Dave Mosley, Seagate’s chairman and chief executive, opened the call with the number that framed everything else: annual revenue up 34%. The drive maker, which has spent the past two years betting its future on high-capacity hard drives for AI data centers, reported Wednesday that its fiscal 2026 revenue reached $12.195 billion, up from $9.097 billion a year earlier, with net income of $3.184 billion, up from $1.469 billion, an increase of nearly 117%. The fourth quarter, ended July 3, brought revenue of $3.629 billion against $2.444 billion a year earlier and net income of $1.294 billion against $488 million.
The results exceeded the company’s own expectations for both revenue and non-GAAP earnings per share, Mosley said, capping a year in which Seagate delivered record profitability and generated a record $3.1 billion in free cash flow. The driver, he said, is straightforward: robust cloud data center demand combined with disciplined execution, momentum he expects to continue into 2027.
The quarter’s details show how the AI buildout is reshaping the storage business. Gross margin hit 52.3% on a GAAP basis, up from 37.4% a year earlier, as demand for mass-capacity drives tightened the market. Operating margin reached 43.0%. The company’s Mozaic platform, built around heat-assisted magnetic recording, or HAMR, is the engine of the improvement: Seagate is ramping shipments of Mozaic 4+ drives to major cloud providers, and Mozaic 5+ is in customer qualification, with production targeted for late 2027.
The HAMR transition is worth understanding because it is the reason Seagate’s margins look like a software company’s. Heat-assisted magnetic recording uses a laser to heat the disk surface so that data can be written more densely, pushing far beyond the physical limits of the perpendicular recording used for two decades. Each Mozaic generation packs more terabytes into a single drive, and for hyperscalers, cost per terabyte remains the purchasing metric that matters most. A drive that holds more data at the same power and floor-space cost wins the order, which is why the major cloud providers have been qualifying Mozaic drives as fast as Seagate can ship them.
The balance sheet story was as strong as the operating one. Seagate generated $3.7 billion in cash flow from operations for the year, reduced its debt by $1.4 billion to $3.6 billion, and returned $810 million to shareholders through dividends and share repurchases. Cash and equivalents stood at $1.7 billion at year-end, and the company exited with 227 million shares outstanding. For a company that carried a heavy debt load through the last industry downturn, the repair work is largely complete, and the capital return program gives management a way to keep the stock working for holders while the HAMR ramp plays out.
The results land in a storage market that has turned from a commodity slog into one of the cleanest demand stories in hardware. AI training and inference clusters do not just need compute; they need to keep the data those models train on, and the data they generate, somewhere cheap and reliable. Nearline hard drives remain the cheapest place to put it, and the hyperscalers that dominate AI infrastructure spending have become Seagate’s most important customers. Analysts note that the same buildout that drove the memory supercycle has quietly done the same for mass storage, with drive shipments and prices rising through the year as AI capacity absorbed supply.
The risks are visible too. Seagate’s customer base is concentrated among a handful of hyperscalers, which gives those customers unusual pricing power when demand softens. The HAMR transition, though technically proven, remains expensive to execute, and any slip in the Mozaic roadmap would reopen the door to competitors. Western Digital, its principal rival in the drive market, has followed a similar HAMR path, and Solidigm, now owned by SK Hynix, competes for the enterprise SSD dollars that sit alongside Seagate’s core business. A sharp pullback in hyperscaler capital spending, the same fear that has rattled memory and semiconductor stocks this month, would hit Seagate’s order book before it showed up in anyone else’s numbers.
For now, the market’s mood is with the company. Drive prices have risen through the year, and management’s confidence in 2027 suggests the order books extend well past the current quarter. The record free cash flow gives Seagate the means to keep buying back stock and retiring debt while funding the Mozaic ramp, and the balance sheet strength means it does not need capital markets to execute its plan.
The deeper question is whether the storage boom is a cycle or a structural shift. Bears argue that hyperscalers will eventually right-size their storage capital spending as AI infrastructure matures, the same argument they made about memory. Bulls counter that the sheer volume of data AI systems produce, training sets, logs, embeddings, synthetic data, leaves the industry with no cheaper alternative to high-capacity drives at scale. Wednesday’s numbers give the bulls the evidence, and the balance sheet gives the company the room to wait for the answer.
