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Seagate Technology Holdings plc (STX)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY2025 delivered profitable growth: revenue $2.16B (+31% YoY, -7% QoQ), non-GAAP EPS $1.90 at the top of guidance; GAAP gross margin 35.2% and non-GAAP gross margin 36.2% reflecting mix and pricing discipline .
  • Results topped Wall Street consensus: revenue beat by ~$31M and non-GAAP EPS beat by ~$0.16; momentum supported by high-capacity nearline demand and initial HAMR volume ramp to qualified customers . Estimates from S&P Global.*
  • Q4 FY2025 guidance: revenue $2.40B ± $150M and non-GAAP EPS $2.40 ± $0.20; management expects minimal direct tariff impact and operating margin expansion into the mid‑20s, with non-GAAP OpEx ≈$285M, tax expense ≈$10M, diluted share count ≈214M .
  • Catalysts: accelerating HAMR qualifications and shipments, sustained cloud nearline demand (tight supply), continued margin expansion, debt reduction ($536M retired; total debt $5.1B), and dividend maintained at $0.72 per share .

What Went Well and What Went Wrong

What Went Well

  • Strong profitability and margins: non-GAAP gross margin expanded 70 bps QoQ to 36.2%; non-GAAP operating margin rose to 23.5%, with EPS at the top of guidance range .
  • Cloud nearline demand robust: nearline exabytes up ~55% YoY to 120 EB; mass capacity revenue $1.7B (+48% YoY), supported by 24TB/28TB PMR mix and initial HAMR ramp; “expanding gross margin for the eighth straight quarter” .
  • Technology leadership: HAMR-based Mozaic drives ramping with first hyperscale customer; second major CSP qualification nearing completion; management confident broader shipments begin in 2H CY2025 .

What Went Wrong

  • Sequential decline from temporary supply constraints: revenue down 7% QoQ; hard drive volume shipments declined to 144 EB (vs 151 EB in December quarter) due to allocation of available supply .
  • Seasonality and legacy/consumer softness: legacy products revenue $254M (-8% QoQ) with typical consumer seasonality; mass capacity shipments -5% QoQ given supply limitations .
  • Tariff uncertainty remains a risk-factor: while minimal direct Q4 impact expected, management is monitoring possible secondary demand effects and may need to offset costs via operational shifts or pricing over time .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Billions)$2.168 $2.325 $2.160
GAAP Diluted EPS ($)$1.41 $1.55 $1.57
Non-GAAP Diluted EPS ($)$1.58 $2.03 $1.90
GAAP Gross Margin %32.9% 34.9% 35.2%
Non-GAAP Gross Margin %33.3% 35.5% 36.2%
GAAP Operating Margin %18.6% 21.0% 20.0%
Non-GAAP Operating Margin %20.4% 23.1% 23.5%
Segment/KPI (Q3 2025)Value
Hard drive revenue ($USD Billions)$2.0
Mass capacity revenue ($USD Billions)$1.7
“Other” (systems, SSD, refurbished) revenue ($USD Millions)$157
Legacy products revenue ($USD Millions)$254
Total HDD exabyte shipments (EB)144
Mass capacity shipments (EB)133
Nearline shipments (EB)120 (~90% of mass capacity volume)
Cash from operations ($USD Millions)$259
Free cash flow ($USD Millions)$216
Debt retired in quarter ($USD Millions)$536
Total debt at quarter-end ($USD Billions)$5.1
Cash and cash equivalents ($USD Millions)$814
Results vs S&P Global ConsensusQ1 2025Q2 2025Q3 2025
Revenue Consensus Mean ($USD Billions)*$2.132*$2.319*$2.129*
Revenue Actual ($USD Billions)$2.168 $2.325 $2.160
Primary EPS Consensus Mean ($)*$1.455*$1.877*$1.740*
Non-GAAP EPS Actual ($)$1.58 $2.03 $1.90

Values with asterisk (*) retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance/OutcomeChange
RevenueQ3 2025$2.10B ± $0.15B Actual: $2.16B Raised/Beat
Non-GAAP EPSQ3 2025$1.70 ± $0.20 Actual: $1.90 Raised/Beat
RevenueQ4 2025N/A$2.40B ± $0.15B New
Non-GAAP EPSQ4 2025N/A$2.40 ± $0.20 New
Non-GAAP OpExQ4 2025N/A≈$285M New
Other income/expense (OIE)Q4 2025N/A≈$80M; “relatively flat” New
Non-GAAP tax expenseQ4 2025N/A≈$10M New
Diluted share countQ4 2025N/A≈214M New
Dividend per shareQ3 2025$0.72 $0.72 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3 2025)Trend
HAMR/technology roadmapQ1: Ramp 28TB nearline; broaden HAMR Mozaic qualifications . Q2: Began HAMR ramp to lead cloud customer; sampling up to 36TB .HAMR volume ramp with first hyperscale; second CSP qualification nearing conclusion; HAMR contributed to upside .Accelerating
Supply constraints/operations— (Q1); Q2 strong exit with decade-high GM .Temporary supply constraints limited QoQ revenue; operational issues fixed; build-to-order model improved predictability .Improving
Tariffs/macro—Minimal direct Q4 impact expected; monitoring secondary demand effects; potential operational shifts and last-resort pass-through if needed .Monitored; manageable
Pricing/marginsQ1: Decade-high GM . Q2: Decade-high GM exiting December quarter .8th straight quarter GM expansion; pricing discipline and richer high-capacity mix; operating margin among company’s best .Expanding
Cloud/AI demand—Nearline revenue and EB up sequentially; HDDs ~90% of bits in large-scale data centers; Google Colossus validates hybrid HDD+SSD architecture for AI workloads .Strong and sustained
Capital allocationQ1/Q2 dividends maintained .Debt reduced $536M; net leverage 2.1x; liquidity $2.1B incl. undrawn $1.3B RCF; prioritize deleveraging then buybacks .Deleveraging
Sustainability—“Decarbonizing Data” report highlights HAMR Mozaic 3+ platform: capacity, embodied carbon reduction, and TCO benefits .Increasing focus

Management Commentary

  • “Seagate delivered another solid quarter of profitable year-on-year growth and margin expansion, elevating our non-GAAP EPS to the top of our guidance range… healthy supply/demand environment for mass capacity storage.” — CEO Dave Mosley .
  • “March quarter revenue came in at $2.16 billion… Despite lower revenue levels, we expanded non-GAAP gross margin by 70 bps to 36.2%… Non-GAAP operating margin increased to 23.5%… Hard drive revenue was $2 billion… mass capacity revenue $1.7 billion… shipments of 133 exabytes… nearline 120 exabytes.” — CFO Gianluca Romano .
  • “HAMR-based Mozaic drives represent the industry’s only 3 terabyte per disk products… ramping volume to qualified customers and on track to qualify a broader range of cloud customers with shipments beginning in the second half of calendar 2025.” — CEO Dave Mosley .
  • “We expect June quarter revenue to be in the range of $2.4 billion ± $150 million… non-GAAP EPS $2.40 ± $0.20… non-GAAP OpEx ≈$285 million… non-GAAP tax expense ≈$10 million.” — CFO Gianluca Romano .

Q&A Highlights

  • Supply recovery and visibility: Management would have guided Q4 the same a month earlier; build‑to‑order improves predictability; operational issues fixed; demand above supply with negotiations extending into 1H CY2026 .
  • HAMR contribution: Upside in the quarter came from squeezing more HAMR volume; ramp is “very, very rapid”; more detail promised at Analyst Day .
  • Margins and pricing: Non-GAAP gross margin expansion continues; pricing increases negotiated through product transitions; underserving Q3 affected segment prioritization, now normalizing .
  • Tariffs approach: Minimal Q4 direct impact; operational/supply chain shifts first; cost pass‑through is last resort but will be considered to maintain margins and reinvest in technology .
  • Capital allocation: Continued debt reduction in coming quarters; buybacks to follow deleveraging; dividend remains a focus .

Estimates Context

  • Q3 FY2025 beat consensus: revenue $2.160B vs $2.129B*; non-GAAP EPS $1.90 vs $1.740*; EBITDA was below consensus given mix and timing (actual $514M vs $560M*) . Values from S&P Global.*
  • Guidance vs consensus (context): Company guided Q4 revenue $2.40B ± $0.15B vs consensus ~$2.423B* and non‑GAAP EPS $2.40 ± $0.20 vs ~$2.443*; implies broadly in-line to slight conservatism on EPS midpoint . Values from S&P Global.*
MetricQ1 2025Q2 2025Q3 2025
Revenue Consensus Mean ($USD Billions)*$2.132*$2.319*$2.129*
Revenue Actual ($USD Billions)$2.168 $2.325 $2.160
Primary EPS Consensus Mean ($)*$1.455*$1.877*$1.740*
Non-GAAP EPS Actual ($)$1.58 $2.03 $1.90

Values with asterisk (*) retrieved from S&P Global.

Key Takeaways for Investors

  • Mix-led margin expansion is intact: non-GAAP GM 36.2% and OM 23.5% as higher-capacity nearline and initial HAMR volumes improve pricing and cost profile .
  • Cloud nearline demand remains tight; build-to-order provides multi-quarter visibility (extending into early CY2026), supporting sustained revenue/margin trajectory .
  • HAMR is a central catalyst: first hyperscale ramp underway; second CSP qualification near completion; broader shipments expected 2H CY2025 .
  • Q4 setup constructive: revenue/EPS guide implies double-digit QoQ growth; minimal direct tariff impact expected; operating margin targeted to mid‑20s .
  • Capital discipline: $536M debt retired; net leverage 2.1x; improving free cash flow ($216M in Q3) with deleveraging ahead of buybacks and dividend maintained at $0.72 .
  • Segment dynamics: mass capacity revenue $1.7B; nearline 120 EB (~90% of mass capacity volume), underpinning sustained HDD share (~90% of bits in large-scale data centers) for AI-era storage .
  • Risk watch: potential secondary tariff effects and 14-week September quarter OpEx timing; management plans operational/geographic shifts and pricing actions if needed .