Chief Executive Officer at Seagate Technology
Thank you, Shanye, and welcome to those of you joining us on today's call. Our June quarter financial results reflected near-record data center demand contrasted with impacts from a confluence of macro headwinds in other end markets, particularly in the consumer-facing legacy markets. We believe the secular data trends driving long-term demand growth for mass capacity storage and infrastructure remain intact, as I will discuss a bit later. However, the impacts from COVID lockdowns in Asia, non-HDD component shortages and global inflationary pressures intensified late in the quarter.
Our resulting June quarter revenue and non-GAAP EPS declined quarter-on-quarter to $2.63 billion and $1.59, respectively. While macro events are weighing on our near-term performance, Seagate's financial achievements for fiscal 2022 were noteworthy. We grew revenue by 9% year-over-year, fueled by 24% growth in our mass capacity products. We expanded profitability even faster than revenue, leading to fiscal year non-GAAP gross margin above 30% and non-GAAP operating margin above 18%, and we achieved record non-GAAP EPS of $8.18.
In fiscal 2022, we generated $1.3 billion in free cash flow, our highest level in four years and maintained our commitment to returning cash to our shareholders, funding $610 million in dividends and repurchasing 9% of our shares outstanding. We are also demonstrating technology leadership and executing our product road map to support the growing demand for data. We attained our fastest ever ramp with the 20-plus terabyte nearline platform, handily beating the projections that we made at the start of the quarter. We are on track to achieve volume and revenue crossover with the 18-terabyte drives in the current quarter.
The 20-plus terabyte product family is based on our highly successful common platform design, which has enabled us to scale and ramp to yield quickly as evidenced by the results I just shared. We have the flexibility to extend into the mid- to upper 20-terabyte capacity points with minimal changes to our design, which allows us to meet customers' timing, readiness and offers an attractive cost profile for both customers and for Seagate. We have worked tirelessly over the last three to four years, improving the resilience of our supply chain, aligning our mass capacity product portfolio to our customers' needs and strengthening our financial foundation.
Our operational execution combined with structural changes that have taken place in the industry, namely the transition to mass capacity products and increased supply discipline, support our view that the company is fundamentally stronger today and better positioned for the future. Let us now turn to the current market environment. Despite the ongoing impacts of COVID lockdowns and supply challenges, mass capacity revenue was flat quarter-over-quarter, due in part the strong cloud customer adoption of our 20-plus terabyte nearline drives.
U.S. cloud data center demand remains strong. However, persistent non-HDD component shortages have led to inventory imbalances, precluding new data center build-outs from being completed. These, along with other supply disruptions have led to a buildup in inventory levels across a broad spectrum of customers, a trend that continued through the end of the quarter. As macro uncertainties and inflationary pressures intensify, we expect customers will increasingly focus on reducing their inventory levels while maintaining the ability to address end market demand.
At the same time, our Asia-based cloud customers are dealing with the impacts of COVID restrictive measures, which have had far-reaching effects across all of the end markets that we serve in the region. In the VIA markets, recall that many of the major projects driving demand are in the Asia region, particularly in China, where lockdowns are impacting our near-term revenue. While the situation remains fluid, we are confident that mass capacity demand growth will resume once lockdowns ease and inventory levels normalize.
Within the legacy markets, demand rapidly deteriorated at the end of the quarter as lockdowns and surging inflation severely impacted consumer spending for PCs and external drives. Exiting the June quarter, the legacy business represented only 20% of our HDD revenue, which is a historic low. In response to the current business conditions, Seagate is taking actions to maintain strong supply discipline and a favorable pricing environment. We are reducing our manufacturing production plans while continuing to focus on driving efficiencies in the factory and across supply chains.
We are maintaining prudent cost controls across the business and executing our product road map, which also helps to support our customers' TCO objectives. While the current environment is challenging, the multiple secular drivers fueling long-term demand for mass capacity storage have not changed, and in fact, continue to expand. Digital transformation is still in the early innings according to leading cloud service providers who have estimated that only 10% of corporate IT has moved to the cloud. New AI applications continue to emerge with the AI engines requiring a massive amount of new data for training, data that must be captured, analyzed, stored and moved across a more distributed multi-cloud network.
And as the digital and physical worlds begin to converge, enterprises are employing data-intensive digital twins to enhance decision-making and overall business efficiencies. These trends dovetailed into a view that businesses will need technology investment strategies to remain competitive in a data-driven world, which includes the need for mass capacity storage and infrastructure. Seagate is poised to benefit with a broad product portfolio of cloud and edge infrastructure solutions from mass capacity HDDs to enterprise systems to our live cloud and mobile service offerings.
We are executing our development plans for the 30 terabyte plus product family based on our innovative HAMR technology, which enables capacity points of 30, 40, 50 terabytes and beyond to support future data demand growth. Seagate's innovation extends beyond our HDD technology leadership. We're garnering recognition for our systems portfolio, capturing the coveted Product of the Year Award for hardware infrastructure at this year's NAB show for our CORVAULT storage system. CORVAULT has also gained customer attention with its unique autonomous drive regeneration technology, which combines our device and systems expertise to enable self-healing capabilities.
These systems provide enterprise CIOs with peace of mind that their data will be protected while offering a strong TCO value proposition. Additionally, technologies such as self-healing distributed data protection and secure erase play a critical role in reducing the environmental impact of our products. Drives with these technologies can be repaired, reused or recycled rather than just discarded thus helping to preserve the Earth's precious resources. These efforts are critically important to Seagate and a key pillar of our product circularity strategy.
We are also receiving very positive feedback from customers on a global basis for our work in this area. In closing, Seagate has broad exposure to the strong secular tailwinds driving demand for mass capacity storage. These trends remain intact, which lends confidence that growth will resume the supply constraints and COVID lockdown impacts ease. Seagate is fundamentally a stronger company today and is exceptionally well positioned to endure the current market environment. We have the right product portfolio, deep customer relationships and operational agility to optimize profits and fuel growth.
I'll now hand the call over to Gianluca to discuss the financial results.