Release Date: January 22, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q: Can you provide more details on the order trends by end market and how they inform your Q2 guidance? Also, have you seen any volatility in AI orders? A: Orders were ahead of expectations, supporting our confidence in sequential improvement and broad momentum in industrial businesses. Regionally, Asia shows strength, while Europe remains weak, especially in auto and industrial sectors. AI orders grew nicely, and excluding AI, industrial segment orders grew 10% year-over-year. Aerospace and energy sectors show strong growth, while automation and control indicate stabilization.
Q: How do you view incremental leverage in the Transportation Solutions (TS) segment during a recovery? A: We've improved TS margins significantly, aiming for 20% or better. The commercial transportation business, currently depressed, will provide leverage as it recovers. We've optimized our footprint, especially in Europe, reducing fixed costs, allowing us to maintain margins even in low-growth environments.
Q: What is driving the strength in AI revenues, and how should we think about the margin profile of AI? A: AI revenue doubled in the quarter, with broad participation from hyperscalers and semiconductor players. Our share remains stable at 30-35%. The margin profile is similar to our cloud products, with volume benefits expected as we scale.
Q: Can you discuss your strategy if tariffs are implemented and your approach to M&A given strong cash flow? A: Our manufacturing is localized, with 80% in-region, aligning with customer supply chains. We've dealt with tariffs before, using a playbook involving logistics adjustments and cost recovery through pricing. For M&A, we're focused on bolt-on acquisitions in familiar areas, with an active pipeline and enhanced resources for opportunities.
Q: Can you elaborate on the stabilization in industrial markets and the outlook for medical business? A: Industrial markets show stabilization, with positive order momentum in Asia, sideways trends in the US, and weakness in Europe. The medical business decline was due to inventory normalization, but we expect sequential growth as orders improve.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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