Western Digital(WDC)2024-10-24 23:14Financial Data and Key Metrics Changes - Western Digital reported total revenue of $4.1 billion, representing a 9% sequential increase and a 49% year-over-year increase [13] - Non-GAAP gross margin was 38.5%, up 220 basis points sequentially, and non-GAAP earnings per share were $1.78 [13][15] - Operating income increased by 33% sequentially to $884 million, with an operating margin of 21.6%, the highest in five years [16] Business Line Data and Key Metrics Changes - Flash revenue reached $1.9 billion, up 7% sequentially and 21% year-over-year, driven by strong demand for enterprise SSD products [14] - HDD revenue was $2.2 billion, up 10% sequentially and 85% year-over-year, with nearline bit shipments at a record level of 141 exabytes [14][15] - The gross margin for Flash was 38.9%, up 240 basis points sequentially, while HDD gross margin was 38.1%, up 200 basis points sequentially [15][16] Market Data and Key Metrics Changes - Cloud represented 54% of total revenue at $2.2 billion, up 17% sequentially and more than doubling year-over-year [13] - Client segment represented 29% of total revenue at $1.2 billion, flat sequentially and up 5% year-over-year [13] - Consumer segment accounted for 17% of revenue at $0.7 billion, flat sequentially and down 7% year-over-year [13] Company Strategy and Development Direction - The company is on track with the separation of its Flash and HDD businesses, having completed the soft-spin phase [6][7] - The focus remains on enhancing product offerings, particularly in enterprise SSDs, to capitalize on the AI Data Cycle and growing storage needs [5][21] - The company anticipates continued growth in both Flash and HDD segments, with a strong emphasis on operational excellence and maintaining a balanced supply-demand dynamic [12][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the product roadmap and the significant opportunities presented by the AI Data Cycle [21] - The company expects a recovery in consumer and client end markets as it moves through calendar year 2025 [9] - There is a positive outlook for enterprise SSDs, with expectations for the mix to comprise over 15% of overall portfolio bit shipments in fiscal year 2025 [9][24] Other Important Information - The company completed the sale of 80% of its equity interest in SanDisk Semiconductor Shanghai to JCET, forming a joint venture [18] - Cash capital expenditures for the fiscal first quarter were $48 million, with total liquidity of $3.9 billion [17] Q&A Session Summary Question: Can you speak to the qualifications seen with enterprise SSDs, particularly with NVIDIA's GB200? - Management noted strong confidence in the enterprise SSD portfolio, with qualifications doubling in the last quarter and strong demand expected [23][24] Question: How is pricing negotiation evolving in the HDD industry? - Management indicated improved visibility into customer demand and a better supply-demand balance, which supports pricing negotiations [26] Question: What is the plan for separating the companies? - The company is executing a soft-spin phase and will report one set of numbers for the December quarter, with plans to file the Form-10 during the March quarter [29][30] Question: How much room is there for expanding HDD capacity? - Management stated that they have sized their infrastructure to meet market demand and are focused on driving profitability without expanding the manufacturing capacity footprint [34][35] Question: What is the outlook for Flash ASPs given the mixed market conditions? - Management expects blended pricing to be flat with some cost headwinds, while enterprise SSDs remain strong [46][47] Question: How does the company ensure that HDD shipments are not piling up as inventory? - Management expressed confidence that there is no excessive inventory being built and emphasized close relationships with customers to gauge future demand [50] Question: What are the CapEx expectations for HDD and Flash for the rest of the year? - Management indicated that gross CapEx is expected to remain in line with the average over the last few quarters [51]