Seagate says demand for its hard drives is still growing faster than it can supply them, and its customers have already claimed most of its nearline capacity into 2028.
“Demand is growing even faster than what we were thinking,” CFO Gianluca Romano said at a Citi technology conference, according to a MarketBeat report syndicated by Yahoo Finance. “The gap between supply [and] demand is not decreasing, it is actually a little bit increasing.”
Romano said the current upcycle has run for more than three years, and purchase orders already in hand point to more improvement through fiscal 2027. Seagate has long-term agreements covering the next two to three years and purchase orders for the next four to five quarters that fix product mix, pricing and delivery timing. Customers have asked for more volume each time the agreements come up for review, he said.
Most of the capacity is spoken for
CEO Dave Mosley gave the longer view on the July earnings call. “Based on the long-term supply agreements in place today, the vast majority of our nearline exabytes are now allocated into calendar 2028,” he said, as quoted by ITPro. Data centers now account for about 90% of Seagate’s exabyte shipments, and Mosley said many customers want to extend planning “through 2029 and beyond.”
The June quarter showed the effect. Revenue rose to $3.6 billion from $2.4 billion a year earlier, net income reached $1.2 billion versus $488 million, and margins hit 52.3%, up from 37.4%, ITPro reported. Fiscal 2026 revenue grew 34%. For the September quarter Seagate guided to $4.1 billion, plus or minus $100 million, which would be 56% growth at the midpoint, according to Zacks.
More terabytes, not more drives
Seagate is growing by packing more capacity into each drive rather than building more of them. Romano reiterated a target of at least 25% compound annual exabyte growth over the next two to three years. The company is moving its heat-assisted magnetic recording (HAMR) drives from 30 terabytes to 40 terabytes, a 33% jump per unit, and expects to start qualifying a 50-terabyte drive in about a year. HAMR made up about 40% of the nearline exabyte run rate at the end of fiscal 2026.
Mosley said the second-generation Mozaic 4 platform, which supports up to 44 terabytes per drive, is in customer testing, and that Seagate aims to exit 2026 with half its HAMR exabytes on it. Mozaic 5 is on track for qualification shipments in late 2027.
Capital spending will stay at 4% to 6% of revenue, and operating expenses near $300 million a quarter, Romano said. With most debt reduction done, Seagate plans to put more free cash flow, which topped $1 billion last quarter, into buybacks while keeping its dividend.
Customers say they aren’t ready
Seagate also released its first Data Infrastructure Readiness Report, based on a Recon Analytics survey of 2,712 enterprise technology decision-makers in seven markets, as summarized by CXOToday. Ninety-nine percent expect AI to increase their storage needs over the next three years, and 32% expect those needs to grow by more than half, yet only 38% said they are fully prepared. Data quality (53%) and storage infrastructure (43%) ranked as the top obstacles to deploying AI, ahead of compute availability (27%) and energy (24%).
Romano pointed to video AI, robotics, factory automation and autonomous driving as the next sources of demand, because camera data from those systems is often kept for training and compliance. “There are some tiers inside KV cache that can use hard disk drive,” he added.
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