Data Storage Leader Demonstrates Operational Excellence Amid AI-Driven Demand Surge
Seagate Technology Holdings plc (NASDAQ: STX) has reported fiscal second quarter 2026 results that surpassed market expectations, delivering revenue of $2.83 billion alongside record-setting profitability metrics. The mass-capacity data storage innovator achieved a non-GAAP gross margin of 42.2% and non-GAAP diluted earnings per share of $3.11—both company records that underscore the strategic value of its heat-assisted magnetic recording (HAMR) technology roadmap.
The December quarter results represent a significant year-over-year improvement, with revenue climbing from $2.33 billion in fiscal Q2 2025 to $2.83 billion in the most recent period. This 21.5% revenue increase coincided with dramatic margin expansion: GAAP gross margin jumped from 34.9% to 41.6%, while operating margin surged from 21.0% to 29.8%. These figures signal not merely top-line growth, but fundamental improvements in operational efficiency and product mix.
HAMR Technology Drives Data Center Performance
Chair and Chief Executive Officer Dave Mosley attributed the quarter’s outperformance to three converging factors: disciplined operational execution, sustained data center demand, and accelerating adoption of the company’s Mozaic product family. Mozaic drives leverage HAMR technology to deliver superior areal density—the amount of data stored per square inch of disk surface—a critical capability as hyperscale cloud providers and enterprise customers confront exponential data growth.
The artificial intelligence revolution has fundamentally altered data center economics. Machine learning model training, inference workloads, and AI-generated content create massive unstructured datasets that require cost-effective storage at exabyte scale. Traditional storage architectures struggle to balance performance requirements with total cost of ownership. Seagate’s areal-density-focused roadmap addresses this tension directly, enabling customers to store more data per drive while reducing power consumption and physical footprint per terabyte.
Strong Cash Generation Supports Capital Allocation Strategy
Beyond income statement performance, Seagate demonstrated robust cash flow generation during the quarter. The company produced $723 million in operating cash flow and $607 million in free cash flow, providing substantial financial flexibility. Management deployed this capital strategically, retiring $500 million in Exchangeable Senior Notes due 2028 while returning $154 million to shareholders through dividends.
The board of directors declared a quarterly dividend of $0.74 per share, payable April 8, 2026, to shareholders of record on March 25, 2026. This dividend reflects management’s confidence in sustainable cash generation even while investing aggressively in next-generation storage technologies. As of quarter end, Seagate maintained $1.0 billion in cash and cash equivalents with 218 million shares outstanding, establishing a solid foundation for continued innovation and shareholder returns.
Forward Guidance Reflects Momentum and Cautious Optimism
For fiscal third quarter 2026, Seagate projects revenue of $2.90 billion (plus or minus $100 million) and non-GAAP diluted EPS of $3.40 (plus or minus $0.20). This guidance incorporates the net dilutive impact from remaining Exchangeable Senior Notes and assumes minimal disruption from recently announced global tariff policies. The sequential revenue guidance suggests continued market share gains in data center applications where capacity-optimized nearline drives represent the dominant storage tier.
The company’s performance validates a multi-year thesis: as data creation accelerates and AI workloads proliferate, storage density improvements become increasingly valuable. Organizations cannot simply add more drives indefinitely; physical space, power infrastructure, and cooling capacity impose hard limits. Seagate’s HAMR technology roadmap directly addresses these constraints, positioning the company to capture disproportionate value as enterprise IT architectures evolve to support AI-first applications and analytics-intensive workloads.
About Seagate
Seagate Technology is a leading innovator of mass-capacity data storage. We create breakthrough technology so you can confidently store your data and easily unlock its value. Founded over 45 years ago, Seagate has shipped over four billion terabytes of data capacity and offers a full portfolio of storage devices, systems, and services from edge to cloud. To learn more about how Seagate leads storage innovation, visit www.seagate.com and our blog, or follow us on X, Facebook, LinkedIn, and YouTube.
