Seagate Technology (STX) BofA Securities 2024 Global Technology Conference summary

Demand and market trends

• Cloud segment is driving the current recovery, with enterprise OEM and China expected to contribute more significantly by year-end.

• AI infrastructure buildout is increasing storage demand, with data generation as a key driver.

• Exabyte sales are expected to rise sequentially each quarter, with 2025 projected as a strong year for storage.

• Supply may become constrained if demand from China and enterprise OEM accelerates as anticipated.

• Video and image applications are showing early signs of recovery in China.

Pricing, profitability, and gross margin

• Pricing has been consistently increased quarter over quarter, with no plans to stop as long as demand remains strong.

• Gross margin target of 33% could be achieved at lower revenue levels than previous peaks, with current quarter performance near the top of guidance.

• Profitability is expected to improve further as product mix shifts toward mass capacity and underutilization costs decrease.

• Long-term revenue growth is expected to support continued bottom-line improvement.

• CapEx is targeted at 4–6% of revenue, supporting free cash flow as revenue grows.

HAMR technology and product roadmap

• HAMR drive qualification was delayed due to a component issue, now resolved, with major customer qualifications starting in the September quarter.

• Major ramp in HAMR volume is expected by mid-2025, with broader customer qualification underway.

• HAMR is expected to be accretive to gross margin, especially as more customers qualify and demand increases.

• Short-term revenue impact from HAMR delays is minimal, as PMR drives can substitute.

• Manufacturing and firmware changes have been implemented to improve yield and efficiency.