Seagate delivered a strong Q1 FY2027, beating guidance with a record $4.8 billion in revenue versus $4.1 billion expected, driven by hyperscale cloud demand for high-capacity HAMR drives. It shipped 220 EB of capacity, with data center customers representing 90% of total volume; cloud nearline revenue grew for the 12th consecutive quarter, while enterprise OEM revenue hit its second-highest level in over a decade. Persistent data is becoming more valuable as AI expands beyond training into inference and agentic workloads.
CEO William Mosley said fiscal 2027 had started exceptionally well, with revenue up more than 60% year-over-year and non-GAAP EPS nearly tripling to a record $7.68. Both gross and operating margins reached new highs, while data center and edge IoT revenue grew 18% and 13% sequentially. He expects continued strong sequential revenue growth and margin expansion throughout the fiscal year.
Key results included a record 57.3% gross margin, $1.69 billion in operating cash flow, $1.5 billion in free cash flow, a stable $1.7 billion cash position, reduced gross debt of $2.4 billion, and diluted EPS of $7.68. Seagate is growing net income as a percentage of revenue, increasing revenue and profit per exabyte, and narrowing the gap with rival WD.
Rather than expanding unit shipments, Seagate and WD are raising capacity per drive, enabling them to supply more GB to hyperscalers at lower cost per GB while lifting per-drive prices. Toshiba, the distant third player, plans to increase unit output, but the impact is unclear. Q1 FY2027 was Seagate’s second straight quarter of accelerating growth.
Mosley called areal density the company’s priority. HAMR is expected to represent about 50% of nearline exabyte shipments by the end of 2026, with Mozaic 4—up to 44 TB—making up roughly half of those HAMR volumes and ramping with two leading CSPs. Additional customer qualifications are expected in the coming months. Gen 3 Mozaic drives, up to 55 TB across ten platters, should enter qualification near the end of 2027, and Seagate has demonstrated 8 TB per platter in the lab. Each HAMR transition lowers manufacturing cost per bit and improves profitability.
Like DRAM and NAND suppliers, Seagate and WD now use LTAs with major customers, extending demand visibility beyond 2030. High capital barriers and AI-driven supply tightness mean customers are competing to secure drives. Mosley said nearline exabyte supply should grow at a mid-20% compound rate, supported by the technology roadmap.
Seagate has improved its balance sheet and expects to be net cash positive by the end of the year. It is shifting capital returns toward share repurchases, supplemented by dividends; the board recently raised the quarterly dividend to $0.76 per share. Most nearline exabyte supply is now committed under long-term agreements through 2028, with some cloud deals extending to 2030.
The business is moving from commodity drive sales toward custom engagements with large customers. Mosley noted broadening demand from enterprise OEMs managing large datasets and said Seagate is developing reference architectures combining validated compute and storage hardware with customer-selected software. He believes the company is still in the early stage of a multi-year growth cycle. Seagate guides next-quarter revenue of $4.8 billion, +/- $100 million, or about 7% year-over-year growth at the midpoint.
Beijing Qianxing Jietong Technology Co., Ltd.
Sandy Yang/Global Strategy Director
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