Seagate Technology Holdings, a leading hard disk-drive company, reported a surprising profit for the December quarter. Despite this positive news, the company’s shares experienced a decline in late trading on Wednesday.
Signs of Improving Demand from Cloud Data-Center Customers
Seagate has observed signs of improving demand from cloud data-center customers. However, investors may have expected the results and financial forecasts from management to surpass Wall Street consensus estimates more decisively.
Q2 2020 Results
For its fiscal second quarter that ended on December 29, Seagate posted a revenue of $1.56 billion. Although this figure represents an 18% decrease from the previous year, it is up 7% sequentially. The revenue falls in line with both management’s guidance and Street estimates as tracked by FactSet.
On an adjusted basis, Seagate reported earnings of 12 cents per share, surpassing its forecast of a loss of 10 cents per share. Under generally accepted accounting principles, the company incurred a loss of 9 cents per share.
Promising Outlook for the March Quarter
Seagate projects a revenue of $1.65 billion for the March quarter, which aligns with Street estimates. The company also expects an adjusted profit of 25 cents per share, exceeding the consensus call of 19 cents.
Seagate expressed optimism about the market recovery for cloud nearline drives, which are used for mass storage. The company cited improving cloud demand, strong cost discipline, and price execution as factors contributing to its positive results.
Additionally, Seagate reported an increase in demand from both U.S. and China cloud customers.
Despite these favorable developments, the stock experienced a 2.4% decrease and closed at $87 in late trading.