Seagate Technology Q4 Earnings Call Highlights
Key Points
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- Seagate exceeded its fiscal Q4 outlook, reporting $3.6 billion in revenue, up 48% year over year, and non-GAAP EPS of $5.71, up 121%. Gross margin expanded to 52.7%, while operating margin reached 44.6%.
- Data center demand, particularly from cloud and AI workloads, drove growth. Data center revenue rose 57% year over year to $2.9 billion, while HAMR products reached approximately 40% of nearline exabyte shipments and major cloud customers are ramping newer platforms.
- Seagate expects strong fiscal 2027 momentum and improving cash generation. It forecast September-quarter revenue of about $4.1 billion and EPS of $7.30, while record fiscal 2026 free cash flow of $3.1 billion and planned debt repayments are expected to reduce gross debt to roughly $2.4 billion.
Seagate Technology (NASDAQ:STX) reported fiscal fourth-quarter results that exceeded its outlook, driven by data center demand for mass-capacity storage and continued expansion in profitability. Management said the company expects revenue growth in fiscal 2027 to surpass the 34% growth recorded in fiscal 2026, with sequential improvement in revenue, margins and cash generation through the year.
For the quarter ended in June, Seagate posted revenue of $3.6 billion, up 17% sequentially and 48% from a year earlier. Non-GAAP earnings per share reached $5.71, rising 39% from the prior quarter and 121% year over year. Non-GAAP gross margin expanded 570 basis points sequentially to 52.7%, while non-GAAP operating margin rose to 44.6%.
“We capped fiscal 2026 delivering strong sequential double-digit top and bottom-line growth in the June quarter,” Chief Financial Officer Gianluca Romano said, citing revenue and gross-margin expansion across every end market served.
Data Center Demand Drives Growth
Seagate shipped 218 exabytes during the June quarter, up 34% year over year. Data center shipments accounted for 89% of the total, or 195 exabytes, which rose 11% sequentially and 43% from the prior-year period. Data center revenue totaled $2.9 billion, up 17% from the March quarter and 57% year over year.
Chief Executive Officer Dave Mosley said cloud customers remain the primary driver of nearline-storage demand, supported by traditional data-intensive workloads and expanding adoption of artificial intelligence applications. Seagate has recorded three years of sequential quarterly exabyte growth from cloud customers, he said.
Management also pointed to strengthening enterprise demand. Enterprise nearline revenue increased for a fifth consecutive quarter, while enterprise OEM data center markets delivered double-digit year-over-year growth in both revenue and exabyte shipments during the June quarter.
Mosley said AI workloads could increase demand for persistent storage as companies retain data for context, compliance and reuse. He highlighted tiered storage architectures that use memory, solid-state drives and hard drives together, particularly for agentic AI applications that rely on key-value cache data. The company also sees longer-term opportunities from physical AI applications such as robotics and autonomous vehicles, which generate large amounts of unstructured sensor and video data.
HAMR Ramp and Customer Commitments
Seagate said its heat-assisted magnetic recording, or HAMR, technology is central to its strategy of expanding storage capacity without significantly increasing hard-drive unit output. HAMR-based products represented about 40% of Seagate’s nearline exabyte shipment run rate at the end of fiscal 2026, reaching the company’s stated milestone for the period.
The company’s Mozaic 3 HAMR products are qualified and operating in production environments across major cloud customers, Mosley said. Its Mozaic 4 platform, which can support up to 44 terabytes per drive, is ramping with the two largest global cloud service providers. Seagate expects 50% of its HAMR exabytes to be on the Mozaic 4 platform by the end of calendar 2026. Mozaic 5, a platform designed for more than 5 terabytes per disk, remains on track for qualification shipments in late calendar 2027.
Management reiterated a target for nearline exabyte growth in the mid-20% range over the next several years. Mosley said the company is maintaining a strategy of relatively stable drive unit output while raising capacity through higher-density heads and media. He noted that product transitions can add manufacturing complexity and require investments in tools, but said the company sees potential for further favorable areal-density gains.
Seagate said the vast majority of its nearline exabytes are allocated through calendar 2028 under long-term supply agreements. The company said customers are seeking to extend planning horizons into 2029 and beyond. Contracts covering calendar 2027 define product configurations and pricing terms, according to management.
Cash Flow, Debt Reduction and Outlook
Free cash flow exceeded $1.1 billion in the June quarter, representing a 31% free-cash-flow margin and the company’s strongest quarterly cash generation in more than a decade. For fiscal 2026, Seagate generated record free cash flow of $3.1 billion. Capital expenditures totaled $187 million in the June quarter, and fiscal-year CapEx represented 4.7% of revenue. The company expects fiscal 2027 Capital spending to remain within its target range of 4% to 6% of revenue.
Seagate ended fiscal 2026 with $1.7 billion in cash and cash equivalents, $3 billion in liquidity including its undrawn revolving credit facility, and approximately $3.6 billion in gross debt. Gross debt declined $1.4 billion during the fiscal year. Romano said the company retired $1 billion of high-yield senior notes in July and plans to retire the remaining balance on its convertible notes in September, which would reduce debt to roughly $2.4 billion by the end of the fiscal first quarter.
For the September quarter, Seagate forecast revenue of $4.1 billion, plus or minus $100 million, implying 56% year-over-year growth at the midpoint. The company expects non-GAAP operating expenses of about $300 million, non-GAAP operating margin of around 50% at the revenue midpoint, and non-GAAP EPS of $7.30, plus or minus $0.20.
Romano said pricing, product mix and sustained demand are expected to support continued profitability expansion. While he did not provide a long-term gross-margin target, he said Seagate’s incremental gross margin has been “well above” 60% and that the company expects sequential gross-margin improvement during the remainder of fiscal 2027.
About Seagate Technology (NASDAQ:STX)
Seagate Technology (NASDAQ: STX) is a global data storage company that designs, manufactures and sells a broad range of storage products and systems. The firm's product portfolio includes traditional hard disk drives (HDDs), solid-state drives (SSDs), hybrid storage devices and integrated storage systems aimed at enterprise, cloud, OEM and consumer markets. Seagate also provides services that support its hardware offerings, including data recovery and storage management solutions.
Seagate's products are used in a wide array of applications, from large-scale data centers and cloud infrastructure to desktop and portable consumer devices.
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