Financial Data and Key Metrics Changes - For the fiscal fourth quarter, the company reported revenue of $2.6 billion, a 30% year-over-year increase, and non-GAAP earnings per share of $1.66, which was above the high end of the guidance range [11][15] - Non-GAAP gross margin was 41.3%, improving by 60 basis points year-over-year, reflecting a shift towards higher capacity drives and effective cost control [16][17] - Free cash flow for the quarter was $675 million, with operating cash flow at $746 million and capital expenditures of $71 million [19] Business Line Data and Key Metrics Changes - The cloud segment represented 90% of total revenue at $2.3 billion, up 36% year-over-year, driven by strong demand for higher capacity nearline products [16] - Client revenue accounted for 5% of total revenue at $140 million, up 2% year-over-year, while consumer revenue also represented 5% at $136 million, down 12% year-over-year [16] Market Data and Key Metrics Changes - Shipments of the latest generation ePMR drives with capacities up to 26 terabytes CMR and 32 terabytes Ultra SMR more than doubled quarter-over-quarter, exceeding 1.7 million units [8][11] - The company has firm purchase orders or long-term agreements with all top five hyperscale customers for the entire fiscal year 2026, indicating strong demand [11][12] Company Strategy and Development Direction - The company is focusing on operational execution, capital return programs, and leveraging AI-driven data growth to enhance storage solutions [6][10] - The transition to higher capacity drives and the development of HAMR technology are central to the company's strategy, with expectations for continued revenue growth driven by data center demand [9][20] Management's Comments on Operating Environment and Future Outlook - Management noted that while the broader environment remains uncertain due to tariffs, strong demand driven by AI is expected to continue [11][12] - For fiscal year 2026, the company anticipates revenue growth of approximately 22% year-over-year, with gross margin expected between 41% and 42% [20][21] Other Important Information - The company initiated a quarterly cash dividend program and authorized a $2 billion share repurchase program, repurchasing nearly $150 million worth of shares in the fourth quarter [11][19] - The balance sheet was strengthened with a reduction of $2.6 billion in debt, achieving a net leverage target of 1 to 1.5 times [11][18] Q&A Session Summary Question: Can you help us understand the gross margin guidance for September? - Management indicated that gross margin expansion is expected to slow due to various factors, including pricing stability and a favorable mix shift towards higher capacity drives [26][30] Question: How should investors think about share repurchase activity going forward? - Management expressed confidence in continuing to return cash to shareholders through dividends and share repurchases, with room for growth in the dividend program [34][37] Question: What is the ASP per terabyte for the last quarter? - Management noted that ASP per terabyte was down in low single digits, primarily due to mix, while ASPs per drive continue to rise with higher capacity drives [39][70] Question: How does the extra week in the quarter affect revenue and OpEx? - Management clarified that the extra week would add approximately $15 million in OpEx, but revenue impact would be minimal as customers operate on quarterly forecasts [75][76] Question: What is the outlook for AI's impact on growth? - Management highlighted that AI is expected to provide a significant uplift in exabyte growth, potentially increasing revenue growth from mid to high single digits to mid-teens [78][80]

Financial Data and Key Metrics Changes - For the fiscal fourth quarter, the company reported revenue of $2.6 billion, a 30% increase year-over-year, and non-GAAP earnings per share of $1.66, which was above the high end of the guidance range [11][15] - Non-GAAP gross margin was 41.3%, improving by 60 basis points year-over-year, reflecting a shift towards higher capacity drives and effective cost control [17][18] - Free cash flow for the quarter was $675 million, with operating cash flow at $746 million and capital expenditures of $71 million [20] Business Line Data and Key Metrics Changes - Cloud business represented 90% of total revenue at $2.3 billion, up 36% year-over-year, driven by strong demand for higher capacity nearline products [16] - Client business accounted for 5% of total revenue at $140 million, up 2% year-over-year, while consumer revenue also represented 5% at $136 million, down 12% year-over-year [17] Market Data and Key Metrics Changes - Shipments of the latest generation ePMR drives with capacities up to 26 terabytes CMR and 32 terabytes Ultra SMR more than doubled quarter-over-quarter, exceeding 1.7 million units [7][10] - The company has secured firm purchase orders or long-term agreements with all top five hyperscale customers for the entire fiscal year 2026, indicating strong demand [12][45] Company Strategy and Development Direction - The company is focusing on operational execution, capital return programs, and leveraging AI-driven data growth to enhance storage solutions [5][15] - The transition to next-generation HAMR technology is on track, with expectations for ramp-up in 2027, while the next generation of ePMR drives will complete qualification in 2026 [9][88] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued revenue growth driven by data center demand and improved profitability from high-capacity drives [12][21] - The company anticipates revenue for fiscal year 2026 to be approximately $2.7 billion, reflecting a year-over-year growth of about 22% [21] Other Important Information - The company initiated a quarterly cash dividend program and authorized a $2 billion share repurchase program, repurchasing nearly $150 million worth of shares in the fourth quarter [12][20] - The effective tax rate for the quarter was 9.3%, and diluted share count was approximately 362 million shares [18] Q&A Session Summary Question: Gross margin guidance for September - Management indicated that gross margin expansion is expected to slow due to various factors, including pricing stability and a favorable mix shift towards higher capacity drives [28][31] Question: Share repurchase activity and cash management - The company plans to continue returning cash to shareholders through dividends and share repurchases, with strong free cash flow generation supporting these initiatives [34][36] Question: ASP and non-HDD revenue - ASP per terabyte was down in low single digits, primarily due to mix, while the overall pricing environment remains stable [38][72] Question: Seasonality in the business - Management noted that traditional seasonality may not apply anymore due to the structural changes in the business, with strong demand from hyperscale customers driving revenue [42][46] Question: Adoption of Ultra SMR technology - The company has completed qualifications for Ultra SMR with multiple hyperscale customers, indicating a positive adoption curve [57] Question: Impact of tariffs and enterprise demand - Management has not seen material impacts from tariffs and noted that any potential softness in enterprise demand would be offset by cloud demand [66][68] Question: Hard drive ASPs and market capacity - The company emphasized that their ability to produce higher capacity drives at scale differentiates them in the market, and they do not foresee needing incremental investments into capacity [75]