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Seagate (STX) delivered a blowout start to fiscal 2026, comfortably beating 1Q26 targets on both the top and bottom line while setting new margin records -- and it followed with guidance that built on that momentum for 2Q26. Management emphasized that cloud customers are tightly contracting capacity through 2026 with visibility into 2027, and that AI-driven inferencing is materially increasing demand for high-capacity nearline drives.

• Non-GAAP EPS jumped 65% yr/yr to $2.61, while revenue rose 21% to $2.63 bln, comfortably above expectations and the high end of guidance.
• Shares are surging toward record highs and now up over 200% year-to-date, lifting peer Western Digital (WDC) ahead of its results tomorrow afternoon.
• STX guided 2Q26 EPS to $2.75, +/- $0.20, and revenue to $2.70 bln, +/- $100 mln, slightly above consensus at midpoints and consistent with its history of conservative forecasting.
• The company said nearline production is largely contracted through 2026 with visibility into 2027, citing rapid AI-related growth in unstructured data and inferencing workloads that drive high-capacity storage needs.
• Non-GAAP gross margin jumped to 40.1% from 33.3% last year, with 2Q guidance implying approximately 41% as mix shifts toward higher-capacity HAMR drives and cloud volumes scale.
• Mosaic HAMR traction continues, with five major cloud customers qualified, over 1 mln Mosaic drives shipped in September, and a roadmap to 44TB products in 2026 -- positioning HAMR to meaningfully contribute to FY26 revenue and margin expansion.

Briefing.com Analyst Insight:

STX’s Q1 report marks a meaningful inflection, pairing strong execution with structural demand visibility tied to cloud and AI workloads. Record margins and long-term capacity contracts into 2027 reinforce that this cycle is being driven by secular forces rather than traditional storage demand swings. The AI narrative -- particularly inferencing at scale -- appears to be translating into sustained exabyte growth and favorable mix. HAMR progress is no longer conceptual, with multi-hyperscaler qualification and early volume shipments signaling commercial readiness. While STX’s stock has already experienced a massive run, margin durability and HAMR economics could continue to justify premium valuation. Investors will be watching the cadence of broader enterprise recovery and the pace of HAMR volume ramps, but the setup heading into FY26 remains compelling.