Seagate Technology Holdings PLC

Welcome to the Seagate Technology Fiscal Fourth Quarter and Fiscal Year 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 2. Please note, this event is being recorded. I would now like to turn the conference over to Shanye 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 Q4 and fiscal 2026 year-end 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 also included on 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 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. 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, Shanye, and hello, everyone. Seagate delivered a very strong finish to an outstanding fiscal 2026. Our June quarter results outperformed our expectations for both revenue and non-GAAP EPS, and we expanded our non-GAAP gross margin for a 13th consecutive quarter. Our performance led to free cash flow margins of 31%, which totaled more than $1.1 billion, our strongest quarter in over a decade. Our impressive fiscal 2026 financial performance was underpinned by the three structural growth pillars that I outlined last quarter. Sustainable market demand, our differentiated technology roadmap, and disciplined operational execution. First, sustainable market demand. As our results show, demand for mass capacity storage is strong and growing. We delivered fiscal year revenue growth of 34%, led by cloud customers' demand for data storage solutions amplified by the adoption of AI-enhanced applications. Given our momentum, and the improved visibility we have into demand, we expect fiscal 2027 revenue growth to outpace our performance in fiscal 2026. Second, we are executing our differentiated technology roadmap anchored by our HAMR-based MOSAIC platform. HAMR enables us to increase aerial density and store more data on each disk. As a result, we can scale exabyte shipments to meet rising demand in a highly capital-efficient manner to capture more value per drive. Exiting the year, Hammer-based products represented approximately 40% of our near-line exabyte shipment run rate, and we continue to invest in Hammer capabilities to support our mid-20% exabyte growth target while further enhancing profitability and capital efficiency. Our third pillar centers on translating demand strength and technology advancements into profitable growth. In Fiscal 26, we increased non-GAAP gross margin 10 percentage points, grew non-GAAP EPS more than 90%, and generated record free cash flow of $3.1 billion. Looking ahead to Fiscal 27, we expect to deliver sequential margin and cash generation growth throughout the year. Our confidence is supported by the scale, quality, and duration of our data center customer commitments in a strengthening demand environment. Data Center Demand now represents approximately 90% of our Exabyte shipments. Based on the long-term supply agreements in place today, the vast majority of our Nearline Exabytes are now allocated into calendar 2028. Importantly, we are not seeing customers pull back on planning horizons. As our strategic relationships deepen, many are actively seeking to extend planning horizons through 2029 and beyond. which we believe reflects growing confidence in their own long-term infrastructure needs. These engagements reinforce our view of demand durability while providing customers greater supply assurance and support for the key technology transitions. We remain disciplined in securing orders from these customers prior to initiating drive production with contracts that define both product configuration and pricing terms covering the entirety of calendar 2027. We continue to execute Our value-based pricing strategy, balancing a stronger demand environment with our objective of supporting sustainable, profitable growth over the long term. Cloud customers remain the largest driver for near-line demand today, with three years of sequential quarterly exabyte growth and no evidence of a slowdown as AI adoption now builds on demand for traditional data-intensive applications, including video. We continue to benefit from cloud infrastructure deployments. which fuel the need for scalable, cost-efficient and reliable storage. At the same time, we believe storage demand will prove durable through investment cycles. First, new data is constantly being created across existing cloud and enterprise infrastructure. And second, customers are retaining and reusing more of that data over time as its value extends beyond its initial use. AI is reinforcing these trends and illustrating how data is not only growing, it is compounding. With the transition from AI model training to inference to agentic applications, more data is generated and retained for historical context, compliance, and future reuse. As these data center environments become larger and more complex, customers must balance performance, energy consumption, and cost across distributed infrastructures. Cloud providers have long addressed these challenges through tiered storage architectures that combine high-performance memory and SSDs with mass capacity hard drives to optimize performance and economics at scale. Our recent white paper with SK Hynix illustrates the importance of tiered storage for inference and agentic AI workloads, which show a direct benefit to hard drive storage. These workloads rely on persistent context across user interactions and Key Value or KB Cache is used to retain and reuse that context efficiently. KB Cache can expand significantly as the number of users increase and interactions become longer and more sophisticated. Our research found that by extending KB Cache data across memory, SSD and hard drive tiers, organizations can retain more context and avoid recomputing previously generated data. This drives the need for increased hard drive storage and reduces GPU usage during the most compute intensive phases of an agentic application. As a result, GPU resources are available for additional revenue generating workloads. Additionally, we are now seeing the relevance of tiered storage extend beyond large cloud data centers into enterprise deployments. As enterprises increasingly operate across public cloud, private cloud, and on-prem environments, They must manage growing volumes of structured and unstructured data while facing similar performance costs and energy consumption trade-offs that hyperscalers have addressed for years. We see this broadening of demand in our business. Enterprise nearline revenue increased for a fifth consecutive quarter in June, and we are engaging more frequently with NeoCloud operators and leading model developers. As our data management needs scale, these providers are starting to adopt modern peer storage architectures where hard drives provide the trusted mass capacity foundation. Looking ahead, we believe physical AI applications such as robotics and autonomous vehicles will drive the next set function expansion and data creation and retention at the edge. These applications rely on world models, trained on millions of hours of historical and synthetic video content in order to understand and reliably interact with the physical world. Taken together, these trends reinforce a structural change in storage demand. Applications are creating, retaining, and reusing more data across cloud and enterprise environments than ever before, extending the role of mass capacity storage across modern tiered architectures and creating additional opportunities for Seagate over time. Our technology roadmap plays an integral role in Seagate's ability to capitalize on growing storage demand. Advancing aerial density is our North Star. We believe that increasing the amount of data stored on every disk we produce is the fastest, most capital-efficient path to supporting long-term exabyte growth while maintaining relatively stable hard drive unit output. Our expertise across material science, precision manufacturing, advanced photonics, and nanoscale wafer production has enabled us to pioneer Hammer Technology and the Mosaic platform, which have increased storage density per disk and per drive. We continue to push the boundaries of innovation, as demonstrated by our vertically integrated laser manufacturing capabilities, which yielded tens of millions of edge-emitting lasers last quarter. Our team's achievements underscore the scale, maturity, and supply chain resilience behind our Mosaic platform. These innovations are improving the total cost of ownership for our customers, while expanding our exabyte output and enhancing efficiency across our operations and supply chain. We ended fiscal 2026 on schedule with our hammer-based product ramp. Our Mosaic 3 products are now qualified and operating in production environments across all major cloud customers. Our second-generation Mosaic 4 platform, capable of supporting up to 44 terabytes per drive, continues to ramp with the two largest global CSPs, and additional customer qualifications are underway. We expect to achieve our next ramp milestone by exiting calendar 26, with 50% of our hammer exabytes on our Mosaic 4 platform. Looking further ahead, Mosaic 5, our 5 plus terabyte for this platform, remains on track for qualification shipments in late calendar 2027. Wrapping up, we delivered across the board in fiscal 2026 with each quarter building on the momentum of the last and we expect that momentum to continue through fiscal 2027. The growth in data creation, retention, and utilization continues to elevate the importance of hard drive storage and modern data architectures. Together, our demand outlook, differentiated technology strategy, and disciplined execution position Seagate to capture the significant opportunities ahead and create long-term value for our stakeholders. I'll close by thanking our global team for another year of outstanding execution. I'd also like to thank our customers, suppliers, partners, and shareholders for their continued support and trust in the company. With that, I'll turn it over to Gianluca.