Samsung talks break down, strike on Thursday! How to position in memory stocks?
閃迪2026財年Q3業績直播
Key Takeaways (AI-Generated)
Financial Performance:
- Sandisk reported Q3 FY2026 revenue of $5.95 billion, a significant increase of 251% year-over-year and 97% sequentially, driven by a strategic mix shift towards high-value customers.
- Non-GAAP gross margin for the quarter was exceptionally strong at 78.4%, benefiting from enhanced product mix and favorable pricing conditions.
- Non-GAAP EPS was reported at $23.41, substantially exceeding the previous quarter’s $6.20.
- Adjusted free cash flow was $2.955 billion, evidencing robust profitability with a margin of 49.7%.
Business Progress:
- Sandisk has secured 5 multiyear supply partnerships designed to stabilize revenue and ensure supply commitments, fundamentally reshaping business predictability and reducing cyclical volatility.
- Advances in NAND flash technology and BiCS8 integration bolster the company’s product offerings, aligning with heightened demands in data center and AI infrastructure sectors.
- The company unveiled next-generation SSD portfolios to enhance product offerings in high-performance computing and consumer sectors.
Opportunities:
- The conclusion of the new business models (NBMs) with strategic multiyear agreements emphasizes a reduction in business volatility and an increase in predictable financial outcomes.
- Continued innovation and leadership in the NAND technology space, particularly with the introduction of BiCS8 and enhanced SSD solutions, place Sandisk at the forefront of meeting the exponential demands of next-gen data centers and AI-driven markets.
- The shift towards premium devices in consumer electronics marks a significant opportunity for growing Sandisk’s high-value product mix.
Next Quarter Guidance:
- Projected Q4 FY2026 revenue is expected to range between $7.75 billion and $8.25 billion.
- Anticipated non-GAAP gross margin for Q4 is forecast between 79% and 81%.
- Expected non-GAAP operating expenses for Q4 are estimated between $480 million and $500 million.
- Non-GAAP EPS for the fourth quarter is forecast between $30 and $33.
Risks:
- While the company has locked in supply agreements, there remains a cautious approach to market pricing dynamics and contractual commitments which may affect long-term profitability.
Full Transcript (AI-Generated)
Operator
Good afternoon and welcome to Sandisk's Third Quarter Fiscal Year 2026 Earnings Conference Call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press * then one on your telephone keypad. To withdraw your question, please press * then two. Please note this event is being recorded.
I would now like to turn the conference over to Ivan Donaldson, Vice President of Investor Relations. Please go ahead.
Ivan Donaldson
Before we begin, please note that today's discussion will contain forward-looking statements based on management's current assumptions and expectations, which are subject to various risks and uncertainties. These forward-looking statements including expectations for our technology and product portfolio, our business plans and performance, our capital allocation priorities, market trends and opportunities and our future financial results. We assume no obligation to update these statements.
Please refer to our Annual Report on Form 10K and our other filings with the SEC for more information on the risks and uncertainties that could cause actual results to differ materially from expectations. We will also make references to non GAAP financial measures today. Reconciliations between the non GAAP and comparable GAAP financial measures are included in the written materials posted in the Investor Relations section of our website. With that, I'll turn the call over to David.
David V. Goeckeler
Thanks, Ivan. Good afternoon and thank you for joining Sandisk's fiscal third quarter earnings call. We delivered another strong quarter with excellent performance across all key metrics reflecting the strength of the SanDisk franchise. Before turning to our end markets, I'd like to provide an update on a priority we previously outlined.
Last quarter we were engaged in discussions with customers on multi year supply partnerships, what we refer to as new business models or NBMS. I am pleased to share that we have successfully advanced those conversations with five multi year partnership signed so far. These partnerships are structured to lock in committed supply for our customers and committed financials for SanDisk. Our customers commitments are backed by firm financial guarantees.
These partnerships support durable structurally higher earnings and a significantly more predictable and less cyclical business for SanDisk. We believe this marks the fundamental evolution of our business which is centered on deeper customer alignment, enhanced visibility and long term value creation. These NBMS reflect the strategic value of our world class NAND technology which is built on decades of innovation.
The investment we've made in R&D and manufacturing, including 10s of billions of dollars in cumulative CapEx and IP have built the foundation for a powerful new business model in which we manage the full stack from front end manufacturing through chip and system level design to final back end assembly and test. Both the extension of our joint venture with Kioxia and the supply agreement for DRAM following our investment in Nanya further strengthen our supply chain resiliency.
This leverage is enabling us to drive stronger customer engagement, allowing long term conversations with partners who value technology performance and long term supply assurance. With increased engagement in the optionality across the portfolio, we can optimize our end market mix more effectively. Together, these transformations have resulted in a step change in what we believe to be sustainable gross margins, free cash flow generation and earnings power in a market that we expect to grow in the double digits for the foreseeable future.
Data center is a clear example of this strategy in action with revenue growing 233% sequentially. This milestone reflects years of preparation and our deliberate shift toward what is now the most strategic and fastest growing end market. While we have made substantial progress, there is significant growth opportunities ahead driven by the fundamental shift in underlying infrastructure requirements of artificial intelligence.
We are witnessing extraordinary growth not just in model size, but in resulting token generation. The duration and complexity of model runs in the increasing importance of context. As AI models scale from billions to trillions of parameters and deployments advance from simple inference to deep reasoning and increasingly autonomous agentic systems, NAND has become a critical component of the underlying infrastructure.
Inference optimizations such as KV cache along with workloads like RAG require substantial high performance, low latency flash to deliver real time responsiveness and quality of user experience. These workloads expand the amount of data that now needs to be stored on low latency flash, which is well beyond the model itself as systems must retain context, intermediate data and large external data sets.
As a result, NAND Flash is emerging as the only economically viable solution to deliver that capacity, performance and efficiency required to keep models accessible for real time inference at scale. This shift in understanding the critical nature of our technology comes at a time when our product differentiation is strongest anchored in what has been recognized as an industry gold standard for NAND technology with BiCS8 and a broad leading portfolio with TLC and QLC offerings.
We are confident that our world class product portfolio and technology leadership will continue to drive data center customers to see SanDisk as a partner of choice over the long term and we are already seeing that preference translate into results. Our fiscal third quarter revenue was enhanced by strong demand for our TLC based enterprise SSD portfolio, which powers performance intensive compute workloads where speed and latency are paramount.
Looking ahead to the fiscal fourth quarter, we expect to begin shipping our QLC Stargate solutions for revenue, adding another layer of revenue growth. Together, TLC and QLC serve distinct but complementary roles reflecting how we are deliberately architecting our portfolio to meet evolving customer needs. With our broad portfolio of AI focus data center products in Edge, we are seeing a continued shift towards premium devices across both PC and smartphone markets.
These platforms are increasingly incorporating on device capabilities which are driving higher storage requirements and greater demand for high performance solution. As a result, our mix continues to shift to high value configuration and customers that assign the appropriate value to our technology. Consumer saw strong year over year revenue growth across all key storage categories and regions despite evolving consumer industry dynamics.
This performance was supported by our strong brand recognition and channel presence as we focused on the most financially attractive demand. In February, we unveiled our next generation portable SSD portfolio designed to support faster, more demanding workflows and AI enabled content creation. This launch reinforced our innovation and leadership in the SSD category, generating meaningful external visibility with coverage across multiple global media outlets.
We also continue to strengthen global consumer engagement through new brand LED go to market activities such as our Space to Hold More campaign, which is driving deeper customer connection by localizing global narratives and engaging diverse communities worldwide. Together, these efforts reflect our focus on our end markets and commitment to driving demand through brand recognition, product innovation and strong go to market execution as we shift our portfolio toward higher value opportunities and transition away from legacy upsell models.
Our broad end market exposure sets us apart and we remain committed to serving customers across these markets. With that, I'll turn the call over to Luis to dive deeper into our financial performance and guidance.
Luis Visoso
Thank you, David. I will begin with an update on our new business models, or NBMs, which are designed to provide us with demand certainty and provide our customers with supply assurance. We signed 3 agreements in the third quarter and an additional 2 so far in the fourth quarter, and we're currently in active negotiations with several other customers.
These agreements are tailored to meet the needs of our customers and in aggregate, provide us with demand certainty and financials that we expect will be consistent with our fiscal fourth quarter guidance. The duration of this agreement varies, with the longest contract extending to five years in aggregate. Volume commitments increase during the life of the contracts with quarterly commitments and a combination of fixed and variable pricing.
These agreements with variable pricing allow us to capture upside if prices rise, while allowing our customers some upside if prices decline over time. As you will see in our 10 Q, the three contracts signed during the quarter provide minimum contractual revenue of approximately $42 billion. We will update you as we make more progress.
Each contract is secured with financial guarantees that protect us if the purchase obligations are not fully performed by our customers. In aggregate, the five agreements signed so far include financial guarantees that exceed $11 billion and include prepayments and other financial instruments managed by third party financial institutions. Out of these agreements, $0.4 billion in prepayments are included in our Q3 balance sheet.
These five new business models account for over a third of our bits in fiscal year 2027, which we expect to increase as we conclude additional agreements over the next few months. We expect these new business models to reshape the historical cyclicality of our business, improving visibility and results in pricing and margins that reflect the value of our technology and investments, ultimately delivering higher, more consistent and durable returns for shareholders.
Moving on to our results for the quarter. Revenue for the third quarter was $5,950 million, up 97% sequentially and up 251% year over year. This compares favorably to our guidance of $4,400 million to $4,800 million and was driven by both a mix shift towards higher value customers and higher pricing.
Our bit shipments were flat year over year and down high teens sequentially as we build higher inventory levels primarily to support strong BiCS8 QLC demand in the fourth quarter Stargate ramp and to prepare for our recently signed new business models. In line with our mid to high teens growth model, bit shipments increased 18% fiscal year to date.
Moving on to the end markets. Sequentially, data center revenue grew 233% to $1,467 million. Edge grew 118% to $3,663 million and consumer came in at $820 million, down 10%. In line with our historical seasonality, our portfolio planning strategy focuses on delivering attractive long term economics with diversification remaining a core strength. We remain committed to serving all three end markets to maximize long term value creation.
Our non GAAP gross margin for the third quarter was 78.4%, up from 51.1% in the prior quarter. This compares favorably to our guidance of 65 to 67% and was driven by our shift towards higher value mix and the overall pricing environment. Non GAAP operating expenses for the third quarter were $448 million and represents 7.5% of revenue as compared to 13.7% of revenue in the prior quarter as we generate additional leverage. This compares favorably to our guidance range of $450 million to $470 million.
As a result, non GAAP operating margin was 70.9%, up from 37.5% in the prior quarter. Non GAAP EPS was $23.41, up from $6.20 in the prior quarter. This compares favorably to our guidance range of $12 to $14. Key GAAP to non GAAP reconciliation items include $20 million in stock based compensation net of taxes which represents 0.3% of revenue and $46 million related to the write off of unamortized issuance fees.
As a result of our repayment of the remaining $650 million balance in our TLB, we closed the quarter with $3,735 million in cash and cash equivalents on our balance sheet. Moving on to free cash flow, During the quarter, we generated $2,955 million in adjusted free cash flow, which represents a 49.7% margin. Cash flow from operations came in at $3,038 million, partially offset by $83 million from net cash capital spending.
Gross capital expenditures totaled $240 million and represented 4% of revenue. Our capital plan is designed to balance growth opportunities and generate attractive returns while supporting our ongoing BiCS8 transition. We remain highly disciplined in how we evaluate such investments to protect long term sustainability of our business financials.
Moving on to guidance for the fourth quarter, we forecast revenue between $7,750 million to $8,250 million from both bits growth and higher pricing. Our forecast for non GAAP gross margin is between 79 and 81%. We expect non GAAP operating expenses between $480 million and $500 million as we continue to invest in innovation and R&D. We expect non GAAP interest and other income between $10 million and $30 million and non GAAP tax expenses between $775 million and $875 million.
We forecast non GAAP EPS between $30 and $33 assuming 158 million fully diluted shares. Moving to capital allocation, the priorities we outlined in February of last year were to invest in the business, achieve a net cash position and then return cash to shareholders. In line with these priorities, we have taken steps over the last two quarters to solidify our supply chain, including extending our JV with Kioxia through December 2034 and investing approximately $1 billion in Nanya to secure long term DRAM supply.
We have also taken actions that put us in a strong net cash position by paying off the remaining balance of our TLB. Given the strong progress today, we're announcing that our Board of Directors have authorized a $6 billion share buyback program of outstanding shares of common stock. The repurchase authorization is effective immediately with no expiration date. With that, I'll turn the call back to David for closing remarks.
David V. Goeckeler
Thank you, Luis. In summary, we continue to execute with conviction at a critical inflection point for this business. NAND has always been a foundational technology empowering the world's best in class semiconductor storage solutions required to drive the largest technological movements including PC, mobile, cloud and now artificial intelligence.
Data center has become our fastest growing market and the workloads driving that demand, including inference, reasoning and agentic systems represent a structural and durable shift in how the world's most consequential technology is built and deployed. Our new business models reflect this shift. 5 signed agreements to date, over $11 billion in financial guarantees and over a third of our bits in fiscal year 2027 under firm customer commitments represent a fundamental reshaping of our business, providing visibility, pricing protection and more consistent durable returns.
Our technology and product portfolio are intersecting this extraordinary demand at exactly the right moment. Equipped with a complete portfolio that now includes a scaled and rapidly growing enterprise SSD business, we are allocating supply to the highest value opportunities and establishing a new pillar of growth for SanDisk. This progress has converged in a single moment.
We believe our margins are sustainable, we've achieved our net cash target and we've announced plans to return capital to shareholders through buybacks, all while reinforcing our operational foundation. Combined with our multi year NBMs and the acceleration in the data center end market, this gives us both financial strength and structural resilience. The result is a durable growth model, a valuable franchise and a business built to generate substantial sustained cash flow. With that, Ivan, let's see if there's any questions.
Operator
Thank you. We will now begin the question and answer session. To ask a question, you press *, then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press *, then two. At this time, we will pause momentarily to assemble our roster.
The first question comes from Mark Newman with Bernstein. Please go ahead.
Mark Newman
Congrats on another great quarter. A couple of just quick questions here. So the EPS guidance you've given $30 to $33, I mean these are all fantastic numbers. It does imply that the rate of price increase is slowing a bit into the current quarter. And I just wondered if that is either being conservative on your side because obviously, we're still quite early in the quarter? Or is that related to some of these very, very long-term agreements that you've signed? And with regards to the long-term agreements, I believe you mentioned about 1/3 of bits for FY '27 in some kind of long-term agreement. I'd like to ask to what degree is price fixed in the coming quarters, just so I can get a kind of sense for that.
David V. Goeckeler
Mark, it's good to hear from you, and thanks for the comments. So first on next quarter and pricing, so we don't really guide pricing, but I think you saw in FQ3 rather extraordinary pricing acceleration across the business. So we're very happy about that. And you're right, it's early in the quarter, and it's an extremely dynamic market. So it pays to be a bit conservative when you're going down that path, but we're very confident in the numbers. The second part on the agreements, I will -- I'll make a few comments, and Luis will have something to say as well. I think you were asking about pricing being fixed.
So these agreements are really tailored to individual customers. So they have different elements depending on the customer, it depends on the length of the agreement that really gives us some assurance on consistency of demand, which is really what we need. I mean, again, a lot of this is -- I've talked about this in the past. We need to get our customers' business model and our business model aligned. We run a fab. We have very consistent output. We need very consistent consumption. And I think the primary thing -- one of the major attributes of these agreements is they give us that. And our customers have -- they understand the dynamic very clearly when we talk it through. It's one of the reasons why these agreements don't just happen overnight. It's not just about prepaying for a couple of quarters' worth of supply. This is about establishing a -- up to a 5-year agreement on supply that's very consistent quarter-over-quarter.
And as we said, there's financial instruments in place that if that consumption does not happen on that very predictable time frame, then there's financial commitments that come to us immediately. So they are backed up and they're very, very strong. The pricing, like I said, it's set up where there's fixed elements, there's variable elements. Maybe I'll let Luis talk about it in a little more detail.
Luis Visoso
Yes. I just want to reinforce what David was saying. These models are here to deliver durable, more predictable, more attractive, more consistent financial results. So they're very good. And frankly, it's a win-win for us and for our customers. We provide supply, they provide demand, and we have visibility for many years all the way to 5 years. So we're very happy about that. I guess you've never heard about us talk about RPO or remaining performance obligations in this business, and we started to talk about that, and you will see it in our 10-Q, as we mentioned, about $42 billion of RPO in this business.
So we're very happy about that. The pricing, as we mentioned, it's a combination of fixed and variable to address your question directly. The shorter time you are in within the contract, the more fixed it is, the longer out you go out, there would be more components of variable. So you could assume that most of the pricing that we're seeing in the very short term is mostly fixed. And then as you go out, there is a little bit more variable for us to capture upside and for our customers to capture some upside if prices were to go down.
Operator
The next question comes from Joe Moore with Morgan Stanley.
Joseph Moore
I wonder if you could talk about the growth in enterprise SSD that you saw, pretty impressive. How much of that is the market? How much of that is you guys kind of putting the product portfolio in a better place?
David V. Goeckeler
Yes. Like a lot of things, when you see 233% sequential growth, Joe, there's a lot of elements of that, to your point. So it starts with the portfolio, right? I mean the portfolio is in great shape. Our TLC product -- this is almost exclusively our TLC product. We're going to start shipping our Stargate project or product for revenue next quarter. So really, really strong performance, very, very strong product, a broadening of qualifications. Now, it takes a little while to get into all these accounts, so a large number of accounts at this point.
And then there is a strong market pull. There's no doubt about it. There's a lot of demand in the market for these high-performance enterprise SSDs. We got the right product at the right time. And we're really happy to see this part of the portfolio now expand and getting to the levels where we expect it to be. We were -- it was 25% of the portfolio this quarter, and we expect that to increase as we go forward.
Joseph Moore
And my follow-up, I mean, where do you see that in a few years? It seems like that hyperscalers want everything you can make and then some -- just how much of the business could be enterprise in the long term?
David V. Goeckeler
It could be a significant amount. I mean, I think, Joe, you've known for a long time, we value a balanced portfolio. So we're going to -- and we want to mix in the way that gets the best financial return for us, and that changes quarter-over-quarter. But I think the key point is we're in a position where we can mix into this -- into data center in a way that we've never been able to do before. So I expect that number to keep rising over the next several quarters and the next several years, to your point.
Operator
The next question comes from Ben Reitzes with Melius Research.
Benjamin Reitzes
It's great to be on board here. I almost feel like I'm on a software call here. So it's great to be speaking with you. Dave, I wanted to talk about the -- you said 1/3 of bit growth next year is contracted. Where do you see this going to based on your conversations? Should we expect that every year, you're getting -- it's 1/3 next year, but like every year, can this be above 50% where you know how much is kind of done going into the year? And then I have a follow-up.
David V. Goeckeler
Yes. So first of all, welcome. We're glad you're here. It's good to hear your voice again. So look, I would say a couple of things to this. One is we're just -- we're still in a lot of conversations about how we're changing this business. And it takes a little bit of a while. It takes a while depending on the customer. Some customers are -- come into the conversation really concerned about multiyear supply agreements. And so it's an easier conversation. Other customers come into the conversation very used to the way the market has worked in the past, where they commit volume and want to negotiate price every quarter. That's not the kind of agreement we're interested in. We're interested in agreements that give us certainty of economics. And a key point of what Luis said in the script, I want to make sure it's understood. These -- there are fixed and variable elements of these agreements, but we're targeting the 5 agreements we've signed, we're targeting financials that are in line with what we just forecasted to.
So this is very, very, very attractive business. Now then we're still in active conversations for our supply going forward. That includes next year all the way through the next 5 years. So I expect the number that we said at least 1/3. So we're over 1/3, and I expect that number to go up over the next several quarters. Where can it get to? I definitely think it can get above 50% and -- but we'll see. And I think we can drive it actually quite high, and we have a desire to drive it quite high.
Benjamin Reitzes
Great. And then just with regard to margins, Dave, I mean, do you feel like with -- when you do these kind of agreements that you can lock in margins? I mean your stock is not trading as if you're going to stay at 80% anyway. But when you do these kind of things, is there a target margin? And will you be willing to kind of share what range at least it's in? You could argue the stock is trading like your margin is going to go back into the 40s or something or something like that. So do you have a target margin that is in a range that you're comfortable talking about?
David V. Goeckeler
Yes. I don't think we're there yet to talk about that, Ben. I mean when we get a little further along in this, we'll wrap this all up in a new model for everybody. But we're very proud of our technology. Let's put it that way. I think we're finally for the first time in decades in this business, getting to the point where the value of our technology is getting recognized, at least for us. I mean, quite frankly, the value of our technology has been recognized in the market. It's just other people have been collecting that value, and it hasn't been the producers. And I think that now we're getting a more even distribution of those -- of that value.
So we're not necessarily interested in trading away that value for certainty. We're interested in getting that value and getting certainty as well. And to your point, look, we understand how the franchise is valued, and we're very, very focused on getting the cyclicality out of this business. It's corrosive. It's corrosive to the way we invest our CapEx. It's corrosive to our customers' ability to get a sufficient amount of product to drive their spectacular businesses. And I think we've taken some very meaningful steps down this path now. We've got very significant commitments from very significant customers. And I think as we can continue to proceed down this path, we will move this entire business to a very different spot to everybody's benefit. Our benefit, our investors benefit, our customers benefit and their customers benefit because they're building just spectacular technology and we're a key part of that.
So I think we're on that journey. I think it was very questionable if we could even make that progress. I've had a lot of people tell me in the last year, it's never going to happen. It's happening. But we're still in the early stages. And as we make continued progress, we'll continue to give everybody updates on that progress.
Operator
The next question comes from C.J. Muse with Cantor Fitzgerald.
Christopher Muse
I guess curious to get your thoughts around supply/demand going forward for NAND. It's fairly interesting in the sense that we're getting only limited greenfield, mostly layer count driving bit growth where new greenfield is really being prioritized for DRAM. So within that kind of construct as well as the Agentic AI kind of incremental growth, how are you thinking about when the industry might get into balance?
David V. Goeckeler
Yes. So I think, C.J, you know my point of view on this is the industry is always in balance, right? Markets always balance supply and demand. I think the question is, implicit in your question, what I hear is if you lower the price, will you meet more demand. And I mean that's just -- we're kind of working around that whole environment. Look, let me start on -- make a couple of points. On the demand side, we continue to see data center accelerate. Before what we saw this week, we would raise even our calendar year '26 data center growth number to the mid-70s percent from where we were in the 60s percent just 3 months ago, which is up from the 40s percent 3 months before that and the 20s percent 3 months before that. So we continue to see very, very strong growth in the data center. Outside of data center, we're seeing some contraction in the market just because of unit decline. That's to be expected, although we expect to see that bounce back in '27.
Now on the supply side, I think this is a major, major benefit of this franchise is that we can increase supply through nodal transitions, right? We have a very, very productive R&D pipeline. This is something we've invested in for a very, very long time with our JV partner and the BiCS road map. And so we can continue to drive the bit growth we're talking about mid- to high teens through nodal transitions. We don't need -- we need to add some clean room space because each node has more steps and more steps is more tools. So there is some additional CapEx. But it's not like other markets that you referenced where you actually have to add capacity because you're not getting that much from the nodal transition.
So quite frankly, I think this is what makes this franchise such a spectacular cash generator because the amount of CapEx we need to invest, especially CapEx as a percent of revenue is continuing to go down substantially. The absolute CapEx is still there. I'm just saying the relative to our revenue generation. And we've made all the investments in the nodal transition. So we have years of runway into what our nodes are going to be and what the bit growth is going to be from those. And we will continue to invest in those and drive those nodal transitions to grow the market in that mid- to high teens rate. And that's basically what we see across the NAND players, quite frankly.
Christopher Muse
Very helpful. I guess just real quickly in terms of capital structure, you're now no debt, $3.7 billion cash. What do you think you need to retain given your view today and given kind of the new contracts that you're signing? And then how should we think about kind of buybacks from here?
Luis Visoso
Yes. So we did announce a share buyback program with this call, right? We just announced a $6 billion buyback and we'll keep on tracking our cash flow. We're generating good cash. And as things change and as we execute the share buyback program, we'll keep you updated, C.J.
Operator
The next question comes from Jim Schneider with Goldman Sachs.
James Schneider
One more question on the new business models, if I could. Can you maybe talk about whether any of the 5 largest U.S. hyperscalers are included in those contracts thus far? And related to this on a go-forward basis, do you plan on providing any sort of ACV or in-year confirmed contract value as part of your normal disclosures?
Luis Visoso
Yes. We're not going to disclose the names of our customers. But we have, as David said at the beginning, we have some very meaningful customers who are joining and some more that we're working with, but we can't disclose the name of our customers. I think to your second part of your question, James, we will provide you this RPO metric, which I think is very interesting, which is how much of the business is already contracted. And that's based on minimal prices, right? So we'll continue to give that information every quarter, and you have that visibility as we make progress quarter-over-quarter.
James Schneider
And then maybe as a quick follow-up. Can you maybe talk about given these new business models and your visibility on customer demand, what is the state of your discussions with Kioxia in terms of potentially increasing bit supply? And are you contemplating anything above the sort of 20% range of growth that you've outlined previously?
David V. Goeckeler
No. We still have the same plans and conversations with Kioxia are always very robust and very ongoing, and the teams are working on this every single day. But we have our BiCS8 transition plan that we've aligned on, and we're executing to it, and it's going extremely well.
Operator
The next question comes from Aaron Rakers with Wells Fargo.
Unknown Analyst
This is Jake on for Aaron. Congrats on the great results, guys. Just to start off, looking at Stargate starting to ship for revenue in 4Q. Can you just give maybe some color on how meaningful that ramp could be over the next few quarters?
David V. Goeckeler
I mean, look, we have a whole another -- there are 2 major products in the data center space. I think we've talked about this a lot. There's the compute-focused -- what we consider kind of compute-focused enterprise SSD lower capacities, much higher speeds and then their interface speeds and then there's much, much higher densities. Stargate is -- and the progress we've seen so far in the portfolio is coming off of that compute-focused TLC drive, and now we're going to bring the whole QLC product to market, which has been under qualification with some major players for well over a year. So we're not going to forecast a specific market segment, but we're very proud of that product, and we think it's going to do quite well in the market.
Unknown Analyst
Okay. And then maybe as a follow-on with some of the more powerful LLMs released over the past few weeks, I guess, how are you thinking about the KV cache opportunity as we see Agentic AI grow? Has that meaningfully changed over the last few quarters and maybe how customer discussions have changed there?
David V. Goeckeler
Yes. I think that we've advanced our understanding of that a lot over the last quarter or 2 since it became a major part of the conversation. I even think the team did a webinar on that, which we'd be happy to repeat if folks are interested. And I think when you really start to drill into that opportunity and you try and size it, it obviously gets very complicated very quickly. What are the number of concurrent sessions that are going to be run, what's the average input tokens, what's cash hit ratios, storage durations. So there's a lot of elements to that. And I think what it says is kind of where you were going, which is we need to stay very close to our customers because they're the ones that are going to have all the detail on the infrastructure they're building, the ones that are doing infrastructure at scale are going to have the great insight into how are all those variables put together against the use cases they believe they're building to.
And I think this just reinforces this business model question as our customers go through those calculations and understand the significance of NAND that, that could drive, that is a good foundation for the conversation about striking deals 2 years, 3 years, 5 years in length that are very, very substantial in the amount of demand. I mean we're talking about 5 deals in more than 1/3 of our portfolio. So it's an extremely, extremely dynamic situation. I think these are all the things that go into kind of understanding where this market is right now and how fast it's moving. It's literally moving every single day.
And even for those of us on the inside of the market that see the data points literally hour over hour, it is moving very, very rapidly as people start to -- our customers really start to understand the dynamics of the infrastructure they're building. And I think I feel very good about we've been able to stay very close to them. They're obviously very close to our technology and our products. They're responding very positively to those products. They understand that they're willing to commit years of purchasing with a financial model around that, that is very attractive for us, and it gives them a very attractive attribute, which is guaranteed supply.
And then quite frankly, they're willing to put a very large financial commitment up that basically guarantees that ongoing demand. And I think that's a very big part of what we're talking about. I mean I think that we've talked about these agreements a lot. We've gotten a lot of feedback from a whole lot of people. There's a lot of sometimes talk in the market that they won't hold, they won't have teeth, all these kinds of things. And I can tell you nothing can be further from the truth. We have customers that are literally putting up billions of dollars of collateral through various financial instruments that will survive for the life of these contracts. And if they don't meet their obligations on consistent purchasing every quarter, then that financial commitment immediately comes to us as a compensation for that contract not being concluded.
So I actually don't probably never expect to collect those because I think our customers are extremely serious about needing this product. And I can tell you the normal case is we sign an agreement and within weeks, we're having a conversation about how we increase the amount of product we can get to them over that time frame. So a very dynamic market. Things are changing very quickly. It does make it difficult to forecast and the things you see. I mean you see the results we're able to put up, and they're significantly better than they we thought they were 3 months before, and that's because the market is just moving very, very quickly. And the pieces change literally day by day.
And what we're doing is we want to solve a whole bunch of issues for our business in this. We know we have great technology. We've made enormously substantial investments in intellectual property. I mean we've been building the BiCS road map for decades. We have enormous investments in fabs, some of the largest fab complexes in the world with our JV partner. And we want to leverage all of that, get a fair return for our product and get the cyclicality out of the business because like I said, I think it's -- I think, quite frankly, it's corrosive for everybody that's in this industry. And well, I shouldn't say that. I can't speak for everybody.
But I think what's happening is there are now customer sets that -- very substantial customers that don't want to play the quarter-by-quarter price game. They have spectacular businesses, and they understand that we provide a very important component to their spectacular business, and they want to make sure that they have the best products, which we believe we provide. We know we provide those, and they want them on a very consistent basis so they can continue to play in their own business. That is opening this opportunity I think, to fundamentally change the way this business has worked over the last several decades. And quite frankly, that's a lot of fun for us to do that because customers are very happy with those agreements. We're very happy with them. And like I said, I think everybody wins. I'm trying to figure out who doesn't win in this equation. And so far, every agreement we've signed, the customers have been thrilled to get to the point of actually getting it signed.
So anyway, probably maybe, Jake, a little longer answer than you were looking for, but we feel very, very good about where we're at, and we think that we're now starting down a path that is -- as Ben said, quite frankly, there's lots of other technology industries that understand how to do this. This is not -- we're not reinventing the wheel. We're just using techniques that people associate with other businesses that are recurring revenue models. But certainly, everybody that -- well, not everybody, if you run a whole bunch of technology business, you understand how recurring revenue works, and it's a very, very powerful financial model, and we think we can bring it to our franchise.
Operator
The next question comes from Asiya Merchant with Citigroup.
Asiya Merchant
A great set of numbers here. Good to hear from you again. David, I think I heard you say some client demand, maybe with PCs or smartphones related snapping back. You sounded optimistic on that into next year. I wonder if you're seeing anything, whether it's edge -- AI on edge devices that underpins your optimism here and in that same context, I mean, given that the demand supply seems more tilted towards -- meeting hyperscaler demand, the data center demand, what gives you confidence that you can meet some of that client demand if it snaps back?
And if I can squeeze one in more for Luis as well. CapEx, at one point, there used to be obviously mid-teens as a percentage of revenues. Obviously, our revenues are exploding here, so we don't expect that same ratio. How should we think about that going forward?
David V. Goeckeler
Okay. Let me unpack that a little bit and see if I can help. So when we look at '27, we see definitely PC and phones units are down in both now, as you would expect. And we see those flattening out up slightly in '27 is kind of our internal view of the world. And quite frankly, I think that, that's just a reflection of market's ability to adapt, right? I mean I think that's -- if you're in business, and I think especially the device business, those are spectacular companies, very, very smart people that run them. And they understand how to change their portfolio mix and what they need to do given the environment they're in to drive their spectacular business forward. And I think there's no doubt, there's an adjustment process right now, and it's happening. And I think we'll get through that. And I think we'll get back to a point where we're still going to see content per device increase this year, at least on phones, PCs, we've got it flat. We'll see both of those start to inflect up next year, while units are flat to up slightly.
So now what will we supply? So that's an interesting question. So we're going to supply the customers that we have agreements with. That's the way we're starting to look at the market. I think this is the change that we've been talking about. We're not going to wait until next year and see what the market gives us. We're talking to edge customers as well about these new business models, agreements that are multiyear agreements with all the characteristics we've talked about in the past, committed growing demand, same kind of structure we talked about for these first 5. So those customers understand their businesses extremely well. We're engaged in those kind of conversations. We'll see if we reach the finish line on some of those. I'm sure we will. And that's how we'll have great insight into what their demand is because they will have told us and they will have put a financial commitment behind it, which will allow us to plan a lot better what demand we're going to serve.
So we're kind of navigating out of this market where we just show up and kind of see what demand is and see what the price is and then adjust our mix very rapidly. We know how to do that, but where we'd rather go is the path we're down, which is customers commit to us what their demand is and they committed in a way that we can really count on it. And quite frankly, they can really count on us.
Luis Visoso
I think to your last question on CapEx. I mean, David just talked about our philosophy. We continue to invest towards kind of a mid-teens capacity growth over time. What this translates to into dollars, obviously, you shouldn't think about it as a percent of revenue, but more in dollars, it's a little bit of an increase into the next several quarters as we did the easier conversions first, and they are -- the next conversions will be a little bit more expensive on a dollar basis to deliver that same kind of growth. Nothing dramatic, but just as you're modeling things, I would put in a few -- a little bit more higher CapEx per -- as we transition, but not a change in our philosophy, as David mentioned earlier.
Operator
The next question comes from Vijay Rakesh with Mizuho.
Vijay Rakesh
David and Luis, phenomenal set of results here. Just a quick question on the RPO and the financial guarantees there. I see your data center is already $1.5 billion. So that's like an annualized $6 billion run rate on the data center side. Is all the $11 billion and the $42 billion RPO mostly all in data center? Is that a fair assumption? And on to the pricing question, on these guarantees, it's probably mark-to-market, you would assume, right, as you look out 2, 3 years, there has to be some benchmarking to the market. Is that fair? I have a follow-up.
Luis Visoso
Yes. So we're not disclosing the customers -- so I'll leave it at that. But if you look at the $42 billion, not a lot of companies would be able to do that. So that's our RPO, and that's the minimum contractual revenue that you would expect from the 3 deals that we signed before the end of the quarter, right? So if you include all 5, that would be a larger number, and you will see that number in our next quarter, but it's not part of the $42 billion.
If you think about the $11 billion, which I think is the second part of your question. There are different financial instruments that we're using to protect us. There is a portion that is in prepayments. And as I mentioned in my prepared remarks, you will see that in the 10-Q, that's somewhere around $400 million that you'll see in our balance sheet. And there are other financial instruments and that's probably as far as I can go, which are managed by third-party financial institutions that are triggered if there is a breach in the contract that doesn't go all the way to the end. So that's kind of how it works, Vijay.
Vijay Rakesh
David, on the -- as you look at your NAND SSD road map, you have a pretty disruptive technology coming down the pipe in terms of high-bandwidth flash. Any thoughts on how that's progressing, how that's going, if you can give us some color?
David V. Goeckeler
Yes. We're happy with how it's going. It's kind of steady as she goes. We're having conversations with customers on how they would deploy it. We're building the technology, the NAND die itself, the controller. So we're still on the time line we talked about earlier of having actual the NAND late this year, and look for more of the system with the controller early mid next year.
Operator
The next question comes from Blayne Curtis with Jefferies.
Blayne Curtis
Great results. Yes. Maybe just following on that, I had a question about -- you're hearing a lot more discussion about different memory tiering, maybe accelerators using more DRAM. I'm just kind of curious if you had any perspective. There was a previous question on KV cache. I think everybody just assumed there'd be a lot more hard SSDs to serve that. But I'm just kind of curious, as you look at that future road map in different memory tiering, high-bandwidth flash fits into that. I'm just kind of curious if there's any change over the last quarter or so on just the thoughts of where that storage will be?
David V. Goeckeler
I don't -- not -- I mean, I think the kind of tiering architecture that came out maybe a quarter ago is what's being deployed. High-bandwidth flash is -- again, it's not necessarily a substitute for an enterprise SSD or something like that. It's a way to bring a lot more density to inference in a little different way. We have to follow up on that with a little more detail. But look, we're seeing -- you can see it in our numbers. We're just seeing an enormous amount of pull on that portfolio of high-performance enterprise SSDs as these architectures get deployed and inference starts to get deployed at scale. As we said in the prepared remarks, I mean, NAND is just a big part of that architecture now given the size of models, the size of the KV cache, the context length, all these things is NAND is the most scalable semiconductor technology in the world. It's now front and center -- well, it's now a critical component of that architecture, and we're seeing that be pulled through.
And -- I still expect this will be refined as we go forward. Again, this is why -- again, why we're staying very close to our customers. Our customers are the ones that know -- the big customers that are deploying this at scale. I suspect they have -- well, I know they have very, very detailed insight into how they're going to scale this across a global franchise. And so understanding what that is and what that means for demand on our products, I think that there's an enormous amount of work going on there. And again, that's what's driving the demand signals that are years into the future for us and allowing us to align our business model around that demand.
Operator
The next question comes from Amit Daryanani with Evercore ISI.
Victor Santiago
This is Victor Santiago on for Amit. I wanted to ask about the Nanya investment and supply agreement last month. Could you help us better understand the strategic rationale for it? Is that primarily the secure DRAM or access to HBF or future memory products going forward?
Luis Visoso
Yes. As you have seen, our data center business is doing pretty well, and we just posted very interesting growth. And that's just with our TLC product and a lot more to come as we continue to expand our business now with QLC and as we drive growth through our new business models. And one of the key things that we need to have access is DRAM, the partnership with Nanya provides an investment into the company and gives us a preferential treatment of access to DRAM as well. So that's the rationale.
Victor Santiago
Got it. And as a follow-up, I believe you provided the duration on the longest contract that you signed, but could you give us any idea on what the average duration might be across the 5 deals you signed so far?
Luis Visoso
Yes. Frankly, we're not -- we cannot get into that level of detail. We're giving -- I think you know the minimums we signed before were more shorter, but we're not giving an average. I apologize for that, Victor.
David V. Goeckeler
I think, Victor, one thing, we want a portfolio of deals like 1 year, 2 year, 3 year, 5 year and so that they don't all end at the same time and all those kinds of things, and we don't face cliffs. I mean we have every expectation we'll renew some of these. Some of the deals are for a certain number of years with options for more years. So it's still a little bit early, but we're going about this where it's not just -- there's not a fixed template, right? It depends on the customer. Every deal is kind of customized to specific customers. And as we get a little deeper into this, maybe we can have some of the conversations and some of the numbers you're asking for. But right now, it's a little bit early for that.
Operator
The next question comes from Wamsi Mohan with Bank of America.
Ruplu Bhattacharya
It's Ruplu filling in for Wamsi. I just have 2 quick ones, one for Luis. On the long-term agreements, is there any restriction on when you can raise prices? Is it allowing for annual price increases? Or are there certain conditions when you can raise prices? And then one for Dave. How do you see the interest in QLC flash trending? And how do you see the mix of TLC versus QLC trending over the next couple of quarters?
Luis Visoso
Yes. So -- sorry, I'm going to frustrate you a little bit. We can't go into pricing in detail for each of the contracts. As I said, at the beginning, there are some fixed price components and some variable pricing components, and it is very different depending on each of the agreements that we have. So there is no kind of an overall answer overall on pricing.
David V. Goeckeler
So TLC, QLC, I mean, if you look across the whole portfolio, roughly 2/3 TLC, 1/3 QLC. If you look at data center, obviously, for us, it's predominantly TLC, and we'll be launching major QLC products next quarter. But there's a lot of demand for TLC, given these -- especially in the enterprise SSD space. Given the inference architectures and some of the comments earlier around KV cache and how important it is and quite frankly, how it can scale dramatically based on your assumptions of the use case you're serving, there's a very, very strong demand on TLC. That said, we expect our QLC products to do very well.
Operator
This concludes our question-and-answer session. I would like to turn the conference back over to Ivan Donaldson for any closing remarks.
Ivan Donaldson
Yes. I just want to say thank you to everyone for joining the call today. Thank you for your support, and we look forward to speaking with you throughout the quarter.
Operator
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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