Western Digital Corporation (WDC) Earnings & Analysis

Latest quarter

Western Digital reported Q1 FY2027 revenue of $4.4 billion, up 55.5% from $2.8 billion a year earlier. Diluted earnings per share were $4.63, compared with $3.07; adjusted earnings per share were $4.64.

The company’s filing attributed revenue growth to demand across its Cloud, Client and Consumer markets. Cloud represented 88% of revenue and grew 54% year over year, with both storage capacity shipped and average selling prices rising. Client revenue rose 119%, while Consumer revenue increased 19% as higher pricing offset a decline in capacity shipped.

Western Digital reported gross margin of 57.8%, compared with 43.5% a year earlier, and operating margin of 46.7%, compared with 28.1%. The filing attributed the gross profit increase to improved pricing, higher shipment volumes and lower costs on newer products. Free cash flow was $1.4 billion, up from $599.0 million.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

On the earnings call, executive Tiang Yew Tan said demand remained durable and that Western Digital had visibility into its top seven customers’ needs through 2030 and 2031. He said the company was also seeing demand from frontier AI labs, neocloud providers and hybrid-cloud equipment makers.

Asked about pricing, CFO Kris Sennesael said average price per terabyte rose 28% year over year and that further increases were possible over the next three or four quarters. He said some long-term agreements were expiring and being replaced, while some capacity was sold outside contracts. Tan said higher prices, a shift toward higher-capacity drives and shipping more data without producing more units could support further gross margin expansion.

Sennesael said Western Digital faced higher costs for inputs including DRAM and NAND. The company was using engineering changes to address them, he said, but implementation and qualification take time. He expects cost per terabyte to fall by less than 10% year over year in the near term, against a longer-term goal of approximately 10% annual reductions.

Tan said the company remained focused on increasing the data stored per drive rather than investing in additional unit capacity. He said other manufacturers might add units to maintain their positions. Sennesael said capital spending would target heads, media and factory automation, and would run modestly above the company’s 4% to 6% long-term average as a share of revenue over the next 2 years.

For upcoming product transitions, Tan said Western Digital was working to complete first-generation HAMR qualifications with two customers and expected volume shipments in the first half of calendar 2027. He also expected the latest ePMR platform to account for 30% of nearline bits in fiscal Q2 and 50% in fiscal Q3. Sennesael said the company expected operating expenses to rise sequentially in Q2 because of product qualification activities.

Guidance

Sennesael said Western Digital guides one quarter at a time. For Q2 FY2027, the company expects non-GAAP operating expenses of $400.0 million to $410.0 million, compared with its earlier Q1 outlook of $390.0 million to $400.0 million.