How Should You Play Seagate Stock Ahead of Q1 Earnings Release?

Core Viewpoint - Seagate Technology Holdings plc is expected to report strong earnings for the first quarter of fiscal 2026, with a projected earnings per share of $2.36, reflecting a 49.4% year-over-year increase, and revenues estimated at $2.53 billion, indicating a 16.7% rise from the previous year [1][9]. Financial Performance - Management anticipates first-quarter revenues of $2.5 billion, with a potential variance of +/- $150 million, suggesting a 15% year-over-year improvement. Non-GAAP earnings are expected to be $2.3 per share, with a variance of +/- 20 cents [2]. - Seagate has consistently beaten earnings estimates in the past four quarters, with an average surprise of 7% [2]. - The company expects mass capacity revenues to increase by 22.5% year-over-year to $2.1 billion in the fiscal first quarter, while HDD segment revenues are projected to rise by 17.4% to $2.35 billion [8]. Market Dynamics - The demand for mass capacity storage solutions is driven by robust nearline cloud storage needs, with revenues from mass capacity devices increasing by 40% year-over-year to $2 billion [5]. - Cloud service providers are prioritizing AI application development, which is expected to boost HDD demand [6]. - Seagate's new Mozaic 3+ hard drive platform, incorporating HAMR technology, is anticipated to enhance market share in mass capacity storage solutions [7]. Competitive Positioning - Seagate's stock has gained 185% over the past six months, outperforming the Zacks Computer-Integrated Systems industry, which grew by 100% [12]. - The company is trading at a price/earnings ratio of 20.21, which is lower than the industry average of 25.75 but above its historical mean of 11.84 [17]. Strategic Outlook - Management expects improved margin performance due to a favorable product mix and ongoing pricing optimization, with gross margin estimated at 39.4% for the fiscal first quarter, up from 33.3% in the prior year [10]. - The company is positioned for higher profitability and steady dividends in fiscal 2026, supported by a strong product pipeline and disciplined capital allocation [10][19].