Seagate reported record first-quarter fiscal 2027 revenue of $4.8 billion, exceeding its $4.1 billion forecast, as cloud providers and other data-center customers increased purchases of high-capacity hard drives. The company shipped 220 exabytes (EB) of storage capacity during the quarter, with data-center customers accounting for 90% of the total.
The results underline the growing importance of high-capacity nearline drives to cloud infrastructure as AI workloads generate and retain more data. Seagate said its cloud nearline business recorded a 12th consecutive quarter of revenue growth. Revenue from enterprise original equipment manufacturers also reached its second-highest quarterly level in more than a decade.
HAMR drives move further into cloud deployments
Heat-Assisted Magnetic Recording (HAMR) is central to Seagate’s effort to increase the amount of data stored on each drive rather than relying on higher drive-unit output. CEO William Mosely described areal density—the quantity of data that can be recorded on a disk surface—as the company’s main technology priority. Higher capacities per drive can give hyperscale buyers more storage for each installed unit while improving storage economics.
Seagate expects HAMR drives to account for about half of its nearline exabyte shipment run rate by the end of calendar 2026. Within those HAMR shipments, the company expects its Mozaic 4 generation to make up roughly half. Mozaic 4 drives, with capacity of up to 44 terabytes, are ramping with two leading cloud service providers, and Seagate expects additional qualifications with cloud providers and enterprise OEMs over the next couple of months.
The next generation, known as gen 3 Mozaic, is expected to offer up to 55TB using 10 platters. Seagate said customer qualification is expected to begin toward the end of calendar 2027. The company has demonstrated technology supporting 8TB per platter in its laboratory. Each HAMR transition is also intended to reduce manufacturing cost per bit, helping the company increase the amount of capacity it can produce economically.
Long-term agreements extend demand visibility
Seagate shipped a record 198EB of nearline capacity to data-center customers in the quarter. It expects a meaningful increase in nearline shipments in the December quarter as Mozaic 4 continues to ramp. The company forecast compound annual growth in nearline exabyte supply in the mid-20% range, while cautioning that quarterly shipment growth may fluctuate as new products are introduced and reach more customers.
Management said demand visibility extends beyond 2030. Most of Seagate’s nearline supply is allocated through long-term agreements (LTAs) covering deliveries through calendar 2028, with some cloud customer deals extending through 2030. Such agreements give the company a clearer view of future capacity needs and reflect a market in which demand for drives is outpacing available supply, according to Seagate.
The supply strategy is industry-wide. Seagate and Western Digital are emphasizing higher capacity per drive rather than increasing unit production, while Toshiba, the third major disk-drive supplier, plans to expand its unit output. The shift toward capacity growth through areal density enables suppliers to serve hyperscale requirements without relying on a comparable increase in the number of drives shipped.
Strong quarter supports investment and returns
Seagate’s financial measures strengthened alongside revenue. Gross margin reached a record 57.3%, compared with 52.3% in the prior quarter. Operating cash flow was $1.69 billion, free cash flow was $1.5 billion, and diluted earnings per share set a record at $7.68. Gross debt declined to $2.4 billion from $3.6 billion, while cash and cash equivalents remained at $1.7 billion.
The company said it expects to be net cash positive by the end of calendar 2026 and is placing greater emphasis on returning capital to shareholders. Its board approved an increase in the quarterly dividend to $0.76 per share, with share repurchases identified as the primary means of returning capital, alongside dividends.
Seagate forecast December-quarter revenue of $4.8 billion, plus or minus $100 million. The midpoint would represent 7% year-over-year growth. The company’s results and outlook point to persistent storage capacity as a significant investment requirement for cloud operators, particularly as AI use expands from model training to inference and agent-based applications.
