Financial Performance - Revenue for the three months ended January 2, 2026, was $3,025 million, a 61% increase from $1,876 million for the same period in 2024[192] - Gross profit increased to $1,541 million, representing a gross margin of 50.9%, compared to 32.3% in the prior year[192] - Operating income rose to $1,065 million, a significant increase of 446% from $195 million in the previous year[192] - Net income for the quarter was $803 million, up 672% from $104 million in the same quarter of the previous year[192] - Net revenue increased 42% to $5,333 million for the six months ended January 2, 2026, compared to $3,759 million for the same period in the prior year, driven by a 26% increase in exabytes sold and a 13% increase in average selling prices (ASP) per gigabyte[195] - Datacenter revenue rose 29% to $1,061 million for the six months ended January 2, 2026, primarily due to a 41% increase in exabytes sold, despite a 9% decrease in ASP per gigabyte[196] - Edge revenue increased 46% to $3,065 million for the six months ended January 2, 2026, driven by a 24% increase in exabytes sold and an 18% increase in ASP per gigabyte[197] - Gross profit increased by $896 million for the six months ended January 2, 2026, resulting in a gross margin increase of 600 basis points to 41.8%[200] Expenses and Costs - Research and development expenses increased by $81 million for the six months ended January 2, 2026, primarily due to a $46 million increase in compensation and benefits and a $9 million increase in spending for R&D projects[203] - Selling, general and administrative expenses increased by $46 million for the six months ended January 2, 2026, mainly due to a $28 million increase in compensation and benefits and a $26 million increase in outside service costs[205] - Interest and other expense, net increased by $134 million for the six months ended January 2, 2026, primarily due to the settlement of legal matters and an increase in interest expense[212] Tax and Legal Matters - The company recorded a $10 million tax benefit related to the impact of the One Big Beautiful Bill Act on the Company's 2025 tax provision[213] - For the three months ended January 2, 2026, the effective tax rate was 14%, with an income tax expense of $134 million on income before taxes of $937 million[216] - The Company recorded a tax indemnification liability of $112 million on February 21, 2025, with a remaining liability of $128 million classified as Other liabilities as of January 2, 2026[234] - The liability for unrecognized tax benefits as of January 2, 2026, was approximately $196 million, with potential cash payments of about $195 million[232] Cash Flow and Investments - Net cash provided by operating activities for the six months ended January 2, 2026, was $1,507 million, a significant increase from a cash outflow of $36 million in the same period the previous year[218] - Net cash used in investing activities for the six months ended January 2, 2026, was $180 million, primarily due to $89 million in capital expenditures[224] - Net cash used in financing activities for the six months ended January 2, 2026, totaled $1,273 million, mainly from term loan repayments of $1,250 million[225] - As of January 2, 2026, the company held $476 million in cash and cash equivalents outside of the U.S., with no material tax consequences for repatriation[220] - The total known material cash requirements as of January 2, 2026, amounted to $9,138 million, including long-term debt and commitments related to Flash Ventures[227] Business Operations and Agreements - The company expects demand for NAND storage to continue to outpace supply through calendar year 2026 and beyond, driven by AI infrastructure growth[184] - A five-year supply agreement with SDSS includes a minimum annual commitment of $550 million, which may lead to a modest reduction in annual operating expenses[180] - The company entered into a loan agreement for a $2.0 billion Term Loan Facility and a $1.5 billion Revolving Credit Facility[182] - The business separation from Western Digital Corporation was completed on February 21, 2025, with 80.1% of shares distributed to WDC stockholders[176] - The company anticipates increased capital investments in fiscal year 2026 to transition to newer nodes to meet product demand[218] - The Company has entered into indemnification agreements with directors and certain officers, requiring indemnification against certain liabilities arising from their service[235] - Historically, the Company has not incurred material costs from obligations under indemnification agreements[236] - There have been no material changes in critical accounting policies and estimates from those disclosed in the Annual Report on Form 10-K for the year ended June 27, 2025[239] Performance Metrics - Sales incentive and marketing programs represented 14% of gross revenues for the three months ended January 2, 2026, down from 22% in the prior year[199] - The company experienced a 1900 basis points increase in gross margin for the three months ended January 2, 2026, attributed to higher ASP and increased exabytes sold[200] - The cash conversion cycle improved to 105 days for the three months ended January 2, 2026, down from 151 days in the prior year, driven by a decrease in days sales outstanding and days in inventory[222]
Sandisk Corporation(SNDK) - 2026 Q2 - Quarterly Report