Western Digital Corporation
WDC · Nasdaq
Next quarter
Expected to report Jan 28, 2027 — estimated from last year’s reporting date.
Consensus is $5.63 EPS for Dec 2026 across 4 estimates, ranging $5.59 to $5.68.
WDC Sep 2026
- 11.03%
- -2.97%
- $3.99
- $4.43
- —
- $4.38B
Reported results
- $4.38B
- $2.05B
- $1.78B
- $4.63
Highlights
- Revenue: Fiscal Q1 2027 revenue was $4.381 billion, up 55% year over year and 17% from Q4 FY2026’s $3.747 billion.
- Earnings: GAAP diluted EPS was $4.63 and non-GAAP diluted EPS was $4.64; the supplied expectations data lists reported EPS of $4.43 versus $3.99 consensus, an 11.03% beat.
- Cloud demand and pricing: Cloud revenue rose 54% to $3.868 billion, or 88% of sales, as exabytes shipped increased more than 20% and average selling price per exabyte rose about 25%.
- Margins: GAAP gross margin expanded to 57.8% from 43.5% a year earlier and 54.1% in Q4; non-GAAP operating margin reached 49.1%, up from 30.4% a year ago.
- Q2 outlook: WD expects revenue of $5.1 billion, plus or minus $100 million, non-GAAP gross margin of 60%–61%, and non-GAAP EPS of $5.80, plus or minus $0.20.
- Cash generation: Operating cash flow was $1.604 billion and free cash flow was $1.377 billion, compared with $672 million and $599 million, respectively, a year ago.
- Shareholder returns: WD repurchased $1.001 billion of stock in the quarter and raised its quarterly dividend 17% to $0.175 per share.
Analysis
Western Digital’s fiscal Q1 2027 was a strong demand-and-pricing quarter, with revenue of $4.381 billion up 55% year over year and 17% sequentially. GAAP diluted EPS was $4.63; the supplied expectations data reports EPS of $4.43 against $3.99 consensus, an 11.03% beat. Non-GAAP EPS was $4.64, up 161% from $1.78 a year earlier and 30% from $3.56 in Q4 FY2026. GAAP net income fell 44% sequentially to $1.779 billion, but the comparison is distorted by Q4’s $2.05 billion gain on WD’s retained Sandisk interest; non-GAAP net income instead rose 29% sequentially to $1.779 billion.
The print was defined by cloud storage growth, improving pricing and a sharp step-up in profitability. Cloud generated 88% of revenue, with shipped exabytes up more than 20% and average price per exabyte up about 25%. Gross margin reached 57.8% GAAP and 58.1% non-GAAP, while non-GAAP operating margin rose to 49.1%. Management’s Q2 outlook points to further acceleration: revenue of $5.1 billion at midpoint, 66%–72% year-over-year growth, and non-GAAP EPS of $5.80. Cash generation supported $1.0 billion of repurchases and a 17% dividend increase.
Cloud-led growth
Cloud was the engine of the quarter: revenue rose 54% year over year to $3.868 billion, representing 88% of total sales. WD attributed the increase to sustained cloud and AI-related storage needs, which supported both higher shipment volumes and better pricing. Management also cited longer production lead times and customers engaging earlier on future requirements.
- Cloud: Exabytes shipped increased more than 20%, while average selling price per exabyte rose about 25%.
- Client: Revenue increased 119% to $320 million, with exabytes up about 15% and average selling price per exabyte up about 90%, reflecting mix and pricing.
- Consumer: Revenue grew 19% to $193 million as average selling price per exabyte rose about 70%; exabytes shipped fell about 30% amid softer demand at higher prices.
Margin expansion
Revenue growth combined with improved pricing, greater shipment volume and a lower cost structure on newer-generation products to drive unusually strong operating leverage. GAAP gross profit more than doubled year over year to $2.534 billion. Operating expenses rose 12% to $488 million, slower than the 55% increase in revenue, although business realignment charges increased to $43 million from $3 million.
- Gross margin: GAAP margin was 57.8%, up 1,430 basis points year over year and 370 basis points sequentially; non-GAAP margin was 58.1%.
- Operating margin: GAAP operating income rose 158% year over year to $2.046 billion, for a 46.7% margin; non-GAAP operating income increased 152% to $2.153 billion, for a 49.1% margin.
- EPS: GAAP diluted EPS was $4.63 versus $3.07 a year ago and $8.21 in Q4; non-GAAP EPS was $4.64 versus $1.78 a year ago and $3.56 in Q4.
Q2 outlook
WD’s outlook signals that momentum is expected to continue into fiscal Q2. At the midpoint, revenue of $5.1 billion would be about 16% above Q1 and management expects year-over-year growth of 66%–72%. The forecast also implies further margin improvement, with non-GAAP gross margin guided to 60%–61%. Guidance is non-GAAP; the company said reconciliation to GAAP is unavailable without unreasonable effort because some adjustments depend on future events.
- Revenue: $5.1 billion, plus or minus $100 million.
- Profitability: Non-GAAP gross margin of 60%–61%; operating expenses of $400 million–$410 million.
- EPS: Non-GAAP diluted EPS of $5.80, plus or minus $0.20, based on approximately 380 million diluted shares.
Cash and capital returns
Higher earnings translated into stronger cash generation, though the ramp in production and sales absorbed working capital. Cash and cash equivalents ended the quarter at $1.314 billion, down from $1.579 billion at fiscal year-end, after substantial financing outflows. WD said cash and operating cash flows should be sufficient for working capital, debt, dividends, capital spending and planned repurchases.
- Cash flow: Operating cash flow was $1.604 billion and free cash flow was $1.377 billion, versus $672 million and $599 million, respectively, a year earlier. Capital expenditures were $227 million, up from $73 million.
- Capital returns: WD repurchased $1.001 billion of stock and paid $56 million in dividends; the board raised the quarterly dividend 17% to $0.175 per share.
- Debt: WD ended the quarter with $650 million drawn on its revolving facility and $141 million of convertible notes outstanding after settlements and conversions; it expects substantially all remaining notes to convert before the November 16 redemption date.
Quarter comparisons
Sequential GAAP net income and EPS were lower than Q4 FY2026, but that is not a clean read on underlying operating performance: Q4 included a $2.05 billion gain on WD’s retained Sandisk interest, while Q1 had no such gain. Q1 interest and other expense was $8 million, compared with $1.684 billion of income in Q4. On the company’s non-GAAP basis, which excludes the Sandisk mark-to-market gain and other specified items, net income increased 29% sequentially to $1.779 billion and EPS rose 30% to $4.64. The prior-year comparison also reflects differing quarter lengths: Q1 FY2026 had 14 weeks, while Q1 FY2027 had 13.
