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STX Q3 Earnings Top Estimates, Revenues Up on AI-Led Storage Demand
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Key Takeaways
STX Q3 non-GAAP EPS of $4.10 and revenues of $3.11B beat estimates and guidance.
Nearline was ~90% of exabyte shipments; capacity largely allocated through calendar 2027.
Seagate began Mozaic 4 shipments; non-GAAP gross margin hit a record 47%.
Seagate Technology Holdings plc (STX - Free Report) reported third-quarter fiscal 2026 non-GAAP earnings of $4.10 per share, beating the Zacks Consensus Estimate of $3.50 and exceeding the high end of management’s guidance of $3.40 (+/- 20 cents).
The bottom line expanded 115% year over year and 32% sequentially on the back of STX’s strong execution of its strategic objectives and effective use of the technology roadmap to support growing demand.
Non-GAAP revenues of $3.11 billion exceeded the Zacks Consensus Estimate by 5.7%. Revenues also surpassed the high end of guidance, increasing 44% year over year.
STX is operating in a very strong demand environment, especially in data center markets. Management noted that the shift toward inference-driven workloads, agentic AI and multimodal applications is leading to exponential growth in data creation and storage needs.
Seagate Technology Holdings PLC Price, Consensus and EPS Surprise
The March quarter witnessed steady growth in high-capacity nearline drive demand across global cloud and hyperscaler customers. Nearline products accounted for roughly 90% of total exabyte shipments, with capacity largely allocated through calendar 2027.
Modern data centers increasingly need solutions that balance performance with cost efficiency, a trend that strongly favors Seagate’s roadmap. The company’s areal-density-driven strategy aligns well with the long-term growth of AI-generated data, suggesting sustained demand beyond short-term cycles.
The company’s HAMR (Heat-Assisted Magnetic Recording) technology and Mozaic platform remain central to its long-term growth strategy. It began revenue shipments of Mozaic 4 in late March, which can deliver up to 44 terabytes per drive, representing more than 30% higher capacity compared with the first-generation drives. Seagate noted that Mozaic 4+ is projected to constitute the majority of its HAMR exabyte shipments exiting calendar 2026. With the development of Mozaic 5 underway, STX targets to commence qualification shipments of the same in late calendar 2027.
Image Source: Zacks Investment Research
Following a robust business performance, STX’s shares are up 15.3% in the pre-market trading today. In the past year, shares have gained 536.1% compared with the Zacks Computer-Integrated Systems industry’s rise of 158.1%.
STX's Revenues by End Market
Beginning first-quarter fiscal 2026, STX reports revenues across two key markets — Data Center, encompassing nearline products and systems sold to cloud, enterprise and VIA customers, and Edge IoT, covering consumer and client-focused segments, including network-attached storage.
The data center segment accounted for 80% of total revenues, at $2.5 billion, representing a 12% sequential increase and 55% year-over-year growth. The uptick is driven by continued strong demand from global cloud customers and sequential improvement across enterprise OEM markets.
The edge IoT segment accounted for the remaining 20% of revenues, at $612 million, up 12% year over year and 2% sequentially. Higher supply and NAND prices, particularly in the client and consumer markets, offset the typical seasonal slowdown in March.
STX's Exabyte Shipments in Detail
In the reported quarter, Seagate shipped 199 exabytes of HDD storage, up 39% year over year and 5% sequentially. The data center market accounted for 88% of shipments, driven by sustained demand from cloud and enterprise clients.
The company shipped 175 exabytes to data center customers, up 6% sequentially and 47% year over year.
STX's Margin Details
Non-GAAP gross margin reached a record 47%, rising about 480 basis points (bps) quarter over quarter and roughly 1,080 bps year over year, driven by favorable product mix and continued pricing initiatives.
Non-GAAP operating expenses were $296 million, up 8% year over year.
Non-GAAP income from operations totaled $1.2 billion, up from $507 million a year ago. Non-GAAP operating margin increased to 37.5% from 23.5% year over year.
Non-GAAP adjusted EBITDA totaled $1.2 billion, which more than doubled from the prior-year quarter.
STX's Balance Sheet and Cash Flow
As of April 3, 2026, cash and cash equivalents were $1.146 billion compared with $1.046 billion as of Jan. 2.
Long-term debt (including the current portion) was $3.86 billion as of April 3, 2026, compared with $4.5 billion as of Jan. 2.
Cash flow from operations was $1.1 billion compared with $723 million in the previous quarter. Free cash flow amounted to $953 million, up 57% sequentially, being the highest level in a decade as highlighted by STX.
In the March quarter, STX returned $191 million to its shareholders via dividends. STX retired $641 million in debt, including exchangeable senior notes (using cash on hand) worth $600 million due 2028, reducing potential dilution and preserving cash flexibility for future share repurchases.
STX’s Strong Fiscal Q4 Business Outlook
STX does not expect any material impact on its business amid ongoing geopolitical tensions, including the Middle East. For the fiscal fourth quarter, STX expects revenues of $3.45 billion (+/- $100 million). At the midpoint, this indicates a 41% year-over-year improvement.
Non-GAAP earnings are expected to be $5.00 per share (+/- 20 cents). For the quarter, non-GAAP operating expenses are expected to be around $295 million. At the midpoint of revenue guidance, non-GAAP operating margin is projected to increase in the low 40% range.
Management also revised its long-term revenue outlook, now targeting a minimum of 20% annual revenue growth over the next few years, up from prior expectations of low to mid-teens growth.
STX expects free cash flow ("FCF") generation to improve through the remaining quarter in calendar 2026. Sustained demand, operational efficiencies and capital discipline are likely to support FCF growth.
The company will maintain capital discipline while continuing the transition and ramp-up of HAMR technology, with fiscal 2026 capital spending expected to remain within its target range of 4-6% of revenues.
International Business Machines Corporation (IBM - Free Report) reported strong first-quarter 2026 results, with adjusted earnings and revenues beating the respective Zacks Consensus Estimate. The company witnessed healthy demand trends for hybrid cloud and AI solutions with a client-focused portfolio and broad-based growth. Despite economic uncertainty stemming from geopolitical conflicts and volatility in crude oil prices, IBM expects to deliver sustainable growth through advanced technology and deep consulting expertise, supported by diversity across businesses, geographies and industries.
IBM’s total revenues increased to $15.92 billion from $14.54 billion on strong demand for hybrid cloud and AI, driving growth in the Software segment. On a constant currency basis, revenues were up 6% year over year. The top line exceeded the consensus estimate of $15.68 billion.
Silicon Motion Technology Corporation (SIMO - Free Report) reported first-quarter 2026 non-GAAP earnings of $1.58 per share, beating the Zacks Consensus Estimate of $1.31 by 20.61%. SIMO’s revenues of $342.1 million also surpassed the consensus estimate of $299 million by 14.23% and increased 105% year over year.
The strong performance was driven by robust growth in embedded eMMC and UFS controllers as well as sharp acceleration in Ferri and boot drive solutions, highlighting Silicon Motion’s expanding traction in enterprise and AI-related markets.
SAP SE (SAP - Free Report) reported first-quarter 2026 non-IFRS EPS of €1.72 ($2.01), which increased 20% from the year-ago quarter. The Zacks Consensus Estimate was $1.92 per share.
Driven by momentum in the cloud business, SAP reported total revenues on a non-IFRS basis of €9.56 billion ($11.2 billion), which increased 6% year over year (up 12% at constant currency or cc). The Zacks Consensus Estimate stood at $11.3 billion. SAP’s Business AI momentum is acting as a critical differentiator.
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STX Q3 Earnings Top Estimates, Revenues Up on AI-Led Storage Demand
Key Takeaways
Seagate Technology Holdings plc (STX - Free Report) reported third-quarter fiscal 2026 non-GAAP earnings of $4.10 per share, beating the Zacks Consensus Estimate of $3.50 and exceeding the high end of management’s guidance of $3.40 (+/- 20 cents).
The bottom line expanded 115% year over year and 32% sequentially on the back of STX’s strong execution of its strategic objectives and effective use of the technology roadmap to support growing demand.
Non-GAAP revenues of $3.11 billion exceeded the Zacks Consensus Estimate by 5.7%. Revenues also surpassed the high end of guidance, increasing 44% year over year.
STX is operating in a very strong demand environment, especially in data center markets. Management noted that the shift toward inference-driven workloads, agentic AI and multimodal applications is leading to exponential growth in data creation and storage needs.
Seagate Technology Holdings PLC Price, Consensus and EPS Surprise
Seagate Technology Holdings PLC price-consensus-eps-surprise-chart | Seagate Technology Holdings PLC Quote
The March quarter witnessed steady growth in high-capacity nearline drive demand across global cloud and hyperscaler customers. Nearline products accounted for roughly 90% of total exabyte shipments, with capacity largely allocated through calendar 2027.
Modern data centers increasingly need solutions that balance performance with cost efficiency, a trend that strongly favors Seagate’s roadmap. The company’s areal-density-driven strategy aligns well with the long-term growth of AI-generated data, suggesting sustained demand beyond short-term cycles.
The company’s HAMR (Heat-Assisted Magnetic Recording) technology and Mozaic platform remain central to its long-term growth strategy. It began revenue shipments of Mozaic 4 in late March, which can deliver up to 44 terabytes per drive, representing more than 30% higher capacity compared with the first-generation drives. Seagate noted that Mozaic 4+ is projected to constitute the majority of its HAMR exabyte shipments exiting calendar 2026. With the development of Mozaic 5 underway, STX targets to commence qualification shipments of the same in late calendar 2027.
Image Source: Zacks Investment Research
Following a robust business performance, STX’s shares are up 15.3% in the pre-market trading today. In the past year, shares have gained 536.1% compared with the Zacks Computer-Integrated Systems industry’s rise of 158.1%.
STX's Revenues by End Market
Beginning first-quarter fiscal 2026, STX reports revenues across two key markets — Data Center, encompassing nearline products and systems sold to cloud, enterprise and VIA customers, and Edge IoT, covering consumer and client-focused segments, including network-attached storage.
The data center segment accounted for 80% of total revenues, at $2.5 billion, representing a 12% sequential increase and 55% year-over-year growth. The uptick is driven by continued strong demand from global cloud customers and sequential improvement across enterprise OEM markets.
The edge IoT segment accounted for the remaining 20% of revenues, at $612 million, up 12% year over year and 2% sequentially. Higher supply and NAND prices, particularly in the client and consumer markets, offset the typical seasonal slowdown in March.
STX's Exabyte Shipments in Detail
In the reported quarter, Seagate shipped 199 exabytes of HDD storage, up 39% year over year and 5% sequentially. The data center market accounted for 88% of shipments, driven by sustained demand from cloud and enterprise clients.
The company shipped 175 exabytes to data center customers, up 6% sequentially and 47% year over year.
STX's Margin Details
Non-GAAP gross margin reached a record 47%, rising about 480 basis points (bps) quarter over quarter and roughly 1,080 bps year over year, driven by favorable product mix and continued pricing initiatives.
Non-GAAP operating expenses were $296 million, up 8% year over year.
Non-GAAP income from operations totaled $1.2 billion, up from $507 million a year ago. Non-GAAP operating margin increased to 37.5% from 23.5% year over year.
Non-GAAP adjusted EBITDA totaled $1.2 billion, which more than doubled from the prior-year quarter.
STX's Balance Sheet and Cash Flow
As of April 3, 2026, cash and cash equivalents were $1.146 billion compared with $1.046 billion as of Jan. 2.
Long-term debt (including the current portion) was $3.86 billion as of April 3, 2026, compared with $4.5 billion as of Jan. 2.
Cash flow from operations was $1.1 billion compared with $723 million in the previous quarter. Free cash flow amounted to $953 million, up 57% sequentially, being the highest level in a decade as highlighted by STX.
In the March quarter, STX returned $191 million to its shareholders via dividends. STX retired $641 million in debt, including exchangeable senior notes (using cash on hand) worth $600 million due 2028, reducing potential dilution and preserving cash flexibility for future share repurchases.
STX’s Strong Fiscal Q4 Business Outlook
STX does not expect any material impact on its business amid ongoing geopolitical tensions, including the Middle East. For the fiscal fourth quarter, STX expects revenues of $3.45 billion (+/- $100 million). At the midpoint, this indicates a 41% year-over-year improvement.
Non-GAAP earnings are expected to be $5.00 per share (+/- 20 cents). For the quarter, non-GAAP operating expenses are expected to be around $295 million.
At the midpoint of revenue guidance, non-GAAP operating margin is projected to increase in the low 40% range.
Management also revised its long-term revenue outlook, now targeting a minimum of 20% annual revenue growth over the next few years, up from prior expectations of low to mid-teens growth.
STX expects free cash flow ("FCF") generation to improve through the remaining quarter in calendar 2026. Sustained demand, operational efficiencies and capital discipline are likely to support FCF growth.
The company will maintain capital discipline while continuing the transition and ramp-up of HAMR technology, with fiscal 2026 capital spending expected to remain within its target range of 4-6% of revenues.
STX’s Zacks Rank
Currently, Seagate carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Recent Performances of Other Companies
International Business Machines Corporation (IBM - Free Report) reported strong first-quarter 2026 results, with adjusted earnings and revenues beating the respective Zacks Consensus Estimate. The company witnessed healthy demand trends for hybrid cloud and AI solutions with a client-focused portfolio and broad-based growth. Despite economic uncertainty stemming from geopolitical conflicts and volatility in crude oil prices, IBM expects to deliver sustainable growth through advanced technology and deep consulting expertise, supported by diversity across businesses, geographies and industries.
IBM’s total revenues increased to $15.92 billion from $14.54 billion on strong demand for hybrid cloud and AI, driving growth in the Software segment. On a constant currency basis, revenues were up 6% year over year. The top line exceeded the consensus estimate of $15.68 billion.
Silicon Motion Technology Corporation (SIMO - Free Report) reported first-quarter 2026 non-GAAP earnings of $1.58 per share, beating the Zacks Consensus Estimate of $1.31 by 20.61%. SIMO’s revenues of $342.1 million also surpassed the consensus estimate of $299 million by 14.23% and increased 105% year over year.
The strong performance was driven by robust growth in embedded eMMC and UFS controllers as well as sharp acceleration in Ferri and boot drive solutions, highlighting Silicon Motion’s expanding traction in enterprise and AI-related markets.
SAP SE (SAP - Free Report) reported first-quarter 2026 non-IFRS EPS of €1.72 ($2.01), which increased 20% from the year-ago quarter. The Zacks Consensus Estimate was $1.92 per share.
Driven by momentum in the cloud business, SAP reported total revenues on a non-IFRS basis of €9.56 billion ($11.2 billion), which increased 6% year over year (up 12% at constant currency or cc). The Zacks Consensus Estimate stood at $11.3 billion. SAP’s Business AI momentum is acting as a critical differentiator.