Kevan Krysler: Yes. Thanks for the question. And really, we won’t go into a lot of detail specific to next year. We want to navigate through our seasonally largest quarter, which is Q4. But I think two important things to take away that we’re seeing. One is that demand has strengthened and is expected to strengthen through the first half, and that’s a good sign for us. And second is the momentum on for Evergreen//One and strength we’re seeing for a variety of reasons that Charlie walked through. And so both those factors will be in play in terms of how we think about next year, but would want to get through Q4 before providing anything more specific for next year.
Paul Ziots: Thank you, Noah. Next question, please.
Operator: The next question is from the line of Krish Sankar of TD Cowen. You may proceed.
Krish Sankar: Hi. Thanks for taking my question. I had a question on the $40 million telco order. It seems like a pretty big number on a quarterly basis. I was under the impression you have such a high customer concentration. So can you talk a little bit about that? And also, is this being used for 5G applications what kind of application is being useful. Thank you.
Charlie Giancarlo: Yes. No, we highlighted that it is, in fact, a 5G application environment that this is going into. And I would say in order of this type in one quarter is not terribly unusual for us. It does happen from time to time. And 5G has been a very strong market for us. The advantages that we have in space, power and cooling, reliability and longevity of the product in its remote management capability really aligns well with telco and especially 5G, which is a very distributed environment. And I will say, although it’s unusual for us in general, it’s not unusual in the telco space to have scheduled shipments aligning with their upgrades to their distributed 5G environment. So our typical business in IT and other areas is book and ship within weeks. This is a scheduled shipment based on build outs – their build-out schedule of their 5G environment.
Paul Ziots: Thank you, Krish. Next question, please.
Operator: The next question comes from the line of Sidney Ho of Deutsche Bank. You may proceed.
Sidney Ho: Thank you for the question. I want to look at the product growth – actually, gross margin is very, very good at 74%, curious about the sustainability of that, particularly if you look at the product gross margin being 73.1%, looking forward, how would you characterize the pricing environment, especially given many of your competitors have access to lower price and components now? And what specifically do you have to be more aggressive in pricing in order to keep or win businesses, especially in areas that are starting to see more competition? Thanks.
Charlie Giancarlo: Thank you, Sidney. We intend to be very aggressive in pricing and especially as we penetrate the lower price performance tiers of the disk market. It’s a new market for flash and the opportunity there is huge, more than half of the overall enterprise storage market, and we believe we have a special opportunity that ahead of every other player in the market. So our intention is the E family grows is to be very aggressive in that segment. Frankly, as you point out, the 73 is above our intended range for product gross margins. And we’re going to use that a natural cost advantage we have to continue to gain market share.
Rob Lee: And just to add on to that, I think it’s important to just highlight and remember that because of our flash management technology and direct flash, we’ve got a sustained and significant structural advantage over the competitive set who are trapped an SSD-based technology. Because of the direct flash, we can deliver products that are less complex, more reliable, more efficient, more performance. And at the end of the day, that translates to better products delivered in a more cost-effective way. And behind that, our Purity software really is that differentiation. And so just to – again, just to add on to Charlie’s points, the advantages that we have really are structural and sustainable, driven by our significant software and hardware IP.
Kevan Krysler: So I’m just going to add to this a little bit more, taking a step back, agreeing that the gross margins across the board were very strong, and so we’re quite pleased with that and validating and agreeing with obviously Charlie and Rob and really wanting to reiterate as well that the majority of our bits shipped now continue to be QLC, which ties into the continued innovation that we’re driving. And look, we really do benefit from flash pricing, both improving and weakening and we are currently seeing some improvement in the NAND pricing. And then reiterating Charlie’s point, from a financial lens with our strong product gross margins, we will be aggressive in our disk takeout strategy with our E family price performance solutions.
As we think about our subscription growth margins, that’s going to be a combination of our scale on our Evergreen offerings, including the consumption and subscription portfolio as a key contributor, also similar to the strength we’re seeing in product margins, our Evergreen subscription gross margins are also benefiting from the structural advantages that Rob alluded to. So yes, definitely pleased with what we’re seeing in terms of our margin performance overall.
Paul Ziots: Thank you, Sidney. Next question, please.
