""We continue to demonstrate strong financial leverage, expanding gross margin for the eighth straight quarter... This performance supported non-GAAP EPS performance at the top of our guidance range."" - Dave Mosley
Seagate Technology Holdings plc reported strong financial results for Q3 2025, with revenue reaching $2.16 billion, reflecting a 31% year-over-year increase despite a 7% sequential decrease due to temporary supply constraints. The company achieved an impressive non-GAAP gross margin of 36.2%, marking the eighth consecutive quarter of expansion, thanks to a favorable product mix and strategic pricing initiatives. Management emphasized the ongoing demand for mass capacity storage, particularly from cloud customers, and expressed confidence in future growth driven by the successful ramp-up of HAMR technology. Looking ahead, Seagate forecasts Q4 revenue in the range of $2.4 billion, indicating strong momentum through the remainder of 2025.
Cash Flow Metrics:
- Cash provided by operating activities: $259 million
- Free Cash Flow: $216 million
Compared to key competitors such as NetApp and Western Digital, Seagate's gross margin and operating efficiency demonstrate a robust positioning in the market, particularly highlighted by its growth in high-capacity drives.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
2.16B
30.51%
-7.10%
Gross Profit
760.00M
77.57%
-6.40%
Operating Income
431.00M
179.87%
-11.68%
Net Income
340.00M
1 260.00%
1.19%
EPS
1.60
1 236.48%
1.50%
Key Financial Ratios
currentRatio
1.36
grossProfitMargin
35.2%
operatingProfitMargin
20%
netProfitMargin
15.7%
returnOnAssets
4.49%
returnOnEquity
-41%
operatingCashFlowPerShare
$1.22
freeCashFlowPerShare
$1.22
dividendPayoutRatio
44.7%
priceToBookRatio
-21.72
priceEarningsRatio
13.24
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key Insights from Management:
- "Seagate delivered another solid quarter of profitable year-on-year growth... Our third quarter results are highlighted by a 31% year-on-year increase in revenue and 81% growth in non-GAAP gross profit dollars." - Dave Mosley
- "This performance supported non-GAAP EPS performance at the top of our guidance range and increased free cash flow generation." - Gianluca Romano
- "Current demand indicators remain intact, particularly among global cloud customers... Nearline revenue and exabytes were up by nearly 10% sequentially." - Dave Mosley
- "We expect June quarter revenue to be in a range of $2.4 billion... this reflects 11% improvement sequentially and 27% improvement year-over-year." - Gianluca Romano
"We continue to demonstrate strong financial leverage, expanding gross margin for the eighth straight quarter... This performance supported non-GAAP EPS performance at the top of our guidance range."
â Dave Mosley
"We are managing the business for long-term durability, optimizing both profitability and cash generation."
â Gianluca Romano
Forward Guidance
Management provided an optimistic forecast for the June quarter, expecting revenue between $2.4 billion to $2.55 billion. This outlook is supported by robust demand for high capacity nearline drives, alignment with cloud CapEx investment cycles, and upcoming product launches, including the scaling of HAMR drives. Seagate anticipates continued gross margin expansion, projecting non-GAAP EPS in the range of $2.40, reflecting a healthy growth trajectory amidst favorable industry trends. Investors should keep a close watch on macroeconomic factors, particularly potential secondary impacts of tariff policies.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
STX Focus
35.19%
20.00%
-41.00%
13.24%
NTAP
69.80%
22.10%
30.10%
21.49%
DELL
21.80%
6.55%
-49.30%
20.55%
PSTG
70.10%
7.18%
4.51%
64.00%
HPQ
21.50%
6.95%
-46.00%
13.80%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Given Seagate's strong financial performance, solid gross and operating margins, and expansion in the high-capacity product space, the investment outlook remains favorable. The company's proactive measures to enhance supply chain resilience and its capability to navigate macroeconomic uncertainties also support a positive long-term growth thesis. Investors should monitor upcoming HAMR production ramps and broader cloud demand trends to assess the potential for continued profitability and share value appreciation.
Key Investment Factors
Growth Potential
Seagate's strategically positioned product lines such as HAMR technology are anticipated to capitalize on the rising data storage demand, particularly driven by AI and cloud computing needs, positioning the company for long-term growth.
Profitability Risk
The major risk involves supply chain disruptions and the potential impacts of tariff policies on pricing and customer demand, which could hinder growth projections and affect margins.
Financial Position
Seagate closed the quarter with strong liquidity of $2.1 billion, including $1.3 billion in undrawn credit. The firm successfully reduced debt by approximately $536 million during the quarter, resulting in a net leverage ratio of 2.1 times, reflecting prudent financial management.
SWOT Analysis
Strengths
Strong revenue growth of 31% YoY illustrating robust demand for storage solutions.
High gross margin of 36.2% indicating effective cost management and pricing strategies.
Leadership in high-capacity drive technology with innovative HAMR products.
Weaknesses
Dependence on a limited number of high-capacity product lines, posing risks if new technologies fail to gain traction.
Previous operational issues which led to temporary supply constraints could re-emerge.
Opportunities
Increasing demand from cloud service providers, particularly for AI-related storage needs.
Expansions into new markets and applications such as hyperscale data centers.
Threats
Potential negative impacts from tariffs and trade policy changes affecting operational costs.
Intensifying competition from industry peers such as Western Digital and NetApp in the storage solutions market.