Western Digital Corporation (NASDAQ: WDC) Q2 2026 Earnings Call dated Jan. 29, 2026
Corporate Participants:
Ambrish Srivastava — Investor Relations
Irving Tan — Chief Executive Officer
Kris Sennesael — Chief Financial Officer
Analysts:
Aaron Rakers — Analyst
Eric Woodring — Analyst
CJ Muse — Analyst
Vamsi Mohan — Analyst
Asia Merchant — Analyst
Amit Dharyanani — Analyst
Carl Ackerman — Analyst
Thomas O malley — Analyst
Vijay Rakesh — Analyst
Steven Fox — Analyst
Ananda Barua — Analyst
Krish Sankar — Analyst
Presentation:
operator
Good afternoon and thank you for standing by. Welcome to Western Digital’s second quarter fiscal 2026 conference call. Presently all participants are in listen only mode. Later we will conduct a question and answer session at that time. If you would like to ask a question you may press Star then one on your phone. As a reminder, this call is being recorded now. I will turn the call over to Mr. Ambresh Srivastava, Vice President, Investor Relations. You may begin.
Ambrish Srivastava — Investor Relations
Thank you and good afternoon everyone. Joining me today are Irving Tan, Western Digital’s Chief Executive Officer, and Chris Senesal, Western Digital’s Chief Financial Officer. 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 include expectations for our product portfolio, our business plans and performance, ongoing market trends, and our future financial results. We assume no obligation to update these statements. Please refer to our most recent 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.
In our prepared remarks, our comments will be related to non GAAP results on a continuing operations basis unless stated otherwise. Reconciliations between the non GAAP and comparable GAAP financial measures are included in the press release and other materials that are being posted in the Investor Relations section, our website@investor.wdc.com Lastly, I want to note that when we refer to we us are or similar terms, we are referring only to Western Digital as a company and not speaking on behalf of the industry. With that, I will now turn the call over to Irving for introductory remarks.
Irving Tan — Chief Executive Officer
Irving thanks Ambrish and good afternoon everyone and thank you for joining us today. The growth and impact of AI continues to accelerate across numerous industries as generative AI models become the norm and agentic AI scales to drive business productivity. It is clear that AI is becoming a true strategic enabler of business transformation. AI inference has also begun to take hold in many ways becoming the true AI workload with deployment to chatbots and virtual assistants and customer relationship management tools. Further innovations in physical AI are also accelerating quickly generating increasingly larger multimodal models propelled by advancements in autonomous vehicles and robotics.
In all cases, it is data that is needed to fuel the entire AI process, from training to inference to enable stronger models and sharper inference results. And as more data is generated and the value of data increases, the demand to store it is expanding at a rapid rate as AI capabilities expand, cloud continues to grow as well and both are driving the surge in demand for higher density storage solutions. In this new era where AI and cloud dominates, Western Digital has taken a customer focused approach to managing this strong demand by working closely with our hyperscale customers, ensuring that we deliver reliable high capacity drives at scale to give them the best performance and total cost of ownership.
We are doing this by continuing to focus on increasing our drives aerial density and accelerating our Hammer and EPMR roadmaps as well as upshifting our customers to accelerate adoption of higher capacity drives and ultrasmr technology. This last quarter we shipped over 3.5 million units of our latest generation EPMR products offering up to 26 TB CMR and 32 TB Ultra SMR capacities representing strong confidence and adoption by our customers customers. We have also started qualification of our Hammer and next generation EPMR products, each with a different hyperscale customer. These drives will offer our customers the higher capacity and improve total cost of ownership that they are looking for.
In addition, we continue to accelerate our Hammer innovation. To support this, we recently acquired intellectual property assets and talent that will help us in the development of our internal laser capabilities. Also this past quarter in partnership with software ecosystem partners, we announced our Ultra SMR enabled JBOT platforms, expanding Ultra SMR adoption to a broader customer set. These platforms deliver significantly higher storage density compared to conventional drives, giving customers hyperscale like performance and make mass scale data analysis more sustainable and efficient. We are truly seeing our approach resonate with our customers and this is reflected in longer term agreements and better visibility into their requirements.
We have firm purchase orders with our top seven customers through calendar year 2026. We also have in place robust commercial agreements with three of our top five customers, two through calendar 2027 and one through calendar 2028. These agreements indicate a strong trust that we have built with our customers and confidence in our ability to meet their exabyte needs. We are hosting an innovation day on February 3rd in New York next week where we will share updated roadmaps for our Hammer and EPMR products as well as further details on core innovations that we are developing to improve our drives performance, energy efficiency and throughput.
We will also provide an update on our financial model in keeping with our strategy to incubate new growth factors based on our intellectual property and core capabilities. Last month we announced a strategic investment in Colab, which combines our expertise in material science and precision manufacturing with CoLab’s breakthrough approach to quantum hardware design. Working with Colab, we aim to advance next generation nanofabrication processes that improve qubit performance, reliability and scalability. Looking ahead, we see our positive momentum continuing and will remain focused on supporting our customers exabyte storage requirements while completing qualifications and launching our next generation Hammer and EPMR drives.
I will now hand it over to Chris to share our Q2 results and outlook for Q3.
Kris Sennesael — Chief Financial Officer
Thank you Irving and good afternoon everyone. Western Digital delivered another quarter of strong financial performance reflecting disciplined execution across our organization and our ability to meet the customers growing demand in the AI driven data economy during the second quarter of fiscal 2026. Revenue was 3 billion, up 25% year over year driven by strong demand for our nearline drives. Earnings per share was $2.13. Both revenue and EPS were above the high end of the guidance range. We delivered 215 exabytes to our customers up 22% year over year. This includes over 3.5 million drives or 103 exabytes of our latest generation EPMR with capacity points up to 32 terabytes.
Cloud represented 89% of total revenue at 2.7 billion, up 28% year over year driven by strong demand for our higher capacity nearline product portfolio. Klein represented 6% of total revenue at 176 million, up 26% year over year. Consumer represented 5% of revenue at 168 million, down 3% year over year. Gross margin for the fiscal second quarter was 46.1%. Gross margin, improved seven hundred and seventy basis points year over year and two hundred and twenty basis points sequentially. The improved gross margin performance reflects continued mix shift towards higher capacity drives and tight cost control. In our manufacturing sites and throughout the supply chain.
Operating expenses were 372 million. As a percentage of revenue, operating expenses declined 120 basis points sequentially, primarily due to operating leverage. In the model, operating income was slightly above 1 billion, translating into an operating margin of 33.8%. Interest and other expenses were 45 million and our effective tax rate in the fiscal second quarter was 15.1%, taking into account a diluted share count of 378 million shares. EPS was $2.13, an increase of 78% year over year. Turning to the balance sheet at the end of our fiscal second quarter, cash and cash equivalents were 2 billion and total liquidity was 3.2 billion, including the undrawn revolver capacity.
Debt outstanding was $4.7 billion, translating into a net debt position of $2.7 billion and a net leverage EBITDA ratio of well below one term operating cash flow for the fiscal second quarter was $745 million and capital expenditures were $92 million, resulting in strong free cash flow generation of $653 million for the quarter, which reflected a free cash flow margin of 21.6%. During the quarter, we made 48 million of dividend payments and increased our share repurchases to 615 million, repurchasing 3.8 million shares of common stock. Since the launch of our capital return program in the fourth quarter of fiscal 2025, we have returned more 1.4 billion to our shareholders by way of share repurchases and dividend payments.
Also today we announced that our board has approved a quarterly cash dividend of 12.5 cents per share of the company’s common stock, payable on March 18, 2026 to shareholders of record as of March 5, 2026. I will now turn to the outlook for the third quarter of fiscal 2026. We anticipate revenue to be 3.2 billion plus minus 100 million at midpoint. This reflects a growth of approximately 40% year over year. Gross margin is expected to be between 47 and 48%. We expect operating expenses in the range of 380 million to 390 million. Interest and other expenses are anticipated to be approximately 50 million.
The tax rate is expected to be approximately 16%. As a result, we expect diluted earnings per share to be $2.30 plus minus $0.15, based on a non GAAP diluted share count of approximately 385 million shares. To wrap up, Western Digital achieved another strong quarter with performance ahead of expectations. Our guidance for the next quarter underscore continued favorable trends in our business alongside our disciplined approach to free cash flow, capital returns and long term value creation for shareholders. With that, let’s now begin the Q and A. Amrish.
Ambrish Srivastava — Investor Relations
Thank you, Chris. Operator, you can now open the line to questions please. To ensure that we hear from as many analysts as possible, please ask one question at a time. After we respond, we will give you an opportunity to ask one follow up question.
Questions and Answers:
operator
Operator Ladies and gentlemen, we will now begin the question and answer portion of today’s call. If you have a question, please press Star one on your phone. If you would like to withdraw your question, please press Star two. One moment please for the first question. Our first question today comes from Aaron Rakers with Wells Fargo. Please go ahead.
Aaron Rakers
Yeah, thanks for taking the question and I will stick to one umbreesh on the gross margin line. The guidance that you’re giving for 47 to 48%. I guess the back of the envelope math would suggest that you’re maintaining what looks to be like a 70, maybe 75% incremental margin flow through. So I guess my question is how do you think about the durability of that incremental margin? Or maybe taken another way, how do you think about the cost curve down on a per terabyte basis as we look out over the next call several quarters. Thank you.
Kris Sennesael
Yes, Aaron, thanks for your question. And so first of all, I’m really happy with what’s going on with the gross margin. We delivered 46.1% gross margin margin up 220 basis points quarter over quarter, up 770 basis points year over year and we are guiding to 47, 48%. So 47.5% at the midpoint, which is up 740 basis points on a year over year basis. And Aaron, I think your math is working. The incremental gross margin is on about 75% depending on how you look at it on a year over year basis or quarter over quarter basis.
So I’ve stated before, I’m very comfortable with an incremental gross margin higher than 50% and definitely 75% is, is, is higher than 50%. I mean in gross margins there’s two sides to the equation. On one hand you have pricing environment and the other hand you have the cost environment in pricing. I’ve talked about that before. We see a stable pricing environment with prices on a price per terabyte kind of flattish to slightly up. Actually last quarter it was up 2,3% on ASP per terabyte basis. So that clearly demonstrate the value that we continue to deliver to our customers.
And on the cost front the teams continue to execute really well. We continue to upshift our customers to higher capacity drives which gives us a cost benefit. And then there is great execution as well on driving down the cost in our manufacturing assets as well as throughout the supply chain. And when you look at it, last quarter the cost per terabyte was coming down on or about 10% on a year over year basis. And so when you put this all together, we continue to drive further gross margin expansion and we believe in the next couple of quarters and beyond we will continue to be able to do that.
Ambrish Srivastava
Thank you. Thank you Aaron. We’ll go to the next question please.
operator
The next question is from Eric Woodring with Morgan Stanley. Please go ahead.
Eric Woodring
Great guys, thank you for taking my questions. Irving, just given the tightness of the HDD market and kind of the significant inflation that NAND is going through right now. Can you maybe just talk about maybe your patience in being able to sign purchase orders further into calendar 27 to extract better economic relative to maybe how you were approaching signing POS last year? Is that making any difference in the economics you’re able to extract?
Irving Tan
Thank you. Yeah, thanks Eric. As we highlighted, we’re pretty much sold out for calendar year 26. We have firm POS with our top seven customers and we’ve also established LTA’s with two of them for calendar year 27 and one for them for calendar year 28. Obviously these LTA’s have a combination of volume of exabytes and price. And in relation to pricing, I think first it’s important to recognize that our customers actually see value, that there’s actually a structural shift in the value that we deliver to them, especially in the impact that we have to their total cost of ownership as the business moves more and more towards inference where monetization is happening.
So in this case, the pricing that we’ve provided there reflects the value that we are create that we’re delivering to them. And so as Chris mentioned, we continue to see going forward a stable pricing environment that gives us an opportunity to continue to extract more value as we deliver both better TCO value to our customers and to better support their supply demand needs as well through higher capacity drives.
Kris Sennesael
Do you have a follow up, Eric?
Eric Woodring
Sure. Just very quickly, Chris, would just love to know how you’re approaching the SanDisk share ownership. Do you still plan to monetize before? I think it’s the February, February 21st deadline. And more importantly, how do you expect to leverage those proceeds? Thanks so much guys. Best of luck.
Kris Sennesael
Yes, Eric, as you probably know, we still have 7.5 million SanDisk shares and it’s our intention to monetize those shares before the one year anniversary of the separation, likely in a similar transaction that we have done before. Meaning it’s a debt for equity swap and so the proceeds will be used to further reduce the debt.
Ambrish Srivastava
Thank you, Eric. Next question please. Operator.
operator
The next question is from CJ Muse with Kantor Fitzgerald. Please go ahead.
CJ Muse
Yeah, hi, thanks for taking the question. I guess. Could you speak to how customer engagement. And contracts are evolving in this very tight environment? Thanks so much.
Irving Tan
Yes, cj, this is Ravi. Thanks for the question. One of the things that we’ve been very focused on over the last year is really develop a much more customer centric approach. As we’ve shared in the past, we’ve really pivoted our organization to be centered around our big hyperscale customers with dedicated teams for each of them. That’s really deepened the relationship that we have with them in terms of both technology roadmap development, in terms of getting better visibility of their demand requirements. And you see the result of that in the longer term. LTA’s we’ve been able to structure with them. We’re also looking forward to sharing with all of you the innovations that we are going to be delivering to support the AI needs, workloads, needs going forward at our innovation day next week.
But definitely the relationship has improved. As I highlighted, they definitely see the value and the structural that’s resulting in the structural change that we’re seeing in terms of pricing with them. That’s also resulting in the longer term contracts that we have. Ultimately what we want to do is to be able to ensure that it’s a fair value exchange, deliver predictable pricing to them because one of the things that they are concerned about is the high volatility of some tiers of the storage space and to ensure that there’s sustainable value creation both for them and for us along the way.
Ambrish Srivastava
You have a follow up C.J. let’s go to the next one. Sorry. C.J. Go ahead.
CJ Muse
Yeah, sorry about that Ambrose. I guess just to Follow on the SanDisk share comment, can you talk about your plans thereafter? Are you going to focus more so on share repurchase or other? Well, we already focusing on share repurchases since we’ve announced the $2 billion share repurchase authorization in May of 2025. We already have repurchased 1.3 or we have used 1.3 billion of that program repurchasing on or about 13 million shares and there is no hesitation, we will continue to use that program.
Ambrish Srivastava
Thank you. C.J.
operator
The next question is from Wamsi Mohan with Bank of America. Please go ahead.
Vamsi Mohan
Hi, this is Ashlyn Greninger on for wamsi. Congrats on the results guys. Just one question for me. Mine’s on the mix of ultra smr. Just given your order book, LTA’s how is this mix trend on Altra SMR trending and how does this mix shift play a role kind of as a driver of gross margins moving forward? Thanks.
Irving Tan
Yes, that’s a really great question, Ashley. Thank you for that. Well, last quarter we crossed on the nearlying portfolio 50% mix on ultra SMR and we actually see that increasing as we’ve highlighted one of the things that we’re doing to better support the Growth in demand from our customers is really to upshift them to higher capacity drives. A big part of that is the upshift to Ultra SMR based drives. And we see more and more customers adopting Ultra smr. We have our top three customers fully on board with Ultra SMR drives already today and we have another two to three more that are moving into a process of adopting Ultra smr.
So we are likely to see the. Ultra SMR mix of our total nearly exabyte base continue to increase going forward. That’s actually very important for us because one, we are better able to serve our customer demand needs. As you recall, Ultra SMR gives a 20% capacity uplift over CMR and a 10% capacity uplift over the standard industry standard SMR. But equally important from a gross margin standpoint, Ultra SMR is a software based solution. So it’s very accretive for us from a margin standpoint as well. So a higher mix of Ultra SMR is definitely going to be beneficial both to our customers and to our ongoing profitability as well.
Ambrish Srivastava
And Ashley, one thing in Irving’s prepared remarks we mentioned the JBOD that we have launched, which also expands our Ultra SMR customer reach beyond what we have been targeting so far. So thanks for your question. We can go to the next question please.
operator
The next question is from Asia Merchant with Citigroup. Please go ahead.
Asia Merchant
Hi, good afternoon, it’s Mike Cadiz at Citi for ASEA today. So I have a question and perhaps a follow up. So the first is could you provide any color or additional color on yields and reliability? I know that is, those are a couple points that Irving has brought up over the past couple quarters. In relation to the multiple rollouts, is there any implication to cost per bit declines that we can think of?
Irving Tan
Yeah, thanks for the question, Mike. So our yields on our EPMR products continue to be very, very. They continue to be yielding very well in the low 90s percentage yield range. And obviously from a reliability and quality standpoint, we received very good feedback from our customers. The fact that we’ve been able to last quarter deliver over 3.5 million units of our flagship EPMR drives is a testimony to the confidence that they have in terms of the reliability and the quality. In terms of the cost related to the cost down, obviously as we get yields up, cost continues to decline as the Ultra SMR mix goes up within those new products as well.
That’s also going to be a driver of cost down as well.
Asia Merchant
Did you have a follow up, Mike? I did, yeah. Thank you for that. So can you talk more about any progress or the progress from your Rochester test and integration site, how you’re leveraging perhaps those efforts to accelerate maybe any the existing customer transitions. Thanks.
Irving Tan
Yeah, you know, one update that we shared in the prepared script is actually we last quarter we indicated that we would start Hammer qualification. We pulled it forward to the first half of calendar 26. We actually have started qualification of those drives already this month for Hammer. On top of that, we’ve also started qualification for our next generation EPMR drives as well. And obviously our Rochester SIDLAB plays a critical role in ensuring that we have a very smooth, quick qualification. And equally important, as they move into production environments that they deliver the same reliability and quality that our customers have been used to our previous generations of products.
Again on this one, we look forward to sharing a lot more. On the 3rd of February in our innovation Day, we’ll be highlighting the updated roadmaps for both our EPMR and HAMR portfolio. And so we look forward to sharing more of that exciting news next week.
Asia Merchant
Thank you, Mike.
operator
The next question is from Amit Dharyanani with Evercore. Please go ahead.
Amit Dharyanani
Hi, this is Hannah on for Amit. I was just wondering, are there any notable investments related to HAMR that are currently flowing through cogs or operating expenses and should we expect those costs to roll up or normalize as HAMR begins to ramp?
Kris Sennesael
Yeah, we have been working on HAMR for the last 10 years and the engineering teams are making good progress. So there is no change there. We will continue to work on those programs and we will in general continue to innovate and make performance improvements to our programs, continue to drive higher capacity drives and those investments will continue as it relates to the gross margin. We haven’t started the Hammer ramp yet, but we are confident once we start ramping Hammer that will be neutral to accretive to our gross margins. Yes, maybe.
Irving Tan
Just to add on to what Chris said, even with the Hammer RAM that we anticipate will happen at the start of calendar year 27, our CapEx as a percentage of revenue on a run rate basis will still be within the 4 to 6% range.
Amit Dharyanani
Did you have a follow up?
Kris Sennesael
No. Thank you.
Amit Dharyanani
Okay, thank you.
operator
The next question is from Carl Ackerman with BNP Paribas. Please go ahead.
Carl Ackerman
Thank you gentlemen. Rose mid teens in 2025 and it’s projected to advance double digits again in 2026. As agentic AI is supposed to drive a significant recovery in front end conventional servers. But in your case because hard drive units are highly correlated to demand for conventional servers and you’re also seeing a content uplift from these new drives. Do you believe agentic AI demand can enable you to exceed your long term exabyte growth CAGR of low 20s? Thank you.
Irving Tan
Yeah, thanks for the question Carl. Well, I think we’ve definitely seen exabyte growth over the last few quarters in the low 20s as you’ve highlighted. Actually we see as the AI value changes from model training to inference, more data is going to get created as a result. In order to enable inference delivery, more data needs to get stored as a result of that data getting generated as well. And if you look at the economics of being able to deliver inference at the right cost structure to drive mass scale adoption, again, a lot of that data that’s getting generated and requires storage will be stored on hard drives as they are, as we’ve highlighted in the past, where hyperscalers really are masters of managing the economics and moving data across the different tiers of SSDs, HDDs and tape as well.
So from our perspective and the conversations that we’ve been having with our customers, inference is definitely going to drive a significant amount of data storage requirement and that’s really positive for HDDs going forward.
Ambrish Srivastava
Do you have a follow up Carl, if I may?
Carl Ackerman
Ambreesh, just going back to Hammer. It sounds like you’ve pulled in the progression of Hammer at least your first primary customer. Can you talk about the interest beyond your initial customer given the robust hyperscaler demand for exabyte capacity?
Irving Tan
Thank you. Yeah, thanks for the question Carl. As we’ve mentioned, you know we are starting qualification in the first half of this year. We’ve already started that with one hyperscale customer already this month and we will be initiating another one initiating qualification with another hyperscale customer relatively soon.
Ambrish Srivastava
Thank you Carl.
operator
The next question is from Thomas o’ Malley with Barclays. Please go ahead.
Thomas O malley
Hi guys, thanks for taking the question. Just to follow up on some of. The comments from the preamble about acquiring some ip, I think on the laser side, could you maybe give us a little more detail on that? Maybe the size of the purchase and then what in particular you needed to add on the laser side that you felt like you needed to go out. And do a deal?
Irving Tan
Yes, thanks for the question. Unfortunately, the terms and conditions of the deal are confidential, so we can’t really share too much about it. But we are excited about acquiring this technology. We’ll share again more of that next week at our Innovation day. But what I will say is it’s definitely going to give us the benefit of taking much less real estate in the drive and that will actually help with manufacturability in terms of reliability. And we also see that with this innovative technology, energy requirements to support the lasers will also be reduced compared to the conventional laser diode.
So we’re quite excited about both the IP and the capabilities that we’ve acquired.
Ambrish Srivastava
A follow up tomorrow I do with.
Thomas O malley
Nvidia’s addition of the KVCache offload and the NAND attach that’s thought to go with that. I was curious if you guys have been engaging with any large hyperscalers or any large procurers of storage for any kind of solution that would maybe attach onto custom silicon deployments, AKA something that brings the hard drive a little bit closer to some of the accelerators if there’s a roadmap for those, or if you’re engaging in that way with any customers. Thank you.
Irving Tan
Yeah, thanks for the question. Again, I think the initiative that Nvidia has been driving is really to help accelerate inference capability and as I’ve highlighted as a result of that the velocity and the volume of data is going to get generated much more rapidly and benefit from us obviously will be able to. It will require a lot more storage, which obviously HDDs are well suited with the superior economics we are working on, as we’ve highlighted in the prepared remarks on interesting innovations to improve both our bandwidth and throughput of our drives. Again, something we’re looking forward to be sharing with all of you next week as well.
Ambrish Srivastava
Thank you Dom.
operator
The next question is from Vijay Rakesh with Mizuho. Please go ahead.
Vijay Rakesh
Yeah, hi, thanks Irving and Chris, pretty phenomenal numbers here. Just a quick question on the hammer side, are you expecting to pull in the hammer roadmap timeline given how tight supply is, et cetera?
Irving Tan
Yeah, we’ve pulled in the qualification already by half a year and we’ve started the qualification process with one customer. As I just mentioned earlier to Carl’s question, we will be starting a qualification with a second customer imminently on qualification. Obviously getting hammer and higher capacity drives customers are a key part of the approach that we’re taking to meet the strong demand for exabytes from our customers on hdd. But it’s also very important to remember we also have started the qualification of our next generation EPMR drives and those products have shown the ability not to only deliver very high capacity per drive but also be able to support high degree of scalability and manufacturability where we are able to deliver large volumes of drives to our customers.
So last quarter we delivered over 3.5 million drives and this quarter we’re looking to deliver close to 4 million drives.
Ambrish Srivastava
Got it. And then on the gross margin trajectory, I guess with the incremental 50% drop through, when you look at Hammer ramps, any thoughts on how we should look at those margins, I guess you might call it on the innovation day, but any preliminary thoughts there?
Vijay Rakesh
Thanks. Yeah, I mean, as we’ve consistently highlighted, we see the transition once Hammer gets to the same scale as our EPMR portfolio, the gross margins for Hammer will be neutral to accretive from what we have with epmr.
Ambrish Srivastava
Thank you, Vijay.
operator
The next question is from Steven Fox with Fox Advisors. Please go ahead.
Steven Fox
Hi, good afternoon. I was wondering if you can maybe. Talk about the revenue per exabyte in the quarter compared to last quarter and a year ago in the sense that. How much of the change quarter over. Quarter and year over year as related. To change in mix. And then I had a follow up, if I could.
Irving Tan
Yeah, maybe I can start off here. And Chris might want to add in the big driver of our sort of revenue per exabyte both year in year and quarter and quarter is related to our cloud segment. So our big hyperscale customers, we see very strong demand from that segment. So obviously that’s driving a lot of the bids and the revenues associated with that. And in that segment, as Chris has highlighted, the pricing is stable. So in fact it was up single digit last quarter and year on year as well. So that’s a positive trend that we continue to see and that’s going to be a growth driver for the business for the year and probably for the.
Next two years as well.
Ambrish Srivastava
Thanks. And if I could just quickly file follow up. Can you just. Is there any commentary on how successful you were in terms of maybe getting. Out more exabytes during the quarter than. Originally planned for or, you know, whether. Through quicker customer qualifications or your own. Efficiencies, Any, any update there would help. Thank you. Yeah, well, last quarter we delivered 215exabytes. Right.
Steven Fox
That was up 22% year on year. And again, a lot of it’s being driven by our cloud portfolio. As we’ve highlighted. We shipped over 3.5 million units of our current EPMR products that go up to 32 terabytes. So it’s a clear recognition of the stability, quality and scalability of that product. So we will continue to do that and we look forward to ramping the next generation of EPMR and Hamra in the coming quarters to better support the customer demands.
Ambrish Srivastava
Thank you Steven.
operator
The next question is from Ananda Barua with Loop Capital. Please go ahead.
Ananda Barua
Yeah, good afternoon guys. Thanks for taking the question on cost down. You mentioned that. I think Chris, December quarter was 10% year over year down and with Ultra SMR becoming a larger portion of the ship and then with hammer coming on sort of margin neutral deposits. Do you think that cost out? I think it’s classically been about 10% year over year. Do you think that can increase in coming years cost out increasing per exabyte ship? Thanks.
Kris Sennesael
Yeah, so currently it’s on at about 10% cost per terabyte or exabyte reductions. Obviously we will continue to innovate, continue to push to higher capacity drives, continue to upshift our customers to adoption of those higher capacity drives including Ultra smr. And all of those actions will lead to further cost reductions on a cost per terabyte. I think it’s fair to say that on or about 10% is a good number and as we potentially accelerate our roadmaps we could potentially drive that higher.
Ananda Barua
That’s super helpful.
Ambrish Srivastava
Do you have a follow up on it? Yeah, quick, quick.
Ananda Barua
Amrish, thanks. This may be one for next week actually. But just interested in understanding how far up the aerial density stack do you think you can get CMR and Ultra SMR before you really get hammer going? Thanks.
Irving Tan
Yeah, I think that’s something we are looking very much forward to sharing with you next week. So we look forward to seeing you there.
Ambrish Srivastava
Go to the next question please. Thank you.
operator
Anand, the last question is from Krish Sankar with TD Cowan. Please go ahead.
Krish Sankar
Hey guys, this is Adi for Krishna. You mentioned you have three LTA’s for. 2027 and 2028 that are volume not price based. I do wonder what is the reason. These contracts are not locked in price especially given the very tight supply. Is it the customer who prefer not. To lock in price or is it. You guys who prefer to have the flexibility? Any high level color would be helpful. Thank you.
Irving Tan
Yeah, thanks for the question. Just to Clarify, we have two customers that have LTA’s true calendar year 27. One customer that has an LTA through calendar 28. These LTA’s have both price and volume conditions in them. Okay noted. Thank you.
Krish Sankar
That’s great color.
Ambrish Srivastava
Thank you. Thank you. Thank you. Eddie.
operator
This concludes today’s conference call. Thank you for joining. You may now disconnect.