TenQ

The Seagate Technology story

Seagate Technology makes mass-capacity storage, with the central question being whether its Mozaic hard drives can meet cloud demand while preserving stronger margins and cash generation.

Seagate Technology stock reportTenQ Score 18/36 · every chart and check from its filings
  • $639.01share price, last close
  • $144.8Bmarket value
  • 18/36TenQ Score checks passed
  • 20.5%growth a year the price assumes

The story in brief

  • Cloud demand drives growth. Revenue reached $12.2 billion over the last twelve months, growing 34.1%, as cloud data center demand supported record annual free cash flow.
  • Debt falls, shares expand. Seagate reduced debt by $1.4 billion in fiscal year 2026, but its exchanges of debt for cash and ordinary shares also diluted shareholders.
  • Growth remains embedded. The reverse DCF implies free cash flow after stock pay grows 24.0% a year for ten years, below Seagate's recent record but requiring sustained expansion.

What drives the business

  • Seagate derives the vast majority of its business from Data Center markets, serving hyperscale cloud operators, cloud service providers and enterprises with hard drives of up to 44TB and storage systems of up to 3.5PB.
  • Its Mozaic platform uses heat-assisted magnetic recording to increase storage density, supported by in-house design and manufacturing of critical components such as recording heads and media.
  • Major customers purchase under master purchase agreements, while certain high-capacity drives have longer-term demand forecasts and supply commitments that include cancellation charges in some circumstances.
  • Its Edge IoT portfolio serves industrial, commercial and consumer uses, including video, network-attached storage, gaming and backup, through equipment manufacturers, distributors and retail channels.
  • Cloud demand and execution supported a 33.6% operating margin and $3.1 billion in free cash flow in fiscal year 2026, while GAAP gross margin reached 52.3% in the quarter to July 2026.

What the price assumes

At $805.63 per share, the reverse DCF implies free cash flow after stock pay grows 24.0% a year for ten years using a 10.3% discount rate.

Seagate delivered 75.3% annual growth in that measure over the last 3 fiscal years, and the implied rate falls below the TenQ check's 39.6% bar, which slows the historical record halfway toward 4%.

That growth check passes, but the 1.7% free cash flow yield remains below its 8.3% historical comparison, and the 57.9x earnings multiple accompanies only 1 of 6 Value checks passing.

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What could change the story

  • Limited suppliers for some components, along with exposure to rare earth elements, precious metals and global logistics, can constrain production or raise costs.
  • Substantial manufacturing investment makes capacity utilization important, while cloud procurement schedules, technology transitions and industry capacity can change demand and pricing.
  • Despite debt reduction, Seagate ended fiscal year 2026 with $3.6 billion in debt against $1.7 billion in cash and cash equivalents, and its debt-to-equity measure of 1.66 failed TenQ's 1.00 bar.
  • Dilution accompanied the balance sheet repair: in September 2026, settlement of the remaining exchangeable notes required approximately $150.97 million in cash and delivery of 1,647,862 ordinary shares.
  • The $105 million legal settlement charge in fiscal year 2026 was excluded from non-GAAP results, illustrating why adjusted earnings do not capture every cost borne by the business.

What to watch next

  • Seagate's fiscal first quarter 2027 guidance calls for revenue of $4.1 billion, plus or minus $100 million, and non-GAAP diluted EPS of $7.30, plus or minus $0.20.
  • That outlook included estimated dilution from the Exchangeable Senior Notes due 2028 and assumed minimal effects from tariffs and the Middle East conflict as of the release date.
  • Mozaic production progress, gross margin and capital spending are the operating measures to follow alongside the $1.1 billion in free cash flow generated in the quarter to July 2026.
  • The next reported cash, debt and diluted share count will show the balance sheet and per-share effects of the September 2026 note settlement.

Sources

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