How much is KV cache currently helping demand, and when will physical AI start impacting exabytes?

Dave stated both are in very early stages. KV cache is driven by the need for persistent context in agentic AI. Physical AI is viewed as a significant data play, with sensor networks and video content from robots and autonomous vehicles requiring substantial long-term storage in local or larger clouds. “Physical AI, we are quite excited about. I think I hear a lot about robotics. We've all seen autonomous vehicles. People focus very much on the end product, the robot, if you will, but I actually think it's a lot more of a data play.”

Given 10% YoY price per exabyte growth in Q4 and an implied 20%+ in Q1 FY27, how should pricing evolve, and can it accelerate further due to supply-demand imbalance?

Gianluca confirmed that the gap between supply and demand is wider, allowing for very good pricing on increased output. He expects the strong pricing trend to continue, contributing to sequential revenue and margin improvement throughout the fiscal year. “the gap between supply and demand is now a little bit bigger than a few quarters ago. And our volume was a little bit higher in fiscal Q4. Now we think it can be maybe a little bit of output available in fiscal Q1. And of course, we are pricing that increased output at a very good price right now.”

Can the exabyte growth rate sustain above 30% into FY27, given the mid-20% CAGR target and Mozaic 4/5 ramps?

Dave clarified that exabyte growth is driven by increasing heads and media inside drives, not increasing box count. While product transitions (Mozaic 3 to 4 to 5) introduce factory inefficiencies, they ultimately yield more exabytes. The mid-20s CAGR target is realistic given the ongoing innovation and qualification cycles. “we're not really increasing the box count. We are working really hard to get the heads and media inside the boxes to be able to go up in the technology capability to get exabytes out.”

STX

Seagate (STX) Q4 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q4 FY26)· Information Technology· Jul 28, 2026

Source: earnings call transcript

Executive summary

Seagate Q4 FY26 — Strong Outperformance Driven by AI-Amplified Demand and HAMR Ramp

Seagate concluded fiscal 2026 with strong Q4 results, outperforming expectations across revenue and profitability, driven by robust mass capacity storage demand from cloud customers amplified by AI adoption. The company's HAMR-based Mozaic platform ramp and value-based pricing strategy are underpinning sequential revenue and margin expansion expected through fiscal 2027, supported by deep customer commitments extending into 2028 and beyond.

Highlights

Q4 revenue of $3.6 billion, up 17% sequentially and 48% year-over-year, exceeding the high end of guidance.
Non-GAAP gross margin expanded for the 13th consecutive quarter to 52.7%, up 570 basis points sequentially.
Record free cash flow of $1.1 billion, representing a 31% margin, the strongest quarter in over a decade.
Non-GAAP EPS of $5.71, up 39% quarter-over-quarter and 121% year-over-year, exceeding guidance by a wide margin.
Net leverage ratio improved to 0.4x based on adjusted EBITDA of $1.7 billion.

Guidance & targets

Category	Target	Timeline	Confidence
Fiscal Year 2027 Revenue Growth	outpace fiscal 2026 performance high materiality	FY27	High
Fiscal Year 2027 Margin and Cash Generation	sequential growth throughout the year high materiality	FY27	High
September Quarter Revenue	$4.1 billion, plus or minus $100 million high materiality	Q1 · FY27	High
September Quarter Non-GAAP Operating Expenses	approximately $300 million medium materiality	Q1 · FY27	High
September Quarter Non-GAAP Operating Margin	around 50% high materiality	Q1 · FY27	High
September Quarter Non-GAAP EPS	$7.30 plus or minus $0.20 high materiality	Q1 · FY27	High
September Quarter Tax Rate	about 16% low materiality	Q1 · FY27	High
September Quarter Non-GAAP Diluted Share Count	231 million shares low materiality	Q1 · FY27	High
Fiscal Year 2027 Capital Expenditures	remain well within our target range of 4% to 6% of revenue medium materiality	FY27	High
Nearline Exabyte Growth	mid-20% range high materiality	next few years	Medium
Mozaic 4 HAMR Exabyte Ramp Milestone	50% of our HAMR exabytes on our Mozaic 4 platform medium materiality	exiting calendar '26	High
Mozaic 5 Qualification Shipments	on track for qualification shipments medium materiality	late calendar 2027	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Data Center Global cloud customers are driving the vast majority of data center revenue and exabyte demand. Demand trends in the enterprise OEM data center markets have also strengthened. Exabytes shipped: 195 exabytesExabytes shipped YoY growth: 43%Exabytes shipped QoQ growth: 11%Share of total exabyte shipments: 89%	$2.9 billion	57%	17%	—
Edge IoT Growth due in part to ongoing tight supply conditions and increasing NAND pricing. Share of total revenue: 19%	$697 million	20%	14%	—

STX operating KPIs by quarter

STX operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Dec 2025 Q2 FY26	Mar 2026 Q3 FY26	This call Jun 2026 Q4 FY26	Change vs prior quarter
Exabytes shipped	190 To that end, we shipped 190 exabytes in the December quarter, up 26% year-over-year, while keeping overall unit capacity relatively flat. Source: earnings call transcript	199 We shipped 199 exabytes in the quarter, up 39% year-over-year. Source: earnings call transcript	218 In the June quarter, we shipped a total of 218 exabytes, up 34% year-over-year, with data center representing 89% of the total. Source: earnings call transcript	+9.5%
Exabytes shipped Data center	165 We shipped 165 exabytes in the data center market, up 4% sequentially and 31% year-on-year. Source: earnings call transcript	175 We shipped 175 exabytes into the data center market, up 6% sequentially and 47% year-on-year. Source: earnings call transcript	195 We shipped 195 exabytes into the data center market, up 11% sequentially and 43% year-over-year, with data center revenue coming in at $2.9 billion, up 17% sequentially and 57% year-over-year. Source: earnings call transcript	+11.4%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

Nearline exabytes allocated vast majority Q4 FY26

Allocated into calendar 2028 based on long-term supply agreements.

Customer planning horizons through 2029 and beyond Q4 FY26

seeking to extend

Customers are actively seeking to extend planning horizons, reflecting growing confidence in their long-term infrastructure needs.

Contract coverage entirety of calendar 2027 Q4 FY26

Contracts define product configuration and pricing terms for orders secured prior to initiating drive production.

Product announcements

Product	Type	Timeline	Details
Mozaic 5	roadmap	late calendar 2027

Deals & partnerships

SK hynix White paper collaboration illustrating the importance of tiered storage for AI workloads.

Our recent white paper with SK hynix illustrates the importance of tiered storage for inference and agentic AI workloads, showing a direct benefit to hard drive storage.

What to watch in Q1 FY27

September Quarter Revenue

Q1 FY27 (September quarter)

Current $3.6 billion (Q4 FY26)

Target $4.1 billion +/- $100 million

Why it matters

Verifies continued strong demand and execution of value-based pricing strategy.

We expect September quarter revenue to be in the range of $4.1 billion, plus or minus $100 million, which represents a 56% year-over-year improvement at the midpoint.

Find out whether STX delivers this. Inve re-checks your case every morning.

Q&A highlights

Is the implied mid-57% gross margin for Q1 FY27 correct, and is mid-teens cost down per terabyte sustainable with Mozaic 3 to 4 transition?

Gianluca confirmed strong gross margin improvement and continued pricing strategy. Dave noted that the Mozaic 3 to 4 transition boosts profitability and allows for better cost execution than planned, despite factory complexities.

“our pricing strategy is continuing as we have discussed now for several quarters. I would say we have adopted this strategy more than 12, 13 quarters ago. So we are continuing in that direction.”

asked by Aaron Rakers · answered by Gianluca Romano

2 min read 6 chapters

Detailed narrative

AI-Driven Demand for Mass Capacity Storage

Demand for mass capacity storage is robust and growing, significantly amplified by the adoption of AI-enhanced applications. Cloud customers are the primary driver, demonstrating three consecutive years of sequential quarterly exabyte growth with no signs of slowdown. AI is reinforcing data creation, retention, and reuse trends, with specific workloads like KV cache and agentic applications directly benefiting hard drive storage by requiring persistent context and reducing GPU usage, thereby increasing the need for storage.

Tiered Storage Architectures Broaden Adoption

Seagate emphasizes the critical role of tiered storage architectures, which combine high-performance memory and SSDs with mass capacity hard drives to optimize performance, energy consumption, and cost at scale. This approach, traditionally used by hyperscalers, is now extending to enterprise deployments, Neocloud operators, and leading model developers.

These new adopters are increasingly integrating modern tiered storage, with hard drives serving as the foundational mass capacity layer.

HAMR Technology and Mozaic Platform Advancements

The HAMR-based Mozaic platform is central to Seagate's technology roadmap, enabling significant increases in areal density to meet rising exabyte demand efficiently. Mozaic 3 products are fully qualified and deployed across all major cloud customers. The second-generation Mozaic 4 platform, capable of supporting up to 44 terabytes per drive, is actively ramping with the two largest global CSPs, with Mozaic 5 (5+ TB/disk) on track for qualification shipments in late calendar 2027.

Value-Based Pricing and Long-Term Customer Commitments

Seagate continues to execute its value-based pricing strategy, leveraging a strengthening demand environment to drive sustainable, profitable growth. The company has secured long-term supply agreements (LTAs) that allocate the vast majority of nearline exabytes into calendar 2028. Customers are actively seeking to extend these planning horizons through 2029 and beyond, reflecting strong confidence in their long-term infrastructure needs and reinforcing demand durability.

Strong Financial Performance and Strategic Debt Reduction

Fiscal 2026 concluded with outstanding financial results, including 13 consecutive quarters of non-GAAP gross margin expansion and record free cash flow generation of $3.1 billion for the full year. Seagate is aggressively reducing its debt, having lowered gross debt by $1.4 billion in FY26 to $3.6 billion.

An additional $1.2 billion in debt is slated for retirement in Q1 FY27, with $1 billion already extinguished in July, while simultaneously increasing share buybacks.

Future Growth Drivers: Physical AI and Edge Data

Beyond current cloud and enterprise applications, Seagate anticipates physical AI applications, such as robotics and autonomous vehicles, will drive the next significant expansion in data creation and retention at the edge. These applications require training on millions of hours of historical and synthetic video content, generating vast amounts of unstructured data that will further elevate the importance of mass capacity storage across modern tiered architectures.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.