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Seagate Technology Holdings plc (STX - Free Report) is scheduled to report first-quarter fiscal 2027 earnings on Oct. 27, after the closing bell.
The Zacks Consensus Estimate for earnings is pegged at $7.44 per share, indicating a 185.06% year-over-year increase. The Zacks Consensus Estimate for revenues is $4.11 billion, suggesting a 56.32% uptick from the year-ago actual.
Management anticipates fiscal first-quarter revenues of $4.1 billion (+/- $100 million). At the midpoint, this indicates a 56% year-over-year improvement. Non-GAAP earnings are expected to be $7.30 per share (+/- 20 cents).
STX’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 12.4%.
Image Source: Zacks Investment Research
What the Zacks Model Predicts for STX
Our proven model predicts an earnings beat for Seagate this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is exactly the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
STX's fiscal first-quarter performance is likely to have benefited from strong demand visibility through its BTO model, reinforcing confidence in sustained demand for high-capacity nearline drives as AI adoption accelerates. Revenue and profitability are expected to have continued expanding during the September quarter, fueled by the ramp-up of its Mozaic platform and pricing strategy. Strong data center demand drives growth, with cloud customers accounting for about 90% of exabyte shipments and long-term commitments extending into 2028.
The growing adoption of AI and tiered storage architectures is increasing the need for high-capacity hard drives as AI workloads generate more data that must be stored and retained. To capitalize on this opportunity, Seagate is advancing its HAMR-based Mozaic platform, which is helping increase storage density and support exabyte growth. HAMR drives now account for roughly 40% of nearline exabytes, with the Mozaic 4 ramp progressing and Mozaic 5 planned for late 2027. The company aims to increase HAMR penetration to 70% of exabytes by June 2027, supported by investments in manufacturing tools, technology development and yield optimization.
Seagate is also benefiting from a disciplined, value-based pricing strategy, with strong demand and product transitions supporting higher pricing in recent contract negotiations. While manufacturing transitions involve greater factory complexity, additional tool requirements and yield improvements, Seagate remains well poised to meet rising demand. Growing storage needs from AI, video, sensor data, edge applications and physical AI are further strengthening its long-term outlook. With demand visibility extending through fiscal 2027, improving gross margins and confidence in achieving margins above 60%, the company is positioning itself for sustained revenue and profitability growth.
For the quarter, non-GAAP operating expenses are expected to be around $300 million. At the midpoint of revenue guidance, non-GAAP operating margin is projected to be roughly 50%. The guidance incorporates expected dilution from Exchangeable Senior Notes due 2028, minimal anticipated impact from tariffs and minimal expected impact from current Middle East geopolitical conflicts. This outlook suggests that management expects cloud spending and AI-driven storage demand to remain healthy.
Image Source: Zacks Investment Research
Moreover, rapid deleveraging enhances financial flexibility. Seagate ended fiscal 2026 with $1.7 billion in cash and approximately $3.6 billion in debt. The company reduced gross debt by $1.4 billion during the fiscal year, bringing net leverage down to 0.4 times adjusted EBITDA. It further strengthened its balance sheet by extinguishing $1 billion in high-yield notes in July and retiring the remaining convertible-note balance in September. Lower debt levels are expected to reduce interest expenses and provide greater financial flexibility to support shareholder returns through dividends and share repurchases, while funding investments in advanced storage technologies.
Despite the favorable outlook, Seagate faces several risks such as execution risks from HAMR transitions, which could increase manufacturing complexity, delay customer qualifications and pressure yields and margins. Heavy reliance on cloud customers exposes it to spending fluctuations, while tariffs, trade restrictions and currency volatility pose additional risks. Intense competition from HDD heavyweights like Western Digital Corporation (WDC - Free Report) , SSD providers and storage-system vendors, coupled with macroeconomic uncertainty and supply-chain volatility, could further pressure pricing and profitability.
The company has also surpassed its industry peers like Agilysys, Inc. (AGYS - Free Report) , which has rose 4.8% in the past year and WDC, which grew 171.3%. STX, however, has lagged storage rival Micron Technology (MU - Free Report) , which rose 298.7%.
STX’s Key Valuation Metrics
In terms of forward price/earnings, STX’s shares are trading at 14.68X, higher than the industry’s 9.53X.
Image Source: Zacks Investment Research
WDC, MU and AGYS are trading at multiples of 14.08X, 4.83X and 57.57X, respectively.
Should You Buy STX Stock Ahead of Q1 Earnings?
Seagate's investment case is backed by growing AI-led storage requirements, higher-capacity HDD technology, favorable pricing conditions and strong recent cash generation. Seagate is worth considering as a potential beneficiary of the AI storage cycle, but investors should not buy solely in anticipation of an earnings beat. Revenue growth, margin sustainability, free cash flow and forward guidance will better indicate whether the stock deserves a higher valuation.
The company has provided an encouraging outlook, reflecting stronger demand for mass-capacity storage, improved pricing and expanding AI infrastructure requirements. If Seagate beats fiscal first-quarter guidance, delivers stronger margins and signals sustained demand growth, the positive results could boost investor confidence and support further share price gains.
View the Zacks #1 Rank List
Image: Bigstock
Seagate Eyes a Q1 Earnings Beat: Is the Stock Worth Buying Now?
Key Takeaways
Seagate Technology Holdings plc (STX - Free Report) is scheduled to report first-quarter fiscal 2027 earnings on Oct. 27, after the closing bell.
The Zacks Consensus Estimate for earnings is pegged at $7.44 per share, indicating a 185.06% year-over-year increase. The Zacks Consensus Estimate for revenues is $4.11 billion, suggesting a 56.32% uptick from the year-ago actual.
Management anticipates fiscal first-quarter revenues of $4.1 billion (+/- $100 million). At the midpoint, this indicates a 56% year-over-year improvement. Non-GAAP earnings are expected to be $7.30 per share (+/- 20 cents).
STX’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 12.4%.
Image Source: Zacks Investment Research
What the Zacks Model Predicts for STX
Our proven model predicts an earnings beat for Seagate this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is exactly the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Seagate has an Earnings ESP of +2.07% and a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
STX's Q1 FY2027 Earnings: What to Expect
STX's fiscal first-quarter performance is likely to have benefited from strong demand visibility through its BTO model, reinforcing confidence in sustained demand for high-capacity nearline drives as AI adoption accelerates. Revenue and profitability are expected to have continued expanding during the September quarter, fueled by the ramp-up of its Mozaic platform and pricing strategy. Strong data center demand drives growth, with cloud customers accounting for about 90% of exabyte shipments and long-term commitments extending into 2028.
The growing adoption of AI and tiered storage architectures is increasing the need for high-capacity hard drives as AI workloads generate more data that must be stored and retained. To capitalize on this opportunity, Seagate is advancing its HAMR-based Mozaic platform, which is helping increase storage density and support exabyte growth. HAMR drives now account for roughly 40% of nearline exabytes, with the Mozaic 4 ramp progressing and Mozaic 5 planned for late 2027. The company aims to increase HAMR penetration to 70% of exabytes by June 2027, supported by investments in manufacturing tools, technology development and yield optimization.
Seagate is also benefiting from a disciplined, value-based pricing strategy, with strong demand and product transitions supporting higher pricing in recent contract negotiations. While manufacturing transitions involve greater factory complexity, additional tool requirements and yield improvements, Seagate remains well poised to meet rising demand. Growing storage needs from AI, video, sensor data, edge applications and physical AI are further strengthening its long-term outlook. With demand visibility extending through fiscal 2027, improving gross margins and confidence in achieving margins above 60%, the company is positioning itself for sustained revenue and profitability growth.
For the quarter, non-GAAP operating expenses are expected to be around $300 million. At the midpoint of revenue guidance, non-GAAP operating margin is projected to be roughly 50%. The guidance incorporates expected dilution from Exchangeable Senior Notes due 2028, minimal anticipated impact from tariffs and minimal expected impact from current Middle East geopolitical conflicts. This outlook suggests that management expects cloud spending and AI-driven storage demand to remain healthy.
Image Source: Zacks Investment Research
Moreover, rapid deleveraging enhances financial flexibility. Seagate ended fiscal 2026 with $1.7 billion in cash and approximately $3.6 billion in debt. The company reduced gross debt by $1.4 billion during the fiscal year, bringing net leverage down to 0.4 times adjusted EBITDA. It further strengthened its balance sheet by extinguishing $1 billion in high-yield notes in July and retiring the remaining convertible-note balance in September. Lower debt levels are expected to reduce interest expenses and provide greater financial flexibility to support shareholder returns through dividends and share repurchases, while funding investments in advanced storage technologies.
Despite the favorable outlook, Seagate faces several risks such as execution risks from HAMR transitions, which could increase manufacturing complexity, delay customer qualifications and pressure yields and margins. Heavy reliance on cloud customers exposes it to spending fluctuations, while tariffs, trade restrictions and currency volatility pose additional risks. Intense competition from HDD heavyweights like Western Digital Corporation (WDC - Free Report) , SSD providers and storage-system vendors, coupled with macroeconomic uncertainty and supply-chain volatility, could further pressure pricing and profitability.
STX Stock vs. Industry
STX stock has climbed 173.7% in the past year, exceeding the Zacks Computer-Integrated Systems industry, the Zacks Computer & Technology sector and the S&P 500’s growth of 96.3%, 11.6% and 11.1%, respectively.
Image Source: Zacks Investment Research
The company has also surpassed its industry peers like Agilysys, Inc. (AGYS - Free Report) , which has rose 4.8% in the past year and WDC, which grew 171.3%. STX, however, has lagged storage rival Micron Technology (MU - Free Report) , which rose 298.7%.
STX’s Key Valuation Metrics
In terms of forward price/earnings, STX’s shares are trading at 14.68X, higher than the industry’s 9.53X.
Image Source: Zacks Investment Research
WDC, MU and AGYS are trading at multiples of 14.08X, 4.83X and 57.57X, respectively.
Should You Buy STX Stock Ahead of Q1 Earnings?
Seagate's investment case is backed by growing AI-led storage requirements, higher-capacity HDD technology, favorable pricing conditions and strong recent cash generation. Seagate is worth considering as a potential beneficiary of the AI storage cycle, but investors should not buy solely in anticipation of an earnings beat. Revenue growth, margin sustainability, free cash flow and forward guidance will better indicate whether the stock deserves a higher valuation.
The company has provided an encouraging outlook, reflecting stronger demand for mass-capacity storage, improved pricing and expanding AI infrastructure requirements. If Seagate beats fiscal first-quarter guidance, delivers stronger margins and signals sustained demand growth, the positive results could boost investor confidence and support further share price gains.