Data storage manufacturer Seagate (NASDAQ: STX) announced better-than-expected revenue in Q2 CY2026, with sales up 48.5% year on year to $3.63 billion. On top of that, next quarter’s revenue guidance ($4.1 billion at the midpoint) was surprisingly good and 8.7% above what analysts were expecting. Its non-GAAP profit of $5.71 per share was 12.1% above analysts’ consensus estimates.
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Seagate (STX) Q2 CY2026 Highlights:
- Revenue: $3.63 billion vs analyst estimates of $3.50 billion (48.5% year-on-year growth, 3.6% beat)
- Adjusted EPS: $5.71 vs analyst estimates of $5.09 (12.1% beat)
- Adjusted EBITDA: $1.68 billion vs analyst estimates of $1.54 billion (46.4% margin, 9.7% beat)
- Revenue Guidance for Q3 CY2026 is $4.1 billion at the midpoint, above analyst estimates of $3.77 billion
- Adjusted EPS guidance for Q3 CY2026 is $7.30 at the midpoint, above analyst estimates of $5.87
- Operating Margin: 43%, up from 23.2% in the same quarter last year
- Free Cash Flow Margin: 30.8%, up from 17.4% in the same quarter last year
- Inventory Days Outstanding: 83, down from 84 in the previous quarter
- Market Capitalization: $184.8 billion
“Seagate’s strong fourth quarter exceeded our expectations for revenue and non-GAAP EPS, capping a fiscal 2026 in which we grew annual revenue 34%, delivered record profitability, and generated a record $3.1 billion in free cash flow. Our performance is being driven by robust cloud data center demand and disciplined execution, and we see the momentum continuing in 2027,” said Dave Mosley, Seagate’s chair and chief executive officer.
Company Overview
One of two remaining major hard drive manufacturers after decades of industry consolidation, Seagate (NASDAQ: STX) manufactures hard disk drives and solid state drives that store data in data centers, cloud systems, and consumer devices.
Revenue Growth
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, Seagate’s 2.7% annualized revenue growth over the last five years was tepid. This wasn’t a great result, but there are still things to like about Seagate. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).
Long-term growth is the most important, but short-term results matter for semiconductors because the rapid pace of technological innovation (Moore’s Law) could make yesterday’s hit product obsolete today. Seagate’s annualized revenue growth of 36.4% over the last two years is above its five-year trend, suggesting its demand recently accelerated. 
This quarter, Seagate reported magnificent year-on-year revenue growth of 48.5%, and its $3.63 billion of revenue beat Wall Street’s estimates by 3.6%. Beyond the beat, this marks 9 straight quarters of growth, showing that the current upcycle has had a good run - a typical upcycle usually lasts 8-10 quarters. Company management is currently guiding for a 56% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 39.6% over the next 12 months, an improvement versus the last two years. This projection is particularly noteworthy for a company of its scale and indicates its newer products and services will spur better top-line performance.
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Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’s capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Seagate’s DIO came in at 83, which is 3 days above its five-year average. These numbers suggest that despite the recent decrease, the company’s inventory levels are higher than what we’ve seen in the past.
Key Takeaways from Seagate’s Q2 Results
It was good to see Seagate beat analysts’ EPS expectations this quarter. We were also excited its operating income outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 6.6% to $795.60 immediately following the results.
Indeed, Seagate had a rock-solid quarterly earnings result, but is this stock a good investment here? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here (it’s free).
