Earnings may not be as strong as they seem for Maxim Global Berhad

Maxim Global Berhad reported strong profits, but the stock was stagnant. The company's earnings were not supported by free cash flow, which may indicate a lower underlying earnings power. The accrual ratio from cashflow was 0.37, which is a negative sign for future profitability. The company had negative free cash flow of RM215m despite a profit of RM28.9m, which may indicate high risk.

Seagate Technology Holdings plc (STX) has announced plans to resume share buybacks in the September quarter, signaling its confidence in the company's financial strength and outlook. This move comes on the heels of a robust fiscal 2025 performance, with revenues reaching $9.1 billion, a 39% year-over-year increase, primarily driven by strong nearline demand from cloud customers [1].

A key driver of Seagate’s growth is the ongoing implementation and expansion of its HAMR technology, which aims to increase areal density and support next-generation storage solutions. This technology is crucial for meeting the increased demand for high-capacity storage in hyperscale data centers, AI training workloads, and decentralized edge environments. Non-GAAP operating profit more than tripled to $2.1 billion in fiscal 2025.

Free cash flow in the fiscal fourth quarter was $425 million, driven by robust top-line growth and disciplined capital expenditures of 3% of revenues, below the long-term target range of 4-6%. Annual free cash flow was $818 million. STX expects cash generation to expand in the back half of calendar 2025, even with a large variable compensation payout in the current quarter. Further, structural changes and a robust product pipeline are expected to drive higher profitability and cash generation in fiscal 2026.

With profitability trending higher and mass capacity storage demand accelerating, Seagate appears well-positioned to balance growth with meaningful capital returns, thereby enhancing shareholder value in fiscal 2026 and beyond. In fiscal 2025, the company distributed nearly 75% of free cash flow through dividends, while paying down gross debt of about $150 million in the fiscal fourth quarter.

Comparative Analysis

Western Digital Corporation (WDC) also gained from rising demand for high-capacity storage driven by cloud computing and generative AI. WDC’s revenues skyrocketed 51% year-over-year to $9.5 billion in fiscal 2025. Free cash flow amounted to $675 million in the fiscal fourth quarter, up 139% while annual free cash flow was $1.4 billion. With strong cash flow, a solid balance sheet, and confidence in its business outlook, WDC’s board approved up to $2 billion in share buybacks [1].

Pure Storage (PSTG) reported second-quarter fiscal 2026 results with revenues growing 13% to $861 million. Free cash flow was $150.1 million compared with $166.6 million in the year-ago quarter. In the fiscal second quarter, the company returned $42 million to its shareholders by repurchasing 0.8 million shares. Pure Storage has $109 million left under its current authorization plan [1].

Market Performance

In the past month, shares of STX have gained 9.6% against the Zacks Computer Integrated Systems industry’s decline of 3.5%. In terms of forward price/earnings, STX’s shares are trading at 15.58X, lower than the industry’s 19.97X. The Zacks Consensus Estimate for STX’s earnings for fiscal 2026 has been revised up 4.2% to $10.30 over the past 60 days. Currently, Seagate has a Zacks Rank #3 (Hold) [1].

References

[1] https://www.tradingview.com/news/zacks:be02fab09094b:0-seagate-resumes-buybacks-amid-rising-free-cash-flow-momentum/