Goldman Sachs Communacopia + Tech Conf 2025: Seagate CFO on Cloud Demand, HAMR, and Fin. Outlook

Key Takeaways

TL;DR: STX’s shift to build-to-order, steady pricing, and HAMR ramp are driving GP, visibility, and predictability. Cloud demand robust, high cap. utilization, and migration to higher-cap drives. Expect further margin expansion as HAMR scales (esp. 40TB+), OpEx efficiency, manageable debt, and strong FCF. NAND/SSD not a near-term threat to HDD share in DCs. Cap structure and mix tailwinds support margin/earnings growth over next 12–18m.

Key Investment Topics

1. Sector/Industry Dynamics & End-Mkt Demand

• Structural Tightness & Discipline:
  • HDD industry “fairly full,” no excess inventory; all units sold—tight S/D.
  • Build-to-order model (last 9Q) = improved predictability, pricing discipline vs. prior cycles.
• Cloud Driving Exabyte Demand:
  • Cloud = dominant customer; migration to higher-cap drives (24TB, 30TB, 40TB, 50TB soon).
  • “Vast majority of exabytes” to cloud; DC mix rising, edge/client (esp. low-cap HDD) to “continue to decline.”
  • Customers incentivized to move up capacity ladder (better TCO, higher price for legacy), driving predictability and profit expansion.

2. Pricing Power & Methodology

• Consistent Upward Pricing:
  • “We started to increase price...slowly, but very consistently” w/ each new build-to-order cycle.
  • Customers “used to it”; non-migrators pay more for old drives.
• Pricing Determination:
  • No material diff. per-exabyte vs. per-drive; customer focus = exabyte growth.

3. Tech Roadmap & Competitive Position

• HAMR Transition:
  • HAMR = next-gen cost-down, perf. leadership:
    • 30TB HAMR “slightly better” than last-gen PMR on cost/TB; “clear crossover” and “big cost saving” at 40TB+.
    • 40TB HAMR qual. began July; “4 cloud customers out of big 7” now qual. (incl. 3 major US hyperscalers + 1 intl).
    • Production ramp accelerating: “Good improvement in HAMR prod. every Q.”
    • Cost curve progress: “between 40TB and 50TB, probably 18–24m.”
  • Impact on Margin:
    • “Big help [to margin], already helping a little...much more near-term as 40TB HAMR ramps.”
• HDD vs. NAND/SSD:
  • Cost/bit “delta is huge” (6x–8x lower for HDD). “90% [cloud data] still on HDD.” No imminent NAND share threat in cloud: “cost curve...for at least a few years is not going to reduce, actually going to increase [in favor of HDD].”
  • HAMR to widen HDD cost adv. over SSD.

4. Ops & Fin. Fundamentals

• GP Trajectory:
  • “More than doubled our GP and increased rev.” since strategic shift.
  • Outlook: “Every Q, higher rev., higher profitability...big help from mix moving 24TB→30TB→40TB, where we generate cost reduction and improve profitability.”
  • “No reason to have a different trend [into 2026].”