Seagate's Data Center Revenue Climbs 34% on HAMR Drive Adoption
Seagate is capitalizing on strong demand from global cloud customers, with its data center revenue rising 34% year-over-year to $2.1 billion in the first fiscal quarter. This segment now accounts for approximately 80% of the company's total sales. The growth is underpinned by the faster adoption of its high-capacity Heat-Assisted Magnetic Recording (HAMR) drives. Seagate shipped more than 1 million of its Mozaic HAMR drives in the September quarter, with five major cloud customers having already qualified the technology.
The company's product roadmap is driving significant growth in exabyte shipments and improving financial visibility through long-term contracts extending into 2026. For its fiscal second quarter, Seagate forecasts revenue of about $2.7 billion, which would represent 16% year-over-year growth, and projects non-GAAP operating margins near 30%. In its commitment to shareholders, the company returned $153 million in dividends and $29 million in share repurchases during the first quarter. However, its significant debt levels remain a financial risk.
Western Digital Rises 184% on Strategic Split and AI Demand
Western Digital is experiencing a surge in demand driven by AI adoption, which propelled its stock to a 183.7% gain over the past six months. A key catalyst was the strategic separation of its HDD and Flash businesses in March 2025, a move designed to unlock shareholder value. In its fiscal first quarter, the company shipped 204 exabytes of storage, a 23% increase year-over-year, driven by hyperscaler demand. Its innovation has centered on energy-efficient ePMR technology, with shipments exceeding 2.2 million units in the September quarter.
This robust operational performance generated $672 million in operating cash flow in the first quarter, a dramatic increase from $34 million a year earlier. This enabled the company to return $592 million to shareholders through buybacks and dividends. While Western Digital is on track to begin qualifying its own HAMR drives in the first half of 2026, with volume production slated for 2027, it faces near-term risks from macroeconomic volatility and its own debt load.
WDC Holds Valuation Edge with 19.95 Forward P/E Ratio
When directly compared, Western Digital emerges as the more attractive investment from a valuation standpoint. Its shares currently trade at a forward price-to-earnings (P/E) ratio of 19.95, which is notably lower than Seagate's P/E of 23.12. This valuation gap exists even as earnings estimates for both companies have been revised upward; the Zacks Consensus Estimate for WDC's fiscal 2026 earnings was raised by 14.8%, versus a 6.7% upward revision for STX.
Although Seagate has a current technological lead in HAMR shipments, analysts suggest Western Digital's diversified business mix, improving margins, and more disciplined capital allocation make it a more balanced and resilient investment. While both companies carry a Zacks Rank #1 (Strong Buy), WDC's stronger stock performance and more favorable valuation present a compelling case for investors looking to gain exposure to the growing data storage market.
