Seagate Technology (STX:NASDAQ) shares fell about 6% in after-hours trading on Tuesday, October 27, after the company reported the most profitable quarter in its history. Fiscal Q1 2027 revenue rose 61% to $4.23 billion, non-GAAP EPS came in at $7.68, and free cash flow hit a record $1.5 billion.
The outlook was even stronger. Seagate guided to $4.8 billion in revenue and $9.20 in non-GAAP EPS for the December quarter at the midpoints. Analysts had expected $4.53 billion and $8.58, according to Benzinga Pro data. The stock closed at $667.85 before the report, roughly 30% below where it traded a month earlier.
This Was Seagate’s Best Quarter Yet
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Non-GAAP gross margin hit 57.8%, up from 40.1% a year earlier.
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Non-GAAP operating margin reached 50.7%, up from 29.0%.
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Seagate retired $1.2 billion of debt during the quarter, reducing gross debt to $2.4 billion, and repaid another $750 million after quarter-end, bringing principal debt to about $1.6 billion. It also raised its quarterly dividend about 3% to $0.76.
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On the earnings call, management said it expects to significantly increase buybacks starting in calendar 2027. It has $4.4 billion left on its authorization.
The margin is the number to focus on. Seagate’s quarterly gross margin was 11.14% in the September 2023 quarter and 52.30% in the July 2026 quarter. This quarter’s 57.3% GAAP figure is more than five times the 2023 level.
Seagate Stock Is Getting Cheaper as Earnings Climb
Before the report, Seagate traded at 18.22x NTM earnings. That’s below its five-year mean of 26.17x and less than half the 40x-plus it reached in June. (The mean is inflated by 2023, when trough earnings pushed the multiple past 127x.)
Earnings estimates are heading the other way. Analysts expect normalized EPS of $36.66 for fiscal 2027 and $57.44 for fiscal 2028. The new Q2 guide alone works out to $36.80 annualized, already above the full-year estimate. At about $630 after hours, the stock trades at roughly 17x this year’s EPS estimate and 11x next year’s.
The price is falling while earnings are rising.
TIKR Tracks 27 Analysts on Seagate. How Many Say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Seagate, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Seagate’s Analyst Ratings
Why Investors Won’t Pay Up
The fear is supply. On October 2, Toshiba said it had shipped the first drives from an expanded nearline production line in the Philippines and aims to nearly double its annual production capacity, on a storage capacity basis, by its fiscal 2027. Seagate and Western Digital (WDC:NASDAQ) fell sharply on the news. Toshiba is the only other major hard drive maker, and tight supply is what has let Seagate raise prices. Higher pricing has helped expand margins, alongside an improving product mix and manufacturing efficiencies as Seagate shifts to higher-capacity HAMR drives.
