Group 1 - The company, Western Digital, forecasts second-quarter earnings that exceed Wall Street estimates, indicating a positive outlook for its financial performance [1] - The anticipated increase in earnings is attributed to higher demand for data storage products, driven by cloud providers expanding their data center capacity [1]

Revenue and Sales Performance - Net revenue for the three months ended October 3, 2025, increased by 27% to $2,818 million from $2,212 million in the prior year, driven by a 3% increase in units sold and a 19% increase in average selling price per unit [131][132]. - Cloud revenue rose by 31% to $2,510 million, primarily due to a 5% increase in units sold and a 19% increase in average selling price per unit, reflecting higher shipments of high-capacity enterprise products [133]. - The top 10 customers accounted for 77% of net revenue, up from 65% in the prior year, indicating increased customer concentration [136]. - Net sales for the three months ended October 3, 2025, were $1,158 million, while net sales for the year ended June 27, 2025, totaled $5,249 million [170]. - Intercompany revenue for the three months ended October 3, 2025, was $1,715 million, up from $1,378 million for the year ended June 27, 2025 [170]. Profitability and Income - Gross profit increased by $421 million, resulting in a gross margin improvement of 7 percentage points year-over-year, attributed to higher volumes and improved pricing [137]. - Operating income for the three months ended October 3, 2025, was $792 million, a 137% increase from $334 million in the prior year [131]. - Gross profit for the three months ended October 3, 2025, was $459 million, representing a gross margin of approximately 39.6% [170]. - Operating income for the three months ended October 3, 2025, was $107 million, compared to $279 million for the year ended June 27, 2025 [170]. - Net income for the three months ended October 3, 2025, was $550 million, a significant recovery from a net loss of $320 million for the year ended June 27, 2025 [170]. Expenses and Investments - Research and development expenses rose by $32 million to $294 million, driven by higher variable compensation and continued investment in innovation [138]. - Selling, general and administrative expenses decreased by $66 million to $138 million, reflecting lower compensation and benefits as well as reduced marketing activities [139]. - Net cash used in investing activities for the three months ended October 3, 2025, was primarily $73 million in capital expenditures [154]. Cash Flow and Financing - For the three months ended October 3, 2025, net cash provided by operating activities was $672 million, a significant increase from $34 million for the same period in 2024 [148]. - The company reported a net decrease in cash and cash equivalents of $66 million for the three months ended October 3, 2025 [148]. - Net cash used in financing activities for the three months ended October 3, 2025, included $553 million for share repurchases [155]. - The company issued $1.60 billion of convertible senior notes in November 2023, maturing on November 15, 2028, with an annual interest rate of 3.00% [165]. - As of October 3, 2025, the company had $1.25 billion available for borrowing under its revolving credit facility maturing in January 2027 [167]. Taxation and Liabilities - The effective tax rate for the three months ended October 3, 2025, was 12%, significantly lower than the U.S. Federal statutory rate of 21%, due to the mix of earnings and the tax-free gain on the retained Sandisk interest [145]. - As of October 3, 2025, the liability for unrecognized tax benefits was $598 million, with $130 million potentially payable within the next twelve months [159]. - The company has accrued Global Minimum Tax (GMT) taxes of $21 million, expected to be paid in Q2 2028 [172]. - Current liabilities decreased to $3,317 million from $3,800 million, indicating a reduction of 12.7% [170]. - Non-current liabilities slightly decreased to $2,848 million from $2,873 million, a decline of 0.9% [170]. Future Expectations - The company expects to monetize its remaining stake in Sandisk within one year from the Separation Date, which occurred on February 21, 2025 [127]. - The company expects capital expenditures for 2026 to be approximately 4% to 6% of net revenue [149]. Insurance and Risk Management - The company maintains director and officer insurance to cover certain liabilities arising from indemnification agreements [175].

Financial Data and Key Metrics Changes - For Q1 fiscal 2026, the company reported revenue of $2.8 billion, a 27% increase year-over-year, driven by strong demand for nearline drives [13][14] - Non-GAAP gross margin was 43.9%, improving by 660 basis points year-over-year and 260 basis points sequentially [15][11] - Non-GAAP earnings per share (EPS) was $1.78, exceeding guidance [13][11] - Free cash flow for the quarter was $599 million, reflecting strong cash generation capabilities [11][16] Business Line Data and Key Metrics Changes - Cloud business represented 89% of total revenue at $2.5 billion, up 31% year-over-year, driven by demand for higher capacity nearline products [14] - Client business accounted for 5% of total revenue at $146 million, up 5% year-over-year [15] - Consumer business represented 6% of revenue at $162 million, down 1% year-over-year [15] Market Data and Key Metrics Changes - The company delivered 204 exabytes to customers, a 23% increase year-over-year, including 2.2 million drives of the latest generation ePMR [13][11] - Shipments of ePMR products with capacities up to 26 terabytes CMR and 32 terabytes Ultra SMR surpassed 2.2 million units in the September quarter [5][11] Company Strategy and Development Direction - The company is focusing on AI-driven growth, leveraging AI to enhance productivity and innovation internally [4][5] - Investments are being made in head wafer and media technology to drive higher aerial density and manufacturing throughput [6][7] - The company is on track to start HAMR qualification for one hyperscale customer in the first half of calendar year 2026, with plans to expand to three customers [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in long-term business strength despite macroeconomic uncertainties, expecting continued revenue growth driven by data center demand [12][11] - The company anticipates revenue for Q2 fiscal 2026 to be around $2.9 billion, reflecting approximately 20% year-over-year growth [18][12] Other Important Information - The company announced a 25% increase in its dividend per share to $0.125, reflecting confidence in long-term business prospects [11][17] - The company has returned a total of $785 million to shareholders through share repurchases and dividends since the launch of its capital return program [17][16] Q&A Session Summary Question: How does the company plan to meet rising customer demand while keeping supply-demand in balance? - The company focuses on delivering higher capacity drives and has shipped over 2.2 million units last quarter, equating to about 70 exabytes of data [23][24] Question: How should the market think about incremental gross margins moving forward? - The company reported a gross margin of 43.9% and expects further improvement in Q2 fiscal 2026, with a focus on maintaining incremental gross margins of approximately 50% [26][27] Question: Can you provide an update on the HAMR roadmap and its qualification timeline? - The company has pulled forward the qualification process for HAMR to the first half of calendar 2026, with expectations for ramp-up in the first half of calendar 2027 [31][32] Question: What is the outlook for exabyte growth and pricing trends? - The company sees exabyte growth trending towards 23% due to strong demand and expects mid to high single-digit cost reductions per terabyte [41][42] Question: How does the company view the balance between HDDs and SSDs in the market? - The company anticipates HDDs will continue to represent about 80% of the bits stored in data centers, despite the rise of SSDs for certain workloads [92][93] Question: What are the implications of long-term agreements with hyperscale customers? - The company has secured firm purchase orders extending throughout 2026 and into 2027, indicating strong customer confidence and demand [8][62]

Financial Performance Highlights - Revenue reached $2.8 billion, exceeding the high end of guidance[5] - Non-GAAP gross margin was 43.9%, a year-over-year increase of 660 basis points[5, 10] - Non-GAAP operating margin was 30.4%, a year-over-year increase of 1200 basis points[5, 10] - Non-GAAP EPS was $1.78, also above the high end of guidance[5] - Cash flow from operations was $672 million[5] - Free cash flow was $599 million[5] Capital Allocation - Share repurchases increased to $553 million[5] - Dividend increased to $0.125 per share[5] Revenue Breakdown - Cloud revenue was $2.51 billion in Q1FY26[13] - Total revenue in Q1FY26 was $2.818 billion, a 27% increase year-over-year[10, 13] Q2FY26 Guidance (Non-GAAP) - Revenue is expected to be $2.9 billion, plus or minus $100 million[11] - Diluted EPS is projected at $1.88, plus or minus $0.15[11]

Q1FY26 Highlights: Exhibit 99.1 • Revenue of $2.82 billion, up 27% year over year • GAAP diluted EPS of $3.07 and non-GAAP diluted EPS of $1.78 • Cash flow from operations of $672 million; free cash flow of $599 million • Q2FY26 revenue expected to be up 20% year over year at mid-point SAN JOSE, Calif. — October 30, 2025 — Western Digital Corp. (Nasdaq: WDC) today reported fiscal first quarter 2026 financial results for the period ended October 3, 2025. "Western Digital continues to execute well in a strong ...

Industry Overview - The data-storage sector is experiencing significant growth driven by cloud migration, AI/ML workloads, and edge devices, with a projected CAGR of 17.2%, reaching $774 billion by 2032 from $255.3 billion in 2025 [2][3] - The cloud storage segment is expected to dominate the market due to its scalability and cost-effectiveness, while the healthcare sector is anticipated to have the highest CAGR due to increasing unstructured data [2] Company Analysis: Western Digital Corporation (WDC) - WDC is a key player in the global data infrastructure, focusing on hardware storage solutions like HDDs and SSDs, and is committed to technological improvements to enhance product density, speed, energy efficiency, and cost-effectiveness [4][5] - The company is leveraging AI technology to drive growth, with a new 25,600-square-foot System Integration and Test Lab to accelerate product development and testing [5] - WDC expects non-GAAP revenues of $2.7 billion for the fiscal first quarter, reflecting a 22% year-over-year increase, and anticipates gross margins of 41-42% [6][8] - The company has reduced its debt by $2.6 billion, achieving a net leverage target of 1–1.5x, and is focused on enhancing shareholder value through dividends and buybacks [10][8] Company Analysis: NetApp Inc. (NTAP) - NTAP is positioned to drive growth in data infrastructure, focusing on AI and cloud solutions, with strong demand for its all-flash portfolio and modern data infrastructure [11][16] - The company reported an 80% revenue increase in its Keystone storage-as-a-service, and its Public Cloud segment is benefiting from healthy traction in hyperscaler services [18][19] - NTAP returned $404 million to shareholders in the fiscal first quarter and $1.57 billion for the fiscal year through dividends and share repurchases [19] - Despite challenges from macroeconomic uncertainty and cautious IT spending, NTAP is experiencing strong demand for its AI and data lake solutions [20][12] Performance Comparison - Over the past year, WDC's stock has increased by 116.5%, while NTAP's stock has declined by 1% [23] - In terms of valuation, NTAP trades at a forward price/sales ratio of 3.3, lower than WDC's 4.21 [24] - The Zacks Consensus Estimate for WDC's earnings for fiscal 2026 has been revised up by 2.6% to $6.67, while NTAP's estimate has increased by 0.26% to $7.77 [27][29] Investment Outlook - Both WDC and NTAP are well-positioned to capitalize on the emerging data storage industry, with WDC currently rated as a Strong Buy and NTAP as a Hold according to Zacks Rank [30]

We recently published 10 Stocks Defying Wall Street Slump; 8 Hit Fresh Highs. Western Digital Corp. (NASDAQ:WDC) is one of the best-performing stocks on Thursday. Western Digital bounced back on Wednesday to reach a new all-time high as investors took early positions ahead of the release of its earnings performance which came out after market close. During the session, Western Digital Corp. (NASDAQ:WDC) soared to its highest price of $145.68 before paring gains to finish the day just up by 13.18 percent ...

Core Insights - Western Digital Corporation is set to release its first-quarter earnings results on October 30, with analysts expecting earnings of $1.58 per share, a decrease from $1.78 per share in the same period last year [1] - The consensus estimate for quarterly revenue is $2.73 billion, down from $4.09 billion a year earlier [1] Financial Performance - On July 30, Western Digital reported better-than-expected fourth-quarter results and provided first-quarter guidance that exceeded estimates [2] - Following the positive fourth-quarter results, Western Digital shares increased by 13.2%, closing at $141.38 [2] Analyst Ratings - UBS analyst Timothy Arcuri maintained a Neutral rating and raised the price target from $85 to $135 [4] - Mizuho analyst Vijay Rakesh maintained an Outperform rating and increased the price target from $120 to $160 [4] - Loop Capital analyst Ananda Baruah maintained a Buy rating and raised the price target from $92 to $150 [4] - Wedbush analyst Matt Bryson maintained an Outperform rating and increased the price target from $90 to $135 [4] - Citigroup analyst Asiya Merchant maintained a Buy rating and raised the price target from $110 to $135 [4]

Core Insights - Western Digital Corp. (NASDAQ:WDC) triggered a significant Power Inflow alert, indicating strong bullish sentiment among traders [3][4] - The stock price rose from $138.77 to a high of $144.30 following the Power Inflow signal, reflecting a 4.0% increase [4][7] - The Power Inflow signal is a proprietary indicator from TradePulse that highlights significant shifts in order flow, suggesting a high probability of bullish price movement [5][6] Order Flow Analytics - Order flow analytics assess real-time buying and selling trends by analyzing volume, timing, and order size from both retail and institutional traders [6] - These analytics provide insights into price behavior and market sentiment, enabling informed trading decisions [6] Intraday Performance - At the time of the Power Inflow alert, WDC's stock was priced at $138.77, with a notable increase in buying activity observed immediately after the signal [4][7] - The Power Inflow alert serves as an example of how order flow analytics can identify bullish momentum, particularly when stock prices appear stagnant [7]

Core Viewpoint - The storage sector in the U.S. stock market has experienced significant gains, with companies like Seagate Technology, Western Digital, SanDisk, and Micron Technology seeing substantial increases in their stock prices over the past two months, driven by a dramatic rise in memory prices [1][2][3]. Group 1: Stock Performance - Seagate Technology's stock rose by 17.2%, with a cumulative increase of 54.41% over the past two months [1][2]. - Western Digital's stock increased by over 12%, with a cumulative rise of 72.37% [1][2]. - SanDisk's stock surged by over 10%, with an impressive cumulative increase of 283% [1][2]. - Micron Technology's stock rose nearly 3%, with a cumulative increase of 89.13% [1][2]. Group 2: Price Trends - Memory prices have seen a dramatic increase, with reports indicating that memory module prices in Hangzhou, Zhejiang, have doubled within a month [2][3]. - TrendForce data shows that DRAM prices surged by 171.8% year-over-year in Q3 2025, while gold prices increased by only 115% during the same period [3][4]. - Specific DRAM products, such as DDR5 and DDR4, saw price increases of 20.59% and 11.11% respectively in mid-October, with month-over-month increases of 58.73% and 43% [3][4]. Group 3: Supply and Demand Dynamics - The surge in prices is attributed to a structural imbalance in supply caused by the shift in production capacity towards high-bandwidth memory (HBM) chips due to the AI boom [4][5]. - Major manufacturers are reallocating production from standard DRAM to HBM, which is expected to dominate the market, with HBM revenue projected to nearly double by 2025 [4][5]. - The competition in the low-end DRAM market has prompted leading manufacturers like Samsung and SK Hynix to pivot towards higher-margin products, further constraining the supply of DDR4 memory [4][5]. Group 4: Market Reactions - Many distributors began stockpiling memory products earlier in the year, leading to reduced market supply and exacerbating price increases [5][6]. - The rising costs of memory chips are putting pressure on consumer electronics and server manufacturers, who are starting to pass these costs onto consumers [6][7]. - Companies like Raspberry Pi and Xiaomi have publicly acknowledged the impact of rising memory costs on their pricing strategies [6][7].