Seagate Technology (STX) 26 Oct 232024 Q1 Earnings call transcript

Welcome to the Seagate Technology Fiscal First Quarter 2024 Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Shanye Hudson, Senior Vice President of Investor Relations. Please go ahead.

Thank you. welcome call. and everyone, morning, to today's Good

for Joining and Officer. Gianluca Dave section Mosley, of supplemental We've the results Executive Officer; Seagate's Chief information detailed Romano, and our our press me September Investors earnings quarter on are posted release our our website. Chief Financial

non-GAAP not our to our be Form and figures may press earnings to out in measures. call, Therefore, certain outlook is website included figures items these our Non-GAAP impact reconciled on in and today's We've During that reconciliation GAAP efforts. are measures measures because control material not measures are we'll X-K. unreasonable available the the a release reasonably of corresponding GAAP refer non-GAAP cannot without reconciled GAAP posted and/or to predicted.

as well of on supplemental including factors more risks, report Form about filings, any business. remind results, risks found our learn as our report date. the I'd results as based associated on To should affect and uncertainties today that and our these be relied or views refer the our you Form today's begin, management's are contained XX-K the and press that us as subsequent call assumptions by SEC Actual not annual statements with we recent XX-Q, all like today materially uncertainties upon to our contains other to of reflect available quarterly may to website. subject that from forward-looking Before current may most please forward-looking business future and release issued they implied statements in on those section and may of and information information, Investors the to be which of on as differ

up As opening our open to call the remarks, over always, call remarks. questions. Dave the for prepared now for I'll hand we'll following

you, everyone. Shanye, welcome, Thank and

Middle place situation results, I want Before the the discuss to I in acknowledge East. taking our financial

people the our in their loved of team members, all and with are families Seagate including the thoughts Our region, ones.

$X.XX came of $X.XX. economic Revenue Consistent Moving in cloud per demand for on quarter markets, at to with the hard our weak we loss China experienced non-GAAP correction continued in commentary, inventory results. the ongoing in and recent while billion trends to restrain with public our softer-than-anticipated demand legacy September drives. share near-term

uneven. Looking the ahead, economic we expect of in be to recovery China pace

However, progress of are U.S. inventory the we by positive consumption. cloud encouraged

Importantly, priorities down position for balance our we sheet financial to of strengthen markets the enhanced company at recover. demonstrate generation, as this we cash continue the the and and cycle, to profitability strong discipline onset on execution namely outlined drive the

Seagate to compelling key enabling gains our We future gains profitability. translate offer also basis, development significant on demonstrating with continued a into to our costs while TCO density per hit our milestones, bit this ability for proposition technology. drive product storage all These HAMR lower a customers areal to enhancing

starting to Qualification important ramp plans differentiator respect on shoots of trends. that terabyte track demand see in high products revenue cloud competitive with ramp light the remain we're and volume early and a XX-plus starting with [indiscernible] is increasingly for green our to fully

model, customers our entering capacity mass XXXX. by fundamentals growth uptick encouraged build-to-order constructive our transition modest are U.S. quarter We project to customers. among and we markets, dialogue on the Within confident us demand a U.S. making nearline incremental high-capacity saw in products demand more from for cloud cloud customer calendar December in regarding a revenue the again

workloads. conclusion, well are suggests as both continue nearing new industry analysis workloads core their the while a that as IT of efforts cloud Additionally, to cost-optimization include customer cloud. AI-specific enterprises migrating behavior These workloads

mass temporarily priorities capacity for demand further have slowed which of cost efforts, shifted In optimization towards for the pace infrastructure, spending addition CSPs recovery to have storage. AI-related

customers cloud have While and AI-related several coming spending IT investments the will indicated near-term in in quarters. traditional other resume servers that remains hardware a priority,

of trends enterprise HDD OEM cloud demand for markets. both and recovery the in bode well these All

These conditions that mentioned markets these same in I China economic the due regional are earlier. signals early lagging positive to

were and notable and video projects China demand within have applications demand exception, VIA in the reflecting security image investments city globally. and private been smart for both drivers a However, and key smart Public market.

the severe these China's in global are to intact of macro long trends demand uncertainties next broader believe remain we the While demand quarters. sector temper slowdown and underlying over property term, over likely couple the

systems. advances, evolving more enhance Near-term VIA's use optimistic we the monitoring AI retention the about rates. incorporating lead effectiveness systems in of data hard data AI market well are that more longer capacity offer are aside, disk increasing the solutions like basic that are from and VIA given conditions These deep analytics These of and cameras storage of to terms high-definition for to and insights fulsome solutions cost, tools suited performance. data-intensive valuable

of the with vital benefits AI the to Looking the generational mega AI generative high-capacity applications, and growth. We personal rise cost-effective, enterprise's that will anticipate which contributes to the return to healthy ongoing to to exabyte cloud. back view harness same mobile, the across migration experienced. ability a our of big data to Internet, for trend to the we to XX-year the have been be long-term our storage true technology every has From history, computing

week, us product our deliver leveraging sets to with growth at up XX-disc proven announced we terabytes capacity XX disc high-capacity X.X this Seagate's boasting Last and capacity starting backdrop. portfolio platform latest storage our terabytes. per mass nearline strongly

a configuration needs. architectural We offer customers conventional and their on or SMR deploy the capacity specific a as flexibility continue to these to based is drive drives CMR shingled

calendar qualification begin in expect with number on first 'XX. the half and enterprise of cloud volume customers We of and shipments are a to engaging

our Initial HAMR metrics. at to customer expect to the qualifications are These reliability range. products capacity to hit terabyte offer in also SMR terabytes disk density We configurations and per adopt terabyte aggressively ramping we either customers same drives and yield begin CMR flexibility well, mid-XX calendar boost early deliver XXXX. starting into X XX based progressing and technology areal or very continue to further the on

planned. the of customer and number qualifications getting positive are are we We as extremely customer broadening feedback,

We've been map possible. existing where road very technology, product stage commonality to in design building leveraging HAMR our and product process thoughtful

improve For compatible all The of electronics seventh represent complexity reduce in that and They our time products. invested our with generation ensure HAMR the the efficiency, example, drives XX-plus These terabyte many manufacturing reliability for capital PMR capital same terabyte HAMR terabyte platform products. to the using and components XX-plus is XX-plus virtually the utilize generation glass of XX-disk fourth drives as product leverages actions substrates. hasten the market.

to HAMR density and wafer in research appropriate persistent firmware, drive revolutionizes from we innumerable in cycles to balance reached areal gains design years areal density and reliability product development of nature, optimization the the HAMR electrical across now advancements evolutionary through mechanical have volume. our of of aspects many While and and investment, designs launch elements cost iterations are all between processing and optimization design

Our demand. execution and strengthening X terabytes differentiating we cycles mass us full of the per yielding of significantly portfolio, to spectrum years' time, continue addressing enabled disc products learning launch Seagate X to our expect in capacity and have and less than

bit of closing NAND comparable storage relative We and areal capacity speaking, The X/X a TCO Architecturally density storage. Simply affirm the advantages that customers sustain solutions mass offer tier. per to is are don't the data today's economy, delivering for cost less storage value data-driven advancements existing center mass relative HDD next the to mass than at basis. a NAND decade in we that we data over on business put, capacity foresee gap crucial architectures.

realize to addition power of HDDs costs, Customers these can optimizing In intensely objectives center customers on focused of conserving are across to drives. their by installed upgrading benefits data each floor higher-capacity existing space. and base

for storage or using and their the compared across savings space. new in to large HAMR-based HAMR the floor uses assets same maximize XX% than customers the build-outs and reduction in valuable center more defer half dollars. and than centers. or their a operating optionality power budgets saving and for floor offer for double offer other Xx upgrade capacity their best terabyte would about reallocate to qualification are capacity even These or to data capital monetize base space average storage power The data compelling are storage costs XX-plus existing more the This drives currently installed cost

As we customers, also are our on of value we to the deliver capturing product our benefits portfolio. focused these

that As with ensures noted supply chain price opportunity on our for a the last industry healthy adjust value, call, we commensurate which are improved over efforts long continuing customers offers to the term. TCO both and

will serve. to anticipate We have end markets benefit few quarters broadly across we implement strategy, from take we this some a already the which seen more

share Gianluca results call the hand on outlook. quarter now September I'll over our for the further and details to

of loss total expectations. revised results expanded of by Thank a you, revenue on and non-GAAP gross decline company were non-GAAP points Dave. and more margin reflecting HDD the our revenue, per September our consistent in by Seagate's sequential $X.XX XXX points, financial non-GAAP enhancing quarter basis generated share. focus margin than Despite billion gross We basis with profitability. $X.XX about XX we

sales, billion, in our Within $X.X legacy expected. steeper modest disk mass exabytes, resulted drive. essentially in sequentially quarter. to of increased XX the drive X.X terabytes shipments Average to the revenue improvement declined reflecting had HDD X% capacity by towards a we business, per shift per total flat mix sequentially originally offset drives in roughly with hard market The drive capacity higher-capacity XX% decline than prior

were XX% in over X% VIA June as of billion, $X the mainly increased quarter. Mass HDD the totaled the up a exabytes percentage capacity in just quarter. total Mass the improvement market. June XX exabytes XX capacity capacity from compared revenue driven sequentially mass shipments anticipated The to XX%, in exabytes with shipments roughly by

were increased among as shipment For began improve. of nearline products, nearline modestly demand per Average to drive customers up cloud slightly U.S. sequentially trends capacity XX quarter-over-quarter. XX% exabytes

ship customers. and in existing to continues end industry our inventory making consumption the progress at reducing cloud that believe We below is

the we more rebalance will through among that of least levels we As CSP to the customers last for year demand quarter, broadly. improve inventory to take end for mentioned and anticipate at it calendar

Specific to VIA quarter. was up sequentially the September market, the expected as in revenue

earlier, environment the However, to change seems the in term. in economic China uncertain unlikely as noted David near

of anticipate will we even the result, market an pattern a forward. As going VIA recovery reflect

million, product X of demand consumer. served, was markets with and Legacy each sequentially, down $XXX mission-critical, the XX% revenue lower in clients

to Finally, we with our non-HDD million remain quarter. spending a last $XXX to compared levels slightly more in uncertainties $XXX revenue economic revenue headwind for of business, Reserved quarter. anticipated patterns expect light December enterprise in million the and decreased similar system our than IT business

$XX Consistent revenue gross the in slightly to by compared levels the of million. profit decreased non-GAAP expanded to September Non-GAAP our Moving quarter, performance. operational XX.X% lower million margin to $XXX with adjustments activities were which cost, the approximately cost savings restructuring in prior Pricing enacted during more decrease million. in quarter $XX from earlier X% than underutilization increase mitigated revenue quarter. the and gross and

adjustment price and execute margin expect to further quarters of savings. realization cost as benefit full we to the projected see entire future across portfolio We in continue achieve

I estimated note our with the equipment in used the change capital useful that, life manufacturing. beginning certain quarter, September results reflected in of

to ability This base to X X a the efficiency fixed useful range approximately enabled quarter. existing expense asset years by range change from of to about September goods has increase within and increase us to to years. a lives million depreciation the our of December XX of reduced expected $XX extend cost by X $X to Our of the the in is quarter sold in million

$XXX June Reduced in million non-GAAP expenses million, to down quarter. $XXX operating from the

to non-GAAP slightly a conclude. do quarter reduction spending continue be certain we minor expect in manage up of begin the all to measures While actively spending, to areas December we OpEx

balance the and sheet. flow cash to Moving

improve generation. were to September in billion. have cash million under reduced prior manage $XX debt expenditures actions We $XX sequentially by to with inventory compared capital the continued working X% we $X.X Capital positive profile just take quarter. quarter, flow free million support our to to and

half For in heavily the still expect the a we 'XX, year. fiscal to year, significant of fiscal fiscal will planning spending weighted be first compared the reduction spend with are and CapEx more

and million on Free generation million the approximately We XXX million effect dividend giving quarter $XX cash last used after that was of we million the exited shares quarterly flow for had restructuring-related $XXX payments $XX outstanding. with our to highlighted calls. earning

billion $X.X undrawn in facility. We liquidity, revolving including closed our the available with quarter September credit

total were billion the During fund convertible through in transaction used interest capital used effective quarter, The approximately to a bearing $X.X were an share per call of our term the $XXX rate new of which potential of remaining price on proceeds that majority to notes future proceeds A reducing outstanding capital increased raised low X.X%. portion nearly share, a the we the retire balance billion. dilution. to the issuance convert $X.X of loans,

As million a debt interest this about basis. actions realize expect $XX of on result animal of restructuring savings an cash we to

of through sales the terms XXXX. the agreement, our our Additionally, group, we and fiscal from covenants we lender relaxed renegotiated with support debt significantly

end I billion level million, just flat September December all was expense at expense actions similar debt $XXX quarter. $X.X in quarter, at Non-GAAP balance million was sequentially the we for the up interest described, our quarter-over-quarter. that Accounting $XX expect and the of

to Turning outlook. our

We VIA quarter, our offsetting expect December mass demand. the supported by and both nearline enterprise products capacity sales from for higher to softer sequential in incremental slightly customers, demand cloud move

legacy the higher seasonal Within demand is from be consumer business, essentially while the are mainly flat. we revenue projecting non-HDD expected market, to

with range With the of minus the costs expect revenue $XXX underutilization we be percentage $X.XX to be with to better of expected non-GAAP quarter million. September to operating expect in midpoint margin December range be context, At billion, in or revenue guidance, plus flat mid-single-digit quarter. our a the relatively we

share based non-GAAP XXX shares or to a and the in plus expense count tax share We per expect $X.XX, range. on of non-GAAP narrow approximately loss $X.XX, $XX million a to minus our million

will comments. call for I now back to the Dave turn final

Thanks, Gianluca.

which in evident are very we've I'm today. our innovation operating operational longer-than-typical determination shared We've cycle, priorities, by and is financial, We proud a actions to the our drive and continued and discussed resilience. of team's

decisions We free cash generation. on our tactical are flow business focusing

We And on map are capacity restructuring balance to future growth. sheet mass actions. our data strengthening are road through debt product we address our executing

has industry past started to is improve, look recovery And of emerge capitalize. Signs XXXX. of as the Seagate calendar to we ready end conditions as

to density value map stronger, our deliver to positioning a are road and areal customers efficient our We shareholders. enhanced with extends Seagate a leadership, more company technology that

of of the call to your all Operator, let's Seagate. for our Thanks support stakeholders open ongoing for up questions.

[Operator Morgan Instructions] question comes of The Woodring from first Erik Stanley.

at if take back a So was to to Dave, grow XX% back. we step that a shipped I And could exabytes kind want Analyst capacity annual rate. of mass your expectation Day, go the

from macro the investment emergence and is priority. outlook AI world Now both today clearly the of as Board-level a of different kind

And are how as linearity that longer kind Just that. time? capacity we the capacity curious, grow? of on which look linear? at help think So us exabyte maybe that long-term mass X-year Is could the you any of of about over X- be. to term that forward, relatively strengthen what you have about mass thoughts could thinking growth Could rate exabytes kind

was the XX% Thanks back for in of the question, year. coming were a Erik. number that X Yes, off we almost

the pretty mid-XXs then all that back feeling these we're given say, good the know So last for all in to that the data your we us, current happening. point, events, Analyst through growth Day, was seeing. is And I'll we've gone

linearity, point function. a your to Look, don't think about it's I very linear

I Up can down can year, be. one very think be next, the choppy. it it

probably But out that the As see mid-XXs in would from years probably X is we will we I look good temper say time. to and now, to modeling range. X a more time growth somewhat

being the for that middle in were run that, of data think applications happened in into pandemic, of data do centers I given the centers. that of enterprise -- move the data

that going in to data still centers. think those data grow is I

peak And center AI you with then sped that and all applications top growth. big, demand there's at think that of generative up top these really lather I not will data on them, on new a be like features coming. we're growth healthy So AI

XX% for would decade or to that. any for of out years X X that's something healthy like going to CAGR be or a kind go

demand economy be won't think digestion But will as and periods growth. this well. healthy it there's think there of we growth linear. see be We'll then There flutters. be periods to will So continue I big the as do of

from The Bank Mohan Wamsi comes of America. next question of

are what near expect years qualifications you HAMR share terms shipments, in the the in what about in of ramp given term? about How talk know you many X on out? maybe you expecting can color aggregate, you And unit maybe customers qualification? Dave, X,

this if might higher you product. to maybe dollars change terabyte density super could And just would how relative per helpful. on comment shift current That areal the be

crack a that. at can I take Interesting. Yes.

the first. we are qualification, So necessarily relative customers, easiest to not prioritizing customers

we we our challenging build do make because customers, we sure on home. and that tight trying Sometimes strong we're the that we be difficult, But a will of those qualifications, they to drives has be every staying very talked sure that make bring customers. in Make there adequate more I with -- initial can will sure remarks, like have we for as demand. that prepared that supply the about think a more that's we we're

space be. projection the What them. point -- they'll TCO model we're of is their proposition, itself. the showing a will right with the TCO the we as for some value Part get power acquisition benefits cost now, customers of your of floor and exactly of to part that drive improvements it is on is That that what

going big I been biggest years. there I higher last is we've to do the So to be this like density done push be think in think for of X that has in just there's in jumps the that capacities, always industry. our And areal a the going one

So of right the growth is us. healthy ahead

with we lines millions qualifications when on -- shipments the next but filling And the or parts to time coming. are drives in lines are of HAMR year. the are, year, next based calendar volume wafer parts. We the It'll with out all the see expect

The Ho Bank. comes Sidney Deutsche next of question from

your getting to beyond the of visibility -- customers? especially rate quarter, to what earlier last to in you there? your talked timing going about give see efforts green a Can U.S. us kind It's going like normalize of with recovery are of or about Dave, quarters. in indications market. given shoots the more increase through the cloud update December some to cloud of longer-term quarter, great to couple But the is an look you you inventory rate that recovery collaboration collaboration importantly, is expecting

predictability pipeline, likewise our Yes, in on products Thanks. are out that customers time. they what in have what I we good. the predictability need giving we think there giving more Very on as are will

at of the quite some been don't was need industry make So allocations "We really that. very were like saying, we've I the through much for you would about we're strong, years look data customers quarters ago to got X year." that. and our demand something another this what say, going has and last period then where if entire now ago, X And entered Or into already centers suffering in we

like very It's factories run that. hard to

to said, right "Okay, gone compared forecasts we're we're for And are and the long-term volumes ago. the in these for years now so They're that's I customers that. we X where customers for think What the of predictable." build-to-order showing us smaller. and at why we've of let's on get showing upside were showing numbers much then asking out -- are But predictability nothing top us

a So gets demand. really true into the about it what's interesting discussion

satisfying it is your true still is data get demand I the this we're ultimately, us exactly help But And I to point, through back XX% think of when large. still large. because growth very the not very, -- the will then of period. think, CAGR

sides, trying parts process in what better predictable to people economics for for show the that we start customers. ultimately can sure our them. have both get make exactly And for and we that schedule we desperately more us to will manage all so a paid showing ourselves and better they're that we're of on trying And

next of comes Karl The BNP from question Paribas. Ackerman

drives? to prioritize ask relative OCP On they to last because your efficiency week, introduce as hyperscalers newer you SMR HAMR, those and continue metrics the power existing at I that it's metrics metrics perhaps could technology. clear discuss reliability

perhaps could with the guess customer? engagements beyond discuss as of number that existing the I also address question, maybe customer HAMR you And have you you

-- we're now. before, Yes. as said on we Karl, right customers bringing We're multiple

about qualification shipped I customers. in talk to already multiple units we've particular. them So out won't

on to so like have the course really metrics working to Yes, also to And things traditional there's the reliability no reliability drives, be we're the metrics there's and pointed normal these HAMR The power people no identical laser that, there. change but I in change down small very in either. products. power, will there's changes of mean according subsystem that.

points we I same realize and the just disc get to the mechanical mid-X beyond terabytes family per think X.X announced terabit are one or parts. should platter nodes of similar even about that per important electrical into terabyte drive the drives the those very X that with to that, per design drive thing is we the

there's same no electronics, really in mechanics, no reliability change so So there's change expectations power, in same either.

one. may I Super sneak helpful. If another

Just on moderated That quarters. systems last XX% the business. roughly X your has

outlook flash suppose, Just and kind the curious, I perhaps is much that. the drive prices for that, how of And versus that CoreVault hard of offering? in why within softness maybe

cloud or Yes. It's down I enterprise the it can't applications. either recover it more, requirements And Flash much as from has traditional thankfully, as to you copies multiple think enterprise all requirements year. was It's back massive was on-prem to cloud. I into been it. has time this sovereignty I'll it nearly keep recent think year-over-year. thought call, as well because benefit don't you've off-site been should It's the data. cases, has move as but cycle, with In that what regulatory the in the want not space on-prem and I at will of do bad many data And we too as over really or what think anyway. cyclical got of growth not the you the or

have a point, and business we're multiple recover. to should and happy our enterprise some does on-prem on think that accounts do front enterprise penetration business, on-prem when good the at recovery the I recover So into systems with

The next question comes from Fargo. of Aaron Wells Rakers

the million a of of basis. maybe last $XX guide wanted you help to little kind on the I just this Could bit, a appreciating reported the of you understand gross impact kind margin underutilization expect unpack give the to don't December going forward quarter? quarter relative you guys into that defined to us a

maybe variables quarters. cetera. about that the about, path thinking I'm out kind starts the within of guys lift of just next curious how to that couple kind et you margin XX% over do think of we starts the to as the trajectory, are how the think looking gross out of level to how about we or back glide that ramping, And model, as HAMR

guidance that implying structure. from in is will of the Yes, a that This question. the we better have December is, the September it's are coming flat underutilization quarter. improvement of from improvement cost quarter for started from, think the margin. there course, for the pricing you of impact we with Part Thank our quarter. the We fairly an gross underutilization. for course, be not But coming actions restructuring is sure already and in started and prior we taking, quarter, in the full of plan prior the coming

So now we in cost start impact seeing the structure. full our

the those gross So are the drivers margin. major in improvement for

will we continue and to Then our sequentially. also think revenue we to continue our improve will structure, increase

to that to the revenue lower. lower XX% think have margin, prior the need think peak, Now XX% say, we go back we to than a we at the, gross is let's least

of achieve lower with that level we profitability much So a can revenue.

Timothy The question comes Arcuri from UBS. of next

the gross I gross becomes margin? Gianluca, like point negative terms to in Or as for on will it of also when what positive I it's margin. wanted to be ask margin. whether HAMR some think controversy initially for crossover ramps, there's gross

of question, answer I that into off on obviously. trajectory sort depends think your margins how about But plays here? yields, just talk the you bottom the can of the to it your

Yes.

terabytes per drive, gross will accretive will see increase gross our improvement. beginning. sure, strongly drive, a said you improve be X, will But X since we capacity to margin. X, our Dave to course, when will, before, per even the As It of and for no, bigger HAMR that margin go our

'XX. in time first think lower we could new revenue to the could our X improvement yield, gross as course, a to you strongly the go every margin HAMR of and That start a fairly as new X, the will quarter limit sold. think we we the in have technology We of sequentially. first that or a Now see be improving But help, little will we into months opportunity margin. have about units and calendar million gross bit products, the we

lot does heads our just remember address XX that about also although structure. points the It's again. to or -- And Tim, point, a will, drive points, would areal highest improved mid-range, those us and that of like cost just I enables in XX it's go capacity the add, media you capacity if density capacity Or about terabytes with those terabytes factories. not

Great, yes.

that much of build-to-order just I you know you to trajectory how build-to-order inventory? guided much is first that to change revenue you is it tell what are is improving, half the having into due And maybe talk bookings? customers to about how So do the that talked how So like so and of to jumped pretty about late, also I but impacting flat, on But of smidge seems being this. bookings can wonder to and going the go revenue about is of next the through bookings the just the worked due shift where is year? to I

Yes. It's actually interesting question. an

for through is their reasons some have some the And are it because that. burned going to Maybe completely, so and predictability. they embracing customers inventory they're of there have that that we buying. do be are So know they

lower speaking, the for generally are money speculatively a right? giving because remember, into the of Everybody at think make do not it's there leaning to tough I products multiple now think rate to these least yet customers are the now. visibility, that just us the runs, we, and make at the decisions. right . But start procurement doesn't better all decisions various who I bunch reasons. just so They time, has industry industry years have

so get going We for that have start, and the make do to we on. are suppliers what to paid sure

sure the TCO take we out to want the capacity generally and we that well. and proposition is put front make pretty like higher points that value as capacity of will terabyte point, X-plus higher advantage model the in I X-plus And of think I think them. working disk show then out terabyte they people can per

it pick So anticipate steam. will I up

quarters are X still that or We quarters or that. like X things are doing something

get everything, as to can so that we our negotiations to back investing the in the continue there's make continue and And we value be least that. we so will those can right on, sure But can industry and we in industry. everyone that to by returning think at frustrated where point keep that ourselves, so suppliers, a negotiations I

That's I that's done one point. we've important this. think an the reasons of

comes TD Cowen. Krish question next The Sankar from of

X-part had a I question.

folks exabytes to shipped nearline about the is you First XX quarter. customers in

Given you the going hit think the run rate will calendar view sometime you to that in 'XX, exabyte nearline improve in XXX calendar 'XX? is do

And HAMR the what Gianluca, more demand the quarter gross customer and prior was versus the reason quarter helpful. seems in for purchasing Dave then that? Any most it about would HAMR a of that on quarters. had improvement give Was to next or all any this of Kind the there better follow-up confident it curious, year? margin increased you is that is, be milestones? visibility some Or color into and

the our Yes. -- I and make targets. time the would qualifications on, And reliability progress, qualification. we above, get of can say progress maybe against more certainty see all we the as and of the the teams more targets, the towards end marches yield we as have

qualification going. before, all platter, exactly we're we'll So which also made of is the forward this how are factoring continue that almost those point again, to everyone confidence, it's X.X this things with into starting the I . Remember same I box. and update into our per think going terabyte

the vendors and through PMR a parts, vendors, we're vendors have these the lion's platforms. share common same we so the the that of outlet X parts most to commonality, And of driving the of for have

things in paid that. people much that volume like we So can more get and predictably drive and

nearline. exabytes is too for you aggressive? the next XXX year? And Can then exabytes it hit on Or

Yes.

sequentially probable and that quarters. for double probably think those 'XX, but think in is current will can very year the we calendar we exabyte, we the fiscal the I grow all not

of question next The Barclays. Curtis from comes Blayne

I here. on just talked have name for better wanted Sorry the O'Malley is near you line at QX. And This about and here. is of kind December. about pushed Barclays. the of then to you And recovery bit QX, a previously mixup end timing talked Tom to particular. this understand about it's of in the a the

kind be step Or in again, you for update just that kind when your in You're of in you this elongated the of U.S. Is expectations for expected things March? market so do seeing uptick and the that would recovery cloud helpful. still Any given said, expect But on up market? situation? the have December. inventory September

thanks. Tom, Yes,

the I a last quarter. uptick. gradual think same about we're plan we that talked still on It's

new So we're in. We're being orders inventory the come seeing watching depleted.

but not the the the the customers, global world. a But and think global a same some one cloud we'll the gradual than customers, plan, variable still U.S. I on of have maybe cloud the issues some given see that we're speaking, some of of maybe uptick stick. rather cloud would customers, of various the be hockey economic parts generally in we

gross well, midpoint slightly the as And then in points gross about operating and guidance actually taking just implies you're up the sequential side expenses improvement of basis XXX-plus margin margin. quarter. just in talking on the of It December

other understand pricing to in you the impacting full other are that benefit than terms Is to VIA going mix pretty pointed -- nearline that down levers that get levers gone be some in December? some pricing, you the any could benefit to, have Obviously, But quick are or there. point I but just you that increases, December. contributing will with other that any to there and up.

driving that is is thing say only pricing the up. margin important. not will cost the gross the side Actually, I Yes. very

the executed COGS, much full the quarters course, OpEx. the higher. little OpEx not a bit have are going into of could also in but in prior all plan restructuring now impact be higher, that we that We our our of

a talking few are higher. dollars we So about million

So right sequentially. our I margin say cost pricing direction improve and should to gross would go the both in

right? product in proposition going can We're drive, through work can the the of on -- a we And with we some the TCO the better next that. also by on and and may there's sorry, a customer as then just go products, cost of those increases offset one to price be So older raise clear. transitions,

the and So that. mix see the benefit, for plays incentivized a role, the they're and customers can TCO

of question comes next Steven The from Fox Advisors. Fox

XX, lot understanding said cyclical about that what the there's XX you a sort headwinds still recovery, macro there. the months last is in Dave, macro has decline outdone everything obviously, your doing. of sales a out of over And

cycles as in than much curious, business, tough more business pressures, more you recovering? you I'm where point in would think other may macro like with there the anything of? can idea cloud limit So that, particular spending not that to Or get you you just that how we as comfortable your just Is see keeps outgrew environments.

Thanks. Right.

grow, data environment. continues time. I economics right. and the to say is their want that will a You're improve people It to all tough

have data centers hard So of the the enormous that world number in an exist drives.

So we're aging large. going are those are fairly to various see of for just actually upgrades -- could The refresh some reasons, some them power, off. be of

drives that economical buying are replacing data in still and a I market through X be system. centers. may that mean, about -terabyte ripple drive will think your those XX-terabyte you benefits the If

think And attention new everyone through going investments mean, we inventory the with being But still that And costs there depleted of the opportunities big, the obviously, some is already of products that, macro. do on think since to to have data make, growing the is some the also do cycle, cases, so will it to on will be macro. paying the in world. and to that is bucks go so already I I coming. the I in also have be trend some side there been of that save the early around what's we've

there's out there bubble not anymore. inventory that massive So

want That's year. interesting assume I half But in gross if QX us our color. give And charges you should likely directionally of that mean, think just can you sort long are charges of keep first the give specific can in next you Gianluca, to underutilization don't QX smaller you -- a like calendar I even calculations? for margin keep for how we to there sense and then, modeling

could little of calendar top a of is than QX and -- bit that the cost December, we of in still bit have Yes, a But producing volume little have the a probably the installed what cycle course. what course, underutilization bit before. calendar in we to had are QX, lower we be we also expect below at

comes question Loop of Ananda Baruah next Capital. The from

to sort up the through think, to and opportunity just you given of, things I for offline? about starting capacity tight you've go that increases, get firm Yes, taken to start I 'XX. Dave, the just through Q-over-Q What's guess, that see given go you're talking 'XX saying the as in nearline as you

the kind data said growing Well, tightness that know in before, interesting all the being generated quickly to actually relative The data quite of in is growing some on we is quickly. points, of the now there data times we hard think I like because, amount I that's And is the done centers, think reacting that. current right -- of drive that capacity the and as at not highest of frankly, the parts, anything just as be. exist much to especially lead damage because some of chain there's the used supply the to been industry flex

my we may think see I upgrading of I of where see environment enter the an so part we here now. say, And -- people "Okay, economics into may fleet

Let's and "Well, space. allow power, me might get time the save go then it. It and in, x, will do challenge." orders will they be their me ahead call we'll the It me will it growing." once to that's answer And data that the for save the is lead say,

simply I gains just used I have it may to. a things drive does when itself. don't when, it the hard think get that because know will and could into I tight that certainly get how immediate industry the like manifest exactly situation not that capacity that's but So we think

the the occur it's to type I then that long-term up, mean, some that? find... impacts of been the goes still deal. Is past, in stuff if -- And pricing downstream are what so what you that of the that could agreement,

But right. exactly we're they we're base that's models us at some I some -- think visibility. customer build-to-order these predictable sense, predictable in get because give we're least can the -- a we helping with if the why customers addressing outcome financial That's

Mark . the The next question Benchmark comes from Company. Miller of

when just will of I'm magnitude any idea these ramp? And to VIA in think on next you cameras in the opportunities AI sales mentioned opportunities these start for You do really year? opportunities and other wondering, terms of areas.

Yes, lot Mark, AI. quantify hard stuff to I'll of data say, say a yet, just think big I it's there's really going around in, but on

Chief appointing it to got able case allowing more we be base, might in monetize to us the we that tools what's want our its track up and You've just so people with to value, customer where or Data that process? are on to some understand data, forth, is that factories. retain So now about end with Officers

I in in the cloud. I So think is all will think up personal the it don't move my to throwing term that of data we're of away the edge. the will do innings of And it of longer some a benefits for keeping a of early from opinion lot that corporations. end be

a lot be think it will I on the of actually edge.

just it's very is this so yet. carefully. something think tracking don't itself manifests we're And I that really

will to I I queries much branded a user applications them. which be being some more these and kind that them interface, maybe the think people of new of believe much certainly, the be understand of new if And are applications know is used that made generative are get to -- you AI efficiently. more using AI, application and application like will, allow things efficiently to to I like capabilities

in and is that that us. think know that's early good and longevity to critical, latch, going data the still And that I think we're data of I the But data and innings. all integrity once does of we're I think it the for so

idea Can any fiscal a CapEx or you 'XX. lower range would mentioned be? You it us for give would

-- inside so spending. our probably X% very of I X% existing of we think is to the we'll revenue. the down, range, But revenue of since far mindful are stay we are

to that we as get quickens, certain However, we tools possibly as to the soon And according can the will as quickly we can. HAMR pace. up pace as see we need -- bring a there if

. well understand is, and what we'll recipe we spend what's and recipe understand accordingly. needed to really we the the make So

Rakesh of question come last Vijay The Mizuho. will from

was units? by or you quickly the would exiting at side. be mix either Just just wondering, calendar exabyte on when what HAMR 'XX, I look of HAMR your

said? you 'XX, Calendar

Yes.

the precisely on Yes, I mix. don't far time think we in guide so

going doing disc like platforms guide talked right? we I industry optimization Yes. I aggressive. very drive of will we'll something that. for We're things years be When rates decades, But these and and that to about per cost not a years, and is years that. mean this and hard that has say been

long. we're very in very technology, we'll We these transitions. confident times look do So aggressive how are the also be and wafer to to lead The we there. quite know

already wafer. on in this we're because starting So already we're journey

populating it. support we're will the the parts fabs wafer so And that with

shipments obviously, Got the nearline come it. And bit. quite have the a easements down then side, on

would comfortable, feel As do back, inventory at OEMs and at you you you the look green a are terms at some shoots you center pretty what return coming look that characterize in if X? those see levels spend? the of on the given How you data the with what

inventory has front that world needs think to do been Yes. how depleted all in and center. them the of complexity data and of that about much growth the data material parked of out I be for them of replacements is levels the the the if data the then think now you centers to what in

people down inventory feel going levels predictable I point that get to now have . think come more to we back buying are comfortable the to a where patterns.

for management like closing This turn would remarks. I concludes over back our any to conference to session. question-and-answer the

Thanks, Andrea.

once shareholders by our support technology we our their near Thanks our all today, capture joining on for opportunities long-term to to As speaking including you again of for and map, thanking key ongoing look the over Seagate. to and the leading positions executing Seagate term heard focused with well road which us enhance profitability us during for today, of mass you forward capacity storage. I'll remains close believe quarter. priorities, we

you attending you for today's conference Thank has now disconnect. now The may and concluded. presentation,