Seagate Tech (STX, Financial) saw an 8% increase in its stock price, adding to an impressive rally fueled by strong Q2 (Dec) performance. The hard disk drive (HDD) manufacturer has appreciated nearly 30% in 2025, driven by growing AI-related demand. As a leading HDD maker, STX benefits from the need for affordable and fast storage, maintaining advantages over flash storage, which is Western Digital's (WDC, Financial) specialty. WDC's better-than-expected outlook last week also boosted STX's rally ahead of its Q2 results.
- STX reported EPS of $2.03, marking a nearly 16x year-over-year increase, reflecting recovery from a prolonged downturn. Non-GAAP operating margins rose by 14.9 points to 23.1% year-over-year.
- Revenue grew by 51.6% year-over-year to $2.33 billion, slightly up from a 49.1% increase in the previous quarter. Cloud services drove revenue, with rising nearline product demand and nearly 50% growth in cloud capital investments by customers last year. Supply constraints, discussed last month, have been resolved but will impact Q3 (Mar) financials.
- STX expects cloud customers to continue investing in 2025 to support traditional services and Gen AI applications. CEO William Mosley expressed optimism about Gen AI, predicting it will drive significant growth in mass capacity storage. In edge computing, more data storage at the source is anticipated as AI computing evolves.
- To leverage this trend, STX is expanding its Mozaic HAMR (heat-assisted magnetic recording) platform to meet exabyte-scale demand. The company has achieved key qualifications for the next phase of its Mozaic volume ramp in late 2025.
However, STX's Q3 guidance showed some weakness. The company projected EPS of $1.50-1.90 and revenues of $1.95-2.25 billion. The midpoint of the earnings forecast met estimates, but the revenue forecast slightly missed consensus. This shortfall is due to a seasonal decline in the VIA (edge computing market) and legacy markets, alongside a $200 million revenue headwind from supply constraints affecting in-quarter volume opportunities.
Despite this minor setback, investors remain optimistic, focusing on the sustained demand for STX's new nearline products, like Mozaic, and the persistent demand for AI, which is expected to maintain STX's upward momentum.
