Seagate unveils growth strategy, boosts share repurchases to USD $5bn

Seagate Technology has announced a new business strategy targeting financial and technological growth supported by its Heat-Assisted Magnetic Recording (HAMR) technology and a revised share repurchase program.

The company has set new financial targets through its 2028 fiscal year, underpinned by the introduction and broader adoption of HAMR technology, which it claims will transform storage capacity and efficiency for hyperscale and enterprise data centres. As part of the announced strategy, Seagate also increased its share repurchase authorisation to USD $5 billion.

Seagate outlined a product roadmap featuring its Mozaic platform, with projections to progress from 3+ terabytes per disk to more than 10 terabytes per disk in response to escalating demand for storage driven by artificial intelligence and cloud computing. The roadmap is designed to address increasing requirements from large-scale data centres, offering a scalable path to higher data storage densities.

Dave Mosley, Seagate's Chief Executive Officer, said: "Technology innovation and AI are fueling exponential data growth and driving demand for the hard drive storage industry. Seagate today is uniquely positioned to capture this opportunity with our Mozaic portfolio powered by market-leading HAMR technology. Our differentiated portfolio addresses critical data center challenges, including cost, scale and sustainability, enabling us to deliver storage solutions for customers from cloud to edge."

Mosley further commented: "Since our last Investor Day in 2021, we have made structural improvements to extend demand visibility, maintain supply discipline, optimize product mix, and streamline cost structure. We are a stronger company today thanks to the dedicated efforts of our global team. This is an incredibly exciting time at Seagate, and we are confident we have the right technology and strategy to lead the next era of storage in today's data-driven world, while delivering enhanced value to shareholders."

During its investor event, Seagate shared new financial targets that cover the period through FY2028. The company is aiming for a revenue compound annual growth rate in the low-to-mid teens, a non-GAAP gross margin target of 40% with potential for further expansion, and an incremental margin of approximately 50% starting at USD $2.6 billion in quarterly revenue. Operating expenses are projected to remain around 10% of revenue, and capital expenditures are expected to be between 4% and 6% of revenue. The company anticipates returning more than 75% of free cash flow to shareholders.

Part of the updated capital allocation strategy includes an increase in the share repurchase authorisation to USD $5 billion. The authorisation does not have a specific expiration date, and decisions regarding share repurchases will be influenced by Seagate's financial position, results of operations, available cash and cash flow, capital requirements, distributable reserves, and other factors deemed relevant by the company.

The financial targets and product development roadmap are being introduced as data centre operators and cloud service providers face mounting requirements for cost-effective, high-capacity storage solutions. Seagate expects demand will be mainly driven by increased adoption of AI workloads, cloud migration, and continued digital transformation across several industries.

Seagate's Mozaic portfolio, designed to be powered by HAMR technology, intends to address these requirements by elevating data storage density while aiming to improve cost efficiencies and operational sustainability within data centres. The company's management maintains that its technology and operational decisions are structured to provide long-term shareholder value while supporting evolving market needs.

The company confirmed that the execution of repurchases within the expanded authorisation will remain flexible and evaluate multiple business and financial considerations. The share repurchase programme represents an ongoing component of Seagate's broader capital allocation strategy, reflecting management's stated confidence in the sustainability of its business model and future prospects.

Seagate's updated strategic focus follows previous structural improvements since its last major investor update in 2021. These changes include efforts to enhance demand forecasting, maintain supply chain discipline, optimise product range, and reduce operating costs.