Seagate Q1 FY2027 Earnings: Revenue Up 61%, Cost of Revenue Up 13%, Gross Margin 57.3%

Seagate's revenue rose $1.6 billion in the September quarter, and its cost of revenue rose $214 million. That is the whole quarter in two numbers: about 87% of the new revenue became gross profit, by our computation, and gross margin jumped to 57.3% from 39.4% a year earlier. Net income was $1.76 billion, more in one quarter than Seagate earned in all of fiscal 2022, and the company used the cash to retire $1.2 billion of debt. CEO Dave Mosley credits a "value-based pricing strategy" and "supply discipline"; the ledger shows what that looks like when it works.

Revenue grew 61%; cost of revenue grew 13%​

Revenue for the fiscal first quarter of 2027, the 13 weeks ended October 2, 2026, was $4,233 million, up 61% from $2,629 million (earnings release). Cost of revenue was $1,806 million against $1,592 million. Gross profit rose to $2,427 million from $1,037 million.

Mosley describes "record profitability" in "a strengthening demand environment," and says Seagate addresses "growing exabyte demand through areal density gains while maintaining supply discipline": more data per drive from its HAMR recording technology, rather than more drives. When demand grows faster than the supply a manufacturer chooses to add, prices rise, and most of a price increase is margin. That is what the cost line shows.

The treemap shows how little else there is: after $1,806 million of cost of revenue, the quarter carried $200 million of product development, $159 million of marketing and administration, $4 million of restructuring and a net $82 million of non-operating items, mostly interest and a $44 million loss on retiring debt. Operating expenses were $363 million against $343 million a year ago, so operating margin rose to 48.8% from 26.4%.

Five years of margins in one table​

Each row is one reported period: revenue as a negative credit, cost of revenue as a debit and Equity:Adjustments as net income. Gross margin, by our computation from those rows, was 29.8% in fiscal 2022, 18.3% in 2023 at the bottom of the downturn, 23.4% in 2024, 35.2% in 2025, 45.6% in 2026 and 57.3% in this quarter. Net income went from a $529 million loss in fiscal 2023 to $3,184 million in fiscal 2026; the September quarter alone, at $1,761 million, exceeds fiscal 2022's full-year $1,649 million.

The same table is a reminder of how cyclical the business is. Revenue fell from $11,661 million in fiscal 2022 to $6,551 million in fiscal 2024 before recovering. A margin built on pricing is worth most while supply stays tight; the downturn rows show what happens when it does not.

The cash went to the balance sheet​

Operating cash flow was $1,690 million and capital expenditure $211 million, leaving about $1,479 million of free cash flow, which the release calls Seagate's highest for a September quarter. Seagate redeemed or repurchased $1,262 million of debt, paid $168 million of dividends, raised its quarterly dividend about 3% to $0.76, and bought back $400 million of shares.

A liability is a credit, so falling debt plots as a rising line. Long-term debt was between $4,995 million and $5,388 million at every fiscal year-end from 2022 through 2025, $3,380 million in July and $2,351 million on October 2, with no current portion left. Seagate's accumulated deficit, the result of years of buybacks and dividends larger than profit, shrank to $4,737 million from $8,960 million at the end of fiscal 2024, and total shareholders' equity rose to $3,453 million from $2,167 million in one quarter. The period file carries each line with its filing caption.

What to watch in the December quarter​

• The guide. Seagate expects revenue of $4.8 billion, plus or minus $100 million, and non-GAAP diluted EPS of $9.20, plus or minus $0.20, after $7.68 in the September quarter.
• Pricing versus volume. With cost of revenue growing far slower than revenue, the margin depends on price holding. A quarter in which cost of revenue starts growing with revenue would mean volume is doing more of the work.
• Working capital. Receivables rose to $1,817 million from $1,534 million and inventory to $1,700 million from $1,571 million; both grew slower than revenue, but they are the first lines to show a demand slowdown.
• Capital returns. With debt down to $2.35 billion, the split between buybacks and further debt reduction is now the company's choice rather than a necessity.