Revenue Growth - Net revenue for the three months ended March 28, 2025, increased by 31% to $2,294 million, driven by a 4% increase in units sold and a 23% increase in pricing [162]. - For the nine months ended March 28, 2025, net revenue rose by 60% to $6,915 million, attributed to an 18% increase in units sold and a 35% increase in average selling price per unit [164]. - Cloud revenue for the three months ended March 28, 2025, increased by 38% to $2,007 million, reflecting a 14% increase in units sold and an 18% increase in average selling price per unit [165]. Income and Profitability - Operating income for the three months ended March 28, 2025, was $760 million, a significant increase of 709% compared to the prior year [162]. - The company reported a net income from continuing operations of $772 million for the three months ended March 28, 2025, compared to a net loss of $8 million in the same period last year [162]. - Gross profit increased by $393 million for the three months ended March 28, 2025, primarily due to higher product shipments and improved pricing [171]. - Gross margin increased by 10 percentage points year over year for the three months ended March 28, 2025, mainly due to improved pricing [171]. - Operating income for the nine months ended March 28, 2025, was $435 million, a turnaround from an operating loss of $927 million for the year ended June 28, 2024 [212]. - Net income for the nine months ended March 28, 2025, was $138 million, compared to a net loss of $1,211 million for the year ended June 28, 2024 [212]. Expenses and Cost Management - Total operating expenses for the three months ended March 28, 2025, decreased by 64% to $152 million, primarily due to a reduction in selling, general, and administrative expenses [162]. - Selling, general and administrative (SG&A) expense decreased by $68 million for the three months ended March 28, 2025, primarily due to a decrease in compensation and benefits [174]. - Research and development (R&D) expense increased by $49 million for the nine months ended March 28, 2025, primarily driven by higher variable compensation and increased headcount [173]. Cash Flow and Liquidity - Net cash provided by operating activities was $945 million for the nine months ended March 28, 2025, compared to a net cash used of $660 million for the same period in the prior year [185]. - Cash and cash equivalents increased by $1.598 billion for the nine months ended March 28, 2025 [185]. - Net cash provided by investing activities for the nine months ended March 28, 2025, was $401 million from the sale of a majority interest in a subsidiary, offset by $336 million in capital expenditures [195]. - Net cash provided by financing activities for the nine months ended March 28, 2025, included $2.15 billion from drawing on credit facilities, partially offset by $1.37 billion transferred to Sandisk [196]. Business Separation and Future Outlook - The company completed the separation of its HDD and Flash business units on February 21, 2025, creating two independent public companies [156]. - The company anticipates that digital transformation, including the artificial intelligence data-cycle, will drive improved market conditions in the long term [159]. - The company expects to monetize its 19.9% stake in Sandisk within one year from the separation date [156]. Inventory and Receivables Management - For the three months ended March 28, 2025, Days Sales Outstanding (DSO) increased by 7 days to 58 days, primarily due to lower trade accounts receivable factoring and timing of shipments [194]. - Days in Inventory (DIO) decreased by 24 days to 86 days, reflecting higher consumption of inventory driven by increased sales [194]. - Days Payable Outstanding (DPO) increased by 10 days to (85) days, attributed to more favorable payment terms and timing of purchases [194]. Tax and Regulatory Matters - The liability for unrecognized tax benefits as of March 28, 2025, was $561 million, with potential cash payments of approximately $476 million [200]. - The estimated mandatory deemed repatriation tax obligation as of March 28, 2025, was $331 million, expected to be paid within the next twelve months [214]. Capital Structure and Dividends - A quarterly cash dividend program was authorized, with a declared dividend of $0.10 per share to be paid on June 18, 2025 [204]. - The company issued $1.60 billion in convertible senior notes in November 2023, maturing on November 15, 2028, with an annual interest rate of 3.00% [206]. - As of March 28, 2025, the company had $1.25 billion available for borrowing under its revolving credit facility maturing in January 2027 [208]. Asset Management - As of March 28, 2025, current assets increased to $5,313 million from $2,149 million on June 28, 2024, while non-current assets rose to $4,677 million from $2,208 million [212]. - Intercompany revenue for the nine months ended March 28, 2025, was $1,128 million, down from $1,416 million for the year ended June 28, 2024 [212]. Accounting Policies - There have been no material changes in critical accounting policies and estimates from those disclosed in the 2024 Annual Report [221]. - The company has begun capitalizing and amortizing R&D expenses since 2023, which may lead to higher cash tax payments in future profitable periods [215]. - The company utilizes foreign exchange contracts to hedge against currency fluctuations affecting operating expenses and product costs [216].

Group 1 - Chip stocks have been significant underperformers in the stock market this year, with the iShares Semiconductor ETF (SOXX) declining nearly 20% [1] - Concerns affecting the semiconductor industry include increased competition from cheaper chips produced in China, a potential trade war, and other market dynamics [1] Group 2 - Gary Alexander has extensive experience in technology sectors, having worked on Wall Street and in Silicon Valley, and has been an advisor to several seed-round startups [1]

Core Insights - Western Digital Corporation (WDC) reported third-quarter fiscal 2025 non-GAAP earnings of $1.36 per share, exceeding the Zacks Consensus Estimate of $1.17 and significantly up from 63 cents per share in the prior-year quarter [1] - Revenues for the quarter reached $2.29 billion, a 31% year-over-year increase, surpassing the Zacks Consensus Estimate of $2.24 billion, driven by strong demand in Cloud end markets [1][4] - The company completed the separation of its HDD and Flash businesses into two independent entities on February 21, 2025, positioning the new SanDisk to capitalize on AI opportunities [2] Financial Performance - Revenues from the Cloud end market, which constitutes 87% of total revenues, increased by 38% year over year to $2 billion, although it saw a 4% sequential decline [4] - Client end market revenues decreased by 2% year over year and sequentially to $137 million, while Consumer end market revenues fell by 4% year over year and 13% sequentially [5] - Non-GAAP gross margin improved to 40.1% from 30.1% in the year-ago quarter, supported by higher capacity drive adoption [6] - Non-GAAP operating income surged 290% year over year to $596 million, with operating expenses down 14% to $324 million [6] Balance Sheet & Cash Flow - As of March 28, 2025, cash and cash equivalents stood at $3.477 billion, up from $2.291 billion as of December 27, 2024 [9] - Long-term debt was reported at $7.333 billion, while cash generated from operations reached $508 million, a significant increase from $58 million in the prior-year quarter [9] - Free cash flow for the quarter was $436 million, reflecting a 379% year-over-year increase [9] Fiscal Q4 Outlook - For the upcoming quarter, WDC expects non-GAAP revenues of $2.45 billion (+/- $150 million), with a consensus estimate of $2.38 billion [10] - Projected non-GAAP earnings are anticipated to be $1.45 (+/- 20 cents), compared to a consensus estimate of $1.34 [10] - The company expects non-GAAP gross margin to be in the range of 40-41% and operating expenses between $330 million and $340 million [10]

Company Overview - Western Digital held its Third Quarter Fiscal 2025 Conference Call, with key participants including CEO Irving Tan and Interim CFO Don Bennett [2][3]. Financial Performance - The discussion included forward-looking statements based on management's current assumptions and expectations regarding product portfolio, business plans, market trends, and future financial results [4]. Risk Factors - The company acknowledged various risks and uncertainties that could cause actual results to differ materially from expectations, referencing their most recent financial report on Form 10-K for detailed information [5].

Core Viewpoint - Western Digital reported quarterly earnings of $1.36 per share, exceeding the Zacks Consensus Estimate of $1.22 per share, and showing significant growth from $0.63 per share a year ago [1][2] Financial Performance - The company achieved revenues of $2.29 billion for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 2.07%, but down from $3.46 billion year-over-year [3] - Over the last four quarters, Western Digital has exceeded consensus EPS estimates four times and revenue estimates twice [2][3] Stock Performance - Western Digital shares have declined approximately 31.9% since the beginning of the year, compared to a 5.5% decline in the S&P 500 [4] - The stock currently holds a Zacks Rank 5 (Strong Sell), indicating expectations of underperformance in the near future [7] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $1.34 on revenues of $2.38 billion, and for the current fiscal year, it is $4.62 on revenues of $9.24 billion [8] - The estimate revisions trend for Western Digital has been unfavorable leading up to the earnings release [7] Industry Context - The Computer-Storage Devices industry, to which Western Digital belongs, is currently ranked in the bottom 36% of over 250 Zacks industries, suggesting potential challenges ahead [9]

Financial Data and Key Metrics Changes - For the third fiscal quarter, the company reported revenue of $2.3 billion, down 5% sequentially but up 31% year over year [15] - Non-GAAP gross margin was 40.1%, reflecting a sequential improvement of 1.7 percentage points [17] - Non-GAAP earnings per share (EPS) was $1.36, driven by disciplined cost management and tax benefits [15][17] - Free cash flow for the quarter was $436 million [20] Business Line Data and Key Metrics Changes - Cloud business represented 87% of total revenue at $2 billion, down 4% sequentially but up 38% year over year [16] - Client business accounted for 6% of total revenue at $137 million, down 2% sequentially and year over year [16] - Consumer segment represented 7% of revenue at $150 million, down 13% sequentially and 4% year over year [17] Market Data and Key Metrics Changes - Nearline bit shipments decreased by 6% sequentially to 145 exabytes, while average price per unit increased by 4% sequentially to $179 [16] - Demand from hyperscale customers remains robust despite broader market uncertainties [12][13] Company Strategy and Development Direction - The company is focused on three pillars for capital allocation: reinvestment in the business, debt reduction, and returning cash to shareholders [11] - The introduction of a quarterly dividend of $0.10 per share reflects confidence in long-term cash generation ability [21] - The company is addressing tariff-related challenges through cross-functional teams and strategic evaluations of supply chain shifts [12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the current uncertain environment driven by tariffs and global trade tensions but remains optimistic about data center demand [12][14] - The company expects sequential revenue growth in the fiscal fourth quarter, driven by sustained strength in data center demand [14] - Management emphasized the importance of long-term agreements with hyperscale customers for better visibility and planning [13][32] Other Important Information - The company successfully redeemed $1.8 billion of its 2026 senior notes, strengthening its balance sheet [11][20] - The effective tax rate for the fiscal third quarter was 2%, lower than expected due to one-time deferred tax benefits [19] Q&A Session Summary Question: Inquiry about capital allocation and dividend growth - Management stated that once net leverage is reduced to the target range of 1.0-1.5x, they intend to return 100% of excess cash to shareholders through dividends and share buybacks [28] Question: Visibility on revenue margins and EPS growth - Management indicated that long-term agreements with customers provide greater visibility and confidence in strong demand through 2025 and into 2026 [32] Question: Clarification on tariff impacts - Management noted that while there is demand uncertainty in certain segments due to tariffs, they do not anticipate direct tariff impacts on pricing or costs in Q4 [36] Question: Discussion on gross margin expectations - Management highlighted that strong gross margins are driven by technology value and operational discipline, with potential for continued expansion [40][73] Question: Insights on LTAs and their benefits - Management explained that LTAs provide critical visibility and help maintain supply-demand balance, with agreements extending from three to six months to nine to twelve months [87] Question: Commentary on exabyte growth and capacity - Management stated that exabyte growth is primarily driven by technology improvements, allowing for capacity increases without significant capital expenditures [46] Question: Future of non-enterprise and non-cloud markets - Management confirmed that these markets remain a material part of the business, with ongoing efforts to drive growth in those areas [98]

Financial Data and Key Metrics Changes - For the third fiscal quarter, the company reported revenue of $2.3 billion, down 5% sequentially but up 31% year over year [12] - Non-GAAP gross margin was 40.1%, an improvement of 1.7 percentage points sequentially [14] - Non-GAAP earnings per share (EPS) was $1.36, driven by disciplined cost management and tax benefits [12][14] - Free cash flow for the quarter was $436 million [17] Business Line Data and Key Metrics Changes - Cloud business represented 87% of total revenue at $2 billion, down 4% sequentially but up 38% year over year [13] - Client business accounted for 6% of total revenue at $137 million, down 2% sequentially and year over year [13] - Consumer segment represented 7% of revenue at $150 million, down 13% sequentially and 4% year over year [14] Market Data and Key Metrics Changes - Nearline bit shipments decreased by 6% sequentially to 145 exabytes, while average price per unit increased by 4% to $179 [12][13] - Demand from hyperscale customers remains robust despite broader market uncertainties [10] Company Strategy and Development Direction - The company is focused on three pillars for capital allocation: reinvestment in the business, debt reduction, and returning cash to shareholders [8] - The introduction of a quarterly dividend of $0.10 per share reflects confidence in long-term cash generation [18] - The company is committed to innovation in HDD technology, with a focus on high-capacity drives and energy efficiency [6] Management's Comments on Operating Environment and Future Outlook - The current environment is characterized by uncertainty due to tariffs and global trade tensions, but demand from hyperscale customers remains strong [9][10] - The company expects sequential revenue growth in the fiscal fourth quarter, driven by data center demand [10][11] - Management expressed confidence in navigating the dynamic environment and maintaining a healthy supply-demand balance [20] Other Important Information - The company successfully redeemed $1.8 billion of its 2026 senior notes, strengthening its balance sheet [8][17] - The effective tax rate for the fiscal third quarter was 2%, lower than expected due to one-time deferred tax benefits [16] Q&A Session Summary Question: Inquiry about capital allocation and dividend growth - Management indicated that once the net leverage is reduced to the target range of 1.0 to 1.5x, they plan to return 100% of excess cash to shareholders through dividends and share buybacks [25][26] Question: Visibility into revenue margins and EPS growth - Management noted that long-term agreements with hyperscale customers provide greater visibility, suggesting strong demand through 2025 and into 2026 [28][30] Question: Clarification on tariff impacts - Management stated that while there are no direct tariff impacts anticipated, there is demand uncertainty in certain segments due to market volatility [34][36] Question: Discussion on gross margins and pricing dynamics - Management confirmed that gross margins are driven by technology value and operational discipline, with expectations for continued strength [38][40] Question: Insights on manufacturing capacity and exabyte growth - Management highlighted that exabyte growth is primarily driven by technology improvements rather than additional manufacturing capacity [44][53] Question: Update on HAMR technology and customer engagement - Management expects to start qualification for HAMR technology in the second half of 2026, with production ramp-up planned for early 2027 [78][80] Question: Concerns about hyperscaler demand and potential double ordering - Management reassured that there are no signs of double ordering and that demand patterns align with long-term agreements [67][69]

April 30, 2025 2 © 2025 WESTERN DIGITAL CORPORATION OR ITS AFFILIATES ALL RIGHTS RESERVED Disclaimers Fiscal Third Quarter 2025 Financial Results Western Digital © 2025 WESTERN DIGITAL CORPORATION OR ITS AFFILIATES ALL RIGHTS RESERVED 3 Fiscal Third Quarter Executive Summary 1. See Appendix for GAAP to non-GAAP Reconciliations. Results1 Forward-Looking Statements This presentation contains forward-looking statements within the meaning of federal securities laws, including statements regarding expectations f ...

Western Digital Reports Fiscal Third Quarter 2025 Financial Results; Adopts Dividend Program and Declares Quarterly Cash Dividend on Common Stock News Summary SAN JOSE, Calif. — April 30, 2025 — Western Digital Corp. (Nasdaq: WDC) today reported fiscal third quarter 2025 financial results. "Western Digital executed well in its fiscal third quarter achieving revenue at the high end of our guidance range and gross margin over 40%," said Irving Tan, CEO of Western Digital. "Even in a world marked by geopolitic ...

Core Viewpoint - Western Digital Corporation is set to release its third-quarter earnings results, with expectations of improved earnings per share but a decline in revenue compared to the previous year [1]. Financial Performance - Analysts predict Western Digital will report earnings of $1.11 per share for the third quarter, an increase from 63 cents per share in the same period last year [1]. - The company is projected to report quarterly revenue of $2.48 billion, down from $3.46 billion a year earlier [1]. Business Developments - On February 24, Western Digital announced the completion of the planned separation of its flash business, Sandisk [2]. Stock Performance - Western Digital shares experienced a decline of 0.7%, closing at $40.62 [3]. Analyst Ratings - Rosenblatt analyst Kevin Cassidy maintained a Buy rating but reduced the price target from $76 to $50 [8]. - Morgan Stanley analyst Joseph Moore kept an Overweight rating while cutting the price target from $93 to $46 [8]. - Benchmark analyst Mark Miller upgraded the stock from Hold to Buy with a price target of $55 [8]. - Mizuho analyst Vijay Rakesh maintained an Outperform rating and lowered the price target from $82 to $68 [8]. - UBS analyst Timothy Arcuri maintained a Neutral rating and reduced the price target from $74 to $50 [8].