Seagate Earnings Call: Demand 'Not a One-Quarter Spike' — Nearline Capacity Booked Through 2028

Seagate Technology (STX-US) released its latest quarterly financial results after market close on Tuesday, May 28 (Eastern Time), with both revenue and profitability surpassing market expectations. The company also provided an optimistic outlook for fiscal year 2027.

Fueled by the widespread adoption of artificial intelligence (AI) applications and strong demand from cloud data centers for high-capacity storage, Seagate achieved a record-high gross margin. Additionally, the majority of its nearline storage production capacity has already been allocated through long-term supply agreements (LTAs) extending to 2028.

Financial Performance and Outlook: Expanding Margins

Seagate’s fourth-quarter revenue reached $3.63 billion, a 48% year-over-year increase. Adjusted earnings per share (EPS) came in at $5.71, up 121% annually and significantly exceeding the analyst consensus of $5.09. The non-GAAP gross margin reached 52.7%, improving by 570 basis points from the prior quarter.

For the next quarter (first quarter of fiscal 2027), Seagate forecasts revenue of $4.1 billion (±$100 million) and adjusted EPS of $7.30 (±$0.20).

Chief Financial Officer Gianluca Romano stated that the company expects sequential quarterly improvements in both revenue and gross margin throughout fiscal 2027, with incremental gross margins well above 60%.

Market Demand: Cloud Customers and AI Storage Benefits

Data center demand now serves as Seagate’s core growth engine, accounting for 90% of its total exabyte (EB) shipments. CEO Dave Mosley noted that AI-driven data generation is creating a 'sustained, long-term demand for high-capacity storage.' He further predicted that revenue growth in fiscal 2027 will exceed the 34% growth achieved in fiscal 2026.

Regarding supply and demand, Seagate indicated that most of its current production capacity has already been allocated through LTAs extending to 2028. Mosley stated, 'We are not seeing customers shorten their planning cycles; many are actively extending their planning into 2029 and beyond.'

On pricing strategy, Romano explained that due to widening supply-demand gaps, customers are often willing to pay above-contract prices to secure additional capacity premiums.

Technology Progress: HAMR Enters Mass Production Phase

Seagate continues to advance its Heat-Assisted Magnetic Recording (HAMR) technology. The current Mosaic 3 platform has completed certification with major cloud customers, while the Mosaic 4 platform—supporting 4TB per platter and total capacities up to 44TB—is accelerating mass production. It is expected to account for 50% of total HAMR shipments by the end of 2026. The next-generation Mosaic 5 platform (5TB+ per platter) is scheduled to begin certification by the end of 2027.

Mosley specifically highlighted that as AI models transition from training to inference, massive 'KV Cache' data is generated. Layered storage—combining HDDs with memory and SSDs—can reduce the computational load on GPUs from redundant calculations. Furthermore, 'physical AI'—unstructured video data generated by robots and sensors—is seen as a long-term demand source for HDD storage.