Financial Data and Key Metrics Changes - For the third fiscal quarter, the company reported revenue of $2.3 billion, down 5% sequentially but up 31% year over year [15] - Non-GAAP gross margin was 40.1%, reflecting a sequential improvement of 1.7 percentage points [17] - Non-GAAP earnings per share (EPS) was $1.36, driven by disciplined cost management and tax benefits [15][17] - Free cash flow for the quarter was $436 million [20] Business Line Data and Key Metrics Changes - Cloud business represented 87% of total revenue at $2 billion, down 4% sequentially but up 38% year over year [16] - Client business accounted for 6% of total revenue at $137 million, down 2% sequentially and year over year [16] - Consumer segment represented 7% of revenue at $150 million, down 13% sequentially and 4% year over year [17] Market Data and Key Metrics Changes - Nearline bit shipments decreased by 6% sequentially to 145 exabytes, while average price per unit increased by 4% sequentially to $179 [16] - Demand from hyperscale customers remains robust despite broader market uncertainties [12][13] Company Strategy and Development Direction - The company is focused on three pillars for capital allocation: reinvestment in the business, debt reduction, and returning cash to shareholders [11] - The introduction of a quarterly dividend of $0.10 per share reflects confidence in long-term cash generation ability [21] - The company is addressing tariff-related challenges through cross-functional teams and strategic evaluations of supply chain shifts [12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the current uncertain environment driven by tariffs and global trade tensions but remains optimistic about data center demand [12][14] - The company expects sequential revenue growth in the fiscal fourth quarter, driven by sustained strength in data center demand [14] - Management emphasized the importance of long-term agreements with hyperscale customers for better visibility and planning [13][32] Other Important Information - The company successfully redeemed $1.8 billion of its 2026 senior notes, strengthening its balance sheet [11][20] - The effective tax rate for the fiscal third quarter was 2%, lower than expected due to one-time deferred tax benefits [19] Q&A Session Summary Question: Inquiry about capital allocation and dividend growth - Management stated that once net leverage is reduced to the target range of 1.0-1.5x, they intend to return 100% of excess cash to shareholders through dividends and share buybacks [28] Question: Visibility on revenue margins and EPS growth - Management indicated that long-term agreements with customers provide greater visibility and confidence in strong demand through 2025 and into 2026 [32] Question: Clarification on tariff impacts - Management noted that while there is demand uncertainty in certain segments due to tariffs, they do not anticipate direct tariff impacts on pricing or costs in Q4 [36] Question: Discussion on gross margin expectations - Management highlighted that strong gross margins are driven by technology value and operational discipline, with potential for continued expansion [40][73] Question: Insights on LTAs and their benefits - Management explained that LTAs provide critical visibility and help maintain supply-demand balance, with agreements extending from three to six months to nine to twelve months [87] Question: Commentary on exabyte growth and capacity - Management stated that exabyte growth is primarily driven by technology improvements, allowing for capacity increases without significant capital expenditures [46] Question: Future of non-enterprise and non-cloud markets - Management confirmed that these markets remain a material part of the business, with ongoing efforts to drive growth in those areas [98]

Financial Data and Key Metrics Changes - For the third fiscal quarter, the company reported revenue of $2.3 billion, down 5% sequentially but up 31% year over year [12] - Non-GAAP gross margin was 40.1%, an improvement of 1.7 percentage points sequentially [14] - Non-GAAP earnings per share (EPS) was $1.36, driven by disciplined cost management and tax benefits [12][14] - Free cash flow for the quarter was $436 million [17] Business Line Data and Key Metrics Changes - Cloud business represented 87% of total revenue at $2 billion, down 4% sequentially but up 38% year over year [13] - Client business accounted for 6% of total revenue at $137 million, down 2% sequentially and year over year [13] - Consumer segment represented 7% of revenue at $150 million, down 13% sequentially and 4% year over year [14] Market Data and Key Metrics Changes - Nearline bit shipments decreased by 6% sequentially to 145 exabytes, while average price per unit increased by 4% to $179 [12][13] - Demand from hyperscale customers remains robust despite broader market uncertainties [10] Company Strategy and Development Direction - The company is focused on three pillars for capital allocation: reinvestment in the business, debt reduction, and returning cash to shareholders [8] - The introduction of a quarterly dividend of $0.10 per share reflects confidence in long-term cash generation [18] - The company is committed to innovation in HDD technology, with a focus on high-capacity drives and energy efficiency [6] Management's Comments on Operating Environment and Future Outlook - The current environment is characterized by uncertainty due to tariffs and global trade tensions, but demand from hyperscale customers remains strong [9][10] - The company expects sequential revenue growth in the fiscal fourth quarter, driven by data center demand [10][11] - Management expressed confidence in navigating the dynamic environment and maintaining a healthy supply-demand balance [20] Other Important Information - The company successfully redeemed $1.8 billion of its 2026 senior notes, strengthening its balance sheet [8][17] - The effective tax rate for the fiscal third quarter was 2%, lower than expected due to one-time deferred tax benefits [16] Q&A Session Summary Question: Inquiry about capital allocation and dividend growth - Management indicated that once the net leverage is reduced to the target range of 1.0 to 1.5x, they plan to return 100% of excess cash to shareholders through dividends and share buybacks [25][26] Question: Visibility into revenue margins and EPS growth - Management noted that long-term agreements with hyperscale customers provide greater visibility, suggesting strong demand through 2025 and into 2026 [28][30] Question: Clarification on tariff impacts - Management stated that while there are no direct tariff impacts anticipated, there is demand uncertainty in certain segments due to market volatility [34][36] Question: Discussion on gross margins and pricing dynamics - Management confirmed that gross margins are driven by technology value and operational discipline, with expectations for continued strength [38][40] Question: Insights on manufacturing capacity and exabyte growth - Management highlighted that exabyte growth is primarily driven by technology improvements rather than additional manufacturing capacity [44][53] Question: Update on HAMR technology and customer engagement - Management expects to start qualification for HAMR technology in the second half of 2026, with production ramp-up planned for early 2027 [78][80] Question: Concerns about hyperscaler demand and potential double ordering - Management reassured that there are no signs of double ordering and that demand patterns align with long-term agreements [67][69]