Key Stats for Seagate Stock
- Price Change for Seagate stock: 6.3%
- Current Share Price as of Oct. 28: $223
- 52-Week High: $265
- $STX Stock Price Target: $241
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What Happened?
Seagate (STX) stock jumped nearly 7% early-market trading after it crushed earnings expectations and showcased that its transformation into a high-margin AI storage business is accelerating.
The hard drive manufacturer reported fiscal first-quarter revenue of $2.63 billion, up 8% sequentially and 21% year-over-year.
Non-GAAP gross margin hit a company record at 40.1%, up 220 basis points from the prior quarter. Non-GAAP operating margin expanded to 29%, a level last seen in fiscal 2012. Non-GAAP EPS came in at $2.61, exceeding the high end of guidance.
For the December quarter, Seagate expects revenue around $2.7 billion at the midpoint, representing 16% year-over-year growth.
The company guided non-GAAP operating margin to expand to around 30%, with EPS expected at $2.75, plus or minus 20 cents.
Management also announced a 3% increase to the quarterly dividend to $0.74 per share, reflecting confidence in cash flow generation.
Following the results, Baird analyst Tristan Gerra raised his price target on STX stock to $270 from $188, keeping an Outperform rating.
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What the Market Is Telling Us About STX Stock
The surge in STX stock reflects investor excitement that Seagate’s shift toward high-capacity AI-driven storage is delivering massive profitability improvements.
The company is no longer a commoditized hard drive maker struggling with thin margins. It’s becoming a high-margin supplier of specialized storage for data centers powering AI applications.
Seagate shipped 182 exabytes in the September quarter, up 32% year-over-year. Data center revenue accounted for 80% of total revenue, totaling $2.1 billion, up 13% sequentially and 34% year-over-year.
Cloud exabyte demand increased for the ninth consecutive quarter, with nearly 80% of nearline volume coming from drives at or above 24 terabytes.
The real story is HAMR technology—Heat-Assisted Magnetic Recording. This next-generation hard drive technology allows Seagate to pack significantly more data onto each disk.
The company now has five global cloud service providers qualified on its Mozaic 3+ terabyte-per-disk products, which deliver capacities up to 36 terabytes per drive.
Seagate shipped over 1 million Mozaic drives in the September quarter and expects to reach the 50% exabyte crossover for HAMR drives in the second half of calendar 2026.
For STX stock, the margin expansion is the key metric investors are watching. Incremental margins came in at nearly 70% in the September quarter, well above the 50% target management outlined at its May Analyst Day.
CFO Gianluca Romano said the company is executing better than expected due to faster adoption of higher-capacity HAMR drives and an effective pricing strategy.
Seagate’s pricing approach has been consistent for about 10 consecutive quarters. When the company renegotiates contracts, it slightly increases pricing for the same product.
As customers move to higher-capacity products, they get a lower price per terabyte, but Seagate benefits from a lower cost per terabyte due to product mix.
Revenue per terabyte has remained stable despite the significant shift toward higher-capacity drives, which shows pricing discipline.
Supply remains tight, and CEO Dave Mosley said nearline production is largely committed under build-to-order contracts through calendar 2026, with longer-term agreements providing visibility through calendar 2027.
Seagate isn’t planning to add unit capacity. Instead, it’s adding exabyte capacity by transitioning customers to higher-capacity drives through product upgrades.
AI demand is driving the urgency, as Mosley highlighted that AI inferencing is creating explosive growth in unstructured data, particularly video content.
One major hyperscaler reported a 50-fold increase in monthly token consumption over the past year. Video is a huge driver—over 80% of internet traffic is now video content. AI-generated videos make this even more pronounced.
Google reported that over 275 million videos were generated on its Veo platform within the first five months. A one-minute AI video can be up to 20,000 times larger than a 1,000-word text file.
This creates massive demand for cost-effective, high-capacity storage. Hard drives remain the most economical solution for storing enormous volumes of data that need to be retained long-term but accessed less frequently.
Seagate’s HAMR technology provides a sustainable cost advantage compared to alternative storage technologies.
The company is also beginning qualification of its Mozaic 4+ terabyte-per-disk platform with a second major cloud customer.
This platform will offer capacities up to 44 terabytes, with an initial volume ramp starting in the first half of calendar 2026. Seagate expects to remain on its long-term roadmap toward 10 terabytes per disk.
Seagate generated $427 million in free cash flow despite a substantial variable compensation payout.
Cash and cash equivalents increased 25% sequentially to $2.4 billion, including an undrawn credit facility. Net leverage dropped to 1.5 times adjusted EBITDA, and S&P upgraded Seagate’s credit rating earlier this month, recognizing the improved financial profile.
Seagate maintained its three-year revenue CAGR target of around 20% as it expects to grow revenue while expanding margins as customers shift to next-generation storage solutions.
Management emphasized that the best years are still ahead as AI adoption drives structural demand for exabyte-scale storage.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
