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Seagate

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Price, not volume, carried the quarter

Revenue rose to $4.23B from $3.63B last quarter on 220 exabytes against 218, and the filing credits pricing actions for the rise.

Q1 FY2027, the quarter to Oct 2, 2026 (Seagate's fiscal 2027 ends in June 2027) · 10-Q filed Oct 29, 2026

Q1 FY2027 · revenue
$4.2B+61.0% on the year
Operating margin
48.8%
Net income
$1.8B
Free cash flow, quarter
$1.5B

Largest source of revenue: OEMs, 80.7% of the total.

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Where Seagate's money goes

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Key insights · Q1 FY2027
  1. 01

    Price, not volume, carried the quarter

    Revenue rose to $4.23B from $3.63B last quarter on 220 exabytes against 218, and the filing credits pricing actions for the rise.

    Why it matters

    Against the prior quarter, Q4 FY2026, revenue rose to $4.23B from $3.63B while HDD exabytes shipped went to 220 from 218. The filing attributes the rise "primarily" to "favorable pricing actions undertaken by the Company". Cost of revenue moved only to $1.81B from $1.73B, so its share of revenue fell to 42.7% from 47.7%, and operating income rose to $2.06B from $1.56B.1

    Against the same quarter a year earlier, revenue rose 61.0% while cost of revenue rose 13.4%, and exabytes went to 220 from 182. Here the filing names two causes: pricing actions and "an increase in nearline exabytes shipped reflecting higher demand for nearline products". Gross margin reached 57.3%, which the filing credits to pricing and "product mix shift to higher capacity products".1

    The year-ago quarter was a week longer than this one, so the year-on-year growth rates compare a shorter quarter with a longer one. The comparison with the prior quarter, which was the same length, is free of that effect and still shows revenue rising on almost unchanged volume.1

    AnalysisRead as analysis: when shipped capacity holds nearly flat and revenue climbs, the extra dollars arrive with little added cost of their own, which is why operating income grew faster than revenue against the prior quarter. The same arithmetic runs in reverse if prices ease.

  2. 02

    Same revenue as FY2022, twice the operating profit

    FY2026 revenue of $12.2B was close to FY2022's $11.66B, but operating income was 2.1 times as large, as cost of revenue fell to $6.64B from $8.19B.

    Why it matters

    In FY2022 Seagate had revenue of $11.66B, cost of revenue of $8.19B (70.3% of revenue) and operating income of $1.96B, a 16.8% operating margin. In FY2026 revenue was $12.2B, cost of revenue $6.64B against $8.19B, and operating income $4.09B, a 33.6% margin. Free cash flow was $3.11B against $1.28B.1

    The filing attributes this quarter's gross margin gain to pricing and "product mix shift to higher capacity products", and lists "executing our pricing strategy and maintaining supply discipline" among the structural changes it has made to the business, together with long-term customer engagements.1

    AnalysisRead as analysis: selling a similar dollar amount of drives at a much lower cost of revenue means each dollar of sales now carries far less factory cost. That fits higher prices per exabyte and a mix tilted toward high-capacity nearline drives, rather than a larger business. The filing does not split the effect between price and mix.

  3. 03

    One quarter earned half of last year's operating profit

    Operating income of $2.06B equals 50.4% of FY2026's $4.09B, and free cash flow reached $1.48B in the quarter.

    Why it matters

    FY2026 operating income was $4.09B and free cash flow $3.11B. This quarter alone produced $2.06B of operating income and $1.48B of free cash flow. Net income was $1.76B for the quarter, against $3.18B for all of FY2026.1

    The climb was steady rather than sudden: quarterly operating income went $694M, $843M, $998M and $1.56B through FY2026, then $2.06B this quarter. The operating margin rose to 48.8% from 26.4% a year earlier.1

    Profit arrived as cash. Operating cash flow of $1.69B equals 96.0% of net income, and capital spending of $211M took 12.5% of it, leaving a free cash flow margin of 34.9% on revenue.1

    AnalysisRead as analysis: a quarter is not a year, and the filing itself warns that quarterly results "fluctuate, sometimes significantly". The ratio measures how far the business has moved from last year's level, not a run rate for the year ahead.

  4. 04

    Interest now takes 2.0% of operating income

    Interest expense fell to $41M from $80M while operating income nearly tripled, so interest went from 11.5% of operating income to 2.0%.

    Why it matters

    Interest expense fell 48.8% to $41M from $80M a year earlier as the company redeemed and repurchased notes. Retiring notes early produced a $44M net loss from debt transactions, against $6M a year earlier, so other expense, net was $82M against $80M: this quarter, the one-off loss offset the interest saving.1

    Income before income taxes was $1.98B. The tax charge of $221M was 11.2% of it, against 10.6% a year earlier, and net income was $1.76B, a 41.6% net margin. Diluted earnings per share were $7.59 against $2.43, on 232M diluted shares against 226M.1

    AnalysisRead as analysis: a smaller fixed interest charge lowers the operating income the business must earn before anything is left for shareholders, which matters most in a slow year. The filing still describes the company as leveraged and bound by a net leverage covenant, so the cushion is growing, not complete.

Sources

  1. 1.Seagate 10-Q for the period to 2026-10-02 (the filing), Oct 29, 2026, read Nov 2, 2026

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Business performance

Growth, profit and margin

Revenue went from $9.8B in FY2009 to $12.2B in FY2026, the operating margin from -27.2% to 33.6%, over 17 years.

  • Revenue$12.2B
  • Operating income$4.1B
  • Operating margin33.6%
Period
Q1 FY2027
Revenue
$4.2B
Operating income
$2.1B
Operating margin
48.8%
Net income
$1.8B
Free cash flow
$1.5B
Business performance

Does the profit turn into cash?

Q1 FY2027: free cash flow of $1.5B against net income of $1.8B in the quarter.

  • Operating cash flow$3.7B
  • Capital expenditure$569.0M
  • Free cash flow$3.1B
  • Net income$3.2B

Capital expenditure is drawn below the axis as cash out. Cash conversion is operating cash flow over net income, shown in the tooltip for years with a profit.

Financial data and sources

How the revenue mix has shifted

Each breakdown the filing reports, as shares of revenue, for every period it restates.

ContractWithCustomerSalesChannel

Revenue (Details). The filing restates this breakdown for 1 period.

Click a member to isolate it across the years shown.

The figures

Margins, cash and growth for the period, each with what it was computed from.

Gross margin
57.3%
Source10-Q, Derived from Revenue and Cost of revenue in the 10-Q filed 2026-10-29
Operating margin
48.8%
Source10-Q, Derived from Income from operations and Revenue in the 10-Q filed 2026-10-29
Net margin
41.6%
Source10-Q, Derived from Net income and Revenue in the 10-Q filed 2026-10-29
Free cash flow, quarter
$1.5B
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-10-29
Free cash flow margin, quarter
34.9%
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-10-29
Cash conversion, quarter
0.96x
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-10-29
Capital spending, quarter
5.0%
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-10-29
Revenue growth
+61.0%
From the record's own history, against the prior year.

Where revenue comes from

Every breakdown the filing reports for the period, with each item's share.

ContractWithCustomerSalesChannel

OEMs$3.4B80.7%
Distributors$626.0M14.8%
Retailers$193.0M4.6%

Source10-Q, us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax, as reported in the 10-Q filed 2026-10-29

What it costs

The cost lines beneath operating income, each as a share of revenue, then the operating result.

Costs are reported by function: what it cost to make what was sold, then the expenses of selling, developing and administering.

Cost lineQ1 FY2027Of revenueSource
Total operating expenses$2.2B51.2%Source10-Q, us-gaap:CostsAndExpenses, as reported in the 10-Q filed 2026-10-29
Income from operations$2.1B48.8%Source10-Q, us-gaap:OperatingIncomeLoss, as reported in the 10-Q filed 2026-10-29

Operating figures the company states

From the text of the filing rather than its statements, each with the sentence that states it.

HDD exabytes shipped
220 exabytes
As of Oct 2, 2026
View source
During the September 2026 quarter, we shipped 220 exabytes of HDD storage capacity.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, 10-Q filed Oct 29, 2026
Nearline exabytes shipped
198 exabytes
As of Oct 2, 2026
View source
Nearline 198 195 160
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, 10-Q filed Oct 29, 2026
Non-nearline exabytes shipped
22 exabytes
As of Oct 2, 2026
View source
Non-nearline 22 23 22
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, 10-Q filed Oct 29, 2026

The statements, as filed

The income statement, cash flow statement and balance sheet in the company's own order and words. Every line links to the filing.

Income statement22 lines, as presented in the 10-Q
LineQ1 FY2027A year earlierChangeOf revenueSource
Income Statement
Revenue$4.23B$2.63B+61%100%Source10-Q, us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax, as reported in the 10-Q filed 2026-10-29
Cost of revenue$1.81B$1.59B+13%42.7%Source10-Q, us-gaap:CostOfGoodsAndServicesSold, as reported in the 10-Q filed 2026-10-29
Product development$200.0M$186.0M+7.5%4.7%Source10-Q, us-gaap:ResearchAndDevelopmentExpense, as reported in the 10-Q filed 2026-10-29
Marketing and administrative$159.0M$144.0M+10%3.8%Source10-Q, us-gaap:SellingGeneralAndAdministrativeExpense, as reported in the 10-Q filed 2026-10-29
Restructuring and other, net$4.0M$13.0M-69%0.1%Source10-Q, stx:RestructuringExpenseBenefit, as reported in the 10-Q filed 2026-10-29
Total operating expenses$2.17B$1.94B+12%51.2%Source10-Q, us-gaap:CostsAndExpenses, as reported in the 10-Q filed 2026-10-29
Income from operations$2.06B$694.0M+197%48.8%Source10-Q, us-gaap:OperatingIncomeLoss, as reported in the 10-Q filed 2026-10-29
Interest income$7.0M$7.0M0.0%0.2%Source10-Q, us-gaap:InvestmentIncomeInterest, as reported in the 10-Q filed 2026-10-29
Interest expense (shown as a deduction)($41.0M)$80.0M-49%1.0%Source10-Q, us-gaap:InterestExpenseNonoperating, as reported in the 10-Q filed 2026-10-29
Net loss from debt transactions-$44.0M-$6.0M+633%1.0%Source10-Q, us-gaap:GainsLossesOnExtinguishmentOfDebt, as reported in the 10-Q filed 2026-10-29
Other, net-$4.0M-$1.0M+300%0.1%Source10-Q, us-gaap:OtherNonoperatingIncomeExpense, as reported in the 10-Q filed 2026-10-29
Other expense, net-$82.0M-$80.0M+2.5%1.9%Source10-Q, us-gaap:NonoperatingIncomeExpense, as reported in the 10-Q filed 2026-10-29
Income before income taxes$1.98B$614.0M+223%46.8%Source10-Q, us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest, as reported in the 10-Q filed 2026-10-29
Income tax expense (benefit)$221.0M$65.0M+240%5.2%Source10-Q, us-gaap:IncomeTaxExpenseBenefit, as reported in the 10-Q filed 2026-10-29
Net income$1.76B$549.0M+221%41.6%Source10-Q, us-gaap:NetIncomeLoss, as reported in the 10-Q filed 2026-10-29
Effects of derivative instruments-$4.0M$00.1%Source10-Q, us-gaap:OtherComprehensiveIncomeLossCashFlowHedgeGainLossAfterReclassificationAndTaxParent, as reported in the 10-Q filed 2026-10-29
Other comprehensive loss, net of tax-$4.0M$00.1%Source10-Q, us-gaap:OtherComprehensiveIncomeLossNetOfTaxPortionAttributableToParent, as reported in the 10-Q filed 2026-10-29
Comprehensive income$1.76B$549.0M+220%41.5%Source10-Q, us-gaap:ComprehensiveIncomeNetOfTax, as reported in the 10-Q filed 2026-10-29
Net income per share:
Basic (in dollars per share)$8$3+199%0.0%Source10-Q, us-gaap:EarningsPerShareBasic, as reported in the 10-Q filed 2026-10-29
Diluted (in dollars per share)$8$2+212%0.0%Source10-Q, us-gaap:EarningsPerShareDiluted, as reported in the 10-Q filed 2026-10-29
Number of shares used in per share calculations:
Basic (in shares)228,000,000213,000,000+7.0%Source10-Q, us-gaap:WeightedAverageNumberOfSharesOutstandingBasic, as reported in the 10-Q filed 2026-10-29
Diluted (in shares)232,000,000226,000,000+2.7%Source10-Q, us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding, as reported in the 10-Q filed 2026-10-29
Cash flow statement26 lines, as presented in the 10-Q

Year to date, as a quarterly filing reports it.

LineQ1 FY2027A year earlierChangeSource
Operating activities
Net income$1.76B$549.0M+221%Source10-Q, us-gaap:NetIncomeLoss, as reported in the 10-Q filed 2026-10-29
Net loss from debt transactions (shown as a deduction)(-$44.0M)-$6.0M+633%Source10-Q, us-gaap:GainLossOnRepurchaseOfDebtInstrument, as reported in the 10-Q filed 2026-10-29
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization$76.0M$72.0M+5.6%Source10-Q, us-gaap:DepreciationDepletionAndAmortization, as reported in the 10-Q filed 2026-10-29
Share-based compensation$63.0M$52.0M+21%Source10-Q, us-gaap:ShareBasedCompensation, as reported in the 10-Q filed 2026-10-29
Deferred income taxes-$57.0M-$25.0M+128%Source10-Q, us-gaap:DeferredIncomeTaxExpenseBenefit, as reported in the 10-Q filed 2026-10-29
Other non-cash operating activities, net (shown as a deduction)(-$3.0M)-$15.0M-80%Source10-Q, us-gaap:OtherNoncashIncomeExpense, as reported in the 10-Q filed 2026-10-29
Changes in operating assets and liabilities:
Accounts receivable, net (shown as a deduction)($283.0M)$114.0M+148%Source10-Q, us-gaap:IncreaseDecreaseInAccountsReceivable, as reported in the 10-Q filed 2026-10-29
Inventories, net (shown as a deduction)($129.0M)$56.0M+130%Source10-Q, us-gaap:IncreaseDecreaseInInventories, as reported in the 10-Q filed 2026-10-29
Accounts payable$101.0M$84.0M+20%Source10-Q, us-gaap:IncreaseDecreaseInAccountsPayable, as reported in the 10-Q filed 2026-10-29
Accrued employee compensation-$129.0M-$140.0M-7.9%Source10-Q, us-gaap:IncreaseDecreaseInEmployeeRelatedLiabilities, as reported in the 10-Q filed 2026-10-29
Accrued expenses, income taxes and warranty$272.0M$98.0M+178%Source10-Q, us-gaap:IncreaseDecreaseInOtherAccruedLiabilities, as reported in the 10-Q filed 2026-10-29
Other assets and liabilities (shown as a deduction)($32.0M)$9.0M+256%Source10-Q, us-gaap:IncreaseDecreaseInOtherOperatingCapitalNet, as reported in the 10-Q filed 2026-10-29
Statement of Cash Flows
Net cash provided by operating activities$1.69B$532.0M+218%Source10-Q, us-gaap:NetCashProvidedByUsedInOperatingActivities, as reported in the 10-Q filed 2026-10-29
Investing activities
Acquisition of property, equipment and leasehold improvements (shown as a deduction)($211.0M)$105.0M+101%Source10-Q, us-gaap:PaymentsToAcquirePropertyPlantAndEquipment, as reported in the 10-Q filed 2026-10-29
Proceeds from business divestiture$0$15.0MSource10-Q, us-gaap:ProceedsFromDivestitureOfBusinesses, as reported in the 10-Q filed 2026-10-29
Net cash used in investing activities-$211.0M-$90.0M+134%Source10-Q, us-gaap:NetCashProvidedByUsedInInvestingActivities, as reported in the 10-Q filed 2026-10-29
Financing activities
Redemption and repurchase of debt (shown as a deduction)($1.26B)$0Source10-Q, us-gaap:RepaymentsOfLongTermDebt, as reported in the 10-Q filed 2026-10-29
Dividends to shareholders (shown as a deduction)($168.0M)$153.0M+9.8%Source10-Q, us-gaap:PaymentsOfDividendsCommonStock, as reported in the 10-Q filed 2026-10-29
Payments for Repurchase of Common Stock (shown as a deduction)($400.0M)$29.0M+1,279%Source10-Q, us-gaap:PaymentsForRepurchaseOfCommonStock, as reported in the 10-Q filed 2026-10-29
Taxes paid related to net share settlement of equity awards (shown as a deduction)($17.0M)$50.0M-66%Source10-Q, us-gaap:PaymentsRelatedToTaxWithholdingForShareBasedCompensation, as reported in the 10-Q filed 2026-10-29
Proceeds from issuance of ordinary shares under employee stock plans$34.0M$22.0M+55%Source10-Q, us-gaap:ProceedsFromIssuanceOfSharesUnderIncentiveAndShareBasedCompensationPlansIncludingStockOptions, as reported in the 10-Q filed 2026-10-29
Other financing activities, net-$1.0M-$11.0M-91%Source10-Q, us-gaap:ProceedsFromPaymentsForOtherFinancingActivities, as reported in the 10-Q filed 2026-10-29
Net cash used in financing activities-$1.81B-$221.0M+721%Source10-Q, us-gaap:NetCashProvidedByUsedInFinancingActivities, as reported in the 10-Q filed 2026-10-29
Statement of Cash Flows
(Decrease) Increase in cash, cash equivalents and restricted cash-$335.0M$221.0MSource10-Q, us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalentsPeriodIncreaseDecreaseIncludingExchangeRateEffect, as reported in the 10-Q filed 2026-10-29
Cash, cash equivalents and restricted cash at the beginning of the period$1.71BSource10-Q, us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents, as reported in the 10-Q filed 2026-10-29
Cash, cash equivalents and restricted cash at the end of the period$1.37B$1.11B+23%Source10-Q, us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents, as reported in the 10-Q filed 2026-10-29
Balance sheet25 lines, as presented in the 10-Q
LineQ1 FY2027A year earlierChangeSource
Current assets:
Cash and cash equivalents$1.26BSource10-Q, us-gaap:CashAndCashEquivalentsAtCarryingValue, as reported in the 10-Q filed 2026-10-29
Accounts receivable, net$1.82BSource10-Q, us-gaap:AccountsReceivableNetCurrent, as reported in the 10-Q filed 2026-10-29
Inventories, net$1.70BSource10-Q, us-gaap:InventoryNet, as reported in the 10-Q filed 2026-10-29
Other current assets$621.0MSource10-Q, us-gaap:OtherAssetsCurrent, as reported in the 10-Q filed 2026-10-29
Total current assets$5.40BSource10-Q, us-gaap:AssetsCurrent, as reported in the 10-Q filed 2026-10-29
Assets
Property, equipment and leasehold improvements, net$2.17BSource10-Q, us-gaap:PropertyPlantAndEquipmentNet, as reported in the 10-Q filed 2026-10-29
Other intangible assets$1.22BSource10-Q, us-gaap:Goodwill, as reported in the 10-Q filed 2026-10-29
Other assets, net$1.16BSource10-Q, us-gaap:DeferredIncomeTaxAssetsNet, as reported in the 10-Q filed 2026-10-29
Total Assets$383.0MSource10-Q, us-gaap:OtherAssetsNoncurrent, as reported in the 10-Q filed 2026-10-29
Total Assets$10.33BSource10-Q, us-gaap:Assets, as reported in the 10-Q filed 2026-10-29
Current liabilities:
Accounts payable$1.87BSource10-Q, us-gaap:AccountsPayableCurrent, as reported in the 10-Q filed 2026-10-29
Accrued employee compensation$227.0MSource10-Q, us-gaap:EmployeeRelatedLiabilitiesCurrent, as reported in the 10-Q filed 2026-10-29
Accrued warranty$80.0MSource10-Q, us-gaap:ProductWarrantyAccrualClassifiedCurrent, as reported in the 10-Q filed 2026-10-29
Current portion of long-term debt$0Source10-Q, us-gaap:LongTermDebtCurrent, as reported in the 10-Q filed 2026-10-29
Accrued expenses$788.0MSource10-Q, us-gaap:AccruedLiabilitiesCurrent, as reported in the 10-Q filed 2026-10-29
Total current liabilities$2.97BSource10-Q, us-gaap:LiabilitiesCurrent, as reported in the 10-Q filed 2026-10-29
Liabilities and shareholders’ equity
Long-term accrued warranty$138.0MSource10-Q, us-gaap:ProductWarrantyAccrualNoncurrent, as reported in the 10-Q filed 2026-10-29
Other non-current liabilities$1.42BSource10-Q, us-gaap:OtherLiabilitiesNoncurrent, as reported in the 10-Q filed 2026-10-29
Long-term debt, less current portion$2.35BSource10-Q, us-gaap:LongTermDebtNoncurrent, as reported in the 10-Q filed 2026-10-29
Total Liabilities$6.87BSource10-Q, us-gaap:Liabilities, as reported in the 10-Q filed 2026-10-29
Seagate Technology plc shareholders' equity:
Ordinary shares and additional paid-in capital$8.19BSource10-Q, us-gaap:AdditionalPaidInCapitalCommonStock, as reported in the 10-Q filed 2026-10-29
Accumulated other comprehensive loss-$4.0MSource10-Q, us-gaap:AccumulatedOtherComprehensiveIncomeLossNetOfTax, as reported in the 10-Q filed 2026-10-29
Accumulated deficit-$4.74BSource10-Q, us-gaap:RetainedEarningsAccumulatedDeficit, as reported in the 10-Q filed 2026-10-29
Total Shareholders’ Equity$3.45B-$63.0MSource10-Q, us-gaap:StockholdersEquity, as reported in the 10-Q filed 2026-10-29
Liabilities and shareholders’ equity
Total Liabilities and Shareholders’ Equity$10.33BSource10-Q, us-gaap:LiabilitiesAndStockholdersEquity, as reported in the 10-Q filed 2026-10-29

About this data

Source
Seagate 10-Q, accession 0001137789-26-000309, filed Oct 29, 2026, read on Nov 2, 2026.
History
From the SEC's XBRL company facts, the value from the latest filing that stated each period.
Reading
Paragraphs marked Analysis are CXProWealth's reading; everything else is the filing's own numbers and words, or a cited source.
Version
methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-02
Edge and risks

What holds Seagate's model up, and what could bend it

Competitive edge

  • A qualified supplier to a few large cloud buyers

    OEM sales were 80.7% of revenue and nearline drives 90.0% of exabytes; lengthy customer qualification makes such a supplier hard to replace.

    The detail

    OEM sales brought in $3.41B of the $4.23B revenue, with distributors at $626M and retailers at $193M. Nearline drives carried 198 of the 220 exabytes shipped, against 160 of 182 a year earlier. The filing ties nearline demand to "global cloud customers".1

    The filing says new key customers "usually require that we pass a lengthy and rigorous qualification process", that nearline sales cycles "could exceed one year", and that long-term customer engagements "provide greater visibility into future demand trends".1

    AnalysisRead as analysis: the qualification that slows a new supplier also protects an incumbent, so the advantage holds for as long as Seagate passes each new drive generation's qualification on time. The same concentration is the demand risk set out below.

  • Capacity per drive is the cost lever

    Nearline rose to 90.0% of exabytes from 87.9%, and the filing credits higher-capacity mix, with pricing, for gross margin reaching 57.3%.

    The detail

    Nearline exabytes rose to 198 from 160 a year earlier, while non-nearline stayed at 22. The filing attributes the year's gross margin gain to pricing and "product mix shift to higher capacity products".1

    The filing describes moving its Mozaic hard drive platform to HAMR recording technology "to increase HDD capacities", and warns that longer development, qualification or production cycles could cost sales and market share.1

    AnalysisRead as analysis: a drive's cost is mostly physical parts, so storing more data on each platter raises what a drive is worth to a cloud buyer without raising those parts in step. The edge holds while Seagate's recording density stays ahead, which is why the HAMR ramp matters.

  • Growth that needs little new capital

    Capital spending of $211M was 5.0% of revenue and 12.5% of operating cash flow, leaving free cash flow of $1.48B.

    The detail

    Operating cash flow was $1.69B and capital spending $211M, against $532M and $105M in the same quarter a year earlier. Free cash flow was $1.48B, a 34.9% margin on revenue. The filing expects capital spending for the fiscal year to stay within its target range relative to revenue.1

    Exabytes shipped rose to 220 from 182 over the year. The filing names "maintaining supply discipline" among the structural changes behind its results.1

    AnalysisRead as analysis: low capital needs and supply discipline are the same choice seen from two sides. Modest capacity additions keep cash free and support pricing. The advantage lasts as long as competitors make the same choice, which Seagate does not control.

What to watch

  • Margins rest on price, which can reverse

    Against last quarter, revenue rose on nearly flat exabytes, and the filing warns price competition could "risk the commoditization of our products".

    The detail

    The filing says industry standards can make its products "considered commodities, which has historically, and could in the future, result in downward pressure on prices", and that when supply exceeds demand, customers "may be able to command increased leverage in negotiating prices".1

    Against the prior quarter, the filing already names "higher external component costs" as a partial offset to pricing. It lists single or limited suppliers for heads, media substrates, DRAM and NAND, and notes that "Many of these rare earth elements are sourced from China".1

    AnalysisRead as analysis: with cost of revenue at 42.7% of revenue, a lower price per exabyte or dearer components would flow almost directly into operating income. The lines to read each quarter are revenue against exabytes shipped, and cost of revenue against exabytes.

  • Demand follows a few buyers' AI spending

    A limited number of key customers account for much of revenue, and the filing ties their orders to "the pace of their AI-related infrastructure investments".

    The detail

    The filing names OEMs, "large hyperscale data center companies" and cloud service providers among its key customers, and says the loss of, or a significant reduction in purchases by, any one of them "could have a disproportionate effect on our results". OEM sales were 80.7% of revenue this quarter.1

    Seagate builds inventory well ahead of orders, and the filing says data center ordering patterns "may shift rapidly" with cloud capital spending, the timing of hyperscale deployments and customers' monetization of their AI investments.1

    AnalysisRead as analysis: concentration is what makes the qualification edge valuable, and also what lets a pause by one buyer show up across a whole quarter. The two cannot be separated.

  • Fixed costs that widen margins also deepen losses

    In FY2023 revenue fell to $7.38B from $11.66B, and the same factories produced an operating loss of $342M.

    The detail

    FY2022 revenue was $11.66B with operating income of $1.96B. In FY2023 revenue fell to $7.38B, with an operating loss of $342M and a net loss of $529M. FY2024 revenue was $6.55B with operating income of $452M, before a recovery to $9.10B and $1.89B in FY2025.1

    The filing says its vertical design and manufacturing strategy carries "significant fixed costs that are difficult to reduce in the short-term", and that reduced demand required it to cut production plans and recognize factory underutilization charges in FY2024 and FY2023.1

    AnalysisRead as analysis: the operating leverage that turned FY2022-level revenue into a 33.6% margin in FY2026 is the same leverage that turned a revenue fall into a loss in FY2023. Lower debt reduces the break-even point; it does not remove the cycle.

Sources

  1. 1.Seagate 10-Q for the period to 2026-10-02 (the filing), Oct 29, 2026, read Nov 2, 2026
Go deeper

Seagate, further in

Member research, then your own questions on ChatGPT.

What could change the outlook

What Seagate's numbers depend on from here, read from the filing: the conditions behind this period's margins and growth, and where a change would show first.

  • What has to hold for a 48.8% operating margin?

    Which of price, cost per exabyte and supply discipline the margin depends on most, and the quarterly lines that would show each one weakening first.

  • How deep would a downturn cut this time?

    How the lower cost base and the shrinking interest bill change the revenue Seagate needs to break even, set against what FY2023 showed.

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Questions to start with
  • How much of Seagate's revenue rise against last quarter came from price rather than more exabytes shipped?
  • Why did Seagate's operating income double from FY2022 to FY2026 on almost the same revenue?
  • What would a lower price per exabyte do to Seagate's 48.8% operating margin?

Business Lens describes Seagate from its own filings with the SEC. It is not a view on its shares, a target, or advice to buy, sell or hold anything; figures are as filed and may be restated by the company later. The filing, the dates and the version are under the financial data above.