Western Digital(US:WDC)2025-10-30 21:43Revenue and Sales Performance - Net revenue for the three months ended October 3, 2025, increased by 27% to $2,818 million from $2,212 million in the prior year, driven by a 3% increase in units sold and a 19% increase in average selling price per unit [131][132]. - Cloud revenue rose by 31% to $2,510 million, primarily due to a 5% increase in units sold and a 19% increase in average selling price per unit, reflecting higher shipments of high-capacity enterprise products [133]. - The top 10 customers accounted for 77% of net revenue, up from 65% in the prior year, indicating increased customer concentration [136]. - Net sales for the three months ended October 3, 2025, were $1,158 million, while net sales for the year ended June 27, 2025, totaled $5,249 million [170]. - Intercompany revenue for the three months ended October 3, 2025, was $1,715 million, up from $1,378 million for the year ended June 27, 2025 [170]. Profitability and Income - Gross profit increased by $421 million, resulting in a gross margin improvement of 7 percentage points year-over-year, attributed to higher volumes and improved pricing [137]. - Operating income for the three months ended October 3, 2025, was $792 million, a 137% increase from $334 million in the prior year [131]. - Gross profit for the three months ended October 3, 2025, was $459 million, representing a gross margin of approximately 39.6% [170]. - Operating income for the three months ended October 3, 2025, was $107 million, compared to $279 million for the year ended June 27, 2025 [170]. - Net income for the three months ended October 3, 2025, was $550 million, a significant recovery from a net loss of $320 million for the year ended June 27, 2025 [170]. Expenses and Investments - Research and development expenses rose by $32 million to $294 million, driven by higher variable compensation and continued investment in innovation [138]. - Selling, general and administrative expenses decreased by $66 million to $138 million, reflecting lower compensation and benefits as well as reduced marketing activities [139]. - Net cash used in investing activities for the three months ended October 3, 2025, was primarily $73 million in capital expenditures [154]. Cash Flow and Financing - For the three months ended October 3, 2025, net cash provided by operating activities was $672 million, a significant increase from $34 million for the same period in 2024 [148]. - The company reported a net decrease in cash and cash equivalents of $66 million for the three months ended October 3, 2025 [148]. - Net cash used in financing activities for the three months ended October 3, 2025, included $553 million for share repurchases [155]. - The company issued $1.60 billion of convertible senior notes in November 2023, maturing on November 15, 2028, with an annual interest rate of 3.00% [165]. - As of October 3, 2025, the company had $1.25 billion available for borrowing under its revolving credit facility maturing in January 2027 [167]. Taxation and Liabilities - The effective tax rate for the three months ended October 3, 2025, was 12%, significantly lower than the U.S. Federal statutory rate of 21%, due to the mix of earnings and the tax-free gain on the retained Sandisk interest [145]. - As of October 3, 2025, the liability for unrecognized tax benefits was $598 million, with $130 million potentially payable within the next twelve months [159]. - The company has accrued Global Minimum Tax (GMT) taxes of $21 million, expected to be paid in Q2 2028 [172]. - Current liabilities decreased to $3,317 million from $3,800 million, indicating a reduction of 12.7% [170]. - Non-current liabilities slightly decreased to $2,848 million from $2,873 million, a decline of 0.9% [170]. Future Expectations - The company expects to monetize its remaining stake in Sandisk within one year from the Separation Date, which occurred on February 21, 2025 [127]. - The company expects capital expenditures for 2026 to be approximately 4% to 6% of net revenue [149]. Insurance and Risk Management - The company maintains director and officer insurance to cover certain liabilities arising from indemnification agreements [175].