Seagate revenue jumps to $4.233 billion in first quarter as shares fall 6%
Key Facts
Seagate reported revenue of $4.233 billion on October 27 for the fiscal first quarter ended October 2, up from $2.629 billion a year earlier, while non-GAAP diluted earnings per share rose to $7.68 from $2.61. Revenue and earnings per share topped analysts’ estimates of $4.13 billion and $7.39, respectively, according to Investing.com, citing Reuters. Despite beating expectations, shares fell about 6% in after-hours trading, and Investing.com said investors appeared to be taking profits after the stock’s recent rise. This after-hours decline differs from a roughly 2% premarket drop cited in an earlier draft, which could not be verified. The stock closed at $667.85 on October 27, up from $644.21 in the previous session, according to EL7 data.
The company’s margins expanded alongside revenue growth: non-GAAP gross margin was 57.8%, compared with 40.1% in the year-earlier quarter, and non-GAAP operating margin rose to 50.7% from 29.0%. Non-GAAP net income was $1.781 billion, versus $583 million a year earlier, while GAAP earnings per share were $7.59. Chief Executive Dave Mosley said the company delivered “record profitability and the highest free cash flow ever” in the September quarter, pointing to an improving demand environment. The company also generated $1.7 billion in cash from operations and $1.5 billion in free cash flow during the quarter. It used about $1.2 billion to repay principal on its debt.
Demand strength was reflected in storage capacity shipped to data centers: Seagate shipped total capacity of 220 exabytes, up 21% year over year, with data centers accounting for 90% of the total. Revenue from the segment was $3.4 billion, up 63% from the year-earlier period. Shipments included 198 exabytes of nearline capacity, a company record, with annual growth of 24%. Management links this demand to increased data creation, retention and reuse, and to AI applications moving from model training to inference and agentic applications. The company said this shift increases the need to retain and reuse historical data, without attributing all of its revenue to AI.
Growth expectations are also supported by long-term supply commitments: management said most of its nearline exabyte capacity supply is allocated under agreements extending through 2028, with some cloud customer agreements running through 2030. The company’s revenue in fiscal 2026 was $12.195 billion, compared with $9.097 billion in the prior year, up 34% year over year, and Mosley said that year’s performance was driven by strong demand from cloud data centers. The CEO said visibility into long-term demand strengthens the company’s outlook for a multiyear growth phase. Its heat-assisted magnetic recording technology roadmap is intended to meet rising demand for exabyte capacity while maintaining supply discipline. On the earnings call, management forecast a substantial increase in exabyte shipments in the December quarter and said nearline capacity supply growth could reach the mid-20s percentage range on a compounded basis.
For its fiscal second quarter of 2027, Seagate forecast revenue of $4.8 billion, plus or minus $100 million, and non-GAAP diluted earnings per share of $9.20, plus or minus $0.20. After the first quarter ended, the company repaid an additional $750 million of debt principal, bringing total debt to $1.6 billion. It also announced an increase in its quarterly cash dividend to $0.76 per share from $0.74 in the previous payout. The dividend is payable on January 7, 2027, to shareholders of record on December 23, 2026. The company has therefore combined debt reduction with a higher dividend, while investors continue to focus on next quarter’s outlook and the long-term drivers of demand.