Key Highlights

  • Fiscal fourth-quarter revenue reached $3.6 billion, up 48% year over year and above guidance.
  • Non-GAAP gross margin expanded to 52.7%, its thirteenth consecutive quarter of improvement.
  • Free cash flow of $1.1 billion marked the company's strongest quarterly result in more than a decade.
  • Fiscal 2027 revenue guidance for the first quarter points to $4.1 billion, up 56% year over year at the midpoint.

Cloud Demand Drives a Historic Finish to Fiscal 2026

Seagate Technology Holdings plc (NASDAQ:STX) reported fiscal fourth-quarter revenue of $3.6 billion, up 17% sequentially and 48% from a year earlier, exceeding the high end of the company's guidance range. Full fiscal year revenue grew 34% to $12.2 billion, with data center customers accounting for approximately 90% of exabyte shipments by year-end.

Data center revenue rose 57% year over year in the quarter to $2.9 billion, as cloud providers continued expanding storage capacity to support artificial intelligence workloads alongside traditional data-intensive applications. Total exabyte shipments reached 218 exabytes for the quarter, up 34% from the prior year, with nearline exabyte shipments allocated well into calendar 2028 under existing customer agreements.

Technology Transition and Pricing Discipline Lift Margins

Non-GAAP gross margin expanded to 52.7% in the fourth quarter, up 570 basis points sequentially and marking thirteen consecutive quarters of improvement. Management attributed the gain to continued execution of a multi-year pricing strategy alongside a shift in product mix toward higher-capacity nearline drives.

The company's HAMR-based Mozaic platform, which increases the amount of data stored on each disk, represented approximately 40% of nearline exabyte shipment volume by the end of the fiscal year. A newer generation platform, capable of up to 44 terabytes per drive, began ramping with major cloud service providers during the quarter, with a further generation targeting even higher density expected to reach qualification in late calendar 2027.

Debt reduction also featured prominently in the results. The company retired $302 million in debt during the quarter and $1.4 billion for the full year, ending fiscal 2026 with total debt of $3.6 billion, down from roughly $5 billion at the start of the year. Net leverage improved to 0.4 times adjusted EBITDA.

Supply Constraints Could Extend Pricing Strength, But Concentration Risk Remains

Management guided to first-quarter fiscal 2027 revenue of $4.1 billion, plus or minus $100 million, representing 56% growth at the midpoint, alongside non-GAAP earnings per share of $7.30, plus or minus $0.20. Executives indicated that supply remains tighter than demand, which could continue supporting pricing gains beyond the historical mid-to-high single-digit growth rate the company previously described.

Some risks could temper this trajectory. A meaningful share of recent pricing strength was tied to a preferential rate for an early HAMR customer that is rolling off, though executives characterized this as a minor factor in the improved outlook. The company's exabyte growth also depends on continued execution through complex product transitions from lower- to higher-capacity platforms, a process management acknowledged introduces some manufacturing inefficiency during each transition period.

Emerging applications in physical AI and expanded enterprise adoption of tiered storage architectures could provide additional demand drivers beyond the current cloud-dominated base, though the timing of these contributions remains uncertain.

Conclusion

Seagate's fiscal 2026 results reflect a business benefiting from a favorable combination of technology leadership and constrained industry supply, with data center demand for AI-related storage showing few signs of slowing. The company's guidance implies continued sequential improvement in fiscal 2027, though the durability of current pricing strength and the pace of the HAMR technology transition remain the key variables likely to determine whether growth accelerates further or moderates from current levels.