Seagate vs. Western Digital: Which Storage Stock is the Better Buy Now?

As global data creation accelerates, driven by AI, cloud computing and cybersecurity, demand for reliable storage continues to grow. Both Seagate Technology Holdings plc STX and Western Digital Corporation WDC are prominent data storage hardware companies competing in the hard disk drive (HDD) and broader storage solutions market, with significant exposure to growing demand from AI and cloud infrastructure.Seagate is primarily focused on HDDs, especially high-capacity drives used in cloud data centers. Western Digital operates across HDDs and NAND flash SSDs, giving it broader exposure to PCs, smartphones and enterprise storage.Per a report from Mordor Intelligence, the global data storage market is projected to grow from $250.8 billion in 2025 to $483.9 billion by 2030 at a CAGR of 14%, while a report from Future Market Insights estimates that the global HDD vertical will reach $111.2 billion by 2035 from $66.6 billion in 2025 at a CAGR of 5.3%. While both operate in the HDD space, their business mix, financial profiles and near-term outlooks differ meaningfully. However, if investors have to pick just one, the decision comes down to how each company stacks up in terms of financial strength, valuation, growth outlook and risk tolerance.Let’s uncover this in detail.The Case for STXSeagate entered fiscal 2026 with solid results and record margins, supported by strong demand from global cloud customers and faster adoption of high-capacity HAMR drives. Long-term contracts have improved visibility into revenue and profits, while steady execution of its product roadmap is driving growth in exabyte shipments. Management anticipates AI-led data growth to drive operational momentum and profitability in the upcoming quarters.Seagate is seeing strong momentum across both markets and technology. Data center revenue rose 34% year over year to $2.1 billion in the fiscal first quarter, now accounting for about 80% of total sales, as global cloud customers commit to nearline capacity through long-term build-to-order contracts extending into 2026. AI inferencing is further lifting demand for high-capacity drives, pushing average nearline capacities up 26% year over year. On the technology side, Seagate shipped more than 1 million Mozaic HAMR drives in the September quarter, with Mozaic 3+ qualified by five major cloud customers and broader qualification expected by mid-2026. Meanwhile, Mozaic 4+ drives are progressing through qualification, with initial volume ramps anticipated in the second half of fiscal 2026, supporting both large-scale cloud and edge workloads.Advancing aerial density is a major competitive advantage for Seagate and the broader HDD industry. By leveraging manufacturing expertise and technologies such as silicon photonics, STX is targeting up to 10TB per disk. This roadmap delivers a durable total cost of ownership advantage over alternative storage technologies, and customers increasingly see higher-capacity HAMR drives as the most efficient way to meet rapidly growing, AI-driven data storage needs.Seagate’s business model restructuring and strong product pipeline position it for further margin expansion and cash flow growth in fiscal 2026. The company is committed to returning at least 75% of free cash flow to shareholders through dividends and buybacks, as highlighted in the fiscal first quarter by $153 million in dividends and $29 million in share repurchases. Management expects stronger free cash flow in the December quarter and sees higher revenue and margins as customers adopt next-generation storage solutions. For the fiscal second quarter, it forecasts revenue of about $2.7 billion, implying roughly 16% year-over-year growth, with non-GAAP operating margins near 30%. Capital spending is expected to remain disciplined at 4–6% of revenue for fiscal 2026.Image Source: Zacks Investment ResearchHowever, Seagate faces headwinds from forex volatility, intense competition and ongoing macroeconomic and supply-chain uncertainty. Its high debt levels also increase financial risk and limit flexibility for buybacks, dividends and acquisitions, which could weigh on long-term growth.The Case for WDCWestern Digital is riding on rapid AI adoption, which is fueling strong demand for high-capacity storage, leading to record shipments, better margins and multi-year customer agreements. Supported by ongoing innovation in ePMR and HAMR and a growing order book through 2027, the company expects continued revenue growth, operating efficiency and shareholder returns while carefully managing capacity and industry risks.A key catalyst for Western Digital is the separation of its HDD and Flash businesses, which is poised to unlock shareholder value by allowing each unit to be valued independently. In March 2025, the company spun off Sandisk to scale its SSD business, while simultaneously sharpening its focus on the fast-growing HDD market, intensifying competition with Seagate for market leadership. Its HDD innovation focuses on higher capacity, better performance, energy efficiency and lower total cost of ownership. In the fiscal first quarter, it shipped 204 exabytes of storage, up 23% year over year, driven by strong AI-led hyperscaler demand and a shift to higher-capacity drives.Image Source: Zacks Investment ResearchShipments of its latest ePMR products exceeded 2.2 million units in the September quarter, underscoring the strength of its data center portfolio. WDC is on track with HAMR development, with initial hyperscaler qualification expected in the first half of 2026 and volume production targeted for 2027, supporting continued revenue growth and margin improvement. WDC is balancing growth investment with strong shareholder returns. Robust execution drove operating cash flow to $672 million in the fiscal first quarter from $34 million a year earlier, enabling $592 million in buybacks and dividends during the quarter and $785 million returned since fourth-quarter fiscal 2025, highlighting disciplined capital allocation.Recently, the company invested in Qolab to develop nanofabrication to improve qubit performance and scalability. The initiative integrates Qolab’s innovative approach to superconducting quantum hardware and WDC’s deep expertise in materials science, precision manufacturing and nanofabrication. This partnership supports U.S. tech leadership, boosting domestic nanofabrication and semiconductor research. The investment is unlikely to impact near-term results but positions it to benefit from future quantum-driven demand. In the long run, quantum commercialization could open opportunities beyond its core storage business and support long-term, innovation-led growth.Nonetheless, Western Digital faces near-term risks from macro volatility, including tariffs and trade tensions that could weigh on demand. Rising AI-driven storage needs also add manufacturing complexity, while its high debt load limits flexibility for acquisitions and growth.Price Performance and Valuation for STX & WDCOver the past six months, STX and WDC have registered gains of 98.3% and 183.7%, respectively.Image Source: Zacks Investment ResearchWDC looks more attractive than STX from a valuation standpoint. Going by the price/earnings ratio, WDC’s shares currently trade at 19.95 forward earnings, lower than 23.12 for STX.Image Source: Zacks Investment ResearchHow Do Zacks Estimates Compare for STX & WDC?The Zacks Consensus Estimate for STX’s earnings for fiscal 2026 has been revised up 6.7% to $11.26 over the past 60 days.Image Source: Zacks Investment ResearchThe Zacks Consensus Estimate for WDC’s earnings for fiscal 2026 has been revised up 14.8% to $7.66 over the past 60 days.Image Source: Zacks Investment ResearchSTX or WDC: Which is a Smarter Storage Bet for AI & Cloud?Both STX and WDC stand to gain from AI-driven data growth, but with different risk profiles. Seagate offers higher near-term upside via leadership in high-capacity HAMR HDDs and hyperscaler demand, but is hurt by greater debt and volatility. Western Digital’s diversified HDD and flash mix, improving margins, long-term customer commitments and disciplined capital returns make it the more balanced, resilient play.Also, while both the firms boast a Zacks Rank #1 (Strong Buy), WDC looks better right now in terms of valuations. You can see the complete list of today’s Zacks #1 Rank stocks here.Radical New Technology Could Hand Investors Huge GainsQuantum Computing is the next technological revolution, and it could be even more advanced than AI.While some believed the technology was years away, it is already present and moving fast. 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Click to get this free report Western Digital Corporation (WDC): Free Stock Analysis Report Seagate Technology Holdings PLC (STX): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks