Seagate Technology (NasdaqGS:STX) FY Conference Transcript

Seagate Technology FY Conference Summary Company Overview - Company: Seagate Technology (NasdaqGS: STX) - Date of Conference: February 25, 2026 Industry Insights - Market Dynamics: The hard disk drive (HDD) market is experiencing growth, with Seagate agreeing with competitor Western Digital's forecast of mid-20s exabyte growth in nearline HDDs over the next three to five years [3][4]. - Pricing Trends: HDD pricing has remained stable, with slight increases year-on-year. Seagate expects average prices per terabyte to remain flat to slightly up, consistent with their pricing strategy established three years ago [5][8][14]. Key Points Growth and Demand - Exabyte Production: Seagate anticipates a 25% compound annual growth rate (CAGR) in exabyte production over the next three to four years, despite challenges in areal density improvements [25][33]. - Demand vs. Supply: Demand for HDDs is currently exceeding supply, with all produced units being sold. The company does not foresee a shift to NAND for large-scale data storage, as their infrastructure remains reliant on HDDs [17][23]. Pricing Strategy - Contract Negotiations: Seagate's pricing strategy involves consistent price increases during contract renewals, aiming to encourage customers to adopt newer, higher-capacity products [6][10]. - Long-term Contracts: The company is discussing pricing and volume agreements for 2026 and beyond, with a focus on maintaining stability in pricing [114][120]. Technology and Production - HAMR Technology: Seagate is advancing its Heat-Assisted Magnetic Recording (HAMR) technology, which is expected to improve areal density significantly. However, the current yield rates for HAMR products are not yet at the level of traditional Perpendicular Magnetic Recording (PMR) products [44][47]. - Production Capacity: Seagate's factories are currently operating at full capacity, and there are no immediate plans to increase unit production. The focus is on optimizing existing production to meet demand [37][43]. Financial Performance - Gross Margins: The company has seen consistent improvements in gross margins over the past 11 quarters, driven by stable pricing and cost reductions associated with higher-capacity drives [73][92]. - Free Cash Flow: Seagate plans to return over 75% of free cash flow to shareholders, with a focus on reducing debt, which has decreased from over $6 billion to below $4 billion [92][93]. Competitive Landscape - Comparison with Western Digital: Despite Seagate's advancements in HAMR technology, Western Digital currently maintains a slightly higher gross margin. This is attributed to differences in production optimization and product mix [77][82]. - Market Positioning: Seagate emphasizes that customers prioritize exabyte capacity and cost efficiency over the specific technology used in HDDs, indicating a strong market demand for larger capacity drives [150][152]. Additional Insights - AI and Data Storage: The rise of AI applications is driving demand for data storage, particularly in video AI and autonomous driving, which require significant data retention [125][130]. - Total Cost of Ownership (TCO): The increasing NAND prices are widening the cost gap between HDDs and SSDs, but this is not significantly impacting Seagate's core business, which remains focused on data centers [95][96]. Conclusion Seagate Technology is positioned strongly within the HDD market, with a clear strategy focused on maintaining pricing stability, optimizing production, and leveraging technological advancements to meet growing demand. The company is navigating competitive pressures while ensuring robust returns to shareholders through effective cash flow management.