Third Quarter 2026 Earnings Conference Call - CORNING INC

Explicit Guidance:

• Q4 2026 Revenue: Expected growth of ~19% year-over-year to a range of $5.2 billion to $5.3 billion.
• Q4 2026 EPS: Expected growth of ~36% year-over-year to a range of $0.96 to $1.00.
• Full Year 2026 Capital Expenditures (CapEx): Planned investment of approximately $2 billion, primarily to support growth in optical communications.
• Long-Term Financial Targets:
  • Annualized sales run rate of $20 billion by end of 2026.
  • Annualized sales run rate of $30 billion by end of 2028.
  • Annualized sales run rate of $40 billion by end of 2030 (doubling from the $20 billion base).
  • Compound Annual Growth Rate (CAGR) of 19% from 2027 through 2030 (accelerating from 15% CAGR).
  • EPS growth anticipated to significantly outpace sales growth.
  • Free Cash Flow (FCF) expected to grow through the planning cycle despite continued investment.

Business-Segment Outlook:

• Optical Communications: Sales surged 44% YoY; record profitability achieved. Future growth driven by accelerating capacity utilization. Management anticipates a transition from "scale-out" to "scale-up" connectivity (optical replacing copper within clusters) to begin accelerating in 2028, potentially increasing fiber demand per GPU by 10x.
• Enterprise: GenAI product sales grew >100% YoY, outpacing GPU unit growth. Current run rate of $6 billion (quadrupled since Springboard launch). Growth driven by adoption of high-density products in AI data centers.
• Carrier: Sales grew 4% YoY driven by Data Center Interconnect (DCI). Long-term agreements signed with Xeo, Verizon, and AT&T validate a DCI opportunity larger than the previously communicated $1 billion target, though a new specific target has not yet been set. Fiber-to-the-Home remains a growth driver.
• Glass Innovations:
  • Apple Partnership: By end of 2026, the Harrodsburg, Kentucky facility will produce 100% of global cover glass for iPhone (including Duo) and Apple Watch.
  • Pricing: Price adjustments for display glass substrates to take effect in Q4 2026 to address weak yen and rising input costs; expected to drive revenue impact primarily in 2027 and beyond.
• Solar: Sales up 37% YoY but still net loss-making; ramping production at a slower-than-anticipated pace. Targeting a > $3 billion revenue stream with profitability above corporate average by end of 2027. The drag on margins expected to slowly improve from current levels through 2027 as productivity improves.
• Life Sciences & Emerging Growth: Sales up 1% YoY; net income impacted by continued investments in emerging programs.
• Automotive: Sales up 4% YoY; North American Class 8 truck market recovery offsetting a 3% decline in the light-duty vehicle market.

Market and Competitive Outlook:

• Demand Trends: Strong demand persists in AI/data centers and optical communications, with customers requesting "more new products faster and broader."
• Pricing & Costs: Pricing environment in solar strengthened due to U.N. Section 232 trade actions favoring U.S.-made products. Overall company pricing power is positive as new high-value products are launched.
• Competition: Exposure to Chinese fiber dropping due to high integration levels increasing shipping/tariff costs; Corning maintains "highest quality, lowest cost" advantage.
• Technology Shifts: Anticipated shift to optical scale-up in 2028 represents a "decade-long" inflection point for network architecture. Low Earth Orbit (LEO) satellites (e.g., Starlink) viewed as "frenemies" driving bandwidth demand and fiber landing requirements.

Macro / Industry Outlook:

• Currency (FX): USD weakness (strong yen) impacting Glass margins; hedging strategy targets ~94-98% exposure management with no specific reduction plan announced.
• Trade/Regulation: U.S. Section 232 rulings viewed positively for solar pricing and demand for domestic manufacturing.
• Economic/Market Conditions: Management expresses high conviction in the "Springboard" plan's acceleration, citing strong customer co-innovation agreements and long-term contracts.

Strategic Initiatives:

• Springboard Plan 2.0: Accelerating growth phase initiated in 2027; aims to double sales from $20B to $40B by 2030.
• Capacity Funding Model: Utilizing customer upfront deposits to fund new capacity additions, sharing risk/reward with customers (e.g., $639 million in customer deposits YTD). This mechanism aims to smooth FCF volatility and fund the flywheel of growth.
• Capital Allocation: Priority on organic growth investments with high returns; primary shareholder return vehicle expected to shift to share buybacks as dividends are already strong. An $2 billion ATM equity program filed for "housekeeping" purposes with no immediate intention to utilize.
• Manufacturing: Continued investment in high-density product capacity to meet AI and DCI demand; Harrodsburg facility expansion for Apple glass.

Risks and Headwinds to Outlook:

• Solar Profitability: Current net loss and margin drag due to slower-than-anticipated production ramp; expected to improve slowly.
• Cost Inflation: Rising costs for critical materials and energy, mitigated by price adjustments and hedging.
• Capacity Constraints: Potential tension in allocating capacity between Carrier and Enterprise segments due to high demand for newest high-density products.
• Macroeconomic Uncertainty: Management notes "risks, uncertainties, and other factors" in legal disclaimer; potential changes in customer spending or financing constraints in the AI sector.
• Competition: Potential future competitive pressure from Chinese fiber, though currently not considered significant.

Management Tone on the Future:

• Confidence Level: Highly confident and aggressive; describing the current quarter as "outstanding" and the momentum as "accelerating."
• Sentiment: Management characterizes the current state as having "exceeded springboard target" early and views the next phase as the "next one" of the plan that shareholders will "love."
• Guidance Changes: Q4 and full-year guidance exceeded expectations in Q3; management indicates readiness to grow sales at 19% CAGR for the next phase, representing a 400 basis point acceleration from the previous 15% CAGR.
• Hedges/Caveats: While optimistic, management avoids giving specific future margin targets due to ongoing solar drag and capacity additions, advising investors to view current margin levels as a "vector" for continued improvement rather than a fixed ceiling.

Miscellaneous:

• Customer Relationships: Emphasis on "co-innovation" and long-term agreements where customers fund capacity via upfront deposits, providing supply chain assurance for them and risk mitigation for Corning.
• Financial Metrics: Operating leverage expected to continue, with OpEx growing slower than sales. Current average debt maturity exceeds 20 years with no significant debt maturities due in the near term.