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Cloud Giants Record $1.1T RPO: A Growth Catalyst for Seagate?
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Key Takeaways
Seagate raised its annual revenue growth outlook to at least 20% on stronger cloud demand.
STX said Mozaic HAMR drives shipped to its first CSP as AI boosts demand for high-capacity HDDs.
STX said nearline capacity is largely allocated through 2027, supporting visibility into 2028 and beyond.
On its last earnings call, Seagate Technology Holdings plc (STX - Free Report) highlighted that the top three global cloud service providers (CSPs) have nearly doubled their Remaining Performance Obligations (RPO) to a record $1.1 trillion, signaling a massive pipeline of future cloud and AI infrastructure spending that could drive stronger demand for STX's high-capacity storage solutions. RPO represents the total value of contracted revenue that companies have yet to recognize. For cloud providers, RPO includes multi-year commitments from enterprise customers using cloud infrastructure, AI services, software platforms and data solutions.
Seagate highlighted strong momentum in HAMR adoption in 2025, with Mozaic-based 3TB-per-disk HAMR drives shipping to its first CSP. STX’s strategy rests on three pillars: durable storage demand, a strong technology roadmap and disciplined execution. AI-driven applications are accelerating data creation, increasing retention needs and expanding reliance on historical datasets from cloud to edge, reinforcing demand for cost- and energy-efficient, high-capacity HDDs. Its Mozaic platform and HAMR innovation position it to meet this demand with timely technology, while its build-to-order model, pricing discipline and capital allocation framework drive margin expansion and long-term value creation.
This combination is already pushing performance ahead of prior targets, leading Seagate to raise its annual revenue growth outlook to at least 20%. Confidence is supported by sustained cloud investment, with hyperscalers continuing to expand infrastructure spending and future commitments, as reflected in sharply rising RPO levels. Nearline products—about 90% of exabyte shipments—remain in high demand, with capacity largely allocated through 2027, supported by long-term supply agreements, build-to-order contracts and value-based pricing that enhance visibility and profitability into 2028 and beyond.
Rising CSP Spending Intensifies Storage Competition for STX
Western Digital Corporation (WDC - Free Report) is gaining from strength across end markets, riding on AI-led storage needs and multi-year agreements extending through 2028-29. To address the growing needs of mid-scale cloud and enterprise customers, WD is expanding its Platforms business to deliver hyperscale-like efficiency without requiring hyperscale resources. With UltraSMR technology, compatible across both ePMR and HAMR drives, WDC is broadening customer adoption. Three of its largest customers have already embraced the technology, with two meeting nearly all of their exabyte demand through UltraSMR and the third quickly scaling toward similar levels. Management expects all major customers to be qualified on UltraSMR by the end of calendar 2027.
Micron Technology (MU - Free Report) is transforming its customer relationships through strategic agreements across data center, consumer and auto markets. MU has signed 16 SCAs, generally structured as take-or-pay agreements with binding volume commitments over multiple years. These signed agreements represent roughly 20% of DRAM volume and a third of NAND volume over the agreement period. When completed, Micron expects half or more of its revenues to be under SCAs. Fourteen of the 16 agreements have cumulative revenues at minimum contract pricing of approximately $100 billion. The signed agreements also include projected customer deposits and related financial commitments of $22 billion, including approximately $18 billion in cash deposits.
STX’s Price Performance, Valuation & Estimates
In the past year, STX shares have skyrocketed 504.7%, outperforming the Computer Integrated Systems industry’s growth of 227.6%.
Image Source: Zacks Investment Research
Going by the price/earnings ratio, the company’s shares currently trade at 31.48 forward earnings compared with 14.04 for the industry.
Image Source: Zacks Investment Research
STX is currently witnessing an uptrend in estimate revisions. Earnings estimates for fiscal 2026 have inched up 0.3% to $14.93 over the past 60 days, while the same for fiscal 2027 has gone up 6.5% to $28.05.
View the Zacks #1 Rank List
Image: Bigstock
Cloud Giants Record $1.1T RPO: A Growth Catalyst for Seagate?
Key Takeaways
On its last earnings call, Seagate Technology Holdings plc (STX - Free Report) highlighted that the top three global cloud service providers (CSPs) have nearly doubled their Remaining Performance Obligations (RPO) to a record $1.1 trillion, signaling a massive pipeline of future cloud and AI infrastructure spending that could drive stronger demand for STX's high-capacity storage solutions. RPO represents the total value of contracted revenue that companies have yet to recognize. For cloud providers, RPO includes multi-year commitments from enterprise customers using cloud infrastructure, AI services, software platforms and data solutions.
Seagate highlighted strong momentum in HAMR adoption in 2025, with Mozaic-based 3TB-per-disk HAMR drives shipping to its first CSP. STX’s strategy rests on three pillars: durable storage demand, a strong technology roadmap and disciplined execution. AI-driven applications are accelerating data creation, increasing retention needs and expanding reliance on historical datasets from cloud to edge, reinforcing demand for cost- and energy-efficient, high-capacity HDDs. Its Mozaic platform and HAMR innovation position it to meet this demand with timely technology, while its build-to-order model, pricing discipline and capital allocation framework drive margin expansion and long-term value creation.
This combination is already pushing performance ahead of prior targets, leading Seagate to raise its annual revenue growth outlook to at least 20%. Confidence is supported by sustained cloud investment, with hyperscalers continuing to expand infrastructure spending and future commitments, as reflected in sharply rising RPO levels. Nearline products—about 90% of exabyte shipments—remain in high demand, with capacity largely allocated through 2027, supported by long-term supply agreements, build-to-order contracts and value-based pricing that enhance visibility and profitability into 2028 and beyond.
Rising CSP Spending Intensifies Storage Competition for STX
Western Digital Corporation (WDC - Free Report) is gaining from strength across end markets, riding on AI-led storage needs and multi-year agreements extending through 2028-29. To address the growing needs of mid-scale cloud and enterprise customers, WD is expanding its Platforms business to deliver hyperscale-like efficiency without requiring hyperscale resources. With UltraSMR technology, compatible across both ePMR and HAMR drives, WDC is broadening customer adoption. Three of its largest customers have already embraced the technology, with two meeting nearly all of their exabyte demand through UltraSMR and the third quickly scaling toward similar levels. Management expects all major customers to be qualified on UltraSMR by the end of calendar 2027.
Micron Technology (MU - Free Report) is transforming its customer relationships through strategic agreements across data center, consumer and auto markets. MU has signed 16 SCAs, generally structured as take-or-pay agreements with binding volume commitments over multiple years. These signed agreements represent roughly 20% of DRAM volume and a third of NAND volume over the agreement period. When completed, Micron expects half or more of its revenues to be under SCAs. Fourteen of the 16 agreements have cumulative revenues at minimum contract pricing of approximately $100 billion. The signed agreements also include projected customer deposits and related financial commitments of $22 billion, including approximately $18 billion in cash deposits.
STX’s Price Performance, Valuation & Estimates
In the past year, STX shares have skyrocketed 504.7%, outperforming the Computer Integrated Systems industry’s growth of 227.6%.
Image Source: Zacks Investment Research
Going by the price/earnings ratio, the company’s shares currently trade at 31.48 forward earnings compared with 14.04 for the industry.
Image Source: Zacks Investment Research
STX is currently witnessing an uptrend in estimate revisions. Earnings estimates for fiscal 2026 have inched up 0.3% to $14.93 over the past 60 days, while the same for fiscal 2027 has gone up 6.5% to $28.05.
Image Source: Zacks Investment Research
STX currently boasts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.