Core Viewpoint - The latter half of 2025 is expected to be characterized as a stock picker's market, moving away from the dominance of momentum stocks like Microsoft and Nvidia [1] Group 1: Market Dynamics - The S&P 500 has been heavily influenced by momentum plays, indicating a potential shift in investment strategies as the market evolves [1] Group 2: Analyst Background - Gary Alexander has extensive experience in technology sectors, having worked on Wall Street and in Silicon Valley, and has been an adviser to seed-round startups [1]

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].

Group 1 - Hong Kong logistics stocks saw initial gains, with ZTO Express (2057.HK) rising over 8%, JD Logistics (2618.HK) nearly 3%, and Kerry Logistics (0636.HK) over 1%. The Ministry of Transport emphasized accelerating the construction of the national comprehensive transportation network and major project development [1] - CSPC Pharmaceutical Group (1093.HK) increased over 6% after announcing an exclusive licensing agreement with Madrigal Pharmaceuticals for the development and commercialization of the oral GLP-1 receptor agonist SYH2086 [1] - Yuehai Property (0124.HK) surged over 13% following a profit warning, expecting a profit of at least HKD 260 million for the six months ending June 30, 2025, compared to a loss of approximately HKD 217 million in the same period of 2024 [1] Group 2 - NIO (9866.HK) opened nearly 9% higher, with the chairman stating that the L90 model will support profitability in Q4, which is a key target for the company [2] - Silicon material stocks rose, with Xinte Energy (1799.HK) up 6.02% and GCL-Poly Energy (3800.HK) up 4.27%, following the Ministry of Industry and Information Technology's announcement of energy-saving inspection tasks for the polysilicon industry [2] - Geek+ (2590.HK) saw a rise of over 4% after establishing a new company focused on embodied intelligence technology [2] - Zhisheng Technology Group (1159.HK) surged over 16% after announcing a profit forecast of approximately HKD 145 million to HKD 155 million for the six months ending June 30, 2025, compared to a loss of approximately RMB 11.3 million in the same period of 2024 [2] Group 3 - Prada (1913.HK) fell over 3% after a report indicated that its first-half performance was slightly below expectations, with revenues of EUR 2.74 billion, 2% lower than market expectations [3] - CloudWalk Technology (9678.HK) rose over 6% after signing a memorandum of understanding with the government of Vanuatu for AI cooperation [3] - Hong Kong photovoltaic stocks generally rose, with KSTAR (1108.HK) up over 7% and Flat Glass Group (6865.HK) up over 5%, as the industry aims to stabilize prices and increase demand [3] Group 4 - Shoulder Innovations (SI.US) debuted on the US stock market, initially rising over 7% before closing up 0.33% [4] - Western Digital (WDC.US) rose 10.16% after reporting Q2 sales of USD 2.61 billion, a 30% year-on-year increase, exceeding Wall Street expectations [4] - Align Technology (ALGN.US) plummeted 36.63% after reporting Q2 earnings that fell short of analyst expectations despite a slight year-on-year increase in adjusted earnings [4] Group 5 - eBay (EBAY.US) surged 18.3% after reporting Q2 revenue of USD 2.7 billion, a 6% year-on-year increase [5] - Arm Holdings (ARM.US) fell 13.44% due to increased R&D spending and lower-than-expected profit guidance [5] - SoFi Technologies (SOFI.US) rose 3.25% after Mizuho Bank raised its target price from USD 20 to USD 26 [5] Group 6 - Roblox (RBLX.US) rose 10.28% after reporting Q2 revenue of USD 1.08 billion, a 21% year-on-year increase [6] - Meta Platforms (META.US) increased 11.25% after reporting strong Q2 revenue and positive guidance for Q3 [6] - Amazon (AMZN.US) fell over 6% in after-hours trading despite steady growth in AWS [6]

Core Insights - Western Digital (WDC.US) shares rose over 7%, approaching historical highs, closing at $76.72 [1] - The company reported Q2 2025 earnings with a 30% year-over-year sales increase, reaching $2.61 billion, exceeding Wall Street expectations by approximately 5% [1] - Non-GAAP earnings per share were $1.66, surpassing analyst expectations of $1.48 by 12.1% [1] - Adjusted operating income for Q2 was $732 million, above the anticipated $667.5 million, with a profit margin of 28.1%, exceeding expectations by 9.7% [1] - Free cash flow margin was 25.9%, significantly higher than 12.5% in the same period last year [1] - The strong 30% revenue growth in Q2, at $2.61 billion, was 4.8% above Wall Street forecasts, marking the fourth consecutive quarter of growth for the company [1] - This growth indicates that Western Digital is in an upward industry cycle, which typically lasts 8-10 quarters [1]

Core Viewpoint - Western Digital (WDC.US) shares rose over 7%, nearing historical highs, following the release of its Q2 2025 financial results, which showed strong growth and exceeded Wall Street expectations [1] Financial Performance - Q2 sales increased by 30% year-over-year, reaching $2.61 billion, surpassing Wall Street's expectations by approximately 5% [1] - Non-GAAP earnings per share were $1.66, exceeding analyst expectations of $1.48 by 12.1% [1] - Adjusted operating profit for Q2 was $732 million, higher than the anticipated $667.5 million, with a profit margin of 28.1%, exceeding expectations by 9.7% [1] - Free cash flow margin was 25.9%, significantly up from 12.5% in the same period last year [1] Growth Trends - The company has achieved revenue growth for four consecutive quarters, indicating that Western Digital is in an upward industry cycle, which typically lasts 8-10 quarters [1]

Core Insights - Western Digital Corporation (WDC) reported strong financial performance in Q4 fiscal 2025, with non-GAAP earnings of $1.66 per share, exceeding estimates by 12.2% and up from $1.44 in the prior year [1] - The company’s quarterly revenues reached $2.61 billion, a 30% increase year over year, driven by demand for high-capacity storage solutions [2] - For fiscal 2025, revenues surged 51% year over year to $9.5 billion, with significant growth in shipments of high-capacity drives [3] Financial Performance - WDC's Q4 revenues from the Cloud end market, which constitutes 90% of total revenues, increased by 36% year over year to $2.6 billion [5] - Non-GAAP gross margin improved to 41.3%, up 610 basis points year over year, attributed to a shift towards higher-capacity drives and effective cost control [6] - Non-GAAP operating income rose 147% year over year to $732 million, while operating expenses decreased by 16% to $345 million [9] Market Dynamics - The demand for high-capacity storage is being driven by cloud computing and generative AI, which require extensive and cost-effective storage solutions [2] - WDC shipped 190 exabytes of storage in Q4, marking a 32% increase year over year, with nearline drives and 26TB CMR and 32TB UltraSMR products seeing significant demand [3][8] Strategic Developments - On February 21, 2025, WDC split its HDD and Flash businesses into two separate public companies, with the new SanDisk focusing on Flash and AI growth [4] - The company repurchased $149 million in stock during the quarter and authorized up to $2 billion in buybacks, reflecting strong cash flow [11] Future Outlook - For Q1 fiscal 2026, WDC anticipates non-GAAP revenues of $2.7 billion, a 22% year-over-year increase, and non-GAAP earnings of $1.54 per share [12][13]

Core Viewpoint - Western Digital has refocused on mechanical hard drives after the spin-off of its flash memory business, SanDisk, and reported strong financial performance for FY2025, indicating significant growth and confidence in its long-term cash generation capabilities [1][3]. Financial Performance - For FY2025, Western Digital achieved revenue of $9.52 billion (approximately ¥68.515 billion), a 51% increase compared to FY2024's revenue of $6.317 billion (excluding flash memory) [1]. - In Q4 FY2025, the company reported revenue of $2.605 billion (approximately ¥18.748 billion), representing a 30% year-over-year growth and a 14% quarter-over-quarter increase [3]. - The GAAP gross margin for FY2025 was 38.8%, with operating income of $2.334 billion, while the Non-GAAP gross margin was 39.4% with operating income of $2.336 billion [1]. - For Q4 FY2025, the GAAP gross margin was 41.0% with operating income of $680 million, and the Non-GAAP gross margin was 41.3% with operating income of $732 million [3]. Future Outlook - Western Digital expects revenue for Q1 FY2026 to be approximately $2.7 billion (around ¥19.432 billion), which would represent a year-over-year growth of about 22%, with a projected Non-GAAP gross margin of approximately 41.5% [3]. - The CEO expressed confidence in the company's long-term cash generation ability, highlighting the importance of mechanical hard drives in the global data infrastructure, especially in an AI-driven future [3].

Group 1: Financial Performance - Company reported Q2 sales of $2.61 billion, a 30% year-over-year increase, exceeding Wall Street expectations by approximately 5% [1] - Non-GAAP earnings per share for Q2 were $1.66, surpassing analyst expectations of $1.48 by 12.1% [1] - Adjusted operating profit for Q2 was $732 million, higher than the expected $667.5 million, with a profit margin of 28.1%, exceeding expectations by 9.7% [1] - Free cash flow margin was 25.9%, up from 12.5% in the same period last year [1] Group 2: Historical Performance and Trends - Over the past five years, the company has experienced an average annual revenue decline of 10.7%, indicating relatively low business quality [2] - The semiconductor industry is cyclical, and long-term investors should prepare for alternating periods of high growth and revenue contraction [2] - The company has seen an average annual revenue decline of 12.1% over the past two years, reflecting ongoing demand suppression [4] Group 3: Future Outlook - The recent performance indicates that the company is in an upward industry cycle, having achieved four consecutive quarters of growth, which typically lasts 8-10 quarters [7] - Analysts project a 10.3% revenue growth over the next 12 months, suggesting improvements driven by new products and services [7] - The company's inventory turnover days data is missing, which is a critical indicator for semiconductor manufacturers [7] Group 4: Market Reaction - The significant improvement in inventory levels and the quarterly performance exceeding analyst expectations left a positive impression on the market [9] - Following the earnings report, the company's stock price rose over 10%, reaching $79 [9]

Core Insights - Western Digital (WDC) reported quarterly earnings of $1.66 per share, exceeding the Zacks Consensus Estimate of $1.48 per share, and up from $1.44 per share a year ago [1] - The earnings surprise was +12.16%, following a previous surprise of +11.48% with earnings of $1.36 per share against an expectation of $1.22 per share [2] - The company generated revenues of $2.61 billion for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 6.13%, but down from $3.76 billion year-over-year [3] Earnings Performance - Over the last four quarters, Western Digital has consistently surpassed consensus EPS estimates four times [2] - The company has also topped consensus revenue estimates three times in the last four quarters [3] Stock Performance - Western Digital shares have increased approximately 18.4% since the beginning of the year, outperforming the S&P 500's gain of 8.3% [4] - The stock currently holds a Zacks Rank 1 (Strong Buy), indicating expectations for continued outperformance in the near future [7] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $1.40 on revenues of $2.55 billion, and for the current fiscal year, it is $5.92 on revenues of $10.36 billion [8] - The Computer-Storage Devices industry is ranked in the top 18% of over 250 Zacks industries, suggesting a favorable outlook for stocks within this sector [9]

Financial Data and Key Metrics Changes - For the fiscal fourth quarter, the company reported revenue of $2.6 billion, a 30% year-over-year increase, and non-GAAP earnings per share of $1.66, which was above the high end of the guidance range [11][15] - Non-GAAP gross margin was 41.3%, improving by 60 basis points year-over-year, reflecting a shift towards higher capacity drives and effective cost control [16][17] - Free cash flow for the quarter was $675 million, with operating cash flow at $746 million and capital expenditures of $71 million [19] Business Line Data and Key Metrics Changes - The cloud segment represented 90% of total revenue at $2.3 billion, up 36% year-over-year, driven by strong demand for higher capacity nearline products [16] - Client revenue accounted for 5% of total revenue at $140 million, up 2% year-over-year, while consumer revenue also represented 5% at $136 million, down 12% year-over-year [16] Market Data and Key Metrics Changes - Shipments of the latest generation ePMR drives with capacities up to 26 terabytes CMR and 32 terabytes Ultra SMR more than doubled quarter-over-quarter, exceeding 1.7 million units [8][11] - The company has firm purchase orders or long-term agreements with all top five hyperscale customers for the entire fiscal year 2026, indicating strong demand [11][12] Company Strategy and Development Direction - The company is focusing on operational execution, capital return programs, and leveraging AI-driven data growth to enhance storage solutions [6][10] - The transition to higher capacity drives and the development of HAMR technology are central to the company's strategy, with expectations for continued revenue growth driven by data center demand [9][20] Management's Comments on Operating Environment and Future Outlook - Management noted that while the broader environment remains uncertain due to tariffs, strong demand driven by AI is expected to continue [11][12] - For fiscal year 2026, the company anticipates revenue growth of approximately 22% year-over-year, with gross margin expected between 41% and 42% [20][21] Other Important Information - The company initiated a quarterly cash dividend program and authorized a $2 billion share repurchase program, repurchasing nearly $150 million worth of shares in the fourth quarter [11][19] - The balance sheet was strengthened with a reduction of $2.6 billion in debt, achieving a net leverage target of 1 to 1.5 times [11][18] Q&A Session Summary Question: Can you help us understand the gross margin guidance for September? - Management indicated that gross margin expansion is expected to slow due to various factors, including pricing stability and a favorable mix shift towards higher capacity drives [26][30] Question: How should investors think about share repurchase activity going forward? - Management expressed confidence in continuing to return cash to shareholders through dividends and share repurchases, with room for growth in the dividend program [34][37] Question: What is the ASP per terabyte for the last quarter? - Management noted that ASP per terabyte was down in low single digits, primarily due to mix, while ASPs per drive continue to rise with higher capacity drives [39][70] Question: How does the extra week in the quarter affect revenue and OpEx? - Management clarified that the extra week would add approximately $15 million in OpEx, but revenue impact would be minimal as customers operate on quarterly forecasts [75][76] Question: What is the outlook for AI's impact on growth? - Management highlighted that AI is expected to provide a significant uplift in exabyte growth, potentially increasing revenue growth from mid to high single digits to mid-teens [78][80]