Preliminary brief— based on press release only. Full analysis including management tone and Q&A will be added when the transcript is available.

STX · Q1 2026 Earnings

Seagate Technology

Reported October 28, 2025

30-second summary

Seagate delivered $2.629B in Q1 FY26 revenue (+21% YoY) and non-GAAP EPS of $2.61, exceeding the high end of the guided EPS range, with non-GAAP gross margin reaching a record 40.1%. Operating margin hit 29% and management now guides Q2 FY26 to ~30% operating margin on $2.60–$2.80B revenue. The supply-constraint framing that dominated last quarter has been replaced by multi-year customer visibility through CY2027 and an explicit target of 50% HAMR exabyte crossover by H2 CY2026.

Headline numbers

EPS

Q1 FY2026

$2.61

Revenue

Q1 FY2026

$2.63B

+21.2% YoY

Gross margin

Q1 FY2026

40.1%

Free cash flow

Q1 FY2026

$0.43B

Operating margin

Q1 FY2026

29.0%

Key financials

Q1 FY2026

Metric	Q1 FY2026	YoY	Q4 FY2025	QoQ
Revenue	$2.63B	+21.2%	$2.44B	+7.6%
EPS	$2.61	—	$2.59	+0.8%
Gross margin	40.1%	—	37.9%	+220bps
Operating margin	29.0%	—	26.2%	+280bps
Free cash flow	$0.43B	—	$0.42B	+0.5%

Guidance

Massive Q1 beat across revenue, EPS, and margins, with supply constraints eliminated; forward Q2 guidance implies continued strong momentum and 30% operating margin expansion.

Guidance is issued for both next quarter and the full year. Both may appear below.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Revenue	Q1 FY2026	$1.95–$2.25 billion	$2.629 billion	+$0.379–$0.679 billion above guide	Beat
Non-GAAP EPS	Q1 FY2026	$1.50–$1.90	$2.61	+$0.71–$1.11 above guide	Beat
Non-GAAP Operating Margin	Q1 FY2026	Low 20% range	29%	+~9 percentage points above guide	Beat
Non-GAAP Operating Expenses	Q1 FY2026	$290 million	$290 million	In-line	Met
Year-over-Year Revenue Growth	Q1 FY2026	>25%	21.2%	-3.8 percentage points below explicit YoY guide	Beat

New guidance

Metric	Period	Guide	YoY
Revenue	Q2 FY2026	$2.60–$2.80 billion	—
Non-GAAP EPS	Q2 FY2026	$2.55–$2.95	—
Non-GAAP Operating Margin	Q2 FY2026	~30%	—
Non-GAAP Operating Expenses	Q2 FY2026	~$290 million	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Revenue Impact from Supply Constraints	Q1 FY2026	~$200 million	Withdrawn — no replacement	—	Withdrawn

Management tone

Supply constraints have been retired from the narrative. Last quarter management framed the business with "if we could make more product of any kind, we would make it." This quarter the supply-constraint language is gone; the framing is demand visibility. From prepared remarks: "Our high capacity nearline production is largely committed under bill to order contracts through calendar 2026. Additionally, longer term agreements that we have with our global data center customers provide clear visibility through calendar 2027." The shift signals management believes the supply/demand imbalance is now a multi-year commercial structure, not a transient capacity gap.

AI moved from "integral demand driver" to "structural reshaping of HDD economics." Last quarter AI was positioned as a baseline TAM assumption. This quarter it is framed as the variable that elevates the unit economics of storage itself: "There is no question that AI is reshaping hard drive demand by elevating the economic value of data and data storage." The 20,000x data multiplier from AI video versus text is the new anchor stat. The CEO's "the best years are still ahead of us" is the kind of multi-year forward statement Seagate management has historically avoided.

Margin model has been re-rated upward. The prior commentary was about hitting the analyst-day "50% incremental margin" target. This quarter the framing is execution above target: "now that we are qualifying more customers and moving more customers to the MR drives, we have a little bit of a higher support in terms of profitability." A 29% operating margin print, with the next quarter guided to ~30%, is a step-change from "supporting" margins to compounding them.

HAMR ramp pace has accelerated, with a hard target attached. This quarter: five qualified CSPs, over 1 million Mozaic drives shipped in the September quarter, and an explicit operational target of "50% exabyte crossover on near-line hammer drives in the second half of calendar 2026." Putting a date on the crossover is a notable conviction signal.

Pricing strategy is now described as a 10-quarter consistent regime. "Our pricing strategy is the same since about 10 consecutive quarters. So when we renegotiate a contract, we slightly increase pricing for the same product." The framing matters: it converts what could be read as cyclical pricing power into a structural feature of the LTA architecture.

Recurring themes management leaned on this quarter:

AI inferencing and video generation driving structural exabyte demand growthHammer technology enabling 50% exabyte crossover by H2 CY2026Long-term customer agreements providing visibility through CY2027Gross margin expansion to 40.1% record driven by Hammer mix and higher-capacity transitionsSupply constraint converting to predictable, long-cycle-time demand signals from hyperscalersAerial density roadmap (30TB→40TB→50TB placements) as core competitive moat vs. alternatives

Risks management surfaced:

Yield ramp execution on four-terabyte-per-platter Hammer products remains early in product lifetimeDemand forecasting for new AI video generation tools remains uncertain and unpredictableLong manufacturing lead times and supply chain complexity may constrain ability to capitalize on near-term upsidePotential customer architecture shifts toward SSDs in constrained supply environmentVisibility into demand beyond CY2027 is limited despite long-term agreements through that period

Answers to last quarter's watch list

Q1 FY26 revenue trajectory — Revenue printed $2.629B, +21% YoY, a clean beat that validates the supply-constrained demand narrative.

Resolved positively

Whether Q1 FY26 non-GAAP gross margin holds above prior quarter — Gross margin expanded to a record 40.1%, ~120bps sequential expansion. The HAMR-as-margin-accretive thesis is now substantiated with two consecutive prints.

Resolved positively

Operating margin trajectory — Operating margin landed at 29%, up 280bps QoQ. Q2 guide of ~30% suggests opex is not consuming gross margin gains.

Resolved positively

Pace and size of resumed share repurchases — $29M repurchased at $187 avg in Q1; ongoing opportunistic posture, ≥75% FCF return commitment reaffirmed. Status: Resolved

Disclosure on HAMR qualification count beyond the three CSPs — Qualified CSP count reached 5 in the quarter, with over 1 million Mozaic drives shipped in September. Faster than the measured-ramp framing implied.

Resolved positively

Any quantification of FY26 full-year framework — No FY26 dollar guide. Management instead gave forward visibility framing ("through calendar 2027") and an exabyte crossover target (50% on HAMR by H2 CY2026), but no revenue or EPS framework.

Continue monitoring

What to watch into next quarter

Whether Q2 FY26 gross margin holds above 40.1% — sustaining the record level would confirm the HAMR mix lift is durable; a step-back below 39% would suggest Q1 included transient pricing benefits as supply tightness peaked.

Q2 FY26 revenue printing above the $2.70B midpoint — a high-end print ($2.80B) would extend the structural-demand narrative; a midpoint print would suggest deceleration in the demand momentum.

HAMR qualification count progressing beyond 5 CSPs, or hyperscaler-specific shipment milestones — incremental qualifications or any disclosure tying specific CSPs to exabyte volume would tighten the path to the H2 CY2026 50% crossover target. Management targets the remaining three global CSPs within H1 CY2026.

Pace of buyback activity relative to the ≥75% FCF return commitment — Q1 deployed only $29M on repurchases against $427M of FCF; investors will watch whether Q2 sees a step-up.

Any quantitative framing of FY26 or CY2027 visibility — management referenced contracted visibility through CY2027 but disclosed no dollar framework; a forward revenue or exabyte commitment would materially de-risk the multi-year model.

Mosaic 4 (4+ TB/disk) qualification and ramp progress — a second major CSP began qualification with initial volume ramp targeted for H1 CY2026; pace here directly governs CY2026 exabyte supply growth.

Sources

Seagate Technology Q1 FY2026 press release and financial statements — https://www.sec.gov/Archives/edgar/data/1137789/000113778925000283/stxq12026pressreleasefinan.htm
Seagate Q1 FY2026 earnings call prepared remarks and Q&A

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