Remember when your friend told you to buy that “boring” data storage company because “AI needs somewhere to put all its stuff”? Well, turns out they weren’t wrong. Seagate Technology (NASDAQ: STX) just dropped earnings that made Wall Street do a double-take, and the stock shot up 19% faster than you can say “I should have bought more.”
Here’s the deal: Seagate makes the hard drives that store all the data powering our AI-obsessed world. Think of them as the digital equivalent of that friend who has a massive garage where everyone stores their stuff – except instead of old Christmas decorations, it’s training data for ChatGPT.
The Numbers That Made Everyone Happy
Seagate’s Q1 results were basically a masterclass in “how to beat expectations without breaking a sweat”:
- Revenue: $2.63 billion (up 21% year-over-year) – analysts expected $2.55 billion
- Earnings per share: $2.61 adjusted (up 65%) – analysts expected $2.40
- Net income: $305 million (up 80%)
Translation: They made more money, faster than anyone thought possible. The stock is now up over 200% this year, making it one of those “I wish I’d bought it in January” stories.
Why Everyone Suddenly Cares About Hard Drives
Here’s where it gets interesting. Seagate and their main rival Western Digital basically own this market – they control about 80% of it between them. It’s like having a duopoly on something everyone desperately needs.
The secret sauce? Their new Mozaic HAMR technology (yes, that’s “hammer” but spelled cooler). This tech lets them cram way more data onto each drive, which is exactly what AI companies need. Five of the seven biggest cloud companies have already given it their stamp of approval, and Seagate shipped out 1 million units in Q3 alone.
CEO Dave Mosley put it perfectly: “AI is transforming how content is being consumed and generated.” Translation: Every time someone asks ChatGPT to write a poem about their cat, somewhere a Seagate drive is working overtime.
The Crystal Ball Says…
For next quarter, Seagate is projecting $2.70 billion in revenue and $2.75 earnings per share – both up from this quarter. Wall Street analysts are falling over themselves to raise price targets, with some calling for $290 per share (the stock’s currently around $260).
The company’s sitting on $427 million in free cash flow, up from a measly $7 million last year. That’s “we can invest in whatever we want” money.
The Bottom Line
Sometimes the best AI plays aren’t the flashy companies making robots or chatbots – they’re the ones quietly providing the infrastructure that makes it all possible. Seagate is basically the plumbing of the AI revolution, and as anyone who’s ever had a plumbing emergency knows, you really don’t want to be without it.
With a forward P/E of 25 (reasonable for this kind of growth) and a dominant market position in a booming industry, Seagate might just be the AI stock that doesn’t require you to understand what a neural network actually does.