Seagate Prepares for Q1 Earnings: Key Insights and Expectations

Seagate Technology Holdings plc STX is set to announce its first-quarter fiscal 2025 earnings on October 22.

Strong Growth Predicted for Seagate’s Earnings

The Zacks Consensus Estimate for the upcoming earnings stands at $1.48 per share, reflecting a 2.1% increase in the last 60 days. This contrasts with a non-GAAP loss of 22 cents per share reported in the same quarter last year. Expected revenue for this quarter is $2.11 billion, which is a significant 44.8% increase compared to the previous year.

Management has guided first-quarter fiscal 2025 revenues around $2.1 billion, with a margin of +/- $150 million. Additionally, non-GAAP earnings are projected at $1.40 per share, with a variability of +/- 20 cents.

In the last four quarters, STX has surpassed the Zacks Consensus Estimate three times, with a surprising earnings average of 80.9% on the positive side.

Driving Forces Behind Seagate’s Performance

Seagate is witnessing a steady rise in mass capacity demand, particularly from global cloud customers. Increased sales to cloud service providers and stable enterprise demand have fueled nearline cloud revenues. Additionally, the growing workloads in traditional cloud computing and new AI deployments are expected to bolster demand further as fiscal 2025 unfolds.

The company enhances its competitive edge through innovations, such as the Mozaic 3+ hard drive platform launched earlier this year, which utilizes Heat-Assisted Magnetic Recording technology. This positions Seagate favorably in the fast-growing mass capacity storage market.

We expect mass capacity revenues to be approximately $1,655.9 million in the first quarter, reflecting a remarkable year-over-year growth of 62.8%. This increase is anticipated to offset declines in revenue from older markets.

For VIA, management notes that sales may vary in the latter half of calendar 2024. Despite smart cities representing a significant growth opportunity, visibility into budgets remains uncertain due to broader economic conditions.

Seagate anticipates improvements in gross margins due to a higher proportion of mass capacity revenues and strategic pricing measures. The company expects minimal underutilization costs given the favorable demand environment.

Projected revenues from the HDD segment are $1,932.2 million, marking a 49.2% increase year-over-year. Meanwhile, the non-HDD segment, which includes enterprise data solutions and solid-state drives, is estimated to reach $169.1 million, a rise of 6.3% compared to the previous year.

Lingering global economic challenges, especially the slow recovery in China, pose risks, alongside rising costs. For the upcoming fiscal first quarter, non-GAAP operating expenses are anticipated to be around $270 million.

Positive Indicators from the Zacks Model

Our analysis indicates a favorable outcome for Seagate’s earnings this quarter, as the company shows a positive Earnings ESP and holds a Zacks Rank of #1 (Strong Buy).

Seagate currently enjoys an Earnings ESP of +5.09% with a Zacks Rank of #1, suggesting a promising forecast for the earnings report.

Other Stocks Worth Watching

Investors may also find these stocks appealing, as they possess factors indicating a potential earnings beat this season.

SEI Investments Company SEIC has an Earnings ESP of +0.94% and a Zacks Rank of #2. Scheduled to report earnings on October 23, SEIC’s projected earnings and revenues are $1.07 per share and $532.1 million, respectively. The stock has appreciated by 29.9% over the past year.

Ameriprise Financial, Inc AMP is set to report on October 23 with an Earnings ESP of +0.5% and a Zacks Rank of #2. The consensus estimates for AMP are $8.86 earnings per share and $4.3 billion in revenue, having risen 60% in the past year.

American Airlines Group Inc. AAL holds an Earnings ESP of +32.87% and a Zacks Rank of #2. Scheduled for October 24, AAL’s estimates are set at 13 cents per share and $13.49 billion in revenues, reporting a 13.5% growth over the past year.

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