Seagate(US:STX)2025-10-31 12:10Financial Performance - In the September 2025 quarter, the company shipped 182 exabytes of HDD storage capacity and generated revenue of approximately $2.6 billion with a gross margin of 39.4%[105]. - Revenue increased by $185 million compared to the June 2025 quarter, primarily due to higher demand for Data Center exabytes shipped and favorable pricing actions[112]. - Data Center markets contributed 80% of total company revenue, driven by demand from global cloud customers for AI-related applications[108]. - Net income for the September 2025 quarter was $549 million, representing a 12.5% increase compared to the June 2025 quarter[110]. - Gross margin improved by 2 percentage points compared to the June 2025 quarter and by 6 percentage points compared to the September 2024 quarter, driven by pricing actions and favorable product mix[115]. Operating Expenses and Tax - Operating expenses totaled $343 million, with product development expenses increasing by $7 million compared to the June 2025 quarter[117]. - Other expense, net for the September 2025 quarter was $80 million, primarily related to interest expense[121]. - The company recorded an income tax expense of $65 million for the September 2025 quarter[123]. Geographic Revenue Distribution - The Americas accounted for 53% of revenue, while Asia Pacific contributed 39% in the September 2025 quarter[112]. Cash Flow and Liquidity - As of October 3, 2025, cash and cash equivalents increased by $221 million to $1,112 million from $891 million on June 27, 2025, primarily due to $532 million net cash provided by operating activities[126]. - Cash provided by operating activities for the three months ended October 3, 2025, was $532 million, reflecting adjustments for non-cash items and major working capital movements[127]. - Net cash used in investing activities for the same period was $90 million, mainly for $105 million in capital expenditures, partially offset by $15 million from a business divestiture[127]. - Net cash used in financing activities totaled $221 million, which included $153 million in dividends paid and $29 million for share repurchases[129][136]. - The company has approximately $1.1 billion in cash and cash equivalents and $1.3 billion available for borrowing under its Revolving Credit Facility as of October 3, 2025[129]. Debt and Obligations - Future principal payment obligations on long-term debt amount to $5.0 billion, with estimated future interest payments of approximately $1.7 billion[137]. - The company has unconditional purchase obligations of approximately $1.3 billion, primarily related to inventory components, with $1.2 billion expected to be paid within one year[135]. - A settlement penalty of $300 million was accrued for fiscal year 2023, with quarterly payments of $15 million starting October 31, 2023[138]. Dividends and Capital Expenditures - A quarterly cash dividend of $0.74 per share was declared on October 28, 2025, payable on January 9, 2026[139]. - The company expects capital expenditures to be higher in fiscal year 2026 compared to fiscal year 2025, requiring substantial cash for working capital and strategic investments[141]. Foreign Currency and Credit Risk - The total notional amount of foreign currency forward exchange contracts is $171 million, with the highest exposure in Thai Baht at $66 million[150]. - The average contract rates for the foreign currency forward exchange contracts include 0.74 for British Pound Sterling and 7.10 for Chinese Renminbi[150]. - The company monitors and limits credit exposure related to foreign currency forward exchange contracts through ongoing credit evaluations[150]. - Changes in corporate issuer credit ratings have minimal impact on near-term financial results but may affect future capital raising and transaction execution[151]. Equity Market Risks - The company entered into a Total Return Swap (TRS) to manage equity market risks associated with the non-qualified deferred compensation plan, paying a floating rate based on SOFR plus an interest rate spread[152]. - The TRS is designed to substantially offset changes in the SDCP liabilities due to fluctuations in the value of investment options selected by employees[152]. - The investment portfolio is diversified and structured to minimize credit risk associated with foreign currency contracts[150]. - The company maintains limits on the maximum tenor of contracts based on the credit rating of financial institutions involved[150]. - There is exposure to counterparty credit downgrades, which could negatively impact future capital costs[151]. - The company is subject to equity market risks due to changes in the fair value of notional investments selected by employees[151].