Seagate Shares Climb After 50% Margin Projection Highlights Operating Leverage

NEW YORK, July 29, 2026, 05:58 EDT – Seagate shares advanced on Tuesday as the company’s forecast for 50% margins shifted investor attention to its operating leverage.

Shares of Seagate Technology Holdings plc NASDAQ:STX rose 5.9% to $791.11 in premarket trading before Wednesday’s open, after dropping 8.5% the previous day. Activity in premarket hours was elevated.

The rebound was primarily fueled by the outlook rather than the quarterly results. Seagate projected September-quarter revenue of $4.1 billion, with a possible variation of $100 million in either direction. This midpoint is 9.3% higher than the $3.75 billion LSEG consensus.

The projected adjusted earnings of $7.30 per share are 25.9% higher than the LSEG consensus. Executives anticipate an adjusted operating margin close to 50%, up from 44.6% in the June quarter.

The margin adjustment is the key indicator for investors. An initial midpoint estimate suggests adjusted operating profit in the region of $2.05 billion. In the previous quarter, Seagate reported $1.619 billion.

Accordingly, Seagate stands to gain around $431 million in operating profit from $471 million in extra revenue, equating to about 92 cents of operating profit for every additional dollar of sales. The figure is an early estimate, as management referred to the margin target as approximate.

Metric	Q4 FY2026 actual	Q1 FY2027 midpoint	Sequential change
Revenue	$3.629 billion	$4.100 billion	+$471 million
Non-GAAP operating margin	44.6%	About 50.0%	+5.4 points
Non-GAAP operating profit	$1.619 billion	About $2.050 billion	+$431 million
Non-GAAP operating expenses	$293 million	About $300 million	+$7 million
Non-GAAP diluted EPS	$5.71	$7.30	+27.8%

The Q1 operating profit number is an early estimate based on midpoint revenue and the company’s expected margin range.

Expenses account for the sharp conversion. Adjusted operating costs are projected to rise by only $7 million. Chief Financial Officer Gianluca Romano stated incremental gross margin had been “very strong for the last several quarters.” Investing.com

Revenue for the fourth quarter increased by 48.5%, totaling $3.63 billion, topping forecasts of $3.49 billion from analysts. Adjusted earnings were $5.71 per share, ahead of the $5.09 average estimate.

Data-center revenue rose 57% to $2.93 billion, accounting for 81% of overall revenue. Nearline exabyte shipments grew 43% to 195 exabytes.

Seagate reported that nearline supply has been mostly committed until the end of calendar 2028. Clients are now making plans for 2029 and further into the future. The company is increasing production of Mozaic 4+ drives with two prominent global cloud customers.

Chief Executive Dave Mosley said, “As AI accelerates data generation and its value, we see durable long-term demand for mass capacity storage.” Seagate Investors

Cash flow improved as well. Free cash flow for the fourth quarter came to $1.12 billion, with the full year generating $3.11 billion. Seagate intends to pay down a further $1.2 billion of debt in the September quarter.

Shares climbed 8.1% over the last week as of Friday’s close, before dropping 12.3% across Monday and Tuesday.

Prior to earnings, Morgan Stanley’s NYSE:MS Erik Woodring maintained overweight ratings on both Seagate and Western Digital Corporation NASDAQ:WDC. He described worries about the sustainability of hard-drive demand as “overblown.” Investor’s Business Daily

The next peer assessment is scheduled for August 5. Western Digital is set to announce its fiscal fourth-quarter earnings after markets close. Before that, investors will focus on Wednesday’s Federal Reserve announcement and Seagate’s response during regular trading hours.

Risks: Data centers contributed 81% of revenue for the quarter, making results sensitive to fluctuations in cloud demand. The forecast anticipates little direct effect from newly announced tariffs. Seagate’s projections are based on non-GAAP metrics.

The execution test has become more targeted. Seagate is required to reach an operating margin of nearly 50% and increase its quarterly revenue by roughly 13%.

What is the performance of Seagate shares following the earnings announcement?

STX ended regular trading on July 28 at $747.30, falling 8.53%. As of 5:56 ET on July 29, premarket trading saw shares rise 6.38% to nearly $795. The stock remains about 31% lower than its peak of $1,145. The gain follows strong results, but confirmation during regular hours is still awaited. Finviz

Were fiscal fourth-quarter results significantly ahead of expectations?

Seagate posted revenue of $3.629 billion, climbing 48.5% from a year earlier. Adjusted EPS was $5.71, marking a 121% increase and beating the $5.09 LSEG consensus. Revenue surpassed the consensus view of $3.49 billion by roughly 4%. GAAP net income climbed to $1.294 billion compared with $488 million the previous year. The results topped forecasts across the board. Seagate Investors

How ambitious is the fiscal first-quarter outlook provided by management?

Seagate provided first-quarter revenue guidance at $4.1 billion, with a possible variance of $100 million. This midpoint is 13% higher than the previous quarter and 9% over LSEG consensus. Projected adjusted EPS at $7.30 exceeds the $5.80 consensus by 26%. Management anticipates a non-GAAP operating margin close to 50%, compared to 44.6% in the prior quarter. The forecast factors in limited effects from tariffs and Middle East developments as of July 28. The guidance is strong, but remains subject to conditions.

Is AI demand resulting in tangible shipments, rather than solely being reflected in what management says?

Data center revenue was $2.933 billion, accounting for 81% of sales in the quarter. This marked a 57% increase from the same period last year. Nearline shipments totaled 195 exabytes, rising 43%, with overall HDD shipments at 218 exabytes. Roughly 90% of shipped exabytes were destined for data center applications. Seagate stated nearline supply is mainly allocated through calendar 2028. The allocations enhance visibility, but future demand may still vary.

Will record margins keep climbing?

Adjusted gross margin for Q4 was 52.7%, increasing by 570 basis points from the previous quarter. Adjusted operating margin advanced to 44.6%, a rise of 710 basis points. Revenue posted a 17% sequential gain, while operating expenses were down 1% to $293 million, highlighting significant operating leverage. Operating margin is forecast at about 50% for the first quarter. Sustainability is tied to pricing, product composition, and ongoing supply control.

Is HAMR turning into a quantifiable edge over competitors?

Mozaic 3+ products are deployed with every major cloud customer. Mozaic 4+ enables support for up to 44 terabytes per unit. Adoption is increasing with the two leading global cloud providers. More customer qualifications are in progress. Qualification shipments for Mozaic 5+ are planned to start in late 2027. The roadmap is concrete, though further adoption depends on ongoing execution.

To what extent has the balance sheet strengthened, and are shareholders seeing gains?

Fourth-quarter free cash flow stood at $1.118 billion, resulting in a total yearly FCF of $3.105 billion. Outstanding debt closed at $3.565 billion, a 29% decrease from the previous year. Cash holdings reached $1.704 billion, putting net debt at around $1.899 billion. Net leverage dropped to 0.4 times adjusted EBITDA. Seagate distributed $810 million throughout FY26 in dividends and stock repurchases. At the current quarterly dividend, the yield annualizes to approximately 0.37% on about $795. Despite share buybacks, shares outstanding increased 7% to 227 million, so dilution has not been fully offset.

Does the earnings beat support the current valuation?

At the close on July 28, STX was valued at nearly 54 times FY26 GAAP EPS. Seagate’s full-year adjusted EPS commanded a multiple of approximately 48. With shares trading near $795 in premarket, those trailing price-to-earnings ratios climb to about 57 and 51, respectively. These numbers are high. Since these are trailing ratios, improved FY27 earnings would lower them. Data centers now contribute 81% of revenue, so any slowdown among hyperscalers has significant impact. The current valuation offers little margin for softer pricing or potential HAMR setbacks. Finviz

Mateusz Kaczmarek Latest posts

Mateusz Kaczmarek is a financial and technology journalist at TS2.tech, covering stocks, artificial intelligence, semiconductors and global market developments. A graduate of the Poznań University of Economics and Business, he previously worked in financial analysis before moving into business journalism. His reporting focuses on technology companies, market trends and the forces shaping global investment markets. Follow Mateusz Kaczmarek on Google News.

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