A month has gone by since the last earnings report for Seagate (STX Quick QuoteSTX - Free Report) . Shares have added about 35.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Seagate due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Seagate's Q3 Earnings Beat Estimates

Seagate 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 the 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.

It 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.

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, it targets to commence qualification shipments of the same in late calendar 2027.

Revenues by End Market

Beginning first-quarter fiscal 2026, it 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.

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.

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.

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 Seagate. 

In the March quarter, it returned $191 million to its shareholders via dividends. It 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.

Strong Fiscal Q4 Business Outlook

It does not expect any material impact on its business amid ongoing geopolitical tensions, including in the Middle East. For the fiscal fourth quarter, it 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.

It 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.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

The consensus estimate has shifted 36.13% due to these changes.

VGM Scores

At this time, Seagate has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for value investors.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Seagate has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Seagate is part of the Zacks Computer - Integrated Systems industry. Over the past month, IBM (IBM Quick QuoteIBM - Free Report) , a stock from the same industry, has gained 12.4%. The company reported its results for the quarter ended March 2026 more than a month ago.

IBM reported revenues of $15.92 billion in the last reported quarter, representing a year-over-year change of +9.5%. EPS of $1.91 for the same period compares with $1.60 a year ago.

IBM is expected to post earnings of $2.95 per share for the current quarter, representing a year-over-year change of +5.4%. Over the last 30 days, the Zacks Consensus Estimate has changed +4.6%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for IBM. Also, the stock has a VGM Score of D.