Disk drive giant Seagate saw revenues rise 21 percent year-over-year to $2.63 billion with a $549 million GAAP profit, up 80 percent, as supply-constrained drives met AI-driven demand strength and prices rose. It said its global cloud customers are driving nearline drive demand with overall production largely committed through calendar 2026 based on built-to-order contracts.
Seagate chairman and CEO Dave Mosley said: “With clear visibility into sustained demand strength, we are ramping shipments of our areal density-leading Mozaic HAMR products, which are now qualified with five of the world’s largest cloud customers… AI is transforming how content is being consumed and generated, increasing the value of data and storage and Seagate is well positioned for continued profitable growth.”
Financial Summary
- Gross margin: 40.1 percent vs 37.9 percent in prior quarter
- Operating cash flow: $532 million vs $508 million in previous quarter
- Free cash flow: $427 million vs $425 million in prior quarter
- Cash and cash equivalents: $1.1 billion, up 25 percent from last quarter
- Gross debt: $4.994 billion vs $4.995 billion in prior quarter
- Diluted EPS: $2.61 vs $2.59 in prior quarter
Seagate noted AI inferencing is elevating demand for high-capacity nearline drives to store, monitor, validate, and reintegrate data into infinite training loops. Average nearline drive capacities increased 26 percent year-over-year as customers transitioned to higher capacity drives to support increasing storage needs. Global cloud customers are driving demand strength with overall nearline production largely committed through calendar 2026 based on build-to-order contracts. Seagate’s data center revenue increased 34 percent year-over-year to $2.1 billion, representing 80 percent of total revenue.
It shipped more than one million Mozaic HAMR drives in the quarter. Current generation Mozaic 3+ (3 TB/platter) drives are on track to be qualified with the remaining few major global CSP customers by mid-2026.
Wedbush analyst Matt Bryson is of the opinion that this implies “about 15 percent of nearline units and closer to 20 percent of nearline exabytes were HAMR-based.” He added: “Management also indicated its initial customer, which we believe represents the bulk of units shipped last quarter, is receiving a discount on its purchases, which dissipates over time.”
Mozaic 4+ HAMR drives (4 TB/platter) are in qualification with a second global CSP, with the initial volume ramp expected to begin in 2H FY26. This disk drive platform will support both cloud workloads with capacities up to 44 TB and lower-capacity drives with fewer platters for edge workloads.
Next quarter’s outlook is for revenues to rise to $2.7 billion ± $100 million, a 16 percent year-over-year rise. This is based on announced tariff policies as of October 28, 2025, and reflects minimal direct impact to the outlook.
Bryson pointed out that Seagate sees no chance of HDD supply meeting customer demand over the next 4 quarters. There is not enough manufacturing capacity to meet current requirements, let alone growing future requirements. Seagate does not intend to add manufacturing capacity. It will “meet future exabyte demand through areal density gains.” This should keep prices high “as supply trails demand for the foreseeable future.”
