Seagate rides AI storage boom to record margins as nearline capacity sells through 2028

AI storage boom is keeping Seagate's hard drives spinning

The AI infrastructure boom isn't just eating all the memory - it's also driving demand for storage, giving high-capacity hard drives a new lease of life, according to Seagate. The storage veteran says cloud operators are buying ever more mass-capacity hardware as AI applications generate and retain growing volumes of data. "Datacenter demand now represents approximately 90 percent of our exabyte shipments," chairman and CEO Dave Mosley told analysts during a call to discuss Seagate's Q4 and full-year results. "Based on the long-term supply agreements in place today, the vast majority of our nearline exabytes are now allocated into calendar 2028," he said. Back in February, Seagate warned that its production capacity of nearline drives was fully allocated for this year, and it had started accepting orders for 2027. "Importantly, we are not seeing customers pull back on planning horizons," Mosley added, suggesting hyperscalers remain keen to reserve hard drive capacity years in advance. AI agents that carry out tasks with varying degrees of autonomy are the latest source of demand for nearline drives - at least according to Seagate's CEO. "With the transition from AI model training to inference to agentic applications, more data is generated and retained for historical context, compliance and future reuse. As these datacenter environments become larger and more complex, customers must balance performance, energy consumption and cost." Cloud operators already address these challenges through tiered storage combining high-performance memory and SSDs with mass capacity hard drives to optimize performance and economics at scale, he added. "Our recent white paper with SK hynix illustrates the importance of tiered storage for inference and agentic AI workloads, which show a direct benefit to hard drive storage. These workloads rely on persistent context across user interactions, and key-value or KV cache is used to retain and reuse that context efficiently." By distributing KV cache data across memory, SSD, and hard drive tiers, organizations can retain more context and avoid recomputing previously generated data. Seagate claims this increases demand for hard drive capacity while reducing the GPU resources spent recomputing old context, leaving more compute available for revenue-generating workloads. Of course, some will say that Seagate would big up the hard drive market. Its SSD business has been described as "utterly trivial," so the company largely depends on selling nearline HAMR disks to hyperscalers and large enterprises. CFO Gianluca Romano acknowledged that Seagate's capacity growth has mostly come from shipping drives with more disks and heads, rather than selling more units. "If you look at our last year, and if you look at the number of disks and the number of heads inside the box, they probably grew between 15 and 20 percent and the units were absolutely flat," he said, describing this as "a normal part of the business." All the same, demand for capacity helped lift Seagate's full-year revenue by 34 percent from $9.1 billion to $12.2 billion. For its fourth quarter, ended July 3, the biz reported revenue of $3.6 billion, up 50 percent from $2.4 billion a year earlier. It expects revenue of $4.1 billion, plus or minus $100 million, in the current quarter - which would represent year-on-year growth of 56 percent. Seagate says it is ramping up production of its Mozaic 4 platform, which supports drives of up to 44 TB, for major cloud providers. The next-generation Mozaic 5 remains on track for qualification shipments in late 2027 and is expected to deliver more than 5 TB per platter. ®

Seagate forecasts upbeat quarter on strong AI-driven storage demand

July 28 (Reuters) - Seagate Technology (STX.O), opens new tab forecast quarterly revenue and profit above estimates on Tuesday, as the rapid buildout of AI infrastructure fuels robust demand for its high-capacity hard disk drives. Shares of the Singapore-based company, which have more than doubled this year, rose over 8% in extended trading. Here are some details: Reporting by Anhata Rooprai in Bengaluru; Editing by Sahal Muhammed Our Standards: The Thomson Reuters Trust Principles., opens new tab

Seagate Hits Record Margins Amid AI Storage Boom - Seagate Technology Hldgs (NASDAQ:STX)

Seagate reported quarterly earnings of $5.71 per share, which beat the Street estimate of $5.09 by 12.18%, according to Benzinga Pro data. Quarterly revenue came in at $3.63 billion, which beat the consensus estimate of $3.49 billion and was up from $2.44 billion in the same period last year. Seagate shipped 218 exabytes in the June quarter, up 34% year over year (Y/Y), with data center customers representing 89% of total shipments. Data center shipments reached 195 exabytes, increasing 11% sequentially (Q/Q) and 43% year over year (Y/Y), while data center revenue rose to $2.9 billion, up 17% Q/Q and 57% Y/Y. Adjusted gross margin reached a record 52.7%, expanding 570 basis points sequentially from 47% in the prior quarter, driven by pricing execution and favorable product mix. Adjusted operating margin improved to 44.6%, up 710 basis points sequentially, in the quarter. Seagate generated $1.1 billion in free cash flow during the quarter and returned approximately $283 million to shareholders through dividends and share repurchases. Seagate ended fiscal 2026 with $1.7 billion in cash and cash equivalents and total liquidity of $3 billion, including its undrawn revolving credit facility. Management Commentary In the company conference call, Seagate said that data center demand remained the primary growth driver, contributing approximately 90% of exabyte shipments. Based on existing long-term supply agreements, most of Seagate's nearline exabyte capacity is committed through calendar 2028, with customers seeking additional capacity commitments extending into 2029 and beyond. Cloud customers continued to drive nearline storage demand, with Seagate recording three consecutive years of sequential quarterly exabyte growth and no indications of demand slowing. Enterprise demand also improved, with enterprise nearline revenue increasing for the fifth consecutive quarter as customers increasingly adopt modern tiered storage architectures across public cloud, private cloud, and on-premise environments. Outlook For the September quarter, Seagate expects revenue of approximately $4.00 billion to $4.02 billion, representing 56% Y/Y growth. The outlook includes non-GAAP operating expenses of around $300 million and a non-GAAP operating margin of around 50%, and non-GAAP EPS of $7.30 ± $0.20 Seagate expects continued revenue growth, margin expansion, and improved cash generation through fiscal 2027, supported by strong data center demand, increasing HAMR technology adoption, and disciplined execution. The company expects physical AI applications, including robotics and autonomous vehicles, to drive additional storage demand as these systems require significant volumes of historical and synthetic data for training and real-world operations. STX Price Action: Seagate Technology Hldgs shares were up 5.28% at $786.75 during premarket trading on Wednesday, according to Benzinga Pro data. Photo via Shutterstock Market News and Data brought to you by Benzinga APIs To add Benzinga News as your preferred source on Google, click here.

Wedbush raises the bar for two AI storage stocks

Seagate Technology (STX) and Western Digital (WDC) supply high-capacity hard drives used by cloud providers to store the growing volumes of data produced by artificial intelligence workloads. The companies have become two of the market's most closely watched AI infrastructure stocks as hyperscalers expand data-center capacity and reserve hard-drive supply years in advance. Both stocks moved sharply lower on July 27 despite a bullish analyst call. Seagate shares fell about 6.1% to $800 around midday July 27, and Western Digital declined about 6.1% to $487.87. Seagate will report fiscal fourth-quarter and full-year results after the market closes on July 28. Western Digital is scheduled to report on Aug. 5. The reports will show whether limited hard-drive supply is still helping the companies raise prices and protect margins. They will also show whether production constraints are limiting the number of drives Seagate and Western Digital can deliver. Wedbush analyst Matt Brysonraised his Seagate price target to $1,000 from $825 and lifted his Western Digital target to $650 from $540. Bryson maintained Outperform ratings on both stocks. SOPA Images / Getty Images Wedbush expects the HDD shortage to continue into 2027 Wedbush expects growing demand and limited hard-drive supply to continue well into 2027. Cloud providers are reserving high-capacity drives as they expand storage for AI training data, inference output, customer records and backups. The shortage gives Seagate and Western Digital more leverage in negotiating new customer agreements because hyperscalers have fewer suppliers with available capacity. However, higher market prices may take time to reach Seagate's financial results. The company has already committed much of its fiscal 2027 capacity through long-term agreements that set volumes and pricing in advance. That means the strongest benefit may come when existing agreements reset or Seagate signs contracts for later delivery periods at higher prices. Seagate had declined about 17% in July entering Monday, while Western Digital had fallen more than 20%, according to Investor's Business Daily. The pullback shows investors are waiting for more details on contract pricing, available capacity, and whether limited production will prevent the companies from accepting additional orders. AI expansion is increasing demand for mass-capacity storage AI models require storage before and after they run. Companies retain training datasets, model checkpoints, inference results, security logs, and customer information inside cloud data centers. High-capacity hard drives allow cloud providers to store large amounts of that information in a smaller physical footprint. A recent Bank of America report placed that demand inside a wider shift in technology investment. The debate around frontier technologies has shifted from experimentation to scalability. BofA did not mention Seagate or Western Digital in that section of the report. Its scalability framework helps explain why storage availability has become part of the AI infrastructure buildout alongside processors, networking equipment, and electricity. AI companies can experiment with limited computing capacity. Running those products for millions of customers requires much larger systems for computing, moving, and retaining data. The demand has already affected Seagate's production planning. CEO Dave Mosley said in May that building new factories would take too long and could leave the company with unused capacity if demand later weakened. Mosley said recording-head wafers had lead times exceeding nine months. Finished drives required roughly another quarter after that stage. Seagate later said its nearline capacity was almost fully allocated through calendar 2027. Nearline drives are high-capacity products designed for cloud and enterprise data centers. The storage shortage can also cap revenue growth Limited supply can lift prices when customers compete for available capacity. It creates a different problem when manufacturers cannot produce enough drives to accept additional orders. Seagate and Western Digital therefore need to show that pricing gains outweigh the revenue they may be leaving behind due to constrained production. Their margin benchmarks are already high. Seagate reported a 47% non-GAAP gross margin in its fiscal third quarter, up from 36.2% a year earlier. The company forecast fiscal fourth-quarter revenue of $3.45 billion, plus or minus $100 million. It projected non-GAAP earnings of $5 a share, plus or minus 20 cents. Western Digital reported fiscal third-quarter revenue of $3.34 billion and a non-GAAP gross margin of 50.5%. It forecast fourth-quarter revenue of about $3.65 billion and a non-GAAP gross margin of approximately 51.5%. Those results leave little room for a quarter that merely meets expectations. Investors will need evidence that new contracts are being signed at higher prices, recent margin gains can continue, and customer commitments extend beyond the capacity already reserved for 2027. Key numbers ahead of Seagate and Western Digital earnings * $1,000: Wedbush's new Seagate price target * $650: Wedbush's new Western Digital price target * 47%: Seagate's latest non-GAAP gross margin * 50.5%: Western Digital's latest non-GAAP gross margin * $3.45 billion: Seagate's fiscal fourth-quarter revenue guidance midpoint * $3.65 billion: Western Digital's fiscal fourth-quarter revenue guidance midpoint * Through 2027: Period for which Seagate's nearline capacity was almost fully allocated Wedbush's targets assume that constrained supply will continue supporting contract prices and margins. Seagate reports first, giving investors the earliest indication of whether the recent decline has reset expectations or reflects concern that profitability is approaching a peak. Western Digital will face the same test the following week. The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc. This story was originally published July 28, 2026 at 10:33 AM.

Seagate Sees a Better-Than-Expected Quarter on AI-Driven Demand

Seagate expects Q1 revenue of $4.1bn, plus or minus $100m, along with adjusted EPS of $7.30, both well above analysts' estimates. The hard-drive maker is benefiting from strong demand from cloud service providers, which are investing heavily in storage capacity to support the expansion of generative AI applications. The company is notably leaning on its heat-assisted magnetic recording (HAMR) technology, which boosts drive storage density using tiny lasers, without requiring new production lines. "As artificial intelligence accelerates data creation and increases its value, we expect sustained long-term demand for very high-capacity storage solutions," Chief Executive Dave Mosley said. That momentum enabled Seagate to raise prices and deliver strong Q4 results. Revenue climbed 48.5% y-o-y to $3.63bn, while adjusted EPS reached $5.71, both beating market forecasts.