Seagate Says Debt Repair Is Done And Buybacks Will 'Significantly' Grow Starting In 2027
The hard-drive maker retired $1.2 billion of debt last quarter, lifted its dividend to 76 cents and has $4.4 billion left to buy back stock.
Seagate Technology, which makes hard disk drives and storage systems for data centers and industrial and consumer uses, said on its fiscal first-quarter earnings call Tuesday that its balance sheet work is finished and cash will now flow to shareholders, led by share repurchases. Chief Financial Officer Gianluca Romano said the company expects to "significantly increase share purchases starting in calendar 2027."
Debt retired, investment grade regained
Chair and CEO Dave Mosley said on the call that Seagate hit its main debt-reduction goals and regained investment-grade status, so the focus shifts to capital returns, with buybacks the primary vehicle and dividends a complement.
Romano said the company retired $1.2 billion of debt in the September quarter, including the remaining convertible notes and about $1 billion of high-yield debt. After quarter-end it retired another $750 million of high-yield senior notes, cutting principal debt to about $1.6 billion. Seagate expects to be net cash positive exiting this calendar year.
The quarter's free cash flow was a record of nearly $1.5 billion, which Romano said was up 32% from the prior quarter and more than tripled from a year earlier.
The buyback and dividend plan
Seagate returned $568 million through dividends and buybacks in the September quarter, roughly two times the June-quarter amount, Romano said. The board raised the quarterly dividend about 3% to 76 cents a share, and $4.4 billion remained on the repurchase authorization at quarter-end.
Pressed by an analyst from Melius Research on how much free cash flow would go to buybacks, Mosley said the company's model is 75% and it should get back to that level "over some period of time." Anything beyond that, he said, is opportunistic.
Romano said Seagate was already buying shares this quarter but will step up from the March quarter, since no other debt activity is planned.
Record quarter behind the pivot
September-quarter revenue was $4.2 billion, up 61% from a year earlier, and adjusted earnings per share were a record $7.68. Data center revenue was $3.4 billion, 81% of the total.
For the December quarter, Seagate guided to revenue of $4.8 billion, plus or minus $100 million, and adjusted earnings of $9.20 a share, plus or minus 20 cents. Capital spending is expected to stay within 4% to 6% of revenue for fiscal 2027.
Seagate's market value was $146.5 billion, and the next test of the buyback pledge comes with the March quarter, when Romano said repurchases step up.
Sources
- Seagate Technology Beats Adjusted Earnings Expectations on AI Demand - WSJ — The Wall Street Journal
- Seagate Technology tumbles even as Q1 results, guidance top estimates (STX:NASDAQ) | Seeking Alpha — seekingalpha.com
- Seagate Technology Q1 preview: Analysts project earnings beat amid strong HDD demand (STX:NASDAQ) | Seeking Alpha — seekingalpha.com
- Seagate Eyes a Q1 Earnings Beat: Is the Stock Worth Buying Now? — Yahoo Finance
- STX Stock Surges Over 6% Ahead Of Earnings — Rosenblatt Cuts Target But Sees Near-Term Profit Upside — Yahoo Finance
