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AI data centers require massive amounts of high-performance storage capacity.
Seagate is a supplier of choice for hyperscalers.
Shares of Seagate Technology (NASDAQ: STX) popped on Wednesday after the hard disk drive maker's fast-growing profits highlighted the shocking demand for its data storage products.
By the close of trading, Seagate's stock price was up more than 19%.
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Image source: Getty Images.
Seagate's revenue jumped 22% year over year to $2.83 billion in its fiscal 2026 second quarter, which ended on Jan. 2.
"As AI applications amplify the creation and economic value of data, modern data centers increasingly need storage solutions that combine performance and cost-efficiency at exabyte-scale," CEO Dave Mosley said in a press release.
An exabyte is an enormous amount of digital information, equal to one billion gigabytes.
With demand skyrocketing and supply limited, Seagate is enjoying strong pricing power. The mass-capacity data storage leader's profits are surging in turn.
Seagate's adjusted gross margin improved by 6.7 percentage points to 42.2%, while its operating margin increased by 8.8 percentage points to 31.9%.
All told, Seagate's adjusted earnings per share leaped 53% to $3.11.
Looking ahead to Seagate's fiscal third quarter, management guided for revenue of roughly $2.9 billion and adjusted earnings of $3.40 per share.
"In the December quarter, we saw sustained demand growth for our high-capacity nearline drives across global cloud data centers as well as continued improvement from the enterprise edge," Mosley said during a conference call with analysts. "Based on our build-to-order pipeline, we anticipate these positive demand trends will continue for some time."
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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