Seagate Surges on AI Boom: Storage Giant Smashes Earnings, Eyes Breakout Abov $241 as Data Deluge Explodes

Seagate Technology delivered the kind of quarter that keeps the AI trade humming. The company beat across the board in its fiscal first quarter, guided above expectations for the second quarter, and leaned hard into a message of durable, contracted demand from hyperscale cloud customers. Revenue of $2.63 billion came in ahead of the Street’s $2.55 billion estimate, up 21% year over year, while non-GAAP EPS of $2.61 topped consensus ($2.36–$2.40 range depending on source) and even exceeded management’s prior guidance range. Gross margin hit a record 40.1%. The stock is reacting the way you’d expect in this tape: up roughly 8% pre-market, riding its 20-day moving average higher and threatening to make a run at the $241 area, which now stands out as key resistance. In a market that is rewarding anything tied to AI infrastructure spend and ignoring anything cyclical-without-AI, STX is very much in the first bucket, and that positioning looks favorable into year-end as long as AI euphoria doesn’t break.

Start with the scorecard. Seagate posted fiscal Q1 revenue of $2.629 billion versus expectations around $2.538–$2.55 billion. That’s not subtle; that’s a solid top-line beat in a hardware/storage name. On the bottom line, non-GAAP EPS printed $2.61 versus the ~$2.36–$2.40 expectation, and GAAP EPS came in at $2.43. Non-GAAP operating margin expanded to 29%, back to levels last seen in 2012, and gross margin at 40.1% set a company record. Net income was $549 million, up 80% year over year. Cash generation followed through: $532 million from operations, up 460% year on year, and $427 million of free cash flow. Management returned $182 million to shareholders between buybacks and dividends, and lifted the quarterly dividend to $0.74. This is not a “we beat by a penny on cost cuts” quarter. This is “demand is real, pricing is holding, and we’re printing cash.”

Guidance reinforced the view that this is not a one-off pop. For fiscal Q2, Seagate guided revenue to $2.6–$2.8 billion, with a midpoint of $2.7 billion, and non-GAAP EPS to $2.55–$2.95, midpoint $2.75. Both ranges imply continued sequential strength and, importantly, confidence in margin sustainability. Management also called out that guidance already bakes in several headwinds: global minimum tax under Pillar Two, dilution from the company’s exchangeable senior notes due 2028, and minimal expected tariff drag. In other words, they’re not guiding optimistically and ignoring friction; they’re guiding through friction and still pointing higher. The midpoint implies mid-teens year-over-year revenue growth in the December quarter and operating margins around 30%. For a storage company that just climbed out of an industry downturn a year ago, that’s a tone shift from “stabilization” to “controlled acceleration.”

The driver here is not complicated: hyperscale cloud demand for capacity is ripping, and Seagate is getting paid for higher-capacity nearline drives. Management said the data center end market accounted for roughly 80% of total revenue, up 34% year over year, and that cloud exabyte demand increased for the ninth straight quarter. Seagate shipped 182 exabytes overall, 159 exabytes into data centers alone. The company’s new Mozaic HAMR (Heat-Assisted Magnetic Recording) platform is the tip of the spear. Those HAMR-based drives, which enable higher areal density and capacities up to 36TB per drive, are now qualified with five of the world’s largest cloud service providers. Over one million Mozaic drives shipped in the September quarter. Management expects to qualify the remaining major cloud players in the first half of calendar 2026 and says it has “build-to-order” contracts that give visibility into customer demand through 2027.

That last point is the tell for equity investors: we’re not just talking about “AI is creating a lot of data” as a vibe. We’re talking about multi-year contractual visibility from hyperscale buyers who are scaling AI training, inference, and especially video-heavy workloads. Seagate is basically saying, “We have line of sight to how much storage these guys want and we’re already committing capacity against it.” In the AI narrative, Nvidia monetizes compute, but someone still has to store what that compute is generating. Seagate is pitching itself as that “someone,” especially for unstructured data like video.

On that front, management leaned hard into AI-driven content growth. The call highlighted that AI-generated video is already exploding, citing examples like text-to-video tools and early adoption curves for generative media. The math is simple but brutal: a one-minute AI video can be thousands of times larger than a text output, and those assets have to live somewhere, be served somewhere, be recalled and re-fed into other models. Seagate’s view is that this is not just incremental demand for storage — it’s a structurally higher baseline for exabyte-scale retention. That’s why the company is spending on capacity, and why capital expenditures rose to $105 million (about 4% of revenue). They’re building for the flood, not for the drizzle.

Margins tell us whether this demand is healthy or just desperate volume. Here, too, Seagate is delivering. Record gross margin at 40.1% (up 220 bps sequentially) and operating margin at 29% (up 280 bps sequentially) say the company isn’t just moving more terabytes; it’s moving better terabytes. Management noted that higher-capacity HAMR products improve cost per terabyte for customers, which actually supports pricing discipline because buyers are incentivized to move up the capacity stack instead of haggling price on legacy SKUs. That mix shift is doing a lot of work. It also explains why investors are comfortable paying up for the stock into year-end: Seagate isn’t just benefiting from a cyclical restock, it’s potentially stepping into structurally higher incremental margins tied to AI infrastructure.

From a balance sheet standpoint, Seagate is still not pristine — gross debt is about $5 billion and the company is only just digging out of a period where shareholder equity was negative — but the direction is improving. Liquidity sits at roughly $2.4 billion, net leverage is about 1.5x, and free cash flow is now scaling with revenue. Management is confident enough in that trajectory to keep buying back stock and to raise the dividend. That tells you they think this demand cycle has legs, not quarters.

Technically, the setup matches the fundamentals. The stock closed around $223 and is now trading near $233 pre-market, riding the 20-day moving average higher. The next obvious level is the $241 area, which has offered some resistance. If the stock can push and hold through that zone with margins still tracking ~40% and guidance intact, you’re going to hear the phrase “breakout into year-end” from momentum/AI-complex traders on loop. The risk is less about Seagate’s execution right now and more about the macro AI trade: if AI sentiment cracks, the whole group will get hit, Seagate included. But as long as the AI buildout narrative stays intact — data centers scaling, video models proliferating, hyperscalers locking in capacity years in advance — Seagate screens like one of the cleanest second-derivative beneficiaries.