Investing
Seagate Falls 32% in a Month Before Oct. 27 Earnings Test
By Bear Creek Staff, . Bear Creek Capital Network.
Seagate Technology's stock dropped from $923.11 on September 23 to $630.49 in the weeks that followed, a decline of roughly 31.7%, after reports emerged that Toshiba is planning a significant capacity ramp for AI data center hard disk drives. 24/7 Wall St. covered the setup ahead of the October 27 report, noting that Barron's reported Morgan Stanley has since come out in support of the stock.
What the last quarter showed
The June quarter was Seagate's fifth consecutive beat on both earnings per share and revenue. Non-GAAP earnings per share came in at $5.71 against a consensus of $5.09. Revenue climbed 48.5% year over year to reach $3.629 billion, with non-GAAP gross margin at 52.7% and free cash flow above $1.1 billion.
For the September quarter, management guided to revenue of "$4.10 billion in revenue, plus or minus $100 million, and non-GAAP EPS of $7.30, plus or minus $0.20," according to the report. CEO Dave Mosley said growth in fiscal 2027 revenue should exceed the 34% rate posted in fiscal 2026.
Three things to watch on October 27
The first is pricing. Price per exabyte climbed 10% year over year in the June quarter, and management indicated that the gap between supply and demand had grown wider than it had been several quarters prior. If Toshiba's ramp is already pressuring deal terms, that is where it will show up first.
The second is contract coverage. Mosley said "the vast majority of nearline exabytes are allocated into calendar 2028," with customers pushing to extend planning through 2029 and beyond. Whether those horizons are holding or shortening is a direct read on how seriously buyers are taking the oversupply threat.
The third is the Mozaic 4 ramp. Seagate's 44-terabyte HAMR (heat-assisted magnetic recording, a technology that uses a laser to briefly heat the disk surface and allow denser data storage) platform is scaling with the two largest global cloud providers. The company aims to exit calendar 2026 with half of HAMR exabytes on Mozaic 4, and management expected a stronger contribution in the September quarter than in June. Product transitions carry yield risk, so delivery against the roughly 50% operating margin target matters as much as the volume figures.
On capital returns, debt is expected to fall to around $2.4 billion this quarter, with buybacks projected to increase over the following several quarters.
What the options market is signaling
The options market is leaning cautious. The full-chain put/call ratio sits at 1.06, meaning slightly more bets are positioned for further downside than for a recovery. That is not a dramatic skew, but it reflects genuine uncertainty rather than a market that has already decided the oversupply story is overblown.
What to watch
The core question is whether Toshiba's capacity plans are already affecting Seagate's pricing conversations or whether long-term contracts are insulating the company from spot-market pressure. If Mosley can show firm pricing alongside the 2028 allocation data, the oversupply narrative loses its clearest mechanism. If pricing per exabyte has softened or contract horizons have pulled back, the selloff will look less like an overreaction and more like a leading indicator. The margin trajectory on Mozaic 4 is the secondary signal: a platform transition that hits its yield targets on schedule is evidence of execution; one that misses is a compounding problem on top of a competitive threat.
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