Seagate reported flat Q3 revenues of $2.73bn (up 0.4 per cent) and $329m net income, advancing 2.8 per cent The disk drive maker said it sold more nearline, high-capacity drives and is ramping up 18TB shipments from the current 16TB high-end.
In the earnings call yesterday, CEO Dave Mosley said: “Seagate delivered an outstanding March quarter, executing well across multiple dimensions,” referring to revenues, operating margin, earnings-per-share and share buybacks.
He added: “Strong cloud data centre demand and ongoing recovery in the enterprise markets drove our highest ever HDD shipments of 140 exabytes, a record mass capacity revenue of more than $1.6 billion.”
Gross margin – 27.1 per cent (27.4 per cent a year ago)
Operating margin – 14.1 per cent (13.8 per cent a year ago)
Cash flow from operations – $378m
Diluted EPS – $1.48 ($1.38 a year ago)
Demand was strong in the enterprise nearline and data centre markets. PC drive demand was steady and the company noted increased demand for mission-critical 2.5-inch 10K rpm) drives. Video surveillance and image demand was down but should rise in the next quarter, the company said. The average capacity per drive rose to 5.1TB from 4.1TB a year ago. Shipments of 16TB, 18TB and 20TB drives represented nearly half of all the exabytes Seagate shipped in the quarter.
Mosley’s prepared remarks revealed that Seagate is “servicing the vast majority of market demand for 16TB and higher capacity drives. We’ve started to aggressively ramp 18-terabyte volume, and current demand suggests strong sequential growth through at least the calendar year.”
It is also shipping Mach.2 dual actuator drives, having “recently begun the high volume ramp of MACH.2 drives with a leading hyperscale customer and plan to expand shipments to additional customers later in the calendar year.”
Heat-assisted magnetic recording (HAMR) drives are being evaluated by users; “ Today customers are testing 20TB HAMR drives in their production environments, which offers valuable feedback that we are factoring into our product roadmaps.”
But Seagate is hedging its HAMR tech bets, planning to “begin shipping a few versions of 20-terabyte drives in the second half of the calendar year,” Mosley said. A shingled magnetic recording version was also mentioned in the earnings call, along with drives with different firmware environments, to cater for hyperscale customers who need 20TB drives in a variety of formats.
The Lyve Drive external disk drive program is expanding cautiously. Mosley said Seagate is “on track to have four Lyve Cloud sites up by the end of the calendar year. We are getting an ecosystem support and have now been certified with each of the leading backup software vendors.“
He is excited about “future potential for Lyve products and services, which open a large and growing market opportunity for Seagate estimated to reach about $50bn by 2025.”
Mosley said: “Seagate continues to execute well and remains excited about the tremendous opportunities we foresee ahead, both in the near-term and longer term, driven by massive growth of data.’
Seagate expects fourth quarter revenues of $2.85bn, plus/minus $185m, 13.1 per cent Y/Y growth at the $2.85bn number. This would make for full year revenues of $10.5bn, the same as last year. That growth rate is a substantial acceleration on the current quarter’s 0.4 per cent Y/Y growth and if it were to continue throughout the next few quarters Seagate’s fy2022 results could show a substantial rise over fy2021.