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Seagate (STX) Q1 Earnings & Revenues Top Estimates, Shares Up

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Seagate Technology Holdings plc (STX - Free Report) reported first-quarter fiscal 2022 non-GAAP earnings of $2.35 per share, which beat the Zacks Consensus Estimate by 6.3%. The bottom line increased 152% from the year-ago quarter’s figure and 18% sequentially.

Management had anticipated non-GAAP earnings per share for the fiscal first quarter to be $2.20 per share (+/- 15 cents).

Non-GAAP revenues of $3.115 billion outpaced the Zacks Consensus Estimate by 0.4%. The figure improved 35% on a year-over-year basis and 3% sequentially. Management had anticipated fiscal first-quarter revenues of 3.1 billion (+/- 150 million).

Robust demand for its mass capacity storage solutions from cloud data center customers as well as recovering video and image application (VIA) market boosted the top line.

Following the announcement, shares of Seagate are up 3.3% in the pre-market trading on Oct 22. In the past year, shares of the company have returned 62.1% against the industry’s decline of 12.5%.


Exabyte Shipments in Detail

During the reported quarter, Seagate shipped 159.1 exabytes of hard disk drive (“HDD”) storage, with an average capacity of record 5.7 terabytes (TB) per drive. This marked year-over-year improvement of 39% and sequential growth of 4% in total HDD exabytes shipments.

Average mass capacity improved to 5.7 TB from 4.4 TB (up 28%) reported in the year-ago quarter and increased from 5.4 TB (up 5%) reported in the previous quarter.

The company shipped 132.3 exabytes for the mass capacity storage market (includes nearline and video and image applications as well as network-attached storage or NAS). This marked sequential growth of 7% and year-over-year improvement of 53% in exabytes shipments. Average mass capacity per drive improved sequentially to 9.6 TB from 9.4 TB.

In the nearline market, the company shipped 106.4 exabytes of HDD, up 65% year over year and 5% sequentially.

The company shipped 26.8 exabytes for the Legacy market (includes mission-critical, notebook, desktop, gaming consoles, digital video recorders or DVR and external consumer devices), which represents year-over-year decline of 4% in exabyte shipments. Average capacity was flat on a sequential basis to 1.9TB.

Revenues by Product Group

Total HDD revenues (91.9% of revenues) increased 34% year over year and 5% sequentially to $2.864 billion in the reported quarter. Revenues from mass capacity storage soared 53.8% year over year and crossed $2 billion mark for the first time. Mass capacity contributed 71% to total HDD revenues.

Non-HDD segment revenues (8.1%), which include enterprise data solutions, cloud systems and SSDs, was $251 million, down 9% sequentially but up 42% year over year.

Margin Details

Non-GAAP gross margin expanded 450 basis points (bps) on a year-over-year basis to 31%.

Non-GAAP operating expenses were up 5.9% on a year-over-year basis to $339 million.

Non-GAAP income from operations were $627 million, up 113.3% from the year-ago quarter’s figure. Non-GAAP operating margin expanded 740 bps from the prior-year quarter’s reported figure to 20.1%.

Balance Sheet and Cash Flow

As of Oct 1, 2021, cash and cash equivalents were $991 million compared with $1.209 billion as of Jul 2, 2021.

As of Oct 1, 2021, long-term debt (including current portion) was $5.136 billion compared with $5.139 billion as of Jul 2, 2021.

Cash flow from operations was $496 million compared with $478 million reported in the previous quarter.

Free cash flow for the reported quarter amounted to $379 million compared with $354 million in the previous quarter.

In the fiscal first quarter, the company repurchased 4.9 million shares worth $425 million and paid out cash dividends worth $153 million.

Seagate’s board of directors approved a dividend hike of 4.5% bringing the quarterly cash dividend of 70 cents per share. The dividend will be paid out on Jan 5, 2022, to shareholders of record as of the close of business on Dec 22, 2021.


Management anticipates second-quarter fiscal 2022 revenues of 3.1 billion (+/- 150 million). The Zacks Consensus Estimate for revenues is pegged at $3.04 billion.

Meanwhile, non-GAAP earnings per share for the fiscal second quarter is expected to be $2.35 (+/- 15 cents). The Zacks Consensus Estimate for earnings is pegged at $2.13 per share.

Zacks Rank & Stocks to Consider

Currently, Seagate carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader technology sector worth considering are Salesforce (CRM - Free Report) , Jabil (JBL - Free Report) and HP Inc (HPQ - Free Report) . The stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Salesforce, Jabil and HP Inc is currently pegged at 16.8%, 12% and 8.2%, respectively.

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