The AI Stock Everyone Knows - But Few See Becoming a Future Winner

If cloud providers slow down purchases, it could weigh on the companies’ financial performance. Some also worry that if HDD technology fails to advance and is displaced by another cost-effective technology, Seagate can face significant pressure.  

But these concerns are overly pessimistic. At the moment, Seagate continues to exhibit strong fundamentals, which could provide a solid foundation for future growth. Let’s explore why Seagate could become a future winner, an opportunity many investors may be overlooking or failing to imagine now –  

Seagate: AI Demand Fuels Strong Growth and Rising Margins 

Strong AI-driven storage demand has recently boosted Seagate’s revenue growth. For the fiscal fourth quarter of 2026, Seagate’s revenues were $3.63 billion, up around 49% year over year, according to investors.seagate.com. For the fiscal year 2026, revenues jumped about 34% year over year to $12.2 billion.  

Demand for high-capacity HDDs has increased on the back of AI-driven data growth, helping Seagate expand its margins. In the fiscal fourth quarter, Seagate’s gross margin increased sharply to 52.3% from 37.4% a year earlier. For the fiscal year 2026, the company’s gross margin reached 45.6% from 35.2% in the prior-year period.  

The combination of revenue growth and expanding margins is encouraging for stakeholders, while growth, particularly revenues, is expected to continue into 2027. Revenues are expected to increase to $4.1 billion, plus or minus $100 million, in the fiscal first quarter of 2027.  

Profitability is also projected to improve, while the company’s robust cash flow and reduced debt burden position it well for continued growth and further investments in research and development. In the fiscal year 2026, Seagate generated a healthy $3.1 billion in free cash flow and trimmed its debt burden by 1.4 billion to $3.6 billion, further strengthening its balance sheet. 

Consequently, the company’s expected earnings growth rate for the current and next year is 124.5% and 59.6%, respectively. The Zacks Consensus Estimate of $34.99 for STX’s earnings per share (EPS) is up 168.7% year over year.

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Brokers also see greater upside potential in Seagate. The average short-term price target for STX stock is $1,141.82, representing a 30% upside from its last closing price of $878.21. The highest price target stands at $1,600, suggesting a potential upside of 82.2%.

Image Source: Zacks Investment Research

Seagate currently has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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