Seagate(STX) - 2025 Q4 - Annual Results

Financial Highlights and Business Overview Fiscal Q4 and Full Year 2025 Performance Seagate reported strong financial results for fiscal Q4 and the full year 2025, driven by a 30% year-over-year revenue increase in the fourth quarter and significant margin expansion. The performance was bolstered by strong demand from cloud customers for high-capacity drives and structural business enhancements - The company highlighted a strong FQ4 with a 30% year-over-year revenue increase, record gross margin, and non-GAAP EPS at the top of the guidance range, attributed to structural business enhancements and strong demand from cloud customers[2] - Seagate is continuing to execute its ramp plans for areal density-leading HAMR products to meet growing customer demand for mass data storage in cloud and edge markets[3] Fiscal Q4 2025 Financial Performance (GAAP vs. Non-GAAP) | Metric | GAAP FQ4 2025 | Non-GAAP FQ4 2025 | GAAP FQ4 2024 | Non-GAAP FQ4 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue ($M) | $2,444 | $2,444 | $1,887 | $1,887 | | Gross Margin | 37.4% | 37.9% | 31.8% | 30.9% | | Operating Margin | 23.2% | 26.2% | 16.6% | 17.3% | | Net Income ($M) | $488 | $556 | $513 | $222 | | Diluted EPS | $2.24 | $2.59 | $2.39 | $1.05 | Fiscal Year 2025 Financial Performance (GAAP vs. Non-GAAP) | Metric | GAAP FY 2025 | Non-GAAP FY 2025 | GAAP FY 2024 | Non-GAAP FY 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue ($M) | $9,097 | $9,097 | $6,551 | $6,551 | | Gross Margin | 35.2% | 35.8% | 23.4% | 25.5% | | Operating Margin | 20.8% | 23.4% | 6.9% | 10.3% | | Net Income ($M) | $1,469 | $1,733 | $335 | $272 | | Diluted EPS | $6.77 | $8.10 | $1.58 | $1.29 | Cash Flow, Capital Return, and Balance Sheet The company demonstrated robust cash generation in FY 2025, with $1.1 billion in operating cash flow and $818 million in free cash flow. This supported shareholder returns of $600 million via dividends and a significant debt reduction of $684 million, strengthening the balance sheet Cash Flow and Capital Management (FY 2025) | Metric | Amount ($M) | | :--- | :--- | | Cash flow from operations | $1,100 | | Free cash flow | $818 | | Returned to shareholders (dividends) | $600 | - The company strengthened its balance sheet by reducing total debt by approximately $684 million during fiscal year 2025, ending the year with total debt of $5.0 billion[7] - The Board of Directors declared a quarterly cash dividend of $0.72 per share, payable on October 9, 2025[9] Business Outlook (FQ1 2026 Guidance) Seagate provides a positive outlook for the first quarter of fiscal 2026, forecasting revenue of $2.50 billion (±$150 million) and non-GAAP diluted EPS of $2.30 (±$0.20). This guidance incorporates the estimated impact of the Pillar Two global minimum tax framework Guidance for Fiscal First Quarter 2026 | Metric | Guidance Range | | :--- | :--- | | Revenue | $2.50 billion ± $150 million | | Non-GAAP Diluted EPS | $2.30 ± $0.20 | - The FQ1 2026 guidance includes the estimated impact of the Pillar Two global minimum tax framework, the net dilutive impact from the 2028 Exchangeable Senior Notes, and minimal expected impact from current global tariff policies[13] - A reconciliation of non-GAAP diluted EPS guidance to the comparable GAAP measure is not provided, as material items that may impact these measures are out of the company's control and cannot be reasonably predicted[12] Consolidated Financial Statements (GAAP) Condensed Consolidated Balance Sheets As of June 27, 2025, Seagate's total assets increased to $8.02 billion from $7.74 billion a year prior. Total liabilities decreased to $8.48 billion from $9.23 billion, leading to a significant improvement in the total shareholders' deficit, which narrowed from -$1.49 billion to -$453 million Balance Sheet Summary (in millions) | Account | June 27, 2025 | June 28, 2024 | | :--- | :--- | :--- | | Total Current Assets | $3,653 | $3,332 | | Total Assets | $8,023 | $7,739 | | Total Current Liabilities | $2,648 | $3,099 | | Total Liabilities | $8,476 | $9,230 | | Total Shareholders' Deficit | ($453) | ($1,491) | Condensed Consolidated Statements of Operations For fiscal year 2025, Seagate's revenue grew to $9.10 billion from $6.55 billion in FY 2024. This top-line growth, combined with improved cost management, resulted in a substantial increase in GAAP net income to $1.47 billion, up from $335 million in the prior year Statement of Operations Summary (in millions, except per share data) | Account | FY 2025 | FY 2024 | | :--- | :--- | :--- | | Revenue | $9,097 | $6,551 | | Income from operations | $1,890 | $452 | | Net income | $1,469 | $335 | | Diluted net income per share | $6.77 | $1.58 | Condensed Consolidated Statements of Cash Flows In fiscal year 2025, the company generated $1.08 billion in net cash from operating activities, an increase from $918 million in FY 2024. Net cash used in financing activities was $1.27 billion, primarily due to debt redemption, while investing activities used $276 million. This resulted in a net decrease in cash of $467 million for the year Statement of Cash Flows Summary (in millions) | Activity | FY 2025 | FY 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,083 | $918 | | Net cash (used in) provided by investing activities | ($276) | $126 | | Net cash used in financing activities | ($1,274) | ($473) | | (Decrease) increase in cash | ($467) | $572 | | Cash at end of year | $893 | $1,360 | Non-GAAP Financial Measures and Reconciliations Use and Explanation of Non-GAAP Measures Seagate uses non-GAAP financial measures to evaluate its core operating performance by excluding items it believes are not indicative of ongoing operations, such as share-based compensation, restructuring costs, and acquisition-related charges. These measures are intended to provide investors with a supplemental view of the company's performance - Management uses non-GAAP results to assess performance, allocate resources, and plan for future periods, as they are believed to exclude items not part of ongoing operations and thus provide a better understanding of core operating results[25][26] - Key non-GAAP adjustments include the exclusion of share-based compensation, restructuring costs, acquisition-related charges, purchase order cancellation fees, and strategic investment gains/losses[36][39][40][41] - Free Cash Flow is defined as net cash from operating activities less capital expenditures. Adjusted EBITDA is defined as net income before interest, taxes, depreciation, and amortization, further adjusted for non-core items. These are used to assess liquidity and comply with debt covenants[46][47] GAAP to Non-GAAP Reconciliations The company provides detailed reconciliations from GAAP to non-GAAP results. For FY 2025, key adjustments included adding back $200 million in share-based compensation and $38 million in restructuring charges to derive non-GAAP income from operations of $2.13 billion and non-GAAP net income of $1.73 billion Gross Profit and Operating Income Reconciliation For fiscal year 2025, Non-GAAP Gross Profit was $3.26 billion (35.8% margin) compared to GAAP Gross Profit of $3.20 billion (35.2% margin). Non-GAAP Income from Operations was $2.13 billion (23.4% margin) versus GAAP Income from Operations of $1.89 billion (20.8% margin), with primary adjustments being share-based compensation and restructuring charges FY 2025 GAAP vs. Non-GAAP Operating Metrics (in millions) | Metric | GAAP | Non-GAAP | Key Adjustments | | :--- | :--- | :--- | :--- | | Gross Profit | $3,200 | $3,255 | Share-based compensation ($51), Restructuring ($13), Purchase order fees (-$9) | | Gross Margin | 35.2% | 35.8% | - | | Operating Income | $1,890 | $2,127 | Share-based compensation ($200), Restructuring ($38) | | Operating Margin | 20.8% | 23.4% | - | Net Income and EPS Reconciliation In fiscal year 2025, Seagate's GAAP Net Income was $1.47 billion ($6.77 per diluted share). After adjustments, including adding back $200 million for share-based compensation and $53 million for strategic investment losses, Non-GAAP Net Income was $1.73 billion ($8.10 per diluted share) FY 2025 GAAP vs. Non-GAAP Net Income & EPS | Metric | GAAP | Non-GAAP | Key Adjustments ($M) | | :--- | :--- | :--- | :--- | | Net Income ($M) | $1,469 | $1,733 | Share-based compensation ($200), Strategic investment losses ($53), Restructuring ($38) | | Diluted EPS | $6.77 | $8.10 | - | Free Cash Flow and EBITDA Reconciliation For fiscal year 2025, Free Cash Flow was calculated at $818 million, derived from $1.08 billion in net cash from operating activities minus $265 million in capital expenditures. Non-GAAP Adjusted EBITDA for the last twelve months totaled $2.35 billion FY 2025 Free Cash Flow Calculation (in millions) | Metric | Amount | | :--- | :--- | | Net Cash Provided by Operating Activities | $1,083 | | Less: Acquisition of property, equipment | ($265) | | Free Cash Flow | $818 | - Last Twelve Months (LTM) Non-GAAP Adjusted EBITDA was $2,349 million[34]