Seagate Technology Q4 2025 Earnings Report

Seagate Technology EPS Results

• Actual EPS: $2.59
• Consensus EPS: $2.45
• Beat/Miss: Beat by +$0.14
• One Year Ago EPS: $1.05

Seagate Technology Revenue Results

• Actual Revenue: $2.44 billion
• Expected Revenue: $2.40 billion
• Beat/Miss: Beat by +$45.71 million
• YoY Revenue Growth: +29.50%

Seagate Technology Announcement Details

• Quarter: Q4 2025
• Date: 7/29/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, July 29, 2025
• Conference Call Time: 5:00PM ET

Seagate Technology (NASDAQ:STX) provides data storage technology and solutions in Singapore, the United States, the Netherlands, and internationally. It provides mass capacity storage products, including enterprise nearline hard disk drives (HDDs), enterprise nearline solid state drives (SSDs), enterprise nearline systems, video and image HDDs, and network-attached storage drives. The company also offers legacy applications comprising Mission Critical HDDs and SSDs; external storage solutions under the Seagate Ultra Touch, One Touch, and Expansion product lines, as well as under the LaCie brand name; desktop drives; notebook drives, DVR HDDs, and gaming SSDs. In addition, it provides Lyve edge-to-cloud mass capacity platform. The company sells its products primarily to OEMs, distributors, and retailers. Seagate Technology Holdings plc was founded in 1978 and is based in Dublin, Ireland.

Seagate Technology Q4 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Achieved record fiscal 2025 performance with 40% revenue growth to $9.1 billion, non-GAAP operating profit of $2.1 billion and EPS of $8.10.
• Positive Sentiment: Strong data center demand drove a 14% sequential increase in hard drive revenue to $2.3 billion, mass capacity shipments up 16% quarter-over-quarter to 151 exabytes and cloud nearline now 91% of volume.
• Positive Sentiment: HAMR ramp is on track with three major cloud service providers qualified on Mosaic products and the 4 TB/platter platform scheduled for early CY 2026, expected to boost future margins.
• Positive Sentiment: Free cash flow nearly doubled to $425 million in June, returned 75% of FCF to shareholders through dividends and buybacks, and reduced net leverage to 1.8×.
• Neutral Sentiment: Guided Q1 FY26 revenue of $2.5 billion ± $150 million (up 15% YoY), mid-to-high-20s% operating margin and EPS of $2.30 ± 0.20, reflecting the new global minimum tax.

Presentation

[Dave Mosley, CEO & Director at Seagate]

Global teams, partners, and customers for your contributions to a strong fiscal year and to Seagate's ongoing success. Let me now turn the call over to Gianluca.

[Gianluca Romano, Executive VP & CFO at Seagate]

Thank you, Dave. We capped fiscal twenty twenty five delivering strong double digit top and bottom line growth and achieving record gross margin levels. June revenue came in at $2,440,000,000 up 13% sequentially and up 30% year over year. We expanded non GAAP gross margin by 170 basis points sequentially to 37.9%. And we increased non GAAP operating margin by two seventy basis points to 26.2%.

[Gianluca Romano, Executive VP & CFO at Seagate]

Our resulting non GAAP EPS was $2.59 at the high end of our guided range. For fiscal twenty twenty five, we grew revenue by nearly 40% to $9,100,000,000 We achieved non GAAP operating profit of $2,100,000,000 marking one of our strongest annual performances and recorded non GAAP EPS of $8.10. These results underscore our solid operational execution and the ongoing momentum for data center demand, particularly among global cloud customers. Sales from nearline cloud sales, along with seasonal improvement in the VM market, led to a 14% sequential increase in hard drive revenue, reaching $2,300,000,000. Volume shipments increased to 163 exabytes from 144 exabytes in the March.

[Gianluca Romano, Executive VP & CFO at Seagate]

Mass capacity revenue topped the $2,000,000,000 mark, up 15% sequentially and 40% year on year. Mass capacity shipments were 151 exabytes compared to 133 exabytes in the prior quarter. Nearline shipments into cloud and edge data center made up the vast majority of mask capacity volume. In the June, nearline represented 91% of mass capacity exabytes with shipments of 137 exabytes, up 14% sequentially and 52% year on year. Our twenty four and twenty eight terabyte PMR products have been widely adopted by global cloud and enterprise data centers to support their massive data workloads.

[Gianluca Romano, Executive VP & CFO at Seagate]

At the same time, we are ramping our HAMR based MOSEIK products and continuing to build customer momentum. Three major cloud service providers are qualified on our Mosaic products with additional qualification proceeding extremely well. On top of strong demand growth from cloud customers, nearline sales into the enterprise OEM market show a modest sequential improvement in the quarter, and we expect stable demand over the next few quarters. The remaining 80% of revenue came from legacy and other product lines. Sales from the legacy market totaled $270,000,000 up 6% sequentially, while revenue from our other product lines increased 3% sequentially to $163,000,000.

[Gianluca Romano, Executive VP & CFO at Seagate]

Starting the September, we plan to adjust how we discuss our end markets. We will focus on two main areas, data center and edge IoT. The data center markets accounted for about 75% of our fiscal twenty twenty five revenue and include nearline products and systems sold into cloud and enterprise customers, as well as cloud based via application. Edge IoT include consumer and client centric markets, along with network attached storage. We believe this new framework is better aligned with industry practice and reflects the AI driven market we serve today.

[Gianluca Romano, Executive VP & CFO at Seagate]

Moving on to the rest of the income statement. Non GAAP gross profit increased to $926,000,000 up 19% quarter over quarter and 59% compared with the prior year period. Our resulting non GAAP gross margin expanded to 37.9%. We continue to benefit from a favorable mix, including increased adoption of our latest generation products and ongoing pricing adjustment. These factors, combined with a strong demand environment for data center products, supported non GAAP gross margin for the hard drive business above the corporate average.

[Gianluca Romano, Executive VP & CFO at Seagate]

Non GAAP operating expenses totaled $286,000,000 up 4% quarter on and in line with our expectations. Other income and expenses decreased 9% sequentially to $73,000,000 due in part to lower net interest expense during the quarter. Adjusted EBITDA was $697,000,000 up 24% quarter over quarter and up 73% year on year. Non GAAP net income was $556,000,000 resulting in non GAAP EPS of $2.59 per share based on a diluted share count of approximately $215,000,000 shares. Turning now to cash flow and the balance sheet.

[Gianluca Romano, Executive VP & CFO at Seagate]

We invested $83,000,000 in capital expenditures for the June and February for fiscal twenty twenty five, which equates to 3% of revenue. Looking ahead to fiscal twenty twenty six, we anticipate capital expenditure to be inside our target range of 4% to 6% of revenue, while we continue maintaining capital discipline. Free cash flow nearly doubled in the June to $425,000,000 up from $216,000,000 in the prior period. Based on our current outlook, we expect free cash flow generation to expand further in the second half of calendar year 2025 compared to the first half. This is even accounting for a substantial variable compensation payout in the September, which is consistent with our strong performance.

[Gianluca Romano, Executive VP & CFO at Seagate]

In the June, we returned $153,000,000 to shareholders through the quarterly dividend, and we returned nearly 75% of free cash flow to shareholders for the fiscal year, demonstrating a strong commitment to our capital return strategy. Cash and cash equivalents increased 9% sequentially to close the June with ample liquidity of $2,200,000,000 including our undrawn revolving credit facility of $1,300,000,000 We reduced our debt balance by approximately $150,000,000 during the quarter, including retiring $5.00 $5,000,000 through a new $400,000,000 note issuance and cash on hand. We exited the quarter with gross debt of approximately $5,000,000,000 The combination of lower debt and strong profitability resulted in net leverage ratio of 1.8 times, with further reduction anticipated in the coming quarter as profit expands. Turning now to September outlook. From a demand perspective, the visibility gained through our B2O strategy instill confidence in sustained demand strength for our high capacity nearline drives and support both revenue and margin expansion in the September.

[Gianluca Romano, Executive VP & CFO at Seagate]

As previously communicated, starting in fiscal twenty twenty six, we will be subject to a global minimum tax rate in the mid teens. Accounting for risk factors and for the fourteen week period, we expect September revenue to be in the range of $2,500,000,000 plus or minus $150,000,000 At the midpoint, this reflects a 15% improvement year over year. Non GAAP operating expenses are expected to be approximately $290,000,000 reflecting the fourteen week period, partially offset by lower variable compensation as we reset the annual plan for fiscal twenty twenty six. Based on the midpoint of our revenue guidance, non GAAP operating margin is expected to expand into the mid to high 20s percentage range. And non GAAP EPS is expected to be $2.3 plus or minus $0.20 with a 16% tax rate and non GAAP diluted share count of $221,000,000 shares.

[Gianluca Romano, Executive VP & CFO at Seagate]

Our EPS guidance reflects estimated dilution from our 2028 convertible notes and equity compensation. Dilution to non GAAP earnings from the convertible notes occurs when the volume weighted average price of SIGINT stock trades above approximately $108 during the period. We target to partially offset the dilutive impact of the convertible notes through share repurchases, which we expect to resume in the current quarter. To close, SIGINT's strong June performance underscores our continued focus on driving growth, enhancing profitability and optimizing cash generation. We are executing our strategic objectives, underpinned by a structurally changed business model and leading technology road map to deliver on our financial targets and enhance value for both customers and shareholders. Operator, let's open the call up for questions.

[Operator]

We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To draw your question, please press star, then 2. In the interest of time, we ask that you limit yourself to one question.

[Operator]

If you have further questions, you may reenter the question queue. Once again, that was star one to ask a question. At this time, we will pause momentarily to assemble our And your first question today will come from Eric Woodring with Morgan Stanley. Please go ahead.

[Erik Woodring, MD - Equity Research at Morgan Stanley]

Super. Good afternoon, guys. Thank you very much for taking my question. John, Luca, I just want to kind of ask you about the maybe implied gross margin guidance for the September. Over the last eight quarters, you've expanded gross margins by over 200 basis points sequentially on average.

[Erik Woodring, MD - Equity Research at Morgan Stanley]

I believe at the midpoint of your guide, depending on the interpretation of mid to high 20% operating margins, you're guiding to something like 20 basis points of sequential margin expansion. Can you maybe, one, just confirm kind of that math? And then two, just help us understand the puts and takes and maybe why we're not seeing that gross margin implied gross margin expansion in September despite the confidence that we're hearing from you guys about getting to 40% gross margins in a few quarters. Thanks so much.

[Gianluca Romano, Executive VP & CFO at Seagate]

Thank you, Eric. I would say your estimate is a bit low. Actually, I'd say it's significantly lower than what is implied in the guidance. So we have just achieved a new record high in our history in terms of gross margin and having a very high operating margin. But we are guiding up revenue.

[Gianluca Romano, Executive VP & CFO at Seagate]

We are guiding up gross margin and operating margin, I would say, significantly more than what you are modeling right now. So our path to achieve the milestone or the first milestone that we discussed at our Investor Day just a few weeks ago is intact. Now we are going exactly in that direction. I think we can be there fairly soon.

[Operator]

Our next question today will come from Assia Merchant with Citigroup. Please go ahead.

[Asiya Merchant, Technology Equity Research at Citigroup Global Markets Inc.]

Great. Thank you for taking my question. If you can delve a little bit on the AI inference edge demand, both on the cloud side, maybe also on the edge side, you know, what are you seeing perhaps in the customer commentaries that you're having that would suggest that, you know, there is an uplift here from AI? And sort of what's kind of your as you look ahead into the next few quarters, what are you implying or what are you seeing in terms of AI exit by demand just specifically from inferencing and workloads that are sort of baking you you know, workloads that you're expecting for your guidance? Thank you.

[Dave Mosley, CEO & Director at Seagate]

Thanks, Asiya. Yeah. It's a fairly complex space, a lot of different things being called AI. What I would say, generally speaking, in the cloud, it's about video properties. We've seen this for many quarters in a row now.

[Dave Mosley, CEO & Director at Seagate]

The where video is actually stored in the cloud and the the diversity of video that's actually coming in from, you know, all parts of the world that gets stored in the cloud, that those are tremendously rich datasets for us to ultimately store on hard drives. As far as edge goes, you're starting to see all kinds of different applications, whether they're video applications themselves, factories, you know, safety, factory efficiency, hospitals. There's a lot of big data sets that exist, especially video data sets that exist at the edge. And some of those applications are taking off, so call them inferencing, but they need a lot of data to be fed with at the edge. And then there's also just the normal growth of of, I'll call it, data and analytics, text data analytics still.

[Dave Mosley, CEO & Director at Seagate]

But interestingly, at the edge, we're starting to cross over from a point where maybe treated data as something that you had to sort through and then delete. Now it's just snapshot snapshot snapshot. Just keep saving lots of snapshots at the edge because you might wanna go back and look through it. So those are actually driving some of the edge the edge growth that we've made reference to as well.

[Asiya Merchant, Technology Equity Research at Citigroup Global Markets Inc.]

If I may just you know, how does that affect kinda what you guys shared at the analyst event in terms of, you know, exabyte CAGR as you kind of look ahead? Thank you.

[Dave Mosley, CEO & Director at Seagate]

Yeah. I think the biggest wildcard in that, and we're still sticking to the same exabyte Keggers that we talked about, you know, mid twenties that we're we're comfortable with that. But there are we are watching some of these new applications that people talk about viral applications that happen to be very data dependent are very interesting to us. And most of those are edge applications because there's a lot of data at the edge that ultimately gets just thrown away. And so if it if it could be processed or stored longer, it's it's more interesting to us.

[Dave Mosley, CEO & Director at Seagate]

So I think the cloud knows how to deal with the data that actually ultimately resides on the cloud very well.

[Asiya Merchant, Technology Equity Research at Citigroup Global Markets Inc.]

Great. Thank you.

[Dave Mosley, CEO & Director at Seagate]

Sovereign sovereign data weight datasets. Sorry. Especially sovereign datasets where people are wanting to keep the data locally like we made reference to in the prepared remarks. I mean, those are interesting as well.

[Asiya Merchant, Technology Equity Research at Citigroup Global Markets Inc.]

Thank you.

[Operator]

And your next question today will come from Jim Schneider with Goldman Sachs. Please go ahead.

[James Schneider, Analyst at Goldman Sachs]

Good afternoon. Thanks for taking my question. I was wondering maybe if you could talk a little bit about the HAMR contribution you saw in terms of revenue in this quarter and whether you expect and how much you would expect that to increase, if at all, in the September? And then maybe following on to that, any kind of impact you expect that would have on gross margins either positive or negative in the out quarter? Thank you.

[Dave Mosley, CEO & Director at Seagate]

Yes. Thanks, Jim. So HAMR is growing steadily, and we're very happy once we get more people qualified like we've talked about, then we'll continue to ramp. What we're very focused on in the company right now is getting to the four terabyte per platter platform. And we're, you know, in some sense winding up for that, which, you know, we'll that that ramp early in calendar 2026, like we said in the prepared remarks.

[Dave Mosley, CEO & Director at Seagate]

As far as gross margin, the current product sets are still accretive to gross margin. As we get higher and higher, we expect it to be more accretive. But, John Luke, you wanna give some more color on that?

[Gianluca Romano, Executive VP & CFO at Seagate]

Yeah. No. We are we are ramping HAMR higher quarter over quarter, and we have already three major cloud customers that are qualified on Mosaic three, and we are starting MOSAIC four terabyte per per disk. So we are executing our road map, the one that we recently discussed at our Investor Day, and we expect q one to be another step higher in term of volume and, of course, in term of revenue. And as we discussed, because Hanmi's higher capacity drive and lower cost per terabyte, we expect a positive impact to our gross margin.

[James Schneider, Analyst at Goldman Sachs]

Thank you.

[Operator]

And your next question today will come from Wamsi Mohan with Bank of America. Please go ahead.

[Wamsi Mohan, Senior Equity Research Analyst at Bank of America Merrill Lynch]

Yes, thank you. Yes, you had a strong quarter clearly, but you guided revenue slightly below consensus for the September and your DSO also jumped up. So I was wondering if you could clarify if there was anything that you would point out in linearity in the quarter. And I guess the question is, how well is your HAMR capacity ramp aligned with qualifications and demand? Like, are you tracking better on production versus demand because of qualification, which could maybe potentially drive some catch up in the December? Thank you so much.

[Dave Mosley, CEO & Director at Seagate]

Yeah, Wamsi. I'll let Gianluca jump in here. But relative to the HAMR ramp, sorry, let me just talk about this quarter versus last quarter. Last quarter, obviously, the planning for these quarters is six months, nine months ago with with build to order or more in in some cases. And so we have to look at what is qualified exactly to your point, and then what's going to be qualified in six months or nine months.

[Dave Mosley, CEO & Director at Seagate]

We're leaning into the product transitions that happen along the way. If anything, we could make more product of any kind, we would make it, but we're also trying to incentivize these product transitions to three plus and then four plus as well. And we're consuming a lot of our operational efficiency that way. Maybe there was a little bit over pull to your question last about last quarter, and that's indicative of strong demand. I mean, this demand may be stronger as we get out to the back half of the year.

[Dave Mosley, CEO & Director at Seagate]

We we certainly see fairly strong demand right now. We're trying to balance our manufacturing capability and that planning that we've done long term what we had promised people nine months ago. We're trying to balance all that together, but also prioritizing the product transitions.

[Gianluca Romano, Executive VP & CFO at Seagate]

Yes. Now, Wamsi, you said well, we had a very strong June quarter. We now achieved better results than also what we were estimating at the beginning of the quarter, and we are guiding a better quarter in September. Demand is strong. It's above supply.

[Gianluca Romano, Executive VP & CFO at Seagate]

So our guidance is mainly based on what we think we are ready to supply during the quarter and that volume of exabytes, they will be fully sold. We also need to dedicate a little bit of our production to qualification. So some of our volume is dedicated to pull, and as you know, we are qualifying a a big number of customers on HEMR. And so now, of course, we we are slightly impacted in the volume that we sell because now we need to keep some volume for for customer call. But we are going in the in the direction where, you know, we recently discussed is another step further into our improvement in not only revenue, but even more importantly, in profitability.

[Gianluca Romano, Executive VP & CFO at Seagate]

And when you look at our guidance, of course, you need to remember that starting this quarter, we will be subject to the global minimum tax. So when you look at EPS, of course, there is an impact from the tax expense, and there is also an impact from an higher number of share outstanding because of the convertible and equity compensation. So when you model all those things correctly, you will see actually a fairly good improvement in both gross margin and operating margin.

[Wamsi Mohan, Senior Equity Research Analyst at Bank of America Merrill Lynch]

Thanks, Gianluca. Just to clarify that one last point you made around the capacity ramp and some of the capacity being tucked away sort of for these calls. Would you say that that's something that just continues to roll forward as you're qualifying more customers? Or do you have a potential for, you know, really meaningful step up once you get into December because now you've got these CSPs called on on MosaiQ three? Thank you so much.

[Gianluca Romano, Executive VP & CFO at Seagate]

We don't we don't guide December. But as I said before, we are going into the direction of continuing to improve revenue and profitability. And, of course, part of this revenue now is coming from having a little bit more supply available. So we are executing our plan now. We don't see any major constraint right now in achieving we said recently, and we are very, very confident.

[Operator]

And your next question today will come from Thomas O'Malley with Barclays. Please go ahead.

[Thomas O'Malley, Director - Equity Research at Barclays]

Hey, guys. Thanks for taking my question. On the HAMR side, I'll I'll ask a different way. Don't think you guys wanna give out the exact percentage of revenue over the next couple of quarters. I think you did a good job at the Analyst Day of showing where the crossover point was in the '27.

[Thomas O'Malley, Director - Equity Research at Barclays]

But maybe from a customer perspective, like, a large part of the ramp thus far has been with a single customer. You're talking about multiple multiple customers qualified. At this point, are customers two, three, etcetera, outside of customer one making up a significant portion of the ramp, like 10% or more, let's say. I just I just I'm trying to get an understanding of the adoption outside of the of the first guy. Thank you.

[Dave Mosley, CEO & Director at Seagate]

Thanks, Tom. Yes. Simple answer to your question is yes. The other customers are starting to ramp as well, and the pull is pretty strong. Also, depending on who's called where, they may ask for more of the last generation product or may wanna wait till the four terabyte per platter, but everybody has pretty good visibility, and we have multiple customers pulling hard.

[Dave Mosley, CEO & Director at Seagate]

And and that's indicative of the exabyte demand. Maybe to to the earlier question that Wamsi was asking, you know, we add exabyte capacity by getting through these transitions. And so that's that's been our move is we're we're not really trying to add gross capacity of number of drives. We're trying to, you know, get through these transitions as fast as we can to be much more efficient with the exabytes.

[Thomas O'Malley, Director - Equity Research at Barclays]

Helpful. And in terms of that transition, I think you guys had previously said on the mass capacity side, like, where you kind of ran into a wall in terms of where you were willing to produce with, a 160 exabytes on the mass capacity side. Is that still the right way to think about where things are stopping before you get just the growth from the technology side, or are you looking that in any different way now? Just wanted to see if there's an update there.

[Dave Mosley, CEO & Director at Seagate]

With continued ramp of Mosaic three plus pro platforms, we could continue to grow, but, you know, four plus allows significant growth above that. Yeah. So it's it's not a it's not a wall so much anymore. You know, it really was when we were stuck in the middle of two terabytes per platter product, but, you know, we're we're way past that now.

[Thomas O'Malley, Director - Equity Research at Barclays]

Super helpful. Thank you.

[Operator]

And your next question today will come from Amit Daryanani with Evercore. Please go ahead.

[Amit Daryanani, Senior MD - Equity Research at Evercore]

Thanks a lot. Good afternoon, everyone. Dave, as you think about the LTAs that are giving you visibility, it sounds like into early twenty six right now. Can you just touch on what pricing assumptions are you seeing embedded on a exabyte basis in these contracts? And really, as you think about the HAMR products on the ramp up over the next twelve months, you end up in a pretty good cost advantage I think on a per exabyte basis on HAMR exabytes.

[Amit Daryanani, Senior MD - Equity Research at Evercore]

Do you think these LTAs will enable you to keep those cost savings for Seagate? Or would we see a bigger drop in price per exabyte you have to engage with your customers with at that point?

[Dave Mosley, CEO & Director at Seagate]

Yeah. No. We don't have to incent it's a good quest we don't have to incentivize the transition. I mean, there's a significant TCO benefit of running these new products in your data center. So if you think about, you know, a 40 terabyte versus a 30 terabyte, for example, and you're going to run that for six or seven years, that's a huge TCO benefit.

[Dave Mosley, CEO & Director at Seagate]

So there's an incentive baked in right there. We know what our costs are going to be, and we know what pricing we want to incentivize, and we know what margin would that we need to be able to go back and refeed our R and D and our supply chain and everything else. So we're balancing all these things in the planning that we're doing. John Liu, do you want to talk about pricing?

[Gianluca Romano, Executive VP & CFO at Seagate]

Yes. Are not changing our, pricing strategy that we have started more than two years ago. So our like for like pricing will continue to slightly increase, every time we negotiate a new bill to order. Of course, the mix is going into more higher capacity drives, that is also that part of the set. But again, everything is aligned to how we are executing our plan that we presented just a few weeks ago.

[Wamsi Mohan, Senior Equity Research Analyst at Bank of America Merrill Lynch]

Perfect. Thank you.

[Dave Mosley, CEO & Director at Seagate]

Thanks.

[Operator]

And your next question today will come from Aaron Rakers with Wells Fargo. Please go ahead.

[Aaron Rakers, Managing Director & Technology Analyst at Wells Fargo]

Yes. Thanks, for taking the question. I wanna ask a little bit about free cash flow generation and and how we should think about share repurchase. So I think in the prepared comments, you had you had pointed out that you should be in your CapEx revenue or CapEx spend range of 4% to 6%. I guess the first part of this is that that would seem to apply a fairly healthy uptick in the CapEx spend year over year for fiscal 'twenty six versus fiscal 'twenty five.

[Aaron Rakers, Managing Director & Technology Analyst at Wells Fargo]

And I guess why would that be? And then the second question is kind of tied to that is that as we see the generation of free cash flow, you've hit the sub $5,000,000,000 gross debt level. How do we think about the right level of cash operationally you're willing to hold? How maybe in the opposite way, we should think about excess cash being built and capacity for share repurchase? Any thoughts around that would be helpful. Thank you.

[Dave Mosley, CEO & Director at Seagate]

Thanks, Aaron. I'll hand it over to John Luca in just a second. But just to handle from an operations perspective, I mean, given what we've been through in the last few years, we were pretty tight on CapEx. So I'm not sure that looking at a year ago or two years ago baseline is a great way to think about it. Some of our gear needs to be replaced.

[Dave Mosley, CEO & Director at Seagate]

There's a small tick up for that, but then there's also us looking forward into FY 'twenty seven and FY 'twenty eight and saying, how do we make sure we stay for four terabytes of platter and five terabytes of platter makes make sure we have the right gear for that. There you know, that may drive CapEx a little bit. We'll still be well within our range, though. And then, John, look on the

[Gianluca Romano, Executive VP & CFO at Seagate]

Yes, Adam. So free cash flow is improving a lot. Now you have seen already in the June a major step up. This will continue, as we said, during the second part of calendar '25, and we also continue for for the second part of our fiscal twenty six. We have reduced our debt, as you said, at the target level we were targeting since more than a year at this point.

[Gianluca Romano, Executive VP & CFO at Seagate]

And Dave just announced that we are restarting share buyback. So, again, we are we are executing our plan. I think, obviously, it's a good time to restart the share buyback. And in term of liquidity, you were asking, and excess cash flow or excess cash, we don't have excess cash right now. I think we can maybe still increase a little bit our cash position, but the vast majority of our free cash flow, of course, will go back to our shareholders through the dividend and through the share buyback.

[Aaron Rakers, Managing Director & Technology Analyst at Wells Fargo]

Thank you.

[Gianluca Romano, Executive VP & CFO at Seagate]

Thank you.

[Operator]

Thanks. And your your next question today will come from Ananda Baruah with Loop Capital. Please go ahead.

[Ananda Baruah, Equity Analyst at Loop Capital Markets LLC]

Yeah. Thanks, guys, for taking the question. Dave, just just going back to your prior remarks about the AI drivers that you're seeing in your business, and this would be sort of not at the edge of the data center remarks. And did you actually make mention that you're seeing multiple types of AI video drivers? And if you are, could you do you mind just sort of speaking to those again? I just wanted to get clear on those. Thanks.

[Dave Mosley, CEO & Director at Seagate]

Well, yeah. I would say, Ananda, there's the video properties that that I call them. The the the things that are storing a lot of video on the cloud and then sharing that video across, you know, many, many users around the world. Right? So we all are familiar with those and use those every day.

[Dave Mosley, CEO & Director at Seagate]

There's also just unstructured data that's coming into the cloud for processing that could be video content as well. And then there's video generation from some of the new AI applications also that some of those are starting to go viral as well. That's a small trend so far. So the the video processing, the unstructured data processing is is big, and then and then the the video properties, as I call them, is is just huge, creating you know, because humans are creating all kinds of diverse content and then show storing them through these applications.

[Ananda Baruah, Equity Analyst at Loop Capital Markets LLC]

And are you are you seeing from from a from the autonomous sector anything starting to happen with generative AI? Any visibility into that? And that that's it for me. Thanks.

[Dave Mosley, CEO & Director at Seagate]

That's an interesting question. So we do have some partnerships with people that are making autonomous vehicles. Typically, so far, the the data is actually gathered in the field and then processed in a local cloud. And it's fairly data rich. But so far, there hasn't really been a generation of data at the extreme edge and then monetization somewhere else besides just teaching the car how to drive better.

[Dave Mosley, CEO & Director at Seagate]

Should that ever happen, you know, so that the cars themselves become units that are actually picking up a lot of data and then sharing it some other way. That could be a huge opportunity. So far, we haven't seen that. It's more about training and inferencing just to make sure that the vehicles are driving right and staying safe.

[Ananda Baruah, Equity Analyst at Loop Capital Markets LLC]

Got it. Thanks a lot.

[Operator]

And your next question today will come from C. J. Muse with Cantor Fitzgerald. Please go ahead.

[CJ Muse, Senior Managing Director at Cantor Fitzgerald]

Yes. Good afternoon. Thank you for taking the question. So I was hoping to better understand your ability to drive revenue growth both short term and longer term. So for the September, you're guiding up 2%.

[CJ Muse, Senior Managing Director at Cantor Fitzgerald]

You have an extra week, but you talked about select HAMR bits, you know, going to qualification. So I I would have thought perhaps with the extra week, maybe you could have had more output. So is there something else going on there? Is there a mix issue? Would would love to have, help there.

[CJ Muse, Senior Managing Director at Cantor Fitzgerald]

And then for fiscal twenty six, you know, at your Analyst Day, you talked about longer term growth of low to mid teens top line. And I'm just curious, at what point in the HAMR ramp do you think you'll have the capacity to support that type of growth? Thanks so much.

[Dave Mosley, CEO & Director at Seagate]

Yeah. I'll I'll I'll let Gianluca deal with the longer term period. But, you know, obviously, the as I said before, the quarter over quarter stuff was the a lot of the supply perspective on these quarters was dictated six months ago or nine months ago under built to order. And I don't think our customers look at it as fourteen week or an extra week or whatever. So if there happens to be a little bit more demand at the end of the quarter, maybe it'll come our way.

[Dave Mosley, CEO & Director at Seagate]

There's maybe some evidence that it did last quarter. But I don't really get into the what happened in one week period. From our perspective, the way we put more exabytes online is to go through the product transition, not necessarily by capital to try to, you know, build more for demand because that would be a long, long lead time anyway. So we're actually, you know, very focused on getting the new products in, qualified, up the ramp, so on and so forth, and that'll help build our margins.

[Gianluca Romano, Executive VP & CFO at Seagate]

Yes. The mix is going in the right direction. So we are increasing both MOSAIC, so the MR product, and the last generation of BMR product. So you will see the increase in exabyte that are now implied in our guidance and also what we have done in the most recent quarter. We are increasing exabyte.

[Gianluca Romano, Executive VP & CFO at Seagate]

We are not increasing units. So this is all technology transition. So more and more we move customers to HEMR, the more and more we have the opportunity to increase exabyte, and, of course, that will result in in higher revenue. In term of what we what we said at our Analyst Day in term of revenue growth, so the low to mid teens, we guided next quarter at $2,500,000,000 If you look where we were a year ago, I think it's probably 15% higher. So I don't see any you know, anything different compared to what we we were saying few weeks ago and what we are executing.

[Gianluca Romano, Executive VP & CFO at Seagate]

Of course, now every quarter is different. And as I said before, we guide based on what we think we are producing in the quarter. If we will produce it a bit more, we will be able to generate a little bit more revenue. But right now, this is the visibility.

[CJ Muse, Senior Managing Director at Cantor Fitzgerald]

Very helpful. Thank you.

[Gianluca Romano, Executive VP & CFO at Seagate]

Thank you.

[Operator]

And your next question come from Krish Sankar with TD Cowen. Please go ahead.

[Eddy Orabi, Vice President at TD Cowen]

Hey, guys. This is Eddie for Krish. Just a question on the guide. It seems that your guidance implies incremental gross margins about, like, 50%. Even though we are still below the 2.6, billion revenue baseline you outlined on the Analyst Day, I I wonder as you go from the 2,500,000,000.0 in September to 2,600,000,000.0 and above, why would your incremental gross margin not be better than the 50% number you guided at the Analyst Day?

[Eddy Orabi, Vice President at TD Cowen]

Like, are there some headwinds in the near term? It's just, like, a little bit puzzling, especially given that the HAMR ramp is still in very early stages. So someone should expect, like, revenue, gross margin accretion be above the 50% you guided. But so any any color on that regard would be helpful.

[Gianluca Romano, Executive VP & CFO at Seagate]

Yes, guys. I think you need to look at your model a little bit deeper because the implied gross margin in the guidance is way higher than what you are seeing. Again, look at your model, look at the impact of the increase in the share outstanding, the increase in the tax. But the gross margin in our guidance is much higher than 50 basis points sequentially.

[Eddy Orabi, Vice President at TD Cowen]

Sorry, John Luca. I meant 50% incremental gross margin, not 15 basis point.

[Gianluca Romano, Executive VP & CFO at Seagate]

Yeah. Okay. Perfect. Well, no, I would say that, no, every quarter will be a little bit different depending exactly from, you the mix that we we change quarter over quarter.

[Gianluca Romano, Executive VP & CFO at Seagate]

But I would say our first goal is to achieve the 2,600,000,000.0 in revenue and the 40% gross margin. And I think we are trending well in that direction. And after that, our goal is to continue to increase revenue in the low to mid teens, as we discussed at the Analyst Day and increase our profitability for an incremental 50% gross margin. So I would say nothing changed the last eight weeks. So I think the plan is is ongoing, and and we are executing well.

[Eddy Orabi, Vice President at TD Cowen]

Got it. Thank you.

[Gianluca Romano, Executive VP & CFO at Seagate]

Thanks.

[Dave Mosley, CEO & Director at Seagate]

Thanks, sir.

[Operator]

And your next question today will come from Timothy Arcuri with UBS. Please go ahead.

[Timothy Arcuri, Managing Director at UBS Group]

Thanks a lot. Dave, you made a comment that I haven't heard you make before. You said the capacity is booked out to mid twenty six and visibility is extending into the back half. What what what does that mean? Because build to order I mean, the lead time to build to drive is a year.

[Timothy Arcuri, Managing Director at UBS Group]

So if you place an order now, you're not gonna get to drive until this time next year anyway. So sort of by definition, you have a year, you know, worth of visibility. Are you changing how you book that capacity? And I guess part of that is, what does that really give you? Like, do you know exactly what's gonna ship in December?

[Timothy Arcuri, Managing Director at UBS Group]

I know you don't wanna give us guidance, but can customers push out? Like like, if you wanted a guide December, could you tell us what you're gonna ship in December? You know? I'm just wondering if something changed for you to give that, comment. Thanks.

[Dave Mosley, CEO & Director at Seagate]

Nothing's really changed. So you're and you're somewhat right. We're remember, we're leaning through these product transitions. So we we have customers who are driving us to not only start the ramp of Mosaic three plus, but start the ramp of Mosaic four plus and so on. And they're working with us on qualifications.

[Dave Mosley, CEO & Director at Seagate]

And that's some of the stuff that we talk about visibility. They generally want exabytes. They don't want specific boxes, but they want the most efficient boxes they can get. And so do we have pretty good visibility into that? Yes.

[Dave Mosley, CEO & Director at Seagate]

And we have long lead times for, you know, some of the components, so we have to make sure we start those components right now. If that helps your comment, Tim.

[Timothy Arcuri, Managing Director at UBS Group]

Yeah. I guess I'm just trying to figure out, like, do you know exactly what you're gonna ship in December? I know you don't wanna give guidance, but, I mean, could December be down potentially, or do you have visibility to say, look. We know exactly what we're gonna ship in December, and, you know, we don't wanna tell you, but we at least know what it's gonna be.

[Dave Mosley, CEO & Director at Seagate]

Right. I I I would say we know what the customers want. And and, you know, demand is very strong. That's what we made. We you know?

[Dave Mosley, CEO & Director at Seagate]

As far as what else might happen in the world, I don't I don't know what else might happen in the world. But, you know, from our perspective, demand is still strong, probably stronger than what we have capacity for. And even though we're building capacity as we get through some of these transitions, the exabyte capacity via the transition.

[Gianluca Romano, Executive VP & CFO at Seagate]

And, Tim, we said previously also in prior calls, we expect calendar 2025 to sequentially increase revenue and profitability. So we continue in that direction. So December will be higher revenue and higher profitability.

[Timothy Arcuri, Managing Director at UBS Group]

Cool. Thank you.

[Operator]

And your next question today will come from Steven Fox with Fox Advisors. Please go ahead.

[Steven Fox, Founder & CEO at Fox Advisors, LLC]

Hi. Good afternoon. I was just curious if there's any seasonality we have to think about as we figure out the full fiscal year quarters. It seems like there's a lot of positive quarter on quarter tailwinds as you go through the year. What kind of seasonal warnings would you throw up, Gianluca?

[Dave Mosley, CEO & Director at Seagate]

The the season is starting to really diminish in our in our business. So, you know, if the legacy and other businesses are still have some seasonality in them, Via is interesting because as time marches on, VIA some of the VIA workloads are moving to the cloud as well. And so we're seeing not the typical seasonality that we would have seen in the VIA markets. It's more muted now. But I I think the the bulk of our business, there really isn't any seasonality anymore.

[Steven Fox, Founder & CEO at Fox Advisors, LLC]

Thanks. And just real quickly

[Steven Fox, Founder & CEO at Fox Advisors, LLC]

total Again, sorry.

[Gianluca Romano, Executive VP & CFO at Seagate]

Sorry. In total, would say, March is usually our lower quarter in term of revenue. But as Dave said, that seasonality impact every year becomes a little bit smaller.

[Steven Fox, Founder & CEO at Fox Advisors, LLC]

Thank you. And just real quick, if I could squeeze one in. I know someone asked you about receivables. I'm not clear on the answer in terms of why the receivables were up so much in the quarter.

[Gianluca Romano, Executive VP & CFO at Seagate]

Probably nothing strange. As you know, in the past, we did also some factoring, and we didn't do any factoring this quarter. And that's because now our free cash flow was really strong already. So nothing unusual, I would say, in business that drive receivable higher.

[Dave Mosley, CEO & Director at Seagate]

Yes. I'd say we're back to running the business the way we want to, and we've got the supply chain moving the way we want to. So we're very pleased with the progress in FY 'twenty five.

[Steven Fox, Founder & CEO at Fox Advisors, LLC]

Great. Thank you.

[Operator]

Your next question today will come from Tristan Gerra with Baird. Please go ahead.

[Tristan Gerra, Senior Research Analyst at Robert W. Baird & Co]

Hi, good afternoon. High level question. It looks like NAND hasn't been cannibalistic to HDD demand for some time. Each storage type has their own respective end market. And there's been so much in terms of capacity cuts in NAND recently that has precluded any production cost down.

[Tristan Gerra, Senior Research Analyst at Robert W. Baird & Co]

So as eventually NAND capacity normalizes and production costs return to a normal curve, should we view this as a potential pressure on HGD demand in certain end market? Or are the dynamics such that notably with HAMR, your density versus production costs maintain the gap with NAND?

[Dave Mosley, CEO & Director at Seagate]

Yeah. It's a complex question, but I I would say that your last point is the way we think about it. We're continuing to increase the capacity point per drive and also, you know, keep our costs in line. We have a great value proposition for customers. And so therefore, in the markets that we that are really material to us, like the cloud markets, the interface between NAND and HDD is not really changing that much.

[Dave Mosley, CEO & Director at Seagate]

And when I say interface, keep in mind, there's a lot of NAND in the cloud. Right? There's a lot of front end memory in these application spaces. And in some in some cases, some are very app memory dependent. But when it comes to mass data storage, the interface between all the NAND that's being used and all the hard drive bits that are being used is not changing that much.

[Dave Mosley, CEO & Director at Seagate]

And because of the economics that you talked about, because of the the like we talked about in the Analyst Day, the total amount of capital that would be required to replace the bytes in that are HCV with NAND. So NAND's a great technology. It's got a lot of interesting applications on the edge. They need to manage the business well. That may be the result that may be what's resulting in some of the behaviors that you made reference to.

[Dave Mosley, CEO & Director at Seagate]

But in the the bulk of mass storage applications, certainly in the cloud, the the architectures are not changing.

[Tristan Gerra, Senior Research Analyst at Robert W. Baird & Co]

Great. Thank you very much.

[Operator]

And your next question today will come from Vijay Rakesh with Mizuho. Please go ahead.

[Vijay Rakesh, Managing Director at Mizuho Financial Group]

Yeah. Hi, Dave and Gianluca. Just first question on the on the gross margin side, assuming your margins, you know, go to, like, thirty eight seven, thirty eight eight, 3.8% in the September, is that pickup coming from pricing utilization and the HAMMER mix? Can you give us some attribution, like what percent goes to from the pricing improvement versus utilization versus the HAMMER mix? And then I have a follow-up.

[Gianluca Romano, Executive VP & CFO at Seagate]

And you're talking about the September or the June?

[Vijay Rakesh, Managing Director at Mizuho Financial Group]

Yeah. September. Sorry. Yeah.

[Gianluca Romano, Executive VP & CFO at Seagate]

Oh, yeah. Yes. I I would say all those factors that you mentioned. So HAMR volume will be higher, and this is, of course, a a good help to our gross margin. And the pricing strategy, as we said before, is not changing.

[Gianluca Romano, Executive VP & CFO at Seagate]

So for the few contracts that we will have in the September, we will have a little bit better pricing. And we are selling all our production. So, of course, also on the cost side, we are getting fairly good cost per terabyte decline. So I would say Yeah. Not differently from from the last few quarters.

[Gianluca Romano, Executive VP & CFO at Seagate]

We are we are trending in the same direction, and, and we are continuing this, this sequential improvement.

[Vijay Rakesh, Managing Director at Mizuho Financial Group]

Got it. And and, David, mentioned three customers on HAMR now. And I think you guys have said five customers by the end of fiscal twenty six. Can you talk to what the how the other two are going and how you expect the the number two and number three ramps to progress, I guess? Thanks.

[Dave Mosley, CEO & Director at Seagate]

Yeah. So earlier, I talked about the fact that there were more people ramping the product. So that is relative to the three customer comment. We haven't really said five yet, but we've said major customers will be qualified by early twenty six, as was said in the prepared remarks. And we actually talked about that at Analyst Day as well.

[Dave Mosley, CEO & Director at Seagate]

So we're still on exactly that path. To your question about how are the qual's going, they're going very well. I think as as customers need more bikes, they, you know, see that as they get through the qualification, they see that as an option, and then they're they're creating that demand. Obviously, we with the build to order, we have to be very prescriptive of of it. So we know exactly what we're gonna be able to build.

[Dave Mosley, CEO & Director at Seagate]

We know which wafers are flowing, and we know what what, you know, heads of media capabilities we're going to have to to hit those things. We'll be as predictable as we can for them, but the the progress on the qualifications is going quite well.

[Vijay Rakesh, Managing Director at Mizuho Financial Group]

Right. Thank you.

[Operator]

And your next question today will come from Mark Miller with The Benchmark Company. Please go ahead.

[Mark Miller, Equity Research Analyst at The Benchmark Company LLC]

Yeah. I'm trying to get my arms around the impact of this global minimum tax, which kicks in in fiscal twenty twenty six. I believe you said the non GAAP tax rate will be 16%. Can you can you give any insight what the GAAP tax rate will be with this global minimum tax?

[Gianluca Romano, Executive VP & CFO at Seagate]

Yeah, it will be very similar. So the global minimum tax is impacting us on both GAAP and non GAAP.

[Mark Miller, Equity Research Analyst at The Benchmark Company LLC]

Okay. Thank you.

[Dave Mosley, CEO & Director at Seagate]

Thanks, Mark.

[Operator]

This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks.

[Dave Mosley, CEO & Director at Seagate]

Thanks, Nick. Thanks everyone for joining us today. Fiscal twenty twenty five was an incredible year for Seagate and I'm really proud of our team's execution. We're operating in a strong demand environment driven in part by advancements in GenAI and the march towards all these agentic models. These breakthroughs have solidified data as one of the world's most critical resources.

[Dave Mosley, CEO & Director at Seagate]

Hard drives are a key component in powering businesses to harness the full value of their data. And Seagate's leading technology roadmap make us uniquely positioned to capture value from those growing opportunities. We appreciate the ongoing support of our customers, our suppliers, our employees and the shareholders, and we look forward to sharing our progress in the quarters ahead. Thank you.

[Operator]

Conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Participants

Executives

• Gianluca Romano, Executive VP & CFO

Analysts

• Dave Mosley, CEO & Director at Seagate
• Erik Woodring, MD - Equity Research at Morgan Stanley
• Asiya Merchant, Technology Equity Research at Citigroup Global Markets Inc.
• James Schneider, Analyst at Goldman Sachs
• Wamsi Mohan, Senior Equity Research Analyst at Bank of America Merrill Lynch
• Thomas O'Malley, Director - Equity Research at Barclays
• Amit Daryanani, Senior MD - Equity Research at Evercore
• Aaron Rakers, Managing Director & Technology Analyst at Wells Fargo
• Ananda Baruah, Equity Analyst at Loop Capital Markets LLC
• CJ Muse, Senior Managing Director at Cantor Fitzgerald
• Eddy Orabi, Vice President at TD Cowen
• Timothy Arcuri, Managing Director at UBS Group
• Steven Fox, Founder & CEO at Fox Advisors, LLC
• Tristan Gerra, Senior Research Analyst at Robert W. Baird & Co
• Vijay Rakesh, Managing Director at Mizuho Financial Group
• Mark Miller, Equity Research Analyst at The Benchmark Company LLC