Seagate Technology (STX) Morgan Stanley Technology, Media & Telecom Conference 2026 summary

Demand trends and industry drivers

• AI, especially Video AI, is accelerating data storage demand, with growth arriving faster than expected in recent quarters.

• Data growth is not limited to AI; applications like autonomous driving are also contributing.

• 90% of storage remains on hard disk, and the focus is on increasing capacity per unit rather than unit count.

• Customer agreements now provide strong visibility into exabyte volume needs through 2026 and into 2027.

• The industry has shifted from transactional to partnership models with major customers, enhancing long-term planning.

Technology and product innovation

• Transition to higher-capacity drives, notably the 40TB HAMR (Mozaic 4+), is underway, with major customers now qualified and shipments starting.

• Focus remains on increasing areal density per disk for better returns, with future potential to add more disks per drive.

• Cost per terabyte is declining significantly as capacity per unit rises, with stable bill of materials.

• The ramp of new technology is limited by internal manufacturing cycle times, not external supply constraints.

• Target is to reach 70% of nearline exabytes sold with HAMR technology by June 2027.

Financial outlook and capital allocation

• Revenue and profitability are expected to increase each quarter of 2026, supported by strong demand and pricing.

• Gross and operating margins are already above 40% and 30% respectively, with further improvement anticipated.

• OpEx is expected to remain stable, with only minor increases from annual salary adjustments.

• CapEx will stay at 4–6% of revenue, focused on technology transition rather than unit expansion.

• Free cash flow is being used for both debt reduction and share buybacks, with a goal to return nearly all to shareholders after deleveraging.