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DATE

Thursday, April 30, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — David V. Goeckeler
  • Chief Financial Officer — Luis Visoso
  • Vice President, Investor Relations — Ivan Donaldson

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TAKEAWAYS

  • Revenue -- $5.95 billion, up 97% sequentially and 251% year over year, surpassing guidance of $4.4 billion to $4.8 billion, driven by higher-value customer mix and improved pricing.
  • Non-GAAP Gross Margin -- 78.4%, up from 51.1% sequentially, exceeding guidance of 65%-67% due to favorable mix and pricing.
  • Non-GAAP Operating Expenses -- $448 million, or 7.5% of revenue, compared to $450 million-$470 million guidance and down from 13.7% of revenue sequentially, reflecting operating leverage.
  • Non-GAAP Operating Margin -- 70.9%, up from 37.5% sequentially.
  • Non-GAAP EPS -- $23.41, compared to $6.20 prior quarter and exceeding guidance range of $4.12 to $14.
  • Free Cash Flow -- $2.955 billion adjusted, a margin of 49.7%.
  • Cash and Cash Equivalents -- $3.735 billion at quarter end.
  • Bit Shipments -- Flat year over year, down high-teens sequentially, with 18% increase fiscal year-to-date; higher quarter-end inventory supports BiCS 8 QLC demand and new business model (NBM) preparation.
  • New Business Models (NBMs) -- Five multiyear supply agreements signed; three in the quarter and two more so far in Q4, with minimum revenue of $42 billion (for the three Q3 contracts only) and over $11 billion in financial guarantees, including $400 million prepayments on balance sheet.
  • NBM Bit Commitment -- Agreements cover more than one-third of bits for fiscal 2027, with expectations to further increase this proportion as more contracts are signed.
  • Data Center Revenue -- $1.467 billion, up 233% sequentially, reflecting rapid AI infrastructure demand and mix shift to TLC-based enterprise SSDs; QLC Stargate solutions expected to begin shipping revenue in the next quarter.
  • Edge Revenue -- $3.163 billion, up 118% sequentially, driven by premium storage in PC and smartphone markets as on-device AI capabilities increase.
  • Consumer Revenue -- $820 million, down 10% sequentially, attributed to seasonality despite year-over-year growth.
  • Capital Expenditures -- $240 million, equal to 4% of revenue for the quarter.
  • Interest and Debt -- $650 million remaining TLB balance repaid; $20 million non-GAAP adjustment for stock-based compensation and $46 million for write-off of unamortized issuance fees tied to repayment.
  • Q4 Guidance -- Expected revenue of $7.75 billion-$8.25 billion, non-GAAP gross margin of 79%-81%, non-GAAP operating expenses of $480 million-$500 million, non-GAAP EPS of $30-$33 based on 158 million fully diluted shares.
  • Share Buyback -- $6 billion repurchase program authorized, effective immediately and with no expiration date.
  • BiCS 8, TLC, and QLC -- BiCS 8 and TLC enterprise SSDs led growth this quarter; QLC Stargate revenue to commence in Q4, establishing a diversified data center product mix.
  • Kioxia JV and Nanya Investment -- JV with Kioxia extended through December 2034; $1 billion invested in Nanya for DRAM supply security.
  • Variable Pricing in NBMs -- Agreements contain both fixed and variable pricing elements, enabling upside capture as market prices move.
  • NBM Financial Guarantee Structure -- Protections include prepayments and third-party secured financial instruments to assure contract compliance.
  • Data Center Demand Forecast -- Management indicated data center sector growth expectations for calendar 2026 have been revised upward to the "mid-70s%" from "the 60s%" described three months prior.
  • CapEx Outlook -- CapEx projected to rise slightly in dollar terms for upcoming nodal transitions but to decrease as a percentage of revenue over time.

SUMMARY

Sandisk Corporation (SNDK +3.04%)'s third quarter results highlighted a rapid transition to multiyear NBMs, with over a third of fiscal 2027 bit supply now contracted under five agreements that include more than $11 billion of enforceable financial guarantees, while the three contracts signed during the quarter provide a minimum $42 billion revenue backlog. Data center momentum intensified as enterprise SSD revenue surged 233% sequentially, led by TLC products and readiness for the QLC Stargate launch. A new $6 billion share buyback reflects the company’s attainment of a net cash position following full repayment of its TLB. This quarter saw sharp margin expansion, with gross margin reaching 78.4% and adjusted free cash flow at $2.955 billion—driven by high-value customer mix and pricing discipline. Revised guidance forecasts continued revenue and margin growth, while structural changes—such as the Kioxia JV extension and Nanya investment—reinforce Sandisk’s ability to balance supply, secure pricing, and sustain earnings power in a dynamically evolving AI storage market.

  • Management described customer-prepayment guarantees and variable contract pricing as tools creating "These partnerships support durable, structurally higher earnings and a significantly more predictable and less cyclical business for Sandisk Corporation."
  • Non-GAAP operating expenses fell to 7.5% of revenue, the lowest reported in recent quarters.
  • Company leadership highlighted that customer contracts now "account for over a third of our bits in fiscal year 2027," with discussions ongoing to push this even higher.
  • Kioxia joint venture extension through 2034 and $1 billion Nanya investment were cited as key supply-chain enablers.
  • Management now expects mid-teen percentage bit shipment growth to continue, driven by ongoing R&D and manufacturing transitions.
  • Enterprise SSDs made up 25% of portfolio revenue, with expectations for this share to increase further as QLC shipments ramp.
  • Commitment to balancing growth and capital discipline was emphasized as CapEx for upcoming node transitions will modestly rise in absolute dollars but decrease in revenue proportion.

INDUSTRY GLOSSARY

  • NBM (New Business Model): Multiyear, financial-guarantee-backed supply agreements locking in committed volumes, prices, and supply with select customers, intended to reduce business cyclicality and generate more predictable returns.
  • RPO (Remaining Performance Obligations): The minimum contractual revenue yet to be recognized under multiyear customer supply agreements as disclosed in regulatory filings.
  • TLB (Term Loan B): A form of senior secured bank loan, historically used by Sandisk for debt financing, now fully repaid.
  • BiCS 8: The latest generation of 3D NAND flash process technology, codeveloped with JV partner Kioxia, referenced as a differentiator in Sandisk’s data center SSD portfolio.
  • TLC/QLC: Types of NAND flash storing three (TLC—Triple Level Cell) and four (QLC—Quad Level Cell) bits per cell, used to achieve higher storage density in SSDs for distinct workloads.
  • KV cache: A memory technique in AI systems optimizing inference performance by storing and reusing intermediate data for rapid model response.
  • Stargate: Sandisk's branded QLC-based enterprise SSD line aimed at high-capacity, AI-centric data center deployments, entering revenue shipment in the coming quarter.

Full Conference Call Transcript

David V. Goeckeler: Thanks, Ivan. Good afternoon, and thank you for joining Sandisk Corporation's fiscal third quarter earnings call. We delivered another strong quarter with excellent performance across all key metrics, reflecting the strength of the Sandisk Corporation franchise. Before turning to our end markets, I would like to provide an update on a priority we previously outlined. Last quarter, we were engaged in discussions with customers on multiyear supply partnerships—what we refer to as new business models, or NBMs. I am pleased to share that we have successfully advanced those conversations, with five multiyear partnerships signed so far. These partnerships are structured to lock in committed supply for our customers and committed financials for Sandisk Corporation.

Our customers' commitments are backed by firm financial guarantees. These partnerships support durable, structurally higher earnings and a significantly more predictable and less cyclical business for Sandisk Corporation. We believe this marks a fundamental evolution of our business centered on deeper customer alignment, enhanced visibility, and long-term value creation. These NBMs reflect the strategic value of our world-class NAND technology, which is built on decades of innovation. Investment we have made in R&D and manufacturing, including tens of billions of dollars in cumulative CapEx and IP, have built the foundation for a powerful new business model in which we manage the full stack—from front-end manufacturing through chip and system-level design to final back-end assembly and test.

Both the extension of our joint venture with Kioxia and the supply agreement for DRAM following our investment in Nanya further strengthen our supply chain resiliency. This leverage is enabling us to drive stronger customer engagement, allowing long-term conversations with partners who value technology performance and long-term supply assurance. With increased engagement and optionality across the portfolio, we can optimize our end-market mix more effectively. Together, these transformations have resulted in a step change in what we believe to be sustainable gross margins, free cash flow generation, and earnings power in a market that we expect to grow in the double digits for the foreseeable future.

Data center is a clear example of this strategy in action, with revenue growing 233% sequentially. This milestone reflects years of preparation and our deliberate shift toward what is now the most strategic and fastest-growing end market. While we have made substantial progress, there are significant growth opportunities ahead driven by the fundamental shift in underlying infrastructure requirements of artificial intelligence. We are witnessing extraordinary growth not just in model size, but in resulting token generation, the duration and complexity of model runs, and the increasing importance of context.

As AI models scale from billions to trillions of parameters, and deployments advance from simple inference to deep reasoning in increasingly autonomous agentic systems, NAND has become a critical component of the underlying infrastructure. Inference optimizations such as KV cache, along with workloads like RAG, require substantial high-performance, low-latency flash to deliver real-time responsiveness and quality of user experience. These workloads expand the amount of data that now needs to be stored on low-latency flash well beyond the model itself, as systems must retain context, intermediate data, and large external data sets.

As a result, NAND flash is emerging as the only economically viable solution to deliver the capacity, performance, and efficiency required to keep models accessible for real-time inference at scale. This shift in understanding the critical nature of our technology comes at a time when our product differentiation is strongest, anchored in what has been recognized as an industry gold standard for NAND technology with BiCS 8, and a broad, leading portfolio with TLC and QLC offerings. We are confident that our world-class product portfolio and technology leadership will continue to drive data center customers to see Sandisk Corporation as a partner of choice over the long term, and we are already seeing that preference translate into results.

Our fiscal third quarter revenue was enhanced by strong demand for our TLC-based enterprise SSD portfolio, which powers performance-intensive compute workloads where speed and latency are paramount. Looking ahead to the fiscal fourth quarter, we expect to begin shipping our QLC Stargate solutions for revenue, adding another layer of revenue growth. Together, TLC and QLC serve distinct but complementary roles, reflecting how we are deliberately architecting our portfolio to meet evolving customer needs with our broad portfolio of AI-focused data center products. In edge, we are seeing a continued shift toward premium devices across both PC and smartphone markets. These platforms are increasingly incorporating on-device capabilities, which are driving higher storage requirements and greater demand for high-performance solutions.

As a result, our mix continues to shift to high-value configurations and customers that assign the appropriate value to our technology. Consumer saw strong year-over-year revenue growth across all key storage categories and regions despite evolving consumer industry dynamics. This performance was supported by our strong brand recognition and channel presence as we focused on the most financially attractive demand. In February, we unveiled our next-generation portable SSD portfolio designed to support faster, more demanding workflows and AI-enabled content creation. This launch reinforced our innovation and leadership in the SSD category, generating meaningful external visibility with coverage across multiple global media outlets.

We also continue to strengthen global consumer engagement through new brand-led go-to-market activities such as our “Space to Hold More” campaign, which is driving deeper customer connection by localizing global narratives and engaging diverse communities worldwide. Together, these efforts reflect our focus on our end markets and commitment to driving demand through brand recognition, product innovation, and strong go-to-market execution as we shift our portfolio toward higher-value opportunities and transition away from legacy upsell models. Our broad end-market exposure sets us apart, and we remain committed to serving customers across these markets. With that, I will turn the call over to Luis to dive deeper into our financial performance and guidance.

Luis Visoso: Thank you, David. I will begin with an update on our new business models, or NBMs, which are designed to provide us with demand certainty and provide our customers with supply assurance. We signed three agreements in the third quarter and an additional two so far in the fourth quarter, and we are currently in active negotiations with several other customers. These agreements are tailored to meet the needs of our customers and, in aggregate, provide us with demand certainty at financials that we expect will be consistent with our fiscal fourth quarter guidance. The duration of these agreements varies, with the longest contract extending to five years.

In aggregate, volume commitments increase during the life of the contracts, with quarterly commitments and a combination of fixed and variable pricing. These agreements with variable pricing allow us to capture upside if prices rise, while allowing our customers some upside if prices decline over time. As you will see in our 10-Q, the three contracts signed during the quarter provide minimum contractual revenue of approximately $42 billion. We will update you as we make more progress. Each contract is secured with financial guarantees that protect us if the purchase obligations are not fully performed by our customers.

In aggregate, the five agreements signed so far include financial guarantees that exceed $11 billion and include prepayments and other financial instruments managed by third-party financial institutions. Out of these agreements, $400 million in prepayments are included in our Q3 balance sheet. These five new business models account for over a third of our bits in fiscal year 2027, which we expect to increase as we conclude additional agreements over the next few months. We expect these new business models to reduce the historical cyclicality of our business, improving visibility and resulting in pricing and margins that reflect the value of our technology and investments, ultimately delivering higher, more consistent, and durable returns for shareholders.

Moving on to our results for the quarter. Revenue for the third quarter was $5.95 billion, up 97% sequentially and up 251% year-over-year. This compares favorably to our guidance of $4.4 billion to $4.8 billion and was driven by both a mix shift toward higher-value customers and higher pricing. Our bit shipments were flat year-over-year and down high-teens sequentially as we build higher inventory levels, primarily to support strong BiCS 8 QLC demand in the fourth quarter Stargate ramp and to prepare for our recently signed new business models. In line with our mid- to high-teens growth model, bit shipments increased 18% fiscal year-to-date. Moving on to the end markets. Sequentially, data center revenue grew 233% to $1.467 billion.

Edge grew 118% to $3.163 billion, and consumer came in at $820 million, down 10% in line with our historical seasonality. Our portfolio planning strategy focuses on delivering attractive long-term economics, with diversification remaining a core strength. We remain committed to serving all three end markets to maximize long-term value creation. Our non-GAAP gross margin for the third quarter was 78.4%, up from 51.1% in the prior quarter. This compares favorably to our guidance of 65% to 67% and was driven by our shift toward higher-value mix and the overall pricing environment.

Non-GAAP operating expenses for the third quarter were $448 million and represent 7.5% of revenue, as compared to 13.7% of revenue in the prior quarter, as we generate additional leverage. This compares favorably to our guidance range of $450 million to $470 million. As a result, non-GAAP operating margin was 70.9%, up from 37.5% in the prior quarter. Non-GAAP EPS was $23.41, up from $6.20 in the prior quarter. This compares favorably to our guidance range of $4.12 to $14.

Key GAAP to non-GAAP reconciliation items include $20 million in stock-based compensation, net of taxes, which represents 0.3% of revenue, and $46 million related to the write-off of unamortized issuance fees as a result of our repayment of the remaining $650 million balance in our TLB. We closed the quarter with $3.735 billion in cash and cash equivalents on our balance sheet. Moving on to free cash flow. During the quarter, we generated $2.955 billion in adjusted free cash flow, which represents a 49.7% margin. Cash flow from operations came in at $3.038 billion, partially offset by $83 million from net cash capital spending. Gross capital expenditures totaled $240 million and represented 4% of revenue.

Our capital plan is designed to balance growth opportunities and generate attractive returns while supporting our ongoing BiCS 8 transition. We remain highly disciplined in how we evaluate such investments to protect the long-term sustainability of our business financials. Moving on to guidance. For the fourth quarter, we forecast revenue between $7.75 billion and $8.25 billion from both bits growth and higher pricing. Our forecast for non-GAAP gross margin is between 79% and 81%. We expect non-GAAP operating expenses between $480 million and $500 million as we continue to invest in innovation and R&D. We expect non-GAAP interest and other income between $10 million and $30 million and non-GAAP tax expenses between $775 million and $875 million.

We forecast non-GAAP EPS between $30 and $33, assuming 158 million fully diluted shares. Moving to capital allocation. The priorities we outlined in February were to invest in the business, achieve a net cash position, and then return cash to shareholders. In line with these priorities, we have taken steps over the last two quarters to solidify our supply chain, including extending our JV with Kioxia through December 2034 and investing approximately $1 billion in Nanya to secure long-term DRAM supply. We have also taken actions that put us in a strong net cash position by paying off the remaining balance of our TLB.

Given the strong progress, today we are announcing that our board of directors has authorized a $6 billion share buyback program of outstanding shares of common stock. The repurchase authorization is effective immediately with no expiration date. With that, I will turn the call back to David for closing remarks.

David V. Goeckeler: Thank you, Luis. In summary, we continue to execute with conviction at a critical inflection point for this business. NAND has always been a foundational technology, empowering the world's best-in-class semiconductor storage solutions required to drive the largest technological movements, including PC, mobile, cloud, and now artificial intelligence. Data center has become our fastest-growing market, and the workloads driving that demand—including inference, reasoning, and agentic systems—represent a structural and durable shift in how the world's most consequential technology is built and deployed. Our new business models reflect this shift.

Five signed agreements to date, over $11 billion in financial guarantees, and over a third of our bits in fiscal year 2027 under firm customer commitments represent a fundamental reshaping of our business, providing visibility, pricing protection, and more consistent, durable returns. Our technology and product portfolio are intersecting this extraordinary demand at exactly the right moment. Equipped with a complete portfolio that now includes a scaled and rapidly growing enterprise SSD business, we are allocating supply to the highest-value opportunities and establishing a new pillar of growth for Sandisk Corporation. This progress has converged in a single moment.

We believe our margins are sustainable, we have achieved our net cash target, and we have announced plans to return capital to shareholders through buybacks—all while reinforcing our operational foundation. Combined with our multiyear NBMs and the acceleration in the data center end market, this gives us both financial strength and structural resilience. The result is a durable growth model, a valuable franchise, and a business built to generate substantial, sustained cash flow. With that, Ivan, let us see if there are any questions.

Operator: Thank you. We will now open the call for questions. To ask a question, please press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Mark Newman with Bernstein. Please go ahead.

Mark Newman: Thanks very much for taking my question, and congrats on another great quarter. A couple of quick questions here. So the EPS guidance you have given, $30 to $33—these are fantastic numbers. It does imply that the rate of price increase is slowing a bit into the current quarter. I wondered if that is either being conservative on your side because we are still quite early in the quarter, or is that related to some of these very long-term agreements that you signed? And with regards to the long-term agreements, I believe you mentioned about a third of bits for FY '27 in some kind of long-term agreement.

I would like to ask to what degree is price fixed in the coming quarters, just so I can get a sense for that. Thank you very much. Really appreciate it.

David V. Goeckeler: Hey, Mark. It is good to hear from you, and thanks for the comments. First, on next quarter and pricing, we do not really guide pricing, but I think you saw in FQ3 rather extraordinary pricing acceleration across the business, so we are very happy about that. And you are right, it is early in the quarter and it is an extremely dynamic market, so it pays to be a bit conservative when you are going down that path. But we are very confident in the numbers. On the agreements, I will make a few comments and Luis will have something to say as well. You were asking about pricing being fixed. These agreements are really tailored to individual customers.

They have different elements depending on the customer and on the length of the agreement that give us assurance on consistency of demand, which is what we need. We run a fab. We have very consistent output. We need very consistent consumption. One of the major attributes of these agreements is they give us that. Our customers understand the dynamic very clearly. These agreements do not just happen overnight. It is not just about prepaying for a couple of quarters’ worth of supply. This is about establishing up to a five-year agreement on supply that is very consistent quarter over quarter.

And as we said, there are financial instruments in place such that if that consumption does not happen on that very predictable time frame, there are financial commitments that come to us immediately. The pricing has fixed elements and variable elements. Maybe I will let Luis talk about it in a little more detail.

Luis Visoso: I just want to reinforce what David was saying. These models are here to deliver more durable, more predictable, more attractive, more consistent financial results. They are very good, and, frankly, a win-win for us and for our customers. We provide supply; they provide demand. We have visibility for many years, all the way to five years, so we are very happy about that. You have never heard us talk about RPO, or remaining performance obligations, in this business, and we started to talk about that. You will see it in our 10-Q—about $42 billion of RPO in this business. On pricing, it is a combination of fixed and variable.

To address your question directly, the shorter term within the contract is more fixed; the longer out you go, there is more variable. You can assume most of the pricing in the very short term is mostly fixed, and as you go out, there is a little bit more variable for us to capture upside and for our customers to capture some upside if prices were to go down.

Mark Newman: Thanks so much. I really appreciate it.

David V. Goeckeler: Thanks, Mark.

Operator: The next question comes from Joseph Moore with Morgan Stanley. Please go ahead.

Joseph Moore: Great, thank you. I wonder if you could talk about the growth in enterprise SSD that you saw—pretty impressive. How much of that is the market, and how much of that is you putting the product portfolio in a better place?

David V. Goeckeler: Like a lot of things, when you see 233% sequential growth, Joe, there are a lot of elements to that. It starts with the portfolio. The portfolio is in great shape. Our TLC product—this is almost exclusively our TLC product. We are going to start shipping our Stargate product for revenue next quarter. So really strong performance, very strong product, and a broadening of qualifications. It takes a while to get into all these accounts, so we are now in a large number of accounts. And there is strong market pull. There is a lot of demand in the market for these high-performance enterprise SSDs.

We have the right product at the right time, and we are really happy to see this part of the portfolio expand and get to the levels where we expect it to be. We were 25% of the portfolio this quarter, and we expect that to increase as we go forward.

Joseph Moore: And my follow-up: where do you see that in a few years? It seems like hyperscalers want everything you can make and then some. Just how much of the business could be enterprise in the long term?

David V. Goeckeler: It could be a significant amount. You have known for a long time we value a balanced portfolio. We want to mix in the way that gets the best financial return for us, and that changes quarter over quarter. The key point is we are in a position where we can mix into data center in a way that we have never been able to do before. I expect that number to keep rising over the next several quarters and the next several years.

Operator: The next question comes from Analyst with Melius Research. Please go ahead.

Analyst: Hey, guys. It is great to be on board here. I almost feel like I am on a software call here. You said one-third of bit growth next year is contracted. Where do you see this going based on your conversations? It is one-third next year, but can this be above 50% where you know how much is kind of done going into the year? And then I have a follow-up. Thanks.

David V. Goeckeler: First of all, welcome. We are glad you are here. We are still in a lot of conversations about how we are changing this business. It takes a while depending on the customer. Some customers come into the conversation really concerned about multiyear supply agreements, so it is an easier conversation. Other customers are used to the way the market has worked in the past—commit volume and negotiate price every quarter. That is not the kind of agreement we are interested in. We are interested in agreements that give us certainty of economics.

A key point of what Luis said in the script: there are fixed and variable elements of these agreements, but we are targeting financials for the five agreements we signed that are in line with what we just forecasted to—this is very attractive business. We are in active conversations for our supply going forward—that includes next year all the way through the next five years. We said at least a third; we are over a third, and I expect that number to go up over the next several quarters. Where can it get to? I definitely think it can get above 50%, and we have a desire to drive it quite high.

Analyst: And with regard to margins, when you do these kinds of agreements, can you lock in margins? Is there a target margin range you are comfortable talking about? You could argue the stock is trading like your margin is going back into the 40s.

David V. Goeckeler: I do not think we are there yet to talk about a target. When we get a little further along, we will wrap this all up in a new model for everybody. We are very proud of our technology. I think for the first time in decades in this business we are getting to the point where the value of our technology is getting recognized by producers. We are not interested in trading away that value for certainty; we are interested in getting that value and getting certainty as well. We are very focused on getting the cyclicality out of this business.

It is corrosive to how we invest our CapEx and to our customers' ability to get sufficient product to drive their businesses. We have taken meaningful steps: very significant commitments from very significant customers. We will move this entire business to a very different spot to everybody’s benefit. It was questionable if we could make that progress; people told me it would never happen. It is happening—but we are still in the early stages. As we make continued progress, we will continue to give updates.

Luis Visoso: Thanks.

Operator: The next question comes from C.J. Muse with Cantor Fitzgerald. Please go ahead.

C.J. Muse: Good afternoon. Thanks for taking the question. Curious to get your thoughts around supply-demand going forward for NAND. We are getting only limited greenfield, mostly layer count driving bit growth, while new greenfield is being prioritized for DRAM. With that construct and the agentic AI incremental growth, how are you thinking about when the industry might get into balance?

David V. Goeckeler: My point of view is the industry is always in balance—markets always balance supply and demand. Implicit in your question is, if you lower the price, will you meet more demand? We are working around that whole environment. On the demand side, we continue to see data center accelerate. We would raise our calendar year '26 data center growth number to the mid-70s from the 60s just three months ago, which is up from the 40s three months before that and the 20s three months before that. Very strong growth in data center. Outside of data center, we are seeing some contraction due to unit decline; we expect that to bounce back in '27.

On the supply side, a major benefit of this franchise is that we can increase supply through nodal transitions. We have a very productive R&D pipeline with our JV partner and the BiCS roadmap. We can continue to drive the mid- to high-teens bit growth through nodal transitions. We need to add some cleanroom space because each node has more steps, so there is some additional CapEx, but it is not like other markets where you must add capacity because you are not getting that much from the nodal transition. This is what makes this franchise such a spectacular cash generator: CapEx as a percent of revenue continues to go down substantially.

The absolute CapEx is still there, but relative to revenue generation we have years of runway into what nodes are going to be and what the bit growth will be. We will continue to invest in those and drive nodal transitions to grow the market in that mid- to high-teens rate, and that is basically what we see across the NAND players.

C.J. Muse: Very helpful. Just quickly, in terms of capital structure, you are now no debt, $3.7 billion cash. What do you think you need to retain given your view today and the new contracts, and how should we think about buybacks from here?

Luis Visoso: We announced a $6 billion share buyback with this call. We will keep tracking our cash flow—we are generating good cash—and as things change and as we execute the share buyback program, we will keep you updated.

Operator: The next question comes from James Schneider with Goldman Sachs. Please go ahead.

James Schneider: Good afternoon. Thanks for taking my question. One more question on the new business models. Can you talk about whether any of the five largest U.S. hyperscalers are included in those contracts thus far? And related to this, on a go-forward basis, do you plan on providing any sort of ACV or confirmed contract value per your normal disclosures?

Luis Visoso: We are not going to disclose the names of our customers, but as David said at the beginning, we have some very meaningful customers who are joining and more that we are working with. To your second question, we will provide the RPO metric, which is how much of the business is already contracted, and that is based on minimum prices. We will continue to give that information every quarter, and you will have that visibility as we make progress.

James Schneider: Thank you. As a quick follow-up, given these new business models and your visibility on customer demand, what is the state of your discussions with Kioxia in terms of potentially increasing bit supply? Are you contemplating anything above the sort of 20% range of growth you have outlined previously?

David V. Goeckeler: We still have the same plans. The conversations with Kioxia are always very robust and ongoing, and the teams are working on this every day. We have our BiCS 8 transition plan that we have aligned on, and we are executing to it. It is going extremely well.

James Schneider: Thank you.

Luis Visoso: Thanks, Jim.

Operator: The next question comes from Aaron Rakers with Wells Fargo. Please go ahead.

Aaron Rakers: Hi. This is Jake on for Aaron. Congrats on the great results, guys. Looking at Stargate starting to ship for revenue in April, can you give some color on how meaningful that ramp could be over the next few quarters?

David V. Goeckeler: There are two major products in the data center space. There is the compute-focused enterprise SSD—lower capacities and much higher interface speeds—and then there are much higher densities. The progress we have seen so far is coming off that compute-focused TLC drive, and now we are going to bring the whole QLC product to market, which has been under qualification with some major players for well over a year. We are not going to forecast a specific market segment, but we are very proud of that product, and we think it is going to do quite well in the market.

Aaron Rakers: Thanks. As a follow-on, with more powerful LLMs released over the past few weeks, how are you thinking about the KV cache opportunity as we see agentic AI grow? Has that meaningfully changed over the last few quarters, and how have customer discussions changed there?

David V. Goeckeler: We have advanced our understanding a lot over the last quarter or two since it became a major part of the conversation. When you drill into that opportunity and try to size it, it gets complicated quickly—number of concurrent sessions, average input tokens, cache hit ratios, storage durations, and more. We need to stay very close to our customers because they will have the detail on the infrastructure they are building. Those doing infrastructure at scale have great insight into how those variables come together. This reinforces the business model conversation as our customers understand the significance of NAND—this is a foundation for striking two-, three-, or five-year deals that are very substantial in demand.

It is an extremely dynamic situation. Our customers are responding very positively to our products. They are willing to commit years of purchasing with a financial model that is very attractive for us and gives them guaranteed supply. They are putting up billions of dollars of collateral through various financial instruments that will survive for the life of these contracts, and if they do not meet their obligations on consistent purchasing every quarter, that financial commitment immediately comes to us. We do not expect to collect those because our customers are extremely serious about needing this product. The normal case is we sign an agreement and within weeks we are having a conversation about increasing the amount of product.

The market is moving very quickly—literally every day—and that makes it difficult to forecast. We want to solve a bunch of issues for our business: get a fair return for our product, leverage our substantial investments in IP and fabs with our JV partner, and get the cyclicality out of the business. There are now very substantial customers that do not want to play the quarter-by-quarter price game. They want the best products on a consistent basis so they can plan their own business. That opens the opportunity to fundamentally change how this business has worked for decades.

There are lots of other technology industries that understand recurring revenue models—it is a very powerful financial model, and we think we can bring it to our franchise.

Operator: The next question comes from Asiya Merchant with Citigroup. Please go ahead.

Asiya Merchant: Thanks for taking my questions and a great set of numbers. David, I think I heard you say some client demand with PCs or smartphones may be snapping back; you sounded optimistic on that into next year. Are you seeing anything—AI on edge devices—that underpins your optimism? And given that demand seems tilted toward meeting hyperscaler demand, what gives you confidence you can meet some of that client demand if it snaps back? And for Luis, CapEx used to be mid-teens as a percentage of revenues. How should we think about that going forward?

David V. Goeckeler: Looking at '27, we see PC and phone units are down now as you would expect; we see those flattening out and up slightly in '27. That reflects the market’s ability to adapt. Device companies are spectacular—very smart people that understand how to change their portfolio mix. We will still see content per device increase this year—phones up, PCs flat—and we will see both inflect up next year while units are flat to up slightly. What will we supply? We are going to supply the customers that we have agreements with. That is the change we have been talking about. We are talking to edge customers as well about these NBMs—multiyear agreements with the same characteristics.

Those customers understand their businesses extremely well; if we reach the finish line, we will have great insight into their demand because they will have told us and put a financial commitment behind it. We are navigating away from a market where we just show up and see what demand and price are, to one where customers commit demand we can really count on—and they can really count on us.

Luis Visoso: On CapEx, we continue to invest toward a mid-teens capacity growth over time. You should think about it more in dollars than percent of revenue. It is a little bit of an increase into the next several quarters as we continue transitions—we did the easier conversions first, and the next conversions will be a little more expensive on a dollar basis to deliver the same kind of growth. Nothing dramatic, and no change in philosophy.

Operator: The next question comes from Vijay Rakesh with Mizuho. Please go ahead.

Vijay Rakesh: Phenomenal set of results. On the guarantees and RPO: data center is already at $1.5 billion, an annualized $6 billion run rate. Are the $11 billion in guarantees and the $42 billion RPO mostly in data center? And on pricing in these guarantees, is it mark-to-market as you look out two to three years?

Luis Visoso: We are not disclosing customers or segment mix tied to the $42 billion RPO. That $42 billion is the minimum contractual revenue from the three deals signed before the end of the quarter. If you include the other two signed so far in Q4, that would be a larger number—you will see that number in our next quarter, but it is not part of the $42 billion. Regarding the $11 billion, they are different financial instruments used to protect us. There is a portion in prepayments—around $400 million you will see on our balance sheet—and there are other financial instruments managed by third-party financial institutions, triggered if the contract is not fulfilled.

Vijay Rakesh: As you look at your NAND roadmap, you have a pretty disruptive technology coming in terms of high bandwidth flash. Any thoughts on how that is progressing?

David V. Goeckeler: We are happy with how it is going—steady as she goes. We are having conversations with customers on how they would deploy it. We are building the technology—the NAND die and the controller. We are still on the timeline we talked about earlier of having the NAND late this year, and looking for more of a system with the controller early to mid next year.

Operator: The next question comes from Blayne Curtis with Jefferies. Please go ahead.

Blayne Curtis: Maybe following on that: you are hearing more discussion about different memory tiering—maybe accelerators using more DRAM. Any perspective on where high bandwidth flash fits into that? Any change over the last quarter on where that storage will be?

David V. Goeckeler: Not really. The tiering architecture that came out maybe a quarter ago is what is being deployed. High bandwidth flash is not a substitute for an enterprise SSD; it is a way to bring a lot more to inference in a different way. You can see it in our numbers—enormous pull on the portfolio of high-performance enterprise SSDs as these architectures get deployed and inference scales. NAND is the most scalable semiconductor technology in the world and is now a critical component of that architecture. We still expect refinements as we go forward. That is why we are staying close to customers deploying at scale.

Understanding what that means for demand on our product is driving demand signals years into the future for us, allowing us to align our business model around that demand.

Operator: The next question comes from Ruplu Bhattacharya with Bank of America. Please go ahead.

Ruplu Bhattacharya: Hi. Thanks for taking my question. Two quick ones. For Luis: on the long-term agreements, is there any restriction on when you can raise prices? Is it allowing for annual price increases, or are there conditions when you can raise prices? And for Dave: how do you see interest in QLC flash trending, and how do you see the mix of TLC versus QLC trending over the next couple of quarters?

Luis Visoso: We cannot go into pricing details for each contract. As said, there are fixed-price components and variable components, and it is different depending on each agreement. There is no overall answer on pricing cadence.

David V. Goeckeler: On TLC versus QLC, across the whole portfolio it is roughly two-thirds TLC and one-third QLC. In data center, for us it is predominantly TLC, and we will be launching major QLC products next quarter. There is a lot of demand for TLC in enterprise SSDs given the inference architectures and the importance of KV cache, which can scale dramatically based on use case assumptions. That said, we expect our QLC products to do very well.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Ivan Donaldson for any closing remarks.

Ivan Donaldson: Yes. I just want to say thank you, everyone, for joining the call today. Thank you for your support.

David V. Goeckeler: We look forward to speaking with you throughout the quarter.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.