Seagate Technology Earnings Call Summary Company Overview - **Company**: Seagate Technology (STX.O) - **Industry**: IT Hardware - **Market Cap**: $84,018 million - **Current Stock Price**: $371.76 (as of January 27, 2026) - **Price Target**: Increased from $372.00 to $468.00, with a bull case of $600.00 [2][3][9] Key Financial Metrics - **Revenue**: $2.83 billion for F2Q26, exceeding Morgan Stanley estimates by 1% and consensus by 3% [11] - **Gross Margin**: 42.2%, outperforming estimates by 100bps and 130bps [11] - **Operating Margin**: Expected to approach mid-thirties percentage in the upcoming quarter [11] - **EPS**: Increased to $3.40 +/- $0.20 for the March quarter, with FY27 EPS revised to $26.00 from $20.80 [9][10] Core Insights - **Demand Drivers**: Strong demand for HDDs driven by data center storage needs, particularly in video, agentic AI, and multi-modal applications [5][9] - **Pricing Power**: Strengthening pricing environment due to supply-demand imbalance, with expectations for further pricing tailwinds into CY27 [9][12] - **HAMR Technology**: The ramp-up of Heat-Assisted Magnetic Recording (HAMR) technology is accelerating, with significant growth expected in shipments of the Mozaic 3 and Mozaic 4 platforms [10][15] - **Market Outlook**: The HDD cycle is expected to remain strong, with supply constraints leading to favorable pricing dynamics [9][12] Earnings Performance - **Revenue Growth**: Driven by Edge IoT revenue, which was 14% above estimates, while Data Center revenue was slightly below expectations [11] - **Non-GAAP Net Income**: Reported at $702 million, representing a net margin of 24.8%, beating estimates [11] - **Future Guidance**: Management guided for revenue of $2.90 billion +/- $100 million for the March quarter, indicating a 3% quarter-over-quarter growth at the midpoint [11] Investment Thesis - **Overweight Rating**: The stock is rated as Overweight due to strong demand growth, pricing power, and technological advancements [22] - **Long-term Growth**: The company is positioned to benefit from ongoing data growth and AI-driven storage demand, with expectations for multi-year earnings growth [22] - **Risks**: Potential risks include slower-than-expected HDD demand growth and geopolitical tensions affecting supply chains [31] Additional Insights - **Capacity and Shipments**: Nearline HDD capacity is fully accounted for in CY26, with demand visibility extending into CY27 [12] - **Margin Expansion**: Gross margins are expected to expand to 50%+ levels, driven by pricing actions and a favorable product mix [21] - **CSP Qualifications**: All major US Cloud Service Providers (CSPs) have qualified on Mozaic 3, with increasing qualifications for Mozaic 4 expected [15] This summary encapsulates the key points from Seagate Technology's earnings call, highlighting the company's strong performance, market dynamics, and future outlook.

Core Insights - The demand for scalable and cost-efficient storage is increasing due to the acceleration of cloud computing, AI, and data-intensive workloads, with HDDs remaining essential for hyperscale data centers despite the rise of flash technology [1][8] Group 1: HDD Technology and Innovation - Areal density, which measures data storage per unit of surface area, is crucial for enhancing storage capacity in HDDs, providing a competitive edge for hyperscale data centers [2] - Seagate Technology Holdings plc (STX) is advancing areal density as a key strength, ensuring a total cost of ownership (TCO) advantage for HDDs over alternative technologies [2][4] - Seagate's high-capacity HAMR drives, including the Mozaic 3+ platform, are being adopted to meet the growing AI-driven storage demand, with drives offering up to 36TB and further advancements planned for 44TB and 5TB-per-disk technology by 2028 [3][8] Group 2: Competitive Landscape - Western Digital Corporation (WDC) remains a strong competitor in the HDD market, benefiting from its ePMR and UltraSMR drives while advancing its HAMR roadmap, with strong customer commitments extending into 2027 [5] - NetApp, Inc. (NTAP) is experiencing growth in its flash business and cloud services, supported by partnerships with major hyperscalers like Amazon and Microsoft, positioning it well in the cloud infrastructure space [6] Group 3: Financial Performance - STX's stock has increased by 217.5% over the past year, outperforming the Computer Integrated Systems industry's growth of 103.5% [7] - The current forward price/earnings ratio for STX is 27.23X, which is higher than the industry's average of 18.74X, indicating a stretched valuation [9]

Core Viewpoint - Seagate Technology (STX) has emerged as the top performer in the S&P 500 with a 196% year-to-date increase, surpassing Palantir's 143% surge, driven by the growing demand for data storage in AI infrastructure [1][2]. Company Performance - Seagate's sales for fiscal 2025 reached $9.1 billion, marking a 39% year-over-year increase, while gross margins expanded from 23% to 35% due to supply constraints enhancing pricing power [4]. - Adjusted earnings per share grew by 527% year-over-year to $8.10, indicating strong financial performance [4]. Market Dynamics - The data center storage market is projected to nearly double from $13 billion in 2024 to $23 billion by 2028, with build-to-order pipelines already booked through mid-2026 [4]. - Seagate shipped 137 exabytes of storage capacity to data centers last quarter, reflecting a 52% year-over-year increase [3]. Technological Advancements - Seagate's competitive advantage lies in its heat-assisted magnetic recording technology, branded as Mozaic, which allows for higher data density and lower energy consumption [5]. - The Mozaic 3 platform has been qualified by three major cloud services, with the Mozaic 4 expected to enter volume production in early 2026 [6]. Analyst Sentiment - Morgan Stanley raised its price target for STX stock from $168 to $265, anticipating an extended demand cycle that could push gross margins above 45% by early 2027 [7].