Matthew Prisco — Analyst, Cantor Fitzgerald
Hey, guys. Thanks for taking the questions. I just want to start on the Data Center Computing side. Can you offer some more color on the increased positivity you're seeing versus three months ago? Maybe how have customer conversations developed? How are you thinking about the mix today? You commented that you see accelerating growth into 2027. What exactly does that mean? Thanks.
Steve Kelley — President and CEO, Advanced Energy
Thanks for the question, Matthew. What's changed in the past three months is that our customers have been successful in removing some of the supply chain issues that we faced three months ago. For us, that means we've been able to grow more bullish on our second half revenue and our 2027 revenue in Data Center Computing. So this year we've got a good line of sight to increasing business in Data Center. As we look into 2027, we see a couple key vectors there. The hyperscale customers who we've been engaged with for the last three years, we see a lot more wins ramping to volume there. We also are bringing on the second wave customers. These are the wins that we've earned this year that'll ramp to volume next year.
As a third vector, we think we'll see some business in 800 V towards the end of next year, and we see that ramping to production in 2028.
Matthew Prisco — Analyst, Cantor Fitzgerald
Gotcha. Thank you. Maybe for the second question, on the Semiconductor Equipment side of the business, obviously trends improving here as well. Just would love to hear your thoughts outside of the 25% of your business linked to service and ion implant, how are you thinking about the ability for AE to outgrow WFE in 2026 and maybe in 2027, and how do we think about that kind of new product traction that you've been highlighting on the call? Thank you.
Steve Kelley — President and CEO, Advanced Energy
Yeah. I think right now, we're better positioned to gain share than at any other time in our history. I say that because of the acceptance of our new technologies, both in plasma power as well as system power. Today, I think we're well ahead of the share gain targets we published at our 2024 Analyst Day about 18 months ago. We're very happy with the progress. We think we've laid the groundwork to gain share in conductor etch, in dielectric etch, and deposition. We're working at the leading-edge nodes across all those categories of logic, NAND, and DRAM. The reason why we're preferred is that we're offering yield and throughput advantages to the customers as they move to these very challenging geometries. Today, we see strong pull from all of our major customers.
We're winning wherever we're engaged, and our modularity allows us to spin off derivatives relatively quickly. On the system power side, we've gained some major wins in process tools and in tester applications. System power differs from plasma power products, and the development cycle time is much less. We're basically gaining share on two fronts, in plasma power and system power in the semiconductor area.
Matthew Prisco — Analyst, Cantor Fitzgerald
Thanks, guys.
Joe Quatrochi — Analyst, Wells Fargo
Yeah, thanks for taking the questions. I was wondering if you could talk about your inventory situation and just, you talked about buying more piece part inventory. How do you think about that in the forward demand? I think coming back, as we go back to the last kind of cycle, especially in semis, component availability was a bit of an issue for you guys. Any sense of kind of where we sit today?
Steve Kelley — President and CEO, Advanced Energy
Yeah. I guess the first thing I'll say is we learned a lot about our supply chain during COVID, so our team is battle tested. What we did during the COVID shortages, we brought on second sources wherever possible. We built inventory where it was necessary, and for new designs, we stopped designing components from underperforming suppliers. Our current situation is we don't want to constrain our customers, and we don't want to constrain our revenue due to shortages of piece parts. We're leaning into strategic inventory as lead times extend for these components and the demand that we see continues to increase. We think the inventory we're building right now is healthy inventory with very little obsolescence risk.
We're also maintaining high factory staffing at our factories in the Philippines, in Malaysia, and in Mexico, and that enables us to flex up when scarce parts arrive late in the quarter. These actions that we're taking, both in inventory and factory staffing, are helping us stay ahead of our customer demand.
Paul Oldham — EVP and CFO, Advanced Energy
May I just add to that, Joe, we signaled going into this ramp a quarter or so ago, our intention was to lean into inventory because we fundamentally believed it would enable volume upsides and flexibility in manufacturing, and that's what we're doing. A couple of comments on that. We said that would impact turns in the near term, and we've seen turns come down to about two and a half, which is what we signaled. I think it's worth noting that at the same time, we've invested in inventory to give ourselves flexibility and stay ahead of the curve. Both AP and AR have improved, which have mitigated the impact on working capital. Look, we have a strong balance sheet.
We think it makes sense at this point in the cycle to invest in our own piece part inventory, as Steve said, to stay in front of customer needs and be able to deliver to upsides.
Joe Quatrochi — Analyst, Wells Fargo
Thanks for that. Maybe as a follow-up, as we think about just the puts and takes in gross margin, you talked about some price actions that you're taking. Any help on just quantifying how we think about that as part of the gross margin guidance?
Steve Kelley — President and CEO, Advanced Energy
First of all, I'd like to say we're reluctant to raise pricing unless it's absolutely necessary. We first try to mitigate the price increases from our suppliers through second sourcing and through negotiation. Where we can't mitigate, we pass that through to the customer to preserve our own gross margin. Longer term, our first priority is delivering more value through new products, which tends to drive higher pricing and better margins.
Paul Oldham — EVP and CFO, Advanced Energy
Maybe I'll just add onto that one too a little bit. If you think about that, our stated goal is to remain price cost neutral. I think that's working. Again, I think compared to a few years ago during the supply chain crisis, we're a little more in front of that and being proactive. If you look at what really drives gross margin going forward, it's a few things. Number one, in terms of future opportunity is in fact better mix coming from new products, as Steve mentioned. The good news is we're already seeing some of that benefit come in. There's more opportunity to run there. That's higher priced products, which have higher value to our customers and are tied to new products. Obviously, volume makes a difference. We've seen some of that this last quarter. We'll continue to see that as revenues grow.
Finally, we've been growing at quite a rapid clip, we've certainly seen some inefficiency in manufacturing as we grow. We have high confidence that over time we'll be able to wring those costs out as well. Pricing certainly in the near term intention is to keep neutral, but we believe we can continue to improve gross margins really on structural improvements in the business.
Joe Quatrochi — Analyst, Wells Fargo
Thank you.
Krish Sankar — Analyst, TD Cowen
Hi, thanks for taking my question. I have two of them. First and foremost, congrats on the great results. Steve, I'm just wondering, when I look at your semi-revenue guide, it's about a little over 30% year-over-year. Some of your customers are guiding to almost 40% revenue growth. I'm just kind of curious, is there being better inventory management from your customers that you're not seeing a sharper growth, or is this the new normal where you're kind of going to grow more in line or slightly better than WFE, not outperform WFE when the cycle turns?
Steve Kelley — President and CEO, Advanced Energy
Krish, thanks for the question. I guess the first thing I would say is, over time, over the last three to five years, we have outgrown the competition. You do see variations year-over-year, based on changes in the market where one particular product may be up one year, another product the next year. It's hard to follow WFE every single year, but over time, we've done better than WFE and better than our competitors. As I look forward, we see extremely strong second half in Semiconductor. We think, if you look at the second half of this year compared to the second half of last year, we'll be up almost 50% year-over-year. No matter how you slice it, that's pretty good performance.
Krish Sankar — Analyst, TD Cowen
Got it. Thanks for that, Steve. A follow-up on the data center side. You said that you're continuing to win at hyperscalers. I'm just wondering, how many hyperscaler customers do you have today on the data center power supply side? Along the path, the 800-V DC, it seems like it's still later next year into 2028 for your early revenue. Why is it late when some of your competitors are shipping to ASIC hyperscalers, are expecting early revenues in second half of this year?
Steve Kelley — President and CEO, Advanced Energy
Krish. What we've said is that we have four hyperscale customers, but some of those are bigger than others. They tend to be very engineering intensive, and we've been very successful with the hyperscalers where we've engaged. As far as the second wave customers go, we have engaged with them this year, but it typically takes nine months to a year to go from engagement to production. We saw that with the hyperscalers. We're seeing it with the second wave customers. We think we're in pretty good position to add significant revenue from second wave customers in 2027. Ultimately, we think we can grow the aggregate second wave revenue to the same level as our largest hyperscale customers. It could become quite significant, and it could help us diversify our customer base a bit.
Krish Sankar — Analyst, TD Cowen
The 800 V?
Steve Kelley — President and CEO, Advanced Energy
Yeah. 800 V. We've got some interesting products, and there's been a high level of interest in our solutions at multiple customers. We see this as an opportunity for AE to increase our content per rack. We've brought a number of solutions to market. Some of those are DC-to-DC, some are AC-to-DC. They're all modular solutions, and they allow us to quickly customize, to mix and match to meet customer requirements. They're low profile, and they've received very positive feedback from the customers who have sampled these products. The other feature is they're all focused on high efficiency in the 98% range, high power density, and high reliability. What we're doing is leveraging our technology leadership and our strong technical team to win in this market.
We expect the initial production revenue in late 2027 and to see more meaningful ramp in 2028. We believe longer term that 800 V is going to coexist with both 12 V and 48 V data center architectures.
Krish Sankar — Analyst, TD Cowen
Got it. Thank you very much, Steve. Very helpful. Thank you.
Steve Kelley — President and CEO, Advanced Energy
Thank you.
Shane Brett — Analyst, Morgan Stanley
Thank you for letting me ask a question. I actually wanted to follow up on your answer to Krish's question just now on second-wave customers growing to the same level as your largest hyperscale customers. Is that a revenue contribution comment, and just what is the timeframe you envision for those second-wave customers to get to the same level as your main hyperscaler customers? Thank you.
Steve Kelley — President and CEO, Advanced Energy
Shane. Thank you for the question. We haven't put a specific timeframe on that ramp for the second-wave customers. My expectation is it's going to take at least until 2028, perhaps 2029 to get there. We have a number of different wins, and we're working on more wins in our pipeline, it's hard to really nail the timing down. I feel very good about our ability to ramp these second-wave customers in our factory in the Philippines as well as our new factory in Thailand.
Shane Brett — Analyst, Morgan Stanley
Understood. Thank you. My next question is also on data center, can you help quantify your current expectations and how much your content opportunity per gigawatt or rack steps up as you move through 400-V to 800-V conversion products? Should we think about a multiple of sort of revenue contribution per gigawatt or rack, or is it kind of more incremental and more smaller than that? Thank you.
Steve Kelley — President and CEO, Advanced Energy
Yeah. I think it's difficult, if you look at our business, to really find a metric where you could try to gauge our future revenue growth. I think what we've been doing is focusing on opportunities where we could be the sole source or one of two sources. These are opportunities where the customer needs best-in-class performance. We're avoiding commodity spaces and trying to focus on high-end opportunities where the customer needs engineering input from Advanced Energy.
Shane Brett — Analyst, Morgan Stanley
Thank you very much.
Steve Barger — Analyst, KeyBanc Capital Markets
Thanks. Steve, can you compare current engagements to a couple of years ago? Meaning, how much earlier in the design cycle are customers talking to you on the data center side? Are those starting to extend to the broader architecture around rack and cluster designs? Just where do most of your products sit, and do you have opportunities to expand that?
Steve Kelley — President and CEO, Advanced Energy
Yeah, I think today, most of our products sit in the rack, and I would say, the defining feature of the AI data center is the very fast development cycle times. I think what we've seen is that we've partnered closely with our key hyperscaler customers, because there's very little time to perfect the solution. What we've done is maximize reuse and work very closely with the customer to develop a solution that meets their next-generation needs. Generally speaking, there's about a 9-to-12-month lag between the final design and the full ramp. This is a continuous cycle. Over time, what's changed is the number of projects per customer has gone up as they develop confidence in Advanced Energy, both in our development capability as well as our ability to ramp to high volume.
Steve Barger — Analyst, KeyBanc Capital Markets
When you say projects per customer, do you mean inside the four walls of an existing facility, or does that extend to they're giving you more opportunities in other facilities as they grow?
Steve Kelley — President and CEO, Advanced Energy
Yeah. When I said that, I really meant the number of projects that we have with a particular customer. In many cases, we've qualified more than one facility to build these power supplies. Really we've got three choices now. One is the Philippines, one is in Mexico, and now we're bringing up Thailand. We'll basically build these products where it makes sense for the customer.
Steve Barger — Analyst, KeyBanc Capital Markets
Got it. Then we talk a lot about increasing power density in the data center, as you look at the leading-edge roadmaps in the Semiconductor business, are you seeing power requirements per tool increase faster than unit volumes there as well?
Steve Kelley — President and CEO, Advanced Energy
I think your question is, are we seeing increasing stress on power density in semiconductor fabs in addition to what we see in data centers? Is that correct?
Steve Barger — Analyst, KeyBanc Capital Markets
Yeah, exactly. Are you getting more content or is it a harder engineering problem at the leading edge as you look at the roadmaps going forward?
Steve Kelley — President and CEO, Advanced Energy
Yeah, that's a good question. It's definitely a harder problem for a couple reasons. One is the voltages tend to go up over time. We see this across the portfolio as we move into the leading-edge development. The second is we don't have more room to get the job done. Typically, the space availability in a wafer fab is very constrained. Our customers want us to accomplish the task in the smallest possible volume. We face significant challenges on power density, but we're able to basically use common technologies across our company, and we apply learnings that we have made in data center to our semiconductor product development and vice versa. I think this is one of the strengths of Advanced Energy, is we can apply learnings across all of our markets.
Steve Barger — Analyst, KeyBanc Capital Markets
Right. Volume and content opportunities in both data center and semiconductor.
Steve Kelley — President and CEO, Advanced Energy
Yes.
Steve Barger — Analyst, KeyBanc Capital Markets
Perfect. Thanks.
Mehdi Hosseini — Analyst, SIG
Yes. Thanks for taking my question. A couple of follow-ups. Want to focus on Data Center first. Steve, is there any way qualitatively or quantitatively you can help me understand the mix of different products embedded in the Data Center revenue? Specifically, I just want to see if most of your revenue is concentrated on the power solution or whether you have been able to diversify to include, PDUs and more of a module or shelf solution.
Steve Kelley — President and CEO, Advanced Energy
Mehdi, what we've said is, so far, all of our solutions have been rack-level solutions. We really haven't been any more specific than that for competitive reasons. I think moving forward, we're looking at participating in all types of architectures. Some of our participation may move out of the rack, but I think our primary focus will be on rack power and some of the peripherals.
Mehdi Hosseini — Analyst, SIG
Does that mean as power densification increase, you should be able to generate more dollars of revenue per rack or per watt?
Steve Kelley — President and CEO, Advanced Energy
Yes. That's what it means because the challenges are greater the higher the power levels. That's what we've seen. Each generation brings us a bit more opportunity as a supplier of precision power.
Mehdi Hosseini — Analyst, SIG
Because, obviously, it's outstanding to have doubled the revenue year last year, and now you're tracking to 50%. I'm just wondering if, looking forward, there is growth acceleration on a year-over-year basis.
Steve Kelley — President and CEO, Advanced Energy
I think there is. I think, looking back, we've tripled the size of this business in two years, which is impressive. Looking forward, we think there are three growth vectors. Obviously, the first one is our business with the hyperscalers. We're well embedded there and well established with these customers, and there are plenty of opportunities for us. The second one is the second wave I referred to earlier. These are customers that don't require a lot of engineering support. We could use existing technology blocks to quickly meet their needs. Again, over the next couple of years, I think we can grow them to a size which is similar to our largest hyperscale customer today. Finally, since we're a technology company, and really a technology leader, we see a lot of opportunity in 800 V because this is a technology transition.
As this develops, I think it's a great opportunity for us to gain share and grow content.
Mehdi Hosseini — Analyst, SIG
Great. Okay. Just one quick follow-up on the Semi side. Your guide of the revenue in the second half would be up 50% year-over-year, and implied guide for Q3 suggests to me that there is a sizable deceleration from Q3 to Q4. I find that kind of surprising because looking into the projects that your customers are working on, I would imagine there is a higher growth into the first half of 2027, higher growth for your customers. How come they're not preparing for that by building inventory? Why should your revenue on the Semi side decelerating to Q4 when your customers are facing a step-up in shipment into the first half?
Paul Oldham — EVP and CFO, Advanced Energy
I think if you look at the numbers, Mehdi, it depends kind of how you attribute Q3 and Q4. I think what we said in our call is that we're shipping in line to demand. That's how you should think about that.
Mehdi Hosseini — Analyst, SIG
Okay. Your customers are still not building inventory well in advance of complete system shipment?
Paul Oldham — EVP and CFO, Advanced Energy
Yeah. It's hard for us to comment on our customers, but I think what we've said is that we believe we're shipping in line to their demand. We're not holding them up-
Mehdi Hosseini — Analyst, SIG
Got you
Paul Oldham — EVP and CFO, Advanced Energy
We're delivering what they're asking.
Mehdi Hosseini — Analyst, SIG
Okay. Thanks for the clarification.
Paul Oldham — EVP and CFO, Advanced Energy
Yep.
Jim Ricchiuti — Analyst, Needham & Company
Thanks. A quick question just on Thailand. Did you say what kind of volume you anticipate in Q4? As we think about the scale-up of the facility, just given the strength you're seeing in both semi and data center, how are you thinking about allocating resources there to those markets?
Steve Kelley — President and CEO, Advanced Energy
Yeah, good question, Jim. If you take our Q3 guidance of $640 million in revenue, that implies that we already have more than $2.6 billion in revenue-generating capacity in the company. We continue to build capacity. We're investing in existing factory sites, including adding new buildings. That's going to allow us to continue to grow in Q4 and into 2027. All that's going to be augmented by our new Thailand factory. There's a lot of activity in Thailand right now, and we'll be producing first revenue there in Q4 of this year, so next quarter. Something notable is that we are qualifying big customers in Thailand, and these are big customers in the data center and the semiconductor markets. We're leading with our premier customers, and I think that's a real positive for the company.
Jim Ricchiuti — Analyst, Needham & Company
Steve, again, given what you're seeing in the market at this point, are you allocating more of the production capacity as you look into 2027 to semi or to data center, or is that not changing versus your expectations when you started thinking about accelerating the capacity build?
Steve Kelley — President and CEO, Advanced Energy
I think we're basically investing to meet the capacity needs of both markets. In addition, we're investing to meet the needs of the Industrial and Medical market. I don't see any limitations in our capacity. We've invested heavily in CapEx for a number of years now, and we're using this capacity that we built. If you look at our investments, the bulk of the investment has been in Data Center the past couple of years, but the return on investment and the payback is very quick on this CapEx for Data Center. I think it's money well spent, and it's helping to fuel growth for the company.
Jim Ricchiuti — Analyst, Needham & Company
Thank you.
Paul Oldham — EVP and CFO, Advanced Energy
Hey, Jim, one thing I just comment is, I think we said in our prepared remarks, we expect to see revenue growth into 2027. We believe that we've delivered two straight years of over 20% growth. We could see over 20% growth next year as well. Some of that additional growth will come out of Thailand. We haven't quantified it specifically, and we haven't tied down how much to each market is. Steve said you should think about both Data Center and Semi large customers going in there. Thailand will certainly help support another growth year of over 20% for AE.
Jim Ricchiuti — Analyst, Needham & Company
Thank you. I appreciate that, Paul. Thank you.
Scott Graham — Analyst, Seaport Research
Hey, good afternoon. Congratulations on a great quarter. I wanted to maybe understand a little bit some of the dynamics within semiconductor that has you at a market pace, whereas I guess I thought with some of the wafer intensity improvements relative to your plasma power solutions, that maybe you'd be a little higher than that. Is there any way of sizing— I know the quarter to quarter is not a measurement, but it's just sort of what I put out there to start the question, and that is: Would you guys be able to size for us the systems business versus the plasma power business right now and which one is growing faster?
Paul Oldham — EVP and CFO, Advanced Energy
Yeah. We haven't broken it out specifically, but I think a couple of things. We said we thought we could grow the system business by $40 million by 2030. I think we're well on track to do that. That gives you a little bit of a sense. It's obviously much smaller than the overall plasma business. You also have the service business, which is circa high teens or 20% of the plasma, which is growing much slower. That's right in our disclosures. I think if you could take those couple of things, and maybe you're looking at 25% or so of the semi business is maybe not equivalent to WFE. That could give you a little bit of a way to triangulate that growth relative to our numbers versus what you might hear in the market around system growth.
Scott Graham — Analyst, Seaport Research
That makes sense, Paul. Thank you.
Paul Oldham — EVP and CFO, Advanced Energy
Yep.
Scott Graham — Analyst, Seaport Research
The other question I wanted to ask, as you know I'm kind of one that has a lot of interest in the I&M side, I was just wondering, one of the issues that the company was having until really the last several quarters was that you had design wins, but they were in a lot of different markets, you've been looking for an acquisition to kind of consolidate that business, give you some more critical mass. I'm wondering if has any market maybe started to grow enough over the last several quarters where maybe there is some more critical mass that you're serving? Within medical, is there a market there, or is that just more customer centric? In industrial, is it automation? I'm just trying to understand how the dynamics of that business looks going forward, even without an acquisition.
Steve Kelley — President and CEO, Advanced Energy
Yeah. Thanks for the question. The I&M business has gotten a lot better in the past few quarters. If I take a look at the bookings, they're almost double. If I look at the bookings per quarter, the last three quarters, they're almost double what they were the previous two years. Some of that is the general market recovery. This is the post-COVID hangover that the I&M market's been going through. Some of it is new product design wins ramping to volume. So we've been very pleased that some of these wins are actually going to high volume now. Those two vectors are really helping push our I&M business upward.
If I look at some of the distributor metrics, our bookings are up 80% year-over-year, resales are up 40%, our sales into the channel are up 45%, our inventory turns continue to improve. I'd say the industrial medical market is definitely healthy for Advanced Energy right now, and we see strength in both industrial and in medical. I think we're seeing greatest success in areas like test and measurement, aerospace and defense, factory automation, robotics, and anything else related to AI. We tend to play in the high end of the market, and there's a lot of activity there right now. A lot of our wins from the past three years are starting to bear fruit.
Scott Graham — Analyst, Seaport Research
Thank you.
Elizabeth Sun — Analyst, Citi
Hi, thanks for taking my question. I guess my first question is on the data center as well. Across all the hyperscaler customers, your position is very strong with one of them. I mean, very concentrated on one of the hyperscaler customers. I was just wondering, is your position strengthening over the rest of the hyperscaler customers over the past, say, one or two quarters? How do you balance your resources on continuing to support your biggest hyperscaler customer, grow your share in the others, and support the ramp of the second wave of customers?
Steve Kelley — President and CEO, Advanced Energy
Yeah. We have said, Elizabeth, that our resources are focused on a very select group of hyperscalers. For us, it's very important to be successful at the customers we've selected. These hyperscalers are very engineering intensive. They expect a lot from us, and they expect it quickly. We've been successful with that strategy, and we have to be careful not to dilute our resources. That's why to augment our business with the selected hyperscalers, we've chosen to go with the second wave approach, because the second wave customers aren't nearly as engineering intensive as the hyperscalers are. We can spin off derivatives using our existing technology blocks relatively quickly, and it doesn't strain our engineering resources.
That's our strategy, not necessarily to go and broaden our hyperscale exposure, but to really take our technology and bring it to the second wave customers.
Elizabeth Sun — Analyst, Citi
Understood. That's very helpful. My second question is on the semi side. I think if I remember correctly, you were expecting some share gains in semi from the new products in the dielectric etch in the second half this year. I'm just wondering how that share gain progress is at this time right now?
Steve Kelley — President and CEO, Advanced Energy
Yeah. We haven't been specific about our share gains this year, but what we have said is that we're ahead of plan. If you take a look at what we discussed at our Investor Day in December of 2024, we're ahead of that plan as far as incremental revenue due to share gains. I think it's a combination of things. One is in our traditional areas of strength, like plasma power. We're really focused on gaining share in conductor etch, dielectric, and in deposition. In the system power area, where we really haven't emphasized this area in the past, we've been successful getting some major wins, both for process equipment as well as test equipment. These are meaningful wins, which, taken together with what we're doing in plasma power, should power a fair amount of share growth over the next four to five years.
A lot of what we're doing on the plasma power side is at the very leading edge, and that takes time to show up in our revenue, but it tends to be very robust and tends to last a long time. That's why when I think about market share, I'm thinking about what are we going to do over the next three to five years.
Elizabeth Sun — Analyst, Citi
Thanks, Steve.
Steve Kelley — President and CEO, Advanced Energy
You're welcome.
Duksan Jang — Analyst, Bank of America
Hi, thank you for taking the question. Just a follow-up on the semis question, you've been consistently talking about WFE outgrowth. Your customers have been pretty strong. You've been talking about your own product ramps, I think the market share gains that you just talked about. Putting all of these together, what kind of visibility or how much confidence do you have in actually outgrowing WFE for the foreseeable future? I'm asking this because, clearly, you've been gaining share relative to your competitor, but because deposition and etch haven't been really growing in line with WFE, I think you've undergrown the market the last couple of years. Obviously you're doing great with the results today, but I'd like to hear any more visibility color. Thank you.
Paul Oldham — EVP and CFO, Advanced Energy
Yeah, it's a good question, Duksan. Our overall goal is to outgrow WFE. Obviously, the mix of WFE matters, which segments are growing at what pace, and what our participation is in them. As we look at the market, as Steve said earlier, we highlighted $140 million we felt of share gain that we could accomplish. This was from our 2018 Analyst Day, our 2024 Analyst Day. We think we're on track to beat that. Now WFE's bigger, so we'll have to see what the pace of growth is. Certainly, again, the mix of WFE growth over time will have an impact. When we look at our fundamental systems business that's within our semi market, we still feel very good about our ability to outgrow WFE.
Duksan Jang — Analyst, Bank of America
Got it. One on more gross margin outlook. I think people have already asked around capacity and your product mix, but I think in the past you've mentioned volume as also a pretty big driver.
Paul Oldham — EVP and CFO, Advanced Energy
Yep.
Duksan Jang — Analyst, Bank of America
For your target model, I believe it was $3 billion sales and 53%, or 43%, sorry, gross margin. We're kind of getting in that range in a few years. As we expand further with the Thailand facility, and clearly the end markets are really growing strong, what kind of gross margin, I guess, puts and takes, and further opportunity do you have ahead?
Paul Oldham — EVP and CFO, Advanced Energy
Yeah, it's a good question. You're right about volume, and we've certainly realized some of that benefit. We've also realized a lot of the benefit from our factory consolidations. The areas where there's more room to improve gross margins, if you will, relative to volume, is in the areas of the product mix, and now a little bit of manufacturing efficiency. When we talked about product mix, we talked about new products, and they becoming a larger portion of the total over time. That takes a little bit of time. The fact is we're running way ahead of the revenue number based on volume. We think from these levels, there's still a fair amount of improvement that we can gain from that mix of new product revenue. Like I said in our prepared comments, we're already seeing that start to happen.
That'll be the number one driver I'll say, faster margin improvement than just volume is from that ongoing improvement from product mix. Similarly, I think we can work out additional benefits for manufacturing efficiency. We're scaling rapidly. I think we're getting better at that over time, and we'll see those benefits fall through as well. On balance, we're fortunate to be running quite a bit ahead of our 2024 model on revenue. That's contributing to higher gross margins in aggregate. Certainly, we think we can go beyond our model because, in fact, we're starting to exceed the revenue side. Thinking forward, there's no reason we shouldn't be able to deliver more than 43% margin as margins improve, or as volume increases and the new product mix continues to strengthen.
Duksan Jang — Analyst, Bank of America
Sounds good. Thank you.
Quinn Fredrickson — Analyst, Baird
Hey, good afternoon, guys. First question, just on 800 V. Just wonder if you could talk about how you feel you're competitively positioned as the market makes the transition, and why a hyperscaler might choose to buy your solution instead of an integrated sidecar that some of your competitors might make.
Steve Kelley — President and CEO, Advanced Energy
Yeah, thank you for the question. Our positioning, 800 V, is very similar to our current positioning. We're a technology leader. What we've chosen to do at 800 V is to create a number of different modular solutions. This gives our customers a lot of flexibility on how they mix and match our technology. This has been very well-received, this approach. I think we're competitively positioned pretty well, actually, based on the feedback we're getting from customers. They also know that we can ramp to volume. We've been doing it now for the last few years in data center very successfully. What we offer customers is a mix of technology leadership and manufacturing muscle. It's a good combination.
Quinn Fredrickson — Analyst, Baird
Okay, thanks, Steve. You discussed potentially north of 20% growth next year, and talked about semi and data center side. What does your visibility to the Industrial and Medical side look like in the next year from a new design win standpoint and just underlying market?
Steve Kelley — President and CEO, Advanced Energy
We don't have the same visibility necessarily as we do in semiconductor and data center, because those are markets where it's very large customers and there's just a few of them. In I&M, really need to look at the trends. What we see is a very positive trend in the past three quarters, and we think that trend will extend into 2027, probably through the entire year. Our expectation is that I&M is going to do very well in 2027. We're well-positioned to take advantage of that given our design win pipeline and our capacity. I think we're looking at a very strong year in 2027. As Paul said, up at least 20%, and that'll be up in all of our markets.
Quinn Fredrickson — Analyst, Baird
Thank you.
Daniela Talio — Analyst, Stifel
Hi, this is Daniela. I am on for Brian Chin from Stifel.
My first question is on semi. I know you have touched on the second half, 50% year-over-year growth. I was wondering if you could maybe tell us a little bit more if that is coming from your existing flagship products or your new products ramping faster than expected. Thank you.
Steve Kelley — President and CEO, Advanced Energy
Yeah, Daniela. Most of that is from the existing products, but we also see contribution from the new products, but it is not as significant this year as it will be next year. We have good visibility into next year from our customer base in semiconductor. We think it is going to be a very good year. It is going to be a good year both in Plasma Power, where we see a number of our new products becoming more significant on the revenue line, as well as with our existing products. I think we are well-positioned to grow both in the second half of this year into 2027.
Daniela Talio — Analyst, Stifel
Great. Thank you. If I could touch on gross margin a little bit more, also on semi cap. If you have a shift in mix towards semi, does that enhance your ability to drive gross margin leverage? Maybe to quantify that a little bit, for every 100 basis points, could you see that on a $50 million quarterly revenue increase? Thank you.
Paul Oldham — EVP and CFO, Advanced Energy
Maybe two parts to that answer. We've commented before that semiconductors on balance have the better margins than the rest of the company. If we had more mix shift towards semi on balance, that would be positive. I think, as data centers improved, we've talked about that that sort of closed the gap and is approaching corporate average. It's not as big as a gap as it's been historically. The second thing is, we do continue to get volume leverage. We said for every $50 million of quarterly revenue. If you go back to when we put the model out, that was worth 100 basis points. As you know, as your revenue grows, it's the same dollar contribution, but the percentage impact, it is smaller because the denominator is bigger.
At this level of revenue, it's about 40 basis points for every $50 million of quarterly revenue. That's the same dollar contribution for that move. It's just a smaller percentage because the revenue's much higher.
Daniela Talio — Analyst, Stifel
Great. Thank you.
Paul Oldham — EVP and CFO, Advanced Energy
Yep.