Seagate Technology Holdings PLC

Welcome to the Seagate Technology Fiscal Third Quarter 2025 Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Shanie Hudson, Senior Vice President, Investor Relations. Please go ahead.

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

Thank you, Shanie, and hello, everyone. Seagate delivered another solid quarter of profitable year-on-year growth and strong execution. Our third quarter results are highlighted by a 31% year-on-year increase in revenue, and 81% growth in non-GAAP gross profit dollars. We continue to demonstrate strong financial leverage, expanding gross margin for the eighth straight quarter and achieving the third highest operating margin in the company's history. This performance supported non-GAAP EPS performance at the top of our guidance range and increased free cash flow generation. These strong levels of performance reflect the combination of a healthy supply demand environment for mass capacity storage and the proactive steps we've taken over the recent cycle to transform how we operate. Our supply discipline, the visibility we gain through our build to order strategy, and our execution on strategic pricing actions all contribute to sustainable and profitable growth over the long term. In addition to strengthening our operating model, these factors further enhance our agility, which is critical to our ability to navigate the fluid business environment. Based on the latest trade policy announcements, we expect minimal impact to fourth quarter financial performance due to tariffs. We are continuing to monitor the situation and evaluate strategic solutions, including geographically shifting certain of our manufacturing processes and aligning our supply chains to mitigate risks associated with trade policies over the long term should the need arise. In this dynamic macro landscape, we will continue to focus on managing controllable factors while executing our aerial density-driven technology roadmap, which delivers increasing value to our customers. Seagate's hammer-based mosaic drives represent the industry's only 3 terabyte per disc products. We are ramping volume to qualified customers and remain on track to qualify a broader range of cloud customers with shipments beginning in the second half of calendar 2025. Turning to the demand environment, we are mindful that tariff measures could affect customer buying decisions. However, current demand indicators remain intact, particularly among global cloud customers. In the March quarter, cloud nearline revenue and exabytes were up by nearly 10% sequentially, almost doubling year over year amid a very tight supply environment. The growing demand for mass capacity storage aligns with the cloud CapEx investment cycle and ongoing build out of data center infrastructure to support AI transformations. Hard drives continue to store close to 90% of the bits in large scale data center deployments. Data center architects are highly sophisticated and have consistently employed a strategic mix of storage solutions to optimize scalability, cost efficiency, and workload performance. Reinforcing this approach, Google recently unveiled details about their foundational Colossus storage system, highlighting the use of SSDs for fast data access, while depending on hard drives for mass storage and data retention needs due to their scalability and cost benefits. This hybrid storage strategy is particularly vital for AI workloads that require access to massive datasets for training and inference, and subsequently generate valuable data content that users want to retain. For instance, training in an AI model to generate images requires billions of static pictures, while AI-based video generation demands thousands of hours of footage to accurately capture transitions and variations between frames. At 24 frames per second, each hour of video equates to roughly 80,000 images. Hard drives have historically benefited from the growth in video content on social media platforms and content delivery networks. Emerging text-to-video applications promise to revolutionize content creation and lower production costs, likely to increase storage demand. In this context, hard drives are crucial for storing training data, maintaining model checkpoints, and preserving both inference and generated content. Over the past 18 months, large cloud and hyperscale customers have driven HDD demand growth. However, we have also started to see a pickup from smaller edge data centers and private clouds that seek to preserve their valuable data for privacy or sovereignty purposes. In the year ahead, near-line exit demand looks strong through calendar 2025, and we now have visibility of demand with several customers into the first half of calendar 2026 as we negotiate new bill-to-order agreements. Seagate is in a strong position to address the favorable demand outlook as we ramp shipments of our high-capacity drives. Our 24 and 28 terabyte PMR platforms continue to ramp aggressively, with exabyte shipments up roughly 60% quarter over quarter. Additionally, we are continuing to ramp hammer-based products with our first hyperscale customer, and we are approaching the conclusion of our second major CSP qualification. Feedback from other cloud customers has been positive as they progress through their respective qualification timelines. We expect an appreciable increase in Hammer product shipments over the coming quarters as these future qualifications conclude. Based on the time required to fully scale Hammer production, we plan to fulfill build-to-order commitments through a blend of Hammer and PMR products over the next several quarters. It is becoming increasingly evident to both our customers and the market that Hammer is a groundbreaking technology that will extend TCO advantages for hard drives over other storage media for many years to come. More than a decade in the making, Hammer's pivotal in enabling Seagate to meet the world's exabyte demand growth through technology innovation rather than supply expansion, thereby supporting Seagate's ability to deliver sustained and profitable growth. I'll stop here and turn the call over to John Luca.