Financial Analysis

Debt Debt consisted of the following: January 2, 2026 June 27, 2025 (in millions) 4.75% senior unsecured notes due 2026 $ 500 $ 500 Variable interest rate Term Loan A-3 maturing 2027 1,586 1,649 3.00% convertible notes due 2028 1,600 1,600 2.85% senior notes due 2029 500 500 3.10% senior notes due 2032 500 500 Total debt 4,686 4,749 Issuance costs (31) (38) Subtotal 4,655 4,711 Less: current portion of long-term debt (2,226) (2,226) Long-term debt $ 2,429 $ 2,485 During the three and six months ended January 2, 2026, the Company made scheduled repayments of $32 million and $63 million, respectively, under Term Loan A-3. The Company intends to redeem or repay the outstanding $500 million aggregate principal amount of 4.75% senior unsecured notes due 2026 on or before the scheduled maturity date of February 15, 2026. The Term Loan A-3 bears interest, at the Companys option, at a base rate plus an applicable margin (as defined in the loan agreement governing the Term Loan A-3, which the Company refers to as the Loan Agreement). The all-in interest rate for Term Loan A-3 as of January 2, 2026 was 5.300%. As of January 2, 2026, the Company had no outstanding standby letters of credit and the available capacity under the revolving credit facility maturing in January 2027 was $1.25 billion as of that date. The Loan Agreement requires the Company to comply with a financial leverage ratio covenant. As of January 2, 2026, the Company was in compliance with the financial covenant. As of …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

The following table summarizes the Companys disaggregated revenue: Three Months Ended Six Months Ended January 2, 2026 December 27, 2024 January 2, 2026 December 27, 2024 (in millions) Revenue by end market Cloud $ 2,673 $ 2,096 $ 5,183 $ 4,005 Client 176 140 322 279 Consumer 168 173 330 337 Total revenue $ 3,017 $ 2,409 $ 5,835 $ 4,621 Revenue by geography (1) Americas $ 1,291 $ 1,039 $ 2,391 $ 2,286 Asia 1,117 910 2,292 1,596 Europe, Middle East and Africa 609 460 1,152 739 Total revenue $ 3,017 $ 2,409 $ 5,835 $ 4,621 (1) Net revenue is attributed to geographic regions based on the ship-to location of the customer. …

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Fair Value Measurements and Investments Financial Instruments Carried at Fair Value Financial assets and liabilities that are remeasured and reported at fair value at each reporting period are classified and disclosed in one of the following three levels: Level 1. Quoted prices in active markets for identical assets or liabilities. Level 2. Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3. Inputs that are unobservable for the asset or liability and that are significant to the fair value of the assets or liabilities. The following tables present information about the Companys financial instruments that were measured at fair value on a recurring basis for the periods presented and indicate the fair value hierarchy of the valuation techniques utilized to determine such values: January 2, 2026 Level 1 Level 2 Level 3 Total (in millions) Assets: Retained interest in Sandisk $ 2,068 $ $ $ 2,068 Cash equivalents - Money market funds 133 133 Foreign exchange contracts 13 13 Total assets at fair value $ 2,201 $ 13 $ $ 2,214 Liabilities: Foreign exchange contracts $ $ 7 $ $ 7 Total liabilities at fair value $ $ 7 $ $ 7 June 27, 2025 Level 1 Level 2 Level 3 Total (in millions) Assets: Retained interest in …

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Income Taxes Previously, the Tax Cuts and Jobs Act of 2017 (TCJA) eliminated the ability to deduct research and development (R&D) expenditures in the year incurred, requiring capitalization and amortization under Internal Revenue Code Section 174. On July 4, 2025, the One Big Beautiful Bill Act of 2025 (OBBBA) was signed into law, which includes broad tax reform provisions that extend and modify key elements of the TCJA. Notably, the new legislation now allows an option for the immediate expensing of domestic R&D expenditures, beginning with 2026. The legislation also includes favorable modifications to international tax provisions, including changes to the Global Intangible Low-Taxed Income regime and enhancements to the Foreign-Derived Deduction Eligible Income (FDDEI) deduction that will become effective for the Company in 2027. 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 $1.0 billion. Although CAMT became effective for the Company beginning with 2024, the Company was not subject to CAMT in 2024 and 2025. The Company does not expect to be subject to CAMT in 2026 as its average annual AFSI did not exceed $1.0 billion for the preceding three-year period. On December 20, 2021, the Organization for Economic Co-operation and Development G20 (OECD/G20) In …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

Legal Proceedings Intellectual Property Litigation On September 28, 2016, SPEX Technologies, Inc. (SPEX) filed a lawsuit in the Central District Court against the Company and two of the Companys current or former wholly-owned subsidiaries, Western Digital Technologies, Inc. and HGST Inc., alleging infringement of U.S. Patent Nos. 6,088,802 and 6,003,135, both of which allegedly relate to moving a security mechanism (e.g., the encrypting/decrypting mechanism) from a host computer or a separate device to a peripheral device that provides data storage. As the case progressed, SPEX dismissed its allegations relating to U.S. Patent No. 6,003,135 and narrowed its case to one claim related to U.S. Patent No. 6,088,802 and asserted this against certain HDD products that may include certain encryption capabilities. The trial commenced on October 8, 2024, and concluded on October 18, 2024, and the jury awarded SPEX damages of $316 million for the use of one claim related to U.S. Patent No. 6,088,802 in the past, prior to its expiration in 2017. On January 8, 2025, the Court entered judgment for SPEX in accordance with the verdict and also awarded SPEX prejudgment interest of $237 million and legal costs. On June 16, 2025, the Court ruled on the Companys post-trial motions, finding that SPEX did not present sufficient evidence on which a damages award could be determined and therefore awarded nominal damages of $1. On June 27, 2025, the Court entered an amended judgment awarding SPEX no …

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Leases and Other Commitments Leases The Company leases certain domestic and international facilities and data center space under long-term, non-cancelable operating leases that expire at various dates through 2034. These leases include no material variable or contingent lease payments. Operating lease assets and liabilities are recognized based on the present value of the remaining lease payments discounted using the Companys incremental borrowing rate. Operating lease assets also include prepaid lease payments minus any lease incentives. Extension or termination options present in the Companys lease agreements are included in determining the right-of-use asset and lease liability when it is reasonably certain the Company will exercise those options. Lease expense is recognized on a straight-line basis over the lease term. The following table presents right-of-use lease assets and lease liabilities included in the Companys Condensed Consolidated Balance Sheets: January 2, 2026 June 27, 2025 (in millions) Operating lease right-of-use assets (included in Other non-current assets ) $ 132 $ 123 Operating lease liabilities: Current portion of long-term operating lease liabilities (included in Accrued expenses ) 33 31 Long-term operating lease liabilities (included in Other liabilities ) 115 110 Total operating lease liabilities $ 148 $ 141 The following table summarizes supplemental disclosures of operating cost and cash flow information related to operating leases: Three Months E …

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Recently Issued Accounting Pronouncements Not Yet Adopted In December 2025, the Financial Accounting Standards Board (FASB) issued accounting standards update (ASU) No. 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities (ASU 2025-10), which establishes guidance on the recognition, measurement, and presentation of government grants. The standard may be adopted using a full retrospective, modified retrospective, or modified prospective transition method. ASU 2025-10 is effective for the year beginning June 30, 2029, and interim periods within that year, with early adoption permitted. The Company is currently assessing the impact of this guidance on its condensed consolidated financial statements and related disclosures. In November 2025, the FASB issued ASU No. 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements (ASU 2025-09), which introduces targeted improvements to better align hedge accounting with entities risk management activities. ASU 2025-09 is effective for the year beginning July 3, 2027, and interim periods within that year, with early adoption permitted. The Company is currently assessing the impact of this guidance on its condensed consolidated financial statements and related disclosures. In September 2025, the FASB issued ASU No. 2025-07, Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606): Derivatives Scope Refinements and Scope Clarification for Sh …

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Pension and Other Post-Retirement Benefit Plans The Company has pension and other post-retirement benefit plans in various countries. The Companys principal pension plans are in Japan, Thailand, and the Philippines. All pension and other post-retirement benefit plans outside of the Companys Japan, Thailand, and the Philippines defined benefit pension plans (the Pension Plans) are immaterial to the Condensed Consolidated Financial Statements. The expected long-term rate of return on the Pension Plans assets is 2.5%. Obligations and Funded Status The following table presents the unfunded status of the benefit obligations for the Pension Plans: January 2, 2026 June 27, 2025 (in millions) Benefit obligation at end of period $ 257 $ 272 Less: Fair value of plan assets at end of period 179 204 Unfunded status $ 78 $ 68 The following table presents the unfunded amounts related to the Pension Plans as recognized on the Companys Condensed Consolidated Balance Sheets: January 2, 2026 June 27, 2025 (in millions) Current liabilities (included in Accrued expenses) $ 1 $ 1 Non-current liabilities (included in Other liabilities) 77 67 Net amount recognized $ 78 $ 68 Net periodic benefit costs were immaterial for the three and six months ended January 2, 2026 and December 27, 2024. …

PensionAndOtherPostretirementBenefitsDisclosureTextBlock · excerpt; the full note is in the filing