Good afternoon. Welcome to Compal's Q4 2025 results conference call.

I am Randy Abrams, I'm head of Taiwan Research at UBS, and I am joined by the Compal management team. We have with us Mr.

Tony Bonadero, CEO, Mr. Jack Wang, CFO and spokesperson, and Ms.

Tina Chang, Senior Director and Investor Relations. Format for the call, we will start with Tina for financial review, followed by Tony for the business update and guidance, and then we'll turn it back over to Q&A where you can raise hand to ask your question.

With that, I'll turn it over to Tina to go through on the financial review. Thanks, everyone, for joining us.

Thank you, Randy. Thank you, everyone, joining today's call.

This is Tina from Compal IR team. Before I move into the details, before I move into the financial detail, please turn to page two for the for the presentation.

The safe harbor notice for today's call, please take a moment to review the statement. Now let's move to page five for the product mix.

Compal Q4 revenue $190.9 billion, sequential growth of 2% quarter-over-quarter, is mainly driven by the PC revenue growth, and it rose in our key pillar, server and 5G products. Overall, the revenue mix stayed at similar level as Q3.

Next page is for the full year. Full year revenue is $757.5 billion, down 17% year-over-year, is mainly impacted by the weaker global consumer demand, market competition, and our strategic business adjustment.

However, our overall product mix improved. Non-PC revenue increased from 25% to 29%, while notebook PC account for 71%.

The non-PC growth in the 2025 include the smartphone, 5G product, and the server. Please turn to next page for the income statement.

If we overall look into the Q4, Compal, we continued our efforts in the product mix enhancement and the business transformation. Q4 gross margin improved quarter-over-quarter to 5.8%.

However, due to the seasonal increase in operating expenses and ongoing investment in our new business, Q4 operating margin remained flattish at 1.4% level. We booked some non-operating losses in Q4, and we will provide the detail later.

Overall, the Q4 net profit was $1.4 billion, and EPS was $0.32. Next page.

Next page is on the full year performance. The full year gross margin increased from 5% to 5.6%, reflecting our steady improvement in the fundamentals.

2025 was Compal's the first year of AI transformation. We ramped up investment in R&D and a new business.

However, the revenue contribution from this new initiative haven't yet scaled, resulting the limited operating leverage. Therefore, there is a slightly decline in the OP margin from 1.6% to 1.4%.

However, we believe these investment are important for Compal next growth cycle. Overall, the full year net profit was $6 billion NT dollar, and with the EPS $1.38.

Next page. Next page is the details on the operating non-operating breakdown.

Overall, for the Q4 non-operating performance was mainly impacted by the investment losses, about $230 million, driven by the losses booked by our equity method affiliates and our mark-to-market adjustment on some financial assets. For the full year-wise, non-operating losses was primarily caused by the $1 billion foreign exchange losses due to the sharp NT dollar versus US dollar fluctuation during the second quarter of the last year.

Next. Next is the balance sheet.

If we look at the balance sheet, with the improved the cash flow for 2025, Compal's total cash and cash equivalent increased to $83.3 billion at the end of last year, which has account for 19% of our total asset. The total cash conversion cycle remained healthy at around 50 days plus in Q4.

Liability ratio remained stable at 66%, and the book value per share was $29.9 at the end of the 2025. Let's move to next page.

This page summarized the key financial metrics for the past three years, including the revenue, gross margin, operating margin, and net margin. We have been talked about that pretty much.

Next page. Next page is the balance sheet trend for the past three years.

If you look at the bottom left, the chart can see slightly increased the cash conversion cycle day in 2025 compared to 2024 was mainly due to the increase in inventory day levels inventory days, driven by the product mix and the inventory build-up request by the smart devices customer in Q4. Overall, the cash conversion cycle, again, stayed about like a 50 days plus-minus, still remain a healthy level for the company.

Next, let's look at page 14 on the earning distribution and cash dividend for 2025. Last week, Compal the Board of Director meeting has approved the $1.1 cash dividend per share for 2025, which representing payout ratio of about 80%.

The higher payout ratio shows Compal board's commitment to the shareholder returns. Updates on schedule here is that the ex-dividend record date will be on the April 4th, and the payment date expected to be on the April 24th.

Okay. This conclude the financial review session.

Now I'd like to hand over to Tony for the the business update and outlook. Tony, please.

Thanks.

We continue to focus on, in addition to the transformation efforts at Compal, in addition to the core PC business, the kind of plus five initiatives that we talked about: infrastructure solutions, automotive electronics, advanced communications, 5G, medical technology, and industrials. In 2025, we showcased our high-density, liquid-cooled AI servers at SC25, featured and powered by AMD EPYC processors and AMD Instinct GPUs.

We also showcased our flagship AI server, SGX32, built on NVIDIA HGX B300 at SC25. In December, we joined forces with our medical affiliates showcasing group integration at the 2025 Taiwan Healthcare Expo.

We're also recognized by Taiwan's Top 100 Sustainable Enterprises for consecutive years, winning the prestigious awards at GCSA and TCSA. We are also continuing to focus on the gaming area, introducing the Apache Neo handheld ultrasound device by Compal for healthcare and also in other areas, including gaming.

Compal was again awarded the Ministry of Education Silver Medal in 2025 for advanced rural education and supporting underprivileged children. We continue to focus our corporate events on some of the things we're doing.

We go to the next slide. Continue to focus on ESG achievements and investing in the areas of ESG.

We won the Gold Award for Circular Resource Excellence by Taiwan's Ministry of Environment. We continue with Morgan Stanley's Sustainalytics Low Carbon Leaderboard, recognizing our standard service and climate transition management.

Sustainability, we continue to focus on that area, and governance, achieved the recognition of top 5% in Taiwan's Corporate Governance Evaluation, amongst other areas in that space. If we go to the next slide, I'll talk just a little bit about kind of our outlook and what we're seeing in the areas that we're focused on.

In PC, due to seasonality, memory shortages, and rising component prices, we expect first quarter '26 PC units to decline by 15% to 20%. We expect the component constraints to persist in 2027, at least through 2026 into 2027, and we will continue to monitor the situation closely and work with customers on product planning and prioritization.

For memory, obviously, our pricing is proprietary, not going to share specific percentages, but if you look at just the spot market for a gigabyte of DRAM over the last 6 months is up nearly 5.5 times at $2.39 a gigabit. NAND, the cost is about 20 cents a gigabit, almost nearly 4x over the last 6 months.

We continue to see industry analysts predict Q2 is up over Q1 in the range of anywhere from 20% to 40%, Q3 at 5% to 15%, and Q4 at 5% to 10%. We will continue to see impacts throughout '26 and into '27.

For smart device, supported by inventory builds in Q1, we expect our smart device business to deliver double-digit growth quarter-on-quarter in Q1 '26. For servers, we are seeing steady progress in our Infrastructure Server Services business group.

We will see sales in our server business more than double quarter-over-quarter, and in 2026, we expect server to be greater than 10% of total 2026 Compal sales. On non-PC diversification, in 2025, our non-PC revenue achieved 29% of total revenue.

In '26, we are targeting 60/40, about 60% PC to 40% non-PC. That's our business outlook, and we'll turn it into the Q&A.

Okay. Thank you.

Our Q&A session will be moderated by Ken from OpenExchange. You can raise your hand to get in the queue, and we'll make sure we pull you for questions.

Actually, maybe I'll just kick off with two questions first, and then we'll open up to the audience. Tony, in the business outlook, you mentioned about the server greater than 10% of this year's sales.

It does sound like a acceleration from what you were previously looking for. If you could recap just where you're seeing the strength, and how does the profile ramp up for the server business?

Both just from a timing if it's second-half weighted, and how is the weighting between traditional and AI server? I'll just start with that one.

Sure. Compal server business is seeing strong customer traction and AI server platform progress and solid supply chain component management.

We expect the server sales to more than double, as I mentioned, quarter-over-quarter in Q1 '26. We have solid order visibility through the first half of '26 and into the second half.

We also expect, as I mentioned, server revenue to exceed 10% of total sales in 2026. As we look at general versus AI servers, the growth being driven primarily by AI servers.

We're seeing strong demand for HGX B300 and RTX AI platforms in the first half of '26, and we expect AI servers to account for approximately 80% of the total server revenue in 2026.

No, that's helpful. In Q&A, we may get some follow-up questions.

The second one, just before we open up to the audience, to go into the notebook guidance for the 15% to 20% decline, is that maybe just the decline, is that a kind of a seasonal outlook where you're seeing just seasonal slowdown, and curious how much it's the memory impact, either from the price hike we saw at some of the PC OEMs or is there any outright shortage that might be impacting some of the volume where they can't get enough components? Just curious a bit more on the 15% to 20% seasonal

versus

impact from memory. Sure.

I think what we saw in Q4 is some increased inventory build-up in Q4, not a ton, but some, which would lead to some weakness in January. You, of course, have your normal seasonality.

January is usually down 11% to 13%, something like that, it's a little higher than seasonal. Some of that is by some of the build-up in Q4 that we saw.

Again, I think the price increases mostly impacting the consumer market, and so I think that's typically what's driving the January weakness. We saw some in the earnings calls over the past several weeks, we saw Lenovo talk about mid-single-digit decline year-over-year.

We saw HP and Dell be a little bit more conservative and in double-digit. I think Dell mentioned 11% or 12%.

IDC recently came out with a revised forecast that's down 11.3% year-over-year to 253 million total PCs and -11.4% year-over-year to 181 million notebooks, very much in line with the Dell speculation. We do expect that it's somewhere in that range.

They say the market always finds a way, and so through pricing and reconfiguring and really focusing the memory allocation for 2026 on the right products, I think revenue stays whole. Some people are even talking about revenue growth.

We're talking about higher price band products getting more TAM, more share as there's a deemphasis on lower-end consumer and Chromebook. Those are some of the dynamics that we see playing out right now.

Okay. Now I may ask follow-ups, but let me see.

I'll turn it over to Ken to direct if there's any questions on the line.

Thanks, Randy. We don't have any raised hands yet.

Okay. Let me ask a few follow-ups.

We're getting some in from participants online, and ones that do, I'll look out for it in my email if you send a message to me. I'll ask a couple of follow-ups on the notebook business while we're waiting for questions.

First, last year in the notebook business, I think you acknowledged there was a little bit more competition from China that affected market share. For this year, for the Compal business, relative to the market TAM, how's your view on market share in the bidding for projects for this year?

I think we've through the transformation efforts that we've been undergoing here, which range everywhere from just getting better at what we do through automation, through digitalization, through performance in the factory to also just understanding what's happening in the PC notebook supply chain and kind of the alternative solutions that are available today, I think our feeling about our competitive position is way better today than it has been. I think we've looked at various different supply chains options for some key components and outside of what maybe the largest OEM customers are constantly working with us on, right, their AVL's, their standard vendors.

We've also now found some alternative ways to manage things and design things and propose those solutions to our customers. We're way more competitive today.

If we're competing apples to apples with the same approved vendor list, the same supply chains, we can compete on cost with anybody. From a competitive perspective, we feel way better about our competitive standing now after much improvement through the transformation and through understanding those supply chain variables.

For Compal, despite all the headwinds that we talked about, we expect our PC business to remain flat to slightly up in 2026, which, again, reflects our transformation results on competitiveness, the automation, the digitalization, the rolling out of AI, cost reductions, etc.

Okay. No, good.

I see questions. I'll turn it to Ken because I see Irene, Albert, and Al Kaihan.

I'll turn it to Ken to moderate that.

Thanks, Randy. The first question comes from Irwin.

Irwin, please go ahead.

Hi, can you hear me?

Yes.

Yes.

Yes.

Hi, this is Howard from Morgan Stanley. My first question is to follow up on the notebook business.

I think if we look at 2025 just amongst your Taiwan ODM peers for notebook, it looks like Compal was a share loser. Just wondering if this was a result of you pouring and focusing more of your resources on the server business or was there any other dynamic that led to this kind of result?

I know you talked about this year being flat to slightly up. Just wondering what are you doing differently I guess this year versus last year?

I would say, Howard, our focus on non-PC adjacencies to go drive revenue has not distracted us away from PC. We have totally separate teams, totally separate areas of focus.

As I mentioned, I think the reason we kicked off these transformation projects within the company over a year ago is because we recognized that we needed to get a much better handle on our competitive situation, our competitive road map, where we were going. Keep in mind that our business today, if we ship a product today for the first time, first mass production of a product goes out today, that product was awarded to Compal anywhere from 10 to 18 months ago.

A lot of what you're seeing in share loss or some delay in that system because of the time it takes when we get an RFQ, we bid on an RFQ, we win it, we design the system, we take it to mass production. I think, quite frankly, our customers told us dating back a couple years ago that, hey, you need to catch up on digitalization, on automation, on just modern factory processes.

That's what we've been hard at work on for the last 18-plus months. Really, the transformation exercises after we went through diagnostics, after we mobilized everybody, we've been at for about 12 to 14 months now.

A lot of that has been paying off with vastly improved productivity at our sites, vastly improved quality, lower instances of human error on the line. Then we've embraced digital and rolled out AI, not just in the factories, of course, but also within our R&D department, within our supply chain area, within our quality and service areas.

In a short span, we've caught up and positioned ourselves to be more competitive in those spaces.

Thank you. Very clear.

My other question is on your AI server business. You talked about seeing strong demand for HGX as well as RTX platforms, but can you talk a bit about your opportunities within the rack-scale systems like the GB300s or the Helios rack from AMD?

Are there any opportunities to see revenue contributions later this year?

In terms of rack solutions, we are definitely working with AMD on some of the rack solutions that they provide. GB300, honestly, is the life cycle of those platforms, as we all have heard time and again from Jensen, is pretty quick, right?

They're turning those within 12 months, and a lot of talk now about Vera Rubin. We will focus on next generation.

We'll focus on trying to be enabled for Vera Rubin into the next phase of that development. We will definitely focus on rack solutions this year.

That'll be a big focus for us.

Got it. Thank you.

Just one last follow-up on that. For Vera Rubin, is your intention to primarily do level 10 or level 11 assembly?

Thank you.

We will initially start with level 10, and then migrate to level 10 and L11.

Got it. Thank you so much.

Thank you, Howard.

Thank you. We have the next question from Albert.

Albert, please go ahead.

Hi. Thanks for taking my question.

This is Albert from JPMorgan. My first question is, Tony, you showed some colors on the product pipeline for AI server.

May I get more color the customer mix for this 10% AI server contribution? Is it fair to assume majority of that business is coming from existing customer, or we should see also some new customer?

Thank you.

No, I think for the server space, you can expect us to have some new customers as well, not just existing customers. We look at whether it's regional customers, whether it's the some of the hyperscalers that we're talking to or some of the enterprise customers, we'll continue to support old friends as well as gain new customers in that space.

Understood. Thank you.

How should we think about the profitability for the business? In terms of the pricing, is it fair to assume more aggressive pricing for Compal to say compete in the business in early stage?

Also how should we think about the opex, the op leverage in the business?

I think overall gross margin for Compal in 2025 was 5.6%. We expect some pressure on that as our server investments ramp up in '26.

Right now, we see the server business as slightly above that number, but as we transition more of the business from a board-level business to L10, we'll see it migrate more towards that number. Just the scale of it will, obviously, deliver more operating profit for us, but it will end up somewhere about where we are today.

Understood. Lastly, on the notebook one, I know you have shared some colors, but I guess there's still a lot of market concerns on the competition from China, especially they have a lot of subsidy from local government.

If we have very high confidence to reverse the market share trend this year, could you share what kind of change are we seeing from the competition side? If we're going to outperform the market, is it because of market share gain in existing customer, or it's more like a new product share gain for this year?

No, I would say that our PC business, as I mentioned earlier, Compal's PC business, what we see will be flat to slightly up this year in the face of a lot of headwinds. We kind of agree more with Dell and HP.

It's probably more conservative, double-digit decline, there'll be some growth to market, if you will, in that space. I think we're already seeing it, right?

We're already seeing some wins, and, from a subsidy perspective, we heard a lot of the same things, but as we really go in and dissect the competition and look at what's happening, really, it's more of kind of rethinking supply chain a little bit, and also just rethinking overall design guidance, design tolerance levels, things like that. When you start looking at those types of things, there's new supply chains, there's new opportunities in the supply chains which can provide lower-cost components that in some cases weren't considered in the past, that could be considered in the future.

I don't believe that the government subsidies are really what's making the difference. Again, I think if we're competing apples to apples, we produce in China, too, we deal a lot with the local governments over there, we believe we can be cost-competitive with anybody on an apples-to-apples basis.

Understood. That's clear.

Thank you. I'll go back to the queue.

Thanks, Albert.

Thank you. We have next question comes from Kai Han, please go ahead.

Hello, can you hear me? Thank you for accepting my question.

Kaihan Kevin from Fubon Life. My first follow-up is about the PC business.

Just want to be clear whether the guidance of PC to stay flattish to slightly up this year is due to the ASP growth or just the shipment-wise or the market share-wise?

That's just a unit statement. I think people will do some component matching, right?

How much memory are we getting and then where are we going to place that memory? We expect ASPs to be better, obviously, as pricing goes up.

We expect the revenue side of things, but my statement was strictly from a unit perspective.

Understood. Thank you.

That's very clear. My second follow-up is about the server business.

Could you please remind us about the percentage of the revenue contribution from server last year?

Kaihan, last year is low single digit from server revenue.

Understood. Also, we have very ambitious target for server business for this year and the years to come, and I am also very curious about the funding since most of the ODM players on the market has been raising an additional funds to support the growth of server business.

What do we need, or the extra funding for the future?

We can't talk about everything that we're doing, but we're obviously aware of those fundraising efforts, some of the convertible bond efforts that happened, and we are pursuing some of those avenues as well. Stay tuned, more to come.

Actually, Kaihan, Compal Board of Director approved the ECB funding proposal last year on November, $600 million US dollar, and we also get approval from the SEC. We got approval, but overall, I think when to implement that and when to issuance actually still depends on how overall the market condition and as well as Compal overall the working capital financial needs.

Understood. Thank you.

That is very helpful. My final follow-up is about the profit margin, percentage-wise.

Since we all know that the AI server may have some pressure on the gross margin rate and the OP margin rate as well, what is our forecast for our overall margin ratio for the years to come?

Kai Han, actually, we cannot give a specific number, right, on the margin percentage rate. Overall, I think Tony already gives some overall the color and how we think about the margin trend for this year, right?

Gross margin for Compal is that when this year we are getting the more revenue contribution from server, and the server business model actually transit from the board level to the full system level. Definitely that would be put some pressure to the overall company's overall the gross margin rate.

Overall, if we look at the product-by-product-wise, we still see the very healthy the margin rate of pretty each product-wise, right? Overall, fundamentally-wise, for Compal still solid, and we will continue to actively to manage the product mix, productivity, and efficiency to overall to mitigate the potential impact there.

Yeah. Understood.

Thank you.

Thank you. We don't have any questions yet.

Randy, I'll get back to you.

Thank you. I'll ask a follow-up.

Actually, to Kaihan's question on margin, within the notebook business, factoring the pass-through, because you mentioned server will have a little bit dilution, but within notebook, because you already have a bit of unit growth, but then component cost inflation, should we model just due to the higher pass-through a lower margin for the notebook business while we go through the memory price hikes?

On an apples-to-apples comparison on a SKU, if you look at the working capital and the memory cost and what we're carrying through, it's about $100 to $150 per unit is kind of what we're talking about.

I think as for Tony's the overall comment here is that, if you look at the margin rate, right, definitely that will be depends on overall the ASP, right, given the higher BOM cost. Actually, on the margin dollar-wise, it's really no impact because it's just pass-through.

Okay. No, that's right.

It's it's the inflation of revenue. We should be thinking that the units the unit growth and then getting a dollar margin on that if it's a low single unit growth, and then the ASP uplift is mostly the pass-through on the revenue.

Yeah. ASP will be also several factors dynamic there, right?

Will be impact on the overall the BOM cost, but overall also will be depends on how's the commercial, consumer performance for this year, and also depends on how's the customer they're adjusting their configuration on the models, right? That will be impact on overall blended ASP.

Okay. Maybe as the follow-up,

is there a way to think about because you have a few trends. I would think, maybe if you can see how you're seeing commercial versus consumer and also premium, is there a discernible trend where we should think factoring the adjustment of configuration, focusing on premium, do you see a discernible year-over-year ASP trend on top versus the units, in addition to memory?

I think that's a good point. Obviously with the trends that we're seeing, the prices up, right, it's going to blunt consumer.

We see commercial continuing, the kind of Windows 10 refresh is continuing into 2026. It's the longest protracted refresh cycle that I've ever seen.

That'll continue, we'll see a stronger commercial customer, and they're also picking up AI PC. We expect AI PC to reach about 60%, high 50%, 60% in 2026, 80% in 2027, more of a trend for higher compute, higher CPUs, higher capability CPUs, memory, etc.

Yes, we expect to see commercial stronger than consumer given all of the headwinds and the consumer and economic sentiment.

Okay. The guidance doesn't seem to reflect it, but there were some talks about pull-in if the channel and customers now are aware of the memory price, then it pulls in demand.

Are you seeing that overall or in the commercial?

Saw a little bit of that, and not with commercial. We saw a little bit of that in Q4, anticipating memory prices going even higher.

That led to what we're seeing now, which is still kind of a lower cost inventory position, which is quickly going away. We expect probably this month, sometime in the March time frame, certainly by the end of March, all that kind of lower cost inventory gets flushed out, and now we're dealing with the new cost, new pricing.

Okay. On the margin side, the opex I think last year grew 5%.

As you grow out the server, is there a thought the range you're planning for the opex, and also with the US expansion? Also, you could go through on the capex kind of where we were last year versus expectation for this year.

Capex. Randy, your question is capex, right?

Actually, sorry, I asked two parts. I asked opex, the expectation after growing 5% last year for opex,

and then

also the capex last year, where it ended up and this year.

Okay. Opex, if we look at the opex, yeah, you're right, last year $32.1 billion, right, increased about 5% year-over-year.

If you break down into the details that the mainly increased actually is our investment in R&D. R&D is about $20.2 billion, it's up about 7% year-over-year.

However, the marketing, admin expenses is only grow 2% to 3% year-over-year. That show the overall the increase of opex shows that the company can continue the investment in the new business and R&D.

This kind of investment for the new business R&D definitely will be continued into 2026 this year, right? However, as you can see that, the company actually will still closely monitored our overall expenses trend and to take the disciplined approach to manage the opex growth while supporting the long-term growth.

That continued to be our approach and our expectation for this year on the opex side, okay? On the capex-wise, capex actually last year, if we look at into the cash flow statement, is about $8.2 billion the capex for Compal last year.

Compared to historically, we're running about $7 billion capex, incrementally, we add on another $1 billion capex last year is mainly for ramping up our US factory, right? Overall, those of investment going to continue, right, as we mentioned this year, we're going to see a lot of growth from the server side.

This year, the overall the capex plan is about $18 billion, 1-8 billion, okay, incrementally, we're expecting to increase additional $10 billion the capex for this year. Roughly is that the $6 billion will be go into the server-related investment, including our build the server lab in Taiwan and the capacity, some additional capacity in Taiwan, some SMT line in Vietnam, as well as the capacity ramp for US factory, right?

Also additional $4 billion will be go to the Taiwan our headquarter construction spending. That's the some details on the capex.

Okay. Oh, Tina, I might have missed.

You said $6 billion server, $4 billion Taiwan headquarter. Oh, that's for the increase.

Or is that and then

That's the increase $10 billion, right? Last year is $8 billion, this year guidance is $18 billion.

Which is incremental. Okay.

Then since we're waiting for question, I'll ask a couple others. To clarify, I think you mentioned last year server low-single.

We should assume Q4 just for the doubling year-over-year that we're not off. It was still at the end of the year low single digit, a couple percent of revenue for server by Q4?

Last year Q4 still also low single digit.

Okay. Then a follow-up on server, I think originally your plan was 5% going to 10% by reaching that in 2027.

Now if you could do an initial look forward that maybe a rougher level, how are you thinking about the further growth as we go into the Rubin or we'll start to go to more advanced like AMD Helios? Should we expect or see potential another we get to 15%, 20%?

Is there kind of a rough look how you see that server business scaling out as we go out into 2027?

Depends who you ask, right? If you ask my boss, yes, absolutely, but we do see, again, a strong pipeline.

We are talking to a lot of customers and potential customers, and capacity is something, qualified, very good capacity with good yields, good quality, good automation is in dire need. We believe our timing to the market is great, and we believe that there could be a path, certainly by 2027, we believe that 20% number is absolutely achievable.

Okay. Great.

Oh, and I see a question on the line, I'll come back in the queue.

Next question from Kai Han, please go ahead.

Thank you for accepting my question again. Just wondering whether you could give us more colors on the competitive advantage on the server business, especially for those like HGX and RTX model.

We have seen many players on this market such as like Supermicro, GIGABYTE, and their gross margin seems to be some erosion there due to the price competition between those player. How do we stand out in this AI server market in the future?

I think for us, you're right. Especially as we talked about, kind of standardization of the rack and things like that, things are getting more crowded from a competitive perspective.

We believe that our background in being best of class in manufacturing, delivering quality solutions, providing state-of-the-art manufacturing facility, and providing the proper engineering resources both in the design phase and also in the factory is critical. We also believe there's a critical element of back-end service and being able to service the products that are whether they're failing in the factory or whether they're failing in data centers, but being able to have the right level of service infrastructure in region, we believe is absolutely very critical.

We're looking at a total kind of end-to-end solution to provide a competitive advantage to a crowded market.

Understood. Thank you so much for the color.

A follow-up question is about the funding. Like many ODMs players on this market for now seems to be adopting the buy and sell mode for their server business.

The more revenue they gain, the more funding demand they need. Do we consider like the consign mode for the server business in the future or the buy-sell will be the main mode?

As we talk to new customers, there's always new ideas in how to do this, and we are actually looking at some consignment models as well. It doesn't always obviously have to follow a traditional buy-sell type of model that we're used to.

We're open to anything, recognizing the amounts of capital that it takes to hold the inventory and to run these types of businesses. We are talking to customers about a variety of different options.

Understood. My final follow-up is also about the server business.

Since the DRAM and SSD prices just go higher and higher in the recent quarters, is there any impact you see on the server demand, whether it's AI or non-AI for now?

No, we don't. Let me put it this way: the prioritization that's been made for HBM and to kind of prioritize higher profit memory and storage products are leading to obviously changes for PCs and non-PCs, consumer electronics, everything like that.

We have not seen any shortages or reference of shortages in the server, AI server space. The lead times are longer to fulfill POs and those types of things, but by and large, we've not seen any shortages, to speak, in the server area.

Understood. Thank you for the colors.

Thank you.

Thank you, Kaihan. A follow-up question, Tony, on the server mix, you had mentioned earlier L10 moving to L11.

For the profile between HGX, which your focus has been, versus doing the bigger NVL72, how do you see the mix evolving between those? Is it going to mostly at the revenue scales up be driven by ramp of the full NVL72 racks?

It will certainly going to be driven by just the transition L10 as we transition our business from mostly board business or majority board business in 2025 to way more L10 this year. Yes, it'll be driven by the larger racks, but also again we're seeing strong demand right now for B300 and other products as well.

Okay.

The demand on B300, because we've had a few recently like Dell has talked about it, even CoreWeave, and NVIDIA mix of HGX is higher. Are you seeing a new inflection like diversification out for those B300 or is it just more supply able to go into that market?

How are you seeing the demand trends, what's driving B300 now?

I think, clearly, the availability is certainly one thing. Then I think there's certain workloads that are being identified that can maybe be more economically run on that.

There's the usage and applications are evolving, but of course, the availability helps a lot.

Great. Actually, I wanted to ask a question on there's been a lot of talk on Rubin that NVIDIA for certain customers may standardize where they'll control more of the L10 value chain for the racks.

Are you seeing that change in business model? How do you see participating?

Would you be participating in those? Is there like any change in economics or how it would impact the Compal server ramp if you are seeing that?

No, I think there's a vested interest. I think NVIDIA has a vested interest in to controlling more of that.

I think with GB200 and GB300, lots of complexity, lots of manufacturing complexity, lots of people doing customization and changing things, I think also led to a lot of complexity. I think to clean that up, I think there'll be a kind of a much greater focus on standardization and on design for manufacturing and less customization.

We'll fit within that model, and we'll compete based on the things I mentioned earlier about how we provide a competitive differentiation.

Great. Since no question, we have a little bit of time.

There's one or two areas that I think you still may want to cover. Just we focused on notebook and server.

If you could give a sense on the other growth pillars in expectation for this year, just for other application like automotive, 5G, smart devices, if you see any growth engine or potential, how you see those businesses?

Sure. Yeah.

As I mentioned earlier, we got several growth pillars. In addition to talked a lot about notebooks and the servers today, primarily, of course, automotive, 5G, industrial, medtech.

A lot of those businesses are going through changes. Automotive especially, you guys are aware of a lot of the last two or three years, I guess, or more maybe, that industry's changed pretty radically.

Our growth pillars in 2025 grew almost 20 20%. That's AI, again, AI servers, automotive, 5G, and medical.

5G, we saw related revenue nearly double in 2025, and we see that momentum continuing into 2026 as we look at more not just 5G, but also 5G integrated into solutions. That brings in the industrial part of it.

Auto and medical, as I mentioned, auto changed pretty radically. Medical, we think there's a component of M&A involved in medical growth, and there's some opportunities for us to continue to look at that.

Both of those areas remain strategic to our long-term growth, and we're adjusting as needed. With automotive, for example, we're focusing way less on contract manufacturing.

You guys heard me talk a number of times in these calls about diversifying away from the EMS businesses and contract manufacturing and looking more towards ADAS and thermal-enabled detection systems and other higher-margin, full component solutions for automotive. We continue to invest there, knowing that automotive takes time.

A dollar of revenue spent today or a dollar of R&D expense today, you may not recoup that for 2, 3, 4 years just based on the timing of some of that business. Still important, we still continue to invest.

Again, collectively, those non-PC pillars grew 20% in 2025.

Okay. The last one, I think, and then I'll turn it back to Ken if no other questions.

The smart device, I think in your business outlook, you said double-digit sequentially for inventory builds, first quarter will start to rebound. Do you see much momentum for smart device for this coming year?

I think what we're seeing is just based on a customer profile or a couple customer profiles that we have that require inventory builds in Q1. I'll call that somewhat seasonal for those types of businesses.

I would say overall, the consumer electronics market, the impact of memory is pretty minimal, I think. It's still everybody scramble where are we going to get memory from.

Again, I think the industry always finds a way. The usage in most of those devices is pretty low.

Not just memory prices, but also other component prices, we think are going to cause consumers pause in these economic times and as people think about the affordability issues that they're dealing with and some of the economic sentiment. We expect some of those areas like smartphones, we think is down low double digits year-over-year.

I think wearables also probably flattish, that type of thing. I don't think anything major in that space, but nothing stand out in terms of growth either.

Great. Now that's helpful.

Let me turn it back to Ken. We can pull if any other final questions before we wrap up the call, and if not, we can hand it over to Tony for closing remarks.

Ken, do you want to see if any final questions?

Looks like we don't have any questions yet.

Okay. Let's then hand it over to Tony Bonadero to do the closing remarks.

Ahead of that, I just want to thank everyone for joining the conference call, but let me turn it to Tony.

Yeah. I'd like to also thank everybody for joining today's call.

We continue, as I mentioned, to focus on the transformation effort of Compal, kind of rebuilding a lot of our businesses and how we serve them, in some cases if we serve them, right? Selectively looking at every dollar we're investing across the business and in the areas that don't make sense that don't align with our strategic vision, we are decisively moving away from those businesses and reconsolidating in others.

2026 is kind of a touchstone year for us because we believe that a lot of the efforts that we've been putting in these adjacent businesses and these growth pillars and in the transformation all kind of start to take root this year in terms of results. While we think we have a really good story in the second half of servers, again, a strong momentum now, but we think that continues, and we look forward to talking to you guys next time and updating you further.

Thank you very much.

Okay. Thank you, Tony.

Thank you, everyone. Have a great one.

Okay. Thanks, everyone.

Feel free to reach out to the Compal team or also to us if any follow-up questions. Appreciate everyone joining.

Thank you.