Seagate Technology Holdings plc (STX)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion of the Company’s financial condition, changes in financial condition and results of operations for the fiscal quarters ended April 3, 2026, January 2, 2026 and March 28, 2025, referred to herein as the “March 2026 quarter”, the “December 2025 quarter” and the “March 2025 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 March 2026 quarter, December 2025 quarter and March 2025 quarter were each 13 weeks.

You should read this discussion in conjunction with financial information and related notes included in this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the fiscal year ended June 27, 2025. Unless the context indicates otherwise, as used herein, the terms “we,” “us,” “Seagate,” the “Company” and “our” refer collectively to Seagate Technology Holdings plc, an Irish public limited company, and its subsidiaries. References to “$” or “dollars” are to United States dollars.

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.

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided in addition to the accompanying Condensed Consolidated Financial Statements and notes to assist readers in understanding our results of operations, financial condition and cash flows. Our MD&A is organized as follows:

•Overview of the March 2026 quarter. Highlights of events in the March 2026 quarter that impacted our financial position.

•Results of Operations. Analysis of our financial results comparing the March 2026 quarter to the December 2025 quarter and the March 2025 quarter.

•Liquidity and Capital Resources. Analysis of changes in our balance sheets and cash flows and discussion of our financial condition, including potential sources of liquidity, material cash requirements and their general purpose.

•Critical Accounting Policies and Estimates. Accounting policies and estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results.

For an overview of our business, see “Part I, Item 1. Financial Statements—Note 1. Basis of Presentation and Summary of Significant Accounting Policies—Organization.”

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Overview of the March 2026 quarter

During the March 2026 quarter, we shipped 199 exabytes of HDD storage capacity. We generated revenue of approximately $3.1 billion with a gross margin of 46.5% and net income of $748 million. Our operating cash flow was $1.1 billion, we retired $641 million principal amount of long-term debt, paid $161 million for the purchase of property, equipment and leasehold improvements and paid $161 million in dividends.

Beginning in fiscal year 2026, we changed our presentation of principal data storage markets to better reflect current demand drivers and the growing impact of AI-driven applications. We now present our products and services under two end markets: Data center and Edge IoT. Data center comprises the majority of the Company’s business and primarily includes high-capacity nearline products for mass capacity data storage and systems sold to cloud and enterprise customers, as well as cloud-based video and image applications. Edge IoT primarily includes consumer and client-centric markets along with network-attached storage, mission critical and SSD.

We reflected these changes to our revenue and HDD exabytes shipped by end market retrospectively to the earliest period presented. The change had no impact on our previously reported consolidated net revenue.

Recent Developments, Economic Conditions and Challenges

In the March 2026 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 increasing sales for 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 heightened geopolitical uncertainty and evolving trade policies. 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.

For a further discussion of the uncertainties and business risks, see “Part II, Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q.

Results of Operations

We list in the tables below summarized information from our Condensed Consolidated Statements of Operations by dollar amounts and as a percentage of revenue:

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Revenue

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

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(1) Revenue is attributed to geography based on the bill from location.

Revenue in the March 2026

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion of the Company’s financial condition, changes in financial condition and results of operations for the fiscal years ended July 3, 2026 and June 27, 2025. Discussions of year-to-year comparisons between fiscal years 2025 and 2024 are not included in this Annual Report on Form 10-K and can be found in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended June 27, 2025, which was filed with the SEC on August 1, 2025.

You should read this discussion in conjunction with “Item 8. Financial Statements and Supplementary Data” included elsewhere in this Annual Report on Form 10-K. Except as noted, references to any fiscal year mean the twelve-month period ending on the Friday closest to June 30 of that year. Accordingly, fiscal year 2026 comprised of 53 weeks and ended on July 3, 2026. Fiscal year 2025 comprised of 52 weeks and ended on June 27, 2025. Fiscal year 2032 will be comprised of 53 weeks and will end on July 2, 2032.

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided in addition to the accompanying Consolidated Financial Statements and notes to assist readers in understanding our results of operations, financial condition and cash flows. Our MD&A is organized as follows:

•Overview of Fiscal Year 2026. Highlights of events in fiscal year 2026 that impacted our financial position.

•Results of Operations. Analysis of our financial results comparing fiscal years 2026 and 2025.

•Liquidity and Capital Resources. Analysis of changes in our balance sheets and cash flows and discussion of our financial condition, including potential sources of liquidity, material cash requirements and their general purpose.

•Critical Accounting Policies and Estimates. Accounting policies and estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results.

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For an overview of our business, see “Part I, Item 1. Business”.

Overview of Fiscal Year 2026

During fiscal year 2026, we shipped 789 exabytes of HDD storage capacity. We generated revenue of approximately $12.2 billion with a gross margin of 46% and net income of $3.2 billion. Our operating cash flow was $3.7 billion and we paid $634 million in dividends and repurchased $176 million of our ordinary shares.

We reduced our outstanding debt by $1.4 billion through exchanges of our 2028 Notes for total consideration of $1.3 billion cash and approximately 12.6 million of our ordinary shares as well as repurchases of Senior Notes.

Recent Developments, Economic Conditions and Challenges

During fiscal year 2026, demand for our data storage solutions strengthened. Growth was led by data center end markets in which we experienced sustained demand for our high capacity nearline drives across global cloud customers, as well as increasing sales for enterprise edge deployments. Customers continue to invest in data center infrastructure to serve both traditional data intensive workloads along with growing AI related applications. The ongoing adoption of these applications increases the volume of data being generated, retained and reused, which we believe supports demand growth for scalable, cost-efficient and reliable storage solutions.

At the same time, the macroeconomic environment remains dynamic, marked by heightened geopolitical uncertainty and evolving trade policies. 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. However, we believe the structural changes that we have made to the business, including executing our pricing strategy and maintaining supply discipline, together with the long-term customer engagements we have in place provide greater visibility into future demand trends. We believe our hard drive storage business will continue to benefit from growing demand for data creation, retention and utilization supported by the increasing value organizations derive from their data.

For a further discussion of the uncertainties and business risks, see “Part I, Item 1A. Risk Factors” of our Annual Report.

Results of Operations

We list in the tables below summarized information from our Consolidated Statements of Operations and Comprehensive Income by dollar amounts and as a percentage of revenue:

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Revenue

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

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(1) Revenue is attributed to geography based on the bill from location.

Revenue in fiscal year 2026 increased approximately 34%, or $3.1 billion, from fiscal year 2025, primarily due to an increase in nearline exabytes shipped reflecting higher demand for nearline products and favorable pricing actions undertaken by the Company.

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Cost of Revenue and Gross Margin

For fiscal year 2026, gross margin increased by 11 percentage points compared to the prior fiscal year primarily driven by pricing actions undertaken by the Company and product mix shift to higher capacity products.

Operating Expenses

Product Development Expense. Product development expenses for fiscal year 2026 increased by $31 million from fiscal year 2025 primarily due to a $22 million increase in outside services costs, a $7 million increase in compensation and other employee benefits and a $7 million increase in facilities costs, partially offset by an $8 million decrease in material expenses.

Marketing and Administrative Expense. Marketing and administrative expenses for fiscal year 2026 increased by $16 million from fiscal year 2025 primarily due to an $11 million increase in compensation and other employee benefits and a $5 million increase in information technology expenses.

Legal settlement. We recorded a charge of $105 million in fiscal year 2026 related to a litigation matter. Refer to “Item 8. Financial Statements and Supplementary Data—Note 12. Legal, Environmental and Other Contingencies” for more details.

Restructuring and Other, net. In fiscal year 2026, we recorded $27 million of restructuring charges, primarily related to employee related termination benefits. In fiscal year 2025, we recorded $25 million of restructuring charges in Operating expenses, primarily related to employee related termination benefits and right-of-use (“ROU”) asset impairment charges.

Other Expense, net

Other expense, net for fiscal year 2026 primarily related to $284 million of interest expense and $151 million of net loss from debt transactions, partially offset by $30 million of interest income. Other expense, net for fiscal year 2025 primarily related to $321 million of interest expense and $53 million loss on investments.

Income Taxes

We recorded an income tax provision of $506 million for fiscal year 2026 compared to an income tax provision of $44 million for fiscal year 2025.

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We established Singapore as our principal executive offices in fiscal year 2024. Our parent holding company owns various U.S. and non-Singaporean subsidiaries that operate in multiple non-Singaporean income tax jurisdictions. Our worldwide operating income is either subject to varying rates of income tax or is exempt from income tax due to tax incentive programs we operate under in Singapore and Thailand. Starting from fiscal year 2026, major jurisdictions that we operate in have implemented Pillar Two global minimum tax. Our effective tax rate was 13.73% for fiscal year 2026 and 2.91% for fiscal year 2025.

Our income tax recorded for fiscal year 2026 differed from the provision for income taxes that would be derived by applying the Singaporean statutory rate of 17% to income before income taxes, primarily due to the net effect of tax benefits related to earnings generated in jurisdictions that are subject to tax incentive programs, offset by the effects of Pillar Two global minimum tax. The fiscal year 2026 provision for income taxes also includes a discrete tax benefit related to the release of certain valuation allowances in connection with the OBBBA in July 202

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