Seagate Technology Sees AI Storage Demand Fueling HAMR Growth and Margin Gains

Seagate Technology Sees AI Storage Demand Fueling HAMR Growth and Margin Gains

AI infrastructure is boosting storage demand across hyperscalers, enterprises and on-premises data centers, with applications such as video AI, robotics and autonomous driving driving long-term data growth.

Seagate is expanding capacity primarily through higher-capacity drives and its HAMR technology . The company is selling 30TB HAMR drives broadly, 40TB drives to two major hyperscalers, expects a 50TB product around late 2027, and projects HAMR will represent 80%–90% of data-center volume within a few years.

Strong orders, pricing and supply discipline are supporting continued revenue and margin gains; Seagate reported incremental gross margins above 70% recently and plans to prioritize debt reduction before increasing share repurchases and potentially dividends.

Seagate Technology NASDAQ: STX CFO Gianluca Romano said demand for mass storage is being supported by the early stages of artificial intelligence infrastructure investment, with growth extending from large public-cloud customers to enterprise original equipment manufacturers and on-premises data centers.

Speaking at the Goldman Sachs Communacopia + Technology Conference, Romano said customer capital-expenditure trends indicate that AI investment remains in an early phase. He pointed to expanding data requirements from video AI, robotics, autonomous driving and AI-enabled quality-control applications as drivers of long-term storage demand.

Romano said Seagate’s strategy centers on increasing exabyte shipments through higher-capacity drives rather than significantly raising unit output. He said the hard-drive industry has maintained capital-expenditure and capacity discipline for the past two to three years, helping preserve a balance between supply and demand.

The company has previously discussed a mid-20% compound annual growth rate in exabytes over a three- to four-year period. Romano said investors should also consider absolute exabyte growth, rather than focusing solely on percentage growth as the company’s shipment base expands. He said a transition from a 30-terabyte drive to a 40-terabyte drive can add 33% more capacity per unit.

Seagate’s technology and pricing strategy over the past three years have helped it nearly triple gross margin, according to Romano, while storage represents only a low- to mid-single-digit percentage of customers’ capital expenditures.

Romano added that purchase orders currently in place for Seagate’s fiscal year support the company’s expectation for revenue and margin improvement in every quarter of the year.

Romano highlighted Seagate’s heat-assisted magnetic recording, or HAMR, technology as a key element of its capacity expansion. He said Seagate is selling 30-terabyte HAMR drives to all major hyperscale customers and is selling 40-terabyte drives to its two largest hyperscale customers while qualifying the product with additional customers in the United States and Asia.

The company expects its 50-terabyte product to arrive around the end of calendar 2027, Romano said. He reiterated that Seagate expects HAMR to reach volume crossover by December and projected that HAMR could account for 80% to 90% of Seagate’s data-center volume within a couple of years.

“There is no way that the PMR technology can...