STXSeagate Technology

In re Seagate Technology Holdings plc Securities Litigation. On July 10, 2023 and July 26, 2023, two securities class action lawsuits were filed in the U.S. District Court for the Northern District of California against Seagate Technology Holdings plc, Dr. William D. Mosley, and Gianluca Romano. The cases were consolidated on September 25, 2023. On September 12, 2024, the plaintiffs filed the currently operative complaint, asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, and a class period between September 14, 2020 and April 19, 2023, inclusive. On April 3, 2026, the parties agreed to a settlement in principle to resolve the matter for a total amount of $175 million, approximately $70 million of which will be paid by the Company’s insurers. The operative complaint seeks unspecified monetary damages and other relief. On May 12, 2025, the Court granted in part and denied in part the defendants’ motion to dismiss the operative complaint. On June 9, 2025, the defendants moved to certify the May 12, 2025 order for interlocutory appeal. parties have since executed a stipulation of settlement. The Company believes that recorded a charge of $105 million which was included in Legal settlement in its Consolidated Statements of Operations and Comprehensive Income. On July 7, 2026, the asserted claims are without merit court granted preliminary approval of the settlement, and intends to vigorously defend the case. a final approval hearing will be held on November 17, 2026.

During fiscal year 2025, we experienced a significant increase in demand for our high capacity nearline drives primarily from cloud customers. At the same time, we have continued to operate in a dynamic the macroeconomic environment remains dynamic, marked by rapid shifts in heightened geopolitical uncertainty and evolving trade policies and increasing geopolitical tensions. 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 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 expect have in place provide greater visibility into future demand trends. We believe our hard drive storage business will continue to benefit from future growth in growing demand for data demand creation, retention and data value, including utilization supported by the increasing value organizations derive from the adoption of Generative AI applications. their data.

Our manufacturing process requires us to make significant product-specific investments in inventory for production at least three to six months in advance. As a result, we incur inventory and manufacturing costs in advance of anticipated sales that may never materialize or that may be substantially lower than expected. expected, particularly in our data center markets where customer ordering patterns may shift rapidly in response to changes in cloud capital spending, the timing of hyperscale deployments, our customers’ capital expenditure budgets and the pace of their AI-related infrastructure investments, and the timing of our customers’ monetization of their AI investments. Because we must also make decisions regarding manufacturing capacity and related investments well in advance of anticipated demand, forecasting errors may result in either excess capacity and associated underutilization costs or insufficient capacity to meet customer demand on a timely basis, either of which could adversely affect our business, financial condition and results of operations. In addition, because of our vertical design and manufacturing strategy, operations have significant fixed costs that are difficult to reduce in the short-term, including our costs relating to utilization of existing facilities and equipment. If we fail to forecast demand accurately or if there is a partial or complete reduction in long term demand for our products, we may also experience excess and obsolescence of inventory, higher inventory carrying costs, factory underutilization charges and manufacturing rework costs, which have resulted in and could in the future result in material and adverse effects on our financial condition and results of operations. For example, due to customer inventory adjustments, we have in the past experienced, and may in the future experience, a slowdown in demand for our products, particularly in the mass capacity markets. data center market. These reductions in demand have required us to significantly reduce manufacturing production plans and recognize factory underutilization charges in fiscal years 2024 and 2023.

In November 2023, 2024, the FASB issued ASU 2023-07 2024-04 (ASC Topic 280), Improvements to Reportable Segment Disclosures. Subtopic 470-20), Induced Conversions of Convertible Debt Instruments. This ASU improves reportable segment disclosure clarifies the requirements primarily through enhanced disclosures about significant segment expenses. for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. The guidance is effective for fiscal years beginning after December 15, 2025, with early adoption permitted. The Company adopted the disclosure requirement for its annual reporting guidance on a prospective basis in fiscal year 2025 2026 and is required applied the amendments in the ASU to adopt the guidance for interim period reporting beginning exchanges of the first quarter of fiscal year 2026 on a retrospective basis. 2028 Notes. Refer to “Note 15. Business Segment and Geographic Information”. 4. Debt”.