Seagate Technology (STX) is likely to report better-than-expected fiscal Q3 results and provide in-line guidance for the fiscal Q4, driven by continued strength in hard disk drive demand, Morgan Stanley said in a note Wednesday.

The brokerage is modeling $2.14 billion in revenue and $1.75 in earnings per share for the March quarter, slightly above consensus, but believes Seagate could surpass those expectations. The company previously guided for fiscal Q3 revenue of $2.10 billion plus or minus $150 million and non-GAAP EPS of $1.70 plus or minus $0.20.

Recent industry checks indicate stronger-than-expected nearline HDD shipments and the potential for revenue to reach as high as $2.2 billion, supported by lower operating expenses, according to the note.

For the June quarter, Morgan Stanley expects revenue of $2.3 billion and EPS of $2.10, reflecting sequential growth in revenue, gross margins, free cash flow, and earnings per share. These projections are in line with current consensus and buyside expectations.

The firm noted that HDD demand continues to outpace supply, with capacity largely booked through calendar year 2025. It also cited accelerating year-over-year cloud infrastructure spending and stable inventory levels among cloud service providers as key demand drivers.

Additionally, a favorable mix shift toward higher-capacity drives and growth in heat-assisted magnetic recording shipments are seen as margin tailwinds.

Morgan Stanley raised its 12-month price target on the stock to $89 from $84 and maintained its overweight rating, noting that Seagate's May 22 Analyst Day could serve as a key catalyst following earnings.

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