Seagate sales outlook disappoints amid softer demand, geopolitical uncertainty

Seagate Technology on Monday reported better quarterly earnings than expected, but the company’s sales outlook disappointed investors against the backdrop of softer demand and trade tensions.

Tech giants including Apple and Nvidia have recently warned of weaker sales in China, fuelling concerns over an economic slowdown in the region and its impact on companies that make components for smartphones, computers and servers.

For the current quarter, Seagate expects revenue to hit $2.3bn, plus or minus 3 per cent, amid weakness in the consumer and gaming markets. Analysts polled by Refinitiv were looking for $2.48bn.

Shares in Seagate erased gains of more than 3 per cent in after-hours trading, falling 7.2 per cent to $42.30 after executives detailed the outlook on an earnings call.

Seagate said in a statement it booked solid results “against a more challenging demand environment” in the December quarter.

“While there are market and geo-political uncertainties impacting the storage industry, our belief in the long term growth of data creation and storage demand remains unchanged,” chief executive Dave Mosley said.

Last month, rival Western Digital signalled its revenue would improve in the second half of the fiscal year, citing an expected uptick in demand for cloud computing products.

Cost cuts helped Seagate more than double net income to $384m, or $1.34 a share, from $159m, or 55 cents a share, in the company’s second quarter a year earlier. On an adjusted basis, earnings per share fell to $1.41 from $1.48 but easily surpassed analysts’ forecast of $1.27.

Gross margin narrowed to 29.2 per cent from 30.1 per cent.

Revenue of $2.72bn, a decline of 6.8 per cent year-over-year, matched Wall Street’s estimates.

Shares in Seagate rallied 3.6 per cent to $47.18 in after-hours trading.