Seagate Shares Slip 6% Despite Strong Quarter and Dividend Hike

what happened

Seagate Technology (STX) shares fell about 6% in overnight trading after its late-Tuesday report, according to Stocktwits. The data storage company posted fiscal first-quarter results above expectations, issued a strong forecast and raised its quarterly dividend.

Revenue rose to $4.23 billion from $2.63 billion a year earlier, ahead of the $4.15 billion analysts expected, per FactSet. Adjusted earnings came to $7.68 a share against the $7.45 forecast. For the current quarter, the company guided to adjusted earnings of $9.00 to $9.40 a share on revenue of $4.7 billion to $4.9 billion. The quarterly dividend rose 2.7% to $0.76 from $0.74.

Wedbush Securities analyst Matt Bryson told CNBC that the implied gross margin of about 60% signals slowing margin growth, and said the slowdown looks cyclical. CEO Dave Mosley said demand for storage remains extremely strong.

why it matters

The signal for investors is mixed: solid numbers and a dividend increase sit alongside a guide pointing to slower margin gains. The drop mirrored the reaction to peer Western Digital's (WDC) upbeat report last week, and with STX up 143% year to date, the stock is sensitive to any sign of slowing.

market impact

STX and storage stocks: strong results offset by a softer margin outlook

• ↔Seagate shares (STX) mixed — solid results and dividend are offset by the implied slowdown in gross margin growth

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