Core Viewpoint - SanDisk Corp. will replace Leslie Inc. in the S&P SmallCap 600 effective February 25, 2025, due to Leslie's market capitalization no longer being representative of the small cap market space [1]. Group 1: Index Changes - SanDisk (SNDK) will be added to the S&P SmallCap 600 on February 25, 2025, in the Information Technology sector [2]. - Leslie (LESL) will be deleted from the S&P SmallCap 600 on the same date, categorized under the Consumer Discretionary sector [2]. Group 2: Corporate Actions - Western Digital Corp. is spinning off SanDisk, with the transaction expected to be completed on February 24, 2025, and Western Digital will remain in the S&P 500 post spin-off [1].

Core Viewpoint - Western Digital's strong Q2 2025 results, driven by record nearline shipments and the adoption of UltraSMR technology, have led to a significant stock price increase, outperforming the S&P 500 [1][2] Financial Performance - Q2 2025 revenue surged 41% year-over-year to $4.3 billion, with cloud-related revenue accounting for 55% of total sales at $2.3 billion, more than doubling year-over-year [2] - Client revenue rose 4% year-over-year, while consumer revenue dropped 8% year-over-year due to lower HDD and Flash shipments [2] - Gross margins expanded significantly to 35.4% from 16.2% a year earlier, and diluted earnings per share improved to $1.77 from a loss of $0.93 in Q2 2024 [2] Stock Performance - Over the past four years, Western Digital's stock has shown volatility, with an 18% gain in 2021, a 52% decline in 2022, a 66% rebound in 2023, and a 14% rise in 2024 [3] - In comparison, the Trefis High Quality Portfolio has demonstrated more stability and outperformed the S&P 500 during the same period [3] Valuation Insights - The adjusted valuation for Western Digital is $76 per share, based on an expected EPS of $5.82 and a 13.1x price-to-earnings multiple for fiscal 2025, indicating a nearly 13% premium over the current market price [4] - Analysts' average price target of $84 suggests a potential 25% upside, indicating room for further growth [4] Business Separation and Future Projections - Western Digital is set to finalize the separation of its Flash and HDD businesses by February 21, 2025, with projected Q3 revenue between $3.75 billion and $3.95 billion [5] - Operating expenses are expected to rise to between $700 million and $720 million due to one-time separation costs [5] Segment Performance Expectations - The Flash business is anticipated to see a mid-teens percentage revenue decline in Q3, while the HDD segment is projected to experience a mid-to-high single-digit percentage revenue decline [6] - HDD gross margins are expected to improve by approximately 50 basis points as average selling prices increase [6]

Financial Performance - Revenue for the second quarter of fiscal 2025 reached $4,285 million, a 41% increase from $3,032 million in the same period last year[174]. - Gross profit for the first half of fiscal 2025 was $3,067 million, representing a 419% increase compared to $591 million in the prior year[176]. - The company reported a net income of $594 million for the second quarter, a significant turnaround from a net loss of $287 million in the same quarter last year, marking a 307% improvement[174]. - Operating income for the first half of fiscal 2025 was $1,594 million, compared to an operating loss of $806 million in the same period last year, reflecting a 298% increase[176]. - Consolidated net revenue for the three months ended December 27, 2024, was $4,285 million, a 41.3% increase from $3,032 million in the prior year[1][2]. - The Obligor Group reported net sales of $2.905 billion for the six months ended December 27, 2024, with a gross profit of $1.141 billion[234]. - The Obligor Group's net income for the six months ended December 27, 2024, was $52 million, a significant improvement compared to a net loss of $1.211 billion for the year ended June 28, 2024[234]. Revenue Breakdown - HDD revenue increased by 76% for the three months ended December 27, 2024, driven by a 93% increase in exabytes sold, despite an 8% decline in average selling prices per gigabyte[3][4]. - Flash revenue rose by 13% for the three months ended December 27, 2024, reflecting a 14% increase in average selling prices per gigabyte[5][6]. - Cloud revenue surged by 119% for the three months ended December 27, 2024, with a 114% increase in exabytes sold[7][8]. - Consolidated gross profit increased by $1.02 billion for the three months ended December 27, 2024, primarily due to higher product shipments and improved pricing[9][10]. - Gross margin for HDD improved by approximately 14 percentage points year over year for the three months ended December 27, 2024[11]. Expenses and Cost Management - Research and development expenses increased to $1,021 million for the first half of fiscal 2025, up 17% from $875 million in the prior year[176]. - R&D expenses increased by $58 million for the three months ended December 27, 2024, driven by higher variable compensation and increased headcount[12]. - SG&A expenses rose by $40 million for the three months ended December 27, 2024, primarily due to increased compensation and legal fees[13]. - The company experienced a supply-demand imbalance in the first half of 2024, leading to reduced shipments and pricing pressures, prompting cost-reduction measures[167]. - The company anticipates a modest reduction in annual operating expenses and capital expenditures due to a new five-year Supply Agreement with SDSS, committing to a minimum of $550 million annually[171]. Business Strategy and Separation - The company plans to separate its HDD and Flash business units, with an expected distribution of 80.1% of Sandisk Corporation shares to common stockholders on or about February 21, 2025[166]. - The company plans to enter into an amendment with lenders to facilitate the separation of its HDD and Flash business units, which may adjust certain commitments under existing loan agreements[231]. Cash Flow and Capital Expenditures - Net cash provided by operating activities was $437 million for the six months ended December 27, 2024, a significant improvement from a net cash used of $(718) million in the same period in 2023[206]. - Capital expenditures were reduced to approximately $825 million in 2024 from approximately $2.22 billion in 2023, reflecting a disciplined approach to capital investments[209]. - The company expects cash capital expenditures in 2025 to be higher than in 2024 but remain below 2023 expenditures[209]. - Net cash provided by investing activities for the six months ended December 27, 2024, included $191 million in net proceeds from the sale of a majority interest in a subsidiary[216]. - During the six months ended December 27, 2024, net cash used in financing activities was primarily due to $225 million for repayment of amounts borrowed under the revolving credit facility[217]. Debt and Financial Obligations - As of December 27, 2024, the total long-term debt, including current portion, was $7.413 billion, with interest on debt amounting to $848 million[221]. - The company had commitments related to Flash Ventures totaling $4.442 billion, with $1.318 billion due in the remaining six months of 2025[221]. - 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%[228]. - The company had $2.25 billion available for borrowing under its revolving credit facility maturing in January 2027[230]. - The company is in compliance with financial leverage ratio covenants as of December 27, 2024[230]. Tax and Regulatory Matters - Income tax expense for the three months ended December 27, 2024, was $147 million, resulting in an effective tax rate of 20%, compared to an effective tax rate of (11)% for the same period in 2023[202]. - The effective tax rate for the six months ended December 29, 2023, was impacted by a net decrease of $30 million to the liability for unrecognized tax benefits[203]. - The company expects to realize tax savings of approximately $166 million from reductions in mandatory deemed repatriation tax obligations and interest deductions in future years[224]. - As of December 27, 2024, the estimated mandatory deemed repatriation tax obligation was $331 million, expected to be paid within the next twelve months[238]. Market and Risk Management - The company expects long-term market improvements driven by digital transformation and artificial intelligence data-cycle advancements[168]. - There have been no material changes to the company's market risk during the six months ended December 27, 2024[247]. - The company uses foreign exchange contracts to hedge against fluctuations in foreign currency for operating expenses and product costs[240]. - 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 $239 million[248]. - The outstanding balance on the company's variable rate debt was $2.5 billion as of December 27, 2024, and a one percent increase in the variable interest rate would increase annual interest expense by $25 million[249]. Accounting and Compliance - The financial statements are prepared in accordance with U.S. GAAP, requiring judgments and estimates that may materially impact reported amounts[244]. - There have been no material changes in critical accounting policies and estimates from those disclosed in the previous Annual Report[245]. - The company maintains director and officer insurance to cover certain liabilities arising from indemnification agreements[241]. - The company has not incurred material costs from indemnification obligations historically[242].

Core Insights - Western Digital Corporation (WDC) reported second-quarter fiscal 2025 non-GAAP earnings of $1.77 per share, exceeding the Zacks Consensus Estimate of $1.75, and a significant improvement from a loss of 75 cents per share in the prior-year quarter [1][4] - Revenues reached $4.29 billion, surpassing the Zacks Consensus Estimate by 0.8%, and reflecting a 41% year-over-year increase driven by strong demand in Cloud end markets [2][5] - The company is strategically positioned to benefit from the upcoming split with SanDisk, aiming to capture AI-driven storage demand and optimize its Flash business for long-term success [3] Financial Performance - Revenues from the Cloud end market, which constitutes 55% of total revenues, surged 119% year over year to $2,346 million, with a sequential growth of 6% [5] - Client end market revenues (27% of total) increased 4% year over year to $1,168 million, but saw a 3% sequential decline due to pricing pressure in Flash [6] - Consumer end market revenues (18% of total) decreased 8% year over year to $771 million, although they increased 14% sequentially [7] Product Group Performance - Flash revenues, accounting for 43.8% of total revenues, rose 13% year over year to $1.9 billion, remaining flat sequentially [8] - HDD revenues, making up 56.2% of total revenues, surged 76% year over year to $2.4 billion, with a 9% quarter-over-quarter increase [9] Margins and Expenses - Non-GAAP gross margin improved to 35.9% from 15.5% in the prior-year quarter, with HDD gross margin at 38.6% and Flash gross margin at 32.5% [12] - Non-GAAP operating expenses rose 20% year over year to $674 million, while non-GAAP operating income reached $864 million compared to a loss of $91 million in the prior-year quarter [12] Balance Sheet and Cash Flow - As of December 27, 2024, cash and cash equivalents were $2.291 billion, up from $1.71 billion as of September 27, 2024 [13] - The company generated $403 million in cash from operations, a significant increase from $92 million utilized in the prior-year quarter, with free cash flow amounting to $335 million [13] Fiscal Q3 Outlook - For the upcoming quarter, WDC expects non-GAAP revenues between $3.75 billion and $3.95 billion, with earnings projected between 90 cents and $1.20 per share [14]

Group 1 - The stock markets are experiencing volatility due to the emergence of China's DeepSeek AI models, leading to significant declines in tech stocks, particularly in the semiconductor sector [1] - NVIDIA is highlighted as maintaining its dominance in the market despite the overall downturn in tech stocks [1] - The article reflects on the author's extensive experience in technology sectors, including Wall Street and Silicon Valley, which informs the analysis of current industry trends [1] Group 2 - The author has been a contributor to Seeking Alpha since 2017, indicating a long-standing engagement with investment analysis and technology trends [1] - The author's insights are disseminated through various platforms, including popular trading apps like Robinhood, suggesting a broad reach and influence in the investment community [1]

Fiscal Second Quarter 2025 Financial Results Western Digital January 29, 2025 © 2025 Western Digital Corporation or its affiliates All rights reserved 2 Disclaimers Forward-Looking Statements This presentation contains forward-looking statements within the meaning of federal securities laws, including statements regarding expectations for: the company's business outlook and financial performance for the fiscal third quarter of 2025 and beyond; product qualifications, momentum and adoption; the strength and ...

Core Insights - Western Digital (WDC) reported revenue of $4.29 billion for the quarter ended December 2024, marking a year-over-year increase of 41.3% and exceeding the Zacks Consensus Estimate by 0.81% [1] - The company achieved an EPS of $1.77, a significant improvement from -$0.69 a year ago, with an EPS surprise of 1.14% over the consensus estimate of $1.75 [1] Financial Performance Metrics - Total HDD unit shipments were 13.5 million, below the two-analyst average estimate of 14.21 million [4] - The average selling price (ASP) for HDD was $172, surpassing the $166.25 average estimate [4] - Net revenue from Flash products was $1.88 billion, matching the average estimate [4] - Net revenue from HDD reached $2.41 billion, exceeding the $2.36 billion average estimate, representing a year-over-year increase of 76.2% [4] - Gross profit from HDD was $929 million, above the average estimate of $898.26 million [4] - Gross profit from Flash was $609 million, falling short of the average estimate of $671.47 million [4] Stock Performance - Shares of Western Digital have returned +5.4% over the past month, outperforming the Zacks S&P 500 composite's +1.7% change [3] - The stock currently holds a Zacks Rank 5 (Strong Sell), indicating potential underperformance in the near term [3]

Western Digital (WDC) came out with quarterly earnings of $1.77 per share, beating the Zacks Consensus Estimate of $1.75 per share. This compares to loss of $0.69 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 1.14%. A quarter ago, it was expected that this maker of hard drives for businesses and personal computers would post earnings of $1.74 per share when it actually produced earnings of $1.78, delivering a surprise of 2.3 ...

Exhibit 99.1 Western Digital Reports Fiscal Second Quarter 2025 Financial Results News Summary ($ in millions, except per share amounts) | | GAAP | | | | Non-GAAP | | | --- | --- | --- | --- | --- | --- | --- | | | Q2 2025 | Q1 2025 | Q/Q | Q2 2025 | Q1 2025 | Q/Q | | Revenue | $4,285 | $4,095 | up 5% | $4,285 | $4,095 | up 5% | | Gross Margin | 35.4% | 37.9% | down 2.5 ppt | 35.9% | 38.5% | down 2.6 ppt | | Operating Expenses | $664 | $809 | down 18% | $674 | $691 | down 2% | | Operating Income | $852 | $7 ...

Western Digital Coproration (WDC) is set to report fiscal second-quarter 2025 results on Jan. 29.Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.The Zacks Consensus Estimate for earnings is pegged at $1.75 per share, which moved down 8.4% in the past 60 days. WDC reported a loss per share of 69 cents in the prior-year quarter.The consensus estimate for revenues is currently pegged at $4.26 billion, indicating an increase of 40.4% from the prior-year quarter’s figure.  The company's ...