Data Center Momentum Accelerates Seagate's Revenue Growth

Core Insights - Seagate Technology Holdings plc's revenue growth is primarily driven by the increasing demand for data centers, particularly from cloud service providers and enterprise customers supporting AI workloads and rising data volumes [1] Group 1: Financial Performance - In the first quarter of fiscal 2026, Seagate's data center revenue accounted for 80% of total revenue, reaching $2.1 billion, which is a 13% sequential increase and a 34% year-over-year increase [3][9] - For the fiscal second quarter, Seagate expects revenues of $2.7 billion (+/- $100 million), indicating a 16% year-over-year improvement at the midpoint [2] - The non-GAAP operating margin is projected to increase to approximately 30% at the midpoint of revenue guidance [2] Group 2: Product and Market Dynamics - Seagate shipped 159 exabytes to data center customers in the first quarter, up from 137 exabytes in the prior-year period, with a 26% increase in average nearline drive capacity contributing to overall growth [4][9] - The company is ramping up production of its high-capacity Mozaic products, with most major global cloud providers already qualified on Seagate's HAMR-based drives [5] - Long-term agreements with global data center customers provide strong visibility through 2027, supporting confidence in sustained demand [4] Group 3: Competitive Landscape - Western Digital Corporation's HDD business is also experiencing revenue growth, shipping 204 exabytes, up 23%, driven by demand for higher-capacity drives [6] - Pure Storage, Inc. is innovating in enterprise storage, raising its fiscal 2026 revenue outlook to $3.63-$3.64 billion, indicating a year-over-year growth of 14.5-14.9% [7] Group 4: Stock Performance and Valuation - Seagate's shares have gained 248.3% over the past year, outperforming the Zacks Computer Integrated Systems industry's growth of 97.6% [10] - The forward price/earnings ratio for Seagate's shares is currently at 24.26X, higher than the industry's 17.73X [11] - The Zacks Consensus Estimate for Seagate's earnings for fiscal 2026 has been revised up by 2.18% to $11.26 over the past 60 days [12]