Financial Data and Key Metrics Changes - Revenue for the second quarter was $3,025 million, up 31% quarter-over-quarter and 61% year-over-year, exceeding guidance of $2,550 million-$2,650 million [16] - Non-GAAP gross margin for the second quarter was 51.1%, up from 29.9% in the prior quarter, driven by higher pricing and unit cost reductions [16][17] - Non-GAAP EPS for the second quarter was $6.20, up from $1.22 in the prior quarter, reflecting higher than expected revenue and lower costs [17] Business Line Data and Key Metrics Changes - Data center revenue was $440 million, up 64% sequentially, driven by increased demand for enterprise SSDs [16][8] - Edge revenue was $1,678 million, up 21% sequentially, with demand exceeding supply due to AI adoption [16][9] - Consumer revenue was $907 million, up 39% quarter-over-quarter, with a shift towards premium products [16][10] Market Data and Key Metrics Changes - The NAND market is experiencing structural evolution driven by AI, leading to higher demand across all end markets [12][13] - The data center market is expected to become the largest market for NAND by 2026, with significant growth in exabyte demand [21][70] - Pricing across segments is moving in tandem, with NAND flowing to the most attractive markets [85] Company Strategy and Development Direction - The company is transitioning to multi-year agreements with customers to ensure supply certainty and better align planning cycles [5][6] - Continued investment in R&D and capital expenditures is essential to support innovation and meet long-term demand [11][19] - The focus remains on disciplined execution and strategic partnerships to maximize value creation across diversified customer segments [15][19] Management's Comments on Operating Environment and Future Outlook - Management noted that customer demand is expected to remain well above supply beyond calendar year 2026, necessitating careful allocation planning [11] - The company anticipates a reset of margins at a structurally higher level, driven by innovation and investment in technology [22] - Management expressed optimism about the evolving market dynamics and the increasing importance of NAND in AI infrastructure [21][70] Other Important Information - The company closed the quarter with $1,539 million in cash and cash equivalents and $603 million in debt, with a net cash position of $936 million [18] - An agreement was reached with Kioxia to extend the Yokkaichi joint venture through December 31, 2034, ensuring continued product supply [19] - Guidance for the third quarter expects revenue between $4.4 billion and $4.8 billion, with non-GAAP gross margin projected between 65% and 67% [20] Q&A Session All Questions and Answers Question: How are you thinking about long-term agreements? - Management acknowledged the pros and cons of long-term agreements, emphasizing the need for confidence in sustained demand and attractive pricing [24][30] Question: Any plans to add supply given the current undersupply situation? - Management indicated that supply plans are in place, and they are focused on meeting customer demand while ensuring profitability [25][35] Question: Can you quantify incremental demand for NAND related to AI infrastructure? - Management noted that exabyte demand in the data center is forecasted to grow significantly, driven by AI, with high 60s exabyte growth expected for 2026 [47] Question: How should we think about capital return plans, particularly around share repurchases? - Management stated that the priority is to continue investing in the business and reducing debt, with capital return plans to be evaluated at the right time [49] Question: Can you provide an update on the product roadmap to meet new performance requirements? - Management highlighted ongoing innovation in high-performance products and the development of new technologies to meet the demands of AI [87][89]