Seagate Technology Holdings plc

Previous wording

The following is a discussion of the Company’s financial condition, changes in financial condition and results of operations for the fiscal quarters ended October 3, 2025, June 27, 2025 and September 27, 2024, referred to herein as the “September 2025 quarter”, the “June 2025 quarter” and the “September 2024 quarter”, respectively. We operate and report financial results on a fiscal year of 52 or 53 weeks ending on the Friday closest to June 30. The September 2025 quarter was 14 weeks, while the June 2025 quarter and September 2024 quarter were each 13 weeks.

Current wording

The following is a discussion of the Company’s financial condition, changes in financial condition and results of operations for the fiscal quarters ended January 2, 2026, October 3, 2025 and December 27, 2024, referred to herein as the “December 2025 quarter”, the “September 2025 quarter” and the “December 2024 quarter”, respectively. We operate and report financial results on a fiscal year of 52 or 53 weeks ending on the Friday closest to June 30. The December 2025 quarter and December 2024 quarter were each 13 weeks, while the September 2025 quarter was 14 weeks.

Previous wording

During the September 2025 quarter, we shipped 182 exabytes of HDD storage capacity. We generated revenue of approximately $2.6 billion with a gross margin of 39.4% and net income of $549 million. Our operating cash flow was $532 million, we paid $153 million in dividends and we repurchased approximately 0.2 million of our ordinary shares for $29 million.

Current wording

During the December 2025 quarter, we shipped 190 exabytes of HDD storage capacity. We generated revenue of approximately $2.8 billion with a gross margin of 41.6% and net income of $593 million. Our operating cash flow was $723 million, we retired $500 million principal amount of long-term debt and paid $154 million in dividends.

Previous wording

In the September 2025 quarter, the Data Center markets contributed 80% of total company revenue supported by ongoing demand for our high-capacity nearline drives. Demand growth was led by global cloud customers to support their data storage requirements for applications including AI inferencing and training. At the same time, we continue to operate in a dynamic macroeconomic environment marked by rapid shifts in trade policies 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 future growth in data demand and data value, including from the ongoing adoption of Generative AI applications.

Current wording

In the December 2025 quarter, we continued to operate in a strong demand environment, particularly within the data center end markets. We experienced sustained demand growth for our high capacity nearline drives across global cloud customers, as well as continued improvement from the enterprise edge deployments. Customers continue to invest in data center infrastructure to support ongoing demand from traditional workloads along with growing AI related demand. This trend reflects the ongoing adoption of AI applications which drives increased data content generation and storage needs for inferencing, training and maintaining AI model integrity. At the same time, the macroeconomic environment remains dynamic, marked by uncertainties in trade policies 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 growing demand for data and its increased value, particularly as AI applications continue to proliferate.

Previous wording

The following table summarizes information regarding consolidated revenues by channel, geography, and market and HDD exabytes shipped by market and price per terabyte:

Current wording

The following table summarizes information regarding consolidated revenues by channel, geography, and market and HDD exabytes shipped:

Previous wording

Revenue in the September 2025 quarter increased by $185 million compared to the June 2025 quarter, primarily due to an increase in Data Center exabytes shipped reflecting higher demand for nearline cloud and enterprise products and favorable pricing actions undertaken by the Company.

Current wording

Revenue in the December 2025 quarter increased by $196 million compared to the September 2025 quarter, primarily due to favorable pricing actions undertaken by the Company and an increase in exabytes shipped reflecting higher demand for both nearline and non-nearline products.

Previous wording

Revenue in the September 2025 quarter increased by $461 million compared to the September 2024 quarter, primarily due to an increase in Data Center exabytes shipped reflecting higher demand for nearline cloud products and favorable pricing actions undertaken by the Company.

Current wording

Revenue for the three and six months ended January 2, 2026, increased by $500 million and $961 million from the three and six months ended December 27, 2024, respectively, primarily due to an increase in nearline exabytes shipped reflecting higher demand for nearline cloud products and favorable pricing actions undertaken by the Company.

Previous wording

We maintain various sales incentive programs such as channel and OEM rebates. Sales incentive programs were approximately 12% of gross revenue for the September 2025 quarter, 14% for the June 2025 quarter and 13% for the September 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.

Current wording

We maintain various sales incentive programs such as channel and OEM rebates. Sales incentive programs were approximately 11% of gross revenue for the December 2025 quarter, 12% for the September 2025 quarter and 14% for the December 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 September 2025 quarter increased by 2 percentage points and 6 percentage points compared to the June 2025 quarter and the September 2024 quarter, respectively, primarily driven by pricing actions undertaken by the Company and favorable product mix.

Current wording

Gross margin for the December 2025 quarter increased by 3 percentage points compared to the September 2025 quarter primarily driven by pricing actions undertaken by the Company and favorable product mix.

Previous wording

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

Current wording

Warranty cost related to new shipments was 0.9%, 0.8% and 0.7% of revenue for the December 2025 quarter, September 2025 quarter and December 2024 quarter, respectively.

Previous wording

Product Development Expense. Product development expenses increased by $7 million in the September 2025 quarter compared to the June 2025 quarter primarily due to a $5 million increase in compensation and other employee benefits and a $2 million increase in facility costs.

Current wording

Product Development Expense. Product development expenses remained relatively flat in the December 2025 quarter compared to the September 2025 quarter and the December 2024 quarter, respectively.

Previous wording

Product development expenses increased by $5 million in the September 2025 quarter compared to the September 2024 quarter primarily due to a $3 million increase in facility costs and a $2 million increase in outside services costs.

Current wording

Product development expenses increased by $8 million in the six months ended January 2, 2026 compared to the six months ended December 27, 2024, primarily due to a $10 million increase in outside services costs, partially offset by a $3 million decrease in compensation and other employee benefits.

Previous wording

Marketing and Administrative Expense. Marketing and administrative expenses decreased by $10 million in the September 2025 quarter compared to the June 2025 quarter, primarily due to a $7 million decrease in outside services costs and a $5 million decrease in share-based compensation expense.

Current wording

Marketing and Administrative Expense. Marketing and administrative expenses remained relatively flat in the December 2025 quarter compared to the September 2025 quarter and the December 2024 quarter, respectively.

Previous wording

Marketing and administrative expenses increased by $15 million in the September 2025 quarter compared to the September 2024 quarter primarily due to a $7 million increase in share-based compensation expense, a $5 million increase in outside services costs and a $3 million increase in facility costs.

Current wording

Marketing and administrative expenses increased by $19 million in the six months ended January 2, 2026 compared to the six months ended December 27, 2024, primarily due to a $10 million increase in compensation and other employee benefits, a $4 million increase in facilities costs, a $3 million increase in information technology expenses and a $3 million increase in outside services costs.

Previous wording

Restructuring and other, net. We recorded $13 million of restructuring charges in the September 2025 quarter, primarily related to employee related termination benefits.

Current wording

Restructuring and other, net. We recorded $3 million of restructuring charges in the December 2025 quarter, primarily related to employee related termination benefits.

Previous wording

Other expense, net for the September 2024 quarter primarily related to interest expense of $85 million, $4 million of foreign currency remeasurement losses and $2 million of factoring fees, partially offset by $7 million of interest income.

Current wording

Other expense, net. Other expense, net for the December 2025 quarter primarily related to $72 million of interest expense and $66 million net loss from debt transactions, partially offset by $7 million of interest income.

Previous wording

Other expense, net. Other expense, net for the September 2025 quarter primarily related to $80 million of interest expense and $6 million net loss from debt transactions, partially offset by $7 million of interest income.

Current wording

Other expense, net for the September 2025 quarter primarily related to $80 million of interest expense and $6 million net loss from debt transactions, partially offset by $7 million of interest income.

Previous wording

For the September 2025 quarter and September 2024 quarter, we recorded income tax expense of $65 million and $11 million, respectively. For further discussion, refer to “Part I, Item 1. Financial Statements—Note 4. Income Taxes”.

Current wording

For the December 2025 quarter, September 2025 quarter and December 2024 quarter, we recorded income tax expense of $114 million, $65 million and $14 million, respectively. For the six months ended January 2, 2026 and December 27, 2024, we recorded income tax expense of $179 million and $25 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 October 3, 2025 increased by $221 million from June 27, 2025 primarily as a result of net cash of $532 million provided by operating activities, partially offset by $153 million dividends paid to our shareholders, $105 million payments for capital expenditures and $50 million taxes paid related to net share settlement of equity awards.

Current wording

Our cash and cash equivalents as of January 2, 2026 increased by $155 million from June 27, 2025 primarily as a result of net cash of $1.3 billion provided by operating activities, partially offset by $500 million cash paid for the partial retirement of 2028 Notes, $307 million dividends paid to our shareholders, $221 million payments for capital expenditures and $70 million taxes paid related to net share settlement of equity awards.

Previous wording

Cash provided by operating activities for the three months ended October 3, 2025 was $532 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 six months ended January 2, 2026 was $1.3 billion 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 $119 million in accrued expenses, primarily due to an increase in accrued income taxes and timing of interest payments on our long-term debt; and

Current wording

•an increase of $197 million in accrued expenses, income taxes and warranty, primarily due to an increase in accrued income taxes and timing of interest payments on our long-term debt; and

Previous wording

•an increase of $84 million in accounts payable, primarily due to timing of payments; partially offset by

Current wording

•an increase of $162 million in accounts payable, primarily due to an increase in direct materials purchased; partially offset by

Previous wording

•a decrease of $140 million in accrued employee compensation, primarily due to variable compensation payments;

Current wording

•a decrease of $108 million in accrued employee compensation, primarily due to variable compensation payments;

Previous wording

•an increase of $114 million in accounts receivable, primarily due to increased revenue; and

Current wording

•an increase of $287 million in accounts receivable, primarily due to increased revenue; and

Previous wording

•an increase of $56 million in inventories, primarily due to an increase in work in progress inventory.

Current wording

•an increase of $58 million in inventories, primarily related to an increase in work-in-process inventory.

Previous wording

Net cash used in investing activities for the three months ended October 3, 2025 was $90 million, primarily attributable to payments of $105 million for the purchase of property, equipment and leasehold improvements, partially offset by proceeds of $15 million from our business divestiture from the sale of System-on-Chip Operations during fiscal year 2024.

Current wording

Net cash used in investing activities for the six months ended January 2, 2026 was $206 million, primarily attributable to payments of $221 million for the purchase of property, equipment and leasehold improvements, partially offset by proceeds of $15 million from our business divestiture from the sale of System-on-Chip Operations during fiscal year 2024.

Previous wording

Net cash used in financing activities of $221 million for the three months ended October 3, 2025 was primarily attributable to the following activities:

Current wording

Net cash used in financing activities of $894 million for the six months ended January 2, 2026 was primarily attributable to the following activities:

Previous wording

•$153 million in dividends paid to our shareholders;

Current wording

•$307 million in dividends paid to our shareholders;

Previous wording

•$50 million taxes paid related to net share settlement of equity awards;

Current wording

•$70 million taxes paid related to net share settlement of equity awards;

Previous wording

•$11 million debt fees primarily relating to the Obligor Exchange; partially offset by

Current wording

•$15 million debt fees relating to the Obligor Exchange and retirement of long-term debt; partially offset by

Previous wording

•$22 million in proceeds from the issuance of ordinary shares under employee stock plans.

Current wording

•$27 million in proceeds from the issuance of ordinary shares under employee stock plans.

Previous wording

Our primary sources of liquidity as of October 3, 2025, consist of: (1) approximately $1.1 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 Credit Agreement (as defined within “Part I, Item 1. Financial Statements—Note 3. Debt”).

Current wording

Our primary sources of liquidity as of January 2, 2026, consist of: (1) approximately $1.0 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 Credit Agreement (as defined within “Part I, Item 1. Financial Statements—Note 3. Debt”).

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 October 3, 2025, we had unconditional purchase obligations of approximately $1.3 billion, primarily related to purchases of inventory components with our suppliers. We expect $1.2 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 October 3, 2025.

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 January 2, 2026, we had unconditional purchase obligations of approximately $1.4 billion, primarily related to purchases of inventory components with our suppliers. We expect $1.3 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 January 2, 2026.

Previous wording

As of October 3, 2025, the future principal payment obligation on our long-term debt was $5.0 billion, which will mature in more than one year. As of October 3, 2025, future interest payments on this outstanding debt is estimated to be approximately $1.7 billion, of which $299 million is expected to be paid within one year. As of the calendar quarter ended September 30, 2025, the conditional conversion option of the 2028 Notes was triggered in accordance with the terms of the 2028 Notes indenture. Accordingly, the 2028 Notes are exchangeable through December 31, 2025. As a result, we have classified the 2028 Notes within Current liabilities in our Condensed Consolidated Balance Sheets as of October 3, 2025. 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.

Current wording

As of January 2, 2026, the future principal payment obligation on our long-term debt was $4.5 billion, which will mature in more than one year. As of January 2, 2026, future interest payments on this outstanding debt are estimated to be approximately $1.5 billion, of which $281 million is expected to be paid within one year. As of the calendar quarter ended December 31, 2025, the conditional conversion option of the 2028 Notes was triggered in accordance with the terms of the 2028 Notes indenture. Accordingly, the 2028 Notes are exchangeable through March 31, 2026. As a result, we have classified the 2028 Notes within Current liabilities in our Condensed Consolidated Balance Sheets as of January 2, 2026. 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 $120 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 $105 million thereafter. Refer to “Item 1. Financial Statements—Note 11. Legal, Environmental and Other Contingencies” for more details.

Previous wording

From time to time, at our discretion, we may repurchase any of our outstanding ordinary shares through private, open market, or broker assisted purchases, tender offers, or other means, including through the use of derivative transactions. During the three months ended October 3, 2025, we repurchased approximately 0.5 million of our ordinary shares including approximately 0.3 million shares withheld for statutory tax withholdings related to vesting of employee equity awards. As of October 3, 2025, $5.0 billion remained available for repurchase under our existing repurchase authorization limit. We may limit or terminate the repurchase program at any time. All repurchases are effected as redemptions in accordance with our Constitution.

Current wording

From time to time, at our discretion, we may repurchase any of our outstanding ordinary shares through private, open market, or broker assisted purchases, tender offers, or other means, including through the use of derivative transactions. During the six months ended January 2, 2026, we repurchased approximately 0.6 million of our ordinary shares including approximately 0.4 million shares withheld for statutory tax withholdings related to vesting of employee equity awards. As of January 2, 2026, $5.0 billion remained available for repurchase under our existing repurchase authorization limit. We may limit or terminate the repurchase program at any time. All repurchases are effected as redemptions in accordance with our Constitution.

Previous wording

For fiscal year 2026, we expect capital expenditures to be higher than fiscal year 2025. We require substantial amounts of cash to fund any increased working capital requirements, future capital expenditures, scheduled payments of principal and interest on our indebtedness and payments of dividends. We will continue to evaluate and manage the retirement and replacement of existing debt and associated obligations, including evaluating the issuance of new debt securities, exchanging existing debt securities for other debt securities and retiring debt pursuant to privately negotiated transactions, open market purchases, tender offers or other means or otherwise. In addition, we may selectively pursue strategic alliances, acquisitions, joint ventures and investments, which may require additional capital.

Current wording

We require substantial amounts of cash to fund any increased working capital requirements, future capital expenditures, scheduled payments of principal and interest on our indebtedness and payments of dividends. We will continue to evaluate and manage the retirement and replacement of existing debt and associated obligations, including evaluating the issuance of new debt securities, exchanging existing debt securities for other debt securities and retiring debt pursuant to privately negotiated transactions, open market purchases, tender offers or other means or otherwise. In addition, we may selectively pursue strategic alliances, acquisitions, joint ventures and investments, which may require additional capital.

Previous wording

See “Item 1. Financial Statements and Supplementary Data—Note 1. Basis of Presentation and Summary of Significant Accounting Policies” for information regarding the effect of new accounting pronouncements on our financial statements.

Current wording

See “Item 1. Financial Statements—Note 1. Basis of Presentation and Summary of Significant Accounting Policies” for information regarding the effect of new accounting pronouncements on our financial statements.