Seagate Technology used its latest earnings call to push back against bearish market sentiment, laying out a stronger growth and margin outlook for fiscal 2027.
CEO Dave Mosley said revenue growth in fiscal 2027 will exceed that of fiscal 2026, and projected full-year growth of 34%. CFO Gianluca Romano said Seagate expects to deliver quarterly revenue growth and gross margin expansion throughout fiscal 2027.
Nearline capacity is locked through 2028
Management said current nearline hard drive capacity has been secured through 2028 under long-term supply agreements, while customer willingness to plan into 2029 continues to build.
Mosley said contracts are usually locked for one year. He added that when yield improvements free up additional capacity, customers are often willing to pay prices above contract levels for that extra supply. According to management, that dynamic is driving a stepwise increase in pricing from quarter to quarter as the supply-demand gap widens.
September-quarter margin guide remains strong
For the September quarter, Seagate guided for gross margin of about 57% and operating margin of about 50%.
Romano also said incremental gross margin is well above 60%. He confirmed that discounted pricing for early HAMR customers will be completely gone in the September quarter, a change the company expects to lift average selling prices further.
HAMR roadmap stays on track
On the technology side, Seagate said its HAMR roadmap is progressing as planned. Mosaic 3 has completed qualification with all major cloud customers and has entered mass production. Mosaic 4, with up to 44TB per drive, is ramping quickly at the world’s two largest CSPs and is making a significant financial contribution. Mosaic 5, at 5TB+ per disk, is expected to begin qualification shipments by the end of 2027.
HAMR already accounts for 40% of nearline enterprise bulk shipments, and Seagate is targeting 50% by the end of the year.
Manufacturing complexity is rising
Seagate management said the move from 3TB per disk to 4TB and 5TB is increasing manufacturing complexity. The number of heads and disks inside each system has risen by 15% to 20% over the past year, which the company described as the core reason behind its capital spending needs.
AI storage demand is still in the early phase
On AI demand, management pointed to two emerging drivers. One is KV cache in agent applications, which is creating demand for massive contextual data storage. The other is physical AI, which is expected to generate large volumes of unstructured video data. Seagate said both trends are still in an early stage.
Net leverage falls to 0.4x
On the financial side, the company said net debt leverage has dropped to 0.4x. It also plans to repay another $1.2 billion of debt in the September quarter, while the pace of share repurchases is accelerating.
After the call, Seagate shares reversed course and at one point were up 10% in after-hours trading, reflecting the market’s response to management’s case for durable storage demand.