STX Q4 Earnings Top on 48% Sales Jump, AI-led Storage Demand Continues

Strong enterprise OEM demand led to double-digit revenue and exabyte shipment growth in the June quarter. Seagate is expanding HAMR production to meet growing cloud and enterprise storage needs. It shipped 218 exabytes, up 34% year over year, with data centers accounting for 89% of total shipments. Data center exabyte shipments increased 43% year over year and 11% sequentially. Global cloud customers constitute the majority of Seagate's data center revenue and exabyte demand.

The company is expanding production of HAMR-based drives, initially targeting cloud customers before broadening adoption across enterprise markets. It is investing in manufacturing capacity and technology to support the transition while maintaining stable output as demand shifts to higher-capacity drives. These efforts are expected to support mid-20% annual nearline exabyte growth over the next few years.

STX's Revenues by End Market

Beginning first-quarter fiscal 2026, STX reports revenues across two key markets — Data Center, encompassing nearline products and systems sold to cloud, enterprise and VIA customers, and Edge IoT, covering consumer and client-focused segments, including network-attached storage.

The data center segment accounted for 81% of total revenues, at $2.9 billion, representing a 17% sequential increase and 57% year-over-year growth.

The edge IoT segment accounted for the remaining 19% of revenues, at $697 million, up 20% year over year and 14% sequentially, aided by ongoing supply constraints and favorable NAND pricing.

STX's Margin Details

Non-GAAP gross profit surged to $1.9 billion, more than doubling year over year and 31% sequentially. Non-GAAP gross margin reached a record 52.7%, rising about 570 basis points (bps) quarter over quarter and roughly 1,480 bps year over year. The gains were driven by disciplined pricing and a favorable product mix, with management expecting these trends to continue amid robust demand.

Non-GAAP operating expenses were $293 million, up 2% year over year.

Non-GAAP operating profit climbed 39% sequentially to $1.6 billion, with a 44.6% operating margin, highlighting strong execution in pricing, supply management and areal density innovation.

Non-GAAP adjusted EBITDA totaled $1.2 billion, up 37% quarter over quarter and 142% year over year.

STX's Balance Sheet and Cash Flow

As of July 3, 2026, cash and cash equivalents were $1.7 billion compared with $1.2 billion as of April 3.

Long-term debt (including the current portion) was $3.6 billion as of July 3, 2026, compared with $3.9 billion as of April 3.

Cash flow from operations during the fiscal fourth quarter was $1.3 billion compared with $1.1 billion in the previous quarter. Free cash flow increased 17% sequentially and 163% year over year to $1.1 billion. Seagate expects further cash flow growth in fiscal 2027, supported by strong demand, operational efficiency and disciplined capital spending.

June-quarter capital spending totaled $187 million, bringing fiscal 2026 CapEx to 4.7% of revenue, within its target range of 4-6% of revenue. Seagate continues balancing investment with shareholder returns. The company returned approximately $810 million during fiscal 2026 through quarterly dividends and share repurchases. Additionally, Seagate declared another quarterly dividend of 74 cents per share, payable on Oct. 7, 2026, to shareholders of record on Sept. 24.

STX’s Fiscal Q1 2027 Guidance Points at Continued Momentum

Seagate's BTO model points to sustained demand for high-capacity nearline drives amid rising AI adoption. The company expects continued revenue and margin growth in the September quarter, backed by the Mozaic rollout and disciplined pricing. Management anticipates fiscal first-quarter revenues of $4.1 billion (+/- $100 million). At the midpoint, this indicates a 56% year-over-year improvement.

Non-GAAP earnings are expected to be $7.3 per share (+/- 20 cents).

For the quarter, non-GAAP operating expenses are expected to be around $300 million. At the midpoint of revenue guidance, non-GAAP operating margin is projected to be roughly 50%.

The guidance incorporates expected dilution from Exchangeable Senior Notes due 2028, minimal anticipated impact from tariffs and minimal expected impact from current Middle East geopolitical conflicts. This outlook suggests that management expects cloud spending and AI-driven storage demand to remain healthy.

STX’s Zacks Rank

Currently, Seagate carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Recent Performances

International Business Machines Corporation IBM reported relatively modest second-quarter 2026 results with adjusted earnings of $2.93 per share, up 5% year over year and in line with the Zacks Consensus Estimate. Revenues rose 1.1% to $17.16 billion but missed the consensus mark of $17.32 billion by 0.9%. The top-line miss reflected delayed large, capital-expenditure-sensitive software transactions and weaker IBM Z revenues.

Cadence Design Systems CDNS delivered strong second-quarter 2026 results, driven by broad-based demand for its AI-oriented portfolio amid robust design activity and new system architectures across hyperscaler infrastructure and physical AI. Non-GAAP earnings per share (EPS) of $2.11 beat the Zacks Consensus Estimate by 2.9%, increased 27.9% year over year and topped management’s guided range of $2.02 to $2.08. Revenues of $1.584 billion beat the Zacks Consensus Estimate by 0.5% and increased 24.2% year over year. The figure was within the management’s guided range of $1.555-$1.595 billion.

Progress Software Corporation PRGS reported second-quarter fiscal 2026 results wherein revenues came in at $253 million, up 7% year over year and 6% on a constant currency (cc) basis. ARR of $868 million inched up 2% year over year on a cc basis. PRGS reported a 16% year-over-year increase in non-GAAP earnings per share, which stood at $1.62. 

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