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    STX
    Earnings call· Jun 2025(Q4 FY25)

    Seagate Technology Holdings Q4 FY25 earnings call STX

    Jul 29, 2025 Source

    Executive summary

    Seagate Q4 FY25 — Strong Profitability and HAMR Momentum

    Seagate concluded fiscal 2025 with robust financial performance, driven by strong demand for mass capacity storage, particularly from cloud and edge AI workloads. The company is successfully executing its HAMR technology roadmap, which is enhancing profitability and cash generation, and plans to resume share repurchases, reflecting confidence in its future outlook.

    Highlights

    5

    • Revenue grew 30% year-over-year to $2.44 billion in Q4 FY25, and 39% for the full fiscal year to $9.1 billion.

    • Non-GAAP gross margin reached a record 37.9% in Q4 FY25, improving for the ninth consecutive quarter.

    • Non-GAAP EPS was $2.59 in Q4 FY25, near historic highs, and $8.10 for the full fiscal year.

    • Free cash flow nearly doubled sequentially to $425 million in Q4 FY25.

    • The company expects to resume share repurchases later in the September quarter, enhancing capital returns.

    Concerns

    2

    • The global minimum tax rate, effective in FY26, will impact both GAAP and non-GAAP tax rates, starting at 16% for the September quarter.

    • Higher diluted share count of 221 million for the September quarter, due to convertible notes and equity compensation, will impact EPS.

    Guidance & targets

    16
    CategoryTargetConfidence
    Revenue
    $2.5B +/- $150M
    high materiality
    High
    Non-GAAP Operating Expenses
    approximately $290M
    medium materiality
    High
    Non-GAAP Operating Margin
    mid- to high 20s percentage range
    high materiality
    High
    Non-GAAP EPS
    $2.30 +/- $0.20
    high materiality
    High
    Capital Expenditure as % of Revenue
    4% to 6%
    medium materiality
    High
    Free Cash Flow Generation
    expand further
    medium materiality
    High
    Share Repurchases
    resume
    high materiality
    High
    Global Minimum Tax Rate
    mid-teens
    medium materiality
    High
    Mozaic 3+ Shipments
    expanding to additional CSPs
    medium materiality
    High
    Mozaic 4TB per Disk Platform Volume Ramp
    begin volume ramp in the first half of calendar 2026
    high materiality
    High
    HAMR-based Nearline Drives Exabyte Shipment Crossover
    second half of calendar '26
    high materiality
    High
    5 Terabytes per Disk Technology Introduction
    early calendar 2028
    medium materiality
    High
    10 Terabytes per Disk Technology Demonstration
    demonstrate in the lab
    medium materiality
    High
    Longer-term Revenue Growth
    low to mid-teens
    high materiality
    High
    Longer-term Gross Margin
    40%
    high materiality
    High
    Longer-term Incremental Gross Margin
    50%
    high materiality
    High

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    Mass Capacity
    Topped the $2 billion mark in Q4 FY25. Nearline shipments into cloud and edge data centers made up the vast majority of mass capacity volume.
    Shipments: 151 exabytesPrior Quarter Shipments: 133 exabytes
    		$2B40%15%—
    Nearline (within Mass Capacity)
    Represented 91% of mass capacity exabytes in Q4 FY25. Sales into enterprise OEM market showed modest sequential improvement.
    Shipments: 137 exabytesPercentage of Mass Capacity Exabytes: 91%
    		—52%14%—
    Legacy Market
    Sales from the legacy market in Q4 FY25.
    		$270M—6%—
    Other Product Lines
    Revenue from other product lines in Q4 FY25.
    		$163M—3%—
    Data Center (New Framework)
    Includes nearline products and systems sold into cloud and enterprise customers, as well as cloud-based VIA applications. New reporting framework starting September quarter.
    Percentage of FY25 Revenue: 75%
    		————

    Operational metrics

    25
    Non-GAAP Gross Margin
    37.9%up 170 bps sequentially
    Q4 FY25

    Achieved record gross margins.

    Non-GAAP Operating Margin
    26.2%up 270 bps sequentially
    Q4 FY25
    Non-GAAP EPS
    $2.59
    Q4 FY25

    At the high end of guided range.

    Non-GAAP EPS
    $8.10
    FY25

    For the full fiscal year 2025.

    Non-GAAP Operating Expenses
    $286Mup 4% quarter-over-quarter
    Q4 FY25

    In line with expectations.

    Other Income and Expenses
    $73Mdecreased 9% sequentially
    Q4 FY25

    Due in part to lower net interest expense.

    Adjusted EBITDA
    $697Mup 24% quarter-over-quarter and up 73% year-on-year
    Q4 FY25
    Non-GAAP Net Income
    $556M
    Q4 FY25
    Diluted Share Count
    215M
    Q4 FY25

    Used for Q4 FY25 non-GAAP EPS calculation.

    Capital Expenditures
    $83M
    Q4 FY25
    Capital Expenditures
    $265M
    FY25

    For fiscal year 2025.

    Capital Returned to Shareholders (Dividend)
    $153M
    Q4 FY25

    Through quarterly dividends.

    Capital Returned to Shareholders (Total)
    nearly 75%
    FY25

    For the fiscal year.

    Cash and Cash Equivalents
    $2.2Bincreased 9% sequentially
    Q4 FY25

    Ample liquidity at quarter end.

    Undrawn Revolving Credit Facility
    $1.3B
    Q4 FY25

    Part of total liquidity.

    Debt Reduction
    $150M
    Q4 FY25

    During the quarter, including retiring $505M through a new $400M note issuance.

    Gross Debt
    $5B
    Q4 FY25

    Exited the quarter with this amount.

    Net Leverage Ratio
    1.8x
    Q4 FY25

    Anticipate further reduction in coming quarters.

    Hard Drive Revenue
    $2.3Bup 14% sequential
    Q4 FY25
    Volume Shipments (Total)
    163 exabytesup from 144 exabytes in prior quarter
    Q4 FY25
    Tax Rate (Non-GAAP)
    16%
    Q1 FY26

    Used for September quarter EPS guidance.

    Diluted Share Count (Non-GAAP)
    221M
    Q1 FY26

    Used for September quarter EPS guidance, reflecting estimated dilution from convertibles and equity compensation.

    Convertible Notes Dilution Threshold
    ~$108
    Q1 FY26

    Dilution occurs when stock trades above this price.

    Exabyte CAGR
    mid-20s
    Longer-term

    Reiterated from Analyst Day.

    Like-for-like Pricing
    slightly increase
    Ongoing

    Expected with new build-to-order contracts.

    Industry KPIs

    8
    MetricValueDetails
    Capital return FCF$425MUSD
    Gross margin drivers37.9%%
    Exabyte bit shipments163 exabytesexabytes
    Long term supply agreements—
    Component supply constraintsno major constraint
    Capacity roadmap qualification—
    Revenue mix by end market segment—
    Revenue per terabyte cost per exabyte—

    Orderbook & backlog

    1
    Nearline exabyte production capacitylargely spoken forQ4 FY25

    Through the middle of next calendar year (mid-CY26), with visibility building into the second half of CY26. Based on build-to-order strategy.

    Product announcements

    4
    ProductTypeDetails
    Mozaic 3+ productsexpansion
    Mozaic 4 terabyte per disk platformmilestone
    5 terabytes per disk technologyroadmap
    10 terabytes per disk technologyroadmap

    Risks & headwinds

    3
    Global Minimum Tax Ratestarting FY26

    mid-teens

    EPS Dilution from Convertible Notes and Equity CompensationQ1 FY26 onwards

    221 million diluted shares for Q1 FY26 guidance; dilution occurs when stock trades above ~$108

    Mitigation: Target to partially offset the dilutive impact of convertible notes through share repurchases, expected to resume in the current quarter.

    Evolving Trade Policy Landscape

    minimal tariff-related impacts expected

    Mitigation: Closely tracking developments and ready to deploy mitigation strategies to minimize potential future impact.

    What to watch in Q1 FY26

    5

    Mozaic 3+ Customer Expansion

    next quarter
    CurrentShipments expanding to additional CSPs in September quarter
    TargetConfirmation of expanded shipments and additional CSP qualifications

    Why it matters

    Indicates successful adoption and ramp of HAMR technology across a broader customer base, crucial for exabyte growth.

    We are tracking to plan with shipments expanding to additional CSPs in the September quarter.

    Q&A highlights

    5

    The implied gross margin expansion for the September quarter seems low (around 20 bps sequentially) based on consensus math, despite confidence in reaching 40% gross margins soon. Can management clarify the puts and takes?

    Gianluca Romano stated that the analyst's estimate for implied gross margin expansion is significantly too low. He affirmed that the company is on track to achieve its Investor Day milestone of 40% gross margins, with September quarter showing significant improvement in both revenue and gross/operating margins.

    “I would say your estimate is a bit low. Actually, I say is significantly lower than what is implied in the guidance. So we have just achieved a new record high in our history in terms of gross margin and having a very high operating margin. But we are guiding up revenue. We are driving up gross margin and operating margin, I would say, significantly more than what you are modeling right now.”

    asked by Erik Woodring · answered by Gianluca Romano

    2 min read5 chapters

    Detailed Narrative

    01

    Q4 FY25 Performance Highlights

    Seagate delivered strong financial results for Q4 FY25, with revenue increasing 30% year-over-year to $2.44 billion. Non-GAAP gross margin reached a record 37.9%, marking the ninth consecutive quarter of improvement. Non-GAAP EPS was $2.59, near historic highs, and free cash flow nearly doubled sequentially to $425 million. For the full fiscal year 2025, revenue grew 39% to $9.1 billion, with non-GAAP operating profit more than tripling to $2.1 billion.

    02

    HAMR Technology Ramp and Product Roadmap

    The company is making significant progress with its HAMR-based Mozaic technology. The high-volume ramp of Mozaic 3+ products is on track, with shipments expanding to additional Cloud Service Providers (CSPs) in the September quarter. Qualification for the Mozaic 4 terabyte per disk platform has begun with a global CSP, and volume ramp is expected in the first half of calendar 2026, leading to an exabyte shipment crossover on HAMR-based nearline drives in the second half of calendar 2026. Seagate also targets introducing 5 terabytes per disk technology in early calendar 2028 and demonstrating 10 terabytes per disk in the lab around the same time.

    03

    AI-Driven Demand and Edge Growth

    Seagate is experiencing strong global cloud demand for its nearline products, with its build-to-order capacity largely committed through mid-calendar 2026. AI-supported applications are increasingly driving mass data storage needs in both cloud and edge data centers. Examples include tiered storage solutions for social media platforms and new storage systems for AI applications from enterprise IT infrastructure providers, leveraging HAMR technology to optimize TCO and data utilization.

    04

    Capital Allocation and Shareholder Returns

    Reflecting confidence in future profitability and cash generation, Seagate expects to resume share repurchases in the current quarter. The company reduced its debt balance by $150 million in Q4 FY25, exiting the quarter with gross debt of approximately $5 billion and a net leverage ratio of 1.8x, with further reductions anticipated. Nearly 75% of free cash flow was returned to shareholders for the fiscal year.

    05

    New End-Market Reporting Framework

    Starting in the September quarter, Seagate will adjust its end-market reporting to focus on two main areas: data center and edge IoT. The data center market accounted for about 75% of fiscal 2025 revenue, encompassing nearline products and systems for cloud and enterprise customers, as well as cloud-based VIA applications. Edge IoT includes consumer and client-centric markets, along with network-attached storage, aligning with industry practice and the AI-driven market.

    AI-generated summary of the company’s earnings call. Not investment advice.