We’re forecasting still in the mid-20s right now. And it may be a little bit higher as people get into some of these replacement cycles that we talked about. The interesting dynamic as I look back on the last 1.5 years was the push for AI and how it consumed a lot of compute dollars for the compute infrastructure that was going on in the data centers. And that’s critical for most of our customers. They have been raised up to get as much compute memory for that compute online as they could to be able to handle all these AI applications everyone’s talking about. I do think ultimately, there’s a data back end piece of that. And then also, there’s the fact that they were — as they were prioritizing that, they were letting the drives that they had in the data centers just continue to run.
So there’s the replacement cycle for power and space and just overall cost benefits. We’re all — we’re definitely having those conversations with our customers. And then factoring that into what exactly our volume plans are for the next 3 years and saying this is what we’re intending to build. This is the economics that you could get it to — and we’ve talked about this build to order before and I think we’re getting a lot of good reception is. There’s a lot of other supply chains that are actually managed this way by these people. So they understand it fairly well and they see the TCO benefits of the higher capacity drives, so they want to reach for that, plan it well and they’ll get it. And we have to be careful, of course, because the factories have been so decimated by this downturn that we need to make sure that as we grow back, we go back in a smart way.
Operator: And our next question today comes from Aaron Rakers with Wells Fargo.
Aaron Rakers: I wanted to maybe just ask about the income statement, just the P&L trajectory from here. This guidance that you’ve given, looks like it’s the first kind of sequential increase in OpEx that we’ve seen and I can appreciate improving fundamentals, et cetera. I’m just curious, how do we think about the pace of quarterly OpEx and maybe a normalized level of operating expenses looking out over a couple of quarters. And then kind of building off of that with free cash flow generation returning — just remind us again how you think about the capital structure and possibility of coming back into the market in terms of share repo?
Gianluca Romano: Thank Alan. Well, in terms of OpEx, if you look, our trend has always been very positive in terms of OpEx control, cost control. Just a few quarters ago, we were at well above $300 million. So we went fairly low, especially in the last quarter, now at $240 million. As I said in the prepared remarks, we have little bit of higher costs expected in this quarter because we took some extraordinary action on salary that ended at the end of last quarter. So we have a little bit of higher labor cost. As usual, we will focus on OpEx control is still a very, very good number. And I think in the next few quarters, we will stay around this level of OpEx until next fiscal year, as you know, in the current fiscal year, we don’t have any variable compensation overall in our COGS and OpEx but a big part is in OpEx. So I think this level is probably reasonable for fiscal Q3 and fiscal Q4.
And then next fiscal year, probably a little bit higher cost in OpEx. Still, I think well below the $300 million, probably between $270 million to $80 million a quarter is probably a reasonable way to model it. Free cash flow, we had another positive free cash flow quarter. Of course, always very important for us to generate positive free cash flow. Revenue is increasing, profitability is increasing and therefore, we expect free cash flow also to improve sequentially through the next few quarters.
Operator: And our next question today comes from Krish Sankar with TD Cowen.
Unidentified Analyst: This is Eddie [ph] for Krish. Congrats on the HAMR launch. It’s an exciting opportunity for you guys I have a question regarding the customer value you are providing with these 2 terabyte HAMR drives. Will customers be enjoying lower price for terabyte versus 22 and 24 terabytes CMR drives, for example, or because HAMR yields haven’t matured yet, this benefit will be more about power and space and the lower price per terabyte to take place in the future.
