Seagate Technology Q1 FY2027: revenue up 61% to $4.23B, EPS tripled to $7.59 on a 57% gross margin

Seagate's fiscal first quarter of 2027 (the 13 weeks from July 4 to October 2, 2026; Seagate's fiscal year runs to the Friday closest to June 30, so this is the first quarter of the year that ends in mid-2027) produced revenue of $4.23 billion, up 61% from $2.63 billion a year earlier and up 17% from the $3.63 billion of the previous quarter. Net income tripled to $1.76 billion, or $7.59 per diluted share against $2.43. GAAP gross margin (the share of revenue left after the cost of making the drives) reached 57.3%, up from 39.4% a year ago and 52.3% last quarter. Both revenue and adjusted EPS came in above the top of the range management gave in July.

This analysis is written from the earnings release (Exhibit 99.1 to the 8-K). The full 10-Q has not been filed yet, so exabytes shipped, the data-center share of revenue and management's line-by-line explanations of each change are not available here; Seagate put those in a separate supplemental document on its investor-relations site.

Key metrics

Free cash flow is operating cash flow minus spending on equipment and facilities ($1,690M − $211M this quarter; $532M − $105M a year ago). Non-GAAP figures are Seagate's own adjusted measures; what they exclude is covered below.

What drove the quarter

Margins did nearly all the work. Revenue grew by $1,604M, but cost of revenue grew by only $214M ($1,592M to $1,806M). Gross profit therefore rose by $1,390M to $2,427M. Operating expenses (product development, marketing and administration, restructuring) rose just $20M to $363M, which is why operating margin — the share of revenue left after running the business, before interest and tax — widened even more than gross margin, to 48.8%. Since the release carries no exabyte or price-per-terabyte data, we can't split this quarter's revenue growth between volume and price. The fiscal 2026 10-K credited the year's margin gains "primarily" to "pricing actions" and a mix shift to higher-capacity drives, and the cost line here behaves the same way: shipping a lot more revenue with only 13% more cost.

Sequentially, the step-up continued. Against fiscal Q4 2026 (the June quarter), revenue rose 16.6% ($3,629M to $4,233M), gross margin rose 5.0 points (52.3% to 57.3%) and operating margin 5.8 points (43.0% to 48.8%). Net income rose 36% ($1,294M to $1,761M). CEO Dave Mosley called it "another quarter of record profitability" and described "a strengthening demand environment."

Below the operating line, two things roughly cancelled. Interest expense halved to $41M from $80M because Seagate has been paying down debt. But retiring that debt early cost a $44M "net loss from debt transactions" (against $6M a year ago). Total other expense was $82M against $80M. The tax rate was also little changed: $221M on $1,982M of pre-tax income, about 11.2%, against about 10.6% a year ago.

Balance sheet, cash and capital returned

• Seagate retired about $1.2 billion of debt principal in the quarter ($1,262M of cash spent on redemptions and repurchases), cutting gross debt to $2.4 billion. After the quarter closed it retired another $750 million, bringing gross debt to $1.6 billion — down from $3.6 billion at the July 3 fiscal year-end. That is why interest expense is falling.
• Cash ended at $1.26 billion, down from $1.70 billion, because debt repayment and shareholder returns ($1.83 billion combined) exceeded free cash flow.
• Shareholder returns were $568 million: $400 million of buybacks (against $29 million a year ago) and $168 million of dividends. The quarterly dividend goes up about 3% to $0.76 per share, payable January 7, 2027.
• Shareholders' equity rose to $3.45 billion from $2.17 billion in one quarter.

What the headline numbers hide

The year-ago quarter was a week longer. Seagate's fiscal year ends on the Friday closest to June 30. Fiscal 2026 had 53 weeks and began June 28, 2025, so its first quarter (to October 3, 2025) ran 14 weeks; this quarter (July 4 to October 2, 2026) ran 13. The release doesn't state the week counts, but they follow from those dates and the 10-K's fiscal-year definition. Per week, revenue rose about 73% ($326M against $188M), not 61%. The headline growth rates understate the change.

Cash backs the profit. Operating cash flow of $1,690M was 96% of net income ($1,761M). Receivables rose $283M during the quarter (to $1,817M, +18% from July 3), slightly faster than the 17% sequential revenue gain, and inventory rose $129M (+8%) — neither out of line with a business growing this fast. A $272M rise in accrued expenses, income taxes and warranty helped operating cash flow; some of that is likely tax owed but not yet paid, which will reverse when it is paid.

GAAP and adjusted EPS are almost the same, for a reason. Non-GAAP EPS of $7.68 is only $0.09 above GAAP. Seagate's adjusted figure excludes share-based compensation ($0.33 per share), the debt-retirement loss ($0.19), restructuring ($0.02) and intangible amortization ($0.01). But it then taxes adjusted profit at a projected 15.5% rate, higher than the roughly 11% actually booked, which takes back $0.46. So the adjusted figure is not flattering the result.

The buybacks didn't shrink the share count. Despite $400M of repurchases, diluted shares rose 2.7% to 232 million (from 226 million) and basic shares rose 7% to 228 million (from 213 million). That fits the 10-K's description of the 2028 exchangeable notes: when holders exchange them, Seagate pays the principal in cash and delivers new shares for the value above it, which is large with the share price well above the $82.39 exchange price. EPS growth here came entirely from operations, not from a smaller share count.

One-offs: the $44M debt-retirement loss (about $0.19 per share) is the only notable non-recurring item, and it cuts GAAP profit rather than boosting it. Restructuring fell to $4M from $13M.

On balance the quarter's reported growth is understated rather than flattered: the year-ago comparison includes an extra week, GAAP profit absorbs a $44M debt-retirement loss, and neither the tax rate nor buybacks did any of the lifting.

Did last time's read hold up?

Our fiscal 2026 annual report said the key question was "whether that pricing discipline holds, more than whether demand does," and listed management's guidance of $4.1B ± $100M revenue and $7.30 ± $0.20 adjusted EPS. Both were beaten: revenue of $4.23B was above the top of the range, and adjusted EPS of $7.68 was $0.18 above the top. Gross margin rose again, from 52.3% to 57.3%, which is what holding prices firm while costs grow slowly looks like. We also flagged the HAMR ramp, customer concentration and a higher tax rate as risks; the release doesn't give enough detail to judge HAMR progress or concentration, and the tax rate (about 11%) stayed below the 15.5% non-GAAP rate Seagate plans with.

Takeaway: Seagate turned 61% more revenue into three times the profit because its costs barely moved: 87 cents of each extra revenue dollar became gross profit, and the comparison is against a quarter that was a week longer. The cash went first to debt, which will be down to $1.6 billion, from $3.6 billion at fiscal year-end, so interest costs keep falling — but buybacks are not yet shrinking the share count, because note exchanges keep adding shares.

Outlook

Management guides fiscal Q2 2027 (the quarter ending in early January 2027) to:

• Revenue of $4.8 billion ± $100 million, about 13% above this quarter.
• Non-GAAP diluted EPS of $9.20 ± $0.20, about 20% above this quarter's $7.68. The figure excludes roughly $0.30 per share of share-based compensation.

Mosley pointed to "long term customer demand visibility" and "supply discipline," meaning Seagate intends to add capacity through higher-capacity HAMR drives (heat-assisted magnetic recording, its technology for packing more data on each disk) rather than by building more drive output.

Our view. EPS guided up faster than revenue (about 20% against 13%) implies margins are expected to widen again from 57% gross. Seagate has beaten the top of its guidance two quarters running now, so the guide looks set with room. The risks are the ones the fiscal 2026 10-K described: demand concentrated in a small number of cloud buyers, the HAMR ramp, and a historically cyclical industry where high margins attract more supply. Margins this high have much further to fall than the 35–40% gross margins of a year ago if pricing turns. The 10-Q, due in the coming weeks, will show whether this quarter's gains came more from price or from exabyte volume — the split that matters most for how durable these margins are.

Source: Seagate Technology Holdings plc earnings release for the fiscal first quarter of 2027, Exhibit 99.1 to Form 8-K filed October 27, 2026. Fiscal-year definitions and 2028 note terms from the Form 10-K for the fiscal year ended July 3, 2026.