SYNAPTICS Inc Q2 FY2026 Earnings Call

Good day, and thank you for standing by. Welcome to Synaptics Second Quarter Fiscal Year 2026 Financial Results Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Munjal Shah, Vice President and Head of Investor Relations. Please go ahead.

Good afternoon, and thank you for joining us today on Synaptics' Second Quarter Fiscal 2026 Conference Call. My name is Munjal Shah, and I'm the Vice President of Investor Relations. With me on today's call are Rahul Patel, our President and CEO; and Ken Rizvi, our CFO. This call is being broadcast live over the web and can be accessed from the Investor Relations section of the company's website. In addition to a copy of our earnings press release detailing our quarterly results, a supplemental slide presentation and a copy of these prepared remarks have been posted on our Investor Relations website. Today's discussion of financial results is presented on a GAAP financial basis, along with supplementary results on a non-GAAP basis, which excludes share-based compensation, acquisition-related costs and certain other noncash or recurring or nonrecurring items. All non-GAAP financial metrics discussed are reconciled to the most directly comparable GAAP financial measures in our earnings press release and supplemental materials available on our Investor Relations website. As a reminder, the matters we are discussing today in our prepared remarks, in our supplemental materials and response to your questions may contain certain forward-looking statements. These forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. Although Synaptics believes the estimates and assumptions underlying these forward-looking statements to be reasonable, the statements are subject to a number of risks and uncertainties beyond our control. Synaptics cautions that actual results may differ materially from any future performance suggested in the company's forward-looking statements. Therefore, we refer you to the company's earnings release issued today and our current and periodic reports filed with the SEC, including our most recent annual report on Form 10-K and quarterly report on Form 10-Q for important risk factors that could cause actual results to differ materially from those contained in any forward-looking statements. All forward-looking statements speak only as of the date thereof. Except as required by law, Synaptics expressly disclaims any obligation to update this forward-looking information. I will now turn the call over to Rahul.

Thank you, Munjal. Good afternoon, everyone, and thank you for joining our fiscal second quarter 2026 earnings call. We delivered another solid quarter with strong results and continued momentum across our business. Total company revenue increased 13% year-over-year, marking our fifth consecutive quarter of double-digit year-over-year growth. This performance was driven by 53% year-over-year growth in our Core IoT products. Disciplined execution helped deliver strong earnings growth with non-GAAP earnings per share increasing 32% year-over-year to $1.21. The Consumer Electronics Show in January was a successful event for Synaptics. We saw meaningful engagement with customers and partners as we showcased the breadth of our latest technologies and solutions. We demonstrated several use cases across our portfolio, including Google's Gemma 3 model running natively on our multimodal processors, highlighted our differentiated Wi-Fi sensing and Bluetooth channel sounding capabilities and one of our partners, Grinn, demonstrated a robotic hand built using Synaptics processors, connectivity and sensing products. We want to thank the analysts and investors who visited our booth. A defining theme at CES and across the industry is the accelerating shift towards physical and edge AI, as intelligence moves closer to the device. This evolution aligns directly with Synaptics' strategic focus and core product strengths. Our portfolio is purpose-built to deliver power-efficient intelligent systems at the edge, and we believe this transition towards physical AI positions Synaptics for sustained long-term growth. We are seeing early, but meaningful traction in robotics, where Synaptics brings differentiated capabilities across processing, connectivity and sensing. One example is humanoids. Synaptics is actively engaged and sampling products with an industry leader that is building a lineup of advanced humanoids. These humanoids incorporate multiple Synaptics touch controllers designed to enable tactile sensing as well as our interface bridge product to support high-bandwidth data transport. Touch sensing is critical for humanoids to perform physical tasks, including sensing force, proximity and surface characteristics. Our touch controllers integrate ML/AI algorithms that enable this level of dexterity, allowing a humanoid to modulate grip force ranging from delicate glassware to solid metal objects while distinguishing subtle pressure variations between plastic and paper cups. As we expand into new markets, we see growing applications for our intelligent sensing portfolio at the deep sensor edge. More broadly in robotics, we are engaging with a growing set of new customers and entering new markets. These engagements span multiple applications that tend to benefit from physical AI and leverage our portfolio of sensing, video interface, processors and connectivity technologies. Our recently introduced Astra multimodal microprocessors are seeing strong interest from both customers and partners. They are choosing Synaptics Astra over competing platforms because of its open-source architecture, developer-ready software, power efficiency and differentiated AI capabilities enabled by Synaptics' Torq neural processing architecture developed in collaboration with Google. We are engaging with customers across a wide range of industries. For example, a leading security and controls company is evaluating our Astra processors along with our connectivity technology as a complete solution, citing our differentiation in AI and power efficiency. Smart home appliance manufacturers are also showing strong interest in Astra for its low-power AI-native design. As physical AI continues to gain momentum, we expect customers to embed increasing levels of intelligence across their devices. Our partner ecosystem for processors continues to expand across industrial markets. We are collaborating with Toradex, a leader in single-board compute solutions, serving industrial automation, healthcare, transportation, agriculture, smart city and aerospace markets. This quarter, we also added another European partner focused on industrial applications. In addition to our Linux-based Astra microprocessors, we are gaining meaningful traction with our high-performance AI-native Astra microcontroller portfolio. During the quarter, we secured a design with a Tier 1 consumer electronics OEM that selected Astra for its differentiated vision capabilities, enabling gesture-based system control in smart televisions. While this is one example, the Astra MCU supports a broad range of vision modalities, including presence, object detection and security. Customer engagements are continuing to broaden across multiple end markets, and we expect to share additional design wins in the coming quarters. As our current Astra products continue to gain traction, we are executing with discipline and advancing our roadmap. This quarter, we are further expanding our Edge AI portfolio by sampling two new products. First, our Astra MCU with connectivity that combines our low-power microcontroller, neural processing technology and latest connectivity into a single monolithic system on a chip. Importantly, it is the only solution in its class to support Wi-Fi 7, Bluetooth 6.0 and Thread, while competing solutions remain anchored to Wi-Fi 6. This device also uniquely integrates front-end touch and voice interfaces, delivering a true system-level solution, enabling meaningful bill of material savings for customers. Second, Synaptics connectivity SoC is our latest device that supports Wi-Fi 7, Bluetooth, BLE and Thread. It is a stand-alone connectivity solution that can be easily integrated into systems using non-Astra compute platforms, furthering our participation in the broader edge IoT market. We are seeing strong interest for these products from home appliance manufacturers, security camera customers, drones, robotics and broad-based IoT module makers, and we expect revenue contribution beginning in calendar 2027. Turning to enterprise and mobile touch. We continue to focus on premium tier of the market. In enterprise, we have seen steady improvement as customers gradually upgrade their infrastructure to support return-to-office initiatives and replace an aging installed base. In mobile touch, we secured another foldable design with a leading OEM in China, reinforcing the technology leadership we bring to this market with our next-generation touch architecture and building on the momentum established by last quarter's win with a leading Korean OEM. As we have noted previously, our content is more than two times higher in foldables. We are actively engaged with additional smartphone OEMs and remain confident in being able to scale this technology to other large display applications. As we continue to focus the company on edge AI solutions, I am combining our processors and connectivity teams into a single organization. This better aligns our resources and accelerates our roadmap to more efficiently deliver world-class integrated processor and wireless system solutions. To summarize, we are seeing continued improvement in our financial performance with double-digit year-over-year revenue growth and operating profit growing at nearly twice the rate of revenue. We are accelerating our innovation and product roadmap to capitalize on growing physical and edge AI opportunities. With a differentiated platform and expanding pipeline and growing customer engagement, we believe Synaptics is well positioned for sustained long-term growth. I will now turn the call over to Ken to review our second quarter financial results and outlook for our fiscal 2026 third quarter.

Thank you, Rahul, and good afternoon, everyone. I will focus my remarks on our non-GAAP results, which are reconciled to GAAP financial measures in the earnings release tables found in the Investor Relations section of our website. Now let me turn to our financial results for the second quarter of fiscal 2026. Revenue for fiscal Q2 was $302.5 million, above the midpoint of our guidance and up 13% on a year-over-year basis, driven by strength in our Core IoT products. The revenue mix in the second quarter was in line with our expectations, 31% Core IoT; 53% enterprise and automotive; and 16% mobile touch products. Core IoT product revenues increased 53% year-over-year, driven primarily by continued strength in our wireless connectivity products. Enterprise and automotive product revenues were up modestly year-over-year and slightly ahead of our expectations. Mobile touch product revenues increased 3% year-over-year. While supply constraints are improving, we still see challenges in certain areas. Second quarter non-GAAP gross margin was 53.6%, slightly ahead of the midpoint of our guidance. Second quarter non-GAAP operating expenses were $104.2 million, better than the midpoint of our guidance. Our non-GAAP operating margin was 19.2%, up approximately 160 basis points sequentially and 190 basis points year-over-year. Non-GAAP net income in Q2 was $48.4 million. And non-GAAP EPS per diluted share came in above the midpoint of our guidance at $1.21 per share, an increase of 32% on a year-over-year basis. Now let me turn to the balance sheet. We ended the fiscal second quarter with approximately $437.4 million in cash and cash equivalents, down $22.5 million from the prior quarter as we repurchased $36.4 million of our shares in Q2. Through fiscal Q2, we have bought a total of $43.6 million of our shares. Cash flow from operations was $30 million in the second fiscal quarter, and capital expenditures for the second quarter were $11.6 million. Depreciation for the quarter was $7.6 million. Receivables at the end of December were $132.7 million and days of sales outstanding were 39 days, up slightly from 37 days last quarter. Our ending inventory balance was $158 million, which increased by $15 million from the previous quarter. Days of inventory were 101 days compared to 94 days at the end of the last quarter. This increase reflects our strategic decision to purchase inventory slightly ahead of demand. Now turning to our third quarter of 2026 guidance. Our guidance is subject to ongoing macroeconomic and global trade and tariff-related uncertainty. For Q3, we expect revenues to be approximately $290 million at the midpoint, plus or minus $10 million. Our guidance for the third quarter reflects an expected revenue mix from Core IoT, enterprise and automotive, and mobile touch products of approximately 32%, 54%, and 14%, respectively. We expect non-GAAP gross margin to be 53.5% at the midpoint, plus or minus 1%. Non-GAAP operating expenses in the March quarter are expected to be approximately $106 million at the midpoint of our guidance, plus or minus $2 million. We expect non-GAAP net interest and other expenses to be approximately $2 million and our non-GAAP tax rate to be in the range of 13% to 15% for the third quarter. Non-GAAP net income per diluted share is anticipated to be $1 per share at the midpoint, plus or minus $0.15 on an estimated 40.6 million fully diluted shares. This wraps up our prepared remarks. I would like to turn the call over to the operator to start the Q&A session.

Our first question comes from the line of Ross Seymore of Deutsche Bank.

The first question may seem a bit negative while the second will likely be more positive. The first question pertains to the supply situation you mentioned improving in mobile, but we are experiencing increased pressure regarding memory costs and availability. Do you foresee any challenges in your mobile touch business and possibly in your PC business? Are both of these categories still around 30% to 35% of total revenues?

Ross, this is Rahul. As you know, majority of our mobile business, in fact, all of our mobile business is in the premium to high tier. And by virtue of us being in that category, we are not seeing, as of this moment, any substantial pressure on volumes that we had anticipated we were going to experience. And so relative to the rest of the mobile market, where they may be seeing some supply pressures, the premium tier seems to be a lot more stable. And it feels like it's a bit immune to the supply challenges, especially if you are referring to memory-related challenges.

Ross, this is Ken. Just to clarify, right, our comments were related to our ability to get supply for some of our products for the mobile touch market. If you recall, last quarter, we highlighted that that's starting to ease for us, but it is specific to us getting the supply for some of those touch products for the mobile market.

The PC half of that question?

Same thing. If you look at the PC market, it's as Rahul highlighted, if you look at where we play, we play in the high end in the enterprise market. And so if you look at that demand elasticity, historically, that's a more inelastic market. If I just take a look at my own behavior for Synaptics as the CFO, if we have a new employee, I'm going to give them a PC. If that PC costs $50 or $100 more, they're going to need that PC. So for those portions of the market where we service, which is really that premium tier, as Rahul highlighted earlier, we believe there's a bit more demand elasticity in the sense that the enterprise and high-end consumer markets will still need to purchase those PCs as we go through this upgrade cycle.

And I guess the positive follow-up question, the Astra side, you guys had some great demos at CES. Thanks for showing those and it sounded like some good traction, design wins, engagements, those sorts of things. Rahul, when should we start to see that be a meaningful tailwind in your Core IoT business? And does it also kick in on the gross margin line beyond just revenues?

Ross, as you mentioned earlier, we are still on track to see significant revenue contributions from our Astra line of products by calendar 2027. The Astra product category is highly beneficial to our gross margin, so we could expect it to contribute not only to our revenue but also to an improvement in our gross margin.

And our next question comes from the line of Tom O'Malley of Barclays.

Mine is on the guidance and gross margins in particular. If you look at the moving pieces, mobile is down the most. Obviously, volume is coming down a little bit. So you would expect a little bit of an impact from gross margin. But just with mobile being kind of the lowest gross margin business, you would expect some tailwinds there. Anything in particular that you want to call out on gross margins into the March quarter? Is it just mix related and volume related?

Yes, Tom, thanks for the question. I think we're still in this range here in that mid-53% range, 53.5% is where we guided. Obviously, there are some boundaries around it. We'll try to do better. But for the current mix of the product and portfolio for Q3, that's where we're ending up.

Super helpful. And then maybe just a broader question on the portfolio. Where are you in the sampling process across new chips? You had kind of talked about the second half with the device with the lead customer that you kind of talked about. Any update there on timing? And what should we be paying attention to in terms of announcements, etc. in the coming months?

Tom, this is Rahul. So we have started to sample our microprocessor, Astra microprocessor last quarter towards the end of calendar quarter 3, early part of calendar quarter 4. And that sampling has gone just as expected, in fact, ahead of our plans. We anticipate going into production on that part end of this quarter, early part of next quarter. In my prepared remarks, I talked about two new products that are in early phase of sampling at this point. The one that we talked about is the Astra product is a microcontroller that is integrating an NPU. It's also integrating certain interface for benefiting of the bill of materials and many other things. But importantly, it is in its class, I can think of, based on what I can see from my side, the only MCU that has got Wi-Fi 7, BLE and Bluetooth 6.0 and Thread integrated into silicon. That is sampling right now. And we are not going to walk away from non-Astra opportunities. And so for that, we have also built a Synaptics connectivity part that is Wi-Fi 7, Bluetooth, BLE and Thread that can integrate onto non-Synaptics processors as well. And so both of those products are in early phase of sampling. And then I believe you may have hinted about the semi-custom MCU that is still for a major customer that is still on track for being taped out in early part of the next quarter, more likely April time period. And so you can see the entire lineup on Astra processors as well as connectivity, stand-alone connectivity and integrated connectivity with market-leading Wi-Fi 7, Bluetooth 6.0 and BLE and Thread is coming out from Synaptics in the first half of this year, and believe me, I think there's a lot more in store that we are working towards delivering in the second half of the calendar year as well, more Astra class processors. Obviously, we are doing other things in the interface business as well, and we'll talk about them as we are about to launch in the marketplace.

And our next question comes from the line of Joe Quatrochi of Wells Fargo.

This is Travis on for Joe. So I had a question on automotive. I noticed you didn't touch on it in the prepared remarks. So I was just curious on how that did during the quarter? And secondly, how should we think about this portion of the business over the long term? I remember you mentioning that you were investing in this area last quarter. So just curious on getting updated thoughts.

Travis, it's Ken. Thanks for your remarks. If you look at automotive, it represents a small part of our overall business, and it has remained relatively steady over the past few quarters. The growth in the enterprise and automotive sectors is mainly driven by the enterprise side. Moving forward, we will concentrate more of our research and development efforts, as well as our overall focus, on the enterprise market, in addition to Core IoT and Edge AI specifically.

That's helpful. And then I know you guys only guide like a quarter at a time, but Ken, can you help us understand like kind of what the June quarter typically looks like from a seasonality standpoint, just kind of as we calibrate our models?

Yes, happy to. We don't provide guidance more than one quarter ahead, but maybe I can give you a little bit of a color here, a flavor here, as we head into June. Historically, we would expect that quarter to be up a bit from the March quarter. If we look at the starting backlog as one data point, the starting backlog for Q4 compared to the same point in time for Q3 is up. Obviously, we need to continue to see progress in those trends in terms of bookings and the like, but that's at least a strong data point for us as we look to June.

Our next question comes from the line of Neil Young of Needham & Company.

I wanted to ask on Astra. So regarding the pipeline for Astra, I'm not asking you to put a number out there, but could you maybe share the rough split of that pipeline by end market?

Well, I think the way to think about Astra is our pipeline is growing really fast. And the benefit that Astra has is it is also having a very nice companion capability in our connectivity. And so combining the two, it becomes a very compelling solution and a starting point for many of our customers to engage with Synaptics. And so we are really encouraged by how fast the pipeline is building up on Astra and our connectivity combining together as a solution. Having said that, I think the nature of the market is such that the pipeline builds up fast for consumer applications and industrials follow. And I think it's just because of the design cycles and the entire decision-making process between consumer and industrial marketplaces, and that's how it's playing out. Our consumer pipeline is a lot larger than industrial, but that's how it is as expected in our launch of the Astra lineup in the marketplace. What's important is we have a SKU map, and that's extremely compelling to our customers. If you notice, we have a platform play that is built on open source platforms, very friendly to the developer community. And if you heard me in my prepared remarks or the question that Tom had asked earlier, we are building our SKU map out really fast, courtesy of the phenomenal IP capability that we have developed in-house that allows us to create very fast turn SoCs on Astra. And I think that is being leveraged very nicely to build out a SKU map. And what that does to our engagement with our customers is makes it very compelling because their software investment can now scale across the entire SKU map very nicely. If they are focusing on audio modalities-based MCU application, then you have Astra. If they are focusing on vision modalities-based MCU, then you have Astra. However, your base code line and your stack for application code basically don't have to dramatically change as you can work within the SKU map of Synaptics' Astra MCUs and microprocessors. And so long-winded answer, Neil, but really excited about how fast the pipeline is building. Consumers definitely the lead marketplace. Industry is falling right behind consumers.

Great. And then my follow-up, you talked about humanoids in your prepared remarks. As you engage with customers on these platforms, the humanoid platforms, could you help us think about the typical architecture, specifically how many processing, connectivity and sensing nodes one of these humanoid robots might require and where Synaptics tends to participate within that?

Neil, in my prepared remarks, I talked about our engagement in humanoids. This has been in play for some time. What I was specifically calling out is we are now sampling silicon for pilot builds of humanoids at a major customer that's leading the marketplace and has made commitments to the marketplace to deliver pilots this year and go into production next year. This is on the backs of our touch sensory controllers and our bridge solutions that help transport high bandwidth data effectively in the humanoid. And so this is all underway. We are in the process of working with our customer, our lead customer, building out the pilot program that they are working towards basically and delivering in the marketplace this year. We see our opportunity in humanoids extending into the larger robotics marketplace. And what it means is, from my point of view, robotics is a very broad market. It goes from home vacuum cleaner to all the way to humanoid and everything in between. And in situations where you would have at the furthest end of the spectrum from humanoid, like a vacuum cleaner, an MCU class product with a native AI capability and wireless connectivity, not only Wi-Fi, Bluetooth, and Thread, but also GNSS and GPS, if it is on an industrial floor is very valuable. And that's the opportunity for Synaptics. If you take it up all the way back to the humanoid, you have sensory capabilities that are required that are going to mirror not only what a typical human nervous system could do but maybe with a higher precision. And so the number of touch controllers would vary. We have demonstrated at CES a partner that has come out and built a platform using I believe, 30-odd touch controllers in the palm of a robotic arm, combining it with Astra, combining it with a vision processor and combining it with wireless connectivity. And so as you can see, this is where the opportunity is. And if you have a high-end humanoid, there may be a main processor, there may be a GPU, a data server type processor. However, that requires a lot of ML and AI data to be locally processed from the sensory inputs like a touch controller so that there's effective decision-making taking place within the tolerance of the latency that the end application may require. And so as you can see, the Synaptics portfolio scales very nicely from an MCU class AI native processing platform for a robotic and application to something that would be all the way to a humanoid. And you're seeing designs that are consuming our sensory capabilities, especially our touch interface and controller capabilities, not only in the palm but also in the foot of a humanoid. And I think there's many things that will come about. But more importantly, again, I want to reiterate. What I was excited about in this quarter is we have started sampling our silicon for a pilot build to a company that is leading the marketplace, building multiple advanced humanoids to be delivered to the marketplace at the end of this year as pilots.

Our next question comes from the line of Christopher Rolland of Susquehanna.

So I did want to circle back on the memory issues in PC and mobile. And I know like, for example, Qualcomm was out yesterday, and they said that there's no demand destruction that they expect because they play at the high end of the market. But also at the same time, what they said was mobile vendors, in particular, were working down their inventories. It sounded like chips, but also in process and finished inventories and that this could take as long as six months to kind of work through. And so I wanted to make sure that there weren't any channel effects from that perspective that could affect you guys for both the PC market and the mobile market.

Yes, it’s Ken. Thank you for that note. To start, the overall mobile business is a small category for us in terms of sales percentage when compared to other categories. Additionally, while we view channel services mainly as logistics, we keep track of inventories as they provide insight into various markets and OEMs. Currently, our inventory levels are very lean and have remained so over the last few quarters, making it difficult to comment on other companies' inventories and supply chains. We usually provide guidance for one quarter ahead, and I mentioned a few insights regarding how we're approaching June. We operate at the high end of the market for both enterprise and mobile. We will keep monitoring the memory market, as it is utilized in numerous devices. However, based on what we observe for our March quarter and early indicators for the June quarter, we are still experiencing strong and healthy backlog and bookings levels.

And then I guess, secondly, I know mobile is smaller for you guys, but combo chips, connectivity into mobile, there can be potentially high volumes there. Is this a real opportunity, call it, '27 and beyond? Or do you think just the IoT market is really all the focus and will ultimately be all the contribution?

Chris, this is Rahul. From where we stand, let me start with connectivity. Connectivity for us is the entire SKU map. From IP development point of view to delivery of end products, we intend to build out the entire SKU map. As you probably may know, we have all the way from mobile platform class, premium mobile platform class, Wi-Fi 7, Bluetooth connectivity to an IoT class integrated into Astra processor, Wi-Fi 7, Bluetooth 6.0, BLE, Thread connectivity kind of a portfolio of products. And obviously, we have prior generations as well. We are also building out Wi-Fi 8 as we speak and plan to sample Wi-Fi 8 by the end of this year to our customers. And so going back to your question, generally, we start at the high end and waterfall very quickly into the IoT class products with our Wi-Fi capabilities and Bluetooth capabilities. And so going back to your specific question about play in mobile, we are going to be remaining very opportunistic in terms of the available platforms. We are not going to go head on in a platform chipset competitive situation because it just does not bode well for us in terms of competitive landscape. And so there can be opportunities as many phone OEMs are now also choosing to build their own apps processor. However, and one of them has also gone down this path of building their own cellular modem, but many of them don't have their wireless connectivity in play. And so opportunistically, because we are going to advance our wireless connectivity for our IoT marketplaces, we will continue to look for opportunities in smartphone, where it would be a reasonable gross margin and profit contributing engagement for Synaptics. And that's how I would think of our play in mobile on a going-forward basis for wireless connectivity.

Our next question comes from the line of Kevin Cassidy of Rosenblatt Securities.

Congratulations on the great results. Just maybe even along those same lines as putting wireless connectivity and mobile, is there opportunities in PC? And maybe in a bigger question, what do you see in the enterprise PC market? Is there a refresh coming? Or has the DRAM shortage put a stall to that?

So Kevin, this is Rahul. Let me first address the enterprise PC. Our approach in the enterprise PC segment has gained traction in two key areas. First, we are starting to see a gradual refresh occurring. Second, our team has excelled in capturing market share within the Enterprise segment. Thus, we have two positive factors influencing our performance in the PC sector, especially in the enterprise space. Regarding your question about wireless connectivity in PCs, we certainly will not pursue that avenue due to the nature of it being a platform play, which is tightly controlled by the x86 vendors. Additionally, it’s not favorable for margins or our profit and loss at this time to invest in Windows in this regard.

Great. Understood. You've experienced significant growth in your wireless connectivity within the IoT market. Who do you see as your competitors in that space? Do you believe you are outpacing the market? It seems that way, but perhaps you could share your insights on the market.

Kevin, I don't know of any microprocessor or MCU company that is investing in wireless connectivity at the speed we are, not only in terms of investment but also in advancing to a newer generation of wireless connectivity. We currently have over 500 engineers working on Wi-Fi 8 at Synaptics. We believe that pursuing an MCU or processor option without wireless connectivity prevents customers from having an effective starting point for building their end products. This is where we are setting ourselves apart by pushing our roadmap forward, being the first in the IoT space to offer wireless connectivity alongside our AI-native Astra processors. I recognize there is a significant opportunity for non-Astra MCUs and processors within IoT as well. If you consider my prepared remarks, we are also sampling a host-independent wireless connectivity solution, which includes Wi-Fi 7, Bluetooth 6.0, BLE, and Thread, that can operate its driver software independently of the host processor. This allows non-Astra, non-Synaptics processors to integrate wireless connectivity seamlessly. Our SKU map reflects this approach. Competitively, I am not aware of any MCU or microprocessor outside of Synaptics that has Wi-Fi 7 integrated; the last I checked was Wi-Fi 6. Thus, we feel very confident in our position on wireless connectivity across our entire SKU map with our processors and as a wireless connectivity supplier on our path toward potentially launching Wi-Fi 8 from Synaptics this year.

Our next question comes from the line of Robert Mertens of TD Cowen.

This is Robert on behalf of Krish Sankar. Let's see. I know we've gone over a lot of the finer points of your Astra processor platform. But maybe if you could just take a larger view in terms of the customers that you're working with and the progress that they're making with the roadmaps. Are you sort of expecting more of the additional demand to come from this industrial applications? Or is it a mix of both the industrial as well as consumer customers? Any sort of details of just sort of how that mix is playing out would be helpful.

Yes, that's an excellent question. As I've mentioned in my prepared remarks over the last couple of quarters, I've highlighted our designs, which typically involve leading customers in specific market categories. In this call, I discussed our Astra processor, which enhances the processing of certain vision modalities, creating a unique experience for television OEMs. This technology enables televisions to become more intelligent, allowing them to recognize who's in the room and manage features like parental controls. While I will continue to provide examples like these, the breadth of our engagement in the design activity is much wider. Most of our initial ramp-up will occur in the consumer sector, with industrial designs following a bit later. Furthermore, if we look at our edge IoT strategy and our involvement in humanoid robotics, it underscores our direction in the industrial space. One significant customer leading the market in humanoid technology has announced plans to begin shipping pilots this year, with full production set for late 2027, illustrating the evolution of the industrial market. Therefore, while we expect to lead in the consumer space regarding revenue recognition in 2027, we anticipate seeing revenue from industrial channels in the 2028 calendar year as well.

Great. That's helpful. And then just a quick follow-up. In terms of just your view into the market, what's your current view of channel inventory? Are we more normalized levels? Or are there any areas of your business where inventory levels could be a near-term headwind still?

Yes. Thanks, Robert, it's Ken. On that front, if you look at our inventory levels in the channel, just to highlight the distribution channel for us is primarily a logistics-oriented channel for us. It remains very lean for us. We went through what I classify a couple of years ago this COVID boom and COVID bust. And over the last three quarters or so, we finally leaned out where we're shipping really towards end market demand. So we're in good shape across the board when we look at those inventories.

Our next question comes from the line of Peter Peng of JPMorgan.

You guys have intentions to move down to the broad market. So I guess just given the recent acquisition announcement in the space, how are you guys thinking about this part of the market now? Is it becoming I think more competitive because of potential cost advantages from the other players? Maybe just share your thoughts on that.

Peter, this is Rahul. First and foremost, we feel very strongly about the leadership that we have in certain edge IoT solutions play. We believe our portfolio in wireless connectivity from the edge IoT marketplace is bar none in the marketplace. And so we feel very strong about our position and what we are investing from a roadmap point of view versus everybody in this marketplace at this time, especially the MCU class and the microprocessor class products. Having said that, if you're referring to this one company that got acquired or is in the process of getting acquired, our markets did not overlap. They were largely focused on MCU with integrated BLE with some Wi-Fi coming, but not a whole lot of Wi-Fi in their end products. And so our play is vastly different. Our play is a lot more broader in terms of the end market participation within the larger edge IoT marketplace. And so we seem to be engaging with customers that I would think they may not be able to engage. And that's how I see our play on a going-forward basis continuing.

And a follow-up question is you talked about the semi-custom project being on track. And I think last quarter, you talked about several other engagements as well. I guess like when you think about just this opportunity, what are some of the criteria that you look for to drive the engagement, either in terms of volumes, like market success? Like maybe just give us some parameters on how you think about these certain engagements.

Yes, Peter, that's a great question. I believe in aligning our roadmaps with the visions and plans of significant customers. This semi-custom opportunity with our MCU is linked to a major OEM that supports hybrid computing for AI. We are involved with this large company on the consumer side, which develops products using our semi-custom MCU implementation. The OEM will create a software stack for various applications, and ultimately, our silicon will be integrated into their reference design, used not only in their products but also in third-party ones, similar to what we see in the phone market, particularly outside the iOS ecosystem. In summary, this outlines a typical semi-custom opportunity for us moving forward. It's not just a single project but something that will evolve with the next chip we supply to the same OEM, enhancing both their product and our roadmap. Additionally, in the realm of humanoid robots, we have partnered with a significant leader in the market, and when the time is right, it will be clear that they are a major player. These are the types of factors we consider in our semi-custom engagements with clients.

I'm showing no further questions at this time. I'll now turn it back to President and CEO, Rahul Patel, for closing remarks.

In closing, I want to emphasize that the Synaptics team is executing with focus as we advance our strategy. We are expanding our portfolio with new products that strengthen our leadership in edge AI. Our financial results highlight our ability to grow the company with disciplined execution. I want to thank our global team for their hard work and dedication and to you all, our shareholders, for your continued support of Synaptics. Have a great rest of the day.

Thank you for your participation in today's conference. This concludes the program. You may now disconnect.