Seagate Technology (STX) Wells Fargo 8th Annual TMT Summit summary

Key announcements and product updates

• Achieved qualification of HAMR technology for the cloud segment, with plans to qualify more customers by mid-2025 and ramp up volume production, being the only company currently shipping 30 TB drives.

• Recent manufacturing issue will reduce March quarter production by $200 million, but no impact is expected in subsequent quarters.

• Demand for nearline drives is strong, with shipments doubling year-over-year and further growth expected.

• Build-to-order model provides strong demand visibility through 2025, helping to manage industry cycles and inventory.

• Cloud segment now represents about 70% of nearline business, up from 50%, with cloud expected to continue outpacing enterprise OEMs.

Technology and manufacturing strategy

• Manufacturing capacity is being restored to pre-down cycle levels (150-160 EB), with no plans to add new equipment beyond this.

• Transition to HAMR technology allows for higher exabyte output without expanding manufacturing footprint.

• 4 TB per platter HAMR drives are expected in about a year, with incremental increases in areal density each quarter.

• Both CMR and SMR versions of HAMR drives are available, depending on customer preference.

Financial performance and outlook

• HAMR drives are already accretive to gross margin, with greater impact expected as volumes ramp, especially from mid-2025.

• Industry gross margins have improved from 20% to 33% over the past year, with nearline margins in the mid-30s%.

• Gradual price increases are being implemented with each contract renegotiation, supporting profitability.

• OpEx is stabilized at around $285 million per quarter, with headcount optimized and focus shifted to HAMR R&D.

• Capital return strategy prioritizes dividends, with share buybacks expected to resume next fiscal year after debt reduction.