Rambus CEO Says Chip Supply 'Will Remain Tight' In 2027 As Lead Times Stretch
Rambus is spending balance-sheet cash on inventory as suppliers' lead times lengthen and customers place orders earlier.
Rambus, which makes memory interface chips and licenses chip designs for data center and AI systems, expects supply to stay constrained next year. CEO Luc Seraphin told analysts on the company's third-quarter earnings call Monday that "Demand is strong going into 2027. Supply will remain tight."
Longer lead times, a bigger inventory build
Seraphin said lead times from Rambus's suppliers are increasing, a squeeze the company flagged two calls ago. Rambus is using its balance sheet to stock up on products it expects to grow substantially with customers, he said, while the lead times it quotes its own customers have not increased.
CFO Sumeet Gagneja said inventory grew by $12 million in the third quarter. He said Rambus plans to build inventory again in the fourth quarter at a similar level to the third and second quarters, citing better visibility into backlog and accelerating demand.
Cash, cash equivalents and marketable securities ended the quarter at $777 million, down $48 million from the second quarter. Record operating cash flow of $102 million was outweighed by $135 million of buybacks, including a completed $100 million accelerated share repurchase.
Orders arrive earlier, but no hoarding seen
An analyst from Evercore ISI asked whether customers downstream were stockpiling. Seraphin called that "very hard to determine," but said customers are placing backlog earlier than they did a quarter or two ago. "We don't see people building inventory, but we see people placing backlog," he said.
A Baird analyst asked whether supply could limit growth next year. Seraphin said Rambus works with its supply chain partners almost weekly and is trying every avenue to support customers, helped by a rising ratio of CPUs to GPUs in AI systems.
A record quarter behind the caution
Third-quarter revenue was $218 million, up 22% from a year earlier and 5% from the second quarter. Product revenue reached about $114 million, up 22% year over year and 15% sequentially. Non-GAAP earnings per share, an adjusted measure, were $0.84.
For the fourth quarter, Rambus guided to revenue of $227 million to $233 million and adjusted earnings of $0.84 to $0.92 a share. Product revenue is guided to $127 million to $133 million.
Seraphin said demand strengthening into 2027 gives Rambus better backlog visibility, and he expects some seasonality between the first and second halves to continue.
Rambus guided to fourth-quarter product revenue of $127 million to $133 million, a quarter in which it plans to keep building inventory.
Sources
- Rambus (RMBS) Beats Q3 Earnings and Revenue Estimates — Yahoo Finance
- Rambus: Q3 Earnings Snapshot — Associated Press
- Rambus Non-GAAP EPS of $0.84 beats by $0.05, revenue of $218.3M beats by $5.3M (RMBS:NASDAQ) | Seeking Alpha — seekingalpha.com
- Rambus Inc. (RMBS) Stock Price, News, Quote & History - Yahoo Finance — Yahoo Finance
