Back in February, we had the opportunity to attend WD’s (formerly Western Digital) Innovation Day 2026, where the company outlined its plans for the future. Notably, the company discusses its split from SanDisk, and it’s expectations for the future, including discussion around its HAMR roadmap, in addition to its ePMR discussions, and fielding questions from analysts.
Like many of our previous event transcripts, this is almost exactly what we heard at the press-only event. As such, some elements have been lightly edited for flow and clarity. If you have not had the chance to check out other Tom’s Hardware Premium transcripts, be sure to check out our coverage from CES and GTC 2026.
Ambrish Srivastava: I guess we have to go first with Amit in that case, so just a quick — we have mic runners, there’s four of us, we’ll start off with Amit, and then we’ll queue up Aaron Rakers, right next to Amit. Ah, name and firm, please.
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Amit Daryanani: Thanks a lot; Amit Daryanani, Evercore. Thanks for the presentation. The two things that stood out, and I’d love to get your perspectives on this; one is the cost-per-bit decline—if you could just talk about how you are thinking about cost-per-bit declines over the next three to five years of the roadmap. Is that different in ePMR versus HAMR? Just, if you can walk through that math a little bit.
And then, Irving, for you, it seems like you want to commit towards an ePMR and a HAMR roadmap at least through 2028; if all customers care about is ‘the highest capacity’, ‘the most reliable at scale’, why have a dual technology roadmap when it seems like HAMR is going to work out? Just walk through the dynamic given what customers are asking for. Thank you.
Irving Tan: That sounded like more than one question, in one question. [laughing] So, let me try to address the cost-down question for a second. Obviously, you know, the cost down that was delivered, dollar per teraybte, has been about ten percent over the last few quarters. Obviously we’re not guiding to anything beyond that, but more importantly, what you’ve heard Ahmed, even as we deliver a roadmap that has both HAMR and ePMR, the common platforming that we’ve done to ensure that it’s common mechanicals, the fact that we’ve internalized our own laser capability, gives us the confidence that we’ll be able to maintain a very competitive cost-down trajectory going forward.
In relation to the roadmap — and I think Ahmed, it’s cool for you to join in — obviously what we want is to give our customers very smooth transitions, and you’ve heard how risk-adverse they are to transitions given the size and scale and the importance of storage to their business. So we’ll continuously work with our customers to make sure that the economics work for them, the economics work for us. The reality is, as we go beyond, say 60, 70, we will have to transition to HAMR. As we get to 80, 90, 100 terabytes, there is — at some point, the laws of physics will require us to transition to HAMR, but we want to do it in a way that makes economic sense, that manages risk, gives our customers smooth transitions, AND equally important, makes economic sense for us, as well. The benefit we have is that we’re able to do both whilst delivering the strong financial performance that Kris read off.
Ambrish Srivastava: I’m going to go to Aaron and after that we’ll come to Erik over here.
Aaron Rakers: Thank you, Ambrish. Aaron Rakers, with Wells Fargo. First question on the laser, the integration of the laser technology, I’m curious — and I apologize if I missed this — can you help us appreciate when that inserts itself in the roadmap? Is that a point of gross margin leverage, are there any kind of further details on how we should think about that technology path as we go to the HAMR?
And then Kris, for you, I just want to ask, I mean — first of all, congrats on the Sandisk ownership, it’s $5.075 billion [laughing] I’m curious if, as we pivot now to this significant free cash flow generation that appears to be supported by this model, how do you actually structurally think about your capital structure? You know? Are you wanting to build cash in a balance sheet, what’s the appropriate level of cash to run the organization; I’m just trying to get a frame for how you think about excess cash generation because you clearly are going to have a lot of capacity for capital return; I’m curious about how you, longer-term, think about that. Thank you.
Irving Tan: You can go ahead and take the laser question.
Ahmed Shihab: Yeah, well — I was hoping that Kris would answer the laser question too. [laughing]
Kris Sennesael: I can, but please go ahead. [laughing]
Ahmed Shihab: Oh, thank you. The laser technology, it’s — it is smaller, it is cheaper for us to produce, so that is going to be useful and accretive to the business, and we are starting a slow ramp in introducing it. So it’s not going to be a lightswitch transition because we want to be careful about when we transition that. So we’ll start that transition right around the 48-, 40-terabyte range, and even a little bit before that.
Kris Sennesael: In terms of capital structure; so, assuming a successful monetization of the Sandisk shares, we’re going to end up with $1.6 billion dollars of debt on the balance sheet, which is the convert. At the appropriate time, I want to get rid of the convert, but still keep about $1.6 billion dollars of debt on the balance sheet. So yes, we have strong free cash flow; the intent is to return all of that free cash flow back to the shareholders.
Ambrish Srivastava: We’re going to go to Erik and then we’ll tee up Asiya over here, and then Wamsi after that.
Erik Woodring: Awesome. Good morning guys. I’ll rebut Aaron and say, remember you guys once had 23 million shares of Sandisk, and— [laughing]
Irving Tan: Hindsight is 20/20, Erik. [group laughing]
Erik Woodring: Very true. No, thank you guys for all the content here. I just want to break it down, which is — we’ve gone through a lot of different configurations and platforms that you’re introducing; they all have 11 platters on them. Your competitor is coming out with HAMR with 10 platters. How do you remain price-per-terabyte, price-per-exabyte competitive; how do you continue to push down cost per terabyte when we have that kind of differential. What are you doing differently that allows you to remain competitive despite that one extra platter per drive.
Irving Tan: So maybe I’ll just make one big comment and then I’ll leave it to Ahmed. You saw his presentation, he had two very important points. One is we’re going to continue to focus on increasing areal density. Right? So, if you look at it, we’re going to deliver a 40 terabyte ePMR, as example, that’s only 11 platters; that’s close to 4 terabytes a platter. When we get to 60, we’ll introduce another platter. So that’s 5 terabytes per platter. So we’re increasing areal density. Right? So then on HAMR, we said we would get up to 10. By 2029?
Ahmed Shihab: 28.
Irving Tan: 28, sorry. He’s even ahead of me.
Ahmed Shihab: He’s sandbagging. [crowd laughing]
Irving Tan: So, if you talk about what the rest of the industry has been saying, they’re saying we’re going to get up to 10 terabytes per platter. So we’re equal or potentially, timeline-wise, going to be ahead of them in areal density. Now, what we are doing is to increase the capacity of the drives beyond areal density. So we’re going to be at parity or even ahead on areal density per platter, but we have that ability because of the innovative work that the teams have been doing, the laser technology, to — within the same drive — to increase the number of platters. Alright? So that’s how you get to a potential 140. So we feel actually, from a drive economics standpoint, actually, our dollar-per-terabyte is going to be even more competitive going forward.
Erik Woodring: Okay. And maybe just a quick followup, going back whatever it is, just 12 months ago to the last Analyst Day, I think we were setting a floor for op margins and gross margins at 24% and 38%; I know we’re kind of dreaming the dream now, which is exactly what we were all asking for, but if we do think about the other side of that, where do we think about the potential floor and margins, is it any different than a year ago or has that changed as well? Thank you so much guys.
Kris Sennesael: No — so the financial model that I put out there, as I said, it’s a target model, so we still have some time to go and some work to do to get to the targets, but I have confidence that once we hit those targets over the next three to five years, we will be able to continue to operate the business at or above those values.
Ambrish Srivastava: We’ll come to Asiya and then after that Wamsi.
Asiya Merchant: Thank you, Asiya Merchant, Citigroup, and thank you for all the content; that was great. Just one for Kris, and if I can, one for Irving as well. Kris, you know, when you talk about stable pricing, I know right now it’s a great environment, just walk us through why stable pricing makes sense beyond maybe the next few quarters where you have great visibility; if there’s a down cycle, why do you still think stable pricing could probably prevail?
And then one for Irving; Irving, on the earnings call you also talked about quantum computing. I didn’t get to hear anything about it, maybe it’s just the timeframe here that we’re talking about. Just walk us through that innovation that you’ve talked about and how does that fit into the broader roadmap? Thank you.
Kris Sennesael: So, as it relates to pricing, for me, pricing is fully tied to how much value do we deliver to our customers, right? It has nothing to do with tightness in the supply chain or strength in the cycle or weakness in the cycle. It’s “how much value do we provide to our customers,” and moving to higher-capacity drives with better areal density, with better performance, is what our customers want, it’s what our customer needs, and delivers a tremendous amount of value. That’s why we are going to remain disciplined in terms of pricing, no matter where we are in the cycle. And that’s why I have high confidence in this stable pricing environment.
Irving Tan: Yeah. Maybe I’ll just add onto that. I’ve been in regular communication with our customers, with one of the big ones, just two weeks ago — I mean, what they really want from us is predictability in pricing. It’s very hard for them to be designing their datacenter architectures two, three years, five years out when you have the volatility that we’re seeing in some of the storage tiers. So what we’re really focusing is on continuing to deliver value to them, and as Kris said, to be able to share that value, so that we can deliver that stable pricing. Obviously in the near term we’re seeing mid-to-high single digits, but in the long term model, a stable pricing environment.
In relation to your second question on Quantum and — we didn’t want to distract from all the exciting things. We had to stay on the the drive itself, and obviously as I mentioned, we look to have regular Innovation Days to keep you posted on what we’re doing. But the reason I mentioned it — because we’re not building the business just for today. We are also incubating new growth vectors for the company for tomorrow, and that’s why I took a moment to highlight the rich core capabilities and IP that we have. If you look up what the next, probably, tech growth driver beyond AI; quantum represents a huge opportunity going forward. And our magnetics capability, our magnetics junction technology capability, our nano-fabrication technology, by which we build our drives, positions us very well to deliver cost-economical qubits to support quantum computing going forward. And that’s kind of why we made the strategic investment into Qolabs — not because it’s a financial investment, but we’re also a key technology partner to them, to be able to bring quantum computing economically at scale, just like we have done for the hard drive industry.
Ambrish Srivastava: Great. And while you get ready for a question, I want to widen our horizon and see who’s in the back as I’ve been sticking with the front-benchers but we’ll go with Wamsi and—
Wamsi Mohan: Thank you, Wamsi Mohan, Bank of America, I appreciate you guys doing this, and Kris, love your comment on ‘no ceiling to numbers,’ that’s definitely encouraging here. I guess the two questions I have are one, you noted smooth transition across recording technologies and looks like relative to last year your EPMR road map is significantly different. I think last year you said ePMR might end at 36, now we’re saying 60 plus, so very different. How do you think that impacts the adoption of HAMR at your customers just given the fact that so far you’ve seen tremendous success with EPMR, and that might be an easier transition at higher capacities. So do you think it impacts the transition to HAMR from a WD perspective?
So that’s my first question, and second question is, there was a lot of innovation you shared here in terms of performance, improving performance, in terms of power, in terms of IOPS. Just curious how you think about this could expand the TAM for Western Digital, and does that — when this comes around does it accelerate your growth rate even further? Thank you.
Ahmed Shihab: So the — when we talk to our customers, one of the things they’re really very clear about is they really don’t like those step up transitions, and they want to have that smoother ramp in terms of equivalent capacity so they can choose when to ramp the capacity points for themselves. And that’s really the genesis of why we pushed the ePMR technology further. We don’t think it’s going to decelerate HAMR adoption because customers understand, to get to the beyond-60-terabytes, to the 80 to the 100s, they really need to adopt HAMR. But they want to be sure of the quality and the reliability of this new technology, new recording technology that hasn’t been in the data centers for two, three, five years, so they get comfortable with it.
So they appreciate us creating that road map for them. And since it’s manufactured on the same lines, we’re not — we’ve created — it’s fungible capacity from that perspective. So we feel that it’s the right approach for the customers; that’s certainly the feedback we’ve heard from all the customers is, they appreciate the thoughtful approach that we’ve taken to the transition. They will transition in their own time. There’s a deadline, but there is a transition.
Irving Tan: I guess in terms of the performance features, Wamsi, that you’re referring to, obviously we anticipate the take-up rate within the existing fleet of drives that we have shipping to customers, on the high bandwidth drives — Ahmed, would I say, 20, 15%?
Ahmed Shihab: About 20%.
Irving Tan: Okay, 20% of customers would want that in their fleets, right? And then obviously the energy efficient drives, that actually opens up a new TAM for us because that actually is an unfilled need between the hard drives and the archival storage tiers. Obviously all these new capabilities will be reflected in pricing that’s above and beyond what we deliver for pure capacity today.
Ambrish Srivastava: Great. We’ll go with Steve Fox over there? And then [points].
Steven Fox: Hi, thanks for all the great information; really an eye opener for someone who’s followed this industry for many years. Um, one question; it seems like maybe it’s an older question, but thinking about your areal density curve, it looks like it’s going to be a lot faster over the next three years than you’re talking about for bit growth, and you just mentioned new TAMs, etc. So, can you sort of talk — and I recognize you’re not going to be 100% at 10 terabytes per platter in three years, but can you sort of talk about how you manage that sort of additional supply through this areal density and where else it could go?
Ahmed Shihab: So increasing the areal density, the acceleration of the areal density that we’re seeing, it’s really the focus of our engineers on the media recipes, how we design the media recipes and how we increase the — change the head design. So we’re taking further advantage of technology we’ve had in our drives for some time; we’re just being a lot more bullish about what they can do and we that’s how we get the higher densities that we’re looking for right now.
Steven Fox: But I guess I’m wondering, it compares to like a 25% bit growth CAGR and you’re increasing areal density by two and a half [times] over like three years, so how does how do we equate those two numbers together?
Kris Sennesael: So, we will continue to innovate as fast as we can, and Ahmed has lined out the timing of that. Of course, on top of that, you have to lay an adoption curve at the customers, and the combination of all of that, for us, we believe we will be able to supply in line with the nearline growth of mid20s that we expect over the next three to five years.
Ambrish Srivastava: Great. We’re going to go to Tom O’Malley?
Tom O’Malley: Tom O’Malley, Barclays. Thank you guys for doing this; appreciate it. Not not much to pick at here, just two questions on the technology side. You spent a little time talking about the bottleneck of SATA for flash. Can you talk about industry improvements in memory bandwidth and if you see that getting better over the next couple of years, and if that may help flash providers? And then second, you talked about a common API for flash and hard disk drives. A big gating factor for more flash use in the past has been the difficulty with moving the software over. As you guys integrate that, is that going to hurt you in customers being more readily able to move back and forth between flash and HDDs? Thank you.
Ahmed Shihab: Improvements in — so improvements in memory interfaces is just going to accelerate the pace with which data moves around. So that’s just going to require more and more data to be transferred in and out of storage. So that’s why we feel our bandwidth drives help us really meet some of that demand. So we see that trend is going in parallel with each other, and I think that’s an important thing for us to have delivered to our customers.
On your second question, which I kind of — will the API hurt us versus help us? We feel that in those customers that have already started on flash, we want to meet them where they are. So we don’t want to make an abrupt transition for them; we want to make a smooth transition for them as well. So by offering the same API and making the transition on the same media, they get the same performance capabilities, and then when they’re ready they can take advantage of the hard drive economics without disrupting their business. And I think that’s an important transition.
I don’t think it’ll hurt us going the other way, because starting with hard drives, you’re going to like the economics, you’re going to like the performance. There will be a small amount of workloads that may benefit from flash, but being customer-centric, it’s the right thing to do for the customer.
Irving Tan: Yeah, if I may add, I think it’s ultimately down to the workloads and specifically what we’re looking at in the platforms with those open APIs is to really focus on the neoclouds where they’re starting from a flash-first perspective to really open up the HDD TAM that we don’t really actively participate today. As they start to grow and amount of their storage requirements increase, the economics will require them to move into that direction.
Ambrish Srivastava: We’ll go, right next to Tom, right there. [points] Thank you.
Ananda Baruah: Hey, yeah, thanks guys. Ananda Baruah, Loop Capital. With the roadmap for areal density that you provided, which is super impressive — is there a useful way to think about mitigation of the supply-demand gap that’s in place today? Is there a time frame that you think supply-demand can start to normalize? It sounds like regardless you guys have your paradigm on economics and value-add, that you have, so sounds like that won’t change based on supply-demand equilibrium, but any context there given that your areal density roadmap seems like it’s going to move pretty quickly over the next couple years? Thanks.
Irving Tan: Yeah, I mean — as we know that the supply environment is very strong, and the demand side of the house is trying to catch up. Obviously from a roadmap standpoint and from a production standpoint there’s limited opportunity in what we can do for calendar year 26, but as we get — as you see the road map, as we’re able to ramp up, as customers — again, as Kris mentioned, depending on the adoption cycle as we move to the latter part of ’27, ’28, we anticipate that gap to narrow. But again, you know, something that we’ve seen is that the demand for storage continues to grow at a rapid rate, so — even the mid-20s, who knows what it’s going to be going forward.
Ambrish Srivastava: Can we come to the front here please?
Yang Pu: This is Yang Pu for Karl Ackerman at BNP Paribas. Thank you for this great presentation. I have two questions, first to Ahmed about the high bandwidth drives. The idea of dual-actuator drives has existed for years, but never really took off; why is that? And why do you believe they can be successful today? And I have a follow-up.
Ahmed Shihab: Okay. I think as I said earlier, these ideas have been around for a while, but typically the way they were implemented required customers to change the interfaces, the software, the hardware, and they typically cost more money and more power. That’s been the history of trying to introduce these technologies. What we’ve done in our designs is really paid attention to keeping the customer experience the same. So we took all the complexity away from the customer and kept it inside the drive. That’s a testament to our engineering capabilities and the way that we’re able to work through the drive in the small form factor we have, but keep the customer experience the same. That’s what’s different about these. I’ve seen many of these ideas, as a customer, come to me over the years, and typically it suffered from poor experience, poor power, or it’s more expensive, and in this case we solved for those problems very quickly based on the history of technologies we’ve been incubating for quite some time.
Irving Tan: Yeah, I hope you see the big change in in our focus as a company. We talked about, a year ago, being really focused on our customer in everything. You’ve probably heard the word customer close to 100 times over the last two hours and everything we are doing starts with the customer at the center. Having Ahmed and more and more of our talent that comes from the hyperscale environment really gives us good insight into what we need to be doing from our customers. It’s not a technology-first view. It’s a customer-first view that technology enables the outcome that they want.
Ambrish Srivastava: You go to —
Yang Pu: Sorry, I have a followup. It’s just a overarching question, just a long-term look at where we are in the cycle right now. Demand is through the roof, and supply is constrained; the industry is very consolidated. I feel like it’s hard to apply any of our previous experience of the historical cycles onto this one. How do you think this cycle would unwind? What would make you — anything make you worry about, like, in three to five years, anything would change? Or do you all sleep very well in night? I know no one has a crystal ball but any of your longtime perspective would be very helpful.
Irving Tan: Well, we let you guys predict the cycle, right? We don’t do that; you guys are experts at it. I think our focus is on staying close to our customers. The fact that three of our top five customers have entered into long-term agreements with us that extend one and two, all the way up to calendar ’28, through to ’27. As Kris mentioned, we’re having active discussions with the rest for ’28, ’29, and some of them for even ’30. That visibility gives us the confidence of where things need to go and the fact that you know we’re not driving this business with high CapEx unit capacity focus, we can toggle technology if we need to to meet exabyte supply and demand balance.
Ambrish Srivastava: [points]
Mehdi Hosseini: Thank you. Mehdi Hosseini, Susquehanna. Two follow-ups; one for Ahmed. Should I assume that most of the drives installed today, and over the next couple of years, are going to be on a SAS bus interconnect infrastructure?
Ahmed Shihab: No, most of the drives that exist today are on SATA interfaces. So all the hyperscalers use SATA interfaces. They’re sufficient for their capabilities, and they have done for the last 10 years.
Mehdi Hosseini: Sure. Is that going to be sufficient, especially as for inferencing, and assuming that inferencing; some is done in the cloud and some on the edge. How is how would that change the SAS or SATA requirement?
Ahmed Shihab: We don’t see the — customers have been really good at building the software layer, the object store layers and the file system layers such that they can aggregate the performance for many thousands of drives into serving those workloads. But as those workloads get hotter, they’re looking for that more performance from us so that they can serve even more capacity and more performance to their end users. So the interfaces and the design of the boxes will evolve to meet the performance needs that we have in the future.
Mehdi Hosseini: Sure. Okay. And just one quick free cash flow question. Should I assume that the capital intensity will remain in the same range?
Kris Sennesael: Yeah, absolutely. So the CapEx intensity is four to six percent to revenue, and all the innovation that — Ahmed has talked about it, right? Especially because it’s even recording technology agnostic, right? Will not require a step-up, will NOT require a step-up in CapEx.
Mehdi Hosseini: Thank you. Oh by the way I guess if we were all trying to figure out the downside is we have to figure out when is the next flood hitting Malaysia. God forbid. [chuckles]
Ambrish Srivastava: So, you used up four or five questions for the next several earnings calls. [group laughing] As did Amit! But we’re going to go over there to Matt.
Matthew Scheffler: Hi, Matthew Scheffler, Investment Strategies Fund. You know, the amount of innovation sort of belies this question, but how do we know we’re spending enough on R&D?
Ahmed Shihab: [chuckling] I think the results show that we are being very frugal about how we get ideas to market. We test the ideas the way that makes sense to us. We incubate them. We test them and only develop the ideas that are really resonating for our customers’ experience; take them forward. So there’s a lot more ideas than what we are looking at behind the scenes, it’s just we do it in a very responsible and very frugal way.
Irving Tan: Yeah. Maybe I’ll just add on to that, and Kris wants to as well. Look, we have definitely not stifled R&D at all. And even a year ago at the investor day, we said very clearly: we would return 100% of excess free cash flow to our shareholders. That’s after the investments that we make into R&D. So again, we we’re building a business not only for delivering our core drive business for today, we’re also making investments into incubations for the future. These new growth vectors are something we are and will continue to make investments in, going forward — both R&D investments, and also financial investments into whether it’s startups or M&A that we think is necessary, because our innovation framework has three pillars to it. We build internally, we partner, right? We co-innovate with our partners. And we also have a buy model of it. So that will not change going forward. Kris?
Kris Sennesael: Yeah, and so again, we’re not starving the company. We are focused on accelerating the pace of innovation. I will allow him to spend more R&D dollars provided he does it in the most effective, most efficient way, and there is a strong return on investment. I’ll stop it there. [group laughs]
Ambrish Srivastava: We have time for one more question; we’re going to go to CJ over there. [points]
CJ Muse: Thank you. CJ Muse with Cantor Fitzgerald. Two questions: the first one I want to push you a little bit on gross margins. You’re just a couple quarters away, I think, from 50% if you keep pricing stable and you maintain that 10% cost down. So, curious: is there something that’s occurring going forward in the transitions that’s reducing either your cost down, or yields not going to impact things as well? We’d love to learn a little bit more on that. And then second question would be probably a question you haven’t received in, ever, which would be cannibalization going the other way. With NAND pricing moving the way it is, are you talking with customers and starting to see demand perhaps pick up that had traded away over to SSDs? Thanks so much.
Kris Sennesael: Yeah. So I’ll take the gross margin question. So you think about it the right way. We are making good progress at improving gross margins. We are getting closer to the 50 and 50-plus gross margins. Obviously, we have a technology transition in front of us, but we’ve always stated, and I’ll be happy to repeat it today, that if and when we transition to HAMR, this will be neutral to accretive to the gross margins.
Irving Tan: Yeah. And CJ to your question, look — I think what you see from the innovation that we shared today, from a capability standpoint, from a performance standpoint, we are reinventing the hard drive to make it much more competitive, much more suited for the AI workloads for today. At a minimum it’s definitely going to preserve that 80% of bytes that’s stored in hard drives. Do we think there’s opportunity for us to expand on that given pricing? Again, it’s a highly volatile environment and we’ll see. But at a minimum I think it really gives us that confidence that we will continue to maintain that 80% share with some upside opportunity to grow it over time.
Ambrish Srivastava: Great. Thank you. So we come to the conclusion of our session.
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