Seagate Technology Q1 Earnings Call Highlights

Key Points

• Seagate exceeded fiscal Q1 2027 expectations, reporting $4.2 billion in revenue, up 61% year over year, record non-GAAP EPS of $7.68, and a 50.7% operating margin.
• Data-center demand remained the key growth driver, generating $3.4 billion of revenue, or 81% of total sales. Seagate cited strong cloud demand, AI-related data retention and expanding storage requirements.
• The company raised its growth and shareholder-return outlook: December-quarter guidance calls for $4.8 billion in revenue and $9.20 in non-GAAP EPS, while debt reduction is largely complete and repurchases are expected to increase in 2027.

Seagate Technology NASDAQ: STX reported fiscal first-quarter 2027 results that exceeded its guidance, with revenue rising 61% year over year to $4.2 billion and non-GAAP earnings per share reaching a record $7.68.

Chief Executive Officer Dave Mosley said the company benefited from sustained demand for mass-capacity storage, particularly from data-center customers. Revenue increased 17% sequentially, while non-GAAP operating margin reached a record 50.7%. Seagate also generated nearly $1.5 billion in free cash flow during the September quarter.

“Fiscal 2027 is off to an outstanding start,” Mosley said, citing demand strength, pricing gains and the company’s technology roadmap as factors supporting expectations for continued sequential growth and margin expansion through the fiscal year.

Data-center demand drives growth

Data-center revenue totaled $3.4 billion, up 18% sequentially and 63% from a year earlier, accounting for 81% of Seagate’s total revenue. The company shipped 220 exabytes overall during the quarter, including 198 exabytes to data-center customers. Data-center shipments represented 90% of total exabyte volume.

Mosley said cloud nearline products posted their 12th consecutive quarter of revenue growth, while enterprise OEM revenue reached its second-highest quarterly level in more than a decade. Seagate’s edge IoT business also grew, with revenue of $784 million, up 13% sequentially and 52% year over year.

The CEO said customers are increasingly retaining data for longer periods as they find new uses for it, a trend that he said is being reinforced by artificial intelligence applications. He said AI inference and agentic applications depend on large quantities of historical data and generate additional information that must be retained, governed and reused.

“The value of data extends well beyond its original use,” Mosley said. He added that Seagate believes future storage demand will increasingly reflect this expanding data lifecycle.

Mozaic and HAMR roadmap

Seagate is expanding shipments of its HAMR-based Mozaic products, which are designed to increase drive capacity through higher areal density. Mosley said Mozaic 4 drives, offering up to 44 terabytes of capacity, are ramping with two leading cloud service providers. The company expects additional qualifications across global cloud customers and enterprise OEMs over the next several months.

Seagate expects HAMR technology to account for about 50% of its nearline exabyte shipment run rate exiting calendar 2026, with Mozaic 4 comprising about half of HAMR shipments. Its next-generation Mozaic 5 drives are expected to provide more than 50 TB of capacity using a 10-disk platform, with customer qualification shipments expected to begin near the end of calendar 2027.

The company said it recently demonstrated 8 TB per disk in its laboratory, which Mosley said supported its confidence in the longer-term potential of the HAMR platform. Seagate continues to target mid-20% compound growth in nearline exabyte supply, primarily by increasing capacity per disk rather than significantly increasing drive-unit output.

Management said the comparatively modest sequential growth in exabytes during the September quarter reflected the timing of product transitions and preparations for customer qualifications, rather than yield problems or data-center readiness issues. The company expects a meaningful increase in capacity shipments in the December quarter as Mozaic 4 volume grows.

Supply agreements and pricing

Seagate said the vast majority of its nearline exabyte supply is allocated under long-term agreements through calendar 2028, with some cloud-customer agreements extending through calendar 2030. Under its build-to-order process, the company said it generally finalizes drive configurations and pricing within roughly 12 months of delivery.

Management said pricing has continued to improve due to value-based pricing and higher costs for certain externally sourced components. Chief Financial Officer Gianluca Romano said internally produced components continue to experience cost reductions, but higher prices for externally purchased components have partially offset those gains.

Mosley said there has been no evidence of demand destruction or product cancellations. “Absolutely everything we can make above and beyond our plans is being spoken for,” he said during the question-and-answer session.

Cash flow, debt reduction and shareholder returns

Operating cash flow was $1.7 billion in the September quarter, while capital expenditures were $211 million, or 5% of revenue. Seagate expects capital expenditures to remain within a 4% to 6% range of revenue for fiscal 2027 as it continues its transition to HAMR technology.

During the quarter, Seagate retired $1.2 billion in debt, including remaining convertible notes and about $1 billion of high-yield debt. After the quarter ended, it retired an additional $750 million in high-yield senior notes, reducing principal debt to approximately $1.6 billion. Romano said the company expects to be net-cash-positive by the end of the calendar year.

With its debt-reduction objectives largely completed and investment-grade status regained, Seagate said it is shifting more attention toward shareholder returns. The company returned $568 million to shareholders through dividends and repurchases during the September quarter, increased its quarterly dividend by about 3% to $0.76 per share, and had $4.4 billion remaining under its share-repurchase authorization.

Mosley said Seagate’s capital-return model targets returning 75% of free cash flow to shareholders over time, with share repurchases serving as the primary vehicle alongside dividends. Romano said the company expects to significantly increase repurchases beginning in calendar 2027.

December-quarter outlook

For the December quarter, Seagate forecast revenue of $4.8 billion, plus or minus $100 million, and non-GAAP EPS of $9.20, plus or minus $0.20. The company expects non-GAAP operating expenses to remain near $300 million and non-GAAP operating margin to expand toward the mid-50% range.

Romano said the outlook reflects continued demand momentum, a significant rise in exabyte shipments and continued execution of the company’s pricing strategy. Seagate said its September-quarter performance and December outlook support its expectation that fiscal 2027 revenue growth will meaningfully exceed fiscal 2026 growth.

About Seagate Technology (NASDAQ:STX)

Seagate Technology Holdings plc NASDAQ: STX is a data storage company that develops and manufactures mass-capacity storage products and solutions. Its portfolio is centered on hard disk drives (HDDs) used in cloud data centers, enterprise systems, network-attached storage, video and imaging applications, and personal computers.

The company also provides storage-related services and solutions designed to help organizations store, manage, protect, and access large volumes of digital information.

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