What’s Driving Seagate Stock Higher?

Seagate (NASDAQ: STX) has posted an impressive 60% year‑to‑date gain, far outpacing the S&P 500’s 4% increase. This surge stems from structural enhancements to the business, coupled with strong market dynamics and targeted execution in advanced technologies such as HAMR (Heat Assisted Magnetic Recording). The company is riding the wave of a data‑storage market rebound and benefiting from rising demand driven by generative AI.

Looking back to FY 2022, STX has more than doubled, bolstered by:

1. 1. A 176% increase in its P/S multiple—rising from 1.16x in FY 2022 to 2.30x in FY 2024, and currently around 3.20x.

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   2. A 44% decline in annual revenues (from $11.7  billion to $6.6  billion), reflecting industry-wide softening.

   3. A 5% reduction in shares outstanding, thanks to approximately $2.2 billion spent on buybacks since FY 2022.

We’ll examine these drivers in more detail. While STX stock has delivered strong returns, those seeking growth with less volatility than individual stocks might explore the High Quality portfolio, which has outpaced the S&P 500 with returns exceeding 91% since inception.

Image by K. Mishina from Pixabay

What’s Behind The Revenue Performance?

Seagate’s revenue declined sharply from $11.66 bil in FY 2022 to $6.55 bil in FY 2024—a 44% drop—chiefly due to weak consumer PC and external HDD demand, Covid-related disruptions in Asia, component shortages, and lingering inflation pressure. However, in the first nine months of FY 2025, revenue soared 42% y-o-y to $6.7 bil, driven by robust data-center and cloud customer demand. The explosive growth in AI use cases is increasingly fueling the appetite for high-capacity drives.

Despite SSDs stealing share with speed and efficiency, their higher cost per terabyte still leaves HDDs essential for large-scale storage. Seagate has smartly doubled down on enterprise-grade, high-capacity HDDs while scaling back lower-capacity consumer drives and limiting its SSD exposure. Rather than vertically integrate NAND, it sources from partners like Kioxia, enabling a lean focus on cost-effective, bulk storage solutions. This strategy has spurred steady, sustainable growth in Seagate’s core markets.

What’s Driving The Valuation Higher For STX Stock?

Seagate stock has experienced a significant increase in valuation multiples, with its price-to-sales (P/S) ratio jumping from 1.2x in FY 2022 to 3.2x now.  Currently trading around $136, STX stock’s trailing P/S multiple of 3.2x is higher than its four-year average of 2.2x, and also well above Western Digital’s (NASDAQ: WDC) historical average (1.15x). Several key factors are driving this sustained growth:

1. AI-Driven Storage Demand & HAMR Adoption: Growing demand from AI, cloud, and data center customers is boosting high-capacity nearline HDD sales. Early volume shipments of HAMR-powered Mozaic drives (3 TB/platter, with a roadmap up to 10 TB and ultimately 100 TB) are capturing market share amid supply constraints.
2. Strong Earnings Beats & Positive Outlook: Q3 results showed strong revenue, margins, and EPS, reinforcing optimism heading into fiscal 2025. Seagate reported third-quarter adjusted earnings of $1.90 per share (compared to 33 cents in Q3 2024) and quarterly revenue of $2.16 billion (up 31% year-over-year).
3. Shareholder Returns: Seagate launched a $5 billion share repurchase program, signalling confidence in supporting EPS.
4. Margin Expansion: Seagate’s operating margin has expanded to 20% in the first three quarters of 2025 from a mere 3% in the same period last year. With AI and HAMR driving revenue per drive higher, investors are pricing in significant operating leverage, justifying premium multiples.

But There Are Risks

Despite the strong outlook, there are notable risks. During market downturns, STX has consistently underperformed the S&P 500—dropping 58.2% during the 2022 inflation-driven selloff (from $116.02 on Jan 4 to $48.49 on Nov 3, versus a 25.4% S&P decline), yet it fully rebounded by May 27, 2025 and surged to $136.31 by June 24. In the COVID crash, STX plunged 35.6% compared to a 33.9% dip in the S&P. During the 2008 financial crisis, the stock collapsed 89.1% versus the S&P’s 56.8% fall.

While Seagate benefits from AI/cloud-driven storage demand, it still faces risks including tech shifts, capacity bottlenecks, regulatory or supply chain disruptions, pricing pressure, and reputational challenges. Investor confidence is currently priced in via premium multiples (3x P/S), but a lack of buffer means a downturn could hit hard, especially compared to peers like WDC, which trades nearer to 1x in downturns.

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