Western Digital Corp Q2 2025 Earnings Call Transcript

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

Question: CJ Muse - Cantor Fitzgerald - Analyst : Yes, good afternoon. Thank you for taking the question. I guess first question on the HDD side, you talked about a sequential decline for the March quarter. Curious, is that a function of simply lower client and consumer units, or are you also seeing a pause in cloud? And within that construct, can you speak a bit more about your prepared remarks related to expectations for volatility, Q-on-Q and HDD? Trying to better understand what's really driving that underlying change.

Question: CJ Muse - Cantor Fitzgerald - Analyst : Great, very helpful. And I guess Dave, a question for you two part. First, what gives you the confidence that this is just a mid-cycle pause and then within the spin of the NAND asset, are there any other sort of technical regulatory things that we should be thinking about that are necessary to get that done in the next four weeks? Thank you very much.

Question: CJ Muse - Cantor Fitzgerald - Analyst : Thanks so much.

Question: Aaron Rakers - Wells Fargo - Analyst : Yes, thanks for taking the question. Good afternoon as well. I guess thinking about the NAND gross margins, I'm wondering if you can unpack if I think about the $20 million to $30 million that you talked about as being underutilization charges in the current quarter. If I look back the last time that you took capacity out, that looks like that's around 10% or 15% of the underutilization charges you took a year or so ago. Is that how I think about how much capacity out you're taking? I think the other way of asking it is, I look at some of your competitors and the news is that they're taking -- or so percent of their bit supply out. Is that a fair assessment of what you guys are doing?

Question: Aaron Rakers - Wells Fargo - Analyst : Yes, that's very helpful. And just to kind of build on that, is there any way to frame how we should think about the underutilization impact into the fiscal fourth quarter? And just to be clear, is there any risk of inventory charges taken based on the current market dynamics? Thank you

Question: Aaron Rakers - Wells Fargo - Analyst : Okay. Thank you.

Question: Wamsi Mohan - Bank of America - Analyst : Yes, thank you so much. Dave or Irving. Can you talk about just at a high level where we are in the HDD cycle overall, I think, Dave, you said in your prepared remarks a few times that demand is exceeding supply. Like the calendar Q1 guide is to be down sequentially slightly. So can you help us unpack if that is just seasonality, is there something beyond that? And how should we think about pricing as we think about 20, 25 and maybe the maximum amount of exabytes that you can ship, given that supply is so tight at the current time. And I will quick follow up.

Question: Wamsi Mohan - Bank of America - Analyst : Okay. Great. As a follow up, can I just ask quickly, on the NAND side, I think you used the word temporary weakness? And I'm just wondering, as you think about some of the actions that you're taking from a supply standpoint, what kind of assumptions are you making around demand recovery, whether it be on PC side or smartphone side, into maybe the second half of the year and is that the timeframe when you're thinking that the market gets tight again? Thank you.

Question: Wamsi Mohan - Bank of America - Analyst : Thank you so much.

Question: Joe Moore - Morgan Stanley - Analyst : Great, thank you. I wonder if you could give us an update on Enterprise solid state drives. I know there's been some choppiness in that segment. Are you still tracking your targets and just how are you, how are you doing there?

Question: Joe Moore - Morgan Stanley - Analyst : Great, that's helpful. Thank you. And then just more of a procedural question, but is there a time where you'll give guidance for the two businesses separately? Does that happen at the analyst days at the spin and form 10 just or just how should I think about that?

Question: Joe Moore - Morgan Stanley - Analyst : Okay, thank you very much.

Question: Thomas O'Malley - Barclays - Analyst : Hey, thanks for taking my question. I just wanted to ask about CapEx. You're starting a new calendar year here and I'm sure you'll give us a broader update at the analyst day. But given the reduction in utilization and just a broader pause, you're saying kind of a mid-cycle pause in the business. Any update on how you're thinking about spend on the Flash side? You've talked about technology transitions. It sounds like the SSD business is going through a couple of lumpy quarters just with all of those factors in. Any additional color on how you think about spending on the NAND side of the business, particularly? Thank you.

Question: Thomas O'Malley - Barclays - Analyst : Yes, helpful. And then pivoting to the HDD side. So Seagate has given us some framework for where they think their capacity kind of hits a wall on the HDD side that's about 160 exabytes on a quarterly basis. You guys have kind of gotten, I believe in this last quarter to around 175 exabytes. Could you help us understand where you guys start running into a wall in terms of capacity? You've talked about some capacity drawdown potentially into the March quarter. But is there a similar framework that you guys go by? Just historically the market has been a little bit different than you guys being ahead in terms of the number of exabyte chips. So any kind of help with where you run into a wallet, you continue to grow there. Thank you.

Question: Thomas O'Malley - Barclays - Analyst : Thank you.

Question: Karl Ackerman - BNP Paribas - Analyst : Yes, thank you gentlemen. The last quarter you launched the 32 terabyte SMR and 26 terabyte CMR with 11 disks. And I think you noted you would complete qualifications in coming quarters. I think you have that beginning to ship at two hyperscalers now and perhaps a third one is in the process of qualifying. So I was hoping you could discuss the order rates and visibility you see for these high capacity drives as we think about the sustainability and growth of the HDD business throughout 2025. Thank you.

Question: Karl Ackerman - BNP Paribas - Analyst : Thank you.

Question: Asiya Merchant - Citigroup - Analyst : Yes, thank you very much. One question we get. I understand the seasonality here in March and I understand a couple of quarter where there is some variability. But any visibility into the inventory levels here and then just at the hyperscalers how you guys are thinking about it and then just the supply chain on the HDD side. How are you thinking about the supply chain being able to meet the rising demand that you guys are thinking about? Thank you.

Question: Asiya Merchant - Citigroup - Analyst : Thank you.

Question: Vijay Rakesh - Mizuho - Analyst : Yes, hi. Just to follow up on the hard disk drive side, good numbers there. But I think as you move this capacity to create two terabyte disks, I think we were going up to 11. Do you see the need to kind of push on the areal density side too as your fear is moving on the hammer side? Any thoughts there and then a follow up.

Question: Vijay Rakesh - Mizuho - Analyst : Got it. And then on the NAND side, I know you talked about gaining more CapEx guidance at the analyst day. Any thoughts on how you see the pricing margin kind of trend to the year? I know probably haven't talked about that in the past.

Question: Vijay Rakesh - Mizuho - Analyst : Got it. Thank you.

Question: Ananda Baruah - Loop Capital - Analyst : Yes, thanks guys for taking the question. I'll just keep it to one, but David would love to get your or any of your view on sort of Flash, the role of Flash in hyperscale storage. The area that's been sort of overwhelmingly represented by Neil and Jack. There's a pretty, it's a pretty big flash vendor, systems vendor that made it pretty public announcement in December about having a hyperscale win. And that's been a big topic of conversation over the last few months here in both businesses. So we'd just love to get your view on dynamics in that market. That's it for me, thanks.

Question: Ananda Baruah - Loop Capital - Analyst : Thank you for all that, really appreciate it.

Question: Mark Miller - The Benchmark Company. - Analyst : Thank you for the question. I just was wondering, are you seeing across the board supply reductions by your NAND competitors and if so, any estimate on how much they're reducing?

Question: Mark Miller - The Benchmark Company. - Analyst : Thank You.