Seagate Says Hard Drive Supply Is Allocated Through 2028, With Some Cloud Deals Running To 2030
CEO Dave Mosley says build-to-order contracts fix nearline pricing through 2027 and that everything Seagate can make above plan is spoken for.
Seagate Technology, which designs and makes hard disk drives and storage systems, has most of its nearline supply committed to customers through calendar 2028, CEO Dave Mosley said on the company's fiscal first-quarter earnings call Tuesday. Some cloud customer agreements extend through calendar 2030.
Booked years out
Mosley, Seagate's chair and chief executive, said the "vast majority" of nearline exabyte supply is allocated under long-term agreements through calendar 2028. Nearline drives are the high-capacity drives sold to data centers.
Build-to-order contracts already set configuration and pricing for nearline shipments through calendar 2027, he said. Over the next few quarters, Seagate expects to begin finalizing those terms for the 2028 allocations.
Asked about demand, Mosley said customers are no longer swapping products or skipping quarters, as they did in past years. "Absolutely everything we can make above and beyond our plans is being spoken for," he said.
Seagate locks in configuration and then pricing when a contract comes within about 12 months, Mosley said, and he added that some contracts may be locked at higher prices if demand stays strong.
Can the pricing jump repeat
An analyst from Bernstein said pricing appeared to accelerate from a mid-single-digit sequential rise to something like a mid-teens rise in the September quarter, and asked whether that pace could continue. Mosley said new contracts keep stepping up and that he does not see the trend changing much.
CFO Gianluca Romano said every quarter is a bit different. He said the December-quarter outlook includes everything, with part of the revenue upside coming from exabytes and part from pricing, and that the next step up in gross margin comes mainly from pricing. Romano said higher costs for externally sourced components partly offset Seagate's own cost declines, and that Seagate passes those costs through when contracts are renegotiated.
An analyst from Cantor Fitzgerald asked whether pre-building explained the outlook, noting inventory days rose to 97 from 83. Mosley said the product transitions are planned and staged well ahead of time.
The quarter behind the claims
September-quarter revenue was $4.2 billion, up 61% from a year earlier, and non-GAAP earnings per share, the company's adjusted measure, hit a record $7.68. Non-GAAP gross margin was 57.8%, up 510 basis points, or 5.1 percentage points, from the prior quarter. 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 per share, plus or minus 20 cents. The board raised the quarterly dividend about 3% to 76 cents a share, and Romano said share repurchases should step up significantly starting in the March quarter.
Seagate's market value stood at $146.5 billion in the report written after Tuesday's call.
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
