Seagate Technology Stock (STX) Makes New High Into Earnings – We Look At The Setup

Seagate’s stock (STX) is rallying ahead of today’s earnings report, up 5.76% at $378.92, having hit a new high at $383.88 earlier in the session. The company reports after the close, with expectations on the quarter sitting at $2.84 adjusted EPS on $2.75B revenue, both above the company’s October guidance midpoint of $2.75 EPS on $2.70B revenue.

That gap creates a setup where merely meeting the prior guide will likely disappoint investors who have pushed estimates higher over the past three months.

The stock trades at 46x trailing earnings and sits just below its all-time high today, a valuation that embeds substantial confidence in both the durability of cloud storage demand and Seagate’s ability to maintain record gross margins through mix and pricing discipline.

The market has priced in a structural shift in the HDD industry, with analysts citing fully committed nearline production through 2026 and the successful ramp of 32TB Mozaic HAMR drives as evidence that supply constraints will support pricing power. The earnings report will clarify whether that thesis remains intact or whether demand normalization and capacity expansion are arriving sooner than the bull case assumes.

Recent analyst upgrades from BofA Securities, Morgan Stanley, Rosenblatt, and BNP Paribas have reinforced bullish sentiment, with BNP Paribas specifically highlighting expectations for a longer-than-expected upcycle in data center storage demand.

The stock has posted 31 moves greater than 5% over the past year, reflecting both the volatility inherent in cyclical hardware businesses and the market’s sensitivity to incremental data on AI infrastructure spending. A beat on consensus combined with guidance that extends visibility into fiscal 2027 would likely support the current premium valuation.

Conversely, revenue in line with the prior midpoint or commentary suggesting slower nearline allocation from hyperscalers would challenge the assumption that this cycle differs from prior HDD recoveries.

Consensus Estimates

Consensus has drifted upward since Seagate issued guidance on October 28, when the Street expected $2.62 EPS on $2.66B revenue for the December quarter. FactSet’s current $2.84 EPS estimate sits 3% above the company’s $2.75 midpoint, while the $2.75B revenue consensus is 2% above the $2.70B guide. That revision pattern reflects analyst confidence that nearline demand strength will drive a beat, consistent with the six upward EPS revisions over the past 30 days and zero downward moves. The estimate range spans $2.73 to $3.12 on EPS, a 14% spread that captures uncertainty around mix, pricing realization, and the pace of Mozaic HAMR revenue contribution.

The year-over-year comparison shows 39.8% EPS growth and 18.5% revenue growth, a margin expansion story that underpins the bull thesis. Seagate posted $2.03 adjusted EPS on $2.33B revenue in the December 2024 quarter, a period when the company was still emerging from the industry downcycle. The current setup assumes gross margins remain near the record levels achieved in fiscal Q1 2026, when the company reported 39.6% non-GAAP gross margin. Any deterioration in that metric, whether from unfavorable mix or pricing pressure, would challenge the Street’s confidence in sustained profitability.

Management Guidance and Commentary

“We are pleased with our strong start to fiscal 2026, driven by sustained nearline demand strength and the continued ramp of our Mozaic platform. We achieved record gross margins and are well-positioned to capitalize on the growing demand for mass capacity storage solutions.”

Seagate’s October 28 guidance called for $2.70B revenue at the midpoint with a $100M range, and $2.75 adjusted EPS with a $0.20 range. Management emphasized that nearline production remains fully committed through calendar 2026, a constraint that both validates demand strength and limits upside optionality. The company highlighted Mozaic HAMR technology as central to maintaining areal density leadership and meeting hyperscaler requirements for higher-capacity drives, positioning the platform as a structural competitive advantage rather than a near-term revenue driver.

The gap between management’s midpoint and current consensus is modest but meaningful given the stock’s valuation. Revenue consensus of $2.75B sits $50M above the guide, implying either stronger-than-expected nearline allocation or better mix realization from 32TB drives. On EPS, the $2.84 consensus is $0.09 above the $2.75 midpoint, a 3% premium that assumes gross margin sustains above 39% and operating leverage continues to improve. Seagate’s pattern over the past year has been to guide conservatively and beat modestly, but the July 2025 quarter demonstrated that the market punishes even clean beats when forward guidance disappoints. The stock dropped 8% in extended trading on July 29 despite reporting $2.59 adjusted EPS versus $2.45 expected, because the September-quarter outlook came in slightly below Street expectations at the time.

The critical variable is not whether Seagate beats the December quarter—the company has beaten adjusted EPS estimates in four consecutive quarters—but whether management’s March-quarter guidance supports the narrative that AI-driven storage demand extends well into fiscal 2027. Consensus for the March quarter sits at $3.01 EPS on $2.79B revenue. If Seagate guides below those levels or frames demand visibility as uncertain beyond the June quarter, the market will likely treat the December beat as backward-looking and reprice the stock based on a flattening growth trajectory.

Analyst Price Targets & Ratings

Wall Street remains largely bullish on Seagate, with 80% of analysts rating shares a Buy or Strong Buy. However, the consensus target of $354.82 sits slightly below the current price of $358.29, suggesting analysts believe the stock has reached fair value at current levels. This modest disconnect reflects the challenge of justifying further upside given the 46x trailing P/E multiple and the stock’s proximity to all-time highs.

Sector & Peer Comparison

Seagate trades at a substantial premium to storage sector peers, with a 46.1x trailing P/E that is more than double Western Digital’s 18.3x multiple. That valuation gap reflects the market’s view that Seagate has executed more effectively through the HDD cycle recovery, evidenced by the company’s 17.92% profit margin versus Western Digital’s 8.2%. Seagate’s forward P/E of 14.2x is more reasonable and in line with Micron’s 14.1x, suggesting the market expects significant earnings growth to justify current levels.

Earnings Track Record

Seagate has beaten adjusted EPS estimates in 14 of the past 19 quarters, a 73.7% success rate that establishes credibility on execution. The average surprise of 8.2% over that period is consistent, with the most recent four quarters showing surprises ranging from 6.1% to 9.3%. The pattern suggests Seagate guides conservatively and delivers modest beats, a dynamic that has worked well during the recovery phase but creates vulnerability if the company merely meets expectations during a period when the stock trades at all-time highs.

The June 2024 quarter stands out as an inflection point, with Seagate posting $1.05 adjusted EPS versus $0.75 expected, a 40% beat that marked the beginning of sustained margin expansion. That quarter coincided with commentary about tightening nearline supply and improving cloud demand, themes that have driven the stock’s subsequent rally. The progression from $0.12 EPS in December 2023 to $2.61 in September 2025 illustrates the magnitude of the cyclical recovery, but also raises questions about how much of that improvement is sustainable versus driven by temporary supply-demand imbalances.

Post-Earnings Price Movement History

Seagate’s post-earnings price movements show high variance, with the average next-day move of 2.6% masking a wide distribution of outcomes. The September 2025 quarter produced a 12.1% gain following an 8.8% EPS beat, the largest positive reaction in recent history and a move that accelerated the stock’s rally to new highs. That reaction reflected both the beat itself and management’s guidance for the December quarter, which came in above Street expectations and validated the thesis that nearline demand would remain strong through calendar year-end.

Expected Move & Implied Volatility

The options market implies a 7.5% move in either direction following the earnings report, a range of $331.42 to $385.16 that brackets the stock’s current price of $358.29. That expected move is elevated relative to typical large-cap technology hardware names, reflecting both Seagate’s recent volatility and investor uncertainty about whether the AI-driven storage demand narrative can sustain current valuations.

Expert Predictions & What to Watch

Key Outlook: Cautiously Bullish

The base case assumes Seagate delivers adjusted EPS in the range of $2.88 to $2.92, above the $2.84 consensus, and revenue between $2.76B and $2.80B, modestly above the $2.75B estimate. That outcome would represent the company’s fifth consecutive beat and would validate the thesis that nearline production remains fully committed.

Key Metrics to Watch

The most important variable is not the December quarter’s results but the slope of guidance. Seagate has established credibility on execution, beating adjusted EPS estimates in four consecutive quarters with an average surprise of 8.2%. The market has priced that consistency into the stock, which now trades at 46x trailing earnings and sits just 3% below all-time highs. A beat on consensus combined with March-quarter guidance at or above $3.01 EPS would likely drive the stock to new highs, validating the thesis that AI-driven storage demand is durable and that Seagate can sustain record margins through mix and pricing discipline.

Conversely, a scenario where Seagate beats the December quarter but guides the March quarter to $2.90 EPS or frames demand visibility as uncertain would challenge the structural improvement narrative. The July 2025 earnings reaction provides the template: the stock dropped 8% in extended trading despite a clean beat because the forward outlook disappointed relative to Street expectations. With consensus already above management’s prior guidance and the stock at all-time highs, the bar for a positive reaction has risen materially.

Hitting new highs into earnings raises expectations, we will find out soon if the company can deliver.