Seagate Technology (NASDAQ: STX) Q4 Earnings Report: Steady Performance Meets Expectations, But Revenue Outlook Falls Short

Seagate (NASDAQ:STX) announced a strong Q4 for CY2024, with revenue hitting $2.33 billion. This is a 49.5% increase compared to last year. However, its forecast for the next quarter came in lower than expected, at $2.1 billion, which is about 4.9% less than what analysts predicted. Its adjusted profit was $2.03 per share, beating the average estimate of $1.88 by 8.1%.

• Revenue: $2.33 billion vs. expected $2.32 billion (49.5% year-on-year growth)

• Adjusted EPS: $2.03 vs. expected $1.88 (8.1% beat)

• Adjusted EBITDA: $489 million vs. expected $591.7 million (17.4% miss)

• Q1 CY2025 Revenue Guidance: $2.1 billion, below $2.21 billion estimate

• Q1 CY2025 EPS Guidance: $1.70, below $1.74 estimate

• Operating Margin: 21%, up from 8% last year

• Free Cash Flow Margin: 6.5%, similar to last year

• Inventory Days Outstanding: 89 days, up from 87 days last quarter

• Market Capitalization: $20.66 billion

“Seagate showed strong revenue growth and improved margins throughout 2024. This reflects our efforts to adapt and capture value in a growing market,” stated CEO Dave Mosley.

As a pioneer in the hard drive industry, Seagate produces hard drives and Solid State Drives (SSDs) used in various devices, including personal computers and data centers.

The demand for storage solutions is skyrocketing, driven by increased data generation. This trend supports everything from consumer electronics to robust cloud services. Technologies like machine learning and the rise of digital media content are also boosting the need for effective data storage solutions. However, the semiconductor industry is vulnerable to cycles of growth and decline, influenced by market demands and product trends.

While Seagate’s recent quarterly revenue spike is impressive, its longer-term sales performance raises some concerns. Over the past five years, the company has faced challenges, with a 4.2% annual decrease in sales. This trend might point to issues in maintaining competitive quality. Investors should be mindful of the cyclical nature of this field, where revenue can swing between rapid growth and decline.

This quarter’s year-on-year growth of 49.5% highlights a strong performance for Seagate, though expectations for next quarter suggest a more modest increase at 26.9%. Analysts predict an overall revenue growth of 18.6% over the next year, indicating potential for improvement driven by new products.

Days Inventory Outstanding (DIO) is vital for chipmakers, indicating demand and capital usage. Seagate’s DIO stands at 89 days, slightly above its five-year average, which may signal rising inventory levels. This can hint at potential drops in demand, requiring adjustments in production.

Seagate’s quarterly results were a mix. While the company exceeded EPS expectations, it missed revenue and EPS guidance for the next quarter. The stock stayed steady at $101.13 after the announcement. Overall, the latest results are just one part of a bigger story regarding its long-term quality and potential as an investment.