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Seagate Technology (STX) reported 4Q25 results that showcased solid earnings and margin performance, driven by strong demand for high-capacity drives and record gross margins of 36.2%, but the company's cautious 1Q26 guidance is tempering enthusiasm. Following last quarter’s upbeat Q4 EPS and revenue guidance, which exceeded estimates, STX’s 1Q26 outlook disappointed with revenue guidance coming in below expectations at the midpoint of the $2.35-$2.65 bln range, while EPS guidance of $2.10-$2.50 was also slightly below the FactSet consensus estimate of $2.36 at the midpoint.

With shares soaring nearly 130% since early April, propelled by optimism around AI-driven storage and HAMR technology, STX faced elevated investor expectations, creating a challenging setup that's contributing to a pullback in the stock as the market digested the conservative outlook.

• STX’s performance reflects a mixed demand environment, with softness in the PC market weighing on hard disk drive sales amid macroeconomic headwinds. Despite optimism surrounding AI-enabled features and the anticipated Windows 11 refresh cycle, which were expected to bolster PC demand, growth remains uncertain due to oversupply and shifting consumer behavior in the sector. This murkiness likely prompted STX’s conservative 1Q26 guidance, as management cited “weak demand for storage devices” and ongoing global trade policy uncertainties, signaling a cautious approach to navigating near-term volatility.
• A key bright spot in STX’s report is the continued progress of its Heat-Assisted Magnetic Recording (HAMR) technology, which is gaining traction with multiple cloud and enterprise customer qualifications underway. HAMR, enabling high-capacity drives up to 36TB, is well-positioned to capitalize on rising demand for mass storage in cloud and edge computing, driven by AI and data-intensive applications. 
• With qualifications expected to broaden by mid-2025, HAMR’s growth potential mitigates concerns over the cautious 1Q26 outlook, reinforcing STX’s strategic pivot toward high-margin, AI-ready storage solutions. The company has indicated that HAMR is on track for a production ramp-up by mid-2025, with CEO Dave Mosley noting during the Q4 earnings call that HAMR qualifications with cloud and enterprise customers are expected to contribute meaningfully to revenue growth in FY26 and beyond.

STX’s stock, having surged dramatically since April, was primed for profit-taking, and the cautious 1Q26 guidance provided the catalyst for investors to lock in gains. Despite this near-term pullback, the long-term outlook remains compelling, as HAMR technology positions STX to lead in the rapidly expanding mass storage market for cloud and AI applications. The company’s focus on innovation and margin discipline continues to underpin its growth narrative.