As AI drives hardware demand, investors are weighing Apple and Seagate as investment opportunities. While Apple eyes AI as a catalyst for customer upgrades across its diverse product line, Seagate has secured long-term data center commitments through 2028, positioning it as a more direct play on immediate AI infrastructure growth. Seagate’s impressive recent margin expansion due to strong pricing needs to be sustained, especially compared to Apple’s historically stable margins and more diversified sales.
In the burgeoning era of artificial intelligence, investors are closely examining companies poised to capitalize on the soaring demand for AI hardware. Two tech giants, Apple (AAPL) and Seagate Technology (STX), present distinct opportunities. Apple anticipates AI will spur significant customer upgrades across its ecosystem, while Seagate has seen a remarkable 90% of its September quarter capacity absorbed by data center clients. This stark difference positions Seagate as a potentially more direct avenue for investing in AI infrastructure, provided its pricing power persists. The crucial question then becomes: how firmly has Seagate locked in this burgeoning demand?
Seagate Secures Long-Term Commitments Through 2028
Seagate's strategy in the data center market is characterized by long-term vision, securing multi-year agreements rather than short-term quarterly orders. During their October 27, 2026 earnings call, management revealed that extensive long-term supply agreements through calendar year 2028 have effectively allocated the vast majority of the company's data center capacity. For the upcoming December quarter, Seagate forecasts revenue between $4.7 billion and $4.9 billion, a notable increase from the $4.2 billion reported in the September quarter. While demand is locked in, pricing for the 2028 commitments is yet to be finalized.
In contrast, Apple's outlook extends only to the December quarter, projecting revenue growth of 7% to 10% year-over-year, following 12% growth in the September quarter. This more conservative forecast is largely attributed to supply constraints, particularly for memory components affecting Mac and iPad production, where demand has exceeded expectations. Thus, Seagate's foresight in securing years of supply commitments starkly contrasts with Apple's more immediate, supply-limited quarterly perspective.
Seagate's Margin Expansion Outpaces Apple Amidst Rising Costs
Seagate has demonstrated an impressive ability to outpace cost increases with higher prices. In fiscal Q1 2027 (quarter ending October 2, 2026), the company recorded a robust operating margin of 48.9%, a significant leap from 26.9% in the same period last year. Management attributed this improvement to superior pricing strategies and an optimized product mix, which more than compensated for increased costs of certain external components. Furthermore, Seagate maintains a lean spending profile, with projected capital expenditures of 4% to 6% of revenue for fiscal 2027, and anticipates a net cash position by the close of calendar 2026.
Apple, conversely, is also navigating rising memory costs, impacting its profitability. While its gross margin stood at 47.9% in the September quarter, expectations for the December quarter are tempered to 45% to 46%, primarily due to escalating memory expenses. To mitigate these pressures, Apple implemented price adjustments for Mac and iPad in June, and for iPhone in September.
A Head-to-Head Financial Showdown: Seagate's Strengths and Weaknesses
Examining the latest twelve-month performance, Seagate emerges as the more financially attractive option in several key metrics. It trades at a lower earnings multiple of 26.3 times, compared to Apple's 38.7 times. Seagate also boasts superior revenue growth at 44.4% versus Apple's 15.1%, and a higher operating margin of 40.5% against Apple's 33.0%.
However, Apple maintains advantages in other areas. It carries significantly less debt relative to its market capitalization, with total debt at 1.6% compared to Seagate's 2.3% (though Seagate has since reduced its debt by $750 million as of October 2, 2026). Apple also demonstrates a longer track record of margin stability; its operating margin was already 31.5% in the twelve months to September 2024, whereas Seagate's was a much lower 13.1%. Moreover, Apple's sales are far more diversified, with iPhone accounting for roughly half of its September quarter revenue, while data center revenue constitutes a dominant 81% of Seagate's sales.
This suggests that Seagate's recent impressive margins are a relatively new development within the past two years. Should its customers cease forward commitments, or if escalating costs erode its pricing power, Seagate's margins could revert to significantly lower historical levels. The unwavering demand for Seagate’s data center offerings appears to be its strongest asset at present. However, the uncertainty surrounding 2028 pricing introduces a degree of risk. Investors will be keenly watching Seagate’s operating margin in its upcoming report, anticipated in January 2027, as a crucial indicator of its continued success.
