Seagate Technology | North America M Idea F2Q26 Earnings — Are You Not Entertained?! | What's Changed | | | | --- | --- | --- | | Seagate Technology (STX.O) | From | To | | Price Target | $372.00 | $468.00 | Reaction to earnings Strengthens our thesis Modest upside Meaningful revision higher Impact to our thesis Financial results versus consensus Direction of next 12-month consensus EPS January 28, 2026 05:01 AM GMT Demand strength, elongating customer visibility, better price per TB growth, and operating m ...

on 27-Jan-2026 27 January 2026 U.S. IT Hardware Global Technology: A conversation with 3 CIOs - perspectives on AI, Cloud, PCs, and vendors (conference call transcript) Mark C. Newman +1 212 845 7822 mark.newman@bernsteinsg.com Peter Weed +1 917 344 8390 peter.weed@bernsteinsg.com Mark L. Moerdler, Ph.D. +1 917 344 8506 mark.moerdler@bernsteinsg.com Firoz Valliji, CFA +1 917 344 8316 firoz.valliji@bernsteinsg.com Luwei Yang +1 917 344 8342 luwei.yang@bernsteinsg.com Shelly Tang, CFA +1 917 344 8342 shelly.t ...

Summary of Apple, Inc. Earnings Preview Company Overview - **Company**: Apple, Inc. (AAPL.O) - **Industry**: IT Hardware - **Market Cap**: $3,678,135 million - **Current Stock Price**: $248.04 - **Price Target**: $315.00 - **Fiscal Year Ending**: September 2026 Key Points Industry and Market Context - The earnings preview indicates a cautious outlook for the near term due to uncertainties in the first half of the fiscal year, but a more optimistic view for the second half due to several catalysts [3][10] - Apple is expected to face challenges from rising memory costs, which are not fully reflected in consensus estimates [15][21] Financial Performance Expectations - **Q1 FY26 Revenue**: Expected at $139,557 million, representing a 12.3% year-over-year growth, which is above consensus estimates [23] - **Q2 FY26 Revenue**: Projected at $107,954 million, with a year-over-year growth of 13.2% [23] - **iPhone Revenue**: Anticipated to be $79,968 million for Q1 and $55,447 million for Q2, both exceeding consensus estimates [23] - **EPS Estimates**: Q1 EPS expected at $2.70, slightly above consensus, while Q2 EPS is projected at $1.83, in line with consensus [23][21] iPhone Demand and Supply Chain Insights - Strong demand for the iPhone 17 is expected to lead to higher shipments than consensus estimates, with projections of 83 million units for Q1 and 60 million units for Q2 [11][12] - Supply chain checks indicate robust iPhone 17 shipments, with Apple reportedly placing additional orders to secure component supply [11][9] Cost and Margin Considerations - Rising memory costs are projected to impact gross margins, with NAND prices expected to increase by 55-60% quarter-over-quarter [15] - Operating expenses (opex) are expected to be higher than consensus, with a forecast of $18.2 billion for Q2, compared to consensus of $17.2 billion [3][14] - Gross margin for FY26 is expected to contract to 45.9%, down from 46.9% in FY25 [50] Long-Term Outlook and Catalysts - The second half of FY26 is anticipated to be stronger due to several product launches, including a foldable iPhone and a new Siri/Apple Intelligence feature [10][31] - The iPhone 18 is expected to see a price increase of $100, which may help maintain gross profit levels despite rising costs [15][10] - Analysts remain positive on the long-term growth potential, with FY27 EPS forecasted at $9.77, which is 7% above consensus [10][32] Risks and Market Sentiment - The market is currently cautious, with Apple shares expected to trade sideways until there is a clearer adjustment in product gross margins [27] - Historical performance indicates that Apple shares tend to underperform in the first quarter, which may affect investor sentiment [3][27] Conclusion - While Apple faces near-term cost uncertainties and margin pressures, the strong demand for the iPhone 17 and upcoming product launches provide a foundation for potential growth in the second half of FY26. The company remains rated as "Overweight" with a price target of $315.00, reflecting confidence in its long-term prospects despite short-term challenges [39][10]

Founded in 1939, Hewlett Packard Enterprise Company (HPE) develops intelligent solutions in the United States and internationally. The company has a market capitalization of $28.1 billion and operates in Server, Hybrid Cloud, Networking, Financial Services, Corporate Investments and Other segments. The Spring, Texas-based company is expected to release its Q1 2026 earnings soon. Ahead of the event, analysts expect the company’s EPS to be $0.51 on a diluted basis, up 30.8% from $0.39 in the year-ago quart ...

Summary of the Conference Call Transcript Industry Overview - The report covers the **US IT hardware and distributors** sector, with specific focus on companies such as **DELL**, **Hewlett Packard Enterprise (HPE)**, **NetApp (NTAP)**, **TD SYNNEX (SNX)**, **Penguin Solutions (PENG)**, **Super Micro Computer Inc (SMCI)**, and **HP Inc (HPQ)** [1][4]. Core Insights Hardware Demand Environment - General consensus among investors indicates that **neocloud AI infrastructure demand** will remain strong through **2026**. However, there is skepticism regarding the demand outlook for **PCs**, **general servers**, and **storage**, with concerns that these markets may be adversely affected by **memory price hikes** and shortages. The forecast for **PC shipments** in **2026** is projected to decline by **4% year-over-year**, which is more pessimistic than the **IDC's** estimate of a **2% decline** [4][5]. Company-Specific Feedback - **DELL (Buy)**: Investors expressed concerns about potential **margin pressure** due to a deteriorating PC market, demand for core **ISG** (general server, storage), and the sustainability of the **AI server opportunity**. However, DELL is viewed as better positioned than smaller competitors due to its scale and business mix [4][5]. - **HPE (Buy)**: Discussions focused on execution risks in the **Networking** business, particularly regarding the integration of **Juniper's** offerings. While HPE is considered attractively valued, investors are uncertain about near-term catalysts for earnings revisions [4][5]. - **HPQ (Sell)**: Investors largely agree that the current PC market conditions will negatively impact HPQ's **Personal Systems** business, affecting both top-line growth and margins [5]. - **SMCI (Sell)**: There is a consensus that SMCI's margins will be pressured due to its business mix and product transitions. Investors are particularly interested in understanding SMCI's working capital needs against its revenue growth expectations [5]. Least Push Back - There was minimal opposition to the ratings on **HPQ** and **SMCI**, indicating a general agreement on the challenges these companies face [4][5]. Valuation and Key Risks DELL - **Rating**: Buy - **Target Price**: $165, based on a **12.0X** NTM+1Y EPS [6]. - **Key Risks**: Weaker than expected demand in the consumer and commercial PC markets, enterprise IT spending, and pricing pressures due to excess inventory [7]. HPE - **Rating**: Buy - **Target Price**: $31, reflecting **11X** NTM+1Y EPS [8]. - **Key Risks**: Lower corporate IT spending, competition from white box manufacturers, and integration challenges with Juniper [9]. NTAP - **Rating**: Buy - **Target Price**: $128, reflecting **14X** NTM+1 EPS [10]. - **Key Risks**: Supply shortages, demand declines for on-premise storage, and increased competition [11]. SNX - **Rating**: Buy - **Target Price**: $180, based on **11.0X** NTM+1Y EPS [12]. - **Key Risks**: Prolonged lower IT spending and shifts in sales models that bypass distributors [13]. PENG - **Rating**: Buy - **Target Price**: $25, based on a blended valuation methodology [14]. - **Key Risks**: Memory market cyclicality and competition from OEMs [14]. SMCI - **Rating**: Sell - **Target Price**: $26, reflecting **9X** NTM+1 EPS [16]. - **Key Risks**: Demand for AI servers and market share gains [16]. HPQ - **Rating**: Sell - **Target Price**: $21, based on **7.5X** NTM+1 EPS [17]. - **Key Risks**: Better-than-expected PC demand and recovery in office and consumer demand [17]. Additional Considerations - The report emphasizes the importance of understanding the broader market dynamics and individual company strategies in navigating the current challenges in the IT hardware sector [4][5].

Group 1: Stock Market Movements - Logitech (LOGI), NetApp (NTAP), and CDW (CDW) saw declines of 6%, 4%, and 2% respectively after Morgan Stanley downgraded all three, citing a "perfect storm" for IT hardware due to the slowest corporate spending in 15 years outside of COVID-19 [4] - The downgrade was influenced by a 4Q CIO survey indicating softer demand, with resellers expecting 30%-60% of customers to cut budgets for PCs, servers, and storage amid rising component prices [4][5] - The hardware down-cycle is expected to last three to five quarters, with CDW downgraded to Equal-Weight (PT $141), Logitech to Underweight (PT $89), and NetApp to Underweight (PT $89) [5] Group 2: NYSE Developments - The New York Stock Exchange (NYSE) is developing a platform for 24/7 trading of tokenized U.S.-listed equities and ETFs using blockchain technology [5][6] - This platform aims to enable instant settlement, dollar-sized orders, and stablecoin-based funding, although the launch date has not been disclosed [6] - The initiative is part of Intercontinental Exchange's (ICE) broader digital strategy, which includes enhancing clearing infrastructure for 24/7 trading and supporting tokenized deposits [7][8] Group 3: Tesla and EV Market - Tesla (TSLA) is expected to benefit from Canada's decision to reduce tariffs on Chinese-made electric vehicles (EVs) from 100% to 6.1%, allowing 49,000 EVs to be imported annually [9][10] - The EV quota may increase to 70,000 within five years, with half reserved for vehicles priced under C$35,000 ($25,192), which does not include Tesla's models [11] - Tesla's largest plant in Shanghai is already equipped to produce a Canada-specific version of its Model Y, which was previously shipped to Canada before the tariff imposition [10]

U.S. IT hardware stocks fell on Tuesday after Morgan Stanley downgraded its view on the industry, warning that companies could drastically reduce their spending budgets as enterprise demand slows and component costs rise. ...

Group 1 - Hewlett-Packard Enterprise Company (NYSE:HPE) is recognized as a significant player in the AI sector, with Goldman Sachs analyst Katherine Murphy upgrading the stock from Neutral to Buy, setting a price target of $31 [1] - The upgrade follows HPE's acquisition of Juniper in July 2025, which is expected to enhance its business mix towards the higher-margin, faster-growing Networking segment [1] - Despite concerns regarding HPE's legacy IT hardware business and limited participation in AI infrastructure, the acquisition is seen as a strategic move to strengthen its position in the enterprise/campus networking market [2] Group 2 - The merger with Juniper positions HPE as the second-largest player in the enterprise/campus networking market, expanding its capabilities in data center networking [2] - HPE provides high-performance computing systems, AI software, and data storage solutions aimed at supporting complex AI workloads [2] - While HPE shows potential as an investment, there are other AI stocks perceived to offer greater upside with less downside risk [3]

Summary of Key Points from the Conference Call Industry Overview - **Industry Focus**: U.S. IT Hardware, specifically the impact of AI on memory and storage sectors [1][2] - **Data Explosion**: The ongoing intelligence revolution is driving a significant increase in data demand, with no signs of slowing down in 2026 [1][10] Core Insights - **AI's Role**: Continuous improvements in AI models are expected to unlock new use cases and enhance productivity, leading to an estimated $1.3 trillion in enterprise willingness to pay for AI [10][11] - **Memory and Storage Demand**: The data explosion is creating an unprecedented super cycle in memory and storage, with intense workloads driving insatiable demand for NAND and DRAM [2][22] - **Price Increases**: Recent price hikes in NAND and DRAM have been significant, with NAND spot prices increasing over 250% quarter-over-quarter [45] Company-Specific Insights SanDisk (SNDK) - **Target Price**: Increased to $580 based on strong NAND demand and pricing [6][45] - **Earnings Estimates**: FY26 EPS estimated at $21.16, 61% above consensus; FY27 EPS at $52.66, 129% above consensus [46] - **Gross Margin Improvement**: Revised gross margin estimates for FY27 to 67.6%, significantly above previous estimates [45] Seagate (STX) - **Target Price**: Set at $370, benefiting from advanced HAMR technology and disciplined capacity additions in the HDD market [58] - **Margin Expectations**: Estimated gross margin of 53.1% by 2030, outperforming competitors [59] Apple (AAPL) - **AI Developments**: Anticipation of significant upgrades in iOS26.4, with potential 30% upside to FY28 EPS from AI services [4][63] - **Defensive Position**: Apple is seen as a defensive play in the AI sector, with a strong negotiating position due to its large user base [71][72] Risks and Challenges - **OEMs Impacted**: Companies like HPQ and SMCI face potential EPS declines of 19% due to rising memory prices, while Apple may need to raise prices on future models [3][62] - **Quantum Computing**: While showing promise, widespread quantum supremacy is still far off, with IBM estimated to have a 23% upside from quantum developments [5] Additional Insights - **Market Dynamics**: The memory and storage sectors are experiencing unprecedented price hikes due to increased demand from AI workloads, with NAND supply growth lagging behind demand [36][38] - **Long-Term Outlook**: The intelligence revolution is expected to structurally benefit AI infrastructure vendors, with sustained demand for AI servers and memory [15] This summary encapsulates the key points discussed in the conference call, highlighting the significant trends and projections within the U.S. IT hardware industry, particularly in relation to AI's impact on memory and storage sectors.

Summary of Key Points from the Conference Call Industry Overview - **Industry**: IT Hardware, specifically focusing on North America - **Key Trends**: Rising memory costs, HDD supply shortages, and strong demand for AI servers are shaping the current landscape Core Insights 1. **iPhone Demand**: iPhone strength is expected to continue into CY26, with December 2025 tracking 20-40% year-over-year growth in China, partly due to Huawei's decline [13][11] 2. **HDD Supply Shortage**: The HDD supply shortage is worsening, now projected to be 200EB short of demand over the next 12 months, up from previous estimates of 100-150EB [12][15] 3. **Price Increases**: Most hardware OEMs, except Apple, are expected to raise product prices significantly in the first half of CY26 to offset rising memory costs, which may lead to unit declines in Android smartphones and Windows PCs for the full year [2][12] 4. **AI Server Demand**: Demand for AI servers remains robust, with over 30% year-over-year growth expected for general servers among cloud service providers (CSPs) in 2026 [2][21] 5. **OEM Headcount Reductions**: OEMs like DELL, HPQ, and HPE are likely to cut headcount to protect operating margins due to rising input costs and a shift towards AI servers, which have lower gross margins [2][12] Additional Important Insights 1. **Memory Pricing**: DRAM prices are expected to increase by 40-70% quarter-over-quarter in C1Q26, while NAND prices are projected to rise by 30-35% [9][8] 2. **Apple's Strategy**: Apple has secured favorable NAND pricing through a deal with KIOXIA but may face renegotiations in early 2026. Apple is also expected to introduce a low-cost MacBook at $599 in C1H26 to gain market share [7][14] 3. **General Server Pricing**: General server pricing is anticipated to increase significantly due to rising memory costs, which may lead to a strong C1Q26 followed by a weaker second half of the year [12][19] 4. **PC Market Dynamics**: PC demand is currently stable, with OEMs negotiating prices due to rising memory costs. Smaller OEMs may struggle to secure memory supply compared to larger players like DELL and HPQ [20][22] 5. **Supply Chain Adjustments**: HDD makers are reallocating capacity from consumer applications to cloud demand, and STX is raising consumer HDD prices by 10% each quarter to align margins with nearline drives [15][12] Conclusion The IT hardware industry is facing significant challenges and opportunities driven by rising memory costs, supply shortages, and shifting demand towards AI servers. Companies are adapting their strategies to navigate these dynamics, with a focus on maintaining margins and market share.