Revenue and profitability
- Q1 FY2026 revenue: $2.629B, up 21% YoY and 8% QoQ; gross profit (GAAP) not disclosed in the press release, but non-GAAP gross margin reached a record 40.1%, up 220 bp sequentially; non-GAAP operating margin expanded 280 bp QoQ to 29%.
- Net income and EPS (non-GAAP): Non-GAAP EPS was $2.61, above the high end of guidance; GAAP EPS not provided in the transcript, but net income was $549M.
- Operating leverage: Strong top-line growth and leverage delivered a 19% increase in non-GAAP operating income to $763M; non-GAAP net income rose to $583M with 223M–ish diluted shares used for the quarter.
Demand and mix
- Data center revenue: $2.1B, representing 80% of total quarterly revenue; up 13% QoQ and 34% YoY; 159 exabytes shipped to data center customers, up from 137 exabytes prior period. Cloud exabyte demand was up for the ninth straight quarter, with nearline volumes skewing toward 24TB+ drives (roughly 80% of nearline volume at or above 24TB).
- Edge IoT: $515M revenue, down from data-center strength but expected to recover modestly in December quarter.
- Exabyte and capacity growth: Q1 exabytes of 182, up 32% YoY; average nearline drive capacity increased 26% YoY; Mozaic platform shipments exceeded 1 million drives in the September quarter.
Cash flow and balance sheet
- Free cash flow: $427M (flat QoQ despite a sizable variable compensation payout);
- Capital expenditures: $105M in the September quarter (about 4% of revenue); full-year calendar 2026 capex guidance remains 4–6% of revenue.
- Shareholder returns: Dividend increased ~3% to $0.74 per share; $29M of share repurchases executed in the quarter; management reiterated commitment to returning at least 75% of free cash flow to shareholders over time.
- Liquidity and leverage: Cash and cash equivalents ~$2.4B; gross debt ~$5.0B; net leverage around 1.5x based on adjusted EBITDA of ~$831M for the September quarter; S&P upgrade to Seagate’s credit rating highlighted by management.
Outlook and guidance
- December quarter guidance: Revenue guidance of $2.7B ± $100M, implying ~16% YoY growth at the midpoint; non-GAAP operating expenses ≈ $290M; non-GAAP EPS guidance of $2.75 ± $0.20; tax rate guidance of ~16%; diluted shares ~227M (including ~10M shares from the 2028 convertible notes).
- Margin expectations: Management indicated December quarter non-GAAP operating margin around 30%, signaling continued margin expansion as HAMR adoption and Mozaic mix advance.
- Strategic trajectory: Management reaffirmed a focus on HAMR-based road map and exabyte growth through high-capacity nearline drives for AI and cloud workloads, with qualification of the Mozaic platform expanding to additional CSPs and volumes in 2026–2027.