The artificial intelligence (AI) infrastructure boom supercharged the stocks of several companies that have benefited from the rollout of this technology in recent years, and data storage solutions provider Seagate Technology (STX 2.82%) is one of them.
This AI stock's price has shot up a stunning 7x over the past year. This surge was partly driven by investor enthusiasm over strong demand for Seagate's high-capacity hard disk drives (HDDs) and solid-state drives (SSDs), which are used in data centers. Importantly, the favorable trends driving Seagate's solid growth are likely to persist for the remainder of 2026 and beyond.
It won't be surprising to see this stock head higher as the year progresses. Let's say you have $1,000 in investible cash right now, after meeting expenses, paying off any expensive loans, and saving for rough times. Putting that money into Seagate could be a smart move. Let's look at the reasons why.
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Strong demand and supply constraints will be tailwinds for Seagate
Data centers are the biggest customers of Seagate's storage solutions, accounting for 87% of its shipments in the second quarter of fiscal 2026 (which ended on Jan. 2, 2026). What's worth noting is that storage demand from data centers is so strong that Seagate already sold out its high-capacity HDDs for 2026. Even better, major cloud customers are already lining up to purchase Seagate's capacity for 2027 and 2028.
NASDAQ: STX
Key Data Points
The shortage of HDDs led to a 60% price increase for high-capacity storage drives between November 2025 and February 2026. SSD prices jumped even more aggressively. Market research firm Gartner anticipates a 56% jump in spending on data center systems this year, an increase of around 4 percentage points over last year.
The acceleration in data center spending suggests that the favorable HDD pricing environment isn't going away anytime soon. Seagate's non-GAAP earnings jumped by 53% year over year in fiscal Q2 to $3.11 per share. The company's fiscal 2026 earnings guidance of $3.40 per share points to a stronger increase of 79% over the year-ago period's reading of $1.90 per share.
Seagate, therefore, seems well on its way to exceeding the consensus earnings growth estimate of 63% for the current fiscal year to $13.17 per share. Even better, the HDD shortage for the rest of the year has put Seagate in a strong position to negotiate favorable pricing terms with its customers. As a result, don't be surprised if the company's earnings growth for fiscal 2027 (which begins in July of this year) outpaces the 58% jump analysts are expecting.
The potential outperformance is the reason Seagate can deliver healthy gains by the end of the year.
Stronger-than-expected earnings growth should translate into more stock price upside
Seagate's consensus earnings expectations have risen this year, with the fiscal 2027 estimate being an especially prominent increase.
Data by YCharts.
It won't be surprising to see these estimates rise as the year progresses, especially given the recent rapid increase in HDD prices. Seagate guided for $3.40 in earnings per share at the midpoint for its recently concluded fiscal Q3 2026 (which coincided with the first quarter of the calendar year).
We have already noted that the year-over-year increase would be 79%. Assuming Seagate's earnings increase by 70% year over year in the remaining three quarters of calendar 2026, its overall earnings for the calendar year would land at $17.53 per share.
|
Period |
Projected EPS |
Year-ago EPS |
Estimated growth |
|---|---|---|---|
|
FY 2026 Q3 |
$3.40 |
$1.90 |
79% |
|
FY 2026 Q4 |
$4.40 |
$2.59 |
70% |
|
FY 2027 Q1 |
$4.44 |
$2.61 |
70% |
|
FY 2027 Q2 |
$5.29 |
$3.11 |
70% |
|
12-month total |
$17.53 |
$10.21 |
72% |
Data source: Seagate Technology quarterly earnings reports. EPS = Earnings per share.
Seagate is trading at 33 times forward earnings. That's a discount to the U.S. tech sector's earnings multiple of 43. However, this tech stock deserves to trade at a premium, as it is poised to increase its earnings at a much higher rate than the broader market. The S&P 500's earnings, for instance, are expected to increase by 18% this year.
Assuming Seagate trades at 50 times earnings at the end of 2026 and its earnings reach $17.53 per share in calendar 2026, its stock price could increase by 50% to $877. So an investment of $1,000 in Seagate stock right now could be worth $1,500 by the end of the year, suggesting that investors can still buy this high-flying stock even after the multibagger gains it has clocked in the past year.
