Can Strong Enterprise Demand Sustain Quantum's Momentum?
Quantum Corporation QMCO is seeing continued momentum from strong enterprise demand, with customers increasingly focused on managing rapidly growing data volumes while controlling budgets, power consumption and infrastructure costs. In the first quarter of fiscal 2027, revenue reached $80.8 million, up 25.7% year over year and above the company’s guidance of $75 million, plus or minus $2 million. The performance was driven by strong demand for ActiveScale and tape storage solutions, while backlog increased significantly.
Enterprise demand remains a key growth driver, with Quantum seeing strength across product lines and regions. Revenue in the Americas increased more than 20% sequentially, while APAC revenue rose more than 50%. The company also reported a dramatic increase in deals valued above $1 million, with most exceeding $3 million, many of which were large enterprise opportunities. ActiveScale continues to gain traction, with increasing seven-digit enterprise deals and customer expansions as users recognize its cost, power-efficiency, scaling and availability benefits.
Tape-related demand is another factor supporting momentum. Quantum said tape royalty revenue remained strong, while LTO capacity shipments increased 15% sequentially. Customers are increasingly adopting tape to improve storage economics, lower power consumption and strengthen cyber resilience. The company’s tape opportunity funnel also reached its highest level in years. However, supply constraints remain a key challenge, particularly around tape drives and certain disk drives, with demand currently exceeding Quantum’s ability to fulfill orders. Quantum expects customer demand to remain strong in the fiscal second quarter, but near-term revenue will depend largely on its ability to fulfill and ship orders in a supply-constrained market.
The company expects second-quarter revenue of approximately $82 million, plus or minus $2 million, with the midpoint representing about 31% year-over-year growth. Adjusted operating expenses are expected to be $27 million, plus or minus $1 million, while adjusted EBITDA is projected at $6 million, plus or minus $1 million.
Quantum’s growing backlog, strong enterprise demand, larger deals and expanding ActiveScale adoption are supporting continued momentum. At the same time, supply availability and pricing pressures remain important factors as the company works to convert its demand and pipeline into shipments.
Taking a Look at QMCO’s Competitors
Seagate Technology Holdings plc STX is gaining from strong data center demand, HAMR adoption and pricing discipline. Management expects cloud spending and AI-led storage demand to remain healthy. Demand visibility is strong, with most nearline capacity allocated through 2028 and customer commitments extending into 2029. Seagate's HAMR-based Mozaic roadmap, disciplined pricing and manufacturing efficiencies are expected to drive revenue growth, margin expansion and cash generation in fiscal 2027. The company anticipates fiscal first-quarter revenues of $4.1 billion (+/- $100 million). At the midpoint, this indicates a 56% year-over-year improvement. Non-GAAP operating margin is projected to be roughly 50%, at the midpoint of revenue guidance.
Western Digital Corporation WDC is benefiting from sustained demand for high-capacity storage as AI, cloud and data-intensive workloads expand. Cloud end market (89% of total sales) rose 43%, fueled by strong demand for high-capacity nearline drives and favorable pricing. HDDs retain favorable economics for large-scale data retention, while higher-capacity ePMR, UltraSMR and upcoming HAMR products deepen WD’s position with hyperscale customers. Longer customer agreements improve demand visibility and support predictable pricing. A richer product mix, lower cost per terabyte and operating leverage are lifting margins and cash generation. For the first quarter of fiscal 2027, Western Digital expects non-GAAP revenue of $4.1 billion at the midpoint, up 45% year over year. It projects non-GAAP gross margin to be between 55% and 56%.
QMCO Price Performance, Valuation and Estimates
Shares of Quantum have gained 280.2% in the past six months compared with the Computer- Storage Devices industry’s growth of 90.9%.
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In terms of price/sales F12M, QMCO’s shares are trading at 2.33X, lower than the Computer- Storage Devices industry’s 2.99X.
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The Zacks Consensus Estimate for QMCO’s earnings for 2026 has been revised significantly upward over the past 60 days.
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Quantum currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
