Seagate Technology (NASDAQ:STX) CFO Gianluca Romano told investors at a Bernstein event that the company’s outlook for nearline hard disk drive demand remains broadly aligned with industry expectations, while Seagate continues to execute a pricing strategy aimed at improving profitability and encouraging adoption of higher-capacity drives.
Nearline demand outlook and supply conditions
Romano said Seagate generally agrees with a “mid-20s” nearline exabyte compound annual growth rate outlook over a multi-year period, noting the company presented a similar forecast at its investor day in May of last year. He emphasized that year-to-year growth can vary, and that current industry shipments reflect supply more than demand.
Pricing strategy: consistent increases, stable averages
Romano said Seagate is not changing its pricing strategy, which he described as consistent over nearly three years. He said that when contracts are renegotiated, Seagate typically implements “a little bit of price increase,” with the goal of pushing customers toward the newest products and driving higher exabytes without expanding unit output.
He acknowledged Seagate could be more aggressive on pricing given that demand is above supply, but said stability and visibility are important. Romano said Seagate aims to avoid “unreasonable” price increases, preferring steady improvement over volatility. He added that Seagate expects average price per terabyte to be “flat to slightly up” based on orders for calendar 2026, consistent with prior commentary made during an earnings release.
Romano also discussed how average pricing can be affected by mix, including introductory pricing dynamics for customers adopting higher-capacity products for the first time. He said the “offset is very limited” and that overall average price per terabyte should show stability and some increase through the rest of the calendar year.
NAND comparison: limited substitution in Seagate’s core business
In response to questions about sharply rising NAND flash prices and whether that could shift demand toward hard drives, Romano said Seagate’s nearline data center business has limited overlap with SSD storage. He described cloud architectures as typically separating HDD-based storage from NAND used when applications need to run, with data moved back and forth as needed.
Romano said the overlap is “very, very limited” in Seagate’s core public cloud segment and that any incremental demand driven by NAND’s price moves would be difficult to fulfill anyway because Seagate already sells 100% of its exabyte output.
He added that price sensitivity and potential substitution are more relevant in lower-capacity segments, including consumer, client, and some OEM areas. Romano said higher NAND prices may temporarily help Seagate’s “Edge IoT” segment—about 20% of quarterly revenue—by supporting both volume and pricing, but he reiterated that the majority of Seagate’s revenue is tied to data centers.
Addressing market chatter about hyperscalers switching from HDDs to NAND due to HDD supply constraints, Romano characterized it as “people talking,” reiterating his view that HDD and NAND serve different purposes in large cloud environments.
Technology roadmap: HAMR yields, cost per terabyte, and Mozaic 4+
Romano said Seagate’s HAMR products continue to see yield improvements typical of new technology ramps, though he noted yields are not yet at the level of the company’s long-established PMR technology. He said initial HAMR qualification began in November 2024.
He described Seagate’s current HAMR generation as Mozaic 3+, with the company now on what he called a fourth-generation HAMR platform around 30TB drives that can extend into the mid-30TB range. Romano said Seagate is qualifying a second HAMR platform that starts at 40TB SMR and is expected to grow into the mid-40TB range over time.
On cost, Romano said that while Mozaic 3+ is roughly similar in cost per terabyte to the last PMR products, the company expects a more meaningful cost decline beginning with the 40TB generation. He also confirmed that more than 20% of Seagate’s nearline exabytes shipped last quarter were HAMR and that those shipments were “all Mozaic 3+.”
Romano said Seagate is currently qualifying Mozaic 4+ with two large U.S. cloud customers and expects to ramp volumes more in the second part of the current calendar year.
Capacity approach, SMR trend, and capital returns
Romano said Seagate’s factories are “full” and that the company has “no interest in adding units,” preferring to grow exabytes through higher capacity per drive rather than increased unit volumes. He added that, in his view, Seagate is not the primary bottleneck preventing new data center builds.
On SMR, Romano said Seagate sells both SMR and CMR, with SMR increasingly favored by large public cloud customers. He said the SMR share is “continuing to increase,” though Seagate has not recently disclosed a specific percentage. He also indicated pricing differences between SMR and CMR are not significant in general, describing pricing as centered on terabytes delivered for a given customer relationship.
Financially, Romano pointed to “11 quarters of consecutive improvement” in pricing and cost, driving gross margin expansion. On capital allocation, he said Seagate’s stated policy is to return more than 75% of free cash flow to shareholders, but he did not rule out returning essentially all free cash flow over time, as the company has done in the past. Romano said Seagate has prioritized debt reduction in recent quarters, noting debt had been above $6 billion and is now below $4 billion after a recent convertible-related transaction, with expectations to reduce it further.
About Seagate Technology (NASDAQ:STX)
Seagate Technology (NASDAQ: STX) is a global data storage company that designs, manufactures and sells a broad range of storage products and systems. The firm’s product portfolio includes traditional hard disk drives (HDDs), solid-state drives (SSDs), hybrid storage devices and integrated storage systems aimed at enterprise, cloud, OEM and consumer markets. Seagate also provides services that support its hardware offerings, including data recovery and storage management solutions.
Seagate’s products are used in a wide array of applications, from large-scale data centers and cloud infrastructure to desktop and portable consumer devices.
