Seagate Posts Record $4.8B Quarter as HAMR Drives Hyperscaler Demand

Seagate brought in a record $4.8 billion for its first fiscal 2027 quarter, beating its own $4.1 billion guidance, as hyperscale cloud buyers absorbed 220 exabytes of shipped capacity. Datacenter customers took 90 percent of that capacity, and the September quarter's revenue grew more than 60 percent year over year.

CEO William Mosley set the tone on the earnings call: "Fiscal '27 is off to an outstanding start." Non-GAAP EPS nearly tripled to a record $7.68, while gross margin climbed to 57.3 percent from 52.3 percent in the prior quarter. Data center revenue rose 18 percent sequentially; edge IoT gained 13 percent.

Why pricing holds while capacity grows

The structural story is supply discipline. Seagate and market leader Western Digital are not raising drive unit output; they are raising capacity per drive. That lets both vendors sell more gigabytes per unit to hyperscalers at lower cost per gigabyte while still charging more per drive. Toshiba, a distant third, plans to lift unit output, but the effect of that on the market remains an open question.

Mosley was blunt about the strategy: "Advancing areal density is our North Star. We are scaling drive capacity through areal density rather than relying on higher drive unit production." HAMR, heat-assisted magnetic recording, is the enabling technology. Each HAMR transition cuts Seagate's manufacturing cost per bit and widens margin.

What is the HAMR roadmap?

Seagate expects HAMR to represent roughly 50 percent of its nearline exabyte shipment run rate exiting calendar 2026, with Mozaic 4 drives making up about half of those shipments. Mozaic 4 offers up to 44 terabytes per drive and is ramping with two leading cloud service providers. Mosley said additional qualifications are on track to complete within the next couple of months across multiple global CSPs and enterprise OEM customers.

Customer qualification of third-generation Mozaic drives, at up to 55 TB across ten platters, should begin toward the end of calendar 2027. Seagate has demonstrated 8 TB-per-platter technology in its lab.

Long-term agreements reshape the market

Like the DRAM and NAND suppliers before it, Seagate now signs long-term agreements with major buyers. The capital cost of entering the disk drive business, plus AI demand running ahead of supply, means the three makers now watch buyers compete for their disks rather than the reverse. Mosley said the vast majority of nearline exabyte supply is allocated under agreements through calendar 2028, with some cloud deals extending through 2030, and planning discussions reaching further still.

"Our confidence is supported by an extremely strong demand environment with visibility extending beyond 2030," Mosley said. He expects nearline exabyte supply growth in the mid-20 percent range on a compound basis, with quarterly variation as new Mozaic generations stage in. Nearline shipments hit a record 198 exabytes this quarter, and he anticipates a meaningful step-up in the December quarter on the Mozaic 4 ramp.

What changes in the financial picture?

The quarter's numbers show the shift from commodity drive sales to a seller's market:

• Operating cash flow: $1.69 billion, up from $1.3 billion
• Free cash flow: $1.5 billion, up from $1.1 billion
• Gross debt: $2.4 billion, down from $3.6 billion
• Cloud nearline revenue: a twelfth consecutive quarter of growth
• Enterprise OEM revenue: second-highest quarterly level in over a decade

Seagate expects to be net cash positive by the end of this calendar year. The board raised the quarterly dividend to $0.76 per share, with share repurchases as the primary return vehicle. Mosley tied the capital plan directly to LTA-backed visibility.

The business is also changing shape. Mosley described moving beyond hyperscalers toward enterprise OEMs managing large data sets, with Seagate building reference architectures that pair compute and storage hardware with customer-selected software. As AI workloads shift from training toward inference and agentic applications, persistent data grows in importance. "Data growth is profound across a wide variety of applications," he said.

Seagate guides next quarter's revenue at $4.8 billion, plus or minus $100 million, roughly 7 percent year-over-year growth at the midpoint. In his view, the industry is "still in the early days of a multiyear growth phase."