Executive Summary

Fiscal Q2 2025 delivered strong execution: revenue rose to $2.33B, non-GAAP gross margin expanded to 35.5%, and non-GAAP EPS reached $2.03, at the high end of guidance, driven by high-capacity nearline mix, pricing discipline, and cost efficiencies .
Demand strength in cloud and improving enterprise/VIA supported nearline exabyte growth; management flagged a one-quarter supply constraint (~$200M impact) that limits Q3 upside but is resolved, with demand intact and margin expected to improve sequentially .
Technology milestones: HAMR-based Mozaic ramp began to a lead CSP, with sampling up to 36TB; management reiterated HAMR is margin-accretive and will accelerate in 2H CY2025, positioning Seagate for profitable growth .
Q3 FY2025 guidance: revenue $2.10B ±$150M and non-GAAP EPS $1.70 ±$0.20 amid seasonal VIA/legacy softness and temporary supply constraints; non-GAAP OpEx ~$290M; non-GAAP tax ~$20M; margin expected to remain ~20% operating range with potential gross margin improvement .
Capital and cash: free cash flow was $150M; dividend maintained at $0.72/share; liquidity strong and net leverage trending lower after retiring ~$479M notes in early January; no maturities until late FY2027 .

What Went Well and What Went Wrong

What Went Well

Nearline momentum: “almost doubling of nearline product revenue” YoY in Q2; mass capacity revenue rose to $1.9B; total HDD exabytes reached 151 EB, with nearline shipments 126 EB vs 114 EB prior quarter .
Margin expansion: non-GAAP gross margin improved to 35.5% (+220bps QoQ), seventh consecutive quarterly improvement; CFO emphasized price adjustment and mix shift to higher capacities as drivers .
HAMR progress: “ramping HAMR-based Mozaic products to our lead cloud customer… sampling up to 36TB”; management affirmed HAMR accretive to gross margin and a key roadmap enabler .

What Went Wrong

Temporary supply constraint: management quantified ~$200M revenue impact embedded in Q3 guidance; clarified it is a supply issue, not demand, and the shortfall “is probably going away” rather than shifting fully into June .
VIA and legacy seasonality: anticipated sequential decline in VIA and legacy in March quarter, limiting ability to offset supply constraints despite strong cloud demand .
Strategic investment losses: non-GAAP reconciliation shows $52M strategic investment losses/impairments in Q2, impacting GAAP-to-non-GAAP bridge and highlighting non-core headwinds .

Financial Results

Metric	Q4 FY2024	Q1 FY2025	Q2 FY2025
Revenue ($USD Billions)	$1.887	$2.168	$2.325
GAAP Diluted EPS ($)	$2.39	$1.41	$1.55
Non-GAAP Diluted EPS ($)	$1.05	$1.58	$2.03
GAAP Gross Margin (%)	31.8%	32.9%	34.9%
Non-GAAP Gross Margin (%)	30.9%	33.3%	35.5%
GAAP Operating Margin (%)	16.6%	18.6%	21.0%
Non-GAAP Operating Margin (%)	17.3%	20.4%	23.1%
Free Cash Flow ($USD Millions)	$380	$27	$150

Segment and shipment detail:

Metric	Q4 FY2024	Q1 FY2025	Q2 FY2025
HDD Revenue ($USD Billions)	$1.7	$2.0	$2.2
Mass Capacity Revenue ($USD Billions)	$1.4	$1.7	$1.9
Legacy Products Revenue ($USD Millions)	$290	$270	$275
Other Business Revenue (Systems/SSD/Refurb) ($USD Millions)	$160	$164	$156
Total HDD Exabyte Shipments (EB)	114	138	151
Mass Capacity Shipments (EB)	104	128	140
Nearline Shipments (EB)	84 (prior definition)	109 (prior def.) ; 114 (new def. baseline)	126 (new def.)

Key KPIs and balance sheet:

Metric	Q4 FY2024	Q1 FY2025	Q2 FY2025
Cash from Operations ($USD Millions)	$434	$95	$221
Capital Expenditure ($USD Millions)	$54	$68	$71
Cash And Equivalents ($USD Billions)	$1.360	$1.241	$1.238
Inventories ($USD Billions)	$1.239	$1.383	$1.473
Total Debt ($USD Billions)	$5.195 LT, $0.479 current	$5.197 LT, $0.479 current	$5.200 LT, $0.479 current
Dividend per Share ($USD)	$0.70	$0.72 (raised ~3%)	$0.72 (declared)
Adjusted EBITDA ($USD Millions)	$404	$498	$591

YoY context: Q2 FY2024 revenue was $1.555B; GAAP diluted EPS was -$0.09; non-GAAP diluted EPS was $0.12; non-GAAP gross margin 23.6% .

Non-GAAP adjustments: Q2 FY2025 non-GAAP net income excludes items such as share-based compensation ($49M), strategic investment losses ($52M), and other charges, yielding non-GAAP net income of $433M vs GAAP $336M .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	Q2 FY2025	$2.30B ± $150M	Actual $2.325B	n/a (reported)
Non-GAAP EPS	Q2 FY2025	$1.85 ± $0.20	Actual $2.03	Beat vs guidance range high
Revenue	Q3 FY2025	—	$2.10B ± $150M	Lower vs Q2 guidance midpoint (seasonality + supply constraint)
Non-GAAP EPS	Q3 FY2025	—	$1.70 ± $0.20	Lower vs Q2 guidance midpoint
Non-GAAP OpEx	Q3 FY2025	—	~$290M	New
Non-GAAP Tax Expense	Q3 FY2025	—	~$20M	New
Operating Margin (non-GAAP)	Q3 FY2025	—	~20% range at guidance midpoint	New
Dividend	Q3 FY2025	$0.72 (raised in Q1)	$0.72 declared, payable Apr 2, 2025	Maintained

Management quantified approximately $200M revenue impact embedded in Q3 guidance due to supply constraints; gross margin still expected to improve sequentially given mix and HAMR ramp .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 FY2024 & Q1 FY2025)	Current Period (Q2 FY2025)	Trend
AI/technology initiatives	Emphasis on AI-driven workloads requiring cost-efficient HDD storage; early HAMR shipments to non-cloud; Mozaic 3+ and roadmap to 4+ per disk; strong pricing and margin recovery	HAMR ramp to lead CSP; sampling up to 36TB; IDC cites 89% cloud data stored on HDD; survey shows 61% expecting >100% cloud storage growth by 2028	Strengthening AI narrative; clearer commercialization milestones
Supply chain & capacity	Tight nearline supply; focus on build-to-order; capacity expansion via aerial density, not new head/media; utilization >90%	One-quarter supply constraint (~$200M) resolved; BTO commitments maintained; June quarter will resume normal supply-demand matching	Transitory constraint; discipline maintained
Pricing & margins	Sequential gross margin expansion; pricing rationality; elimination of underutilization charges; guidance for continued margin gains	Non-GAAP GM 35.5%; management confident in sequential GM improvement even with lower Q3 revenue; HAMR accretive	Continued improvement; mix and technology-led
HAMR roadmap & ramp	Qualification with lead CSP in Sept quarter; broader quals mid-CY2025; Mozaic 4+ planned	Volume ramp to lead CSP; sampling 36TB; multiple customers in qualification; accretive to margins; majority of ramp in 2H CY2025	Ramping; broader customer adoption
Enterprise/VIA regional trends	Enterprise OEM improving modestly; VIA stable with China headwinds; seasonality discussed	VIA avg. drive capacity record; surveillance ~4–5 EB of nearline; March quarter seasonally soft	Gradual improvement; seasonality continues
Capital structure & liquidity	Raised convert to retire term loans; strong liquidity; plan to reduce debt; net debt down; FCF to normalize	$479M notes retired; no maturities until late FY2027; net leverage 2.5x exiting Q2; $2.7B available liquidity	Deleveraging progress; liquidity robust

Management Commentary

CEO: “We began ramping HAMR-based Mozaic products to our lead cloud customer in the December quarter and are already sampling in capacities of up to 36 terabytes. Looking ahead, we believe Seagate is in a great position to deliver profitable growth in fiscal 2025.”
CFO: “Non-GAAP EPS was $2.03 at the high end of our guidance range, reflecting strong adoption of our high capacity nearline drive, along with ongoing price adjustment and cost discipline… non-GAAP gross margin expanded by 220 basis points to 35.5%… seventh consecutive quarter of sequential gross margin improvement.”
Product note: “Seagate… announced shipments of Exos M hard drive samples to select customers in… up to 36TB… ramping… up to 32TB with a leading cloud service provider.”

Q&A Highlights

Supply constraint impact: Management clarified the ~$200M Q3 shortfall is supply-related and “is probably going away” rather than shifting entirely into June; BTO commitments preserved; normal matching resumes in June .
Margin trajectory: HAMR accretive; mix shift to higher capacities supports sequential gross margin improvement even if revenue dips in March; potential for structurally higher margins over time .
Capacity strategy: No addition of head/media units; exabyte capacity growth via aerial density (transitioning 24/28TB PMR to HAMR 30TB+ and beyond); many PMR components convertible to HAMR .
Nearline/VIA reporting change: Nearline exabytes now include shipments to VIA; nearline 126 EB in December vs 114 EB prior; surveillance accounts for ~4–5 EB .
Pricing discipline and market share: Focus on predictability via BTO rather than chasing share; pricing improvements continue amid healthy supply-demand .

Estimates Context

S&P Global consensus estimates for Q2 FY2025 could not be retrieved due to API rate limits; therefore, explicit “vs estimates” comparisons are unavailable in this recap [GetEstimates errors].
Context: Non-GAAP EPS of $2.03 landed at the high end of company guidance ; Q3 guidance sets a lower revenue/EPS baseline due to seasonality and transitory supply constraints .

Key Takeaways for Investors

Margin momentum intact: Seven straight quarters of GM expansion; HAMR and pricing should support further improvement even amid Q3 supply constraints and VIA seasonality .
Technology catalyst: HAMR ramp to lead CSP and sampling to 36TB broaden competitive moat; accretive to margin, mix, and TCO—key for AI-era data growth narratives .
Demand visibility: BTO model secures exabyte commitments; cloud demand robust; enterprise improving; surveillance/VIA seasonal but growing in average capacity .
Temporary speed bump: ~$200M supply shortfall limits Q3 upside; issue resolved; watch for June quarter normalization and potential margin uptick despite Q3 revenue dip .
Capital discipline: Dividend maintained; deleveraging ongoing; no major maturities until late FY2027; liquidity ample—supports multi-quarter execution of HAMR ramp .
Mix-driven operating leverage: Transition to higher-capacity PMR and HAMR drives increases exabytes per unit, enabling profit growth without head/media capacity adds .
Monitoring items: Strategic investment losses in GAAP-to-non-GAAP bridge; ongoing price adjustments; surveillance share of nearline; exabyte shipment trajectory into 2H CY2025 .

All figures and statements are sourced from Seagate’s Q2 FY2025 press release and 8-K, Q2 FY2025 earnings call, Q1 FY2025 and Q4 FY2024 materials, and related press releases as cited above.

Seagate Technology Holdings plc (STX)·Q2 2025 Earnings Summary