Seagate Technology (STX) Morgan Stanley Technology, Media & Telecom Conference 2026 summary

Demand trends and AI-driven growth

• Strong demand for data storage, with AI—especially Video AI—accelerating growth faster than expected in recent quarters.

• Data storage needs are rising across applications, including autonomous driving and cloud, with 90% of storage still on hard disk drives.

• Video AI has driven a notable uptick in demand, arriving earlier than anticipated.

• Customers are increasingly focused on exabyte volume agreements for 2026 and 2027, providing high visibility into future demand.

• The industry is shifting from transactional to partnership models with major cloud service providers, enhancing collaboration and product alignment.

Technology innovation and product roadmap

• Transition to higher-capacity drives is underway, with 40 TB HAMR drives now qualified and shipping to major customers.

• Focus remains on increasing areal density per disk rather than adding more disks, maximizing capacity and cost efficiency.

• The ramp of new HAMR technology is expected to reach 70% of nearline exabytes sold by June 2027, optimizing manufacturing and profitability.

• Cost per terabyte is declining significantly as higher-capacity drives are adopted, with stable unit costs but more storage per drive.

• No plans to increase unit production; all CapEx is directed toward technology transition and capacity per unit improvements.

Financial outlook and capital allocation

• Revenue and profitability are projected to increase each quarter of 2026, supported by strong demand and pricing power.

• Gross and operating margins are already above 40% and 30%, respectively, with further improvement expected.

• OpEx is expected to remain stable, with only minor increases tied to annual salary adjustments and variable compensation.

• CapEx will stay within 4–6% of revenue, focused on technology upgrades rather than unit expansion.

• Free cash flow is being used for both debt reduction and share buybacks, with a goal to return nearly all free cash flow to shareholders after debt obligations.