Seagate Technology (STX) shares closed nearly 20% higher on Jan. 28 after the American data storage firm posted its Q2 earnings that handily topped estimates on insatiable AI-driven demand.

Investors cheered STX today as its gross margin climbed to a record 42.2% in the second quarter and management guided for a much better-than-expected $2.9 billion in sales in Q3.

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However, since Seagate stock has witnessed a more than 6x increase in less than a year, it’s well within reason to question if it’s already too late to build a position in STX.

According to Asiya Merchant, a senior Citi analyst, STX stock could push further in 2026 given its meteoric rally is backed by unprecedented visibility into future revenue.

In her research note, Merchant said Seagate is sold out for 2026 and its long-term agreements with major cloud customers offer “strong demand visibility extending into 2027.”

In fact, some of them are already “discussing demand for 2028 to ensure supply,” the analyst told clients.

This shift from cyclical uncertainty to multi-year supply assurance suggests Seagate has evolved from just a hardware play to a critical infrastructure provider in the artificial intelligence (AI) era.

Beyond its Q2 earnings release, the bull case for Seagate shares rests on the firm’s structural shift toward higher profitability products.

The ramp of Mozaic 3 Heat-Assisted Magnetic Recording (HAMR) drives is a game-changer, allowing STX to increase storage density and pricing without significantly raising production costs

This areal density advantage led to a record 31.9% operating margin (adjusted) in the company’s second financial quarter.

With free cash flow at an eight-year high, STX is well-positioned for aggressive capital returns as well.

According to Barchart, Seagate’s PEG multiple sits at 1.06x currently, indicating valuation remains reasonable relative to the company’s massive earnings growth potential.

Wall Street remains bullish on STX shares, especially since they remain decisively above their key moving averages (50-day, 100-day, 200-day).

The consensus rating on Seagate Technology sits at “Strong Buy” currently, with price targets going as high as $465, indicating potential upside of another 5% from here.

On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com