Seagate Technology Holdings PLC

Good afternoon, and welcome to the Seagate Technology Fiscal Third Quarter 2026 Conference Call. All participants will be in listen-only mode. If 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 and 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 of 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 March quarter results on the investor section of our website. During today's call, we'll refer to GAAP and non-GAAP measures. Non-GAAP figures are reconciled to GAAP figures in the earnings press release posted on our website and included in our form 8K. 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 gap 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.

Thanks, Jamie, and hello, everyone. CE delivered a very strong March quarter, underscoring both the durability of demand and the leverage in our model. We grew revenue 44% year over year. achieved record gross margins, more than doubled non-GAAP operating income, and generated one of our highest ever levels of free cash flow at close to $1 billion. Momentum continues to build for our Mosaic hammer-based platforms, with two of the world's largest CSPs now qualified on our 4-plus terabyte per disc product. For both of these customers, qualification timelines were in line with PMR products. underscoring the maturity of the platform and our team's outstanding execution as we work to meet customers' accelerated demand requirements. Our strong FQ4 guidance issued today demonstrates our growing conviction in the business and future opportunities. As we look ahead, we see Seagate now entering a period of structural growth. Our belief is rooted in three pillars. First is the sustainability of rising storage demand. AI-enhanced applications are accelerating data creation, expanding retention, and increasing reliance on historical data sets for advanced reasoning. Extending beyond cloud data centers to the enterprise edge, these trends require storage solutions that deliver cost and energy efficiency at scale, making high-capacity hard drives essential to modern data center architectures. Second is our strategic technology roadmap. Anchored by the Mosaic platform and Hammer innovation, we are delivering critical technology breakthroughs at the right time to support our customers' rising demand now and into the future. Third is our proven strategy focused on converting demand into profitable growth and value creation. Our build-to-order model enhances demand visibility and supports pricing and supply discipline. Our Hammer-based product roadmap enables margin expansion as we scale. And our capital allocation framework enables us to leverage our earnings growth and cash flow generation into strengthening our balance sheet and enhancing shareholder returns over the long term. The combination of these pillars, robust market demand, a proven technology roadmap, and disciplined operational execution is already driving performance ahead of the financial targets outlined at our analyst event a year ago. The progress we have made gives us confidence to significantly increase our annual revenue growth target from the low to mid teens to a minimum of 20% over the next few years. This confidence is reinforced by the strength of the current demand environment shaped by ongoing momentum from cloud investments. The March quarter marked our 10th consecutive period of revenue growth from cloud customers who have committed hundreds of billions of dollars in infrastructure CapEx investment to support their own long-term growth and AI transformations. Using remaining performance obligations, or RPO, as a proxy for future revenue potential, the top three global CSPs alone have nearly doubled their RPO to a staggering $1.1 trillion, a clear indicator of sustained growth ahead. Assurance of reliable supply is our customers' highest priority. particularly for Nearline products, which accounted for close to 90% of total Exabyte shipments in the March quarter. We have Exabyte scale supply agreements in place with nearly all major cloud and hyperscale customers, with Nearline capacity almost fully allocated through calendar 2027. At the same time, we are finalizing bill-to-order contracts with these customers through the end of fiscal 2027, which defines specific configuration and pricing. Our value-based pricing approach enables customers to plan with confidence while contributing to sustained profit growth for Seagate. And we are actively engaged in strategic planning discussions now reaching into calendar 2028 and beyond. Today, AI sits at the center of nearly all customer demand conversations. We are in the midst of an inference inflection where compute infrastructure is shifting from periodic training to becoming engines that continually generate mass capacity data. Leading AI chatbots now handle billions of user prompts daily, each consuming and producing multimodal outputs that fuel an unprecedented surge in data creation. Agentic AI pushes this even further, transforming sporadic engagements into autonomous workflows that continuously ingest inputs, generate reasoning, and store durable outputs that are dramatically increasing data intensity and long-term storage requirements. AI is amplifying demand across existing applications such as video, where large cloud providers are integrating AI into platforms to boost user engagement and revenue opportunities, driving new video creation and the need to store it. We believe demand will further accelerate as AI applications move beyond the data center into the physical world, powering manufacturing systems, autonomous vehicles, and robotics. These physical AI deployments generate massive data streams from sensors, cameras, and telemetry, with a single autonomous vehicle producing up to four terabytes per hour. A portion of this data is reused for simulation, validation, and retraining, with retention requirements stretching five to 10 years to meet compliance standards. These inference-based applications are creating a growing need for both cloud and local storage. We've started to see interest from sovereign and neocloud data centers for our enterprise nearline drives and system solutions. To manage these intensifying workloads, cloud and edge data centers deploy storage tiers that work in concert to optimize performance, cost, energy efficiency, and data durability. Hard drives are critical to these modern data center architectures, delivering scalable capacity along with energy and cost efficiencies that form the foundation of the mass data storage tier. DGA's proven product portfolio makes us well-positioned to address this broadening opportunity set. Our technology strategy prioritizes aerial density innovation over increasing unit volumes to address rising demand. Leveraging our technology strengths We provide the most capital and manufacturing efficient path to scale while delivering improved cost and power efficiency per terabyte for our customers. This approach supports our goal to supply data center exabyte growth in the mid 20% range. Our Mosaic 4 Plus platform is a prime example. As our second generation hammer-based product, Mosaic 4 can deliver up to 44 terabytes per drive over 30% more capacity compared to the first generation Mosaic drives, which we achieve with the same number of disks and heads with minimal change to the bill of materials. Mosaic 4 also incorporates our internally designed laser and integrated photonic circuitry into the recording head. This innovation enables high volume, extreme precision manufacturing that enhances our ability to increase drive capacity and cost efficiency. We began revenue shipments for Mosaic 4 in late March, and based on current ramp plans, we expect Mosaic 4 to represent a majority of our Hammer exabyte shipments exiting calendar 2026. We have shipped millions of Hammer-based drives, highlighting our ability to engineer with atomic-level precision and then integrate that innovation into high-volume exabyte scale. We work closely with customers to ensure our technology roadmap aligns with their future storage capacity and performance needs. Customer feedback consistently indicates that tiered storage architectures and software solutions meet their performance needs over the next few years. Capacity scaling remains their top priority, and we are executing the plan. Our Mosaic 5 product development is progressing well to plan to deliver capacities at 50 terabytes with qualification shipments targeted for late calendar 2027. These drives leverage our advanced photonics expertise, internally designed laser, and mature 10-disc platform to extend aerial density capabilities. This approach offers customers a predictable path for addressing their future exabyte growth needs, as well as upgrade the storage capacity of their installed base while using the same power budget and floor space. And the momentum we've seen in qualifying Mosaic products continues to validate this approach. Today, the vast majority of Hammer supply is allocated to cloud and hyperscale customers. However, as production scales, we expect to leverage four and five terabyte per disk capabilities to produce cost efficient, lower capacity products for enterprise data centers and edge IoT applications. This unified platform approach will simplify our product portfolio. and enable manufacturing, supply chain, and cost efficiencies to deliver strong economics for Seagate over the long term. In summary, Seagate is entering a period of structural growth powered by durable demand, increasing adoption of our mosaic-based products, and continued execution against the strategy designed to drive margin expansion, cash flow, and long-term value creation. I want to thank our global team for delivering another strong quarter and recognize our suppliers, customers, and shareholders for their ongoing support. With that, I'll turn it over to Gianluca.