The high prosperity in optical communications persists, with the two leading Hong Kong-listed player
康宁2026Q2业绩直播
Key Takeaways (AI-Generated)
Financial Performance
- Q2 sales grew 17% year-over-year to $4.74 billion, exceeding guidance
- EPS increased 30% to $0.78, above guided range
- Gross margin expanded 120 basis points to 39.6%
- Operating margin expanded 190 basis points to 20.9%
Business Highlights
- Announced multi-billion dollar partnerships with Amazon and NVIDIA for optical connectivity
- Launched upgraded Springboard 203040 plan targeting $40B by 2030
- Achieved record profitability in Optical Communications with 21% NPAT margin
- Positioned as only US-based polysilicon and wafer manufacturer in solar market
Financial Guidance
- Q3 sales expected to grow 16% year-over-year to $4.9-5.0 billion range
- Q3 core EPS expected to grow 28% year-over-year to $0.85-0.89 range
- Full year CapEx expected at approximately $2 billion for growth support
- Sales CAGR of 19% expected from Q4 2026 to Q4 2030
Opportunities
- AI data centers growth with potential 10x increase in fiber content per GPU
- New photonics targeting $10 billion revenue stream by 2030
- Long-term agreements with Meta, NVIDIA, Amazon providing revenue visibility
- Increasing content per device strategy in premium market segments
Risks
- Memory price impacts expected to affect handheld market with mid-teens unit decline
- Automotive market remains muted with global vehicle market down 2%
- Optical scale-up adoption timing challenges due to technical complexity
- Supply chain readiness concerns for new technology deployment
Full Transcript (AI-Generated)
Operator
Welcome to the Corning Incorporated Second Quarter 2026 Earnings call. At this time all participants are in a listen only mode. After the speaker's presentation there will be a question and answer session. To place yourself into the Q&A queue, please press *11 on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, please press *11. Again, please be advised that today's conference is being recorded.
It is my pleasure to introduce to you Chris Keenan, Director of Investor Relations.
Chris Keenan
Thank you, Carmen. Good morning and welcome to Corning's second quarter 2026 earnings call. With me today are Wendell Weeks, Chairman, Chief Executive Officer and President and Ed Flesinger, 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 second quarter. Differences between GAAP and core EPS principally reflects adjustments for hedged exposures along with largely non cash discrete tax items and restructuring and impairment charges. 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 now I'll turn the call over to Wendell.
Wendell Weeks
Thank you, Chris, and good morning, everyone. Today, we announced outstanding second quarter results that demonstrated progress on our newly upgraded Springboard plan. Now for those of you who have been on the Springboard journey with us, you'll recall that we launched Springboard from quarter 4/2023 with an annualized sales run rate of $13 billion.
Over the past 2 1/2 years, we have significantly increased our sales and we have successfully transformed the financial profile of the company. Our plan is to now 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're entering a new phase of accelerating growth. We expect to deliver a sales CAGR of 19% from quarter 4/2026 to quarter 4/2030, while growing earnings faster than sales with significantly higher returns on invested capital and substantially more free cash flow.
With that context, let me get into the second quarter results. Year over year in the quarter, sales grew 17% to $4.74 billion. EPS grew 30% to $0.78. Gross margin expanded 120 basis points to 39.6%, operating margin expanded 190 basis points to 20.9%, ROIC expanded 180 basis points to 14.9% and we grew free cash flow to $1.42 billion.
Our results were led by Optical Communications where we grew sales 32% year over year to over $2 billion and net income grew 77% to $438 million. We continue to see strong demand for our Gen. AI products and enterprise networks and our orders are accelerating from the beginning of Springboard, we have more than tripled enterprise sales.
In quarter two. We grew sales 65% year over year to $1.27 billion and our Gen. AI product sales nearly doubled. Keep in mind this is all just scale out. We're not yet seeing scale up or photonics in our results all together. We're pursuing a significant opportunity in optical communications and I will go into more detail in just a moment.
Turning to solar, our sales grew 90% year over year and we completed an extended maintenance shutdown and equipment upgrade at our solar wafer facility. We expect our sales and profitability to improve in the third quarter.
Also in the quarter, we continued the drum beat of major customers choosing to adopt our latest innovations and support the expansion of our manufacturing platforms to accelerate both their and our growth plans. To recap our progress, last year Apple expanded by long standing relationship committing to produce 100% of iPhone and Apple Watch cover glass at our Kentucky facility.
In quarter one, Corning and Meta announced a multi year up to $6 billion agreement to support Meta apps, technologies and AI ambitions using our newest innovations in optical fiber, cable and connectivity solutions. Then in May, NVIDIA announced a multi year commercial and technology partnership with Corning to dramatically expand US based manufacturing of the advanced optical connectivity solutions needed to power next generation AI infrastructure.
In June, Amazon announced A multibillion dollar agreement with Corning under which will supply the optical fiber cable and connectivity solutions that power Amazon's expanding data center infrastructure across the United States. These deep customer partnerships support extraordinary growth that has been outlined in our upgraded Springboard plan that we shared at our May investor event.
Now, as most of you know, we provided a whole lot of exciting news in detail at that event and I encourage you to check out the presentations on our website. If you were not able to attend this morning, I'll share just a very quick recap of the key takeaways.
Our internal Springboard plan is 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. To keep it simple, we're thinking of this as our Springboard 203040 plan.
As a reminder, our internal plans are the output of the strategic planning process we run with each of our market access platforms. These are our actual business plans. We set our objectives and compensation based upon those plans. When our businesses submit plans to corporate, they factor in a variety of probabilistic outcomes. They try to account for the known unknowns.
The business plans aim for a 70% confidence interval, which means that based on their analysis there is a 70% chance that they will deliver sales greater than or equal to that number. We then translate our internal plan into a corporate level risk adjusted high confidence plan for investors, which Ed will recap in just a few minutes.
I'll share some of the key assumptions. In our internal plan for 2027 to 2030, we incorporated a forward rate of 100.¥50 per U.S. dollar to account for a weaker yen, We plan for flat TV and smartphone and markets and the impact of higher memory price. We planned for a declining ICE demand offset by increasing Corning auto content.
We also plan to capture a larger solar opportunity with an upgraded sales outlook. We included new innovations and form factors in Gorilla Glass and we see accelerating growth in fiber to the home and data center interconnect in carrier.
With that context, let's look at our growth across the company. To start out, lift the chart to show you our total revenue base. We are entering a phase of accelerating growth. For the first phase of Springboard ending in quarter 4/2026, we expect to deliver an attractive sales CAGR of 15% along with a dramatically enhanced financial profile.
Looking at quarter to 2026 versus the start of Springboard, we doubled EPS and expanded operating margin 460 basis points and ROIC 610 basis points. So overall we have an excellent launch point for highly profitable future growth from that large point.
As we enter 2027, we expect our growth rate to accelerate to a CAGR of 19% of 400 basis point increase. We expect consumer electronics, solar carrier, auto and life sciences all to grow in aggregate. We are planning for a mid single digit CAGR in those maps.
We plan to introduce our springboard approach of frequent updates for investors with deeper dives into individual maps as they hit significant milestones. At our May event. We had just reached such milestones in enterprise and photonics and so that was the focus of our presentations.
We're working in a fast moving space and there are a variety of perspectives on future AI network architectures. Our fundamental views haven't changed since we presented in May. So I want to reiterate the key takeaways.
Starting an enterprise, we have the opportunity to grow faster than the rate of GPU growth driven by the technical drivers that increase optical in the data center. At the most basic level, assuming no changes to the network, we would grow as GPUs grow. Now you all will have your own opinion on what the rate of growth of GPUs will be.
The insight that we'd like to reiterate today is some of the potential network changes that offer us the opportunity to grow faster than GPU's in our enterprise map. And we will cover the technical drivers, the logic and the impact of each.
The first driver is cluster size growth. The logic is that cluster sizes greater than 130,000 GPUs will require a third optical layer as clusters grow. That is good for our content opportunity as shown here. Once cluster sizes get above 130,000 GPU's, we exceed the network scale capability. That can be achieved with a 512 Radix switch with two layers. This requires adding a third layer.
Basically 3 layers divided by two layers yields 50% more content per GPU for very large clusters. These large clusters are a fast growing. Segment of AI factories. Therefore, cluster size growth is a positive for Corning relative to GPU growth.
So let's turn to the second driver. The second driver is bandwidth growth. Historically, GPU and ASIC bandwidth doubles about every two years. We link them through a combination of lane rate and number of lanes. Typically this is a neutral to positive impact.
Depending on SerDes cycles, we increase bandwidth either by increasing lane rate or SerDes which would have a neutral impact on fiber content or by increasing the quantity of lanes which can have a positive impact on fiber content. You can see that we've when we move from Hopper to Blackwell, the SerDes stayed the same AT100G, but the bandwidth needed to double, thus requiring that we increase the fibers from 8 to 16, doubling the amount of content.
As we're moving into the Rubin era of GPU architectures, we see a jump in SerDes to 200G. Thus we're able to keep the lane quantity consistent, resulting in a neutral impact on fiber content. Feynman likely won't be the primary system until the 2029/2030 time frame.
There is still a lot we don't know about it, but if it follows past patterns and stays AT200G, the number of lanes would double bandwidth, doubles and that would double fiber again. Or if 400G SerDes is available, the fiber content would be neutral or no change.
Likewise, there are other optical schemes which can be used to increase fiber efficiency, such as by dye and WDM, which can also reduce the need to increase the number of fibers per GPU. This has yet to be adjudicated. Now we'll know more in a year or so, but the main take away is bandwidth is neutral or positive for us. In our 203040 springboard plan, we assumed the impact of bandwidth on fiber count per GPU to be neutral.
The third driver is scaled up. Today this is 100% copper, but optical is beginning to penetrate the scale up network. This has an entirely new optical network, and while the timing of adoption and penetration are very difficult to predict, the size of the opportunity for an increase in optical content is quite large.
First, let's consider what has been announced regarding optical scaling. Recently NVIDIA announced a Vera Rubin Ultra configuration which will scale up to 576 GPU's in eight separate racks. Each rack will have 72 Rubin Ultra GPU's which are interconnected with copper and then extended rack to rack with direct optical connections.
This is a transition step to optical that is effectively a hybrid system approach to scale up. Optical is now playing a role. The percent of optical ports has not yet been announced publicly. What has been announced is the scale out bandwidth of 1.6 terabits per second and the scale up bandwidth for the individual GPU which will be 14.4 terabits per second.
So let's bracket the opportunity at the lowest end. We can assume 100% of the scale up network will be done as it is today and that's copper. What this translates to is the same opportunity that we have today, which is no fiber in the scale up and. 16 fibers per GPU in scale out.
Now let's compare that to a fully optical scale up system. We take the 14.4 terabits per second bandwidth per scale up and the 1.6 terabits per second bandwidth per scale out and divide them by the 200G SerDes. This will translate into 72 lanes and eight lanes respectively, each requiring 2 fibers.
This results in 144 fibers needed to support the scale up bandwidth and 16 fibers to support the scale out bandwidth. When we combine these demands we get a total fiber content of 160 fibers per GPU, which is 10 times the amount of fibers of the current scale out network.
What we know for sure is neither of those cases will be the hybrid system that was just announced. It will be somewhere in between. To be exact on the opportunity, we would need to both know the percent of optical ports in the offering and to know what extent these new hybrid optical scale up nodes penetrate AI factories.
Regretfully, I can't share the first because it's confidential and no one knows for sure what the answer is to the second question, which is just how successful will these be? But it is clearly a very large opportunity for us, and this is a topic that generates much technical debate, and you'll be able to get your own point of view by engaging with experts.
When I put all of these technical drivers together, we calculate that the demand for optical content per GPU in our enterprise map will increase by 1.3 to 1.5 times by 2028. As we head into 2030, we see the potential that that number could head much, much higher. Much of that increase is driven by the scale up opportunity quickly increasing, which leads us to the next incremental opportunity inside the box.
Scale up also supercharges our opportunity and our new photonics map which serves a new class of customers. We are bringing optics inside the box for a new generation of technology for Co package optics and near package optics. Although these technologies will likely start with scale out, it is clear that scale up drives a dramatic increase in the size of the opportunity.
Optical scale up is new technology that will likely have an exponential adoption curve leading to timing challenges that are difficult to predict. Based on our assumptions and our discussions and agreements with customers, we believe we have the opportunity for a $10 billion market access platform by 2030.
Essentially, new inside the box optical functions create the opportunity for Corning passive photonics to manage light. Historically, we have had no inside the box content. What's happening here is that because of the potential for improvement of latency, faceplate density, power and reliability, customers are looking for the opportunity to move away from pluggables and toward Co package optics and near package optics.
So as you can see in this diagram, light creation, modulation and delivery of the encoded optical signal Now move inside the box at the silicon photonic optical engine and everything in yellow is potential Corning content where none existed inside the box before. This creates an opportunity for Corning to supply the passive photonics required to move and manage the light.
Well, we just walked through a lot of information together. Obviously, this is a greatly abbreviated A version of the entire presentation we shared at our May investor event. Again, I'd encourage you to catch up on the full presentation on our website if you haven't seen it.
Before I turn it over to Ed, let me just recap the main takeaways that I'd like to leave you with today. We delivered a great second quarter, demonstrating the progress on our 203040 Springboard plan. We 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're in the new phase of accelerating growth. We expect to deliver a sales CAGR of 19% from quarter 4/2026 to quarter 4/2030, while growing earnings faster than sales with significantly higher returns on invested capital and substantially more free cash flow.
We expect growth across the company, highlighted by significant opportunities in our enterprise networks and photonics maps. In enterprise, we expect to capture strong growth as a identity data center. Cluster size increases in scale out and optical scale up takes hold. And in our new photonics map, we plan to build a $10 billion revenue stream by 2030.
We continue to deepen relationships with industry leaders, most recently with Amazon and NVIDIA, and these long term partnerships support our extraordinary growth opportunity. We're obviously living through a very exciting time for the company. We plan to continue our springboard approach of frequent updates for investors with deeper dives into the individual maps as they hit significant milestones.
And I look forward to updating you as we make progress on our journey to doubling the company over the next several years. We are so glad that you're on this journey with us. With that, I'll turn things over to Ed.
Ed Flesinger
Thank you, Wendell. Good morning, everyone. I'm very pleased with our strong second quarter results. We delivered another quarter of double digit year over year sales growth while continuing to improve our financial profile year over year.
In Q2, sales grew 17% to 4.74 billion and EPS increased 30% to $0.78 per share, both above our guided range. Operating margin grew 190 basis points to 20.9%, ROIC was up 180 basis points to 14.9% and we delivered free cash flow of 1.42 billion.
Turning to the segments and starting with Optical Communications, sales were two point O 7 billion, up 32% year over year. Net income was 438 million, up 77% year over year. The segment delivered record profitability in the second quarter with NPAT as a percent of sales of 21%.
Sales and enterprise grew 65% year over year driven by continued strong demand for our Gen. AI innovations and our orders are accelerating. The portion of enterprise sales related to AI data centers nearly doubled in the quarter. Carrier sales grew 1% year over year in the second quarter.
Longer term in carrier, we expect to grow sales mid single digits driven by fiber to the home deployments and data center interconnect across optical communications. We continue to expand and strengthen strategic agreements across our key customer base, reinforcing Corning's position as a critical supplier to next generation AI and broadband infrastructure.
Moving to Glass Innovations, second quarter sales were 1.4. Or 6 billion, up 20 million or 1% year over year, primarily driven by higher display glass sales. Net income was 354 million, up 9% year over year.
Now we've received a lot of questions about the impact of memory prices. For the full year, we expect memory prices to impact the handheld market with units to be down a mid teens percentage. Despite these headwinds, we expect Gorilla Glass sales to outperform the end market, driven by strong demand for our innovations and our position in the premium segment of the market.
We saw this dynamic in the first half of the year as well. Even in a down market are more Corning strategy to increase our content per device with products like glass, ceramics or products for foldable displays makes a positive difference.
In the display market, the impact of memory prices is expected to be less significant. In fact, as component costs increase, TV brands and panel makers are shifting to higher price and larger size TV's, which favors Corning. With our strong position in Gen. 10.5 glass and in advanced optics, we expect strong demand for advanced memory to support long term demand from chip makers and semiconductor equipment suppliers for our solutions.
In our automotive segment, Q2 sales were 471 million, up 2% year over year. Net income of 82,000,000 was up 4% year over year. Our sales to the automotive market were up 2% and driven by more Corning content outperformed the global automotive automotive vehicle market, which was down 2%.
Diesel sales grew 3% year over year and 13% sequentially driven by improving North American Class 8 orders. Looking ahead, we remain focused on our more Corning content strategy. We expect underlying secular trends favorable to Corning to remain intact and Dr. adoption of larger and higher resolution in vehicle displays as well as new emission control products.
In solar, Q2 sales were 438 million up to 107 million or 90% year over year. The segment reported a net loss of 7 million in Q2. As expected, we experienced an additional 30 million of expense versus Q1 as our solar wafer factory underwent an extended maintenance shutdown, transitioning to a permanent power system while repairing and upgrading production equipment.
Customer demand is strong across the map and we expect sales and profit to improve beginning in the third quarter. Overall in the business, we continue to secure long term customer commitments for polysilicon wafers and modules. The market preference for US made solar products continues to strengthen, supported by ongoing trade and tax policy developments and other government initiatives to advance domestic manufacturing.
Corning remains well positioned in this area as we are the only US based Poly silicon and wafer manufacturer and we remain firmly on track to build our solar business into a three billion revenue stream with profitability above the corporate average.
Sales in Life Sciences and emerging growth businesses were up 8% sequentially, driven by strong performance in our life sciences research business and net income was up 13% sequentially.
Shifting to our outlook, in the third quarter, we expect sales to grow approximately 16% year over year to a range of 4.9 billion to 5 billion and core EPS to grow approximately 28% year over year to a range of 85 to $0.89. In our solar business, we expect sales and profit to improve beginning in the third quarter.
For CapEx, we expect to increase our investment run rate into Q3 and Q4 and to invest approximately 2 billion for the year to support the compelling growth plan Wendell just described in Optical Communications. For the full year, we remain on track to generate significantly more free cash flow year over year, while continuing to invest in our growth opportunities alongside our customers.
Now before we move to Q&A, let me turn back to our. Springboard plan for a moment. I'll start by reiterating how we translate our internal plan into our high confidence plan to aid with your investment decisions. Our internal Springboard plan is 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.
With earnings growing faster than sales, our high confidence plan is to grow sales to an annualized run rate of 27 billion by the end of 2028 and 35 billion by the end of 2030. Interestingly, in either case, we expect to double the size of the company by the end of 2030.
If we achieve our internal plan, we'll double our sales run rate from Q4/26 through Q 4/2030. Our high confidence plan doubles our run rate from Q 4/2025 through Q 4/2030.
And as a reminder on how the plans work, our internal plans are the output of the strategic planning process we run with each of our market access platforms. These are actual business plans. We set our objectives and compensation upon these plans to arrive at our high confidence plan. We take our internal plans and further risk adjustment at the corporate level.
We seek to probabilistically adjust for factors including macroeconomic slowdowns, changes in government policy, timing of multiple secular trends and the rate of adoption for our related innovations. One of the most significant areas we are adjusting for is the timing on scale up of the network. This impacts both enterprise and photonics.
Adoption of optical scale up into AI factories is a significant technical change. The overall size of the opportunity is dramatic, but calling the timing is challenging. We will get smarter about this with each passing month and as we've done throughout Springboard, we'll provide updates and milestones that help you as investors track against both plans.
Overall, we have an excellent launch point for highly profitable future growth. If you compare the Q2/2026 results we shared today with our Q 4/2023 Springboard starting point, we have increased sales by 45%, improved operating margin by 460 basis points, grew EPSA 100% and expanded ROIC by 610 basis points.
So we are operating from a very strong financial profile and we expect that financial profile to improve. From here. Our plan is to grow sales at a 19% CAGR from Q4/26 to Q4/2030. You can expect us to continue to run at or above 20% operating margin even as we continue to invest to capture all of the growth. We'll come back later this year to give you an update on how we're thinking about operating margin.
And we've been growing EPS faster than sales and we expect that to continue. We've significantly improved ROIC to approximately 15% and we expect to continue improving ROIC into the high teens through the planning cycle. And most importantly, we expect free cash flow to grow significantly.
Typically when we invest organically, we invest significant amounts of capital upfront, which means we take risk before the revenue and free cash flow shows up. As part of Springboard, we are deepening key customer relationships with long term agreements to more appropriately share the risk and cost of our required expansions with our customers.
So the results will be attractive and we expect free cash flow to grow even as we invest to capture the higher sales. Overall, we've outlined A compelling new plan to further enhance our financial profile. The performance and progress on key milestones that we just shared for Q2 show we are off to a strong start, and we look forward to continuing to update you on this significant value creation opportunity.
With that, I will turn things back over to Chris for Q&A.
Chris Keenan
Thank you, Ed. Operator, we're ready for the first question. Reminder, if you do have a question, simply press *11 to get in the queue and wait for your name to be announced. To remove yourself, press *11 again 1 moment.
Operator
For our first question that comes from a SIA merchant with Citi. Please proceed.
SIA Merchant
Great, good morning and great set of results here. If I can just dig into you know Wendell and Ed you know the second-half growth expectations you're especially into four Q as we look into your three Q guide, you have improving optical capacity that's ramping and the solar facility migration that you talked about seems to have you know done its bit in the second quarter. Why should 4 Q, assuming an exit run rate of 5 billion year, why is there just very limited 4 Q growth? Is there something in the other markets that we should be thinking about? Thank you.
Ed Flesinger
Thanks, SIA. So first of all, as we shared, we expect to continue to increase our sales significantly from our current run rate sort of through the next planning cycle to get from a 20 billion run rate to 30 to 40 over the next four years or so. In the third quarter. Our guide implies that we might actually get to that 20 billion that we put out for the end of this year 1/4 or so early. And then you know we expect to continue to grow from there.
And I think most importantly, we've been growing at a mid teens growth rate year over year, you know, call it 15% or so. We're starting to see that growth rate accelerate and we actually expect our growth rate from the end of this year through the end of the planning cycle to also accelerate up to closer to 20%. You know our CAGR is 19%.
Wendell Weeks
So I don't think we're implying anything specific with respect to any of our other maps. I think a lot of the growth will come from enterprise and photonics as we've shared and certainly we expect solar to grow from our current levels just just normal simpler self is just in May, we provided that we get to the $20 billion run rate by quarter four and our growth rates are just going better. And so it looks like we could hit it a quarter early and we didn't want to re upgrade our springboard plan again after just doing it in May. So when we get around to updating and providing quarter 4 guide, we'll do that. Meanwhile, there's no implied message.
SIA Merchant
Great, thank you very much. If I can just ask one more on optical margins here, looks like, you know that should be ramping nicely here in the second-half. You do have capacity hopefully ramping to meet demand and seems like orders are accelerating here, especially on the AI side. Just if you can help us think about how we should think about margins in net income margins in optical, that would be great. Thank you.
Ed Flesinger
Thanks, SIA. So you know last quarter we got to 20%. This quarter we're over 20%, a significant improvement from where we were when we first started the springboard plan. I think we'll continue to see nice growth in optical and we can certainly see margin expansion as well.
Chris Keenan
Thank you, SIA. Next question, we come from Josh Pector with UBS. Please proceed.
Josh Pector
Yeah, hi, good morning. So I want to ask about your your Investor Day update and I'm appreciating you just went through a pretty big rehash of that. But to be crystal clear here, I mean, has has anything changed now versus two months ago? And specifically thinking about photonics and scale up, just, you know, there's been a lot of industry chatter around supply chain readiness for this and potential delays. I mean it seems like you're reiterating that photonics could be, you know, a billion dollar plus business potentially next year. Do you still have your visibility to that? And would you characterize anything differently today versus two months ago?
Wendell Weeks
So what you're hearing from us is we see no changes to our fundamental belief that we just shared with you in May. Yes, there has been. Much industry speculation on the exact timing of when everything begins, and that's fair enough. You have to understand when we provide that Springboard plan, we're adjusting for different probabilities of different timings and different content opportunities.
And what we're doing is we're basing that set of judgments with an understanding of the different ways different product sets and timing can go. So we see no real change inside the real ecosystem. There is much less drama and what it looks like from the people outside of it.
We're doing the steady work that it takes to build a $10 billion new photonics platform and bring in a significant new technical node to overall AI, which is scale up, which is where the biggest opportunity is for us. And it's just from inside the ecosystem. There's just way less change than from what sort of gets speculated on because all of us on the inside know the various trade-offs we can make to still deliver scale up depending on what happens with other component suppliers and chip dynamics. Does that make sense, Josh?
Josh Pector
Yeah, no, that makes that makes sense. I appreciate that. And I don't think we guided anything for next year on photonics. Just to be clear, right, you're, you're we gave the longer term 10 billion, we gave the chart and what the growth is, but we've yet to provide a specific number for you in photonics. So the billion dollar photonics analysis since you've done, I get it. I get how you get to those numbers. We'll update sort of each quarter as we go and we're giving you the long term photonics plan that we presented in our 203040 plan.
Wendell Weeks
OK, thank you. I'll be there. Thanks, Josh.
Chris Keenan
Thank you. It comes from George Noder with Wofford Research. Please proceed.
George Noder
Hi guys, thanks very much. I was just curious about you know the mixture of the optical business that's covered under long term agreements. I'm wondering what that looks like right now, wondering what that looks like maybe a year from now. And then I guess I assume you guys are going to be more aggressive on pricing in the optical business for customers that are not under LTAs. I'm just curious about where that stands right now. What kind of pricing increases are you taking? Any perspective there would be great. Thanks a lot.
Wendell Weeks
Thanks for the question, George. You can expect us to continue to increase the amount of long term agreements that we enter into because all of our significant capacity moves are back by those type of agreements as we seek to appropriately share the risk and rewards of the incredibly strong growth in our capabilities that our customers want.
So that will be a steadily increasing drum beat. Sometimes other customers want to be public and then we announce, sometimes not, but that workflow continues and we continue to see more and more customers wanting more and more from us and that they're willing to commit to underpin any investments that we need to make. That's the first part of your question. Did I answer that to your satisfaction, George, before I get that's right question.
George Noder
OK, Yeah, I'm just, I'm just curious about like is this a, is this a minor piece of the overall optics business, a major piece of the overall optics business, which will be bigger, smarter than a breadbox than you think will be the lion's share of our optical business?
Wendell Weeks
Because when I say that you're going to underpin any major capacity expansion, we'll be underpinned by these agreements that appropriately share the sort of risk and rewards given our rate of growth. Just the math says that that is just going to be the overwhelming part of our. Overall optical business, does that make sense?
George Noder
Yeah, that makes sense. OK. And then on pricing, so now we'll do pricing. I didn't forget the second part of your question, George.
Wendell Weeks
Sure. Let's just sort of start with what we see in the results and then we'll talk about how do we do it, right. So what you just went to Ed, just ran through with you is you saw opto sales up about 30% and net income up almost 80%. So you see dramatically improving profitability right now how we do that isn't just about increasing the price of bare fiber. The price is higher, but that really isn't how we're driving that profitability improvement.
We create value by delivering innovations in fiber cable connectivity to dramatically reduce our customers cost or increase their speed of deployment or increase the reliability of their networks. And then when we create value for our customers with our innovations, we get to keep a portion of that value of the innovation and that is what's driving this really significant increase in profitability that you see. I would expect that to continue
Implied in your question is also a question of sort of how much demand versus how much supply. We continue to have the enviable situation of if we could make more, we could sell more and and especially if we could make more of our most innovative products. We see nothing but growing appetite for these new high density product sets that we started on so long ago that are definitely gaining and accelerating in their adoption rate.
Chris Keenan
Thanks, George. Next question?
Operator
Thank you. From the line of Wamsi Mohan with Bank of America, please proceed.
Wamsi Mohan
Yes, thank you so much. I was wondering if you could maybe drill down a little bit more into the moving pieces of guidance for Q3 at the consolidated level. At the midpoint, you have a point of deceleration implied in your Q3 guide and I hear all the positives around your longer term story around reacceleration. Q2 was obviously underpinned by very strong optical enterprise strength. So the question is really do you expect that strength to continue? I think Wendell, you might have mentioned that Gen. AI was potentially a double in related sales were a double in Q2. Is that a trend that you expect to sustain here into Q3Q4 as well or are there other moving pieces that are creating a slight shortfall within within Q3?
Ed Flesinger
Yeah, Hey Wamsi, thanks for the question. So our guide for Q3 is not intended to imply any deceleration in growth. I think it's, you know similar it's it's intended to imply similar year over year growth as we had in Q2. And then as we've shared longer term, we expect that growth rate to actually accelerate. So that's sort of how you should think about it in total and for sure enterprise growth is a significant component of that.
Wamsi Mohan
As you go into Q3, are there anything add in there that any end markets that are going to track below seasonal for any particular reason as you as you think about Q3? And maybe I'll just ask this as well. You you grew enterprise sales by 300 million roughly quarter on quarter Q1 to QQ 2, but your Net margin didn't see a lot of operating leverage. What were some of the offsets to that to that leverage that you might get with that level of increase in sales? Thank you so much.
Ed Flesinger
Yeah. So on your the first part of your question, I would say, you know as I shared in my prepared remarks, I think the the areas that maybe aren't going to grow at normal seasonality would be things that might be impacted by memory. Like the handheld market in general will be significantly weaker than the first half of the year. You know we will outperform that market because we'll sell more content per device.
Into the market, but certainly that could have an impact. You know automotive market remains relatively muted, but I don't know that you know it has a huge impact on seasonality, but you know those are similar dynamics to what you saw in the second quarter.
And then on margins, I think we continue, I think Wendell's description of margins specifically an optical is really compelling from our perspective and we expect those margins to continue to increase as we grow and sell more of our new innovations and we're able to capture more value. And you know, again, Corning's overall operating margin continues to expand as we grow as well.
Chris Keenan
Thanks, Wamsi. Next question.
Operator
Our next question comes from the line of Joseph Cardoso with JPM. Please proceed.
Joseph Cardoso
Hey, good morning and thank you for the question. I know there's a few assumptions here, but when I give the back of the envelope and the half on the three Q guide, it implies a pretty nice uptick in bulk gross and operating margins and a nice improvement in the associated incrementals there. First, is that fair directionally? And then second, if So, what are the moving pieces driving the step up into three? Q And how should we think about the sustainability there just given, you know in the prepared remarks kind of sticking with the operating margin target of 20% plus just trying to unwrap back that a little bit more? Thank you.
Ed Flesinger
Yeah, Joe, I think your assessment is correct. And you know, one thing I would call out is we expect our solar business to improve profit and profitability from Q2 to Q3 as we've gotten past this cycle of, you know, improving our manufacturing performance there. So that is definitely a driver, You know, and as we've shared maybe more broadly even going back to our IR event in May, we expect to be at or above the 20% operating margin target we have set a couple of years ago.
We haven't set a new target. We'll come back later this year. We'll talk a little bit about that, but I think. The things to consider are we're still ramping that solar business. So that's not fully done. So profitability will continue to improve. We want to see that. We want to get a little bit more of that behind us and then we have to build a very significant photonics business as we see the scale up of the network and photonics kicking in.
And we also want to continue to see that we feel great about our profitability. But before we would change our target, we just want to have a little bit more experience behind us.
Joseph Cardoso
No, thank you. I appreciate it.
Chris Keenan
Thanks, Joe. Next question.
Operator
Thank you. It comes from the line of Meta Marshall with Morgan Stanley. Please proceed.
Meta Marshall
Great, thanks. Maybe just on the carrier business for a second, you know is that a reflection of just challenging comps in terms of some of the the newer customers that were ramping last year? Is that reallocation of some of the enterprise share? Just trying to get a little bit of insight into, you know, this quarter's results versus kind of your indications that that would still be mid single digit growth. And then maybe adding on to that, you know, there's been a lot of talk about kind of new incremental investments made in kind of reinforcing some of those lines or adding new kind of incremental long haul capacity. Just any any commentary about participation there? Thanks.
Wendell Weeks
So just it's just customer timing, what you're seeing in the quarter, if you look at the first half sort of a this year of 2026 versus the first half of 2025, sales are up about 17% in carrier and about 1/4 of a billion dollars. So just the way carriers work, right, what project is happening when in our timing of what we're doing with that particular customer.
But so we're not seeing anything in carrier where we're not where we don't see a growing set of demand both in DCI as you mentioned, but also in fiber to the home. So that's going to continue to be a nice growth rate. Did that address your, your question or do you have a follow up?
Meta Marshall
Yeah. And then just, I mean, there's been, you know, conversations with Verizon and Google, you know, just incremental projects that are coming online and, and do you view those as as ability to participate in those as kind of extra growth opportunities?
Wendell Weeks
I, I put that in the same, in the same category as the commentary we just had in enterprise. So we have customers really want our new product sets, right, as much as we can do. So any and all those new opportunities, they're coming to us almost always 1st. And then so we have a good amount of demand.
And what we're trying to do is make sure that we're positioning to continue to build these great customer franchises that are just going to last for decades and give us the opportunity to innovate and create value and give our investors a chance to count on a long term annuity. And that's what tends to drive our customer choice.
Chris Keenan
Great, thanks so much. Thanks, Meta. Last question please.
Operator
Thank you. It comes from Mehdi Hosseini with Susquehanna. Please go ahead.
Mehdi Hosseini
Thanks for taking my question. Most of the good words have already been asked so I have two follow up. Starting with Wendell, there is increased effort to bring semiconductor manufacturing into us. We do have a roadway for manufacturer former NEMC. And in that context, I'm just wondering why not allocate a larger portion of your polysilicon to electronic grade where there's a clear path to better profitability and it kind of sets into mating USA thing. And I have a follow up.
Wendell Weeks
I think to your point, we would expect more and more of our products set to we're going to increase the amount of Poly in the semi, especially in the highest grade semi going forward so that we will continue as a percent of our overall mix of revenue. So is just so much bigger in terms of volume, but we will, I think your advice is good and. And you should expect us to continue to increase our participation in the highest grade of semi Poly.
Mehdi Hosseini
OK, all right. And that should help with the better profitability for solar division. And then second question, thank you so much for all the details as it relates to optical and you provided another insight that could actually be applied to the whole supply chain. What I want to get from you is to what extent a scale up and fiber array unit is already done into a springboard. You, you went into a lot of details, but I'm a little bit confused how much of that is big into your springboard program.
Wendell Weeks
So I can totally understand where this some of the confusion can come from because we have the delivery of the fiber right to the sort of face plate in enterprise and that is a huge increase potentially with scale up. And then what we do is what we call photonics is what's inside the face plate, which among many other things is also what you refer to as an FAU harness or or a fiber ray unit harness.
So that is what we're putting in that photonics number, that map, which you see at ten billion, the FA us are part of that. There's a lot more content than just those within that photonics map. The best way to understand that is if you take a look at that diagram I showed you that all those yellow that's all potential Corning content and that'll give you a good picture of the variety of different products within it.
Mehdi Hosseini
So the 10 billion go on, I'm sorry, go on, sorry to instruct you. So the 10 billion baseline assumption does include some of the opportunities highlighted in the yellow color on a slide 26. But but there could be upside or this just based on assumption. We don't know the slope of the adoption.
Wendell Weeks
Yes, a lot that, that depends. The biggest driver here is going to be if you're on the right question, which is what percent of the ports are optical, right. And that how successful is optical scale up in AI factories? And that dynamic you're just seeing, you're going to have two parts to scale up, which is why we pay such close attention to it, which is both the dramatic increase in our Enterprise Products as well as the dramatic increase in our inside the box of photonics products.
And that's why I laid out exactly the technical drivers that you can keep an eye on as an investor and talk to people to develop a point of view because the answers to those questions drive how much faster than GPU growth do we grow?
Mehdi Hosseini
Got it, crystal clear. Thank you.
Chris Keenan
OK, well, thank you for joining us. And before we close, I wanted to let everyone know that we'll be attending Cities 2026 Global TMT conference on September 9th. Additionally, we'll be scheduling management visits to investor offices in select cities. And 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. You may now disconnect.
Details at Corning IR
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