Seagate Technology has delivered one of the strongest quarters in its history — and the market still sent its shares lower. The data-storage maker reported fiscal first-quarter revenue of $4.23 billion for the three months ended October 2, 2026, up 61% from $2.63 billion a year earlier and ahead of Wall Street's consensus of about $4.15 billion, as demand for mass-capacity drives tied to artificial intelligence kept climbing.
Profitability surged even faster than sales. GAAP net income more than tripled to $1.76 billion, from $549 million a year earlier, while GAAP diluted earnings per share rose to $7.59 from $2.43. On a non-GAAP basis, earnings per share reached $7.68, up from $2.61 a year earlier and above the roughly $7.45 analysts had expected.
Record profit, record cash
Margins widened sharply. GAAP gross margin reached 57.3%, up from 39.4% a year earlier, while GAAP operating margin rose to 48.8% from 26.4%. Seagate generated $1.69 billion in operating cash flow and $1.48 billion in free cash flow, which chief executive Dave Mosley described as the company's highest ever free cash flow in a September quarter.
“Seagate delivered another quarter of record profitability and our highest ever free cash flow in the September quarter, demonstrating the earnings power of our business amid a strengthening demand environment,” Mosley said. “Data creation, retention and reuse continue to compound storage demand with long term customer demand visibility reinforcing our view of a multi-year growth phase.”
The balance sheet strengthened alongside the results. Seagate retired about $1.2 billion of principal debt during the quarter, bringing gross debt to $2.4 billion, and a further $750 million after the quarter closed. It returned $568 million to shareholders through dividends and share buybacks and raised its quarterly dividend by about 3% to $0.76 per share, payable on January 7, 2027.
Why shares fell anyway
Despite beating expectations on revenue, profit and guidance, Seagate shares fell more than 5% in after-hours trading on Tuesday, after rising 3.7% in the regular session. The reaction echoed a pattern seen a week earlier, when rival Western Digital also fell after reporting strong results, as investors questioned how much further storage demand and pricing can run after a blistering rally.
Seagate has been one of the standout beneficiaries of the AI buildout, with hard-disk drives a key component in cloud data centres. But the stock had already pulled back more than 30% from its June record highs before Tuesday's report, reflecting concern about whether AI demand can sustain its current pace.
One detail that drew attention was inventory: days of inventory outstanding rose to 86, up from 83 in the previous quarter, a sign that stock levels are running above their five-year average even as demand stays strong.
What comes next
Seagate's outlook for the fiscal second quarter was itself well above expectations. The company guided to revenue of $4.8 billion, plus or minus $100 million, and non-GAAP diluted earnings per share of $9.20, plus or minus $0.20. Analysts had expected about $4.5 billion in revenue and roughly $8.6 in earnings per share.
Mosley pointed to Seagate's HAMR-based technology roadmap — heat-assisted magnetic recording that packs more data onto each drive — as the key to meeting growing exabyte demand while maintaining supply discipline, combined with what he called a value-based pricing strategy.
For now, the quarter leaves Seagate in an unusual position: record profit, record cash generation, a stronger balance sheet and a forecast above consensus — and a share price that fell anyway, as investors decided that even a record quarter was already reflected in the stock.