Seagate Technology (STX) Citi's Global TMT Conference 2024 summary

Market and demand trends

• Cloud segment continues to drive the upcycle, with revenue guidance up over 10% sequentially and profitability expected at the high end of the range, supported by a favorable product mix and pricing.

• Enterprise OEM demand is showing initial signs of recovery, expected to contribute more to the upcycle in coming quarters.

• Data storage demand is structurally growing, driven by multiple applications including AI, with a focus on long-term profitability over short-term volume.

• AI is expected to be a significant long-term demand driver, with benefits from longer data retention and increased data generation, but its impact is just beginning.

• Industry discipline on capacity and a shift to build-to-order models are helping to limit inventory risks and smooth out cycles.

Product and technology roadmap

• Transition to higher-capacity drives (24-TB CMR, 28-TB SMR) is ongoing, with mix shifts driving exabyte growth rather than unit increases.

• HAMR technology qualifications are progressing, with initial success in video/image and enterprise OEM segments; cloud customer qualifications are ongoing and expected to ramp by mid-2025.

• HAMR enables higher capacity without increasing bill of materials, leading to improved cost per terabyte and profitability as volumes scale.

• Manufacturing lines for PMR and HAMR are largely compatible, allowing flexible production allocation.

• Cost per terabyte is expected to decline further with HAMR, as capacity increases are achieved through areal density rather than more components.

Industry structure and competition

• The industry has shifted focus from market share to profitability, with disciplined capacity management and predictable, incremental pricing increases.

• Market share fluctuations are seen as temporary and product-driven; upcoming HAMR products are expected to strengthen competitive positioning.

• Legacy business (low-capacity drives) now represents only 10% of volume, with mass capacity drives accounting for 90%, reducing oversupply risks.

• SSD cannibalization is not significant in cloud or large data centers, as HDDs remain the primary storage medium.

• Industry consolidation and the transition to mass capacity have fundamentally changed supply dynamics, with most supply now fully consumed.