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What changed in Western Digital's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Western Digital's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+389 added−415 removedSource: 10-K (2025-08-14) vs 10-K (2024-08-20)

Top changes in Western Digital's 2025 10-K

389 paragraphs added · 415 removed · 237 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeThat commitment is reflected through sustainability-focused initiatives as well as day-to-day activities, including our adoption of sustainability-focused policies and procedures, our publicly-recognized focus on fostering an inclusive workplace, our constant drive toward more efficient use of materials and energy, our careful and active management of our supply chain, our community-focused volunteerism programs and philanthropic initiatives and our impactful, globally-integrated ethics and compliance program. • We seek to protect the human rights and civil liberties of our employees through policies, procedures and programs that avoid risks of compulsory and child labor, both within our company and throughout our supply chain. • We foster a workplace of dignity, respect, diversity and inclusion through our recruiting and advancement practices, internal communications and employee resource groups. • We educate our employees annually on relevant ethics and compliance topics, publish accessible guidance on ethical issues and related company resources in our Global Code of Conduct and encourage reporting of ethical concerns through any of several global and local reporting channels. • We support local communities throughout the world, focusing on hunger relief, environmental quality and STEM (science, technology, engineering and math) education, especially for underrepresented and underprivileged youth. • We utilize a robust integrated management system, with associated policies and procedures, to evaluate and manage occupational health and safety risks, environmental compliance and chemical and hazardous substance risks. • We work to minimize our impacts on the environment through emissions reduction targets and other initiatives and to evaluate and enhance our climate resiliency. • We innovate to reduce the energy used by our products, the energy used to manufacture them and the amount of new materials required to manufacture them.
Biggest changeOur sustainability strategy is reflected through sustainability-focused initiatives as well as day-to-day activities, including our adoption of sustainability-focused policies and procedures, fostering an inclusive workplace, our constant drive toward more efficient use of materials and energy, our careful and active management of our supply chain, our community-focused volunteerism programs and philanthropic initiatives and our impactful, globally-integrated ethics and compliance program. • We work to minimize our impact on the environment by reducing emissions, water withdrawal and waste to landfills, and by evaluating and enhancing our climate resiliency. • We strive to innovate in ways that reduce the energy used by our products, the energy used to manufacture them and the amount of new materials required to manufacture them. • We actively collaborate with customers, suppliers, industry associations, governments, academics, standards organizations and industry partners to generate value, reduce emissions across the ecosystem, and increase circularity to reduce raw materials extraction. • We seek to foster a workplace of inclusion by hiring and developing team members with different experiences and creating opportunities for connections across the company through our Employee Resource Groups. • We are guided by our global pillars centered on hunger relief, environmental quality and STEM (science, technology, engineering and math) education and activate employees locally to have an impact on their community. • We seek to protect the human rights and civil liberties of our employees through policies, procedures and programs that avoid risks of compulsory and child labor, both within our company and throughout our supply chain. • We educate our employees annually on relevant ethics and compliance topics, publish accessible guidance on ethical issues and related company resources in our Global Code of Conduct and encourage reporting of ethical concerns through any of several global and local reporting channels. • We set new environmental goals post-Separation to expand our focus to include carbon-free energy alternatives, add an upstream direct emissions reduction goal and goals for increasing recycled content in products and packaging for our enterprise HDD portfolio.
For additional information regarding our service and warranty policy, see Part II, Item 8, Note 1, Organization and Basis of Presentation, and Note 4, Supplemental Financial Statement Data, of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.
For additional information regarding our service and warranty policy, see Part II, Item 8, Note 1, Organization and Basis of Presentation, and Note 5, Supplemental Financial Statement Data, of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.
For a discussion of such risks, see Part I, Item 1A, Risk Factors , of this Annual Report on Form 10-K. 8 Table of Contents We perform our marketing and advertising functions both internally and through outside firms utilizing both consumer media and trade publications targeting various reseller and end-user markets.
For a discussion of such risks, see Part I, Item 1A, Risk Factors , of this Annual Report on Form 10-K. We perform our marketing and advertising functions both internally and through outside firms utilizing both consumer media and trade publications targeting various reseller and end-user markets.
Compliance with existing or future governmental regulations, including, but not limited to, those pertaining to global trade, the environment, consumer and data protection, employee health and safety and taxes, could have a material impact on our capital expenditures, earnings, competitive position and overall business in subsequent periods.
Compliance with existing or future governmental regulations, including, but not limited to, those pertaining to global trade, the environment, consumer and data protection, employee health and safety, and taxes, could have a material impact on our capital expenditures, earnings, competitive position and overall business.
The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC, including us. 11 Table of Contents
The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC, including us. 9 Table of Contents
HDD products provide non-volatile data storage by recording magnetic information on a rotating disk. We develop and manufacture substantially all of the recording heads and magnetic media used in our HDD products. We have led the industry in innovation to drive increased areal density and high-performance attributes.
HDD products provide non-volatile data storage by recording magnetic information on rotating disks. We develop and manufacture substantially all of the recording heads and magnetic media used in our HDD products. We have led the industry in innovation to drive increased areal density and high-performance attributes.
We design and manufacture substantially all of the recording heads and magnetic media required for our products. As a result, we are more dependent upon our own development and execution efforts for these components and less reliant on recording head and magnetic media technologies developed by other manufacturers.
We design and manufacture substantially all of the recording heads and magnetic media required for our products. As a result, 6 Table of Contents we are more dependent upon our own development and execution efforts for these components and less reliant on recording head and magnetic media technologies developed by other manufacturers.
Our multi-year product roadmap for high-capacity HDD, which combines ePMR, OptiNAND, UltraSMR and triple stage actuators to deliver a cutting-edge portfolio of drives, in commercial volumes, at a wide variety of capacity points, puts Western Digital in a strong position to capitalize on the opportunities presented by the large and growing storage markets.
Our multi-year product roadmap for high-capacity HDDs, which include ePMR, OptiNAND, UltraSMR and triple stage actuators to deliver a cutting-edge portfolio of drives, in commercial volumes, at a wide variety of capacity points, puts Western Digital in a strong position to capitalize on the opportunities presented by the large and growing storage markets.
The critical elements of our production of both HDD and Flash are high volume and utilization, low-cost assembly and testing, strict adherence to quality metrics and maintaining close relationships with our strategic component suppliers to access best-in-class technology and manufacturing capacity.
The critical elements of our production are high volume and utilization, low-cost assembly and testing, strict adherence to quality metrics and maintaining close relationships with our strategic component suppliers to access best-in-class technology and manufacturing capacity.
Patents, Licenses and Proprietary Information We rely on a combination of patents, trademarks, copyright and trade secret laws, confidentiality procedures and licensing arrangements to protect our IP rights. We have approximately 13,000 active patents worldwide and have many patent applications in process. We continually seek additional United States (“U.S.”) and international patents on our technology.
Patents, Licenses and Proprietary Information We rely on a combination of patents, trademarks, copyright and trade secret laws, confidentiality procedures and licensing arrangements to protect our IP rights. We have approximately 4,500 active patents worldwide and have many patent applications in process. We continually seek additional United States (“U.S.”) and international patents on our technology.
The ability to access, store and share data from anywhere on any device is increasingly important to our customers and end users. From the intelligent edge to the cloud, data storage is a fundamental component underpinning the global technology architecture.
Industry We operate in the data storage industry. The ability to access, store and share data from anywhere on any device is increasingly important to our customers and end users. From the intelligent edge to the cloud, data storage is a fundamental component underpinning the global technology architecture.
Our employees also regularly participate in philanthropy to support the communities in which they work and live. In 2024, more than half of our employees gave their time to participate in company-sponsored volunteer events.
Our employees also regularly participate in philanthropy to support the communities in which they work and live. In 2025, more than half of our employees around the world gave their time to participate in company-sponsored volunteer events.
We continually monitor our manufacturing capabilities to respond to the changing requirements of our customers and maintain our competitiveness and position as a data technology leader. HDD and Flash manufacturing are each complex processes involving the production and assembly of precision components with narrow tolerances and rigorous testing.
We continually monitor our manufacturing capabilities to respond to the changing requirements of our customers and maintain our competitiveness and position as a data technology leader. HDD manufacturing is a complex process involving the production and assembly of precision components with narrow tolerances and rigorous testing.
We believe there is tremendous market opportunity flowing from the rapid global adoption of the technology architecture built with cloud infrastructure tied to intelligent endpoints all connected by high-performance networks. 4 Table of Contents The increase in computing complexity and advancements in artificial intelligence (“AI”), along with growth in cloud computing applications, connected mobile devices and Internet-connected products and edge devices is driving unabated growth in the volume of digital content to be stored and used.
We believe there is tremendous market opportunity created by the rapid global adoption of technology built with cloud infrastructure, connected intelligent devices, and high-performance networks. 4 Table of Contents The increase in computing complexity and advancements in AI, along with growth in cloud computing applications, connected mobile devices and Internet-connected products and edge devices is driving rapid growth in the volume of digital content to be stored and used.
Our Data Solutions Our broad portfolio of technology and products addresses multiple end markets of “Cloud,” “Client” and “Consumer” and are comprised of the Western Digital®, SanDisk® and WD® brands. Cloud represents a large and growing end market comprised primarily of products for public or private cloud environments and enterprise customers.
Our broad portfolio of technology and products addresses our customers’ storage needs through multiple end markets: “Cloud,” “Client” and “Consumer” and is comprised of the Western Digital® and WD® brands. Cloud . Cloud represents a large and growing end market comprised primarily of products for public or private cloud environments and enterprise customers.
Our strengths in innovation and cost leadership, diversified product portfolio and broad routes to market provide a foundation upon which we are solidifying our position as an essential building block of the digital economy.
Our strengths in innovation, areal density and cost leadership provide a foundation upon which we are solidifying our position as an essential building block of the digital economy.
Business Strategy Our overall strategy focuses on leadership, innovation and execution to be an industry-leading and broad-based developer, manufacturer and provider of storage devices and solutions that support the infrastructure that has enabled the unabated proliferation of data.
Our overall strategy focuses on leadership, innovation and execution, with a goal of furthering Western Digital as an industry-leading and broad-based developer, manufacturer and provider of storage devices and solutions that support the infrastructure that has enabled a proliferation of data.
We continually evaluate which steps in the manufacturing process would benefit from automation and how automated manufacturing processes can improve productivity and reduce manufacturing costs. We also leverage contract manufacturers when strategically advantageous.
We continually evaluate which steps in the manufacturing process would benefit from automation and how automated manufacturing processes can improve productivity and reduce manufacturing costs. We also leverage contract manufacturers when strategically advantageous. HDD consists primarily of recording heads, magnetic media, controllers and firmware and a printed circuit board assembly.
These drives are primarily for use in data storage systems, in tiered storage models and where data must be stored reliably for years.
These drives are primarily for use in data storage systems, in tiered storage models and where data must be stored reliably for years. We also provide higher value data storage platforms to the market. Client .
Compensation and Benefits We believe that recognition is crucial for retaining and motivating our employees, and we are committed to rewarding performance with competitive compensation consisting of base salary and short-term and long-term incentives.
Compensation and Benefits We believe that recognition is crucial for retaining and motivating our employees, and we are committed to rewarding performance with competitive compensation consisting of base salary and short-term and long-term incentives. We also offer a global recognition program to celebrate the contributions of employees who bring to life our core values: Customers, Results, Connection, Excellence, and Innovation.
For a discussion of associated risks, see Part I, Item 1A, Risk Factors , of this Annual Report on Form 10-K.
Our business is also impacted by cyclicality in the industry, as well as macroeconomic factors. For a discussion of associated risks, see Part I, Item 1A, Risk Factors , of this Annual Report on Form 10-K.
We benchmark our compensation and benefits programs annually using market data from reputable third-party consultants. We also conduct internal focus groups and employee surveys to inform programs and identify opportunities. To ensure that our pay practices are fair and equitable, we conduct an annual pay equity assessment to promote equal pay for equal work regardless of gender.
We benchmark our compensation and benefits programs annually using market data from reputable third-party consultants. We also conduct internal focus groups and employee surveys to inform programs and identify opportunities.
To help our employees reach their full potential, we aim to cultivate an environment that encourages learning, development and career growth. Our performance framework includes developing goals collaboratively through transparent and actionable feedback in regular check-ins and performance designations.
To help our employees reach their full potential, we aim to cultivate an environment that encourages learning, development and career growth. Our performance framework includes setting goals to establish clear expectations and receiving feedback and coaching to achieve them.
We maintain sales offices in selected parts of the world including the major geographies of the Americas, Asia Pacific, Europe and the Middle East.
Sales and Distribution We sell our products to cloud service providers, computer manufacturers and OEMs, resellers, distributors and retailers throughout the world. We maintain sales offices in selected parts of the world including the major geographies of the Americas, Asia Pacific, Europe and the Middle East.
At Western Digital, we continue to transform ourselves to address the growth in data by providing what we believe to be the broadest range of storage technologies in the industry with a comprehensive product portfolio and global reach. Industry We operate in the data storage industry.
We continue to transform ourselves to address the growth in data by providing what we believe to be the broadest range of storage technologies in the industry with a comprehensive product portfolio and global reach. For a discussion of associated risks, see Part I, Item 1A, Risk Factors , of this Annual Report on Form 10-K.
Our international sales, which include sales to foreign subsidiaries of U.S. companies but do not include sales to U.S. subsidiaries of foreign companies, represented 72%, 69% and 71% of our net revenue for 2024, 2023 and 2022, respectively.
Our international sales, which include sales to foreign subsidiaries of U.S. companies but do not include sales to U.S. subsidiaries of foreign companies, represented 55%, 58% and 57% of our net revenue for 2025, 2024 and 2023, respectively. Our sales are subject to certain risks, including exposure to tariffs and various trade regulations.
We believe the separation will better position each business unit to execute innovative technology and product development, capitalize on unique growth opportunities, extend respective leadership positions and operate more efficiently with distinct capital structures. The completion of the planned separation is subject to certain conditions, including final approval by our Board of Directors.
We believe the Separation better positions each business unit to execute innovative technology and product development, capitalize on unique growth opportunities, extend respective leadership positions, operate more efficiently with distinct capital structures, and pursue capital allocation strategies that maximize long-term shareholder value.
We believe the use of our in-house manufacturing, assembly and test facilities provides the controls necessary to provide the demanding capabilities, performance and reliability our customers require. 7 Table of Contents Our vertically integrated, in-house assembly and test operations for our HDD products are concentrated in Prachinburi and Bang Pa-In, Thailand; Penang, Johor Bahru, and Kuching, Malaysia; Laguna, Philippines; Shenzhen, China; and San Jose and Fremont, CA, USA.
Our vertically integrated, in-house assembly and test operations are concentrated in Prachinburi and Bang Pa-In, Thailand; Penang, Johor Bahru, and Kuching, Malaysia; Laguna, Philippines; Shenzhen, China; and San Jose and Fremont, CA, USA.
The strong growth in the amount, value and use of data continues, creating a global need for larger, faster and more capable storage solutions. We are a customer-focused organization that has developed deep relationships with industry leaders to continue to deliver innovative solutions to help users capture, store and transform data across a boundless range of applications.
We believe Western Digital is well positioned as a leading supplier in the industry given the depth of our industry knowledge and the breadth of our product portfolio. We are a customer-focused organization that has developed deep relationships with industry leaders to deliver innovative solutions to help users capture, store and transform data across a boundless range of applications.
We depend on an external supply base for all remaining components and materials for use in our HDD design, manufacturing and testing.
We depend on an external supply base for all remaining components and materials for use in our design, manufacturing and testing. We believe the use of our in-house manufacturing, assembly and test facilities offers the controls necessary to provide the demanding capabilities, performance and reliability our customers require.
We provide competitive benefits (which vary by country/region), including health coverage, life and disability insurance, retirement plans, paid time off, employee assistance program and employee stock purchase plan. In 2024, we continued our multi-year journey to modernize our benefits portfolio to offer more choices to meet the unique needs of our diverse employees.
We invest in the physical, mental and financial well-being of our people through a dynamic and differentiated Total Rewards program that aligns to our culture and values. We provide competitive benefits (which vary by country or region), including health coverage, life and disability insurance, retirement plans, paid time off, employee assistance program and employee stock purchase plan.
With much of the world’s data stored on Western Digital products, our innovation powers the global technology ecosystem from consumer devices to the edge, to the heart of the cloud. We enable cloud, Internet and social media infrastructure players to build more powerful, cost-effective and efficient data centers.
With much of the world’s data stored on Western Digital products, our innovation powers the global technology ecosystem — anchored in the cloud, and extending from consumer devices to the edge — enabling the data-driven future, including AI and emerging applications.
Government Regulation Our worldwide business activities are subject to various laws, rules and regulations of the United States as well as of foreign governments.
We provide extensive health and safety resources and training to all employees, especially those working in our manufacturing facilities, where we use an integrated management system to manage health and safety standards. Government Regulation Our worldwide business activities are subject to various laws, rules and regulations of the United States as well as of foreign governments.
Our HDD and SSD are designed for use in devices requiring high performance, reliability and capacity with various attributes such as low cost per gigabyte, quiet acoustics, low power consumption and protection against shocks. 5 Table of Contents We serve the Consumer end market with a portfolio of HDD and SSD embedded into external storage products and removable Flash, which include cards, universal serial bus (“USB”) flash drives and wireless drives, through our retail and channel routes to market.
Through the Client end market, we provide our original equipment manufacturer (“OEM”) and channel customers a broad array of high-performance HDD solutions across desktop and notebooks. Our products are designed for use in devices requiring high performance, reliability and capacity with various attributes such as low cost per gigabyte, quiet acoustics, and low power consumption. Consumer .
We help OEMs address storage opportunities and solutions to capture and transform data in a myriad of devices and edge technologies. We have also built strong consumer brands with tools to manage vast libraries of personal content and to push the limits of what is possible for storage.
We have also built strong consumer brand recognition with tools to manage vast libraries of personal content and to push the limits of what is possible for storage. We serve the Consumer end market with a portfolio of HDD external storage products and our vast presence around the world through our retail and channel routes to market.
We continue to foster early talent through our intern and new college graduate recruitment programs, and in 2024, we converted nearly half of our global intern population to employees. In 2024, we launched our first-ever U.S. Department of Labor approved apprenticeship program, serving as a career pathway for veterans and other underserved populations.
We continue to foster the next generation of talent through our intern and new college graduate recruitment programs, and we converted about 40% of our eligible global intern population to employees in 2025. We have a U.S.
We provide the Cloud end market with an array of high-capacity enterprise HDD, high-performance enterprise SSD and platforms. Our capacity enterprise hard disk drives provide high-capacity storage needs and a low total cost of ownership for the growing cloud data center and smart video system markets.
Our capacity enterprise HDDs address growing storage demands with high reliability, easy scalability, and lower time to value for our customers — all while delivering a low total cost of ownership for cloud data center and smart video system markets.
We focus our engineering efforts on optimizing our product design and manufacturing processes to bring our products to market in a cost-effective and timely manner. For a discussion of associated risks, see Part I, Item 1A, Risk Factors , of this Annual Report on Form 10-K.
We have broad research and development (“R&D”) capabilities and devote substantial resources to the development of new products and the improvement of existing products. We focus our engineering efforts on optimizing our product design and manufacturing processes to bring our products to market in a cost-effective and timely manner.
Item 1. Business General Western Digital is a leading developer, manufacturer and provider of data storage devices and solutions based on both hard disk drive and NAND flash technologies.
Item 1. Business General Western Digital was founded in 1970 and is a Standard & Poor’s 500 (“S&P 500”) company headquartered in San Jose, California. We are a leading developer, manufacturer, and provider of data storage devices and solutions based on hard disk drive (“HDD”) technology. HDDs are critical components in the worldwide data infrastructure market, powering the digital economy.
We have extensive customer, partner and channel relationships across a number of end markets and geography and have a rich heritage of innovation and operational excellence, a wide range of intellectual property (“IP”) assets, broad research and development (“R&D”) capabilities and large-scale, efficient manufacturing supply chains.
We have extensive customer, partner and channel relationships across our end markets and geographies and a rich heritage of innovation and operational excellence. We have a wide range of intellectual property (“IP”) assets, including patent portfolios containing approximately 4,500 active patents , covering groundbreaking data storage technologies, magnetic recording and other technology building blocks.
See Part I, Item 1A, Risk Factors for a discussion of these potential impacts. 10 Table of Contents Corporate Responsibility and Sustainability We believe responsible and sustainable business practices support our long-term success. As a company, we are deeply committed to protecting and supporting our people, our environment and our communities.
See Part I, Item 1A, Risk Factors for a discussion of these potential impacts. 8 Table of Contents Corporate Responsibility and Sustainability At Western Digital, sustainability is about innovating with technology to positively impact our future.
We also engage employees by taking action to promote and ground them in our core values and beliefs, and to support our commitment to conducting business in an ethical way. In 2024, we were named one of the World’s Most Ethical Companies by Ethisphere Institute for the sixth consecutive year.
Our Employee Resource Groups are employee-led and foster connections based on a shared identity or background and are open to all employees who want to join. We continued our commitment to conducting business in an ethical way around the world. In 2025, we were named one of the World’s Most Ethical Companies by Ethisphere for the seventh consecutive year.
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With a differentiated innovation engine driving advancements in storage and semiconductor technologies, our broad and ever-expanding portfolio delivers powerful hard disk drives (“HDD”) and flash-based products (“Flash”) storage solutions for everyone from students, gamers and home offices, to the largest enterprises and public clouds to capture, preserve, access and transform an ever-increasing diversity of data.
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HDDs provide reliable, cost-effective, high-capacity storage needs for a wide range of applications, ranging from cloud data centers, enterprise storage systems, edge computing, and video surveillance to client and consumer devices.
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Our broad portfolio of technology and products addresses multiple end markets: “Cloud,” “Client” and “Consumer.” Cloud is comprised primarily of products for public or private cloud environments and end customers.
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On February 21, 2025 (the “Separation Date”), we completed the separation of our HDD and Flash business units (the “Separation”) to create two independent public companies, with Western Digital focusing on our existing HDD business and Sandisk Corporation (“Sandisk”), formerly a wholly-owned subsidiary of the Company, holding the Flash business.
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Through the Client end market, we provide our original equipment manufacturer (“OEM”) and channel customers a broad array of high-performance hard drive and flash solutions across personal computer, mobile, gaming, automotive, virtual reality headsets, at-home entertainment, and industrial spaces.
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As global data creation continues to accelerate, particularly in the age of AI, and as the need to store and retain data also grows, we believe HDDs will continue to remain the preferred technology for storing large volumes of data as the most economical solution to the large cloud data centers for their mass storage needs.
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The Consumer end market is highlighted by our broad range of retail and other end-user products, which capitalize on the strength of our product brand recognition and vast points of presence around the world.
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We enable cloud, Internet and social media infrastructure players to build more powerful, cost-effective and efficient data centers. We provide the Cloud end market with an array of high-capacity enterprise HDDs and platforms.
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On October 30, 2023, we announced that our Board of Directors had completed its strategic review of our business and, after evaluating a comprehensive range of alternatives, authorized us to pursue a plan to separate our HDD and Flash business units to create two independent, public companies.
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While this growth has led to the creation of several form factors for data storage and an increasing use of a tiered architecture approach, HDDs occupy a unique place in the market by providing an economical means to create, store and utilize an increasing amount of data in the age of AI.
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Significant effort is underway and extensive progress has been made with respect to the separation as we continue to drive towards completing the work required to separate the businesses by the end of calendar year 2024. Founded in 1970 in Santa Ana, California, Western Digital is now a Standard & Poor’s 500 (“S&P 500”) company headquartered in San Jose, California.
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We believe HDDs provide a sustainable total cost of ownership (TCO) advantage to our cloud customers to meet their storage needs. Research and Technology The strong growth in the amount, value and use of data continues to create a global need for larger, faster and more capable storage solutions.
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We have valuable patent portfolios containing approximately 13,000 active patents , covering groundbreaking memory technologies and beyond.
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This platform strategy also enables our customers to leverage their qualification efforts onto successive product models. Competition We believe we are well-positioned in our competitive industry with our leading product portfolio, differentiated innovation engine, global manufacturing footprint, and leadership in driving areal density and cost efficiency.
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This growth has led to the creation of new form factors for data storage. The storage industry is increasingly utilizing tiered architectures with solid state drives (“SSD”), HDD and other non-volatile memory-based storage to address an expanding set of uses and applications.
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Nevertheless, we face strong competition from several manufacturers of storage products and storage systems and solutions, whether directly or indirectly.
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We believe our expertise and innovation across both HDD and Flash technologies enable us to bring powerful solutions to a broad range of applications. We continuously monitor the full array of storage technologies, including reviewing these technologies with our customers, to ensure we are appropriately resourced to meet our customers’ storage needs. Technology Hard Disk Drives.
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Our competitors include HDD competitors such as Seagate Technology Holdings plc, and Toshiba Electronic Devices & Storage Corporation along with NAND flash suppliers that provide and enable alternative storage technologies, as well as storage systems and solutions providers. 5 Table of Contents Business Strategy Our vision is to unleash the power and value of data.
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This platform strategy also enables our customers to leverage their qualification efforts onto successive product models. Flash Technologies . Flash-based products provide non-volatile data storage based on flash technology. We develop and manufacture solid state storage products for a variety of applications including enterprise or cloud, client, automotive, mobile devices and removable memory devices.
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Our mission is to be the market leader in data storage by delivering storage solutions for now and the future. By understanding our customers’ needs, together we can help them unlock the value and power of data that we are starting to see come to the fore, especially in this age of AI.
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Over time, we have successfully developed and commercialized successive generations of multi-dimensional flash technology with increased numbers of storage bits per cell in an increasingly smaller form factor, further driving cost reductions. We devote significant R&D resources to the development of highly reliable, high-performance, cost-effective flash-based technology and are continually pursuing developments in next-generation flash-based technology capacities.
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Our strategy reflects the following foundational elements: (1) Enhanced customer focus for driving greater customer advocacy and deeper customer engagement, (2) Product and technology leadership for realizing the best total cost of ownership through disciplined product management, (3) Rigorous financial discipline by having a clear capital allocation strategy, ambitious financial targets and prudent capital investment, (4) Operational excellence for driving best-in-class cost to achieve industry-leading margin profiles with strong execution, (5) Innovation and growth for creating new products and applications and identifying new market opportunities, and (6) High performance teams with the skill sets to meet go-forward business needs.
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We are leveraging our expertise, resources and strategic investments in non-volatile memories to explore a wide spectrum of persistent memory and storage class memory technologies. We have also initiated, defined and developed standards to meet new market needs and to promote wide acceptance of flash storage standards through interoperability and ease of use.
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For 2025, three customers accounted for 17%, 12%, and 10%, respectively, of our net revenue. For 2024 and 2023, no single customer accounted for 10% or more of our net revenue.
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Our high-performance enterprise class SSD include high-performance flash-based SSD and software solutions that are optimized for performance applications providing a range of capacity and performance levels primarily for use in enterprise servers and supporting high-volume online transactions, AI-related workloads, data analysis and other enterprise applications. We also provide higher value data storage platforms to the market.
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Cyclicality and Seasonality Our business is subject to variability of sales because it is largely dependent on the buying patterns of our large Cloud customers, driven by their needs for deploying our technology in their data center buildouts, as well as on their ability to procure other products that go into such buildouts.
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Through the Client end market, we provide numerous data solutions that we incorporate into our client’s devices, which consist of HDD and SSD desktop and notebook PCs, gaming consoles and set top boxes, as well as flash-based embedded storage products for mobile phones, tablets, notebook PCs and other portable and wearable devices, automotive applications, Internet of Things and industrial and connected home applications.
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Our People Our people strategy supports our vision of unleashing the power and value of data and our mission to be the market leader in data storage, delivering solutions for now and the future. At the end of 2025, we employed approximately 40,000 people worldwide.
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Our external HDD storage products in both mobile and desktop form factors provide affordable, high quality, reliable storage for backup and capacity expansion that are designed to keep digital content secure. We offer client portable SSD with a range of capacities and performance characteristics to address a broad spectrum of the client storage market.
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Our diverse team spans 24 countries with approximately 88% of our employees in Asia Pacific, approximately 11% in the Americas and less than 1% in Europe, the Middle East and Africa. Talent Growth and Engagement 7 Table of Contents We invest in developing our people to lead us into the future.
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Our removable cards are designed primarily for use in consumer devices, such as mobile phones, tablets, imaging systems, cameras and smart video systems. Our USB flash drives are used in the computing and consumer markets and are designed for high-performance and reliability.
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Our on-demand learning management system offers learning activities to help employees map their career journey, access learning online and track progress against development goals. We also provide upskilling and reskilling opportunities to our factory employees through on-the-job training, technical classes, workshops and partnerships with universities and colleges. We make it a priority to recruit exceptional talent across the organization.
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Our wireless drive products allow in-field backup of created content, as well as wireless streaming of high-definition movies, photos, music and documents to tablets, smartphones and PCs. Competition Our industry is highly competitive. We believe we are well-positioned with our leading product portfolio, premium consumer brand, differentiated semiconductor innovation engine and leadership in driving cost efficiency.
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Department of Labor approved apprenticeship program, serving as a career pathway for veterans and other underserved populations, which helps us build a workforce that mirrors the communities that we serve. We believe employee engagement is key to performance and retention and that by listening to our employees we can better understand how we enable them to do their best work.
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Nevertheless, we face strong competition from other manufacturers of HDD and Flash in the Cloud, Client and Consumer end markets. In HDD, we compete with Seagate Technology Holdings plc and Toshiba Electronic Devices & Storage Corporation.
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We use a combination of our employee survey and listening sessions at all levels to understand what we are doing well and identify opportunities to strengthen employee engagement in support of our business strategy.
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In Flash, we compete with vertically integrated suppliers such as Kioxia, Micron Technology, Inc., Samsung Electronics Co., Ltd., SK Hynix, Inc., Yangtze Memory Technologies Co., Ltd. and numerous smaller companies that develop and manufacture flash-based products.
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We strive to cultivate an inclusive environment where every individual feels valued, respected, and appreciated, thereby enabling them to contribute effectively to the organization and excel in their roles. Our initiatives celebrate the diversity of our workforce and ensure that all voices are heard.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur level of debt could have significant consequences, including limiting our ability to obtain additional financing for working capital, capital expenditures, acquisitions or other general corporate purposes; requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes; imposing financial and other restrictive covenants on our operations, including minimum liquidity requirements and limitations on our ability to (i) declare or pay dividends or repurchase shares of our common stock; (ii) purchase assets, make investments, complete acquisitions, consolidate or merge with or into, or sell all or substantially all of our assets to, another person; (iii) enter into sale/leaseback transactions or certain transactions with affiliates; (iv) incur additional indebtedness; and (v) incur liens, making us more vulnerable to economic downturns and limiting our ability to withstand competitive pressures or take advantage of new opportunities to grow our business.
Biggest changeOur level of debt could have significant consequences, including limiting our ability to obtain additional financing for working capital, capital expenditures, acquisitions or other general corporate purposes; requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes; and imposing financial and other restrictive covenants on our operations.
Our strategic relationships are subject to additional risks that could harm our business, including, but not limited to, the following: failure by our strategic partners to comply with applicable laws or employ effective internal controls; difficulties and delays in product and technology development at, ramping production at, and transferring technology to, our strategic partners; declining financial performance of our strategic partners, including failure by our strategic partners to timely fund capital investments with us or otherwise meet their commitments, including the payment of amounts owed to us or third parties when due; losing the rights to, or ability to independently manufacture, certain technology or products being developed or manufactured by strategic partners, including as a result of any of them being acquired by another company, filing for bankruptcy or experiencing financial or other losses; a bankruptcy event involving a strategic partner, which could result in 17 Table of Contents structural changes to or termination of the strategic partnership; and changes in tax or regulatory requirements, which may necessitate changes to the agreements governing our strategic partnerships.
Our strategic relationships are subject to additional risks that could harm our business, including, but not limited to, the following: failure by our strategic partners to comply with applicable laws or employ effective internal controls; difficulties and 17 Table of Contents delays in product and technology development at, ramping production at, and transferring technology to, our strategic partners; declining financial performance of our strategic partners, including failure by our strategic partners to timely fund capital investments with us or otherwise meet their commitments, including the payment of amounts owed to us or third parties when due; losing the rights to, or ability to independently manufacture, certain technology or products being developed or manufactured by strategic partners, including as a result of any of them being acquired by another company, filing for bankruptcy or experiencing financial or other losses; a bankruptcy event involving a strategic partner, which could result in structural changes to or termination of the strategic partnership; and changes in tax or regulatory requirements, which may necessitate changes to the agreements governing our strategic partnerships.
This has caused, and may in the future cause, our forecasts to exceed actual market demand, resulting in periods of product oversupply, excess inventory, underutilization of manufacturing capacity and price decreases, which has impacted and could further impact our sales, ASPs and gross margin or require us to incur additional inventory write-downs or additional charges for unabsorbed manufacturing overhead, thereby negatively affecting our operating results and our financial condition.
This has caused, and may in the future cause, our forecasts to exceed actual market demand, resulting in periods of product oversupply, excess inventory, underutilization of manufacturing capacity and price decreases, which has impacted and could further impact our sales, ASPs and gross margin or require us to incur inventory write-downs or charges for unabsorbed manufacturing overhead, thereby negatively affecting our operating results and our financial condition.
We may from time to time seek to further refinance our substantial indebtedness by issuing additional shares of common stock or other securities that are convertible into common stock or grant the holder the right to purchase common stock, each of which may dilute our existing stockholders, reduce the value of our common stock, or both.
We may from time to time seek to refinance our substantial indebtedness by issuing additional shares of common stock or other securities that are convertible into common stock or grant the holder the right to purchase common stock, each of which may dilute our existing stockholders, reduce the value of our common stock, or both.
Our suppliers may be acquired by our competitors, decide to exit the industry or redirect their investments and increase costs to us. In addition, some of our suppliers have experienced a decline in financial performance, including as a result of cancelled or deferred purchase commitments.
Our suppliers may be acquired by our competitors, decide to exit the industry or redirect their investments or increase costs to us. In addition, some of our suppliers have experienced a decline in financial performance, including as a result of cancelled or deferred purchase commitments.
We are subject to laws, rules and regulations relating to the collection, use, security and privacy of third-party data, including data that relates to or identifies an individual person. We are also subject to the terms of our privacy policies and obligations to third parties related to privacy, data protection and security.
We are subject to laws, rules and regulations relating to the collection, use, security and privacy of data, including data that relates to or identifies an individual person. We are also subject to the terms of our privacy policies and obligations to third parties related to privacy, data protection and security.
Adverse changes in global or regional economic and social conditions, including, but not limited to, volatility in the financial markets, reduced access to credit, recession, inflation, rising interest rates, slower growth in certain geographic regions, political uncertainty, geopolitical tensions or conflicts, terrorism, other macroeconomic factors and new or changed regulations, could significantly harm demand for our products, increase credit and collectability risks, result in revenue reductions, reduce profitability as a result of underutilization of our assets, cause us to change our business practices, increase manufacturing and operating costs or result in impairment charges or other expenses.
Adverse changes in global or regional economic and social conditions, including, but not limited to, volatility in the financial markets, reduced access to credit, recession, inflation, rising interest rates, trade wars or changes to tariffs, slower growth in certain geographic regions, political uncertainty, geopolitical tensions or conflicts, terrorism, other macroeconomic factors and new or changed regulations, could significantly harm demand for our products, increase credit and collectability risks, result in revenue reductions, reduce profitability as a result of underutilization of our assets, cause us to change our business practices, increase manufacturing and operating costs or result in impairment charges or other expenses.
As a result of the number and complexity of these factors, accurately forecasting demand has been and continues to be increasingly difficult for us, our customers and our suppliers.
As a result of the number and complexity of these factors, accurately forecasting demand has been and continues to be difficult for us, our customers and our suppliers.
Our possession and use of third-party data, including personal data and employee data in conducting our business, subjects us to legal and regulatory obligations that require us to notify vendors, customers or employees or other parties with which we have commercial relations of a data security breach and to respond to regulatory inquiries and to enforcement proceedings.
Our possession and use of data, including personal data and employee data in conducting our business, subjects us to legal and regulatory obligations that require us to notify vendors, customers or employees or other parties with which we have commercial relations of a data security breach and to respond to regulatory inquiries and to enforcement proceedings.
These customers have a variety of suppliers to choose from and therefore can make substantial demands on us, including demands on product pricing, contractual terms and the environmental impact and attributes of our products, often resulting in the allocation of risk or increased costs to us as the supplier.
In addition, our customers have a variety of suppliers to choose from and therefore can make substantial demands on us, including demands on product pricing, contractual terms and the environmental impact and attributes of our products, often resulting in the allocation of risk or increased costs to us as the supplier.
In order to successfully execute on strategic initiatives, we must continue to identify and successfully complete attractive transactions, some of which may be large and complex, and manage post-closing issues such as integration of the acquired company or employees and integration of processes and systems.
In order to successfully execute on strategic initiatives, we must continue to identify and successfully complete attractive transactions, some of which may be large and complex, and manage post-closing issues such as integration of the acquired company or employees, integration of processes and systems, and post-Separation changes.
Managing these notifications, especially in large volumes, can lead to significant expenses, even with cybersecurity insurance coverage. Laws and regulations relating to the collection, use, security and privacy of third-party data change over time and new laws and regulations become effective from time to time.
Managing these notifications, especially in large volumes, can lead to significant expenses, even with cybersecurity insurance coverage. Laws and regulations relating to the collection, use, security and privacy of data change over time and new laws and regulations become effective from time to time.
Third party claims for patent infringement are excluded from coverage under our insurance policies. A future obligation to indemnify our customers or suppliers may harm our business. Our reliance on IP and other proprietary information subjects us to the risk that these key components of our business could be copied by competitors.
Third party claims 21 Table of Contents for patent infringement are excluded from coverage under our insurance policies. A future obligation to indemnify our customers or suppliers may harm our business. Our reliance on IP and other proprietary information subjects us to the risk that these key components of our business could be copied by competitors.
If we bring a patent infringement 25 Table of Contents action and are not successful, our competitors may be able to use similar technology to compete with us. Moreover, the defendant in such an action may successfully countersue us for infringement of their patents or assert a counterclaim that our patents are invalid or unenforceable.
If we bring a patent infringement action and are not successful, our competitors may be able to use similar technology to compete with us. Moreover, the defendant in such an action may successfully countersue us for infringement of their patents or assert a counterclaim that our patents are invalid or unenforceable.
Further, the enforceability of similar exclusive forum provisions in other companies’ organizational documents has been challenged in legal proceedings, and it is possible that a court could find any of our exclusive forum provisions to be inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings.
Further, the enforceability of similar exclusive forum provisions in other companies’ 23 Table of Contents organizational documents has been challenged in legal proceedings, and it is possible that a court could find any of our exclusive forum provisions to be inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings.
If a court were to find all or any part of our exclusive forum provisions to be inapplicable or unenforceable in an action, we might incur additional costs associated with resolving such action in other jurisdictions. 26 Table of Contents Item 1B. Unresolved Staff Comments Not applicable.
If a court were to find all or any part of our exclusive forum provisions to be inapplicable or unenforceable in an action, we might incur additional costs associated with resolving such action in other jurisdictions. Item 1B. Unresolved Staff Comments Not applicable.
We may also have difficulty effectively competing with manufacturers benefiting from governmental investments and may be subject to increased complexity and reduced efficiency in our supply chain as a result of governmental efforts to promote domestic semiconductor industries in various jurisdictions.
We may also have difficulty effectively competing with manufacturers benefiting from governmental investments and may be subject to increased complexity and reduced efficiency in our supply chain as a result of governmental efforts to promote domestic technologies in various jurisdictions.
If a fire (including a climate change-related fire), flood, earthquake, tsunami or other natural disaster, condition or event such as a power outage, contamination event, terrorist attack, cybersecurity incident, physical security breach, political instability, civil unrest, localized labor unrest or other employment issues or a health epidemic negatively affects any of these facilities, it would significantly affect our ability to manufacture or sell our products and source components and would harm our business.
If a fire, flood, earthquake, tsunami or other natural disaster, condition or event such as a power outage, contamination event, terrorist attack, cybersecurity incident, physical security breach, political instability, civil unrest, localized labor unrest or other employment issues or a health epidemic or pandemic negatively affects any of these facilities, it would significantly affect our ability to manufacture or sell our products and source components and would harm our business.
In addition, if our customers choose to delay transition to new technologies, if demand for the products that we develop is lower than expected or if the supporting 18 Table of Contents technologies to implement these new technologies are not available, we may be unable to achieve the cost structure required to support our profit objectives or may be unable to grow or maintain our market position.
In addition, if our customers choose to delay transition to new technologies, if demand for the products that we develop is lower than expected or if the supporting technologies to implement these new technologies are not available, we may be unable to achieve the cost structure required to support our profit objectives or may be unable to grow or maintain our market position.
Compromises of our infrastructure, information systems or products could also cause our customers and other affected third parties to suffer loss or misuse of proprietary or confidential information, IP, or sensitive or personal information, and could harm our relationships 14 Table of Contents with customers and other third parties and subject us to liability.
Compromises of our infrastructure, information systems or products could also cause our customers and other affected third parties to suffer loss or misuse of proprietary or confidential information, IP, or sensitive or personal information and could harm our relationships with customers and other third parties and subject us to liability.
Our success depends upon the continued contributions of our talent. Changes in our key management team may result in loss of continuity, loss of accumulated knowledge, departure of other key employees, disruptions to our operations and inefficiency during transitional periods.
Our success depends upon the continued contributions of our talent. Changes in our key management team have resulted in and may in the future result in loss of continuity, loss of accumulated knowledge, departure of other key employees, disruptions to our operations and inefficiency during transitional periods.
In addition, currency variations may adversely affect, and from time to time have adversely affected, margins on sales of our products in countries outside the U.S. We attempt to manage the impact of foreign currency exchange rate changes by, among other things, entering into short-term foreign exchange contracts.
In addition, currency variations may adversely affect, and from time to time have adversely affected, margins on sales of our products in countries outside the United States. We attempt to manage the impact of foreign currency exchange rate changes by, among other things, entering into short-term foreign exchange contracts.
Failing to successfully integrate or realign our business to take advantage of efficiencies or reduce redundancies of an acquisition or divestiture may result in not realizing all or any of the anticipated benefits of the transaction.
Failing to successfully integrate or realign our business to take advantage of efficiencies or reduce redundancies of an acquisition or divestiture, including pursuant to the Separation, may result in not realizing all or any of the anticipated benefits of the transaction.
IP risks increase when we enter into new markets where we have little or no IP protection as a deterrent against litigation. The complexity of the technology involved and the uncertainty of IP litigation increase the IP risks we face. Litigation can be expensive, lengthy and disruptive to normal business operations.
IP risks increase when we participate in new markets where we have little or no IP protection as a deterrent against litigation. The complexity of the technology involved and the uncertainty of IP litigation increase the IP risks we face. Litigation can be expensive, lengthy and disruptive to normal business operations.
We do not have long-term contracts with some of our existing suppliers, nor do we always have guaranteed manufacturing capacity with our suppliers, so we cannot guarantee that they will devote sufficient resources or capacity to manufacturing our 12 Table of Contents products. Any significant problems that occur at our suppliers could lead to product shortages or quality assurance problems.
We do not have long-term contracts with some of our existing suppliers, and we do not always have guaranteed manufacturing capacity with our suppliers, so we cannot guarantee that they will devote sufficient resources or capacity to manufacturing our products. Any significant problems that occur at our suppliers could lead to product shortages or quality assurance problems.
Legislation has been, and may in the future be, enacted in locations where we manufacture or sell our products, which could impair our ability to conduct business in certain jurisdictions or with certain customers and harm our operating results.
Legislation has been, and may in the future be, enacted in locations where we manufacture or sell our products, which could impair our ability to conduct business in certain jurisdictions or with certain customers and harm 22 Table of Contents our operating results.
In addition, we cannot be sure that these actions will be as successful in reducing our overall expenses as we expect, that additional costs will not offset any such reductions or consolidations or that we do not forego future business opportunities as a result of these actions.
These actions could also impact employee retention. In addition, we cannot be sure that these actions will be as successful in reducing our overall expenses as we expect, that additional costs will not offset any such reductions or consolidations or that we do not forego future business opportunities as a result of these actions.
When such events occur, they have had, and may in the future have, a negative impact on our business. Prices for our products are substantially U.S. dollar denominated, even when sold to customers that are located outside the U.S.
When such events occur, they have had, and may in the future have, a negative impact on our business. 19 Table of Contents Prices for our products are substantially U.S. dollar denominated, even when sold to customers that are located outside the United States.
For example, as disclosed in Part I, Item 1, Note 13, Income Tax Expense , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K, we are under examination by the Internal Revenue Service for certain fiscal years.
For example, as disclosed in Part II, Item 8, Note 13, Income Taxes , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K, we are under examination by the Internal Revenue Service for certain fiscal years.
Further, the majority of countries in the G20 and Organization for Economic Cooperation and Development (OECD) Inclusive Framework on Base Erosion and Profit Shifting (BEPS) have agreed to adopt a two-pillar approach to taxation, which includes the implementation of a global corporate minimum tax rate of 15%, which, when effective, could materially increase our tax obligations in these countries.
Further, the majority of countries in the G20 and Organization for Economic Cooperation and Development (OECD) Inclusive Framework on Base Erosion and Profit Shifting (BEPS) have agreed to adopt a two-pillar approach to taxation, which includes the implementation of a global corporate minimum tax rate of 15%.
We are also subject to risks that could harm our business associated with our global manufacturing operations, global sales efforts and our utilization of contract manufacturers, including: the need to obtain governmental approvals and compliance with evolving foreign regulations; the need to comply with regulations on international business, including the Foreign Corrupt Practices Act, the United Kingdom Bribery Act 2010, the anti-bribery laws of other countries and rules regarding conflict minerals; exchange, currency and tax controls and reallocations; weaker protection of IP rights; policies and financial incentives by governments in China, the United States, and countries in Europe and Asia designed to reduce dependence on foreign semiconductor manufacturing capabilities; trade restrictions, such as export controls, export bans, import restrictions, embargoes, sanctions, license and certification requirements (including semiconductor, encryption and other technology), tariffs and complex customs regulations; and difficulties in managing international operations, including appropriate internal controls.
We are also subject to risks that could harm our business associated with our global manufacturing operations, global sales efforts and our utilization of contract manufacturers, including: the need to obtain governmental approvals and compliance with evolving foreign regulations; the need to comply with regulations on international business, including the Foreign Corrupt Practices Act, the United Kingdom Bribery Act 2010, the anti-bribery laws of other countries and rules regarding conflict minerals; the effects of political and economic instability; exchange, currency and tax controls and reallocations; the ongoing development and applicability of global and local tax systems; weaker protection of IP rights; policies and financial incentives by governments in China, the United States, and countries in Europe and Asia designed to reduce dependence on foreign manufacturing capabilities; trade restrictions, such as export controls, export bans, import restrictions, embargoes, sanctions, license and certification requirements (including encryption and other technology), trade wars, tariffs and complex customs regulations; difficulties in managing international operations, including appropriate internal controls; and fluctuations in financial markets and interruptions to supply chains from public health crises.
Our determination of our tax liability in the U.S. and other jurisdictions is subject to review by applicable domestic and foreign tax authorities.
Our determination of our tax liability in the United States and other jurisdictions is subject to review by applicable domestic and foreign tax authorities.
Our ability to hire and retain employees also depends on our ability to build and maintain a diverse and inclusive workplace culture and to fund competitive compensation and benefits, each of which contribute to being viewed as an employer of choice.
Our ability to hire and retain employees also depends on our ability to build and maintain an inclusive workplace culture, provide opportunities for career development and fund competitive compensation and benefits, each of which contribute to being viewed as an employer of choice.
We believe malicious cybersecurity acts are increasing in number and that cybersecurity threat actors are increasingly organized and well-financed or supported by state actors, and are developing increasingly sophisticated systems and means to not only infiltrate information systems, but also to evade detection or to obscure their activities. Geopolitical tensions or conflicts may create heightened risk of cybersecurity incidents.
We believe malicious cybersecurity acts are increasing in number and that cybersecurity threat actors are increasingly organized and well-financed or supported by state actors and are developing increasingly sophisticated systems and means to not only infiltrate information systems, but also to evade detection or to obscure their activities.
We maintain limited insurance coverage and, in some cases, no coverage at all, for natural disasters and damage to our facilities, as these types of insurance are sometimes not available or available only at a prohibitive cost.
Due to market availability, pricing or other reasons, we may elect not to purchase insurance coverage or to purchase only limited coverage. We maintain limited insurance coverage and, in some cases, no coverage at all, for natural disasters and damage to our facilities, as these types of insurance are sometimes not available or available only at a prohibitive cost.
Cost saving measures, restructurings and divestitures may result in workforce reduction and consolidation of our manufacturing or other facilities. As a result of these actions, we may experience a loss of continuity, loss of accumulated knowledge, disruptions to our operations and inefficiency during transitional periods. These actions could also impact employee retention.
Cost saving measures, restructurings and divestitures have had and may in the future result in workforce reduction and consolidation of our manufacturing or other facilities. As a result of these actions, we have experienced and may in the future experience a loss of continuity, loss of accumulated knowledge, disruptions to our operations and inefficiency during transitional periods.
Our effective tax rate may be negatively impacted if we are unable to realize deferred tax assets. We regularly review our deferred tax assets for recoverability and establish a valuation allowance if it is more likely than not that some portion or all of a deferred tax asset will not be realized.
We regularly review our deferred tax assets for recoverability and establish a valuation allowance if it is more likely than not that some portion or all of a deferred tax asset will not be realized.
As such, these convertible notes were classified as current debt as of that date. In the event that holders of our convertible debt exercise conversion rights, we will be required to settle the principal amount of any converted notes in cash.
In the event that holders of our convertible debt exercise conversion rights, we will be required to settle the principal amount of any converted notes in cash.
Our ratings reflect the opinions of the ratings agencies as to our financial strength, operating performance and ability to meet our debt obligations. There can be no assurance that we will achieve a particular rating or maintain a particular rating in the future. We also guarantee a significant amount of lease obligations of Flash Ventures owed to third parties.
Our ratings reflect the opinions of the ratings agencies as to our financial strength, operating performance and ability to meet our debt obligations. There can be no assurance that we will achieve a particular rating or maintain a particular rating in the future.
Negative changes in the creditworthiness or the ability to access credit, or the bankruptcy or shutdown of any of our significant retail or distribution partners would harm our revenue and our ability to collect outstanding receivable balances. A significant portion of our sales is also made through retailers.
Negative changes in the creditworthiness or the ability to access credit, or the bankruptcy or shutdown of any of our significant retail or distribution partners would harm our revenue and our ability to collect outstanding receivable balances.
We also develop products to meet certain industry and technical standards, which may change and cause us to incur substantial costs as we adapt to new standards or invest in different manufacturing processes to remain competitive. We experience sales seasonality and cyclicality, which could cause our operating results to fluctuate.
We also develop products to meet certain industry and technical standards, which may change and cause us to incur substantial costs as we adapt to new standards or invest in different manufacturing processes to remain competitive.
We have entered into and expect to continue to enter into strategic relationships with various partners for product development, manufacturing, sales growth and the supply of technologies, components, equipment and materials for use in our product design and manufacturing, including our business ventures with Kioxia.
Our strategic relationships subject us to risks and uncertainties that could harm our business. We have entered into and expect to continue to enter into strategic relationships with various partners for product development, manufacturing, sales growth and the supply of technologies, components, equipment and materials for use in our product design and manufacturing.
Demand for and prices of our products are influenced by, among other factors, the actual and projected growth of data to be stored, the balance between supply and demand in the storage market, including the effects of new fab capacity, macroeconomic factors, business conditions, the emergence or growth of new or existing technologies (including AI), technology transitions and other actions taken by us or our competitors.
Demand for and prices of our products are influenced by, among other factors, the actual and projected growth of data to be stored, the spending plans of our large hyperscale customers, the balance between supply and demand in the storage market, macroeconomic factors (such as tariffs and actual or perceived threat of recessions), business conditions, the emergence or growth of new or existing technologies (including AI), technology transitions and other actions taken by us or our competitors.
Additionally, we negotiate and procure some of our component requirements in U.S. dollars from non-U.S. based vendors. If the U.S. dollar weakens against other foreign currencies, some of our component suppliers may increase the price they charge for their components in order to maintain an equivalent profit margin.
If the U.S. dollar weakens against other foreign currencies, some of our component suppliers may increase the price they charge for their components in order to maintain an equivalent profit margin.
If we fail to adapt to or implement new technologies, if we fail to quickly and cost-effectively develop new products that meet the specifications and requirements intended or desired by our customers or if technology transitions negatively impact our existing product roadmaps, our business may be harmed.
If we fail to adapt to or implement new technologies (including the transition to areal density recording technologies that use heat-assisted magnetic recording (“HAMR”) technology to increase HDD capacities), if we fail to quickly and cost-effectively develop new products that meet the specifications and requirements intended or desired by our customers or if technology transitions negatively impact our existing product roadmaps, our business may be harmed.
We must also qualify our products with customers through potentially lengthy testing processes with uncertain results. Some of our competitors offer products that we do not offer, which may allow them to win sales from us, and some of our customers may be developing storage solutions internally, which may reduce their demand for our products.
Some of our competitors offer products that we do not offer, which may allow them to win sales from us, and some of our customers may be developing storage solutions internally, which may reduce their demand for our products.
Compliance requirements or even our inadvertent failure to comply with applicable laws may cause us to incur substantial costs, subject us to proceedings by governmental entities or others, and cause us to incur penalties or other significant legal liability or lead us to change our business practices. 23 Table of Contents We are and may in the future be subject to state, federal and international legal and regulatory requirements, such as environmental, labor, health and safety, trade and public-company reporting and disclosure regulations, customers’ standards of corporate citizenship and industry and coalition standards, such as those established by the Responsible Business Alliance (“RBA”), and compliance with those regulations and requirements could cause an increase in our operating costs and failure to comply may harm our business.
We are and may in the future be subject to state, federal and international legal and regulatory requirements, such as environmental, labor, health and safety, trade and public company reporting and disclosure regulations, customers’ standards of corporate citizenship and industry and coalition standards, such as those established by the Responsible Business Alliance (“RBA”), and compliance with those regulations and requirements could cause an increase in our operating costs and failure to comply may harm our business.
We have not filed trademark registrations in all jurisdictions where our brands or logos may be used. The exclusive forum provisions in our Bylaws could limit our stockholders' ability to bring a claim in a judicial forum that it finds favorable for disputes with the Company or its directors, officers or other employees.
The exclusive forum provisions in our Bylaws could limit our stockholders’ ability to bring a claim in a judicial forum that it finds favorable for disputes with the Company or its directors, officers or other employees.
If we do not properly manage technology transitions and product development and introduction, our competitiveness and operating results may be negatively affected. The markets for our products continuously undergo technology transitions that can impact our product roadmaps and that we must anticipate in order to adapt our existing products or develop new products effectively.
The markets for our products continuously undergo technology transitions that can impact our product roadmaps and that we must anticipate in order to adapt our existing products or develop new products effectively.
Therefore, as a substantial portion of our sales are from countries outside the U.S., fluctuations in currency exchanges 22 Table of Contents rates, most notably the strengthening of the U.S. dollar against other foreign currencies, contribute to variations in sales of products in impacted jurisdictions and could negatively impact demand and revenue growth.
Therefore, as a substantial portion of our sales are from countries outside the United States, fluctuations in currency exchange rates, such as the strengthening of the U.S. dollar against other foreign currencies, could increase the cost of our products in those countries and negatively impact demand and revenue growth.
In that event, the debt holders could accelerate the related debt, which may result in the cross-acceleration or cross-default of other debt, leases or other obligations. We also utilize convertible debt in our capital structure and as of June 28, 2024, $1.6 billion principal amount of our convertible notes were convertible at the option of the holder.
In that event, the debt holders could accelerate the related debt, which may result in the cross-acceleration or cross-default of other debt, leases or other obligations. We also utilize convertible debt in our capital structure.
Due to the large scale of our U.S. and international business activities, many of these enacted and proposed changes to the taxation of our activities, including cash movements, could increase our worldwide effective tax rate and harm our business.
Due to the large scale of our U.S. and international business operations, enacted and proposed changes to tax laws — including those affecting the taxation of our global activities and intercompany cash movements — could materially increase our worldwide effective tax rate and adversely impact our financial results and cash flows.
We will need to ensure that we and our suppliers, customers and partners timely comply with such laws and regulations, which may result in an increase in our operating costs.
If we or our suppliers, customers and partners do not timely comply with such laws and regulations, it may result in an increase in our operating costs.
Although many of these holidays may be extended when certain conditions are met, we may not be able to meet such conditions. If the tax holidays are not extended, or if we fail to satisfy the conditions of the reduced tax rate, then our effective tax rate could increase in the future.
If the tax holidays are not extended, or if we fail to satisfy the conditions of the reduced tax rate, then our effective tax rate could increase in the future. Our effective tax rate may be negatively impacted if we are unable to realize deferred tax assets.
In addition, failing to achieve the financial model projections for an acquisition or changes in technology development and related roadmaps following an acquisition may result in the incurrence of impairment charges (including goodwill impairments or other asset write-downs) and other expenses, both of which could negatively impact our results of operations or financial condition. 19 Table of Contents Acquisitions and investments may also result in the issuance of equity securities that may be dilutive to our stockholders as well as earn-out or other contingent consideration payments and the issuance of additional indebtedness that would put additional pressure on liquidity.
In addition, failing to achieve the financial model projections for an acquisition or changes in technology development and related roadmaps following an acquisition may result in the incurrence of impairment charges (including goodwill impairments or other asset write-downs) and other expenses, both of which could negatively impact our results of operations or financial condition.
These factors could result in a substantial decrease in our market share and harm our business. As we compete in new product areas, the overall complexity of our business may increase and may result in increases in R&D expenses and substantial investments in manufacturing capability, technology enhancements and go-to-market capability.
As we compete in new product areas, the overall complexity of our business may increase and may result in increases in R&D expenses and substantial investments in manufacturing capability, technology enhancements and go-to-market capability. We must also qualify our products with customers through potentially lengthy testing processes with uncertain results.
To the extent we are not successful in adequately responding to these changes, our operating results and financial condition could be harmed.
To the extent we are not successful in adequately responding to these changes, our operating results and financial condition could be harmed. We experience variability in our sales and cyclicality in our industry, which could cause our operating results to fluctuate. In addition, accurately forecasting demand is difficult, which could harm our business.
Global privacy and data protection legislation, enforcement and policy activity in this area are rapidly expanding and evolving, and may be inconsistent from jurisdiction to jurisdiction.
We are subject to notice and privacy statement requirements, as well as obligations to respond to data subject requests. Global privacy and data protection legislation, enforcement and policy activity in this area are rapidly expanding and evolving, including with respect to the use of AI, and may be inconsistent from jurisdiction to jurisdiction.
We and certain of our officers are and may continue to be involved in litigation, investigations and governmental proceedings, which may be costly, may divert the efforts of our key personnel and could result in adverse court rulings, fines or penalties, which could materially harm our business.
Compliance requirements or even our inadvertent failure to comply with applicable laws may cause us to incur substantial costs, subject us to proceedings by governmental entities or others, and cause us to incur penalties or other significant legal liability or lead us to change our business practices. 20 Table of Contents We and certain of our officers are and may continue to be involved in litigation, investigations and governmental proceedings, which may be costly, may divert the efforts of our key personnel and could result in adverse court rulings, fines or penalties, which could materially harm our business.
Litigation initiated by us could also result in counter-claims against us, 24 Table of Contents which could increase the costs associated with the litigation and result in our payment of damages or other judgments against us.
With or without merit, such matters may be complex, may extend for a protracted period of time, may be very expensive and the expense may be unpredictable. Litigation initiated by us could also result in counter-claims against us, which could increase the costs associated with the litigation and result in our payment of damages or other judgments against us.
There can be no assurance that in the future we will be able to maintain existing insurance coverage or that premiums will not increase substantially. Due to market availability, pricing or other reasons, we may elect not to purchase insurance coverage or to purchase only limited coverage.
We may incur losses beyond the limits of, or outside the scope of, the coverage of our insurance policies. There can be no assurance that in the future we will be able to maintain existing insurance coverage or that premiums will not increase substantially.
We are dependent on a limited number of qualified suppliers who provide critical services, materials or components, and a disruption in our supply chain could negatively affect our business. We depend on an external supply base for technologies, software (including firmware), preamps, controllers, dynamic random-access memory, components, equipment and materials for use in our product design and manufacturing.
We depend on an external supply base for technologies, software (including firmware), preamps, controllers, dynamic random-access memory, components, equipment and materials for use in our product design and manufacturing. We also depend on suppliers for a portion of our wafer testing, chip assembly, product assembly and product testing, and on service suppliers for providing technical support for our products.
For example, in 2024 and 2023, we incurred $407 million and $497 million of charges for unabsorbed manufacturing overhead costs as a result of the reduced utilization of our manufacturing capacity, respectively. Additionally, in 2024, we incurred $108 million of charges to write-down our inventory as a result of decreases in market pricing.
For example, in 2024 and 2023, we incurred $155 million and $201 million of charges for unabsorbed manufacturing overhead costs as a result of the reduced utilization of our manufacturing capacity, respectively. These charges were attributable to a significant imbalance of supply and demand and our actions taken in response thereto.
Demand for our devices, software and solutions, which we refer to in this Item 1A as our “products”, depends in large part on the demand for systems manufactured by our customers and on storage upgrades to existing systems.
We participate in a highly competitive industry that is subject to variations in average selling prices (“ASPs”) and demand, technological change and lengthy product qualifications, all of which can negatively impact our business. 14 Table of Contents Demand for our devices, software and solutions, which we refer to in this Item 1A as our “products”, depends in large part on the demand for systems manufactured by our customers and on storage upgrades to existing systems.
We also depend on suppliers for a portion of our wafer testing, chip assembly, product assembly and product testing, and on service suppliers for providing technical support for our products. In addition, we use logistics partners to manage our worldwide just-in-time hubs and distribution centers and to meet our freight needs.
In addition, we use logistics partners to manage our worldwide just-in-time hubs and distribution centers and to meet our freight needs.
In addition, some of our components have long lead-times, requiring us to place orders several months in advance of anticipated demand. Such long lead-times increase the risk of excess inventory, potentially resulting in inventory write-downs, or loss of sales in the event our forecasts vary substantially from actual demand.
In addition, some of our components have long lead-times, requiring us to place orders several months in advance of anticipated demand.
We depend on Flash Ventures for the 16 Table of Contents development and manufacture of flash-based memory. Our strategic relationships, including Flash Ventures, are subject to various risks that could harm the value of our investments, our revenue and costs, our future rate of spending, our technology plans and our future growth opportunities.
Our strategic relationships are subject to various risks that could harm the value of our investments, our revenue and costs, our future rate of spending, our technology plans and our future growth opportunities. Our control over the operations of our business ventures may be limited, and our interests could diverge from our strategic partners’ interests regarding ongoing and future activities.
Fluctuations in currency exchange rates as a result of our international operations may negatively affect our operating results. Because we manufacture and sell our products abroad, our revenue, cost of revenue, margins, operating costs and cash flows are impacted by fluctuations in foreign currency exchange rates.
Because we manufacture and sell our products abroad, our revenue, cost of revenue, margins, operating costs and cash flows are impacted by fluctuations in foreign currency exchange rates. If the U.S. dollar exhibits sustained weakness against most foreign currencies, the U.S. dollar equivalents of unhedged manufacturing costs could increase because a portion of our production costs are foreign-currency denominated.
Possible impacts include work and equipment stoppages and damage to or closure of our facilities, or those of our suppliers or customers, for an indefinite period of time. Climate change has in the past and is expected to continue to increase the incidence and severity of certain natural disasters, including wildfires and adverse weather events.
Possible impacts include work and equipment stoppages and damage to or closure of our facilities, or those of our suppliers or 11 Table of Contents customers, for an indefinite period of time.
The storage market has recently experienced, and may continue to experience, periods of excess capacity leading to liquidation of excess inventories, inventory write-downs, significant reductions in ASPs and negative impacts on our revenue and gross margins and volatile product life cycles that harm our ability to recover the cost of product development.
The storage market has in the past experienced, and may in the future experience, periods of excess capacity leading to our factories running below the desired utilization levels, resulting in us taking underutilization charges, inventory write-downs and reductions in ASPs, all of which lead to negative impacts on our revenue and gross margins.
Climate change may reduce the availability or increase the cost of certain types of insurance by contributing to an increase in the incidence and severity of certain natural disasters. We depend upon Kioxia to obtain and maintain sufficient property, business interruption and other insurance for Flash Ventures.
Climate change may reduce the availability or increase the cost of certain types of insurance by contributing to an increase in the incidence and severity of certain natural disasters. The loss of our key management, staff and skilled employees or the inability to hire and develop new employees could negatively impact our business prospects.
If these additional expenses are significant, they could harm our business. BUSINESS AND STRATEGIC RISKS The proposed separation of our HDD and Flash business units into two independent public companies is subject to various risks and uncertainties and may not be completed in accordance with the expected plans or anticipated timeline, or at all.
If these additional expenses are significant, they could harm our business. BUSINESS AND STRATEGIC RISKS We are subject to risks related to the separation of Sandisk, our former Flash business, into an independent public company.
Loss of revenue from a key customer, or consolidation among our customer base, could harm our operating results. Historically, nearly one half of our total revenue came from sales to our top 10 customers.
Loss of revenue from the Cloud end market or a key customer, or consolidation among our customer base, could harm our operating results. As a result of the Separation, there is increased revenue concentration in our Cloud end market and among our top customers.
Further, for many of our OEM customers utilizing just-in-time inventory, we do not generally require firm order commitments and instead receive a periodic forecast of requirements, which may prove to be inaccurate. In addition, because our products are designed to be largely interchangeable with competitors’ products, our demand forecasts may be impacted significantly by the strategic actions of our competitors.
Further, while most of our revenue is derived from customers with whom we have long-term agreements and from whom we require firm order commitments, a smaller number of our other customers utilize just-in-time inventory; from these customers, we do not generally require firm order commitments and instead receive a periodic forecast of requirements, which may prove to be inaccurate.
Failure to successfully execute on strategic initiatives including acquisitions, divestitures or cost saving measures may negatively impact our future results. We have made and expect to continue to make acquisitions and divestitures, and engage in cost saving measures.
We have made and expect to continue to make acquisitions and divestitures (such as the recent Separation) and engage in cost saving measures.
In addition, accurately forecasting demand has become more difficult, which could harm our business. Sales of many of our products tend to be seasonal and subject to volatile and irregular supply-demand cycles. Changes in seasonal and cyclical supply and demand patterns have made it, and could continue to make it, more difficult for us to forecast demand.
Changes in their demand patterns and in cyclical supply and demand patterns have made it, and could continue to make it, difficult for us to forecast demand. Changes in the linearity of our business within a quarter can also impact our business.
We face significant competition in this channel as a result of limited product qualification programs and a significant focus on price and availability of product. As a result of the shift to mobile devices, more computing devices are being delivered to the 20 Table of Contents market as complete systems, which could weaken the distribution market.
We also face significant competition in the distribution channel (in which our distribution customers sell to small computer manufacturers, dealers, systems integrators and other resellers, as well as to Cloud customers in some cases) as a result of limited product qualification programs and a significant focus on price and availability of product.
Any of the above factors could cause the Separation (or the failure to execute the Separation) to have a material adverse effect on our business, financial condition, results of operations and the trading price of our common stock and/or other securities.
Any of these factors could have a material adverse effect on our business, financial condition, results of operations, cash flows, and the price of our common stock. If we do not properly manage technology transitions and product development and introduction, our competitiveness and operating results may be negatively affected.
As forecasting demand becomes more difficult, the risk that our forecasts are not in line with demand increases.
In addition, because our products are designed to be largely interchangeable with competitors’ products, our demand forecasts may be impacted significantly by the strategic actions of our competitors. As forecasting demand remains difficult, the risk that our forecasts are not in line with demand persists.
If the U.S. dollar exhibits sustained weakness against most foreign currencies, the U.S. dollar equivalents of unhedged manufacturing costs could increase because a significant portion of our production costs are foreign-currency denominated. Conversely, there would not be an offsetting impact to revenues since revenues are substantially U.S. dollar denominated.
Conversely, there would not be an offsetting impact to revenues since revenues are substantially U.S. dollar denominated. Additionally, we negotiate and procure some of our component requirements in U.S. dollars from non-U.S. based vendors.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Impact Assessment Committee receives updates and communications from the Security Operations Center on a fixed cadence determined by incident severity and follows our pre-established escalation framework to communicate with and include executive leadership, outside counsel and the Board of Directors, as appropriate.
Biggest changeThe Impact Assessment Committee receives updates and communications from the Security Operations Center on a fixed cadence determined by incident severity and follows our pre-established escalation framework provided by our Security Incident Response Plan to communicate with and include executive leadership, outside counsel and our Board of Directors, as appropriate.
Our Board of Directors has delegated to the Audit Committee the responsibility to oversee risks related to cybersecurity threats, and our Audit Committee Charter requires the Audit Committee to review and discuss with management the Company’s policies with respect to risk assessment and enterprise risk management and to review the risk exposure of the Company related to the Committee’s areas of responsibility, including with respect to cybersecurity.
Our Board of Directors has delegated to our Audit Committee the responsibility to oversee risks related to cybersecurity threats, and our Audit Committee Charter requires our Audit Committee to review and discuss with management the Company’s policies with respect to risk assessment and enterprise risk management and to review the risk exposure of the Company related to the Committee’s areas of responsibility, including with respect to cybersecurity.
The Impact Assessment Committee works with the Company’s internal and external legal counsel to determine and facilitate appropriate communications with the Board of Directors. Our Board of Directors is responsible for overseeing the cybersecurity risk management process and exercises this risk oversight through both our full Board of Directors and its Audit Committee.
The Impact Assessment Committee works with our internal and external legal counsel to determine and facilitate appropriate communications with our Board of Directors. Our Board of Directors is responsible for overseeing the cybersecurity risk management process and exercises this risk oversight through both our full Board of Directors and its Audit Committee.
In carrying out this role, the Audit Committee meets with our Chief Information Security Officer regularly and receives at least quarterly reports on cybersecurity matters.
In carrying out this role, our Audit Committee meets with our Chief Information Security Officer regularly and receives at least quarterly reports on cybersecurity matters.
To help mitigate the potential impact of cybersecurity incidents on our business and protect against cybersecurity threats, we have established organizational structures, procedural measures and response plans that define roles and responsibilities related to cybersecurity risk management. Western Digital’s Information Security organization addresses cybersecurity risks with a broad spectrum of technologies, controls, and processes that focus on mitigating these risks.
To help mitigate the potential impact of cybersecurity incidents on our business and protect against cybersecurity threats, we have established organizational structures, procedural measures and response plans that define roles and responsibilities related to cybersecurity risk management. Our Information Security organization addresses cybersecurity risks with a broad spectrum of technologies, controls, and processes that focus on mitigating these risks.
Our enterprise risk management (“ERM”) process is designed to facilitate the identification, assessment, management, reporting and monitoring of material risks our company may face over the short-term and long-term and assure regular communication with our Board of Directors and its committees regarding these risks.
Our enterprise risk management (“ERM”) process is designed to facilitate the identification, assessment, management, reporting and monitoring of material risks our company may face over the short-term and long-term and promote regular communication with our Board of Directors and its committees regarding these risks.
Each of these third-parties must be cleared through a formal cybersecurity risk assessment process before being allowed to integrate with Western Digital’s information systems, access confidential data, or provide electronic services to members of our workforce.
Each of these third parties must be cleared through a formal cybersecurity risk assessment process before being allowed to integrate with our information systems, access confidential data, or provide electronic services to members of our workforce.
Additionally, we have established a Cyber Incident Response Plan that follows the structure of the Incident Handling Guide published by the U.S. National Institute of Standards and Technology (SP 800-61r2) and that serves as an operational guide for handling cybersecurity incidents at Western Digital.
Additionally, we have established a Cyber Incident Response Plan that follows the structure of the Incident Handling Guide published by the U.S. National Institute of Standards and Technology (SP 800-61r2) and that serves as an operational guide for handling cybersecurity incidents.
As part of our ongoing information security program, Western Digital utilizes periodic independent third-party experts to conduct assessments of our program’s effectiveness. These experts are also leveraged to design and orchestrate tabletop exercises where multiple business functions and leadership levels must navigate complex incident scenarios to help determine our level of preparedness for various cybersecurity incidents.
As part of our ongoing information security program, we utilize periodic independent third-party experts to conduct assessments of our program’s effectiveness. These experts are also leveraged to design and orchestrate tabletop exercises where multiple business functions and leadership levels must navigate complex incident scenarios to help determine our level of preparedness for various cybersecurity incidents.
Additionally, further scrutiny is applied during the post-assessment onboarding process in order to fine-tune access rights to limit privileges to those necessary to enable the related service, resulting in a least-privilege level of access. 27 Table of Contents Western Digital has in the past experienced cybersecurity incidents of varying degrees involving our technology infrastructure and information systems, including incidents in which unauthorized parties have obtained access to our information systems and networks.
Additionally, further scrutiny is applied during the post-assessment onboarding process in order to fine-tune access rights to limit privileges to those necessary to enable the related service, resulting in a least-privilege level of access. 24 Table of Contents We have in the past experienced cybersecurity incidents of varying degrees involving our technology infrastructure and information systems, including incidents in which unauthorized parties have obtained access to our information systems and networks.
Also at least annually, our Chief Information Security Officer reports to the full Board of Directors on cybersecurity matters related to or impacting our company and our business. 28 Table of Contents
Also at least annually, our Chief Information Security Officer reports to our full Board of Directors on cybersecurity matters related to or impacting our company and our business. 25 Table of Contents
Through our ERM process, we have determined that the compromise, damage or interruption of our technology infrastructure, information systems or products by cybersecurity incidents is a key risk to our company that may have a material negative impact on our business.
Through our ERM process, we have determined that the compromise, damage and interruption of our technology infrastructure, information systems or products by cybersecurity incidents are key risks to our company that may have a material negative impact on our business.
As part of our business operations, Western Digital engages with a number of third parties, including but not limited to, online software service providers, vendors, consultants, and partners.
As part of our business operations, we engage with a number of third parties, including but not limited to, online software service providers, vendors, consultants, and partners.
Governance Western Digital has implemented a governance framework related to cybersecurity that includes operational risk-mitigation practices and Board-level cybersecurity risk oversight.
Governance We have implemented a governance framework related to cybersecurity that includes operational risk-mitigation practices and Board-level cybersecurity risk oversight.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur principal manufacturing, R&D, marketing and administrative facilities as of June 28, 2024 were as follows: Location Buildings Owned or Leased Approximate Square Footage Description United States California Fremont Leased 295,000 HDD manufacturing of head wafers and R&D Irvine Leased 408,000 HDD R&D, administrative, marketing and sales Milpitas Leased 578,000 Flash R&D, marketing and sales, and administrative San Jose Owned 2,205,000 Manufacturing of head wafers, head, media and product development, R&D for Flash and HDD, administrative, marketing and sales Colorado Longmont Leased 62,000 Flash R&D Colorado Springs Leased 54,000 HDD R&D Minnesota Rochester Leased 156,000 Flash and HDD product development Asia China Shanghai Owned 917,000 Flash assembly and test of SSD Shenzhen Owned and Leased 614,000 HDD manufacturing of media and sales Japan Fujisawa Owned 661,000 HDD product development Malaysia Johor Owned 277,000 HDD manufacturing of substrates Kuala Lumpur Owned 145,000 HDD R&D and administrative Kuching Owned 529,000 HDD manufacturing and development of substrates Penang Owned 2,420,000 Assembly and test of SSD, manufacturing of media, and R&D for Flash and HDD Philippines Laguna Owned 632,000 HDD manufacturing of HGAs and slider fabrication Thailand Bang Pa-In Owned and Leased 1,595,000 HDD slider fabrication, manufacturing of HDDs and HGAs, and R&D Prachinburi Owned 1,568,000 HDD manufacturing India Bangalore Owned and Leased 1,317,000 Flash R&D and administrative Middle East Israel Kfar Saba Owned 167,000 Flash R&D Tefen Owned 72,000 Flash R&D We also lease office space in various other locations worldwide primarily for R&D, sales, operations, manufacturing, administration and technical support.
Biggest changeOur principal manufacturing, R&D, marketing and administrative facilities as of June 27, 2025 were as follows: Location Buildings Owned or Leased Approximate Square Footage Description United States California Fremont Leased 295,000 Manufacturing and R&D Irvine Leased 258,000 R&D, administrative, marketing and sales San Jose Owned 1,957,000 Manufacturing, R&D, administrative, marketing and sales Colorado Colorado Springs Leased 54,000 R&D Minnesota Rochester Leased 111,000 R&D Asia China Shenzhen Owned and Leased 614,000 Manufacturing Japan Fujisawa Owned 638,000 R&D Malaysia Johor Owned 277,000 Manufacturing Kuala Lumpur Owned 145,000 R&D and administrative Kuching Owned 529,000 Manufacturing and R&D Penang Owned 1,192,000 Manufacturing Philippines Laguna Owned 632,000 Manufacturing and administrative Thailand Bang Pa-In Owned and Leased 1,595,000 Manufacturing and R&D Prachinburi Owned 1,568,000 Manufacturing We also lease office space in various other locations worldwide primarily for R&D, marketing and sales, and administration.
Item 2. Properties Our principal executive offices are located in San Jose, California. Our leased facilities have contracts expiring at various times through 2039.
Item 2. Properties Our principal executive offices are located in San Jose, California. Our leased facilities have contracts expiring at various times through 2034.
During the year ended June 28, 2024, we completed a sale and leaseback of our facility in Milpitas, California. We believe our present facilities are adequate for our current needs.
We believe our present facilities are adequate for our current needs. 26 Table of Contents
Removed
We continuously update our facilities from time to time to meet technological and market requirements. 29 Table of Contents Substantially all of our flash-based memory wafers are manufactured by Kioxia in purpose-built, wafer fabrication facilities located in Yokkaichi and Kitakami, Japan. 30 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeLegal Proceedings See Part II, Item 8, Note 17, Legal Proceedings and Note 13, Income Tax Expense of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for disclosures regarding certain legal proceedings and the status of statutory notices of deficiency issued by the IRS with regards to tax years 2008 through 2015, respectively, which are incorporated by reference herein.
Biggest changeItem 3. Legal Proceedings See Part II, Item 8, Note 17, Legal Proceedings of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for disclosures regarding certain legal proceedings, which are incorporated by reference herein.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+9 added−1 removed0 unchanged
Biggest changeTechnology Hardware & Equipment Index $ 100.00 $ 145.46 $ 224.80 $ 200.70 $ 300.76 $ 457.57 The stock performance graph shall not be deemed soliciting material or to be filed with the SEC or subject to Regulation 14A or 14C under the Securities Exchange Act of 1934 or to the liabilities of Section 18 of the Securities Exchange Act of 1934, nor shall it be incorporated by reference into any past or future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent we specifically request that it be treated as soliciting material or specifically incorporate it by reference into a filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
Biggest changeSecurities and Exchange Commission (the “SEC”) or subject to Regulation 14A or 14C under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or to the liabilities of Section 18 of the Exchange Act, nor shall it be incorporated by reference into any past or future filing under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act, except to the extent we specifically request that it be treated as soliciting material or specifically incorporate it by reference into a filing under the Securities Act or the Exchange Act.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock Our common stock is listed on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “WDC”. The approximate number of holders of record of our common stock as of August 7, 2024 was 802.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock Our common stock is listed on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “WDC”. The approximate number of holders of record of our common stock as of July 23, 2025 was 720.
Stock Performance Graph The following graph compares the cumulative total stockholder return of our common stock with the cumulative total return of the S&P 500 Index and the Dow Jones U.S. Technology Hardware & Equipment Index for the five years ended June 28, 2024.
The company may suspend or discontinue the share repurchase program at any time. Stock Performance Graph The following graph compares the cumulative total stockholder return of our common stock with the cumulative total return of the S&P 500 Index and the Dow Jones U.S. Technology Hardware & Equipment Index for the five years ended June 27, 2025.
The graph assumes that $100 was invested in our common stock at the close of market on June 28, 2019 and that all dividends were reinvested. Stockholder returns over the indicated period should not be considered indicative of future stockholder returns.
The graph assumes that $100 was invested in our common stock at the close of market on July 3, 2020 and that all dividends were reinvested.
TOTAL RETURN TO STOCKHOLDERS (Assumes $100 investment at market close on June 28, 2019) 32 Table of Contents Total Return Analysis June 28, 2019 July 3, 2020 July 2, 2021 July 1, 2022 June 30, 2023 June 28, 2024 Western Digital Corporation $ 100.00 $ 89.25 $ 147.66 $ 91.31 $ 79.77 $ 159.35 S&P 500 Index $ 100.00 $ 107.51 $ 151.36 $ 135.29 $ 161.80 $ 201.53 Dow Jones U.S.
Stockholder returns over the indicated period should not be considered indicative of future shareholder returns. 28 Table of Contents TOTAL RETURN TO STOCKHOLDERS (Assumes $100 investment at market close on July 3, 2020) Total Return Analysis July 3, 2020 July 2, 2021 July 1, 2022 June 30, 2023 June 28, 2024 June 27, 2025 Western Digital Corporation $ 100.00 $ 165.43 $ 102.31 $ 88.60 $ 178.53 $ 197.73 S&P 500 Index $ 100.00 $ 141.23 $ 125.94 $ 149.04 $ 185.64 $ 212.67 Dow Jones U.S.
Removed
Dividends In April 2020, we suspended our quarterly cash dividend. For more information about our dividends, see Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations – Short- and Long-term Liquidity.
Added
Dividends Cash Dividend Program On April 29, 2025, our Board of Directors authorized the adoption of a quarterly cash dividend program. Under the cash dividend program, holders of our common stock will receive dividends when and as declared by our Board of Directors.
Added
During the year ended June 27, 2025, we paid cash dividends of $0.10 per share of our outstanding common stock, totaling $36 million, including payment to holders of our Series A Preferred Stock in accordance with their participation rights.
Added
Subsequent to year-end, on July 29, 2025, our Board of Directors declared a cash dividend of $0.10 per share of our common stock, which will be paid on September 18, 2025 to our shareholders of record as of the close of business on September 4, 2025.
Added
We may modify, suspend, or cancel our cash dividend program in any manner and at any time.
Added
The amount of future dividends under our cash dividend program, and the declaration and payment thereof, will be based upon all relevant factors, including our financial position, results of operations, cash flows, capital requirements and restrictions under our Loan Agreement and other financing agreements, and shall be in compliance with applicable law.
Added
Issuer Purchases of Equity Securities The following table provides information about repurchases by us of shares of our common stock during the quarter ended June 27, 2025: (in millions, except average price paid per share) Total Number of Shares Purchased Average Price Paid per Share (1) Total Number of Shares Purchased As Part of Publicly Announced Program (2) Maximum Value of Shares that May Yet be Purchased Under the Program (2) Mar. 29, 2025 - Apr. 25, 2025 — $ — — $ 2,000 Apr. 26, 2025 - May 23, 2025 0.5 49.74 0.5 $ 1,975 May 24, 2025 - Jun. 27, 2025 2.3 54.92 2.3 $ 1,851 Total for the quarter ended Jun. 27, 2025 2.8 $ 53.97 2.8 (1) Includes commissions.
Added
(2) On May 9, 2025, our Board of Directors authorized a share repurchase program for the repurchase of up to $2.0 billion of our common stock. There is no expiration date for the share repurchase program.
Added
Repurchases under the share repurchase program may be made in the open market or in privately negotiated transactions and may be made under a Rule 10b5-1 plan. We expect share repurchases to be funded principally by operating cash flows. The amount and timing of share repurchases will depend on market conditions and other corporate considerations.
Added
Technology Hardware & Equipment Index $ 100.00 $ 156.60 $ 137.50 $ 207.56 $ 315.78 $ 352.49 The stock performance graph shall not be deemed soliciting material or to be filed with the U.S.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

85 edited+72 added−62 removed28 unchanged
Biggest changeA discussion of our results of operations for 2022, including a comparison of such results of operations to 2023, is included in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , included in our Annual Report on Form 10-K for the year ended June 30, 2023 filed with the SEC on August 22, 2023. 41 Table of Contents Liquidity and Capital Resources The following table summarizes our statements of cash flows: 2024 2023 2022 (in millions) Net cash provided by (used in): Operating activities $ (294) $ (408) $ 1,880 Investing activities (27) (762) (1,192) Financing activities 187 875 (1,718) Effect of exchange rate changes on cash (10) (9) (13) Net decrease in cash and cash equivalents $ (144) $ (304) $ (1,043) We had previously reached a final agreement with the IRS and received notices of deficiency with respect to years 2008 through 2012 and in February 2024, we also reached a final agreement for resolving the notices of proposed adjustments with respect to years 2013 through 2015.
Biggest changeSee Part II, Item 8, Note 3, Discontinued Operations , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional cash flow information related to our discontinued operations. 2025 2024 2023 (in millions) Net cash provided by (used in): Operating activities $ 1,691 $ (294) $ (408) Investing activities 150 (27) (762) Financing activities (1,612) 187 875 Effect of exchange rate changes on cash 6 (10) (9) Net increase (decrease) in cash and cash equivalents $ 235 $ (144) $ (304) We had previously reached a final agreement with the IRS and received notices of deficiency with respect to years 2008 through 2012, and in February 2024, we also reached a final agreement for resolving the notices of proposed adjustments with respect to years 2013 through 2015.
Inventories We value inventories at the lower of cost or net realizable value (“NRV”), with cost determined on a first-in, first-out basis. We record inventory write-downs of our inventory to lower of cost or net realizable value or for obsolete or excess inventory based on assumptions, which requires significant judgement.
Inventories We value inventories at the lower of cost or net realizable value (“NRV”) with cost determined on a first-in, first-out basis. We record inventory write-downs of our inventory to the lower of cost or net realizable value or for obsolete or excess inventory based on assumptions, which requires significant judgement.
Financing Activities During 2024, net cash provided by financing activities primarily consisted of $3.00 billion in proceeds from the issuance of the 2028 Convertible Notes, the drawdown of the Delayed Draw Term Loan and draws on the revolving credit facility.
During 2024, net cash provided by financing activities primarily consisted of $3.00 billion in proceeds from the issuance of the 2028 Convertible Notes, the drawdown of a delayed draw term loan and draws on the revolving credit facility.
We periodically perform an excess and obsolete analysis of our inventory based on assumptions, which includes changes in business and economic conditions, changes in technology and projected demand of our products.
We periodically perform an analysis of potential excess and obsolete inventory based on assumptions, which includes changes in business and economic conditions, changes in technology and projected demand of our products.
In addition, from time to time, we also invest directly in certificates of deposit, asset-backed securities and corporate and municipal notes and bonds. 42 Table of Contents Operating Activities Net cash provided by or used in operating activities primarily consists of net income or loss, adjusted for non-cash charges, plus or minus changes in operating assets and liabilities.
In addition, from time to time, we also invest directly in certificates of deposit, asset-backed securities and corporate and municipal notes and bonds. 38 Table of Contents Operating Activities Net cash provided by or used in operating activities primarily consists of net income or loss, adjusted for non-cash charges, plus or minus changes in operating assets and liabilities.
For a description of our current foreign exchange contract commitments, see Part II, Item 8, Note 6, Derivative Instruments and Hedging Activities , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.
For a description of our current foreign exchange contract commitments, see Part II, Item 8, Note 7, Derivative Instruments and Hedging Activities , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.
We constrain variable consideration until the likelihood of a significant revenue reversal is not probable and believes that the expected value method is the appropriate estimate of the amount of variable consideration based on the fact that we have a large number of contracts with similar characteristics.
We constrain variable consideration until the likelihood of a significant revenue reversal is not probable and believe that the expected value method is the appropriate estimate of the amount of variable consideration based on the fact that we have a large number of contracts with similar characteristics.
Additional information regarding our indebtedness, including information about availability under our revolving credit facility and the principal repayment terms, interest rates, covenants and other key terms of our outstanding indebtedness, is included in Part II, Item 8, Note 7, Debt , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.
Additional information regarding our indebtedness, including information about availability under our 2027 Revolving Credit Facility and the principal repayment terms, interest rates, covenants, collateral and other key terms of our outstanding indebtedness, is included in Part II, Item 8, Note 8, Debt , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.
If in any period, we can sell inventories that had been written down to a level below the realized selling price in previous period, higher gross profit would be recognized in that period.
If in any period, we can sell inventories that had been written down to a level below the realized selling price in previous periods, higher gross profit would be recognized in the current period.
You should read this information in conjunction with the Consolidated Financial Statements and the notes thereto included in Part II, Item 8 of this Annual Report on Form 10-K. See also “Forward-Looking Statements” immediately prior to Part I, Item 1 of this Annual Report on Form 10-K.
You should read this information in conjunction with the Consolidated Financial Statements and the notes thereto included in Part II, Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K. See also “Forward-Looking Statements” immediately prior to Part I, Item 1, Business , of this Annual Report on Form 10-K.
Prior to that date, if the trading price of our common stock remains above 130% of the conversion price for at least 20 trading days (whether or not consecutive) during the 30 consecutive trading-day period prior to the end of a calendar quarter, holders of the 2028 Convertible Notes would have the right to convert the 2028 Convertible Notes during the next succeeding calendar quarter.
Prior to August 15, 2028, if the trading price of our common stock remains above 130% of the conversion price for at least 20 trading days (whether or not consecutive) during the 30 consecutive trading-day period prior to the end of a calendar quarter, holders of the 2028 Convertible Notes would have the right to convert the 2028 Convertible Notes during the next succeeding calendar quarter.
Litigation and Contingencies We disclose information regarding claims and contingencies where the likelihood of a material loss is probable or reasonably possible. If a loss contingency is probable and the amount of the loss can be reasonably estimated, we record an accrual for the loss.
Litigation and Contingencies 45 Table of Contents We disclose information regarding claims and contingencies where the likelihood of a material loss is probable or reasonably possible. If a loss contingency is probable and the amount of the loss can be reasonably estimated, we record an accrual for the loss.
The actual liability for unrealized tax benefits in any such contingency may be materially different from our estimates, which could result in the need to record additional liabilities for unrecognized tax benefits or potentially adjust previously-recorded liabilities for unrealized tax benefits and materially affect our operating results. Goodwill Goodwill is not amortized.
The actual liability for unrealized tax benefits in any such contingency may be materially different from our estimates, which could result in the need to record additional liabilities for unrecognized tax benefits or potentially adjust previously recorded liabilities for unrealized tax benefits and materially affect our operating results.
Additional information regarding our indebtedness, including the principal repayment terms, interest rates, covenants and other key terms of our outstanding indebtedness, and additional information on the terms of our convertible preferred shares is included in Part II, Item 8, Note 7, Debt, of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.
Information regarding our indebtedness, including the principal repayment terms, interest rates, covenants and other key terms of our outstanding indebtedness, and additional information on the terms of our convertible preferred shares is included in Part II, Item 8, Note 8, Debt , and Note 12, Shareholders’ Equity and Convertible Preferred Stock , of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.
DPO increased 9 days over the prior year, primarily due to more favorable payment terms and routine variations in the timing of purchases and payments during the period.
DPO increased by 2 days over the prior year, primarily due to more favorable payment terms and routine variations in the timing of purchases and payments during the period.
Of this amount, $34 million of interest savings from the interest paid with respect to years 2008 through 2012 is classified as a deferred tax asset due to interest expense limitation rules. See Part II, Item 8, Note 13, Income Tax Expense, of the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K.
Of this amount, $65 million of interest savings from the interest paid with respect to years 2008 through 2015 is classified as a deferred tax asset due to interest expense limitation rules. See Part II, Item 8, Note 13, Income Taxes of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.
The Consumer end market is highlighted by our broad range of retail and other end-user products, which capitalize on the strength of our product brand recognition and vast points of presence around the world. Our fiscal year ends on the Friday nearest to June 30 and typically consists of 52 weeks.
The Consumer end market provides a broad range of retail and other end-user products, which capitalize on the strength of our product brand recognition and vast points of presence around the world. Our fiscal year ends on the Friday nearest to June 30 and typically consists of 52 weeks.
If a retroactive extension is granted, we will make an adjustment to our effective tax rate in that period. The primary drivers of the difference between the effective tax rate for 2023 and the U.S.
If an extension is granted, we will make an adjustment to our effective tax rate in that period. The primary drivers of the difference between the effective tax rate for fiscal year 2023 and the U.S.
The actual outcome of such matters could differ materially from our estimates. 49 Table of Contents
The actual outcome of such matters could differ materially from our estimates. 46 Table of Contents
Investing Activities N et cash used in investing activities in 2024 primarily consisted of $487 million in capital expenditures, partially offset by $239 million in net notes receivable proceeds from (issuances to) Flash Ventures and $195 million in proceeds from the sale of property, plant and equipment.
Net cash used in investing activities in 2024 primarily consisted of $487 million of capital expenditures, partially offset by $239 million in net notes receivable proceeds from Flash Ventures and $195 million in proceeds from the sale-leaseback of property, plant and equipment.
These sources were partially offset by $2.10 billion used for the repayment of draws on the revolving credit facility, repayments of the Delayed Draw Term Loan, scheduled payments on the Term Loan A-2, and settlement of the remaining 2024 Convertible Notes; $505 million used to repurchase a portion of the 2024 Convertible Notes and $155 million for the purchase of capped calls to hedge the potential dilution impact of the conversion feature of the 2028 Convertible Notes.
These sources were partially offset by $2.10 billion used for the repayment of draws on the revolving credit facility, repayments of a delayed draw term loan, scheduled payments on the Term Loan A-2, and settlement of our remaining 1.50% convertible senior notes due February 1, 2024 (the “2024 Convertible Notes”); $505 million used to repurchase a portion of the 2024 Convertible Notes; and $155 million for the purchase of capped calls to hedge the potential dilution impact of the conversion feature of the 2028 Convertible Notes.
A total of $1.43 billion and $1.28 billion of our cash and cash equivalents were held outside of the U.S. as of June 28, 2024 and June 30, 2023, respectively. There are no material tax consequences that were not previously accrued for on the repatriation of this cash.
A total of $0.98 billion and $1.43 billion of our cash and cash equivalents were held outside of the U.S. as of June 27, 2025 and June 28, 2024, respectively. There are no material tax consequences that were not previously accrued for on the repatriation of this cash.
In addition, see the discussions further below related to unrecognized tax benefits, the intellectual property litigation, dividend rights with respect to the Series A Preferred Stock, foreign exchange contracts and indemnifications.
In addition, see the discussions further below related to unrecognized tax benefits, litigation matters, cash dividend program, dividend rights with respect to the Series A Preferred Stock, foreign exchange contracts and indemnifications.
Unrecognized Tax Benefits As of June 28, 2024, the liability for unrecognized tax benefits (excluding accrued interest and penalties) was approximately $721 million. Accrued interest and penalties related to unrecognized tax benefits are recognized in liabilities for uncertain tax positions and are recorded in the provision for income taxes.
Unrecognized Tax Benefits As of June 27, 2025, the liability for unrecognized tax benefits (excluding accrued interest and penalties) was approximately $569 million. Accrued interest and penalties related to unrecognized tax benefits are recognized in liabilities for uncertain tax positions and are recorded in the provision for income taxes.
A discussion of our cash flows for 2022, including a comparison of such cash flows to 2023, is included in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources , included in our Annual Report on Form 10-K for the year ended June 30, 2023 filed with the SEC on August 22, 2023. 43 Table of Contents Off-Balance Sheet Arrangements Other than the commitments related to Flash Ventures incurred in the normal course of business and certain indemnification provisions (see “Short- and Long-term Liquidity – Indemnifications ” below), we do not have any other material off-balance sheet financing arrangements or liabilities, guarantee contracts, retained or contingent interests in transferred assets, or any other obligation arising out of a material variable interest in an unconsolidated entity.
A discussion of our cash flows for 2023, including a comparison of such cash flows to 2024, is included in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources , included in our Annual Report on Form 10-K for the year ended June 28, 2024 filed with the SEC on August 20, 2024. 39 Table of Contents Off-Balance Sheet Arrangements Other than certain indemnification provisions (see “Short- and Long-term Liquidity – Purchase Obligations and Other Commitments ” below), we do not have any other material off-balance sheet financing arrangements or liabilities, guarantee contracts, retained or contingent interests in transferred assets, or any other obligation arising out of a material variable interest in an unconsolidated entity.
The 2028 Convertible Notes are also convertible prior to that date upon the occurrence of certain corporate events.
The 2028 Convertible Notes are also convertible prior to August 15, 2028 upon the occurrence of certain corporate events.
At the end of the respective fourth quarters, the cash conversion cycles were as follows (in days): 2024 2023 2022 (in days) Days sales outstanding 52 54 56 Days in inventory 126 130 107 Days payables outstanding (65) (56) (66) Cash conversion cycle 113 128 97 Changes in days sales outstanding (“DSO”) are generally due to the timing of shipments to and collections from customers.
At the end of the respective fourth quarters, the cash conversion cycles were as follows (in days): 2025 2024 2023 Days sales outstanding 52 56 56 Days in inventory 76 97 107 Days payables outstanding (75) (73) (66) Cash conversion cycle 53 80 97 Changes in days sales outstanding (“DSO”) are generally due to the timing of shipments to and collections from customers.
Historically, we have not incurred material costs as a result of obligations under these agreements. 47 Table of Contents Recent Accounting Pronouncements For a description of recently issued and adopted accounting pronouncements, including the respective dates of adoption and expected effects on our results of operations and financial condition, see Part II, Item 8, Note 2, Recent Accounting Pronouncements , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.
Recent Accounting Pronouncements For a description of recently issued and adopted accounting pronouncements, including the respective dates of adoption and expected effects on our results of operations and financial condition, see Part II, Item 8, Note 2, Recent Accounting Pronouncements , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.
For additional information regarding employee termination, asset impairment, and other, see Part II, Item 8, Note 15, Employee Termination, Asset Impairment, and Other , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.
For information regarding Business realignment charges, see Part II Item 8, Note 15, Business Realignment Charges , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.
Federal statutory rate of 21% are the relative mix of earnings and losses by jurisdiction, the deduction for foreign derived intangible income, credits, and tax holidays in Malaysia, the Philippines and Thailand that will expire at various dates during years 2025 through 2031. On November 1, 2023, one of our tax holidays in Malaysia expired.
Federal statutory rate of 21% are the relative mix of earnings and losses by jurisdiction, the deduction for foreign derived intangible income, credits, and tax holidays in the Philippines and Thailand. On November 1, 2023, our tax holiday in Malaysia expired.
We expect to pay any remaining balance with respect to this matter within the next twelve months. In connection with settlements for the years 2008 through 2015, we expect to realize reductions to our mandatory deemed repatriation tax obligations and tax savings from interest deductions in future years aggregating to approximately $165 million.
In connection with settlements for the years 2008 through 2015, we expect to realize reductions to our mandatory deemed repatriation tax obligations and tax savings from interest deductions in future years aggregating to approximately $166 million.
For each of 2024, 2023 and 2022, no single customer accounted for 10% or more of our net revenue. Consistent with standard industry practice, we have sales incentive and marketing programs that provide customers with price protection and other incentives or reimbursements that are recorded as a reduction to gross revenue.
Consistent with standard industry practice, we have sales incentive and marketing programs that provide customers with price protection and other incentives or reimbursements that are recorded as a reduction to gross revenue. For 2025, 2024 and 2023, these programs represented 10%, 11% and 18%, respectively, of gross revenue.
We expect to pay any remaining balance with respect to this matter within the next twelve months. In connection with settlements for the years 2008 through 2015, we expect to realize reductions to our mandatory deemed repatriation tax obligations and tax savings from interest deductions in future years aggregating to $165 million.
In connection with settlements for the years 2008 through 2015, we expect to realize reductions to our mandatory deemed repatriation tax obligations and tax savings from interest deductions in future years aggregating to $166 million.
The tax measures include, among other things, a corporate alternative minimum tax (“CAMT”) of 15% on corporations with three-year average annual adjusted financial statement income (“AFSI”) exceeding $1.00 billion. The CAMT is effective for us beginning with fiscal year 2024.
On August 16, 2022, the Inflation Reduction Act of 2022 was signed into law, which contained, among other things, a corporate alternative minimum tax (“CAMT”) of 15% on corporations with three-year average annual adjusted financial statement income (“AFSI”) exceeding $1.00 billion. The CAMT became effective for us beginning with fiscal year 2024.
Federal statutory rate of 21% are the relative mix of earnings and losses by jurisdiction, the deduction for foreign derived intangible income, credits, and tax holidays in Malaysia, the Philippines and Thailand that will expire at various dates during years 2025 through 2031.
Federal statutory rate of 21% are the relative mix of earnings and losses by jurisdiction, the deduction for foreign derived intangible income, credits, and tax holidays in the Philippines and Thailand that will expire at various dates during 2026 through 2033. These resulted in decreases to our effective tax rate below the U.S. Federal statutory rate for fiscal year 2025.
During the twelve months ended June 28, 2024, we made payments aggregating $524 million for tax and interest with respect to years 2008 through 2012 and have a remaining liability of $185 million as of June 28, 2024 related to all years from 2008 through 2015.
During the year ended June 27, 2025, we made payments aggregating to $162 million for tax and interest with respect to years 2008 through 2015 and have no remaining liability as of June 27, 2025 related to all years from 2008 through 2015.
These shares are entitled to cumulative preferred dividends and will also participate in any dividends declared for common shareholders on an as-converted equivalent basis. See Part II, Item 8, Note 12, Shareholders’ Equity and Convertible Preferred Stock , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for more information regarding these dividend provisions.
See Part II, Item 8, Note 12, Shareholders’ Equity and Convertible Preferred Stock , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for more information regarding these dividend provisions.
We have an existing shelf registration statement (the “Shelf Registration Statement”) filed with the SEC, which allows us to offer and sell shares of common stock, preferred stock, warrants, and debt securities. The Shelf Registration Statement expires in late August 2024, and we plan to renew the Shelf Registration Statement at that time.
In August 2024, we filed a shelf registration statement (the “Shelf Registration Statement”) with the Securities and Exchange Commission that expires in August 2027. The Shelf Registration Statement allows us to offer and sell shares of common stock, preferred stock, warrants, and debt securities.
Our ability to sustain our working capital position is subject to a number of risks that we discuss in Part I, Item 1A, Risk Factors , in this Annual Report on Form 10-K.
We believe we can also access the various debt and equity capital markets to further supplement our liquidity position if necessary. Our ability to sustain our working capital position is subject to a number of risks that we discuss in Part I, Item 1A, Risk Factors , in this Annual Report on Form 10-K.
Net cash used for changes in operating assets and liabilities was $307 million for 2024, as compared to $92 million of net cash provided by such changes for 2023, which largely reflects payments made on the IRS matter and an increase in net operating assets and liabilities resulting from the increase in the volume of our business.
Net cash used for changes in operating assets and liabilities was $1.03 billion for 2025, as compared to $307 million of net cash used for such changes for 2024, which largely reflects an increase in net operating assets and liabilities resulting from the increase in the volume of our business as well as the timing and amount of tax payments.
See Part II, Item 8, Note 9, Related Parties and Related Commitments and Contingencies , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for information regarding Flash Ventures.
For information regarding litigation matters, see Part II Item 8, Note 17, Legal Proceedings , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.
In addition to our existing debt, as of June 28, 2024 , we had $2.22 billion available for borrowing under our revolving credit facility until January 2027, subject to customary conditions under the loan agreement.
In addition to our outstanding debt, as of June 27, 2025, we had $1.25 billion available for borrowing under our revolving credit facility maturing in January 2027 (the “2027 Revolving Credit Facility”), subject to customary conditions under the Loan Agreement.
We are not subject to the CAMT of 15% for fiscal year 2024 as our average annual AFSI did not exceed $1.00 billion for the preceding three-year period.
We were not subject to CAMT in fiscal year 2024 and do not expect to be subject to CAMT for fiscal year 2025 as our average annual AFSI did not exceed $1.0 billion for the preceding three-year period.
The increase in exabytes sold was driven by an increase in shipments of our high-capacity enterprise drives. The decline in ASPs per gigabyte was primarily due to a shift in the product mix to larger capacity drives.
The increase in units sold was driven by higher shipments of our high-capacity enterprise products. The increase in average selling price per unit was primarily due to a shift in product mix to higher capacity drives.
Leveraging our expertise and innovation in both areas, we believe we are well-positioned to capitalize on this improved market condition. 34 Table of Contents Tax Resolution As disclosed in previous periods, we had previously reached a final agreement with the Internal Revenue Service (“IRS”) and received notices of deficiency with respect to years 2008 through 2012 and in February 2024, we also reached a final agreement for resolving the notices of proposed adjustments with respect to years 2013 through 2015.
Tax Resolution As previously disclosed, we had reached a final agreement with the U.S. Internal Revenue Service (the “IRS”) and received notices of deficiency with respect to years 2008 through 2012, and in February 2024, we also reached a final agreement for resolving the notices of proposed adjustments with respect to years 2013 through 2015.
Financing Activities On November 3, 2023, we issued $1.60 billion aggregate principal amount of convertible senior notes, which bear interest at an annual rate of 3.00% and mature on November 15, 2028, unless earlier repurchased, redeemed or converted (the “2028 Convertible Notes”). We received net proceeds of approximately $1.56 billion after issuance costs.
The Company issued $1.60 billion aggregate principal amount of convertible senior notes in November 2023, which bear interest at an annual rate of 3.00% and mature on November 15, 2028 (the “2028 Convertible Notes”).
The increase was largely due to higher revenues from both Flash and HDD, cost reductions due to cost efficiencies achieved through improved manufacturing operations and cost-saving actions, and a more favorable product mix.
Gross Profit and Gross Margin Gross profit increased by $1.92 billion in 2025 compared to 2024. The increase was largely due to higher revenues, cost reductions due to efficiencies achieved through improved manufacturing operations, cost-saving actions, and a more favorable product mix.
During the twelve months ended June 28, 2024, we made payments of $363 million for tax and $161 million for interest with respect to years 2008 through 2012 and recorded adjustments to align with IRS calculations, resulting in a remaining liability of $185 million as of June 28, 2024, related to all years from 2008 through 2015.
During the year ended June 27, 2025, we made payments of $130 million for interest with respect to years 2008 through 2012 and $32 million for tax and interest with respect to years 2013 through 2015, resulting in no remaining liability as of June 27, 2025 related to all years from 2008 through 2015.
During the twelve months ended June 28, 2024, we made payments of $363 million for tax and $161 million for interest with respect to years 2008 through 2012 and recorded adjustments to align with IRS calculations, resulting in a remaining liability of $185 million as of June 28, 2024 related to all years from 2008 through 2015.
During the year ended June 27, 2025, we made payments of $130 million for interest with respect to years 2008 through 2012 and $32 million for tax and interest with respect to years 2013 through 2015, resulting in no remaining liability as of June 27, 2025 related to all years from 2008 through 2015.
We use judgment in our assessment of variable consideration in contracts to be included in the transaction price. We use the expected value method to arrive at the amount of variable consideration.
We use the expected value method to arrive at the amount of variable consideration.
For 2024, 2023 and 2022, these programs represented 15%, 20% and 17%, respectively, of gross revenues. The amounts attributed to our sales incentive and marketing programs generally vary according to several factors including industry conditions, list pricing strategies, seasonal demand, competitor actions, channel mix and overall availability of products.
The amounts attributed to our sales incentive and marketing programs generally vary according to several factors, including industry conditions, list pricing strategies, seasonal demand, competitor actions, channel mix and overall availability of products. Changes in future customer demand and market conditions may require us to adjust our incentive programs as a percentage of gross revenue.
The 2028 Convertible Notes are convertible at the option of any holder at an initial conversion price of approximately $52.20 per share of common stock beginning August 15, 2028.
The 2028 Convertible Notes are convertible at the option of any holder beginning August 15, 2028 at a conversion price of approximately $37.82 per share of common stock (which conversion price has been adjusted from approximately $52.20 in accordance with the indenture as a result of the Separation).
Revenue We provide distributors and retailers (collectively referred to as “resellers”) with limited price protection for inventories held by resellers at the time of published list price reductions. We also provide resellers and OEMs with other sales incentive programs. We record estimated variable consideration related to these items as a reduction to revenue at the time of revenue recognition.
We also provide resellers and OEMs with other sales incentive programs. We record estimated variable consideration related to these items as a reduction to revenue at the time of revenue recognition. We use judgment in our assessment of variable consideration in contracts to be included in the transaction price.
We believe the separation will better position each business unit to execute innovative technology and product development, capitalize on unique growth opportunities, extend respective leadership positions, and operate more efficiently with distinct capital structures. The completion of the planned separation is subject to certain conditions, including final approval by our Board of Directors.
We believe the Separation better positions each business unit to execute innovative technology and product development, capitalize on unique growth opportunities, extend respective leadership positions, operate more efficiently with distinct capital structures, and pursue capital allocation strategies that maximize long-term shareholder value.
Several non-US jurisdictions have either enacted legislation or announced their intention to enact future legislation to adopt certain or all components of the Pillar Two Model Rules, which may be effective for us as early as 2025. When effective, this legislation could materially increase our tax obligations in certain jurisdictions.
Several non-U.S. jurisdictions have either enacted legislation or announced their intention to enact future legislation to adopt certain or all components of Pillar Two, also known as Global Minimum Tax (“GMT”), some of which are effective for us in fiscal year 2025.
We believe our cash and cash equivalents as well as our available revolving credit facility will be sufficient to meet our working capital, debt and capital expenditure needs for at least the next twelve months and for the foreseeable future thereafter. We believe we can also access the various capital markets to further supplement our liquidity position if necessary.
We expect our capital expenditures for fiscal year 2026 to be between 4% to 6% of our net revenue. We believe our cash and cash equivalents and our available 2027 Revolving Credit Facility will be sufficient to meet our working capital, debt, dividend and capital expenditure needs for at least the next twelve months and for the foreseeable future thereafter.
Approximately every five to six years, we report a 53-week fiscal year to align the fiscal year with the foregoing policy. Fiscal years 2024, 2023, and 2022, which ended on June 28, 2024, June 30, 2023, and July 1, 2022, respectively, each comprised 52 weeks, with all quarters presented consisting of 13 weeks.
Fiscal years 2025, 2024, and 2023, which ended on June 27, 2025, June 28, 2024, and June 30, 2023, respectively, each comprised 52 weeks, with all quarters presented consisting of 13 weeks.
Accrued interest and penalties related to unrecognized tax benefits as of June 28, 2024, were approximately $181 million. Of these amounts, approximately $736 million could result in potential cash payments.
Accrued interest and penalties related to unrecognized tax benefits as of June 27, 2025, were approximately $82 million. Of these amounts, approximately $498 million could result in potential cash payments, of which $332 million is reasonably expected to be paid within the next twelve months.
Consolidated gross margin increased 7.3 percentage points in 2024 compared to 2023, with approximately 2 percentage points of the increase due to the lower net charges in the current period and the remainder driven by the same factors as noted above.
Gross margin increased 10.7 percentage points in 2025 compared to 2024, with approximately 2.5 percentage points of the increase due to the impact of unabsorbed manufacturing overhead costs in the prior year and the remainder driven by the factors as noted above. 34 Table of Contents Gross profit increased by $382 million in 2024 compared to 2023.
The increase also reflected charges of approximately $407 million ($252 million in Flash and $155 million in HDD) for unabsorbed manufacturing overhead costs as a result of the reduced utilization of our manufacturing capacity in 2024, compared to approximately $497 million of such costs ($296 million in Flash and $201 million in HDD) in 2023.
The increase was largely due to cost efficiencies achieved through improved manufacturing operations, cost-saving actions, and a more favorable product mix. The increase also reflected a reduction in charges for unabsorbed manufacturing overhead costs as a result of the reduced utilization of our manufacturing capacity to approximately $155 million in 2024, from approximately $200 million of such costs in 2023.
See Part II, Item 8, Note 17, Legal Proceedings , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for more information. Dividends As of June 28, 2024, 235,000 shares of our Series A Preferred Stock remained outstanding.
Litigation Matters For additional information on our litigation matters, see Part II, Item 8, Note 17, Legal Proceedings , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K. Cash Dividend Program On April 29, 2025, our Board of Directors authorized the adoption of a quarterly cash dividend program.
The loan agreement governing our revolving credit facility and our Term Loan A-2 due 2027 require us to comply with certain financial covenants, consisting of a minimum leverage ratio covenant and a minimum liquidity covenant.
The loan agreement governing our 2027 Revolving Credit Facility and our Term Loan A-3 (as amended, the “Loan Agreement”) requires us to comply with a financial leverage ratio covenant. As of June 27, 2025, we were in compliance with the financial covenant.
We have adopted accounting policies and practices that are generally accepted in the industry in which we operate. If these estimates differ significantly from actual results, the impact to the Consolidated Financial Statements may be material.
We have adopted accounting policies and practices that are generally accepted in the industry in which we operate.
We continue to evaluate the tax impact of enacted and future legislation concerning the Pillar Two Model Rules in the non-US tax jurisdictions we operate in. For additional information regarding Income tax expense, see Part II, Item 8, Note 13, Income Tax Expense , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.
For additional information regarding Income tax expense, see Part II, Item 8, Note 13, Income Taxes , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K. 37 Table of Contents Liquidity and Capital Resources The following table summarizes our statements of cash flows, which are presented on a consolidated basis.
Of this amount, $34 million of interest savings from the interest paid with respect to years 2008 through 2012 is classified as a deferred tax asset due to interest expense limitation rules.
Of this amount, $65 million of interest savings from the interest paid with respect to years 2008 through 2015 is classified as a deferred tax asset due to interest expense limitation rules. See Part II, Item 8, Note 13, Income Taxes , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for further details.
We have applied for an extension and anticipate this extension, if granted, will be applied retroactively and begin on November 2, 2023. Because the exact terms of the extension are not currently known, we are applying the Malaysia corporate statutory tax rate on the expired tax holiday income.
We have applied for an extension and continue to be engaged in active discussions with the Malaysian Investment Development Authority. Because the exact terms of an extension are not currently known, we are applying the Malaysia corporate statutory tax rate on our Malaysian income for the full fiscal year.
In 2024, DSO decreased by 2 days over the prior year, reflecting timing of shipments and customer collections, partially offset by a 5-day increase from lower accounts receivable factoring. DIO decreased by 4 days over the prior year, primarily reflecting an increase in products shipped.
In 2025, DSO decreased by 4 days over the prior year, reflecting timing of shipments and customer collections. DIO decreased by 21 days over the prior year, primarily reflecting improvements in inventory management.
While adjustments to these reserves have generally not been material to the years presented, in 2023, we recorded a charge to Cost of revenue of approximately $130 million, primarily to reduce component inventory to net realizable value as a result of a sudden change in demand for certain products. 48 Table of Contents Income Taxes We account for income taxes under the asset and liability method, which provides that deferred tax assets and liabilities be recognized for temporary differences between the financial reporting basis and the tax basis of our assets and liabilities and expected benefits of utilizing net operating loss and tax credit carryforwards.
Income Taxes We account for income taxes under the asset and liability method, which provides that deferred tax assets and liabilities be recognized for temporary differences between the financial reporting bases and the tax bases of our assets and liabilities and expected benefits of utilizing net operating loss and tax credit carryforwards.
Net cash used in investing activities in 2023 primarily consisted of $821 million of capital expenditures, partially offset by $14 million in net notes receivable proceeds from (issuances to) Flash Ven tures.
Investing Activities Net cash provided by investing activities in 2025 primarily consisted of $401 million in net proceeds from our sale of a majority interest in one of our subsidiaries and $148 million in net notes receivable proceeds from Flash Ventures, partially offset by $412 million in capital expenditures.
Such indemnification agreements may not be subject to maximum loss clauses.
Such indemnification agreements may not be subject to maximum loss clauses. Historically, we have not incurred material costs as a result of obligations under these agreements.
Operating Expenses R&D expense decreased $102 million or 5% in 2024 compared to 2023, which was primarily driven by a $31 million decrease in compensation and benefits, a $30 million decrease in depreciation and amortization and a $13 million decrease in outside services. The decrease in compensation and benefits was due to a reduction in headcount.
This increase was primarily driven by a $46 million increase in costs for compensation and benefits, which was attributed to an increase in headcount in support of our technology and product roadmap. This increase was partially offset by a decrease in depreciation and amortization. R&D expense decreased by $36 million or 4% in 2024 compared to 2023.
Cloud revenue increased 2% in 2024 compared to 2023, primarily driven by a 12% increase in exabytes sold, largely offset by a 7% decline in ASPs per gigabyte. The increase in exabytes sold was driven by higher shipments of our high-capacity enterprise HDD products.
The increase was also driven by a 15% increase in units sold as a result of higher shipments of our high-capacity enterprise products stemming from data center expansions. Cloud revenue increased by 65% in 2025 compared to 2024, primarily driven by a 36% increase in units sold and a 20% increase in average selling price per unit.
Any such additional financing will be subject to market conditions and may not be available on terms acceptable to us or at all. As noted previously, in 2024, we had scaled back on capital expenditures, consolidating production lines and reducing bit growth to align with market demand.
Any such additional financing will be subject to market conditions and may not be available on terms acceptable to us or at all. As a result of the Separation, we no longer have any capital expenditure requirements for the Flash business or its joint ventures with Kioxia Corporation.
Total 1 Year (2025) 2-3 Years (2026-2027) 4-5 Years (2028-2029) More than 5 Years (Beyond 2029) (in millions) Long-term debt, including current portion (1) $ 7,488 $ 1,750 $ 4,738 $ 500 $ 500 Interest on debt 1,076 371 527 132 46 Flash Ventures related commitments (2) 4,168 2,021 1,526 522 99 Operating leases 499 60 107 78 254 Purchase obligations and other commitments 477 172 155 40 110 Mandatory deemed repatriation tax 466 265 201 — — Total $ 14,174 $ 4,639 $ 7,254 $ 1,272 $ 1,009 (1) Principal portion of debt, excluding discounts and issuance costs based on contractual maturity.
Total 1 Year (2026) 2-3 Years (2027-2028) 4-5 Years (2029-2030) More than 5 Years (Beyond 2030) (in millions) Long-term debt, including current portion (1) $ 4,749 $ 2,226 $ 1,523 $ 500 $ 500 Interest on debt 507 203 204 69 31 Operating leases 165 36 53 30 46 Purchase obligations and other commitments 76 50 26 — — Mandatory deemed repatriation tax 331 331 — — — Total $ 5,828 $ 2,846 $ 1,806 $ 599 $ 577 (1) Principal portion of debt, excluding issuance costs.
In addition, our total tax expense in future years may also vary as a result of discrete items such as excess tax benefits or deficiencies. On December 20, 2021, the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting released Model Global Anti-Base Erosion rules under Pillar Two (“Pillar Two Model Rules”).
On December 20, 2021, the Organization for Economic Co-operation and Development G20 Inclusive Framework on Base Erosion and Profit Shifting released Model Global Anti-Base Erosion rules under Pillar Two.
The following table sets forth Income tax information from our Consolidated Statements of Operations by dollar and effective tax rate: 2024 2023 2022 (in millions, except percentages) Income (loss) before taxes $ (661) $ (1,550) $ 2,171 Income tax expense 137 134 625 Effective tax rate (21) % (9) % 29 % Beginning in 2023, the 2017 Act requires us to capitalize and amortize R&D expenses rather than expensing them in the year incurred.
The following table sets forth Income tax information from our Consolidated Statements of Operations by dollar and effective tax rate: 2025 2024 2023 (in millions, except percentages) Income (loss) before taxes $ 1,130 $ (739) $ (849) Income tax expense (benefit) (513) 26 53 Effective tax rate (45) % (4) % (6) % The primary drivers of the difference between the effective tax rate for fiscal year 2025 and the U.S.
Interest and Other Income Total interest and other income, net increased $79 million or 30% in 2024 compared to 2023, primarily reflecting a $105 million of higher interest expense resulting from increases in interest rates and higher outstanding debt balance, partially offset by higher other income, net, of $11 million, driven primarily by a net gain on our strategic investments, and $15 million of higher interest income due to higher interest rates.
The increase was partially offset by lower interest expense driven by lower debt balances. Total interest and other expense, net increased by $35 million or 12% in 2024 compared to 2023.
Through the Client end market, we provide our OEM and channel customers a broad array of high-performance HDD and Flash solutions across personal computer, mobile, gaming, automotive, virtual reality headsets, at-home entertainment, and industrial spaces.
Cloud is comprised primarily of products for public or private cloud environments and enterprise customers. Through the Client end market, we provide our original equipment manufacturer (“OEM”) and channel customers a broad array of high-performance HDD solutions across desktop and notebooks.
The tax effects related to the capitalization of R&D expenses are included in the effective tax rate for fiscal years 2023 and 2024. 40 Table of Contents The primary drivers of the difference between the effective tax rate for 2024 and the U.S.
This loss is not deductible for tax purposes and provides no income tax benefit to us. The primary drivers of the difference between the effective tax rate for fiscal year 2024 and the U.S.
Debt As described in “Key Developments – Financing Activities ” above, we undertook several financing actions during 2024, including the issuance of the 2028 Convertible Notes and the repurchase and/or settlement of our 2024 Convertible Notes.
Debt As described in “Key Developments – Capital Allocation Actions ” above, we undertook several financing actions during 2025, including the amendment of our Credit Facility in connection with the Separation and the exchange of a portion of our retained interest in Sandisk shares to reduce a portion of our TLA-3 loan balance.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs of June 28, 2024, the outstanding balance on our Term Loan A-2 was $2.59 billion and a 1% increase in the variable rate of interest would increase annual interest expense by $26 million. 50 Table of Contents
Biggest changeAs of June 27, 2025, the outstanding balance on our Term Loan A-3 was $1.65 billion, and a 1% increase in the variable rate of interest would increase annual interest expense by $16 million. 47 Table of Contents
We have performed sensitivity analyses for 2024, using a modeling technique that measures the change in the fair values arising from a hypothetical 10% adverse movement in the levels of foreign currency exchange rates relative to the U.S. dollar, with all other variables held constant.
We have performed sensitivity analyses for 2025 using a modeling technique that measures the change in the fair values arising from a hypothetical 10% adverse movement in the levels of foreign currency exchange rates relative to the U.S. dollar, with all other variables held constant.
For additional information, see Part II, Item 8, Note 5, Fair Value Measurements and Investments, and Note 6, Derivative Instruments and Hedging Activities , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.
For additional information, see Part II, Item 8, Note 6, Fair Value Measurements and Investments, and Note 7, Derivative Instruments and Hedging Activities , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.
During 2024, 2023 and 2022, total net realized and unrealized transaction and foreign exchange contract currency gains and losses were not material to our Consolidated Financial Statements.
During 2025, 2024 and 2023, total net realized and unrealized transaction and foreign exchange contract currency gains and losses were not material to our Consolidated Financial Statements.
The analyses cover all of our foreign currency derivative contracts used to offset the underlying exposures. The foreign currency exchange rates used in performing the sensitivity analyses were based on market rates in effect at June 28, 2024.
The analyses cover all of our foreign currency derivative contracts used to offset the underlying exposures. The foreign currency exchange rates used in performing the sensitivity analyses were based on market rates in effect at June 27, 2025.
The sensitivity analyses indicated that a hypothetical 10% adverse movement in foreign currency exchange rates relative to the U.S. dollar would result in a foreign exchange fair value loss of $248 million at June 28, 2024.
The sensitivity analyses indicated that a hypothetical 10% adverse movement in foreign currency exchange rates relative to the U.S. dollar would result in a foreign exchange fair value loss of $75 million at June 27, 2025.
As of June 28, 2024, our variable rate debt outstanding consisted of our Term Loan A-2, which is based on various index rates as discussed further in Note 7, Debt , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.
As of June 27, 2025, our variable rate debt outstanding consisted of our Term Loan A-3, which is based on various index rates as discussed further in Note 8, Debt , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.

Other WDC 10-K year-over-year comparisons