Seagate Technology shares fall 6% despite Q1 earnings beat and raised guidance
Seagate Technology shares fall 6% despite Q1 earnings beat and raised guidance
Seagate Technology Holdings plc (NASDAQ: STX) reported first-quarter financial results that exceeded analyst expectations across the board, though shares fell 6% in subsequent trading as investors appeared to take profits following the stock’s strong recent run.
The data storage company delivered robust year-over-year growth, characterized by significant margin expansion and record profitability. Seagate posted adjusted earnings per share (EPS) of $7.68, beating the analyst consensus of $7.39. Revenue reached $4.2 billion, surpassing estimates of $4.13 billion and representing a 61% increase from the $2.6 billion reported in the prior-year period.
Strong Q2 Outlook
Looking ahead, Seagate issued second-quarter guidance that came in significantly above Wall Street expectations. The company projects Q2 EPS of $9.00 to $9.40, with the $9.20 midpoint easily clearing the consensus estimate of $8.61. Revenue is expected to range between $4.7 billion and $4.9 billion, with the $4.8 billion midpoint sitting well above the $4.56 billion consensus.
"Seagate delivered another quarter of record profitability and our highest ever free cash flow in the September quarter, demonstrating the earnings power of our business amid a strengthening demand environment," said Dave Mosley, Seagate’s chair and chief executive officer.
Financial Highlights and Capital Allocation
The quarter was marked by substantial operational efficiency improvements. Adjusted gross margin expanded to 57.8%, up sharply from 40.1% in the year-ago quarter, while adjusted operating margin improved to 50.7% from 29.0%.
Key balance sheet and capital return metrics include:
The company generated $1.5 billion in free cash flow during the quarter.
Seagate retired $1.2 billion in debt during Q1, reducing gross debt to $2.4 billion. Subsequent to the quarter’s end, the company retired an additional $750 million in debt, bringing total gross debt down to $1.6 billion.
Seagate returned $568 million to investors through a combination of dividends and share repurchases.
The board of directors approved an approximate 3% increase to the quarterly cash dividend, raising it to $0.76 per share, payable on January 7, 2027.
The company ended the quarter with $1.3 billion in cash and cash equivalents and 230 million shares outstanding.