Seagate's Q3 Earnings Beat on Solid Revenue Growth, Shares Jump

Core Insights - Seagate Technology Holdings plc (STX) reported third-quarter fiscal 2025 non-GAAP earnings of $1.90 per share, exceeding the Zacks Consensus Estimate by 7.95% and reflecting operational discipline and effective cost management [1] - Non-GAAP revenues reached $2.16 billion, beating estimates by 1.3% and showing a 31% year-over-year increase, although down 7% sequentially due to supply chain challenges [1][3] - The company continues to benefit from strong demand for mass capacity storage, particularly driven by nearline cloud demand, which surged 48% year over year [2][3] Financial Performance - Non-GAAP gross margin increased to 36.2% from 26.1% in the prior-year quarter, contributing to improved earnings and free cash flow [13] - Non-GAAP income from operations rose to $507 million from $183 million a year ago, with operating margin increasing to 23.5% from 11.1% [14] - Cash flow from operations was $259 million, with free cash flow amounting to $216 million, indicating a positive trend in cash generation [16] Product and Market Dynamics - Seagate shipped 143.6 exabytes of HDD storage, a 45% year-over-year increase, although down 5% sequentially [6] - Mass capacity storage shipments reached 132.9 exabytes, up 50% year over year, with average capacity per drive increasing to 16.2 TB [7] - The company is ramping up its HAMR technology to meet increasing cloud customer demand, with volume shipments expected to expand in the second half of calendar 2025 [4] Future Outlook - Management anticipates fourth-quarter fiscal 2025 revenues of $2.4 billion, reflecting an 11% sequential increase and a 27% year-over-year improvement [17] - Non-GAAP earnings are projected to be $2.4 per share, with operating expenses expected around $285 million [18] - The outlook indicates stability in demand and minimal impact from recent global tariff developments [17]