Seagate Technology ((STX)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Seagate Technology’s recent earnings call painted a picture of robust financial performance and strategic growth, underpinned by strong demand in the cloud sector and innovative product developments. Despite the positive momentum, the company acknowledged challenges related to supply constraints and seasonal market fluctuations that may affect short-term results.
Strong Revenue Growth
Seagate concluded calendar 2024 with an impressive 7% sequential revenue growth in the December quarter, indicative of the company’s resilient market position and effective growth strategies.
Non-GAAP Earnings Per Share Achievement
For the first time in 12 quarters, Seagate’s non-GAAP earnings per share surpassed $2, reflecting the company’s enhanced profitability and financial health.
Nearline Product Revenue Surge
A standout achievement for Seagate was the near doubling of nearline product revenue year-over-year in the December quarter, showcasing nearly 60% growth for the entire calendar year, driven by increasing cloud demand.
HAMR Product Milestones
Seagate reached significant milestones with its HAMR-based products, completing qualifications and initiating ramp-ups, with sampling drives capable of up to 36 terabytes, demonstrating its technological leadership.
Operating Income and Margin Growth
The company reported a 22% sequential increase in non-GAAP operating income, with an operating margin of 23.1%, highlighting its operational efficiency and profitability improvements.
Gross Margin Improvement
Seagate marked its seventh consecutive quarter of sequential gross margin improvement, with non-GAAP gross margin expanding by 220 basis points to 35.5%, underscoring consistent financial discipline.
Supply Constraints Impacting Revenue
Despite strong demand, Seagate faced production issues leading to supply constraints, predicting a $200 million revenue impact for the March quarter, presenting a near-term challenge.
Debt and Leverage
At the end of the December quarter, Seagate’s debt stood at $5.7 billion, with a net leverage ratio of 2.5x, reflecting the company’s strategic financial management.
Seasonal Decline in VIA and Legacy Markets
Seagate anticipates ongoing demand strength to partially counteract seasonal declines in the VIA and legacy markets, maintaining a cautious yet optimistic outlook.
Forward-Looking Guidance
Seagate’s guidance for the upcoming quarters remains optimistic, with expectations of a fiscal Q3 revenue around $2.1 billion, despite a temporary revenue impact due to supply constraints. The company projects continued demand from cloud customers and advancements in HAMR-based technology to drive profitable growth in fiscal 2025 and beyond.
In conclusion, Seagate Technology’s earnings call reflected a positive sentiment driven by robust growth and strategic advancements. While short-term challenges like supply constraints exist, the company’s strong market position and innovative product developments offer a promising outlook for sustained profitability and growth.
