Seagate Technology reported that its heat-assisted magnetic recording (HAMR) drive platform is approaching volume crossover by December, a milestone that is reshaping the company's profitability and pricing trajectory.
The storage maker said gross margins on incremental HAMR sales have exceeded 70% in recent quarters, well above its earlier 50% target. That performance has helped lift overall gross margin nearly threefold over the past 12 to 13 quarters.
Pricing has turned sharply positive. Seagate stated that price per exabyte grew 11% year-over-year in the most recent quarter, ending a period of mid-single-digit declines over the prior three years and flat pricing in between.
During a presentation at the Goldman Sachs Communacopia + Technology Conference on September 10, CFO Gianluca Romano outlined a rapid product ramp. The first-generation 30-terabyte Mozaic 4+ drive is shipping to major hyperscalers globally, with qualifications completed for the top eight to 10 customers. Fourty-terabyte HAMR units are now shipping to the two largest cloud providers, with further customer qualifications underway in the U.S. and Asia. A 50-terabyte capacity is planned for calendar year 2027.
Seagate projects that HAMR will account for 80% to 90% of its data-center drive volume within approximately two years. The data-center segment itself represents roughly 80% of total revenue and is composed of drives of 30 terabytes and above. Purchase orders are already secured for the next four to five quarters.
Perpendicular magnetic recording (PMR) is being phased out of the high-capacity tier. Seagate indicated PMR will remain relevant only in lower-capacity consumer, client, and edge IoT products ranging from 2 terabytes to 14 terabytes, or future 4-terabyte lower tiers.
On the supply side, Seagate noted a shift in laser sourcing for HAMR heads. First-generation drives relied entirely on outside suppliers, while second-generation units employ a mix of internal and external lasers, transitioning toward a higher internal share to reduce cost and supply risk.
Financially, Seagate retired about $1 billion of high-coupon debt over the past one to two years, with the final retirement expected next quarter. Share repurchases are anticipated to scale meaningfully beginning in calendar year 2027. Dividend changes are reviewed internally each fall.
Demand growth continues to be supported by video AI, robotic AI, autonomous vehicles, and quality-control systems, alongside broader video consumption. Seagate retained a long-term target of mid-20% compound annual exabyte growth, though it emphasized tracking absolute exabyte additions given its larger base.
The stock fell 2.98% to $859.50 on Thursday, following a prior close of $885.92. Shares have gained 222% year-to-date and posted a 363% return over the past year. The company trades at a trailing P/E of 61.76 against a PEG ratio of 0.6, while last twelve months' revenue surged 34% to $12.2 billion. Gross profit margin stands at 45.6%, and the dividend yield is 0.33%, with payments maintained for 16 consecutive years.
