a strong example is AI beyond data center and into cars, humanoid robots, drones, and personal AI devices, each of which opens a new opportunity for our precision timing. In all types of vehicles, including agricultural and heavy equipment, our content increases significantly as more AI-based autonomous driving is built into the system. Positional accuracy is key to autonomous driving, a $400 million SAM, and it depends upon precision timing. Customers choose SiTime devices for resilience that delivers up to 10 times better positional accuracy. In defense, we see a significant opportunity in assured PNT, which is position, navigation, and timing, a $400 million market where timing keeps working when GPS does not. As jamming and spoofing become prevalent, GPS-dependent platforms need a local timing backup that can be trusted. This is exactly where our precision timing shines.

Our devices enable systems to be immune to spoofing and extend PNT validity. This opens a retrofit opportunity across the install base as defense spending increases worldwide. In mobile, IoT, and consumer, or MICBU, personal AI devices, smart glasses, wearables, hearables, health devices, are an emerging growth area. Since January, we have added significant oscillator opportunities to our funnel in these applications, and our Titan resonators continue gaining traction with partners and OEMs. Mobile demand continues to grow with visibility through 2027, and our MICBU funnel is now over $1.2 billion. On July 1, we closed the acquisition of Renesas' timing business well ahead of our year-end goal. We call this business our Timing Products Division or TPD. To the TPD team worldwide, we say to you that you are in the right place for your talents and ambition, so welcome home.

This 20-year clocking franchise is a highly respected provider of clocking products. Over its evolution from ICS to IDT to Renesas, this business has consistently delivered architectures, and the engineers are known for their technical prowess. Take two examples, FemtoClock and VersaClock, two proven clock families with many generations of products that are now part of our portfolio. FemtoClock has led the industry in jitter performance and features for over 20 years. VersaClock, used across CED and industrial applications, has offered the best balance of power, jitter, size, and programmable flexibility for 25 years. Buffers, which are usually considered less differentiated, are over $100 million in revenue for TPD with a broad customer base. TPD's formula for success is to consistently lead the industry by 12 to 18 months in new architectures and performance.

This business serves 10,000 customers with 70% gross margins and nearly 70% of the revenue coming from CED. The same factors that are driving the growth in SiTime's CED business also help TPD. Our previous guidance of $300 million in revenue in the 12 months post-close indicated a growth of 40% over the 2025 revenue. While it's still early times, we expect that TPD could grow at a higher rate. This acquisition accelerates SiTime's path to $1 billion in revenue. It moves us closer to our goal to be the timing in every important system in the world. I'd like to leave you with where our innovation is heading in the future. We're moving timing from a discrete component to something that's integrated into the heart of the system through chiplets, advanced substrates, and modules that enable higher performance and compute density.

In CED, we think that this expands our SAM by $2.5 billion by 2030 in opportunities that do not exist today. As AI moves outward from the center into physical edge and personal systems, we expect this integration of timing will build similar higher value opportunities as well. The opportunity in front of us has never been clearer. Modern electronics run on precision timing, a category we created. We lead it today with the strongest portfolio, the best customers, and the balance sheet to invest through cycles, and intend to lead it in the foreseeable future. Thank you. Beth? Thanks, Rajesh.

Today, I'll walk through our second quarter 2026 results, and then I'll provide our outlook for the third quarter. As a reminder, my remarks focus on non-GAAP financial results, which are reconciled to GAAP in our press release, unless otherwise noted. Q2 was another strong quarter and demonstrates the power of our model as revenue scales. Revenue was $157.4 million, up 127% year-over-year and 39% sequentially. This performance was driven by broad strength across the businesses, led by Communications, Enterprise, and Data Center, or CED. CED revenue was $101.2 million, up 181% year-over-year and up 34% sequentially. Growth in this segment continues to reflect expanding demand for precision timing across AI infrastructure, including optical modules, switches, accelerators, and related high-performance systems.