Story Stocks^®

Seagate Technology (STX) delivered a record-breaking conclusion to calendar 2025, clearing a high hurdle as investor expectations were sky-high heading into the print. While STX is known for guiding conservatively, its 3Q26 guidance for revenue and earnings easily topped consensus, signaling sustained momentum in the high-capacity storage market.

• STX reported record non-GAAP EPS of $3.11, a 19% sequential increase, and set a new company record for non-GAAP gross margin at 42.2%. These milestones were driven by the execution of a disciplined pricing strategy and an improving mix of high-capacity drives.
• The data center market remains the primary engine of growth, accounting for 87% of shipment volume in the December quarter. Revenue from this segment rose to $2.2 bln, up 28% yr/yr, as cloud and enterprise customers transition to higher-capacity drives to support AI workloads.
• The surge in AI infrastructure buildout is a critical revenue driver, particularly for training large language models and maintaining model integrity through checkpoint data sets. Emerging "agentic AI" and video applications, which have seen YouTube uploads jump from 2 mln to 20 mln daily in three years, are fueling massive demand for persistent, high-capacity storage. 
• Momentum for STX’s Mozaic-based HAMR (Heat-Assisted Magnetic Recording) products is accelerating, with quarterly shipments exceeding 1.5 mln units by year-end. Mozaic 3 drives are now qualified with all major US Cloud Service Providers, and the second-generation Mozaic 4 (4TB per disc) products are on track for a ramp later this quarter.
• Supply-demand dynamics remain exceptionally tight, with STX’s nearline capacity now fully allocated through CY26. Management expects to begin accepting orders for 1H27 in the coming months as visibility strengthens through long-term agreements with major cloud customers.
• STX's robust results and bullish outlook are providing a significant sympathy lift to its chief rival, Western Digital (WDC), which is scheduled to release quarterly results tomorrow afternoon.

Briefing.com Analyst Insight:

STX’s performance represents a definitive validation of its HAMR technology as the long-term winner for mass-capacity storage. The fact that STX is already fully allocated through 2026 suggests that the traditional cyclicality of the hard drive market is being smoothed out by the relentless storage requirements of the AI era. If STX continues to hit its roadmap milestones, including the 5TB and 10TB per disc targets, it will likely maintain a durable competitive moat against alternative storage technologies for the next decade.