CJ Muse: Very helpful. If I could ask just a quick follow-up. Wissam, can you shed some light on how to think about OpEx into June quarter and beyond? Thank you.
Wissam Jabre: Yes, of course, CJ. So on the OpEx side, for the June quarter I expect us to be more or less in line. Beyond that, as the business profitability continues to improve, I expect a gradual increase. But we’re laser focused on profitability and so I don’t anticipate to increase our OpEx faster than revenue growth, of course. And when you look at look at where we’ve come from and where we are today. We’re still at or maybe more than 20% lower than where we were at the beginning of the cyclical downturn.
CJ Muse: Thank you.
David Goeckeler: Thanks, CJ.
Operator: Our next question comes from Karl Ackerman with BNP Paribas. Please go ahead.
Karl Ackerman: Yes. Thank you, gentlemen. I have two if I may. The first, why do you think there was a doubling of China demand for [indiscernible] applications this quarter? And how sustainable do you think that is? I ask, because the Chinese economy hasn’t been robust for some time, so any thoughts on that would be helpful.
David Goeckeler: Yes, I wouldn’t attribute it to the smart video market. It’s more of the China hyper scalers coming back and better demand there.
Karl Ackerman: Got it. Okay. Thank you for that. I guess, [indiscernible] if I may. It’s nice to see an improving outlook for March. Showing one quarter ahead of many of our expectations. However, I’m a bit surprised to see your NAND ASP trajectory in December below that of peers. So is there any reason why your NAND prices or ASPs perhaps would fall behind peers from here? And/or maybe there would be a catch-up opportunity as well. Thank you.
David Goeckeler: Yes. Price, your price deltas, obviously, have a big dependency on your starting point and we were starting from a better gross margin position than anybody else in the industry by quite a bit. And then on top of that, you have mix based on what’s happening in the quarter and kind of where the product is going. I think if you look at profitability of the franchise, it’s still leading the industry.
Karl Ackerman: Thank you.
David Goeckeler: Thank you, Karl.
Operator: Our next question comes from Tom O’Malley with Barclays. Your line is now opened.
Tom O’Malley: Hey guys, thanks for taking my question. It’s Tom O’Malley here at Barclays. I wanted to ask you [Multiple Speakers] So I wanted to ask on the competitive environment. Your competitor obviously talked about a million unit shipments of Hammer in the first half of the calendar year here. I just wanted to get your comments on, are you seeing any change in your interactions with your customers? Are they pointing to Hammer as a solution that they’re going to move too early in the year? Can you just talk to just the broader ecosystem and if you are seeing a transition or if it’s the other side really, clearly you are seeing some better trends with your UltraSMR drives. Just any color on that transition with your customers would be helpful.
David Goeckeler: I think customers just want to understand everybody’s roadmap, right? And they’re not looking for a particular solution. I mean, for example, we’ve been shipping EPMR drives for years versus PMR drives and nobody really asked us for EPMR drive. So they just want the capacity point at a TCO at a reliability level and be able to satisfy their demand. And I think that’s the way we’ve optimized our portfolio. We’ve commercialized EPMR, we’re very happy with the technology. We have UltraSMR on top of that. That allows us to deliver both highest capacity point in the industry, the best TCO position at very, very large scale. We can produce millions and millions of those drives per quarter. So that’s what customers are looking for and they’re looking to understand on your road map that you can continue to drive that TCO equation forward, because they’re obviously betting extremely large data centers on our ability to do that.
And our customers, I can tell you, our customers have an enormous amount of confidence in our roadmap, in our current products, and you’re seeing that in the performance of the business. You’re seeing accelerating growth, you’re seeing better profitability, you’re seeing share gains. That’s a clear indication that customers are very happy with our products. Now in particular on the transition of EPMR to Hammer, I know this has gotten a lot of attention. For our portfolio, given our UltraSMR technology, it’s been adopted by the market, Hammer does not make sense until we get to 4 terabytes per platter. Because Hammer adds a lot of costs to the product, so it adds a lot of costs to your bill of material. So we can deliver — we see the next couple of generations or couple of years of ability to deliver a very strong TCO proposition at scale on the EPMR plus UltraSMR platforms that customers have clearly adopted.
We see it as the majority of our demand in calendar year 2025. We will transition to Hammer when we get to that 4 terabytes per platter. That’s the economic crossover, right, that we’re looking for from a portfolio management point of view. So that gives you a little more color on how we’re thinking about the technology, the transition, and how customers are thinking about it. I think it’s very clear, customers are very happy with our road map and they understand in great detail where we’re going.
Tom O’Malley: Perfect. And then just one quick one on HDD gross margins. I think, when you look at the underutilization charges that are still present, you can look at just taking that out and what that means to the gross margins over the next couple of quarters. But is there any way to frame like a revenue level that gets you back to that 30% gross margin target for the HDD business or is it kind of just a wait and see when utilization takes back up and it will get there eventually. Any way to frame that from a modeling perspective as to when that can get back to your range? Thank you.
