AI Boom Fuels Storage Demand Surge for Seagate and Western Digital
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 3 days ago
0mins
Should l Buy STX?
Source: Yahoo Finance
- Supply-Demand Tightness: According to Bank of America analyst Wamsi Mohan, hard disk drive supply remains tight as manufacturers are not increasing capacity, leading to sustained demand exceeding supply, which creates favorable profit margins for Seagate and Western Digital in the coming years.
- Earnings Forecast Upgrade: Mohan predicts that Seagate's earnings per share could approach $45 by 2028, raising its price target to $700, while Western Digital's potential earnings are set at $33 per share with a target of $495, reflecting strong market confidence.
- Significant Revenue Growth: Seagate reported $9.10 billion in annual revenue for fiscal 2025, a 39% year-over-year increase, with the latest quarterly revenue of $3.11 billion exceeding analyst expectations; Western Digital achieved $9.52 billion in annual revenue, up 51%, showcasing robust performance from both companies in the market.
- Long-Term Contracts Assurance: By securing long-term contracts, Seagate and Western Digital enhance revenue predictability, shifting to a more stable business model, while the implementation of HAMR technology reduces material costs, further boosting profitability.
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Analyst Views on STX
Wall Street analysts forecast STX stock price to fall
18 Analyst Rating
14 Buy
3 Hold
1 Sell
Moderate Buy
Current: 673.640
Low
150.00
Averages
310.39
High
465.00
Current: 673.640
Low
150.00
Averages
310.39
High
465.00
About STX
Seagate Technology Holdings plc provides mass-data storage infrastructure solution. The Company’s principal products are hard disk drives, commonly referred to as disk drives, hard drives (HDDs). In addition to HDDs, the Company produces a range of data storage products, including solid state drives (SSDs), solid state hybrid drives, storage subsystems, as well as a scalable edge-to-cloud mass data platform. Its HDD products are designed for mass capacity storage and legacy markets. Mass capacity storage involves use cases, such as hyperscale data centers and public clouds, as well as emerging use cases. The Company’s HDD and SSD product portfolio includes Serial Advanced Technology Attachment, Serial Attached SCSI and Non-Volatile Memory Express based designs to support a variety of mass capacity and legacy applications. Its systems portfolio includes storage subsystems for enterprises, cloud service providers, scale-out storage servers and original equipment manufacturers.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Margin Improvement: The adjusted gross margin improved by over 10 percentage points to 47%, while the operating margin jumped 14 percentage points to 37.5%, indicating that the company successfully raised prices in a high-demand environment, thereby enhancing profitability.
- Net Income Soars: Seagate's adjusted net income soared 129% to $934 million, translating to $4.10 per share, reflecting the company's strong financial performance in a rapidly growing market and further solidifying its market leadership.
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See More
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- Rising Capital Expenditures: Alphabet reported a capital expenditure of $35.7 billion in Q1, primarily aimed at supporting AI opportunities, reflecting the urgency of investing in technical infrastructure, with projections indicating capex could exceed $1 trillion by next year.
- Growing Hardware Demand: Meta Platforms is extending the lifespan of aging servers due to an inability to acquire new ones, with an internal memo noting that hardware demand growth has exceeded expectations, particularly in critical server commodities like DRAM and HDDs, which are becoming binding constraints.
- Emerging Investment Opportunities: With strong earnings from major tech firms, Wall Street analysts believe investors will continue to chase perceived winners in the semiconductor and memory sectors, especially against the backdrop of rising prices for DRAM and NAND products, while demand for memory testing equipment is also on the rise.
See More
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- Profitability Turnaround: The company reported a non-GAAP profit of nearly $3.68 billion ($23.41 per share), a remarkable recovery from a loss of $43 million in the previous year, indicating a substantial improvement in profitability.
- Strong Segment Performance: Revenue from the data center segment skyrocketed 645% year-over-year to nearly $1.47 billion, while edge computing contributed $3.66 billion with a 295% increase, and consumer revenue grew 44% to $820 million, showcasing strong demand across all segments.
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See More
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