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Seagate vs. Western Digital: Which HDD Stock Has More Room to Run?
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Key Takeaways
Seagate benefits from strong nearline demand, higher-capacity drives and long-term hyperscaler commitments.
Western Digital is ramping 40TB ePMR and plans a 44TB HAMR launch in 2027.
New HDD capacity could pressure pricing, while both stocks have already posted substantial 2026 gains.
The AI boom is creating an unexpected beneficiary in the storage market: hard disk drives (HDDs). While AI discussions often center on GPUs, networking and high-bandwidth memory, AI workloads also generate massive volumes of data that must be stored economically. HDDs remain critical for hyperscale data centers because of their high capacity, lower cost per terabyte and power efficiency. This backdrop has favored two HDD giants: Seagate Technology Holdings plc (STX - Free Report) and Western Digital Corporation (WDC - Free Report) .
According to a report by Fortune Business Insights, the global data storage market is projected to witness a CAGR of 16.1% and reach $984.6 billion by 2034, up from $298.5 billion in 2026. A report from Mordor Intelligence estimates the HDD market to expand from $51.8 billion in 2026 to $69.7 billion by 2031 at a CAGR of 6%. Seagate and Western Digital are direct competitors in HDDs and mass-capacity data storage, with both benefiting from AI- and cloud-driven data-center demand. Seagate itself identifies Western Digital as a major HDD competitor.
Both companies are benefiting from strong nearline HDD demand, higher-capacity drives and pricing discipline. However, with both stocks having delivered substantial gains in 2026, investors may wonder which one still has more room to run.
Let’s unearth in depth.
The Case for STX Stock
Seagate appears well-positioned to capitalize on the current HDD upcycle. The company generated fiscal 2026 revenues of $12.2 billion, up 34% year over year, while non-GAAP gross margin expanded to 46.1% from 35.8%. The improvement was driven largely by higher nearline exabyte shipments, favorable pricing and a richer mix of high-capacity products. It ended fiscal 2026 with $1.7 billion in cash and $3.6 billion in debt, while gross debt fell $1.4 billion, reducing net leverage to 0.4 times adjusted EBITDA. STX later retired $1 billion of high-yield notes and its remaining convertible debt, lowering interest costs and boosting flexibility for dividends, buybacks and technology investments.
Image Source: Zacks Investment Research
A major part of the bull case is Seagate's Mozaic platform and HAMR technology. HAMR allows the company to increase areal density and pack more data onto each platter. By the end of fiscal 2026, HAMR-based products represented about 40% of Seagate's nearline exabyte shipment run rate. Higher areal density is important because it allows Seagate to increase storage capacity without proportionately increasing the number of drives, improving capital efficiency and potentially supporting stronger margins.
AI is generating enormous amounts of training data, model checkpoints, video, sensor information and other unstructured data. Much of this information does not require the speed of flash storage and can be economically housed on high-capacity HDDs. Seagate shipped 789 exabytes of HDD storage capacity in fiscal 2026, while data-center demand accounted for roughly 90% of its exabyte shipments exiting the year. Management highlighted the vast majority of its nearline exabytes are already allocated under long-term agreements into calendar 2028.
However, Seagate faces execution risks as it transitions to successive HAMR generations, with manufacturing complexity, qualification delays and yield issues potentially limiting exabyte growth and pressuring margins. Heavy cloud-customer concentration also creates spending-cycle risks, while tariffs, trade restrictions, FX and macroeconomic volatility could weigh on results. Competition from Western Digital, SSD providers and other storage vendors remains intense.
The Case for WDC Stock
Western Digital is also advancing aggressively on HDD technology. The company began shipping its 40TB ePMR drives in the June 2026 quarter and is entering volume production with customers. More importantly, WDC remains on track to ship its 44TB HAMR product in the first half of calendar 2027. It is also pursuing UltraSMR technology, which can increase exabyte capacity through a combination of recording technology and software enhancements. Its longer-term roadmap extends well beyond today's drive capacities, giving WDC additional opportunities to increase revenue per drive as customers upgrade their storage infrastructure.
WD maintains predictable, long-term pricing strategies aligned with capacity growth, enabling value delivery during product transitions. It is benefiting from strong customer demand, with LTAs extending into 2029–2031 and fiscal fourth-quarter exabyte shipments rising 22% year over year. Lower cost per terabyte, favorable product mix and pricing support healthy margins, while ePMR and HAMR launches should drive capacity growth. AI, cloud, inference, physical AI, autonomous vehicles and video workloads are fueling long-term storage demand, with neoclouds, sovereign AI and Asian markets offering additional opportunities.
The company also remains committed to disciplined capital allocation through dividends and share repurchases. It returned $3.1 billion to shareholders during fiscal 2026. In the fiscal fourth quarter, WDC repurchased common shares for $1 billion and paid $54 million in dividends. Western Digital also completed the monetization of its remaining 1.7 million Sandisk shares by exchanging them for 4.8 million Western Digital shares. At fiscal 2026 year-end, the company held about $1.6 billion in cash against $1.1 billion of debt, leaving a net cash position of roughly $500 million.
Image Source: Zacks Investment Research
However, Western Digital remains heavily reliant on large cloud customers, with Cloud accounting for 89% of quarterly revenues. Uneven purchasing schedules and shifts between CMR and UltraSMR products can cause quarterly exabyte shipments to fluctuate. While LTAs extending into 2029-2031 provide visibility, changes in orders, pricing or technology adoption could still significantly impact revenues and margins.
Furthermore, its fiscal 2027 roadmap depends on successfully ramping 40TB ePMR, 44TB HAMR and 50TB drives, alongside broader UltraSMR adoption. Qualification delays, manufacturing challenges or slower customer adoption could limit expected capacity and cost-per-terabyte improvements, while competition from HDD and flash-based alternatives could add pricing pressure.
Price Performance and Valuation for STX & WDC
Over the past six months, WDC and STX have registered gains of 21.3% and 62.3%, respectively.
Image Source: Zacks Investment Research
WDC trades at a valuation broadly in line with STX. Going by the price/earnings ratio, WDC’s shares currently trade at 17.45 forward earnings compared with 19.32 for STX.
Image Source: Zacks Investment Research
How Does the Zacks Consensus Estimate Compare for STX & WDC?
WDC’s estimate revisions are currently on an upward trajectory. The Zacks Consensus Estimate for WDC’s earnings for fiscal 2027 has been revised upward by 1% to $20.03 per share over the past 60 days, while the same for fiscal 2028 has gone up 1.9% to $34.74.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for STX’s earnings for the current fiscal year has remained unchanged over the past 60 days.
Both companies are well-positioned to benefit from structural growth in data storage as AI expands the volume of information that hyperscalers must retain. Seagate has the edge for investors seeking a stronger near-term upside story. Its record free cash flow, expanding margins, strong hyperscaler commitments and faster monetization of HAMR provide a compelling combination of growth and profitability. Western Digital remains a strong alternative, particularly for investors looking toward 2027 and beyond. Its 40TB ePMR ramp and planned 44TB HAMR launch could support further increases in capacity and revenue per drive.
However, the key risk to the HDD thesis is additional supply. Recent reports that Toshiba plans to significantly expand its AI data-center HDD production have triggered concerns that additional industry capacity could eventually weaken pricing power. Shares of both Seagate and Western Digital recently sold off sharply on those concerns. STX and WDC appear to be treading the middle of the road, and new investors could be better off if they trade with caution.
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Seagate vs. Western Digital: Which HDD Stock Has More Room to Run?
Key Takeaways
The AI boom is creating an unexpected beneficiary in the storage market: hard disk drives (HDDs). While AI discussions often center on GPUs, networking and high-bandwidth memory, AI workloads also generate massive volumes of data that must be stored economically. HDDs remain critical for hyperscale data centers because of their high capacity, lower cost per terabyte and power efficiency. This backdrop has favored two HDD giants: Seagate Technology Holdings plc (STX - Free Report) and Western Digital Corporation (WDC - Free Report) .
According to a report by Fortune Business Insights, the global data storage market is projected to witness a CAGR of 16.1% and reach $984.6 billion by 2034, up from $298.5 billion in 2026. A report from Mordor Intelligence estimates the HDD market to expand from $51.8 billion in 2026 to $69.7 billion by 2031 at a CAGR of 6%. Seagate and Western Digital are direct competitors in HDDs and mass-capacity data storage, with both benefiting from AI- and cloud-driven data-center demand. Seagate itself identifies Western Digital as a major HDD competitor.
Both companies are benefiting from strong nearline HDD demand, higher-capacity drives and pricing discipline. However, with both stocks having delivered substantial gains in 2026, investors may wonder which one still has more room to run.
Let’s unearth in depth.
The Case for STX Stock
Seagate appears well-positioned to capitalize on the current HDD upcycle. The company generated fiscal 2026 revenues of $12.2 billion, up 34% year over year, while non-GAAP gross margin expanded to 46.1% from 35.8%. The improvement was driven largely by higher nearline exabyte shipments, favorable pricing and a richer mix of high-capacity products. It ended fiscal 2026 with $1.7 billion in cash and $3.6 billion in debt, while gross debt fell $1.4 billion, reducing net leverage to 0.4 times adjusted EBITDA. STX later retired $1 billion of high-yield notes and its remaining convertible debt, lowering interest costs and boosting flexibility for dividends, buybacks and technology investments.
Image Source: Zacks Investment Research
A major part of the bull case is Seagate's Mozaic platform and HAMR technology. HAMR allows the company to increase areal density and pack more data onto each platter. By the end of fiscal 2026, HAMR-based products represented about 40% of Seagate's nearline exabyte shipment run rate. Higher areal density is important because it allows Seagate to increase storage capacity without proportionately increasing the number of drives, improving capital efficiency and potentially supporting stronger margins.
AI is generating enormous amounts of training data, model checkpoints, video, sensor information and other unstructured data. Much of this information does not require the speed of flash storage and can be economically housed on high-capacity HDDs. Seagate shipped 789 exabytes of HDD storage capacity in fiscal 2026, while data-center demand accounted for roughly 90% of its exabyte shipments exiting the year. Management highlighted the vast majority of its nearline exabytes are already allocated under long-term agreements into calendar 2028.
However, Seagate faces execution risks as it transitions to successive HAMR generations, with manufacturing complexity, qualification delays and yield issues potentially limiting exabyte growth and pressuring margins. Heavy cloud-customer concentration also creates spending-cycle risks, while tariffs, trade restrictions, FX and macroeconomic volatility could weigh on results. Competition from Western Digital, SSD providers and other storage vendors remains intense.
The Case for WDC Stock
Western Digital is also advancing aggressively on HDD technology. The company began shipping its 40TB ePMR drives in the June 2026 quarter and is entering volume production with customers. More importantly, WDC remains on track to ship its 44TB HAMR product in the first half of calendar 2027. It is also pursuing UltraSMR technology, which can increase exabyte capacity through a combination of recording technology and software enhancements. Its longer-term roadmap extends well beyond today's drive capacities, giving WDC additional opportunities to increase revenue per drive as customers upgrade their storage infrastructure.
WD maintains predictable, long-term pricing strategies aligned with capacity growth, enabling value delivery during product transitions. It is benefiting from strong customer demand, with LTAs extending into 2029–2031 and fiscal fourth-quarter exabyte shipments rising 22% year over year. Lower cost per terabyte, favorable product mix and pricing support healthy margins, while ePMR and HAMR launches should drive capacity growth. AI, cloud, inference, physical AI, autonomous vehicles and video workloads are fueling long-term storage demand, with neoclouds, sovereign AI and Asian markets offering additional opportunities.
The company also remains committed to disciplined capital allocation through dividends and share repurchases. It returned $3.1 billion to shareholders during fiscal 2026. In the fiscal fourth quarter, WDC repurchased common shares for $1 billion and paid $54 million in dividends. Western Digital also completed the monetization of its remaining 1.7 million Sandisk shares by exchanging them for 4.8 million Western Digital shares. At fiscal 2026 year-end, the company held about $1.6 billion in cash against $1.1 billion of debt, leaving a net cash position of roughly $500 million.
Image Source: Zacks Investment Research
However, Western Digital remains heavily reliant on large cloud customers, with Cloud accounting for 89% of quarterly revenues. Uneven purchasing schedules and shifts between CMR and UltraSMR products can cause quarterly exabyte shipments to fluctuate. While LTAs extending into 2029-2031 provide visibility, changes in orders, pricing or technology adoption could still significantly impact revenues and margins.
Furthermore, its fiscal 2027 roadmap depends on successfully ramping 40TB ePMR, 44TB HAMR and 50TB drives, alongside broader UltraSMR adoption. Qualification delays, manufacturing challenges or slower customer adoption could limit expected capacity and cost-per-terabyte improvements, while competition from HDD and flash-based alternatives could add pricing pressure.
Price Performance and Valuation for STX & WDC
Over the past six months, WDC and STX have registered gains of 21.3% and 62.3%, respectively.
Image Source: Zacks Investment Research
WDC trades at a valuation broadly in line with STX. Going by the price/earnings ratio, WDC’s shares currently trade at 17.45 forward earnings compared with 19.32 for STX.
Image Source: Zacks Investment Research
How Does the Zacks Consensus Estimate Compare for STX & WDC?
WDC’s estimate revisions are currently on an upward trajectory. The Zacks Consensus Estimate for WDC’s earnings for fiscal 2027 has been revised upward by 1% to $20.03 per share over the past 60 days, while the same for fiscal 2028 has gone up 1.9% to $34.74.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for STX’s earnings for the current fiscal year has remained unchanged over the past 60 days.
Image Source: Zacks Investment Research
STX or WDC: Which Stock Has More Upside?
Both STX and WDC at present carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Both companies are well-positioned to benefit from structural growth in data storage as AI expands the volume of information that hyperscalers must retain. Seagate has the edge for investors seeking a stronger near-term upside story. Its record free cash flow, expanding margins, strong hyperscaler commitments and faster monetization of HAMR provide a compelling combination of growth and profitability. Western Digital remains a strong alternative, particularly for investors looking toward 2027 and beyond. Its 40TB ePMR ramp and planned 44TB HAMR launch could support further increases in capacity and revenue per drive.
However, the key risk to the HDD thesis is additional supply. Recent reports that Toshiba plans to significantly expand its AI data-center HDD production have triggered concerns that additional industry capacity could eventually weaken pricing power. Shares of both Seagate and Western Digital recently sold off sharply on those concerns. STX and WDC appear to be treading the middle of the road, and new investors could be better off if they trade with caution.