ZACKS·2026-02-25 14:20Core Insights - The global data storage market is projected to grow significantly, reaching $984.6 billion by 2034 at a CAGR of 16% [2] - Seagate Technology Holdings plc (STX) focuses on hardware drives, while NetApp, Inc. (NTAP) specializes in data management and hybrid cloud storage [1] Seagate Technology Holdings plc (STX) - Seagate specializes in HDDs and enterprise nearline storage, benefiting from rising demand driven by AI and cloud workloads [4][8] - Fiscal Q2 revenue reached $2.83 billion, a 22% year-over-year increase, supported by strong nearline cloud demand [4][7] - Non-GAAP gross margin exceeded 42%, aided by pricing strategies and high-capacity drive adoption [5] - The company is advancing HAMR technology, aiming for 10 terabytes per disk by early next decade [5] - Seagate's strong cash flow supports innovation, acquisitions, and shareholder returns, with $154 million returned to shareholders in the December quarter [9] - The company maintains capital discipline with fiscal 2026 capital spending expected to be 4-6% of revenue [10] - However, Seagate faces challenges from forex fluctuations, competition, and a high debt load of $4.5 billion against $1.05 billion in cash [11] NetApp, Inc. (NTAP) - NetApp provides enterprise storage and data management solutions, with growth driven by all-flash storage and AI solutions [12] - All-flash revenue grew 9% to $1 billion, with Keystone sales increasing 76% year-over-year [7][15] - The company emphasizes cybersecurity, enhancing its ransomware resilience capabilities [14] - Keystone storage-as-a-service is gaining traction, with revenues up 76% year-over-year [15] - NetApp returned $353 million to shareholders in fiscal Q2, supported by solid free cash flow [16] - The company remains cautious on spending due to macroeconomic uncertainties, projecting fiscal 2026 revenue between $6.625 billion and $6.875 billion [17] Price Performance and Valuation - Over the past year, STX shares surged 294.9%, while NTAP shares declined 19.8% [20] - STX trades at a price/earnings ratio of 24.82, compared to NTAP's 14.49 [21] - The Zacks Consensus Estimate for STX's fiscal 2026 earnings has been revised up 11.8% to $12.63, while NTAP's estimate has been revised down to $7.91 [25][27] Investment Considerations - STX benefits from strong demand for mass-capacity HDDs and margin expansion, but is exposed to hyperscaler capex cycles and earnings volatility [28] - NTAP is gaining from hybrid-cloud adoption and recurring revenue, but faces intense competition and slower growth compared to peers [28]