Key Takeaways The computer storage devices industry players are likely to gain from solid momentum in cloud computing, Internet of Things (IoT), auto, connected devices, virtual reality and artificial intelligence (AI) in the long run. These factors propel the demand for robust data storage solutions, bolstering computer storage product requirements. WDC expects the proliferation of generative AI-driven storage deployments to result in a client and consumer device refresh cycle, and boost content creation a ...

Core Viewpoint - The comparison between Western Digital (WDC) and Pure Storage (PSTG) indicates that WDC is more attractive to value investors due to its stronger earnings outlook and better valuation metrics [1][3]. Valuation Metrics - WDC has a forward P/E ratio of 11.67, significantly lower than PSTG's forward P/E of 31.47 [5]. - WDC's PEG ratio is 0.85, while PSTG's PEG ratio is 1.69, suggesting WDC is more undervalued relative to its expected earnings growth [5]. - WDC's P/B ratio stands at 4.98, compared to PSTG's P/B of 14.99, further indicating WDC's relative undervaluation [6]. Zacks Rank and Style Scores - WDC holds a Zacks Rank of 1 (Strong Buy), while PSTG has a Zacks Rank of 3 (Hold), reflecting a stronger improvement in WDC's earnings outlook [3][6]. - WDC's Value grade is B, contrasting with PSTG's Value grade of F, highlighting WDC's superior valuation metrics [6].

Core Insights - The rapid adoption of Agentic AI is increasing the demand for unstructured data storage, with Western Digital Corporation (WDC) leveraging this technology to enhance product development and efficiency [1][2] - The demand for scalable storage solutions is rising as data becomes crucial for AI-driven innovation, with HDDs providing unmatched cost efficiency and reliability [2] - WDC's product demand is growing, with significant shipments of high-capacity drives, reflecting a strong market position [3][5] Company Performance - WDC reported a 30% year-over-year revenue increase to $2.61 billion, driven by high-capacity HDD storage for cloud and generative AI workloads [5][10] - The company projects a 22% year-over-year revenue growth for the fiscal first quarter, estimating revenues of $2.7 billion (+/- $100 million) [5][10] - Shipments of PMR drives exceeding 26 terabytes more than doubled sequentially, surpassing 1.7 million units in the June quarter [3][10] Competitive Landscape - WDC competes with major players like Seagate Technology and Pure Storage in the storage and data market [6] - Seagate reported a 30% year-over-year revenue increase to $2.44 billion, driven by demand from cloud, AI, and edge computing [8] - Pure Storage focuses on software-defined all-flash solutions, enhancing performance for unstructured data workloads [9] Market Outlook - WDC's platforms business is accelerating due to the growth of AI, positioning the company to serve infrastructure providers and AI companies [4] - Despite macroeconomic uncertainties, WDC expects revenues to grow 11% to $3.5 billion for fiscal 2026, supported by strong demand for its product offerings [11] - WDC shares have gained 18.4% over the past year, outperforming the Zacks Computer-Storage Devices industry [12]

PART I [Item 1. Business](index=5&type=section&id=Item%201.%20Business) Western Digital, a leading HDD data storage provider, now focuses on its HDD business for cloud data centers and AI infrastructure after its Flash business separation - Western Digital completed the separation of its HDD and Flash business units on February 21, 2025, to create two independent public companies, now focusing on its existing HDD business[21](index=21&type=chunk) - HDDs are considered the preferred technology for storing large volumes of data due to their economical solution for mass storage needs in cloud data centers, especially in the age of AI[22](index=22&type=chunk)[30](index=30&type=chunk) - The company's product portfolio addresses three main end markets: Cloud (public/private cloud, enterprise), Client (OEM and channel customers for desktops/notebooks), and Consumer (external storage products)[24](index=24&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk) - Western Digital holds approximately **4,500 active patents** covering data storage technologies and invests substantial resources in R&D to develop new products and improve existing ones, focusing on areal density and cost leadership[31](index=31&type=chunk)[32](index=32&type=chunk)[37](index=37&type=chunk) - The company's business strategy centers on leadership, innovation, and execution, with foundational elements including enhanced customer focus, product/technology leadership, rigorous financial discipline, operational excellence, innovation/growth, and high-performance teams[34](index=34&type=chunk)[35](index=35&type=chunk) - International sales represented **55%**, **58%**, and **57%** of net revenue for 2025, 2024, and 2023, respectively, indicating significant global market presence[46](index=46&type=chunk) - As of the end of 2025, Western Digital employed approximately **40,000 people worldwide**, with **88% in Asia Pacific** and **11% in the Americas**[51](index=51&type=chunk) [Item 1A. Risk Factors](index=13&type=section&id=Item%201A.%20Risk%20Factors) The company faces material risks from global conditions, supply chain disruptions, technology transitions, intense competition, customer concentration, high debt, and legal/compliance issues - Adverse global or regional conditions (e.g., volatility in financial markets, inflation, trade wars, geopolitical tensions) could significantly harm demand, increase costs, and reduce profitability[67](index=67&type=chunk) - Dependence on a limited number of qualified suppliers for critical components and services poses a risk of supply chain disruptions, increased costs, or inability to meet demand[73](index=73&type=chunk)[74](index=74&type=chunk) - The separation of the Flash business unit (Sandisk) introduces risks such as potential business disruption, diversion of management time, impact on talent retention, and increased vulnerability as a smaller, less diversified company[88](index=88&type=chunk)[89](index=89&type=chunk) - Failure to properly manage technology transitions (e.g., to HAMR technology) and product development, or accurately forecast demand, can negatively impact competitiveness and operating results[93](index=93&type=chunk)[94](index=94&type=chunk)[108](index=108&type=chunk) - The company operates in a highly competitive industry subject to variations in average selling prices (ASPs), demand, and technological change, including competition from alternative storage technologies like flash memory[97](index=97&type=chunk)[98](index=98&type=chunk) - Increased revenue concentration in the Cloud end market (**88% of total revenue in 2025**) and among top customers (top 10 accounted for **68% in 2025**) makes the company vulnerable to changes in their demand patterns or loss of key customers[103](index=103&type=chunk) - High debt levels may limit liquidity, restrict operations, and increase vulnerability to adverse economic conditions, with **$1.6 billion in convertible notes** classified as current debt as of June 27, 2025, due to a conversion trigger[116](index=116&type=chunk)[117](index=117&type=chunk) - The company is subject to evolving laws and regulations concerning data privacy, cybersecurity, and intellectual property, with non-compliance potentially leading to penalties, litigation, and reputational harm[129](index=129&type=chunk)[133](index=133&type=chunk)[137](index=137&type=chunk) [Item 1B. Unresolved Staff Comments](index=29&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) No unresolved staff comments are applicable to the company - No unresolved staff comments are applicable[147](index=147&type=chunk) [Item 1C. Cybersecurity](index=29&type=section&id=Item%201C.%20Cybersecurity) Western Digital maintains a robust cybersecurity framework with board oversight, and known threats have not materially impacted its business or financial condition - The company's cybersecurity strategy is dynamic and adaptive, influenced by frameworks like NIST-CSF, and includes advanced security protocols, vulnerability management, access controls, third-party risk management, and employee training[149](index=149&type=chunk) - A dedicated 24x7 Security Operations Center handles security incidents, determining severity, initiating notification protocols, and triaging events based on a pre-established incident severity matrix[150](index=150&type=chunk) - The Cyber Incident Response Plan follows NIST guidelines for incident prevention, detection, analysis, escalation, notification, containment, eradication, and recovery[151](index=151&type=chunk) - The Board of Directors, through its Audit Committee, oversees cybersecurity risk management, receiving regular reports from the Chief Information Security Officer[157](index=157&type=chunk) - As of the report date, the company does not believe known risks from cybersecurity threats have materially affected its business strategy, results of operations, or financial condition[154](index=154&type=chunk) [Item 2. Properties](index=31&type=section&id=Item%202.%20Properties) Western Digital's principal offices are in San Jose, California, with major facilities across the US and Asia, deemed adequate for current needs - Principal executive offices are in San Jose, California[159](index=159&type=chunk) Principal Facilities as of June 27, 2025 | Location | Buildings Owned or Leased | Approximate Square Footage (in thousands) | Description | |:---|:---|:---|:---| | **United States** | | | | | California (Fremont) | Leased | 295 | Manufacturing and R&D | | California (Irvine) | Leased | 258 | R&D, administrative, marketing and sales | | California (San Jose) | Owned | 1,957 | Manufacturing, R&D, administrative, marketing and sales | | Colorado (Colorado Springs) | Leased | 54 | R&D | | Minnesota (Rochester) | Leased | 111 | R&D | | **Asia** | | | | | China (Shenzhen) | Owned and Leased | 614 | Manufacturing | | Japan (Fujisawa) | Owned | 638 | R&D | | Malaysia (Johor) | Owned | 277 | Manufacturing | | Malaysia (Kuala Lumpur) | Owned | 145 | R&D and administrative | | Malaysia (Kuching) | Owned | 529 | Manufacturing and R&D | | Malaysia (Penang) | Owned | 1,192 | Manufacturing | | Philippines (Laguna) | Owned | 632 | Manufacturing and administrative | | Thailand (Bang Pa-In) | Owned and Leased | 1,595 | Manufacturing and R&D | | Thailand (Prachinburi) | Owned | 1,568 | Manufacturing | [Item 3. Legal Proceedings](index=32&type=section&id=Item%203.%20Legal%20Proceedings) Legal proceedings information is incorporated by reference from Note 17 of the Consolidated Financial Statements - Legal proceedings information is detailed in Note 17 of the Consolidated Financial Statements[161](index=161&type=chunk) [Item 4. Mine Safety Disclosures](index=32&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine safety disclosures are not applicable to the company - Mine Safety Disclosures are not applicable[162](index=162&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=33&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Western Digital's common stock is listed on Nasdaq, with a new dividend program and a $2.0 billion share repurchase authorization, impacting stockholder returns - Common stock is listed on the Nasdaq Global Select Market under the symbol 'WDC'[164](index=164&type=chunk) - A quarterly cash dividend program was authorized on April 29, 2025, with **$0.10 per share** paid in fiscal 2025, totaling **$36 million**[165](index=165&type=chunk) - A **$2.0 billion** share repurchase program was authorized on May 9, 2025; in fiscal 2025, **2.8 million shares** were repurchased for **$149 million**, leaving **$1.85 billion** available[168](index=168&type=chunk)[190](index=190&type=chunk) Issuer Purchases of Equity Securities (Quarter Ended June 27, 2025) | Period | Total Number of Shares Purchased (millions) | Average Price Paid per Share ($) | Total Number of Shares Purchased As Part of Publicly Announced Program (millions) | Maximum Value of Shares that May Yet be Purchased Under the Program ($ millions) | |:---|:---|:---|:---|:---| | Mar. 29, 2025 - Apr. 25, 2025 | — | — | — | 2,000 | | Apr. 26, 2025 - May 23, 2025 | 0.5 | 49.74 | 0.5 | 1,975 | | May 24, 2025 - Jun. 27, 2025 | 2.3 | 54.92 | 2.3 | 1,851 | | **Total for the quarter ended Jun. 27, 2025** | **2.8** | **53.97** | **2.8** | | Total Return Analysis (Assumes $100 investment at market close on July 3, 2020) | | July 3, 2020 | July 2, 2021 | July 1, 2022 | June 30, 2023 | June 28, 2024 | June 27, 2025 | |:---|:---|:---|:---|:---|:---|:---| | Western Digital Corporation | $100.00 | $165.43 | $102.31 | $88.60 | $178.53 | $197.73 | | S&P 500 Index | $100.00 | $141.23 | $125.94 | $149.04 | $185.64 | $212.67 | | Dow Jones U.S. Technology Hardware & Equipment Index | $100.00 | $156.60 | $137.50 | $207.56 | $315.78 | $352.49 | [Item 6. [Reserved]](index=34&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section reviews Western Digital's financial performance, including the Flash business separation, revenue growth, improved profitability, and liquidity, alongside critical accounting policies - Western Digital focuses on HDD technology for cloud and hyperscale data center markets after the Flash business separation[176](index=176&type=chunk) - The company completed the separation of its HDD and Flash business units on February 21, 2025, distributing **80.1% of Sandisk shares** to stockholders and retaining a **19.9% stake**[179](index=179&type=chunk) - In fiscal 2025, the company reduced its principal debt by **$2.78 billion** through actions including redeeming senior unsecured notes and exchanging Term Loan A-3 for Sandisk shares[186](index=186&type=chunk)[187](index=187&type=chunk) - A quarterly cash dividend program was adopted in April 2025, and a **$2.0 billion** share repurchase program was authorized in May 2025[188](index=188&type=chunk)[190](index=190&type=chunk) - The One Big Beautiful Bill Act of 2025 (OBBBA) allows for immediate expensing of domestic R&D expenditures starting fiscal year 2026, which is expected to lower future cash tax payments[214](index=214&type=chunk)[257](index=257&type=chunk) Summary Comparison of Consolidated Statements of Operations (in millions, except percentages) | | 2025 | % of Net Revenue | 2024 | % of Net Revenue | 2023 | % of Net Revenue | |:---|:---|:---|:---|:---|:---|:---| | Revenue, net | $9,520 | 100.0% | $6,317 | 100.0% | $6,255 | 100.0% | | Cost of revenue | 5,828 | 61.2% | 4,544 | 71.9% | 4,864 | 77.8% | | Gross profit | 3,692 | 38.8% | 1,773 | 28.1% | 1,391 | 22.2% | | Total operating expenses | 1,358 | 14.3% | 2,176 | 34.4% | 1,939 | 31.0% | | Operating income (loss) | 2,334 | 24.5% | (403) | (6.4)% | (548) | (8.8)% | | Total interest and other income, net | (1,204) | (12.6)% | (336) | (5.3)% | (301) | (4.8)% | | Income (loss) before taxes | 1,130 | 11.9% | (739) | (11.7)% | (849) | (13.6)% | | Income tax expense (benefit) | (513) | (5.4)% | 26 | 0.4% | 53 | 0.8% | | Net income (loss) from continuing operations | $1,643 | 17.3% | $(765) | (12.1)% | $(902) | (14.4)% | Disaggregated Revenue by End Market (in millions) | Revenue by end market | 2025 | 2024 | 2023 | |:---|:---|:---|:---| | Cloud | $8,341 | $5,052 | $4,753 | | Client | $556 | $577 | $691 | | Consumer | $623 | $688 | $811 | | **Total revenue** | **$9,520** | **$6,317** | **$6,255** | Cash Flows Summary (in millions) | Net cash provided by (used in): | 2025 | 2024 | 2023 | |:---|:---|:---|:---| | Operating activities | $1,691 | $(294) | $(408) | | Investing activities | $150 | $(27) | $(762) | | Financing activities | $(1,612) | $187 | $875 | | Effect of exchange rate changes on cash | $6 | $(10) | $(9) | | Net increase (decrease) in cash and cash equivalents | $235 | $(144) | $(304) | [Our Company](index=35&type=section&id=Our%20Company) Western Digital is a leading HDD technology provider, primarily serving cloud and hyperscale data center markets, with its fiscal year 2026 comprising 53 weeks - Western Digital is a leading developer, manufacturer, and provider of HDD data storage devices and solutions, leveraging its capabilities for cloud and hyperscale data center markets[176](index=176&type=chunk) - The company's broad portfolio serves Cloud (public/private cloud, enterprise), Client (OEM/channel for desktops/notebooks), and Consumer (retail/end-user products) end markets[177](index=177&type=chunk) - Fiscal years 2025, 2024, and 2023 each comprised 52 weeks; fiscal year 2026 will be 53 weeks[178](index=178&type=chunk) [Key Developments](index=35&type=section&id=Key%20Developments) Key developments include the Flash business separation, significant debt reduction, initiation of a dividend and share repurchase program, and finalization of prior-year tax resolutions - The separation of HDD and Flash business units was completed on February 21, 2025, with Western Digital focusing on HDD and Sandisk Corporation holding the Flash business[179](index=179&type=chunk) - Western Digital retained **28.8 million shares (19.9%)** of Sandisk common stock, disposing of **21.3 million shares** in June 2025 via a tax-free debt-for-equity exchange[179](index=179&type=chunk) - The company reduced its principal debt by **$2.78 billion** in fiscal 2025 through various actions, including redeeming **$1.80 billion of 4.75% senior unsecured notes** and settling **$800 million of Term Loan A-3**[186](index=186&type=chunk)[187](index=187&type=chunk) - A quarterly cash dividend program was adopted on April 29, 2025, and a **$2.0 billion** share repurchase program was authorized on May 9, 2025, with **$149 million** in repurchases during fiscal 2025[188](index=188&type=chunk)[190](index=190&type=chunk) - Final agreements were reached with the IRS for tax years 2008-2015, with **$162 million** paid in fiscal 2025, resulting in no remaining liability for those years[192](index=192&type=chunk)[223](index=223&type=chunk) [Results of Operations](index=38&type=section&id=Results%20of%20Operations) Western Digital's net revenue increased by 51% in 2025 to $9,520 million, driven by higher capacity HDD sales, leading to a significant improvement in gross profit and a net income of $1,643 million from continuing operations Summary Comparison of Consolidated Statements of Operations (in millions, except percentages) | | 2025 | % of Net Revenue | 2024 | % of Net Revenue | 2023 | % of Net Revenue | |:---|:---|:---|:---|:---|:---|:---| | Revenue, net | $9,520 | 100.0% | $6,317 | 100.0% | $6,255 | 100.0% | | Cost of revenue | 5,828 | 61.2% | 4,544 | 71.9% | 4,864 | 77.8% | | Gross profit | 3,692 | 38.8% | 1,773 | 28.1% | 1,391 | 22.2% | | Total operating expenses | 1,358 | 14.3% | 2,176 | 34.4% | 1,939 | 31.0% | | Operating income (loss) | 2,334 | 24.5% | (403) | (6.4)% | (548) | (8.8)% | | Total interest and other income, net | (1,204) | (12.6)% | (336) | (5.3)% | (301) | (4.8)% | | Income (loss) before taxes | 1,130 | 11.9% | (739) | (11.7)% | (849) | (13.6)% | | Income tax expense (benefit) | (513) | (5.4)% | 26 | 0.4% | 53 | 0.8% | | Net income (loss) from continuing operations | $1,643 | 17.3% | $(765) | (12.1)% | $(902) | (14.4)% | Disaggregated Revenue by End Market (in millions) | Revenue by end market | 2025 | 2024 | 2023 | |:---|:---|:---|:---|\ | Cloud | $8,341 | $5,052 | $4,753 | | Client | $556 | $577 | $691 | | Consumer | $623 | $688 | $811 | | **Total revenue** | **$9,520** | **$6,317** | **$6,255** | - Net revenue increased by **51% in 2025** compared to 2024, driven by a **29% increase in average selling price per unit** and a **15% increase in units sold**, primarily from high-capacity enterprise products for data centers[195](index=195&type=chunk) - Cloud revenue increased by **65% in 2025**, driven by a **36% increase in units sold** and a **20% increase in average selling price per unit** due to a shift to higher capacity drives[196](index=196&type=chunk) - Gross profit increased by **$1.92 billion in 2025**, and gross margin increased by **10.7 percentage points**, attributed to higher revenues, cost reductions, improved manufacturing efficiencies, and a more favorable product mix[205](index=205&type=chunk) - Total operating expenses decreased by **$818 million in 2025**, primarily due to a **$198 million litigation matter credit** and a **$158 million decrease in SG&A expenses**[194](index=194&type=chunk)[209](index=209&type=chunk) - Total interest and other expense, net, increased by **$868 million in 2025**, mainly due to a **$772 million mark-to-market loss** on the retained interest in Sandisk and a **$100 million loss on debt extinguishment**[212](index=212&type=chunk) Income Tax Information (in millions, except percentages) | | 2025 | 2024 | 2023 | |:---|:---|:---|:---|\ | Income (loss) before taxes | $1,130 | $(739) | $(849) | | Income tax expense (benefit) | $(513) | $26 | $53 | | Effective tax rate | (45)% | (4)% | (6)% | [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) Western Digital's liquidity significantly improved in 2025, with net cash provided by operating activities reaching $1,691 million, driven by improved cash conversion and strategic capital allocation actions Cash Flows Summary (in millions) | Net cash provided by (used in): | 2025 | 2024 | 2023 | |:---|:---|:---|:---|\ | Operating activities | $1,691 | $(294) | $(408) | | Investing activities | $150 | $(27) | $(762) | | Financing activities | $(1,612) | $187 | $875 | | Effect of exchange rate changes on cash | $6 | $(10) | $(9) | | Net increase (decrease) in cash and cash equivalents | $235 | $(144) | $(304) | - Net cash provided by operating activities was **$1,691 million in 2025**, a significant improvement from net cash used in 2024 and 2023[223](index=223&type=chunk) Cash Conversion Cycle (in days) | | 2025 | 2024 | 2023 | |:---|:---|:---|:---|\ | Days sales outstanding | 52 | 56 | 56 | | Days in inventory | 76 | 97 | 107 | | Days payables outstanding | (75) | (73) | (66) | | **Cash conversion cycle** | **53** | **80** | **97** | - Net cash provided by investing activities in 2025 was **$150 million**, primarily from **$401 million in net proceeds** from a subsidiary sale and **$148 million from Flash Ventures**, partially offset by **$412 million in capital expenditures**[232](index=232&type=chunk) - Net cash used in financing activities in 2025 was **$1,612 million**, mainly for **$2.09 billion in debt repayments**, **$1.37 billion cash transferred to Sandisk**, and **$149 million in share repurchases**, partially offset by **$2.15 billion from debt issuance**[233](index=233&type=chunk) - Capital expenditures for fiscal year 2026 are expected to be between **4% to 6% of net revenue**[226](index=226&type=chunk) Material Cash Requirements as of June 27, 2025 (in millions) | | Total | 1 Year (2026) | 2-3 Years (2027-2028) | 4-5 Years (2029-2030) | More than 5 Years (Beyond 2030) | |:---|:---|:---|:---|:---|:---|\ | Long-term debt, including current portion | $4,749 | $2,226 | $1,523 | $500 | $500 | | Interest on debt | 507 | 203 | 204 | 69 | 31 | | Operating leases | 165 | 36 | 53 | 30 | 46 | | Purchase obligations and other commitments | 76 | 50 | 26 | — | — | | Mandatory deemed repatriation tax | 331 | 331 | — | — | — | | **Total** | **$5,828** | **$2,846** | **$1,806** | **$599** | **$577** | - The liability for unrecognized tax benefits (excluding interest and penalties) was **$569 million** as of June 27, 2025, with **$332 million** expected to be paid within the next twelve months, offset by **$148 million in tax receivables**[238](index=238&type=chunk)[512](index=512&type=chunk)[513](index=513&type=chunk) [Recent Accounting Pronouncements](index=49&type=section&id=Recent%20Accounting%20Pronouncements) The company adopted ASU 2022-04 and ASU 2023-07, enhancing disclosures, and anticipates future changes from ASU 2024-03 and ASU 2023-09 for more detailed expense and income tax reporting - Adopted ASU 2022-04 (Supplier Finance Programs) in fiscal 2024, requiring disclosures on outstanding obligations[357](index=357&type=chunk) - Adopted ASU 2023-07 (Segment Reporting) in fiscal 2025, expanding disclosures on significant segment expenses[358](index=358&type=chunk) - ASU 2024-03 (Expense Disaggregation) is effective for fiscal years beginning after December 15, 2026, requiring more detailed expense disclosures[359](index=359&type=chunk) - ASU 2023-09 (Income Tax Disclosures) is effective for the year ending July 3, 2026, enhancing income tax disclosure requirements[360](index=360&type=chunk) [Critical Accounting Policies and Estimates](index=49&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The company's financial statements rely on significant judgments and estimates for revenue recognition, inventory valuation, income taxes, and litigation, which are subject to change and could materially impact financial results - Revenue recognition involves significant judgment in estimating variable consideration (price protection, sales incentives) using the expected value method, constrained until a significant revenue reversal is not probable[264](index=264&type=chunk)[265](index=265&type=chunk) - Inventories are valued at the lower of cost or net realizable value, requiring significant judgment in estimating average selling prices, selling expenses, and assessing potential excess or obsolescence based on market conditions and demand[266](index=266&type=chunk)[267](index=267&type=chunk) - Income taxes are accounted for using the asset and liability method, with a valuation allowance recorded for deferred tax assets when realization is not more likely than not, and liabilities for uncertain tax positions recognized based on a two-step process[268](index=268&type=chunk)[269](index=269&type=chunk) - Litigation and contingencies require significant judgment to assess the likelihood and amount of potential loss, with accruals made for probable and estimable losses, and disclosures for reasonably possible losses[271](index=271&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=53&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages foreign currency risk with short-term hedges and interest rate risk on its variable-rate Term Loan A-3, with potential impacts from market movements - The company uses short-term foreign exchange contracts (maturity 12 months or less) to hedge foreign currency fluctuations on operating expenses and product costs, primarily in non-U.S. dollar denominated transactions[272](index=272&type=chunk) - A hypothetical **10% adverse movement** in foreign currency exchange rates relative to the U.S. dollar would result in a foreign exchange fair value loss of **$75 million** as of June 27, 2025[273](index=273&type=chunk) - As of June 27, 2025, the outstanding balance on the variable rate Term Loan A-3 was **$1.65 billion**, and a **1% increase** in the variable interest rate would increase annual interest expense by **$16 million**[275](index=275&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=54&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section provides audited consolidated financial statements, including balance sheets, income statements, cash flows, and detailed notes, along with the independent auditor's report - The consolidated financial statements include the balance sheets, statements of operations, comprehensive income (loss), cash flows, and convertible preferred stock and shareholders' equity for the three years ended June 27, 2025[279](index=279&type=chunk) - KPMG LLP, the independent registered public accounting firm, issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting as of June 27, 2025[279](index=279&type=chunk)[280](index=280&type=chunk) - Critical audit matters included the evaluation of sufficiency of audit evidence over certain variable consideration reductions to revenue and the tax-free determination of the Flash business separation and debt-for-equity exchange[286](index=286&type=chunk)[287](index=287&type=chunk)[290](index=290&type=chunk) Consolidated Balance Sheets (in millions) | ASSETS | June 27, 2025 | June 28, 2024 | |:---|:---|:---|\ | Cash and cash equivalents | $2,114 | $1,551 | | Accounts receivable, net | 1,486 | 1,231 | | Inventories | 1,291 | 1,387 | | Retained interest in Sandisk | 354 | — | | Other current assets | 611 | 360 | | Current assets of discontinued operations | — | 3,531 | | **Total current assets** | **5,856** | **8,060** | | Property, plant and equipment, net | 2,343 | 2,359 | | Goodwill | 4,319 | 4,319 | | Other non-current assets | 1,484 | 837 | | Non-current assets of discontinued operations | — | 8,613 | | **Total assets** | **$14,002** | **$24,188** | | **LIABILITIES, CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY** | | | | Accounts payable | $1,266 | $1,054 | | Accrued expenses | 719 | 1,053 | | Income taxes payable | 800 | 471 | | Accrued compensation | 407 | 435 | | Current portion of long-term debt | 2,226 | 1,750 | | Current liabilities of discontinued operations | — | 1,324 | | **Total current liabilities** | **5,418** | **6,087** | | Long-term debt | 2,485 | 5,684 | | Other liabilities | 559 | 1,002 | | Non-current liabilities of discontinued operations | — | 368 | | **Total liabilities** | **8,462** | **13,141** | | Convertible preferred stock | 229 | 229 | | Common stock | 3 | 3 | | Additional paid-in capital | 4,621 | 4,752 | | Accumulated other comprehensive income (loss) | 20 | (712) | | Retained earnings | 762 | 6,775 | | Treasury stock | (95) | — | | **Total shareholders' equity** | **5,311** | **10,818** | | **Total liabilities, convertible preferred stock and shareholders' equity** | **$14,002** | **$24,188** | Consolidated Statements of Operations (in millions, except per share amounts) | | Year Ended June 27, 2025 | Year Ended June 28, 2024 | Year Ended June 30, 2023 | |:---|:---|:---|:---|\ | Revenue, net | $9,520 | $6,317 | $6,255 | | Cost of revenue | 5,828 | 4,544 | 4,864 | | Gross profit | 3,692 | 1,773 | 1,391 | | Operating expenses: | | | | | Research and development | 994 | 950 | 986 | | Selling, general and administrative | 568 | 726 | 807 | | Litigation matter | (198) | 291 | — | | Business realignment charges | (6) | 209 | 146 | | Total operating expenses | 1,358 | 2,176 | 1,939 | | Operating income (loss) | 2,334 | (403) | (548) | | Interest and other income (expense): | | | | | Interest income | 45 | 33 | 19 | | Interest expense | (357) | (414) | (310) | | Loss on retained interest in Sandisk | (772) | — | — | | Loss on extinguishment of debt | (100) | — | — | | Other income (expense), net | (20) | 45 | (10) | | Total interest and other expense, net | (1,204) | (336) | (301) | | Income (loss) before taxes | 1,130 | (739) | (849) | | Income tax expense (benefit) | (513) | 26 | 53 | | Net income (loss) from continuing operations | 1,643 | (765) | (902) | | Net income (loss) from discontinued operations, net of taxes | 246 | (33) | (782) | | **Net income (loss)** | **$1,889** | **$(798)** | **$(1,684)** | | **Net income (loss) per common share:** | | | | | Basic: | | | | | Continuing operations | $4.61 | $(2.51) | $(2.91) | | Discontinued operations | 0.70 | (0.10) | (2.46) | | Net income (loss) per share | 5.31 | (2.61) | (5.37) | | Diluted: | | | | | Continuing operations | 4.45 | (2.51) | (2.91) | | Discontinued operations | 0.67 | (0.10) | (2.46) | | Net income (loss) per share | 5.12 | (2.61) | (5.37) | Consolidated Statements of Cash Flows (in millions) | | Year Ended June 27, 2025 | Year Ended June 28, 2024 | Year Ended June 30, 2023 | |:---|:---|:---|:---|\ | **Cash flows from operating activities** | | | | | Net income (loss) | $1,889 | $(798) | $(1,684) | | Adjustments to reconcile net income (loss) to net cash provided by (used in) operations | | | | | Depreciation and amortization | 451 | 568 | 828 | | Stock-based compensation | 265 | 295 | 318 | | Deferred income taxes | (745) | (161) | (48) | | Loss on retained interest in Sandisk | 772 | — | — | | Loss on extinguishment of debt | 100 | — | — | | Changes in operating assets and liabilities, net | (1,030) | (307) | 26 | | **Net cash provided by (used in) operating activities** | **1,691** | **(294)** | **(408)** | | **Cash flows from investing activities** | | | | | Purchases of property, plant and equipment | (412) | (487) | (821) | | Proceeds from business divestiture | 401 | — | — | | Notes receivable issuances to Flash Ventures | (266) | (243) | (627) | | Notes receivable proceeds from Flash Ventures | 239 | 482 | 641 | | **Net cash provided by (used in) investing activities** | **150** | **(27)** | **(762)** | | **Cash flows from financing activities** | | | | | Repayment of debt | (2,094) | (2,104) | (1,180) | | Proceeds from debt issuance | 2,150 | 3,000 | 1,180 | | Cash transferred to Sandisk related to Separation | (1,366) | — | — | | Repurchases of common stock | (149) | — | — | | Dividends paid to shareholders | (44) | — | — | | **Net cash provided by (used in) financing activities** | **(1,612)** | **187** | **875** | | Effect of exchange rate changes on cash | 6 | (10) | (9) | | **Net increase (decrease) in cash and cash equivalents** | **235** | **(144)** | **(304)** | | Cash and cash equivalents, end of year | $2,114 | $1,879 | $2,023 | [Note 1. Organization and Basis of Presentation](index=63&type=section&id=Note%201.%20Organization%20and%20Basis%20of%20Presentation) Western Digital, a leading HDD technology provider, operates as a single reportable segment post-Flash separation, with financial statements prepared under U.S. GAAP, relying on estimates for key accounting policies - Western Digital is a leading developer, manufacturer, and provider of HDD data storage devices and solutions, serving Cloud, Client, and Consumer end markets[308](index=308&type=chunk)[309](index=309&type=chunk) - Following the Flash business separation, the company's continuing operations consist of a single reportable segment: HDD[313](index=313&type=chunk) - Financial statements are prepared under U.S. GAAP, with estimates and assumptions that could be materially affected by changes in U.S. trade policies and tariffs[310](index=310&type=chunk)[315](index=315&type=chunk) - Key accounting policies include valuing inventories at the lower of cost or net realizable value, recognizing revenue when control is transferred and adjusting for variable consideration, and accounting for income taxes under the asset and liability method with valuation allowances[320](index=320&type=chunk)[321](index=321&type=chunk)[327](index=327&type=chunk)[333](index=333&type=chunk)[343](index=343&type=chunk) - Goodwill and In-process Research and Development (IPR&D) are tested annually for impairment, with no impairment recorded in 2025, 2024, or 2023[323](index=323&type=chunk)[325](index=325&type=chunk) - The company uses foreign exchange contracts to hedge foreign currency risk, with changes in fair value for designated cash flow hedges deferred in Other comprehensive income (loss)[349](index=349&type=chunk)[350](index=350&type=chunk) [Note 2. Recent Accounting Pronouncements](index=71&type=section&id=Note%202.%20Recent%20Accounting%20Pronouncements) Western Digital adopted ASU 2022-04 and ASU 2023-07, enhancing disclosures, and anticipates future changes from ASU 2024-03 and ASU 2023-09 for more detailed expense and income tax reporting - Adopted ASU 2022-04, 'Liabilities-Supplier Finance Programs,' in fiscal 2024, requiring annual and interim disclosures for supplier finance program obligations[357](index=357&type=chunk) - Adopted ASU 2023-07, 'Segment Reporting,' in fiscal 2025, expanding disclosures on significant segment expenses and other segment items[358](index=358&type=chunk) - ASU 2024-03, 'Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures,' is effective for fiscal years beginning after December 15, 2026, requiring more detailed expense disaggregation[359](index=359&type=chunk) - ASU 2023-09, 'Income Taxes,' is effective for the year ending July 3, 2026, calling for enhanced income tax disclosure requirements[360](index=360&type=chunk) [Note 3. Discontinued Operations](index=72&type=section&id=Note%203.%20Discontinued%20Operations) Western Digital completed the separation of its Flash business unit, Sandisk Corporation, into an independent public company on February 21, 2025, retaining a 19.9% interest and reporting historical results as discontinued operations - The separation of the Flash business unit (Sandisk Corporation) was completed on February 21, 2025, making Sandisk an independent public company[363](index=363&type=chunk) - Western Digital retained a **19.9% ownership interest (28.8 million shares)** in Sandisk, which is measured at fair value; **21.3 million shares** were exchanged for **$800 million of Term Loan A-3**[363](index=363&type=chunk) - The historical net income and applicable assets/liabilities of Sandisk are reported as discontinued operations for periods prior to the separation[363](index=363&type=chunk) Assets and Liabilities of Discontinued Operations (June 28, 2024, in millions) | Assets | Amount | |:---|:---|\ | Cash and cash equivalents | $328 | | Accounts receivable, net | 935 | | Inventories | 1,955 | | Other current assets | 313 | | **Current assets of discontinued operations** | **$3,531** | | Property, plant and equipment, net | $808 | | Notes receivable and investments in Flash Ventures | 991 | | Goodwill | 5,713 | | Other non-current assets | 1,101 | | **Non-current assets of discontinued operations** | **$8,613** | | **Liabilities** | | | Accounts payable | $357 | | Accounts payable to related parties | 313 | | Accrued expenses | 427 | | Income taxes payable | 54 | | Accrued compensation | 173 | | **Current liabilities of discontinued operations** | **$1,324** | | **Non-current liabilities of discontinued operations** | **$368** | Net Income (Loss) from Discontinued Operations, Net of Taxes (in millions) | | 2025 | 2024 | 2023 | |:---|:---|:---|:---|\ | Revenue, net | $4,361 | $6,686 | $6,063 | | Cost of revenue | 2,892 | 5,514 | 5,567 | | Operating income (loss) | 488 | 86 | (737) | | Income (loss) before taxes | 452 | 78 | (701) | | Income tax expense | 206 | 111 | 81 | | **Net income (loss) from discontinued operations, net of taxes** | **$246** | **$(33)** | **$(782)** | - Prior to separation, the company sold **80% of its equity interest** in SanDisk Semiconductor (Shanghai) Co. Ltd. (SDSS), resulting in a gain on divestiture of **$113 million** and net proceeds of **$401 million**[370](index=370&type=chunk) [Note 4. Segment Reporting, Disaggregated Revenue, Geographic Information, and Concentrations of Risk](index=75&type=section&id=Note%204.%20Segment%20Reporting%2C%20Disaggregated%20Revenue%2C%20Geographic%20Information%2C%20and%20Concentrations%20of%20Risk) Western Digital operates as a single HDD segment, with revenue disaggregated by end market and geography, facing significant customer and supplier concentration risks - The company operates as a single reportable segment: HDD, following the Flash business separation[374](index=374&type=chunk) Disaggregated Revenue by End Market (in millions) | Revenue by end market | 2025 | 2024 | 2023 | |:---|:---|:---|:---|\ | Cloud | $8,341 | $5,052 | $4,753 | | Client | $556 | $577 | $691 | | Consumer | $623 | $688 | $811 | | **Total revenue** | **$9,520** | **$6,317** | **$6,255** | Net Revenue by Geographic Region (in millions) | | 2025 | 2024 | 2023 | |:---|:---|:---|:---|\ | United States | $4,328 | $2,636 | $2,694 | | China | 1,549 | 488 | 471 | | Hong Kong | 1,051 | 1,331 | 1,139 | | Rest of Asia | 792 | 573 | 546 | | Europe, Middle East and Africa | 1,536 | 1,067 | 1,175 | | Other | 264 | 222 | 230 | | **Total** | **$9,520** | **$6,317** | **$6,255** | - For 2025, three customers accounted for **17%**, **12%**, and **10% of net revenue**, respectively; the top 10 customers accounted for **68% of net revenue**[379](index=379&type=chunk) - As of June 27, 2025, three customers accounted for **20%**, **19%**, and **12% of net accounts receivable**[380](index=380&type=chunk) - The company relies on single-source vendors for some key components and third-party subcontractors for assembly and testing, posing supplier concentration risks[383](index=383&type=chunk) [Note 5. Supplemental Financial Statement Data](index=78&type=section&id=Note%205.%20Supplemental%20Financial%20Statement%20Data) This note provides supplemental details on accounts receivable, inventories, property, plant and equipment, product warranty liability, goodwill, and accumulated other comprehensive income (loss), highlighting changes in these key financial items - No trade accounts receivable were sold in 2025, compared to **$284 million in 2024** and **$406 million in 2023**[386](index=386&type=chunk) Inventories (in millions) | Inventories | June 27, 2025 | June 28, 2024 | |:---|:---|:---|\ | Raw materials and component parts | $227 | $329 | | Work-in-process | 785 | 829 | | Finished goods | 279 | 229 | | **Total inventories** | **$1,291** | **$1,387** | - Depreciation expense for property, plant and equipment totaled **$334 million in 2025**, **$347 million in 2024**, and **$389 million in 2023**[388](index=388&type=chunk) - Goodwill carrying amount was **$4.32 billion** as of June 27, 2025, with no impairment charges in 2025, 2024, or 2023[393](index=393&type=chunk) Product Warranty Accrual (in millions) | | 2025 | 2024 | 2023 | |:---|:---|:---|:---|\ | Warranty accrual, beginning of period | $142 | $202 | $293 | | Charges to operations | 99 | 79 | 76 | | Utilization | (83) | (119) | (143) | | Changes in estimate related to pre-existing warranties | (6) | (20) | (24) | | **Warranty accrual, end of period** | **$152** | **$142** | **$202** | Accumulated Other Comprehensive Income (Loss) (in millions) | | Actuarial Pension Gains (Losses) | Foreign Currency Translation Adjustment | Unrealized Gains (Losses) on Derivative Contracts | Total Accumulated Comprehensive Income (Loss) | |:---|:---|:---|:---|:---|\ | Balance at June 30, 2023 | $(2) | $(389) | $(157) | $(548) | | Net current-period other comprehensive income (loss) | 16 | (116) | (64) | (164) | | Balance at June 28, 2024 | 14 | (505) | (221) | (712) | | Net current-period other comprehensive income | 2 | 45 | 139 | 186 | | Distribution in connection with the Separation | — | 458 | 88 | 546 | | **Balance at June 27, 2025** | **$16** | **$(2)** | **$6** | **$20** | [Note 6. Fair Value Measurements and Investments](index=81&type=section&id=Note%206.%20Fair%20Value%20Measurements%20and%20Investments) The company classifies financial assets and liabilities at fair value into Level 1, 2, and 3, with total assets at fair value of $649 million and liabilities of $4 million as of June 27, 2025 Financial Instruments Carried at Fair Value (June 27, 2025, in millions) | | Level 1 | Level 2 | Level 3 | Total | |:---|:---|:---|:---|:---|\ | **Assets:** | | | | | | Retained interest in Sandisk | $354 | — | — | $354 | | Cash equivalents – Money market funds | 285 | — | — | 285 | | Foreign exchange contracts | — | 10 | — | 10 | | **Total assets at fair value** | **$639** | **$10** | **$—** | **$649** | | **Liabilities:** | | | | | | Foreign exchange contracts | $— | $4 | $— | $4 | | **Total liabilities at fair value** | **$—** | **$4** | **$—** | **$4** | Financial Instruments Not Carried at Fair Value (in millions) | | June 27, 2025 Carrying Value | June 27, 2025 Fair Value | June 28, 2024 Carrying Value | June 28, 2024 Fair Value | |:---|:---|:---|:---|:---|\ | 4.75% senior unsecured notes due 2026 | $500 | $499 | $2,296 | $2,253 | | Variable interest rate Term Loan A-2 maturing 2027 | — | — | 2,578 | 2,539 | | Variable interest rate Term Loan A-3 maturing 2027 | 1,642 | 1,655 | — | — | | 3.00% convertible notes due 2028 | 1,575 | 2,849 | 1,568 | 2,556 | | 2.85% senior notes due 2029 | 498 | 463 | 496 | 434 | | 3.10% senior notes due 2032 | 496 | 442 | 496 | 407 | | **Total** | **$4,711** | **$5,908** | **$7,434** | **$8,189** | - The retained interest in Sandisk (**7.5 million shares** as of June 27, 2025) is valued based on quoted market prices (Level 1)[401](index=401&type=chunk) - Foreign exchange contracts are valued using an income approach based on a present value of future cash flows model, with market-based observable inputs (Level 2)[403](index=403&type=chunk) [Note 7. Derivative Instruments and Hedging Activities](index=83&type=section&id=Note%207.%20Derivative%20Instruments%20and%20Hedging%20Activities) Western Digital uses short-term foreign exchange forward contracts as cash flow or non-designated hedges to manage foreign currency risk, with immaterial net gains and losses for the periods presented - The company uses foreign exchange forward contracts (maturity 12 months or less) to hedge foreign currency risk, designated as cash flow hedges or non-designated hedges[408](index=408&type=chunk) - Unrealized gains or losses on designated cash flow hedges are recognized in Accumulated other comprehensive income (loss) and subsequently reclassified to earnings[410](index=410&type=chunk) - Total net realized and unrealized transaction and foreign exchange contract currency gains and losses were not material for 2025, 2024, and 2023[409](index=409&type=chunk) [Note 8. Debt](index=84&type=section&id=Note%208.%20Debt) Western Digital's total debt decreased to $4,749 million in 2025 due to repayments and a debt-for-equity exchange, with $1.60 billion in convertible notes classified as current liabilities due to a conversion trigger Debt Composition (in millions) | Debt | June 27, 2025 | June 28, 2024 | |:---|:---|:---|\ | 4.75% senior unsecured notes due 2026 | $500 | $2,300 | | Variable interest rate Term Loan A-2 maturing 2027 | — | 2,588 | | Variable interest rate Term Loan A-3 maturing 2027 | 1,649 | — | | 3.00% convertible notes due 2028 | 1,600 | 1,600 | | 2.85% senior notes due 2029 | 500 | 500 | | 3.10% senior notes due 2032 | 500 | 500 | | **Total debt** | **$4,749** | **$7,488** | | Issuance costs | (38) | (54) | | Subtotal | 4,711 | 7,434 | | Less: current portion of long-term debt | (2,226) | (1,750) | | **Long-term debt** | **$2,485** | **$5,684** | - The company settled **$800 million of Term Loan A-3 principal** through a non-cash exchange of **21.3 million Sandisk common shares** and a **$4 million cash payment**, resulting in a **$100 million loss on extinguishment of debt**[415](index=415&type=chunk) - The **3.00% convertible notes due 2028 ($1.60 billion principal)** were classified as current liabilities as of June 27, 2025, because the sale price conditional conversion feature was triggered[427](index=427&type=chunk) - The company maintains a **$1.25 billion 2027 Revolving Credit Facility** and was in compliance with all financial covenants as of June 27, 2025[419](index=419&type=chunk)[421](index=421&type=chunk) Maturity of Debt as of June 27, 2025 (in millions) | Fiscal year | Contractual Maturity | |:---|:---|\ | 2026 | $2,226 | | 2027 | 1,523 | | 2028 | — | | 2029 | 500 | | 2030 | — | | 2031 and thereafter | 500 | | **Total debt maturities** | **$4,749** | | Issuance costs | (38) | | **Net carrying value** | **$4,711** | [Note 9. Pension and Other Post-Retirement Benefit Plans](index=88&type=section&id=Note%209.%20Pension%20and%20Other%20Post-Retirement%20Benefit%20Plans) Western Digital maintains unfunded pension plans primarily in Japan, Thailand, and the Philippines, with a projected benefit obligation of $272 million and plan assets of $204 million as of June 27, 2025 - The company's principal pension plans are in Japan, Thailand, and the Philippines[438](index=438&type=chunk) Pension Plans Obligations and Funded Status (in millions) | | 2025 | 2024 | 2023 | |:---|:---|:---|:---|\ | Projected benefit obligation at end of period | $272 | $244 | $273 | | Fair value of plan assets at end of period | 204 | 184 | 185 | | **Unfunded status** | **$68** | **$60** | **$88** | - The expected long-term rate of return on the Pension Plans' assets is **2.5%**[438](index=438&type=chunk)[442](index=442&type=chunk) - The target asset allocation for pension plans is **55% in debt securities**, **30% in equity securities**, and **15% in other assets**, with risk managed through diversification and periodic review[445](index=445&type=chunk) Pension Plans Assets Measured at Fair Value (June 27, 2025, in millions) | | Level 1 | Level 2 | Level 3 | Total | |:---|:---|:---|:---|:---|\ | **Plan assets measured at fair value:** | | | | | | Equity commingled/mutual funds | $— | $66 | $— | $66 | | Fixed income commingled/mutual funds | — | 110 | — | 110 | | Net plan assets subject to leveling | — | 176 | — | 176 | | Real estate investment trust at net asset value | — | — | — | 28 | | **Total investments at fair value** | **$—** | **$176** | **$—** | **$204** | [Note 10. Leases and Other Commitments](index=92&type=section&id=Note%2010.%20Leases%20and%20Other%20Commitments) Western Digital leases facilities and data center space under long-term operating leases, with right-of-use assets of $123 million and total liabilities of $141 million as of June 27, 2025, alongside minimum long-term purchase commitments - The company leases facilities and data center space under long-term operating leases expiring through 2034[454](index=454&type=chunk) Operating Lease Assets and Liabilities (in millions) | | June 27, 2025 | June 28, 2024 | |:---|:---|:---|\ | Operating lease right-of-use assets | $123 | $143 | | Current portion of long-term operating lease liabilities | 31 | 28 | | Long-term operating lease liabilities | 110 | 133 | | **Total operating lease liabilities** | **$141** | **$161** | - Lease expense was **$33 million in 2025**, **$41 million in 2024**, and **$49 million in 2023**[455](index=455&type=chunk) - The weighted average remaining lease term is **6.1 years**, and the weighted average discount rate is **5.0%** as of June 27, 2025[455](index=455&type=chunk) Minimum Long-term Commitments (in millions) | | Long-term Commitments | |:---|:---|\ | 2026 | $50 | | 2027 | 26 | | **Total** | **$76** | [Note 11. Western Digital Corporation 401(k) Plan](index=94&type=section&id=Note%2011.%20Western%20Digital%20Corporation%20401%28k%29%20Plan) Western Digital maintains a 401(k) Plan for U.S. employees, resuming matching contributions on January 1, 2024, with total contributions of $22 million in 2025 - The Western Digital Corporation 401(k) Plan covers substantially all U.S. employees, with employer matching contributions vesting immediately upon hire[459](index=459&type=chunk) - The company suspended matching contributions from February 18, 2023, and resumed them on January 1, 2024[461](index=461&type=chunk) 401(k) Plan Contributions (in millions) | Year | Contributions | |:---|:---|\ | 2025 | $22 | | 2024 | $8 | | 2023 | $13 | [Note 12. Shareholders' Equity and Convertible Preferred Stock](index=95&type=section&id=Note%2012.%20Shareholders'%20Equity%20and%20Convertible%20Preferred%20Stock) Western Digital's equity structure includes common stock, convertible preferred stock, and stock-based compensation plans, with adjustments made post-Flash separation, alongside a new share repurchase program and quarterly cash dividend - The 2021 Long-Term Incentive Plan authorizes various equity awards, including stock options, RSUs, and PSUs, with vesting periods typically ranging from two to four years[465](index=465&type=chunk) - Outstanding RSU and PSU awards have dividend equivalent rights, accumulated and paid in additional shares upon vesting[466](index=466&type=chunk) - The ESPP allows eligible employees to purchase common stock at **95% of fair market value**, with **2.0 million shares** issued in 2025 for **$77 million**[468](index=468&type=chunk)[469](index=469&type=chunk) - Following the Flash business separation, outstanding stock-based compensation awards were adjusted to preserve intrinsic value, resulting in an incremental value of approximately **$40 million** to be recognized over remaining service periods[470](index=470&type=chunk) Stock-based Compensation Expense (in millions) | | 2025 | 2024 | 2023 | |:---|:---|:---|:---|\ | RSUs and PSUs | $151 | $182 | $201 | | ESPP | 16 | 20 | 11 | | **Total** | **$167** | **$202** | **$212** | - As of June 27, 2025, **235,000 Series A Preferred Shares** were outstanding, with an initial stated value of **$1,000 per share**, accruing a cumulative preferred dividend at **6.25% per annum**[480](index=480&type=chunk)[481](index=481&type=chunk) - The Preferred Shares are convertible into common stock at an adjusted conversion rate of approximately **$35.51 per share**[482](index=482&type=chunk) - A share repurchase program for up to **$2.0 billion** was authorized on May 9, 2025, with **$149 million** in repurchases during fiscal 2025[489](index=489&type=chunk) - A quarterly cash dividend program was adopted on April 29, 2025, with **$0.10 per share** paid in fiscal 2025, totaling **$36 million**[491](index=491&type=chunk) [Note 13. Income Taxes](index=101&type=section&id=Note%2013.%20Income%20Taxes) Western Digital reported a net income tax benefit of $513 million in 2025, driven by foreign income and tax rate differentials, with deferred tax assets increasing and significant unrecognized tax benefits Income (Loss) Before Taxes (in millions) | | 2025 | 2024 | 2023 | |:---|:---|:---|:---|\ | Foreign | $2,602 | $(492) | $(696) | | Domestic | (1,472) | (247) | (153) | | **Income (loss) before taxes** | **$1,130** | **$(739)** | **$(849)** | Income Tax Expense (Benefit) (in millions) | | 2025 | 2024 | 2023 | |:---|:---|:---|:---|\ | Current | $302 | $117 | $47 | | Deferred | (815) | (91) | 6 | | **Income tax expense (benefit)** | **$(513)** | **$26** | **$53** | Effective Tax Rate Reconciliation | | 2025 | 2024 | 2023 | |:---|:---|:---|:---|\ | U.S. Federal statutory rate | 21% | 21% | 21% | | Tax rate differential on international income | (36) | (22) | (22) | | Tax effect of non-deductible loss on retained interest in Sandisk | 16 | — | — | | Inter-entity asset transfer | (61) | — | — | | **Effective tax rate** | **(45)%** | **(4)%** | **(6)%** | - The OBBBA, signed July 4, 2025, allows immediate expensing of domestic R&D expenditures starting fiscal year 2026, but its tax effects are not included in 2025 results[498](index=498&type=chunk) - The company was not subject to Corporate Alternative Minimum Tax (CAMT) in fiscal 2024 and does not expect to be in fiscal 2025[499](index=499&type=chunk) - Tax holidays and incentive programs in the Philippines and Thailand increased net earnings by **$551 million in 2025**[506](index=506&type=chunk) Unrecognized Tax Benefits (excluding interest and penalties, in millions) | | 2025 | 2024 | 2023 | |:---|:---|:---|:---|\ | Unrecognized tax benefit, beginning balance | $721 | $1,021 | $1,047 | | Gross increases related to current year tax positions | 11 | 25 | 7 | | Gross increases related to prior year tax positions | 26 | 73 | 22 | | Gross decreases related to prior year tax positions | (13) | (32) | (47) | | Settlements | (40) | (363) | (5) | | Lapse of statute of limitations | (10) | (3) | (3) | | Distribution in connection with the Separation | (126) | — | — | | **Unrecognized tax benefit, ending balance** | **$569** | **$721** | **$1,021** | - As of June 27, 2025, **$332 million of unrecognized tax benefits** (including interest and penalties) could result in potential cash payments within 12 months, offset by **$148 million in tax receivables**[512](index=512&type=chunk)[513](index=513&type=chunk) [Note 14. Net Income (Loss) Per Common Share](index=106&type=section&id=Note%2014.%20Net%20Income%20%28Loss%29%20Per%20Common%20Share) Western Digital computes net income (loss) per common share using a two-class method, reporting basic EPS of $4.61 and diluted EPS of $4.45 from continuing operations in 2025, while prior years showed anti-dilutive net losses - Net income (loss) per common share is computed using a two-class method, allocating income to common stock and participating securities[345](index=345&type=chunk) Net Income (Loss) Per Common Share (in millions, except per share data) | | 2025 | 2024 | 2023 | |:---|:---|:---|:---|\ | Net income (loss) from continuing operations attributable to common shareholders - basic | $1,598 | $(819) | $(926) | | Net income (loss) from discontinued operations, net of taxes, attributable to common shareholders | 242 | (33) | (782) | | **Net income (loss) attributable to common shareholders - basic** | **$1,840** | **$(852)** | **$(1,708)** | | Weighted average shares: Basic | 347 | 326 | 318 | | RSUs, PSUs, ESPP, and the convertible notes | 12 | — | — | | Diluted | 359 | 326 | 318 | | Net income (loss) per common share: | | | | | Continuing operations - basic | $4.61 | $(2.51) | $(2.91) | | Discontinued operations - basic | 0.70 | (0.10) | (2.46) | | **Net income (loss) per common share - basic** | **$5.31** | **$(2.61)** | **$(5.37)** | | Continuing operations - diluted | 4.45 | (2.51) | (2.91) | | Discontinued operations - diluted | 0.67 | (0.10) | (2.46) | | **Net income (loss) per common share - diluted** | **$5.12** | **$(2.61)** | **$(5.37)** | - For 2024 and 2023, all shares subject to outstanding equity awards were excluded from diluted EPS calculation due to anti-dilutive impact from net losses[520](index=520&type=chunk) [Note 15. Business Realignment Charges](index=107&type=section&id=Note%2015.%20Business%20Realignment%20Charges) Western Digital recorded a net credit of $6 million in 2025 for business realignment, primarily from a recovery of non-cancellable purchase orders, contrasting with charges in prior years - Business realignment charges are incurred to streamline operations and reduce cost structure, including employee termination benefits and asset impairments[521](index=521&type=chunk) Business Realignment Charges (in millions) | | 2025 | 2024 | 2023 | |:---|:---|:---|:---|\ | Employee termination benefits | $2 | $34 | $130 | | Asset impairments | — | 146 | 19 | | Other charges (gains): | | | | | Gain on disposition of assets and other charges | — | — | (8) | | Contract termination and other | 2 | 29 | 5 | | Recovery of non-cancellable purchase orders | (10) | — | — | | **Total business realignment charges** | **$(6)** | **$209** | **$146** | - In 2025, a net credit of **$6 million** was recorded, including a **$10 million recovery** of non-cancellable purchase orders[522](index=522&type=chunk) [Note 16. Supplier Finance Program](index=108&type=section&id=Note%2016.%20Supplier%20Finance%20Program) Western Digital operates a voluntary supplier finance program, allowing suppliers to sell receivables for early payment, with outstanding obligations of $39 million as of June 27, 2025 - The company maintains a voluntary supplier finance program, enabling participating suppliers to sell receivables to a third-party financial institution for early payment[524](index=524&type=chunk) - The company's vendor payment terms (generally 60 to 90 days) are not impacted, and no guarantees are provided to third parties[525](index=525&type=chunk) Supplier Finance Program Obligations (in millions) | | June 27, 2025 | June 28, 2024 | |:---|:---|:---|\ | Confirmed obligations outstanding | $39 | $37 | [Note 17. Legal Proceedings](index=109&type=section&id=Note%2017.%20Legal%20Proceedings) Western Digital settled intellectual property litigation with MRT for $130 million, reversing $201 million in charges, and saw a $316 million jury award in the SPEX case reduced to nominal damages - In July 2024, a jury awarded MR Technologies, GmbH (MRT) **$262 million plus $117 million in prejudgment interest** for patent infringement[528](index=528&type=chunk) - In April 2025, a global settlement of **$130 million** was reached with MRT, resulting in a reversal of **$201 million** in previously recorded litigation charges[530](index=530&type=chunk) - In the SPEX Technologies, Inc. litigation, a jury awarded **$316 million in damages**, but the court subsequently reduced it to nominal damages of **$1**, with no prejudgment interest or legal costs[531](index=531&type=chunk) - The company believes a loss in the SPEX matter is not probable and has not accrued a liability[531](index=531&type=chunk) [Note 18. Quarterly Results of Operations (unaudited)](index=110&type=section&id=Note%2018.%20Quarterly%20Results%20of%20Operations%20%28unaudited%29) Unaudited quarterly results for 2025 show consistent increases in net revenue and net income from continuing operations, contrasting with net losses in 2024, following the Sandisk separation Unaudited Quarterly Results of Operations (2025, in millions, except per share amounts) | | First | Second | Third | Fourth | |:---|:---|:---|:---|:---|\ | Revenue, net | $2,212 | $2,409 | $2,294 | $2,605 | | Gross profit | 806 | 907 | 912 | 1,067 | | Net income from continuing operations | 153 | 466 | 772 | 252 | | Net income | 493 | 594 | 520 | 282 | | Net income per common share: | | | | | | Continuing operations - basic | $0.43 | $1.32 | $2.17 | $0.70 | | Earnings per common share - basic | 1.40 | 1.68 | 1.46 | 0.78 | | Continuing operations - diluted | 0.42 | 1.28 | 2.11 | 0.67 | | Earnings per common share - diluted | 1.35 | 1.63 | 1.42 | 0.75 | Unaudited Quarterly Results of Operations (2024, in millions, except per share amounts) | | First | Second | Third | Fourth | |:---|:---|:---|:---|:---|\ | Revenue, net | $1,194 | $1,367 | $1,752 | $2,004 | | Gross profit | 244 | 313 | 519 | 697 | | Net income (loss) from continuing operations | (365) | (146) | (8) | (246) | | Net income (loss) | (685) | (287) | 135 | 39 | | Net income (loss) per common share: | | | | | | Continuing operations - basic | $(1.18) | $(0.49) | $(0.07) | $(0.77) | | Earnings (loss) per common share - basic | (2.17) | (0.92) | 0.35 | 0.08 | | Continuing operations - diluted | (1.18) | (0.49) | (0.07) | (0.77) | | Earnings (loss) per common share - diluted | (2.17) | (0.92) | 0.35 | 0.08 | [Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=111&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There were no changes in or disagreements with accountants on accounting and financial disclosure - No changes in or disagreements with accountants on accounting and financial disclosure[536](index=536&type=chunk) [Item 9A. Controls and Procedures](index=111&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of June 27, 2025, with no material changes - The Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective as of June 27, 2025[538](index=538&type=chunk) - Management concluded that internal control over financial reporting was effective as of June 27, 2025, based on the COSO 2013 framework[540](index=540&type=chunk) - KPMG LLP issued an audit report concurring with management's assessment of the effectiveness of internal control over financial reporting[540](index=540&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 27, 2025[541](index=541&type=chunk) [Item 9B. Other Information](index=112&type=section&id=Item%209B.%20Other%20Information) CEO Irving Tan and EVP Cynthia Tregillis adopted Rule 10b5-1 Plans for company securities transactions during the quarter - CEO Irving Tan adopted a Rule 10b5-1 Plan on May 12, 2025, for the sale of up to **80,000 shares** before May 26, 2026[544](index=544&type=chunk) - Cynthia Tregillis, EVP, Chief Legal Officer and Secretary, adopted a Rule 10b5-1 Plan on May 23, 2025, for the sale of up to **17,502 shares** before May 26, 2026[544](index=544&type=chunk) [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=112&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) Disclosure regarding foreign jurisdictions that prevent inspections is not applicable to the company - Disclosure regarding foreign jurisdictions that prevent inspections is not applicable[543](index=543&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=113&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference from the Proxy Statement for the 2025 Annual Meeting of Stockholders[546](index=546&type=chunk) - The Code of Business Ethics, applicable to all directors, employees, and officers, is available on the company's website[546](index=546&type=chunk) [Item 11. Executive Compensation](index=113&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation information is incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference from the Proxy Statement for the 2025 Annual Meeting of Stockholders[547](index=547&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=113&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership and related stockholder matters are incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference from the Proxy Statement for the 2025 Annual Meeting of Stockholders[548](index=548&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=113&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference from the Proxy Statement for the 2025 Annual Meeting of Stockholders[549](index=549&type=chunk) [Item 14. Principal Accountant Fees and Services](index=113&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Principal accountant fees and services information is incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference from the Proxy Statement for the 2025 Annual Meeting of Stockholders[550](index=550&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedules](index=114&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists financial

Company Overview - Western Digital (WDC) currently holds a Momentum Style Score of A, indicating strong momentum potential [3] - The company has a Zacks Rank of 1 (Strong Buy), which is associated with a historical outperformance in the market [4] Price Performance - WDC shares have increased by 11.23% over the past week, while the Zacks Computer-Storage Devices industry has decreased by 3.66% during the same period [6] - Over the last month, WDC's price change is 13.35%, significantly outperforming the industry's 0.89% [6] - In the last quarter, WDC shares have risen by 49.97%, and over the past year, they have gained 25.62%, compared to the S&P 500's increases of 13.18% and 21.49%, respectively [7] Trading Volume - The average 20-day trading volume for WDC is 7,489,715 shares, which serves as a bullish indicator when combined with rising stock prices [8] Earnings Outlook - In the past two months, five earnings estimates for WDC have been revised upwards, with no downward revisions, leading to an increase in the consensus estimate from $5.70 to $6.50 [10] - For the next fiscal year, one estimate has moved upwards, with no downward revisions noted [10] Conclusion - Given the strong price performance, positive earnings outlook, and high momentum score, WDC is positioned as a promising investment opportunity [12]

Core Viewpoint - Western Digital (WDC) is positioned as a strong investment opportunity due to a significant revision in earnings estimates, indicating an improving earnings outlook [1][9]. Earnings Estimate Revisions - The trend of rising estimate revisions reflects growing analyst optimism regarding Western Digital's earnings prospects, which is expected to positively influence its stock price [2]. - For the current quarter, Western Digital is projected to earn $1.57 per share, representing a year-over-year decline of 11.8%. However, the Zacks Consensus Estimate has increased by 13.02% over the last 30 days, with three estimates raised and no negative revisions [6]. - For the full year, the earnings estimate stands at $6.50 per share, showing a year-over-year increase of 31.9%. Over the past month, five estimates have been revised upward, with no negative revisions [7]. Zacks Rank and Performance - Western Digital currently holds a Zacks Rank 1 (Strong Buy), indicating strong agreement among analysts in raising earnings estimates, which historically correlates with stock performance [3][8]. - Stocks with a Zacks Rank 1 and 2 have demonstrated significant outperformance compared to the S&P 500, with Zacks 1 stocks averaging a 25% annual return since 2008 [3][8]. Recent Stock Performance - The stock has appreciated by 18.5% over the past four weeks, driven by strong estimate revisions, suggesting potential for further upside [9].

Investors interested in Computer- Storage Devices stocks are likely familiar with Western Digital (WDC) and NetApp (NTAP) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look. Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank is a proven strategy that targets companies with p ...

Market Overview - Stock markets are showing signs of nervousness at all-time highs, with companies experiencing significant corrections despite strong earnings reports [1] - This situation serves as a reminder for investors to exercise caution and consider deploying strategies to mitigate risks [1] Analyst Background - Gary Alexander has extensive experience covering technology companies on Wall Street and has worked in Silicon Valley, providing insights into current industry trends [1] - He has been a contributor on Seeking Alpha since 2017 and has been quoted in various web publications, with his articles reaching audiences through popular trading apps like Robinhood [1]

To me, the back half of 2025 is going to be a stock picker's market. The S&P 500 has been dominated by momentum plays like Microsoft ( MSFT ) and Nvidia ( NVDA ); in order to trulyWith combined experience of covering technology companies on Wall Street and working in Silicon Valley, and serving as an outside adviser to several seed-round startups, Gary Alexander has exposure to many of the themes shaping the industry today. He has been a regular contributor on Seeking Alpha since 2017. He has been quoted in ...

Investment Rating - The report assigns a positive outlook for Western Digital (WDC), indicating strong performance driven by AI-related demand and robust customer agreements [1][2]. Core Insights - In FY2025Q4, Western Digital achieved Non-GAAP revenue of $2.605 billion, a year-over-year increase of 30% and a quarter-over-quarter increase of 14%, exceeding guidance [2][7]. - The Non-GAAP gross margin was reported at 41.3%, up 6.1 percentage points year-over-year and 1.2 percentage points quarter-over-quarter, significantly above company guidance [2][7]. - The company has secured long-term purchase orders with major clients, ensuring strong demand through FY2026 [2][3]. Summary by Sections Overall Performance - FY2025Q4 Non-GAAP revenue reached $2.605 billion, with a Non-GAAP gross margin of 41.3% and a Non-GAAP net profit of $600 million, up from $487 million in the previous quarter [2][7]. Inventory - The inventory turnover days for FY2025Q4 were 76 days, with an inventory value of $1.3 billion [10]. Revenue by End Market - Cloud revenue was $2.329 billion, accounting for 90% of total revenue, with a year-over-year growth of 36% [11]. - Client revenue was $14 million, showing a modest growth of 2% year-over-year [11]. - Consumer revenue was $136 million, down 12% year-over-year due to decreased product prices and shipment volumes [11]. Business Progress - The company delivered 190 exabytes of data, a 32% increase year-over-year, driven by strong nearline shipments and sales of high-capacity hard drives [17]. - 90% of the business is focused on cloud services, with significant contributions from large-scale clients [3][17]. FY2026Q1 Guidance - The company expects a revenue midpoint of $2.7 billion for FY2026Q1, with a Non-GAAP gross margin forecasted between 41% and 42% [4][18]. - Operating expenses are anticipated to slightly increase to a range of $370 million to $380 million [4][18].