Seagate STX FY2026 10-K: Revenue Up 34%, 789 Exabytes Shipped, 46% Gross Margin
The Hook
Seagate Technology Holdings $STX just closed the best year in its history: 12.195 billion dollars of revenue, up 34.1%, and 3.184 billion of net income, up 116.8%. Management's explanation, in its own MD&A, is "pricing actions undertaken by the Company and product mix shift to higher capacity products."
Run the arithmetic in Seagate's own tables and a different answer falls out. The company shipped 789 exabytes of hard drive capacity in FY2026, up from 595. That is a 32.6% increase in units of storage against a 34.1% increase in revenue. Revenue per exabyte shipped rose about 1%. Volume did essentially all of the work.
There is a second thing. For four straight annual reports Seagate published a line in that same table called "HDD Price per Terabyte": 17 dollars in FY2022, 15 in FY2023, 15 in FY2024, 14 in FY2025. In the FY2026 10-K, the row is gone. In the first FY2026 10-Q the lead-in sentence still promises "HDD exabytes shipped by market and price per terabyte" and the row underneath it had already been deleted. By the second quarter the sentence was quietly reworded too.
Company Snapshot
Seagate designs and manufactures hard disk drives, storage systems and solid state drives, serving two end markets it renamed this year: Data Center (80% of FY2026 revenue, up from 75%) and Edge IoT (20%). It employs roughly 30,000 people, about 25,000 of them in Asia. Seagate Technology Holdings plc is Irish-incorporated, but it established its principal executive offices in Singapore in FY2024, and the tax note now benchmarks against Singapore's 17% statutory rate, not Ireland's.
This analysis is built on the FY2026 Form 10-K, filed 2026-08-04 for the fiscal year ended 2026-07-03, plus the three FY2026 10-Qs and the FY2022 through FY2025 10-Ks for the comparatives.
Before any comparison: fiscal 2026 was a 53-week year. It ran to 2026-07-03 against FY2025's close on 2025-06-27, so the current year contains 371 days against 364. Seagate discloses the extra week twice, in Note 1 and in the MD&A preamble, and then never quantifies it anywhere in the filing. The extra week landed in the first quarter, which the Q1 10-Q states was 14 weeks. On a straight pro rata, one week of FY2026 revenue is about 230 million dollars; priced at the actual 14-week first quarter's run rate of about 188 million dollars a week, it is a little less. Either way, roughly 2 to 2.5 points of the 34.1% headline is calendar rather than demand, and comparable growth is closer to 31.5%. Per week of trading, exabytes shipped still rose about 30%. The extra week is real and it is small - but you have to compute it yourself, because the filing does not.
The Financial Story
The volume test. Exabytes shipped went 631 (FY2022), 441, 398, 595, 789. Nearline capacity, the drives sold into cloud and enterprise data centers, went from 497 exabytes to 695, up 39.8%. Non-nearline actually shrank, from 98 to 94. Every incremental exabyte and more came from the data center.
The price test. Here is the table nobody builds, assembled from five consecutive 10-Ks:
| Fiscal year | Exabytes shipped | Revenue, USD millions | Revenue per exabyte, USD millions | HDD price per TB, as disclosed |
|---|---|---|---|---|
| FY2022 | 631 | 11,661 | 18.48 | $17 |
| FY2023 | 441 | 7,384 | 16.74 | $15 |
| FY2024 | 398 | 6,551 | 16.46 | $15 |
| FY2025 | 595 | 9,097 | 15.29 | $14 |
| FY2026 | 789 | 12,195 | 15.46 | not disclosed |
Revenue per exabyte is derived (total revenue divided by total HDD exabytes shipped) and is not the same measure as Seagate's disclosed HDD price per terabyte, which covers hard drives only. The two track closely and move in the same direction.
Seagate earns 16.4% less revenue per exabyte shipped than it did at the FY2022 peak. The measure fell for four straight years and then ticked up about 1% in FY2026, which is the entirety of the pricing contribution to a 34% revenue year. Seagate's own disclosed price per terabyte went from 17 dollars to 14 across four annual reports before it stopped being published. This is not a pricing recovery in any per-unit sense. It is a company selling far more of a product that keeps getting cheaper.
So where did the margin come from? Cost. Cost of revenue rose 12.5% while revenue rose 34.1%. Divide cost of revenue by exabytes shipped and the answer is unmistakable:
| Fiscal year | Cost of revenue per TB | Gross profit per TB | Gross margin |
|---|---|---|---|
| FY2022 | $12.98 | $5.50 | 29.7% |
| FY2023 | $13.68 | $3.06 | 18.3% |
| FY2024 | $12.60 | $3.86 | 23.4% |
| FY2025 | $9.91 | $5.38 | 35.2% |
| FY2026 | $8.41 | $7.04 | 45.6% |
Cost per terabyte fell 15.1% in one year and 35.2% against FY2022. Gross profit per terabyte is up 28.1% against FY2022 even though revenue per terabyte is down 16.4%. That gap is the whole company. It is the areal density roadmap - the Mozaic platform and heat-assisted magnetic recording, which put more terabytes on the same platter and the same motor - showing up as unit cost rather than as price.
Operating leverage did the rest. Operating expenses rose just 154 million dollars, and 105 million of that was a one-time legal settlement. Product development was 755 million dollars against 941 million in FY2022 - Seagate spends 19.8% less on R&D in dollars than it did four years ago. Marketing and administrative was 577 million against 559 million four years ago, up 3.2% over four years. Operating income of 4.094 billion dollars is 109% above the FY2022 peak of 1.955 billion on 4.6% more revenue.
| USD millions | FY2026 | FY2025 | Change |
|---|---|---|---|
| Revenue | 12,195 | 9,097 | +34.1% |
| Cost of revenue | 6,637 | 5,897 | +12.5% |
| Gross profit | 5,558 | 3,200 | +73.7% |
| Product development | 755 | 724 | +4.3% |
| Marketing and administrative | 577 | 561 | +2.9% |
| Legal settlement | 105 | 0 | new |
| Restructuring and other, net | 27 | 25 | +8.0% |
| Operating income | 4,094 | 1,890 | +116.6% |
| Other expense, net | (404) | (377) | +7.2% |
| Provision for income taxes | 506 | 44 | +1,050% |
| Net income | 3,184 | 1,469 | +116.8% |
The record absorbed 256 million dollars of charges. The 105 million dollar legal settlement is Seagate's net share of a 175 million dollar securities class action settlement agreed in principle on 2026-04-03; roughly 70 million is being paid by insurers. The class period runs 2020-09-14 to 2023-04-19 - the exact window in which the business went from peak to a 529 million dollar loss. The court granted preliminary approval on 2026-07-07 with a final hearing set for 2026-11-17. Separately, other expense includes a 151 million dollar net loss from debt transactions, incurred retiring the 3.50% 2028 exchangeable notes for 1.3 billion dollars of cash and about 12.6 million ordinary shares. Total debt fell 1.4 billion dollars, from 4.995 billion to 3.565 billion. Seagate also still owes the balance of a 300 million dollar Bureau of Industry and Security settlement over hard drive sales to Huawei, paid at 15 million dollars a quarter; total accrued legal settlements at year end were 225 million dollars.
Below the line, the tax rate quadrupled. The effective rate went from 2.91% in FY2025 to 13.73% in FY2026, as major jurisdictions implemented the Pillar Two global minimum tax. Pre-tax income rose 143.9% while net income rose 116.8% - net income growth is understated by the tax normalization, not flattered by it. There is a discrete benefit in the other direction (a valuation allowance release tied to the OBBBA in July 2025 plus excess share-based compensation benefits), but the direction of travel on tax is up: non-current income tax payable went from 1 million dollars to 436 million.
Diluted EPS grew slower than net income for a reason. Net income rose 116.8%; diluted EPS rose 105.3%, to 13.90 dollars from 6.77. Diluted shares went from 217 million to 229 million, largely the 12.6 million shares handed over in the note exchange. Deleveraging was paid for partly in equity.
Cash and the balance sheet turned. Operating cash flow was 3.674 billion dollars against 1.083 billion. Capital expenditure was 569 million, so free cash flow was roughly 3.1 billion. Capex more than doubled and is still only 4.7% of revenue, inside the company's stated 4% to 6% target, while exabytes shipped rose 32.6%; net property, plant and equipment is just 2.034 billion dollars. Cash rose to 1.704 billion from 891 million. And shareholders' equity swung from negative 453 million dollars to positive 2.167 billion in a single year.
Forward commitments, honestly stated. Seagate reports 2.1 billion dollars of unconditional purchase obligations, 1.6 billion of which is payable within a year, plus 465 million of capital expenditure commitments. Item 1 says that for high-capacity nearline drives Seagate works with key customers "to establish longer-term demand forecasts and supply commitments, including provisions for cancellation charges in certain circumstances," and the commitments note refers to "certain long-term market share based inventory purchase commitments." Those customer-side commitments are described but never sized. This is the disclosure that would settle the durability question, and it is qualitative only.
Valuation - what it's worth as a normal business
Market data below is from public quote sources as of 2026-08-08 and is not from the filing; everything else in this brief is.
Seagate traded around 813 dollars a share for a market capitalisation near 196 billion dollars, after roughly a fivefold move over 52 weeks. Against the filing that is about 58.5 times FY2026 diluted EPS of 13.90 dollars, 16.1 times revenue, roughly 45 times EV to EBITDA (operating income plus 276 million of depreciation and amortisation) and a 1.6% free cash flow yield. The declared dividend of 2.94 dollars a share yields about 0.36%. Consensus among roughly 25 analysts is a Strong Buy with an average 12-month target near 1,110 dollars.
Scenario DCF on FY2026 free cash flow of 3.105 billion dollars, 242 million shares, 1.861 billion of net debt. Assumptions are stated, not fitted:
| Scenario | FCF growth, years 1-5 | Terminal | WACC | Implied value per share |
|---|---|---|---|---|
| Bear (cycle repeats) | +15%, -35%, +10%, +10%, +5% | 1.0% | 11.0% | $109 |
| Base | +25%, +15%, +10%, +6%, +4% | 2.5% | 10.0% | $256 |
| Bull | +40%, +30%, +20%, +12%, +8% | 3.5% | 9.0% | $510 |
A peer re-rating grid on FY2026 GAAP diluted earnings gives 208 dollars at 15 times, 348 at 25 times and 556 at 40 times. None of these reach the market price, and that is the point rather than a failure of the model: at 813 dollars, a 25 times multiple requires 32.51 dollars of earnings per share, or 2.3 times what Seagate earned in its record year. A 4% free cash flow yield would require 7.9 billion dollars of free cash flow, roughly 2.5 times FY2026. The market is not paying for this filing. It is paying for two or three more years like it. That is a coherent thing to believe, given nearline exabytes grew 39.8% and cost per terabyte is falling; it is simply not a claim the FY2026 10-K makes or supports on its own. Implied value under stated assumptions - not a price target, not investment advice.
Risks
The concentration is severe and disclosed: one customer accounted for approximately 14% of consolidated revenue in FY2026, and Item 1A warns that hyperscale and cloud customers can "command increased leverage in negotiating prices" when supply exceeds demand. Seagate's own risk factors name "price erosion" and "the commoditization of our products" explicitly, and the five-year price-per-terabyte series shows commoditization is not hypothetical - it is the base rate, temporarily outrun by cost reduction. The FY2023 result is the proof of the downside: revenue fell 43.8% from FY2022 to FY2024 and operating income went to negative 342 million dollars.
Second, the entire cost story depends on execution of the heat-assisted magnetic recording transition. Item 1A states plainly that if the Mozaic and HAMR transitions "require development, qualification or production cycles that are longer than anticipated," Seagate "may lose sales and market share." Add to that 2.1 billion dollars of purchase obligations that must be honoured whether or not demand holds, a risk factor conceding Seagate has previously cancelled supplier commitments and paid for it, an unresolved patent case remanded for retrial, an antitrust claim on petition to the Supreme Court, and a tax rate that has one direction of travel under Pillar Two.
The Bottom Line
Seagate did not raise prices its way to a record. It cut the cost of a terabyte by 35% against the last peak, sold 25% more terabytes, and let a fixed cost base that has barely moved in four years do the rest. That is a better business than a pricing cycle would be, because it is repeatable and it is technological. Watch three things: nearline exabytes per quarter, cost of revenue divided by exabytes shipped, and whether the price-per-terabyte row ever comes back. A company that stops publishing a metric in the year the metric turns awkward has told you where to look.
Every figure above is from Seagate's SEC filings, pulled from the RoboSystems SEC Shared Repository. Nobody wrote this by hand, and the same pipeline runs on any of the ten thousand companies that file with the SEC. More at robosystems.ai/pricing. New customers get 50% off your first month with code ROBO50.
This is not investment advice and contains no price targets.