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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Seagate's earnings call indicates strong financial performance with record revenue growth, improved profitability, and significant demand for new products like HAMR. Despite slight revenue guidance concerns, the overall sentiment is positive due to robust demand, operational efficiencies, and resumed share buybacks. The Q&A session revealed confidence in product transition and growth potential in AI-driven markets. These factors, coupled with strong financial metrics and optimistic guidance, suggest a strong positive stock price reaction.
Revenue for June quarter $2.44 billion, up 13% sequentially and up 30% year-over-year. The increase was driven by strong demand for data center products and favorable product mix.
Non-GAAP Gross Margin 37.9%, expanded by 170 basis points sequentially. The improvement was due to increased adoption of latest generation products and ongoing pricing adjustments.
Non-GAAP Operating Margin 26.2%, increased by 270 basis points sequentially. This was supported by strong demand for data center products and operational efficiencies.
Non-GAAP Earnings Per Share (EPS) $2.59, near historic highs, driven by strong revenue growth and operational execution.
Fiscal Year 2025 Revenue $9.1 billion, up nearly 40% year-over-year. Growth was attributed to strong demand for data center products and supply-demand alignment.
Non-GAAP Operating Profit for Fiscal Year 2025 $2.1 billion, more than tripled year-over-year. This was due to operational efficiencies and strong demand for data center products.
Mass Capacity Revenue Over $2 billion, up 15% sequentially and 40% year-over-year. Growth was driven by strong demand for nearline products in cloud and edge data centers.
Nearline Shipments 137 exabytes, up 14% sequentially and 52% year-over-year. Growth was driven by adoption of 24 and 28 terabyte PMR products and ramping of HAMR-based Mozaic products.
Free Cash Flow for June Quarter $425 million, nearly doubled from $216 million in the prior period. This was due to strong profitability and operational execution.
Cash and Cash Equivalents $2.2 billion, increased 9% sequentially. This was supported by strong free cash flow generation and reduced debt balance.
High-volume ramp of two new nearline platforms: Including the industry's first heat-assisted magnetic recording (HAMR) hard drive, which is cost-effective and energy-efficient.
HAMR-based Mozaic products: Three major cloud service providers are qualified, with additional qualifications progressing well. Volume ramp expected in the first half of calendar 2026.
4+ terabyte per disk qualification: Supports cloud workloads with capacities up to 44 terabytes and lower capacity drives for edge workloads. Qualification started with a global CSP.
5 terabytes per disk technology: Expected market introduction in early calendar 2028, with plans to demonstrate 10 terabytes per disk in the lab by the same time.
Global cloud demand: Strong demand for nearline products, with production capacity largely spoken for through mid-next calendar year.
Edge data centers: Growing demand due to data sovereignty regulations and AI-driven insights. Mass capacity hard drives critical for localized data storage.
Revenue growth: Fiscal 2025 revenue increased by 39% to $9.1 billion, with non-GAAP operating profit tripling.
Mass capacity shipments: 151 exabytes shipped in the June quarter, up 40% year-on-year.
Free cash flow: Nearly doubled in the June quarter to $425 million.
Resumption of share repurchases: Expected later this quarter to enhance capital returns to shareholders.
New market framework: Starting in fiscal 2026, focus will shift to two main areas: data center and edge IoT.
Trade Policy Landscape: The evolving trade policy landscape poses potential risks, though the company currently expects minimal tariff-related impacts. However, there is a need to closely track developments and deploy mitigation strategies to minimize potential future impacts.
Global Minimum Tax Rate: Starting in fiscal 2026, the company will be subject to a global minimum tax rate in the mid-teens, which could impact profitability.
Supply Chain and Production Capacity: While the company has strong visibility into nearline exabyte production capacity through mid-next calendar year, any disruptions in supply chain or production could impact the ability to meet demand.
Customer Qualification Timelines: The qualification of key global CSP customers for HAMR-based Mozaic drives is expected by mid-calendar 2026. Delays in this timeline could impact revenue and market positioning.
Economic and Market Conditions: The company is reliant on strong demand from cloud and edge data centers. Any economic downturn or reduction in demand from these sectors could adversely affect financial performance.
Debt and Leverage: The company has a gross debt of approximately $5 billion. While the net leverage ratio is improving, high debt levels could pose financial risks if profitability or cash flow generation declines.
Revenue Expectations: Seagate expects September quarter revenue to be in the range of $2.5 billion, plus or minus $150 million, reflecting a 15% improvement year-over-year.
Margin Projections: Non-GAAP operating margin is expected to expand into the mid- to high 20s percentage range for the September quarter.
Capital Expenditures: Capital expenditure for fiscal '26 is anticipated to be within the target range of 4% to 6% of revenue, maintaining capital discipline.
Market Trends: Strong global cloud demand for nearline products is expected to continue, with visibility into production capacity largely spoken for through mid-calendar 2026. Installed data center capacity is expected to more than double by 2029.
Business Segment Performance: Momentum for high-capacity HAMR drives is building, with volume ramp expected in the first half of calendar 2026. Exabyte shipment crossover on HAMR-based nearline drives is targeted for the second half of calendar 2026. The company also plans to introduce 5 terabytes per disk technology by early calendar 2028, with a goal of demonstrating 10 terabytes per disk in the lab by the same time.
Strategic Plans: Seagate plans to resume share repurchases later this quarter. The company is also focused on executing the 4-plus terabyte per disk qualification and volume ramp in fiscal '26, supporting cloud workloads with capacities of up to 44 terabytes.
Quarterly Dividends: In the June quarter, Seagate returned $153 million to shareholders through quarterly dividends.
Fiscal Year Dividends: For the fiscal year, Seagate returned nearly 75% of free cash flow to shareholders, demonstrating a strong commitment to its capital return strategy.
Share Repurchase Program: Seagate expects to resume share repurchases in the current quarter, reflecting confidence in its financial position and enhancing capital returns to shareholders.
The earnings call presents a positive outlook with strong revenue and margin projections, driven by product transitions and cloud demand. Share repurchases and strategic plans for HAMR technology bolster investor confidence. The Q&A section highlights strong demand and predictable pricing, despite some vagueness in management responses. Overall, the positive financial outlook and strategic initiatives outweigh minor uncertainties, suggesting a positive stock reaction.
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