Data storage manufacturer Seagate (NASDAQ: STX) announced better-than-expected revenue in Q1 CY2026, with sales up 44.1% year on year to $3.11 billion. Its non-GAAP profit of $4.10 per share was 17.1% above analysts’ consensus estimates.

Is now the time to buy STX? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Seagate’s first quarter results were positively received by the market, reflecting robust demand from major cloud customers and operational improvements. Management attributed the strong performance to surging data center requirements, particularly from hyperscale and cloud service providers investing in artificial intelligence (AI) infrastructure. CEO Dave Mosley highlighted the company’s success in qualifying its Mozaic HAMR-based drives with two of the world’s largest cloud customers, noting that the platform’s maturity and execution were crucial in meeting accelerated customer timelines. The company also cited its disciplined pricing strategy and operational leverage as key contributors to margin expansion.

Looking ahead, Seagate’s guidance is anchored in expectations of continued structural growth, fueled by increasing AI-driven data creation and large-scale cloud investments. Management emphasized that its technology roadmap, centered on higher capacity HAMR drives, positions the company to serve expanding data retention and compliance needs across both cloud and physical edge deployments. CFO Gianluca Romano stated, “We are confident in delivering quarterly revenue growth and margin expansion through 2027,” highlighting the predictability provided by long-term customer agreements and a stable product mix. The company remains focused on capitalizing on AI-fueled storage demand, ongoing product transitions, and disciplined supply chain management.

Key Insights from Management’s Remarks

Management pointed to surging AI workloads, a strategic technology transition, and a disciplined go-to-market approach as the main drivers behind the quarter’s growth and future outlook.

• Cloud and AI demand surge: Seagate noted that AI-enhanced applications are dramatically increasing data creation and retention needs, especially among hyperscale cloud service providers. Nearline hard disk drives—designed for high-capacity, always-on data center storage—accounted for nearly 90% of Seagate’s exabyte shipments this quarter. Management stated cloud customers have nearly doubled their future infrastructure commitments, reflecting ongoing investment in AI transformation.
• HAMR product transition accelerates: The company’s Mozaic 4+ platform, based on heat-assisted magnetic recording (HAMR), began ramping up late in the quarter. This second-generation technology enables higher capacity drives (up to 44 terabytes), with CEO Dave Mosley emphasizing that “minimal changes to the bill of materials” allowed Seagate to boost capacity without significant cost increases. Mozaic drives are expected to comprise a majority of HAMR shipments by the end of 2026.
• Long-term customer agreements: Seagate secured multi-year, exabyte-scale supply agreements and build-to-order contracts with major cloud and hyperscale customers, locking in both specific configurations and pricing through the end of 2027. This provides strong visibility and supports a disciplined pricing strategy, which management credits for margin expansion and revenue predictability.
• Cost structure and operational discipline: CFO Gianluca Romano highlighted cost reductions driven by a rapid shift to higher-capacity drives and full utilization of manufacturing. The company achieved significant operating leverage, with gross profit growing twice as fast as revenue and operating expenses remaining below 10% of revenue. Management indicated future cost reductions would mainly come from ongoing product mix improvements.
• Strategic focus on aerial density: Seagate reiterated its technology strategy prioritizes increasing areal density—packing more data onto each disk—over boosting unit volumes. This approach supports capital efficiency, scalability, and reduced cost per terabyte, allowing the company to meet rising demand without major increases in manufacturing complexity or costs.

Drivers of Future Performance

Seagate’s outlook centers on persistent AI-driven storage demand, a continued transition to higher-capacity products, and disciplined supply and pricing strategies.

• AI and cloud momentum: Management believes accelerating AI adoption and ongoing cloud infrastructure investments will drive sustained exabyte demand, particularly for high-capacity nearline drives. The company expects this will enable mid-20% exabyte shipment growth, with cloud and enterprise customers maintaining strong purchase commitments.
• Product roadmap execution: Seagate’s future growth depends on timely qualification and ramp-up of next-generation HAMR drives, including Mozaic 4 and the planned Mozaic 5 (targeting 50 terabytes per drive). Management stressed that successful execution of this roadmap will allow the company to address both high-end data center and emerging edge/IoT applications, while supporting further margin gains.
• Cost and pricing discipline: The company plans to maintain stable operating expenses and continue leveraging its build-to-order contracts to lock in pricing. Management cited predictable cost structures and ongoing mix improvements as key to sustaining expanding margins, but warned that execution risks and potential supply chain disruptions remain areas to monitor.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will be watching (1) continued adoption and ramp-up of Mozaic 4 and the upcoming Mozaic 5 product lines, (2) the pace of cloud and AI infrastructure investments that drive exabyte demand, and (3) management’s ability to sustain cost reductions and pricing discipline amid a dynamic supply chain. Progress in expanding into new end markets such as edge and IoT storage will also be key signposts.

Seagate currently trades at $687.00, up from $581 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free).

Now Could Be The Perfect Time To Invest In These Stocks

ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren't just high-quality businesses. Something is happening with them right now. Elite fundamentals meeting near-term momentum — both boxes checked at the same time.

Find out which stocks our AI platform is flagging this week. See this week's Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.

Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.