Story Stocks^®

Seagate Tech (STX) is surging to new all-time highs after reporting blowout Q3 (Mar) results last night, as the hard drive and mass-capacity storage provider continues to benefit from the massive storage needs created by cloud and AI workloads. STX delivered a huge EPS beat, while revenue jumped 44.1% yr/yr to $3.11 bln. The Q4 guidance was also notably strong, with EPS of $4.80-5.20 and revenue of $3.35-3.55 bln both well above expectations.

• The blowout results and guidance reflect sustained data center demand, as cloud and enterprise customers require more high-capacity storage for AI workloads. Inference, agentic AI, video, and physical AI applications are driving greater data creation and longer-term storage needs.
• Data center accounted for 88% of exabyte shipments and 80% of revenue, with shipments increasing 47% yr/yr to 175 exabytes. Data center revenue increased 55% yr/yr and 12% sequentially to $2.5 bln.
• Importantly, STX began revenue shipments of Mozaic 4 in late March, with Mozaic 4 expected to represent a majority of HAMR exabyte shipments exiting CY26. Mozaic 5 remains on track for qualification shipments in late CY27.
• Non-GAAP gross margin expanded sharply to a record 47%, up 480 bps sequentially and from 36.2% last year. The expansion reflects stronger pricing and better product mix, which drove a mid-single-digit yr/yr increase in data center revenue per terabyte, a trend STX expects to continue.
• Despite rising geopolitical tensions, STX does not expect a material impact. Demand fundamentals remain intact, and strong visibility supports its expectation for quarterly revenue growth and margin expansion through FY27.
• The results offer an encouraging read-through for peer Western Digital (WDC), which is trading sharply higher in sympathy and is set to report its results tomorrow after the close.

Briefing.com Analyst Insight

This was another standout quarter from STX, clearing a high bar and further validating its HAMR/Mozaic roadmap and position as a key beneficiary of mass-capacity storage demand. The strength in data center revenue, margins, and guidance all suggest a company firing on all cylinders as cloud and AI workloads continue to drive the need for higher-capacity storage.Importantly, the report also signals that this momentum has room to continue, with nearline capacity almost fully allocated through CY27 and customer discussions already extending into CY28. Mozaic 4 is now shipping and is expected to become the majority of HAMR exabyte shipments exiting CY26, supporting higher drive capacities and better cost efficiency. The combination of durable demand, increasing adoption of Mozaic-based products, and continued margin expansion reinforces the view that STX is entering a more structural growth phase.