Seagate (STX) stock is yet another AI tailwinds-driven winner that has outperformed with returns of 225% for the year. While the rally has been significant, forward valuations remain attractive considering the growth outlook.
The good news continues to flow with the recent announcement that STX stock will be added to the Nasdaq-100 Index after the annual reconstitution. This is likely to translate into buying activity, as funds tracking the Nasdaq-100 Index will also realign their portfolios.
Of course, that’s not the only reason to be positive. The strong demand for HDDs is likely to translate into healthy revenue growth coupled with margin expansion.
Seagate, headquartered in Fremont, California, is a provider of mass-capacity data storage. The company’s product portfolio includes enterprise nearline hard disk drives, enterprise nearline solid-state drives, and enterprise nearline systems, among others.
For Q1 2026, Seagate reported healthy revenue growth of 21% on a year-on-year (YoY) basis to $2.63 billion. Further, the company has guided for revenue of $2.7 billion for Q2 2026, which is likely to be supported by strong data center market demand.
With healthy growth, robust cash flows, and positive industry tailwinds, STX stock has surged by 115% in the past six months.
With healthy revenue growth, Seagate has witnessed sustained improvement in credit metrics. As of Q1 2026, the company reported $1.1 billion in cash. Further, with an undrawn credit facility of $1.3 billion, the total liquidity buffer stands at $2.4 billion.
While Seagate reported gross debt of $5 billion, it’s unlikely to be a concern considering the fact that leverage is low at 1.5x. The interest coverage ratio for the same period was healthy at 8.6x.
It’s also worth noting that for Q1 2026, the company reported operating and free cash flow of $532 million and $427 million, respectively. This implies an annualized FCF potential of $1.7 billion.
Seagate offers an annualized (FWD) dividend of $2.88 per share. With swelling cash flows, it’s likely that dividends will increase. At the same time, the company has been creating value through share repurchase.
