STX

• Revenue depends on timely new product introductions and market acceptance, particularly the transition to HAMR-based Mozaic hard drives; failure risks loss of market share.
• A limited number of key customers, including one at 14% of FY2026 revenue, account for a significant portion of sales; loss or reduced purchases by hyperscale/CSP customers could materially harm results.
• Supply chain risks include reliance on single-source suppliers for critical components (e.g., read/write heads, ASICs, rare earth elements from China) and potential cost increases or shortages from tariffs and trade restrictions.
• A long, unpredictable sales cycle for nearline storage solutions and the need to make significant inventory investments 3-6 months ahead of orders create demand forecasting and excess inventory risks.
• The Settlement Agreement with BIS over past Huawei sales requires compliance audits and carries a suspended denial order; any violation could severely restrict export activities.
• Macroeconomic pressures, including inflation, elevated interest rates, and evolving U.S. trade policy with new tariffs, have negatively impacted and may continue to impact customer spending and operating costs.

Our principal executive offices are located in Singapore. Our principal manufacturing facilities are located in China, Malaysia, Northern Ireland, Singapore, Thailand and the United States. Our principal product development facilities are located in California, Colorado, Minnesota and Singapore. Our leased facilities are occupied under leases that expire on various dates through 2068. Our material manufacturing, product development and marketing and administrative facilities at July 3, 2026 are as follows: Location Building(s) Owned or Leased Approximate Square Footage Primary Use Europe Northern Ireland Springtown Owned 479,000 Manufacture of recording heads United States California Leased 575,000 Product development, marketing and administrative and operational offices Colorado Leased 533,000 Product development, administrative and operational offices Minnesota Owned/Leased 1,157,000 Manufacture of recording heads and product development Asia China Wuxi Leased 707,000 Manufacture of drives and drive subassemblies Malaysia Johor Owned (1) 631,000 Manufacture of substrates Singapore Woodlands Owned/Leased (1) 1,543,000 Manufacture of media, administrative and operational offices Ayer Rajah Leased 440,000 Product development, administrative and operational offices Thailand Korat Owned/Leased 2,706,000 Manufacture of drives and drive subassemblies Teparuk Owned/Leased 453,000 Manufacture of drive subassemblies ___________________________________ (1) Land leases for these facilities expire on various dates through 2068. As of July 3, 2026, we owned or leased a total of approximately 9.8 million square feet of space worldwide. We believe that our existing properties are in good operating condition and are suitable for the operations for which they are used.

See “Item 8. Financial Statements and Supplementary Data—Note 12. Legal, Environmental and Other Contingencies”. 32 Table of Contents

• Total revenue increased $3.1B (34%) to $12.2B, driven by a 40% jump in nearline exabytes shipped and favorable pricing actions.
• Gross margin improved to 46% from 35%, primarily due to pricing actions and a product mix shift toward higher-capacity drives.
• Operating expenses rose $154M, including a $105M legal settlement charge; product development costs increased modestly on higher outside services and compensation.
• Operating cash flow reached $3.7B, supporting $634M in dividends, $176M in share repurchases, and a $1.4B reduction in outstanding debt.
• The effective tax rate increased to 13.73% from 2.91%, largely reflecting the impact of the Pillar Two global minimum tax.
• For fiscal 2027, capital expenditures are expected to be higher than fiscal 2026 and within 4–6% of revenue, supporting the volume ramp of HAMR-technology hard drives.

• Cash investments are primarily floating-rate money market funds and deposits ($475M at 3.59%); available-for-sale investments are immaterial.
• Fixed-rate debt totals $3.6B at a weighted-average rate of 6.78%, with maturities concentrated in 2030 and beyond.
• FX risk is managed with forward contracts on British Pound, Chinese Renminbi, Singapore Dollar, and Thai Baht (total notional $230M, net fair value $1M gain).
• Commodity price risk from precious metals is hedged with forward contracts, but the notional amount is immaterial and a 10% adverse price move would not be material.
• Equity market risk from the non-qualified deferred compensation plan (SDCP) is offset via a Total Return Swap paying SOFR plus a spread.
• Counterparty credit risk on derivatives and the fixed-income portfolio is managed through credit evaluations, counterparty limits, and diversification.

• Revenue grew 34% to $12.2 billion, with OEM channel sales reaching $9.8 billion and one customer accounting for 14% of total revenue.
• Net income more than doubled to $3.2 billion, while operating cash flow increased to $3.7 billion from $1.1 billion in the prior year.
• The company recorded a $105 million charge for a securities class action settlement and a $131 million non-cash loss from induced conversions of its 2028 Exchangeable Senior Notes.
• Total debt decreased to $3.6 billion from $5.0 billion, and shareholders' equity turned positive at $2.2 billion after a $453 million deficit last year.
• Government incentives reduced operating expenses by $163 million, and the company had $1.7 billion in cash and equivalents at year-end.