Seagate Gears Up to Report Q3 Earnings: Here's What to Expect

Seagate Technology Holdings plc STX is scheduled to report third-quarter fiscal 2025 earnings on April 29.

The Zacks Consensus Estimate for third-quarter fiscal 2025 earnings has been unchanged in the past 30 days at $1.75 per share. The company reported non-GAAP earnings of 33 cents per share in the prior-year quarter. The Zacks Consensus Estimate for revenues is currently pegged at $2.13 billion, indicating a 28.7% uptick from the year-ago actual.

Management anticipates third-quarter fiscal 2025 revenues to be $2.1 billion (+/- $150 million). Non-GAAP earnings are expected to be $1.70 per share (+/- 20 cents).

STX’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 19.24%. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Factors Shaping STX’s Q3 Results

Seagate expects continued improvements in mass capacity in the quarter to be reported, owing to strengthening nearline demand from global cloud customers and improvement in the enterprise & OEM markets. Management expects the increase in mass capacity revenues to offset lower revenues from legacy and seasonal decline in VIA markets, despite supply-chain woes. It plans to meet build-to-order commitments but has limited capacity for unexpected volume increases, with supply issues likely affecting revenues by $200 million. 

Also, cloud service providers have been focusing more on the development and deployment of AI applications while building cloud infrastructure. Seagate believes HDDs will play a key role in enabling these stages of the AI-adoption curve. It expects HDD demand to pick up pace going ahead. 

Secular trends and innovations in driving up aerial density are likely to have spurred mass capacity storage demand. Seagate has significantly increased production of its 24-28 terabyte PMR drives, which now represent its top-selling product line in terms of both revenues and exabyte shipments. The company’s technology strategy remains closely aligned with shifting market trends. In the December quarter, Seagate started scaling up the production of HAMR-based Mozaic products for its lead cloud customer. It has also achieved a significant milestone by sampling products with capacities as high as 36 terabytes.

Seagate Technology Holdings PLC Price and EPS Surprise

Seagate Technology Holdings PLC price-eps-surprise | Seagate Technology Holdings PLC Quote

We expect mass capacity revenues to be up 50.1% year over year to $1.77 billion in the fiscal third quarter.

Our estimate for revenues from the HDD segment is pegged at $1.989 million, indicating an increase of 34.7% from the year-ago actual. The estimate for the non-HDD (which includes enterprise data solutions, cloud systems and solid-state drives) segment is pegged at $150.2 million, down 15.6% from the prior-year level.

Margin performance is expected to have benefited from strong demand for its new nearline products, like Mozaic and ongoing pricing actions. We expect non-GAAP gross margin for the fiscal third quarter to be 35.8%, up from 26.1% recorded in the prior-year quarter. 

Soft global macroeconomic conditions remain a concern. Increasing costs are additional headwinds. In the fiscal third quarter, STX expects non-GAAP operating expenses to be $290 million.

What the Zacks Model Unveils About STX

Our proven model does not predict an earnings beat for Seagate this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here.

Seagate has an Earnings ESP of -1.28% and a Zacks Rank #5 (Strong Sell) at present. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are a few stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season.

Sprouts Farmers Market, Inc. SFM currently has an Earnings ESP of +0.44% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here. 

Sprouts Farmers Market is scheduled to report quarterly earnings on April 30. The Zacks Consensus Estimate for SFM’s to-be-reported quarter’s earnings and revenues is pegged at $1.53 per share and $2.19 billion, respectively. Shares of SFM have gained 148.9% in the past year.

Qorvo, Inc QRVO has an Earnings ESP of +3.42% and a Zacks Rank #2 at present. QRVO is scheduled to report quarterly figures on April 29. The Zacks Consensus Estimate for QRVO’s to-be-reported quarter’s earnings and revenues is pegged at $1.01 per share and $851.7 million, respectively. Shares of Qorvo have plunged 45.6% in the past year.

Woodward, Inc. WWD has an Earnings ESP of +3.88% and a Zacks Rank #3 at present. It is scheduled to report quarterly figures on April 28. The Zacks Consensus Estimate for Woodward’s to-be-reported quarter’s earnings and revenues is pegged at $1.44 per share and $830.3 million, respectively. Shares of WWD have gained 20.2% in the past year.

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This article originally published on Zacks Investment Research (zacks.com).

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