Seagate Forecasts Higher Q4 Profit on Strong Cloud Computing Demand

Seagate Technology, the Ireland-based storage device maker, has forecast higher-than-expected profit for the fourth quarter of fiscal year 2024, driven by strong demand for its memory chips from cloud computing customers. The company reported revenue growth of 6% and more than doubled its non-GAAP earnings per share in the March quarter compared to the previous quarter, benefiting from improved cloud demand, strong operating discipline, and price execution.

While the overall storage device market was hit last year due to soft demand, the advances in artificial intelligence technology have boosted demand for cloud computing, leading to increased investments in data centers that use Seagate's memory chips. Seagate CEO Dave Mosley attributed the improved performance to "improving cloud demand, our strong operating discipline and price execution."

Why this matters: Seagate's positive outlook and strong performance are good signs for the storage device industry, which has been impacted by soft demand in recent years. The increased demand for cloud computing, driven by advances in AI technology, presents significant growth opportunities for companies like Seagate that supply memory chips to data centers.

For the fourth quarter ending June 2024, Seagate expects adjusted earnings per share of 70 cents, plus or minus 20 cents, compared to analysts' estimates of 60 cents. The company's revenue guidance of $1.85 billion, plus or minus $150 million, also indicates anticipated increased profits. Seagate's third quarter adjusted profit of 33 cents per share exceeded analysts' expectations of 29 cents, although its revenue fell 11% year-over-year to $1.66 billion, slightly missing estimates.

Seagate is preparing to ramp up its Mozaic products, which are anchored by industry-leading HAMR (Heat-Assisted Magnetic Recording) technology. The company believes this will position it well to capitalize on the growing demand for mass storage driven by trends like AI and machine learning. Seagate generated $188 million in cash flow from operations and $128 million in free cash flow during the third quarter, and returned $147 million to shareholders through its quarterly dividend.

Seagate's strong financial results and optimistic outlook have contributed to a jump in its share price, with the stock rising 2.5% in post-market trading following the earnings report. The company's positive performance is also a good sign for its competitor Western Digital, which is set to report its earnings in the coming days.

Key Takeaways

• Seagate forecasts higher-than-expected Q4 2024 profit due to strong cloud demand.
• Seagate's Q3 2024 revenue grew 6% and non-GAAP EPS more than doubled.
• Advances in AI boosted cloud computing demand, driving investments in Seagate's data center chips.
• Seagate expects Q4 2024 EPS of $0.70 vs. analyst estimates of $0.60 and revenue of $1.85B.
• Seagate's strong results and outlook contributed to a 2.5% jump in its stock price.