We have to make sure that what we do start that the suppliers are going to get paid for and so on. I think the model is generally working out pretty well. And as we show higher value, like the 3 plus terabyte per disk capacity points. And then the 4 plus terabyte per disk capacity point, I think people will want to make sure that they can take advantage of that TCO proposition we put out in front of them. So, I anticipate it’ll pick up steam. We are still doing things that are two quarters or four quarters or something like that. And so you know, there’s negotiations and everything. And I can be frustrated by that. But as those negotiations continue on, I think we will continue to make sure that we write the industry and ourselves our suppliers so that we can at least get back to a point where returning value to everyone so we can keep investing in the industry.
I think that’s an important point. That’s one of the reasons we’ve done this.
Timothy Arcuri: Got it. Thank you so much.
Operator: The next question comes from Krish Sankar of TD Cowen. Please go ahead.
Krish Sankar: Yeah. Hi. Thanks for taking my question. I have two part question. First is, you folks shipped about 56 exabytes to Nearline customers in the quarter. Given the view that, Nearline has been improving calendar 24, you think you’ll hit the 100 exabyte run rate, sometime in calendar 24? And then a follow-up is, Dave and Gianluca, it seems they’re giving more confident about HAMR ramp and gross margin this quarter versus all the prior quarters. Kind of curious what is the reason for that? Were there any improvement in the quarter that you could hit some milestones, or was it more increased customer demand or better visibility into their purchasing of HAMR next year. Any color on that would be helpful.
Dave Mosley: Yeah. I would say all of the above as time marches on, our teams make progress against the yield targets, the reliability targets, and the qualifications progress, and we can see when we have more and more certainty we get towards the end of the qualification. So all of those things are factoring into to our confidence. And I think, we’ll continue to update everyone going forward exactly how this is going. Remember that we’re also starting into qualification with this 2.4 terabyte per platter, which, again, I made the point before it’s almost the same box. And so, we have a PMR outlet for those same parts and we’re driving the vendors to that commonality, most of the vendors, the lion’s share, the vendors have common parts through these two platforms. So, we can drive that much more volume in and predictably get people paid and things like that.
Krish Sankar: And then on the exabytes senior line, can you hit 100 exabytes next year, or is that too aggressive?
Gianluca Romano: Yeah. I think for the current fiscal year and probably the calendar 24, is not very probable that we can double the exabyte, but we think we will grow sequentially in all those quarters.
Krish Sankar: Thanks, Gianluca. Thank you, Dave.
Dave Mosley: Thank you.
Operator: The next question comes from Blayne Curtis of Barclays. Please go ahead.
Thomas O’Malley: Hey. Sorry about the name mix up there. This is Tom O’Malley on for Barclays. I just wanted to understand the timing of the recovery a bit better here. You previously have talked about Q4 and then you talked about the end of December. And this is a Nearline in particular, and you know, it’s kind of pushed to Q1. You’re seeing this US cloud uptick. You said again, so kind of in September and in your expectations for December. But when do you expect the market step up in the market? Is that still expected for March? Or have things kind of elongated just given the inventory situation? Any update on that recovery will be helpful.
Dave Mosley: Yeah, Tom. Thanks. I think we’re still on the same plan that we talked about last quarter. It’s a gradual uptick. So, we’re watching the inventory being depleted. We’re seeing new orders come in. I think the one variable would be maybe some of the global cloud customers, not the US cloud customers, maybe some of the global cloud customers given some of the economic issues that we have in various parts of the world. But generally speaking, we’re still on the same plan and we’ll see a gradual uptick rather than a hockey stick.
Thomas O’Malley: And then just on the gross margin side as well, just taking the midpoint of guidance and you’re talking about operating expenses actually up slightly in the December quarter. It implies 200 plus basis points of sequential improvement in gross margin. I understand that you pointed to some pricing increases, but that’ll be pretty quick in terms to get the full benefit there. Is there any other levers that are contributing to December? Obviously, you have some mix benefit with [Viagon] (ph) or going down and Nearline up, but just any other levers that you could point to other than the pricing that are impacting December? Thank you.
Gianluca Romano: Yeah. I will not say that pricing is the only thing, driving the gross margin up, actually the cost side is very important. We have the full impact of all the restructuring plan that we executed in the prior quarter that are now going into our COGS. Of course, also in our OpEx. OpEx could be a little bit higher, but not much higher. So we are talking about few million dollar higher. So, I would say both pricing and cost should go in the right direction to improve our gross margin sequentially.
Dave Mosley: And sorry, just to be clear, we are also going through product transitions. Right? So as we may raise price on one of the older products and then there’s a — the customer can offset some of those increases by a better TCO proposition in the next drive. And we can go work the cost on that. So the mix plays a role and the customers can see the TCO benefit they’re incentivized for that.
Operator: The next question comes from Steven Fox of Fox Advisors. Please go ahead.
Steven Fox: Thanks for taking my question. Dave understanding everything that you said about sort of a cyclical recovery, there’s still a lot of macro headwinds out there. And, obviously, your decline in sales over the last 12, 18 months is out done, what the macro is doing. So I’m just curious. How can we get comfortable with the idea that as you see more macro pressures that business your business keeps recovering. Is there anything you would point to in particular that may not limit cloud spending as much more than you think of? Or just like other cycles where you outgrew in tough environments. Thank you.
Dave Mosley: Right. Thanks. You’re right. It is a tough environment. I will say that data continues to grow and people want to improve their economics all the time. So, the data centers that exist in the world have an enormous number of hard drives. So we’re going to see some, refresh of those for various reasons, power some of them are just aging off. The upgrades are — can be actually fairly large. If you think about buying a 32 terabyte drive and replacing 4, 8 terabyte drives that may still be in your system. I mean, those are market economical benefits that will ripple through the data centers. And so I do think that in some cases, since data is growing so big, it bucks the trend of what’s going on in the macro. I mean, obviously, that everyone’s paying attention to the macro.
