STX · Q2 2027 Earnings

Neutral

Seagate Technology

Reported January 27, 2026

30-second summary

SENTIMENT: Constructive Seagate beat its own Q2 FY2026 guide on every line that matters — revenue $2.825B came in $25M above the high end of the $2.60–$2.80B guide, non-GAAP EPS $3.11 sixteen cents above the high end, operating margin 31.9% vs. the ~30% guide — with gross margin printing a fresh record at 42.2%. The Q3 FY2026 revenue guide of $2.80–3.00B sits roughly flat to modestly up versus the Q2 print at the midpoint, and the EPS midpoint of $3.40 implies continued margin expansion. The press-release language ("durability of data center demand," "ongoing ramp of our HAMR-based Mozaic products") is consistent with the multi-year visibility framing established last quarter.

Headline numbers

EPS

Q2 FY2027

$3.11

Revenue

Q2 FY2027

$2.83B

+21.5% YoY

Gross margin

Q2 FY2027

42.2%

Free cash flow

Q2 FY2027

$0.61B

Operating margin

Q2 FY2027

31.9%

Key financials

Q2 FY2027

Metric	Q2 FY2027	YoY	Q1 FY2026	QoQ
Revenue	$2.83B	+21.5%	$2.63B	+7.5%
EPS	$3.11	—	$2.61	+19.2%
Gross margin	42.2%	—	40.1%	+210bps
Operating margin	31.9%	—	29.0%	+290bps
Free cash flow	$0.61B	—	$0.43B	+42.2%

Guidance

Q2 FY2027 results handily beat both revenue and EPS guides; Q3 FY2027 guidance implies a YoY revenue decline of 3.5–10% from Q3 FY2026, signaling meaningful demand headwinds despite strong data center narrative.

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	Q2 FY2027	$2.6–2.8B	$2.825B	+$0.025B above high end of guide	Beat
Non-GAAP EPS	Q2 FY2027	$2.55–2.95	$3.11	+$0.16 above high end of guide	Beat
Non-GAAP Operating Margin	Q2 FY2027	~30%	31.9%	+1.9pts above guide	Beat

New guidance

Metric	Period	Guide	YoY
Revenue	Q3 FY2027	$2.8–3.0B	-10.0% to -3.5% YoY
Non-GAAP EPS	Q3 FY2027	$3.2–3.6	—

Management tone

Narrative arc: Supply-constrained / build-to-order → AI-driven structural reshaping → Multi-year CY2027 visibility → Record-margin beat with continued expansion guided.

No transcript was available for this revision; tone observations below are anchored to press-release language only.

The press-release language remains uniformly bullish: "durability of data center demand," "ongoing ramp of our HAMR-based Mozaic products," "areal-density-driven product roadmap positions us to meet the evolving storage requirements." That is consistent with the multi-year-visibility framing introduced last quarter. The Q3 EPS guide reinforces the margin-expansion story even as revenue is guided roughly flat sequentially at the midpoint.

Answers to last quarter's watch list

Whether Q2 FY2026 gross margin holds above prior-quarter record — Non-GAAP gross margin printed 42.2%, a new record.

Resolved positively

Q2 FY2026 revenue printing above the $2.70B midpoint — Revenue printed $2.825B, above the high end of the $2.60–2.80B range.

Resolved positively

HAMR qualification count progressing beyond 5 CSPs, or hyperscaler-specific shipment milestones — The press release does not disclose updated CSP qualification counts or shipment volumes; this will need transcript follow-up.

Continue monitoring

Pace of buyback activity relative to the ≥75% FCF return commitment — Six-month buyback totaled $29M per the cash flow statement, against H1 FCF of $1.034B. This remains the open question on capital allocation.

Continue monitoring

Any quantitative framing of FY26 or CY2027 visibility — No full-year dollar framework was issued. Management continues guiding one quarter forward only.

Continue monitoring

Mosaic 4 (4+ TB/disk) qualification and ramp progress — Not addressed in the press release.

Continue monitoring

What to watch into next quarter

Whether Q3 FY2026 revenue prints within or above the $2.80–3.00B range — a print at or above the high end would suggest demand momentum into H2; a print below midpoint would warrant transcript follow-up on customer-mix or build-plan timing.

Whether Q3 FY2026 gross margin holds above 42.2% — sustained margin expansion would support the HAMR mix thesis; any slippage below 41% would suggest the volume-leverage tailwind is moderating.

Operating margin landing inside the implied ~32–33% range from the EPS guide — sustained margin expansion is the bull case; any compression toward 30% would suggest the Q2 beat included transient mix benefits.

Buyback dollars deployed in Q3 against the ≥75% FCF return commitment — H1 FY26 FCF is $1.034B with only $29M repurchased; a material step-up in H2 is required to honor the framework.

HAMR/Mozaic CSP qualification updates — the H1 CY2026 target for the remaining three global CSPs was set last quarter; no update appears in this release. The next call needs to address pace.

Sources

Seagate Technology Q2 FY2026 press release and financial statements — https://www.sec.gov/Archives/edgar/data/1137789/000113778926000016/stxq22026pressreleasefinan.htm
Tapebrief prior-quarter briefs: STX Q1 FY2026, STX Q4 FY2025

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