Seagate Q1 revenue misses expectations, weighed down by slump in enterprise buying

Seagate predicts a gradual return to health by enterprise clients in 2021 will help restore disk drive sales.

Disk drive maker Seagate Technology this afternoon reported fiscal Q1 revenue that missed expectations, and forecast this quarter's results slightly higher, citing continued pressure on enterprise storage buying.

The company's stock dropped sharply in late trading.

Seagate's revenue dropped 10%, year over year, to $2.31 billion. That was slightly ahead of the company's own forecast for $2.3 billion, but missed consensus for $2.36 billion. The company's earnings per share, 93 cents, topped Wall Street's area estimate of 90 cents. 

For the current quarter, Seagate sees revenue in a range of $2.35 billion to $2.75 billion, which, at the midpoint, would be ahead of consensus of $2.47 billion. 

Earnings per share this quarter is seen in a range of 95 cents to $1.25, just slightly below the average $1.11 estimate.

The results reflect "good execution against the backdrop of continued macro disruptions that impacted several of our key end markets," CEO Dave Mosley said in prepared remarks.

"These disruptions were most pronounced in the enterprise market as the anticipated slowdown in enterprise IP spending impacted sales of our enterprise Nearline and mission critical dress," he added.

Mosley said enterprise spending should pick up in 2021. He noted, however, that this year may be the first year that cloud spending surpasses traditional on-prem IT spending, citing data from market research firm IDC.

"The adoption of cloud services" said Mosley, "is driving ongoing cloud data center investments."

"According to IDC, 2020 may be the first year in which cloud infrastructure hardware spending surpasses traditional infrastructure hardware spending."