Seagate Technology Holdings plc

Previous wording

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical fact. These statements include, among other things, statements about our plans, programs, strategies and prospects; anticipated shifts in technology and storage industry trends, and anticipated demand for and performance of new storage product introductions; expectations regarding market demand for our products and technologies and our ability to optimize our level of production and meet market and industry expectations and the effects of these future trends on our performance; financial outlook for future periods; expectations regarding our ability to service debt, meet debt and credit agreement covenants and continue to generate free cash flow; expectations regarding our ability to make timely quarterly payments under the Settlement Agreement with BIS; the impact of macroeconomic headwinds and customer inventory adjustments on our business and operations; our cost saving plans, including our ability to execute such plans, the projected savings under such plans and the assumptions on which the plans and projected savings are based; expectations regarding our business strategy and performance; the sufficiency of our sources of cash to meet cash needs for the next 12 months; and our expectations regarding capital expenditures and dividend issuance plans. Forward-looking statements generally can be identified by words such as “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “should,” “may,” “will,” “will continue,” “can,” “could,” or negative of these words, variations of these words and comparable terminology, in each case, intended to refer to future events or circumstances. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. Forward-looking statements are based on information available to the Company as of the date of this Quarterly Report on Form 10-Q and are subject to known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from historical experience and our present expectations or projections. Therefore, undue reliance should not be placed on forward-looking statements. These risks and uncertainties include, but are not limited to, those set forth in “Part II, Item 1A. Risk Factors” in this Quarterly Report on Form 10-Q. We undertake no obligation to update forward-looking statements, except as required by law.

Current wording

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical fact. These statements include, among other things, statements about our plans, programs, strategies and prospects; anticipated shifts in technology and storage industry trends, and anticipated demand for and performance of new storage product introductions; expectations regarding market demand for our products and technologies and our ability to optimize our level of production and meet market and industry expectations and the effects of these future trends on our performance; our ability to successfully integrate acquisitions with our existing business; financial outlook for future periods; expectations regarding our ability to service debt, meet debt and credit agreement covenants and continue to generate free cash flow; expectations regarding our ability to make timely quarterly payments under the Settlement Agreement with BIS; the impact of macroeconomic headwinds and customer inventory adjustments on our business and operations; uncertainty related to tariffs, trade restrictions or evolving global trade policy; our cost saving plans, including our ability to execute such plans, the projected savings under such plans and the assumptions on which the plans and projected savings are based; expectations regarding our business strategy and performance; the sufficiency of our sources of cash to meet cash needs for the next 12 months; and our expectations regarding capital expenditures and dividend issuance plans. Forward-looking statements generally can be identified by words such as “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “should,” “may,” “will,” “will continue,” “can,” “could,” or negative of these words, variations of these words and comparable terminology, in each case, intended to refer to future events or circumstances. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. Forward-looking statements are based on information available to the Company as of the date of this Quarterly Report on Form 10-Q and are subject to known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from historical experience and our present expectations or projections. Therefore, undue reliance should not be placed on forward-looking statements. These risks and uncertainties include, but are not limited to, those set forth in “Part II, Item 1A. Risk Factors” in this Quarterly Report on Form 10-Q. We undertake no obligation to update forward-looking statements, except as required by law.

Previous wording

During the December 2024 quarter, we shipped 151 exabytes of HDD storage capacity. We generated revenue of approxima tely$2.3 billion with a gross margin of 34.9%. Our operating cash flow was$221 million and we paid$148 million in dividends.

Current wording

During the March 2025 quarter, we shipped 144 exabytes of HDD storage capacity. We generated revenue of approxima tely$2.2 billion with a gross margin of 35.2%. Our operating cash flow was$259 million and we paid$152 million in dividends. We reduced our outstanding debt by $536 million through repayment of the 2025 Notes and partial repurchase of certain senior notes.

Previous wording

During the December 2024 quarter, revenue growth was driven by continued improvement in demand for our high capacity nearline drives from both cloud and enterprise/OEM customers along with seasonal uplift from certain other markets. We remain focused on improving operational efficiency and enhancing profitability, supported by expected increasing demand for our higher capacity nearline products alongside ongoing cost management and pricing actions. We have been increasing our factory production levels in light of higher demand. Temporary supply constraints are anticipated to impact our ability to fully respond to customer demand in the March quarter. These constraints are due to production related challenges that have now been resolved. We continue to operate in a dynamic macroeconomic environment, which may impact our business and results of operations. However, we expect our HDD storage business to benefit from further growth in data demand, including potential demand driven by the adoption of Generative AI applications.

Current wording

During the March 2025 quarter, we experienced increased demand for our high capacity nearline drives primarily from cloud customers, offset by the typical seasonal slowdown in certain of our other end markets. Temporary supply constraints impacted our ability to fully address customer demand during the quarter. These supply constraints were due to production related challenges that were resolved during the quarter. We continue to operate in a dynamic macroeconomic environment marked by rapid shifts in trade policies that began during the March 2025 quarter and increasing geopolitical tensions. These factors may impact our business and results of operations. We will continue to monitor the situation and assess plans to mitigate future risk to the business. Over the long-term we expect our hard drive storage business to benefit from further growth in data demand, including potential demand driven by the adoption of Generative AI applications.

Previous wording

Revenue in the December 2024 quarter increased by $157 million compared to the September 2024 quarter, primarily due to an increase in mass capacity exabytes shipped as we experienced higher demand primarily for our nearline products and favorable pricing actions undertaken by the Company.

Current wording

Revenue in the March 2025 quarter decreased by $165 million compared to the December 2024 quarter, primarily due to a decrease in mass capacity exabytes shipped as we experienced temporary supply constraints and typical seasonality in certain of our markets.

Previous wording

Revenue for the three and six months ended December 27, 2024 increased by $770 million and $1.5 billion from the three and six months ended December 29, 2023, respectively, primarily due to an increase in mass capacity exabytes shipped as we experienced higher demand primarily for our nearline products and favorable pricing actions undertaken by the Company.

Current wording

Revenue for the three and nine months ended March 28, 2025 increased by $505 million and $2 billion from the three and nine months ended March 29, 2024, respectively, primarily due to an increase in mass capacity exabytes shipped as we experienced higher demand primarily for our nearline cloud products and favorable pricing actions undertaken by the Company.

Previous wording

Wemaintain various sales incentive programs such as channel and OEM rebates. Sales incentive programs were approximately 14% of gross revenue for the December 2024 quarter, 13% for the September 2024 quarter and 18% for the December 2023 quarter. Adjustments to revenues due to under or over accruals for sales incentive programs related to revenues reported in prior quarterly periods were less than 2% of quarterly gross revenue in all periods presented.

Current wording

Wemaintain various sales incentive programs such as channel and OEM rebates. Sales incentive programs were approximately 14%of gross revenue for the March 2025 quarter, 14% for the December 2024 quarter and 15% for the March 2024 quarter. Adjustments to revenues due to under or over accruals for sales incentive programs related to revenues reported in prior quarterly periods were less than 1% of quarterly gross revenue in all periods presented.

Previous wording

Gross margin for the December 2024 quarter increased by 12 percentage points compared to the December 2023 quarter, primarily driven by favorable product mix and pricing actions undertaken by the Company, as well as $36 million of factory underutilization charges that did not recur.

Current wording

Gross margin for the March 2025 quarter increased by 9 percentage points compared to the March 2024 quarter, primarily driven by favorable product mix and pricing actions undertaken by the Company, and $43 million of factory underutilization charges in the March 2024 quarter that did not recur, partially offset by $10 million of restructuring costs related to an inventory write down due to a discontinued product line in the March 2025 quarter.

Previous wording

Gross margin for thesix months ended December 27, 2024 increased by 17 percentage points compared to the six months ended December 29, 2023, primarily driven by favorable product mix and pricing actions undertaken by the Company, as well as $115 million of cancellation fees, $95 million of factory underutilization charges, and $13 million of accelerated depreciation expense for certain capital equipment in thesix months ended December 29, 2023 that did not recur.

Current wording

Gross margin for thenine months ended March 28, 2025 increased by 14 percentage points compared to the nine months ended March 29, 2024, primarily driven by favorable product mix and pricing actions undertaken by the Company, a decrease of $117 million of supply related purchase order cancellation fees, as well as $138 million of factory underutilization charges and $13 million of accelerated depreciation expense for certain capital equipment in the nine months ended March 29, 2024 that did not recur, partially offset by $10 million of restructuring costs related to an inventory write down due to a discontinued product line in thenine months ended March 28, 2025.

Previous wording

Warranty cost related to new shipments was 0.7%, 0.7% and 0.9% of revenue for the December 2024 quarter, September 2024 quarter and December 2023 quarter, respectively.

Current wording

Warranty cost related to new shipments was 0.7%, 0.7%and 0.8% of revenue for the March 2025 quarter, December 2024 quarter and March 2024 quarter, respectively.

Previous wording

Product Development Expense. Product development expenses increased by $3 million in the December 2024 quarter compared to the September 2024 quarter primarily due to a $4 million increase in compensation and other employee benefits, partially offset by a $2 million decrease in materials expense.

Current wording

Product Development Expense. Product development expenses decreased by $4 million in the March 2025 quarter compared to the December 2024 quarter primarily due to a $2 million decrease in compensation and other employee benefits, and a $2 million decrease in facility costs.

Previous wording

Product development expenses increased by $33 million in the six months ended December 27, 2024 compared to the six months ended December 29, 2023, primarily due toa $35 million increase in compensation and other employee benefits as a result of the variable compensation expense recognized in thesix months ended December 27, 2024 and temporary salary reductions in thesix months ended December 29, 2023, a $6 million increase in facilities costs, a $3 million increase in equipment expense, and a $2 million increase in lease expense, partially offset by a $13 million decrease in materials expense.

Current wording

Product development expenses increased by $49 million in the nine months ended March 28, 2025 compared to the nine months ended March 29, 2024, primarily due toa $52 million increase in compensation and other employee benefits as a result of the variable compensation expense recognized in the nine months ended March 28, 2025 and temporary salary reductions in the nine months ended March 29, 2024, a $6 million increase in facility costs, a $4 million increase in equipment expense and a $2 million increase in travel expense, partially offset by a $15 million reduction in materials costs.

Previous wording

Marketing and Administrative Expense. Marketing and administrative expenses increased by $10 million in the December 2024 quarter compared to the September 2024 quarter primarily due to a $7 million increase in compensation and other employee benefits anda $3 million increase in outside services expense.

Current wording

Marketing and Administrative Expense. Marketing and administrative expenses remained flat in the March 2025 quarter compared to the December 2024 quarter.

Previous wording

Product development expenses increased by $23 million in the December 2024 quarter compared to the December 2023 quarter primarily due to a $24 million increase in compensation and other employee benefits as a result of the variable compensation expense recognized in the December 2024 quarter and temporary salary reductions in the December 2023 quarter, a $4 million increase in facilities costs, and a $2 million increase in equipment expense, partially offset by an $8 million decrease in materials expense.

Current wording

Marketing and administrative expenses increased by $23 million in the March 2025 quarter compared to the March 2024 quarter primarily due to a $22 million increase in compensation and other employee benefits as a result of the variable compensation expense recognized in the March 2025 quarter.

Previous wording

Marketing and administrative expenses increased by$55 million in the six months ended December 27, 2024 compared to the six months ended December 29, 2023, primarily dueto a $46 million increase in compensation and other employee benefits as a result of the variable compensation expense in thesix months ended December 27, 2024 and temporary salary reductions in thesix months ended December 29, 2023, a $4 million increase in outside services expense and a $4 million increase in travel expense.

Current wording

Marketing and administrative expenses increased by$78 million in the nine months ended March 28, 2025 compared to the nine months ended March 29, 2024, primarily dueto a $68 million increase in compensation and other employee benefits as a result of the variable compensation expense recognized in the nine months ended March 28, 2025 and temporary salary reductions in the nine months ended March 29, 2024, a $5 million increase in travel expense, and a $3 million increase in outside services expense.

Previous wording

Other expense, net increased by $79 million in the six months ended December 27, 2024 compared to the six months ended December 29, 2023, primarily due to a $75 million net gain recognized from the early redemption of debt and the termination of interest rate swaps associated with the repayment of term loans that did not recur, a $10 million increase in net loss from certain investments, and a $6 million increase in net loss from foreign currency exchange transactions, partially offset by a $10 million increase in interest income and a $3 million decrease in factoring expense.

Current wording

Other expense, net increased by $70 million in the nine months ended March 28, 2025 compared to the nine months ended March 29, 2024, primarily due to a $104 million net gain from termination of interest rate swap that did not recur and a $10 million increase in net loss from certain investments, partially offset by a $25 million decrease in net loss from debt transactions and an $11 million increase in interest income.

Previous wording

For thethree months ended December 27, 2024, September 27, 2024, and December 29, 2023, we recorded income tax expense of $14 million, $11 million and $15 million, respectively. For the six months ended December 27, 2024 and December 29, 2023, we recorded income tax expense of $25 million and $52 million, respectively. For further discussion, refer to“Part I, Item 1. Financial Statements—Note 4. Income Taxes”.

Current wording

For thethree months ended March 28, 2025, December 27, 2024, and March 29, 2024, we recorded income tax expense of $15 million, $14 million, and $33 million, respectively. For the nine months ended March 28, 2025 and March 29, 2024, we recorded income tax expense of $40 million and $85 million, respectively. For further discussion, refer to“Part I, Item 1. Financial Statements—Note 4. Income Taxes”.

Previous wording

Our cash and cash equivalents as of December 27, 2024 decreased by $120 million from June 28, 2024 primarily as a result of $295 million dividends paid to our shareholders and $139 million payments for capital expenditures, partially offset by net cash of $316 million provided by operating activities.

Current wording

Our cash and cash equivalents as of March 28, 2025 decreased by $544 million from June 28, 2024 primarily as a result of $531 million repayment of the 2025 Notes and repurchase of debt, $447 million dividends paid to our shareholders and $182 million payments for capital expenditures, partially offset by net cash of $575 million provided by operating activities.

Previous wording

Cash provided by operating activities for the six months ended December 27, 2024 was $316 million and includes the effects of net income adjusted for non-cash items including depreciation, amortization, share-based compensation, and the following major working capital related movements:

Current wording

Cash provided by operating activities for the nine months ended March 28, 2025 was $575 million and includes the effects of net income adjusted for non-cash items including depreciation, amortization, share-based compensation, and the following major working capital related movements:

Previous wording

•an increase of $85 million in accrued employee compensation, primarily due to an increase in our variable compensation expense; partially offset by

Current wording

•an increase of $116 million in accrued employee compensation, primarily due to an increase in our variable compensation expense; partially offset by

Previous wording

•a decrease of $190 million in accounts payable, primarily due to timing of payments; and

Current wording

•a decrease of $331 million in accounts payable, primarily due to timing of payments;

Previous wording

•an increase of $234 million in inventories, primarily due to an increase in purchased materials;

Current wording

•an increase of $233 million in inventories, primarily due to an increase in purchased materials; and

Previous wording

•an increase of $158 million in accounts receivable, primarily due to increased revenue.

Current wording

•an increase of $193 million in accounts receivable, primarily due to increased revenue.

Previous wording

Net cash used in investing activities for the six months ended December 27, 2024 was $138 million, which was primarily attributable to payments for the purchase of property, equipment and leasehold improvements.

Current wording

Net cash used in investing activities for the nine months ended March 28, 2025 was $146 million, primarily attributable to payments of $182 million for the purchase of property, equipment and leasehold improvements, partially offset by proceeds of $25 million from our business divestiture from the sale of System-on-Chip Operations during fiscal year 2024, as well as proceeds of $10 million from the sale of certain investments.

Previous wording

Net cash used in financing activities of $298 million for the six months ended December 27, 2024 was primarily attributable to the following activities:

Current wording

Net cash used in financing activities of $973 million for the nine months ended March 28, 2025 was primarily attributable to the following activities:

Previous wording

•$295 million in dividends paid to our shareholders; and

Current wording

•$447 million in dividends paid to our shareholders; and

Previous wording

•$35 million taxes paid related to net share settlement of equity awards; partially offset by

Current wording

•$44 million taxes paid related to net share settlement of equity awards; partially offset by

Previous wording

•$32 million in proceeds from the issuance of ordinary shares under employee stock plans.

Current wording

•$56 million in proceeds from the issuance of ordinary shares under employee stock plans.

Previous wording

Our primary sources of liquidity as of December 27, 2024, consist of: (1) approximately $1.2 billion in cash and cash equivalents, (2) cash we expect to generate from operations and (3) $1.5 billion available for borrowing under our senior unsecured revolving credit facility (“Revolving Credit Facility”), which is part of our Credit Agreement (as defined below).

Current wording

Our primary sources of liquidity as of March 28, 2025, consist of: (1) approximately $0.8 billion in cash and cash equivalents, (2) cash we expect to generate from operations and (3) $1.3 billion available for borrowing under our senior unsecured revolving credit facility (“Revolving Credit Facility”), which is part of our New Credit Agreement (as defined below).

Previous wording

As of December 27, 2024, no borrowings (including swing line loans) were outstanding and no commitments were utilized for letters of credit issued under the Revolving Credit Facility. The Revolving Credit Facility is available for borrowings, subject to compliance with financial covenants and other customary conditions to borrowing.

Current wording

As of March 28, 2025, no borrowings (including swing line loans) were outstanding and no commitments were utilized for letters of credit issued under the Revolving Credit Facility. The Revolving Credit Facility is available for borrowings, subject to compliance with a financial covenant and other customary conditions to borrowing.

Previous wording

As of December 27, 2024, the Credit Agreement includes two financial covenants: (1) interest coverage ratio and (2) net leverage ratio. We continue to evaluate our debt portfolio and structure to comply with our financial debt covenants. As of December 27, 2024, we were in compliance with all of the covenants under our debt agreements. Refer to “Part I, Item 1. Financial Statements—Note 3. Debt” for more details.

Current wording

As of March 28, 2025, the New Credit Agreement includes one financial covenant, net leverage ratio. We continue to evaluate our debt portfolio and structure to comply with our financial debt covenant. As of March 28, 2025, we were in compliance with all of the covenants under our debt agreements. Refer to “Part I, Item 1. Financial Statements—Note 3. Debt” for more details.

Previous wording

As of December 27, 2024, cash and cash equivalents held by our subsidiaries was $1.2 billion. This amount is potentially subject to taxation in Singapore upon repatriation by means of an intercompany dividend into our parent company, unless certain exemption is given, or a special approval is granted by the Ministry of Finance in Singapore. However, it is our intent to indefinitely reinvest earnings of subsidiaries in excess of the amount paid as dividends to shareholders. Our current plans do not demonstrate a need to repatriate such excess earnings. Should funds be needed in the parent company and should we be unable to fund parent company activities through means other than a taxable repatriation, we would be required to accrue and pay taxes on such dividend.

Current wording

As of March 28, 2025, cash and cash equivalents held by our subsidiaries was $698 million. This amount is potentially subject to taxation in Singapore upon repatriation by means of an intercompany dividend into our parent company, unless certain exemption is given, or a special approval is granted by the Ministry of Finance in Singapore. However, it is our intent to indefinitely reinvest earnings of subsidiaries in excess of the amount paid as dividends to shareholders. Our current plans do not demonstrate a need to repatriate such excess earnings. Should funds be needed in the parent company and should we be unable to fund parent company activities through means other than a taxable repatriation, we would be required to accrue and pay taxes on such dividend.

Previous wording

Purchase obligations are defined as contractual obligations for the purchase of goods or services, which are enforceable and legally binding on us, and that specify all significant terms. From time to time, we enter into long-term, non-cancelable purchase commitments or make large up-front investments with certain suppliers in order to secure certain components or technologies for the production of our products or to supplement our internal manufacturing capacity for certain components. As of December 27, 2024, we had unconditional purchase obligations of approximately $900 million, primarily related to purchases of inventory components with our suppliers. We expect $810 million of these commitments to be paid within one year. In addition, we also had certain long-term, market share-based, non-cancellable inventory purchase commitments as of December 27, 2024.

Current wording

Purchase obligations are defined as contractual obligations for the purchase of goods or services, which are enforceable and legally binding on us, and that specify all significant terms. From time to time, we enter into long-term, non-cancelable purchase commitments or make large up-front investments with certain suppliers in order to secure certain components or technologies for the production of our products or to supplement our internal manufacturing capacity for certain components. As of March 28, 2025, we had unconditional purchase obligations of approximately $1.2 billion, primarily related to purchases of inventory components with our suppliers. We expect $1.1 billion of these commitments to be paid within one year. In addition, we also had certain long-term, market share-based, non-cancellable inventory purchase commitments as of March 28, 2025.

Previous wording

As of December 27, 2024, the future principal payment obligation on our long-term debt was $5.7 billion, of which $479 million had a maturity within one year and was fully repaid on January 2, 2025 at maturity. As of December 27, 2024, future interest payments on this outstanding debt is estimated to be approximately $1.8 billion, of which $312 million is expected to be paid within one year. From time to time, we may repurchase, redeem or otherwise extinguish any of our outstanding senior notes in open market or privately negotiated purchases or otherwise, or we may repurchase or redeem outstanding senior notes pursuant to the terms of the applicable indenture. Refer to “Item 1. Financial Statements—Note 3. Debt” for more details.

Current wording

As of March 28, 2025, the future principal payment obligation on our long-term debt was $5.2 billion, which will mature in more than one year. As of March 28, 2025, future interest payments on this outstanding debt is estimated to be approximately $1.8 billion, of which $299 million is expected to be paid within one year. From time to time, we may refinance, repurchase, redeem or otherwise extinguish any of our outstanding senior notes in open market or privately negotiated purchases or otherwise, or we may repurchase or redeem outstanding senior notes pursuant to the terms of the applicable indenture. Refer to “Item 1. Financial Statements—Note 3. Debt” for more details.

Previous wording

We accrued a settlement penalty of $300 million for fiscal year 2023, related to BIS’ allegations of violations of the U.S. EAR, which were subsequently resolved by the Settlement Agreement in April 2023. As part of the Settlement Agreement with BIS, quarterly payments of $15 million are made over the course of five years beginning October 31, 2023, of which $60 million is expected to be paid within one year and $165 million thereafter. Refer to “Item 1. Financial Statements—Note 11. Legal, Environmental and Other Contingencies” for more details.

Current wording

We accrued a settlement penalty of $300 million for fiscal year 2023, related to BIS’ allegations of violations of the U.S. EAR, which were subsequently resolved by the Settlement Agreement in April 2023. As part of the Settlement Agreement with BIS, quarterly payments of $15 million are made over the course of five years beginning October 31, 2023, of which $60 million is expected to be paid within one year and $150 million thereafter. Refer to “Item 1. Financial Statements—Note 11. Legal, Environmental and Other Contingencies” for more details.