WDC - Earnings call transcript Q2 2020 | Western Digital Corporation

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Operator

Good afternoon. And thank you for standing by. Welcome to Western Digital's Second Quarter of Fiscal 2020 Conference Call. [Operator Instructions]

Now I will turn the call over to Mr. Andrew. Peter

begin. may You

Peter Andrew

and everyone. you, good Thank afternoon, Okay.

Joining Mike Officer; Cordano, are Steve and Executive Officer; Milligan, Chief President Eulau, Financial me Chief today Bob Officer. and Chief Operating

let expectations, business Form and does trends discussion begin, Before current could recent XX-Q that on update these statements. outlook refer include financial assume for report uncertainties. plans, most information remind and assumptions materially. including and development statements risks on results and in today's with expectations, no the we to obligation differ product more filed contains to Please SEC me based cause forward-looking management's financial the We risks everyone our to such, on as uncertainties actual that

measures comparable press being non-GAAP between We will section today. that other Investor also Reconciliations Relations GAAP in our the measures of make and are release included and in the are materials website. financial the posted references financial non-GAAP to

over will I that, With Steve. now the call to turn

Steve Milligan

good and range and delivered came the midpoint guidance the Peter, quarter range. solid of the in EPS at you, was revenue of second the afternoon. upper non-GAAP at as Thank in the results Digital end Western

this gross roadmap, cycle. flash our Our execution strong in hard our flash that the an environment. comments prior the and in performance of increasing marked our product drive bottom Notably, these reflects reinforce margin, improving success results quarter June

and XX-terabyte unrivaled feature benefits. XX-terabyte our extended and our as providing recording capacity we We CMR magnetic and areal technology enterprise XX-terabyte product drives TCO sampling These energy-assisted in started SMR density December. drives leadership

the quarter the the of XXXX. We and revenue CMR expect shipments calendar commence ramp through shipments of in March rest drives to

quite is drive and air based platform our is in customer XX-terabyte interest well, XX-terabyte performing high. Our

market XD leading positioning hyperscale enterprise The SSD continued product continue us our of and revenue allow growth design wins, another our We strength NAND share BiCSX, capacity joins major highest technologies announcement XXX secured delivering customer made XD NAND of and us at XD date, important share including and layers next-generation technology, NAND advanced high-single-digit it NVMe our BiCSX of position. achieved reliability. to performance gains. enterprise goal with most We storage. portfolio share additional to maintain an as portfolio market our our exceptional a full to of will and density of this afternoon for vertical

quarter. the team quarter, drive increasing in accelerated hard from gross the executed expect recovery an half first margins XX% non-GAAP the calendar the flash approximately continued in our prior XXXX well of improvement with margins in We our Our XX.X% of in through to now the gross year. end

now I share to highlights. our will business ask Mike

Mike Cordano

and you good Thank afternoon.

solid hard flash reflect improving execution, drive market an margin, and results product December environment. gross an increase Our in

and share XX, a in us collaboration drives. between head, product continued Data allowed and products, to and teams Center in simultaneously provide we gains us XX mechanical delivering new margin leadership areal calendar best-in-class continued These design in technology recording executed Devices positioning magnetic with In innovations a greater quality well and in introduce actuator our our XX, XXXX. enterprise new media, terabyte density us and capacity for triple-stage design resulting profitable energy-assisted year growth reliability. Solutions, and drives, close and

makes quality partner. at introducing while the best to us focus product and the TCO trusted the Our highest and technology their hyperscale on right right time, customers delivering OEM

product the drove capacity of XXXX, led enterprise drive exabyte line our our success calendar XX-terabyte XX% growth. year year-over-year In over by

and drives CMR quarter. sampling XX-terabyte and We SMR shipments current in plan the commence our XX-terabyte to and the CMR also revenue of XX-terabyte started drives

continued leadership. are positioned our for air-based XX-terabyte we well with As these drives ramp along drives,

to as demand enabling sequentially. of goal our product volatility participation based see years XX% Supply encouraged revenue to portfolio our the over market. NVMe in have increase our past than as in better I grew the In share enterprise are flash several significant market lower of SSD the was flash, growth, us upside enterprise parts expected. and over we our investments high-single-digit achieved made higher constraints am expanding we SSD margin, limited higher

We share. broadening have we year our secured product additional base. our including major goal towards we and XX% portfolio design enterprise hyperscale our to customer, move demonstrates diversifying as In which wins, double revenue calendar success customer another of SSD in market XXXX, our our expect

and another center center product to Our strong the the growth is desktop drove data sequential on We Devices, of breadth of data the look growth product competitive customer quality. revenue quarter. with portfolio, unrivaled, along built technology in December strong and superior position within market. our year smart relationships, forward the strong in Client the in hard growth drives SSD, growth video and in client mobility leadership,

gaming to the in into enter to to platform. is expected console we gaming quarter, quarter, As multi-exabyte this the expect starting opportunity Furthermore, improve. be March new calendar begin shipments pricing flash The a continues we year. market a June

USB Client we Within a portable range strong to drive and for products including innovative capacity, of sequential demonstrated SSD enabled on gaming. world's and a flash for revenue SSD solutions At highest our basis. the hard demand holiday world's Solutions, X.X pocket-sized, grow the both CES exclusively first XXXX,

of offer and of BiCSX. memory our cell new array bits increased technology significantly enables scaling Utilizing generation up manufacturing advancements with a wafer XX% to horizontally vertical combination BiCSX XD the announced technology, BiCSX we XXX compared has more to afternoon, wide This These wafer. range innovation, XX-layer density capability Digital's Western capacity of fifth NAND across layers per technology. to storage lateral in BiCSX

this with shipping products We BiCSX year. production consumer expected later mass calendar built initial on to commenced begin have

chain has growth. in position to inventory with and for are continued These returned product demand tightness. flash dynamics and levels, products believe flash us of execution continued supply in strong pockets We experiencing the with hard normal for both we our combined well profitable drives

to details Bob for over on call our the performance. turn now will financial I

Bob Eulau

was of sequentially Solutions By and X% Data a Devices up good December a $X.X Center flat for and year billion, was Thanks markets, from September the that Please Mike and end recall afternoon everyone. the ago. revenue XX-week quarter Revenue up offset sequential quarter quarter. drives of was and down On basis, impact exit a XX% the SSD capacity storage-system nearly was and growth $X.X the a from decline year-over-year. enterprise our X% by in in sequentially enterprise business. billion

Client was $X.X and year-over-year. up basis billion nearly Devices on revenue of XX% a sequential XX% decreased

was hard and desktop drives. due by TAM decreased in mobility, Mike the participation The flash, our and SSD, noted smart and mobility, our primarily earlier, a video, growth to As in driven to decline HDD. year-over-year was limit decision sequential client desktop for notebook pricing

X% was up year-over-year. Sequential $XXX growth revenue sequentially in and million, drives. strength flat driven was Solutions by Client hard

ASPs and price billion, down category, X% related drive billion, X% increased XX% product was year-over-year. roughly flat was By sequentially primarily hard revenue revenue sequentially. participation And in up Bit mobility. Average $X.X sequentially, XX% $XX. year-over-year. was to $X.X Flash flash flat drive XX% were per down XX% our and at shipments shipments up sequentially were were down sequentially sequentially. Hard exabyte up

otherwise. related all cost non-GAAP As stated we to note move unless be results, expenses, my to comments will on and please

to was Gross margin XX.X%. December quarter up for percentage sequentially point X.X the

our quarter, quarter. as Our was The the drive mobile. slightly from XX% almost margin by prior from hard increased grew expected more to better XX.X% a participation was margin offset flash gross gross up in last than environment pricing XX.X%,

expense cost of pricing expenses have due KL drive a and been of would was environment to ASP realization improvement at the compensation per sequentially as This benefits the $XXX normal closure incentive flat million. the expenses with Operating Operating full to $XXX were overall stable closer $XX. million.

to and cash of include ventures was statement our Operating cash flow cash related flow of an the free and million. expenditures, for and million on flow million. equipment were December the Capital property, activity $XXX was $XXX quarter plant inflow $XXX purchase flash which

the and As previously the us are we joint funds between back going timing the venture. benefiting of forth noted, and from

expect a into our new cash is $X be For the on presentation fiscal expenditures, An Relations to to capital Gross transparency between of provide few expected be close portion billion and expenditures to zero. self-operating joint clarity slides to billion. our and includes and leasing capital earnings $X.X year, we've full funding expenditures, to which effort venture our website. our added capital we greater Investor available

the dividends optional value. million December $XXX perspective, next debt our the first priority our million, we is million an business $XXX our in paying capital and After In debt shareholders. $XXX debt by which our reduced reinvest included long-term to to We priorities. in shareholder the distributed are pay-down. maximize allocation dividend quarter, reducing From a to that,

the the and equivalents. quarter, have we cash cash in of end billion $X.X At

remained both and a debt our $X.XX and $XX were sequential drive Our down under unused Total as dollars revolver decrease. billion. just flash inventory was outstanding hard billion $XXX on million inventory basis gross

the third for guidance as Moving quarter on, non-GAAP follows. our fiscal is

billion revenues expect of the We in billion. range be $X.X $X.X to to

approximately margin note in million gross to fab. KX associated approximately XX.X%. to Operating million that range be to expect and $XXX includes be We $XX $XXX XX.X% expected expenses Please are between million. this with costs the

compensation The midpoint new R&D normal in guidance variable assumes expense, return a to the selective of investment. range

$XX XX%. and million around $XX tax expect to XX% We between to expect interest of other million the we rate and expense be and be to

earnings of we shares. million $XXX guidance, a approximately $X.XX share fully detailed expect $X.XX, As in per assuming this between diluted result and

operator our call the I begin that, take Q&A now turn the session. With now over to the we'll to question. will Operator, first

Operator

question question-and-answer portion from of now call. will Mohan comes of Instructions] with we gentlemen, first Wamsi America. and the today's Ladies Bank Our begin [Operator

Wamsi Mohan

XXXX thank and of thoughts you that exit and year? here key that through gross about When Yes, calendar congrats an the speak you drivers margins, the accelerated of recovery velocity in on where layout might strong you you're the guidance. flash on you thinking can of how and the recovery any

Steve Milligan

Yes, I'll question. is that Wamsi, Steve. take this

say is believe in the our inventory market. or of an returned different from our have to first prepared things we remarks, One, industry estimation perspective on are levels. that the levels the flash as in I really we best call So, it that the balance normal couple – a thing there's would going terms indicated in of of in

thing one So, that that's occurred.

allowing have on into the margin is, manage carry we time business, that higher which markets other working is and with been that gross obviously to the our that business. is to very volatility hard their as us sell over The stickier improving lineup, well profiles product will thing flash we as help is that associated us believe

that tightening is behalf of on The is, that there and demand part our that is other all thing that, of awareness increasing supply that an inventory customer is up. base as is

is words, year. demand going other supply to exceed this In

are we're so, Prices that. Right of necessarily board. in the pockets. not customers across seeing is, now, And that tightness recognizing improving. kind It's it's

seeing through the market, and move expect pockets of we're So we the will in we balance year, increase. tightness of that as tightness the that

margins gross a in the means we last would we margin gross that modest from in what we perspective, quarter that thought so our area. see flash And improvement said

that saying of more of we'll we're back even – improvement, see profile Now, will back an increasing year, in – expect tightens I the half will terms of we move accelerate that into as calendar of and up more in it half our margin market XXXX. the would as that the the

numeric the would is from gross perspective margins get into year. that our for XX% means a as the that the the we of flash to we opportunity that XX% get What back into half calendar have say range we to

Wamsi Mohan

of the you. That's up Appreciate about from margins and great, And those well Can you obviously as just in step HDD Thank you path well? can on you have Steve. talk guided side the as quarter as you to of margins sort here great. the well. HDD had gross executed Okay, maybe color. the the Thanks. pretty guys

Bob Eulau

think I think in is about going we're range those the a forward. to Yes, comfortable we're way where

range will the So around we we operate that to reported. continue

Steve Milligan

to drive increasing With With a bias Wamsi, those as our margins time volume an add shifts capacity for of enterprise. improving bias would hard that. to a over -- I amount

necessarily will So is but be a that of something the in year, calendar happen the not time. in range. what this we've We're period over bias talked that mid-XX% should about that saying

Wamsi Mohan

Okay, great. you. Thank

Operator

Thank you.

Our with next Wells question comes from Rakers Fargo. Aaron

Aaron Rakers

the questions. Yes. Thanks for taking

a you deck, the year-over-year questions, business, keeping know what I did the currently in hard about plus drive of given and in that kind talked release it environment? on perform But landscape or press the disk competitive the curious, XXX% competitive you capacity a that slide the are on growth HDD sequential seeing nearline First – shipments. did how the basis how I'm and

Steve Milligan

where this market Yes, it so low mid-XXs. the out leading in once kind maintain share our think we to position, see settles I reports. general, of call We'll in all everybody

continue to opportunity We right to then year. obviously continue expect of to in first this some have the through that back the think we half, slightly. And half grow we calendar

feel throughout we expected be noted but year. very we XX, remarks, product in the volume ramp a the will occur which about from highest our XX of good will not quarter. to which XXXX, current prepared standpoint, in as shipments And continues revenue So initial positioning we XX, and only shipper, our the the the begin

Aaron Rakers

margin And flash now gross Can to on as Okay. driver us meaningful BiCS, how in about the of bits terms at you talk to side, of back kind mix to and about execute XX% And relative I'm right the it'd gross we then shift mix on to shipped BiCSX currently update we you think said, are to we curious curve a BiCSX. mix now? guess, XX% that just you continue the cost gross on in start to as margin? to you BiCSX of where take that margin. be can on be just But I the effect

Mike Cordano

BiCSX of overwhelming majority bits. the Yes, is

transition. to initial Aaron, plus take through be though, exposure We’re then and Relative really of I course this mix, think just expect drivers XX% of to or year environment cost enhancement product market would going we starting product both next ASP XXXX. way broader the in about we certainly and would The as pricing of minus that the to down, are segment say the annualized and the margin BiCSX move through to the calendar is continue this kind ramp.

Aaron Rakers

Thank you.

Operator

Thank you.

question with from comes Our Hosseini next Mehdi SIG.

Mehdi Hosseini

taking for have for follow-ups Mike I my Steve. Thanks and question. Yes. two

console I and the this console, are drive to First some prior moving follow-up. on base figures for the and are out that is incremental. on to the is imagine game and generations as game there. that new I’m a your I the And SSDs. incremental what new console is disk just side wanted is given to is now hard And supply see, the assumption the NAND there going have of kind game this consume, NAND fact rather

Mike Cordano

wouldn’t from from the hard Yes, you’re an we the industry XXXX I were and is right. standpoint more don’t farther be and we is think think remarks, participating our I large in It on side. because this not market prepared we certainly incremental. we to want standpoint, multi-exabyte a in any market year, what in all go to going any And gaming than specifically. want to our drive said calendar comment

Mehdi Hosseini

fair. Okay,

plates to terabyte. help how product How Can obviously, going drive, competitive? me you’re fewer be to new of I from Moving XX XX. market cost competitiveness a and introducing share. on migrate a hard disk your XX has as understand you used you’re is to increase we understand, number that cost to

Mike Cordano

Yes.

think So I on we XX significant lead we think our to time market XX. from and standpoint, a have

generation. And count so distance with understanding platter our next is, to the

to our leading been for relative the through So that generation smoothly a generation benefit about in in market quickly. bringing is over several the and We’ve market customer always right getting way, ramping years. qualification products share doing

this we’ll year. XX-terabyte ramping be do will the again that XX, We and XX that on product

Steve Milligan

– the cost in you’re underlying mean, one and continues things that, profit and to and And and would our And alluding are a glass we media drives XX that our I and drive drive the is that’s we have aluminum represented lower this performance. is XX, that a advantage enterprise gross Mehdi, cost? capacity think that, we hard versus XX-terabyte using for that we media of do

Mehdi Hosseini

you. Thank it. Got

Operator

you. Thank

Karl Ackerman from comes question next Our with Cowen.

Karl Ackerman

gentlemen. afternoon, I may. if two, have I good Hi,

to sitting NAND be calendar and supply Or is and the by an spoke Is kind NAND facility? about outlook growth it industry conversions growing that planning capital of for – going Korean South First demand for KX How capacity high-XXs from XXXX. peer question to Greenfield process is substantial most NAND addition night dictated into regarding And at process? that, your coming inventory? calling industry were for XXXX. that you demand last your does adding of in XX% in the play what your

Steve Milligan

I about growth, believe Karl, were want high I talking supply not to XX%, demand Hey, Yes. one comment they is, when growth. that was thing

let on anyway, comment I’ll the but Mike specifics. So,

Mike Cordano

Yes.

the transition. So the and all ours is both growth, technology industry

is our for technology across in we on industry. about that going about So in way that’s – in. be just commented think on really all And it, technology the – the our growth, what Steve There KX capacity is think, transition. I further no for will of room expansion XXs growth plans this were. talked comments comment supply in where to low demand we We range terms XX% plus Samsung’s year. And believe

Steve Milligan

Hence, the shortage.

Karl Ackerman

I one, Last if Very helpful. may.

servers? I existing year a this by architecture think But U.S. is Your quite an of announced to close lower in are that server. retrofitting when much opportunity after versus asked for X Tier be depreciation due about driven server just – the is March will hyperscale think useful and And enterprise launch significant SSD that in I because new life their that share a based them how impressive. of we increase market

just little I could about that if you. So bit, great. be of Thank that’d kind a talk

Mike Cordano

Yes.

So server dependent on transition. no, any specific we’re not

to products what NVMe where be we of and design new able then in there’ll is So with new existing NVMe when socket both we’re a similarly designed. our SaaS, be announced, course, do in space. will And series the products of wins server

a server as not transition product as we’re and any so portfolio power driving the really of that share strength And the and well for preferred view the customer’s of growth. supplier it’s us on as that’s dependent particular

Karl Ackerman

Thank you.

Mike Cordano

you. Thank

Operator

you. Thank

with next Barclays. comes question from Our Long Tim

Tim Long

Thank you.

Just two me back for – well. as going

year the less nearline and just we talk do move ASP about in through XX a we little XX impacts be little think mobile? HDD from through sense What or as the as ramp a calendar in talked NAND bit that then And will as you On there? the margin market your just a on you to participation bit Thank expect gross business? side, can about give you XX, just comment, Could early XXXX. the And dilution us you. should was you there the more for side, mix.

Bob Eulau

is this Tim, Bob. Yes.

on as drive, first our drive gross been up mix into giving hard the specifics one better our And on enterprise mid-XX% before, capacity the trends hard have said can as than enterprise, average. do and they the margins range. the not expect are margins, towards across we So but and we more more we’ve get

exactly specific, benefit So to quarter. always that mix dilutive to on also And a over a I was question, market, that. but obviously it terms in that’ll of from mobile but we’re mean, get numerical us the not we’ll in not the the was be to implication to – manage mobile, – able time, us. And what participate continue some we’ll this

Steve Milligan

demand Yes. the tightens become from see more margin add a And us I situation mobile up, flash for we gross supply the will market attractive perspective.

Tim Long

Okay. Thank you. point. Good

Operator

Thank you.

comes next Morgan Joe question Stanley. Moore Our from with

Joe Moore

impacts To Great. question, you if fab won’t Thank year? of extent And sort you the because the can change won’t about said about growth at the at have big in you year growth Can of are of for of on behind CapEx outage. how the the shut level that you down, NAND. power to CapEx, CapEx on you your the the business supply and earlier going. talk us then of you half you. the process lot you that that a Do industry need guess, the second that thinking update wonder that could just the – get have earlier I feel the calendar profitability you your the where feeling sort better without JV? guys I JV planning is

Steve Milligan

sort be with philosophical to from of an the in on terms to the a mean, and growth overall Yes. want supply that I is a thing. bid largely overall perspective. adding market that consistent growth demand that the I’ll overall from perspective, comment mean, I of CapEx we

of plans. a supply our from as – not want growth accelerating a period and to improving looking But or at would over to demand. perspective try not we’re a longer an time, environment, growth manage we So we’re result our to decelerating of

hasn’t that so And changed.

Joe Moore

thank Great., you.

Operator

RBC Thank with you. question Markets. Mitch next Steves from And our comes Capital

Mitch Steves

Hey, guys.

numbers it. Just around clarify want two to way try from least to I this me. or get think any about some questions at just to

And that you you when can guys plus statement the understand to the you in. clean slide trying it’s combine gains overall to of trying the demands, this look how much just get gave that number. you so platforms kind opportunities, you demand double SSD you’re much for just that the we with at of guys how visibility adding share XX% is side. So of in gaming share there of the deck. the under the on a much NVMe, have an on How to understanding guys coming is your gaming enterprise your made I’m

Mike Cordano

own So number demand the broader independent right. sort growth, as you of our share of gave industry we

of – in any one segments. and So these particular

So aggregate our the year across of view per bit. on growth industry an side XX% demand the is

about SSD While segment gains. enterprise obviously that's gains segment gaming we product related in in share and talk

we're going So to not that. talk about specifically

can you think where of we think calculate kind SSD enterprise I we're comment. the my given side on going

Steve Milligan

And call in kind is, to to further margin, to opportunities driving I it let's elements. to bits to market. two one One, referring from or enterprise will our perspective, that. product we're it place context a thereby for of add call that characterize. higher value gross us we're Yes, markets add do is what that those more trying trying

volatile be stickier, the the incremental stickier it of downs also a kind can ups areas tend those also from that tends occur in to then business, market this to it's less yes, market. perspective, that Gaming, manage and that either but are more of so predictable. And we flash

the And to to so parts that of us business place are as of those look our more has market. in some it characteristics attractive we attractive

call it to, transactional opposed As or market. more areas of price-driven let's the

Mitch Steves

XX% kind guys a like you the the margin NAND for to, just ramps, take you kind that it. of you get how have you the Got to of understanding can XX% you help, And trying goal that? to better any to number Understood. think it to kind of in guys want guys or something is one, guys just get get that exit think sort longer then of last when you gross mentioned can is in you've a at to than going talked looking of lot past? Just calendar is year I'm

Steve Milligan

on commented trajectory to we the flash out what get Well, expect range we it XX% we see calendar of back into half will move business margin that and in XX% rate of given our is into that as I where our the playing the year. the year, gross

that's QX Now and QX that calendar half exactly the that, or that I not see being to market range the as right mean believe that back calendar But clearly specific wants XX% the believe approach is to the calendar evolves. continue how we of to us begin we level we'll in year. for

Mitch Steves

Thank you. Perfect.

Operator

Thank you.

Our with comes next Evercore. Muse question from C.J.

C.J. Muse

talked Yes. what you for with in mobility basis? question. first taking you to line elsewhere? you thinking are versus Can revenue contemplating share I bits growth low-XXs and us in And a about would guess that. how of industry for you part on be Thank Good expect the the as you there, your question, you supply bit with afternoon. bit

Bob Eulau

we Well, thing our the don't we would quite state. positions own in specifically, comment but say relative, balanced have one to inventory I'd expect

the expect year We to be and entering the exiting are year. it we calendar

extent So for to give it. that you feel a will calculate to the want you that,

C.J. Muse

mobility consoles? enterprise Okay. the – thinking thinking you’re that and on that, more is stick you're side, to the And maybe on something you'll

Bob Eulau

about talked continue exposure all mobility. maintain last not several is some areas. is to we over of And mobility getting will No. the the effort to newer years The as side But part Steve more product our of diversification, equal.

make and to sure exposure able market we're that manage just the or continues make choices will as good We evolve. to making we're

area So of we investment. as see a it long-term

are see attractive We'd there some parts very marketplace. the within mobile

year be be more We'll bid to our just into to through allocation future. continue the this broadly calendar there. investing we'll manage So able and

C.J. Muse

as might kind you and and utilization the XXX% today, Excellent. on think be? another state shocking. follow-up, are kind speak accretive charges, the that of KX you of industry the my also you running there? question But how if might roll-off what given do NAND margins, of you tailwind when gross And I they And Thank you. see guess the could to

Mike Cordano

Yes.

runs having we in production mean, and quarter of So as XX would the think through terms going I more on last larger didn't that year, around came charges quite we're as to continue we XX I have now we call and had think be have to, million. KX, said progress million production around we real thought this it in this last we I were quarter we'll

quarter, start In costs, period but current how we're it's around those down ability really go expense XX quarter. and to absorb should a million get of this in quarter, of the production And function here. in the we expecting And March charge. after to better think ramp terms to a obviously that start it'll I from

Bob Eulau

of And thing the the in still about the talked back one when of the would XX% in year. I gross that flash just half comment on Yes. margins half is calendar to that any year, back XX% costs to inclusive of potential remain startup

Operator

Thank you.

Shah question with next Munjal comes from UBS. Our

Munjal Shah

on my XXX% down? sequentially, just on talk One, Hi. if they XXXX? X% questions. taking down why on and then Yes. the near be a year-on-year, but update would And you secondly two you line, Thanks were for HDD on us visibility search so exabyte, could then exabyte CEO about what's pie as growth two sequential to could you to those the on basis into related exabyte basis question,

Steve Milligan

Yes.

So I'll enterprise. then CEO comment or comment Mike capacity a question, and on search can take the

is And today. is process with progress the of making they're So add search, the I the the board to that ongoing. pleased the that very things is will one regarding search that

have all And for we now. update so the that's

Mike Cordano

enterprise a our the marketplace, us. to was fiscal one shipment relative a quarter And for record capacity

be our leading And exabyte of share was XX% a talked position so profit I about would XX% Our in to share around and depending some of things where XX%. that on kind maintain We to operating of out. this both little optimize drop. bit settle were space, share that as

first of the across that of leading share breadth think the talked But position strong. to calendar maintain fairly market the we I this half a this demand remaining good see we just market looked we as into about. in year, position And we're

when we but the Obviously year. pretty aggregate of comfortable good. first continued different with strength is plans, visibility different demand calendar the through half it, So we feel customers and have

Munjal Shah

thanks Yes, lot. a

Operator

you. Thank

Our Fox next question Research. Steven from comes with Cross

Steven Fox

afternoon. good Hi,

secondly, from guess on you those you anything supply it would on tightness sort mentioned Thank the can Just about this first you you're the questions you expand quarter? maybe quarter, you I constraint to exactly of how a and pockets couple it you the became of the wondering then And call that besides and where was about comment implies for future work next maybe through of coming there could growth, elaborate pockets quarter. what just seeing, quick on talk me, if you. all, Can out, I but SSDs quarter? that you currently expand NVMe the your of in what enterprise, during

Mike Cordano

Yes.

take We've to demand NVMe was a other the the move supply issue, expected it what on flash some not be the through issue components then our resolve of question? the It forward happened that constraint we it should and XXXX. question those had is was basically was worked as than And product. SSD we an I'll calendar the use in supply constraint. NVMe and So better we not

Steve Milligan

Yes.

in demand general been fine SSD, I we're the is, has in categories. think very really So what across strong seeing performance

that’s of world the pricing – in parts some shown direction. on the in and being constraints are that's there there positive being some reflected in So a movement

Steven Fox

you. Thank Great.

Operator

Thank you.

comes question Sur Harlan next with JPMorgan. Our from

Harlan Sur

the at that year? we actually think digits exited the the products for strong cloud and you SSD Do still NVMe the Good taking the platforms, supply given sharp my year tracking growth you Hi. enterprise, percentage question. environment. strong Good the the to in or guys market constrained these momentum see in low-double share afternoon. somewhat on on spending are exiting Thanks the calendar

Mike Cordano

Yes. actually of our components. a other the comment, availability Steve's To actual in demand excess of we saw

fully had had low-double That that? realize to able share. we in inside time. digits itself So now been the we're lead we Frankly on been as remedies

revenue we continue demand I year-over-year. to talked for strong double category And those We to that as see in products. expect about,

Harlan Sur

XX% continued I range outlook up on the this growth just Thanks. XX% HDD cloud the Great. type we're seems year, year-over-year bit of on it's capacity shipments in with spending mid-XX% conservative. the it for this And the more the given kind strong likely of in side, a year-over-year year, mean that half hearing or trends. exabyte first enterprise

you wondering the strong. in still for here seems to cloud year of and the consumption just given first hyperscale kind of assumptions quite be half exabyte layout spending your So that if can maybe

Mike Cordano

Yes, comment we will specific haven’t you see do bias that. in I time this demand. I too on a give a say, will been up we that at

that’s So in your think reflected comments. I

So, from a think or bias is a I view annual expectation, our up relative to so there. current XX%

Harlan Sur

Thank Great. you.

Operator

next [Operator from with Instructions] Loop comes Baruah Ananda Capital. Our question

Ananda Baruah

performance continue to with or good solid taking Congratulations the the is Steve; Hi, thanks here. of is of would amplifying a guide exabyte the but Appreciate little asking us just it’s and you you’re where sooner, an there a sort you stick up I’ll continuing? this one of of see context on some guys for it a be just nearline a potential I’m really back the extended into going question. then Mike, but cloud demand not half then could you to maybe year, well Mike the Is it. guide, peak you sort saying it more see Mike XXXX great. the context as Steve calendar aesthetic? for about you’re like extent. it sounds kind sort cycle. And the expected a of through year, of through of how year see potentially the to to do cycle up the now balance this potential, Any gets give

Mike Cordano

We an of a annualized made. try talking We calendar been the I the bit. want to comment half to on, year any strong. further of certainly me individual of first shape basis I’ll the about full each Let clarify the year wouldn’t look. back remaining comments there. On annualized the we’ve XX% little bias to just I see the basis, on a the kind way annualized see or reference growth. from an up quarters do of

Ananda Baruah

that That’s Thank Okay. clarification. helpful. you guys. appreciate I

Operator

you. Thank

from Nikko Our next question comes with Srini SMBC Securities. Pajjuri

Srini Pajjuri

Thank you.

quarters follow as cloud concern guess, from slowdown a to long and Intel the that just into say here first that, the there they drive to be digestion Just especially going end that of out wondering market you Steve. up the strong period. that questions, to these digestion pretty a visibility, there’s of, believe two And you be period. to expect I signs the seeing pretty side. tend a I’m may did period ahead we’ve I there there’s half. some on previous digestion think wondering, any on you’re somewhat causes have of I’m if kind just had

Steve Milligan

Yes.

So half again, that, calendar first the the of equal. year. quite remains the customers aggregate not created it, through all when demand but There that are some strong doing are we

Operator

Thank you.

with from comes question Rakesh Our next Mizuho. Vijay

Vijay Rakesh

in at aggressive rest I I’m discipline. Are seeing ecosystem. is with NAND you Yes. China of view or I your with CapEx or continue Hi, to keeping on Thanks. for expand, coming XXXX, as just the the increased just been are that? any fiscal aggressive wondering, look do I should the trending? CapEx side thoughts how guys. pricing you what of it terms how down wondering, CapEx, saw in also supply the your YMTC given has And

Steve Milligan

we’re in industry, information. in Yes. the and growth talking mid XX% terms of others talking supply kind have a neighborhood. XX% that’s as we’re I low – XXs. – Samsung rate at extent rate Samsung of similar indicated, growth a overall low about But high comment public or will all With that in bit and circling indicated there’s

we’re months us, And anybody take XX and of so, for all would capacity. to seeing to kind up NAND concern that supply capacity the it a not on would productive because term that short not adding aggregating perspective become we’re from certainly

think would behave anybody so, the balance upset a And seeing that that not in demand way a we’re from we perspective. supply

we about pretty good So feel that.

of there. And material market to ramp, see terms our We upon several years. their not having change in real continue to standpoint, to. from next the the would to planning but only would And visibility two years regard. we pure have production no from over a that three that in I concerns within But depending not impact next a that them any that’s perspective. evaluate we’ll technology in terms expectations no say for of ability do cycle the kind YMTC, the of certainly

Operator

Thank you.

question Sidney from Deutsche Bank. with comes Our next Ho

Sidney Ho

by the guide you. be you you look than is to NAND seems of expectations just NAND? seasonal drives ASP your if by curious side. being or which made above at goal thank quarter-by-quarter, on Can segment? about calendar I’m that versus can how question is Great, improvement much SLC function especially hard-drive talk roughly your of flat a seasonal, better The QX products for

Steve Milligan

So of let me, to it thing, Mike then if really backdoor or and answer you can I’m I’ll a specifics. level look add But going first way. of comment Bob a sort I mean, more a little kind high bit at and at

of driven look you is gross at to range, our all XX.X flash improving terms of significant terms by quarter-on-quarter, to in If in margin the environment. which almost improvement that is XX.X pretty XX.X of

namely all right. So pricing,

of there’s And improvements mix thing. yes, so, and sort that and

revenue. directly And that so impacts

you improving to to quarter-on-quarter us overall pricing not not that, on when a an mean, revenues, necessarily, not basis. see then to And we bad. So keep kind it look that’s of helping flattish I environment solid. be our let’s beyond environment demand but at the call continue great, solid, just

statement. and a and And drive that’s a so kind of both flash there hard it’s just

in against And calendar what seasonality would allowing kind QX. so that’s of in us drop revenue normal to work be

big are factors. kind So the really of two

Operator

you. Thank

Chokshi Nehal from Group. Maxim comes question with next Our

Nehal Chokshi

their as they accumulate. which the inventory flash recovery did flash But And were there. increase. going Yes, for great NAND NAND sure gross I prices understand NAND your NAND flash I to Do decline the in own the Micron to has make think is commented; flash Q-on-Q accelerated the quarter to margins. thank see inventory expect you on for expecting want to I dynamic March to that you.

as So if there color as I’m had just that. far wondering on expectations you some your

Bob Eulau

Bob. satisfied reduction the a don’t we next couple are where and inventory to company. by this on that of But a can make focused internally is giving at comments quarter. our not get quarters few for on inventory this with goal Yes, what over we of I And want I turns. And that’s least five start in guidance we’re to quarter. the is spite saw we’re as still to

strictly So we be won’t that there, fairly it’ll we it linear think soon. – can achieve but getting

Operator

Thank you.

Stifel. Our come next question Patrick Ho will with from

Patrick Ho

the in have much. gross of last to acceleration get think drives follow-up terabyte or and gross the those Can that in talked in drive of the you TAC-X, questions terms development somewhat nine-platter the the the as does sooner of you those that quarter to gigabit ability XX a of How the of Thank development. your target released. Maybe in by the about margin about discuss acceleration been very drives? is impacted margin gross your I some terms your margin You how pulled out was progression? help XX,

Bob Eulau

I margins enterprise. is terms capacity in would say up I mix. that’ll drive gross are Yes, first more this earlier, our our Bob. I thing said is pull capacity as our guess the tends is enterprise of good and more very mix already overall toward And hard

prior Our quarter, the improvement. past was quarters, as mix good not saw still this as but you margin

spite tougher You ASP a in of mix. stayed saw flat that

solid think will think we as very enterprise margins continue. are So and overall product, trend that on new a introduced capacity I I

Operator

come by will statement from short with question final our Miller our And you. Thank CEO. Mark end before a with Benchmark, we

Mark Miller

to and the I have data I about in half wanted been address questions center But nearline second also you. Thank believe the strength posed.

need to don’t posed again. those I So,

Steve Milligan

your Hey Mark, voice. good to hear

Steve Milligan

right. All

seeing today Technology joining to you a look day. all at Goldman So Have San rest Conference you us Francisco. and for Sachs of forward upcoming in good the thank we the

Operator

today’s you concludes for joining. call. Thank conference This

now disconnect. may You

Western Digital (WDC) 30 Jan 202020 Q2 Earnings call transcript