Sandisk Corporation (SNDK) Earnings Call Transcript & Summary

Good afternoon, and welcome to SanDisk's First Quarter Fiscal Year 2027 Earnings Conference Call. [Operator Instructions] Please also note, today's event is being recorded. At this time, I'd like to turn the floor over to Ivan Donaldson, Vice President of Investor Relations. Please go ahead.

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 technology and product portfolio, our business plans and performance, our capital allocation priorities, market trends and opportunities and our financial results. We assume no obligation to update these statements. Please refer to our 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. We will also make references to non-GAAP financial measures today. Reconciliations between the non-GAAP and comparable GAAP financial measures are included in the written materials posted in the Investor Relations section of our website. With that, I'll turn the call over to David.

Thanks, Ivan. Good afternoon, and thank you for joining SanDisk's Fiscal First Quarter 2027 Earnings Call. We began fiscal year 2027 with another strong quarter, creating value for customers and shareholders and delivering results above guidance. Our strategy is working and our execution is delivering strong results. Revenue for the quarter was $11 billion. Non-GAAP gross margin was 85.1% and non-GAAP earnings per share was $49.51. We generated $5.7 billion of adjusted free cash flow and returned $5 billion to shareholders through share repurchases. Our confidence in the long-term trajectory of the business is grounded in 3 enduring strengths: technology leadership, deep customer partnerships and disciplined financial management. These strengths are reinforced by a structural increase in NAND demand driven particularly by AI and by customer signals now extending beyond fiscal year 2030 through our new business model, our NBM partnerships. Together, they position us to invest with confidence in our technology road map, strengthen and expand our customer relationships, and deliver growing and durable free cash flow while returning capital to shareholders. It starts with our technology leadership. BiCS 8 is the backbone of our current production portfolio in the industry benchmark for performance and density across TLC and QLC. BiCS 8 introduced our CMOS directly bonded to Array, our CBA architecture, enabling the performance required by AI data center customers in establishing the framework for future generations. BiCS 9 pairs the proven BiCS 8 cell array with next-generation CMOS significantly increasing interface performance while retaining a mature memory architecture. BiCS 10 10 advances the full node architecture across both TLC and QLC with a 1 terabit TLC die designed for performance-intensive workloads in a 2-terabit QLC die delivering industry-leading density in twice the read and right bandwidth of BiCS 8. Together, these technologies will extend the BiCS 8 foundation to meet the evolving performance and capacity requirements of next-generation infrastructure. Beyond the core road map, high-bandwidth flash, or HBF, reached an important milestone in the fiscal first quarter with the tape-out of our first HBF memory die with fabrication now underway. As we outlined at Investor Day, HBF is a new memory architecture for inference that targets HBM class read bandwidth with substantially greater capacity to support larger models, longer context lengths and growing KV caches. It is designed to complement HBM by bringing NAND class capacity closer to the processor, and we remain on track to deliver samples of our first HBF-based products next calendar year. HBF remains a future innovation and is not included in the long-term financial model we introduced at Investor Day. As customer adoption, product requirements and manufacturing readiness become more clearly defined, we expect to provide further perspective on the market opportunity. Customers recognize the strength of our innovation and increasingly view SanDisk as an important partner in achieving their growth objectives. Through our NBMs, we continue to evolve customer relationships into long-term partnerships grounded in innovation, collaboration and shared commitment. Our most recent customers' engagements with the world's leading AI companies indicate further upside in demand for our technology. Our market-leading technology product portfolio and customer partnerships are the backbone of our strong financial position, which allows us to reinvest to maintain our technology leadership and expand supply through R&D-focused CapEx. Each of these strengths is reinforced by tailwinds from AI, the need for scalable memory and storage is expanding as inference workloads grow, making NAND increasingly integral to AI infrastructure. During inference, each generated token must reference the context that precedes it, creating a growing KV cache that serves as the model's working memory. Longer prompts, more complex reasoning, multimodal inputs and persistent user context materially increase these storage requirements. HBM and DRAM support the highest performance tier, while flash provides the capacity required to retain broader context efficiently and avoid costly recomputation. We believe this is a secular dynamic that is expanding NAND's role across the AI stack. The memory hierarchy defines the role of each NAND architecture. TLC provides the lower latency, higher rate performance and greater endurance required for active data sets, check-pointing and latency-sensitive KV cache workloads. In our AI lab comparison, we presented at Investor Day, systems utilizing SSD delivered approximately 3x the token throughput while using approximately 75% less energy than comparable systems relying on volatile memory alone. QLC further increases storage density for capacity-intensive applications, such as data lakes, vector databases that power AI search and retrieval repositories. Between these layers, a growing persistent context tiers, establishes data to be retained and recalled rather than regenerated. As inference costs declined, we expect the adoption and usage to expand, supporting our view that KV cache will represent approximately 1/3 of the AI data center flash market by the end of the decade and that the AI data center opportunity will approach the size of the NAND industry today. Turning to our end markets. In data center, our portfolio addresses the full range of AI infrastructure requirements from performance-intensive enterprise SSD to high-capacity platforms. Demand remains strong and continues to grow, and we estimate that data center has expanded from approximately 20% of industry bids early in a decade to roughly half of the industry bits today. This structural shift in customer mix is reshaping industry economics and is central to the transformation underway at Sandisk. This quarter, data center again delivered strong growth and continued to outpace the broader market as we allocated more supply to address the growing demand from this end market. Edge is a large and strategically important market for Sandisk, spanning smartphones, PCs, automotive tablets and an expanding range of physical AI applications. Automotive is becoming an increasingly important growth vector in our Edge business and a meaningful long-term growth opportunity. We have deepening engagements with leading customers reinforcing our confidence that automotive can become one of the largest markets within edge over time. Our consumer business remains a differentiated strategic asset, combining direct brand engagement with hundreds of millions of end users and broad shelf presence across the world's leading channel partners. The consumer end market provides a durable foundation for our business. while its direct connection to the market informs product development and provides early insight into shifts in end user demand. Taken together, these results reinforce the durability of the model we outlined at our Investor Day. We have established a strong level of profitability and cash generation, and our focus from here is consistent execution across the portfolio. With that, I'll turn the call over to Luis for a detailed update on our business and outlook.

Thank you, David. We're executing these strategies and plans that we outlined at the Investor Day, and we're delivering attractive financial results. In the first quarter, we closed 2 NBMs because. Both deals closed before our fourth quarter earnings call, we announced these partnerships on that call. We're in active conversations with existing [indiscernible] customers that are evaluating extending existing agreements and with new customers that are evaluating new NBMs. These long-term partnerships provide greater visibility into demand and financial performance, supporting a more durable financial model. We will remain patient and disciplined in selecting the right long-term partners as we define the optimal percentage of our bids that we allocate to NBMs, which is slightly higher than our current levels. Revenue for the first quarter was $11 billion, up 23% sequentially and 378% year-over-year. This compares favorably with our guidance range of $10.3 billion to $10.8 billion. Both volume growth and higher pricing contributed to revenue growth, with approximately 60% of the increase attributable to volume growth and 40% to higher pricing. Data center revenue was $4.8 billion, up 61% sequentially, outpacing estimated market growth for the quarter. Our leading products and strong customer partnerships including 3 U.S. hyperscalers underpin our continued expansion in this fast-growing end market. Edge revenue was $5.8 billion, up 7% sequentially, reflecting resilience in premium and mainstream markets, partially offset by contraction at the lower end. Within Edge, we saw strong growth with automotive and IoT customers. Consumer revenue was $397 million, down 29% sequentially as the market adjusts to higher pricing. We remain committed to serving all 3 end markets with our diversified portfolio that optimizes our performance over time. Non-GAAP gross margin for the first quarter was 85.1%, up from 84.6% in the prior quarter, driven by higher volumes and pricing. This compares favorably with our guidance range of 83% to 85%. Non-GAAP operating expenses were $513 million, representing 4.7% of revenue. Non-GAAP operating margin was 80.4% compared to 79.2% in the prior quarter. Non-GAAP EPS was $49.51, up from $39.25 in the prior quarter and $1.22 in the same quarter of the prior fiscal year. This compares favorably with our guidance range of $44 to $46. We closed the quarter with 154 million diluted shares outstanding. Key GAAP to non-GAAP reconciliation includes $91 million in stock-based compensation, representing 0.8% of revenue and $513 million gain on equity securities primarily attributable to our investment in Nanya. During the quarter, we repurchased approximately 3.2 million shares of our common stock for $5 billion. Over the past 2 quarters, we have repurchased 6 million shares, representing approximately 4% of our total shares outstanding. Our repurchases reflect our conviction in the long-term value of the business and our disciplined approach to capital allocation. We continue to invest appropriately in the business while returning 100% of excess cash to shareholders. Moving on to free cash flow. Cash flow from operations was $6.4 billion. Gross capital expenditures totaled $378 million, representing 3.4% of revenue. We expect gross capital spending to increase during the balance of the year and represent mid-single-digit percentage of revenue for fiscal year 2027. During the quarter, we generated $5.7 billion in adjusted free cash flow, representing approximately 52% margin. We closed the quarter with $5.1 billion in cash and cash equivalents and no debt. Moving on to guidance. Our confidence in the long-term health of the market is reinforced by the structural growth of our -- of the AI infrastructure and the expanding role of NAND across inference workloads. Before turning to our second quarter outlook, I will announce that the Sandisk Board of Directors has approved an [ 8-for-1 ] stock split of the company's common stock. The additional shares are expected to be distributed on November 19 and trading on a split-adjusted basis is expected to begin on November 20. For the second quarter of fiscal year 2027, we expect revenue between $12.2 billion and $12.6 billion. We expect non-GAAP gross margin between 84.5% and 85.5%, which includes modest like-for-like price increases. On a pre-split basis, we expect non-GAAP EPS between $55 and $57, assuming 151 million fully diluted shares. On an 8-for-1 split-adjusted basis, this equates to non-GAAP EPS between $6.88 and $7.13 and assuming approximately 1,208 million fully diluted shares. For context, we expect a strong market in calendar year 2027. Data center is expected to be, again, the engine of growth and represent over 55% of the market, with bit demand growing about 40% year-on-year enabled by higher AI-driven capital spending. This is after more than doubling in 2026. Our NBM pipeline exceeds our supply throughout the end of the decade. With that, let me turn the call back to David.

Thank you, Luis. We continue to execute on the strategy we outlined at Investor Day, reinforcing our confidence in Sandisk's long-term trajectory. Our technology leadership, deep customer partnership and disciplined financial management, supported by a structural increase in NAND demand driven by AI, position us to serve our customers, deliver growing and durable free cash flow and return capital to shareholders. Over the past year, we have transformed the earnings and cash generation power of the business and established a strong foundation for durable performance. We remain focused on disciplined execution, sustained value creation and delivering against our long-term financial objectives. With that, Ivan, let's open it up for questions.

[Operator Instructions] Our first question today comes from Ben Reitzes from Melius.

I appreciate it, Dave. I wanted to ask two, if I could. One on the NBMs. You signed 2 before the last call. So I'm just wondering if we're going to have a lot more of them because it seems like you're already capacity constrained to agree to them. And then do you mind reminding us what the bits under contract will be in the next few years, if that's changed at all? And then I have a quick follow-up.

Yes, I'll make a few -- thanks, Ben. We appreciate it. Always good to hear from you. So I'll make a few comments on NBMs and then Luis will fill in. Yes, we've got a very strong pipeline of NBMs and you kind of hit on all the issues there. As the portfolio gets more subscribed and more committed and we're at half the bits for this fiscal year and 2/3s for next year. It's a fitting exercise to get the next tranche of them in there, but the pipeline is very strong. I think we said last quarter -- I know we said last quarter that we're going to be patient and consider the next set of customers. And that's exactly what we're doing. And we expect more of them over the next several months, several quarters as we continue to allocate the rest of the portfolio. So the pipeline is very strong and growing, quite frankly, and it's become the predominant way we deal with our customers. And I expect that the percent of the portfolio committed to continue to go up over the next couple of quarters. So Luis?

Yes. I mean just a few things I think David covered most of it. We feel very good about where we are with NBMs. As you know, we've been very selective, very strategic in who we chose to sign these deals with. We're looking at the companies we have and today, 95% of our NBMs -- sorry, with companies that are investment grade, and they generated about $130 billion in operating cash flow. So we feel that we've made the right choices. And as David just mentioned, we'll continue to be patient. We'll continue to be selective and the pipeline is terrific. So you should expect us to make -- continue to make progress. I think in my prepared remarks, I said that we expect the bids to continue to grow we had shared with you that about 50% of our bids are under NBM for '27 and about 2/3s for '28, and we expect that number to continue to go a little bit higher from the 2/3s.

Ben, I'll just make one more comment. You got to ask two questions. I'll make 2 comments. We're also balancing customers that are coming back for more like that is a real thing. And in general, we're hearing from our customers that they have underestimated the amount of NAND they need to run their infrastructure. And so we have multiple customers coming back for a second round, and then balancing that against bringing new customers into the portfolio. So there's a lot to sort out, and these are big complicated agreements. But we feel very, very good about where the pipeline is, where the portfolio is at, the products are resonating. And we'll continue to update you as we build out the portfolio of NBMs over the next couple of quarters.

Okay. Great. And just a quick follow-up. You may have seen that Intel guided down for the next quarter due to PCs and it really the impact of the memory is more than anybody thought, at least with their guidance, I don't know about anybody else. Just wondering if you are seeing NBM interest from those in the PC market more and how you -- if there's -- if that market, with regard to some of the device makers, is something that will become an NBM or is actually now getting more attractive because they're willing to pay more. How should we think about that as it looks like they're starved for product and missing numbers in that segment?

Yes. I mean, Ben, we have -- we cannot talk about specific customers. What we've said in the past is we do have NBMs in the data center business. It's data center-centric. But we also have customers on the edge. And we've offered this construct to any customer that wants it and start a process where it makes sense. So we're not trying to restrict it from any customer. We're open for business.

So Ben, the other thing I'll say to this. I mean, we are looking at this in our own reviews. We know that units were down this year. They're going to be slightly down next year, low single digits. I mean these 2 calendar quarters right now are really the trough of the year-over-year compares where they're the most negative. And so this is where we're feeling the biggest amount of change in that market on a unit basis on a year-over-year basis. All that said, we expect the PC exabytes to grow next year. And in fact, we think our internal models are every segment in the NAND market, PCs, smartphones, data center, will all show positive growth next year because of content per device continues to go up as part of that is mixing to premium. So there's no doubt there's been a market adjustment. In many ways, we're in -- as I said, from a unit basis, we're in the teeth of that on a year-over-year basis, but we see improvement from here.

Our next question comes from Joe Moore from Morgan Stanley.

Great. It seems like the underlying story here in addition to just how good the market is, is your presence in data center, you're up almost 20x year-on-year, up 61% sequentially. Can you talk about -- obviously, the market's good but it seems like your participation is also a lot better. Is that because of BiCS 8? Is that just because the market is different? Just what is it that's allowing you to get to those levels of penetration. And if data centers half of bits at some point, would you get to that in your own mix as well?

Yes, Joe. So thanks for the comment. We feel very good about where we're at in Data Center. I mean anything where you see the kind of numbers we posted year-over-year is a combination of things. I mean it starts with the fundamental NAND node. BiCS 8 is a very good node. CBA gives you very clean CMOs, which is very good interface speeds, all those kinds of things. We built the right products. We've had a TLC product in the market for several years now. It was just a couple of quarters ago that we started selling our QLC product for revenue and that we expected a faster ramp and that's happening. So we got the right product at the right time based on the right technology. And then over the last quarter or so, there's been a lot more refinement of the AI inference architecture is what I would say. When I look at the market and we kind of decompose it internally, customers are just getting more refined about how they're using NAND, where they're using TLC, where they're using QLC all different phases from KV cash to staging to fast data lakes and all the sub parts of those markets, inference and agent orchestration, model pretraining model post training, there's just a general. We're seeing NAND be applied in a more, I would say, nuanced way. In the past, QLC is being used in the right places and you're even seeing QLC sub customers even move into like KV cache where it can be supported. On the other side of the spectrum, we're seeing SLC being pulled into the architecture. It's not really in sales yet. It's more in architectural conversations. And it's not a performance type of conversation. It's more endurance think like during agenetic workloads, the amount of endurance required. And in that place, it's kind of where can we substitute NAND for DRAM. And we think those kind of architectures will be very sticky over time. Once you make that transition, you're going to stick with it given the price differential. So we see all of these things working together and I think these NBM set us up for these very deep and strategic level conversations with our customers about how they're using our product deep discussions with our engineers about how they could use our product to solve different use cases and all of that is leading to a tremendous pull on our portfolio. And like I said, our biggest customers, we've already signed one second tranche of an NBM and we're in discussions in others. So the whole setup is very strong, and we feel good about it, and we appreciate your recognition of the performance on a year-over-year basis. It really is quite outstanding.

That is surprising. And where do you think the mix goes long term in terms of good [ overhead ]?

So yes, we're working hard to catch up to have our portfolio mix equal what the market bits are. And we're going to continue to make progress throughout calendar year '27. We'll see if we actually catch up by the end of the quarter, but I think we'll get to a substantially higher number on mix than we are if we look back at calendar year -- our fiscal year '26. We'll continue to make progress here.

Our next question comes from Mark Newman from Bernstein.

On the -- if I could just first talk about price and volume in the guidance. You talked about in the fiscal Q1 that you just reported, I think you said 60% of the revenue growth from volume and 40% from pricing. Baked into your guide, I mean, how do you expect that mix to progress? Any comments on pricing? I appreciate that you've got a very high portion of volumes on these NBMs but still wanted to get some clarity on pricing, I think there's a comment that modest improvements in pricing in Q2, any further clarity on that? And then I have a follow-on question on HBF and some of the new NAND technologies as well.

Yes. So let me take the first one. Yes, you're right. We reported -- about 60% of the revenue growth came from volume and 40% from pricing in Q1 roughly and we do expect both to contribute in the next quarter. We normally don't break this mark into its pieces. But we do expect some modest pricing as we put in our prepared remarks. So we do expect both to contribute during the quarter, and we expect pricing to continue to increase modestly throughout the year.

That's helpful. Fair enough. And follow-up question is on HBS and other new NAND technologies in the data center. So there was a comment about some progress on HBF, which was great to hear. But I wondered if there's any more comments on progress and discussions with partners and customers, anything there. And the other thing, Dave, you mentioned about some of the other new NAND technologies in the data center storage next and then there's also the CMX context memory. Just what's your view on all these types of new NAND tiers in the data center, do you think they all win? Just any kind of comments on the interplay of all these and the roles each and how Sandisk plays in and the timing would be really appreciated.

Sure. So Mark, no the conversations with potential customers on HBF are robust and continue to be -- we'll continue to have those conversations as we go into putting product samples in their hands that they can start to use and understand how it's going to fit in their system. So we'll continue to update on that, but it's kind of an always on conversation. Your second question. I think this is like very, very healthy for where AI inference is, which is, as it scales out, it needs to be -- the architecture is just being relentlessly refined for economics and that's a very good thing because it's going to make -- it's going to scale, the more economic it is, the better -- and that's pulling NAND into more parts of the architecture because NAND is the most scalable semiconductor technology, right? So we're seeing -- like I said, we're seeing -- if you would go back a couple of years ago, it was all about going for more density again, going from TLC to QLC, we're still doing that, right? That's still a big part of the strategy. But now there's some of it even going in the other direction. How do I use -- how do I get more endurance in specific parts of the architecture is the endurance in the performance I get out of NAND good enough to solve the use case at a part of the architecture, where I can use it over competing technologies that may be significantly more expensive and difficult to acquire. So I would say this is a very, very dynamic discussion. There's a lot of ideas on the table. I think there should be a lot of ideas on the table. I think they'll all be pursued. And I think that the most important thing is to stay close to the people that are spending the money to scale the infrastructure. Because in the end, they'll make the decisions of what's right for them based on the use cases they're trying to solve at scale and where they're putting all this money behind it. And we're deeply -- we're deeply engaged in those conversations, and I expect them to continue to be very robust to have a lot of different ideas about how we could structure our technology in different directions to fit more and more use cases and building a product, it's always the same thing. I want the right technology at the right time and the right intensity at the right cost and really not anything less or anything more. And that's what building a product is all about because you can deliver it at the right price and then you can get the right return on it. So that process is full on in AI architecture working with our customers.

Our next question comes from David Gibson from MST Financial.

Just wondering -- thanks very much for your time today. Just a quick one. Just wondering whether you're looking to accelerate the BiCS transition from 8 to 9, 10 and so forth as a way to accelerate the bit growth in the short term and then satisfy some of that very strong customer demand.

No. I mean we're committed to the bit growth we talked about, mid to high teens. Those nodal transitions require a lot of planning and tool purchases and where lines are set up. So we're still -- we have that fab plan set up for the kind of bit growth we've been talking about for a long time. So no plans to change that at this point.

Okay. And just 1 follow-up. You talked about earlier about allocating more supply to the data center in Q1. Are there any limits to increasingly allocating your bits to data center?

Well, I mean it's -- that's very -- in some ways, yes. I mean out of the fab, you come out with a certain mix of TLC, QLC, certain dynamics, all these kinds of issues. So it's a constant fitting exercise of getting the right product to the right customer and there's a lot of magic that goes on in the organization and Luis' organization is a big part of that working with our sales teams of what is the available inventory, what's coming out of the fab, what's the mix? And where is it all going to go? Do you want to say a little bit more about that.

Yes, I think the only thing I would add, obviously, changes depending on the time frame we're looking at over the short term, it's almost impossible to do anything. It takes 120 days or so to produce a wafer. But obviously, as you look further out, there are more degrees of freedom.

Our next question comes from C.J. Muse from Cantor Fitzgerald.

A question on the comment around your NBM pipeline exceeding supply through the end of the decade in the slide deck. I guess can you elaborate on that? And how is that changing kind of your thought process around what bit supply will look like for the industry over the next handful of years? And how are you adjusting, if at all, your CapEx plans. I know you talked about mid-single digits, which implies roughly $2.5 billion to $3 billion gross CapEx, fairly low kind of number. So I would love to hear kind of your thoughts on how the visibility is impacting your thoughts around bit growth and supply.

Well, I mean, I think my first thing I say about, C.J., is the process is working. I mean it was only 2 or 3 quarters ago, we talked about even instituting this kind of business model, and we had some customers that were like-minded, and we made some very good progress. And here we are a couple of quarters later, and it's -- we talked about this after our Investor Day, we had customers coming to us offering NBMs. And that now becomes -- it's not the only way we do business. There's lots of customers with lots of different volume levels and different products, and we want to meet our customers where they are. There's no doubt about that. But it's very good to see that we have a robust pipeline now through the end -- through 2030, and we're even getting beyond that, as we talked about of customers that are really willing to give us their demand signals and financial commitments. And to the question earlier, those kinds of things will allow us -- if we choose to eventually start changing supply and demand and all those kinds of things, but we're just not there yet, right? We got to go through negotiations on all of those. We've got to get commitments. We've got to get everything all aligned. But I would say the process is working well. We're very happy with where it's at, and it gives us a lot more visibility into how we plan. But the process is still underway, right? It's still underway. And we'll -- as I said, we'll continue to update you over the next couple of quarters as we make progress.

Just a quick follow-up for Luis. On these contracts and considering some have deposits, are you able to use those deposits for buybacks? Or is that cash restricted?

Yes. In theory, we could, C.J. But as we explained at Analyst Day, a vast majority are financial guarantees, which are held by third-party financial institutions. So they are not in my balance sheet. The only thing that's in the balance sheet is prepayments and we -- that's by far the smallest amount. But there is no legal restriction on that.

Our next question comes from Karl Ackerman from BNP Paribas.

It's encouraging to see increasing NAND content per XPU and AI servers to support at cash demand, which I think compares to reductions in memory content and some server SKUs. But Dave, could you discuss how you see enterprise SSD content per server progressing in 2027 in the context of this agentic AI proliferation because it's certainly becoming a larger portion of your portfolio?

Yes. That's a big question, Karl. I mean, look, what we're doing is there's no doubt in inference agent orchestration that our product is tied to kind of CPU demand in -- for those type of applications. I mean we know at a pretty granular level the amount of demand that we expect per CPU, something 60 to 90 gigabytes per CPU is what we see in those kind of applications. I haven't run the math against what the server TAM is and kind of what the elasticity is between those two, but we can follow up on that. But as I said earlier, we continue to see more NAND being pulled into the inference architecture in all parts of the architecture and in very different ways, right? TLC, QLC and as I said earlier, now, people looking for high endurance solutions that will fit -- work -- fit parts of the workload where they don't need to use DRAM and they can use that type of NAND. So it's all very encouraging, and we'll continue to stay close. But we'll do some work on the 2 TAM analysis and what the trade-offs are between them.

Sure. If I may, a quick follow-up. Do you have an updated view or progress on your goal for enterprise SSD share? I mean can you achieve perhaps a low to mid-teens share in 2027 because you're seeing quite success right now?

Yes. We're probably not -- I mean, in the past, many years ago, we put some share goals out there, and I've tried very hard not to put share goals out there because sometimes it leads to kind of perverse choices in the portfolio. We want to maximize the value of the portfolio across all time horizons, near term, midterm, long term. So we want to keep some balance into it. Clearly, we're going to mix higher into data center. I mean you see that. We talked about that earlier. I think 17x growth year-over-year. You don't see a 17x very often in a business at this scale. And as I said, I expect that to go higher as we go through '27. In the balance point, in some ways, will be end will depend quarter-by-quarter or what we see and then what NBMs we signed, right? Those will give us a big -- a lot of visibility over the next several years where we see that mix going. So it's going higher, but I'm not going to put a specific target out there.