Evercore's quarterly note examines the June 2026 hard disk drive (HDD) results for Seagate Technology and Western Digital, documenting divergent trajectories in exabyte shipment growth, gross margin performance, pricing moves and capital allocation.
On exabyte shipments, Seagate recorded a 34% year-over-year increase to 218EB. Western Digital reported a 22% year-over-year rise to 231EB. The divergence was more pronounced in nearline product shipments: Seagate's nearline volumes rose 43% year-over-year to 195EB, while Western Digital's nearline growth was 23% to 209EB.
Western Digital management attributed the relatively slower exabyte growth versus some peers to customer drive mix. Larger customers have been choosing a heavier conventional magnetic recording - CMR - mix, which the company said limits exabytes-per-unit compared with an ultraSMR-weighted mix. Despite the mix impact, Western Digital reiterated a long-term exabyte growth target of about 25% as it advances new capacity products - specifically ramping a 40TB ePMR drive and preparing a 44TB HAMR product expected to ship in the first half of calendar year 2027.
Margin performance also differed. Evercore noted Seagate's implied gross margin incrementals exceeded 90%, supporting gross margins in the 57-58% range. Western Digital's gross margin reached 55.5%, with incrementals around 67%. The note highlighted that Western Digital has outperformed the high end of its gross margin guidance by roughly 200 basis points over the past six quarters.
On next-generation HAMR technology and related ramps, Seagate is advancing its Mozaic 4 program at two large cloud service providers, with the first Mozaic 4 platform reported as already in volume production. Western Digital is shipping 40TB ePMR drives and expects a volume ramp in coming quarters; the company also has HAMR in qualification with four customers.
Blended pricing trends were positive for both firms, with Seagate's blended prices up 10.6% year-over-year and Western Digital's rising 18.4% year-over-year.
Capital allocation diverged in fiscal year 2026. Western Digital returned approximately 88% of free cash flow to shareholders, primarily through share buybacks. Seagate returned roughly 26% of free cash flow to shareholders and allocated the remainder to debt reduction, retiring $1.4 billion in debt in fiscal 2026 and cutting leverage from 1.8x to 0.4x.
Implications
- Seagate's stronger exabyte growth in nearline segments and higher implied margin incrementals suggest a favorable mix and margin leverage within that company's recent results.
- Western Digital delivered higher total exabyte shipments and larger blended price gains, while emphasizing customer mix and ongoing product ramps as drivers of future growth.
- Differences in capital deployment - heavy buybacks at Western Digital versus debt paydown and modest buybacks at Seagate - reflect distinct balance sheet and shareholder-return priorities.