Western Digital Corporation (WDC) Earnings Call Transcript & Summary

So we're going to get started guys. Welcome to day 2 of the flagship TMT conference here. My name is Erik Woodring. I lead the U.S. IT hardware coverage here. I am pleased to be joined by Western Digital today. Irving Tan, CEO; Kris Sennesael, CFO. Before we get into introductions and whatnot, quickly, before we begin, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures for important disclosures. If you have any questions, please reach out to your sales representative. And then, Kris, I'll let you do the safe harbor agreement and then...

Yes. Thanks, Erik, for having us. And just housekeeping, today, we will be making forward-looking statements based on management's current assumptions and expectations, including with respect to our product portfolio, business plans and performance. These forward-looking statements are subject to risks and uncertainties, and so please refer to our Form 10-K and 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 be making references to non-GAAP financials and a reconciliation to GAAP and non-GAAP results can be found on our Investor Relations section on our website.

Perfect. Thank you, Kris. So, Irving, first time together at the TMT Conference, same with you, Kris, but obviously, mainstays for everyone here. I would love if you guys could maybe, Irving, just start with maybe importantly, in an all-encompassing look back on the first year at the helm, post-split with SanDisk. I know the year was tremendously strong. But like what did you learn from the last 12 months? And how are you applying that as we look forward, call it, 1, 3, 5 years down the line?

Thanks for the question, Erik. I think the main thing we took away and what we've really seen is a structural change in how our customers really view the value of data and by association, the value of storage that comes with it, right, really driven by what we're seeing with AI boom and also just the ongoing secular growth of the cloud as well. And that's really translated into a very different dynamic that we have with them. A change in how they view hard drives as not a commodity, but a strategic element of the AI and cloud stack going forward. That also means it's a great responsibility for us because we need to be able to deliver quality, scalable, reliable exabytes to our customers going forward. And that's really shaped the strategy that we've laid out for the company when we spun out SanDisk, which is really focused around the customer really getting much closer to the customer, just not in our traditional engagement with their supply chain organizations. We're much deeper with their engineering and technical organizations as well. This has really helped us shape the innovation roadmap that we have going forward, which we shared most recently at our Innovation Day just last month beyond just the higher capacity drives that we're delivering to deliver better TCO, but also better performance capabilities and energy efficiency as well. So that's really translated, that deeper customer insight has translated into faster innovation, better aligned product roadmap, I would say, an industry-leading product portfolio. And then obviously, underneath that, a lot of focus has been just really getting the fundamentals of the business right to be able to support where we want to go going forward in terms of making sure we are operationally excellent across every aspect of the internal organization. Kris has done a great job driving just the financial discipline within the company. And then obviously, we're also doing a lot to reshape our human talent capabilities to better prepare the company for where we need to be going forward to be able to better take advantage of technology advancements and automation as well. Kris, anything you want to add on the finance side?

Yes. Maybe so as a result of this deep customer engagement and focus on innovation and execution, we have now much better visibility in the business. And what used to be a cyclical business is now a long-term secular growth business. Again, with longer-term visibility. And that also has translated in much better and stronger financial output. If you look in terms of our gross margins, our operating margins and our free cash flow margin, and there is still more room to grow from here as we continue to execute as well. In addition to that, we have now transformed the company into a strong balance sheet company with some of the monetization of our SanDisk shares and in combination with strong free cash flow. So to me, this is a totally different business with much better visibility and stronger financial output.

Perfect. So we'll get into all of this. But I'd love to maybe start with the question that I get very often which is, we want to understand kind of exactly how AI is acting as a tailwind for HDDs. And what I mean by that is it's clear that leveraging more data, storing more data is going to be a broad tailwind. But what are the specific use cases for HDDs in an AI world? Can you give a few emerging examples, how do we size those opportunities? And is there a rule of thumb for us to do exabytes per megawatt, exabytes per CapEx dollar, exabytes per GPU, something like that. Just would love if you could dig into that.

Yes. I think providing a rule of thumb, it's always a bit of a tricky one, Erik, because it's very much use case dependent, right? What we do know for a fact is that obviously, as LLMs transition more towards multimodal, being multimodal in nature, especially as you transition to video, which requires order of magnitude, more storage requirements than still images or tech. That's going to be a big growth driver for storage going forward. But if you look at AI workload value chain here, if I simplify it, there are really 4 pieces to it, right? That's data ingestion. That's just storing all the metadata that's being created, whether it's in the cloud, or whether it's in AI. And that's where I would say HDDs really come to the fall because of the superior economics and the reliability. So a lot of data ingestion, the basic storage of metadata is all being done on HDD. And then the next piece of the value chain is really data preparation, right? As you prepare for model training, what do you need to do with data? So model preparation and model training, they're sort of symbiotic in nature. What do our hyperscale customers do? They take all that metadata that store on HDDs in order to prepare for the models that they want to run, they cash that data into SSDs to be able to deliver the velocity of data flow to feed the GPUs. But again, HDD still play a very prominent role in that, right? And once those models are developed, they require that those models and associated data that was used to train those models are required to be stored as well. And what is the primary storage media that they use, again, it's HDD. And then we go to the last piece of the AI sort of workload value chain, which is inference. And does this belief that inference is purely about SSDs as well. That may be true of today because the look back in inference is relatively short in terms of time. But as you go forward, as inference look backs get longer and longer and longer, you can't store that amount of data on SSDs because it's just not economically viable. So the similar behavior that we see in model training, right? Again, having all that data for inference stored on hard drives, prepping that metadata into SSDs to be able to support inference workloads is what we are seeing happening going forward as well. So HDDs play a role across the entire value chain. Obviously, a much stronger footprint in the ingestion and storage piece and then it gets a bit lighter as we move towards inference side. But it plays across the...

I want to touch on video. This feels or it seems like a really exciting emerging opportunity. 3 years ago, YouTube was doing 2 million uploads per day. Today, it's 20 million uploads per day, over 20 billion videos on the platform. It still feels like things like Google Veo or Sora are early days. But can you maybe just help us understand how important you see video, and again, kind of an extension multimodal as kind of the key driver as we look forward as maybe the most exciting part of what's emerging from AI.

Yes. I mean video itself, as I mentioned, requires an order of magnitude more storage, somewhere between 100 and 1,000x more between tech and still images, right? So it's definitely going to be a big driver of storage. And as you mentioned, Veo and Sora still in its infancy. We're talking about 15, 20-second clips. You've seen some of the interesting capabilities that have come out, right? If you guys have seen that sort of fight between -- I think it was Tom Cruise and Brad Pitt, as well, right? So that actually you start to see AI-driven video formats getting longer and longer, and there is potential for it to be short films or even full blown films down the road. So that's definitely a big driver of growth. But we're talking a lot about the consumer aspect. I think what's sometimes forgotten is industrial applications as well. If you take autonomous vehicles, as an example, right? Literally, the video feed from every car right of an autonomous vehicle that's flying the roads here in many parts of the U.S. and the world is getting stored both for compliance reasons, just in case the vehicle meets into an altercation, there's ability to go back and reference what's happened. But also that video is being stored to be able to create synthetic data to train models as well because you don't have a real life situation very regularly to be able to train a model if you have a power outage where the traffic lights go down or if you have a police stop, what does the vehicle do? You're able to simulate a lot of that by using the addition -- the video that you stored using AI to generate synthetic data to create these corner cases to be able to train these models, right? And so we think -- and that applies to whether it's autonomous vehicles, I just came from visiting our facilities in Thailand, where our latest facilities are very automated. Again, we're using a lot of the video feeds to train the tools and the robots and the machinery that we have to run a fully automated facility that flights out. These industrial applications that are also very video-rich are requiring tremendous amount of storage requirements.

Okay. That's really helpful. As a follow-up on this, obviously, we've heard you guys demand is extremely strong. Can you maybe just help us give an update on visibility where it stands today? And underlying that, a question that I get is always about overordering in this type of environment. How do you -- as you think about that elongation of visibility also protect yourself from that risk of overordering and what it could do in the future?

Sure. In terms of visibility, we have 1 of our top 5 hypescalers that has given us orders all the way through to calendar year '28. Two of them have given us orders all the way through to calendar year '27 and we're pretty much for our top 7, we have firm POs for all of calendar '26. So I would say visibility is very strong. This is a big change from even just probably a year, 2 years ago where our agreements typically span 2 quarters, right? Beyond that visibility, the commercial constructs that we have for these orders are much more robust financially as well. So there's obviously a lot of downside protection in terms of the financial risk that we are exposed to as well. And we also don't just use our customer demand signal as the only driver of the supply decisions that we make. We use it just as 1 data point, right? We also look at our own internal assessments. We run our own ML models to determine what we think that supply is. We look at our supplier base, and we have a triangulation of factors that determine sort of what supply base we should be creating to support that customer demand.

And just given the tightness of the market and obviously, the kind of bullishness behind your customers' views on the long-term growth of data, can you maybe just help us understand the top customers that don't have these commercial agreements beyond calendar '26. Is that a WD-driven decision? Is that a customer-driven decision? Why do some customers decide to give you 3 years of commercial agreements why others might not?

I would say, we're in active discussions with the remainder of them. So it's -- those are the ones that I've highlighted that we've closed commercial contracts with them, obviously. The rest of them are in active discussions with us to be able to secure supply in the outer years as well. I didn't address one of the important points that you raised. Is there a concern about customer hoarding or inventory buildup. We actually do not see that at all. This is quite different from the situation that we had sort of post-COVID where there was a big buildup of inventory during the COVID period. Our customers undertook a lot of software enhancements to improve the utilization of their storage asset. All that's been taken into account, really pretty much everything that we're shipping to them is getting deployed as quickly as they can as well.

Okay. And maybe last question on this topic is, again, just longer term, when you have conversations with your large DSP customers, I think you've talked about a bit of a different relationship now it's less transactional. It's more partnership-based. Do you believe that this kind of demand planning and visibility is different now? Has it fundamentally changed if we look back versus kind of that '22, '23 era?

I think the first thing to qualify is no demand planning purchase perfect. So will there be a degree of error in it, absolutely right? But I think the big difference is, one, we are talking about a much longer-term horizon. What's giving us a lot more confidence in the demand signal of our customers, it's also their willingness to actually sit down and show us not just a demand signal for storage, but the roadmap of applications that they are looking to launch into the future and how those applications are translating into storage requirements, specifically for hard drives. That's giving us a lot more confidence. And that reflects the fundamental changes as I mentioned from the very onset of the discussion, where there's a structural change in how our customers view the value of data and storage. And they're beginning to realize if we -- they don't have the storage capability, they're able to monetize, they're able -- the ability to compete in cloud and AI is going to be severely impacted. And that's a big change that we are seeing. The other change is also we've done a lot of education to help our customers understand that as it drives that we produce increasing capacity going forward on improved performance and energy consumption. The lead times for these drives are getting longer as well. There's a lot more sophistication and complexity that we're building into it. So they are aware that if you take the longest item in the lead time, which is the head wafers we produce, it takes us roughly about 9 months to produce one hit wafer and another 3 months to convert that into a head reader, right? So even if you give us a demand signal today, you're not going to see any change until 12 months down the road. So a lot of that education has really changed their perception. And again, it goes back to what I mentioned at the very onset, this fundamental shift in terms of how they see the strategic importance of hard drives, particularly around associated with the value of data in the world of AI and cloud going forward.

And Erik, maybe just to add there, keep in mind that 90% of our revenue today is linked to cloud, right? If you will look back 3 or 5 years ago, that was probably less than 50%, and the other 50% was our consumer business and our client PC business which is now down to 10%. Obviously, there is more cyclicality and volatility in consumer and client than there is in our cloud business.

So I want to touch on the point, Irving, that you made about cycle times, and I know this is a topic that has been well covered. No plans to add greenfield unit capacity. And just making sure that still stands today, that's still the view. And I think some people maybe try to tie looking to external vendors for head and media, additional head and media capacity as something that could imply greenfield unit capacity additions from your end. Would just love if you set the record straight about what you're doing with unit capacity as you look out right now?

Yes. So thanks for the question, I get that a lot. Let me be very, very specific and explicit about it. We are not adding any drive unit capacity, right? What we are doing is to see how we can debottleneck our existing investments, how we can leverage more automation to obviously improve throughput, which is just part and parcel of running a very efficient business that we're doing. And that's kind of why we were in Thailand looking at what opportunities that exist. We have said that we are going to continue to make investments into our head and media capabilities because. That's a big driver of areal density capability going forward, where a lot of the investments are more targeted at how we can launch the next generations of head and media, which drives higher areal density at the end day. In relation to our approach to using third-party component providers in head and media. That is actually part and parcel of our -- what has been our ongoing innovation framework, right? Yes, we are vertically integrated as a company, but we actually do utilize third-party head and media for 2 purposes. One, we are able to leverage core innovation with them that is beneficial for us and also challenges our internal teams to do better. So we're constantly always benchmarking our internal assets. This is what we can get from the market, looking at whether the combination of those assets to drive higher areal density. That's something we can do on an ongoing basis. We've always had that. We also have used them to some degree in our supply chain, right? Even some of the -- a portion of the drive that we use today already incorporates some of those third-party head and media. And that gives us supply chain resiliency as well and create some degree of buffer for us even as we drive some degree of innovation in our supply chain that takes some capacity.

And last maybe question before we get into kind of pricing and innovation is, so we take all this together, your Innovation Day, maybe 3 weeks ago, we talked about -- or you guys talked about how that Nearline outlook has changed. You now see mid-20 exabyte CAGR. That was kind of your bull case assumption, maybe slightly higher than your prior bull case assumption. Just help us understand what has now the kind of math that you've gotten to get there, the thought process around driving there? And could we be sitting here in a year and discussing the new bull case, the new outlook for Nearline exabyte shipments?

Well, I'd never say never. I think Kris would probably agree, we feel quite comfortable with the 25% CAGR on exabyte growth. Again, our focus is to be able to support that. Exabyte growth through areal density improvements, not by adding more unit capacity. And I think Kris did a great job at Innovation Day, really showcasing what can be done. So if you take what we are delivering to the market today. Last quarter, our average near line capacity is 23 terabytes. We are shipping today a 32-terabyte drive. If we can shift all our customers to that 32-terabyte drive, that's a 40% increase in exabytes into the marketplace without having to add any unit capacity. If you fast forward to the end -- the second half of this year when we're going to introduce our 40-terabyte SMR drives on the ePMR recording technology. That gives a 75% capacity increase versus that 23-terabyte average that we're shipping today. So we have that capability, right, by getting customers to adopt technology faster. We've also seen a very rapid adoption of our UltraSMR capability. We are consistently over 50% of the bids that we're shipping every quarter on UltraSMR already, and we see that increasing, over time, we have our top 3 largest customers fully onboard on UltraSMR, and we have 3 more in the pipeline coming up as well.

Okay. Great. Just, Kris, I'm going to turn it to you just on pricing. At the end of the Innovation Day, I thought maybe one of the most surprising kind of financial updates we got was that as we look to kind of the remainder of calendar year '26, as we think about price per -- blended price per terabyte, that can grow mid- to high-single digits. And that's kind of inclusive of the pricing that you've been able to set in these commercial agreements to date. You -- after that, you mentioned stable pricing beyond calendar '26. I'm just going to put you on the spot a little bit and just say, why can't that be better than stable, just given how strong demand is, where supply stands, what the substitute technology, potential substitute technology is doing from a pricing standpoint. Just the pricing outlook beyond calendar '26 as you see it today? Why could that be stronger?

Yes. And so just to reiterate, right, for calendar year '26 for all 4 quarters, we do see mid- to high-single digits year-over-year ASP per terabyte increase. And then beyond that, I indicated that the pricing environment is stable, meaning that we will continue to see flat to slightly up pricing on a price per terabyte from the higher levels that we reached in calendar year 2026. Now can it be better than that? Sure, right? But the further out there, I'm not going to commit on further price increases. Yes, we are looking at pricing from competing products, but guess what are those prices going to be in '27 or '28.

All right. Okay. Let's turn to the Innovation Day. One of the questions -- main questions I got after Innovation Day was just the desire to dual track ePMR and HAMR up to at least 60 terabytes, right? Obviously, HAMR will go well beyond that. What are the benefits that you get from kind of selling both platforms? And just help me understand, are there added costs that we need to all think about as you ramp these 2 platforms simultaneously.

I think, first and foremost, it's very important to qualify that we are firm believers in HAMR. HAMR is important for us to be able to scale capacity points to 100 terabytes and beyond, as we've laid out in innovation day. But we're in this transition period as we're moving from, one, a very established, very reliable technology to a new one. And with any technology transition, there's always a period of learning in optimization that needs to go on, whether it's yields, whether it's reliability. And as I mentioned from the very onset, our customers depend on us to be a reliable quality supplier that can deliver exabytes at scale and support them with our TCO. So we take that very seriously, and that's kind of why we sort of dual track this, right? And if you look at our ePMR portfolio we are -- we've announced the next generation of it, which we are qualifying with 2 of our largest hyperscale customers right now. Historically, we only take 2 quarters to qualify it. So we anticipate that we will start to ship in volume in the second half of the year. This is at the 40-terabyte level. And as we laid out in Innovation Day, we can probably get by 2028 to 60 terabytes. So it's roughly on a 12-platter platform So that's roughly 5 terabytes platter. And then we will also introduce HAMR at the same capacity points in parallel. This gives our customers the flexibility to transition from one technology to the other. The other important point that we made in Innovation Day that may be lost sometimes is that we are making the drives interchangeable. So our customers are able to plug and play a HAMR drive from WD or ePMR drive from WD into the same rack without any software changes or operational changes on the other side. So the whole focus is to make the whole transition seamless, reliable and to be able to deliver scalable exabytes to the customers to support their needs. We don't see it being an operational cost adder because the approach that we're taking is all the mechanical designs for the 40 terabytes and above ePMR will be the same mechanical designs that will be used in our HAMR platforms, right? The only difference in the HAMR platforms will be the fact that we have a laser of which we have a third-party provider, and we have our own internal capability and the transition to glass. But the mechanical design, the firmware for both will be identical as well. So it's really leverageable across 2 platforms.

Okay. And just touching on HAMR quickly. You announced at the Innovation Day, another customer, another large CSP customer qualifying on HAMR. I think the time line is still we should expect volume shipments in calendar -- the first half of calendar '27. Just provide the latest update. I just want to make sure that's the latest for all of us.

Yes. So we have 2 CSPs, 2 of our top 5 customers that have really started HAMR qualification. Again, we're anticipating the ramp will be in -- which we pulled forward 6 months earlier. So we were anticipating to start qualification in the second half of '26. We pulled that forward to the first half of '26. In fact, we pulled it forward to the first quarter of '26. So we have 2 CSP customers qualifying HAMR with 2 CSP customers qualifying the 40-terabyte UltraSMR EPM platforms as well. In terms of the ramp for HAMR, we're still targeting that to be first half of calendar '27. We are very comfortable with the areal density improvements that we've been making in HAMR. The focus on the qualification is really ensuring that we get the same reliability, quality and yields that we can get for ePMR. Because ultimately, the approach that we've taken is, one, to derisk the transition from our customers, give them the right reliability, give them the highest capacity points in the industry at scale to give them the best TCO but ultimately also gives us as a company the best economics. So they were able to transition from one recording technology to the other and ensure that transition is margin neutral to accretive going forward.

Okay. And maybe last innovation question before we turn to Kris on some of the numbers is, you announced a number of other kind of technology innovations, high-bandwidth drive, dual pivot. You announced power-efficient HDDs. Maybe just collectively, the thoughts behind all of this innovation. I know they maybe address different parts of the market what are the intentions as you roll out these different technologies? What are they addressing that is so critical?

So the introduction of the high-bandwidth drives really address the throughput challenges that hard drive SaaS vis-a-vis SSDs, dual pivot addresses the IOPS limitations that HDDs have versus SSDs. And as we position HDDs more and more towards AI workloads, these are important factors that our customers have told us, and again, goes back to the whole pivot that we've made as a company to be much more customer-centric. So you need to solve these issues for us, especially when you get to the 50-terabyte capacity level, bandwidth and IOPS becomes an issue. And so we've been very busy working on it. We actually have already engineering samples for a high-bandwidth drive in a customer. We anticipate that for high bandwidth drives. On average, about 20% of customers will take it up, some were much higher. Some will be lower depending on the workloads that they run. But again, it's all software related. So anything we do there will be accretive to the business. It's not factored into Kris' financial model that we shed in the Innovation Day. And then on power efficient drives, again, it caters to a specific segment of the market where there's this opportunity to say I can trade off some performance because I don't need the throughput. I don't need IOPS, but I can save energy, which is more important to me. So what we're doing is to give customers a much more granular ability to sort of segment their storage workloads by creating these capabilities that really are attuned for the AI workloads going forward.

So we're obviously focused on areal density, which clearly is a cost benefit for you, cost PCL benefit your customers you've been able to kind of cost down per terabyte at a rate of around 10% per annum is -- maybe, Kris, this is for you, but is that how we think about cost downs annually going forward? Could those accelerate as you move into 36s and 40s and beyond? Just how do we think about the trajectory of cost per terabyte as you bring these new higher capacity drives to market?

Yes. You think about it the right way. We have been executing really well on driving down the cost per terabyte we probably have the lowest cost per terabyte in the industry, which translate, of course, in leading gross margins in the industry as well. But obviously, we're not going to stop there. We are focused on driving down the cost in our global manufacturing footprint. We're also collaborating with our supply chain partners and taking out costs through value engineering. And then probably most importantly, as we move to higher capacity drives through areal density improvements, you will see a further improvement in the cost per terabyte.

Okay. Perfect. So we bring all of this together, the model, obviously, is extremely impressive, 50%-plus gross margins, 40%-plus op margins, 30%-plus free cash margins, kind of a target of $20 of earnings. I realize this is going to be -- it sounds like an aggressive question, but rational oligopolies in my mind, are extremely powerful market structures. What's the time line as we think about that path to that $20? Is there a path beyond $20?

Yes. So the time line was the next 3 to 5 years but you explained it really well. So those targets were not ceilings, right? Those targets were almost like floors. We believe we -- once we hit those targets, we will be able to continue to operate the business at or above those targets.

Okay. Perfect. So just to be very clear, and I think that's a very powerful message, which is, as we think about history, and maybe through cycle margins, through cycle earnings power, the kind of point that you're making is there's been a structural change in kind of demand signals. And as you've been able to innovate, as you've been able to kind of refocus on operations as a stand-alone HDD focused company, we believe that these are kind of the floor as we think about them as we move forward. That's kind of the message.

Yes. Yes. I think that's fair. And so again, we don't see the cycle turning anytime soon based on the strong visibility that we have from our customers. Now is there in the future going to be some periods where the growth is going to slow down, I think that is possible. But again, it's all about being disciplined from a pricing point of view, continue to innovate and drive down the cost per terabyte, and as a result of that, I do believe we will continue to be able to continue to operate the business at or above those targets.

Awesome. So I want to make sure we touch on capital structure because I think it's incredibly important. You monetized some of your SanDisk holdings. You've retired, I think it's $3.1 billion of debt, that's your term loan and senior unsecured debt. You're left with about, I think it's 1.7 million SanDisk shares, and you have your $1.6 billion convert. What's the path forward for here when we think about the capital structure, either addressing the convert? What do we want to do from a leverage standpoint? What -- where do we go from here?

Yes. So the only thing that's left right now in terms of debt is the $1.6 billion convertible debt, which is matured in 2028 with callable in November of 2026. We still have 1.7 million of SanDisk shares, which is on or about $1 billion, give or take, in value. And we've indicated that we want to continue with the monetization of the remainder of that stake potentially through an equity-for-equity transaction which basically will further reduce our share count. We will evaluate once that is all done, we will evaluate the balance sheet and the cap structure and see how we will operate the business going further. But in the meantime, of course, we will continue to generate very strong free cash flow. And all that free cash flow is being returned back to the shareholders through a combination of our dividend program where we still have plenty of room to grow. We are committed to our dividend program and plenty of room to grow as well through our ongoing share repurchases and at Innovation Day, we announced a new $4 billion program that sits on top of the prior $2 billion authorization. And we will -- there's no hesitation there. We're definitely in the market today and continue to return the free cash flow back to the shareholders.

I love that. So just with the remaining time we have, maybe Irving, Kris, you can tag team this question. But -- just what's the final message you want to leave us with as we end the session, maybe things that could be undervalued or underappreciated as you think about Wall Street's perception of the story, I just want to give you the kind of final word for everyone here.

Yes, maybe from my perspective very quickly, I really do feel that, as I said, there's a renaissance of structural change in terms of how storage is perceived and the value of it as a result of the value of data, right? And that -- you see that from the visibility that we have. Second is, what I think that's underappreciated is actually the innovation that we have, right? There's been a lot of focus on some of the innovation in our industry. But what we've shown is we can innovate on capacity, we can innovate on performance, we can innovate on power efficiency. But equally important, what you've probably seen from us over the last 12 months is not only about innovation. It's about this relentless focus on execution, right? And we've been delivering on everything that we said that we would do since the day on the spin, and that's something that we continue to be very focused on not just laying out an innovation roadmap, but making sure we're consistently executing towards it. And I think we do that well. We'll bring a smile to Kris' financial model and maybe ask something beyond as well.

Thanks for hosting us Erik.

Awesome. Thank you, guys.

Thank you very much.