Seagate’s Q1 Earnings Dilemma on Oct. 27: Blockbuster AI Data Demand Confronts Rising Oversupply Fears
Seagate stock cratered 31% in a month on fears that a Toshiba supply surge will crush pricing, but the upcoming earnings report could either validate those fears or expose them as overblown. Watch one metric above all others to know…
Seagate Technology (NASDAQ:STX | STX Price Prediction) reports fiscal first-quarter results on Oct. 27 after the bell. The shares fell 31.7% over the past month on oversupply fears. This report has to show that AI storage demand and pricing power still hold.
Record Results Run Into a Sharp Monthlong Selloff
Last quarter was Seagate’s fifth straight beat on both EPS and revenue. Non-GAAP EPS of $5.71 exceeded the $5.09 consensus. Revenue rose 48.5% year over year to $3.629 billion. Non-GAAP gross margin reached 52.7%, and free cash flow came in above $1.1 billion.
Management guided to $4.10 billion in revenue, plus or minus $100 million, and non-GAAP EPS of $7.30, plus or minus $0.20. CEO Dave Mosley said fiscal 2027 revenue growth should outpace fiscal 2026’s 34%.
Sentiment turned soon after. Reports that Toshiba plans a major capacity ramp for AI data center HDDs raised concerns of a supply glut. The stock slid from $923.11 on Sept. 23 to $630.49. Barron’s reported that Morgan Stanley has since come out in support of the battered stock.
Analysts Expect Triple-Digit EPS Growth
| Metric | Consensus | Year-Ago Actual | Implied YoY Growth |
|---|---|---|---|
| Q1 FY27 EPS | $7.4031 | $2.61 | 183.6% |
| Q1 FY27 Revenue | $4.14 billion | $2.629 billion | 57.5% |
| FY27 EPS | $36.6633 | $15.58 | 135.3% |
| FY27 Revenue | $19.08 billion | $12.195 billion | 56.5% |
Consensus EPS sits above the guidance midpoint. It has risen since $5.8791 90 days earlier.
Price per Exabyte Will Settle the Oversupply Debate
Pricing is the first metric to watch. June-quarter price per exabyte rose 10% year over year, and management said the supply-demand gap had widened from a few quarters earlier. Management also noted some available output in fiscal Q1, priced favorably. If Toshiba’s ramp is putting pressure on deals, it should show up here first.
Contract coverage is the second test. Mosley said the vast majority of nearline exabytes are allocated into calendar 2028, and customers want to extend planning through 2029 and beyond. You should listen for whether those horizons keep stretching.
Third is the Mozaic 4 ramp. The 44-terabyte HAMR platform is scaling up with the two largest global cloud service providers, and management expected an even stronger contribution in the September quarter. Seagate is one of the picks-and-shovels AI infrastructure names we broke down in a free report on seven stocks powering the AI boom beyond the chipmakers. Seagate plans to exit calendar 2026 with 50% of HAMR exabytes on Mozaic 4. Product transitions bring yield challenges, so delivery against the about 50% operating margin guide matters.
Finally, capital returns. Debt should fall to about $2.4 billion this quarter, and management expects buybacks to increase over the next several quarters.
Locked-In Contracts Have to Beat the Glut Narrative
Seagate keeps exceeding estimates, but the stock still sold off hard on competition headlines. The options market leans cautious, with a full-chain put/call ratio of 1.06. This report gives management room to show that long-term contracted pricing drives results. If Mosley supports the 2028 allocation story with firm pricing and margin data, I think the oversupply concerns lose much of their hold.
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After two decades of patrolling the dark corners of suburbia as a police officer, Rich Duprey hung up his badge and gun to begin writing full time about stocks and investing. For the past 20 years, he’s been cruising the markets looking for companies to lock up as long-term holdings in a portfolio while writing extensively on the broad sectors of consumer goods, technology, and industrials. Because his experience isn’t from the typical financial analyst track, Rich is able to break down complex topics into understandable and useful action points for the average investor. His writings have appeared on The Motley Fool, InvestorPlace, Yahoo! Finance, Money Morning, and, of course, 24/7 Wall St. He has been featured in both U.S. and international publications, including MarketWatch, Financial Times, Forbes, Fast Company, and USA Today.
