コーニング（GLW）2026年第3四半期決算説明会：光関連売上高が44％急増、第4四半期見通しを上方修正

主要なポイント

• コーニングが発表した2026年第3四半期のコア売上高は前年同期比19%増の51億ドル、コアEPSは36%増の0.91ドルとなり、ともに同社のガイダンスを上回りました。
• 売上総利益率は150ベーシスポイント（bp）拡大して40.5%となり、営業利益率は310bp上昇の22.7%、ROIC（投下資本利益率）は330bp改善して16.7%となりました。
• オプティカル・コミュニケーション（光通信）部門が成長を牽引しました。同部門の売上高は前年同期比44%増の24億ドル、純利益は80%増の5億3,200万ドルとなりました。エンタープライズ向け売上高は84%増加し、そのうち生成AI関連製品の売上高は100%を超える伸びを記録しました。
• コーニングは5億ドル以上の能力増強投資を実施した上で、第3四半期に6億6,100万ドルのフリーキャッシュフローを創出しました。最初の9ヶ月間（第1〜第3四半期累計）のフリーキャッシュフローは23億ドルに達し、設備投資額は13億ドルとなりました。
• 経営陣は第4四半期の売上高を前年同期比約19%増の52億ドル〜53億ドル、EPSを約36%増の0.96ドル〜1.00ドルと予想しています。
• 同社は2028年末までに年換算売上高300億ドル、2030年末までに400億ドルの達成を引き続き目標としており、EPSは売上高を大幅に上回るペースで成長すると見込んでいます。

主要財務データ

コーニングは連結業績の議論において、主にコア（非GAAP）指標を使用しています。同社によると、第3四半期のGAAPベースEPSとコアEPSの主な差額は、ヘッジ・エクスポージャーの調整および単発的な税務項目を反映したものです。

事業および業績の動向

オプティカル・コミュニケーション（光通信）

オプティカル・コミュニケーション（光通信）部門は引き続き主要な成長エンジンとなりました。売上高は前年同期比44%増の24億ドル、純利益は80%増の5億3,200万ドルとなり、四半期として過去最高のセグメント利益率を再び記録しました。

エンタープライズ向け売上高は84%増加しました。顧客によるコーニングの新製品の採用が進み、同社が生産能力を拡張したことで、生成AI関連製品の売上高はGPUの出荷台数増加ペースを大幅に上回る100%超の伸びとなりました。エンタープライズ事業の年換算売上高は、「Springboard」構想開始時の14億ドルから60億ドルへと拡大しました。

通信キャリア向け売上高は、データセンター相互接続（DCI）に支えられ4%増加しました。コーニングはZayo、ベライゾン、AT&Tと光ファイバーおよび接続製品に関する長期契約を締結しました。経営陣は、DCIにおける市場機会は以前に掲げた「2020年代末までに10億ドル」という目標の到達時期および規模の両方を上回る見込みであると述べていますが、新たな目標数値は提示しませんでした。

経営陣は、光スケールアップ構成の採用拡大が2028年に加速し始めると引き続き予想しています。コーニングによると、現在のスケールアウト構成ではGPU 1基あたり約16本の光ファイバーを使用しますが、完全な光スケールアップではGPU 1基あたり160本に増加する可能性があるとしています。

グラス・イノベーション

グラス・イノベーション部門の売上高は前年同期比3%減の15億ドル、純利益は10%減の3億2,800万ドルとなりました。コーニングは、「More Corning」戦略により、メモリー価格の影響を受けたエンド市場を上回る業績を維持できたと述べています。テレビ向け出荷台数は4%減少、ノートPCおよびモバイル端末向け出荷台数は約20%減少しました。

同社は、円安ならびに重要な原材料費やエネルギーコストの上昇に対応するため、ディスプレイ用ガラス基板の値上げを実施しています。この値上げは第4四半期から開始されますが、主に2027年以降の業績に寄与することを目指しています。

コーニングはまた、2026年末までに、iPhone Duoを含むiPhoneおよびApple Watchの世界で販売される全製品のカバーガラスが、ケンタッキー州ハロズバーグの同社施設で生産される予定であると発表しました。

オートモーティブ（自動車）

オートモーティブ（自動車）部門の売上高は4%増加しました。小型車市場の3%の減少を、北米のクラス8トラック市場の回復が相殺して余りある伸びとなりました。同部門の純利益は1%減の6,700万ドルとなりました。

ソーラー

ソーラー部門の売上高は前年同期比37%増の4億3,600万ドルとなりましたが、同部門は700万ドルの純損失を計上しました。米国のウエハーおよびモジュール工場における生産の立ち上げは、引き続き想定よりも緩やかなペースにとどまりました。

経営陣は、2027年にかけて生産性、生産能力、収益性が段階的に改善すると予想しています。同社はソーラー事業において、売上高30億ドル超、および全社平均を上回る収益性の達成を引き続き目標としています。また、通商拡大法232条に基づく最近の米国政府の通商措置により、価格環境および米国製ソーラー製品の需要が改善したと述べました。

ライフサイエンスおよび新興成長事業

売上高は1%増加し、ライフサイエンス事業がそのエンド市場を上回る実績を上げました。純利益は新興成長プログラムへの投資により、前年同期比で1,300万ドル減少しました。

経営陣による業績予想（ガイダンス）

コーニングの2026年第4四半期予想は以下の通りです：

売上高予想の中央値である52億5,000万ドルに基づくと、経営陣は年換算売上高を210億ドルと試算しています。前年同期比の成長の大半はオプティカル・コミュニケーション（光通信）部門が牽引する見込みであり、ソーラー部門も追加の生産能力が稼働するにつれて貢献する見通しです。

更新された「Springboard」計画に基づき、コーニングは2028年末までに年換算売上高300億ドル、2030年末までに400億ドルの達成を目指しています。経営陣は2027年から2030年までの売上高の年平均成長率（CAGR）を19%と計画しており、EPSは売上高を大幅に上回るペースで成長すると予想しています。

コーニングは、主にオプティカル・コミュニケーション（光通信）部門の成長を支援するため、2026年に約20億ドルの設備投資（CapEx）を計画しています。経営陣は、継続的な能力投資にもかかわらず、計画期間を通じてフリーキャッシュフローが増加すると予想しています。

リスクと注目点

• 光関連製品の供給は依然として逼迫しており、増収は新たな生産能力の稼働開始に一部依存しています。コーニングは長年の既存顧客や、能力増強への資金拠出を行う顧客を優先しています。
• ソーラー部門の生産立ち上げは計画より遅れています。同部門は引き続き全社の利益率の押し下げ要因となっており、改善は生産性の向上にかかっています。
• グラス・イノベーション部門は、デバイスのエンド市場の低迷、円安、ならびに重要な原材料およびエネルギーの価格高騰による圧力を受けています。
• ディスプレイ用ガラスの値上げによる第4四半期への影響は限定的と予想され、主な増益効果は2027年以降を対象としています。
• 顧客預託金は事業拡張に伴う前払い現金負担を軽減しますが、コーニングは顧客が約束した数量を購入するに応じてこれらの預託金を返還します。
• 経営陣は、中国製光ファイバーが現時点で大きな競争圧力をもたらしてはいないと述べましたが、コーニングはその可能性に引き続き備えています。

アナリスト質疑応答の要点

経営陣は、オプティカル・コミュニケーション（光通信）部門の純利益率が10%台半ばから20%台前半へと改善しており、今後さらに改善する可能性があると述べました。ただし、光関連の生産能力増強を継続中であり、現在赤字であるソーラー事業の立ち上げ段階にあるため、新たな利益率目標は設定していません。

生成AI需要の持続性について、経営陣は顧客が引き続きより多くの製品をより速いペースで要求していると述べました。コーニングは複数年契約や顧客からの資金拠出を活用することで、生産能力のコミットメントを確保し、投資リスクを軽減しています。

維持管理費を除く成長関連投資の大部分は、長期顧客契約によって資金が賄われていると経営陣は説明しました。一般に、関連する設備投資が支出される前に顧客からの現金を受領するため、投資・納品サイクルを通じてフリーキャッシュフローが平準化されます。

全社費用には、通常レベルを上回る変動報酬が含まれていました。経営陣は、この費用が第4四半期に増加するのではなく横ばいで推移すると予想しており、売上高よりも緩やかなペースでしか増加しないことから、営業費用はレバレッジ効果（営業利益率向上）をもたらす要因になると捉えています。

コーニングは、20億ドル規模のATM（アット・ザ・マーケット）方式による株式発行プログラムについて、バランスシートの整理・管理の一環であると説明しました。同社は、現時点でこのプログラムを利用する意図はないとしています。

決算説明会文字起こし全文

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would like now to turn the conference over to Chris Keenan, Director of Investor Relations. Please go ahead.

Christopher Keenan

Thank you, and good morning. Welcome to Corning's Third Quarter 2026 Earnings Call. With me today are Wendell Weeks, Chairman, Chief Executive Officer and President; and Ed Schleshinger, Executive Vice President and Chief Financial Officer.

I'd like to remind you that today's remarks contain forward-looking statements that fall within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks, uncertainties and other factors that could cause actual results to differ materially. These factors are detailed in the company's financial reports.

You should also note that we will be discussing our consolidated results using core performance measures, unless we specifically indicate our comments relate to GAAP data. Our core performance measures are non-GAAP measures used by management to analyze the business. For the third quarter, the difference between GAAP and core EPS principally reflects adjustments for hedged exposures along with discrete tax items. A reconciliation of core results to the comparable GAAP value can be found in the Investor Relations section of our website at corning.com. You may also access core results on our website with downloadable financials in the Interactive Analyst Center.

Supporting slides are being shown live on our webcast, and we encourage you to follow along. They are also available on our website for downloading.

And with that, I'll turn the call over to Wendell.

Wendell Weeks

Thank you, Chris, and good morning, everyone. Today, we announced outstanding third quarter results. Year-over-year, we grew sales 19% to $5.1 billion and grew EPS significantly faster at 36% to $0.91, both exceeding guidance. We expanded gross margin 150 basis points to 40.5%, we increased operating margin 310 basis points to 22.7%, and we improved ROIC 330 basis points to 16.7%, all while delivering $661 million of free cash flow after investing over $0.5 billion in capacity to support future growth. Overall, a great quarter.

And we expect our strong performance to continue. For the fourth quarter, we expect to grow sales about 19% year-over-year to a range of $5.2 billion to $5.3 billion, and to grow EPS by about 36% year-over-year to a range of $0.96 to $1.

So let's put our very strong results and outlook in the context of our Springboard journey. In May of this year, we upgraded and extended our Springboard plan to grow our annualized sales run rate to $20 billion by the end of 2026, $30 billion by the end of 2028 and $40 billion by the end of 2030. We shared that we were entering a new phase of accelerating growth. We plan for our compound annual growth rate to increase to 19% beginning in 2027 through 2030, after already growing at a robust 15% CAGR for the first 3 years of Springboard. That is a 400 basis point acceleration.

In the third quarter, we already began to grow 19% year-over-year to $5.1 billion. That is an annualized run rate of $20.3 billion. And looking ahead to quarter 4, if you take the midpoint of our guidance, we'll grow 19% again to $5.25 billion. That is an annualized run rate of $21 billion. So just 1 quarter after upgrading our plan, we are exceeding our Springboard target of a $20 billion run rate by the end of 2026. And we are already demonstrating the accelerated growth rate anticipated for the next phase of our plan.

Interestingly, today's earnings call actually marks the 3-year anniversary of when we introduced Springboard to all of you. So let's briefly look back on our journey and review what we've accomplished together. In the first 3 years of Springboard, from our starting point through quarter 4 2026, we will grow sales 60%, and grow EPS much faster at over 150%. And along the way, we are significantly enhancing our financial profile, nearly doubling ROIC and more than tripling full year free cash flow. Altogether, we've established a strong launch point for the next phase of Springboard.

Looking ahead, we plan to double sales from $20 billion to $40 billion, grow EPS significantly faster than sales, expand ROIC, all while delivering robust free cash flow even as we continue to invest to capture growth. So if you liked the first phase of Springboard, you're going to love the next one.

Importantly, we already have many of the critical customer relationships and long-term agreements in place that underpin our growth outlook. Now each relationship is unique, but they do have 2 common characteristics. The first is a focus on technology and co-innovation. We share our technology and development plans with each other. This allows us to help our customers achieve their vision.

Secondly, we seek to appropriately share risks and rewards as we deliver that vision. Our customers are counting on us to provide the right products at the right time. So we take on the nontrivial responsibility of meeting challenging performance standards and in-production ramps. They take on the responsibility for how much of our products that they need because, of course, they are best positioned to make that determination.

We use multiple mechanisms to achieve the appropriate balance of mutual obligations depending on the unique circumstances of our customers and their requirements of us. One example of a tool that we have used successfully in our Glass and Solar businesses and have now applied in Optical Communications is to have our customers provide upfront cash to fund our capacity. We then simply return the cash to our customers as they purchase the committed volume. This helps to both derisk our capacity investments and give our customers supply chain assurance.

You can see this dynamic already at work in our financials. In the first phase of Springboard, we more than tripled our full year free cash flow while investing strongly in new capacity. Looking ahead to the new Springboard phase of accelerating growth, we are seeking to continue to increase free cash flow and improve our financial profile, even as we invest to double the size of the company. Ed will share more color on this in a few minutes.

We feel blessed to have these types of foundational relationships with our customers. They extend from our long-standing model of invent, make and serve. This fundamental approach has governed us for 175 years and will continue to guide us well into the future. We invest in innovation to invent products that enable transformative technologies. We create and build manufacturing platforms to deliver higher quality and lower cost than anyone else in the world, all to serve our customers over decades-long relationships.

When we get this right, our customers become enduring partners, giving us the opportunity to solve their challenges and help create their own extraordinary products that delight their customers in turn. So after 175 years, we are once again in a moment where we have the opportunity to apply our long-standing, principled approach to value creation: for our customers, for our people, for our communities and, importantly, for our shareholders. We are delighted to have you with us on that journey.

Ed?

Edward Schlesinger

Thank you, Wendell. Good morning, everyone. We delivered an outstanding third quarter, and our results demonstrate the acceleration of growth outlined in our 20-30-40 Springboard Plan. Year-over-year in Q3, sales grew 19% to $5.1 billion, and EPS increased 36% to $0.91, both above our guided ranges. We expanded gross margin 150 basis points to 40.5%. Operating margin grew 310 basis points to 22.7%. ROIC grew 330 basis points to 16.7%. And we delivered strong free cash flow of $661 million even as we continue to invest to capture robust demand.

Now moving to our segments. Our results were led by Optical Communications. Sales were $2.4 billion, up 44% year-over-year. Net income was $532 million, up 80% year-over-year, with the segment again delivering record profitability.

Enterprise grew sales 84% year-over-year, with Gen AI product sales growing more than 100% year-over-year, significantly outpacing GPU unit growth. This was driven by the rapid and broader adoption of our innovations and enabled by our steady capacity additions. At the launch of Springboard, our Enterprise sales run rate was $1.4 billion. Since that time, we've quadrupled Enterprise sales to a $6 billion run rate. And keep in mind, our growth is driven by scale out. As Optical penetrates the scale-up portion of the network, our revenue opportunity will increase dramatically.

In Carrier, sales grew 4% year-over-year, driven by growth in data center interconnect. During the quarter, we announced long-term customer agreements with Zayo, Verizon and AT&T to deliver fiber and connectivity solutions in support of their network expansions across broadband and data center interconnect. Collectively, these agreements serve as an excellent proof point for our long-term opportunity in Carrier, and give us confidence that our opportunity in DCI is bigger than the $1 billion target we've previously communicated.

Moving to Glass Innovations. The successful execution of our More Corning strategy helped us outperform our end markets, which were significantly impacted by memory prices. Looking at the market, in the third quarter, TV units were down 4%, while notebooks and handhelds were down about 20%. Our third quarter sales were $1.5 billion, down $54 million or 3% year-over-year. Net income was $328 million, down 10% year-over-year.

Looking ahead, we expect to continue executing our More Corning strategy. For example, we continue advancing our nearly 20-year partnership with Apple. By the end of 2026, all of the cover glass for iPhone, including iPhone Duo and Apple Watch sold worldwide, will be produced at our Harrodsburg, Kentucky facility. Additionally, we recently announced a price adjustment for our display glass substrates that will begin to take effect in the fourth quarter to address a weaker yen environment and rising costs such as critical materials and energy.

In Automotive, our sales were up 4% year-over-year. Recovery in North American Class 8 truck market more than offset the impact from the light-duty vehicle market, which was down 3%. Net income of $67 million was down 1% year-over-year. Looking ahead, we remain focused on our More Corning content strategy.

In Solar, Q3 sales were $436 million, up $117 million or 37% year-over-year. The segment reported a net loss of $7 million. We continue to ramp production at our wafer and module facilities, albeit at a slower pace than anticipated. As our productivity improves, so will our output and profitability. Demand remains strong, and the market preference for U.S.-made solar products continues to strengthen. Recent U.S. trade action under Section 232 of the Trade Expansion Act of 1962 improves the overall pricing environment and demand for Corning's Solar products. Overall, we are making solid progress building a more than $3 billion revenue stream in Solar with profitability above the corporate average.

Sales in Life Sciences and Emerging Growth Businesses were up 1% year-over-year, as our Life Sciences business outperformed the end market. Net income was down $13 million year-over-year due to investments in Emerging Growth programs.

Shifting to our outlook. In the fourth quarter, we expect sales to grow approximately 19% year-over-year to a range of $5.2 billion to $5.3 billion, and EPS to grow approximately 36% year-over-year to a range of $0.96 to $1. As we move to our next phase of Springboard, we have a really compelling opportunity in front of us. We plan to double the size of the company from $20 billion to $40 billion by the end of 2030.

We grow organically by inventing products that enable transformative technologies, and we create and build manufacturing platforms to deliver higher quality and lower costs than anyone else in the world. Historically, this meant we invest capital upfront before the revenue and free cash flow shows up. And then we have high returns and generate strong free cash flow down the road.

We have been steadily improving that model by appropriately sharing the risk and responsibility of investments with our customers. Many such long-term customer agreements underpin our growth. We use multiple mechanisms in our agreements to achieve the appropriate balance of mutual obligations, depending upon the unique circumstances of our customers and their requirements of us.

One tool we use is for our customers to provide the cash upfront. And then we return that cash as they purchase the committed volume. We have successfully used this tool in our Glass and Solar businesses and are now applying it in Optical Communications. This both provides our customers with supply chain certainty while securing our revenue, returns and free cash flow.

You can see this dynamic already at work in our financials. There is a line in our operating cash flow labeled Customer Deposits. For the first 9 months of the year, that amount was $639 million. This line includes upfront cash we received from our customers during the period net of the cash returned to customers from previous deposits as they purchase their committed volumes.

At a macro level, this mechanism smooths the cash impact of our capacity additions, helping fund the upfront investment and then returning customer deposits from the operating cash flow generated by our profitable delivery of the committed volume. You can already see this in effect in our cash flows. We generated $2.3 billion of free cash flow over the first 9 months of this year, while we steadily invested $1.3 billion in CapEx to add capacity supporting the growth outlined in Springboard. As we've previously shared in 2026, we're planning to invest approximately $2 billion in CapEx, primarily to support the growth in Optical Communications.

We plan to keep this flywheel going as we enter our new accelerating growth phase of Springboard. We seek to continue to increase free cash flow and further improve our financial profile even as we invest to double the size of the company.

Given our increasing free cash flow, this takes us to capital allocation. Our philosophy is to prioritize investing in organic growth opportunities that drive significant returns. Our shareholders have validated that this creates the most value for them, and this remains a priority. We will continue to maintain a strong and efficient balance sheet. And we're in great shape. We have one of the longest debt tenors in the S&P 500. Our current average debt maturity is more than 20 years, and we have no significant debt maturity coming due in any given year.

We also expect to continue our strong track record of returning excess cash to shareholders. We already have a strong dividend, and therefore, as we go forward, our primary vehicle for returning cash to shareholders will be share buybacks.

Now before we move to Q&A, let me reiterate my key takeaways. We've had great success to date with Springboard. We delivered significant growth and dramatically enhanced our financial profile. We also built a strong foundation with our capabilities, manufacturing platforms and our deep customer relationships. From this foundation, our growth will accelerate.

Our third quarter results and fourth quarter outlook already demonstrate the momentum we expect in the next phase of Springboard. We expect to double our sales from $20 billion to $40 billion by the end of 2030, to grow EPS much faster than sales, and to improve our financial profile even further. We expect our free cash flow to grow through the planning cycle even as we invest.

In total, we're focused on creating significant value for our shareholders, and we look forward to updating you on our journey.

And with that, I will turn things back over to Chris for Q&A.

Christopher Keenan

Thank you, Ed. Operator, we are ready for the first question. .

Operator

[Operator Instructions] The first question comes from Josh Spector with UBS.

質疑応答

Joshua Spector

I wanted to ask on just the Optical margin cadence. I don't know, Ed or Wendell, when you guys feel comfortable to kind of talk about margin on a forward view at all. Clearly, your investments are picking up. Your incremental pretax margins are still in kind of a 40% or higher range. Is this something you have confidence yet to be able to talk about and give a target at some point in the near future?

Edward Schlesinger

So thanks for the question, Josh. So I would agree. I think we have done a really nice job as we've been growing Optical to improve our net income margin. I'll use that as sort of the vector to think about. We were in the mid-teens. We're now in the low 20s. I certainly think there is an opportunity for us to continue to improve from there. And obviously, that has driven the company's operating margin significantly. We've grown that into the low 20s as well.

And again, I think we feel good about our environment. The thing I would say is we're going to be adding capacity in Optical to grow. As we've shared, we're also still building a Solar business, and that is actually still negatively impacting or dragging our margins a little bit. So I don't know that we're quite yet ready to put out a new target, but I think you should think of us as continuing to be where we're at and making progress from there as we grow.

Joshua Spector

That's helpful. If I could just follow up just in terms of corporate costs, that seems to be a thing people are nitpicking on this morning a bit. You're about $50 million lower year-on-year. That was kind of a big part of kind of why 3Q was in line. Is there something going on there between the allocations between corporate and the segments? And what's the assumption in the fourth quarter, please?

Edward Schlesinger

Yes, there's nothing going on. I mean we mentioned on our second quarter call, and it continues here in our third quarter, that our variable compensation expense -- so we pay for performance and we have a number of tools that we use to do that. And the compensation expense is a little above what I would consider to be normalized levels. We saw that in the second quarter. We've seen that here in the third quarter. It probably levels off. I don't necessarily think it accelerates in the fourth quarter. And then it resets as we go into the subsequent year.

So I view operating expenses, which, in general, is what sits in that corporate expenses bucket, as being a leverage point for us as we grow. I think we will continue to be able to leverage our operating expenses. They will grow slower than our sales.

Operator

And our next question will come from Asiya Merchant with Citi.

Asiya Merchant

Great. Just a couple of quick questions here. Wendell, you talked about at CNBC earlier this morning about Gen AI related demand. There's just been a lot of concerns in the market about the durability of this demand, whether it's financing or any other kind of various constraints that are out there. You're standing firm with your Springboard, there was a large growth factor associated with optical. Just if you can talk about how you're thinking about these various constraints and how you factor that into your Springboard?

Wendell Weeks

Thanks for the question, Asiya. What she's referring to, for those of you who didn't have a chance to see CNBC this morning, is one of the things that I talked about is sort of an important -- a document has been filed this last week, which is Anthropic's S-1. And you see a number of interesting things in that, but through my -- 3 main takeaways are the tremendous growth is there. Second is the implied profitability of their inference tokens, which is that primary driver for what it is their customers use as inference, and that looks very profitable. And their comment that their number one constraint is now and will continue to be compute, and we provide the networking for that compute.

What we see in our demand, Asiya, is continued press from our customers to do more and more. And as a result, what you see us doing when we're doing these multiyear agreements is asking those customers. Our customers are primarily the major hyperscalers given our long-standing relationships, help us fund and secure that capacity so that we can be assured of that demand, and we reduce any amount of risk to our shareholders. So I don't think I have gotten one call yet that has been for anything else other than more of our new products, faster and broader.

Does that answer your question or did you have something deeper behind that, Asiya?

Asiya Merchant

No, no, that's great. And just on the scale up, Ed, I know you talked about the scale-up opportunity being significantly greater. You guys talked about it at your Investor Day as well. Just any update, there's been just a lot of chatter around all the various events that have happened around Optical and scale up. Just any more color on how you're thinking about photonics as a MAP through 2030 and any other color for next year as well on the Photonics MAP?

Wendell Weeks

That's a great question, Asiya. So for those of you who don't follow this closely, Asiya is asking about scale up is [indiscernible] our demand is primarily driven by what's called scale out, connecting those GPUs out down the road to every other GPU that sits in the cluster. That's about 16 fibers per GPU in today's architectures.

100% of the current scale up architectures are in copper. If that was 100% optical scale up, you increase to 160 fibers per GPU. So that's a 10-fold increase. And so the question then becomes how fast is that going to happen, of what percent of the GPUs will be connected by optical scale up? And given its strong leverage on our financials because, obviously, a 10x increase in demand for GPU would have a significant impact on our financials given our position, this is what drives the quite appropriate fascination with timing.

So what we said in the May IR event was we expected Optical scale up to begin to accelerate in 2028. We continue to believe that strongly. We're on the inside of that ecosystem. I know people hear different things about different particular components, and will this be delayed or will that be delayed. This is just classic technology development. We continue to be quite convicted that this accelerates in 2028.

Operator

The next question comes from Meta Marshal with Morgan Stanley.

Meta Marshall

Great. Maybe Wendell, maybe expanding on that, if you could just speak to kind of the battle that you guys are having in terms of being able to fulfill Carrier versus Enterprise and maybe just how, if there is a battle there to figure out, how to make those allocations?

And then maybe second for Ed. Just I believe in previous quarters, you would kind of contextualize what the Solar overhang was. Just if you were willing to lay that out?

Wendell Weeks

So we've been -- we started so early that -- it's why you've been able to see our revenues, they seem to increase so smoothly because we started on the capacity early. You are correct that, especially our new and high-density products, are supplying us with the speed and breadth of their adoption, and that our traditional carrier customers now really want this product in their DCI architectures because they can fit 2 to 4 more times fiber is the same conduit. And at the same time, Gen AI is why we developed the dense products as we try to increase the amount of fibers per GPU, that also has a strong demand for those products.

And so what's really causing the tension is people want that newest product, and we're still ramping that up to be the product across all of our platforms. The way we sort of sort that out is centered around the long-standing nature of the relationships, those ones that are going on for decades, we tend to prioritize those customers. And then as well, when we have to add capacity, we have a natural [ sort ] towards quality because we ask them to contribute to those capacity adds. This will tend to shift our allocation, shift the percent of our revenue that goes to those folks who have the resources to help us fund that capacity. Does that make sense to you, Meta?

Meta Marshall

Yes, that does.

Edward Schlesinger

So I'll take the second question, Meta. The first thing I want to point out is I think the most important thing on Solar, the most important takeaway, I think, for folks is the Section 232 ruling, which took place in the third quarter. That actually has a very nice impact on the pricing environment and also indexes to demand for U.S.-made solar products. So that's us. I think that is a really important thing. It actually continues to strengthen our view in the ability to build a more than $3 billion business with nice profitability. So I think that's important.

As we said on the call, we continue to make slow, steady progress on our ability to make and sell the products that we make. So we make polysilicon, wafers and [ modules ] in the U.S. And we had sort of, I'll call it, bottomed out in the second quarter and we're around the same level here in the third quarter. So the drag, if you will, or the EPS or margin impact in the third quarter is similar to what we saw in the second quarter, and we would expect it to slowly improve from this level as we go through 2027. And then depending on our ability to inflect up on our productivity, that will really drive the profitability aspect of the business.

Operator

And the next question is going to come from Joseph Cardoso with JPMorgan.

Marc Vitenzon

This is Marc Vitenzon on for Joseph Cardoso. I guess the first question kind of piggybacks on the supply question with regards to accelerating top line growth from 17% in 2Q to 19% in 3Q and then high teens exiting the year and going into next year. How much of that is driven by demand versus new capacity coming online? How should we just think about the broader demand-supply dynamics there? And then I have a follow-up.

Wendell Weeks

Things are tight, and so as you see our revenue increasing, certainly, is bringing on our new capacity is part and parcel of that. Hence, we have the capacity plans in place that are already well underway to support that accelerating growth that you see in the next phase of Springboard as we move from the 15% CAGR during the first 3 years to 19% from '27 to -- throughout the end of our Springboard planning period. And so it will be both.

The other thing that also helps us on the revenue is basically realized price. Overall, price is going up. But more importantly, as we develop these new products, they create a lot of value for our customers. And we tend to split that value creation with our customers that allows us to get more revenue per element of capacity. Did that answer your question, Marc?

Marc Vitenzon

Yes, that's super helpful. And then the follow-up would be on Carrier where, historically, you framed growth around mid-single digits. This quarter, you signed Verizon and AT&T on top of Lumen and Zayo. How are you thinking about Carrier growth into 2027? Would the acceleration primarily be driven by DCI and long haul? Or is fiber-to-the-home also a substantial contributor?

Edward Schlesinger

Yes, Marc. For sure, data center interconnect is the bigger opportunity in the Carrier space. I would expect that to drive nice growth as we go into next year and then beyond that. As we shared, we had originally said we thought that DCI could be a $1 billion business by the end of the decade. We'll clearly exceed both the timing and the magnitude of that target. We haven't yet set a new target because I think there's a lot of activity in that space. So we'll take some time and sort of lay that out and come back and talk about it later.

I would also say that fiber-to-the-home will continue to be a growth driver. I think you will see deployments certainly by the large carriers in that space. We're very well positioned for that as well.

Operator

And the next question will come from Wamsi Mohan with Bank of America.

Wamsi Mohan

I had 2 as well. Maybe first on the customer deposits. Can you help us think through how much of the $2 billion of 2026 CapEx was funded by customers? And how does such share change into 2027 and beyond? And if you sort of look at the free cash flow dynamic, if I understand it right, you're going to repay deposits as customers take volume. So how much does it sort of create a headwind for free cash flows as you look into '27 and '28. And I have a follow-up.

Edward Schlesinger

Thanks, Wamsi. And also congrats on the marathon. I saw some photos of you at the Wineglass Marathon. So on the customer funding, what I would say is not all of our capital is for optical or towards our growth, some of it is maintenance of business. So if I sort of exclude that part, the maintenance of business part, the majority of our capital is funded by the long-term agreements that we've signed. And that will kind of, over the long term, that will kind of even out. It may not match exactly in any given quarter. We generally would get cash before we're spending the capital.

The cash flow question, which I tried to explain today a little bit, but maybe I'll elaborate a little bit more, I think, is really the important one. So for us, what we are seeking to do is as we grow and invest, to continue to increase our free cash flow through the planning cycle. You saw that -- you've been seeing that in 2026, clearly year-to-date, we're in a great position. And even as we return that cash, we expect to be able to continue to grow our free cash flow nicely because we will be generating a nice return, a nice level of profit and cash on the volume we're selling. And then, therefore, we're returning a portion of that via that incremental operating cash flow.

So it sort of smooths out our cash flow, reduces the volatility over time, and it allows us to grow free cash flow as we continue to grow sales. So that's how you should think about it.

Wamsi Mohan

Okay. I appreciate the comment. On the display price increases, how large is the increase and how much shows up in Q4? Does it fully offset sort of the weaker yen? Because you did have a little step-down in display profitability in the quarter. Are we back to normal by Q4? Or does it take a little longer for it to flow through?

Edward Schlesinger

Yes. So first of all, on the timing, we're implementing those increases now. They should begin to take place in the fourth quarter, but I don't think you should expect that to be a significant impact in the quarter. They're really geared around 2027 and beyond. As you know, the yen has been weak and there are other input costs where we're seeing some level of inflation.

We shared back in May that we had sort of derisked our long-term plan and taken the yen to 150. We continue to hedge, and we hope to do better than that in our hedging, but that's sort of why we're making these price increases. We're not disclosing the specific amount of the increase, but you can think of it as similar to what we've done the last few times we've done it.

Operator

And our next question comes from George Notter with Wolfe Research.

George Notter

Wendell, I wanted to ask about your perspective on the Chinese fiber in your business. I assume you're going to talk to tariffs and shipping costs, keeping Chinese fiber out of the markets that you play in. Certainly, there's geopolitical concerns, certainly, there's your LTAs and co-innovation with customers. But at the same time, I mean the market is just so asymmetric in terms of supply and demand. And I guess what I'm asking is, are you seeing fiber from China? And what's your perspective on that potential impact on your business?

Wendell Weeks

I think it's actually a great question, George. In terms of the percent of the market that we see exposure to Chinese fiber, that has been dropping actually. Now [ I see with a lot of different things ], not the least of which is more and more of the fiber is being consumed in a pretty complicated connectivity of product sets, where the degree of integration is high. And once it becomes integrated, its shipping costs become a lot higher, right? And the tariff cost becomes a lot higher. So it's not quite as easy as shipping reels of fiber around because you have so much of the value that's sitting in connectivity.

Now that being said, we always recompete in China against the Chinese players. And what we always count on for the long term is we're the highest quality, lowest cost, biggest producer in the world. And we continue to expand those advantages. So for now, we're not seeing it as a significant competitive pressure, but we're always preparing for the moment when that could happen.

Operator

And our next question is going to come from Matt Niknam with Truist.

Matthew Niknam

Congrats on the quarter. Kind of on the theme just asked, 2 quick ones, if I could. First, on the fourth quarter outlook, maybe, Ed, if you can help us unpack the outlook for the $5.2 billion to $5.3 billion for sales just across the different segments?

And then maybe a follow-on for Ed as well. You filed for a $2 billion ATM equity program a few months ago. You've got $2.5 billion of cash on the balance sheet. The business is obviously generating additional incremental cash flow. So if you can speak to the rationale for setting up the ATM and what would make you effectively use it relative to debt or other sort of customer prepayments.

Edward Schlesinger

Yes. And Matt, I just want to make sure I caught your first question. Specifically, are you asking about the content of the sales growth, like where it's coming from in the fourth quarter?

Matthew Niknam

That's right, across the different segments. Any relative changes relative to 3Q?

Edward Schlesinger

Got you. Yes, I think for sure, we expect to have a really robust quarter in Optical Communications. That will drive the lion's share of our growth year-over-year. As we shared, the AI data center component of our Enterprise business grew 100%. I think we really are seeing very strong demand, and that's going to do -- drive a lot of the growth.

I think Solar will continue to also drive growth as we bring capacity on, and then that should start to impact our earnings as we improve our productivity. Again, think of that is slow and steady, but it will certainly be a growth driver. So probably pretty similar dynamics to what you saw in the third quarter.

And on the ATM, I think of it as housekeeping for us. We have a shelf registration for debt. This is very much like a shelf registration for equity. So we have no intention of doing anything at this time, but it just -- it allows us to use this as a tool if we ever need to do that in the future.

As you know, what's important to us is having a very strong balance sheet. We invest over long cycles in innovation, and we are growing a lot now, and obviously, we're adding capacity. But there are a lot of technology opportunities for us, and we want to make sure that no matter what happens in the external environment, we can continue to invest through any kind of cycle. So we always do things that help improve our balance sheet, and this is just a housekeeping thing for us to have on the shelf.

Operator

And the next question is going to come from Martin Yang with Oppenheimer.

Martin Yang

A question on Solar's profitability in the medium term, perhaps your operating -- corporate operating margin keeps improving. You have the goal of Solar getting to corporate average towards the end of '27. I just want to make sure that goal is still intact. And you're referring to this continued improvement trajectory of corporate average for Solar is meeting that moving target, or is it Solar's margin profile getting to the previous corporate average comparing to the most recent ones?

Edward Schlesinger

Yes. I think in general, currently, Solar is below our corporate operating margins, so it's creating a drag. As we improve productivity, that profitability will improve, and I think it will be slow and steady. And we feel great about the business overall, and the Section 232 ruling is also very favorable to the pricing environment, which is a nice impact in general to margins.

I don't know -- I think you should just think about it as continuing to help our overall corporate average as it improves. If we continue to move that number up, certainly possible that Solar gets there. But I think of, if we get above 20% in Solar, it will significantly improve our overall corporate average.

Wendell Weeks

It's a positive sort of question in that, will our corporate average improve faster than we can -- the ultimate level of profitability we can deliver? And so that would be a really good problem to have, both of them racing for increased profitability.

Operator

[Operator Instructions] Our next question will come from John Roberts with Mizuho.

John Ezekiel Roberts

We usually think of Starlink as a competitive threat. But with their new move towards terrestrial, do they become a frenemy? And maybe with their data centers, they become more than a frenemy? Could you maybe give us some thoughts on that.

Wendell Weeks

Yes. So we're fans of LEO, of lower orbit. A, because we have some content on those. But B, you are right on the right area, which is now we'll be able to connect people, especially in more sparsely created areas or sparsely populated areas, as well as any sort of spots in the network that you can easily reach with a shared architecture. That's going to increase the bandwidth as they go more and more into data centers, that becomes a big driver for our product as well. And as you quite rightly point out, the data has to land in a network, and that data, as it lands, is certainly fiber optics.

So in general, we are very positive on LEO, and we think you're looking at it right.

I keep out the frenemy part. I think they're an important part of the mosaic, and we like customers.

John Ezekiel Roberts

And then, Ed, the yen hedge went from 98% down to 94%. Is there a plan to lower that over time by about 4% per quarter?

Edward Schlesinger

No. No plans, John. We do our best to hedge the majority of our exposure in any given quarter. That moves around a little bit depending on what happens in the quarter, but the goal is to be as hedged up, if you will, as we can be practically.

Operator

Thank you. I am showing no further questions at this time. I will now turn the call back over to Chris for closing remarks.

Christopher Keenan

Thank you for joining us. And before we close, I want to let everyone know that we will be attending the UBS Global Technology and AI Conference on December 1. Additionally, we'll be scheduling management visits to investor offices in select cities.

Finally, a web replay of today's call will be available on our site starting later this morning. Once again, thank you all for joining us. Operator, that concludes our call. Please disconnect all lines.

Operator

Thank you for participating, and you may now disconnect.