Seagate Hits Record Margins Amid AI Storage Boom

Seagate Technology Holdings Plc (NASDAQ: STX ) shares are trading higher in Wednesday’s premarket session after reporting its fourth-quarter results after Tuesday’s closing bell, beating analyst estimates on the top and bottom lines.

Seagate Q4 Details Seagate reported quarterly earnings of $5.71 per share, which beat the Street estimate of $5.09 by 12.18%, according to Pro data.

Quarterly revenue came in at $3.63 billion, which beat the consensus estimate of $3.49 billion and was up from $2.44 billion in the same period last year.

Seagate shipped 218 exabytes in the June quarter, up 34% year over year (Y/Y), with data center customers representing 89% of total shipments.

Data center shipments reached 195 exabytes, increasing 11% sequentially (Q/Q) and 43% year over year (Y/Y), while data center revenue rose to $2.9 billion, up 17% Q/Q and 57% Y/Y.

Adjusted gross margin reached a record 52.7%, expanding 570 basis points sequentially from 47% in the prior quarter, driven by pricing execution and favorable product mix.

Adjusted operating margin improved to 44.6%, up 710 basis points sequentially, in the quarter.

Seagate generated $1.1 billion in free cash flow during the quarter and returned approximately $283 million to shareholders through dividends and share repurchases.

Seagate ended fiscal 2026 with $1.7 billion in cash and cash equivalents and total liquidity of $3 billion, including its undrawn revolving credit facility.

Management Commentary In the company conference call, Seagate said that data center demand remained the primary growth driver, contributing approximately 90% of exabyte shipments.

Based on existing long-term supply agreements, most of Seagate’s nearline exabyte capacity is committed through calendar 2028, with customers seeking additional capacity commitments extending into 2029 and beyond.

Cloud customers continued to drive nearline storage demand, with Seagate recording three consecutive years of sequential quarterly exabyte growth and no indications of demand slowing.

Enterprise demand also improved, with enterprise nearline revenue increasing for the fifth consecutive quarter as customers increasingly adopt modern tiered storage architectures across public cloud, private cloud, and on-premise environments.

Outlook For the September quarter, Seagate expects revenue of approximately $4.00 billion to $4.02 billion, representing 56% Y/Y growth.

The outlook includes non-GAAP operating expenses of around $300 million and a non-GAAP operating margin of around 50%, and non-GAAP EPS of $7.30 ± $0.20 Seagate expects continued revenue growth, margin expansion, and improved cash generation through fiscal 2027, supported by strong data center demand, increasing HAMR technology adoption, and disciplined execution.

The company expects physical AI applications, including robotics and autonomous vehicles, to drive additional storage demand as these systems require significant volumes of historical and synthetic data for training and real-world operations.

STX Price Action: Seagate Technology Hldgs shares were up 5.28% at $786.75 during premarket trading on Wednesday, according to Pro data.

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