Business

Seagate beats forecasts as AI data boom lifts profits, yet shares slip

The hard-drive maker posted record shipments and fat margins, but investors sold after a huge run-up in the stock.

By Bharat Brief Desk·1h ago·Updated 1h ago·2 min read

Seagate Technology beat Wall Street estimates for its latest fiscal first quarter, then watched its shares drop about 6% in after-hours trading. The company reported earnings of $7.68 a share on revenue of $4.2 billion. Analysts had expected $7.39 a share and $4.13 billion.

The year-on-year jump is the real headline. Revenue is up 61% from a year ago and up 17% from the previous quarter. Adjusted earnings per share rose 194% from a year earlier. For a company that sells spinning hard drives, those are numbers more often seen in software.

The reason is the data piled up in the cloud. Seagate said it shipped a record 198 exabytes of nearline storage to data center customers in the quarter. Every photo you back up, video you stream and AI tool you try has to be stored somewhere. Management said cloud and enterprise buyers are pulling hard for high-capacity drives, and that the gap between supply and demand is widening rather than closing.

That tight supply is showing up in profits. Adjusted gross margin hit 67.8% and operating margin reached 50.7%, up 510 and 610 basis points from the prior quarter. Put simply, Seagate kept about half of each revenue dollar as operating profit. Free cash flow came in near $1.5 billion, more than triple the year-earlier level.

So why did the stock fall? Because it had already run so far. Seagate closed the regular session at $667.85, up 3.67%, then slid to $628.38 after the report. The shares have returned about 192% over the past year, and the source report notes InvestingPro data suggests they trade above fair value. When expectations are that high, a modest beat of roughly 4% on earnings and 1.7% on revenue may not be enough to excite buyers.

The market is asking how long the boom can last. The stock's price-to-earnings ratio is 48.7, but a PEG ratio of 0.44 suggests it looks cheaper once expected earnings growth is counted. For everyday users, the takeaway is that AI and cloud demand are making storage a hot, scarce resource, and that matters for the companies that keep your data.

Read the original coverage: Investing.com's Seagate earnings call transcript summary.