Seagate Technology (STX) Continued pricing momentum and HAMR ramp should bolster confidence in earnings power and capital re...

Equity Research 28 July 2026 | 9:30PM EDT

Seagate Technology (STX): Continued pricing momentum and HAMR ramp should bolster confidence in earnings power and capital returns -

Key stock takeaways: We expect the stock to trade higher on significant upside to James Schneider, Ph.D. | guidance, despite elevated expectations heading into the print following a recent Goldman Sachs & Co. LLC drawdown in the stock. Our investor conversations highlight bullish positioning Khalil Fenina heading into the quarter, based on strong CapEx and storage demand trends from | hyperscalers, as well as tight supply dynamics in HDDs. We believe Seagate’s very Goldman Sachs & Co. LLC

strong incremental margins, which are being bolstered by the company’s HAMR Anmol Makkar | technology ramp, should allow the company to deliver outsized earnings growth over Goldman Sachs & Co. LLC the coming year - enabling increased capital returns as the company retires its remaining debt. We would be buyers of the stock, especially in light of the recent Luya You | pullback, as we see Seagate as a key beneficiary of persistent industry tightness and Goldman Sachs & Co. LLC

Quarterly results were above the Street: Seagate reported revenue of $3.63 bn, above GS at $3.58 bn and the Street at $3.50 bn, while gross margin of 52.7% was well above GS at 50.7% and the Street at 50.6%. Operating EPS of $5.71 was well above GS at $5.26 and the Street at $5.12. By end market, Data Center revenue of $2.93 bn was above GS at $2.90 bn and the Street at $2.86 bn, and Edge IoT revenue of $697 mn was above GS at $679 mn and the Street at $650 mn. Operating EPS of $5.71 was well above GS at $5.26 and the Street at $5.12.

n Pricing and margins: Seagate reported an ~11% y/y increase in price per Exabyte, and management expects pricing trend to sustain itself through FY27 - which we believe reflects the tight supply/demand environment noted above. Management also indicated that it expects sequential quarterly increases for both revenue and EPS over the course of fiscal 2027. After delivering ~90% incremental gross margins over the past two quarters, we expect the company can sustain at least 80% incremental gross margins over the coming year. n HAMR technology ramp: Seagate has now qualified its Mozaic 4 qualification with two hyperscalers thus far, and plans to qualify additional customers in the coming months. The company continues to expect to reach volume crossover for HAMR relative to PMR by the end of calendar 2026, with Mozaic 4 also crossing over Mozaic 3 at this point. We expect HAMR technology to represent ~70% of shipments in CY27. Management expects Mozaic 5 to be in qualification at key customers by the end of CY27. n Capital structure and shareholder returns: Seagate retired ~$300mn of debt in the quarter, and the company expects to focus its near-term free cash flow

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Goldman Sachs Seagate Technology (STX)

generation on retiring ~$1.2bn in high-yield debt in the term debt. After this point, management plans to re-focus its capital allocation activities on share repurchases.

1Q EPS guidance is well above the Street. Seagate guided 1Q well above the Street. Revenue was guided to $4.1 bn at the midpoint, which is well above GS at $3.87 bn and the Street at $3.77 bn. Operating EPS guidance of $7.30 is far above GS at $6.11 and the Street at $5.89. Operating margin is expected to be approximately 50% (relative to the Street at 44.5%). Operating EPS guidance of $7.30 is far above GS at $6.11 and the Street at $5.89. Included in the company’s guidance is an OpEx assumption of $300 mn, a tax rate of 16%, and share count of 231 mn.

Estimate changes. We increase our…