Steven Fox: Dave, I was just wondering if you could zoom out a little bit without putting any kind of time frame on it, to get to the 30% gross margins, it seems like you can almost get there from here on just the typical incremental margins from volumes. But based on everything you said, it doesn’t seem that easy, especially early stage with HAMR versus later stage. So can you sort of walk through some of the puts and takes, say, over the next 2 to 3 quarters versus, say, when you hit that volume crossover where it becomes more smooth to get to the margin. It’s just — there’s been a lot of comments around this. Maybe you could just sum it up.
Dave Mosley: Yes. And Gianluca can share some insights as well here. I think that First of all, we’re ramping HAMR according to some prescriptive schedule. We can deploy it into certain mass capacity hyperscaler markets. We can also deploy it in other markets, depending on how we choose to do things so we can put it in VIA markets, for example, over time. And the rate at which we are able to transition and our yields and scrap and things like that, especially once we get to 4 terabytes per platter, then I think that becomes more and more accretive in margin. Fundamentally, though, I still think the demand picture actually is going to shape the next few quarters from a margin perspective. My sense is the demand has still not come anywhere close to where it was 2 years ago.
We may see with the growth of data and with investments that people need to make in data around all these AI applications, we may see demand pick back up again and that will be the fundamental driver. Gianluca, go ahead.
Gianluca Romano: Yes. No, I said that before, I think the combination of stronger demand through the cycle and our very good products based on HAMR technology. will drive further improvement in gross margin, sequential improvement. Now I think we will have a sequential improvement through the entire kind of ’24. And this is, of course, based on our view of the ramp of HAMR and also the recovery from the prior down cycle that we expect, especially in the mass capacity to continue through the entire kind of ’24 and actually even kind of ’25 in it.
Steven Fox: That’s helpful. Just can you fill in one other blank which is back-end testing capacity? How does that sort of help hurt margins as this ramp happens?
Dave Mosley: Based on where we were from legacy products years ago on desktop and so on and even just the volumes we were at a couple of years ago, I think we have plenty of back in test capacity.
Steven Fox: But is it a longer test cycle though, is it minimal cycle for test cycle.
Dave Mosley: It is. It certainly is the bigger the drive, the longer the test cycle but we still have plenty of capacity to cover the demands at this level.
Operator: And our next question comes from Timothy Arcuri with UBS.
Unidentified Analyst: This is Mia [ph] on for Tim. Just one for me. Now you don’t report orders but perhaps you could give us some color on book-to-bill and just some idea of where orders are relative to revenues and where that — how that book-to-bill has been trending and where you think that’s going over the next couple of quarters, that would be helpful.
Dave Mosley: Yes, that does get into our build-to-order plans. We are definitely, like I said before, very prescriptive on what we’re building for people 2, 3, 4 quarters out. And as long as we all stay on that plan, I think that’s predictable economics for our customers as well. So it’s going better and better every quarter. I think when we first launched this, there was questions that I was getting on these earnings calls about supply is so far below or sorry, since demand is so far below supply today, how can you do something like this but we need that predictability in order to run the supply chain and reward everyone upstream of the supply chain. So far, the progress has been fairly good and we’re getting better visibility in the next quarter and beyond.
Operator: And our next question comes from Vijay Rakesh with Mizuho.
Vijay Rakesh: Dave, just on the enterprise hard disk drive side on the hardest asset, do you see, given the 25% exabyte growth and recovery on the TC side this year, do you expect those revenues to get back to that $2 billion run rate exiting ’24, I guess, calendar ’24?
Gianluca Romano: No, we don’t guide after this quarter. So we just gave a good guidance for the March quarter in terms of revenue increase and profitability increase. And as we said, no, we are ramping here volume. We are seeing better demand environment. So we expect sequential improvement through the quarter but we don’t give specific guidance on revenue for the end of the calendar year.
Dave Mosley: Yes. I would say that, obviously, we’re watching near-line demand, CSP demand on-prem [ph] enterprise demand continuing to build strength but not nearly be as big as it was a couple of years ago but that’s very good and we’re being very careful building into it. The one point that you just raised which was the whole AI TPC [ph] demand which I think it’s still very early innings in this but we do see opportunity there. high-end workstations, if you will, that are running AI applications may actually be an interesting opportunity.
