Seagate (STX) Q1 2027 Earnings Call Transcript

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DATE

Tue, Oct. 27, 2026

CALL PARTICIPANTS

• Senior Vice President, Investor Relations – Shanye Hudson
• Chair and Chief Executive Officer – William Mosley
• Chief Financial Officer – Gianluca Romano

TAKEAWAYS

• Revenue — $4.2 billion, increasing 61% year over year due to sustained data center demand and pricing strength across the portfolio.
• Non-GAAP EPS — $7.68, expanding nearly threefold year over year reflecting record gross and operating margins.
• Non-GAAP Gross Margin — 57.8%, up 510 basis points sequentially driven by favorable pricing execution and an improving product mix as Mozaic 4 products ramped.
• Non-GAAP Operating Margin — 50.7%, increasing 610 basis points sequentially due to top-line growth and disciplined expense management.
• Data Center Revenue — $3.4 billion, growing 63% year over year and representing 81% of total quarterly revenue.
• Edge IoT Revenue — $784 million, rising 52% year over year and 13% sequentially.
• Nearline Capacity Shipments — 198 exabytes, a record for the company driven by cloud customer demand and the continued ramp of Mozaic 4 products.
• Total Capacity Shipments — 220 exabytes, an increase of 21% year over year with data center customers accounting for 90% of shipped volume.
• Free Cash Flow — nearly $1.5 billion, a record for the company supported by high profitability and disciplined capital expenditures.
• Capital Expenditures — $211 million, representing 5% of revenue to support the transition to Heat-Assisted Magnetic Recording technology.
• Quarterly Dividend — $0.76 per share, an increase of approximately 3% reflecting management’s confidence in sustainable cash generation.
• Second Quarter Revenue Guidance — $4.8 billion plus or minus $100 million, reflecting continued demand momentum and an expected step-up in exabyte shipments.
• Second Quarter Non-GAAP EPS Guidance — $9.20 plus or minus $0.20, underpinned by operating margin expansion toward the mid-50% range.
• Debt Reduction — $1.2 billion in principal debt retired during the quarter, including the remaining convertible notes and $1 billion in high-yield debt.
• Post-Quarter Debt Activity — $750 million in high-yield senior notes retired in early Oct., reducing total principal debt to approximately $1.6 billion.
• Share Repurchases — $400 million, contributing to a total of $568 million returned to shareholders in the September quarter.
• Inventory Days — 97 days, an increase from 83 days in the prior quarter due to staging Mozaic 4 products for upcoming qualifications.
• Non-GAAP Operating Expenses — $300 million, remaining flat sequentially and expected to stay at this level in the Dec. quarter.
• Long-Term Exabyte Growth Target — mid-20% range on a compound basis, supported by the company’s areal density-driven technology road map.
• HAMR Shipment Target — 50% of nearline exabyte run rate, expected to be achieved when exiting calendar 2026.

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RISKS

• Romano stated, “The cost of the external component, as you know, compared to a year ago, is now much higher,” noting that these costs partially offset internal cost reductions.
• Mosley noted that the company is “investing in additional tools and technologies necessary to offset longer manufacturing cycle times” associated with the transition to HAMR-based products.

SUMMARY

Seagate Technology Holdings plc (STX +3.67%) reported results for the first quarter of fiscal 2027 and provided guidance for the second quarter. Management indicated that the company is shifting its capital allocation focus toward share repurchases and dividends following the completion of primary debt reduction goals. The company stated that demand is being driven by the expansion of AI applications from model training toward inference and agentic workloads, which increases the value of persistent data storage. Management reported that the vast majority of nearline exabyte supply is now allocated under long-term supply agreements through calendar 2028.

• Microsoft recently qualified a joint solution combining Mozaic drives with Broadcom connectivity infrastructure, validating SMR-enabled storage at hyperscale.
• Management expects customer qualification shipments for Mozaic 5 products, which offer capacity of 50 terabytes or more, to begin toward the end of calendar 2027.
• The company plans to significantly increase share repurchases starting in calendar 2027, as no additional debt activity is currently planned.
• CEO Mosley stated, “We believe future storage demand will increasingly be tied to this new data life cycle and compound again as physical AI applications proliferate.”
• The company is focusing on increasing capacity per disk through areal density growth rather than relying on higher drive unit production to manage manufacturing cycle times.

INDUSTRY GLOSSARY

• Areal Density: The amount of data that can be stored on a given surface area of a disk platter.
• Exabyte (EB): A unit of data storage equal to one billion gigabytes.
• HAMR (Heat-Assisted Magnetic Recording): A technology that uses laser heating to increase the amount of data that can be stored on a hard drive disk.
• KV Cache (Key-Value Cache): A storage mechanism used in large language models to store and reuse previously computed data for improved efficiency.
• Mozaic 4: Seagate’s storage platform utilizing HAMR technology to achieve capacities of 30 terabytes or more.
• Nearline: Enterprise-grade high-capacity storage drives designed for data that needs to be accessible but not constantly active.
• SMR (Shingled Magnetic Recording): A data recording technique that layers tracks on a disk like shingles on a roof to increase storage density.

Full Conference Call Transcript

Operator: Welcome to the Seagate Technology Fiscal First Quarter 2027 Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Shanye Hudson, Senior Vice President, Investor Relations. Please go ahead.

Shanye Hudson: Thank you. Hello, everyone, and welcome to today’s call. Joining me are Dave Mosley, Seagate’s Chair and Chief Executive Officer; and Gianluca Romano, our Chief Financial Officer. We’ve posted our earnings press release and detailed supplemental information for our September quarter results on the Investors section of our website. During today’s call, we’ll refer to GAAP and non-GAAP measures. Non-GAAP figures are reconciled to GAAP figures in the earnings press release posted on our website and included on our Form 8-K. We’ve not reconciled certain non-GAAP outlook measures because material items that may impact these measures are out of our control and/or cannot be reasonably predicted. Therefore, a reconciliation to the corresponding GAAP measures is not available without unreasonable effort.

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