Financial Performance - Net revenue increased by 23% to $2,308 million for the three months ended October 3, 2025, compared to $1,883 million in the same period last year, driven by a 31% increase in exabytes sold[184] - The cost of revenue rose by 40% to $1,621 million, resulting in a gross profit of $687 million, down 5% from $726 million[184] - Operating income decreased by 40% to $176 million, compared to $291 million in the prior year[184] - The company reported a net income of $112 million, a decrease of 47% from $211 million in the previous year[184] - Gross profit decreased by $39 million, with gross margin declining by 9% due to lower ASP and higher costs per gigabyte[190] Revenue Breakdown - Datacenter revenue decreased to $269 million from $300 million, while Edge revenue increased to $1,387 million from $1,069 million[184] - Consumer revenue rose to $652 million from $514 million, contributing to the overall revenue growth[184] - Datacenter revenue decreased by 10% to $X million, primarily due to an 11% decrease in ASP per gigabyte, despite a 1% increase in exabytes sold[186] - Edge revenue increased by 30% to $X million, driven by a 39% increase in exabytes sold, partially offset by an 11% decrease in ASP per gigabyte[186] - Consumer revenue increased by 27% to $X million, primarily due to a 32% increase in exabytes sold, partially offset by a 4% decrease in ASP per gigabyte[187] Expenses - Research and development expenses increased by 12% to $316 million, while selling, general and administrative expenses rose by 38% to $179 million[184] - R&D expenses increased by $33 million, driven by a $16 million increase in compensation and benefits and a $6 million increase in datacenter program material purchases[192] - Selling, general and administrative expenses increased by $49 million, primarily due to a $12 million increase in compensation and benefits and an $11 million increase in stock-based compensation[193] Cash Flow and Financing - Net cash provided by operating activities was $488 million, a significant improvement from a net cash used of $131 million in the prior year[204] - Net cash used in investing activities was $15 million, primarily consisting of $50 million in capital expenditures, offset by $25 million in net proceeds from the sale of a subsidiary[210] - Net cash used in financing activities totaled $515 million, primarily due to $500 million in Term Loan Facility repayments[211] - The company entered into a loan agreement for a total of $3.5 billion, consisting of a $2.0 billion Term Loan Facility and a $1.5 billion Revolving Credit Facility[175] Tax and Liabilities - The effective tax rate for the three months ended October 3, 2025, was 10%, down from 21% in the prior year, reflecting changes in the mix of earnings and tax credits[202] - The company recorded a tax indemnification liability of $112 million on February 21, 2025, with a remaining liability of $125 million as of October 3, 2025[220] - The liability for unrecognized tax benefits, excluding accrued interest and penalties, was approximately $137 million as of October 3, 2025[218] - The company has accrued interest and penalties related to unrecognized tax benefits amounting to $13 million as of October 3, 2025[218] Long-term Commitments and Agreements - As of October 3, 2025, the company's total known material cash requirements amount to $10,029 million, with $2,231 million due within nine months and $1,704 million beyond 2030[213] - The company has a long-term debt of $1,400 million, with additional commitments related to Flash Ventures amounting to $5,211 million[213] - The company entered into a loan agreement on February 21, 2025, consisting of a $1.5 billion revolving credit facility and a $2 billion term loan facility due in 2032[214] - The company is in compliance with the loan agreement financial covenant requiring a maximum Leverage Ratio as of October 3, 2025[215] - Flash Ventures has equipment lease agreements with guaranteed obligations, with compliance maintained under these lease facilities as of October 3, 2025[216] - The company has entered into long-term agreements with suppliers that include fixed future commitments contingent on performance and quality[217] - The company maintains director and officer insurance to cover certain liabilities arising from indemnification obligations[221]
Sandisk Corporation(SNDK) - 2026 Q1 - Quarterly Report