Earnings Alert: Seagate Reports Robust Q1 Results, Optimistic on HAMR Technology

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Earnings Alert: Seagate Reports Robust Q1 Results, Optimistic on HAMR Technology

Seagate Technology (NASDAQ: STX) showcased a robust financial performance in the first quarter of fiscal year 2025, with significant increases in revenue and earnings per share. The company’s revenue rose to $2.17 billion, indicating a year-over-year growth of 49% and a 15% increase from the previous quarter. Non-GAAP earnings per share also exceeded expectations at $1.58, driven by an improved product mix and pricing.

Seagate's gross profit margin reached a decade-high of 33.3%, with non-GAAP gross profit increasing by 24% to $723 million. The company maintains a positive outlook, especially due to strong demand in cloud and enterprise markets for high-capacity nearline drives.

Key Highlights:

  • Revenue reached $2.17 billion, reflecting a 49% year-over-year rise.
  • Non-GAAP earnings per share hit $1.58, surpassing guidance.
  • Gross profit margin reached a decade-high of 33.3%.
  • Dividend per share was raised to $0.72, approximately a 3% increase.
  • Liquidity at quarter-end was $2.7 billion, with a net leverage ratio of 3.2 times.
  • Revenue forecast for the December quarter is $2.3 billion (±$150 million).
  • Non-GAAP earnings per share forecast for the December quarter is $1.85 (±$0.20).

Company Outlook: Seagate anticipates continued demand growth, particularly for high-capacity nearline drives. The company is accelerating its latest PMR platform and expects broader customer qualifications for HAMR technology by mid-calendar year 2025. The fiscal year 2025 is projected to have stable demand with manageable seasonality.

Challenges: Economic uncertainties in China pose challenges for global Smart City project demand. Potential delays in HAMR rollout could necessitate a fallback to PMR products.

Opportunities: Seagate remains optimistic about demand for high-capacity drives and future growth using HAMR technology. The company anticipates nearline data shipments approaching 130 exabytes soon. AI-enabled workloads, particularly in video applications, are expected to gradually boost demand.

Shortcomings: At $27 million, free cash flow was relatively low, though improvement is expected in the December quarter.

Q&A Highlights: Most customer agreements are fully committed, indicating confidence in Seagate's supply chain. Factory utilization exceeds 90%, demonstrating strong operational capacity. The company is prepared to manage potential delays in HAMR qualification by transitioning to PMR products if necessary.

Conclusion: Seagate Technology's fiscal year 2025 first-quarter results were strong, illustrating confidence in financial strategy, product mix, and technological innovation. The focus on high-capacity nearline drives and the shift to HAMR technology positions Seagate well for future growth despite some market uncertainties. Company management remains committed to delivering scalable storage solutions and maximizing shareholder value through dividends and prudent financial management.

InvestingPro Insights: Seagate Technology's strong financial performance in the first quarter of fiscal 2025 is supported by real-time data from InvestingPro. The company's market capitalization stands at $22.13 billion, reflecting its significant presence in the Technology Hardware, Storage & Peripherals sector.

InvestingPro data shows that Seagate's trailing twelve-month revenue as of the fourth quarter of 2024 was $6.551 billion, with a quarterly revenue growth of 17.79% in the fourth quarter of 2024. This aligns with the company’s reported 49% annual revenue growth in the last quarter, indicating a strong upward trend in sales.

One tip from InvestingPro highlights Seagate's sustained dividend payments for 14 consecutive years, consistent with the company's increase in dividend to $0.72 per share. The current dividend yield is 2.49%, offering investors a stable income stream.

Another relevant InvestingPro tip indicates that Seagate is trading at a low P/E ratio relative to short-term earnings growth, which could appeal to value investors, especially given the company’s positive outlook and projected increase in demand for high-capacity nearline drives.

Seagate’s stock performance has been strong, with a price total return of 77.86% over the past year and 31.92% over the past six months. This performance is in line with the company’s improving financial results and positive future outlook.

For investors seeking more comprehensive analysis, InvestingPro offers additional tips and insights. Currently, there are 13 additional InvestingPro Tips available for Seagate Technology, providing a deeper understanding of the company's financial health and market position.