Seagate Technology (STX) Citi’s 2026 Global TMT Conference summary

Market trends and demand outlook

• Revenue and profitability have improved for over three years, with demand outpacing supply and no signs of a slowdown through fiscal 2027.

• Long-term agreements (LTAs) and purchase orders indicate increasing exabyte volumes year over year, with no expected digestion period in the next two to three years.

• AI, video AI, robotics, and autonomous driving are major drivers of storage demand, with new applications expected to further boost exabyte growth.

• Both public cloud and on-premise enterprise segments are growing, with public cloud adopting higher-capacity drives faster than on-premise data centers.

• Demand is strong across all customer segments, supporting pricing improvements and sustained revenue growth.

Technology and product innovation

• Focus is on technology transition, moving from 30 TB to 40 TB HAMR drives, with 50 TB drives set for qualification in about a year.

• Exabyte growth is targeted at a 25% CAGR over the next two to three years, driven by higher areal density rather than unit growth.

• Second-generation HAMR is being adopted more quickly by customers, with qualification cycles accelerating compared to the first generation.

• Manufacturing transitions to higher-capacity drives introduce some variability in exabyte output, but overall CAGR remains strong.

• Cost per terabyte is declining due to internal technology improvements, despite some external component cost variability.

Financial performance and capital allocation

• Pricing improvements are seen in every segment, with a focus on sustainable, non-aggressive increases.

• Gross margin expansion is driven by both pricing and cost reductions, with recent quarters showing strong performance.

• OpEx is expected to remain stable around $300 million per quarter, with no significant headcount increases anticipated.

• CapEx remains within 4%-6% of revenue, even as production shifts to higher-capacity drives.

• Strong free cash flow generation is enabling increased share buybacks and continued dividend returns, with debt levels now well below targets.