Seagate Technology PLC (NASDAQ:STX) shares gained nearly 3% in pre-market trading on Wednesday after the data storage company reported stronger-than-expected fourth-quarter earnings and revenue while issuing first-quarter guidance that significantly exceeded Wall Street forecasts.
The company reported adjusted earnings of $5.71 per share for the fourth quarter on revenue of $3.6 billion. Revenue increased 49% from $2.4 billion in the same quarter a year earlier, comfortably beating analysts’ expectations of earnings of $5.09 per share on revenue of $3.5 billion.
AI-Driven Cloud Demand Boosts Growth
Seagate’s performance was supported by continued investment in cloud infrastructure as hyperscale data centre operators and enterprise customers expanded capacity to meet growing artificial intelligence and data-intensive computing requirements.
The stronger demand also drove a significant improvement in profitability, with non-GAAP gross margin rising to 52.7%, compared with 37.9% in the corresponding quarter last year.
Commenting on the results, Morgan Stanley analyst Erik Woodring said: “As expected, pricing is the key factor driving better-than-expected revenue, margins, EPS and FCF in June/Sept, with more pricing upside to come.”
He added: “Demand visibility/duration is also improving, and we see several qtrs of accelerating rev growth ahead. We’re buying any rotation-based/factor weakness.”
First-Quarter Guidance Tops Market Forecasts
Looking ahead, Seagate issued guidance for the first quarter of fiscal 2027 that was well ahead of analyst expectations.
The company forecast revenue of approximately $4.1 billion, plus or minus $100 million, along with non-GAAP diluted earnings per share of $7.30, plus or minus $0.20.
By comparison, analysts had been expecting first-quarter revenue of $3.8 billion and earnings per share of $5.87.
Management attributed the strong outlook to long-term demand trends in cloud storage and continued growth in global data creation.
Chief Executive Officer Dave Mosley said Seagate’s proprietary Mozaic platform and its Heat-Assisted Magnetic Recording (HAMR) technology roadmap position the company to benefit from increasing demand for high-capacity storage solutions as AI workloads continue to expand.
Record Cash Generation Strengthens Balance Sheet
For fiscal 2026, Seagate generated revenue of $12.2 billion and reported non-GAAP diluted earnings per share of $15.58, representing a substantial improvement from the previous fiscal year.
The company also delivered record cash generation, producing operating cash flow of $3.7 billion and free cash flow of $3.1 billion during the year.
Strong cash generation enabled Seagate to further strengthen its balance sheet while continuing to return capital to shareholders.
During fiscal 2026, the company repaid $1.4 billion of debt, including $302 million in the fourth quarter, ending the year with total debt of $3.6 billion and cash and cash equivalents of $1.7 billion.
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