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Western Digital vs. Seagate: Best AI Stock to Buy After Earnings
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Key Takeaways
Western Digital's Q1 revenues rose 55% to $4.38 billion, while non-GAAP EPS surged 161% to $4.64.
Seagate's Q1 revenues climbed 61% to $4.23 billion, while non-GAAP EPS jumped 194% to $7.68.
Seagate's 386.9% ROE and 19.01 forward P/E compare with Western Digital's 57.9% and 19.37.
Demand for high-capacity data storage has increased due to the growing adoption of artificial intelligence (AI), benefiting both Western Digital Corporation (WDC - Free Report) and Seagate Technology Holdings plc (STX - Free Report) . Both companies delivered strong results in their latest quarterly reports, but which AI stock is the better buy after earnings? Let’s explore –
Western Digital’s AI Boom Drives Strong Growth
According to Western Digital’s Oct. 22 press release, its revenues increased to $4.38 billion in the fiscal first quarter of 2027, up 55% year over year and a 17% sequential rise. Western Digital’s storage products saw an increase in demand, fueled by the expansion of AI infrastructure, which helped drive an increase in revenues.
Improvement in pricing and optimal product mix also boosted Western Digital’s profit margins. The company’s GAAP gross margin was 57.8%, up 14.3 percentage points year over year. Meanwhile, non-GAAP earnings per share (EPS) came in at $4.64, up 161% year over year and 30% sequentially. Profits grew at a faster pace than revenues, highlighting solid operating leverage.
Looking ahead, Western Digital expects fiscal second-quarter 2027 revenues to reach $5.1 billion at the midpoint of guidance, representing an increase of about 16.4% from the fiscal first quarter. This means that management continues to see an increase in demand for high-capacity data-center storage. At the same time, free cash flow of $1.38 billion in the fiscal first quarter has given the company enough resources to manage debt and support investments for further growth.
AI-Driven Growth Boosts Seagate’s Earnings and Cash Flow
Growing AI infrastructure has increased demand for high-capacity storage, eventually benefiting Seagate. The company’s revenues surged 61% year over year to $4.23 billion in the fiscal first quarter of 2027, according to its Oct. 27 press release.
Demand for Seagate’s mass-capacity storage products has increased sharply, helping the company’s profit margins expand sharply. Seagate’s GAAP gross margin was 57.3%, up 17.9 percentage points year over year. Meanwhile, non-GAAP EPS increased to $7.68, an increase of around 194% year over year. Earnings growing at a faster pace than revenue growth highlights Seagate’s ability to translate an increase in sales into stronger profits.
For the fiscal second quarter of 2027, Seagate now expects revenues of $4.8 billion, plus or minus $100 million. From the midpoint, this would be approximately 13.4% more than the fiscal first quarter. Additionally, in the fiscal first quarter, the company generated a record free cash flow of $1.5 billion, which has strengthened its balance sheet and provided greater flexibility to invest in growth.
WDC vs. STX: Which AI Stock Is the Best Buy After Earnings?
The latest earnings and robust outlook indicated that both Western Digital and Seagate have gained immensely from rising AI-driven storage demand. Both companies reported strong revenue and improved profit margins, while healthy cash flow has bolstered their financial strength.
However, Seagate appears more efficient than Western Digital at generating profits from shareholders’ equity. This is because Seagate’s return on equity (ROE) of 386.9% exceeds Western Digital’s ROE of 57.9%.
Image Source: Zacks Investment Research
Additionally, Seagate appears more attractively valued than Western Digital. Per the price/earnings (P/E) ratio, STX trades at 19.01 forward earnings compared with WDC’s forward earnings multiple of 19.37.
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Western Digital vs. Seagate: Best AI Stock to Buy After Earnings
Key Takeaways
Demand for high-capacity data storage has increased due to the growing adoption of artificial intelligence (AI), benefiting both Western Digital Corporation (WDC - Free Report) and Seagate Technology Holdings plc (STX - Free Report) . Both companies delivered strong results in their latest quarterly reports, but which AI stock is the better buy after earnings? Let’s explore –
Western Digital’s AI Boom Drives Strong Growth
According to Western Digital’s Oct. 22 press release, its revenues increased to $4.38 billion in the fiscal first quarter of 2027, up 55% year over year and a 17% sequential rise. Western Digital’s storage products saw an increase in demand, fueled by the expansion of AI infrastructure, which helped drive an increase in revenues.
Improvement in pricing and optimal product mix also boosted Western Digital’s profit margins. The company’s GAAP gross margin was 57.8%, up 14.3 percentage points year over year. Meanwhile, non-GAAP earnings per share (EPS) came in at $4.64, up 161% year over year and 30% sequentially. Profits grew at a faster pace than revenues, highlighting solid operating leverage.
Looking ahead, Western Digital expects fiscal second-quarter 2027 revenues to reach $5.1 billion at the midpoint of guidance, representing an increase of about 16.4% from the fiscal first quarter. This means that management continues to see an increase in demand for high-capacity data-center storage. At the same time, free cash flow of $1.38 billion in the fiscal first quarter has given the company enough resources to manage debt and support investments for further growth.
AI-Driven Growth Boosts Seagate’s Earnings and Cash Flow
Growing AI infrastructure has increased demand for high-capacity storage, eventually benefiting Seagate. The company’s revenues surged 61% year over year to $4.23 billion in the fiscal first quarter of 2027, according to its Oct. 27 press release.
Demand for Seagate’s mass-capacity storage products has increased sharply, helping the company’s profit margins expand sharply. Seagate’s GAAP gross margin was 57.3%, up 17.9 percentage points year over year. Meanwhile, non-GAAP EPS increased to $7.68, an increase of around 194% year over year. Earnings growing at a faster pace than revenue growth highlights Seagate’s ability to translate an increase in sales into stronger profits.
For the fiscal second quarter of 2027, Seagate now expects revenues of $4.8 billion, plus or minus $100 million. From the midpoint, this would be approximately 13.4% more than the fiscal first quarter. Additionally, in the fiscal first quarter, the company generated a record free cash flow of $1.5 billion, which has strengthened its balance sheet and provided greater flexibility to invest in growth.
WDC vs. STX: Which AI Stock Is the Best Buy After Earnings?
The latest earnings and robust outlook indicated that both Western Digital and Seagate have gained immensely from rising AI-driven storage demand. Both companies reported strong revenue and improved profit margins, while healthy cash flow has bolstered their financial strength.
However, Seagate appears more efficient than Western Digital at generating profits from shareholders’ equity. This is because Seagate’s return on equity (ROE) of 386.9% exceeds Western Digital’s ROE of 57.9%.
Image Source: Zacks Investment Research
Additionally, Seagate appears more attractively valued than Western Digital. Per the price/earnings (P/E) ratio, STX trades at 19.01 forward earnings compared with WDC’s forward earnings multiple of 19.37.
Image Source: Zacks Investment Research
Therefore, Seagate seems to be the more attractive AI stock to buy, given its higher ROE and lower forward P/E ratio than Western Digital. Seagate currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.