Seagate raised its margin target range in an earnings call Wednesday night.
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Seagate Technology shares jumped in late trading Wednesday after the disk-drive company provided an upbeat financial outlook, raising its long-term model for the profitability of its business.
For the fiscal second quarter ended Dec. 31, Seagate (ticker: STX) posted revenue of $3.12 billion, up 18% from a year ago, and in line with estimates. Non-GAAP profits of $2.41 a share edged the Street consensus forecast of $2.36 a share.
For the fiscal third quarter, the company projected revenue of $2.9 billion, give or take $150 million, with non-GAAP profits of $2 a share, plus or minus 20 cents, which is consistent with the consensus call for $2.92 billion and $2.07 a share.
For investors, the bigger news came on the company’s post-earnings conference call. Seagate chief financial officer Gianluca Romano told analysts that the company is raising its long-term non-GAAP operating margin target range to between 18% and 22% of revenue, up from a prior target of 15% to 20%. The company expects to be at the lower end of the new range in the March quarter.
Romano also said that Seagate now sees revenue growth for the June 2022 fiscal year to be up 12% to 14%, which compares to a previous forecast for a low double-digit increase. “We believe the structural changes in the industry combined with Seagate’s disciplined execution will support a higher operating margin over time,” he said on the call.
In a statement, CEO Dave Mosely noted that the company had its highest revenue quarter in more than six years, driven by strong demand from cloud data center customers.
Seagate shares initially traded lower in after-hours trading, but reversed course after Romano made his remarks about expanding margins. Around 7:15 p.m. Eastern, Seagate rallied 6.1%, to $102.21.
As is often the case when there’s good news for Seagate, buying spilled over to shares of rival Western Digital (WDC), which gained almost 3% after hours.
Write to Eric J. Savitz at [email protected]
