Seagate Technology Holdings plc STX is well-placed to gain from solid momentum in mass capacity, which is driving the lion’s share of its revenues.

In the last reported quarter, mass capacity revenues surged 79% year over year and 9% sequentially, owing to strong cloud demand. Its mass capacity exabyte shipments now represent more than 93% of HDD exabyte shipments.

Nearline revenues nearly doubled in the second quarter of fiscal 2025 from the prior year, reflecting 60% growth for 2024. This surge was fueled by robust demand from both cloud service providers and Enterprise/OEM clients. Management noted the increased demand for nearline products aligns with approximately 50% growth in cloud capital expenditures by its customers in 2024. Furthermore, these CapEx investments are expected to keep growing steadily throughout the calendar year 2025.

Also, cloud service providers are focusing more on the development and deployment of AI applications while building cloud infrastructure. Seagate believes that HDDs will play a key role in enabling these stages of the AI-adoption curve. It expects HDD’s demand to pick up the pace going ahead.

Management anticipates third-quarter fiscal 2025 revenues to be $2.1 billion (+/- $150 million). Our estimate is $2,140.1 million. Seagate expects strong cloud demand to help offset seasonal declines in VIA and legacy markets despite supply-chain woes. It plans to meet build-to-order commitments but has limited capacity for unexpected volume increases, with supply issues likely affecting revenues by $200 million. However, strong demand for its new nearline products, like Mozaic, could boost gross margins in the fiscal third quarter.

Mozaic is a Game Changer for STX

Seagate expects HAMR to aid in exploiting megatrends like AI and machine learning, which will drive long-term demand for cost-effective mass capacity storage solutions.

Seagate has significantly increased production of its 24-28 terabyte PMR drives, which now represent the company's top-selling product line in terms of both revenues and exabyte shipments. Seagate's technology strategy remains closely aligned with shifting market trends. The company has made notable progress with its advanced HAMR technology. In the December quarter.

Seagate started scaling up the production of HAMR-based Mozaic products for its lead cloud customer. It has also achieved a significant milestone by sampling products with capacities as high as 36 terabytes. The company anticipates delivering capacity increases through further areal density gains for its Mozaic 4+ platform. This will lead to lower savings for its customers.

STX Needs to Watch Out for Stiff Competition

The increasing demand trends offer all players a lucrative opportunity to drive growth, thereby resulting in intense competition. Stiff competition can put pricing pressure, which can affect margin performance.

Seagate faces tough competition from other players like Western Digital Corporation WDC, NetApp Inc NTAP and Pure Storage, Inc PSTG in the data storage industry, including HDD and SSD manufacturers. It also faces competition from companies engaged in offering storage subsystems, like electronic manufacturing services and contract electronic manufacturing.

Headquartered in San Jose, CA, WDC is a leading developer and manufacturer of data storage devices and solutions based on NAND flash and hard disk drive technologies. WDC is catering to the demands of the cloud and enterprise markets through innovation in ePMR CMR HDDs, HAMR and UltraSMR technology.  In February 2025, Western Digital completed the separation of its HDD and Flash businesses into two independent, publicly traded companies, each with a specific focus on its respective market. With a deep understanding of memory and storage technology, the new SanDisk is ready to meet market demands.

NetApp provides enterprise storage as well as data management software and hardware products and services. It assists enterprises in managing multiple cloud environments, adopting next-generation technologies like artificial intelligence (AI), Kubernetes and contemporary databases, and navigating the complexity brought by the quick development of data and cloud usage. NetApp’s performance is being driven by strong demand for an all-flash portfolio and growth in first-party and marketplace cloud storage services. In the fiscal third quarter, the company’s All-Flash Array Business’ annualized net revenue run rate was $3.8 billion, up 10% year over year. Total billings rose 2% year over year to $1.7 billion.

Headquartered in Mountain View, CA, PSTG provides software-defined all-flash solutions that are uniquely fast and cloud-capable for customers. Pure Storage’s primary offerings are FlashArray and FlashBlade products, which include FlashArray//C, FlashArray//XL, FlashArray File Services, FlashBlade//S and FlashBlade//E. In the last reported quarter, revenues expanded 11% from the year-ago quarter to $879.8 million, beating the Zacks Consensus Estimate by 1.08%. The top line outpaced management’s guidance owing to record sales across FlashBlade, FlashArray//XL, Portworx, the //E portfolio and renewals of its Evergreen subscriptions.

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