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-$2,650 million [16] - Non-GAAP gross margin for the second quarter was 51.1%, up from 29.9% in the prior quarter, and above guidance of 41%-43% [16] - Non-GAAP EPS for the second quarter was $6.20, up from $1.22 in the prior quarter, exceeding guidance of $3.00-$3.40 [17] Business Line Data and Key Metrics Changes - Data center revenue was $440 million, up 64% sequentially, reflecting strong demand driven by AI workloads [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 undergoing structural evolution driven by AI, with data center expected to become the largest market for NAND in 2026 [12][21] - Higher demand for NAND in data centers is impacting other markets, leading to overall growth across segments [13] - The company anticipates continued strong demand well above supply beyond calendar year 2026 [11] Company Strategy and Development Direction - The company is transitioning to multi-year agreements with customers to ensure supply certainty and better align planning cycles with demand [5][6] - Focus on disciplined execution through the BiCS8 transition, supporting average long-term bit growth in the mid to high teens [11] - Continued investment in R&D and capital expenditures to support advanced semiconductor technologies [11][19] Management's Comments on Operating Environment and Future Outlook - Management noted that the NAND industry is becoming more durable and structurally attractive with higher average returns [6] - The company expects margins to reset at a structurally higher level, delivering fair returns on innovation and investment [22] - Management expressed optimism about the evolving business practices in the data center market, which is becoming increasingly strategic [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] - For the third quarter, the company expects revenue between $4.4-$4.8 billion and non-GAAP gross margin 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 demand and pricing stability [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 data center exabyte growth is forecasted to be high 60s for 2026, driven largely by AI [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 [48] 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 introduction of new technologies to meet AI demands [87]
Sandisk Corporation(SNDK) - 2026 Q2 - Earnings Call Transcript