Seagate's Growth Engine Gains Momentum Across 3 Fronts

Seagate Technology Holdings plc STX has emerged as one of the major beneficiaries of the accelerating demand for data storage, particularly as AI, cloud computing and hyperscale data centers generate unprecedented volumes of information. The company’s latest results suggest that its momentum is not being driven by a single catalyst, but by three interconnected pillars: strong demand, technological innovation and disciplined execution.

The most important pillar behind STX’s momentum is demand. Demand for mass-capacity storage remains strong, driven by cloud customers and the growing adoption of AI-enhanced applications. This helped STX deliver 34% fiscal 2026 revenue growth, with the company expecting fiscal 2027 revenue growth to outpace fiscal 2026 amid strong momentum and improved demand visibility. Demand alone is not enough as Seagate needs to continually increase storage density while keeping the cost and energy requirements of each terabyte competitive. That is where its second growth pillar—innovation—comes into play.

Seagate has been aggressively advancing its Mozaic platform, based on HAMR. HAMR enables data to be written at substantially higher areal densities, paving the way for significantly higher-capacity HDDs. As a result, STX can scale exabyte shipments to meet rising demand in a highly capital-efficient manner while capturing more value per drive. By fiscal 2026 end, HAMR-based products accounted for approximately 40% of its nearline exabyte shipment run rate. Continued investment in HAMR supports its mid-20% exabyte growth target and further enhances profitability and capital efficiency.

Strong demand and innovative products are valuable only if they translate into sustainable profitability and cash generation. STX’s third pillar focuses on disciplined execution. In fiscal 2026, STX significantly strengthened profitability, expanding non-GAAP gross margin by 10 percentage points, increasing non-GAAP EPS by more than 90%, and generating a record $3.1 billion in free cash flow. The company expects continued sequential improvements in margins and cash generation throughout fiscal 2027.

Can STX Stay Ahead of the Storage Pack?

Western Digital Corporation WDC is a pure-play HDD model built around durable cloud and AI-driven storage demand, highlighting longer-term LTA discussions extending to 2031, an ongoing 40TB ePMR ramp and a 44TB HAMR shipment target for the first half of calendar 2027. Fiscal fourth-quarter results and first-quarter outlook also underscored expanding margins, strong cash generation and continued shareholder returns, alongside a strategy focused on predictable pricing as customers transition to higher-capacity drives. Beyond inference and Agentic AI, WDC sees emerging physical AI applications such as autonomous vehicles, robotics and humanoids driving storage demand as synthetic data generation grows.

Micron Technology MU is benefiting from AI-driven demand for memory and storage, tighter DRAM and NAND supply and a richer mix of HBM, data center SSD and high-capacity products. Micron’s technology roadmap is strengthening its exposure to high-value memory solutions used in AI, machine learning and data analytics. Its 1-gamma DRAM node and G9 NAND node are ramping up well and are on track to become the highest-volume nodes in Micron’s history. Development of next-generation DRAM and NAND nodes is set to begin volume production in the second half of calendar year 2027. These advances deepen Micron’s role in data center, client, mobile and automotive platforms.

STX Price Performance, Valuation and Estimates

In the past year, STX shares have skyrocketed 526.8%, outperforming the Computer Integrated Systems industry’s growth of 214.5%.

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Going by the price/earnings ratio, the company’s shares currently trade at 26.51 forward earnings compared with 12.65 for the industry.

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STX is currently witnessing an uptrend in estimate revisions. Earnings estimates for fiscal 2027 have been revised up 26.2% to $34.99 over the past 60 days, while estimates for fiscal 2028 have risen 12.9% to $55.85.

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STX currently boasts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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