Key Points
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The revenue growth rates and gross margins of Western Digital and Seagate Technology are nearly the same.
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Both companies have emphasized the durability of their business models amid the AI supercycle while issuing identical revenue guidance targets for fiscal 2027 Q1.
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Seagate Technology’s stock has rallied by more than Western Digital, giving the latter a more attractive valuation for new buyers.
- 10 stocks we like better than Western Digital ›
Western Digital (NASDAQ: WDC) and Seagate Technology (NASDAQ: STX) have both outpaced the S&P 500 by a wide margin this year, driven by their data storage products. Solid-state and hard-disk drives have become critical hardware for the artificial intelligence build-out, and both companies specialize in those products.
While both growth stocks have performed well, if you’re trying to pick which to invest in now, there are a few key factors to weigh.
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Their growth rates are similar
Western Digital and Seagate Technology are delivering similar top-line results, and that has been the trend for many years. In its most recent report — for its fiscal 2026 fourth quarter — Western Digital posted 44% year-over-year revenue growth.
Seagate Technology’s most recent results also came from its fiscal 2026 fourth quarter, when it delivered $3.6 billion in revenue. That was a 48% year-over-year improvement.
This neck-and-neck trend also plays out if you expand the earnings snapshot. For instance, Western Digital’s revenue has a five-year compound annual growth rate of negative 5.3% compared to Seagate Technology’s 2.7%.
Both of their revenues were down significantly a few years ago due to the cyclical nature of data storage needs. AI has created a multiyear boom as hyperscalers continue to ramp up their capital expenditures. A major part of the investment thesis for these companies rests on the belief that the artificial intelligence trend will remain hot for multiple years.
Their gross profit margins are similar as well
Not only are both companies growing at similar rates and operating in the same industry, but their gross profit margins are also similar. Western Digital posted a 54.1% gross margin in its fiscal 2026 fourth quarter, while Seagate Technology had a 52.3% gross margin.
Some investors are concerned that these companies won’t be able to maintain those high gross margins due to their industry’s cyclical nature. However, that risk applies equally to both companies.
It’s extraordinary how similar their numbers are. Both companies have even forecast exactly $4.1 billion, plus or minus $100 million, for their fiscal 2027 first-quarter revenue.
Each company also hinted at continued momentum throughout fiscal 2027. Western Digital CEO Irving Tan said that management had “continued confidence in the durability of demand and with increasing visibility into our business.” Seagate CEO Dave Mosley mentioned “durable long-term demand for mass capacity storage” and seeing the momentum “continuing into 2027.”
Revenue growth rates and gross profit margins look the same, but there are still people who prefer one stock over the other. For instance, Western Digital is up by 287% this year, compared to Seagate Technology’s 575% jump over the same period. Naturally, differences must exist.
Valuations are the deciding factor
Meaningful differences start to appear when you look at their valuations. Western Digital only trades at a 22 forward P/E ratio, while Seagate Technology is valued at a 24 forward P/E ratio.
Seagate Technology has outpaced Western Digital in year-to-date gains, resulting in the latter trading at a more attractive valuation for new buyers. Those higher gains have also left Seagate Technology more exposed to another AI stock correction.
It’s hard to choose between them because they’re so similar. Even Seagate Technology’s $193 billion market cap is barely higher than Western Digital’s $166 billion market cap.
Western Digital has a slightly more attractive valuation, while Seagate Technology has slightly higher revenue growth. Seagate Technology will maintain a higher revenue growth rate in its fiscal 2027 first quarter if both companies earn $4.1 billion. However, Western Digital barely wins out in terms of gross margin.
When almost everything about two companies is so similar, valuation should be the decisive factor. And on that score, Western Digital barely emerges on top.
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Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Western Digital. The Motley Fool has a disclosure policy.
