Western Digital's Q4 2025: Unraveling Contradictions in Dividends, Tariffs, and Growth Strategies

Dividend and share repurchase policies, tariff impacts and business uncertainty, exabyte growth strategy and capacity expansion, gross margin expansion and drivers, and demand and supply dynamics in NAND are the key contradictions discussed in Western Digital's latest 2025Q4 earnings call.



Strong Financial Performance and Revenue Growth:
- Western Digital delivered revenue of $2.6 billion for the fiscal fourth quarter, with a year-over-year increase of 30%.
- The growth was driven by strong demand for higher capacity and nearline products in the cloud sector, particularly in UltraSMR drives.

Gross Margin Improvement:
- The company's gross margin reached 41.3%, an improvement of 610 basis points year-over-year.
- This improvement was due to mix shifts towards higher capacity drives and effective cost control measures throughout the supply chain.

Cash Management and Balance Sheet Strengthening:
- Western Digital lowered its debt by $2.6 billion and achieved a net leverage target range of 1 to 1.5x.
- This was accomplished by using cash on hand and a debt-for-equity exchange, improving cash flow and balance sheet strength.

AI and Market Demand:
- Agentic AI is creating a significant need for large-scale data storage, with demand for AI-specific storage expected to grow substantially.
- This trend is favoring the use of hard drives due to their cost efficiency and reliability, driving continued demand for Western Digital's products.