Seagate: Fiscal 3Q24 Financial Results

Comments

Seagate delivered solid financial performance in the March quarter with sequential improvement across every key financial metric. Revenue was $1.66 billion, up 6% Q/Q. Non-GAAP operating income was up 44% Q/Q to $183 million, leading to a non-GAAP operating margin of 11% of revenue, expanding nearly 300 basis points Q/Q, and non-GAAP EPS was $0.33, increasing $0.21 Q/Q and above the midpoint of guidance range, reflecting the improving demand trends and continued cost discipline.

Within HDD business, exabyte shipments grew 4% sequentially to 99EB, while revenue increased 7% to $1.5 billion. Revenue performance was mainly driven by the expected improvement in the nearline cloud market, as well as favorable pricing actions.

Within the mass capacity market, revenue outpaced exabyte growth, increasing 11% Q/Q to $1.2 billion with nearline cloud demand more than offsetting the slight decline in the VIA market. Mass capacity shipment totaled 89EB compared with 83EB in the December quarter.

Mass capacity shipment as a percentage of total HDD exabyte was 89%, reflecting the continued long-term secular growth for mass capacity demand.

For nearline products, shipment of 72EB were up Q/Q from 65EB. Inventory among most CSP customers has decreased and the company anticipates continued nearline demand improvement in the June quarter and beyond. In the VIA market, the March quarter will prove to be a low point of the calendar year with demand returning to more typical seasonal patterns moving forward.

Legacy product revenue was $297 million, down from $324 million in 2FQ24, primarily driven by lower seasonal demand in the consumer market.

Finally, revenue for non-HDD business was $178 million, essentially flat Q/Q.

The firm expects both the legacy and non-HDD market to remain at a similar level in the June quarter.

99EB HDD capacity shipped +4% Q/Q, 8.7TB average capacity per drove +6% Q/Q

In 3FQ24, Seagate grew revenue 6%, expanded non-GAAP gross profit 18%, and more than doubled non-GAAP earnings per share compared with 2FQ24.

Nearline cloud demand trends are increasingly positive across both USA and China customers, and the firm also saw a sequential improvement in the enterprise OEM markets in 3FQ24.

The 24 and 28TB PMR drives are in qualification at most of global cloud and enterprise customers. The company has already completed qualification with one major enterprise customer, some global tier-2 customers, and with its enterprise systems business. It currently expect to begin shipping significant volumes in 1FH05. Relative to HAMR technology, it continues to progress toward completing its first large CSP customer qualification, though it experienced a temporary slowdown in recent weeks.

It determined a mechanical component unrelated to the HAMR recording subsystem and some of drives was not performing as expected. It identified and implemented the solution with support from customers. Verification tests are underway and these tests should be completed in the June quarter. Every other aspect of the qualification process has gone as expected.

HDDs from 1FQ19 to 3FQ24

FY ending in June
* in $million

Earnings call transcript