Seagate Technology Holdings plc Q1 FY2025 earnings call

• Seagate delivered strong revenue and profit growth, with fiscal first quarter revenue at $2.17 billion and non-GAAP EPS at $1.58, above guidance midpoint. - Driven by HDD business, with non-GAAP gross margins in mid-30% range. - Mass capacity market trends: strong cloud demand for nearline drives, uptick in nearline enterprise sales, and stable VIA demand with smart city projects as key driver. - Product ramp plans: ramping 24 and 28 terabytes PMR platform, expanding Mozaic HAMR adoption with customer qualifications progressing, expect shipment and revenue ramp of HAMR mid-2025. - Increased quarterly dividend by nearly 3% and build-to-order model providing good demand visibility for future quarters.

Fiscal first quarter revenue was $2.17 billion. Within the Hard Disk Drive business, exabyte shipments grew 20% sequentially to 128 exabytes and revenue increased 16% to $2 billion. Mass capacity revenue was $1.7 billion, up 21% sequentially, representing 93% of total HDD exabyte shipments. Legacy products totaled $270 million (12% of total revenue) and other businesses (system, SSD, refurbished drives) were $164 million (8% of revenue). Non-GAAP gross profit increased 24% sequentially to $723 million, with non-GAAP gross margin at 33.3%, expanding by 240 basis points quarter-over-quarter.

• December quarter revenue expected in range of $2.3 billion ±$150 million, midpoint up 6% sequentially and 48% year-over-year. - Non-GAAP operating expenses expected ~$285 million. - Non-GAAP operating margin expected in low-20s percentage range. - Non-GAAP EPS expected $1.85 ±$0.20, based on diluted share count and non-GAAP tax expense.

• Industry supply-demand uncertainties that could impact margin expansion. - Potential delays in HAMR qualification processes affecting product ramp. - Economic uncertainties in China impacting VIA business in that market.

Q: Wamsi Mohan from Bank of America asked about build-to-order and demand visibility, and competition vs competitors' products as HAMR ramps.

A: Dave Mosley responded on build-to-order predictability and confidence in HDD product portfolio including HAMR ramping.

Q: Krish Sankar from TD Cowen inquired about market share and industry pricing.

A: Dave Mosley talked about market share re-equilibration and Gianluca Romano discussed positive pricing environment and gross margin improvement.

Q: Amit Daryanani from Evercore asked about cyclical peak fears and exabyte shipment deployment.

A: Dave Mosley addressed cyclicality changes and improved processes for tracking customer deployment.

Q: Erik Woodring from Morgan Stanley questioned gross margin expansion.

A: Gianluca Romano explained factors like cost structure and mix impact on gross margin.

Q: Toshiya Hari from Goldman Sachs asked about HAMR qualification timeline and smoothness.

A: Dave Mosley stated failure mode behind us and confidence in HAMR qualification progress.

Q: Asiya Merchant from Citigroup asked about HAMR ramp impact on margins.

A: Dave Mosley and Gianluca Romano said HAMR should be accretive to gross margin.

Q: Aaron Rakers from Wells Fargo asked about OpEx trajectory and share repurchase.

A: Gianluca Romano discussed OpEx due to variable comp and share repurchase plans post debt management.

Q: Timothy Arcuri from UBS asked about capacity outlook.

A: Dave Mosley talked about expanding capacity via technology transitions.

Q: C.J. Muse from Cantor Fitzgerald asked about nearline visibility and seasonality.

A: Dave Mosley mentioned good visibility and predictable business.

Q: Ananda Baruah from Loop Capital asked about capacity increase process.

A: Dave Mosley explained capacity growth via aerial density and component efficiency.

Q: Vijay Rakesh from Mizuho asked about unit shipments and idle capacity.

A: Dave Mosley and Gianluca Romano discussed unit shipment flexibility and idle capacity reduction.

Q: Thomas O'Malley from Barclays asked about HAMR delay actions and AI contribution timeline.

A: Dave Mosley talked about pivot flexibility and AI demand trends.

Q: Mark Miller from Benchmark Co. asked about PC AI chip refresh cycle.

A: Dave Mosley provided insights on PC AI adoption uncertainty.

Q: Karl Ackerman from BNP Paribas asked about build-to-order and SMR mix.

A: Dave Mosley and Gianluca Romano discussed build-to-order agreements and SMR mix in product configuration.