Seagate surpassed the high end of the prior quarter’s $2.8 billion revenue outlook with $2.83 billion for its second fiscal 2026 quarter – a 21.5 percent rise year-on-year based on strong datacenter disk drive demand.
There was a $702 million GAAP profit, up 62 percent year-on-year and representing 24.8 percent of its revenues. It was the highest profit for Seagate in six years. For comparison, data protection supplier Commvault reported profits of $18 million, just 5.73 percent of its revenues. It operates in a market with multiple major and minor competitors, whereas Seagate has one main and one minor competitor in the oligopolistic disk drive market.
Chairman and CEO Dave Mosley said: “Seagate’s December quarter results exceeded our expectations on both the top and bottom line, setting new records for gross margin, operating margin, and non-GAAP EPS. This performance highlights our team’s strong operational execution, the durability of data center demand, and the ongoing ramp of our HAMR-based Mozaic products.”
He thinks Seagate is set fair for the future: “Our areal-density-driven product roadmap positions us to meet the evolving storage requirements and exabyte demand growth, while creating significant value for our customers and shareholders for years to come.”
Financial Summary
- Gross margin: 41.6 percent vs 40.1 percent in prior quarter
- Operating cash flow: $723 million vs $532 million in previous quarter
- Free cash flow: $607 million vs $427 million in prior quarter
- Cash and cash equivalents: $1 billion vs $1.1 billion last quarter
- Gross debt: $4.499 billion vs $4.994 billion in prior quarter
- Diluted EPS: $2.60 vs $2.61 in prior quarter
Free cash flow was up 42 percent sequentially, marking the highest level in eight years. Datacenter revenue increased 28 percent year-on-year to $2.2 billion, supported by ongoing demand strength from global cloud customers and sequential growth across the enterprise/OEM markets. Looking ahead, nearline EB capacity is allocated through calendar 2026, and long-term agreements are in place with major cloud customers through calendar 2027, with multiple CSPs discussing demand projections for calendar 2028.
The HAMR drive transition is near completion. Current Mozaic 3+ generation HAMR-based drives continue to ramp. Seagate completed qualifications with all major US CSPs and says it’s on track to complete remaining global CSP qualifications in 1H CY26. Next generation Mozaic 4+ (4 TB/platter) HAMR qualifications with multiple customers are expected to complete in the coming months with initial volume ramp starting in the next quarter. A 7 TB per platter HAMR technology has been demonstrated in Seagate’s internal engineering labs.
Seagate’s focus on nearline, mass-capacity drives saw 165 EB of nearline capacity shipped, up 31 percent annually, with just 25 EB of non-nearline capacity shipped, flat year-on-year. Average capacity per nearline drive rose 22 percent to 23 TB. Mosley said in the earnings call: “At the same time, revenue per terabyte sold has remained relatively stable, reflecting the effectiveness of our pricing strategy.”
He called out video storage: “Video applications continue to drive significant demand for hard drives with platforms like YouTube witnessing 20 million video uploads daily, up from just 2 million 3 years ago. This staggering pace of growth extends to other cloud video platforms and doesn’t yet include the full surge in content generation expected from emerging AI-driven video applications.”
And, of course, AI: “With the deployment of AI agents at the edge, where untapped data often resides, we believe the stage is set for a sustained and meaningful increase in data generated and stored that will support inferencing, continuous training and also maintain model integrity.”
Mosley sees a stable and growing future for Seagate: “Our deep expertise across mechanical engineering, material science, nanoscale fabrication and now advanced photonics, not only enable Seagate to deliver on the HAMR roadmap, but also creates a durable competitive moat for hard drive technology well into the future.”
Seagate’s entire focus is, it seems, on areal density (capacity) improvements, not I/O. It is also sticking with a ten-platter technology, for manufacturing cost reasons, whereas Western Digital has 11 and Toshiba has demonstrated 12 platters. Should its competitors catch up with HAMR technology, then they could offer higher capacities than Seagate through having more platters.
Next quarter’s revenue outlook is for better, rather than more of the same, with $2.9 billion 
± $100 million guidance issued, meaning a 34.3 percent year-on-year increase. It expects to see minimal impact from global tariff policies announced so far.
