It has been about a month since the last earnings report for Seagate (STX). Shares have added about 2.5% in that time frame, outperforming the S&P 500.
But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Seagate due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Seagate's Q1 Earnings Beat Estimates
Seagate reported first-quarter fiscal 2026 non-GAAP earnings of $2.61 per share, beating the Zacks Consensus Estimate by 10.6% and exceeding the high end of management’s guidance of $2.3 per share (+/- 20 cents). The company continues to advance its technology roadmap to meet the growing demand for higher-capacity products.
Non-GAAP revenues of $2.63 billion exceeded the Zacks Consensus Estimate by 3.9%. Revenues were above the guidance midpoint, increasing 21% year over year. The rising demand for high-capacity hard drives contributed to this growth. Global cloud service providers primarily fueled demand, with notable sequential revenue increases from enterprise customers.
With strong demand visibility, it is ramping up shipments of its Mozaic HAMR products, now qualified by five major cloud providers. These high-performance, durable and cost-effective drives support existing workloads, such as social media and video platforms, as well as new AI-driven applications. As AI drives data creation and consumption, Seagate is well-positioned for sustained profitable growth. It shipped more than 1 million Mozaic drives during the September quarter.
Revenues by End Market
It now reports revenues across two key markets- Data Center, encompassing nearline products and systems sold to cloud, enterprise and VIA customers, and Edge IoT, covering consumer and client-focused segments, including network-attached storage.
The data center segment accounted for 80% of total revenue, at $2.1 billion, representing a 13% sequential increase and 34% year-over-year growth. Demand from global cloud customers continues to rise, with notable improvement in the enterprise OEM market. These positive trends are expected to continue, with cloud growth outpacing enterprise demand.
High-capacity nearline production remains mostly committed under build-to-order contracts through 2026. Robust data center growth offset lower sequential sales in the Edge IoT segment, which accounted for 20% of revenue at $515 million, down 11% quarter over quarter and 12% year over year. It expects seasonal improvement in Edge IoT revenue in the December quarter, driven by VIA, edge and consumer products.
Exabyte Shipments in Detail
In the reported quarter, Seagate shipped 182 exabytes of HDD storage, up 32% year over year and 12% sequentially. A major chunk of the shipment was delivered to global data center customers.
The company shipped 159 exabytes to data center customers, up 17% sequentially and 39% year over year. Cloud exabyte demand rose for the ninth consecutive quarter, with nearly 80% of nearline volume comprising drives of 24TB or higher as customers transition to higher capacities.
Margin Details
Non-GAAP gross margin reached a record 40.1%, rising by about 220 basis points (bps) quarter over quarter and roughly 680 bps year over year, driven by stronger adoption of Seagate's high-capacity nearline products and continued pricing initiatives.
Non-GAAP operating expenses came in at $291 million, up 2% sequentially and 3.5% year over year, aligning with its expectations.
Non-GAAP income from operations totaled $763 million, up from $442 million a year ago, driven by solid sales and effective financial leverage.
Non-GAAP operating margin increased 860 bps year over year to 29%. Adjusted EBITDA totaled $831 million.
Balance Sheet and Cash Flow
As of Oct. 3, 2025, cash and cash equivalents were $1.1 billion compared with $891 million as of June 27, 2025.
As of Oct. 3, 2025, long-term debt (including the current portion) was $4.9 billion compared with $5 billion as of June 27, 2025.
Cash flow from operations was $532 million compared with $508 million in the previous quarter. Free cash flow amounted to $427 million, the same as in the last quarter. It anticipates stronger free cash flow generation in the December quarter.
The company returned capital to shareholders through dividends of $153 million and the repurchase of 153,000 shares for $29 million at an average price of $187 per share. It is dedicated to returning a minimum of 75% of its free cash flow to shareholders over the long term.
Strong Fiscal Q2 Business Outlook
Management expects demand to remain solid, led by global cloud data centers. It projects higher revenue and margin expansion as customers adopt its next-generation storage solutions. For the fiscal second quarter, it expects revenues of $2.7 billion (+/- $100 million). At the midpoint, this indicates a 16% year-over-year improvement.
Non-GAAP earnings are expected to be $2.75 per share (+/- 20 cents).
For the quarter, non-GAAP operating expenses are expected to be around $290 million.
At the midpoint of revenue guidance, non-GAAP operating margin is projected to increase to approximately 30%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
The consensus estimate has shifted 12.48% due to these changes.
VGM Scores
Currently, Seagate has a average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock has a grade of D on the value side, putting it in the bottom 40% for value investors.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Seagate has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Seagate Technology Holdings PLC (STX): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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