Seagate Technology — Call Transcript 2026

Welcome to the Seagate Technology Fiscal Second Quarter 2026 Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Shanye Hudson, Senior Vice President, Investor Relations. Please go ahead. Thank you, and hello, everyone. Welcome to today's call. Joining me are Dave Mosley, Seagate's Chair and Chief Executive Officer, and Gianluca Romano, our Chief Financial Officer. We've posted our earnings, press release, and detailed supplemental information for our December quarter results on the investors section of our website. During today's call, we'll refer to GAAP and non-GAAP measures. Non-GAAP figures are reconciled to GAAP figures in the earnings press release posted on our website and included on our Form 8-K. We've not reconciled certain non-GAAP outlook measures because material items that may impact these measures are out of our control and/or cannot be reasonably predicted. Therefore, a reconciliation to corresponding GAAP measures is not available without unreasonable effort. Before we begin, I'd like to remind you that today's call contains forward-looking statements that reflect management's current views and assumptions based on information available to us as of today. They should not be relied upon as of any subsequent date. Actual results may differ materially from those contained in or implied by these forward-looking statements, as are subject to risks and uncertainties associated with our business. To learn more about these risks, uncertainties, and other factors that may affect our future business results, please refer to the press release issued today and our SEC filings, including our most recent annual report on Form 10-K and quarterly report on Form 10-Q, as well as the supplemental information, all of which may be found on the investors section of our website. Following our prepared remarks, we'll open the call up for questions. In order to provide all analysts with the opportunity to participate, we thank you in advance for asking one primary question and then reentering the queue. With that, I'll turn the call over to you, Dave. Thanks, Shanye, and hello, everyone. Seagate closed out calendar 2025 with a record-breaking quarter, driven by sequential revenue growth across nearly all end markets. December quarter financial results exceeded both top and bottom-line expectations and set new company records for exabyte shipments, gross margin, operating margin, and non-GAAP earnings per share. We expanded non-GAAP gross margin above 42%, supported by the execution of our pricing strategy, along with an improving mix of our high-capacity drives as HAMR shipments ramp. Looking at the entire calendar year, 2025 marked a transformational period for Seagate, both financially and operationally. Over the calendar year, we increased revenue by over 25%, improved gross margins by nearly 740 basis points, and expanded operating margins by an even greater amount, demonstrating the profitability leverage in our financial model. 2025 also solidified HAMR technology as a long-term enabler of mass capacity storage. We ended the year shipping 3 TB per disk Mozaic-based HAMR products to our first CSP customer, and by year's end, quarterly HAMR shipments exceeded 1.5 million units and have continued to ramp. Mozaic 3 HAMR drives are now qualified with all of the major U.S. CSP customers, and qualifications for our second generation Mozaic 4 TB per disk products are tracking well to plan. These developments align with our long-term areal density roadmap that extends to 10 TB per disk, which we expect to deliver early in the next decade. I want to thank our Seagate teams around the world for exceeding our performance expectations and delivering outstanding value to our global customers. We continue to operate in an exceptionally strong demand environment, particularly within the data center end markets. In the December quarter, we saw sustained demand growth for our high-capacity nearline drives across global cloud data centers, as well as continued improvement from the enterprise edge. Based on our build-to-order pipeline, we anticipate these positive demand trends will continue for some time. Our nearline capacity is fully allocated through calendar year 2026, and we expect to begin accepting orders for the first half of calendar year 2027 in the coming months. Further out, demand visibility is strengthening based on the long-term agreements in place with major cloud customers through calendar 2027. Additionally, multiple cloud customers are discussing their demand growth projections for calendar 2028, underscoring that supply assurance remains their highest priority. We will continue to meet strengthening demand through our strategy to maintain supply discipline and satisfy exabyte growth through areal density and advancements and without increasing unit production volume. In the December quarter, our average nearline drive capacities rose by 22% year-over-year, approaching 23 TB per drive, with those sold to cloud customers averaging significantly higher. This trend underscores the strong adoption of our higher capacity drives to support demand growth. At the same time, revenue per TB sold has remained relatively stable, reflecting the effectiveness of our pricing strategy. Seagate is well positioned to continue benefiting from the combination of powerful secular tailwinds and supply discipline. Video applications continue to drive significant demand for hard drives, with platforms like YouTube witnessing 20 million video uploads daily, up from just two million three years ago. This staggering pace of growth extends to other cloud video platforms and doesn't yet include the full surge in content generation expected from emerging AI-driven video applications. These applications are not only fueling social media uploads, but are also transforming how organizations turn their data into tangible value, enabling personalized marketing, interactive education, and advanced simulations capable of training manufacturing, engineering, healthcare, and other professionals. The strategic value of data is further underscored as new applications and use cases emerge across cloud and edge workloads. Among the most promising of these is agentic AI, which relies on persistent access to large volumes of historic data to enable effective planning, reasoning, and independent decision-making. Adoption is already gaining momentum, with one recent survey conducted by a leading cloud service provider reporting more than half of participating customers were actively using AI agents. Early adopters are already realizing measurable returns, with benefits ranging from lower costs to increased revenue opportunities. With the deployment of AI agents at the edge, where untapped data often resides, we believe the stage is set for a sustained and meaningful increase in data generated and stored that will support inferencing, continuous training, and also maintain model integrity. Modern data centers have evolved to address the complexity and scale that massive workloads bring through sophisticated data tiering architectures, ensuring that the right data is available at the right time and place. Hard drives are essential to these architectures, anchoring the mass capacity data tier that stores the vast majority of exabytes. From storing the checkpoint datasets used to train and maintain model integrity, to supporting vector databases that provide the context necessary for accurate inference results and agentic AI performance. By leveraging hard drives, data center operators, whether in the cloud or on-prem, can achieve the optimal balance of performance, capacity, and cost efficiency at scale. Against this transformational backdrop, Seagate's HAMR technology roadmap positions us to meet growing demand and deliver ongoing TCO improvement for our customers. HAMR is a proven technology, with large volumes of drives running in cloud production environments for more than three quarters now, and performing well across a broad spectrum of use cases. We are systematically ramping our Mozaic 3 HAMR products to qualified customers while maintaining focus on optimizing the profitability of our available supply. As noted earlier, Mozaic 3 is now qualified with all major US CSP customers and remains on track to have all global CSPs qualified within the first half of calendar 2026. Additionally, qualifications of our second generation Mozaic 4 products are progressing well. We expect to begin the ramp of Mozaic 4 later this quarter and have multiple CSPs qualified in the coming months, in line with our plans. We continue to set the pace for the industry, recently demonstrating 7 TB per disk capability in our labs. As one of our largest CSP customers recently aptly described, hard drives are engineering marvels, a sentiment that we obviously share. Our deep expertise across mechanical engineering, material science, nanoscale fabrication, and now advanced photonics, not only enables Seagate to deliver on the HAMR roadmap, but also creates a durable competitive mode for hard drive technology well into the future. Wrapping up, 2025 was a milestone year for Seagate in every respect: financial performance, operational execution, and technology leadership. We are carrying this momentum into calendar 2026, supported by a powerful demand backdrop as new AI applications start to complement traditional workloads. We will remain highly disciplined and focused on expanding profitability through our higher capacity product mix, underpinned by the strong economics of HAMR. Our areal density roadmap positions Seagate to sustain the core TCO and efficiency advantages of hard drives as data creation and storage requirements accelerate in the AI era. We believe this foundation creates a compelling long-term value proposition for the company, our customers, and our shareholders. I'll now turn the call over to Gianluca to cover our results in greater detail. Thank you, Dave. Seagate delivered another quarter of strong year-over-year revenue growth and set new record profitability metrics in the December quarter, underscoring the durability of data center demand trends. Additionally, we strengthened our financial position by retiring $500 million in gross debt and generating over $600 million in free cash flow, marking the highest level in eight years. December quarter revenue came in at $2.83 billion, up 7% sequentially and up 22% year-over-year. We achieved non-GAAP gross margin of 42.2%, up 210 basis points sequentially, and we expanded non-GAAP operating margin by 290 basis points sequentially to 31.9%. Our resulting non-GAAP EPS was $3.11, up 19% quarter-over-quarter. With strong financial results demonstrate our ability to execute our strategic objectives, including leveraging our technology roadmap to support demand growth. To that end, we shipped 190 exabytes in the December quarter, up 26% year-over-year, while keeping overall unit capacity relatively flat. The data center market accounted for 87% of our shipment volume, supported by ongoing demand momentum from global cloud customer and sequential growth across enterprise OEM markets. We shipped 165 exabytes in the data center market, up 4% sequentially and 31% year-over-year. Data center revenue grew at roughly the same pace, totaling $2.2 billion for the quarter, up 5% sequentially and 28% year-over-year. Against this strong demand backdrop, both cloud and enterprise customers are transitioning to higher capacity drives. Average cloud nearline capacity increased to nearly 26 TB in the December quarter, and will continue to grow with the ramp of HAMR-based Mozaic products. As Dave highlighted, Mozaic drives are running very well in production environment and meeting all performance, reliability, and integration expectations. In the enterprise OEM market, we are benefiting from slight improvement in traditional server units, along with increasing demand for storage servers, driven in large part by the adoption of AI applications and need to store data at the enterprise edge. The edge IoT market made up the remaining 21% of revenue at $601 million, supported by anticipated seasonal improvement for consumer products and the VIA client market. We project the broader VIA market to grow over time, with the largest growth contribution coming from VIA nearline products that are captured as part of our data center end market. Moving on to the rest of the income statement, non-GAAP gross profit increased to $1.2 billion, up 13% quarter-over-quarter, and 44% compared with the prior year period, significantly outpacing revenue growth. Non-GAAP gross margin expanded to 42.2% in the December quarter, up from 40.1% in the prior period. This improvement reflects the ongoing execution of our pricing strategy and the growing adoption of our latest generation high-capacity products, which collectively drove a modest sequential increase in revenue per TB, a trend we expect to continue into the March quarter. Non-GAAP operating expenses were $290 million, relatively flat quarter-over-quarter and in line with our expectations. Operating expense as a percent of our revenue declined to 10.3%, rapidly trending towards our long-term target of 10%. The combination of strong top-line growth and significant financial leverage drove an 18% sequential improvement in non-GAAP operating profit to $901 million, almost 32% of revenue. Other income and expenses were $70 million, reflecting slightly lower interest expenses on the reduced outstanding debt balance. We currently project other income and expenses to remain relatively flat in the March quarter. We grew non-GAAP net income to $702 million, with corresponding non-GAAP EPS of $3.11 per share, based on tax expenses of $129 million and a diluted share count of approximately 226 million shares, including the net impact of our 2028 convertible notes. Turning now to cash flow and the balance sheet. We invested $116 million in capital expenditures for the December quarter, or roughly 4% of revenue. We are maintaining capital discipline while we continue to transition and ramp HAMR technology. To support these objectives, we anticipate capital expenditures for fiscal year 2026 to be inside our target range of 4%-6% of revenue. Free cash flow generation was strong at $607 million, up 42% from the prior quarter. Looking ahead, we expect free cash flow generation to further expand in the March quarter, supported by sustained demand trends, operational efficiency, and capital discipline. These factors position us well for durable, long-term cash flow generation. Cash and cash equivalents totaled just over $1 billion at the end of December quarter, with ample liquidity of $2.3 billion, including our undrawn revolving credit facility. During the December quarter, we returned $154 million to shareholders through dividends. We retired approximately $500 million of exchangeable senior notes due 2028, which serves to limit further dilutive impact from these notes and optimize cash deployed for future share repurchases. Our resulting gross debt balance was approximately $4.5 billion exiting the quarter. Net leverage ratio improved to 1.1 times, based on adjusted EBITDA of $962 million for the December quarter, up 16% quarter-over-quarter, and up 63% year-on-year. We expect the net leverage ratio will trend lower as profitability and cash generation increase, while we continue to evaluate opportunities to further reduce debt. Turning now to the March quarter outlook. The demand environment remains strong, particularly among global cloud customers. As a result, we expect data center demand will more than offset typical March quarter seasonality in the edge IoT market. We expect March quarter revenue to be in a range of $2.9 billion ±$100 million, which represent a 34% year-over-year improvement as a midpoint. Non-GAAP operating expenses are expected to be approximately $290 million. Based on the midpoint of our revenue guidance, non-GAAP operating margin is expected to approach the mid-30s% range. Non-GAAP EPS is expected to be $3.40 ±$0.20, based on a tax rate of about 16% and non-GAAP diluted share count of 230 million shares, including estimated dilution from our 2028 convertible notes of approximately 7.6 million shares. Seagate's strong December quarter performance and March quarter guidance underscore our continued focus on driving growth, enhancing profitability, and optimizing cash generation. Based on our current outlook, we expect to deliver sequential improvement to both the top and bottom line throughout calendar 2026, and remain in a strong position to enhance value for both customers and shareholders over the long term. Operator, let's open the call up for questions. Thank you. We will now begin the question-and-answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. In the interest of time, we ask that you limit yourself to one question. If you have further questions, you may reenter the question queue. Once again, that was star, then one to ask a question. At this time, we will pause momentarily to assemble our roster. The first question today will come from CJ Muse with Cantor Fitzgerald. Please go ahead. Yeah, good afternoon. Thank you for taking the question. You know, given the supply-demand dynamics, you're obviously in the catbird seat and wanted to really try to get some more detail on gross margins going forward. Your philosophy historically has been to share the gains, you know, both your customers and yourselves. But at the same time, you know, given this tight environment, you are raising like-for-like pricing. So curious, you know, is there a framework to think about in terms of the incremental gross margins that we should model from here? And then I guess maybe bigger picture, as you think about overall average pricing per exabyte, you know, we've gone from kind of down double digits to high single digits, and I think we just exited the quarter down 4% year-on-year. You know, do you see a world where, you know, pricing, you know, could flat or even move positive year-over-year? Thanks so much. Yeah. Thanks, CJ. I'll let Gianluca chime in here as well, but the pricing will be dictated by the demand. Right now, the demand is really strong, so I think as we roll through into 2027 and 2028, we look at how much capacity we're having. We're bringing online by virtue of the fact that we're making all these aggressive product transitions. We'll bring more exabytes to bear, and then, you know, people go out there and renegotiate for those. I think flat to slightly up is certainly possible, and that's the way we're really managing it. As we talk to our customers, the value proposition of the new drives as they go up 5 TB, 10 TB at a time is pretty strong. Hey, CJ. So on the gross margin, we are executing very well. We are executing a little bit better than what we discussed at our Investor Day, where we presented a model with a 50% incremental margin above $2.6 billion of revenue. We have done better every quarter, of course, now is our objective to continue to optimize what we produce, what we sell, and finally, the profitability that we can get from the product. So the model cover over a longer period of time, now two, three years, not two or three quarters, but I'm positive we are continuing to progress in the right direction. Thank you. Thanks, CJ. The next question will come from Wamsi Mohan with Bank of America. Please go ahead. Yes, thank you. I have a similar type of question. I guess the gross margins and the guide and the incremental quarter-over-quarter gross margins and the guide are very strong. Can you maybe help bridge the drivers between mix and price? Obviously, you've got, you know, better mix of data center revenue next quarter, but just wondering if you can dimensionalize that. And the opportunity for pricing, Dave, you just said sort of, you know, flat to up is possible, but as we think about the pricing that might be getting embedded within these LTAs, and sort of beyond 26, why can't that be a lot higher, just given, you know, the tightness in the supply-demand environment? Thank you. Yeah. I think this gets into how persistent is, is the demand going to be, Wamsi? You know, we've talked about two or three years from now. The one behavior change that I really like in the last year is that people are starting to say: "If I can't get it now, I'll plan next year better and the following year better." So we're having great dialogues on that front. You know, of course, supply has risen quite a bit in the last year, supply of exabytes from the industry. The industry has reacted pretty well, but I think demand is still pretty strong. My perspective on this is I think demand will stay strong for quite some time. So in that kind of world, we're having great discussions with customers further out in time. And the biggest part that helps us in our planning is through these product transitions. They know that's how they get more exabytes. Wamsi, we are saying in the script, Dave, for the rest of the calendar year, we expect revenue and profitability to continue to improve sequentially every quarter. So we are not, we are not implying in any way that this trend is changing. It's actually now getting better somehow. Thank you. The next question will come from Erik Woodring with Morgan Stanley. Please go ahead. Great. Good afternoon, guys. Thank you for taking my question, and congrats on these results, incredible. You know, Dave, your Analyst Day last year, you kind of pointed to a mid-20% exabyte growth CAGR. And I'm just wondering where you think that supply growth can land, you know, this calendar year, and as you get closer to that HAMR crossover point later this year, like, does that pace of exabyte growth accelerate? And I'm just asking this because demand is clearly outpacing supply. So can you maybe just help us try to better understand the shape of your exabyte supply growth? Because obviously, it'll dictate kind of exabyte shipments for the year. Thank you very much. Yeah. Thanks, Erik. So, we are planning to transition to 4 TB of platter and, you know, fairly aggressively. But I think what people have to keep in mind is that we're fairly tight all throughout manufacturing, so we have products that are in the pipeline already that are committed to customers and so on. We don't just move very quickly to 3 TB or 4 TB of platter as things come. And it's a good problem to have, actually. You know, we're running manufacturing quite tight right now. So I think it'll be a fairly prescriptive ramp, to your point. It won't be, you know, as fast as maybe we've done some ramps in the past, but it'll be very profitable, and that's the way we look at it. As we go further out in time, you know, I'm very optimistic that the 4 TB per platter is a very strong product. It'll start to replace some of the other, you know, legacy products, I'll say, that way, and because it has so much better value proposition in a lot of those markets. Then when that happens, then we see more opportunity. Great. Thank you, guys, and best of luck. Thank you. The next question will come from Asiya Merchant with Citi. Please go ahead. Great. Thank you for taking my questions, and great results here. Just a couple that are related to the prior question. You know, you guys gave some projections on HAMR, not just for fiscal year 2026, but even into fiscal 2027. So if you could talk about, you know, upside to achieving those targets for the HAMR rollout. And related to that, how we should think about the blended cost reductions. You know, pretty impressive, again, margins here and guiding for improved profitability. So if you could talk to us a little bit about the cost reductions going forward, especially as you ramp HAMR here with the Mozaic 4, that would be great. Thank you. Yes, Asiya. So I would say, first of all, we are very happy with the transition to HAMR. Now, we qualified the last big cloud service provider in U.S., and we have qualified six out of eight of the top cloud service providers. So the transition from PMR technology to HAMR technology is progressing very well, and we are now qualifying the new product, the 4 TB per disk, so a 40 TB per drive. Of course, this will help with the increase in exabyte in term of mix. We gave a good indication, I think, at our Investor Day, and now we want to be aligned to that. And the cost will be favorably impacted, especially when we start ramping high volume of the 40 TB drive. Of course, that will drive a fairly important reduction in cost per TB compared to the current HAMR, and of course, will be a good contributor to further increase our gross margin. The next question will come from Karl Ackerman with BNP Paribas. Please go ahead. Yes, thank you. Gianluca and Dave, I was hoping you could clarify what portion of your LTAs or overall nearline HDD capacity has fixed or multi-quarter pricing agreements? I ask because as these LTAs roll off throughout 2026, any new agreements will be locked in at higher values, reflective of not only the main use case, also widening price per TB gap between enterprise hard drives HDDs. Thank you. Karl, the second part of your question was a little fuzzy, so we captured the first part, but might ask you for clarity on that second. Sure. Yes, obviously. I'll just repeat, if I could. As these LTAs roll off throughout 2026, I would imagine those new- ... LTAs will be priced at perhaps a higher value or higher order value, clearly given the widening gap between hard drives and S- and SSDs. So we'd comment on the mix of LTAs and how you think that progresses throughout 2026 would be great. Thank you. Yeah, thanks, Karl. So, as we roll off, say, for example, somebody might have been qualified on a 2.4 TB per platter product or something, and then they might be qualifying a 3.2 or even a 4 TB per platter as we roll forward. So, you know, we change based on the demand that we see, we change and our available supply, we change the pricing dynamic there. I think that's one of the biggest things you're pointing out. I'll say that 2026 is fairly booked. We talked about that in the call, that to the extent that we can out execute our plan, it'll be marginal like you saw last quarter. You know, we get the qualifications done a little faster, we ship a few more drives, that's how we can do better than planned. But other than that, it's fairly predictable in 2026, and we're looking to start 2027 the same way. Thank you. The next question will come from Jim Schneider with Goldman Sachs. Please go ahead. Good afternoon, and thanks for taking my question. I was wondering if you could maybe, you know, address, you know, given everything you just said about demand and about the, the mix effect from HAMR this year, maybe can you give us any kind of directional guidance about where you might expect, exabyte shipments to end up on a calendar 2026 versus calendar 2025 basis, you know, relative to the sort of the long-term targets you've, you've laid out previously? It seems like you could do materially better than that, but I just wanted to confirm what your expectations were if you'd give us a numerical range. Thank you. Hey, Jim. No, we are not guiding calendar 2026, but we said in our financial model, we said that we expect exabyte nearline exabyte to grow in the mid-20%. We have done it a bit better. If you look the, you know, the last few quarters, and we always, as Dave said before, we always try to extract as many exabyte we can from our manufacturing. So no, we are continuing this trend, but we don't guide calendar 2026. But moving from 2.4 per platter to 3 per platter to 4 per platter, you can see that, you know, we're on a trajectory like you described. When it gets down to the individual customer level, obviously we have to be very predictable because they need what they need and what they've... what we've committed to in order to build out that data center. So we'll continue to execute that plan, and maybe we can do a little bit better as we transition to 4 TB per platter. The next question will come from Amit Daryanani with Evercore. Please go ahead. Good afternoon, everyone. Thanks for taking my question. You know, I guess, Gianluca, I'm hoping you can talk a little bit about the March quarter guide, because it seems to be a really sizable uptick in gross margins. I think it's up, like, 250 basis points or 100% plus incrementals. Could you just? Is there any you would call out in March quarter that's unique, that's helping drive that kind of margin expansion? And is this really all coming from the core HDD business, or is there a potential benefit from the old systems business that's helping you as well? Thank you. Amit, I mean, what I would say is now we expect to be a very good quarter. I don't think it's different than what we have done before. Now, it's always based on the pricing strategy and the mix. Now, as you know, we qualified another customer on HAMR, so we will ramp a little bit more volume on HAMR, which is helping us to get better margin. But fundamentally, it's not really a difference in how we think we are going to execute the quarter, and it's good. I think the incremental margin looks very good. Yeah, and it's not the systems business. The systems business is doing well, but it's fairly small-scale in comparison. Got it. The next question will come from Mark Newman with Bernstein. Please go ahead. Great. Hi, thanks for taking my question, and congrats on the numbers today. Just want to touch again on this, the LTAs and pricing arrangements you have. Just curious, do you think there's an opportunity here for more significant price increases? You know, in NAND flash, we're hearing things like 40%-100% up quarter on quarter for some contracts. I appreciate hard disk drives. You have a very long-term agreements, but I think there's a lot of questions I'd like to just touch on this as well. And a lot of, as the LTAs roll off, is there an opportunity for some of those to be repriced at a more significant, more significantly higher price to change the trajectory? Certainly, numbers are great, you're printing. We're just trying to figure out, could you start to see more significant price increases rather than... At the moment, you're seeing kind of flattish, down a little bit, up a little bit, but overall, your average prices are flat, which I understand is a mixture of, like for like, slightly up, offset by new products coming in at a lower price. Just wondered if that may change. And then if it's just a quick update on HAMR mix, if there's any update on the trajectory of the HAMR mix that you've outlined before. Thanks very much. Thanks, Mark. A couple of points. On the HAMR mix. We necessarily constrained ourselves on the 3 TB per platter because the factories were fairly full, and we knew we would be going to the 4 TB per platter product. So we've been leaning harder on that and making sure it gets through the development and qualification phases. As time goes on, then we'll move off and onto the 4 TB per platter very aggressively. So that, if that helps you on the mix side. And the other thing about HAMR mix is it'll be necessarily mixed up. I think the demand for those products will be at the high capacity points, not necessarily the lower capacity points just yet. And then relative to pricing, I think I said before, as one long-term agreement rolls into the next year or the next year, we've satisfied our existing supply commitments, then people are looking at the new products. We have constrained supply of those new products, then we look at what the demand is, and we dictate where our pricing is. And, you know, one of the very first questions I said is, it could be flat to up a little bit. You know, that's the way I think about it right now, but it all depends on what the demand is. If the demand continues very strong, that's great, and again, what we're seeing is people who can't get what they need today, they're saying, "Okay, I need to be able to plan my data center procurement out in the future. Let's get more predictable in the future." It's giving us better visibility, helps us run our factories for better cost and so on, so that's great. Thanks so much. The next question will come from Krish Sankar with TD Cowen. Please go ahead. Yeah, thank you for my question. I had a question, I just want to put it in two parts. One is, how much was your HAMR as a percentage of your exabyte shipment last year? How much do you expect it to be this year? The genesis of the question is I'm just trying to figure out, you know, obviously, a lot of questions on the very strong gross margins. If there's a way to put it in three buckets, like how much of the gross margin upside is driven by pricing? How much is driven by product mix? How much is driven by cost reduction, by offshoring manufacturing? Thank you. Yeah, there's really no offshoring manufacturing or anything like that involved. You know, our manufacturing operations around the world are doing quite well and quite full, so that's helping from a cost perspective. But really no change in any manufacturing strategy to speak of. Relative—I would say a lot of what the benefits we're seeing is mix, and mix not just because we're actually transitioning into higher, but into a more better products over time, but also because the demand for those products is quite high. You think about it, if you're building a data center with a 3 TB per platter versus a 4 TB per platter, you're going to be running that data center for a long time. You want the higher capacity point. To the extent that we can do that as predictably as possible, that mix is what's driving the stability out in the market for us and you know, helping us plan. Yeah, Krish, we don't give specific details on the impact of pricing, mix, and cost, but they are somehow interrelated. Now, the change in mix is helping with the cost reduction, and the supply-demand situation is, of course, supporting our pricing strategy. So now they are all very good contributor to the increasing gross margin, and as we said before, now this is going to continue through the calendar year. How much of HAMR is the percentage of the mix? Well, Dave gave an indication on the unit that we shipped in last quarter, so I think you can fairly easily calculate that. Thank you very much. Thank you. Thank you. The next question will come from Steven Fox with the Fox Advisors LLC. Please go ahead. Thanks. Good afternoon. I guess I was just wondering on this, on your mix question, looking at your average capacity per drive being up 22%, like, how much of that, like, obviously, the supply-demand environment has tightened over the last year. And in reaction to that, are you taking steps to accelerate, you know, that mix up as the customers pushed you that way? Like, I'm just curious how much you can control going forward now that we're here on even tighter supply to sort of help your customers in terms of absolute petabytes you're delivering. Thanks, Steve. So yeah, we are. The lead time out of the wafer fab is quite long, so you know, we have to be predictable for our customers, say, six months, nine months later, so on and so forth. That's one of the reasons why we talk kind of a year at a time inside of these LTAs. So we start wafers based on what we know we're gonna be able to deliver so that we're as predictable as we can be for our customers. As if we're deploying manufacturing, you know, engineering resources, we're trying to get through these product transitions because that's what gets us the most exabytes after that. And so you know, going mixing up is kind of our goal. So that you know, if that helps clarify what our strategy is. It does, Dave. I just wonder, like, when you had your analyst meeting, you said that sort of a pretty well-defined timeline for no transitions. Maybe just can you give yourself a report card on how you're doing on some of those timelines if we look out now versus the next year or longer term? Yeah, I think that's good. We're on the plan or slightly ahead. Most of that's under our control. We can execute. We execute well, and we've been executing well. Some of it's under our customer's control as well. The behavioral changes we've seen in the customer, I made reference to earlier, they're really pulling hard because they need more exabytes. And so that helps get the quals done quickly, you know, it helps a lot of roadmap alignment and then supply, specific supply alignment, which helps our factory. So. Great, that's helpful. Thank you. The next question will come from Aaron Rakers with Wells Fargo. Please go ahead. Yeah, thanks for taking the question, and also congrats on the results. I want to go back to gross margin. I know you talked a lot about the pricing dynamics and the visibility you have, but you know, the thing that stands out to me is you've been executing on, like, a cost per TB, you know, of like a mid-teens year-on-year decline these last several quarters. As we roll out the 4 TB per platter, you know, Mozaic drives, you know, how do I think about that cost down curve? Is it mid-single digit? Is it... Can you sustain a double digit? And wouldn't we expect the 4 TB per platter HAMR drives to actually maybe accelerate the cost down, given the ability to bring that into, you know, lower end, other outside of nearline platforms? I'm just curious of how you think about that cost down curve? Yeah, we are very positive on the 4 TB per disk in terms of impact on the cost. As we discussed before, now the unique costs tend to be fairly similar, but of course, we are adding a lot of content per unit. So that will be a good help to reducing the cost and improving profitability. So as you know, we are qualifying two major customers on this new product, so the time to finalize the qual and then ramp, probably through the end of the calendar year and for sure now well into the now the impact will be strong, I think, in the next calendar year, too. Yeah, and you know, we plan on making a big transition to 4 TB per platter over the coming few years, and then getting to 5 TB per platter as well. We do add complexity as we make those transitions, but you know, I'd say the first order, the things that dictate the speed of the ramp are our ability to go work scrap and yields all through our supply chain and so on, and we're working very hard on that. I like the product, so I think it provide for a bright and stable future for us. We just need to stay focused on it. Thank you. The next question will come from Timothy Arcuri with UBS. Please go ahead. Thanks a lot. I want to ask about LTAs. I think you said nearline capacity is allocated through 2026, so it sounds like both pricing and exabytes are locked in this year. But for 2027, I think you said something that I took that exabyte and pricing is not locked in, but you have some sort of agreement. So I guess I had two questions. First of all, is it right to assume that pricing is also locked in for all of 2026? And what sort of agreement are you referring to for 2027, if you know, volume and pricing is not locked in next year? Thanks. Yes. For this calendar year, now, we said basically we have PO in place for, for all the quarters, so volume and pricing is well defined. As Dave said before, if in a quarter we can produce a little bit more, of course, we will sell those exabyte in the open market at a, at a good profitability. But I would say we have the vast, now the vast, vast majority of, of the volume is already allocated. Calendar 2027, we will, we'll start working on that fairly soon. Of course, we have very good indication and, and agreement on volumes, but we have not, we have not fixed the price yet. Yeah, and Tim, if this helps, so we haven't really started the longest lead time parts, but we will very soon for the start of 2027, and we need to start having those discussions with our customers, which quals are we going to get through together with, you know, what, what exactly is the plan? Because a lot of them need predictability as well, so we'll have to build in our factories what, how, based upon how hard they want to pull on those new products. Okay, thanks. The next question will come from Mehdi Hosseini with the Susquehanna Financial Group. Please go ahead. Yes, just a quick housekeeping item, Gianluca. Your CapEx has been increasing on a quarter on quarter basis. How should I think about depreciation, especially since it did dip in the December quarter? Any color here will be great looking forward. Yeah, no, our CapEx is aligned to our target of 4%-6% of revenue. Now, we are actually at the bottom of that range, so it's not, it's not, increasing in term of what we want to achieve or what we said. Of course, comparing to a period where we were more into the down cycle in term of dollars, of course, is higher. We are supporting our HAMR transition and HAMR ramp. So I would say there is nothing different than what we said. Yeah, I think that's the way I think about it as well, as well, Mehdi, is that if you, if you go back two years ago and you use that as a baseline, you know, we were still significantly lower revenue, but also, you know, we were challenged on the supply-demand balance. Right now, we're in a totally different environment, of course. So, we'll probably stay well within the 4%-6% range, but, you know, as the revenue goes up, we'll spend a little bit more, and probably the first priority is maintenance tools and the things that we weren't doing a couple of years ago. I apologize, I may have confused. I was focusing more on depreciation. Given these several quarters of increase in CapEx, should I expect a step up in depreciation looking forward? Depreciation will follow the CapEx. So, I guess you have your model on the revenue, so you can calculate the 4%-6% of CapEx, and then depreciation for us is on a 10-year useful life, so you can probably model in that way. It's not like some other fabs, it's not necessarily the huge part of the cost drivers. There's a lot of other pieces of cost that we can go manage, so. Got you. Thank you. The next question will come from Ananda Baruah with Loop Capital. Please go ahead. Yeah, guys. Good afternoon. Thanks for taking the question. Dave, while we have you, a little bit of a technical one, are you—what kind of activity are you seeing, you know, at sort of the so-called warm tier of storage? It's a question that comes up a bunch in our conversations. We've heard that it's obviously growing. It's growing both hard drive and flash storage. It's participating nicely, but would love to get your input on it, 'cause I think there's still... First of all, we'd love to know if what we're hearing is accurate. But secondarily, I think there's a lot of people that are assuming that that's really, like, it's becoming a NAND tier, and largely a NAND tier in a GenAI world. Anyway, just would love to get any context there that you have. Thanks. Yeah, I think you have to be a little bit careful, Ananda. So, there are applications that are very memory-dependent, that are attached to compute, and some of these applications are neat. I like them. When you start talking about big data storage, if you will, in data centers, the tiering architecture is fairly well set and probably won't change based on economics and also architectures that are well known, people know how to play. So, if the concept is that drives aren't working hard, they're, you know, in the background, just storing data, that's not the way a good way to think about it. That's not the way hard drives are being used right now. They're working 24/7. A lot of times they're optimized for performance themselves, largely streaming performance, not random small block workloads. That's more of a memory thing. And so, you know, if you had an application that's random small block, it's probably memory. If you have big data, it's probably a little bit of memory on the front end and a lot of hard drive on the back end. And we think that there are applications across the entire spectrum, of course, but we think that in the future, when we start to talk about the concepts in their enormity, about checkpoints and physical AI and video and things like that, it's large, large data, so the architectural tier that stores the data will probably remain constant for the next decade. That's super helpful. I'll keep it there. Thanks a lot. That's great. The next question will come from Vijay Rakesh with Mizuho. Please go ahead. Yeah, hi. Thanks, Dave and Gianluca. Just a quick question on HAMR. I know you're ramping it faster in the March quarter. Should that drive a much better gross margin profile, I guess? And any thoughts on how we should see the margins improve, I guess, as HAMR starts to ramp? And then follow up. Vijay, now, if you are referring to the March quarter, of course, the ramp of HAMR is included in our guidance, and our guidance is indicating a fairly good improvement in gross margin again. And then I said, for the rest of the calendar year, now we expect both revenue and profitability to improve sequentially, and of course, part of that is coming from additional HAMR products. We think demand will be strong for the 4 TB per platter, of course, and so that's one of the reasons why we're, you know, making that a priority in the transition that we go through this calendar year and into next. Got it. Very helpful. And just a quick question also on the OpEx side. You know, very nice, obvious topics. Same time last year, somewhere in the 14% range, now it's down to 10%. I know, Gianluca, you said probably that's a long-term target, but looks like, as Dave mentioned, with top line ramping up, with all the design wins, it looks like OpEx could go down again. Is that fair, as a percent of mix? Well, I would say, you know, we are getting closer and closer to our fourth target of 10% of revenue for OpEx. We are almost there. We should be there actually in the March quarter. And then, of course, it's not that we relax our cost control. We will continue to keep our cost control and revenue supposed to increase, so we can probably do it a bit better. Yeah, I'm, I'm glad you asked that, Vijay, because, you know, obviously, a few years ago, the tough times that we went through, we weren't investing in ourselves to the, the rate that I'd like. And of course, it's with the HAMR transition in front of us, that was a lot of work. Now that we've kind of cleared that HAMR transition, we can see the future fairly well. It's, you know, the, the clouds are parting, if you will, and we can see areal density opportunities in front of us, and we will take that, the money, such as it is, even staying within our same model, and we'll take that money and reinvest in ourselves so that we can continue to drive the areal density. Got it. Great. Thanks a lot, guys. Appreciate it. This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks. Thank you, Nick, and thanks to everyone for joining us on the call. The Seagate team is executing very well, delivering on our financial targets and advancing areal density roadmaps, and successfully qualifying customers on our HAMR-based Mozaic products to address the sustained and growing demand for data storage. As data creation accelerates, driven by both traditional workloads and these emerging AI applications, Seagate's transformational technology positions us well to capture the significant demand opportunities ahead. I'd like to thank our employees for their dedication and innovation, and our customers and suppliers for their trust and collaboration, and our shareholders as well for their continued support. Together, we're driving Seagate's ongoing success. Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker 14: Welcome to the Seagate Technology Fiscal Second Quarter 2026 Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Shanye Hudson, Senior Vice President, Investor Relations. Please go ahead. Welcome to the Seagate Technology Fiscal Second Quarter 2026 Conference Call. welcome to the seagate technology fiscal second quarter 2026 conference call All participants will be in a listen-only mode. all participants will be in a listen-only mode Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. should you need assistance please signal a conference specialist by pressing the star key followed by zero After today's presentation, there will be an opportunity to ask questions. after today's presentation there will be an opportunity to ask questions To ask a question, you may press star, then one on a touch-tone phone. to ask a question you may press star then one on a touch-tone phone To withdraw your question, please press star, then two. to withdraw your question please press star then two Please note, this event is being recorded. please note this event is being recorded I would now like to turn the conference over to Shanye Hudson, Senior Vice President, Investor Relations. i would now like to turn the conference over to shanye hudson senior vice president investor relations Please go ahead. please go ahead

Speaker 15: Thank you, and hello, everyone. Welcome to today's call. Joining me are Dave Mosley, Seagate's Chair and Chief Executive Officer, and Gianluca Romano, our Chief Financial Officer. We've posted our earnings, press release, and detailed supplemental information for our December quarter results on the investors section of our website. During today's call, we'll refer to GAAP and non-GAAP measures. Non-GAAP figures are reconciled to GAAP figures in the earnings press release posted on our website and included on our Form 8-K. We've not reconciled certain non-GAAP outlook measures because material items that may impact these measures are out of our control and/or cannot be reasonably predicted. Therefore, a reconciliation to corresponding GAAP measures is not available without unreasonable effort. Before we begin, I'd like to remind you that today's call contains forward-looking statements that reflect management's current views and assumptions based on information available to us as of today. Thank you, and hello, everyone. thank you and hello everyone Welcome to today's call. welcome to today's call Joining me are Dave Mosley, Seagate's Chair and Chief Executive Officer, and Gianluca Romano, our Chief Financial Officer. joining me are dave mosley seagate's chair and chief executive officer and gianluca romano our chief financial officer We've posted our earnings, press release, and detailed supplemental information for our December quarter results on the investors section of our website. we've posted our earnings press release and detailed supplemental information for our december quarter results on the investors section of our website During today's call, we'll refer to GAAP and non-GAAP measures. during today's call we'll refer to gaap and non-gaap measures Non-GAAP figures are reconciled to GAAP figures in the earnings press release posted on our website and included on our Form 8-K. non-gaap figures are reconciled to gaap figures in the earnings press release posted on our website and included on our form 8-k We've not reconciled certain non-GAAP outlook measures because material items that may impact these measures are out of our control and/or cannot be reasonably predicted. we've not reconciled certain non-gaap outlook measures because material items that may impact these measures are out of our control and/or cannot be reasonably predicted Therefore, a reconciliation to corresponding GAAP measures is not available without unreasonable effort. therefore a reconciliation to corresponding gaap measures is not available without unreasonable effort Before we begin, I'd like to remind you that today's call contains forward-looking statements that reflect management's current views and assumptions based on information available to us as of today. before we begin i'd like to remind you that today's call contains forward-looking statements that reflect management's current views and assumptions based on information available to us as of today They should not be relied upon as of any subsequent date. Actual results may differ materially from those contained in or implied by these forward-looking statements, as are subject to risks and uncertainties associated with our business. To learn more about these risks, uncertainties, and other factors that may affect our future business results, please refer to the press release issued today and our SEC filings, including our most recent annual report on Form 10-K and quarterly report on Form 10-Q, as well as the supplemental information, all of which may be found on the investors section of our website. Following our prepared remarks, we'll open the call up for questions. In order to provide all analysts with the opportunity to participate, we thank you in advance for asking one primary question and then reentering the queue. With that, I'll turn the call over to you, Dave. They should not be relied upon as of any subsequent date. they should not be relied upon as of any subsequent date Actual results may differ materially from those contained in or implied by these forward-looking statements, as are subject to risks and uncertainties associated with our business. actual results may differ materially from those contained in or implied by these forward-looking statements as are subject to risks and uncertainties associated with our business To learn more about these risks, uncertainties, and other factors that may affect our future business results, please refer to the press release issued today and our SEC filings, including our most recent annual report on Form 10-K and quarterly report on Form 10-Q, as well as the supplemental information, all of which may be found on the investors section of our website. to learn more about these risks uncertainties and other factors that may affect our future business results please refer to the press release issued today and our sec filings including our most recent annual report on form 10-k and quarterly report on form 10-q as well as the supplemental information all of which may be found on the investors section of our website Following our prepared remarks, we'll open the call up for questions. following our prepared remarks we'll open the call up for questions In order to provide all analysts with the opportunity to participate, we thank you in advance for asking one primary question and then reentering the queue. in order to provide all analysts with the opportunity to participate we thank you in advance for asking one primary question and then reentering the queue With that, I'll turn the call over to you, Dave. with that i'll turn the call over to you dave

Speaker 6: Thanks, Shanye, and hello, everyone. Seagate closed out calendar 2025 with a record-breaking quarter, driven by sequential revenue growth across nearly all end markets. December quarter financial results exceeded both top and bottom-line expectations and set new company records for exabyte shipments, gross margin, operating margin, and non-GAAP earnings per share. We expanded non-GAAP gross margin above 42%, supported by the execution of our pricing strategy, along with an improving mix of our high-capacity drives as HAMR shipments ramp. Looking at the entire calendar year, 2025 marked a transformational period for Seagate, both financially and operationally. Over the calendar year, we increased revenue by over 25%, improved gross margins by nearly 740 basis points, and expanded operating margins by an even greater amount, demonstrating the profitability leverage in our financial model. Thanks, Shanye, and hello, everyone. thanks shanye and hello everyone Seagate closed out calendar 2025 with a record-breaking quarter, driven by sequential revenue growth across nearly all end markets. seagate closed out calendar 2025 with a record-breaking quarter driven by sequential revenue growth across nearly all end markets December quarter financial results exceeded both top and bottom-line expectations and set new company records for exabyte shipments, gross margin, operating margin, and non-GAAP earnings per share. december quarter financial results exceeded both top and bottom-line expectations and set new company records for exabyte shipments gross margin operating margin and non-gaap earnings per share We expanded non-GAAP gross margin above 42%, supported by the execution of our pricing strategy, along with an improving mix of our high-capacity drives as HAMR shipments ramp. we expanded non-gaap gross margin above 42% supported by the execution of our pricing strategy along with an improving mix of our high-capacity drives as hamr shipments ramp Looking at the entire calendar year, 2025 marked a transformational period for Seagate, both financially and operationally. looking at the entire calendar year 2025 marked a transformational period for seagate both financially and operationally Over the calendar year, we increased revenue by over 25%, improved gross margins by nearly 740 basis points, and expanded operating margins by an even greater amount, demonstrating the profitability leverage in our financial model. over the calendar year we increased revenue by over 25% improved gross margins by nearly 740 basis points and expanded operating margins by an even greater amount demonstrating the profitability leverage in our financial model 2025 also solidified HAMR technology as a long-term enabler of mass capacity storage. We ended the year shipping 3 TB per disk Mozaic-based HAMR products to our first CSP customer, and by year's end, quarterly HAMR shipments exceeded 1.5 million units and have continued to ramp. Mozaic 3 HAMR drives are now qualified with all of the major U.S. CSP customers, and qualifications for our second generation Mozaic 4 TB per disk products are tracking well to plan. These developments align with our long-term areal density roadmap that extends to 10 TB per disk, which we expect to deliver early in the next decade. I want to thank our Seagate teams around the world for exceeding our performance expectations and delivering outstanding value to our global customers. We continue to operate in an exceptionally strong demand environment, particularly within the data center end markets. 2025 also solidified HAMR technology as a long-term enabler of mass capacity storage. 2025 also solidified hamr technology as a long-term enabler of mass capacity storage We ended the year shipping 3 TB per disk Mozaic-based HAMR products to our first CSP customer, and by year's end, quarterly HAMR shipments exceeded 1.5 million units and have continued to ramp. we ended the year shipping 3 tb per disk mozaic-based hamr products to our first csp customer and by year's end quarterly hamr shipments exceeded 1.5 million units and have continued to ramp Mozaic 3 HAMR drives are now qualified with all of the major U.S. mozaic 3 hamr drives are now qualified with all of the major u.s CSP customers, and qualifications for our second generation Mozaic 4 TB per disk products are tracking well to plan. csp customers and qualifications for our second generation mozaic 4 tb per disk products are tracking well to plan These developments align with our long-term areal density roadmap that extends to 10 TB per disk, which we expect to deliver early in the next decade. these developments align with our long-term areal density roadmap that extends to 10 tb per disk which we expect to deliver early in the next decade I want to thank our Seagate teams around the world for exceeding our performance expectations and delivering outstanding value to our global customers. i want to thank our seagate teams around the world for exceeding our performance expectations and delivering outstanding value to our global customers We continue to operate in an exceptionally strong demand environment, particularly within the data center end markets. we continue to operate in an exceptionally strong demand environment particularly within the data center end markets In the December quarter, we saw sustained demand growth for our high-capacity nearline drives across global cloud data centers, as well as continued improvement from the enterprise edge. Based on our build-to-order pipeline, we anticipate these positive demand trends will continue for some time. Our nearline capacity is fully allocated through calendar year 2026, and we expect to begin accepting orders for the first half of calendar year 2027 in the coming months. Further out, demand visibility is strengthening based on the long-term agreements in place with major cloud customers through calendar 2027. Additionally, multiple cloud customers are discussing their demand growth projections for calendar 2028, underscoring that supply assurance remains their highest priority. We will continue to meet strengthening demand through our strategy to maintain supply discipline and satisfy exabyte growth through areal density and advancements and without increasing unit production volume. In the December quarter, we saw sustained demand growth for our high-capacity nearline drives across global cloud data centers, as well as continued improvement from the enterprise edge. in the december quarter we saw sustained demand growth for our high-capacity nearline drives across global cloud data centers as well as continued improvement from the enterprise edge Based on our build-to-order pipeline, we anticipate these positive demand trends will continue for some time. based on our build-to-order pipeline we anticipate these positive demand trends will continue for some time Our nearline capacity is fully allocated through calendar year 2026, and we expect to begin accepting orders for the first half of calendar year 2027 in the coming months. our nearline capacity is fully allocated through calendar year 2026 and we expect to begin accepting orders for the first half of calendar year 2027 in the coming months Further out, demand visibility is strengthening based on the long-term agreements in place with major cloud customers through calendar 2027. further out demand visibility is strengthening based on the long-term agreements in place with major cloud customers through calendar 2027 Additionally, multiple cloud customers are discussing their demand growth projections for calendar 2028, underscoring that supply assurance remains their highest priority. additionally multiple cloud customers are discussing their demand growth projections for calendar 2028 underscoring that supply assurance remains their highest priority We will continue to meet strengthening demand through our strategy to maintain supply discipline and satisfy exabyte growth through areal density and advancements and without increasing unit production volume. we will continue to meet strengthening demand through our strategy to maintain supply discipline and satisfy exabyte growth through areal density and advancements and without increasing unit production volume In the December quarter, our average nearline drive capacities rose by 22% year-over-year, approaching 23 TB per drive, with those sold to cloud customers averaging significantly higher. This trend underscores the strong adoption of our higher capacity drives to support demand growth. At the same time, revenue per TB sold has remained relatively stable, reflecting the effectiveness of our pricing strategy. Seagate is well positioned to continue benefiting from the combination of powerful secular tailwinds and supply discipline. Video applications continue to drive significant demand for hard drives, with platforms like YouTube witnessing 20 million video uploads daily, up from just two million three years ago. This staggering pace of growth extends to other cloud video platforms and doesn't yet include the full surge in content generation expected from emerging AI-driven video applications. In the December quarter, our average nearline drive capacities rose by 22% year-over-year, approaching 23 TB per drive, with those sold to cloud customers averaging significantly higher. in the december quarter our average nearline drive capacities rose by 22% year-over-year approaching 23 tb per drive with those sold to cloud customers averaging significantly higher This trend underscores the strong adoption of our higher capacity drives to support demand growth. this trend underscores the strong adoption of our higher capacity drives to support demand growth At the same time, revenue per TB sold has remained relatively stable, reflecting the effectiveness of our pricing strategy. at the same time revenue per tb sold has remained relatively stable reflecting the effectiveness of our pricing strategy Seagate is well positioned to continue benefiting from the combination of powerful secular tailwinds and supply discipline. seagate is well positioned to continue benefiting from the combination of powerful secular tailwinds and supply discipline Video applications continue to drive significant demand for hard drives, with platforms like YouTube witnessing 20 million video uploads daily, up from just two million three years ago. video applications continue to drive significant demand for hard drives with platforms like youtube witnessing 20 million video uploads daily up from just two million three years ago This staggering pace of growth extends to other cloud video platforms and doesn't yet include the full surge in content generation expected from emerging AI-driven video applications. this staggering pace of growth extends to other cloud video platforms and doesn't yet include the full surge in content generation expected from emerging ai-driven video applications These applications are not only fueling social media uploads, but are also transforming how organizations turn their data into tangible value, enabling personalized marketing, interactive education, and advanced simulations capable of training manufacturing, engineering, healthcare, and other professionals. The strategic value of data is further underscored as new applications and use cases emerge across cloud and edge workloads. Among the most promising of these is agentic AI, which relies on persistent access to large volumes of historic data to enable effective planning, reasoning, and independent decision-making. Adoption is already gaining momentum, with one recent survey conducted by a leading cloud service provider reporting more than half of participating customers were actively using AI agents. Early adopters are already realizing measurable returns, with benefits ranging from lower costs to increased revenue opportunities. These applications are not only fueling social media uploads, but are also transforming how organizations turn their data into tangible value, enabling personalized marketing, interactive education, and advanced simulations capable of training manufacturing, engineering, healthcare, and other professionals. these applications are not only fueling social media uploads but are also transforming how organizations turn their data into tangible value enabling personalized marketing interactive education and advanced simulations capable of training manufacturing engineering healthcare and other professionals The strategic value of data is further underscored as new applications and use cases emerge across cloud and edge workloads. the strategic value of data is further underscored as new applications and use cases emerge across cloud and edge workloads Among the most promising of these is agentic AI, which relies on persistent access to large volumes of historic data to enable effective planning, reasoning, and independent decision-making. among the most promising of these is agentic ai which relies on persistent access to large volumes of historic data to enable effective planning reasoning and independent decision-making Adoption is already gaining momentum, with one recent survey conducted by a leading cloud service provider reporting more than half of participating customers were actively using AI agents. adoption is already gaining momentum with one recent survey conducted by a leading cloud service provider reporting more than half of participating customers were actively using ai agents Early adopters are already realizing measurable returns, with benefits ranging from lower costs to increased revenue opportunities. early adopters are already realizing measurable returns with benefits ranging from lower costs to increased revenue opportunities With the deployment of AI agents at the edge, where untapped data often resides, we believe the stage is set for a sustained and meaningful increase in data generated and stored that will support inferencing, continuous training, and also maintain model integrity. Modern data centers have evolved to address the complexity and scale that massive workloads bring through sophisticated data tiering architectures, ensuring that the right data is available at the right time and place. Hard drives are essential to these architectures, anchoring the mass capacity data tier that stores the vast majority of exabytes. From storing the checkpoint datasets used to train and maintain model integrity, to supporting vector databases that provide the context necessary for accurate inference results and agentic AI performance. By leveraging hard drives, data center operators, whether in the cloud or on-prem, can achieve the optimal balance of performance, capacity, and cost efficiency at scale. With the deployment of AI agents at the edge, where untapped data often resides, we believe the stage is set for a sustained and meaningful increase in data generated and stored that will support inferencing, continuous training, and also maintain model integrity. with the deployment of ai agents at the edge where untapped data often resides we believe the stage is set for a sustained and meaningful increase in data generated and stored that will support inferencing continuous training and also maintain model integrity Modern data centers have evolved to address the complexity and scale that massive workloads bring through sophisticated data tiering architectures, ensuring that the right data is available at the right time and place. modern data centers have evolved to address the complexity and scale that massive workloads bring through sophisticated data tiering architectures ensuring that the right data is available at the right time and place Hard drives are essential to these architectures, anchoring the mass capacity data tier that stores the vast majority of exabytes. hard drives are essential to these architectures anchoring the mass capacity data tier that stores the vast majority of exabytes From storing the checkpoint datasets used to train and maintain model integrity, to supporting vector databases that provide the context necessary for accurate inference results and agentic AI performance. from storing the checkpoint datasets used to train and maintain model integrity to supporting vector databases that provide the context necessary for accurate inference results and agentic ai performance By leveraging hard drives, data center operators, whether in the cloud or on-prem, can achieve the optimal balance of performance, capacity, and cost efficiency at scale. by leveraging hard drives data center operators whether in the cloud or on-prem can achieve the optimal balance of performance capacity and cost efficiency at scale Against this transformational backdrop, Seagate's HAMR technology roadmap positions us to meet growing demand and deliver ongoing TCO improvement for our customers. HAMR is a proven technology, with large volumes of drives running in cloud production environments for more than three quarters now, and performing well across a broad spectrum of use cases. We are systematically ramping our Mozaic 3 HAMR products to qualified customers while maintaining focus on optimizing the profitability of our available supply. As noted earlier, Mozaic 3 is now qualified with all major US CSP customers and remains on track to have all global CSPs qualified within the first half of calendar 2026. Additionally, qualifications of our second generation Mozaic 4 products are progressing well. We expect to begin the ramp of Mozaic 4 later this quarter and have multiple CSPs qualified in the coming months, in line with our plans. Against this transformational backdrop, Seagate's HAMR technology roadmap positions us to meet growing demand and deliver ongoing TCO improvement for our customers. against this transformational backdrop seagate's hamr technology roadmap positions us to meet growing demand and deliver ongoing tco improvement for our customers HAMR is a proven technology, with large volumes of drives running in cloud production environments for more than three quarters now, and performing well across a broad spectrum of use cases. hamr is a proven technology with large volumes of drives running in cloud production environments for more than three quarters now and performing well across a broad spectrum of use cases We are systematically ramping our Mozaic 3 HAMR products to qualified customers while maintaining focus on optimizing the profitability of our available supply. we are systematically ramping our mozaic 3 hamr products to qualified customers while maintaining focus on optimizing the profitability of our available supply As noted earlier, Mozaic 3 is now qualified with all major US CSP customers and remains on track to have all global CSPs qualified within the first half of calendar 2026. as noted earlier mozaic 3 is now qualified with all major us csp customers and remains on track to have all global csps qualified within the first half of calendar 2026 Additionally, qualifications of our second generation Mozaic 4 products are progressing well. additionally qualifications of our second generation mozaic 4 products are progressing well We expect to begin the ramp of Mozaic 4 later this quarter and have multiple CSPs qualified in the coming months, in line with our plans. we expect to begin the ramp of mozaic 4 later this quarter and have multiple csps qualified in the coming months in line with our plans We continue to set the pace for the industry, recently demonstrating 7 TB per disk capability in our labs. As one of our largest CSP customers recently aptly described, hard drives are engineering marvels, a sentiment that we obviously share. Our deep expertise across mechanical engineering, material science, nanoscale fabrication, and now advanced photonics, not only enables Seagate to deliver on the HAMR roadmap, but also creates a durable competitive mode for hard drive technology well into the future. Wrapping up, 2025 was a milestone year for Seagate in every respect: financial performance, operational execution, and technology leadership. We are carrying this momentum into calendar 2026, supported by a powerful demand backdrop as new AI applications start to complement traditional workloads. We will remain highly disciplined and focused on expanding profitability through our higher capacity product mix, underpinned by the strong economics of HAMR. We continue to set the pace for the industry, recently demonstrating 7 TB per disk capability in our labs. we continue to set the pace for the industry recently demonstrating 7 tb per disk capability in our labs As one of our largest CSP customers recently aptly described, hard drives are engineering marvels, a sentiment that we obviously share. as one of our largest csp customers recently aptly described hard drives are engineering marvels a sentiment that we obviously share Our deep expertise across mechanical engineering, material science, nanoscale fabrication, and now advanced photonics, not only enables Seagate to deliver on the HAMR roadmap, but also creates a durable competitive mode for hard drive technology well into the future. our deep expertise across mechanical engineering material science nanoscale fabrication and now advanced photonics not only enables seagate to deliver on the hamr roadmap but also creates a durable competitive mode for hard drive technology well into the future Wrapping up, 2025 was a milestone year for Seagate in every respect: financial performance, operational execution, and technology leadership. wrapping up 2025 was a milestone year for seagate in every respect financial performance operational execution and technology leadership We are carrying this momentum into calendar 2026, supported by a powerful demand backdrop as new AI applications start to complement traditional workloads. we are carrying this momentum into calendar 2026 supported by a powerful demand backdrop as new ai applications start to complement traditional workloads We will remain highly disciplined and focused on expanding profitability through our higher capacity product mix, underpinned by the strong economics of HAMR. we will remain highly disciplined and focused on expanding profitability through our higher capacity product mix underpinned by the strong economics of hamr Our areal density roadmap positions Seagate to sustain the core TCO and efficiency advantages of hard drives as data creation and storage requirements accelerate in the AI era. We believe this foundation creates a compelling long-term value proposition for the company, our customers, and our shareholders. I'll now turn the call over to Gianluca to cover our results in greater detail. Our areal density roadmap positions Seagate to sustain the core TCO and efficiency advantages of hard drives as data creation and storage requirements accelerate in the AI era. our areal density roadmap positions seagate to sustain the core tco and efficiency advantages of hard drives as data creation and storage requirements accelerate in the ai era We believe this foundation creates a compelling long-term value proposition for the company, our customers, and our shareholders. we believe this foundation creates a compelling long-term value proposition for the company our customers and our shareholders I'll now turn the call over to Gianluca to cover our results in greater detail. i'll now turn the call over to gianluca to cover our results in greater detail

Speaker 8: Thank you, Dave. Seagate delivered another quarter of strong year-over-year revenue growth and set new record profitability metrics in the December quarter, underscoring the durability of data center demand trends. Additionally, we strengthened our financial position by retiring $500 million in gross debt and generating over $600 million in free cash flow, marking the highest level in eight years. December quarter revenue came in at $2.83 billion, up 7% sequentially and up 22% year-over-year. We achieved non-GAAP gross margin of 42.2%, up 210 basis points sequentially, and we expanded non-GAAP operating margin by 290 basis points sequentially to 31.9%. Our resulting non-GAAP EPS was $3.11, up 19% quarter-over-quarter. Thank you, Dave. thank you dave Seagate delivered another quarter of strong year-over-year revenue growth and set new record profitability metrics in the December quarter, underscoring the durability of data center demand trends. seagate delivered another quarter of strong year-over-year revenue growth and set new record profitability metrics in the december quarter underscoring the durability of data center demand trends Additionally, we strengthened our financial position by retiring $500 million in gross debt and generating over $600 million in free cash flow, marking the highest level in eight years. additionally we strengthened our financial position by retiring $500 million in gross debt and generating over $600 million in free cash flow marking the highest level in eight years December quarter revenue came in at $2.83 billion, up 7% sequentially and up 22% year- over- year. december quarter revenue came in at $2.83 billion up 7% sequentially and up 22% year- over- year We achieved non-GAAP gross margin of 42.2%, up 210 basis points sequentially, and we expanded non-GAAP operating margin by 290 basis points sequentially to 31.9%. we achieved non-gaap gross margin of 42.2% up 210 basis points sequentially and we expanded non-gaap operating margin by 290 basis points sequentially to 31.9% Our resulting non-GAAP EPS was $3.11, up 19% quarter- over- quarter. our resulting non-gaap eps was $3.11 up 19% quarter- over- quarter With strong financial results demonstrate our ability to execute our strategic objectives, including leveraging our technology roadmap to support demand growth. To that end, we shipped 190 exabytes in the December quarter, up 26% year-over-year, while keeping overall unit capacity relatively flat. The data center market accounted for 87% of our shipment volume, supported by ongoing demand momentum from global cloud customer and sequential growth across enterprise OEM markets. We shipped 165 exabytes in the data center market, up 4% sequentially and 31% year-over-year. Data center revenue grew at roughly the same pace, totaling $2.2 billion for the quarter, up 5% sequentially and 28% year-over-year. Against this strong demand backdrop, both cloud and enterprise customers are transitioning to higher capacity drives. With strong financial results demonstrate our ability to execute our strategic objectives, including leveraging our technology roadmap to support demand growth. with strong financial results demonstrate our ability to execute our strategic objectives including leveraging our technology roadmap to support demand growth To that end, we shipped 190 exabytes in the December quarter, up 26% year-over-year, while keeping overall unit capacity relatively flat. to that end we shipped 190 exabytes in the december quarter up 26% year-over-year while keeping overall unit capacity relatively flat The data center market accounted for 87% of our shipment volume, supported by ongoing demand momentum from global cloud customer and sequential growth across enterprise OEM markets. the data center market accounted for 87% of our shipment volume supported by ongoing demand momentum from global cloud customer and sequential growth across enterprise oem markets We shipped 165 exabytes in the data center market, up 4% sequentially and 31% year-over-year. we shipped 165 exabytes in the data center market up 4% sequentially and 31% year-over-year Data center revenue grew at roughly the same pace, totaling $2.2 billion for the quarter, up 5% sequentially and 28% year-over-year. data center revenue grew at roughly the same pace totaling $2.2 billion for the quarter up 5% sequentially and 28% year-over-year Against this strong demand backdrop, both cloud and enterprise customers are transitioning to higher capacity drives. against this strong demand backdrop both cloud and enterprise customers are transitioning to higher capacity drives Average cloud nearline capacity increased to nearly 26 TB in the December quarter, and will continue to grow with the ramp of HAMR-based Mozaic products. As Dave highlighted, Mozaic drives are running very well in production environment and meeting all performance, reliability, and integration expectations. In the enterprise OEM market, we are benefiting from slight improvement in traditional server units, along with increasing demand for storage servers, driven in large part by the adoption of AI applications and need to store data at the enterprise edge. The edge IoT market made up the remaining 21% of revenue at $601 million, supported by anticipated seasonal improvement for consumer products and the VIA client market. We project the broader VIA market to grow over time, with the largest growth contribution coming from VIA nearline products that are captured as part of our data center end market. Average cloud nearline capacity increased to nearly 26 TB in the December quarter, and will continue to grow with the ramp of HAMR-based Mozaic products. average cloud nearline capacity increased to nearly 26 tb in the december quarter and will continue to grow with the ramp of hamr-based mozaic products As Dave highlighted, Mozaic drives are running very well in production environment and meeting all performance, reliability, and integration expectations. as dave highlighted mozaic drives are running very well in production environment and meeting all performance reliability and integration expectations In the enterprise OEM market, we are benefiting from slight improvement in traditional server units, along with increasing demand for storage servers, driven in large part by the adoption of AI applications and need to store data at the enterprise edge. in the enterprise oem market we are benefiting from slight improvement in traditional server units along with increasing demand for storage servers driven in large part by the adoption of ai applications and need to store data at the enterprise edge The edge IoT market made up the remaining 21% of revenue at $601 million, supported by anticipated seasonal improvement for consumer products and the VIA client market. the edge iot market made up the remaining 21% of revenue at $601 million supported by anticipated seasonal improvement for consumer products and the via client market We project the broader VIA market to grow over time, with the largest growth contribution coming from VIA nearline products that are captured as part of our data center end market. we project the broader via market to grow over time with the largest growth contribution coming from via nearline products that are captured as part of our data center end market Moving on to the rest of the income statement, non-GAAP gross profit increased to $1.2 billion, up 13% quarter-over-quarter, and 44% compared with the prior year period, significantly outpacing revenue growth. Non-GAAP gross margin expanded to 42.2% in the December quarter, up from 40.1% in the prior period. This improvement reflects the ongoing execution of our pricing strategy and the growing adoption of our latest generation high-capacity products, which collectively drove a modest sequential increase in revenue per TB, a trend we expect to continue into the March quarter. Non-GAAP operating expenses were $290 million, relatively flat quarter-over-quarter and in line with our expectations. Operating expense as a percent of our revenue declined to 10.3%, rapidly trending towards our long-term target of 10%. Moving on to the rest of the income statement, non-GAAP gross profit increased to $1.2 billion, up 13% quarter-over-quarter, and 44% compared with the prior year period, significantly outpacing revenue growth. moving on to the rest of the income statement non-gaap gross profit increased to $1.2 billion up 13% quarter-over-quarter and 44% compared with the prior year period significantly outpacing revenue growth Non-GAAP gross margin expanded to 42.2% in the December quarter, up from 40.1% in the prior period. non-gaap gross margin expanded to 42.2% in the december quarter up from 40.1% in the prior period This improvement reflects the ongoing execution of our pricing strategy and the growing adoption of our latest generation high-capacity products, which collectively drove a modest sequential increase in revenue per TB, a trend we expect to continue into the March quarter. this improvement reflects the ongoing execution of our pricing strategy and the growing adoption of our latest generation high-capacity products which collectively drove a modest sequential increase in revenue per tb a trend we expect to continue into the march quarter Non-GAAP operating expenses were $290 million, relatively flat quarter-over-quarter and in line with our expectations. non-gaap operating expenses were $290 million relatively flat quarter-over-quarter and in line with our expectations Operating expense as a percent of our revenue declined to 10.3%, rapidly trending towards our long-term target of 10%. operating expense as a percent of our revenue declined to 10.3% rapidly trending towards our long-term target of 10% The combination of strong top-line growth and significant financial leverage drove an 18% sequential improvement in non-GAAP operating profit to $901 million, almost 32% of revenue. Other income and expenses were $70 million, reflecting slightly lower interest expenses on the reduced outstanding debt balance. We currently project other income and expenses to remain relatively flat in the March quarter. We grew non-GAAP net income to $702 million, with corresponding non-GAAP EPS of $3.11 per share, based on tax expenses of $129 million and a diluted share count of approximately 226 million shares, including the net impact of our 2028 convertible notes. Turning now to cash flow and the balance sheet. The combination of strong top-line growth and significant financial leverage drove an 18% sequential improvement in non-GAAP operating profit to $901 million, almost 32% of revenue. the combination of strong top-line growth and significant financial leverage drove an 18% sequential improvement in non-gaap operating profit to $901 million almost 32% of revenue Other income and expenses were $70 million, reflecting slightly lower interest expenses on the reduced outstanding debt balance. other income and expenses were $70 million reflecting slightly lower interest expenses on the reduced outstanding debt balance We currently project other income and expenses to remain relatively flat in the March quarter. we currently project other income and expenses to remain relatively flat in the march quarter We grew non-GAAP net income to $702 million, with corresponding non-GAAP EPS of $3.11 per share, based on tax expenses of $129 million and a diluted share count of approximately 226 million shares, including the net impact of our 2028 convertible notes. we grew non-gaap net income to $702 million with corresponding non-gaap eps of $3.11 per share based on tax expenses of $129 million and a diluted share count of approximately 226 million shares including the net impact of our 2028 convertible notes Turning now to cash flow and the balance sheet. turning now to cash flow and the balance sheet We invested $116 million in capital expenditures for the December quarter, or roughly 4% of revenue. We are maintaining capital discipline while we continue to transition and ramp HAMR technology. To support these objectives, we anticipate capital expenditures for fiscal year 2026 to be inside our target range of 4%-6% of revenue. Free cash flow generation was strong at $607 million, up 42% from the prior quarter. Looking ahead, we expect free cash flow generation to further expand in the March quarter, supported by sustained demand trends, operational efficiency, and capital discipline. These factors position us well for durable, long-term cash flow generation. Cash and cash equivalents totaled just over $1 billion at the end of December quarter, with ample liquidity of $2.3 billion, including our undrawn revolving credit facility. We invested $116 million in capital expenditures for the December quarter, or roughly 4% of revenue. we invested $116 million in capital expenditures for the december quarter or roughly 4% of revenue We are maintaining capital discipline while we continue to transition and ramp HAMR technology. we are maintaining capital discipline while we continue to transition and ramp hamr technology To support these objectives, we anticipate capital expenditures for fiscal year 2026 to be inside our target range of 4%-6% of revenue. to support these objectives we anticipate capital expenditures for fiscal year 2026 to be inside our target range of 4%-6% of revenue Free cash flow generation was strong at $607 million, up 42% from the prior quarter. free cash flow generation was strong at $607 million up 42% from the prior quarter Looking ahead, we expect free cash flow generation to further expand in the March quarter, supported by sustained demand trends, operational efficiency, and capital discipline. looking ahead we expect free cash flow generation to further expand in the march quarter supported by sustained demand trends operational efficiency and capital discipline These factors position us well for durable, long-term cash flow generation. these factors position us well for durable long-term cash flow generation Cash and cash equivalents totaled just over $1 billion at the end of December quarter, with ample liquidity of $2.3 billion, including our undrawn revolving credit facility. cash and cash equivalents totaled just over $1 billion at the end of december quarter with ample liquidity of $2.3 billion including our undrawn revolving credit facility During the December quarter, we returned $154 million to shareholders through dividends. We retired approximately $500 million of exchangeable senior notes due 2028, which serves to limit further dilutive impact from these notes and optimize cash deployed for future share repurchases. Our resulting gross debt balance was approximately $4.5 billion exiting the quarter. Net leverage ratio improved to 1.1 times, based on adjusted EBITDA of $962 million for the December quarter, up 16% quarter-over-quarter, and up 63% year-on-year. We expect the net leverage ratio will trend lower as profitability and cash generation increase, while we continue to evaluate opportunities to further reduce debt. Turning now to the March quarter outlook. The demand environment remains strong, particularly among global cloud customers. During the December quarter, we returned $154 million to shareholders through dividends. during the december quarter we returned $154 million to shareholders through dividends We retired approximately $500 million of exchangeable senior notes due 2028, which serves to limit further dilutive impact from these notes and optimize cash deployed for future share repurchases. we retired approximately $500 million of exchangeable senior notes due 2028 which serves to limit further dilutive impact from these notes and optimize cash deployed for future share repurchases Our resulting gross debt balance was approximately $4.5 billion exiting the quarter. our resulting gross debt balance was approximately $4.5 billion exiting the quarter Net leverage ratio improved to 1.1 times, based on adjusted EBITDA of $962 million for the December quarter, up 16% quarter-over-quarter, and up 63% year-on-year. net leverage ratio improved to 1.1 times based on adjusted ebitda of $962 million for the december quarter up 16% quarter-over-quarter and up 63% year-on-year We expect the net leverage ratio will trend lower as profitability and cash generation increase, while we continue to evaluate opportunities to further reduce debt. we expect the net leverage ratio will trend lower as profitability and cash generation increase while we continue to evaluate opportunities to further reduce debt Turning now to the March quarter outlook. turning now to the march quarter outlook The demand environment remains strong, particularly among global cloud customers. the demand environment remains strong particularly among global cloud customers As a result, we expect data center demand will more than offset typical March quarter seasonality in the edge IoT market. We expect March quarter revenue to be in a range of $2.9 billion ±$100 million, which represent a 34% year-over-year improvement as a midpoint. Non-GAAP operating expenses are expected to be approximately $290 million. Based on the midpoint of our revenue guidance, non-GAAP operating margin is expected to approach the mid-30s% range. Non-GAAP EPS is expected to be $3.40 ±$0.20, based on a tax rate of about 16% and non-GAAP diluted share count of 230 million shares, including estimated dilution from our 2028 convertible notes of approximately 7.6 million shares. As a result, we expect data center demand will more than offset typical March quarter seasonality in the edge IoT market. as a result we expect data center demand will more than offset typical march quarter seasonality in the edge iot market We expect March quarter revenue to be in a range of $2.9 billion ±$100 million, which represent a 34% year-over-year improvement as a midpoint. we expect march quarter revenue to be in a range of $2.9 billion ±$100 million which represent a 34% year-over-year improvement as a midpoint Non-GAAP operating expenses are expected to be approximately $290 million. non-gaap operating expenses are expected to be approximately $290 million Based on the midpoint of our revenue guidance, non-GAAP operating margin is expected to approach the mid-30s% range. based on the midpoint of our revenue guidance non-gaap operating margin is expected to approach the mid-30s% range Non-GAAP EPS is expected to be $3.40 ±$0.20, based on a tax rate of about 16% and non-GAAP diluted share count of 230 million shares, including estimated dilution from our 2028 convertible notes of approximately 7.6 million shares. non-gaap eps is expected to be $3.40 ±$0.20 based on a tax rate of about 16% and non-gaap diluted share count of 230 million shares including estimated dilution from our 2028 convertible notes of approximately 7.6 million shares Seagate's strong December quarter performance and March quarter guidance underscore our continued focus on driving growth, enhancing profitability, and optimizing cash generation. Based on our current outlook, we expect to deliver sequential improvement to both the top and bottom line throughout calendar 2026, and remain in a strong position to enhance value for both customers and shareholders over the long term. Operator, let's open the call up for questions. Seagate's strong December quarter performance and March quarter guidance underscore our continued focus on driving growth, enhancing profitability, and optimizing cash generation. seagate's strong december quarter performance and march quarter guidance underscore our continued focus on driving growth enhancing profitability and optimizing cash generation Based on our current outlook, we expect to deliver sequential improvement to both the top and bottom line throughout calendar 2026, and remain in a strong position to enhance value for both customers and shareholders over the long term. based on our current outlook we expect to deliver sequential improvement to both the top and bottom line throughout calendar 2026 and remain in a strong position to enhance value for both customers and shareholders over the long term Operator, let's open the call up for questions. operator let's open the call up for questions

Speaker 14: Thank you. We will now begin the question-and-answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. In the interest of time, we ask that you limit yourself to one question. If you have further questions, you may reenter the question queue. Once again, that was star, then one to ask a question. At this time, we will pause momentarily to assemble our roster. The first question today will come from CJ Muse with Cantor Fitzgerald. Please go ahead. Thank you. thank you We will now begin the question-and-answer session. we will now begin the question-and-answer session To ask a question, you may press star, then one on your telephone keypad. to ask a question you may press star then one on your telephone keypad If you are using a speakerphone, please pick up your handset before pressing the keys. if you are using a speakerphone please pick up your handset before pressing the keys To withdraw your question, please press star, then two. to withdraw your question please press star then two In the interest of time, we ask that you limit yourself to one question. in the interest of time we ask that you limit yourself to one question If you have further questions, you may reenter the question queue. if you have further questions you may reenter the question queue Once again, that was star, then one to ask a question. once again that was star then one to ask a question At this time, we will pause momentarily to assemble our roster. at this time we will pause momentarily to assemble our roster The first question today will come from CJ Muse with Cantor Fitzgerald. the first question today will come from cj muse with cantor fitzgerald Please go ahead. please go ahead

Speaker 5: Yeah, good afternoon. Thank you for taking the question. You know, given the supply-demand dynamics, you're obviously in the catbird seat and wanted to really try to get some more detail on gross margins going forward. Your philosophy historically has been to share the gains, you know, both your customers and yourselves. But at the same time, you know, given this tight environment, you are raising like-for-like pricing. So curious, you know, is there a framework to think about in terms of the incremental gross margins that we should model from here? And then I guess maybe bigger picture, as you think about overall average pricing per exabyte, you know, we've gone from kind of down double digits to high single digits, and I think we just exited the quarter down 4% year-on-year. Yeah, good afternoon. yeah good afternoon Thank you for taking the question. thank you for taking the question You know, given the supply-demand dynamics, you're obviously in the catbird seat and wanted to really try to get some more detail on gross margins going forward. you know given the supply-demand dynamics you're obviously in the catbird seat and wanted to really try to get some more detail on gross margins going forward Your philosophy historically has been to share the gains, you know, both your customers and yourselves. your philosophy historically has been to share the gains you know both your customers and yourselves But at the same time, you know, given this tight environment, you are raising like-for-like pricing. but at the same time you know given this tight environment you are raising like-for-like pricing So curious, you know, is there a framework to think about in terms of the incremental gross margins that we should model from here? so curious you know is there a framework to think about in terms of the incremental gross margins that we should model from here And then I guess maybe bigger picture, as you think about overall average pricing per exabyte, you know, we've gone from kind of down double digits to high single digits, and I think we just exited the quarter down 4% year-on-year. and then i guess maybe bigger picture as you think about overall average pricing per exabyte you know we've gone from kind of down double digits to high single digits and i think we just exited the quarter down 4% year-on-year You know, do you see a world where, you know, pricing, you know, could flat or even move positive year-over-year? Thanks so much. You know, do you see a world where, you know, pricing, you know, could flat or even move positive year-over-year? you know do you see a world where you know pricing you know could flat or even move positive year-over-year Thanks so much. thanks so much

Speaker 6: Yeah. Thanks, CJ. I'll let Gianluca chime in here as well, but the pricing will be dictated by the demand. Right now, the demand is really strong, so I think as we roll through into 2027 and 2028, we look at how much capacity we're having. We're bringing online by virtue of the fact that we're making all these aggressive product transitions. We'll bring more exabytes to bear, and then, you know, people go out there and renegotiate for those. I think flat to slightly up is certainly possible, and that's the way we're really managing it. As we talk to our customers, the value proposition of the new drives as they go up 5 TB, 10 TB at a time is pretty strong. Yeah. yeah Thanks, CJ. thanks cj I'll let Gianluca chime in here as well, but the pricing will be dictated by the demand. i'll let gianluca chime in here as well but the pricing will be dictated by the demand Right now, the demand is really strong, so I think as we roll through into 2027 and 2028, we look at how much capacity we're having. right now the demand is really strong so i think as we roll through into 2027 and 2028 we look at how much capacity we're having We're bringing online by virtue of the fact that we're making all these aggressive product transitions. we're bringing online by virtue of the fact that we're making all these aggressive product transitions We'll bring more exabytes to bear, and then, you know, people go out there and renegotiate for those. we'll bring more exabytes to bear and then you know people go out there and renegotiate for those I think flat to slightly up is certainly possible, and that's the way we're really managing it. i think flat to slightly up is certainly possible and that's the way we're really managing it As we talk to our customers, the value proposition of the new drives as they go up 5 TB, 10 TB at a time is pretty strong. as we talk to our customers the value proposition of the new drives as they go up 5 tb 10 tb at a time is pretty strong

Speaker 8: Hey, CJ. So on the gross margin, we are executing very well. We are executing a little bit better than what we discussed at our Investor Day, where we presented a model with a 50% incremental margin above $2.6 billion of revenue. We have done better every quarter, of course, now is our objective to continue to optimize what we produce, what we sell, and finally, the profitability that we can get from the product. So the model cover over a longer period of time, now two, three years, not two or three quarters, but I'm positive we are continuing to progress in the right direction. Hey, CJ. hey cj So on the gross margin, we are executing very well. so on the gross margin we are executing very well We are executing a little bit better than what we discussed at our Investor Day, where we presented a model with a 50% incremental margin above $2.6 billion of revenue. we are executing a little bit better than what we discussed at our investor day where we presented a model with a 50% incremental margin above $2.6 billion of revenue We have done better every quarter, of course, now is our objective to continue to optimize what we produce, what we sell, and finally, the profitability that we can get from the product. we have done better every quarter of course now is our objective to continue to optimize what we produce what we sell and finally the profitability that we can get from the product So the model cover over a longer period of time, now two, three years, not two or three quarters, but I'm positive we are continuing to progress in the right direction. so the model cover over a longer period of time now two three years not two or three quarters but i'm positive we are continuing to progress in the right direction

Speaker 5: Thank you. Thank you. thank you

Speaker 6: Thanks, CJ. Thanks, CJ. thanks cj

Speaker 14: The next question will come from Wamsi Mohan with Bank of America. Please go ahead. The next question will come from Wamsi Mohan with Bank of America. the next question will come from wamsi mohan with bank of america Please go ahead. please go ahead

Speaker 19: Yes, thank you. I have a similar type of question. I guess the gross margins and the guide and the incremental quarter-over-quarter gross margins and the guide are very strong. Can you maybe help bridge the drivers between mix and price? Obviously, you've got, you know, better mix of data center revenue next quarter, but just wondering if you can dimensionalize that. And the opportunity for pricing, Dave, you just said sort of, you know, flat to up is possible, but as we think about the pricing that might be getting embedded within these LTAs, and sort of beyond 26, why can't that be a lot higher, just given, you know, the tightness in the supply-demand environment? Thank you. Yes, thank you. yes thank you I have a similar type of question. i have a similar type of question I guess the gross margins and the guide and the incremental quarter-over-quarter gross margins and the guide are very strong. i guess the gross margins and the guide and the incremental quarter-over-quarter gross margins and the guide are very strong Can you maybe help bridge the drivers between mix and price? can you maybe help bridge the drivers between mix and price Obviously, you've got, you know, better mix of data center revenue next quarter, but just wondering if you can dimensionalize that. obviously you've got you know better mix of data center revenue next quarter but just wondering if you can dimensionalize that And the opportunity for pricing, Dave, you just said sort of, you know, flat to up is possible, but as we think about the pricing that might be getting embedded within these LTAs, and sort of beyond 26, why can't that be a lot higher, just given, you know, the tightness in the supply-demand environment? and the opportunity for pricing dave you just said sort of you know flat to up is possible but as we think about the pricing that might be getting embedded within these ltas and sort of beyond 26 why can't that be a lot higher just given you know the tightness in the supply-demand environment Thank you. thank you

Speaker 6: Yeah. I think this gets into how persistent is, is the demand going to be, Wamsi? You know, we've talked about two or three years from now. The one behavior change that I really like in the last year is that people are starting to say: "If I can't get it now, I'll plan next year better and the following year better." So we're having great dialogues on that front. You know, of course, supply has risen quite a bit in the last year, supply of exabytes from the industry. The industry has reacted pretty well, but I think demand is still pretty strong. My perspective on this is I think demand will stay strong for quite some time. So in that kind of world, we're having great discussions with customers further out in time. Yeah. yeah I think this gets into how persistent is, is the demand going to be, Wamsi? i think this gets into how persistent is is the demand going to be wamsi You know, we've talked about two or three years from now. you know we've talked about two or three years from now The one behavior change that I really like in the last year is that people are starting to say: "If I can't get it now, I'll plan next year better and the following year better." So we're having great dialogues on that front. the one behavior change that i really like in the last year is that people are starting to say "if i can't get it now i'll plan next year better and the following year better." so we're having great dialogues on that front You know, of course, supply has risen quite a bit in the last year, supply of exabytes from the industry. you know of course supply has risen quite a bit in the last year supply of exabytes from the industry The industry has reacted pretty well, but I think demand is still pretty strong. the industry has reacted pretty well but i think demand is still pretty strong My perspective on this is I think demand will stay strong for quite some time. my perspective on this is i think demand will stay strong for quite some time So in that kind of world, we're having great discussions with customers further out in time. so in that kind of world we're having great discussions with customers further out in time And the biggest part that helps us in our planning is through these product transitions. They know that's how they get more exabytes. And the biggest part that helps us in our planning is through these product transitions. and the biggest part that helps us in our planning is through these product transitions They know that's how they get more exabytes. they know that's how they get more exabytes

Speaker 8: Wamsi, we are saying in the script, Dave, for the rest of the calendar year, we expect revenue and profitability to continue to improve sequentially every quarter. So we are not, we are not implying in any way that this trend is changing. It's actually now getting better somehow. Wamsi, we are saying in the script, Dave, for the rest of the calendar year, we expect revenue and profitability to continue to improve sequentially every quarter. wamsi we are saying in the script dave for the rest of the calendar year we expect revenue and profitability to continue to improve sequentially every quarter So we are not, we are not implying in any way that this trend is changing. so we are not we are not implying in any way that this trend is changing It's actually now getting better somehow. it's actually now getting better somehow

Speaker 19: Thank you. Thank you. thank you

Speaker 14: The next question will come from Erik Woodring with Morgan Stanley. Please go ahead. The next question will come from Erik Woodring with Morgan Stanley. the next question will come from erik woodring with morgan stanley Please go ahead. please go ahead

Speaker 7: Great. Good afternoon, guys. Thank you for taking my question, and congrats on these results, incredible. You know, Dave, your Analyst Day last year, you kind of pointed to a mid-20% exabyte growth CAGR. And I'm just wondering where you think that supply growth can land, you know, this calendar year, and as you get closer to that HAMR crossover point later this year, like, does that pace of exabyte growth accelerate? And I'm just asking this because demand is clearly outpacing supply. So can you maybe just help us try to better understand the shape of your exabyte supply growth? Because obviously, it'll dictate kind of exabyte shipments for the year. Thank you very much. Great. great Good afternoon, guys. good afternoon guys Thank you for taking my question, and congrats on these results, incredible. thank you for taking my question and congrats on these results incredible You know, Dave, your Analyst Day last year, you kind of pointed to a mid-20% exabyte growth CAGR. you know dave your analyst day last year you kind of pointed to a mid-20% exabyte growth cagr And I'm just wondering where you think that supply growth can land, you know, this calendar year, and as you get closer to that HAMR crossover point later this year, like, does that pace of exabyte growth accelerate? and i'm just wondering where you think that supply growth can land you know this calendar year and as you get closer to that hamr crossover point later this year like does that pace of exabyte growth accelerate And I'm just asking this because demand is clearly outpacing supply. and i'm just asking this because demand is clearly outpacing supply So can you maybe just help us try to better understand the shape of your exabyte supply growth? so can you maybe just help us try to better understand the shape of your exabyte supply growth Because obviously, it'll dictate kind of exabyte shipments for the year. because obviously it'll dictate kind of exabyte shipments for the year Thank you very much. thank you very much

Speaker 6: Yeah. Thanks, Erik. So, we are planning to transition to 4 TB of platter and, you know, fairly aggressively. But I think what people have to keep in mind is that we're fairly tight all throughout manufacturing, so we have products that are in the pipeline already that are committed to customers and so on. We don't just move very quickly to 3 TB or 4 TB of platter as things come. And it's a good problem to have, actually. You know, we're running manufacturing quite tight right now. So I think it'll be a fairly prescriptive ramp, to your point. It won't be, you know, as fast as maybe we've done some ramps in the past, but it'll be very profitable, and that's the way we look at it. Yeah. yeah Thanks, Erik. thanks erik So, we are planning to transition to 4 TB of platter and, you know, fairly aggressively. so we are planning to transition to 4 tb of platter and you know fairly aggressively But I think what people have to keep in mind is that we're fairly tight all throughout manufacturing, so we have products that are in the pipeline already that are committed to customers and so on. but i think what people have to keep in mind is that we're fairly tight all throughout manufacturing so we have products that are in the pipeline already that are committed to customers and so on We don't just move very quickly to 3 TB or 4 TB of platter as things come. we don't just move very quickly to 3 tb or 4 tb of platter as things come And it's a good problem to have, actually. and it's a good problem to have actually You know, we're running manufacturing quite tight right now. you know we're running manufacturing quite tight right now So I think it'll be a fairly prescriptive ramp, to your point. so i think it'll be a fairly prescriptive ramp to your point It won't be, you know, as fast as maybe we've done some ramps in the past, but it'll be very profitable, and that's the way we look at it. it won't be you know as fast as maybe we've done some ramps in the past but it'll be very profitable and that's the way we look at it As we go further out in time, you know, I'm very optimistic that the 4 TB per platter is a very strong product. It'll start to replace some of the other, you know, legacy products, I'll say, that way, and because it has so much better value proposition in a lot of those markets. Then when that happens, then we see more opportunity. As we go further out in time, you know, I'm very optimistic that the 4 TB per platter is a very strong product. as we go further out in time you know i'm very optimistic that the 4 tb per platter is a very strong product It'll start to replace some of the other, you know, legacy products, I'll say, that way, and because it has so much better value proposition in a lot of those markets. it'll start to replace some of the other you know legacy products i'll say that way and because it has so much better value proposition in a lot of those markets Then when that happens, then we see more opportunity. then when that happens then we see more opportunity

Speaker 7: Great. Thank you, guys, and best of luck. Great. great Thank you, guys, and best of luck. thank you guys and best of luck

Speaker 6: Thank you. Thank you. thank you

Speaker 14: The next question will come from Asiya Merchant with Citi. Please go ahead. The next question will come from Asiya Merchant with Citi. the next question will come from asiya merchant with citi Please go ahead. please go ahead

Speaker 4: Great. Thank you for taking my questions, and great results here. Just a couple that are related to the prior question. You know, you guys gave some projections on HAMR, not just for fiscal year 2026, but even into fiscal 2027. So if you could talk about, you know, upside to achieving those targets for the HAMR rollout. And related to that, how we should think about the blended cost reductions. You know, pretty impressive, again, margins here and guiding for improved profitability. So if you could talk to us a little bit about the cost reductions going forward, especially as you ramp HAMR here with the Mozaic 4, that would be great. Thank you. Great. great Thank you for taking my questions, and great results here. thank you for taking my questions and great results here Just a couple that are related to the prior question. just a couple that are related to the prior question You know, you guys gave some projections on HAMR, not just for fiscal year 2026, but even into fiscal 2027. you know you guys gave some projections on hamr not just for fiscal year 2026 but even into fiscal 2027 So if you could talk about, you know, upside to achieving those targets for the HAMR rollout. so if you could talk about you know upside to achieving those targets for the hamr rollout And related to that, how we should think about the blended cost reductions. and related to that how we should think about the blended cost reductions You know, pretty impressive, again, margins here and guiding for improved profitability. you know pretty impressive again margins here and guiding for improved profitability So if you could talk to us a little bit about the cost reductions going forward, especially as you ramp HAMR here with the Mozaic 4, that would be great. so if you could talk to us a little bit about the cost reductions going forward especially as you ramp hamr here with the mozaic 4 that would be great Thank you. thank you

Speaker 8: Yes, Asiya. So I would say, first of all, we are very happy with the transition to HAMR. Now, we qualified the last big cloud service provider in U.S., and we have qualified six out of eight of the top cloud service providers. So the transition from PMR technology to HAMR technology is progressing very well, and we are now qualifying the new product, the 4 TB per disk, so a 40 TB per drive. Of course, this will help with the increase in exabyte in term of mix. We gave a good indication, I think, at our Investor Day, and now we want to be aligned to that. And the cost will be favorably impacted, especially when we start ramping high volume of the 40 TB drive. Yes, Asiya. yes asiya So I would say, first of all, we are very happy with the transition to HAMR. so i would say first of all we are very happy with the transition to hamr Now, we qualified the last big cloud service provider in U.S., and we have qualified six out of eight of the top cloud service providers. now we qualified the last big cloud service provider in u.s and we have qualified six out of eight of the top cloud service providers So the transition from PMR technology to HAMR technology is progressing very well, and we are now qualifying the new product, the 4 TB per disk, so a 40 TB per drive. so the transition from pmr technology to hamr technology is progressing very well and we are now qualifying the new product the 4 tb per disk so a 40 tb per drive Of course, this will help with the increase in exabyte in term of mix. of course this will help with the increase in exabyte in term of mix We gave a good indication, I think, at our Investor Day, and now we want to be aligned to that. we gave a good indication i think at our investor day and now we want to be aligned to that And the cost will be favorably impacted, especially when we start ramping high volume of the 40 TB drive. and the cost will be favorably impacted especially when we start ramping high volume of the 40 tb drive Of course, that will drive a fairly important reduction in cost per TB compared to the current HAMR, and of course, will be a good contributor to further increase our gross margin. Of course, that will drive a fairly important reduction in cost per TB compared to the current HAMR, and of course, will be a good contributor to further increase our gross margin. of course that will drive a fairly important reduction in cost per tb compared to the current hamr and of course will be a good contributor to further increase our gross margin

Speaker 14: The next question will come from Karl Ackerman with BNP Paribas. Please go ahead. The next question will come from Karl Ackerman with BNP Paribas. the next question will come from karl ackerman with bnp paribas Please go ahead. please go ahead

Speaker 10: Yes, thank you. Gianluca and Dave, I was hoping you could clarify what portion of your LTAs or overall nearline HDD capacity has fixed or multi-quarter pricing agreements? I ask because as these LTAs roll off throughout 2026, any new agreements will be locked in at higher values, reflective of not only the main use case, also widening price per TB gap between enterprise hard drives HDDs. Thank you. Yes, thank you. yes thank you Gianluca and Dave, I was hoping you could clarify what portion of your LTAs or overall nearline HDD capacity has fixed or multi-quarter pricing agreements? gianluca and dave i was hoping you could clarify what portion of your ltas or overall nearline hdd capacity has fixed or multi-quarter pricing agreements I ask because as these LTAs roll off throughout 2026, any new agreements will be locked in at higher values, reflective of not only the main use case, also widening price per TB gap between enterprise hard drives HDDs. i ask because as these ltas roll off throughout 2026 any new agreements will be locked in at higher values reflective of not only the main use case also widening price per tb gap between enterprise hard drives hdds Thank you. thank you

Speaker 15: Karl, the second part of your question was a little fuzzy, so we captured the first part, but might ask you for clarity on that second. Karl, the second part of your question was a little fuzzy, so we captured the first part, but might ask you for clarity on that second. karl the second part of your question was a little fuzzy so we captured the first part but might ask you for clarity on that second

Speaker 10: Sure. Yes, obviously. I'll just repeat, if I could. As these LTAs roll off throughout 2026, I would imagine those new- Sure. sure Yes, obviously. yes obviously I'll just repeat, if I could. i'll just repeat if i could As these LTAs roll off throughout 2026, I would imagine those new- as these ltas roll off throughout 2026 i would imagine those new- ... LTAs will be priced at perhaps a higher value or higher order value, clearly given the widening gap between hard drives and S- and SSDs. So we'd comment on the mix of LTAs and how you think that progresses throughout 2026 would be great. Thank you. ... LTAs will be priced at perhaps a higher value or higher order value, clearly given the widening gap between hard drives and S- and SSDs. ltas will be priced at perhaps a higher value or higher order value clearly given the widening gap between hard drives and s- and ssds So we'd comment on the mix of LTAs and how you think that progresses throughout 2026 would be great. so we'd comment on the mix of ltas and how you think that progresses throughout 2026 would be great Thank you. thank you

Speaker 6: Yeah, thanks, Karl. So, as we roll off, say, for example, somebody might have been qualified on a 2.4 TB per platter product or something, and then they might be qualifying a 3.2 or even a 4 TB per platter as we roll forward. So, you know, we change based on the demand that we see, we change and our available supply, we change the pricing dynamic there. I think that's one of the biggest things you're pointing out. I'll say that 2026 is fairly booked. We talked about that in the call, that to the extent that we can out execute our plan, it'll be marginal like you saw last quarter. Yeah, thanks, Karl. yeah thanks karl So, as we roll off, say, for example, somebody might have been qualified on a 2.4 TB per platter product or something, and then they might be qualifying a 3.2 or even a 4 TB per platter as we roll forward. so as we roll off say for example somebody might have been qualified on a 2.4 tb per platter product or something and then they might be qualifying a 3.2 or even a 4 tb per platter as we roll forward So, you know, we change based on the demand that we see, we change and our available supply, we change the pricing dynamic there. so you know we change based on the demand that we see we change and our available supply we change the pricing dynamic there I think that's one of the biggest things you're pointing out. i think that's one of the biggest things you're pointing out I'll say that 2026 is fairly booked. i'll say that 2026 is fairly booked We talked about that in the call, that to the extent that we can out execute our plan, it'll be marginal like you saw last quarter. we talked about that in the call that to the extent that we can out execute our plan it'll be marginal like you saw last quarter You know, we get the qualifications done a little faster, we ship a few more drives, that's how we can do better than planned. But other than that, it's fairly predictable in 2026, and we're looking to start 2027 the same way. You know, we get the qualifications done a little faster, we ship a few more drives, that's how we can do better than planned. you know we get the qualifications done a little faster we ship a few more drives that's how we can do better than planned But other than that, it's fairly predictable in 2026, and we're looking to start 2027 the same way. but other than that it's fairly predictable in 2026 and we're looking to start 2027 the same way

Speaker 10: Thank you. Thank you. thank you

Speaker 14: The next question will come from Jim Schneider with Goldman Sachs. Please go ahead. The next question will come from Jim Schneider with Goldman Sachs. the next question will come from jim schneider with goldman sachs Please go ahead. please go ahead

Speaker 9: Good afternoon, and thanks for taking my question. I was wondering if you could maybe, you know, address, you know, given everything you just said about demand and about the, the mix effect from HAMR this year, maybe can you give us any kind of directional guidance about where you might expect, exabyte shipments to end up on a calendar 2026 versus calendar 2025 basis, you know, relative to the sort of the long-term targets you've, you've laid out previously? It seems like you could do materially better than that, but I just wanted to confirm what your expectations were if you'd give us a numerical range. Thank you. Good afternoon, and thanks for taking my question. good afternoon and thanks for taking my question I was wondering if you could maybe, you know, address, you know, given everything you just said about demand and about the, the mix effect from HAMR this year, maybe can you give us any kind of directional guidance about where you might expect, exabyte shipments to end up on a calendar 2026 versus calendar 2025 basis, you know, relative to the sort of the long-term targets you've, you've laid out previously? i was wondering if you could maybe you know address you know given everything you just said about demand and about the the mix effect from hamr this year maybe can you give us any kind of directional guidance about where you might expect exabyte shipments to end up on a calendar 2026 versus calendar 2025 basis you know relative to the sort of the long-term targets you've you've laid out previously It seems like you could do materially better than that, but I just wanted to confirm what your expectations were if you'd give us a numerical range. it seems like you could do materially better than that but i just wanted to confirm what your expectations were if you'd give us a numerical range Thank you. thank you

Speaker 8: Hey, Jim. No, we are not guiding calendar 2026, but we said in our financial model, we said that we expect exabyte nearline exabyte to grow in the mid-20%. We have done it a bit better. If you look the, you know, the last few quarters, and we always, as Dave said before, we always try to extract as many exabyte we can from our manufacturing. So no, we are continuing this trend, but we don't guide calendar 2026. Hey, Jim. hey jim No, we are not guiding calendar 2026, but we said in our financial model, we said that we expect exabyte nearline exabyte to grow in the mid-20%. no we are not guiding calendar 2026 but we said in our financial model we said that we expect exabyte nearline exabyte to grow in the mid-20% We have done it a bit better. we have done it a bit better If you look the, you know, the last few quarters, and we always, as Dave said before, we always try to extract as many exabyte we can from our manufacturing. if you look the you know the last few quarters and we always as dave said before we always try to extract as many exabyte we can from our manufacturing So no, we are continuing this trend, but we don't guide calendar 2026. so no we are continuing this trend but we don't guide calendar 2026

Speaker 6: But moving from 2.4 per platter to 3 per platter to 4 per platter, you can see that, you know, we're on a trajectory like you described. When it gets down to the individual customer level, obviously we have to be very predictable because they need what they need and what they've... what we've committed to in order to build out that data center. So we'll continue to execute that plan, and maybe we can do a little bit better as we transition to 4 TB per platter. But moving from 2.4 per platter to 3 per platter to 4 per platter, you can see that, you know, we're on a trajectory like you described. but moving from 2.4 per platter to 3 per platter to 4 per platter you can see that you know we're on a trajectory like you described When it gets down to the individual customer level, obviously we have to be very predictable because they need what they need and what they've... what we've committed to in order to build out that data center. when it gets down to the individual customer level obviously we have to be very predictable because they need what they need and what they've what we've committed to in order to build out that data center So we'll continue to execute that plan, and maybe we can do a little bit better as we transition to 4 TB per platter. so we'll continue to execute that plan and maybe we can do a little bit better as we transition to 4 tb per platter

Speaker 14: The next question will come from Amit Daryanani with Evercore. Please go ahead. The next question will come from Amit Daryanani with Evercore. the next question will come from amit daryanani with evercore Please go ahead. please go ahead

Speaker 2: Good afternoon, everyone. Thanks for taking my question. You know, I guess, Gianluca, I'm hoping you can talk a little bit about the March quarter guide, because it seems to be a really sizable uptick in gross margins. I think it's up, like, 250 basis points or 100% plus incrementals. Could you just? Is there any you would call out in March quarter that's unique, that's helping drive that kind of margin expansion? And is this really all coming from the core HDD business, or is there a potential benefit from the old systems business that's helping you as well? Thank you. Good afternoon, everyone. good afternoon everyone Thanks for taking my question. thanks for taking my question You know, I guess, Gianluca, I'm hoping you can talk a little bit about the March quarter guide, because it seems to be a really sizable uptick in gross margins. you know i guess gianluca i'm hoping you can talk a little bit about the march quarter guide because it seems to be a really sizable uptick in gross margins I think it's up, like, 250 basis points or 100% plus incrementals. i think it's up like 250 basis points or 100% plus incrementals Could you just? could you just Is there any you would call out in March quarter that's unique, that's helping drive that kind of margin expansion? is there any you would call out in march quarter that's unique that's helping drive that kind of margin expansion And is this really all coming from the core HDD business, or is there a potential benefit from the old systems business that's helping you as well? and is this really all coming from the core hdd business or is there a potential benefit from the old systems business that's helping you as well Thank you. thank you

Speaker 8: Amit, I mean, what I would say is now we expect to be a very good quarter. I don't think it's different than what we have done before. Now, it's always based on the pricing strategy and the mix. Now, as you know, we qualified another customer on HAMR, so we will ramp a little bit more volume on HAMR, which is helping us to get better margin. But fundamentally, it's not really a difference in how we think we are going to execute the quarter, and it's good. I think the incremental margin looks very good. Amit, I mean, what I would say is now we expect to be a very good quarter. amit i mean what i would say is now we expect to be a very good quarter I don't think it's different than what we have done before. i don't think it's different than what we have done before Now, it's always based on the pricing strategy and the mix. now it's always based on the pricing strategy and the mix Now, as you know, we qualified another customer on HAMR, so we will ramp a little bit more volume on HAMR, which is helping us to get better margin. now as you know we qualified another customer on hamr so we will ramp a little bit more volume on hamr which is helping us to get better margin But fundamentally, it's not really a difference in how we think we are going to execute the quarter, and it's good. but fundamentally it's not really a difference in how we think we are going to execute the quarter and it's good I think the incremental margin looks very good. i think the incremental margin looks very good

Speaker 6: Yeah, and it's not the systems business. The systems business is doing well, but it's fairly small-scale in comparison. Yeah, and it's not the systems business. yeah and it's not the systems business The systems business is doing well, but it's fairly small-scale in comparison. the systems business is doing well but it's fairly small-scale in comparison

Speaker 2: Got it. Got it. got it

Speaker 14: The next question will come from Mark Newman with Bernstein. Please go ahead. The next question will come from Mark Newman with Bernstein. the next question will come from mark newman with bernstein Please go ahead. please go ahead

Speaker 12: Great. Hi, thanks for taking my question, and congrats on the numbers today. Just want to touch again on this, the LTAs and pricing arrangements you have. Just curious, do you think there's an opportunity here for more significant price increases? You know, in NAND flash, we're hearing things like 40%-100% up quarter on quarter for some contracts. I appreciate hard disk drives. You have a very long-term agreements, but I think there's a lot of questions I'd like to just touch on this as well. And a lot of, as the LTAs roll off, is there an opportunity for some of those to be repriced at a more significant, more significantly higher price to change the trajectory? Certainly, numbers are great, you're printing. Great. great Hi, thanks for taking my question, and congrats on the numbers today. hi thanks for taking my question and congrats on the numbers today Just want to touch again on this, the LTAs and pricing arrangements you have. just want to touch again on this the ltas and pricing arrangements you have Just curious, do you think there's an opportunity here for more significant price increases? just curious do you think there's an opportunity here for more significant price increases You know, in NAND flash, we're hearing things like 40%-100% up quarter on quarter for some contracts. you know in nand flash we're hearing things like 40%-100% up quarter on quarter for some contracts I appreciate hard disk drives. i appreciate hard disk drives You have a very long-term agreements, but I think there's a lot of questions I'd like to just touch on this as well. you have a very long-term agreements but i think there's a lot of questions i'd like to just touch on this as well And a lot of, as the LTAs roll off, is there an opportunity for some of those to be repriced at a more significant, more significantly higher price to change the trajectory? and a lot of as the ltas roll off is there an opportunity for some of those to be repriced at a more significant more significantly higher price to change the trajectory Certainly, numbers are great, you're printing. certainly numbers are great you're printing We're just trying to figure out, could you start to see more significant price increases rather than... At the moment, you're seeing kind of flattish, down a little bit, up a little bit, but overall, your average prices are flat, which I understand is a mixture of, like for like, slightly up, offset by new products coming in at a lower price. Just wondered if that may change. And then if it's just a quick update on HAMR mix, if there's any update on the trajectory of the HAMR mix that you've outlined before. Thanks very much. We're just trying to figure out, could you start to see more significant price increases rather than... we're just trying to figure out could you start to see more significant price increases rather than At the moment, you're seeing kind of flattish, down a little bit, up a little bit, but overall, your average prices are flat, which I understand is a mixture of, like for like, slightly up, offset by new products coming in at a lower price. at the moment you're seeing kind of flattish down a little bit up a little bit but overall your average prices are flat which i understand is a mixture of like for like slightly up offset by new products coming in at a lower price Just wondered if that may change. just wondered if that may change And then if it's just a quick update on HAMR mix, if there's any update on the trajectory of the HAMR mix that you've outlined before. and then if it's just a quick update on hamr mix if there's any update on the trajectory of the hamr mix that you've outlined before Thanks very much. thanks very much

Speaker 6: Thanks, Mark. A couple of points. On the HAMR mix. We necessarily constrained ourselves on the 3 TB per platter because the factories were fairly full, and we knew we would be going to the 4 TB per platter product. So we've been leaning harder on that and making sure it gets through the development and qualification phases. As time goes on, then we'll move off and onto the 4 TB per platter very aggressively. So that, if that helps you on the mix side. And the other thing about HAMR mix is it'll be necessarily mixed up. I think the demand for those products will be at the high capacity points, not necessarily the lower capacity points just yet. Thanks, Mark. thanks mark A couple of points. a couple of points On the HAMR mix. on the hamr mix We necessarily constrained ourselves on the 3 TB per platter because the factories were fairly full, and we knew we would be going to the 4 TB per platter product. we necessarily constrained ourselves on the 3 tb per platter because the factories were fairly full and we knew we would be going to the 4 tb per platter product So we've been leaning harder on that and making sure it gets through the development and qualification phases. so we've been leaning harder on that and making sure it gets through the development and qualification phases As time goes on, then we'll move off and onto the 4 TB per platter very aggressively. as time goes on then we'll move off and onto the 4 tb per platter very aggressively So that, if that helps you on the mix side. so that if that helps you on the mix side And the other thing about HAMR mix is it'll be necessarily mixed up. and the other thing about hamr mix is it'll be necessarily mixed up I think the demand for those products will be at the high capacity points, not necessarily the lower capacity points just yet. i think the demand for those products will be at the high capacity points not necessarily the lower capacity points just yet And then relative to pricing, I think I said before, as one long-term agreement rolls into the next year or the next year, we've satisfied our existing supply commitments, then people are looking at the new products. We have constrained supply of those new products, then we look at what the demand is, and we dictate where our pricing is. And, you know, one of the very first questions I said is, it could be flat to up a little bit. You know, that's the way I think about it right now, but it all depends on what the demand is. And then relative to pricing, I think I said before, as one long-term agreement rolls into the next year or the next year, we've satisfied our existing supply commitments, then people are looking at the new products. and then relative to pricing i think i said before as one long-term agreement rolls into the next year or the next year we've satisfied our existing supply commitments then people are looking at the new products We have constrained supply of those new products, then we look at what the demand is, and we dictate where our pricing is. we have constrained supply of those new products then we look at what the demand is and we dictate where our pricing is And, you know, one of the very first questions I said is, it could be flat to up a little bit. and you know one of the very first questions i said is it could be flat to up a little bit You know, that's the way I think about it right now, but it all depends on what the demand is. you know that's the way i think about it right now but it all depends on what the demand is If the demand continues very strong, that's great, and again, what we're seeing is people who can't get what they need today, they're saying, "Okay, I need to be able to plan my data center procurement out in the future. Let's get more predictable in the future." It's giving us better visibility, helps us run our factories for better cost and so on, so that's great. If the demand continues very strong, that's great, and again, what we're seeing is people who can't get what they need today, they're saying, "Okay, I need to be able to plan my data center procurement out in the future. if the demand continues very strong that's great and again what we're seeing is people who can't get what they need today they're saying "okay i need to be able to plan my data center procurement out in the future Let's get more predictable in the future." It's giving us better visibility, helps us run our factories for better cost and so on, so that's great. let's get more predictable in the future." it's giving us better visibility helps us run our factories for better cost and so on so that's great

Speaker 12: Thanks so much. Thanks so much. thanks so much

Speaker 14: The next question will come from Krish Sankar with TD Cowen. Please go ahead. The next question will come from Krish Sankar with TD Cowen. the next question will come from krish sankar with td cowen Please go ahead. please go ahead

Speaker 11: Yeah, thank you for my question. I had a question, I just want to put it in two parts. One is, how much was your HAMR as a percentage of your exabyte shipment last year? How much do you expect it to be this year? The genesis of the question is I'm just trying to figure out, you know, obviously, a lot of questions on the very strong gross margins. If there's a way to put it in three buckets, like how much of the gross margin upside is driven by pricing? How much is driven by product mix? How much is driven by cost reduction, by offshoring manufacturing? Thank you. Yeah, thank you for my question. yeah thank you for my question I had a question, I just want to put it in two parts. i had a question i just want to put it in two parts One is, how much was your HAMR as a percentage of your exabyte shipment last year? one is how much was your hamr as a percentage of your exabyte shipment last year How much do you expect it to be this year? how much do you expect it to be this year The genesis of the question is I'm just trying to figure out, you know, obviously, a lot of questions on the very strong gross margins. the genesis of the question is i'm just trying to figure out you know obviously a lot of questions on the very strong gross margins If there's a way to put it in three buckets, like how much of the gross margin upside is driven by pricing? if there's a way to put it in three buckets like how much of the gross margin upside is driven by pricing How much is driven by product mix? how much is driven by product mix How much is driven by cost reduction, by offshoring manufacturing? how much is driven by cost reduction by offshoring manufacturing Thank you. thank you

Speaker 6: Yeah, there's really no offshoring manufacturing or anything like that involved. You know, our manufacturing operations around the world are doing quite well and quite full, so that's helping from a cost perspective. But really no change in any manufacturing strategy to speak of. Relative—I would say a lot of what the benefits we're seeing is mix, and mix not just because we're actually transitioning into higher, but into a more better products over time, but also because the demand for those products is quite high. You think about it, if you're building a data center with a 3 TB per platter versus a 4 TB per platter, you're going to be running that data center for a long time. You want the higher capacity point. Yeah, there's really no offshoring manufacturing or anything like that involved. yeah there's really no offshoring manufacturing or anything like that involved You know, our manufacturing operations around the world are doing quite well and quite full, so that's helping from a cost perspective. you know our manufacturing operations around the world are doing quite well and quite full so that's helping from a cost perspective But really no change in any manufacturing strategy to speak of. but really no change in any manufacturing strategy to speak of Relative—I would say a lot of what the benefits we're seeing is mix, and mix not just because we're actually transitioning into higher, but into a more better products over time, but also because the demand for those products is quite high. relative—i would say a lot of what the benefits we're seeing is mix and mix not just because we're actually transitioning into higher but into a more better products over time but also because the demand for those products is quite high You think about it, if you're building a data center with a 3 TB per platter versus a 4 TB per platter, you're going to be running that data center for a long time. you think about it if you're building a data center with a 3 tb per platter versus a 4 tb per platter you're going to be running that data center for a long time You want the higher capacity point. you want the higher capacity point To the extent that we can do that as predictably as possible, that mix is what's driving the stability out in the market for us and you know, helping us plan. To the extent that we can do that as predictably as possible, that mix is what's driving the stability out in the market for us and you know, helping us plan. to the extent that we can do that as predictably as possible that mix is what's driving the stability out in the market for us and you know helping us plan

Speaker 8: Yeah, Krish, we don't give specific details on the impact of pricing, mix, and cost, but they are somehow interrelated. Now, the change in mix is helping with the cost reduction, and the supply-demand situation is, of course, supporting our pricing strategy. So now they are all very good contributor to the increasing gross margin, and as we said before, now this is going to continue through the calendar year. Yeah, Krish, we don't give specific details on the impact of pricing, mix, and cost, but they are somehow interrelated. yeah krish we don't give specific details on the impact of pricing mix and cost but they are somehow interrelated Now, the change in mix is helping with the cost reduction, and the supply-demand situation is, of course, supporting our pricing strategy. now the change in mix is helping with the cost reduction and the supply-demand situation is of course supporting our pricing strategy So now they are all very good contributor to the increasing gross margin, and as we said before, now this is going to continue through the calendar year. so now they are all very good contributor to the increasing gross margin and as we said before now this is going to continue through the calendar year

Speaker 11: How much of HAMR is the percentage of the mix? How much of HAMR is the percentage of the mix? how much of hamr is the percentage of the mix

Speaker 8: Well, Dave gave an indication on the unit that we shipped in last quarter, so I think you can fairly easily calculate that. Well, Dave gave an indication on the unit that we shipped in last quarter, so I think you can fairly easily calculate that. well dave gave an indication on the unit that we shipped in last quarter so i think you can fairly easily calculate that

Speaker 11: Thank you very much. Thank you. Thank you very much. thank you very much Thank you. thank you

Speaker 8: Thank you. Thank you. thank you

Speaker 14: The next question will come from Steven Fox with the Fox Advisors LLC. Please go ahead. The next question will come from Steven Fox with the Fox Advisors LLC. the next question will come from steven fox with the fox advisors llc Please go ahead. please go ahead

Speaker 16: Thanks. Good afternoon. I guess I was just wondering on this, on your mix question, looking at your average capacity per drive being up 22%, like, how much of that, like, obviously, the supply-demand environment has tightened over the last year. And in reaction to that, are you taking steps to accelerate, you know, that mix up as the customers pushed you that way? Like, I'm just curious how much you can control going forward now that we're here on even tighter supply to sort of help your customers in terms of absolute petabytes you're delivering. Thanks. thanks Good afternoon. good afternoon I guess I was just wondering on this, on your mix question, looking at your average capacity per drive being up 22%, like, how much of that, like, obviously, the supply-demand environment has tightened over the last year. i guess i was just wondering on this on your mix question looking at your average capacity per drive being up 22% like how much of that like obviously the supply-demand environment has tightened over the last year And in reaction to that, are you taking steps to accelerate, you know, that mix up as the customers pushed you that way? and in reaction to that are you taking steps to accelerate you know that mix up as the customers pushed you that way Like, I'm just curious how much you can control going forward now that we're here on even tighter supply to sort of help your customers in terms of absolute petabytes you're delivering. like i'm just curious how much you can control going forward now that we're here on even tighter supply to sort of help your customers in terms of absolute petabytes you're delivering

Speaker 6: Thanks, Steve. So yeah, we are. The lead time out of the wafer fab is quite long, so you know, we have to be predictable for our customers, say, six months, nine months later, so on and so forth. That's one of the reasons why we talk kind of a year at a time inside of these LTAs. So we start wafers based on what we know we're gonna be able to deliver so that we're as predictable as we can be for our customers. As if we're deploying manufacturing, you know, engineering resources, we're trying to get through these product transitions because that's what gets us the most exabytes after that. And so you know, going mixing up is kind of our goal. So that you know, if that helps clarify what our strategy is. Thanks, Steve. thanks steve So yeah, we are. so yeah we are The lead time out of the wafer fab is quite long, so you know, we have to be predictable for our customers, say, six months, nine months later, so on and so forth. the lead time out of the wafer fab is quite long so you know we have to be predictable for our customers say six months nine months later so on and so forth That's one of the reasons why we talk kind of a year at a time inside of these LTAs. that's one of the reasons why we talk kind of a year at a time inside of these ltas So we start wafers based on what we know we're gonna be able to deliver so that we're as predictable as we can be for our customers. so we start wafers based on what we know we're gonna be able to deliver so that we're as predictable as we can be for our customers As if we're deploying manufacturing, you know, engineering resources, we're trying to get through these product transitions because that's what gets us the most exabytes after that. as if we're deploying manufacturing you know engineering resources we're trying to get through these product transitions because that's what gets us the most exabytes after that And so you know, going mixing up is kind of our goal. and so you know going mixing up is kind of our goal So that you know, if that helps clarify what our strategy is. so that you know if that helps clarify what our strategy is

Speaker 16: It does, Dave. I just wonder, like, when you had your analyst meeting, you said that sort of a pretty well-defined timeline for no transitions. Maybe just can you give yourself a report card on how you're doing on some of those timelines if we look out now versus the next year or longer term? It does, Dave. it does dave I just wonder, like, when you had your analyst meeting, you said that sort of a pretty well-defined timeline for no transitions. i just wonder like when you had your analyst meeting you said that sort of a pretty well-defined timeline for no transitions Maybe just can you give yourself a report card on how you're doing on some of those timelines if we look out now versus the next year or longer term? maybe just can you give yourself a report card on how you're doing on some of those timelines if we look out now versus the next year or longer term

Speaker 6: Yeah, I think that's good. We're on the plan or slightly ahead. Most of that's under our control. We can execute. We execute well, and we've been executing well. Some of it's under our customer's control as well. The behavioral changes we've seen in the customer, I made reference to earlier, they're really pulling hard because they need more exabytes. And so that helps get the quals done quickly, you know, it helps a lot of roadmap alignment and then supply, specific supply alignment, which helps our factory. So. Yeah, I think that's good. yeah i think that's good We're on the plan or slightly ahead. we're on the plan or slightly ahead Most of that's under our control. most of that's under our control We can execute. we can execute We execute well, and we've been executing well. we execute well and we've been executing well Some of it's under our customer's control as well. some of it's under our customer's control as well The behavioral changes we've seen in the customer, I made reference to earlier, they're really pulling hard because they need more exabytes. the behavioral changes we've seen in the customer i made reference to earlier they're really pulling hard because they need more exabytes And so that helps get the quals done quickly, you know, it helps a lot of roadmap alignment and then supply, specific supply alignment, which helps our factory. and so that helps get the quals done quickly you know it helps a lot of roadmap alignment and then supply specific supply alignment which helps our factory So. so

Speaker 16: Great, that's helpful. Thank you. Great, that's helpful. great that's helpful Thank you. thank you

Speaker 14: The next question will come from Aaron Rakers with Wells Fargo. Please go ahead. The next question will come from Aaron Rakers with Wells Fargo. the next question will come from aaron rakers with wells fargo Please go ahead. please go ahead

Speaker 1: Yeah, thanks for taking the question, and also congrats on the results. I want to go back to gross margin. I know you talked a lot about the pricing dynamics and the visibility you have, but you know, the thing that stands out to me is you've been executing on, like, a cost per TB, you know, of like a mid-teens year-on-year decline these last several quarters. As we roll out the 4 TB per platter, you know, Mozaic drives, you know, how do I think about that cost down curve? Is it mid-single digit? Is it... Can you sustain a double digit? And wouldn't we expect the 4 TB per platter HAMR drives to actually maybe accelerate the cost down, given the ability to bring that into, you know, lower end, other outside of nearline platforms? Yeah, thanks for taking the question, and also congrats on the results. yeah thanks for taking the question and also congrats on the results I want to go back to gross margin. i want to go back to gross margin I know you talked a lot about the pricing dynamics and the visibility you have, but you know, the thing that stands out to me is you've been executing on, like, a cost per TB, you know, of like a mid-teens year-on-year decline these last several quarters. i know you talked a lot about the pricing dynamics and the visibility you have but you know the thing that stands out to me is you've been executing on like a cost per tb you know of like a mid-teens year-on-year decline these last several quarters As we roll out the 4 TB per platter, you know, Mozaic drives, you know, how do I think about that cost down curve? as we roll out the 4 tb per platter you know mozaic drives you know how do i think about that cost down curve Is it mid-single digit? is it mid-single digit Is it... is it Can you sustain a double digit? can you sustain a double digit And wouldn't we expect the 4 TB per platter HAMR drives to actually maybe accelerate the cost down, given the ability to bring that into, you know, lower end, other outside of nearline platforms? and wouldn't we expect the 4 tb per platter hamr drives to actually maybe accelerate the cost down given the ability to bring that into you know lower end other outside of nearline platforms I'm just curious of how you think about that cost down curve? I'm just curious of how you think about that cost down curve? i'm just curious of how you think about that cost down curve

Speaker 8: Yeah, we are very positive on the 4 TB per disk in terms of impact on the cost. As we discussed before, now the unique costs tend to be fairly similar, but of course, we are adding a lot of content per unit. So that will be a good help to reducing the cost and improving profitability. So as you know, we are qualifying two major customers on this new product, so the time to finalize the qual and then ramp, probably through the end of the calendar year and for sure now well into the now the impact will be strong, I think, in the next calendar year, too. Yeah, we are very positive on the 4 TB per disk in terms of impact on the cost. yeah we are very positive on the 4 tb per disk in terms of impact on the cost As we discussed before, now the unique costs tend to be fairly similar, but of course, we are adding a lot of content per unit. as we discussed before now the unique costs tend to be fairly similar but of course we are adding a lot of content per unit So that will be a good help to reducing the cost and improving profitability. so that will be a good help to reducing the cost and improving profitability So as you know, we are qualifying two major customers on this new product, so the time to finalize the qual and then ramp, probably through the end of the calendar year and for sure now well into the now the impact will be strong, I think, in the next calendar year, too. so as you know we are qualifying two major customers on this new product so the time to finalize the qual and then ramp probably through the end of the calendar year and for sure now well into the now the impact will be strong i think in the next calendar year too

Speaker 6: Yeah, and you know, we plan on making a big transition to 4 TB per platter over the coming few years, and then getting to 5 TB per platter as well. We do add complexity as we make those transitions, but you know, I'd say the first order, the things that dictate the speed of the ramp are our ability to go work scrap and yields all through our supply chain and so on, and we're working very hard on that. I like the product, so I think it provide for a bright and stable future for us. We just need to stay focused on it. Yeah, and you know, we plan on making a big transition to 4 TB per platter over the coming few years, and then getting to 5 TB per platter as well. yeah and you know we plan on making a big transition to 4 tb per platter over the coming few years and then getting to 5 tb per platter as well We do add complexity as we make those transitions, but you know, I'd say the first order, the things that dictate the speed of the ramp are our ability to go work scrap and yields all through our supply chain and so on, and we're working very hard on that. we do add complexity as we make those transitions but you know i'd say the first order the things that dictate the speed of the ramp are our ability to go work scrap and yields all through our supply chain and so on and we're working very hard on that I like the product, so I think it provide for a bright and stable future for us. i like the product so i think it provide for a bright and stable future for us We just need to stay focused on it. we just need to stay focused on it

Speaker 1: Thank you. Thank you. thank you

Speaker 14: The next question will come from Timothy Arcuri with UBS. Please go ahead. The next question will come from Timothy Arcuri with UBS. the next question will come from timothy arcuri with ubs Please go ahead. please go ahead

Speaker 17: Thanks a lot. I want to ask about LTAs. I think you said nearline capacity is allocated through 2026, so it sounds like both pricing and exabytes are locked in this year. But for 2027, I think you said something that I took that exabyte and pricing is not locked in, but you have some sort of agreement. So I guess I had two questions. First of all, is it right to assume that pricing is also locked in for all of 2026? And what sort of agreement are you referring to for 2027, if you know, volume and pricing is not locked in next year? Thanks. Thanks a lot. thanks a lot I want to ask about LTAs. i want to ask about ltas I think you said nearline capacity is allocated through 2026, so it sounds like both pricing and exabytes are locked in this year. i think you said nearline capacity is allocated through 2026 so it sounds like both pricing and exabytes are locked in this year But for 2027, I think you said something that I took that exabyte and pricing is not locked in, but you have some sort of agreement. but for 2027 i think you said something that i took that exabyte and pricing is not locked in but you have some sort of agreement So I guess I had two questions. so i guess i had two questions First of all, is it right to assume that pricing is also locked in for all of 2026? first of all is it right to assume that pricing is also locked in for all of 2026 And what sort of agreement are you referring to for 2027, if you know, volume and pricing is not locked in next year? and what sort of agreement are you referring to for 2027 if you know volume and pricing is not locked in next year Thanks. thanks

Speaker 8: Yes. For this calendar year, now, we said basically we have PO in place for, for all the quarters, so volume and pricing is well defined. As Dave said before, if in a quarter we can produce a little bit more, of course, we will sell those exabyte in the open market at a, at a good profitability. But I would say we have the vast, now the vast, vast majority of, of the volume is already allocated. Calendar 2027, we will, we'll start working on that fairly soon. Of course, we have very good indication and, and agreement on volumes, but we have not, we have not fixed the price yet. Yes. yes For this calendar year, now, we said basically we have PO in place for, for all the quarters, so volume and pricing is well defined. for this calendar year now we said basically we have po in place for for all the quarters so volume and pricing is well defined As Dave said before, if in a quarter we can produce a little bit more, of course, we will sell those exabyte in the open market at a, at a good profitability. as dave said before if in a quarter we can produce a little bit more of course we will sell those exabyte in the open market at a at a good profitability But I would say we have the vast, now the vast, vast majority of, of the volume is already allocated. but i would say we have the vast now the vast vast majority of of the volume is already allocated Calendar 2027, we will, we'll start working on that fairly soon. calendar 2027 we will we'll start working on that fairly soon Of course, we have very good indication and, and agreement on volumes, but we have not, we have not fixed the price yet. of course we have very good indication and and agreement on volumes but we have not we have not fixed the price yet

Speaker 6: Yeah, and Tim, if this helps, so we haven't really started the longest lead time parts, but we will very soon for the start of 2027, and we need to start having those discussions with our customers, which quals are we going to get through together with, you know, what, what exactly is the plan? Because a lot of them need predictability as well, so we'll have to build in our factories what, how, based upon how hard they want to pull on those new products. Yeah, and Tim, if this helps, so we haven't really started the longest lead time parts, but we will very soon for the start of 2027, and we need to start having those discussions with our customers, which quals are we going to get through together with, you know, what, what exactly is the plan? yeah and tim if this helps so we haven't really started the longest lead time parts but we will very soon for the start of 2027 and we need to start having those discussions with our customers which quals are we going to get through together with you know what what exactly is the plan Because a lot of them need predictability as well, so we'll have to build in our factories what, how, based upon how hard they want to pull on those new products. because a lot of them need predictability as well so we'll have to build in our factories what how based upon how hard they want to pull on those new products

Speaker 17: Okay, thanks. Okay, thanks. okay thanks

Speaker 14: The next question will come from Mehdi Hosseini with the Susquehanna Financial Group. Please go ahead. The next question will come from Mehdi Hosseini with the Susquehanna Financial Group. the next question will come from mehdi hosseini with the susquehanna financial group Please go ahead. please go ahead

Speaker 13: Yes, just a quick housekeeping item, Gianluca. Your CapEx has been increasing on a quarter on quarter basis. How should I think about depreciation, especially since it did dip in the December quarter? Any color here will be great looking forward. Yes, just a quick housekeeping item, Gianluca. yes just a quick housekeeping item gianluca Your CapEx has been increasing on a quarter on quarter basis. your capex has been increasing on a quarter on quarter basis How should I think about depreciation, especially since it did dip in the December quarter? how should i think about depreciation especially since it did dip in the december quarter Any color here will be great looking forward. any color here will be great looking forward

Speaker 8: Yeah, no, our CapEx is aligned to our target of 4%-6% of revenue. Now, we are actually at the bottom of that range, so it's not, it's not, increasing in term of what we want to achieve or what we said. Of course, comparing to a period where we were more into the down cycle in term of dollars, of course, is higher. We are supporting our HAMR transition and HAMR ramp. So I would say there is nothing different than what we said. Yeah, no, our CapEx is aligned to our target of 4%-6% of revenue. yeah no our capex is aligned to our target of 4%-6% of revenue Now, we are actually at the bottom of that range, so it's not, it's not, increasing in term of what we want to achieve or what we said. now we are actually at the bottom of that range so it's not it's not increasing in term of what we want to achieve or what we said Of course, comparing to a period where we were more into the down cycle in term of dollars, of course, is higher. of course comparing to a period where we were more into the down cycle in term of dollars of course is higher We are supporting our HAMR transition and HAMR ramp. we are supporting our hamr transition and hamr ramp So I would say there is nothing different than what we said. so i would say there is nothing different than what we said

Speaker 6: Yeah, I think that's the way I think about it as well, as well, Mehdi, is that if you, if you go back two years ago and you use that as a baseline, you know, we were still significantly lower revenue, but also, you know, we were challenged on the supply-demand balance. Right now, we're in a totally different environment, of course. So, we'll probably stay well within the 4%-6% range, but, you know, as the revenue goes up, we'll spend a little bit more, and probably the first priority is maintenance tools and the things that we weren't doing a couple of years ago. Yeah, I think that's the way I think about it as well, as well, Mehdi, is that if you, if you go back two years ago and you use that as a baseline, you know, we were still significantly lower revenue, but also, you know, we were challenged on the supply-demand balance. yeah i think that's the way i think about it as well as well mehdi is that if you if you go back two years ago and you use that as a baseline you know we were still significantly lower revenue but also you know we were challenged on the supply-demand balance Right now, we're in a totally different environment, of course. right now we're in a totally different environment of course So, we'll probably stay well within the 4%-6% range, but, you know, as the revenue goes up, we'll spend a little bit more, and probably the first priority is maintenance tools and the things that we weren't doing a couple of years ago. so we'll probably stay well within the 4%-6% range but you know as the revenue goes up we'll spend a little bit more and probably the first priority is maintenance tools and the things that we weren't doing a couple of years ago

Speaker 13: I apologize, I may have confused. I was focusing more on depreciation. Given these several quarters of increase in CapEx, should I expect a step up in depreciation looking forward? I apologize, I may have confused. i apologize i may have confused I was focusing more on depreciation. i was focusing more on depreciation Given these several quarters of increase in CapEx, should I expect a step up in depreciation looking forward? given these several quarters of increase in capex should i expect a step up in depreciation looking forward

Speaker 8: Depreciation will follow the CapEx. So, I guess you have your model on the revenue, so you can calculate the 4%-6% of CapEx, and then depreciation for us is on a 10-year useful life, so you can probably model in that way. Depreciation will follow the CapEx. depreciation will follow the capex So, I guess you have your model on the revenue, so you can calculate the 4%-6% of CapEx, and then depreciation for us is on a 10-year useful life, so you can probably model in that way. so i guess you have your model on the revenue so you can calculate the 4%-6% of capex and then depreciation for us is on a 10-year useful life so you can probably model in that way

Speaker 6: It's not like some other fabs, it's not necessarily the huge part of the cost drivers. There's a lot of other pieces of cost that we can go manage, so. It's not like some other fabs, it's not necessarily the huge part of the cost drivers. it's not like some other fabs it's not necessarily the huge part of the cost drivers There's a lot of other pieces of cost that we can go manage, so. there's a lot of other pieces of cost that we can go manage so

Speaker 13: Got you. Thank you. Got you. got you Thank you. thank you

Speaker 14: The next question will come from Ananda Baruah with Loop Capital. Please go ahead. The next question will come from Ananda Baruah with Loop Capital. the next question will come from ananda baruah with loop capital Please go ahead. please go ahead

Speaker 3: Yeah, guys. Good afternoon. Thanks for taking the question. Dave, while we have you, a little bit of a technical one, are you—what kind of activity are you seeing, you know, at sort of the so-called warm tier of storage? It's a question that comes up a bunch in our conversations. We've heard that it's obviously growing. It's growing both hard drive and flash storage. It's participating nicely, but would love to get your input on it, 'cause I think there's still... First of all, we'd love to know if what we're hearing is accurate. But secondarily, I think there's a lot of people that are assuming that that's really, like, it's becoming a NAND tier, and largely a NAND tier in a GenAI world. Yeah, guys. yeah guys Good afternoon. good afternoon Thanks for taking the question. thanks for taking the question Dave, while we have you, a little bit of a technical one, are you—what kind of activity are you seeing, you know, at sort of the so-called warm tier of storage? dave while we have you a little bit of a technical one are you—what kind of activity are you seeing you know at sort of the so-called warm tier of storage It's a question that comes up a bunch in our conversations. it's a question that comes up a bunch in our conversations We've heard that it's obviously growing. we've heard that it's obviously growing It's growing both hard drive and flash storage. it's growing both hard drive and flash storage It's participating nicely, but would love to get your input on it, 'cause I think there's still... it's participating nicely but would love to get your input on it 'cause i think there's still First of all, we'd love to know if what we're hearing is accurate. first of all we'd love to know if what we're hearing is accurate But secondarily, I think there's a lot of people that are assuming that that's really, like, it's becoming a NAND tier, and largely a NAND tier in a GenAI world. but secondarily i think there's a lot of people that are assuming that that's really like it's becoming a nand tier and largely a nand tier in a genai world Anyway, just would love to get any context there that you have. Thanks. Anyway, just would love to get any context there that you have. anyway just would love to get any context there that you have Thanks. thanks

Speaker 6: Yeah, I think you have to be a little bit careful, Ananda. So, there are applications that are very memory-dependent, that are attached to compute, and some of these applications are neat. I like them. When you start talking about big data storage, if you will, in data centers, the tiering architecture is fairly well set and probably won't change based on economics and also architectures that are well known, people know how to play. So, if the concept is that drives aren't working hard, they're, you know, in the background, just storing data, that's not the way a good way to think about it. That's not the way hard drives are being used right now. They're working 24/7. A lot of times they're optimized for performance themselves, largely streaming performance, not random small block workloads. Yeah, I think you have to be a little bit careful, Ananda. yeah i think you have to be a little bit careful ananda So, there are applications that are very memory-dependent, that are attached to compute, and some of these applications are neat. so there are applications that are very memory-dependent that are attached to compute and some of these applications are neat I like them. i like them When you start talking about big data storage, if you will, in data centers, the tiering architecture is fairly well set and probably won't change based on economics and also architectures that are well known, people know how to play. when you start talking about big data storage if you will in data centers the tiering architecture is fairly well set and probably won't change based on economics and also architectures that are well known people know how to play So, if the concept is that drives aren't working hard, they're, you know, in the background, just storing data, that's not the way a good way to think about it. so if the concept is that drives aren't working hard they're you know in the background just storing data that's not the way a good way to think about it That's not the way hard drives are being used right now. that's not the way hard drives are being used right now They're working 24/7. they're working 24/7 A lot of times they're optimized for performance themselves, largely streaming performance, not random small block workloads. a lot of times they're optimized for performance themselves largely streaming performance not random small block workloads That's more of a memory thing. And so, you know, if you had an application that's random small block, it's probably memory. If you have big data, it's probably a little bit of memory on the front end and a lot of hard drive on the back end. And we think that there are applications across the entire spectrum, of course, but we think that in the future, when we start to talk about the concepts in their enormity, about checkpoints and physical AI and video and things like that, it's large, large data, so the architectural tier that stores the data will probably remain constant for the next decade. That's more of a memory thing. that's more of a memory thing And so, you know, if you had an application that's random small block, it's probably memory. and so you know if you had an application that's random small block it's probably memory If you have big data, it's probably a little bit of memory on the front end and a lot of hard drive on the back end. if you have big data it's probably a little bit of memory on the front end and a lot of hard drive on the back end And we think that there are applications across the entire spectrum, of course, but we think that in the future, when we start to talk about the concepts in their enormity, about checkpoints and physical AI and video and things like that, it's large, large data, so the architectural tier that stores the data will probably remain constant for the next decade. and we think that there are applications across the entire spectrum of course but we think that in the future when we start to talk about the concepts in their enormity about checkpoints and physical ai and video and things like that it's large large data so the architectural tier that stores the data will probably remain constant for the next decade

Speaker 3: That's super helpful. I'll keep it there. Thanks a lot. That's great. That's super helpful. that's super helpful I'll keep it there. i'll keep it there Thanks a lot. thanks a lot That's great. that's great

Speaker 14: The next question will come from Vijay Rakesh with Mizuho. Please go ahead. The next question will come from Vijay Rakesh with Mizuho. the next question will come from vijay rakesh with mizuho Please go ahead. please go ahead

Speaker 18: Yeah, hi. Thanks, Dave and Gianluca. Just a quick question on HAMR. I know you're ramping it faster in the March quarter. Should that drive a much better gross margin profile, I guess? And any thoughts on how we should see the margins improve, I guess, as HAMR starts to ramp? And then follow up. Yeah, hi. yeah hi Thanks, Dave and Gianluca. thanks dave and gianluca Just a quick question on HAMR. just a quick question on hamr I know you're ramping it faster in the March quarter. i know you're ramping it faster in the march quarter Should that drive a much better gross margin profile, I guess? should that drive a much better gross margin profile i guess And any thoughts on how we should see the margins improve, I guess, as HAMR starts to ramp? and any thoughts on how we should see the margins improve i guess as hamr starts to ramp And then follow up. and then follow up

Speaker 8: Vijay, now, if you are referring to the March quarter, of course, the ramp of HAMR is included in our guidance, and our guidance is indicating a fairly good improvement in gross margin again. And then I said, for the rest of the calendar year, now we expect both revenue and profitability to improve sequentially, and of course, part of that is coming from additional HAMR products. Vijay, now, if you are referring to the March quarter, of course, the ramp of HAMR is included in our guidance, and our guidance is indicating a fairly good improvement in gross margin again. vijay now if you are referring to the march quarter of course the ramp of hamr is included in our guidance and our guidance is indicating a fairly good improvement in gross margin again And then I said, for the rest of the calendar year, now we expect both revenue and profitability to improve sequentially, and of course, part of that is coming from additional HAMR products. and then i said for the rest of the calendar year now we expect both revenue and profitability to improve sequentially and of course part of that is coming from additional hamr products

Speaker 6: We think demand will be strong for the 4 TB per platter, of course, and so that's one of the reasons why we're, you know, making that a priority in the transition that we go through this calendar year and into next. We think demand will be strong for the 4 TB per platter, of course, and so that's one of the reasons why we're, you know, making that a priority in the transition that we go through this calendar year and into next. we think demand will be strong for the 4 tb per platter of course and so that's one of the reasons why we're you know making that a priority in the transition that we go through this calendar year and into next

Speaker 18: Got it. Very helpful. And just a quick question also on the OpEx side. You know, very nice, obvious topics. Same time last year, somewhere in the 14% range, now it's down to 10%. I know, Gianluca, you said probably that's a long-term target, but looks like, as Dave mentioned, with top line ramping up, with all the design wins, it looks like OpEx could go down again. Is that fair, as a percent of mix? Got it. got it Very helpful. very helpful And just a quick question also on the OpEx side. and just a quick question also on the opex side You know, very nice, obvious topics. you know very nice obvious topics Same time last year, somewhere in the 14% range, now it's down to 10%. same time last year somewhere in the 14% range now it's down to 10% I know, Gianluca, you said probably that's a long-term target, but looks like, as Dave mentioned, with top line ramping up, with all the design wins, it looks like OpEx could go down again. i know gianluca you said probably that's a long-term target but looks like as dave mentioned with top line ramping up with all the design wins it looks like opex could go down again Is that fair, as a percent of mix? is that fair as a percent of mix

Speaker 8: Well, I would say, you know, we are getting closer and closer to our fourth target of 10% of revenue for OpEx. We are almost there. We should be there actually in the March quarter. And then, of course, it's not that we relax our cost control. We will continue to keep our cost control and revenue supposed to increase, so we can probably do it a bit better. Well, I would say, you know, we are getting closer and closer to our fourth target of 10% of revenue for OpEx. well i would say you know we are getting closer and closer to our fourth target of 10% of revenue for opex We are almost there. we are almost there We should be there actually in the March quarter. we should be there actually in the march quarter And then, of course, it's not that we relax our cost control. and then of course it's not that we relax our cost control We will continue to keep our cost control and revenue supposed to increase, so we can probably do it a bit better. we will continue to keep our cost control and revenue supposed to increase so we can probably do it a bit better

Speaker 6: Yeah, I'm, I'm glad you asked that, Vijay, because, you know, obviously, a few years ago, the tough times that we went through, we weren't investing in ourselves to the, the rate that I'd like. And of course, it's with the HAMR transition in front of us, that was a lot of work. Now that we've kind of cleared that HAMR transition, we can see the future fairly well. It's, you know, the, the clouds are parting, if you will, and we can see areal density opportunities in front of us, and we will take that, the money, such as it is, even staying within our same model, and we'll take that money and reinvest in ourselves so that we can continue to drive the areal density. Yeah, I'm, I'm glad you asked that, Vijay, because, you know, obviously, a few years ago, the tough times that we went through, we weren't investing in ourselves to the, the rate that I'd like. yeah i'm i'm glad you asked that vijay because you know obviously a few years ago the tough times that we went through we weren't investing in ourselves to the the rate that i'd like And of course, it's with the HAMR transition in front of us, that was a lot of work. and of course it's with the hamr transition in front of us that was a lot of work Now that we've kind of cleared that HAMR transition, we can see the future fairly well. now that we've kind of cleared that hamr transition we can see the future fairly well It's, you know, the, the clouds are parting, if you will, and we can see areal density opportunities in front of us, and we will take that, the money, such as it is, even staying within our same model, and we'll take that money and reinvest in ourselves so that we can continue to drive the areal density. it's you know the the clouds are parting if you will and we can see areal density opportunities in front of us and we will take that the money such as it is even staying within our same model and we'll take that money and reinvest in ourselves so that we can continue to drive the areal density

Speaker 18: Got it. Great. Thanks a lot, guys. Appreciate it. Got it. got it Great. great Thanks a lot, guys. thanks a lot guys Appreciate it. appreciate it

Speaker 14: This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks. This concludes our question and answer session. this concludes our question and answer session I would like to turn the conference back over to management for any closing remarks. i would like to turn the conference back over to management for any closing remarks

Speaker 6: Thank you, Nick, and thanks to everyone for joining us on the call. The Seagate team is executing very well, delivering on our financial targets and advancing areal density roadmaps, and successfully qualifying customers on our HAMR-based Mozaic products to address the sustained and growing demand for data storage. As data creation accelerates, driven by both traditional workloads and these emerging AI applications, Seagate's transformational technology positions us well to capture the significant demand opportunities ahead. I'd like to thank our employees for their dedication and innovation, and our customers and suppliers for their trust and collaboration, and our shareholders as well for their continued support. Together, we're driving Seagate's ongoing success. Thank you. Thank you, Nick, and thanks to everyone for joining us on the call. thank you nick and thanks to everyone for joining us on the call The Seagate team is executing very well, delivering on our financial targets and advancing areal density roadmaps, and successfully qualifying customers on our HAMR-based Mozaic products to address the sustained and growing demand for data storage. the seagate team is executing very well delivering on our financial targets and advancing areal density roadmaps and successfully qualifying customers on our hamr-based mozaic products to address the sustained and growing demand for data storage As data creation accelerates, driven by both traditional workloads and these emerging AI applications, Seagate's transformational technology positions us well to capture the significant demand opportunities ahead. as data creation accelerates driven by both traditional workloads and these emerging ai applications seagate's transformational technology positions us well to capture the significant demand opportunities ahead I'd like to thank our employees for their dedication and innovation, and our customers and suppliers for their trust and collaboration, and our shareholders as well for their continued support. i'd like to thank our employees for their dedication and innovation and our customers and suppliers for their trust and collaboration and our shareholders as well for their continued support Together, we're driving Seagate's ongoing success. together we're driving seagate's ongoing success Thank you. thank you

Speaker 14: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. The conference is now concluded. the conference is now concluded Thank you for attending today's presentation. thank you for attending today's presentation You may now disconnect. you may now disconnect