Western Digital Corporation

Good afternoon, and thank you for standing by. Welcome to Western Digital's third quarter fiscal 2026 conference call. Presently, all participants are in listen-only mode. Later, we will conduct a question and answer session. At that time, if you would like to ask a question, you may press star 1 on your phone. As a reminder, this call is being recorded. Now I'll turn the call over to Mr. Ambrish Srivastava, Vice President, Investor Relations. You may begin.

Thank you and good afternoon, everyone. Joining me today are Irving Tan, WD's Chief Executive Officer, and Chris Senesal, WD's Chief Financial Officer. 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 product portfolio, our business plans and performance, ongoing market trends, and our future financial results. We assume no obligation to update these statements. Please refer to our most recent 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. In our prepared remarks, our comments will be related to non-GAAP results on a continuing operations basis, unless stated otherwise. Reconciliations between the non-GAAP and comparable GAAP financial measures are included in the press release and other materials that have been posted in the investor relations section of our website at investor.wdc.com. Lastly, I want to note that when we refer to we, us, are, or similar terms, We are referring only to WD as a company and not speaking on behalf of the industry. With that, I will now turn the call over to Irving for introductory remarks. Irving?

Thanks, Ambrish. And good afternoon, everyone. And thank you for joining us today. WD started calendar year 2026 with great execution, driving strong sequential and year-over-year revenue growth in our cloud, consumer, and client businesses. while expanding gross and operating margins. Gross margin exceeded 50%, driven by our continued innovation and focus on improving total cost of ownership for our customers through higher capacity drives and increased adoption of our ultra-SMR products. With strong operating leverage, lower interest expense and efficient tax structure, these efforts resulted in nearly doubling of our EPS compared to last year. These results underscore our commitment to leading-edge innovation and strong execution. It is an exciting time to be part of WD, a focused HDD company and a strategic partner to hyperscalers and cloud service providers in this AI-driven data economy. We are well-positioned with business momentum building across our entire portfolio with greater visibility into long-term customer demand. Looking at the bigger picture, it is clear that data and data storage are becoming more critical and valuable. As AI workloads extend from training to large-scale inferencing, data generation is at an inflection point. This year, inference is expected to account for roughly two-thirds of all AI compute. This larger focus on inference increases the amount of data generated, which in turn increases the need for data storage. The scale of what is happening is also considerable. One leading hyperscalers LLM processes over 16 billion tokens per minute via direct API used by their customers, while another AI company processes over 2.5 billion prompts every single day from 900 million active users. While the resources that are used to create tokens are recycled, The data that is being created must be stored. Every token, every prompt, and every query answered and checkpoint saved creates data that requires persistent, scalable, and cost-efficient storage. And the majority of this data is stored on hardness drives. As we look ahead, we see the rise of agentic AI. The next wave, and arguably the biggest yet, What we are seeing with agentic AI frameworks represents a structural shift from AI that answers questions to AI that continuously executes workflows. That transition materially increases data generation and extends data retention cycles. Every hour of autonomous agent work and every action an agent takes creates data that must be stored. As a result, we expect agentic AI to drive a step function increase in capacity-oriented storage demand, particularly in cloud and enterprise environments. Beyond agentic AI, two more waves are building simultaneously. Synthetic data, the primary fuel for physical AI, is by design orders of magnitude larger than real-world inputs that seed it. Across industries, physical AI data factory frameworks are being designed to transform limited training data into larger synthetic datasets at scale for robotics, autonomous vehicles, and vision AI. And physical AI itself, robots, industrial systems, autonomous fleets, generates continuous streams of video, sensor, and motion data that must be stored, versioned, and fed back into training loops. These forces are not additive They are a compounding loop. Inference creates data. Agents consume and generate more data. Physical AI creates data and trains synthetic models that create more data. And ultimately, the loop accelerates. We are truly seeing that the AI-driven data economy is creating an unprecedented demand for high-capacity, reliable, high-performance storage on HDDs. This reinforces our conviction that the long-term data storage growth will be greater than 25% CAGR. WDE's technology and product roadmap is purpose-built to meet this growing demand. As we shared on our Innovation Day in February, we continue to innovate to meet our customers' needs through a combination of capacity leadership and performance innovation. Our high-capacity drive roadmap now extends from our 44TB HAMR and 40TB ePMR drives that are currently in qualification to a roadmap that goes beyond 100TB. On Hammer, we are accelerating our development and we are now in qualification with 4 customers. We are qualifying our 40TB ePMR drives with 3 customers and are on track to start volume production in the second half of Calendir 2026. With UltraSMR technology, which works across both ePMR and hammer drives, we are expanding our customer base significantly. Three of our largest customers now have adopted the technology. Two are already meeting nearly all of their exabyte demand with UltraSMR, while the third is rapidly ramping in that direction. We plan to have all of our major customers qualified on UltraSMR by the end of calendar year 2027. We are delivering on major aerial density improvements along with a focus on performance innovation with our high bandwidth drives. Customer response to our innovation has been very positive. Our high bandwidth drives are currently sampling with two hyperscale customers with an additional customer scheduled to start this quarter. Our dual pivot technology is being built specifically for new AI workloads with an open API approach aimed at simplifying deployment at scale. Based on our industry-leading technology and product roadmap, we are well positioned to support growing customer capacity, demand, and address their AI workload needs. Our long-term visibility continues to improve, with the duration of our agreements now extending into calendar 28 and calendar 29. We continue to see strong demand from across our client-consumer and OEM enterprise customers as well. In summary, the tailwinds shaping our industry today are both exciting and dynamic, and at WD, we remain focused on meeting our customers' needs while enhancing the value proposition and delivering long-term shareholder value to our investors. With that, let me now hand it over to Chris to share our Q3 results and outlook for Q4.