Seagate Technology Holdings PLC

Welcome to the Seagate Technology Fiscal First Quarter 2026 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 Chair and Chief Executive Officer, and Gianluca Romano, our Chief Financial Officer. We've posted our earnings press release and detailed supplemental information for our September 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 8-K. We've not reconciled certain non-GAAP outlook measures because material items that may impact these measures are out of our control and or cannot be reasonably predicted. Therefore, 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 Dave.

Thanks, Shani, and hello, everyone. Seagate delivered a very strong start to fiscal 2026. Revenue grew 21% year-over-year, non-GAAP gross margin set a new company record at 40.1%, and non-GAAP operating margin climbed to 29%, a level last seen in fiscal 2012. Non-GAAP EPS exceeded the high end of our guidance range, underscoring our focus on expanding profitability. Today, we announced an increase to our quarterly dividend of approximately 3%. reflecting confidence in our execution and ongoing sustainability of our cash flow generation capabilities as we leverage our leading hammer technology in a strengthening demand environment for high-capacity hard drives. Demand strength was led by global cloud service providers, and we also saw meaningful sequential revenue growth from enterprise customers in the September quarter. The data center end market, which is comprised of near-line sales into cloud, enterprise, and via customers, represented 80% of overall revenue. Amid this improving demand backdrop, our high capacity nearline production is largely committed under bill to order contracts through calendar 2026. Additionally, longer term agreements that we have with our global data center customers provide clear visibility through calendar 2027, reinforcing our view that these favorable demand conditions will persist. We remain focused on executing our Hammer-based product roadmap to support our customers' growing Exabyte needs and continue working with them to transition to higher-capacity drives. There is no question that AI is reshaping hard drive demand by elevating the economic value of data and data storage. This is evident by the growing demand for our high-capacity near-line drives as customers continue to ramp investments in AI applications. AI inferencing is set to inflect and scale rapidly, further increasing data's value. Inferencing consumes and generates large volumes of data, which is then stored, monitored, validated, and reintegrated into an infinite training loop. We are already seeing the positive impact of this trend as global CSPs deploy large-scale inferencing applications that rely on multimodal inputs such as text, audio, and video. Using monthly token consumption as a proxy for inferencing adoption, one major hyperscaler reported a 50-fold increase in the span of a year. This explosive growth is driving a sharp increase in unstructured data generation that creates demand for hard drive storage. Video content is a major contributor of unstructured data and is driving considerable demand for hard drives today, from social media platforms to content delivery networks and online marketing. AI-generated videos promise to further fuel demand growth. There are already numerous text-to-video tools that democratize creativity by letting anyone generate professional quality videos from text, images, or sketches. We see this trend already taking hold. For example, Google reports over 275 million videos were generated on its video platform within the first five months. With a one-minute AI video, Being up to 20,000 times larger than a 1,000-word text file, the data storage implications are clear. The rapid adoption and growing capability of these tools are already having a positive impact on the demand for storage. Beyond the application space, we've discussed new storage use cases from emerging trends around hybrid cloud environments that enhance data security and compliance with data sovereignty regulations. Recently, Seagate partnered with a global CSP to develop a sovereign cloud solution for managing massive volumes of sensitive telemetry and sensor data collected from a fleet of autonomous vehicles. These types of data sets are subject to strict requirements and stipulate such data must be processed, stored, and managed locally. As in any other data center, Hard drives provide the ideal solution by meeting customer requirements for throughput, durability, and cost-efficient long-term data retention. As data generation explodes and new use cases emerge, Seagate is answering the call with a clear long-term roadmap to capture demand. Momentum continues to build for our hammer-based Mosaic platforms, and we achieved several important milestones in the quarter, consistent with what we discussed during our analyst event. We now have five global CSPs qualified on MOSAIC 3 plus terabyte per disk products, which can deliver capacities up to 36 terabytes per drive. We remain on track to qualify the remaining three global CSPs within the first half of calendar 2026. Additionally, we shipped over 1 million MOSAIC drives in the September quarter. These products are performing well in live production environments. And we are on pace to achieve 50% exabyte crossover on near-line hammer drives in the second half of calendar 2026. And we started qualification with a second major CSP on the MOSAIC 4 plus terabyte per disk platform with initial volume ramp starting in the first half of next calendar year. This platform will offer capacities of up to 44 terabytes. Advancing aerial density is a key competitive advantage Not just for Seagate, but for the hard drive industry overall. We are leveraging our manufacturing expertise and advancements in technologies, including silicon photonics, to pave the path to 10 terabytes per disk. Our aerial density roadmap delivers a superior and sustainable TCO advantage for hard drives compared to alternative technologies well into the future. Customers clearly see the value of transitioning to higher capacity Hammer products as the most efficient way to support their rapidly expanding data storage needs in an AI-driven world. Wrapping up, the Seagate team continues to execute at an exceptional level. We are delivering on our target financial framework supported by a structurally improved business and a strong sustainable demand environment. We are advancing our Hammer-led technology roadmap which creates significant value for our customers and positions Seagate for long-term success. With the strength of our technology roadmap and the transformative impact of AI, we believe the best years are still ahead of us. I am proud of how our teams are rising to meet the opportunities ahead as we remain focused on delivering profitable revenue growth and expanding cash flow generation in fiscal 26 and beyond. I'd like to thank our employees, supply partners, and customers for their many contributions to our performance and to Seagate's ongoing success. Let me now turn the call over to Gianluca.