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As a result, our business depends significantly on global and regional conditions.
−Removed: 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.
+Added: 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.
Our revenue growth is significantly dependent on the growth of international markets, and we may face challenges in international sales markets.
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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;
+Added: the effects of political and economic instability;
exchange, currency and tax controls and reallocations;
+Added: the ongoing development and applicability of global and local tax systems;
weaker protection of IP rights;
−Removed: 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;
−Removed: 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;
−Removed: and difficulties in managing international operations, including appropriate internal controls.
+Added: 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;
+Added: 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;
+Added: difficulties in managing international operations, including appropriate internal controls;
+Added: and fluctuations in financial markets and interruptions to supply chains from public health crises.
+Added: Changes in U.S.
+Added: trade policy and the impact of tariffs and retaliatory actions may have a material adverse effect on our business and results of operations.
+Added: Our business, financial condition and results of operations may be adversely affected by uncertainty and changes in U.S.
+Added: trade policies, including tariffs, trade agreements or other trade restrictions imposed by the United States or other governments.
+Added: For example, the United States has announced changes to its trade policies, including increasing tariffs on imports, in some cases significantly.
+Added: These actions have caused substantial uncertainty and have also resulted in retaliatory measures on U.S.
+Added: goods and exports to the United States.
+Added: Any imposition of or increase in tariffs may increase the cost of importing our products or the costs for materials or components used in our products, which would increase our costs unless we are able to implement actions to offset these costs, such as leveraging tariff exemptions where possible, optimizing our supply chain, sourcing from alternative suppliers, or passing the costs to our customers through tariff surcharges or increased prices.
+Added: There can be no assurance that we will be able to successfully offset or mitigate any resulting increase in our costs.
+Added: If we are unable to pass on any cost increases or if supply and demand conditions will not support price increases for our products, our revenue and gross margin would be negatively impacted.
+Added: In addition, retaliatory actions by other countries in response to U.S.
+Added: trade policy could increase prices for our products, negatively affect demand for our products or restrict our ability to manufacture our products.
+Added: Tariffs or other trade restrictions may also lead to increased costs for our customers, declining consumer confidence, significant inflation and diminished expectations for the economy, as well as ultimately reduced demand for our products.
+Added: Such conditions could have a material adverse impact on our business, results of operations and cash flows.
+Added: In addition, tariff actions by the United States and retaliatory actions by other countries have caused, and may in the future cause, significant disruption and volatility in the financial markets, which could adversely affect the availability, terms and cost of capital, including to refinance our existing debt, and which in turn could reduce our cash flows and harm our business.
+Added: Changes in tariffs and trade restrictions can be announced with little or no advance notice.
+Added: The adoption and expansion of tariffs or other trade restrictions, increasing trade tensions and retaliatory actions, or other changes in governmental policies related to tariffs, trade agreements or trade policies are difficult to predict, which makes risks difficult to anticipate and mitigate.
+Added: If we are unable to navigate further changes in U.S.
+Added: or international trade policy, it could have a material adverse impact on our business, financial condition and results of operations.
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.
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Delays, shortages or cost increases experienced by our suppliers in developing or sourcing materials and components for use in our products or incompatibility or quality issues relating to our products, could also harm our business.
−Removed: 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
+Added: 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.
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In addition, our supply base has experienced industry consolidation.
−Removed: Our suppliers may be acquired by our competitors, decide to exit the industry or redirect their investments and increase costs to us.
+Added: 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.
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The facilities of many of our customers, our suppliers and our customers’ suppliers are also concentrated in certain geographic locations throughout Asia and elsewhere.
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: 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.
+Added: Possible impacts include work and equipment stoppages and damage to or closure of our facilities, or those of our suppliers or
+Added: customers, for an indefinite period of time.
+Added: Climate change has in the past and is expected to continue to increase the incidence and severity of certain natural disasters, including wildfires, floods and other adverse weather events.
In addition, the geographic concentration of our manufacturing sites could exacerbate the negative impacts resulting from any of these problems.
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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.
−Removed: We depend upon Kioxia to obtain and maintain sufficient property, business interruption and other insurance for Flash Ventures.
−Removed: If Kioxia fails to do so, we could suffer significant unreimbursable losses, and such failure could also cause Flash Ventures to breach various financing covenants.
−Removed: Public health crises have had, and could in the future have, a negative effect on our business.
−Removed: Public health crises have in the past negatively impacted, and may in the future negatively impact, our workforce and operations, as well as those of our strategic partners, customers, suppliers and logistics providers.
−Removed: The impacts we experienced in connection with the COVID-19 pandemic included temporary closures of certain manufacturing facilities;
−Removed: under-absorbed overhead;
−Removed: increased logistics, component and other costs;
−Removed: decreased demand for our products;
−Removed: and manufacturing challenges.
−Removed: Future outbreaks of infectious disease or other public health crises may have similar impacts.
−Removed: The effects of public health crises are uncertain and difficult to predict, but may also include disruptions to our supply chain, our operations or those of our strategic partners, customers or suppliers;
−Removed: deterioration of worldwide credit markets, which may limit our ability or increase our cost to obtain external financing and result in a higher rate of losses on our accounts receivable;
−Removed: volatility in financial markets, which may be extreme and could harm our ability to access the financial markets on acceptable terms or at all;
−Removed: increased data security and technology risks related to increased remote work;
−Removed: and reduced productivity or other disruptions of our operations.
−Removed: The degree to which any future public health crises ultimately impact our business will depend on many factors beyond our control, which are highly uncertain and cannot be predicted at this time.
−Removed: The loss of our key management, staff and skilled employees;
−Removed: the inability to hire and develop new employees;
−Removed: or decisions to realign our business could negatively impact our business prospects.
+Added: 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.
Our success depends upon the continued contributions of our talent.
−Removed: 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.
+Added: 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.
Global competition for skilled employees in the technology industry is intense, and our business success is increasingly dependent on our ability to attract, develop and retain top talent, implement succession plans for key management and staff and replace aging skilled employees.
Changes in immigration policies may also impair our ability to recruit and hire technical and professional talent.
−Removed: Additionally, uncertainty about business realignment actions or the structure and organization of our business as a result of our ongoing separation of our HDD and Flash business units into two independent public companies could negatively impact our ability to recruit and retain key staff and skilled employees.
−Removed: We have and may continue to put retention arrangements in place for key employees to address the uncertainty about our business separation.
−Removed: When these retention payments are earned, we may suffer further attrition.
−Removed: 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.
+Added: 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.
Additionally, because a substantial portion of our key employees’ compensation is linked to the performance of our business, we may be at a competitive disadvantage for hiring and retaining talent when our operating results are negatively impacted.
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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.
−Removed: Geopolitical tensions or conflicts may create heightened risk of cybersecurity incidents.
+Added: Additionally, as AI capabilities continue to evolve and become more readily available, we may face increasingly sophisticated cyberattacks that leverage AI technologies.
+Added: These may include highly convincing phishing or social engineering attacks that use AI-generated deepfakes, the exploitation of vulnerabilities in electronic identity validation security programs via AI-replicated images or voices, or the inadvertent incorporation of malicious or hallucinated content generated by AI tools into our systems or those of our customers or partners.
+Added: Separately, the AI technologies that we employ for business purposes may be vulnerable to prompt-injection or other
+Added: adversarial attacks, which could result in unauthorized access to or leakage of sensitive information.
+Added: Geopolitical tensions or conflicts may also create heightened risk of cybersecurity incidents.
Our products are also targets for malicious cybersecurity acts, including those products utilized in cloud-based environments as well as our cloud service offerings.
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We may also experience disruptions or outages of our information systems due to internal or third-party mistakes or technical errors, including due to software updates, which could disrupt our business operations.
−Removed: 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
−Removed: with customers and other third parties and subject us to liability.
+Added: 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.
As a result of actual or perceived cybersecurity incidents or other information system disruptions, we have in the past experienced and may in the future experience additional costs, notification requirements, civil and administrative fines and penalties, indemnification claims, litigation or damage to our brand and reputation.
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BUSINESS AND STRATEGIC RISKS
−Removed: 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.
−Removed: On October 30, 2023, we announced that our Board of Directors had completed its review of potential strategic alternatives and had unanimously approved pursuing a plan to separate the Flash business unit from our remaining HDD business (the “Separation”).
−Removed: The Separation is intended to be structured in a tax-free manner and we continue to drive towards completing the work required to separate the businesses by the end of calendar year 2024.
−Removed: No assurance can be given as to whether the Separation will occur, when any such transaction will be approved or when any separation may be completed.
−Removed: Furthermore, while we are working toward the Separation, the specific assets, liabilities and entities to be separated are still being finalized and may change.
−Removed: We may determine to abandon any efforts with respect to the Separation at any time for any reason.
−Removed: The form or other terms of the Separation may change over time, including with respect to the scope of the businesses to be separated or retained by us.
−Removed: The final determination to separate is subject to Board approval, the execution of definitive documentation, receipt of opinions or rulings as to the tax-free nature of the Separation and satisfaction of customary conditions, including the effectiveness of appropriate filings with the SEC, the completion of audited financial statements and the availability of financing.
−Removed: Additionally, no assurance can be given that the intended tax treatment will be achieved or that shareholders will not incur substantial tax liabilities in connection with the Separation.
−Removed: The failure to satisfy any of these conditions could delay the completion of the Separation for a significant period of time or prevent it from occurring at all.
−Removed: Various factors, including changes in the competitive conditions of our markets, changes in financial markets and economic conditions, failure to obtain any third party consents that may be required for the Separation, delays in obtaining tax opinions or rulings, material or unanticipated tax liability for our shareholders, us, and/or the Flash business unit, and other challenges in executing the separation of the two businesses, could delay or prevent the completion of the Separation or cause it to occur on terms or conditions that are different or less favorable than expected.
−Removed: Further, our Board of Directors could decide, either because of a failure of conditions or because of market or other factors, to abandon the Separation.
−Removed: Our review of the Separation has and will continue to involve significant time, expense and resources and could disrupt or adversely affect our business.
−Removed: Executing the Separation has required and will continue to require significant time and attention from our senior management and employees and may divert their attention from operating and growing our business in ways that could adversely affect our business, financial condition and results of operations.
−Removed: Our employees may also be distracted due to uncertainty about their future roles with the separated companies, and customers or suppliers could delay or defer decisions or may end their relationships with us.
−Removed: In addition, we have incurred and will continue to incur expenses in connection with our strategic review and the consideration of the Separation and expect that the process of reviewing the Separation and executing the Separation, if any, will be time-consuming and involve significant additional costs and expenses, which may not yield a benefit if the Separation is not completed.
−Removed: If pursued, we will also incur ongoing costs and dis-synergies in connection with, or as a result of, the Separation and related restructuring transactions, including costs of operating as independent, publicly traded companies that the two businesses will no longer be able to share.
−Removed: 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.
−Removed: The Separation may not achieve the anticipated benefits and could expose us to new risks, including with respect to our existing indebtedness and future capital structure.
−Removed: We may not realize any strategic, financial, operational or other benefits from the Separation.
−Removed: We cannot predict with certainty if or when anticipated benefits will occur or the extent to which they will be achieved.
−Removed: If the Separation is completed, our operational and financial profile (including our capital structure) will change and we will face new risks.
−Removed: If the Separation is completed, we will be a smaller and less-diversified company and may be more vulnerable to changing market conditions.
−Removed: While we believe that the Separation will position each company to better unlock its full standalone long-term potential, we cannot assure you that following the Separation we will be successful.
−Removed: Further, there can be no assurance that the combined value of the shares of the two resulting companies will be equal to or greater than what the value of our common stock would have been had the Separation not occurred.
−Removed: In addition, following the completion of the Separation or any other disposition of our Flash business unit, we will not be able to rely on the earnings, assets or cash flow of the Flash business unit, and that business will not provide funds to finance our working capital or other cash requirements.
−Removed: As a result, our ability to service our debt may be adversely affected.
−Removed: We cannot predict the prices at which our common stock may trade after the Separation or the effect of the Separation on the trading prices of our common stock.
−Removed: The Separation will be subject to numerous conditions, including the availability of financing.
−Removed: We have not obtained any financing with respect to the Separation transaction, including any new financing for the remaining business and the terms of any such arrangements may be more burdensome or costly than the terms of our current indebtedness or we may not be able to obtain credit on attractive terms and price.
−Removed: Furthermore, the Separation may leave us with higher leverage and may also cause us to violate provisions of contracts or breach covenants in our existing indebtedness if such contracts or indebtedness are not replaced, repaid or refinanced or waivers are not obtained prior to the Separation.
−Removed: For example, our credit facilities contain specific restrictions on any disposal of our Flash business unit.
−Removed: In addition, we cannot assure you that a holder of our outstanding senior notes will not argue that the Separation constitutes a change of control and try to require us to repurchase its notes as a result of the Separation.
−Removed: We rely substantially on strategic relationships with various partners, including Kioxia, which subjects us to risks and uncertainties that could harm our business.
−Removed: 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.
−Removed: We depend on Flash Ventures for the
−Removed: development and manufacture of flash-based memory.
−Removed: 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.
−Removed: For example, while Flash Ventures is operating, certain of our agreements with Kioxia preclude us from manufacturing flash-based memory ourselves except to the extent that we acquire any manufacturing capacity of a Flash Ventures entity as a result of that entity’s dissolution, termination or acquisition by us.
−Removed: This could also impair our ability to consolidate with other industry participants who manufacture flash-based memory.
−Removed: Substantially all of our flash-based memory is obtained from Flash Ventures, which limits our ability to respond to market demand and supply changes and makes our financial results particularly susceptible to variations from our forecasts and expectations.
−Removed: For example, we are contractually obligated to pay for 50% of the fixed costs of Flash Ventures regardless of whether we order any flash-based memory, and our orders placed with Flash Ventures on a three-month rolling basis are binding.
−Removed: As a result, a failure to accurately forecast supply and demand could cause us to over-invest or under-invest in inventory, technology transitions or the expansion of Flash Ventures’ capacity.
−Removed: Over-investment by us or our competitors can result in excess supply and lead to significant decreases in our product prices, significant excess, obsolete inventory or inventory write-downs or underutilization charges, and the potential impairment of our investments in Flash Ventures.
−Removed: For example, for our Flash business, in 2024 and 2023, we incurred $252 million and $296 million of charges for unabsorbed manufacturing overhead costs as a result of the reduced utilization of our manufacturing capacity, respectively.
−Removed: Additionally, in 2024, we recorded $108 million of charges to write-down our inventory as a result of decreases in market pricing.
−Removed: These charges were attributable to a significant imbalance of supply and demand and our actions taken in response thereto.
−Removed: On the other hand, if we under-invest in Flash Ventures, or otherwise grow or transition Flash Ventures’ capacity too slowly, we may not have enough supply of flash-based memory, or the right type of flash-based memory, to meet demand on a timely and cost effective basis, and we may lose opportunities for revenue, gross margin and market share as a result.
−Removed: If our supply is limited, we might make strategic decisions with respect to the allocation of our supply among our products and customers, which could result in less favorable gross margins or damage customer relationships.
−Removed: 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.
−Removed: For example, each Flash Ventures entity operates for a defined period of time agreed upon between the joint venture partners.
−Removed: Although we and Kioxia have agreed to extend that period of time for each Flash Ventures entity since the start of Flash Ventures, there is a risk that we and Kioxia will be unable to agree on a further extension of one or more of the Flash Ventures entities in the future.
−Removed: Additionally, under the Flash Ventures agreements, we cannot unilaterally direct most of Flash Ventures’ activities, and we have limited ability to source or fabricate flash outside of Flash Ventures.
−Removed: Flash Ventures requires significant investments by both Kioxia and us for technology transitions and capacity expansions, and our business could be harmed if our technology roadmap and investment plans are not sufficiently aligned with Kioxia’s.
−Removed: Lack of alignment with Kioxia with respect to Flash Ventures could negatively impact our ability to react quickly to changes in the market, or to stay at the forefront of technological advancement.
−Removed: Misalignment could arise due to changes in Kioxia’s strategic priorities, management, ownership or access to capital, which have changed in recent years and could continue to change.
−Removed: Kioxia’s stakeholders may include, or have included in the past, competitors, customers, a private equity firm, government entities or public stockholders.
−Removed: Kioxia’s management changes, ownership and capital structure could lead to delays in decision-making, disputes or changes in strategic direction that could negatively impact the strategic partnership, and therefore us.
−Removed: There may exist conflicts of interest between Kioxia’s stakeholders and Flash Ventures or us with respect to, among other things, protecting and growing Flash Ventures’ business, IP and competitively sensitive confidential information.
−Removed: Together with Kioxia, we fund a portion of the investments required for Flash Ventures through lease financings.
−Removed: Continued availability of lease financings for Flash Ventures is not guaranteed and could be limited by several factors, including availability of tools qualified for leasing, investor capacity and risk allocation policies, our or Kioxia’s financial performance and changes to our or Kioxia’s business, ownership or corporate structure.
−Removed: To the extent that lease financings are not accessible on favorable terms or at all, more cash would be required to fund investments.
−Removed: Our strategic relationships are subject to additional risks that could harm our business, including, but not limited to, the following:
−Removed: failure by our strategic partners to comply with applicable laws or employ effective internal controls;
−Removed: difficulties and delays in product and technology development at, ramping production at, and transferring technology to, our strategic partners;
−Removed: 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;
−Removed: 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;
−Removed: a bankruptcy event involving a strategic partner, which could result in
−Removed: structural changes to or termination of the strategic partnership;
−Removed: and changes in tax or regulatory requirements, which may necessitate changes to the agreements governing our strategic partnerships.
−Removed: We participate in a highly competitive industry that is subject to declining average selling prices (“ASPs”), volatile demand, rapid technological change and industry consolidation, as well as lengthy product qualifications, all of which can negatively impact our business.
−Removed: 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.
−Removed: The demand for systems has been volatile in the past and often has had an exaggerated effect on the demand for our products in any given period.
−Removed: 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.
−Removed: 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.
−Removed: Further, our ASPs and gross margins tend to decline when there is a shift in the mix of product sales to lower priced products.
−Removed: We have faced declining gross margins in the past, and may face potential gross margin pressures in the future, resulting from our ASPs declining more rapidly than our cost of revenue.
−Removed: Rapid technological changes often reduce the volume and profitability of sales of existing products and increase the risk of inventory obsolescence and write-downs.
−Removed: Finally, the data storage industry has experienced consolidation over the past several years, which could enhance the resources and lower the cost structure of some competitors.
−Removed: These factors could result in a substantial decrease in our market share and harm our business.
−Removed: 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.
−Removed: We must also qualify our products with customers through potentially lengthy testing processes with uncertain results.
−Removed: 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.
−Removed: We expect that competition will continue to be intense, and our competitors may be able to gain a product offering or cost structure advantage over us, which would harm our business.
−Removed: Further, our competitors may utilize pricing strategies, including offering products at prices at or below cost, that we may be unable to competitively match.
−Removed: 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.
+Added: We are subject to risks related to the separation of Sandisk, our former Flash business, into an independent public company.
+Added: On February 21, 2025, we completed our planned spin-off of our Flash business unit from our remaining HDD business (which we refer to as the Separation), as a result of which Sandisk became an independent public company.
+Added: There can be no assurance that the anticipated benefits of the Separation will be realized, or that the costs or dis-synergies of the Separation (including costs of related restructuring transactions) will not exceed the anticipated amounts, in each case in the monetary or other amounts or within the timeframes that were anticipated.
+Added: The Separation has and may continue to impose challenges on us and our business, such as potential business disruption;
+Added: the diversion of management time on matters relating to the Separation;
+Added: the impact on our ability to retain talent;
+Added: and potential impacts on our relationships with our customers, suppliers, employees,
+Added: and other counterparties.
+Added: In addition, following the Separation, we are a smaller and less diversified company, which could make us more vulnerable to changing market conditions.
+Added: In connection with the Separation, we and Sandisk entered into various agreements to effect the Separation and provide for the temporary framework of the relationship between us and Sandisk following the Separation, including, among others, a separation and distribution agreement, a tax matters agreement, and a transition services agreement.
+Added: Performance under these agreements or other related conditions outside of our control could materially affect our operations and future financial results.
+Added: We retained an equity interest in Sandisk in connection with the Separation, of which we divested a portion in June 2025 in a debt-for-equity exchange.
+Added: As of June 27, 2025, we retain approximately 7 million shares of common stock in Sandisk.
+Added: We cannot predict the trading price of shares of Sandisk’s common stock and the market value of the Sandisk shares is subject to market volatility and other factors outside of our control.
+Added: We expect to monetize our remaining stake in Sandisk within one year from the Separation Date, but there can be no assurance regarding the timing of, or timeframe over which, such divestiture or divestitures may occur, or the amount of proceeds received by us in connection with any such divestitures.
+Added: In addition, while the Separation is intended to be tax-free to our stockholders for U.S.
+Added: federal income tax purposes, there is no assurance that the Separation will qualify for this treatment.
+Added: If the Separation is ultimately determined to be taxable, Western Digital, Sandisk, or our stockholders could incur income tax and/or other liabilities that could be significant.
+Added: 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.
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.
−Removed: 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.
+Added: 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.
+Added: Additionally, the impact of generative AI on the storage and data management markets and regulation thereof is still unfolding and could evolve unpredictably, and it is difficult to accurately forecast related demands.
In addition, the success of our technology transitions and product development depends on a number of other factors, including R&D expenses and results;
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Our success in new product areas may depend on our ability to enter into favorable supply agreements.
−Removed: 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
−Removed: 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.
+Added: 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.
Additionally, new technologies could impact demand for our products in unforeseen or unexpected ways and new products could substitute for our current products and make them obsolete, each of which would harm our business.
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.
−Removed: We experience sales seasonality and cyclicality, which could cause our operating results to fluctuate.
−Removed: In addition, accurately forecasting demand has become more difficult, which could harm our business.
−Removed: Sales of many of our products tend to be seasonal and subject to volatile and irregular supply-demand cycles.
−Removed: 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.
−Removed: Changes in the product or channel mix of our business can also impact seasonal and cyclical patterns.
−Removed: For example, we often ship a high percentage of our total quarterly sales in the third month of the quarter, which makes it difficult for us to forecast our financial results before the end of each quarter.
+Added: 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.
+Added: 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.
+Added: The demand for systems has been volatile in the past and often has had an exaggerated effect on the demand for our products in any given period.
+Added: 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.
+Added: We also experience competition from other companies that produce alternative storage technologies such as flash memory, particularly in our legacy markets where we participate with our lower capacity, smaller form factor HDDs.
+Added: Flash-based solutions also target our larger addressable market, i.e., Cloud.
+Added: 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.
+Added: While our ASPs tend to be relatively stable, we may experience periods during an industry downturn when we face adverse headwinds to our ASPs.
+Added: Additionally, our gross margin may face downward pressure if we are unable to migrate our product mix to the higher capacity needs of our customers and/or to reach the desired manufacturing yield in our production.
+Added: Our gross margin could also face pressure if we are unable to achieve the desired manufacturing yields when we ramp our new technologies.
+Added: Further, technological changes can reduce the volume and profitability of sales of existing products.
+Added: 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.
+Added: If we fail to respond to changes in demand in the distribution market, our business could suffer.
+Added: Additionally, if the distribution market weakens as a result of technology transitions or a significant change in consumer buying preference, or if we experience significant price declines due to demand changes in the distribution channel, our operating results would be negatively impacted.
+Added: 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.
+Added: 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.
+Added: We must also qualify our products with customers through potentially lengthy testing processes with uncertain results.
+Added: 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.
+Added: We expect that competition will continue to be intense, and our competitors may be able to gain a product offering or cost structure advantage over us, which would harm our business.
+Added: Further, our competitors may utilize pricing strategies, including offering products at prices at or below cost, that we may be unable to competitively match.
+Added: 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.
+Added: In addition, if we fail to effectively manage our government relationships in various jurisdictions in which we operate, we may experience missed opportunities (including incentives and investments), unfavorable policy outcomes or operational inefficiencies, any of which would put us at a competitive disadvantage.
+Added: Loss of revenue from the Cloud end market or a key customer, or consolidation among our customer base, could harm our operating results.
+Added: As a result of the Separation, there is increased revenue concentration in our Cloud end market and among our top customers.
+Added: For the year ended June 27, 2025, the Cloud end market accounted for 88% of our total revenue and our top 10 customers accounted for 68% of our net revenue, with three customers each accounting for 10% or more of the Company’s net revenue.
+Added: If we fail to respond to changes in demand in the Cloud and hyperscale data center markets, our business could suffer.
+Added: 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.
+Added: Our ability to maintain strong relationships with our principal customers is essential to our future performance.
+Added: We have experienced and may in the future experience events such as the loss of a key customer, prohibition or restriction of sales to a key customer by law, regulation or other government action, reductions in sales to or orders by a key customer, customer requirements to reduce our prices before we are able to reduce costs or the acquisition of a key customer by one of our competitors.
+Added: These events have impacted, and may in the future impact, our operating results and financial condition.
+Added: Further, government authorities may implement laws or regulations or take other actions that could result in significant changes to the business or operating models of our customers.
+Added: Such changes could negatively impact our operating results.
+Added: Additionally, if there is consolidation among our customer base, our customers may be able to command increased leverage in negotiating prices and other terms of sale, which could negatively impact our profitability.
+Added: Consolidation among our customer base may also lead to reduced demand for our products, increased customer pressure on our prices, replacement of our products by the combined entity with those of our competitors and cancellations of orders, each of which could harm our operating results.
+Added: Also, the storage ecosystem is constantly evolving, and our traditional customer base is changing.
+Added: Fewer companies now hold greater market share for certain applications and services, such as cloud storage and computing platforms, mobile, social media, shopping and streaming media.
+Added: As a result, the competitive landscape is changing, giving these companies increased leverage in negotiating prices and other terms of sale, which could negatively impact our profitability.
+Added: In addition, the changes in our evolving customer base create new selling and distribution patterns to which we must adapt.
+Added: To remain competitive, we must respond to these changes by ensuring we have proper scale in this evolving market, as well as offer products that meet the technological requirements of this customer base at competitive pricing points.
+Added: To the extent we are not successful in adequately responding to these changes, our operating results and financial condition could be harmed.
+Added: We experience variability in our sales and cyclicality in our industry, which could cause our operating results to fluctuate.
+Added: In addition, accurately forecasting demand is difficult, which could harm our business.
+Added: 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.
+Added: 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.
+Added: Changes in the linearity of our business within a quarter can also impact our business.
As a result of the above or other factors, our forecast of financial results for a given quarter may differ materially from our actual financial results.
The variety and volume of products we manufacture are based in part on accurately forecasting market and customer demand for our products, which are influenced by a wide variety of factors.
−Removed: 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.
−Removed: 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.
+Added: 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.
+Added: 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;
+Added: 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.
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.
−Removed: As forecasting demand becomes more difficult, the risk that our forecasts are not in line with demand increases.
−Removed: 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.
+Added: As forecasting demand remains difficult, the risk that our forecasts are not in line with demand persists.
+Added: 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.
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.
−Removed: Additionally, in 2024, we incurred $108 million of charges to write-down our inventory as a result of decreases in market pricing.
These charges were attributable to a significant imbalance of supply and demand and our actions taken in response thereto.
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Failure to successfully execute on strategic initiatives including acquisitions, divestitures or cost saving measures may negatively impact our future results.
−Removed: We have made and expect to continue to make acquisitions and divestitures, and engage in cost saving measures.
−Removed: 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.
+Added: We have made and expect to continue to make acquisitions and divestitures (such as the recent Separation) and engage in cost saving measures.
+Added: 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.
We may not be able to continue to identify or complete appealing acquisition or investment opportunities given the intense competition for these transactions.
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There have been and may continue to be difficulties with implementing new systems and processes or with integrating systems and processes of companies with complex operations, which may result in inconsistencies in standards, controls, procedures and policies and may increase our vulnerability to cybersecurity attacks or the risk that our internal controls are found to be ineffective.
−Removed: 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.
+Added: 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.
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.
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In addition, new legislation or additional regulations may affect or impair our ability to invest with or in certain other countries or require us to obtain regulatory approvals to do so, including investments in joint ventures, minority investments and outbound technology transfers to certain countries.
−Removed: Cost saving measures, restructurings and divestitures may result in workforce reduction and consolidation of our manufacturing or other facilities.
−Removed: 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.
+Added: 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.
+Added: 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.
These actions could also impact employee retention.
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and the possibility of conflict with joint venture or alliance partners regarding strategic direction, prioritization of objectives and goals, governance matters or operations.
−Removed: Loss of revenue from a key customer, or consolidation among our customer base, could harm our operating results.
−Removed: Historically, nearly one half of our total revenue came from sales to our top 10 customers.
−Removed: 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.
−Removed: Our ability to maintain strong relationships with our principal customers is essential to our future performance.
−Removed: We have experienced and may in the future experience events such as the loss of a key customer, prohibition or restriction of sales to a key customer by law, regulation or other government action, reductions in sales to or orders by a key customer, customer requirements to reduce our prices before we are able to reduce costs or the acquisition of a key customer by one of our competitors.
−Removed: These events have impacted, and may in the future impact, our operating results and financial condition.
−Removed: Further, government authorities may implement laws or regulations or take other actions that could result in significant changes to the business or operating models of our customers.
−Removed: Such changes could negatively impact our operating results.
−Removed: Additionally, if there is consolidation among our customer base, our customers may be able to command increased leverage in negotiating prices and other terms of sale, which could negatively impact our profitability.
−Removed: Consolidation among our customer base may also lead to reduced demand for our products, increased customer pressure on our prices, replacement of our products by the combined entity with those of our competitors and cancellations of orders, each of which could harm our operating results.
−Removed: Also, the storage ecosystem is constantly evolving, and our traditional customer base is changing.
−Removed: Fewer companies now hold greater market share for certain applications and services, such as cloud storage and computing platforms, mobile, social media, shopping and streaming media.
−Removed: As a result, the competitive landscape is changing, giving these companies increased leverage in negotiating prices and other terms of sale, which could negatively impact our profitability.
−Removed: In addition, the changes in our evolving customer base create new selling and distribution patterns to which we must adapt.
−Removed: To remain competitive, we must respond to these changes by ensuring we have proper scale in this evolving market, as well as offer products that meet the technological requirements of this customer base at competitive pricing points.
−Removed: To the extent we are not successful in adequately responding to these changes, our operating results and financial condition could be harmed.
−Removed: Sales in the distribution channel and to the retail market are important to our business, and if we fail to respond to demand changes within these markets, or maintain and grow our applicable market share, our business could suffer.
−Removed: Our distribution customers typically sell to small computer manufacturers, dealers, systems integrators and other resellers.
−Removed: 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.
−Removed: As a result of the shift to mobile devices, more computing devices are being delivered to the
−Removed: market as complete systems, which could weaken the distribution market.
−Removed: If we fail to respond to changes in demand in the distribution market, our business could suffer.
−Removed: Additionally, if the distribution market weakens as a result of technology transitions or a significant change in consumer buying preference, or if we experience significant price declines due to demand changes in the distribution channel, our operating results would be negatively impacted.
−Removed: 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.
−Removed: A significant portion of our sales is also made through retailers.
−Removed: Our success in the retail market depends in large part on our ability to maintain our brand image and corporate reputation and to expand into and gain market acceptance of our products in multiple retail market channels.
−Removed: Particularly in the retail market, negative publicity, whether or not justified, or allegations of product or service quality issues, even if false or unfounded, could damage our reputation and cause our customers to choose products offered by our competitors.
−Removed: Further, changes to the retail environment, such as store closures caused by macroeconomic conditions or changing customer preferences, may reduce the demand for our products.
−Removed: If customers no longer maintain a preference for our product brands or if our retailers are not successful in selling our products, our operating results may be negatively impacted.
+Added: Our strategic relationships subject us to risks and uncertainties that could harm our business.
+Added: 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.
+Added: Please see the risk factor entitled “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,” for a further description of the risks associated with our reliance on external suppliers.
+Added: 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.
+Added: 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.
+Added: Our strategic relationships are subject to additional risks that could harm our business, including, but not limited to, the following:
+Added: failure by our strategic partners to comply with applicable laws or employ effective internal controls;
+Added: difficulties and
+Added: delays in product and technology development at, ramping production at, and transferring technology to, our strategic partners;
+Added: 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;
+Added: 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;
+Added: a bankruptcy event involving a strategic partner, which could result in structural changes to or termination of the strategic partnership;
+Added: and changes in tax or regulatory requirements, which may necessitate changes to the agreements governing our strategic partnerships.
FINANCIAL RISKS
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requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes;
−Removed: 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;
−Removed: (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;
−Removed: (iii) enter into sale/leaseback transactions or certain transactions with affiliates;
−Removed: (iv) incur additional indebtedness;
−Removed: 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.
+Added: and imposing financial and other restrictive covenants on our operations.
Our ability to meet our debt service obligations, comply with our debt covenants and deleverage depends on our cash flows and financial performance, which are affected by financial, business, economic and other factors.
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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.
−Removed: 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.
−Removed: As such, these convertible notes were classified as current debt as of that date.
+Added: We also utilize convertible debt in our capital structure.
+Added: The $1.6 billion principal amount of our convertible notes will be convertible at the option of the holder beginning on August 15, 2028 and, prior to that date, may be convertible in any given calendar quarter depending on the trading price of our common stock during the prior calendar quarter.
+Added: During the calendar quarter ended June 30, 2025, the sale price conditional conversion feature of the convertible notes was triggered and, as a result, the holders of the convertible notes have the right to convert the notes during the next succeeding calendar quarter.
+Added: As such, these convertible notes were classified as current debt as of June 28, 2025.
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.
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There can be no assurance that we will achieve a particular rating or maintain a particular rating in the future.
−Removed: We also guarantee a significant amount of lease obligations of Flash Ventures owed to third parties.
−Removed: Flash Ventures sells to and leases back a portion of its equipment from a consortium of financial institutions.
−Removed: Most of the lease obligations are guaranteed 50% by us and 50% by Kioxia.
−Removed: Some of the lease obligations are guaranteed in full by us.
−Removed: The leases are subject to
−Removed: customary covenants and cancellation events that relate to Flash Ventures and each of the guarantors.
−Removed: If a cancellation event were to occur, Flash Ventures would be required to negotiate a resolution with the other parties to the lease transactions to avoid cancellation and acceleration of the lease obligations.
−Removed: Such resolution could include, among other things, supplementary security to be supplied by us, increased interest rates or waiver fees.
−Removed: If a resolution is not reached, we may be required to pay all of the outstanding lease obligations covered by our guarantees, which would significantly reduce our cash position and may force us to seek additional financing, which may not be available on terms acceptable to us, if at all.
−Removed: 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.
+Added: 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.
Tax matters may materially affect our financial position and results of operations.
Changes in tax laws in the United States, the European Union and around the globe have impacted and will continue to impact our effective worldwide tax rate, which may materially affect our financial position and results of operations.
−Removed: 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.
+Added: In the United States, the Tax Cuts and Jobs Act of 2017 (“TCJA”), the Inflation Reduction Act of 2022 (“IRA”), and the One Big Beautiful Bill Act of 2025 (“OBBBA”) each include broad tax reform provisions.
+Added: We are currently evaluating the impact of the OBBBA and related tax provisions on our operations and financial reporting, and future guidance provided by the U.S.
+Added: Department of the Treasury and Internal Revenue Service could change our conclusions regarding such impact.
+Added: The OBBBA and related guidance could materially impact our effective tax rate, deferred tax positions, and overall tax strategy.
+Added: 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%.
+Added: Several non-U.S.
+Added: jurisdictions have already enacted legislation or announced their intention to enact future legislation to adopt certain or all components of the Pillar Two Model rules.
+Added: Our tax obligations could increase materially as this legislation becomes effective in countries that have already adopted a two-pillar approach or if adoption expands to other jurisdictions in which we operate.
Due to the large scale of our U.S.
−Removed: 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.
−Removed: The Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenditures in the year incurred, requiring amortization in accordance with IRC Section 174.
−Removed: Depending on our operating results, this requirement could materially increase our effective tax rate and reduce our operating cash flows.
+Added: 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.
Additionally, portions of our operations are subject to a reduced tax rate or are free of tax under various tax holidays that expire in whole or in part from time to time, or may be terminated if certain conditions are not met.
−Removed: Although many of these holidays may be extended when certain conditions are met, we may not be able to meet such conditions.
+Added: Although many of these holidays may be extended when certain conditions are met, in the past we have not been able to, and in the future, 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.
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If we are unable to generate sufficient future taxable income or if there is a change to the time period within which the underlying temporary differences become taxable or deductible, we could be required to increase our valuation allowance against our deferred tax assets, which could result in a material increase in our effective tax rate.
−Removed: Our determination of our tax liability in the U.S.
−Removed: and other jurisdictions is subject to review by applicable domestic and foreign tax authorities.
−Removed: 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.
+Added: Our determination of our tax liability in the United States and other jurisdictions is subject to review by applicable domestic and foreign tax authorities.
+Added: 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.
Although we believe our tax positions are properly supported, the final timing and resolution of any tax examinations are subject to significant uncertainty and could result in litigation or the payment of significant amounts to the applicable tax authority in order to resolve examination of our tax positions, which could result in an increase of our current estimate of unrecognized tax benefits and may harm our business.
+Added: Any decisions to reduce or discontinue paying cash dividends to our stockholders or the repurchase of our shares of common stock pursuant to our previously announced share repurchase program could cause the market price for our common stock to decline.
+Added: Although our Board of Directors authorized the adoption of a quarterly cash dividend program and a share repurchase program during the fourth quarter of fiscal year 2025, we are under no obligation to pay cash dividends to our stockholders in the future or to repurchase shares of our common stock at any particular price or at all.
+Added: The declaration and payment of any future dividends and any future repurchase of our common stock is at the discretion of our Board of Directors.
+Added: Our payment of quarterly cash dividends and the repurchase of shares of our common stock pursuant to our share repurchase program are subject to, among other things, our financial position and results of operations, available cash and cash flow, capital and regulatory requirements, market and economic conditions, the market price of our common stock, and other factors.
+Added: Any reduction or discontinuance by us of the payment of quarterly cash dividends or the repurchase of shares of our common stock could cause the market price of our common stock to decline.
+Added: Moreover, in the event our payment of quarterly cash dividends or repurchases of shares of our common stock is reduced or discontinued, our failure or inability to resume such activities could result in a persistent lower market valuation for our common stock.
Fluctuations in currency exchange rates as a result of our international operations may negatively affect our operating results.
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dollar exhibits sustained weakness against most foreign currencies, the U.S.
−Removed: dollar equivalents of unhedged manufacturing costs could increase because a significant portion of our production costs are foreign-currency denominated.
+Added: dollar equivalents of unhedged manufacturing costs could increase because a 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.
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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.
−Removed: In addition, our purchases of flash-based memory from Flash Ventures and our investment in Flash Ventures are denominated in Japanese yen.
−Removed: If the Japanese yen appreciates against the U.S.
−Removed: dollar, our cost of purchasing flash-based memory wafers and the cost to us of future capital funding of Flash Ventures would increase.
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.
−Removed: dollar denominated, even when sold to customers that are located outside the U.S.
−Removed: Therefore, as a substantial portion of our sales are from countries outside the U.S., fluctuations in currency exchanges
−Removed: rates, most notably the strengthening of the U.S.
−Removed: dollar against other foreign currencies, contribute to variations in sales of products in impacted jurisdictions and could negatively impact demand and revenue growth.
−Removed: 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.
+Added: dollar denominated, even when sold to customers that are located outside the United States.
+Added: 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.
+Added: dollar against other foreign currencies, could increase the cost of our products in those countries and negatively impact demand and revenue growth.
+Added: 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.
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We are subject to laws, rules and regulations relating to the collection, use, sharing and security of data, including personal data, and our failure to comply with these laws, rules and regulations could subject us to proceedings by governmental entities or others and cause us to incur penalties, significant legal liability, or loss of customers, loss of revenue and reputational harm.
−Removed: 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.
+Added: 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.
In many cases, these requirements apply not only to third-party transactions, but also to transfers of information between our information systems and our subsidiaries, and among us, our subsidiaries and other parties with which we have commercial relations.
−Removed: 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.
+Added: 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.
Managing these notifications, especially in large volumes, can lead to significant expenses, even with cybersecurity insurance coverage.
−Removed: 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.
−Removed: We are subject to notice and privacy statement requirements, as well as obligations to respond to requests to know and access personal information, correct personal information, delete personal information and say no to the sale of personal information.
−Removed: 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.
+Added: 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.
+Added: We are subject to notice and privacy statement requirements, as well as obligations to respond to data subject requests.
+Added: 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 may also be subject to restrictions on cross-border data transfers and requirements for localized storage of data that could increase our compliance costs and risks and affect the ability of our global operations to coordinate activities and respond to customers and individuals.
+Added: Our use of AI technology may create new privacy and security risks, especially where personal data is involved.
+Added: The use of AI may raise ethical concerns, lead to flawed outcomes, or present other privacy and security risks that could make it more difficult to adopt or implement effectively.
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.
−Removed: 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.
−Removed: We are subject to, and may become subject to, additional, state, federal and international laws and regulations governing our environmental, labor, trade, health and safety practices and public-company reporting and disclosures requirements.
−Removed: These laws and regulations, particularly those applicable to our international operations, are or may be complex, extensive and subject to change.
−Removed: 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.
−Removed: 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.
−Removed: In addition, climate change and financial reform legislation is a significant topic of discussion and has generated and may continue to generate federal, international or other regulatory responses in the near future, which could substantially increase the complexity of our public-company reporting and disclosure requirements and our compliance and operating costs.
−Removed: If we or our suppliers, customers or partners fail to timely comply with applicable legislation, certain customers may refuse to purchase our products or we may face increased operating costs as a result of taxes, fines or penalties, or legal liability and reputational damage, which could harm our business.
−Removed: In connection with our compliance with environmental laws and regulations, as well as our compliance with industry and coalition environmental initiatives, such as those established by the RBA, the standards of business conduct required by some of our customers, and our commitment to sound corporate citizenship in all aspects of our business, we could incur substantial compliance and operating costs and be subject to disruptions to our operations and logistics.
−Removed: In addition, if we or our suppliers, customers or partners were found to be in violation of these laws or noncompliant with these initiatives or standards of conduct, we could be subject to governmental fines, liability to our customers and damage to our reputation and corporate brand, which could cause our financial condition and operating results to suffer.
−Removed: Our aspirations, disclosures and actions related to environmental, social and governance (“ESG”) matters expose us to risks that could adversely affect our reputation and performance.
−Removed: There is an increased focus from investors, customers, associates, business partners and other stakeholders concerning ESG matters, and we announce initiatives and goals related to ESG matters from time to time, including renewable energy and net zero emissions commitments.
−Removed: These statements reflect our current plans and aspirations and are not guarantees that we will be able to achieve them.
−Removed: Our ability to achieve any ESG objective is subject to numerous risks, many of which are outside of our control, including the availability and cost of alternative energy sources;
−Removed: the evolving regulatory and reporting requirements affecting ESG practices and disclosures;
−Removed: the locations and usage of our products and the implications on their greenhouse gas emissions;
−Removed: and the successful execution of our strategy.
−Removed: Our failure to accomplish or accurately track and report on these goals on a timely basis, or at all, and the potential added costs involved, could adversely affect our reputation;
−Removed: financial performance and growth;
−Removed: our ability to attract or retain talent;
−Removed: and our attractiveness as a business partner or supplier, and could expose us to increased litigation risk, as well as increased scrutiny from the investment community and enforcement authorities.
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.
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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.
−Removed: Litigation initiated by us could also result in counter-claims against us,
−Removed: which could increase the costs associated with the litigation and result in our payment of damages or other judgments against us.
+Added: 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.
In addition, litigation, investigations or governmental proceedings and any related publicity may divert the efforts and attention of some of our key personnel, affect demand for our products and harm the market prices of our securities.
13 unchanged sentences
We may also receive claims of potential infringement if we attempt to license IP to others.
−Removed: IP risks increase when we enter into new markets where we have little or no IP protection as a deterrent against litigation.
+Added: 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.
14 unchanged sentences
We may be engaged in litigation as a result of these indemnification obligations.
−Removed: Third party claims for patent infringement are excluded from coverage under our insurance policies.
+Added: Third party claims
+Added: for patent infringement are excluded from coverage under our insurance policies.
A future obligation to indemnify our customers or suppliers may harm our business.
8 unchanged sentences
Enforcement of our rights often requires litigation.
−Removed: If we bring a patent infringement
−Removed: action and are not successful, our competitors may be able to use similar technology to compete with us.
+Added: 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.
7 unchanged sentences
We believe the popularity of our brands makes them a target of counterfeiting or imitation, with third parties attempting to pass off counterfeit products as our products.
+Added: We license certain IP rights related to our brands for use by third parties and have safeguards in place to monitor and control such use.
+Added: We also license certain IP rights related to brands from third parties that we rely on to offer, distribute and sell certain of our products.
+Added: However, we cannot be certain that our licenses to third parties have not been and will not be breached by such parties, that the licenses we take from third parties will not be revoked or invalidated, or that the safeguards we have in place will comprehensively protect against marketplace confusion.
Any occurrence of counterfeiting, imitation or confusion with our brands could negatively affect our reputation and impair the value of our brands, which in turn could negatively impact sales and pricing of our branded products, our share and our gross margin, as well as increase our administrative costs related to brand protection and counterfeit detection and prosecution.
2 unchanged sentences
We have not filed trademark registrations in all jurisdictions where our brands or logos may be used.
+Added: 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.
+Added: We are subject to, and may become subject to, additional, state, federal and international laws and regulations governing our environmental, labor, trade, health and safety practices and public company reporting and disclosures requirements.
+Added: These laws and regulations, particularly those applicable to our international operations, are or may be complex, extensive and subject to change.
+Added: 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.
+Added: 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
+Added: our operating results.
+Added: In addition, climate change and financial reform legislation is a significant topic of discussion and has generated and may continue to generate federal, international or other regulatory responses in the near future, which could substantially increase the complexity of our public-company reporting and disclosure requirements and our compliance and operating costs.
+Added: If we or our suppliers, customers or partners fail to timely comply with applicable legislation, certain customers may refuse to purchase our products or we may face increased operating costs as a result of taxes, fines or penalties, or legal liability and reputational damage, which could harm our business.
+Added: In connection with our compliance with environmental laws and regulations, as well as our compliance with industry and coalition environmental initiatives, such as those established by the RBA, the standards of business conduct required by some of our customers, and our commitment to sound corporate citizenship in all aspects of our business, we could incur substantial compliance and operating costs and be subject to disruptions to our operations and logistics.
+Added: In addition, if we or our suppliers, customers or partners were found to be in violation of these laws or noncompliant with these initiatives or standards of conduct, we could be subject to governmental fines, liability to our customers and damage to our reputation and corporate brand, which could cause our financial condition and operating results to suffer.
+Added: Our aspirations, disclosures and actions related to environmental, social and governance (“ESG”) matters expose us to risks that could adversely affect our reputation and performance.
+Added: There is an increased focus from investors, customers, associates, business partners and other stakeholders concerning ESG matters, and we announce initiatives and goals related to ESG matters from time to time, including renewable energy and net zero emissions commitments.
+Added: These statements reflect our current plans and aspirations and are not guarantees that we will be able to achieve them.
+Added: Our ability to achieve any ESG objective is subject to numerous risks, many of which are outside of our control, including the availability and cost of alternative energy sources;
+Added: the evolving regulatory and reporting requirements affecting ESG practices and disclosures;
+Added: the locations and usage of our products and the implications on their greenhouse gas emissions;
+Added: and the successful execution of our strategy.
+Added: Our failure to accomplish or accurately track and report on these goals on a timely basis, or at all, and the potential added costs involved, could adversely affect our reputation;
+Added: financial performance and growth;
+Added: our ability to attract or retain talent;
+Added: and our attractiveness as a business partner or supplier, and could expose us to increased litigation risk, as well as increased scrutiny from the investment community and enforcement authorities.
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.
8 unchanged sentences
The court in the designated forum under our exclusive forum provisions may also reach different judgments or results than would other courts, including courts where a stockholder would otherwise choose to bring the action, and such judgments or results may be more favorable to the Company than to our stockholders.
−Removed: 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.
+Added: Further, the enforceability of similar exclusive forum provisions in other companies’
+Added: 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.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.