Seagate Technology (STX) has transformed itself from a legacy hardware maker into a critical AI infrastructure darling, with its stock price hitting $411 in February 2026. This 330% climb over the past year has been fueled by the successful commercialization of Heat-Assisted Magnetic Recording (HAMR) technology. By packing significantly more data into the same physical footprint, Seagate’s 30TB+ drives have become the standard for cloud giants looking to maximize data center density without increasing power consumption. The company just posted record gross margins of 42.2%, proving that its technological lead has granted it significant pricing power over its rivals.
The 2026 outlook is bolstered by Seagate's eighth consecutive quarter of earnings beats, supported by a 305% explosion in free cash flow. CEO Dave Mosley has successfully positioned the company to capture the "modernization cycle" of the global grid, where older, less efficient drives are being swapped out for Seagate’s Mozaic HAMR platforms. Beyond the tech, Seagate's commitment to shareholder returns remains a core pillar; despite the stock's massive appreciation, the company continues to pay a reliable dividend and execute a disciplined buyback program. This combination of "old school" capital discipline and "new school" AI growth has made STX a top-performing large-cap stock.
From a strategic standpoint, Seagate is creating a massive moat around the "Mass Capacity" storage segment. As AI models grow, the need for cheap, high-capacity bulk storage (HDDs) is growing alongside the need for fast storage (SSDs). Seagate is the primary beneficiary of this "cold storage" explosion, as its HAMR drives offer a significantly lower total cost of ownership (TCO) for hyperscalers compared to all-flash arrays. However, the risk in 2026 is that any manufacturing yields for the new 30TB+ drives could face bottlenecks, potentially allowing competitors to narrow the gap. For the moment, Seagate’s vertical integration gives it a distinct advantage in controlling costs and quality.
I calculated the $338.20 Fair Value by forecasting the next five years of Unlevered Free Cash Flow (UFCF) and discounting it back using a WACC of 9.8% to account for market risk. By taking the present value of all future cash flows and adding a terminal value for the mature storage market, we find the company's true intrinsic floor. Since this value sits below the current $411 market price, the stock is technically overvalued; this affects the stock by creating a "priced-for-perfection" scenario, suggesting to investors that the recent rally has outpaced the fundamental cash-generating capability of the business.
Have other thoughts on Seagate Technology Holdings?
Create your own narrative on this stock, and estimate its Fair Value using our Valuator tool.
Create NarrativeHow well do narratives help inform your perspective?
Disclaimer
The user unknown holds no position in NasdaqGS:STX. Simply Wall St has no position in any of the companies mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
