Seagate Technology Holdings plc (STX) Earnings Call Transcript & Summary

Hi, everyone. Good morning. I think we'll get started. Come take a seat. I'm Mark Newman, Bernstein's U.S. IT hardware analyst. And very happy to introduce Gianluca Romano, CFO of Seagate. Thanks very much for joining us today.

Thank you, Mark. Before we start, let me remind everyone that I will be making forward-looking statements today, and you can learn more about those risks on our website.

Okay. Perfect. So I'm going to get started here and just remind everyone, we've got some prepared questions I'm going to ask, and then I'm going to open it up to the floor. There is an app you can submit a question or if you prefer, we have a microphone, and you can ask questions live as well. So to start off, let's talk a little bit about the market dynamics in hard disk drives. So recently, one of your competitors, Western Digital, they -- or I should say, your main competitor, sorry, one of your main competitor, Western Digital forecasted mid-20s exabyte growth in nearline. And I just wondered what's your latest thoughts on growth. Do you agree with this? Or what are your latest thoughts on that?

Yes. And generally, we agree. We presented to our Investor Day May last year, a very similar forecast in terms of nearline exabyte CAGR, north mid-20s. is over a period of time of 3, 4, even 5 years. So every year is a bit different. But generally, I think we have a similar view of what will be demand and what we can increase in terms of exabyte production.

And on pricing, how I describe pricing. Recently, we've seen blended average prices on a per terabyte basis to be stable, flat to very slightly up, up something like low single digits year-on-year, something like that seems to be -- just going back to Western Digital because they just had an Analyst Day. So they recently said that they're sold out for 2026 and with some contracts going to the end of 2027 and even one contract going through to the end of 2028 and that they expect prices to remain stable, they call it, which the implication from that was flat to very slightly up. I just want -- so starting off, do you expect prices to stay stable for the next 5 years? Do you think prices could go up? Or how do you see that?

We are not changing our pricing strategy. We're starting this strategy about almost 3 years ago at this point. And we are very consistent. So every time we renegotiate a contract, there is a little bit of price increase. It's very important to push customers to adopt the latest product available because this is how we want to increase exabyte. It's not adding unit, but it's increasing exabyte from the same number of units that we can produce in our manufacturing. So I would say we could be more aggressive on pricing for sure, but I think stability and visibility is very important. So we are very consistent. Every quarter, we do a little bit better. We don't go for unreasonable price increase, but we are very consistent. So there is always the impact of the mix from lower capacity drive to higher capacity drive. So when you look at the average, it's not really telling you exactly what we do product-by-product. But I tend to agree that based on the orders that we have for calendar '26, as we said at our earnings release, we expect pricing -- average price per terabyte to be flat to slightly up.

Just to clarify what you do -- to the benefit of the audience, I believe what you do is you -- for legacy products or products that are being renewed that are more than 1 year old, you're essentially increasing the price on like-for-like products, right? And then that's what you're saying is you're offsetting that with new products with the higher density coming in at a higher price per drive, but a lower price per terabyte and that offsets the price increasing on the like-for-like drive. Is that a correct summary?

I would say the offset is very limited. It's not a full offset. So there is an increase of the average price per terabyte as you have seen, and you will see through the rest of the calendar year. There is maybe a little bit of incentive when a customer is adopting a much higher drive in terms of capacity because our cost per terabyte is much lower. So our profitability improved a lot despite that very small discount. But this is valid only for the first time they buy that product. When they come back and buy again the same product, now price is going up, which is why to model every quarter is not so easy. There is a lot of mix impact and who is buying this new product for the first time, who is buying for the second time. Some have a discount; some have an increased price. So -- but when you put all together, we see stability and some increase in price per terabyte -- average price per terabyte.

Given that the market seems to be so strong right now and given that NAND flash prices have been increasing dramatically, and probably double or triple in the last quarter or so. Is there an opportunity to -- I mean, I know you touched on it, but is there a realistic opportunity for Seagate and potentially your competitors to increase price per terabyte more than the currently quite -- yes, compared to NAND and DRAM, your price increases is quite slow. So is there an opportunity to increase it more? Or is that going to be more limited because of the longer-term contracts that you have?

No, I think if we wanted to increase pricing more aggressively, we could. Demand is well above supply. So we could, but it's just as we want to manage our strategy and hopefully how the industry is viewing this is a long-term benefit for the industry to have demand a little bit above supply. And we are reasonable with the price increase, but we are very consistent. So it's stable, maybe not super aggressive, but very stable and very consistent, and this is increasing our profitability for almost 3 years consecutive every quarter. So I think if I have to decide what I want is a major increase and then possibly a decrease in profitability or is more stable increase, I always prefer the more stable increase.

Fair enough. Fair enough. Drilling down on the point versus NAND a little bit more. Given how steep NAND prices have gone up, that cost differential for your customers is much wider. So it used to be 6 to 7x, I believe, NAND being 6 to 7x more expensive per gigabyte. Now it's probably 10, 15x, maybe 20x, not that far away around the corner given how fast prices are going up. So does that impact your potential demand? I know demand is already tight, but is there some portion of demand that can -- that's on the edge between the hard disk drive and NAND that can flip backwards and forwards -- and that potentially you can benefit from?

I would say in general, as you said, demand is above supply. So whatever we produce is going to be sold. So this additional potential demand cannot be satisfied anyway because we already sell 100% of our exabyte. In the public cloud infrastructure, I don't see a lot of changes. It's kind of independent. The price of NAND from hard disk is independent wherever they go, very high or very low. The infrastructure has always been very similar, that is storage is on hard disk and then you move the data from an hard disk into an end when you need to run the application and then you send the data back to an hard disk. So that infrastructure has never changed for the last 10, 15 years. It's always separating the 2 components. And I guess, their procurement, our customers' procurement, are buying those 2 components for different needs. So the overlap is very, very limited. Now when you go in other segments, low-capacity segments, there is for sure an overlap. And of course, in that case, the delta price can drive some delta volume. But because 80% of our revenue is in data center, I would say it's very limited.

So this will be some OEM business potentially?

Some OEMs, some VIA client, so video and image application, but in the client space, consumer, for sure, very sensitive to pricing, but not in the big public cloud and probably not even too much in the big enterprise OEM.

A few months ago, there was some market chatter about some hyperscalers hard disk drive demand switching to NAND because they couldn't get enough hard disk drive at that time. Did you see that? Or is that false?

As I said before, I think it's just people talking. As I said before, all what we produce is sold and is sold today for the end of the calendar year. So we sell what we produce, then you can talk and say whatever you want about the extra demand that we cannot serve. I don't think it's going anywhere because of what I discussed before. The 2 components are used differently. Now I don't exclude that for very, very small volume, you could use some NAND to do storage, but it's not a good decision for our customers. And by the way, it's not that they are now swimming into NAND either. So I don't know how they can do it.

Switching gears to technology and supply side. You said that HAMR should enable roughly high teens areal density per year. This, though, is still a pretty large gap with long-term demand in the mid-20s. And at the moment, your shipments are matching pretty close to where demand is mid-20s. So how do we reconcile that gap between the high teens' areal density improvement and demand and shipments in the mid-20s?

Yes, it's a good question. Well, first of all, I would say it's not that demand is in the mid-20s. Demand, the TAM is what the industry can produce. So for sure, supply and demand today, if you look at what we ship, is equal to supply. It's not equal to demand. Demand is higher. Yes, we are increasing our exabyte at -- like 25% CAGR. And that depends from the entire mix. So you need to think about not everyone today is on a 30-terabyte drive and tomorrow moving to a 40-terabyte drive. If theoretically, everyone is doing that in a year, you can increase by 33%, your exabyte CAGR. But really, there are -- we sell drive from 1-terabyte to very soon 40-terabyte. So the increase in exabyte depends on how all this mix is moving up. It's not just the highest capacity. It's everything up. There are a lot of enterprise OEMs that are buying 18 terabytes, 20-terabyte, 24-terabyte and every year, they move up, but they don't go from 30 to 40. So when we look at that mix change and of course, our product road map and how we think customers will be qualified and what we can ramp of those products, we think about 25% exabyte CAGR is what we can generate for the next 3 to 4 years.

I see. So even though areal density is only in the high teens, you think you can still with some of that mix change.

If you think about -- if you have a customer that today is on 20-terabyte and can go quickly to 40-terabyte can double. So -- but the mix is not very variable. So when you put all together, the 25% CAGR is what we think we can do. It is fairly close to what we have done. I think recently, we have been between 25% and 30%, depending from the quarter. I think that is the range.

Is there any plans -- you probably get this question like every day. Any plans to add -- but I have to ask you, any plans to add unit capacity? Any motors board factories that could be repurposed to boost unit production?

Well, our factories are full at this point. Of course, we always try to optimize the space that we have, but we are full. We have no interest in adding units because we think with our product road map with the same number of units, we can generate that increase in exabyte that we think will be enough to satisfy the short-term need of our customers, possibly not giving them the opportunity to build a lot of inventory or any inventory, but also not so short that they cannot build the next data center because they don't have hard disk. Today, I'm not aware of any project on a data center that is put on hold because they will not have hard disk. So we are one of the components that can be short, but we are not at the top of the list. So of course, there is a demand that our customers have and then it's what they can do based on the power they can get and other components. There are some components in memory that looks to be short right now. Of course, GPU was another component that is probably still a bit short, some of the semiconductors seems to be short. So we are possibly a little bit high in the list, but we are not the component that is the bottleneck in building the next data center. And this is exactly what we want. We don't want to be a problem for our customers. but we don't want to produce more than what is really, really needed for the short term.

Okay. Great. Can you talk about yields in your HAMR products?

Well, yields as every new product that you have improve with the time. So of course, every quarter, we have a little bit better yield. We are now at the second generation of HAMR. So we have the fourth generation that is the platform is on a 30-terabyte and go from 30 to mid-30s. So there are different variants of that product. And we are qualifying the second generation. So the second platform that start at 40-terabyte SMR, and then we will grow with the time also into the mid-40s. So the yield will improve as always been in the past.

So at the moment, though, the yield, would you say it's not quite mature as PMR yields?

No. It's not exactly the same level. Of course, PMR, we have built that product technology for more than 20 years. We are building HAMR. We -- the first qualification was November 2024. So it's not even -- it's basically 1.5 years. So there are opportunities to improve the yield, that means lower cost for us. And of course, this is also what we include in our estimate for the 25% exabyte CAGR. So some will come also from better yield. Now the yield is good. It's not bad. It's actually very good, but it's not equal to PMR at this point.

Right. And is there a difference in yield between your first-gen Mozaic 3 and your second-gen Mozaic 4, presumably?

Second generation will be better, but we are still not really producing that. We are still in the call phase. So we are finalizing those calls and then we ramp. So we will see, but I'm sure it will be better.

But I guess my other question, though, on yields would be even though you may have a slightly lower yield for your HAMR products, is it still correct that due to the area density improvement you have, you still have a lower cost per terabyte?

Absolutely. We show that actually at our Investor Day, where I was -- a slide with the cost per terabyte of our last product on the prior technology, so on PMR, the fourth generation HAMR and then the following generations of HAMR. And you can see the fourth generation of HAMR is fairly similar to the last product on PMR in terms of cost per terabyte, a little bit lower, but fairly similar. And then you start to see the very good impact in the cost decline from the second generation on. So this 40-terabyte drive will give us a good opportunity in terms of cost reduction.

So the big benefit really is 4...?

Start at 4, was some benefit on the 3-terabyte per disk, so 30-terabyte per drive, it will be much better on 4. And then with improvement, it will continue to be a very good driver for our cost decline and of course, our profitability increase in the next several years.

So I think last quarter, I know you don't break it out exactly, but doing the math, you had HAMR was over 20% of nearline exabyte shipped. Is that -- so I assume then that's all Mozaic 3 because Mozaic 4...

It's all Mozaic 3, yes.

Yes. So not much difference between those products within Mozaic. Do you have any shingle products within?

Of course. We sell a good portion of our products are SMR, depending from the customer. If the customer prefer SMR, it's just a firm change that we do at the end of the production and we sell SMR. If they want CMR, we sell CMR. I would say the big public cloud are moving more and more into SMR. So we sell more and more of that version. But it's the same product. But when you shingle, you get a little bit more capacity. So it's good for us and it's good for them if they can use it. Unfortunately, not everyone can use SMR yet, but that is a trend. And of course, we are in favor of this change in the future.

And you share that cost benefit from SMR with the customer or you take it off?

No, a terabyte is a terabyte.

So they basically pay similar for SMR...

I would say there are no significant differences. And of course, every customer is different. But in general, today, a customer or buy SMR or buy CMR. They don't buy a mix. So you cannot really even compare. So there is a price for a certain customer based on the terabyte that they want. And then if they want SMR, they get SMR. If they want CMR, they get CMR.

So can you talk about what is your mix now, your SMR versus CMR? And is that continue to increase going forward?

Continue to increase. I don't think we have disclosed recently exactly what is the percentage, but I would say it's continuing to increase. And because customers are the same in the industry, I would say hard disk suppliers, they should have a similar percentage overall.

Right. Okay. Moving on to more the financial side. Given stable to strong pricing and your HAMR ramp, how should we think about your cost per exabyte declines in gross margins going forward?

Well, I would say we have a very good trend in the last almost 3 years, now 11 quarters of consecutive improvement in pricing, improvement in cost and therefore, in better gross margin. I think we guided another very good improvement in the current quarter. And as I said before, we are not changing our strategy. So the pricing strategy is the same. So I expect a similar result in the future or even better possibly. And they move into the mix to higher capacity drives give us the opportunity to continue to reduce the cost. Of course, you need to ramp high volume of that product to get really the impact in the financials. So it takes a little bit of time. It's not in the fourth quarter that you get all the benefit, it takes time, time to ramp-up, but will be very beneficial.

Could you remind us what is the schedule for the Mozaic 4 ramp?

So we are qualifying 2 customers right now, 2 big cloud customers in U.S. So as soon as we qualify, we start shipping a certain volume. But of course, at the beginning is not much because before we qualify, then we ramp. So we have a little bit of volume for them available when they qualify, but then we really ramp. I would say, more in the second part of this calendar year.

Got it. Got it. Okay. I guess one of the questions I get a lot from investors is around relative profitability between Seagate and your competitor, Western Digital. Despite Seagate having a strong lead in HAMR, Western Digital still has a slightly higher gross margin. Can you talk about why that is? And will that narrow?

I don't know. I don't compare too much in details with my competitor, but I would say there are maybe a couple of reasons. One is they don't produce HAMR yet. And of course, at the beginning, when you have 2 technologies in the same factories, you don't -- you are not fully optimized. So for sure, your cost structure in manufacturing is not optimized. No, it will be better for us when we move more and more on HAMR because at a certain point, our production will be mainly HAMR. So we will not have that little bit of disruption within the 2 technology. They will have to go through that transition at a certain point, of course, it will be good for them also to be fully on HAMR, but there is a little bit of time where you have bad disruption. And second, I guess, they produce a little bit more exabyte probably for the same reason. And those exabytes are probably paid very well.

And presumably, the SMR shingling may have some impact on that because they have -- I think they have a higher portion of shingling, and the ultra SMR has a bit of a bigger benefit versus Seagate shingling?

I don't know. No, of course, they don't provide a lot of details exactly on the individual product. I would say customers are the same. So if a customer is buying SMR from one supplier, it's probably buying SMR from the other supplier because that means their data center can handle SMR. So I don't think there are huge differences. And then, of course, everyone has own technology or if they can produce more terabyte from the same number of units, it's because they have a different technology. We focus on HAMR. We think HAMR is the technology of the future. And we took a little bit a different decision. We anticipate HAMR, they are doing HAMR to be later. I think it's a temporary difference. Going on with the times. The 2 companies probably will have similar technology and similar capacity per drive.

But more a bit of a transition in the meantime, though. On capital returns, so your latest guidance, I believe, is greater than 75% of free cash flow returned to shareholders. But your free cash flow is -- it's growing massively. And in my projections, expected to grow -- continue to grow significantly, rapidly shrinking debt. Shouldn't you be considering something closer to 100% of free cash flow? Percentage wise?

Well, this is what we have done in the past. We have basically returned the entirety of our free cash flow to shareholders. So I don't exclude we will do the same in the future. We have focused on reducing the debt in the last few quarters. So at a certain point, our debt was above $6 billion. Now with the last transaction that we have done recently on our convertible, we are below 4, and we will reduce that even more in the future. But except for that focus on reducing debt, I would say the other part of the free cash flow will probably go to shareholders through dividend and share buyback.

Okay. I have more questions, but I just want to give the audience an opportunity to jump in if there are any questions from the audience, please put your hand up or submit it online. I haven't seen any on the portal. No one seems to be using the portal, but feel free to put your hand out. We've got a microphone right here. No hands so far. I'm going to keep going. So -- actually, I had a question on TCO. So HAMR versus SSD, TCO. So NAND pricing rising significantly. Has this changed the TCO gap between hard disk drives and SSDs? How are you thinking about that going forward for total cost of ownership?

Well, if you look at history, that NAND price is more volatile than hard disk. So right now, it's in a period of time where NAND price is increasing quarter after quarter. So of course, there is an increase in the gap between the 2 technology. But as I said before, this is not really impacting too much our business. 80% of our business is in data center. And in the data center, there is no overlap between NAND and hard disk. So again, demand is very strong. So we sell all what we produce. So it is kind of independent from where the NAND price is. Now in the edge IoT part, what we call edge IoT, there is, for sure, a price sensitivity. We were discussing before saying if you go into the consumer business, for example, the fact that the NAND price is going up is probably giving us the opportunity to do 2 things. One is probably to sell a little bit more volume. Second, to have a better price. So it's helping, at least temporary is helping that part of the business, but it's not the majority of our volume, of our revenue is about 20% of what we sell in a quarter.

So the AI demand. Are you seeing some shift where sort of the customers' hyperscalers or neoclouds in AI use hard disk drives, not just for cold storage but also warm training data as well?

Well, the neocloud is a bit different structure. What I said before, in the public cloud infrastructure, they are a complete data center. So they have storage that is hard risk and they have where they run the application, and they transfer the data from the storage hard disk into NAND and they run. The neocloud are basically running the application for the big public cloud. So we have basically the same customer. We provide the storage, they provide an additional compute opportunity. So the storage is still in the public cloud. So they import the data from our hard desk in a public cloud into their NAND in the neocloud, they run the application and send it back.

So the neocloud is not actually purchasing hard disk drives. They're utilizing the large storage network in the public cloud, which is...

They use their customer storage to provide the application for the same customer. So when they use a certain -- either on the application for a certain customer, they take that storage, they import, they run the application and send it back. When it's a different customers, it's the same, takes the data from the other customer, runs application and send it back. Now in the future, if they evolve in a complete data center. So that means they don't -- they just don't run the application for the same customers, but they have different customers, and they want to be independent, they also need to have their storage. At that point they will buy hard disk.

Got it. During our recent Q2 earnings, you talked about nearline capacity fully allocated through calendar '26, I believe. And just in a world with booming AI demand that requires persistent access to this massive, massive data sets, are you seeing hyperscalers trying to lock in supply for longer term, 2027, 2028? I mean one of your competitors did talk about that, but Seagate has not yet talked about that. Just curious if you're seeing that...

Yes. No, I think we talk about that also. I think high level is very similar, but maybe what is a small difference on how we agree and when we agree on pricing. In terms of volume, it's very similar. So we discuss with customers entire calendar '26, calendar '27 in certain case even longer. So the volume agreement are already there. What we have done maybe differently, I don't know, possibly different is when we discuss price. And we discussed -- we fully discussed pricing for the entire calendar '26 because when we start the product in our manufacturing, it takes about 3 quarters to come out, and we want to be sure that there is an order attached to that product. And that order has to have the customer, the time of delivery and the price. When you go longer, we think it's probably good for us to wait a little bit before we define the price, as you discussed before, there is this demand that is very strong and a slight imbalance between supply and demand, that is, of course, helping our strategy on pricing and continue our pricing strategy as we have done for many, many quarters. So we prefer to wait it a bit longer. I would say right now, we are discussing pricing for the first part of calendar '27. So we always say -- so we always have those 4, 5 quarters where everything is fully defined, everything. But going longer, we basically only define volume. And then we define the exact mix of the product based on what they are qualified and the exact pricing at a different time. Now for what we are discussing in the first part of '27, pricing is following exactly what has been in the past. So no changes there.

And have you seen signs that AI demand is expanding beyond and you talked about hyperscalers towards enterprise and sovereign. Have you started to see that yet?

Possibly. I'll say it's probably still at the beginning. I would say, in AI, the major recent change that we have seen is a faster adoption of video AI in China and in U.S. So there are a lot of China new video AI application like we have in U.S. That is what is boosting a little bit more demand, a little bit faster than what we were expecting. So it's creating a little bit of a bigger gap between supply and demand in the short-term. But again, it's not that we were not expecting video AI to be a big driver of the demand. It's just happening a little bit faster than earlier than what we were expecting. That, I think, is where the exabyte, there was a big volume is currently is.

You've also identified agentic AI as a driver for persistent historical data storage. So as AI agents evolve from simple training to independent decision-making, they require constant context from vector databases stored in hard drives. And -- so does this transition move nearline drives into higher replacement cycle environment, given the faster the cycles that you may be used on that type of use case?

I would say, generally, when you look at AI, there are different phases. There is a training phase and then there is no inference. There are different phases and data is used differently. In training, you need a lot of data. So that impact retention. So if you are training for AI, you don't delete any data. You actually want all the data possible to do a better training. Then you use that trained AI to generate a data that is valuable to you. It can be for you in manufacturing, for you in your personal life or in whatever application you're using. So at that point, AI starts to generate data. And I think we're already in the second phase. Now before we were saying, well, to us in terms of storage, the major impact from this new AI is detention. Companies are not deleting data anymore and cloud are keeping more data, more data, more data. Now we see data generated from AI coming back into storage. And video is huge because video consume a lot of terabyte. So the more companies are keeping video for surveillance or for quality manufacturing or people to generate video for their use. This is a lot of exabytes that are consumed every quarter. So there are different applications, different cases. Now it's not only AI. Right now, AI is a big change compared to the traditional application, but every year, you will see new things. Even application that already exists like autonomous driving are many years where we are talking about autonomous driving, but we didn't see a lot of cars going around without a driver yet. Now it's happening. Now you go to San Francisco, you go Phoenix, you go other cities, you have more and more of those autonomous driving. This is generating a lot of data and that data gets stored. So there are a lot of applications on top of AI that will generate more and more data. And robotics will be the next one. Robotics need a lot of data, and you need to keep that data. It's also part of the training of the robotics. So it's somehow linked to AI, but it's not the pure AI. But all those new applications are all based on data and how they use the data to improve and to generate something more valuable in the future.

I want to give the audience a chance to ask a question again. Any questions? I could keep going, but I want to give you a chance. No questions? It's all clear. So actually, another question about -- we actually -- we've only got -- we don't have that much long left, but I'm going to squeeze in 1 or 2 more. So your competitor, I'm sorry to ask about your competitor, but they just had the Analyst Day. So that's why I referred to them. They recently talked about hyperscaler customers, being technology-agnostic and don't care whether they're shipping HAMR or PMR, just -- they just want exabytes, they want terabytes. Is that -- do you agree with that?

I tend to agree. I tend -- I know I'm sure a customer needs a certain number of exabyte. And they don't care what is the technology inside the box. They care about how big is the drive because this is their TCO, especially in this period of time where pricing are not going down, they're going up, your TCO comes from the size of the drive. If you can put a 40 terabyte drive into a current data center, where before you had a 20-terabyte drive for the same cost of that location, you double the storage. And they sell storage, our customers are selling terabyte to all of us and to our companies. So for the same cost, with a bigger drive, you can strongly increase your revenue and your profitability. That's why they care about the size of the drive. Said that, if you produce hard disk, you want to produce this bigger size with a better cost. And so the number of disk, the number of ads are important to the cost. So if you can produce the same capacity with a lower below material, you come out with a better cost reduction. But I would say a customer doesn't care if a hard disk is a PMR or a HAMR. And if it has 12 disks or 10, they don't. We care because it's a cost opportunity and also because inside the box, there is a limited space. So you can add disk until a certain limit and then there is no space anymore. So HAMR is the future because we'll continue to increase the capacity per disk, so what we call areal density. So you can store more and more data in one disk. So you avoid that problem of the physical space, and you continue to produce bigger and bigger hard disk drives. But I would say, from a customer perspective, I don't think it's a big difference.

They care about exabytes and how much they're paying per exabyte and reliability in the performance.

They care about exabyte in total, they care about terabyte per unit. So they want 1 hard disk at 40 terabyte, not 2 at 20, because of what I told you before from the same location. Now they get more storage.

So just finally, just wrapping up for me, just looking around and see if there's any questions, please put your hand up any questions. Otherwise, we're going to be wrapping up in a minute. And what do you think is most misunderstood on the Street? I mean, obviously, Seagate stock has been pretty strong. Do you think there's anything that's misunderstood? Or anything you want to point out that you think Wall Street analysts like myself or buy side are not getting quite right or missing?

What I would say, in general, I think the story is fairly well understood, the application that are running and driving the need for more storage are very well known. And is fairly clear where demand is stronger than supply. I think -- I think it's important to understand that this industry is generating an increase in exabyte year after year after year. So there is a huge increase in exabyte that maybe will not fully answer to the demand, but it is a huge increase and is a strong industry. It's a very consolidated industry. I think there are differences between the industry today and the industry years ago. And I think the business is very strong and the cyclicality, if any, will be very different in future compared to what has been seen in the past. I think from time to time is still hear about the NAND versus hard disk. That is a part that I don't understand. I don't understand how after 15 years of cloud infrastructure being exactly in the same way. People can still think that will change somehow. And by the way, as I always say, it's not that there's a lot of NAND available. So that is maybe some -- I don't want to say doubt, but some possible small misunderstanding.

Too much focus on that.

Yes. But overall, I'd say the story is stronger. I think is recognized from the analysts and our investors.

Okay. Well, great. Thank you very much, Gianluca, for joining us today. And thanks, everyone, for joining today.

Thank you.