Asustek Computer (TWSE:2357) Q2 2026 Earnings Call

0:00 Hello, everyone, and welcome to the ASUS twenty twenty six Quarter two Online Investor Conference. Today's meeting will be hosted by ASUS Co CEOs, Mr. S. Y. Xu and Mr. Samsung Hu alongside CFO, Mr. Nick Wu. The conference will be divided into two parts. In the first part, the CFO will outline ASU's financial results for the second quarter of twenty twenty six, followed by the Co CEOs who will discuss our operational strategies and outlook. The second part will be a QA session, and if you have any questions, please submit them via the webpage, and we will address them after the presentation. Thank you. We will now begin with the presentation from the CFO. Hello, everyone. Thank you for joining the ASUS twenty twenty six Quarter two Online Investor Conference.

0:49 Please turn your attention to Page five of the PowerPoint. Page five provides a summary of ASUS brand consolidated income statement for quarter two twenty twenty six. We are pleased to report that the second quarter of twenty twenty six saw outstanding operational results. We achieved all time historical highs for the brand across consolidated revenue, operating profit and net profit after tax. We see that revenue reached $241,000,000,000, representing a Y o Y growth of 39%.

1:27 Operating profit was NT19.6 billion dollars an increase of 230% year over year. Net profit after tax stood at NT19 billion dollars up 94% Y o Y. This translates to a quarterly earnings per share EPS of $25.6 The revenue growth in the second quarter was primarily driven by momentum in AI servers and the PC business. Our growth and operating margins reflect the strength of the ASU's brand, our high end competitive product mix, and the supply chain resilience and control that we have previously reported. We are very pleased to have fulfilled our commitment to outperform the industry.

2:17 And we are confident that this outperformance will continue into subsequent quarters, which will allow us to further expand ASU's growth potential and operational results going forward.

2:38 Please move to the next page. This covers our non operating income and expenses. In the second quarter of twenty twenty six, interest income was approximately $460,000,000 investment income was US1.47 billion dollars foreign exchange gains were billion dollars and dividend income was US1.8 billion dollars So consequently, total non operating income for quarter two was approximately US5 billion remaining roughly flat Y o Y. And looking at Page seven, this presents the brand balance sheet. As of the second quarter, cash and cash equivalents were maintained at approximately RMB70.9 Accounts receivable increased to NT165.3 billion dollars We saw a significant increase in inventory, which rose to NT339.9 billion dollars This is largely due to strategic stockpiling of high unit price and critical components to support order visibility and operational growth as we anticipate demand for the third quarter and the second half of the year.

3:53 Additionally, as our scale of operations expanded, accounts payable reached 194,500,000,000. And overall, by the end of quarter two, we expect that the accumulated shareholders' equity will stand at CNY 301,300,000,000, with total assets totaling approximately 803,300,000,000. Please refer to these key figures for your insights. Over onto Page eight, we outline our revenue composition. Breaking down by business group, the system business group contributed 45% of revenue, the open platform business group accounted for 19%, and the infrastructure solutions business group represented 36%.

4:46 And breaking down by region, Asia Pacific accounted for 50%, Europe 35%, and The Americas 15%. And that was an overview of our revenue breakdown by different metrics. Turning over to Page nine, we report our targets and operational outlook for quarter three. First, we expect that we are going to experience healthy quarterly growth across our three main product lines. PC growth is projected at 15% to 20%, components at 5% to 10% and servers at 10% to 15%. From a year over year perspective, PC growth is expected to exceed 20%, while servers will continue to show exceptionally strong momentum with projected year over year growth of over 150%.

5:43 So overall, we expect revenue and operational growth to continue reach new heights as we enter the third quarter.

5:54 And furthermore, as mentioned before, we are currently engaged in long term operational planning and budgeting for the second half of this year, and in fact, the next one and two years potentially. So based on current order visibility and the momentum of our planned new products, that of course includes edge AI deployments, AI PCs, HPCs, products like NVIDIA's RTX Spark. We anticipate that there are going to be larger innovation and product growth cycles in the coming years. And so to support that level of visibility and revenue momentum over the next two to three years, the Board of Directors today approved two capital market resolutions.

6:49 The first being the issuance of $1,500,000,000 in convertible bonds. And secondly, the issuance of $1,000,000,000 in exchangeable bonds using ASU's long term investment in Advent Tech. And so to put it simply, we are ensuring that our logistics are secured before the army moves. And that is a strategy that we're hoping given the visibility of the strong growth momentum ahead will help us proactively prepare for future operational and financial resource allocation. And that concludes the financial report. I will now hand it over to our two co CEOs, S. Y. And Samson to share the operational highlights and strategies. REPRESENTATIVE:] Thank

7:44 Thank you, and good afternoon everyone, investors and members of the press. I would like to welcome everyone to the ASUS twenty twenty six Quarter two Investor Conference. I am Co CEO, SOIC and I will now provide a detailed instruction to our strategies and future outlook. In the second quarter of this year, ASUS brand revenue reached 241,100,000,000, which is a Y o Y increase of 39%, which is once again settling a historical record. And this marks the first time our single quarter brand revenue has surpassed the $200,000,000,000 threshold, which is a stellar achievement driven primarily by growth in server and PC businesses. With the accelerated explosion in global AI computing power and cloud infrastructure demand, ASUS server business saw revenue double in the second quarter, providing a significant growth momentum for us.

8:43 And given our current order visibility and layout in the AI server field, we expect a prolonged period of growth this year, and we will continue to expand our core customer base by providing comprehensive solutions, consolidating our service business pivotal role within the AI super cycle. Another highlight is our PC business. Despite headwinds from rising component prices across the industry, we achieved counter cyclical growth, with a 20% year over year increase in the second quarter. And to my knowledge, Asus is the only company among the top five PC brands to maintain positive growth in quarter two. And among Windows PC manufacturers, Asus continues to use innovation as the core driver across our gaming, consumer and commercial sectors to optimise our product mix and expand market share.

9:41 And so I think that our second quarter shipments really made us the only growing brand in the windows camp, and that demonstrates our operational resilience, which is shown to exceed the industry average. And I think that I would like to also especially highlight our commercial PC business. While ASUS has historically had larger shipments in consumer PCs, we have worked hard in the commercial markets over the last few years. In quarter two, our commercial PC Y o Y growth reached 58%, and more accurately we have seen Y o Y growth exceeding 50% for six consecutive quarters.

10:26 And so I think that proves our strategic transformation into the commercial PC market as having been highly successful. And moving on, Asust revenue momentum is strong, extremely strong, primarily due to our forward looking layout in AI. With our motif of ubiquitous AI and incredible possibilities, we are building a complete AI ecosystem across the cloud, edge computing, and physical AI. And so now I'd like to introduce the layouts of our four core business groups across AI industries and products. First is the ISBG, which provides complete solutions for cloud infrastructure and edge computing. We offer one stop customised solutions for diverse requirements, significantly lowering the barrier to entry and upgrade costs for consumers and customers adopting new technologies.

11:19 Next, the open platform BG continues to deepen its focus on edge AI in areas such as workstations, where we are seeing a positive growth trend. For example, we launched the compact AI supercomputer, the Asus Ascent GX10 in the fourth quarter of last year, and shipments in the second quarter were three times those of the first, indicating a rising trend in edge AI applications for workstations. Furthermore, we are preparing to launch a desktop product for the new RTX Spark platform, model number GR1X. And in the fourth quarter of this year, we expect that this will drive another wave of Windows based AI development demand. In the SystemVG portion, we were among the first to market with AIPC products during the nascent stage of the industry.

12:10 RTX Spark products will enter the fray in the fourth quarter of this year. And as one of the first manufacturers to launch RTX Spark based systems, the market response to pre orders for our Pro Notebook P16 and P14 has been intense. They are currently completely sold out. And ASOS will also integrate the AI agent ASUS Danny Claw across our entire product line to provide users with a comprehensive and automated AI system that enhances user experience efficiency and productivity. And as AI enters the physical AI stage, Asust was also one of the earliest companies to lay the groundwork for robotics. We launched the Zenbo back in 2016, and since then we have accumulated foundations, technology and talent to align with that physical AI trend. And moving forward, we established the autonomous platform BU in the second half of twenty twenty five, and they are currently developing products which we expect to release as early as the end of this year or early next year. And if you are interested in physical AI products, please stay tuned for further updates.

13:25 And finally, in the AIoT BG, we are implementing AI in the real world through smart factories and smart healthcare. This encompasses wearables, handheld ultrasound, medical monitors, and AI software solutions to accelerate the digitalization of health applications. We believe our overall AL layout will position Asus as one of the most important solution providers in this AI super wave, creating revenue momentum and a significant competitive advantage.

14:05 Next page. And now I will introduce the strategy for the rapidly growing ISBG. This is divided into three parts. First, the DCS unit focuses on the development of AI and general service. Our customized service teams can flexibly respond to the needs of Next Wave CSPs, enterprise IT and other corporate clients. Second, edge computing. Edge computing focuses on industrial and vertically integrated edge computing scenarios, which helps achieve localized deployment of AI applications across diverse terminal environments. For the solution BU, it provides storage and infrastructure solutions by combining hardware and software system integration and industry specific architectures.

14:53 We provide customized plans that accelerate the customer's journey from AI data center planning to token generation, drastically reducing the cost of time and the barrier to adopting new technologies. These three units work in close synergy, giving the ISPG a complete capability to meet diverse market demands and drive company growth. Next page. Focusing on our consumer PCs, at this year's Computex, we unveiled two key consumer laptops for the second half of the year, and the market response has been very enthusiastic, laying a strong foundation for H2 growth. First, the ProArc P16 and P14. Asus will be among the first manufacturers to ship the NVIDIA RTX Spark platform.

15:41 The ProArc P16 and P14 integrate workstation grade AI performance into slim 12.9 millimeter chassis and targets a high unit price market segment for creators and professional users. And I think that this contributes directly to the premium ASP mix because during Computex ProArt was the most discussed RTX Spark device in the media, and we expect sales to begin the fourth quarter, capturing the first wave of RTX Spark replacement demand. Moving on, the Zenbook 14 is also positioned in the fastest growing premium machine thin and light market. Media reviews describe it as strong and accessible competitor to the MacBook Neo. We've also introduced ZeraLumina, a new proprietary material technology, with a new pink and blue colorways for this year starting at USD799.

16:36 And it combines specifications with price competitiveness. It's expected to launch in the third quarter and will be a primary driver of consumer laptop shipment growth for us in the second half of the year. And so the awards and media search volume from Computex, I think validate the ZenBook fourteen's positioning, and we remain highly confident in the demand for these two product lines. Moving on to commercial PCs, the ExpertBook Ultra is a genuine technical moat beyond just being a thin and light laptop. It features the robust design our clients demand, utilizing a nano ceramic coating paired with magnesium aluminum alloy and a CNC finished unibody process.

17:23 And the surface hardness reaches 9H, which is five times the industry standard, meaning ordinary scratches leaves almost no mark. It's also stain and fingerprint resistant, allowing it to be wiped clean in business settings. And structurally, it passed 100,000 simulated pressure tests despite weighing less than one kilogram. The ultrathin chassis will not deform over extended use. And we believe that this results in lower repair rates and lower total cost of ownership for enterprises, demonstrating our ambition to penetrate into the high end commercial market. And in terms of market performance, since the expert book Ultra began rolling out in June across Taiwan, Japan, Singapore, Australia, and Southeast Asia, it's received very positive feedback.

18:16 And in addition to winning multiple international product awards, it has garnered a lot of attention from local media clients, particularly for its extreme lightness, AI business applications and flagship performance. So at the same time, we launched pre order programs in Taiwan and large scale brand promotions in Japan, reflecting our confidence in regional channels and partners. So And that continues to drive the visibility of ASUS in the high end commercial brand and overall market momentum. And moving on, let's discuss the highly anticipated AgenTeq AI products. So ASUS has its own AgenTeq AI called ASUS Zeniclaw. This is a professional personal AI capable of understanding the user's way of thinking and proactively executing tasks in work, daily life and other scenarios.

19:03 Through Asustek internal design thinking, we believe that we've made it intuitive for users and it employs a hybrid local and cloud infrastructure and combined with built in security and data protection mechanisms to achieve an excellent balance between performance, privacy and cost. I think diverse applications that can handle include things like meeting notes summaries, generating presentations, providing personal schedule reminders and travel planning for daily life. And so Asustek Cloud has already been integrated into our commercial and consumer laptops. And we believe that the application of AgenTik AI will bring greater convenience to users and create new wave of AI growth momentum. I'll now move the mic to my fellow co CEO. Thank you, Aswai. Before I further share the operational performance and strategic priorities of each business group, I would like to spend two pages sharing some important milestones and highlights of the ROG brand.

20:03 This year marks the twentieth anniversary of the ROG brand. As one of the earliest brands to cultivate the gaming industry, ROG has evolved over the past twenty years, leveraging its deep technical heritage from a leader in gaming PCs, motherboards, and displays into a comprehensive gaming lifestyle brand that includes accessories and handhelds. To share some figures, for the past twenty years, we have reached a total cumulative shipment volume of over 35,000,000 units, and cumulative sales of graphics cards exceeding 130,000,000 units.

20:49 And if you lined up these cards and laptops, they will wrap around the earth more than once. So this is not just a technical achievement and it symbolizes the innovation and trust ROG holds in the hearts of gamers worldwide. And next page. But beyond sales milestones, our ROG twentieth anniversary activities centers our community and innovation. At Computex, we launched a series of products and events. During this event, we also released the ROG Edition 20 series, and it spans motherboards, graphics cards, and peripherals, contributing to the brand's aesthetic design while paying tribute to the past, and of course also exploring what the future holds.

21:44 And among these, the market highly anticipates the Orogy Xbox Alloy X20 bundle made its debut. It has been upgraded to feature a 7.4

21:57 inches OLED screen with a new joystick design. Paired with the Orogy R1 Edition 20 Gaming AR glasses, the gaming experience itself is also extended to a 171 inches AR large screen. This product has been a major win in international media, indicating that our specifications and experience lead the industry. And so our share of voice in the market is currently number one, which I believe will drive significant sales. Furthermore, millions of ROG fans gathered in Taipei through our homecoming event, which was held at the Computex venue and our headquarters. And it featured a series of OLG related activities and design showcases, and has deepened the emotional connection between the brand and the community, providing a very strong foundation for our operational momentum in the second half of the year and the coming years.

22:58 Turning to the next page. I will now introduce the operational performance and strategic priorities of each business group. First, in the system business group, despite the pressure of rising RAM component costs, PC revenue still achieved a 20% year over year growth.

23:21 This fully demonstrates ASU's growth momentum and brand value. Notably, high value products account for 65% of our product mix, including gaming, high end Copilot plus PCs, and non Chromebook convertibles. And so this high value mix provides us with operational resilience. And the revenue share of AI PCs within consumer laptops has also risen rapidly, reaching 30% in the second quarter, indicating that market demand for AI PCs remain strong. Regarding commercial PC shipments, as ASUY shared, our layout over the last few years has yielded significant results since last year.

24:16 In the second quarter of this year, we saw a year over year growth of over 50%, marking the sixth consecutive quarter of growth exceeding 50%. And so this clearly shows the continuous expansion of our commercial market share, driven by brand power, product strength and supply chain resilience. Our PC shipments maintains positive growth in quarter two, again as SY noted. Right now, we are the only brand in the Windows PC camp to achieve positive growth. Next page. And now regarding the operational performance of the open platform business group, facing industry headwinds from key component costs, our second quarter revenue declined approximately 10% to 15% year over year.

25:12 However, key products within the ROG gaming ecosystem, including monitors and accessories, saw year over year revenue growth of 20% and over 50%, respectively.

25:26 And this highlights the strong momentum of the ASUS gaming brand ecosystem, driving upgrades in the gaming market and consolidating our leadership position with ROG as a brand. Additionally, our NUC business has performed exceptionally well, driven by the growth of the NVIDIA branded Ascent GX10, we saw revenue increase by 30%. And this strong momentum shows a rising trend in edge AI applications for workstations. As for our industry leading motherboards and graphics cards, we're now facing significant price hikes in memory, which has impacted end user demand.

26:21 However, we still saw growth in the high end segments, such as the workstation series for motherboards, and an increased proportion of high end graphics cards. Growth in these high end areas translates to improved profitability, and underscores ASU's position as the industry leader in boards and cards. Looking ahead to the second half of the year, current market observations suggest that short term headwinds cause a deferment of demand, rather than a complete disappearance of demand. And so as we see the pace of memory price increases gradually slowing in that second half,

27:05 though they are still trending upwards, the surge is visibly less steep than in the first half. We believe the boards and cards business can gradually climb out of the trial and return to a growth trajectory. And so that was for the open platform business group. Next page. Moving on to ISBG, the Infrastructure Solutions Business Group. As previously mentioned, we saw an explosive doubling of revenue growth in the second quarter. Based on current visibility, we are very confident that this growth momentum will continue through the second half of the year. With the launch of new platforms and the steady expansion of core customers, we are confidently revising our four year server growth target from the 100% we reported in the last quarterly conference to at least 150% year over year.

28:06 And I believe that this will be a powerful growth engine for the company. I would also like to share a few major highlights.

28:22 At Computex twenty twenty six, together with our partner NVIDIA, we demonstrated a complete end to end AI factory solution covering design, deployment, and actual operation. And by using NVIDIA's DSX, we help customers use digital twin technology to simulate and evaluate power, cooling, networking, and storage assets before actual construction, thereby significantly reducing the risk of deployment. Furthermore, to support the next generation of trillion per RAM models, we also launched the NVIDIA Vera Rubin NVL72 with a 100% liquid cooling design.

29:26 We call it the ASUS AI part, which is a rack level platform. And so from data to tokens, ASUS is not only optimizing token generation efficiency, but also leading factories toward large scale intelligence to accelerate corporate profitability. At the same time, to ensure high quality servers and accelerate the development and mass production validation of our products, we established the Asus AI lab, and through rigorous practical testing, we validate AI infrastructure and optimize thermal performance, power systems, and liquid cooling technology to ensure enterprise grade reliability

30:15 and brand trust. Moving on, regarding the AIoT business group, for this one, I have two highlights. First, we have made a breakthrough in the healthcare industry. In January 2026, ASUS Blade AI blood smear analysis software received Singaporean Health Sciences Authority certification. We received Class II in vitro diagnostic medical device certification. This is ASU's first certified individual device individual diagnostic product, and the software was co developed with the National Ching Kun University Hospital and Koo Teck Puat Hospital.

31:16 Following clinical evaluations across five medical institutions in Singapore, it achieved nearly 100% accuracy. It supports white blood cell classification, red blood cell morphology interpretation,

31:30 and remote hematological pathology reviews. Additionally, Asust showcased smart healthcare solutions at Smart Health Asia twenty twenty six, which includes wearables, handheld ultrasound, medical monitors, and AI software. We are also deepening our strategic cooperation with the National Health Research Institute by combining the Asus VivoWatch, which is a handheld rather, and handheld wireless ultrasound, and HealthHUB health stations, Endoscopic AI solutions, the HES, H E E S, medical information system, medical displays, and smart robots.

32:19 We are using these lineups to provide a comprehensive smart healthcare solution. We are integrating with NHRI's forward looking research cohorts and national level data integration capabilities to accelerate the transition of digital health applications from concept validation to commercialisation. Next page.

32:41 Finally, we received a number of awards this quarter that I would like to share. In terms of corporate governance, ASUS was ranked in the top 5% of the optimal category for listed companies in Taiwan's twelfth corporate governance evaluation, reflecting our commitment to strengthening governance and responsibility management. Regarding products, we won 10 best choice awards at this year's Computex, with the LG G1000 Edition 20 gaming desktop winning the gold award, and the Asus ExpertBook Ultra business laptop receiving the sustainable technology special award.

33:31 And finally, we also won 43 awards in the Red Dot Production Design Awards. In particular, the Orogy Falcon ACE HFX magnetic axial keyboards and the Orogy Xipherst Duo both received the highest honor of Red Dot Best of the Best. And so this fully demonstrates ASUS excellence in design and innovation. And that concludes my presentation. Thank you. Thank you to the CEOs and the CFO. We will now begin the QA session. If you have any questions, please submit them via the question mark icon on the left side of the webpage. We will consolidate all questions and answer them shortly. Thank you.

34:21 Our first question comes from KGI Securities. First, congratulations to the company on the exceptional operational growth. Regarding Q3 guidance, you mentioned that PC revenue is expected to grow 15% to 20% quarter over quarter. Could you break down this growth from the perspective of both ASP and shipment volume? Furthermore, could the company share its views on global PC shipments for 2026 as well as ASU's own shipment targets? Thank you. Regarding the projected 15% to 20% quarter over quarter growth for the third quarter. If you break it down by ASP and volume, it's essentially a fifty-fifty split.

35:09 Both components are seeing positive growth, with each ranging between five percent and ten percent, which combines for the total of 15% to 20% quarterly increase. As for which types of PCs will perform most strongly in the third quarter, I think it's well known that memory prices are currently the most significant impact on the PC market. We have observed that high end products are relatively less affected. The reasoning is slightly simple as well, because for high end products, the increase in memory cost represents a smaller proportion of the total cost, which minimizes the impact on the final selling price.

35:56 And as an aside, customers capable of purchasing high end products tend to be less price sensitive. Consequently, high end models have remained relatively resilient. Regarding our outlook for global PC shipments 2026, I think the most mainstream forecasts will project a year over year decline of approximately 4%. And if we split this into the first and second halves of the year, in the first half, there is typically an advanced stocking effect, meaning that shipment volumes in H1 were not significantly different from the last year, and this shifts the traditional seasonal weight, wherein usually the second half of the year carries a higher proportion of shipments.

36:46 However, due to that early stocking that happened this year, the split between H1 and H2 will likely be closer to fiftyfifty. But since volumes did not drop in the first half, the entirety of the projected decline will fall on the second half, therefore the decline in volume for Q3 and Q4 will be more pronounced, while the full year drop may be around 4%, but the decline for the second half of the year will likely exceed 10%. And that's our prediction. Thank you. The next question is from Morgan Stanley and several other institutional investors. They would like the company to explain the sources of the margin improvement in the second quarter and whether there are any plans to revise or increase future profitability targets.

37:41 Okay, I am CFO Nik Lu, I'll take this question. In the second quarter, both our gross margin and operating margin reached historical highs, and this primarily reflects ASU's established brand position, our product mix, and our supply chain resilience. And these factors combined have created strong market competitiveness and high customer recognition, even amidst these volatile market conditions. And so from a quantitative market perspective, ASUS achieved a significant increase in market share in the second quarter, maintaining a positive year over year growth in shipment volume.

38:32 In terms of volume, the entire market's ASP will likely grew by over 20% due to rising memory prices, and so expanding the overall market value by a similar margin. As a brand that is outperforming the industry, ASUS has captured even greater value premiums from this growth and margin expansion process. And additionally, our server and business group continues to see rapid and massive growth, with the ramp up of new products like the GB300, and resulting economies of scale profitability in the server segment has also seen a pleasing increase.

39:31 But looking ahead, the company is focusing on two primary objectives. First, we will continue to strive for growth and operational result that outperform the industry. And this was admittedly our previously stated goal, which successfully achieve in the first and second quarters, and we are confident we can maintain this trajectory. But secondly, as we have shared long term, we use an operating margin of 4% to 5% as our baseline assumption for reasonable profitability. And while our performance in recent quarters has significantly exceeded this range, we cannot provide a definitive forecast for the future.

40:19 However, for the third quarter, we anticipate that our profitability will likely remain above the upper end of that 4% to 5% range. Looking at the long term, however, we are managing a portfolio balance between our two major product lines PC, motherboards, and gaming on one side versus servers on the other. In the foreseeable future, specifically the next one to two years, the growth in the server segment is expected to be substantially larger because servers and brand products have different margin profiles, our goal is to achieve industry outperforming growth and superior capital returns, specifically return on invested capital ROIC across both business units.

41:20 And that's really what we're aiming for in terms of the goal. But to supplement one more point onto that, regarding service, what we're seeing right now is incredibly strong momentum in orders and our order book. In fact, our current operational and financial resources are reaching a point where they cannot fully satisfy all the orders we have received. And consequently, we are planning to increase our investment in operational resources and financial preparations to support that demand. And this applies not only to servers, but also to large product upgrade cycles that we anticipate in AIPCs and HPCs over the next two to three years.

42:06 And this is really the core of our strategic thinking. Thank you. The next question is from Morgan Stanley and KGI Securities. Could the company share the shipment and revenue proportions of RAC level products within the server segment? And furthermore, is the revenue growth in servers for the third quarter primarily driven by RACs or the other form factor? Finally, what are the shipment and profitability targets for servers in 2026? And what is the status of the supply of key components for these new server products? Thank you. Okay, I will answer this one. I am Samson.

42:51 And so first regarding our AI server layout, we have a very comprehensive portfolio covering both HGX type servers and full rack systems like the GB300 NVL72 systems. And so in terms of that lineup, it's very comprehensive, but going to a breakdown preference, HD X accounts for approximately 60% and the NVL72 GB300 line for rack systems, they account for approximately 30% in the second quarter. And for the first half of the year overall, the split was roughly 65% to 35%.

43:37 Together, these two account for about 90% of our total server revenue, with the remaining 10% consisting of general purpose servers and miscellaneous products. But as I mentioned earlier, we have very high visibility and confidence going forward in the growth of our server business, and that's both for this year and beyond. So for 2026, we have revised our year over year growth target upward to at least 150%, and we remain very confident in our outlook for the next year. As for specific growth targets for 2027, please give us a little bit more time because the picture will become clearer by the fourth quarter.

44:33 And in general, we expect our customer base to be even more diversified next year than it has been or it will be this year. But as we continue to scale, we think that server profitability from us has reached a very healthy industry level. So the service segment will likely continue to be a critical growth pillar for ASUS, not just this year, but also for several years to come in the future. That's definitely servers is a big focus that we're keeping track of.

45:20 But then splitting our attention to server components, we do see that memory supply remains tight, and that the allocation priority is skewed clearly towards server demand. So while there is still some shortage, the situation for server memory is better than it is for the PC product line. The same applies to CPUs, actually, because we're seeing that vendor allocation priority is higher for servers than for PCs. And while we cannot say that supply is 100 sufficient, the severity is not as high as it is for the general PC market. So for ASUS, this is within our controllable range and has not caused significant operational disruption in spite of the fact there is definitely a shortage present.

46:19 So that managed level of shortage is our perspective right now. Thank you. Thank you. The next question is from Bank of America Merrill Lynch. The company has expressed strong confidence in PC growth for the second half of the year. What is the approximate contribution of commercial PCs to that growth? And furthermore, does Asustek have specific target markets or product lines it is focusing on within the commercial sector? And what are the key reasons for ASU's success in this area? Okay, so as reported previously, our commercial PC business has performed exceptionally well over the last six quarters.

47:11 We have seen growth rates that exceed over 50% each quarter. And this is primarily due to strategic adjustments we made in our commercial PC approach a few years back, including the introduction of a new operational team. I think it's fair that the drive for growth in commercial PCs differs slightly from consumer PCs, because if you approach commercial clients before you are fully ready for that market, it can actually be highly counterproductive. Commercial clients designately have different requirements and higher standards for product stability than consumer clients, and therefore we adopt a specific strategy. For target markets, we initially focused on regions where ASUS has already established that strong presence in the consumer market, for example, in many Southeast Asian countries, where we were already the number one brand in those local markets.

48:13 And that existing high local brand awareness makes it much easier to convince corporate clients to adopt our commercial products. That transfer of recognition tends to make it easier, at least in terms of the initial adoption. But then beyond brand recognition, adjusted product specifications to meet commercial needs, because commercial clients really do require a more total solution rather than just the standalone hardware that consumer clients typically expect. Over the past two years, ASUS has invested heavily in hardware design, software enhancements, and the establishment of local service teams to each locale. And these efforts together have yielded significant results across various segments, starting with small and medium businesses, education, and government markets.

49:21 And starting there, we have also progressively secured larger corporate clients. For instance, we have won orders from several major banks in Southeast Asia. And since these banks have numerous branches nationwide, these wins contribute significantly to our shipment volume. And that is a brief overview of our commercial PC business. Thank you. Thank you. Moving on to the next question from Taixin International Bank. The CEO mentioned that Asus is launching the Xeni Cloud solution. So were the local model for Xeni Cloud consider using models like Cloud or ChatGPT?

50:11 So let me address this question. So our goal for the ZeniClaw application is to be able to have it run smoothly across all ASUS notebooks, and not only run, but run smoothly. And so given that the computing power of a standard PC is relatively limited, it is impossible to host a massive large language model locally. So therefore, the currently implemented local model is approximately 4,000,000,000 in parameter count in size. As regarding cloud or chat GPT, these are closed source models, not open source. It's not something they're not something that we can use even if we wanted to.

51:05 So what we're doing is that we're using a fine tuned open source small language model that can give users a better experience. And so the fine tuning process is designed to figure out whether, you know, if the user's request can be handled locally. The local model basically acts as a judge to determine if the task is too complex for the local model to handle. In that case, the system offloads the query to a cloud based model, and so this hybrid approach ensures that the NGENTIQ AI platform performs better and meets customer needs more effectively. But you may also be wondering about the cost of cloud tokens.

51:50 And so this is definitely a factor that we considered during the design of Zenith Claw For our commercial PC products, we have implemented a variation of Zeniqlo to adjust this, because to run larger models on a machine with limited amounts of memory, we do need some form of workaround. And we're basically hoping to use something called VRAM virtualization. And we collaborated with a Taiwan based flash controller vendor that provides AI adaptive technology and integrated that into our commercial PC models.

52:44 And so by integrating that technology, we can run models larger than that 4,000,000,000 parameter count I mentioned, but of course this is not going to match the massive parameter counts of cloud or chat GPT models. But nonetheless, this sort of offloading approach can significantly reduce token costs, and our tests showed that this sort of vRAM virtualization is a fairly effective way to save on token generation costs. But of course, the trade off is that the token generation speed is slightly lower due to that memory offload. However, many AgenTeq AI tasks do not require an instantaneous response.

53:37 For example, a user can issue a command at the end of the day and check the results the next morning. And so for those types of applications that are not time sensitive, this sort of architecture is a near perfect solution. It's cost effective and it still gets the job done. And so we do support various architectural configurations depending on the customer's needs. And so that's really, I think, a very balanced approach that we have adopted. But at the end of the day, it's down to the individual customers' needs, And so we do allow for that flexibility in GenTeC AI itself. Thank you.

54:24 The next question is from Taiwan Life Insurance. Regarding the ProArp P16 and P14, which are the NVIDIA RTX Spark platform products, what is the estimated global sales volume for the first year? Does ASUS have a target market share or a specific price range for these products? As I mentioned at the beginning, ASUS is part of the first wave of manufacturers launching NVIDIA RTX Spark products. Our launch timing is aligned with a schedule set by our key partner and is expected to fall in the fourth quarter. Regarding current demand, the market response has far exceeded our expectations, essentially the initial quantities we planned have already been fully pre ordered by our channel partners.

55:21 So we're continuing to place additional orders with our partners, so we're very optimistic about next year's sales, and we will reserve the specific volume figures for now, pending how the future plays out. But we are generally highly confident in the product. Because of its high AI computing power relative to its compact size, we believe this is a highly suitable platform for agentic AI inferencing applications. It's perfect as an edge AI compute module, and so it aligns perfectly with that broader trend of edge AI development.

56:12 In addition to these laptops, we are also very confident on the DG AS station products that we mentioned before. They are workstation grade RTX Spark computing power units. We believe that these two product lines will create a new growth segment for the industry in the era of AgenTeq AI. And as a leader in this space, we have high expectations for the momentum that these products will bring to our operations in the fourth quarter and throughout next year. And that is definitely something that we are looking forward to.

57:01 Thank you. Thank you. I would like to once again thank everyone for participating in today's ASUS Online Investor Conference. We believe we have provided comprehensive answers to the main questions. I will now hand the time back to our two co CEOs for their closing statements. Thank you. First, I would like to thank investors and members of the press for your continued support. Your questions were very insightful and gave us the opportunity to more deeply share ASU's vision, while also reminding us of the areas where we must continue to improve. Before we conclude, I will provide a brief summary. In the second quarter, ASU's brand revenue and profitability both reached historical heights. This result was driven by two simultaneous engines.

57:51 First, our server business revenue grew twofold year over year. With the accelerating demand for AI computing and cloud infrastructure, we have high confidence in our order visibility for the second half of the year, and that allows us to revise our full year server growth target from 100% to 150%. And second, despite the headwinds we're facing because of rising component costs, our PC business achieved a still impressive 20% year over year growth, making us the only growing brand in the Windows camp in terms of shipments. And our commercial PC business has also maintained growth above 50% for six consecutive quarters, proving that our strategic transition into the commercial market has been highly successful and is now bearing fruit. And we are very optimistic about our outlook for the second half of the year, and believe that momentum is very sustainable.

58:53 And these numbers are the results of ASU's comprehensive layout across four layers: the cloud, edge computing, terminal devices, and physical AI. We will continue to face the challenges of the industry environment with a pragmatic but aggressive attitude. We remain highly confident in our position within this AI wave by staying user centric and leveraging superior products, services and comprehensive AI ecosystem. We will continue to be a trusted trusted technology partner for global enterprises and create long term value for our customers, partners and shareholders. Thank you. I am Co CEO of Samsung Hu. Finally, I would like to once again thank everyone, especially to the investors and the media for your participation in today's conference and your long term guidance and support.

59:45 Because ASUY has covered the main points, was going to add a few closing remarks to supplement. In the face of headwinds from memory and CP components, we rely on our supply chain partnership and our high value product mix. As shared today, high value products account for over 65% of our revenue. Furthermore, our pricing power in the gaming brand market provides us with significant operational resilience, and this is why we have clearly outperformed the industry in the first half of the year, and we are confident we can expand these results in the second half. And regarding AI servers, I will emphasize this once more.

1:00:31 We are very confident in achieving at least 150% year over year growth this year, and we are equally confident in our outlook for the next year. This is all from my side. Thank you. Thank you everyone. Goodbye.