Q1 FY2027 results
| Metric | Result | Change |
|---|---|---|
| Revenue | $11 billion | up 23% sequentially and 378% year-over-year |
| Data center revenue | $4.8 billion | up 61% sequentially |
| Non-GAAP gross margin | 85.1% | up from 84.6% in the prior quarter |
| Non-GAAP EPS | $49.51 | up from $39.25 in the prior quarter |
| Adjusted free cash flow | $5.7 billion | Not stated |
Guidance and outlook
- For the second quarter of fiscal year 2027, we expect revenue between $12.2 billion and $12.6 billion.
- We expect non-GAAP gross margin between 84.5% and 85.5%.
- On a pre-split basis, we expect non-GAAP EPS between $55 and $57.
- On an 8-for-1 split-adjusted basis, this equates to non-GAAP EPS between $6.88 and $7.13.
How management sounded
Positive (+7 on our -10 to +10 scale). Management highlighted strong execution, revenue above guidance, and a robust pipeline of long-term partnerships driven by AI demand. Management sounded more upbeat than on 48% of the 190 calls we cover; most companies sound positive on their own calls, so the comparison says more than the label.
Q&A summary
NBM Pipeline
Asked: Ben Reitzes from Melius asked if there will be more NBMs given capacity constraints and if bits under contract have changed.
Answer: Management stated the pipeline is very strong and growing, and they expect the percentage of the portfolio committed to NBMs to increase over the next several quarters.
Data Center Growth
Asked: Joe Moore from Morgan Stanley asked what is driving the 20x year-on-year growth in data center and if the company can match market bit mix.
Answer: Management attributed growth to the BiCS 8 node, the right product mix, and refined AI inference architectures, noting they are working to align their portfolio mix with market bit demand.
Pricing and Volume
Asked: Mark Newman from Bernstein asked about the split between price and volume in guidance.
Answer: Management noted that both volume and pricing contributed to growth in Q1 and expects modest pricing increases to continue throughout the year.
HBF Technology
Asked: Mark Newman from Bernstein asked about the progress and role of HBF technology.
Answer: Management stated that conversations with customers are robust and they are focused on putting product samples in customer hands to understand integration and use cases.
Capital Allocation
Asked: Amit Daryanani from Evercore asked if the company would consider leverage given the less cyclical business model.
Answer: Management reaffirmed the strategy to remain debt-free, invest in internal innovation, and return 100% of excess cash to shareholders.
What to watch before the next call
- The progress of the 8-for-1 stock split distribution on November 19 and trading on November 20.
- The ramp of QLC products and the potential adoption of SLC NAND for AI inference workloads.
- The ongoing negotiation and signing of new NBM agreements as the company balances customer demand.
