Seagate's Q2 Earnings & Revenues Beat, Increase Y/Y, Stock Gains

Seagate Technology Holdings plc STX reported second-quarter fiscal 2025 non-GAAP earnings of $2.03 per share, beating the Zacks Consensus Estimate by 7.98%. Also, the figure was toward the high end of management’s guidance of $1.85 per share (+/- 20 cents). The figure surpassed $2 for the first time in 12 quarters, highlighting STX’s continued focus on profitability. The company reported non-GAAP earnings of 12 cents per share in the year-ago quarter. The strong uptake of its high-capacity nearline drives, consistent price optimization and disciplined cost management drove the bottom line.Stay up-to-date with all quarterly releases: See Zacks  Earnings Calendar.Non-GAAP revenues of $2.325 billion beat the Zacks Consensus Estimate by 0.64%. The figure increased 49.5% year over year and 7.2% sequentially. For the fiscal second quarter, management projected revenues to be $2.3 billion (+/-$150 million). The upside resulted from strong momentum in the nearline cloud segment and significant improvements in the enterprise markets.Higher mass capacity revenues were driven by stronger nearline cloud demand. Mass capacity revenues surged 79% year over year to $1.894 billion. Its exabyte shipments now represent 93% of total HDD exabyte shipments.Nearline revenues almost doubled in the fiscal second quarter from the previous year. The figure grew 60% for 2024, driven by strong demand from both cloud service providers (CSPs) and Enterprise/OEM customers. Management noted that the uptick in demand for nearline products aligns with the roughly 50% growth in cloud capital investments by its customers in 2024, with their CapEx projected to continue rising throughout the calendar year 2025.Seagate Technology Holdings PLC Price, Consensus and EPS Surprise Seagate Technology Holdings PLC price-consensus-eps-surprise-chart | Seagate Technology Holdings PLC QuoteSeagate’s technological roadmap continues to align with evolving market demands. The company has taken significant strides in its cutting-edge HAMR technology. During the December quarter, Seagate began ramping up HAMR-based Mozaic products for its lead cloud customer. The company has already reached a milestone by sampling products with capacities of up to 36 terabytes (TB).Highlighting steady growth in revenues, gross margin and non-GAAP earnings per share across all quarters of the year, STX’s shares rose 3.7% and closed trading at $101.25 on Jan. 21, 2025. Shares also went up 6% in the pre-market trading session on Jan. 22. In the past year, STX has gained 13.5% compared with the sub-industry’s growth of 2.8%.Image Source: Zacks Investment ResearchSTX's Exabyte Shipments in DetailIn the reported quarter, Seagate shipped 150.8 exabytes of HDD storage, up 59% year over year and 10% sequentially. Our estimate was pegged at 143.8 exabytes of HDD storage. Average capacity per drive increased 41% year over year and 9% sequentially to 11.6 TB.The company shipped 140 exabytes for the mass-capacity storage market (including nearline, video and image applications, and network-attached storage). This recorded a year-over-year increase of 68% in exabyte shipments and 9% sequentially. Our estimate was pegged at 134.1 exabytes of mass-capacity storage. Average mass capacity per drive increased sequentially to 15 TB from 14.3 TB.Seagate shipped 10.8 exabytes for the legacy market (which includes mission-critical notebooks, desktops, gaming consoles, digital video recorders or DVR and external consumer devices), down 10% year over year but up 13% sequentially. Average capacity increased 15% year over year to 3 TB.STX's Revenues by Product GroupTotal HDD revenues (93.3% of total revenues) rose 57% year over year to $2.169 billion in the reported quarter. On a sequential basis, revenues were up 8%.Systems, SSD & Other segment’s revenues (6.7%), including enterprise data solutions, cloud systems and solid-state drives, were $156 million, down 9% on a year-over-year basis and 5% sequentially.Our estimates for revenues from HDD and non-HDD segments were $$2.134 billion and $171.1 million, respectively.Seagate's Margin DetailsNon-GAAP gross margin increased to 35.5% from 23.6% in the prior-year quarter. This expansion was driven by price adjustment, cost discipline and a favorable product mix shift to mass-capacity products. Non-GAAP operating expenses were up 19.6% on a year-over-year basis to $287 million, primarily due to higher variable compensation.Non-GAAP income from operations totaled $538 million, up from $127 million a year ago. Non-GAAP operating margin increased to 23.1% from 8.2% in the year-earlier quarter.STX's Balance Sheet and Cash FlowAs of Dec. 27, 2024, cash and cash equivalents were $1.238 million compared with $1.239 million as of Sept. 27, 2024.As of Dec. 27, 2024, long-term debt (including the current portion) was $5.679 billion compared with $5.676 billion as of Sept. 27, 2024.Cash flow from operations was $221 million compared with $169 million in the previous quarter. Free cash flow amounted to $150 million compared with $99 million in the previous quarter. Management anticipates sequential improvement in free cash flow generation throughout the remainder of the fiscal year.Seagate announced a quarterly cash dividend of 72 cents per share. The dividend will be paid out on April 2, 2025, to shareholders of record as of the close of business on March 19, 2025.Seagate's GuidanceManagement anticipates third-quarter fiscal 2025 revenues of $2.1 billion (+/- $150 million). STX anticipates strong cloud demand to partly offset seasonal declines in VIA and legacy markets, alongside supply constraints. It expects to meet build-to-order commitments, but its capacity to handle in-quarter volume increases will be limited, with an estimated $200 million revenue impact from supply woes included in its guidance. Amid supply constraints in the fiscal third quarter, sustained demand for its latest nearline products, including Mozaic, presents an opportunity for sequential growth in gross margin performance.Non-GAAP earnings are expected to be $1.7 per share (+/- 20 cents).For the quarter, non-GAAP operating expenses are expected to be $290 million. At the midpoint of the revenue guidance, management expects the non-GAAP operating margin to grow in the low-20s percentage range of revenues. STX continues to expect fiscal 2025 capex to be at or below the low end of its long-term target range of 4-6% of revenues.STX’s Zacks RankCurrently, Seagate carries a Zacks Rank #4 (Sell).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Performance of Other CompaniesSimulations Plus, Inc. SLP reported first-quarter fiscal 2025 adjusted earnings of 17 cents per share, which declined 5.6% year over year. The figure, however, missed the Zacks Consensus Estimate of 18 cents per share.Shares of SLP declined 20.9% in the past year.BlackBerry BB reported the third quarter of fiscal 2025 non-GAAP earnings per share (EPS) of 2 cents. The figure was better than the company’s estimate of a loss of 1 cent to EPS of 1 cent. In the year-ago quarter, it reported a non-GAAP EPS of 1 cent. Shares of BB gained 14.6% in the past year.Prologis, Inc. PLD reported fourth-quarter 2024 core funds from operations (FFO) per share of $1.50, outpacing the Zacks Consensus Estimate of $1.38. This compares favorably with the year-ago quarter’s figure of $1.26.Shares of PLD declined 8.4% in the past year. Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Prologis, Inc. (PLD): Free Stock Analysis Report Seagate Technology Holdings PLC (STX): Free Stock Analysis Report Simulations Plus, Inc. 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