Tech Conference. Welcome, everyone. Asiya Merchant. I am here. I lead Citi's tech hardware and supply chain on the research side. Really excited to have Luis.
Thank you.
Visoso here, CFO of SanDisk. I am sure this is one of the more exciting sessions here at Citi's Tech Conference. I am going to start off here with a few questions. Any safe harbor or something?
Yeah.
You would have to read.
Let me just read it quickly.
All right.
We'll be making forward-looking statements in today's discussion based on management's current assumptions and expectations, including with respect to our technology and product portfolio, our business plans and performance, market trends and opportunities, and our future financial results. These forward-looking statements are subject to risks and uncertainties. We assume no obligations to update these statements. Please refer to our annual report on Form 10-K and other filings with the SEC for more information on the risks and uncertainties that could cause actual results to materially differ from expectations. We will also be making reference to non-GAAP financials and a reconciliation of GAAP to non-GAAP financials that can be found on our website.
Great.
Thank you.
Thank you. All right. I'm going to kick it off here with a few questions. I'm going to leave some opportunity for investors to ask a few. Please do raise your hand so we can bring the mic to you. All right. Thank you again.
Thank you.
For being here.
It's great to be here.
Of course. I have to credit David and yourself, Luis, here for these NBMs. They've taken investors' interest quite unexpectedly. I know you guys have been talking about it.
Yeah.
But when actually people did see it in your results, and now it's been two quarters, plus you had an Analyst Day as well where you talked about it. I'm going to start it off with that because that seems to be on top of everybody's mind. Just to recap, you expect NBMs from a bits perspective to be 50% of your bits this year. You're talking about it, but 2/3 into fiscal 2028. Just where do we end up with the steady state? Are you thinking about this being like a 70%, 80% through your I think at the Analyst Day, you talked about it through fiscal 2030, sort of your long-term target overall when you laid that out.
Yeah.
But in terms of NBM bits, what do you think could be the steady state going on after fiscal 2028?
Yeah, I love the question and just what we're trying to do here. You really take a step back. Just when we started, we were transacting every quarter, right? It was tough because you would start the quarter, and you did not know what our customers wanted. You got an idea of what they wanted, but not necessarily agreement on price. It was very tricky to manage and to guide our forecast. I remember one of our first board member meetings, one of our board members asked, "What's your backlog?" I was like, "What do you mean backlog? That doesn't exist in this industry." There was not kind of profitability, was really challenging. Starting this journey on building the new business models, I think was the right thing to do.
We started talking about that maybe three quarters ago, and it was an idea, and we were working on it. We had several customers engaged, and we signed our first NBM, I think was in January. We were taking small steps and really warming up and learning on how to do this, and it was a shorter one, and it was with a strategic customer, obviously. We then fast-forward to where we are today, and I think the relationship with these customers has dramatically changed. I think as you and I have talked, we have been very selective. We did not want 20 or whatever. We wanted to focus on those few customers that we thought are going to win in the market, that are very, very strategic for us, and those customers that are going to continue to take more bits as we go along the journey.
I do not know what the magic number is of where we want to be, right? We keep on learning. We have these conversations with customers, and they tell us their needs. We work on financials. Again, we are working on an attractive business that is durable. That is the single most important thing to do, and we do both. Doing one or the other does not make sense. We want an attractive business that is durable. Therefore, as we negotiate with customers, we are constantly redefining where do we want that 50%, 2/3 to evolve into the future.
Just within that framework right now, you have 50%, you have the 2/3 fiscal 2027, fiscal 2028. What about the one that is left over? Should investors think about that as any kind of upside above sort of whatever the pricing is within these NBMs? Is that sort of upside relative, and it could be a function of the spot price or the broader contract price that is going market?
Yeah. I think there are some customers which some of them just are never going to embrace their new business model, and we will sell bits that we have for them in the market at market prices. There is also a small percentage of our business that goes to very strategic customers that are just relatively small, and their new business model may never be a good solution for them. But we think there will be a proportion of our business that will stay in the non-NBM business, and that will be based on spot prices.
Okay. Then just a little bit on margins. Obviously, investors are captivated by your current margins, and you've said that even at these floor levels, which are within these NBMs, there's a floor and a ceiling, but even at floor levels, you're hovering around 80% gross margins, which is very, very attractive. When you talk about economic sharing mechanism at these, just help investors understand what happens on the upside, right? Because there's a ceiling.
Yeah.
But then there is what happens on the downside, and then how do we think about the transactional part of that, which are non-NBMs?
Yeah. When we started to work with our customers and started to lengthen the time of these new business models, we thought, well, a fixed price is going to be tricky, because one of us is not going to be happy. If prices go up, we wouldn't be happy because we wouldn't capture it. If prices go lower, our customers would be uncompetitive versus what others would be paying in their markets. So we said, well, there would be a mechanism, this floor and ceiling, around that fixed pricing. So think about it kind of parallel to the fixed pricing, kind of some upside protection and some downside protection. The good thing is, as you've mentioned, we feel good about margins, even at the low-case scenario. The non-NBM business will continue to price at spot prices.
Okay.
Well, whatever we think the value we offer to our customers and what we can negotiate with them. Even if you are an NBM customer and you want upside, obviously, we're going to see what is the right price for that business.
Okay. Which brings us back to the fact that you've had a couple of customers come back to you after those initial NBMs. I think you've talked about that in your last call. When we think about these customers who are coming back, are these more hyperscalers? Are these non-hyperscalers, but still in the data center? Are they edge customers? How should we think about these NBMs when you renegotiate them? Are they just incrementally higher price now? Is it the entire agreement that got redone? Is it part of that agreement that was just the upside? Just maybe help investors understand.
Yeah. So there are two contracts that we changed, but there are many NBM customers that have come back to us, and some of them have just bought business outside of the NBM, which is great. We're strengthening this relationship, which moves us from being a tactical vendor to a very strategic partner, and I think that has many implications, including if they ever had to make choices, we are closer to them, and that would give us a preferential treatment, or we expect that will give us a different treatment. But to your question, yeah, two customers have come back. One of them extended the duration, and the other one just added a ton of volume to the NBM that we had initially signed. This was a very interesting contract because they all take time.
Somebody was asking me, "Why do they take so much time?" Well, because they are pretty big, right? It takes longer to buy a house than to buy something small, I guess. But these are big commitments, and our customers take them very seriously. Even when we were signing the first version, they started to talk about upside, and they said, "Well, engineering is coming up with these numbers based on these models, inference usage models, and the numbers are just too big, and we need more time to vet them. Why don't we sign version one, and then we'll see what happens over time?" Not surprisingly, they came back and said, "Hey, we actually do need more. We are ready to commit," and we changed that.
The contract is not super long, but these are robust contracts with a lot of different clauses that protect around supply and demand certainty, right? So there is a few things. The only things that changed in the new contract were quantities, and we did adjust price to the prices that we thought were attractive for them and attractive for us.
Okay. All right. Just while we are on the topic of data centers, and I know there is a lot of questions on data centers, but remind us, 38%, I think, exiting fiscal 2026, which was your last quarter. How do you think about the business overall? Do you think 40%, 50% is kind of where you think sort of end state, where data centers, and obviously you have your retail business, and then you have your edge business.
Yeah. We started late with data center, right?
Yeah.
When financials were a lot tougher, we had to make choices. We prioritize edge versus data center, and just didn't have the right products. All of that changed when we had BiCS8, which is an amazing technology, and then we brought these products into market with, we call Carrera for our compute product and Stargate for QLC, right, for storage. Now we have the right products, which are amazing in terms of performance, density, and energy consumption. We are very happy. We reported $3 billion in revenue from these businesses in the last quarter. But as you said, we are only 38% of our business going to data center, and the market is very soon going to be 50%. In my view, we are still a little bit underrepresented in data center. We expect this will continue to evolve. But we believe in a portfolio.
We believe in having presence across markets. We think that is the right thing to maximize value over time. Just like we are committed to our consumer business. Some people talk about consumer as edge.
We talk about consumer really what you and I would buy in an Amazon.com or Best Buy or those type of stores, and we believe in that portfolio. It's very important.
Okay. All right. If I can, just before I switch from the data. When we're talking about QLC technology, you talk about data lakes, you talked about at your Analyst Day, you had some very interesting projections as well on how big this data center could become in terms of exabyte consumption for the overall industry. You're also talking about a cost structure with your BiCS8, BiCS10, BiCS11. You do have Chinese competition, YMTC. They're very, very aggressive. They have been aggressive for the last few years. Are they also gaining a lot of hyperscaler attention? How do you think about that competition from hyperscalers, which is where a lot of the growth that you've talked about for the industry?
Yeah. It's difficult for me to talk about their business because I don't know.
Okay.
I know as much as you can read externally. There is some information through the IPO process which seems to indicate to me, or at least my understanding, is they are more of a component, selling a lot of components. I don't know how much they are developing their eSSDs. What I can tell you is our relationship with hyperscalers is very strong and robust and growing. So we feel about our competitive position in the market despite of a YMTC.
Yeah. Just talk a little bit, I know you guys don't like to talk about costs per se, but just as you think about your migration, BiCS8, BiCS10, BiCS11, how are you thinking about your moats? Cost obviously should be attractive for your hyperscaler customers, but broadly speaking, how are you thinking about your moats as you're transitioning on that technology roadmap from your current BiCS8, BiCS10, and I know you talked about BiCS9 as well at the Investor Day.
Yeah.
Yeah.
Yeah. We don't think it's a good strategy to talk about our cost downs, particularly our negotiating prices with customers. Having said that, we do see some benefit in cost as we continue to innovate in our portfolio. As we drive new nodes, we continue to improve yield, and our single most important advantage is how much CapEx is required to spend to generate new nodes. Alper has this. Isn't it amazing when your R&D leader talk about CapEx efficiency, right? That's what you want. So he has this beautiful chart that proves that over time, we've been consistently spending less CapEx per additional bit, which makes us very competitive, because then that flows through obviously lower depreciation, lower unit cost.
So we think that that's a competitive advantage, which goes back to our ability to continue to drive scaling. So we're very focused on driving cost as a competitive advantage, we think it's very important. You could argue a little bit less critical right now because margins are better, but we are very focused on driving cost down. There are within our cost, as you track our unit cost over time, there will be mixed impacts.
But as you move more of your business to data center, those products are more costly per unit. But the gross margins are still very interesting and attractive, but the unit cost could be higher because there is more components, more DRAM, more components in general. So there will be a mixed element of that, and DRAM and just as a few other components have increased in cost. So what we call non-memory cost keeps on going up.
Right. Then you also have your CMOS, which is your bonding technology, direct bonding technology. Just help us understand, when you think about your, I think, mid- to- high teens bit growth, kind of how you're thinking about overall, how much of that is a function of just the mix towards more of the bonded arrays, how much of that is sort of just wafer migration towards these higher nodes, stacking, et cetera?
Yeah. I would say it is 100% driven by node transition. If you look at our history, we have been producing fewer wafers over the years, from where we were all the way to a point where we started underutilizing the fabs, whatever, 18 months ago, maybe a bit less. Then we have been ramping back up. But going forward, we do not expect that we will need any wafer additions to supply the market. All of this is driven by more efficient, more productive wafers where you can fit in more bits. There was this picture we showed at Analyst Day where you saw one on top of the other, and you can clearly visible see it is just more efficient from a space point of view, right? Just every wafer can produce a lot more bits. That is our single driver.
Your bonding is very interesting because now you can be more productive in your R&D, because now you can innovate on the array or on the CMOS. You can do one or both, so it gives you a lot more flexibility, back to your BiCS9 comment. But that is not how we drive productivity on the wafer. It is the array itself.
Okay. When you talk about BiCS10, I know you talked a lot about what was interesting from that, whether it was bandwidth, it was power efficiency. Any one particular thing that hyperscalers are more focused on as you. Is it bandwidth? Is it power efficiency? Maybe if it's density, it's TCO. Where do you think your technology, is it all of the above where it's like.
I think it's the three of them, really.
Yeah.
If I had to say one that's increasing in importance is energy efficiency, right? We know the reasons for that. But it's difficult to see them sacrificing one over the other. They want it to be an and. But if there is one increasing, it's that one.
Okay. If I can just maybe switch a little bit towards the non-hyperscale or the non-data center customers, I think I should say. If you think about the edge, that's still a very important part of your business.
Yeah.
You've talked about it, smartphones, PCs. As you think about maybe some return to growth here in calendar 2027 in the back half from a unit perspective.
Yeah.
When you think also on top of that content growth, we obviously have iPhones launching here, the new iPhones, foldables, et cetera. How are you thinking about that end market? What are these customers telling you about from a, whether it's a return to growth on units or content overall for the market?
Yeah. First I would say their financial results seems to be good, right? Or very good, if I will say. Some of them reported last week, and some have been reporting over the last several weeks, and seems like their revenue, their margins, their free cash flow seems to be pretty robust. So I think that the edge customers are adjusting to the fact that memory was subsidized, and now it's no longer being subsidized. I think what's happening is that the low-end models, right, they are just not viable anymore. And they are really shifting towards a higher performing, medium to higher performing models, which makes more sense. If your business model was built around very cheap NAND to subsidize your business model, that just doesn't make any sense. I don't think you want us to subsidize those business models, so we're not.
What gives us confidence that this will grow in the future? Again, once you eliminate the lower-end models, we believe that next year we should expect to see low single-digit unit growth and maybe a little bit more on content growth. Just particularly focused on the models that will remain, which are the medium and the higher end.
Okay. Do you see, I don't know, AI at the edge maybe driving a little bit of that content growth yet? Is it too early?
Yeah.
How are you guys thinking about that? Or your customer conversations at least, that their content growth is driven by AI on the edge there.
Yeah, I wouldn't say we're seeing too much of that. AI could be a driver of replacement of old PCs, for example, but not a major factor so far. I would see it more on the data center.
Okay. Then, the mid-to-high teens bit growth that you guys have talked about. When you think about the industry, and I know you have a market intelligence team that runs through all these numbers, if the demand is stronger than expected, we obviously heard from neoclouds, have our own AI model here at Citi. We've upped numbers there more recently. If demand is stronger and all your competitors alongside SanDisk are looking at this, I think investors are always worrisome about overbuilding or capacity. What if they're building for 35% bit growth or 25% bit growth versus mid-to-high teens bit growth? What gives you the confidence that we're not going to repeat what probably we've seen in past cycles?
Yeah. I don't know what others will do, right? We track them as much as we can. There is a lot of external press related to that. What I can speak to is what we're doing, and we've been consistent over the last 24 months. We believe that the market will sustainably grow mid-to-high teens, and that's where we're executing to. I think you can easily make the argument that you should invest for more, and then a minute later you would find out that that's probably not a good thing to do. So we think that that's sustainable over the long term. As you know, there is very little or nothing we can do to change supply over the short term. So really you're looking at a 10- 15 year horizon, right?
Am I making a bet to increase our CapEx? I don't think that makes sense at this point in time.
Yeah. Investors also, just to your point exactly that about demand, why couldn't demand be higher than that mid-to-high teen? I know you guys have been very consistent. I've heard David, even when he was back at Western Digital, talk about NAND bit growth that range. Since then we've seen AI adoption, right? What gives you confidence on that long-term mid-to-high teens bit growth? Why couldn't it be stronger?
It could be stronger, but then you are subsidizing business models that do not make sense, right? Everything is going to be balanced at the end of the day. There cannot be more demand than supply, right?
Right. Okay.
By definition.
Yes.
You are setting at a price that makes sense for your customers and for us, and we believe that we are achieving that now, which was not the case in the.
Okay. A little bit on HBF.
Yeah.
You guys talked about it. That is interesting. Obviously, it solves a need or a business case is there for it. You have talked about it, you introduced it a couple of years ago. At your last analyst event, you talked about more developments in it. Just remind investors again, where are we? When should we start to see this as really in your model, in the business model itself?
Yeah. I love the quote from Akbar. He is in love with HBFs.
Yes.
I said a few things. We are very interested in the technology, right? The first thing we needed to do was build a consortium. When we announced that we are working on HBF, we saw a few companies raise their hand, particularly, SK Hynix called us, and they said they were interested in partnering with us in developing the standard. We are not developing products together, we are just developing standards. SK Hynix obviously knows a few things about HBM, being one of the largest producers of HBM. We welcome that, and particularly given that it requires some changes for our customers. Having two strong players partnered together made a ton of sense. Since then, Google and Meta joined the consortium, right? You have two manufacturers, and you have two potential or two users of this technology that could be very interesting.
I think that was one of the key steps. The next step is to get products in our customers' hands. What we will do in 2027, and then we'll see from there, right? We'll see the reactions. We're encouraged by the conversations and the relationships we are having with our customers. But we'll see how things evolve once they test the product and get more excited.
Okay. Just again, for those who may not be fully aware of what HBF does, do you see that on these workloads, like more sort of a DRAM replacement or HBM and transitioning more of the workloads to HBF? In these customer conversations that have evolved over the last few, I don't know, weeks, months.
Yeah. The idea is to get much closer to the CPU or GPU to be able to manage all the inference memory that's needed. Models are useless if they need to compute everything over and over again. NAND is the perfect way to solve that problem, and HBF has the ability to get much closer to the CPU, GPU, as I just said, and serve that purpose. That is the intent.
Okay.
You solve a problem without any bandwidth trade-offs, and you get a lot more density into it.
Okay. And then KV caching, I think SanDisk put out some projections out there in terms of the demand for KV caching. At your Analyst Day, I think it was roughly 35% of the workload by 2030. But I think you also talked about it just being very sensitive to a whole bunch of factors, whether it is token size, how many users, the parameters that are being used. What are puts and takes to that output that you put out, that it could just be 35%? I mean, could be much greater? Could be lower?
Yeah.
How are you thinking about overall NAND demand and where you talked about data centers could consume as much NAND as you produce today.
Totally.
Yeah.
Yeah. The model is very sensitive, and every time we've revised it recently, we have gone up.
Okay.
But I think to your point, the two variables that are most sensitive is number of concurrent users, right? How much is AI being used at the same time? And second, for how long and how much data do you need to save for your context in your KV cache? And those are the two most critical variables, and they seem to be going up, right?
Okay.
That is very encouraging as more AI is used, customer service, software development, whatever, right? All these areas, the more context you have, the better job AI does.
Okay. I am going to pause here. Now it is a full house. All right, Nara, your the question. Can we please bring the mic?
I understand that there are a lot of demand for the LTA with you guys. I am just wondering that, so far the NBMs are mostly with the cloud customers, but are you seeing any demand from edge customers are asking for the LTAs? Because given that we are hearing from Asia that Apple are looking for three year to five year LTA with NAND makers, even without a price cap.
Yeah. We are open to new business models with any customer, right? And we have had conversations with anybody that wants to engage with it. The only constraint is it has to be within the framework that we talked about. There has to be a time commitment, there has to be a volume commitment, there has to be price, and there has to be a financial guarantee. That is very important. Otherwise, we are back to the old model of negotiating pricing every quarter. Frankly, we have no interest of doing that if we have the alternative, which is to do a new business model with those elements. We said at Analyst Day that we do have customers, at least one customer in the edge, right? We did not say who it was but we are very excited about that.
Right. You did also say hyperscale, right?
Three high, three U.S. hyperscalers.
Yeah. A question here. Okay. All right. Let's talk about the fact that you have a whole bunch of investments as well. I think you've talked about Kioxia just had some announcement, Kioxia and SanDisk had an announcement about how much to invest. Can you just remind investors again, strengthening your positioning here in AI and the fact that you are under indexed to the data center market, you're trying to at least be on par with the industry. What should investors think about the pace of investments and the ones that you recently announced? Do you think that would help you to get to that 50% mark for data center?
Yeah. So we're investing capacity towards the mid-to-high teens growth that we've been talking about. The dollar amount will increase, right? And why? If you go back to where we started the BiCS8 transition, we come from a world where we were underutilizing our fab. So by definition, you have tools available. So when you transition, you first do the most efficient transition, right? So it was less dollars needed. So the dollars are increasing a little bit, but still within the percentages that we talked about, percentage of revenue, and it's still for the same percentage growth on NAND year over year. So we haven't changed that. We just did the most efficient ones first, and then you transition your model going forward. And that should enable our ability to continue to drive our data center.
Okay. When you think about HBF and some of these newer technologies that maybe could drive substantial growth, when you think about any incremental capital investments, because it seems like HBF wasn't really included in that long-term target model that you shared. I think investors came back saying, "Well, what if it does take off?" Are you then going to be investing more or is that still within that, I think, CapEx as a percentage of revenue that you outlined at the investor?
Yeah. So we cover the OpEx for HBF.
Right.
We don't have the revenue, the gross margin, the gross profit, and the CapEx. We need to figure that out.
Okay.
I think we need just a little bit more time to understand the customer's acceptance, their needs, how fast they're willing to go. We'll figure that out, and we'll be very clear about that with you. The good thing is the foundation is BiCS technology. This is BiCS8. It's not that we need to invent a new node.
Right.
We have the node. It can be produced in existing tools. It's not something completely out of what we're already doing because it's BiCS8 based.
Okay. Even on the OpEx side, Luis, you've come down, I think you've said, what, 5% or so if I'm not mistaken for OpEx, as a percentage of revenues. How comfortable are you with that? Why couldn't it be higher if some of these technologies like HBF, I understand it's kind of BiCS8, but still there could be a lot more development work that needs to happen.
Yeah. So we're funding our R&D to the point where we believe we're creating value. So we're fully funding our BiCS program, right? We jointly agreed to the program with Kioxia, and we fund that to the level we think it makes sense. We also fund Khurram, right? Who takes the NAND and develops products for eSSDs and for client and for all of that. So that's a totally different organization, which we also fund. Then we're funding two big bets. One is HBF and the other one is this new memory technology that was briefly discussed by Alper in the Analyst Day. So we're investing in our core, 2X, Alper and Khurram, NAND and products. We're investing in two kind of extend the core into the future, particularly focused on AI with HBF. So we think we're properly funding the business.
We also made an investment to extend the JV. We feel good about that. We made an investment in India to get the DRAM. We invested $1 billion, something that's worth probably close to $2 billion right now. Right? So it continued to go up after the quarter closed. So we're happy with those investments that we're making. But I think if there was an attractive investment, we'll definitely consider that. I don't want you to think we'll be constrained by a number in the model, right? We believe that's the right model.
We will continue to invest in the business to maximize value creation.
One of the things that I heard at the Flash Memory Summit, there are some alternatives to, talking about KV caching, there are some alternatives that are out there. I think one is the camp that you're in. I think Kioxia has some alternative. There is so much change that is happening.
Yeah.
When you think about your own investments, how do you make sure that you're investing at the right pace or the right technology? Just because there's so much change that's happening on the architectures itself.
Our teams are well connected externally. They are looking at all these trends.
Yep.
We think we are balanced right now in terms of where we want to be. We will keep on assessing, and if there is ever a need to make a change, we will share that with you. We think we are properly funding the business.
Okay. Coming to capital deployment, you had a big announcement at the earnings as well. You are talking about essentially generating a lot of free cash flow here, as you did in your last quarter. I guess, just returning it all pretty much to shareholders the way I see it. I think there was a couple of questions on the Analyst Day where people were just trying to understand when you mean excess cash, is that really just free cash flow and how to think about it. The pace of CapEx, the pace of capital return, sorry. You had a big buyback in the last quarter. Did one expect at similar levels as we are going through fiscal 2027?
Yeah. We generated $5 billion last quarter. We bought $4.5 billion. That is pretty much all excess cash. You know.
Yeah.
We cannot get the forecast perfectly, but we think we like how we are executing. I think one of the things you should take is whatever we tell you is what we intend to do, and we are executing that, and we will do that. The board continued to authorize more spending, and we will be updating you every quarter as we do that. We did talk to many investors to try to understand what was the best way they thought we should return cash to shareholders. We think that, at least at the current point in time, we believe that share buyback is the best way to do it, the most tax efficient, and it makes sense.
We may consider different things down the line. I am not saying we are going to make a change or anything, but we are always open to continue to adjust our strategies going forward. We will continue to buy our shares back, our excess cash, and I think that is an important message that we should hear.
Yeah. Anything on M&A? Like that is something that you think might be needed in the portfolio? I am not talking about gigantic M&A, but even small tuck-ins here and there, technology purchases that you think would be attractive.
Yeah, we like the portfolio, but we will always keep an eye on and be open-minded about opportunities.
Any other questions from the audience? All around. Maybe I can ask a little bit about the market sizing itself. I think your market team talked about, I think you guys talked about $500 billion as a market in calendar 2027. I think people were immediately doing the math there. So what is SanDisk's share of that? But just talk to us about how you got to that $500 billion. And on top of that, I think, at least in your target model, you talked about mid-to-high teens revenue growth through the long-term model.
Yeah.
Which was in line with the mid-to-high teens bit growth, which assumes like a pricing environment that is very, very favorable beyond fiscal 2027 or beyond calendar 2027 as well. Just help us understand what is underpinning that market size, and as you think about fiscal 2028 to 2030, a very favorable pricing dynamic that is kind of baked into your long-term target model.
Yeah, I mean, it's very interesting because this industry has been around $50 billion for a long period of time.
Yeah.
We talk about cycles, but those cycles were small variations within that $50 billion. All of a sudden, AI and these data center players come in, and the market grows from that $50+ billion to $300 billion, and we continue to see a path to continue to grow. AI is driving that. AI is this, data center is by far the single most important driver. They continue to invest CapEx. Every time we hear an update on CapEx, those numbers continue to go up.
Yeah.
They seem to be generating significant revenue growth out of that, right? The revenue growth keeps on accelerating. That's the biggest driver, right? More volume and prices obviously have changed, and that's enabling that growth. We're assuming there, obviously, data center continues to be the bulk of the growth, and then edge, after this reduction in units, then goes back, as we were just saying, to grow on the low single digits in units and content.
Okay. Any like, are you tracking any milestones in inference adoption or anything? You're thinking about that?
We track a lot of data.
You look at it.
Yeah. We want to understand the market as much as we can. Frankly, the more data we get is from this relationship with our customer, right? The more engagement we can have and how exactly are you using our products and what are you seeing. So that helps us a lot.
Okay. Last five seconds, Luis. What do you think investors are still missing about the SanDisk story?
Yeah. I think the key question is sustainability, right? It is difficult to prove a negative in the future won't happen. I think our focus is to make sure we execute, right, and build that credibility so you guys can change your view. That is what we are trying to do. I think the long-term models, the investments in our supply chain, hopefully those give you some confidence. That is what we are trying to do.
Great. Thank you, everyone. Thank you, Luis.
Thank you. I appreciate it.