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Seagate Revenue Soars 61% in Q1: Can This Momentum Continue?
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Key Takeaways
Seagate's Q1 fiscal 2027 revenues surged 61% to $4.2B, while non-GAAP EPS jumped 194% to $7.68.
Data center revenues climbed 63% to $3.4B, driven by hyperscaler demand and record capacity shipments.
STX projects Q2 revenues of $4.8B and EPS of $9.20, supported by HAMR adoption and favorable pricing.
Seagate Technology Holdings plc (STX - Free Report) began fiscal 2027 on a strong note, reporting first-quarter revenues of $4.2 billion, up 61% year over year and 17% sequentially. The impressive performance was driven by sustained demand for mass-capacity storage, favorable pricing and growing adoption of high-capacity drives. Non-GAAP earnings surged 194% year over year to $7.68 per share, reflecting improving profitability and operating leverage.
Data center revenues jumped 63% year over year and 18% sequentially to $3.4 billion, accounting for 81% of total revenues. The company shipped a record 198 exabytes of data center capacity, representing 90% of total exabyte shipments. Cloud nearline products recorded their 12th consecutive quarter of revenue growth, supported by robust hyperscaler demand. Edge IoT revenues increased 52% year over year to $784 million.
Seagate's profitability also improved significantly, with non-GAAP gross margin expanding 510 basis points sequentially to 57.8%. Non-GAAP operating margin reached 50.7%, benefiting from favorable pricing, an improving product mix and disciplined expense management. Free cash flow reached a record $1.5 billion, more than tripling year over year.
Looking ahead, growing AI adoption, increasing data retention requirements and the ongoing transition to heat-assisted magnetic recording (HAMR) technology are expected to boost demand. Seagate's Mozaic 4 platform, offering capacities of up to 44 terabytes, continues to ramp, while the company expects HAMR to account for approximately 50% of its nearline exabyte shipment run rate by the end of calendar 2026. Long-term supply agreements covering most nearline capacity through 2028, with some extending to 2030, provide additional visibility.
For second-quarter fiscal 2027, Seagate projects revenues of $4.8 billion, plus or minus $100 million, representing approximately 70% year-over-year growth at the midpoint. Non-GAAP earnings are expected to reach $9.20 per share, plus or minus 20 cents, with operating margin approaching the mid-50% range. Management anticipates continued sequential revenue growth, margin expansion and stronger cash generation throughout fiscal 2027, supported by sustained demand, increasing Mozaic adoption and favorable pricing.
Taking a Look at STX’s Competitors
Western Digital Corporation (WDC - Free Report) is benefiting from robust demand for high-capacity HDDs, favorable pricing and expanding cloud and AI infrastructure investments. For second-quarter fiscal 2027, management expects revenues of $5.1 billion, up 69% year over year, with non-GAAP gross margin of 60-61% and earnings of $5.80 per share. Strong pricing momentum, reflected in a 28% increase in average price per terabyte, is supporting profitability. Growing adoption of higher-capacity drives and improving customer demand visibility through 2030-2031 further strengthen its outlook. The company's 40TB ePMR and upcoming HAMR drives are expected to support sustained exabyte shipment growth and profitability.
NetApp (NTAP - Free Report) is benefiting from robust demand for AI-driven storage solutions, enterprise infrastructure modernization and growing adoption of all-flash arrays. First-quarter fiscal 2027 revenues surged 29.9% year over year to $2.03 billion, driven by 30.1% growth in Hybrid Cloud revenues and 28% growth in Public Cloud revenues. All-flash revenues jumped 46.6% to a record $1.31 billion, reflecting strong demand for high-performance storage. For the second quarter of fiscal 2027, NetApp expects revenues of $2.03-$2.18 billion. Non-GAAP gross margin is projected at 67-68%, operating margin at 30.9-31.9% and earnings at $2.54-$2.64 per share. Management raised fiscal 2027 revenue guidance to $7.98-$8.23 billion, indicating sustained momentum.
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Seagate Revenue Soars 61% in Q1: Can This Momentum Continue?
Key Takeaways
Seagate Technology Holdings plc (STX - Free Report) began fiscal 2027 on a strong note, reporting first-quarter revenues of $4.2 billion, up 61% year over year and 17% sequentially. The impressive performance was driven by sustained demand for mass-capacity storage, favorable pricing and growing adoption of high-capacity drives. Non-GAAP earnings surged 194% year over year to $7.68 per share, reflecting improving profitability and operating leverage.
Data center revenues jumped 63% year over year and 18% sequentially to $3.4 billion, accounting for 81% of total revenues. The company shipped a record 198 exabytes of data center capacity, representing 90% of total exabyte shipments. Cloud nearline products recorded their 12th consecutive quarter of revenue growth, supported by robust hyperscaler demand. Edge IoT revenues increased 52% year over year to $784 million.
Seagate's profitability also improved significantly, with non-GAAP gross margin expanding 510 basis points sequentially to 57.8%. Non-GAAP operating margin reached 50.7%, benefiting from favorable pricing, an improving product mix and disciplined expense management. Free cash flow reached a record $1.5 billion, more than tripling year over year.
Looking ahead, growing AI adoption, increasing data retention requirements and the ongoing transition to heat-assisted magnetic recording (HAMR) technology are expected to boost demand. Seagate's Mozaic 4 platform, offering capacities of up to 44 terabytes, continues to ramp, while the company expects HAMR to account for approximately 50% of its nearline exabyte shipment run rate by the end of calendar 2026. Long-term supply agreements covering most nearline capacity through 2028, with some extending to 2030, provide additional visibility.
For second-quarter fiscal 2027, Seagate projects revenues of $4.8 billion, plus or minus $100 million, representing approximately 70% year-over-year growth at the midpoint. Non-GAAP earnings are expected to reach $9.20 per share, plus or minus 20 cents, with operating margin approaching the mid-50% range.
Management anticipates continued sequential revenue growth, margin expansion and stronger cash generation throughout fiscal 2027, supported by sustained demand, increasing Mozaic adoption and favorable pricing.
Taking a Look at STX’s Competitors
Western Digital Corporation (WDC - Free Report) is benefiting from robust demand for high-capacity HDDs, favorable pricing and expanding cloud and AI infrastructure investments. For second-quarter fiscal 2027, management expects revenues of $5.1 billion, up 69% year over year, with non-GAAP gross margin of 60-61% and earnings of $5.80 per share. Strong pricing momentum, reflected in a 28% increase in average price per terabyte, is supporting profitability. Growing adoption of higher-capacity drives and improving customer demand visibility through 2030-2031 further strengthen its outlook. The company's 40TB ePMR and upcoming HAMR drives are expected to support sustained exabyte shipment growth and profitability.
NetApp (NTAP - Free Report) is benefiting from robust demand for AI-driven storage solutions, enterprise infrastructure modernization and growing adoption of all-flash arrays. First-quarter fiscal 2027 revenues surged 29.9% year over year to $2.03 billion, driven by 30.1% growth in Hybrid Cloud revenues and 28% growth in Public Cloud revenues. All-flash revenues jumped 46.6% to a record $1.31 billion, reflecting strong demand for high-performance storage. For the second quarter of fiscal 2027, NetApp expects revenues of $2.03-$2.18 billion. Non-GAAP gross margin is projected at 67-68%, operating margin at 30.9-31.9% and earnings at $2.54-$2.64 per share. Management raised fiscal 2027 revenue guidance to $7.98-$8.23 billion, indicating sustained momentum.
STX Price Performance, Valuation and Estimates
In the past month, STX’s shares have lost 31.1% compared with the Zacks Computer Integrated Systems industry decline of 19.7%.
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STX’s shares are trading at a forward price-to-earnings multiple of 13.11X, higher than the industry’s 8.98X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for STX’s earnings for fiscal 2027 has been revised up 7.4% to $38.77 per share over the past 60 days.
Image Source: Zacks Investment Research
Currently, Seagate holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.