Western Digital Q4 Earnings Exceed Expectations, Shares Surge 8%

Western Digital Corporation reported Q4 fiscal 2025 non-GAAP earnings of $1.66 per share, surpassing the Zacks Consensus Estimate by 12.2%. Revenues of $2.61 billion surged 30% YoY, driven by rising demand for high-capacity storage in cloud computing and generative AI. Shares jumped 8% in pre-market trading. The company shipped 190 exabytes of storage, up 32% YoY, fueled by strong demand for nearline drives and growing volumes of its 26TB CMR and 32TB UltraSMR products.

Western Digital Corporation (WDC) reported its fourth-quarter (Q4) fiscal 2025 non-GAAP earnings of $1.66 per share, surpassing the Zacks Consensus Estimate by 12.2%. The company reported earnings of $1.44 per share in the prior-year quarter. Quarterly revenues of $2.61 billion surged 30% year-over-year (YoY), driven by rising demand for high-capacity storage in cloud computing and generative AI. Shares jumped 8% in pre-market trading [1].

The growth reflects strong demand for nearline drives and growing volumes of its 26TB CMR and 32TB UltraSMR products. Shipments of these products more than doubled from the previous quarter, topping 1.7 million units in June. This was one of the fastest ramps in the company's history [1].

Revenues from the cloud end market (90% of total revenues) climbed 36% YoY to $2.6 billion, driven by strong demand for higher-capacity nearline products. Revenues from the client end market (5%) were up 2% YoY to $140 million, while revenues from the consumer end market (5%) were down 12% YoY to $136 million [1].

Western Digital reported a non-GAAP gross margin of 41.3%, up 610 basis points YoY, driven by a shift to higher-capacity drives and strong cost control across manufacturing and the supply chain. Non-GAAP operating expenses decreased 16% YoY to $345 million, but were slightly above guidance ($330-$340 million), mainly due to higher variable compensation from better-than-expected performance. Non-GAAP operating income totaled $732 million, up 147% YoY [1].

The company generated $746 million in cash from operations compared with $366 million in the prior-year quarter. Free cash flow amounted to $675 million in the quarter under review, up 139%. With strong cash flow, a solid balance sheet, and confidence in its business outlook, WDC’s board approved up to $2 billion in share buybacks. In the quarter, the company repurchased about 2.8 million shares for $149 million [1].

Looking ahead, Western Digital anticipates non-GAAP revenues of $2.7 billion (+/- $100 million) for the first quarter (Q1) of fiscal 2026, up 22% YoY. The Zacks Consensus Estimate is currently pegged at $2.55 billion. Management projects non-GAAP earnings of $1.54 (+/- 15 cents) for Q1 2026, with the Zacks Consensus Estimate at $1.40. The company expects non-GAAP gross margin in the range of 41-42% and non-GAAP operating expenses between $370 million and $380 million [1].

Western Digital currently sports a Zacks Rank #1 (Strong Buy), indicating that the stock is expected to outperform the market in the near future [1].

References:
[1] https://finance.yahoo.com/news/western-digital-wdc-tops-q4-212503358.html
[2] https://www.theglobeandmail.com/investing/markets/stocks/SAP/pressreleases/33783067/western-digital-q4-earnings-beat-on-solid-top-line-growth-shares-jump/