A：The forward-looking statements in the earnings call include expectations for the technology and product portfolio, business plans and performance, market trends and opportunities, and future financial results. Risks and uncertainties that could cause actual results to differ materially from expectations are detailed in the company's annual report on Form 10-K and other filings with the SEC.

A：Artificial intelligence is driving a step change in demand for data center and edge workloads, expanding system complexity and storage content requirements. This shift, along with strategic capacity allocation and disciplined commercial actions, has led to discussions between suppliers and customers moving from quarterly negotiations towards multi-year agreements with commitments on supply and pricing.

A：NAND is recognized as essential for the world's storage needs, driving a foundational shift in supplier-customer relationships, necessitating supply certainty and long-term planning horizons. The company is engaging in discussions for multi-year agreements to align with customers' structural demand extending beyond traditional cycles. The evolution is perceived as creating a more durable, structurally attractive industry with higher average returns.

A：The company is advancing next-generation product innovations and qualifications across the business, with key customer programs progressing in the data center. This is impacting various markets, including enterprise SSD demand which is growing across ecosystems with AI workload scaling, inference driving an increase in NAND content per deployment, and strong adoption across AI infrastructure builders like cloud, hyperscalers, and enterprise data centers.

A：The company has completed the qualification of Pcie Gen 5 hyper TLC drives with a second hyperscaler and is on track with additional hyperscalers for the Pcie Gen 5 TLC solutions. These products are driving significant revenue growth in the company's data center portfolio. The Bix AI QLC storage class product, Stargate, is advancing through qualification with major hyperscalers and is expected to contribute to data center growth in the next several quarters.

A：In the edge computing market, demand has exceeded supply due to replacement cycles and AI adoption, driving richer configurations and higher storage content per device. The company is partnering with key Edge customers to prioritize mission-critical needs and optimize product mix within available supply. A new product, the Sandisk extre fit, has been launched as a breakthrough in the USB form factor, providing a way to expand storage on PCs and smartphones.

A：Strategically, the company is focused on disciplined execution through the transition to more advanced nodes, supporting long-term bit growth in the mid to high teens while maintaining capital expenditure plans. They aim to support customer demand and maintain profitability levels necessary for substantial R&D and capital investments in advanced semiconductor technologies.

A：The company believes that the NAND market is undergoing a structural evolution catalyzed by AI, with a more pronounced effect in the data center where data growth is accelerating. As a result, they are evolving strategic engagement to prioritize customers with multi-year supply frameworks and share planning commitments. Their capital spending plans have been adjusted to support mid to high teens revenue growth through the transition to more advanced nodes.

A：Revenue for the second quarter was $3,020.5 million, with a sequential increase of 20% and year-over-year increase of 16.7%. Non GAAP gross margin was $6.68, up from $6.58 in the prior quarter, mainly from higher pricing. Non GAAP operating expenses were $400 million, and non GAAP operating margins were 6.68, up from 6.56 in the prior quarter. Non GAAP EPS for the second quarter was $6.20, reflecting higher-than-expected revenue and lower costs.

A：The purpose of extending the yokaichi joint venture is to ensure consistent product supply by aligning the operations of both companies. The financial implications include Sandisk paying for manufacturing services provided by Kyuka, amounting to $165 million to be paid between calendar years 2026 and 2029. This cost will be reflected in Sandisk's cost of goods sold over the next several years.

A：For the third quarter, the expectations are for revenue between $4.4 and $4.8 billion, with a forecasted non-GAAP gross margin between 41% and 43%. The non-GAAP operating expenses are expected to be between $510 and $570 million, and non-GAAP interest and other expenses between $25 and $30 million, with non-GAAP tax expenses between $325 and $350 million. The non-GAAP EPS for the third quarter is expected to be between $1.40 and $1.14, assuming 170 million fully diluted shares.

A：The business is evolving with a focus on technology that is essential for a variety of devices and data centers, making it central to many technologies used daily, from PCs and smartphones to the cloud and robotics. NAND technology is critical for the development and proliferation of artificial intelligence and is expected to become the largest market for such technology in the data center, driven by major technology companies. The business's supply plans are aligned to meet long-term demand which is expected to reset at a structurally higher level, providing fair returns on substantial innovation and investment.

A：The impact of long-term agreements is significant as they lock in prices at times when they are rising, which is beneficial for the company. However, there are concerns about the potential reduction in flexibility with fast price increases. The supply demand balance is currently quite tight, undersupplied, which has implications for future supply plans and potential additions to increase supply. The company is cautious about the visibility of demand and the ability to meet customer needs for long-term growth, especially in the data center market, which is experiencing substantial demand.

A：The strong business results are attributed to a combination of factors: portfolio and innovation with the ramping of the new Bix Ly node, strong customer response to fundamental NAND technology, and the extended joint venture which has led to a robust enterprise SSD portfolio. Sequential growth in both the enterprise and consumer businesses, driven by new product introductions and a better portfolio mix resulting from trading lower-margin business for higher-margin business, also contributed to the strong performance. Additionally, the overall supply demand dynamics of the market have propelled the entire market forward.

A：The customers have responded strongly to the company's fundamental NAND technology and the new consumer products announced this year. The feedback on the new extreme fit product, which allows seamless and affordable capacity expansion for devices, has been positive, with the company achieving Ed year over year growth in the consumer business. The company is making significant progress with several customers who are eager for prioritized supply as it is a critical enabler for their business. The company is being thoughtful in defining metrics for these long-term agreements, including the length of the agreement, the transaction price, quantity, and any pre-payment components.

A：The company plans for long-term agreements to ensure a fair return for its technology and to provide customers with more supply assurance. The focus is on aligning the long-term growth rate with the sustained demand in the market and achieving attractive financials. The company has been very transparent about its supply plans, investing heavily in R&D and CapEx to drive sustainable mid-teens to high teens bit growth. However, there is a need for greater visibility into customer demand, which is not simply quarterly but annual. The objective is to establish a model that can reliably supply that level of demand.

A：Data center customers are characterized as proactive and engaging in conversations about understanding supply assurance several years out. They are more willing to discuss business practices changes that are anticipated to happen during the transition to a data center.

A：The potential demand increase for data centers related to AI architecture is significant. Initial projections suggest an additional demand of 75 to 100 exabytes within the next year, which could potentially double in the following year. This demand underscores the importance of NAND in AI architecture and reflects an evolution in technology deployment.

A：The current demand forecast for enterprise SSDs is growing with a mix predominantly towards TLC, especially within the speaker's company's portfolio. The company is anticipating the launch of their Stargate product, which is in qualification and set to start shipping for revenue in the next few quarters, contributing to growth. The demand is expected to shift towards QLC as the product becomes available but remains predominantly TLC at present.

A：The growth in NAND demand is directly related to the build-out of AI infrastructure, excluding cash-related values. The projected growth for NAND demand in the data center is from high exabytes, which is a significant increase from mid exabytes in the previous forecast. This growth is attributed to AI and is reflected in the forecasted increase in data center exabyte growth.

A：The company's approach to capital management following the reduction in debt levels involves continuing to invest in the business, build prudent cash reserves, and further reduce debt. They are also considering share repurchases at the appropriate time, reflecting a conservative but strategic financial position.

A：The company's strategy for expanding their JV factory network includes the recent extension of joint venture agreements for both Yokkaichi and Kitakami sites, providing nine years of supply assurance. They have moved past any underutilization in the fabrication facility and are focusing on expanding capacity at Kitakami with the new KI fab. The company is confident in their capacity planning and the ability to expand as needed over the coming years. In terms of the industry's greenfield capacity expansions, the company expects continued growth and the necessary clean room space to meet forecasted demand through innovation, without any out-of-the-ordinary expansion plans.

A：While the company does not provide an exact number, they indicate that enterprise SSD exposure is expected to be substantial and continue to grow in the market, driven by sequential growth and the anticipated launch of their Bixa QLC product. They expect continued interest in their products and high qualifications, which will contribute to future growth.

A：When assessing the impact of ASB (Average Sales Price) on the company's financials, it's important to understand the mix effect, as the premium captured increases with scaling. Although understanding the absolute change in ASP is crucial, the relative mix and its impact on economic value are equally significant, as the company's strategy is not just about increasing the price but also about capturing value across the product portfolio.

A：The company's gross margin is being positively impacted by a better product mix and partnership with customers that value their relationship and products. This has resulted in improved gross margin.

A：The speaker suggests that there is a fair amount of urgency and indicates that the industry is trying to navigate out of its traditional quarterly auction pricing model. There's an implication that this change is challenging the existing business practices of the market. The market's transition to a focus on data centers, with high-performance and specialized needs, is seen as moving away from traditional commodity NAND. This transition is happening fairly quickly, and the speaker is optimistic about the speed of change, even though major shifts in contracts have not been announced yet.

A：The company has changed its product sales approach by now charging for qualification units, shifting from the previous method of recording costs as they were incurred (period costs) to treating these costs as inventories. This transition provides a one-time benefit and recurring savings as customers are charged for the qualification units.

A：The company's capital allocation strategy remains unchanged. It plans to continue investing in the business, build prudent cash reserves, and reduce debt. The company is fully funding the business and Opex from existing resources, and the guide does not include any underutilization charges.

A：The company is seeing consistent mid to high teens bit growth every year. The pricing across end markets has been moving up, driven by strong demand and sustainability. The company's plan, which they refer to as the plan of record, anticipates high, high teens bit growth year over year. The pricing across markets has gone up, with prices in the data center market having an impact on other markets. The company continues to see price increases across various markets.

A：The company is responding to new data center requirements with a focus on high-performance TLC drives, which have driven the portfolio. The company is well-positioned as these drives are migrated to higher capacities. Additionally, there is innovation underway in high IOPS enterprise SSDs and re-architecting of NAND to bring it into AI, with a focus on high bandwidth flash. This is in response to the need for larger storage capacities and the scaling requirements of AI models and caches.

A：The expectation is that the technology will be scaled globally in the very early stages and the process will continue for a very long time.

A：Yes, the company has signed and closed one agreement with a prepayment component, which is considered important in this type of agreement. There are several more such agreements in the queue.

A：The company is very happy with the performance of the consumer portfolio, having turned in over 50% year-over-year growth. The company has a long-term commitment to this market and believes in the value of the Sandisk brand.

A：The company views the market changes, such as unit and content growth across markets, as positive. They are receiving strong signals from customers for supply and continue to work closely with them. The company expects some base effects on units due to prior year performance but remains confident in the strength of customer relationships and the markets.

A：The company acknowledges the natural occurrence of mix changes in the market, which result from changes in component availability and prices. They consider this a normal market dynamic and not something to be overly concerned about.

A：The company expects to maintain a strong presence in the consumer market due to excellent customer relationships and a long-standing commitment to these markets. The business is valued for its wide reach across device technology and the strategic importance of the cloud and AI deployments in driving future demand.

A：The company has made significant investments in R&D and capital to manufacture front-end and back-end technology. They are now beginning to see the value of these investments recognized in their own results.

A：The company recognizes high CapEx and RD investments as critical but indicates a preference for a different industry position. They acknowledge being above script in terms of production but expect to improve their through cycle margins by progressing towards a more sustainable spending level for Opex and guiding towards a healthier tax rate.

A：The company aims to maintain Opex at sustainable levels, focusing on efficiencies and innovation without waste. The tax rate is expected to increase slightly from current levels to around 14-15% on an ongoing basis, mainly due to prior year losses in Malaysia being consumed quickly upon profitability.