Seagate Technology (STX +4.40%) stock was soaring on Wednesday, rising some 20% in early trading after the company released blowout fiscal second-quarter earnings after the market closed Jan. 27.
For this high-flying artificial intelligence (AI) stock, it's a continuation of the breakout success it had in 2025 as one of the best-performing stocks on the S&P 500. Seagate returned 225% in 2025, and it's already up a ridiculous 61% year to date.
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Over the past 12 months, Seagate stock has risen 343%. And the good news for investors is that it doesn't appear to be slowing down anytime soon.
Seagate reported blowout earnings
Seagate and its chief rival, Western Digital, were two of the best S&P 500 stocks last year, each returning in excess of 200%.
NASDAQ: STX
Key Data Points
These two companies, which make high-capacity hard disk drives primarily for data centers, are the dominant players, splitting about 80% of the market share in this space. That puts them in a prime position to capitalize on the AI boom and the growing need for data centers and storage.
In the fiscal second quarter, Seagate generated $2.8 billion in revenue, a 22% increase year over year that beat analysts' estimates. Net income surged 76% to $593 million, or $2.60 per share. On an adjusted basis, net income rose 62% to $433 million, or $3.11 per share, which blew away estimates of $2.84 per share.
Its adjusted earnings were a new record, as were its 41.6% gross margin and 29.8% operating margin.
The third-quarter guidance called for revenue of $2.9 billion, which was beyond estimates of $2.79 billion. Further, Seagate anticipates non-GAAP (adjusted) diluted EPS of $3.40, plus or minus $0.20. This crushes estimates of $3.01 per share.
Seagate has more room to run
Wall Street analysts were quick to raise the price targets for Seagate stock after the earnings report. Some 10 different analysts boosted their targets, led by Morgan Stanley, which lifted it by $96 to $468 per share, and Cantor Fitzgerald, which lifted it by $100 to $500 per share.
On the earnings call, Seagate Chair and CEO William Mosley said demand has been "exceptionally strong," and that orders are completely booked for 2026 already, and the company will be taking orders for 2027 soon.
"Further out, demand visibility is strengthening based on the long-term agreements in place with major cloud customers through calendar '27," he said. "Additionally, multiple cloud customers are discussing their demand growth projections for calendar '28, underscoring that supply assurance remains their highest priority."
With the hyperscale data center market, which is the primary source of Seagate's revenue, expected to grow at a compound annual rate of 25% through 2030, Seagate is in prime position to reap the benefits with its duopoly.
Seagate's trailing-12-month price-to-earnings ratio is a bit high at 44, but its forward P/E is a more reasonable 31. However, with its massive earnings power, it is probably sustainable and lower than many other AI highfliers. Investors should keep an eye on that, especially after Wednesday's huge surge.
Seagate is firing on all cylinders, and it should keep rolling in 2026 and beyond; just keep an eye on the valuation.
