Yang Pu: This is Yang Pu for Karl Ackerman at BNP Paribas. Thank you for this great presentation. I have two questions, first to Ahmed about the high bandwidth drives. The idea of dual-actuator drives has existed for years, but never really took off; why is that? And why do you believe they can be successful today? And I have a follow-up.
Ahmed Shihab: Okay. I think as I said earlier, these ideas have been around for a while, but typically the way they were implemented required customers to change the interfaces, the software, the hardware, and they typically cost more money and more power. That's been the history of trying to introduce these technologies. What we've done in our designs is really paid attention to keeping the customer experience the same. So we took all the complexity away from the customer and kept it inside the drive. That's a testament to our engineering capabilities and the way that we're able to work through the drive in the small form factor we have, but keep the customer experience the same. That's what's different about these. I've seen many of these ideas, as a customer, come to me over the years, and typically it suffered from poor experience, poor power, or it's more expensive, and in this case we solved for those problems very quickly based on the history of technologies we've been incubating for quite some time.
Irving Tan: Yeah, I hope you see the big change in in our focus as a company. We talked about, a year ago, being really focused on our customer in everything. You've probably heard the word customer close to 100 times over the last two hours and everything we are doing starts with the customer at the center. Having Ahmed and more and more of our talent that comes from the hyperscale environment really gives us good insight into what we need to be doing from our customers. It's not a technology-first view. It's a customer-first view that technology enables the outcome that they want.
Yang Pu: Sorry, I have a followup. It's just a overarching question, just a long-term look at where we are in the cycle right now. Demand is through the roof, and supply is constrained; the industry is very consolidated. I feel like it's hard to apply any of our previous experience of the historical cycles onto this one. How do you think this cycle would unwind? What would make you — anything make you worry about, like, in three to five years, anything would change? Or do you all sleep very well in night? I know no one has a crystal ball but any of your longtime perspective would be very helpful.
Irving Tan: Well, we let you guys predict the cycle, right? We don't do that; you guys are experts at it. I think our focus is on staying close to our customers. The fact that three of our top five customers have entered into long-term agreements with us that extend one and two, all the way up to calendar '28, through to '27. As Kris mentioned, we're having active discussions with the rest for '28, '29, and some of them for even '30. That visibility gives us the confidence of where things need to go and the fact that you know we're not driving this business with high CapEx unit capacity focus, we can toggle technology if we need to to meet exabyte supply and demand balance.
Mehdi Hosseini: Thank you. Mehdi Hosseini, Susquehanna. Two follow-ups; one for Ahmed. Should I assume that most of the drives installed today, and over the next couple of years, are going to be on a SAS bus interconnect infrastructure?
Ahmed Shihab: No, most of the drives that exist today are on SATA interfaces. So all the hyperscalers use SATA interfaces. They're sufficient for their capabilities, and they have done for the last 10 years.
Mehdi Hosseini: Sure. Is that going to be sufficient, especially as for inferencing, and assuming that inferencing; some is done in the cloud and some on the edge. How is how would that change the SAS or SATA requirement?
Ahmed Shihab: We don't see the — customers have been really good at building the software layer, the object store layers and the file system layers such that they can aggregate the performance for many thousands of drives into serving those workloads. But as those workloads get hotter, they're looking for that more performance from us so that they can serve even more capacity and more performance to their end users. So the interfaces and the design of the boxes will evolve to meet the performance needs that we have in the future.
Mehdi Hosseini: Sure. Okay. And just one quick free cash flow question. Should I assume that the capital intensity will remain in the same range?
Kris Sennesael: Yeah, absolutely. So the CapEx intensity is four to six percent to revenue, and all the innovation that — Ahmed has talked about it, right? Especially because it's even recording technology agnostic, right? Will not require a step-up, will NOT require a step-up in CapEx.
Mehdi Hosseini: Thank you. Oh by the way I guess if we were all trying to figure out the downside is we have to figure out when is the next flood hitting Malaysia. God forbid. [chuckles]
Ambrish Srivastava: So, you used up four or five questions for the next several earnings calls. [group laughing] As did Amit! But we're going to go over there to Matt.
Matthew Scheffler: Hi, Matthew Scheffler, Investment Strategies Fund. You know, the amount of innovation sort of belies this question, but how do we know we're spending enough on R&D?
Ahmed Shihab: [chuckling] I think the results show that we are being very frugal about how we get ideas to market. We test the ideas the way that makes sense to us. We incubate them. We test them and only develop the ideas that are really resonating for our customers' experience; take them forward. So there's a lot more ideas than what we are looking at behind the scenes, it's just we do it in a very responsible and very frugal way.
Irving Tan: Yeah. Maybe I'll just add on to that, and Kris wants to as well. Look, we have definitely not stifled R&D at all. And even a year ago at the investor day, we said very clearly: we would return 100% of excess free cash flow to our shareholders. That's after the investments that we make into R&D. So again, we we're building a business not only for delivering our core drive business for today, we're also making investments into incubations for the future. These new growth vectors are something we are and will continue to make investments in, going forward — both R&D investments, and also financial investments into whether it's startups or M&A that we think is necessary, because our innovation framework has three pillars to it. We build internally, we partner, right? We co-innovate with our partners. And we also have a buy model of it. So that will not change going forward. Kris?
Kris Sennesael: Yeah, and so again, we're not starving the company. We are focused on accelerating the pace of innovation. I will allow him to spend more R&D dollars provided he does it in the most effective, most efficient way, and there is a strong return on investment. I'll stop it there. [group laughs]
Ambrish Srivastava: We have time for one more question; we're going to go to CJ over there. [points]
CJ Muse: Thank you. CJ Muse with Cantor Fitzgerald. Two questions: the first one I want to push you a little bit on gross margins. You're just a couple quarters away, I think, from 50% if you keep pricing stable and you maintain that 10% cost down. So, curious: is there something that's occurring going forward in the transitions that's reducing either your cost down, or yields not going to impact things as well? We'd love to learn a little bit more on that. And then second question would be probably a question you haven't received in, ever, which would be cannibalization going the other way. With NAND pricing moving the way it is, are you talking with customers and starting to see demand perhaps pick up that had traded away over to SSDs? Thanks so much.
Kris Sennesael: Yeah. So I'll take the gross margin question. So you think about it the right way. We are making good progress at improving gross margins. We are getting closer to the 50 and 50-plus gross margins. Obviously, we have a technology transition in front of us, but we've always stated, and I'll be happy to repeat it today, that if and when we transition to HAMR, this will be neutral to accretive to the gross margins.
Irving Tan: Yeah. And CJ to your question, look — I think what you see from the innovation that we shared today, from a capability standpoint, from a performance standpoint, we are reinventing the hard drive to make it much more competitive, much more suited for the AI workloads for today. At a minimum it's definitely going to preserve that 80% of bytes that's stored in hard drives. Do we think there's opportunity for us to expand on that given pricing? Again, it's a highly volatile environment and we'll see. But at a minimum I think it really gives us that confidence that we will continue to maintain that 80% share with some upside opportunity to grow it over time.
Ambrish Srivastava: Great. Thank you. So we come to the conclusion of our session.
Zak is a freelance contributor to Tom's Hardware with decades of PC benchmarking experience who has also written for HotHardware and The Tech Report. A modern-day Renaissance man, he may not be an expert on anything, but he knows just a little about nearly everything. ","collapsible":{"enabled":true,"maxHeight":250,"readMoreText":"Read more","readLessText":"Read less"}}), "https://slice.vanilla.futurecdn.net/13-4-19/js/authorBio.js"); } else { console.error('%c FTE ','background: #9306F9; color: #ffffff','no lazy slice hydration function available'); } Zak Killian Contributor Zak is a freelance contributor to Tom's Hardware with decades of PC benchmarking experience who has also written for HotHardware and The Tech Report. A modern-day Renaissance man, he may not be an expert on anything, but he knows just a little about nearly everything.
Key considerations
- Investor positioning can change fast
- Volatility remains possible near catalysts
- Macro rates and liquidity can dominate flows
Reference reading
- https://www.tomshardware.com/pc-components/hdds/SPONSORED_LINK_URL
- https://www.tomshardware.com/pc-components/hdds/wd-innovation-day-2026-press-q-and-a-transcript-roadmap-plans-to-reach-60tb-with-epmr-and-100tb-via-hamr-by-2029-at-some-point-the-laws-of-physics-will-require-us-to-transition-to-hamr#main
- https://www.tomshardware.com
- NVIDIA, Telecom Leaders Build AI Grids to Optimize Inference on Distributed Networks
- AMD's upcoming Ryzen 9 9950X3D2 listed around $1,000 at several retailers across Canada and the UK — New flagship dual-cache CPU might demand a hefty premium
- Level up your gaming setup with this Core Ultra 5 250K Plus bundle for $299 — save $60 with ASRock's rock-solid B860 motherboard
- Sequoia Capital shares founder’s 1977 memo for investing in Apple — initial $600,000 investment is worth $26.4 billion today, firm said it was ‘tough to do this
- Game On: Five New Titles Now Streaming on GeForce NOW
Informational only. No financial advice. Do your own research.