The AI Stock Nobody Is Talking About - but Could Be a Big Winner

Let us thus see what is driving Seagate’s growth, and why it could be the next big winner, making the stock a compelling buy –  

Seagate: AI Demand Drives Growth and Margin Expansion 

The AI-driven data growth is increasing hyperscalers’ demand for high-capacity HDDs, leading to stronger pricing and higher margins for Seagate. In the fiscal year 2026, Seagate’s gross margin increased significantly to 45.6% from 35.2% a year ago, according to investors.seagate.com. The improvement was even more noteworthy in the fiscal fourth quarter of 2026, when gross margin was 52.3% compared with 37.4% in the fiscal fourth quarter of 2025.  

Seagate’s revenue growth has also been exceptional. The company’s revenues for fiscal year 2026 were $12.2 billion, up roughly 34% year over year. For the fiscal fourth quarter of 2026, revenues were $3.63 billion, up approximately 49% year over year. The strong revenue growth is particularly attributable to high AI-driven storage demand. More importantly, Seagate is not only growing its top line but also expanding its margins, allowing the company to earn more profit per dollar of revenue, which is highly valuable for shareholders. 

The most bullish aspect is the company’s fiscal first-quarter 2027 guidance. Management expects revenues for the fiscal first quarter of 2027 to increase to $4.1 billion, plus or minus $100 million. Profitability is expected to strengthen as well, with non-GAAP earnings per share (EPS) projected at $7.30, up from $5.71 reported in the fiscal fourth quarter of 2026. Both indicate that Seagate’s growth momentum is expected to continue into fiscal year 2027, and hasn’t slowed down after a superb fiscal 2026. 

Seagate’s cash generation is excellent; it has registered a free cash flow of $3.1 billion in fiscal year 2026, which will help the company reduce its debt burden and reinvest in HAMR/Mozaic technology. Anyhow, the company is maintaining a strong balance sheet as its debt burden has declined by $1.4 billion to $3.6 billion in fiscal year 2026. 

Why Seagate Could Be the Next Big Winner and a Strong Buy 

Strong AI-driven storage demand, expanding margins, increasing revenues and EPS, and a strong cash flow position set Seagate to be the next big winner in the AI infrastructure boom.  

At the same time, Seagate remains more efficient at generating profits than its peers. This is because Seagate’s return on equity (ROE) of 386.9% exceeds the Computer - Integrated Systems industry’s ROE of 33.4%.

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All these factors make Seagate a solid buy, backed by its Zacks Rank #1 (Strong Buy) and an impressive 124.6% expected earnings growth rate for the current year. 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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