Group 1 - The stock market has entered the Q1 earnings season with significant pessimism regarding tariffs, but the actual results from reporting companies suggest a different narrative [1] - Companies reporting earnings have shown that the reality may not align with the initial pessimistic expectations surrounding tariffs [1] Group 2 - Gary Alexander has extensive experience in covering technology companies and has worked in Silicon Valley, providing insights into current industry themes [1] - He has been a contributor to Seeking Alpha since 2017 and has been featured in various web publications, indicating a strong presence in the investment community [1]

Core Viewpoint - Seagate Technology's stock has experienced an increase, with the company asserting that tariffs are not a significant issue for its operations [1] Group 1 - Seagate Technology reported a positive market response, indicating resilience against tariff impacts [1] - The company emphasized its ability to manage costs effectively despite external economic pressures [1] - Seagate's strategic positioning in the market allows it to navigate challenges without significant disruptions [1]

Core Insights - Seagate Technology Holdings plc (STX) reported third-quarter fiscal 2025 non-GAAP earnings of $1.90 per share, exceeding the Zacks Consensus Estimate by 7.95% and reflecting operational discipline and effective cost management [1] - Non-GAAP revenues reached $2.16 billion, beating estimates by 1.3% and showing a 31% year-over-year increase, although down 7% sequentially due to supply chain challenges [1][3] - The company continues to benefit from strong demand for mass capacity storage, particularly driven by nearline cloud demand, which surged 48% year over year [2][3] Financial Performance - Non-GAAP gross margin increased to 36.2% from 26.1% in the prior-year quarter, contributing to improved earnings and free cash flow [13] - Non-GAAP income from operations rose to $507 million from $183 million a year ago, with operating margin increasing to 23.5% from 11.1% [14] - Cash flow from operations was $259 million, with free cash flow amounting to $216 million, indicating a positive trend in cash generation [16] Product and Market Dynamics - Seagate shipped 143.6 exabytes of HDD storage, a 45% year-over-year increase, although down 5% sequentially [6] - Mass capacity storage shipments reached 132.9 exabytes, up 50% year over year, with average capacity per drive increasing to 16.2 TB [7] - The company is ramping up its HAMR technology to meet increasing cloud customer demand, with volume shipments expected to expand in the second half of calendar 2025 [4] Future Outlook - Management anticipates fourth-quarter fiscal 2025 revenues of $2.4 billion, reflecting an 11% sequential increase and a 27% year-over-year improvement [17] - Non-GAAP earnings are projected to be $2.4 per share, with operating expenses expected around $285 million [18] - The outlook indicates stability in demand and minimal impact from recent global tariff developments [17]

Financial Data and Key Metrics Changes - Seagate reported a 31% year-on-year increase in revenue and an 81% growth in non-GAAP gross profit dollars for Q3 2025 [5][13] - Non-GAAP EPS was $1.90, which is at the top end of the guidance range, despite a 7% sequential decline in revenue [13][20] - Non-GAAP gross margin expanded by 70 basis points sequentially to 36.2% and over 1,000 basis points year-on-year [16][20] Business Line Data and Key Metrics Changes - Nearline revenue represented approximately 90% of mass capacity volume, with shipments of 120 exabytes, down 5% sequentially but up 55% year-on-year [15] - Mass capacity revenue declined sequentially by $145 million to $1.7 billion, representing a 48% increase year-on-year [14] - Legacy product sales totaled $254 million, down 8% sequentially, reflecting expected seasonal trends [15] Market Data and Key Metrics Changes - Cloud nearline revenue and exabytes were up nearly 10% sequentially, almost doubling year-over-year amid a tight supply environment [8] - Demand for mass capacity storage aligns with the cloud CapEx investment cycle and ongoing data center infrastructure build-out to support AI transformations [8][10] - Nearline exabyte demand looks strong through calendar 2025, with visibility of demand extending into the first half of calendar 2026 [10] Company Strategy and Development Direction - The company is focusing on managing controllable factors while executing its aerial density-driven technology roadmap [7] - Seagate's HAMR-based Mosaic drives are positioned as the industry's only three terabyte per disk products, with shipments expected to ramp in the second half of calendar 2025 [7][12] - The company aims to transform its business model to prioritize profits and cash generation while capitalizing on the growth in data generation and value [23] Management's Comments on Operating Environment and Future Outlook - Management expects minimal impact from tariffs on fourth-quarter financial performance and is monitoring the situation closely [6][20] - The demand environment remains intact, particularly among global cloud customers, despite potential tariff measures affecting customer buying decisions [7][20] - The company anticipates free cash flow generation to improve sequentially through the rest of the calendar year [19][20] Other Important Information - The company returned $152 million to shareholders through dividends and ended the quarter with liquidity of $2.1 billion [19] - The debt balance was $5.1 billion at the end of March, with a net leverage ratio of 2.1 times [19] Q&A Session Summary Question: Understanding upside in revenue despite supply constraints - Management confirmed that the guidance for June would have remained the same a month ago, indicating predictability built through the build-to-order process [29][30] Question: Progress on HAMR qualifications and contributions - Management stated that HAMR is growing well, with one major CSP qualification almost complete and more in progress [35][36] Question: Visibility on customer demand and pricing - Management noted that build-to-order models provide visibility into demand, and they expect to negotiate higher prices as they transition to higher capacity products [42][43] Question: Impact of tariffs on financial model - Management indicated that passing through tariff-related costs would be a last resort, and they are focused on maintaining margins to reinvest in the business [50][52] Question: Expectations for revenue growth and gross margin in the back half of the year - Management expressed confidence in revenue growth and profitability, with no reason to change expectations based on current visibility [58][60]

Seagate | 2 Q2FY25 Financial Results SUPPLEMENTAL FINANCIAL INFORMATION Q2FY25 JANUARY 21, 2025 Safe Harbor Statement and Use of Non-GAAP Financial Information This document and our other communications regarding our quarterly financial results contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relat ...

Market Overview - The S&P 500 experienced its sixth consecutive day of gains, with no negative impact from economic data or earnings reports [1] - The Dow increased by 300 points (+0.75%), the S&P 500 rose by 32 points (+0.58%), and the Nasdaq grew by 95 points (+0.55%) [2] - Bond yields decreased, with the 10-year yield at 4.17% and the 2-year yield at 3.65% [2] Housing Market - The Case Shiller Home Price Index for February showed a headline increase of +3.9%, which is 20 basis points lower than the previous month [3] - The 10-City survey reported a +5.2% increase, down from +5.7%, while the 20-City index showed a +4.5% increase, down from +4.7% [3] - Notable cities for rising home prices included New York City (+7.7%), Chicago (+7.0%), and Cleveland (+6.6%) [3] Labor Market - The JOLTS report for March indicated job openings at 7.19 million, below the expected 7.5 million, with the previous month revised down to 7.5 million [5] - Job quits remained stable at 3.3 million, with a quits rate of +2.1% [6] - Layoffs in the retail sector decreased by 66,000, and federal government layoffs fell by 11,000 [6] Consumer Confidence - The Consumer Confidence Index (CCI) for April dropped to 86.0, below the expected 87.3 and down 7.9 points from the previous month [7] - The Expectations Index fell to 54.4, a decrease of -12.5 month over month, marking the lowest level since October 2011 [8] - 32.1% of consumers expect fewer jobs in the next six months, the highest rate since April 2009 [8] Company Earnings - Visa reported fiscal Q2 earnings of $2.76 per share, exceeding expectations of $2.68 and the previous year's $2.51, with revenues of $9.59 billion slightly above the anticipated $9.56 billion [10] - Starbucks missed both earnings and revenue expectations for fiscal Q2, reporting earnings of 41 cents per share and revenues of $8.76 billion, below the expected $8.79 billion [12] - Booking Holdings posted strong Q1 results with earnings of $24.81 per share and revenues of $4.76 billion, surpassing expectations [13] - Seagate Technologies exceeded estimates with fiscal Q3 earnings of $1.90 per share and revenues of $2.16 billion, raising guidance for the next quarter to $2.40 per share [14]

Group 1 - Seagate reported quarterly earnings of $1.90 per share, exceeding the Zacks Consensus Estimate of $1.76 per share, and showing a significant increase from $0.33 per share a year ago, representing an earnings surprise of 7.95% [1] - The company achieved revenues of $2.16 billion for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 1.34%, and up from $1.66 billion year-over-year [2] - Seagate has consistently outperformed consensus EPS and revenue estimates over the last four quarters, indicating strong operational performance [2] Group 2 - The stock's immediate price movement will largely depend on management's commentary during the earnings call, as well as future earnings expectations [3][4] - Despite outperforming the market this year, the current estimate revisions trend for Seagate is unfavorable, resulting in a Zacks Rank 4 (Sell), suggesting potential underperformance in the near future [6] - The current consensus EPS estimate for the upcoming quarter is $2.28 on revenues of $2.4 billion, and for the current fiscal year, it is $7.60 on revenues of $9.02 billion [7] Group 3 - The Computer - Integrated Systems industry, to which Seagate belongs, is currently ranked in the bottom 31% of over 250 Zacks industries, which may negatively impact stock performance [8] - Another company in the same industry, IonQ, Inc., is expected to report a quarterly loss of $0.27 per share, reflecting a year-over-year decline of 42.1%, with revenues projected at $7.5 million, down 1.1% from the previous year [9]

Financial Data and Key Metrics Changes - Seagate reported a 31% year-on-year increase in revenue, reaching $2.16 billion, and an 81% growth in non-GAAP gross profit dollars [6][15] - Non-GAAP gross margin expanded by 70 basis points sequentially to 36.2%, and non-GAAP operating margin increased to 23.5% of revenue [15][18] - Non-GAAP EPS was $1.90, at the top end of the guidance range, with free cash flow generation increasing to $216 million compared to $150 million in the prior period [20][21] Business Line Data and Key Metrics Changes - Alt drive revenue was $2 billion, down 8% sequentially, while mass capacity revenue declined by $145 million to $1.7 billion, representing a 48% increase year-on-year [16] - Nearline represented roughly 90% of mass capacity volume, with shipments of 120 exabytes, down 5% sequentially but up 55% year-on-year [17] - Sales of legacy products totaled $254 million, down 8% sequentially, while revenue from other businesses remained flat at $157 million [17] Market Data and Key Metrics Changes - Cloud nearline revenue and exabytes were up nearly 10% sequentially, almost doubling year-over-year amid a tight supply environment [10] - Demand for mass capacity storage is aligned with the cloud CapEx investment cycle and ongoing data center infrastructure build-out to support AI transformations [10][11] - Nearline exabyte demand looks strong through calendar 2025, with visibility of demand extending into the first half of calendar 2026 [12] Company Strategy and Development Direction - Seagate is focusing on managing controllable factors while executing its aerial density-driven technology roadmap, which enhances customer value [9] - The company is ramping up shipments of high-capacity drives and expects significant increases in HAMR product shipments in the coming quarters [13][14] - Seagate's transformation towards a profit and cash generation-focused business model is expected to capitalize on the growing demand for mass capacity storage [25] Management's Comments on Operating Environment and Future Outlook - Management expects minimal impact from trade policy changes on fourth-quarter financial performance and is monitoring the situation closely [8] - The company anticipates continued robust demand for high-capacity nearline products, with revenue forecasted to be in the range of $2.4 billion for June [23] - Management remains optimistic about the long-term growth prospects driven by increasing data generation and the value of data [25] Other Important Information - Seagate's debt balance was $5.1 billion at the end of March, with a net leverage ratio of 2.1 times, and plans to continue reducing debt [22] - The company returned $152 million to shareholders through dividends and maintained ample liquidity of $2.1 billion [21] Q&A Session Summary Question: Can you help us understand how and where you got some of the upside in the quarter with the supply shortage? - Management indicated that the predictability built through the build-to-order process allowed them to guide the same revenue expectations a month ago, despite previous operational issues being resolved [29][30] Question: Where are you with HAMR qualifications and how much did it contribute to the March results? - Management confirmed that HAMR is growing well, with significant contributions expected as qualifications progress [34][36] Question: How has your visibility improved regarding new demand from neo clouds? - Management noted that build-to-order agreements provide better visibility into demand, and customers are making data center investments due to the importance of data infrastructure [40][41] Question: Why are margins not seeing more upside in June despite expected increases in nearline? - Management explained that while nearline and cloud demand is expected to be higher, pricing dynamics and contract negotiations will influence margin outcomes [43][45] Question: How do you see the impact of tariffs on your financial model? - Management stated that passing through tariff-related costs would be a last resort, and they are focused on maintaining margins through value-added negotiations [50][51] Question: What is the expected contribution of HAMR to your bits as you progress through calendar 2025? - Management expressed confidence in the increasing presence of HAMR drives as qualifications complete, contributing significantly to future growth [73] Question: How do you see the impact of emerging AI inference storage on your long-term TAM? - Management highlighted the potential for increased storage demand driven by AI applications, emphasizing the importance of data infrastructure [64][66]

Financial Data and Key Metrics Changes - Seagate reported a 31% year-on-year increase in revenue, reaching $2.16 billion, and an 81% growth in non-GAAP gross profit dollars [5][13] - Non-GAAP gross margin expanded by 70 basis points sequentially to 36.2%, and non-GAAP operating margin increased to 23.5% of revenue [13][16] - Non-GAAP EPS was $1.90, at the top end of the guidance range, with free cash flow generation increasing to $216 million compared to $150 million in the prior period [18][19] Business Line Data and Key Metrics Changes - Nearline revenue represented approximately 90% of mass capacity volume, with shipments of 120 exabytes, down 5% sequentially but up 55% year-on-year [15] - Mass capacity revenue declined sequentially by $145 million to $1.7 billion, but represented a 48% increase year-on-year [14] - Legacy product sales totaled $254 million, down 8% sequentially, reflecting expected seasonal trends [15] Market Data and Key Metrics Changes - Cloud nearline revenue and exabytes were up nearly 10% sequentially, almost doubling year-over-year amid a tight supply environment [8] - Demand for mass capacity storage aligns with the cloud CapEx investment cycle and ongoing data center infrastructure build-out to support AI transformations [8][10] - Nearline exabyte demand looks strong through calendar 2025, with visibility of demand extending into the first half of calendar 2026 [10] Company Strategy and Development Direction - The company is focused on managing controllable factors while executing its aerial density-driven technology roadmap [7] - Seagate's HAMR-based Mosaic drives are positioned as the industry's only three terabyte per disk products, with ramping volume to qualified customers [7][12] - The company aims to transform its business model to prioritize profits and cash generation, capitalizing on the growth in data generation and value [23] Management's Comments on Operating Environment and Future Outlook - Management expects minimal impact from trade policy changes on fourth-quarter financial performance and is monitoring the situation closely [6][20] - The company anticipates robust demand for high-capacity nearline products across the global cloud customer base, driving revenue and profits higher in the upcoming quarter [20] - Management expressed confidence in the long-term growth potential driven by increasing data generation and the need for mass capacity storage [23] Other Important Information - The company returned $152 million to shareholders through dividends and maintained liquidity of $2.1 billion at the end of March [19] - Seagate's debt balance was $5.1 billion, with a net leverage ratio of 2.1 times, and plans for further reduction in the coming quarters [19] Q&A Session Summary Question: How did Seagate manage upside in the quarter despite supply constraints? - Management indicated that the predictability built through the build-to-order process allowed them to guide revenue effectively, despite previous operational issues being resolved [29][30] Question: What is the status of HAMR qualifications and its contribution to results? - Management confirmed that HAMR is growing well, with several qualifications in progress, and that it contributed positively to the quarter's results [34][37] Question: How has visibility improved regarding customer demand? - Management noted that build-to-order models provide predictability, and there is a sense of urgency from customers for data center investments [41][42] Question: What is the impact of tariffs on financial models? - Management stated that passing through tariff-related costs would be a last resort, and they are focused on maintaining margins to reinvest in technology [50][52] Question: What is the outlook for revenue growth and gross margin in the back half of the year? - Management expressed confidence in sequential revenue growth and gross margin expansion, with strong demand visibility extending into early 2026 [55][58] Question: How does the company view the impact of emerging AI workloads on storage demand? - Management highlighted that AI workloads are expected to drive significant storage demand, particularly for video applications and large datasets [64][65]

[Fiscal Q3 2025 Financial Results](index=1&type=section&id=Fiscal%20Q3%202025%20Financial%20Results) [Financial Highlights](index=1&type=section&id=Financial%20Highlights) Seagate reported strong fiscal third-quarter 2025 results, driven by structural business model enhancements and a healthy mass capacity storage market FQ3 2025 vs FQ3 2024 Financial Performance | Metric | GAAP FQ3 2025 | GAAP FQ3 2024 | Non-GAAP FQ3 2025 | Non-GAAP FQ3 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue ($M) | $2,160 | $1,655 | $2,160 | $1,655 | | Gross Margin | 35.2% | 25.7% | 36.2% | 26.1% | | Operating Margin | 20.0% | 8.6% | 23.5% | 11.1% | | Net Income ($M) | $340 | $25 | $407 | $71 | | Diluted EPS | $1.57 | $0.12 | $1.90 | $0.33 | - The company's strong performance is attributed to structural enhancements to its business model and a healthy supply/demand environment for mass capacity storage[2](index=2&type=chunk) - Seagate remains focused on executing its HAMR (Heat-Assisted Magnetic Recording) product ramp to support ongoing demand from cloud customers[3](index=3&type=chunk) [Capital Management](index=1&type=section&id=Capital%20Management) Seagate generated substantial cash flow, reduced debt, and returned capital to shareholders through dividends in the third fiscal quarter FQ3 2025 Cash Flow and Capital Return | Metric | Amount ($M) | | :--- | :--- | | Cash flow from operations | $259 | | Free cash flow | $216 | | Capital returned to shareholders (dividends) | $152 | | Debt reduction | $536 | - The Board of Directors declared a quarterly cash dividend of **$0.72 per share**, payable on July 8, 2025[8](index=8&type=chunk) - The company ended the quarter with **$814 million** in cash and cash equivalents and **212 million** ordinary shares issued and outstanding[5](index=5&type=chunk) [Business Outlook (FQ4 2025)](index=2&type=section&id=Business%20Outlook%20(FQ4%202025)) Seagate anticipates continued growth for fiscal fourth quarter 2025, with specific revenue and non-GAAP diluted EPS guidance provided Fiscal Fourth Quarter 2025 Guidance | Metric | Guidance | | :--- | :--- | | Revenue | $2.40 billion ± $150 million | | Non-GAAP diluted EPS | $2.40 ± $0.20 | - The guidance for non-GAAP diluted EPS excludes known pre-tax charges related to estimated share-based compensation expenses of **$0.22 per share**[9](index=9&type=chunk) - A reconciliation of the non-GAAP diluted EPS guidance to the corresponding GAAP measure is not available without unreasonable effort due to the unpredictability of material items[10](index=10&type=chunk) [Financial Statements](index=4&type=section&id=Financial%20Statements) [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Seagate's balance sheet as of March 28, 2025, shows a decrease in total assets and a significant reduction in total liabilities Balance Sheet Summary (in millions) | Account | March 28, 2025 | June 28, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $814 | $1,358 | | Total Assets | $7,564 | $7,739 | | Total Liabilities | $8,393 | $9,230 | | Total Shareholders' Deficit | $(829) | $(1,491) | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Seagate reported significant year-over-year improvements in revenue and net income for the third quarter ended March 28, 2025 Statement of Operations Summary - Three Months Ended (in millions) | Metric | March 28, 2025 | March 29, 2024 | | :--- | :--- | :--- | | Revenue | $2,160 | $1,655 | | Income from operations | $431 | $143 | | Net income | $340 | $25 | | Diluted EPS | $1.57 | $0.12 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities increased, while significant cash was used in financing activities for debt reduction and dividends Cash Flow Summary - Nine Months Ended (in millions) | Activity | March 28, 2025 | March 29, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $575 | $484 | | Net cash used in investing activities | $(146) | $(157) | | Net cash used in financing activities | $(973) | $(319) | [Reconciliation of GAAP to Non-GAAP Measures](index=7&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures) [Reconciliation Tables](index=8&type=section&id=Reconciliation%20Tables) Detailed reconciliations of GAAP to non-GAAP financial results are provided, highlighting key adjustments for net income and free cash flow FQ3 2025 GAAP to Non-GAAP Net Income Reconciliation (in millions) | Description | Amount | | :--- | :--- | | **GAAP Net Income** | **$340** | | Share-based compensation | $54 | | Restructuring and other, net | $20 | | Other adjustments (net) | $(7) | | **Non-GAAP Net Income** | **$407** | FQ3 2025 Free Cash Flow Reconciliation (in millions) | Description | Amount | | :--- | :--- | | GAAP Net Cash Provided by Operating Activities | $259 | | Acquisition of property, equipment and leasehold improvements | $(43) | | **Free Cash Flow** | **$216** | [Explanation of Non-GAAP Adjustments](index=7&type=section&id=Explanation%20of%20Non-GAAP%20Adjustments) Seagate explains its use of non-GAAP measures to provide a clearer view of core financial performance by excluding non-recurring or non-operational items - Non-GAAP results are used by management to assess performance, allocate resources, and plan for future periods, and are intended to supplement, not replace, GAAP results[23](index=23&type=chunk)[24](index=24&type=chunk) - Key adjustments include restructuring costs, share-based compensation, acquisition-related charges, purchase order cancellation fees, and strategic investment gains/losses, which are excluded because they are not considered indicative of core operating performance[32](index=32&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk) - Free cash flow is defined as net cash from operating activities less capital expenditures and is used to assess liquidity. EBITDA and Adjusted EBITDA are used to evaluate the company's debt portfolio and comply with financial covenants[42](index=42&type=chunk)[43](index=43&type=chunk)