Seagate’s Massive Q1 Beat Shows the Power of AI Demand

Seagate (NASDAQ: STX) shares surged by double digits after the data storage giant crushed estimates in its fiscal Q1 2026 earnings. Revenue jumped 21% year-over year to $2.63 billion, and adjusted EPS hit $2.61, both comfortably above Wall Street expectations. The headlines celebrated the AI-driven turnaround, but buried in Seagate’s filings are a few key operating metrics that reveal just how deep this momentum runs.

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1. Record Exabyte Shipments

Seagate shipped 182 exabytes of hard-drive capacity in the quarter ended October 3, 2025, up sharply from a year ago. Of that, 159 exabytes came from nearline drives — the high-capacity units used in cloud and hyperscale data centers. That nearline figure underscores how critical Seagate’s cloud exposure has become to its top line growth.

2. The Capacity Story Behind AI

Average capacity per drive climbed to 14.6 terabytes, reflecting a 26% year-on-year increase in nearline drive capacity. That step-up matters because cloud operators are buying fewer, but much larger, drives to feed AI and data-intensive workloads. The higher average density translates directly into margin expansion — one of the drivers behind Seagate’s outsized EPS beat.

3. Mozaic HAMR Goes Mainstream

Seagate’s next-generation Mozaic HAMR drives, which use heat-assisted magnetic recording to pack more bits per platter, quietly crossed a major production milestone. The company shipped over 1 million Mozaic drives during the September quarter. That’s a signal that Seagate has moved past the proof-of-concept phase and into commercial scale.

4. Building Cloud Credibility

Five major cloud service providers have now qualified Seagate’s Mozaic 3+ HAMR platform, with another hyperscale customer in qualification for Mozaic 4+, expected to ramp in the second half of FY26. These qualifications take years to secure and often translate into multi-year supply visibility, a key factor supporting the company’s raised guidance.

5. The Bigger Picture

Beneath the AI buzz, Seagate’s strong execution in drive density, product qualification, and manufacturing scale suggests the company has reached an inflection point. Investors focusing only on EPS might overlook how technology advances and customer adoption are now aligning with the surge in AI-driven storage demand.

While Seagate remains a cyclical business, this quarter introduced something new—greater visibility. With next-generation HAMR drives ramping, deeper cloud qualifications, and continued gains in drive capacity, the market’s excitement around STX may signal more than a short-term rally. It could mark the beginning of a sustained structural uptrend.

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