Seagate Technology Holdings plc (STX) | The Buildout — AI Infrastructure
The Verdict
Seagate makes hard disk drives, SSDs, and storage systems, with its center of gravity in high-capacity nearline HDDs for cloud and enterprise data centers. Those drives sit in the mass-capacity tier beneath compute and memory, storing the unstructured data that inference and agentic AI workloads generate and retain.
| Market Cap | — |
| Revenue (TTM) | $12.2B |
| Revenue Growth | +34.1% |
| EBITDA Margin (TTM) | 35.8% |
| Net Debt | $1.9B |
| Earnings Beats | 7 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Data center revenue reached $2.9 billion in FQ4 FY26, up 57% year over year and about 80% of total revenue.
- Nearline capacity visibility extends into calendar 2028: management says the vast majority of nearline exabytes are allocated under long-term supply agreements, with customers seeking 2029+ planning horizons.
- HAMR milestones are being hit: Mozaic 3 is qualified across all major cloud customers; Mozaic 4 is ramping with the two largest CSPs; 40% of nearline exabyte run rate was on HAMR exiting FY26.
- Free cash flow was more than $1.1 billion in FQ4 and $3.1 billion for fiscal 2026, a 31% FCF margin.
- Gross debt ended fiscal 2026 at about $3.6 billion, down $1.4 billion year over year, with net leverage at 0.4x and cash and equivalents of $1.7 billion.
What We’re Watching
- Western Digital is a direct, credible HAMR competitor with qualifications and road map momentum.
- Data center is roughly 80–81% of revenue and about 89% of exabytes, and one unnamed customer was approximately 10% of fiscal 2025 revenue.
- Manufacturing spans China, Thailand, Singapore, Malaysia, and Northern Ireland, exposing the company to explicit tariff and trade risk.
- A proposed securities class action settlement was announced August 11, 2026, with no terms yet disclosed.
The thesis is strengthening on the observed evidence: results beat guidance, margins expanded for a thirteenth consecutive quarter, contracted visibility extended into calendar 2028, and the balance sheet de-levered. The key open question is whether the pricing power and allocation hold once Western Digital's HAMR supply fully arrives.
Earnings Beat
FQ4 FY2026 revenue was $3.6 billion, up 17% sequentially and 48% year over year. Non-GAAP gross margin reached 52.7%, up 570 basis points sequentially, and non-GAAP operating margin was 44.6%. Free cash flow of more than $1.1 billion was the standout result.
| Metric | Q4 FY2026 | Q3 FY2026 | Q4 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $3.6B | $3.1B | $2.4B | +48.5% |
| Gross margin | 52.3% | 46.5% | 37.4% | +1490bps |
| EBITDA | $1.6B | $1.1B | $629M | +156.4% |
| EPS | $5.65 | $3.27 | $2.24 | +152.4% |
| Data center revenue | $2.9B | $2.5B | n/a | +57% YoY |
I do not think that probably our areal density transitions are going to be sufficient.— Dave Mosley, Chief Executive Officer, July 28, 2026
Management tone: Management's tone shifted from cyclical recovery to structural growth, saying fiscal 2027 revenue growth is expected to outpace fiscal 2026's 34%. On early-stage AI applications such as KV-cache tiering and physical AI, management used restrained language, calling them very, very early days.
Management Guidance
For the September quarter, management guided revenue of $4.1B ± $100M, non-GAAP operating margin around 50%, non-GAAP EPS of $7.30 ± $0.20, non-GAAP operating expenses of approximately $300 million, a tax rate of about 16%, and a diluted share count of about 231 million. Management also said fiscal 2027 revenue growth should outpace fiscal 2026's 34% and expects sequential revenue, margin, and cash generation growth through fiscal 2027.
Trajectory
Total revenue rose from $2.63 billion in FQ1 FY26 to $2.83 billion, $3.11 billion, and $3.6 billion in FQ4 FY26. Non-GAAP gross margin stepped from 47.0% in FQ3 to 52.7% in FQ4. Data center revenue reached $2.9 billion in FQ4, up 57% year over year, and price per exabyte moved from mid-single-digit growth in March to 10% in June, with the September guide implying roughly 20% per analyst math. The drivers are contracted nearline demand, richer mix toward higher-capacity HAMR drives, and a supply-constrained internal component fab.
The Model
The model projects FY+1 revenue of $15.460 billion and EBITDA of $6.632 billion, a 42.9% margin. FY+2 revenue is projected at $18.550 billion with EBITDA of $8.385 billion, a 45.2% margin. The near-term anchor is the contracted fiscal 2027 build-to-order capacity and management's expectation that FY27 revenue growth outpaces FY26's 34%; FY+2 assumes nearline exabyte growth in the mid-20% range and continued HAMR mix gains.
| Metric | FY2026 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $12.2B | $15.5B | $18.6B |
| YoY Growth | — | +26.8% | +20.0% |
| EBITDA | $4.4B | $6.6B | $8.4B |
| EBITDA Margin | 35.8% | 42.9% | 45.2% |
Projections are the median of 5 independent model runs. The model’s revenue sits 15.2% below analyst consensus.
For the September quarter, management guided revenue of $4.1B ± $100M, non-GAAP operating margin around 50%, non-GAAP EPS of $7.30 ± $0.20, non-GAAP operating expenses of approximately $300 million, a tax rate of about 16%, and a diluted share count of about 231 million. Management also said fiscal 2027 revenue growth should outpace fiscal 2026's 34% and expects sequential revenue, margin, and cash generation growth through fiscal 2027.
What Could Go Right — and Wrong
- Fiscal 2027 revenue growth outpaces fiscal 2026's 34%, and nearline exabyte growth runs in the mid-20% range.
- Price per exabyte growth holds near or above the roughly 20% level implied by the September guidance.
- Mozaic 4 reaches 50% of HAMR exabytes exiting calendar 2026 and HAMR reaches 70% of nearline exabytes by end of fiscal 2027.
- Western Digital's HAMR qualifications convert slowly enough for Seagate to keep scarce-capacity pricing.
- Enterprise, neocloud, sovereign, and model-developer orders scale into disclosed volume.
- A large cloud customer cancels or delays purchases inside the calendar-2027 build-to-order book.
- Western Digital converts its four HAMR qualifications into high-volume commercial shipments earlier than expected.
- A HAMR yield or qualification slip on Mozaic 4 or Mozaic 5 throttles exabyte output.
- NAND/SSD architectures capture more of the AI storage tier, reducing HDD exabyte growth.
- Tariffs on information and communication technology products disrupt production across China, Thailand, Singapore, or Malaysia.
Looking Ahead
The next twelve months center on converting the contracted nearline book into reported results. Management guided September quarter revenue of $4.1 billion ± $100 million with around 50% non-GAAP operating margin and expects sequential revenue, margin, and cash growth through fiscal 2027. Product milestones include Mozaic 4 reaching 50% of HAMR exabytes exiting calendar 2026 and HAMR reaching 70% of nearline exabytes by end of fiscal 2027, while Mozaic 5 qualification shipments are targeted for late calendar 2027.
- September quarter FY27September quarter results — Tests $4.1B ± $100M revenue and around 50% non-GAAP operating margin.
- Exiting calendar 2026Mozaic 4 mix milestone — Targets 50% of HAMR exabytes on Mozaic 4.
- End of fiscal 2027HAMR mix target — Targets 70% of nearline exabytes built on HAMR.
- Late calendar 2027Mozaic 5 qualification shipments — Targets up to 50TB drive qualification units.
- Full fiscal 2027FY2027 revenue growth — Must outpace fiscal 2026's 34% growth.
- Next several quartersShare repurchases — Management expects higher buyback level after debt reduction.
Financials
Annual Summary
| Metric | FY2025 | FY2026 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $9.1B | $12.2B | $12.2B | +34.1% |
| Gross Margin | 35.1% | 45.0% | 45.6% | +985bps |
| EBITDA | $2.1B | $4.4B | $19.4B | +104.1% |
| EBITDA Margin | 23.5% | 35.8% | 35.8% | +1,230bps |
| Net Income | $1.5B | $3.2B | $3.2B | +116.7% |
| Free Cash Flow | $818M | $3.3B | $13.4B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)45.6%
- EBITDA Margin (TTM)35.8%
- Net Margin (TTM)26.1%
- ROIC80.3%
- FCF Conversion76.1%
- SBC / Revenue1.3%
The Company
Seagate Technology Holdings plc is a data storage company whose principal products are hard disk drives. It also sells SSDs, storage subsystems, and an edge-to-cloud mass data platform called Lyve. The center of gravity is high-capacity nearline HDDs sold into data centers: data center revenue was $2.9 billion in FQ4 FY26, about 80% of total revenue, and those drives provide the mass-capacity tier beneath compute and memory in cloud and AI-era architectures.
The company reports one operating segment under its current reporting view, though the 10-K describes Mass Capacity Storage and Legacy Applications product lines. Manufacturing spans recording heads in Northern Ireland, substrates in Malaysia, media in Singapore, and drive assembly in China and Thailand. Seagate is vertically integrated in heads, media, substrates, and HAMR lasers, and its internal component fabs are the binding capacity constraint.
Business Segments
Competitive Landscape
Seagate faces direct HDD competition from Western Digital, a direct, credible HAMR competitor with qualifications and road map momentum. The 10-K also names Kioxia, Micron, Samsung, SanDisk, SK hynix, and Toshiba as competitors. The central competitive pressure is whether a second source of high-capacity HAMR supply loosens current scarcity pricing.
- Western DigitalDirect, credible HAMR competitor; qualifications and road map momentum.
- MicronNamed in 10-K competitor list; not discussed in source set.
- SanDiskNamed in 10-K competitor list; not discussed in source set.
- KioxiaNamed in 10-K competitor list; not discussed in source set.
- SK hynixNamed in 10-K competitor list; management cited its KV-cache white paper as an architectural proof point for HDD demand.
Supply Chain
Seagate sits between sole- or limited-source component suppliers and a concentrated set of cloud, hyperscale, and enterprise data center buyers. Hyperscaler and OEM names in the source set are inferred ecosystem neighbors, not company-disclosed customers.
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