Eddy Orabi

Eddy Orabi sought clarification on Western Digital's long-term agreements (LTAs) for 2027 and 2028, specifically questioning if they were solely volume-based and not price-based, and the rationale behind such a structure given the tight supply environment.

Answer

CFO Kris Sennesael clarified that Western Digital has two customers with LTAs extending through calendar year 2027 and one customer with an LTA through calendar year 2028. He explicitly stated that these LTAs include *both* price and volume conditions.

Eddy Orabi sought clarification on Western Digital's long-term agreements (LTAs) for 2027 and 2028, specifically whether these contracts include both volume and price conditions, given the tight supply environment.

Answer

Kris Sennesael, CFO, clarified that the LTAs, which include two through calendar year 2027 and one through calendar year 2028, indeed contain both price and volume conditions.

Speaking for Krish Sankar, Eddy Orabi of TD Cowen asked for an update on engagements with other hyperscalers beyond Meta, questioning how these discussions have evolved over the past three months and if they are still in the early stages.

Answer

CTO Rob Lee confirmed that progress with their first hyperscaler customer has accelerated engagements with other prospects. He stated that these discussions are progressing well, with multiple proofs of concept and technology assessments underway. While he expects future engagements to be faster due to learnings, he characterized the current status with these other hyperscalers as still being in the early stages of a co-engineering process.

Eddy Orabi, on behalf of Krish Sankar at TD Cowen, asked why incremental gross margins would not exceed the 50% level outlined at the Analyst Day, considering the HAMR ramp is still in its early stages.

Answer

CFO Gianluca Romano clarified that the immediate goal is to reach 40% gross margin at $2.6 billion in revenue, and the company is trending well in that direction. He stated that the 50% incremental margin model applies after that milestone is achieved and that the plan presented at the Analyst Day remains unchanged and is being executed well.