Seagate Technology Holdings plc STX is entering its fiscal second quarter with another sizable growth step in view. Higher cloud storage demand, favorable pricing and the continued transition to heat-assisted magnetic recording, or HAMR, are supporting management’s expectation for stronger revenues, earnings and margins.
The key test is execution. December-quarter results will depend on converting long-term demand visibility into higher exabyte shipments while keeping product qualifications and manufacturing transitions on track.
Seagate’s Q2 Guide Points to Another Step-Up
Management expects fiscal second-quarter revenues of $4.8 billion, plus or minus $100 million. At the midpoint, that would represent roughly 70% year-over-year growth. Non-GAAP earnings are projected at $9.20 per share, plus or minus 20 cents.
The outlook also calls for non-GAAP operating margin to move toward the mid-50% range, with operating expenses expected to remain near $300 million. Management expects a significant increase in exabyte shipments and continued benefit from its value-based pricing strategy.
STX’s HAMR Mix Could Lift Capacity and Margins
Seagate expects HAMR to represent roughly half of its nearline exabyte shipment run rate exiting calendar 2026. Mozaic 4, which supports capacities of up to 44 terabytes, is ramping with two leading cloud service providers and is expected to account for about half of HAMR shipments.
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The company’s areal-density strategy is designed to raise capacity per drive rather than depend on materially higher drive-unit production. That can support exabyte growth and capital efficiency. Western Digital Corporation WDC, now branded as WD, is also positioning high-capacity hard drives as infrastructure for AI and cloud data centers, underscoring the importance of storage density across the industry.
Seagate’s Contracts Extend Demand Visibility
The vast majority of Seagate’s nearline exabyte supply is allocated under long-term agreements through calendar 2028, with some cloud customer agreements extending through 2030. These commitments give the company greater visibility as it plans production and technology transitions.
Build-to-order contracts establish specific configurations and pricing terms for nearline shipments through calendar 2027. Seagate expects to begin finalizing 2028 configuration and pricing terms over the coming quarters, which could further strengthen planning visibility.
STX’s Execution Risks Could Disrupt the Ramp
Nearline shipments increased only 1% sequentially to 198 exabytes in the September quarter as Seagate staged Mozaic 4 products ahead of customer qualifications. Management expects another step-up in December, making qualification timing an important factor in the near-term ramp.
Longer HAMR manufacturing cycles require additional tools and tighter execution, while external component costs remain a headwind. Micron Technology, Inc. MU is also expanding high-capacity data-center SSD offerings for AI, cloud and hyperscale workloads, highlighting competition for storage spending across different architectures.
Seagate’s Ratings Back Near-Term Momentum
The December-quarter setup is favorable, but the expected growth still depends on product qualifications, manufacturing execution and sustained pricing. That keeps the near-term case tied closely to delivery against the company’s stated ramp plans.
STX currently carries a Zacks Rank #2 (Buy). It also has a Growth Score of A, Momentum Score of A and VGM Score of B, which are favorable indicators when paired with a top Zacks Rank. The Value Score of F is less supportive, suggesting that growth and momentum characteristics are stronger than the stock’s value profile. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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