Seagate Raised Guidance Above Estimates, and Its Stock Fell 8%

Seagate rose about 5% in the October 27 session. News that its Mozaic drives had been validated on Microsoft Azure supported the stock.

Earnings came out seven minutes after the close. Revenue, profit and guidance all beat, and the stock fell 7-8% in early after-hours trading.

Seagate Beat Estimates, and the Stock Fell

Adjusted EPS came in at $7.68 against an expected $7.39. Revenue was $4.23 billion, up from $2.63 billion a year earlier.

The adjusted operating margin rose from 29% to 50.7%. Free cash flow of $1.48 billion was the highest in the company's history.

Seagate retired $1.2 billion of debt during the quarter and another $750 million after it ended. Gross debt fell to $1.6 billion.

The Real Bar Sat Above Consensus

For the second quarter, Seagate guided to $4.8 billion in revenue and $9.20 in EPS. Consensus stood at $4.53 billion and $8.58.

The funds that own the stock were not looking at that number. Rosenblatt had expected revenue above $4.9 billion and EPS of at least $9.75 before the report.

The guidance beat the published average but fell short of the most bullish analyst estimates. Reports attributed the drop to profit-taking in a stock up 149% this year.

The market did not read these results as a quarterly report card. It read them as a clue about how long the price cycle will last.

Price, Not Volume, Is Growing the Profit

Seagate's gross margin rose from 40.1% to 57.8% in a year. The jump comes from selling the same drive at a higher price.

When price increases slow, profit growth drops from the 130% range to the pace of volume growth. The share price is weighing when that slowdown arrives, not today's profit.

Bank of America expects EPS of $76.24 for fiscal 2028. At the intraday price of $674, the stock traded at about 8.8 times that figure. The low multiple shows the market does not treat that profit as durable.

Western Digital Took the Same Path

Five days earlier, Western Digital also beat, raised guidance and fell 6.5% after hours. Details are in our earnings analysis.

At Western Digital, price per terabyte rose 28% from a year earlier and shipments rose 22%. Multiplying 1.28 by 1.22 gives 1.56; revenue grew 55.5%.

Western Digital's management said price increases would slow after three to four quarters. Seagate's release contained no figure that changed that timeline.

According to The Next Web, citing Bloomberg, Western Digital and Sandisk have lost more than 44% since early July. Seagate is down 33% and Micron 22%.

The Part That Does Not Fit the Story

There is no sign of weaker demand. On its previous call, Seagate said most of its nearline capacity was allocated to customers through 2028.

Mozaic is the technology that raises capacity per drive. The drives joined Broadcom's approved vendor list and were validated on Azure, widening the customer base they can be sold to.

The chart is live; its range counts back from today and shows the pullback from the June peak.

What It Means for Investors

• The market priced the record margin, but not the idea that price increases will extend beyond 2027.
• Seagate, Western Digital and Sandisk share one price cycle, so one company's guidance moves the others' shares.
• SK Hynix reports on October 28; on October 29, Sandisk's figures against its $10.3-10.8 billion revenue guidance are the first threshold.
• The risk to the thesis is that contract prices for memory and drives stop rising earlier than expected.

Earnings figures come from Seagate's October 27, 2026 release; the stock reaction and analyst estimates come from Investing.com and 24/7 Wall St. reports. Sector declines come from The Next Web's Bloomberg-based report, and Western Digital figures from our earnings analysis. The after-hours price reflects early trading and may change overnight.