Western Digital Corp Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: C.J. Muse - Cantor Fitzgerald - Analyst : Yeah, good afternoon, and thank you for taking the question. I guess first question, you raised your enterprise SSD as part of the mix of 15%, which I think is a pretty important inflection. So I'm just hoping you could speak to the qualifications that you've seen. And in particular, would love to hear more around the recently announced qualification and with NVIDIA GB200 NVL72 rack-system. If there's any way to go to quantify how to think about the ramp and magnitude of incremental dollars your business, would be great.

Question: C.J. Muse - Cantor Fitzgerald - Analyst : Very helpful. Thank you. And I guess a quick follow-up. You talked around the ongoing transformation of the HDD industry and now two to six quarters of customer visibility. We'd love to hear kind of how perhaps pricing negotiation is evolving and within that construct, do you have visibility today for pricing beyond one quarter in the drive business? Thank you.

Question: C.J. Muse - Cantor Fitzgerald - Analyst : Okay. Thanks so much.

Question: Joe Moore - Morgan Stanley - Analyst : Great. Thank you. I just want make sure I understand the steps towards separating the companies. You talked about having kind of prepared to stop spenders. So you're going to report -- you'll have two separate sets of numbers for the December quarter. And assuming if that goes well, you'll be able to file the Form 10 at some point during the March quarter. Is that the plan? And where the -- anything that could cause that to come later?

Question: Joe Moore - Morgan Stanley - Analyst : Great. Thank you so much for that. And I guess, I get a lot of questions from more event driven types of investors about the resolve to do this in the wake of things are happening with your JV partner, things like that. So just maybe you could just kind of state how focused you are getting this time? Any impediments? Any chance that this doesn't happen from out of your discretion?

Question: Joe Moore - Morgan Stanley - Analyst : Great. Thank you, much.

Question: Karl Ackerman - BNP Paribas Securities Corp. - Analyst : Yes, thank you. Two, if I may. First off, how much room do you have in your existing facilities to expand capacity of heads and media for hard disk drives? I ask if you just reported record exabytes in hard drives are moving about 180. And as we address that question, you spoke of a third hyperscaler that is qualified SMR, David and will ramp in the coming quarters. Is that for your 32TB offering? Or is that just a broad statement? Thank you.

Question: Karl Ackerman - BNP Paribas Securities Corp. - Analyst : Very clear. Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2024 / 8:30PM, WDC.OQ - Q1 2025 Western Digital Corp Earnings Call

Question: Aaron Rakers - Wells Fargo Securities, LLC - Analyst : Yeah, thanks for taking the questions. I'll stick with you as well. I guess the first question is going back to kind of operating the two entities separately now starting in this October period, can you just remind us again of how we should think about dissynergies? What may be factored into your December quarter guide? Clearly you're carrying two company cost structures. And then as kind of a follow-up to Karl's question, you are shipping nearline capacity 25% above your prior peak levels. If my math close to be right. How much of it -- how quickly can you bring on new capacity? And is there any way to frame like -- I can appreciate technology and aerial density expansion of the key driver, but do you see a situation where you will be constrained over the foreseeable next couple of quarters or just --? I'll love to dig a little bit deeper into Karl's question there.

Question: Aaron Rakers - Wells Fargo Securities, LLC - Analyst : Very helpful. Thank you, guys.

Question: Timothy Arcuri - UBS Equities - Analyst : Thanks a lot. Can you just talk about bookings on the HDD side? I mean, they see pricing going higher. They see you and Seagate talking about not adding capacity. So why would they not just placed shadow orders to make sure they get what they need a year from now? I mean, that's often how it works in memory. I certainly understand that the cycle times here are a much, much longer. But can you talk about that as sort of what is two to six quarter agreement cycle mean? Are these take-or-pay so that they can't just place shadow orders that they'd be on the hook to take this stuff when you build it? Can you talk about all that? Thanks.

Question: Wamsi Mohan - BofA Global Research - Analyst : Thank you so much. Your guidance suggests that a slight tick down in gross margins at the midpoint sequentially. Can you just help us think through the drivers of that? And you obviously the larger 11 flatter mass capacity drives too. How should we think of margins of with that scale higher as you go through the course of the course of fiscal '25? Thank you.

Question: Harlan Sur - J.P. Morgan Securities LLC - Analyst : Good afternoon, and thanks for taking my question. So on enterprise SSD, it's taken a while, but now there's clarity on the really strong pie and right to the AI and accelerated compute clusters. Can you give us your view on a bit mix. But according to my calculations, I think June quarter enterprise SSD was about 7%, 8% of your total flash fabs effect. In the September quarter, it stepped up to about 12%, 13% of your flash revenues. Is that about right? And then on some of the recent stats on your high capacity 54 terabyte, 128 terabyte platforms targeted for AI. Looks like the team has really stepped up their competitiveness here. What have been the biggest drivers of that better performance with controller technologies, with firmware? Is it reliability, quality metric? Like any color here would be great. Thank you.

Question: Krish Sankar - TD Cowen - Analyst : Yeah, hi. Thanks for taking my question. And Dave, thanks for the color. When I look at December quarter, you said flash revenues should grow, while bit shipments should be up mid-single digits. So what does it mean for ASPs. The reason I'm asking is that while eSSD is strong, you keep hearing the non-eSSD data points are not good. So that's what I'm wondering how to think about ASP. And if I may extrapolate, how to think about March quarter for both flash and hard drives, given there is some seasonality aspects of both those segments in March? Thank you.

Question: Amit Daryanani - Evercore ISI - Analyst : Thanks for taking my question. I guess, Dave, if I just go back to the 100 -- exabyte shipments of 163 on the HDD side, how do you get confidence that this is not sitting in inventory versus actually getting deployed by customers? Is there any metrics in the UC internally that gives you confidence that this is actually getting used up and not piling up as inventory potentially? Anything on that front would be really helpful to understand. And then Wissam, have you just touch on your CapEx expectations for HDD and flash business for rest of the year, that would be helpful. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2024 / 8:30PM, WDC.OQ - Q1 2025 Western Digital Corp Earnings Call

Question: Thomas O'Malley - Barclays - Analyst : Hey, Dave, Wamsi. Thanks for taking the question. I just wanted to ask you to help quantify the benefit on the eSSD side versus the traditional million portfolio. Obviously, you're saying that grows from 15% today, 15% to 20%, so a nice tailwind throughout the year. But just on a like-for-like basis, could you just try to help describe what that tailwind means? Obviously, you're not going to give exact pricing, but just give us a flavor for how beneficial that is for the business. Thank you.

Question: Srini Pajjuri - Raymond James - Analyst : Thank you, David, just to follow up to the previous question, I'm looking at your flash ASPs being down 6% on a blended basis. But on a like-for-like basis, it's only down 4%. So it seems somewhat counterintuitive because your eSSD mix is growing, but the blended ASP is actually worse then like for like. I'm just trying to understand those dynamics as to why that's the case. And as I guess, eSSD grows, how should we think about the blended ASP going forward? Thank you.

Question: Ananda Baruah - Loop Capital Markets, LLC - Analyst : I appreciate it. Thanks for question. Actually, I wanted to ask you could you refresh our memory on what your conventional technology areal density roadmap looks like kind of up until -- I know you talked about Hammer loosely kind of next few year, but how should we think about the conventional tech areal density roadmap up until then? That would be helpful. Thanks a lot.

Question: Asiya Merchant - Citi Investment Reserach - Analyst : Great. Thank you for taking the call -- taking the question. So just in terms of HDD, I understand that this trend here continued trend here in the December quarter. We typically see some seasonality on the flash side in the March quarter. Given the strength you're seeing the HDD side, should we expect some seasonality here in the March quarter on the HDD side as well, both in terms of bit shipments and then also on the ASP side? Thank you.

Question: Steven Fox - Fox Advisors LLC - Analyst : Hi, good afternoon. I was just wondering if you could provide a little bit more color into the manufacturing efficiencies you think you get on a regular basis, how the HDD business. I would imagine there's de-bottlenecking still going on and also as mix changes, it helps to utilization on that had some platters. I don't know if there's any rule of thumb we can think about or just maybe a little bit more color on that would be helpful. Thank you.

Question: Vijay Rakesh - Mizuho Securities USA - Analyst : Thanks. Just a quick question on the Ultra SMR 32 terabyte, with 11 disk, are you be able to still make it accretive on the margin side to your current portfolio? And also on the flash side, just wondering what the CapEx looks like for next year? This year, I think you had like a pointed fairly low cash outlay on the CapEx side. But just wondering how it looks like next year. Thanks.

Question: Matt Bryson - Wedbush Securities, Inc - Analyst : Thanks for taking my question. Sure. What I was wondering, your hardware pricing was relatively stable quarter over quarter. I would have thought with the greater shipments into the cloud as well as the mix of towards hard copy drives. you would have seen a little bit of benefit there. And then just one more point. When you talk about there being production constraints, one of the things that are I've heard is being constraining factors test paradigm telling us that they're not seeing a test stores. Should we take that as a sign that the hard drive industry is acting in a more rational fashion than in the past? Thank you.