Key Takeaways:
- Seagate is executing a strategic transformation through HAMR technology, positioning itself to capitalize on the growing demand for AI-driven storage.
- STX could reasonably reach $306/share by June 2028, based on our valuation assumptions.
- This implies a total return of 36% from today’s price of $225/share, with an annualized return of 12% over the next 2.7 years.
Seagate Technology (STX) is undergoing one of the most significant transformations in its history, driven by breakthrough heat-assisted magnetic recording (HAMR) technology that’s reshaping the data storage landscape.
As AI workloads continue to explode and data centers race to expand capacity, Seagate’s technology roadmap positions it to capitalize on this secular growth trend.
The data storage leader delivered fiscal 2025 revenue of $9.1 billion, marking 39% year-over-year growth.
More impressively, gross margins reached record levels of 37.9% in the June quarter, marking nine consecutive quarters of expansion.
This sustained profitability improvement reflects fundamental changes to Seagate’s business model, including its build-to-order strategy that provides multi-quarter visibility and reduces inventory risk.
Seagate serves cloud service providers, enterprise customers, and edge computing markets with high-capacity hard drives that strike a balance between performance, cost, and energy efficiency.
The company’s nearline drives now represent roughly 75% of revenue, with mass capacity products generating over $2 billion in quarterly sales.
Under CEO Dave Mosley’s leadership, Seagate has navigated the transition from perpendicular magnetic recording (PMR) to HAMR technology while maintaining financial discipline.
Seagate generated strong free cash flow in fiscal 2025, reduced gross debt to $5 billion, and recently resumed share buybacks, signaling confidence in future cash generation.
STX stock went public in 2002 and has returned over 4,000% to shareholders after adjusting for dividends.
Here’s why Seagate stock could provide attractive returns through 2028 as it scales HAMR production and captures market share across cloud and edge applications.
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What the Model Says for Seagate Stock
We analyzed the upside potential for STX stock using valuation assumptions based on the company’s HAMR technology roadmap, market position in AI-driven storage, and operational improvements from its restructured business model.
The opportunity ahead for Seagate centers on its technology leadership in mass capacity storage. HAMR enables Seagate to increase storage density without adding physical components, creating a sustainable cost advantage as the company ramps higher-capacity drives from 30 terabytes to 40 terabytes and beyond.
Seagate’s build-to-order strategy offers several advantages, as customers commit to volumes and pricing in advance, providing Seagate with predictable revenue streams. This visibility extends through mid-2026 for nearline products, with momentum building into the second half of calendar 2026.
Based on estimates of 11% annual revenue growth, 31% operating margins, and a normalized P/E valuation multiple of 19x, the model projects Seagate stock could rise from $225/share to $306/share.
That would be a 36% total return, or a 12% annualized return over the next 2.7 years.
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Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for STX stock:
1. Revenue Growth: 11%
Seagate delivered an exceptional fiscal 2025 performance, with 39% revenue growth driven primarily by the buildout of cloud infrastructure and demand for mass capacity.
Looking forward, growth drivers include the expansion of the global cloud customer base (currently four major customers qualified on HAMR, with more expected by mid-2026), sovereign AI infrastructure investments requiring localized data storage, and the increasing adoption of tiered storage architectures that leverage hard drives for both mass storage and caching layers.
We forecast 11% annual revenue growth, reflecting Seagate’s ability to capture AI storage demand while managing the transition from PMR to HAMR across its customer base.
This assumption accounts for the company’s build-to-order visibility and positions Seagate to benefit from data center capacity expansion, which is expected to more than double by 2029 on a gigawatt basis.
2. Operating Margins: 31%
Seagate achieved 26.2% non-GAAP operating margins in the June quarter, representing substantial improvement from earlier periods. The company is targeting further expansion, aiming for 40% gross margins, as HAMR volume increases and operational efficiencies scale.
HAMR drives deliver a lower cost per terabyte compared to PMR technology, and this advantage increases as capacity expands from 30TB to 40TB and eventually to 50TB products.
Seagate’s pricing strategy remains consistent under its build-to-order model. The company negotiates pricing when customers place orders quarters in advance, with like-for-like pricing trending slightly higher over time.
When customers transition to higher-capacity drives, they benefit from a better total cost of ownership, while Seagate captures margin improvements from lower costs per terabyte.
The company reduced operating expenses (OpEx) by consolidating development efforts on HAMR technology, eliminating parallel development in PMR. Management targets OpEx at approximately 10% of revenue, down from higher levels during the technology transition period.
3. Exit P/E Multiple: 19x
Seagate stock currently trades at a 21.5x forward earnings multiple, reflecting its growth profile and leadership in mass capacity storage technology.
We apply a 19x exit multiple, which sits below the current valuation but above historical averages, reflecting several considerations.
Seagate’s business model has undergone structural improvements through build-to-order contracts, which reduce volatility and enhance capital efficiency.
The company generates substantial free cash flow with low capital intensity (4-6% of revenue), supporting consistent shareholder returns through dividends and buybacks.
Seagate’s roadmap extends to 10 terabytes per platter (100TB drives) in the laboratory, providing visibility into sustained cost and capacity leadership. This technology moat should support reasonable valuation multiples as investors recognize the durability of Seagate’s competitive position.
The 19x multiple reflects attractive but not excessive optimism about Seagate’s execution capabilities and market positioning.
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What Happens If Things Go Better or Worse?
Different scenarios for STX stock through 2030 show varied outcomes based on execution and market conditions: (these are estimates, not guaranteed returns):
- Low Case: Slower HAMR adoption and margin pressure → 6% annual returns
- Mid Case: Successful HAMR ramp and customer diversification → 11% annual returns
- High Case: Accelerated AI storage demand and margin expansion → 15% annual returns
Even in the conservative scenario, Seagate stock offers reasonable returns supported by its technology leadership and improved business model.
The company’s build-to-order strategy provides downside protection by aligning production with committed customer demand.
The upside case for STX stock could deliver superior performance if Seagate successfully scales HAMR production faster than expected while capitalizing on sovereign AI infrastructure investments and edge computing applications.
Key indicators to watch include quarterly HAMR shipment volumes, the number of qualified cloud customers, and the progression of gross margin toward the 40% target.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
