WDC - Earnings call transcript Q4 2024 | Western Digital Corporation

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Operator

Good afternoon, and thank you for standing by. Welcome to Western Digital's Fourth Quarter and Fiscal 2024 Conference Call. [Operator Instructions] As a reminder, today's call is being recorded.

I'd now like to turn the conference over to Mr. Peter Andrew, Vice President, Financial Planning and Analysis and Investor Relations.

begin. may You

T. Peter Andrew

good and Thank afternoon, you, everyone.

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

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

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

over With introductory for the that, call to remarks. I'll turn now David

David Goeckeler

everyone, discuss Good fiscal and for Peter. call you to afternoon, Thanks, XXXX performance. the our joining and quarter fourth thank year

Western billion, of share $X.XX. Digital quarter non-GAAP fourth and delivered $X.X non-GAAP strong earnings per results revenue gross XX.X% of with fiscal margin of

For $XX year fiscal the XXXX, totaled revenue billion.

for to our volatility both on profitability of broad growth focus have products improving aligning of across portfolio range HDD. structurally and our and maintained mitigate strategic our markets We a opportunities Flash industry-leading while through-cycle end with

positioned market the how are opportunities. we heading our discuss these our we performance, Before on capitalize and provide want to is to growth views where on storage I well

beginning our Our diverse are structural benefit broad end from to the the with we is recovery strengthen changes we see markets. portfolio, to across us made enabling operations, to our have coupled

new generate data creating operating continuous increasing both processing and the demand storage process data training, Cycle substantial HDD. cycle Flash and require need systems In These for increasing new storage AI is and Data generation. a of and existing AI consumption, data drivers addition, in the for across analyze and

technologies AI models and necessary the of managing the data. vast computational performance large support to must systems of capacity storage deliver demands advance, while As data sophisticated volumes

Given benefit both poised this training is both inference HDD to the we landscape, input benefit models. expect at Flash stages output from to AI and these while AI of and

Cycle. hard needs rapid meet A content UltraSMR training capacity HDD AI terabyte we of deep address customer continued demonstrate for end the Flash storage X-terabyte power high-capacity X SSD and our commitment our our to SSD Lake developed To at storage capacity growing across have PCIe the Data for maps drive road entire build-out AI requirements, the optimizing and and AI support and highest performance, ePMR to world's the XX and market to industry-leading product Data These high-performance leadership. inference. effective Gen cost scale. introduced in the and offerings innovation We new

positioned well driver to the industry. storage the the in Cycle for storage a believe enter data capture and be year are growth Data incremental fiscal growth we will we significant long-term As XXXX, opportunities AI

on to company the team has our Before drive our as update progress required I pleased separate I to into at to I of the calendar end continue year. work further updates, the dive to want am the completing business you plans. with made the separation we

anticipated beginning separation anticipate As the costs. for separation, impact briefly the incur costs part calendar the the these Wissam to second dis-synergy in will of preparation the of half we year. ongoing of discuss

offset mix with Starting by to cloud a of by in and mobile, in a was recovery in the to business The client shift partially revenue turn growth updates. decline now our I'll Flash. gaming consumer. driven and

Our proactively we end mix through-cycle on across markets. bids higher reflected focus our as is results profitability our in driving

of at the our remain the position competitive offerings innovative market, Our growth and reinforcing forefront prospects. bolstering our

For sequential basis, TLC performance previous better XX% products. significantly a example, exabyte QLC-based SSDs, than our client on offer which our grew generation new

controller QLC this and Combining node enable We to deliver development, products that client these the believe portfolio high-performance industry's lead of us a unmatched with transition our in-house SSDs performance provide value. will to flash.

growing superior BiCSX wafer and as establish BiCSX new architecture, for capital last storage in Built cost and AI era groundbreaking webinar world's I/O QLC XD capacity integrating reinforces designed a chip XD leadership in of the to as by NAND of highest die advanced foundation to bonded to X-terabyte During a needs. Kioxia's month, future on efficiency bonding meet Western introduced we well data specifically memory NAND. performance array scalability our and Digital manufacturing center

In with calendar terabyte this later for addition, our SSD enterprise XX year. now being is shipment sampled volume plans

PCIe our read as enterprise efficiency. Furthermore, Gen delivers X well based power SSD performance as best-in-class

product, this map the ramp currently qualifying with half talk road in interest at in at second a hyperscaler significant year. the this expected Flash in calendar Memory Summit about of seeing is August. Flash are our which upcoming We'll We more early

softness markets fourth and transactional Turning our product dynamic we bits mix the mix outlook. we consumer as Flash quarter, are the markets response channel. such seeing to between in was as more our to end proactively in the Throughout the

both bits approach Our success the most in allocating gross to growth of is identifying revenue and in our reflected profitable the margin.

growth into we we enterprise high-teens As SSD the quarter, mobile a expect addition environment ramp the the and sequential our new saw offerings of first fourth mid- seasonal in mix we look to quarter, in bit in on basis. continued strength the drive to

opportunities percent year we performance of remain now in represent period driving expansion going The The era share expect full and these portfolio and we strategically efficiency, mix. and new a timing is capital prioritize power our disciplined capacity longer-lasting race double-digit capital nodes, layers the emphasis for now of the is The margin are means NAND managing of SSDs us. enterprise is economic growth. new a XXXX, towards revenue within our while focus change, enhancing spending. behind shifting in decisions increasingly Innovation to For to nodes. introduction fiscal

driven by HDD. commitment Revenue have high-capacity The future improved strength leveraging and profitability. has a HDD at our we business ongoing remarkable market. our range, structure, to to By introducing growth recent SMR Turning demand to strategic leadership improve target nearline underscoring aimed pricing. undergone by innovative, initiatives our transformation and surpassed gross marked lean the in in most quarters, cost was products margin

have profitability We SMR our qualifying manufacturing by footprint our cost operational and all optimizing efficiency ramping our restructuring while our and drive structure to meaningfully increased technology.

bringing better operating innovative excellence operational business. to our are the future With balance, change a demand, into products continue highly we are future. poised visibility We increasing market into while our to HDD trajectory structurally the we and commitment to continue profitability supply-demand way to of sustaining

nearline select On and technology the and customers. while advanced feature exceptional These drives qualification, enterprise data are UltraSMR/ePMR maintaining deployment cloud technology which OptiNAND to and in reliability. front, XX-terabyte drives triple-stage designed ship our hard samples integration hyperscale centers of we actuators seamless for

With this the to positioned best in capacity drives mind, we highest are TCO. industry's hard deliver well and the

outlook. HDD the to Turning

further first As and we the favorable more fiscal greater by demand look quarter, growth we expect driven pricing. to

begin ramp SMR, to and to the continue we first SMR in vendor quarter. adopting anticipate major of Our cloud to fiscal customers the a cloud third transition

the focused supported business. reflect profitability innovation We leading improvements ongoing in TCO driving our Our on products HDD structure cost remain to margins deliver have we and and to significant our higher lean customers. improvements

in for for approach technologies our HDDs to us ePMR, gross strategic AI's UltraSMR as be to target surpass to industry. Our and the winning margin commercializing driver OptiNAND emergence another of the growth the proven has strategy, pivotal enabling midst

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

Wissam Jabre

up results margin high delivered earnings of for share and good Thanks, Western everyone. earnings gross exceeding end And fourth per afternoon, quarter, was year-over-year. guidance with the Non-GAAP the David. the Total quarter X% sequentially $X.XX. fiscal the XX% $X.X share In was and range. per revenue Digital billion, great

Looking per pricing with with growth SSD. to in and shipments. year-over-year Cloud XX% higher at enterprise revenue due XX% nearline XX% bit was is HDDs along coupled price unit enterprise in shipments at of in total higher The end HDD, billion. and higher attributed increased markets, bid nearline sequential pricing represented shipments to shipments and The SSD $X.X increase of

shipments and exabytes, up to record XX% a quarter compared were at XXX XXXX. from XXX% the bit previous level of line of fiscal New fourth quarter

at ASPs HDD higher The growth was The increase billion. the total of offset XX% by flash was X% at increase both shipments, $X.X represented the of increase Flash $X.X by sequential decrease slightly. represented improved Consumer driven and HDD XX% flash bit and flash bit a ASPs Client to total shipments The ASPs, in flash decline higher due X% revenue was in by revenue offsetting year-over-year billion. HDD. partially revenue decreased bit driven lower due shipments. X% XX% in of ASPs. Sequentially, and year-over-year to flash while was

revenue up loss year points gross XXXX, per For was was X.X billion, Non-GAAP X.X%. and fiscal year margin percentage margin Non-GAAP X.X share to non-GAAP XX.X% points percentage fiscal operating to increased $X.XX. XXXX. X% $XX increased from

fiscal year Looking revenue Cloud pricing. enterprise increased end higher year-over-year to due XXXX, improved demand capacity at markets for and HDDs X% for

client X%, and consumer year, to respectively, higher grew by and X% revenue shipments. flash For bit the due

and up -- by revenue ASPs and HDD was XX% a respectively. average on sequentially Flash last to price from proactively a fiscal to shipments last year-over-year. billion, as revenue price Compared like-for-like flash XX% to XX% of to and up In increased year X% profitability. Bit mixed XX%, quarter, as the quarter maximize billion, blended fourth the to unit shipments per and XX% XX% on now XX% total fourth sequentially increased Flash up were segment. revenue shipments decreased while compared per basis year exabyte Turning X% XXXX, exabyte grew HDD $X last and and $X.X $XXX. bits XX%, were Compared up fiscal unit revenue was basis. quarter last to average we XX% X% quarter,

statement. to Please to Moving income non-GAAP the be note, otherwise. stated rest related unless the my comments results of will

gross HDD progress. through-cycle as the reduction guidance percentage better and quarter, as well Gross improving focus higher sequentially improved shown points Flash Our cost the above both reached has well points margin and by due pricing profitability XX.X%, in XX.X In on range. to fourth fiscal X year-on-year great and percentage volume. total margin

we consecutive last have cost initiatives, for and percentage gross year-over-year. and Flash, quarter by end points percentage Flash improved X.X margin to on proactively XX.X%, was points X up Within bits quarters. gross compared our XX.X allocating margin markets between reduction executing

a operations range, primarily cash and cost range, up XX.X was make long-term in guided XXXX. Operating profitability. to compensation tax X million XX.X%, percentage of by of to improving manufacturing our leading the portfolio profitability. target million, due million We exceeding cash margin HDD, efficient quarter $XXX quarter, expenses expense continue Operating offering for points the and gross sequentially was fiscal fourth better-than-expected $XXX discipline, $X.XX. flow income In $XXX Operating share and compared with higher free points earnings delivered a we progress were per $XXX million, running product percentage focused on flow was million. $XX variable above associated was was to

purchase cash outflow of and Cash which expenditures, and the capital ventures joint related statement flash on the $XX of activity million. equipment, property, a cash to flow plant include represented

XXXX, decline. year the facility. a our $XXX cash XX% or excluding Year-over-year, X.X% were fiscal the of this sale capital from leaseback proceeds For million of revenue, expenditures Milpitas represented

end in than was fourth $X.X inventory and billion including in Flash cash quarter. the decline more equivalents was increasing HDD from days billion. inventory. to $X.X billion, total quarter Cash prior Fourth were outstanding the undrawn of $X.X inventory days. with the billion of debt an quarter inventory increase was by revolver and XXX billion, days liquidity offset XXX at at up $X.X $X.X Gross of A was capacity fiscal from

paid delayed the of drought $XXX loan. During quarter, the we million remaining down term the

billion. first our now expected to anticipate range XX%. continue revenue and and Gross in I'll quarter HDD to businesses. $X XX% improve revenue to to Flash billion is margin the both anticipate drive to sequential as in between guidance. and We margin basis profitability We fiscal the turn of be $X.X gross to on across we be a improvements non-GAAP

offset operating We separation continue expect be increase range will a the as executing slightly decrease costs million by variable on to synergy make $XXX million. expenses progress we of plans. to to the to A $XXX in compensation

dis-synergy this million. in are Included costs $XX of $XX to million range

of approximately and costs expenses synergy the to and to $X.XX to expect We be Tax second share and rate [ Interest $XX million earnings quarter the on is be $XX between XXX outstanding. anticipated based $X.XX expected fiscal between million. $XXX XX%. million. be ] in expect million per to are We XX% approximately shares

discipline. we higher on shown our and while cost capital committed focus driving maintaining As remain in guidance, to profitability

I'll David. now back call turn over to the

David Goeckeler

Western we Today's capitalizing for industry, on map, Digital's prospects guidance results underscore HDD. opportunities execution initiatives driving on our Cycle with robust We end of and exciting and emergence an promising Wissam. ahead. doubled product incredibly as solid road both Thanks, the marks down Data strategic in The markets. strong across and results growth our fundamental delivered Flash shifts growth AI transformation our

to 'XX our Looking positioned ahead value unparalleled leadership to innovative positions customers. fiscal well to are technologies year delivered leverage spearhead we our for and

you. Peter, let's begin Q&A. the Thank

Operator

And Muse C.J. Fitzgerald. with from first comes Instructions] today's question [Operator Cantor

Christopher Muse

your whether truly of visibility HDD was gross and calendar I question results. hoping should progression about my I of would go impressive we we your could supply as margins pricing that into in to today, how and guess think year I gross beyond. you around the speak margins, into December calendar outlook actual like as second the the of to focus that, And extends into September, HDD part 'XX. the half contracted

David Goeckeler

Sure. C.J. Yes. Thanks,

So a spot time long and yes, that it where focused position now HDD a on customers. are points. a the is in happy the continued were products, of strong plus those The business with the manufacturing adoption the our our cost we They're puts lot great at. great leading us volume ramps we us. footprint there in for of drives -- They're right for right? back, capacity UltraSMR, strong We've optimization spent getting very

together, you all business. able put we when it target our margin to in gross past were that deliver So

around historians tell margin the gross of it's the best here Some me like ever.

And it's news, you said, going the as good is higher.

so at rest us So a good and giving know calendar time made, significant lead we moved throughout go point. weeks got of visibility good where transition this going visibility -- we to HDDs. on really request our that is the much a year, quarter supply-demand drive us to We XX that's past customers I every ahead, give think, our this we're we up the balance to XX-week pretty

Now the net XX time is an reason cycle about HDD that's so the a build important weeks. on is to

very to change really drive our business demand. customer us with technology, So give manufacturing, the but also this drive that our business us we've been align to to working the the hard investment allows of visibility practices our

a very that it to fiscal still entire customers up, visibility are we biggest -- we're have working Our number customers. and with are. But the our with where of now through well still all -- Others have responded request, the we're for them. year margins happy from it wrap to we're

the far to do continue We customers. continue to innovate, continue make future. to balance that. a and getting higher, very continue to to to to map in better robust as And going place TCO practices road and got visibility into business we've demand in can see we business going now supply If higher keep in sure we're drive the to the we -- innovate. we our going deliver to this margins We're margins

addresses hopefully, question. that your So

Operator

comes next from Stanley. today Morgan Moore our And at Joe question

Joseph Moore

to and go wanted good QX, you you good -- good. has to I of And this needing about ask kind volumes demand pricing in that up. think but have seeing are sort disappointing, we're the for pricing. NAND, usually, been And about weaker of everywhere sort but that the still pricing of volume

think demand So happens talk of NAND? year about dynamic? do supply And over can half with that the what you just for back you the and

David Goeckeler

know, very As market. Joe, it's dynamic a you

enterprise and next seeing negotiated growth So sequential sequential good -- and We excited we're markets, SSD, something growth very expecting very pricing SSD, in enterprise saw see in we're especially about. good the we're really in we're quarter. still good we the seeing increases, still that's --

where frankly, weak. raw Some the and consumer you own general that some more of players little don't more transactional demand a is dynamic more little bit markets pricing a have players in and their involved in is NAND, produce

come year, put all variability. through a strong a -- pricing. a of little see markets, as in as we top to got quite aggressive as demand the little demand negotiated But half where that but we of -- in those a continue we the then markets, on good in enterprise moves, still you headwind, go So mix we quarter-by-quarter And you quite pricing not see more of the see to bit number up back with SSD. more

we quarter, We see here of maybe as but that the improving of an the go PC market kind throughout little in the really see a next year. rebalancing bit on going inventory we

I think recovery part really first pricing. NAND here the process quarters the that's a couple given of of in normal of strong a

through still the shows frankly, see the throughout next well. supply as half And year. we demand modeling quite calendar second year our outstripping So of

Operator

from UBS. our next And Tim Arcuri question today comes with

Unknown Analyst

[ and flow was on This bit talk the appropriate to could Grant any Arcuri. about little how now how And leverage updated between segments? you cash prioritize a want hoping generated thoughts the you the for I and Tim is Josh view ] the free the for separation? of on sheet each balance you X

Wissam Jabre

Yes, sure.

noted remaining I paid in $XXX of million the drop down in QX, we the prepared the term As loan. delayed remarks,

to the is as are in to in aim the or own -- we said, of Investor their competitive separation, closer But to our X detail. be days create more that respect progress Days hosting discuss market be we that sheet. will will we strengthen so part Obviously, is focus And the related of to as capital cash, to to as question our question related -- we the the the we're for generate to balance to The prepare making second good the with as spaces. structure. companies time get continue separation, world-class capital always we've

cash profile as market structures so their reflecting would well. dynamics -- their generation from and cap profitability, the be a And

Operator

Fargo. Rakers Aaron comes And our next question today Wells with from

Aaron Rakers

flattish? Is I business, next throw and basis there. the ship on the dissynergy growing operating capacity in then want Yes. costs And kind in guys out guess quarter. I from would is expenses? of is I underlying mid- Or clarification flattish there think more anything is a should be question that When think is, a question just would One high kind to in you're if the math dynamic, a your And maybe this so, something that? in all consider to in me thinking of the we talked mix you be look how COGS? my assumption that September think that? about where sequentially perspective. about leaves at NAND there I we would teens ASP that pricing I that of a guess trend of why my quarter. remarks prepared Is to

David Goeckeler

I'll question. the now. part the of take I the remember second Can't part first

Wissam Jabre

the the operating all the expenses split were cost take were -- anything they me or they synergy first there's COGS. Let whether was in in fired question

are So the will million expenses. quoted, costs in Aaron, all some numbers material. the the COGS, in million to operating I dis-synergy that they're not but $XX There $XX be really

so they're also And we reflected And why QX. guidance our out. in didn't them for that's call

David Goeckeler

pricing, went your you answered on of there, through question a Yes. dynamic. There's huge as the Aaron, confirm I And mix kind think you NAND just it. to

we're the we've else, everybody consumer. seeing in like So got weakness some

of consumer portfolio. so And flash -- is that's our X/X

average margins. always big talked business, very and So that's a we've has through-cycle higher about that than

a that's then seasonally a it's for bit headwind. strong mobile. we quarter So -- of And a

mix a there as there's big well. So -- that's dynamic

thinking it way. about but you're right that the So

Operator

today question next our Paribas. BNP from Karl with comes And Ackerman

Karl Ackerman

indicative may. if addition half your in SSDs my a clarification X of is the speak your SSDs, From address SSD you you to growing second the in breadth guess XX are portfolio this I the you to question, on of relative to I your terabyte a year? question, of and sampling One at enterprise wins customer calendar of question, of mix. or which SSD overall PCI share could as separate have enterprise clarification Gen hyperscaler design question that

David Goeckeler

Cycle. separate products parts of different the Yes. AI are X There targeted to Data

because what pipeline full. keep designed to feed the So a we it's compute call product that mentioned, GPs data the compute into product you and

the a So in everybody performance, and that hyperscaler efficiency, read building an of that really product good NAND. infrastructure is interest ecosystem looking very of in believe is best market. lot we That that's that high in AI a we're performance training high-performance product for and and what anybody AI getting that's very is power qualification because across product the a

to high-performance separate that is the XX that's a across AI before well. enterprise qualified products drive kind Anybody for The is the And products. hyperscalers of lakes of up building of at AI same downturn, we are X or products X looking data terabyte and for those had sort addition product in we're those these the an at infrastructure and kind SSD, of qualified as targeted had that's training, building at training we looking that's picking customers. back now the

we we happy well on -- have demand people with are the in now building we those is So a targeted products and adding AI were the is of enterprise keep it. we to a much were really And lot which training to infrastructure. portfolio, pull where SSD,

Operator

Our next TD comes Sankar Cowen. from question Kris with today

Unknown Analyst

Or Kris, if more nearline second is transitioning low XXs. above Eddie this [ I to progress this anything is is versus exposure? do main This peer in your think your for being wonder do there. guys PMR for you ] congrats specific to customer tied share XX% share HDD great HAMR? you on you of market I may. if from has with the historically think the This to quarter On

active fiscal wonder shipments I high. are also, if capacity think you'd you at And your given have 'XX, that within all-time a

David Goeckeler

know We products, our time. advance, because closely. think for work products. of map. with had a none and our map, the our TCO long surprised road great We've They highest very quite frankly, in years road we products in customers delivering road the of that are about by their map them our We're share this is right?

highest the qualified. providing -- scale highest easily they're are capacity well, drives capacity providing at we're believe the we we So

center delivered incredibly now best customers the The a scale building architecture deliver XX-terabyte is architecture And do, is well at TCO they important. if our to drive. we've known TCO. you're absolutely data the And a and our customers.

at side XX% First drives for versus sampling these per scale, COGS great the terabyte the has incremental UltraSMR is SMR because And that's TCO. then XX capacity with accretive. it, crossed time drive, great great UltraSMR we which XX% more nice. more capacity that's typical really That's more XX% of for the a anybody can more without unit. the XX% They our capacity any system, to so us adding or that's get It's get customers. capacity margin very deliver

seeing adopt third we're And UltraSMR technology starting our the starting the year. hyperscaler in to now second half the of

we this think to the So point. feel portfolio the times really development where in ago a in just to given good decades been this is. time has These that portfolio long We were decisions for lead business. this get were made

And so in increases balance allow as work on the customers TCO products. -- it And to the great to responding us pricing supply-demand just we side are of believe we're the also well.

a really So now out. capacity, we was to to important starting lead to our we're because year time XX-week it this It as get gives that far the for look, forecast got customers ability plan capacity. as earlier, I mentioned from us

than to that. looks -- up don't come not We address and roll volume. we're then issue add what of for capacity. So going in as as this and position in -- to we work at we capacity want more increase customers those a sustained that, X-quarter we think But like, a this is add that much do we be we we our forecasts get them we'll look in with and picture

demand customers looking a we will to we be whole big or market to as AI what have ship and customers driver mix. that to mix about, question we for answer over exabytes want better be the happy and the where and all driver a going AI a As But sustained to But capacity or as add think for our able do is to I of visibility, better and Data a into on HDDs see next we're in us we'll we're based and talked to quarter give so, the well. place. plan get And keeps I way to We now, big that see future. is up, able that - at the per that our capacity. now going commitments then we with of our Cycle quarter ship right we're more have from

Operator

Our next question with today Daryanani Evercore. comes from Amit

Amit Daryanani

guess HDD just on focusing maybe I the again. side

at fear is, the from much to exabyte think the to this the think peak a going you point, that? margins And everyone close I shipping is I with both -- of peak, performance sitting at have intensive where are are. gross how last which versus

maybe just to wide about and year what exabytes up. remain or through focus side your talk on 'XX. the into gross that you can Can the margins just So about can conviction you the keep if on growing way favorable HDD is gross think back HDD margins assuming pricing of this and potentially

David Goeckeler

Yes.

as announced a continue drive. that biggest better just to and that. to to to drive a It's we than value to simple build R&D we're XX is customers, the the just which we're drive continue as and is a deliver continue more better next is key product our that's If innovate. whole to that market, XX-terabyte our terabyte, the think which that able question I TCO in of participate to spending. capacity We on XX% new innovate

as So a participate better to they continue to in long do go we customers able and as we our we're that. proposition, and to value that, get

going And as to case, we're map that's that. do long conviction forward, I amount of and a continue road as have the the tremendous that to drive we

margins business. drive this continue to in will We higher

Amit Daryanani

yet. this. guess, I it go come perspective this normalize, hyperscalers. production once Maybe away and [indiscernible] a share HAMR market out me help more once margins And clarify the gross that a is with all volume would peer does durable? the has HDD few from on the Or in not comes margin just had side, be, performance the Is HAMR reflection has perhaps out, of your

David Goeckeler

like No. Like on to has slot it that right? that. think the delivering deliver said, in I I to that The we're able think the more want don't It's product it continuing density TCO. don't and customers same technology I greater matters has underlying deliver you're of -- to do much,

to visibility drive a deliver down, industry the been now. have continue industry people map to ordering. to of that. client cloud transition TCO road drives has map deliver hard an We to about, in given oversupplied going talked Other we think, past that we're the better and to we're that, road I all a into persistently I've been have get that's lot a

the value it. balance products we want And the we the what supply-demand We leading -- when is dynamics of of all for for margin incredibly because a deliver And customers. durable. higher It's think footprint world-class customers. think our like are I that it's enormous right, value for Good And the our deal seeing get is proposition way I we're a great we us. that industry deal manufacturing provide good amounts to drives our that get were them.

Operator

Vijay comes question Mizuho. next our And with Rakesh from

Vijay Rakesh

Just ARPU side, can help obviously, at I -- disk have level where in solid forward, Because I NAND at XX%, mean, I disk could on execution to we think obviously, think XX%. out? highest I road walk you like and gone XX%. years. think hard as hard see is the margin you margins to? you us margin look drive get you how past, think margins Could set gross very the to But the like drive the X And margins in the XX%, map going

David Goeckeler

we've bring business next -- what continue long in quarter, we continue as are up, the going And -- in have innovate to the business, margins our I business which great -- to for we again, very, for -- as think the portfolio stalwart both products we've think I think been in I been we we I time. ever as in strong been. that's it's NAND look, long And a to time of long is and want. so a mean is always consumer. as market, very strong a and

a have portfolio. strong We very client

portfolio in really a is the at portfolio. and a enterprise always where have We the we're gaming very SSD, right where now amount building significant been AI We've have the we mobile driving Cycle of demand. Data good time strong out

very, cyclical in portfolio balance perspective technology very know At of good the the long-term shape. So is a and all we're we I where business. that think from point, We it's supply-demand business. positioned, at look a

add have nodal capacity, talked on era capacity very of more this in our transitions NAND. in you to give about large increments You new to CapEx bring

that, I our is new power, innovation something more the and that the bigger idea the of of era is that bigger the soak to in past, NAND the within let's market the future in business count to going is and been that of performance, the than node on and is capacity introduction we're strategic think, bits that layer put past. so I nodes NAND on add manage race it elasticity I the think think way says like just all era nodes in the -- on this and capacity more up different has

the coming And overall then downturn. we look at in the NAND of lot there's just been a supply-demand spending And of out not balance. CapEx

And so we see good a balance. supply-demand

portfolio. continued So momentum to positive we in expect the see

I of think the said time. starting see like transition. we're this it's a really, client position -- to to about results through been is this transformation that starting business we're a last probably. the gone to a this in HDD, transformation years getting for that in we the prepared is, has over been Industry is remarks, year, the remarkable that's going cloud On long XX frankly, through for see quite on, One

through of kind we're now. So that

bigger X, much, X much is percent the peak today. just Client than our business, percent of a much back past X, look if the it portfolio. Even years client a to is just ago smaller of you was

So with map. our to road map long And be to on able TCO to business for drive gains a I business better our technology now it's really continue the road think strong TCO continuing we deliver cloud customers. has a

producing side, a demand be got on stored the AI the to on people side, got then HDD more on that lot Cycle where Data on And is you've And to the of -- you've all on content of going HDD. the this input big again, AI part stored a is output now side, data be HDDs.

getting So end capacity the oversupplied market. good so into should practices demand we business we see a right good in how visibility we of up environment, add an don't

changed. HDD has the So I think business structurally

The higher TCO question. to said, be margins at and I a in that a going drive value will continue going a way margins see higher. to value maintained It's the really proposition drive lower. structural point. We're not like continue higher we And I higher going to is there.

Operator

of from And with today Bank Mohan Wamsi comes our next question America.

Wamsi Mohan

same you I was a originally in wondering time, maybe inventory declined you bit well. bit little like-for-like on the had markets the help a you what could as as your where quarter. is quarter, ASP in trajectory at shipment NAND also square your end the clarification comments through expected. the you prior But could bits from below proactively mixing quarter question, what just for across think us had September And a a build in

David Goeckeler

Okay.

all, the question. one of mix, was mix first first the think I So the

So question was in quarter? the the

Wissam Jabre

Yes, how profitability. how generate in do it's to quarter, fourth we bits proactively we -- mix the the proactively better

David Goeckeler

declining. were bits When

Okay.

that we're the trying to our guess, and return. what saw picture, So Yes. to in basis to some looking what customers highest I the in always we're where every a and I on telling to just us, and going we're going we're look, in a get are big we're put mean, I consumer. market week-over-week where mean, at get is We headwinds demand bits

parts enterprise other also business. So we mixed in of client saw good really And SSD. we into growth

I enterprise in saw growth think we sequential SSD. XX%

So that how it. the part provided question? side of on of mix second And floor the a kind think of we the about

Wissam Jabre

place. tends us take and consumer for second for more be half the maybe -- that inventory the it's to one, for oriented inventory June shipments that typically on sort prepared exiting on so the -- to have unusual on not as the builds we of more Yes, the the there's comments inventory, get quarter

And comfortable so with Yes. we're that.

September the expecting the NAND sort quarter, for be on So to ASP slightly like-for-like in the single-digit up the in range. percentage we're low of

Operator

question me, excuse Toshiya Goldman Sachs. And next with our Hari from today comes --

Toshiya Hari

quick I and question. had clarification one one

$XX it to the that's assume December clarification, forward business costs away? fair the combined million my is $XX do up going question. separation. costs post the of those for That's you do Or the Or separation? to those dis-synergies, we million beyond kind guided potentially clarification On the to quarter, saw go go a steady for state

your you about question with loaded significantly the -- had rates And then at are 'XX But for along should at think utilization trough peers. fabs Dave are fully know NAND your this of cut point? side, fiscal cycle, the my I we the where on CapEx? pretty how today? And

Wissam Jabre

Yes.

-- thanks, Let Toshiya. me

me the question. Let of first take the part

discussed This quarter, So where noted December $XX -- fair that $XX the it's you with that the million separation I going assume is synergies state million. until to the the respect to is will and costs steady to range for this forward. be

David Goeckeler

at are And part fabs the at the then We And full we're -- question. third on this the then the don't have NAND running -- on NAND point. costs underutilization of utilization.

Wissam Jabre

the On CapEx.

David Goeckeler

CapEx. 'XX FY

Wissam Jabre

Yes.

what And to business. respect this our thoughts cash changed, we're So -- side, the And in to line that's X% share around with we'd less CapEx the this on this point look, more revenue. on is in fiscal think what will quarter, I CapEx at of I was to on -- I'm future to our the investments the expect And where focus focus. for time, in main perspective, or CapEx a of quarter. we the from -- continue current profitability see haven't really be CapEx which fourth it quarter, with like basically

Operator

comes at The next Steven question from Fox Fox Research.

Steven Fox

you the wondering sort prior cycles of then promises. to you up the What against live overzealous disappointing times, how orders down customers maybe being with are sure protect make HDD how you in I the to was you doing experienced and mentioned customers road? XX-week on their lead given yourself do -- and just side,

David Goeckeler

are customers. I relationships mean, very with these big big very

So them a basis. we're very day-to-day on close to

value there's we of look well. something lot clearly a that relationship think as So here for. But I

our for look, to now. fairly So But talk almost like area that rational the we're in process. everybody that. right to HDD be I to lookout more we HDDs of an expect customers whole we'll be would have this mean, about where we on

giving quite So way is will really in without frankly, in infrastructure ending the in, our are visibility in a we we I manufacturing everybody unpleasant and market allow that a cycle understanding where to think the off is up us lot the can an us cut to satisfy costs the set we which really, exercise. of move where situation people were down having payroll, more

kind kind we stuff. very information customers. we'll a to our ordering on and stay of So that of also have patterns close lot of have And all

we'll an keep eye out that. So for

Operator

Citigroup. comes next Our from Instructions] [Operator question today Merchant Asiya with

Asiya Merchant

going your if little can maybe how that about reflects changed and just a a improved that HDD. you HDD and balance talk if cost forward, given Flash industry favorable declines see has both cost we with and may, I you bit across your that you for how the in business. structure think about should that both can If maybe decline and environment it pricing NAND Great

David Goeckeler

Yes.

and reset a So manufacturing have on the low a base, contributing very getting off couple margins just things number. HDD been that been are side, we've been here. coming we -- of One the is there's to better

better get we utilization, cost produce to we unit that. we get and full as So more per of out

where -- next couple So we the we're quarters plant are over we're the where know of that's about, I at tailwind. the as good talked But all a been drives going.

to part like going And deliver of continuing the dynamics. on TCO, other improvements, cost is drive year terabyte high something down And as cost better innovate, cost down technology-driven a like single it the then continue per you we to It's the said, HDD digits better that. or business.

this course, down On continue cost good NAND, that still XX% the we drive of for to year, range with we're number. in

that we continue in the storage, we cost very that. and technology innovation, the So continue to feel a we big do that's where about good through part are teams of industry to can have is R&D the drive down

Operator

session. This you. for over to like closing I'd remarks. the David our conference back Goeckeler question-and-answer Thank to concludes turn

David Goeckeler

All right. Thanks, everyone.

and We're You to the happy with in appreciate throughout talking things right your as shape, the the we're everybody in is to quarter. time portfolio think where We look We and forward time very we throughout quarter. driving. move are We you great about more today. forward today. to going talking direction. the business to it is where your the Thanks for a look

Operator

presentation. today's for today's attending thank call. all We sir. This Thank you conference concludes you,

now evening. disconnect and lines, a may your have wonderful You

Western Digital (WDC) 31 Jul 242024 Q4 Earnings call transcript