Where Did Seagate Stock’s Gains Really Come From

Seagate Technology (STX) sells hard drives, primarily to the data centers operated by its cloud customers. The stock is up 766% since July 2021, before dividends. While such a steep ascent suggests a massive expansion of the underlying business, a share price can climb for reasons entirely disconnected from sales. So how much of the rise came from Seagate selling more?

How Much Did Seagate's Sales Grow?

Seagate's sales grew 14% over those five years. Trailing twelve-month sales were $10.7 billion then and stand at $12.2 billion now.

Compared against a stock that rose 766%, the top-line contribution remains small. Only about 6% of the appreciation came from Seagate selling more. The growth was real, and Seagate now earns far more on each sale than it previously did. However, generating more profit per transaction is not the same as increasing overall sales volume.

What Else Lifted Seagate Stock?

Two factors accounted for about 94% of the rise: the profit Seagate keeps on its sales and the price investors pay for that profit.

Multiple expansion played the largest role. The price-to-earnings multiple, which measures what investors pay for each dollar of profit, was 15.4 five years ago and is 54.9 now. About 59% of the stock's rise came from that change alone.

Net margin, the share of sales the company retains as profit, accounted for another 35% of the rise. During the July call, management pointed to its pricing strategy and a stronger product mix. The share count barely changed, contributing nothing to the gain.

Can Margins And Multiples Keep Rising?

Sales can theoretically expand as long as Seagate sells more drives, but margins and multiples face structural limits. Seagate's margin was 12.3% five years ago and sits at 26.1% now, marking its highest point in ten years.

Management stated on the July call that it sees gross margin and profitability rising every quarter. Eventually, however, a company cannot keep an ever larger share of each sale, and investors cannot pay ever more for each dollar of profit. These two drivers cannot repeat continuously the way sales growth can.

What Seagate Would Need To Repeat Its Rise

If the margin, the multiple, and the share count stayed put, sustaining the same yearly pace of stock appreciation would require sales growth of 50.5% a year. Seagate grew its sales 2.5% a year over the same stretch.

Current sales are growing far faster than that average. Sales rose 48.5% from a year earlier in the June quarter, and data center revenue rose 57%. Management said the year's growth was led by cloud customers' demand for storage, adding that it expects fiscal 2027 growth to outpace the 34% of fiscal 2026.

Seagate's sales growth remains the central figure to watch in its report for the September quarter.

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