Stocks of memory and storage chip manufacturers saw notable appreciation on Wednesday after Seagate Technology Inc. (NASDAQ:STX) unexpectedly exceeded quarterly earnings forecasts, intensifying an ongoing rally sparked by a global shortage in storage capacity amid surging AI-driven consumption. Seagate shares rose over 15% subsequent to the release of results that surpassed Wall Street's projections in multiple key metrics.
This positive momentum quickly influenced other participants in the sector. SanDisk Corp. (NASDAQ:SDNK) and Western Digital Corp. (NASDAQ:WDC) each advanced by more than 6%, with year-to-date gains reaching 84% and 40% respectively. Since its initial public offering in February 2025, SanDisk has ascended by more than 1,330%, mirroring the returns achieved by Nvidia Corp. (NASDAQ:NVDA) since November 2022, coinciding with the launch of ChatGPT.
Seagate's Earnings Highlights
Seagate delivered earnings per share of $3.11, significantly outperforming the consensus estimate of $2.83, representing a 53% increase compared with the previous year. Revenue reached $2.83 billion, surpassing the anticipated $2.74 billion and marking a 21% year-over-year improvement. The company also reported encouraging margin performance, with gross margins hitting 42.2%, exceeding expectations.
Outlook remains robust, with guidance for the current quarter indicating expected revenues of $2.90 billion at the midpoint, outpacing the Street's forecast of $2.81 billion. Operating earnings per share are projected to be $3.40, well above the consensus of $3.03.
Goldman Sachs analyst James Schneider responded by raising Seagate’s price target from $310 to $385, reflecting confidence in the company’s trajectory amidst tight market conditions.
Supply Constraints and Pricing Dynamics
Management disclosed that production capacity for 2026 is fully booked and anticipates significant order activity from major hyperscale customers for 2027 in the near term. This supply-demand imbalance has enabled Seagate to implement price increases on a per-terabyte basis and strengthen profit margins. Sequential growth in earnings and revenue is anticipated to continue through 2026.
Seagate noted a moderate increase in average pricing per terabyte during the reported quarter and expects further price hikes in the upcoming quarter. The company’s strategic decision to restrain capacity expansion is intended to maintain a tight supply environment for investors.
Technological Progress and Market Adoption
Progress in heat-assisted magnetic recording (HAMR) technology was also reported, with shipments reaching 1.5 million units last quarter, up from 1 million in the prior period. Seagate has successfully qualified its Mozaic 3 platform with all primary U.S. hyperscaler customers, demonstrating growing acceptance of this technology in key market segments.
Analysts remain optimistic about Seagate’s positioning as a primary beneficiary of enduring industry constraints and robust pricing trends, though they caution about risks including potential supply overcapacity and slower than expected uptake of new technologies.
Sector Performance Comparison
Year-to-date, the memory and storage sector has demonstrated markedly strong performance. SanDisk’s stock appreciation parallels the remarkable gains seen by Nvidia since the rise of AI-centric applications beginning in late 2022, underscoring the intersection of AI innovation and hardware capacity constraints.
This confluence of factors continues to drive investor interest and valuations across storage-related equities, reflecting tightening supply capabilities amid swelling demand prompted by AI workloads.