Key Stats
- Current Price: ~$727 (May 1, 2026)
- Q3 FY2026 Revenue: $3.1B, +44% YoY
- Q3 FY2026 Non-GAAP EPS: $4.10, +115% YoY
- Q4 FY2026 Revenue Guidance: $3.45B (midpoint), +41% YoY
- Q4 FY2026 Non-GAAP EPS Guidance: $5
- TIKR Model Price Target: ~$2,093
- Implied Upside: ~211%
Seagate Technology Stock Posts Record Margins as AI Storage Demand Accelerates
Seagate Technology stock (STX) posted $3.1B in Q3 FY2026 revenue, up 44% year-over-year, while non-GAAP EPS of $4.10 more than doubled compared to the prior-year quarter.
Data center revenue drove the headline, reaching $2.5B for the quarter, up 55% year-over-year, according to CFO Gianluca Romano on the Q3 FY2026 earnings call.
Nearline drives, the high-capacity products supplying cloud and hyperscale buildouts, accounted for close to 90% of total exabyte shipments in the quarter.
The company shipped 199 exabytes in total, up 39% year-over-year, with the data center segment alone contributing 175 exabytes.
CEO Dave Mosley framed the results as a structural shift, not a cyclical beat: “Seagate is entering a period of structural growth, powered by durable demand, increasing adoption of our Mozaic-based products and continued execution against the strategy designed to drive margin expansion.”
Edge IoT contributed $612M in revenue, up 2% sequentially, with the client and consumer markets facing headwinds from high NAND supply, according to Romano on the Q3 earnings call.
Non-GAAP operating expenses held at $296M, or about 10% of revenue, a level management expects to maintain roughly flat in dollar terms going forward.
Free cash flow reached $953M in the quarter, the company’s highest in over a decade, according to Romano on the Q3 earnings call.
Seagate also retired $641M in gross debt during the quarter and raised its long-term annual revenue growth target from the low-to-mid-teens to a minimum of 20% per year.
For Q4 FY2026, management guided revenue to $3.45B at the midpoint, representing 41% year-over-year growth, with non-GAAP operating margin expected in the lower 40% range and non-GAAP EPS of $5.00 at the midpoint.
Seagate Technology Stock Financials: A Margin Expansion Story Still in Progress
Seagate Technology stock’s income statement tells a clear operating leverage story: revenue has climbed every quarter from $1.89B in Q1 FY2025 to $3.11B in Q3 FY2026, and margins have expanded at every level throughout that run.
Gross margin reached 47% in Q3 FY2026, up from 42% in Q2 FY2026 and from 36% a year ago in Q3 FY2025.
Gross profit grew 88% year-over-year, roughly twice the rate of revenue, reflecting the combination of pricing discipline and a product mix shift toward higher-capacity HAMR-based drives.
Operating margin expanded to 36% in Q3 FY2026, up from 24% a year prior and just 15% two years ago, marking the sharpest sequential operating leverage gain in the data shown.
Operating income reached $1.11B in Q3 FY2026, up 146% year-over-year from $451M in Q3 FY2025.
Romano attributed the margin expansion to the company’s long-term pricing strategy and an improving product mix, noting that data center revenue per terabyte rose a mid-single-digit percentage year-over-year in the quarter.
What Does the Valuation Model Say?
The TIKR model prices Seagate Technology stock at ~$2,093, implying roughly 211% upside from the current ~$674 price embedded in the model.
The mid-case assumptions driving that target are a 24% revenue CAGR and a 41% net income margin over the forecast period, a scenario that would require Seagate to sustain current margin gains while continuing to grow exabyte demand at pace.
This quarter’s results directly validate the core assumptions: operating margins are already running ahead of TIKR’s mid-case trajectory, and management raised the long-term revenue growth target to a minimum of 20% per year.
The investment case for Seagate Technology stock is materially stronger after this quarter: record free cash flow, a multi-quarter margin expansion track record, and locked-in build-to-order contracts through fiscal 2027 all reduce execution risk at the levels the model requires.
Seagate has locked in revenue visibility through FY2027, but the model’s multi-year upside depends on whether AI-driven exabyte demand continues to compound beyond what’s already contracted.
Thesis Intact
- Q3 FY2026 non-GAAP operating margin hit 38%, already inside the TIKR mid-case range, nearly four quarters ahead of schedule
- Nearline capacity is almost fully allocated through calendar 2027, with build-to-order contracts finalized for the entire fiscal 2027 period
- Mozaic 4+ ships up to 44TB per drive and is expected to represent a majority of HAMR exabyte shipments by the end of calendar 2026
- Management raised the annual revenue growth target to a minimum of 20%, with Mozaic 5 qualification shipments targeting late calendar 2027
Thesis at Risk
- The TIKR model’s upside scenario requires a 26% revenue CAGR and 43% net income margins through 2035, a sustained performance level with no comparable historical precedent in the income statement
- Nearly all nearline capacity is currently allocated to public cloud customers, leaving limited near-term ability to expand into enterprise and edge markets where Seagate Technology stock could diversify revenue
- Geopolitical risk was flagged on the call as a monitoring item, and any disruption to the supply chain or logistics network could affect the company’s ability to fulfill its contracted exabyte commitments
- The transition from Mozaic 3 to Mozaic 4+ involves a longer HAMR cycle time than PMR, meaning yield risk persists until the second-generation product fully reaches scale
Should You Invest in Seagate Technology Holdings plc?
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