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Seagate Technology Holdings PLC (NASDAQ:STX) reported stronger-than-expected fiscal third quarter 2026 results on April 28, driven by sustained demand for high-capacity data storage tied to artificial intelligence workloads, with shares rising about 12%.
The company posted revenue of $3.11 billion, ahead of analyst expectations of roughly $2.94 billion to $2.96 billion. Adjusted earnings per share came in at $4.10, topping forecasts that ranged from $3.50 to $3.97.
On a GAAP basis, Seagate reported diluted EPS of $3.27, while non-GAAP net income rose to $934 million from $407 million a year earlier. Gross margins also improved significantly, with non-GAAP gross margin at 47.0%, compared with 36.2% in the same quarter last year. Non-GAAP operating margin expanded to 37.5% from 23.5% a year earlier.
Cash generation remained strong, with $1.1 billion in cash flow from operations and $953 million in free cash flow. During the quarter, Seagate retired $641 million in debt and returned $191 million to shareholders through dividends and buybacks.
The company attributed the results to stronger pricing, disciplined supply management, and robust demand for nearline storage used in data centers, particularly those supporting AI and cloud workloads.
“Seagate delivered outstanding March quarter results, exceeding the high end of our revenue and EPS guidance, achieving record margin performance, and generating close to $1 billion in free cash flow,” Seagate CEO Dave Mosley said in a statement.
Looking ahead, Seagate issued fiscal fourth-quarter guidance above Wall Street expectations. The company projected revenue of $3.45 billion, plus or minus $100 million, and non-GAAP diluted earnings per share of $5.00, plus or minus $0.20.
The outlook factors in the expected impact of exchangeable senior notes due in 2028, while assuming minimal effects from global tariffs and geopolitical risks as of the release date.
Following the report, Bank of America raised its price target on Seagate to $840 from $700 and reiterated a ‘Buy’ rating, citing stronger-than-expected execution and improving demand visibility across the data storage cycle.
The firm described the quarter as strong across pricing, revenue, margins, and cash flow, noting continued strength in demand partly driven by AI workloads.
The analysts wrote that tight HDD supply is supporting pricing power, with dollars per terabyte rising 6% year over year and 6% quarter over quarter.
They also highlighted improving long-term visibility, pointing to build-to-order contracts extending through fiscal 2027 and nearline capacity that is now almost fully allocated through calendar 2027. Bank of America believes this supports sustained pricing stability and margin expansion.
The firm expects incremental gross margins to remain elevated and sees continued improvement in profitability and cash generation as Seagate shifts further toward HAMR technology and higher-value storage products. It also noted that capital returns are expected to gradually shift from debt reduction toward buybacks over time as deleveraging progresses.