Sandisk Corp
For the period ended Jan 2, 2026. Filed Jan 30, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jan 2, 2026 · Filed Jan 30, 2026
SNDK$835.06+3.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-10-03; filed 2025-11-07.
0001628280-25-050698
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-01-02; filed 2026-01-30.
0001628280-26-004407
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 103 previous paragraphs and 114 current paragraphs.
68 unchanged; 28 reworded; 16 added; 7 removed; 0 previous and 2 current paragraphs rearranged.
Tables are not compared: 6 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (16)
Current report
Datacenter revenue increased 29%in thesix months ended January 2, 2026 from the comparable period in the prior year, primarily due toa 41% increase inexabytes sold, partially offset by a 9% decrease in ASP per gigabyte .
Current report
Edge revenue increased 63%in the three months ended January 2, 2026 from the comparable period in the prior year, primarily due to a 55% increase in ASP per gigabyte and a 10% increase in exabytes sold.
Current report
Edge revenue increased 46%in thesix months ended January 2, 2026 from the comparable period in the prior year, primarily due to a 24% increase in exabytes sold and an 18% increase in ASP per gigabyte.
Current report
Consumer revenue increased 52%in the three months ended January 2, 2026 from the comparable period in the prior year, primarily due to a 30% increase in ASP per gigabyte and a 17% increase in exabytes sold.
Current report
Consumer revenue increased 40%in thesix months ended January 2, 2026 from the comparable period in the prior year, primarily due to a 24% increase in exabytes sold and a 13% increase in ASP per gigabyte.
Current report
Gross profit increased by $935 million and $896 million, respectively, for the three and six months ended January 2, 2026 from the comparable period in the prior year, primarily due to a higher ASP and an increase in exabytes sold.
Current report
Gross margin increased by 1,900 basis points and 600 basis points, respectively, for the three and six months ended January 2, 2026 from the comparable period in the prior year, primarily due to a higher ASP and an increase in exabytes sold.
Current report
The higher ASP was primarily driven by favorable pricing conditions in the industry. As a result, for the three and six months ended January 2, 2026, the increase in ASP has outpaced the movement in costs per gigabyte, inclusive of the $11 million underutilization charges incurred in the first fiscal quarter of 2026, resulting in positive margins from the comparable period in the prior year.
Current report
Research and development (“R&D”) expenses increased $48 million in the three months ended January 2, 2026 from the comparable period in the prior year, primarily due to a$30 million increase in compensation and benefits due to variable compensation associated with company performance and increased headcount and an$8 million increase in stock-based compensation.
Current report
Selling, general and administrative expenses decreased $3 million in the three months ended January 2, 2026 from the comparable period in the prior year, primarily due to a $40 million decrease in materials due to a change in business practice for the launch of new products, whereby the Company is distributing fewer free samples and has started entering into contracts to sell certain qualification units to customers. The cost of qualification units are recorded in inventory until sold to customers and recognized as cost of revenue. The change contributed to a decrease in materials and production costs classified as selling expenses when compared to the prior year period, partially offset by an $18 million increase in outside service costs supporting operation and a $16 million increase in compensation and benefits mainly due to variable compensation associated with company performance and increased headcount.
Current report
Selling, general and administrative expenses increased $46 million in the six months ended January 2, 2026 from the comparable period in the prior year, primarily due to a $30 million decrease in materials due to a change in business practice for the launch of new products, whereby the Company is distributing fewer free samples and has started entering into contracts to sell certain qualification units to customers. The cost of qualification units are recorded in inventory until sold to customers and recognized as cost of revenue. The change contributed to a decrease in materials and production costs classified as selling expenses when compared to the prior year period, partially offset by a $28 million increase in compensation and benefits and employee-related costs mainly due to variable compensation associated with company performance and increase in headcount, a $26 million increase in outside service costs supporting operations and a $12 million increase in stock-based compensation.
Current report
Business separation costs decreased $12 million in the three months ended January 2, 2026 from the comparable period in the prior year due to post-separation-related costs decreasing.
Current report
Business separation costs decreased $23 million in the six months ended January 2, 2026 from the comparable period in the prior year due to post-separation-related costs decreasing.
Current report
(Gain) loss on business divestiture
Current report
(Gain) loss on business divestiture decreased $34 million in the three months ended January 2, 2026 from the comparable period in the prior year as a result of the closing of the sale of SDSS that took place on September 28, 2024, for which there was no comparable transaction in the current period.
Current report
Interest and other expense, net increased $134 million in the six months ended January 2, 2026 from the comparable period in the prior year, primarily due to the settlement of certain non-operating legal matters, an increase in interest expense from our Term Loan Facility, and the impairment of an investment, partially offset by an increase in interest income related to cash and investment accounts and a gain on sale of investment.
Removed paragraphs (7)
Previous report
Edge revenue increased 30%in the three months ended October 3, 2025 from the comparable period in the prior year, primarily due to a 39% increase in exabytes sold, partially offset by an 11% decrease in ASP per gigabyte.
Previous report
Consumer revenue increased 27%in the three months ended October 3, 2025 compared to the comparable period in the prior year, primarily due to a 32% increase in exabytes sold, partially offset by a 4% decrease in ASP per gigabyte.
Previous report
Gross profit and gross margin decreased by $39 million and 9%, respectively, for the three months ended October 3, 2025 from the comparable period in the prior year, as the increase in exabytes sold was offset by a lower ASP and higher costs per gigabyte.
Previous report
The lower ASP was primarily driven by higher peak pricing in the comparative period. In addition, the cost per gigabyte has increased, resulting in a higher cost of revenue, coupled with $10.5 million in underutilization charges in the three months ended October 3, 2025, for which there were no comparable charges in the comparable period.
Previous report
Selling, general and administrative expenses increased $49 million in the three months ended October 3, 2025 from the comparable period in the prior year, primarily due to a $12 million increase in compensation and benefits mainly due to variable compensation associated with company performance, and an additional week within the fiscal quarter, an $11 million increase in stock based compensation, an $11 million increase in materials, driven by higher samples for new programs, and a $9 million increase in marketing costs.
Previous report
Business separation costs decreased $11 million in the three months ended October 3, 2025 from the comparable period in the prior year, as we are now post-separation and related costs are decreasing.
Previous report
Loss on business divestiture
Reworded paragraphs (28)
Previous wording
On February 21, 2025, WDC executed the spin-off of the Company through WDC’s pro rata distribution of 116,035,464, or 80.1%, of the Company’s outstanding shares of common stock to holders of WDC’s common stock. Each WDC stockholder received one-third (1/3) of one share of the Company’s common stock for each share of WDC’s common stock held by such WDC stockholder as of February 12, 2025, the record date of the distribution. Upon completion of the separation, WDC owned 28,827,787, or 19.9%, of the outstanding shares of the Company’s common stock, which WDC is expected to retain for a period of up to twelve months following the distribution. Following the distribution, the Company became an independent publicly listed company, and on February 24, 2025, the Company began trading as an independent, publicly traded company under the stock symbol “SNDK” on Nasdaq.
Current wording
On February 21, 2025, WDC executed the spin-off of the Company through WDC’s pro rata distribution of 116,035,464, or 80.1%, of the Company’s outstanding shares of common stock to holders of WDC’s common stock. Each WDC stockholder received one-third (1/3) of one share of the Company’s common stock for each share of WDC’s common stock held by such WDC stockholder as of February 12, 2025, the record date of the distribution. Upon completion of the separation, WDC owned 28,827,787, or 19.9%, of the outstanding shares of the Company’s common stock. Following the distribution, the Company became an independent publicly listed company, and on February 24, 2025, the Company began trading as an independent, publicly traded company under the stock symbol “SNDK” on Nasdaq.
Previous wording
On June 9, 2025, WDC disposed of 21,314,768, or 14.6%, of our common stock through an exchange of our common stock for WDC debt held by WDC creditors which shares were sold by affiliates of the WDC creditors in a registered public offering by the Company. All expenses for the offering were paid for by us. As of October 3, 2025, WDC continued to retain 7,513,019, or 5.1%, of the outstanding shares of the Company’s common stock.
Current wording
On June 9, 2025, WDC disposed of 21,314,768, or 14.6%, of our common stock through an exchange of our common stock for WDC debt held by WDC creditors, which shares were sold by affiliates of the WDC creditors in a registered public offering by the Company. All expenses for the offering were paid for by us. As of January 2, 2026, WDC retained 7,513,019, or 5.1%, of the outstanding shares of the Company’s common stock, which WDC is expected to divest within twelve months following the separation.
Previous wording
On September 25, 2025, SanDisk China and JCET entered into an Amendment No. 1 to the Amended and Restated Equity Purchase Agreement that included a $10 million provision for working capital support, resulting in a reduction of the September 28, 2025 installment payment from JCET. The Company recognized the adjustment as a Loss on business divestiture for the three months ended October 3, 2025 and the amendment reduced the September 28, 2025 installment to $27 million, as discussed in Part I, Item 1, Note 10, Related Parties and Related Commitments and Contingencies—Flash Ventures of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
Current wording
On September 25, 2025, SanDisk China and JCET entered into an Amendment No. 1 to the Amended and Restated Equity Purchase Agreement that included a $10 million provision for working capital support, resulting in a reduction of the September 28, 2025 installment payment from JCET. The Company recognized the adjustment as a Loss on business divestiture during the six months ended January 2, 2026 and the amendment reduced the September 28, 2025 installment to $27 million, as discussed in Part I, Item 1, Note 10, Related Parties and Related Commitments and Contingencies—Flash Ventures of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
Previous wording
Prior to the separation, the Company received financing from certain of WDC’s subsidiaries in the form of borrowings under revolving credit agreements and promissory notes to fund activities primarily related to Flash Ventures. Additional information regarding our outstanding notes due to (from) Western Digital Corporation is included in Part I, Item 1, Note 10, Related Parties and Related Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
Current wording
Prior to the separation, the Company received financing from certain of WDC’s subsidiaries in the form of borrowings under intercompany revolving credit agreements and promissory notes to fund activities primarily related to Flash Ventures. Additional information regarding our outstanding notes due to (from) Western Digital Corporation is included in Part I, Item 1, Note 10, Related Parties and Related Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
Previous wording
As discussed in Part I, Item 1, Note 8, Debtof the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, on February 21, 2025, the Company entered into a loan agreement comprised of a seven-year Term Loan B facility in an aggregate principal amount of$2.0 billion (the “Term Loan Facility”) and a five-year revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of$1.5 billion with$150 million for letters of credit.
Current wording
As discussed in Part I, Item 1, Note 8, Debtof the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, on February 21, 2025, the Company entered into a loan agreement comprised of a seven-year Term Loan B facility in an aggregate principal amount of$2.0 billion (the “Term Loan Facility”) and a five-year revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of$1.5 billion, including up to $150 million for letters of credit.
Previous wording
In the first quarter, we generally saw demand for our NAND continue to outpace supply, leading to improved revenues when compared to prior periods. We expect this balance of supply and demand to persist through calendar year 2026 and beyond. The rapid growth of AI infrastructure is driving demand for high-performance storage products, and AI adoption is driving the need for NAND storage to support these workloads.
Current wording
In the second quarter, we generally saw demand for our NAND continue to outpace supply, leading to improved revenues when compared to prior periods. We expect this imbalance of supply and demand to persist through calendar year 2026 and beyond. The rapid growth of AI infrastructure is driving demand for high-performance storage products, and AI adoption is driving the need for NAND storage to support these workloads.
Previous wording
On February 21, 2025, the Company became a standalone publicly traded company, and its financial statements are now presented on a consolidated basis. Prior to the separation, the Company’s historical combined financial statements were derived from WDC’s consolidated financial statements and accounting records and prepared as if the Company existed on a standalone basis. The financial statements for all periods presented, including the historical results of the Company prior to February 21, 2025, are now referred to as “Consolidated Financial Statements” and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and the policies and practices that are generally accepted in the industry in which it operates, in consistency with prior statements.
Current wording
On February 21, 2025, the Company became a standalone publicly traded company, and its financial statements are now presented on a consolidated basis. Prior to the separation, the Company’s historical consolidated financial information was derived from WDC’s consolidated financial statements and accounting records and prepared as if the Company existed on a standalone basis. The financial statements for all periods presented, including the historical results of the Company prior to February 21, 2025, are now referred to as “Consolidated Financial Statements” and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and the policies and practices that are generally accepted in the industry in which it operates, consistent with prior statements.
Previous wording
Net revenue increased 23% in the three months ended October 3, 2025 from the comparable period in the prior year, primarily due to a 31% increase in exabytes sold due to stronger demand in our data storage products, partially offset by a 9% decrease in average selling prices (“ASP”) per gigabyte.
Current wording
Net revenue increased 61% in the three months ended January 2, 2026 from the comparable period in the prior year, primarily due to a 36% increase in average selling prices (“ASP”) per gigabyte and a 22% increase in exabytes sold due to stronger demand in our data storage products.
Previous wording
Datacenter revenue decreased 10%in thethree months ended October 3, 2025 from the comparable period in the prior year, primarily due to an 11% decrease in ASP per gigabyte, partially offset by a 1% increase inexabytes sold.
Current wording
Datacenter revenue increased 76%in thethree months ended January 2, 2026 from the comparable period in the prior year, primarily due to a 90% increase inexabytes sold, partially offset by an 8% decrease in ASP per gigabyte.
Previous wording
The changes in net revenue by geography in thethree months ended October 3, 2025 from the comparable period in the prior year primarily reflected higher revenue in the Asia region from Edge customers, partially offset by lower revenue in the Americas, Europe, Middle East and Africa.
Current wording
The changes in net revenue by geography in thethree and six months ended January 2, 2026 from the comparable period in the prior year primarily reflected higher revenue in the Asia region from Edge customers, partially offset by lower revenue in Europe, Middle East and Africa from Datacenter customers.
Previous wording
Consistent with standard industry practice, we offer 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 the three months ended October 3, 2025 and September 27, 2024, these programs represented 16% and 16%, 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. Changes in future customer demand and market conditions may require us to adjust our incentive programs as a percentage of gross revenue.
Current wording
Consistent with standard industry practice, we offer 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 the three months ended January 2, 2026 and December 27, 2024, these programs represented 14% and 22%, respectively, of gross revenues. For thesix months ended January 2, 2026 and December 27, 2024, these programs represented 14% and 19%, 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. Changes in future customer demand and market conditions may require us to adjust our incentive programs as a percentage of gross revenue.
Previous wording
Research and development (“R&D”) expenses increased $33 million in the three months ended October 3, 2025 from the comparable period in the prior year, primarily due to a$16 million increase in compensation and benefits due to variable compensation associated with company performance, and an additional week within the fiscal quarter, a$6 million increase in datacenter program material purchases and a $4 million increase in spending for R&D projects as we continue to invest in innovation.
Current wording
R&D expenses increased $81 million in the six months ended January 2, 2026 from the comparable period in the prior year, primarily due to a$46 million increase in compensation and benefits due to variable compensation associated with company performance and increased headcount, a$10 million increase instock-based compensation, a$9 million increase in spending for R&D projects as we continue to invest in innovation and a $4 million increase in datacenter program material purchases.
Previous wording
Employee termination and other charges decreased $5 million in the three months ended October 3, 2025 from the comparable period in the prior year, as there were no restructuring actions taken in the current period.
Current wording
Employee termination and other charges decreased $2 million in the three months ended January 2, 2026 from the comparable period in the prior year, as there were no restructuring actions taken in the current period.
Previous wording
Loss on business divestiture increased $10 million in the three months ended October 3, 2025 from the comparable period in the prior year due to an amendment to the Amended and Restated Equity Purchase Agreement with JCET, related to our prior sale of SDSS, for which there was no comparable transaction in the prior period. On September 25, 2025, SanDisk China and JCET entered into an Amendment No. 1 to the Amended and Restated Equity Purchase Agreement that included a $10 million provision for working capital support, resulting in a reduction of the September 28, 2025 installment payment from JCET. The Company recognized the adjustment as a Loss on business divestiture for the three months ended October 3, 2025, as discussed in Part I, Item 1, Note 10, Related Parties and Related Commitments and Contingencies—Flash Venturesof the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
Current wording
(Gain) loss on business divestiture decreased $44 million in the six months ended January 2, 2026 from the comparable period in the prior year as a result of the closing of the sale of SDSS on September 28, 2024 and an amendment to the Amended and Restated Equity Purchase Agreement with JCET, related to our prior sale of SDSS, in the current period that resulted in a loss. On September 25, 2025, SanDisk China and JCET entered into an Amendment No. 1 to the Amended and Restated Equity Purchase Agreement that included a $10 million provision for working capital support, resulting in a reduction of the September 28, 2025 installment payment from JCET. The Company recognized the adjustment as a Loss on business divestiture for the six months ended January 2, 2026, as discussed in Part I, Item 1, Note 10, Related Parties and Related Commitments and Contingencies—Flash Venturesof the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
Previous wording
Interest and other expense, net increased $28 million in the three months ended October 3, 2025 from the comparable period in the prior year, primarily due to a $37 million increase in interest expense from our Term Loan Facility, partially offset by a $13 million increase in interest income related to cash and investment accounts.
Current wording
Interest and other expense, net increased $106 million in the three months ended January 2, 2026 from the comparable period in the prior year, primarily due to the settlement of certain non-operating legal matters, an increase in interest expense from our Term Loan Facility, and the impairment of an investment, partially offset by an increase in interest income related to cash and investment accounts and a gain on sale of investment.
Previous wording
H.R.1, more widely known as the One Big Beautiful Bill Act (“OBBBA”), was signed into law on July 4, 2025. It reversed the requirement for capitalization of U.S. research and development expenditures that came into law under the Tax Cuts and Jobs Act of 2017, but the mandatory requirement of capitalization of foreign research and development expenditures remains. The tax rates for income earned by our foreign subsidiaries will also be changed under H.R. 1, which applies to our fiscal years 2027 and onwards. Depending on our operating results, these changes can materially impact our effective tax rate and operating cash flows. During thethree months ended October 3, 2025, we recorded a $10 million tax benefit in relation to the OBBBA’s impact on the Company’s 2025 tax provision.
Current wording
H.R.1, more widely known as the One Big Beautiful Bill Act (“OBBBA”), was signed into law on July 4, 2025. It reversed the requirement for capitalization of U.S. research and development expenditures that came into law under the Tax Cuts and Jobs Act of 2017, but the mandatory requirement of capitalization of foreign research and development expenditures remains. The tax rates for income earned by our foreign subsidiaries will also be changed under H.R. 1, which applies to our fiscal years 2027 and onwards. Depending on our operating results, these changes can materially impact our effective tax rate and operating cash flows. During the three and six months ended January 2, 2026, we recorded a $10 million tax benefit in relation to the OBBBA’s impact on the Company’s 2025 tax provision.
Previous wording
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 (“Pillar Two”). 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, some of which are effective for us in fiscal 2025. For the first fiscal quarter of 2026, we expect to be able to meet certain transitional safe harbors and do not expect any material Pillar Two taxes. There may be material increases in our future tax obligations if our operating results change.
Current wording
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 (“Pillar Two”). Pillar Two is currently effective in most of the jurisdictions in which we operate. Accordingly, these taxes are included in the Company’s Income tax expense for the three and six months ended January 2, 2026.
Previous wording
The relative mix of earnings and losses by jurisdiction, the deduction for foreign-derived intangible income, credits and tax holidays in Malaysia that will expire at various dates during years 2028 through 2031 resulted in decreases to the effective tax rate below the U.S. statutory rate for the three months ended October 3, 2025.
Current wording
The relative mix of earnings and losses by jurisdiction credits and tax holidays in Malaysia that will expire at various dates during years 2028 through 2031 resulted in decreases to the effective tax rate below the U.S. statutory rate for the three and six months ended January 2, 2026.
Previous wording
A total of $626 million and $692 million of our cash and cash equivalents were held outside of the U.S. as of October 3, 2025 and June 27, 2025, respectively. There are no material tax consequences that were not previously accrued for the repatriation of this cash. Our cash equivalents are primarily invested in money market funds that invest in U.S. Treasury securities and U.S. Government agency securities.
Current wording
A total of $476 million and $692 million of our cash and cash equivalents were held outside of the U.S. as of January 2, 2026 and June 27, 2025, respectively. There are no material tax consequences that were not previously accrued for the repatriation of this cash. Our cash equivalents are primarily invested in money market funds that invest in U.S. Treasury securities and U.S. Government agency securities.
Previous wording
Net cash provided by (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. Net cash provided as a result of changes in operating assets and liabilities was $250 million in the three months ended October 3, 2025, as compared to $344 million net cash used in the three months ended September 27, 2024, reflecting an increase in the volume of our business, as discussed above.
Current wording
Net cash provided by operating activities primarily consists of net income or loss, adjusted for non-cash charges, plus or minus changes in operating assets and liabilities. Net cash provided as a result of changes in operating assets and liabilities was $313 million in the six months ended January 2, 2026, as compared to $487 million net cash used in the six months ended December 27, 2024, reflecting an increase in the volume of our business, as discussed above.
Previous wording
For the three months ended October 3, 2025 and September 27, 2024, DSO remained consistent primarily due to the timing of receivables collections during these periods. During the three months ended October 3, 2025, DIO decreased 48 days over the three months ended September 27, 2024, primarily due to an increase in petabytes shipped. DPO increased 2 days over the comparable period in the prior year, primarily due to routine variations in the timing of purchases and payments during the period.
Current wording
For the three months ended January 2, 2026, DSO decreased 7 days primarily due to higher revenue during the period and continued strong receivables collections. During the three months ended January 2, 2026, DIO decreased 35 days over the three months ended December 27, 2024, primarily due to an increase in petabytes shipped. DPO increased 4 days over the comparable period in the prior year, primarily due to routine variations in the timing of purchases and payments during the period.
Previous wording
Net cash used in investing activities in the three months ended October 3, 2025 primarily consisted of $50 million in capital expenditures, partially offset by $25 million in net proceeds from our sale of a majority interest in one of our subsidiaries and $10 million in net proceeds from activity related to Flash Ventures. Net cash used in investing activities in the three months ended September 27, 2024 primarily consisted of $67 million in capital expenditures, partially offset by $48 million in net proceeds from activity related to Flash Ventures.
Current wording
Net cash used in investing activities in the six months ended January 2, 2026 primarily consisted of $89 million in capital expenditures, partially offset by $25 million in net proceeds from our sale of a majority interest in one of our subsidiaries, coupled with $127 million in net issuances from activity related to Flash Ventures. Net cash used in investing activities in the six months ended December 27, 2024 primarily consisted of $191 million in net proceeds from our sale of a majority interest in one of our subsidiaries and $92 million in net proceeds from activity related to Flash Ventures, partially offset by $115 million in capital expenditures.
Previous wording
Net cash used in financing activities in the three months ended October 3, 2025 primarily consisted of Term Loan Facility repayments totaling $500 million and $15 million of taxes paid on vested stock awards. Net cash provided by financing activities in the three months ended September 27, 2024 primarily consisted of $189 million net transfers from WDC and $101 million in origination of notes due from WDC, partially offset by $76 million in net repayments on notes due to WDC.
Current wording
Net cash used in financing activities in the six months ended January 2, 2026 primarily consisted of Term Loan Facility repayments totaling $1,250 million and $47 million of taxes paid on vested stock awards. Net cash provided by financing activities in the six months ended December 27, 2024 primarily consisted of primarily consisted of $550 million in proceeds from borrowings on notes due to WDC and $101 million in proceeds from repayments on notes due from WDC, partially offset by $231 million transferred from WDC and $76 million in net repayments on notes due to WDC.
Previous wording
In connection with the separation, on February 21, 2025, the Company entered into a loan agreement comprised of a $1.5 billion revolving credit facility, which was undrawn at the separation date, and a $2 billion term loan facility due in 2032. The Company used a portion of the proceeds received from the term loan facility, as well as cash on hand, to make a net distribution payment of $1.5 billion to WDC in exchange for assets, liabilities and certain legal entities of WDC associated with the Company.
Current wording
In connection with the separation, on February 21, 2025, the Company entered into a loan agreement comprised of a $1.5 billion revolving credit facility, which was undrawn at the separation date, and a $2.0 billion term loan facility due in 2032. The Company used a portion of the proceeds received from the term loan facility, as well as cash on hand, to make a net distribution payment of $1.5 billion to WDC in exchange for assets, liabilities and certain legal entities of WDC associated with the Company.
Previous wording
As of October 3, 2025, the Company wasin compliance with the loan agreement financial covenant that requires the Company tomaintain a maximum Leverage Ratio. Additional information regarding our indebtedness, including information about availability under our revolving credit facility and the principal repayment terms, interest rates, covenants, collateral and other key terms of our outstanding indebtedness, is included in Part I, Item INote 8, Debt of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
Current wording
As of January 2, 2026, the Company wasin compliance with the loan agreement financial covenant that prohibits the Company from exceeding a maximum Leverage Ratio. Additional information regarding our indebtedness, including information about availability under our revolving credit facility and the principal repayment terms, interest rates, covenants, collateral and other key terms of our outstanding indebtedness, is included in Part I, Item INote 8, Debt of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
Previous wording
Flash Ventures sells to, and leases back from, a consortium of financial institutions a portion of its tools and has entered into equipment lease agreements, of which we guarantee half or all of the outstanding obligations under each lease agreement. The leases are subject to customary covenants and cancellation events that relate to Flash Ventures and each of the guarantors. The occurrence of a cancellation event could result in an acceleration of the lease obligations and a call on our guarantees. As of October 3, 2025, we were in compliance with all covenants under these Japanese lease facilities. See Part I, Item 1, Note 10, Related Parties and Related Commitments and Contingencies of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for information regarding Flash Ventures.
Current wording
Flash Ventures sells to, and leases back from, a consortium of financial institutions a portion of its tools and has entered into equipment lease agreements, of which we guarantee half of all of the outstanding obligations under each lease agreement. The leases are subject to customary covenants and cancellation events that relate to Flash Ventures and each of the guarantors. The occurrence of a cancellation event could result in an acceleration of the lease obligations and a call on our guarantees. As of January 2, 2026, we were in compliance with all covenants under these Japanese lease facilities. See Part I, Item 1, Note 10, Related Parties and Related Commitments and Contingencies of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for information regarding Flash Ventures.
Previous wording
As of October 3, 2025, our liability for unrecognized tax benefits (excluding accrued interest and penalties) was approximately $137 million. Accrued interest and penalties included in the Company’s liability related to unrecognized tax benefits as of October 3, 2025 and June 27, 2025 was $13 million and $11 million, respectively. Of these amounts, approximately $138 million could result in potential cash payments.
Current wording
As of January 2, 2026, our liability for unrecognized tax benefits (excluding accrued interest and penalties) was approximately $196 million. Accrued interest and penalties included in the Company’s liability related to unrecognized tax benefits as of January 2, 2026 and June 27, 2025 was $14 million and $11 million, respectively. Of these amounts, approximately $195 million could result in potential cash payments.
Previous wording
Concurrent with the separation, the Company and WDC entered into a Tax Matters Agreement under which the Company and WDC agreed to indemnify each other for certain tax positions. As a result of this agreement, the Company recorded a tax indemnification liability of $112 million on February 21, 2025, which was recognized as an adjustment to the Net investment from Western Digital Corporation. The remaining tax indemnification liability of $125 million is classified as Other liabilities in the Condensed Consolidated Balance Sheets as of October 3, 2025.
Current wording
Concurrent with the separation, the Company and WDC entered into a Tax Matters Agreement under which the Company and WDC agreed to indemnify each other for certain tax positions. As a result of this agreement, the Company recorded a tax indemnification liability of $112 million on February 21, 2025, which was recognized as an adjustment to the Net investment from Western Digital Corporation. The remaining tax indemnification liability of $128 million is classified as Other liabilities in the Condensed Consolidated Balance Sheets as of January 2, 2026.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Net revenue increased 42% in the six months ended January 2, 2026 from the comparable period in the prior year, primarily due to a 26% increase in exabytes sold due to stronger demand in our data storage products and a 13% increase in ASP per gigabyte.
Current report — wording carried from elsewhere
Employee termination and other charges decreased $7 million in the six months ended January 2, 2026 from the comparable period in the prior year, as there were no restructuring actions taken in the current period.