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]

Core Insights - The AI theme continues to dominate the market, with significant attention on companies like NVIDIA, while others with notable AI exposure, such as Tempus AI, SoundHound AI, and Innodata, are being overlooked [1][16] Group 1: SoundHound AI (SOUN) - SoundHound AI is a leader in conversational intelligence, providing voice AI solutions for businesses [3] - Despite a challenging start to 2025, SOUN is projected to achieve 85% EPS growth and 91% higher sales in the current fiscal year [3] - SOUN shares have rebounded 40% from their 2025 lows, with quarterly sales reaching $29.1 million, a 150% year-over-year increase, and a diverse customer base mitigating risk [4][6] Group 2: Innodata (INOD) - Innodata specializes in data engineering solutions for Generative AI, experiencing significant growth with sales of $58.3 million, a 120% year-over-year increase [9] - The company reaffirmed its FY25 revenue growth guidance of 40% or more, with analysts projecting $242 million in sales, over 50% growth from the previous year [11] Group 3: Tempus AI (TEM) - Tempus AI focuses on advancing precision medicine through AI, reporting sales of $255.7 million, reflecting a 75% year-over-year increase [13] - The company’s Genomics and Data and Services segments saw sales growth of 90% and 43%, respectively, and it raised its FY25 revenue guidance to approximately $1.3 billion, indicating an 80% growth rate year-over-year [15]