PresentationAsiya MerchantVP & Analyst Here because we're always running short on time. It's busy. It's day 1 of our Global TMT conference. It feels like the afternoon already. But -- really pleased here to have Irving and Kris, both -- as well as WDC's IR, who are here in the audience. This is expected to be an open fireside. So we have some questions. But before we kick things off, I'd like to hand it over to WDC first for some prepared commentary, and then we can kick it off with some questions. So welco ...

[संगीत] एन एक्सपेरिमेंट दैट बंच ऑफ़ रिसर्चरर्स डिड इन 2013 अह वेयर दे अह गट माइस टू बी अ फ्रेड ऑफ़ चेरी ब्लासम्स नॉट जस्ट अ माइस दे वे वर एक्सपेरिमेंटिंग ऑन बट ऑल्सो देयर चिल्ड्रन एंड देयर चिल्ड्रन चिल्ड्रन। एंड दिस इस हाउ व्हाट हपेंड। द रिसर्चर गट अ ग्रुप ऑफ़ माइस टू स्मेल चेरी ब्लासम्स एंड एट द सेम टाइम गव देम एन इलेक्ट्रिक शॉप। अह व्हिच मींस दैट द माइस गॉट रियली स्केर्ड। व्हेनएवर नाउ दे एनकाउंटर द चेरी ब्लासम एंड डिड दिस इनफ नंबर ऑफ़ टाइम्स फॉर देम टू स्टार्ट फियरिंग द चेरी ब्लासम एज़ सून एज़ दे एनकाउंटर्ड इट। ...

Summary of Western Digital (WDC) 2025 Conference Call Company Overview - Western Digital is now a pure-play hard drive company focused on data storage, particularly in the cloud, with 90% of revenue from cloud services and 10% from client and consumer segments [5][6] Core Strategic Priorities 1. **Growth Initiatives**: - Engaging more with hyperscale customers to understand their architectures and use cases [6] - Product leadership through advanced technologies like EPMR and upcoming HAMR [7] - Continuous innovation in platform business relevant for neocloud players and OEMs [8] 2. **Operational Excellence**: - Focus on flawless execution across all business facets, including process re-engineering and technology adoption [8] - Cultural change emphasizing individual performance and results [9] Financial Performance - The third quarter showed a revenue increase of 30% with significant bottom-line growth [12] - Baseline growth projected at 15% exabyte CAGR, with AI uplift case showing 23% growth [13] - Firm purchase orders (POs) secured with top customers extending into fiscal year 2027 [14][15] Demand and Market Dynamics - Demand for hard drives is central to AI growth, with customers recognizing HDDs as critical for their operations [15] - The company is experiencing a multi-quarter growth cycle driven by AI and cloud demand [16] Risk Mitigation Strategies - Focus on supporting capacity growth through improvements in aerial density and reliable production [17][18] - Investments in head and media facilities to enhance production capabilities [18] Tariffs and Supply Chain - Currently not impacted by tariffs due to classification as a semiconductor, with manufacturing capabilities in the U.S. [20] - Ongoing efforts to mitigate potential tariff impacts through supply chain management [20] Customer Engagement and Demand Visibility - Strong partnerships with customers provide early visibility into demand, reducing uncertainty [23] - The company utilizes machine learning algorithms to assess demand signals beyond customer input [22] AI Workloads and Storage Economics - AI workloads require significant storage, with 80% of data in hyperscale data centers stored on HDDs [26] - HDDs are essential for storing models and associated data during AI training processes [25] Competitive Landscape - Despite the rise of SSDs, HDDs remain vital due to their cost-effectiveness and capacity advantages [31] - The company maintains a 6x delta in acquisition costs compared to flash storage, ensuring HDDs remain competitive [31] Financial Health and Shareholder Returns - Strong free cash flow and a healthy balance sheet with $4.7 billion gross debt and $2.1 billion cash [64] - Commitment to returning excess cash to shareholders through dividends and share buybacks [64] Margins and Cost Management - Gross margins have improved from low 30s to mid-40s, with further room for growth [51][53] - Focus on driving down costs per terabyte through higher capacity drives and technology advancements [52] Technology Roadmap - The introduction of UltraSMR technology provides a 20% capacity uplift over standard drives [55] - Ongoing development of HAMR technology aims to enhance capacity and reliability [46] Conclusion - Western Digital is strategically positioned to capitalize on the growing demand for data storage driven by cloud and AI, with a strong focus on customer engagement, operational excellence, and innovative technology solutions [69]

Core Insights - NetApp's international operations are crucial for assessing its financial strength and growth potential [1][2][3] - The company's total revenue for the quarter ending July 2025 was $1.56 billion, reflecting a 1.2% increase [4] International Revenue Trends - Europe, Middle East, and Africa contributed 32.3% of total revenue, amounting to $503 million, which was a decline of 2.71% compared to expectations of $517.03 million [5] - Asia Pacific generated $265 million, representing 17% of total revenue, exceeding projections by 12.47% [6] Future Revenue Projections - Analysts forecast total revenue of $1.69 billion for the current fiscal quarter, a 1.7% increase year-over-year, with contributions from Europe, Middle East, and Africa expected to be $569.75 million and Asia Pacific $257.2 million [7] - For the full year, projected revenue is $6.75 billion, indicating a 2.8% rise from the previous year, with Europe, Middle East, and Africa expected to contribute $2.28 billion and Asia Pacific $1.03 billion [8] Overall Market Context - The reliance on international markets presents both opportunities and risks for NetApp, making it essential to monitor international revenue trends for future forecasts [9] - Analysts are closely tracking these trends amid increasing global interdependencies and geopolitical tensions [10]

Group 1 - The second China Storage Conference, organized by the China Computer Federation (CCF), focuses on the forefront development and industrial application of storage technology in the intelligent era [1][2] - The conference features six major segments, including an opening ceremony, thirteen keynote speeches, the launch of the "CCF&U" initiative, the release of storage testing reports, 26 sub-forums, and an awards dinner [2] - The "CCF&U" initiative aims to collect retired USB drives from members nationwide to transform them into an artistic installation that honors the history of storage technology [2] Group 2 - Wuhan is highlighted as a key city in the national data strategy, with expectations to achieve significant results in data storage, processing, and application, thereby promoting high-quality development of the regional digital economy [3] - Huazhong University of Science and Technology (HUST) aims to leverage this conference to gather global innovation resources in the storage field, driving breakthroughs in key technologies and contributing to the digital economy [3]

Core Insights - Pure Storage (PSTG.US) surged nearly 30%, reaching an all-time high of $78.41 following the release of its Q2 FY2026 earnings report [1] Financial Performance - The company reported revenue of $861 million for Q2 FY2026, a 13% year-over-year increase, exceeding analyst expectations of $846.8 million [1] - Earnings per share were $0.43, surpassing the anticipated $0.39 [1] - Subscription service revenue reached $414.7 million, reflecting a 15% year-over-year growth [1] - Annual recurring revenue from subscriptions hit $1.8 billion, up 18% year-over-year, contributing to an overall gross margin of 72.1% [1] Guidance and Projections - The company raised its sales guidance for FY2026 to between $3.6 billion and $3.63 billion, up from the previous guidance of $3.515 billion [1] - For Q3, sales are projected to be between $950 million and $960 million, exceeding the expected $913.1 million [1]

Core Viewpoint - Pure Storage (PSTG.US) experienced a nearly 30% surge, reaching an all-time high of $78.41 following the release of its Q2 FY2026 earnings report, which exceeded analyst expectations [1] Financial Performance - The company reported revenue of $861 million for Q2 FY2026, a 13% year-over-year increase, surpassing analyst expectations of $846.8 million [1] - Earnings per share were $0.43, exceeding the anticipated $0.39 [1] - Subscription service revenue reached $414.7 million, reflecting a 15% year-over-year growth [1] - Annual recurring revenue from subscriptions hit $1.8 billion, up 18% year-over-year, contributing to an overall gross margin of 72.1% [1] Guidance and Projections - Pure Storage raised its sales guidance for FY2026 to between $3.6 billion and $3.63 billion, up from the previous guidance of $3.515 billion [1] - The company anticipates Q3 sales to be between $950 million and $960 million, exceeding the expected $913.1 million [1]

Financial Data and Key Metrics Changes - The company achieved revenue of $1,560 million in Q1, which is above the midpoint of guidance and represents a 1% year-over-year increase [5][22] - Excluding the divested spot business, total revenue increased by 3% year-over-year [22] - Q1 hybrid cloud revenue was $1,400 million, up 1% year-over-year, driven by support revenue growth of 3% and professional services revenue growth of 18% [22] - Consolidated gross margin improved by 1.6 percentage points sequentially to 71.1% [24] - Operating profit was $400 million with an operating margin of 25.7% [26] - The company ended Q1 with $4,530 million in deferred revenue, up 9% year-over-year [23] Business Line Data and Key Metrics Changes - All flash array revenue grew 6% year-over-year to $893 million, with a run rate of $3,600 million [10] - Public cloud revenue increased by 1% year-over-year to $161 million, and excluding spot, it was up 18% year-over-year [23] - Professional services revenue grew 18% year-over-year, driven by the Keystone offering, which increased approximately 80% compared to the same period last year [22][24] Market Data and Key Metrics Changes - The Americas enterprise performance offset declines in the U.S. Public sector and EMEA [6][21] - The company secured approximately 125 AI infrastructure and data lake modernization deals across various geographies and industries in Q1 [17] Company Strategy and Development Direction - The company is focused on helping customers modernize their data infrastructure and advance cloud transformations, particularly in the emerging enterprise AI market [7][19] - The strategy includes enhancing profitability and free cash flow while consistently delivering value to customers and shareholders [28] - The company aims to maintain its leadership position in the all flash market and expand its cloud services [19][20] Management's Comments on Operating Environment and Future Outlook - Management noted some macro-related spending caution but highlighted strong demand for AI solutions and cloud transformations [7][19] - The company expects revenue for Q2 to be $1,690 million, implying 2% growth year-over-year at the midpoint [27] - Full-year guidance for fiscal year 2026 remains between $6,625 million and $6,875 million, reflecting 3% growth year-over-year [28] Other Important Information - The company redeemed senior notes due in June 2025 for $757 million and returned $404 million to shareholders through share repurchases and dividends [26] - The balance sheet remains strong with $3,300 million in cash and short-term investments and $2,500 million in total debt, resulting in a net cash position of approximately $840 million [27] Q&A Session Summary Question: All flash revenue growth has decelerated from double digits to just 5%. What is driving this? - Management indicated that softness in the U.S. Public sector and EMEA contributed to the lower growth, but they anticipate improvement for the rest of the year [34][36] Question: How should we think about the seasonality into January? - Management expressed confidence in the outlook for the year, noting that Q2 is typically a strong budget spending quarter for the U.S. public sector [48] Question: What is the competitive landscape for all flash? - Management acknowledged a competitive environment but expressed confidence in their competitive position and did not see any specific adverse patterns in the quarter [102] Question: Can you elaborate on the AI wins and their magnitude? - Management reported over 125 AI wins in the quarter, with a mix of smaller and larger scale deployments, indicating strong momentum in AI adoption [41][66] Question: What is the strategy regarding hypervisor offerings? - The company supports a broad range of hypervisors and aims to continue providing support based on customer demand [125]

Financial Data and Key Metrics Changes - Total revenue for Q1 2026 was $1,560 million, up 1% year over year, exceeding the midpoint of guidance [21] - Excluding the divested spot business, total revenue increased by 3% year on year [21] - Q1 hybrid cloud revenue was $1,400 million, also up 1% year over year [21] - Product revenue decreased by 2% year over year to $654 million [21] - Public cloud revenue increased by 1% year over year to $161 million, and excluding spot, it was up 18% year over year [21] - Q1 consolidated gross margin improved by 1.6 percentage points sequentially to 71.1% [23] - Operating profit was $400 million with an operating margin of 25.7% [25] - Diluted EPS was $1.55, aligned with expectations [25] Business Line Data and Key Metrics Changes - All flash array revenue grew 6% year over year to $893 million, with an annualized run rate of $3,600 million [8] - Professional services revenue grew 18% year over year to $97 million, driven by Keystone, which was up approximately 80% compared to the same period last year [21] - Recurring support business maintained a gross margin of 92.3% [23] - Public cloud gross margin was 80.1%, up 80 basis points sequentially and nine percentage points year over year [24] Market Data and Key Metrics Changes - Strong performance in The Americas enterprise offset declines in the U.S. Public sector and EMEA [5] - The company secured approximately 125 AI infrastructure and data lake modernization deals across various geographies and industries in Q1 [15] - The emerging enterprise AI market is driving urgency among customers to modernize data infrastructure [6] Company Strategy and Development Direction - The company is focused on helping customers modernize their data infrastructure and advance cloud transformations [5] - The strategy includes enhancing profitability and free cash flow while delivering value to customers and shareholders [27] - The company aims to capitalize on growing opportunities in the enterprise AI sector [18] Management's Comments on Operating Environment and Future Outlook - Management noted some macro-related spending caution but emphasized strong demand for AI solutions [6] - The company expects revenue for Q2 to be $1,690 million, implying 2% growth year over year at the midpoint [26] - Full year guidance for fiscal year 2026 remains between $6,625 million and $6,875 million, reflecting 3% growth year over year [27] Other Important Information - The company ended Q1 with $4,530 million in deferred revenue, up 9% year over year [22] - Cash flow from operations reached a record $673 million in Q1 [25] - The company redeemed senior notes due in June 2025 for $757 million [25] Q&A Session Summary Question: All flash revenue growth has decelerated from double digits to just 5%. What is driving this? - Management indicated that softness in the U.S. Public sector and EMEA contributed to lower growth, but they anticipate improvement for the rest of the year [34][36] Question: What is the outlook for enterprise AI adoption? - Management reported strong momentum with over 125 AI wins in Q1, indicating a shift from proof of concept to production [40] Question: How does the availability of 128 terabyte QLC based NAND impact search solutions for AI applications? - Management stated that they have a broad range of NAND technologies available and do not feel gated by any specific technology [44] Question: What is the competitive landscape for all flash storage? - Management expressed confidence in their competitive position despite challenges in certain markets, noting that high-performance flash outgrew capacity flash year on year [110] Question: Can you elaborate on the gross margin guidance for public cloud business? - Management explained that improvements in gross margin are driven by depreciation roll-off and increased software content in revenue [57]

Financial Data and Key Metrics Changes - Revenue for Q2 FY 2026 was $861 million, representing a 13% year-over-year growth, while operating profit was $130 million with an operating margin of 15.1% [22][28] - Subscription services revenue reached $415 million, up 15% year-over-year, accounting for 48% of total revenue [26] - Total remaining performance obligations (RPO) grew 22% to $2.8 billion, reflecting robust renewals and new commitments [26] - Total gross margin remained strong at 72.1%, with subscription services gross margin at 76.5% [27] Business Line Data and Key Metrics Changes - Strong performance was noted across the entire portfolio, particularly in FlashBlade and core software and services offerings like Evergreen One, Cloud Block Store, and Portworx [22][24] - Total contract value (TCV) sales for Storage as a Service offerings grew 24% year-over-year to $125 million [24] - The FlashBlade E family showed strength, contributing to overall product gross margin improvement [88] Market Data and Key Metrics Changes - U.S. revenue was $577 million, growing 7%, while international revenue was $284 million, growing 26% year-over-year [27] - More than 300 new customers were added, maintaining a 62% penetration rate in the Fortune 500 [27] Company Strategy and Development Direction - The company is focused on the enterprise data cloud architecture, which is transforming how organizations manage data, emphasizing the shift from traditional siloed storage to a software-defined model [9][11] - Continued investment in partnerships with hyperscalers, including Meta, to enhance direct flash technology and expand market presence [25][17] - The introduction of a guidance range for financial metrics aims to align with industry practices and provide flexibility for growth opportunities [30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to extend industry leadership despite a variable macro environment, citing strong execution and planning [20] - Positive momentum is expected in the second half of the fiscal year, driven by strong demand signals and an increasing pipeline of large deals [110] - The company anticipates revenue for FY 2026 to be in the range of $3.6 billion to $3.63 billion, representing a 14% year-over-year growth at the midpoint [31] Other Important Information - The company reported a strong free cash flow performance of $150 million, with a free cash flow margin of 17.4% [29] - A new partnership with Nutanix is expected to enhance customer interest and scalability in virtualization environments [58] Q&A Session Summary Question: What is driving the acceleration of growth in the back half of the fiscal year? - Management noted broad-based strength in product lines and improved visibility into the pipeline, contributing to confidence in growth forecasts [36] Question: How has the relationship with Meta evolved? - The relationship is progressing as expected, with deployments on track and revenue recognition beginning [42] Question: What factors contributed to the sequential gross margin improvement? - Management attributed the improvement to revenue mix, product mix, and pricing discipline, with Meta's contribution being less material than anticipated [48] Question: How is the engagement with other hyperscalers progressing? - Early-stage engagements are ongoing, with technology assessments and proofs of concept underway, but still in the initial phases [64] Question: What are the long-term expectations for Meta's contribution? - Management expects to achieve one to two exabytes of deployment this fiscal year, with potential for double-digit contributions in the next fiscal year [70] Question: How should the split between product versus subscriptions be viewed? - Management indicated that both product and subscription revenues are expected to grow, with subscription gross margins being higher than product gross margins [98]