Seagate’s third quarter results were met with a positive market reaction, as the company reported notable growth in both revenue and profitability. Management attributed this performance primarily to robust demand from global cloud service providers and enterprise customers, especially for high-capacity nearline hard drives. CEO Dave Mosley emphasized the importance of Seagate’s HAMR-based Mozaic platforms in capturing this demand, noting that “the data center end market, which is comprised of nearline sales into cloud, enterprise and VIA customers, represented 80% of overall revenue.” This surge in data center activity, fueled by the proliferation of AI applications and a sharp rise in unstructured video data, was the dominant driver of Seagate’s strong quarter.
Is now the time to buy STX? Find out in our full research report (it’s free for active Edge members).
Seagate Technology (STX) Q3 CY2025 Highlights:
- Revenue: $2.63 billion vs analyst estimates of $2.55 billion (21.3% year-on-year growth, 3% beat)
- Adjusted EPS: $2.61 vs analyst estimates of $2.40 (8.8% beat)
- Adjusted EBITDA: $835 million vs analyst estimates of $755.1 million (31.8% margin, 10.6% beat)
- Revenue Guidance for Q4 CY2025 is $2.7 billion at the midpoint, above analyst estimates of $2.65 billion
- Adjusted EPS guidance for Q4 CY2025 is $2.75 at the midpoint, above analyst estimates of $2.68
- Operating Margin: 26.4%, up from 18.6% in the same quarter last year
- Inventory Days Outstanding: 86, in line with the previous quarter
- Market Capitalization: $56.71 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Seagate Technology’s Q3 Earnings Call
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Mark Newman (Bernstein) asked about plans for capacity expansion and potential supply chain bottlenecks. CEO Dave Mosley explained that Seagate is not adding unit capacity but is instead increasing exabyte capacity through product transitions to higher-capacity HAMR drives, emphasizing predictability and customer engagement in long-term agreements.
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Erik Woodring (Morgan Stanley) questioned the sustainability of higher incremental margins. CFO Gianluca Romano responded that recent margin outperformance is due to favorable product mix and profitability from HAMR transitions, but cautioned that margins will vary quarter to quarter depending on customer qualifications and pricing cycles.
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Asiya Merchant (Citi) inquired about the visibility and seasonality of AI inferencing demand. Mosley noted the strong and somewhat unpredictable nature of video-driven AI demand, while Romano added that the seasonal impact on revenue is diminishing as data center customers become a larger share of the business.
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Wamsi Mohan (Bank of America) asked about pricing strategy in a constrained supply environment. Mosley and Romano described a disciplined approach with contractually predictable pricing, where customers moving to higher-capacity HAMR drives may enjoy lower per-terabyte costs, but overall profitability still rises due to product mix.
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Thomas O'Malley (Barclays) sought clarification on the timing and supply impact of transitioning from Mozaic 3 to Mozaic 4 platforms. Mosley indicated the ramp for new products would be somewhat faster due to manufacturing commonality, but that yield improvements and qualification timelines remain critical factors.
Catalysts in Upcoming Quarters
Looking ahead, our team will monitor (1) the pace of customer qualification and adoption for new high-capacity HAMR drives, (2) execution on manufacturing transitions and yield improvements for Mozaic 4+ products, and (3) the impact of AI- and video-driven demand on data center storage needs. We will also track the stability of long-term contracts and margin trends as Seagate scales its next-generation platforms.
Seagate Technology currently trades at $263.22, up from $222.82 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).
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