Quantum (QMCO) Q2 2027 earnings review
Quantum's sales grow 43%, but it cannot ship every order
Quantum, which sells tape and disk systems for storing data, sold far more hardware and still cannot fill every order. Revenue rose 43% from a year ago, and chief executive Hugues Meyrath reported a record backlog of unshipped orders of nearly $100 million. Quantum still posted a net loss, because it booked a $52 million non-cash charge on share-purchase rights that a former lender holds.
| Revenue | $89.6M +43% from a year ago |
|---|---|
| Net loss | $44.85M includes a $51.6M non-cash warrant charge |
| Backlog of unshipped orders | Nearly $100M over $25M a year ago |
| Next-quarter revenue outlook | $89–93M middle of the range: 22% growth |
⚖️ Verdict: 🟢 Bullish
The story got better, because Quantum finally put a number on its unshipped orders and they exceed a full quarter of sales. Its gross margin also reached 41%. One caution: the company's own plan for next quarter has revenue barely moving and profit excluding one-offs falling.
The question now is whether high prices during an industry-wide parts shortage explain the margin, or whether the gain lasts. If the shortage explains it, margin slips as supply returns; if the product mix explains it, margin holds. Next quarter's gross margin will tell.
🐂 Bull Case
Unshipped Orders Reach Nearly $100 Million
A backlog is the pile of orders a company has accepted and not yet shipped. Quantum, which sells tape and disk systems for storing data, declined to give the figure last quarter. This time chief executive Hugues Meyrath did: a "record backlog of nearly $100 million".
Two orders stand out. Meyrath described "one of the most significant purchase orders in the Company’s history", a deployment of Scalar tape systems for a hyperscale customer. Hyperscale customers operate very large data centres. He also reported "the largest ActiveScale Cold Storage order in company history".
- Backlog: nearly $100 million, up from over $25 million a year ago
- Contracted revenue not yet recognised: $184.6 million, up from $165.9 million in June
This matters because the backlog now exceeds the revenue Quantum expects for all of next quarter. So demand does not limit sales; shipments do. But the release warns that customers can delay, reduce or cancel orders in the backlog.
What to watch: the backlog figure with next quarter's results. A backlog that keeps rising while revenue also climbs would mean customers are ordering faster than Quantum can deliver.
Tape and Archive Systems Now Half of Sales
Quantum calls its tape libraries, object storage and backup appliances secondary storage. These are its "low-cost, long-term storage systems for data protection and archiving". Chief executive Hugues Meyrath called tape "our most consistent growth driver", and credited operators of very large data centres.
- Secondary storage revenue: $44.7 million, up 126% from a year ago
- Share of total revenue: 50%, against 32% a year ago
- Asia-Pacific revenue: $11.4 million, almost double a year ago
The numbers support Meyrath, and the gain spans regions. But the 126% rate compares with last year's lowest-revenue quarter, so part of it reflects an easy comparison.
What to watch: secondary storage's share of revenue in the next quarterly filing. A share above 50% with higher total revenue would show tape orders are turning into shipments.
Hardware Margin Climbs to 32.7%
Gross margin is the share of revenue left after the cost of making and servicing products. Quantum's reached 41.0%, and hardware accounts for the whole gain from a year ago.
The cost of making products took 67.3% of product revenue, down from 81.3% a year ago. The filing credits "higher volume of core products with better blended margin mix and increased average selling prices". It also cites a "benefit from proactively managing our supply chain ahead of supplier price increases".
- Product gross margin: 32.7%, against 18.7% a year ago
- Product gross margin last quarter: 26.3%
- Service gross margin: 57.0%, against 59.3% a year ago
- Total cost of revenue: 59.0% of revenue, down 3.4 percentage points
This matters because products now bring in 70% of revenue, so hardware margin drives the total. But two of the reasons Quantum gives concern prices, and prices can reverse when parts supply returns.
What to watch: product gross margin in the next quarterly filing. A reading near this quarter's level, once supply eases, would show the gain comes from what Quantum sells and not from shortage prices.
Quantum Generates Cash and Carries No Debt
A year ago Quantum owed lenders more than $100 million and its operations consumed cash. In June it repaid its term loan, and another lender converted its note into shares, so the storage group has no debt.
- Cash from operations: $13.4 million by our math, against a $15.6 million outflow a year ago
- Cash and restricted cash: $67.5 million, up from $54.6 million in June
One soft spot: unpaid supplier bills rose $9.8 million from June, by our math, equal to about 73% of that cash. Still, the filing says expected operating cash flows "will be sufficient to fund operations for at least one year".
What to watch: cash from operations next quarter, after Quantum pays those suppliers. A positive figure without that help would show the business funds itself.
🐻 Bear Case
Quantum's Own Outlook Has Profit Falling
"This quarter marked our fourth consecutive quarter of sequential revenue growth and our second quarter of non-GAAP profitability," chief executive Hugues Meyrath said. He means profit excluding one-offs such as this quarter's warrant charge.
The plan for next quarter does not extend that run in profit. Quantum's outlook has Ebitda excluding one-offs, a measure of operating profit, at $9.1 million, down from $11.1 million.
- Revenue outlook: $91 million at the middle of the range, against $89.6 million this quarter
- Gross margin implied by the outlook: about 39.5% by our math, against 41.0% this quarter
The lower margin matters because it tests pricing. The filing credits higher selling prices for part of this quarter's gain, and the plan's arithmetic leaves room for those prices to ease. One caveat: Quantum has beaten the top of its revenue range for four straight quarters, and it delivered more margin than last quarter's plan implied.
What to watch: Ebitda excluding one-offs next quarter, against the $9.1 million plan. A result near the plan would mean shortage pricing lifted this quarter's margin to a high point.
Parts Shortage Lifts Purchase Commitments to $246 Million
An industry-wide shortage of storage parts limits how much Quantum can ship. Chief executive Hugues Meyrath said "demand remains ahead of available supply", although "our ability to secure disk drives has improved". Meanwhile Quantum has committed to buy far more from suppliers.
- Purchase commitments it cannot cancel: $245.9 million, up from $142.6 million in June
- Commitments against cash: about 3.6 times, by our math
- Inventory: up 44% since June
This matters because Quantum must pay for those parts even when customers delay orders. The filing also reports "longer sales cycles" with enterprise and commercial customers.
What to watch: purchase commitments against backlog in the next quarterly filing. Commitments that keep climbing while backlog stops growing would leave Quantum holding parts it cannot sell.
A Director's Fund Holds $83 Million of Warrants
A warrant is a right to buy a company's shares at a fixed price. Quantum issued two to Dialectic, a former lender, and accounting rules make it record their estimated worth as a liability.
That estimate rose $51.6 million, so Quantum reported a net loss of $44.85 million. Without the charge it would have earned about $6.7 million, by our math.
- Warrant liability: $83.3 million, up from $31.7 million in June
- Shares the warrants cover: about 2.76 million, 7% of the total by our math
The holder is a related party: board member John Fichthorn is managing partner of Dialectic's investment adviser, the filing says.
What to watch: the warrant liability in the next filing. Until the holder exercises the warrants, this estimate will keep moving Quantum's reported net income.
Risks this quarter didn't answer
Five standing concerns received no answer this quarter. Two got numbers that still point the wrong way, and three got no new numbers at all.
- Primary storage, its fast systems for active data: revenue fell 27% to $8.0 million; a quarter of stable revenue would be the first sign of a floor.
- Service and subscription: revenue slipped 2% to $25.0 million; growth here would show hardware sales bring support contracts.
- Financial controls: the filing says disclosure controls "were not effective"; a filing that declares the weaknesses fixed would close this.
- Shareholder lawsuits over the fiscal 2025 restatement: the motion to dismiss "has not yet been heard"; a court ruling would move it.
- Large-customer dependence: Quantum gave no customer breakdown; its largest customer's revenue share would settle it.
👓 Other Themes
Quantum Introduces Software That Places Data Automatically
Quantum introduced Autonomous Data Management, or ADM, software that works with its object storage and tape products. Chief executive Hugues Meyrath said it "combines intelligence with action" to help customers "optimize data placement based on value, risk, and cost". The release gives no price, customer count or revenue for ADM, so the product has no financial reading yet.
💲 Other KPIs
Deferred revenue, cash customers have paid for service not yet delivered, rose 15% from a year ago. The balance shrank 4% a year earlier and has grown faster in each of the last two quarters. Service contracts make up most of it, so the balance points to steadier service revenue.
Operating costs excluding one-offs rose 9% from a year ago, and 7% from last quarter. Revenue grew much faster, so these costs fell to 30.0% of sales from 39.5%. Quantum links the extra spending to sales costs that vary with revenue and to investment in its product development teams.
Customers owed Quantum 61% more than a year ago at quarter-end. That outpaced revenue, so collection slowed. By our math the balance equals about 73 days of sales, against 64 a year earlier. It stood at 75 days in June.
🔮 Guidance
New. The plan has revenue near $91 million, about 22% above a year ago. That is only 2% more than this quarter. Growth slows from 43% mainly because last year's comparison quarter was stronger. Quantum beat the middle of its range in each of the last five quarters, by 9% on average. If the pattern holds, revenue would land near $99 million.
New. The plan has operating costs excluding one-offs near $28 million, about 4% above this quarter. They were $25.1 million two quarters earlier, so spending keeps climbing as Quantum pays sales commissions and invests in product development. This quarter's costs landed inside the planned range.
New. The middle of the range is $0.20, below this quarter's $0.25. The plan assumes about 39.5 million shares and a 3% tax rate. By our math that implies profit excluding one-offs near $7.9 million, against $9.8 million this quarter. Quantum beat the top of its range for this measure in each of the last two quarters.
New. Ebitda is profit before interest, tax and depreciation. The plan has it near $9.1 million, down from $11.1 million, even with slightly higher revenue. By our math that points to a gross margin near 39.5%, against 41.0%. Quantum topped its Ebitda range in each of the last two quarters, by more than $4 million each time.
❓ Key Questions
How much of the backlog ships within two quarters?
Backlog of nearly $100 million exceeds a full quarter of revenue, but Quantum gave no shipping schedule. The outlook has revenue up only 2%, so the timing decides whether growth continues.
Is the shortage of tape drives easing?
Meyrath said supply of disk drives improved and named no change for tape drives, the part he called scarce last quarter. He also calls tape Quantum's most consistent source of growth, so that supply sets the pace of sales.
How much of the margin gain came from prices?
The filing credits volume, product mix, higher selling prices and early buying of parts, without sizing each. A gain that rests on prices can reverse when the shortage ends, while a gain from mix can last.
How much backlog comes from one hyperscale customer?
Meyrath described one order from an operator of very large data centres as among the most significant in Quantum's history. A backlog that rests on one buyer carries more risk of delay or cancellation.
Will the warrants soon count in loss per share?
A new accounting rule applies to Quantum from April 2027. The filing says the storage group is evaluating its effect on diluted loss per share from the warrants, which cover about 2.76 million shares.