Seagate Technology Holdings Conference Call Summary Company Overview - **Company**: Seagate Technology Holdings (NasdaqGS:STX) - **Date**: December 01, 2025 - **Key Speaker**: Gianluca Romano, CFO Industry Insights - **Industry**: Hard Disk Drive (HDD) and Storage Solutions - **Current Market Condition**: Supply-demand tightness has persisted for over two years, with demand consistently exceeding supply [2][8][34] Core Points and Arguments 1. **Supply-Demand Dynamics**: - Demand for HDDs has been above supply for over two years, with a focus on increasing exabytes rather than unit capacity [2][3] - Seagate aims to transition customers to higher capacity drives using HAMR technology, which can increase capacity from 30TB to 50TB and beyond [2][5] 2. **Capacity Expansion Strategy**: - Seagate does not plan to expand unit capacity based on customer prepayments; they will self-fund any future capacity increases [4][5] - The company is currently booked out through 2026 and into 2027, indicating strong demand [8][20] 3. **Profitability and Gross Margin**: - Seagate has doubled its gross margin in less than 10 quarters, focusing on consistent pricing strategies and moving customers to higher capacity drives [5][28] - Gross margin has expanded by 400-500 basis points in the last calendar year, driven by product mix and pricing strategies [28][29] 4. **Demand Drivers**: - AI applications are significantly increasing storage consumption, particularly in video storage [11][12] - The company does not see HDDs as a bottleneck in data center build-up; other components, such as power, are currently more constraining [10][34] 5. **Technology Roadmap**: - The qualification of HAMR drives is accelerating, with five customers qualified and more in the pipeline [22][24] - By the end of the fiscal year, 40% of exabytes sold will be from HAMR products, increasing to 70% by the end of fiscal 2027 [25][27] 6. **Market Position and Competition**: - Seagate does not view SSDs as direct competitors for the same workloads, as HDDs remain essential for data center storage needs [13][16] - The cost gap between NAND and HDD is expected to widen, benefiting HDDs as HAMR technology reduces costs per terabyte [39][40] 7. **Cash Flow and Capital Return**: - Seagate has reduced its debt from over $6 billion to $4.5 billion and plans to increase shareholder returns through dividends and share buybacks [35][36] 8. **Future Outlook**: - Demand growth is projected at a mid-20s percentage CAGR over the next three years, with short-term performance exceeding expectations [37] - The company is monitoring order volumes and market conditions closely to identify any signs of demand slowdown [34] Additional Important Insights - **Customer Agreements**: Long-term agreements with customers are in place for exabyte allocations, providing confidence in future demand [21] - **CapEx Contribution**: HDDs represent a mid-single-digit percentage of total data center CapEx, indicating a stable market share [45] This summary encapsulates the key insights and strategic direction of Seagate Technology Holdings as discussed in the conference call, highlighting the company's focus on capacity management, profitability, and adapting to market demands.

Core Insights - Western Digital (WDC) shows a significant improvement in earnings outlook, making it an attractive investment option as analysts continue to raise earnings estimates [1][3] - The upward trend in earnings estimate revisions reflects growing analyst optimism regarding the company's earnings prospects, which is expected to positively impact its stock price [2][3] Current-Quarter Estimate Revisions - The earnings estimate for the current quarter is $1.85 per share, representing a +4.5% change from the previous year [6] - Over the last 30 days, the Zacks Consensus Estimate for Western Digital has increased by 8.28%, with two estimates moving higher and no negative revisions [6] Current-Year Estimate Revisions - For the full year, the earnings estimate is $7.06 per share, indicating a +43.2% change from the year-ago figure [7] - The consensus estimate has increased by 5.71% over the past month, with three estimates moving higher and no negative revisions [8] Favorable Zacks Rank - Western Digital has achieved a Zacks Rank 1 (Strong Buy) due to promising estimate revisions, which is a reliable indicator for investors [9] - Stocks with Zacks Rank 1 and 2 have historically outperformed the S&P 500, suggesting strong potential for Western Digital [9] Bottom Line - Western Digital shares have increased by 26.1% over the past four weeks, indicating investor confidence in its earnings growth prospects [10]

Financial Data and Key Metrics Changes - Seagate reported revenue of $2.63 billion for the September quarter, representing an 8% sequential increase and a 21% year-over-year growth [15][16] - Non-GAAP gross margin reached a record 40.1%, up 220 basis points sequentially, while non-GAAP operating margin expanded by 280 basis points to 29% [15][16] - Non-GAAP EPS was $2.61, exceeding the high end of the guidance range [15][20] Business Line Data and Key Metrics Changes - Data center revenue accounted for 80% of total revenue at $2.1 billion, up 13% sequentially and 34% year-over-year [16][17] - The company shipped 182 exabytes in the September quarter, a 32% increase year-over-year, with the majority delivered to global data center customers [15][16] - Edge IoT revenue made up the remaining 20% of revenue at $515 million, with expectations for seasonal improvement in the December quarter [18] Market Data and Key Metrics Changes - Demand from global cloud service providers (CSPs) continued to grow, with cloud exabyte demand increasing for the ninth consecutive quarter [17][18] - The average nearline drive capacity increased by 26% over the past year, contributing to exabyte volume growth [17] - The company noted a significant increase in unstructured data generation, particularly from video content, driving demand for hard drives [8][9] Company Strategy and Development Direction - Seagate is focused on executing its HAMR-based product roadmap to support growing exabyte needs and transitioning customers to higher-capacity drives [7][10] - The company aims to leverage its manufacturing expertise and advancements in technology to achieve 10 terabytes per disk [12] - Seagate is committed to returning at least 75% of free cash flow to shareholders over time, with a quarterly dividend increase of approximately 3% [21][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the sustainability of cash flow generation and the ongoing demand environment for high-capacity hard drives [6][13] - The company anticipates continued strong demand from global cloud data centers, projecting December quarter revenue in the range of $2.7 billion, representing a 16% year-over-year improvement [23] - Management highlighted the transformative impact of AI on hard drive demand, with expectations for ongoing growth in data storage needs [7][8] Other Important Information - Seagate's cash and cash equivalents increased by 25% sequentially to $2.4 billion, with a net leverage ratio of 1.5 times based on adjusted EBITDA [22] - The company shipped over 1 million Mosaic drives in the September quarter, with plans to qualify additional global CSPs for higher-capacity products [10][11] Q&A Session Summary Question: Plans to add capacity and supply chain bottlenecks - Management indicated that capacity will be added through product transitions rather than increasing unit capacity, focusing on exabyte capacity instead [28][29] Question: Update on HAMR rollout and customer adoption - Management confirmed that five major cloud customers are now qualified on HAMR, contributing to revenue and profitability growth [33] Question: Sustainability of incremental margins - Management acknowledged that while current margins are higher due to product mix, variability exists from quarter to quarter based on customer negotiations and market conditions [39][40] Question: Cost reduction expectations for calendar 2026 - Management noted that improvements in cost per terabyte are expected from the transition to higher capacity drives, with ongoing qualification of 40-terabyte drives [44] Question: Visibility of inference demand and seasonality - Management expressed confidence in the growth of inference demand driven by video content generation, with expectations for lower seasonal impacts on data center revenue [50][52] Question: Pricing strategy in a constrained environment - Management stated that pricing strategy remains consistent, with slight increases for higher capacity products while maintaining competitive pricing for existing products [56][58] Question: Managing supply between consumer and cloud markets - Management clarified that while some supply is being shifted from edge IoT to cloud, overall demand remains strong, and no significant cannibalization is expected [62][63]

Financial Data and Key Metrics Changes - Seagate reported revenue of $2.63 billion for the September quarter, representing an 8% sequential increase and a 21% year-over-year growth [13] - Non-GAAP gross margins reached a record 40.1%, up 220 basis points sequentially [13] - Non-GAAP operating margin expanded by 280 basis points to 29% sequentially, with non-GAAP EPS at $2.61, exceeding the high end of guidance [5][13] - Free cash flow generation was flat quarter-over-quarter at $427 million, with a projected increase in the December quarter [19] Business Line Data and Key Metrics Changes - Data center revenue accounted for 80% of total revenue at $2.1 billion, up 13% sequentially and 34% year-over-year [15] - The company shipped 182 exabytes in the September quarter, a 32% increase year-over-year, with the majority delivered to global data center customers [14] - Edge IoT revenue made up the remaining 20% of revenue at $515 million, with expectations for seasonal improvement in the December quarter [17] Market Data and Key Metrics Changes - Demand from global cloud service providers (CSPs) continued to grow, with cloud exabyte demand increasing for the ninth consecutive quarter [16] - The average nearline drive capacity increased by 26% over the past year, contributing to exabyte volume growth [16] - The company noted a significant increase in unstructured data generation, particularly from video content, driving demand for hard drives [7][8] Company Strategy and Development Direction - Seagate is focused on executing its HAMR-based product roadmap to support growing exabyte needs and transitioning customers to higher-capacity drives [6][11] - The company aims to leverage its manufacturing expertise and advancements in technology to achieve a competitive advantage in aerial density [10] - Seagate is committed to returning at least 75% of free cash flow to shareholders over time, with a recent increase in quarterly dividends by approximately 3% [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the sustainability of cash flow generation and the ongoing demand environment for high-capacity hard drives [5][11] - The company anticipates continued strong demand from global cloud data centers, projecting December quarter revenue in the range of $2.7 billion, representing a 16% year-over-year improvement [22] - Management highlighted the transformative impact of AI on hard drive demand, particularly in relation to data storage needs [6][7] Other Important Information - Seagate's cash and cash equivalents increased by 25% sequentially to $2.4 billion, with a net leverage ratio of 1.5 times based on adjusted EBITDA [20] - The company shipped over 1 million Mosaic drives in the September quarter, with plans to qualify additional global CSPs for higher-capacity products [9][10] Q&A Session Summary Question: Plans to add capacity and supply chain bottlenecks - Management indicated that capacity addition is through product transitions rather than unit capacity increases, focusing on exabyte capacity [27][28] Question: Adoption of HAMR technology - Management noted that customer engagement on long-term agreements is driven by visibility into higher capacity points, with ongoing qualification of customers on HAMR drives [30] Question: Sustainability of incremental margins - Management acknowledged that while current margins are higher due to product mix, variability exists from quarter to quarter based on customer negotiations and product transitions [34] Question: Cost reduction expectations - Management stated that improvements in cost per terabyte are expected from the transition to higher capacity drives, with ongoing qualification of 40-terabyte drives [40] Question: Visibility of inference demand - Management expressed confidence in the growth of inference demand driven by video content generation, with expectations for lower seasonality impact on data center revenue [45][47] Question: Pricing strategy in a constrained environment - Management confirmed that pricing strategy remains consistent, with slight increases for higher capacity products while maintaining profitability [52] Question: Managing supply for cloud versus consumer markets - Management indicated that while there is some seasonality in edge IoT markets, demand for cloud remains strong, and supply is being prioritized accordingly [58][60] Question: Future exabyte demand and supply - Management expects significant increases in exabyte supply as the company transitions to higher capacity products, with ongoing collaboration with major hyperscalers [82]

Core Insights - Micron Technology's stock has more than doubled in value this year, driven by increasing demand for artificial intelligence (AI) and ongoing shortages in memory and data storage solutions [1][9] - Analysts from Citi and UBS have raised their price targets for Micron, indicating strong future potential due to its role in supplying memory solutions for leading AI chip manufacturers [4][2] Company Performance - Micron Technology's stock reached an all-time high, with Citi raising its target to $240 from $200 and UBS increasing it to $245, citing potential contracts with AI companies like OpenAI [4][2] - Western Digital and Seagate Technology also saw stock price increases following target hikes from Wedbush, with Western Digital's target raised to $135 from $90 and Seagate's to $260 from $175 [5][2] Market Context - The tech sector experienced a downturn, yet Micron, Western Digital, and Seagate were among the leading gainers in the S&P 500, highlighting their resilience amid broader market concerns [2][8] - Wall Street analysts are broadly bullish on these stocks, with a majority issuing "buy" ratings, reflecting confidence in their growth prospects due to AI demand and supply shortages [6][8] Industry Trends - The demand for AI technology has significantly benefited hardware providers, with Micron positioned as a key supplier for AI chip leaders like Nvidia and AMD [3][4] - Persistent shortages in memory and data storage hardware are expected to continue, potentially leading to higher pricing and margins for these companies through 2026 and beyond [5][4]

Market Performance - Major U.S. equities indexes recovered from early losses, with the S&P 500 adding 0.3% and the Dow gaining 0.1%, both reaching all-time highs. The Nasdaq climbed 0.4%, finishing just short of its closing record [3] - Shares of renewable energy provider AES surged nearly 17% following reports of a potential acquisition by Global Infrastructure Partners, which could be valued at around $38 billion [4][8] - Pharmaceutical stocks, including Eli Lilly, Biogen, and Regeneron Pharmaceuticals, extended gains after Pfizer became the first major drugmaker to comply with the White House's push to lower medication prices in the U.S. [5][6] Company Developments - Corteva's shares tumbled 9.1% after announcing a plan to split its crop protection and seed businesses into two independent companies, expected to be completed by the second half of 2026 [7][8] - Micron Technology's shares advanced close to 9%, alongside Seagate Technology and Western Digital, due to anticipated demand growth for data storage supporting AI [6] - Gartner's stock fell 4.5% as the government shutdown affected sentiment across the advisory industry, despite the U.S. federal government accounting for less than 5% of its revenue [9] Strategic Moves - Interpublic Group's stock lost 5% after being named the exclusive creative and media partner for Bayer's consumer health business, while also facing pressure from ongoing regulatory approval processes for its merger with Omnicom [10]