Is Seagate Still The Business You Bought?

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If you own Seagate Technology (STX), you likely bought into a hard disk manufacturer whose profits expanded in strong years and contracted in weak ones. The company released its fiscal first quarter of 2027 results on October 27, 2026. Management said on the earnings call that the new fiscal year was off to an outstanding start. Does that picture of a hard disk maker riding the ups and downs still fit the company you own?

Not Quite: Seagate Now Earns Far More Per Sale

Not on profits: over the last twelve months, Seagate reported an operating margin of 40.5%, the highest of the 40 quarter ends since fiscal Q2 2017. The company previously logged a median margin of 13.0% across the 56 quarter ends from December 2011 to October 2025, and it posted an operating loss in the twelve months to September 2023.

Seagate also turns far more of its sales into cash. Free cash flow over the last twelve months represented 30.1% of revenue, compared with a median of 11.3% over those 56 quarter ends. Shareholders can welcome this news, because the underlying business is now more profitable than it has been in years.

Why Is Seagate Earning So Much More Now?

Management said on the October 27 call that the gross margin rose because of better pricing and a richer product mix as the company ramps its Mozaic 4 products. Overall sales expanded as well, with revenue reaching $4.23 billion in fiscal Q1 2027, up 61.0% from a year earlier.

The underlying products remain hard disks, and most of these drives go to data centers. Those customers brought in 81% of revenue in the September quarter, management said. Seagate has changed how it sells those disks. Management said the company has now allocated most of the data center storage capacity it can make to customers under long-term supply agreements through calendar 2028.

Not every cost is moving in Seagate’s favor. Management said parts purchased from outside suppliers cost more than a year ago, partly offsetting the savings the company makes in its own factories. So Seagate still makes the same hard disks, but it now sells them at better prices and on longer contracts.

What Seagate’s Higher Margins Mean For Your Money

This additional cash is meant to go back to investors. Seagate generated $4.16 billion of free cash flow over the last twelve months, and management said the company is now shifting its focus toward shareholder returns, with share repurchases as the main tool. Seagate is raising its quarterly dividend by about 3% to $0.76 a share. Management expects to increase buybacks significantly starting in calendar 2027.

Buybacks have not yet shrunk your slice. Seagate had 232 million diluted shares in fiscal Q1 2027, compared with 226 million a year earlier. Investors also pay a premium for this business relative to the broader market. The stock trades at 33.4 times its earnings over the last twelve months, against 22.6 for the S&P 500.

Seagate’s profits have historically swung with its sales, shifting from an operating loss in the twelve months to September 2023 to the highest margin of the last 40 quarter ends. Based on the latest figures, investors now own a company that earns far more on each sale and has promised most of its data center supply to customers in advance. The stock still fell 31.8% in October, including a 10.2% drop on October 2 after a report that rival Toshiba plans to double its capacity for AI data center drives. Seagate’s operating margin is the measure to watch when the company reports its fiscal second quarter, expected in January 2027.

How To Act On STX?

Not necessarily on Seagate Technology alone, if your goal is long-term wealth. Wealth is built by owning the companies that keep outperforming, the leaders of their industries, wherever they are. Seagate Technology is one. Over the five years to October 2026, its stock rose 734%, ahead of 17 of the 20 other companies in Technology Hardware, Storage & Peripherals, where the typical company rose 2.6%.

Finding companies like these takes comparison across industries and sectors, and that is what the Trefis High Quality (HQ) Portfolio does. It holds 30 quality companies in equal weight and, since its inception in September 2020, has returned more than 105%, ahead of a benchmark that combines the S&P 500, S&P Mid-cap and Russell 2000. See how we find the leaders.

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