Ananda Baruah: Cool. That’s super helpful. Thanks, guys.
Dave Mosley: Thanks, Ananda.
Operator: The next question is from Mehdi Hosseini with SIG. Please go ahead.
Mehdi Hosseini: Yes, a couple of follow-ups from me. I was under impression that for most of your components you have gone in-source, so what is it with HAMR that has made you rely on external vendors and how is — how you’re switching these vendors? And one follow-up for Dave. What is your most updated exabyte — overall exabyte growth looking forward as the cycle gains momentum? Thank you.
Dave Mosley: Yeah, Thanks, Mehdi. For our critical components, we are largely in-sourced, but again these — this is a mechanical piece part that is not something that we make ourselves, it’s something that we source from the outside and it’s very common in all product families, so just for that clarification. And, Gianluca, you want to take the second part?
Gianluca Romano: No, I was just thinking about the components, but there are many components that we source externally, actually now the Ads and media, of course, we produce internally. Those are the most critical components, but there are many other components that we get from external suppliers. And on that particular component, we have multiple sources, so we can switch from one to the other.
Dave Mosley: Yeah, and then on exabyte growth, Mehdi, I think it’s a good question because we come out of negative and we know that that’s not real. The negative was the first time in the history of the industry that we’ve ever seen something like that. So I do expect things to start expanding. And the — we get into this discussion about whether we like 35% or 25%, we back down to 25%, maybe near-term we’re going to see something a little bit more expansive. It’s still early in this demand cycle, but we’re fairly encouraged by what we’re seeing. And I think also our ability to go answer that with these new products, which provide more exabytes may actually drive even more exabyte expansion. The key point right now is we want to make sure that we reestablish the financial predictability of our industry because the industry has been so damaged of late, I think as we grow back, we have to make sure we’re not giving this stuff away that we’re doing it in a way that’s very measured, and the only way we can do that right now and it’s the only way that makes any financial sense too is to make sure we control supply very tightly.
Mehdi Hosseini: Thank you.
Operator: The next question is from C.J. Muse with Cantor Fitzgerald. Please go ahead.
C.J. Muse: Yeah, good afternoon. Thank you for taking the question. I know you talked about the qualification just being a three-month delay in qualifications elsewhere on track, but if things do push out a bit, how do you, I guess, expect to maybe impact your planned utilization elsewhere, your thoughts around pricing and mix, and what kind of impact could that have? I would think positively on gross margin in the back half, would love your thoughts there.
Dave Mosley: Yeah, thanks, C.J. The interesting thing is, as demand comes back, we have much more flexibility than we did, say, six months or a year ago. We’ve — we in this build-to-order process, we’ve basically told people what we’re going to build and then they’ve said, okay, I understand the economics, as more demand comes, we can now have a new discussion with them and say, which product is qualified, which one do you want to hurry up and qualify, and so I think we have a lot of options there. I mean, we’ve been focused on operating profit and free cash flow and we’re finally back in double-digits on operating profit and ROAC is finally turning back up. So all of this is just reinforcing the strategy to keep running the business for long-term predictability. This build-to-order thing is working and I think we’re going to stay on it.
C.J. Muse: Thank you.
Operator: The next question is from Toshiya Hari with Goldman Sachs. Please go ahead.
Toshiya Hari: Hi, thanks for taking the question. Dave, in your prepared remarks, you talked a little bit about AI. I realize you don’t have perfect visibility into what’s driving customer demand, but I’m curious based on your conversations with your customers, to what extent is AI having impact on your business? I know it’s nascent, but if you can comment on that, that would be great. And then related to that, I was hoping you could opine on your ability and the broader ACD industry’s ability to compete with Flash in AI. I think based on recent conversations, some of the concerns that investors seem to have is that hard disk drives, you’re very cost-competitive, but when you take into consideration things like read-write capability, space, and power consumption, it might be a little bit more competitive vis-a-vis what you’re shipping today. So curious if you can — if you can opine on that. Thank you.
Dave Mosley: Thanks, Toshiya. So, yeah, AI is a big question and I know it’s confusing for a lot of people because there’s so much marketing around it. I do think that the cloud service providers, even the enterprise OEM customers that we have, they have many different types of applications, and some of those application spaces continue to grow. Some of those applications are being dramatically transformed right now by the new compute capabilities that people have and so on. And what I would say in general, is that there are applications that are definitely, I’ll call it, cold storage, colder storage, or big data applications that are coming, video applications, for example, that we are very encouraged by, and we are seeing purchase orders now from cloud service providers and so on that actually say AI on them, which is — it wasn’t true six-months ago, but given all the creativity in this application space, I’m really excited about it.
