Can Seagate's Growth Trajectory Outrun Debt Pressure & Market Rivalry?

Seagate Technology Holdings plc (STX) is benefiting from strong data growth fueled by hyperscale cloud demand, AI workloads and edge computing—each driving the need for scalable, reliable and high-density storage solutions. Its recent quarterly results show a strong revenue trajectory driven by enterprise HDD shipments, with improving gross margins as pricing power improves, and strong cash flows, although leveraged by significant debt.

A major growth catalyst for Seagate is the rollout and scaling of its HAMR technology, designed to boost areal density and enable next-generation storage solutions. Management highlighted the successful ramp of its HAMR-based Mozaic products, with three major cloud customers already qualified and more in progress.

However, its high debt burden presents a risk for investors. As of June 27, 2025, the company had only $891 million in cash and cash equivalents against $5 billion in long-term debt (including the current portion). This leverage, driven by acquisitions and investments, increases financial vulnerability if returns are delayed. Despite healthy cash flow, the large debt load jeopardizes Seagate’s ability to maintain dividends, execute buybacks, or pursue profitable acquisitions, which could undermine its long-term financial flexibility.

Seagate Technology Holdings PLC Price and Consensus

Seagate Technology Holdings PLC price-consensus-chart | Seagate Technology Holdings PLC Quote

Furthermore, intense rivalry from other players in the data storage industry, such as Western Digital Corporation (WDC) and Pure Storage (PSTG), weighs on Seagate’s market position and profitability. It also faces competition from companies offering storage subsystems, such as electronic manufacturing services and contract electronic manufacturing. At the same time, macroeconomic headwinds and supply-chain volatility worsen the pressures. These factors are likely to weaken STX's competitive edge and raise execution risks.

Nonetheless, Seagate expects continued growth in fiscal 2026, anchored by strong demand, ongoing product transitions and its focus on cost discipline. The company plans to resume share repurchases and anticipates further improvements in revenue, profitability and cash generation.

How Rivals are Squeezing STX’s Market

San Jose, CA-based Western Digital is a leading developer and manufacturer of data storage devices and solutions based on NAND flash and hard disk drive technologies. STX and WDC are fiercely competing as AI and cloud demand grow.

It remains a cornerstone of global data infrastructure, providing high-capacity, energy-efficient HDDs at a low total cost of ownership. In the fiscal fourth quarter, it shipped 190 exabytes of storage, marking a 32% increase year over year, driven by strong nearline demand and rapid adoption of its 26TB CMR and 32TB UltraSMR drives, which more than doubled sequentially to 1.7 million units—the fastest ramp in its history. The reliability, scalability and TCO benefits of its ePMR and UltraSMR technologies continue to enhance its data center presence. Looking ahead, WDC is developing next-generation ePMR and HAMR drives, with ePMR qualification expected by early 2026 and HAMR ramp-up targeted for the first half of 2027.

Based in Mountain View, CA, Pure Storage provides software-defined all-flash solutions that are uniquely fast and cloud-capable for customers. STX and PSTG compete in the broader data storage market, where solutions are chosen based on cost, capacity and performance requirements. Both companies are developing new storage technologies. Seagate invests in new hardware and software to maintain its competitive edge in the storage industry, while Pure Storage focuses on developing and improving its software-defined, all-flash platforms to provide superior performance and agility for businesses.

As enterprises speed up digital transformation, Pure Storage’s strong finances, innovative products and customer-first approach position it well to gain market share and shape the future of storage. With 13% revenue growth, a robust subscription ARR of $1.8 billion and the launch of the Enterprise Data Cloud in the fiscal second quarter, PSTG is addressing the heightened demand for storage infrastructure.

STX Price Performance, Valuation and Estimates

In the past year, shares have gained 71.4% compared with the Zacks Computer Integrated Systems industry’s growth of 21.3%.

In terms of forward price/earnings, STX’s shares are trading at 15.58X, lower than the industry’s 20.09X.

The Zacks Consensus Estimate for STX’s earnings for fiscal 2026 has been revised up 4.15% to $10.30 over the past 60 days.

Currently, Seagate has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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