Key Takeaways:
Seagate Technology Holdings Plc reported third-quarter fiscal 2026 sales of $3.11 billion, as surging demand for high-capacity hard disk drives from AI data centers drove the storage company's best quarterly performance in years.
"The results reflect a structural shift in demand for high-capacity storage that we have not seen in the history of this industry," said Gianluca Romano, chief financial officer at Seagate, on the earnings call.
Non-GAAP earnings per share reached $4.10, while GAAP gross margins hit 46.5% and non-GAAP margins touched 47%. Cash from operations totaled $1.1 billion, translating to $953 million in free cash flow. The company paid down $641 million in debt during the quarter and returned $191 million to shareholders through buybacks and dividends.
Seagate's fourth-quarter outlook topped analyst estimates, with management projecting revenue of $3.45 billion and adjusted EPS of $5.00, both above consensus. The guidance extends a rally that has pushed shares up roughly 269% year to date, making Seagate one of the five best-performing stocks in the S&P 500 in 2026.
The AI Storage Supercycle
The relationship between artificial intelligence and traditional hard drives has become a central theme for storage investors. As hyperscalers expand data centers to support AI training and inference workloads, demand for high-capacity nearline HDDs has accelerated beyond previous forecasts. Morgan Stanley analysts highlighted Seagate and Western Digital Corp. as preferred investments, projecting HDD demand expanding 40% to 50% year over year while manufacturing capacity grows just 30% to 35%.
Seagate's HAMR technology, which increases storage density, has arrived at a moment when hyperscalers need cost-effective solutions for the massive datasets generated by AI models. The company's nearline storage products are widely used by cloud providers managing AI-related information.
Wall Street Turns Bullish
Of 25 sell-side analysts covering Seagate, 21 rate it a buy, four a hold, and none a sell, according to MarketBeat data. Consensus price targets have climbed from the mid-$700 range toward $830, while Morgan Stanley and Barclays have pushed their targets near or exceeding $1,000.
The stock now trades above its consensus price target of $831.79, a gap that reflects how aggressively investors have moved ahead of Wall Street's average expectations. Seagate carries a forward price-to-earnings multiple of 72.05, the highest among the storage peers riding the AI memory supercycle.
Western Digital, which has surged roughly 279% year to date, hit an all-time high on June 15 after Morgan Stanley raised its price target by 33%. SanDisk Corp., the NAND flash specialist spun off from Western Digital, has gained nearly 788% this year, leading the entire S&P 500.
What Comes Next
The guidance raise signals that management expects AI-driven storage demand to continue accelerating. Industry insiders have said they expect the AI-driven memory shortage to last at least through 2028, according to Morgan Stanley. Investors will watch Seagate's fiscal fourth-quarter report due in late July for updated segment margins and any further capacity expansion plans.
This article is for informational purposes only and does not constitute investment advice.
