Seagate Technology (STX, Financial) saw a significant stock increase of 9% following its impressive Q3 results. The data storage leader reported its fourth consecutive double-digit EPS beat. Revenue rose 30.5% year-over-year to $2.16 billion, slightly surpassing expectations despite a 7% sequential decline. The standout feature was the strong guidance for Q4, alleviating concerns about macroeconomic pressures on client decisions.
Key Highlights:
- STX anticipates minimal direct impact from tariff policies, while monitoring potential secondary effects on customer demand. Current demand indicators remain stable, especially among global cloud customers. In March, cloud nearline revenue and exabytes increased nearly 10% sequentially and almost doubled from the previous year amid a tight supply environment.
- Rising demand for mass capacity storage aligns with the cloud CapEx investment cycle and the ongoing expansion of data center infrastructure to support AI.
- Hard drives, storing close to 90% of data in large-scale data centers, play a crucial role. Seagate highlighted Google's Colossus storage system, which uses SSDs for fast data access and hard drives for mass storage due to scalability and cost benefits. This hybrid strategy is essential for AI workloads accessing massive datasets.
- Seagate projects strong nearline exabyte demand through 2025, with visibility into customer demand extending into the first half of 2026. The company is well-positioned to meet this demand as it increases shipments of high-capacity drives.
The stock's rise is attributed to the robust upside guidance, which exceeded investor expectations amidst macroeconomic concerns, particularly tariffs. Additionally, positive guidance from peer Western Digital (WDC, Financial), which rose 4.5%, further encouraged investors. The tariff concern centered on potential client order slowdowns, but demand appears strong, driven by AI infrastructure development.
