[Management View]
Silicom Ltd. reported a strong third quarter performance with revenue reaching $15.6 million, a 6% increase YoY. The company achieved eight major design wins year-to-date, surpassing the lower end of its annual target. Management emphasized the importance of these wins in driving future growth and highlighted the company's leadership in post-quantum cryptography solutions.

[Outlook]
Management reaffirmed full-year revenue expectations of $15 million to $16 million for 2025 and anticipates double-digit revenue growth in 2026 and beyond. The company aims to achieve EPS above $3 as annual revenue scales to the $150 million to $160 million range. Silicom plans to secure seven to nine new design wins in 2026, focusing on expanding its opportunity funnel across all product lines.

[Financial Performance]
Revenue for Q3 2025 was $15.6 million, a 6% increase from $14.8 million in Q3 2024. Gross margin improved to 31.8% from 28.8% YoY. Operating expenses rose to $7.4 million due to unfavorable currency movements. Net loss was $2.1 million, compared to $1.7 million in 2024. The balance sheet remains strong with $114 million in working capital and marketable securities.

[Q&A Highlights]
Question 1: Hi. This is Jeff Hopson on for Ryan Koontz from Needham. Just wanted to understand maybe more where Silicom Ltd. could fit in with the ongoing AI narrative? Obviously, ASICs have a place in AI, but I would think there are also specialized situations where your guys' NICs could be utilized. So just maybe some more info on that.

Answer: Absolutely. So we look at AI, we see opportunities in a few different product lines. Maybe even all product lines to be more accurate. So, on the one side, we see opportunities for our high-speed NICs, 400 gig NICs. Those are just the right equipment you need for the inference systems as well as the training systems. So this is one area that we think this could be very good potential. Another area with the FPGA because a lot of things are not really defined still, I would say, in AI systems, and there's a lot of proprietary communication and protocols that FPGA can bridge the gap there where ASICs are not available right now and probably will not be in the foreseeable future. And the third one is also on the edge systems, where we are able to see opportunities for edge inference. We actually just had a webinar together with Intel about it yesterday, showing some use cases of AI at the edge, and we feel there are opportunities with all of them. Some of those are more advanced right now, some of them are more early exploratory, but I think we definitely have opportunities in all of them. Thank you.

Question 2: And then looking at the presentation, you also have some large opportunities with service providers and some telco equipment. Just curious about the spending environment in those two in the telecom industry, if that's getting better or if there are certain things that are pushing spending or new types of hardware there.

Answer: Yes. I mean, we have discussions with both service providers as well as OEMs and enterprises. Service providers, we have like Tier one, also Tier two, Tier three service providers. Some of them are really big telcos and some of them are smaller. We definitely see for our products or our type of products, we see the need, customers see the need, they actually need our products for the next generation and to support their customers. So this is something that we feel has good opportunities. We probably will also have design wins with service providers, so we feel good about it.

[Sentiment Analysis]
The tone of the management was optimistic, emphasizing strategic growth and design win momentum. Analysts showed interest in AI and telecom opportunities, indicating positive sentiment towards Silicom's potential in these areas.

[Quarterly Comparison]
| Metric | Q3 2025 | Q3 2024 |
|-----------------------|---------|---------|
| Revenue | $15.6M | $14.8M |
| Gross Margin | 31.8% | 28.8% |
| Operating Expenses | $7.4M | $6.5M |
| Net Loss | $2.1M | $1.7M |
| Loss Per Share | $0.36 | $0.28 |

[Risks and Concerns]
Silicom faces risks related to customer concentration, with one client accounting for 14% of revenue. Currency fluctuations impacted operating expenses, and the company is exposed to geopolitical and economic uncertainties that could affect demand.

[Final Takeaway]
Silicom Ltd. demonstrated strong performance in Q3 2025, driven by strategic design wins and robust financial management. The company is well-positioned for future growth, with plans to expand its design win funnel and capitalize on opportunities in AI and telecom sectors. Despite challenges such as customer concentration and currency impacts, Silicom's solid balance sheet and strategic focus provide a foundation for sustainable long-term value creation.