STX can convert HDD scarcity and HAMR leadership into durable cash generation, with constrained supply supporting pricing and margins.
The bull case depends on peak pricing persisting while volume growth remains uneven; execution, supply, and valuation risks could quickly reverse earnings leverage.
The company's pricing accelerated significantly, with total revenue per TB rising 16% quarter-over-quarter and 33% year-over-year, driven by contract re-upping and component-cost pass-through, indicating strong pricing power.
Management's decision to hold capex at 4-6% for FY27, despite competitors flagging higher capital intensity, supports the rational-duopoly case for the multiple and suggests the company is not engaging in a capacity race.
The company is the only vendor with HAMR in volume production, and its areal-density roadmap allows for ~25% annual exabyte growth on flat units and low capex, with significant cost-per-TB reductions.
Demand for HDDs is broadening due to inference and agentic AI shifting data from store-and-forget to retain-and-reuse, and enterprise/sovereign builds adding customers beyond hyperscalers.
The company achieved record free cash flow and significantly stepped up buybacks, with a $4.4B authorization remaining, indicating strong capital return to shareholders.
The December quarter guide implies approximately 60% gross margin and 54% operating margin on flat opex, demonstrating strong profitability and margin expansion driven by pricing.
Management's commentary on long-term agreements (LTAs) covering the "vast majority" of nearline exabyte supply through CY28 and some cloud agreements extending to CY30 provides significant revenue visibility.
In Tech, Semis +1% continuing to rally on the back of Korea’s KOSPI’s 7% gain. Overall, earnings mixed overnight in the space with SKHY, VRT, GEV, FLEX, APH all betterand STX, NXPI, TER, FFIV mixed.
as STX this morning on a print that wasn’t as good, although STX held capex while one of the pushbacks against WDC was rising capex intensity for the next couple of years (STX mgmt must have been watching the px action AH on WDC’s print). For context, WDC g...
WDC did +7% q/q exabytes last week. That puts the exabyte debate on STX now, after it was the main knock on WDC. Mgmt explained away the exabyte miss as it planned staging of Mozaic 4 ahead of customer quals (inventory +$129M q/q to $1.70B), said there were...
Pricing. The story of the quarter. Total $/TB rose ~16% q/q to ~$19.2, or +33% y/y vs. ~10% last q and the ~20% the Street read into the Sept guide; DC $/TB rose ~31% y/y, and Edge IoT revenue ($784M, +52% y/y vs. +20% last q, ~17% above Street) came on fla...
Competition. On Toshiba, mgmt wouldn’t speculate but said bringing meaningful HDD capacity online is “orders of magnitude more difficult” than “plugging in a few machines,” and expects supply to stay “fairly tight” through CY28. On build vs. buy for heads a...
Bears argue STX is a cyclical hardware company printing peak margins at peak pricing, and the market is right to refuse it a secular multiple. Price is now doing most of the work: $/TB +33% y/y vs. EBs +21% (and +16% vs. +1% q/q), with EB growth down from +...
This quarter handed bears several talking points. The ~5–6% EB miss and its explanation (staging ahead of quals, OEM mix at lower capacity per drive) show volume growth is lumpier and more qualification-dependent than a smooth mid-20s CAGR implies, and inve...
The company's third-quarter results, while beating Street estimates, fell short of buyside expectations on all metrics, and the December quarter guide was below buyside targets, indicating a miss on elevated expectations.
Exabyte growth was nearly flat quarter-over-quarter, significantly missing Street estimates, and volume growth is lumpier and more qualification-dependent than a smooth CAGR implies.
Cost per TB fell only ~6% year-over-year and rose ~3% quarter-over-quarter, representing the weakest cost-down in several quarters, with management indicating that higher external component costs are not one-time.
The company is perceived as a cyclical hardware company printing peak margins at peak pricing, and the market is justified in refusing it a secular multiple.
Price is now doing most of the work for growth, with revenue per TB up 33% year-over-year versus exabytes up 21%, and exabyte growth decelerating from the previous quarter.
The pricing was set amid extreme scarcity across storage, and if new Chinese memory capacity and AI capex digestion lead to falling flash prices in 2H27, the price umbrella over HDDs could shrink just as supply responds.
Supply is responding, with competitors planning to increase capacity and areal density, potentially leading to increased competition and pressure on pricing.
Visibility is primarily about allocation, not price, as build-to-order terms lock only ~12 months out, CY28 pricing is unnegotiated, and management could pull back if customers stop pulling to plan.
Customer concentration, AI-funding risk at hyperscalers and neoclouds, and the historical volatility of the company's P/E ratio suggest the stock should trade on peak-to-trough math rather than a secular multiple.
Inventory rose ~8% quarter-over-quarter, and the December quarter guide implies incremental gross margins falling to ~76% from ~89%, indicating a slowdown in margin expansion.
STX - 2.5%: Beat Street but came up short of the buyside bar on every line, and the Dec guide ($4.8B / $9.20 EPS) is well above Street but below the ~$4.9–5.05B / $10–10.50 bogeys. Exabytes flat q/q. Tough for a still somewhat crowded long following WDC’s b...
The company achieved record free cash flow with low capital expenditure, executed significant share buybacks, reduced debt, and secured long-term data center nearline supply agreements.
WDC did +7% q/q exabytes last week. That puts the exabyte debate on STX now, after it was the main knock on WDC.
The company's third-quarter results beat Street expectations but fell short of buyside targets across all metrics, and its December quarter guidance, while above Street, was below buyside bogeys.
Exabyte growth was flat quarter-over-quarter, which was disappointing for a stock that had been a crowded long position, especially compared to a competitor's better print.
The company's September quarter revenue, gross margin, and EPS all missed buyside bogeys, despite beating Street estimates.
The primary concern was volume, as exabytes shipped were significantly below Street expectations, with nearly all quarter-over-quarter revenue growth driven by price/mix rather than volume, contrasting negatively with a competitor's stronger exabyte growth.
The December quarter guidance for revenue, EPS, and gross margin, while above Street, fell short of buyside bogeys, and its relative outperformance against Street estimates was less significant compared to a competitor.
STX -6%: Beat Street but came up short of the buyside bar on every line, and the Dec guide ($4.8B / $9.20 EPS) is well above Street but below the ~$4.9–5.05B / $10–10.50 bogeys. Exabytes flat q/q. Tough for a still somewhat crowded long following WDC’s bett...
EPS $9.20 vs. $8.54 Street and $10–10.50 bogey. Op margin guided “toward mid-50%” on ~$300M opex implies ~60–61% GM vs. 59.7% Street and the ~62–63.5% bogey. For context, WDC guided Dec revenue ~12% and EPS ~21% above Street; STX is ~7% and ~8% above.
Exabytes. Shipments were 248 EB (+22% y/y, +7% q/q), with nearline at 223 EB (+22%, ~90% of EB). Both came in a touch below Street (~249-250 total, ~227 nearline). Growth was stuck at 22% for a second quarter, below the >25% LT target and well behind STX’s...
The company's stock was mixed, with sentiment suggesting that if Elon Musk can add significant capacity, the market might not be as tight as perceived.
Morgan Stanley views current ~8x FY28 EPS valuations as too punitive, arguing they assume an HDD cycle peak by FY28 and an 80% SSD price collapse over 2–3 years.
Checks remain bullish, with spot nearline pricing significantly higher than blended contracts, the CY27/28 supply shortfall widening, and non-nearline pricing rising 15–30%+ quarter-over-quarter.
Morgan Stanley's December-quarter EPS estimate is approximately 12% above Street consensus, with further upside possible, and sets a price target of $1,200.
STX/WDC: MS says 8x FY28 already prices in an HDD peak; supply shortfall + pricing still moving higher
Rising shipments and pricing, combined with cost-down initiatives, are driving significant margin expansion.
Nearline exabytes are allocated into CY29 with pricing contracted through CY27/28, indicating strong long-term demand and pricing stability.
Structural concerns remain regarding the potential for new industry capacity to eventually trigger a downcycle.
UBS's note suggests that TDK's external heads and Toshiba's capacity could eventually break the "no new capacity" narrative, leading to a downcycle in late 2028/early 2029.
STX/WDC bulls argue nearline exabytes are allocated into CY29 now with pricing contracted through CY27/28; bears will point to UBS’s own STX note this morning, which sees TDK’s external heads and Toshiba capacity eventually breaking the “no new capacity” na...
WDC/STX -5-6% and Memory -5% leading the way lower. Some pointing to the CXMT news from yesterday and Musk’s tweet below:
STX -3.8%; WDC -2.6% stayed heavy on the Toshiba HDD capacity overhang, even as Evercore added WDC to its tactical list. Good pushback in Slack here: MK said 2028 is already locked in with 2029 pricing talks ongoing and Toshiba won’t dent a ~400EB shor...
The $380 million investment by Toshiba is not substantial for the industry and likely includes equipment upgrades and next-gen technology, not just new supply.
Toshiba's datacenter drives are 1-2 generations behind, with 40TB+ HAMR not expected until CY28, while its exabyte growth is roughly in line with STX/WDC, and unit forecasts are low teens in FY27 and mid-teens in FY28.
Toshiba's reliance on external suppliers for key components like heads, media, and substrates creates supply gates, with Resonac reportedly sold out through late CY27/CY28.
Toshiba has already delayed its LSD million drives/quarter target due to yield issues.
Even if Toshiba doubles its output, it would only add about 10% to industry supply, similar to what STX/WDC themselves are adding, and the 2028 supply gap is likely to remain wider than Toshiba's incremental capacity.
The recent underperformance of STX/WDC, despite strong pricing, suggests that some of the Toshiba news was already priced in by Asia investors.
Semis +10bps lagged with megacap AI up and most everything else down: AVGO +2.1%; NVDA +2.1% worked after Morgan Stanley said both are shielded from the AI power crunch, the latter hitting new all-time highs while the neocloud/BTM complex reversed early gains (NBIS -...
WDC +6.3%; STX +4.5% bounced off Friday's ~10% Toshiba gap-down with the Street out in force. Bulls had a whole long list of things to push back on. Take a deep breath: 1) $380M isn’t a huge investment for this industry, and some likely goes toward equipmen...
on 26/28TB CMR, with 40TB+ HAMR not expected until CY28 at the earliest; 3) the headline is a 2x increase in exabyte output at the Philippines facility, which is only ~2/3 of Toshiba’s base. On a total-company basis that implies closer to ~70% EB growth, ro...
We’ve heard Resonac is supposedly sold out through late CY27/CY28; 5) Toshiba has already pushed out its LSD million drives/quarter target because of yield issues 6) even if Toshiba doubled from ~200EB versus ~1,000EB each for STX/WDC, it only adds roughly...
Unlike memory names, HDD multiples have not yet discounted the risk of increased competition and still trade at double-digit P/Es, making them vulnerable to any new entrant using price as a negotiation tool.
Bulls argue that Toshiba already sources most of TDK's HDD heads, Western Digital has secured a significant portion of TDK's 2027 capacity, HAMR technology requires glass media, and there are doubts about the deal closing due to Toshiba's limited need for such volume and potential regulatory hurdles.
The company experienced a significant drop following a report that it is vying with Toshiba for TDK's HDD-head business, which bears interpret as Toshiba becoming a more serious competitor.
Bears suggest that Toshiba's potential ownership of TDK's HDD-head business could lead to concerns about supply allocation and component pricing, in addition to increased competition in finished HDDs.
Early one today as I need to head out shortly. QQQs +61bps as of 2pm ET, after the S&P and NDX both tagged fresh record highs late morning before fading as crude bounced off its lows; small caps lagged (IWM -62bps; ARKK -1.8%). Software +1.2% outpaced semis...
The Street pushed back on concerns regarding Toshiba's investment, arguing that the $380M investment is not substantial for the industry and likely includes equipment upgrades and next-gen technology, not just new supply.
Toshiba's datacenter drives are technologically behind STX/WDC, with their 40TB+ HAMR not expected until CY28 at the earliest, indicating they are not a near-term competitive threat.
The reported doubling of exabyte output at Toshiba's Philippines facility translates to only about 70% total company EB growth, which is roughly in line with STX/WDC's growth, and higher-capacity drives mean 'doubling capacity' does not equate to twice as many physical drives.
Toshiba's reliance on external suppliers for key components like heads, media, and substrates creates supply bottlenecks, with one supplier reportedly sold out through late CY27/CY28.
Toshiba has already delayed its LSD million drives/quarter target due to yield issues, suggesting challenges in scaling production.
Even if Toshiba doubles its output, it would only add approximately 10% to industry supply, which is similar in absolute exabyte terms to what STX/WDC themselves are adding.
The projected supply gap in 2028 is likely to remain wider than Toshiba's incremental capacity, indicating that Toshiba's expansion will not fully address the market's needs.
The recent underperformance of STX/WDC, despite strong pricing checks, suggests that some of the Toshiba news may have already been priced in by Asia investors.
Semis +10bps lagged with megacap AI up and most everything else down: AVGO +2.1%; NVDA +2.1% worked after Morgan Stanley said both are shielded from the AI power crunch, the latter hitting new all-time highs while the neocloud/BTM complex reversed early gains (NBIS -...
WDC +6.3%; STX +4.5% bounced off Friday's ~10% Toshiba gap-down with the Street out in force. Bulls had a whole long list of things to push back on. Take a deep breath: 1) $380M isn’t a huge investment for this industry, and some likely goes toward equipmen...
on 26/28TB CMR, with 40TB+ HAMR not expected until CY28 at the earliest; 3) the headline is a 2x increase in exabyte output at the Philippines facility, which is only ~2/3 of Toshiba’s base. On a total-company basis that implies closer to ~70% EB growth, ro...
We’ve heard Resonac is supposedly sold out through late CY27/CY28; 5) Toshiba has already pushed out its LSD million drives/quarter target because of yield issues 6) even if Toshiba doubled from ~200EB versus ~1,000EB each for STX/WDC, it only adds roughly...
Unlike memory stocks that have already discounted Chinese supply risks and trade at lower multiples, HDD multiples have not yet discounted the risk of new entrants, trading at double-digit P/Es.
Any new entrant attempting to gain significant market share in an oligopoly will likely use price as a negotiation tool, potentially giving hyperscalers leverage in negotiating 2029-2031 contracts.
In Tech, Semis leading the way higher as NVDA +1.7% close to all-time highs this morning on the back of MS making it a top pick after NDRs this week; STX/WDC ~-10% on news Toshiba is investing ¥60bn to double its production capacity for hard disk drives while targeti...
The company's stock declined due to news that Toshiba is investing ¥60bn to double its production capacity for hard disk drives and targeting 30% market share.
The company's multiples are vulnerable at >20x Fwd PE.
Agentic workloads create much larger memory requirements across HBM, DRAM, NAND, and HDD, benefiting STX from logs/traces.
SNDK is viewed as the clearest beneficiary as KV cache and suspended agent state spill into flash, while WDC/STX benefit from logs/traces, P/NTAP from enterprise context storage, and DELL/HPE from higher CPU/DRAM/NAND content. Networking/connectivity names...
The company is expected to benefit from logs/traces, along with WDC.
The company's stock lagged, indicating underperformance in the HDD sector.
SKHY on Bloomberg’s report that Solidigm is weighing a US IPO as soon as 2027 at up to $100B. Sell-side out with bullish MU previews (JPM sees the DRAM/HBM shortage through CY27-28); investors are focused on FY27 margin durability as LTAs get layered on. HD...
Pricing for the company's products is still climbing.
STX/WDC: Hearing Edgewater positive saying pricing still climbing
The stock was weaker despite some positive checks, as memory prices may be approaching a peak, particularly for NAND.
HDDs underperformed (STX +2% /WDC +1.5%) despite positive note out from Cleveland saying hyperscale/OEM HDD ASPs moving materially higher into CY27 and unpriced volumes potentially at $25–30+/TB,.
The company's HDDs underperformed despite a positive note from Cleveland suggesting materially higher hyperscale/OEM HDD ASPs into CY27 and unpriced volumes potentially at $25–30+/TB.
HDDs were weaker, and the space has been one of the weakest over the last month and a half, being one of the few AI semi sectors finally below the "Leopold Lows."
The group is still being plagued by cost commentary from mid-August, when IR talked down costs.
The company is seeing strong incremental gross margins and has pricing power in the storage market due to the overlap between HDD and SSD segments.
Pricing checks for volume agreements continue to be positive, with discussions for future years already beginning.
WDC +1% / STX -1.5%: Pricing checks continue to sound positive as ‘28 volume agreements are lock down with some ‘29 discussions starting although ‘28 pricing elements still unset.
The stock is finally receiving some positive attention.
STX/WDC +3% finally getting a little love.
The stock has fallen 30.6% from its high, indicating a substantial downturn.
AMBA: -27.6% JBL: -28.9% MCHP: -29.9% MRVL: -30.5% STX: -30.6% VRT: -32.9% TSEM: -34.0% NXPI: -34.6%
Bernstein says discussions with STX management reinforced strong multi-year demand visibility, with volumes initially set through LTAs and converted into firm POs 4–5 quarters before shipment.
Disciplined industry supply should support continued ASP gains.
AI is structurally positive for HDD demand because more AI-generated data ultimately requires low-cost storage, with neoclouds emerging as an additional long-term opportunity.
Bernstein views STX as the best-positioned HDD beneficiary due to HAMR leadership and better cost-down potential.
TD Cowen's FMS discussions indicated notably constructive HDD feedback, with long-term pricing power running above current 2027 expectations, reinforcing STX's positioning.
Compare that with the anemic follow-through in AI Semis: ANET following its big beat, STX, or ALAB selling off despite the big Sept Q guide. The weaker prints like INTC and SNDK also continue to struggle to find a bid.
The stock experienced anemic follow-through, contrasting with better price action in internet and software names.
Citi reiterates Buy and a $1,300 price target, as management meetings reinforced an exceptionally strong demand and pricing backdrop, with nearline exabyte capacity fully allocated through CY27 and into CY28.
AI storage demand is broadening beyond training into inference, agentic AI, and physical AI, with KV-cache architectures potentially shifting context storage to lower-cost HDDs.
Disciplined capacity, HAMR mix, and contractual pricing ladders should support continued margin expansion, as the company is still underserving demand with no evidence of double-ordering or excess inventory.
The company appears to be the relative winner following its earnings print, particularly due to its earlier adoption and ramp-up of HAMR technology.
The company is driving faster exabyte growth (34% vs. WDC's 22%) and deeper cost-per-terabyte declines (-14% vs. WDC's -5%).
The company provided a much stronger guide compared to its competitor.
WDC -13% / STX +2%: tale of two stocks following their print.
WDC confirmed strong HDD demand/pricing while STX comes out after earnings looking like the relative winner: earlier HAMR (44TB HAMR is already ramping at two hyperscalers, roughly 2–3 quarters ahead of WDC’s planned 1H27 launch), driving faster exabyte gro...
BNP raised its price target to $1,275 from $1,050 and reiterated an Outperform rating, as management meetings increased confidence in the durability of the HDD upcycle and Seagate's ability to scale HAMR beyond 4TB per disk.
Expanding LTA commitments, firm purchase orders four to five quarters out, and disciplined unit capacity are expected to support favorable pricing through CY29.
Mozaic4 is improving capacity and margins, and Mozaic5 remains on track for late CY27.
BNP raised its CY28 EPS to $58.95 from $45.74, and expects approximately 30% CAGR in nearline exabyte demand to sustain record utilization and earnings upside.
The stock was weaker, with no clear reasons provided for the decline.
HDDs weaker: STX/WDC -3%…didn’t hear any great reasons.
The company is successfully transitioning from a cyclical PC-HDD vendor to a provider of mass-capacity storage for the cloud, with strong demand visibility and pricing power through 2028.
STX must pause or slow parts of its factories during transitions from 3TB to 4TB and eventually 5TB per disk, while yields, qualification timing and more complex head-and-media processing can temporarily constrain output or raise costs. Mgmt also acknowledg...
There is a risk that the market is over-capitalizing peak pricing and margins, and that customer concentration could lead to a sharp correction if long-term agreements roll off or cloud spending moderates.
Lots of earnings to go through. We’ll cover STX, Hynix, KLAC, NXPI, VRT, and CTSH then the usual below that. We’ll put our recap of BE in the slack since we’re running out of time here…
US names following earlier with SNDK/MU/WDC/STX -7% early. Many other names down 4-5% as momentum looks to take another hit early. Good chart from our friends at Jefferies showing the magnitude of the momentum unwind, the worst going back to 2000:
Morgan Stanley reiterated its Overweight rating and kept STX as its Top Pick, expecting strong pricing-led beats and raises due to tightening exabyte supply and improved hyperscaler visibility.
Morgan Stanley anticipates June results to be at the high end of guidance and September guidance to exceed Street expectations, with CY27–28 pricing discussions moving towards $25–$30/TB and spot exabytes commanding significant premiums.
Checks indicate an annual supply shortfall through 2028 and demand visibility extending to 2032, supporting substantial annual EPS growth through at least 2028.
Clev was positive, calling out further upside to CY27 pricing trends as more volume fills in at $20-$30/TB, with some signs of pricing reaching $30+.
Positive pricing checks indicate CY27-28 pricing discussions are moving towards $25-$30/TB, with spot EBs commanding significant premiums and an annual supply shortfall through 2028, implying strong EPS CAGR.
Pricing is a significant lever for the company, with the potential to generate substantial EPS at higher price points.
The company remains a favored name despite recent pullback and is expected to outperform in a choppy market, with the storage narrative gaining importance amid memory turbulence.
Storage demand is decoupled from compute and memory, as every token generated requires storage, suggesting sustained spend on storage even if compute and memory CapEx slows.
STX/WDC -4% despite some positive pricing checks.
Evercore added the company to its Tactical Outperform list with a price target of $1,000, arguing that pricing remains the key source of upside into FY27.
Nearline pricing is expected to rise around 7% q/q, supported by constrained supply, cloud/AI storage demand, and improving Mozaic/HAMR mix, leading to stronger revenue, margins, and earnings visibility.
Evercore sees FY27 revenue growth of roughly 40% and believes current Street estimates underappreciate the potential for favorable long-term agreements and accelerating Mozaic adoption to push earnings materially higher.
Korea fell 9% and is dragging down semis -3% with it early while Software +50bps and Internet +10bps are green. Memory names the weakest as Asian names were all down double digits: SNDK/WDC/MU/STX -5%.
The stock experienced a decline.
The company was upgraded to Overweight with a raised price target due to expectations of stronger nearline HDD shipment growth, continued ASP expansion, improving gross margins, and durable revenue growth driven by AI infrastructure demand.
The company is seen as having greater upside from earnings revisions and spare capacity.
Wells Fargo sees Seagate as having the greater upside from earnings revisions and spare capacity, while both STX and WDC benefit from extending customer visibility into CY28 and disciplined industry capacity allocation.
Fox Advisors downgraded Seagate to Equal-Weight from Outperform, citing concerns that expectations for hard disk drive pricing “may be getting ahead” of likely increases.
HDDs continue to reach all-time highs.
HDDs continue their rip to all-time highs: STX/WDC +4-6%.
The company's stock showed strength, leading the market higher alongside other HDD and Memory names.
In Techlandia, strength in semis continues although more bifurcated this morning with HDDs/Memory leading us higher (WDC/STX +8-10%) and SNDK/MU +2-3% while CPU names softer (ARM -2%, INTC -1% although AMD +50bps)
The stock showed strength, indicating continued positive momentum in the HDD sector.
HDD strength continued today: WDC +4%/ STX +1%
Even with conservative assumptions, Morgan Stanley's FY28 EPS estimates are roughly 70% above Street consensus for both STX and WDC, leading to price target increases to $1,035 for STX.
JPM is constructive on the HDD setup, arguing that pricing, not exabyte growth, is the primary earnings driver, with investors overly focused on exabyte growth.
Management emphasized that the current supply-constrained environment allows price increases to stick across product transitions, avoiding typical givebacks seen in prior cycles.
Both WDC and STX indicated incremental gross margins remain around 90% as pricing flows through, and JPM believes operating leverage is likely understated, particularly at STX.
JPM views both names favorably, with pricing, margin expansion, and operating leverage driving upside rather than a reacceleration in unit growth.
HDDs: JPM Says Pricing, Not Exabyte Growth, Remains the Bigger Earnings Driver for WDC and STX
Customers are increasingly seeking volume visibility into 2032, with long-term agreements expanding and hyperscalers operating with just 1-2 weeks of HDD inventory, indicating strong demand.
HDD vendors are targeting significantly higher pricing, with expectations of $25-$30 per TB over the next 2-3 years compared to current pricing below $15/TB, which would lead to substantial EPS upside.
Checks indicate that pricing has inflected higher over the last several weeks, suggesting strong market momentum.
The company has significant pricing torque, with incremental gross margins at 90%+, meaning pricing increases flow directly to the bottom line.
Assuming pricing close to $30/TB in CY28, the company could achieve EPS of $100+, significantly higher than the street's current estimate of ~$45, implying substantial upside.
The stock is trading at less than 10x projected CY28 EPS, suggesting it is undervalued given the significant upside potential from pricing.
HDDs outperformed today with WDC +16% & STX +9%. Didn’t hear any great reasons for the difference in performance despite a lot of questions. Names were up on several positive sell-side notes.
Checks here seem to have inflected higher over the last several weeks. We wrote a little about what $30/TB means for WDC/STX yesterday in our weekly. Remember, lots of pricing torque in these names as incremental gross margins are 90%+. From our weekly yest...
The $30/TB numbers we heard this week are big (non-hyperscsalers are already getting charged $30+/TB in the spot market). If you assume something close to $30/TB in CY28 (street still sub $20/TB), you get something on the order of $70+ in EPS for WDC and ~$...
The $70 for WDC and $100 for STX doesn’t assume any incremental buybacks from increased FCF. That means both stocks trading at sub 10x those numbers…we think HDD stocks will follow SNDK to new all-time highs in short order and probably have more “juice” near-term as...
As a reference, street here at ~$45 for STX in CY28 and close to $30 for WDC so this pretty significant upside. These shouldn’t be trading <10x.
JPM became more constructive on the HDD group, arguing the industry is entering a period of stronger and more durable pricing supported by AI-driven demand, long-duration customer agreements, and disciplined supply growth.
The firm highlighted accelerating demand from cloud and AI datacenters, where HDDs remain critical for storing expanding datasets and supporting AI workflows.
Long-term agreements (LTAs) are improving visibility and reducing cyclicality.
JPM expects the company to deliver pricing above prior expectations through FY27, driving higher revenue growth, margin expansion, and earnings revisions.
HDDs: JPM Says Pricing Is Accelerating Faster Than Expected, with Further Upside for WDC and STX
Mizuho sees growing TPU, OpenAI, and MTIA deployments as incrementally positive for memory and storage demand, reinforcing its bullish view on STX.
AI-driven storage demand and industry supply discipline are creating a stronger-for-longer HDD cycle.
STX/WDC: Citi Raises Targets, Sees AI-Driven HDD Tightness Extending Through 2028
Citi raised its price target, citing AI-driven storage demand and industry supply discipline supporting a stronger-for-longer HDD cycle with shortages persisting through at least 2028.
Wells Fargo remains constructive on the company, citing a durable >20% growth outlook and visibility extending beyond 2029.
The firm argues the debate is no longer whether the cycle exists, but how long it lasts, indicating confidence in sustained growth.
Wells Fargo also remains constructive on STX and WDC, citing a durable >20% growth outlook and visibility extending beyond 2029. The firm argues the debate is no longer whether the cycle exists, but how long it lasts.
Barclays remains bullish on the broader memory/storage trade, arguing LTAs are materially improving pricing visibility and reducing historical cyclicality.
The firm highlighted stronger nearline HDD demand/pricing discipline for the company.
Barclays raised its price target, arguing the market still underestimates the durability of AI-driven storage demand and structural pricing improvement.
Memory: Barclays Says MU/STX/WDC Still Have Another Leg Higher as LTAs Improve Visibility
HDD strength stood out today.
Barclays reiterated bullish talking points regarding LTA contract structures increasingly resembling infrastructure-style recurring revenue frameworks.
The CEO sounded bullish at JPMorgan, with the standout detail being that Mozaic 4+ (4TB/platter HAMR) is now qualified at all planned CSPs on 3+ and at two hyperscalers on 4+, and qualification timelines are collapsing back to PMR-equivalent speeds, significantly de-risking the HAMR platform.
Build-to-order visibility remains locked for 4–5 quarters, but demand significantly exceeds factory supply, and re-ups are coming in at higher pricing, which is the core driver behind sustainable 70% incremental margins.
The CEO flagged a 50TB drive shipping by the end of calendar 2027 and a path to a $20 billion revenue run rate by FY28, all on a largely flat OpEx base.
On capital allocation, the priority is to fix the balance sheet this year, then return 75% of free cash flow to shareholders via dividends and buybacks, with no large capex buildouts or major M&A planned.
The company is positioned for a durable multi-year growth cycle driven by the adoption of HAMR technology, disciplined supply management, long-term agreements, and accelerating AI data generation.
Management anticipates HAMR technology to account for over 70% of nearline exabytes by FY27, which is expected to drive sustained pricing, margin expansion, and incremental exabyte growth.
Hard disk drives (HDDs) remain crucial for AI infrastructure due to their retention and storage economics, as NAND technology cannot economically displace HDDs at scale, while constrained supply and disciplined pricing support favorable industry dynamics.
The stock was down early in pre-market trading, aligning with a broader weakness in tech semiconductors following a decline in the Korean market.
STX/WDC -3%, QCOM -3%. 5% STX/WDC 3% QCOM 3%
The stock performed strongly, indicating positive sentiment in the memory sector.
The company's earnings beat expectations, leading to positive stock performance.
Charts are being bought aggressively on any mini-pull back (AVGO, LITE, AMD), plenty of names breaking out to new highs, beats are following through to the upside (NOK, STX, QCOM, WDC, TXN, VRT, INTC), and misses are being bought up (CLS, TER, GLW, ON, AMZN...
BofA raised its price target, seeing significant EPS upside on tight HDD supply and pricing strength, with scenario analysis pointing to potential CY28 EPS of ~$45.
Improving visibility from long-term contracts and HAMR-driven capacity gains support higher exabyte shipments and margin expansion.
Current valuations underwrite more conservative outcomes, with upside driven by stronger $/TB growth and operating leverage.
BofA reiterates Buy, citing durable supply-demand dynamics and structural earnings upside.
STX/WDC: BofA Raises PTs ($700/$495), Sees Significant EPS Upside on Tight HDD Supply and Pricing
Barclays upgraded the stock to Overweight with a price target of $625, seeing significant value in the drive names due to potential earnings upside and multiple expansion.
The duopoly structure, commitment to not add capacity, and substantial pricing upside suggest further growth, with $/TB gains expected to approach the high teens as STX transitions to 40TB with HAMR, driving material density improvements and cost advantages.
HDD industry revenue estimates were raised by approximately $4 billion for CY26 to $29.7 billion and by approximately $9 billion for CY27 to $38.8 billion, both representing 31% year-over-year growth.
Edgew is positive, indicating rising upside potential in FY27 as STX pushes for better pricing, with hyperscale customers projecting EB demand growth of 30-50% through CY28.
STX: Barclays Upgrades to OW/$625, Raises WDC PT to $405 — Denser Platters Drive Earnings and Multiple Expansion
Barclays upgrades STX to OW (PT to $625) and raises WDC to $405, seeing the most value in the storage/memory hierarchy in the drive names on both earnings upside and multiple expansion.
The company is set up for a strong F3Q/F4Q with data center demand offsetting seasonality, driving revenue/EPS above Street and continued GM expansion (~45–47% range) supported by tight supply and favorable pricing.
HAMR ramp (1–2mn units near-term, ~7mn FY26) and successful 40TB qualifications are key drivers of incremental margins (>50%) and mix shift.
Estimates and PT are raised on higher confidence in sustained margin expansion and durable cloud-driven demand.
HDDs strong (STX +4% / WDC +3%): didn’t see much here other than BofA raising PTs saying STX is set up for a strong F3Q/F4Q with data center demand offsetting seasonality, driving rev/EPS above Street and continued GM expansion (~45–47% range) supported by...
The company faces a growing valuation disconnect, with the market treating HDDs as structurally stable despite still-cyclical demand dynamics.
HDD demand could see a sharp drop once capacity ordering peaks, creating downside risk to revenue/EPS.
Current multiples (~11x) already reflect elevated expectations vs prior cycle peaks.
STX/WDC/MU: UBS Prefers Memory Over HDD; Sees Valuation Disconnect and Cyclical Risk
BofA reiterated a Buy rating and raised its price target, expecting strong F3Q results and F4Q guide driven by robust data center demand offsetting seasonality.
The firm highlights gross margins expanding with incremental margins above 50%, supported by strong pricing, cost reductions, and the ramp of HAMR drives.
HAMR qualifications are progressing, positioning the company for sustained mix-driven margin upside, with estimates raised and price target moved due to higher confidence in durable earnings expansion.
JPMorgan prefers the company, highlighting stronger setups where AI demand is driving near-term upside to earnings.
The company's stock rose, indicating a positive sentiment in the HDD market.
MU +22bps as Clev also had a note but didn’t sound as positive for DRAM as NAND with price increases expected to moderate. HDDs mixed with STX +3% / WDC
Mizuho reiterated Outperform and raised its price target, citing tight NAND/HDD supply driving pricing through 1H27E.
The KVCache ramp is driving NAND demand as eSSDs deliver significantly higher read/write speeds than HDDs and contain more NAND content in inference racks compared to training-only AI racks.
The upcoming High Bandwidth Flash (HBF) in 2H26E, offering 6x HBM capacity at 100x TLC SSD bandwidth, could create new NAND supply constraints as 16-layer SLC-NAND stacks consume conventional capacity.
Memory/Storage: Mizuho Raises PTs Across MU/SNDK/STX/WDC — KVCache, QLC eSSDs and HBF Drive Inference Storage Inflection
The company is positioned for greater than 20% sales, EPS, and FCF CAGRs as nearline EB shipments grow in the mid-20s%, driven by AI and cloud data creation.
The HDD industry is structurally healthier due to consolidation, nearline capacity being sold out through CY26 with multiyear BTO/LTA programs, and stable-to-increasing pricing.
HAMR/ePMR technology transitions are expected to drive 10-15% cost reductions and push gross margins from the low-50s% towards 60%+, with both companies targeting approximately 50% incremental margins.
The market may re-rate the company to 25-30x P/E multiples, levels typically reserved for infrastructure compounders, reflecting the 'new HDD model'.
STX, WDC: Evercore ISI Raises PTs to $550/$378 (~20% Upside Each); HDD Industry Shifting From Cyclical to Growth Compounder
The stock continued its upward breakout trend, with ISI and MS expressing positive views.
HDDs are seen as the simplest way to capitalize on the structural memory shift, with the company positioned for over 20% sales, EPS, and FCF CAGRs driven by mid-20s% growth in nearline EB shipments due to AI/cloud data creation.
STX +6% / WDC +8.5% as both names continue to break out to the upside.
The selloff in HDD and memory names following Google's TurboQuant announcement is considered an overreaction, as TurboQuant's impact on HDD demand is zero and negligible on NAND.
The firm raised its target to $620 and named it their top HDD pick for a 12-month+ horizon, expecting HAMR's higher areal density to drive accelerating cost declines in FY27-28.
Demand and pricing are supported by AI workloads, richer content creation, and data sovereignty requirements.
WDC +7.5%/STX+8% as Bernstein upgraded WDC to Buy saying Turboquane has 0 impact to HDDs. They called STX their top pick on a 12-month+ horizon given HAMR’s higher areal density should drive accelerating cost declines in FY27-28
JPM initiated Seagate Technology at Overweight, stating that recent stock strength still leaves significant upside potential to estimates.
The firm noted that HDD demand is accelerating due to cloud capital expenditures and AI infrastructure, with exabyte growth in the mid-20% range supporting a stronger pricing environment.
Disciplined industry supply from Seagate and Western Digital, along with a shift towards higher-capacity drives, including HAMR technology, are identified as key margin tailwinds.
The analyst forecasts approximately 25% revenue CAGR and over 50% earnings CAGR, with further upside from pricing and multiple expansion.
STX: JPM Initiates at Overweight, $525 PT; Cloud/AI Demand + Pricing Drive Upside
JPMorgan initiated coverage with a positive rating, citing accelerating HDD demand with mid-20s exabyte growth supporting a better pricing environment.
Despite a positive initiation from JPMorgan, the stock was down.
STX -4.5% despite the positive JPM initiation saying HDD demand is accelerating with exabyte growth in the mid 20s supporting better pricing environment
The stock performed strongly as part of a broader positive trend in the memory sector.
SNDK +12% with a nice bounce, strongest out of the memory group although rest were also strong with MU +5% despite press reports out of Asia they lost out on HBM4 in Vera Rubin (debate how true this is); STX/WDC +6-7%
The stock experienced weakness along with other memory and HDD names.
The company delivered a clean beat and raise, driven by strong performance in nearline and data center segments, constructive pricing, and operating leverage, with management's commentary on demand and pricing being very positive.
Management described an "exceptionally strong" data center environment and anticipates data center demand will more than compensate for typical March seasonality in Edge IoT, while enterprise OEM markets are experiencing slight improvements in traditional server units and additional storage-server demand linked to AI workloads.
Management reiterated that nearline capacity is fully allocated through CY26, with plans to accept 1H27 orders and long-term agreements providing strengthening visibility through CY27, and customers already discussing CY28 needs.
Management reiterated that revenue per TB remains relatively stable and noted a modest sequential increase in $/TB, a trend expected to continue, with commentary on long-term agreements suggesting flat-to-slightly-up pricing on renewals, which is a significant change from prior cycles and a key driver for multiple expansion if it persists.
Management highlighted progress in Mozaic 3 qualification across major U.S. CSPs and plans to begin the Mozaic 4 ramp shortly, while continuing to communicate a longer areal-density roadmap, including 7TB/disk demonstrated in labs, which supports the view that cost/TB will decrease while $/TB remains stable.
The company shipped 190EB, a 26% year-over-year increase, which was in-line with Street expectations, but management emphasized shipping exabyte growth while maintaining relatively flat overall unit capacity, driven by higher average capacity per drive (areal density) and disciplined supply.
Hard drives are essential for Agentic AI architectures, anchoring the mass capacity data tier that stores the majority of exabytes, from checkpoint data sets for training and model integrity to supporting vector databases for accurate inference results and Agentic AI performance.
The company has entered a structurally improved HDD cycle characterized by a rational market structure, limited unit output growth, and customers increasingly purchasing based on exabytes/$ per TB rather than units, with management's commentary on nearline allocation through CY26 and demand discussions extending into CY27/CY28 indicating unusually strong visibility for a historically cyclical business.
The "flat-to-up $/TB" messaging is seen as a key inflection point; if price per TB can remain steady or modestly increase while areal density reduces cost per TB, the margin model will significantly improve.
Specific bullish points for the quarter include the beat and raise with implied March profitability stepping up, management explicitly stating stable revenue per TB and an expected modest sequential increase, and continued HAMR execution (qualification/ramp progress and roadmap messaging) supporting the "cost-down accelerator" narrative.
The strong demand and unique cycle justify a premium multiple, with a 20x multiple on $30 of CY EPS leading to a $600 valuation.
Despite the strong earnings, HDDs remain cyclical and highly exposed to data-center build rates, enterprise refresh cycles, and industry pricing behavior over time.
The current "tight supply" and strong pricing environment could ease if demand normalizes (due to AI spend digestion or delayed datacenter builds) or if the industry over-responds with increased supply.
Bears also focus on the risk of substitution at the margin (SSD/flash, tiering changes) and execution risks in the HAMR transition, where yields, cost reductions, or customer transitions might not proceed smoothly enough to sustain the high incremental margin implied by near-term guidance.
Despite the upside, bears note that exabytes were in-line, raising questions about the sustainability of pricing/GM outperformance, and the March guide implies extremely high incremental profitability, which bears may view as difficult to repeat.
Bears argue that these are cyclical stocks and should not trade at a 20x multiple.
The stock rose, following the trend of other memory and storage companies.
The company's execution on its HAMR ramp has been nearly flawless, leading to an upgrade in rating.
Hard disk drives are experiencing surging demand due to their critical role in AI buildout, which is expected to sustain strong growth trends.
The analyst raises estimates for HDD names, noting moderated $/TB ASP declines and incremental gross margin upside.
Bernstein named Seagate as a top 2026 IT hardware pick due to AI-driven data explosion, highlighting insatiable and relatively price-insensitive demand for HDDs.
The firm views Seagate as a steadier beneficiary of the data surge due to its HAMR leadership.
The firm highlights insatiable, relatively price-insensitive demand for NAND and HDDs, noting NVIDIA’s Rubin KV-cache requirements could drive up to ~5x NAND TB per GPU, while rising memory prices pressure OEM margins, with HPQ and SMCI seen as most exposed...
The stock was negatively impacted as HDDs/memory experienced a hit.
QQQs -57bps today in a pretty fragmented factor day coupled with AI infra unwind / rotation: the worst pocket was Network Equip (-7.5%) and anything tied to optical + storage + DC plumbing, with CIEN (-13.1%) COHR (-9.6%) and LITE (-11%) dragging the optica...
Main read-throughs that should get a bid today are other names where tight supply/demand is causing pricing to be strong: HDDs (WDC/STX), NAND (SNDK), and Optical (LITE, COHR). Hearing some fears this morning around rising DRAM prices mean for Hardware (AAP...
STX + WDC + SNDK: Initiated Buy at China Renaissance
WDC/STX: Citi Reiterates Buy as Pricing Strength and Demand Visibility Push Targets Higher
HDDs WDC +4.5% / STX+3.3%: Didn’t see much here other than strength in memory names and GOOGLs new video generation model Veo 3.1 gaining some traction which puts multi-modal back in the spotlight
Structural industry transformation driven by AI workloads and cloud demand.
Improved pricing power and margin expansion from HAMR adoption and long-term agreements.
Strong capital returns with plans to distribute 75-100% of free cash flow.
STX/WDC: ISI Sees Structural Re-Rating Ahead for HDD Industry; Ups PTs to $330/$190
STX/WDC/SNDK: Citi Positive on Storage Fundamentals; Closes Near-Term Bullish View Post Rally
Citi remains constructive on HDD and NAND fundamentals across STX, WDC, and SNDK, citing stronger storage demand, supply tightness, and solid pricing momentum —but says it is closing short-term upside views following sharp stock gains into earnings. The fir...
STX/WDC: Wells Fargo Raises PTs to $240/$150 on Stronger Nearline Demand, Margin Expansion
ISI reiterates its Outperform stance on Seagate (STX) and Western Digital (WDC), raising price targets to $330 and $190 respectively, arguing the HDD industry is undergoing a durable structural transformation driven by AI, cloud, and supply discipline. The...
WFC forecasts WDC EPS above $11/sh by CY27 and STX EPS above $17/sh, supported by incremental gross margin expansion to the mid-40% range and disciplined capital returns. Both companies are expected to return over 75% of free
Research through 2026-10-28 · 2025-10-09 to 2026-10-28 · 74 source reports.
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Research through 2026-11-03. Artifact validity does not establish factual accuracy or research freshness.