Seagate Q1 FY27: Two More Exabytes, $604M More Revenue. Price Did the Work.

The setup

Seagate grew revenue $604M in the September quarter and shipped two more exabytes to do it. Revenue rose 16.6% sequentially to $4,233M; HDD exabytes went from 218 to 220, up 0.9%. Both quarters had 13 weeks, so there is no calendar in the way of that comparison. Two extra exabytes at June's revenue per terabyte account for $33.3M of the gain, 5.5%. The other $570.7M is revenue per terabyte, which rose 15.6% in a single quarter to $19.24. Price did the work, and it did almost all of it.

That makes the call in the September dive a hit, and it should be graded before anything else. On September 29 this site wrote that if HDD exabytes for the quarter ending October 2 came in below 228, the $4.1B guide was being met on price and Seagate was running the same model tkal found at Western Digital; at 237 or more, June's step was HAMR capacity arriving on schedule and the read was wrong. The supplemental says 220. Revenue landed $133M above the $4.1B midpoint, and revenue per terabyte cleared the top of the $17.30 to $17.98 band the guide implied by $1.26. The call held, on both its primary and its secondary test.

One part of the September framing needs correcting, and it cuts against the year-on-year version of the test. The quarter ended October 3, 2025 had 14 weeks, because fiscal 2026 had 53. The September dive set its 228 line as 25.6% growth on that quarter's 181.5 exabytes without saying the base carried an extra week. Per week, exabytes grew 30.5% year on year, not 21.2%. The library has a rule for exactly this, divide by the weeks before you read the growth rate, and the September dive did not apply it. The sequential test has no week problem, and it lands the same way: the September dive called a return to the 4.7% to 4.9% sequential pace of December and March. The quarter printed 0.9%.

So the forward call follows from the same arithmetic. Our call: Seagate's December quarter is a price quarter again. HDD exabytes for the quarter ending January 1, 2027 stay below 237.5, under 25% growth on the 190.0 of a year earlier (13 weeks against 13), while revenue lands inside the $4.7B to $4.9B guide. At 237.5 exabytes the $4.8B midpoint needs revenue per terabyte of $20.21; at a flat 220 it needs $21.82. We are wrong if exabytes print at 237.5 or more, because that is the mid-20% exabyte growth management keeps naming as its target. Seagate has not announced the date; on its usual calendar the print lands in late January 2027 (date not yet announced).

None of this is a criticism of the quarter. It was the best in Seagate's history on every profit line it reports: non-GAAP gross margin 57.8%, up 510 basis points in a quarter; non-GAAP operating margin 50.7%; non-GAAP EPS of $7.68 against a $7.30 guide midpoint; free cash flow of $1,479M. Dave Mosley, the chief executive, opened the release with "another quarter of record profitability and our highest ever free cash flow." The filing agrees with him. The question this page is about is which ingredient produced it, and what that ingredient promises for the next one.

The numbers

Revenue of $4,233M was 61% above a year earlier and 3.2% above the $4.1B guide midpoint. GAAP cost of revenue was $1,806M, so GAAP gross profit reached $2,427M at a 57.3% margin, against 39.4% a year ago. Operating expenses were $363M on a GAAP basis and $300M non-GAAP, 7.1% of revenue; GAAP operating income was $2,064M, 48.8% of revenue. Below the line, interest expense fell to $41M from $80M a year earlier as the debt came down, and a $44M net loss on debt transactions came from the $1,262M of notes Seagate redeemed or repurchased in the quarter. Tax was $221M on $1,982M of pre-tax income. Net income was $1,761M, GAAP diluted EPS $7.59.

The incremental arithmetic is the cleanest way to read the margin. Gross profit rose $529M on $604M of extra revenue, an 87.6% incremental gross margin. That is what a quarter looks like when almost none of the added revenue came with added product. The cost of the extra two exabytes was small; most of the extra revenue arrived as margin.

The guide is the same shape again. Revenue of $4.8B plus or minus $100M for the December quarter, up 69.9% on the $2,825M of a year earlier and 13.4% on September, with non-GAAP EPS of $9.20 plus or minus $0.20, non-GAAP operating expenses of about $300M, a tax rate of about 16% and an operating margin the supplemental describes as "towards mid 50% range of revenue." Seagate also raised the quarterly dividend to $0.76 from $0.74.