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 ...

Core Viewpoint - Rosenblatt analyst Kevin Cassidy has relaunched coverage on Western Digital (WDC) with a Buy rating and lowered the price target from $76 to $50, reflecting a valuation based on expected profitable growth in the HDD market [1] Group 1: Market Dynamics - HDDs are expected to remain the dominant storage media, accounting for over 80% of cloud storage, with exabyte shipments projected to grow at a 23% CAGR from 2024 to 2028 [2] - AI-driven storage demand is accelerating, contributing an estimated 8% growth to the HDD market by 2028, with Nearline HDD growth forecasted at 14% CAGR when including AI [2][3] Group 2: Financial Performance - Western Digital anticipates fiscal 2025 revenue for HDDs to be approximately $2.2 billion to $2.3 billion, with a sequential gross margin expansion of 50 basis points [5] - The company expects to generate $600 million from the SanDisk spin-off and aims for adjusted gross margins of 38% or higher and operating margins of 24% or higher in the long term [6] Group 3: Strategic Focus - Western Digital is shifting its focus to cloud storage, projected to contribute 88% of revenue by fiscal 2025, with Nearline HDDs being the primary revenue driver [3][4] - The company is transitioning to higher-capacity HDDs (40TB+) with EAMR and HAMR technologies to maintain cost-competitive leadership in the AI-driven era [8][10] Group 4: Cost Competitiveness - HDDs maintain a six times cost advantage over enterprise SSDs and a 3.6 times TCO advantage, with plans to transition to HAMR technology by 2027 [4][9] - HDD manufacturing has a capital intensity of just 5%, significantly lower than NAND's 44%, and has lower emissions intensity per TB [9] Group 5: Shareholder Returns - Western Digital is initiating a dividend in the fourth quarter of fiscal 2025 and is committed to returning 100% of excess cash to shareholders after achieving a net leverage target of 1.0 to 1.5 times EBITDA [7]