Western Digital Corporation (NASDAQ:WDC) Q2 2023 Earnings Call Transcript

Wissam Jabre: Thank you, Steven.

Operator: And our last question will come from Sidney Ho with Deutsche Bank. Please go ahead.

Sidney Ho: A couple of quick ones. On the gross margin side, if I think about fiscal third quarter, if hard drive underutilization charges goes down quarter-over-quarter and revenue goes up modestly, is it fair to assume that gross margins for hard drive goes up. And if that’s the case, does that mean NAND gross margin could go below zero in the quarter. Obviously, there’s a onetime charge involved.

Wissam Jabre: So, Sidney, this is a fair way of looking at the transition from Q2 to Q3 with the improved utilization or, let’s say, smaller — lesser underutilization on the hard drive side, we expect to see some improvement in the gross margin quarter-to-quarter. And unfortunately, with the high underutilization charge related to the 30% supply cut on the Flash side, we’re anticipating the gross margin there to be slightly negative. And so that sums it up.

Sidney Ho: Great. And then my quick follow-up here is just maybe you have covered this already. But how would you characterize the inventory level in the channel and the customers for both hard drive and Flash. It sounds like hard drive is in decent shape. But curious, more curious on the flash side.

David Goeckeler: Yes. I would say it’s — actually, the channel has been pretty good on the client — on SSDs this past quarter. So, I don’t think there’s anything particularly unusual in the channel. I think the channel performance has been — was actually one of the bright spots last quarter. So, I don’t think we see anything too unusual there.

Sidney Ho: Thank you.

David Goeckeler: Thank you, Sidney. Hi, everyone. Thanks for joining us on the call. We look forward to talking to you throughout the quarter. Take care.

Wissam Jabre: Thank you.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect your lines at this time.