Seagate Technology (NASDAQ:STX | STX Price Prediction) is one of the sole-source picks-and-shovels suppliers to hyperscalers that has already contracted nearline capacity almost fully through calendar year 2027. Here are 3 reasons why Seagate could be worth a closer look ahead of the company’s Q4 earnings on July 28.
3 Numbers That Make Seagate Impossible to Ignore
Growth is accelerating, not decaying. Fiscal Q3 revenue landed at $3.11 billion, up 44.07% year over year, beating consensus by 5.22%. Non-GAAP EPS of $4.10 cleared the $3.506 estimate by 16.94%. Management then guided Q4 to $3.45 billion in revenue and $5.00 in EPS at the midpoint, and CEO Dave Mosley raised the multi-year revenue growth target from low- to mid-teens to a minimum of 20% over the next few years.
The cash flow is investment-grade. Free cash flow hit $953 million, up 341.2% year over year, on a 31% free cash flow margin. Seagate retired $641 million of debt in the quarter, pushed net leverage to 0.7x, earned an investment-grade upgrade from Fitch, and raised the quarterly dividend to $0.74 per share.
The catalyst is visible on paper. The top three cloud service providers have nearly doubled their remaining performance obligations to $1.1 trillion. Seagate’s Mozaic 4 HAMR drives ship up to 44 terabytes per drive, over 30% more capacity than first-generation Mozaic. Polymarket traders assign a 93.5% probability that Q4 hard drive exabyte shipments will exceed 190.
The Bottom Line: Seagate’s AI Demand Is Locked In Through 2027
The biggest risk today is that data-center storage demand eventually slows. However, Seagate has already booked nearly all of its available nearline capacity through 2027, while profitability has improved for 12 consecutive quarters.
Wall Street remains bullish, with 21 buy ratings, three holds, and only one sell. Analysts’ average price target of $1,008.61 also implies 18.4% upside from the current price of $851.69. Investors can collect Seagate’s rising dividend while its contracted hyperscaler demand supports continued revenue and earnings growth.
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