Seagate breaks out as markets tumble
1min read Seagate Technology (STX) reported strong Q4 earnings, significantly surpassing analyst expectations. The company posted adjusted earnings per share (EPS) of $1.05, well above the consensus estimate of $0.76. Revenues also saw a robust increase, rising 17.8% year-over-year to $1.89 billion, slightly exceeding the expected $1.87 billion.
For the upcoming quarter, Seagate provided optimistic guidance, anticipating EPS of $1.40, plus or minus $0.20, compared to the consensus of $1.16. Revenue guidance for Q1 is projected to be $2.10 billion, plus or minus $150 million, also above the consensus estimate of $2.07 billion. This positive outlook has been well-received by the market, with Seagate shares rising by 5.4% following the announcement.
In terms of industry trends, Seagate's performance is particularly notable in the context of the broader storage market. Demand from cloud service providers (CSPs) and the video and imaging application (VIA) segments drove results above expectations. The company’s build-to-order strategy has enabled better manufacturing utilization and increased prices, resulting in a significant expansion in non-GAAP gross margins to 30.9%, up from 26.1% last quarter and 19.5% a year ago.
Analysts have raised their price targets and maintained positive ratings on Seagate’s stock, citing strong gross margin improvements and a robust outlook for cloud demand. Loop Capital, Morgan Stanley, and BAML have all increased their price targets, reflecting confidence in Seagate's ability to maintain high margins and benefit from the growing demand for high-capacity storage solutions, particularly in the cloud sector.
Seagate’s strategic acquisitions and continued innovation in high-capacity drives, including advancements in Heat-Assisted Magnetic Recording (HAMR) technology, position the company well for future growth. The recent acquisitions of Lutze and CommScope’s mobile networks-related businesses are expected to further strengthen Seagate's market position and drive additional revenue growth in the coming quarters.
The company’s balance sheet remains strong, with significant operating and free cash flow generation. Seagate declared a quarterly cash dividend of $0.70 per share, payable on October 7, 2024, reflecting its commitment to returning value to shareholders. The increase in dividend payouts alongside strategic investments highlights the company's robust financial health and confidence in sustained future growth.
In summary, Seagate’s Q4 earnings report demonstrates significant revenue and margin growth, driven by strong demand in the cloud and enterprise sectors. The company’s positive guidance and strategic focus on high-capacity storage solutions and technological advancements in HAMR are likely to continue driving its performance, making it a key player to watch in the storage industry.