Seagate Technology — Call Transcript 2026

Good morning, everyone. Thank you for being here. I'm Samik Chatterjee. I cover the hardware and networking companies at JPMorgan. As you all get settled, I'll just introduce the next speaker here. Here for the next fireside chat is Dr. Dave Mosley, Chief Executive Officer of Seagate. Dave, thank you for being here. Thank you to the audience as well. Maybe, Dave, I'll start you off with a question that's more broader, more longer term. You've been at Seagate for nearly three decades, CEO since 2017. When you look at the storage industry today versus prior cycles, what is structurally different about the demand profile? I know everyone wants to say this time it's different. What do you think investors are still underappreciating about this current cycle that we're in? Thanks, Samik. A couple things. Forward-looking statements, risk factors on our website. Get that out of the way. Yeah, it's been a long road for me and for our teams as well. I don't look at it as small cycles, 'cause I think every one is different. The last downside we went through was profoundly different, created by its own unique situations. I look at it more as a macro cycle. I mean, from my perspective, data's always growing underneath everything. Our industry went through a enormous build-out period through the client server days, up until peaking about 2012. For reference, we shipped 66 million drives in one quarter, they were all low capacity going into notebooks and desktops. If you think about those times back then, the drives were not full. They were not being utilized very often, you know, just not turned on very much. What's different now is the drives are chock-full of those heads and media critical components that we'd built out the factories for back in those days. A lot fewer drives, but they're big beasts now. If you go into the data centers, they're working very hard, you know, 100% utilization and full. Very different profile for the industry as we've pivoted the supply chain for the last decade. Okay. Okay. Maybe to get into that a bit further, you've talked about agentic AI generating much larger data sets than periodic queries, for example. Can you just go and sort of one level deeper into that, decompose what you're seeing in exabyte growth in calendar 2026, 2027, and how much is the broadening out of the use cases when it comes to training, inferencing? How much of that is becoming a driver of exabyte growth going forward? Yeah, it's really hard to break out because the application space is growing so quickly. What some things are called, you know, inference one day, you know, may be actually developing into something that's actually learning more the next. I think we try to think about the First of all, the recovery that happened in the last three or four years was really driven by video properties first. Yep. It's not small text data sets. It's large unstructured data sets, which are usually video data sets. If you think about the training that happened early days, it was a lot of text for training large language models and being able to get utility out of them, and they are very useful, don't get me wrong. Now it's not about training on, you know, ages and ages worth of text that was stored somewhere. It's a lot more about understanding what's going on in the real world, and being up to the minute in your cycle and ingesting a lot of the large data sets and then being able to figure out how that is changing so that you can give the proper inference, and we're seeing this all the time. If I look at the workloads that are across the drives in some of those applications, they're very diverse. There's not a predictable way of using them, and depending on the day or the user or whatever, it can actually change quite frequently, and that's what I would say characterizes the AI workloads more than anything. Okay. Okay. You've mentioned moving to a build-to-order approach with your customers. How has that impacted visibility for the industry for yourself, and is that something that you're seeing across the industry being adopted as well? It is. I mean, we're driven by very long lead times in our wafer operations, so we have recording head wafers that take a long time to build, you know, could be more than nine months. The drives themselves take another, you know, quarter or something like that. Inside of that, we know what's coming out a year from now, and we've basically gone to the customers and said, "Look, if you wanna plan this really well, which you should be for your data centers, we know what's coming out. You can buy this stuff up to a certain period." We wanna keep that four or five quarters of visibility very, very solid for what's being built. The demand is significantly higher than that. We know that if we can get a little bit more out of the factories, we're sensing the market. The market really wants the exabytes even more. We're now giving predictability into what we're going to be building in the next year or two years, three years based on technology transitions. The customer demand for that is still very strong. It's not really locked in. The build-to-orders are really only locked in for four or five quarters. Beyond there we have great visibility. What's the financial implication of moving to this model? Like, for investors that have looked at Seagate over the cycles, how do you think about what changes on the financial side? Well, what I really wanted out of it when we started was revenue predictability. Just, you know, we wanna make sure we're not building into a forecast that's not real. Now it appears that not only are the forecasts real, but the demand's significantly higher. You know, fundamentally, the financials will be driven by the demand. We're trying to answer that demand as aggressively as we can with our technology. You know, I think that's why the financials keep getting better. If we have predictability for four quarters, but then we start to roll through that period, and we go to re-up the next one, then we're seeing that the demand's even stronger, and so therefore the economics get better. Okay. Okay. You mentioned this, lead times are now quite long. We've seen some of the press reports as well mentioning lead times are over one year in some cases for HDDs. However, when you take a step back, I think investors have always been concerned about the industry adding capacity right at the peak of demand, and by that time the capacity comes online, you're going through a moderation in the demand cycle. What's giving you the comfort now in terms of your capacity planning, and how are you thinking about your capacity roadmap? There's a couple different kinds of capacity. If I go back to the industry 15, 20 years ago, the headway for the fabs, the lead time was only a few months. Very, very fast to turn. Now it's significantly longer with the technology being as complex it is as it is now. You know, that's really what we're gated by is those critical components that are long lead time. As far as the number of drives at the back end, we could be still fairly flexible on that. Because we're able to sell the capacity that's already coming out, we don't necessarily need to. How do I think about adding capacity now? It's not just one machine you plug in, it has to be synchronized all the way across not only our production, but also the supply chain. It's really long lead time now and we're adding tools to make our capacity a little bit stronger inside of the manufacturing facilities that have those long lead times, but they tend to be the types of tools that will go through technology transitions rather than just pure capacity adds. Maybe just to follow up on that, and this question comes up pretty often, so I'm sure you've taken this question before, is what fundamentally needs to happen for you to add unit capacity or floor space capacity rather than just depending on higher capacity drives to add exabytes? Right. There is an answer to the question. I'll get to that in a second. What our customers are driving us for right now is more exabytes. We believe that the way to get the most exabytes is to take our talented teams and really go through these technology transitions. You know, we're targeting mid-20s% growth, which is enormous CAGR, the only way we're gonna get there is to be able to go through those technology transitions. If you will, to take a 3 TB per platter product to a 4 TB per platter to a 5 TB per platter year over year over year. That's really the way we're driving it. If we took the teams off and started building new factories or bringing up new machines, it would just take too long. You'd end up more capacity, if you will, you'd slow the rate of growth on that technology. Back to your question directly, the wild card really is in unit capacity for disk drives, which we, again, could be fairly flexible with once we package those heads and media. That gets down to more customer diversification and edge AI and, you know, all those use cases, which I think could come someday. We would take the heads and media that we have planned and divert them somewhere else should those applications take hold. Okay. Interesting. sovereign AI, neoclouds, the sort of next tier of cloud companies below the hyperscalers, what does that opportunity look like for Seagate? Yeah. It's complex space. There's a lot of different terms being thrown around. The way I think about it is neoclouds generally tend to be compute, data centers, if you will, that are failover or being used by the major CSPs. Not entirely, you know, can be. There's not a whole lot of hard drives in there. Where do they get their data when they need it? They get it from major CSPs or the big installs that already exist in the world. Sovereign's a little bit different, because Sovereign could be more what I would call traditional data centers, not just compute data centers. In a lot of cases, people are saying, "I want my data right here next to me." That's the term Sovereign. We are seeing some of those people build out, wanna have aspirations themselves. Some of them are still very beholden to the architectures of the CSPs, so they're asking the CSPs what to build, and they're just plugging that in. Some of them have their own architectures as well. Is that the way I should interpret that, is you're not seeing them as direct customers, but more in terms of demand coming through your hyperscalers directly? A few direct customers, but it's still very small. Yeah. Okay. I would say more of the sovereign behavior has been, "Hey, I know somebody's gonna need this data center equipment. I'll build the shell, or I'll start plugging gear into the shell that I already have, and then, you know, I'll go find people that can use it at scale. Got it. Okay. All investors today associate the Seagate investment bull case with HAMR. Maybe talk about HAMR, why that's a strong differentiation for Seagate, and do you think that differentiation is defensible against competitors? HAMR is heat-assisted magnetic recording, in case you're not familiar with it. It's really our ability to use a different material set on our disk, iron platinum alloys. What I would say is that the problem with making the disks out of iron platinum is not just making them, but it's also being able to write them. We needed a large amount of photonics, integrated circuits, PICs, and lasers to be able to write spot sizes that are 20 nm or 30 nm in diameter. It's been a miraculous journey, really, frankly. We're now at the point where we've shipped millions of HAMR drives, not 1 million or 2 million, many more than that too. We've got qualifications, a little bit of new news here, is we've got qualifications against all planned CSPs now on Mozaic 3+. We've even got the 4 TB qualified at two places, which we've already announced. Yeah. The qualifications are going very well. We're very confident in the technology, and we can get it to five as well. This is our desire to bring more exabytes into the world. I can't really speak about competition right now because, you know, they'll probably figure out their own plans. I would say that, you know, as we keep working really hard to keep marching up the technology curve, I think this is the best way to answer what the world ultimately needs, which is more exabytes fast. Okay. Great. Congratulations on the additional qualifications there. Maybe now thinking about the implications of HAMR from a financial perspective, how do you think about it leading to market share increases versus lower cost and driving more of the financial returns from a lower cost equation? Yeah. I've said this many times. We don't really think about market share. I think about how many wafers I'm gonna start and whether I've sold them or not, and what the economics of that is. We're trying to get predictability not only for ourselves, but for, also for our customers, you know, for the next, say, four quarters or five quarters. To the extent that we go from three to four to five, we're doing that without adding significant componentry. The cost leverage we get is really good, actually, and we get a lot more terabytes, exabytes out of that. So that's the way I think about the advantage to the extent that you're making a 40 TB or then a 50 TB, which we talked about in our earnings call we'd be doing by the end of next calendar year. That's a huge value proposition for power, space into a data center if you're gonna be running that data center for 5-10 years. Like, that's the way our customers think about it. I think, you know, those products are gonna get very good looks from the customers, and we're gonna be able to book them predictably. There is another wild card in this, in that there's still a lot of capacity that's actually at 20 TB. If you think about how you're making a 20 TB drive today, how many critical heads and media it takes versus at 4 TB per platter, 20 TB necessarily in 5 disk. 5 TB a platter, it's 4 disk, so you're able to address those price bands with significantly better cost perspective. That's the way we think about it, one of the reasons we're driving areal density so hard. Got it. I have a follow-up on that, but I'll come back after this question because this will be related. Mozaic 3+ took years to qualify at the first hyperscaler. Mozaic 4+, you qualified it in much shorter duration, like PMR equivalent times at two of your largest CSPs. What specifically changed on the customer side? Are customers much more familiar with the platform? What's changing the timelines around the qualification? Yeah. I think two things. The first is that customers, it's a new technology, so customers were maybe a little bit reluctant at the start. You know, anytime you're making big areal density jumps, people will look at it and say, "I have to make sure I check it out." They did. We had some early issues as well. We've got through a huge learning curve as we went up the volume ramp. I think the second thing is that there was a lot of noise about HAMR being different. The reality is, once I deliver the drive to you as a customer, it's not different. It's, you know. To the extent that you're not ready for a 30 TB drive in your, you know, architecture, the way your software runs. Now I think people are. They're ready for 30, they're ready for 40, they're ready for 50. I think the adoption will be much quicker and we're trying to do this all very predictably. We'll start those head wafers when we know we have demand, and we know we can get through the qualifications quickly, and so on and so forth. That's what we're in the middle of right now. Yeah. The expectation should be, which I had for you as a follow-up, is Mozaic 5 and Mozaic 6 should be qualified in much quicker time with the same group of customers? I think so, back to the traditional qualification cycle. Okay. Going back to the last question when you said a lot of customers still are on 20 TB. Now, do you see them then taking the leap to 40 TB rise with Mozaic 4+, or still opting to go through that transition with Mozaic 3+, then to Mozaic 4+? I think there are a lot of different use cases in the world where people really don't need that much capacity, depending on what's going on, especially in small data centers. Could be on the enterprise edge, which, you know, I know needs a little bit better definition out in the world. You know, our traditional enterprise customers may be running small, medium businesses or even large businesses, they'll still be able to use low capacity drives. Not everything will move to the highest capacity. Okay. As you think about the improvements that you're delivering on cost per terabyte with the ramp on HAMR, you've talked about a 50% exabyte crossover to HAMR in the second half of calendar 2026. Once you get beyond that crossover point, what happens to the cost per terabyte curve? Like, what does it look like once you get over that 50% threshold? Again, you know, the same number of components in the drive. You know, if we can keep pushing areal density, the cost stays relatively the same. The more terabytes we get out, the better. The demand for terabytes is so aggressive that I think some of our customers are willing to work with us on the, not only the new technology, but any new features that will get us there. With that fundamental, you know, cost floor, if you will, I think we're set up pretty well to continue margin expansion. That, you know, all comes down to exabyte demand though, right? Got it. Maybe on the technology side, you're focused on HAMR, and that's one approach that we've seen. There are other approaches we've seen from some of your competitors in terms of looking at track layout being different. How do you think about what makes sense longer term? Do different technology approaches, including exploring alternative areas around track layouts, do those have a position in your roadmap as well long term? Yeah, I mean, things like SMR get discussed a lot. We started shipping SMR, I think, 2013 when we went from 5 TB to 6 TBs. And we've shipped literally hundreds of millions of SMR drives into desktop markets and things like that. There are other track layout tricks that, you know, may be useful over time, and we're already doing that for major CSPs as well, I think, just to be clear. It's HAMR Plus, if you will. One of the things that I'm most interested about the industry right now is that, yeah, you get through the transition of being able to use this new media type and getting the photonic circuits right. There are fantastic new roadmaps now on PICs, on photonic circuits, and on lasers, and being able to use some of the other technologies that exist in the world and take pieces of that and apply them to areal density. There's a lot of ideas on the table now, and I don't think our areal density roadmap is gonna stall at all. I think it's gonna increase. It will be largely building on top of the HAMR platform, but with additional innovation on top. I think we'll be using iron-platinum for quite some time. It gives a much stronger signal to be read back at small bit sizes. The bits are about roughly 30 nm wide by 7 nm down track, so they're already pretty small. You have to make them even smaller, you know, the HAMR media gives you a great signal out of something that's that size. We have room to run. Got it. Maybe just flesh out how you're thinking about density of the drive itself. Like, when you think about nearline being the clear driver of growth here, you've done a quite robust roadmap in terms of technology innovation. When you look past the roadmap beyond, like, Mozaic 6, for example, what are the big two or three technology bets you will have to take today to enable that? Again, back to photonics, I think we're going to be pouring technology into making the world's smallest edge-emitting lasers and making them behave the way we want and as low cost as we can get them. Then there's a lot of technology to be brought to bear at the integrating the photonic circuits level. I think recording channels still wide open. A lot of progress being made in silicon. There's a lot of progress being made on things like GPUs and TPUs and learning so that we can actually apply that learning back to what's going on on each individual drive. That's one of the reasons I'm very excited about we have research efforts into all these. Got it. When you say you will make those investments or efforts, is it all organic, or do you see that there's a need to do acquisitions to fill the portfolio on that front? We're not afraid of doing acquisitions if we saw the right technology. We, you know, some of our technology has always been so bespoke to our application that we'll be doing it. It'll be organically led for sure. Before prices of NAND went up where they are today, the popular bear thesis on hard disk drives was that you're ceding share to SSDs incrementally. How do you think about that sort of long-term roadmap, now, and is there overlap with SSDs when it comes to the warm tier of storage? Are you seeing that more and more becoming more prevalent? Or with the price increase in NAND, is that actually reducing in terms of how much you overlap with SSDs? I think a lot of this comes back to what happened in the PC. You know, the PC forever, the capacity points in the PC were growing, and then they stopped, and they're still stopped, and it's still, the PC is still the same capacity point it ever was. When that happened, it transitioned from hard drive to flash and has been flash for a decade, right? That's the way I think about it. A lot of people, it's a very natural, emotional thing. You say, "Well, then the hard drives are going away." Not in the data tiers in the data center. As a matter of fact, I think the data tiers there are not only stuck on hard drives, but they're stuck for a long way into the future, and that's because people know how to manage them really well, and the economics of replacing the amount of data that's in the data centers with flash, it doesn't make sense. I say this all the time. Flash is great technology. It has a lot of little niches to put product in. There's different kinds of flash. There's fast and there's more, I'll call it long-term flash. Can be tricky to manage and so on. Our customers in the data tiers in the data centers understand all this really well. They're some of the best storage architects on the planet. They've already figured out exactly how they're gonna deal with hard drives and memory layers above. I don't see that changing. If anything, now that flash has gotten considerably more expensive, they're asking the hard drives, "How much more can you do at your tier?" The demand just keeps growing. You talk about zettabytes worth of storage capacity inside of disk drives. To replace that with flash would be ridiculous investment. It's not gonna happen. Yeah. No, makes sense. Let's talk about pricing. Big shift for the industry, particularly now revenue per terabyte basis. I think you, your peer Western Digital is seeing the same thing. Just talk about the pricing power that you now see, particularly when you engage with hyperscalers in these pricing discussions. How has the balance of power in terms of pricing changed? Yeah, I wouldn't say it's power. Fundamentally, it comes down to demand. If when we started out of the depths of the last downturn, we said, "Hey, we wanna get paid for what's coming out of our factories, we cannot just build it speculatively." Because of that, we locked in certain pricing for, you know, say, four quarters or five quarters back to the BTO discussion. As those roll forward, different customers are on different timelines, of course. You get to the end of that cycle you say, "Okay, now there's more demand, then let's up." We're still going for predictability, and that's what's driven that CSP pricing up. The way we test this all the time is if there happen to be any swaps, anybody says, "I don't need product," or we get a little bit more out of our factory and can take the parts that we're already making and make a new different product out of them, then what happens is we go out and offer that to the markets, and we see where the new pricing is. That's the biggest reason for things to go up. We don't see that stopping. Maybe let me take a step back and try to address the question what the more longer term focus is. When you look pre-COVID, most of your gross margins were in that sort of 20%-25% range for most years. Today, both you and Western Digital are progressing to 50% gross margin. You're almost there at this point. One part of it is the demand cycle, as you said. If the demand cycle were to change in a few years, is the company structurally a better margin company than what it was pre-COVID? Yeah, I think given visibility, of course, you know, demand is the fundamental answer to everything, right? Given visibility that we have into the demand, We actually took a lot of supply offline by virtue of what we went through after the COVID downturn. Right now, lead times being what they are, that we can't really react on the upside to the demand. In some respects, if demand were to start going down, we have visibility into it. We would take necessary action, I think, again. I don't see that really right now. What's happening in the application layer is profound. The way I think about it, and I'm a hardware person, so you have to be careful with me. You know, some of the software layers before that used to siphon money off the top are not there anymore. Now what's exposed is, hey, I've got this really fast application, it needs data, and I think that's more of what we're seeing in the world. Okay. Interesting. What a lot of investors ask us about is hyperscalers have been increasing their capital spending plans every time they get on an earnings call, et cetera. With the kind of long lead time that you have, the build-to-order framework that you have, what's the typical duration between a hyperscaler saying, "Well, we'll spend more," to Seagate seeing that impact on the revenue line? I think the hyperscalers understand what workloads are actually driving them, they are seeing these new application spaces. Say the video, for example. They know how much video is being created all the time at the extreme edge. They know how much video could be if it was enabled properly. They know the sources of data on the edge. You know, they know exactly how much people are uploading to their properties all day long. They get a pretty good sense of those businesses. There's new nascent spaces like people talking about physical AI and robotics that will need mass capacity. Is that gonna be serviced in the cloud or at the edge? Very good questions. All these applications are being forecast into the future and we'll have the storage components as well. I think that's one of the reasons why they're giving us that two, three, four-year visibility. Even though we haven't locked in the BTO orders, we are getting very good visibility and a nice, solid growth. That's another thing different about this demand cycle. Got it. Got it. Okay. In the last five minutes, let's try and get through three questions here. A big talking point has been your 70% incremental margins that you've been delivering consistently. As you go through the ramp on HAMR and you continue to deliver more exabytes, how should we think about sustainability of these 70% incremental margins that you've been delivering? Yeah. Again, fundamentally, demand will dictate everything. Our execution to the extent that we can, if we get through the 4 TB to 5 TB transition aggressively while the demand is still high, I think that'll serve us very well. We have all the assets in place that we need to do that. Our team is executing just fantastically. That's what it really comes down to is, you know, from an OpEx perspective. Our team's aligned on the right technology, knows exactly how we got to 3 TB and 4 TB, now knows what we need to do to get to 5 TB. We have all the tools in place. We've been planning this technology transition for quite a while. You know, I think it is sustainable. Okay. Does pricing and how the pricing environment is give you a lever to even exceed the 70% on the incremental margin? Yeah, pricing will always come down to demand. I do think that, you know, the difference between a 3 TB and a 4 TB and a 5 TB is pretty compelling if you're building a new data center or replacing the hundreds of millions of drives that are out in an existing data center. From a power perspective, the rest of the equipment you need to support that, the number of exabytes you're running, you know, I could see if the demand continues to remain strong, then, you know, we would have that kind of capability. Okay. operating leverage. significant expansion on operating margins, I think 1,400 basis points year-over-year in the March quarter. You've been holding OpEx relatively flat. As the business now scales towards a $20 billion annual run rate by fiscal 2028, how do you think about the OpEx envelope that needs to support that overall revenue profile? I mean, given the downturn we went through, our first priority was, you know, giving our people raises and they've deserved the bonus they've been getting, the variable comp and so, and so on. Again, we have the team, the technologists together to do what we need to do. We could spend more on OpEx over time, but, you know, I don't really see the need to right now. Hiring more people, great, but that would take a long time to train them. We are just really focused right now on using the existing team that we have to go get 5 TB of platter going, and then we'll see what happens in the future. Does broadening out the customer base or investing in these new technologies that you're seeing, talking about photonics, does that impact the R&D pace or is that largely sort of similar to the run rate you've been on? Far, we've been doing that inside of our existing footprint. And you know, we have thousands of thousands of engineers that are in tune with those technologies and markets. Again, we could if we wanted to. I still don't see the need right now. We love the footprint we have, we love the team we have, and we're trying to stay focused. Okay. Let me end with capital allocation. Clearly, you'll be generating a lot of cash. How are you thinking about capital allocation, primarily in terms of how do you invest, where do you and how much do you invest in the business? How much do you allocate to M&A or buybacks? How are you thinking about those drivers? Yeah, no real change. I mean, I think I said this on the earnings call that we just had, last year was all about patching up the supply chain, just getting working capital back. This year is about readdressing our debt, you know, getting in fighting shape in case there is some other downturn. We don't see that, you know, we just wanna be the best stewards that we can. Then, you know, we'll get back to being the Seagate that we want to, which is, you know, returning 75% of the cash to shareholders. We have a strong dividend, we always did. You know, we're gonna be reassessing exactly how that weighs off versus buybacks, we believe that it's the shareholders' money and we wanna give it back to them. Inside of that, I think we have enough flexibility to do anything we need to for whether it's investing back in our own R&D or if we need to do small tuck-ins or something like that for technology access, we can do that. We're not really focused that way. We're more focused on just getting through this year, getting that 5 TB per platter launched and seeing what the next year holds. Okay, great. I'll wrap it up there. Thank you for coming to the conference. Thank you to the audience as well. Thank you. Thank you, everyone. Thank you.

Speaker 2: Good morning, everyone. Thank you for being here. I'm Samik Chatterjee. I cover the hardware and networking companies at JPMorgan. As you all get settled, I'll just introduce the next speaker here. Here for the next fireside chat is Dr. Dave Mosley, Chief Executive Officer of Seagate. Dave, thank you for being here. Thank you to the audience as well. Maybe, Dave, I'll start you off with a question that's more broader, more longer term. You've been at Seagate for nearly three decades, CEO since 2017. When you look at the storage industry today versus prior cycles, what is structurally different about the demand profile? I know everyone wants to say this time it's different. What do you think investors are still underappreciating about this current cycle that we're in? Good morning, everyone. good morning everyone Thank you for being here. thank you for being here I'm Samik Chatterjee. i'm samik chatterjee I cover the hardware and networking companies at JPMorgan. i cover the hardware and networking companies at jpmorgan As you all get settled, I'll just introduce the next speaker here. as you all get settled i'll just introduce the next speaker here Here for the next fireside chat is Dr. Dave Mosley, Chief Executive Officer of Seagate. here for the next fireside chat is dr dave mosley chief executive officer of seagate Dave, thank you for being here. dave thank you for being here Thank you to the audience as well. thank you to the audience as well Maybe, Dave, I'll start you off with a question that's more broader, more longer term. maybe dave i'll start you off with a question that's more broader more longer term You've been at Seagate for nearly three decades, CEO since 2017. you've been at seagate for nearly three decades ceo since 2017 When you look at the storage industry today versus prior cycles, what is structurally different about the demand profile? when you look at the storage industry today versus prior cycles what is structurally different about the demand profile I know everyone wants to say this time it's different. i know everyone wants to say this time it's different What do you think investors are still underappreciating about this current cycle that we're in? what do you think investors are still underappreciating about this current cycle that we're in

Speaker 1: Thanks, Samik. A couple things. Forward-looking statements, risk factors on our website. Get that out of the way. Yeah, it's been a long road for me and for our teams as well. I don't look at it as small cycles, 'cause I think every one is different. The last downside we went through was profoundly different, created by its own unique situations. I look at it more as a macro cycle. I mean, from my perspective, data's always growing underneath everything. Our industry went through a enormous build-out period through the client server days, up until peaking about 2012. For reference, we shipped 66 million drives in one quarter, they were all low capacity going into notebooks and desktops. Thanks, Samik. thanks samik A couple things. a couple things Forward-looking statements, risk factors on our website. forward-looking statements risk factors on our website Get that out of the way. get that out of the way Yeah, it's been a long road for me and for our teams as well. yeah it's been a long road for me and for our teams as well I don't look at it as small cycles, 'cause I think every one is different. i don't look at it as small cycles 'cause i think every one is different The last downside we went through was profoundly different, created by its own unique situations. the last downside we went through was profoundly different created by its own unique situations I look at it more as a macro cycle. i look at it more as a macro cycle I mean, from my perspective, data's always growing underneath everything. i mean from my perspective data's always growing underneath everything Our industry went through a enormous build-out period through the client server days, up until peaking about 2012. our industry went through a enormous build-out period through the client server days up until peaking about 2012 For reference, we shipped 66 million drives in one quarter, they were all low capacity going into notebooks and desktops. for reference we shipped 66 million drives in one quarter they were all low capacity going into notebooks and desktops If you think about those times back then, the drives were not full. They were not being utilized very often, you know, just not turned on very much. What's different now is the drives are chock-full of those heads and media critical components that we'd built out the factories for back in those days. A lot fewer drives, but they're big beasts now. If you go into the data centers, they're working very hard, you know, 100% utilization and full. Very different profile for the industry as we've pivoted the supply chain for the last decade. If you think about those times back then, the drives were not full. if you think about those times back then the drives were not full They were not being utilized very often, you know, just not turned on very much. they were not being utilized very often you know just not turned on very much What's different now is the drives are chock-full of those heads and media critical components that we'd built out the factories for back in those days. what's different now is the drives are chock-full of those heads and media critical components that we'd built out the factories for back in those days A lot fewer drives, but they're big beasts now. a lot fewer drives but they're big beasts now If you go into the data centers, they're working very hard, you know, 100% utilization and full. if you go into the data centers they're working very hard you know 100% utilization and full Very different profile for the industry as we've pivoted the supply chain for the last decade. very different profile for the industry as we've pivoted the supply chain for the last decade

Speaker 2: Okay. Okay. Maybe to get into that a bit further, you've talked about agentic AI generating much larger data sets than periodic queries, for example. Can you just go and sort of one level deeper into that, decompose what you're seeing in exabyte growth in calendar 2026, 2027, and how much is the broadening out of the use cases when it comes to training, inferencing? How much of that is becoming a driver of exabyte growth going forward? Okay. okay Okay. okay Maybe to get into that a bit further, you've talked about agentic AI generating much larger data sets than periodic queries, for example. maybe to get into that a bit further you've talked about agentic ai generating much larger data sets than periodic queries for example Can you just go and sort of one level deeper into that, decompose what you're seeing in exabyte growth in calendar 2026, 2027, and how much is the broadening out of the use cases when it comes to training, inferencing? can you just go and sort of one level deeper into that decompose what you're seeing in exabyte growth in calendar 2026 2027 and how much is the broadening out of the use cases when it comes to training inferencing How much of that is becoming a driver of exabyte growth going forward? how much of that is becoming a driver of exabyte growth going forward

Speaker 1: Yeah, it's really hard to break out because the application space is growing so quickly. What some things are called, you know, inference one day, you know, may be actually developing into something that's actually learning more the next. I think we try to think about the First of all, the recovery that happened in the last three or four years was really driven by video properties first. Yeah, it's really hard to break out because the application space is growing so quickly. yeah it's really hard to break out because the application space is growing so quickly What some things are called, you know, inference one day, you know, may be actually developing into something that's actually learning more the next. what some things are called you know inference one day you know may be actually developing into something that's actually learning more the next I think we try to think about the First of all, the recovery that happened in the last three or four years was really driven by video properties first. i think we try to think about the first of all the recovery that happened in the last three or four years was really driven by video properties first

Speaker 2: Yep. Yep. yep

Speaker 1: It's not small text data sets. It's large unstructured data sets, which are usually video data sets. If you think about the training that happened early days, it was a lot of text for training large language models and being able to get utility out of them, and they are very useful, don't get me wrong. Now it's not about training on, you know, ages and ages worth of text that was stored somewhere. It's a lot more about understanding what's going on in the real world, and being up to the minute in your cycle and ingesting a lot of the large data sets and then being able to figure out how that is changing so that you can give the proper inference, and we're seeing this all the time. It's not small text data sets. it's not small text data sets It's large unstructured data sets, which are usually video data sets. it's large unstructured data sets which are usually video data sets If you think about the training that happened early days, it was a lot of text for training large language models and being able to get utility out of them, and they are very useful, don't get me wrong. if you think about the training that happened early days it was a lot of text for training large language models and being able to get utility out of them and they are very useful don't get me wrong Now it's not about training on, you know, ages and ages worth of text that was stored somewhere. now it's not about training on you know ages and ages worth of text that was stored somewhere It's a lot more about understanding what's going on in the real world, and being up to the minute in your cycle and ingesting a lot of the large data sets and then being able to figure out how that is changing so that you can give the proper inference, and we're seeing this all the time. it's a lot more about understanding what's going on in the real world and being up to the minute in your cycle and ingesting a lot of the large data sets and then being able to figure out how that is changing so that you can give the proper inference and we're seeing this all the time If I look at the workloads that are across the drives in some of those applications, they're very diverse. There's not a predictable way of using them, and depending on the day or the user or whatever, it can actually change quite frequently, and that's what I would say characterizes the AI workloads more than anything. If I look at the workloads that are across the drives in some of those applications, they're very diverse. if i look at the workloads that are across the drives in some of those applications they're very diverse There's not a predictable way of using them, and depending on the day or the user or whatever, it can actually change quite frequently, and that's what I would say characterizes the AI workloads more than anything. there's not a predictable way of using them and depending on the day or the user or whatever it can actually change quite frequently and that's what i would say characterizes the ai workloads more than anything

Speaker 2: Okay. Okay. You've mentioned moving to a build-to-order approach with your customers. How has that impacted visibility for the industry for yourself, and is that something that you're seeing across the industry being adopted as well? Okay. okay Okay. okay You've mentioned moving to a build-to-order approach with your customers. you've mentioned moving to a build-to-order approach with your customers How has that impacted visibility for the industry for yourself, and is that something that you're seeing across the industry being adopted as well? how has that impacted visibility for the industry for yourself and is that something that you're seeing across the industry being adopted as well

Speaker 1: It is. I mean, we're driven by very long lead times in our wafer operations, so we have recording head wafers that take a long time to build, you know, could be more than nine months. The drives themselves take another, you know, quarter or something like that. Inside of that, we know what's coming out a year from now, and we've basically gone to the customers and said, "Look, if you wanna plan this really well, which you should be for your data centers, we know what's coming out. You can buy this stuff up to a certain period." We wanna keep that four or five quarters of visibility very, very solid for what's being built. It is. it is I mean, we're driven by very long lead times in our wafer operations, so we have recording head wafers that take a long time to build, you know, could be more than nine months. i mean we're driven by very long lead times in our wafer operations so we have recording head wafers that take a long time to build you know could be more than nine months The drives themselves take another, you know, quarter or something like that. the drives themselves take another you know quarter or something like that Inside of that, we know what's coming out a year from now, and we've basically gone to the customers and said, "Look, if you wanna plan this really well, which you should be for your data centers, we know what's coming out. inside of that we know what's coming out a year from now and we've basically gone to the customers and said "look if you wanna plan this really well which you should be for your data centers we know what's coming out You can buy this stuff up to a certain period." We wanna keep that four or five quarters of visibility very, very solid for what's being built. you can buy this stuff up to a certain period." we wanna keep that four or five quarters of visibility very very solid for what's being built The demand is significantly higher than that. We know that if we can get a little bit more out of the factories, we're sensing the market. The market really wants the exabytes even more. We're now giving predictability into what we're going to be building in the next year or two years, three years based on technology transitions. The customer demand for that is still very strong. It's not really locked in. The build-to-orders are really only locked in for four or five quarters. Beyond there we have great visibility. The demand is significantly higher than that. the demand is significantly higher than that We know that if we can get a little bit more out of the factories, we're sensing the market. we know that if we can get a little bit more out of the factories we're sensing the market The market really wants the exabytes even more. the market really wants the exabytes even more We're now giving predictability into what we're going to be building in the next year or two years, three years based on technology transitions. we're now giving predictability into what we're going to be building in the next year or two years three years based on technology transitions The customer demand for that is still very strong. the customer demand for that is still very strong It's not really locked in. it's not really locked in The build-to-orders are really only locked in for four or five quarters. the build-to-orders are really only locked in for four or five quarters Beyond there we have great visibility. beyond there we have great visibility

Speaker 2: What's the financial implication of moving to this model? Like, for investors that have looked at Seagate over the cycles, how do you think about what changes on the financial side? What's the financial implication of moving to this model? what's the financial implication of moving to this model Like, for investors that have looked at Seagate over the cycles, how do you think about what changes on the financial side? like for investors that have looked at seagate over the cycles how do you think about what changes on the financial side

Speaker 1: Well, what I really wanted out of it when we started was revenue predictability. Just, you know, we wanna make sure we're not building into a forecast that's not real. Now it appears that not only are the forecasts real, but the demand's significantly higher. You know, fundamentally, the financials will be driven by the demand. We're trying to answer that demand as aggressively as we can with our technology. You know, I think that's why the financials keep getting better. If we have predictability for four quarters, but then we start to roll through that period, and we go to re-up the next one, then we're seeing that the demand's even stronger, and so therefore the economics get better. Well, what I really wanted out of it when we started was revenue predictability. well what i really wanted out of it when we started was revenue predictability Just, you know, we wanna make sure we're not building into a forecast that's not real. just you know we wanna make sure we're not building into a forecast that's not real Now it appears that not only are the forecasts real, but the demand's significantly higher. You know, fundamentally, the financials will be driven by the demand. now it appears that not only are the forecasts real but the demand's significantly higher. you know fundamentally the financials will be driven by the demand We're trying to answer that demand as aggressively as we can with our technology. we're trying to answer that demand as aggressively as we can with our technology You know, I think that's why the financials keep getting better. you know i think that's why the financials keep getting better If we have predictability for four quarters, but then we start to roll through that period, and we go to re-up the next one, then we're seeing that the demand's even stronger, and so therefore the economics get better. if we have predictability for four quarters but then we start to roll through that period and we go to re-up the next one then we're seeing that the demand's even stronger and so therefore the economics get better

Speaker 2: Okay. Okay. You mentioned this, lead times are now quite long. We've seen some of the press reports as well mentioning lead times are over one year in some cases for HDDs. However, when you take a step back, I think investors have always been concerned about the industry adding capacity right at the peak of demand, and by that time the capacity comes online, you're going through a moderation in the demand cycle. What's giving you the comfort now in terms of your capacity planning, and how are you thinking about your capacity roadmap? Okay. okay Okay. okay You mentioned this, lead times are now quite long. you mentioned this lead times are now quite long We've seen some of the press reports as well mentioning lead times are over one year in some cases for HDDs. we've seen some of the press reports as well mentioning lead times are over one year in some cases for hdds However, when you take a step back, I think investors have always been concerned about the industry adding capacity right at the peak of demand, and by that time the capacity comes online, you're going through a moderation in the demand cycle. however when you take a step back i think investors have always been concerned about the industry adding capacity right at the peak of demand and by that time the capacity comes online you're going through a moderation in the demand cycle What's giving you the comfort now in terms of your capacity planning, and how are you thinking about your capacity roadmap? what's giving you the comfort now in terms of your capacity planning and how are you thinking about your capacity roadmap

Speaker 1: There's a couple different kinds of capacity. If I go back to the industry 15, 20 years ago, the headway for the fabs, the lead time was only a few months. Very, very fast to turn. Now it's significantly longer with the technology being as complex it is as it is now. You know, that's really what we're gated by is those critical components that are long lead time. As far as the number of drives at the back end, we could be still fairly flexible on that. Because we're able to sell the capacity that's already coming out, we don't necessarily need to. How do I think about adding capacity now? There's a couple different kinds of capacity. there's a couple different kinds of capacity If I go back to the industry 15, 20 years ago, the headway for the fabs, the lead time was only a few months. if i go back to the industry 15 20 years ago the headway for the fabs the lead time was only a few months Very, very fast to turn. very very fast to turn Now it's significantly longer with the technology being as complex it is as it is now. now it's significantly longer with the technology being as complex it is as it is now You know, that's really what we're gated by is those critical components that are long lead time. you know that's really what we're gated by is those critical components that are long lead time As far as the number of drives at the back end, we could be still fairly flexible on that. as far as the number of drives at the back end we could be still fairly flexible on that Because we're able to sell the capacity that's already coming out, we don't necessarily need to. because we're able to sell the capacity that's already coming out we don't necessarily need to How do I think about adding capacity now? how do i think about adding capacity now It's not just one machine you plug in, it has to be synchronized all the way across not only our production, but also the supply chain. It's really long lead time now and we're adding tools to make our capacity a little bit stronger inside of the manufacturing facilities that have those long lead times, but they tend to be the types of tools that will go through technology transitions rather than just pure capacity adds. It's not just one machine you plug in, it has to be synchronized all the way across not only our production, but also the supply chain. it's not just one machine you plug in it has to be synchronized all the way across not only our production but also the supply chain It's really long lead time now and we're adding tools to make our capacity a little bit stronger inside of the manufacturing facilities that have those long lead times, but they tend to be the types of tools that will go through technology transitions rather than just pure capacity adds. it's really long lead time now and we're adding tools to make our capacity a little bit stronger inside of the manufacturing facilities that have those long lead times but they tend to be the types of tools that will go through technology transitions rather than just pure capacity adds

Speaker 2: Maybe just to follow up on that, and this question comes up pretty often, so I'm sure you've taken this question before, is what fundamentally needs to happen for you to add unit capacity or floor space capacity rather than just depending on higher capacity drives to add exabytes? Maybe just to follow up on that, and this question comes up pretty often, so I'm sure you've taken this question before, is what fundamentally needs to happen for you to add unit capacity or floor space capacity rather than just depending on higher capacity drives to add exabytes? maybe just to follow up on that and this question comes up pretty often so i'm sure you've taken this question before is what fundamentally needs to happen for you to add unit capacity or floor space capacity rather than just depending on higher capacity drives to add exabytes

Speaker 1: Right. There is an answer to the question. I'll get to that in a second. What our customers are driving us for right now is more exabytes. We believe that the way to get the most exabytes is to take our talented teams and really go through these technology transitions. You know, we're targeting mid-20s% growth, which is enormous CAGR, the only way we're gonna get there is to be able to go through those technology transitions. If you will, to take a 3 TB per platter product to a 4 TB per platter to a 5 TB per platter year over year over year. That's really the way we're driving it. If we took the teams off and started building new factories or bringing up new machines, it would just take too long. Right. right There is an answer to the question. there is an answer to the question I'll get to that in a second. i'll get to that in a second What our customers are driving us for right now is more exabytes. what our customers are driving us for right now is more exabytes We believe that the way to get the most exabytes is to take our talented teams and really go through these technology transitions. we believe that the way to get the most exabytes is to take our talented teams and really go through these technology transitions You know, we're targeting mid-20s% growth, which is enormous CAGR, the only way we're gonna get there is to be able to go through those technology transitions. you know we're targeting mid-20s% growth which is enormous cagr the only way we're gonna get there is to be able to go through those technology transitions If you will, to take a 3 TB per platter product to a 4 TB per platter to a 5 TB per platter year over year over year. if you will to take a 3 tb per platter product to a 4 tb per platter to a 5 tb per platter year over year over year That's really the way we're driving it. that's really the way we're driving it If we took the teams off and started building new factories or bringing up new machines, it would just take too long. if we took the teams off and started building new factories or bringing up new machines it would just take too long You'd end up more capacity, if you will, you'd slow the rate of growth on that technology. Back to your question directly, the wild card really is in unit capacity for disk drives, which we, again, could be fairly flexible with once we package those heads and media. That gets down to more customer diversification and edge AI and, you know, all those use cases, which I think could come someday. We would take the heads and media that we have planned and divert them somewhere else should those applications take hold. You'd end up more capacity, if you will, you'd slow the rate of growth on that technology. you'd end up more capacity if you will you'd slow the rate of growth on that technology Back to your question directly, the wild card really is in unit capacity for disk drives, which we, again, could be fairly flexible with once we package those heads and media. back to your question directly the wild card really is in unit capacity for disk drives which we again could be fairly flexible with once we package those heads and media That gets down to more customer diversification and edge AI and, you know, all those use cases, which I think could come someday. that gets down to more customer diversification and edge ai and you know all those use cases which i think could come someday We would take the heads and media that we have planned and divert them somewhere else should those applications take hold. we would take the heads and media that we have planned and divert them somewhere else should those applications take hold

Speaker 2: Okay. Interesting. sovereign AI, neoclouds, the sort of next tier of cloud companies below the hyperscalers, what does that opportunity look like for Seagate? Okay. okay Interesting. sovereign AI, neoclouds, the sort of next tier of cloud companies below the hyperscalers, what does that opportunity look like for Seagate? interesting sovereign ai neoclouds the sort of next tier of cloud companies below the hyperscalers what does that opportunity look like for seagate

Speaker 1: Yeah. It's complex space. There's a lot of different terms being thrown around. The way I think about it is neoclouds generally tend to be compute, data centers, if you will, that are failover or being used by the major CSPs. Not entirely, you know, can be. There's not a whole lot of hard drives in there. Where do they get their data when they need it? They get it from major CSPs or the big installs that already exist in the world. Sovereign's a little bit different, because Sovereign could be more what I would call traditional data centers, not just compute data centers. In a lot of cases, people are saying, "I want my data right here next to me." That's the term Sovereign. Yeah. yeah It's complex space. it's complex space There's a lot of different terms being thrown around. there's a lot of different terms being thrown around The way I think about it is neoclouds generally tend to be compute, data centers, if you will, that are failover or being used by the major CSPs. the way i think about it is neoclouds generally tend to be compute data centers if you will that are failover or being used by the major csps Not entirely, you know, can be. not entirely you know can be There's not a whole lot of hard drives in there. there's not a whole lot of hard drives in there Where do they get their data when they need it? where do they get their data when they need it They get it from major CSPs or the big installs that already exist in the world. they get it from major csps or the big installs that already exist in the world Sovereign's a little bit different, because Sovereign could be more what I would call traditional data centers, not just compute data centers. sovereign's a little bit different because sovereign could be more what i would call traditional data centers not just compute data centers In a lot of cases, people are saying, "I want my data right here next to me." That's the term Sovereign. in a lot of cases people are saying "i want my data right here next to me." that's the term sovereign We are seeing some of those people build out, wanna have aspirations themselves. Some of them are still very beholden to the architectures of the CSPs, so they're asking the CSPs what to build, and they're just plugging that in. Some of them have their own architectures as well. We are seeing some of those people build out, wanna have aspirations themselves. we are seeing some of those people build out wanna have aspirations themselves Some of them are still very beholden to the architectures of the CSPs, so they're asking the CSPs what to build, and they're just plugging that in. some of them are still very beholden to the architectures of the csps so they're asking the csps what to build and they're just plugging that in Some of them have their own architectures as well. some of them have their own architectures as well

Speaker 2: Is that the way I should interpret that, is you're not seeing them as direct customers, but more in terms of demand coming through your hyperscalers directly? Is that the way I should interpret that, is you're not seeing them as direct customers, but more in terms of demand coming through your hyperscalers directly? is that the way i should interpret that is you're not seeing them as direct customers but more in terms of demand coming through your hyperscalers directly

Speaker 1: A few direct customers, but it's still very small. Yeah. A few direct customers, but it's still very small. a few direct customers but it's still very small Yeah. yeah

Speaker 2: Okay. Okay. okay

Speaker 1: I would say more of the sovereign behavior has been, "Hey, I know somebody's gonna need this data center equipment. I'll build the shell, or I'll start plugging gear into the shell that I already have, and then, you know, I'll go find people that can use it at scale. I would say more of the sovereign behavior has been, "Hey, I know somebody's gonna need this data center equipment. i would say more of the sovereign behavior has been "hey i know somebody's gonna need this data center equipment I'll build the shell, or I'll start plugging gear into the shell that I already have, and then, you know, I'll go find people that can use it at scale. i'll build the shell or i'll start plugging gear into the shell that i already have and then you know i'll go find people that can use it at scale

Speaker 2: Got it. Okay. All investors today associate the Seagate investment bull case with HAMR. Maybe talk about HAMR, why that's a strong differentiation for Seagate, and do you think that differentiation is defensible against competitors? Got it. got it Okay. okay All investors today associate the Seagate investment bull case with HAMR. all investors today associate the seagate investment bull case with hamr Maybe talk about HAMR, why that's a strong differentiation for Seagate, and do you think that differentiation is defensible against competitors? maybe talk about hamr why that's a strong differentiation for seagate and do you think that differentiation is defensible against competitors

Speaker 1: HAMR is heat-assisted magnetic recording, in case you're not familiar with it. It's really our ability to use a different material set on our disk, iron platinum alloys. What I would say is that the problem with making the disks out of iron platinum is not just making them, but it's also being able to write them. We needed a large amount of photonics, integrated circuits, PICs, and lasers to be able to write spot sizes that are 20 nm or 30 nm in diameter. It's been a miraculous journey, really, frankly. We're now at the point where we've shipped millions of HAMR drives, not 1 million or 2 million, many more than that too. HAMR is heat-assisted magnetic recording, in case you're not familiar with it. hamr is heat-assisted magnetic recording in case you're not familiar with it It's really our ability to use a different material set on our disk, iron platinum alloys. it's really our ability to use a different material set on our disk iron platinum alloys What I would say is that the problem with making the disks out of iron platinum is not just making them, but it's also being able to write them. what i would say is that the problem with making the disks out of iron platinum is not just making them but it's also being able to write them We needed a large amount of photonics, integrated circuits, PICs, and lasers to be able to write spot sizes that are 20 nm or 30 nm in diameter. we needed a large amount of photonics integrated circuits pics and lasers to be able to write spot sizes that are 20 nm or 30 nm in diameter It's been a miraculous journey, really, frankly. it's been a miraculous journey really frankly We're now at the point where we've shipped millions of HAMR drives, not 1 million or 2 million, many more than that too. we're now at the point where we've shipped millions of hamr drives not 1 million or 2 million many more than that too We've got qualifications, a little bit of new news here, is we've got qualifications against all planned CSPs now on Mozaic 3+. We've even got the 4 TB qualified at two places, which we've already announced. We've got qualifications, a little bit of new news here, is we've got qualifications against all planned CSPs now on Mozaic 3+. we've got qualifications a little bit of new news here is we've got qualifications against all planned csps now on mozaic 3+ We've even got the 4 TB qualified at two places, which we've already announced. we've even got the 4 tb qualified at two places which we've already announced

Speaker 2: Yeah. Yeah. yeah

Speaker 1: The qualifications are going very well. We're very confident in the technology, and we can get it to five as well. This is our desire to bring more exabytes into the world. I can't really speak about competition right now because, you know, they'll probably figure out their own plans. I would say that, you know, as we keep working really hard to keep marching up the technology curve, I think this is the best way to answer what the world ultimately needs, which is more exabytes fast. The qualifications are going very well. the qualifications are going very well We're very confident in the technology, and we can get it to five as well. we're very confident in the technology and we can get it to five as well This is our desire to bring more exabytes into the world. this is our desire to bring more exabytes into the world I can't really speak about competition right now because, you know, they'll probably figure out their own plans. i can't really speak about competition right now because you know they'll probably figure out their own plans I would say that, you know, as we keep working really hard to keep marching up the technology curve, I think this is the best way to answer what the world ultimately needs, which is more exabytes fast. i would say that you know as we keep working really hard to keep marching up the technology curve i think this is the best way to answer what the world ultimately needs which is more exabytes fast

Speaker 2: Okay. Great. Congratulations on the additional qualifications there. Maybe now thinking about the implications of HAMR from a financial perspective, how do you think about it leading to market share increases versus lower cost and driving more of the financial returns from a lower cost equation? Okay. okay Great. great Congratulations on the additional qualifications there. congratulations on the additional qualifications there Maybe now thinking about the implications of HAMR from a financial perspective, how do you think about it leading to market share increases versus lower cost and driving more of the financial returns from a lower cost equation? maybe now thinking about the implications of hamr from a financial perspective how do you think about it leading to market share increases versus lower cost and driving more of the financial returns from a lower cost equation

Speaker 1: Yeah. I've said this many times. We don't really think about market share. I think about how many wafers I'm gonna start and whether I've sold them or not, and what the economics of that is. We're trying to get predictability not only for ourselves, but for, also for our customers, you know, for the next, say, four quarters or five quarters. To the extent that we go from three to four to five, we're doing that without adding significant componentry. The cost leverage we get is really good, actually, and we get a lot more terabytes, exabytes out of that. So that's the way I think about the advantage to the extent that you're making a 40 TB or then a 50 TB, which we talked about in our earnings call we'd be doing by the end of next calendar year. Yeah. yeah I've said this many times. i've said this many times We don't really think about market share. we don't really think about market share I think about how many wafers I'm gonna start and whether I've sold them or not, and what the economics of that is. i think about how many wafers i'm gonna start and whether i've sold them or not and what the economics of that is We're trying to get predictability not only for ourselves, but for, also for our customers, you know, for the next, say, four quarters or five quarters. we're trying to get predictability not only for ourselves but for also for our customers you know for the next say four quarters or five quarters To the extent that we go from three to four to five, we're doing that without adding significant componentry. to the extent that we go from three to four to five we're doing that without adding significant componentry The cost leverage we get is really good, actually, and we get a lot more terabytes, exabytes out of that. the cost leverage we get is really good actually and we get a lot more terabytes exabytes out of that So that's the way I think about the advantage to the extent that you're making a 40 TB or then a 50 TB, which we talked about in our earnings call we'd be doing by the end of next calendar year. so that's the way i think about the advantage to the extent that you're making a 40 tb or then a 50 tb which we talked about in our earnings call we'd be doing by the end of next calendar year That's a huge value proposition for power, space into a data center if you're gonna be running that data center for 5-10 years. Like, that's the way our customers think about it. I think, you know, those products are gonna get very good looks from the customers, and we're gonna be able to book them predictably. There is another wild card in this, in that there's still a lot of capacity that's actually at 20 TB. If you think about how you're making a 20 TB drive today, how many critical heads and media it takes versus at 4 TB per platter, 20 TB necessarily in 5 disk. 5 TB a platter, it's 4 disk, so you're able to address those price bands with significantly better cost perspective. That's a huge value proposition for power, space into a data center if you're gonna be running that data center for 5 -1 0 years. that's a huge value proposition for power space into a data center if you're gonna be running that data center for 5 -1 0 years Like, that's the way our customers think about it. like that's the way our customers think about it I think, you know, those products are gonna get very good looks from the customers, and we're gonna be able to book them predictably. i think you know those products are gonna get very good looks from the customers and we're gonna be able to book them predictably There is another wild card in this, in that there's still a lot of capacity that's actually at 20 TB. there is another wild card in this in that there's still a lot of capacity that's actually at 20 tb If you think about how you're making a 20 TB drive today, how many critical heads and media it takes versus at 4 TB per platter, 20 TB necessarily in 5 disk. 5 TB a platter, it's 4 disk, so you're able to address those price bands with significantly better cost perspective. if you think about how you're making a 20 tb drive today how many critical heads and media it takes versus at 4 tb per platter 20 tb necessarily in 5 disk 5 tb a platter it's 4 disk so you're able to address those price bands with significantly better cost perspective That's the way we think about it, one of the reasons we're driving areal density so hard. That's the way we think about it, one of the reasons we're driving areal density so hard. that's the way we think about it one of the reasons we're driving areal density so hard

Speaker 2: Got it. I have a follow-up on that, but I'll come back after this question because this will be related. Mozaic 3+ took years to qualify at the first hyperscaler. Mozaic 4+, you qualified it in much shorter duration, like PMR equivalent times at two of your largest CSPs. What specifically changed on the customer side? Are customers much more familiar with the platform? What's changing the timelines around the qualification? Got it. got it I have a follow-up on that, but I'll come back after this question because this will be related. i have a follow-up on that but i'll come back after this question because this will be related Mozaic 3+ took years to qualify at the first hyperscaler. mozaic 3+ took years to qualify at the first hyperscaler Mozaic 4+, you qualified it in much shorter duration, like PMR equivalent times at two of your largest CSPs. mozaic 4+ you qualified it in much shorter duration like pmr equivalent times at two of your largest csps What specifically changed on the customer side? what specifically changed on the customer side Are customers much more familiar with the platform? are customers much more familiar with the platform What's changing the timelines around the qualification? what's changing the timelines around the qualification

Speaker 1: Yeah. I think two things. The first is that customers, it's a new technology, so customers were maybe a little bit reluctant at the start. You know, anytime you're making big areal density jumps, people will look at it and say, "I have to make sure I check it out." They did. We had some early issues as well. We've got through a huge learning curve as we went up the volume ramp. I think the second thing is that there was a lot of noise about HAMR being different. The reality is, once I deliver the drive to you as a customer, it's not different. It's, you know. To the extent that you're not ready for a 30 TB drive in your, you know, architecture, the way your software runs. Yeah. yeah I think two things. i think two things The first is that customers, it's a new technology, so customers were maybe a little bit reluctant at the start. the first is that customers it's a new technology so customers were maybe a little bit reluctant at the start You know, anytime you're making big areal density jumps, people will look at it and say, "I have to make sure I check it out." They did. you know anytime you're making big areal density jumps people will look at it and say "i have to make sure i check it out." they did We had some early issues as well. we had some early issues as well We've got through a huge learning curve as we went up the volume ramp. we've got through a huge learning curve as we went up the volume ramp I think the second thing is that there was a lot of noise about HAMR being different. i think the second thing is that there was a lot of noise about hamr being different The reality is, once I deliver the drive to you as a customer, it's not different. the reality is once i deliver the drive to you as a customer it's not different It's, you know. it's you know To the extent that you're not ready for a 30 TB drive in your, you know, architecture, the way your software runs. to the extent that you're not ready for a 30 tb drive in your you know architecture the way your software runs Now I think people are. They're ready for 30, they're ready for 40, they're ready for 50. I think the adoption will be much quicker and we're trying to do this all very predictably. We'll start those head wafers when we know we have demand, and we know we can get through the qualifications quickly, and so on and so forth. That's what we're in the middle of right now. Now I think people are. now i think people are They're ready for 30, they're ready for 40, they're ready for 50. they're ready for 30 they're ready for 40 they're ready for 50 I think the adoption will be much quicker and we're trying to do this all very predictably. i think the adoption will be much quicker and we're trying to do this all very predictably We'll start those head wafers when we know we have demand, and we know we can get through the qualifications quickly, and so on and so forth. we'll start those head wafers when we know we have demand and we know we can get through the qualifications quickly and so on and so forth That's what we're in the middle of right now. that's what we're in the middle of right now

Speaker 2: Yeah. The expectation should be, which I had for you as a follow-up, is Mozaic 5 and Mozaic 6 should be qualified in much quicker time with the same group of customers? Yeah. yeah The expectation should be, which I had for you as a follow-up, is Mozaic 5 and Mozaic 6 should be qualified in much quicker time with the same group of customers? the expectation should be which i had for you as a follow-up is mozaic 5 and mozaic 6 should be qualified in much quicker time with the same group of customers

Speaker 1: I think so, back to the traditional qualification cycle. I think so, back to the traditional qualification cycle. i think so back to the traditional qualification cycle

Speaker 2: Okay. Going back to the last question when you said a lot of customers still are on 20 TB. Now, do you see them then taking the leap to 40 TB rise with Mozaic 4+, or still opting to go through that transition with Mozaic 3+, then to Mozaic 4+? Okay. okay Going back to the last question when you said a lot of customers still are on 20 TB. going back to the last question when you said a lot of customers still are on 20 tb Now, do you see them then taking the leap to 40 TB rise with Mozaic 4+, or still opting to go through that transition with Mozaic 3+, then to Mozaic 4+? now do you see them then taking the leap to 40 tb rise with mozaic 4+ or still opting to go through that transition with mozaic 3+ then to mozaic 4+

Speaker 1: I think there are a lot of different use cases in the world where people really don't need that much capacity, depending on what's going on, especially in small data centers. Could be on the enterprise edge, which, you know, I know needs a little bit better definition out in the world. You know, our traditional enterprise customers may be running small, medium businesses or even large businesses, they'll still be able to use low capacity drives. Not everything will move to the highest capacity. I think there are a lot of different use cases in the world where people really don't need that much capacity, depending on what's going on, especially in small data centers. i think there are a lot of different use cases in the world where people really don't need that much capacity depending on what's going on especially in small data centers Could be on the enterprise edge, which, you know, I know needs a little bit better definition out in the world. could be on the enterprise edge which you know i know needs a little bit better definition out in the world You know, our traditional enterprise customers may be running small, medium businesses or even large businesses, they'll still be able to use low capacity drives. you know our traditional enterprise customers may be running small medium businesses or even large businesses they'll still be able to use low capacity drives Not everything will move to the highest capacity. not everything will move to the highest capacity

Speaker 2: Okay. As you think about the improvements that you're delivering on cost per terabyte with the ramp on HAMR, you've talked about a 50% exabyte crossover to HAMR in the second half of calendar 2026. Once you get beyond that crossover point, what happens to the cost per terabyte curve? Like, what does it look like once you get over that 50% threshold? Okay. okay As you think about the improvements that you're delivering on cost per terabyte with the ramp on HAMR, you've talked about a 50% exabyte crossover to HAMR in the second half of calendar 2026. as you think about the improvements that you're delivering on cost per terabyte with the ramp on hamr you've talked about a 50% exabyte crossover to hamr in the second half of calendar 2026 Once you get beyond that crossover point, what happens to the cost per terabyte curve? once you get beyond that crossover point what happens to the cost per terabyte curve Like, what does it look like once you get over that 50% threshold? like what does it look like once you get over that 50% threshold

Speaker 1: Again, you know, the same number of components in the drive. You know, if we can keep pushing areal density, the cost stays relatively the same. The more terabytes we get out, the better. The demand for terabytes is so aggressive that I think some of our customers are willing to work with us on the, not only the new technology, but any new features that will get us there. With that fundamental, you know, cost floor, if you will, I think we're set up pretty well to continue margin expansion. That, you know, all comes down to exabyte demand though, right? Again, you know, the same number of components in the drive. again you know the same number of components in the drive You know, if we can keep pushing areal density, the cost stays relatively the same. you know if we can keep pushing areal density the cost stays relatively the same The more terabytes we get out, the better. the more terabytes we get out the better The demand for terabytes is so aggressive that I think some of our customers are willing to work with us on the, not only the new technology, but any new features that will get us there. the demand for terabytes is so aggressive that i think some of our customers are willing to work with us on the not only the new technology but any new features that will get us there With that fundamental, you know, cost floor, if you will, I think we're set up pretty well to continue margin expansion. with that fundamental you know cost floor if you will i think we're set up pretty well to continue margin expansion That, you know, all comes down to exabyte demand though, right? that you know all comes down to exabyte demand though right

Speaker 2: Got it. Maybe on the technology side, you're focused on HAMR, and that's one approach that we've seen. There are other approaches we've seen from some of your competitors in terms of looking at track layout being different. How do you think about what makes sense longer term? Do different technology approaches, including exploring alternative areas around track layouts, do those have a position in your roadmap as well long term? Got it. got it Maybe on the technology side, you're focused on HAMR, and that's one approach that we've seen. maybe on the technology side you're focused on hamr and that's one approach that we've seen There are other approaches we've seen from some of your competitors in terms of looking at track layout being different. there are other approaches we've seen from some of your competitors in terms of looking at track layout being different How do you think about what makes sense longer term? how do you think about what makes sense longer term Do different technology approaches, including exploring alternative areas around track layouts, do those have a position in your roadmap as well long term? do different technology approaches including exploring alternative areas around track layouts do those have a position in your roadmap as well long term

Speaker 1: Yeah, I mean, things like SMR get discussed a lot. We started shipping SMR, I think, 2013 when we went from 5 TB to 6 TBs. And we've shipped literally hundreds of millions of SMR drives into desktop markets and things like that. There are other track layout tricks that, you know, may be useful over time, and we're already doing that for major CSPs as well, I think, just to be clear. It's HAMR Plus, if you will. One of the things that I'm most interested about the industry right now is that, yeah, you get through the transition of being able to use this new media type and getting the photonic circuits right. Yeah, I mean, things like SMR get discussed a lot. yeah i mean things like smr get discussed a lot We started shipping SMR, I think, 2013 when we went from 5 TB to 6 TBs. we started shipping smr i think 2013 when we went from 5 tb to 6 tbs And we've shipped literally hundreds of millions of SMR drives into desktop markets and things like that. and we've shipped literally hundreds of millions of smr drives into desktop markets and things like that There are other track layout tricks that, you know, may be useful over time, and we're already doing that for major CSPs as well, I think, just to be clear. there are other track layout tricks that you know may be useful over time and we're already doing that for major csps as well i think just to be clear It's HAMR Plus, if you will. it's hamr plus if you will One of the things that I'm most interested about the industry right now is that, yeah, you get through the transition of being able to use this new media type and getting the photonic circuits right. one of the things that i'm most interested about the industry right now is that yeah you get through the transition of being able to use this new media type and getting the photonic circuits right There are fantastic new roadmaps now on PICs, on photonic circuits, and on lasers, and being able to use some of the other technologies that exist in the world and take pieces of that and apply them to areal density. There's a lot of ideas on the table now, and I don't think our areal density roadmap is gonna stall at all. I think it's gonna increase. There are fantastic new roadmaps now on PICs, on photonic circuits, and on lasers, and being able to use some of the other technologies that exist in the world and take pieces of that and apply them to areal density. there are fantastic new roadmaps now on pics on photonic circuits and on lasers and being able to use some of the other technologies that exist in the world and take pieces of that and apply them to areal density There's a lot of ideas on the table now, and I don't think our areal density roadmap is gonna stall at all. there's a lot of ideas on the table now and i don't think our areal density roadmap is gonna stall at all I think it's gonna increase. i think it's gonna increase

Speaker 2: It will be largely building on top of the HAMR platform, but with additional innovation on top. It will be largely building on top of the HAMR platform, but with additional innovation on top. it will be largely building on top of the hamr platform but with additional innovation on top

Speaker 1: I think we'll be using iron-platinum for quite some time. It gives a much stronger signal to be read back at small bit sizes. The bits are about roughly 30 nm wide by 7 nm down track, so they're already pretty small. You have to make them even smaller, you know, the HAMR media gives you a great signal out of something that's that size. We have room to run. I think we'll be using iron-platinum for quite some time. i think we'll be using iron-platinum for quite some time It gives a much stronger signal to be read back at small bit sizes. it gives a much stronger signal to be read back at small bit sizes The bits are about roughly 30 nm wide by 7 nm down track, so they're already pretty small. the bits are about roughly 30 nm wide by 7 nm down track so they're already pretty small You have to make them even smaller, you know, the HAMR media gives you a great signal out of something that's that size. you have to make them even smaller you know the hamr media gives you a great signal out of something that's that size We have room to run. we have room to run

Speaker 2: Got it. Maybe just flesh out how you're thinking about density of the drive itself. Like, when you think about nearline being the clear driver of growth here, you've done a quite robust roadmap in terms of technology innovation. When you look past the roadmap beyond, like, Mozaic 6, for example, what are the big two or three technology bets you will have to take today to enable that? Got it. got it Maybe just flesh out how you're thinking about density of the drive itself. maybe just flesh out how you're thinking about density of the drive itself Like, when you think about nearline being the clear driver of growth here, you've done a quite robust roadmap in terms of technology innovation. like when you think about nearline being the clear driver of growth here you've done a quite robust roadmap in terms of technology innovation When you look past the roadmap beyond, like, Mozaic 6, for example, what are the big two or three technology bets you will have to take today to enable that? when you look past the roadmap beyond like mozaic 6 for example what are the big two or three technology bets you will have to take today to enable that

Speaker 1: Again, back to photonics, I think we're going to be pouring technology into making the world's smallest edge-emitting lasers and making them behave the way we want and as low cost as we can get them. Then there's a lot of technology to be brought to bear at the integrating the photonic circuits level. I think recording channels still wide open. A lot of progress being made in silicon. There's a lot of progress being made on things like GPUs and TPUs and learning so that we can actually apply that learning back to what's going on on each individual drive. That's one of the reasons I'm very excited about we have research efforts into all these. Again, back to photonics, I think we're going to be pouring technology into making the world's smallest edge-emitting lasers and making them behave the way we want and as low cost as we can get them. again back to photonics i think we're going to be pouring technology into making the world's smallest edge-emitting lasers and making them behave the way we want and as low cost as we can get them Then there's a lot of technology to be brought to bear at the integrating the photonic circuits level. then there's a lot of technology to be brought to bear at the integrating the photonic circuits level I think recording channels still wide open. i think recording channels still wide open A lot of progress being made in silicon. a lot of progress being made in silicon There's a lot of progress being made on things like GPUs and TPUs and learning so that we can actually apply that learning back to what's going on on each individual drive. there's a lot of progress being made on things like gpus and tpus and learning so that we can actually apply that learning back to what's going on on each individual drive That's one of the reasons I'm very excited about we have research efforts into all these. that's one of the reasons i'm very excited about we have research efforts into all these

Speaker 2: Got it. When you say you will make those investments or efforts, is it all organic, or do you see that there's a need to do acquisitions to fill the portfolio on that front? Got it. got it When you say you will make those investments or efforts, is it all organic, or do you see that there's a need to do acquisitions to fill the portfolio on that front? when you say you will make those investments or efforts is it all organic or do you see that there's a need to do acquisitions to fill the portfolio on that front

Speaker 1: We're not afraid of doing acquisitions if we saw the right technology. We, you know, some of our technology has always been so bespoke to our application that we'll be doing it. It'll be organically led for sure. We're not afraid of doing acquisitions if we saw the right technology. we're not afraid of doing acquisitions if we saw the right technology We, you know, some of our technology has always been so bespoke to our application that we'll be doing it. we you know some of our technology has always been so bespoke to our application that we'll be doing it It'll be organically led for sure. it'll be organically led for sure

Speaker 2: Before prices of NAND went up where they are today, the popular bear thesis on hard disk drives was that you're ceding share to SSDs incrementally. How do you think about that sort of long-term roadmap, now, and is there overlap with SSDs when it comes to the warm tier of storage? Are you seeing that more and more becoming more prevalent? Or with the price increase in NAND, is that actually reducing in terms of how much you overlap with SSDs? Before prices of NAND went up where they are today, the popular bear thesis on hard disk drives was that you're ceding share to SSDs incrementally. before prices of nand went up where they are today the popular bear thesis on hard disk drives was that you're ceding share to ssds incrementally How do you think about that sort of long-term roadmap, now, and is there overlap with SSDs when it comes to the warm tier of storage? how do you think about that sort of long-term roadmap now and is there overlap with ssds when it comes to the warm tier of storage Are you seeing that more and more becoming more prevalent? are you seeing that more and more becoming more prevalent Or with the price increase in NAND, is that actually reducing in terms of how much you overlap with SSDs? or with the price increase in nand is that actually reducing in terms of how much you overlap with ssds

Speaker 1: I think a lot of this comes back to what happened in the PC. You know, the PC forever, the capacity points in the PC were growing, and then they stopped, and they're still stopped, and it's still, the PC is still the same capacity point it ever was. When that happened, it transitioned from hard drive to flash and has been flash for a decade, right? That's the way I think about it. A lot of people, it's a very natural, emotional thing. You say, "Well, then the hard drives are going away." Not in the data tiers in the data center. I think a lot of this comes back to what happened in the PC. i think a lot of this comes back to what happened in the pc You know, the PC forever, the capacity points in the PC were growing, and then they stopped, and they're still stopped, and it's still, the PC is still the same capacity point it ever was. you know the pc forever the capacity points in the pc were growing and then they stopped and they're still stopped and it's still the pc is still the same capacity point it ever was When that happened, it transitioned from hard drive to flash and has been flash for a decade, right? when that happened it transitioned from hard drive to flash and has been flash for a decade right That's the way I think about it. that's the way i think about it A lot of people, it's a very natural, emotional thing. a lot of people it's a very natural emotional thing You say, "Well, then the hard drives are going away." Not in the data tiers in the data center. you say "well then the hard drives are going away." not in the data tiers in the data center As a matter of fact, I think the data tiers there are not only stuck on hard drives, but they're stuck for a long way into the future, and that's because people know how to manage them really well, and the economics of replacing the amount of data that's in the data centers with flash, it doesn't make sense. I say this all the time. Flash is great technology. It has a lot of little niches to put product in. There's different kinds of flash. There's fast and there's more, I'll call it long-term flash. Can be tricky to manage and so on. Our customers in the data tiers in the data centers understand all this really well. They're some of the best storage architects on the planet. As a matter of fact, I think the data tiers there are not only stuck on hard drives, but they're stuck for a long way into the future, and that's because people know how to manage them really well, and the economics of replacing the amount of data that's in the data centers with flash, it doesn't make sense. as a matter of fact i think the data tiers there are not only stuck on hard drives but they're stuck for a long way into the future and that's because people know how to manage them really well and the economics of replacing the amount of data that's in the data centers with flash it doesn't make sense I say this all the time. i say this all the time Flash is great technology. flash is great technology It has a lot of little niches to put product in. it has a lot of little niches to put product in There's different kinds of flash. there's different kinds of flash There's fast and there's more, I'll call it long-term flash. there's fast and there's more i'll call it long-term flash Can be tricky to manage and so on. can be tricky to manage and so on Our customers in the data tiers in the data centers understand all this really well. our customers in the data tiers in the data centers understand all this really well They're some of the best storage architects on the planet. they're some of the best storage architects on the planet They've already figured out exactly how they're gonna deal with hard drives and memory layers above. I don't see that changing. If anything, now that flash has gotten considerably more expensive, they're asking the hard drives, "How much more can you do at your tier?" The demand just keeps growing. You talk about zettabytes worth of storage capacity inside of disk drives. To replace that with flash would be ridiculous investment. It's not gonna happen. They've already figured out exactly how they're gonna deal with hard drives and memory layers above. they've already figured out exactly how they're gonna deal with hard drives and memory layers above I don't see that changing. i don't see that changing If anything, now that flash has gotten considerably more expensive, they're asking the hard drives, "How much more can you do at your tier?" The demand just keeps growing. if anything now that flash has gotten considerably more expensive they're asking the hard drives "how much more can you do at your tier?" the demand just keeps growing You talk about zettabytes worth of storage capacity inside of disk drives. you talk about zettabytes worth of storage capacity inside of disk drives To replace that with flash would be ridiculous investment. to replace that with flash would be ridiculous investment It's not gonna happen. it's not gonna happen

Speaker 2: Yeah. No, makes sense. Let's talk about pricing. Big shift for the industry, particularly now revenue per terabyte basis. I think you, your peer Western Digital is seeing the same thing. Just talk about the pricing power that you now see, particularly when you engage with hyperscalers in these pricing discussions. How has the balance of power in terms of pricing changed? Yeah. yeah No, makes sense. no makes sense Let's talk about pricing. let's talk about pricing Big shift for the industry, particularly now revenue per terabyte basis. big shift for the industry particularly now revenue per terabyte basis I think you, your peer Western Digital is seeing the same thing. i think you your peer western digital is seeing the same thing Just talk about the pricing power that you now see, particularly when you engage with hyperscalers in these pricing discussions. just talk about the pricing power that you now see particularly when you engage with hyperscalers in these pricing discussions How has the balance of power in terms of pricing changed? how has the balance of power in terms of pricing changed

Speaker 1: Yeah, I wouldn't say it's power. Fundamentally, it comes down to demand. If when we started out of the depths of the last downturn, we said, "Hey, we wanna get paid for what's coming out of our factories, we cannot just build it speculatively." Because of that, we locked in certain pricing for, you know, say, four quarters or five quarters back to the BTO discussion. As those roll forward, different customers are on different timelines, of course. You get to the end of that cycle you say, "Okay, now there's more demand, then let's up." We're still going for predictability, and that's what's driven that CSP pricing up. Yeah, I wouldn't say it's power. yeah i wouldn't say it's power Fundamentally, it comes down to demand. fundamentally it comes down to demand If when we started out of the depths of the last downturn, we said, "Hey, we wanna get paid for what's coming out of our factories, we cannot just build it speculatively." Because of that, we locked in certain pricing for, you know, say, four quarters or five quarters back to the BTO discussion. if when we started out of the depths of the last downturn we said "hey we wanna get paid for what's coming out of our factories we cannot just build it speculatively." because of that we locked in certain pricing for you know say four quarters or five quarters back to the bto discussion As those roll forward, different customers are on different timelines, of course. as those roll forward different customers are on different timelines of course You get to the end of that cycle you say, "Okay, now there's more demand, then let's up." We're still going for predictability, and that's what's driven that CSP pricing up. you get to the end of that cycle you say "okay now there's more demand then let's up." we're still going for predictability and that's what's driven that csp pricing up The way we test this all the time is if there happen to be any swaps, anybody says, "I don't need product," or we get a little bit more out of our factory and can take the parts that we're already making and make a new different product out of them, then what happens is we go out and offer that to the markets, and we see where the new pricing is. That's the biggest reason for things to go up. We don't see that stopping. The way we test this all the time is if there happen to be any swaps, anybody says, "I don't need product," or we get a little bit more out of our factory and can take the parts that we're already making and make a new different product out of them, then what happens is we go out and offer that to the markets, and we see where the new pricing is. the way we test this all the time is if there happen to be any swaps anybody says "i don't need product," or we get a little bit more out of our factory and can take the parts that we're already making and make a new different product out of them then what happens is we go out and offer that to the markets and we see where the new pricing is That's the biggest reason for things to go up. that's the biggest reason for things to go up We don't see that stopping. we don't see that stopping

Speaker 2: Maybe let me take a step back and try to address the question what the more longer term focus is. When you look pre-COVID, most of your gross margins were in that sort of 20%-25% range for most years. Today, both you and Western Digital are progressing to 50% gross margin. You're almost there at this point. One part of it is the demand cycle, as you said. If the demand cycle were to change in a few years, is the company structurally a better margin company than what it was pre-COVID? Maybe let me take a step back and try to address the question what the more longer term focus is. maybe let me take a step back and try to address the question what the more longer term focus is When you look pre-COVID, most of your gross margins were in that sort of 20%-25% range for most years. when you look pre-covid most of your gross margins were in that sort of 20%-25% range for most years Today, both you and Western Digital are progressing to 50% gross margin. today both you and western digital are progressing to 50% gross margin You're almost there at this point. you're almost there at this point One part of it is the demand cycle, as you said. one part of it is the demand cycle as you said If the demand cycle were to change in a few years, is the company structurally a better margin company than what it was pre-COVID? if the demand cycle were to change in a few years is the company structurally a better margin company than what it was pre-covid

Speaker 1: Yeah, I think given visibility, of course, you know, demand is the fundamental answer to everything, right? Given visibility that we have into the demand, We actually took a lot of supply offline by virtue of what we went through after the COVID downturn. Right now, lead times being what they are, that we can't really react on the upside to the demand. In some respects, if demand were to start going down, we have visibility into it. We would take necessary action, I think, again. I don't see that really right now. What's happening in the application layer is profound. The way I think about it, and I'm a hardware person, so you have to be careful with me. Yeah, I think given visibility, of course, you know, demand is the fundamental answer to everything, right? yeah i think given visibility of course you know demand is the fundamental answer to everything right Given visibility that we have into the demand, We actually took a lot of supply offline by virtue of what we went through after the COVID downturn. given visibility that we have into the demand we actually took a lot of supply offline by virtue of what we went through after the covid downturn Right now, lead times being what they are, that we can't really react on the upside to the demand. right now lead times being what they are that we can't really react on the upside to the demand In some respects, if demand were to start going down, we have visibility into it. in some respects if demand were to start going down we have visibility into it We would take necessary action, I think, again. we would take necessary action i think again I don't see that really right now. i don't see that really right now What's happening in the application layer is profound. what's happening in the application layer is profound The way I think about it, and I'm a hardware person, so you have to be careful with me. the way i think about it and i'm a hardware person so you have to be careful with me You know, some of the software layers before that used to siphon money off the top are not there anymore. Now what's exposed is, hey, I've got this really fast application, it needs data, and I think that's more of what we're seeing in the world. You know, some of the software layers before that used to siphon money off the top are not there anymore. you know some of the software layers before that used to siphon money off the top are not there anymore Now what's exposed is, hey, I've got this really fast application, it needs data, and I think that's more of what we're seeing in the world. now what's exposed is hey i've got this really fast application it needs data and i think that's more of what we're seeing in the world

Speaker 2: Okay. Interesting. What a lot of investors ask us about is hyperscalers have been increasing their capital spending plans every time they get on an earnings call, et cetera. With the kind of long lead time that you have, the build-to-order framework that you have, what's the typical duration between a hyperscaler saying, "Well, we'll spend more," to Seagate seeing that impact on the revenue line? Okay. okay Interesting. interesting What a lot of investors ask us about is hyperscalers have been increasing their capital spending plans every time they get on an earnings call, et cetera. what a lot of investors ask us about is hyperscalers have been increasing their capital spending plans every time they get on an earnings call et cetera With the kind of long lead time that you have, the build-to-order framework that you have, what's the typical duration between a hyperscaler saying, "Well, we'll spend more," to Seagate seeing that impact on the revenue line? with the kind of long lead time that you have the build-to-order framework that you have what's the typical duration between a hyperscaler saying "well we'll spend more," to seagate seeing that impact on the revenue line

Speaker 1: I think the hyperscalers understand what workloads are actually driving them, they are seeing these new application spaces. Say the video, for example. They know how much video is being created all the time at the extreme edge. They know how much video could be if it was enabled properly. They know the sources of data on the edge. You know, they know exactly how much people are uploading to their properties all day long. They get a pretty good sense of those businesses. There's new nascent spaces like people talking about physical AI and robotics that will need mass capacity. Is that gonna be serviced in the cloud or at the edge? Very good questions. I think the hyperscalers understand what workloads are actually driving them, they are seeing these new application spaces. i think the hyperscalers understand what workloads are actually driving them they are seeing these new application spaces Say the video, for example. say the video for example They know how much video is being created all the time at the extreme edge. they know how much video is being created all the time at the extreme edge They know how much video could be if it was enabled properly. they know how much video could be if it was enabled properly They know the sources of data on the edge. they know the sources of data on the edge You know, they know exactly how much people are uploading to their properties all day long. you know they know exactly how much people are uploading to their properties all day long They get a pretty good sense of those businesses. they get a pretty good sense of those businesses There's new nascent spaces like people talking about physical AI and robotics that will need mass capacity. there's new nascent spaces like people talking about physical ai and robotics that will need mass capacity Is that gonna be serviced in the cloud or at the edge? is that gonna be serviced in the cloud or at the edge Very good questions. very good questions All these applications are being forecast into the future and we'll have the storage components as well. I think that's one of the reasons why they're giving us that two, three, four-year visibility. Even though we haven't locked in the BTO orders, we are getting very good visibility and a nice, solid growth. That's another thing different about this demand cycle. All these applications are being forecast into the future and we'll have the storage components as well. all these applications are being forecast into the future and we'll have the storage components as well I think that's one of the reasons why they're giving us that two, three, four-year visibility. i think that's one of the reasons why they're giving us that two three four-year visibility Even though we haven't locked in the BTO orders, we are getting very good visibility and a nice, solid growth. even though we haven't locked in the bto orders we are getting very good visibility and a nice solid growth That's another thing different about this demand cycle. that's another thing different about this demand cycle

Speaker 2: Got it. Got it. Okay. In the last five minutes, let's try and get through three questions here. A big talking point has been your 70% incremental margins that you've been delivering consistently. As you go through the ramp on HAMR and you continue to deliver more exabytes, how should we think about sustainability of these 70% incremental margins that you've been delivering? Got it. got it Got it. got it Okay. okay In the last five minutes, let's try and get through three questions here. in the last five minutes let's try and get through three questions here A big talking point has been your 70% incremental margins that you've been delivering consistently. a big talking point has been your 70% incremental margins that you've been delivering consistently As you go through the ramp on HAMR and you continue to deliver more exabytes, how should we think about sustainability of these 70% incremental margins that you've been delivering? as you go through the ramp on hamr and you continue to deliver more exabytes how should we think about sustainability of these 70% incremental margins that you've been delivering

Speaker 1: Yeah. Again, fundamentally, demand will dictate everything. Our execution to the extent that we can, if we get through the 4 TB to 5 TB transition aggressively while the demand is still high, I think that'll serve us very well. We have all the assets in place that we need to do that. Our team is executing just fantastically. That's what it really comes down to is, you know, from an OpEx perspective. Our team's aligned on the right technology, knows exactly how we got to 3 TB and 4 TB, now knows what we need to do to get to 5 TB. We have all the tools in place. We've been planning this technology transition for quite a while. You know, I think it is sustainable. Yeah. yeah Again, fundamentally, demand will dictate everything. again fundamentally demand will dictate everything Our execution to the extent that we can, if we get through the 4 TB to 5 TB transition aggressively while the demand is still high, I think that'll serve us very well. our execution to the extent that we can if we get through the 4 tb to 5 tb transition aggressively while the demand is still high i think that'll serve us very well We have all the assets in place that we need to do that. we have all the assets in place that we need to do that Our team is executing just fantastically. our team is executing just fantastically That's what it really comes down to is, you know, from an OpEx perspective. Our team's aligned on the right technology, knows exactly how we got to 3 TB and 4 TB, now knows what we need to do to get to 5 TB. that's what it really comes down to is you know from an opex perspective. our team's aligned on the right technology knows exactly how we got to 3 tb and 4 tb now knows what we need to do to get to 5 tb We have all the tools in place. we have all the tools in place We've been planning this technology transition for quite a while. we've been planning this technology transition for quite a while You know, I think it is sustainable. you know i think it is sustainable

Speaker 2: Okay. Does pricing and how the pricing environment is give you a lever to even exceed the 70% on the incremental margin? Okay. okay Does pricing and how the pricing environment is give you a lever to even exceed the 70% on the incremental margin? does pricing and how the pricing environment is give you a lever to even exceed the 70% on the incremental margin

Speaker 1: Yeah, pricing will always come down to demand. I do think that, you know, the difference between a 3 TB and a 4 TB and a 5 TB is pretty compelling if you're building a new data center or replacing the hundreds of millions of drives that are out in an existing data center. From a power perspective, the rest of the equipment you need to support that, the number of exabytes you're running, you know, I could see if the demand continues to remain strong, then, you know, we would have that kind of capability. Yeah, pricing will always come down to demand. yeah pricing will always come down to demand I do think that, you know, the difference between a 3 TB and a 4 TB and a 5 TB is pretty compelling if you're building a new data center or replacing the hundreds of millions of drives that are out in an existing data center. i do think that you know the difference between a 3 tb and a 4 tb and a 5 tb is pretty compelling if you're building a new data center or replacing the hundreds of millions of drives that are out in an existing data center From a power perspective, the rest of the equipment you need to support that, the number of exabytes you're running, you know, I could see if the demand continues to remain strong, then, you know, we would have that kind of capability. from a power perspective the rest of the equipment you need to support that the number of exabytes you're running you know i could see if the demand continues to remain strong then you know we would have that kind of capability

Speaker 2: Okay. operating leverage. significant expansion on operating margins, I think 1,400 basis points year-over-year in the March quarter. You've been holding OpEx relatively flat. As the business now scales towards a $20 billion annual run rate by fiscal 2028, how do you think about the OpEx envelope that needs to support that overall revenue profile? Okay. operating leverage. significant expansion on operating margins, I think 1,400 basis points year-over-year in the March quarter. okay operating leverage significant expansion on operating margins i think 1,400 basis points year-over-year in the march quarter You've been holding OpEx relatively flat. you've been holding opex relatively flat As the business now scales towards a $20 billion annual run rate by fiscal 2028, how do you think about the OpEx envelope that needs to support that overall revenue profile? as the business now scales towards a $20 billion annual run rate by fiscal 2028 how do you think about the opex envelope that needs to support that overall revenue profile

Speaker 1: I mean, given the downturn we went through, our first priority was, you know, giving our people raises and they've deserved the bonus they've been getting, the variable comp and so, and so on. Again, we have the team, the technologists together to do what we need to do. We could spend more on OpEx over time, but, you know, I don't really see the need to right now. Hiring more people, great, but that would take a long time to train them. We are just really focused right now on using the existing team that we have to go get 5 TB of platter going, and then we'll see what happens in the future. I mean, given the downturn we went through, our first priority was, you know, giving our people raises and they've deserved the bonus they've been getting, the variable comp and so, and so on. i mean given the downturn we went through our first priority was you know giving our people raises and they've deserved the bonus they've been getting the variable comp and so and so on Again, we have the team, the technologists together to do what we need to do. again we have the team the technologists together to do what we need to do We could spend more on OpEx over time, but, you know, I don't really see the need to right now. we could spend more on opex over time but you know i don't really see the need to right now Hiring more people, great, but that would take a long time to train them. hiring more people great but that would take a long time to train them We are just really focused right now on using the existing team that we have to go get 5 TB of platter going, and then we'll see what happens in the future. we are just really focused right now on using the existing team that we have to go get 5 tb of platter going and then we'll see what happens in the future

Speaker 2: Does broadening out the customer base or investing in these new technologies that you're seeing, talking about photonics, does that impact the R&D pace or is that largely sort of similar to the run rate you've been on? Does broadening out the customer base or investing in these new technologies that you're seeing, talking about photonics, does that impact the R&D pace or is that largely sort of similar to the run rate you've been on? does broadening out the customer base or investing in these new technologies that you're seeing talking about photonics does that impact the r&d pace or is that largely sort of similar to the run rate you've been on

Speaker 1: Far, we've been doing that inside of our existing footprint. And you know, we have thousands of thousands of engineers that are in tune with those technologies and markets. Again, we could if we wanted to. I still don't see the need right now. We love the footprint we have, we love the team we have, and we're trying to stay focused. Far, we've been doing that inside of our existing footprint. far we've been doing that inside of our existing footprint And you know, we have thousands of thousands of engineers that are in tune with those technologies and markets. and you know we have thousands of thousands of engineers that are in tune with those technologies and markets Again, we could if we wanted to. again we could if we wanted to I still don't see the need right now. i still don't see the need right now We love the footprint we have, we love the team we have, and we're trying to stay focused. we love the footprint we have we love the team we have and we're trying to stay focused

Speaker 2: Okay. Let me end with capital allocation. Clearly, you'll be generating a lot of cash. How are you thinking about capital allocation, primarily in terms of how do you invest, where do you and how much do you invest in the business? How much do you allocate to M&A or buybacks? How are you thinking about those drivers? Okay. okay Let me end with capital allocation. let me end with capital allocation Clearly, you'll be generating a lot of cash. clearly you'll be generating a lot of cash How are you thinking about capital allocation, primarily in terms of how do you invest, where do you and how much do you invest in the business? how are you thinking about capital allocation primarily in terms of how do you invest where do you and how much do you invest in the business How much do you allocate to M&A or buybacks? how much do you allocate to m&a or buybacks How are you thinking about those drivers? how are you thinking about those drivers

Speaker 1: Yeah, no real change. I mean, I think I said this on the earnings call that we just had, last year was all about patching up the supply chain, just getting working capital back. This year is about readdressing our debt, you know, getting in fighting shape in case there is some other downturn. We don't see that, you know, we just wanna be the best stewards that we can. Then, you know, we'll get back to being the Seagate that we want to, which is, you know, returning 75% of the cash to shareholders. We have a strong dividend, we always did. You know, we're gonna be reassessing exactly how that weighs off versus buybacks, we believe that it's the shareholders' money and we wanna give it back to them. Yeah, no real change. yeah no real change I mean, I think I said this on the earnings call that we just had, last year was all about patching up the supply chain, just getting working capital back. i mean i think i said this on the earnings call that we just had last year was all about patching up the supply chain just getting working capital back This year is about readdressing our debt, you know, getting in fighting shape in case there is some other downturn. this year is about readdressing our debt you know getting in fighting shape in case there is some other downturn We don't see that, you know, we just wanna be the best stewards that we can. we don't see that you know we just wanna be the best stewards that we can Then, you know, we'll get back to being the Seagate that we want to, which is, you know, returning 75% of the cash to shareholders. then you know we'll get back to being the seagate that we want to which is you know returning 75% of the cash to shareholders We have a strong dividend, we always did. we have a strong dividend we always did You know, we're gonna be reassessing exactly how that weighs off versus buybacks, we believe that it's the shareholders' money and we wanna give it back to them. you know we're gonna be reassessing exactly how that weighs off versus buybacks we believe that it's the shareholders' money and we wanna give it back to them Inside of that, I think we have enough flexibility to do anything we need to for whether it's investing back in our own R&D or if we need to do small tuck-ins or something like that for technology access, we can do that. We're not really focused that way. We're more focused on just getting through this year, getting that 5 TB per platter launched and seeing what the next year holds. Inside of that, I think we have enough flexibility to do anything we need to for whether it's investing back in our own R&D or if we need to do small tuck-ins or something like that for technology access, we can do that. inside of that i think we have enough flexibility to do anything we need to for whether it's investing back in our own r&d or if we need to do small tuck-ins or something like that for technology access we can do that We're not really focused that way. we're not really focused that way We're more focused on just getting through this year, getting that 5 TB per platter launched and seeing what the next year holds. we're more focused on just getting through this year getting that 5 tb per platter launched and seeing what the next year holds

Speaker 2: Okay, great. I'll wrap it up there. Thank you for coming to the conference. Thank you to the audience as well. Okay, great. okay great I'll wrap it up there. i'll wrap it up there Thank you for coming to the conference. thank you for coming to the conference Thank you to the audience as well. thank you to the audience as well

Speaker 1: Thank you. Thank you. thank you

Speaker 2: Thank you, everyone. Thank you. Thank you, everyone. thank you everyone Thank you. thank you