Core Insights - The demand for data storage stocks is driven by the explosion of data from AI, cloud computing, and digital transformation, with Seagate Technology Holdings plc (STX) and Pure Storage Inc. (PSTG) representing traditional HDDs and modern enterprise flash storage, respectively [1][24] Market Overview - The global data storage market is projected to grow from $298.5 billion in 2026 to $984.6 billion by 2034, at a CAGR of 16% [2] - The HDD market is expected to expand from $51.8 billion in 2026 to $69.7 billion by 2031, at a CAGR of 6%, while the enterprise flash storage market is projected to grow from $29.04 billion in 2025 to $49.87 billion by 2030, at an 11.42% CAGR [2] Seagate Technology Holdings (STX) - Seagate reported record revenue of $2.83 billion in the fiscal second quarter, a 22% increase year over year, driven by strong demand for HAMR drives and data centers [4][7] - The company has a fully booked capacity through 2026 and anticipates continued revenue and profit growth, with average nearline drive capacity increasing 22% year over year to nearly 23 TB per drive [5][8] - Seagate's strong cash flow supports ongoing investment in innovation and shareholder returns, with $154 million returned to shareholders in the fiscal second quarter [9] - The company faces challenges from forex volatility, competition, and high debt levels, with long-term debt at $4.5 billion as of January 2, 2026 [10] Pure Storage Inc. (PSTG) - Pure Storage's revenue grew 16% year over year to $964.5 million in the fiscal third quarter, driven by strong demand for FlashBlade and enterprise offerings [13] - The company raised its fiscal 2026 revenue outlook to $3.63–$3.64 billion, indicating 14.5–14.9% year-over-year growth [14] - However, Pure Storage faces headwinds from competition, rising NAND costs, and macroeconomic uncertainty, which could pressure pricing and margins [11][12] - The company plans to invest in R&D and has authorized an additional $400 million for share repurchase [15] Valuation and Performance - Over the past month, STX and PSTG have gained 62.1% and 8.3%, respectively, with STX trading at 35.8X forward earnings compared to PSTG's 95.9X [16][17] - The Zacks Consensus Estimate for STX's earnings for fiscal 2026 has been revised up by 2.7% to $11.61, while PSTG's estimate has been revised down by 1% to $1.95 [19][23] - STX is currently rated as a Zacks Rank 1 (Strong Buy), while PSTG holds a Zacks Rank 4 (Sell), indicating a more favorable investment outlook for STX [24]

Mosley and CFO Gianluca Romano repeatedly pointed to HAMR as a key enabler of Seagate’s capacity roadmap and profitability. Mosley said Seagate ended calendar 2025 shipping 3 terabytes per disk Mozaic-based HAMR products to its first cloud service provider (CSP) customer, and that quarterly HAMR shipments exceeded 1.5 million units by year-end and “have continued to ramp.”Mosley said Seagate’s nearline capacity is “fully allocated through calendar year 2026,” and the company expects to begin accepting order ...

Financial Data and Key Metrics Changes - Seagate reported December quarter revenue of $2.83 billion, representing a 7% sequential increase and a 22% year-over-year increase [15] - Non-GAAP gross margin improved to 42.2%, up 210 basis points sequentially, while non-GAAP operating margin expanded by 290 basis points to 31.9% [15][19] - Non-GAAP EPS was $3.11, reflecting a 19% increase quarter-over-quarter [15][20] Business Line Data and Key Metrics Changes - The data center market accounted for 87% of shipment volume, with 165 exabytes shipped, up 4% sequentially and 31% year-over-year [16] - Average cloud nearline drive capacities increased to nearly 26 terabytes in the December quarter, with a strong demand for higher capacity drives [17] - The edge IoT market contributed $601 million, supported by seasonal improvements in consumer products [17] Market Data and Key Metrics Changes - Demand for high-capacity nearline drives in global cloud data centers continued to grow, with nearline capacity fully allocated through calendar year 2026 [7] - The average nearline drive capacity rose by 22% year-over-year, approaching 23 TB per drive [8] - Video applications are driving significant demand, with platforms like YouTube seeing 20 million video uploads daily, up from 2 million three years ago [8] Company Strategy and Development Direction - Seagate's HAMR technology roadmap is positioned to meet growing demand and improve total cost of ownership (TCO) for customers [12][14] - The company aims to maintain supply discipline while satisfying exabyte growth through advancements in areal density without increasing unit production volume [7] - Seagate is focused on expanding profitability through a higher capacity product mix, supported by strong demand from AI applications [13][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand environment, particularly from global cloud customers, and expects data center demand to offset typical seasonality [22][23] - The company anticipates revenue for the March quarter to be in the range of $2.9 billion ±$100 million, representing a 34% year-over-year improvement [23] - Management highlighted the importance of maintaining pricing discipline and the potential for flat to slightly increased pricing in the future [28][71] Other Important Information - Seagate generated over $600 million in free cash flow, the highest level in eight years, and retired $500 million in gross debt [15][21] - The company expects to continue improving profitability and cash generation throughout calendar 2026 [24] - Seagate's net leverage ratio improved to 1.1 times, with expectations for further reduction as profitability increases [22] Q&A Session Summary Question: Can you provide more detail on gross margins going forward? - Management indicated that pricing will be dictated by demand, with potential for flat to slightly up pricing as capacity increases [28] Question: How do you see the pricing dynamics evolving? - Management noted that demand remains strong, and discussions with customers are focused on future planning [35] Question: What is the expected growth rate for exabyte shipments in 2026? - Management did not provide specific guidance for 2026 but indicated a mid-20% growth expectation for nearline exabytes [60] Question: How is the transition to HAMR technology progressing? - The transition is on track, with six out of eight major cloud service providers qualified for HAMR products [48] Question: What portion of your LTAs has fixed pricing agreements? - Management confirmed that for 2026, volume and pricing are well defined, but pricing for 2027 has not yet been fixed [96]

Financial Data and Key Metrics Changes - Seagate reported December quarter revenue of $2.83 billion, up 7% sequentially and 22% year-over-year, setting new records for profitability metrics [15][24] - Non-GAAP gross margin increased to 42.2%, up 210 basis points sequentially, while non-GAAP operating margin expanded by 290 basis points to 31.9% [15][19] - Non-GAAP EPS was $3.11, reflecting a 19% increase quarter-over-quarter [15][20] Business Line Data and Key Metrics Changes - The data center market accounted for 87% of shipment volume, with 165 exabytes shipped, up 4% sequentially and 31% year-over-year [16] - Average cloud nearline drive capacities rose to nearly 26 TB in the December quarter, indicating a shift towards higher capacity drives [17] - The edge IoT market contributed $601 million, supported by seasonal improvements in consumer products [17] Market Data and Key Metrics Changes - Demand for high-capacity nearline drives in global cloud data centers continued to grow, with nearline capacity fully allocated through calendar year 2026 [7][16] - Video applications are driving significant demand, with platforms like YouTube seeing 20 million video uploads daily, up from 2 million three years ago [8] - The strategic value of data is increasing, particularly with the rise of AI applications that require large volumes of historic data [9] Company Strategy and Development Direction - Seagate's HAMR technology roadmap is positioned to meet growing demand and improve total cost of ownership (TCO) for customers [12][14] - The company aims to maintain supply discipline while satisfying exabyte growth through advancements in areal density without increasing unit production volume [7][12] - Seagate is focused on expanding profitability through a higher capacity product mix, supported by strong demand from AI applications [13][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand environment, particularly from global cloud customers, and expects data center demand to offset typical seasonality [22][23] - The company anticipates continued sequential improvement in revenue and profitability throughout calendar 2026 [24] - Management highlighted the importance of maintaining predictable supply and pricing strategies as they transition to higher capacity products [28][70] Other Important Information - Seagate generated over $600 million in free cash flow, the highest level in eight years, and retired $500 million in gross debt [15][21] - The company expects capital expenditures for fiscal year 2026 to remain within the target range of 4%-6% of revenue [21][102] - Cash and cash equivalents totaled just over $1 billion, with ample liquidity of $2.3 billion [21] Q&A Session Summary Question: Can you provide more detail on gross margins going forward? - Management indicated that pricing will be dictated by demand, with potential for flat to slightly up pricing as capacity increases [28][29] Question: How do you see the pricing dynamics evolving? - Management noted that strong demand is leading to better discussions with customers about future pricing, with expectations for flat to slightly up pricing [34][70] Question: What is the expected growth rate for exabyte shipments in 2026? - Management did not provide specific guidance for 2026 but indicated a mid-20% growth rate for nearline exabytes based on historical performance [58] Question: How is the transition to HAMR technology progressing? - Management reported successful qualification of major cloud service providers and expects to ramp up production of 4 TB per disk drives [47][91] Question: What portion of your LTAs has fixed pricing agreements? - Management confirmed that pricing and volume for 2026 are well defined, with ongoing discussions for 2027 [96][97]

Financial Data and Key Metrics Changes - Seagate reported December quarter revenue of $2.83 billion, representing a 7% sequential increase and a 22% year-over-year increase [14] - Non-GAAP gross margin improved to 42.2%, up 210 basis points sequentially, while non-GAAP operating margin expanded by 290 basis points to 31.9% [14][17] - Non-GAAP EPS was $3.11, reflecting a 19% increase quarter-over-quarter [14] Business Line Data and Key Metrics Changes - The data center market accounted for 87% of shipment volume, with 165 exabytes shipped, up 4% sequentially and 31% year-over-year [15] - Average cloud nearline drive capacities increased to nearly 26 terabytes in the December quarter, indicating a shift towards higher capacity drives [16] - The edge IoT market contributed $601 million, supported by seasonal improvements in consumer products [16] Market Data and Key Metrics Changes - Demand for high-capacity nearline drives in global cloud data centers continued to grow, with sustained demand trends expected to persist [6][7] - Video applications are driving significant demand for hard drives, with platforms like YouTube seeing a surge in uploads [8] - The strategic value of data is increasing, particularly with the rise of AI applications that require large volumes of historic data [9] Company Strategy and Development Direction - Seagate's HAMR technology is positioned as a long-term enabler of mass capacity storage, with expectations to deliver 10 TB per disk early in the next decade [5][12] - The company aims to maintain supply discipline while meeting demand growth through advancements in areal density without increasing unit production volume [7] - Seagate is focused on expanding profitability through a higher capacity product mix, supported by strong demand from AI applications [12][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand environment, particularly among global cloud customers, and expects data center demand to offset typical seasonal declines [20][21] - The company anticipates revenue for the March quarter to be in the range of $2.9 billion ±$100 million, representing a 34% year-over-year improvement [21] - Management highlighted the importance of maintaining pricing discipline and the potential for flat to slightly increasing pricing in the future [26][71] Other Important Information - Seagate generated over $600 million in free cash flow, the highest level in eight years, and retired $500 million in gross debt [14][20] - The company expects capital expenditures for fiscal year 2026 to remain within the target range of 4%-6% of revenue [19][102] - Cash and cash equivalents totaled just over $1 billion, with ample liquidity of $2.3 billion [20] Q&A Session Summary Question: Can you provide more detail on gross margins going forward? - Management indicated that pricing will be dictated by demand, with potential for flat to slightly up pricing as capacity increases [26] Question: Can you help bridge the drivers between mix and price? - Management noted that demand remains strong, and discussions with customers are focused on future planning [32] Question: What is the expected exabyte growth for this calendar year? - Management did not provide specific guidance for calendar 2026 but indicated a mid-20% exabyte growth CAGR is expected [58] Question: How is the transition to HAMR technology progressing? - The transition is on track, with six out of eight top cloud service providers qualified for HAMR technology [46] Question: What portion of your LTAs has fixed pricing agreements? - Management confirmed that volume and pricing for 2026 are well defined, with discussions for 2027 beginning soon [95]