Seagate’s most recent quarter delivered growth above Wall Street’s expectations, but the market responded negatively, reflecting some caution. Management attributed the strong performance to ongoing demand from cloud providers and a successful ramp of its advanced nearline and HAMR-based hard drives. CEO Dave Mosley highlighted that "record gross margins" and robust exabyte shipments were underpinned by product transitions and discipline in aligning supply with demand. The company also emphasized operational improvements and increased adoption of high-capacity drives by major cloud customers as key contributors to the quarter’s results.
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Seagate Technology (STX) Q2 CY2025 Highlights:
- Revenue: $2.44 billion vs analyst estimates of $2.43 billion (29.5% year-on-year growth, 0.6% beat)
- Adjusted EPS: $2.59 vs analyst estimates of $2.44 (6% beat)
- Adjusted EBITDA: $701 million vs analyst estimates of $699 million (28.7% margin, in line)
- Revenue Guidance for Q3 CY2025 is $2.5 billion at the midpoint, below analyst estimates of $2.56 billion
- Adjusted EPS guidance for Q3 CY2025 is $2.30 at the midpoint, below analyst estimates of $2.32
- Operating Margin: 23.2%, up from 16.6% in the same quarter last year
- Inventory Days Outstanding: 86, down from 96 in the previous quarter
- Market Capitalization: $32.26 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Seagate Technology’s Q2 Earnings Call
- Erik Woodring (Morgan Stanley) asked about the implied gross margin guidance for the next quarter. CFO Gianluca Romano replied that the guidance suggests a more significant margin expansion than analysts were modeling, emphasizing continued progress toward longer-term margin targets.
- Asiya Merchant (Citigroup) inquired about the impact of AI inference and edge demand on storage needs. CEO Dave Mosley described video and unstructured data applications as major growth drivers in both cloud and edge environments, supporting their exabyte growth assumptions.
- Jim Schneider (Goldman Sachs) questioned the revenue contribution and margin impact of HAMR drives. Management confirmed HAMR shipments are growing and expected to be increasingly accretive to gross margin as capacity ramps up.
- Wamsi Mohan (Bank of America) sought clarification on the alignment between HAMR capacity ramp and customer qualifications. Management explained that some production is reserved for qualification, which limits short-term revenue growth but supports long-term adoption.
- Thomas O'Malley (Barclays) asked about the breadth of HAMR adoption beyond the initial customer. Mosley confirmed that multiple customers are now ramping, with strong demand for higher-capacity drives driving further transitions.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will monitor (1) the pace and breadth of HAMR drive adoption and customer qualifications, (2) Seagate’s ability to expand production while maintaining gross margin improvements, and (3) the impact of new global tax rules and share buybacks on earnings per share. The migration of enterprise and edge workloads to higher-capacity platforms and progress in product transitions will also be important indicators of sustained growth.
Seagate Technology currently trades at $151.02, down from $152.90 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).
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