STX Stock Forecast & Price Target

Seagate Technology Holdings reported robust financial performance, with Data Center revenue reaching $2.1 billion, representing a substantial 34% year-over-year increase, now constituting 80% of total revenue, fueled by strong demand from hyperscale cloud providers and the adoption of its HAMR Mozaic platform. The company's first-quarter revenue of $2.63 billion was 21% higher year-over-year and exceeded expectations, supported by the strong cloud and enterprise market. Additionally, Seagate achieved a record non-GAAP gross margin of 40.1%, and the positive momentum is expected to continue into FY27, driven by the ongoing adoption of the HAMR product line.

Seagate Technology Holdings faces a challenging outlook due to a significant decline in its Edge/IoT segment, which reported revenues of $515 million, reflecting an 11% quarter-over-quarter and 12% year-over-year drop attributed to weakened consumer and client demand. Despite a stable gross debt of $5 billion and a reduction in net leverage from 1.8x to 1.5x, the company's reliance on projected seasonal improvements in demand remains a concern, especially in light of current negative trends. While management's build-to-order strategy appears to aid inventory control and visibility, the ongoing softness in key segments raises questions about sustainable growth and profitability moving forward.