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Founded in Silicon Valley at the dawn of the computer age, Western Digital is one of the world’s largest producers of hard disk drives used for data storage. The company’s portfolio of magnetic hard drives includes products designed for personal computing and for the data centers that power today’s cloud services. Western Digital spun out its flash memory business in February 2025, creating a separate publicly traded company under the SanDisk brand.

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Western Digital (WDC): Company Profile, Stock Price, News, Rankings

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Western Digital

western digital

Good afternoon, and thank you for standing by. Welcome to Western Digital's Fourth Quarter Fiscal twenty twenty five Conference Call. Presently, all participants are in listen only mode. Later, we will conduct a question and answer session. As a reminder, this call is being recorded.

Now I will turn the call over to mister Ambrish Srivastava, vice president, investor relations. You may begin.

Thank you, and good afternoon, everyone. Joining me today are Irving Tan, Western Digital's chief executive officer, and Chris Senesael, Western Digital's chief financial officer. Before we begin, please note that today's discussion will contain forward looking statements based on management's current assumptions and expectations, which are subject to various risks and uncertainties. These forward looking statements include expectations for our product portfolio, our business plans and performance, ongoing market trends, and our future financial results. We assume no obligation to update these statements.

Please refer to our most recent annual report on Form 10 k and our other filings with the SEC for more information on the risks and uncertainties that could cause actual results to differ materially from expectations. In our prepared remarks, our comments will be related to non GAAP results on a continuing operations basis, unless stated otherwise. Reconciliations between the non GAAP and comparable GAAP financial measures are included in the press release and other materials that are being posted in the investor relations section of our website at investor.wdc.com. Lastly, I want to note that when we refer to we, us, are, or similar terms, we are referring only to Western Digital as a company and not speaking on behalf of the industry. With that, I will now turn the call over to Irving for introductory remarks. Irving?

Thanks, Ambrish. Good afternoon, everyone, and thank you for joining us today. Let me first begin by welcoming and introducing Chris Senesal, our new Chief Financial Officer. Chris brings extensive experience and a strong track record as a public company CFO. His leadership will be instrumental as we sharpen our focus on operational execution, accelerate our capital return program, and continue to create value for our shareholders.

We are excited to have Chris on board. Let me now walk you through our business update. AI is ushering in a new era of data growth by fundamentally transforming how data is created, collected, processed, and stored, and more importantly, valued. Looking beyond large language models, which have been a key driver of storage needs, the emergence of agentic AI at scale in multiple industries is creating an increasing need to store unstructured data. Agents customized with domain specific knowledge will create a significant amount of distinct use cases and generate data at an unprecedented pace.

To cite a few examples, applications leveraging agentic AI range from business tools like enterprise chatbots and code development assistance, all the way to agents assisting in engineering design and development. Within our own engineering organization, we are already realizing tangible benefits of AgenTik AI to help accelerate our product development cycles. These trends are still in the early stages, but are expanding rapidly across industries globally. As data becomes more valuable and central to AI driven innovation, the need to store and retain it at scale grows in parallel. And no storage technology matches the cost efficiency and reliability of HDDs, which remain the foundation of the world's data infrastructure, delivering unmatched value for mass storage in an AI driven future.

Against this backdrop, demand for our products continues to strengthen. We remain disciplined in managing capacity and are addressing long term market demand through high quality, reliable, and larger capacity products. Shipments of our latest generation ePMR drives with capacity up to 26 terabyte CMR and 32 terabyte Ultra SMR more than doubled quarter over quarter, exceeding 1,700,000 units in the June. This marks one of the shortest qualification and ramp cycles in our history. The reliability, scalability, and TCO value of our ePMR and ultra SMR technologies that delivers the fastest time to value for our customers is core to our continued success in the data center market.

We aim to extend ePMR's strong track record of high yield, reliability, and a scalable performance into our next generation of hammer drives. The feedback from tests at two of our hyperscale customers continues to be encouraging. I am pleased to note that we are ahead of our internal milestones with steady progress in aerial density improvement and continue to focus on increasing long term reliability and manufacturing yield of our HAMR products. Next, we will transition from testing to qualification stage with these customers, staying well on track for ramp in the 2027. Meanwhile, our next generation of ePMR drives will complete qualification in the 2026.

These drives will continue to deliver strong TCO along with the hallmark reliability and predictability, paving the way for a smooth and economically sound transition to HAMR. In addition, the rapid rise of AI is also accelerating our platforms business. Our platforms technology enables us to deliver dense systems that extract the full performance and capacity of our drive. This business is building traction with infrastructure providers and is well positioned to support the growing number of native AI companies that don't have their own storage infrastructure teams. Let me now turn to our quarterly results and capital allocation updates.

For the fiscal fourth quarter, Western Digital delivered revenue of $2,600,000,000 non GAAP gross margin of 41.3% and non GAAP earnings per share of 1.66 Free cash flow for the quarter was $675,000,000 During the June, we lowered our debt by $2,600,000,000 via a combination of using cash on hand and a debt for equity exchange of a portion of our stake in Sandus. As a result, we have strengthened our balance sheet and achieved a net leverage target range of one to 1.5x we communicated at our Investor Day in February in less than two quarters. Keeping with our commitment to returning cash to shareholders, we initiated a quarterly cash dividend program, and the Board authorized a $2,000,000,000 share repurchase program. In our fiscal fourth quarter, we repurchased nearly $150,000,000 worth of shares. Looking ahead, while the broader environment continues to be marked with uncertainty related to tariffs, we are seeing strong demand for our products driven by AI and related tailwinds in our business. Our visibility into our customers' plans continue to improve, and we currently have firm POs or LTAs with all of our top five hyperscale customers covering our entire fiscal year 2026.

This close collaboration with our customers enables us to plan more effectively and address their growing needs for storage. For the 2026, we expect continued revenue growth driven by data center demand and improved profitability led by adoption of our high capacity drives. Let me now turn the call over to Chris, who will discuss our fiscal fourth quarter results and Q1 fiscal year 'twenty six guidance in more detail.

Thank you, Erwin, and good afternoon, everyone. I'm honored to be joining you today for my first earnings call as the chief financial officer of Western Digital. Over the past several weeks, I had the opportunity to perform a deep dive into our business and met with many of our valued employees across the company. I also had several meaningful engagements with customers, suppliers and partners, and the investor community. It's been a tremendously energizing experience, providing great insight into our strategic, financial, and operational priorities.

It's clear to me that Western Digital is now operating as a strategically focused hard disk drive company. The company is leveraging its technology leadership position, operational excellence, and deep customer engagements to provide innovative solutions to meet the evolving needs of its customers. This provides a strong foundation for growth, profitability, and cash flow generation that creates long term shareholder value. During the 2025, Western Digital delivered very strong financial results. Revenue was 2,600,000,000.0, up 30% year over year and earnings per share was 1.66 Revenue and EPS were above the high end of the guidance range.

We delivered 190 exabytes to our customers, up 32% year over year, driven by strong nearline shipments and the ramp of our 26 terabyte CMR and 32 terabyte ultra SMR drives. Cloud represented 90% of total revenue at 2,300,000,000.0, up 36% year over year driven by strong demand for our higher capacity nearline product portfolio. Client represented 5% of total revenue at 140,000,000, up 2% year over year And consumer also represented 5% of revenue at 136,000,000, down 12% year over year. Gross margin for the fiscal fourth quarter was 41.3%. Gross margin improved six ten basis points year over year on a continuing operating basis and was above our guidance range.

The improved gross margin performance reflects continued mix shift towards higher capacity drives and tight cost control in our manufacturing sites and throughout the supply chain. Operating expenses were $345,000,000, slightly above guidance due to higher variable compensation on stronger than expected results. Operating income was $732,000,000, translating into an operating margin of 28.1%. Interest and other expenses were $52,000,000 a substantial reduction from the prior quarter due to the repayment of $2,600,000,000 of debt during the quarter. Taking into account an effective tax rate of 9.3% and a diluted share count of $362,000,000 shares, EPS was $1.66 up 22% sequentially.

Turning to the balance sheet, At the end of our fiscal fourth quarter, cash and cash equivalents were $2,100,000,000 and the total liquidity was $3,400,000,000 including the undrawn revolver capacity. During the quarter, we exchanged approximately 21,000,000 shares of SanDisk for debt. As a result, our term loan A reduced by 800,000,000 and we still own 7,500,000.0 shares of SanDisk. In addition, we redeemed 1,800,000,000.0 of the senior unsecured notes, resulting in gross debt outstanding of 4,700,000,000.0 at the end of fiscal twenty twenty five. We strengthened our balance sheet and achieved our target net leverage ratio of one to 1.5 times as outlined at our Investor Day.

Operating cash flow for the fiscal fourth quarter was $746,000,000 and capital expenditures were $71,000,000 resulting in strong free cash flow generation of six seventy five million dollars for the quarter. Backed by strong cash flow generation, a robust balance sheet, and confidence in the fundamentals of our business, the board authorized up to 2,000,000,000 of share repurchases. During the quarter, we repurchased approximately 2,800,000.0 shares for a total of $149,000,000. In addition, as announced during the last earnings call, the board initiated a cash dividend of 10¢ per share resulting in $36,000,000 of dividend payments during the quarter. The board also declared a quarterly cash dividend of $0.10 per share of the company's common stock payable on 09/18/2025 to shareholders of record as of 09/04/2025.

I will now turn to the outlook for the 2026. This guidance includes our current estimate of all anticipated or known tariff related impacts on our business in this period. We anticipate revenue to be 2,700,000,000.0 plus minus 100,000,000. At the midpoint, this reflects a growth of approximately 22% year over year. Gross margin is expected to be between forty one percent and forty two percent.

We expect operating expenses to increase on a sequential basis to a range of $370,000,000 to $380,000,000, including an additional week of expenses as Q1 will be a fourteen week quarter. Interest and other expenses are anticipated to be approximately 50,000,000. The tax rate is expected to be between 1619%. As a result, we expect EPS to be $1.54 plus minus $0.15 based on a non GAAP diluted share count of approximately $363,000,000 shares.

In closing, Western Digital is well positioned to succeed in the AI driven data economy. We remain committed to meeting our customers' growing storage needs while using our cash flow generation and strong balance sheet to deliver long term value for our shareholders. With that, I will now turn the call back to Irving. Thank you, Chris.

Western Digital's strong result and positive outlook this quarter reflects the ongoing successful execution of our strategy and the continued trust our customers place in the performance, reliability, and TCO advantages of our products.

This combination of customer trust, strategic focus, and disciplined execution is driving our strong financial results. With that, let's now begin with the q and a. Over to you, Ambrish.

Thank you, Irving. Operator, you can now open the line to questions, please. To ensure that we hear from as many analysts as possible, please ask one question at a time. After we respond, we will give you an opportunity to ask one follow-up question. Operator?

We will now begin the question and answer session. The first question comes from Eric Wudring with Morgan Stanley. Your line is now open.

Hey, guys. Thank you. Thank you very much for taking my questions and congrats on the results tonight. Chris, I wanted to kind of better understand the gross margin guidance for the September. You're calling for, I believe, 20 basis points of sequential gross margin expansion at the midpoint.

Can you maybe just help us unpack maybe why we're seeing that sequential gross margin expansion slow into the September? If there are any one timers or headwinds that are unusual in the quarter to call out? And I'll just ask the follow-up because it's related, which is beyond September, I realize you have a 38% gross margin in your three year financial model. As we progress to this up cycle though, how should we be thinking about the incremental margins in this business and maybe help us stream the dream of what's possible during this Thanks so much.

Yes. Thanks, Eric, for the question. And so, first of all, I'm very pleased with the progress that we are making with our gross margin. As you probably recall, at the February Investor Day, we had when we announced the business model with a 38% gross margin. And so last quarter, even before I joined the company, I was very pleased to see that the company for the first time had gross margins with a four handle in the 40% range.

And last quarter in 2025, I'm very pleased with the fact that we delivered 41.3% gross margin. So really good progress for many quarters in a row. As you know, in gross margins, there's multiple elements that go into it. There is pricing, there is mix, there is cost. And in each of those fronts, I think the company is executing really well.

Pricing is very stable environment. The mix is shifting in the right direction to higher capacity drives that is accretive to gross margins. And the operational team is executing really well, driving down cost reductions in the factories as well throughout the supply chain. And so I do believe there is further gross margin progression. We guided now 2026 to 41% to 42%.

I'm confident that the team will execute well and continue to focus on further gross margin improvements over time.

The next question comes from Aaron Rakers with Wells Fargo. Please go ahead. Your line Yes, is thanks for taking

the question. I do have two, and I'll wait to ask a follow-up. I guess the first question, Chris, congrats on the results as well. But you've taken the debt down. You're well within your targeted range of one to 1.5 on a leverage ratio basis.

Strong free cash flow generation, you've got $2,100,000,000 in cash on the balance sheet. I'm curious as you start to think about share repurchase activity going forward, how should we as investors think about that? Or how do you think about excess cash generation or the right level of cash in the balance sheet that you'll operate the business at or rather the capacity for even stepping further on share repurchase going forward?

Aaron, that's a great question. And here again, I'm really pleased with what I've seen in the company as well in terms of capital structure and capital allocation. And just to summarize it as well, there is very strong free cash flow. Just last quarter, the first quarter as the standalone hard disk drive company, we generated six seventy five million dollars of free cash flow, which was a 26% free cash flow margin. Now, not each and every quarter will be as strong as last quarter, but the business model is really a strong free cash flow business model.

In addition to that, the company has done a great job at strengthening the balance sheet at the time of the separation, as well as last quarter where we retired $2,600,000,000 of debt. Now getting to a net debt of $2,600,000,000 which is all about one time LTM EBITDA. So really good job there. And so there's no hesitation from the Board to the management team to continue to return cash back to the shareholders through a combination of our dividend program and the share repurchase program. The dividend program, we started with $0.10 per quarter.

I think there is room to grow that dividend over time. We're going to be very thoughtful about that. But there was also no hesitation to switch on the buyback the day it got approved. You saw we did $150,000,000 I think over time as the cash flow generation continues to grow, we can do more and there will be no hesitation to execute the share repurchase program.

Do you have a follow-up, Eric? Aaron, sorry.

Yes, do have reached. Thank you. One of the metrics that you guys have historically given and helps kind of bridge the hard disk drive versus the non hard disk drive business was the ASP. I didn't see that in tonight's release. So I'm curious if that's something that you could talk to or I guess maybe put another way, how do we think about the non HDD revenue in this most recent quarter?

Yes, Erinn, thanks for the question. This is Erinn. Obviously, ASP per terabyte is obviously a function of mix by and large. But I would say for last quarter, ASP per terabyte was down, low single digits.

The next question comes from Wamsi Mohan with Bank of America. Your line is open.

Yes, thank you so much and congrats on your solid results as well. Could you maybe help us think a little bit longer term here? When you look at sort of the revenue contribution, 90% coming from cloud, does it really mean that the seasonality in the business is going to be materially different? And what I'm particularly wondering is, should we be thinking that you're just going to see sequential growth as demand is kind of strong, still all indications of cloud CapEx remain very strong, that you could grow through even typically a seasonal weaker like quarter like the March? And I have a follow-up.

Yeah. Thanks, Wamsi, for the question. Look, I think you sort of got it, well, in the sense that we're structurally quite a different business today than we were in the past. As you highlighted, 90% of our business is in the data center. A large portion of that business is driven by a few set of key hyperscale customers that we have.

They have multiyear CapEx programs to really invest in their data storage assets, both to support the ongoing growth in the cloud and to also support the additional tailwind that they see coming from the AI revolution as well. So that plus the fact that we also now have moved to a fifty two week lead time program with them. And as we've highlighted, we have POs or LTAs for all five of our top customers spending the entire fiscal year 2026. And for two out of five of them all the way to the middle of fiscal 2027, we don't think that the seasonality of the past applies anymore. It's really driven by the cloud, CapEx spend of the big hyperscalers in terms of their new data center deployments, their refresh cycles as well.

Having said that, we do recognize that we are in a cyclical business. At some point, those cycles, there will be periods of digestion as we highlighted in our Q3 results as well. But we pretty much have a really good handle on how the business is flowing over a twelve, eighteen month timeframe. But if I summarize it, you got it pretty right. The traditional seasonality of the past doesn't really apply to this business a lot more.

It's really driven, by the, programs that our hyperscale customers have in terms of new data centers coming online in their refresh cycles.

Okay. That's super helpful, Irving. And as my follow-up, Chris, I just want to go back to the incremental margin question that Eric asked around. And you answered with the moving pieces being price mix and cost. So, we think about the sequential improvement in this June of 120 bps, what would you say was the biggest driver between those three elements?

And as we look forward, where do you see the most opportunity? I would think that, you know, the pricing is what it's going to be. It's pretty stable. It's kind of, you know, not maybe a huge incremental driver. So, should we think that mix is really the biggest kind of contributor on a go forward basis as you mix up to these ultra SMR drives, or should I be thinking about it differently? Thank you so much.

No, you have it right. Mix is the most important item that we as a company focus on. That's why we continue to invest in our technology and product roadmaps and really focusing on higher capacity drives. That is something that our customers are asking us for. That's something we are working and collaborating with our customers on.

And it's a win win situation for us. Higher capacity drives typically translates into higher gross margin and, the company is executing really well on that.

Yeah. Maybe, Wamsi, this is Irving. I'll just add on to what Chris said. So I echo exactly what he said. It's really driven very much by mix, and you would have seen that our latest generation of ePMR drives at 26 terabyte CMR and 32 terabyte ultra SMR, the number of units that we shipped doubled in the second quarter out from just over 800,000 units in, last quarter to over 1,700,000 units this quarter.

That's a clear recognition of our customers, seeing the TCO value that it delivers, the strong reliability, that it delivers to and quality that they are comfortable and used to from our ePMR drives. And as I've highlighted in the past as well, these drives are not only at the leading edge of capacity points where the ability of our operations teams deliver very high yields, is also adding to the profitability of that business. And we look forward to introducing, our next generation ePMR drives in the not too distant future. So I think there will be continued room to continue to deliver value, innovation, TCO benefit that we can benefit from and drive further margin expansion.

Our next question comes from Karl Ackerman with BNP Paribas. Your line is now open.

Yes, thank you. Thank you, gentlemen. So one of the main ways you have driven higher margins is from the adoption of Ultra SMR. And I was hoping if you could discuss the adoption curve and willingness of hyperscalers to grow their hard drive fleets based exclusively on Ultra SMR. I guess, is there a certain workload are there certain workloads where Ultra SMR is disadvantaged that would prevent you from attaining perhaps 100% of your fleet on Ultra SMR? Thank you.

Hey, Carl. Thanks for thanks for the question. Well, we have, in the past had two key customers on ultra SMR. We've just completed the qualification of a third hyperscale customer out of our top five on ultra SMR and they're starting to ramp ultra SMR in the second half of the calendar year. We now have a fourth customer in the process of qualifying ultra SMR as well.

And again, to reiterate, it's very important to note that Ultra SMR is a technology that is that will be extensible into HAMR as well. As we transition into HAMR our HAMR products in the not too distant future, we will be able to deliver that on the ultra SMR platforms as well to enable our customers to take advantage of the incremental capacity points within that. Specifically, your question around workloads, it really depends on the application. So even in the existing customer environments that do use Ultra SMR today, there are some specific legacy workloads that they buy lower capacity drives, eighteens, 20 terabyte drives. But what we are seeing is for any new workloads that they are, bringing to the market, it's all on the highest capacity points that they can adopt, which is typically on ultra as a month.

I do, if I may. So you and your peer have seen the strongest visibility in terms of order rates in really the longest time ever. That clearly speaks to the demand requests from hyperscale customers. Clearly, would love to have you add capacity. Given the longer lead times and the sophistication of these customers, how do you balance the visibility with those customers as well as the demand requests for those customers as you plan your capacity planning and they can plan their hyperscale build outs for the next two years? Thank you.

Yeah. Thanks. It's a great question. So on the demand signal, I think the first step was really to educate our customers on the long lead times as the products become much more sophisticated as we move to higher capacity drives. We have highlighted and they are aware that really the long lead times are driven by the hit wafers that we have to produce that take roughly nine months to produce a hit wafer and another three months to convert them into a head stack.

So one year lead time on that, component alone, and that's been instrumental in driving us to that, twelve month, LTA visibility. We are now also having conversations with them, as I've highlighted, with two of them, we now have eighteen months, visibility. So that really is a key in terms of that partnership to get greater visibility to support their growth requirements. That's giving us a lot of insight into how we need to accelerate our aerial density improvements in our products. That also is a function of why you saw the very rapid take up of our latest generation of ePMR drives.

I think we will see something very similar in our next generation of ePMR drives, out very soon, as well. But again, the focus is on really delivering increased areal density, to our customers, through technologies like Ultra, SMR, OptiNan. And if there's any investment that we do need to make into capacity, it's really on the head and media side of our business to support aerial density improvement.

Our next question comes from Assia Merchant with Citigroup. Your line is now open.

Great. Thank you. Thanks for taking my question. I think in the last call, there were some discussion on tariffs and some potential for enterprise slowdown. Just curious if you have anything to suggest there, any updates there?

And how do we make sure how do we how are you making sure that some of this demand is not just related to tariff pull forward? Thank you.

Yes. Thanks, Ashi, for the question. I guess there are two parts to the question. First, on the enterprise demand, called it out as a risk with the potential concern that the impact of tariffs might have. We haven't seen that materialize.

So obviously, the tariffs, some of the reciprocal tariffs got pushed out as well. So we haven't seen that, yet. But again, as I highlighted, some of the potential softness in enterprise, which didn't materialize, we would pick up in the cloud anyway because enterprises would move from CapEx to consumption based models. So we sort of netted off regardless, but we haven't seen any of that risk materialize. To your second question about tariffs, it's a very fluid and dynamic situation, but we don't see any double ordering, based on the analysis that we've done.

We look at in quarter linearity trends and they're very similar, to what we've seen historically. We compare that against the twelve month lead times that our customers have given us either through firm POs or through LTAs and they're pretty much matching those same projections to the T. And last but not least, we're in a very, very tight supply environment. So our ability to deliver upside within a quarter is also very limited. For those reasons and the fact that we do monitor, our customer inventory levels the best we can, we don't see any pull forwards as a result of tariffs as of now.

Thank you for your two questions, Assia. We'll go to the next caller, please.

Yes. The next question comes from Tom O'Malley with Barclays. Your line is now open.

Hi, guys. Thanks for taking my question. I just wanted to make sure I heard this correctly. You guys said ASPs in the June were down low single digits. Is that correct?

So, Tom, ASPs per drive continue to go up as we move to higher capacity drives, but ASP per terabyte was slightly down, but mostly driven by mix because the price environment is very stable.

Got it. That makes sense. And then I guess as a follow-up, if you look at the market today, I think that your competitor had talked about an exabyte target where after that certain target, I think they said around 160 exabytes, they would need to see growth really exclusively from technology transitions. I asked you last quarter, but in terms of where you guys stand, is there any mark that you would call out as that kind of waterfall? Is there a spot that you would say, from this point forward, we only need technology transitions to move forward just in your ability to capacity kind of constrain the market? Anything you have there.

Yes. Tom, I would say that if you look at the last quarter, we delivered 190 exabytes, and that's really a result of the, latest generation of ePMR drives that we've delivered. So our ability to not only produce higher capacity drives, but our ability to produce them at scale with high yields, I think has really differentiated us. And so, we look we are laser focused on continuing to ensure we have high yields, of our components, our drives and continuing to deliver products to our customers at scale. So as a result of that, we don't have to make any incremental investments into capacity.

next question comes from Amit Daryanani with Evercore. Your line is open.

Thanks. I guess maybe to start with hoping you folks could spend a bit of time on talking about how does the extra week flow through your P and L and on the revenue and OpEx side and what's the right OpEx run rate to think about beyond that extra week?

Yeah. On the revenue side, our customers, they think in quarterly buckets in line with their long term forecasts and LTAs and POs that they have placed. So we don't really see much on the revenue side. There might be a little bit of a benefit in consumer retail side of the business. But as you know, that's relatively small for Western Digital.

On the OpEx side, however, it is an extra week. And so it's I would say it's all about 15 one-five million of incremental spend that happens in 2026. Obviously, looking ahead to Q2, Q3, Q4 that comes out of it as those quarters are normal thirteen week quarters.

I do. Thanks a lot. Erwin, you initially I think spoke a good bit about AgenTik AI deployment and how that could drive demand for HDDs. I think about your Analyst Day, you talked about like 20% exabyte growth, mid to high single digit revenue growth for the company. As you start to see AI getting deployed, I'm wondering how do you think those numbers can move higher?

And if there's way to quantify what kind of tailwind this would provide for your business longer term? Thank you.

Yeah. Thanks, Amit, for the question. Yeah. If you recall, what we presented at Investor Day was a base model that of 15 exabyte growth. That was primarily driven by the sort of secular growth in the cloud, and we highlighted the potential upside of that 15 exabyte CAGR growth to 23%, as a result of an AI uplift.

We're starting to see some of that uplift materialize. So, it's still early days, but we think that the exabyte growth is more between at 15% to 23% range rather than the base number that we've highlighted. In that model that we presented at, Investor Day, we also had a 7% ASP decline. As Chris highlighted, we're seeing a much lower ASP decline in the low single digits, as well. So, as we see exabyte growth trend more to that 23% level and ASPs in the low single digits, there's definitely opportunity for revenue growth from a CAGR perspective to go from the sort of mid to high single digit range that we have highlighted at Investor Day to trend more towards the mid teens.

And if you take that mid teens revenue growth with the OpEx levels that we've highlighted, we will probably be at an OpEx level of 10% of OpEx to revenue. So hopefully that gives you a sense of bridging what we shared at Investor Day and the changing outlook that we see in the business as a result of the AI tailwinds that we're beginning to highlight.

Our next question comes from Ananda Baruahi with Loop Capital. Your line is now open.

Yes. Good afternoon, guys. Thanks for taking the question. I really appreciate it. Two, if I could.

I'll go one into one. You Irvin, could you remind us of the Aerial Density Roadmap from here until HAMR? And where do you think HAMR where do you think you come out areal density wise, let's say you sort of execute through the first half twenty twenty calendar year twenty twenty seven roadmap? Where do you think you are areaal density wise there? So the roadmap up to that point, and then where do you think you come out at Thanks.

Sure. No problem. So our current, EPMR product, that we've brought into the marketplace is a 26 terabyte CMR, 32 terabyte Ultra SMR. We have highlighted in our roadmap that we look to start qualification for our next generation of ePMR, which will be our final generation of ePMR in the first half of calendar 2026. That will be a 28 terabyte CMR, 36 terabyte ultra SMR.

And then we will start qualification of HAMMER in the second half of calendar '27. We've ramped in the '27, calendar '27. That will be at the 38 terabyte CMR, 44 terabyte Ultra SMR. As we've highlighted in the past, we feel the four terabyte per platter or if you assume a Tendus drive, 40 terabyte drive, four terabytes per platter is sort of where we see things as of now, the economic crossover where it makes economic sense to transition to HAMR.

I do, ambush. And really more of a clarification, you guys mentioned the platforms business and opportunity to sell dent systems into native AI companies still have their own infrastructure. Are those the Neo Cloud? Is that what you're talking about? And then how many of the like and if yes, like what's a useful way to think about, you know, which which of that cadre may not have their own infrastructure teams?

Western Digital (WDC) Q4 2025 Earnings Call Transcript

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