WDC - Earnings call 2 2024 | Western Digital Corporation

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Operator

Good afternoon, and thank you for standing by. Welcome to Western Digital's Second Quarter Fiscal 2024 Analyst Call. [Operator Instructions] Now I will turn the call over to Mr. Peter Andrew, VP of FP&A and IR.

You may begin.

T. Peter Andrew

good and you, thank afternoon, everyone. Well,

today Wissam Jabre, me are David and Officer; Executive Chief Chief Goeckeler, Joining Financial Officer.

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

being will comparable call the We non-GAAP release materials the financial make over included non-GAAP website. turn Relations in for remarks. With are to are I to in also Reconciliations other will press the introductory that, measures between today. now section of references posted GAAP and the our measures David Investor financial and that

David Goeckeler

to manufacturing business profitability and the HDD costs closely a through-cycle producing and of XXXX product our quarter and strategy dampen our changes I controlling everyone, you, call Flash Western discuss across markets, Thank for the been fiscal put in and second have broad are and results. cycles. we allow business last results building will second agility year focused years outperformance joining significant we end products R&D quarter bolstering through the us afternoon, thanks Digital's demonstrate few our confident to of that improve of across businesses. am structural the Peter. and Good that range leading the our executing over place have

the of all gross non-GAAP a As which met of per billion, XX.X% exceeded $X.XX, of we or of we October. provided margin a reported in revenue share non-GAAP $X loss guidance ranges and result, non-GAAP

emerging HDD Before are made benefit. ] to and business [ the want how the we trends details, on have comments discussing seeing the we Flash I businesses to position our and provide some changes

In broad margin Flash, our and products partnership proactively, of throughout capital efficiency cycle. navigate inventory in by These gross business cycles reflected to managing joint a the range we've successful offering been venture Kioxia. optimizing our efforts are with best-in-class able through

quarter, gross our and the allocate shipments strategy margin. upside During portfolio dynamically in to bit drove ASPs

bit to a to to future. supply Looking continue ahead, approach with and structurally profitability through-cycle align customer disciplined our and supply will proactively manage we shipments continue our our the we and take into to investments. Consequently, capital improve demand inventory

another the recovery and a HDD entering daily is driver yet technology to has addition that In quickly growth AI growth both emerged is we lives. as Generative transformative all believe period. and all reshaping multiyear our industries, flash in markets, in storage companies

during the Importantly, another increase estimate XXXX, of significantly cloud pulled now industry pandemic. indication represents approximately an year bit that demand from in NAND approximately XX% which calendar analysts that total edge in is shipments, was the XX%

deployments a and gaming addition, PC, second in the and consumer spark AI-driven coming client consumer In generative we the believe in smartphone, content reaccelerate storage of years. wave growth and refresh cycle device will

positioned well Our flash secular portfolio tailwind. emerging is from extremely to benefit this

highest outperform customers enhanced peers us to We enable strategy In and technology and technology believe to our capacity deployment. Digital's for innovative UltraSMR allow and offer the this platform ePMR market the us HDD, cycle. our the cloud throughout mass leading best drives Western to provide TCO portfolio

XXXX the financial us. customers outperformance to nearline evident anticipate fiscal We second are become share our We have profitable accelerates reengaged the as year confident from more into demand subsided our have beyond. cloud that resulting headwinds gains and as half demand multi-quarter with of nearline major

on end market to Moving commentary.

a consumer, in shipments in strength optimized proactively was in as was by revenue first an the in The revenue cloud ASPs. time revenue flash the in bit as retail shipments X seasonal the product increase was sequential During into mix. the growth In decline increase returned quarter, quarters. flash in for sequential end market growth sequential by sequentially, declined slightly led an by bit we and offset flash the to client, shipments. revenue ASPs led growth increase In in nearline

I'll starting to turn now updates, flash. with business

in performance, execution resulting increase client driving across and was markets, shipment inflection revenue price ASP end Black the record offers experience new optimizing broad revenue XX% product, WD the quarter, During our a with due over in our capabilities particular, of gaming expansive go-to-market increase. which hyper stronger SSD growth bit consumer by shipment achieved bit a in best-in-class the stronger-than-planned In storage gaming into high reliability, sequential year-over-year. to channels realistic

remain track front, client On we of to ramp SSDs on the technology. technology an utilizing BiCSX array QLC-based

a node offer to of SSDs our development unmatched controller high-performance and with to allows ability this with Our in-house new portfolio value. performance client combine us

expect We products calendar the XXXX. flash QLC year to in lead to these transition

is remain yield on to Additionally, track progressing productize and we BiCSX well, this technology.

sequential HDD The Turning of ahead drive this forward. quarters, drives first and were increase of anticipate significantly We fiscal calendar continue the shipped increase nearline the year-over-year was revenue We by driven drives pricing. to quarter improving Moreover, third hard and throughout outgrow and UltraSMR million our in in quarter. basis, shipments second by of per we with approximately we X shipments in both drive In doubling to growth that on both to forecast going SMR encouraged UltraSMR year. CMR demand revenue expectations. sequential to China and demand which year-over-year a are HDD.

China. major the in including UltraSMR the as customers cloud worldwide, this in as third adoption customers video and titan is well a to of Importantly, broadening our U.S. smart year hyperscale

nearline the these by complete We quarter this to qualifications of demand and at to year of the and drives majority XX-terabyte and XXXX. XX-terabyte year UltraSMR SMR expect calendar the forecast throughout calendar our customers comprise

the Digital's our be will in technology, which profitability while commercializing our near that to followed the long of term both leading conviction UltraSMR transition TCO industry-leading strong offers and the industry. by HAMR, ePMR have to in We portfolio our portfolio from Western first strategy delivering customers best

Over number we training of the ePMR, AI OptiNAND multiple of UltraSMR in be including XX- range, to combining generations explosion a years, and the and production products, will which ready XX-terabyte the high-volume exciting next for support to content. technologies all several drives introducing data of nearline will upper of capacity be

over industry to XXXX. growth to bit I calendar similar the we with In in to turn share rate to estimate growth on our year percentage, mid-teens some starting wanted I year XXXX, Before in the be calendar Flash, perspectives outlook. Wissam, demand around

the quickly business demand transition production we remain capital-efficient range. fab in and growth On via the ] BiCS believe our estimate supply low-cost [ and side, architecture percentage more supply highly enabled our nodal peers. We agility that have with much than us out align mid-single-digit bit our to to

our customer We managing keep approach to our demand. with our capital aligned dynamically will continue disciplined and end to supply inventory capacities expenditures

flash driver increases undersupplied focus pricing equipment revenue year. most allocating for has investments. well will markets be throughout cash remain below wafer be lows continue to continue and growth on in term the and started flash this the bids capital of an profitability our near flash anticipate to Overall, that We increase, to end our to the spending the an justify and to will time. Although in primary extended at generation historic level calendar increase ASP to attractive we period anticipate be

portfolio X competitive achieve our calendar to profitable HDD, us in the In enabled years. strategy last has consistently share gain

as will demand trend We nearline to are continue we and continue UltraSMR-enabled that products. this our confident to improve continues ramp

over call results. the our Wissam, turn second financial to now discuss will me Let who quarter

Wissam Jabre

you, and everyone. Thank afternoon, good

$X the billion, reflected performance. ASP in the Non-GAAP or of Non-GAAP on fiscal were comments, October. X% gross we strategy strong in and the end we was XX% have flash execution the broad per in financial Following our up benefited guidance our second down Total David's quarter loss go-to-market margin. revenue results the the at year-over-year. channels provided as high executing been and ranges sequentially for $X.XX of was success share is exceeded with quarter

cloud nearline The markets, nearline to at billion, XX bit were exabytes, XX% growth shipments center decrease of at Nearline the pricing. better Looking lower at was due and shipments. customers XX% revenue and year-over-year sequentially total year-over-year. shipments XX%. up end Sequentially, bit is that represented higher to eSSD down XX% up $X.X attributed to

revenue shipments. total a shipments in a into cloud by decline HDD bit well flash basis, HDD revenue flash decline as at primarily decline year-over-year. an year-over-year first shipments. X% seasonal PC the to time offset was by than Consumer up quarters. ASP due shipments. year-over-year. increase X% lower was due Client ASP X% driven ASP. flash at sequentially billion, flash a in was increased was flash represented On offset Sequentially, a for basis, of up X applications client in in and XX% in than Sequentially, in more shipments strength SSD increase in of XX% primarily $X.X as revenue down sequentially and On offsetting increase by bit flash higher a shipments year-over-year partially The bit the growth to XX% the $X.X total year-over-year represented billion, more

year-over-year record by the a stronger revenue Flash basis, basis, as prior X% grew $X.X was shipments with decreased than a prices. shipments revenue growing like-for-like quarter, blended business On in after XX% ASPs on anticipated billion, a and segment. entering fiscal to shipments the increased increase quarter. quarter. basis now lower sequentially the revenue XX% offsetting Flash a Bit bit In Turning X% in X% flash slightly on second

XX% average while price year-over-year unit per revenue increasing billion, declined and increased X% HDD $X.X exabyte XX%. price increased was shipments total On revenue sequentially HDD average $XXX. as exabyte X%, unit per and X% basis, increased total shipments increased XX% a to

higher of X.X Moving while to range unless point than was $XXX be million ASPs guidance product flash will percentage mix, year-over-year. we otherwise. in higher the to gross sequential percentage points offset results charges or stated October The margin comments underutilization than increase more was optimized primarily margin XX.X a proactively percentage XX.X%, as declining by note, Please related anticipated which non-GAAP and my provided driven improving sequentially points headwind. above X.X and Gross expenses.

sequentially includes year-over-year. Flash underutilization points up and HDD margin. of XX.X%, X.X million to percentage percentage point year-over-year. $XXX percentage or higher expected charges X.X was percentage X.X%, than points This headwind percentage gross of percentage at underutilization X.X gross charges was X.X margin or a This margin $XX X.X points headwind. up and sequentially gross points includes XX.X a points million down

flow at million, was million. $XXX We Fiscal which cash for were $X.XX, second associated in an for included second dividend end quarter which the loss million. an quarter and inclusive free continue share quarter, with flow the and to of quarter million Operating operating per the XX% year-over-year lower range. was the the of million, loss Operating $XX $XX $XX the charges tightly guidance cash manage $XXX a preferred down expenses, convertible underutilization of of was of outflow $XXX million was outflow shares.

$X.X the Cash billion, of which majority inventory days in represented statement flash a property, declining outflow decreased the capital inventory Days expenditures of flash the X ending The on The where $XXX million to and the plant and low. activity flow equipment, million. was prior include of joint at quarter. quarter ventures $XX a flash, of decline to our inventory cash cash remained of X-year was from days related XXX days. purchase

delayed down quarter, $XXX million debt billion fiscal at was end of outstanding XXXX $X.X in billion draw million $X.X notes, convertible second repurchased $XXX loan. the paid notes During convertible issued the quarter. ] the of term the of Gross outstanding the and [ we

of to million February $XXX remaining We of XXXX retire balance in XXXX. the notes approximately expect maturity at convertible the

the second $X.XX billion, At liquidity and of quarter, $X.X $X.X including fiscal and the revolver the were billion. capacity equivalents end was undrawn billion, cash cash total of

on expect increase is flash we up growth and the anticipate to optimizing fiscal $X.X to range in as the in remain to of be we revenue be we be non-GAAP we sequential billion driven quarter, to bit guidance expect by HDD; ASP. third For our slightly focused billion; as an shipments revenue revenue $X.X mainly follows:

XX% We to $XX and gross XX%, includes which million. be charges expect between $XX million underutilization of margin to HDD

and increase $XX expect approximately compensation between expenses reinstatement to has strengthened. and of be Interest certain to by other are incentive We driven expenses $XXX the financial the outlook expected operating be million, as million. with the programs million $XXX

third expect We expenses million $XX and for to $XX quarter between year fiscal for be million to XXXX. tax continue income fiscal to million $XX and million $XXX

We dividend expect the $XX preferred of million.

XXX earnings outstanding. based per minus We share $X.XX, expect plus to be or on $X.XX, million shares approximately

of proactively business, now improved, end goal with spending, to our back all to the managing will profitability. call has executing meet I'll in demand outlook turn disciplined controlling financial the the As remain we over supply the and improving and customer capital David. inventory

David Goeckeler

Thanks, Wissam.

have ahead. our I our dampen then on strength the Let me Through market ability want to moving enabled and which to quickly and taken up up, Western product and strategy, deploy trends, upswing through-cycle adapt am our also us and execute capitalize term. anticipate that I cycles to we the long instill open to volatile product confident team positioned to wrap industry-leading well Digital for an emphasize over questions. we'll on reaffirm and has portfolio, will future dynamics profitability, are business to we see the the improve steps to leadership both while current

Let's now the Q&A. begin

Operator

Morgan Stanley. [Operator comes Instructions] Our first with Joe Moore question from

Joseph Moore

QX. improvement. how apportion And I the I good being on pricing. about guess would pretty you could a little guess -- volume, margin with I think in drive I I'm I you between business? wonder that more the business the guess, bit might expected improvement and gross you NAND margin some have do get gross NAND if judicious talk I

there? I'm what curious, just missing So

David Goeckeler

Joe, see good it's so the inflect. Yes, pricing been -- to we've

the into we the were at Flash in we with quarter look margin you happy QX, the gross If X.X%. business delivered December in

well. able we the the in market were think to I turn capture

gives on little bulk you into that going March So businesses, look at us on and higher bits will you Flash up down base quarter. see the if be price. But a the

we're volume. on but see strong increases So quarter-to-quarter, we price still down we -- see

it, call and digits. business, And volume increase double then the in in increase in we HDD price. low Let's see

Operator

with Our Aaron Rakers from next question comes Wells Fargo.

Aaron Rakers

Yes.

Just say, in of to let's in Flash trying flash you're of the What's drive general, assumption gross in the up, XX%-plus I underutilization just how then think normalized your a return we quarter price that theory puts hard you'd think and off of business? know about on in guidance and implementation of gross term about guide. you underutilization. do to takes in How disk continues. kind this gross XX% the pricing backed of building XX% of that kind margin, to just what the increases question. think about and characterize last trajectory you current talked embedded Expectation kind do of So the as longer kind margin. about margin Flash? you the making the And in the

Wissam Jabre

Thanks, Aaron.

So for we our have guide, QX. don't Flash underutilization for in

executed we our schedule fact, reached and faster ahead than In supply targeted of goals and inventory what we anticipated.

to you as inventory to supply our continue we And so know, dynamically manage demand. and end meet

so utilization And that. fab the reflects

inventory. you our exited levels at $XXX Last in $XXX down If decline we Flash quarter, in a years. in few was another recall, million. results over haven't almost QX, inventory We quarter we million saw seen the in

to spend. With question will question or demand your supply the our continue So course, in XX% having clarify, customer we obviously, your manage said to our end that, the we XX%, let respect on control HDD was on the And meet capital side? me disciplined of flash the also, inventory on be how to flash. and at

Aaron Rakers

Well, to going but I... I I'm say both, guess

Wissam Jabre

when start you flash. improvement the Yes, the look going reflect thought it. was the we continuous also HDD. Look, HDD, level. HDD let close it at start that second side. and guide, I we're about I I pretty heard talking talking what quarter you in much say does When me to you very delivered at at Well on margin look to about

also business. in there as be that continuous recovery that I so And the improvement should anticipate continues

be soon. within pretty much achieve should And to XX% reach. So able is very we it

lot ASP and do up on course, deliver with of mix product to On the to optimize a reduction. continuing side, that to to continuing our also, drive the the has cost Flash --

well mid-teens. mid-teens And We've the for the that reduction reduction, us I so this cost cost we've to expect year. fiscal on done so far. been hit in percentage also

the in be So to would we say, would also as we pricing the let's next quarters. would there continues I that the in -- few improve, be anticipate --

Operator

C.J. comes Cantor question with [ ] from next Muse Fitzgerald. Our

Unknown Analyst

NAND house. was hoping the to I on guess I of bit focus the side

looks we have December. they're March mix. in talking down in optimizing the quarter. It here, down bits implied -- down product You're about But like

think So can little to, And in terms up? And when there? open guess, will your the you can end which come focused market and more specific plans we that I on? and speak to a to you how you When markets be pricing? do of should about think you're they implications timing

David Goeckeler

Yes.

add Wissam and can I'll So start, too. some

a a underutilization not out to just I more. and keep quarter, past We've be we record were our were control. kind -- the bits talked little it's we the X of mean matched. and lot So had this we'll bit quarters last doing down, of a demand we down inventory down had then ago, quarter then and a reflection supply yes, this of flow get of through that about let we

good been we've on inventory. X-year a inventory. very low We're think keeping I at about our

on NAND So side. the

we're So very just what aligned forward. we going focused demand on stay and go those is, of look, at sure where inventory utilization make to to keep fab the as adjust the in C.J., we're

So said see growth you're of in I think script, flash of kind as calendar throughout we year, that be to you this the going pricing. from assume most the in

the I of -- ahead, going As your on move please. was to go second far as part question.

Unknown Analyst

Yes, please. Go ahead.

David Goeckeler

Okay.

-- like a week day, the is in dynamic process. Like week mix literally business. So mix is by by just very day

consumer a sell We all have world. franchise. the We big over

of ] thousands [ platforms. of of hundreds e-tail points have in We presence

the Then where up pricing quarterly the to, have a can big channel negotiated We obviously, market. weekly. business way adjusted get all

segments, those we just again, dynamically going have each be. is different to where understanding we're pricing always products. of in So then And

down that We all Black, are the have to SSDs Green. way WD WD client

margins, the And all get price of of the different segments with points, the profiles. going all just return. a to constant making it's different put different where demand all with market, sure we in process with supply we're different So best

it we out a that where mix back And The bit do is that. come expect to been continue market of clients expect you and well. waiting That's into we're that as in come to back, we'll strong a as starts we to quarter, And This would for into last still quarter. little consumer enterprise to place we SSD. depressed. talked mixed still as about pretty consumer,

Unknown Analyst

think light some you helpful. Very follow-up, I quarter quick and Wissam. could June ask to a beyond? If just OpEx shed how on into Can about

Wissam Jabre

Yes.

course, Of C.J.

June the in I or us expect more OpEx side, the to for So quarter, be on less line.

the I continues improve, But that, as profitability. on Beyond to business profitability laser increase. we're a expect gradual focused

so look And or you we to revenue the at where I we from course. XX% than don't lower of our beginning maybe downturn. anticipate at OpEx come where than the at were growth, today, increase than where we're we've more when And still faster cyclical and are of

Operator

comes Ackerman question next Paribas. with Our from Karl BNP

Karl Ackerman

may. I if X, have I

do you because why this a think applications was economy there for how ] sustainable of quarter? first, time. China via hasn't for think the you been Chinese is? The doubling that some I ask And robust [ demand do

be So would any helpful. that on thoughts

David Goeckeler

the I video market. attribute more coming it smart there. better wouldn't It's Yes. back to demand China and of the hyperscalers

Karl Ackerman

it. Got

March, to may. of I switch quarter to ahead see It's improving outlook for like our the to of I -- expectations. certainly many Okay. an guess if X manufacturers,

a bit NAND below was I in see that surprised ASP appears. trajectory to However, your December

as NAND well? maybe peers and/or a would fall is from catch-up or behind opportunity reason would perhaps prices there here there why your any ASPs So be

David Goeckeler

deltas from position by quite anybody have your a on in dependency obviously bit. margin than a the starting -- industry we price were else better and your gross starting price point, a big Yes,

of then the have and in going. happening of that, kind top based the you quarter on product and is -- what's mix So where on

the of franchise, think you I still leading at profitability the look it's if industry.

Operator

from comes question next with Tim Our Barclays. O'Malley

Thomas O'Malley

wanted Barclays. here, O'Malley ask... Tom to It's I

David Goeckeler

something. That was or twin your evil

Thomas O'Malley

I know.

So I on the ask wanted to environment. competitive

you the Are if they there? talked they're Or a talk on, about your X change you're solution any some to to as seeing of wanted in obviously comments just other I customers? you year? here. in of broader transition with you're calendar your Clearly, to are just HAMR unit that competitor seeing shipments with Your side, HAMR million in the the Can UltraSMR ecosystem? seeing first a if the year pointing drives. early get your your interactions And just to move better the really? going to trends it's half

transition on any that your be Just color with would customers helpful.

David Goeckeler

looking and ePMR example, just for solution. a not particular to everybody's ePMR we've really for customers drives for want us nobody understand they're map, asks I I And road right? versus years think for drives. drives been mean, shipping PMR

they the happy ePMR. demand. level And capacity at the satisfy I a just their reliability with We're to a point be commercialized able portfolio. So we've technology. at think and way that's very the TCO our We've optimized want

in industry, top large the have of UltraSMR to quarter. millions those the We very us best drives millions right? at produce very, per TCO on allows capacity both scale, We that. position can That and the deliver highest points of

that. I our the an business. confidence to products, you, tell our performance extremely that's have continue So map obviously and to road centers that our that the you're can current in what they're forward can they're on you looking customers are for, do that of equation betting amount and customers seeing ability road in your data on map our TCO to our understand because enormous customers, in large looking of And drive

accelerating growth. You're seeing

You're indication products. with very gains. customers profitability, seeing better that a you're clear seeing happy are That's our share

on particular, this of transition gotten the a of ePMR HAMR, I lot know has to In attention.

HAMR does lot Because not make X per sense it's For cost adopted our to get platter. product. you HAMR by a portfolio, been our of market, the until given the to technology, UltraSMR terabytes adds

cost adds material. lot your a of of bill to it So

year deliver very our TCO to it customers clearly the calendar generations see in that couple So adopted. of deliver years plus majority on of ePMR couple a strong the the we UltraSMR at platform scale a we proposition We can -- see as next of demand of or have 'XX. ability

right, of that a per to for That economic we point portfolio -- we that crossover, management view. terabyte from when That's will transition X the looking get HAMR we're platter. to

and a customers on how that thinking the about more how it. about gives color transition we're technology, thinking you the are So little

where it's understand going. our with road I in great think clear, map, are customers detail we're very happy very and they

Thomas O'Malley

Perfect. And gross on quick X then just X margins. HDD

I you and quarters. the that when gets as over eventually? just margins that what just XX% gross to means HDD frame that kind at still margin utilization present, just revenue from back like is wait-and-see that back and the way in look next look that modeling for Or can the is a think taking business? to that of perspective But back there frame are to range? any gross target you up, couple picks when way it of level at that you can charges out underutilization the there it to a to will And to get when a your get a

Wissam Jabre

if our the there. we're and almost you numbers underutilization adjust look So for at you Tom, charges,

at be what you in than any of at would XX% through-cycle say, us So movement, level of as We've I the to that a normal say our well I expect level structure, would cost a in or of giving taken know. what number our is lower I instead periods. quantifying let's had out cost a run prior say, bit rate very we've quite it,

there a faster will at pace. that so help And us get

then With the this we I probably are underutilization quarter, a June it underutilization, of then. do have see in -- and respect one, bit to we another where can talk to beyond quarter anticipate about we'll more

Operator

Cowen. TD with Sankar Krish from comes question next The

Sreekrishnan Sankarnarayanan

them. Two of

on or that calendar back sustainability be NAND the a half, do the of Dave either Wissam, up could pricing pricing you of think given the X into mortality view first how half that sustainability? So for first to base, [ NAND, that? a then cost, over drive ] would side. sort in hard do follow-up trigger of the just you what the adding about point start capacity be we have How you XX%. on And And the there's think

And ads mentioned would You wants laser of a start Quite a given get ], kind WD, discs? -- market doing of it? HAMR with how sense you whenever kind the solution HAMR you you lot -- do it, the of can would makes XX MFT. which a and it curious if clock you soon from [

David Goeckeler

a There's there. Okay. lot in

we -- in see what it's things obviously time -- of our look, given CapEx investment. the a nodal goes where is that's transitions, There's NAND, look the profitability of a lot in from are the market, into current on and equation. NAND. a to NAND, in supply for of But in that at rates, business. lot And to utilization So stuff NAND we we view quite undersupplied of complicated some appropriate the we

As we've I is look, to going way to to got prepared happy and going to to said it long thought profitability ahead inflection remarks, of the we're be, before it's performance -- of the we're see pricing the was in but business, we where and the in a go where to come -- levels investment to we're the going get back. where going it's

our that to of would model. very hole, while time. get clear profitability through-cycle match coming out a your And a And and numbers I that that over for need you think to we to imply we're visibility the answer level question, through-cycle above that need into to level your be deep

repeat disciplined we're we're of next sure difficult And -- supply don't So I'm HDD predict, I On stay quarter. But the careful managing demand expect very increases and just we that's and that what so about again business. we're you could down question sequentially. make I is will we very it? good our that the sorry, pricing We are got bits in clearly, talked into HDD it. pricing and -- forecast predicting notoriously we to looking And at. pricing

Sreekrishnan Sankarnarayanan

side. figure it trying on Harold just out doing you be HDD, disks. #X, was I with the sure. Yes, to ] A, [ XXXX

Digital out? it solution a if can HAMR market the soon get solution, from one Second is Western how you wants

David Goeckeler

Yes.

the that a particular delivering said certain it defer -- The customer technology built is cost millions reliability box controlled, wants be it's deliver to level with to couple all and we've and is terabytes forward technology, that. it well-proven, looking customer HAMR get deliver we we're technology. mean to going and a earlier. market able discs details no quarter what to allows me That's manufacturing at a I the to we're the on We've a the less happy is, What's have that's how are to progress reality of a inside let said those demands have years. The the -- real there's like on to high have I And process. got a we'll -- that ability, units customers get level millions closer road manufacture is until map thing and over XX performance. important. at many we at of just product built So for. given of that road next our of to launch the The that project and where certain to certain map very a capacity technology us TCO it's per point is of to market. a you to of our of satisfy a you what of level looking

see that's increasing are continue very scale, can forecast. high-quality be highly very, our We UltraSMR ability can increasing can which, reliable to what it and And pricing from customers Our quickly. technology higher. we and at we very drive qualified ePMR exactly adopting that very can as if increasingly The produce you high technology, And products. deliver TCO, our it delivers. to TCO, deliver it's

Operator

next comes with from question America. of Bank The Wamsi Mohan

Wamsi Mohan

runway runway different Dave, pricing comments relative you about I on time, had how past you've a But pricing. longer you mean, around I to flash slightly that I could in you your ask inventory this pricing would that that given would you to have cycles? gave cycles? manage you you how appreciate if should be say commentary past expectation a the your than have the given way, what undersupplied in think for on just venture answer that long to your be the

David Goeckeler

On NAND?

Wamsi Mohan

Yes.

David Goeckeler

I'm we sorry. cycle -- I a I out mean the out steps Look, we of think I before, haven't era. out just first We're it. think, in cycle like I I coming XD not it's of we're the taking it. Like just guess we're of the -- said, seen

profitability best and our portfolio we control profitability. matched, our what supply and the we're that the is best have the sure therefore, the optimize sure Wamsi, have given making and just the portfolio So best we and we keep doing, to make can get continue mix we inventory demand deliver

be. although It's CapEx very not general business. but to is -- there's where to wait point And needed, have point I real we're pricing. difficult a see And is close on are going back. but in clearly, the where quite mean, come right be some I And that is in think to more through-cycle to I to our going to predict as things to direction, profitability, is future going to frankly. it's we're supply to investment reinvest we back, the future the to utilization said, visibility that, that going going that's what this number come on, going

Wamsi Mohan

higher? edge and edge, bits Okay. with period If see I multiyear growth start that the generative the about a could, industry you the for inflect especially When AI mentioned you to start to at at demand NAND NAND bits. entering the for will demand do this think

David Goeckeler

PC we Look, think into it cycles. as going Yes. start I to to we're go refresh see

So and edge. that I of cloud very AI mean, big then we -- cloud we're the all -- us that drive now the part in -- of right? still this, early to right to the -- capable Gen down architecture is the still delivering admitted getting

specs think where NAND. markets, of to amount products they're starting I of some of the increasing see of we're the some in the future

gets as years optimistic So we're that couple next we adopted. of go and through about deployed this and the architecture

certainly, launches you. in new But to at time. for or like a technology can't pace very I've any technology I down long than it faster seen adoption, it's technology put So particular moving quarter a as a new

Operator

The Hosseini SIG. next with comes from question Mehdi

Mehdi Hosseini

did tracking NAND is demand to X%? say of to Just compares and David, growth that mid-teens supply bit you wanted bit that clarification, to the --

David Goeckeler

Yes. demand mid-single digits. We see between out. that's those. see around And as mid-teens. there's we obviously, fab And inventory production of of fab kind What

Mehdi Hosseini

also What said me I NAND confused is multiyear you? a got Okay. inventory misunderstand your Did low. is you

David Goeckeler

You misunderstand me.

Mehdi Hosseini

Okay.

you demand so So The price the -- would a and exceeding supply, ship to going throughout low multiyear are is ship or basically if not year? your not is demand remain... going the to you're well to to price supply and increase inventory

David Goeckeler

Yes, share demand the throughout year. shift our we'll to

Mehdi Hosseini

that select profitable or Would you're your impact end more focusing share, Okay. market? on market

Wissam Jabre

and impact market. share. the and that third-party Mehdi, for estimates where don't overall the the our you anticipate production market mentioned stats estimates on see that supply on from we No, we our to what

Mehdi Hosseini

reflection Okay. Overall not market, a that...

David Goeckeler

sorry. ahead. Go Please ahead, Mehdi. I'm go

Mehdi Hosseini

Yes.

So Digital. these have a follow-up. to quick just Western specific so are may market trend, I If

of terms CAGR? of In the long-term NAND trend terms should cost we that assume in down, down of what, XX%

David Goeckeler

mean 'XX, ahead I will frankly, now that for year. the look can when full still No, XX% of if the in you it but we're downs. believe FY year, -- we're come right you think that comfortable quite back. XX% And We cost fiscal the with at model I you

Operator

from Our Steven Fox question comes next with Fox Advisors.

Steven Fox

situation just depressed I into you and they're given mentioned are enterprise in on remind like talked the is still a like, and was of mix And back what SSDs, it. that about you us that Flash in normal -- you'll in just business? supply the SSDs we your your But you like how that mix cycle, where envision wondering coming can do looks what market? just enterprise you

David Goeckeler

went frankly, and into kind most SSD and the has part a quite Well, us, that emerging SSD right market part NAND we downturn, I yet. depressed then mean, we a enterprise the the enterprise come back in Going an qualified cloud an the in of I of portfolio, number for titans our NVMe-based or -- seen -- into numerous haven't it's market been it's downturn, right? we of at the think, of got emerging where

be into have that just another versus we depending is back come bids. on segment So for us opportunity we mix price to those much as it it be that will for out that. -- other digestion, on what the of starts options that to mix in will How into

have qualified. don't for. just a fixed have we're we percentage the we It's going product. So It's necessarily

comes demand whole demand As back, portfolio the we'll consider part that of in calculus.

Steven Fox

be a just cycle product by spending in big it be? certain the as that trails would you a the enterprise recovers amount do of that where general? enterprise vision for [indiscernible] HDDs time have Would Like picture

David Goeckeler

than Certainly, But market it was is here. about in trailing cycle enterprise that HDD. inventory I enterprise the there's on mean hyperscale clearly, enterprise. -- I capacity was there don't more know it's digestion if I there in SSD generalization enterprise HDDs. could just X because make a

about, in fiscal calendar projecting HDDs. enterprise capacity this fiscal about growth throughout year, sequential and see talked talking the we're year continued we we the We throughout started As year. sequential now growth out growth

we a through. digestion good is So capacity which see again, inventory for back. just demand SSDs more trends enterprise little coming sign -- to good come enterprise there's get will back there's It's on HDD,

Operator

Mark comes The with question from Company. next Our Benchmark Miller

Mark Miller

quarter, significantly cash there When during the flow cash but still, expect you was from positive an Your outflow. improved to flow free perspective? be do a

Wissam Jabre

Yes, Mark.

free on cash turning very us. much So it. flow top We're focused for a positive is priority

We of achieving have sight to line it.

either of positive expect 'XX, achieve flow or half the the the free fiscal We quarter next. in cash to second this

know, guide cash you don't typically we for As flow.

Mark Miller

Do revolver? you you your on it? expect on to you to have expect will draw to Or do -- that won't have you draw

Wissam Jabre

don't I point. that this see at

Operator

The last Baruah Loop Capital. question from with comes Ananda

Ananda Baruah

supply a in and if of cycles be the you you of Just sort have on wondering corporate not of just edge there's increase as if rate could time you other have and Gen increases do of the cycles, constituencies, increase XXXX bit NAND you end sort impacts market any if hypercare you Fortune early have but opinion sort do, -- NAND do the noticeable? as guys well think all -- sort if and material an opinion on storage AI

David Goeckeler

Yes.

comments thing cycle And capital the NAND in still to far we're need which put is lot growth market, investing you that to at market as what in have in were big ability the of NAND see going also, we be nodes to about bit like the my good a and here, to it's the the efficient earlier you and future. and there's more NAND get So believers much growth. it. point new great in about the And is and -- produce as how a

look, to a And business, grow, again, NAND continue very, map on cost an point, the we rotated through long expect our client technology can business, overall PC gaming our So really Especially still we this edge, portfolio really business, AI OEM. our continuing very additive great the a market, road to edge-centric that. to the on That's generative where your with with has to downs. well which, SSD -- deliver for position our with our NAND rotated to to market thesis with expect positioned we be is have -- story. downturn with consumer we

and come go to that the So the as ability the back have we resets there. we're very economics that positioned demand it well yes, And we see demand. of industry, satisfy

And so you're about that. I bullish think very

Ananda Baruah

That's context. useful

David Goeckeler

appreciate I quarter. everyone. Take time throughout today. Thanks, see the We'll right. All you. Thank care. you your

Operator

This for Thank you presentation. our conference. concludes attending today's

now disconnect. may You

Western Digital (WDC) 25 Jan 242024 Q2 Earnings call transcript